G.R. No.

167552 April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,
vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
Before Us is a petition for review by certiorari assailing the Decision
1
of the Court of
Appeals dated 10 August 2004 and its Resolution
2
dated 17 March 2005 in CA-G.R.
SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.
Echavez." The assailed Decision and Resolution affirmed the Order
3
dated 29 January
2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent
EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.
The generative facts of the case are as follows:
PETITIONER is engaged in the business of importation and distribution of various
European industrial equipment for customers here in the Philippines. It has as one of its
customers Impact Systems Sales ("Impact Systems") which is a sole proprietorship
owned by respondent ERWIN Cuizon (ERWIN). RESPONDENT EDWIN is the sales
manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products
allegedly amounting to ninety-one thousand three hundred thirty-eight (P91,338.00)
pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge
pump valued at P250,000.00 with respondents making a down payment of fifty
thousand pesos (P50,000.00).
4
When the sludge pump arrived from the United
Kingdom, petitioner refused to deliver the same to respondents without their having fully
settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN
and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner, the pertinent part of which states:
1.) That ASSIGNOR
5
has an outstanding receivables from Toledo Power
Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND
(P365,000.00) PESOS as payment for the purchase of one unit of Selwood
Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto
the ASSIGNEE
6
the said receivables from Toledo Power Corporation in the
amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS
which receivables the ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.
7

Following the execution of the Deed of Assignment, petitioner delivered to respondents
the sludge pump as shown by Invoice No. 12034 dated 30 June 1995.
8

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed
of Assignment, proceeded to collect from Toledo Power Company the amount
of P365,135.29 as evidenced by Check Voucher No. 0933
9
prepared by said power
company and an official receipt dated 15 August 1995 issued by Impact
Systems.
10
Alarmed by this development, petitioner made several demands upon
respondents to pay their obligations. As a result, respondents were able to make partial
payments to petitioner. On 7 October 1996, petitioners counsel sent respondents
a final demand letter wherein it was stated that as of 11 June 1996, respondents total
obligations stood at P295,000.00 excluding interests and attorneys fees.
11
Because of
respondents failure to abide by said final demand letter, petitioner instituted a
complaint for sum of money, damages, with application for preliminary attachment
against herein respondents before the Regional Trial Court of Cebu City.
12

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

On 25 June 1997, respondent EDWIN filed his Answer
14
wherein he admitted
petitioners allegations with respect to the sale transactions entered into by Impact
Systems and petitioner between January and April 1995.
15
He, however, disputed the
total amount of Impact Systems indebtedness to petitioner which, according to him,
amounted to only P220,000.00.
16

By way of special and affirmative defenses, respondent EDWIN alleged that he is not
a real party in interest in this case. According to him, he was acting as mere agent of
his principal, which was the Impact Systems, in his transaction with petitioner and the
latter was very much aware of this fact. In support of this argument, petitioner points to
paragraphs 1.2 and 1.3 of petitioners Complaint stating
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City.
He is the proprietor of asingle proprietorship business known as Impact Systems
Sales ("Impact Systems" for brevity), with office located at 46-A del Rosario
Street, Cebu City, where he may be served summons and other processes of the
Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of
Cebu City. He is the Sales Manager of Impact Systems and is sued in this action
in such capacity.
17

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default
with Motion for Summary Judgment. The trial court granted petitioners motion to
declare respondent ERWIN in default "for his failure to answer within the prescribed
period despite the opportunity granted"
18
but it denied petitioners motion for summary
judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16
October 2001.
19
However, the conduct of the pre-trial conference was deferred pending
the resolution by the trial court of the special and affirmative defenses raised by
respondent EDWIN.
20

After the filing of respondent EDWINs Memorandum
21
in support of his special and
affirmative defenses and petitioners opposition
22
thereto, the trial court rendered its
assailed Order dated 29 January 2002 dropping respondent EDWIN as a party
defendant in this case. According to the trial court
A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant
Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact]
Systems Sale is a single proprietorship entity and the complaint shows that defendant
Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its general
manager Alberto de Jesus in the contract which is dated June 28, 1995. A study of
Annex "H" to the complaint reveals that [Impact] Systems Sales which is owned solely
by defendant Erwin H. Cuizon, made a down payment of P50,000.00 that Annex "H" is
dated June 30, 1995 or two days after the execution of Annex "G", thereby showing that
[Impact] Systems Sales ratified the act of Edwin B. Cuizon; the records further show
that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin B.
Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff,
therefore, cannot say that it was deceived by defendant Edwin B. Cuizon, since in the
instant case the principal has ratified the act of its agent and plaintiff knew about said
ratification. Plaintiff could not say that the subject contract was entered into by Edwin B.
Cuizon in excess of his powers since [Impact] Systems Sales made a down payment
of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped
as party defendant.
23

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to
the Court of Appeals which, however, affirmed the 29 January 2002 Order of the
court a quo. The dispositive portion of the now assailed Decision of the Court of
Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the conclusions
reached by the public respondent in his Order dated January 29, 2002, it is hereby
AFFIRMED.
24

Petitioners motion for reconsideration was denied by the appellate court in its
Resolution promulgated on 17 March 2005. Hence, the present petition raising, as sole
ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED
THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS
SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS
NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE
PARTICIPATE IN THE PERPETUATION OF A FRAUD.
25

To support its argument, petitioner points to Article 1897 of the New Civil Code which
states:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs
act of collecting the receivables from the Toledo Power Corporation notwithstanding the
existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems.
While said collection did not revoke the agency relations of respondents, petitioner
insists that ERWINs action repudiated EDWINs power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an
agent, petitioner claims that he should be made personally liable for the obligations of
his principal.
26

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

In his Comment,
28
respondent EDWIN again posits the argument that he is not a real
party in interest in this case and it was proper for the trial court to have him dropped as
a defendant. He insists that he was a mere agent of Impact Systems which is owned by
ERWIN and that his status as such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales manager of the said
business venture. Likewise, respondent EDWIN points to the Deed of Assignment which
clearly states that he was acting as a representative of Impact Systems in said
transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another with the latters consent.
29
The
underlying principle of the contract of agency is to accomplish results by using the
services of others to do a great variety of things like selling, buying, manufacturing,
and transporting.
30
Its purpose is to extend the personality of the principal or the party
for whom another acts and from whom he or she derives the authority to act.
31
It is said
that the basis of agency is representation, that is, the agent acts for and on behalf of the
principal on matters within the scope of his authority and said acts have the same legal
effect as if they were personally executed by the principal.
32
By this legal fiction, the
actual or real absence of the principal is converted into his legal or juridical presence
qui facit per alium facit per se.
33

The elements of the contract of agency are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a representative and not for himself; (4)
the agent acts within the scope of his authority.
34

In this case, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent. The only cause of the present
dispute is whether respondent EDWIN exceeded his authority when he signed the Deed
of Assignment thereby binding himself personally to pay the obligations to petitioner.
Petitioner firmly believes that respondent EDWIN acted beyond the authority granted
by his principal and he should therefore bear the effect of his deed pursuant to Article
1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
presents two instances when an agent becomes personally liable to a third person. The
first is when he expressly binds himself to the obligation and the second is when he
exceeds his authority. In the last instance, the agent can be held liable if he does not
give the third party sufficient notice of his powers. We hold that respondent EDWIN
does not fall within any of the exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the
sales manager of Impact Systems. As discussed elsewhere, the position of manager is
unique in that it presupposes the grant of broad powers with which to conduct the
business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general
agent or manager; such a position presupposes a degree of confidence reposed and
investiture with liberal powers for the exercise of judgment and discretion in transactions
and concerns which are incidental or appurtenant to the business entrusted to his care
and management. In the absence of an agreement to the contrary, a managing agent
may enter into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management. x x x.
35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within
his authority when he signed the Deed of Assignment. To recall, petitioner refused to
deliver the one unit of sludge pump unless it received, in full, the payment for Impact
Systems indebtedness.
36
We may very well assume that Impact Systems desperately
needed the sludge pump for its business since after it paid the amount of fifty thousand
pesos (P50,000.00) as down payment on 3 March 1995,
37
it still persisted in negotiating
with petitioner which culminated in the execution of the Deed of Assignment of its
receivables from Toledo Power Company on 28 June 1995.
38
The significant amount of
time spent on the negotiation for the sale of the sludge pump underscores Impact
Systems perseverance to get hold of the said equipment. There is, therefore, no doubt
in our mind that respondent EDWINs participation in the Deed of Assignment was
"reasonably necessary" or was required in order for him to protect the business of his
principal. Had he not acted in the way he did, the business of his principal would have
been adversely affected and he would have violated his fiduciary relation with his
principal.
We likewise take note of the fact that in this case, petitioner is seeking to recover both
from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here
that Article 1897 of the New Civil Code upon which petitioner anchors its claim against
respondent EDWIN "does not hold that in case of excess of authority, both the agent
and the principal are liable to the other contracting party."
39
To reiterate, the first part of
Article 1897 declares that the principal is liable in cases when the agent acted within the
bounds of his authority. Under this, the agent is completely absolved of any liability. The
second part of the said provision presents the situations when the agent himself
becomes liable to a third party when he expressly binds himself or he exceeds the limits
of his authority without giving notice of his powers to the third person. However, it must
be pointed out that in case of excess of authority by the agent, like what petitioner
claims exists here, the law does not say that a third person can recover from both the
principal and the agent.
40

As we declare that respondent EDWIN acted within his authority as an agent, who did
not acquire any right nor incur any liability arising from the Deed of Assignment, it
follows that he is not a real party in interest who should be impleaded in this case. A
real party in interest is one who "stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit."
41
In this respect, we sustain his
exclusion as a defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision
dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in
CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial
Court, Branch 8, Cebu City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu
City, for the continuation of the proceedings against respondent Erwin Cuizon.
SO ORDERED.

G.R. No. 120465 September 9, 1999
WILLIAM UY and RODEL ROXAS, petitioners,
vs.
COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY, respondents.

KAPUNAN, J .:
PETITIONERS William Uy and Rodel Roxas ARE AGENTS authorized to sell eight
parcels of land by the owners thereof. By virtue of such authority, petitioners offered to
sell the lands, located in Tuba, Tadiangan, Benguet TO RESPONDENT NATIONAL
Housing Authority (NHA) to be utilized and developed as a housing project.
On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the
acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867
million, pursuant to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands. Of the eight parcels of land, however, only five were paid for
by the NHA because of the report
1
it received from the Land Geosciences Bureau of
the Department of Environment and Natural Resources (DENR) that the remaining
area is located at an active landslide area and therefore, not suitable for development
into a housing project.
On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over
the three parcels of land. The NHA, through Resolution No. 2394, subsecguently
offered the amount of P1.225 million to the landowners as daos perjuicios.
On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon
City a Complaint for Damages against NHA and its General Manager Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the contract to
be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of
P1.255 million, the same amount initially offered by NHA to petitioners as
damages.1wphi1.nt
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial
court and entered a new one dismissing the complaint. It held that since there was
"sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of
damages. The Court of Appeals also noted that petitioners were mere attorneys-in-
fact and, therefore, not the real parties-in-interest in the action before the trial court.
. . . In paragraph 4 of the complaint, plaintiffs alleged themselves to
be "sellers' agents" for the several owners of the 8 lots subject
matter of the case. Obsviously, William Uy and Rodel Roxas in
filing this case acted as attorneys-in-fact of the lot owners who are
the real parties in interest but who were omitted to be pleaded as
party-plaintiffs in the case. This omission is fatal. Where the action
is brought by an attorney-in-fact of a land owner in his name, (as in
our present action) and not in the name of his principal, the action
was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974];
Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that every
action must be prosecuted in the name of the real parties-in-interest
(Section 2, Rule 3, Rules of Court).
When plaintiffs UY and Roxas sought payment of damages in
their favor in view of the partial rescission of Resolution No. 1632
and the Deed of Absolute Sale covering TCT Nos. 10998, 10999
and 11292 (Prayer complaint, page 5, RTC records), it becomes
obviously indispensable that the lot owners be included, mentioned
and named as party-plaintiffs, being the real party-in-interest. UY
and Roxas, as attorneys-in-fact or apoderados, cannot by
themselves lawfully commence this action, more so, when the
supposed special power of attorney, in their favor, was never
presented as an evidence in this case. Besides, even if herein
plaintiffs Uy and Roxas were authorized by the lot owners to
commence this action, the same must still be filed in the name of
the principal, (Filipino Industrial Corporation vs. San Diego, 23
SCRA 706 [1968]). As such indispensable party, their joinder in the
action is mandatory and the complaint may be dismissed if not so
impleaded (NDC vs. CA, 211 SCRA 422 [1992]).
2

Their motion for reconsideration having been denied, petitioners seek relief from this
Court contending that:
I. THE RESPONDENT CA ERRED IN DECLARING THAT
RESPONDENT NHA HAD ANY LEGAL BASIS FOR RESCINDING
THE SALE INVOLVING THE LAST THREE (3) PARCELS
COVERED BY NHA RESOLUTION NO. 1632.
II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HAD
LEGAL BASIS TO RESCIND THE SUBJECT SALE, THE
RESPONDENT CA NONETHELESS ERRED IN DENYING
HEREIN PETITIONERS' CLAIM TO DAMAGES, CONTRARY TO
THE PROVISIONS OF ART. 1191 OF THE CIVIL CODE.
III. THE RESPONDENT CA ERRED IN DISMISSING THE
SUBJECT COMPLAINT FINDING THAT THE
PETITIONERS FAILED TO JOIN AS INDISPENSABLE PARTY
PLAINTIFF THE SELLING LOT-OWNERS.
3

We first resolve the issue raised in the the third assignment of error.
Petitioners claim that they lodged the complaint not in behalf of their principals but in
their own name as agents directly damaged by the termination of the contract. The
damages prayed for were intended not for the benefit of their principals but to indemnify
petitioners for the losses they themselves allegedly incurred as a result of such
termination. These damages consist mainly of "unearned income" and
advances.
4
Petitioners, thus, attempt to distinguish the case at bar from those involving
agents or apoderedos instituting actions in their own name but in behalf of their
principals.
5
Petitioners in this case purportedly brought the action for damages in their
own name and in their own behalf.
We find this contention unmeritorious.
Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted
and defended in the name of the real party-in-interest. The real party-in-interest is the
party who stands to be benefited or injured by the judgment or the party entitled to the
avails of the suit. "Interest, within the meaning of the rule, means material interest, an
interest in the issue and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental interest.
6
Cases construing the
real party-in-interest provision can be more easily understood if it is borne in mind that
the true meaning of real party-in-interest may be summarized as follows: An action shall
be prosecuted in the name of the party who, by the substantive law, has the right sought
to be enforced.
7

Do petitioners, under substantive law, possess the right they seek to enforce? We rule
in the negative.
The applicable substantive law in this case is Article 1311 of the Civil Code, which
states:
Contracts take effect only between the parties, their assigns, and
heirs, except in case where the rights and obligations arising from
the contract are not transmissible by their nature, or by stipulation,
or by provision of law. . . .
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a
favor upon a third person. (Emphasis supplied.)
Petitioners are not parties to the contract of sale between their principals and NHA.
They are mere agents of the owners of the land subject of the sale. As agents, they only
render some service or do something in representation or on behalf of their
principals.
8
The rendering of such service did not make them parties to the contracts of
sale executed in behalf of the latter. Since a contract may be violated only by the parties
thereto as against each other, the real parties-in-interest, either as plaintiff or defendant,
in an action upon that contract must, generally, either be parties to said contract.
9

Neither has there been any allegation, much less proof, that petitioners are the heirs of
their principals.
Are petitioners assignees to the rights under the contract of sale? In McMicking
vs. Banco Espaol-Filipino,
10
we held that the rule requiring every action to be
prosecuted in the name of the real party-in-interest.
. . . recognizes the assignments of rights of action and also
recognizes that when one has a right of action assigned to him he
is then the real party in interest and may maintain an action upon
such claim or right. The purpose of [this rule] is to require the
plaintiff to be the real party in interest, or, in other words, he must
be the person to whom the proceeds of the action shall belong, and
to prevent actions by persons who have no interest in the result of
the same. . . .
Thus, an agent, in his own behalf, may bring an action founded on a contract made for
his principal, as an assignee of such contract. We find the following declaration in
Section 372 (1) of the Restatement of the Law on Agency (Second):
11

Sec. 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or who acquires an
interest in a contract which he makes on behalf of his principal can,
although not a promisee, maintain such action thereon maintain
such action thereon as might a transferee having a similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a contract on behalf of
another may become an assignee of the contract and bring suit
against the other party to it, as any other transferee. The customs
of business or the course of conduct between the principal and the
agent may indicate that an agent who ordinarily has merely a
security interest is a transferee of the principals rights under the
contract and as such is permitted to bring suit. If the agent has
settled with his principal with the understanding that he is to
collect the claim against the obligor by way of reimbursing
himself for his advances and commissions, the agent is in the
position of an assignee who is the beneficial owner of the chose in
action. He has an irrevocable power to sue in his principal's name. .
. . And, under the statutes which permit the real party in interest to
sue, he can maintain an action in his own name. This power to sue
is not affected by a settlement between the principal and the obligor
if the latter has notice of the agent's interest. . . . Even though the
agent has not settled with his principal, he may, by agreement with
the principal, have a right to receive payment and out of the
proceeds to reimburse himself for advances and commissions
before turning the balance over to the principal. In such a case,
although there is no formal assignment, the agent is in the position
of a transferee of the whole claim for security; he has an
irrevocable power to sue in his principal's name and, under statutes
which permit the real party in interest to sue, he can maintain an
action in his own name.
Petitioners, however, have not shown that they are assignees of their principals to the
subject contracts. While they alleged that they made advances and that they suffered
loss of commissions, they have not established any agreement granting them "the right
to receive payment and out of the proceeds to reimburse [themselves] for advances and
commissions before turning the balance over to the principal[s]."
Finally, it does not appear that petitioners are beneficiaries of a stipulation pour
autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no
stipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring a
favor to any third person.
That petitioners did not obtain their commissions or recoup their advances
because of the non-performance of the contract did not entitle them to file the
action below against respondent NHA. Section 372 (2) of the Restatement of the
Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as to entitle
him to maintain an action at law upon it in his own name merely
because he is entitled to a portion of the proceeds as compensation
for making it or because he is liable for its breach.
The following Comment on the above subsection is illuminating:
The fact that an agent who makes a contract for his principal will gain or
suffer loss by the performance or nonperformance of the contract by the
principal or by the other party thereto does not entitle him to maintain an
action on his own behalf against the other party for its breach. An agent
entitled to receive a commission from his principal upon the performance
of a contract which he has made on his principal's account does not, from
this fact alone, have any claim against the other party for breach of the
contract, either in an action on the contract or otherwise. An agent who is
not a promisee cannot maintain an action at law against a purchaser
merely because he is entitled to have his compensation or advances paid
out of the purchase price before payment to the principal. . . .
Thus, in Hopkins vs. Ives,
12
the Supreme Court of Arkansas, citing Section 372 (2)
above, denied the claim of a real estate broker to recover his alleged commission
against the purchaser in an agreement to purchase property.
In Goduco vs. Court of appeals,
13
this Court held that:
. . . granting that appellant had the authority to sell the property, the
same did not make the buyer liable for the commission she
claimed. At most, the owner of the property and the one who
promised to give her a commission should be the one liable to pay
the same and to whom the claim should have been directed. . . .
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour
autrui under the contracts of sale, they do not, under substantive law, possess the right
they seek to enforce. Therefore, they are not the real parties-in-interest in this case.
Petitioners not being the real parties-in-interest, any decision rendered herein would be
pointless since the same would not bind the real parties-in-
interest.
14

Nevertheless, to forestall further litigation on the substantive aspects of this case, we
shall proceed to rule on me merits.
15

Petitioners submit that respondent NHA had no legal basis to "rescind" the sale of the
subject three parcels of land. The existence of such legal basis, notwithstanding,
petitioners argue that they are still entitled to an award of damages.
Petitioners confuse the cancellation of the contract by the NHA as a rescission of the
contract under Article 1191 of the Civil Code. The right of rescission or, more
accurately, resolution, of a party to an obligation under Article 1191 is predicated on a
breach of faith by the other party that violates the reciprocity between them.
16
The
power to rescind, therefore, is given to the injured party.
17
Article 1191 states:
The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of
the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do
so for the other parties to the contract, the vendors, did not commit any breach, much
less a substantial breach,
18
of their obligation. Their obligation was merely to deliver the
parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any
injury by the performance thereof.
The cancellation, therefore, was not a rescission under Article 1191. Rather, the
cancellation was based on the negation of the cause arising from the realization that the
lands, which were the object of the sale, were not suitable for housing.1wphi1.nt
Cause is the essential reason which moves the contracting parties to enter into it.
19
In
other words, the cause is the immediate, direct and proximate reason which justifies the
creation of an obligation through the will of the contracting parties.
20
Cause, which is the
essential reason for the contract, should be distinguished from motive, which is the
particular reason of a contracting party which does not affect the other party.
21

For example, in a contract of sale of a piece of land, such as in this case, the cause of
the vendor (petitioners' principals) in entering into the contract is to obtain the price. For
the vendee, NHA, it is the acquisition of the land.
22
The motive of the NHA, on the other
hand, is to use said lands for housing. This is apparent from the portion of the Deeds of
Absolute Sale
23
stating:
WHEREAS, under the Executive Order No. 90 dated December 17, 1986,
the VENDEE is mandated to focus and concentrate its efforts and
resources in providing housing assistance to the lowest thirty percent
(30%) of urban income earners, thru slum upgrading and development of
sites and services projects;
WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by
Letter of Instruction No. 630, prescribed slum improvement and upgrading,
as well as the development of sites and services as the principal housing
strategy for dealing with slum, squatter and other blighted communities;
xxx xxx xxx
WHEREAS, the VENDEE, in pursuit of and in compliance with the above-
stated purposes offers to buy and the VENDORS, in a gesture of their
willing to cooperate with the above policy and commitments, agree to sell
the aforesaid property together with all the existing improvements there or
belonging to the VENDORS;
NOW, THEREFORE, for and in consideration of the foregoing premises
and the terms and conditions hereinbelow stipulated, the VENDORS
hereby, sell, transfer, cede and convey unto the VENDEE, its assigns, or
successors-in-interest, a parcel of land located at Bo. Tadiangan, Tuba,
Benguet containing a total area of FIFTY SIX THOUSAND EIGHT
HUNDRED NINETEEN (56,819) SQUARE METERS, more or less . . . .
Ordinarily, a party's motives for entering into the contract do not affect the contract.
However, when the motive predetermines the cause, the motive may be regarded as
the cause. In Liguez vs. Court of Appeals,
24
this Court, speaking through Justice J.B.L.
REYES, HELD:
. . . it is well to note, however, that Manresa himself (Vol. 8, pp.
641-642), while maintaining the distinction and upholding the
inoperativeness of the motives of the parties to determine the
validity of the contract, expressly excepts from the rule those
contracts that are conditioned upon the attainment of the motives of
either party.
The same view is held by the Supreme Court of Spain, in its
decisions of February 4, 1941, and December 4, 1946, holding that
the motive may be regarded as causa when it predetermines the
purpose of the contract.
In this case, it is clear, and petitioners do not dispute, that NHA would not have entered
into the contract were the lands not suitable for housing. In other words, the quality of
the land was an implied condition for the NHA to enter into the contract. On the part of
the NHA, therefore, the motive was the cause for its being a party to the sale.
Were the lands indeed unsuitable for housing as NHA claimed?
We deem the findings contained in the report of the Land Geosciences Bureau dated 15
July 1991 sufficient basis for the cancellation of the sale, thus:
In Tadiangan, Tuba, the housing site is situated in an area of
moderate topography. There [are] more areas of less sloping
ground apparently habitable. The site is underlain by . . . thick slide
deposits (4-45m) consisting of huge conglomerate boulders (see
Photo No. 2) mix[ed] with silty clay materials. These clay particles
when saturated have some swelling characteristics which is
dangerous for any civil structures especially mass housing
development.
25

Petitioners contend that the report was merely "preliminary," and not conclusive, as
indicated in its title:
MEMORANDUM
TO: EDWIN G. DOMINGO
Chief, Lands Geology Division
FROM: ARISTOTLE A. RILLON
Geologist II
SUBJECT: Preliminary Assessment of
Tadiangan Housing Project in Tuba, Benguet
26

Thus, page 2 of the report states in part:
xxx xxx xxx
Actually there is a need to conduct further geottechnical [sic]
studies in the NHA property. Standard Penetration Test (SPT) must
be carried out to give an estimate of the degree of compaction (the
relative density) of the slide deposit and also the bearing capacity
of the soil materials. Another thing to consider is the vulnerability of
the area to landslides and other mass movements due to thick soil
cover. Preventive physical mitigation methods such as surface and
subsurface drainage and regrading of the slope must be done in
the area.
27

We read the quoted portion, however, to mean only that further tests are required to
determine the "degree of compaction," "the bearing capacity of the soil materials," and
the "vulnerability of the area to landslides," since the tests already conducted were
inadequate to ascertain such geological attributes. It is only in this sense that the
assessment was "preliminary."
Accordingly, we hold that the NHA was justified in canceling the contract. The
realization of the mistake as regards the quality of the land resulted in the negation of
the motive/cause thus rendering the contract inexistent.
28
Article 1318 of the Civil Code
states that:
Art. 1318. There is no contract unless the following requisites
concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (Emphasis
supplied.)
Therefore, assuming that petitioners are parties, assignees or beneficiaries to the
contract of sale, they would not be entitled to any award of damages.
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.

G.R. No. 136433 December 6, 2006
ANTONIO B. BALTAZAR, petitioner,
vs.
HONORABLE OMBUDSMAN, EULOGIO M. MARIANO, JOSE D. JIMENEZ, JR.,
TORIBIO E. ILAO, JR. and ERNESTO R. SALENGA, respondents.
The Case
Ascribing grave abuse of discretion to respondent Ombudsman, this Petition for Review
on Certiorari,
1
under Rule 45 pursuant to Section 27 of RA 6770,
2
seeks to reverse and
set aside the November 26, 1997 Order
3
of the Office of the Special Prosecutor (OSP)
in OMB-1-94-3425 duly approved by then Ombudsman Aniano Desierto on August 21,
1998, which recommended the dismissal of the Information
4
in Criminal Case No.
23661 filed before the Sandiganbayan against respondents Pampanga Provincial
Adjudicator Toribio E. Ilao, Jr., Chief Legal Officer Eulogio M. Mariano and Legal Officer
Jose D. Jimenez, Jr. (both of the DAR Legal Division in San Fernando, Pampanga), and
Ernesto R. Salenga. The petition likewise seeks to set aside the October 30, 1998
Memorandum
5
of the OSP duly approved by the Ombudsman on November 27, 1998
which denied petitioner's Motion for Reconsideration.
6
Previously, the filing of the
Information against said respondents was authorized by the May 10, 1996
Resolution
7
and October 3, 1996 Order
8
of the Ombudsman which found probable
cause that they granted unwarranted benefits, advantage, and preference to respondent
Salenga in violation of Section 3 (e) of RA 3019.
9

The Facts
Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga.
Her Attorney-in-Fact Faustino R. Mercado leased the fishpond for PhP 230,000.00 to
Eduardo Lapid for a three (3)-year period, that is, from August 7, 1990 to August 7,
1993.
10
Lessee Eduardo Lapid in turn sub-leased the fishpond to Rafael Lopez for PhP
50,000.00 during the last seven (7) months of the original lease, that is, from January
10, 1993 to August 7, 1993.
11
RESPONDENT Ernesto Salenga was hired by Eduardo
Lapid as fishpond watchman (bante-encargado). In the sub-lease, Rafael Lopez
rehired respondent Salenga.
Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis
Lagman, sent his January 28, 1993 demand letter
12
to Rafael Lopez and Lourdes Lapid
for unpaid salaries and non-payment of the 10% share in the harvest.
On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga
informing the latter that for the last two (2) months of the sub-lease, he had given the
rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00.
13
This
prompted respondent Salenga to file a Complaint
14
before the Provincial Agrarian
Reform Adjudication Board (PARAB), Region III, San Fernando, Pampanga docketed
as DARAB Case No. 552-P93 entitled Ernesto R. Salenga v. Rafael L. Lopez and
Lourdes L. Lapid for Maintenance of Peaceful Possession, Collection of Sum of Money
and Supervision of Harvest. The Complaint was signed by respondent Jose D. Jimenez,
Jr., Legal Officer of the Department of Agrarian Reform (DAR) Region III Office in San
Fernando, Pampanga, as counsel for respondent Salenga; whereas respondent Eulogio
M. Mariano was the Chief Legal Officer of DAR Region III. The case was assigned to
respondent Toribio E. Ilao, Jr., Provincial Adjudicator of DARAB, Pampanga.
On May 10, 1993, respondent Salenga amended his complaint.
15
The amendments
included a prayer for the issuance of a temporary restraining order (TRO) and
preliminary injunction. However, before the prayer for the issuance of a TRO could be
acted upon, on June 16, 1993, respondent Salenga filed a Motion to Maintain Status
Quo and to Issue Restraining Order
16
which was set for hearing on June 22, 1993. In
the hearing, however, only respondent Salenga with his counsel appeared despite
notice to the other parties. Consequently, the ex-partepresentation of respondent
Salengas evidence in support of the prayer for the issuance of a restraining order was
allowed, since the motion was unopposed, and on July 21, 1993, respondent Ilao, Jr.
issued a TRO.
17

Thereafter, respondent Salenga asked for supervision of the harvest, which the board
sheriff did. Accordingly, defendants Lopez and Lapid received their respective shares
while respondent Salenga was given his share under protest. In the subsequent hearing
for the issuance of a preliminary injunction, again, only respondent Salenga appeared
and presented his evidence for the issuance of the writ.
Pending resolution of the case, Faustino Mercado, as Attorney-in-Fact of the fishpond
owner Paciencia Regala, filed a motion to intervene which was granted by respondent
Ilao, Jr. through the November 15, 1993 Order. After the trial, respondent Ilao, Jr.
rendered a Decision on May 29, 1995 dismissing the Complaint for lack of merit; but
losing plaintiff, respondent Salenga, appealed the decision before the DARAB Appellate
Board.
Complaint Before the Ombudsman
On November 24, 1994, pending resolution of the agrarian case, the instant case was
instituted by petitioner Antonio Baltazar, an alleged nephew of Faustino Mercado,
through a Complaint-Affidavit
18
against private respondents before the Office of the
Ombudsman which was docketed as OMB-1-94-3425 entitled Antonio B. Baltazar v.
Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao, Jr. and Ernesto Salenga for violation of
RA 3019. Petitioner charged private respondents of conspiracy through the issuance of
the TRO in allowing respondent Salenga to retain possession of the fishpond, operate it,
harvest the produce, and keep the sales under the safekeeping of other private
respondents. Moreover, petitioner maintains that respondent Ilao, Jr. had no jurisdiction
to hear and act on DARAB Case No. 552-P93 filed by respondent Salenga as there
was no tenancy relation between respondent Salenga and Rafael L. Lopez, and thus,
the complaint was dismissible on its face.
Through the December 14, 1994 Order,
19
the Ombudsman required private
respondents to file their counter-affidavits, affidavits of their witnesses, and other
controverting evidence. While the other respondents submitted their counter-affidavits,
respondent ILAO, J R. instead filed his February 9, 1995 motion to dismiss, February
21, 1995 Reply, and March 24, 1995 Rejoinder.
Ombudsmans Determination of Probable Cause
On May 10, 1996, the Ombudsman issued a Resolution
20
finding cause to bring
respondents to court, denying the motion to dismiss of respondent Ilao, Jr., and
recommending the filing of an Information for violation of Section 3 (e) of RA 3019.
Subsequently, respondent Ilao, Jr. filed his September 16, 1996 Motion for
Reconsideration and/or Re-investigation
21
which was denied through the October 3,
1996 Order.
22
Consequently, the March 17, 1997 Information
23
was filed against all the
private respondents before the Sandiganbayan which was docketed as Criminal Case
No. 23661.
Before the graft court, respondent Ilao, Jr. filed his May 19, 1997 Motion for
Reconsideration and/or Re-investigation which was granted through the August 29,
1997 Order.
24
On September 8, 1997, respondent Ilao, Jr. subsequently filed his
Counter-Affidavit
25
with attachments while petitioner did not file any reply-affidavit
despite notice to him. The OSP of the Ombudsman conducted the re-investigation; and
the result of the re-investigation was embodied in the assailed November 26, 1997
Order
26
which recommended the dismissal of the complaint in OMB-1-94-3425 against
all private respondents. Upon review, the Ombudsman approved the OSPs
recommendation on August 21, 1998.
Petitioners Motion for Reconsideration
27
was likewise denied by the OSP through the
October 30, 1998 Memorandum
28
which was approved by the Ombudsman on
November 27, 1998. Consequently, the trial prosecutor moved orally before the
Sandiganbayan for the dismissal of Criminal Case No. 23661 which was granted
through the December 11, 1998 Order.
29

Thus, the instant petition is before us.
The Issues
Petitioner raises two assignments of errors, to wit:
THE HONORABLE OMBUDSMAN ERRED IN GIVING DUE COURSE A
MISPLACED COUNTER-AFFIDAVIT FILED AFTER THE TERMINATION OF
THE PRELIMINARY INVESTIGATION AND/OR THE CASE WAS ALREADY
FILED BEFORE THE SANDIGANBAYAN.
ASSUMING OTHERWISE, THE HONORABLE OMBUDSMAN LIKEWISE
ERRED IN REVERSING HIS OWN RESOLUTION WHERE IT WAS RESOLVED
THAT ACCUSED AS PROVINCIAL AGRARIAN ADJUDICATOR HAS NO
JURISDICTION OVER A COMPLAINT WHERE THERE EXIST [sic] NO
TENANCY RELATIONSHIP CONSIDERING [sic] COMPLAINANT IS NOT A
TENANT BUT A "BANTE-ENCARGADO" OR WATCHMAN-OVERSEER HIRED
FOR A SALARY OF P3,000.00 PER MONTH AS ALLEGED IN HIS OWN
COMPLAINT.
30

Before delving into the errors raised by petitioner, we first address the preliminary
procedural issue of the authority and locus standi of petitioner to pursue the instant
petition.
Preliminary Issue: Legal Standing
Locus standi is defined as "a right of appearance in a court of justice x x x on a given
question."
31
In private suits, standing is governed by the "real-parties-in interest" rule
found in Section 2, Rule 3 of the 1997 Rules of Civil Procedure which provides that
"every action must be prosecuted or defended in the name of the real party in interest."
Accordingly, the "real-party-in interest" is "the party who stands to be benefited or
injured by the judgment in the suit or the party entitled to the avails of the
suit."
32
Succinctly put, the plaintiffs standing is based on their own right to the relief
sought.
The records show that petitioner is a non-lawyer appearing for himself and conducting
litigation in person. Petitioner instituted the instant case before the Ombudsman in his
own name. In so far as the Complaint-Affidavit filed before the Office of the
Ombudsman is concerned, there is no question on his authority and legal standing.
Indeed, the Office of the Ombudsman is mandated to "investigate and prosecute on its
own or on complaint by any person, any act or omission of any public officer or
employee, office or agency, when such act or omission appears to be illegal, unjust,
improper or inefficient (emphasis supplied)."
33
The Ombudsman can act on anonymous
complaints andmotu proprio inquire into alleged improper official acts or omissions from
whatever source, e.g., a newspaper.
34
Thus, any complainant may be entertained by the
Ombudsman for the latter to initiate an inquiry and investigation for alleged irregularities.
However, filing the petition in person before this Court is another matter. The Rules
allow a non-lawyer to conduct litigation in person and appear for oneself only when he is
a party to a legal controversy. Section 34 of Rule 138 pertinently provides, thus:
SEC. 34. By whom litigation conducted. In the court of a justice of the peace a
party may conduct his litigation in person, with the aid of an agent or friend
appointed by him for that purpose, or with the aid of an attorney. In any other
court, a party may conduct his litigation personally or by aid of an attorney,
and hisappearance must be either personal or by a duly authorized member of
the bar (emphases supplied).
Petitioner has no legal standing
Is petitioner a party or a real party in interest to have the locus standi to pursue the
instant petition? We answer in the negative.
While petitioner may be the complainant in OMB-1-94-3425, he is not a real party in
interest. Section 2, Rule 3 of the 1997 Rules of Civil Procedure stipulates, thus:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by law or these Rules, every action must
be prosecuted or defended in the name of the real party in interest.
The same concept is applied in criminal and administrative cases.
In the case at bar which involves a criminal proceeding stemming from a civil (agrarian)
case, it is clear that petitioner is not a real party in interest. Except being the
complainant, the records show that petitioner is a stranger to the agrarian case. It must
be recalled that the undisputed owner of the fishpond is Paciencia Regala, who
intervened in DARAB Case No. 552-P93 through her Attorney-in-Fact Faustino
Mercado in order to protect her interest. The motion for intervention filed by Faustino
Mercado, as agent of Paciencia Regala, was granted by respondent Provincial
Adjudicator Ilao, Jr. through the November 15, 1993 Order in DARAB Case No. 552-
P93.
Agency cannot be further delegated
Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit
and presented a Special Power of Attorney
35
(SPA) from Faustino Mercado. However,
such SPA is unavailing for petitioner. For one, petitioners principal, Faustino Mercado,
is an agent himself and as such cannot further delegate his agency to another.
Otherwise put, an agent cannot delegate to another the same agency. The legal
maxim potestas delegata non delegare potest; a power once delegated cannot be re-
delegated, while applied primarily in political law to the exercise of legislative power, is a
principle of agency.
36
For another, a re-delegation of the agency would be detrimental to
the principal as the second agent has no privity of contract with the former. In the instant
case, petitioner has no privity of contract with Paciencia Regala, owner of the fishpond
and principal of Faustino Mercado.
Moreover, while the Civil Code under Article 1892
37
allows the agent to appoint a
substitute, such is not the situation in the instant case. The SPA clearly delegates the
agency to petitioner to pursue the case and not merely as a substitute. Besides, it is
clear in the aforecited Article that what is allowed is a substitute and not a delegation of
the agency.
Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor
is he a real party in interest in the criminal proceedings conducted by the Ombudsman
as elevated to the Sandiganbayan. He is not a party who will be benefited or injured by
the results of both cases.
Petitioner: a stranger and not an injured private complainant
Petitioner only surfaced in November 1994 as complainant before the Ombudsman.
Aside from that, not being an agent of the parties in the agrarian case, he has no locus
standi to pursue this petition. He cannot be likened to an injured private complainant in
a criminal complaint who has direct interest in the outcome of the criminal case.
More so, we note that the petition is not pursued as a public suit with petitioner
asserting a "public right" in assailing an allegedly illegal official action, and doing so as a
representative of the general public. He is pursuing the instant case as an agent of an
ineffective agency.
Petitioner has not shown entitlement to judicial protection
Even if we consider the instant petition as a public suit, where we may consider
petitioner suing as a "stranger," or in the category of a "citizen," or "taxpayer," still
petitioner has not adequately shown that he is entitled to seek judicial protection. In
other words, petitioner has not made out a sufficient interest in the vindication of the
public order and the securing of relief as a "citizen" or "taxpayer"; more so when there is
no showing that he was injured by the dismissal of the criminal complaint before the
Sandiganbayan.
Based on the foregoing discussion, petitioner indubitably does not have locus standi to
pursue this action and the instant petition must be forthwith dismissed on that score.
Even granting arguendo that he has locus standi, nonetheless, petitioner fails to show
grave abuse of discretion of respondent Ombudsman to warrant a reversal of the
assailed November 26, 1997 Order and the October 30, 1998 Memorandum.
First Issue: Submission of Counter-Affidavit
The Sandiganbayan, not the Ombudsman, ordered re-investigation
On the substantive aspect, in the first assignment of error, petitioner imputes grave
abuse of discretion on public respondent Ombudsman for allowing respondent Ilao, Jr.
to submit his Counter-Affidavit when the preliminary investigation was already
concluded and an Information filed with the Sandiganbayan which assumed jurisdiction
over the criminal case. This contention is utterly erroneous.
The facts clearly show that it was not the Ombudsman through the OSP who allowed
respondent Ilao, Jr. to submit his Counter-Affidavit. It was the Sandiganbayan who
granted the prayed for re-investigation and ordered the OSP to conduct the re-
investigation through its August 29, 1997 Order, as follows:
Considering the manifestation of Prosecutor Cicero Jurado, Jr. that accused
Toribio E. Ilao, Jr. was not able to file his counter-affidavit in the preliminary
investigation, there appears to be some basis for granting the motion of said
accused for reinvestigation.
WHEREFORE, accused Toribio E. Ilao, Jr. may file his counter-affidavit, with
documentary evidence attached, if any, with the Office of the Special Prosecutor
within then (10) days from today. The prosecution is ordered to conduct a
reinvestigation within a period of thirty (30) days.
38
(Emphases supplied.)
As it is, public respondent Ombudsman through the OSP did not exercise any discretion
in allowing respondent Ilao, Jr. to submit his Counter-Affidavit. The OSP simply followed
the graft courts directive to conduct the re-investigation after the Counter-Affidavit of
respondent Ilao, Jr. was filed. Indeed, petitioner did not contest nor question the August
29, 1997 Order of the graft court. Moreover, petitioner did not file any reply-affidavit in
the re-investigation despite notice.
Re-investigation upon sound discretion of graft court
Furthermore, neither can we fault the graft court in granting the prayed for re-
investigation as it can readily be seen from the antecedent facts that respondent Ilao, Jr.
was not given the opportunity to file his Counter-Affidavit. Respondent Ilao, Jr. filed a
motion to dismiss with the Ombudsman but such was not resolved before the
Resolutionfinding cause to bring respondents to trialwas issued. In fact, respondent
Ilao, Jr.s motion to dismiss was resolved only through the May 10, 1996 Resolution
which recommended the filing of an Information. Respondent Ilao, Jr.s Motion for
Reconsideration and/or Re-investigation was denied and the Information was filed with
the graft court.
Verily, courts are given wide latitude to accord the accused ample opportunity to
present controverting evidence even before trial as demanded by due process. Thus,
we held in Villaflor v. Vivar that "[a] component part of due process in criminal justice,
preliminary investigation is a statutory and substantive right accorded to the accused
before trial. To deny their claim to a preliminary investigation would be to deprive them
of the full measure of their right to due process."
39

Second Issue: Agrarian Dispute
Anent the second assignment of error, petitioner contends that DARAB Case No. 552-
P93 is not an agrarian dispute and therefore outside the jurisdiction of the DARAB. He
maintains that respondent Salenga is not an agricultural tenant but a mere watchman of
the fishpond owned by Paciencia Regala. Moreover, petitioner further argues that
Rafael Lopez and Lourdes Lapid, the respondents in the DARAB case, are not the
owners of the fishpond.
Nature of the case determined by allegations in the complaint
This argument is likewise bereft of merit. Indeed, as aptly pointed out by respondents
and as borne out by the antecedent facts, respondent Ilao, Jr. could not have acted
otherwise. It is a settled rule that jurisdiction over the subject matter is determined by
the allegations of the complaint.
40
The nature of an action is determined by the material
averments in the complaint and the character of the relief sought,
41
not by the defenses
asserted in the answer or motion to dismiss.
42
Given that respondent Salengas
complaint and its attachment clearly spells out the jurisdictional allegations that he is an
agricultural tenant in possession of the fishpond and is about to be ejected from it,
clearly, respondent Ilao, Jr. could not be faulted in assuming jurisdiction as said
allegations characterize an agricultural dispute. Besides, whatever defense asserted in
an answer or motion to dismiss is not to be considered in resolving the issue on
jurisdiction as it cannot be made dependent upon the allegations of the defendant.
Issuance of TRO upon the sound discretion of hearing officer
As regards the issuance of the TRO, considering the proper assumption of jurisdiction
by respondent Ilao, Jr., it can be readily culled from the antecedent facts that his
issuance of the TRO was a proper exercise of discretion. Firstly, the averments with
evidence as to the existence of the need for the issuance of the restraining order were
manifest in respondent Salengas Motion to Maintain Status Quo and to Issue
Restraining Order,
43
the attached Police Investigation Report,
44
and Medical
Certificate.
45
Secondly, only respondent Salenga attended the June 22, 1993 hearing
despite notice to parties. Hence, Salengas motion was not only unopposed but his
evidence adduced ex-parte also adequately supported the issuance of the restraining
order.
Premises considered, respondent Ilao, Jr. has correctly assumed jurisdiction and
properly exercised his discretion in issuing the TROas respondent Ilao, Jr. aptly
maintained that giving due course to the complaint and issuing the TRO do not reflect
the final determination of the merits of the case. Indeed, after hearing the case,
respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing DARAB Case No.
552-P93 for lack of merit.
Court will not review prosecutors determination of probable cause
Finally, we will not delve into the merits of the Ombudsmans reversal of its initial finding
of probable cause or cause to bring respondents to trial. Firstly, petitioner has not
shown that the Ombudsman committed grave abuse of discretion in rendering such
reversal. Secondly, it is clear from the records that the initial finding embodied in the
May 10, 1996 Resolution was arrived at before the filing of respondent Ilao, Jr.s
Counter-Affidavit. Thirdly, it is the responsibility of the public prosecutor, in this case the
Ombudsman, to uphold the law, to prosecute the guilty, and to protect the innocent.
Lastly, the function of determining the existence of probable cause is proper for the
Ombudsman in this case and we will not tread on the realm of this executive function to
examine and assess evidence supplied by the parties, which is supposed to be
exercised at the start of criminal proceedings. In Perez v. Hagonoy Rural Bank,
Inc.,
46
as cited in Longos Rural Waterworks and Sanitation Association, Inc. v. Hon.
Desierto,
47
we had occasion to rule that we cannot pass upon the sufficiency or
insufficiency of evidence to determine the existence of probable cause.
48

WHEREFORE, the instant petition is DENIED for lack of merit, and the November 26,
1997 Order and the October 30, 1998 Memorandum of the Office of the Special
Prosecutor in Criminal Case No. 23661 (OMB-1-94-3425) are hereby AFFIRMED IN
TOTO, with costs against petitioner.
SO ORDERED.


