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SECOND DIVISION SO ORDERED.

2
On April 3, 2006, the Regional Trial Court of Antipolo
[G.R. No. 188288. January 16, 2012.] City, Branch 74 (RTC) rendered a Decision, giving due course to
the complaint for sum of money and damages filed by petitioners
SPOUSES FERNANDO and Fernando Viloria (Fernando) and Lourdes Viloria(Lourdes),
LOURDES VILORIA, petitioners, vs. CONTIN collectively called Spouses Viloria, against
ENTAL AIRLINES, INC., respondent. respondent Continental Airlines, Inc. (CAI). As culled from the
records, below are the facts giving rise to such complaint.
On or about July 21, 1997 and while in the United
DECISION States, Fernando purchased for himself and his wife, Lourdes,
two (2) round trip airline tickets from San Diego, California to
Newark, New Jersey on board Continental Airlines. Fernando
purchased the tickets at US$400.00 each from a travel agency
REYES, J p: called "Holiday Travel" and was attended to by a certain
Margaret Mager (Mager). According to Spouses Viloria,
This is a petition for review under Rule 45 of the Rules Fernando agreed to buy the said tickets after Mager informed
of Court from the January 30, 2009 Decision 1 of the Special them that there were no available seats at Amtrak, an intercity
Thirteenth Division of the Court of Appeals (CA) in CA-G.R. passenger train service provider in the United States. Per the
CV No. 88586 entitled "Spouses Fernando and tickets, Spouses Viloria were scheduled to leave for Newark on
Lourdes Viloria v.Continental Airlines, Inc.," the dispositive August 13, 1997 and return to San Diego on August 21,
portion of which states: 1997. DaACIH
WHEREFORE, the Decision of the Regional Subsequently, Fernando requested Mager to reschedule
Trial Court, Branch 74, dated 03 April 2006, their flight to Newark to an earlier date or August 6, 1997. Mager
awarding US$800.00 or its peso equivalent at the informed him that flights to Newark
time of payment, plus legal rate of interest from 21 via Continental Airlines were already fully booked and offered
July 1997 until fully paid, [P]100,000.00 as moral the alternative of a round trip flight via Frontier Air. Since flying
damages, [P]50,000.00 as exemplary damages, with Frontier Air called for a higher fare of US$526.00 per
[P]40,000.00 as attorney's fees and costs of suit to passenger and would mean traveling by night, Fernando opted to
plaintiffs-appellees is request for a refund. Mager, however, denied his request as the
hereby REVERSED and SET ASIDE. subject tickets are non-refundable and the only option
Defendant-appellant's counterclaim is DENIED. that Continental Airlines can offer is the re-issuance of new
tickets within one (1) year from the date the subject tickets were
Costs against plaintiffs-appellees.
issued. Fernando decided to reserve two (2) seats with Frontier Lourdes' ticket was non-transferable, thus, cannot be used for the
Air. purchase of a ticket in his favor. He was also informed that a
round trip ticket to Los Angeles was US$1,867.40 so he would
As he was having second thoughts on traveling via
have to pay what will not be covered by the value of his San
Frontier Air, Fernando went to the Greyhound Station where he
Diego to Newark round trip ticket. aTSEcA
saw an Amtrak station nearby. Fernando made inquiries and was
told that there are seats available and he can travel on Amtrak In a letter dated June 21, 1999, Fernando demanded for
anytime and any day he pleased. Fernando then purchased two the refund of the subject tickets as he no longer wished to have
(2) tickets for Washington, D.C. them replaced. In addition to the dubious circumstances under
which the subject tickets were issued, Fernando claimed that
From Amtrak, Fernando went to Holiday Travel and
CAI's act of charging him with US$1,867.40 for a round trip
confronted Mager with the Amtrak tickets, telling her that she
ticket to Los Angeles, which other airlines priced at US$856.00,
had misled them into buying the Continental Airlines tickets by
and refusal to allow him to use Lourdes' ticket, breached its
misrepresenting that Amtrak was already fully booked. Fernando
undertaking under its March 24, 1998 letter. 6
reiterated his demand for a refund but Mager was firm in her
position that the subject tickets are non-refundable. On September 8, 2000, Spouses Viloria filed a complaint
against CAI, praying that CAI be ordered to refund the money
Upon returning to the Philippines, Fernando sent a letter
they used in the purchase of the subject tickets with legal interest
to CAI on February 11, 1998, demanding a refund and alleging
from July 21, 1997 and to pay P1,000,000.00 as moral damages,
that Mager had deluded them into purchasing the subject
P500,000.00 as exemplary damages and P250,000.00 as
tickets. 3
attorney's fees. 7
In a letter dated February 24,
CAI interposed the following defenses:
1998, Continental Micronesia informed Fernando that his
(a) Spouses Viloria have no right to ask for a refund as the
complaint had been referred to the Customer Refund Services
subject tickets are non-refundable; (b) Fernando cannot insist on
of Continental Airlines at Houston, Texas. 4
using the ticket in Lourdes' name for the purchase of a round trip
In a letter dated March 24, 1998, Continental Micronesia ticket to Los Angeles since the same is non-transferable; (c) as
denied Fernando's request for a refund and advised him that he Mager is not a CAI employee, CAI is not liable for any of her
may take the subject tickets to any Continental ticketing location acts; (d) CAI, its employees and agents did not act in bad faith as
for the re-issuance of new tickets within two (2) years from the to entitle Spouses Viloria to moral and exemplary damages and
date they were issued. Continental Micronesia informed attorney's fees. CAI also invoked the following clause printed on
Fernando that the subject tickets may be used as a form of the subject tickets:
payment for the purchase of another Continental ticket, albeit
3. To the extent not in conflict with the foregoing
with a re-issuance fee. 5
carriage and other services performed by each
On June 17, 1999, Fernando went to Continental's carrier are subject to: (i) provisions contained in
ticketing office at Ayala Avenue, Makati City to have the subject this ticket, (ii) applicable tariffs, (iii) carrier's
tickets replaced by a single round trip ticket to Los Angeles, conditions of carriage and related regulations
California under his name. Therein, Fernando was informed that which are made part hereof (and are available on
application at the offices of carrier), except in agent's unethical tactics for baiting trusting
transportation between a place in the United States customers." 10
or Canada and any place outside thereof to which
tariffs in force in those countries apply. 8 Citing Articles 1868 and 1869 of the Civil Code, the
RTC ruled that Mager is CAI's agent, hence, bound by her bad
According to CAI, one of the conditions attached to their faith and misrepresentation. As far as the RTC is concerned,
contract of carriage is the non-transferability and non- there is no issue as to whether Mager was CAI's agent in view of
refundability of the subject tickets. CAI's implied recognition of her status as such in its March 24,
1998 letter.
The RTC's Ruling
The act of a travel agent or agency being involved
Following a full-blown trial, the RTC rendered its April
here, the following are the pertinent New Civil
3, 2006 Decision, holding that Spouses Viloria are entitled to a
Code provisions on agency:
refund in view of Mager's misrepresentation in obtaining their
consent in the purchase of the subject tickets. 9 The relevant Art. 1868. By the contract of agency a
portion of the April 3, 2006 Decision states: person binds himself to render some
Continental Airlines agent Ms. Mager was in bad service or to do something in
faith when she was less candid and diligent in representation or on behalf of another,
presenting to plaintiffsspouses their booking with the consent or authority of the latter.
options. Plaintiff Fernando clearly wanted to travel Art. 1869. Agency may be express, or
via AMTRAK, but defendant's agent misled him implied from the acts of the principal,
into purchasing Continental Airlines tickets from his silence or lack of action, or his
instead on the fraudulent misrepresentation that failure to repudiate the agency, knowing
Amtrak was fully booked. In fact, defendant that another person is acting on his behalf
Airline did not specifically denied (sic) this without authority.
allegation. SDHETI
Agency may be oral, unless the law
Plainly, plaintiffs spouses, particularly plaintiff requires a specific form.
Fernando, were tricked into
buying Continental Airline tickets on Ms. Mager's As its very name implies, a travel agency binds
misleading itself to render some service or to do something in
misrepresentations. Continental Airlines agent Ms. representation or on behalf of another, with the
Mager further relied on and exploited plaintiff consent or authority of the latter. This court takes
Fernando's need and told him that they must book judicial notice of the common services rendered by
a flight immediately or risk not being able to travel travel agencies that represent themselves as such,
at all on the couple's preferred date. Unfortunately, specifically the reservation and booking of local
plaintiffs spouses fell prey to the airline's and its and foreign tours as well as the issuance of airline
tickets for a commission or fee.
The services rendered by Ms. Mager of Holiday ticketing agent of Holiday Travel who was in turn
Travel agency to the plaintiff spouses on July 21, a ticketing agent of Continental Airlines.
1997 were no different from those offered in any Proceeding from this premise, they contend
other travel agency. Defendant airline impliedly if that ContinentalAirlines should be held liable for
not expressly acknowledged its principal-agent the acts of Mager. The trial court held the same
relationship with Ms. Mager by its offer in the view.
letter dated March 24, 1998 — an obvious attempt
to assuage plaintiffs spouses' hurt feelings. 11 We do not agree. By the contract of agency, a
person binds him/herself to render some service or
Furthermore, the RTC ruled that CAI acted in bad faith to do something in representation or on behalf of
in reneging on its undertaking to replace the subject tickets another, with the consent or authority of the latter.
within two (2) years from their date of issue when it charged The elements of agency are: (1) consent, express
Fernando with the amount of US$1,867.40 for a round trip ticket or implied, of the parties to establish the
to Los Angeles and when it refused to allow Fernando to use relationship; (2) the object is the execution of a
Lourdes' ticket. Specifically: juridical act in relation to a third person; (3) the
agent acts as a representative and not for
Tickets may be reissued for up to two years from
him/herself; and (4) the agent acts within the scope
the original date of issue. When defendant airline
of his/her authority. As the basis of agency is
still charged plaintiffsspouses US$1,867.40 or
representation, there must be, on the part of the
more than double the then going rate of
principal, an actual intention to appoint, an
US$856.00 for the unused tickets when the same
intention naturally inferable from the principal's
were presented within two (2) years from date of
words or actions. In the same manner, there must
issue, defendant airline exhibited callous treatment
be an intention on the part of the agent to accept
of passengers. 12 CScaDH
the appointment and act upon it. Absent such
The Appellate Court's Ruling mutual intent, there is generally no agency. It is
likewise a settled rule that persons dealing with an
On appeal, the CA reversed the RTC's April 3, 2006
assumed agent are bound at their peril, if they
Decision, holding that CAI cannot be held liable for Mager's act
would hold the principal liable, to ascertain not
in the absence of any proof that a principal-agent relationship
only the fact of agency but also the nature and
existed between CAI and Holiday Travel. According to the
extent of authority, and in case either is
CA,Spouses Viloria, who have the burden of proof to establish
controverted, the burden of proof is upon them to
the fact of agency, failed to present evidence demonstrating that
establish it. Agency is never presumed, neither is it
Holiday Travel is CAI's agent. Furthermore, contrary
created by the mere use of the word in a trade or
to Spouses Viloria's claim, the contractual relationship between
business name. We have perused the evidence and
Holiday Travel and CAI is not an agency but that of a sale.
documents so far presented. We find nothing
Plaintiffs-appellees assert that Mager was a sub- except bare allegations of plaintiffs-appellees that
agent of Holiday Travel who was in turn a Mager/Holiday Travel was acting in behalf
of Continental Airlines. From all sides of legal Los Angeles considering CAI's undertaking to re-issue new
prism, the transaction in issue was simply a tickets to them within the period stated in their March 24, 1998
contract of sale, wherein Holiday Travel buys letter. CAI likewise acted in bad faith when it disallowed
airline tickets from Continental Airlines and then, Fernando to use Lourdes' ticket to purchase a round trip to Los
through its employees, Mager included, sells it at a Angeles given that there is nothing in Lourdes' ticket indicating
premium to clients. 13 that it is non-transferable. As a common carrier, it is CAI's duty
to inform its passengers of the terms and conditions of their
The CA also ruled that refund is not available contract and passengers cannot be bound by such terms and
to Spouses Viloria as the word "non-refundable" was clearly conditions which they are not made aware of. Also, the subject
printed on the face of the subject tickets, which constitute their contract of carriage is a contract of adhesion; therefore, any
contract with CAI. Therefore, the grant of their prayer for a ambiguities should be construed against CAI. Notably, the
refund would violate the proscription against impairment of petitioners are no longer questioning the validity of the subject
contracts. contracts and limited its claim for a refund on CAI's alleged
Finally, the CA held that CAI did not act in bad faith breach of its undertaking in its March 24, 1998 letter. ECcTaS
when they charged Spouses Viloria with the higher amount of The Respondent's Case
US$1,867.40 for a round trip ticket to Los Angeles. According to
the CA, there is no compulsion for CAI to charge the lower In its Comment, CAI claimed that Spouses Viloria's
amount of US$856.00, which Spouses Viloria claim to be the fee allegation of bad faith is negated by its willingness to issue new
charged by other airlines. The matter of fixing the prices for its tickets to them and to credit the value of the subject tickets
services is CAI's prerogative, which Spouses Viloria cannot against the value of the new ticket Fernando requested. CAI
intervene. In particular: argued that Spouses Viloria's sole basis to claim that the price at
which CAI was willing to issue the new tickets is
It is within the respective rights of persons owning unconscionable is a piece of hearsay evidence — an
and/or operating business entities to peg the advertisement appearing on a newspaper stating that airfares
premium of the services and items which they from Manila to Los Angeles or San Francisco cost
provide at a price which they deem fit, no matter US$818.00. 15 Also, the advertisement pertains to airfares in
how expensive or exhorbitant said price may September 2000 and not to airfares prevailing in June 1999, the
seemvis-à-vis those of the competing companies. time when Fernando asked CAI to apply the value of the subject
The Spouses Viloria may not intervene with the tickets for the purchase of a new one. 16 CAI likewise argued
business judgment ofContinental Airlines. 14 that it did not undertake to protect Spouses Viloria from any
The Petitioners' Case changes or fluctuations in the prices of airline tickets and its only
obligation was to apply the value of the subject tickets to the
In this Petition, this Court is being asked to review the purchase of the newly issued tickets.
findings and conclusions of the CA, as the latter's reversal of the
RTC's April 3, 2006 Decision allegedly lacks factual and legal With respect to Spouses Viloria's claim that they are not
bases. Spouses Viloria claim that CAI acted in bad faith when it aware of CAI's restrictions on the subject tickets and that the
required them to pay a higher amount for a round trip ticket to terms and conditions that are printed on them are ambiguous,
CAI denies any ambiguity and alleged that its representative e. Is CAI justified in pegging a different price for
informed Fernando that the subject tickets are non-transferable the round trip ticket to Los Angeles
when he applied for the issuance of a new ticket. On the other requested by Fernando?
hand, the word "non-refundable" clearly appears on the face of
the subject tickets. f. Alternatively, did CAI act in bad faith or renege
its obligation to Spouses Viloria to apply
CAI also denies that it is bound by the acts of Holiday the value of the subject tickets in the
Travel and Mager and that no principal-agency relationship purchase of new ones when it refused to
exists between them. As an independent contractor, Holiday allow Fernando to use Lourdes' ticket and
Travel was without capacity to bind CAI. in charging a higher price for a round trip
Issues ticket to Los Angeles?

To determine the propriety of disturbing the CA's This Court's Ruling


January 30, 2009 Decision and whether Spouses Viloria have the I. A principal-agent relationship exists between CAI and
right to the reliefs they prayed for, this Court deems it necessary Holiday Travel.
to resolve the following issues:
With respect to the first issue, which is a question of fact
a. Does a principal-agent relationship exist that would require this Court to review and re-examine the
between CAI and Holiday Travel? evidence presented by the parties below, this Court takes
exception to the general rule that the CA's findings of fact are
b. Assuming that an agency relationship exists
conclusive upon us and our jurisdiction is limited to the review
between CAI and Holiday Travel, is CAI
of questions of law. It is well-settled to the point of being
bound by the acts of Holiday Travel's
axiomatic that this Court is authorized to resolve questions of
agents and employees such as Mager?
fact if confronted with contrasting factual findings of the trial
c. Assuming that CAI is bound by the acts of court and appellate court and if the findings of the CA are
Holiday Travel's agents and employees, contradicted by the evidence on record. 17 ISAcHD
can the representation of Mager as to
According to the CA, agency is never presumed and that
unavailability of seats at Amtrak be
he who alleges that it exists has the burden of
considered fraudulent as to vitiate the
proof.Spouses Viloria, on whose shoulders such burden rests,
consent of Spouse Viloria in the purchase
presented evidence that fell short of indubitably demonstrating
of the subject tickets?
the existence of such agency.
d. Is CAI justified in insisting that the subject We disagree. The CA failed to consider undisputed facts,
tickets are non-transferable and non- discrediting CAI's denial that Holiday Travel is one of its agents.
refundable? Furthermore, in erroneously characterizing the contractual
relationship between CAI and Holiday Travel as a contract of
sale, the CA failed to apply the fundamental civil law principles is also present considering that CAI has not made any allegation
governing agency and differentiating it from sale. that Holiday Travel exceeded the authority that was granted to it.
In fact, CAI consistently maintains the validity of the contracts
In Rallos v. Felix Go Chan & Sons Realty
of carriage that Holiday Travel executed
Corporation, 18 this Court explained the nature of an agency and
with Spouses Viloria and that Mager was not guilty of any
spelled out the essential elements thereof:
fraudulent misrepresentation. That CAI admits the authority of
Out of the above given principles, sprung the Holiday Travel to enter into contracts of carriage on its behalf is
creation and acceptance of the relationship of easily discernible from its February 24, 1998 and March 24,
agency whereby one party, called the principal 1998 letters, where it impliedly recognized the validity of the
(mandante), authorizes another, called the agent contracts entered into by Holiday Travel with Spouses Viloria.
(mandatario), to act for and in his behalf in When Fernando informed CAI that it was Holiday Travel who
transactions with third persons. The essential issued to them the subject tickets, CAI did not deny that Holiday
elements of agency are: (1) there is consent, Travel is its authorized agent.
express or implied of the parties to establish the
Prior to Spouses Viloria's filing of a complaint against it,
relationship; (2) the object is the execution of a
CAI never refuted that it gave Holiday Travel the power and
juridical act in relation to a third person; (3) the
authority to conclude contracts of carriage on its behalf. As
agent acts as a representative and not for himself,
clearly extant from the records, CAI recognized the validity of
and (4) the agent acts within the scope of his
the contracts of carriage that Holiday Travel entered into
authority.
with Spouses Viloria and considered itself bound
Agency is basically personal, representative, with SpousesViloria by the terms and conditions thereof; and this
and derivative in nature. The authority of the agent constitutes an unequivocal testament to Holiday Travel's
to act emanates from the powers granted to him by authority to act as its agent. This Court cannot therefore allow
his principal; his act is the act of the principal if CAI to take an altogether different position and deny that
done within the scope of the authority. Qui facit Holiday Travel is its agent without condoning or giving
per alium facit se. "He who acts through another imprimatur to whatever damage or prejudice that may result
acts himself." 19 from such denial or retraction to Spouses Viloria, who relied on
good faith on CAI's acts in recognition of Holiday Travel's
Contrary to the findings of the CA, all the elements of an authority. Estoppel is primarily based on the doctrine of good
agency exist in this case. The first and second elements are faith and the avoidance of harm that will befall an innocent party
present as CAI does not deny that it concluded an agreement due to its injurious reliance, the failure to apply it in this case
with Holiday Travel, whereby Holiday Travel would enter into would result in gross travesty of justice. 20 Estoppel bars CAI
contracts of carriage with third persons on CAI's behalf. The from making such denial.
third element is also present as it is undisputed that Holiday
Travel merely acted in a representative capacity and it is CAI and As categorically provided under Article 1869 of the Civil
not Holiday Travel who is bound by the contracts of carriage Code, "[a]gency may be express, or implied from the acts of the
entered into by Holiday Travel on its behalf. The fourth element principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on the transferee in the attitude or position of
his behalf without authority." SITCcE an owner and makes him liable to the
transferor as a debtor for the agreed price,
Considering that the fundamental hallmarks of an agency
and not merely as an agent who must
are present, this Court finds it rather peculiar that the CA had
account for the proceeds of a resale, the
branded the contractual relationship between CAI and Holiday
transaction is a sale; while the essence of
Travel as one of sale. The distinctions between a sale and an
an agency to sell is the delivery to an
agency are not difficult to discern and this Court, as early as
agent, not as his property, but as the
1970, had already formulated the guidelines that would aid in
property of the principal, who remains the
differentiating the two (2) contracts. In Commissioner of Internal
owner and has the right to control sales,
Revenue v. Constantino, 21 this Court extrapolated that the
fix the price, and terms, demand and
primordial differentiating consideration between the two (2)
receive the proceeds less the agent's
contracts is the transfer of ownership or title over the property
commission upon sales made. 1 Mechem
subject of the contract. In an agency, the principal retains
on Sales, Sec. 43; 1 Mechem on Agency,
ownership and control over the property and the agent merely
Sec. 48; Williston on Sales, 1; Tiedeman
acts on the principal's behalf and under his instructions in
on Sales, 1." (Salisbury v. Brooks, 94 SE
furtherance of the objectives for which the agency was
117, 118-119) 22
established. On the other hand, the contract is clearly a sale if the
parties intended that the delivery of the property will effect a As to how the CA have arrived at the conclusion that the
relinquishment of title, control and ownership in such a way that contract between CAI and Holiday Travel is a sale is certainly
the recipient may do with the property as he pleases. confounding, considering that CAI is the one bound by the
Since the company retained ownership of the contracts of carriage embodied by the tickets being sold by
goods, even as it delivered possession unto the Holiday Travel on its behalf. It is undisputed that CAI and not
dealer for resale to customers, the price and terms Holiday Travel who is the party to the contracts of carriage
of which were subject to the company's control, executed by Holiday Travel with third persons who desire to
the relationship between the company and the travel via Continental Airlines, and this conclusively indicates
dealer is one of agency, tested under the following the existence of a principal-agent relationship. That the principal
criterion: is bound by all the obligations contracted by the agent within the
scope of the authority granted to him is clearly provided under
"The difficulty in distinguishing between Article 1910 of the Civil Code and this constitutes the very
contracts of sale and the creation of an notion of agency.
agency to sell has led to the establishment
II. In actions based on quasi-delict, a principal can only be
of rules by the application of which this
held liable for the tort committed by its agent's employees if
difficulty may be solved. The decisions
it has been established by preponderance of evidence that the
say the transfer of title or agreement to
principal was also at fault or negligent or that the principal
transfer it for a price paid or promised is
exercise control and supervision over them.
the essence of sale. If such transfer puts
Considering that Holiday Travel is CAI's agent, does it has to prove is the existence of the contract and the fact of its
necessarily follow that CAI is liable for the fault or negligence of non-performance by the carrier."
Holiday Travel's employees? Citing China Air Lines, Ltd. v.
Spouses Viloria's cause of action on the basis of Mager's
Court of Appeals, et al., 23 CAI argues that it cannot be held
alleged fraudulent misrepresentation is clearly one of tort or
liable for the actions of the employee of its ticketing agent in the
quasi-delict, there being no pre-existing contractual relationship
absence of an employer-employee relationship.
between them. Therefore, it was incumbent
An examination of this Court's pronouncements upon SpousesViloria to prove that CAI was equally at fault.
in China Air Lines will reveal that an airline company is not
However, the records are devoid of any evidence by
completely exonerated from any liability for the tort committed
which CAI's alleged liability can be substantiated. Apart from
by its agent's employees. A prior determination of the nature of
their claim that CAI must be held liable for Mager's supposed
the passenger's cause of action is necessary. If the passenger's
fraud because Holiday Travel is CAI's agent, Spouses Viloriadid
cause of action against the airline company is premised on culpa
not present evidence that CAI was a party or had contributed to
aquiliana or quasi-delict for a tort committed by the employee of
Mager's complained act either by instructing or authorizing
the airline company's agent, there must be an independent
Holiday Travel and Mager to issue the said misrepresentation.
showing that the airline company was at fault or negligent or has
contributed to the negligence or tortuous conduct committed by It may seem unjust at first glance that CAI would
the employee of its agent. The mere fact that the employee of the consider Spouses Viloria bound by the terms and conditions of
airline company's agent has committed a tort is not sufficient to the subject contracts, which Mager entered into with them on
hold the airline company liable. There is no vinculum CAI's behalf, in order to deny Spouses Viloria's request for a
juris between the airline company and its agent's employees and refund or Fernando's use of Lourdes' ticket for the re-issuance of
the contractual relationship between the airline company and its a new one, and simultaneously claim that they are not bound by
agent does not operate to create a juridical tie between the airline Mager's supposed misrepresentation for purposes of
company and its agent's employees. Article 2180 of the Civil avoiding Spouses Viloria's claim for damages and maintaining
Code does not make the principal vicariously liable for the tort the validity of the subject contracts. It may likewise be argued
committed by its agent's employees and the principal-agency that CAI cannot deny liability as it benefited from Mager's acts,
relationship per se does not make the principal a party to such which were performed in compliance with Holiday Travel's
tort; hence, the need to prove the principal's own fault or obligations as CAI's agent. acCTIS
negligence. aHTCIc However, a person's vicarious liability is anchored on his
On the other hand, if the passenger's cause of action for possession of control, whether absolute or limited, on the
damages against the airline company is based on contractual tortfeasor. Without such control, there is nothing which could
breach or culpa contractual, it is not necessary that there be justify extending the liability to a person other than the one who
evidence of the airline company's fault or negligence. As this committed the tort. As this Court explained in Cangco v. Manila
Court previously stated in China Air Lines and reiterated in Air Railroad Co.: 25
France vs. Gillego, 24 "in an action based on a breach of With respect to extra-contractual obligation
contract of carriage, the aggrieved party does not have to prove arising from negligence, whether of act or
that the common carrier was at fault or was negligent. All that he
omission, it is competent for the legislature to "It is an old and well-settled rule of the
elect — and our Legislature has so elected — to courts that the burden of proving the
limit such liability to cases in which the person action is upon the plaintiff, and that if he
upon whom such an obligation is imposed is fails satisfactorily to show the facts upon
morally culpable or, on the contrary, for reasons which he bases his claim, the defendant is
of public policy, to extend that liability, without under no obligation to prove his
regard to the lack of moral culpability, so as to exceptions. This [rule] is in harmony with
include responsibility for the negligence of those the provisions of Section 297 of the Code
persons whose acts or omissions are imputable, of Civil Procedure holding that each party
by a legal fiction, to others who are in a position must prove his own affirmative
to exercise an absolute or limited control over allegations, etc." 29 (citations omitted)
them. The legislature which adopted our Civil
Code has elected to limit extra-contractual liability Therefore, without a modicum of evidence that CAI
— with certain well-defined exceptions — to cases exercised control over Holiday Travel's employees or that CAI
in which moral culpability can be directly imputed was equally at fault, no liability can be imposed on CAI for
to the persons to be charged. This moral Mager's supposed misrepresentation.
responsibility may consist in having failed to III. Even on the assumption that CAI may be held liable for
exercise due care in one's own acts, or in having the acts of Mager, still, Spouses Viloria are not entitled to a
failed to exercise due care in the selection and refund. Mager's statement cannot be considered a causal
control of one's agent or servants, or in the control fraud that would justify the annulment of the subject
of persons who, by reasons of their status, occupy contracts that would oblige CAI to
a position of dependency with respect to the indemnify Spouses Viloria and return the money they paid
person made liable for their conduct.26 (emphasis for the subject tickets.
supplied)
Article 1390, in relation to Article 1391 of the Civil
It is incumbent upon Spouses Viloria to prove that CAI Code, provides that if the consent of the contracting parties was
exercised control or supervision over Mager by preponderant obtained through fraud, the contract is considered voidable and
evidence. The existence of control or supervision cannot be may be annulled within four (4) years from the time of the
presumed and CAI is under no obligation to prove its denial or discovery of the fraud. Once a contract is annulled, the parties
nugatory assertion. Citing Belen v. Belen, 27 this Court ruled are obliged under Article 1398 of the same Code to restore to
in Jayme v. Apostol, 28 that: each other the things subject matter of the contract, including
their fruits and interest.
In Belen v. Belen, this Court ruled that it was
enough for defendant to deny an alleged On the basis of the foregoing and given the allegation
employment relationship. The defendant is under of Spouses Viloria that Fernando's consent to the subject
no obligation to prove the negative averment. This contracts was supposedly secured by Mager through fraudulent
Court said: means, it is plainly apparent that their demand for a refund is
tantamount to seeking for an annulment of the subject contracts should not have been employed by both
on the ground of vitiated consent. IDEHCa contracting parties.
Whether the subject contracts are annullable, this Court To quote Tolentino again, the "misrepresentation
is required to determine whether Mager's alleged constituting the fraud must be established by full,
misrepresentation constitutes causal fraud. Similar to the dispute clear, and convincing evidence, and not merely by
on the existence of an agency, whether fraud attended the a preponderance thereof. The deceit must be
execution of a contract is factual in nature and this Court, as serious. The fraud is serious when it is sufficient to
discussed above, may scrutinize the records if the findings of the impress, or to lead an ordinarily prudent person
CA are contrary to those of the RTC. into error; that which cannot deceive a prudent
Under Article 1338 of the Civil Code, there is fraud person cannot be a ground for nullity. The
when, through insidious words or machinations of one of the circumstances of each case should be considered,
contracting parties, the other is induced to enter into a contract taking into account the personal conditions of the
which, without them, he would not have agreed to. In order that victim." 34
fraud may vitiate consent, it must be the causal (dolo causante), After meticulously poring over the records, this Court
not merely the incidental (dolo incidente), inducement to the finds that the fraud alleged by Spouses Viloria has not been
making of the contract. 30 In Samson v. Court of satisfactorily established as causal in nature to warrant the
Appeals, 31 causal fraud was defined as "a deception employed annulment of the subject contracts. In fact, Spouses Viloriafailed
by one party prior to or simultaneous to the contract in order to to prove by clear and convincing evidence that Mager's statement
secure the consent of the other." 32 was fraudulent. Specifically, Spouses Viloria failed to prove that
Also, fraud must be serious and its existence must be (a) there were indeed available seats at Amtrak for a trip to New
established by clear and convincing evidence. As ruled by this Jersey on August 13, 1997 at the time they spoke with Mager on
Court in Sierra v. Hon. Court of Appeals, et al., 33 mere July 21, 1997; (b) Mager knew about this; and (c) that she
preponderance of evidence is not adequate: purposely informed them otherwise.
Fraud must also be discounted, for according to This Court finds the only proof of Mager's alleged fraud,
the Civil Code: which is Fernando's testimony that an Amtrak had assured him of
the perennial availability of seats at Amtrak, to be wanting. As
Art. 1338. There is fraud when, through CAI correctly pointed out and as Fernando admitted, it was
insidious words or machinations of one of possible that during the intervening period of three (3) weeks
the contracting parties, the other is from the time Fernando purchased the subject tickets to the time
induced to enter into a contract which he talked to said Amtrak employee, other passengers may have
without them, he would not have agreed cancelled their bookings and reservations with Amtrak, making it
to. TCAScE possible for Amtrak to accommodate them. Indeed, the existence
Art. 1344. In order that fraud may make a of fraud cannot be proved by mere speculations and conjectures.
contract voidable, it should be serious and Fraud is never lightly inferred; it is good faith that is. Under the
Rules of Court, it is presumed that "a person is innocent of crime
or wrong" and that "private transactions have been fair and Carton Corporation, 38 this Court ruled that a claim for a
regular." 35 Spouses Viloriafailed to overcome this presumption. reimbursement in view of the other party's failure to comply with
his obligations under the contract is one for rescission or
IV. Assuming the contrary, Spouses Viloria are nevertheless
resolution.
deemed to have ratified the subject contracts.
However, annulment under Article 1390 of the Civil
Even assuming that Mager's representation is causal
Code and rescission under Article 1191 are two (2) inconsistent
fraud, the subject contracts have been impliedly ratified
remedies. In resolution, all the elements to make the contract
whenSpouses Viloria decided to exercise their right to use the
valid are present; in annulment, one of the essential elements to a
subject tickets for the purchase of new ones. Under Article 1392
formation of a contract, which is consent, is absent. In resolution,
of the Civil Code, "ratification extinguishes the action to annul a
the defect is in the consummation stage of the contract when the
voidable contract."
parties are in the process of performing their respective
Ratification of a voidable contract is defined under obligations; in annulment, the defect is already present at the
Article 1393 of the Civil Code as follows: time of the negotiation and perfection stages of the contract.
Art. 1393. Ratification may be effected expressly Accordingly, by pursuing the remedy of rescission under Article
or tacitly. It is understood that there is a tacit 1191, the Vilorias had impliedly admitted the validity of the
ratification if, with knowledge of the reason which subject contracts, forfeiting their right to demand their
renders the contract voidable and such reason annulment. A party cannot rely on the contract and claim rights
having ceased, the person who has a right to or obligations under it and at the same time impugn its existence
invoke it should execute an act which necessarily or validity. Indeed, litigants are enjoined from taking inconsistent
implies an intention to waive his right. positions. 39
V. Contracts cannot be rescinded for a slight or casual
Implied ratification may take diverse forms, such as by
breach.
silence or acquiescence; by acts showing approval or adoption of
the contract; or by acceptance and retention of benefits flowing CAI cannot insist on the non-transferability of the subject tickets.
therefrom. 36 Considering that the subject contracts are not annullable
Simultaneous with their demand for a refund on the on the ground of vitiated consent, the next question is:
ground of Fernando's vitiated consent, Spouses Viloria likewise "DoSpouses Viloria have the right to rescind the contract on the
asked for a refund based on CAI's supposed bad faith in reneging ground of CAI's supposed breach of its undertaking to issue new
on its undertaking to replace the subject tickets with a round trip tickets upon surrender of the subject tickets?"
ticket from Manila to Los Angeles. IEAaST Article 1191, as presently worded, states:
In doing so, Spouses Viloria are actually asking for a The power to rescind obligations is implied in
rescission of the subject contracts based on contractual breach. reciprocal ones, in case one of the obligors should
Resolution, the action referred to in Article 1191, is based on the not comply with what is incumbent upon
defendant's breach of faith, a violation of the reciprocity between him. IDSaTE
the parties 37 and in Solar Harvest, Inc. v. Davao Corrugated
The injured party may choose between the Contrary to CAI's claim, that the subject tickets are non-
fulfilment and the rescission of the obligation, transferable cannot be implied from a plain reading of the
with the payment of damages in either case. He provision printed on the subject tickets stating that "[t]o the
may also seek rescission, even after he has chosen extent not in conflict with the foregoing carriage and other
fulfillment, if the latter should become impossible. services performed by each carrier are subject to: (a) provisions
contained in this ticket, . . . (iii) carrier's conditions of carriage
The court shall decree the rescission claimed, and related regulations which are made part hereof (and are
unless there be just cause authorizing the fixing of available on application at the offices of carrier) . . . ." As a
a period. common carrier whose business is imbued with public interest,
This is understood to be without prejudice to the the exercise of extraordinary diligence requires CAI to
rights of third persons who have acquired the inform Spouses Viloria, or all of its passengers for that matter, of
thing, in accordance with articles 1385 and 1388 all the terms and conditions governing their contract of carriage.
and the Mortgage Law. CAI is proscribed from taking advantage of any ambiguity in the
contract of carriage to impute knowledge on its passengers of
According to Spouses Viloria, CAI acted in bad faith and and demand compliance with a certain condition or undertaking
breached the subject contracts when it refused to apply the value that is not clearly stipulated. Since the prohibition on
of Lourdes' ticket for Fernando's purchase of a round trip ticket transferability is not written on the face of the subject tickets and
to Los Angeles and in requiring him to pay an amount higher CAI failed to inform Spouses Viloriathereof, CAI cannot refuse
than the price fixed by other airline companies. to apply the value of Lourdes' ticket as payment for Fernando's
In its March 24, 1998 letter, CAI stated that "non- purchase of a new ticket.
refundable tickets may be used as a form of payment toward the CAI's refusal to accept Lourdes' ticket for the purchase of a
purchase of another Continental ticket for $75.00, per ticket, new ticket for Fernando is only a casual breach.
reissue fee ($50.00, per ticket, for tickets purchased prior to
October 30, 1997)." Nonetheless, the right to rescind a contract for non-
performance of its stipulations is not absolute. The general rule is
Clearly, there is nothing in the above-quoted section of that rescission of a contract will not be permitted for a slight or
CAI's letter from which the restriction on the non-transferability casual breach, but only for such substantial and fundamental
of the subject tickets can be inferred. In fact, the words used by violations as would defeat the very object of the parties in
CAI in its letter supports the position ofSpouses Viloria, that making the agreement. 40 Whether a breach is substantial is
each of them can use the ticket under their name for the purchase largely determined by the attendant circumstances. 41
of new tickets whether for themselves or for some other person.
While CAI's refusal to allow Fernando to use the value
Moreover, as CAI admitted, it was only when Fernando of Lourdes' ticket as payment for the purchase of a new ticket is
had expressed his interest to use the subject tickets for the unjustified as the non-transferability of the subject tickets was
purchase of a round trip ticket between Manila and Los Angeles not clearly stipulated, it cannot, however be considered
that he was informed that he cannot use the ticket in Lourdes' substantial. The endorsability of the subject tickets is not an
name as payment. essential part of the underlying contracts and CAI's failure to
comply is not essential to its fulfillment of its undertaking to from fixing the price of a round trip ticket between Manila and
issue new tickets upon Spouses Viloria's surrender of the subject Los Angeles in an amount it deems proper and which does not
tickets. This Court takes note of CAI's willingness to perform its provide Spouses Viloria an excuse not to pay such price, albeit
principal obligation and this is to apply the price of the ticket in subject to a reduction coming from the value of the subject
Fernando's name to the price of the round trip ticket between tickets. It cannot be denied that Spouses Viloria had the
Manila and Los Angeles. CAI was likewise willing to accept the concomitant obligation to pay whatever is not covered by the
ticket in Lourdes' name as full or partial payment as the case may value of the subject tickets whether or not the subject tickets are
be for the purchase of any ticket, albeit under her name and for transferable or not.
her exclusive use. In other words, CAI's willingness to comply
There is also no showing that Spouses Viloria were
with its undertaking under its March 24, 1998 cannot be doubted,
discriminated against in bad faith by being charged with a higher
albeit tainted with its erroneous insistence that Lourdes' ticket is
rate. The only evidence the petitioners presented to prove that the
non-transferable. AaHcIT
price of a round trip ticket between Manila and Los Angeles at
Moreover, Spouses Viloria's demand for rescission that time was only $856.00 is a newspaper advertisement for
cannot prosper as CAI cannot be solely faulted for the fact that another airline company, which is inadmissible for being
their agreement failed to consummate and no new ticket was "hearsay evidence, twice removed." Newspaper clippings are
issued to Fernando. Spouses Viloria have no right to insist that a hearsay if they were offered for the purpose of proving the truth
single round trip ticket between Manila and Los Angeles should of the matter alleged. As ruled in Feria v. Court of Appeals,: 44
be priced at around $856.00 and refuse to pay the difference
[N]ewspaper articles amount to "hearsay evidence,
between the price of the subject tickets and the amount fixed by
twice removed" and are therefore not only
CAI. The petitioners failed to allege, much less prove, that CAI
inadmissible but without any probative value at all
had obliged itself to issue to them tickets for any flight anywhere
whether objected to or not, unless offered for a
in the world upon their surrender of the subject tickets. In its
purpose other than proving the truth of the matter
March 24, 1998 letter, it was clearly stated that "[n]on-
asserted. In this case, the news article is admissible
refundable tickets may be used as a form of payment toward the
only as evidence that such publication does exist
purchase of another Continental ticket" 42 and there is nothing in
with the tenor of the news therein
it suggesting that CAI had obliged itself to
stated. 45 (citations omitted)
protect Spouses Viloria from any fluctuation in the prices of
tickets or that the surrender of the subject tickets will be The records of this case demonstrate that both parties
considered as full payment for any ticket that the petitioners were equally in default; hence, none of them can seek judicial
intend to buy regardless of actual price and destination. The CA redress for the cancellation or resolution of the subject contracts
was correct in holding that it is CAI's right and exclusive and they are therefore bound to their respective obligations
prerogative to fix the prices for its services and it may not be thereunder. As the 1st sentence of Article 1192 provides:
compelled to observe and maintain the prices of other airline
Art. 1192. In case both parties have committed a
companies. 43
breach of the obligation, the liability of the first
The conflict as to the endorsability of the subject tickets infractor shall be equitably tempered by the
is an altogether different matter, which does not preclude CAI
courts. If it cannot be determined which of the Another consideration that militates against the propriety
parties first violated the contract, the same shall be of holding CAI liable for moral damages is the absence of a
deemed extinguished, and each shall bear his own showing that the latter acted fraudulently and in bad faith. Article
damages. (emphasis supplied) 2220 of the Civil Code requires evidence of bad faith and fraud
and moral damages are generally not recoverable in culpa
Therefore, CAI's liability for damages for its refusal to contractual except when bad faith had been proven. 48The
accept Lourdes' ticket for the purchase of Fernando's round trip award of exemplary damages is likewise not warranted. Apart
ticket is offset by Spouses Viloria's liability for their refusal to from the requirement that the defendant acted in a wanton,
pay the amount, which is not covered by the subject tickets. oppressive and malevolent manner, the claimant must prove his
Moreover, the contract between them remains, hence, CAI is entitlement to moral damages. 49 HDAECI
duty bound to issue new tickets for a destination chosen
by Spouses Viloria upon their surrender of the subject tickets WHEREFORE, premises considered, the instant
and Spouses Viloria are obliged to pay whatever amount is not Petition is DENIED.
covered by the value of the subject tickets. SO ORDERED.
This Court made a similar ruling in Central Bank of the Carpio, Perez, Sereno and Perlas-Bernabe, * JJ., concur.
Philippines v. Court of Appeals. 46 Thus:
Since both parties were in default in the
performance of their respective reciprocal Footnotes
obligations, that is, Island Savings Bank failed to
comply with its obligation to furnish the entire
loan and Sulpicio M. Tolentino failed to comply *Additional Member in lieu of Associate Justice Arturo D. Brion
with his obligation to pay his P17,000.00 debt per Special Order No. 1174 dated January 9, 2012.
within 3 years as stipulated, they are both liable
1.Penned by Associate Justice Monina Arevalo-Zenarosa, with
for damages.
Associate Justices Isaias P. Dicdican and Ramon M. Bato,
Article 1192 of the Civil Code provides that in Jr., concurring; rollo, pp. 42-54.
case both parties have committed a breach of their
2.Id. at 53.
reciprocal obligations, the liability of the first
infractor shall be equitably tempered by the courts. 3.Id. at 64.
WE rule that the liability of Island Savings Bank
for damages in not furnishing the entire loan is 4.Id. at 65.
offset by the liability of Sulpicio M. Tolentino for 5.Id. at 67.
damages, in the form of penalties and surcharges,
for not paying his overdue P17,000.00 6.Id. at 68.
debt. . . . . 47
7.Id. at 69-76.
8.Id. at 80. 24.G.R. No. 165266, December 15, 2010, 638 SCRA 472.
9.Id. at 77-85. 25.38 Phil 768 (1918).
10.Id. at 84. 26.Id. at 775-776.
11.Id. at 83. 27.13 Phil 202 (1909).
12.Id. at 84. 28.G.R. No. 163609, November 27, 2008, 572 SCRA 41.
13.Id. at 50-51. 29.Id. at 51-52.
14.Id. at 52. 30.See Tongson v. Emergency Pawnshop Bula, Inc., G.R. No.
167874, 15 January 2010, 610 SCRA 150, 159,
15.Id. at 214. citing Woodhouse v. Halili, 93 Phil 526, 537 (1953).
16.Id. at 215. 31.G.R. No. 108245, November 25, 1994, 238 SCRA 397.
17.See Heirs of Jose Lim v. Lim, G.R. No. 172690, March 3, 2010, 32.Id. at 404.
614 SCRA 141, 147; Ontimare, Jr. v. Spouses Elep, G.R.
No. 159224, January 20, 2006, 479 SCRA 257, 265. 33.G.R. No. 90270, July 24, 1992, 211 SCRA 785.
18.171 Phil 222 (1978). 34.Id. at 793, citing Tolentino, Commentaries on the Civil Code,
Vol. 4, pp. 508, 514.
19.Id. at 226-227, citing Articles 1868 and 1881, New Civil Code;
11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 25 35.Trinidad v. Intermediate Appellate Court, G.R. No. 65922,
Scaevola, 243, 262; Tolentino, Comments, Civil Code of December 3, 1991, 204 SCRA 524, 530, citing Rule 131,
the Philippines, p.340, vol. 5, 1959 Ed., Columbia Sections 5(a) and 5(p).
University Club v. Higgins, D.C.N.Y., 23 f. Supp. 572,
574; Valentine Oil Co. v. Young, 109 P. 2d 180, 185; 74 36.Acuña v. Batac Producers Coop. Mktg. Ass., 126 Phil 896, 902
C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, (1967).
157 Neb. 87; Purnell v. City of Florence, 175 So. 417, 27 37.Heirs of Sofia Quirong, v. Development Bank of the Philippines,
Ala. App. 516; Stroman Motor Co. v. Brown; 243 P. 133, G.R. No. 173441, December 3, 2009, 606 SCRA 543, 550.
126 Ok. 36.
38.G.R. No. 176868, July 26, 2010, 625 SCRA 448.
20.Philippine Airlines, Inc. v. CA, 325 Phil 303, 323 (1996).
39.Gonzales v. Climax Mining Ltd., 492 Phil 682, 697 (2005).
21.G.R. No. L-25926, February 27, 1970, 31 SCRA 779.
40.See Barredo v. Leaño, G.R. No. 156627, June 4, 2004, 431
22.Id. at 785. SCRA 106, 115.
23.264 Phil 15 (1990).
41.See Central Bank of the Philippines v. Spouses Bichara, 385
Phil 553, 565 (2000), citing Vermen Realty Development
Corporationv. Court of Appeals, et al. , 224 SCRA 549,
555.
42.Rollo, p. 67.
43.Id. at 52.
44.382 Phil 412 (2000).
45.Id. at 423.
46.223 Phil 266 (1985).
47.Id. at 276-277.
48.See Yobido v. Court of Appeals, 346 Phil 1, 13 (1997).
49.Mahinay v. Atty. Velasquez, Jr., 464 Phil 146, 150 (2004).
||| (Spouses Viloria v. Continental Airlines, Inc., G.R. No. 188288,
[January 16, 2012], 679 PHIL 61-97)
in Atkins, Kroll & Co. V8. Posadas (48 Phil., 352), and other
cases. This, however, is not correct. Neither in Atkins, Kroll &
Co. vs. Posadas, nor in the other cases mentioned by the plaintiff,
has the decision in Gil Hermanos V8. Hord been reversed.
Although a distinct result was reached in these cases, this WAS
only because they have been found to be different from the case
SECOND DIVISION of Gil Hermanos vs. Hord. On the contrary, in F. E. Zuellig,
Inc.vs. Collector of Internal Revenue (51 Phil., 629), the doctrine
[G.R. No. 45976. July 20, 1939.] in Gil Hermanos was followed.
3. ID.; ID.; ID.; COMMISSION MERCHANT. — The
PACIFIC COMMERCIAL COMPANY, plaintif question of whether the appellant, in connection with the sugar
f-appellant, vs. ALFREDO L. YATCO, defendant- delivered in its warehouses and thereafter sold to the purchasers,
appellee. acted as a commission merchant, presents no doubt. A
commission merchant i8 one engaged in the purchase or sale for
another of personal property which, for this purpose, is placed in
E. P. Revilla for appellant. his possession and at his disposal. He maintains a relation not
only with his principal and the purchasers or vendors, but also
Solicitor-General Tuason for appellee.
with the property which is the subject matter of the transaction.
In the present case, the sugar was shipped by V. M. Co., and
SYLLABUS upon arrival at the port of destination, the plaintiff received and
transferred it for deposit in its warehouses until the purchaser
called for it. The deposit of the sugar in the warehouses of the
1. PAYMENT OF TAX ON MERCHANT SALES BY plaintiff was made upon its own account and at its own risk until
MANUFACTURER AND OWNER OF SUGAR; PAYMENT it was sold and taken by the purchaser. There is, therefore, no
OF ANOTHER TAX BY ONE; WHO MADE THE SALE doubt that the plaintiff, after taking the sugar on board until it
DOES NOT CONSTITUTE DOUBLE TAXATION. — V. M. was sold, had it in its possession and at its own risk,
Co. already paid the merchant sales tax for the sales of sugar, in circumstances determinative of its status as a commission
its capacity as manufacturer and owner of the sugar sold. It is merchant in connection with the sale of sugar under these
said that the payment of another tax by the plaintiff, who effected conditions.
the sale, constitutes double taxation, there having been only one
sale. In Gil Hermanos vs. Hord (10 Phil., 218), this question was 4. ID; ID.; ID.; COMMERCIAL BROKER. — The
already decided in the sense that there is no double taxation. The plaintiff merely acted as a commercial broker as to the sale of the
case at bar is identical in all respects. sugar delivered to the purchaser on board. The broker, unlike the
commission merchant, has no relation with the thing he sells or
2. ID.; ID.; DECISION IN GIL HERMANOS vs. buys. He is merely an intermediary between the purchaser and
HORD, SUPRA, HAS NOT BEEN REVERSED. — It is said the vendor. He acquires neither the possession nor the custody of
that the decision in Gil Hermanos vs. Hord, supra, was reversed the things sold. His only office is to bring together the parties to
the transaction. These circumstances are present in connection the corresponding purchase order is obtained from them, the
with the plaintiff's sale of the sugar which was delivered to the same is sent to the office of Victorias Milling Co., in Manila,
purchaser on board. The sugar sold under these conditions was which, in turn, endorsed the order to its office in Negros, with
shipped by the plaintiff at its expense and risk until it reached its instructions to ship the sugar thus ordered to Manila, Cebu or
destination, where it was later taken on board by the purchaser. Iloilo, as the case may be. At times, the purchase is made for the
The plaintiff never had possession of the sugar at any time. The delivery of the sugar ex-warehouse of the plaintiff and at other
circumstance that the bill of lading was sent to the plaintiff does times for delivery ex-ship. In all cases, the bill of lading is sent to
not alter its character of being merely a broker, or constitute the plaintiff. If the sugar was to be delivered ex-ship, all that the
possession by it of the sugar shipped, inasmuch as the same was plaintiff did was to hand over the bill of lading to the purchaser
sent to it for the sole purpose of turning it over to the purchaser and collect the price. If it was for delivery ex-warehouse, the
for the collection of the price. The sugar did not come to its sugar is first deposited in the warehouse of the plaintiff before
possession in any sense. delivery to the purchaser.
The court found that of the price of sugar sold by the
plaintiff, the amount of P558,550.41 corresponds to sugar sold
DECISION for delivery ex-warehouse and that of P567,585.55 corresponds
to sugar sold for delivery ex-ship, and considering that in the
first case the plaintiff acted as a commission merchant, and in the
second case as a broker, it ordered the defendant to return to the
AVANCEÑA, C. J p: plaintiff the amount collected from it, by way of tax on the sale
of sugar to be delivered ex-ship, and denied the prayer in the
The plaintiff, a corporation engaged in business as a complaint for the return of the amount paid for the sales of sugar
merchant, with offices in Manila, Cebu and Iloilo, during the to be delivered ex-warehouse.
period from April 1, 1934 to December 31, 1935, sold in the
Philippines, for the account of Victorias Milling Co., another Both parties appealed from this decision.
Philippine corporation, refined sugar, manufactured by the said The appeal raises three questions: (a) whether there is
corporation, up to the total amount of P1,126,135.96, having double taxation in the present case; (b) whether the plaintiff
received by way of commission for this sale the amount of acted as a commission merchant as to the sugar delivered ex-
P29,534.29. The corporation Victorias Milling Co., paid to the warehouse; (c) whether the plaintiff acted as a
Collector of Internal Revenue for this sale the amount of merecommercial broker as to the sugar delivered ex-ship.
P16,944.90 as merchant sales tax in its capacity as manufacturer
and owner of the sugar sold. Notwithstanding this payment made As to the first question, it should be borne in mind that
by Victorias Milling Co., the Collector of Internal Revenue also Victorias Milling Co. already paid the merchant sales tax for the
collected from the plaintiff the same tax for the same amount of sales of sugar, in its capacity as manufacturer and owner of the
P16,944.90 sugar sold. It is said that the payment of another tax by the
plaintiff, who effected the sale, constitutes double taxation, there
The sales of this sugar were made by the plaintiff in two having been only one sale. In Gil Hermanos vs. Hord (10 Phil.,
ways. The plaintiff looked for purchasers of the sugar, and once 218), this question was already decided in the sense that there is
no double taxation. In that case, Aldecoa & Co., remitted abaca account and at its own risk until it was sold and taken by the
to Gil Hermanos, which the latter sold on commission for the purchaser. There is, therefore, no doubt that the plaintiff, after
account of the former. Aldecoa & Co. paid the tax of one-third of taking the sugar on board until it was sold, had it in its
1 per cent upon the value of the abaca sold by Gil Hermanos, and possession and at its own risk, circumstances determinative of its
the latter also paid another one-third of per cent for the same status as a commission merchant in connection with the sale of
sale. It was held that, although there was only one sale, this is not sugar under these conditions.
a case of double taxation, because the tax is not upon property or There is also no doubt on the question of whether the
products, but upon occupation or industry. The tax was paid by plaintiff merely acted as a commercial broker as to the sale of the
Aldecoa & Co. and Gil Hermanos in consideration of the sugar delivered to the purchaser ex-ship. The broker, unlike the
occupation or industry in which each is engaged. The value of commission merchant, has no relation with the thing he sells or
the thing sold is taken into account only as a basis for the fixing buys. He is merely an intermediary between the purchaser and
of the amount of the tax and not as the reason and purpose the vendor. He acquires neither the possession nor the custody of
thereof. The case at bar is identical in all respects. the things sold. His only office is to bring together the parties to
It is said that this decision was reversed in Atkins, Kroll the transaction. These circumstances are present in connection
& Co. vs. Posadas (48 Phil., 352), and other cases. This, with the plaintiff's sale of the sugar which was delivered to the
however, is not correct. Neither in Atkins, Kroll & Co. vs. purchaser ex-ship. The sugar sold under these conditions was
Pasadas, nor in the other cases mentioned by the plaintiff, has the shipped by the plaintiff at its expense and risk until it reached its
decision in Gil Hermanos vs. Hord been reversed. Although a destination, where it was later taken ex-ship by the purchaser.
distinct result was reached in these cases, this was only because The plaintiff never had possession of the sugar at any time. The
they have been found to be different from the case of Gil circumstance that the bill of lading was sent to the plaintiff does
Hermanos vs. Hord. On the contrary, in F. E. Zuellig, Inc.vs. not alter its character of being merely a broker, or constitute
Collector of Internal Revenue (61 Phil., 629), the doctrine in Gil possession by it of the sugar shipped, inasmuch as the same was
Hermanos was followed. sent to it for the sole purpose of turning it over to the purchaser
The question of whether the appellant, in connection for the collection of the price. The sugar did not come to its
with the sugar delivered ex-warehouse and thereafter sold to the possession in any sense.
purchasers, acted as a commission merchant, presents no doubt.
A commission merchant is one engaged in the purchase or sale In view of the foregoing, the appealed decision is
for another of personal property which, for this purpose, is affirmed, without special pronouncement as to the costs. So
placed in his possession and at his disposal. He maintains a ordered.
relation not only with his principal and the purchasers or
vendors, but also with the property which is the subject matter of Villa-Real, Imperial, Diaz, Laurel, and Concepcion,
the transaction. In the present case, the sugar was shipped by JJ., concur.
Victorias Milling Co., and upon arrival at the port of destination,
the plaintiff received and transferred it for deposit in its
warehouses until the purchaser called for it. The deposit of the Separate Opinions
sugar in the warehouses of the plaintiff was made upon its own
MORAN, J., dissenting: Note that the law imposes the tax upon the vendor of
merchandise. In the present case, who sold the merchandise?
I regret to dissent from the majority opinion penned by Was it the Victorias Milling Company or
our illustrious and beloved Chief Justice. the Pacific Commercial Company? As to this, there is no
The tax on the sale made by the controversy on the facts. The Victorias Milling Company sold
plaintiff Pacific Commercial Company, for the account of the merchandise through the Pacific Commercial Company, or,
Victorias Milling Company, has already been paid by the latter, otherwise ,stated, the latter sold the merchandise in the former's
as the majority admits. Hence, to require name. The Victorias Milling Company is the vendor in law, and
the Pacific Commercial Company to pay the same tax is clearly the PacificCommercial Company is the vendor in fact; one
to impose double taxation upon one and the same sale. completes the personality of the other and both constitute one
efficient subject of the sale. In reality, therefore, there is but one
But the majority maintains that this is not a case of vendor and but one sale and only one thing sold, hence, only one
double taxation, because the tax in question is not a tax "upon tax may be collected, which may be paid by Victorias
property or products, but upon occupation or industry." Milling Company or by the Pacific Commercial Company,
Although, in my opinion, the tax, according to the language of alternatively.
the law, is imposed upon the transaction rather than upon the
occupation, or, at most, upon both, I would say that the It is true that the doctrine laid down in Gil Hermanos vs.
distinction made by the majority is not of much importance. The Hord (10 Phil., 218), and F. E. Zuellig, Inc. vs. Collector of
important thing is, as the majority holds, that the value of the Internal Revenue (51 Phil., 629), supports the theory held by the
transaction "is taken into account only as a basis for the fixing of majority; but this doctrine runs counter to that established in
the amount of the tax"; which means, in the last analysis, that the Atkins, Kroll & Co. Is. Posadas (48 Phil., 352). In this case,
transaction is the basis of the tax and that, as a consequence, Atkins, Kroll & Co., through Macleod & Co., Inc., a commission
where there is only one transaction, there is no more basis but for merchant, shipped a certain amount of copra to the United States.
a single tax. In the present case, there is only one sale, that made The Government sought to collect the total tax on the
by the plaintiff in the name of Victorias Milling Company, and consignment both from the owner of the copra as well as from
two taxes cannot be de manded of these two companies because the commission merchant, and this court held that the
they have brought about only one basis for the payment of one Government "has no legal right to levy and collect the same tax
tax. To impose two taxes upon them would be like holding that from two different persons on one consignment abroad on one
the plaintiff has effected one sale and the Victorias shipment of the same copra" (page 359). In other words, this
Milling Company another, which is not true, as both have court held that for a single consignment, the Government is not
realized but one sale. To make this sale twice as a basis for the entitled to collect two taxes, one from the owner of the
collection of two taxes is unjust and unlawful, because a single merchandise and the other from the commission merchant. It is
transaction is thereby pluralized and, moreover, in such case, the true that it had to do with a consignment and not a sale; but both
proportion between the amount of the total tax collected and the transactions are governed by the same legal provision, namely
true value of the only transaction made would exceed the rate section 1459 of the Administrative Code.
fixed by law. The Government is not entitled to receive more Upon the question at issue, our jurisprudence is
than one tax for a single transaction. wavering, if not confusing and contradictory, and I had wished
that this court make a revision thereof to lay down clearly and
definitely a more just and equitable doctrine for the good of
commerce. In my opinion, the Government has no right to
receive more than one tax for a single transaction. A contrary
doctrine would be detrimental to local merchants. If a foreign
merchant sells his merchandise through a resident commission
merchant, the Government will not collect more than one tax,
and will do so from the commission merchant. But if a resident
merchant makes a similar transaction, the Government will
collect the tax twice, from the merchant and from the
commission merchant. I do not believe that the legislator
intended a measure so unjust to the merchants of the country.
||| (Pacific Commercial Co. v. Yatco, G.R. No. 45976, [July 20,
1939], 68 PHIL 398-405)
consignment tax applies, irrespective of who made out the bills
of lading or placed said merchandise on board the vessels.

