G.R. No.

118375 October 3, 2003

CELESTINA T. NAGUIAT, petitioner,

vs.
COURT OF APPEALS and AURORA QUEAO, respondents.

DECISION

TINGA, J.:

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

The case arose when on 11 August 1981, private respondent Aurora Queao (Queao) filed a complaint before the Pasay City RTC for cancellation of a Real Estate
Mortgage she had entered into with petitioner Celestina Naguiat (Naguiat). The RTC rendered a decision, declaring the questioned Real Estate Mortgage void, which
Naguiat appealed to the Court of Appeals. After the Court of Appeals upheld the RTC decision, Naguiat instituted the present petition.1vvphi1.nt

The operative facts follow:

Queao applied with Naguiat for a loan in the amount of Two Hundred Thousand Pesos (200,000.00), which Naguiat granted. On 11 August 1980, Naguiat indorsed to
Queao Associated Bank Check No. 090990 (dated 11 August 1980) for the amount of Ninety Five Thousand Pesos (95,000.00), which was earlier issued to Naguiat by
the Corporate Resources Financing Corporation. She also issued her own Filmanbank Check No. 065314, to the order of Queao, also dated 11 August 1980 and for the
amount of Ninety Five Thousand Pesos (95,000.00). The proceeds of these checks were to constitute the loan granted by Naguiat to Queao.3

To secure the loan, Queao executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat, and surrendered to the latter the owners duplicates of
the titles covering the mortgaged properties.4 On the same day, the mortgage deed was notarized, and Queao issued to Naguiat a promissory note for the amount of
TWO HUNDRED THOUSAND PESOS (200,000.00), with interest at 12% per annum, payable on 11 September 1980.5Queao also issued a Security Bank and Trust
Company check, postdated 11 September 1980, for the amount of TWO HUNDRED THOUSAND PESOS (200,000.00) and payable to the order of Naguiat.

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

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

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

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

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

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

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

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

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

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

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

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

Suffice to say, however, the existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. As correctly pointed out by the
Court of Appeals, Ruebenfeldt was not a stranger or an unauthorized person. Naguiat instructed Ruebenfeldt to withhold from Queao the checks she issued or
indorsed to Queao, pending delivery by the latter of additional collateral. Ruebenfeldt served as agent of Naguiat on the loan application of Queaos friend, Marilou
Farralese, and it was in connection with that transaction that Queao came to know Naguiat.23 It was also Ruebenfeldt who accompanied Queao in her meeting with
Naguiat and on that occasion, on her own and without Queao asking for it, Reubenfeldt actually drew a check for the sum of 220,000.00 payable to Naguiat, to cover
for Queaos alleged liability to Naguiat under the loan agreement.24

The Court of Appeals recognized the existence of an "agency by estoppel25 citing Article 1873 of the Civil Code.26Apparently, it considered that at the very least, as a
consequence of the interaction between Naguiat and Ruebenfeldt, Queao got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to
correct Queaos impression. In that situation, the rule is clear. One who clothes another with apparent authority as his agent, and holds him out to the public as such,
cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith, and in
the honest belief that he is what he appears to be.27 The Court of Appeals is correct in invoking the said rule on agency by estoppel.1awphi1.nt

More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the checks issued or indorsed to
Queao were never encashed or deposited to her account of Naguiat.

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

WHEREFORE, the petition is denied and the assailed decision is affirmed. Costs against petitioner.

SO ORDERED.

G.R. No. L-19265 May 29, 1964

MOISES SAN DIEGO, SR., petitioner,

vs.
ADELO NOMBRE and PEDRO ESCANLAR, respondents.

A. R. Castaeda and M. S. Roxas for petitioner.

Amado B. Parreo Law Office for respondents.

PAREDES, J.:

The case at bar had its origin in Special Proceedings No. 7279 of the CFI of Negros Occidental wherein respondent Adelo Nombre was the duly constituted judicial
administrator. On May 1, 1960, Nombre, in his capacity was judicial administrator of the intestate estate subject of the Sp. Proc. stated above, leased one of the
properties of the estate (a fishpond identified as Lot No. 1617 of the cadastral survey of Kabankaban, Negros Occidental), to Pedro Escanlar, the other respondent. The
terms of the lease was for three (3) years, with a yearly rental of P3,000.00 to expire on May 1, 1963, the transaction having been done, admittedly, without previous
authority or approval of the Court where the proceedings was pending. On January 17, 1961, Nombre was removed as administrator by Order of the court and one
Sofronio Campillanos was appointed in his stead. The appeal on the Order of Nombre's removal is supposedly pending with the Court of Appeals. Respondent Escanlar
was cited for contempt, allegedly for his refusal to surrender the fishpond to the newly appointed administrator. On March 20, 1961, Campillanos filed a motion asking
for authority to execute a lease contract of the same fishpond, in favor of petitioner herein, Moises San Diego, Sr., for 5 years from 1961, at a yearly rental of
P5,000.00. Escanlar was not notified of such motion. Nombre, the deposed administrator, presented a written opposition to the motion of Campillanos on April 11,
1964, pointing out that the fishpond had been leased by him to Escanlar for 3 years, the period of which was going to expire on May 1, 1963. In a supplemental
opposition, he also invited the attention of the Court that to grant the motion of the new administrator would in effect nullify the contract in favor of Escanlar, a
person on whom the Court had no jurisdiction. He also intimated that the validity of the lease contract entered into by a judicial administrator, must be recognized
unless so declared void in a separate action. The opposition notwithstanding, the Court on April 8, 1961, in effect declared that the contract in favor of Escanlar was
null and void, for want of judicial authority and that unless he would offer the same as or better conditions than the prospective lessee, San Diego, there was no good
reason why the motion for authority to lease the property to San Diego should not be granted. Nombre moved to reconsider the Order of April 8, stating that Escanlar
was willing to increase the rental of P5,000.00, but only after the termination of his original contract. The motion for reconsideration was denied on April 24, 1961, the
trial judge stating that the contract in favor of Escanlar was executed in bad faith and was fraudulent because of the imminence of Nombre's removal as administrator,
one of the causes of which was his indiscriminate pleasant, of the property with inadequate rentals.

From this Order, a petition for Certiorari asking for the annulment of the Orders of April 8 and 24, 1961 was presented by Nombre and Escanlar with the Court of
Appeals. A Writ of preliminary injunction was likewise prayed for to restrain the new administrator Campillanos from possessing the fishpond and from executing a
new lease contract covering it; requiring him to return the possession thereof to Escanlar, plus damages and attorney's fees in the amount of P10,000.00 and costs.
The Court of Appeals issued the injunctive writ and required respondents therein to Answer. Campillanos insisted on the invalidity of the contract in favor of Escanlar;
the lower court alleged that it did not exactly annul or invalidate the lease in his questioned orders but suggested merely that Escanlar "may file a separate ordinary
action in the Court of general jurisdiction."

The Court of Appeals, in dismissing the petition for certiorari, among others said

The controlling issue in this case is the legality of the contract of lease entered into by the former administrator Nombre, and Pedro Escanlar on May 1,
1960.