G.R. No. 119858 April 29, 2003
EDWARD C. ONG, petitioner,
vs.
THE COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES, respondents.
CARPIO, J .:
The Case
Petitioner Edward C. Ong ("petitioner") filed this petition for review on certiorari
1
to
nullify the Decision
2
dated 27 October 1994 of the Court of Appeals in CA-G.R. C.R.
No. 14031, and its Resolution
3
dated 18 April 1995, denying petitioner's motion for
reconsideration. The assailed Decision affirmed in toto petitioner's conviction
4
by the
Regional Trial Court of Manila, Branch 35,
5
on two counts of estafa for violation of the
Trust Receipts Law,
6
as follows:
WHEREFORE, judgment is rendered: (1) pronouncing accused EDWARD C.
ONG guilty beyond reasonable doubt on two counts, as principal on both
counts, of ESTAFA defined under No. 1 (b) of Article 315 of the Revised Penal
Code in relation to Section 13 of Presidential Decree No. 115, and penalized
under the 1st paragraph of the same Article 315, and sentenced said accused in
each count to TEN (10) YEARS of prision mayor, as minimum, to TWENTY (20)
YEARS of reclusion temporal, as maximum;
(2) ACQUITTING accused BENITO ONG of the crime charged against him, his
guilt thereof not having been established by the People beyond reasonable
doubt;
(3) Ordering accused Edward C. Ong to pay private complainant Solid Bank
Corporation the aggregate sum of P2,976,576.37 as reparation for the damages
said accused caused to the private complainant, plus the interest thereon at the
legal rate and the penalty of 1% per month, both interest and penalty computed
from July 15, 1991, until the principal obligation is fully paid;
(4) Ordering Benito Ong to pay, jointly and severally with Edward C. Ong, the
private complainant the legal interest and the penalty of 1% per month due and
accruing on the unpaid amount of P1,449,395.71, still owing to the private
offended under the trust receipt Exhibit C, computed from July 15, 1991, until the
said unpaid obligation is fully paid;
(5) Ordering accused Edward C. Ong to pay the costs of these two actions.
SO ORDERED.
7

The Charge
Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and
Benito Ong with two counts ofestafa under separate Informations dated 11 October
1991.
In Criminal Case No. 92-101989, the Information indicts petitioner and Benito Ong of
the crime of estafa committed as follows:
That on or about July 23, 1990, in the City of Manila, Philippines, the said
accused, representing ARMAGRI International Corporation, conspiring and
confederating together did then and there willfully, unlawfully and feloniously
defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO
LAZARO, a corporation duly organized and existing under the laws of the
Philippines located at Juan Luna Street, Binondo, this City, in the following
manner, to wit: the said accused received in trust from said SOLIDBANK
Corporation the following, to wit:
10,000 bags of urea
valued at P2,050,000.00 specified in a Trust Receipt Agreement and covered
by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil
Corporation; under the express obligation on the part of the said accused to
account for said goods to Solidbank Corporation and/or remit the proceeds of the
sale thereof within the period specified in the Agreement or return the goods, if
unsold immediately or upon demand; but said accused, once in possession of
said goods, far from complying with the aforesaid obligation failed and refused
and still fails and refuses to do so despite repeated demands made upon him to
that effect and with intent to defraud, willfully, unlawfully and feloniously
misapplied, misappropriated and converted the same or the value thereof to his
own personal use and benefit, to the damage and prejudice of the said Solidbank
Corporation in the aforesaid amount of P2,050,000.00 Philippine Currency.
Contrary to law.
In Criminal Case No. 92-101990, the Information likewise charges petitioner of the
crime of estafa committed as follows:
That on or about July 6, 1990, in the City of Manila, Philippines, the said
accused, representing ARMAGRI International Corporation, did then and there
willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation
represented by its Accountant, DEMETRIO LAZARO, a corporation duly
organized and existing under the laws of the Philippines located at Juan Luna
Street, Binondo, this City, in the following manner, to wit: the said accused
received in trust from said SOLIDBANK Corporation the following goods, to wit:
125 pcs. Rear diff. assy RNZO 49"
50 pcs. Front & Rear diff assy. Isuzu Elof
85 units 1-Beam assy. Isuzu Spz
all valued at P2,532,500.00 specified in a Trust Receipt Agreement and covered
by a Domestic Letter of Credit No. DOM GD 90-006 in favor of the Metropole
Industrial Sales with address at P.O. Box AC 219, Quezon City; under the
express obligation on the part of the said accused to account for said goods to
Solidbank Corporation and/or remit the proceeds of the sale thereof within the
period specified in the Agreement or return the goods, if unsold immediately or
upon demand; but said accused, once in possession of said goods, far from
complying with the aforesaid obligation failed and refused and still fails and
refuses to do so despite repeated demands made upon him to that effect and
with intent to defraud, willfully, unlawfully and feloniously misapplied,
misappropriated and converted the same or the value thereof to his own personal
use and benefit, to the damage and prejudice of the said Solidbank Corporation
in the aforesaid amount of P2,532,500.00 Philippine Currency.
Contrary to law.
Arraignment and Plea
With the assistance of counsel, petitioner and Benito Ong both pleaded not guilty
when arraigned. Thereafter, trial ensued.
Version of the Prosecution
The prosecution's evidence disclosed that on 22 June 1990, petitioner, representing
ARMAGRI International Corporation
8
("ARMAGRI"), applied for a letter of credit for
P2,532,500.00 with SOLIDBANK Corporation ("Bank") to finance the purchase of
differential assemblies from Metropole Industrial Sales. On 6 July 1990, petitioner,
representing ARMAGRI, executed a trust receipt
9
acknowledging receipt from the Bank
of the goods valued at P2,532,500.00.
On 12 July 1990, petitioner and Benito Ong, representing ARMAGRI, applied for
another letter of credit for P2,050,000.00 to finance the purchase of merchandise from
Fertiphil Corporation. The Bank approved the application, opened the letter of credit and
paid to Fertiphil Corporation the amount of P2,050,000.00. On 23 July 1990, petitioner,
signing for ARMAGRI, executed another trust receipt
10
in favor of the Bank
acknowledging receipt of the merchandise.
Both trust receipts contained the same stipulations. Under the trust receipts,
ARMAGRI undertook to account for the goods held in trust for the Bank, or if the goods
are sold, to turn over the proceeds to the Bank. ARMAGRI also undertook the obligation
to keep the proceeds in the form of money, bills or receivables as the separate property
of the Bank or to return the goods upon demand by the Bank, if not sold. In addition,
petitioner executed the following additional undertaking stamped on the dorsal portion of
both trust receipts:
I/We jointly and severally agreed to any increase or decrease in the interest rate
which may occur after July 1, 1981, when the Central Bank floated the interest
rates, and to pay additionally the penalty of 1% per month until the amount/s or
installment/s due and unpaid under the trust receipt on the reverse side hereof
is/are fully paid.
11

Petitioner signed alone the foregoing additional undertaking in the Trust Receipt for
P2,253,500.00, while both petitioner and Benito Ong signed the additional undertaking
in the Trust Receipt for P2,050,000.00.
When the trust receipts became due and demandable, ARMAGRI failed to pay or
deliver the goods to the Bank despite several demand letters.
12
Consequently, as of 31
May 1991, the unpaid account under the first trust receipt amounted to
P1,527,180.66,
13
while the unpaid account under the second trust receipt amounted to
P1,449,395.71.
14

Version of the Defense
After the prosecution rested its case, petitioner and Benito Ong, through counsel,
manifested in open court that they were waiving their right to present evidence. The trial
court then considered the case submitted for decision.
15

The Ruling of the Court of Appeals
Petitioner appealed his conviction to the Court of Appeals. On 27 October 1994, the
Court of Appeals affirmed the trial court's decision in toto. Petitioner filed a motion for
reconsideration but the same was denied by the Court of Appeals in the Resolution
dated 18 April 1995.
The Court of Appeals held that although petitioner is neither a director nor an officer of
ARMAGRI, he certainly comes within the term "employees or other x x x persons
therein responsible for the offense" in Section 13 of the Trust Receipts Law. The Court
of Appeals explained as follows:
It is not disputed that appellant transacted with the Solid Bank on behalf of
ARMAGRI. This is because the Corporation cannot by itself transact business or
sign documents it being an artificial person. It has to accomplish these through its
agents. A corporation has a personality distinct and separate from those acting
on its behalf. In the fulfillment of its purpose, the corporation by necessity has to
employ persons to act on its behalf.
Being a mere artificial person, the law (Section 13, P.D. 115) recognizes the
impossibility of imposing the penalty of imprisonment on the corporation itself.
For this reason, it is the officers or employees or other persons whom the law
holds responsible.
16

The Court of Appeals ruled that what made petitioner liable was his failure to account to
the entruster Bank what he undertook to perform under the trust receipts. The Court of
Appeals held that ARMAGRI, which petitioner represented, could not itself negotiate the
execution of the trust receipts, go to the Bank to receive, return or account for the
entrusted goods. Based on the representations of petitioner, the Bank accepted the
trust receipts and, consequently, expected petitioner to return or account for the goods
entrusted.
17

The Court of Appeals also ruled that the prosecution need not prove that petitioner is
occupying a position in ARMAGRI in the nature of an officer or similar position to hold
him the "person(s) therein responsible for the offense." The Court of Appeals held that
petitioner's admission that his participation was merely incidental still makes him fall
within the purview of the law as one of the corporation's "employees or other officials or
persons therein responsible for the offense." Incidental or not, petitioner was then acting
on behalf of ARMAGRI, carrying out the corporation's decision when he signed the trust
receipts.
The Court of Appeals further ruled that the prosecution need not prove that petitioner
personally received and misappropriated the goods subject of the trust receipts.
Evidence of misappropriation is not required under the Trust Receipts Law. To establish
the crime of estafa, it is sufficient to show failure by the entrustee to turn over the goods
or the proceeds of the sale of the goods covered by a trust receipt. Moreover, the bank
is not obliged to determine if the goods came into the actual possession of the
entrustee. Trust receipts are issued to facilitate the purchase of merchandise. To
obligate the bank to examine the fact of actual possession by the entrustee of the goods
subject of every trust receipt will greatly impede commercial transactions.
Hence, this petition.
The Issues
Petitioner seeks to reverse his conviction by contending that the Court of Appeals erred:
1. IN RULING THAT, BY THE MERE CIRCUMSTANCE THAT PETITIONER
ACTED AS AGENT AND SIGNED FOR THE ENTRUSTEE CORPORATION,
PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE
OFFENSE; AND
2. IN CONVICTING PETITIONER UNDER SPECIFICATIONS NOT ALLEGED IN
THE INFORMATION.
The Ruling of the Court
The Court sustains the conviction of petitioner.
First Assigned Error: Petitioner comes
within the purview of Section 13 of the Trust Receipts Law.
Petitioner contends that the Court of Appeals erred in finding him liable for the default of
ARMAGRI, arguing that in signing the trust receipts, he merely acted as an agent of
ARMAGRI. Petitioner asserts that nowhere in the trust receipts did he assume personal
responsibility for the undertakings of ARMAGRI which was the entrustee.
Petitioner's arguments fail to persuade us.
The pivotal issue for resolution is whether petitioner comes within the purview of Section
13 of the Trust Receipts Law which provides:
x x x . If the violation is committed by a corporation, partnership, association or
other juridical entities, the penalty provided for in this Decree shall be imposed
upon the directors, officers, employees or other officials or persons therein
responsible for the offense, without prejudice to the civil liabilities arising from the
offense. (Emphasis supplied)
We hold that petitioner is a person responsible for violation of the Trust Receipts Law.
The relevant penal provision of the Trust Receipts Law reads:
SEC. 13. Penalty Clause. - The failure of the entrustee to turn over the proceeds
of the sale of the goods, documents or instruments covered by a trust receipt to
the extent of the amount owing to the entruster or as appears in the trust receipt
or to return said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall constitute the
crime of estafa, punishable under the provisions of Article Three Hundred and
Fifteen, Paragraph One (b), of Act Numbered Three Thousand Eight Hundred
and Fifteen, as amended, otherwise known as the Revised Penal Code. If the
violation or offense is committed by a corporation, partnership, association or
other juridical entities, the penalty provided for in this Decree shall be imposed
upon the directors, officers, employees or other officials or persons therein
responsible for the offense, without prejudice to the civil liabilities arising from the
criminal offense. (Emphasis supplied)
The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the
proceeds of the sale of the goods, or (2) return the goods covered by the trust receipts if
the goods are not sold.
18
The mere failure to account or return gives rise to the crime
which is malum prohibitum.
19
There is no requirement to prove intent to defraud.
20

The Trust Receipts Law recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes
the officers or employees or other persons responsible for the offense liable to suffer the
penalty of imprisonment. The reason is obvious: corporations, partnerships,
associations and other juridical entities cannot be put to jail. Hence, the criminal liability
falls on the human agent responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee.
Being the entrustee, ARMAGRI was the one responsible to account for the goods or its
proceeds in case of sale. However, the criminal liability for violation of the Trust
Receipts Law falls on the human agent responsible for the violation. Petitioner, who
admits being the agent of ARMAGRI, is the person responsible for the offense for two
reasons. First, petitioner is the signatory to the trust receipts, the loan applications and
the letters of credit. Second, despite being the signatory to the trust receipts and the
other documents, petitioner did not explain or show why he is not responsible for the
failure to turn over the proceeds of the sale or account for the goods covered by the
trust receipts.
The Bank released the goods to ARMAGRI upon execution of the trust receipts and as
part of the loan transactions of ARMAGRI. The Bank had a right to demand from
ARMAGRI payment or at least a return of the goods. ARMAGRI failed to pay or return
the goods despite repeated demands by the Bank.
It is a well-settled doctrine long before the enactment of the Trust Receipts Law, that the
failure to account, upon demand, for funds or property held in trust is evidence of
conversion or misappropriation.
21
Under the law, mere failure by the entrustee to
account for the goods received in trust constitutes estafa. The Trust Receipts Law
punishes dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of public order.
22
The mere failure to deliver the proceeds of the sale or the
goods if not sold constitutes a criminal offense that causes prejudice not only to the
creditor, but also to the public interest.
23
Evidently, the Bank suffered prejudice for
neither money nor the goods were turned over to the Bank.
The Trust Receipts Law expressly makes the corporation's officers or employees
or other persons therein responsible for the offense liable to suffer the penalty of
imprisonment. In the instant case, petitioner signed the two trust receipts on behalf of
ARMAGRI 24 as the latter could only act through its agents. When petitioner signed the
trust receipts, he acknowledged receipt of the goods covered by the trust receipts. In
addition, petitioner was fully aware of the terms and conditions stated in the trust
receipts, including the obligation to turn over the proceeds of the sale or return the
goods to the Bank, to wit:
Received, upon the TRUST hereinafter mentioned from SOLIDBANK
CORPORATION (hereafter referred to as the BANK), the following goods and
merchandise, the property of said BANK specified in the bill of lading as follows:
x x x and in consideration thereof, I/we hereby agree to hold said goods in Trust
for the said BANKand as its property with liberty to sell the same for its account
but without authority to make any other disposition whatsoever of the said goods
or any part thereof (or the proceeds thereof) either by way of conditional sale,
pledge, or otherwise.
In case of sale I/we agree to hand the proceeds as soon as received to the
BANK to apply against the relative acceptance (as described above) and for the
payment of any other indebtedness of mine/ours to SOLIDBANK
CORPORATION.
xxx xxx xxx.
I/we agree to keep said goods, manufactured products, or proceeds thereof,
whether in the form of money or bills, receivables, or accounts, separate and
capable of identification as the property of the BANK.
I/we further agree to return the goods, documents, or instruments in the event of
their non-sale, upon demand or within ____ days, at the option of the BANK.
xxx xxx xxx. (Emphasis supplied)
25

True, petitioner acted on behalf of ARMAGRI. However, it is a well-settled rule that
THE LAW OF AGENCY governing civil cases has no application in criminal cases.
When a person participates in the commission of a crime, he cannot escape
punishment on the ground that he simply acted as an agent of another party.
26
In the
instant case, the Bank accepted the trust receipts signed by petitioner based on
petitioner's representations. It is the fact of being the signatory to the two trust
receipts, and thus a direct participant to the crime, which makes petitioner a person
responsible for the offense.
Petitioner could have raised the defense that he had nothing to do with the failure to
account for the proceeds or to return the goods. Petitioner could have shown that he
had severed his relationship with ARMAGRI prior to the loss of the proceeds or the
disappearance of the goods. Petitioner, however, waived his right to present any
evidence, and thus failed to show that he is not responsible for the violation of the Trust
Receipts Law.
There is no dispute that on 6 July 1990 and on 23 July 1990, petitioner signed the two
trust receipts
27
on behalf of ARMAGRI. Petitioner, acting on behalf of ARMAGRI,
expressly acknowledged receipt of the goods in trust for the Bank. ARMAGRI failed to
comply with its undertakings under the trust receipts. On the other hand, petitioner failed
to explain and communicate to the Bank what happened to the goods despite repeated
demands from the Bank. As of 13 May 1991, the unpaid account under the first and
second trust receipts amounted to P1,527,180.60 and P1,449,395.71, respectively.
28

Second Assigned Error: Petitioner's conviction under the
allegations in the two Informations for Estafa.
Petitioner argues that he cannot be convicted on a new set of facts not alleged in the
Informations. Petitioner claims that the trial court's decision found that it was ARMAGRI
that transacted with the Bank, acting through petitioner as its agent. Petitioner asserts
that this contradicts the specific allegation in the Informations that it was petitioner who
was constituted as the entrustee and was thus obligated to account for the goods or its
proceeds if sold. Petitioner maintains that this absolves him from criminal liability.
We find no merit in petitioner's arguments.
Contrary to petitioner's assertions, the Informations explicitly allege that petitioner,
representing ARMAGRI, defrauded the Bank by failing to remit the proceeds of the sale
or to return the goods despite demands by the Bank, to the latter's prejudice. As an
essential element of estafa with abuse of confidence, it is sufficient that the Informations
specifically allege that the entrustee received the goods. The Informations expressly
state that ARMAGRI, represented by petitioner, received the goods in trust for the Bank
under the express obligation to remit the proceeds of the sale or to return the goods
upon demand by the Bank. There is no need to allege in the Informations in what
capacity petitioner participated to hold him responsible for the offense. Under the Trust
Receipts Law, it is sufficient to allege and establish the failure of ARMAGRI, whom
petitioner represented, to remit the proceeds or to return the goods to the Bank.
When petitioner signed the trust receipts, he claimed he was representing ARMAGRI.
The corporation obviously acts only through its human agents and it is the conduct of
such agents which the law must deter.
29
The existence of the corporate entity does not
shield from prosecution the agent who knowingly and intentionally commits a crime at
the instance of a corporation.
30

Penalty for the crime of Estafa.
The penalty for the crime of estafa is prescribed in Article 315 of the Revised Penal
Code, as follows:
1st. The penalty of prision correccional in its maximum period to prision mayor in
its minimum period, if the amount of the fraud is over 12,000 pesos but does not
exceed 22,000 pesos; and if such amount exceeds the latter sum, the penalty
provided in this paragraph shall be imposed in its maximum period, adding one
year for each additional 10,000 pesos; but the total penalty which may be
imposed should not exceed twenty years. x x x .
In the instant case, the amount of the fraud in Criminal Case No. 92-101989 is
P1,527,180.66. In Criminal Case No. 92-101990, the amount of the fraud is
P1,449,395.71. Since the amounts of the fraud in each estafa exceeds P22,000.00, the
penalty of prision correccional maximum to prision mayor minimum should be imposed
in its maximum period as prescribed in Article 315 of the Revised Penal Code. The
maximum indeterminate sentence should be taken from this maximum period which has
a duration of 6 years, 8 months and 21 days to 8 years. One year is then added for
each additional P10,000.00, but the total penalty should not exceed 20 years. Thus, the
maximum penalty for each count of estafa in this case should be 20 years.
Under the Indeterminate Sentence Law, the minimum indeterminate sentence can be
anywhere within the range of the penalty next lower in degree to the penalty prescribed
by the Code for the offense. The minimum range of the penalty is determined without
first considering any modifying circumstance attendant to the commission of the crime
and without reference to the periods into which it may be subdivided.
31
The modifying
circumstances are considered only in the imposition of the maximum term of the
indeterminate sentence.
32
Since the penalty prescribed in Article 315 is prision
correccional maximum to prision mayor minimum, the penalty next lower in degree
would be prision correccional minimum to medium. Thus, the minimum term of the
indeterminate penalty should be anywhere within 6 months and 1 day to 4 years and 2
months.
33

Accordingly, the Court finds a need to modify in part the penalties imposed by the trial
court. The minimum penalty for each count of estafa should be reduced to four (4) years
and two (2) months of prision correccional.
As for the civil liability arising from the criminal offense, the question is whether as the
signatory for ARMAGRI, petitioner is personally liable pursuant to the provision of
Section 13 of the Trust Receipts Law.
In Prudential Bank v. Intermediate Appellate Court,
34
the Court discussed the imposition
of civil liability for violation of the Trust Receipts Law in this wise:
It is clear that if the violation or offense is committed by a corporation,
partnership, association or other juridical entities, the penalty shall be imposed
upon the directors, officers, employees or other officials or persons responsible
for the offense. The penalty referred to is imprisonment, the duration of which
would depend on the amount of the fraud as provided for in Article 315 of the
Revised Penal Code. The reason for this is obvious: corporation, partnership,
association or other juridical entities cannot be put in jail. However, it is these
entities which are made liable for the civil liabilities arising from the criminal
offense. This is the import of the clause 'without prejudice to the civil liabilities
arising from the criminal offense'. (Emphasis supplied)
In Prudential Bank, the Court ruled that the person signing the trust receipt for the
corporation is not solidarily liable with the entrustee-corporation for the civil liability
arising from the criminal offense. He may, however, be personally liable if he bound
himself to pay the debt of the corporation under a separate contract of surety or
guaranty.
In the instant case, petitioner did not sign in his personal capacity the solidary
guarantee clause 35 found on the dorsal portion of the trust receipts. Petitioner placed
his signature after the typewritten words "ARMCO INDUSTRIAL CORPORATION"
found at the end of the solidary guarantee clause. Evidently, petitioner did not undertake
to guaranty personally the payment of the principal and interest of ARMAGRI's debt
under the two trust receipts.
In contrast, petitioner signed the stamped additional undertaking without any indication
he was signing for ARMAGRI. Petitioner merely placed his signature after the additional
undertaking. Clearly, what petitioner signed in his personal capacity was the stamped
additional undertaking to pay a monthly penalty of 1% of the total obligation in case of
ARMAGRI's default.
In the additional undertaking, petitioner bound himself to pay "jointly and severally" a
monthly penalty of 1% in case of ARMAGRI's default. 35 Thus, petitioner is liable to the
Bank for the stipulated monthly penalty of 1% on the outstanding amount of each trust
receipt. The penalty shall be computed from 15 July 1991, when petitioner received the
demand letter, 36 until the debt is fully paid.
WHEREFORE, the assailed Decision is AFFIRMED with MODIFICATION. In Criminal
Case No. 92-101989 and in Criminal Case No. 92-101990, for each count of estafa,
petitioner EDWARD C. ONG is sentenced to an indeterminate penalty of imprisonment
from four (4) years and two (2) months of prision correctional as MINIMUM, to twenty
(20) years of reclusion temporal as MAXIMUM. Petitioner is ordered to pay
SOLIDBANK CORPORATION the stipulated penalty of 1% per month on the
outstanding balance of the two trust receipts to be computed from 15 July 1991 until the
debt is fully paid.
SO ORDERED.

G.R. No. 156262 July 14, 2005
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses
ANASTACIO and MARY T. BUENAVENTURA, Petitioners,
vs.
HEIRS OF BARTOLOME RAMOS, Respondents.
D E C I S I O N
PANGANIBAN, J .:
Stripped of nonessentials, the present case involves the collection of a sum of money.
Specifically, this case arose from the failure of petitioners to pay respondents
predecessor-in-interest. This fact was shown by the non-encashment of checks
issued by a third person, but indorsed by herein Petitioner Maria Tuazon in favor of the
said predecessor. Under these circumstances, to enable respondents to collect on the
indebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suit
is directed, not against the drawer, but against the debtor who indorsed the checks in
payment of the obligation.
The Case
Before us is a Petition for Review
1
under Rule 45 of the Rules of Court, challenging the
July 31, 2002 Decision
2
of the Court of Appeals (CA) in CA-GR CV No. 46535. The
decretal portion of the assailed Decision reads:
"WHEREFORE, the appeal is DISMISSED and the appealed decision is AFFIRMED."
On the other hand, the affirmed Decision
3
of Branch 34 of the Regional Trial Court
(RTC) of Gapan, Nueva Ecija, disposed as follows:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to
pay the plaintiffs, as follows:
"1. The sum of P1,750,050.00, with interests from the filing of the second amended
complaint;
"2. The sum of P50,000.00, as attorneys fees;
"3. The sum of P20,000.00, as moral damages
"4. And to pay the costs of suit.
x x x x x x x x x"
4

The Facts
The facts are narrated by the CA as follows:
"[Respondents] alleged that between the period of May 2, 1988 and June 5, 1988,
spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from [the
deceased Bartolome] Ramos [predecessor-in-interest of respondents]. That of this
[quantity,] x x x only 4,437 cavans [have been paid for so far], leaving unpaid 3,889
cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon issued x x x
[several] Traders Royal Bank checks.
x x x x x x x x x
[B]ut when these [checks] were encashed, all of the checks bounced due to
insufficiency of funds. [Respondents] advanced that before issuing said checks[,]
spouses Tuazon already knew that they had no available fund to support the checks,
and they failed to provide for the payment of these despite repeated demands made on
them.
"[Respondents] averred that because spouses Tuazon anticipated that they would be
sued, they conspired with the other [defendants] to defraud them as creditors by
executing x x x fictitious sales of their properties. They executed x x x simulated
sale[s] [of three lots] in favor of the x x x spouses Buenaventura x x x[,] as well as their
residential lot and the house thereon[,] all located at Nueva Ecija, and another simulated
deed of sale dated July 12, 1988 of a Stake Toyota registered with the Land
Transportation Office of Cabanatuan City on September 7, 1988. [Co-petitioner] Melecio
Tuazon, a son of spouses Tuazon, registered a fictitious Deed of Sale on July 19, 1988
x x x over a residential lot located at Nueva Ecija. Another simulated sale of a Toyota
Willys was executed on January 25, 1988 in favor of their other son, [co-petitioner]
Alejandro Tuazon x x x. As a result of the said sales, the titles of these properties issued
in the names of spouses Tuazon were cancelled and new ones were issued in favor of
the [co-]defendants spouses Buenaventura, Alejandro Tuazon and Melecio Tuazon.
Resultantly, by the said ante-dated and simulated sales and the corresponding transfers
there was no more property left registered in the names of spouses Tuazon answerable
to creditors, to the damage and prejudice of [respondents].
"For their part, defendants denied having purchased x x x rice from [Bartolome]
Ramos. They alleged that it was Magdalena Ramos, wife of said deceased, who
owned and traded the merchandise and Maria Tuazon was MERELY HER AGENT.
They argued that it was Evangeline Santos who was the buyer of the rice and issued
the checks to Maria Tuazon as payments therefor. In good faith[,] the checks were
received [by petitioner] from Evangeline Santos and turned over to Ramos without
knowing that these were not funded. And it is for this reason that [petitioners] have
been insisting on the inclusion of Evangeline Santos as an indispensable party,
and her non-inclusion was a fatal error. Refuting that the sale of several properties
were fictitious or simulated, spouses Tuazon contended that these were sold
because they were then meeting financial difficulties but the disposals were made for
value and in good faith and done before the filing of the instant suit. To dispute the
contention of plaintiffs that they were the buyers of the rice, they argued that there was
no sales invoice, official receipts or like evidence to prove this. They assert that they
were merely agents and should not be held answerable."
5

The corresponding civil and criminal cases were filed by respondents against
Spouses Tuazon. Those cases were later consolidated and amended to include
Spouses Anastacio and Mary Buenaventura, with Alejandro Tuazon and Melecio
Tuazon as additional defendants. Having passed away before the pretrial, Bartolome
Ramos was substituted by his heirs, herein respondents.
Contending that Evangeline Santos was an indispensable party in the case, petitioners
moved to file a third-party complaint against her. Allegedly, she was primarily liable
to respondents, because she was the one who had purchased the merchandise from
their predecessor, as evidenced by the fact that the checks had been drawn in her
name. The RTC, however, denied petitioners Motion.
Since the trial court acquitted petitioners in all three of the consolidated criminal cases,
they appealed only its decision finding them civilly liable to respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed to prove the existence of
an agency between respondents and Spouses Tuazon. The appellate
court disbelieved petitioners contention that Evangeline Santos should have been
impleaded as an indispensable party. Inasmuch as all the checks had been indorsed by
Maria Tuazon, who thereby became liable to subsequent holders for the amounts stated
in those checks, there was no need to implead Santos.
Hence, this Petition.
6

Issues
Petitioners raise the following issues for our consideration:
"1. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not
agents of the respondents.
"2. Whether or not the Honorable Court of Appeals erred in rendering judgment against
the petitioners despite x x x the failure of the respondents to include in their action
Evangeline Santos, an indispensable party to the suit."
7

The Courts Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Courts role in a petition under Rule 45 is
limited to reviewing errors of law allegedly committed by the Court of Appeals. Factual
findings of the trial court, especially when affirmed by the CA, are conclusive on the
parties and this Court.
8
Petitioners have not given us sufficient reasons to deviate from
this rule.
In a contract of agency, one binds oneself to render some service or to do something in
representation or on behalf of another, with the latters consent or authority.
9
The
following are the elements of agency: (1) the parties consent, express or implied, to
establish the relationship; (2) the object, which is the execution of a juridical act in
relation to a third person; (3) the representation, by which the one who acts as an agent
does so, not for oneself, but as a representative; (4) the limitation that the agent acts
within the scope of his or her authority.
10
As the basis of agency is representation, there
must be, on the part of the principal, an actual intention to appoint, an intention naturally
inferable from the principals words or actions. In the same manner, there must be an
intention on the part of the agent to accept the appointment and act upon it. Absent
such mutual intent, there is generally no agency.
11

This Court finds no reversible error in the findings of the courts a quo that petitioners
were the rice buyers themselves; they were not mere agents of respondents in their rice
dealership. The question of whether a contract is one of sale or of agency depends on
the intention of the parties.
12

The declarations of agents alone are generally insufficient to establish the fact or
extent of their authority.
13
The LAW MAKES NO PRESUMPTION OF AGENCY;
proving its existence, nature and extent is incumbent upon the person alleging it.
14
In
the present case, petitioners raise the fact of agency as an affirmative defense, yet fail
to prove its existence.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos for
collection of the amounts represented by the bounced checks, in a separate civil case
that they sought to be consolidated with the current one. If, as they claim, they were
mere agents of respondents, petitioners should have brought the suit against Santos for
and on behalf of their alleged principal, in accordance with Section 2 of Rule 3 of the
Rules on Civil Procedure.
15
Their filing a suit against her in their own names negates
their claim that they acted as mere agents in selling the rice obtained from Bartolome
Ramos.
Second Issue:
Indispensable Party
Petitioners argue that the lower courts erred in not allowing Evangeline Santos to be
impleaded as an indispensable party. They insist that respondents Complaint against
them is based on the bouncing checks she issued; hence, they point to her as the
person primarily liable for the obligation.
We hold that respondents cause of action is clearly founded on petitioners failure to
pay the purchase price of the rice. The trial court held that Petitioner Maria Tuazon had
indorsed the questioned checks in favor of respondents, in accordance with Sections 31
and 63 of the Negotiable Instruments Law.
16
That Santos was the drawer of the
checks is thus immaterial to the respondents cause of action.
As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks
were to be accepted or paid, or both, according to their tenor; and that in case they
were dishonored, she would pay the corresponding amount.
17
After an instrument is
dishonored by nonpayment, indorsers cease to be merely secondarily liable; they
become principal debtors whose liability becomes identical to that of the original obligor.
The holder of a negotiable instrument need not even proceed against the maker before
suing the indorser.
18
Clearly, Evangeline Santos -- as the drawer of the checks -- is not
an indispensable party in an action against Maria Tuazon, the indorser of the checks.
Indispensable parties are defined as "parties in interest without whom no final
determination can be had."
19
The instant case was originally one for the collection of the
purchase price of the rice bought by Maria Tuazon from respondents predecessor. In
this case, it is clear that there is no privity of contract between respondents and Santos.
Hence, a final determination of the rights and interest of the parties may be made
without any need to implead her.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioners.
SO ORDERED.

G.R. No. 145817 October 19, 2011
URBAN BANK, INC, Petitioner,
vs.
MAGDALENO M. PEA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 145822
DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, and ERIC L. LEE, Petitioners,
vs.
MAGDALENO M. PEA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 162562
MAGDALENO M. PEA, Petitioner,
vs.
URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR.,
BENJAMIN L. DE LEON, P. SIERVO H. DIZON, ERIC L. LEE, BEN T. LIM, JR.,
CORAZON BEJASA, and ARTURO MANUEL, JR.,Respondents.
D E C I S I O N
SERENO, J .:
These consolidated petitions began as a simple case for payment of services rendered
and for reimbursement of costs. The case spun a web of suits and counter-suits
because of: (1) the size of the award for agents fee rendered in favor of Atty.
Magdaleno Pea (Pea) PhP24,000,000 rendered by the trial court; (2) the
controversial execution of the full judgment award of PhP28,500,000 (agents fee plus
reimbursement for costs and other damages) pending appeal; and (3) the finding of
solidary liability against Urban Bank, Inc., and several of its corporate officers and
directors together with the concomitant levying and sale in execution of the personal
(even conjugal) properties of those officers and directors; and (4) the fact that assets
with declared conservative values of at least PhP181 Million which, together with those
with undeclared values could reach very much more than such amount,
1
were levied or
sold on execution pending appeal to satisfy the PhP28.5 Million award in favor of Atty.
Pea. Incidentally, two supersedeas bonds worth PhP80 Million (2.8 times the amount
of the judgment) were filed by Urban Bank and some of its officers and directors to stay
the execution pending appeal.
Had the four attendant circumstances not afflicted the original case, it would have been
an open-and-shut review where this Court, applying even just the minimum equitable
principle against unjust enrichment would have easily affirmed the grant of fair
recompense to Atty. Pea for services he rendered for Urban Bank if such had been
ordered by the trial court.
That Atty. Pea should be paid something by Urban Bank is not in dispute the Court
of Appeals (CA) and the Regional Trial Court (RTC) of Bago City, agreed on that. What
they disagreed on is the basis and the size of the award. The trial court claims that the
basis is an oral contract of agency and the award should be PhP28,5000,000; while, the
appellate court said that Atty. Pea can only be paid under the legal principle against
unjust enrichment, and the total award in his favor should only amount to
PhP3,000,000.
In the eyes of the trial court, the controlling finding is that Atty. Pea should be
believed when he testified that in a telephone conversation, the president of Urban
Bank, Teodoro Borlongan, a respondent herein, agreed to pay him for his services 10%
of the value of the property then worth PhP240,000,000, or PhP24,000,000. Costs and
other awards additionally amount to PhP4,500,000, for a total award of PhP28,500,000
according to the trial court. To the Court of Appeals, such an award has no basis, as in
fact, no contract of agency exists between Atty. Pea and Urban Bank. Hence, Atty.
Pea should only be recompensed according to the principle of unjust enrichment, and
that he should be awarded the amount of PhP3,000,000 only for his services and
reimbursements of costs.
The disparity in the size of the award given by the trial court vis--vis that of the Court of
Appeals (PhP28,500,000 v. PhP3,000,000) must be placed in the context of the service
that Atty. Pea proved that he rendered for Urban Bank. As the records bear, Atty.
Peas services consisted of causing the departure of unauthorized sub-tenants in
twenty-three commercial establishments in an entertainment compound along Roxas
Boulevard. It involved the filing of ejectment suits against them, Peas personal
defense in the counter-suits filed against him, his settlement with them to the tune of
PhP1,500,000, which he advanced from his own funds, and his retention of security
guardsand expenditure for other costs amounting to more or less PhP1,500,000. There
is no claim by Atty. Pea of any service beyond those. He claims damages from the
threats to his life and safety from the angry tenants, as well as a vexatious collection
suit he had to face from a creditor-friend from whom he borrowed PhP3,000,000 to
finance the expenses for the services he rendered Urban Bank.
At the time the award of PhP28,500,000 by the trial court came out in 1999, the net
worth of Urban Bank was PhP2,219,781,104.
2
While the bank would be closed by the
Bangko Sentral ng Pilipinas (BSP) a year later for having unilaterally declared a bank
holiday contrary to banking rules, there was no reason to believe that at the time such
award came out it could not satisfy a judgment of PhP28,500,000, a sum that was only
1% of its net worth, and a miniscule 0.2% of its total assets of PhP11,933,383,630.
3
In
fact, no allegation of impending insolvency or attempt to abscond was ever raised by
Atty. Pea and yet, the trial court granted execution pending appeal.
Interestingly, Pea had included as co-defendants with Urban Bank in the RTC case,
several officers and board directors of Urban Bank. Not all board directors were sued,
however. With respect to those included in the complaint, other than against Teodoro
Borlongan, Corazon Bejasa, and Arturo Manuel, no evidence was ever offered as to
their individual actions that gave rise to Atty. Peas cause of action the execution of
the agency contract and its breach and yet, these officers and directors were made
solidarily liable by the trial court with Urban Bank for the alleged breach of the alleged
corporate contract of agency. Execution pending appeal was also granted against them
for this solidary liability resulting in the levy and sale in execution pending appeal of not
only corporate properties of Urban Bank but also personal properties of the individual
bank officers and directors. It would have been interesting to find out what drove Atty.
Pea to sue the bank officers and directors of Urban Bank and why he chose to sue
only some, but not all of the board directors of Urban Bank, but there is nothing on the
record with which this analysis can be pursued.
Before us are: (a) the Petitions of Urban Bank (G. R. No. 145817) and the De Leon
Group (G R. No. 145822) questioning the propriety of the grant of execution pending
appeal, and (b) the Petition of Atty. Pea (G. R. No. 162562) assailing the CAs decision
on the substantive merits of the case with respect to his claims of compensation based
on an agency agreement.
Ordinarily, the final resolution by the Supreme Court of an appeal from a trial court
decision would have automatic, generally-understood consequences on an order issued
by the trial court for execution pending appeal. But this is no ordinary case, and the
magnitude of the disproportions in this case is too mind-boggling that this Court must
exert extra effort to correct whatever injustices have been occasioned in this case.
Thus, our dispositions will include detailed instructions for several judicial officials to
implement.
At core, these petitions can be resolved if we answer the following questions:
1. What is the legal basis for an award in favor of Pea for the services he
rendered to Urban Bank? Should it be a contract of agency the fee for which
was orally agreed on as Pea claims? Should it be the application of the Civil
Code provisions on unjust enrichment? Or is it to be based on something else or
a combination of the legal findings of both the RTC and the CA? How much
should the award be?
2. Are the officers and directors of Urban Bank liable in their personal capacities
for the amount claimed by Pea?
3. What are the effects of our answers to questions (1) and (2), on the various
results of the execution pending appeal that happened here?
Factual Background of the Controversy
Urban Bank, Inc. (both petitioner and respondent in these two consolidated
cases),
4
was a domestic Philippine corporation, engaged in the business of
banking.
5
The eight individual respondents in G. R. No. 162562 were officers and
members of Urban Banks board of directors, who were sued in their official and
personal capacities.
6
On the other hand, Benjamin L. De Leon, Delfin C. Gonzalez, Jr.,
and Eric L. Lee, (hereinafter the de Leon Group), are the petitioners in G. R. No.
145822 and are three of the same bank officers and directors, who had separately filed
the instant Petition before the Court.
PETITIONER-RESPONDENT Atty. Magdaleno M. Pea (Pea)
7
is a lawyer by
profession and was formerly a stockholder, director and corporate secretary of Isabel
Sugar Company, Inc. (ISCI).
8

ISCI owned a parcel of land
9
located in Pasay City (the Pasay property).
10
In 1984, ISCI
leased the Pasay property for a period of 10 years.
11
Without its consent
12
and in
violation of the lease contract,
13
the lessee subleased the land to several tenants, who
in turn put up 23 establishments, mostly beer houses and night clubs, inside the
compound.
14
In 1994, a few months before the lease contract was to expire, ISCI
informed the lessee
15
and his tenants
16
that the lease would no longer be renewed
and that it intended to take over the Pasay property
17
for the purpose of selling it.
18

Two weeks before the lease over the Pasay property was to expire, ISCI and Urban
Bank executed a Contract to Sell, whereby the latter would pay ISCI the amount of
PhP241,612,000 in installments for the Pasay property.
19
Both parties agreed that the
final installment of PhP25,000,000 would be released by the bank upon ISCIs delivery
of full and actual possession of the land, free from any tenants.
20
In the meantime, the
amount of the final installment would be held by the bank in escrow. The escrow
provision in the Contract to Sell, thus, reads:
"The SELLER (ISCI) agrees that from the proceeds of the purchase prices of the
subject Property (Pasay property), the BUYER (Urban Bank) shall withhold the amount
of PHP 25,000,000.00 by way of escrow and shall release this amount to the SELLER
only upon its delivery to the BUYER of the full and actual possession and control of the
Subject Property, free from tenants, occupants, squatters or other structures or from
any liens, encumbrances, easements or any other obstruction or impediment to the free
use and occupancy by the buyer of the subject Property or its exercise of the rights to
ownership over the subject Property, within a period of sixty (60) days from the date of
payment by the BUYER of the purchase price of the subject Property net of the
amounts authorized to be deducted or withheld under Item II (a) of this
Contract.
21
(Emphasis supplied)
ISCI then instructed Pea, who was its director and corporate secretary, to take over
possession of the Pasay property
22
against the tenants upon the expiration of the lease.
ISCIs president, Mr. Enrique G. Montilla III (Montilla), faxed a letter to Pea, confirming
the latters engagement as the corporations agent to handle the eviction of the tenants
from the Pasay property, to wit:
23

MEMORANDUM
TO: Atty. Magdaleno M. Pena
Director
FROM: Enrique G. Montilla III
President
DATE: 26 November 1994
You are hereby directed to recover and take possession of the property of the
corporation situated at Roxas Boulevard covered by TCT No. 5382 of the Register of
Deeds for Pasay City immediately upon the expiration of the contract of lease over the
said property on 29 November 1994. For this purpose you are authorized to engage the
services of security guards to protect the property against intruders. You may also
engage the services of a lawyer in case there is a need to go to court to protect the said
property of the corporation. In addition you may take whatever steps or measures are
necessary to ensure our continued possession of the property.
(sgd.) ENRIQUE G. MONTILLA III
President
24

On 29 November 1994, the day the lease contract was to expire, ISCI and Urban Bank
executed a Deed of Absolute Sale
25
over the Pasay property for the amount agreed
upon in the Contract to Sell, but subject to the above escrow provision.
26
The title to the
land was eventually transferred to the name of Urban Bank on 05 December 1994.
27

On 30 November 1994, the lessee duly surrendered possession of the Pasay
property to ISCI,
28
but the unauthorized sub-tenants refused to leave the
area.
29
Pursuant to his authority from ISCI, Pea had the gates of the property
closed to keep the sub-tenants out.
30
He also posted security guards at the
property,
31
services for which he advanced payments.
32
Despite the closure of the gates
and the posting of the guards, the sub-tenants would come back in the evening, force
open the gates, and proceed to carry on with their businesses.
33
On three separate
occasions, the sub-tenants tried to break down the gates of the property, threw stones,
and even threatened to return and inflict greater harm on those guarding it.
34

In the meantime, a certain Marilyn G. Ong, as representative of ISCI, faxed a letter to
Urban Bank addressed to respondent Corazon Bejasa, who was then the banks
Senior Vice-President requesting the issuance of a formal authority for Pea.
35
Two
days thereafter, Ms. Ong faxed another letter to the bank, this time addressed to its
president, respondent Teodoro Borlongan.
36
She repeated therein the earlier request for
authority for Pea, since the tenants were questioning ISCIs authority to take over the
Pasay property.
37

In response to the letters of Ms. Ong, petitioner-respondent bank, through individual
respondents Bejasa and Arturo E. Manuel Senior Vice-President and Vice-President,
respectively advised Pea
38
that the bank had noted the engagement of his services
by ISCI and stressed that ISCI remained as the lawyers principal.
39

To prevent the sub-tenants from further appropriating the Pasay property,
40
petitioner-
respondent Pea, as director and representative of ISCI, filed a complaint for
injunction
41
(the First Injunction Complaint) with the RTC-Pasay City.
42
Acting on ISCIs
prayer for preliminary relief, the trial court favorably issued a temporary restraining order
(TRO),
43
which was duly implemented.
44
At the time the First Injunction Complaint was
filed, a new title to the Pasay property had already been issued in the name of Urban
Bank.
45

On 19 December 1994, when "information reached the judge that the Pasay property
had already been transferred by ISCI to Urban Bank, the trial court recalled the TRO
and issued a break-open order for the property. According to Pea, it was the first
time that he was apprised of the sale of the land by ISCI and of the transfer of its title
in favor of the bank."
46
It is not clear from the records how such information reached the
judge or what the break-open order was in response to.
On the same day that the TRO was recalled, petitioner-respondent Pea immediately
contacted ISCIs president, Mr. Montilla, who in turn confirmed the sale of the Pasay
property to Urban Bank.
47
Pea told Mr. Montilla that because of the break-open order
of the RTC-Pasay City, he (Pea) would be recalling the security guards he had posted
to secure the property. Mr. Montilla, however, asked him to suspend the planned
withdrawal of the posted guards, so that ISCI could get in touch with petitioner-
respondent bank regarding the matter.
48

Later that same day, Pea received a telephone call from respondent Bejasa. After
Pea informed her of the situation, she allegedly told him that Urban Bank would be
retaining his services in guarding the Pasay property, and that he should continue
his efforts in retaining possession thereof. He insisted, however, on talking to the
Banks president. Respondent Bejasa gave him the contact details of respondent
Borlongan, then president of Urban Bank.
49

The facts regarding the following phone conversation and correspondences are highly-
controverted. Immediately after talking to respondent Bejasa, Pea got in touch with
Urban Banks president, RESPONDENT Borlongan. Pea explained that the
policemen in Pasay City were sympathetic to the tenants and were threatening to force
their way into the premises. He expressed his concern that violence might erupt
between the tenants, the city police, and the security guards posted in the Pasay
property. Respondent Borlongan supposedly assured him that the bank was going to
retain his services, and that the latter should not give up possession of the subject land.
Nevertheless, petitioner-respondent Pea demanded a written letter of authority from
the bank. Respondent Borlongan acceded and instructed him to see respondent Bejasa
for the letter.
50

In the same telephone conversation, respondent Borlongan allegedly asked Pea to
maintain possession of the Pasay property and to represent Urban Bank in any legal
action that might be instituted relative to the property. Pea supposedly demanded
10% of the market value of the property as compensation and attorneys fees and
reimbursement for all the expenses incurred from the time he took over land until
possession was turned over to Urban Bank. Respondent Borlongan purportedly
agreed on condition that possession would be turned over to the bank, free of tenants,
not later than four months; otherwise, Pea would lose the 10% compensation and
attorneys fees.
51

Later that afternoon, Pea received the banks letter dated 19 December 1994,
which was signed by respondents Bejasa and Manuel, and is quoted below:
This is to confirm the engagement of your services as the authorized representative of
Urban Bank, specifically to hold and maintain possession of our abovecaptioned
property [Pasay property] and to protect the same from former tenants, occupants or
any other person who are threatening to return to the said property and/or interfere with
your possession of the said property for and in our behalf.
You are likewise authorized to represent Urban Bank in any court action that you may
institute to carry out the aforementioned duties, and to prevent any intruder, squatter or
any other person not otherwise authorized in writing by Urban [B]ank from entering or
staying in the premises.
52
(Emphasis supplied)
On even date, ISCI sent Urban Bank a letter, which acknowledged ISCIs engagement
of Pea and commitment to pay for any expenses that may be incurred in the course of
his services. ISCIs letter reads:
This has reference to your property located along Roxas Boulevard, Pasay City [Pasay
property] which you purchased from Isabela Sugar Company under a Deed of Absolute
Sale executed on December 1, 1994.
In line with our warranties as the Seller of the said property and our undertaking to
deliver to you the full and actual possession and control of said property, free from
tenants, occupants or squatters and from any obstruction or impediment to the free use
and occupancy of the property by Urban Bank, we have engaged the services of Atty.
Magdaleno M. Pea to hold and maintain possession of the property and to prevent the
former tenants or occupants from entering or returning to the premises. In view of the
transfer of the ownership of the property to Urban Bank, it may be necessary for Urban
Bank to appoint Atty. Pea likewise as its authorized representative for purposes of
holding/maintaining continued possession of the said property and to represent Urban
Bank in any court action that may be instituted for the abovementioned purposes.
It is understood that any attorneys fees, cost of litigation and any other charges or
expenses that may be incurred relative to the exercise by Atty. Pea of his
abovementioned duties shall be for the account of Isabela Sugar Company and any
loss or damage that may be incurred to third parties shall be answerable by Isabela
Sugar Company.
53
(Emphasis supplied)
The following narration of subsequent proceedings is uncontroverted.
Pea then moved for the dismissal of ISCIs First Injunction Complaint, filed on behalf of
ISCI, on the ground of lack of personality to continue the action, since the Pasay
property, subject of the suit, had already been transferred to Urban Bank.
54
The RTC-
Pasay City dismissed the complaint and recalled its earlier break-open order.
55

Thereafter, petitioner-respondent Pea, now in representation of Urban Bank, filed a
separate complaint
56
(the Second Injunction Complaint) with the RTC-Makati City, to
enjoin the tenants from entering the Pasay property.
57
Acting on Urban Banks
preliminary prayer, the RTC-Makati City issued a TRO.
58

While the Second Injunction Complaint was pending, Pea made efforts to settle the
issue of possession of the Pasay property with the sub-tenants. During the negotiations,
he was exposed to several civil and criminal cases they filed in connection with the task
he had assumed for Urban Bank, and he received several threats against his life.
59
The
sub-tenants eventually agreed to stay off the property for a total consideration of
PhP1,500,000.
60
Pea advanced the payment for the full and final settlement of their
claims against Urban Bank.
61

Pea claims to have borrowed PhP3,000,000 from one of his friends in order to
maintain possession thereof on behalf of Urban Bank.
62
According to him, although his
creditor-friend granted him several extensions, he failed to pay his loan when it
became due, and it later on became the subject of a separate collection suit for
payment with interest and attorneys fees.
63
This collection suit became the basis for
Atty. Peas request for discretionary execution pending appeal later on.
On 07 February 1995, within the four-month period allegedly agreed upon in the
telephone conversation, Pea formally informed Urban Bank that it could already take
possession of the Pasay property.
64
There was however no mention of the
compensation due and owed to him for the services he had rendered.
On 31 March 1995, the bank subsequently took actual possession of the property and
installed its own guards at the premises.
65

Pea thereafter made several attempts to contact respondents Borlongan and Bejasa
by telephone, but the bank officers would not take any of his calls. On 24 January
1996, or nearly a year after he turned over possession of the Pasay property, Pea
formally demanded from Urban Bank the payment of the 10% compensation and
attorneys fees allegedly promised to him during his telephone conversation with
Borlongan for securing and maintaining peaceful possession of the property.
66

Proceedings on the Complaint for Compensation
On 28 January 1996, when Urban Bank refused to pay for his services in connection
with the Pasay property, Pea filed a complaint
67
for recovery of agents compensation
and expenses, damages and attorneys fees in RTC-Bago City in the province of
Negros Occidental.
68
Interestingly, Pea sued only six out of the eleven members of
the Board of the Directors of Urban Bank.
69
No reason was given why the six
directors were selected and the others excluded from Peas complaint. In fact, as
pointed out, Atty. Pea mistakenly impleaded as a defendant, Ben Y. Lim, Jr., who was
never even a member of the Board of Directors of Urban Bank; while, Ben T. Lim, Sr.,
father and namesake of Ben Y. Lim, Jr., who had been a director of the bank, already
passed away in 1997.
70

In response to the complaint of Atty. Pea, Urban Bank and individual bank officers
and directors argued that it was ISCI, the original owners of the Pasay property, that
had engaged the services of Pea in securing the premises; and, consequently, they
could not be held liable for the expenses Pea had incurred.
71

On 28 May 1999, the RTC-Bago City
72
ruled in favor of Pea, after finding that an
AGENCY RELATIONSHIP HAD INDEED BEEN CREATED between him and Urban
Bank. The eight directors and bank officers were found to be solidarily liable with the
bank for the payment of agencys fees. The trial court thus ordered Urban Bank and all
eight defendant bank directors and officers whom Pea sued to pay the total amount of
PhP28,500,000 (excluding costs of suit):
WHEREFORE, premised from the foregoing, judgment is hereby rendered ordering
defendants to pay plaintiff jointly and severally the following amounts:
1. P24,000,000 as compensation for plaintiffs services plus the legal rate of
interest from the time of demand until fully paid;
2. P3,000,000 as reimbursement of plaintiffs expenses;
3. P1,000,000 as and for attorneys fees;
4. P500,000 as exemplary damages;
5. Costs of suit.
SO ORDERED.
73

Urban Bank and the individual defendant bank directors and officers filed a common
Notice of Appeal,
74
which was given due course.
75
In the appeal, they questioned the
factual finding that an agency relationship existed between the bank and Pea.
76

Although they put up a single defense in the proceedings in the lower court, Urban Bank
and individual defendants contracted different counsel and filed separate Briefs on
appeal in the appellate court.
In its Brief,
77
Urban Bank
78
assigned as errors the trial courts reliance on the
purported oral contract of agency and Peas claims for compensation during the
controverted telephone conversation with Borlongan, which were allegedly incredible.
Meanwhile, Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (the De Leon
Group),
79
the PETITIONERS in the instant Petition docketed as G. R. No. 145822,
argued that, even on the assumption that there had been an agency contract with the
bank, the trial court committed reversible error in holding them as bank directors
solidarily liable with the corporation.
80

On the other hand, Teodoro Borlongan, Corazon M. Bejasa, Arturo Manuel, Jr., Ben Y.
Lim, Jr., and P. Siervo H. Dizon (the Borlongan Group)
81
reiterated similar arguments as
those of the De Leon Group, adding that the claimed compensation of 10% of the
purchase price of the Pasay property was not reasonable.
82

Pea refuted all of their arguments
83
and prayed that the trial courts Decision be
affirmed.
84