DECISION
FIRST DIVISION

[G.R. No. 46722. June 27, 1940.] MORAN, J p:

The stipulation of facts discloses that in August, 1932,


PACIFIC COMMERCIAL COMPANY, plaintif
plaintiff Pacific Commercial Company, a Philippine corporation,
f-appellant, vs. ALFREDO L. YATCO, as
purchased for its New York office, 6,000 tons of centrifugal
Collector of Internal Revenue of the
sugar from the Calamba Sugar Estate Planters at the prices
Philippines, defendant-appellee.
specified in the letters-contract. It was agreed, inter alia, that the
freight charges shall be paid at destination by the New York
E. P. Sevilla for appellant. office and that payment would be made upon delivery of the
shipping documents. On January 28; 1933, the seller loaded
Solicitor-General Ozaeta and Assistant Solicitor- 3,000 tons of sugar on board the s. s. Chastine Maersk, and on
General Concepcion for appellee. March 30, 1933, another 3,000 tons on board the s. s. Ferndale.
The first vessel sailed from Manila at 6 p. m. of January 28,
1933, and the second, at 12.05 p. m. of March 31, 1933. After the
SYLLABUS cargo has been loaded on, and before the vessels left port, one
Amado M. Honorio as agent of the Calamba Sugar Estate
1. CONSIGNMENT TAX; CONSIGNOR. — In the Planters indorsed in blank and delivered to plaintiff the shipping
instant case, it appears that the bills of lading covering the sugar documents. Payments were correspondingly made by the
in question were indorsed in blank and delivered to the plaintiff plaintiff which were later debited to the account of its New York
by the agent of the seller before the vessels left port. This office. The defendant Collector of Internal Revenue assessed a
indorsement operates to pass title to, and constitutes a consignment tax of P13,479.04, including surcharge, which
constructive but nonetheless complete delivery of, the plaintiff paid under protest and for the recovery of which an
merchandise to the plaintiff at the point of shipment. (4 R. C. L., action was brought in the Court of First Instance of Manila. The
p. 31.) Under such circumstance, plaintiff alone could logically complaint having been dismissed, the present appeal was taken.
ship the cargo to its New York office. The tax imposed by law is Plaintiff contends that it is not subject to the
on merchandise "consigned abroad" and not from one party to consignment tax provided in section 1459 of the Revised
another within the Philippines. The party, therefore, who ships Administrative Code, because, upon the facts of the case, it is a
the merchandise abroad is the consignor upon whom the consignee, not a consignor, of the sugar in question. Reliance is
placed upon the stipulation in the contracts to the effect that
shipment is to be made by the seller.
A condition in a contract is at best prima facie evidence,
and is by no means conclusive, of what actually transpired after
its execution. In the instant case, it appears that the bills of lading
covering the sugar in question were indorsed in blank and
delivered to the plaintiff by the agent of the seller before the
vessels left port. This indorsement operates to pass title to, and
constitutes a constructive but nonetheless complete delivery of,
the merchandise to the plaintiff at the point of shipment. (4 R. C.
L. p., 31.) Under such circumstance, plaintiff alone could
logically ship the cargo to its New York office.
Appellant seems to labor under an erroneous impression
that it could not be a consignor because the vendor was the party
"who made out and signed the bills of lading and placed the
sugar on board the ship." Be this as it may, a matter which is
disputed by the appellee, the making out of bills of lading and
the placing of the merchandise aboard the ship supply no
decisive criterion for determining who the actual consignor is,
for the application of the tax in question. The tax imposed by law
is on merchandise "consigned aboard" and not from one party to
another within the Philippines. The party, therefore, who ships
the merchandise aboard is the consignor upon whom the
consignment tax applies, irrespective of who made out the bills
of lading of placed said merchandise on board the vessel.
Judgment is affirmed, with costs against appellant.
Avanceña, C.J., Imperial, Diaz, Laurel, and Concepcion,
JJ., concur.
||| (Pacific Commercial Co. v. Yatco, G.R. No. 46722, [June 27,
1940], 70 PHIL 285-287)
pipe products. Its manufacturing operations were conducted on
eight parcels of land with a total area of 47,233 square meters.
The properties, located in Mandaluyong City, Metro Manila,
were covered by Transfer Certificates of Title Nos. 451117,
451118, 451119, 451120, 451121, 451122, 451124 and 451125
under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned
by Eteroutremer S.A. Corporation (ESAC), a corporation
organized and registered under the laws of Belgium. 3 Jack
FIRST DIVISION
Glanville, an Australian citizen, was the General Manager and
President of EC, while Claude Frederick Delsaux was the
[G.R. No. 144805. June 8, 2006.] Regional Director for Asia of ESAC. Both had their offices in
Belgium.
EDUARDO V. LITONJUA, JR. and ANTONIO In 1986, the management of ESAC grew concerned
K. LITONJUA, petitioners, vs. ETERNIT about the political situation in the Philippines and wanted to stop
CORPORATION (now ETERTON MULTI- its operations in the country. The Committee for Asia of ESAC
RESOURCES CORPORATION), instructed Michael Adams, a member of EC's Board of Directors,
ETEROUTREMER, S.A. and FAR EAST to dispose of the eight parcels of land. Adams engaged the
BANK & TRUST COMPANY, respondents. services of realtor/broker Lauro G. Marquez so that the
properties could be offered for sale to prospective buyers.
Glanville later showed the properties to Marquez.
DECISION Marquez thereafter offered the parcels of land and the
improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua
& Company, Inc. In a Letter dated September 12, 1986, Marquez
CALLEJO, SR., J p: declared that he was authorized to sell the properties for
P27,000,000.00 and that the terms of the sale were subject to
On appeal via a Petition for Review on Certiorari is the negotiation. 4
Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. Eduardo Litonjua, Jr. responded to the offer. Marquez
51022, which affirmed the Decision of the Regional Trial Court showed the property to Eduardo Litonjua, Jr., and his brother
(RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well Antonio K. Litonjua. The Litonjua siblings offered to buy the
as the Resolution 2 of the CA denying the motion for property for P20,000,000.00 cash. Marquez apprised Glanville of
reconsideration thereof. the Litonjua siblings' offer and relayed the same to Delsaux in
The Eternit Corporation (EC) is a corporation duly Belgium, but the latter did not respond. On October 28, 1986,
organized and registered under Philippine laws. Since 1950, it Glanville telexed Delsaux in Belgium, inquiring on his
had been engaged in the manufacture of roofing materials and position/counterproposal to the offer of the Litonjua siblings. It
was only on February 12, 1987 that Delsaux sent a telex to Delsaux himself later sent a letter dated May 22, 1987,
Glanville stating that, based on the "Belgian/Swiss decision," the confirming that the ESAC Regional Office had decided not to
final offer was "US$1,000,000.00 and P2,500,000.00 to cover all proceed with the sale of the subject land, to wit:
existing obligations prior to final liquidation." 5
May 22, 1987
Marquez furnished Eduardo Litonjua, Jr. with a copy of
the telex sent by Delsaux. Litonjua, Jr. accepted the Mr. L.G. Marquez
counterproposal of Delsaux. Marquez conferred with Glanville, L.G. Marquez, Inc.
and in a Letter dated February 26, 1987, confirmed that the
Litonjua siblings had accepted the counter-proposal of Delsaux. 334 Makati Stock Exchange Bldg.
He also stated that the Litonjua siblings would confirm full 6767 Ayala Avenue
payment within 90 days after execution and preparation of all
documents of sale, together with the necessary governmental Makati, Metro Manila
clearances. 6
Philippines
The Litonjua brothers deposited the amount of
US$1,000,000.00 with the Security Bank & Trust Company, Dear Sir:
Ermita Branch, and drafted an Escrow Agreement to expedite the Re: Land of Eternit Corporation
sale. 7
I would like to confirm officially that our Group
Sometime later, Marquez and the Litonjua brothers has decided not to proceed with the sale of the
inquired from Glanville when the sale would be implemented. In land which was proposed to you. EaSCAH
a telex dated April 22, 1987, Glanville informed Delsaux that he
had met with the buyer, which had given him the impression that The Committee for Asia of our Group met recently
"he is prepared to press for a satisfactory conclusion to the (meeting every six months) and examined the
sale." 8 He also emphasized to Delsaux that the buyers were position as far as the Philippines are (sic)
concerned because they would incur expenses in bank concerned. Considering [the] new political
commitment fees as a consequence of prolonged period of situation since the departure of MR. MARCOS
inaction. 9 and a certain stabilization in the Philippines,
the Committee has decided not to stop our
Meanwhile, with the assumption of Corazon C. Aquino
operations in Manila. In fact, production has
as President of the Republic of the Philippines, the political
started again last week, and (sic) to recognize the
situation in the Philippines had improved. Marquez received a
participation in the Corporation.
telephone call from Glanville, advising that the sale
would nolonger proceed. Glanville followed it up with a Letter We regret that we could not make a deal with you
dated May 7, 1987, confirming that he had been instructed by his this time, but in case the policy would change at a
principal to inform Marquez that "the decision has been taken at later state, we would consult you again.
a Board Meeting not to sell the properties on which Eternit
Corporation is situated." 10 xxx xxx xxx
Yours sincerely, on the ground that there is no valid and binding
sale between the plaintiffs and said defendants.
(Sgd.)
The complaint as against Far East Bank and Trust
C.F. DELSAUX Company is likewise dismissed for lack of cause
cc. To: J. GLANVILLE (Eternit Corp.) 11 of action.

When apprised of this development, the Litonjuas, The counterclaim of Eternit Corporation now
through counsel, wrote EC, demanding payment for damages Eterton Multi-Resources Corporation and
they had suffered on account of the aborted sale. EC, however, Eteroutremer, S.A. is also dismissed for lack of
rejected their demand. merit. 13
The Litonjuas then filed a complaint for specific The trial court declared that since the authority of the
performance and damages against EC (now the Eterton Multi- agents/realtors was not in writing, the sale is void and not merely
Resources Corporation) and the Far East Bank & Trust unenforceable, and as such, could not have been ratified by the
Company, and ESAC in the RTC of Pasig City. An amended principal. In any event, such ratification cannot be given any
complaint was filed, in which defendant EC was substituted by retroactive effect. Plaintiffs could not assume that defendants had
Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. agreed to sell the property without a clear authorization from the
Tan, Stock Ha T. Tan and Deogracias G. Eufemio were corporation concerned, that is, through resolutions of the Board
impleaded as additional defendants on account of their purchase of Directors and stockholders. The trial court also pointed out
of ESAC shares of stocks and were the controlling stockholders that the supposed sale involves substantially all the assets of
of EC. defendant EC which would result in the eventual total cessation
of its operation. 14
In their answer to the complaint, EC and ESAC alleged
that since Eteroutremer was not doing business in the The Litonjuas appealed the decision to the CA, alleging
Philippines, it cannot be subject to the jurisdiction of Philippine that "(1) the lower court erred in concluding that the real estate
courts; the Board and stockholders of EC never approved any broker in the instant case needed a written authority from
resolution to sell subject properties nor authorized Marquez to appellee corporation and/or that said broker had no such written
sell the same; and the telex dated October 28, 1986 of Jack authority; and (2) the lower court committed grave error of law
Glanville was his own personal making which did not bind EC. in holding that appellee corporation is not legally bound for
specific performance and/or damages in the absence of an
On July 3, 1995, the trial court rendered judgment in
enabling resolution of the board of directors." 15They averred
favor of defendants and dismissed the amended
that Marquez acted merely as a broker or go-between and not as
complaint. 12The fallo of the decision reads:
agent of the corporation; hence, it was not necessary for him to
WHEREFORE, the complaint against Eternit be empowered as such by any written authority. They further
Corporation now Eterton Multi-Resources claimed that an agency by estoppel was created when the
Corporation and Eteroutremer, S.A. is dismissed corporation clothed Marquez with apparent authority to negotiate
for the sale of the properties. However, since it was a bilateral
contract to buy and sell, it was equivalent to a perfected contract AUTHORITY FROM RESPONDENT ETERNIT
of sale, which the corporation was obliged to BEFORE THE SALE CAN BE
consummate. cSHIaA PERFECTED. CIcTAE
In reply, EC alleged that Marquez had no written III
authority from the Board of Directors to bind it; neither were
Glanville and Delsaux authorized by its board of directors to THE COURT OF APPEALS ERRED IN NOT
offer the property for sale. Since the sale involved substantially HOLDING THAT GLANVILLE AND
all of the corporation's assets, it would necessarily need the DELSAUX HAVE THE NECESSARY
authority from the stockholders. AUTHORITY TO SELL THE SUBJECT
PROPERTIES, OR AT THE VERY LEAST,
On June 16, 2000, the CA rendered judgment affirming WERE KNOWINGLY PERMITTED BY
the decision of the RTC. 16 The Litonjuas filed a motion for RESPONDENT ETERNIT TO DO ACTS
reconsideration, which was also denied by the appellate court. WITHIN THE SCOPE OF AN APPARENT
The CA ruled that Marquez, who was a real estate AUTHORITY, AND THUS HELD THEM OUT
broker, was a special agent within the purview of Article 1874 of TO THE PUBLIC AS POSSESSING POWER TO
the New Civil Code. Under Section 23 of the Corporation Code, SELL THE SAID PROPERTIES. 17
he needed a special authority from EC's board of directors to Petitioners maintain that, based on the facts of the case,
bind such corporation to the sale of its properties. Delsaux, who there was a perfected contract of sale of the parcels of land and
was merely the representative of ESAC (the majority stockholder the improvements thereon for "US$1,000,000.00 plus
of EC) had no authority to bind the latter. The CA pointed out P2,500,000.00 to cover obligations prior to final liquidation."
that Delsaux was not even a member of the board of directors of Petitioners insist that they had accepted the counter-offer of
EC. Moreover, the Litonjuas failed to prove that an agency by respondent EC and that before the counter-offer was withdrawn
estoppel had been created between the parties. by respondents, the acceptance was made known to them
through real estate broker Marquez.
In the instant petition for review, petitioners aver that Petitioners assert that there was no need for a written
authority from the Board of Directors of EC for Marquez to
I validly act as broker/middleman/intermediary. As broker,
THE COURT OF APPEALS ERRED IN Marquez was not an ordinary agent because his authority was of
HOLDING THAT THERE a special and limited character in most respects. His only job as a
WAS NO PERFECTED CONTRACT OF SALE. broker was to look for a buyer and to bring together the parties to
the transaction. He was not authorized to sell the properties or to
II make a binding contract to respondent EC; hence, petitioners
argue, Article 1874 of the New Civil Code does not apply.
THE APPELLATE COURT COMMITTED
GRAVE ERROR OF LAW IN HOLDING THAT In any event, petitioners aver, what is important and
MARQUEZ NEEDED A WRITTEN decisive was that Marquez was able to communicate both the
offer and counter-offer and their acceptance of respondent EC's 7. More importantly, Exhibits "G" and "H" of the
counter-offer, resulting in a perfected contract of sale. Respondents, which evidenced the fact that
Petitioners' offer was allegedly REJECTED by
Petitioners posit that the testimonial and documentary
both Glanville and Delsaux. 18
evidence on record amply shows that Glanville, who was the
President and General Manager of respondent EC, and Delsaux, Petitioners insist that it is incongruous for Glanville and
who was the Managing Director for ESAC Asia, had the Delsaux to make a counter-offer to petitioners' offer and
necessary authority to sell the subject property or, at least, had thereafter reject such offer unless they were authorized to do so
been allowed by respondent EC to hold themselves out in the by respondent EC. Petitioners insist that Delsaux confirmed his
public as having the power to sell the subject properties. authority to sell the properties in his letter to Marquez, to wit:
Petitioners identified such evidence, thus:
Dear Sir,
1. The testimony of Marquez that he was chosen
by Glanville as the then President and General Re: Land of Eternit Corporation
Manager of Eternit, to sell the properties of said I would like to confirm officially that our Group
corporation to any interested party, which has decided not to proceed with the sale of the
authority, as hereinabove discussed, need not be in land which was proposed to you.
writing.
The Committee for Asia of our Group met recently
2. The fact that the NEGOTIATIONS for the sale (meeting every six months) and examined the
of the subject properties spanned SEVERAL position as far as the Philippines are (sic)
MONTHS, from 1986 to 1987; concerned. Considering the new political situation
3. The COUNTER-OFFER made by Eternit since the departure of MR. MARCOS and a
through GLANVILLE to sell its properties to the certain stabilization in the Philippines, the
Petitioners; Committee has decided not to stop our operations
in Manila[.] [I]n fact production started again last
4. The GOOD FAITH of Petitioners in believing week, and (sic) to reorganize the participation in
Eternit's offer to sell the properties as evidenced the Corporation. SITCcE
by the Petitioners' ACCEPTANCE of the counter-
offer; We regret that we could not make a deal with
you this time, but in case the policy would
5. The fact that Petitioners DEPOSITED the price change at a later stage we would consult you
of [US]$1,000,000.00 with the Security Bank and again.
that an ESCROW agreement was drafted over the
subject properties; In the meantime, I remain

6. Glanville's telex to Delsaux inquiring Yours sincerely,


"WHEN WE (Respondents) WILL IMPLEMENT
ACTION TO BUY AND SELL";
C.F. respondent EC and the petitioners' acceptance thereof. There
DE was no time that they acted without the knowledge of
LS respondents. In fact, respondent EC never repudiated the acts of
AU Glanville, Marquez and Delsaux.
X1
The petition has no merit.
9
Anent the first issue, we agree with the contention of
Petitioners further emphasize that they acted in good respondents that the issues raised by petitioner in this case are
faith when Glanville and Delsaux were knowingly permitted by factual. Whether or not Marquez, Glanville, and Delsaux were
respondent EC to sell the properties within the scope of an authorized by respondent EC to act as its agents relative to the
apparent authority. Petitioners insist that respondents held sale of the properties of respondent EC, and if so, the boundaries
themselves to the public as possessing power to sell the subject of their authority as agents, is a question of fact. In the absence
properties. of express written terms creating the relationship of an agency,
By way of comment, respondents aver that the issues the existence of an agency is a fact question.20 Whether an
raised by the petitioners are factual, hence, are proscribed by agency by estoppel was created or whether a person acted within
Rule 45 of the Rules of Court. On the merits of the petition, the bounds of his apparent authority, and whether the principal is
respondents EC (now EMC) and ESAC reiterate their estopped to deny the apparent authority of its agent are, likewise,
submissions in the CA. They maintain that Glanville, Delsaux questions of fact to be resolved on the basis of the evidence on
and Marquez had no authority from the stockholders of record. 21 The findings of the trial court on such issues, as
respondent EC and its Board of Directors to offer the properties affirmed by the CA, are conclusive on the Court, absent evidence
for sale to the petitioners, or to any other person or entity for that that the trial and appellate courts ignored, misconstrued, or
matter. They assert that the decision and resolution of the CA are misapplied facts and circumstances of substance which, if
in accord with law and the evidence on record, and should be considered, would warrant a modification or reversal of the
affirmed in toto. outcome of the case. 22
Petitioners aver in their subsequent pleadings that It must be stressed that issues of facts may not be raised
respondent EC, through Glanville and Delsaux, conformed to the in the Court under Rule 45 of the Rules of Court because the
written authority of Marquez to sell the properties. The authority Court is not a trier of facts. It is not to re-examine and assess the
of Glanville and Delsaux to bind respondent EC is evidenced by evidence on record, whether testimonial and documentary. There
the fact that Glanville and Delsaux negotiated for the sale of 90% are, however, recognized exceptions where the Court may delve
of stocks of respondent EC to Ruperto Tan on June 1, 1997. into and resolve factual issues, namely:
Given the significance of their positions and their duties in (1) When the conclusion is a finding grounded
respondent EC at the time of the transaction, and the fact that entirely on speculations, surmises, or conjectures;
respondent ESAC owns 90% of the shares of stock of respondent (2) when the inference made is manifestly
EC, a formal resolution of the Board of Directors would be a mistaken, absurd, or impossible; (3) when there is
mere ceremonial formality. What is important, petitioners grave abuse of discretion; (4) when the judgment
maintain, is that Marquez was able to communicate the offer of is based on a misapprehension of facts; (5) when
the findings of fact are conflicting; (6) when the this Code shall be exercised, all business
Court of Appeals, in making its findings, went conducted and all property of such corporations
beyond the issues of the case and the same is controlled and held by the board of directors or
contrary to the admissions of both appellant and trustees to be elected from among the holders of
appellee; (7) when the findings of the Court of stocks, or where there is no stock, from among the
Appeals are contrary to those of the trial court; (8) members of the corporation, who shall hold office
when the findings of fact are conclusions without for one (1) year and until their successors are
citation of specific evidence on which they are elected and qualified.
based; (9) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by
the parties, which, if properly considered, would Indeed, a corporation is a juridical person separate and
justify a different conclusion; and (10) when the distinct from its members or stockholders and is not affected by
findings of fact of the Court of Appeals are the personal rights, obligations and transactions of the
premised on the absence of evidence and are latter. 25 It may act only through its board of directors or, when
contradicted by the evidence on record. 23 authorized either by its by-laws or by its board resolution,
We have reviewed the records thoroughly and find that through its officers or agents in the normal course of business.
the petitioners failed to establish that the instant case falls under The general principles of agency govern the relation between the
any of the foregoing exceptions. Indeed, the assailed decision of corporation and its officers or agents, subject to the articles of
the Court of Appeals is supported by the evidence on record and incorporation, by-laws, or relevant provisions of law. 26
the law. DAaIEc Under Section 36 of the Corporation Code, a corporation
It was the duty of the petitioners to prove that respondent may sell or convey its real properties, subject to the limitations
EC had decided to sell its properties and that it had empowered prescribed by law and the Constitution, as follows:
Adams, Glanville and Delsaux or Marquez to offer the properties SEC. 36. Corporate powers and capacity. —
for sale to prospective buyers and to accept any counter-offer. Every corporation incorporated under this Code
Petitioners likewise failed to prove that their counter-offer had has the power and capacity:
been accepted by respondent EC, through Glanville and Delsaux.
It must be stressed that when specific performance is sought of a xxx xxx xxx
contract made with an agent, the agency must be established by 7. To purchase, receive, take or grant, hold,
clear, certain and specific proof. 24 convey, sell, lease, pledge, mortgage and
Section 23 of Batas Pambansa Bilang 68, otherwise otherwise deal with such real and personal
known as the Corporation Code of the Philippines, provides: property, including securities and bonds of other
corporations, as the transaction of a lawful
SEC. 23. The Board of Directors or Trustees. — business of the corporation may reasonably and
Unless otherwise provided in this Code, the necessarily require, subject to the limitations
corporate powers of all corporations formed under prescribed by the law and the Constitution.
The property of a corporation, however, is not the repudiate the agency knowing that another person is acting on
property of the stockholders or members, and as such, may not his behalf without authority. Acceptance by the agent may be
be sold without express authority from the board of expressed, or implied from his acts which carry out the agency,
directors. 27 Physical acts, like the offering of the properties of or from his silence or inaction according to the
the corporation for sale, or the acceptance of a counter-offer of circumstances. 34 Agency may be oral unless the law requires a
prospective buyers of such properties and the execution of the specific form. 35 However, to create or convey real rights over
deed of sale covering such property, can be performed by the immovable property, a special power of attorney is
corporation only by officers or agents duly authorized for the necessary. 36 Thus, when a sale of a piece of land or any portion
purpose by corporate by-laws or by specific acts of the board of thereof is through an agent, the authority of the latter shall be in
directors. 28 Absent such valid delegation/authorization, the rule writing, otherwise, the sale shall be void. 37
is that the declarations of an individual director relating to the
In this case, the petitioners as plaintiffs below, failed to
affairs of the corporation, but not in the course of, or connected
adduce in evidence any resolution of the Board of Directors of
with, the performance of authorized duties of such director, are
respondent EC empowering Marquez, Glanville or Delsaux as its
not binding on the corporation. 29
agents, to sell, let alone offer for sale, for and in its behalf, the
While a corporation may appoint agents to negotiate for eight parcels of land owned by respondent EC including the
the sale of its real properties, the final say will have to be with improvements thereon. The bare fact that Delsaux may have
the board of directors through its officers and agents as been authorized to sell to Ruperto Tan the shares of stock of
authorized by a board resolution or by its by-laws. 30 An respondent ESAC, on June 1, 1997, cannot be used as basis for
unauthorized act of an officer of the corporation is not binding petitioners' claim that he had likewise been authorized by
on it unless the latter ratifies the same expressly or impliedly by respondent EC to sell the parcels of land. CIAHDT
its board of directors. Any sale of real property of a corporation
Moreover, the evidence of petitioners shows that Adams
by a person purporting to be an agent thereof but without written
and Glanville acted on the authority of Delsaux, who, in turn,
authority from the corporation is null and void. The declarations
acted on the authority of respondent ESAC, through its
of the agent alone are generally insufficient to establish the fact
Committee for Asia, 38 the Board of Directors of respondent
or extent of his/her authority. 31
ESAC, 39 and the Belgian/Swiss component of the management
By the contract of agency, a person binds himself to of respondent ESAC. 40 As such, Adams and Glanville engaged
render some service or to do something in representation on the services of Marquez to offer to sell the properties to
behalf of another, with the consent or authority of the prospective buyers. Thus, on September 12, 1986, Marquez
latter. 32 Consent of both principal and agent is necessary to wrote the petitioner that he was authorized to offer for sale the
create an agency. The principal must intend that the agent shall property for P27,000,000.00 and the other terms of the sale
act for him; the agent must intend to accept the authority and act subject to negotiations. When petitioners offered to purchase the
on it, and the intention of the parties must find expression either property for P20,000,000.00, through Marquez, the latter relayed
in words or conduct between them. 33 petitioners' offer to Glanville; Glanville had to send a telex to
Delsaux to inquire the position of respondent ESAC to
An agency may be expressed or implied from the act of
petitioners' offer. However, as admitted by petitioners in their
the principal, from his silence or lack of action, or his failure to
Memorandum, Delsaux was unable to reply immediately to the
telex of Glanville because Delsaux had to wait for confirmation to sell the said properties to the petitioners. A person dealing
from respondent ESAC. 41 When Delsaux finally responded to with a known agent is not authorized, under any circumstances,
Glanville on February 12, 1987, he made it clear that, based on blindly to trust the agents; statements as to the extent of his
the "Belgian/Swiss decision" the final offer of respondent ESAC powers; such person must not act negligently but must use
was US$1,000,000.00 plus P2,500,000.00 to cover all existing reasonable diligence and prudence to ascertain whether the agent
obligations prior to final liquidation. 42 The offer of Delsaux acts within the scope of his authority. 45 The settled rule is that,
emanated only from the "Belgian/Swiss decision," and not the persons dealing with an assumed agent are bound at their peril,
entire management or Board of Directors of respondent ESAC. and if they would hold the principal liable, to ascertain not only
While it is true that petitioners accepted the counter-offer of the fact of agency but also the nature and extent of authority, and
respondent ESAC, respondent EC was not a party to the in case either is controverted, the burden of proof is upon them to
transaction between them; hence, EC was not bound by such prove it. 46 In this case, the petitioners failed to discharge their
acceptance. burden; hence, petitioners are not entitled to damages from
respondent EC. cCEAHT
While Glanville was the President and General Manager
of respondent EC, and Adams and Delsaux were members of its It appears that Marquez acted not only as real estate
Board of Directors, the three acted for and in behalf of broker for the petitioners but also as their agent. As gleaned from
respondent ESAC, and not as duly authorized agents of the letter of Marquez to Glanville, on February 26, 1987, he
respondent EC; a board resolution evincing the grant of such confirmed, for and in behalf of the petitioners, that the latter had
authority is needed to bind EC to any agreement regarding the accepted such offer to sell the land and the improvements
sale of the subject properties. Such board resolution is not a mere thereon. However, we agree with the ruling of the appellate court
formality but is a condition sine qua non to bind respondent EC. that Marquez had no authority to bind respondent EC to sell the
Admittedly, respondent ESAC owned 90% of the shares of subject properties. A real estate broker is one who negotiates the
stocks of respondent EC; however, the mere fact that a sale of real properties. His business, generally speaking, is only
corporation owns a majority of the shares of stocks of another, or to find a purchaser who is willing to buy the land upon terms
even all of such shares of stocks, taken alone, will not justify fixed by the owner. He has no authority to bind the principal by
their being treated as one corporation. 43 signing a contract of sale. Indeed, an authority to find a
purchaser of real property does not include an authority to
It bears stressing that in an agent-principal relationship,
sell. 47
the personality of the principal is extended through the facility of
the agent. In so doing, the agent, by legal fiction, becomes the Equally barren of merit is petitioners' contention that
principal, authorized to perform all acts which the latter would respondent EC is estopped to deny the existence of a principal-
have him do. Such a relationship can only be effected with the agency relationship between it and Glanville or Delsaux. For an
consent of the principal, which must not, in any way, be agency by estoppel to exist, the following must be established:
compelled by law or by any court. 44 (1) the principal manifested a representation of the agent's
authority or knowlingly allowed the agent to assume such
The petitioners cannot feign ignorance of the absence of
authority; (2) the third person, in good faith, relied upon such
any regular and valid authority of respondent EC empowering
representation; (3) relying upon such representation, such third
Adams, Glanville or Delsaux to offer the properties for sale and
person has changed his position to his detriment. 48 An agency
by estoppel, which is similar to the doctrine of apparent 6.Id. at 397-398.
authority, requires proof of reliance upon the representations, and
that, in turn, needs proof that the representations predated the 7.Id. at 240.
action taken in reliance. 49 Such proof is lacking in this case. In 8.Id. at 241.
their communications to the petitioners, Glanville and Delsaux
positively and unequivocally declared that they were acting for 9.Id.
and in behalf of respondent ESAC. 10.Id. at 399.
11.Id. at 349-400.
Neither may respondent EC be deemed to have ratified
the transactions between the petitioners and respondent ESAC, 12.Id. at 163-175.
through Glanville, Delsaux and Marquez. The transactions and 13.Id. at 174-175.
the various communications inter se were never submitted to the
Board of Directors of respondent EC for ratification. 14.Id. at 173-174.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for 15.Id. at 47-48.
lack of merit. Costs against the petitioners.
16.Id. at 40-53.
SO ORDERED.
17.Id. at 15.
Panganiban, C.J., Austria-Martinez and Chico-Nazario, JJ., concur.
18.Id. at 29-30.
Ynares-Santiago, J., is on leave.
19.Id. at 30-31.
20.Weathersby v. Gore, 556 F.2d 1247 (1977).
Footnotes 21.Cavic v. Grand Bahama Development Co., Ltd., 701 F.2d 879
(1983).
1.Penned by Associate Justice Remedios A. Salazar-Fernando, with 22.Culaba v. Court of Appeals, G.R. No. 125862, April 15, 2004,
Associate Justices Fermin A. Martin, Jr. and Salvador J. 427 SCRA 721, 729; Litonjua v. Fernandez, G.R. No.
Valdez, Jr. (retired), concurring; rollo, pp. 40-53. 148116, April 14, 2004, 427 SCRA 478, 489.
2.Rollo, pp. 54-55. 23.Nokom v. National Labor Relations Commission, 390 Phil.
3.Id. at 11, 61. 1228, 1242-1243 (2000). (citations omitted)

4.Id. at 394-395. 24.Blair v. Sheridan, 10 S.E. 414 (1889).

5.Id. at 396. 25.Philippine National Bank v. Ritratto Group, Inc., 414 Phil. 494,
503 (2001).
26.San Juan Structural and Steel Fabricators, Inc. v. Court of 44.Orient Air Services and Hotel Representatives v. Court of
Appeals, 357 Phil. 631, 644 (1998). Appeals, 274 Phil. 927, 939 (1991).
27.Traders Royal Bank v. Court of Appeals, G.R. No. 78412, 45.Hill v. Delta Loan and Finance Company, 277 S.W. 2d 63, 65.
September 26, 1989, 177 SCRA 788, 792.
46.Litonjua v. Fernandez, supra note 22, at 494; Culaba v. Court
28.BPI Leasing Corporation v. Court of Appeals, G.R. No. 127624, of Appeals, supra note 22, at 730; BA Finance
November 18, 2003, 416 SCRA 4, 11. Corporation v. Court of Appeals, G.R. No. 94566, July 3,
1992, 211 SCRA 112, 116.
29.AF Realty & Development, Inc. v. Dieselman Freight Services,
Co., 424 Phil. 446, 454 (2002). 47.Donnan v. Adams, 71 S.W. 580.
30.De Liano v. Court of Appeals, 421 Phil. 1033, 1052 (2001). 48.Carolina-Georgia Carpet and Textiles, Inc. v. Pelloni, 370 So.
2d 450 (1979).
31.Litonjua v. Fernandez, supra note 22, at 493.
49.Id.
32.Article 1868, NEW CIVIL CODE.
33.Ellison v. Hunsinger, 75 S.E. 2d. 884 (1953); Dominion
Insurance Corporation v. Court of Appeals, 426 Phil. 620, ||| (Litonjua Jr. v. Eternit Corp., G.R. No. 144805, [June 8, 2006],
626 (2002). 523 PHIL 588-612)
34CIVIL CODE, Art. 1870.
35.CIVIL CODE, Art. 1869, paragraph 2.
36.CIVIL CODE, Art. 1878(12).
37.CIVIL CODE, Art. 1874.
38.Exhibits "H" and "H-1," rollo, p. 166.
39.Exhibits "G" and "G-1," id.
40.Exhibits "C" and "C-1," id. at 165.
41.Rollo, p. 396.
42.Exhibits "C" and "C-1," rollo, p. 165.
43.Philippine National Bank v. Ritratto Group, Inc., supra note 25,
at 503.
fidelity, honesty, candor and fairness on the part of the agent, the real
estate broker in this case, to his principal, the vendor. The law
imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions
and other material facts relevant to the agency, so much so that the
law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as
EN BANC void. The duly of an agent is likened to that of a trustee. This is not a
technical or arbitrary rule but a rule founded on the highest and truest
[G.R. No. L-30573. October 29, 1971.] principle of morality as well as of the strictest justice.
2. ID.; ID.; ID.; ID.; EFFECT OF BREACH OF LOYALTY. — An
VICENTE M. DOMINGO, represented by his agent who takes a secret profit in the nature of a bonus, gratuity or
heirs, ANTONIA RAYMUNDO VDA. personal benefit from the vendee, without revealing the same to his
DE DOMINGO, RICARDO, CESAR, principal, the vendor, is guilty of a breach of his loyalty to the
AMELIA, VICENTE JR., SALVADOR, IRENE principal and forfeits his right to collect the commission from his
and JOSELITO, all principal, even if the principal does not suffer any injury by reason of
surnamed DOMINGO, petitioners-appellants, vs such breach of fidelity, or that he obtained better results or that the
. GREGORIO M. DOMINGO, intervenor- agency is a gratuitous one, or that usage or custom allows it, because
respondent. the rule is to prevent the possibility of any wrong, not to remedy or
repair an actual damage.

Teofilo Leonin for petitioners-appellants. 3. ID.; ID.; ID.; ID.; ID.; TAKING OF SECRET PROFIT,
TANTAMOUNT TO BREACH. — By taking such profit or bonus or
Osorio, Osorio & Osorio for respondent-appellee. gift orpropina from the vendee, the agent thereby assumes a position
wholly inconsistent with that of being an agent for his principal, who
Teofilo P. Purisima in his own behalf as intervenor-
has a right to treat him, insofar as his commission is concerned, as if
respondent.
no agency had existed. The fact that the principal may have been
benefited by the valuable services of the said agent does not
SYLLABUS exculpate the agent who has only himself to blame for such a result
by reason of his treachery or perfidy.
1. CIVIL LAW; AGENCY; ARTICLES 1891 AND 1909 OF THE 4. ID.; ID.; ID.; ID.; ID.; LIABILITY FOR ESTAFA. — Because of
NEW CIVIL CODE; DUTY OF AGENT TO PRINCIPAL. — The his responsibility under the aforecited Article 1720, an agent is
duties and liabilities of a broker to his employer are essentially those likewise liable for estafa for failure to deliver to his principal the
which an agent owes to his principal. Consequently, the decisive total amount collected by him in behalf of his principal and cannot
legal provisions are found in Articles 1891 and 1909 of the New retain the commission pertaining to him by subtracting the same
Civil Code. The aforecited provisions demand the utmost good faith, from his collections.
5. ID.; ID.; ID.; ID.; ID.; ID.; PRINCIPAL ENTITLED TO 7. ID.; ID.; ID.; ID.; WHEN INAPPLICABLE. — The duty
RECOVERY OF COMMISSIONS PAID. — Where a principal has embodied in Article 1891 of the New Civil Code will not apply if the
paid an agent or broker a commission while ignorant of the fact that agent or broker acted only as a middleman with the task of merely
the latter has been unfaithful, the principal may recover back the bringing together the vendor and vendee, who themselves thereafter
commission paid, since an agent or broker who has been unfaithful is will negotiate on the terms and conditions of the transaction. Neither
not entitled to any compensation. If the agent does not conduct would the rule apply if the agent or broker had informed the principal
himself with entire fidelity towards his principal, but is guilty of of the gift or bonus or profit he received from the purchaser and his
taking a secret profit or commission in regard the matter in which he principal did not object thereto. Herein defendant-appellee
is employed, he loses his right to compensation on the ground that he Gregorio Domingo was not merely a middleman of the petitioner-
has taken a position wholly inconsistent with that of agent for his appellant VicenteDomingo and the buyer Oscar de Leon. He was the
employer, and which gives his employer, upon discovering it, the broker and agent of said petitioner-appellant only. And herein
right to treat him so far as compensation, at least, is concerned as if petitioner-appellant was not aware of the gift of One Thousand Pesos
no agency had existed. This may operate to give to the principal the (P1,000.00) received by Gregorio Domingo form the prospective
benefit of valuable services rendered by the agent, but the agent has buyer; much less did he consent to his agent's accepting such a gift.
only himself to blame for that result.
6. ID.; ID.; ID.; ID.; ID.; ACCOUNTABILITY OF AGENT FOR
ALL PROFITS RECEIVED. — As a general rule, it is a breach of DECISION
good faith and loyalty to his principal for an agent, while the agency
exists, so to deal with the subject matter thereof, or with information
acquired during the course of the agency, as to make a profit out of it
MAKASIAR, J p:
for himself in excess of his lawful compensation; and if he does so
he may be held as a trustee and may be compelled to account to his Petitioner-appellant Vicente M. Domingo, now deceased and
principal for all profits, advantages, rights, or privileges acquired by represented by his heirs, Antonina Raymundo vda. de Domingo,
him in such dealings, whether in performance or in violation of his Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene and Joselito, all
duties, and be required to transfer them to his principal upon being surnamed Domingo, sought the reversal of the majority decision
reimbursed for his expenditures for the same, unless the principal has dated March 12, 1969 of the Special Division of Five of the Court of
consented to or ratified the transaction knowing that benefit or profit Appeals affirming the judgment of the trial court, which sentenced
would accrue, or had accrued, to the agent, or unless with such the said Vicente M. Domingo to pay Gregorio
knowledge he has allowed the agent so as to change his condition M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima
that he cannot be put in status quo. The application of this rule is not P2,607.50 with legal interest on both amounts from the date of the
affected by the fact that the principal did not suffer any injury by filing of the complaint, to pay Gregorio Domingo P1,000.00 as moral
reason of the agent's dealings, or that he in fact obtained better and exemplary damages and P500.00 as attorney's fees plus costs.
results; nor is it affected by the fact that there is a usage or custom to
the contrary, or that the agency is a gratuitous one. The following facts were found to be established by the majority of
the Special Division of Five of the Court of Appeals:
In a document Exhibit "A" executed on June 2, 1956, Vicente Estate until June 1, 1957, in a document dated June 30, 1956 (the
M. Domingo granted Gregorio Domingo, a real estate broker, the year 1957 therein is a mere typographical error) and marked Exhibit
exclusive agency to sell his lot No. 883 of Piedad Estate with an area "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift
of about 88,477 square meters at the rate of P2.00 per square meter or propina the sum of One Thousand Pesos (P1,000.00) for
(or for P176,954.00) with a commission of 5% on the total price, if succeeding in persuading Vicente to sell his lot at P1.20 per square
the property is sold by Vicente or by anyone else during the 30-day meter or a total in round figure of One Hundred Nine Thousand
duration of the agency or if the property is sold by Vicente within Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00)
three months from the termination of the agency to a purchaser to was not disclosed by Gregorio to Vicente. Neither did Oscar pay
whom it was submitted by Gregorio during the continuance of the Vicente the additional amount of One Thousand Pesos (P1,000.00)
agency with notice to Vicente. The said agency contract was in by way of earnest money. When the deed of sale was not executed on
triplicate, one copy was given to Vicente, while the original and August 1, 1956 as stipulated in Exhibit "C" nor on August 16, 1956
another copy were retained by Gregorio. as extended by Vicente, Oscar told Gregorio that he did not receive
his money from his brother in the United States, for which reason he
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. was giving up the negotiation including the amount of One Thousand
Purisima to look for a buyer, promising him one-half of the 5% Pesos (P1,000.00) given as earnest money to Vicente and the One
commission. Thousand Pesos (P1,000.00) given to Gregorio as propina or gift.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio When Oscar did not see him after several weeks, Gregorio sensed
as a prospective buyer. something fishy. So, he went to Vicente and read a portion of Exhibit
"A" marked Exhibit "A-1" to the effect that Vicente was still
Oscar de Leon submitted a written offer which was very much lower committed to pay him 5% commission, if the sale is consummated
than the price of P2.00 per square meter (Exhibit "B"). Vicente within three months after the expiration of the 30-day period of the
directed Gregorio to tell Oscar de Leon to raise his offer. After exclusive agency in his favor from the execution of the agency
several conferences between Gregorio and Oscar de Leon, the latter contract on June 2, 1956 to a purchaser brought by Gregorio to
raised his offer to P109,000.00 on June 20, 1956 as evidenced by Vicente during the said 30-day period. Vicente grabbed the original
Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon of Exhibit "A" and tore it to pieces. Gregorio held his peace, not
demand of Vicente, Oscar de Leon issued to him a check in the wanting to antagonize Vicente further, because he had still the
amount of P1,000.00 as earnest money, after which Vicente advanced duplicate of Exhibit "A". From his meeting with Vicente, Gregorio
to Gregorio the sum of P300.00. Oscar de Leon confirmed his former proceeded to the office of the Register of Deeds of Quezon City,
offer to pay for the property at P1.20 per square meter in another where he discovered Exhibit "G", a deed of sale executed on
letter, Exhibit "D". Subsequently, Vicente asked for an additional September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over
amount of P1,000.00 as earnest money, which Oscar de Leon their house and lot at No. 40 Denver Street, Cubao, Quezon City, in
promised to deliver to him. Thereafter, Exhibit "C" was amended to favor of Vicente as down payment by Oscar de Leon on the purchase
the effect that Oscar de Leon will vacate on or about September 15, price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning
1956 his house and lot at Denver Street, Quezon City which is part of that Vicente sold his property to the same buyer, Oscar de Leon and
the purchase price. It was again amended to the effect that Oscar will his wife, he demanded in writing payment of his commission on the
vacate his house and lot on December 1, 1956, because his wife was sale price of One Hundred Nine Thousand Pesos (P109,000.00),
on the family way and Vicente could stay in lot No. 883 of Piedad
Exhibit "H". He also conferred with Oscar de Leon, who told him Vicente or Gregorio should be liable directly to the intervenor
that Vicente went to him and asked him to eliminate Gregorio in the Teofilo Purisima for the latter's share in the expected commission of
transaction and that he would sell his property to him for One Gregorio by reason of the sale; and (3) whether the award of legal
Hundred Four Thousand Pesos (P104,000.00). In Vicente's reply to interest, moral and exemplary damages, attorney's fees and costs,
Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not was proper.
entitled to the 5 % commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, Unfortunately, the majority opinion penned by Justice Edilberto
wife of Oscar de Leon. Soriano and concurred in by Justice Juan Enriquez did not touch on
these issues which were extensively discussed by Justice Magno
Gatmaitan in his dissenting opinion. However, Justice Esguerra, in
his concurring opinion, affirmed that it does not constitute breach of
The Court of Appeals found from the evidence that Exhibit "A", the trust or fraud on the part of the broker and regarded the same as
exclusive agency contract, is genuine; that Amparo Diaz, the vendee, merely part of the whole process of bringing about the meeting of the
being the wife of Oscar de Leon, the sale by Vicente of his property minds of the seller and the purchaser and that the commitment from
is practically a sale to Oscar de Leon since husband and wife have the prospective buyer that he would give a reward to Gregorio if he
common or identical interests; that Gregorio and intervenor Teofilo could effect better terms for him from the seller, independent of his
Purisima were the efficient cause in the consummation of the sale in legitimate commission, is not fraudulent, because the principal can
favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de reject the terms offered by the prospective buyer if he believes that
Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as such terms are onerous or disadvantageous to him. On the other
"propina" or gift and not as additional earnest money to be given to hand, Justice Gatmaitan, with whom Justice Antonio Cañizares
the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar concurred, held the view that such an act on the part of Gregorio was
de Leon with respect to the additional earnest money, does not fraudulent and constituted a breach of trust, which should deprive
appear to have been answered by Oscar de Leon and therefore there him of his right to the commission.
is no writing or document supporting Oscar de Leon's testimony that
he paid an additional earnest money of One Thousand Pesos The duties and liabilities of a broker to his employer are essentially
(P1,000.00) to Gregorio for delivery to Vicente, unlike the first those which an agent owes to his principal. 1
amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon
to Vicente as earnest money, evidenced by the letter Exhibit "4"; and Consequently, the decisive legal provisions are found in Articles
that Vicente did not even mention such additional earnest money in 1891 and 1909 of the New Civil Code.
his two replies Exhibits "I" and "J" to Gregorio's letter of demand of "Art. 1891. Every agent is bound to render an
the 5% commission. account of his transactions and to deliver to the
The three issues in this appeal are (1) whether the failure on the part principal whatever he may have received by virtue
of Gregorio to disclose to Vicente the payment to him by Oscar de of the agency, even though it may not be owing to
Leon of the amount of One Thousand Pesos (P1,000.00) as gift or the principal.
"propina" for having persuaded Vicente to reduce the purchase price "Every stipulation exempting the agent from the
from P2.00 to P1.20 per square meter, so constitutes fraud as to cause obligation to render an account shall be void."
a forfeiture of his 5% commission on the sale price; (2) whether
xxx xxx xxx material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent
"Art. 1909. The agent is responsible not only for from such an obligation and considers such an exemption as void.
fraud, but also for negligence, which shall be The duty of an agent is likened to that of a trustee. This is not a
judged with more or less rigor by the courts, technical or arbitrary rule but a rule founded on the highest and truest
according to whether the agency was or was not principle of morality as well as of the strictest justice. 2
for a compensation."
Hence, an agent who takes a secret profit in the nature of a bonus,
Article 1891 of the New Civil Code amends Article 1720 of the old gratuity or personal benefit from the vendee, without revealing the
Spanish Civil Code which provides that: same to his principal, the vendor, is guilty of a breach of his loyalty
"Art. 1720. Every agent is bound to give an to the principal and forfeits his right to collect the commission from
account of his transaction and to pay to the his principal, even if the principal does not suffer any injury by
principal whatever he may have received by virtue reason of such breach of fidelity, or that he obtained better results or
of the agency, even though what he has received is that the agency is a gratuitous one, or that usage or custom allows it;
not due to the principal." because the rule is to prevent the possibility of any wrong, not to
remedy or repair an actual damage. 3 By taking such profit or bonus
The modification contained in the first paragraph of Article 1891 or gift orpropina from the vendee, the agent thereby assumes a
consists in changing the phrase "to pay" to "to deliver", which latter position wholly inconsistent with that of being an agent for his
term is more comprehensive than the former. principal, who has a right to treat him, insofar as his Commission is
Paragraph 2 of Article 1891 is a new addition designed to stress the concerned, as if no agency had existed. The fact that the principal
highest loyalty that is required to an agent — condemning as void may have been benefited by the valuable services of the said agent
any stipulation exempting the agent from the duty and liability does not exculpate the agent who has only himself to blame for such
imposed on him in paragraph one thereof. a result by reason of his treachery or perfidy.

