Sie sind auf Seite 1von 72

1. G.R. No.

L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of CONCEPCION


RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF
APPEALS, respondents.

Seno, Mendoza & Associates for petitioner.

Ramon Duterte for private respondent.

MUÑOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his
principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land
pursuant to a power of attorney which the principal had executed in favor. The
administrator of the estate of the went to court to have the sale declared
uneanforceable and to recover the disposed share. The trial court granted the
relief prayed for, but upon appeal the Court of Appeals uphold the validity of the
sale and the complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia both surnamed
Rallos were sisters and registered co-owners of a parcel of land known as Lot
No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title
No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters executed a
special power of attorney in favor of their brother, Simeon Rallos, authorizing him
to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos
died. On September 12, 1955, Simeon Rallos sold the undivided shares of his
sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. The deed of sale was registered in the
Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer
certificate of Title No. 12989 was issued in the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of


Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the
Court of First Instance of Cebu, praying (1) that the sale of the undivided share of
the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share
be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of
Felix Go Chan & Sons Realty Corporation be cancelled and another title be
issued in the names of the corporation and the "Intestate estate of Concepcion
Rallos" in equal undivided and (3) that plaintiff be indemnified by way of
attorney's fees and payment of costs of suit. Named party defendants were Felix
Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds
of Cebu, but subsequently, the latter was dropped from the complaint. The
complaint was amended twice; defendant Corporation's Answer contained a
crossclaim against its co-defendant, Simon Rallos while the latter filed third-party
complaint against his sister, Gerundia Rallos While the case was pending in the
trial court, both Simon and his sister Gerundia died and they were substituted by
the respective administrators of their estates.

After trial the court a quo rendered judgment with the following dispositive
portion:

A. On Plaintiffs Complaint —

(1) Declaring the deed of sale, Exh. "C", null and void
insofar as the one-half pro-indiviso share of Concepcion
Rallos in the property in question, — Lot 5983 of the
Cadastral Survey of Cebu — is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancel


Transfer Certificate of Title No. 12989 covering Lot 5983
and to issue in lieu thereof another in the names of FELIX
GO CHAN & SONS REALTY CORPORATION and the
Estate of Concepcion Rallos in the proportion of one-half
(1/2) share each pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation to


deliver the possession of an undivided one-half (1/2)
share of Lot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo,


administrator of the Estate of Simeon Rallos, to pay to
plaintiff in concept of reasonable attorney's fees the sum
of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly and


severally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo,


administrator of the Estate of Simeon Rallos, to pay to
defendant Felix Co Chan & Sons Realty Corporation the
sum of P5,343.45, representing the price of one-half (1/2)
share of lot 5983;

(2) Ordering co-defendant Juan T. Borromeo,


administrator of the Estate of Simeon Rallos, to pay in
concept of reasonable attorney's fees to Felix Go Chan &
Sons Realty Corporation the sum of P500.00.

C. On Third-Party Complaint of defendant Juan T. Borromeo


administrator of Estate of Simeon Rallos, against Josefina Rallos
special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing
either a complaint against the regular administrator of the Estate of
Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos,
covering the same subject-matter of the third-party complaint, at bar.
(pp. 98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of
Appeals from the foregoing judgment insofar as it set aside the sale of the one-
half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to
earlier, resolved the appeal on November 20, 1964 in favor of the appellant
corporation sustaining the sale in question. 1 The appellee administrator, Ramon
Rallos, moved for a reconsider of the decision but the same was denied in a
resolution of March 4, 1965. 2

What is the legal effect of an act performed by an agent after the death of his
principal? Applied more particularly to the instant case, We have the query. is the
sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was
executed by the agent after the death of his principal? What is the law in this
jurisdiction as to the effect of the death of the principal on the authority of the
agent to act for and in behalf of the latter? Is the fact of knowledge of the death of
the principal a material factor in determining the legal effect of an act performed
after such death?

Before proceedings to the issues, We shall briefly restate certain principles of law
relevant to the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that no one may
contract in the name of another without being authorized by the latter, or unless
he has by law a right to represent him. 3 A contract entered into in the name of
another by one who has no authority or the legal representation or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed, before it is
revoked by the other contracting party.4 Article 1403 (1) of the same Code also
provides:

ART. 1403. The following contracts are unenforceable, unless they


are justified:

(1) Those entered into in the name of another person by one who hi -
been given no authority or legal representation or who has acted
beyond his powers; ...

Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in his behalf in
transactions with third persons. The essential elements of agency are: (1) there
is consent, express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agents
acts as a representative and not for himself, and (4) the agent acts within the
scope of his authority. 5
Agency is basically personal representative, and derivative in nature. The
authority of the agent to act emanates from the powers granted to him by his
principal; his act is the act of the principal if done within the scope of the
authority. Qui facit per alium facit se. "He who acts through another acts
himself". 6

2. There are various ways of extinguishing agency, 7 but her We are concerned
only with one cause — death of the principal Paragraph 3 of Art. 1919 of the Civil
Code which was taken from Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the


principal or of the agent; ... (Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent,
agency is extinguished by the death of the principal or the agent. This is the law
in this jurisdiction.8

Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the
rationale for the law is found in the juridical basis of agency which
is representation Them being an in. integration of the personality of the principal
integration that of the agent it is not possible for the representation to continue to
exist once the death of either is establish. Pothier agrees with Manresa that by
reason of the nature of agency, death is a necessary cause for its
extinction. Laurent says that the juridical tie between the principal and the agent
is severed ipso jure upon the death of either without necessity for the heirs of the
fact to notify the agent of the fact of death of the former. 9

The same rule prevails at common law — the death of the principal effects
instantaneous and absolute revocation of the authority of the agent unless the
Power be coupled with an interest. 10 This is the prevalent rule in American
Jurisprudence where it is well-settled that a power without an interest confer. red
upon an agent is dissolved by the principal's death, and any attempted execution
of the power afterward is not binding on the heirs or representatives of the
deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or
of the agent extinguishes the agency, subject to any exception, and if so, is the
instant case within that exception? That is the determinative point in issue in this
litigation. It is the contention of respondent corporation which was sustained by
respondent court that notwithstanding the death of the principal Concepcion
Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham
in the property is valid and enforceable inasmuch as the corporation acted in
good faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general
rule afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after
the death of the principal, if it has been constituted in the common
interest of the latter and of the agent, or in the interest of a third
person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the


death of the principal or of any other cause which extinguishes the
agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney
executed in favor of Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent
after the death of his principal is valid and effective only under two conditions,
viz: (1) that the agent acted without knowledge of the death of the principal and
(2) that the third person who contracted with the agent himself acted in good
faith. Good faith here means that the third person was not aware of the death of
the principal at the time he contracted with said agent. These two requisites must
concur the absence of one will render the act of the agent invalid and
unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew
of the death of his principal at the time he sold the latter's share in Lot No. 5983
to respondent corporation. The knowledge of the death is clearly to be inferred
from the pleadings filed by Simon Rallos before the trial court. 12 That Simeon
Rallos knew of the death of his sister Concepcion is also a finding of fact of the
court a quo 13 and of respondent appellate court when the latter stated that
Simon Rallos 'must have known of the death of his sister, and yet he proceeded
with the sale of the lot in the name of both his sisters Concepcion and Gerundia
Rallos without informing appellant (the realty corporation) of the death of the
former. 14

On the basis of the established knowledge of Simon Rallos concerning the death
of his principal Concepcion Rallos, Article 1931 of the Civil Code is
inapplicable. The law expressly requires for its application lack of knowledge on
the part of the agent of the death of his principal; it is not enough that the third
person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court
applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil Code
sustained the validity , of a sale made after the death of the principal because it
was not shown that the agent knew of his principal's demise. 15 To the same
effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the
words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936,
plaintiffs presented no proof and there is no indication in the record,
that the agent Luy Kim Guan was aware of the death of his principal
at the time he sold the property. The death 6f the principal does not
render the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of


Appeals reasoned out that there is no provision in the Code which provides that
whatever is done by an agent having knowledge of the death of his principal is
void even with respect to third persons who may have contracted with him in
good faith and without knowledge of the death of the principal. 16

We cannot see the merits of the foregoing argument as it ignores the existence
of the general rule enunciated in Article 1919 that the death of the principal
extinguishes the agency. That being the general rule it follows a fortiorithat any
act of an agent after the death of his principal is void ab initio unless the same
fags under the exception provided for in the aforementioned Articles 1930 and
1931. Article 1931, being an exception to the general rule, is to be strictly
construed, it is not to be given an interpretation or application beyond the clear
import of its terms for otherwise the courts will be involved in a process of
legislation outside of their judicial function.

5. Another argument advanced by respondent court is that the vendee acting in


good faith relied on the power of attorney which was duly registered on the
original certificate of title recorded in the Register of Deeds of the province of
Cebu, that no notice of the death was aver annotated on said certificate of title by
the heirs of the principal and accordingly they must suffer the consequences of
such omission. 17

To support such argument reference is made to a portion


in Manresa's Commentaries which We quote:

If the agency has been granted for the purpose of contracting with
certain persons, the revocation must be made known to them. But if
the agency is general iii nature, without reference to particular person
with whom the agent is to contract, it is sufficient that the principal
exercise due diligence to make the revocation of the agency publicity
known.