Acting favorably on the appeal, the Court of Appeals
85
annulled the Decision of the
RTC-Bago City and ruled that no agency relationship had been created.
Nevertheless, it ordered Urban Bank to reimburse Pea for his expenses and to give
him reasonable compensation for his efforts in clearing the Pasay property of tenants in
the amount of PhP3,000,000, but absolved the bank directors and officers from solidary
liability. The dispositive portion of the CA decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the May 28, 2000 Decision [sic]
and the October 19, 2000 [sic] Special Order of the RTC of Bago City, Branch 62,
86
are
hereby ANNULLED AND SET ASIDE. However, the plaintiff-appellee [Pea] in CA GR
CV No. 65756 is awarded the amount of P3 Million as reimbursement for his expenses
as well as reasonable compensation for his efforts in clearing Urban Banks property of
unlawful occupants. The award of exemplary damages, attorneys fees and costs of suit
are deleted, the same not having been sufficiently proven. The petition for Indirect
Contempt against all the respondents is DISMISSED for utter lack of
merit.
87
(Emphasis supplied)
Pea duly filed a Motion for Reconsideration of the unfavorable CA Decision.
88
The
appellate court, however, denied his motion.
89
The CA Decision and Resolution were
appealed by Pea to this Court, through one of the three consolidated Rule 45 Petitions
before us (G. R. No. 162562).
Execution Pending Appeal
On 07 June 1999, prior to the filing of the notice of appeal of Urban Bank and individual
bank officers,
90
Pea moved for execution pending appeal
91
of the Decision rendered by
the RTC-Bago City,
92
which had awarded him a total of PhP28,500,000 in
compensation and damages.
93

In supporting his prayer for discretionary execution, Pea cited the pending separate
civil action for collection filed against him by his creditor-friend, who was
demanding payment of a PhP3,000,000 loan.
94
According to Pea, he had used the
proceeds of the loan for securing the banks Pasay property. No other reason for the
prayer for execution pending appeal was given by Pea other than this collection suit.
95

In opposition to the motion, Urban Bank countered that the collection case was not a
sufficient reason for allowing execution pending appeal.
96

On 29 October 1999, the RTC-Bago City, through Judge Henry J. Trocino,
97
favorably
granted Peas motion and issued a Special Order authorizing execution pending
appeal.
98
In accordance with this Special Order, Atty. Josephine Mutia-Hagad, the clerk
of court and ex officio sheriff, issued a Writ of Execution
99
on the same day.
100
The
Special Order and Writ of Execution were directed at the properties owned by Urban
Bank as well as the properties of the eight individual bank directors and officers.
On 04 November 1999, affected by the trial courts grant of execution pending appeal,
Urban Bank
101
filed a Rule 65 Petition with the CA to enjoin the Special Order and Writ
of Execution issued by the trial court with a prayer for a TRO.
102

On 09 November 1999, the appellate court favorably granted the TRO and preliminarily
prohibited the implementation of the Special Order and Writ of Execution.
103

On 12 January 2000, the CA eventually granted Urban Banks Rule 65 Petition, and the
RTCs Special Order and Writ of Execution, which permitted execution pending appeal,
were annulled. The appellate court ruled:
104

WHEREFORE, the instant petition is GRANTED. The Special Order and writ of
execution, both dated October 29, 1999, are ANNULLED and SET ASIDE.
Respondents are directed to desist from further implementing the writ of execution and
to lift the garnishment and levy made pursuant thereto.
105

On 02 February 2000, Pea moved for the reconsideration of the CAs
Decision;
106
while petitioners filed their corresponding Comment/Opposition
thereto.
107

During the pendency of Peas Motion for Reconsideration, Urban Bank declared a
bank holiday on 26 April 2000 and was placed under receivership of the Philippine
Deposit Insurance Corporation (PDIC).
108

In its Amended Decision dated 18 August 2000, the CA
109
favorably granted Peas
Motion for Reconsideration, and reversed its earlier Decision to allow execution pending
appeal.
110
The appellate court found that the bank holiday declared by the BSP after the
promulgation of its earlier Decision, PDICs receivership of Urban Bank, and the
imminent insolvency thereof constituted changes in the banks conditions that would
justify execution pending appeal.
111

On 29 August 2000, Urban Bank and its officers moved for the reconsideration of the
Amended Decision.
112
The De Leon Group subsequently filed several Supplemental
Motions for Reconsideration.
113
Thereafter, respondents Teodoro Borlongan and
Corazon M. Bejasa also filed their separate Supplemental Motion for
Reconsideration,
114
as did petitioner Ben T. Lim, Jr.
115

On 19 October 2000, the Court of Appeals denied the motion for reconsideration for
lack of merit and the other subsequent Supplemental Motions for Reconsideration for
being filed out of time.
116
The appellate court also ordered Pea to post an indemnity
bond.
117
The Amended Decision and the Resolution were the subjects of several Rule
45 Petitions filed by Urban Bank and individual petitioners (G. R. Nos. 145817, 145818
and 145822).
On the same day the CA denied its Motion for Reconsideration, the De Leon Group
immediately moved for the stay of execution pending appeal upon the filing of a
supersedeas bond.
118

On 31 October 2000, the CA
119
granted the stay of the execution upon the filing by the
De Leon Group of a PhP40,000,000 bond in favor of Pea.
120
Pea moved for the
reconsideration of the stay order.
121

1avvphil
In its Resolution dated 08 December 2000,
122
the appellate court denied Peas Motion
for Reconsideration and a stay order over the execution pending appeal was issued in
favor of the De Leon Group, after they had filed their supersedeas bond.
123
The stay of
execution pending appeal, however, excluded Urban Bank.
124

On 08 December 2000, Pea posted his indemnity bond as required by the CA.
125

As mentioned earlier, Urban Bank, the De Leon Group, and the Borlongan Group filed
around December 2000 separate Rule 45 Petitions in this Court, to assail the
unfavorable CA Amended Decision and Resolution that affirmed the execution pending
appeal. The details of these Rule 45 Petitions will be discussed in detail later on.
In the meantime, Export and Industry Bank (EIB) submitted its proposal for rehabilitation
of Urban Bank to the BSP, and requested that the troubled bank be removed from
receivership of the PDIC. On 12 July 2001, or almost a year after the Court of Appeals
amended its decision to allow execution pending appeal, the rehabilitation plan of Urban
Bank was approved by the Monetary Board of the BSP.
126
Thus, the Monetary Board
subsequently lifted PDICs statutory receivership of the bank.
127

On 14 September 2001, Urban Bank, trying to follow the lead of the De Leon Group,
made a similar request with the Court of Appeals for approval of its own supersedeas
bond,
128
for the same amount of PhP40,000,000, and prayed that the execution of the
RTC-Bago Citys Decision against it be stayed as well.
129

Sometime in September and October 2001, Urban Bank began receiving notices of levy
and garnishment over its properties. After it received Notice of the impending public
execution sale of its shares in the Tagaytay Highlands International Golf Club,
130
Urban
Bank reiterated its request for the approval of the supersedeas bond with the Court of
Appeals and the issuance of the corresponding stay order.
131

The appellate court, however, merely noted Urban Banks motion on the ground that
there was no showing whether a petition to the Supreme Court had been filed or given
due course or denied.
132

After the denial by the Court of Appeals of Urban Banks motion for approval of its
supersedeas bond, some of the levied properties of Urban Bank and the other bank
officers were sold on public auction. The table below lists the properties that appear on
record to have been levied and/or sold on execution pending appeal and the
approximate value of some of these properties. They do not include properties covered
by the Petition docketed as G. R. No. 145818.
Table of Levied, Garnished and/or Executed Properties Pending Appeal
1avvphi1
Owner/
Defendant
Property
Description
Estimated Value
or Price at Public
Auction
Total
Amount
Remarks
Urban Bank
Three Club
Shares
Tagaytay
Highlands
International
Golf Club
133

As of 06
December 1999,
one share was
selling at P1.6
Million.
134

4,800,000
Three Club
Shares in Makati
Sports, Club,
Inc. (MSCI)
[Covered by
Stock Certificate
Nos. A-1893, A-
2305 and B-
762]
135

As of 06
December 1999,
MSCI Club
Shares "A" and
"B" were selling at
PhP650,000 and
PhP700,000,
respectively.
136

2,000,000
137
Atty. Pea was
one of the
winning bidders
in the auction
sale together
with his creditor
friend, Roberto
Ignacio, and
Atty. Ramon
Ereeta.
85
Condominium
Units in the
Urban Bank
Plaza, Makati
City
138

The highest bid
price obtained for
the condominium
units was PhP1M
at the time of the
execution sale.
139

85,000,000 Intervenor
Unimega
purchased the
10
condominium
units in the
auction sale for
P1M each or a
total of P10
M.
140

A 155 sqm.
condominium
unit, Makati City
(CCT No.
57697)
141

Estimates are
based on report of
Urban Bank
142

12,400,000
A 12.5 sqm.
condominium
parking space
(Parking Three,
Unit P-46) in
Makati City
(CCT No.
57698)
143

500,000
A 64,677 sqm.
land in Tagaytay
City (TCT No.
20471)
144

Value based on
estimate of Urban
Bank
145

35,572,350
Teodoro
Borlongan
One Club Share
in Manila Polo
Club (No.
3433)
146

Borlongans club
share was
estimated to be
valued at
P1,000,000.
147

1,000,000
Notice of Sale
on Execution
on Personal
Property dated
25 August
2000
148

One Club Share
in Subic Bay
Yacht Club
149

One club share
was estimated to
be valued at
P500,000.
150

500,000
One Club Share
in Baguio
Country Club
151

As of 06
December 1999,
one share was
selling at
P870,000.
152

870,000
One Club Share
in MSCI
153

As of 06
December 1999,
MSCI Club
Shares "A" and
"B" were selling at
PhP650,000 and
PhP700,000
respectively.
154

650,000
Real Property
155
No estimate
available on
record.

Delfin C.
Gonzales, Jr.
One Club Share
in Manila Polo
Club (No.
3818)
156

Gonzales club
share was
estimated to be
valued at
P4,000,000.
157

4,000,000
Notice of Sale
on Execution
on Personal
Property dated
25 August
2000
158

One Club Share
in Baguio
Country Club.
159

Gonzales club
share was
estimated to be
valued at
P1,077,000.
160

1,077,000
One Club Share
in Alabang
Country Club
(Member No.
550)
161

Gonzales club
share was
estimated to be
valued at
P2,000,000.
162

2,000,000
30,585 shares of
stock in D. C.
Gonzales, Jr.,
Inc.
163

P20.00 per
share
164

611,700
40 Shares of
stock in D. C.
Gonzales, Jr.,
Inc.
165

P50.00 per
share
166

2,000
Benjamin L.
de Leon
One Club Share
in Manila Polo
Club (with
Associate
Membership)
[No. 0597]
167

De Leons Share
was estimated at
P4 M for the
share and P1.05
M for the
associate
membership.
168

5,050,000
Notice of Sale
on Execution
on Personal
Property dated
25 August
2000
169

One Club Share
in MSCI (Stock
Certificate No.
A-175)
170

De Leons share
was estimated at
P450,000.
171

450,000
One Club Share
in Baguio
Country Club
(5523)
172

As of 06
December 1999,
one share was
selling at least
P870,000.
173

870,000
P. Siervo G.
Dizon

No records
available as to
properties
levied,
garnished or
executed
pending
appeal.
Eric L. Lee
One Club Share
in Manila Polo
Club (2038)
174

Lees club share
was estimated to
be valued at
P4,000,000.
175

4,000,000
Notice of Sale
on Execution
on Personal
Property dated
25 August
2000
176

One Club Share
in Manila Golf
Club, Inc.
177

Lees club share
was estimated to
be valued at
P15,750,000.
178

15,750,000
One Club Share
in Sta. Elena
Golf Club, Inc.
(Class "A"
Share)
179

Lees club share
was estimated to
be valued at
P2,000,000.
180

2,000,000
Two Club
Shares in
Tagaytay
Highlands Intl
Golf Club,
Inc.
181

Lees club shares
were estimated to
be valued at
P1,000,000.
182

1,000,000 Notice of Sale
on Execution
on Personal
Property dated
25 August
2000
183

One Club Share
in Subic Yacht
Club
184

Lees club share
was estimated to
be valued at
P500,000.
185

500,000
60,757 Shares
of stock in EQL
Properties,
Inc.
186

P20.00 per share 1,214,140
40 Shares of
stock in EQL
Properties,
Inc.
187

P50.00 per share 2,000
Cash garnished
from BPI
Account
188

100,000
Ben T. Lim,
Jr.

No records
available as to
properties
levied,
garnished or
executed
pending
appeal.
Corazon
Bejasa
Real Property
189

No estimated
value.

Arturo
Manuel, Jr.,
Real Property
190

No estimated
value.

TOTAL VALUE 181,919,190
The sum of PhP181,919,190 does not include many other properties and it is not
difficult to believe that the total value covered reached more than that.
191
In summary,
the estimated values and/or purchase prices at the auction sale of the properties of
Urban Bank and its officers amounted to no less than PhP181,919,190 already. This
amounts to almost six times the value of the award given by the trial court. Otherwise
stated, Pea, as judgment creditor, was overly secured by the levied and/or garnished
properties for the amount of PhP28,500,000, where the judgment award was still
subject of reversal on appeal.
On 22 October 2001, Urban Bank, with respect to its pending Rule 45 Petition in this
Court, moved for the approval of its PhP40,000,000 supersedeas bond
192
and
requested that the Court stay the execution pending appeal.
193
Pea opposed the
motion on the ground that it had already been rendered moot and academic by the sale
of the properties of the bank.
194

On 23 October 2002, or almost a year after some of the condominium units were sold in
a public auction, EIB, as the successor of Urban Bank, expressed to the sheriff of RTC-
Bago City an intent to redeem the said condominium units.
195
Thus, EIB tendered three
managers checks in the total amount of PhP22,108,800
196
to redeem the properties
that were previously under the name of Urban Bank.
197
Although the trial court noted the
banks Manifestation,
198
the sheriff returned the EIBs managers checks. Thus, on 29
October 2002, EIB, through a motion, was prompted to turn over the checks to the trial
court itself.
199

When Urban Bank supposedly failed to redeem the condominium units according to the
sheriff,
200
final Certificates of Sale were issued in favor of Unimega on 04 November
2002.
201
Upon the latters motion, RTC-Bago City, in its Order dated 13 November
2002, ordered the Register of Deeds of Makati to transfer the Condominium Certificates
of Title to the name of Unimega.
202
It has not been shown, though, whether this Order
was followed.
This Court, acting on Urban Banks earlier motion to approve its supersedeas bond,
granted the same in its Resolution dated 19 November 2001.
203
Pea moved for
reconsideration of the approval,
204
but his motion was subsequently denied by the
Court.
205

Proceedings in the Supreme Court (G. R. Nos. 145817, 145818 & 145822)
On 21 December 2000, Urban Bank,
206
represented by its receiver, PDIC,
207
filed a
Rule 45 Petition with this Court (docketed as G. R. No. 145817) to assail the CAs
Amended Decision and Resolution granting execution pending appeal.
208
In response,
Pea moved for the denial of the petition on the grounds of lack merit, violation of the
rule against forum shopping, and non-payment of docket fees, among others.
209
In a
separate Comment,
210
Pea also argued that the appellate court had committed no
error when it considered the banks "imminent insolvency" as a good reason for
upholding the validity of the execution pending appeal.
On the other hand, the Borlongan Group
211
filed a separate Rule 45 Petition questioning
the same Decision and Resolution, docketed as G. R. No. 145818.
212
This Court initially
denied their petition on the ground that it failed to sufficiently show that the CA
committed reversible order.
213
The Borlongan Group twice moved for the
reconsideration of the denial of their petition; but the Court nonetheless denied both
motions for lack of merit.
214
This denial of the petition in G. R. No. 145818 became final
and executory, with the issuance of the Entry of Judgment.
215

Meanwhile, another Rule 45 Petition (G. R. No. 145822)
216
was filed by the De Leon
Group, assailing the same Decisions of the appellate court. The Court also preliminarily
denied this petition on the ground that the De Leon Group failed to file the appeal within
the reglementary period and to pay certain fees.
217

Despite the denial of the Rule 45 Petition in G. R. No. 145822 filed by the De Leon
Group, the Court nonetheless ordered that the case be consolidated with Urban Banks
own Rule 45 Petition in G. R. No. 145817.
218
The Court subsequently gave due course
to both of these petitions.
219
In compliance with the Courts Order,
220
Urban Bank
221
and
the De Leon Group
222
filed their respective Memoranda.
As detailed earlier, the Court granted and approved Urban Banks supersedeas bond
and stayed the execution pending appeal.
Considering the favorable stay of execution pending appeal, EIB, as the new owner and
successor of Urban Bank, immediately wrote to tell
223
the corporate secretary of MSCI
not to effect the cancellation or transfer of Urban Banks three MSCI stock certificates
previously sold in a public auction.
224
In reply, MSCI explained that since there was no
injunction or stay order, it had no other option but to comply with the trial courts Order
for the transfer. Eventually, however, it could not effect the transfer of one of the shares
to Pea because a club share had already been previously registered in his name, and
the clubs bylaws prohibited a natural person from owning more than one
share.
225
Meanwhile, one of the winning bidders in the public auction sale of the MSCI
shares wrote to the latter to demand that the club share previously owned by Urban
Bank be transferred to him.
226

On 04 February 2002, considering the conflicting claims of Urban Bank (through EIB)
and the winning bidders of the club shares, MSCI filed a Motion for Clarification of the
Courts Resolution staying the execution pending appeal.
227

In its Motion for Clarification dated 06 August 2002, Urban Bank likewise requested
clarification of whether the stay order suspended, as well, its right to redeem the
properties sold at a public auction.
228
The copy of Urban Banks motion for clarification
intended for Pea was mistakenly sent to the wrong counsel.
In its Resolution dated 13 November 2002, the Court explained that its earlier stay order
prohibited the MSCI from transferring the shares, and that the one-year period for
redemption of the banks properties was likewise suspended:
WHEREFORE, the Court hereby RESOLVES to clarify that as a consequence of its
approval of the supersedeas bond, the running of the one-year period for petitioner
Urban Bank to redeem the properties sold at the public auctions held on October 4, 11
and 25, 2001 as well as the consolidation of the titles in favor of the buyers, is
SUSPENDED OR STAYED. MSCI is also prohibited from transferring petitioner Urban
Banks MSCI club shares to the winning bidders in the execution sale held on October
11, 2001.
229
(Emphasis supplied)
On 09 December 2002, Pea moved that the Courts Resolution be recalled, because
he was not given an opportunity to be heard on Urban Banks Motion for Clarification,
which was sent to a different counsel.
230
Interposing its objection, the bank argued that
the error in mistakenly sending the Motion for clarification to a different counsel was by
sheer inadvertence,
231
but Pea was nonetheless aware of the motion, and that the
Courts clarification did not create or diminish his rights in any case.
232

The Motion for Clarification filed by Urban Bank, the Courts Resolution dated 13
November 2002 and Peas Omnibus Motion praying for the recall of the said
Resolution became the subject of an administrative case (Administrative Case No.
6332), which was treated as a separate matter and later on de-consolidated with the
instant Petitions.
233
The Court had even called for an executive session
234
in which
Pea, among others, appeared and was questioned by the then members of the Courts
First Division, namely retired Chief Justice Hilario Davide, Justices Jose Vitug, Antonio
Carpio and Adolfo Azcuna. Although the Petitions had earlier been assigned to Justice
Carpio, he has since taken no part in the proceedings of this case and this resulted in
the re-raffling of the Petitions. The transfer and unloading of the case by the
subsequently assigned Justices as well as Peas numerous motions for inhibition
and/or re-raffle has likewise cause considerable delay in the disposition of the instant
Petitions and the Administrative Case.
Unimega, which was the winning bidder of some of the publicly executed condominium
units of Urban Bank, moved to intervene in the case and to have the Courts same
Resolution suspending the one-year period of redemption of the properties be
reconsidered.
235
Unimega claimed that ownership of the banks titles to the 10
condominium units had already been transferred to the former at the time the Court
issued the Resolution; and, thus, there was no more execution to be suspended or
stayed. Only Urban Bank
236
opposed the motion
237
of intervenor Unimega on the ground
that the latter was not a buyer in good faith, and that the purchase price was grossly
disproportional to the fair market value of the condominium units.
238

The Court eventually granted the Motion to Intervene considering that the intervenors
title to the condominium units purchased at the public auction would be affected,
favorably or otherwise, by the judgment of the Court in this case. However, it held in
abeyance the resolution of intervenors Motion for Reconsideration, which might
preempt the decision with respect to the propriety of execution pending
appeal.
239
Thereafter, the bank adopted its earlier Opposition to the intervention as its
answer to Unimegas petition-in-intervention.
240
Also in answer thereto, the De Leon
Group adopted its earlier Manifestation and Comment.
241

Intervenor Unimega then requested that a writ of possession be issued in its favor
covering the 10 condominium units sold during the public auction.
242
The Court required
the parties to file their comments on the request.
243
The Lim
244
and Borlongan
Groups
245
manifested separately that they would not be affected by a resolution of the
request of intervenor Unimega, since the latter was not among the contending parties to
the incident. Pea similarly interposed no objection to the issuance of the writ of
possession.
246
In contrast, Urban Bank opposed the application of Unimega on the
ground that the latter was not entitled to possession of the levied properties, because
the rules of extrajudicial foreclosure were not applicable to execution sales under Rule
39, and that intervenor was also not a buyer in good faith.
247
In a similar vein, the De
Leon Group opposed the application for a writ of possession, and further argued that
the Court had already suspended the running of the one-year period of redemption in
the execution sale.
248
Accordingly, intervenor Unimega countered that the right of
redemption of the levied properties had already expired without having been exercised
by the judgment debtor.
249

In summary, the Court shall resolve the substantial issues in the following: (a) the
Petition of Pea (G. R. No. 162562) assailing the CAs decision on the substantive
merits of the case with respect to his claims of compensation based on an agency
agreement; and (b) the Petitions of Urban Bank (G. R. No. 145817) and the De Leon
Group (G R. No. 145822) questioning the propriety of the grant of execution pending
appeal.
OUR RULING
I
Pea is entitled to payment for compensation for services rendered as agent of
Urban Bank, but on the basis of the principles of unjust enrichment and quantum
meruit, and not on the purported oral contract.
The Court finds that Pea should be paid for services rendered under the agency
relationship that existed between him and Urban Bank based on the civil law principle
against unjust enrichment, but the amount of payment he is entitled to should be
made, again, under the principle against unjust enrichment and on the basis of quantum
meruit.
In a contract of agency, agents bind themselves to render some service or to do
something in representation or on behalf of the principal, with the consent or authority of
the latter.
250
The basis of the civil law relationship of agency is representation,
251
the
elements of which include the following: (a) the relationship is established by the parties
consent, express or implied; (b) the object is the execution of a juridical act in relation to
a third person; (c) agents act as representatives and not for themselves; and (d) agents
act within the scope of their authority.
252

Whether or not an agency has been created is determined by the fact that one is
representing and acting for another.
253
The LAW MAKES NO PRESUMPTION OF
AGENCY; proving its existence, nature and extent is incumbent upon the person
alleging it.
254

With respect to the status of Atty. Peas relationship with Urban Bank, the trial and the
appellate courts made conflicting findings that shall be reconciled by the Court. On one
end, the appellate court made a definitive ruling that no agency relationship existed at
all between Pea and the bank, despite the services performed by Pea with respect to
the Pasay property purchased by the bank. Although the Court of Appeals ruled against
an award of agents compensation, it still saw fit to award Pea with Ph3,000,000 for
expenses incurred for his efforts in clearing the Pasay property of tenants.
255
On the
other extreme, the trial court heavily relied on the sole telephone conversation between
Pea and Urban Banks President to establish that the principal-agent relationship
created between them included an agreement to pay Pea the huge amount of
PhP24,000,000. In its defense, Urban Bank insisted that Pea was never an agent of
the bank, but an agent of ISCI, since the latter, as seller of the Pasay property
committed to transferring it free from tenants. Meanwhile, Pea argues on the basis of
his successful and peaceful ejectment of the sub-tenants, who previously occupied the
Pasay property.
Based on the evidence on records and the proceedings below, the Court concludes
that Urban Bank constituted Atty. Pea as its agent to secure possession of the Pasay
property. This conclusion, however, is not determinative of the basis of the
amount of payment that must be made to him by the bank. The context in which the
agency was created lays the basis for the amount of compensation Atty. Pea is entitled
to.
The transactional history and context of the sale between ISCI and Urban Bank of the
Pasay property, and Atty. Peas participation in the transfer of possession thereof to
Urban Bank provide crucial linkages that establish the nature of the relationship
between the lawyer and the landowner-bank.
The evidence reveals that at the time that the Contract to Sell was executed on 15
November 1994, and even when the Deed of Absolute Sale was executed two weeks
later on 29 November 1994, as far as Urban Bank was concerned, Pea was nowhere
in the picture. All discussions and correspondences were between the President and
Corporate Secretary of Urban Bank, on one hand, and the President of ISCI, on the
other. The title to the Pasay property was transferred to Urban Bank on 5 December
1994. Interestingly, Pea testifies that it was only on 19 December 1994 that he learned
that the land had already been sold by ISCI to Urban Bank, notwithstanding the fact that
Pea was a director of ISCI. Pea was not asked to render any service for Urban Bank,
neither did he perform any service for Urban Bank at that point.
ISCI undertook in the Contract to Sell, to physically deliver the property to Urban Bank,
within 60 days from 29 November 1994,
256
under conditions of "full and actual
possession and control ..., free from tenants, occupants, squatters or other structures or
from any liens, encumbrances, easements or any other obstruction or impediment to the
free use and occupancy by the buyer of the subject Property or its exercise of the rights
to ownership over the subject Property...."
257
To guarantee this undertaking, ISCI
agreed to the escrow provision where PhP25,000,000 (which is a little over 10% of the
value of the Pasay property) would be withheld by Urban Bank from the total contract
price until there is full compliance with this undertaking.
Apparently to ensure that ISCI is able to deliver the property physically clean to Urban
Bank, it was ISCIs president, Enrique Montilla who directed on 26 November 1994 one
of its directors, Pea, to immediately recover and take possession of the property upon
expiration of the contract of lease on 29 November 1994.
258
Pea thus first came into
the picture as a director of ISCI who was constituted as its agent to recover the Pasay
property against the lessee as well as the sub-tenants who were occupying the property
in violation of the lease agreement.
259
He was able to obtain possession of the property
from the lessee on the following day, but the unauthorized sub-tenants refused to
vacate the property.
It was only on 7 December 1994, that Urban Bank was informed of the services that
Pea was rendering for ISCI. The faxed letter from ISCIs Marilyn Ong reads:
Atty. Magdaleno M. Pea, who has been assigned by Isabela Sugar Company,
Inc., to take charge of inspecting the tenants would like to request an authority
similar to this from the Bank, as new owners. Can you please issue something like this
today as he needs this.
260

Two days later, on 9 December 1994, ISCI sent Urban Bank another letter that reads:
Dear Mr. Borlongan, I would like to request for an authorization from Urban Bank as per
attached immediately as the tenants are questioning the authority of the people
there who are helping us to take over possession of the property. (Emphasis
supplied)
261

It is clear from the above that ISCI was asking Urban Bank for help to comply with
ISCIs own contractual obligation with the bank under the terms of the sale of the Pasay
property. Urban Bank could have ignored the request, since it was exclusively the
obligation of ISCI, as the seller, to deliver a clean property to Urban Bank without any
help from the latter.
A full-bodied and confident interpretation of the contracts between ISCI and Urban Bank
should have led the latter to inform the unauthorized sub-tenants that under its
obligation as seller to Urban Bank, it was under duty and had continuing authority to
recover clean possession of the property, despite the transfer of title. Yet, what
unauthorized sub-tenant, especially in the kind of operations being conducted within the
Pasay property, would care to listen or even understand such argument?
Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble that it
would reap in the process. In an apparent attempt to allow the efforts of ISCI to secure
the property to succeed, it recognized Peas role in helping ISCI, but stopped short of
granting him authority to act on its behalf. In response to the two written requests of
ISCI, Urban Bank sent this letter to Pea on 15 December 1994:
This is to advise you that we have noted the engagement of your services by Isabela
Sugar Company to recover possession of the Roxas Boulevard property formerly
covered by TCT No. 5382, effective November 29, 1994. It is understood that your
services have been contracted by and your principal remains to be the Isabela
Sugar Company, which as seller of the property and under the terms of our Contract to
Sell dated November 29, 1994, has committed to deliver the full and actual possession
of the said property to the buyer, Urban Bank, within the stipulated
period.
262
(Emphasis supplied)
Up to this point, it is unmistakable that Urban Bank was staying clear from making any
contractual commitment to Pea and conveyed its sense that whatever responsibilities
arose in retaining Pea were to be shouldered by ISCI.
According to the RTC-Bago City, in the reversed Decision, Atty. Pea only knew of the
sale between ISCI and Urban Bank at the time the RTC-Pasay City recalled the TRO
and issued a break-open order:
" when information reached the (Pasay City) judge that the Pasay property had
already been transferred by ISCI to Urban Bank, the trial court recalled the TRO and
issued a break-open order for the property. According to Pea, it was the first time that
he was apprised of the sale of the land by ISCI and of the transfer of its title in favor of
the bank."
263

There is something contradictory between some of the trial courts factual
findings and Peas claim that it was only on 19 December 1994 that he first learned
of the sale of the property to Urban Bank. It is difficult to believe Pea on this point
considering: (1) that he was a board director of ISCI and a sale of this significant and
valuable property of ISCI requires the approval of the board of directors of ISCI; and (2)
that ISCI twice requested Urban Bank for authority to be issued in his favor (07 and 9
December 1994), 12 and 10 days before 19 December 1994, since it would be contrary
to human experience for Pea not to have been informed by an officer of ISCI
beforehand that a request for authority for him was being sent to Urban Bank.
The sequence of fast-moving developments, edged with a sense of panic, with respect
to the decision of the RTC-Pasay City to recall the temporary restraining order and
issue a break-open order on 19 December 1994 in the First Injunction Complaint, is
highly enlightening to this Court.
First, Pea allegedly called up the president of ISCI, Montilla, who, according to Pea,
confirmed to him that the Pasay property had indeed been sold to Urban Bank.
Second, Pea allegedly told Montilla that he (Pea) would be withdrawing his guards
from the property because of the break-open order from the RTC-Pasay City.
Third, Montilla requested Pea to suspend the withdrawal of the guards while ISCI gets
in touch with Urban Bank.
Fourth, apparently in view of Montillas efforts, Bejasa, an officer of Urban Bank called
Pea and according to the latter, told him that Urban Bank would continue retaining his
services and for him to please continue with his effort to secure the property.
Fifth, this statement of Bejasa was not enough for Pea and he insisted that he be
enabled to talk with no less than the President of Urban Bank, Borlongan. At this point,
Bejasa gave him the phone number of Borlongan.
Sixth, immediately after the conversation with Bejasa, Pea calls Borlongan and tells
Borlongan that violence might erupt in the property because the Pasay City policemen,
who were sympathetic to the tenants, were threatening to force their way through the
property.
At this point, if indeed this conversation took place, which Borlongan contests, what
would have been the response of Borlongan? Any prudent president of a bank, which
has just purchased a PhP240,000,000 property plagued by unauthorized and unruly
sub-tenants of the previous owner, would have sought to continue the possession of
ISCI, thru Pea, and he would have agreed to the reasonable requests of Pea.
Borlongan could also have said that the problem of having the sub-tenants ejected is
completely ISCIs and ISCI should resolve the matter on its own that without bothering
the bank, with all its other problems. But the specter of violence, especially as night was
approaching in a newly-bought property of Urban Bank, was not something that any
publicly-listed bank would want publicized. To the extent that the violence could be
prevented by the president of Urban Bank, it is expected that he would opt to have it
prevented.
But could such response embrace the following legal consequences as Pea claims to
have arisen from the telephone conversation with Borlongan: (1) A contract of agency
was created between Pea and Urban Bank whereby Borlongan agreed to retain the
services of Pea directly; (2) This contract of agency was to be embodied in a written
letter of authority from Urban Bank; and (3) The agency fee of Pea was to be 10% of
the market value as "attorneys fees and compensation" and reimbursement of all
expenses of Pea from the time he took over the land until possession is turned over to
Urban Bank.
This Court concludes that the legal consequences described in statements (1) and (2)
above indeed took place and that the facts support them. However, the evidence does
not support Peas claim that Urban Bank agreed to "attorneys fees and compensation"
of 10% of the market value of the property.
Urban Banks letter dated 19 December 1994 confirmed in no uncertain terms Peas
designation as its authorized representative to secure and maintain possession of the
Pasay property against the tenants. Under the terms of the letter, petitioner-respondent
bank confirmed his engagement (a) "to hold and maintain possession" of the Pasay
property; (b) "to protect the same from former tenants, occupants or any other person
who are threatening to return to the said property and/or interfere with your possession
of the said property for and in our behalf"; and (c) to represent the bank in any instituted
court action intended to prevent any intruder from entering or staying in the premises.
264

These three express directives of petitioner-respondent banks letter admits of no other
construction than that a specific and special authority was given to Pea to act on
behalf of the bank with respect to the latters claims of ownership over the property
against the tenants. Having stipulated on the due execution and genuineness of the
letter during pretrial,
265
the bank is bound by the terms thereof and is subject to the
necessary consequences of Peas reliance thereon. No amount of denial can
overcome the presumption that we give this letter that it means what it says.
In any case, the subsequent actions of Urban Bank resulted in the ratification of Peas
authority as an agent acting on its behalf with respect to the Pasay property. By
ratification, even an unauthorized act of an agent becomes an authorized act of the
principal.
266

Both sides readily admit that it was Pea who was responsible for clearing the property
of the tenants and other occupants, and who turned over possession of the Pasay
property to petitioner-respondent bank.
267
When the latter received full and actual
possession of the property from him, it did not protest or refute his authority as an agent
to do so. Neither did Urban Bank contest Peas occupation of the premises, or his
installation of security guards at the site, starting from the expiry of the lease until the
property was turned over to the bank, by which time it had already been vested with
ownership thereof. Furthermore, when Pea filed the Second Injunction Complaint in
the RTC-Makati City under the name of petitioner-respondent bank, the latter did not
interpose any objection or move to dismiss the complaint on the basis of his lack of
authority to represent its interest as the owner of the property. When he successfully
negotiated with the tenants regarding their departure from its Pasay property, still no
protest was heard from it. After possession was turned over to the bank, the tenants
accepted PhP1,500,000 from Pea, in "full and final settlement" of their claims against
Urban Bank, and not against ISCI.
268

In all these instances, petitioner-respondent bank did not repudiate the actions of Pea,
even if it was fully aware of his representations to third parties on its behalf as owner of
the Pasay property. Its tacit acquiescence to his dealings with respect to the Pasay
property and the tenants spoke of its intent to ratify his actions, as if these were its own.
Even assuming arguendo that it issued no written authority, and that the oral contract
was not substantially established, the bank duly ratified his acts as its agent by its
acquiescence and acceptance of the benefits, namely, the peaceful turnover of
possession of the property free from sub-tenants.
Even if, however, Pea was constituted as the agent of Urban Bank, it does not
necessarily preclude that a third party would be liable for the payment of the agency fee
of Pea. Nor does it preclude the legal fact that Pea while an agent of Urban Bank,
was also an agent of ISCI, and that his agency from the latter never terminated. This is
because the authority given to Pea by both ISCI and Urban Bank was common to
secure the clean possession of the property so that it may be turned over to Urban
Bank. This is an ordinary legal phenomenon that an agent would be an agent for the
purpose of pursuing a shared goal so that the common objective of a transferor and a
new transferee would be met.
Indeed, the Civil Code expressly acknowledged instances when two or more principals
have granted a power of attorney to an agent for a common transaction.
269
The agency
relationship between an agent and two principals may even be considered extinguished
if the object or the purpose of the agency is accomplished.
270
In this case, Peas
services as an agent of both ISCI and Urban Bank were engaged for one shared
purpose or transaction, which was to deliver the property free from unauthorized sub-
tenants to the new owner a task that Pea was able to achieve and is entitled to
receive payment for.
That the agency between ISCI and Pea continued, that ISCI is to shoulder the agency
fee and reimbursement for costs of Pea, and that Urban Bank never agreed to pay him
a 10% agency fee is established and supported by the following:
First, the initial agency relationship between ISCI and Pea persisted. No proof was
ever offered that the letter of 26 November 1994 of Mr. Montilla of ISCI to Pea, for the
latter "to immediately recover and take possession of the property upon expiration of the
contract of lease on 29 November 1994" was terminated. It is axiomatic that the
appointment of a new agent for the same business or transaction revokes the previous
agency from the day on which notice thereof was given to the former agent.
271
If it is
true that the agency relationship was to be borne by Urban Bank alone, Pea should
have demonstrated that his previous agency relationship with ISCI is incompatible with
his new relationship with Urban Bank, and was thus terminated.
Second, instead, what is on the record is that ISCI confirmed the continuation of this
agency between Pea and itself and committed to pay for the services of Pea, in its
letter to Urban Bank dated 19 December 1994 which reads:
In line with our warranties as the Seller of the said property and our undertaking to
deliver to you the full and actual possession and control of said property, free from
tenants, occupants or squatters and from any obstruction or impediment to the free use
and occupancy of the property by Urban Bank, we have engaged the services of Atty.
Magdaleno M. Pea to hold and maintain possession of the property and to prevent the
former tenants or occupants from entering or returning to the premises. In view of the
transfer of the ownership of the property to Urban Bank, it may be necessary for Urban
Bank to appoint Atty. Pea likewise as its authorized representative for purposes of
holding/maintaining continued possession of the said property and to represent Urban
Bank in any court action that may be instituted for the abovementioned purposes.
It is understood that any attorneys fees, cost of litigation and any other charges or
expenses that may be incurred relative to the exercise by Atty. Pea of his
abovementioned duties shall be for the account of Isabela Sugar Company and any loss
or damage that may be incurred to third parties shall be answerable by Isabela Sugar
Company.
272
(Emphasis supplied)
Third, Pea has never shown any written confirmation of his 10% agency fee, whether
in a note, letter, memorandum or board resolution of Urban Bank. An agency fee
amounting to PhP24,000,000 is not a trifling amount, and corporations do not grant their
presidents unilateral authority to bind the corporation to such an amount, especially not
a banking corporation which is closely supervised by the BSP for being a business
seriously imbued with public interest. There is nothing on record except the self-serving
testimony of Pea that Borlongan agreed to pay him this amount in the controverted
telephone conversation.
Fourth, while ordinarily, uncontradicted testimony will be accorded its full weight, we
cannot grant full probative value to the testimony of Pea for the following reasons: (a)
Pea is not a credible witness for testifying that he only learned of the sale of the
property of 19 December 1994 when the acts of ISCI, of Urban Bank and his own up to
that point all indicated that he must have known about the sale to Urban Bank; and (b) it
is incredible that Urban Bank will agree to add another PhP24,000,000 to the cost of the
property by agreeing to the agency fee demanded by Pea. No prudent and reasonable
person would agree to expose his corporation to a new liability of PhP24,000,000 even
if, in this case, a refusal would lead to the Pasay City policemen and unauthorized sub-
tenants entering the guarded property and would possibly erupt in violence.
Peas account of an oral agreement with Urban Bank for the payment of
PhP24,000,000 is just too much for any court to believe. Whatever may be the
agreement between Pea and ISCI for compensation is not before this Court. This is
not to say, however, that Urban Bank has no liability to Pea. It has. Payment to him is
required because the Civil Code demands that no one should be unjustly enriched at
the expense of another. This payment is to be measured by the standards of quantum
meruit.
Amount of Compensation
Agency is presumed to be for compensation. But because in this case we find no
evidence that Urban Bank agreed to pay Pea a specific amount or percentage of
amount for his services, we turn to the principle against unjust enrichment and on the
basis of quantum meruit.
Since there was no written agreement with respect to the compensation due and owed
to Atty. Pea under the letter dated 19 December 1994, the Court will resort to
determining the amount based on the well-established rules on quantum meruit.
Agency is presumed to be for compensation.
273
Unless the contrary intent is shown,
a person who acts as an agent does so with the expectation of payment according to
the agreement and to the services rendered or results effected.
274
We find that the
agency of Pea comprised of services ordinarily performed by a lawyer who is tasked
with the job of ensuring clean possession by the owner of a property. We thus measure
what he is entitled to for the legal services rendered.
A stipulation on a lawyers compensation in a written contract for professional services
ordinarily controls the amount of fees that the contracting lawyer may be allowed to
collect, unless the court finds the amount to be unconscionable.
275
In the absence of a
written contract for professional services, the attorneys fees are fixed on the basis
of quantum meruit,
276
i.e., the reasonable worth of the attorneys services.
277
When an
agent performs services for a principal at the latters request, the law will normally imply
a promise on the part of the principal to pay for the reasonable worth of those
services.
278
The intent of a principal to compensate the agent for services performed on
behalf of the former will be inferred from the principals request for the agents.
279

In this instance, no extra-ordinary skills employing advanced legal training nor
sophisticated legal maneuvering were required to be employed in ejecting 23 sub-
tenants who have no lease contract with the property owner, and whose only authority
to enter the premises was unlawfully given by a former tenant whose own tenancy has
clearly expired. The 23 sub-tenants operated beer houses and nightclubs, ordinary retail
establishments for which no sophisticated structure prevented easy entry. After Pea
succeeded in locking the gate of the compound, the sub-tenants would open the
padlock and resume their businesses at night. Indeed, it appears that only security
guards, chains and padlocks were needed to keep them out. It was only the alleged
connivance of Pasay City policemen that Peas ability to retain the possession was
rendered insecure. And how much did it take Pea to enter into a settlement agreement
with them and make all these problems go away? By Peas own account,
PhP1,500,000 only. That means that each tenant received an average of PhP65,217.40
only. Surely, the legal services of Pea cannot be much more than what the sub-tenants
were willing to settle for in the first place. We therefore award him the equivalent
amount of PhP1,500,000 for the legal and other related services he rendered to eject
the illegally staying tenants of Urban Banks property.
The Court of Appeals correctly reversed the trial court and found it to have acted with
grave abuse of discretion in granting astounding monetary awards amounting to a total
of PhP28,500,000 without any basis.
280
For the lower court to have latched on to the
self-serving claims of a telephone agreement as sufficient support for extending a multi-
million peso award is highly irregular. Absent any clear basis for the amount of the
lawyers compensation, the trial court should have instinctively resorted to quantum
meruit, instead of insisting on a figure with circumstantial and spurious justification.
We cannot also agree with the Decision penned by Judge Edgardo L. Catilo
characterizing Penas 10% fee as believable because it is nearly congruent to the
PhP25 Million retention money held in escrow for ISCI until a clean physical and legal
turn-over of the property is effected:
We now come to the reasonableness of the compensation prayed for by the plaintiff
which is 10% of the current market value which defendants claim to be preposterous
and glaringly excessive. Plaintiff [Pea] testified that defendant Borlongan agreed to
such an amount and this has not been denied by Ted Borlongan. The term "current
market value of the property" is hereby interpreted by the court to mean the current
market value of the property at the time the contract was entered into. To interpret it in
accordance with the submission of the plaintiff that it is the current market value of the
property at the time payment is made would be preposterous. The only evidence on
record where the court can determine the market value of the property at the time the
contract of agency was entered into between plaintiff and defendant is the consideration
stated in the sales agreement between Isabela Sugar Company, Inc. and Urban bank
which is P241,612,000.00. Ten percent of this amount is a reasonable compensation of
the services rendered by the plaintiff considering the "no cure, no pay" arrangement
between the parties and the risks which plaintiff had to undertake.
281

In the first place, the Decision of Judge Catilo makes Peas demand of an agency fee
of PhP24 Million, an additional burden on Urban Bank. The Decision does not make the
retention money responsible for the same, or acquit Urban Bank of any liability to ISCI if
it pays the PhP24 Million directly to Pena instead of ISCI. In the second place, the
amount of money that is retained by transferees of property transactions while the
transferor is undertaking acts to ensure a clean and peaceful transfer to the transferee
does not normally approximate a one-to-one relationship to the services of ejecting
unwanted occupants. They may be inclusive of other costs, and not only legal costs,
with enough allowances for contingencies, and may take into consideration other
liabilities as well. The amount can even be entirely arbitrary, and may have been
caused by the practice followed by Urban Bank as advised by its officers and lawyers or
by industry practice in cases where an expensive property has some tenancy problems.
In other words, Judge Catilos statement is a non sequitur, is contrary to normal human
experience, and sounds like an argument being made to fit Peas demand for a
shocking pay-out.
In any case, 10% of the purchase price of the Pasay property a staggering
PhP24,161,200 is an unconscionable amount, which we find reason to reduce.
Neither will the Court accede to the settlement offer of Pea to Urban Bank of at least
PhP38,000,000 for alleged legal expenses incurred during the course of the
proceedings,
282
an amount that he has not substantiated at any time.
Lawyering is not a business; it is a profession in which duty to public service, not
money, is the primary consideration.
283
The principle of quantum meruit applies if
lawyers are employed without a price agreed upon for their services, in which case they
would be entitled to receive what they merit for their services, or as much as they have
earned.
284
In fixing a reasonable compensation for the services rendered by a lawyer on
the basis of quantum meruit, one may consider factors such as the time spent and
extent of services rendered; novelty and difficulty of the questions involved; importance
of the subject matter; skill demanded; probability of losing other employment as a result
of acceptance of the proffered case; customary charges for similar services; amount
involved in the controversy and the resulting benefits for the client; certainty of
compensation; character of employment; and professional standing of the lawyer.
285

Hence, the Court affirms the appellate courts award of PhP3,000,000 to Pea, for
expenses incurred corresponding to the performance of his services. An additional
award of PhP1,500,000 is granted to him for the services he performed as a lawyer in
securing the rights of Urban Bank as owner of the Pasay property.
II
The corporate officers and directors of Urban Bank are not solidarily or personally
liable with their properties for the corporate liability of Urban Bank to Atty. Pea.
The obligation to pay Peas compensation, however, falls solely on Urban Bank.
Absent any proof that individual petitioners as bank officers acted in bad faith or with
gross negligence or assented to a patently unlawful act, they cannot be held solidarily
liable together with the corporation for services performed by the latters agent to secure
possession of the Pasay property. Thus, the trial court had indeed committed grave
abuse of discretion when it issued a ruling against the eight individual defendant bank
directors and officers and its Decision should be absolutely reversed and set aside.
A corporation, as a juridical entity, may act only through its directors, officers and
employees.
286
Obligations incurred as a result of the acts of the directors and
officers as corporate agents are not their personal liabilities but those of the corporation
they represent.
287
To hold a director or an officer personally liable for corporate
obligations, two requisites must concur: (1) the complainant must allege in the
complaint that the director or officer assented to patently unlawful acts of the
corporation, or that the officer was guilty of gross negligence or bad faith; and (2) the
complainant must clearly and convincingly prove such unlawful acts, negligence or bad
faith.
288
"To hold a director, a trustee or an officer personally liable for the debts of the
corporation and, thus, pierce the veil of corporate fiction, bad faith or gross negligence
by the director, trustee or officer in directing the corporate affairs must be established
clearly and convincingly."
289

Pea failed to allege and convincingly show that individual defendant bank directors and
officers assented to patently unlawful acts of the bank, or that they were guilty of gross
negligence or bad faith. Contrary to his claim, the Complaint
290
in the lower court never
alleged that individual defendants acquiesced to an unlawful act or were grossly
negligent or acted in bad faith.
291
Neither is there any specific allegation of gross
negligence or action in bad faith that is attributable to the individual defendants in
performance of their official duties.
In any event, Pea did not adduce any proof that the eight individual defendants
performed unlawful acts or were grossly negligent or in bad faith. Aside from the general
allegation that they were corporate officers or members of the board of directors of
Urban Bank, no specific acts were alleged and proved to warrant a finding of solidary
liability. At most, petitioners Borlongan, Bejasa and Manuel were identified as those who
had processed the agency agreement with Pea through their telephone conversations
with him and/or written authorization letter.
Aside from Borlongan, Bejasa and Manuel, Atty. Pea in the complaint pointed to no
specific act or circumstance to justify the inclusion of Delfin C. Gonzalez, Jr., Benjamin
L. de Leon, P. Siervo H. Dizon, Eric L. Lee, and Ben T. Lim, Jr., except for the fact that
they were members of the Board of Directors of Urban Bank at that time. That the five
other members of the Board of Directors were excluded from Peas complaint
highlights the peculiarity of their inclusion. What is more, the complaint mistakenly
included Ben Y. Lim, Jr., who had not even been a member of the Board of Directors of
Urban Bank. In any case, his father and namesake, Ben T. Lim, Sr., who had been a
director of the bank at that time, had already passed away in 1997.
In ruling for the solidary liability of the other bank directors, the decision of the trial court
hinged solely on the purported admission of Arturo Manuel, Jr., that the transactions
with Atty. Pea were approved by the Board of Directors:
In this case, plaintiff testified as to the personal participation of defendants Ted
Borlongan and Corazon Bejasa in the subject transaction. On the other hand, with
respect to the other defendants, it was the defendants themselves, through witness
Arturo Manuel, Jr., who admitted that all the transactions involved in this case were
approved by the board of directors. Thus, the court has sufficient basis to hold the
directors jointly and severally liable with defendant Urban Bank, Inc.
292
(Emphasis
supplied)
The Decision of the RTC-Bago City must be utterly rejected on this point because its
conclusion of any cause of action, much less actual legal liability on the part of Urban
Banks corporate officers and directors are shorn of any factual finding. That they
assented to the transactions of the bank with respect to Atty. Peas services without
any showing that these corporate actions were patently unlawful or that the officers
were guilty of gross negligence or bad faith is insufficient to hold them solidarily liable
with Urban Bank. It seems absurd that the trial court will hold the impleaded selected
members of the Board of Directors only, but not the others who also purportedly
approved the transactions. Neither is the reason behind the finding of "solidariness" with
Urban Bank in such liability explained at all. It is void for completely being devoid of
facts and the law on which the finding of liability is based.
The Court of Appeals correctly rejected the claim of personal liability against the
individual petitioners when it held as follows:
The plaintiff-appellees complaint before the court a quo does not point to any particular
act of either one or all of the defendants-appellants that will subject them to personal
liability. His complaint merely asserts that defendant Borlongan and Atty. Bejasa acted
for and in behalf of Urban Bank in securing his services in protecting the banks newly
acquired property. Hence, We cannot allow the same.
293