Article 1909 of the New Civil Code is essentially a reinstatement of This Court has been consistent in the rigorous application of Article
Article 1726 of the old Spanish Civil Code which reads thus: 1720 of the old Spanish Civil Code. Thus, for failure to deliver sums
of money paid to him as an insurance agent for the account of his
"Art. 1726. The agent is liable not only for fraud, employer as required by said Article 1720, said insurance agent was
but also for negligence, which shall be judged with convicted of estafa. 4 An administrator of an estate was likewise
more or less severity by the courts, according to liable under the same Article 1720 for failure to render an account of
whether the agency was gratuitous or for a price or his administration to the heirs unless the heirs consented thereto or
reward." are estopped by having accepted the correctness of his account
previously rendered. 5
The aforecited provisions demand the utmost good faith, fidelity,
honesty, candor and fairness on the part of the agent, the real estate Because of his responsibility under the aforecited Article 1720, an
broker in this case, to his principal, the vendor. The law imposes agent is likewise liable for estafa for failure to deliver to his principal
upon the agent the absolute obligation to make a full disclosure or the total amount collected by him in behalf of his principal and
complete account to his principal of all his transactions and other
cannot retain the commission pertaining to him by subtracting the This may operate to give to the principal the
same from his collections. 6 benefit of valuable services rendered by the agent,
but the agent has only himself to blame for that
A lawyer is equally liable under said Article 1720 if he fails to result.'
deliver to his client all the money and property received by him for
his client despite his attorney's lien. 7 The duty of a commission xxx xxx xxx
agent to render a full account of his operations to his principal was
reiterated in Duhart, etc. vs. Macias. 8 "The intent with which the agent took a secret
profit has been held immaterial where the agent
The American jurisprudence on this score is well-nigh unanimous. has in fact entered into a relationship inconsistent
with his agency, since the law condemns the
"Where a principal has paid an agent or broker a corrupting tendency of the inconsistent
commission while ignorant of the fact that the relationship. Little vs. Phipps (1911) 94 NE
latter has been unfaithful, the principal may 260." 9
recover back the commission paid, since an agent
or broker who has been unfaithful is not entitled to "As a general rule, it is a breach of good faith and
any compensation. loyalty to his principal for an agent, while the
agency exists, so to deal with the subject matter
xxx xxx xxx thereof, or with information acquired during the
"In discussing the right of the principal to recover course of the agency, as to make a profit out of it
commissions retained by an unfaithful agent, the for himself in excess of his lawful compensation:
court in Little vs. Phipps (1911) 208 Mass. 331, 94 and if he does so he may be held as a trustee and
NE 260, 34 LRA (NS) 1046, said: 'It is well settled may be compelled to account to his principal for
that the agent is bound to exercise the utmost good all profits, advantages, rights, or privileges
faith in his dealings with his principal. As Lord acquired, by him in such dealings, whether in
Cairns said, this rule "is not a technical or arbitrary performance or in violation of his duties, and be
rule. It is a rule founded on the highest and truest required to transfer them to his principal upon
principles of morality." Parker vs. McKenna being reimbursed for his expenditures for the
(1874) LR 10 Ch (Eng) 96, 118.. If the agent does same, unless the principal has consented to or
not conduct himself with entire fidelity towards his ratified the transaction knowing that benefit or
principal, but is guilty of taking a secret profit or profit would accrue, or had accrued, to the agent,
commission in regard the matter in which he is or unless with such knowledge he has allowed the
employed, he loses his right to compensation on agent so as to change his condition that he cannot
the ground that he has taken a position wholly be put in status quo. The application of this rule is
inconsistent with that of agent for his employer, not affected by the fact that the principal did not
and which gives his employer, upon discovering it, suffer any injury by reason of the agent's dealings,
the right to treat him so far as compensation, at or that he in fact obtained better results; nor is it
least, is concerned as if no agency had existed. affected by the fact that there is a usage or custom
to the contrary, or that the agency is a gratuitous the prospective buyer; much less did he consent to his agent's
one." (Emphasis supplied.) 10 accepting such a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz,
the wife of Oscar de Leon, does not materially alter the situation;
In the case at bar, defendant-appellee Gregorio Domingo as the because the transaction, to be valid, must necessarily be with the
broker, received a gift or propina in the amount of One Thousand consent of the husband Oscar de Leon, who is the administrator of
Pesos (P1,000.00) from the prospective buyer Oscar de Leon, their conjugal assets including their house and lot at No. 40 Denver
without the knowledge and consent of his principal, herein Street, Cubao, Quezon City, which were given as part of and
petitioner-appellant Vicente Domingo. His acceptance of said constituted the down payment on, the purchase price of herein
substantial monetary gift corrupted his duty to serve the interests petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in
only of his principal and undermined his loyalty to his principal, who law and in fact, it was still Oscar de Leon who was the buyer.
gave him a partial advance of Three Hundred Pesos (P300.00) on his
commission. As a consequence, instead of exerting his best to As a necessary consequence of such breach of trust, defendant-
persuade his prospective buyer to purchase the property on the most appellee Gregorio Domingo must forfeit his right to the commission
advantageous terms desired by his principal, the broker, herein and must return the part of the commission he received from his
defendant-appellee Gregorio Domingo, succeeded in persuading his principal.
principal to accept the counter-offer of the prospective buyer to
purchase the property at P1.20 per square meter or One Hundred Teofilo Purisima, the sub-agent of Gregorio Domingo, can only
Nine Thousand Pesos (P109,000.00) in round figure for the lot of recover from Gregorio Domingo his one-half share of whatever
88,477 square meters, which is very much lower than the price of amounts Gregorio Domingo received by virtue of the transaction as
P2.00 per square meter or One Hundred Seventy-Six Thousand Nine his sub-agency contract was with Gregorio Domingo alone and not
Hundred Fifty-Four Pesos (P176,954.00) for said lot originally with Vicente Domingo, who was not even aware of such sub-agency.
offered by his principal. Since Gregorio Domingo received from VicenteDomingo and Oscar
de Leon respectively the amounts of Three Hundred Pesos (P300.00)
The duty embodied in Article 1891 of the New Civil Code will not and One Thousand Pesos (P1,000.00) or a total of One Thousand
apply if the agent or broker acted only as a middleman with the task Three Hundred Pesos (P1,300.00), one-half of the same, which is Six
of merely bringing together the vendor and vendee, who themselves Hundred Fifty Pesos (P650.00), should be paid by
thereafter will negotiate on the terms and conditions of the Gregorio Domingo to Teofilo Purisima.
transaction. Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he received from Because Gregorio Domingo's clearly unfounded complaint caused
the purchaser and his principal did not object thereto 11 Herein Vicente Domingo mental anguish and serious anxiety as well as
defendant appellee GregorioDomingo was not merely a middleman wounded feelings, petitioner-appellant Vicente Domingo should be
of the petitioner-appellant Vicente Domingo and the buyer Oscar de awarded moral damages in the reasonable amount of One Thousand
Leon. He was the broker and agent of said petitioner-appellant only. Pesos (P1,000.00) and attorney's fees in the reasonable amount of
And therein petitioner-appellant was not aware of the gift of One One Thousand Pesos (P1,000.00), considering that this case has been
Thousand Pesos (P1,000.00) received by Gregorio Domingo from pending for the last fifteen (15) years from its filing on October 3,
1956.
WHEREFORE, the judgment is hereby rendered, reversing the
decision of the Court of Appeals and directing the defendant-appellee
Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the
sum of One Thousand Pesos (P1,000.00) as moral damages and One
Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo
Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to
pay the costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro,
Fernando, Teehankee, Barredo and Villamor, JJ., concur.
Footnotes
1.12 Am. Jur. 2d 835; 134 ALR 1346; 1 ALR 2d 987; Brown vs.
Coates, 67 ALR 2d 943; Haymes vs. Rogers, 17 ALR 2d
896; Moore vs. Turner, 32 ALR 2d 713.
2.See also Manresa, Vol. 2, p. 461, 4th ed.
3.12 Am. Jur. 2d. Sec. 171, 811-12.
4.U.S. vs. Kiene, 7 Phil. 736.
5.Ojinaga vs. Estate of Perez, 9 Phil. 185.
6.U.S. vs. Reyes, 36 Phil. 791.
7.In Re: Bamberger, 49 Phil. 962.
8.54 Phil. 513.
9.134 ALR, Ann. pp. 1346, 1347-1348; see also 1 ALR 2d, 987.
10.3 CJS, 53-54; see also 12 Am. Jur. 2d 835-841, 908-912.
11.12 Am. Jur. 2d, 835-841, 908-912; Raymond vs. Davis, Jan. 3,
1936, 199 NE 321, 102 ALR, 1112-1115, 1116-1121.
||| (Domingo v. Domingo, G.R. No. L-30573, [October 29, 1971], 149
PHIL 183-196)
receive a written offer for the purchase of the property during
petitioner's period of authorization (except a latter dated May 18,
1968 coming from petitioner himself on behalf of an undisclosed
buyer who was willing to buy at P4.50 per square meter), respondent
informed petitioner in a lot or that pursuant to their agreement the
FIRST DIVISION latter's authority was deemed terminated.
Thereafter, on June 19, 1968, respondent renewed his offer to sell his
[G.R. No. L-39822. January 31, 1978.] 300-hectare land to the System. The transaction was finalized on July
30, 1968, with the System buying at its original counter
ANTONIO E. PRATS, doing business under the offer of P3.25 per square meter.
name of Philippine Real Estate
Petitioner presented his statement of account to respondent for
Exchange, petitioner, vs. HON.COURT OF APPEAL
professional services as real estate broker in the
S, ALFONSO DORONILA and PHILIPPINE
amount ofP1,380,000. Respondent refused to pay. Hence, petitioner
NATIONAL BANK, respondents.
sued respondent to recover the sum plus damages. The
trial courtfound for the petitioner, but on appeal,
SYNOPSIS the Court of Appeals reversed the decision on factual findings that
petitioner was not the efficient procuring in bringing about the sale
Private respondent offered to sell his 300-hectare land to the Social (prescinding from the fact of expiration of his exclusive authority).
Security System at P4.00 per square meter. He received and accepted Hence, this petition.
a counter-offer of P3.25 per square meter. But since the System did
not take definite action on the transaction, private respondent granted The Supreme Court found no basis in law to reverse the factual
petitioner an exclusive 60-day option and authority to sell the findings of the Appellate Court and to grant relief to petitioner.
property on condition that if no written offer was made to private However, in equity, noting that petitioner had diligently taken steps
respondent until the last day of the authorization, the authority shall to bring back together respondent and the Social Security System,
expire and become null and avoid. The option should have expired the Supreme Court affirmed the decision appealed from, but ordered
on April 18, 1968, but this was extended by private respondent to respondent to pay petitioner the amount of P100,000, and set aside
May 18, 1968. that portion of the decision ordering petitioner to pay respondent
attorney's fees.
During the period of his authorization, petitioner diligently took steps
to bring back together private respondent and the Social Security
System. On March 16, 1968, he wrote the System inviting the SYLLABUS
chairman to discuss the officer of the sale of the property. On May
16, 1968, he made a formal written offer to sell the property at P6.00
1. APPEAL; FACTUAL
per square meter. Thereafter, respondent received a telegram dated
FINDINGS OF THE COURT OF APPEALS, CONCLUSIVE ON
May 17, 1968 from the System informing him that it was considering
THE SUPREME COURT. — The factual
the purchase ofhis property. However, since respondent did not
findings of the Court of Appeals are conclusive on the "In view of all the foregoing, it is our considered
Supreme Court. opinion and hold that the decision of the
lower court he, as it is hereby reversed, and the
2. EQUITY; PRINCIPAL AND AGENT; ALTHOUGH AGENT IS complaint, dismissed. On appellant's counterclaim,
NOT THE EFFICIENT PROCURING CAUSE, HE MAY BE judgment is hereby rendered directing appellee to
COMPENSATED FROM EFFORTS EXERTED TO BRING pay attorney's fees in the sum of P10,000 to
PRINCIPAL AND BUYER TOGETHER. — In an action by a real appellant, no moral damages as therein claimed
estate broker to recover commission from the principal, although being awarded for lack ofevidence to justify the
the Court of Appeals' factual findings provide no basis in law to same. The injunction issued by the lower court on
grant relief to the broker, since said court found that the broker was the P2,000,000.00 cash deposit of the appellant is
not the efficient procuring cause in bringing about the sale, hereby lifted. No special pronouncement as to
nevertheless, relief in equity may be granted where it appears that the costs.
agent had diligently taken steps to bring back together the principal
and the prospective buyer. SO ORDERED." 1
3. CONTRACTS; PARTIES BOUND BY TERMS AND On September 23, 1958 Antonio E. Prats, doing business under the
CONDITIONS THEREOF. — Where the contract between the real name of "Philippine Real Estate Exchange" instituted against
estate broker and the principal requires the former to present to the Alfonso Doronila and Philippine National Bank Civil Case No. Q-
latter a written offer by the prospective buyer within the periodof the 12412 in the Court of First Instance of Rizal at Quezon City to
broker's authorization, otherwise the broker's authorization shall recover a sum of money and damages.
expire and become null and void, the failure of the broker to present
such written offer within the stipulated period will terminate the The complaint stated that defendant Alfonso Doronila was the
broker's authorization. registered owner of 300 hectares of land situated in Montalban,
Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013,
216747 and 216750; that defendant Doronila had for sometime tried
to sell his aforesaid 300 hectares of land and for that purpose had
DECISION designated several agents; that at one time, he had offered the same
property to the Social Security System but failed to consummate any
sale; that his offer to sell to the Social Security System having failed,
defendant Doronila on February 14, 1968 gave the plaintiff an
FERNANDEZ, J p:
exclusive option and authority in writing to negotiate the sale of his
This is a petition for certiorari to review the aforementioned property, which exclusive option and authority the
decision of the Court of Appeals in CA-G.R. No. 45974-R entitled plaintiff caused to be published in the Manila Times on February 22,
"Antonio E. Prats, doing business under the name of Philippine Real 1968; that it was the agreement between plaintiff and defendant
Estate Exchange, versus Alfonso Doronila and the Philippine Doronila that the basic price shall be P3.00 per square meter; that
National Bank", the dispositive part of which reads: plaintiff shall be entitled to a commission of 10% based on P2.10 per
square meter or at any price finally agreed upon and if the property
be sold over and above P300 per square meter, the excess shall be
credited and paid to the plaintiff in addition to his 10% commission Doronila to submit certain documents regarding the property offered;
based on P2.10 per square meter; that as a result of the grant of the that on May 6, 1968, a written offer to sell the 300 hectares of land
exclusive option and authority to negotiate the sale of his 300 belonging to defendant Doronila was formally made by the plaintiff
hectares of land situated in Montalban, Rizal, in favor of the plaintiff, to the Social Security System and accordingly, on May 7, 1968, the
the defendant Doronila, on February 20, 1968, wrote a letter to the Social Security System Administrator dispatched the following
Social Security System withdrawing his previous offer to sell the telegram to defendant Doronila "SSS considering purchase your
same land and requesting the return to him of all papers concerning property for its housing project Administrator Teodoro"; that a few
his offered property; that the Social Security System, complying with days thereafter, the plaintiff accompanied the defendant Doronila to
said request of defendant Doronila, returned all the papers thereon the China Banking Corporation to arrange the matter of clearing
and defendant Doronila, in turn, gave them to the plaintiff as his duly payment by check and delivery of the titles over the property to the
authorized real estate broker; that by virtue ofthe exclusive written Social Security System; that having been brought together by the
option and authority granted him and relying upon the announced plaintiff, the defendant Doronila and the officials of Social Security
policy of the President of the Philippines to promote low housing System, on May 29, 1968 and on June 4, 1968, met at the
program, the plaintiff immediately worked to negotiate the office of the SSS Administrator wherein the price for the
sale of defendant Doronila's 300 hectares of land to the Social purchase of the defendant Doronila's 300 hectares of land was,
Security System, making the necessary contacts and representations among others, taken up; that on June 20, 1968, the Social Security
to bring the parties together, namely, the owner and the buyer, and Commission passed Resolution No. 636 making a counter-
bring about the ultimate sale of the land by defendant Doronila to the offer of P3.25 per square meter subject to an appraisal report; that on
Social Security System; that February 27, 1968, after plaintiff had June 27, 1968, Resolution No. 662 was adopted by the Social
already contacted the Social Security System, its Deputy Security Commission authorizing the Toples & Harding (Far East)
Administrator, Reynaldo J. Gregorio, wrote a letter to defendant Inc. to conduct an appraisal of the property and to submit a report
Doronila inviting the latter to a conference regarding the property in thereon; that pursuant thereto, the said company submitted its
question with Administrator Teodoro, Chairman Gaviola and said appraisal report specifying that the present value of the property is
Reynaldo J. Gregorio on March 4, 1968 at 10:00 o'clock in the P3.34 per square meter and that a housing program development
morning, stating that the SSS would like to take up the offer of the would sent the highest and best use thereof; that on July 18, 1968,
lot; that having granted plaintiff the exclusive written option and the Social Security Commission, at its regular meeting; taking
authority to negotiate the sale of his 300 hectares of land, defendant note of the favorable appraisal report of the Toples & Harding (Far
Doronila in a letter dated February 28, 1968 declined the invitation East) Inc., passed Resolution No. 738, approving the
extended by the Social Security System to meet with its purchase of defendant Doronila's 300 hectares of land in Montalban,
Administrator and Chairman, and requested them instead "to deal Rizal, at a price of P3.25 per square meter or for a total purchase
directly" with the plaintiff; that on March 16, 1968, at the price of Nine Million Seven Hundred Fifty Thousand Pesos
suggestion of defendant Doronila , the plaintiff wrote a letter to the (P9,750,000.00), appropriating the said amount for the purpose and
Social Security System to the effect that plaintiff would be glad to sit authorizing the SSS Administrator to sign the necessary documents
with the officials of the Social Security System to discuss the to implement the said resolution; that on July 30, 1968, defendant
sale of the property of the defendant Doronila; that on March 18, Doronila and the Social Security System executed the corresponding
1968, the Social Security System sent a telegram to defendant deed of absolute the 300 hectares ofland in Montalban, Rizal,
covered by Transfer Certificate of Title Nos. 7701, 77013, 216747 property to the Social Security System on May 6, 1968, said
and 216750 under the terms ofwhich the total price of P9,750,000.00 defendant had already offered his property to, and had a closed
shall be payable as follows: (a) 60% of the agreed purchase price, or transaction or contract of sale of, said property with the Social
Five Million Eight Hundred Fifty Thousand Pesos (P5,850,000.00) Security System; that the letter agreement had become null and void
immediately after signing the deed of sale, and (b) the because defendant Doronila had not received any written offer from
balance of 40% of the agreed price, or Three Million Nine Hundred any prospective buyers of the plaintiff during the agreed period of 60
Thousand Pesos (3,900,000.00) thirty days after the signing of the days until the last day of the authorization which was April 13, 1968
deed ofabsolute sale; that on August 21, 1968, after payment of the counting from February 14, 1968; that it is not true that plaintiff
purchase price, the deed of absolute sale executed by defendant brought together defendant Doronila and the officials of the Social
Doronila in favor of the Social Security System was presented for Security System to take up the purchase price of defendant
registration in the Office of the Register of Deeds of Rizal, and Doronila's property for the simple reason that the plaintiff's offer was
Transfer Certificates of Title Nos. 226574, 226575, 226576, and P6.00 per square meter and later on reduced to P4.50 per square
226577 in the name of the Social Security System were issued; that meter because the SSS Chairman had already a closed transaction
defendant Doronila has received the full purchase price for his 300 with the defendant Doronila at the price of P3.25 per square meter
hectares of and in the total amount ofP9,750,000.00, which amount and that the offer of the plaintiff refused by the officials of the Social
he deposited in his bank Account No. 0012-443 with the defendant Security System; and defendant Doronila did not answer the
Philippine National Bank; that on September 17, 1968, the plaintiff statement of collection of the plaintiff because the latter had no right
presented his statement to, and demanded of defendant Doronila the to demand the payment for services not rendered according to the
payment ofhis professional fee as real estate broker as computed agreement of the parties. The answering defendant interposed a
under the agreement of February 14, 1968 in the total counterclaim for damages and attorney's fees.
amount ofP1,380,000.00; that notwithstanding such demand; the
defendant Doronila, in gross and evident bad faith, after having On January 18, 1969, the plaintiff and defendant Alfonso Doronila
availedof the services of plaintiff as real estate broker, refused to pay submitted the following stipulation of facts:
the professional fees due him; that as a result of defendant Doronila's "STIPULATION OF FACTS
gross and evident bad faith and unjustified refusal to pay plaintiff the
professional fees due him under the agreement, the latter has suffered COME NOW the plaintiff and defendant
and continues to suffer mental anguish, serious anxiety, and social DORONILA, I their respective undersigned
humiliation for which defendant Doronila shall be held liable to pay counsel, and to this Honorable Court, by
moral damages; and, that by reason likewise of the aforesaid way of abbreviating the proceeding in the case at
act of defendant Doronila, the plaintiff has been compelled to file bar, without prejudice to
this action and to engage the services of counsel at a stipulated presentation of explanatory evidence, respectfully
professional fee of P250,000.00. submit the following STIPULATION OF FACTS:
1.
That defendant Doronila was the registered
In his answer filed on November 18, 1968, the defendant Doronila owner of 300 hectares of land, situated in
alleged that when the plaintiff offered the answering defendant's Montalban, Rizal, covered by Transfer
Certificates of Title Nos. 77011, 77013, 216747 That on July 19, 1967, defendant DORONILA
(formerly TCT No. 116621) and 216750 (formerly wrote a letter (a, xerox copy, attached hereto
TCT No. 77012). marked as Annex '2-a' for DORONILA) to
NAWASA, and that in reply thereto, on July 25,
2. 1967, the NAWASA wrote the following letter
That on July 3, 1967, defendant DORONILA (Xerox copy attached hereto to be marked as
under his letter (marked Annex '1' of the answer) Annex '2-b' for DORONILA) to defendant
addressed to the SSS Chairman, offered his said DORONILA.
property to the Social Security System (SSS) at
P4.00 per square meter. 'In connection with your proposed
subdivision plan of your properties
That on July 17, 1967 (Annex '2' of the Answer) adjacent to our Novaliches Watershed, this
the SSS Chairman, Mr. Ramon G. Gaviola, Jr., Office would like to impose the following
replied to defendant DORONILA, as follows: conditions:
'This will acknowledge your 1. Since your property is an
letter of July 3rd, 1967 relative to your immediate boundary of our Novaliches
offer for sale of your real estate property. Watershed, a 20-meter road should be
constructed along our common boundary.
In this regard, may I please be
informed as to how many hectares, 2. That no waste or drainage water
out of the total 300 hectares offered, are from the subdivision should flow towards
located in Quezon City and how many the watershed.
hectares are located in Montalban, Rizal.
Likewise, as regards your offer ofP4.00 3. That the liquid from the septic
per square meter, would there be any tanks or similar waste water should be
possibility that the same be reduced to treated before it is drained to the Alat
P3.25 per square meter? Finally and River above our Alat Dam.
before I submit your proposal for process The above conditions are all
it is requested that the NAWASA certify to safeguards to the drinking water of the
the effect that they have no objection to people of Manila and Suburbs. It is
having this parcel of land subdivided for therefore expected that we all cooperate to
residential house purposes. make our drinking water safer from any
Thank you for your offer and may pollution.'
I hear from you at the earliest possible 3.
time.'
That on July 19, 1967, defendant DORONILA
2-a wrote another letter (marked as Annex '3' on his
Answer) addressed to the SSS Chairman, Mr. With the assurance that you will
Ramon G. Gaviola, Jr., stating, among others, the be periodically informed of developments,
following: we remain.'
'In this connection, I have your 3-b
counter-offer of P3.25 per square meter That on October 30, 1967, Mr. Pastor B. Sajorda,
against my offer of P4.00 per square 'By authority of Atty. Alfonso Doronila, property
meter, although your counter-offer is owner', wrote the following request (Xerox copy
lower comparing to the prices of adjacent attached hereto and marked as Annex '2-d' for
properties, I have to consider the DORONILA) addressed to Realtor Vicente L.
difference as my privilege and opportunity Narciso for a certification regarding the actual
to contribute or support the Presidential prices of DORONILA's property quoted as
policy to promote low cost housing in this follows:
country particularly to the SSS members
by accepting gladly your counter- 'May I have the honor to request
offer of P3.25 per square meter with the for your certification as a member of the
condition that it should be paid in cash and Board of Realtor regarding the actual
such payment shall be made within a prices of my real estate raw-land
period of 30 days from the above stated properties described as Lots 3-B-7, 26-B,
date' (2nd paragraph of letter dated July 6 and 4-C-3 all adjacent to each other,
18, 1967, Annex '3' of the Answer). containing a total area of 3,000,000 square
meters, all registered in the
3.a name of Alfonso Doronila, covered by
That on August 10, 1967, the SSS Chairman, Mr. T.C.T. Nos. 116631, 77013, 77011, and
Ramon G. Gaviola, Jr., wrote the following (Xerox 71012, located at Montalban, Rizal, all
copy attached hereto and marked as Annex '2-c' for adjacent to the Northern portion of the
DORONILA: addressed to defendant NAWASA properties in Quezon City
DORONILA: including those other surrounding adjacent
properties and even those properties
'With reference to your letter, located before reaching my own properties
dated July 1967, please be informed that coming from Manila.
the same is now with the Administrator for
study and comment. The Commission will This request is purposely made for
act on receipt of information re such my references in case decided to sell my
studies. said properties mentioned above.'
3-c
That on November 3, 1961, Realtor Vicente caused directly or indirectly by us within
Narciso wrote the following reply (Xerox copy the time of this option. If the property is
attached hereto and marked as Annex '2-e' for sold over and above P3.00 per square
DORONILA) to Mr. Pastor B. Sajorda: meter, the excess amount shall be credited
and the herein brokers. In addition to the
'As per your request dated 10% commission based on P2.10 per
(October 30, 1967, regarding prices of raw square meter, provided the brokers shall
land, it is my finding that the fair market pay the corresponding taxes to the
value of raw land in the vicinity of the owner of the excess amount over P3.00
NAWASA properties at Quezon City and per square meter, unless paid by check
Montalban, Rizal, including the which would the be deductible as
properties of Atty. Alfonso Doronila, more additional expenses.
particularly known as lots 3-B-7, 26-B,
and 4-C-3 containing approximately 3. This exclusive option and
3,000,000 square meters is P3.00 to P3.50 authority is good for a period of sixty (60)
per square meter. days from the date of your conformity;
provided, however, that should
Current prices before reaching negotiations have been started with a
Doronila's property range from P6.00 to buyer, said period is automatically
P7.00 per square meter. extended until said negotiations is
4. terminated, but not more than fifteen (15)
days;
That on February 14, 1968, defendant
DORONILA granted plaintiff an exclusive option 4. The written offers must be
and authority (Annex 'A' ofcomplaint), under the made by the prospective buyers, unless
following terms and conditions: they prefer to have us take the offer for
and in their behalf some buyers do not
'1. The price of the property is want to be known in the early stages of the
THREE (P3.00) PESOS per square meter. negotiations;
2. A commission of TEN (10%) 5. If no written offer is made to
PERCENT will be paid to us based on you until the last day of this authorization,
P2.10 per square meter, or at any price that this option and authority shall expire and
you (DORONILA) finally agree upon, and become null and void;
all expenses shall be for our account,
including preparation ofthe corresponding 6. It is clearly understood that
deed of conveyance, documentary stamps prospective buyers and all parties
and registration fee, whether the sale is interested in this property shall be referred
to us, and that you will not even quote a that you take immediate steps to withdraw any and
price directly to any agent or buyer. You all papers pertaining to this property offered to the
agree to refer all agents or brokers to us SOCIAL SECURITY SYSTEM.
DURING the time this option is in force;
and
7. There are some squatters Very truly yours,
occupying small portions of the property, PHILIPPINE REAL
which fact will be reported to the ESTATE EXCHANGE
prospective buyers, and said squatters will
be removed at our expense." (Annex
'A' of the complaint.).
Very truly yours, (Sgd.) ANTONIO E. PRATS
PHILIPPINE REAL General Manager
ESTATE EXCHANGE AEP/acc
(Sgd.) ANTONIO E. PRATS RECEIVED ORIGINAL:
General Manager By: (Sgd.) ROGELIO DAPITAN'
CONFORME: 6.
(Sgd.) ALFONSO DORONILA' That on February 20, 1968, pursuant to the letter
Date: February 14, 1968 dated February 19, 1968 of plaintiff, defendant
DORONILA wrote a letter (Annex 'B' of the
5. complaint) to the SSS Administrator stating:
That on February 19, 1968, plaintiff wrote the
following letter to defendant DORONILA (Annex 'Inasmuch as the SSS has not
'4' of the Answer), quoted as follows: acted on my offer to sell a 300 hectare lot
located in Montalban, Rizal, for the last
February 19, 1968 five (5) months I respectfully requested
Don Alfonso Doronila for the return of all my papers concerning
Plaza Ferguzon this offered property.'
Ermita, Manila 7.
Dear Don Alfonso:
That on February 27, 1968, defendant
In view of the exclusive option extended to us for DORONILA received the following letter (Annex
the sale of your property consisting 300 hectares 'C' of the complaint) from the SSS Deputy
located at Montalban, Rizal, we earnestly request Administrator, Mr. Reynaldo J. Gregorio, to wit:
'May I take this With my kind personal regards, I
opportunity of inviting you in am'
behalf of Administrator Teodoro, to meet
with him, Chairman Gaviola and myself 9.
on Friday, March 4, 10:00 A.M. lot offer. That on March 16, 1968, plaintiff, acting upon the
letter of defendant DORONILA dated February
Thanks and regards. 28, 1968 (Annex 'D' for plaintiff), wrote the
8. following letter to SSS Administrator:
That on February 28, 1968, defendant 'Don Alfonso Doronila,
DORONILA wrote the following letter (Annex owner of the 300 hectare land located at
'D' of the complaint) to the SSS Deputy Montalban, Rizal, adjoining the Quezon
Administrator: City boundary, has informed us that the
Administrator of the SOCIAL SECURITY
'Thank you for your invitation to SYSTEM, through Mr. Reynaldo J.
meet Administrator Teodoro, Chairman Gregorio, has invited him to meet with the
Gaviola and your goodself, to take up my Administrator and Chairman Gaviola to
former offer to sell my property to the take up the former offer to sell his
Social Security System. property to the SSS.
Since the SSS had not acted on 'In his letter to the Administrator
my offer dated July 19, 1967, more than dated February 20, 1968 (which has been
seven (7) months ago, I have asked for the received by the SSS on the same day). Mr.
return of my papers, as per my Doronila advised you that as of February
letter of February 20, 1968, and which you 20, 1968, he gave the PHILIPPINE REAL
have kindly returned to me. ESTATE EXCHANGE (PHILREX) the
As of February 20, 1968, I gave exclusive option and authority to negotiate
the Philippine Real Estate Exchange an the sale of his 300 hectare land in
exclusive option and authority to negotiate Montalban, and that he is no longer at
the sale of this 300 hectare land, and I am liberty to negotiate its sale personally, and
no longer at liberty to negotiate its sale that, if you are still interested in this
personally; I shall therefore request you property, the SSS should communicate
communicate directly with the Philippine directly with the PHILIPPINE REAL
Real Exchange, P. O. Box 84, Quezon ESTATE EXCHANGE.
City, and deal with them directly if you are 'It is by virtue of this arrangement
still interested in my property. that Mr. Doronila now refers to us your
invitation and his reply to the SSS and has 13.
requested us to get in touch with you.' That on May 18, 1968, after plaintiff's exclusive
'While, at present we have several option and authority had been extended, plaintiff
prospective buyers interested in this wrote the following letter (Annex 'A-
property, we shall, in compliance with the Reply' of plaintiff's REPLY TO ANSWER) to
request of Mr. Doronila, be happy to sit defendant DORONILA, to wit:
down with you and Chairman Ramon 'CONFIDENTIAL'
Gaviola, Jr.'
'In our conference last Monday,
'Please let us know when it will be May 13, 1968, you have been definitely
convenient to hold the conference.' advised by responsible parties that the
10. SOCIAL SECURITY SYSTEM is
acquiring your 300-hectare land at
That on April 18, 1968, defendant DORONILA Montalban, Rizal, adjoining the Quezon
extended the plaintiff exclusive option and City Boundary - and that said property
authority to expire May 18, 1968. (Annex 'B' — will be acquired in accordance with
Reply, letter of Doronila to SSS Deputy exclusive option and authority you gave
Administrator dated May 8, 1968). the PHILIPPINE REAL ESTATE
11. EXCHANGE. You were assured in that
conference that the property will be
That on May 6, 1968, plaintiff made a formal acquired definitely, but, as it has been
written offer to the Social Security System to sell mentioned during the conference, it may
the 300 hectare land ofdefendant DORONILA at take from 30 to 60 days to have all the
the price of P6.00 per square meter, a Xerox papers prepared and to effect the
copy of which, bearing the stamp or receipt of the corresponding payment. The telegram
Social Security System is attached hereof as from the SSS confirming these
Annex 'D'-plaintiff. negotiations has already been received by
12. you, a copy of which you yourself have
kindly furnished us.
That on May 17, 1968, the defendant DORONILA
received the following telegram (Annex 'E' of the 'Pursuant to paragraph 3 of the terms of the option
complaint) from the SSS Administrator, reading: that you have kindly extended, we still have fifteen
days more from today; May 18, 1968, within
'SSS CONSIDERING which to finish the negotiations for the sale of your
PURCHASE YOUR PROPERTY FOR property to the SSS. For your convenience, we
ITS HOUSING PROJECT' quote the pertinent portion of paragraph 3 of the
option:
'. . . provided, however, that FIVE HUNDRED THOUSAND
should negotiation have been started with (P13,500,000.00) PESOS, Philippine
a buyer, said period is automatically Currency, payable in Cash and D.B.P.
extended until said negotiation is Progress Bonds, on a ratio to be decided
terminated, but no more than fifteen (15) between you and our principal.'
days.'
'To expedite the negotiations, we
'Please be assured that we will do suggest that we sit down sometime early
our very best to complete these next week with our principal to take up the
negotiations for the sale of your property final arrangement and other details in
within this fifteen-day period. In the connection with the purchase of the
meantime, we hope you will also observe subject property.'
the provisions of paragraph 6 of the
exclusive option you have extended to us.' 'To give you further
assurance of the validity of this offer, we
14. refer you to the CHINA BANKING
That on May 18, 1968, plaintiff wrote the CORPORATION (Trust Department) who
following letter (Xerox copy attached and marked has already been apprised of these
hereof as Annex 'H' for plaintiff) addressed to negotiations, to which Bank we strongly
defendant DORONILA, to wit: recommend that this transaction be
coursed through, for your own security
'By virtue of the exclusive option and protection.'
and authority you have granted the
PHILIPPINE REAL ESTATE 15.
EXCHANGE to negotiate the sale of your That on May 30, 1968, plaintiff wrote the
300-hectare land located at Montalban, following letter (Xerox copy attached hereto, and
Rizal, adjoining the Quezon City marked as Annex 'I' for plaintiff) to defendant
boundary, which properties are covered by DORONILA, quoted as follows:
Transfer Certificate of Titles Nos. 116631,
77011, 77012 and 77013, of the 'This is to advise you that the
Registry ofDeeds for the SOCIAL SECURITY SYSTEM agreed to
Province of Rizal, we hereby make a firm purchase your 300-hectare land located at
offer, for and in behalf of our buyer, to Montalban, Rizal, which purchase can be
purchase said property at the conformed by the Chairman of the
price of FOUR PESOS AND FIFTY SOCIAL SECURITY COMMISSION.
CENTAVOS (P4.50) per square meter, or The details will have to be taken up
the total amount ofTHIRTEEN MILLION between you and the Chairman, and we
suggest that you communicate with the the last day of this
Chairman at your earliest convenience.' authorization, this option
and authority shall expire
'This negotiation was made by and becomes null and void.'
virtue of the exclusive option and
authority you have granted the 'As I have informed
PHILIPPINE REAL ESTATE you, that on April 16, 1968
EXCHANGE, which option is in full force or two days after your
and effect, and covers the transaction option expired I have signed
referred above.' an agreement to sell my
property to a
16. group of buyers to whom I
That on June 6, 1968, defendant DORONILA asked later that the
wrote the following letter (Annex '7' for effectivity of said
DORONILA), to the plaintiff, to wit: agreement will be after your
new authority has expired
'I have to inform you officially, will be on June 2, and they
that I have not received any written offer have accepted; As your
from the SSS or others, to purchase my option has expired, and they
Montalban property of which you were know that there was no
given an option and exclusive authority as written offer made by the
appearing in your letter-contract dated SSS for any price ofmy
February 14, 1968, during the 60 property, aside of their
days of your exclusive authority which previous letter announcing
expired on April 14, 1968, nor during the me that they are ready to
extension which was properly a new pay, I was notified on June
exclusive authority of 30 days from April 4, 1968 by their
18, which expired on May 18, 1968, nor representative, calling my
during the provided 15 days grace, in case attention about our
that you have closed any transaction to agreement; that is why I am
terminate it during that period, which also writing you, that having
expired on June 3, 1968.' expired your option and
'As stated in said letter, we have exclusive authority to offer
the following condition: for sale my said property, I
notified only this afternoon
'5. If no written said to comply our
offer is made to you until agreement.
'Hoping for your period of thirty (30) days from the
consideration on the matter, date of my acceptance (July 19, 1967). My
as we have to be guided by acceptance was motivated by the fact that
contracts that we have to within said period of time I had hoped to
comply, I hereby express to repurchase my sugarcane hacienda in
you my sincere sentiments.' Iloilo with the proceeds I expected from
17. the sale. No action was however taken by
the System thereon.
That on June 19, 1968, defendant DORONILA
wrote the following letter (Annex '5' of the Recently, the same properties
Answer) to the SSS Administrator, renewing his were offered by Antonio E. Prats of the
offer to sell his 300 hectare land to the SSS at Philippine Real Estate Exchange to the
P4.00 per square meter, to wit: Presidential Assistant on Housing, at the
price of six pesos (P6.00) per square
meter, who referred it to the System, but
'This is to renew my offer to sell against no action had been taken by the
my properties located at Montalban, Rizal System.
identified as Lot Nos. 3-B-7, 26-B, 6, and Considering the lapse of time
4-C-3, registered in my name in the since our original offer during which
office of the Registry of Deeds of Rizal prices of real estate have increased
under T.C.T. Nos. 116631, 77013, 77011 considerably, on the one hand, and in
and 216750, containing a total area of 300 cooperation with the System's
hectares or 3,000.000 square meters. implementation of our government's
You will recall that last year, I policy to provide low cost houses to its
offered to the Social Security System the members, on the other hand, I am
same properties at the price of Four renewing my offer to sell my properties to
(P4.00) pesos per square meter. After 3 the system only at the same price of P4.00
ocular inspection of Chairman Gaviola, per square meter, or for a total
one of said inspections accompanied by amount of twelve million pesos
Commissioner Arroyo and after receiving (P12,000,000.00), provided the total
the written appraisal report of Manila amount is paid in cash within a
realtor Vicente L. Narciso, the System period of fifteen (15) days from this date.'
then made a counter-offer of Three pesos 18.
and twenty-five (P3.25) per square meter
which I accepted under the condition that That on June 20, 1968, the Social Security
the total amount be paid within a Commission passed Resolution No. 636 by which
the SSS formalized its counter-offer of P3.25 per CONFORME: With condition that the sale will
square meter. (See Annex 'F' of the complaint) consummated within Twenty (20) days from this
date.
19.
That on June 25, 1968, the SSS Administrator, Mr. ALFONSO DORONILA
Gilberto Teodoro, wrote the following reply letter Returned and received the original by
(Annex '6' of the Answer) to defendant
DORONILA, to wit: June 25/68
Admtr's Office'
'This has reference to your letter
dated June 9, 1968 renewing your offer to 20.
sell your property located at Montalban, That on June 27, 1968, the Social Security
Rizal containing an area of 300 hectares at Commission passed Resolution No. 662
P4.00 per square meter. Please be authorizing the Toples & Harding (Far East) to
informed that the said letter was submitted conduct an appraisal of the property of defendant
for the consideration of the Social Security DORONILA and to submit a report thereon. (See
Commission at its last meeting on June 20, Annex 'F' ofthe complaint)
1968 and pursuant to its Resolution No.
636, current series, it decided that the 21.
System reiterate its counter-offer for P3.25 That on July 17, 1968, the Social Security
per square meter subject to a favorable Commission taking note of the report of Toples &
appraisal report by a reputable appraisal Harding (Far East), passed Resolution No. 738,
entity as regards particularly to price and approving the purchase of the 300 hectare
housing project feasibility. Should this land of defendant DORONILA, at the
counter-offer be acceptable to you, kindly price of P3.25 per square meter, for a total
so indicate by signing hereunder your purchase price of NINE MILLION SEVEN
conformity thereon. HUNDRED FIFTY THOUSAND PESOS
Trusting that the foregoing (P9,750,000.00), and appropriating the said
sufficiently advises you on the matter, I amount of money for the purpose. (See Annex
remain 'F' of the complaint).

Very truly yours, 22.


That on July 30, 1968, defendant DORONILA
GILBERTO TEODORO executed the deed of absolute sale (Annex
Administrator 'G' of the complaint) over his 300-hectare land,
situated in Montalban, Rizal, covered by TCT Nos.
77011, 77013, 216747 (formerly TCT No. 116631)
and 216750 (formerly TCT No. 77012), in BOLINAO,
favor of the Social Security System, for the total JR.
purchase price of NINE MILLION SEVEN By: (Sgd.)
HUNDRED FIFTY THOUSAND PESOS
(P9,750,000.00), Philippine currency, which
deed of sale was presented for registration in the
Office of the Register of Deeds of Rizal on August
21, 1968. Counsel for the plaintiff
23. Suite 305, Shurdut Bldg.
That defendant DORONILA had received the full Intramuros, Manila
purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (Sgd.) E. V. Obon
(P9,750,000.00), Philippine Currency, in two Atty. EUGENIO V. OBON
installments.
Counsel for the defendant
24.
9 West Point Street
That on September 17, 1968, plaintiff presented
his STATEMENT OF ACCOUNT, dated Quezon City
September 16, 1968 (Xerox copy ofwhich is
attached hereto and marked as Annex 'J' plaintiff to ALFONSO DORONILA
defendant DORONILA for the payment of his Counsel for the defendant
professional services as real estate broker in the
amount of P1,380,000.00, as computed on the 428 Plaza de Ferguson
basis of the letter-agreement, Annex 'A'of the
Ermita, Manila" 2
complaint, which defendant failed to pay.
Manila, for Quezon City, January 18, 1968.
The trial court rendered its decision dated December 12, 1969, the
Respectfully
dispositive part of which reads:
submitted:
CRISPIN D. "WHEREFORE, judgment is hereby rendered in
BAIZAS & favor plaintiff, ordering defendant Alfonso
ASSOCIATE Doronila, under the first causeof action, to pay to
S plaintiff the sum of P1,380,000.00 with interest
and A.N. thereon at the rate of 6% per annum from
September 23, 1968 until fully paid; and under the
second Cause of Action, to pay plaintiff the their behalf, and that if no such written offer is
sum of P200,000.00 as moral damages; the made until the last day of the authorization, the
sum of P100,000. as exemplary damages; the option and authority shall expire and become null
sum of P150,000.00 as attorney's fees, including and void. Note that the emphasis is placed on the
the expenses oflitigation and costs of this suit. need of a written offer to save the authority from
an automatic termination on the last day of the
The writ of preliminary injunction issued in this authorization. We note such emphasis with special
case is hereby made permanent; and the defendant significance in view of the condition relative to
Philippine National Bank is hereby ordered to pay automatic extension of not more than 15 days if
to the plaintiff the amount of P1,380,000.00 and negotiations have been started. The question then
interest on the P1,380,000.00 to be computed is when are negotiations deemed started? In the
separately out P2,000,000.00 which it presently light of the provisions just cited, it would be when
holds under a fixed time deposit. a response is given by the prospective buyer
SO ORDERED. showing his interest to buy the property when an
offer is made by the seller or broker and make an
December 12, 1969, Quezon City, Philippines. offer of the price. Strictly, therefore, prior to May
29, 1968, there were no negotiations yet started
within the contemplation of the letter-
(SGD.) LOURDES P. SAN DIEGO agreement of brokerage (Exh. A) Nevertheless,
appellant extended appellee's exclusive authority
J u d g e" 3
on expire on May 18, 1968 (par. 10,
Stipulation of Facts; R.A. p. 89), which was
automatically extended by 15 days under their
The defendant appealed to the Court of Appeals where the appeal agreement, to expire on June 2, 1968, if the period
was docketed as CA-G.R. No. 45974-R. extended up to May 18, 1968, was a new authority.
In a decision promulgated on September 19, 1974, For, it may even be considered as taking the
the Court of Appeals reversed the decision of the trial court and place of the 15-day automatic extension, since
dismissed the complaint because: appellee's pretension is that negotiations have been
started within the original period of 60 days.
"In any event, since it has been found that the Appellant, in fixing the expiry date on June 2,
authority of appellee expired on June 2, 1968, 1968, has thus made a liberal concession in
rather than June 12, 1968 as the favor of appellee, when he chose not to regard the
lower court opined, the inquiry would be whether extension up to May 18, 1968 as the automatic
up to that time, a written offer was made by extension which ought to have been no more than
appellee in behalf ofthe SSS. The stipulation is 15 days, but which he generously stretched twice
clear on this point. There should he a written offer as long." 4
by the prospective buyer or by appellee for or in
The petitioner assigned the following errors: The Court in its Resolution of May 23, 1975 originally denied the
petition for lack of merit but upon petitioner's motion for
"I reconsideration and supplemental petition invoking equity, resolved
THE in its Resolution of August 20, 1975 to give due course thereto.
RESPONDENT COURT OF APPEALS ERRED
CONCLUDING THAT PETITIONER WAS NOT From the stipulation of facts and the evidence of record, it is clear
THE EFFICIENT PROCURING CAUSE IN that the offer of defendant Doronila to sell the 300 hectaresof land in
BRINGING ABOUT THE SALE PRIVATE question to the Social Security System was formally accepted by the
RESPONDENT DORONILA'S LAND TO THE System only on June 20, 1968 after the exclusive authority, Exhibit
SSS. A, in favor of the plaintiff, petitioner herein, had expired. The
respondent court's factual findings that petitioner was not the
II efficient procuring cause in bringing about the sale (prescinding from
THE the fact of expiration of his exclusive authority) which are admittedly
RESPONDENT COURT OF APPEALS ERRED final for purposes of the present petition, provide no basis in law to
CONCLUDING THAT THERE WAS FAILURE grant relief to petitioner. The following pertinent excerpts from
ON THE PART OF HEREIN PETITIONER TO respondent court's extensive decision amply demonstrate this:
COMPLY WITH THE TERMS
CONDITIONS OF HIS CONTRACT WITH
PRIVATE RESPONDENT. "It is noted, however, that even in his brief, when
he said —
III
'According to the testimony of the
THE plaintiff-appellee a few days before May
RESPONDENT COURT OF APPEALS ERRED 29, 1968, he arranged with Mr. Gilberto
IN CONCLUDING THAT PETITIONER IS NOT Teodoro, SSS Administrator, a meeting
ENTITLED TO HIS COMMISSION. with Doronila. He talked with Mr. Teodoro
IV over the telephone and fixed the
date of the meeting with defendant-
THE appellant Doronila for May 29, 1968, and
RESPONDENT COURT OF APPEALS ERRED that he was specifically requested by Mr.
IN AWARDING ATTORNEY'S FEES TO Teodoro not to be present at the meeting,
PRIVATE RESPONDENT DORONILA as he, Teodoro, wanted to deal directly
INSTEAD OF AFFIRMING THE with the defendant-appellant alone. (Tsn.,
AWARD OF MORAL AND EXEMPLARY pp. 44-46, March 1, 1969). Finding
DAMAGES AS WELL AS ATTORNEY'S FEES nothing wrong with such a request, as the
TO PETITIONER." 5 sale could be caused directly or indirectly
(Exh. 'A'), and believing that as a broker
all that he needed to do to be entitled to price of P4.50 per square meter, appellee could not
his commission was to bring about a have at the same time arranged a meeting between
meeting between the buyer and the seller the SSS officials and appellant with a view to
as to ripen into a sale, plaintiff-appellee consummating the sale in favor of the SSS which
readily acceded to the request.' had made an offer of only P3.25 per sq. m. and
thus lose the much bigger profit he would realize
appellee is not categorical that it was with a higher price of P4.50 per sq. meter. This
through his efforts that the meeting took 'firm offer' of P4.50 per sq. m. made by appellee
place on May 29, 1968. He refers to a betrayed his lack of any efficient intervention in
telephone call he made 'a few days before the negotiations with the SSS for the purchase by
May 29, 1968,' but in the conversation he it of appellant's property. . . . " 7
had with Mr. Teodoro, the latter requested
him not to be present in the meeting. From xxx xxx xxx
these facts, it is manifest that the SSS
officials never wanted to be in any way ". . . This becomes more evident when it is
guided by, or otherwise subject to, the considered that on May 6, 1968 he was making his
mediation or intervention of, appellee first offer to sell the property at P6.00 per sq. m. to
relative to the negotiation for the the SSS to which offer he received no answer. It is
purchase of the property. It is thus more this cold indifference of the SSS to him that must
reasonable to conclude that if a meeting was have prompted him to look for other buyers,
held on May 29, 1968, it was done resulting in his making the firm offer of P4.51 per
independently, and not by virtue of, sq. m. on May 18, 1968, a fact which only goes to
appellee's wish or efforts to hold such show that for being ignored by the SSS, he gave
meeting." 6 up all effort to deal with the SSS. . . . ." 8

xxx xxx xxx xxx xxx xxx

". . . It is even doubtful if he tried to make any ". . . For him to claim that it was he who aroused
arrangement for meeting at all, because on May the interest of the SSS in buying appellant's
18, 1968, he told appellant: property is to ignore the fact that as early as June,
(July) 1967, the SSS had directly dealt with
'. . . we hereby make a firm offer, appellant to such an extent that the price of P3.25
for and in behalf of our buyer, to purchase as offered by the SSS was accepted by appellant,
said property at the price ofFour Pesos and the latter imposing only the condition that the
Fifty Centavos (P4.50) per square meter . . price should be paid in cash, and within 30 days
. .' from the date of the acceptance. It can truly be said
"As this offer is evidently made in behalf of buyer then that the interest of SSS to acquire the property
other than the SSS which had never offered the had been sufficiently aroused for there to be any
need for appellee to stimulate it further. Appellee purchase of Doronila's property for its housing project. Prats and his
should know this fact for according to him, the 10- witness Raagas testified that Prats had several dinner and lunch
day grace period was agreed upon to give the SSS meetings with Doronila and/or his nephew, Atty. Manuel D. Asencio,
a chance to pay the price of the land at P3.25 per regarding the progress of the negotiations with the SSS.
sq. m., as a 'compromise' to appellant's insistence
that the SSS be excluded from appellee's option or Atty. Asencio had declared that he and his uncle, Alfonso Doronila,
authority to sell the land." 9 were invited several times by Prats, sometimes to luncheons and
sometimes to dinner. On a Sunday, June 2, 1968, Prats and Raagas
". . . There should be a written offer by the had luncheon in Sulu Hotel in Quezon City and they were joined
prospective buyer or by appellee for or in their later by Chairman Gaviola of the SSS.
behalf, and that if no such written offer is made
until the last day of the authorization, the option The Court has noted on the other hand that Doronila finally sold the
and authority shall expired and become null and property to the Social Security System at P3.25 per square meter
void. . . . Yet, no such written offer was made. . . . which was the very same price counter-offered by the Social Security
" 10 System and accepted by him in July, 1967 when he alone was
dealing exclusively with the said buyer long before Prats came into
In equity, however, the Court notes that petition diligently taken the picture but that on the other handPrats' efforts somehow were
steps to bring back together respondent Doronila and the SSS, among instrumental in bringing them together again and finally
which may be mentioned the following: consummating the transaction the same price of P3.25 square meter,
although such finalization was after the expiration of Prats' extended
In July, 1967, prior to February 14, 1968, respondent Doronila had exclusive authority. Still, such price was higher than that stipulated in
offered to sell the land in question to the Social Security System. the exclusive authority granted by Doronila to Prats.
Direct negotiations were made by Doronila with the SSS. The SSS
did not then accept the offer of Doronila. Thereafter, Doronila Under the circumstances, the Court grants in equity the sum of One
executed the exclusive authority in favor of petitioner Prats on Hundred Thousand Pesos (P100,000.00) by compensation for his
February 14, 1968. cdrep efforts and assistance in the transaction, which however was
finalized and consummated after the expiration of his exclusive
Prats communicated with the Office of the Presidential Housing authority and sets aside the P10,000.00-attorneys' fees award
Commission on February 23, 1968 offering the Doronila adjudged against him by respondent court.
property. Prats wrote a follow-up letter on April 18, 1968 which was
answered by the Commission with the suggestion that the property WHEREFORE, the decision appealed from is hereby affirmed, with
be offered directly to the SSS. Prats wrote the SSS on March 16, the modification that private respondent Alfonso Doronila in equity
1968, inviting Chairman Ramon Gaviola, Jr. to discuss the is ordered to pay petitioner or his heirs the amount of One Hundred
offer of the sale of the property in question to the SSS. On May 6, Thousand Pesos (P100,000.00) and that the portion of the said
1968, Prats made a formal written offer to the Social Security System decision sentencing petitioner Prats to pay respondent Doronila
to sell the 300-hectare land of Doronila at the price of P6.00 per attorneys' fees in the sum of P10,000.00 is set aside. cdphil
square meter. Doronila received on May 17, 1968 from the SSS
Administrator a telegram that the SSS was considering the The lifting of the injunction issued by the lower court on the
P2,000,000.00 cash deposit of respondent Doronila as ordered by
respondent court is hereby affirmed, with the exception of the
sum of One Hundred Thousand Pesos (P100,000.00) which is
ordered segregated therefrom to satisfy the award herein given to
petitioner; the lifting of said injunction, as herein ordered, is
immediately executory upon promulgation hereof.
No pronouncement as to costs.
Teehankee (Chairman), Makasiar, Muñoz Palma and Guerrero,
JJ., concur.

Footnotes

1.Rollo, pp. 110-111. The decision was written by Justice Pacifico


Castro and concurred in by Justice Guillermo S. Santos
and Justice Jose C. Bautista.
2.Record on Appeal, pp. 76-102, Rollo, p. 57.
3.Record on Appeal, pp. 183-184, Rollo, p. 57.
4.Rollo, pp. 98-100.
5.Brief for Petitioner, pp. 28-29, Rollo, p. 352.
6.Pp. 35-36, Court of Appeals decision.
7.Pp. 36-37, ibid.
8.Pp. 37, ibid.
9.Pp. 39, ibid.
10.Pp. 40-41, ibid.
||| (Prats v. Court of Appeals, G.R. No. L-39822, [January 31, 1978],
171 PHIL 322-347)
became the purchaser of petitioner's property mainly through the
efforts of private respondent. Without discounting the fact that when
Municipal Ordinance No. 6603 was signed by the City Mayor on
May 17, 1968, private respondent's authority had already expired, it
is to be noted that the ordinance was approved on April 26, 1968
when private respondent's authorization was still in force. Moreover,
the approval by the City Mayor came only three days after the
expiration of private respondent's authority. It is also worth
emphasizing that from the records, the only party given a written
authority by petitioner to negotiate the sale from July 5, 1966 to May
14, 1968 was private respondent.
SECOND DIVISION

[G.R. No. 94753. April 7, 1993.]


DECISION

MANOTOK BROTHERS, INC., petitioner, vs.