In case of a general power which does not specify the persons to


whom represents' on should be made, it is the general opinion that all
acts, executed with third persons who contracted in good faith,
Without knowledge of the revocation, are valid. In such case, the
principal may exercise his right against the agent, who, knowing of
the revocation, continued to assume a personality which he no longer
had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a


mode of terminating an agency which is to be distinguished from revocation
by operation of law such as death of the principal which obtains in this case. On
page six of this Opinion We stressed that by reason of the very nature of the
relationship between principal and agent, agency is extinguished ipso jure upon
the death of either principal or agent. Although a revocation of a power of
attorney to be effective must be communicated to the parties concerned, 18 yet a
revocation by operation of law, such as by death of the principal is, as a rule,
instantaneously effective inasmuch as "by legal fiction the agent's exercise of
authority is regarded as an execution of the principal's continuing will. 19 With
death, the principal's will ceases or is the of authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the
death of the principal What the Code provides in Article 1932 is that, if the agent
die his heirs must notify the principal thereof, and in the meantime adopt such
measures as the circumstances may demand in the interest of the latter. Hence,
the fact that no notice of the death of the principal was registered on the
certificate of title of the property in the Office of the Register of Deeds, is not fatal
to the cause of the estate of the principal

6. Holding that the good faith of a third person in said with an agent affords the
former sufficient protection, respondent court drew a "parallel" between the
instant case and that of an innocent purchaser for value of a land, stating that if a
person purchases a registered land from one who acquired it in bad faith — even
to the extent of foregoing or falsifying the deed of sale in his favor — the
registered owner has no recourse against such innocent purchaser for value but
only against the forger. 20

To support the correctness of this respondent corporation, in its brief, cites the
case of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the
brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil.


630, one Vallejo was a co-owner of lands with Agustin Nano. The
latter had a power of attorney supposedly executed by Vallejo Nano
in his favor. Vallejo delivered to Nano his land titles. The power was
registered in the Office of the Register of Deeds. When the lawyer-
husband of Angela Blondeau went to that Office, he found all in order
including the power of attorney. But Vallejo denied having executed
the power The lower court sustained Vallejo and the plaintiff
Blondeau appealed. Reversing the decision of the court a quo, the
Supreme Court, quoting the ruling in the case of Eliason v.
Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of


the defendant- appellee must be overruled. Agustin Nano
had possession of Jose Vallejo's title papers. Without
those title papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of
the Philippine Bar and the husband of Angela Blondeau,
the principal plaintiff, searched the registration record, he
found them in due form including the power of attorney of
Vallajo in favor of Nano. If this had not been so and if
thereafter the proper notation of the encumbrance could
not have been made, Angela Blondeau would not have
sent P12,000.00 to the defendant Vallejo.' An executed
transfer of registered lands placed by the registered
owner thereof in the hands of another operates as a
representation to a third party that the holder of the
transfer is authorized to deal with the land.

As between two innocent persons, one of whom must


suffer the consequence of a breach of trust, the one who
made it possible by his act of coincidence bear the loss.
(pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us
because here We are confronted with one who admittedly was an agent of his
sister and who sold the property of the latter after her death with full knowledge
of such death. The situation is expressly covered by a provision of law on agency
the terms of which are clear and unmistakable leaving no room for an
interpretation contrary to its tenor, in the same manner that the ruling in Blondeau
and the cases cited therein found a basis in Section 55 of the Land Registration
Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any


voluntary instrument is presented for registration shall be conclusive
authority from the registered owner to the register of deeds to enter a
new certificate or to make a memorandum of registration in
accordance with such instruments, and the new certificate or
memorandum Shall be binding upon the registered owner and upon
all persons claiming under him in favor of every purchaser for value
and in good faith: Provided however, That in all cases of registration
provided by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice,
however, to the right, of any innocent holder for value of a certificate
of title. ... (Act No. 496 as amended)

7. One last point raised by respondent corporation in support of the appealed


decision is an 1842 ruling of the Supreme Court of Pennsylvania in Cassiday v.
McKenzie wherein payments made to an agent after the death of the principal
were held to be "good", "the parties being ignorant of the death". Let us take note
that the Opinion of Justice Rogers was premised on the statement that
the parties were ignorant of the death of the principal. We quote from that
decision the following:

... Here the precise point is, whether a payment to an agent when the
Parties are ignorant of the death is a good payment. in addition to the
case in Campbell before cited, the same judge Lord Ellenboruogh,
has decided in 5 Esp. 117, the general question that a payment after
the death of principal is not good. Thus, a payment of sailor's wages
to a person having a power of attorney to receive them, has been
held void when the principal was dead at the time of the payment. If,
by this case, it is meant merely to decide the general proposition that
by operation of law the death of the principal is a revocation of the
powers of the attorney, no objection can be taken to it. But if it
intended to say that his principle applies where there was 110 notice
of death, or opportunity of twice I must be permitted to dissent from it.