Pea had argued that individual defendant bank directors and officers should be held
personally and solidarily liable with petitioner-respondent bank, since they failed to
argue for limited corporate liability.
294
The trial court subscribed to his reasoning and
held that the failure to resort to the said defense constituted a waiver on the part of
individual defendants.
295
The Court is not persuaded.
As the complainant on the trial court level, Pea carried the burden of proving that the
eight individual defendants performed specific acts that would make them personally
liable for the obligations of the corporation. This he failed to do. He cannot capitalize on
their alleged failure to offer a defense, when he had not discharged his responsibility of
establishing their personal liabilities in the first place. This Court cannot sustain the
individual liabilities of the bank officers when Pea, at the onset, has not persuasively
demonstrated their assent to patently unlawful acts of the bank, or that they were guilty
of gross negligence or bad faith, regardless of the weaknesses of the defenses raised.
This is too basic a requirement that this Court must demand sufficient proof before we
can disregard the separate legal personality of the corporation from its offices.
Hence, only Urban Bank, not individual defendants, is liable to pay Peas
compensation for services he rendered in securing possession of the Pasay property.
Its liability in this case is, however, without prejudice to its possible claim against ISCI
for reimbursement under their separate agreements.
III
Considering the absolute nullification of the trial courts Decision, the proceedings
arising from the execution pending appeal based on the said Decision is likewise
completely vacated.
Since the trial courts main Decision awarding PhP28,500,000 in favor of Pea has
been nullified above, the execution pending appeal attendant thereto, as a result, no
longer has any leg to stand on and is thus completely vacated.
To recall, prior to the filing of Urban Bank of its notice of appeal in the main
case,
296
Pea moved on 07 June 1999 for execution pending appeal
297
of the
Decision,
298
which had awarded him a total of PhP28,500,000 in compensation and
damages.
299
In supporting his prayer for discretionary execution, Pea cited no other
reason than the pending separate civil action for collection filed against him by a
creditor, who was demanding payment of a PhP3,000,000 loan.
300
According to him, he
had used the proceeds of the loan for securing the banks Pasay property.
301
In
opposition to the motion, Urban Bank countered that the collection case was not a
sufficient reason for allowing execution pending appeal.
302

Favorably acting on Peas motion, the RTC-Bago City, through Judge Henry J.
Trocino,
303
issued a Special Order authorizing execution pending appeal on the basis of
Peas indebtedness to his creditor-friend.
304
In accordance with this Special Order,
Atty. Josephine Mutia-Hagad, the clerk of court and ex officio sheriff, expeditiously
issued a Writ of Execution on the same day.
305
The trial courts Special Order and Writ
of Execution were the subjects of a Rule 65 Petition filed by Urban Bank with the CA.
306

Both the Special Order and Writ of Execution are nullified for two reasons:
(1) Since the Decision of the RTC-Bago City is completely vacated, all its
issuances pursuant to the Decision, including the Special Order and the Writ of
Execution are likewise vacated; and
(2) The Special Order authorizing execution pending appeal based on the
collection suit filed against Atty. Pea had no basis under the Rules of Court, and
the same infirmity thus afflicts the Writ of Execution issued pursuant thereto.
Since the Decision of the RTC-Bago City is vacated, all orders and writs pursuant
thereto are likewise vacated.
Considering that the Special Order and Writ of Execution was a result of the trial courts
earlier award of PhP28,500,000, the nullification or complete reversal of the said award
necessarily translates to the vacation as well of the processes arising therefrom,
including all the proceedings for the execution pending appeal.
Considering the unconscionable award given by the trial court and the unjustified
imposition of solidary liability against the eight bank officers, the Court is vacating the
Decision of the RTC-Bago City Decision. The trial court erroneously made solidarily
liable Urban Banks directors and officers without even any allegations, much less proof,
of any acts of bad faith, negligence or malice in the performance of their duties. In
addition, the trial court mistakenly anchored its astounding award of damages
amounting PhP28,500,000 on the basis of the mere account of Atty. Pea of a
telephone conversation, without even considering the surrounding circumstances and
the sheer disproportion to the legal services rendered to the bank.
A void judgment never acquires finality.
307
In contemplation of law, that void decision is
deemed non-existent.
308
Quod nullum est, nullum producit effectum.
309
Hence, the
validity of the execution pending appeal will ultimately hinge on the courts findings with
respect to the decision in which the execution is based.
Although discretionary execution can proceed independently while the appeal on the
merits is pending, the outcome of the main case will greatly impact the execution
pending appeal, especially in instances where as in this case, there is a complete
reversal of the trial courts decision. Thus, if the decision on the merits is completely
nullified, then the concomitant execution pending appeal is likewise without any effect.
In fact, the Rules of Court expressly provide for the possibility of reversal, complete or
partial, of a final judgment which has been executed on appeal.
310
Precisely, the
execution pending appeal does not bar the continuance of the appeal on the merits, for
the Rules of Court explicitly provide for restitution according to equity and justice in case
the executed judgment is reversed on appeal.
311

Considering that the Decision of the RTC-Bago City has been completely vacated and
declared null and void, it produces no effect whatsoever. Thus, the Special Order and
its concomitant Writ of Execution pending appeal is likewise annulled and is also without
effect. Consequently, all levies, garnishment and sales executed pending appeal are
declared null and void, with the concomitant duty of restitution under the Rules of Court,
as will be discussed later on.
In any case, the trial courts grant of execution pending appeal lacks sufficient basis
under the law and jurisprudence.
We rule that the pendency of a collection suit by a third party creditor which credit was
obtained by the winning judgment creditor in another case, is not a sufficiently good
reason to allow execution pending appeal as the Rules of Court provide. Execution
pending appeal is an extraordinary remedy allowed only when there are reasons to
believe that the judgment debtor will not be able to satisfy the judgment debt if the
appeals process will still have to be awaited. It requires proof of circumstances such as
insolvency or attempts to escape, abscond or evade a just debt.
In Florendo v. Paramount Insurance, Corp.,
312
the Court explained that the execution
pending appeal is an exception to the general rule that execution issues as a matter of
right, when a judgment has become final and executory:
As such exception, the courts discretion in allowing it must be strictly construed and
firmly grounded on the existence of good reasons. "Good reasons," it has been held,
consist of compelling circumstances that justify immediate execution lest the judgment
becomes illusory. The circumstances must be superior, outweighing the injury or
damages that might result should the losing party secure a reversal of the judgment.
Lesser reasons would make of execution pending appeal, instead of an instrument of
solicitude and justice, a tool of oppression and inequity. (Emphasis supplied)
Indeed, the presence or the absence of good reasons remains the yardstick in allowing
the remedy of execution pending appeal, which should consist of exceptional
circumstances of such urgency as to outweigh the injury or damage that the losing party
may suffer, should the appealed judgment be reversed later.
313
Thus, the Court held
that even the financial distress of the prevailing company is not sufficient reason to call
for execution pending appeal:
In addressing this issue, the Court must stress that the execution of a judgment before
its finality must be founded upon good reasons. The yardstick remains the presence or
the absence of good reasons consisting of exceptional circumstances of such urgency
as to outweigh the injury or damage that the losing party may suffer, should the
appealed judgment be reversed later. Good reason imports a superior circumstance
that will outweigh injury or damage to the adverse party. In the case at bar, petitioner
failed to show "paramount and compelling reasons of urgency and justice." Petitioner
cites as good reason merely the fact that "it is a small-time building contractor that could
ill-afford the protracted delay in the reimbursement of the advances it made for the
aforesaid increased costs of . . . construction of the [respondent's] buildings."
Petitioner's allegedly precarious financial condition, however, is not by itself a
jurisprudentially compelling circumstance warranting immediate execution. The financial
distress of a juridical entity is not comparable to a case involving a natural person
such as a very old and sickly one without any means of livelihood, an heir seeking an
order for support and monthly allowance for subsistence, or one who dies.
Indeed, the alleged financial distress of a corporation does not outweigh the long
standing general policy of enforcing only final and executory judgments. Certainly, a
juridical entity like petitioner corporation has, other than extraordinary execution,
alternative remedies like loans, advances, internal cash generation and the like to
address its precarious financial condition. (Emphasis supplied)
In Philippine Bank of Communications v. Court of Appeals,
314
the Court denied
execution pending appeal to a juridical entity which allegedly was in financial distress
and was facing civil and criminal suits with respect to the collection of a sum of money.
It ruled that the financial distress of the prevailing party in a final judgment which was
still pending appeal may not be likened to the situation of a natural person who is ill, of
advanced age or dying as to justify execution pending appeal:
It is significant to stress that private respondent Falcon is a juridical entity and not a
natural person. Even assuming that it was indeed in financial distress and on the verge
of facing civil or even criminal suits, the immediate execution of a judgment in its favor
pending appeal cannot be justified as Falcons situation may not be likened to a case of
a natural person who may be ill or may be of advanced age. Even the danger of
extinction of the corporation will not per se justify a discretionary execution unless there
are showings of other good reasons, such as for instance, impending insolvency of the
adverse party or the appeal being patently dilatory. But even as to the latter reason, it
was noted in Aquino vs. Santiago (161 SCRA 570 [1988]), that it is not for the trial judge
to determine the merit of a decision he rendered as this is the role of the appellate court.
Hence, it is not within competence of the trial court, in resolving a motion for execution
pending appeal, to rule that the appeal is patently dilatory and rely on the same as its
basis for finding good reason to grant the motion. Only an appellate court can
appreciate the dilatory intent of an appeal as an additional good reason in upholding an
order for execution pending appeal which may have been issued by the trial court for
other good reasons, or in cases where the motion for execution pending appeal is filed
with the appellate court in accordance with Section 2, paragraph (a), Rule 39 of the
1997 Rules of Court.
What is worse, only one case was actually filed against Falcon and this is the complaint
for collection filed by Solidbank. The other cases are "impending", so it is said. Other
than said Solidbank case, Falcons survival as a body corporate cannot be threatened
by anticipated litigation. This notwithstanding, and even assuming that there was a
serious threat to Falcons continued corporate existence, we hold that it is not
tantamount nor even similar to an impending death of a natural person. The material
existence of a juridical person is not on the same plane as that of human life. The
survival of a juridical personality is clearly outweighed by the long standing general
policy of enforcing only final and executory judgments. (Emphasis supplied)
In this case, the trial court supported its discretionary grant of execution based on the
alleged collection suit filed against Pea by his creditor friend for PhP3,000,000:
It has been established that the plaintiff secured the loan for the purpose of using the
money to comply with the mandate of defendant bank to hold and maintain possession
of the parcel of land in Pasay City and to prevent intruders and former tenants from
occupying the said property. The purpose of the loan was very specific and the same
was made known to defendant bank through defendant Teodoro Borlongan. The loan
was not secured for some other purpose. Truth to tell, the plaintiff accomplished his
mission in clearing the property of tenants, intruders and squatters, long before the
deadline given him by the defendant bank. The plaintiff was assured by no less than the
President of defendant bank of the availability of funds for his compensation and
reimbursement of his expenses. Had he been paid by defendant bank soon after he had
fulfilled his obligation, he could have settled his loan obligation with his creditor.
Defendants were benefitted by the services rendered by the plaintiff. While plaintiff has
complied with the undertaking, the defendants, however, failed to perform their
obligation to the plaintiff.
The plaintiff stands to suffer greatly if the collection case against him is not addressed.
Firstly, as shown in Exhibit "C", plaintiffs total obligation with Roberto Ignacio as of May
1999 is PhP24,192,000.00. This amount, if left unpaid, will continue to increase due to
interest charges being imposed by the creditor to the prejudice of plaintiff. Secondly, a
preliminary attachment has already been issued and this would restrict the plaintiff from
freely exercising his rights over his property during the pendency of the case.
In their opposition, defendants claim that plaintiffs indebtedness is a ruse, however,
defendants failed to adduce evidence to support its claim.
The court finds that the pendency of the case for collection of money against plaintiff is
a good reason for immediate execution.
315

The mere fact that Atty. Pea was already subjected to a collection suit for payment of
the loan proceeds he used to perform his services for Urban Bank is not an acceptable
reason to order the execution pending appeal against the bank. Financial distress
arising from a lone collection suit and not due to the advanced age of the party is not an
urgent or compelling reason that would justify the immediate levy on the properties of
Urban Bank pending appeal. That Pea would made liable in the collection suit filed by
his creditor-friend would not reasonably result in rendering illusory the final judgment in
the instant action for agents compensation.
Peas purported difficulty in paying the loan proceeds used to perform his services
does not outweigh the injury or damages that might result should Urban Bank obtain a
reversal of the judgment, as it did in this case. Urban Bank even asserts that the
collection suit filed against Pea was a mere ruse to provide justification for the
execution pending appeal, no matter how flimsy.
316
As quoted above, the trial court
noted Atty. Peas total obligation to his creditor-friend as of May 1999 was already the
incredible amount of PhP24,192,000.00, even when the Complaint dated 03 April 1999
itself, which spawned the collection suit included only a prayer for payment of
PhP3,500,000 with attorneys fees of PhP100,000.
317
It seems absurd that Atty. Pea
would agree to obtaining a loan from his own friend, when the Promissory Notes
provided for a penalty of 5% interest per month or 60% per annum for delay in the
payment.
318
It sounds more like a creative justification of the immediate execution of the
PhP28.5 Million judgment notwithstanding the appeal.
In fact, the Court of Appeals noted Atty. Peas admission of sufficient properties to
answer for any liability arising from the collection suit arising from his creditor-friend. In
initially denying the execution pending appeal, the appellate court held that:
On the other hand, private respondents claim that the only way he could pay his
indebtedness to Roberto Ignacio is through the money that he expects to receive from
petitioners in payment of his services is belied by his testimony at the hearing
conducted by the trial court on the motion for execution pending appeal wherein
petitioners were able to secure an admission from him that he has some assets which
could be attached by Roberto Ignacio and that he would probably have other assets left
even after the attachment.
319

Hence, to rule that a pending collection suit against Atty. Pea, which has not been
shown to result in his insolvency, would be to encourage judgment creditors to indirectly
and indiscriminately instigate collection suits or cite pending actions, related or not, as a
"good reason" to routinely avail of the remedy of discretionary execution.
320
As an
exception to the general rule on execution after final and executory judgment, the
reasons offered by Atty. Pea to justify execution pending appeal must be strictly
construed.
Neither will the Court accept the trial courts unfounded assumption that Urban Banks
appeal was merely dilatory, as in fact, the PhP28,500,000 award given by the trial court
was overturned by the appellate court and eventually by this Court.
Moreover, at the time the Special Order of Judge Henry Trocio of the RTC-Bago City
came out in 1999, Urban Bank had assets worth more than PhP11 Billion and had a net
worth of more than PhP2 Billion. There was no reason then to believe that Urban Bank
could not satisfy a judgment of PhP28,500,000, a sum that was only 1% of its net worth,
and 1/5 of 1% of its total assets of PhP11,933,383,630.
321
Urban Bank was even given
a Solvency, Liquidity and Management Rating of 82.89 over 100 by no less than the
BSP
322
and reportedly had liquid assets amounting to PhP2,036,878.
323
In fact, no
allegation of impending insolvency or attempt to abscond was ever raised by Atty. Pea
and yet, the trial court granted execution pending appeal.
Since the original order granting execution pending appeal was completely void for
containing no justifiable reason, it follows that any affirmance of the same by the Court
of Appeals is likewise void.
The Decision of the Court of Appeals in the case docketed as CA-G.R. SP No. 55667,
finding a new reason for granting execution pending appeal, i.e., the receivership of
Urban Bank, is likewise erroneous, notwithstanding this Courts ruling in Lee v.
Trocino.
324
In accordance with the subsequent Resolution of the Court in
abovementioned case of Lee v. Trocino,
325
we directly resolve the issue of the
insufficiency of the reasons that led to the grant of execution pending appeal.
In cases where the two or more defendants are made subsidiarily or solidarily liable by
the final judgment of the trial court, discretionary execution can be allowed if all the
defendants have been found to be insolvent. Considering that only Urban Bank, and not
the other eight individual defendants, was later on considered by the Court of Appeals
to have been "in danger of insolvency," is not sufficient reason to allow execution
pending appeal, since the liability for the award to Pea was made (albeit, mistakenly)
solidarily liable together with the bank officers.
In Flexo Manufacturing Corp. v. Columbus Food, Inc., and Pacific Meat Company,
Inc.,
326
both Columbus Food, Inc., (Columbus Food) and Pacific Meat Company, Inc.,
(Pacific Meat) were found by the trial court therein to be solidarily liable to Flexo
Manufacturing, Inc., (Flexo Manufacturing) for the principal obligation of
PhP2,957,270.00. The lower court also granted execution pending appeal on the basis
of the insolvency of Columbus Food, even if Pacific Meat was not found to be insolvent.
Affirming the reversal ordered by the Court of Appeals, this Court ruled that since there
was another party who was solidarily liable to pay for the judgment debt, aside from the
insolvent Columbus Food, there was no good reason to allow the execution pending
appeal:
Regarding the state of insolvency of Columbus, the case of Philippine National Bank v.
Puno, held:
"While this Court in several cases has held that insolvency of the judgment debtor or
imminent danger thereof is a good reason for discretionary execution, otherwise to
await a final and executory judgment may not only diminish but may nullify all chances
for recovery on execution from said judgment debtor, We are constrained to rule
otherwise in this particular case. In the aforecited cases, there was either only one
defeated party or judgment debtor who was, however, insolvent or there were several
such parties but all were insolvent, hence the aforesaid rationale for discretionary
execution was present. In the case at bar, it is undisputed that, assuming MMIC is
insolvent, its co-defendant PNB is not. It cannot, therefore, be plausibly assumed that
the judgment might become illusory; if MMIC cannot satisfy the judgment, PNB will
answer for it. It will be observed that, under the dispositive portion of the judgment
hereinbefore quoted, the liability of PNB is either subsidiary or solidary.
Thus, when there are two or more defendants and one is not insolvent, the insolvency
of a co-defendant is not a good reason to justify execution pending appeal if their
liability under the judgment is either subsidiary or solidary. In this case, Pacific was
adjudged to be solidarily liable with Columbus. Therefore, the latter is not the only party
that may be answerable to Flexo. Its insolvency does not amount to a good reason to
grant execution pending appeal. (Emphasis supplied)
Similarly, the trial court in this case found Urban Bank and all eight individual bank
officers solidarily liable to Atty. Pea for the payment of the PhP28,500,000 award.
Hence, had the judgment been upheld on appeal, Atty. Pea could have demanded
payment from any of the nine defendants. Thus, it was a mistake for the Court of
Appeals to have affirmed execution pending appeal based solely on the receivership of
Urban Bank, when there were eight other individual defendants, who were solidarily
liable but were not shown to have been insolvent. Since Urban Banks co-defendants
were not found to have been insolvent, there was no good reason for the Court of
Appeals to immediately order execution pending appeal, since Atty. Peas award could
have been satisfied by the eight other defendants, especially when the de Leon Group
filed its supersedeas bond.
It seems incongruous for Atty. Pea to be accorded the benefit of erroneously
impleading several bank directors, who had no direct hand in the transaction, but at the
same time, concentrating solely on Urban Banks inability to pay to justify execution
pending appeal, regardless of the financial capacity of its other co-defendants. Worse,
he capitalized on the insolvency and/or receivership of Urban Bank to levy or garnish
properties of the eight other individual defendants, who were never shown to have been
incapable of paying the judgment debt in the first place. The disposition on the
execution pending appeal may have been different had Atty. Pea filed suit against
Urban Bank alone minus the bank officers and the same bank was found solely liable
for the award and later on declared under receivership.
In addition, a judgment creditor of a bank, which has been ordered by the BSP to be
subject of receivership, has to fall in line like every other creditor of the bank and file its
claim under the proper procedures for banks that have been taken over by the PDIC.
Under Section 30 of Republic Act No. 7653, otherwise known as the New Central Bank
Act, which prevailed at that time, once a bank is under receivership, the receiver shall
immediately gather and take charge of all the assets and liabilities of the bank and
administer the same for the benefit of its creditors and all of the banks assets shall be
considered as under custodial legis and exempt from any order of garnishment, levy,
attachment or execution.
327
In the Minute Resolution of the Monetary Board of the BSP,
Urban Bank was not only prevented from doing business in the Philippines but its asset
and affairs were placed under receivership as provided for under the same law.
328
In
fact, even Pea himself assured the PDIC, as receiver of Urban Bank, that he would not
schedule or undertake execution sales of the banks assets for as long as the bank
remains in receivership.
329
Until the approval of the rehabilitation or the initiation of the
liquidation proceedings, all creditors of the bank under receivership shall stand on equal
footing with respect to demanding satisfaction of their debts, and cannot be extended
preferred status by an execution pending appeal with respect to the banks assets:
[t]o execute the judgment would unduly deplete the assets of respondent bank to the
obvious prejudice of other creditors. After the Monetary Board has declared that a bank
is insolvent and has ordered it to cease operations, the Board becomes the trustee of its
assets for the equal benefit of all the depositors and creditors. After its insolvency, one
creditor cannot obtain an advantage or preference over another by an attachment,
execution or otherwise. Until there is an approved rehabilitation or the initiation of the
liquidation proceedings, creditors of the bank stand on equal footing with respect to
demanding satisfaction of their debts, and cannot be afforded special treatment by an
execution pending appeal with respect to the banks assets.
330
(Emphasis supplied)
Moreover, assuming that the CA was correct in finding a reason to justify the execution
pending appeal because of the supervening event of Urban Banks closure, the
assumption by the EIB of the liabilities of Urban Bank meant that any execution pending
appeal can be granted only if EIB itself is shown to be unable to satisfy Peas judgment
award of PhP28,500,000. That is not at all the case. In just one particular sale on
execution herein, EIB offered to answer in cash for a substantial part of Peas claims,
as evidenced by EIBs capacity and willingness to redeem the executed properties
(condominium units sold to intervenor Unimega) by tendering managers checks for
more than PhP22 Million
331
which is already 77.57% of Peas total award from the trial
court.
332
The fact that EIBs offer to take over Urban Bank means it was able to satisfy
the BSPs concern that all legitimate liabilities of Urban Bank be duly discharged.
As an exception to the general rule that only final judgments may be executed,
333
the
grant of execution pending appeal must perforce be based on "good reasons." These
reasons must consist of compelling or superior circumstances demanding urgency
which will outweigh the injury or damages suffered, should the losing party secure a
reversal of the judgment or final order.
334
The circumstances that would reasonably
justify superior urgency, demanding interim execution of Peas claims for
compensation and/or damages, have already been settled by the financial capacity of
the eight other co-defendants, the approval of the supersedeas bonds, the subsequent
takeover by EIB, and the successor banks stable financial condition,
335
which can
answer for the judgment debt. Thus, Peas interest as a judgment creditor is already
well-protected.
While there is a general rule that a final and executory judgment in the main case will
render moot and academic a petition questioning the exercise of the trial courts
discretion in allowing execution pending appeal, we find it necessary to rule
categorically on this question because of the magnitude of the aberrations that attended
the execution pending appeal in the Decision of the RTC-Bago City.
Irregularities in the Levy and Sale on Execution Pending Appeal
Assuming that the Special Order granting execution pending appeal were valid, issues
have been raised on alleged irregularities that mar the levy and sale on execution of the
properties of Urban Bank and its officers and directors. Many of the facts have not been
sufficiently litigated before the trial and appellate courts for us to fully rule on the issue,
nevertheless, from what is on record, the following are the observations of this Court:
First, contrary to the general rules on execution, no opportunity was given to Urban
Bank or the other co-defendants to pay the judgment debt in cash or certified
check.
336
Before proceeding on the levying and garnishing personal and real properties,
demand must be made by the sheriff against the judgment debtors, Urban Bank and the
eight other individual bank officers, for the immediate payment of the award subject of
the execution pending appeal. It has not been shown whether Urban Bank and its
officers and directors were afforded such an opportunity. Instead of garnishing personal
properties of the bank, the sheriff inexplicably proceeded to levy substantial real
properties of the bank and its officers at the onset.
Second, assuming that Urban Bank and its officers did not possess sufficient cash or
funds to pay for the judgment debt pending appeal, they should have been given the
option to choose which of their properties to be garnished and/or levied. In this case,
Urban Bank exercised its option by presenting to the sheriff various parcels of land,
whose values amount to more than PhP76,882,925 and were sufficient to satisfy the
judgment debt.
337
Among those presented by the bank, only the property located in
Tagaytay was levied upon by the sheriff.
338
No sufficient reason was raised why the
banks chosen properties were rejected or inadequate for purposes of securing the
judgment debt pending appeal. Worse, the Sheriff proceeded with garnishing and
levying on as many properties of Urban Bank and its officers, in disregard of their right
to choose under the rules.
Third, the public auction sales conducted in the execution pending appeal sold more
properties of Urban Bank and the directors than what was sufficient to satisfy the debt.
Indeed, the conservative value of the properties levied herein by the sheriff amounting
to more than PhP181,919,190, consisting of prime condominium units in the heart of the
Makati Business district, a lot in Tagaytay City, shares in exclusive clubs, and shares of
stock, among others, was more than sufficient to answer for the PhP28,500,000
judgment debt six times over. Rather than stop when the properties sold had
approximated the monetary award, the execution sale pending appeal continued and
unduly benefitted Atty. Pea, who, as judgment creditor and, at times, the winning
bidder, purchased most of the properties sold.
Fourth, it was supremely disconcerting how Urban Bank, through its successor EIB, was
unduly deprived of the opportunity to redeem the properties, even after presenting
managers checks
339
equal to the purchase price of the condominium units sold at the
execution sale. No reason was offered by the trial court
340
or the sheriff
341
for rejecting
the redemption price tendered by EIB in order to recover the properties executed and
sold in public auction pending appeal.
Finally, the Court cannot turn a blind eye to the fact that there was already a sufficient
supersedeas bond given to answer for whatever monetary award will be given in the
end. To recall, the De Leon Group had already tendered a supersedeas bond of
PhP40,000,000 in the Court of Appeals to prevent execution pending appeal over their
properties. In fact, even Urban Bank tendered a separate supersedeas bond of equal
amount with this Court, for a total of PhP80,000,000 to secure any judgment to be
awarded to Atty. Pea. That execution sales over the properties of judgment debtors
proceeded despite the three-fold value of securities compared to the amount of the
award indicates bad faith, if not malice, with respect to the conduct of the execution
pending appeal.
Inasmuch as the RTC Decision has already been vacated and an independent finding
has been made by this Court of the complete nullity of the order granting execution
pending appeal, it follows that all acts pursuant to such order and its writ are also void. It
does not follow however, that the Courts Decision in Co v. Sillador,
342
is nullified,
inasmuch as an equally-important legal doctrine the immutability of Supreme Court
final decisions is also to be considered. In any case, the factual circumstances and
the ruling on that case were limited to the actions of Sheriff Allan Sillador with respect to
properties levied under the same Special Order and Writ of Execution, which were
subject of third party claims made by the spouses of Teodoro Borlongan, Corazon
Bejasa and Arturo Manuel, Jr.
343
It does not encompass other specific events and acts
committed in the course of the execution pending appeal that may warrant
administrative or disciplinary actions. Having said that, this Court leaves it to the parties
to explore avenues for redress in such a situation.
The observation on the irregularities above-enumerated are made for the purpose of
correcting the injustice that has been committed herein, by allowing the Court to pursue
the question of who was responsible for such gross violation of the rules on execution,
and for the Court to find measures to improve the safeguards against abuse of court
processes. It is for this reason that the Office of the Court Administrator will be given a
special task by the Court on this matter. Judge Henry Trocino of RTC-Bago City, who
issued the Special Order and had supervisory authority over the proceedings of the
execution pending appeal, would have been included under such administrative
investigation by the Office of the Court Administrator, were it not for his retirement from
the judicial service.
The Courts Suspension Order of Execution Pending Appeal
Acting on Atty. Peas Omnibus Motion dated 09 December 2002
344
and Unimegas
Motion for Reconsideration dated 10 December 2002
345
with respect to the Courts
Order dated 13 November 2002
346
that clarified the earlier stay order against the
execution pending appeal,
347
the Court hereby denies both motions. The Court is fully
correct in suspending the period for the running of the redemption period of the
properties of Urban Bank and its officers and directors that were levied and subject of
execution sale to satisfy the judgment debt in favor of Atty. Pea, the Court having
conclusively determined that the supersedeas bond filed was sufficient and considering
the subsequent finding that the said execution pending appeal lacks any sufficient
ground for the grant thereof.
As to the theory of Atty. Pea that the actuations of Justice Carpio, the then ponente of
this case, in drafting the questioned Order should positively impact his motion for
reconsideration of the same, the Court finds this argument utterly devoid of merit.
In the first place, that questioned Order was not the decision of only a single member of
the Court, Justice Carpio, but of the entire division to which he belonged, then
composed of retired Chief Justice Hilario Davide, Justices Jose Vitug, Consuelo
Ynares-Santiago and Adolfo Azcuna. This Order was affirmed by the same Division as
its duly-promulgated order. In relation to this, the affirmation by the Division of this Order
demonstrates that there is no truth to Atty. Peas claim that Justice Carpio fabricated
the Order.
In the second place, Atty. Peas claim of undue interest against Justice Carpio
specifically with respect to the latter having the instant case transferred to his new
Division, is based on ignorance of the system of assignment of cases in the Supreme
Court. When a reorganization of the Court takes place in the form of a change in the
composition of Divisions, due to the retirement or loss of a member, the Justices do not
thereby lose their case assignments but bring the latter with them to their new
Divisions.
348
The cases are then transferred to the Justices new Divisions, by way of
the corresponding request from each justice. Each justice is in fact, required to make
this request, otherwise the rollo of the cases of which he is Member-in-Charge will be
retained by a Division in which he is no longer a member. Indeed, Atty. Peas
imagination has gotten the better of him.
Thirdly, his insinuation (which he denies) that Justice Carpio may have been bribed
because the latter has a new Mercedes Benz
349
is highly offensive and has no place
where his points should have been confined to legal reasons and arguments.
Incidentally, Atty. Pea has voiced the fear in the Letter of Complaint filed in the Courts
Committee on Ethics and Ethical Standards,
350
which he brought against the ponente of
this Decision, that she will suppress material information regarding the issuance of the
Order suspending the redemption period because of her close relationship to Justice
Carpio. Contrary to this fear, this Decision is frontally disposing of this claim by stating
that there is no basis to believe that the questioned Order was anything than the joint
decision of the five members of the then First Division, and that his arguments in his
motion to reconsider does not persuade this Court to vary in any form the questioned
order. Moreover, our disposition of this case renders moot his motion to reconsider the
order.
It must be emphasized that the prolonged resolution of the procedural issue in the
Petitions in G. R. Nos. 145817 and 145822 on the execution pending appeal is due in
no small part to the delays arising from Peas peculiar penchant for filing successive
motions for inhibition and re-raffle.
351
The Court cannot sanction Peas repeated
requests for voluntary inhibition of members of the Court based on the sole ground of
his own self-serving allegations of lack of faith and trust, and would like to reiterate, at
this point, the policy of the Court not to tolerate acts of litigants who, for just about any
conceivable reason, seek to disqualify a judge (or justice) for their own purpose, under a
plea of bias, hostility, prejudice or prejudgment.
352
The Court cannot allow the
unnecessary and successive requests for inhibition, lest it opens the floodgates to
forum-shopping where litigants look for a judge more friendly and sympathetic to their
cause than previous ones.
353

Restitution of the Banks Executed Properties
The Court is still confronted with the supervening acts related to the execution pending
appeal and the reversal of the award of damages, which affect the rights of the parties
as well as of the intervenors to the case, specifically, intervenor Unimega. In completely
resolving the differing claims and performing its educational function, the Court shall
briefly encapsulate and restate the operational rules governing execution pending
appeal when there has been a reversal of the trial courts Decision on the award of
damages in order to guide the parties as well as the bench and bar in general. The
necessity of making these detailed instructions is prompted by the most natural question
an ordinary person with a sense of justice will ask after reading the facts: How can an
obligation to pay for the services of a lawyer so that 23 unwanted tenants leave a
corporation's property lead to the loss or the impairment of use of more than PhP181
Million worth of properties of that corporation and of its officers and directors?
Obviously, this Court must undertake corrective actions swiftly.
The rule is that, where the executed judgment is reversed totally or partially, or annulled
on appeal or otherwise the trial court may, on motion, issue such orders of
restitution or reparation of damages as equity and justice may warrant under the
circumstances.
354
The Rules of Court precisely provides for restitution according to
equity, in case the executed judgment is reversed on appeal.
355
"In an execution
pending appeal, funds are advanced by the losing party to the prevailing party with the
implied obligation of the latter to repay the former, in case the appellate court cancels or
reduces the monetary award."
356

In disposing of the main case subject of these Petitions, the Court totally reversed the
staggering amount of damages given by the trial court, and limited on a quantum meruit
basis the agents compensation to PhP4,500,000 only. However, properties of Urban
Bank and individual petitioners have been garnished and levied upon in the amount of
supposedly more than PhP85,399,350.
357

Applying the foregoing rules, petitioner-respondent bank is entitled to complete and full
restitution of its levied properties, subject to the payment of the PhP4,500,000.
Meanwhile, petitioners bank officers, all of whom have not been found individually or
solidarily liable, are entitled to full restitution of all their properties levied upon and
garnished, since they have been exonerated from corporate liability with respect to the
banks agency relationship with Pea.
Considering the monetary award to Pea and the levy on and execution of some of its
properties pending appeal, Urban Bank, now EIB, may satisfy the judgment in the main
case and at the same time fully recover all the properties executed owing to the
complete reversal of the trial courts awarded damages. It must immediately and fully
pay the judgment debt before the entire lot of levied properties, subject of the execution
pending appeal, is restored to it.
358

Due to the complete reversal of the trial courts award for damages, which was the basis
of the Special Order and Writ of Execution allowing execution pending appeal,
intervenor Unimega and other bidders who participated in the public auction sales are
liable to completely restore to petitioner-respondent bank all of the properties sold and
purchased therein. Although execution pending appeal is sanctioned under the rules
and jurisprudence, when the executed decision is reversed, the premature execution is
considered to have lost its legal bases. The situation necessarily requires equitable
restitution to the party prejudiced thereby.
359
As a matter of principle, courts are
authorized at any time to order the return of property erroneously ordered to be
delivered to one party, if the order is found to have been issued without jurisdiction.
360

As a purchaser of properties under an execution sale, with an appeal on the main case
still pending, intervenor Unimega knew or was bound to know that its title to the
properties, purchased in the premature public auction sale, was contingent on the
outcome of the appeal and could possibly be reversed. Until the judgment on the main
case on which the execution pending appeal hinges is rendered final and executory in
favor of the prevailing judgment creditor, it is incumbent on the purchasers in the
execution sale to preserve the levied properties. They shall be personally liable for their
failure to do so, especially if the judgment is reversed, as in this case.
361
In fact, if
specific restitution becomes impracticable such as when the properties pass on to
innocent third parties the losing party in the execution even becomes liable for the full
value of the property at the time of its seizure, with interest. The Court has ruled:
When a judgment is executed pending appeal and subsequently overturned in the
appellate court, the party who moved for immediate execution should, upon return of the
case to the lower court, be required to make specific restitution of such property of the
prevailing party as he or any person acting in his behalf may have acquired at the
execution sale. If specific restitution becomes impracticable, the losing party in the
execution becomes liable for the full value of the property at the time of its seizure, with
interest.
While the trial court may have acted judiciously under the premises, its action resulted
in grave injustice to the private respondents. It cannot be gainsaid that it is incumbent
upon the plaintiffs in execution (Arandas) to return whatever they got by means of the
judgment prior to its reversal. And if perchance some of the properties might have
passed on to innocent third parties as happened in the case at bar, the Arandas are
duty bound nonetheless to return the corresponding value of said properties as
mandated by the Rules. (Emphasis supplied)
362

In this case, the rights of intervenor Unimega to the 10 condominium units bought
during the public auction sale under the Special Order are rendered nugatory by the
reversal of the award of unconscionable damages by the trial court. It cannot claim to be
an innocent third-party purchaser of the levied condominium units, since the execution
sale was precisely made pending appeal. It cannot simply assume that whatever
inaction or delay was incurred in the process of the appeal of the main Decision would
automatically render the remedy dilatory in character.
363
Whatever rights were acquired
by intervenor Unimega from the execution sale under the trial courts Special Orders are
conditional on the final outcome of the appeal in the main case. Unlike in auction sales
arising from final and executory judgments, both the judgment creditor and the third
parties who participate in auction sales pending appeal are deemed to knowingly
assume and voluntarily accept the risks of a possible reversal of the decision in the
main case by the appellate court.
Therefore, intervenor Unimega is required to restore the condominium units to Urban
Bank. Although the intervenor has caused the annotation of the sale and levied on the
titles to those units, the titles have remained under the name of the bank, owing to the
supersedeas bond it had filed and the Courts own orders that timely suspended the
transfer of the titles and further execution pending appeal.
The obligation to restore the properties to petitioner-respondent bank is, however,
without prejudice to the concurrent right of intervenor Unimega to the return of the
PhP10,000,000 the latter paid for the condominium units, which Pea received as
judgment creditor in satisfaction of the trial courts earlier Decision.
364
Consequently,
intervenors earlier request for the issuance of a writ of possession
365
over those units
no longer has any leg to stand on. Not being entitled to a writ of possession under the
present circumstances, Unimegas ex parte petition is consequently denied.
Upon the reversal of the main Decision, the levied properties itself, subject of execution
pending appeal must be returned to the judgment debtor, if those properties are still in
the possession of the judgment creditor, plus compensation to the former for the
deprivation and the use thereof.
366
The obligation to return the property itself is likewise
imposed on a third-party purchaser, like intervenor Unimega, in cases wherein it directly
participated in the public auction sale, and the title to the executed property has not yet
been transferred. The third-party purchaser shall, however, be entitled to
reimbursement from the judgment creditor, with interest.
Considering the foregoing points, the Court adopts with modification the rules of
restitution expounded by retired Justice Florenz D. Regalado in his seminal work on civil
procedure,
367
which the appellate court itself cited earlier.
368
In cases in which restitution
of the prematurely executed property is no longer possible, compensation shall be
made in favor of the judgment debtor in the following manner:
a. If the purchaser at the public auction is the judgment creditor, he must pay the
full value of the property at the time of its seizure, with interest.
b. If the purchaser at the public auction is a third party, and title to the property
has already been validly and timely transferred to the name of that party, the
judgment creditor must pay the amount realized from the sheriffs sale of that
property, with interest.
c. If the judgment award is reduced on appeal, the judgment creditor must return
to the judgment debtor only the excess received over and above that to which the
former is entitled under the final judgment, with interest.
In summary, Urban Bank is entitled to complete restoration and return of the properties
levied on execution considering the absolute reversal of the award of damages, upon
the payment of the judgment debt herein amounting to PhP4,500,000, with interest as
indicated in the dispositive portion. With respect to individual petitioners, they are
entitled to the absolute restitution of their executed properties, except when restitution
has become impossible, in which case Pea shall be liable for the full value of the
property at the time of its seizure, with interest. Whether Urban Bank and the bank
officers and directors are entitled to any claim for damages against Pea and his
indemnity bond is best ventilated before the trial court, as prescribed under the
procedural rules on execution pending appeal.
WHEREFORE, the Court DENIES Atty. Magdaleno Peas Petition for Review dated 23
April 2004 (G. R. No. 162562) and AFFIRMS WITH MODIFICATION the Court of
Appeals Decision dated 06 November 2003 having correctly found that the Regional
Trial Court of Bago City gravely abused its discretion in awarding unconscionable
damages against Urban Bank, Inc., and its officers. The Decision of the Regional Trial
Court of Bago City dated 28 May 1999 is hence VACATED.
Nevertheless, Urban Bank, Inc., is ORDERED to pay Atty. Pea the amount of
PhP3,000,000 as reimbursement for his expenses and an additional PhP1,500,000 as
compensation for his services, with interest at 6% per annum from 28 May 1999,
without prejudice to the right of Urban Bank to invoke payment of this sum under a right
of set-off against the amount of PhP25,000,000 that has been placed in escrow for the
benefit of Isabela Sugar Company, Inc. The Complaint against the eight other individual
petitioners, namely Teodoro Borlongan (+), Delfin C. Gonzales, Jr., Benjamin L. de
Leon, P. Siervo G. Dizon, Eric L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and Arturo
Manuel, Jr., is hereby DISMISSED.
The Petitions for Review on Certiorari filed by petitioners Urban Bank (G. R. No.
145817) and Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (G. R. No.
145822) are hereby GRANTED under the following conditions:
a. Urban Bank, Teodoro Borlongan, Delfin C. Gonzalez, Jr., Benjamin L. de
Leon, P. Siervo H. Dizon, Eric L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and
Arturo Manuel, Jr., (respondent bank officers) shall be restored to full ownership
and possession of all properties executed pending appeal;
b. If the property levied or garnished has been sold on execution pending appeal
and Atty. Magdaleno Pea is the winning bidder or purchaser, he must fully
restore the property to Urban Bank or respondent bank officers, and if actual
restitution of the property is impossible, then he shall pay the full value of the
property at the time of its seizure, with interest;
c. If the property levied or garnished has been sold to a third party purchaser at
the public auction, and title to the property has not been validly and timely
transferred to the name of the third party, the ownership and possession of the
property shall be returned to Urban Bank or respondent bank officers, subject to
the third partys right to claim restitution for the purchase price paid at the
execution sale against the judgment creditor;
d. If the purchaser at the public auction is a third party, and title to the property
has already been validly and timely transferred to the name of that party, Atty.
Pea must pay Urban Bank or respondent bank officers the amount realized from
the sheriffs sale of that property, with interest from the time the property was
seized.
The Omnibus Motion dated 09 December 2002 filed by Atty. Pea and Motion for
Reconsideration dated 10 December 2002 filed by Unimega with respect to the Courts
Order dated 13 November 2002 is hereby DENIED.
The Office of the Court Administrator is ordered to conduct an investigation into the
possible administrative liabilities of Atty. Josephine Mutia-Hagad, the then RTC-Bago
Citys Clerk of Court, and Allan D. Sillador, the then Deputy Sheriff of Bago City, for the
irregularities attending the execution pending appeal in this case, including all judicial
officers or sheriffs in the various places in which execution was implemented, and to
submit a report thereon within 120 days from receipt of this Decision.
The Office of the Court Administrator is also directed to make recommendations for the
prevention of abuses of judicial processes in relation to executions, especially those
pending appeal, whether thru administrative circulars from this Court or thru a revision
of the Rules of Court, within 30 days from submission of the report on administrative
liabilities adverted to above. Let a copy of the Courts Decision in this case be sent to
the Office of the Court Administrator.
The Presiding Judge of RTC Bago City shall make a full report on all incidents related to
the execution in this case, including all returns on the writ of execution herein.
Because so much suspicious circumstances have attended the execution in this case
by the Regional Trial Court of Bago City, the proceedings with respect to any restitution
due and owing under the circumstances shall be transferred to the Regional Trial Court
in the National Capital Region, Makati City, a court with venue to hear cases involving
Urban Bank/Export and Industry Bank whose headquarters is located in Makati City.
The Executive Judge of the Regional Trial Court of Makati City is ordered to include the
execution of the Decision and the proceedings for the restitution of the case in the next
available raffle.
The Regional Trial Court of Makati City, to which the case shall be raffled, is hereby
designated as the court that will fully implement the restorative directives of this
Decision with respect to the execution of the final judgment, return of properties
wrongfully executed, or the payment of the value of properties that can no longer be
restored, in accordance with Section 5, Rule 39 of the Rules of Court. The parties are
directed to address the implementation of this part of the Decision to the sala to which
the case will be raffled.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 149353 June 26, 2006
JOCELYN B. DOLES, Petitioner,
vs.
MA. AURA TINA ANGELES, Respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of
Court questioning the Decision
1
dated April 30, 2001 of the Court of Appeals (CA) in
C.A.-G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the
Regional Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution
2
dated
August 6, 2001 which denied petitioners Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (RESPONDENT) filed with the RTC a
complaint for Specific Performance with Damages against Jocelyn B. Doles
(PETITIONER), docketed as Civil Case No. 97-82716. Respondent alleged that
petitioner was indebted to the former in the concept of a personal loan amounting
to P405,430.00 representing theprincipal amount and interest; that on October 5, 1996,
by virtue of a "Deed of Absolute Sale",
3
petitioner, as seller, ceded to respondent,
as buyer, a parcel of land, as well as the improvements thereon, with an area of 42
square meters, covered by Transfer Certificate of Title No. 382532,
4
and located at a
subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order
to satisfy her personal loan with respondent; that this property was mortgaged to
National Home Mortgage Finance Corporation (NHMFC) to secure petitioners loan in
the sum ofP337,050.00 with that entity; that as a condition for the foregoing sale,
respondent shall assume the undue balance of the mortgage and pay the monthly
amortization of P4,748.11 for the remainder of the 25 years which began on September
3, 1994; that the property was at that time being occupied by a tenant paying a monthly
rent ofP3,000.00; that upon verification with the NHMFC, respondent learned that
petitioner had incurred arrearages amounting to P26,744.09, inclusive of penalties and
interest; that upon informing the petitioner of her arrears, petitioner denied that she
incurred them and refused to pay the same; that despite repeated demand,
petitioner refused to cooperate with respondent to execute the necessary documents
and other formalities required by the NHMFC to effect the transfer of the title over the
property; that petitioner collected rent over the property for the month of January 1997
and refused to remit the proceeds to respondent; and that respondent suffered
damages as a result and was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint,
denied that she borrowed money from respondent, and averred that from June to
September 1995, she referred her friends to respondent whom she knew to be
engaged in the business of lending money in exchange for personal checks through her
capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo,
Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed
money from respondent and issued personal checks in payment of the loan; that the
checks bounced for insufficiency of funds; that despite her efforts to assist respondent
to collect from the borrowers, she could no longer locate them; that, because of this,
respondent became furious and threatened petitioner that if the accounts were not
settled, a criminal case will be filed against her; that she was forced to issue eight
checks amounting to P350,000 to answer for the bounced checks of the borrowers she
referred; that prior to the issuance of the checks she informed respondent that they
were not sufficiently funded but the latter nonetheless deposited the checks and for
which reason they were subsequently dishonored; that respondent then threatened to
initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that
she was forced by respondent to execute an "Absolute Deed of Sale" over her property
in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid
consideration; that she did not appear before a notary public; that the Community Tax
Certificate number on the deed was not hers and for which respondent may be
prosecuted for falsification and perjury; and that she suffered damages and lost rental
as a result.
The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is
valid; second; if valid, whether petitioner is obliged to sign and execute the necessary
documents to effect the transfer of her rights over the property to the respondent; and
third, whether petitioner is liable for damages.
On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby orders the dismissal of the
complaint for insufficiency of evidence. With costs against plaintiff.
SO ORDERED.
The RTC held that the sale was void for lack of cause or consideration:
5

Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and
further admission that the checks issued by these borrowers in payment of the loan
obligation negates [sic] the cause or consideration of the contract of sale executed by
and between plaintiff and defendant. Moreover, the property is not solely owned by
defendant as appearing in Entry No. 9055 of Transfer Certificate of Title No. 382532
(Annex A, Complaint), thus:
"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the
share of Teodorico Doles on the parcel of land described in this certificate of title by
virtue of the special power of attorney to mortgage, executed before the notary public,
etc."
The rule under the Civil Code is that contracts without a cause or consideration produce
no effect whatsoever. (Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent interposed her sole
assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND
OF [sic] THE DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION
OR INSUFFICIENCY OF EVIDENCE.
6

On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which
reads:
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The
Decision of the lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new
one is entered ordering defendant-appellee to execute all necessary documents to
effect transfer of subject property to plaintiff-appellant with the arrearages of the
formers loan with the NHMFC, at the latters expense. No costs.
SO ORDERED.
The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the
amount borrowed from the respondent to her friends. Hence, the Deed of Absolute
Sale was supported by a valid consideration, which is the sum of money petitioner
owed respondent amounting to P405,430.00, representing both principal and interest.
The CA took into account the following circumstances in their entirety: the supposed
friends of petitioner never presented themselves to respondent and that all transactions
were made by and between petitioner and respondent;
7
that the money borrowed was
deposited with the bank account of the petitioner, while payments made for the loan
were deposited by the latter to respondents bank account;
8
that petitioner herself
admitted in open court that she was "re-lending" the money loaned from respondent to
other individuals for profit;
9
and that the documentary evidence shows that the actual
borrowers, the friends of petitioner, consider her as their creditor and not the
respondent.
10

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

On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing
that respondent categorically admitted in open court that SHE ACTED ONLY AS
AGENT or representative of Arsenio Pua, the principal financier and, hence, she had no
legal capacity to sue petitioner; and that the CA failed to consider the fact that
petitioners father, who co-owned the subject property, was not impleaded as a
defendant nor was he indebted to the respondent and, hence, she cannot be made to
sign the documents to effect the transfer of ownership over the entire property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground
that the foregoing matters had already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28,
2001, petitioner filed the present Petition and raised the following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR
OF THE RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE
PRINCIPAL TO COLLECT DEBT IN HIS BEHALF COULD DIRECTLY
COLLECT PAYMENT FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A
CAUSE.
14

Although, as a rule, it is not the business of this Court to review the findings of fact
made by the lower courts, jurisprudence has recognized several exceptions, at least
three of which are present in the instant case, namely: when the judgment is based on a
misapprehension of facts; when the findings of facts of the courts a quo are conflicting;
and when the CA manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, could justify a different conclusion.
15
To arrive at a
proper judgment, therefore, the Court finds it necessary to re-examine the evidence
presented by the contending parties during the trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of Absolute Sale is supported by a valid
consideration.
1. Petitioner argues that since she is merely the agent or representative of the alleged
debtors, then she is not a party to the loan; and that the Deed of Sale executed between
her and the respondent in their own names, which was predicated on that pre-existing
debt, is void for lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a consideration in
the form of a price certain in money
16
and that this sum indisputably pertains to the debt
in issue. This Court has consistently held that a contract of sale is null and void and
produces no effect whatsoever where the same is without cause or consideration.
17
The
question that has to be resolved for the moment is whether this debt can be considered
as a valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner
"re-lends" the amount borrowed from respondent to her friends: first, the friends of
petitioner never presented themselves to respondent and that all transactions were
made by and between petitioner and respondent;
18
second; the money passed through
the bank accounts of petitioner and respondent;
19
third, petitioner herself admitted that
she was "re-lending" the money loaned to other individuals for profit;
20
and fourth, the
documentary evidence shows that the actual borrowers, the friends of petitioner,
consider her as their creditor and not the respondent.
21

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

Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa
Moraquin, Maria Luisa Inocencio, Zenaida Romulo, they are your friends?
witness:
a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,]
they were just referred.
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?
witness:
a. No, sir.
Atty. Diza:
q. Your friends and the plaintiff did not meet personally?
witness:
a. Yes, sir.
Atty. Diza:
q. You are intermediaries?
witness:
a. We are both intermediaries. As evidenced by the checks of the debtors they
were deposited to the name of Arsenio Pua because the money came from
Arsenio Pua.
x x x x
Atty. Diza:
q. Did the plaintiff knew [sic] that you will lend the money to your friends
specifically the one you mentioned [a] while ago?
witness:
a. Yes, she knows the money will go to those persons.
Atty. Diza:
q. You are re-lending the money?
witness:
a. Yes, sir.
Atty. Diza:
q. What profit do you have, do you have commission?
witness:
a. Yes, sir.
Atty. Diza:
q. How much?
witness:
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my
friends none, sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower,
while the respondent, the real lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following
admission during her cross examination:
23

Atty. Villacorta:
q. Who is this Arsenio Pua?
witness:
a. Principal financier, sir.
Atty. Villacorta:
q. So the money came from Arsenio Pua?
witness:
a. Yes, because I am only representing him, sir.
Other portions of the testimony of respondent must likewise be considered:
24

Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
witness:
a. Yes, sir.
Court:
q. It is not your money?
witness:
a. Yes, Your Honor.
Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to
accommodate somebody, are you aware of that?
witness:
a. I am aware of that.
Atty. Villacorta:
q. More or less she [accommodated] several friends of the defendant?
witness:
a. Yes, sir, I am aware of that.
x x x x
Atty. Villacorta:
q. And these friends of the defendant borrowed money from you with the
assurance of the defendant?
witness:
a. They go direct to Jocelyn because I dont know them.
x x x x
Atty. Villacorta:
q. And is it not also a fact Madam witness that everytime that the defendant
borrowed money from you her friends who [are] in need of money issued
check[s] to you? There were checks issued to you?
witness:
a. Yes, there were checks issued.
Atty. Villacorta:
q. By the friends of the defendant, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of your assistance, the friends of the defendant who are in need
of money were able to obtain loan to [sic] Arsenio Pua through your assistance?
witness:
a. Yes, sir.
Atty. Villacorta:
q. So that occasion lasted for more than a year?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And some of the checks that were issued by the friends of the defendant
bounced, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with you?
witness:
a. Yes, sir.
Respondent is estopped TO DENY THAT SHE HERSELF ACTED AS AGENT of a
certain Arsenio Pua, her disclosed principal. She is also estopped to deny that
petitioner acted as agent for the alleged debtors, the friends whom she (petitioner)
referred.
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation.
25
The question of whether an agency has been created is ordinarily a
question which may be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention.
26
Agency may even
be implied from the words and conduct of the parties and the circumstances of the
particular case.
27
Though the fact or extent of authority of the agents may not, as a
general rule, be established from the declarations of the agents alone, if one professes
to act as agent for another, she may be estopped to deny her agency both as against
the asserted principal and the third persons interested in the transaction in which he or
she is engaged.
28

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

In the case at bar, both petitioner and respondent have undeniably disclosed to
each other that they are representing someone else, AND SO BOTH OF THEM
ARE ESTOPPED TO DENY THE SAME. It is evident from the record that petitioner
merely refers actual borrowers and then collects and disburses the amounts of the loan
upon which she received a commission; and that respondent transacts on behalf of her
"principal financier", a certain Arsenio Pua. If their respective principals do not actually
and personally know each other, such ignorance does not affect their juridical
standing as agents, especially since the very purpose of agency is to extend the
personality of the principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-lending" the money loaned
from respondent to other individuals for profit, it must be stressed that the manner in
which the parties designate the relationship is not controlling. If an act done by one
person in behalf of another is in its essential nature one of agency, the former is
the agent of the latter notwithstanding he or she is not so called.
30
The question is
to be determined by the fact that one represents and is acting for another, and if
relations exist which will constitute an agency, it will be an agency whether the parties
understood the exact nature of the relation or not.
31

That both parties acted as mere agents is shown by the undisputed fact that the friends
of petitioner issued checks in payment of the loan in the name of Pua. If it is true that
petitioner was "re-lending", then the checks should have been drawn in her name and
not directly paid to Pua.
With respect to the second point, particularly, the finding of the CA that the
disbursements and payments for the loan were made through the bank accounts of
petitioner and respondent,
suffice it to say that in the normal course of commercial dealings and for reasons of
convenience and practical utility it can be reasonably expected that the facilities of the
agent, such as a bank account, may be employed, and that a sub-agent be appointed,
such as the bank itself, to carry out the task, especially where there is no stipulation to
the contrary.
32

In view of the two agency relationships, petitioner and respondent are not privy to the
contract of loan between their principals. Since the sale is predicated on that loan, then
the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might have been
backed up by another consideration that is separate and distinct from the debt:
respondent averred in her complaint and testified that the parties had agreed that as a
condition for the conveyance of the property the respondent shall assume the balance
of the mortgage loan which petitioner allegedly owed to the NHMFC.
33
This Court in the
recent past has declared that an assumption of a mortgage debt may constitute a valid
consideration for a sale.
34

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

In view of these anomalies, the Court cannot entertain the
possibility that respondent agreed to assume the balance of the mortgage loan which
petitioner allegedly owed to the NHMFC, especially since the record is bereft of any
factual finding that petitioner was, in the first place, endowed with any ownership rights
to validly mortgage and convey the property. As the complainant who initiated the case,
respondent bears the burden of proving the basis of her complaint. Having failed to
discharge such burden, the Court has no choice but to declare the sale void for lack of
cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of
whether duress or intimidation had been foisted upon petitioner upon the execution of
the sale.
Moreover, even assuming the mortgage validly exists, the Court notes respondents
allegation that the mortgage with the NHMFC was for 25 years which began September
3, 1994. Respondent filed her Complaint for Specific Performance in 1997. Since the 25
years had not lapsed, the prayer of respondent to compel petitioner to execute
necessary documents to effect the transfer of title is premature.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of
Appeals are REVERSED andSET ASIDE. The complaint of respondent in Civil Case
No. 97-82716 is DISMISSED.
SO ORDERED.