Respondents contend that this contract, not having been authorized or approved by the Court, is null and void and cannot be an obstacle to the execution
of another of lease by the new administrator, Campillanos. This contention is without merit. ... . It has been held that even in the absence of such special
powers, a contract or lease for more than 6 years is not entirely invalid; it is invalid only in so far as it exceeds the six-year limit (Enrique v. Watson
Company, et al., 6 Phil. 84). 1

No such limitation on the power of a judicial administrator to grant a lease of property placed under his custody is provided for in the present law. Under
Article 1647 of the present Civil Code, it is only when the lease is to be recorded in the Registry of Property that it cannot be instituted without special
authority. Thus, regardless of the period of lease, there is no need of special authority unless the contract is to be recorded in the Registry of Property. As to
whether the contract in favor of Escanlar is to be so recorded is not material to our inquiry. 1wph1.t

On the contrary, Rule 85, Section 3, of the Rules of Court authorizes a judicial administrator, among other things, to administer the estate of the deceased
not disposed of by will. Commenting on this Section in the light of several Supreme Court decisions (Jocson de Hilado v. Nava, 69 Phil. 1; Gamboa v.
Gamboa, 68 Phil. 304; Ferraris v. Rodas, 65 Phil. 732; Rodriguez v. Borromeo, 43 Phil. 479), Moran says: "Under this provision, the executor or administrator
has the power of administering the estate of the deceased for purposes of liquidation and distribution. He may, therefore, exercise all acts of administration
without special authority of the Court. For instance, he may lease the property without securing previously any permission from the court. And where the
lease has formally been entered into, the court cannot, in the same proceeding, annul the same, to the prejudice of the lessee, over whose person it had no
jurisdiction. The proper remedy would be a separate action by the administrator or the heirs to annul the lease. ... .

On September 13, 1961, petitioner herein Moises San Diego, Sr., who was not a party in the case, intervened and moved for a reconsideration of the above judgment.
The original parties (the new administrator and respondent judge) also filed Motions for reconsideration, but we do not find them in the record. On November 18,
1961, the Court of Appeals denied the motions for reconsideration. With the denial of the said motions, only San Diego, appealed therefrom, raising legal questions,
which center on "Whether a judicial administrator can validly lease property of the estate without prior judicial authority and approval", and "whether the provisions
of the New Civil Code on Agency should apply to judicial administrators."

The Rules of Court provide that

An executor or administrator shall have the right to the possession of the real as well as the personal estate of the deceased so long as it is necessary for the
payment of the debts and the expenses of administration, and shall administer the estate of the deceased not disposed of by his will. (Sec. 3, Rule 85, old
Rules).

Lease has been considered an act of administration (Jocson v. Nava; Gamboa v. Gamboa; Rodriguez v. Borromeo; Ferraris v. Rodas, supra).

The Civil Code, on lease, provides:

If a lease is to be recorded in the Registry of Property, the following persons cannot constitute the same without proper authority, the husband with respect
to the wife's paraphernal real estate, the father or guardian as to the property of the minor or ward, and the manager without special power. (Art. 1647).

The same Code, on Agency, states:

 Special powers of attorneys are necessary in the following cases:

(8) To lease any real property to another person for more than one year. (Art. 1878)

Petitioner contends, that No. 8, Art. 1878 is the limitation to the right of a judicial administrator to lease real property without prior court authority and approval, if it
exceeds one year. The lease contract in favor of Escanlar being for 3 years and without such court approval and authority is, therefore, null and void. Upon the other
hand, respondents maintain that there is no limitation of such right; and that Article 1878 does not apply in the instant case.

We believe that the Court of Appeals was correct in sustaining the validity of the contract of lease in favor of Escanlar, notwithstanding the lack of prior authority and
approval. The law and prevailing jurisprudence on the matter militates in favor of this view. While it may be admitted that the duties of a judicial administrator and an
agent (petitioner alleges that both act in representative capacity), are in some respects, identical, the provisions on agency (Art. 1878, C.C.), should not apply to a
judicial administrator. A judicial administrator is appointed by the Court. He is not only the representative of said Court, but also the heirs and creditors of the estate
(Chua Tan v. Del Rosario, 57 Phil. 411). A judicial administrator before entering into his duties, is required to file a bond. These circumstances are not true in case of
agency. The agent is only answerable to his principal. The protection which the law gives the principal, in limiting the powers and rights of an agent, stems from the
fact that control by the principal can only be thru agreements, whereas the acts of a judicial administrator are subject to specific provisions of law and orders of the
appointing court. The observation of former Chief Justice Moran, as quoted in the decision of the Court of Appeals, is indeed sound, and We are not prone to alter the
same, at the moment.

We, likewise, seriously doubt petitioner's legal standing to pursue this appeal. And, if We consider the fact that after the expiration of the original period of the lease
contract executed by respondent Nombre in favor of Escanlar, a new contract in favor of said Escanlar, was executed on May 1, 1963, by the new administrator
Campillanos. who, incidentally, did not take any active participation in the present appeal, the right of petitioner to the fishpond becomes a moot and academic issue,
which We need not pass upon.

WHEREFORE, the decision appealed from should be, as it is hereby affirmed, in all respects, with costs against petitioner Moises San Diego, Sr.

G.R. No. 102784 April 7, 1997

ROSA LIM, petitioner,

vs.
COURT OF APPEALS AND PEOPLE OF THE PHILIPPINES, respondents.

RESOLUTION

HERMOSISIMA, JR., J.:

Acting on the motion for reconsideration filed by petitioner Rosa Lim praying for her acquittal, this Court takes a second hard look at the present case in the light of the
various arguments raised by the movant.

Petitioner Rosa Lim was charged with, and subsequently convicted of, the crime of estafa as defined under Art. 315, par. 1(b) of the Revised Penal Code before Branch
92 of the Regional Trial Court of Quezon City.1 This conviction was affirmed by the Court Appeals.2 Aggrieved by the decision of the appellate court, Rosa Lim filed a
petition for review under Rule 45 before the Supreme Court. This Court subsequently sustained the ruling of the Court of Appeals, hence, this Motion for
Reconsideration seeking the reversal of our decision dated February 28, 1996.

Her motion for reconsideration is anchored on the following grounds:

I. THE COURT A QUO FAILED TO CONSIDER EVIDENCE TO THE EFFECT THAT THE TRUE AGREEMENT BETWEEN THE PARTIES WAS A SALE ON
CREDIT AND NOT AN AGENCY TO SELL AS BROUGHT OUT IN THE CROSS-EXAMINATION MADE BY THE PRIVATE PROSECUTOR ON THE PETITIONER
AND AURELIA NADERA AS WELL AS ON THE CROSS EXAMINATION MADE ON THE COMPLAINANT BY THE COUNSEL FOR THE PETITIONER; and

II. ON THE ISSUE OF WHETHER OR NOT THE PETITIONER RETURNED THE RING VALUED AT P169,000.00 TO COMPLAINANT THRU AURELIA
NADERA, THE COURT A QUO FAILED TO CONSIDER CONCLUSIVE EVIDENCE THAT SAID RING WAS IN FACT RETURNED TO COMPLAINANT AS
SHOWN BY THE FACT THAT SHE FILED A CRIMINAL CASE AGAINST AURELIA NADERA FOR ISSUING A BOUNCING CHECK IN THE AMOUNT OF
P169,000.00 WHICH SHE ISSUED IN PAYMENT OF THE RING IN THE REGIONAL TRIAL COURT OF QUEZON CITY.