... That a payment may be good today, or bad tomorrow, from the
accident circumstance of the death of the principal, which he did not
know, and which by no possibility could he know? It would be unjust
to the agent and unjust to the debtor. In the civil law, the acts of the
agent, done bona fide in ignorance of the death of his principal are
held valid and binding upon the heirs of the latter. The same rule
holds in the Scottish law, and I cannot believe the common law is so
unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may
evoke, mention may be made that the above represents the minority view in
American jurisprudence. Thus in Clayton v. Merrett, the Court said.—

There are several cases which seem to hold that although, as a


general principle, death revokes an agency and renders null every act
of the agent thereafter performed, yet that where a payment has been
made in ignorance of the death, such payment will be good. The
leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S.
(Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii
broadly announced. It is referred to, and seems to have been
followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in
this latter case it appeared that the estate of the deceased principal
had received the benefit of the money paid, and therefore the
representative of the estate might well have been held to be estopped
from suing for it again. . . . These cases, in so far, at least, as they
announce the doctrine under discussion, are exceptional. The
Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S. 282,
39 AmD 76), is believed to stand almost, if not quite, alone in
announcing the principle in its broadest scope. (52, Misc. 353, 357,
cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out


that the opinion, except so far as it related to the particular facts, was a
mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more


as an extrajudicial indication of his views on the general subject, than
as the adjudication of the Court upon the point in question. But
accordingly all power weight to this opinion, as the judgment of a of
great respectability, it stands alone among common law authorities
and is opposed by an array too formidable to permit us to following it.
(15 Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in


American jurisprudence, no such conflict exists in our own for the simple reason
that our statute, the Civil Code, expressly provides for two exceptions to the
general rule that death of the principal revokes ipso jure the agency, to wit: (1)
that the agency is coupled with an interest (Art 1930), and (2) that the act of the
agent was executed without knowledge of the death of the principal and the third
person who contracted with the agent acted also in good faith (Art. 1931).
Exception No. 2 is the doctrine followed in Cassiday, and again We stress the
indispensable requirement that the agent acted without knowledge or notice of
the death of the principal In the case before Us the agent Ramon Rallos
executed the sale notwithstanding notice of the death of his principal Accordingly,
the agent's act is unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent


appellate court, and We affirm en toto the judgment rendered by then Hon.
Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and
3 of this Opinion, with costs against respondent realty corporation at all
instances.

So Ordered.

Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

2. [G.R. No130148. December 15, 1997]


JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ,
ERNESTO M. LUZ and NARCISO DEGANOS, respondents.

DECISION
REGALADO, J.:

In this appeal by certiorari, petitioners assail the judgment of the Court of


Appeals in CA-G.R. CV No. 49175 affirming the adjudication of the Regional Trial
Court of Malolos, Bulacan which found private respondent Narciso Deganos liable
to petitioners for actual damages, but absolved respondent spouses Brigida D. Luz
and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent
resolution of the Court of Appeals which denied their motion for reconsideration of
its challenged decision.
Petitioners were engaged in the business of purchase and sale of jewelry and
respondent Brigida D. Luz, also known as Aida D. Luz, was their regular
customer. On several occasions during the period from April 27, 1987 to
September 4, 1987, respondent Narciso Deganos, the brother of Brigida D. Luz,
received several pieces of gold and jewelry from petitioners amounting
to P382,816.00. [1] These items and their prices were indicated in seventeen
receipts covering the same. Eleven of the receipts stated that they were received
for a certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated
that they were received for Brigida D. Luz. [2]
Deganos was supposed to sell the items at a profit and thereafter remit the
proceeds and return the unsold items to petitioners. Deganos remitted only the
sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he
return any unsold item to petitioners. By January 1990, the total of his unpaid
account to petitioners, including interest, reached the sum
[3]
of P725,463.98. Petitioners eventually filed a complaint in the barangay court
against Deganos to recover said amount.
In the barangay proceedings, Brigida D. Luz, who was not impleaded in the
case, appeared as a witness for Deganos and ultimately, she and her husband,
together with Deganos, signed a compromise agreement with petitioners. In that
compromise agreement, Deganos obligated himself to pay petitioners, on
installment basis, the balance of his account plus interest thereon. However, he
failed to comply with his aforestated undertakings.
On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the
Regional Trial Court of Malolos, Bulacan against Deganos and Brigida D. Luz for
recovery of a sum of money and damages, with an application for preliminary
attachment.[4] Ernesto Luz was impleaded therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were
charged with estafa[5] in the Regional Trial Court of Malolos, Bulacan, which was
docketed as Criminal Case No. 785-M-94. That criminal case appears to be still
pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos acted as the
agent of Brigida D. Luz when he received the subject items of jewelry and, because
he failed to pay for the same, Brigida, as principal, and her spouse are solidarily
liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid obligation
to petitioners, he claimed that the same was only in the sum of P382,816.00 and
not P725,463.98. He further asserted that it was he alone who was involved in the
transaction with the petitioners; that he neither acted as agent for nor was he
authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six
of the receipts indicated that the items were received by him for the latter. He
further claimed that he never delivered any of the items he received from
petitioners to Brigida.
Brigida, on her part, denied that she had anything to do with the transactions
between petitioners and Deganos. She claimed that she never authorized
Deganos to receive any item of jewelry in her behalf and, for that matter, neither
did she actually receive any of the articles in question.
After trial, the court below found that only Deganos was liable to petitioners for
the amount and damages claimed. It held that while Brigida D. Luz did have
transactions with petitioners in the past, the items involved were already paid for
and all that Brigida owed petitioners was the sum of P21,483.00 representing
interest on the principal account which she had previously paid for.[6]
The trial court also found that it was petitioner Lydia Bordador who indicated in
the receipts that the items were received by Deganos for Evelyn Aquino and
Brigida D. Luz. [7] Said court was persuaded that Brigida D. Luz was behind
Deganos, but because there was no memorandum to this effect, the agreement
between the parties was unenforceable under the Statute of Frauds. [8] Absent the
required memorandum or any written document connecting the respondent Luz
spouses with the subject receipts, or authorizing Deganos to act on their behalf,
the alleged agreement between petitioners and Brigida D. Luz was unenforceable.
Deganos was ordered to pay petitioners the amount of P725,463.98, plus legal
interest thereon from June 25, 1990, and attorneys fees. Brigida D. Luz was
ordered to pay P21,483.00 representing the interest on her own personal
loan. She and her co-defendant spouse were absolved from any other or further
liability. [9]
As stated at the outset, petitioners appealed the judgment of the court a quo to
the Court of Appeals which affirmed said judgment. [10] The motion for
reconsideration filed by petitioners was subsequently dismissed, [11] hence the
present recourse to this Court.
The primary issue in the instant petition is whether or not herein respondent
spouses are liable to petitioners for the latters claim for money and damages in the
sum of P725,463.98, plus interests and attorneys fees, despite the fact that the
evidence does not show that they signed any of the subject receipts or authorized
Deganos to receive the items of jewelry on their behalf.
Petitioners argue that the Court of Appeals erred in adopting the findings of the
court a quo that respondent spouses are not liable to them, as said conclusion of
the trial court is contradicted by the finding of fact of the appellate court that
(Deganos) acted as agent of his sister (Brigida Luz). [12] In support of this
contention, petitioners quoted several letters sent to them by Brigida D. Luz
wherein the latter acknowledged her obligation to petitioners and requested for
more time to fulfill the same. They likewise aver that Brigida testified in the trial
court that Deganos took some gold articles from petitioners and delivered the same
to her.
Both the Court of Appeals and the trial court, however, found as a fact that the
aforementioned letters concerned the previous obligations of Brigida to petitioners,
and had nothing to do with the money sought to be recovered in the instant
case. Such concurrent factual findings are entitled to great weight, hence,
petitioners cannot plausibly claim in this appellate review that the letters were in
the nature of acknowledgments by Brigida that she was the principal of Deganos
in the subject transactions.
On the other hand, with regard to the testimony of Brigida admitting delivery of
the gold to her, there is no showing whatsoever that her statement referred to the
items which are the subject matter of this case. It cannot, therefore, be validly said
that she admitted her liability regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter
clothed him with apparent authority as her agent and held him out to the public as
such, hence Brigida can not be permitted to deny said authority to innocent third
parties who dealt with Deganos under such belief. [13] Petitioners further represent
that the Court of Appeals recognized in its decision that Deganos was an agent of
Brigida.[14]
The evidence does not support the theory of petitioners that Deganos was an
agent of Brigida D. Luz and that the latter should consequently be held solidarily
liable with Deganos in his obligation to petitioners. While the quoted statement in
the findings of fact of the assailed appellate decision mentioned that Deganos
ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the
Court of Appeals categorically stated that, (Brigida Luz) never authorized her
brother (Deganos) to act for and in her behalf in any transaction with Petitioners
xx x. [15] It is clear, therefore, that even assuming arguendo that Deganos acted as
an agent of Brigida, the latter never authorized him to act on her behalf with regard
to the transactions subject of this case.
The Civil Code provides:

Art. 1868. By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of
the latter.