G.R. Nos. L-22951 and L-22952 January 31, 1967
ALLIED FREE WORKERS' UNION (PLUM), petitioner,
vs.
COMPAIA MARITIMA, Manager JOSE C. TEVES, and COURT OF INDUSTRIAL
RELATIONS, respondents.
-----------------------------
G.R. No. L-22971 January 31, 1967
COMPAIA MARITIMA and Manager JOSE C. TEVES, petitioners,
vs.
ALLIED FREEWORKERS' (PLUM) and COURT OF INDUSTRIAL
RELATIONS, respondents.
L-22951 and 22952:
Vicente A. Rafael and Associates for petitioner.
Rafael Dinglasan for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
L-22971:
Rafael Dinglasan for petitioner.
Vicente A. Rafael and Associates for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
BENGZON, J.P., J .:
The three cases before this Court are the respective appeals separately taken by the
parties hereto from an order
1
of the Court of Industrial Relations en banc affirming its
trial judge's decision, rendered on November 4, 1963, in CIR Case 175-MC and CIR
Case 426-ULP. Thus L-22971 is the appeal of MARITIMA
2
in CIR Case 175-MC; L-
22952 isAFWU's appeal in the same case; and L-22951 refers to AFWU's3 appeal in
CIR Case 426-ULP. Since these cases were jointly tried and decided in the court a
quo and they involve the same fundamental issue the presence or absence of
employer-employee relationship they are jointly considered herein.
MARITIMA is a local corporation engaged in the shipping business. TEVES is
its branch manager in the port of Iligan City. And AFWU is duly registered legitimate
labor organization with 225 members.
On August 11, 1952, MARITIMA, through Teves, entered into
a CONTRACT
4
with AFWU the terms of which We reproduce:
ARRASTRE AND STEVEDORING CONTRACT
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT made and executed this 11th day of August, 1952, in
the City of Iligan, Philippines, by and between the
COMPAIA MARITIMA Iligan Branch, represented by its Branch Manager
in Iligan City, and the ALLIED FREE WORKERS' UNION, a duly
authorizedlabor union, represented by its President:
WITNESSETH.
1. That the Compaia MARITIMA hereby engage the services of the
Allied Free Workers' Union to do and perform all the work of stevedoring
and arrastre services of all its vessels or boats calling in the port of Iligan
City, beginning August 12, 1952.
2. That the Compaia MARITIMA shall not be liable for the payment of
the services rendered by the Allied Free Workers' Union, for the loading,
unloading and deliveries of cargoes as same is payable by the owners
and consignees of cargoes, as it has been the practice in the port of
Iligan City.
3. That the Allied Free Workers' Union shall be responsible for the
damages that may be caused to the cargoes in the course of their
handling.
4. That this CONTRACT is good and valid for a period of one (1) month
from August 12, 1952, but same may be renewed by agreement of the
parties; however Compaia MARITIMA reserves the right to revoke
this CONTRACT even before the expiration of the term, if and when the
Allied Free Workers' Unionfails to render good service.
IN WITNESS WHEREOF, we hereunto sign this presents in the City of
Iligan, Philippines, this 11th day of August, 1952.
(SGD) SALVADOR T. LLUCH
President
Allied Free Workers' Union
Iligan City
(SGD) JOSE C. TEVES
Branch Manager
Compaia Maritima
Iligan City
SIGNED IN THE PRESENCE OF:
1. (SGD) JOSE CUETO
2. (SGD) SERGIO OBACH.
During the first month of the existence of the CONTRACT , AFWU rendered
satisfactory service. So, MARITIMA, through Teves, verbally renewed the same.
This harmonious relations between MARITIMA and AFWU lasted up to the latter part
of 1953 when the former complained to the latter of unsatisfactory and inefficient
service by the laborers doing the arrastre and stevedoring work. This deteriorating
situation was admitted as a fact by AFWU'spresident. To remedy the situation
since MARITIMA's business was being adversely affected Teves was forced to hire
extra laborers from among "stand-by" workers not affiliated to any union to help in the
stevedoring and arrastre work. The wages of these extra laborers were paid
by MARITIMA through separate vouchers and not byAFWU. Moreover, said wages
were not charged to the consignees or owners of the cargoes.
On July 23, 1954, AFWU presented to MARITIMA a written proposal
5
for a collective
bargaining agreement.
This demand embodied certain terms and conditions of employment different from
the provisions of theCONTRACT . No reply was made by MARITIMA.
On August 6, 1954, AFWU instituted proceedings in the Industrial Court
6
praying that
it be certified as the sole and exclusive bargaining agent in the bargaining unit
composed of all the laborers doing the arrastre and stevedoring work in connection
with MARITIMA's vessels in Iligan City. MARITIMA answered, alleging lack of
employer-employee relationship between the parties.
On August 24, 1954, MARITIMA informed AFWU of the termination of
the CONTRACT because of the inefficient service rendered by the latter which had
adversely affected its business. The termination was to take effect as of September 1,
1954. MARITIMA then contracted with the Iligan Stevedoring Union for the
arrastre and stevedoring work. The latter agreed to perform the work subject to the
same terms and conditions of the CONTRACT . The new agreement was to be carried
out on September 1, 1954.
On August 26, 1954, upon the instance of AFWU, MARITIMA found itself charged
before the Industrial Court
7
of unfair labor practices under Sec. 4(a), (1), (3), (4)
and (6) of Rep. Act No. 875. MARITIMA answered, again denying the employer-
employee relationship between the parties.
On September 1, 1954, members of AFWU, together with those of the Mindanao
Workers Alliance a sister union formed a picket line at the wharf of Iligan City,
thus preventing the Iligan Stevedoring Union from carrying out the arrastre and
stevedoring work it contracted for.
8
This picket lasted for nine days.
On September 9, 1954, MARITIMA filed an action
9
to rescind the CONTRACT
, enjoin AFWU members from doing arrastre and stevedoring work in connection with
its, vessels, and for recovery of damages against AFWU and its officers. Incidentally,
this civil case has been the subject of three proceedings already which have reached
this Court. The first
10
involved a preliminary injunction issued therein on September 9,
1954, by the trial court prohibiting AFWU from interfering in any manner with the loading
and unloading of cargoes from MARITIMA's vessels. This injunction was lifted that very
evening upon the filing of a counter bond by AFWU. Subsequently, a motion to dissolve
said counterbond was filed by MARITIMA but the hearing on this incident was enjoined
by Us on March 15, 1955, upon the institution of the petition for prohibition and
injunction in said L-8876.
11
Meanwhile,AFWU members-laborers were able to continue
the arrastre and stevedoring work in connection with MARITIMA'svessels.
On December 5, 1960, the CFI decision in the civil case was promulgated. It ordered
the rescission of theCONTRACT and permanently enjoined AFWU members from
performing work in connection with MARITIMA'svessels. AFWU then filed its notice of
appeal, appeal bond and record on appeal.
12
The subsequent incidents thereto gave
rise to the two other proceedings which have previously reached Us here.
On January 6, 1961, upon motion of MARITIMA ,an order of execution pending appeal
and a writ of injunction against AFWU was issued by the trial court in the civil case. This
enabled MARITIMA to engage the services of the Mindanao Arrastre Service to do the
arrastre and stevedoring work on January 8, 1961. However, AFWU filed a petition
for certiorari, injunction and prohibition
13
here and on January 18, 1961, was able to
secure a writ of preliminary injunction ordering the maintenance of the status quo prior
to January 6, 1961. Thus, after January 18, 1961, AFWU laborers were again back
doing the same work as before.
The third incident that reached US
14
involved an order of the same trial court in the
same civil case, dated January 11, 1961, which amended some clerical errors in the
original decision of December 5, 1960. Upon motion ofMARITIMA, the trial court, on
March 24, 1962, issued an order for the execution of the decision of January 11, 1961,
since AFWU did not appeal therefrom, and on March 31, 1962, a writ of execution
ousting the 225 AFWU members-laborers from their work in connection with the loading
and unloading of cargoes was issued and a levy on execution upon the properties
of AFWU was effected. Accordingly, on April 1, 1962, MARITIMA was again able to
engage the services of the Mindanao Arrastre Service.
On April 16, 1962, upon the institution of the petition for certiorari, injunction, prohibition
and mandamus, a preliminary injunction was issued by Us against the orders of March
24 and 31, 1962. But then, on May 16, 1962, upon motion of MARITIMA this preliminary
injunction was lifted by Us insofar as it related to the execution of the order ousting
the AFWU laborers from the stevedoring and arrastre work in connection with
the MARITIMA vessels.
15
Such then was the status of things.
On November 4, 1963, after almost 10 years of hearing the two cases jointly, the
Industrial Court finally rendered its decision. The dispositive part provided:
IN VIEW OF ALL THE FOREGOING CIRCUMSTANCES, the complaint of the
union for unfair labor practices against the Compaia MARITIMA and/or its agent
Jose C. Teves and the Iligan Stevedoring Union and/or Sergio Obach is hereby
dismissed for lack of substantial evidence and merit.
In pursuance of the provisions of Section 12 of Republic Act 875 and the Rules of
this court on certification election, the Honorable, the Secretary of Labor or any of
his authorized representative is hereby requested to conduct certification election
among all the workers and/or stevedores working in the wharf of Iligan City who
are performing stevedoring and arrastre service aboard
Compaia MARITIMA vessels docking at Iligan City port in order to determine
their representative for collective bargaining with the employer, whether their
desire to be represented by the petitioner Allied Free Workers Union or neither
[sic]; and upon termination of the said election, the result thereof shall forthwith
be submitted to this court for further consideration. The union present payroll
may be utilized in determining the qualified voters, with the exclusion of all
supervisors.
SO ORDERED.
As already indicated, the fundamental issue involved in these cases before Us consists
in whether there is an employer-employee relationship between MARITIMA, on the one
hand, and AFWU and/or its members-laborers who do the actual stevedoring and
arrastre work on the other hand.
THE UNFAIR LABOR PRACTICE CASE
(L-22951
*
[CIR Case 426-ULP])
Petitioner AFWU's proposition is that the court a quo erred (1) in concluding
that MARITIMA had not refused to bargain collectively with it, as the majority union; (2)
in not finding that MARITIMA had committed acts of discrimination, interferences and
coercions upon its members-laborers, and (3) in concluding that the CONTRACTmay
not be interferred with even if contrary to law or public policy.
It is true that MARITIMA admits that it did not answer AFWU's proposal for a collective
bargaining agreement. From this it does not necessarily follow that it is guilty of unfair
labor practice. Under the law
16
the duty to bargain collectively arises only between the
"employer" and its "employees". Where neither party is an "employer" nor an
"employee" of the other, no such duty would exist. Needless to add, where there is no
duty to bargain collectively the refusal to bargain violates no right. So, the question is:
Under the CONTRACT , was MARITIMA the "employer" and AFWU and/or its members
the "employees" with respect to one another?
The court a quo held that under the CONTRACT , AFWU was an independent
contractor of MARITIMA. This conclusion was based on the following findings of fact,
which We can no longer disturb, stated in the CIR decision:
7. ... The petitioner union operated as a labor contractor under the so-called
"cabo" system; and as such it has a complete set of officers and office personnel
(Exhs. "F" and "F-1") and its organizational structure includes the following:
General President, with the following under him one vice-president, legal
counsel, general treasurer, general manager and the board of directors. Under
the general manager is the secretary, the auditor, and the office staff composing
of the general foreman, general checker, general timekeeper, and the respective
subordinates like assistant foreman, capataz, assistant general checker, field
checker, office timekeeper, and field timekeeper all appointed by the general
manager of the union and are paid in accordance with the union payroll
exclusively prepared by the union in the office. (See t.s.n. pp. 32-36, June 9,
1960; pp. 78-80, February 16, 1961; pp. 26-28, August 9, 1960). The payrolls
where laborers are listed and paid were prepared by the union itself without the
intervention or control of the respondent company and/or its agent at Iligan City.
The respondent never had any knowledge of the individual names of laborers
and/or workers listed in the union payroll or in their roster of membership.
8. The union engaged the services of their members in undertaking the work of
arrastre and stevedoringeither to haul shippers' goods from their warehouses in
Iligan City to the MARITIMA boat or from the boat to the different
consignees. The charges for such service were known by the union and collected
by them through their bill collector. This is shown by the preparation of the union
forms known as "conduci" or delivery receipts. These "conduci" or receipts
contain informations as to the number and/or volume of cargoes handled by the
union, the invoice number, the name of the vessel and the number of bills of
lading covering the cargoes to be delivered. Those delivery receipts are different
and separate from the bills of lading and delivery receipts issued by the company
to the consignees or shippers. Cargoes carried from the warehouses to the boat
or from the boat to the consignees were always accompanied by the union
checker who hand-carry the "conduci". Once goods are delivered to their
destination the union through its bill collectors prepare the bills of collection and
the charges thereon are collected by the union bill collectors who are employees
of the union and not of the respondent. The respondent had no intervention
whatsoever in the collection of those charges as the same are clearly indicated
and described in the labor CONTRACT , Exhibit "A". There were, however,
instances when the respondents were requested to help the union in the
collection of charges forservices rendered by members of the union when
fertilizers and gasoline drums were loaded aboard the
Compaia MARITIMA boats. This was necessary in order to facilitate the
collection of freight and handling charges from the government for auditing
purposes. When cargoes are to be loaded, the shipper usually notifies the
petitioner union when to load their cargoes aboard Compaia MARITIMA boats
calling in the port of Iligan City; and when a boat docks in said port, the union
undertakes to haul the said shipper's goods to the boat. In doing this work, the
union employs their own trucks or other vehicles or conveyance from shipper's
warehouse to the boat or vice-versa. The respondent has no truck of any kind for
the service of hauling cargoes because such service is included in the
CONTRACT executed between the parties. (See Exh. "A").
9. The union members who were hired by the union to perform arrastre and
stevedoring work on respondents' vessels at Iligan port were being supervised
and controlled by the general foreman of the petitioner union or by any union
assistant or capataz responsible for the execution of the labor CONTRACT when
performing arrastre and/or stevedoring work aboard vessels of the
Compaia MARITIMA docking at Iligan City. The foreman assigned their laborers
to perform the required work aboard vessels of the respondent. For instance,
when a boat arrives, the general foreman requests the cargo report from the
chief mate of the vessel in order to determine where the cargoes are located in
the hold of the boat and to know the destination of these cargoes. All the laborers
and/or workers hired for said work are union members and are only responsible
to their immediate chief who are officers and/or employees of the union. The
respondent firm have their own separate representatives like checkers who
extend aid to the union officers and members in checking the different cargoes
unloaded or loaded aboard vessels of the Compaia MARITIMA. There were no
instances where offices and employees of the respondent Compaia
MARITIMA and/or its agent had INTERFERRED in the giving of instructions to
the laborers performing the arrastre and/or stevedoring work either aboard
vessels or at the wharf of Iligan City. As contractor, the union does not receive
instructions as to what to do, how to do, and works without specific instructions.
They have no fixed hours of work required by the MARITIMA.
10. While cargoes were in transit either from the warehouse to the boat or from
the boat to the different consignees, any losses or damages caused with the said
cargoes were charged to the account of the union; and the union likewise
imposed the penalty or fine to any employee who caused or committed the
damages to cargoes in transit. Other disciplinary measures imposed on laborers
performing the said work were exercised by the general foreman of the union
who has blanket authority from the union general manager to exercise
disciplinary control over their members who were assigned to perform the work in
a group of laborers assigned by the union to perform loading or unloading
cargoes when a Compaia MARITIMA boat docked at Iligan City. The
respondents have not at any time interferred in the imposition of disciplinary
action upon the laborers who are members of the union. In one instance, under
this situation, the president of the union himself dismissed one inefficient laborer
found to have been performing inefficient service at the time(t.s.n. pp. 17-18,
February 15, 1961).
x x x x x x x x x
13. Erring laborers and/or workers who are affiliates of the union were directly
responsible to the union and never to the respondent. Respondent cannot,
therefore, discipline and/or dismiss these erring workers of the union. (Emphasis
supplied)
And in absolving MARITIMA of the unfair labor charge on this point, the court a
quo concluded:
From the foregoing circumstances and findings, the Court is of the opinion that
no substantial evidence has been presented to sustain the charge of unfair labor
practice acts as alleged to have been committed by herein respondent. The
Court finds no interference in the union activities, if any, of the members of the
Allied Free Workers Union as these persons engaged in the stevedoring and
arrastre service were employed by the Allied Free Workers Union as
independent contractor subject to the terms and conditions of their then existing
labor CONTRACT Exhibit "A". To construe the CONTRACT otherwise would tend
to disregard the rights and privileges of the parties intended by them in
their CONTRACT . (Exhibit "A"). This Court believes that it may not interfere in
the implementation of the said labor CONTRACT in the absence of abuse by one
party to the prejudice of the other. ...
Further, the Court finds that the petitioner, aside from its labor CONTRACT (See
Exhibit "A") with the respondent Compaia MARITIMA also has other labor
contracts with other shipping firms on the stevedoring and arrastre work; and that
this CONTRACT obligated the petitioner as an independent labor contractor to
undertake the arrastre and stevedoring service on Compaia MARITIMA boats
docking at Iligan City Port. The petitioner is an independent contractor as defined
in the CONTRACT Exhibit "A" and in the evidence submitted by the parties. "An
INDEPENDENT CONTRACTOR is one who, in rendering services, exercises an
independent employment or occupation and represents the will of his employer
only as to the results of his work and not as to the means whereby it is
accomplished; one who exercising an independent employment, contracts to do
a piece of work according to his own methods, without being subject to the
control of his employer except as to the result of his work; and who engaged to
perform a certain service for another, according to his own manner and methods,
free from the control and direction of his employer in all matters connected with
the performance of the service except as to the result of the work." (see 56 C.J.S.
pp. 41-43; Cruz, et al. vs. Manila Hotel et al., G.R. No. L-9110, April 30,
1957). These factors were present in the relation of the parties as described in
their CONTRACT Exhibit "A".
x x x x x x x x x
In Viaa vs. Al Lagadan et al., G.R. No. L-8967, May 31, 1956, the Supreme
Court states the rule as follows.
'IN DETERMINING THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP, the following elements are generally considered,
namely:
(1) the selection and engagement of the employees;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employee's conduct
although the latter is the most important element (35 Am. Jur. 445).
Assuming that the share received by the deceased could partake of the
nature of wages on which we need not and do not express our view
and that the second element, therefore, exists in the case at bar, the
record does not contain any specific data regarding the third and fourth
elements.'
The clear implication of the decision of the Supreme Court is that if the defendant
has no power of control which, according to the Supreme Court, is the "most
important element" there is no employer-employee relationship. (Emphasis
supplied)
The conclusion thus reached by the court a quo is in full accord with the facts and the
applicable jurisprudence. We totally agree with the court a quo that AFWU WAS AN
INDEPENDENT CONTRACTOR. And an independent contractor is not an
"employee".
17

Neither is there any direct employment relationship between MARITIMA and the
laborers. The latter have no separate individual contracts with MARITIMA. In fact, the
court a quo found that it was AFWU that hired them. Their only possible connection
with MARITIMA is through AFWU which contracted with the latter. Hence, they could
not possibly be in a better class than AFWU which dealt with MARITIMA.
18

In this connection, it is interesting to note that the facts as found by the court a
quo strongly indicate that it is AFWUitself who is the "employer" of those laborers. The
facts very succinctly show that it was AFWU, through its officers, which (1) selected and
hired the laborers, (2) paid their wages, (3) exercised control and supervision over
them, and (4) had the power to discipline and dismiss them. These are the very
elements constituting an employer-employee relationship.
19

Of course there is no legal impediment for a union to be an "employer".
20
Under the
particular facts of this case, however, AFWU appears to be more of a distinct and
completely autonomous business group or association. Its organizational structure and
operational system is no different from other commercial entities on the same line. It
even has its own bill collectors and trucking facilities. And that it really is engaged in
business is shown by the fact that it had arrastre and stevedoring contracts with other
shipping firms in Iligan City.
Now, in its all-out endeavor to make an "employer" out of MARITIMA, AFWU citing
an impressive array of jurisprudence, even goes to the extent of insisting that it be
considered a mere "AGENT" of MARITIMA. Suffice it to say on this point that an
agent can not represent two conflicting interests that are diametrically opposed. And
that the cases sought to be relied upon did not involve representatives of opposing
interests.
Anent the second point raised: AFWU claims that the court a quo found that acts of
interferences and discriminations were committed by MARITIMA against the former's
members simply for their union affiliation.
21
However, nowhere in the 32-page decision
of the court a quo can any such finding be found. On the contrary, said court made the
following finding:
18. There is no showing that this new union, the Iligan Stevedoring Union, was
organized with the help of the branch manager Jose C. Teves. The organizer of
the union like Messrs. Sergio Obach, Labayos and Atty. Obach and their
colleagues have never sought the intervention, help or aid of the respondent
CompaiaMARITIMA or its branch manager Teves in the formation and/or
organization of the said Iligan Stevedoring Union. It appears that these people
have had previous knowledge and experience in handling stevedoring and in the
arrastre service prior to the employment of the Allied Free Workers Union in the
Iligan port. The charge of union interference and domination finds no support
from the evidence. (Emphasis supplied)
More worthy of consideration is the suggestion that the termination of
the CONTRACT was in bad faith. First of all, contrary to AFWU's sweeping statement,
the court a quo did not find that the termination of the CONTRACT was "in retaliation
to AFWU's demand for collective bargaining. On the contrary, the court a quo held
that MARITIMA'sauthority to terminate the CONTRACT was rightfully exercised:
21. The evidence does not show substantially any act of interference in the union
membership or activities of the petitioner union. The rescission of their
CONTRACT is not a union interference contemplated in the law.
x x x x x x x x x
x x x Further, the Court is satisfied that there is no act or acts of discrimination as
claimed by herein petitioner to have been committed by the respondent firm or its
branch manager Teves. Evidence is clear that Teves, in representation of the
principal, the respondent Compaia MARITIMA, has also acted, in good faith in
implementing the provisions of their existent CONTRACT (Exhibit "A"), and when
he advised the union of the rescission of the said CONTRACT effective August
31, 1954, he did so in the concept that the employer firm may so terminate their
contract pursuant to paragraph 4 of Exhibit "A" which at the time was the law
controlling between them. ... (Emphasis supplied)
We are equally satisfied that the real reason for the termination of
the CONTRACT was AFWU's inefficient service. The court a quo drew its conclusion
from the following findings:
11. During the first month of the existence of the labor CONTRACT Exhibit 'A',
the petitioner union rendered satisfactory service. Under this situation, the
Compaia MARITIMA's representative at Iligan City was authorized to renew
verbally with the extension of the CONTRACT Exhibit "A" from month to month
basis after the first month of its expiration. This situation of harmony lasted up to
the latter part of 1953 when the Compaia MARITIMA and its branch manager
agent complained to the union of the unsatisfactory service of the union laborers
hired to load and unload cargoes aboard Compaia MARITIMA boats. This
deteriorating situation was admitted as a fact by the union president (See Exhs.
"3", "3-A" and "3-B"; See also t.s.n. pp. 65-66, August 9, 1960).
12. There was a showing that the laborers employed by the union were inefficient
in performing their jobs, and the business of the respondent company in Iligan
City suffered adversely during the year 1954; and this was due to the fact that
respondents' vessels were forced to leave cargoes behind in order not to disrupt
the schedule of departures. The Union laborers were slow in loading and/or
unloading freight from which the respondent Compaia MARITIMA secured its
income and/or profits. At times, cargoes were left behind because of the union's
failure to load them before vessel's departure. In order to solve this inefficiency of
the complaining union, the branch manager of the Compaia MARITIMA was
forced to hire extra laborers from among 'stand-by' workers not affiliated to any
union for the purpose of helping in the stevedoring and arrastre work on their
vessels because, at that time, the union was not performing and/or rendering
efficient service in the loading and unloading of cargoes. ...
x x x x x x x x x
14. Because of the deterioration of the Service rendered to the respondent, the
branch manager of the respondent Compaia MARITIMA informed the union of
its intention to rescind the CONTRACT Exhibit "A" because the company had
been suffering losses for such inefficient service. (See Exhibit "N").
Respondent Teves reported to the MARITIMA's head office on the financial
losses of the company in its operations. (See Exhibits 'Y', 'Y-1' to 'X-5').
15. On August 24, 1954, branch manager Jose C. Teves of the Iligan
City MARITIMA Branch, wrote the petitioner union informing them of the
termination of their CONTRACT , Exhibit "A". (See Exhibit "N"). This step was
taken after the company found the union lagging behind their work under the
CONTRACT , so much so that MARITIMA boats have to leave on schedule
without loading cargoes already contacted to be transported. (Emphasis
supplied)
Perhaps, AFWU might say that this right to terminate appearing in paragraph 4 of
the CONTRACT is contrary to law, morals, good customs, public order, or public
policy.
22
However, it has not adduced any argument to demonstrate such point.
Moreover, there is authority to the effect that the insertion in a CONTRACT for personal
services of a resolutory condition permitting the cancellation of the CONTRACT by one
of the contracting parties is valid.
23
Neither would the termination constitute "union-
busting". Oceanic Air Products vs. CIR,
24
cited by AFWU is not in point. That case
presupposes an employer-employee relationship between the parties disputants a
basis absolutely wanting in this case.
AFWU's third point is again that MARITIMA's act of terminating
the CONTRACT constituted union interference. As stated, the court a quo found as a
fact that there is no sufficient evidence of union interference. And no reason or
argument has been advanced to show that the fact of said termination alone constituted
union interference.
THE CERTIFICATION ELECTION CASE
(L-22952
**
& L-22971 [CIR Case No. 175-MC]).
In the certification ejection case, the court a quo directed the holding of a certification
election among the laborers then doing arrastre and stevedoring work.
Both MARITIMA and AFWU have appealed from that ruling. The latter maintains that
the lower court should have directly certified it as the majority union, entitled to
represent all the workers in the arrastre and stevedoring work unit,
whereas MARITIMA contends that said court could not even have correctly ordered a
certification election considering that there was an absence of employer-employee
relationship between it and said laborers.
There is no question that certification election could not have been proper during the
existence of the CONTRACT in view of the court a quo's finding that there was no
employment relationship thereunder between the parties. But after the termination of
the CONTRACT on August 31, 1954, what was the nature of the relationship
betweenMARITIMA and the laborers-members of AFWU?
From the finding that after the rescission of the CONTRACT , MARITIMA continued to
avail of the services of AFWUthe court a quo concluded that there came about an
implied employer-employee relationship between the parties. This conclusion cannot be
sustained.
First of all, it is contradicted by the established facts. In its findings of fact, the court a
quo observed that after the rescission, the AFWU laborers continued working in
accordance with the "cabo" system, which was the prevailing custom in the place. Said
the court:
20. After the rescission of the CONTRACT Exhibit "A" on August 31, 1954, the
Allied Free Workers Union and its members were working or performing the work
of arrastre and stevedoring service aboard 'vessels of the Compaia MARITIMA
docking at Iligan City port under the 'cabo system' then prevailing in that teritory;
and the customs and conditions then prevailing were observed by the parties
without resorting to the conditions of the former labor contract Exhibit "A".
(Emphasis supplied)
Under the "CABO" SYSTEM, the union was an independent contractor. This is
shown by the court a quo's own finding that prior to
the CONTRACT between MARITIMA and AFWU, the former had an oral arrastre and
stevedoring agreement with another union. This agreement was also based on the
"cabo" system. As found by the court a quo:
4. That prior to the execution of Exhibit "A", the arrastre and stevedoring work
was performed by the Iligan Wharf Laborers Union headed by one Raymundo
Labayos under a verbal agreement similar to the nature and contents of Exhibit
"A"; and this work continued from 1949 to 1952.
5. Under the oral CONTRACT , the Iligan Laborers Union acting as an
independent labor contractor engaged [in] the services of its members as
laborers to perform the contract work of arrastre and stevedoring service aboard
vessels of the Compaia MARITIMA calling and docking at Iligan City; and for
the services therein rendered the union charged shippers and/or consignees in
accordance with the consignment or place, and the proceeds thereof shall be
shared by the union members in accordance with the union's internal rules and
regulations. This system of work is locally known as the 'cabo system'. The
laborers who are members of the union and hired for the arrastre and
stevedoring work were paid on union payrolls and the Compaia MARITIMA has
had nothing to do with the preparation of the same.
6. Because of unsatisfactory service rendered by the Iligan Wharf Labor Union
headed by Labayos, the Compaia MARITIMA through its agent in Iligan City
cancelled their oral contractor and entered into a new contractor, Exhibit "A" with
the Allied Free Workers Union (PLUM) now petitioner in this case. The terms and
conditions of the same continued and was similar to the oral contractor entered
into with the union headed by Labayos. ...
7. The cancellation of the oral contract with the Iligan Wharf Labor Union headed
by Labayos was due to the inefficient service rendered by the said union. The
labor contract entered into by the petitioner herein (Exh. "A") was negotiated
through the intervention of Messrs. Salvador Lluch, Mariano Ll Badelles,
Laurentino Ll. Badelles, Nicanor T. Halivas and Raymundo Labayos. The
contract was prepared by their legal panel and after several negotiations,
respondent Teves reluctantly signed the said written contract with the union with
the assurance however that the same arrange previously had with the former
union regarding the performance and execution of the arrastre and stevedoring
contract be followed in accordance with the custom of such kind of work at Iligan
City. The petitioner union, operated as a labor contractor under the so-called
"cabor" system; ... (Emphasis supplied)
From the above findings, it is evident that, insofar as the working arrangement was
concerned, there was no real difference between the CONTRACT and the prior oral
agreement. Both were based on the "cabo" system. Under both, (1) the union was an
independent contractor which engaged the services of its members as laborers; (2) the
charges against the consignees and owners of cargoes were made directly by the
union; and (3) the laborers were paid on union payrolls and MARITIMA had nothing to
do with the preparation of the same. These are the principal characteristics of the
"cabo" system on which the parties based their relationship after the termination of
theCONTRACT.
Hence, since the parties observed the "cabo" system after the rescission of
the CONTRACT, and since the characteristics of said system show that the contracting
union was an independent contractor, it is reasonable to assume that AFWU continued
being an independent contractor of MARITIMA. And, being an independent
contractor, it could not qualify as an "employee". With more reason would be true
with respect to the laborers.
Moreover, there is no evidence at all regarding the characteristics of the working
arrangement between AFWU andMARITIMA after the termination of
the CONTRACT. All we have to go on is the court a quo's finding that the "cabo" system
was observed a system that negatives employment relationship. The four elements
generally regarded as indicating the employer-employee relationship or at the very
least, the element of "control" must be shown to sustain the conclusion that there
came about such relationship. The lack of such a showing in the case at bar is fatal
to AFWU's contention.
Lastly, to uphold the court a quo's conclusion would be tantamount to the imposition of
an employer-employee relationship against the will of MARITIMA. This cannot be done,
since it would violate MARITIMA's exclusive prerogative to determine whether it should
enter into an employment CONTRACT or not, i.e, whether it should hire others or
not.
25
In Pampanga Bus Co. vs. Pambusco Employees' Union,
26
We said:
x x x The general right to make a contract in relation to one's business is an
essential part of the liberty of the citizens protected by the due process clause of
the constitution. The right of a laborer to sell his labor to such person as he may
choose is, in its essence, the same as the right of an employer to purchase labor
from any person whom it chooses. The employer and the employee have thus an
equality of right guaranteed by the constitution. 'If the employer can compel the
employee to work against the latter's will, this is servitude. If the employee can
compel the employer to give him work against the employer's will, this is
oppression (Emphasis supplied) .
Therefore, even if the AFWU laborers continued to perform arrastre and stevedoring
work after August 31, 1954, it cannot be correctly concluded as did the court a
quo that an employer-employee relationship even impliedly at that arose when
before there never had been any. Indeed, it would appeal unreasonable and unjust to
force such a relationship upon MARITIMA when it had clearly and continuously
manifested its intention not to have any more business relationship whatsoever
with AFWU because of its inefficient service. It was only to comply with injunctions and
other judicial mandates that MARITIMA continued to abide by the status quo, extending
in fact and in effect the operation of the MARITIMA contract.
The only remaining question now is whether, in the particular context of what We have
said, the lower court's ruling ordering a certification election can be sustained. As
already stated, the duty to bargain collectively exists only between the "employer" and
its "employees". However, the actual negotiations which may possibly culminate in a
concrete collective bargaining contract are carried on between the "employer" itself
and the official representativeof the "employees"
27
in most cases, the majority labor
union. Since the only function of a certification election is to determine, with judicial
sanction, who this official representative or spokesman of the "employees" will be,
28
the
order for certification election in question cannot be sustained. There being no
employer-employee relationship between the parties disputants, there is neither a "duty
to bargain collectively" to speak of. And there being no such duty, to hold certification
elections would be pointless. There is no reason to select a representative to negotiate
when there can be no negotiations in the first place. We therefore hold that where as
in this case there is no duty to bargain collectively, it is not proper to hold certification
elections in connection therewith.
The court a quo's objective in imposing the employer-employee relationship may have
been to do away with the "cabo" system which, although not illegal, is in its operation
regarded as disadvantageous to the laborers and stevedores. The rule however
remains that the end cannot justify the means. For an action to be sanctioned by the
courts, the purpose must not only be good but the means undertaken must also be
lawful.
A true and sincere concern for the welfare of AFWU members-laborers would call for
reforms within AFWU itself, if the evil of the so-called "cabo" system is to be eliminated.
As We suggested in Bermiso vs. Hijos de Escao,
29
the remedy against the "cabo"
system need not be sought in the courts but in the laborers themselves who should
organize into a closely-knit union "which would secure the privileges that the members
desire thru the election of officers among themselves who would not exploit them."
Wherefore, the appealed decision of the Court of Industrial Relations is hereby affirmed
insofar as it dismissed the charge of unfair labor practice in CIR Case 426-ULP, but
reversed and set aside insofar as it ordered the holding of a certification election in CIR
Case No. 175-MC, and the petition for certification in said case should be, as it is
hereby, dismissed. No costs. So ordered.

A.C. No. 959 July 30, 1971
PEDRO OPAREL, SR., complainant,
vs.
ATTY. DOMINADOR ABARIA, respondent.
R E S O L UT I O N

FERNANDO, J .:
This administrative proceeding was started by Pedro Oparel, Sr., who identified himself
as a pauper in his complaint filed with this Court on August 27, 1970 against
RESPONDENT Dominador Abaria, a member of the Philippine Bar. The charge was
that respondent, whose services were retained to assist complainant recover
damages from his employer for injuries suffered, acted dishonestly. Apparently, a
settlement was reached, complainant having been made to sign a receipt in the sum of
P500.00 for his claim, out of which was deducted P55.00 as attorney's fees, when the
truth, according to the complaint, was that respondent did receive the much larger
amount of P5,000.00. In a resolution of September 14, 1970, the respondent was
required to file an answer within ten days from notice. It was duly filed on October 19,
1970 with a vehement denial on the part of the respondent, alleging that the complaint
was "irresponsible, baseless and [should] not merit even the scantiest consideration" of
this Court. He further alleged that while complainant was asking only for P200.00, he
was able to secure a settlement from the employer in the sum of P500.00, admitting that
he was given as fees the aforesaid AMOUNT of P55.00. He accounted for the alleged
sum of P5,000.00 by stating that P3,500 was spent by the employer for plaintiff's
operation and medical bills, another P1,000.00 given to complainant's family during his
confinement in the hospital, and then the P500.00 received in cash by way of additional
settlement. He prayed that the complaint be dismissed.
This Court, in a resolution of October 23, 1970, referred the matter to the Solicitor
General for investigation, report and recommendation. Such report and
recommendation was submitted on June 2, 1971. It was therein stated that the city
fiscal of Bacolod City, who was designated to act as investigator, as the parties were
residents of the place, submitted on March 2, 1971 a report recommending dismissal
due to the desistance of complainant. It appeared that when the case was called for
investigation on February 17, 1971, the complainant manifested that he was no
longer interested in pushing through his complaint against respondent. In his
affidavit of desistance, he admitted that the administrative charge arose out of a
misunderstanding between him and respondent. He likewise admitted that there was
no deception practiced on him by respondent when he was made to sign the affidavit
of September 20, 1966 wherein it appeared that the amount received by him was
P500.00, no mention being made therein of the other P4,500.00 which, as noted in the
answer of respondent, consisted of P3,500.00 for expenses incurred for complainant's
operation and medical bills and P1,000.00 given to his family for support while he was
staying in the hospital. The Solicitor General agreed with such a recommendation and
prayed that the case be dismissed.
While it would appear that under the circumstances no case lies against respondent
Dominador Abaria, it is not amiss to impress on members of the Bar that the
utmost care be taken to minimize occasions for any misunderstanding between them
and their clients. The relationship being one of confidence, there is ever present the
need for the latter being adequately and fully informed of the mode and manner in which
their interest is defended. They should not be left in the dark. They are entitled to the
fullest disclosure of why certain steps are taken and why certain matters are either
included or excluded from the documents they are made to sign. It is only thus that their
faith in counsel may remain unimpaired.
Where, as did happen here, the client happens to be poor and unlettered, seeking to
enforce what he considers his just demands against an employer, it is
even more imperative that matters be explained to him with all precision and clarity.
More than that, no effort should be spared for him to get fully what he is entitled to
under the law. The same zeal should characterize a lawyer's efforts as when he is
defending the rights of property. As it is, there is even the fear that a lawyer works
harder when he appears for men of substance. To show how unfounded is such a
suspicion, he must exert his utmost, whoever be his client.
More specifically, in a case like the present, he should not invite loss of trust by
inadvertence or even by a failure to use the simplest and most understandable
language in communicating matters. For he may lend himself to the suspicion that he is
lacking in candor and may be taking undue advantage of his client for his own profit and
advantage in any dealing with the adverse party. At any rate, with complainant having
been satisfied with the explanation of respondent, he could not be justly charged of
being recreant to his trust for personal gain. The dismissal of this case is therefore
warranted.
WHEREFORE, the administrative case filed by Pedro Oparel, Sr. against respondent
Dominador Abaria is dismissed.

G.R. No. 161757 January 25, 2006
SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO
S. DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch,
Quezon City and DIVINA A. MONTEHERMOZO,Respondents.
D E C I S I O N
CARPIO MORALES, J .:
PETITIONER, Sunace International Management Services (SUNACE), a corporation
duly organized and existing under the laws of the Philippines, deployed to Taiwan
Divina A. Montehermozo (Divina) as a domestic helper under a 12-month contract
effective February 1, 1997.
1
The deployment was with the assistance of a
Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued
working for her Taiwanese employer, Hang Rui Xiong, for two more years, after which
she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint
2
before
the National Labor Relations Commission (NLRC) against Sunace, one Adelaide
Perez, the Taiwanese broker, and the employer-foreign principal alleging that she
was jailed for three months and that she was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate Regina T.
Gavin issued Summons
3
to the Manager of Sunace, furnishing it with a copy of Divinas
complaint and directing it to appear for mandatory conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been concluded,
however.
On April 6, 2000, Divina filed her Position Paper
4
claiming that under her original one-
year contract and the 2-year extended contract which was with the knowledge and
consent of Sunace, the following amounts representing income tax and savings were
deducted:
Year Deduction for Income Tax Deduction for Savings
1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;
5

and while the amounts deducted in 1997 were refunded to her, those deducted in
1998 and 1999 were not. On even date, Sunace, by its Proprietor/General Manager
Maria Luisa Olarte, filed its Verified Answer and Position Paper,
6
claiming as follows,
quoted verbatim:
COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS
SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24 months
savings as she already took back her saving already last year and the employer
did not deduct any money from her salary, in accordance with a Fascimile
Message from the respondent SUNACEs employer, Jet Crown International Co. Ltd., a
xerographic copy of which is herewith attached as ANNEX "2" hereof;
COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX AND
PAYMENT OF ATTORNEYS FEES
4. There is no basis for the grant of tax refund to the complainant as the she finished
her one year contract and hence, was not illegally dismissed by her employer.
She could only lay claim over the tax refund or much more be awarded of damages
such as attorneys fees as said reliefs are available only when the dismissal of a
migrant worker is without just valid or lawful cause as defined by law or contract.
The rationales behind the award of tax refund and payment of attorneys fees is not to
enrich the complainant but to compensate him for actual injury suffered. Complainant
did not suffer injury, hence, does not deserve to be compensated for whatever kind of
damages.
Hence, the complainant has NO CAUSE OF ACTION against respondent SUNACE
for monetary claims, considering that she has been totally paid of all the
monetary benefits due her under her Employment Contract to her full
satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the
Taiwanese law, which respondent SUNACE has no control and complainant has to
obey and this Honorable Office has no authority/jurisdiction to intervene because the
power to tax is a sovereign power which the Taiwanese Government is supreme in its
own territory. The sovereign power of taxation of a state is recognized under
international law and among sovereign states.
7. That respondent SUNACE respectfully reserves the right to file supplemental Verified
Answer and/or Position Paper to substantiate its prayer for the dismissal of the above
case against the herein respondent. AND BY WAY OF -
x x x x (Emphasis and underscoring supplied)
Reacting to Divinas Position Paper, Sunace filed on April 25, 2000 an ". . . answer to
complainants position paper"
7
alleging that Divinas 2-year extension of her contract
was without its knowledge and consent, hence, it had no liability attaching to any
claim arising therefrom, and Divina in fact executed a Waiver/Quitclaim and
Release of Responsibility and an Affidavit of Desistance, copy of each document
was annexed to said ". . . answer to complainants position paper."
To Sunaces ". . . answer to complainants position paper," Divina filed a 2-page
reply,
8
without, however, refuting Sunaces disclaimer of knowledge of the extension
of her contract and without saying anything about the Release, Waiver and Quitclaim
and Affidavit of Desistance.
The Labor Arbiter, rejected Sunaces claim that the extension of Divinas contract for
two more years was without its knowledge and consent in this wise:
We reject Sunaces submission that it should not be held responsible for the
amount withheld because her contract was extended for 2 more years without its
knowledge and consent because as Annex "B"
9
shows, Sunace and Edmund Wang
have not stopped communicating with each other and yet the matter of the contracts
extension andSunaces alleged non-consent thereto has not been categorically
established.
What Sunace should have done was to write to POEA about the extension and its
objection thereto, copy furnished the complainant herself, her foreign employer, Hang
Rui Xiong and the Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have consented to the extension and should
be liable for anything that resulted thereform (sic).
10
(Underscoring supplied)
The Labor Arbiter rejected too Sunaces argument that it is not liable on account of
Divinas execution of a Waiver and Quitclaim and an Affidavit of Desistance. Observed
the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the dispute,
the same shall be reduced to writing and signed by the parties and their respective
counsel (sic), if any, before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied that it was
voluntarily entered into by the parties and after having explained to them the terms and
consequences thereof.
A compromise agreement entered into by the parties not in the presence of the Labor
Arbiter before whom the case is pending shall be approved by him, if after confronting
the parties, particularly the complainants, he is satisfied that they understand the terms
and conditions of the settlement and that it was entered into freely voluntarily (sic) by
them and the agreement is not contrary to law, morals, and public policy.
And because no consideration is indicated in the documents, we strike them down as
contrary to law, morals, and public policy.
11

He accordingly decided in favor of Divina, by decision of October 9, 2000,
12
the
dispositive portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents SUNACE
INTERNATIONAL SERVICES and its owner ADELAIDA PERGE, both in their
personal capacities and as agent of Hang Rui Xiong/Edmund Wang to jointly and
severally pay complainant DIVINA A. MONTEHERMOZO the sum of NT91,950.00 in its
peso equivalent at the date of payment, as refund for the amounts which she is
hereby adjudged entitled to as earlier discussed plus 10% thereof as attorneys
fees since compelled to litigate, complainant had to engage the services of counsel.
SO ORDERED.
13
(Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,
14
affirmed the Labor
Arbiters decision.
Via petition for certiorari,
15
Sunace elevated the case to the Court of Appeals which
dismissed it outright by Resolution of November 12, 2002,
16
the full text of which
reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of discretion on the
part of the public respondent amounting to lack of jurisdiction when the NLRC
affirmed the Labor Arbiters finding that petitioner Sunace International Management
Services impliedly consented to the extension of the contract of private respondent
Divina A. Montehermozo. It is undisputed that petitioner was continually communicating
with private respondents foreign employer (sic). As agent of the foreign principal,
"petitioner cannot profess ignorance of such extension as obviously, the act of the
principal extending complainant (sic) employment contract necessarily bound it."
Grave abuse of discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.
17

SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on words in small letters
and underscoring supplied)
Its Motion for Reconsideration having been denied by the appellate court by Resolution
of January 14, 2004,
18
Sunace filed the present petition for review on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRCs finding that Sunace
knew of and impliedly consented to the extension of Divinas 2-year contract. It
went on to state that "It is undisputed that [Sunace] was continually communicating with
[Divinas] foreign employer." It thus concluded that "[a]s agent of the foreign principal,
petitioner cannot profess ignorance of such extension as obviously, the act of the
principal extending complainant (sic) employment contract necessarily bound it."
Contrary to the Court of Appeals finding, the alleged continuous communication was
with the Taiwanese brokerWang, not with the foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to Sunace,
the only basis of a finding of continuous communication, reads verbatim:
x x x x
Regarding to Divina, she did not say anything about her saving in police
station. As we contact with her employer, she took back her saving already
last years. And they did not deduct any money from her salary. Or she will call
back her employer to check it again. If her employer said yes! we will get it
back for her.
Thank you and best regards.
(Sgd.)
Edmund Wang
President
19

The finding of the Court of Appeals solely on the basis of the above-quoted telefax
message, that Sunace continually communicated with the foreign "principal" (sic) and
therefore was aware of and had consented to the execution of the extension of the
contract is misplaced. The message does not provide evidence that Sunace was
privy to the new contract executed after the expiration on February 1, 1998 of the
original contract. That Sunace and the Taiwanese broker communicated regarding
Divinas allegedly withheld savings does not necessarily mean that Sunace ratified
the extension of the contract. As Sunace points out in its Reply
20
filed before the
Court of Appeals,
As can be seen from that letter communication, it was just an information given to the
petitioner that the private respondent had t[aken] already her savings from her foreign
employer and that no deduction was made on her salary. It contains nothing about the
extension or the petitioners consent thereto.
21

Parenthetically, since the telefax message is dated February 21, 2000, it is safe to
assume that it was sent to enlighten Sunace who had been directed, by Summons
issued on February 15, 2000, to appear on February 28, 2000 for a mandatory
conference following Divinas filing of the complaint on February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess ignorance of such an
extension as obviously, the act of its principal extending [Divinas] employment contract
necessarily bound it,
22

it too is a misapplication, a misapplication of the theory of imputed knowledge.
THE THEORY OF IMPUTED KNOWLEDGE ascribes the knowledge of the agent,
Sunace, to the principal, employer Xiong,not the other way around.
23
The knowledge
of the principal-foreign employer cannot, therefore, be imputed to its agent
Sunace.
There being no substantial proof that Sunace knew of and consented to be bound
under the 2-year employment contract extension, it cannot be said to be privy thereto.
As such, it and its "owner" cannot be held solidarily liable for any of Divinas claims
arising from the 2-year employment extension. As the New Civil Code provides,
Contracts take effect only between the parties, their assigns, and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law.
24

Furthermore, as Sunace correctly points out, there was an implied revocation of its
agency relationship with its foreign principal when, after the termination of the
original employment contract, the foreign principal directly negotiated with Divina and
entered into a new and separate employment contract in Taiwan. Article 1924 of the
New Civil Code reading
The agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons.
thus applies.
In light of the foregoing discussions, consideration of the validity of the Waiver and
Affidavit of Desistance which Divina executed in favor of Sunace is rendered
unnecessary.
WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court of
Appeals are herebyREVERSED and SET ASIDE. The complaint of respondent
Divina A. Montehermozo against petitioner isDISMISSED.
SO ORDERED.