It will be recalled that the facts of this case are as follows:

Rose Lim arrived in Manila from Cebu City sometime in October, 1987 with her friend Aurelia Nadera. On October 8, 1987, they went to the Williams Apartelle in
Timog, Quezon City, where they met Victoria Suarez, a jewelry dealer. Suarez and Nadera knew each other since the latter often sold jewelry for the former on
commission basis. Nadera had previously introduced Rosa Lim to Suarez as a wealthy businesswoman.

Lim was offered two pieces of jewelry by Suarez to wit: one (1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00. The pieces were to
be sold by Lim on commission. Accordingly, Lim signed a receipt prepared by Nadera for Suarez, which stated that:

THIS IS TO CERTIFY, that I received from Vicky Suarez the following jewelry:

Description Price

1 ring 3.35 solo P169,000.00

1 bracelet 170,000.00

Total P339,000.00

in good condition, to be sold in CASH ONLY within . . . days from date of signing receipt:

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 [sic] 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,

I sign my name this . . . day of . . . 19 . . . at Manila.

____________________________________
Signature of Persons who received jewelries [sic]

Address: _________________________________________3

On October 12, 1987, before departing for Cebu, Lim called up Mrs. Suarez by telephone to inform her that she was no longer interested in the
ring and the bracelet. Suarez replied that she was busy at the time and instructed her to return the pieces of jewelry to Nadera instead, who
would in turn give them back to Suarez. Lim then returned the jewelry to Nadera who issued a handwritten receipt dated October 12, 1987.4 On
March 21, 1988, Suarez, thru her counsel, sent Lim a demand letter asking for the return of the ring. Lim, also thru counsel, sent a response letter
to Suarez averring that she had already returned both ring and bracelet to Nadera and as such, she no longer had any liability to Suarez insofar as
the said items were concerned. Irked, Suarez filed a complaint for estafa under Article 315, par. 1 (b) against Rosa Lim. Trial ensued thereafter.

During the trial, Lim asserted that she had already returned both the bracelet and ring to Nadera. This was admitted by Nadera during her direct
examination before the trial court:

Q: Do you know if Rosa Lim returned the jewelries [sic]?

A: She gave the jewelries [sic] to me.

Q: Why did Rose Lim give the jewelries [sic] 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 [sic] to me.

Q: And when did Rosa Lim give you the jewelries [sic]?

A: Before she left for Cebu.5

Nadera further testified that she issued a check in favor of Suarez in payment for the ring which Lim had previously returned to her:

Q: What happened to the ring?

A: I sold it.

xxx xxx xxx

 Q: Whet happened to the proceeds of the sale of the ring?

A: The check that was paid to me bounced. So my check also

bounced.6

After another thorough and painstaking scrutiny of the records of this case, we have decided to act favorably on the petitioner's motion. Thus,
upon a careful and deliberate consideration of the errors assigned by the petitioner, as well as of prevailing jurisprudence, we are convinced that
Rosa Lim must be acquitted.

Rosa Lim asserts that she gave both the bracelet and the ring to Aurelia Nadera for it to be returned to Suarez and that it was Suarez herself who
instructed her to do so. Suarez, on the other hand, refutes this contention by saying that she could not have entrusted the return of the pieces of
jewelry to Nadera since the latter already owed her a substantial amount of money and that to entrust the return of the said ring would be to
tantamount to undue risk on her part. However, Suarez herself admitted that the bracelet was in fact received by her from Nadera:

ATTY. TORIO: Now, Mrs. Witness, you said that the bracelet was returned to you, is it not true that
this bracelet was returned by Aurelia Nadera?

A: I already answered that.

COURT: What was the answer?

WITNESS: It was returned by Aurelia Nadera.7

It is highly unlikely that Lim, if she truly had any intention of defrauding Suarez, would still make an effort to return the bracelet, considering that
as between the two items, it is the more expensive one. Moreover, the Court of Appeals in examining the facts of this case held that there was
indeed such are turn:

. . . 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. (emphasis ours)

In other words, it has been established that the ring which is the subject of the prosecution for estafa was indeed returned, albeit to a person
whom Suarez claims has no authority to receive said item.

Generally, the delivery to a third person of the thing held in trust is not a defense in estafa. As enunciated in the earlier case of United States vs.
Eustaquio:8

When merchandise is received for sale on commission, under the obligation to return the same, or its value, and is
thereafter delivered to a third person without the knowledge or authority of the owner, the two elements which
constitute the crime of estafa exist: (a) the deceit by which it was intended to defraud; and (b) the damage caused the
owner.

However, this rule has already been modified in subsequent cases. In People vs. Nepomuceno9 and People vs. Trinidad, 10 it has been held that:

In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere
negligence in permitting another to take advantage or benefit from the entrusted chattel cannot constitute estafa under
Article 315 paragraph 1-b, of the Revised Penal Code; unless of course the evidence should disclose that the agent acted in
conspiracy or connivance with the one who carried out the actual misappropriation, when the accused would be
answerable for the acts of his co-conspirators. If there is no such evidence, direct or circumstantial, and if the proof is clear
that the accused herself was the innocent victim of her sub-agent's faithlessness, her acquittal is in order. (emphasis ours)

Aurelia Nadera herself admits that she received both the bracelet and the ring in question from Lim. In her testimony, she had no qualms in
admitting that she sold the ring in question and that she issued a check in favor of Suarez as payment for said ring. She also admitted that such
check had bounced. She is now facing a criminal case for violation of Batas Pambansa Blg. 22 instituted by Suarez herself. It is significant to note
that the amount of the bouncing check issued by Nadera as payment to Suarez corresponds to the amount of the ring given by Suarez to Lim
P169,000.00.

We cannot conceive of any motive on the part of Nadera in admitting not only receiving the ring, but also issuing, in payment thereof, a bouncing
check, save the desire to tell the truth, in order that one who is innocent of any crime would not be erroneously convicted. For, the same can
only be to her detriment, considering that she is now facing a criminal charge herself. That she and Lim are very good friends is of no moment, as
 it is inconceivable that she would admit as fact what did not actually happen, when such admission could very well lead to her own incarceration.
Nadera's admission is a declaration against her own interest made under oath. It must thus be given full weight and credence.