THE HONORABLE COURT OF APPEALS,
THE HONORABLE JUDGEOF THE CAMPOS, JR., J p:
REGIONAL TRIAL COURT OF MANILA
Petitioner Manotok Brothers., Inc., by way of the instant Petition
(Branch VI), and SALVADOR
docketed as G.R. No. 94753 sought relief from this Court's
SALIGUMBA, respondents.
Resolution dated May 3, 1989, which reads:
"G.R. No. 78898 (Manotok Brothers, Inc. vs.
Antonio C. Ravelo for petitioner. Salvador Saligumba and Court of Appeals). —
Remigio M. Trinidad for private respondent. Considering the manifestation ofcompliance by
counsel for petitioner dated April 14, 1989 with
the resolution of March 13, 1989 which required
SYLLABUS the petitioner to locate private respondent and to
inform this Court of the present address of said
private respondent, theCourt Resolved to
1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN
DISMISS this case, as the issues cannot be joined
ENTITLED' RULE; APPLICATION IN CASE AT BAR. — In an
as private respondent's and counsel's addresses
earlier case, this Court ruled that when there is a close, proximate
cannot be furnished by the petitioner to
and causal connection between the agent's efforts and labor and the
this court." 1
principal's sale of his property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila ultimately
In addition, petitioner prayed for the issuance of a preliminary sale of the property to the City of Manila for not less than
injunction to prevent irreparable injury to itself pending resolution by P410,000.00. With this letter came another extension of 180 days.
this Court of its cause. Petitioner likewise urged this Court to hold in
contempt private respondent for allegedly adopting sinister ploy to The Municipal Board of the City of Manila eventually, on April 26,
deprive petitioner of its constitutional right to due process. LibLex 1968, passed Ordinance No. 6603, appropriating the
sum ofP410,816.00 for the purchase of the property which private
Acting on said Petition, this Court in a Resolution 2 dated October 1, respondent was authorized to sell. Said ordinance however, was
1990 set aside the entry of judgment made on May 3, 1989 in case signed by the City Mayor only on May 17, 1968, one hundred eighty
G.R. No. 78898; admitted the amended petition; and issued a three (183) days after the last letter of authorization.
temporary restraining order to restrain the execution of the judgment
appealed from. On January 14, 1969, the parties signed the deed of sale of the
subject property. The initial payment of P200,000.00 having been
The amended petition 3 admitted, by this Court sought relief from made, the purchase price was fully satisfied with a second payment
this Court's Resolution abovequoted. In the alternative, petitioner on April 8, 1969 by a check in the amount ofP210,816.00.
begged leave of court to re-file its Petition for Certiorari 4 (G.R. No.
78898) grounded on the allegation that petitioner was deprived of its Notwithstanding the realization of the sale, private respondent never
opportunity to be heard. received any commission, which should have amounted to
P20,554.50. This was due to the refusal of petitioner to pay private
The facts as found by the appellate court, revealed that petitioner respondent said amount as the former does not recognize the latter's
herein (then defendant-appellant) is the owner of a certain role as agent in the transaction.
parcel of land and building which were formerly leased by the
City of Manila and used by the Claro M. Recto High School, at M.F. Consequently, on June 29, 1969, private respondent filed a complaint
Jhocson Street, Sampaloc Manila. against petitioner, alleging that he had successfully negotiated the
sale of the property. He claimed that it was because of his efforts that
By means of a letter 5 dated July 5, 1966, petitioner authorized the Municipal Board of Manila passed Ordinance No. 6603 which
herein private respondent Salvador Saligumba to negotiate with the appropriated the sum for the payment of the property subject of the
City of Manila the sale of the aforementioned property for not less sale.
than P425,000.00. In the same writing, petitioner agreed to pay
private respondent a five percent (5%) commission in the event the Petitioner claimed otherwise. It denied the claim of private
sale is finally consummated and paid. respondent on the following grounds: (1) private respondent would
be entitled to a commission only if the sale was consummated and
Petitioner, on March 4, 1967, executed another letter 6 extending the the price paid within the period given in the respective
authority of private respondent for 120 days. Thereafter, another letters of authority; and (2) private respondent was not the person
extension was granted to him for 120 more days, as evidenced by responsible for the negotiation and consummation of the sale, instead
another letter 7 dated June 26, 1967. it was Filomeno E. Huelgas, the PTA president for 1967-1968 of the
Claro M. Recto High School. As a counterclaim, petitioner (then
Finally, through another letter 8 dated November 16, 1967, the defendant-appellant) demanded the sum of P4,000.00 as attorney's
corporation with Rufino Manotok, its President, as signatory, fees and for moral damages.
authorized private respondent to finalize and consummate the
Thereafter, trial ensued. Private respondent, then plaintiff, testified as be given a "gratification" in the amount of P20,000.00 if the sale was
to the efforts undertaken by him to ensure the consummation of the expedited.
sale. He recounted that it first began at a meeting with
Rufino Manotok at the office of Fructuoso Ancheta, Rufino Manotok confirmed that he knew Huelgas and that there was
principal of C.M. Recto High School. Atty. Dominador Bisbal, then an agreement between the two of them regarding the "gratification".
president of the PTA, was also present. The meeting was set On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA
precisely to ask private respondent to negotiate the sale of the school meetings from 1965 to 1967 but he never offered to help in the
lot and building to the City of Manila. Private respondent then went acquisition of said property. Moreover, he testified that Huelgas was
to Councilor Mariano Magsalin, the author of the Ordinance which aware of the fact that it was private respondent who was negotiating
appropriated the money for the purchase of said property, to present the sale of the subject property.
the project. He also went to the Assessor's Office for appraisal of the
value of the property. While these transpired and his Thereafter, the then Court of First Instance (now, Regional
letters of authority expired, Rufino Manotok always renewed the Trial Court) rendered judgment sentencing petitioner and/or
former's authorization until the last was given, which was to remain RufinoManotok to pay unto private respondent the
in force until May 14, 1968. After securing the report of the appraisal sum of P20,540.00 by way of his commission fees with legal interest
committee, he went to the City Mayor's Office, which indorsed the thereon from the date of the filing of the complaint until payment.
matter to the Superintendent of City Schools ofManila. The latter The lower court also ordered petitioner to pay private respondent the
office approved the report and so private respondent went back to the amount of P4,000.00 as and for attorney's fees. 9
City Mayor's Office, which thereafter indorsed the same to the Petitioner appealed said decision, but to no avail.
Municipal Board for appropriation. Subsequently, on April 26, 1968, Respondent Court of Appeals affirmed the said ruling of the
Ordinance No. 6603 was passed by the Municipal Board for the trial court. 10
appropriation of the sum corresponding to the purchase price.
Petitioner received the full payment of the purchase price, but private Its Motion for Reconsideration having been denied by respondent
respondent did not receive a single centavo as commission. cdll appellate court in a Resolution dated June 22, 1987, petitioner
seasonably elevated its case on Petition for Review on Certiorari on
Fructuoso Ancheta and Atty. Dominador Bisbal both testified August 10, 1987 before this Court, docketed as G.R. No. 78898.
acknowledging the authority of private respondent regarding the
transaction. Acting on said Petition, this Court issued a Minute
Resolution 11 dated August 31, 1987 ordering private respondent to
Petitioner presented as its witnesses Filomeno Huelgas and the comment on said Petition.
petitioner's President, Rufino Manotok.
It appearing that the abovementioned Resolution was returned
Huelgas testified to the effect that after being inducted as PTA unserved with the postmaster's notation "unclaimed", thisCourt in
president in August, 1967 he followed up the sale from the start with another Resolution 12 dated March 13, 1989, required petitioner to
Councilor Magsalin until after it was approved by the Mayor on May locate private respondent and to inform this Courtof the present
17, 1968. He. also said that he came to know Rufino Manotok only address of private respondent within ten (10) days from notice. As
in August, 1968, at which meeting the latter told him that he would petitioner was unsuccessful in its efforts to locate private respondent,
it opted to manifest that private respondent's last address was the between the parties, for the sole reason that when the Deed of Sale
same as that address to which this. Court's Resolution was was finally executed, his extended authority had already expired. By
forwarded. this alone, one might be misled to believe that this case squarely falls
within the ambit ofthe established principle that a broker or agent is
not entitled to any commission until he has successfully done the job
Subsequently, this Court issued a Resolution dated May 3, 1989 given to him. 13
dismissing petitioner's case on the ground that the issues raised in the Going deeper however into the case would reveal that it is within the
case at bar cannot be joined. Thus, the above-entitled case became coverage of the exception rather than of the general rule, the
final and executory by the entry of judgment on May 3, 1989. exception being that enunciated in the
Thereafter, on January 9, 1990 private respondent filed a Motion to case of Prats vs. Court of Appeals. 14 In the said case,
Execute the said judgment before the court of origin. Upon this Court ruled in favorof claimant-agent, despite the
discovery of said development, petitioner verified with expiration of his authority, when a sale was finally
the court of origin the circumstances by which private respondent consummated. LibLex
obtained knowledge of the resolution of this Court. Sensing a In its decision in the abovecited case, this Court said, that while it
fraudulent scheme employed by private respondent, petitioner then was respondent court's (referring to the Court of Appeals) factual
instituted this instant Petition for Relief, on August 30, 1990. On findings that petitioner Prats (claimant-agent) was not the efficient
September 13, 1990, said petition was amended to include, in the procuring cause in bringing about the sale (prescinding from the
alternative, its petition to re-file its Petition for Certiorari (G.R. No. fact of expiration of his exclusive authority), still petitioner was
78898). awarded compensation for his services. And We quote:
The sole issue to be addressed in this petition is whether or not "In equity, however, the Court notes that petitioner
private respondent is entitled to the five percent (5%) agent's had diligently taken steps to bring back together
commission. respondent Doronila and the SSS,.
It is petitioner's contention that as a broker, private respondent's job xxx xxx xxx
is to bring together the parties to a transaction. Accordingly, if the
broker does not succeed in bringing the minds of the purchaser and The court has noted on the other hand that
the vendor to an agreement with respect to the sale, he is not entitled Doronila finally sold the property to the Social
to a commission. Security System at P3.25 per square meter which
was the very same price counter-offered by the
Private respondent, on the other hand, opposes petitioner's position Social Security System and accepted by him in
maintaining that it was because of his efforts that a purchase actually July, 1967 when he alone was dealing exclusively
materialized between the parties. with the said buyer long before Prats came into the
We rule in favor of private respondent. picture but that on the other hand Prats' efforts
somehow were instrumental in bringing them
At first sight, it would seem that private respondent is not entitled to together again and finally consummating the
any commission as he was not successful in consummating the sale transaction at the same price of P3.25 per square
meter, although such finalization was after the Contrary to what petitioner advances, the case of Danon vs.
expiration of Prats' extended exclusive authority. Brimo, 17 on which it heavily anchors its justification for the
denialof private respondent's claim, does not apply squarely to the
xxx xxx xxx instant petition. Claimant-agent in said case fully comprehended the
Under the circumstances, the Court grants in possibility that he may not realize the agent's commission as he was
equity the sum of One hundred Thousand Pesos informed that another agent was also negotiating the sale and thus,
(P100,000.00) by way ofcompensation for his compensation will pertain to the one who finds a purchaser and
efforts and assistance in the transaction, which eventually effects the sale. Such is not the case herein. On the
however was finalized and consummated after the contrary, private respondent pursued with his goal of seeing that the
expiration of his exclusive parties reach an agreement, on the belief that he alone was
authority . . ." 15 (Emphasis supplied.). transacting the business with the City Government as this was what
petitioner made it to appear.
From the foregoing, it follows then that private respondent herein,
with more reason, should be paid his commission, While While it may be true that Filomeno Huelgas followed up the matter
inPrats vs. Court of Appeals, the agent was not even the efficient with Councilor Magsalin, the author of Municipal Ordinance No.
procuring cause in bringing about the sale, unlike in the case at bar, 6603 and Mayor Villegas, his intervention regarding the purchase
it was still held therein that the agent was entitled to compensation. came only after the ordinance had already been passed — when the
In the case at bar, private respondent is the efficient procuring cause buyer has already agreed to the purchase and to the price for which
for without his efforts, the municipality would not have anything to said property is to be paid. Without the efforts of private respondent
pass and the Mayor would not have anything to approve. then, Mayor Villegas would have nothing to approve in the first
place. It was actually private respondent's labor that had set in
In an earlier case, 16 this Court ruled that when there is a close, motion the intervention of the third party that produced the sale,
proximate and causal connection between the agent's efforts and hence he should be amply compensated. cdll
labor and the principal's sale of his property, the agent is entitled to a
commission. WHEREFORE, in the light of the foregoing and finding no
reversible error committed by respondent Court, the
We agree with respondent Court that the City of Manila ultimately decision of theCourt of Appeals is hereby AFFIRMED. The
became the purchaser of petitioner's property mainly through the temporary restraining order issued by this Court in its Resolution
efforts of private respondent. Without discounting the fact that when dated October 1, 1990 is hereby lifted.
Municipal Ordinance No. 6603 was signed by the City Mayor on
May 17, 1968, private respondent's authority had already expired, it SO ORDERED.
is to be noted that the ordinance was approved on April 26, 1968 Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.
when private respondent's authorization was still in force. Moreover,
the approval by the City Mayor came only three days after the Footnotes
expiration of private respondent's authority. It is also worth 1.Rollo of G.R. No. 94753, p. 12.
emphasizing that from the records, the only party given a written
authority by petitioner to negotiate the sale from July 5, 1966 to May 2.Ibid., p. 77.
14, 1968 was private respondent.
3.Ibid., p. 47.
4.Rollo of G.R. No. 78898, p. 12.
5.Supra, note 1 at p. 156.
6.Ibid., p. 160.
7.Ibid., p. 161.
8.Ibid., p. 162.
9.Decision rendered by then Court of Instance, Branch VI, Manila
in Civil Case No. 76997, Rollo, pp. 13-18.
10.Penned by Associate Justice Vicente V. Mendoza and concurred
in by Associate Justices Manuel C. Herrera and Jorge S.
Imperial. Rollo, pp. 19-28.
11.Supra, note 4 at p. 67.
12.Ibid., p. 69.
13.Ramos vs. Court of Appeals, 63 SCRA 331 (1975).
14.81 SCRA 360 (1978).
15.Ibid., pp. 383-385.
16.Reyes vs. Manaoat, et al., 8 C.A. Rep. 2d 368 (1965).
17.42 Phil. 133 (1921).
||| (Manotok Brothers, Inc. v. Court of Appeals, G.R. No. 94753,
[April 7, 1993])
Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural
Bank, a bank owned by the Medrano family. In 1986,
Mr.Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a
buyer of a foreclosed asset of the bank, 3 a 17-hectare mango
plantation priced at P2,200,000.00, located in Ibaan, Batangas. 4
Mr. Dominador Lee, a businessman from Makati City, was a
client of respondent Mrs. Pacita G. Borbon, a licensed real estate
broker. The two met through a previous transaction where Lee
responded to an ad in a newspaper put up by Borbon for an 8-hectare
property in Lubo, Batangas, planted with atis trees. Lee expressed
that he preferred a land with mango trees instead. Borbon promised
SECOND DIVISION to get back to him as soon as she would be able to find a property
according to his specifications. jur2005cd
[G.R. No. 150678. February 18, 2005.]
Borbon relayed to her business associates and friends that she had a
ready buyer for a mango orchard. Flor then advised her that her
BIENVENIDO R. MEDRANO and IBAAN cousin-in-law owned a mango plantation which was up for sale. She
RURAL told Flor to confer with Medrano and to give them a written authority
BANK, petitioners, vs. COURT OF APPEALS, to negotiate the sale of the property. 5 Thus, on September 3,
PACITA G. BORBON, JOSEFINA E. ANTONIO 1986, Medrano issued the Letter ofAuthority, as follows:
and ESTELA A. FLOR, respondents.
Mrs. Pacita G. Borbon & Miss Josefina E. Antonio
Campos Rueda Building
DECISION Tindalo, Makati, M.M.
Mrs. Estela A. Flor & Miss Maria Yumi S. Karasig
CALLEJO, SR., J p: 23 Mabini Street

This is a petition for review of the Quezon City, M.M. ICHcaD


Decision 1 of the Court of Appeals (CA) affirming in toto the Dear Mesdames:
Decision 2 of the Regional TrialCourt (RTC) of Makati City, Branch
135, in Civil Case No. 15664 which awarded to the respondents their This letter will serve as your authority* to
5% broker's commission. negotiate with any prospective buyer for the
sale of a certain real estate property more
The facts are as follows: specifically a mango plantation which is described
more particularly therein below:
Location : Barrio Tulay-na-Patpat, Ibaan, Two days after the visit, respondent Josefina Antonio called Lee to
Batangas inquire about the result of his ocular inspection. Lee told her that the
mango trees "looked sick" so he was bringing an agriculturist to the
Lot Area : 17 hectares (more or less) per property. Three weeks thereafter, Antonio called Lee again to make a
attached Appendix "A" follow-up of the latter's visit to Ibaan. Lee informed her that he
Improvements : 720 all fruit-bearing already purchased the property and had made a down
mango trees payment of P1,000,000.00. The remaining balance of P1,200,000.00
(carabao variety) and other trees was to be paid upon the approvalof the incorporation papers of the
corporation he was organizing by the Securities and Exchange
Price : P2,200,000.00 Commission. According to Antonio, Lee asked her if they had
For your labor and effort in finding a purchaser already received their commission. She answered "no," and Lee
thereof, I hereby bind myself to pay you a expressed surprise over this. 9
commission of 5% of the total purchase price to be A Deed of Sale was eventually executed on November 6, 1986
agreed upon by the buyer and seller. DACTSH between the bank, represented by its President/General Manager
Very truly Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented by
yours, Dominador Lee (as Vendee), for the purchase
price of P1,200,000.00. 10 Since the sale of the property was
(Sgd.) consummated, the respondents asked from the petitioners their
commission, or 5% of the purchase price. The petitioners refused to
B.R. Medra
pay and offered a measly sum of P5,000.00 each. 11Hence, the
no
respondents were constrained to file an action against herein
Owner petitioners.

* Subject to price sale. 6 The petitioners alleged that Medrano issued the letter of authority in
favor of all the respondents, upon the representation ofFlor that she
The respondents arranged for an ocular inspection of the property had a prospective buyer. Flor was the only person known
together with Lee which never materialized — the first time was due to Medrano, and he had never met Borbon and
to inclement weather; the next time, no car was available for the Antonio. Medrano had asked that the name of their prospective buyer
tripping to Batangas. 7 Lee then called up Borbon and told her that be immediately registered so as to avoid confusion later on, but Flor
he was on his way to Lipa City to inspect another property, and failed to do so. Furthermore, the other officers of the bank had never
might as well also take a look at the property Borbon was offering. met nor dealt with the respondents in connection with the sale of the
Since Lee was in a hurry, the respondents could no longer property. Ganzon also asked Lee if he had an agent and the latter
accompany him at the time. Thus, he asked for the exact replied that he had none. The petitioners also denied that the
address of the property and the directions on how to reach the lot in purchase price of the property was P2,200,000.00 and alleged that
Ibaan from Lipa City. Thereupon, Lee was instructed to get in touch the property only cost P1,200,000.00. The petitioners further
with Medrano's daughter and also an officer of the bank, Mrs. Teresa contended that the letter of authority signed by Medrano was not
Ganzon, regarding the property. 8
binding or enforceable against the bank because the latter had a against the defendants, for the latter, jointly and
personality separate and distinct from that of Medrano. Medrano, on severally:
the other hand, denied liability, considering that he was not the
registered owner of the property, but the bank. The petitioners, 1. To pay plaintiffs the sum of P60,000.00
likewise, filed a counterclaim as they were constrained to hire the representing their five percent (5%)
services of counsel and suffered damages. 12 commission of the purchase price of the property
sold based on Exh. "D" or "9" plus legal interest
After the case was submitted for decision, Medrano died, but no from date of filing of the herein complaint until
substitution of party was made at this time. 13 fully paid; EAICTS
The trial court resolved the case based on the following common 2. To pay plaintiffs the sum of P20,000.00 as and
issues: for attorney's fees;
1. Whether or not the letter of authority is binding 3. To pay the plaintiffs the sum of P10,000.00 as
and enforceable against the defendant litigation expenses;
Bank only or both defendants; and
4. To pay the costs of the proceedings. 16
2. Whether or not the plaintiffs are entitled to any
commission for the sale of the subject Unable to agree with the RTC decision, petitioner Ibaan Rural Bank
property. 14 filed its notice of appeal. 17

On September 21, 1994, the trial court rendered a Decision in On October 10, 1994, the heirs of Bienvenido Medrano filed a
favor of the respondents. The petitioners were ordered to pay, jointly Motion for Reconsideration 18 praying that the late
and severally, the 5% broker's commission to herein respondents. BienvenidoMedrano be substituted by his heirs. They further prayed
The trial court found that the letter of authority was valid and binding that the trial court's decision as far as Medrano was concerned be set
as against Medrano and the Ibaan Rural bank. Medrano signed the aside and dismissed considering his demise. The trial court denied
said letter for and in behalf of the bank, and as owner of the property, the motion for reconsideration. 19 Hence, the heirs ofMedrano also
promising to pay the respondents a 5% commission for their efforts filed their notice of appeal. 20
in looking for a purchaserof the property. He is, therefore, estopped On appeal, the petitioners reiterated their stance that the
from denying liability on the basis of the letter of authority he issued letter of authority was not binding and enforceable, as the same was
in favor of the respondents. The trial court further stated that the signed by Medrano, who was not actually the owner of the property.
sale of the property could not have been possible without the They refused to give the respondents any commission, since the
representation and intervention of the respondents. As such, they are latter did not perform any act to consummate the sale. The petitioners
entitled to the broker's commission of 5% of the selling pointed out that the respondents (1) did not verify the real
price of P1,200,000.00 as evidenced by the owner of the property; (2) never saw the property in question; (3)
deed of sale. 15 The fallo of the decision reads as follows: never got in touch with the registered owner of the property; and (4)
WHEREFORE, premises considered, judgment is neither did they perform any act of assisting their buyer in having the
hereby rendered in favor of the plaintiffs and property inspected and verified. 21 The petitioners further raised the
trial court's error in not dismissing the case against LETTER-AUTHORITY AND YET
Bienvenido Medrano considering his death. ERRONEOUSLY GRANTED THE
PRIVATE-RESPONDENTS' DEMAND,
On May 3, 2001, the CA promulgated the assailed decision affirming NOTWITHSTANDING THE NON-
the finding of the trial court that the letter of authority was valid and PERFORMANCEOF THEIR
binding. Applying the principle of agency, the appellate court ruled OBLIGATION
that Bienvenido Medrano constituted the respondents as his agents, THEREUNDER; ASHaDT
granting them authority to represent and act on behalf of the former
in the sale of the 17-hectare mango plantation. The CA also ruled that IV. THE COURT OF APPEALS ERRED IN
the trial court did not err in finding that the respondents were the PRESUMING BAD FAITH UPON THE
procuring causeof the sale. Suffice it to state that were it not for the PETITIONERS;
respondents, Lee would not have known that there was a mango
orchard offered for sale. V. THE COURT OF APPEALS ERRED IN
PLACING THE BURDEN OF PROOF
UPON THE DEFENDANTS-
PETITIONERS;
The CA further ruled that an action for a sum of money continues
even after the death of the defendant, and shall remain as a money VI. THE COURT OF APPEALS FAILED TO
claim against the estate of the deceased. SUBSTANTIATE ITS CONCLUSION
WITH EVIDENCE AND INSTEAD
Undaunted by the CA's unfavorable decision, the petitioners filed the RELIED ON INFERENCE;
instant petition, raising eight (8) assignments of errors, to wit:
VII. THE COURT OF APPEALS FAILED TO
I. THE COURT OF APPEALS ERRED WHEN IT SUBSTANTIATE ITS CONCLUSION
FOUND THE PRIVATE RESPONDENTS WITH EVIDENCE AND MERELY
TO BE THE PROCURING RELIED ON SPECULATION AND
CAUSE OFTHE SALE; SURMISE;
II. THE COURT OF APPEALS ERRED IN VIII. THE COURT OF APPEALS MISAPPRECI
GIVING CREDENCE TO THE LETTER- ATED THE FACTS PRESENTED
AUTHORITY OF PETITIONER BEFORE IT, AND CONSEQUENTLY
MR. MEDRANO; FAILED TO CONSIDER REASONABLY
III. THE COURT OF APPEALS MADE A THE TWO (2) BASIC
MISTAKE WHEN IT CORRECTLY ARGUMENTS OF THE
RECOGNIZED THE EXTENT OF THE PETITIONERS. 22
PRIVATE RESPONDENTS' The petition is denied.
OBLIGATION AND AUTHORITY
CONTAINED IN MEDRANO'S
The records disclose that respondent Pacita Borbon is a licensed real pushed through for reasons beyond the respondents' control. Since
estate broker 23 and respondents Josefina Antonio and Estela A. Flor Lee was in a hurry to see the property, he asked the respondents the
are her associates. 24 A broker is generally defined as one who is exact address and the directions on how to reach Ibaan, Batangas.
engaged, for others, on a commission, negotiating contracts relative The respondents thereupon instructed him to look for Teresa Ganzon,
to property with the custody of which he has no concern; the an officer of the Ibaan Rural Bank and the person to talk to regarding
negotiator between other parties, never acting in his own name but in the property. While the letter-authority issued in favor of the
the name of those who employed him; he is strictly a middleman and respondents was non-exclusive, no evidence was adduced to show
for some purposes the agent of both parties. A broker is one whose that there were other persons, aside from the respondents, who
occupation is to bring parties together, in matters of trade, commerce informed Lee about the property for sale. Ganzon testified that no
or navigation. 25 For the respondents' participation in finding a buyer advertisement was made announcing the sale of the lot, nor did she
for the petitioners' property, the petitioners refuse to pay them give any authority to other brokers/agents to sell the subject
commission, asserting that they are not the efficient procuring property. 31 The fact that it was Lee who personally called Borbon
cause of the sale, and that the letter of authority signed by and asked for directions prove that it was only through the
petitioner Medrano is not binding against the petitioners. respondents that Lee learned about the property for
sale. 32 Significantly, too, Ms. Teresa Ganzon testified that there
"Procuring cause" is meant to be the proximate cause. 26 The term were no other persons other than the respondents who inquired from
"procuring cause," in describing a broker's activity, refers to a her about the sale of the property to Lee. 33 It can thus be readily
cause originating a series of events which, without break in their inferred that the respondents were the only ones who knew about the
continuity, result in accomplishment of prime objective ofthe property for sale and were responsible in leading a buyer to its
employment of the broker — producing a purchaser ready, willing consummation. All these circumstances lead us to the inescapable
and able to buy real estate on the owner's terms. 27 A broker will be conclusion that the respondents were the procuring cause of the sale.
regarded as the "procuring cause" of a sale, so as to be entitled to When there is a close, proximate and causal connection between the
commission, if his efforts are the foundation on which the broker's efforts and the principal's sale of his property, the broker is
negotiations resulting in a sale are begun. 28 The broker must be the entitled to a commission. 34
efficient agent or the procuring cause of the sale. The means
employed by him and his efforts must result in the sale. He must find The petitioners insist that the respondents are not entitled to any
the purchaser, and the sale must proceed from his efforts acting as commission since they did not actually perform any
broker. 29 acts of"negotiation" as required in the letter-authority. They refuse to
pay the commission since according to them, the respondents'
Indeed, the evidence on record shows that the respondents were participation in the transaction was not apparent, if not nil. The
instrumental in the sale of the property to Lee. Without their respondents did not even look at the property themselves; did not
intervention, no sale could have been consummated. They were the introduce the buyer to the seller; did not hold any conferences with
ones who set the sale of the subject land in motion. 30Upon being the buyer, nor take part in concluding the sale. For the non-
informed by Flor that Medrano was selling his mango orchard, compliance of this obligation "to negotiate," the petitioners argue, the
Borbon lost no time in informing Lee that they had found a property respondents are not entitled to any commission. aIcDCA
according to his specifications. An ocular inspection of the property
together with Lee was immediately planned; unfortunately, it never
We find the argument specious. The letter of authority must be read In the case at bar, the role of the respondents in the transaction is
as a whole and not in its truncated parts. Certainly, it was not the undisputed. Whether or not they participated in the
intention of Medrano to expect the respondents to do just that (to negotiations of the sale is of no moment. Armed with an authority to
negotiate) when he issued the letter of authority. The clear intention procure a purchaser and with a license to act as broker, we see no
is to reward the respondents for procuring a buyer for the property. reason why the respondents can not recover compensation for their
Before negotiating a sale, a broker must first and foremost bring in a efforts when, in fact, they are the procuring cause of the sale. 39
prospective buyer. It has been held that a broker earns his pay merely
by bringing the buyer and the seller together, even if no sale is Anent the validity of the letter-authority signed by Medrano, we find
eventually made. 35 The essential feature of a broker's conventional no reversible error with the findings of the appellate and trial courts
employment is merely to procure a purchaser for a property ready, that the petitioners are liable thereunder. Such factual findings
able, and willing to buy at the price and on the terms mutually agreed deserve this Court's respect in the absence of any cogent reason to
upon by the owner and the purchaser. And it is not a prerequisite to reverse the same. Medrano's obligation to pay the respondents
the right to compensation that the broker conduct the negotiations commission for their labor and effort in finding a purchaser or a
between the parties after they have been brought into contact with buyer for the described parcel of land is unquestionable. In the
each other through his efforts. 36 The case of Macondray v. absence of fraud, irregularity or illegality in its execution, such letter-
Sellner 37 is quite instructive: authority serves as a contract, and is considered as the law between
the parties. As such,Medrano can not renege on the promise to pay
The business of a real estate broker or agent, commission on the flimsy excuse that he is not the registered
generally, is only to find a purchaser, and the owner of the property. The evidence shows that he comported
settled rule as stated by the courts is that, in the himself to be the owner of the property. His testimony is quite
absence of an express contract between the broker telling:
and his principal, the implication generally is that
the broker becomes entitled to the usual Q Mr. Medrano, do you know any of the plaintiffs
commissions whenever he brings to his principal a in this case, Pacita Borbon, Josefina
party who is able and willing to take the property Antonio, and Stella (sic) F. Flor?
and enter into a valid contract upon the terms then WITNESS
named by the principal, although the particulars
may be arranged and the matter negotiated and A I know only Stella (sic) F. Flor. The rest, I do
completed between the principal and the purchaser not know them. I have never met them, up
directly. to now. EHTIcD

Notably, there are cases where the right of the brokers to recover Q How about the co-defendant Ibaan Rural Bank?
commissions were upheld where they actually took no part in the A I know co-defendant Ibaan Rural Bank, having
negotiations, never saw the customer, and even some in which they been the founder and at one time or
did nothing except advertise the property, as long as it can be shown another, I have served several capacities
that they were the efficient cause of the sale. 38 from President to Chairman of the Board.
Q Are you familiar with a certain parcel of land alios acta alteri nocere non debet." (page 8 of the
located at Barrio Tulay na Patpat, Ibaan, Appellant's Brief; page 35 of the Rollo). While it
Batangas, with an area of 17 hectares? may be true that technically the Ibaan Rural Bank
did not authorize Bienvenido R. Medrano to sell
A Yes, Sir. I used to own that property but later on the land under litigation or that the latter was no
mortgaged it to Ibaan Rural Bank. longer an officer of the said bank, still, these
Q And what, if any, [did] the bank do to your circumstances do not convince this Court fully
property after you have mortgaged the well to absolve the bank. Note that, as former
same to it? President of the said bank, it is improbable that he
(Bienvenido R. Medrano) was completely
oblivious of the developments therein. By
A After many demands for payment or reason of his past association with the
redemption of my mortgage, which I officers of the said bank (who are, in fact, his
failed to do so, the Ibaan Rural Bank sold relatives), it is unbelievable that Bienvenido
it. R. Medrano could simply have issued the said
letter of authority without the knowledge ofthe
Q After it was foreclosed? said officers. Granting por aguendo that
Bienvenido R. Medrano did not act on
A Yes, Sir.
behalf of the bank, however, We doubt that he had
Q Do you recall having made any transaction with no financial and/or material interest in the said sale
plaintiff Stella (sic) F. Flor regarding the — a fact that could not possibly have eluded Our
property? attention. 41

A Yes, Sir. Since she is the first cousin of my wife, From all the foregoing, there can be no other conclusion than the
I remember [that] she came to my office respondents are indeed the procuring cause of the sale. If not for the
once and requested for a letter of authority respondents, Lee would not have known about the mango plantation
which I issued [in] September 1986, I being sold by the petitioners. The sale was consummated. The bank
think, and I gave her the had profited from such transaction. It would certainly be iniquitous if
letter of authority. 40 the respondents would not be rewarded their commission pursuant to
the letter of authority.
As to the liability of the bank, we quote with favor the
disquisition of the respondent court, to wit: WHEREFORE, the petition is DENIED due course. The
Decision of the Court of Appeals is AFFIRMED.
Further, the appellants cannot use the flimsy
excuse (only to evade liability) that "(w)hat SO ORDERED.
Mr. Medrano represented to the plaintiffs-
Puno, Tinga and Chico-Nazario, JJ., concur.
appellees, without the knowledge or consent of the
defendant Bank, did not bind the Bank. Res inter Austria-Martinez, J., took no part.
Footnotes 22.Rollo, pp. 16-17.
1.Penned by Associate Justice Jose L. Sabio, Jr., with Associate
Justices Ma. Alicia Austria-Martinez (now an Associate 23.Exhibit "A," Records, p. 168.
Justice of the Supreme Court) and Hilarion L. Aquino 24.TSN, 4 December 1987, p. 6.
(retired), concurring.
25.Tan v. Gullas, 393 SCRA 334 (2002).
2.Penned by Judge Omar U. Amin.
26.Black's Law Dictionary, Fifth Edition.
3.Records, p. 8.
27.Clark v. Ellsworth, 66 Ariz. 119, 184 P.2d 821 (1947).
4.TSN, 4 January 1989, p. 6.
28.See Mohamed v. Robbins, 23 Ariz. App. 195, 531 P.2d 928, 930
5.TSN, 4 December 1987, pp. 7-8. (1975).
6.Exhibit "B," Records, p. 153. 29.Danon v. Brimo, 48 Phil. 133 (1921).
7.TSN, 4 December 1987, pp. 9-10; TSN, 15 March 1989, p. 9. 30.Tan v. Gullas, supra.
8.TSN, 15 March 1989, p. 10 31.TSN, 11 September 1990, p. 5.
9.TSN, 11 May 1989, pp. 8-9. 32.TSN, 4 December 1987, p. 11.
10.Exhibit "D," Records, p. 178. 33.TSN, 11 September 1990, p. 5.
11.TSN, 15 March 1989, p. 14. 34.Manotok Brothers, Inc. v. Court of Appeals, 221 SCRA 224
12.Records, pp. 8-10. (1993).

13.Id. at 320. 35.Tan v. Gullas, supra.

14.Id. 36.Wickersham v. T. D. Harris, 313 F.2d 468 (1963).

15.Id. at 229. 37.33 Phil. 370 (1916).

16.Id. at 321. 38.Libby v. Ivers & Pond Piano Co., 317 Mass. 478, 58 N.E.2d
834 (1945); Gleason v. Nelson, 162 Mass. 245, 38 N.E.
17.Id. at 322. 497 (1894); Clarkv. Ellsworth, supra.
18.Id. at 325-327. 39.Wickersham v. Harris, supra.
19.Id. at 370-371. 40.TSN, 6 November 1990, pp. 5-6.
20.Id. at 372. 41.Rollo, p. 41.
21.Rollo, p. 39.
||| (Medrano v. Court of Appeals, G.R. No. 150678, [February 18, is established, and the principal gives notice of the agency and
2005], 492 PHIL 222-237) holds out the agent as his authorized representative, upon the
termination of the agency it is the duty of the principal to give
due and timely notice thereof, otherwise, he will be held liable to
third parties acting in good faith and properly relying upon such
agency.

DECISION
EN BANC

[G.R. No. 6906. September 27, 1911.] MORELAND, J p:

This is an appeal from a judgment of the Court of First


FLORENTINO RALLOS, ET AL., plaintiffs- Instance of the Province of Cebu, the Hon. Adolph Wislizenus
appellees, vs. TEODORO presiding, in favor of the plaintiffs, in the sum of P1,537.08, with
R. YANGCO, defendant-appellant. interest at 6 per cent per annum from the month of July, 1909,
with costs.
Mariano Escueta, for appellant. The defendant in this case on the 27th day of November,
1907, sent to the plaintiff Florentino Rallos, among others, the
Martin M. Levering, for appellees. following letter:
"CIRCULAR No. 1.
SYLLABUS "MANIL
A, Novem
1. PRINCIPAL AND AGENT; TERMINATION OF ber 27,
THE AGENCY; DUTY OF PRINCIPAL TO GIVE DUE 1907.
NOTICE. — The defendant having advertised the fact that C was "Mr. FLORENTINO RALLOS, Cebu.
his agent, having given special notice to the plaintiffs of the
agency, and having also given them a special invitation to deal "DEAR SIR: I have the honor to inform
with such agent, it became the defendant's duty, upon the you that I have on this date opened in my
termination of the relationship of principal and agent, to give due steamship office at No. 163 Muelle de la Reina,
and timely notice thereof to the plaintiffs. Binondo, Manila, P. I., a shipping and commission
department for buying and selling leaf tobacco and
2. D.; ID.; ID.; LIABILITY OF PRINCIPAL. — The other native products, under the following
general rule is that, when the relationship of principal and agent conditions:
"1. When the consignment has been selling the same; with the understanding that after
received, the consignor thereof will be credited such period the consignee is authorized to make
with a sum not to exceed two-thirds of the value of the sale, so as to prevent the advance and cost of
the goods shipped, which may be made available storage from amounting to more than the actual
by acceptance of a draft or written order of the value of said goods, as has often happened.
consignor on five to ten days' sight, or by his "9. The shipment to the consignors of the
ordering at his option a bill of goods. In the latter goods ordered on account of the amount realized
case he must pay a commission of 2 per cent. from the sale of the goods consigned and of the
"2. No draft or written order will be goods bought on remittance of the value thereof,
accepted without previous notice forwarding the under sections (1) and (3), will not be insured
consignment of goods to guarantee the same. against risk by sea and land except on written
"3. Expenses of freight, hauling and order of the interested parties.
everything necessary for duly executing the "10. On all consignments of goods not
commission will be charged in the commission. insured according to the next preceding section,
"4. All advances made under sections (1) the consignors will bear the risk.
and (3) shall bear interest at 10 per cent a year, "11. All the foregoing conditions will take
counting from a month after the making thereof, effect only after this office has acknowledged the
until liquidated by the sale of the goods shipped or consignor's previous notice.
by remittance of the amount thereof. "12. All other conditions and details will
"5. A commission of 2 per cent will be be furnished at the office of the undersigned.
collected on the amount realized from the sale of "If you care to favor me with your
the goods shipped. patronage, my office is at No. 163 Muelle de la
"6. Payment will be made immediately Reina, Binondo, Manila, P. I., under the name of
after collection of the price of the goods shipped. 'Teodoro R. Yangco.' In this connection it gives me
"7. Orders will be taken for the purchase great pleasure to introduce to you Mr. Florentino
of general merchandise, ship-stores, cloths, etc., Collantes, upon whom I have conferred public
upon remittance of the amount with the power of attorney before the notary, Mr. Perfecto
commission of 2 per cent on the total value of the Salas Rodriguez, dated November 16, 1907, to
goods bought. Expenses of freight, hauling, and perform in my name and on my behalf all acts
everything necessary for properly executing the necessary for carrying out my plans, in the belief
commission will be charged to the consignor. that through his knowledge and long experience in
the business, along with my commercial
"8. The consignor of the goods may not connections with the merchants of this city and of
fix upon the consignee a longer period than four the provinces, I may hope to secure the most
months, counting from the date of receipt, for advantageous prices for my patrons. Mr. Collantes
will sign by power of attorney, so I beg that you the defendant, can recover of the defendant under the
make due note of his signature hereto affixed. circumstances above set forth. We are of the opinion that the
"Very respectfully, defendant is liable. Having advertised the fact that Collantes was
his agent and having given special notice to the plaintiffs of that
(Sgd.) "T. fact, and having given them a special invitation to deal with such
R. YANG agent, it was the duty of the defendant on the termination of the
CO. relationship of principal and agent to give due and timely notice
(Sgd.) "F. COLLANTES. thereof to the plaintiffs. Failing to do so, he is responsible to
them for whatever goods may have been in good faith and
Accepting this invitation, the plaintiffs proceeded to do a without negligence sent to the agent without knowledge, actual
considerable business with the defendant through the said or constructive, of the termination of such relationship.
Collantes, as his factor, sending to him as agent for the defendant
a good deal of produce to be sold on commission. Later, and in For these reasons the judgment appealed from is
the month of February, 1909, the plaintiffs sent to the said affirmed, without special finding as to costs.
Collantes, as agent for the defendant, 218 bundles of tobacco in Torres, Mapa, Johnson and Carson, JJ., concur.
the leaf to be sold on commission, as had been other produce
previously. The said Collantes received said tobacco and sold it ||| (Rallos v. Yangco, G.R. No. 6906, [September 27, 1911], 20 PHIL
for the sum of P1,744. The charges for such sale were P206.96, 269-273)
leaving in the hands of said Collantes the sum of P1,537.08
belonging to the plaintiffs. This sum was, apparently, converted
to his own use by said agent.
It appears, however, that prior to the sending of said
tobacco the defendant had severed his relations with Collantes
and that the latter was no longer acting as his factor.
This fact was not known to the plaintiffs; and it is
conceded in the case that no notice of any kind was given by the
defendant to the plaintiffs of the termination of the relations
between the defendant and his agent. The defendant refused to
pay the said sum upon demand of the plaintiffs, placing such
refusal upon the ground that at the time the said tobacco was
received and sold by Collantes he was acting personally and not
as agent of the defendant. This action was brought to recover
said sum.
As is seen, the only question for our decision is whether
or not the plaintiffs, acting in good faith and without knowledge,
having sent produce to sell on commission to the former agent of
third person of the thing held in trust is not a defense in estafa. . . .
However, this rule has already been modified in subsequent
cases. . . . Rosa 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
FIRST DIVISION proven. . . . Rosa Lim's sole purpose in delivering the pieces of
jewelry to Aurcha Nadera, was for Nadera to effect their return to
[G.R. No. 102784. April 7, 1997.] 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
ROSA LIM, petitioner, vs. COURT OF
misappropriation. Verily, that said act manifested Rosa Lim's
APPEALS AND PEOPLE OF THE
recognition that the pieces of jewelry do not belong to her. In doing
PHILIPPINES, respondents.
so, she acknowledged Suarez' right of dominion over them. Thus, it
cannot be regarded as conversion or misappropriation in its true
Zosa & Quijano Law Offices for petitioner. sense sufficient to convict her for estafa. Lim did not deliver them
bracelet and the ring to Nadera so that the latter may re-sell them as
The Solicitor General for respondents. 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
SYLLABUS and Suarez and who, from all indications, enjoy their mutual trust
and confidence. To reiterate, this raises reasonable doubt as to the
1. CRIMINAL LAW; REVISED PENAL CODE; ESTAFA THRU presence of any criminal intent ascribed to her by the prosecution.
MISAPPROPRIATION; APPROPRIATION OR CONVERSION,
3. REMEDIAL LAW; EVIDENCE; DECLARATION AGAINST
MEANING OF. — It is well-settled that the essence of estafa thru
INTEREST; THIRD PERSON'S ADMISSION OF HAVING
misappropriation is the appropriation or conversion of money or
RECEIVED THING HELD IN TRUST, A CASE OF; CASE AT
property received to the prejudice of the owner. The words "convert'
BENCH. — Aurelia Nadera herself admits that she received both the
and "misappropriate" connote an act of using or disposing of
bracelet and the ring in question from Lim. In her testimony, she
another's property as if it were one's own or devoting it to a purpose
had no qualms in admitting that she sold the ring in question and that
or use different from that agreed upon. To misappropriate for one's
she issued a check in favor of Suarez as payment for said ring. She
own use includes, not only conversion to one's personal advantage,
also admitted that such check had bounced. She is now facing a
but also every attempt to dispose of the property of another without
criminal case for violation of Batas Pambansa Blg. 22 instituted by
right.
Suarez herself. It is significant to note that the amount of the
2. ID.; ID.; ID.; ID.; DELIVERY TO THIRD PERSON OF THING bouncing check issued by Nadera as payment to Suarez corresponds
HELD IN TRUST, GENERALLY, NOT A DEFENSE IN ESTAFA; to the amount of the ring given by Suarez to Lim — P169,000.00.
EXCEPTION; CASE AT BENCH. — Generally, the delivery to a 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 Acting on the motion for reconsideration filed by petitioner Rosa
bouncing check, save the desire to tell the truth, in order that one Lim praying for her acquittal, this Court takes a second hard look at
who is innocent of any crime would not be erroneously convicted. the present case in the light of the various arguments raised by the
For, the same can only be to her detriment, considering that she is movant. LLjur
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 Petitioner Rosa Lim was charged with, and subsequently convicted
admit as fact what did not actually happen, when such admission of, the crime of estafa as defined under Art. 315, par. 1(b) of the
could very well lead to her own incarceration. Nadera's admission is Revised Penal Code before Branch 92 of the Regional Trial Court of
a declaration against her own interest made under oath. It must thus Quezon City. 1 This conviction was affirmed by the Court
be given full weight and credence. Appeals. 2 Aggrieved by the decision of the appellate court, Rosa
Lim filed a petition for review under Rule 45 before the Supreme
4. CRIMINAL LAW; NO ESTAFA THROUGH NEGLIGENCE; Court. This Court subsequently sustained the ruling of the Court of
CIVIL LIABILITY FOR RETURN OF THING HELD IN TRUST Appeals, hence, this Motion for Reconsideration seeking the reversal
TO ONE WHO HAS NO AUTHORITY TO RECEIVE THE SAME; of our decision dated February 28, 1996.
CASE AT BENCH. — The act of Lim in returning the items to
Nadera only shows that she had reason to believe that the latter had Her motion for reconsideration is anchored on the following
the authority to receive the same. This belief was inspired by the fact grounds:
that at the time of the said transaction between Lim and Suarez, it I. THE COURT A QUO FAILED TO CONSIDER
was Nadera herself, in behalf of Suarez, who prepared the receipt to EVIDENCE TO THE EFFECT THAT THE TRUE
be signed by Lim. In addition, Nadera was the one who introduced AGREEMENT BETWEEN THE PARTIES WAS
Suarez and Lim to each other. Hence, Rosa Lim can at most be held A SALE ON CREDIT AND NOT AN AGENCY
negligent in returning the ring to one whose authority to receive the TO SELL AS BROUGHT OUT IN THE CROSS-
same was subsequently refuted. Consequently, for the negligently EXAMINATION MADE BY THE PRIVATE
assuming Nadera's authority to receive the ring, Lim cannot be held PROSECUTOR ON THE PETITIONER AND
be held criminally liable. Settled it is in our jurisprudence that there AURELIA NADERA AS WELL AS ON THE
can be no estafa through negligence. At worst, she should only be CROSS EXAMINATION MADE ON THE
held civilly liable, Accordingly, we hold her liable to pay Vicky COMPLAINANT BY THE COUNSEL FOR THE
Suarez the full amount of the ring as actual damages plus legal PETITIONER; and
interest in the amount of six percent (6%) from the time of
extrajudicial demand. 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
RESOLUTION QUO FAILED TO CONSIDER CONCLUSIVE
EVIDENCE THAT SAID RING WAS IN FACT
RETURNED TO COMPLAINANT AS SHOWN
HERMOSISIMA, JR., J p: BY THE FACT THAT SHE FILED A CRIMINAL
CASE AGAINST AURELIA NADERA FOR immediately deliver and account the
ISSUING A BOUNCING CHECK IN THE whole proceeds of sale thereof to the
AMOUNT OF P169,000.00 WHICH SHE owner of the jewelries [sic] at his/her
ISSUED IN PAYMENT OF THE RING IN THE residence; my compensation or
REGIONAL TRIAL COURT OF QUEZON CITY. commission shall be the over-price on the
value of each jewelry quoted above. I am
It will be recalled that the facts of this case are as prohibited to sell any jewelry on credit or
follows: by installment; deposit, give for
Rosa Lim arrived in Manila from Cebu City sometime in October, safekeeping; lend, pledge or give as
1987 with her friend Aurelia Nadera. On October 8, 1987, they went security or guaranty under any
to the Williams Apartelle in Timog, Quezon City, where they met circumstance or manner, any jewelry to
Victoria Suarez, a jewelry dealer. Suarez and Nadera knew each other person or persons,' LLphil
other since the latter often sold jewelry for the former on commission
basis. Nadera had previously introduced Rosa Lim to Suarez as a I sign my name this ___ day of _____
wealthy businesswoman. 19___ at Manila.

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 Signature of Persons who received
P170,000.00. The pieces were to be sold by Lim on commission. jewelries [sic]
Accordingly, Lim signed a receipt, prepared by Nadera for Suarez,
which stated that: Address: ________________________" 3

"THIS IS TO CERTIFY, that I received from On October 12, 1987, before departing for Cebu, Lim called up Mrs.
Vicky Suarez the following jewelry: 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
Description Price time and instructed her to return the pieces of jewelry to Nadera
1 ring 3.35 solo P169,000.00 instead, who would in turn give them back to Suarez. Lim then
returned the jewelry to Nadera who issued a handwritten receipt
1 bracelet 170,000.00 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
Total P339,000.00 she had already returned both ring and bracelet to Nadera and as
in good condition, to be sold in CASH ONLY such, she no longer had any liability to Suarez insofar as the said
within . . . days from date of signing this receipt: items were concerned. Irked, Suarez filed a complaint for estafa
under Article 315, par. 1(b) against Rosa Lim. Trial ensued
'if I could not sell, I shall return all the thereafter.
jewelry, within the period mentioned
above; if I would be able to sell, I shall
During the trial, Lim asserted that she had already returned both the assigned by the petitioner, as well as of prevailing jurisprudence, we
bracelet and ring to Nadera. This was admitted by Nadera during her are convinced that Rosa Lim must be acquitted.
direct examination before the trial court:
Rosa Lim asserts that she gave both the bracelet and the ring to
"Q: Do you know if Rosa Lim returned the Aurelia Nadera for it to be returned to Suarez and that it was Suarez
jewelries [sic]? 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
A: She gave the jewelries [sic] to me. of the pieces of jewelry to Nadera since the latter already owed her a
Q: Why did Rosa Lim give the jewelries [sic] to substantial amount of money and that to entrust the return of the said
you? ring would be to tantamount to undue risk on her part. However,
Suarez herself admitted that the bracelet was in fact received by her
A: Rosa Lim called up Vicky Suarez the following from Nadera:
morning and told Vicky Suarez that she
was going home to Cebu and asked if she ATTY. TORIO: Now, Mrs. Witness, you said that
could give the jewelries [sic] to me. the bracelet was returned to you, is it not
true that this bracelet was returned by
Aurelia Nadera?
Q: And when did Rosa Lim give you the jewelries A: I already answered that.
[sic]?
COURT: What was the answer?
A: Before she left for Cebu." 5
WITNESS: It was returned by Aurelia Nadera. 7
Nadera further testified that she issued a check in favor of Suarez in
payment for the ring which Lim had previously returned to her: It is highly unlikely that Lim, if she truly had any intention of
defrauding Suarez, would still make an effort to return the bracelet,
"Q: What happened to the ring? considering that as between the two items, it is the more expensive
A: I sold it. one. Moreover, the Court of Appeals in examining the facts of this
case held that there was indeed such a return:
xxx xxx xxx
". . . This claim (that the ring had been returned to
Q: What happened to the proceeds of the sale of Suarez thru Nadera) is disconcerting. It
the ring? contravenes the very terms of Exhibit A. The
instruction by the complaining witness to appellant
A: The check that was paid to me bounced. So my
to deliver the ring to Aurelia Nadera is vehemently
check also bounced." 6
denied by the complaining witness, who declared
After another thorough and painstaking scrutiny of the records of this that she did not authorize and/or instruct appellant
case, we have decided to act favorably on the petitioner's motion. to do so. And thus,by delivering the ring to
Thus, upon a careful and deliberate consideration of the errors Aurelia without the express authority and consent
of the complaining witness, appellant assumed the and if the proof is clear that the accused herself
right to dispose of the jewelry as if it were hers, was the innocent victim of her sub-agent's
thereby committing conversion, a clear breach of faithlessness, her acquittal is in order." (emphasis
trust, punishable under Article 315, par. 1(b), ours)
Revised Penal Code."(emphasis ours)
Aurelia Nadera herself admits that she received both the bracelet and
In other words, it has been established that the ring which is the the ring in question from Lim. In her testimony, she hadno qualms in
subject of the prosecution for estafa was indeed returned, albeit to a admitting that she sold the ring in question and that she issued a
person whom Suarez claims has no authority to receive said item. 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
Generally, the delivery to a third person of the thing held in trust is violation of Batas Pambansa Blg. 22 instituted by Suarez herself. It is
not a defense in estafa. As enunciated in the earlier case ofUnited significant to note that the amount of the bouncing check issued by
States vs. Eustaquio: 8 Nadera as payment to Suarez corresponds to the amount of the ring
"When merchandise is received for sale on given by Suarez to Lim — P169,000.00.
commission, under the obligation to return the We cannot conceive of any motive on the part of Nadera in admitting
same, or its value, and is thereafter delivered to a not only receiving the ring, but also issuing, in payment thereof, a
third person without the knowledge or authority of bouncing check, save the desire to tell the truth, in order that one
the owner, the two elements which constitute the who is innocent of any crime would not be erroneously convicted.
crime of estafa exist: (a) the deceit by which it was For, the same can only be to her detriment, considering that she is
intended to defraud; and (b) the damage caused the now facing a criminal charge herself. That she and Lim are very
owner. good friends is of no moment, as it is inconceivable that she would
However, this rule has already been modified in subsequent cases. admit as fact what did not actually happen, when such admission
In People vs. Nepomuceno 9 and People vs. Trinidad, 10 it has been could very well lead to her own incarceration. Nadera's admission is
held that: a declaration against her own interest made under oath. It must thus
be given full weight and credence. cdtai
"In cases of estafa the profit or gain must be
obtained by the accused personally, through his Rosa Lim's assertion that she had returned the ring in question to
own acts, and his mere negligence in permitting Nadera, in addition to the latter's unswerving testimony admitting the
another to take advantage or benefit from the same, raises reasonable doubt as to Lim's liability for estafa.
entrusted chattel cannot constitute estafa under Conversion or misappropriation has not been sufficiently proven. As
Article 315 paragraph 1-b, of the Revised Penal held in the case of People vs. Lopez: 11
Code: unless of course the evidence should "When a demand for the delivery of the thing
disclose that the agent acted in conspiracy or promised, or the return of the money delivered in
connivance with the one who carried out the actual trust, is made, and such demand is not fulfilled
misappropriation, when the accused would be within a reasonable time, a presumption arises that
answerable for the acts of his co-conspirators. If the amount has been misappropriated. This
there is no such evidence, direct or circumstantial,
inference, however, is only deducible when the same. This belief was inspired by the fact that at the time of the said
explanation given by the accused for his failure to transaction between Lim and Suarez, it was Nadera herself, in behalf
account for the money is absolutely devoid of of Suarez, who prepared the receipt to be signed by Lim. 13 In
merits. Where the explanation does not completely addition, Nadera was the one who introduced Suarez and Lim to each
destroy the presumption but at least raises other. Hence, Rosa Lim can at most be held negligent in returning the
reasonable doubt that accused had ring to one whose authority to receive the same was subsequently
misappropriated the amount in question, acquittal refuted. Consequently, for negligently assuming Nadera's authority to
is in order." receive the ring, Lim cannot be held criminally liable. Settled it is in
our jurisprudence that there can be no estafa through negligence. At
It is well-settled that the essence of estafa thru misappropriation is worst, she should only be held civilly liable. Accordingly, we hold
the appropriation or conversion of money or property received to the her liable to pay Vicky Suarez the full amount of the ring as actual
prejudice of the owner. The words "convert" and "misappropriate" damages plus legal interest in the amount of six percent (6%) from
connote an act of using or disposing of another's property as if it the time of extrajudicial demand.
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 WHEREFORE, the Motion for Reconsideration is GRANTED. The
conversion to one's personal advantage, but also every attempt to decision dated February 28, 1996 is hereby MODIFIED. Petitioner
dispose of the property of another without right. 12 Rosa Lim is hereby ACQUITTED of any criminal liability, but is
held civilly liable in the amount of P169,000.00 as actual damages,
Rosa Lim's sole purpose in delivering the pieces of jewelry to plus legal interest, without subsidiary imprisonment in case of
Aurelia Nadera, was for Nadera to effect their return to Victoria insolvency.
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 No pronouncement as to costs.
party, be considered as conversion or misappropriation. Verily, that
said act manifested Rosa Lim's recognition that the pieces of jewelry SO ORDERED.
do not belong to her. In doing so, she acknowledged Suarez' right of Padilla, Bellosillo, Vitug and Kapunan, JJ ., concur.
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 Footnotes
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 1.Docketed as Criminal Case No. Q-89-2216.
person known to both her and Suarez and who, from all indications,
enjoy their mutual trust and confidence. To reiterate, this raises 2.CA-G.R CR No. 10290 entitled "People v. Rosa Lim",
reasonable doubt as to the presence of any criminal intent ascribed to promulgated on August 30, 1991.
her by the prosecution. 3."PINATUTUNAYAN KO na aking tinanggap kay ________ ang
The act of Lim in returning the items to Nadera only shows that she mga alahas na sumusunod:
had reason to believe that the latter had the authority to receive the
Mga uri Halaga 5.TSN, November 16, 1989, p. 12.
1 ring 3.35 solo P169,000.00 6.Ibid., p. 16.
1 bracelet 170,000.00 7.TSN, June 26, 1989, p. 17.
————— 8.31 PHIL 188 (1915).
Kabuuan P339,000.00 9.CA 46 O.G. 6128 (1949)
na nasa mabuting kalagayan upang ipagbili ng 10.CA 53 O.G. 731 (1956)
KALIWAAN (ALCONTADO) lamang sa loob ng . . .
araw mula sa ating pagkalagdaan: 11.CA 56 O.G. 5879 (1960)

'kung hindi ko maipagbili ay isasauli ko ang 12.Amorsolo vs. People, 154 SCRA 556
lahat ng alahas sa loob ng taning na panahong nakatala 13.Direct examination of Rosa Lim, TSN, June 29, 1989, p. 3.
sa itaas; kung maipagbili ko naman ay dagli kong isusuli
at ibibigay ang buong pinagbilhan sa may-ari ng mga ||| (Lim v. Court of Appeals, G.R. No. 102784 (Resolution), [April 7,
alahas sa kanyang bahay-tahanan; ang aking gantimpala 1997], 337 PHIL 459-469)
ay ang mapapahigit na halaga sa nakatakdang halaga sa
itaas ng bawat alahas HINDI ko pinahihintulutang ipa-u-
u-tang o ibibigay na hulugan ng alin mang alahas,
ilalagak, ipagkakatiwala; ipahihiram; isasangla o
ipananagot kahit sa anong paraan ang alin mang alahas
sa ibang mga tao o tao.'