G.R. No. 117356 June 19, 2000
VICTORIAS MILLING CO., INC., petitioner,
vs.
COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents.
D E C I S I O N
QUISUMBING, J .:
Before us is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the decision of theCourt of Appeals dated February 24, 1994, in CA-
G.R. CV No. 31717, as well as the respondent court's resolution of September 30, 1994
modifying said decision. Both decision and resolution amended the judgment dated
February 13, 1991, of the Regional Trial Court of Makati City, Branch 147, in Civil Case
No. 90-118.
The facts of this case as found by both the trial and appellate courts are as follows:
St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner
Victorias Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued
several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among
these was SLDR No. 1214M, which gave rise to the instant case. Dated October 16,
1989, SLDR No. 1214M covers 25,000 bags of sugar. Each bag contained 50 kilograms
and priced at P638.00 per bag as "per sales order VMC Marketing No. 042 dated
October 16, 1989."
1
The transaction it covered was a "direct sale."
2
The SLDR also
contains an additional note which reads: "subject for (sic) availability of a (sic) stock at
NAWACO (warehouse)."
3

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation
(CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated
October 25, 1989 and three checks postdated November 13, 1989 in payment. That
same day, CSC wrote petitioner that it had been authorized by STM to withdraw the
sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No.
1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our
behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar
(SDR) No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags."
4

On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with
petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October
27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside
from SLDR No. 1214M, said checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO
warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been
released, petitioner refused to allow further withdrawals of sugar against SLDR No.
1214M. CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR
No. 1214M had been "sold and endorsed" to it but that it had been refused further
withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000 bags
had been withdrawn.
5
CSC thus inquired when it would be allowed to withdraw the
remaining 23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any further withdrawals of
sugar against SLDR No. 1214M because STM had already dwithdrawn all the sugar
covered by the cleared checks.
6

On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of
23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the amount of
STM's cleared checks had been fully withdrawn and hence, there would be
no more deliveries of the commodity to STM's account. Petitioner also noted that CSC
had represented itself to be STM's agent as it had withdrawn the 2,000 bags against
SLDR No. 1214M "for and in behalf" of STM.
On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil
Case No. 90-1118. Defendants were Teresita Ng Sy (doing business under the name of
St. Therese Merchandising) and herein petitioner. Since the former could not be served
with summons, the case proceeded only against the latter. During the trial, it was
discovered that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who
could not be reached through summons.
7
CSC, however, did not bother to pursue its
case against her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by
SLDR No. 1214M. Therefore, the latter had no justification for refusing delivery of the
sugar. CSC prayed that petitioner be ordered to deliver the 23,000 bags covered by
SLDR No. 1214M and sought the award of P1,104,000.00 in unrealized profits,
P3,000,000.00 as exemplary damages, P2,200,000.00 as attorney's fees and litigation
expenses.
Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000
bags.
8
Since STM had already drawn in full all the sugar corresponding to the amount of
its cleared checks, it could no longer authorize further delivery of sugar to CSC.
Petitioner also contended that it had no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not documents of title,
but mere delivery receipts issued pursuant to a series of transactions entered into
between it and STM. The SLDRs prescribed delivery of the sugar to the party specified
therein and did not authorize the transfer of said party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's co-
conspirator to defraud it through a misrepresentation that CSC was an innocent
purchaser for value and in good faith. Petitioner then prayed that CSC be ordered to
pay it the following sums: P10,000,000.00 as moral damages; P10,000,000.00 as
exemplary damages; and P1,500,000.00 as attorney's fees. Petitioner also prayed that
cross-defendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and
P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the trial court heard the case on the
merits.
As earlier stated, the trial court rendered its judgment favoring private respondent CSC,
as follows:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of
the plaintiff and against defendant Victorias Milling Company:
"1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000
bags of refined sugar due under SLDR No. 1214;
"2) Ordering defendant Victorias Milling Company to pay the amount of
P920,000.00 as unrealized profits, the amount of P800,000.00 as exemplary
damages and the amount of P1,357,000.00, which is 10% of the acquisition
value of the undelivered bags of refined sugar in the amount of P13,570,000.00,
as attorney's fees, plus the costs.
"SO ORDERED."
9

It made the following observations:
"[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the
purchase price of P15,950,000.00 of the 25,000 bags of sugar bought by her covered
by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the 25,000 bags
of sugar bought by her covered by SLDR No. 1213 on the same date, October 16, 1989
(date of the two SLDRs) is duly supported by Exhibits C to C-15 inclusive which are
post-dated checks dated October 27, 1989 issued by St. Therese Merchandising in
favor of Victorias Milling Company at the time it purchased the 50,000 bags of sugar
covered by SLDR No. 1213 and 1214. Said checks appear to have been honored and
duly credited to the account of Victorias Milling Company because on October 27, 1989
Victorias Milling Company issued official receipt no. 34734 in favor of St. Therese
Merchandising for the amount of P31,900,000.00 (Exhibits B and B-1). The testimony of
Teresita Ng Go is further supported by Exhibit F, which is a computer printout of
defendant Victorias Milling Company showing the quantity and value of the purchases
made by St. Therese Merchandising, the SLDR no. issued to cover the purchase, the
official reciept no. and the status of payment. It is clear in Exhibit 'F' that with respect to
the sugar covered by SLDR No. 1214 the same has been fully paid as indicated by the
word 'cleared' appearing under the column of 'status of payment.'
"On the other hand, the claim of defendant Victorias Milling Company that the purchase
price of the 25,000 bags of sugar purchased by St. Therese Merchandising covered by
SLDR No. 1214 has not been fully paid is supported only by the testimony of Arnulfo
Caintic, witness for defendant Victorias Milling Company. The Court notes that the
testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase
price has not been fully paid and is not corroborated by any positive evidence. There is
an insinuation by Arnulfo Caintic in his testimony that the postdated checks issued by
the buyer in payment of the purchased price were dishonored. However, said witness
failed to present in Court any dishonored check or any replacement check. Said witness
likewise failed to present any bank record showing that the checks issued by the buyer,
Teresita Ng Go, in payment of the purchase price of the sugar covered by SLDR No.
1214 were dishonored."
10

Petitioner appealed the trial courts decision to the Court of Appeals.
On appeal, petitioner averred that the dealings between it and STM were part of a
series of transactions involving only one account or one general contract of sale.
Pursuant to this contract, STM or any of its authorized agents could withdraw bags of
sugar only against cleared checks of STM. SLDR No. 21214M was only one of 22
SLDRs issued to STM and since the latter had already withdrawn its full quota of sugar
under the said SLDR, CSC was already precluded from seeking delivery of the 23,000
bags of sugar.
Private respondent CSC countered that the sugar purchases involving SLDR No.
1214M were separate and independent transactions and that the details of the series of
purchases were contained in a single statement with a consolidated summary of cleared
check payments and sugar stock withdrawals because this a more convenient system
than issuing separate statements for each purchase.
The appellate court considered the following issues: (a) Whether or not the transaction
between petitioner and STM involving SLDR No. 1214M was a separate, independent,
and single transaction; (b) Whether or not CSC had the capacity to sue on its own on
SLDR No. 1214M; and (c) Whether or not CSC as buyer from STM of the rights to
25,000 bags of sugar covered by SLDR No. 1214M could compel petitioner to deliver
23,000 bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision modifying the trial
court's judgment, to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders
defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No.
1214M;
"2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the
undelivered bags of refined sugar, as attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."
11

Both parties then seasonably filed separate motions for reconsideration.
In its resolution dated September 30, 1994, the appellate court modified its decision to
read:
"WHEREFORE, the Court hereby modifies the assailed judgment and orders defendant-
appellant to:
"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No.
1214M;
"(2) Pay costs of suit.
"SO ORDERED."
12

The appellate court explained the rationale for the modification as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of sugar which remained
undelivered as 12,586 cannot be made the basis for such a finding. The rule is explicit
that courts should consider the evidence only for the purpose for which it was
offered. (People v. Abalos, et al, 1 CA Rep 783). The rationale for this is to afford the
party against whom the evidence is presented to object thereto if he deems it
necessary. Plaintiff-appellee is, therefore, correct in its argument that Exhibit F' which
was offered to prove that checks in the total amount of P15,950,000.00 had been
cleared. (Formal Offer of Evidence for Plaintiff, Records p. 58) cannot be used to prove
the proposition that 12,586 bags of sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and
Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and 36]) presented by plaintiff-
appellee was to the effect that it had withdrawn only 2,000 bags of sugar from SLDR
after which it was not allowed to withdraw anymore. Documentary evidence (Exhibit I,
Id., p. 78, Exhibit K, Id., p. 80) show that plaintiff-appellee had sent demand letters to
defendant-appellant asking the latter to allow it to withdraw the remaining 23,000 bags
of sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged that sugar
delivery to the STM corresponded only to the value of cleared checks; and that all sugar
corresponded to cleared checks had been withdrawn. Defendant-appellant did not rebut
plaintiff-appellee's assertions. It did not present evidence to show how many bags of
sugar had been withdrawn against SLDR No. 1214M, precisely because of its theory
that all sales in question were a series of one single transaction and withdrawal of sugar
depended on the clearing of checks paid therefor.
"After a second look at the evidence, We see no reason to overturn the findings of the
trial court on this point."
13

Hence, the instant petition, positing the following errors as grounds for review:
"1. The Court of Appeals erred in not holding that STM's and private respondent's
specially informing petitioner that respondent was authorized by buyer STM to
withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf,"
(emphasis in the original) private respondent's withdrawing 2,000 bags of sugar
for STM, and STM's empowering other persons as its agents to withdraw sugar
against the same SLDR No. 1214M, rendered respondent like the other persons,
an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA
252, and precluded it from subsequently claiming and proving being an assignee
of SLDR No. 1214M and from suing by itself for its enforcement because it was
conclusively presumed to be an agent (Sec. 2, Rule 131, Rules of Court) and
estopped from doing so. (Art. 1431, Civil Code).
"2. The Court of Appeals erred in manifestly and arbitrarily ignoring and
disregarding certain relevant and undisputed facts which, had they been
considered, would have shown that petitioner was not liable, except for 69 bags
of sugar, and which would justify review of its conclusion of facts by this
Honorable Court.
"3. The Court of Appeals misapplied the law on compensation under Arts. 1279,
1285 and 1626 of the Civil Code when it ruled that compensation applied only to
credits from one SLDR or contract and not to those from two or more distinct
contracts between the same parties; and erred in denying petitioner's right to
setoff all its credits arising prior to notice of assignment from other sales or
SLDRs against private respondent's claim as assignee under SLDR No. 1214M,
so as to extinguish or reduce its liability to 69 bags, because the law on
compensation applies precisely to two or more distinct contracts between the
same parties (emphasis in the original).
"4. The Court of Appeals erred in concluding that the settlement or liquidation of
accounts in Exh. F between petitioner and STM, respondent's admission of its
balance, and STM's acquiescence thereto by silence for almost one year did not
render Exh. `F' an account stated and its balance binding.
"5. The Court of Appeals erred in not holding that the conditions of the assigned
SLDR No. 1214, namely, (a) its subject matter being generic, and (b) the sale of
sugar being subject to its availability at the Nawaco warehouse, made the sale
conditional and prevented STM or private respondent from acquiring title to the
sugar; and the non-availability of sugar freed petitioner from further obligation.
"6. The Court of Appeals erred in not holding that the "clean hands" doctrine
precluded respondent from seeking judicial reliefs (sic) from petitioner, its only
remedy being against its assignor."
14

Simply stated, the issues now to be resolved are:
(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an
agent of STM and hence, estopped to sue upon SLDR No. 1214M as an
assignee.
(2)....Whether or not the Court of Appeals erred in applying the law on
compensation to the transaction under SLDR No. 1214M so as to preclude
petitioner from offsetting its credits on the other SLDRs.
(3)....Whether or not the Court of Appeals erred in not ruling that the sale of
sugar under SLDR No. 1214M was a conditional sale or a contract to sell and
hence freed petitioner from further obligations.
(4)....Whether or not the Court of Appeals committed an error of law in not
applying the "clean hands doctrine" to preclude CSC from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised this issue for the first
time on appeal.1avvphi1 It is settled that an issue which was not raised during the trial
in the court below could not be raised for the first time on appeal as to do so would be
offensive to the basic rules of fair play, justice, and due process.
15
Nonetheless, the
Court of Appeals opted to address this issue, hence, now a matter for our consideration.
Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar
against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion
of said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to
withdraw for and in our behalf (stress supplied) the refined sugar covered by Shipping
List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the
total quantity of 25, 000 bags."
16

The Civil Code defines a contract of agency as follows:
"Art. 1868. 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."
It is clear from Article 1868 that the basis of agency is representation.
17
On the part of
the principal, there must be an actual intention to appoint
18
or an intention naturally
inferable from his words or actions;
19
and on the part of the agent, there must be an
intention to accept the appointment and act on it,
20
and in the absence of such intent,
there is generally no agency.
21
One factor which most clearly distinguishes agency from
other legal concepts is control; one person - the agent - agrees to act under the control
or direction of another - the principal. Indeed, the very word "agency" has come to
connote control by the principal.
22
The control factor, more than any other, has caused
the courts to put contracts between principal and agent in a separate category.
23
The
Court of Appeals, in finding that CSC, was not an agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon the acts of
the parties, the law makes no presumption of agency, and it is always a fact to be
proved, with the burden of proof resting upon the persons alleging the agency, to show
not only the fact of its existence, but also its nature and extent (Antonio vs.
Enriquez[CA], 51 O.G. 3536]. Here, defendant-appellant failed to sufficiently establish
the existence of an agency relation between plaintiff-appellee and STM. The fact alone
that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our
(STM's) behalf" should not be eyed as pointing to the existence of an agency relation
...It should be viewed in the context of all the circumstances obtaining. Although it would
seem STM represented plaintiff-appellee as being its agent by the use of the phrase "for
and in our (STM's) behalf" the matter was cleared when on 23 January 1990, plaintiff-
appellee informed defendant-appellant that SLDFR No. 1214M had been "sold and
endorsed" to it by STM (Exhibit I, Records, p. 78). Further, plaintiff-appellee has shown
that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold and
transferred by STM to it ...A conclusion that there was a valid sale and transfer to
plaintiff-appellee may, therefore, be made thus capacitating plaintiff-appellee to sue in
its own name, without need of joining its imputed principal STM as co-plaintiff."
24

In the instant case, it appears plain to us that private respondent CSC was a buyer of
the SLDFR form, and not an agent of STM. Private respondent CSC was not subject to
STM's control. The question of whether a contract is one of sale or agency depends on
the intention of the parties as gathered from the whole scope and effect of the language
employed.
25
That the authorization given to CSC contained the phrase "for and in our
(STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention
of the parties.
26
That no agency was meant to be established by the CSC and STM is
clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been
"sold and endorsed" to it.
27
The use of the words "sold and endorsed" means that STM
and CSC intended a contract of sale, and not an agency. Hence, on this score, no error
was committed by the respondent appellate court when it held that CSC was not STM's
agent and could independently sue petitioner.
On the second issue, proceeding from the theory that the transactions entered into
between petitioner and STM are but serial parts of one account, petitioner insists that its
debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279
of the Civil Code.
28
However, the trial court found, and the Court of Appeals concurred,
that the purchase of sugar covered by SLDR No. 1214M was a separate and
independent transaction; it was not a serial part of a single transaction or of one account
contrary to petitioner's insistence. Evidence on record shows, without being rebutted,
that petitioner had been paid for the sugar purchased under SLDR No. 1214M.
Petitioner clearly had the obligation to deliver said commodity to STM or its assignee.
Since said sugar had been fully paid for, petitioner and CSC, as assignee of STM, were
not mutually creditors and debtors of each other. No reversible error could thereby be
imputed to respondent appellate court when, it refused to apply Article 1279 of the Civil
Code to the present case.
Regarding the third issue, petitioner contends that the sale of sugar under SLDR No.
1214M is a conditional sale or a contract to sell, with title to the sugar still remaining with
the vendor. Noteworthy, SLDR No. 1214M contains the following terms and conditions:
"It is understood and agreed that by payment by buyer/trader of refined sugar and/or
receipt of this document by the buyer/trader personally or through a representative, title
to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected
and completed (stress supplied) and buyer/trader assumes full responsibility
therefore"
29

The aforequoted terms and conditions clearly show that petitioner transferred title to the
sugar to the buyer or his assignee upon payment of the purchase price. Said terms
clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped
from alleging the contrary. The contract is the law between the contracting
parties.
30
And where the terms and conditions so stipulated are not contrary to law,
morals, good customs, public policy or public order, the contract is valid and must be
upheld.
31
Having transferred title to the sugar in question, petitioner is now obliged to
deliver it to the purchaser or its assignee.
As to the fourth issue, petitioner submits that STM and private respondent CSC have
entered into a conspiracy to defraud it of its sugar. This conspiracy is allegedly
evidenced by: (a) the fact that STM's selling price to CSC was below its purchasing
price; (b) CSC's refusal to pursue its case against Teresita Ng Go; and (c) the authority
given by the latter to other persons to withdraw sugar against SLDR No. 1214M after
she had sold her rights under said SLDR to CSC. Petitioner prays that the doctrine of
"clean hands" should be applied to preclude CSC from seeking judicial relief. However,
despite careful scrutiny, we find here the records bare of convincing evidence
whatsoever to support the petitioner's allegations of fraud. We are now constrained to
deem this matter purely speculative, bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.

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. . . .
Taking into consideration the fact that the operator owed his position to the company
and the latter could remove him or terminate his services at will; that the service 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
shortcoming of the mechanism itself, which caused its faulty or defective
operation 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.

G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J .:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal
by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former-s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the part
for the prompt payment of the monthly rental agreed on. When the branch
office was opened, the same was run by the herein appellant Una 0.
Sevilla payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla
and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with a
rival firm, the Philippine Travel Bureau, and, since the branch office was
anyhow losing, the Tourist World Service considered closing down its
office. This was firmed up by two resolutions of the board of directors of
Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the
first abolishing the office of the manager and vice-president of the Tourist
World Service, Inc., Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of the Tourist World Service
then located at the said branch office. It further appears that on Jan. 3,
1962, the contract with the appellees for the use of the Branch Office
premises was terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact appellants used
it since Nov. 1961. Because of this, and to comply with the mandate of the
Tourist World Service, the corporate secretary Gabino Canilao went over
to the branch office, and, finding the premises locked, and, being unable
to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to
protect the interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could enter the locked
premises, a complaint wall filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For apparent lack
of interest of the parties therein, the trial court ordered the dismissal of the
case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order
dismissing her counterclaim which the court a quo, in an order dated June
8, 1963, granted permitting her to present evidence in support of her
counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of appellant
Lina Sevilla were jointly heard following which the court a quo ordered
both cases dismiss for lack of merit, on the basis of which was elevated
the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE
NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS.
LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST
WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-
EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING
THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE
TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES
HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM
THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN
HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL
APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O.
SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI
PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT
APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS
GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved
are:
1. Whether the appellee Tourist World Service unilaterally disco
the telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service
was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the
appellee Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture
was entered into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture
appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife
of an eminent eye, ear and nose specialist as well as a
imediately columnist had been in the travel business prior
to the establishment of the joint business venture with
appellee Tourist World Service, Inc. and appellee Eliseo
Canilao, her compadre, she being the godmother of one of
his children, with her own clientele, coming mostly from her
own social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement
dated 19 October 1960 (Exh. 'A') covering the premises at A.
Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for
the prompt payment of the monthly rentals thereof to other
appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from
appellee Tourist World Service, Inc., which had its own,
separate office located at the Trade & Commerce Building;
nor was she an employee thereof, having no participation in
nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own
passengers, her own bookings her own business (and not
for any of the business of appellee Tourist World Service,
Inc.) obtained from the airline companies. She shared the
7% commissions given by the airline companies giving
appellee Tourist World Service, Lic. 3% thereof aid retaining
4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of
maintaining the A. Mabini St. office, paying for the salary of
an office secretary, Miss Obieta, and other sundry expenses,
aside from desicion the office furniture and supplying some
of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and other
expenses in consideration for the 3% split in the co procured
by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant
Mrs. Sevilla would be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.), appellee Eliseo
Canilao admit that it was just a title for dignity (p. 36 tsn.
June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-
39 tsn April 61965-testimony of corporate secretary Gabino
Canilao (pp- 2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager.
1

xxx xxx xxx
The trial court
2
held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the premises.
3
It likewise found the
petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and
as such, she was bound by the acts of her employer.
4
The respondent Court of
Appeal
5
rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court,
erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE
PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND
CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA
O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL
FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING
INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE
SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY
BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ...
(DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP.
7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES
TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE
SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS
AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN."
(ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-
APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND
21 OF THE CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF
YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY
BY TOURIST WORLD SERVICE INC.
6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation
between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to
rule on the question, the crucial issue, in its opinion being "whether or not the
padlocking of the premises by the Tourist World Service, Inc. without the knowledge
and consent of the appellant Lina Sevilla entitled the latter to the relief of damages
prayed for and whether or not the evidence for the said appellant supports the
contention that the appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the Ermita branch office of
the appellee Tourist World Service, Inc.
7
Tourist World Service, Inc., insists, on the
other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its
Ermita "branch" office and that inferentially, she had no say on the lease executed with
the private respondent, Segundina Noguera. The petitioners contend, however, that
relation between the between parties was one of joint venture, but concede
that "whatever might have been the true relationship between Sevilla and Tourist World
Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the
law into their own hands,
8
in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent,
Tourist World Service, Inc., maintains, that the relation between the parties was in the
character of employer and employee, the courts would have been without jurisdiction to
try the case, labor disputes being the exclusive domain of the Court of Industrial
Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force.
9

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

The records will show that the petitioner, Lina Sevilla, was not subject to control by the
private respondent Tourist World Service, Inc., either as to the result of the enterprise or
as to the means used in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound herself in solidumas and
for rental payments, an arrangement that would be like claims of a master-servant
relationship. True the respondent Court would later minimize her participation in the
lease as one of mere guaranty,
12
that does not make her an employee of Tourist World,
since in any case, a true employee cannot be made to part with his own money in
pursuance of his employer's business, or otherwise, assume any liability thereof. In that
event, the parties must be bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was
opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist
World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina
Sevilla.
13
Under these circumstances, it cannot be said that Sevilla was under the
control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the
business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she
retained 4% in commissions from airline bookings, the remaining 3% going to Tourist
World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo,
Tourist World's employee. As we said, employment is determined by the right-of-control
test and certain economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a
joint venture or otherwise, a partnership. And apparently, Sevilla herself did not
recognize the existence of such a relation. In her letter of November 28, 1961, she
expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of
your branch office
14
in effect, accepting Tourist World Service, Inc.'s control over the
manner in which the business was run. A joint venture, including a partnership,
presupposes generally a of standing between the joint co-venturers or partners, in
which each party has an equal proprietary interest in the capital or property
contributed
15
and where each party exercises equal rights in the conduct of the
business.
16
furthermore, the parties did not hold themselves out as partners, and the
building itself was embellished with the electric sign "Tourist World Service, Inc.
17
in lieu
of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must
have done so pursuant to a contract of agency. It is the essence of this contract that the
agent renders services "in representation or on behalf of another.
18
In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept
of commissions. And as we said, Sevilla herself based on her letter of November 28,
1961, pre-assumed her principal's authority as owner of the business undertaking. We
are convinced, considering the circumstances and from the respondent Court's recital of
facts, that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it
is one coupled with an interest, the agency having been created for mutual interest, of
the agent and the principal.
19
It appears that Lina Sevilla is a bona fide travel agent
herself, and as such, she had acquired an interest in the business entrusted to her.
Moreover, she had assumed a personal obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals. She continued the business, using her
own name, after Tourist World had stopped further operations. Her interest, obviously,
is not to the commissions she earned as a result of her business transactions, but one
that extends to the very subject matter of the power of management delegated to her. It
is an agency that, as we said, cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
As we have stated, the respondent Court avoided this issue, confining itself to the
telephone disconnection and padlocking incidents. Anent the disconnection issue, it is
the holding of the Court of Appeals that there is 'no evidence showing that the Tourist
World Service, Inc. disconnected the telephone lines at the branch office.
20
Yet, what
cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have
them reconnected. Assuming, therefore, that it had no hand in the disconnection now
complained of, it had clearly condoned it, and as owner of the telephone lines, it must
shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking
incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease
con-tract did not accord it any authority to terminate that contract without notice to its
actual occupant, and to padlock the premises in such fashion. As this Court has ruled,
the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and
necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a
stranger to that contract having been explicitly named therein as a third party in charge
of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from
possession as summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some
malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures
that she had worked for a rival firm. To be sure, the respondent court speaks of alleged
business losses to justify the closure '21 but there is no clear showing that Tourist World
Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had
moonlit for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another company), Tourist
World's board of directors adopted two resolutions abolishing the office of 'manager"
and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the
takeover of its branch office properties. On January 3, 1962, the private respondents
ended the lease over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office
was padlocked, personally by the respondent Canilao, on the pretext that it was
necessary to Protect the interests of the Tourist World Service. "
22
It is strange indeed
that Tourist World Service, Inc. did not find such a need when it cancelled the lease five
months earlier. While Tourist World Service, Inc. would not pretend that it sought to
locate Sevilla to inform her of the closure, but surely, it was aware that after office
hours, she could not have been anywhere near the premises. Capping these series of
"offensives," it cut the office's telephone lines, paralyzing completely its business
operations, and in the process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish
Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to
elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the
private respondent, Tourist World Service, Inc., should be sentenced to pay damages.
Under the Civil Code, moral damages may be awarded for "breaches of contract where
the defendant acted ... in bad faith.
23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral
injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the
power of attorney granted to her on the authority of Article 21 of the Civil Code, in
relation to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
24

ART. 2219. Moral damages
25
may be recovered in the following and
analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and
35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to
respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no
evidence has been shown that she had connived with Tourist World Service, Inc. in the
disconnection and padlocking incidents. She cannot therefore be held liable as a
cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00
as exemplary damages,
25
and P5,000.00 as nominal
26
and/or temperate
27
damages, to
be just, fair, and reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the
Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby
REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and
Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina
Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and
for exemplary damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.
Costs against said private respondents.
SO ORDERED.

G.R. No. 102784 February 28, 1996
ROSA LIM, petitioner,
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
D E C I S I O N
HERMOSISIMA, JR., J .:
This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No.
10290, entitled "People v. Rosa Lim," promulgated on August 30, 1991.
On January 26, 1989, an Information for ESTAFA was filed against
PETITIONER Rosa Lim before Branch 92 of the Regional Trial Court of Quezon
City.
1
The Information reads:
That on or about the 8th day of October 1987, in Quezon City, Philippines and
within the jurisdiction of this Honorable Court, the said accused with intent to
gain, with unfaithfulness and/or abuse of confidence, did, then and there, wilfully,
unlawfully and feloniously defraud one VICTORIA SUAREZ, in the following
manner, to wit: on the date and place aforementioned said accused got and
received in trust from said complainant one (1) ring 3.35 solo worth
P169,000.00, Philippine Currency, with the obligation to sell the same on
commission basis and to turn over the proceeds of the sale to said complainant
or to return said jewelry if unsold, but the said accused once in possession
thereof and far from complying with her obligation despite repeated demands
therefor, misapplied, misappropriated and converted the same to her own
personal use and benefit, to the damage and prejudice of the said offended party
in the amount aforementioned and in such other amount as may be awarded
under the provisions of the Civil Code.
CONTRARY TO LAW.
2

After arraignment and trial on the merits, the trial court rendered judgment, the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense
of estafa as defined and penalized under Article 315, paragraph 1(b) of the
Revised Penal Code;
2. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and
TWO (2) MONTHS of prision correccional as minimum, to TEN (10) YEARS
of prision mayor as maximum;
3. Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its
value in the amount of P169,000 without subsidiary imprisonment in
case insolvency; and
4. To pay costs.
3

On appeal, the Court of Appeals affirmed the judgment of conviction with the
modification that the penalty imposed shall be six (6) years, eight (8) months and
twenty-one (21) days to twenty (20) years in accordance with Article 315, paragraph 1
of the Revised Penal Code.
4

Petitioner filed a motion for reconsideration before the appellate court on September
20, 1991, but the motion was denied in a Resolution dated November 11, 1991.
In her final bid to exonerate herself, petitioner filed the instant petition for review alleging
the following grounds:
I
THE RESPONDENT COURT VIOLATED THE CONSTITUTION, THE RULES
OF COURT AND THE DECISION OF THIS HONORABLE COURT IN NOT
PASSING UPON THE FIRST AND THIRD ASSIGNED ERRORS IN
PETITIONER'S BRIEF;
II
THE RESPONDENT COURT FAILED TO APPLY THE PRINCIPLE THAT THE
PAROL EVIDENCE RULE WAS WAIVED WHEN THE PRIVATE
PROSECUTOR CROSS-EXAMINED THE PETITIONER AND AURELIA
NADERA AND WHEN COMPLAINANT WAS CROSS-EXAMINED BY THE
COUNSEL FOR THE PETITIONER AS TO THE TRUE NATURE OF THE
AGREEMENT BETWEEN THE PARTIES WHEREIN IT WAS DISCLOSED
THAT THE TRUE AGREEMENT OF THE PARTIES WAS A SALE OF
JEWELRIES AND NOT WHAT WAS EMBODIED IN THE RECEIPT MARKED
AS EXHIBIT "A" WHICH WAS RELIED UPON BY THE RESPONDENT COURT
IN AFFIRMING THE JUDGMENT OF CONVICTION AGAINST HEREIN
PETITIONER; and
III
THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE
PRINCIPLE ENUNCIATED BY THIS HONORABLE COURT TO THE EFFECT
THAT "ACCUSATION" IS NOT, ACCORDING TO THE FUNDAMENTAL LAW,
SYNONYMOUS WITH GUILT: THE PROSECUTION MUST OVERTHROW THE
PRESUMPTION OF INNOCENCE WITH PROOF OF GUILT BEYOND
REASONABLE DOUBT. TO MEET THIS STANDARD, THERE IS NEED FOR
THE MOST CAREFUL SCRUTINY OF THE TESTIMONY OF THE STATE,
BOTH ORAL AND DOCUMENTARY, INDEPENDENTLY OF WHATEVER
DEFENSE IS OFFERED BY THE ACCUSED. ONLY IF THE JUDGE BELOW
AND THE APPELLATE TRIBUNAL COULD ARRIVE AT A CONCLUSION THAT
THE CRIME HAD BEEN COMMITTED PRECISELY BY THE PERSON ON
TRIAL UNDER SUCH AN EXACTING TEST SHOULD SENTENCE THUS
REQUIRED THAT EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT.
THE PROOF AGAINST HIM MUST SURVIVE THE TEST OF REASON; THE
STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY
JUDGMENT. (People v. Austria, 195 SCRA 700)
5

Herein the pertinent facts as alleged by the prosecution.
On or about October 8, 1987, PETITIONER Rosa Lim who had come from Cebu
received from private RESPONDENT Victoria Suarez the following two pieces of
jewelry; one (1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet worth
P170,000.00, to be sold on commission basis. The agreement was reflected in a
receipt marked as Exhibit "A"
6
for the prosecution. The transaction took place at the Sir
Williams Apartelle in Timog Avenue, Quezon City, where Rosa Lim was temporarily
billeted.
On December 15, 1987, PETITIONER returned the bracelet to Vicky Suarez, but failed
to return the diamond ring or to turn over the proceeds thereof if sold. As a result,
private complainant, aside from making verbal demands, wrote a demand letter
7
to
petitioner asking for the return of said ring or the proceeds of the sale thereof. In
response, petitioner, thru counsel, wrote a letter
8
to private respondent's counsel
alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez
sometime in September, 1987, for which reason, petitioner had no longer any liability to
Mrs. Suarez insofar as the pieces of jewelry were concerned. Irked, Vicky Suarez filed a
complaint for estafa under Article 315, par l(b) of the Revised Penal Code for which the
petitioner herein stands convicted.
Petitioner has a different version.
Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October
1987, together with one Aurelia Nadera, who introduced petitioner to private
respondent, and that they were lodged at the Williams Apartelle in Timog, Quezon City.
Petitioner denied that the transaction was for her to sell the two pieces of jewelry
on commission basis. She told Mrs. Suarez that she would consider buying the
pieces of jewelry far her own use and that she would inform the private complainant of
such decision before she goes back to Cebu. Thereafter, the petitioner took the pieces
of jewelry and told Mrs. Suarez to prepare the "necessary paper for me to sign because
I was not yet prepare (d) to buy it."
9
After the document was prepared, petitioner signed
it. To prove that she did not agree to the terms of the receipt regarding the sale on
commission basis, petitioner insists that she signed the aforesaid document on the
upper portion thereof and not at the bottom where a space is provided for the signature
of the person(s) receiving the jewelry.
10

On October 12, 1987 before departing for Cebu, PETITIONER called up Mrs. Suarez
by telephone in order to inform her that she was no longer interested in the ring and
bracelet. Mrs. Suarez replied that she was busy at the time and so, she instructed the
petitioner to give the pieces of jewelry to Aurelia Nadera who would in turn give
them back to the private complainant. The petitioner did as she was told and gave the
two pieces of jewelry to Nadera as evidenced by a handwritten receipt, dated
October 12, 1987.
11

Two issues need to be resolved: First, what was the real transaction between Rosa
Lim and Vicky Suarez a contract of agency to sell on commission basis as set out in the
receipt or a sale on credit; and, second, was the subject diamond ring returned to Mrs.
Suarez through Aurelia Nadera?
Petitioner maintains that she cannot be liable for estafa since she never received
the jewelries in trust or on commission basis from Vicky Suarez. The real agreement
between her and the private respondent was a sale on credit with Mrs. Suarez as the
owner-seller and petitioner as the buyer, as indicated by the bet that petitioner did not
sign on the blank space provided for the signature of the person receiving the jewelry
but at the upper portion thereof immediately below the description of the items taken.
12

The contention is far from meritorious.
The receipt marked as Exhibit "A" which establishes a contract of agency to sell
on commission basis between Vicky Suarez and Rosa Lim is herein reproduced in order
to come to a proper perspective:
THIS IS TO CERTIFY, that I received from Vicky Suarez PINATUTUNAYAN KO
na aking tinanggap kay ___________ the following jewelries:
ang mga alahas na sumusunod:
Description
Mga Uri
Price
Halaga
l ring 3.35 dolo P 169,000.00
1 bracelet 9;170,000.00
total
Kabuuan
P 339,000.00
in good condition, to be sold in CASH ONLY within . . . days from date of signing
this receipt na nasa mabuting kalagayan upang ipagbili ng KALIWAAN
(ALCONTADO) lamang sa loob ng . . . araw mula ng ating pagkalagdaan:
if I could not sell, I shall return all the jewelry within the period mentioned
above; if I would be able to sell, I shall immediately deliver and account
the whole proceeds of sale thereof to the owner of the jewelries at his/her
residence; my compensation or commission shall be the over-price on the
value of each jewelry quoted above. I am prohibited to sell any jewelry on
credit or by installment; deposit, give for safekeeping: lend, pledge or give
as security or guaranty under any circumstance or manner, any jewelry to
other person or persons.
kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng
taning na panahong nakatala sa itaas; kung maipagbili ko naman ay dagli
kong isusulit at ibibigay ang buong pinagbilhan sa may-ari ng mga alahas
sa kanyang bahay tahanan; ang aking gantimpala ay ang mapapahigit na
halaga sa nakatakdang halaga sa itaas ng bawat alahas HINDI ko
ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan ang alin mang
alahas, ilalagak, ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit
sa anong paraan ang alin mang alahas sa ibang mga tao o tao.
I sign my name this . . . day of . . . 19 . . . at Manila, NILALAGDAAN ko ang
kasunduang ito ngayong ika _____ ng dito sa Maynila.
___________________
Signature of Persons who
received jewelries (Lagda
ng Tumanggap ng mga
Alahas)
Address: . . . . . . . . . . . .
Rosa Lim's signature indeed appears on the upper portion of the receipt immediately
below the description of the items taken: We find that this fact does not have the
effect of altering the terms of the transaction from a contract of agency to sell on
commission basis to a contract of sale. Neither does it indicate absence or vitiation of
consent thereto on the part of Rosa Lim which would make the contract void or
voidable. The moment she affixed her signature thereon, petitioner became bound by all
the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations
that may arise from their breach. This is clear from Article 1356 of the New Civil Code
which provides:
Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. . . .
However, there are some provisions of the law which require certain formalities for
particular contracts. The FIRST is when the form is required for the validity of the
contract; the SECOND is when it is required to make the contract effective as against
third parties such as those mentioned in Articles 1357 and 1358; and the THIRD is
when the form is required for the purpose of proving the existence of the contract, such
as those provided in the Statute of Frauds in article 1403.
13
A contract of agency to
sell on commission basis does not belong to any of these three categories, hence
it is valid and enforceable in whatever form it may be entered into.
Furthermore, there is only one type of legal instrument where the law strictly prescribes
the location of the signature of the parties thereto. This is in the case of notarial wills
found in Article 805 of the Civil Code, to wit:
Every will, other than a holographic will, must be subscribed at the end thereof by
the testator himself . . . .
The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and every
page thereof, except the last, on the left margin. . . .
In the case before us, the parties did not execute a notarial will but a simple contract of
agency to sell on commission basis, thus making the position of petitioner's
signature thereto immaterial.
Petitioner insists, however, that the diamond ring had been returned to Vicky Suarez
through Aurelia Nadera, thus relieving her of any liability. Rosa Lim testified to this effect
on direct examination by her counsel:
Q: And when she left the jewelries with you, what did you do thereafter?
A: On October 12, I was bound for Cebu. So I called up Vicky through
telephone and informed her that I am no longer interested in the bracelet and ring
and that I will just return it.
Q: And what was the reply of Vicky Suarez?
A: She told me that she could not come to the apartelle since she was very
busy. So, she asked me if Aurelia was there and when I informed her that Aurelia
was there, she instructed me to give the pieces of jewelry to Aurelia who in turn
will give it back to Vicky.
Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera?
A: Yes, Your Honor.
14

This was supported by Aurelia Nadera in her direct examination by petitioner's counsel:
Q: Do you know if Rosa Lim in fact returned the jewelries?
A: She gave the jewelries to me.
Q: Why did Rosa Lim give the jewelries to you?
A: Rosa Lim called up Vicky Suarez the following morning and told Vicky
Suarez that she was going home to Cebu and asked if she could give the
jewelries to me.
Q: And when did Rosa Lim give to you the jewelries?
A: Before she left for Cebu.
15

On rebuttal, these testimonies were belied by Vicky Suarez herself:
Q: It has been testified to here also by both Aurelia Nadera and Rosa Lim
that you gave authorization to Rosa Lim to turn over the two (2) pieces of
jewelries mentioned in Exhibit "A" to Aurelia Nadera, what can you say about
that?
A: That is not true sir, because at that time Aurelia Nadera is highly indebted
to me in the amount of P140,000.00, so if I gave it to Nadera, I will be exposing
myself to a high risk.
16<

The issue as to the return of the ring boils down to one of credibility. Weight of evidence
is not determined mathematically by the numerical superiority of the witnesses testifying
to a given fact. It depends upon its practical effect in inducing belief on the part of the
judge trying the case.
17
In the case at bench, both the trial court and the Court of
Appeals gave weight to the testimony of Vicky Suarez that she did not authorize Rosa
Lim to return the pieces of jewelry to Nadera. The respondent court, in affirming the trial
court, said:
. . . This claim (that the ring had been returned to Suarez thru Nadera) is
disconcerting. It contravenes the very terms of Exhibit A. The instruction by the
complaining witness to appellant to deliver the ring to Aurelia Nadera is
vehemently denied by the complaining witness, who declared that she did not
authorize and/or instruct appellant to do so. And thus, by delivering the ring to
Aurelia without the express authority and consent of the complaining witness,
appellant assumed the right to dispose of the jewelry as if it were hers, thereby
committing conversion, a clear breach of trust, punishable under Article 315, par.
1(b), Revised Penal Code.
We shall not disturb this finding of the respondent court. It is well settled that we
should not interfere with the judgment of the trial court in determining the credibility of
witnesses, unless there appears in the record some fact or circumstance of weight and
influence which has been overlooked or the significance of which has been
misinterpreted. The reason is that the trial court is in a better position to determine
questions involving credibility having heard the witnesses and having observed their
deportment and manner of testifying during the trial.
18

Article 315, par. 1(b) of the Revised Penal Code provides:
Art. 315. Swindling (estafa). Any person who shall defraud another by any of the
means mentioned hereinbelow shall be punished by:
xxx xxx xxx
(b) By misappropriating or converting, to the prejudice of another, money, goods,
or any other personal property received by the offender in trust or on
commission, or for administration, or under any other obligation involving the duty
to make delivery of or to return the same, even though such obligation be totally
or partially guaranteed by a bond; or by denying having received such money,
goods, or other property.
xxx xxx xxx
The elements of estafa with abuse of confidence under this subdivision are as follows.
(1) That money, goods, or other personal property be received by the offender in trust,
or on commission, or for administration, or under any other obligation involving the duty
to make delivery of, or to return, the same; (2) That there be misappropriation or
conversion of such money or property by the offender or denial on his part of such
receipt; (3) That such misappropriation or conversion or denial is to the prejudice of
another; and (4) That there is a demand made by the offended party to the offender
(Note: The 4th element is not necessary when there is evidence of misappropriation of
the goods by the defendant)
19

All the elements of estafa under Article 315, Paragraph 1(b) of the Revised Penal Code,
are present in the case at bench. First, the receipt marked as Exhibit "A" proves that
petitioner Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be sold
on commission basis. Second, petitioner misappropriated or converted the jewelry to
her own use; and, third, such misappropriation obviously caused damage and prejudice
to the private respondent.
WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals is
hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.

G.R. No. L-27134 February 28, 1986
COMPANIA MARITIMA, plaintiff-appellant,
vs.
JOSE C. LIMSON, defendant-appellant.
Jose W. Diokno and Sergio Guadiz for plaintiff-appellant.
Jose Gutierrez and Agustin Ferrer for defendant-appellant.