Rose Lim's assertion that she had returned the ring in question to Nadera, in addition to the latter's unswerving testimony admitting the same,
raises reasonable doubt as to Lim's liability for estafa. Conversion or misappropriation has not been sufficiently proven. As held in the case
of People vs. Lopez: 11

When a demand for the delivery of the thing promised, or the return of the money delivered in trust, is made, and such
demand is not fulfilled within a reasonable time, a presumption arises that the amount has been misappropriated. This
inference, however, is only deducible when the explanation given by the accused for his failure to account for the money is
absolutely devoid of merits. Where the explanation does not completely destroy the presumption but at least raises
reasonable doubt that accused had misappropriated the amount in question, acquittal is in order.

It is well-settled that the essence of estafa thru misappropriation is the appropriation or conversion of money or property received to the
prejudice of the owner. The words "convert" and "misappropriate" connote an act of using or disposing of another's property as if it were one's
own or devoting it to a purpose or use different from that agreed upon. To misappropriate for one's own use includes, not only conversion to
one's personal advantage, but also every attempt to dispose of the property of another without right. 12

Rosa Lim's sole purpose in delivering the pieces of jewelry to Aurelia Nadera, was for Nadera to effect their return to Victoria Suarez. By no
stretch of the imagination can the act of returning said items to its rightful owner, although through the mediation of a third party, be considered
as conversion or misappropriation. Verily, that said act manifested Rosa Lim's recognition that the pieces of jewelry do not belong to her. In
doing so, she acknowledged Suarez' right of dominion over them. Thus, it cannot be regarded as conversion or misappropriation in its true sense
sufficient to convict her for estafa. Lim did not deliver the bracelet and the ring to Nadera so that the latter may re-sell them as her sub-agent.
Her only purpose was to have them returned to their rightful owner. Moreover, she delivered the said pieces of jewelry to one who is not a total
stranger, but to a person known to both her and Suarez and who, from all indications, enjoy their mutual trust and confidence. To reiterate, this
raises reasonable doubt as to the presence of any criminal intent ascribed to her by the prosecution.

The act of Lim in returning the items to Nadera only shows that she had reason to believe that the latter had the authority to receive the same.
This belief was inspired by the fact that at the time of the said transaction between Lim and Suarez, it was Nadera herself, in behalf of Suarez,
who prepared the receipt to be signed by Lim. 13 In addition, Nadera was the one who introduced Suarez and Lim to each other. Hence, Rosa Lim
can at most be held negligent in returning the ring to one whose authority to receive the same was subsequently refuted. Consequently, for
negligently assuming Nadera's authority to receive the ring, Lim cannot be held criminally liable. Settled it is in our jurisprudence that there can
be no estafa through negligence. At worst, she should only be held civilly liable. Accordingly, we hold her liable to pay Vicky Suarez the full
amount of the ring as actual damages plus legal interest in the amount of six percent (6%) from the time of extrajudicial demand.

WHEREFORE, the Motion for Reconsideration is GRANTED. The decision dated February 28, 1996 is hereby MODIFIED. Petitioner Rosa Lim is
hereby ACQUITTED of any criminal liability, but is held civilly liable in the amount of P169,000.00 as actual damages, plus legal interest, without
subsidiary imprisonment in case of insolvency.

No pronouncement as to cost.

SO ORDERED.

G.R. No. L-40242 December 15, 1982

DOMINGA CONDE, petitioner,

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

MELENCIO-HERRERA, J.:

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

The established facts, as found by the Court of Appeals, show that on 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of
Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural land located in Maghubas Burauen Leyte, (Lot 840), with an
approximate area of one (1) hectare, to Casimira Pasagui, married to Pio Altera (hereinafter referred to as the Alteras), for P165.00. The "Pacto de Retro Sale" further
provided:
 ... (4) if at the end of 10 years the said land is not repurchased, a new agreement shall be made between the parties and in no case title and
ownership shall be vested in the hand of the party of the SECOND PART (the Alteras).

xxx xxx xxx (Exhibit "B")

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

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

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

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

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

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

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

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

5. Because it is about time to repurchase the land, I have allowed the representative of Dominga Conde, Bernardo Conde
and Margarita Conde in the name of EUSEBIO AMARILLE to repurchase the same.

6. Now, this very day November 28, 1945, 1 or We have received together with Paciente Cordero who is my son-in-law the
amount of ONE HUNDRED SIXTY-FIVE PESOS (P165. 00) Philippine Currency of legal tender which was the consideration in
that sale with the right of repurchase with respect to the two parcels of land.

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

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

PIO ALTERA (Sgd.) PACIENTE CORDERO

WITNESSES:

1. (SGD.) TEODORO C. AGUILLON

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

The pacto de retro document was eventually found.

On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde, who are also private respondents herein. Their relationship to
petitioner does not appear from the records. Nor has the document of sale been exhibited.
Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January 1969, in the Court of First Instance of Leyte, Branch IX, Tacloban
City, a Complaint (Civil Case No. B-110), against Paciente Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and Casimira Pasagui Pio
Altera having died in 1966), for quieting of title to real property and declaration of ownership.

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

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

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

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

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

There is no question that neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that there was no formal authorization from the vendees for
Paciente Cordero to act for and on their behalf.

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

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

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

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

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

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

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

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

No costs.
SO ORDERED.

LAUREANO T. ANGELES, G.R. No. 150128

Petitioner,
Present:

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,
- versus - CORONA,
AZCUNA, and
GARCIA, JJ.

Promulgated:

PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES,[1]

Respondents. August 31, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

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 withdrawnwhich, 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 Romualdezsauthorized 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.

LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN G.R. No. 171460

MERCADO, JR., represented by their Attorney-In-Fact,
ALFREDO M. PEREZ, Present:
Petitioners,
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.
ALLIED BANKING CORPORATION,
Respondent.
Promulgated:

July 24, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

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, Julian obtained an additional loan from the respondent in the sum of P5,000,000.00, 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.
 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. 168406 January 14, 2015

CLUB FILIPINO, INC. and ATTY. ROBERTO F. DE LEON, Petitioners,

vs.
BENJAMIN BAUTISTA, RONIE SUALOG, JOEL CALIDA, JOHNNY ARINTO, CARLITO PRESENTACION, and ROBERTO DE GUZMAN, Respondents.

RESOLUTION

LEONEN, J.:

This resolves Club Filipino, Inc.'s Supplemental Motion for Reconsideration of this court's Resolution dated July 13, 2009.