NILALAGDAAN ko ang kasunduang ito


ngayong ika ____ ng dito sa Maynila.

_______________________
(Lagda ng Tumanggap ng mga Alahas)

Address: __________________________"
4.Exhibits "2", "2-a"; Records, p. 93.
Check No. 090990 (dated 11 August 1980) for the amount of Ninety
Five Thousand Pesos (P95,000.00), which was earlier issued to
Naguiat by the Corporate Resource Financing Corporation. She also
SECOND DIVISION issued her own Filmanbank Check No. 065314, to the order of
Queaño, also dated 11 August 1980 and for the amount of Ninety
[G.R. No. 118375. October 3, 2003.] Five Thousand Pesos (P95,000.00). The proceeds of these checks
were to constitute the loan granted by Naguiat to Queaño. 3
CELESTINA T. NAGUIAT, petitioner, vs. To secure the loan, Queaño executed a Deed of Real Estate
COURT OF APPEALS and AURORA Mortgage dated 11 August 1980 in favor of Naguiat, and surrendered
QUEAÑO, respondents. to the latter the owner's duplicates of the titles covering the
mortgaged properties. 4 On the same day, the mortgage deed was
notarized, and Queaño issued to Naguiat a promissory note for the
amount of TWO HUNDRED THOUSAND PESOS (P200,000.00),
DECISION with interest at 12% per annum, payable on 11 September
1980. 5 Queaño also issued a Security Bank and Trust Company
check, postdated 11 September 1980, for the amount of TWO
TINGA, J p: HUNDRED THOUSAND PESOS (P200,000.00) and payable to the
order of Naguiat.
Before us is a Petition for Review on Certiorari under Rule 45,
Upon presentment on its maturity date, the Security Bank check was
assailing the decision of the Sixteenth Division of the respondent
dishonored for insufficiency of funds. On the following day, 12
Court of Appeals promulgated on 21 December 1994 1 , which
September 1980, Queaño requested Security Bank to stop payment
affirmed in toto the decision handed down by the Regional Trial
of her postdated check, but the bank rejected the request pursuant to
Court (RTC) of Pasay City. 2
its policy not to honor such requests if the check is drawn against
The case arose when on 11 August 1981, private respondent Aurora insufficient funds. 6
Queaño (Queaño) filed a complaint before the Pasay City RTC for
On 16 October 1980, Queaño received a letter from Naguiat's lawyer,
cancellation of a Real Estate Mortgage she had entered into with
demanding settlement of the loan. Shortly thereafter, Queaño and one
petitioner Celestina Naguiat (Naguiat). The RTC rendered a decision,
Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting,
declaring the questioned Real Estate Mortgage void, which Naguiat
Queaño told Naguiat that she did not receive the proceeds of the
appealed to the Court of Appeals. After the Court of Appeals upheld
loan, adding that the checks were retained by Ruebenfeldt, who
the RTC decision, Naguiat instituted the present petition.
purportedly was Naguiat's agent.7
The operative facts follow:
Naguiat applied for the extrajudicial foreclosure of the mortgage
Queaño applied with Naguiat for a loan in the amount of Two with the Sheriff of Rizal Province, who then scheduled the
Hundred Thousand Pesos (P200,000.00), which Naguiat granted. On foreclosure sale on 14 August 1981. Three days before the scheduled
11 August 1980, Naguiat indorsed to Queaño Associated Bank sale, Queaño filed the case before the Pasay City RTC, 8seeking the
annulment of the mortgage deed. The trial court eventually stopped Naguiat's case doe not fall under any of the exceptions. In any event,
the auction sale. 9 both the decisions of the appellate and trial courts are supported by
the evidence on record and the applicable laws.
On 8 March 1991, the RTC rendered judgment, declaring the Deed
of Real Estate Mortgage null and void, and ordering Naguiat to Against the common finding of the courts below, Naguiat vigorously
return to Queaño the owner's duplicates of her titles to the mortgaged insists that Queaño received the loan proceeds. Capitalizing on the
lots. 10 Naguiat appealed the decision before the Court of Appeals, status of the mortgage deed as a public document, she cites the rule
making no less than eleven assignments of error. The Court of that a public document enjoys the presumption of validity and
Appeals promulgated the decision now assailed before us that truthfulness of its contents. The Court of Appeals, however, is correct
affirmed in toto the RTC decision. Hence, the present petition. in ruling that the presumption of truthfulness of the recitals in a
public document was defeated by the clear and convincing evidence
Naguiat questions the findings of facts made by the Court of in this case that pointed to the absence of consideration. 18 This
Appeals, especially on the issue of whether Queaño had actually Court has held that the presumption of truthfulness engendered by
received the loan proceeds which were supposed to be covered by notarized documents is rebuttable, yielding as it does to clear and
the two checks Naguiat had issued or indorsed. Naguiat claims that convincing evidence to the contrary, as in this case. 19
being a notarial instrument or public document, the mortgage deed
enjoys the presumption that the recitals therein are true. Naguiat also On the other hand, absolutely no evidence was submitted by Naguiat
questions the admissibility of various representations and that the checks she issued or endorsed were actually encashed or
pronouncements of Ruebenfeldt, invoking the rule on the non- deposited. The mere issuance of the checks did not result in the
binding effect of the admissions of third persons. 11 IDTHcA perfection of the contract of loan. For the Civil Code provides that
the delivery of bills of exchange and mercantile documents such as
The resolution of the issues presented before this Court by Naguiat checks shall produce the effect of payment only when they have been
involves the determination of facts, a function which this Court does cashed. 20 It is only after the checks have produced the effect of
not exercise in an appeal by certiorari. Under Rule 45 which governs payment that the contract of loan may be deemed perfected. Art.
appeal by certiorari, only questions of law may be raised 12 as the 1934 of the Civil Code provides:
Supreme Court is not a trier of facts. 13 The resolution of factual
issues is the function of lower courts, whose findings on these "An accepted promise to deliver something by
matters are received with respect and are in fact generally binding on way of commodatum or simple loan is binding
the Supreme Court. 14 A question of law which the Court may pass upon the parties, but the commodatum or simple
upon must not involve an examination of the probative value of the loan itself shall not be perfected until the delivery
evidence presented by the litigants. 15 There is a question of law in a of the object of the contract."
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 A loan contract is a real contract, not consensual, and, as such, is
or difference arises as to the truth or the falsehood of alleged perfected only upon the delivery of the object of the contract. 21 In
facts. 16 this case, the objects of the contract are the loan proceeds which
Queaño would enjoy only upon the encashment of the checks signed
Surely, there are established exceptions to the rule on the or indorsed by Naguiat. If indeed the checks were encashed or
conclusiveness of the findings of facts of the lower courts. 17 But deposited, Naguiat would have certainly presented the corresponding
documentary evidence, such as the returned checks and the pertinent the honest belief that he is what he appears to be. 27 The Court of
bank records. Since Naguiat presented no such proof, it follows that Appeals is correct in invoking the said rule on agency by estoppel.
the checks were not encashed or credited to Queaño's account.
More fundamentally, whatever was the true relationship between
Naguiat questions the admissibility of the various written Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the
representations made by Ruebenfeldt on the ground that they could checks issued or indorsed to Queaño were never encashed or
not bind her following the res inter alia acta alteri nocere non deposited to her account of Naguiat.
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 All told, we find no compelling reason to disturb the finding of the
rule. 22 Still, Naguiat insists that Ruebenfeldt was not her agent. courts a quo that the lender did not remit and the borrower did not
Suffice to say, however, the existence of an agency relationship receive the proceeds of the loan. That being the case, it follows that
between Naguiat and Ruebenfeldt is supported by ample evidence. the mortgage which is supposed to secure the loan is null and void.
As correctly pointed out by the Court of Appeals, Ruebenfeldt was The consideration of the mortgage contract is the same as that of the
not a stranger or an unauthorized person. Naguiat instructed principal contract from which it receives life, and without which it
Ruebenfeldt to withhold from Queaño the checks she issued or cannot exist as an independent contract. 28 A mortgage contract
indorsed to Queaño, pending delivery by the latter of additional being a mere accessory contract, its validity would depend on the
collateral. Ruebenfeldt served as agent of Naguiat on the loan validity of the loan secured by it. 29
application of Queaño's friend, Marilou Farralese, and it was in WHEREFORE, the petition is denied and the assailed decision is
connection with that transaction that Queaño came to know affirmed. Costs against petitioner.
Naguiat. 23 It was also Ruebenfeldt who accompanied Queaño in her
meeting with Naguiat and on that occasion, on her own and without SO ORDERED.
Queaño asking for it, Ruebenfeldt actually drew a check for the sum Bellosillo, Quisumbing, Austria-Martinez and Callejo, Sr., JJ.,
of P220,000.00 payable to Naguiat, to cover for Queaño's alleged concur.
liability to Naguiat under the loan agreement. 24
Footnotes
The Court of Appeals recognized the existence of an "agency by 1.Justice Corona Ibay-Somera wrote the ponencia, with Justices
estoppel 25 citing Article 1873 of the Civil Code. 26 Apparently, it Asaali S. Isnani and Celia Lipana-Reyes, concurring.
considered that at the very least, as a consequence of the interaction
between Naguiat and Ruebenfeldt, Queaño got the impression that 2.Promulgated on 8 March 1991 by Judge Manuel P. Dumatol.
Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to
3.According to Naguiat, she further delivered to Queaño the
correct Queaño's impression. In that situation, the rule is clear. One
amount of Ten Thousand Pesos (P10,000.00), thus
who clothes another with apparent authority as his agent, and holds
rounding off the amount she allegedly gave to Queaño to
him out to the public as such, cannot be permitted to deny the
Two Hundred Thousand Pesos (See Petition for Certiorari,
authority of such person to act as his agent, to the prejudice of
p. 3). Queaño, however, claims that the amount of Ten
innocent third parties dealing with such person in good faith, and in
Thousand (P10,000.00) was deducted as the stipulated 5% other courts whenever authorized by law, may file with the
interest. Records, p. 342. Supreme Court a verified petition for review on certiorari.
The petition shall raise only questions of law which must
4.Transfer Certificates of Title Nos. 28631 and 28632, issued by be distinctly set forth." See also Metro Transit
the Register of Deeds for District IV (Pasay City) of Metro Organization Inc. v. CA, G.R. No. 142133, 19 November
Manila, with a total area of Six Hundred Thirty One (631) 2002.
Square Meters. Rollo, p. 97.
13.W-Red Construction v. CA, G.R. No. 122648, 17 August 2000.
5.Rollo, p. 98. According to Queaño, the true agreement between
the parties was an interest rate of 5% per month. 14.Engreso v. De La Cruz, G.R. No. 148727, 9 April 2003.
6.Id., p. 99. Queaño alleged that she made the "stop payment" 15.Western Shipyard Services, Inc. v. CA, G.R. No. 110340, 28
request because she was withdrawing her loan application May 2001.
as she failed to receive the loan proceeds which were
supposed to be covered by Naguiat's checks that were 16.Bagunu v. Piedad, G.R. No. 140975, 8 December 2000.
turned not to her but to Ruby Ruebenfeldt, who 17.Exceptional circumstances that would compel the Supreme
purportedly was an agent of Naguiat. Queaño claimed Court to review the findings of fact of the lower courts are:
further that Naguiat demanded additional collaterals and (1) when the conclusion is a finding grounded entirely on
instructed Ruebenfeldt to surrender the checks to Queaño speculations, surmises or conjectures; (2) when the
only upon receipt of the additional security. inference made is manifestly absurd, mistaken or
7.Id., p. 99. Queaño claimed further that Naguiat demanded impossible; (3) when there is grave abuse of discretion in
additional collaterals and instructed Ruebenfeldt to the appreciation of facts; (4) when the judgment is
surrender the checks to Queaño only upon receipt of the premised on a misapprehension of facts; (5) when the
additional security. findings of fact are conflicting; (6) when the Court of
Appeals in making its findings, went beyond the issues of
8.Docketed as Civil Case No. 9330-P. the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the Court of Appeals
9.Rollo, p. 5. manifestly overlooked certain relevant facts not disputed
10.Id., p. 37. by the parties and which, if properly considered, would
justify a different conclusion; and (8) when the findings of
11.Sec. 28, Rule 130. See Rule 130, Sec. 28. "Section fact of the Court of Appeals are contrary to those of the
28. Admission by third party. — The rights of a party trial court, or are mere conclusions without citation of
cannot be prejudiced by an act, declaration, or omission of specific evidence, or where the facts set forth by the
another, except as hereinafter provided." petitioner are not disputed by the respondent, or where the
12.Sec. 1, Rule 45 states: "A party desiring to appeal by certiorari findings of fact of the Court of Appeals are premised on
from a judgment or final order or resolution of the Court of absence of evidence but are contradicted by the evidence
Appeals, the Sandiganbayan, the Regional Trial Court or of record. See Sacay v. Sandiganbayan, 226 Phil. 496, 510
(1986).
18.Rollo, p. 43. 1980, the same was dishonored for being drawn against a
closed account. On account of the dishonor of
19.See Gerales v. Court of Appeals, G.R. No. 85909, 218 SCRA Ruebenfeldt's check, Naguiat filed a criminal complaint for
638, 648, 9 February 1993, and Agdeppa vs. Ibe, G.R. No. violation of B.P. Blg. 22 with the City Prosecutor's Office
96770, 220 SCRA 584, 594, 30 March 1993. of Caloocan. However, the City Prosecutor dismissed the
20.Art. 1249, New Civil Code. ". . . The delivery of promissory said action on the ground that Ruebenfeldt's liability was
notes payable to order, or bills of exchange or other civil and not criminal. See Rollo, p. 5 to 6.
mercantile documents shall produce the effect of payment 25.Rollo, p. 50.
only when they have been cashed, or when through the
fault of the creditor they have been impaired." 26.Art. 1873. "If a person specifically informs another or states by
public advertisement that he has given a power of attorney
21.BPI Investment Corporation v. Court of Appeals, G.R. No. to a third person, the latter thereby becomes a duly
133632, 377 SCRA 117, 124, 15 February 2002. The Court authorized agent, in the former case with respect to the
therein clarified the previous ruling in Bonnevie v. Court person who received the special information, and in the
of Appeals, 210 Phil. 104, 108 (1983) which apparently latter case with regard to any person."
suggested that a contract of loan was a consensual
contract, by noting that the contract in Bonnevie fell under 27.Cuison v. Court of Appeals, G.R. No. 88531, 26 October 1993.
the first clause of Art. 1934 of the Civil Code, it being an
accepted promise to deliver something by way of simple 28.China Banking Corporation v. Lichauco, 46 Phil. 460 (1926).
loan. 29.Filipinas Marble Corp. v. Intermediate Appellate Court, 226
22.See Sec. 29, Rule 130. "Section 29. Admission by co-partner or Phil. 109, 119 (1986).
agent. — The act or declaration of a partner or agent of the ||| (Naguiat v. Court of Appeals, G.R. No. 118375, [October 3, 2003],
party within the scope of his authority and during the 459 PHIL 237-246)
existence of the partnership or agency, may be given in
evidence against such party after the partnership or agency
is shown by evidence other than such act or declaration.
The same rule applies to the act or declaration of a joint
owner, joint debtor or other person jointly interested with
the party."
23.Rollo, p. 49.
24.Security Bank & Trust Company Check No. 017399, drawn by
Ruebenfeldt payable to Naguiat, and postdated to
November 15, 1980. Naguiat accepted the check, allegedly
because she wanted to be assured of repayment. However,
when Naguiat deposited this new check on 15 November
PAGCOR is vested with the power to enter into contracts of
every kind and for any lawful purpose that pertains to its
business. Pursuant to this authority, PAGCOR launched its
SECOND DIVISION Foreign Highroller Marketing Program (Program). The Program
aims to invite patrons from foreign countries to play at the dollar
[G.R. No. 163553. December 11, 2009.] pit of designated PAGCOR-operated casinos under specified
terms and conditions and in accordance with industry practice. 5
YUN KWAN BYUNG, petitioner, vs. The Korean-based ABS Corporation was one of the
PHILIPPINE AMUSEMENT AND GAMING international groups that availed of the Program. In a letter-
CORPORATION, respondent. agreement dated 25 April 1996 (Junket Agreement), ABS
Corporation agreed to bring in foreign players to play at the five
designated gaming tables of the Casino Filipino Silahis at the
Grand Boulevard Hotel in Manila (Casino Filipino). The relevant
DECISION stipulations of the Junket Agreement state:
1. PAGCOR will provide ABS Corporation with
separate junket chips. The junket chips
CARPIO, J p: will be distinguished from the chips being
used by other players in the gaming tables.
The Case
2. ABS Corporation will distribute these junket
Yun Kwan Byung (petitioner) filed this Petition for chips to its players and at the end of the
Review 1 assailing the Court of Appeals' Decision 2 dated 27 playing period, ABS Corporation will
May 2003 in CA-G.R. CV No. 65699 as well as the collect the junket chips from its players
Resolution 3 dated 7 May 2004 denying the Motion for and make an accounting to the casino
Reconsideration. In the assailed decision, the Court of Appeals treasury. CTEDSI
(CA) affirmed the Regional Trial Court's Decision 4 dated 6 May
1999. The Regional Trial Court of Manila, Branch 13 (trial 3. ABS Corporation will assume sole
court), dismissed petitioner's demand against respondent responsibility to pay the winnings of its
Philippine Amusement and Gaming Corporation (PAGCOR) for foreign players and settle the collectibles
the redemption of gambling chips. from losing players.
The Facts 4. ABS Corporation shall hold PAGCOR
PAGCOR is a government-owned and controlled absolutely free and harmless from any
corporation tasked to establish and operate gambling clubs and damage, claim or liability which may arise
casinos as a means to promote tourism and generate sources of from any cause in connection with the
revenue for the government. To achieve these objectives, Junket Agreement.
5. In providing the gaming facilities and services PAGCOR claims that petitioner, who was brought into
to these foreign players, PAGCOR is the Philippines by ABS Corporation, is a junket player who
entitled to receive from ABS Corporation played in the dollar pit exclusively leased by ABS Corporation
a 12.5% share in the gross winnings of for its junket players. PAGCOR alleges that it provided ABS
ABS Corporation or 1.5 million US Corporation with distinct junket chips. ABS Corporation
dollars, whichever is higher, over a distributed these chips to its junket players. At the end of each
playing period of 6 months. PAGCOR has playing period, the junket players would surrender the chips to
the option to extend the period. 6 ABS Corporation. Only ABS Corporation would make an
accounting of these chips to PAGCOR's casino treasury. 10
Petitioner, a Korean national, alleges that from
November 1996 to March 1997, he came to the Philippines four As additional information for the junket players playing
times to play for high stakes at the Casino Filipino. 7 Petitioner in the gaming room leased to ABS Corporation, PAGCOR posted
claims that in the course of the games, he was able to accumulate a notice written in English and Korean languages which reads:
gambling chips worth US$2.1 million. Petitioner presented as NOTICE
evidence during the trial gambling chips with a face value of
US$1.1 million. Petitioner contends that when he presented the This GAMING ROOM is exclusively operated by
gambling chips for encashment with PAGCOR's employees or ABS under arrangement with PAGCOR, the
agents, PAGCOR refused to redeem them. 8 former is solely accountable for all PLAYING
CHIPS wagered on the tables. Any financial
Petitioner brought an action against PAGCOR seeking
ARRANGEMENT/TRANSACTION between
the redemption of gambling chips valued at US$2.1 million.
PLAYERS and ABS shall only be binding upon
Petitioner claims that he won the gambling chips at the Casino
said PLAYERS and ABS. 11
Filipino, playing continuously day and night. Petitioner alleges
that every time he would come to Manila, PAGCOR would PAGCOR claims that this notice is a standard
extend to him amenities deserving of a high roller. A PAGCOR precautionary measure 12 to avoid confusion between junket
official who meets him at the airport would bring him to Casino players of ABS Corporation and PAGCOR's players.
Filipino, a casino managed and operated by PAGCOR. The card
PAGCOR argues that petitioner is not a PAGCOR player
dealers were all PAGCOR employees, the gambling chips,
because under PAGCOR's gaming rules, gambling chips cannot
equipment and furnitures belonged to PAGCOR, and PAGCOR
be brought outside the casino. The gambling chips must be
enforced all the regulations dealing with the operation of foreign
converted to cash at the end of every gaming period as they are
exchange gambling pits. Petitioner states that he was able to
inventoried every shift. Under PAGCOR's rules, it is impossible
redeem his gambling chips with the cashier during his first few
for PAGCOR players to accumulate two million dollars worth of
winning trips. But later on, the casino cashier refused to encash
gambling chips and to bring the chips out of the casino
his gambling chips so he had no recourse but to deposit his
premises. 13
gambling chips at the Grand Boulevard Hotel's deposit box,
every time he departed from Manila. 9 Since PAGCOR disclaimed liability for the winnings of
players recruited by ABS Corporation and refused to encash the
gambling chips, petitioner filed a complaint for a sum of money (c) The Corporation shall provide an office at
before the trial court. 14 PAGCOR filed a counterclaim against casino(s) exclusively for the employees of the
petitioner. Then, trial ensued. aTDcAH designated bank, agent of the Central Bank, where
the Corporation shall maintain a dollar account
On 6 May 1999, the trial court dismissed the complaint
which will be utilized exclusively for the above
and counterclaim. Petitioner appealed the trial court's decision to
purpose and the casino dollar treasury employees;
the CA. On 27 May 2003, the CA affirmed the appealed
decision. On 27 June 2003, petitioner moved for reconsideration (d) Only persons with foreign passports or
which was denied on 7 May 2004. certificates of identity (for Hong Kong patron
Aggrieved by the CA's decision and resolution, only) duly issued by the government or country of
petitioner elevated the case before this Court. their residence will be allowed to play in the
foreign exchange gaming pit;
The Ruling of the Trial Court
(e) Only foreign exchange prescribed to form part
The trial court ruled that based on PAGCOR's of the Philippine International Reserve and the
charter, 15 PAGCOR has no authority to lease any portion of the following foreign exchange currencies: Australian
gambling tables to a private party like ABS Corporation. Section Dollar, Singapore Dollar, Hong Kong Dollar, shall
13 of Presidential Decree No. 1869 or the PAGCOR's charter be used in this gaming pit;
states:
(f) The disbursement, administration, management
Sec. 13. Exemptions. — and recording of foreign exchange currencies used
xxx xxx xxx in the casino(s) shall be carried out in accordance
with existing foreign exchange regulations, and
(4) Utilization of Foreign Currencies — The periodical reports of the transactions in such
Corporation shall have the right and authority, foreign exchange currencies by the Corporation
solely and exclusively in connection with the shall be duly recorded and reported to the Central
operations of the casino(s), to purchase, receive, Bank thru the designated Agent Bank;
exchange and disburse foreign exchange, subject and cSEaTH
to the following terms and conditions:
(g) The Corporation shall issue the necessary rules
(a) A specific area in the casino(s) or gaming pit and regulations for the guidance and information
shall be put up solely and exclusively for players of players qualified to participate in the foreign
and patrons utilizing foreign currencies; exchange gaming pit, in order to make certain that
(b) The Corporation shall appoint and designate a the terms and conditions as above set forth are
duly accredited commercial bank agent of the strictly complied with.
Central Bank, to handle, administer and manage The trial court held that only PAGCOR could use foreign
the use of foreign currencies in the casino(s); currency in its gaming tables. When PAGCOR accepted only a
fixed portion of the dollar earnings of ABS Corporation in the
concept of a lease of facilities, PAGCOR shared its franchise continued to play under the same restrictions over a period of
with ABS Corporation in violation of the PAGCOR's charter. several months confirms his acquiescence to them. Otherwise,
Hence, the Junket Agreement is void. Since the Junket petitioner could have simply chosen to stop gambling. 18
Agreement is not permitted by PAGCOR's charter, the mutual
In dismissing petitioner's complaint, the trial court
rights and obligations of the parties to this case would be
concluded that petitioner's demand against PAGCOR for the
resolved based on agency and estoppel. 16
redemption of the gambling chips could not stand. The trial court
The trial court found that the petitioner wanted to stated that petitioner, a stranger to the agreement between
redeem gambling chips that were specifically used by ABS PAGCOR and ABS Corporation, could not under principles of
Corporation at its gaming tables. The gambling chips come in equity be charged with notice other than of the apparent authority
distinctive orange or yellow colors with stickers bearing with which PAGCOR had clothed its employees and agents in
denominations of 10,000 or 1,000. The 1,000 gambling chips are dealing with petitioner. Since petitioner was made aware of the
smaller in size and the words "no cash value" marked on them. special rules by which he was playing at the Casino Filipino,
The 10,000 gambling chips do not reflect the "no cash value" petitioner could not now claim that he was not bound by them.
sign. The senior treasury head of PAGCOR testified that these The trial court explained that in an unlawful transaction, the
were the gambling chips used by the previous junket operators courts will extend equitable relief only to a party who was
and PAGCOR merely continued using them. However, the unaware of all its dimensions and whose ignorance of them
gambling chips used in the regular casino games were of a exposed him to the risk of being exploited by the other. Where
different quality. 17 the parties enter into such a relationship with the opportunity to
know all of its ramifications, as in this case, there is no room for
equitable considerations to come to the rescue of any party. The
The trial court pointed out that PAGCOR had taken steps trial court ruled that it would leave the parties where they are. 19
to warn players brought in by all junket operators, including ABS
The Ruling of the Court of Appeals
Corporation, that they were playing under special rules. Apart
from the different kinds of gambling chips used, the junket In dismissing the appeal, the appellate court addressed
players were confined to certain gaming rooms. In these rooms, the four errors assigned by petitioner.
notices were posted that gambling chips could only be encashed
First, petitioner maintains that he was never a junket
there and nowhere else. A photograph of one such notice, printed
player of ABS Corporation. Petitioner also denies seeing a notice
in Korean and English, stated that the gaming room was
that certain gaming rooms were exclusively operated by entities
exclusively operated by ABS Corporation and that ABS
under special agreement. 20 TaISEH
Corporation was solely accountable for all the chips wagered on
the gaming tables. Although petitioner denied seeing this notice, The CA ruled that the records do not support petitioner's
this disclaimer has the effect of a negative evidence that can theory. Petitioner's own testimony reveals that he enjoyed special
hardly prevail against the positive assertions of PAGCOR accommodations at the Grand Boulevard Hotel. This similar
officials whose credibility is also not open to doubt. The trial accommodation was extended to players brought in by ABS
court concluded that petitioner had been alerted to the existence Corporation and other junket operators. Petitioner cannot
of these special gambling rules, and the mere fact that he disassociate himself from ABS Corporation for it is unlikely that
an unknown high roller would be accorded choice The CA concluded that no such legal fiction existed
accommodations by the hotel unless the accommodation was between PAGCOR and ABS Corporation. PAGCOR entered into
facilitated by a junket operator who enjoyed such privilege. 21 a Junket Agreement to lease to ABS Corporation certain gaming
areas. It was never PAGCOR's intention to deal with the junket
The CA added that the testimonies of PAGCOR's
players. Neither did PAGCOR intend ABS Corporation to
employees affirming that notices were posted in English and
represent PAGCOR in dealing with the junket players.
Korean in the gaming areas are credible in the absence of any
Representation is the basis of agency but unfortunately for
convincing proof of ill motive. Further, the specified gaming
petitioner none is found in this case. 28
areas used only special chips that could be bought and
exchanged at certain cashier booths in that area. 22 The CA added that the special gaming chips, while
belonging to PAGCOR, are mere accessories in the void Junket
Second, petitioner attacks the validity of the contents of
Agreement with ABS Corporation. In Article 1883, the phrase
the notice. Since the Junket Agreement is void, the notice, which
"things belonging to the principal" refers only to those things or
was issued pursuant to the Junket Agreement, is also void and
properties subject of a particular transaction authorized by the
cannot affect petitioner. 23
principal to be entered into by its purported agent. Necessarily,
The CA reasoned that the trial court never declared the the gambling chips being mere incidents to the void lease
notice valid and neither did it enforce the contents thereof. The agreement cannot fall under this category. 29 TcCDIS
CA emphasized that it was the act of cautioning and alerting the
The CA ruled that Article 2152 30 of the Civil Code is
players that was upheld. The trial court ruled that signs and
also not applicable. The circumstances relating to negotiorum
warnings were in place to inform the public, petitioner included,
gestio are non-existent to warrant an officious manager to take
that special rules applied to certain gaming areas even if the very
over the management and administration of PAGCOR. 31
agreement giving rise to these rules is void. 24
Fourth, petitioner asks for equitable relief. 32
Third, petitioner takes the position that an implied
agency existed between PAGCOR and ABS Corporation. 25 The CA explained that although petitioner was never a
party to the void Junket Agreement, petitioner cannot deny or
The CA disagreed with petitioner's view. A void contract
feign blindness to the signs and warnings all around him. The
has no force and effect from the very beginning. It
notices, the special gambling chips, and the separate gaming
producesno effect either against or in favor of anyone. Neither
areas were more than enough to alert him that he was playing
can it create, modify or extinguish the juridical relation to which
under different terms. Petitioner persisted and continued to play
it refers. Necessarily, the Junket Agreement, being void from the
in the casino. Petitioner also enjoyed the perks extended to
beginning, cannot give rise to an implied agency. The CA
junket players of ABS Corporation. For failing to heed these
explained that it cannot see how the principle of implied agency
signs and warnings, petitioner can no longer be permitted to
can be applied to this case. Article 1883 26 of the Civil Code
claim equitable relief. When parties do not come to court with
applies only to a situation where the agent is authorized by the
clean hands, they cannot be allowed to profit from their own
principal to enter into a particular transaction, but instead of
wrong doing. 33
contracting on behalf of the principal, the agent acts in his own
name. 27 The Issues
Petitioners raise three issues in this petition: with junket operators to operate gambling casinos in the country.
Section 3 (h) of PAGCOR's charter states:
1. Whether the CA erred in holding that PAGCOR
is not liable to petitioner, disregarding the Section 3. Corporate Powers. — The Corporation
doctrine of implied agency, or agency by shall have the following powers and functions,
estoppel; among others:
2. Whether the CA erred in using intent of the xxx xxx xxx
contracting parties as the test for creation
of agency, when such is not relevant since h) to enter into, make, perform, and carry out
the instant case involves liability of the contracts of every kind and for any lawful purpose
presumed principal in implied agency to a pertaining to the business of the Corporation, or in
third party; and any manner incident thereto, as principal, agent or
otherwise, with any person, firm, association, or
3. Whether the CA erred in failing to consider that corporation.
PAGCOR ratified, or at least adopted, the
acts of the agent, ABS Corporation. 34 xxx xxx xxx

The Ruling of the Court The Junket Agreement would be valid if under Section 3
(h) of PAGCOR's charter, PAGCOR could share its gambling
The petition lacks merit. franchise with another entity. In Senator Jaworski v. Phil.
Courts will not enforce debts arising from illegal gambling Amusement and Gaming Corp., 40 the Court discussed the extent
of the grant of the legislative franchise to PAGCOR on its
Gambling is prohibited by the laws of the Philippines as authority to operate gambling casinos:
specifically provided in Articles 195 to 199 of the Revised Penal
Code, as amended. Gambling is an act beyond the pale of good A legislative franchise is a special privilege
morals, 35 and is thus prohibited and punished to repress an evil granted by the state to corporations. It is a
that undermines the social, moral, and economic growth of the privilege of public concern which cannot be
nation. 36 Presidential Decree No. 1602 (PD 1602), 37 which exercised at will and pleasure, but should be
modified Articles 195-199 of the Revised Penal Code and reserved for public control and administration,
repealed inconsistent provisions, 38 prescribed stiffer penalties either by the government directly, or by public
on illegal gambling. 39 agents, under such conditions and regulations as
the government may impose on them in the
As a rule, all forms of gambling are illegal. The only interest of the public. It is Congress that prescribes
form of gambling allowed by law is that stipulated the conditions on which the grant of the franchise
underPresidential Decree No. 1869, which gave PAGCOR its may be made. Thus the manner of granting the
franchise to maintain and operate gambling casinos. The issue franchise, to whom it may be granted, the mode of
then turns on whether PAGCOR can validly share its franchise conducting the business, the charter and the
quality of the service to be rendered and the duty
of the grantee to the public in exercising the State is presumed to exist for the common good.
franchise are almost always defined in clear and Hence, the special privileges and franchises it
unequivocal language. HaIESC receives are subject to the laws of the State and the
limitations of its charter. There is therefore a
reserved right of the State to inquire how these
After a circumspect consideration of the foregoing privileges had been employed, and whether they
discussion and the contending positions of the have been abused. (Emphasis supplied)
parties, we hold that PAGCOR has acted THUS, PAGCOR HAS THE SOLE AND EXCLUSIVE
beyond the limits of its authority when it passed AUTHORITY TO OPERATE A GAMBLING ACTIVITY.
on or shared its franchise to SAGE. WHILE PAGCOR IS ALLOWED UNDER ITS CHARTER TO
In the Del Mar case where a similar issue was ENTER INTO OPERATOR'S OR MANAGEMENT
raised when PAGCOR entered into a joint venture CONTRACTS, PAGCOR IS NOT ALLOWED UNDER THE
agreement with two other entities in the operation SAME CHARTER TO RELINQUISH OR SHARE ITS
and management of jai alai games, the Court, in FRANCHISE. PAGCOR CANNOT DELEGATE ITS POWER
an En Banc Resolution dated 24 August 2001, IN VIEW OF THE LEGAL PRINCIPLE OF DELEGATA
partially granted the motions for clarification filed POTESTAS DELEGARE NON POTEST, INASMUCH AS
by respondents therein insofar as it prayed that THERE IS NOTHING IN THE CHARTER TO SHOW THAT IT
PAGCOR has a valid franchise, but only by itself HAS BEEN EXPRESSLY AUTHORIZED TO DO SO. 41
(i.e., not in association with any other person or Similarly, in this case, PAGCOR, by taking only a
entity), to operate, maintain and/or manage the percentage of the earnings of ABS Corporation from its foreign
game of jai-alai. currency collection, allowed ABS Corporation to operate gaming
In the case at bar, PAGCOR executed an tables in the dollar pit. The Junket Agreement is in direct
agreement with SAGE whereby the former grants violation of PAGCOR's charter and is therefore void.
the latter the authority to operate and maintain Since the Junket Agreement violates PAGCOR's charter,
sports betting stations and Internet gaming gambling between the junket player and the junket operator
operations. In essence, the grant of authority gives under such agreement is illegal and may not be enforced by the
SAGE the privilege to actively participate, partake courts. Article 2014 42 of the Civil Code, which refers to illegal
and share PAGCOR's franchise to operate a gambling, states that no action can be maintained by the winner
gambling activity. The grant of franchise is a for the collection of what he has won in a game of chance.
special privilege that constitutes a right and a duty
to be performed by the grantee. The grantee must Although not raised as an issue by petitioner, we deem it
not perform its activities arbitrarily and necessary to discuss the applicability of Republic Act No.
whimsically but must abide by the limits set by its 9487 43 (RA 9487) to the present case. HITEaS
franchise and strictly adhere to its terms and RA 9487 amended the PAGCOR charter, granting
conditionalities. A corporation as a creature of the PAGCOR the power to enter into special agreement with third
parties to share the privileges under its franchise for the between PAGCOR and ABS Corporation on 25 April 1996 when
operation of gambling casinos: the PAGCOR charter then prevailing (PD 1869) prohibited
PAGCOR from entering into any arrangement with a third party
Section 1. The Philippine Amusement and Gaming
that would allow such party to actively participate in the casino
Corporation (PAGCOR) franchise granted
operations.
under Presidential DecreeNo. 1869 otherwise
known as the PAGCOR Charter, is hereby further It is a basic principle that laws should only be applied
amended to read as follows: prospectively unless the legislative intent to give them
retroactive effect is expressly declared or is necessarily implied
xxx xxx xxx from the language used. 44 RA 9487 does not provide for any
(2) SECTION 3(H) IS HEREBY retroactivity of its provisions. All laws operate prospectively
AMENDED TO READ AS FOLLOWS: absent a clear contrary language in the text, 45 and that in every
case of doubt, the doubt will be resolved against the retroactive
"SEC. 3. CORPORATE POWERS. — operation of laws. 46
"xxx xxx xxx Thus, petitioner cannot avail of the provisions of RA
9487 as this was not the law when the acts giving rise to the
"(h) to enter into, make, conclude,
claimed liabilities took place. This makes the gambling activity
perform, and carry out contracts of every
participated in by petitioner illegal. Petitioner cannot sue
kind and nature and for any lawful
PAGCOR to redeem the cash value of the gambling chips or
purpose which are necessary, appropriate,
recover damages arising from an illegal activity for two reasons.
proper or incidental to any business or
First, petitioner engaged in gambling with ABS Corporation and
purpose of the PAGCOR, including but
not with PAGCOR. Second, the court cannot assist petitioner in
not limited to investment
enforcing an illegal act. Moreover, for a court to grant
agreements, joint venture agreements,
petitioner's prayer would mean enforcing the Junket Agreement,
management agreements, agency
which is void. cTESIa
agreements, whether as principal or as an
agent, manpower supply agreements, or Now, to address the issues raised by petitioner in his
any other similar agreements or petition, petitioner claims that he is a third party proceeding
arrangements with any person, firm, against the liability of a presumed principal and claims relief,
association or corporation." (Boldfacing alternatively, on the basis of implied agency or agency by
supplied) estoppel.
PAGCOR sought the amendment of its charter precisely to Article 1869 of the Civil Code states that implied agency
address and remedy the legal impediment raised in Senator is derived from the acts of the principal, from his silence or lack
Jaworski v. Phil. Amusement and Gaming Corp. of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority. Implied
Unfortunately for petitioner, RA 9487 cannot be applied agency, being an actual agency, is a fact to be proved by
to the present case. The Junket Agreement was entered into deductions or inferences from other facts. 47
On the other hand, apparent authority is based on employees and using PAGCOR chips
estoppel and can arise from two instances. First, the principal bearing the PAGCOR logo; 54
may knowingly permit the agent to hold himself out as having
such authority, and the principal becomes estopped to claim that 3. PAGCOR controlled the release, withdrawal and
the agent does not have such authority. Second, the principal return of all the gambling chips given to
may clothe the agent with the indicia of authority as to lead a ABS Corporation in that part of the casino
reasonably prudent person to believe that the agent actually has and at the end of the day, PAGCOR
such authority. 48 In an agency by estoppel, there is noagency at conducted an inventory of the gambling
all, but the one assuming to act as agent has apparent or chips;55 DSacAE
ostensible, although not real, authority to represent another. 49 4. ABS Corporation accounted for all gambling
The law makes no presumption of agency and proving chips with the Commission on Audit
its existence, nature and extent is incumbent upon the person (COA), the official auditor of
alleging it. 50 Whether or not an agency has been created is a PAGCOR; 56
question to be determined by the fact that one represents and is 5. PAGCOR enforced, through its own manager,
acting for another. 51 all the rules and regulations on the
Acts and conduct of PAGCOR negates the existence of an operation of the gambling pit used by ABS
implied agency or an agency by estoppel Corporation. 57
Petitioner alleges that there is an implied agency. Petitioner's argument is clearly misplaced. The basis for
Alternatively, petitioner claims that even assuming that no actual agency is representation, 58 that is, the agent acts for and on
agency existed between PAGCOR and ABS Corporation, there is behalf of the principal on matters within the scope of his
still an agency by estoppel based on the acts and conduct of authority and said acts have the same legal effect as if they were
PAGCOR showing apparent authority in favor of ABS personally executed by the principal. 59 On the part of the
Corporation. Petitioner states that one factor which distinguishes principal, there must be an actual intention to appoint or an
agency from other legal precepts is control and the following intention naturally inferable from his words or actions, while on
undisputed facts show a relationship of implied agency: the part of the agent, there must be an intention to accept the
appointment and act on it. 60 Absent such mutual intent, there is
1. Three floors of the Grand Boulevard
generally no agency. 61
Hotel 52 were leased to PAGCOR for
conducting gambling operations;53 There is no implied agency in this case because
PAGCOR did not hold out to the public as the principal of ABS
2. Of the three floors, PAGCOR allowed ABS Corporation. PAGCOR's actions did not mislead the public into
Corporation to use one whole floor for believing that an agency can be implied from the arrangement
foreign exchange gambling, conducted by with the junket operators, nor did it hold out ABS Corporation
PAGCOR dealers using PAGCOR with any apparent authority to represent it in any capacity. The
facilities, operated by PAGCOR Junket Agreement was merely a contract of lease of facilities and
services.
The players brought in by ABS Corporation were rooms are all indications that petitioner cannot claim good faith
covered by a different set of rules in acquiring and encashing that he believed he was dealing with PAGCOR. Petitioner cannot
chips. The players used a different kind of chip than what was be considered as an innocent third party and he cannot claim
used in the regular gaming areas of PAGCOR, and that such entitlement to equitable relief as well.
junket players played specifically only in the third floor area and
For his third and final assigned error, petitioner asserts
did not mingle with the regular patrons of PAGCOR.
that PAGCOR ratified the acts of ABS Corporation. caIDSH
Furthermore, PAGCOR, in posting notices stating that the
players are playing under special rules, exercised the necessary The trial court has declared, and we affirm, that the
precaution to warn the gaming public that no agency relationship Junket Agreement is void. A void or inexistent contract is one
exists. which has no force and effect from the very beginning. Hence, it
is as if it has never been entered into and cannot be validated
either by the passage of time or by ratification. 64 Article 1409
For the second assigned error, petitioner claims that the of the Civil Code provides that contracts expressly prohibited or
intention of the parties cannot apply to him as he is not a party to declared void by law, such as gambling contracts, "cannot be
the contract. ratified." 65
We disagree. The Court of Appeals correctly used the WHEREFORE, we DENY the petition.
intent of the contracting parties in determining whether an We AFFIRM the Court of Appeals' Decision dated 27 May 2003
agency by estoppel existed in this case. An agency by estoppel, as well as the Resolution dated 7 May 2004 as modified by this
which is similar to the doctrine of apparent authority requires Decision.
proof of reliance upon the representations, and that, in turn, SO ORDERED.
needs proof that the representations predated the action taken in
reliance. 62 Carpio Morales, * Leonardo-de
Castro, ** Castillo and Abad, JJ., concur.
There can be no apparent authority of an agent without
acts or conduct on the part of the principal and such acts or
conduct of the principal must have been known and relied upon
in good faith and as a result of the exercise of reasonable Footnotes
prudence by a third person as claimant, and such must have
produced a change of position to its detriment. 63 Such proof is *Designated additional member per Special Order No. 807.
lacking in this case.
**Designated additional member per Special Order No. 776.
In the entire duration that petitioner played in Casino
Filipino, he was dealing only with ABS Corporation, and 1.Under Rule 45 of the Rules of Court.
availing of the privileges extended only to players brought in by
ABS Corporation. The facts that he enjoyed special treatment 2.Rollo, pp. 30-38. Penned by Associate Justice Rosmari D.
upon his arrival in Manila and special accommodations in Grand Carandang, with Associate Justices Conrado M. Vasquez,
Boulevard Hotel, and that he was playing in special gaming Jr. and Mercedes Gozo-Dadole, concurring.
3.Id. at 57. Penned by Associate Justice Rosmari D. Carandang 22.Id. at 34.
with Associate Justices Conrado M. Vasquez, Jr. and
Mercedes Gozo-Dadole, concurring. 23.Id.

4.Id. at 58-62. Penned by RTC Judge Mario Guariña III. 24.Id. at 34-35.

5.Id. at 5-6. 25.Id.

6.Records, pp. 23-24. 26.Art. 1883. If an agent acts in his own name, the principal
has no right of action against the persons with whom the
7.Rollo, p. 8. agent has contracted, neither have such persons against the
principal.
8.Id. at 6-7.
In such case, the agent is the one directly bound in favor of the
9.Id. at 8-9. person with whom he has contracted, as if the transaction
10.Id. at 69. were his own, except when the contract involves things
belonging to the principal.
11.Id. at 70.
The provisions of this article shall be understood to be without
12.Id. Petitioner showed a similar notice posted with regard to prejudice to the actions between the principal and agent.
another junket operator GIT.
27.Rollo, p. 35.
13.Id.
28.Id.
14.Id. at 121.
29.Id. at 36.
15.Presidential Decree No. 1869, Consolidating and Amending
Presidential Decree Nos. 1067-A, 1067-B, 1067-C, 1399 30.Art. 2152. The officious manager is personally liable for
and 1632 Relative to the Franchise and Powers of the contracts which he has entered into with third persons,
Philippine Amusement and Gaming Corporation even though he acted in the name of the owner, and there
(PAGCOR). Took effect on 11 July 1983. shall be no right of action between the owner and third
persons. These provisions shall not apply:
16.Rollo, pp. 60-61.
(1) If the owner has expressly or tacitly ratified the management,
17.Id. or
18.Id. (2) When the contract refers to things pertaining to the owner of
19.Id. at 61-62. the business.

20.Id. at 33. 31.Rollo, p. 36.

21.Id. 32.Id.
33.Id. at 36, 38. game, or any other game scheme, whether upon chance or
skill, wherein wagers consisting of money, articles of value
34.Id. at 12. or representative of value are at stake or made;
35.United States v. Salaveria, 39 Phil. 102, 112 (1918). 40.464 Phil. 375, 385-386 (2004).
36.People v. Punto, 68 Phil. 481, 482 (1939). 41.Id.
37.Prescribing Stiffer Penalties on Illegal Gambling. Took effect 42.Art. 2014. No action can be maintained by the winner for the
on 11 June 1978. collection of what he has won in a game of chance. But
38.Gambling and Illegal Lottery are crimes covered by Chapter any loser in a game of chance may recover his loss from
One, Title VI (Crimes against Public Morals) of the the winner, with legal interest from the time he paid the
Revised Penal Code. amount lost, and subsidiarily from the operator or manager
of the gambling house.
39.Section 1. Penalties. — The following penalties are hereby
imposed: 43.An Act Further Amending Presidential Decree No. 1869,
Otherwise Known as PAGCOR Charter. Took effect on 20
(a) The penalty of prision correccional in its medium period or a June 2007.
fine ranging from one thousand to six thousand pesos, and
in case of recidivism, the penalty of prision mayor in its Prior to the amendment, Section 3(h) of the PAGCOR
medium period or a fine ranging from five thousand to ten Charter (PD 1869) reads as follows:
thousand pesos shall be imposed upon: SEC. 3. CORPORATE POWERS. — THE CORPORATION
1. Any person other than those referred to in the succeeding sub- SHALL HAVE THE FOLLOWING POWERS AND
sections who in any manner, shall directly or indirectly FUNCTIONS, AMONG OTHERS:
take part in any illegal or unauthorized activities or games xxx xxx xxx
of cockfighting, jueteng, jai alai or horse racing to include
bookie operations and game fixing, numbers, bingo and H) TO ENTER INTO, MAKE, PERFORM, AND CARRY OUT
other forms of lotteries; cara y cruz, pompiang and the CONTRACTS OF EVERY KIND AND FOR ANY
like; 7-11 and any game using dice; black jack, lucky nine, LAWFUL PURPOSE PERTAINING TO THE BUSINESS
poker and its derivatives, monte, baccarat, cuajo, OF THE CORPORATION, OR IN ANY MANNER
pangguingue and other card games; piak que, high and INCIDENT THERETO, AS PRINCIPAL, AGENT OR
low, mahjong, domino and other games using plastic tiles OTHERWISE, WITH ANY PERSON, FIRM,
and the likes; slot machines, roulette, pinball and other ASSOCIATION OR CORPORATION.
mechanical contraptions and devices; dog racing, boat
racing, car racing and other forms of races, basketball, 44.Erectors, Inc. v. National Labor Relations Commission, 326
boxing, volleyball, bowling, pingpong and other forms of Phil. 640, 646 (1996).
individual or team contests to include game fixing, point 45.Agpalo, Ruben, STATUTORY CONSTRUCTION (5th ed.,
shaving and other machinations; banking or percentage 2003), p. 355.
46.Cebu Portland Cement Co. v. Collector of Internal 63.Supra note 48 at 914.
Revenue, 134 Phil. 735, 740 (1968).
64.Francisco v. Herrera, 440 Phil. 841, 849 (2002).
47.De Leon, Hector S., COMMENTS AND CASES ON
PARTNERSHIP, AGENCY AND TRUSTS, 5th edition, 65.Art. 1409. The following contracts are inexistent and void from
1999, p. 411. the beginning:

48.Woodchild Holdings, Inc. v. Roxas Electric and Construction xxx xxx xxx
Company, Inc., 479 Phil. 896, 914 (2004). (7) Those expressly prohibited or declared void by law.
49.Supra note 47 at 410. These contracts cannot be ratified. Neither can the right to set up
50.Tuazon v. Heirs of Bartolome Ramos, G.R. No. 156262, 14 July the defense of illegality be waived.
2005, 463 SCRA 408, 415. ||| (Yun Kwan Bung v. Philippine Amusement and Gaming Corp.,
51.Angeles v. Philippine National Railways, G.R. No. 150128, 31 G.R. No. 163553, [December 11, 2009], 623 PHIL 23-48)
August 2006, 500 SCRA 444, 452.
52.Formerly known as Silahis Hotel.
53.Rollo, p. 124.
54.Id.
55.Id. at 125.
56.Id.
57.Id.
58.Bordador v. Luz, 347 Phil. 654, 662 (1997).
59.Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No.
167552, 23 April 2007, 521 SCRA 584, 593.
60.Victorias Milling Co., Inc. v. Court of Appeals, 389 Phil. 184,
196 (2000).
61.Supra note 50 at 415.
62.Litonjua, Jr. v. Eternit Corporation, G.R. No. 144805, 8 June
2006, 490 SCRA 204, 225.
THIRD DIVISION During their lifetime, spouses Pedro San Agustin and
Agatona Genil were able to acquire a 246-square meter parcel of
[G.R. No. 160346. August 25, 2009.] land situated in Barangay Anos, Los Baños, Laguna and covered
by Original Certificate of Title (OCT) No. O-(1655) 0-
15. 4Agatona Genil died on September 13, 1990 while Pedro San
PURITA PAHUD, SOLEDAD PAHUD, and Agustin died on September 14, 1991. Both died intestate,
IAN LEE CASTILLA (represented by Mother survived by their eight (8) children: respondents Eufemia, Raul,
and Attorney-in-Fact VIRGINIA Ferdinand, Zenaida, Milagros, Minerva, Isabelita and Virgilio.
CASTILLA), petitioners, vs. COURT OF
APPEALS, SPOUSES ISAGANI Sometime in 1992, Eufemia, Ferdinand and Raul
BELARMINO and LETICIA OCAMPO, executed a Deed of Absolute Sale of Undivided
EUFEMIA SAN AGUSTIN-MAGSINO, Shares 5 conveying in favor of petitioners (the Pahuds, for
ZENAIDA SAN AGUSTIN-McCRAE, brevity) their respective shares from the lot they inherited from
MILAGROS SAN AGUSTIN-FORTMAN, their deceased parents for P525,000.00. 6 Eufemia also signed
MINERVA SAN AGUSTIN-ATKINSON, the deed on behalf of her four (4) other co-heirs, namely:
FERDINAND SAN AGUSTIN, RAUL SAN Isabelita on the basis of a special power of attorney executed on
AGUSTIN, ISABELITA SAN AGUSTIN- September 28, 1991, 7 and also for Milagros, Minerva, and
LUSTENBERGER and VIRGILIO SAN Zenaida but without their apparent written authority. 8 The deed
AGUSTIN, respondents. of sale was also not notarized. 9
On July 21, 1992, the Pahuds paid P35,792.31 to the Los
Baños Rural Bank where the subject property was
DECISION mortgaged. 10 The bank issued a release of mortgage and turned
over the owner's copy of the OCT to the Pahuds. 11 Over the
following months, the Pahuds made more payments to Eufemia
and her siblings totaling to P350,000.00. 12 They agreed to use
NACHURA, J p: the remaining P87,500.00 13 to defray the payment for taxes and
the expenses in transferring the title of the property. 14 When
For our resolution is a petition for review Eufemia and her co-heirs drafted an extra-judicial settlement of
on certiorari assailing the April 23, 2003 Decision 1 and October estate to facilitate the transfer of the title to the Pahuds, Virgilio
8, 2003 Resolution 2 of the Court of Appeals (CA) in CA- refused to sign it. 15 STEacI
G.R. CV No. 59426. The appellate court, in the said decision and
On July 8, 1993, Virgilio's co-heirs filed a
resolution, reversed and set aside the January 14, 1998
Decision 3 of the Regional Trial Court (RTC), which ruled in complaint 16 for judicial partition of the subject property before
the RTC of Calamba, Laguna. On November 28, 1994, in the
favor of petitioners.
course of the proceedings for judicial partition, a Compromise
The dispute stemmed from the following facts. Agreement17 was signed with seven (7) of the co-heirs agreeing
to sell their undivided shares to Virgilio for P700,000.00. The
compromise agreement was, however, not approved by the trial plaintiff Eufemia San Agustin attached to the
court because Atty. Dimetrio Hilbero, lawyer for Eufemia and unapproved Compromise Agreement (Exh. "2") as
her six (6) co-heirs, refused to sign the agreement because he not a valid sale in favor of defendant Virgilio San
knew of the previous sale made to the Pahuds. 18 Agustin;
On December 1, 1994, Eufemia acknowledged having 3. declaring the sale (Exh. "4") made by defendant
received P700,000.00 from Virgilio. 19 Virgilio then sold the Virgilio San Agustin of the property covered by
entire property to spouses Isagani Belarmino and Leticia OCT No. O (1655)-O-15 registered in the names
Ocampo (Belarminos) sometime in 1994. The Belarminos of Spouses Pedro San Agustin and Agatona Genil
immediately constructed a building on the subject property. in favor of Third-party defendant Spouses Isagani
Alarmed and bewildered by the ongoing construction on and Leticia Belarmino as not a valid sale and as
the lot they purchased, the Pahuds immediately confronted inexistent; ETDaIC
Eufemia who confirmed to them that Virgilio had sold the 4. declaring the defendant Virgilio San Agustin
property to the Belarminos. 20 Aggrieved, the Pahuds filed a and the Third-Party defendants spouses Isagani
complaint in intervention 21 in the pending case for judicial and Leticia Belarmino as in bad faith in buying the
partition. portion of the property already sold by the
After trial, the RTC upheld the validity of the sale to plaintiffs in favor of the Intervenors-Third Party
petitioners. The dispositive portion of the decision reads: Plaintiffs and the Third-Party Defendant Sps.
Isagani and Leticia Belarmino in constructing the
WHEREFORE, the foregoing considered, the two-[storey] building in (sic)the property subject
Court orders: of this case; and
1. the sale of the 7/8 portion of the property 5. declaring the parties as not entitled to any
covered by OCT No. O (1655) O-15 by the damages, with the parties shouldering their
plaintiffs as heirs of deceased Sps. Pedro San respective responsibilities regarding the payment
Agustin and Agatona Genil in favor of the of attorney[']s fees to their respective lawyers.
Intervenors-Third Party plaintiffs as valid and
enforceable, but obligating the Intervenors-Third No pronouncement as to costs.
Party plaintiffs to complete the payment of the
SO ORDERED. 22
purchase price of P437,500.00 by paying the
balance of P87,500.00 to defendant Fe (sic) San Not satisfied, respondents appealed the decision to the
Agustin Magsino. Upon receipt of the balance, the CA arguing, in the main, that the sale made by Eufemia for and
plaintiff shall formalize the sale of the 7/8 portion on behalf of her other co-heirs to the Pahuds should have been
in favor of the Intervenor[s]-Third Party plaintiffs; declared void and inexistent for want of a written authority from
her co-heirs. The CA yielded and set aside the findings of the
2. declaring the document entitled "Salaysay sa
trial court. In disposing the issue, the CA ruled:
Pagsang-ayon sa Bilihan" (Exh. "2-a") signed by
WHEREFORE, in view of the foregoing, the respondents San Agustin in favor of
Decision dated January 14, 1998, rendered by the petitioners; aAHDIc
Regional Trial Court of Calamba, Laguna, Branch
92 in Civil Case No. 2011-93-C for Judicial II. The Court of Appeals committed grave and
Partition is hereby REVERSED and SET ASIDE, reversible error in holding that
and a new one entered, as follows: respondents spouses Belarminos are in
good faith when they bought the subject
(1) The case for partition among the plaintiffs- property from respondent Virgilio San
appellees and appellant Virgilio is now Agustin despite the findings of fact by the
considered closed and terminated; court a quo that they were in bad faith
which clearly contravenes the presence of
(2) Ordering plaintiffs-appellees to return to long line of case laws upholding the task
intervenors-appellees the total amount of giving utmost weight and value to the
they received from the latter, plus an factual findings of the trial court during
interest of 12% per annum from the time appeals; [and]
the complaint [in] intervention was filed
on April 12, 1995 until actual payment of III. The Court of Appeals committed grave and
the same; reversible error in holding that
respondents spouses Belarminos have
(3) Declaring the sale of appellant Virgilio San superior rights over the property in
Agustin to appellants spouses, Isagani and question than petitioners despite the fact
Leticia Belarmino[,] as valid and binding; that the latter were prior in possession
(4) Declaring appellants-spouses as buyers in good thereby misapplying the provisions of
faith and for value and are the owners of Article 1544 of the New Civil Code. 24
the subject property. The focal issue to be resolved is the status of the sale of
No pronouncement as to costs. the subject property by Eufemia and her co-heirs to the Pahuds.
We find the transaction to be valid and enforceable.
SO ORDERED. 23
Article 1874 of the Civil Code plainly provides:
Petitioners now come to this Court raising the following
arguments: Art. 1874. When a sale of a piece of land or any
interest therein is through an agent, the authority
I. The Court of Appeals committed grave and of the latter shall be in writing; otherwise, the sale
reversible error when it did not apply the shall be void.
second paragraph of Article 1317 of the
New Civil Code insofar as ratification is Also, under Article 1878, 25 a special power of attorney
concerned to the sale of the 4/8 portion of is necessary for an agent to enter into a contract by which the
the subject property executed by ownership of an immovable property is transmitted or acquired,
either gratuitously or for a valuable consideration. Such stringent not dispose of the interest of her co-heirs in the said lot absent
statutory requirement has been explained in Cosmic Lumber any written authority from the latter, as explicitly required by
Corporation v. Court of Appeals: 26 law. This was, in fact, the ruling of the CA.
[T]he authority of an agent to execute a contract Still, in their petition, the Pahuds argue that the sale with
[of] sale of real estate must be conferred in writing respect to the 3/8 portion of the land should have been deemed
and must give himspecific authority, either to ratified when the three co-heirs, namely: Milagros, Minerva, and
conduct the general business of the principal or to Zenaida, executed their respective special power of
execute a binding contract containing terms and attorneys 29 authorizing Eufemia to represent them in the sale of
conditions which are in the contract he did their shares in the subject property. 30
execute. A special power of attorney is necessary
While the sale with respect to the 3/8 portion is void by
to enter into any contract by which the ownership
express provision of law and not susceptible to ratification, 31we
of an immovable is transmitted or acquired either
nevertheless uphold its validity on the basis of the common law
gratuitously or for a valuable consideration. The
principle of estoppel.
express mandate required by law to enable an
appointee of an agency (couched) in general terms Article 1431 of the Civil Code provides:
to sell must be one that expressly mentions a Art. 1431. Through estoppel an admission or
sale or that includes a sale as a necessary representation is rendered conclusive upon the
ingredient of the act mentioned. For the person making it, and cannot be denied or
principal to confer the right upon an agent to sell disproved as against the person relying thereon.
real estate, a power of attorney must so express the
powers of the agent in clear and unmistakable True, at the time of the sale to the Pahuds, Eufemia was
language. When there is any reasonable doubt that not armed with the requisite special power of attorney to dispose
the language so used conveys such power, no such of the 3/8 portion of the property. Initially, in their answer to the
construction shall be given the complaint in intervention, 32 Eufemia and her other co-heirs
document. 27 ADcHES denied having sold their shares to the Pahuds. During the pre-
trial conference, however, they admitted that they had indeed
In several cases, we have repeatedly held that the sold 7/8 of the property to the Pahuds sometime in
absence of a written authority to sell a piece of land is, ipso 1992. 33 Thus, the previous denial was superseded, if not
jure,void, 28 precisely to protect the interest of an unsuspecting accordingly amended, by their subsequent
owner from being prejudiced by the unwarranted act of another. admission. 34 Moreover, in their Comment, 35 the said co-heirs
Based on the foregoing, it is not difficult to conclude, in again admitted the sale made to petitioners. 36
principle, that the sale made by Eufemia, Isabelita and her two Interestingly, in no instance did the three (3) heirs
brothers to the Pahuds sometime in 1992 should be valid only concerned assail the validity of the transaction made by Eufemia
with respect to the 4/8 portion of the subject property. The sale to the Pahuds on the basis of want of written authority to sell.
with respect to the 3/8 portion, representing the shares of They could have easily filed a case for annulment of the sale of
Zenaida, Milagros, and Minerva, is void because Eufemia could their respective shares against Eufemia and the Pahuds. Instead,
they opted to remain silent and left the task of raising the validity sufficient to induce a reasonable and prudent person to inquire
of the sale as an issue to their co-heir, Virgilio, who is not privy into the status of the property. 40 Such purchaser cannot close
to the said transaction. They cannot be allowed to rely on his eyes to facts which should put a reasonable man on guard,
Eufemia, their attorney-in-fact, to impugn the validity of the first and later claim that he acted in good faith on the belief that there
transaction because to allow them to do so would be tantamount was no defect in the title of the vendor. His mere refusal to
to giving premium to their sister's dishonest and fraudulent deed. believe that such defect exists, or his obvious neglect by closing
Undeniably, therefore, the silence and passivity of the three co- his eyes to the possibility of the existence of a defect in the
heirs on the issue bar them from making a contrary vendor's title, will not make him an innocent purchaser for value,
claim. aDIHCT if afterwards it turns out that the title was, in fact, defective. In
such a case, he is deemed to have bought the property at his own
It is a basic rule in the law of agency that a principal is
risk, and any injury or prejudice occasioned by such transaction
subject to liability for loss caused to another by the latter's
must be borne by him. 41
reliance upon a deceitful representation by an agent in the course
of his employment (1) if the representation is authorized; (2) if it In the case at bar, the Belarminos were fully aware that
is within the implied authority of the agent to make for the the property was registered not in the name of the immediate
principal; or (3) if it is apparently authorized, regardless of transferor, Virgilio, but remained in the name of Pedro San
whether the agent was authorized by him or not to make the Agustin and Agatona Genil. 42 This fact alone is sufficient
representation. 37 impetus to make further inquiry and, thus, negate their claim that
they are purchasers for value in good faith. 43They knew that the
By their continued silence, Zenaida, Milagros and
property was still subject of partition proceedings before the trial
Minerva have caused the Pahuds to believe that they have indeed
court, and that the compromise agreement signed by the heirs
clothed Eufemia with the authority to transact on their behalf.
was not approved by the RTC following the opposition of the
Clearly, the three co-heirs are now estopped from impugning the
counsel for Eufemia and her six other co-heirs. 44 The
validity of the sale from assailing the authority of Eufemia to
Belarminos, being transferees pendente lite, are deemed buyers
enter into such transaction.
in mala fide, and they stand exactly in the shoes of the transferor
Accordingly, the subsequent sale made by the seven co- and are bound by any judgment or decree which may be rendered
heirs to Virgilio was void because they no longer had any interest for or against the transferor. 45 Furthermore, had they verified
over the subject property which they could alienate at the time of the status of the property by asking the neighboring residents,
the second transaction. 38 Nemo dat quod non habet. Virgilio, they would have been able to talk to the Pahuds who occupy an
however, could still alienate his 1/8 undivided share to the adjoining business establishment 46 and would have known that
Belarminos. a portion of the property had already been sold. All these existing
The Belarminos, for their part, cannot argue that they and readily verifiable facts are sufficient to suggest that the
purchased the property from Virgilio in good faith. As a general Belarminos knew that they were buying the property at their own
rule, a purchaser of a real property is not required to make any risk.
further inquiry beyond what the certificate of title indicates on its WHEREFORE, premises considered, the April 23,
face. 39 But the rule excludes those who purchase with 2003 Decision of the Court of Appeals as well as its October 8,
knowledge of the defect in the title of the vendor or of facts 2003 Resolution in CA-G.R. CV No. 59426,
are REVERSED and SET ASIDE. Accordingly, the January 14, Milagros and Minerva in favor of Eufemia effectively ratified
1998 Decision of Branch 92 of the Regional Trial Court of their earlier purchase of the property insofar as the 3/8 portion is
Calamba, Laguna is REINSTATED with concerned, for the established reason that void contracts or the
the MODIFICATION that the sale made by respondent Virgilio illegal terms thereof 3 are not susceptible to ratification. The
San Agustin to respondent spouses Isagani Belarmino and subsequent execution by the three sisters of the respective special
Leticia Ocampo is valid only with respect to the 1/8 portion of powers of attorney only means that they considered the previous
the subject property. The trial court is ordered to proceed with sale null and recognized the salability of their 3/8 portion, thus
the partition of the property with dispatch. DcTaEH paving the way for its transfer to Virgilio San Agustin and its
eventual sale to the spouses Belarmino.
SO ORDERED.
Indeed, as the ponencia elucidates, Articles 1874 and
Chico-Nazario, ** Velasco, Jr. and Peralta, JJ., concur. 1878 of the Civil Code clearly provide that a special power of
Carpio Morales, J., * please see concurring and dissenting opinion. attorney is necessary for an agent to "enter into any contract by
which the ownership of an immovable is transmitted or acquired
either gratuitously or for a valuable consideration" and that
Separate Opinions specifically in cases of sale of a piece of land or any interest
therein through an agent, "the authority of the latter shall be in
CARPIO MORALES, J., concurring and dissenting: writing; otherwise the sale shall be void". CacHES
The ponencia takes one step further, however, in
The ponencia reinstates the trial court's Decision of upholding the validity of the sale of the 3/8 portion belonging to
January 14, 1998 with the modification that "the sale made by the 3 sisters to petitioner notwithstanding the want of a written
respondent Virgilio San Agustin to respondent spouses Isagani authority to sell, by applying the principle of estoppel. It
Belarmino and Leticia Ocampo is valid only with respect to the ratiocinates:
1/8 portion of the subject property". 1
While the sale with respect to the 3/8 portion is
I submit that the validity of the sale to spouses void by express provision of law and not
Belarmino extends to 4/8 or one-half of the property, inclusive of susceptible to ratification, we nevertheless uphold
the combined 3/8 share of respondents-sisters Zenaida, Milagros its validity on the basis of the common law
and Minerva, all bearing the maiden surname of San Agustin, principle of estoppel.
thus leaving only one-half of the property to petitioners Purita
Pahud, et al. who earlier purchased from Eufemia San Agustin Article 1431 of the Civil Code provides:
(Eufemia) the property including the 3/8 portion over Art. 1431. Through estoppel an admission
which no written authority from the three sisters was secured. or representation is rendered conclusive
The ponente, Justice Nachura, in fact, agrees to this proposition upon the person making it, and cannot be
"in principle". 2 denied or disproved as against the person
The ponencia even rejects petitioners' contention that the relying thereon.
special power of attorney subsequently executed by Zenaida,
True, at the time of the sale to the Pahuds, Eufemia employment (1) if the representation is
was not armed with the requisite special power of authorized; (2) if it is within the implied authority
attorney to dispose of the 3/8 portion of the of the agent to make for the principal; or (3) if it is
property. Initially, in their answer to the complaint apparently authorized, regardless of whether the
in intervention, Eufemia and her other co-heirs agent was authorized by him or not to make the
denied having sold their shares to the representation.
Pahuds. During the pre-trial conference, however,
they admitted that they had indeed sold 7/8 of the By their continued silence, Zenaida, Milagros and
property to the Pahuds sometime in 1992. Thus, Minerva have caused the Pahuds to believe that
the previous denial was superseded, if not they have indeed clothed Eufemia with the
accordingly amended, by their subsequent authority to transact on their behalf. Clearly, the
admission. Moreover, in their Comment, the said three co-heirs are now estopped from impugning
co-heirs again admitted the sale made to the validity of the sale from assailing the authority
petitioners. of Eufemia to enter such transaction. 4 (Emphasis
and underscoring supplied) AEDcIH
Interestingly, in no instance did the three (3) heirs
concerned assail the validity of the transaction It is from this aspect of the ponencia that I respectfully
made by Eufemia to the Pahuds on the basis of dissent.
want of written authority to sell. They could have Equity cannot supplant or contravene the law. 5
easily filed a case for annulment of the sale of
Article 1432 of the Civil Code expressly states that the
their respective shares against Eufemia and the
principles of estoppel are adopted "insofar as they are not in
Pahuds. Instead, they opted to remain silent and
conflict with the provisions of this Code", among other laws.
left the task of raising the validity of the sale as an
issue to their co-heir, Virgilio, who is not privy to Indeed, estoppel, being a principle in equity, cannot be
the said transaction. They cannot be allowed to applied in the presence of a law clearly applicable to the case.
rely on Eufemia, their attorney-in-fact, to impugn The Court is first and foremost a court of law. While equity
the validity of the first transaction because to might tilt on the side of one party, the same cannot be enforced
allow them to do so would be tantamount to giving so as to overrule positive provisions of law in favor of the
premium to their sister's dishonest and fraudulent other. 6
deed. Undeniably, therefore, the silence and
Moreover, the evident purpose of the legal requirement
passivity of the three co-heirs on the issue bar
of such written authority is not only to safeguard the interest of
them from making a contrary claim.
an unsuspecting owner from being prejudiced by the
It is a basic rule in the law of agency that a unauthorized act of another, but also to caution the buyer to
principal is subject to liability for loss caused to assure himself of the specific authorization of the putative agent.
another by the latter's reliance upon a deceitful In other words, the drafters of the law already saw the risky
representation by an agent in the course of his predicament of selling lands through agents which, in the
absence of a specific law, would otherwise ultimately depend on accordingly relied on such admission or representation before
equity to resolve disputes such as the present case. The law buying the property from Eufemia. The application of the
undoubtedly seeks to prevent the following confusion: principle of estoppel is proper and timely in heading off shrewd
efforts at renouncing one's previous acts to the prejudice of
Case law tells us that the elements of estoppel are:
another who had dealt honestly and in good faith. 9 It is thus
"first, the actor who usually must have knowledge,
erroneous to conclude that Zenaida, Milagros and Minerva have
notice or suspicion of the true facts, communicates
caused petitioners to believe that they have clothed Eufemia with
something to another in a misleading way, either
the authority to transact on their behalf.
by words, conduct or silence; second, the other in
fact relies, and relies reasonably or justifiably, Could the three sisters ratify the previous sale through
upon that communication; third, the other would their subsequent acts or omissions? I opine they cannot.
be harmed materially if the actor is later permitted Theponencia concedes that "the sale with respect to the 3/8
to assert any claim inconsistent with his earlier portion is void by express provision of law and not susceptible to
conduct; and fourth, the actor knows, expects or ratification".
foresees that the other would act upon the
The previous sale being violative of an express mandate
information given or that a reasonable person in
of law, such cannot be ratified by estoppel. Estoppel cannot give
the actor's position would expect or foresee such
validity to an act that is prohibited by law or one that is against
action". 7
public policy. Neither can the defense of illegality be
The depicted scenario is precisely the misunderstanding waived. 10 An action or defense for the declaration of the
between parties to such type of sale which the lawmakers sought inexistence of a contract does not prescribe. 11 Amid the
to avoid in prescribing the conditions for the validity of such sale confusion from the double dealing made by their sibling
of land. The present case is a classic example of a tedious Eufemia, the three sisters expectedly kept mum about it.
litigation which had ensued as a result of such misunderstanding. Succinctly, their "continued silence" cannot be taken against
This is what the law endeavors to avert. 8 It is not for the Court them. Bargaining away a provision of law should not be
to suspend the application of the law and revert to equitable countenanced.
grounds in resolving the present dispute. Neither can their "admission" to a question of law bind
Assuming arguendo that estoppel can contradict positive them. The ponencia highlights the admission made by Eufemia
law, I submit that Article 1431 of the Civil Code does not apply and her co-heirs during the pre-trial conference before the trial
since it speaks of one's prior admission or court and in their Comment on the present petition that they had
representation, without which the other person could not have earlier sold 7/8 of the property to petitioners. These statements
relied on it before acting accordingly. AaSTIH could not mean, however, as an admission in petitioners' favor
that Zenaida, Milagros and Minerva validly sold their respective
The ponencia cites acts or omissions on the part of the shares to petitioners. They could only admit to the statement of
three sisters which came after the fact such as their "admission" fact 12 that the sale took place, but not to the conclusion of law
and "continued silence" which, however, could not retroact to the that the sale was valid, precisely because the validity of the sales
time of the previous sale as to consider petitioners to have transaction is at issue as it was contested by the parties.
Further, the textbook citation of the rule involving a 7.Id. at 61.
principal's responsibility for an agent's misrepresentation within
the scope of an agent's authority as annotated by the cited author 8.Id. at 37.
under Article 1900 of the Civil Code is inapplicable. The 9.Id. at 50, 140.
qualifying phrase "in the course of his employment" presupposes
that an agency relationship is existing. The quoted rule clearly 10.Id. at 13.
recites that a principal is held liable if the "deceitful 11.Id. at 38.
representation" (not the agency relationship) is authorized either
expressly, impliedly, or apparently. In this case, there 12.Id. at 89-96.
was no agency relationship to speak of.
13.Id. at 97.
I, therefore, vote to reinstate the trial court's January 14,
1998 Decision with modification that the sale made by 14.Id. at 13, 140.
respondent Virgilio San Agustin to respondent spouses Isagani 15.Id. at 38.
Belarmino and Leticia Ocampo is valid with respect to the4/8
portion of the subject property. AEIcTD 16.Id. at 51-54. The complaint was docketed as Civil Case No.
2011-93-C.
17.Id. at 69-71.
Footnotes
18.Id. at 136, 139.

**In lieu of Associate Justice Consuelo Ynares-Santiago per 19.Id. at 106.


Special Order No. 678 dated August 3, 2009. 20.Id. at 135-136.
*Additional member in lieu of Associate Justice Consuelo Ynares- 21.Id. at 72-84.
Santiago per Special Order No. 679 dated August 3, 2009.
22.Id. at 145-146.
1.Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate
Justices Mercedes Gozo-Dadole and Hakim S. 23.Id. at 44-45.
Abdulwahid, concurring; rollo, pp. 35-45. 24.Id. at 19.
2.Id. at 47-48. 25.Article 1878 (5) provides:
3.Rollo, pp. 121-146. Art. 1878. Special powers of attorney are necessary in the
4.Id. at 85-86. following cases:

5.Id. at 49-50. xxx xxx xxx

6.Id. at 37-38.
(5) To enter into any contract by which the ownership of an These contracts cannot be ratified. Neither can the right to set up
immovable is transmitted or acquired either gratuitously or the defense of illegality be waived.
for a valuable consideration.
32.I Records, p. 26; Exh. "I-A", entitled Answer to Counterclaim
26.332 Phil. 948 (1996). dated December 14, 1993.
27.Id. at 957-958. (Emphasis supplied, citations omitted.) 33.II Records, pp. 262-264.
28.Estate of Lino Olaguer, etc. v. Hon. CA and Emiliano M. 34.RULES OF COURT, Rule 10, Sec. 5 provides in full:
Ongjoco, G.R. No. 173312, August 26, 2008; Dizon v.
Court of Appeals,G.R. Nos. 122544 and 124741, January SEC. 5. Amendment to conform to or authorize presentation of
28, 2003, 396 SCRA 151, 155; AF Realty & Development, evidence. — When issues not raised by the pleadings are
Inc. v. Dieselman Freight Services, Co., 424 Phil. 446, 455 tried with the express or implied consent of the parties,
(2002); San Juan Structural and Steel Fabricators, Inc. v. they shall be treated in all respects as if they had been
Court of Appeals, G.R. No. 129459, September 29, raised in the pleadings. Such amendment of the pleadings
1998, 296 SCRA 631, 648. as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon
29.Special Power of Attorney of Isabelita San Agustin- motion of any party at any time, even after judgment; but
Lustenberger was executed on September 28, failure to amend does not affect the result of the trial of
1991, rollo, p. 61 (Annex "E"); Special Power of Attorney these issues. If evidence is objected to at the trial on the
of Milagros San Agustin-Fortman was executed in ground that it is not within the issues made by the
December 1992, id. at 62 (Annex "F"); Special Power of pleadings, the court may allow the pleadings to be
Attorney of Minerva San Agustin-Atkinson was executed, amended and shall do so with liberality if the presentation
undated, but was witnessed by G.R. Stephenson, of the merits of the action and the ends of substantial
Commissioner for Oaths, on February 12, 1993, id. at 63 justice will be subserved thereby. The court may grant a
(Annex "G"); and Special Power of Attorney of Zenaida continuance to enable the amendment to be made.
San Agustin-McCrae was executed on May 10, 1993, id. at
64 (Annex "H"). 35.Rollo, pp. 200-204.
36.Id. at 200.

30.Rollo, p. 20. 37.See De Leon, Comments and Cases on Partnership, Agency and
Trusts, 2005 edition, p. 538, citing Mechem, Cases on the
31.CIVIL CODE, Art. 1409 provides in part: Law of Agency, p. 230.
Art. 1409. The following contracts are inexistent and void from 38.CIVIL CODE, Art. 1409 provides in part:
the beginning:
Art. 1409. The following contracts are inexistent and void from
xxx xxx xxx the beginning:
(7) Those expressly prohibited or declared void by law. xxx xxx xxx
(3) Those whose cause or object did not exist at the time of the 6.Vide id. A waiver will be inoperative and void if it infringes on
transaction; the rights of others (Ouano v. Court of Appeals, infra at
704).
xxx xxx xxx
7.Phil. Bank of Communications v. CA, 352 Phil. 1, 9 (1998).
These contracts cannot be ratified. Neither can the right to set up
the defense of illegality be waived. 8.Cf. Powton Conglomerate, Inc. v. Agcolicol, 448 Phil. 643, 653
(2003) for analogy respecting the vital preconditions to the
39.Lu v. Intermediate Appellate Court, G.R. No. 70149, January validity of a contract for additional works under Article
30, 1989, 169 SCRA 595, 604; Lopez v. Court of 1724 of the Civil Code.
Appeals, G.R. No. 49739, January 20, 1989, 169 SCRA
271, 275-276. 9.Vide Pureza v. CA, 352 Phil. 717, 722 (1998).
40.Abad v. Guimba, G.R. No. 157002, July 29, 2005, 465 SCRA 10.Vide Ouano v. Court of Appeals, 446 Phil. 690, 708 (2003).
356, 367.
11.CIVIL CODE, Art. 1410.
41.Bailon-Casilao v. Court of Appeals, G.R. No. L-78178, April
15, 1988, 160 SCRA 738, 750. 12.RULES OF COURT, Rule 18, Sec. 2 (d). Pre-trial allows the
parties to obtain stipulations or admissions of fact and of
42.I Records, pp. 5-6. documents.
43.Guaranteed Homes, Inc. v. Heirs of Maria P. Valdez, et ||| (Pahud v. Court of Appeals, G.R. No. 160346, [August 25, 2009],
al., G.R. No. 171531, January 30, 2009. 613 PHIL 367-390)
44.I Records, pp. at 60-61.
45.Voluntad v. Dizon, G.R. No. 132294, August 26, 1999, 313
SCRA 209.
46.Rollo, p. 16.
CARPIO MORALES, J., concurring and dissenting:
1.Ponencia, p. 12 (underscoring supplied).
2.Ponencia, p. 7.
3.CIVIL CODE, Art. 1420 in relation to Art. 493.
4.Ponencia, pp. 8-10.
5.Valdevieso v. Damalerio, 492 Phil. 51, 59 (2005).
SECOND DIVISION some other person in the property. "The right of an innocent
purchaser for value must be respected and protected, even if the
[G.R. No. 102737. August 21, 1996.] seller obtained his title through fraud. The remedy of the person
prejudiced is to bring an action for damages against those who
caused or employed the fraud, and if the latter are insolvent, an
FRANCISCO A. VELOSO, petitioner, vs. action against the Treasurer of the Philippines may be filed for
COURT OF APPEALS, AGLALOMA B. recovery of damages against the Assurance Fund."
ESCARIO, assisted by her husband
GREGORIO L. ESCARIO, the REGISTER OF 3. REMEDIAL LAW; EVIDENCE; FORGERY CANNOT BE
DEEDS FOR THE CITY OF PRESUMED. — Mere variance of the signatures cannot be
MANILA, respondents. considered as conclusive proof that the same were forged. Forgery
cannot be presumed. Forgery should be proved by clear and
convincing evidence and whoever alleges it has the burden of
Bernas Law Offices for petitioner. proving the same.
Edgardo A. Arandia for private respondent. 4. ID.; ID.; NOTARIZED DOCUMENTS ARE PRESUMED TO BE
VALID AND DULY EXECUTED. — Documents acknowledged
before a notary public have the evidentiary weight with respect to
SYLLABUS their due execution. The questioned power of attorney and deed of
sale, were notarized and therefore, presumed to be valid and duly
1. CIVIL LAW; AGENCY; A SPECIAL POWER OF ATTORNEY executed.
CAN BE INCLUDED IN THE GENERAL POWER WHEN IT IS 5. CIVIL LAW; PRINCIPLE OF EQUITABLE ESTOPPEL,
SPECIFIED THEREIN THE ACT OR TRANSACTION FOR DEFINED. — The principle of equitable estoppel states that where
WHICH THE SPECIAL POWER IS REQUIRED. — There one or two innocent persons must suffer a loss, he who by his
was no need to execute a separate and special power of attorney conduct made the loss possible must bear it.
since the general power of attorney had expressly authorized the
agent or attorney in fact the power to sell the subject property. The
special power of attorney can be included in the general power when
it is specified therein the act or transaction for which the special DECISION
power is required.
2. ID.; SALE; PURCHASER IN GOOD FAITH; DEFINED; HIS
REMEDY IN CASE OF FRAUD. — It has been consistently held TORRES, JR., J p:
that a purchaser in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in This petition for review assails the decision of the Court of Appeals,
such property and pays a full and fair price for the same, at the time dated July 29, 1991, the dispositive portion of which reads:
of such purchase, or before he has notice of the claim or interest of
"WHEREFORE, the decision appealed from is Petitioner Veloso, therefore, prayed that a temporary restraining
hereby AFFIRMED IN TOTO. Costs against order be issued to prevent the transfer of the subject property; that
appellant." 1 the General Power of Attorney, the Deed of Absolute Sale and the
Transfer Certificate of Title No. 180685 be annulled; and the subject
The following are the antecedent facts: property be reconveyed to him.
Petitioner Francisco Veloso was the owner of a parcel of land Defendant Aglaloma Escario in her answer alleged that she was a
situated in the district of Tondo, Manila, with an area of one hundred buyer in good faith and denied any knowledge of the alleged
seventy seven (177) square meters and covered by Transfer irregularity. She allegedly relied on the general power of attorney of
Certificate of title No. 49138 issued by the Registry of Deeds of Irma Veloso which was sufficient in form and substance and was
Manila. 2 The title was registered in the name of Francisco A. duly notarized. She contended that plaintiff (herein petitioner),
Veloso, single, 3 on October 4, 1957. 4 The said title was had no cause of action against her. In seeking for the declaration of
subsequently cancelled and a new one, Transfer Certificate of nullity of the documents, the real party in interest was Irma Veloso,
Title No. 180685, was issued in the name of Aglaloma B. Escario, the wife of the plaintiff. She should have been impleaded in the case.
married to Gregorio L. Escario, on May 24, 1988. 5 In fact, Plaintiff's cause of action should have been against his wife,
On August 24, 1988, petitioner Veloso filed an action for annulment Irma. Consequently, defendant Escario prayed for the dismissal of
of documents, reconveyance of property with damages and the complaint and the payment to her of damages. 8
preliminary injunction and/or restraining order. The complaint, Pre-trial was conducted. The sole issue to be resolved by the trial
docketed as Civil Case no. 88-45926, was raffled to the Regional court was whether or not there was a valid sale of the subject
Trial Court, Branch 45, Manila. Petitioner alleged therein that he was property. 9
the absolute owner of the subject property and he never authorized
anybody, not even his wife, to sell it. He alleged that he was in During the trial, plaintiff (herein petitioner) Francisco Veloso
possession of the title but when his wife, Irma, left for abroad, he testified that he acquired the subject property from the Philippine
found out that his copy was missing. He then verified with the Building Corporation, as evidenced by a Deed of Sale dated October
Registry of Deeds of Manila and there he discovered that his title 1, 1957. 10 He married Irma Lazatin on January 20, 1962.11 Hence,
was already canceled in favor of defendant Aglaloma Escario. The the property did not belong to their conjugal partnership. Plaintiff
transfer of property was supported by a General Power of further asserted that he did not sign the power of attorney and as
Attorney 6 dated November 29, 1985 and Deed of Absolute Sale, proof that his signature was falsified, he presented Allied Bank
dated November 2, 1987, executed by Irma Veloso, wife of the Checks Nos. 16634640, 16634641 and 16634643, which allegedly
petitioner and appearing as his attorney-in-fact, and defendant bore his genuine signature.
Aglaloma Escario. 7Petitioner Veloso, however, denied having
executed the power of attorney and alleged that his signature was Witness for the plaintiff Atty. Julian G. Tubig denied any
falsified. He also denied having seen or even known Rosemarie participation in the execution of the general power of attorney. He
Reyes and Imelda Santos, the supposed witnesses in the execution of attested that he did not sign thereon, and the same was never entered
the power of attorney. He vehemently denied having met or in his Notarial Register on November 29, 1985.
transacted with the defendant. Thus, he contended that the sale of the In the decision of the trial court dated March 9, 1990, 12 defendant
property, and the subsequent transfer thereof, were null and void. Aglaloma Escario was adjudged the lawful owner of the property as
she was deemed an innocent purchaser for value. The assailed resolution dated Aug. 3, 1992, the motion was granted and the
general power of attorney was held to be valid and sufficient for the petition for review was reinstated. 15
purpose. The trial court ruled that there was no need for a special
power of attorney when the special power was already mentioned in A supplemental petition was filed on October 9, 1992 with the
the general one. It also declared that plaintiff failed to substantiate following assignment of errors:
his allegation of fraud. The court also stressed that plaintiff was not I
entirely blameless for although he admitted to be the only person
who had access to the title and other important documents, his wife The Court of Appeals committed a grave error in
was still able to posses the copy. Citing Section 55 of Act 496, the not finding that the forgery of the power of
court held that Irma's possession and production of the certificate of attorney (Exh. "C") had been adequately proven,
title was deemed a conclusive authority from the plaintiff to the despite the preponderant evidence, and in doing
Register of Deeds to enter a new certificate. Then applying the so, it has so far departed from the applicable
principle of equitable estoppel, plaintiff was held to bear the loss of it provisions of law and the decisions of this
was he who made the wrong possible. Thus: Honorable Court, as to warrant the grant of this
petition for review on certiorari.
"WHEREFORE, the Court finds for the
defendants and against plaintiff — II

a. declaring that there was a valid sale of the There are principles of justice and equity that
subject property in favor of the defendant; warrant a review of the decision.

b. denying all other claims of the parties for want III


of legal and factual basis. The Court of Appeals erred in affirming the
Without pronouncement as to costs. decision of the trial court which misapplied the
principle of equitable estoppel since the petitioner
SO ORDERED." did not fail in his duty of observing due diligence
Not satisfied with the decision, petitioner Veloso filed his appeal with in the safekeeping of the title to the property.
the Court of Appeals. The respondent court affirmed in toto the We find petitioner's contentions not meritorious.
findings of the trial court.
An examination of the records showed that the assailed power of
Hence, this petition for review before Us. attorney was valid and regular on its face. It was notarized and as
This petition for review was initially dismissed for failure to submit such, it carries the evidentiary weight conferred upon it with respect
an affidavit of service of a copy of the petition on the counsel for to its due execution. While it is true that it was denominated as a
private respondent. 13 A motion for reconsideration of the resolution general power of attorney, a perusal thereof revealed that it stated an
was filed but it was denied in a resolution dated March 30, authority to sell, to wit:
1992. 14 A second motion for reconsideration was filed and in a
"2. To buy or sell, hire or lease, mortgage or Petitioner contends that his signature on the power of attorney was
otherwise hypothecate lands, tenements and falsified. He also alleges that the same was not duly notarized for as
hereditaments or other forms of real property, testified by Atty. Tubig himself, he did not sign thereon nor was it
more specifically TCT No. 49138, upon such ever recorded in his notarial register. To bolster his argument,
terms and conditions and under such covenants as petitioner had presented checks, marriage certificate and his
my said attorney shall deem fit and proper." 16 residence certificate to prove his alleged genuine signature which
when compared to the signature in the power of attorney, showed
Thus, there was no need to execute a separate and special power of some difference.
attorney since the general power of attorney had expressly authorized
the agent or attorney in fact the power to sell the subject property. We found, however, that the basis presented by the petitioner was
The special power of attorney can be included in the general power inadequate to sustain his allegation of forgery. Mere variance of the
when it is specified therein the act or transaction for which the signatures cannot be considered as conclusive proof that the same
special power is required. were forged. Forgery cannot be presumed.17 Petitioner, however,
failed to prove his allegation and simply relied on the apparent
The general power of attorney was accepted by the Register of Deeds difference of the signatures. His denial had not established that the
when the title to the subject property was cancelled and transferred in signature on the power of attorney was not his.
the name of private respondent. In LRC Consulta No. 123, Register
of Deeds of Albay, Nov. 10, 1956, it stated that: We agree with the conclusion of the lower court that private
respondent was an innocent purchaser for value. Respondent
"Whether the instrument be denominated as Aglaloma relied on the power of attorney presented by petitioner's
"general power of attorney" or "special power of wife, Irma. Being the wife of the owner and having with her the title
attorney," what matters is the extent of the power of the property, there was no reason for the private respondent not to
or powers contemplated upon the agent or attorney believe, in her authority. Moreover, the power of attorney was
in fact. If the power is couched in general terms, notarized and as such, carried with it the presumption of its due
then such power cannot go beyond acts of execution. Thus, having had no inkling on any irregularity and
administration. However, where the power to sell having no participation thereof, private respondent was a buyer in
is specific, it not being merely implied, much less good faith. It has been consistently held that a purchaser in good
couched in general terms, there can not be any faith is one who buys property of another, without notice that some
doubt that the attorney in fact may execute a valid other person has a right to, or interest in such property and pays a full
sale. An instrument may be captioned as "special and fair price for the same, at the time of such purchase, or before he
power of attorney" but if the powers granted are has notice of the claim or interest of some other person in the
couched in general terms without mentioning any property. 18
specific power to sell or mortgage or to do other
specific acts of strict dominion, then in that case Documents acknowledged before a notary public have the
only acts of administration may be deemed evidentiary weight with respect to their due execution. The
conferred." questioned power of attorney and deed of sale, were notarized and
therefore, presumed to be valid and duly executed. Atty. Tubig
denied having notarized the said documents and alleged that his
signature had also been falsified. He presented samples of his filed for recovery of damages against the
signature to prove his contention. Forgery should be proved by clear Assurance Fund."
and convincing evidence and whoever alleges it has the burden of
proving the same. Just like the petitioner, witness Atty. Tubig merely Finally, the trial court did not err in applying equitable estoppel in
pointed out that his signature was different from that in the power of this case. The principle of equitable estoppel states that where one or
attorney and deed of sale. There had never been an accurate two innocent persons must suffer a loss, he who by his conduct made
examination of the signature, even that of the petitioner. To the loss possible must bear it. From the evidence adduced, it should
determine forgery, it was held in Cesar vs. be the petitioner who should bear the loss. As the court a quo found:
Sandiganbayan 19 (quoting Osborn, The Problem of Proof) that: "Besides, the records of this case disclosed that the
"The process of identification, therefore, must plaintiff is not entirely free from blame. He
include the determination of the extent, kind, and admitted that he is the sole person who has access
significance of this resemblance as well as of the to TCT No. 49138 and other documents
variation. It then becomes necessary to determine appertaining thereto (TSN, May 23, 1989, pp. 7-
whether the variation is due to the operation of a 12). However, the fact remains that the Certificate
different personality, or is only the expected and of Title, as well as other documents necessary for
inevitable variation found in the genuine writing of the transfer of title were in the possession of
the same writer. It is also necessary to decide plaintiff's wife, Irma L. Veloso, consequently
whether the resemblance is the result of a more or leaving no doubt or any suspicion on the part of
less skillful imitation, or is the habitual and the defendant as to her authority. Under Section 55
characteristic resemblance which naturally appears of Act 496, as amended, Irma's possession and
in a genuine writing. When these two questions are production of the Certificate of Title to defendant
correctly answered the whole problem of operated as "conclusive authority from the plaintiff
identification is solved." to the Register of Deeds to enter a new
certificate." 21
Even granting for the sake of argument, that the petitioner's signature
was falsified and consequently, the power of attorney and the deed of Considering the foregoing premises, we found no error in the
sale were null and void, such fact would not revoke the title appreciation of facts and application of law by the lower court which
subsequently issued in favor of private respondent Aglaloma. In will warrant the reversal or modification of the appealed decision.
Tenio-Obsequio vs. Court of Appeals, 20 it was held, viz: ACCORDINGLY, the petition for review is hereby DENIED for lack
"The right of an innocent purchaser for value must of merit.
be respected and protected, even if the seller SO ORDERED.
obtained his title through fraud. The remedy of the
person prejudiced is to bring an action for Regalado, Romero, Puno and Mendoza, JJ ., concur.
damages against those who caused or employed Footnotes
the fraud, and if the latter are insolvent, an action
against the Treasurer of the Philippines may be
1.Decision, Rollo, p. 59, penned by J.N. Lapeña, Jr. and concurred ||| (Veloso v. Court of Appeals, G.R. No. 102737, [August 21, 1996],
in by J.R. Pronove and J.C. Santiago. 329 PHIL 398-409)
2.Exh. "A", Annex "A", Records, p. 12 and 155.
3.Exh. "A-1", Ibid.
4.Exh. "A-2", Ibid.
5.Exh. "B", Annex B, Exh. "3", Records, p. 15 and 157.
6.Records, pp. 96-97.
7.Records, pp. 94-95.
8.Answer, Records, pp. 43-47.
9.Order, Records, pp. 74-76.
10.Exh. "F", Records, pp. 163-164.
11.Exh. "H", Records, p. 166.
12.Decision, Records, pp. 283-292.
13.Resolution, February 3, 1992, Rollo, p. 65.
14.Rollo, p. 72.
15.Rollo, p. 93.
16.Records, pp. 96-97.
17.Tenio-Obsequio vs. Court of Appeals, G. R. 107967, March 1,
1994.
18.Bautista, et. al. vs. Court of Appeals, G.R. 106042, Feb. 28,
1994.
19.G.R. Nos. 54719-50, 17 January 1985.
20.G.R. 109767, March 1, 1994.
21.Decision, Records, p. 291.
EN BANC discretion to dismiss the case, should plaintiff not appear at the pre-
trial.
[G.R. No. 25593. November 15, 1967.] 3. ID.; COMPROMISE; REQUISITE THEREOF. — The Rules of
Court require, for attorneys to compromise the litigation of their
HOME INSURANCE COMPANY, plaintiff- clients, a "special authority" (Sec. 23, Rule 138). And while the same
appellant, vs. UNITED STATES LINES CO., does not state that the special authority be in writing, the court has
ET AL., defendants-appellees. every reason to expect that, if not in writing, the same be duly
established by evidence other than the self-serving assertion of
counsel himself that such authority was verbally given him.
Quasha, Asperilla, Blanco, Zafra & Tayag for plaintiff-appellant.
4. ID.; ID.; AUTHORITY TO COMPROMISE NOT PRESUMED.
Ross, Selph, Salcedo, Del Rosario, Bito & Mesa for defendants- — Authority to compromise a litigation cannot be lightly presumed.
appellees. If, with good reason, the judge is not satisfied that said authority
exists, as in this case, dismissal of the suit for non-appearance of
plaintiff in pre-trial is sanctioned by the Rules of Court.
SYLLABUS

1. ARRASTRE SERVICE; IMMUNITY OF GOVERNMENT DECISION


FROM SUIT. — On grounds of public policy, the Republic of the
Philippines or its agencies may not be sued for the performance of
arrastre operations as a function necessarily incidental to the
governmental function of taxation. BENGZON, J.P., J p:

2. REMEDIAL LAW; PRE-TRIAL UNDER THE NEW RULES


DISTINGUISHED FROM THAT OF THE OLD. — Section 1 of
Rule 20 of the Revised Rules of Court, making pre-trial mandatory
partly provides that "in any action, after the last pleading has been
filed, the court shall direct the parties and their attorneys to appear
before it for a conference." This is different from Section 1 of Rule
25 of the old Rules of Court which provided that "the court may in its
discretion direct the attorneys for the parties to appear before it for a
conference." Section 2, Rule 20 of the new Rules of Court says that
"a party who fails to appear at a pre-trial conference may be non-
suited or considered as in default." This shows the purpose of the
Rules to compel the parties to appear personally before the Court to
reach, if possible, a compromise. Accordingly, the court is given the
Sometime in 1964, SS "Pioneer Moon" arrived in Manila and Bureau of Customs, L-23139, December 17, 1966 and subsequent
discharged unto the custody of the Bureau of Customs, as arrastre rulings, 1 where We held that on grounds of public policy, the
operator, two hundred (200) cartons of carbonized adding machine Republic of the Philippines or its agencies, may not be sued for the
rolls consigned to Burroughs, Limited. When the cargo was delivered performance of arrastre operations as a function necessarily
to the consignee, however, several cartons were damaged. The incidental to the governmental function of taxation.
consignee claimed the P2,605.64 worth of damage from the Bureau
of Customs, the United States Lines Company, owner of the vessel, As regards the other defendant, Section 1 of Rule 20 of the Revised
and the Home InsuranceCompany which had insured the cargo. The Rules of Court, making pre-trial mandatory partly provides: ". . . in
latter paid the claim and demanded reimbursement from either any action, after the last pleading has been filed, the court shall
arrastre operator or the carrier. When both rejected the claim, direct the parties and their attorneys to appear before it for a
the Home Insurance Company, as subrogee, filed on June 11, 1965 conference" (emphasis supplied). This is different from Section 1 of
an action against the Republic of the Philippines, the Bureau of Rule 25 of the old Rules of Court which provided that "the court may
Customs and the United States Lines, in the alternative, for the in its discretion direct the attorneys for the parties to appear before it
recovery of P2,605.64, with interest plus costs. cdasia for a conference. . . " (emphasis supplied). Section 2, Rule 20 of the
new Rules of Court says that "a party who fails to appear at a pre-
Both defendants answered. The United States Lines disclaimed trial conference may be non-suited or considered as in default." This
liability on the ground that the damage was incurred while the cargo shows the purpose of the Rules to compel the parties to appear
was in the possession of its co-defendants. The Republic of the personally before the court to reach, if possible, a compromise.
Philippines and the Bureau of Customs, after denial of their motion Accordingly, the court is given the discretion to dismiss the case
to dismiss, answered and alleged among others, non-suability and should plaintiff not appear at the pre-trial.
noncompliance with Act 3083, as amended byCommonwealth Act
327 which requires money claims to be filed with the Auditor Taking into consideration said purpose and spirit of the new Rules as
General. well as the facts in the present case, We find no reversible error
committed by the court a quo in dismissing the action for the reason
On December 7, 1965, the date set for pre-trial, only the counsel for that only plaintiff's counsel appeared at the pre-trial (and not
the plaintiff appeared, who upon being asked for written authority to plaintiff's official representative also). True, said counsel asserted
compromise, assured the court that though he had no written that he had verbal authority to compromise the case. The Rules,
authority, he had such authority verbally given by the plaintiff. On however, require, for attorneys to compromise the litigation of their
the same day, the court dismissed the case for failure of the plaintiff clients, a "special authority" (Section 23, Rule 138, Rules of Court).
to appear at the pre-trial conference. And while the same does not state that the special authority be in
writing, the court has every reason to expect that, if not in writing,
Its motion for reconsideration having been denied, plaintiff appealed the same be duly established by evidence other than the self-serving
to Us, claiming that the lower court erred in dismissing the case for assertion of counsel himself that such authority was verbally given
failure of the plaintiff to appear. him. The court below, therefore, did not act erroneously in
As against the Republic of the Philippines and the Bureau of proceeding to dismiss the case in spite of such manifestation of
Customs, the dismissal must be sustained in the light of our decision plaintiff's counsel. For, authority to compromise cannot lightly be
in Mobil Philippines Exploration v. Customs Arrastre Service and presumed. And if, with good reason, the judge is not satisfied that
said authority exists, as in this case, dismissal of the suit for non-
appearance of plaintiff in pre-trial is sanctioned by the Rules. The
dismissal should therefore be sustained in toto, with respect to all the
defendants. liblex
WHEREFORE, the appealed order of dismissal is affirmed, without
costs. So ordered.
Concepcion, C.J ., Reyes, J.B.L., Dizon, Makalintal, Zaldivar,
Sanchez, Castro, Angeles and Fernando, JJ ., concur.
Footnotes
1.North British & Mercantile Insurance Co., Ltd. v. Isthmian Lines,
Inc., L-26237, July 10, 1967; Insurance Company of North
Americav. Republic, L-26532, July 10,
1967; Insurance Company of North America v. Republic,
L-24520, July 11, 1967; Insurance Companyof North
America v. Republic, L-25662, July 21, 1967; Manila
Electric Company v. Customs Arrastre Service, L-25515,
July 24, 1967; Shell Refining Co. (Phil.) Inc. v. Manila
Port Service, L-24930, July 31, 1967; The
American Insurance Company v. Macondray & Co., Inc.,
L- 24031, August 19, 1967.
||| (Home Insurance Co. v. United States Lines Co., G.R. No. 25593,
[November 15, 1967], 129 PHIL 106-109)
and upheld the validity of the sales of properties to respondent
Emiliano M. Ongjoco.
The relevant factual antecedents of the case, as found by
the trial court and adapted by the Court of Appeals, are as
follows: CHDAEc
The plaintiffs Sor Mary Edith Olaguer,
Aurora O. de Guzman, Clarissa O. Trinidad,
Lina Olaguer and Ma. Linda O. Montayre are
the legitimate children of the spouses Lino
Olaguer and defendant Olivia P. Olaguer.
Lino Olaguer died on October 3, 1957
so Special Proceedings No. 528 for probate of
will was filed in the then Court of First Instance
THIRD DIVISION of Albay. Defendant Olivia P. Olaguer was
appointed as administrator pursuant to the will.
[G.R. No. 173312. August 26, 2008.] Later, defendant Eduardo Olaguer was appointed
as co-administrator. . . .
ESTATE OF LINO OLAGUER, Represented On October 15, 1959 defendant Olivia P.
by Linda O. Olaguer, and LINDA O. Olaguer got married to defendant Jose A.
MONTAYRE, petitioners, vs. EMILIANO M. Olaguer before the then Justice of the Peace of
ONGJOCO, respondent. Sto. Domingo (Libog) Albay. (Exhibit "NNNN")
On January 24, 1965 they were married in
church. (Exhibit "XX") AaCTcI
DECISION In the order of the probate court dated
April 4, 1961, some properties of the estate were
authorized to be sold to pay obligations of the
estate. Pursuant to this authority, administrators
CHICO-NAZARIO, J p: Olivia P. Olaguer and Eduardo Olaguer on
December 12, 1962 sold to Pastor Bacani for
Assailed in this Petition for Review on Certiorari 1 is [P]25,000 Pesos, twelve (12) parcels of land,
the Decision 2 of the Court of Appeals dated 27 February 2006 particularly, Lots 4518, 4526, 4359, 8750, 7514,
in CA-G.R. CV No. 71710. Said decision modified the 6608, 8582, 8157, 7999, 6167, 8266,
Decision 3 and the subsequent Order 4 of the Regional Trial and 76 with a total area of 99 hectares. (Exhibit
Court (RTC) of Legazpi City, Branch 6, in Civil Case No. 6223,
"A" — Deed of Sale notarized by defendant Jose to Estanislao Olaguer for 7,000 Pesos, ten (10)
A. Olaguer) parcels of land, particularly, (a) TCT No. T-4011
— Lot No. 578, (b) TCT No. T-1417 — Lot No.
This sale of twelve (12) parcels of land
1557, (c) TCT No. T-4031 — Lot No. 1676, (d)
to Pastor Bacani was approved by the Probate
TCT No. T-4034 — Lot No. 4521, (e) TCT No.
Court on December 12, 1962. (Exhibit "15")
T-4035 — Lot No. 4522, (f) TCT No. 4013 —
The following day, December 13, Lot No. 8635, (g) TCT No. T-4014 — Lot 8638,
1962, Pastor Bacani sold back to Eduardo (h) TCT No. T-4603 — Lot No. 7589, (i)
Olaguer and Olivia Olaguer for [P]12,000.00 TCT No. 4604 — Lot No. 7593, and (j)
Pesos, one of the twelve (12) lots he bought TCT No. T-4605 — Lot No. 7396. (Exhibit "D"
the day before, particularly, Lot No. 76 in the — Deed of Sale notarized by Rodrigo R.
proportion of 7/13 and 6/13 pro-indiviso Reantaso) DISTcH
respectively. (Exhibit "B" — Deed of Sale
This sale to Estanislao Olaguer was
notarized by Felipe A. Cevallos, Sr.) DHaECI
approved by the Probate Court on November 12,
Simultaneously, on the same day 1965.
December 13, 1962, Pastor Bacani sold back to
After the foregoing sale to Estanislao
Olivia Olaguer and Eduardo Olaguer the other
Olaguer, the following transactions took place:
eleven (11) parcels he bought from them as
follows: 1) On July 7, 1966, defendant Olivia
P. Olaguer executed a Special Power of
To Olivia Olaguer — Four (4) parcels for
Attorney notarized by Rodrigo R. Reantaso
10,700 Pesos, particularly Lots 4518,
(Exhibit "T") in favor of defendant Jose A.
4526, 4359, 8750 with a total area of 84
Olaguer, authorizing the latter to "sell,
hectares. (Exhibit "E" — Deed of Sale
mortgage, assign, transfer, endorse and
notarized by Felipe A. Cevallos, Sr.)
deliver" the properties covered by TCT No.
To Eduardo Olaguer — Seven (7) parcels 14654 for Lot 76 6/13 share only, T-13983, T-
of land for 2,500 Pesos, particularly Lots 14658, T-14655, T-14656, and T-14657.
7514, 6608, 8582, 8157, 7999, 6167, and 2) On July 7, 1966, Estanislao Olaguer
8266 with a total area of 15 hectares. executed a Special Power of Attorney in favor of
(Exhibit "C" — Deed of Sale notarized by Jose A. Olaguer (Exhibit "X") notarized by
defendant Jose A. Olaguer) Rodrigo R. Reantaso authorizing the latter to
Relying upon the same order of April 4, "sell, mortgage, assign, transfer, endorse and
1961 but without prior notice or permission from deliver" the properties covered by TCT No. T-
the Probate Court, defendants Olivia P. Olaguer 20221, T-20222, T-20225 for Lot No. 8635, T-
and Eduardo Olaguer on November 1, 1965 sold 20226 for Lot No. 8638, T-20227, T-20228, and
T-20229.
By virtue of this Special Power of 6) On June 5, 1968, Estanislao Olaguer
Attorney, on March 1, 1967, Jose A. Olaguer as sold Lot No. 8635 under TCT No. T-20225, and
Attorney-in-Fact of Estanislao Olaguer Lot No. 8638 under TCTNo. 20226 to Jose A.
mortgaged Lots 7589, 7593 and 7396 to Olaguer for 1 Peso and other valuable
defendant Philippine National Bank (PNB) as consideration. (Exhibit "F") Deed of Sale was
security for a loan of 10,000 Pesos. The notarized by Rodrigo R. Reantaso. EcTIDA
mortgage was foreclosed by the PNB on June
7) On May 13, 1971, Jose A. Olaguer in
13, 1973 and the properties mortgage were sold
his capacity as Attorney in-Fact of Estanislao
at public auction to PNB. On December 10,
Olaguer sold to his son Virgilio Olaguer for 1
1990, the PNB transferred the properties to the
Peso and other valuable consideration Lot No.
Republic of the Philippines pursuant to Exec.
1557 — TCT No. 20221 and Lot No. 1676 —
Order No. 407 dated June 14, 1990 for agrarian
TCT No. 20222. The deed of sale was notarized
reform purposes. (records, vol. 1, page
by Otilio Sy Bongon.
66) SAHIDc
8) On July 15, 1974, Jose A. Olaguer
3) On October 29, 1966, Estanislao
sold to his son Virgilio Olaguer Lot No. 4521
Olaguer executed a General Power of Attorney
and Lot No. 4522 for 1,000 Pesos. Deed of Sale
notarized by Rodrigo R. Reantaso (Exhibit "Y")
was notarized by Otilio Sy Bongon. (records,
in favor of Jose A. Olaguer, authorizing the latter
vol. 1, page 34)
to exercise general control and supervision over
all of his business and properties, and among 9) On September 16, 1978 Virgilio
others, to sell or mortgage any of his properties. Olaguer executed a General Power of Attorney
in favor of Jose A. Olaguer notarized by Otilio
4) On December 29, 1966, Estanislao
Sy Bongon (Exhibit "V") authorizing the latter
Olaguer sold to Jose A. Olaguer for 15,000
to exercise general control and supervision over
Pesos, (Exhibit "UU") the ten (10) parcels of
all of his business and properties and among
land (Lots 578, 4521, 4522, 1557, 1676, 8635,
others, to sell or mortgage the same.
8638, 7589, 7593 and 7396) he bought from
Olivia P. Olaguer and Eduardo Olaguer under Olivia P. Olaguer and Eduardo Olaguer
Exhibit "D". were removed as administrators of the estate and
on February 12, 1980, plaintiff Ma. Linda
5) On March 16, 1968, Estanislao
Olaguer Montayre was appointed administrator
Olaguer sold to Jose A. Olaguer for 1 Peso and
by the Probate Court. CIETDc
other valuable consideration Lot No. 4521 —
TCT No. T-20223 and Lot 4522 — TCT No. Defendant Jose A. Olaguer died on
20224 with a total area of 2.5 hectares. (records, January 24, 1985. (Exhibit "NN") He was
vol. 1, page 33) survived by his children, namely the defendants
Nimfa Olaguer Taguay, Corazon Olaguer Uy,
Jose Olaguer, Jr., Virgilio Olaguer, Jacinto b) 4 of the 12 lots namely, Lots 4518,
Olaguer, and Ramon Olaguer. 4526, 4359, and 8750 were sold back to
Olivia Olaguer for 10,700 Pesos. (Exhibit
Defendant Olivia P. Olaguer died on
"E")
August 21, 1997 (Exhibit "OO") and was
survived by all the plaintiffs as the only heirs. c) 7 of the 12 lots namely, Lots 7514,
The decedent Lino Olaguer have had 6608, 8582, 8157, 7999, 6167, and 8266
three marriages. He was first married to were sold back to Eduardo Olaguer for
Margarita Ofemaria who died April 6, 1925. His 2,500 Pesos. (Exhibit "C") cTaDHS
second wife was Gloria Buenaventura who died d) Lot No. 76 was thus issued TCT No.
on July 2, 1937. The third wife was the T-14654 on December 13, 1962 in the
defendant Olivia P. Olaguer. names of Eduardo B. Olaguer married
Lot No. 76 with an area of 2,363 to Daisy Pantig and Olivia P. Olaguer
square meters is in the heart of the Poblacion married to Jose A. Olaguer to the extent
of Guinobatan, Albay. The deceased Lino of 7/13 and 6/13 pro-indiviso,
Olaguer inherited this property from his respectively. (Exhibit "FF" also "14-a")
parents. On it was erected their ancestral e) It appears from Plan (LRC) Psd-
home. 180629 (Exhibit "3") that defendant
As already said above, Lot No. 76 was Jose A. Olaguer caused the subdivision
among the twelve (12) lots sold for 25,000 survey of Lot 76 into eleven (11) lots,
Pesos, by administrators Olivia P. Olaguer namely, 76-A, 76-B, 76-C, 76-D, 76-E,
and Eduardo Olaguer to Pastor Bacani on 76-F, 76-G, 76-H, 76-I, 76-J, and 76-K,
December 12, 1962. The sale was approved by sometime on April 3, 1972. The
the probate court on December 12, subdivision survey was approved on
1962. AaITCS October 5, 1973. After the approval of
the subdivision survey of Lot 76, a
But, the following day, December 13, subdivision agreement was entered into
1962 Pastor Bacani sold back the same 12 lots to on November 17, 1973, among Domingo
Olivia P. Olaguer and Eduardo Olaguer for Candelaria, Olivia P. Olaguer, Domingo
25,200 Pesos, as follows: O. de la Torre and Emiliano M.
a) Lot No. 76 was sold back to Olivia P. [Ongjoco].(records, vol. 2, page
Olaguer and Eduardo Olaguer for 109). aDcEIH
12,000 Pesos, in the proportion of [6/13]
This subdivision agreement is
and [7/13] respectively. (Exhibit "B")
annotated in TCT No. 14654 (Exhibit
"14"-"14-d") as follows:
Lot No. Area in TCT No. Emiliano M. [Ongjoco] for 10,000 Pesos per
sq. m. the deed of absolute sale notarized by Otilio
Sy Bongon. (Exhibit "H") The alleged general
76-A 300 T-36277 power of attorney however was not presented
76-B 200 T-36278 or marked nor formally offered in
76-C 171 T-36279 evidence. AaIDHS
76-D 171 T-36280
On September 7, 1976, Jose A.
76-E 171 T-36281
Olaguer again claiming to be the attorney-in-
76-F 171 T-36282
fact of Virgilio Olaguer under the same
76-G 202 T-36283
general power of attorney referred to in the
76-H 168 T-36284
deed of absolute sale of Lot 1, sold Lot No.
76-I 168 T-36285
2 to Emiliano M. [Ongjoco] for 10,000
76-J 168 T-36286
Pesos. (Exhibit "I") The deed of absolute sale
76-K 473 T-36287
was notarized by Otilio Sy Bongon.
After Lot 76 was subdivided as
On July 16, 1979, Jose A. Olaguer as
aforesaid, Jose A. Olaguer as attorney-in-fact
attorney-in-fact of Virgilio Olaguer under a
of Olivia P. Olaguer, sold to his son Virgilio
general power of attorney Doc. No. 378,
Olaguer Lots 76-B, 76-C, 76-D, 76-E, 76-F,
Page No. 76, Book No. 14, Series of 1978
and 76-G on January 9, 1974 for 3,000
sold Lot No. 76-D to Emiliano M. [Ongjoco]
Pesos. (Exhibit "G") The deed of absolute sale
for 5,000 Pesos. The deed of absolute sale is
was notarized by Otilio Sy Bongon.
Doc. No. 571, Page No. 20, Book No. 16,
Lots 76-B and 76-C were consolidated Series of 1979 of Notary Public Otilio Sy
and then subdivided anew and designated Bongon. (Exhibit "K")
as Lot No. 1 with an area of 186 square
The same Lot No. 76-D was sold on
meters and Lot No. 2 with an area of 185
October 22, 1979 by Jose A. Olaguer as
square meters of the Consolidation
attorney-in-fact of Virgilio Olaguer under a
Subdivision Plan (LRC) Pcs-20015. (Please
general power of attorney Doc. No. 378,
sketch plan marked as Exhibit "4", records, vol.
Page No. 76, Book No. 14, Series of 1978 of
2, page 68)
Notary Public Otilio Sy Bongon sold Lot No.
On January 15, 1976, Jose A. Olaguer 76-D to Emiliano M. [Ongjoco] for 10,000
claiming to be the attorney-in-fact of his son Pesos. The deed of absolute sale is Doc. No.
Virgilio Olaguer under ageneral power of 478, Page No. 97, Book NO. XXII, Series of
attorney Doc. No. 141, Page No. 100, 1979 of Notary Public Antonio A.
Book No. 7, Series of 1972 of Notary Public Arcangel. (Exhibit "J") SAaTHc
Otilio Sy Bongon, sold Lot No. 1 to defendant
On July 3, 1979, Jose A. Olaguer as Olaguer and defendant Olivia P. Olaguer, namely, Sor Mary
attorney-in-fact of Virgilio Olaguer sold Lots Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina
76-E and 76-F to Emiliano M. [Ongjoco] for Olaguer and Ma. Linda O. Montayre, as attorney-in-fact and in
15,000 Pesos. The deed of absolute sale is her own behalf, filed an action for the Annulment of Sales of
Doc. No. 526, Page No. 11, Book No. 16, Series Real Property and/or Cancellation of Titles 6 in the then Court of
of 1979 of Notary Public Otilio Sy First Instance of Albay. 7
Bongon. (Exhibit "M")
Docketed as Civil Case No. 6223, the action named as
The same Lots 76-E and 76-F were defendants the spouses Olivia P. Olaguer and Jose A. Olaguer;
sold on October 25, 1979, by Jose A. Olaguer Eduardo Olaguer; Virgilio Olaguer; Cipriano Duran; the Heirs of
as attorney-in-fact of Virgilio Olaguer under Estanislao O. Olaguer, represented by Maria Juan Vda. de
the same general power of attorney of 1978 Olaguer; and the Philippine National Bank (PNB).
referred to above to Emiliano M. [Ongjoco]
In the original complaint, the plaintiffs therein alleged
for 30,000 Pesos. The deed of absolute sale is
that the sales of the following properties belonging to the Estate
Doc. No. 47, Page No. 11, Book No. XXIII,
of Lino Olaguer to Estanislao Olaguer were absolutely simulated
Series of 1972 of Notary Public Antonio A.
or fictitious, particularly: Lots Nos. 578, 1557, 1676, 4521, 4522,
Arcangel. (Exhibit "L")
8635, 8638, 7589, 7593, and 7396. In praying that the sale be
On July 2, 1979 Jose A. Olaguer as declared as null and void, the plaintiffs likewise prayed that the
attorney-in-fact of Virgilio Olaguer resulting Transfer Certificates of Title issued to Jose Olaguer,
sold Lot No. 76-G to Emiliano M. [Ongjoco] Virgilio Olaguer, Cipriano Duran and the PNB be annulled.
for 10,000 Pesos. The deed of sale is Doc. No.
Defendant PNB claimed in its Answer, 8 inter alia, that
516, Page No. 9, Book No. 16, Series of 1979
it was a mortgagee in good faith and for value of Lots Nos. 7589,
of Notary Public Otilio Sy Bongon. (Exhibit
7593 and 7396, which were mortgaged as security for a loan of
"N")
P10,000.00; the mortgage contract and other loan documents
The same Lot 76-G was sold on were signed by the spouses Estanislao and Maria Olaguer as
February 29, 1980 by Jose A. Olaguer as registered owners; the proceeds of the loan were received by the
attorney-in-fact of Virgilio Olaguer under the mortgagors themselves; Linda Olaguer Montayre had no legal
same general power of attorney of 1978 capacity to sue as attorney-in-fact; plaintiffs as well as Maria
referred to above to Emiliano M. [Ongjoco] Olaguer were in estoppel; and the action was already barred by
for 10,000 Pesos. The deed of absolute sale is prescription. PNB set up a compulsory counterclaim for
Doc. No. l02, Page No. 30, Book No. 17, Series damages, costs of litigation and attorney's fees. It also filed a
of 1980 of Notary Public Otilio Sy cross-claim against Maria Olaguer for the payment of the value
Bongon. (Exhibit "O") 5 (Emphases of the loan plus the agreed interests in the event that judgment
ours.) IcHTCS would be rendered against it. TIHDAa
Thus, on 28 January 1980, the Estate of Lino Olaguer Defendants Olivia P. Olaguer, Jose A. Olaguer and
represented by the legitimate children of the spouses Lino Virgilio Olaguer, in their Answer, 9 denied the material
allegations in the complaint. They maintained that the sales of faith, that plaintiffs had no cause of action against him, and that
the properties to Pastor Bacani and Estanislao Olaguer were the sale of property to Pastor Bacani, from whom Ongjoco
judicially approved; the complaint did not state a sufficient cause derived his title, was judicially approved.
of action; it was barred by laches and/or prescription; lis
On 23 January 1996, plaintiffs filed a Re-Amended
pendensexisted; that the long possession of the vendees have
Complaint, 14 in which the heirs of Estanislao Olaguer were
ripened into acquisitive prescription in their favor, and the
identified, namely, Maria Juan Vda. de Olaguer, Peter Olaguer,
propertiesno longer formed part of the Estate of Lino Olaguer;
Yolanda Olaguer and Antonio Bong Olaguer.
until the liquidation of the conjugal properties of Lino Olaguer
and his former wives, the plaintiffs were not the proper parties in In their Answer, 15 the heirs of Estanislao Olaguer
interest to sue in the action; and in order to afford complete reiterated their claim that Estanislao Olaguer never had any
relief, the other conjugal properties of Lino Olaguer with his transactions or dealings with the Estate of Lino Olaguer; nor did
former wives, and his capital property that had been conveyed they mortgage any property to the PNB. cCEAHT
without the approval of the testate court should also be included On 5 August 1998, the heirs of Estanislao Olaguer and
for recovery in the instant case. petitioner Ma. Linda Olaguer Montayre submitted a compromise
Defendant Maria Juan Vda. de Olaguer, representing the agreement, 16 which was approved by the trial court.
heirs of Estanislao Olaguer, in her Answer, 10 likewise denied On 6 October 1999, Cipriano Duran filed a
the material allegations of the complaint and insisted that the Manifestation 17 in which he waived any claim on Lots Nos.
plaintiffs had no valid cause of action against the heirs of the late 8635 and 8638. Upon motion, Duran was ordered dropped from
Estanislao Olaguer, as the latter did not participate in the alleged the complaint by the trial court in an order 18 dated 20 October
transfer of properties by Olivia P. Olaguer and Eduardo Olaguer 1999.
in favor of the late Estanislao Olaguer.
In a Decision 19 dated 13 July 2001, the RTC ruled in
Defendant Cipriano Duran claimed, in his favor of the plaintiffs. The pertinent portions of the decision
Answer, 11 that the complaint stated no cause of action; he was provide:
merely instituted by his late sister-in-law Josefina Duran to take
over the management of Lots Nos. 8635 and 8638 in 1971; and The entirety of the evidence adduced
the real party-in-interest in the case was the administrator of the clearly show that the sale of the 12 lots to Pastor
estate of Josefina Duran. aEHAIS Bacani pursuant to Exhibit "A" and the sale of
the 10 lots to Estanislao Olaguer pursuant to
On 11 January 1995, an Amended Complaint 12 was Exhibit "D" were absolutely simulated sales and
filed in order to implead respondent Emiliano M. Ongjoco as the thus void ab initio. The two deeds of sales
transferee of Virgilio Olaguer with respect to portions of Lot No. Exhibits "A" and "D" are even worse than
76, namely Lots Nos. 1, 2, 76-D, 76-E, 76-F, and 76-G. fictitious, they are completely null and void for
In his Answer with Counterclaim and Motion to lack of consideration and the parties therein
Dismiss, 13 respondent Ongjoco denied the material allegations never intended to be bound by the terms thereof
of the amended complaint and interposed, as affirmative and the action or defense for the declaration of
defenses the statute of limitations, that he was a buyer in good their inexistence does not prescribe. (Art. 1410,
Civil Code) Aside from being simulated they 6/13 share of Olivia P. Olaguer on Lot No. 76
were clearly and unequivocally intended to by selling it to his son Virgilio for only 3,000
deprive the compulsory heirs of their Pesos, then caused Virgilio to execute a power
legitime . . .. acHCSD of attorney authorizing him to sell or
encumber the 6/13 share which he did by
selling the same to defendant Emiliano M.
The deeds of sale, Exhibits "A" and "D" [Ongjoco]. cHDEaC
being void ab initio, they are deemed as non-
Virgilio Olaguer however executed an
existent and the approval thereof by the probate
affidavit (Exhibit "CC") wherein he denied
court becomes immaterial and
having bought any property from the estate of
of no consequence, because the approval by the
Lino Olaguer and that if there are documents
probate court did not change the character of the
showing that fact he does not know how it came
sale from void to valid. . . . .
about. . . . .
xxx xxx xxx
The 1972 power of attorney referred
Defendant Jose A. Olaguer simulated the to by Jose A. Olaguer as his authority for the
sales and had them approved by the probate sale of Lots 1 and 2(formerly lots 76-B and
court so that these properties would appear then 76-C) was not presented nor offered in
to cease being a part of the estate and the vendee evidence.
may then be at liberty to dispose of the same in There are two deeds of sale over Lot
any manner he may want. They probably 76-D, (Exhibits "K" and "J") in favor of
believed that by making it appear that the defendant Emiliano M. [Ongjoco] with
properties were bought back from Pastor Bacani different dates of execution, different amount
under a simulated sale, they (Olivia Olaguer and of consideration, different Notary Public.
Eduardo Olaguer) would appear then as the
owners of the properties already in their personal There are two deeds of sale over
capacities that disposals thereof will no longer Lots 76-E and 76-F (Exhibits "M" and "L")
require court intervention. . . . . in favor of defendant Emiliano M. [Ongjoco]
with different dates of execution, different
xxx xxx xxx amount of consideration and different Notary
[Jose A. Olaguer] had Olivia P. Public.
Olaguer execute a Special Power of Attorney There are two deeds of sale over Lot
(Exhibit "T") authorizing him (Jose A. 76-G (Exhibits "N" and "O") in favor of
Olaguer) to sell or encumber the properties Emiliano M. [Ongjoco] with different dates of
allegedly bought back from Pastor Bacani execution with the same amount of
which Jose A. Olaguer did with respect to the consideration and the same Notary Public.
While Lot 76-D was allegedly sold fully well that Lots 76-B to 76-G he was
already to Emiliano M. [Ongjoco] in 1979, yet buying was owned by Olivia P. Olaguer and
it was still Jose A. Olaguer who filed a not by Virgilio Olaguer. IHAcCS
petition for the issuance of a second owner's
xxx xxx xxx
copy as attorney in fact of Virgilio Olaguer on
August 8, 1980 (Exhibit "SS") With respect to the 10 lots sold to
and no mention was made about the [Eduardo] Olaguer (Exhibit "D") Jose A.
sale. EAHcCT Olaguer had Estanislao Olaguer execute a power
Under these circumstances, the of attorney (Exhibit "X") authorizing him (Jose
documents of defendant Emiliano M. A. Olaguer) to sell or encumber the 10 lots
[Ongjoco] on lots 76 therefore, in so far as the allegedly bought by Estanislao from the estate.
portions he allegedly bought from Jose A. With this power of attorney, he mortgaged lots
Olaguer as attorney in fact of Virgilio 7589, 7593 and 7398 to the PNB. He sold lots
Olaguer suffers seriously from infirmities and 1557 and 1676 to his son Virgilio Olaguer.
appear dubious. While under Exhibit "UU" dated December 29,
1966, he bought the 10 parcels of land, among
Defendant Emiliano M. [Ongjoco] which is lots 4521 and 4522 from Estanislao
cannot claim good faith because according to Olaguer, yet, on March 16, 1968, he again
him, when these lots 76-[B] to 76-G were bought lots 4521 and 4522 (records, vol. 1, page
offered to him his condition was to transfer 38) from Estanislao Olaguer. While lots 8635
the title in his name and then he pays. He did and 8638 were among those sold to him under
not bother to verify the title of his Exhibit "UU", it appears that he again bought
vendor. . . . . the same on June 5, 1968 under Exhibit "F".
So with respect to the sale of Lots 76- The heirs of Estanislao Olaguer however
B to 76-G, Emiliano M. [Ongjoco] denied having bought any parcel of land from
has no protection as innocent purchaser for the estate of Lino Olaguer. Estanislao Olaguer's
good faith affords protection only to widow, Maria Juan vda. de Olaguer, executed an
purchasers for value from the registered affidavit (Exhibit "BB") that they did not buy
owners. . . . Knowing that he was dealing only any property from the estate of Lino Olaguer,
with an agent . . ., it behooves upon defendant they did not sell any property of the estate and
Emiliano M. [Ongjoco] to find out the extent that they did not mortgage any property with the
of the authority of Jose A. Olaguer as well as PNB. She repeated this in her deposition.
the title of the owner of the property, because (records, vol. 2, page 51) This was corroborated
as early as 1973 pursuant to the subdivision by no less than former co-administrator Eduardo
agreement, (records, vol. 2, page 109 and Olaguer in his deposition too (Exhibit "RRRR")
Exhibit "14" and "14-d") he already knew that the sale of the 10 parcels of land to
Estanislao Olaguer was but a simulated sale decision, the heirs of Olivia P. Olaguer (the
without any consideration. . . . . plaintiffs herein) [sic] are hereby ordered to
execute the necessary document of
xxx xxx xxx
reconveyance, failure for which, the Clerk of
A partial decision was already rendered Court is hereby ordered to execute the said
by this court in its order of August 5, 1998 deed of reconveyance.
(records, vol. 2, page 64) approving the 3) Lot Nos. 7514, 6608, 8582, 8157,
compromise agreement with defendants Heirs of 7999, 6167 and 8266 are hereby ordered
Estanislao Olaguer. (records, vol. 2 page reverted back to the estate of Lino Olaguer
57). DECcAS and for this purpose, within ten (10) days
Defendant Cipriano Duran was dropped from the finality of this decision, defendant
from the complaint per the order of the court Eduardo Olaguer is hereby ordered to
dated October 20, 1999 (records, vol. 2, page execute the necessary document of
155) because he waived any right or claim over reconveyance, failure for which, the Clerk of
lots 8635 and 8638. (records, vol. 2, page 150). Court is hereby ordered to execute the said
(Emphasis ours.) deed of reconveyance. TcEaAS
The dispositive portion of the above decision was, 4) Lots 1 and 2, Pcs-20015, and Lots 76-
however, amended by the trial court in an Order 20 dated 23 July D, 76-E, 76-F and 76-G, Psd-180629 sold to
2001 to read as follows: Emiliano M. [Ongjoco] are hereby ordered
reverted back to the estate of Lino Olaguer. For
WHEREFORE, premises considered,
this purpose, within ten (10) days from the
decision is hereby rendered in favor of the
finality of this decision, defendant Emiliano M.
plaintiffs as follows:
[Ongjoco] is hereby ordered to execute the
1) The deed of sale to Pastor Bacani necessary deed of reconveyance, otherwise, the
(Exhibit "A") and the deed of sale to Estanislao Clerk of Court shall be ordered to execute the
Olaguer (Exhibit "D") are hereby declared as said reconveyance and have the same registered
null and void and without force and effect and with the Register of Deeds so that new titles
all the subsequent transfers and certificates shall be issued in the name of the estate of Lino
arising therefrom likewise declared null and Olaguer and the titles of Emiliano [Ongjoco]
void and cancelled as without force and effect, cancelled.
except as herein provided for.
5) The parties have acquiesced to the
2) Lot Nos. 4518, 4526, 4359 and 8750 sale of the 7/13 portion of Lot 76 to Eduardo
are hereby ordered reverted back to the Olaguer as well as to the latter's disposition
estate of Lino Olaguer and for this purpose, thereof and are now in estoppel to question
within ten (10) days from the finality of this
the same. The court will leave the parties where prescription, the authority of Olivia and Eduardo to dispose of
they are with respect to the 7/13 share of Lot 76. properties formerly belonging to the estate of Lino Olaguer,
recourse in a court of co-equal jurisdiction, and forum shopping.
6) Lots 578, 1557, 1676, 4521, 4522,
8635, 8638, are hereby reverted back to the Petitioner Linda O. Montayre was likewise allowed to
estate of Lino Olaguer and for this purpose, the file a Brief 24 on her own behalf, as Plaintiff-Appellee and
Clerk of [Court] is hereby ordered to execute the Plaintiff-Appellant. 25 She refuted therein the assignment of
necessary deed of reconveyance within ten days errors made by Defendant-Appellant Ongjoco and assigned as
from the finality of this decision and cause its error the ruling of the trial court that the lots mortgaged to the
registration for the issuance of new titles in the PNB should remain with the Republic of the Philippines as a
name of the Estate of Lino Olaguer and the transferee in good faith.
cancellation of existing ones over the same.
On 27 February 2006, the Court of Appeals rendered the
7) While the mortgage with the assailed Decision, the dispositive portion of which reads:
defendant PNB is null and void, Lots 7589, 7593
WHEREFORE, premises considered,
and 7396 shall remain with the Republic of the
the appealed Decision is hereby MODIFIED, in
Philippines as a transferee in good faith.
that Paragraph 4 of the amended decision is
Both the petitioners and respondent filed their respective hereby Ordered Deleted, and the questioned
Notices of Appeal 21 from the above decision. The case was sales to defendant-appellant Emiliano M.
docketed in the Court of Appeals as CA-G.R. CV No. 71710. Ongjoco are UPHELD. 26
In their Plaintiff-Appellant's Brief 22 filed before the In denying the appeal interposed by petitioners, the
Court of Appeals, petitioner Estate argued that the trial court appellate court reasoned that the claim for the value of the lots
erred in not ordering the restitution and/or compensation to them mortgaged with the PNB were not prayed for in the original
of the value of the parcels of land that were mortgaged to PNB, Complaint, the Amended Complaint or even in the Re-Amended
notwithstanding the fact that the mortgage was declared null and Complaint. What was sought therein was merely the declaration
void. Petitioners maintain that the PNB benefited from a void of the nullity of the mortgage contract with PNB. As the relief
transaction and should thus be made liable for the value of the prayed for in the appeal was not contained in the complaint, the
land, minus the cost of the mortgage and the reasonable expenses same was thus barred. HaAIES
for the foreclosure, consolidation and transfer of the
The Court of Appeals also ruled that the evidence of
lots. SDTIHA
petitioners failed to rebut the presumption that PNB was a
Ongjoco, on the other hand, argued in his Defendant- mortgagee in good faith. Contrarily, what was proven was the
Appellant's Brief 23 that the trial court erred in: declaring as null fact that Olivia Olaguer and Jose A. Olaguer were the persons
and void the Deeds of Sale in favor of Pastor Bacani and responsible for the fraudulent transactions involving the
Eduardo Olaguer and the subsequent transfers and certificates questioned properties. Thus, the claim for restitution of the value
arising therefrom; ordering the reconveyance of the lots sold to of the mortgaged properties should be made against them.
him (Ongjoco); and failing to resolve the affirmative defenses of
As regards the appeal of respondent Ongjoco, the THE COURT OF APPEALS
appellate court found the same to be meritorious. The said court COMMITTED AN ERROR IN LAW WHEN IT
ruled that when the sale of real property is made through an DISREGARDED THE CLEAR FINDINGS OF
agent, the buyer need not investigate the principal's title. What FACTS AND CONCLUSIONS MADE BY THE
the law merely requires for the validity of the sale is that the TRIAL COURT, IN THE ABSENCE OF ANY
agent’s authority be in writing. STRONG AND COGENT REASONS TO
REVERSE THE SAID FINDINGS,
Furthermore, the evidence adduced by petitioners was
CONTRARY TO PREVAILING
ruled to be inadequate to support the conclusion that Ongjoco
JURISPRUDENCE. 29
knew of facts indicative of the defect in the title of Olivia
Olaguer or Virgilio Olaguer. Essentially, the question that has been brought before us
for consideration is whether or not, under the facts and
Petitioners moved for a partial reconsideration 27 of the
circumstances of this case, respondent Ongjoco can be
Court of Appeals' decision in order to question the ruling that
considered an innocent purchaser for value.
respondent Ongjoco was a buyer in good faith. The motion was,
however, denied in a Resolution 28 dated 29 June 2006. Petitioners agree with the pronouncement of the trial
court that respondent Ongjoco could not have been a buyer in
Aggrieved, petitioners filed the instant Petition for
good faith since he did not bother to verify the title and the
Review on Certiorari under Rule 45 of the Revised Rules of
capacity of his vendor to convey the properties involved to him.
Court, raising the following assignment of errors:
Knowing that Olivia P. Olaguer owned the properties in 1973
I. and that he merely dealt with Jose A. Olaguer as an agent in
January 1976, Ongjoco should have ascertained the extent of
THE COURT OF APPEALS
Jose’s authority, as well as the title of Virgilio as the principal
COMMITTED AN ERROR IN LAW WHEN IT
and owner of the properties.
RULED, ON SPECULATION, THAT
RESPONDENT EMILIANO M. ONGJOCO Petitioners likewise cite the following incidents that
WAS A BUYER IN GOOD FAITH OF THE were considered by the trial court in declaring that respondent
PROPERTIES OF THE ESTATE OF LINO was a buyer in bad faith, namely: (1) that Virgilio Olaguer
OLAGUER, DESPITE THE EXISTENCE OF executed an affidavit, 30 wherein he denied having bought any
FACTS AND CIRCUMSTANCES FOUND BY property from the estate of Lino Olaguer, and that if there are
THE TRIAL COURT THAT OUGHT TO PUT documents showing that fact, he does not know how they came
EMILIANO M. ONGJOCO ON NOTICE THAT about; (2) that the power of attorney referred to by Jose A.
THE PETITIONERS-APPELLANTS HAVE A Olaguer as his authority for the sale of Lots 1 and 2 (formerly
RIGHT OR INTEREST OVER THE SAID Lots 76-B and 76-C) was not presented or offered in evidence;
PROPERTIES, AND CONTRARY TO (3) that there are two deeds of sale 31 over Lot 76-D in favor of
PREVAILING JURISPRUDENCE. SaDICE Ongjoco; (4) that there are two deeds of sale 32 over Lots 76-E
and 76-F in favor of Ongjoco; (5) that there are two deeds of
II.
sale 33 over Lot 76-G in favor of Ongjoco; and (6) that while Lot
76-D was already sold to Ongjoco in 1979, it was still Jose A. was respondent able to explain the omission. Other than the self-
Olaguer as attorney in fact of Virgilio Olaguer who filed on 8 serving statement of respondent, no evidence was offered at all
August 1980 a petition for the issuance of a second owner’s to prove the alleged written power of attorney. This of course
copy 34 of the title to the property, and no mention was made was fatal to his case.
about the sale to Ongjoco. DHITCc
As it stands, there is no written power of attorney to
Respondent Ongjoco, on the other hand, invokes the speak of. The trial court was thus correct in disregarding the
ruling of the Court of Appeals that he was an innocent purchaser claim of its existence. Accordingly, respondent Ongjoco's claim
for value. His adamant stance is that, when he acquired the of good faith in the sale of Lots Nos. 1 and 2 has no leg to stand
subject properties, the same were already owned by Virgilio on.
Olaguer. Respondent insists that Jose A. Olaguer was duly
As regards Lots Nos. 76-D, 76-E, 76-F and 76-G,
authorized by a written power of attorney when the properties
Ongjoco was able to present a general power of attorney that was
were sold to him (Ongjoco). He posits that this fact alone
executed by Virgilio Olaguer. While the law requires a special
validated the sales of the properties and foreclosed the need for
power of attorney, the general power of attorney was sufficient in
any inquiry beyond the title to the principal. All the law requires,
this case, as Jose A. Olaguer was expressly empowered to sell
respondent concludes, is that the agent's authority be in writing
any of Virgilio's properties; and to sign, execute, acknowledge
in order for the agent's transactions to be considered valid.
and deliver any agreement therefor. 38 Even if a document is
Respondent Ongjoco's posture is only partly correct. designated as a general power of attorney, the requirement of a
special power of attorney is met if there is a clear mandate from
According to the provisions of Article 1874 35 of the
the principal specifically authorizing the performance of the
Civil Code on Agency, when the sale of a piece of land or any
act. 39 The special power of attorney can be included in the
interest therein is made through an agent, the authority of the
general power when the act or transaction for which the special
latter shall be in writing. Absent this requirement, the sale shall
power is required is specified therein. 40
be void. Also, under Article 1878, 36 a special power of attorney
is necessary in order for an agent to enter into a contract by On its face, the written power of attorney contained the
which the ownership of an immovable property is transmitted or signature of Virgilio Olaguer and was duly notarized. As such,
acquired, either gratuitously or for a valuable consideration. the same is considered a public document and it has in its favor
the presumption of authenticity and due execution, which can
We note that the resolution of this case, therefore, hinges
only be contradicted by clear and convincing evidence. 41
on the existence of the written power of attorney upon which
respondent Ongjoco bases his good faith. TEHDIA No evidence was presented to overcome the presumption
in favor of the duly notarized power of attorney. Neither was
When Lots Nos. 1 and 2 were sold to respondent
there a showing of any circumstance involving the said
Ongjoco through Jose A. Olaguer, the Transfer Certificates of
document that would arouse the suspicion of respondent and spur
Title of said properties were in Virgilio's name. 37 Unfortunately
him to inquire beyond its four corners, in the exercise of that
for respondent, the power of attorney that was purportedly issued
reasonable degree of prudence required of a man in a similar
by Virgilio in favor of Jose Olaguer with respect to the sale of
situation. We therefore rule that respondent Ongjoco had every
Lots Nos. 1 and 2 was never presented to the trial court. Neither
right to rely on the power of attorney in entering into the
contracts of sale of Lots Nos. 76-D to 76-G with Jose A. and 76-G since it was entirely proper for him to rely on the duly
Olaguer. cIECTH notarized written power of attorney executed in favor of Jose A.
Olaguer. DaEcTC
With respect to the affidavit of Virgilio Olaguer in which
he allegedly disavowed any claim or participation in the WHEREFORE, premises considered, the instant petition
purchase of any of the properties of the deceased Lino Olaguer, is hereby PARTIALLY GRANTED. The assailed Decision of the
we hold that the same is rather irrelevant. The affidavit was Court of Appeals dated 27 February 2006 in CA-G.R. CV NO.
executed only on 1 August 1986 or six years after the last sale of 71710 is MODIFIED in that Paragraph 4 of the Decision dated
the properties was entered into in 1980. In the determination of 13 July 2001 of the Regional Trial Court of Legazpi City, Branch
whether or not a buyer is in good faith, the point in time to be 6, and the Order dated 23 July 2001 shall read as follows:
considered is the moment when the parties actually entered into
4) Lots 1 and 2, Pcs-20015 sold to
the contract of sale.
Emiliano M. Ongjoco are hereby ordered
Furthermore, the fact that Lots Nos. 76-D to 76-G were reverted back to the estate of Lino Olaguer. For
sold to respondent Ongjoco twice does not warrant the this purpose, within ten (10) days from the
conclusion that he was a buyer in bad faith. While the said finality of this decision, defendant Emiliano M.
incidents might point to other obscured motives and Ongjoco is hereby ordered to execute the
arrangements of the parties, the same do not indicate that necessary deed of reconveyance, otherwise, the
respondent knew of any defect in the title of the owner of the Clerk of Court shall be ordered to execute the
property. said reconveyance and have the same registered
with the Register of Deeds so that new titles
As to the petition filed by Jose A. Olaguer for the
shall be issued in the name of the estate of Lino
issuance of a second owner’s copy of the title to Lot No. 76-D,
Olaguer and the titles of Emiliano Ongjoco
after the property was already sold to respondent Ongjoco, the
cancelled.
same does not inevitably indicate that respondent was in bad
faith. It is more likely that Jose A. Olaguer was merely compiling No costs.
the documents necessary for the transfer of the subject property.
SO ORDERED.
Indeed, it is to be expected that if the title to the property is lost
before the same is transferred to the name of the purchaser, it Ynares-Santiago, Austria-Martinez, Nachura and Reyes,
would be the responsibility of the vendor to cause its JJ., concur.
reconstitution.
Footnotes
In sum, we hold that respondent Emiliano M. Ongjoco
was in bad faith when he bought Lots Nos. 1 and 2 from Jose A. 1.Rollo, pp. 9-36
Olaguer, as the latter was not proven to be duly authorized to sell
2.Penned by Associate Justice Eliezer R. de los Santos with
the said properties.
Associate Justices Jose C. Reyes, Jr. and Arturo G. Tayag,
However, respondent Ongjoco was an innocent concurring; rollo,pp. 37-64.
purchaser for value with regard to Lots Nos. 76-D, 76-E, 76-F
3.Penned by Judge Vladimir B. Brusola; rollo, pp. 79-95.
4.Rollo, pp. 96-97. TSCIEa On 3 March 1987, the trial court reconsidered and set aside the
order of dismissal dated 9 February 1987 but ordered the
5.Id. at 85-91. four (4) cases archived.
6.Records, Vol. 1, pp. 1-14. On 15 January 1998, the records of these cases were again
7.The other related cases concerning the Estate of Lino Olaguer are consolidated with the instant case.
as follows: 8.Records, Vol. 1, pp. 69-75.
After the death of Lino Olaguer on 3 October 1957, Olivia P. 9.Id. at 76-83.
Olaguer filed a Petition for Probate of Will and Issuance of
Letters of Administration on 21 October 1957. The case 10.Id. at 103-105.
was docketed as SPECIAL PROC. NO. 528.
11.Id. at 109-110.
On 24 September 1979, Olivia P. Olaguer filed an action for
Quieting of Title and Damages with Petition for Injunction 12.Id. at 173-190.
against Linda Olaguer Montayre, assisted by her husband 13.Id. at 220-223.
Nelson Montayre, Lina P. Olaguer, Faustino Adra, Celso
Llagas, Mariano Orfano, Estelita Almorfe Orfano, 14.Id. at 348-363.
Geminiano Llagas, Lorenzo Llagas and Serafin Gustilo. 15.Id. at 439-443. THAICD
The case was docketed as CIVIL CASE No. 6146.
16.Records, Vol. 2, pp. 57-59.
On 20 March 1980, the Estate of Lino Olaguer, represented by the
children of the first marriage of Lino Olaguer, filed an 17.Id. at 150.
action for the Annulment of Donation and Recovery of
18.Id. at 155.
Possession and Ownership with Damages against Olivia P.
Olaguer, then married to Jose A. Olaguer. The case was 19.Rollo, pp. 79-95.
docketed as CIVIL CASE No. 6253. EACIcH
20.Id. at 96-97.
In the order of the Executive Judge of the RTC of Legazpi City,
Branch 6 dated 15 June 1983, SPECIAL PROC. NO. 528, 21.Records, Vol. 2, pp. 383, 386-389.
CIVIL CASENO. 6146 and CIVIL CASE NO. 6253 were 22.CA rollo, pp. 93-113.
consolidated with the instant case (CIVIL CASE NO.
6223). 23.Id. at 38-74.
On 9 February 1987, the trial court dismissed all the cases for 24.Id. at 179-198.
failure to prosecute.
25.Id. at 201. ECTHIA
26.Id. at 229.
27.Rollo, pp. 67-78. in any way connected therewith or with my business or
property. IcEaST
28.Id. at 65-66.
39.Bravo-Guerrero v. Bravo, G.R. No. 152658, 29 July 2005, 465
29.Id. at 21. SCRA 244, 259.
30.Exhibit "CC", Exhibits for the Plaintiffs, p. 52. 40.Veloso v. Court of Appeals, 329 Phil. 398, 405 (1996), cited
31.Exhibits "J" and "K", id. at 33-35. in Bravo-Guerrero v. Bravo, id.

32.Exhibits "L" and "M", id. at 36-39. 41.Domingo v. Robles, G.R. No. 153743, 18 March 2005, 453
SCRA 812, 818-819.
33.Exhibits "N" and "O", id. at 40-41. ECTSDa
||| (Estate of Olaguer v. Ongjoco, G.R. No. 173312, [August 26,
34.Exhibit "SS", id. at 67-69. 2008], 585 PHIL 365-389)
35.Art. 1874. When a sale of a piece of land or any interest therein
is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void.
36.Art. 1878. Special powers of attorney are necessary in the
following cases:
xxx xxx xxx
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or
for a valuable consideration;
37.Exhibits "5-a", and "6-a-6-b", Exhibits for the Defendants, pp.
4-5.
38.The specific provisions of the General Power of Attorney
authorizes Jose A. Olaguer, among other powers:
3. To buy or otherwise acquire, to hire or lease, and to pledge,
mortgage or otherwise hypothecate, sell, assign and
dispose of any and all my property, real, personal or
mixed, of any kind whatsoever and wheresoever situated,
or any interest therein, upon such terms and conditions and
under such covenants as my said attorney shall deem fit
and proper, and to execute in or other writings therefore, or
Private respondent F.P. Holdings and Realty Corp. was the registered
owner of a parcel of land situated along E. Rodriguez Avenue,
Quezon City. The property was offered for sale to the general public
through the circulation of a sales brochure stating therein that Meldin
Al G. Roy was the contact person. Because of this advertisement,
petitioner sent a letter to Meldin Roy conveying its interest to
purchase a portion or 1/2 of the front lot of the property. However,
Roy answered that he was informed by respondent F.P. Holdings that
it would take sometime to subdivide the lot and it was not receptive
to the purchase of only one half of the front lot. After a few days,
petitioner through Atty. Mamaril wrote respondent expressing desire
to buy the entire front lot of the subject property. Roy, made a
SECOND DIVISION counter offer, accepted the offer. However, respondent F.P. Holdings
refused to execute the corresponding deed of sale in favor of
[G.R. No. 138639. February 10, 2000.] petitioner. Due to this inaction, petitioner caused the registration of
an adverse claim to the property. On October 4, 1991, F.P. Holdings
filed a petition for the cancellation of the adverse claim against
CITY-LITE REALTY petitioner in the Regional Trial Court of Quezon City. With the filing
CORPORATION, petitioner, vs. COURT OF of the petition, petitioner caused the annotation of the first notice
APPEALS and F.P. HOLDINGS & REALTY of lis pendens, which was recorded in the title of the property. On
CORP., METRO DRUG INC., MELDIN AL G. December 2, 1991, the RTC dismissed F.P. Holding's petition
ROY, VIEWMASTER CONSTRUCTION declaring that petitioner's adverse claim had factual basis and was not
CORP., and the REGISTER OF DEEDS OF sham and frivolous. Thereafter, petitioner instituted a complaint
QUEZON CITY, respondent. against respondent F.P. Holdings for specific performance and
damages. During the pendency of the suit, petitioner moved to
include respondent Viewmaster as necessary party in view of the
Padilla Villanueva Marasigan and Associates for petitioner.
conveyance of the property to the latter. In October, 1995, the court a
Antonio R. Bautista for F.P. Holdings. quo rendered its decision in favor of petitioner and ordered
respondent F.P. Holdings to execute a deed of sale in favor of
Romulo, Mabanta, Buenaventura, Sayoc & De los petitioner. Viewmaster's motion for reconsideration was denied. On
Angeles for respondents Metro/Roy appeal, the Court of Appeals reversed and set aside the judgment of
Alfonso M. Cruz Law Offices for Viewmaster Construction Corp. the lower court. Aggrieved by the decision, herein petitioner filed a
petition for certiorari questioning the decision of the appellate
court. HTASIa
SYNOPSIS
The Supreme Court found the petition devoid of merit. The Court
ruled that Meldin Roy was only a contact person with noauthority to
conclude a sale of the property. Roy or Metro Drug was a mere appraisal." This obviously meant that Meldin Al G. Roy
broker and his job was only to bring the parties together for a and/or Metro Drug was only to assist F.P. HOLDINGS in
possible transaction. Consequently, for lack of written authority to looking for buyers and referring to them possible prospects
sell the subject property by Roy or Metro Drug as mandated by whom they were supposed to endorse to F.P. HOLDINGS.
Article 1874 of the Civil Code, the sale was null and void. But the final evaluation, appraisal and acceptance of the
Accordingly, the appealed decision of the Court of Appeals was transaction could be made only by F.P. HOLDINGS. In
affirmed. other words, Meldin Al G. Roy and/or Metro Drug was
only a contact person with no authority to conclude a sale
of the property. In fact, a witness for petitioner even
SYLLABUS admitted that Roy and/or Metro Drug was a mere broker,
and Roy's only job was to bring the parties together for a
CIVIL LAW; AGENCY; CIVIL CODE REQUIRES THAT AN possible transaction. Consequently, we hold that for lack of
AUTHORITY TO SELL A PIECE OF LAND SHALL BE IN a written authority to sell the "Violago Property" on the
WRITING; CASE AT BAR. — On the issue of whether a contract of part of Meldin Al G. Roy and/or Metro Drug, the sale
sale was perfected between petitioner CITY-LITE and respondent should be as it is declared null and void. Therefore the sale
F.P. HOLDINGS acting through its agent Meldin Al G. Roy of Metro could not produce any legal effect as to transfer the subject
Drug, Art. 1874 of the Civil Code provides: "When the sale of a property from its lawful owner, F.P. HOLDINGS, to any
piece of land or any interest therein is through an agent, the authority interested party including petitioner CITY-LITE.
of the latter shall be in writing; otherwise, the sale shall be void."
Petitioner anchors the authority of Metro Drug and Meldin Al G. Roy
on (a) the testimonies of petitioner's three (3) witnesses and the DECISION
admissions of Roy and the lawyer of Metro Drug; (b) the sales
brochure specifying Meldin Al G. Roy as a contact person; (c) the
guard posted at the property saying that Metro Drug was the
authorized agent; and, (d) the common knowledge among brokers BELLOSILLO, J p:
that Metro Drug through Meldin Al G. Roy was the authorized agent
of F.P. HOLDINGS to sell the property. However, and more This is a petition for review on certiorari filed by CITY-LITE
importantly, the Civil Code requires that an authority to sell a piece REALTY CORPORATION (CITY-LITE) seeking to annul the 20
of land shall be in writing. The absence of authority to sell can be October 1998 Decision of the Court of Appeals 1 which reversed the
determined from the written memorandum issued by respondent F.P. Decision of the Regional Trial Court of Quezon City in its Civil
HOLDINGS' President requesting Metro Drug's assistance in finding CaseNo. Q-92-11068 declaring that a contract of sale over the
buyers for the property. The memorandum in part stated: subject property was perfected and that Metro Drug Inc. and Meldin
Al G. Roy had the authority to sell the property. 2
"We will appreciate Metro Drug's assistance in referring to
us buyers for the property. Please proceed to hold Private respondent F.P. HOLDINGS AND REALTY
preliminary negotiations with interested buyers and CORPORATION (F.P. HOLDINGS), formerly the Sparta Holdings
endorse formal offers to us for our final evaluation and Inc., was the registered owner of a parcel of land situated along E.
Rodriguez Avenue, Quezon City, also known as the "Violago day, CITY-LITE conveyed its interest to purchase a portion or one-
Property" or the "San Lorenzo Ruiz Commercial Center," with an half (1/2) of the front lot of the "Violago Property." Apparently, Roy
area of 71,754 square meters, more or less, and covered by Transfer subsequently informed CITY-LITE's representative that it would take
Certificate of Title No. T-19599. The property was offered for sale to time to subdivide the lot and respondent F.P. HOLDINGS was not
the general public through the circulation of a sales brochure receptive to the purchase of only half of the front lot. After a few
containing the following information: prLL days, Atty. Mamaril wrote Metro Drug (ATTN: MELDIN AL ROY)
expressing CITY-LITE's desire to buy the entire front lot of the
A parcel of land including buildings and other subject property instead of only half thereof provided the asking
improvements thereon located along E. Rodriguez price of P6,250.00/square meter was reduced and that payment be in
Avenue, Quezon City, with a total lot area of installment for a certain period. Roy made a counter offer dated 25
71,754 square meters — 9,192 square meters in September 1991 as follows:
front, 23,332 square meters in the middle, and
39,230 square meters at the back. But the total area Dear Atty. Mamaril,
for sale excludes 5,000 square meters covering the
existing chapel and adjoining areas which will be This has reference to your letter dated September
donated to the Archdiocese of Manila thus 24, 1991 in connection with the interest of your
reducing the total saleable area to 66,754 square clients, Mr. Antonio Teng/City-Lite Realty
meters. Asking price was P6,250.00/square meter Corporation and/or any of their subsidiaries to buy
with terms of payment negotiable. Broker's a portion of the Violago Property fronting E.
commission was 2.0% of selling price, net of Rodriguez Sr. Avenue with an area of 9,192 square
withholding taxes and other charges. As meters. Cdpr
advertised, contact person was Meldin Al G. Roy, We are pleased to inform you that we are prepared
Metro Drug Inc., with address at 5/F Metro House, to consider the above offer subject to the following
345 Sen. Gil Puyat Avenue, Makati City. major terms and conditions: 1. The price shall be
The front portion consisting of 9,192 square meters is the subject of P6,250.00/square meter or a total of
this litigation. cdphil P57,450,000.00; 2. The above purchase price shall
be paid to the owner as follows: (a) P15.0 Million
On 22 August 1991 respondent Meldin Al G. Roy sent a sales downpayment; (b) balance payable within six (6)
brochure, together with the location plan and copy of the Transfer months from date of downpayment without
Certificate of Title No. T-19599 of the Register of Deeds of Quezon interest. Should your client find the above major
City, to Atty. Gelacio Mamaril, a practicing lawyer and a licensed terms and conditions acceptable, please advise us
real estate broker. Atty. Mamaril in turn passed on these documents in writing by tomorrow, September 26, 1991, so
to Antonio Teng, Executive Vice-President, and Atty. Victor P. that we can start formal discussions on the matter .
Villanueva, Legal Counsel, of CITY-LITE. ..
In a letter dated 19 September 1991 sent to Metro Drug (ATTN: Very truly
MELDIN AL ROY) after an initial meeting with Meldin Al Roy that yours,
MELDIN property, but CITY-LITE refused the offer because "it did not suit its
AL G. ROY business needs." With the filing of the petition of F.P. HOLDINGS
for the cancellation of the adverse claim, CITY-LITE caused the
On 26 September 1991 CITY-LITE's officers and Atty. Mamaril met annotation of the first notice of lis pendens which was recorded in
with Roy at the Manila Mandarin Hotel in Makati to consummate the the title of the property under Entry No. 4605.
transaction. After some discussions, the parties finally reached an
agreement and Roy agreed to sell the property to CITY-LITE On 2 December 1991 the RTC-Br. 84 of Quezon City dismissed F.P.
provided only that the latter submit its acceptance in writing to the HOLDINGS' petition declaring that CITY-LITE's adverse claim had
terms and conditions of the sale as contained in his letter of 25 factual basis and was not "sham and frivolous." Meanwhile F.P.
September 1991. Later that afternoon after meeting with Roy at the HOLDINGS caused the resurvey and segregation of the property and
Manila Mandarin Hotel, Atty. Mamaril and Antonio Teng of CITY- asked the Register of Deeds of Quezon City to issue separate titles
LITE conveyed their formal acceptance of the terms and conditions which the latter did on 17 January 1992 by issuing Transfer
set forth by Roy in separate letters both dated 26 September 1991. Certificate of Title No. T-51671. cdll
Following the dismissal of F.P. HOLDINGS' petition for the
cancellation of the adverse claim, CITY-LITE instituted a complaint
However, for some reason or another and despite demand, against F.P. HOLDINGS originally for specific performance and
respondent F.P. HOLDINGS refused to execute the corresponding damages and caused the annotation of the second notice of lis
deed of sale in favor of CITY-LITE of the front lot of the property. pendens on the new certificate of title. After the annotation of the
Upon its claim of protecting its interest as vendee of the property in second lis pendens, the property was transferred to defendant
suit, CITY-LITE registered an adverse claim to the title of the VIEWMASTER CONSTRUCTION CORP. (VIEWMASTER) for
property with the Register of Deeds of Quezon City which was which Transfer Certificate of Title No. T-52398 was issued.
annotated in the Memorandum of Encumbrance of Transfer However, the notice of lis pendens was carried over and annotated on
Certificate of Title No. T-19599 under Entry No. PE-1001 dated 27 the new certificate of title.
September 1991. cdtai
In view of the conveyance during the pendency of the suit, the
On 30 September 1991 CITY-LITE's counsel demanded in writing original complaint for specific performance and damages was
that Metro Drug (ATTN: MELDIN AL G. ROY) comply with its amended with leave of court to implead VIEWMASTER as a
commitment to CITY-LITE by executing the proper deed of necessary party and the Register of Deeds of Quezon City as nominal
conveyance of the property under pain of court action. On 4 October defendant with the additional prayer for the cancellation of
1991 F.P. HOLDINGS filed a petition for the cancellation of the VIEWMASTER's certificate of title. The case was thereafter raffled
adverse claim against CITY-LITE with the Regional Trial Court of to Br. 85 of the Regional Trial Court of Quezon City. cdtai
Quezon City, docketed as LRC Case No. 91-10257, which was
raffled to Br. 84. On 4 October 1995 the court a quo rendered its decision in favor of
CITY-LITE ordering F.P. HOLDINGS to execute a deed of sale of
On 8 October 1991 Edwin Fernandez, President of F.P. HOLDINGS, the property in favor of CITY-LITE for the total consideration of
in a move to amicably settle with CITY-LITE, met with the latter's P55,056,250.00 payable as follows: P15 Million as downpayment to
officers during which he offered properties located in Caloocan City be payable immediately upon execution of the deed of sale and the
and in Quezon Boulevard, Quezon City, as substitute for the
balance within six (6) months from downpayment, without interest. void." Petitioner anchors the authority of Metro Drug and Meldin Al
The court also directed the Register of Deeds of Quezon City to G. Roy on (a) the testimonies of petitioner's three (3) witnesses and
cancel Transfer Certificate of Title No. T-52398 or any subsequent the admissions of Roy and the lawyer of Metro Drug; (b) the sales
title it had issued affecting the subject property, and to issue a new brochure specifying Meldin Al G. Roy as a contact person; (c) the
one in the name of CITY-LITE upon the presentation of the deed of guard posted at the property saying that Metro Drug was the
sale and other requirements for the transfer. It likewise ordered the authorized agent; and, (d) the common knowledge among brokers
defendants, except VIEWMASTER and the Register of Deeds of that Metro Drug through Meldin Al G. Roy was the authorized agent
Quezon City, to pay CITY-LITE jointly and severally P800,000.00 of F.P. HOLDINGS to sell the property. However, and more
by way of nominal damages, P250,000.00 for attorney's fees, and to importantly, the Civil Code requires that an authority to sell a piece
pay the costs. of land shall be in writing. The absence of authority to sell can be
determined from the written memorandum issued by respondent F.P.
On 30 October 1995 VIEWMASTER filed a motion for HOLDINGS' President requesting Metro Drug's assistance in finding
reconsideration of the decision of the lower court questioning its buyers for the property. The memorandum in part stated: "We will
ruling that a perfected contract of sale existed between CITY-LITE appreciate Metro Drug's assistance in referring to us buyers for the
and F.P. HOLDINGS as there was no definite agreement over the property. Please proceed to hold preliminary negotiations with
manner of payment of the purchase price, citing in support interested buyers and endorse formal offers to us for our final
thereof Toyota Shaw Inc. v. Court of Appeals. 3 However the motion evaluation and appraisal." This obviously meant that Meldin Al G.
for reconsideration was denied. Roy and/or Metro Drug was only to assist F.P. HOLDINGS in
In the challenged Decision of 20 October 1998 the Court of Appeals looking for buyers and referring to them possible prospects whom
reversed and set aside the judgment of the Regional Trial Court of they were supposed to endorse to F.P. HOLDINGS. But the final
Quezon City. On 10 May 1999 the Court of Appeals denied CITY- evaluation, appraisal and acceptance of the transaction could be
LITE's motion to reconsider its decision. made only by F.P. HOLDINGS. In other words, Meldin Al G. Roy
and/or Metro Drug was only a contact person with no authority to
Petitioner CITY-LITE is now before us assailing the Court of conclude a sale of the property. In fact, a witness for petitioner even
Appeals for declaring that no contract of sale was perfected between admitted that Roy and/or Metro Drug was a mere broker, 4 and Roy's
it and respondent F.P. HOLDINGS because of lack of a definite only job was to bring the parties together for a possible
agreement on the manner of paying the purchase price and that transaction. 5 Consequently, we hold that for lack of a written
respondents Metro Drug and Meldin Al G. Roy were not authorized authority to sell the "Violago Property" on the part of Meldin Al G.
to sell the property to CITY-LITE, and that the authority of Roy was Roy and/or Metro Drug, the sale should be as it is declared null and
only limited to that of a mere liaison or contact person. void. Therefore the sale could not produce any legal effect as to
We cannot sustain petitioner. On the issue of whether a contract of transfer the subject property from its lawful owner, F.P. HOLDINGS,
sale was perfected between petitioner CITY-LITE and respondent to any interested party including petitioner CITY-LITE. llcd
F.P. HOLDINGS acting through its agent Meldin Al G. Roy of Metro WHEREFORE, the appealed Decision of the Court of Appeals being
Drug, Art. 1874 of the Civil Code provides: "When the sale of a in accord with law and the evidence is AFFIRMED. Costs against
piece of land or any interest therein is through an agent, the petitioner CITY-LITE REALTY CORPORATION.
authority of the latter shall be in writing;otherwise, the sale shall be
SO ORDERED.
Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.
Footnotes
1.Decision penned by Justice Eloy R. Bello Jr., concurred in by
Justices Salome A. Montoya and Ruben T. Reyes, 7th Div.,
Court of Appeals; Rollo, pp. 34-52.
2.Decision penned by Judge Pedro M. Areola, RTC-Br. 85, Quezon
City.
3.G.R. No. 116650, 23 May 1995, 244 SCRA 320.
4.TSN, 10 March 1994, pp. 29-31.
5.Paras, Civil Code of the Philippines Annotated, Vol. V, p. 634,
citing Pac. Com. Co v. Yatco, 68 Phil. 398.
||| (City-Lite Realty Corp. v. Court of Appeals, G.R. No. 138639,
[February 10, 2000], 382 PHIL 268-276)
In affirming the CA decision on appeal, the Supreme Court held: that
the issue raised is factual, which we may not review; that Pineda
could not validly sell subject property because she had no special
power of authority to sell the immovable; and thatno contract was
perfected because the consent of the real owner of the property was
not obtained.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; FINDINGS


FIRST DIVISION OF THE FACT OF THE COURT OF APPEALS MAY NOT
GENERALLY BE REVIEWED ON APPEAL. — The issue raised is
factual. In an appeal via certiorari, we may not review the findings
[G.R. No. 127094. February 6, 2002.]
of fact of the Court of Appeals. DCATHS

ALEJANDRIA PINEDA and SPOUSES 2. CIVIL LAW; CIVIL CODE; SPECIAL CONTRACTS; SALES;
ADEODATO DUQUE, JR., and EVANGELINE SPECIAL POWER OF ATTORNEY IS NECESSARY TO VALIDLY
MARY JANE DUQUE,petitioners, vs. COURT SELL AN IMMOVABLE PROPERTY; CASE AT BAR. —
OF APPEALS and SPOUSES NELSON Petitioner Pineda's "sale" of the property to petitioners Duque was
BAÑEZ and MERCEDES BAÑEZ, respondents. not authorized by the real owners of the land, respondent Bañez. The
Civil Code provides that in a sale of a parcel of land of any interest
therein made through an agent, a special power of attorney is
People's Law Office for petitioners. essential. This authority must be in writing, otherwise the sale shall
be void. In his testimony, petitioner Adeodato Duque confirmed that
Sycip Salazar Hernandez & Gatmaitan for private respondents. at the time he "purchased" respondents' property from Pineda, the
latter had no Special Power of Authority to sell the property. A
special power of attorney is necessary to enter into any contract by
SYNOPSIS
which the ownership of an immovable is transmitted or acquired for
a valuable consideration. Without an authority in writing, petitioner
After the agreement to exchange real property between the Bañez Pineda could not validly sell the subject property to petitioners
spouses and petitioner Pineda to exchange real properties failed to Duque. Hence, any "sale" in favor of petitioners Duque is void.
materialize, petitioner Pineda sold the Bañez property to petitioner
Duque. Both the RTC and the CA declared the Bañez spouses the 3. ID.; ID.; ID.; ID.; CONSENT OF REAL OWNER OF
absolute owners of the lot in question after finding that the deed of PROPERTY IS A PREREQUISITE FOR VALIDITY OF THE
sale purportedly executed by the Bañez spouses in favor of Pineda SALE; CASE AT BAR. — Further, Article 1318 of the Civil Code
was a forgery. lists the requisites of a valid and perfected contract, namely: "(1)
consent of the contracting parties; (2) object certain which is the Pineda to pay an earnest money in the total amount
subject matter of the contract; (3) cause of the obligation which is of $12,000.00 on or before the first week of
established." Pineda was not authorized to enter into a contract to sell February 1983; and 3) to consummate the
the property. As the consent of the real owner of the property was not exchange of properties not later than June 1983. It
obtained, no contract was perfected Consequently, petitioner Duque appears that the parties undertook to clear the
failed to validly acquire the subject property. HTCIcE mortgages over their respective properties. At the
time of the execution of the exchange agreement,
the White Plains property was mortgaged with the
Government Service Insurance System (GSIS)
DECISION
while the California property had a total mortgage
obligation of $84,000.00 (Exh. "A-2", p. 18, Ibid).
"In the meantime, the appellees were allowed to
PARDO, J p:
occupy or lease to a tenant Pineda's California
The Case property (Exh. "A-1", p. 17,Ibid) and Pineda was
authorized to occupy appellees' White Plains
The case is an appeal via certiorari from the decision of the Court of property (Complaint; p. 8. Records). Pursuant to
Appeals, 1 affirming that of the Regional Trial Court, Quezon City, the exchange agreement, Alejandria Pineda paid
Branch 76, declaring that the Bañez spouses are the lawful owners of the appellees the total amount of $12,000.00
the property in question and the petitioners could not convey title to broken down as follows: 1) $5,000.00 on January
the Duque spouses who were buyers in bad faith. 1983; 2) $4,000.00 on April 1983; 3) $3,000.00 on
The Facts January 1985 (Exh. "C" & "D", pp. 28; 36, Ibid).