PATAJO, J .:
This an appeal from a decision of the Court of First Instance of Manila
1
holding
plaintiff Compania Maritima LIABLE TO DEFENDANT in the amount of
P441,339.01 representing the difference between the claim of plaintiff for unpaid
passage and freight charges for shipments of hogs and cattle on plaintiff's vessels for
the period from October 1957 to February 1961 and the claim of defendant for
the purchase price of foodstuffs sold by defendant to plaintiff, payments on account of
freight not accounted for by plaintiff and rebate to which defendant was entitled on the
aforesaid freight charges.
On October 8, 1962, PLAINTIFF Compania Maritima filed a complaint against
DEFENDANT J ose C. Limson for collection of the sum of P44,701.54 representing
the balance of defendant's unpaid accounts for passage and freight on shipments of
hogs, cattle and carabaos abroad plaintiff's vessel from various ports of Visayas and
Mindanao for the period from October 1957 to February 1961. Attached to said
complaint was the statement of account supporting plaintiff's claim for unpaid
passage and freight. Defendant filed a motion for bill of particulars asking that plaintiff
attach to the complaint the bins of lading referred to in said statement of account in
order to enable defendant to answer plaintiff's complaint. Plaintiff opposed said motion.
The Court however ordered plaintiff to attach photostat copies of the bills of
lading upon which the statement of account was based. Plaintiff's motion for
reconsideration of said order was denied by the Court but upon motion of plaintiff said
order was modified to allow plaintiff to attach duplicate originals of the bills of lading
instead of photostat copies thereof.
On July 16, 1963, DEFENDANT filed his answer to the complaint denying any liability
to plaintiff. Defendant alleged that he had already fully paid for all the shipments he
made and that a number of the bills of lading submitted by plaintiff as basis of its
claim are not properly chargeable to defendant since he was not the shipper nor had
he authorized said shipments which were made by parties other than those for whom
defendant is liable or who had been duly authorized by defendant to make said
shipments. Defendant further set up a counterclaim for the refund of the rebate to
which he was entitled to pursuant to an agreement that he had with plaintiff for
shipments made by him from Davao, Cotabato, Dadiangas, Iligan and Masbate and for
cost of foodstuffs sold or delivered to plaintiff in the total amount of P411,477.45.
Since the case involved primarily questions of accounting, upon motion of plaintiff,
without the opposition of defendant, the Court appointed a commissioner to examine
the accounts involved before the Court proceed with the hearing of the case. Anselmo
T. del Rosario, a certified public accountant, was thus appointed by the Court.
On October 29, 1963, Mr. del Rosario submitted his report to the Court. The salient
points in said report showed that with respect to the claim of defendant against
plaintiff, the same was in the total amount of P676,416.05 broken down as follows:
For purchases of foodstuffs................ P433,237.75
Freight adjustments.............................. 8,170.45
Cash payments made by defendant... P235,007.85
P676,416.05
On the other hand, the claim of the plaintiff totalled P545,394.24 based on 1,521 bills
of lading examined by him of which 267 were signed by defendant totaling P67,061.66;
3 bills signed by representative of defendant totaling Pl,148.10; 91 bills signed by a
certain "Perry" with Jose Limson, the defendant, as shipper and consignee totaling
P61,981.00; 149 bills signed by said "Perry" for others as shippers and consignee
totaling P46,869.60; 16 bills signed by others totaling P5,180.70; 662 bills unsigned
totaling P260,170.23 and 333 bills missing totaling P102,982.46. According to the
Commissioner defendant can be held liable only for the 267 bills signed by him and
the 3 bills signed by his representative in the total amount of P68,209.79.
The bills examined by the Commissioner had been classified and regrouped by him into
(1) original bills of lading signed by defendant or his agent; (2) original bills of lading
without signature of defendant or his agent; and (3) charges with no original bills of
lading, to wit:
(1) Original bills of lading duly signed by
defendant or his agent.................... P68,209.76
(2) Original bills of lading without
the signature of defendant............ 310,317.21
(3) No original bills of lading............... 166,867.28
Said Commissioner recommended that only the amount of P68,209.76 supported by
original bills of lading signed by defendant or his agent is properly chargeable to
defendant.
After hearing the lower Court rendered judgment based principally on the report of
the Commissioner. The Court, however, held that defendant was liable for the bills of
lading without originals involving a total of P166,867.26 but liable on the bills of lading
which had not been signed by him or his authorized representative. The Court
sustained defendant's claim that "Perry" was not his authorized representative. Thus
the lower Court rendered judgment sentencing plaintiff to pay defendant the sum of
P441,339.01 with interest thereon at the legal rate from the date of the filing of the
counterclaim plus P5,000.00 as attorney's fees. The amount of P441,339.01 is
computed as follows:
Amount to defendant:
Freight adjustments.............. P 8,170.45
Cash payments.................... 235,007.85
Foodstuffs and supplies delivered 433,237.75
Total............. P676,416.05
Deduct amount to plaintiff on
bills of lading signed by
defendant or his authorized
representative.................... 68,209.76
Bills of lading without originals
but supported by other copies of said bills of lading........ 166,867.28
Total.................. 235,077.04
Balance due defendant...............P441,339.01
From said decision both plaintiff and defendant appealed to this Court, plaintiff
assigning six assignment of errors, to wit:
I
The Trial Court erred in finding that the report of the Commissioner is fully
supported by the documentary evidence presented in this case.
II
The Trial Court erred in concurring with the Commissioner that without the
supporting original documents, the customer's subsidiary ledger
cards are not sufficient and reliable.
III
The Trial Court erred in holding that the Commissioner is right in
disallowing bills of lading not signed either by defendant or his authorized
representatives, instead of holding that the corresponding freight charges
for said bills of lading were probably debited in defendant's charge
account.
IV
The Trial Court erred in finding that the fact that no periodic statements of
account furnished, Limson was kept in the dark as to the true status of his
account with plaintiff.
V
The Trial Court erred in finding that there is a balance of P441,339.01 due
the defendant, said sum with interest thereon from the date of the filing of
the counterclaim plus P5,000.00 as attorney's fees and costs.
VI
The Trial Court erred in dismissing the complaint and in not sentencing the
defendant to pay the plaintiff the sum of P44,701.54 representing the
unpaid balance of defendant's charge account with plaintiff plus legal
interest thereon from the filing of the complaint, and the sum of P2,000.00
and Pl,000.00 as attomey's fees and expenses of litigating respectively
incurred by the plaintiff.
while defendant assigned one sole assignment of error:
I
The Trial Court erred in declaring appellant Limson liable in the amount of
P166,867.28 for freighters and in deducting the same from his claim
against Maritima."
We find that the Court a quo erred in rejecting the bins of lading signed by "Perry"
where defendant appeared shipper or consignee, those signed by "Perry" where
persons other than defendant-appellant as shipper and the bills of lading unsigned by
defendant.
With regards to the 91 controverted bills of lading signed by "Perry" with Limson as
shipper or consignee in the total amount of P61,981.50, witness Cabling testified that
the signatures therein are those of Cipriano Magtibay alias "Perry" who took delivery
of the cargoes stated therein after signing the delivery receipts. He testified thus:
These are all the signatures of Perry. I know it to be his because
oftentimes he goes there to get the deliver y orders and he signed as
"Perry" in my presence. His real name is Cipriano Magtibay. I allowed
delivery of the Cargoes to him because he was the regular representative
of Mr. Limson." (t.s.n., pp. 12-13, Nov. 19, 1964)
On the other hand, Nolasco Cruz Ilagan, delivery order clerk of Compania Maritima,
testified to this wise:
In issuing these delivery orders, I get the data from the manifests or from
the bills of lading. I know the defendant Limson in this case. He is now in
the Court room. I knew him since the middle of 1956 up to 1961 when I
was assigned in the Terminal Office of Maritima. I came to know him
because Mr. Cabling introduced to us that he is a regular shipper of hogs,
cattles, carabaos coming from the southern ports. As a clerk, I prepared
the delivery orders for these cargoes to be delivered to Mr. Limson or his
authorized representatives. I will mention some of his representatives: For
hog the authorized representative is Cipriano Magtibay or Perry; and for
cattles, carabaos and cows, is Eye, Mario, Mr. Marcelino Tinoco and
others whom I don't remember the names. When these representatives of
Mr. Limson take delivery of the shipments, I let them sign the delivery
orders. I prepared the delivery orders as soon as Mr. Limson himself or his
authorized representative go to our office and present the bills of lading. In
case where there is no original bill of lading, delivery order is effected also
only when authorized by Mr. Cabling, basing on the manifests. The boat
gives us the manifest as soon as it arrives. (t.s.n. 255-256, Mar. 10/65 &
256-260, Mar. 10/65. Even though the name of the shipper is not Mr.
Limson or the consignee is not Mr. Limson, I prepared delivery orders by
authorization of Mr. Cabling. (pp. 260-261 Id). The authorized
representative to receive for hogs was Mr. Cipriano Magtibay alias "Perry".
He signs the delivery orders by the name of "Perry". (p. 261 Id.)
We were also the ones who put on the delivery orders the statement
"account Limson". We put that to indicate the cargo is chargeable to Mr.
Limson, so that the accounting department would know that the shipment
is chargeable to Mr. Limson." (pp. 263-265 Id.)
I am familiar with the signature of Perry, In these two bunches of delivery
orders, I find that the signature appearing therein is that of Perry, the
authorized representative of Limson. These delivery orders were signed
by Perry in my presence. I know that Mr. Perry or Magtibay is the
authorized representative of Mr. Limson because he was introduced to us
by Limson himself that he is the one authorized by him to get his cargoes.
He was authorized only to sign delivery orders for hogs. I also knew that
Tinoco, Eye, Mario and other were also authorized by Limson to receive
shipment for him (pp. 265-270 Id). These other persons who were
authorized representatives to receive big cattles signed delivery orders in
my presence. The delivery orders were requested by Eye, Mario, and
Tinoco, the authorized representatives. I know personally that these men
are the authorized representatives for Limson. (pp. 270-275, Id.) (Plaintiff's
brief, pp. 35-37).
Regarding the 16 controverted bills of lading signed by persons other than "Perry" with
freight charges totalling P5,180.70, Ilagan testified that the representatives that signed
the delivery receipts and took delivery of the cargoes thereof were Limson's agents.
Ilagan testified thus:
As clerk, I prepared the delivery orders for those cargoes to be delivered
to Mr. Limson or his authorized representatives. For hogs the authorized
representative was Cipriano Magtibay; and for cattle, carabaos and cows
the authorized representatives were Eye, Mario, Tinoco and others who I
cannot recall the names. (t.s.n. pp. 260-261, Nov. 1/65).
These other persons who were authorized representatives to receive
cattle signed delivery receipts in my presence. The delivery orders were
requested by Eye, Mario and Tinoco, the authorized representatives. I
know personally that these men are the authorized representative for
Limson. (pp,27-275, Id.). (Emphasis supplied).
With respect to the 662 unsigned bills of lading with freight charges totaling
P260,170.23, delivery receipts were issued upon delivery of the shipments. Cabling and
Ilagan who were presented the plaintiff as witnesses testified that the ordinary
procedure at plaintiff's terminal office was to require the surrender of the original bill of
lading, but when the bill of lading cannot be surrendered because it had not arrived or
received by the consignee or assignee, the delivery of the cargo was authorized just the
same, and the delivery receipt was prepared based on the ship's cargo manifests or
ship's copy of the bill of lading. This accommodation was specially given Limson,
because defendant was a regular shipper and ship chandler of plaintiff, and was a
compadre of Cabling. Besides, said hogs and cattle had to be unloaded and released
from the pier for they cannot be kept there long, after having been on board for several
days because they might die. (t.s.n. pp. 320323, March 10, 1965).
Regarding the 149 controverted bills of lading in the name of other persons as shippers
or consignees and signed by Perry in the total amount of P46,869.60, it was established
that said bills of lading were for cattle and hogs-purchased by the defendant from his
"viajeros" in Manila which were delivered to and received by defendant, and for which
he had to pay the freight charges, where in turn, he deducted from the purchase price
the corresponding cost of freight; or were for cattle or hogs that belonged to Marcelino
Tinoco from whom defendant had made arrangements for paying the purchase price of
said Tinoco's cargo partly with the freight costs for which defendant agreed to be
debited in his charge account with Maritima. These facts were admitted by the
defendant himself when he testified on direct and cross-examination, supra. This was
also confirmed by the testimony of Cabling. And now, corroborating the above facts as
testified, Pagkalinawan, another witness for the plaintiff, testified thus:
I know Mr. Limson, He is also a meat dealer. As ship's chandler he
supplies foodstuffs, meat, to Maritima ships. I came to know Mr. Limson
when Mr. Tinoco introduced me to him. Mr. Limson was getting meat from
Mr. Tinoco at that time. It was cow and carabao meat. These cow and
carabao meat which Mr. Limson used to get from Tinoco came from the
Visayas to Manila. They were brought by the Maritima ships and those
were the cows and carabaos that I took delivery at that time. I do not pay
the freight for the delivery of these cows and carabaos. I was allowed by
the Compania Maritima to take delivery of these cows and carabaos of Mr.
Tinoco without paying the freight because the freights win be charged to
Mr. Limson. These freight charges that I did not pay for the shipment of
cows and carabaos of Mr. Tinoco were charged against Mr. Limson.
These freight charges that were charged against Mr. Limson in his
account in the Maritima were credited as payment of Mr. Limson to the
meat that he gets from Mr. Tinoco. (t.s.n. pp. 6-14, April 20, 1966). I am
not the only one who received the cows and carabaos of Mr. Tinoco at the
Maritima. There were many more, Mario Valencia, Remy and one whom I
know only as Ben Negro. (t.s.n. pp. 14-15, April 30, 1966). Sometimes
Marcelino Tinoco himself takes the cargo, I used to accompany him, and I
am the one signing the delivery permit. Sometimes he does too. He does
not pay the freight because it is charged against the account of Mr.
Limson. (t.s.n. pp. 15-20, April 20, 1966). I have occasions taking delivery
of the cows and carabaos of Mr. Tinoco even if there was no original bill of
lading and the freight of which were charged against Mr. Limson. The
office makes true copies of the bills of lading for the originals which could
not be produced. Just the same I could take delivery of the said cows and
carabaos. (t.s.n. pp. 20-21, Id).
In all occasions that I withdrew the cows and carabaos of Mr. Tinoco for
which I signed the delivery receipts there were corresponding original bills
of lading or copies of the bills of lading which were made even if the
original bills could not be produced (t.s.n. pp. 2-3, May 6, 1966). Mr.
Limson signed these bills of lading that I have presented to him. Those
that were not, I was the one who signed it, When the unloading takes
place at nights I just call him up by telephone. (t.s.n., p. 3, Id).
For the shipments of Mr. Marcelino Tinoco, I was the one who gets the
delivery order. But if I am not around, my companions get them. However,
if he is there at the pier, he himself receives his shipments. (t.s.n. pp. 9-
11, Id.) All shipments of Mr. Tinoco are vales of Mr. Limson. If I do not
have the bills of lading, that were signed by Mr. Limson, I can still get the
delivery in this manner. If the shipments takes place at night and I could
not get the signature of Mr. Limson, I simply call him up thru the telephone
who in turn directs me to call on Mr. Cabling and Mr. Cabling used to tell
me to sign the bills of lading because he and Mr. Limson had already an
arrangement. " (t.s.n. pp. 17-18, Id.)
Plaintiff also presented Exhibits B-276 to 1018 in the total amount of P81,462.92, bills of
lading not in the name of defendant Limson, but which Limson himself signed, thereby
proving that defendant took delivery of shipments in the names of others, shipper or
consignee, and which the corresponding charges were debited to his account.
The simpler way to determine how much is the total claim of plaintiff against defendant
is to compute the amount of the freight on the face of the bills of lading supporting the
statement of account attached to the complaint and deducting therefrom the rebates to
which defendant is entitled to under the special arrangement made between defendant
and Mr. F.J. Garay of Compania Maritima dated March 27, 1957. According to the
statement of account submitted by plaintiff and attached to the complaint, the total of
freight charges due from defendant is P698,159.14 (Annex "A" Complaint).
This is the amount due based on what is charged in the bills of lading. It did not reflect
the rebates because said bills of lading were prepared in the field offices of plaintiff
where the special arrangement entitling defendant to rebate had not been transmitted.
According to the report of the Commissioner, the total rebate to which defendant will be
entitled to is P127,418.89 (Supplementary Report dated January 27, 1964, Exhibit 7-B).
According to said Commissioner, he arrived at such amount in the following manner:
I selected the freightage from Davao comprised of 340 shipments from
October 15, 1957, up to February 11, 1961. 340 shipments, and I used
P4.50 as the freightage from Davao to Manila. Now I used the P5.00 as
you requested, and that is the difference.
In other words, the Commissioner summed up the total number of hogs involved in the
340 shipments from Davao which must be some 50,692 hogs. The difference was
arrived at, thus-
50,692 hogs multiplied by P5.00 per head = P253,460.00
less: 50,692 hogs multiplied by P4.50 per head = P228,114.00 P25,346.00
The difference, (P25,346.00) subtracted from the original computation of P152,764.89
resulted to the reduced rebate of P127,418.89 (Supplementary Report, supra).
However, instead of merely verifying the accuracy of the above-stated
computation, the special rates, supra, accorded Limson was individually
applied in computing the freightage due from Limson's shipments, as
itemized in the "Spread of Charges made to Limson's account"
(Commissioner's report, Exh. " 7 "), and arrived at the following:

Total freight charges (special
rates used for shipments from
ports as provided for in the
Agreement)............................................ P517,842.30
Total freight charges (Limson's
shipments (rates used as com-
puted in port of origin) from
ports other than those stated
in the Agreement...................................... 69,025.66
Total charges to Limson's
Account............................................... P586,867.96
In other words, the total freight over-charges which may be due Limson is (P698,159.14
less P586,867.96) P111,291.18 and not P127,418.91 as reported by the Commissioner.
To be added to said rebate of P111,291.18 are the cash payment made by defendant of
P235,007.85, freight adjustment of Pl,138.45 and cost of foodstuffs purchased by
plaintiff from defendant of P411,982.35 (from the total of P433,237.75 representing the
amount of said purchase deduct P21,255.40 which had been billed twice), all of which
would total P759,419.83. Deducting from said amount, the total of freight charges in
favor of plaintiff as per the statement of account attached as Annex "A" to the complaint
of P698,159.14 would give a balance of P61,260.69 in favor of defendant.
It may be noted that in his answer to the complaint defendant stated that the total of his
claim against plaintiff for the cost of foodstuffs delivered is P411,477.45 (par. 22,
Answer of Defendant, page 68, Record on Appeal).
Now, turning to defendant's sole assignment of error, namely, that the Trial Court erred
in declaring defendant liable in the amount of P166,867.20 representing the
amount covered by bills of lading where the originals had been presented.
With respect to defendant's sole assignment of errors, namely, that Court a quo erred in
declaring defendant liable in the amount of P166,867.28 which represents charges for
freight where the originals of the bills of lading were not submitted, We find merit in the
contention of plaintiff that the respondent Court correctly held defendant liable for said
amount because the same actually represented freight charges based on the carbon
originals of the ship's copy of the bills of lading where Limson appeared as consignee in
the amount of P84,529.42 and those based on the ship's cargo manifests, where
defendant appeared as consignee in the amount of P81,874.10. Respondent Court
admitted in evidence said copies of the bills of lading which were not considered by the
Commissioner because they are not actually the original copy of the bill of lading. The
Commissioner accepted only the originals of the bills of lading because he did not
consider even duplicate originals duly signed as originals. The ship's copies of the bills
of lading and the cargo manifests were substantiated by other supporting documents
which were found after the report of the Commissioner from among the records
salvaged from the San Nicolas bodega fire or which were found among the records kept
on plaintiff's terminal office. Said documents were presented in lieu of corresponding
original of the consignee's copy of bill of lading which could not be submitted to the
Commissioner nor presented as plaintiff's evidence to the Court because they were lost
or destroyed during the remodelling of plaintiff's office building or during the fire at
plaintiff's bodega at San Nicolas where they were brought for safekeeping. All said
documents were presented as evidence to prove that all the freight charges for the
shipments evidence thereby were duly earned by plaintiff and were properly debited in
defendant's charge account. Apparently, the Commissioner rejected plaintiff's claims
which were not actually supported by the original of the bills of lading notwithstanding
the fact that duplicate original of the said documents and other secondary evidence
such as the ship cargo manifests have been presented as evidence. As stated above,
witnesses Cabling and Ilagan testified that the practice was that when the originals of
the bins of lading could not be surrendered because they have not yet been received by
the consignee, the delivery of the cargo was nevertheless authorized and a delivery
receipt was prepared on the basis of the ship's cargo manifests or the ship's copy of the
bills of lading. This only shows that the ship's cargo manifests or the ship's copy of the
bills of lading can be accepted as evidence of shipments made by defendant since he
was allowed to accept delivery of said shipments even without presented his copy of the
bill of lading.
By way of recapitulation, the total of freight charges due plaintiff based on
the freight charges appearing on the face of the bills of lading supporting
the statement of account attached to the complaint is P698,159.14.
Deduct from said
amount the following:

(1) Rebate................................................................... P111,291.18
(2) Cash payments made by defendant................. 235,007.85
(3) Freight adjustment.............................................. 1,138.45
(4) Cost of foodstuffs purchased from defendant..411,982.35
Total.......................... P759,419.83
would show a balance in favor of defendant of P61,260.69.
Presented otherwise, the total freight charges due plaintiff after deducting the rebate to
which defendant is entitled to is P586,867.96. (.698,159.14 minus P111,291.18).
Against said freight charges of P586,867.96 defendant should be credited:
(1) Cash payment............................... P235,007.85
(2) Freight adjustment........................ 1,138.45
(3) Cost of foodstuffs........................ P411,982.35
Total............................. P648,128.65

giving a balance in favor of defendant of P61,260.69.
WHEREFORE, the decision of the Court a quo is hereby MODIFIED and judgment
rendered against plaintiff on defendant's counterclaim for the amount of P61,260.69.
In an other respects, the appealed decision is hereby AFFIRMED. No pronouncement
as to cost.
SO ORDERED.

G.R. No. 150128 August 31, 2006
LAUREANO T. ANGELES, Petitioner,
vs.
PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES,
1
Respondents.
D E C I S I O N
GARCIA, J .:
Under consideration is this petition for review under Rule 45 of the Rules of
Court assailing and seeking to set aside the following issuances of the Court of
Appeals (CA) in CA-G.R. CV No. 54062, to wit:
1. Decision
2
dated June 4, 2001, affirming an earlier decision of the Regional Trial
Court (RTC) of Quezon City, Branch 79, which dismissed the complaint for specific
performance and damages thereat commenced by the petitioner against the herein
respondents; and
2. Resolution
3
dated September 17, 2001, denying the petitioner's motion for
reconsideration.
The facts:
On May 5, 1980, the RESPONDENT Philippine National Railways (PNR) informed a
certain Gaudencio Romualdez (Romualdez, hereinafter) that it has accepted the
latters offer to buy, on an "AS IS, WHERE IS" basis, the PNRs scrap/unserviceable
rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per
metric ton, respectively, for the total amount of P96,600.00. After paying the stated
purchase price, Romualdez addressed a letter to Atty. Cipriano Dizon, PNRs
Acting Purchasing Agent. Bearing date May 26, 1980, the letter reads:
Dear Atty. Dizon:
This is to inform you as President of San Juanico Enterprises, that I have authorized the
bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my
lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me.
For this reason, I have given her the original copy of the award, dated May 5, 1980 and
O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests
and participation in favor of LIZETTE R. WIJANCO.
Thank you for your cooperation.
Very truly yours,
(Sgd.) Gaudencio Romualdez
The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles,
petitioner's now deceased wife. That very same day May 26, 1980 Lizette
requested the PNR to transfer the location of withdrawal for the reason that the
scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready
for hauling. The PNR granted said request and allowed Lizette to withdraw
scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However,
the PNR subsequently suspended the withdrawal in view of what it considered as
documentary discrepancies coupled by reported pilferages of over P500,000.00 worth
of PNR scrap properties in Tarlac.
Consequently, the spouses Angeles demanded the refund of the amount
of P96,000.00. The PNR, however, refused to pay, alleging that as per delivery
receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already
been withdrawn which, at P2,100.00 per metric ton, were worth P114,781.80, an
amount that exceeds the claim for refund.
On August 10, 1988, the spouses Angeles filed suit against the PNR and
its corporate secretary, Rodolfo Flores, among others, for specific performance and
damages before the Regional Trial Court of Quezon City. In it, they prayed that PNR be
directed to deliver 46 metric tons of scrap/unserviceable rails and to pay them damages
and attorney's fees.
Issues having been joined following the filing by PNR, et al., of their answer, trial
ensued. Meanwhile, Lizette W. Angeles passed away and was substituted by her
heirs, among whom is her husband, herein petitioner Laureno T. Angeles.
On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not
the real parties-in-interest, rendered judgment dismissing their complaint for lack of
cause of action. As held by the court, Lizette was merely a representative of
Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not an
assignee to the latter's rights with respect to the award.
Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the
threshold hereof, in its decision of June 4, 2001, dismissed the appeal and affirmed that
of the trial court. The affirmatory decision was reiterated by the CA in its resolution of
September 17, 2001, denying the petitioners motion for reconsideration.
Hence, the petitioners present recourse on the submission that the CA erred in
affirming the trial court's holding that petitioner and his spouse, as plaintiffs a quo,
had no cause of action as they were not the real parties-in-interest in this case.
We DENY the petition.
At the crux of the issue is the matter of how the aforequoted May 26, 1980 letter of
Romualdez to Atty. Dizon of the PNR should be taken: was it meant to designate, or
has it the effect of designating, Lizette W. Angeles as a mere agent or as an assignee of
his (Romualdez's) interest in the scrap rails awarded to San Juanico Enterprises? The
CAs conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee,
but merely an agent whose authority was limited to the withdrawal of the scrap rails,
hence, without personality to sue.
WHERE AGENCY EXISTS, the third party's (in this case, PNR's) liability on a
contract is to the principal and not to the agent and the relationship of the third party
to the principal is the same as that in a contract in which there is no agent. Normally, the
agent has neither rights nor liabilities as against the third party. He cannot thus sue or
be sued on the contract. Since a contract may be violated only by the parties thereto as
against each other, the real party-in-interest, either as plaintiff or defendant in an action
upon that contract must, generally, be a contracting party.
The legal situation is, however, DIFFERENT WHERE AN AGENT IS CONSTITUTED
AS AN ASSIGNEE. In such a case, the agent may, in his own behalf, sue on a
contract made for his principal, as an assignee of such contract. The rule
requiring every action to be prosecuted in the name of the real party-in-interest
recognizes the assignment of rights of action and also recognizes
that when one has a right assigned to him, he is then the real party-in-interest and may
maintain an action upon such claim or right.
4

Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May
26, 1980, it is at once apparent that Lizette was to act just as a "representative" of
Romualdez in the "withdrawal of rails," and not an assignee. For perspective, we
reproduce the contents of said letter:
This is to inform you as President of San Juanico Enterprises, that I
have authorized the bearer, LIZETTE R. WIJANCO x x x to be my lawful
representative in the withdrawal of the scrap/unserviceable rails awarded to me.
For this reason, I have given her the original copy of the award, dated May 5, 1980
and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights,
interests and participation in favor of LIZETTE R. WIJANCO. (Emphasis added)
If Lizette was without legal standing to sue and appear in this case, there
is more reason to hold that her petitioner husband, either as her conjugal partner or her
heir, is also without such standing.
Petitioner makes much of the fact that the terms "agent" or "attorney-in-fact" were not
used in the Romualdez letter aforestated. It bears to stress, however, that the words
"principal" and "agent," are not the only terms used to designate the parties in an
agency relation. The agent may also be called an attorney, proxy, delegate or, as
here,representative.
It cannot be over emphasized that Romualdez's use of the active verb "authorized,"
instead of "assigned," indicated an intent on his part to keep and retain his interest in
the subject matter. Stated a bit differently, he intended to limit Lizettes role in the scrap
transaction to being the representative of his interest therein.
Petitioner submits that the second paragraph of the Romualdez letter, stating - "I have
given [Lizette] the original copy of the award x x x which will indicate my waiver of rights,
interests and participation in favor of Lizette R. Wijanco" - clarifies that Lizette was
intended to be an assignee, and not a mere agent.
We are not persuaded. As it were, the petitioner conveniently omitted an important
phrase preceding the paragraph which would have put the whole matter in context. The
phrase is "For this reason," and the antecedent thereof is his (Romualdez) having
appointed Lizette as his representative in the matter of the withdrawal of the scrap
items. In fine, the key phrase clearly conveys the idea that Lizette was given the original
copy of the contract award to enable her to withdraw the rails as Romualdezs
authorized representative.
Article 1374 of the Civil Code provides that the various stipulations of a contract shall be
read and interpreted together, attributing to the doubtful ones that sense which may
result from all of them taken jointly. In fine, the real intention of the parties is primarily to
be determined from the language used and gathered from the whole instrument. When
put into the context of the letter as a whole, it is abundantly clear that the rights which
Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency
relation that he had established for the withdrawal of the rails.
At any rate, any doubt as to the intent of Romualdez generated by the way his letter
was couched could be clarified by the acts of the main players themselves. Article 1371
of the Civil Code provides that to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. In other words,
in case of doubt, resort may be made to the situation, surroundings, and relations of the
parties.
The fact of agency was, as the trial court aptly observed,
5
confirmed in subsequent
letters from the Angeles spouses in which they themselves refer to Lizette as
"authorized representative" of San Juanico Enterprises. Mention may also be made that
the withdrawal receipt which Lizette had signed indicated that she was doing so in a
representative capacity. One professing to act as agent for another is estopped to deny
his agency both as against his asserted principal and third persons interested in the
transaction which he engaged in.
Whether or not an agency has been created is a question to be determined by the
fact that one represents and is acting for another. The appellate court, and before it,
the trial court, had peremptorily determined that Lizette, with respect to the withdrawal
of the scrap in question, was acting for Romualdez. And with the view we take of this
case, there were substantial pieces of evidence adduced to support this determination.
The desired reversal urged by the petitioner cannot, accordingly, be granted. For,
factual findings of the trial court, adopted and confirmed by the CA, are, as a rule, final
and conclusive and may not be disturbed on appeal.
6
So it must be here.
Petitioner maintains that the Romualdez letter in question was not in the form of a
special power of attorney, implying that the latter had not intended to merely authorize
his wife, Lizette, to perform an act for him (Romualdez). The contention is specious.
In the absence of statute, no form or method of execution is required for a VALID
POWER OF ATTORNEY; it may be in any form clearly showing on its face the agents
authority.
7

A POWER OF ATTORNEY is only but an instrument in writing by which a person, as
principal, appoints another as his agent and confers upon him the authority to perform
certain specified acts on behalf of the principal. The written authorization itself is the
power of attorney, and this is clearly indicated by the fact that it has also been called a
"letter of attorney." Its primary purpose is not to define the authority of the agent as
between himself and his principal but to evidence the authority of the agent to third
parties with whom the agent deals.
8
The letter under consideration is sufficient to
constitute a power of attorney. Except as may be required by statute, A POWER OF
ATTORNEY IS VALID ALTHOUGH NO NOTARY PUBLIC INTERVENED IN ITS
EXECUTION.
9

A power of attorney must be strictly construed and pursued. The instrument will be held
to grant only those powers which are specified therein, and the agent may neither go
beyond nor deviate from the power of attorney.
10
Contextually, all that Lizette was
authorized to do was to withdraw the unserviceable/scrap railings. Allowing her authority
to sue therefor, especially in her own name, would be to read something not intended,
let alone written in the Romualdez letter.
Finally, the petitioner's claim that Lizette paid the amount of P96,000.00 to the PNR
appears to be a mere afterthought; it ought to be dismissed outright under the estoppel
principle. In earlier proceedings, petitioner himself admitted in his complaint that it was
Romualdez who paid this amount.
WHEREFORE, the petition is DENIED and the assailed decision of the CA
is AFFIRMED.
Costs against the petitioner.
SO ORDERED.

G.R. No. 171460 July 24, 2007
LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR.,
represented by their Attorney-In-Fact, ALFREDO M. PEREZ, Petitioners,
vs.
ALLIED BANKING CORPORATION, Respondent.
D E C I S I O N
CHICO-NAZARIO, J .:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, filed by petitioners Lillian N. Mercado, Cynthia M. Fekaris and
Julian Mercado, Jr., represented by their Attorney-In-Fact, Alfredo M. Perez, seeking to
reverse and set aside the Decision
1
of the Court of Appeals dated 12 October 2005, and
its Resolution
2
dated 15 February 2006 in CA-G.R. CV No. 82636. The Court of
Appeals, in its assailed Decision and Resolution, reversed the Decision
3
of the Regional
Trial Court (RTC) of Quezon City, Branch 220 dated 23 September 2003, declaring the
deeds of real estate mortgage constituted on TCT No. RT-18206 (106338) null and
void. The dispositive portion of the assailed Court of Appeals Decision thus reads:
WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a new
judgment is hereby entered dismissing the [petitioners] complaint.
4

PETITIONERS are heirs of Perla N. Mercado (Perla). Perla, during her lifetime, owned
several pieces of real property situated in different provinces of the Philippines.
RESPONDENT, on the other hand, is a banking institution duly authorized as such
under the Philippine laws.
On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor of her
husband, Julian D. Mercado (Julian) over several pieces of real property registered
under her name, authorizing the latter to perform the following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over
the different parcels of land described hereinafter, to wit:
a) Calapan, Oriental Mindoro Properties covered by Transfer Certificates
of Title Nos. T-53618 - 3,522 Square Meters, T-46810 3,953 Square
Meters, T-53140 177 Square Meters, T-21403 263 square Meters, T-
46807 39 Square Meters of the Registry of Deeds of Oriental Mindoro;
b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title
Nos. T-108954 600 Square Meters and RT-106338 805 Square
Meters of the Registry of Deeds of Pasig (now Makati);
c) Personal property 1983 Car with Vehicle Registration No. R-16381;
Model 1983; Make Toyota; Engine No. T- 2464
2. To sign for and in my behalf any act of strict dominion or ownership any sale,
disposition, mortgage, lease or any other transactions including quit-claims,
waiver and relinquishment of rights in and over the parcels of land situated in
General Trias, Cavite, covered by Transfer Certificates of Title Nos. T-112254
and T-112255 of the Registry of Deeds of Cavite, in conjunction with his co-
owner and in the person ATTY. AUGUSTO F.DEL ROSARIO;
3. To exercise any or all acts of strict dominion or ownership over the above-
mentioned properties, rights and interest therein. (Emphasis supplied.)
On the strength of the aforesaid SPA, Julian, on 12 December 1996, obtained
a loan from the respondent in the amount of P3,000,000.00, secured by real estate
mortgage constituted on TCT No. RT-18206 (106338) which covers a parcel of land
with an area of 805 square meters, registered with the Registry of Deeds of Quezon
City (subject property).
5

Still using the subject property as security, J ulian obtained an additional loan
from the respondent in the sum ofP5,000,000.00, evidenced by a Promissory Note
6
he
executed on 5 February 1997 as another real estate mortgage (REM).
It appears, however, that there was no property identified in the SPA as TCT No.
RT 18206 (106338) and registered with the Registry of Deeds of Quezon City. What
was identified in the SPA instead was the property covered by TCT No. RT-106338
registered with the Registry of Deeds of Pasig.
Subsequently, Julian defaulted on the payment of his loan obligations. Thus,
RESPONDENT initiated extra-judicial foreclosure proceedings over the subject property
which was subsequently sold at public auction wherein the respondent was declared as
the highest bidder as shown in the Sheriffs Certificate of Sale dated 15 January 1998.
7

On 23 March 1999, petitioners initiated with the RTC an action for the annulment
of REM constituted over the subject property on the ground that the same was not
covered by the SPA and that the said SPA, at the time the loan obligations were
contracted, no longer had force and effect since it was previously revoked by Perla on
10 March 1993, as evidenced by the Revocation of SPA signed by the latter.
8

Petitioners likewise alleged that together with the copy of the Revocation of SPA,
Perla, in a Letter dated 23 January 1996, notified the Registry of Deeds of Quezon City
that any attempt to mortgage or sell the subject property must be with her full consent
documented in the form of an SPA duly authenticated before the Philippine Consulate
General in New York.
9

In the absence of authority to do so, the REM constituted by Julian over the subject
property was null and void; thus, petitioners likewise prayed that the subsequent
extra-judicial foreclosure proceedings and the auction sale of the subject property be
also nullified.
In its Answer with Compulsory Counterclaim,
10
respondent averred that, contrary to
petitioners allegations, the SPA in favor of Julian included the subject property, covered
by one of the titles specified in paragraph 1(b) thereof, TCT No. RT- 106338 registered
with the Registry of Deeds of Pasig (now Makati). The subject property was purportedly
registered previously under TCT No. T-106338, and was only subsequently
reconstituted as TCT RT-18206 (106338). Moreover, TCT No. T-106338 was actually
registered with the Registry of Deeds of Quezon City and not before the Registry of
Deeds of Pasig (now Makati). Respondent explained that the discrepancy in the
designation of the Registry of Deeds in the SPA was merely an error that must not
prevail over the clear intention of Perla to include the subject property in the said SPA.
In sum, the property referred to in the SPA Perla executed in favor of Julian as covered
by TCT No. 106338 of the Registry of Deeds of Pasig (now Makati) and the subject
property in the case at bar, covered by RT 18206 (106338) of the Registry of Deeds of
Quezon City, are one and the same.
On 23 September 2003, the RTC rendered a Decision declaring the REM
constituted over the subject property null and void, for Julian was not authorized by
the terms of the SPA to mortgage the same. The court a quo likewise ordered that the
foreclosure proceedings and the auction sale conducted pursuant to the void REM, be
nullified. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[herein petitioners] and against the [herein respondent] Bank:
1. Declaring the Real Estate Mortgages constituted and registered under Entry
Nos. PE-4543/RT-18206 and 2012/RT-18206 annotated on TCT No. RT-18206
(106338) of the Registry of Deeds of Quezon City as NULL and VOID;
2. Declaring the Sheriffs Sale and Certificate of Sale under FRE No. 2217 dated
January 15, 1998 over the property covered by TCT No. RT-18206 (106338) of
the Registry of Deeds of Quezon City as NULL and VOID;
3. Ordering the defendant Registry of Deeds of Quezon City to cancel the
annotation of Real Estate Mortgages appearing on Entry Nos. PE-4543/RT-
18206 and 2012/RT-18206 on TCT No. RT-18206 (106338) of the Registry of
Deeds of Quezon City;
4. Ordering the [respondent] Bank to deliver/return to the [petitioners]
represented by their attorney-in-fact Alfredo M. Perez, the original Owners
Duplicate Copy of TCT No. RT-18206 (106338) free from the encumbrances
referred to above; and
5. Ordering the [respondent] Bank to pay the [petitioners] the amount
of P100,000.00 as for attorneys fees plus cost of the suit.
The other claim for damages and counterclaim are hereby DENIED for lack of merit.
11

Aggrieved, respondent appealed the adverse Decision before the Court of Appeals.
In a Decision dated 12 October 2005, the Court of Appeals reversed the RTC
Decision and upheld the validity of the REM constituted over the subject property on
the strength of the SPA. The appellate court declared that Perla intended the subject
property to be included in the SPA she executed in favor of Julian, and that her
subsequent revocation of the said SPA, not being contained in a public instrument,
cannot bind third persons.
The Motion for Reconsideration interposed by the petitioners was denied by the Court of
Appeals in its Resolution dated 15 February 2006.
Petitioners are now before us assailing the Decision and Resolution rendered by the
Court of Appeals raising several issues, which are summarized as follows:
I WHETHER OR NOT THERE WAS A VALID MORTGAGE CONSTITUTED
OVER SUBJECT PROPERTY.
II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE SPA.
III WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN- GOOD
FAITH.
For a mortgage to be valid, Article 2085 of the Civil Code enumerates the following
essential requisites:
Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal
of their property, and in the absence thereof, that they be legally authorized for
the purpose.
Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property.
In the case at bar, it was Julian who obtained the loan obligations from respondent
which he secured with the mortgage of the subject property. The property mortgaged
was owned by his wife, Perla, considered a third party to the loan obligations between
Julian and respondent. It was, thus, a situation recognized by the last paragraph of
Article 2085 of the Civil Code afore-quoted. However, since it was not Perla who
personally mortgaged her own property to secure Julians loan obligations with
respondent, we proceed to determining if she duly authorized Julian to do so on her
behalf.
Under Article 1878 of the Civil Code, a SPECIAL POWER OF ATTORNEY is
necessary in cases where real rights over immovable property are created or
conveyed.
12
In the SPA executed by Perla in favor of Julian on 28 May 1992, the latter
was conferred with the authority to "sell, alienate, mortgage, lease and deal otherwise"
the different pieces of real and personal property registered in Perlas name. The SPA
likewise authorized Julian "[t]o exercise any or all acts of strict dominion or
ownership" over the identified properties, and rights and interest therein. The existence
and due execution of this SPA by Perla was not denied or challenged by petitioners.
There is no question therefore that Julian was vested with the power to mortgage
the pieces of property identified in the SPA. However, as to whether the subject
property was among those identified in the SPA, so as to render Julians mortgage of
the same valid, is a question we still must resolve.
Petitioners insist that the subject property was not included in the SPA,
considering that it contained an exclusive enumeration of the pieces of property over
which Julian had authority, and these include only: (1) TCT No. T-53618, with an area of
3,522 square meters, located at Calapan, Oriental Mindoro, and registered with the
Registry of Deeds of Oriental Mindoro; (2) TCT No. T-46810, with an area of 3,953
square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of
Deeds of Oriental Mindoro; (3) TCT No. T-53140, with an area of 177 square meters,
located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of
Oriental Mindoro; (4) TCT No. T-21403, with an area of 263 square meters, located at
Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental
Mindoro; (5) TCT No. T- 46807, with an area of 39 square meters, located at Calapan,
Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (6)
TCT No. T-108954, with an area of 690 square meters and located at Susana Heights,
Muntinlupa; (7) RT-106338 805 Square Meters registered with the Registry of Deeds
of Pasig (now Makati); and (8) Personal Property consisting of a 1983 Car with Vehicle
Registration No. R-16381, Model 1983, Make Toyota, and Engine No. T- 2464.
Nowhere is it stated in the SPA that Julians authority extends to the subject property
covered by TCT No. RT 18206 (106338) registered with the Registry of Deeds of
Quezon City. Consequently, the act of Julian of constituting a mortgage over the
subject property is unenforceable for having been done without authority.
Respondent, on the other hand, mainly hinges its argument on the declarations made
by the Court of Appeals that there was no property covered by TCT No. 106338
registered with the Registry of Deeds of Pasig (now Makati); but there exists a property,
the subject property herein, covered by TCT No. RT-18206 (106338) registered with the
Registry of Deeds of Quezon City. Further verification would reveal that TCT No. RT-
18206 is merely a reconstitution of TCT No. 106338, and the property covered by
both certificates of title is actually situated in Quezon City and not Pasig. From the
foregoing circumstances, respondent argues that Perla intended to include the subject
property in the SPA, and the failure of the instrument to reflect the recent TCT Number
or the exact designation of the Registry of Deeds, should not defeat Perlas clear
intention.
After an examination of the literal terms of the SPA, we find that the subject property
was NOT among those enumerated therein. There is no obvious reference to the
subject property covered by TCT No. RT-18206 (106338) registered with the Registry of
Deeds of Quezon City.
There was also nothing in the language of the SPA from which we could deduce
the intention of Perla to include the subject property therein. We cannot attribute
such alleged intention to Perla who executed the SPA when the language of the
instrument is bare of any indication suggestive of such intention. Contrariwise, to adopt
the intent theory advanced by the respondent, in the absence of clear and convincing
evidence to that effect, would run afoul of the express tenor of the SPA and thus defeat
Perlas true intention.
In cases where the terms of the contract are clear as to leave no room for interpretation,
resort to circumstantial evidence to ascertain the true intent of the parties, is not
countenanced. As aptly stated in the case of JMA House, Incorporated v. Sta. Monica
Industrial and Development Corporation,
13
thus:
[T]he law is that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.
When the language of the contract is explicit, leaving no doubt as to the intention of the
drafters, the courts may not read into it [in] any other intention that would contradict its
main import. The clear terms of the contract should never be the subject matter of
interpretation. Neither abstract justice nor the rule on liberal interpretation justifies the
creation of a contract for the parties which they did not make themselves or the
imposition upon one party to a contract or obligation not assumed simply or merely to
avoid seeming hardships. The true meaning must be enforced, as it is to be presumed
that the contracting parties know their scope and effects.
14

Equally relevant is the rule that a POWER OF ATTORNEY MUST BE STRICTLY
CONSTRUED AND PURSUED. The instrument will be held to grant only those powers
which are specified therein, and the agent may neither go beyond nor deviate from the
power of attorney.
15
Where powers and duties are specified and defined in an
instrument, all such powers and duties are limited and are confined to those which are
specified and defined, and all other powers and duties are excluded.
16
This is but in
accord with the disinclination of courts to enlarge the authority granted beyond the
powers expressly given and those which incidentally flow or derive therefrom as being
usual and reasonably necessary and proper for the performance of such express
powers.
17

Even the commentaries of renowned Civilist Manresa
18
supports a strict and limited
construction of the terms of a power of attorney:
The law, which must look after the interests of all, cannot permit a man to express
himself in a vague and general way with reference to the right he confers upon another
for the purpose of alienation or hypothecation, whereby he might be despoiled of all he
possessed and be brought to ruin, such excessive authority must be set down in the
most formal and explicit terms, and when this is not done, the law reasonably presumes
that the principal did not mean to confer it.
In this case, we are not convinced that the property covered by TCT No. 106338
registered with the Registry of Deeds of Pasig (now Makati) is the same as the subject
property covered by TCT No. RT-18206 (106338) registered with the Registry of
Deeds of Quezon City



. The records of the case are stripped of supporting proofs to verify the respondents
claim that the two titles cover the same property. It failed to present any certification
from the Registries of Deeds concerned to support its assertion. Neither did respondent
take the effort of submitting and making part of the records of this case copies of TCTs
No. RT-106338 of the Registry of Deeds of Pasig (now Makati) and RT-18206 (106338)
of the Registry of Deeds of Quezon City, and closely comparing the technical
descriptions of the properties covered by the said TCTs. The bare and sweeping
statement of respondent that the properties covered by the two certificates of title are
one and the same contains nothing but empty imputation of a fact that could hardly be
given any evidentiary weight by this Court.
Having arrived at the conclusion that Julian was not conferred by Perla with the
authority to mortgage the subject property under the terms of the SPA, the real estate
mortgages Julian executed over the said property are therefore unenforceable.
Assuming arguendo that the subject property was indeed included in the SPA executed
by Perla in favor of Julian, the said SPA was revoked by virtue of a public instrument
executed by Perla on 10 March 1993. To address respondents assertion that the said
revocation was unenforceable against it as a third party to the SPA and as one who
relied on the same in good faith, we quote with approval the following ruling of the RTC
on this matter:
Moreover, an agency is extinguished, among others, by its revocation (Article 1999,
New Civil Code of the Philippines). The principal may revoke the agency at will, and
compel the agent to return the document evidencing the agency. Such revocation may
be express or implied (Article 1920, supra).
In this case, the revocation of the agency or Special Power of Attorney is expressed and
by a public document executed on March 10, 1993.
The Register of Deeds of Quezon City was even notified that any attempt to mortgage
or sell the property covered by TCT No. [RT-18206] 106338 located at No. 21 Hillside
Drive, Blue Ridge, Quezon City must have the full consent documented in the form of a
special power of attorney duly authenticated at the Philippine Consulate General, New
York City, N.Y., U.S.A.
The non-annotation of the revocation of the Special Power of Attorney on TCT No. RT-
18206 is of no consequence as far as the revocations existence and legal effect is
concerned since actual notice is always superior to constructive notice. The actual
notice of the revocation relayed to defendant Registry of Deeds of Quezon City is not
denied by either the Registry of Deeds of Quezon City or the defendant Bank. In which
case, there appears no reason why Section 52 of the Property Registration Decree
(P.D. No. 1529) should not apply to the situation. Said Section 52 of P.D. No. 1529
provides:
"Section 52. Constructive notice upon registration. Every conveyance, mortgage,
lease, lien, attachment, order, judgment, instrument or entry affecting registered land
shall, if registered, filed or entered in the Office of the Register of Deeds for the province
or city where the land to which it relates lies, be constructive notice to all persons from
the time of such registering, filing or entering. (Pres. Decree No. 1529, Section 53)
(emphasis ours)
It thus developed that at the time the first loan transaction with defendant Bank was
effected on December 12, 1996, there was on record at the Office of the Register of
Deeds of Quezon City that the special power of attorney granted Julian, Sr. by Perla
had been revoked. That notice, works as constructive notice to third parties of its being
filed, effectively rendering Julian, Sr. without authority to act for and in behalf of Perla as
of the date the revocation letter was received by the Register of Deeds of Quezon City
on February 7, 1996.
19

Given that Perla revoked the SPA as early as 10 March 1993, and that she informed the
Registry of Deeds of Quezon City of such revocation in a letter dated 23 January 1996
and received by the latter on 7 February 1996, then third parties to the SPA are
constructively notified that the same had been revoked and Julian no longer had any
authority to mortgage the subject property. Although the revocation may not be
annotated on TCT No. RT-18206 (106338), as the RTC pointed out, neither the Registry
of Deeds of Quezon City nor respondent denied that Perlas 23 January 1996 letter was
received by and filed with the Registry of Deeds of Quezon City. Respondent would
have undoubtedly come across said letter if it indeed diligently investigated the subject
property and the circumstances surrounding its mortgage.
The final issue to be threshed out by this Court is whether the respondent is a
mortgagee-in-good faith. Respondent fervently asserts that it exercised reasonable
diligence required of a prudent man in dealing with the subject property.
Elaborating, respondent claims to have carefully verified Julians authority over the
subject property which was validly contained in the SPA. It stresses that the SPA was
annotated at the back of the TCT of the subject property. Finally, after conducting an
investigation, it found that the property covered by TCT No. 106338, registered with the
Registry of Deeds of Pasig (now Makati) referred to in the SPA, and the subject
property, covered by TCT No. 18206 (106338) registered with the Registry of Deeds of
Quezon City, are one and the same property. From the foregoing, respondent
concluded that Julian was indeed authorized to constitute a mortgage over the subject
property.
We are unconvinced. The property listed in the real estate mortgages Julian executed in
favor of PNB is the one covered by "TCT#RT-18206(106338)." On the other hand, the
Special Power of Attorney referred to TCT No. "RT-106338 805 Square Meters of the
Registry of Deeds of Pasig now Makati." The palpable difference between the TCT
numbers referred to in the real estate mortgages and Julians SPA, coupled with the fact
that the said TCTs are registered in the Registries of Deeds of different cities, should
have put respondent on guard. Respondents claim of prudence is debunked by the fact
that it had conveniently or otherwise overlooked the inconsistent details appearing on
the face of the documents, which it was relying on for its rights as mortgagee, and which
significantly affected the identification of the property being mortgaged. In Arrofo v.
Quio,
20
we have elucidated that:
[Settled is the rule that] a person dealing with registered lands [is not required] to inquire
further than what the Torrens title on its face indicates. This rule, however, is not
absolute but admits of exceptions. Thus, while its is true, x x x that a person dealing
with registered lands need not go beyond the certificate of title, it is likewise a
well-settled rule that a purchaser or mortgagee cannot close his eyes to facts
which should put a reasonable man on his guard, and then claim that he acted in
good faith under the belief that there was no defect in the title of the vendor or
mortgagor. His mere refusal to face up the fact that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in the vendors or
mortgagors title, will not make him an innocent purchaser for value, if it afterwards
develops that the title was in fact defective, and it appears that he had such notice of
the defect as would have led to its discovery had he acted with the measure of
precaution which may be required of a prudent man in a like situation.
By putting blinders on its eyes, and by refusing to see the patent defect in the scope of
Julians authority, easily discernable from the plain terms of the SPA, respondent cannot
now claim to be an innocent mortgagee.
Further, in the case of Abad v. Guimba,
21
we laid down the principle that where the
mortgagee does not directly deal with the registered owner of real property, the law
requires that a higher degree of prudence be exercised by the mortgagee, thus:
While [the] one who buys from the registered owner does not need to look behind the
certificate of title, one who buys from [the] one who is not [the] registered owner is
expected to examine not only the certificate of title but all factual circumstances
necessary for [one] to determine if there are any flaws in the title of the transferor, or in
[the] capacity to transfer the land. Although the instant case does not involve a sale but
only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee
in the term "purchaser."
22

This principle is applied more strenuously when the mortgagee is a bank or a banking
institution. Thus, in the case of Cruz v. Bancom Finance Corporation,
23
we ruled:
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such,
unlike private individuals, it is expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A banking institution is expected to
exercise due diligence before entering into a mortgage contract. The ascertainment of
the status or condition of a property offered to it as security for a loan must be a
standard and indispensable part of its operations.
24

Hence, considering that the property being mortgaged by Julian was not his, and there
are additional doubts or suspicions as to the real identity of the same, the respondent
bank should have proceeded with its transactions with Julian only with utmost caution.
As a bank, respondent must subject all its transactions to the most rigid scrutiny, since
its business is impressed with public interest and its fiduciary character requires high
standards of integrity and performance.
25
Where respondent acted in undue haste in
granting the mortgage loans in favor of Julian and disregarding the apparent defects in
the latters authority as agent, it failed to discharge the degree of diligence required of it
as a banking corporation.1awphil
Thus, even granting for the sake of argument that the subject property and the one
identified in the SPA are one and the same, it would not elevate respondents status to
that of an innocent mortgagee. As a banking institution, jurisprudence stringently
requires that respondent should take more precautions than an ordinary prudent man
should, to ascertain the status and condition of the properties offered as collateral and
to verify the scope of the authority of the agents dealing with these. Had respondent
acted with the required degree of diligence, it could have acquired knowledge of the
letter dated 23 January 1996 sent by Perla to the Registry of Deeds of Quezon City
which recorded the same. The failure of the respondent to investigate into the
circumstances surrounding the mortgage of the subject property belies its contention of
good faith.
On a last note, we find that the real estate mortgages constituted over the subject
property are unenforceable and not null and void, as ruled by the RTC. It is best to
reiterate that the said mortgage was entered into by Julian on behalf of Perla without the
latters authority and consequently, unenforceable under Article 1403(1) of the Civil
Code. Unenforceable contracts are those which cannot be enforced by a proper action
in court, unless they are ratified, because either they are entered into without or in
excess of authority or they do not comply with the statute of frauds or both of the
contracting parties do not possess the required legal capacity.
26
An unenforceable
contract may be ratified, expressly or impliedly, by the person in whose behalf it has
been executed, before it is revoked by the other contracting party.
27
Without Perlas
ratification of the same, the real estate mortgages constituted by Julian over the subject
property cannot be enforced by any action in court against Perla and/or her successors
in interest.
In sum, we rule that the contracts of real estate mortgage constituted over the subject
property covered by TCT No. RT 18206 (106338) registered with the Registry of
Deeds of Quezon City are unenforceable. Consequently, the foreclosure proceedings
and the auction sale of the subject property conducted in pursuance of these
unenforceable contracts are null and void. This, however, is without prejudice to the
right of the respondent to proceed against Julian, in his personal capacity, for the
amount of the loans.
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The
Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered
by the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The
Decision dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch
220, in Civil Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED with
modification that the real estate mortgages constituted over TCT No. RT 18206
(106338) are not null and void but UNENFORCEABLE. No costs.
SO ORDERED.

G.R. No. 114311 November 29, 1996
COSMIC LUMBER CORPORATION, petitioner,
vs.
COURT OF APPEAL and ISIDRO PEREZ, respondents.