Club Filipino Employees Association (CLUFEA) is a union representing the employees of Club Filipino, Inc. CLUFEA and Club Filipino, Inc. entered into previous collective
bargaining agreements, the last of which expired on May 31, 2000.1
Before CLUFEA and Club Filipino, Inc.s last collective bargaining agreement expired and within the 60-day freedom period,2 CLUFEA had made several demands on
Club Filipino, Inc. to negotiate a new agreement. Club Filipino, Inc., however, replied that its Board of Directors could not muster a quorum to negotiate with CLUFEA.3

CLUFEA then formally submitted its proposals to Club Filipino Inc.s negotiating panel sometime in June 2000. Still, Club Filipino, Inc. failed to negotiate, citing as reason
the illness of the chairperson of its negotiating panel.4

To compel Club Filipino, Inc. to negotiate with it, CLUFEA filed before the National Conciliation and Mediation Board (NCMB) a request for preventive mediation. The
negotiating panels of CLUFEA and Club Filipino, Inc. finally met on April 5, 2001. However, the meeting ended with the parties respective panels declaring a deadlock
in negotiation.5

Thus, on April 6, 2001, CLUFEA filed with the NCMB a Notice of Strike on the ground of bargaining deadlock. Club Filipino, Inc. submitted the first part of its
counterproposal on April 22, 2001.6

On May 4, 2001, CLUFEA conducted a strike vote under the Department of Labor and Employments supervision with the majority of CLUFEAs total union membership
voting to strike.7

On May 11, 2001, Club Filipino, Inc. submitted to CLUFEA the second part of its counterproposal, which CLUFEA countered with an improved offer. Club Filipino, Inc.,
however, refused CLUFEAs improved offer.8

On May 26, 2001, CLUFEA staged a strike on the ground of bargaining deadlock.9

On May 31, 2001, Club Filipino, Inc. filed before the National Capital Regional Arbitration Branch of the National Labor Relations Commission (NLRC) a Petition to
Declare [CLUFEAs] Strike Illegal.10 According to Club Filipino, Inc., CLUFEA failed to file a Notice of Strike and to conduct a strike vote, in violation of the legal
requirements for staging a strike.11 Worse, CLUFEAs members allegedly committed illegal acts while on strike, preventing their co-workers from entering and leaving
Club Filipino, Inc.s premises and even cutting off Club Filipino, Inc.s electricity and water supply on the first day of the strike.12 Club Filipino, Inc. prayed that all of
CLUFEAs officers who participated in the strike be declared to have lost their employment pursuant to Article 264(a) of the Labor Code.13

CLUFEA answered Club Filipino, Inc.s Petition with the following officers verifying the Answer: Benjamin Bautista, President (Bautista); Danilo Caluag, Vice President
(Caluag); Ronie Sualog, Secretary (Sualog); and Joel Calida, Treasurer (Calida).14

Labor Arbiter Manuel P. Asuncion decided Club Filipino, Inc.s Petition for declaration of illegal strike.15 He found that CLUFEAs Notice of Strike did not contain
CLUFEAs written proposals and Club Filipino, Inc.s counterproposals, in violation of then Rule XXII, Section 4 of the Omnibus Rules Implementing the Labor
Code.16 The rule provided:

In cases of bargaining deadlocks, the notice shall, as far as practicable, further state the unresolved issues in the bargaining negotiations and be accompanied by the
written proposals of the union, the counter-proposals of the employer and the proof of a request for conference to settle differences. In cases of unfair labor practices,
the notice shall, as far as practicable, state the acts complained of, and efforts taken to resolve the dispute amicably.

Any notice which does not conform with the requirements of this and the foregoing section shall be deemed as not having been filed and the party concerned shall be
so informed by the regional branch of the Board.

Thus, in the Decision17 dated November 28, 2001, the Labor Arbiter declared CLUFEAs strike "procedurally infirm"18for CLUFEAs failure to comply with the procedural
requirements for staging a strike. The Labor Arbiter declared the strike illegal and considered "all the officers of the union . . . terminated from service."19 Because of
the retrenchment program Club Filipino, Inc. allegedly launched before the Labor Arbiter issued his Decision, the dismissed union officers were ordered to receive
separation pay "similar in terms with those offered to the employees affected by the retrenchment program of the club."20

On December 20, 2001, CLUFEA appealed the Labor Arbiters Decision before the National Labor Relations Commission (NLRC) with Bautista, Caluag, Sualog, and Calida
verifying the Memorandum of Appeal on CLUFEAs behalf.21

The NLRC ruled that CLUFEAs Appeal was filed by persons "[having] no legal standing to question the [Labor Arbiters] decision."22 Bautista had allegedly resigned from
Club Filipino, Inc. on September 30, 2001, receiving separation benefits pursuant to Club Filipino, Inc.s Employees Retirement Plan.23

For their part, Caluag, Sualog, and Calida allegedly misrepresented themselves as CLUFEAs officers when they appealed to the NLRC. According to the NLRC, CLUFEA
had already elected a new set of officers on September 28, 2001. Caluag, Sualog, and Calida, therefore, were no longer CLUFEAs officers when they filed the Appeal on
December 20, 2001.24

Finding that CLUFEA no longer wished to appeal the Labor Arbiters Decision, the NLRC cited a letter the new officers of CLUFEA allegedly gave Atty. Roberto F. De
Leon, Club Filipino, Inc.s President:

Nais po naming ipabatid na ang ginawad na pagpapasya ng NLRC na naging ilegal ang pagdaos ng pag-aalsa noong Mayo 26, 2001 ay hindi lingid sa aming kaalaman at
kamiylubos na nalulungkot para doon sa mga kasaping opisyal na nasangkot at humantong sa ganito ng dahil na rin sa kanilang kapabayaan, mga padalos-dalos at
mapusok na pagkilos na walang pagkunsulta sa mga miyembro. Ang pamunuan sampu ng aming mga kasapi ay mariing tinututulan ang ano mang uri ng pagaapela
upang maisalba ang natitirang miyembro sa tiyak na kapahamakan kung magpapatuloy and [sic]ganitong uri ng tagisan ng bawat isa.25
Lastly, the NLRC found that as of November 23, 2001, CLUFEA had terminated the services of its legal counsel.26Yet, its former legal counsel filed and signed CLUFEAs
Memorandum of Appeal to the NLRC. The Memorandum of Appeal, therefore, was filed without authority of CLUFEA.

Thus, in the Decision27 dated September 30, 2002, the NLRC denied the Appeal filed on December 20, 2001 for lack of merit.

Club Filipino, Inc. filed a Motion for Partial Reconsideration, while Bautista, Caluag, Sualog, and Calida filed a Motion for Reconsideration of the NLRCs Decision dated
September 30, 2002. Johnny Arinto (Arinto), Roberto de Guzman (de Guzman), and Laureno Fegalquin (Fegalquin), all directors and officers of CLUFEA, 28 joined
Bautista, Caluag, Sualog, and Calida in filing the Motion for Reconsideration.29

The NLRC denied the Motions in the Resolution30 dated July 15, 2003.

On September 22, 2003, Bautista, Sualog, Calida, Arinto, de Guzman, and Fegalquin filed a Petition for Certiorari with the Court of Appeals.31 However, Caluag no
longer joined his colleagues. Instead, Carlito Presentacion (Presentacion), a CLUFEA member, joined in the filing of the Petition for Certiorari.

The Court of Appeals first resolved whether Bautista, Sualog, Calida, Arinto, de Guzman, and Fegalquin had legal personality to appeal before the NLRC. On this issue,
the Court of Appeals ruled that "a worker ordered dismissed under a tribunals decision has every right to question his or her dismissal especially if he [or she] had not
been properly impleaded in the case and in the decision that decreed his or her dismissal."32 Being officers of CLUFEA, Bautista, et al. had the right to appeal the loss of
their employment with the NLRC.