The facts, as found by the Court of Appeals, are as follows: "On December 18, 1984, unknown to the
appellees, Alejandria Pineda and the appellants
"Appellees Nelson Bañez and Mercedes Bañez are Adeodato C. Duque, Jr. and Evangeline Mary Jane
the original owners of a parcel of land together Duque executed an 'Agreement to Sell' over the
with its improvements located at 32 Sarangaya St., White Plains property whereby Pineda sold the
White Plains, Quezon City while Ms. Alejandria property to the appellants for the amount of
Pineda is the owner of a house located at 5224 P1,600,000.00 (Exh. "1", p. 51, Ibid). The contract
Buchanan St., Los Angeles, California. provides that: 1) upon signing of the agreement,
"On January 11, 1983, the appellees and the purchaser shall pay P450,000.00 and the seller
Alejandria Pineda, together with the latter's spouse shall cause the release of the property from any
Alfredo Caldona, executed an `Agreement to encumbrance and deliver to the purchaser the title
Exchange Real Properties' (Exh. "A", p. 16, Folder to the property; 2) balance shall be paid by the
of Exhibits). In the agreement, the parties agreed purchaser to the seller on or before the end of
to: 1) exchange their respective properties; 2) January 1985; 3) upon full payment, the seller
shall deliver to the purchaser a deed of absolute from the appellants as the latter were interested in
sale duly signed by its registered owner, the buying the property (pp. 33-35, November 9,
appellees. On the same date, Pineda, out of the 1989, TSN).
downpayment received from the appellants, paid
the appellees' mortgage obligation with the GSIS "A series of communications ensued between the
in the sum of P112,690.75 (Exhs. "D-1" to "D-3", representatives of the appellees and Ms. Pineda
pp. 41-43, Ibid). with regard to the status of the exchange
agreement which resulted in its rescission for
"Pineda then requested the appellees for a written failure of Pineda to clear her mortgage obligation
authority for the release of the title from the GSIS of the California property (Exhs. "B", "C" & "D",
(pp. 18-19, November 9, 1989, TSN). On January pp. 24-29; 35-37, Folder of Exhibits). Negotiations
1, 1985, the appellees gave Pineda the for the purchase of the property were held between
aforementioned authority with the understanding the appellants and the appellees but the same
that Pineda will personally deliver the title to the failed which resulted in the appellees demanding
appellees (Exh. "E", p. 44, Ibid). The record shows for the appellants to vacate the property (Exhs. "F"
that pursuant to the agreement to sell the following to "F-12", pp. 81-93, Ibid).
payments were made by the appellants to Pineda:
1) $25,000.00 on December 26, 1984; 2) "Appellees claim that upon their return to the
$10,000.00 on January 18, 1985; 3) P50,000.00 on Philippines on July 1987, they discovered from the
January 24, 1985; 4) $500.00 on February 1, 1985; Register of Deeds that the title over their White
and 5) $330 on February 7, 1985 (Exhs. "4" to "8", Plains property was cancelled and a new one was
pp. 55-57, Ibid). The appellants physically issued in the name of Alejandria Pineda. They also
occupied the premises on June or July 1985 (Pre- discovered a fictitious deed of sale dated
Trial Order, p. 156, Records). September 5, 1979 in favor of Pineda. Appellees
alleged that the deed of absolute sale is fictitious
"Upon their return to the Philippines sometime in and their signatures a forgery (pp. 37-39,
March 1985, the appellees discovered that the November 9, 1989, TSN). Appellants maintained
appellants were occupying the White Plains that on December 22, 1986, they discovered the
property. They talked with appellant Atty. property was registered in the name of Pineda by
Adeodato Duque who showed interest in buying virtue of a deed of sale and they informed the
the property and the latter mentioned that they appellees of the existence of the deed of sale in a
gave money to Mrs. Pineda to facilitate the meeting in the United States on March 1987 (pp.
redemption of her property in the U. S. (pp. 23-26, 3-4, October 22, 1990, TSN).
November 9, 1989, TSN). Appellees alleged that
they confronted Pineda on their title to the "During that meeting, an agreement was reached
property but the latter replied that she gave the title by the appellants and the appellees for the sale of
to the appellants. They did not insist on its return the property at $89,000.00. Appellees alleged that
the purchase price was reduced to $60,000.00
which appellants failed to pay (pp. 40-41, simple title of the house and lot in question located
November 10, 1989, TSN). They admitted at 32 Sarangaya St., White Plains, Quezon City,
however to have received the sum of P100,000.00 entitled as such to all the rights blossoming forth
from Atty. Duque (pp. 51-52, November 10, 1989, from such ownership.
TSN). On the other hand, the appellants alleged
that the purchase price of $89,000.00 was "2. Declaring as null and void ab initio for being a
conditioned that all payments made to Pineda as patent forgery that Deed of Absolute Sale dated
well as expenses incurred will be considered as September 5, 1979 (Exh. I) purportedly executed
forming part of the purchase price (pp. 3-4, by plaintiffs in favor of defendant Alejandria
October 22, 1990, TSN). The records are silent as Pineda;
to what happened to this agreement. "3. Declaring as null and void that TCT No. T-
"On September 3, 1987, the present complaint was 338857 (Exh. H) of the land records of Quezon
filed before the court a quo. Since the record of City, issued January 03, 1986 in the name of
this case was burned during the fire that razed the Alejandria (dra) B. Pineda, widow, of legal age,
Quezon City Hall Building sometime in June Filipino and the Register of Deeds of Quezon City,
1988, the record was reconstituted upon petition of after the finality of this decision, is hereby ordered
the plaintiffs Nelson S. Bañez and Mercedes to cancel said Certificate of Title and, in lieu
Bañez, without objection from the defendant thereof, to issue a new Certificate of Title in the
Duques. For failure to serve summons by personal name of plaintiffs Nelson S. Bañez, married to
delivery on defendant Alejandria Pineda, Mercedez Bañez, both of legal age, Filipinos and
an alias writ of summons was issued by residents of No. 32 Sarangaya St., White Plains,
publication. After the lapse of sixty (60) days from Quezon City, covering the lot in question.
the last publication of summons, the court, upon "4. Declaring as null and void ab initio that certain
motion, declared Pineda in default in its order "Agreement to Sell" dated December 18, 1988
dated March 4, 1988. Thereafter, defendant (Exh. 1) executed by and between defendant
spouses Adeodato and Evangeline Mary Jane L. Alejandria Pineda and spouses defendants
Duque, appellants herein, filed their Answer." 2 Adeodato C. Duque, Jr. and Evangeline Mary Jane
Duque, over the house and lot in question;

On February 17, 1992, the trial court rendered a decision, the "5. Declaring alleged vendees, defendants
decretal portion of which reads as follows: Adeodato Duque, Jr. and Evangeline Mary Jane
Duque as purchasers in bad faith of the house and
"WHEREFORE, prescinding from the foregoing, land in suit and as builders in bad faith over
judgment is hereby rendered: whatever improvements introduced by them in the
house and lot in question;
"1. Declaring plaintiffs spouses Nelson S. Bañez
and Mercedes Bañez the absolute owners in fee
"6. Ordering herein defendants Adeodato Duque, sums awarded to plaintiffs by way of reasonable
Jr. and Evangeline Mary Jane Duque, their heirs, attorney's fees; and
and assigns, and all persons claiming under them
to vacate and peacefully surrender possession of "12. Both defendants to pay the costs.
the premises in question located at no. 32 "SO ORDERED." 3
Sarangaya St., White Plains, Quezon City.
Afterwhich, said defendants, their heirs and In time, petitioners appealed the decision to the Court of Appeals. 4
assigns are likewise ordered to respect and not to On September 18, 1992, respondents Nelson and Mercedes Bañez
molest the peaceful possession of plaintiffs filed with the Court of Appeals a motion for execution pending
spouses Bañezes over the premises in question; appeal. 5 On April 27, 1993, the Court of Appeals denied the motion
"7. Ordering defendants spouses Duques to pay for lack of merit. 6
plaintiffs the sum of P10,000.00 monthly rentals On May 20, 1996, the Court of Appeals promulgated a decision, the
since August 1985 until they shall have peacefully dispositive portion of which reads:
surrendered physical possession of the premises in
question to plaintiffs; "WHEREFORE, premises considered, the decision
appealed from is AFFIRMED with the
"8. Ordering plaintiffs spouses Bañez to reimburse modification that rental payments should
defendants spouses the sum of P100,000.00 commence on January 1986 (not August 1985) and
representing the amount they received when said appellants are liable for attorney's fees only in the
defendants Duques offered a proposal to buy the sum of P50,000.00." 7
premises in question (Exh. N, p. 487, dated July
24, 1987), with interest at the legal rate, which On June 26, 1996, petitioners filed a motion for reconsideration of
amount however shall be deducted from the the above quoted decision. 8 On November 7, 1996, the Court of
accumulated past rentals due the plaintiffs; Appeals denied the motion. 9
"9. Ordering defendant Pineda to pay plaintiffs the Hence, this appeal. 10
sum of P200,000.00 by way of moral damages,
The Issue
plus the sum of P100,000.00 by way of exemplary
damages; The issue raised is whether petitioners validly acquired the subject
property.
"10. Ordering defendants spouses Duques to pay
plaintiffs Bañezes the sum of P100,000.00 by way The Court's Ruling
of moral damages, plus the sum of P50,000.00 by We deny the petition. The issue raised is factual. In an
way of exemplary damages; appeal via certiorari, we may not review the findings of fact of the
"11. Ordering herein defendant Pineda and Court of Appeals. 11
defendants spouses Duques to pay jointly and
severally the sum of P50,000.00, plus 10% of the
Nevertheless, it appears that the Bañez spouses were the original SO ORDERED.
owners of the parcel of land and improvements located at 32
Sarangaya St., White Plains, Quezon City. On January 11, 1983, the Davide, Jr., C.J., Puno, Kapunan and Ynares-Santiago, JJ., concur.
Bañez spouses and petitioner Pineda executed an agreement to Footnotes
exchange real properties. However, the exchange did not materialize. 1.In CA-G.R. CV No. 38022, promulgated on May 20, 1996.
Petitioner Pineda's "sale" of the property to petitioners Duque was Buena J., ponente, Sandoval Gutierrez and Vasquez,
not authorized by the real owners of the land, respondent Bañez. Jr., JJ., concurring.
The Civil Code provides that in a sale of a parcel of land or any 2.Petition Annex "A", Rollo, pp. 27-37, at pp. 30-32.
interest therein made through an agent, a special power of attorney is
essential. 12 This authority must be in writing, otherwise the sale 3.CA Rollo, pp. 52-68, at pp. 67-68.
shall be void. 13 In his testimony, petitioner Adeodato Duque 4.Notice of Appeal, RTC Record, p. 342. Docketed as CA-
confirmed that at the time he "purchased" respondents' property from G.R. CV No. 38022.
Pineda, the latter had no Special Power of Authority to sell the
property. 14 5.CA Rollo, pp. 14-21.
A special power of attorney is necessary to enter into any contract by 6.CA Rollo, p. 74.
which the ownership of an immovable is transmitted or acquired for
7.Petition, Annex "A", Rollo, pp. 27-37, at p. 37.
a valuable consideration. 15 Without an authority in writing,
petitioner Pineda could not validly sell the subject property to 8.CA Rollo, pp. 131-137.
petitioners Duque. Hence, any "sale" in favor of petitioners Duque is
void. 16 9.Petition, Annex "B", Rollo, pp. 39-40.

Further, Article 1318 of the Civil Code lists the requisites of a valid 10.Filed on December 27, 1996, Petition, Rollo, pp. 8-25. On
and perfected contract, namely: "(1) consent of the contracting October 1, 1997, we gave due course to the petition (Rollo,
parties; (2) object certain which is the subject matter of the contract; p. 82).
(3) cause of the obligation which is established." 17 Pineda was not 11.Cristobal v. Court of Appeals, 353 Phil. 320, 326
authorized to enter into a contract to sell the property. As the consent [1998]; Sarmiento v. Court of Appeals, 353 Phil. 834, 845-
of the real owner of the property was not obtained, no contract was 846 [1998]; Concepcion v. Court of Appeals, 324 SCRA
perfected. 18 85, 91 [2000], citing Congregation of the Virgin Mary v.
Consequently, petitioner Duque failed to validly acquire the subject Court of Appeals, 353 Phil. 591, 597 [1998] and Sarmiento
property. v. Court of Appeals, supra; Arriola v. Mahilum, 337 SCRA
464, 469 [2000]; Bolanos v. Court of Appeals, 345 SCRA
The Fallo 125, 130-131 [2000].
WHEREFORE, the Court DENIES the petition and AFFIRMS the 12.Article 1878, Civil Code.
decision of the Court of Appeals, 19 in toto. DaScHC
No costs.
13.Article 1874, Civil Code; Cosmic Lumber Corporation v. Court
of Appeals, 332 Phil. 948, 957 [1996]; Delos Reyes v.
Court of Appeals, 372 Phil. 522, 538 [1999].
14.TSN, 22 October 1990, p. 25.
15.Cosmic Lumber v. Court of Appeals, supra, Note 13, at p. 958.
16.Rio v. Yu Tec & CO., 49 Phil 276 [1927]; Jimenez v. Rabot, 38
Phil. 378 [1918]; Article 1403, Civil Code, Section 21 (e),
Rule 132, Revised Rules of Court.
17.Islamic Doctorate of the Philippines v. Court of Appeals, 338
Phil. 956, 984 [1997].
18.San Juan and Steel Fabricators, Inc. v. Court of Appeals, 357
Phil. 631, 647 [1998].
19.In CA-G.R. CV No. 38022, promulgated on May 20, 1996.
||| (Pineda v. Court of Appeals, G.R. No. 127094, [February 6,
2002], 426 PHIL 611-619)
contract containing terms and conditions which are in the contract he
did execute. A special power of attorney is necessary to enter into
any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency
(couched) in general terms to sell must be one that expressly
mentions a sale or that includes a sale as a necessary ingredient of
the act mentioned. For the principal to confer the right upon an agent
to sell real estate, a power of attorney must so express the powers of
the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such
FIRST DIVISION power, no such construction shall be given the document. cdaisa
2. ID.; ID.; ID.; ID.; ABSENCE OF REQUIRED AUTHORITY
[G.R. No. 114311. November 29, 1996.] RENDERS SALE AND COMPROMISE JUDGMENT BASED
THEREON VOID AB INITIO; CASE AT BAR. — The authority
granted Villamil-Estrada under the special power of attorney was
COSMIC LUMBER
explicit and exclusionary; for her to institute any action in court to
CORPORATION, petitioner, vs. COURT OF
eject all persons found on Lots Nos. 9127 and 443 so that petitioner
APPEALS and ISIDRO PEREZ, respondents.
could take material possession thereof, and for this purpose, to
appear at the pre-trial and enter into any stipulation of facts and/or
Millora & Maningding Law Offices for petitioner. compromise agreement but only insofar as this was protective of the
rights and interests of petitioner in the property. Nowhere in this
Manuel D. Ancheta for private respondent. authorization was Villamil-Estrada granted expressly or impliedly
any power to sell the subject property nor a portion thereof. Neither
can a conferment of the power to sell be validly inferred from the
SYLLABUS specific authority "to enter into a compromise agreement" because of
the explicit limitation fixed by the grantor that the compromise
l. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; entered into shall be "so far as it shall protect the rights and interest
AUTHORITY OF AGENT TO SELL A PIECE OF LAND OR of the corporation in the aforementioned lots." In the context of the
INTEREST THEREON MUST BE IN WRITING TO BIND specific investiture of powers to Villamil-Estrada, alienation by sale
PRINCIPAL. — When the sale of a piece of land or any interest of an immovable certainly cannot be deemed protective of the right
thereon is through an agent, the authority of the latter shall be in of petitioner to physically possess the same, more so when the land
writing otherwise, the sale shall be void. Thus the authority of an was being sold for a price of P80.00 per square meter, very much less
agent to execute a contract for the sale of real estate must be than its assessed value of P250.00 per square meter, and considering
conferred in writing and must give him specific authority, either to further that petitioner never received the proceeds of the sale. It is
conduct the general business of the principal or to execute a binding therefore clear that by selling to respondent Perez a portion of
petitioner's land through a compromise agreement, Villamil-Estrada Appellate Court (now Court of Appeals) shall exercise . . . (2)
acted without or in obvious authority. The sale ipso jure is Exclusive original jurisdiction over action for annulment of
consequently void. So is the compromise agreement. This being the judgments of the Regional Trial Courts . . ." However, certain
case, the judgment based thereon is necessarily void. Antipodal to the requisites must first be established before a final and executory
opinion expressed by respondent court in resolving petitioner's judgment can be the subject of an action for annulment. It must
motion for reconsideration, the nullity of the settlement between either be void for want of jurisdiction or for lack of due process of
Villamil-Estrada and Perez impaired the jurisdiction of the trial court law, or it has been obtained by fraud. Conformably with law and the
to render its decision based on the compromise agreement. (Alviar v. above-cited authorities, the petition to annul the decision of the trial
Court of First Instance of La Union). ICcaST court in Civil Case No. D-7750 before the Court of Appeals was
proper. Emanating as it did from a void compromise agreement, the
3. ID.; ID.; ID.; ID.; ID.; REMEDIES AVAILABLE TO trial court had no jurisdiction to render a judgment based thereon.
PRINCIPAL. — This ruling was adopted in Jacinto v. Montesa, by
Mr. Justice J.B.L. Reyes, a much-respected authority on civil law, 5. ID.; ACTIONS; ANNULMENT OF ACTION; EXTRINSIC
where the Court declared that a judgment based on a compromise FRAUD; MANIFEST CONDUCT OF ATTORNEY-IN-FACT
entered into by an attorney without specific authority from the client CONCEALING FROM PRINCIPAL THAT LATTER'S PROPERTY
is void. Such judgment may be impugned and its execution WAS SOLD. — It would also appear, and quite contrary to the
restrained in any proceeding by the party against whom it is sought finding of the appellate court, that the highly reprehensible conduct
to be enforced. The Court also observed that a defendant against of attorney-in-fact Villamil-Estrada in Civil Case No. 7750
whom a judgment based on a compromise is sought to be enforced constituted an extrinsic or collateral fraud by reason of which the
may file a petition for certiorari to quash the execution. He could not judgment rendered thereon should have been struck down. Not all
move to have the compromise set aside and then appeal from the the legal semantics in the world can becloud the unassailable fact
order of denial since he was not a party to the compromise. Thus it that petitioner was deceived and betrayed by its attorney-in-fact.
would appear that the obiter of the appellate court that the alleged Villamil-Estrada deliberately concealed from petitioner, her
nullity of the compromise agreement should be raised as a defense principal, that a compromise agreement had been forged with the
against its enforcement is not legally feasible. Petitioner could not be end-result that a portion of petitioner's property was sold to the
in a position to question the compromise agreement in the action to deforciant, literally for a song. Thus completely kept unaware of its
revive the compromise judgment since it was never privy to such agent's artifice, petitioner was not accorded even a fighting chance to
agreement. Villamil-Estrada who signed the compromise agreement repudiate the settlement so much so that the judgment based thereon
may have been the attorney-in-fact but she could not legally bind became final and executory. cAECST
petitioner thereto as she was not entrusted with a special authority to
sell the land, as required in Art. 1878, par. (5), of the Civil Code. 6. ID.; ID.; ID.; ID.; CONSTRUED. — There is extrinsic fraud
within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is
4. REMEDIAL LAW; COURT OF APPEALS; WITH EXCLUSIVE one the effect of which prevents a party from hearing a trial, or real
ORIGINAL JURISDICTION TO ANNUL JUDGMENT OF THE contest, or from presenting all of his case to the court or where it
RTC; REQUISITES. — Under authority of Sec. 9, par. (2), of B.P. operates upon matters, not pertaining to the judgment itself, but to
Blg. 129, a party may now petition the Court of Appeals to annul and the manner in which it was procured, so that there is not a fair
set aside judgments of Regional Trial Courts. "Thus, the Intermediate submission of the controversy. In other words, extrinsic fraud refers
to any fraudulent act of the prevailing party in the litigation which is hostility to the interests of his principal transcends the power
committed outside of the trial of the case, whereby the defeated party afforded him. DAEaTS
has been prevented from exhibiting fully his side of the case by fraud
or deception practiced on him by his opponent. Fraud is extrinsic
where the unsuccessful party has been prevented from exhibiting
fully his case, by fraud or deception practiced on him by his
opponent, as by keeping him away from court, a false promise of a DECISION
compromise; or where the defendant never had knowledge of the
suit, being kept in ignorance by the acts of the plaintiff; or where an
attorney fraudulently or without authority connives at his defeat;
these and similar cases which show that there has never been a real BELLOSILLO, J p:
contest in the trial or hearing of the case are reasons for which a new
suit may be sustained to set aside and annul the former judgment and COSMIC LUMBER CORPORATION, through its General Manager
open the case for a new and fair hearing. executed on 28 January 1985 a Special Power of Attorney appointing
Paz G. Villamil-Estrada as attorney-in-fact —
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY;
PRINCIPAL IS CHARGEABLE WITH THE KNOWLEDGE OR . . . to initiate, institute and file any court action for
NOTICE TO HIS AGENT RECEIVED; RULE NOT APPLICABLE the ejectment of third persons and/or squatters of
WHERE AGENT IS COMMITTING FRAUD AGAINST THE the entire lot 9127 and 443 and covered by
PRINCIPAL. — It may be argued that petitioner knew of the TCT Nos. 37648 and 37649, for the said squatters
compromise agreement since the principal is chargeable with and to remove their houses and vacate the premises in
bound by the knowledge of or notice to his agent received while the order that the corporation may take material
agent was acting as such. But the general rule is intended to protect possession of the entire lot, and for this purpose, to
those who exercise good faith and not as a shield for unfair dealing. appear at the pre-trial conference and enter into
Hence there is a well-established exception to the general rule as any stipulation of facts and/or compromise
where the conduct and dealings of the agent are such as to raise a agreement so far as it shall protect the rights and
clear presumption that he will not communicate to the principal the interest of the corporation in the aforementioned
facts in controversy. The logical reason for this exception is that lots. 1
where the agent is committing a fraud, it would be contrary to On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of
common sense to presume or to expect that he would communicate attorney, instituted an action for the ejectment of private respondent
the facts to the principal. Verily, when an agent is engaged in the Isidro Perez and recover the possession of a portion of Lot No. 443
perpetration of a fraud upon his principal for his own exclusive before the Regional Trial Court of Dagupan, docketed as Civil
benefit, he is not really acting for the principal but is really acting for Case No. D-7750. 2
himself, entirely outside the scope of his agency. Indeed, the basic
tenets of agency rest on the highest considerations of justice, equity On 25 November 1985 Villamil-Estrada entered into a Compromise
and fair play, and an agent will not be permitted to pervert his Agreement with respondent Perez, the terms of which follow:
authority to his own personal advantage, and his act in secret
1. That as per relocation sketch plan dated June 5, which the trial court based its decision of 26 July 1993 in Civil
1985 prepared by Engineer Rodolfo dela Cruz the Case No. D-7750. Forthwith, upon learning of the fraudulent
area at present occupied by defendant wherein his transaction, petitioner sought annulment of the decision of the trial
house is located is 333 square meters on the court before respondent Court of Appeals on the ground that the
easternmost part of lot 443 and which portion has compromise agreement was void because: (a) the attorney-in-fact did
been occupied by defendant for several years now; not have the authority to dispose of, sell, encumber or divest the
plaintiff of its ownership over its real property or any portion thereof;
2. That to buy peace said defendant pays unto the (b) the authority of the attorney-in-fact was confined to the
plaintiff through herein attorney-in-fact the sum of institution and filing of an ejectment case against third
P26,640.00 computed at P80.00/square meter; persons/squatters on the property of the plaintiff, and to cause their
3. That plaintiff hereby recognizes ownership and eviction therefrom; (c) while the special power of attorney made
possession of the defendant by virtue of this mention of an authority to enter into a compromise agreement, such
compromise agreement over said portion of 333 authority was in connection with, and limited to, the eviction of third
square m. of lot 443 which portion will be located persons/squatters thereat, in order that "the corporation may take
on the easternmost part as indicated in the sketch material possession of the entire lot;" (d) the amount of P26,640.00
as annex A; alluded to as alleged consideration of said agreement was never
received by the plaintiff; (e) the private defendant acted in bad faith
4. Whatever expenses of subdivision, registration, in the execution of said agreement knowing fully well the want of
and other incidental expenses shall be shouldered authority of the attorney-in-fact to sell, encumber or dispose of the
by the defendant. 3 real property of plaintiff; and, (f) the disposal of a corporate property
On 27 November 1985 the "Compromise Agreement" was approved indispensably requires a Board Resolution of its Directors, a fact
by the trial court and judgment was rendered in accordance which is wanting in said Civil Case No. D-7750, and the General
therewith. 4 Manager is not the proper officer to encumber a corporate property. 6

Although the decision became final and executory it was not On 29 October 1993 respondent court dismissed the complaint on the
executed within the 5-year period from date of its finality allegedly basis of its finding that not one of the grounds for annulment,
due to the failure of petitioner to produce the owner's duplicate copy namely, lack of jurisdiction, fraud or illegality was shown to
of Title No. 37649 needed to segregate from Lot No. 443 the portion exist. 7 It also denied the motion for reconsideration filed by
sold by the attorney-in-fact; Paz G. Villamil-Estrada, to private petitioner, discoursing that the alleged nullity of the compromise
respondent under the compromise agreement. Thus on 25 January judgment on the ground that petitioner's attorney-in-fact Villamil-
1993 respondent filed a complaint to revive the judgment, docketed Estrada was not authorized to sell the subject property may be raised
as Civil Case No. D-10459.5 as a defense in the execution of the compromise judgment as it does
not bind petitioner, but not as a ground for annulment of judgment
Petitioner asserts that it was only when the summons in Civil because it does not affect the jurisdiction of the trial court over the
Case No. D-10459 for the revival of judgment was served upon it action nor does it amount to extrinsic fraud. 8
that it came to know of the compromise agreement entered into
between Paz G. Villamil-Estrada and respondent Isidro Perez upon
Petitioner challenges this verdict. It argues that the decision of the contract for the sale of real estate must be conferred in writing and
trial court is void because the compromise agreement upon which it must give him specific authority, either to conduct the general
was based is void. Attorney-in-fact Villamil-Estrada did not possess business of the principal or to execute a binding contract containing
the authority to sell or was she armed with a Board Resolution terms and conditions which are in the contract he did execute. 10 A
authorizing the sale of its property. She was merely empowered to special power of attorney is necessary to enter into any contract by
enter into a compromise agreement in the recovery suit she was which the ownership of an immovable is transmitted or acquired
authorized to file against persons squatting on Lot No. 443, such either gratuitously or for a valuable consideration. 11 The express
authority being expressly confined to the "ejectment of third persons mandate required by law to enable an appointee of an agency
or squatters of . . . lot . . . (No.) 443 . . . for the said squatters to (couched) in general terms to sell must be one that expressly
remove their houses and vacate the premises in order that the mentions a sale or that includes a sale as a necessary ingredient of
corporation may take material possession of the entire lot . . ." the act mentioned. 12 For the principal to confer the right upon an
agent to sell real estate, a power of attorney must so express the
We agree with petitioner. The authority granted Villamil-Estrada powers of the agent in clear and unmistakable language. When there
under the special power of attorney was explicit and exclusionary: is any reasonable doubt that the language so used conveys such
for her to institute any action in court to eject all persons found on power, no such construction shall be given the document. 13
Lots Nos. 9127 and 443 so that petitioner could take material
possession thereof, and for this purpose to appear at the pre-trial and It is therefore clear that by selling to respondent Perez a portion of
enter into any stipulation of facts and/or compromise agreement but petitioner's land through a compromise agreement, Villamil-Estrada
only insofar as this was protective of the rights and interests of acted without or in obvious authority. The sale ipso jure is
petitioner in the property. Nowhere in this authorization was consequently void. So is the compromise agreement. This being the
Villamil-Estrada granted expressly or impliedly any power to sell the case, the judgment based thereon is necessarily void. Antipodal to the
subject property nor a portion thereof. Neither can a conferment of opinion expressed by respondent court in resolving petitioner's
the power to sell be validly inferred from the specific authority "to motion for reconsideration, the nullity of the settlement between
enter into a compromise agreement" because of the explicit Villamil-Estrada and Perez impaired the jurisdiction of the trial court
limitation fixed by the grantor that the compromise entered into shall to render its decision based on the compromise agreement. In Alviar
only be "so far as it shall protect the rights and interest of the v. Court of First Instance of La Union, 14 the Court held —
corporation in the aforementioned lots." In the context of the specific
investiture of powers to Villamil-Estrada, alienation by sale of an . . . this court does not hesitate to hold that the
immovable certainly cannot be deemed protective of the right of judgment in question is null and void ab initio. It
petitioner to physically possess the same, more so when the land was is not binding upon and cannot be executed against
being sold for a price of P80.00 per square meter, very much less the petitioners. It is evident that the compromise
than its assessed value of P250.00 per square meter, and considering upon which the judgment was based was not
further that petitioner never received the proceeds of the sale. subscribed by them . . . . Neither could Attorney
Ortega bind them validly in the compromise
When the sale of a piece of land or any interest thereon is through an because he had nospecial authority . . . .
agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void. 9 Thus the authority of an agent to execute a As the judgment in question is null and void ab
initio, it is evident that the court
acquired no jurisdiction to render it, much less to established before a final and executory judgment can be the subject
order the execution thereof . . . of an action for annulment. It must either be void for want of
jurisdiction or for lack of due process of law, or it has been obtained
. . . A judgment, which is null and void ab initio, by fraud. 17
rendered by a court without jurisdiction to do so, is
without legal efficacy and may properly be Conformably with law and the above-cited authorities, the petition to
impugned in any proceeding by the party against annul the decision of the trial court in Civil Case No. D-7750 before
whom it is sought to be enforced . . . the Court of Appeals was proper. Emanating as it did from a void
compromise agreement, the trial court had nojurisdiction to render a
judgment based thereon. 18
This ruling was adopted in Jacinto v. Montesa, 15 by Mr. Justice J. It would also appear, and quite contrary to the finding of the
B. L. Reyes, a much-respected authority on civil law, where the appellate court, that the highly reprehensible conduct of attorney-in-
Court declared that a judgment based on a compromise entered into fact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic
by an attorney without specific authority from the client is void. Such or collateral fraud by reason of which the judgment rendered thereon
judgment may be impugned and its execution restrained in any should have been struck down. Not all the legal semantics in the
proceeding by the party against whom it is sought to be enforced. world can becloud the unassailable fact that petitioner was deceived
The Court also observed that a defendant against whom a judgment and betrayed by its attorney-in-fact. Villamil-Estrada deliberately
based on a compromise is sought to be enforced may file a petition concealed from petitioner, her principal, that a compromise
for certiorari to quash the execution. He could not move to have the agreement had been forged with the end-result that a portion of
compromise set aside and then appeal from the order of denial since petitioner's property was sold to the deforciant, literally for a song.
he was not a party to the compromise. Thus it would appear that the Thus completely kept unaware of its agent's artifice, petitioner was
obiter of the appellate court that the alleged nullity of the not accorded even a fighting chance to repudiate the settlement so
compromise agreement should be raised as a defense against its much so that the judgment based thereon became final and
enforcement is not legally feasible. Petitioner could not be in a executory.
position to question the compromise agreement in the action to
revive the compromise judgment since it was never privy to such For sure, the Court of Appeals restricted the concept of fraudulent
agreement. Villamil-Estrada who signed the compromise agreement acts within too narrow limits. Fraud may assume different shapes and
may have been the attorney-in-fact but she could not legally bind be committed in as many different ways and here lies the danger of
petitioner thereto as she was not entrusted with a special authority to attempting to define fraud. For man in his ingenuity and fertile
sell the land, as required in Art. 1878, par. (5), of the Civil Code. imagination will always contrive new schemes to fool the unwary.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P.
petition the Court of Appeals to annul and set aside judgments of Blg. 129, where it is one the effect of which prevents a party from
Regional Trial Courts. 16 "Thus, the Intermediate Appellate Court hearing a trial, or real contest, or from presenting all of his case to
(now Court of Appeals) shall exercise . . . (2) Exclusive original the court, or where it operates upon matters, not pertaining to the
jurisdiction over action for annulment of judgments of the Regional judgment itself, but to the manner in which it was procured so that
Trial Courts . . ." However, certain requisites must first be there is not a fair submission of the controversy. In other words,
extrinsic fraud refers to any fraudulent act of the prevailing party in and 10 March 1994, respectively, as well as the decision of the
the litigation which is committed outside of the trial of the case, Regional Trial Court of Dagupan City in Civil Case No. D-7750
whereby the defeated party has been prevented from exhibiting fully dated 27 November 1985, are NULLIFIED and SET ASIDE.
his side of the case by fraud or deception practiced on him by his The"Compromise Agreement" entered into between Attorney-in-fact
opponent. 19 Fraud is extrinsic where the unsuccessful party has Paz G. Villamil-Estrada and respondent Isidro Perez is declared
been prevented from exhibiting fully his case, by fraud or deception VOID. This is without prejudice to the right of petitioner to pursue
practiced on him by his opponent, as by keeping him away from its complaint against private respondent Isidro Perez in Civil
court, a false promise of a compromise; or where the defendant never Case No. D-7750 for the recovery of possession of a portion of
had knowledge of the suit, being kept in ignorance by the acts of the Lot No. 443.
plaintiff; or where an attorney fraudulently or without authority
connives at his defeat; these and similar cases which show that there SO ORDERED.
has never been a real contest in the trial or hearing of the case are Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.
reasons for which a new suit may be sustained to set aside and annul
the former judgment and open the case for a new and fair hearing. 20 Footnotes
1.CA Rollo, p. 11.
It may be argued that petitioner knew of the compromise agreement
since the principal is chargeable with and bound by the knowledge of 2.Assigned to Br. 44.
or notice to his agent received while the agent was acting as such. 3.CA Rollo, p. 17.
But the general rule is intended to protect those who exercise good
faith and not as a shield for unfair dealing. Hence there is a well- 4.Penned by Judge Crispin C. Laron; id., p. 19.
established exception to the general rule as where the conduct and
5.Assigned to Br. 42.
dealings of the agent are such as to raise a clear presumption that he
will not communicate to the principal the facts in 6.CA Rollo, pp. 5-6.
controversy. 21 The logical reason for this exception is that where
the agent is committing a fraud, it would be contrary to common 7.Penned by Justice Minerva P. Gonzaga-Reyes with the
sense to presume or to except that he would communicate the facts to concurrence of Justices Santiago M. Kapunan and Eduardo
the principal. Verily, when an agent is engaged in the perpetration of G. Montenegro;Rollo, p. 43.
a fraud upon his principal for his own exclusive benefit, he is not 8.Rollo, p. 49.
really acting for the principal but is really acting for himself, entirely
outside the scope of his agency. 22 Indeed, the basic tenets of agency 9.Art. 1874, Civil Code of the Philippines.
rest on the highest considerations of justice, equity and fair play, and
10.Johnson v. Lennox, 55 Colo. 125, 133 P 744.
an agent will not be permitted to pervert his authority to his own
personal advantage, and his act in secret hostility to the interests of 11.Art. 1878, par. (5), Civil Code of the Philippines.
his principal transcends the power afforded him.23
12.Strong v. Gutierrez Repide, 6 Phil. 680 (1906).
WHEREFORE, the petition is GRANTED. The decision and
resolution of respondent Court of Appeals dated 29 October 1993 13.Liñan v. Puno, 31 Phil. 259 (1915).
14.64 Phil. 301, 305-306 (1937).
15.No. L-23098, 28 February 1967, 19 SCRA 513, 518-519. See
also Quiban v. Butalid, G.R. No. 90974, 27 August 1990,
189 SCRA 107.
16.Goldloop Properties, Inc. v. Court of Appeals, G.R. No. 99431,
11 August 1992, 212 SCRA 498; Mercado v. Ubay, No. L-
36830, 24 July 1990, 187 SCRA 719; Gerardo v. De la
Peña, G.R. No. 61527, 26 December 1990, 192 SCRA
691.
17.Islamic Da 'Wah Council of the Philippines v. Court of
Appeals, G.R. No. 80892, 29 September 1989, 178 SCRA
178; Ramirez v. Court of Appeals, G.R. No. 76366, 3 July
1990, 187 SCRA 153; Ruiz v. Court of Appeals, G.R. No.
93454, 13 September 1991, 210 SCRA 577; Santos v.
Court of Appeals, G.R. No. 59771, 21 July 1993, 224
SCRA 673. See also Parcon v. Court of Appeals, G.R. No.
85740, 9 November 1990, 191 SCRA 284.
18.See notes 14 and 15.
19.Macabingkil v. PHHC, No. L-29080, 17 August 1976, 72 SCRA
326, 343-344.
20.Id., p. 344 citing US v. Throckmorton, 25 L. Ed. 93, 95.
21.Mutual Life Ins. Co. v. Hilton Green, 241 US 613, 60 L Ed.
1202.
22.Aetna Casualty and Surety Co. v. Local Bldg. And Loan Assoc.,
19 P2d 612, 616.
23.Strong v. Strong, 36 A2d 410, 415.
||| (Cosmic Lumber Corp. v. Court of Appeals, G.R. No. 114311,
[November 29, 1996], 332 PHIL 948-963)
name of Dr. Roque. Petitioner issued to Dr. Roque a check for
P250,000.00 by way of "reservation payment." Simultaneously,
petitioner and Dr. Roque likewise entered into a memorandum of
agreement for the construction, development and operation of a
commercial building complex on the property. Conformably with the
agreement, petitioner issued a check for another P250,000.00
"downpayment" to Dr. Roque.
The contract of lease and the memorandum of agreement, both
notarized, were to be annotated on TCT No. 30591 within sixty (60)
days from 23 December 1993 or until 23 February 1994. The
annotations, however, were never made because of the untimely
demise of Dr. Felipe C. Roque. The death of Dr. Roque on 10
THIRD DIVISION February 1994 constrained petitioner to deal with respondent Efren P.
Roque, one of the surviving children of the late Dr. Roque, but the
negotiations broke down due to some disagreements. In a letter,
[G.R. No. 148775. January 13, 2004.] dated 3 November 1994, respondent advised petitioner "to desist
from any attempt to enforce the aforementioned contract of lease and
SHOPPER'S PARADISE REALTY & memorandum of agreement". On 15 February 1995, respondent filed
DEVELOPMENT a case for annulment of the contract of lease and the memorandum of
CORPORATION, petitioner, vs. EFREN agreement, with a prayer for the issuance of a preliminary injunction,
ROQUE, respondent. before Branch 222 of the Regional Trial Court of Quezon City. Efren
P. Roque alleged that he had long been the absolute owner of the
subject property by virtue of a deed of donation inter vivos executed
in his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26
DECISION December 1978, and that the late Dr. Felipe Roque had no authority
to enter into the assailed agreements with petitioner. The donation
was made in a public instrument duly acknowledged by the donor-
VITUG, J p: spouses before a notary public and duly accepted on the same day by
respondent before the notary public in the same instrument of
On 23 December 1993, petitioner Shopper's Paradise Realty & donation. The title to the property, however, remained in the name of
Development Corporation, represented its president, Veredigno Dr. Felipe C. Roque, and it was only transferred to and in the name
Atienza, entered into a twenty-five year lease with Dr. Felipe C. of respondent sixteen years later, or on 11 May 1994, under TCT No.
Roque, now deceased, over a parcel of land, with an area of two 109754 of the Register of Deeds of Quezon City. Respondent, while
thousand and thirty six (2,036) square meters, situated at Plaza he resided in the United States of America, delegated to his father the
Novaliches, Quezon City, covered by Transfer of Certificate of Title mere administration of the property. Respondent came to know of the
(TCT) No. 30591 of the Register of Deeds of Quezon City in the
assailed contracts with petitioner only after retiring to the Philippines partially executed by the receipt of his father of the
upon the death of his father. DcTSHa downpayment and deposit totaling to
P500,000.00." 1
On 9 August 1996, the trial court dismissed the complaint of
respondent; it explained: The trial court ordered respondent to surrender TCT No. 109754
to the Register of Deeds of Quezon City for the annotation of the
"Ordinarily, a deed of donation need not be questioned Contract of Lease and Memorandum of Agreement.
registered in order to be valid between the parties.
Registration, however, is important in binding On appeal, the Court of Appeals reversed the decision of the trial
third persons. Thus, when Felipe Roque entered court and held to be invalid the Contract of Lease and Memorandum
into a lease contract with defendant corporation, of Agreement. While it shared the view expressed by the trial court
plaintiff Efren Roque (could) no longer assert the that a deed of donation would have to be registered in order to bind
unregistered deed of donation and say that his third persons, the appellate court, however, concluded that petitioner
father, Felipe, was nolonger the owner of the was not a lessee in good faith having had prior knowledge of the
subject property at the time the lease on the subject donation in favor of respondent, and that such actual knowledge had
property was agreed upon. the effect of registration insofar as petitioner was concerned. The
appellate court based its findings largely on the testimony of
"The registration of the Deed of Donation after the Veredigno Atienza during cross-examination, viz:
execution of the lease contract did not affect the
latter unless he had knowledge thereof at the time "Q. Aside from these two lots, the first in the name
of the registration which plaintiff had not been of Ruben Roque and the second, the
able to establish. Plaintiff knew very well of the subject of the construction involved in this
existence of the lease. He, in fact, met with the case, you said there is another lot which
officers of the defendant corporation at least once was part of the development project?
before he caused the registration of the deed of "A. Yes, this was the main concept of Dr. Roque
donation in his favor and although the lease itself so that the adjoining properties of his two
was not registered, it remains valid considering sons, Ruben and Cesar, will comprise one
that no third person is involved. Plaintiff cannot be whole. The other whole property belongs
the third person because he is the successor-in- to Cesar.
interest of his father, Felipe Roque, the lessor, and
it is a rule that contracts take effect not only "Q. You were informed by Dr. Roque that this
between the parties themselves but also between property was given to his three (3) sons;
their assigns and heirs (Article 1311, Civil Code) one to Ruben Roque, the other to Efren,
and therefore, the lease contract together with the and the other to Cesar Roque?
memorandum of agreement would be conclusive
on plaintiff Efren Roque. He is bound by the "A. Yes.
contract even if he did not participate therein. "Q. You did the inquiry from him, how was this
Moreover, the agreements have been perfected and property given to them?
"A. By inheritance. "Q. So in effect, any information gathered by
Biglang-awa was of the same effect as if
"Q. Inheritance in the form of donation? received by you because you were
"A. I mean inheritance. members of the same team?

"Q. What I am only asking you is, were you told "A. Yes." 2
by Dr. Felipe C. Roque at the time of your In the instant petition for review, petitioner seeks a reversal of the
transaction with him that all these three decision of the Court of Appeals and the reinstatement of the ruling
properties were given to his children by of the Regional Trial Court; it argues that the presumption of good
way of donation? faith it so enjoys as a party dealing in registered land has not been
"A. What Architect Biglang-awa told us in his overturned by the aforequoted testimonial evidence, and that, in any
exact words: "Yang mga yan pupunta sa event, respondent is barred by laches and estoppel from denying the
mga anak. Yong kay Ruben pupunta kay contracts.
Ruben. Yong kay Efren palibhasa nasa The existence, albeit unregistered, of the donation in favor of
America siya, nasa pangalan pa ni Dr. respondent is undisputed. The trial court and the appellate court have
Felipe C. Roque." not erred in holding that the non-registration of a deed of donation
"xxx xxx xxx does not affect its validity. As being itself a mode of acquiring
ownership, donation results in an effective transfer of title over the
"Q. When was the information supplied to you by property from the donor to the donee.3 In donations of immovable
Biglang-awa? Before the execution of the property, the law requires for its validity that it should be contained
Contract of Lease and Memorandum of in a public document, specifying therein the property donated and the
Agreement? value of the charges which the donee must satisfy. 4 The Civil Code
"A. Yes. EHTADa provides, however, that "titles of ownership, or other rights over
immovable property, which are not duly inscribed or annotated in the
"Q. That being the case, at the time of the Registry of Property (now Registry of Land Titles and Deeds) shall
execution of the agreement or soon before, not prejudice third persons." 5 It is enough, between the parties to a
did you have such information confirmed donation of an immovable property, that the donation be made in a
by Dr. Felipe C. Roque himself? public document but, in order to bind third persons, the donation
"A. Biglang-awa did it for us. must be registered in the Registry of Property (Registry of Land
Titles and Deeds). 6 Consistently, Section 50 of Act No. 496 (Land
"Q. But you yourself did not? Registration Act), as so amended by Section 51 of P.D. No. 1529
(Property Registration Decree), states:
"A. No, because I was doing certain things. We
were a team and so Biglang-awa did it for "SECTION 51. Conveyance and other dealings by
us. registered owner. — An owner of registered land
may convey, mortgage, lease, charge or otherwise
deal with the same in accordance with existing Code expresses that a special power of attorney is necessary to lease
laws. He may use such forms of deeds, mortgages, any real property to another person for more than one year. The lease
leases or other voluntary instruments as are of real property for more than one year is considered not merely an
sufficient in law. But no deed, mortgage, lease, or act of administration but an act of strict dominion or of ownership. A
other voluntary instrument, except a will special power of attorney is thus necessary for its execution through
purporting to convey or affect registered land an agent.
shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the The Court cannot accept petitioner's argument that respondent is
parties and as evidence of authority to the guilty of laches. Laches, in its real sense, is the failure or neglect, for
Register of Deeds to make registration. an unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier; it is
"The act of registration shall be the operative act negligence or omission to assert a right within a reasonable time,
to convey or affect the land insofar as third warranting a presumption that the party entitled to assert it either has
persons are concerned, and in all cases under this abandoned or declined to assert it. 10
Decree, the registration shall be made in the office
of the Register of Deeds for the province or city Respondent learned of the contracts only in February 1994 after the
where the land lies."(emphasis supplied) death of his father, and in the same year, during November, he
assailed the validity of the agreements. Hardly, could respondent
A person dealing with registered land may thus safely rely on the then be said to have neglected to assert his case for an unreasonable
correctness of the certificate of title issued therefor, and he is not length of time.
required to go beyond the certificate to determine the condition of
the property 7 but, where such party has knowledge of a prior Neither is respondent estopped from repudiating the contracts. The
existing interest which is unregistered at the time he acquired a right essential elements of estoppel in pais, in relation to the party sought
thereto, his knowledge of that prior unregistered interest would have to be estopped, are: 1) a clear conduct amounting to false
the effect of registration as regards to him. 8 representation or concealment of material facts or, at least, calculated
to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to
assert; 2) an intent or, at least, an expectation, that this conduct shall
The appellate court was not without substantial basis when it found influence, or be acted upon by, the other party; and 3) the knowledge,
petitioner to have had knowledge of the donation at the time it actual or constructive, by him of the real facts. 11 With respect to the
entered into the two agreements with Dr. Roque. During their party claiming the estoppel, the conditions he must satisfy are: 1)
negotiation, petitioner, through its representatives, was apprised of lack of knowledge or of the means of knowledge of the truth as to the
the fact that the subject property actually belonged to respondent. facts in question; 2) reliance, in good faith, upon the conduct or
It was not shown that Dr. Felipe C. Roque had been an authorized statements of the party to be estopped; and 3) action or inaction
agent of respondent. based thereon of such character as to change his position or status
calculated to cause him injury or prejudice. 12 It has not been shown
In a contract of agency, the agent acts in representation or in behalf that respondent intended to conceal the actual facts concerning the
of another with the consent of the latter. 9 Article 1878 of the Civil property; more importantly, petitioner has been shown not to be
totally unaware of the real ownership of the subject 11.Kalalo v. Luz, G.R. No. L-27782, 31 July 1970, 34 SCRA 337.
property. aEHADT
12.Id.
Altogether, there is no cogent reason to reverse the Court of Appeals
in its assailed decision.
WHEREFORE, the petition is DENIED, and the decision of the ||| (Shopper's Paradise Realty & Development Corp. v. Roque, G.R.
Court of Appeals declaring the contract of lease and memorandum of No. 148775, [January 13, 2004], 464 PHIL 116-125)
agreement entered into between Dr. Felipe C. Roque and Shopper's
Paradise Realty & Development Corporation not to be binding on
respondent is AFFIRMED. No costs.
SO ORDERED.
Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.
Footnotes
1.Rollo, p. 37.
2.Rollo, pp. 40-41.
3.Article 712, New Civil Code.
4.Article 749, New Civil Code.
5.Article 709, New Civil Code.
6.See Gonzales v. Court of Appeals, G.R. No. 110335, 18 June
2001, 358 SCRA 598.
7.Santos v. Court of Appeals, G.R. No. 90380, 13 September 1990,
189 SCRA 550.
8.Lagandaon v. Court of Appeals, G.R. Nos. 102526-31, 21 May
1998, 290 SCRA 330; Fernandez v. Court of
Appeals, G.R. No. 83141, 21 September 1990, 189 SCRA
780.
9.Article 1868, New Civil Code.
10.Tolentino, Civil Code of the Philippines, vol. IV, 1990-1991, p.
661.