BELLOSILLO, J .:
COSMIC LUMBER CORPORATION through its General Manager executed on
28 January 1985 a Special Power of Attorney appointing Paz G. Villamil-
Estrada as attorney-in-fact
. . . to initiate, institute and file any court action for the ejectment of
third persons and/or squatters of the entire lot 9127 and 443 and covered
by TCT Nos. 37648 and 37649, for the said squatters to remove their
houses and vacate the premises in order that the corporation may take
material possession of the entire lot, and for this purpose, to appear at the
pre-trial conference and enter into any stipulation of facts
and/or compromise agreement so far as it shall protect the rights and
interest of the corporation in the aforementioned lots.
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of
attorney, instituted an action for the ejectment of PRIVATE RESPONDENT
Isidro Perez and recover the possession of a portion of Lot No. 443 before the
Regional Trial Court of Dagupan, docketed as Civil Case No. D-7750.
2

On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement
with RESPONDENT Perez, the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by
Engineer Rodolfo dela Cruz the area at present occupied by defendant
wherein his house is located is 333 square meters on the easternmost
part of lot 443 and which portion has been occupied by defendant for
several years now;
2. That to buy peace said defendant pays unto the plaintiff through herein
attorney-in-fact the sum of P26,640.00 computed at P80.00/square
meter;
3. That plaintiff hereby recognizes ownership and possession of the
defendant by virtue of this compromise agreement over said portion of 333
square m. of lot 443 which portion will be located on the easternmost part
as indicated in the sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental
expenses shall be shouldered by the defendant.
3

On 27 November 1985 the "Compromise Agreement" was approved by the
trial court and judgment was rendered in accordance therewith.
4

Although the decision became final and executory it was not executed within
the 5-year period from date of its finality allegedly due to the failure of petitioner
to produce the owner's duplicate copy of Title No. 37649 needed to segregate
from Lot No. 443 the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada,
to private respondent under the compromise agreement. Thus on 25 January
1993 respondent filed a complaint to revive the judgment, docketed as Civil Case
No. D-10459.
5

Petitioner asserts that it was only when the summons in Civil Case No. D-
10459 for the revival of judgment was served upon it that it came to know of the
compromise agreement entered into between Paz G. Villamil-Estrada and
respondent Isidro Perez upon which the trial court based its decision of 26 July
1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent
transaction, PETITIONER sought annulment of the decision of the trial court
before respondent Court of Appeals on the ground that the compromise
agreement was void because: (a) the attorney-in-fact did not have the authority
to dispose of, sell, encumber or divest the plaintiff of its ownership over its real
property or any portion thereof; (b) the authority of the attorney-in-fact was
confined to the institution and filing of an ejectment case against third
persons/squatters on the property of the plaintiff, and to cause their eviction
therefrom; (c) while the special power of attorney made mention of an authority to
enter into a compromise agreement, such authority was in connection with, and
limited to, the eviction of third persons/squatters thereat, in order that "the
corporation may take material possession of the entire lot;" (d) the amount of
P26,640.00 alluded to as alleged consideration of said agreement was never
received by the plaintiff; (e) the private defendant acted in bad faith in. the
execution of said agreement knowing fully well the want of authority of the
attorney-in-fact to sell, encumber or dispose of the real property of plaintiff; and,
(f) the disposal of a corporate property indispensably requires a Board Resolution
of its Directors, a fact which is wanting in said Civil Case No. D-7750, and the
General Manager is not the proper officer to encumber a corporate property.
6

On 29 October 1993 RESPONDENT COURT dismissed the complaint on the
basis of its finding that not one of the grounds for annulment, namely, lack of
jurisdiction, fraud or illegality was shown to exist.
7
It also denied the motion for
reconsideration filed by petitioner, discoursing that the alleged nullity of the
compromise judgment on the ground that petitioner's attorney-in-fact Villamil-
Estrada was not authorized to sell the subject propety may be raised as a
defense in the execution of the compromise judgment as it does not bind
petitioner, but not as a ground for annulment of judgment because it does not
affect the jurisdiction of the trial court over the action nor does it amount to
extrinsic fraud.
8

Petitioner challenges this verdict. It argues that the decision of the trial
court is void because the compromise agreement upon which it was based is
void. Attorney-in-fact Villamil-Estrada did not possess the authority to sell or
was she armed with a Board Resolution authorizing the sale of its property. She
was merely empowered to enter into a compromise agreement in the recovery
suit she was authorized to file against persons squatting on Lot No. 443, such
authority being expressly confined to the "ejectment of third persons or squatters
of . . . lot . . . (No.) 443 . . . for the said squatters to remove their houses and
vacate the premises in order that the corporation may take material possession
of the entire lot . . ."
We agree with petitioner. The authority granted Villamil-Estrada under the
special power of attorney was explicit and exclusionary: for her to institute
any action in court to eject all persons found on Lots Nos. 9127 and 443 so that
petitioner could take material possession thereof, and for this purpose, to appear
at the pre-trial and enter into any stipulation of facts and/or compromise
agreement but only insofar as this was protective of the rights and interests of
petitioner in the property. Nowhere in this authorization was Villamil-Estrada
granted expressly or impliedly any power to sell the subject property nor a
portion thereof. Neither can a conferment of the power to sell be validly inferred
from the specific authority "to enter into a compromise agreement" because of
the explicit limitation fixed by the grantor that the compromise entered into shall
only be "so far as it shall protect the rights and interest of the corporation in the
aforementioned lots." In the context of the specific investiture of powers to
Villamil-Estrada, alienation by sale of an immovable certainly cannot be deemed
protective of the right of petitioner to physically possess the same, more so when
the land was being sold for a price of P80.00 per square meter, very much less
than its assessed value of P250.00 per square meter, and considering further
that petitioner never received the proceeds of the sale.
WHEN THE SALE OF A PIECE OF LAND OR ANY INTEREST THEREON IS
THROUGH AN AGENT, the authority of the latter shall be in writing;
otherwise, the SALE SHALL BE VOID.
9
Thus the authority of an agent to
execute a contract for the sale of real estate must be conferred in writing and
must give him specific authority, either to conduct the general business of the
principal or to execute a binding contract containing terms and conditions which
are in the contract he did execute.
10
A special power of attorney is necessary
to enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration.
11
The express
mandate required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a sale or that includes
a sale as a necessary ingredient of the act mentioned.
12
For the principal to
confer the right upon an agent to sell real estate, a power of attorney must so
express the powers of the agent in clear and unmistakable language. When there
is any reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.
13

It is therefore clear that by selling to respondent Perez a portion of petitioner's
land through a compromise agreement, Villamil-Estrada acted without or in
obvious authority. The sale ipso jure is consequently void. So is the
compromise agreement. This being the case, the judgment based thereon is
necessarily void. Antipodal to the opinion expressed by respondent court in
resolving petitioner's motion for reconsideration, the nullity of the settlement
between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to
render its decision based on the compromise agreement. In Alviar v. Court of
First Instance of La Union,
14
the Court held
. . . this court does not hesitate to hold that the judgment in question is null
and void ab initio. It is not binding upon and cannot be executed against
the petitioners. It is evident that the compromise upon which the judgment
was based was not subscribed by them . . . Neither could Attorney Ortega
bind them validly in the compromise because he had no special authority .
. .
As the judgment in question is null and void ab initio, it is evident that the
court acquired no jurisdiction to render it, much less to order the execution
thereof . . .
. . . A judgment, which is null and void ab initio, rendered by a court
without jurisdiction to do so, is without legal efficacy and may properly be
impugned in any proceeding by the party against whom it is sought to be
enforced . . .
This ruling was adopted in Jacinto v. Montesa,
15
by Mr. Justice J. B.L. Reyes, a
much-respected authority on civil law, where the Court declared that a judgment
based on a compromise entered into by an attorney without specific authority
from the client is void. Such judgment may be impugned and its execution
restrained in any proceeding by the party against whom it is sought to be
enforced. The Court also observed that a defendant against whom a judgment
based on a compromise is sought to be enforced may file a petition
for certiorari to quash the execution. He could not move to have the compromise
set aside and then appeal from the order of denial since he was not a party to the
compromise. Thus it would appear that the obiter of the appellate court that the
alleged nullity of the compromise agreement should be raised as a defense
against its enforcement is not legally feasible. Petitioner could not be in a position
to question the compromise agreement in the action to revive the compromise
judgment since it was never privy to such agreement. Villamil-Estrada who
signed the compromise agreement may have been the attorney-in-fact but she
could not legally bind petitioner thereto as she was not entrusted with a special
authority to sell the land, as required in Art. 1878, par. (5), of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the
Court of Appeals to annul and set aside judgments of Regional Trial
Courts.
16
"Thus, the Intermediate Appellant Court (now Court of Appeals) shall
exercise . . . (2) Exclusive original jurisdiction over action for annulment of
judgments of the Regional Trial Courts . . ." However, certain requisites must first
be established before a final and executory judgment can be the subject of an
action for annulment. It must either be void for want of jurisdiction or for lack of
due process of law, or it has been obtained by fraud.
17

Conformably with law and the above-cited authorities, the petition to annul the
decision of the trial court in Civil Case No. D-7750 before the Court of Appeals
was proper. Emanating as it did from a void compromise agreement, the trial
court had no jurisdiction to render a judgment based thereon.
18

It would also appear, and quite contrary to the finding of the appellate court, that
the highly reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil Case
No. 7750 constituted an extrinsic or collateral fraud by reason of which the
judgment rendered thereon should have been struck down. Not all the legal
semantics in the world can becloud the unassailable fact that petitioner was
deceived and betrayed by its attorney-in-fact, Villamil-Estrada deliberately
concealed from petitioner, her principal, that a compromise agreement had been
forged with the end-result that a portion of petitioner's property was sold to the
deforciant, literally for a song. Thus completely kept unaware of its agent's
artifice, petitioner was not accorded even a fighting chance to repudiate the
settlement so much so that the judgment based thereon became final and
executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within too
narrow limits. Fraud may assume different shapes and be committed in as many
different ways and here lies the danger of attempting to define fraud. For man in
his ingenuity and fertile imagination will always contrive new schemes to fool the
unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129,
where it is one the effect of which prevents a party from hearing a trial, or real
contest, or from presenting all of his case to the court, or where it operates upon
matters, not pertaining to the judgment itself, but to the manner in which it was
procured so that there is not a fair submission of the controversy. In other words,
extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation
which is committed outside of the trial of the case, whereby the defeated party
has been prevented from exhibiting fully his side of the case by fraud or
deception practiced on him by his opponent.
19
Fraud is extrinsic where the
unsuccessful party has been prevented from exhibiting fully his case, by fraud or
deception practiced on him by his opponent, as by keeping him away from court,
a false promise of a compromise; or where the defendant never had knowledge
of the suit, being kept in ignorance by the acts of the plaintiff; or where an
attorney fraudulently or without authority connives at his defeat; these and similar
cases which show that there has never been a real contest in the trial or hearing
of the case are reasons for which a new suit may be sustained to set aside and
annul the former judgment and open the case for a new and fair hearing.
20

It may be argued that petitioner knew of the compromise agreement since
the principal is chargeable with and bound by the knowledge of or notice to his
agent received while the agent was acting as such. But the general rule is
intended to protect those who exercise good faith and not as a shield for unfair
dealing. Hence there is a well-established exception to the general rule as
where the conduct and dealings of the agent are such as to raise a clear
presumption that he will not communicate to the principal the facts in
controversy.
21
The logical reason for this exception is that where the agent is
committing a fraud, it would be contrary to common sense to presume or to
expect that he would communicate the facts to the principal. Verily, when an
agent is engaged in the perpetration of a fraud upon his principal for his own
exclusive benefit, he is not really acting for the principal but is really acting for
himself, entirely outside the scope of his agency.
22
Indeed, the basic tenets of
agency rest on the highest considerations of justice, equity and fair play, and an
agent will not be permitted to pervert his authority to his own personal advantage,
and his act in secret hostility to the interests of his principal transcends the power
afforded him.
23

WHEREFORE, the petition is GRANTED. The decision and resolution of
respondent Court of Appeals dated 29 October 1993 and 10 March 1994,
respectively, as well as the decision of the Regional Trial Court of Dagupan City
in Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED and SET
ASIDE. The "Compromise Agreement" entered into between Attorney-in-fact Paz
G. Villamil-Estrada and respondent Isidro Perez is declared VOID. This is without
prejudice to the right of petitioner to pursue its complaint against private
respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession
of a portion of Lot No. 443.
SO ORDERED.

G.R. No. 163720 December 16, 2004
GENEVIEVE LIM, petitioner,
vs.
FLORENCIO SABAN, respondents.


D E C I S I O N


TINGA, J .:
Before the Court is a Petition for Review on Certiorari assailing the Decision
1
dated
October 27, 2003 of the Court of Appeals, Seventh Division, in CA-G.R. V No. 60392.
2

The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu
City (the "lot"), entered into an Agreement and Authority to Negotiate and Sell (Agency
Agreement) with RESPONDENT Florencio Saban (Saban) on February 8, 1994.
Under the Agency Agreement, Ybaez authorized Saban to look for a buyer of the
lot for Two Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to
include the amounts needed for payment of taxes, transfer of title and other expenses
incident to the sale, as well as Sabans commission for the sale.
3

Through Sabans efforts, Ybaez and his wife were able to sell the lot to the
PETITIONER Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the
Spouses Lim) on March 10, 1994. The price of the lot as indicated in theDeed of
Absolute Sale is Two Hundred Thousand Pesos (P200,000.00).
4
It appears, however,
that the vendees agreed to purchase the lot at the price of Six Hundred Thousand
Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale. After
the sale, Lim remitted to Saban the amounts of One Hundred Thirteen Thousand Two
Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due on the transaction
as well as Fifty Thousand Pesos (P50,000.00) as brokers commission.
5
Lim also
issued in the name of Saban four postdated checks in the aggregate amount of Two
Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos (P236,743.00). These
checks were Bank of the Philippine Islands (BPI) Check No. 1112645 dated June 12,
1994 for P25,000.00; BPI Check No. 1112647 dated June 19, 1994 for P18,743.00; BPI
Check No. 1112646 dated June 26, 1994 for P25,000.00; and Equitable PCI
Bank Check No. 021491B dated June 20, 1994 for P168,000.00.
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the
letter Ybaez asked Lim to cancel all the checks issued by her in Sabans favor
and to "extend another partial payment" for the lot in his (Ybaezs) favor.
After the four checks in his favor were dishonored upon presentment, Saban filed
a Complaint for collection of sum of money and damages against Ybaez and Lim with
the Regional Trial Court (RTC) of Cebu City on August 3, 1994.
7
The case was
assigned to Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the
lot for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos
(P400,000.00) from the price set by Ybaez. Of the total purchase price
of P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims
agent, and P113,257.00 was given to Saban to cover taxes and other expenses
incidental to the sale. Lim also issued four (4) postdated checks
8
in favor of Saban for
the remaining P236,743.00.
9

Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any
commission for the sale since he concealed the actual selling price of the lot from
Ybaez and because he was not a licensed real estate broker. Ybaez was able to
convince Lim to cancel all four checks.
Saban further averred that Ybaez and Lim connived to deprive him of his sales
commission by withholding payment of the first three checks. He also claimed that
Lim failed to make good the fourth check which was dishonored because the account
against which it was drawn was closed.
In his Answer, Ybaez claimed that Saban was not entitled to any commission
because he concealed the actual selling price from him and because he was not a
licensed real estate broker.
Lim, for her part, argued that she was not privy to the agreement between Ybaez
and Saban, and that she issued stop payment orders for the three checks because
Ybaez requested her to pay the purchase price directly to him, instead of coursing it
through Saban. She also alleged that she agreed with Ybaez that the purchase price
of the lot was only P200,000.00.
Ybaez died during the pendency of the case before the RTC. Upon motion of his
counsel, the trial court dismissed the case only against him without any objection from
the other parties.
10

On May 14, 1997, the RTC rendered its Decision
11
dismissing Sabans complaint,
declaring the four (4) checks issued by Lim as stale and non-negotiable, and absolving
Lim from any liability towards Saban.
Saban appealed the trial courts Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated its Decision
12
reversing the trial
courts ruling. It held that Saban was entitled to his commission amounting
to P236,743.00.
13

The Court of Appeals ruled that Ybaezs revocation of his contract of agency with
Saban was invalid because the agency was coupled with an interest and Ybaez
effected the revocation in bad faith in order to DEPRIVE Saban of his commission and
to keep the profits for himself.
14

The appellate court found that Ybaez and Lim connived to deprive Saban of his
commission. It declared that Lim is liable to pay Saban the amount of the purchase
price of the lot corresponding to his commission because she issued the four checks
knowing that the total amount thereof corresponded to Sabans commission for the sale,
as the agent of Ybaez. The appellate court further ruled that, in issuing the checks in
payment of Sabans commission, Lim acted as an accommodation party. She signed
the checks as drawer, without receiving value therefor, for the purpose of lending her
name to a third person. As such, she is liable to pay Saban as the holder for value of
the checks.
15

Lim filed a Motion for Reconsideration of the appellate courts Decision, but
her Motion was denied by the Court of Appeals in a Resolution dated May 6, 2004.
16

Not satisfied with the decision of the Court of Appeals, Lim filed the present petition.
Lim argues that the appellate court ignored the fact that after paying her agent and
remitting to Saban the amounts due for taxes and transfer of title, she paid the balance
of the purchase price directly to Ybaez.
17

She further contends that she is not liable for Ybaezs debt to Saban under the
Agency Agreement as she is not privy thereto, and that Saban has no one but himself to
blame for consenting to the dismissal of the case against Ybaez and not moving for his
substitution by his heirs.
18

Lim also assails the findings of the appellate court that she issued the checks as an
accommodation party for Ybaez and that she connived with the latter to deprive Saban
of his commission.
19

Lim prays that should she be found liable to pay Saban the amount of his commission,
she should only be held liable to the extent of one-third (1/3) of the amount, since she
had two co-vendees (the Spouses Lim) who should share such liability.
20

In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00,
which consisted of theP200,000.00 which would be paid to Ybaez, the P50,000.00 due
to her broker, the P113,257.00 earmarked for taxes and other expenses incidental to
the sale and Sabans commission as broker for Ybaez. According to Saban, Lim
assumed the obligation to pay him his commission. He insists that Lim and Ybaez
connived to unjustly deprive him of his commission from the negotiation of the sale.
21

The issues for the Courts resolution are whether Saban is entitled to receive his
commission from the sale; and, assuming that Saban is entitled thereto, whether it is
Lim who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by the
Court of Appeals.
The Court affirms the appellate courts finding that the AGENCY WAS NOT
REVOKED since Ybaez requested that Lim make stop payment orders for the checks
payable to Saban only after the consummation of the sale on March 10, 1994. At that
time, Saban had already performed his obligation as Ybaezs agent when,
through his (Sabans) efforts, Ybaez executed the Deed of Absolute Sale of the lot with
Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was
consummated through his efforts would be a breach of his contract of agency with
Ybaez which expressly states that Saban would be entitled to any excess in the
purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes
and other incidental expenses of the sale.
22

In Macondray & Co. v. Sellner,
23
the Court recognized the right of a broker to his
commission for finding a suitable buyer for the sellers property even though the seller
himself consummated the sale with the buyer.
24
The Court held that it would be in the
height of injustice to permit the principal to terminate the contract of agency to the
prejudice of the broker when he had already reaped the benefits of the brokers efforts.
In Infante v. Cunanan, et al.,
25
the Court upheld the right of the brokers to their
commissions although the seller revoked their authority to act in his behalf after they
had found a buyer for his properties and negotiated the sale directly with the buyer
whom he met through the brokers efforts. The Court ruled that the sellers withdrawal in
bad faith of the brokers authority cannot unjustly deprive the brokers of their
commissions as the sellers duly constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the present
case, especially considering that Saban had completely performed his obligations under
his contract of agency with Ybaez by finding a suitable buyer to preparing the Deed of
Absolute Sale between Ybaez and Lim and her co-vendees. Moreover, the contract of
agency very clearly states that Saban is entitled to the excess of the mark-up of the
price of the lot after deducting Ybaezs share of P200,000.00 and the taxes and other
incidental expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that
Sabans agency was one coupled with an interest. Under Article 1927 of the Civil Code,
an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal from the management is
unjustifiable. Stated differently, AN AGENCY IS DEEMED AS ONE COUPLED WITH
AN INTEREST where it is established for the mutual benefit of the principal and of the
agent, or for the interest of the principal and of third persons, and it cannot be revoked
by the principal so long as the interest of the agent or of a third person subsists. In an
agency coupled with an interest, the agents interest must be in the subject matter of
the power conferred and not merely an interest in the exercise of the power because it
entitles him to compensation. WHEN AN AGENTS INTEREST IS CONFINED TO
EARNING HIS AGREED COMPENSATION, the agency is not one coupled with an
interest, since an agents interest in obtaining his compensation as such agent is an
ordinary incident of the agency relationship.
26

Sabans entitlement to his commission having been settled, the Court must now
determine whether Lim is the proper party against whom Saban should address his
claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises
from the Agency Agreement between them. Lim is not a party to the contract.
However, the record reveals that she had knowledge of the fact that Ybaez set the
price of the lot at P200,000.00 and that the P600,000.00the price agreed upon by her
and Sabanwas more than the amount set by Ybaez because it included the amount
for payment of taxes and for Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the lot: P113,257.00
for taxes, P50,000.00 for her broker, and P400.000.00 directly to Ybaez, or a total of
Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos
(P563,257.00).
27
Lim, on the other hand, claims that on March 10, 1994, the date of
execution of theDeed of Absolute Sale, she paid directly to Ybaez the amount of One
Hundred Thousand Pesos (P100,000.00) only, and gave to Saban P113,257.00 for
payment of taxes and P50,000.00 as his commission,
28
and One Hundred Thirty
Thousand Pesos (P130,000.00) on June 28, 1994,
29
or a total of Three Hundred Ninety
Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for his part,
acknowledged that Lim and her co-vendees paid him P400,000.00 which he said was
the full amount for the sale of the lot.
30
It thus appears that he receivedP100,000.00 on
March 10, 1994, acknowledged receipt (through Saban) of the P113,257.00 earmarked
for taxes and P50,000.00 for commission, and received the balance of P130,000.00 on
June 28, 1994. Thus, a total ofP230,000.00 went directly to Ybaez. Apparently,
although the amount actually paid by Lim was P393,257.00, Ybaez rounded off the
amount to P400,000.00 and waived the difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies
her claim that she and her co-vendees did not agree to purchase the lot at P600,000.00.
If she did not agree thereto, there would be no reason for her to issue those checks
which is the balance of P600,000.00 less the amounts of P200,000.00 (due to
Ybaez),P50,000.00 (commission), and the P113,257.00 (taxes). The only logical
conclusion is that Lim changed her mind about agreeing to purchase the lot
at P600,000.00 after talking to Ybaez and ultimately realizing that Sabans commission
is even more than what Ybaez received as his share of the purchase price as vendor.
Obviously, this change of mind resulted to the prejudice of Saban whose efforts led to
the completion of the sale between the latter, and Lim and her co-vendees. This the
Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for the
facts therein are similar to the circumstances of the present case. In that case, Consejo
Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots and the
house built thereon for Thirty Thousand Pesos (P30,000.00) . She promised to pay
them five percent (5%) of the purchase price plus whatever overprice they may obtain
for the property. Cunanan and Mijares offered the properties to Pio Noche who in turn
expressed willingness to purchase the properties. Cunanan and Mijares thereafter
introduced Noche to Infante. However, the latter told Cunanan and Mijares that she was
no longer interested in selling the property and asked them to sign a document stating
that their written authority to act as her agents for the sale of the properties was already
cancelled. Subsequently, Infante sold the properties directly to Noche for Thirty One
Thousand Pesos (P31,000.00). The Court upheld the right of Cunanan and Mijares to
their commission, explaining that
[Infante] had changed her mind even if respondent had found a buyer who was
willing to close the deal, is a matter that would not give rise to a legal
consequence if [Cunanan and Mijares] agreed to call off the transaction in
deference to the request of [Infante]. But the situation varies if one of the parties
takes advantage of the benevolence of the other and acts in a manner that would
promote his own selfish interest. This act is unfair as would amount to bad faith.
This act cannot be sanctioned without according the party prejudiced the reward
which is due him. This is the situation in which [Cunanan and Mijares] were
placed by [Infante]. [Infante] took advantage of the services rendered by
[Cunanan and Mijares], but believing that she could evade payment of their
commission, she made use of a ruse by inducing them to sign the deed of
cancellation.This act of subversion cannot be sanctioned and cannot serve as
basis for [Infante] to escape payment of the commission agreed upon.
31

The appellate court therefore had sufficient basis for concluding that Ybaez and Lim
connived to deprive Saban of his commission by dealing with each other directly and
reducing the purchase price of the lot and leaving nothing to compensate Saban for his
efforts.
Considering the circumstances surrounding the case, and the undisputed fact that Lim
had not yet paid the balance of P200,000.00 of the purchase price of P600,000.00, it is
just and proper for her to pay Saban the balance ofP200,000.00.
Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess
of P30,000.00 from his asking price of P200,000.00, Saban may claim such excess
from Ybaezs estate, if that remedy is still available,
32
in view of the trial courts
dismissal of Sabans complaint as against Ybaez, with Sabans express consent, due
to the latters demise on November 11, 1994.
33

The appellate court however erred in ruling that Lim is liable on the checks because she
issued them as an accommodation party. Section 29 of the Negotiable Instruments Law
defines an accommodation party as a person "who has signed the negotiable
instrument as maker, drawer, acceptor or indorser, without receiving value therefor, for
the purpose of lending his name to some other person." The accommodation party is
liable on the instrument to a holder for value even though the holder at the time of taking
the instrument knew him or her to be merely an accommodation party. The
accommodation party may of course seek reimbursement from the party
accommodated.
34

As gleaned from the text of Section 29 of the Negotiable Instruments Law, the
accommodation party is one who meets all these three requisites, viz: (1) he signed the
instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the
signature; and (3) he signed for the purpose of lending his name to some other person.
In the case at bar, while Lim signed as drawer of the checks she did not satisfy the two
other remaining requisites.
The absence of the second requisite becomes pellucid when it is noted at the outset
that Lim issued the checks in question on account of her transaction, along with the
other purchasers, with Ybaez which was a sale and, therefore, a reciprocal contract.
Specifically, she drew the checks in payment of the balance of the purchase price of the
lot subject of the transaction. And she had to pay the agreed purchase price in
consideration for the sale of the lot to her and her co-vendees. In other words, the
amounts covered by the checks form part of the cause or consideration from Ybaezs
end, as vendor, while the lot represented the cause or consideration on the side of Lim,
as vendee.
35
Ergo, Lim received value for her signature on the checks.
Neither is there any indication that Lim issued the checks for the purpose of enabling
Ybaez, or any other person for that matter, to obtain credit or to raise money, thereby
totally debunking the presence of the third requisite of an accommodation party.
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
SO ORDERED.

G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA.
DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and
JOSELITO, all surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-
respondent.
Teofilo Leonin for petitioners-appellants.
Osorio, Osorio & Osorio for respondent-appellee.
Teofilo P. Purisima in his own behalf as intervenor-respondent.

MAKASIAR, J .:
PETITIONER-APPELLANT Vicente M. Domingo, now deceased and represented by
his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente Jr.,
Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority
decision dated, March 12, 1969 of the Special Division of Five of the Court of Appeals
affirming the judgment of the trial court, which sentenced the said Vicente M.
Domingo to pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P.
Purisima P2,607.50 with interest on both amounts from the date of the filing of the
complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and
P500.00 as attorney's fees plus costs.
The following facts were found to be established by the majority of the Special Division
of Five of the Court of Appeals:
In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo
GRANTED Gregorio Domingo, a real estate broker, the EXCLUSIVE AGENCY TO
SELL his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at
the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on
the total price, if the property is sold by Vicente or by anyone else during the 30-day
duration of the agency or if the property is sold by Vicente within three months from the
termination of the agency to a purchaser to whom it was submitted by Gregorio during
the continuance of the agency with notice to Vicente. The said agency contract was in
triplicate, one copy was given to Vicente, while the original and another copy were
retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for
a buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a
prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price
of P2.00 per square meter(Exhibit "B"). Vicente directed Gregorio to tell Oscar de Leon
to raise his offer. After several conferences between Gregorio and Oscar de Leon, the
latter raised his offer to P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to
which Vicente agreed by signing Exhibit "C". Upon demand of Vicente, Oscar de Leon
issued to him a check in the amount of P1,000.00 as earnest money, after which
Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his
former offer to pay for the property at P1.20 per square meter in another letter,
Exhibit "D". Subsequently, Vicente asked for an additional amount of P1,000.00 as
earnest money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C"
was amended to the effect that Oscar de Leon will vacate on or about September 15,
1956 his house and lot at Denver Street, Quezon City which is part of the purchase
price. It was again amended to the effect that Oscar will vacate his house and lot on
December 1, 1956, because his wife was on the family way and Vicente could stay in lot
No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the
year 1957 therein is a mere typographical error) and marked Exhibit "D". Pursuant to his
promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand
Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per
square meter or a total in round figure of One Hundred Nine Thousand Pesos
(P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by
Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of One
Thousand Pesos (P1,000.00) by way of earnest money. In the deed of sale was not
executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as
extended by Vicente, Oscar told Gregorio that he did not receive his money from
his brother in the United States, for which reason he was giving up the negotiation
including the amount of One Thousand Pesos (P1,000.00) given as earnest money to
Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio aspropina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy.
So, he went to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect
that Vicente was still committed to pay him 5% commission, if the sale is consummated
within three months after the expiration of the 30-day period of the exclusive agency in
his favor from the execution of the agency contract on June 2, 1956 to a purchaser
brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the
original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to
antagonize Vicente further, because he had still duplicate of Exhibit "A". From his
meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of
Quezon City, where he discovered Exhibit "G' deed of sale executed on September
17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40
Denver Street, Cubao, Quezon City, in favor Vicente as down payment by Oscar de
Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus
learning that Vicente sold his property to the same buyer, Oscar de Leon and his
wife, he demanded in writting payment of his commission on the sale price of One
Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with
Oscar de Leon, who told him that Vicente went to him and asked him to eliminate
Gregorio in the transaction and that he would sell his property to him for One
Hundred Four Thousand Pesos (P104,000.0 In Vicente's reply to Gregorio's letter,
Exhibit "H", Vicente stated that Gregorio is not entitled to the 5% commission
because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another
buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency
contract, is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon the
sale by Vicente of his property is practically a sale to Oscar de Leon since husband
and wife have common or identical interests; that Gregorio and intervenor Teofilo
Purisima were the efficient cause in the consummation of the sale in favor of the
spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of
One Thousand Pesos (P1,000.00) as "propina" or gift and not as additional earnest
money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to
Oscar de Leon with respect to the additional earnest money, does not appear to have
been answered by Oscar de Leon and therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid an additional earnest money of One
Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount
of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest
money, evidenced by the letter Exhibit "4"; and that Vicente did not even mention such
additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of
demand of the 5% commission.
The three issues in this appeal are (1) whether the failure on the part of Gregorio to
disclose to Vicente the payment to him by Oscar de Leon of the amount of One
Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to
reduce the purchase price from P2.00 to P1.20 per square meter, so constitutes fraud
as to cause a forfeiture of his commission on the sale price; (2) whether Vicente or
Gregorio should be liable directly to the intervenor Teofilo Purisima for the latter's share
in the expected commission of Gregorio by reason of the sale; and (3) whether the
award of legal interest, moral and exemplary damages, attorney's fees and costs, was
proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred
in by Justice Juan Enriquez did not touch on these issues which were extensively
discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice
Esguerra, in his concurring opinion, affirmed that it does not constitute breach of trust or
fraud on the part of the broker and regarded same as merely part of the whole process
of bringing about the meeting of the minds of the seller and the purchaser and that the
commitment from the prospect buyer that he would give a reward to Gregorio if he could
effect better terms for him from the seller, independent of his legitimate commission, is
not fraudulent, because the principal can reject the terms offered by the prospective
buyer if he believes that such terms are onerous disadvantageous to him. On the other
hand, Justice Gatmaitan, with whom Justice Antonio Cafizares corner held the view that
such an act on the part of Gregorio was fraudulent and constituted a breach of trust,
which should deprive him of his right to the commission.
The duties and liabilities of a broker to his employer are essentially those which an
agent owes to his principal.
1

Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the
New Civil Code.
Art. 1891. Every agent is bound to render an account of his transactions
and to deliver to the principal whatever he may have received by virtue of
the agency, even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an
account shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but also for
negligence, which shall be judged with more less rigor by the courts,
according to whether the agency was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code
which provides that:
Art. 1720. Every agent is bound to give an account of his transaction and
to pay to the principal whatever he may have received by virtue of the
agency, even though what he has received is not due to the principal.
The modification contained in the first paragraph Article 1891 consists in changing the
phrase "to pay" to "to deliver", which latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that
is required to an agent condemning as void any stipulation exempting the agent from
the duty and liability imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the
old Spanish Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for negligence,
which shall be judged with more or less severity by the courts, according
to whether the agency was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and
fairness on the part of the agent, the real estate broker in this case, to his principal, the
vendor. The law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and other
material facts relevant to the agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from such an obligation and considers
such an exemption as void. The duty of an agent is likened to that of a trustee. This is
not a technical or arbitrary rule but a rule founded on the highest and truest principle of
morality as well as of the strictest justice.
2

Hence, AN AGENT WHO TAKES A SECRET PROFIT in the nature of a bonus, gratuity
or personal benefit from the vendee, without revealing the same to his principal, the
vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to
collect the commission from his principal, even if the principal does not suffer any
injury by reason of such breach of fidelity, or that he obtained better results or that the
agency is a gratuitous one, or that usage or custom allows it; because the rule is to
prevent the possibility of any wrong, not to remedy or repair an actual damage.
3
By
taking such profit or bonus or gift or propina from the vendee, the agent thereby
assumes a position wholly inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as his commission is concerned,
as if no agency had existed. The fact that the principal may have been benefited
by the valuable services of the said agent does not exculpate the agent who has
only himself to blame for such a result by reason of his treachery or perfidy.
This Court has been consistent in the rigorous application of Article 1720 of the old
Spanish Civil Code. Thus, for failure to deliver sums of money paid to him as an
insurance agent for the account of his employer as required by said Article 1720, said
insurance agent was convicted estafa.
4
An administrator of an estate was likewise
under the same Article 1720 for failure to render an account of his administration to the
heirs unless the heirs consented thereto or are estopped by having accepted the
correctness of his account previously rendered.
5

Because of his responsibility under the aforecited article 1720, an agent is likewise
liable for estafa for failure to deliver to his principal the total amount collected by him in
behalf of his principal and cannot retain the commission pertaining to him by subtracting
the same from his collections.
6

A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the
money and property received by him for his client despite his attorney's lien.
7
The duty
of a commission agent to render a full account his operations to his principal was
reiterated in Duhart, etc. vs. Macias.
8

The American jurisprudence on this score is well-nigh unanimous.
Where a principal has paid an agent or broker a commission while
ignorant of the fact that the latter has been unfaithful, the principal may
recover back the commission paid, since an agent or broker who has been
unfaithful is not entitled to any compensation.
xxx xxx xxx
In discussing the right of the principal to recover commissions retained by
an unfaithful agent, the court in Little vs. Phipps (1911) 208 Mass. 331, 94
NE 260, 34 LRA (NS) 1046, said: "It is well settled that the agent is bound
to exercise the utmost good faith in his dealings with his principal. As Lord
Cairns said, this rule "is not a technical or arbitrary rule. It is a rule founded
on the highest and truest principles, of morality." Parker vs.
McKenna (1874) LR 10,Ch(Eng) 96,118 ... If the agent does not conduct
himself with entire fidelity towards his principal, but is guilty of taking a
secret profit or commission in regard the matter in which he is employed,
he loses his right to compensation on the ground that he has taken a
position wholly inconsistent with that of agent for his employer, and which
gives his employer, upon discovering it, the right to treat him so far as
compensation, at least, is concerned as if no agency had existed. This
may operate to give to the principal the benefit of valuable services
rendered by the agent, but the agent has only himself to blame for that
result."
xxx xxx xxx
The intent with which the agent took a secret profit has been held
immaterial where the agent has in fact entered into a relationship
inconsistent with his agency, since the law condemns the corrupting
tendency of the inconsistent relationship. Little vs. Phipps (1911) 94 NE
260.
9

As a GENERAL RULE, it is a breach of good faith and loyalty to his
principal for an agent, while the agency exists, so to deal with the subject
matter thereof, or with information acquired during the course of the
agency, as to make a profit out of it for himself in excess of his lawful
compensation; and if he does so he may be held as a trustee and may
be compelled to account to his principal for all profits, advantages,
rights, or privileges acquired by him in such dealings, whether in
performance or in violation of his duties, and be required to transfer them
to his principal upon being reimbursed for his expenditures for the same,
unless the principal has consented to or ratified the transaction
knowing that benefit or profit would accrue or had accrued, to the agent, or
unless with such knowledge he has allowed the agent so as to change his
condition that he cannot be put in status quo. The application of this rule
is not affected by the fact that the principal did not suffer any injury
by reason of the agent's dealings or that he in fact obtained better results;
nor is it affected by the fact that there is a usage or custom to the contrary
or that the agency is a gratuitous one. (Emphasis applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift
or propina in the amount of One Thousand Pesos (P1,000.00) from the prospective
buyer Oscar de Leon, without the knowledge and consent of his principal, herein
petitioner-appellant Vicente Domingo. His acceptance of said substantial monetary
gift corrupted his duty to serve the interests only of his principal and undermined
his loyalty to his principal, who gave him partial advance of Three Hundred Pesos
(P300.00) on his commission. As a consequence, instead of exerting his best to
persuade his prospective buyer to purchase the property on the most advantageous
terms desired by his principal, the broker, herein defendant-appellee Gregorio Domingo,
succeeded in persuading his principal to accept the counter-offer of the prospective
buyer to purchase the property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters,
which is very much lower the the price of P2.00 per square meter or One Hundred
Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot
originally offered by his principal.
The duty embodied in Article 1891 of the New Civil Code WILL NOT APPLY if the
agent or broker acted only as a middleman with the task of merely bringing together
the vendor and vendee, who themselves thereafter will negotiate on the terms and
conditions of the transaction. Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he received from the
purchaser and his principal did not object therto.
11
Herein defendant-appellee
Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente
Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner-
appellant only. And therein petitioner-appellant was not aware of the gift of One
Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective
buyer; much less did he consent to his agent's accepting such a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar
de Leon, does not materially alter the situation; because the transaction, to be valid,
must necessarily be with the consent of the husband Oscar de Leon, who is the
administrator of their conjugal assets including their house and lot at No. 40 Denver
Street, Cubao, Quezon City, which were given as part of and constituted the down
payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad
Estate. Hence, both in law and in fact, it was still Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-appellee Gregorio
Domingo must forfeit his right to the commission and must return the part of the
commission he received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio
Domingo his one-half share of whatever amounts Gregorio Domingo received by virtue
of the transaction as his sub-agency contract was with Gregorio Domingo alone and not
with Vicente Domingo, who was not even aware of such sub-agency. Since Gregorio
Domingo received from Vicente Domingo and Oscar de Leon respectively the amounts
of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of
One Thousand Three Hundred Pesos (P1,300.00), one-half of the same, which is Six
Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo
Purisima.
Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo
mental anguish and serious anxiety as well as wounded feelings, petitioner-appellant
Vicente Domingo should be awarded moral damages in the reasonable amount of One
Thousand Pesos (P1,000.00) attorney's fees in the reasonable amount of One
Thousand Pesos (P1,000.00), considering that this case has been pending for the last
fifteen (15) years from its filing on October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of
Appeals and directing defendant-appellee Gregorio Domingo: (1) to pay to the heirs of
Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and
One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the
sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.

G.R. No. 102737 August 21, 1996
FRANCISCO A. VELOSO, petitioner,
vs.
COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted by her husband
GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF
MANILA, respondents.

TORRES, JR., J .:p
This petition for review assails the decision of the Court of Appeals, dated July
29, 1991, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED IN
TOTO. Costs against appellant.
1

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

On August 24, 1988, PETITIONER VELOSO filed an action for annulment of
documents, reconveyance of property with damages and preliminary injunction
and/or restraining order. The complaint, docketed as Civil Case No. 88-45926,
was raffled to the Regional Trial Court, Branch 45, Manila. Petitioner alleged
therein that he was the absolute owner of the subject property and he never
authorized anybody, not even his wife, to sell it. He alleged that he was in
possession of the title but when his wife, Irma, left for abroad, he found out
that his copy was missing. He then verified with the Registry of Deeds of
Manila and there he discovered that his title was already cancelled in favor
of defendant Aglaloma Escario. The transfer of property was supported by
a GENERAL POWER OF ATTORNEY
6
dated November 29, 1985 and Deed of
Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the
petitioner and appearing as his attorney-in-fact, and defendant Aglaloma
Escario.
7
Petitioner Veloso, however, denied having executed the power of
attorney and alleged that his signature was falsified. He also denied having seen
or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in
the execution of the power of attorney. He vehemently denied having met or
transacted with the defendant. Thus, he contended that the sale of the property,
and the subsequent transfer thereof, were null and void. Petitioner Veloso,
therefore, prayed that a temporary restraining order be issued to prevent the
transfer of the subject property; that the General Power of Attorney, the Deed of
Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled; and
the subject property be reconveyed to him.
DEFENDANT Aglaloma Escario in her answer alleged that she was a buyer
in good faith and denied any knowledge of the alleged irregularity. She
allegedly relied on the general power of attorney of Irma Veloso which was
sufficient in form and substance and was duly notarized. She contended that
plaintiff (herein petitioner), had no cause of action against her. In seeking for the
declaration of nullity of the documents, the real party in interest was Irma
Veloso, the wife of the plaintiff. She should have been impleaded in the case. In
fact, Plaintiff's cause of action should have been against his wife, Irma.
Consequently, defendant Escario prayed for the dismissal of the complaint and
the payment to her of damages.
8

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

During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he
acquired the subject property from the Philippine Building Corporation, as
evidenced by a Deed of Sale dated October 1, 1957.
10
He married Irma Lazatin
on January 20, 1962.
11
Hence, the property did not belong to their conjugal
partnership. Plaintiff further asserted that he did not sign the power of attorney
and as proof that his signature was falsified, he presented Allied Bank
Checks Nos. 16634640, 16634641 and 16634643, which allegedly bore his
genuine signature.
Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the
execution of the general power of attorney. He attested that he did not sign
thereon, and the same was never entered in his Notarial Register on November
29, 1985.
In the decision of the trial court dated March 9, 1990,
12
defendant Aglaloma
Escario was adjudged the lawful owner of the property as she was deemed an
innocent purchaser for value. The assailed general power of attorney was
held to be valid and sufficient for the purpose. The trial court ruled that
there was no need for a special power of attorney when the special power was
already mentioned in the general one. It also declared that plaintiff failed to
substantiate his allegation of fraud. The court also stressed that plaintiff was not
entirely blameless for although he admitted to be the only person who had
access to the title and other important documents, his wife was still able to
possess the copy. Citing Section 55 of Act 496, the court held that Irma's
possession and production of the certificate of title was deemed a conclusive
authority from the plaintiff to the Register of Deeds to enter a new certificate.
Then applying the principle of equitable estoppel, plaintiff was held to bear the
loss for it was he who made the wrong possible. Thus:
WHEREFORE, the Court finds for the defendants and against plaintiff
a. declaring that there was a valid sale of the subject
property in favor of the defendant;
b. denying all other claims of the parties for want of legal and
factual basis.
Without pronouncement as to costs.
SO ORDERED.
Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of
Appeals. The respondent court affirmed in toto the findings of the trial court.
Hence, this petition for review before Us.
This petition for review was initially dismissed for failure to submit an affidavit of
service of a copy of the petition on the counsel for private respondent.
13
A
motion for reconsideration of the resolution was filed but it was denied in are
resolution dated March 30, 1992.
14
A second motion for reconsideration was
filed and in a resolution dated Aug. 3, 1992, the motion was granted and the
petition for review was reinstated.
15

A supplemental petition was filed on October 9, 1992 with the following
assignment of errors:
I
The Court of Appeals committed a grave error in not finding that the
forgery of the power of attorney (Exh . "C") had been adequately proven,
despite the preponderant evidence, and in doing so, it has so far departed
from the applicable provisions of law and the decisions of this Honorable
Court, as to warrant the grant of this petition for review on certiorari.
II
There are principles of justice and equity that warrant a review of the
decision.
III
The Court of Appeals erred in affirming the decision of the trial court which
misapplied the principle of equitable estoppel since the petitioner did not
fail in his duty of observing due diligence in the safekeeping of the title to
the property.
We find petitioner's contentions NOT meritorious.
An examination of the records showed that the assailed power of attorney was
valid and regular on its face. It was notarized and as such, it carries the
evidentiary weight conferred upon it with respect to its due execution. While it is
true that it was denominated as a GENERAL POWER OF ATTORNEY, a
perusal thereof revealed that it stated an authority to sell, to wit:
2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands,
tenements and hereditaments or other forms of real property, more
specifically TCT No. 49138, upon such terms and conditions and under
such covenants as my said attorney shall deem fit and proper.
16

Thus, there was NO NEED TO EXECUTE A SEPARATE AND SPECIAL
POWER OF ATTORNEY since the general power of attorney had expressly
authorized the agent or attorney in fact the power to sell the subject
property. The SPECIAL POWER OF ATTORNEY CAN BE INCLUDED IN THE
GENERAL POWER when it is specified therein the act or transaction for which
the special power is required.
The general power of attorney was accepted by the Register of Deeds when the
title to the subject property was cancelled and transferred in the name of private
respondent. In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10,
1956, it stated that:
Whether the instrument be denominated as "GENERAL POWER OF
ATTORNEY" or "SPECIAL POWER OF ATTORNEY", what matters is
the extent of the power or powers contemplated upon the agent or
attorney in fact. IF THE POWER IS COUCHED IN GENERAL TERMS,
then such power cannot go beyond acts of administration. HOWEVER,
WHERE THE POWER TO SELL IS SPECIFIC, it not being merely
implied, much less couched in general terms, there can not be any
doubt that the attorney in fact may execute a valid sale. An instrument
may be captioned as "special power of attorney" but if the powers granted
are couched in general terms without mentioning any specific power to sell
or mortgage or to do other specific acts of strict dominion, then in that
case only acts of administration may be deemed conferred.
Petitioner contends that his signature on the power of attorney was falsified. He
also alleges that the same was not duly notarized for as testified by Atty. Tubig
himself, he did not sign thereon nor was it ever recorded in his notarial register.
To bolster his argument, petitioner had presented checks, marriage certificate
and his residence certificate to prove his alleged genuine signature which when
compared to the signature in the power of attorney, showed some difference.
We found, however, that the basis presented by the petitioner was inadequate to
sustain his allegation of forgery. Mere variance of the signatures cannot be
considered as conclusive proof that the same were forged. Forgery cannot be
presumed
1
7 Petitioner, however, failed to prove his allegation and simply relied
on the apparent difference of the signatures. His denial had not established that
the signature on the power of attorney was not his.
We agree with the conclusion of the lower court that private respondent
was an innocent purchaser for value. Respondent Aglaloma relied on the
power of attorney presented by petitioner's wife, Irma. Being the wife of the
owner and having with her the title of the property, there was no reason for the
private respondent not to believe in her authority. Moreover, the power of
attorney was notarized and as such, carried with it the presumption of its due
execution. Thus, having had no inkling on any irregularity and having no
participation thereof, private respondent was a buyer in good faith. It has been
consistently held that a purchaser in good faith is one who buys property of
another, without notice that some other person has a right to, or interest in such
property and pays a full and fair price for the same, at the time of such purchase,
or before he has notice of the claim or interest of some other person in the
property.
18

Documents acknowledged before a notary public have the evidentiary weight
with respect to their due execution. The questioned power of attorney and deed
of sale, were notarized and therefore, presumed to be valid and duly executed.
Atty. Tubig denied having notarized the said documents and alleged that his
signature had also been falsified. He presented samples of his signature to prove
his contention. Forgery should be proved by clear and convincing evidence and
whoever alleges it has the burden of proving the same. Just like the petitioner,
witness Atty. Tubig merely pointed out that his signature was different from that
in the power of attorney and deed of sale. There had never been an accurate
examination of the signature, even that of the petitioner. To determine forgery, it
was held in Cesar vs. Sandiganbayan
19
(quoting Osborn, The Problem of Proof)
that:
The process of identification, therefore, must include the determination of
the extent, kind, and significance of this resemblance as well as of the
variation. It then becomes necessary to determine whether the variation is
due to the operation of a different personality, or is only the expected and
inevitable variation found in the genuine writing of the same writer. It is
also necessary to decide whether the resemblance is the result of a more
or less skillful imitation, or is the habitual and characteristic resemblance
which naturally appears in a genuine writing. When these two questions
are correctly answered the whole problem of identification is solved.
Even granting for the sake of argument, that the petitioner's signature was
falsified and consequently, the power of attorney and the deed of sale were null
and void, such fact would not revoke the title subsequently issued in favor of
private respondent Aglaloma. In Tenio-Obsequio vs. Court of Appeals,
20
it was
held, viz:
The right of an innocent purchaser for value must be respected and
protected, even if the seller obtained his title through fraud. The remedy
of the person prejudiced is to bring an action for damages against
those who caused or employed the fraud, and if the latter are insolvent,
an action against the Treasurer of the Philippines may be filed for recovery
of damages against the Assurance Fund.
Finally; the trial court did not err in applying equitable estoppel in this case. The
principle of equitable estoppel states that where one or two innocent persons
must suffer a loss, he who by his conduct made the loss possible must bear it.
From the evidence adduced, it should be the petitioner who should bear the loss.
As the court a quo found:
Besides, the records of this case disclosed that the plaintiff is not entirely
free from blame. He admitted that he is the sole person who has access to
TCT No. 49138 and other documents appertaining thereto (TSN, May 23,
1989, pp. 7-12) However, the fact remains that the Certificate of Title, as
well as other documents necessary for the transfer of title were in the
possession of plaintiff's wife, Irma L. Veloso, consequently leaving no
doubt or any suspicion on the part of the defendant as to her authority.
Under Section 55 of Act 496, as amended, Irma's possession and
production of the Certificate of Title to defendant operated as "conclusive
authority from the plaintiff to the Register of Deeds to enter a new
certificate."
21

Considering the foregoing premises, we found no error in the appreciation of
facts and application of law by the lower court which will warrant the reversal or
modification of the appealed decision.
ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.
SO ORDERED.