With respect to Arinto, de Guzman, and Fegalquin, the Court of Appeals further ruled that they were not granted "the full hearing that the due process requirements
of the Philippine Constitution impose."33 Arinto, de Guzman, and Fegalquin participated only during the Motion for Reconsideration stage with the NLRC. The Labor
Arbiters Decision, therefore, did not bind Arinto, de Guzman, and Fegalquin.

On the merits, the Court of Appeals held that the Labor Arbiter gravely abused his discretion in declaring CLUFEAs strike illegal. The Court of Appeals ruled that the
requirements under Rule XXII, Section 4 of the Omnibus Rules Implementing the Labor Code "[do] not appear to be absolute."34 Rule XXII, Section 4 only requires that
the proposals and counterproposals be attached to the Notice of Strike "as far as practicable."35 Since CLUFEA had already filed a Notice of Strike when Club Filipino,
Inc. submitted its counterproposals, it was not practicable for CLUFEA to attach Club Filipino, Inc.s counterproposals to the Notice of Strike.

The Court of Appeals found that the Labor Arbiter "disregarded"36 the law on the status of employees who participated in an illegal strike. Under the law, union officers
may be dismissed for participating in an illegal strike only if they knowingly participated in it. According to the Court of Appeals, the Labor Arbiter erred in ordering all
the officers of CLUFEA dismissed from the service without even naming these officers and specifying the acts these officers committed that rendered the strike illegal.

The Court of Appeals, however, found that Bautista and Fegalquin had already resigned during the pendency of the case and had received separation benefits from
Club Filipino, Inc. Bautista and Fegalquin, therefore, "no longer [had] any legal interest [in filing the petition for certiorari]."37

As for Presentacion, the Court of Appeals found that he was not an officer of CLUFEA and was not dismissed by virtue of the Labor Arbiters Decision. He, therefore,
had no personality to join Bautista, Sualog, Calida, Arinto, de Guzman, and Fegalquin in filing the Petition for Certiorari. As for Sualog, Calida, Arinto, and de Guzman,
the Court of Appeals ruled that the Labor Arbiters Decision was void.

Thus, in the Decision38 dated May 31, 2005, the Court of Appeals granted the Petition for Certiorari with respect to Sualog, Calida, Arinto, and de Guzman. The Court of
Appeals set aside the Labor Arbiters Decision for being null and void and ordered the payment of full backwages and benefits to them from the time of their dismissal
up to the finality of the Court of Appeals Decision. In lieu of reinstatement, the Court of Appeals ordered Club Filipino, Inc. to pay Sualog, Calida, Arinto, and de
Guzman separation pay computed at one (1) month salary per year of service from the time of their hiring up to the finality of the Decision less any amount Sualog,
Calida, Arinto, and de Guzman may have received pursuant to the Labor Arbiters Decision.

As for Bautista, Fegalquin, and Presentacion, the Court of Appeals dismissed the Petition for Certiorari.39

On June 23, 2005, Club Filipino, Inc. filed a Petition for Review on Certiorari40 with this court. Bautista, Sualog, Calida, Arinto, Presentacion, and de Guzman filed their
Comment41 to which Club Filipino, Inc. replied.42

After the parties had filed their respective memoranda,43 this court considered this case submitted for decision.44

This court agreed with the Court of Appeals Decision. This court ruled that CLUFEA could not have attached Club Filipino, Inc.s counterproposals in the Notice of Strike
since Club Filipino, Inc. submitted it only after CLUFEA had filed the Notice of Strike. It was, therefore, "not practicable"45 for CLUFEA to attach Club Filipino, Inc.s
counterproposal to the Notice of Strike. CLUFEA did not violate Rule XXII, Section 4 of the Omnibus Rules Implementing the Labor Code.

This court sustained the Court of Appeals finding that the Labor Arbiter gravely abused his discretion in ordering the "wholesale dismissal"46 of CLUFEAs officers.
According to this court, the law requires "knowledge [of the illegality of the strike] as a condition sine qua non before a union officer can be dismissed . . . for
participating in an illegal strike."47 However, "[n]owhere in the ruling of the labor arbiter can [there be found] any discussion of how respondents, as union officers,
knowingly participated in the alleged illegal strike. Thus, even assuming . . . that the strike was illegal, [the] automatic dismissal [of CLUFEAs officers] had no basis."48

Thus, in the Resolution49 dated July 13, 2009, this court denied Club Filipino, Inc.s Petition for Review on Certiorari.
On August 17, 2009, Club Filipino, Inc. filed a Motion for Reconsideration,50 which this court denied with finality in the Resolution51 dated September 9, 2009. This court
declared that it shall not entertain any further pleadings or motions and ordered that Entry of Judgment in this case be made in due course.52

On September 14, 2009, Solis Medina Limpingco and Fajardo entered its appearance for Club Filipino, Inc.53 and simultaneously filed a Motion for Leave54 to file and
admit the attached Supplemental Motion for Reconsideration.55

On November 3, 2009, Club Filipino, Inc. filed its Motion for Leave to File and Admit further Pleading/Motion,56alleging that this court failed to consider its
Supplemental Motion for Reconsideration in issuing its September 9, 2009 Resolution denying Club Filipino, Inc.s first Motion for Reconsideration. Club Filipino, Inc.
prayed that this court resolve the Supplemental Motion for Reconsideration.

In the Resolution57 dated January 11, 2010, this court granted Club Filipino, Inc.s Motions for Leave and noted the Supplemental Motion for Reconsideration.

However, because of this courts Resolution dated September 9, 2009, an Entry of Judgment58 was issued on October 26, 2010, declaring that this case had become
final and executory as of October 26, 2009. This court likewise ordered the return of the case records to the Court of Appeals for remand to the court of origin.59

Club Filipino, Inc. received the Entry of Judgment on November 10, 2010.60 Nine (9) days after, Club Filipino, Inc. filed a Manifestation and Motion,61 arguing that the
court prematurely issued the Entry of Judgment because it still had to resolve the Supplemental Motion for Reconsideration.

This court noted the Manifestation and Motion in the Resolution62 dated January 19, 2011. On October 18, 2011, Club Filipino, Inc. filed a very urgent Motion to
Resolve,63 alleging that respondents filed a Motion for Execution of this courts Decision on the illegal strike case despite the pendency of its Supplemental Motion for
Reconsideration with this court. Club Flipino, Inc. prayed that this court resolve the Supplemental Motion for Reconsideration in order not to render the filing of its
Supplemental Motion for Reconsideration moot.

In the Resolution64 dated November 23, 2011, this court noted the very urgent Motion to Resolve.

On March 23, 2012, Club Filipino, Inc. filed the very urgent Motion for Leave to File and Admit very urgent Motion for Clarification.65 It informed this court that the
NLRC granted respondents Motion for Execution, which would allegedly result in Club Filipino, Inc. paying respondents separation pay twice. Because of the "extreme
urgency"66brought about by the developments in this case, Club Filipino, Inc. prayed that this court resolve its Supplemental Motion for Reconsideration.