The basis for agency is representation. Here, there is no showing that Brigida
consented to the acts of Deganos or authorized him to act on her behalf, much
less with respect to the particular transactions involved. Petitioners attempt to foist
liability on respondent spouses through the supposed agency relation with
Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to entrust to
Deganos, not once or twice but on at least six occasions as evidenced by six
receipts, several pieces of jewelry of substantial value without requiring a written
authorization from his alleged principal. A person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. [16]
The records show that neither an express nor an implied agency was proven
to have existed between Deganos and Brigida D. Luz. Evidently, petitioners, who
were negligent in their transactions with Deganos, cannot seek relief from the
effects of their negligence by conjuring a supposed agency relation between the
two respondents where no evidence supports such claim.
Petitioners next allege that the Court of Appeals erred in ignoring the fact that
the decision of the court below, which it affirmed, is null and void as it contradicted
its ruling in CA-G.R. SP No. 39445 holding that there is sufficient evidence/proof
against Brigida D. Luz and Deganos for estafa in the pending criminal case. They
further aver that said appellate court erred in ruling against them in this civil action
since the same would result in an inevitable conflict of decisions should the trial
court convict the accused in the criminal case.
By way of backdrop for this argument of petitioners, herein respondents Brigida
D. Luz and Deganos had filed a demurrer to evidence and a motion for
reconsideration in the aforestated criminal case, both of which were denied by the
trial court. They then filed a petition for certiorari in the Court of Appeals to set
aside the denial of their demurrer and motion for reconsideration but, as just stated,
their petition therefor was dismissed.[17]
Petitioners now claim that the aforesaid dismissal by the Court of Appeals of
the petition in CA-G.R. SP No. 39445 with respect to the criminal case is equivalent
to a finding that there is sufficient evidence in the estafa case against Brigida D.
Luz and Deganos. Hence, as already stated, petitioners theorize that the decision
and resolution of the Court of Appeals now being impugned in the case at bar
would result in a possible conflict with the prospective decision in the criminal
case. Instead of promulgating the present decision and resolution under review,
so they suggest, the Court of Appeals should have awaited the decision in the
criminal case, so as not to render academic or preempt the same or, worse, create
two conflicting rulings. [18]
Petitioners have apparently lost sight of Article 33 of the Civil Code which
provides that in cases involving alleged fraudulent acts, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the
injured party. Such civil action shall proceed independently of the criminal
prosecution and shall require only a preponderance of evidence.
It is worth noting that this civil case was instituted four years before the criminal
case for estafa was filed, and that although there was a move to consolidate both
cases, the same was denied by the trial court. Consequently, it was the duty of the
two branches of the Regional Trial Court concerned to independently proceed with
the civil and criminal cases. It will also be observed that a final judgment rendered
in a civil action absolving the defendant from civil liability is no bar to a criminal
action. [19]
It is clear, therefore, that this civil case may proceed independently of the
criminal case [20] especially because while both cases are based on the same facts,
the quantum of proof required for holding the parties liable therein differ. Thus, it is
improvident of petitioners to claim that the decision and resolution of the Court of
Appeals in the present case would be preemptive of the outcome of the criminal
case. Their fancied fear of possible conflict between the disposition of this civil
case and the outcome of the pending criminal case is illusory.
Petitioners surprisingly postulate that the Court of Appeals had lost its
jurisdiction to issue the denial resolution dated August 18, 1997, as the same was
tainted with irregularities and badges of fraud perpetrated by its court
officers. [21] They charge that said appellate court, through conspiracy and fraud on
the part of its officers, gravely abused its discretion in issuing that resolution
denying their motion for reconsideration. They claim that said resolution was
drafted by the ponente, then signed and issued by the members of the Eleventh
Division of said court within one and a half days from the elevation thereof by the
division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in issuing the resolution
as the same was made without waiting for the lapse of the ten-day period for
respondents to file their comment and for petitioners to file their reply. It was
allegedly impossible for the Court of Appeals to resolve the issue in just one and
a half days, especially because its ponente, the late Justice Maximiano C.
Asuncion, was then recuperating from surgery and, that, additionally, hundreds of
more important cases were pending. [22]
These lamentable allegation of irregularities in the Court of Appeals and in the
conduct of its officers strikes us as a desperate attempt of petitioners to induce this
Court to give credence to their arguments which, as already found by both the trial
and intermediate appellate courts, are devoid of factual and legal substance. The
regrettably irresponsible attempt to tarnish the image of the intermediate appellate
tribunal and its judicial officers through ad hominem imputations could well be
contumacious, but we are inclined to let that pass with a strict admonition that
petitioners refrain from indulging in such conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this case affirming
the trial courts decision. [23] Petitioners moved for reconsideration and the Court of
Appeals ordered respondents to file a comment. Respondents filed the same on
August 5, 1997 [24] and petitioners filed their reply to said comment on August 15,
1997. [25] The Eleventh Division of said court issued the questioned resolution
denying petitioners motion for reconsideration on August 18, 1997.[26]
It is ironic that while some litigants malign the judiciary for being supposedly
slothful in disposing of cases, petitioners are making a show of calling out for
justice because the Court of Appeals issued a resolution disposing of a case
sooner than expected of it. They would even deny the exercise of discretion by the
appellate court to prioritize its action on cases in line with the procedure it has
adopted in disposing thereof and in declogging its dockets. It is definitely not for
the parties to determine and dictate when and how a tribunal should act upon those
cases since they are not even aware of the status of the dockets and the internal
rules and policies for acting thereon.
The fact that a resolution was issued by said court within a relatively short
period of time after the records of the case were elevated to the office of
the ponente cannot, by itself, be deemed irregular. There is no showing
whatsoever that the resolution was issued without considering the reply filed by
petitioners. In fact, that brief pleading filed by petitioners does not exhibit any
esoteric or ponderous argument which could not be analyzed within an hour. It is
a legal presumption, born of wisdom and experience, that official duty has been
regularly performed; [27] that the proceedings of a judicial tribunal are regular and
valid, and that judicial acts and duties have been and will be duly and properly
performed. [28] The burden of proving irregularity in official conduct is on the part of
petitioners and they have utterly failed to do so. It is thus reprehensible for them to
cast aspersions on a court of law on the bases of conjectures or surmises,
especially since one of the petitioners appears to be a member of the Philippine
Bar.
Lastly, petitioners fault the trial courts holding that whatever contract of agency
was established between Brigida D. Luz and Narciso Deganos is unenforceable
under the Statute of Frauds as that aspect of this case allegedly is not covered
thereby. [29] They proceed on the premise that the Statute of Frauds applies only
to executory contracts and not to executed or to partially executed ones. From
there, they move on to claim that the contract involved in this case was an executed
contract as the items had already been delivered by petitioners to Brigida D. Luz,
hence, such delivery resulted in the execution of the contract and removed the
same from the coverage of the Statute of Frauds.
Petitioners claim is speciously unmeritorious. It should be emphasized that
neither the trial court nor the appellate court categorically stated that there was
such a contractual relation between these two respondents. The trial court merely
said that if there was such an agency existing between them, the same is
unenforceable as the contract would fall under the Statute of Frauds which requires
the presentation of a note or memorandum thereof in order to be enforceable in
court. That was merely a preparatory statement of a principle of law. What was
finally proven as a matter of fact is that there was no such contract between Brigida
D. Luz and Narciso Deganos, executed or partially executed, and no delivery of
any of the items subject of this case was ever made to the former.
WHEREFORE, no error having been committed by the Court of Appeals in
affirming the judgment of the court a quo, its challenged decision and resolution
are hereby AFFIRMED and the instant petition is DENIED, with double costs
against petitioners
SO ORDERED.
Puno, Mendoza, and Martinez, JJ., concur.