On April 2, 2012, Club Filipino, Inc. filed a second very urgent Motion for Clarification,67 pleading the court to clarify its January 11, 2010 Resolution noting the
Supplemental Motion for Reconsideration. It reiterated its claim that implementing the Writ of Execution in the illegal strike case "will only result in doubly
compensating respondents to the utmost prejudice and manifest injustice of [Club Filipino, Inc.]."68

Club Filipino, Inc. subsequently filed the very urgent Manifestation and Omnibus Motion,69 very urgent Omnibus Motion,70 and second very urgent Omnibus
Motion,71 all arguing that the implementation of the Writ of Execution would result in double compensation to respondents. All of these Motions were noted by this
court.

In the Supplemental Motion for Reconsideration and the subsequent Motions to Resolve, Club Filipino, Inc. maintains that this court erred in affirming the Court of
Appeals award of backwages and separation pay in the illegal strike case on top of the separation pay respondents received by virtue of Club Filipino, Inc.s
retrenchment program.

Club Filipino, Inc. alleged that pending its Petition for declaration of illegal strike with the NLRC, it implemented a retrenchment program to minimize its "mounting
losses."72 Among the 76 retrenched employees were respondents.

Respondents, together with other retrenched employees, filed a Complaint for illegal dismissal with the NLRC, questioning the validity of the retrenchment program. In
the Decision73 dated October 2, 2002, Labor Arbiter Natividad M. Roma dismissed the Complaint and found the retrenchment program valid. She ordered that the
retrenched employees, which included respondents, be paid their separation pay.

Labor Arbiter Natividad M. Romas Decision was affirmed by the NLRC in the Decision dated February23, 2004. The NLRCs Decision became final and executory on
March 27, 2004. Considering that the NLRC had finally resolved that respondents were not illegally dismissed and had already ordered that respondents be paid
separation pay under the retrenchment program, Club Filipino, Inc. argues that the NLRCs Resolution of the issue constituted res judicata as to bar the Court of
Appeals from declaring that respondents were illegally dismissed and from awarding respondents separation pay in the illegal strike case.

The issues for our Resolution are:

(1) Whether Club Filipino, Inc.s filing of the Supplemental Motion for Reconsideration prevented our Resolution dated July 13, 2009 from becoming final
and executory; and

(2) Whether the NLRCs Decision on the illegal dismissal case was res judicata on the illegal strike case.

The Supplemental Motion for Reconsideration must be denied with finality.

 I

The filing of the Supplemental Motion for

Reconsideration did not prevent this
courts Resolution dated July 13, 2009
from becoming final and executory.

Petitioner Club Filipino, Inc.s Supplemental Motion for Reconsideration of the Resolution dated July 13, 2009 is in the nature of a second Motion for Reconsideration.

As a general rule, the filing of second Motions for Reconsideration of a judgment or final resolution is prohibited. Rule 52, Section 2 of the Rules of Court provides:

Section 2. Second motion for reconsideration. No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained.

This prohibition is reiterated in Rule 15, Section 3 of the Internal Rules of the Supreme Court: Section 3. Second motion for reconsideration. The Court shall not
entertain a second motion for reconsideration, and any exception to this rule can only be granted in the higher interest of justice by the Court en banc upon a vote of
at least two-thirds of its actual membership. There is reconsideration "in the higher interest of justice" when the assailed decision is not only legally erroneous, but is
likewise patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties. A second motion for reconsideration can
only be entertained before the ruling sought to be reconsidered becomes final by operation of law or by the Courts declaration.

In the Division, a vote of three Members shall be required to elevate a second motion for reconsideration to the Court En Banc.

For this court to entertain second Motions for Reconsideration, the second Motions must present "extraordinarily persuasive reasons and only upon express leave first
obtained."74 Once leave to file is granted, the second Motion for Reconsideration is no longer prohibited.75

This court explained the rationale for the rule in Ortigas and Company Limited Partnership v. Judge Velasco,76 thus:

A second motion for reconsideration is forbidden except for extraordinarily persuasive reasons, and only upon express leave first obtained. The propriety or
acceptability of such a second motion for reconsideration is not contingent upon the averment of "new" grounds to assail the judgment, i.e., grounds other than those
theretofore presented and rejected. Otherwise, attainment of finality of a judgment might be staved off indefinitely, depending on the party's ingeniousness or
cleverness in conceiving and formulating "additional flaws" or "newly discovered errors" therein, or thinking up some injury or prejudice to the rights of the movant for
reconsideration. "Piece-meal" impugnation of a judgment by successive motions for reconsideration is anathema, being precluded by the salutary axiom that a party
seeking the setting aside of a judgment, act or proceeding must set out in his motion all the grounds therefor, and those not so included are deemed waived and cease
to be available for subsequent motions.

For all litigation must come to an end at some point, in accordance with established rules of procedure and jurisprudence. As a matter of practice and policy, courts
must dispose of every case as promptly as possible; and in fulfillment of their role in the administration of justice, they should brook no delay in the termination of
cases by stratagems or maneuverings of parties or their lawyers.77

In the present case, this court granted leave to petitioner Club Filipino, Inc. to file the Supplemental Motion for Reconsideration in the Resolution dated January 11,
2010. The Supplemental Motion for Reconsideration, therefore, is no longer prohibited.

The grant of leave to file the Supplemental Motion for Reconsideration, however, did not prevent this courts July 13, 2009 Resolution from becoming final and
executory. A decision or resolution of this court is deemed final and executory after the lapse of 15 days from the parties receipt of a copy of the decision or
resolution.78 The grant of leave to file the second Motion for Reconsideration does not toll this 15-day period. It only means that the Entry of Judgment first issued may
be lifted should the second Motion for Reconsideration be granted.79

In Aliviado v. Procter and Gamble Philippines, Inc.80 this court explained that:

[i]t is immaterial that the Entry of Judgment was made without the Court having first resolved P&Gs second motion for reconsideration. This is because the issuance of
the entry of judgment is reckoned from the time the parties received a copy of the resolution denying the first motion for reconsideration. The filing by P&G of several
pleadings after receipt of the resolution denying its first motion for reconsideration does not in any way bar the finality or entry of judgment. Besides, to reckon the
finality of a judgment from receipt of the denial of the second motion for reconsideration would be absurd. First, the Rules of Court and the Internal Rules of the
Supreme Court prohibit the filing of a second motion for reconsideration. Second, some crafty litigants may resort to filing prohibited pleadings just to delay entry of
judgment.81 (Underscoring in the original, emphasis supplied)

This case became final and executory on October 26, 2009, after the lapse of the 15th day from petitioner Club Filipino, Inc.s receipt of the Resolution denying its first
Motion for Reconsideration. Entry of Judgment, therefore, was in order.

Since this court did not issue any temporary restraining order to enjoin the execution of the Court of Appeals Decision, the NLRC correctly proceeded in implementing
the Court of Appeals Decision in the illegal strike case.

II
The NLRCs Decision on the illegal
dismissal case was not res judicata on the
illegal strike case.

Res judicata "literally means a matter adjudged; a thing judicially acted upon or decided; [or] a thing or matter settled by judgment."82 Res judicata" lays the rule that
an existing final judgment or decree rendered on the merits, and without fraud or collusion, by a court of competent jurisdiction, upon any matter within its
jurisdiction,is conclusive of the rights of the parties or their privies, in all other actions or suits in the same or any other judicial tribunal of concurrent jurisdiction on
the points and matters in issue in the first suit."83

Res judicata has two (2) aspects. The first is bar by prior judgment that precludes the prosecution of a second action upon the same claim, demand or cause of
action.84 The second aspect is conclusiveness of judgment, which states that "issues actually and directly resolved in a former suit cannot again be raised in any future
case between the same parties involving a different cause of action."85

The elements of res judicata are:

(1) the judgment sought to bar the new action must be final;

(2) the decision must have been rendered by a court having jurisdiction over the subject matter and the parties;

(3) the disposition of the case must be a judgment on the merits; and

(4) there must be as between the first and second action identity of parties, subject matter, and causes of action.86

The first three (3) elements of res judicata are present in this case.

The NLRCs judgment on the illegal dismissal case is already final with respondents not having appealed the Decision within the reglementary period.

The Labor Arbiter, who has the exclusive original jurisdiction to hear, try, and decide illegal dismissal cases,87decided the case. The Labor Arbiters Decision was heard
on appeal by the NLRC, which has exclusive appellate jurisdiction over all cases decided by Labor Arbiters.88

The Labor Arbiters judgment was on the merits.89 Based on the facts presented by the parties, the Labor Arbiter ruled that petitioner Club Filipino, Inc.s retrenchment
program was valid.

The fourth element of res judicata, however, is absent. Although the cases have substantially identical parties and subject matter of the dismissal of respondents, the
cause of action for declaration of illegal strike and the cause of action for illegal dismissal are different.

A cause of action is "the act or omission by which a party violates the rights of another."90 Its elements are:

1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created;

2) an obligation on the part of the named defendant to respect or not to violate such right; and 3) act or omission on the part of such defendant in violation
of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for
recovery of damages or other appropriate relief.91

In an action for declaration of illegal strike, the cause of action is premised on a union or a labor organizations conduct of a strike without compliance with the
statutory requirements.92

On the other hand, in an action for illegal dismissal, the cause of action is premised on an employers alleged dismissal of an employee without a just or authorized
cause as provided under Articles 282, 283, and 284 of the Labor Code.93

There is no res judicata in the present case. Petitioner Club Filipino, Inc. filed the illegal strike because members of CLUFEA allegedly disrupted petitioner Club Filipino,
Inc.s business when they staged a strike without complying with the requirements of the law. For their part, respondents filed the illegal dismissal case to question the
validity of petitioner Club Filipino, Inc.s retrenchment program.

Although there is no res judicata, the actions have the same subject matter.1wphi1 The subject matter of an action is "the matter or thing from which the dispute has
arisen."94 Both the illegal strike and illegal dismissal cases involve the dismissal of respondents. In respondents action for illegal dismissal, respondents were found to
have been dismissed by virtue of a valid retrenchment program. The NLRC then ordered that they be paid separation pay based on the parties collective bargaining
agreement.

In petitioner Club Filipino, Inc.s action for declaration of illegal strike, the Labor Arbiters finding that respondents conducted an illegal strike resulted in their dismissal.
Respondents were ordered to receive separation pay "similar in terms with those offered to the employees affected by the retrenchment program of the club."95 The
Court of Appeals, however, found that the Labor Arbiter gravely abused his discretion in declaring the strike illegal. It then reversed the Labor Arbiters Decision and
awarded some of the respondents full backwages, benefits, and separation pay.

Because of the cases similar subject matter, it was possible that an employee who had already availed of the benefits under the retrenchment program would be
declared entitled to separation benefits under the illegal strike case. This is true especially if the retrenched employee did not execute a valid quitclaim upon receiving
the benefits under the retrenchment program.

Thus, to prevent double compensation, the Court of Appeals ordered that those who already retired and received their benefits may no longer claim full backwages,
benefits, and separation pay under the decision in the illegal strike case. This is with respect to respondents Benjamin Bautista and Laureno Fegalquin who already
executed their quitclaims. The Court of Appeals said:

We agree in theory with the petitioners position that workers releases and quitclaims are frowned upon and cannot simply be accepted at face value. Jurisprudence
however provides us guidance on when to accept and when to reject workers releases and quitclaims. In the present case where the recipients are responsible union
officers who have regularly acted in behalf of their members in the discharge of their union duties and where there is no direct evidence of coercion or vitiation of
consent, we believe we can safely conclude that the petitioners Bautista and Fegalquin fully knew that they entered into when they accepted their retirement benefits
and when they executed their quitclaims. The Club (as well as the NLRC) is therefore correct in their position that these petitioners no longer have any interest that can
serve as basis for their participation in the present petition.96 (Citations omitted)

With respect to respondent Carlito Presentacion who was not a union officer and, therefore, could not have been dismissed under the illegal strike case, the Court of
Appeals held that he cannot receive benefits under Court of Appeals Decision:

The same is true with respect to petitioner Carlito Presentacion who does not appear to be covered by the assailed Labor Arbiter and NLRC decisions because he was
not a union officer and was not dismissed under the assailed decisions, and who had sought redress through a separately-filed case.97

For respondents who were not found to have executed a quitclaim with respect to the benefits under the retrenchment program, the Court of Appeals ruled that any
benefits received" as a result of the decisions [of the Labor Arbiter]"98 must be deducted from the separation pay received under the illegal strike case. This is with
respect to Ronie Sualog, Joel Calida, Roberto de Guzman, and Johnny Arinto:

We grant the petition and declare the assailed decision null and void with respect to petitioners Ronie Sualog, Joel Calida, Roberto de Guzman and Johnny Arinto as the
decision to dismiss them had been attended by grave abuse of discretion on the part of the Labor Arbiter and the NLRC as discussed above. In the exercise of our
discretion, however, we stop short of ordering the reinstatement of these petitioners [sic] in light of their obviously strained relationship with the Club resulting from
the strike and in light as well of the restructuring of the Clubs workforce since then. We confine our order therefore to the payment of the petitioners full backwages
and benefits from the time of their dismissal up the finality of this Decision, and to the payment of petitioners' separation pay computed at one (1) month salary per
year of service from the time they were hired up to the finality of this Decision. Any amount they might have received from the Club as a result of the decisions below
can be deducted from the payments we hereby find to be due them.99

Since the Court of Appeals ordered that any benefit received from the illegal dismissal case be deducted from any benefit receivable under the Court of Appeals'
Decision, there was no "double compensation" as petitioner Club Filipino, Inc. claims.

All told, the Decision in the illegal dismissal case was not res judicata on the illegal strike case. The NLRC correctly executed the Court of Appeals' Decision in the illegal
strike case. WHEREFORE, the Supplemental Motion for Reconsideration is DENIED. No further pleadings shall be entertained in this case. The Entry of Judgment issued
in this case is AFFIRMED.

SO ORDERED.