3. G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,


vs.
COURT OF APPEALS and AMERICAN AIR-LINES
INCORPORATED, respondents.

G.R. No. 76933 May 29, 1991

AMERICAN AIRLINES, INCORPORATED, petitioner,


vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES, INCORPORATED,respondents.

Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel
Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA, J.:

This case is a consolidation of two (2) petitions for review on certiorari of a


decision1 of the Court of Appeals in CA-G.R. No. CV-04294, entitled "American
Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc." which
affirmed, with modification, the decision2 of the Regional Trial Court of Manila,
Branch IV, which dismissed the complaint and granted therein defendant's
counterclaim for agent's overriding commission and damages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American


Air), an air carrier offering passenger and air cargo transportation in the
Philippines, and Orient Air Services and Hotel Representatives (hereinafter
referred to as Orient Air), entered into a General Sales Agency Agreement
(hereinafter referred to as the Agreement), whereby the former authorized the
latter to act as its exclusive general sales agent within the Philippines for the sale
of air passenger transportation. Pertinent provisions of the agreement are
reproduced, to wit:

WITNESSETH

In consideration of the mutual convenants herein contained, the parties


hereto agree as follows:

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General
Sales Agent within the Philippines, including any United States military
installation therein which are not serviced by an Air Carrier Representation
Office (ACRO), for the sale of air passenger transportation. The services to
be performed by Orient Air Services shall include:

(a) soliciting and promoting passenger traffic for the services of


American and, if necessary, employing staff competent and sufficient
to do so;

(b) providing and maintaining a suitable area in its place of business


to be used exclusively for the transaction of the business of
American;

(c) arranging for distribution of American's timetables, tariffs and


promotional material to sales agents and the general public in the
assigned territory;

(d) servicing and supervising of sales agents (including such sub-


agents as may be appointed by Orient Air Services with the prior
written consent of American) in the assigned territory including if
required by American the control of remittances and commissions
retained; and

(e) holding out a passenger reservation facility to sales agents and


the general public in the assigned territory.
In connection with scheduled or non-scheduled air passenger
transportation within the United States, neither Orient Air Services nor its
sub-agents will perform services for any other air carrier similar to those to
be performed hereunder for American without the prior written consent of
American. Subject to periodic instructions and continued consent from
American, Orient Air Services may sell air passenger transportation to be
performed within the United States by other scheduled air carriers provided
American does not provide substantially equivalent schedules between the
points involved.

xxx xxx xxx

4. Remittances

Orient Air Services shall remit in United States dollars to American the
ticket stock or exchange orders, less commissions to which Orient Air
Services is entitled hereunder, not less frequently than semi-monthly, on
the 15th and last days of each month for sales made during the preceding
half month.

All monies collected by Orient Air Services for transportation sold


hereunder on American's ticket stock or on exchange orders, less
applicable commissions to which Orient Air Services is entitled hereunder,
are the property of American and shall be held in trust by Orient Air
Services until satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold


hereunder by Orient Air Services or its sub-agents as follows:

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for all
sales of transportation by Orient Air Services or its sub-agents over
American's services and any connecting through air transportation, when
made on American's ticket stock, equal to the following percentages of the
tariff fares and charges:

(i) For transportation solely between points within the United States
and between such points and Canada: 7% or such other rate(s) as
may be prescribed by the Air Traffic Conference of America.

(ii) For transportation included in a through ticket covering


transportation between points other than those described above: 8%
or such other rate(s) as may be prescribed by the International Air
Transport Association.

(b) Overriding commission


In addition to the above commission American will pay Orient Air Services
an overriding commission of 3% of the tariff fares and charges for all sales
of transportation over American's service by Orient Air Service or its sub-
agents.

xxx xxx xxx

10. Default

If Orient Air Services shall at any time default in observing or performing


any of the provisions of this Agreement or shall become bankrupt or make
any assignment for the benefit of or enter into any agreement or promise
with its creditors or go into liquidation, or suffer any of its goods to be taken
in execution, or if it ceases to be in business, this Agreement may, at the
option of American, be terminated forthwith and American may, without
prejudice to any of its rights under this Agreement, take possession of any
ticket forms, exchange orders, traffic material or other property or funds
belonging to American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or


resolutions of the International Air Transport Association and the Air Traffic
Conference of America, and such rules or resolutions shall control in the
event of any conflict with the provisions hereof.

xxx xxx xxx

13. Termination

American may terminate the Agreement on two days' notice in the event
Orient Air Services is unable to transfer to the United States the funds
payable by Orient Air Services to American under this Agreement. Either
party may terminate the Agreement without cause by giving the other 30
days' notice by letter, telegram or cable.

xxx xxx x x x3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the
Agreement by failing to promptly remit the net proceeds of sales for the months
of January to March 1981 in the amount of US $254,400.40, American Air by
itself undertook the collection of the proceeds of tickets sold originally by Orient
Air and terminated forthwith the Agreement in accordance with Paragraph 13
thereof (Termination). Four (4) days later, or on 15 May 1981, American Air
instituted suit against Orient Air with the Court of First Instance of Manila, Branch
24, for Accounting with Preliminary Attachment or Garnishment, Mandatory
Injunction and Restraining Order4 averring the aforesaid basis for the termination
of the Agreement as well as therein defendant's previous record of failures "to
promptly settle past outstanding refunds of which there were available funds in
the possession of the defendant, . . . to the damage and prejudice of plaintiff."5
In its Answer6 with counterclaim dated 9 July 1981, defendant Orient Air denied
the material allegations of the complaint with respect to plaintiff's entitlement to
alleged unremitted amounts, contending that after application thereof to the
commissions due it under the Agreement, plaintiff in fact still owed Orient Air a
balance in unpaid overriding commissions. Further, the defendant contended that
the actions taken by American Air in the course of terminating the Agreement as
well as the termination itself were untenable, Orient Air claiming that American
Air's precipitous conduct had occasioned prejudice to its business interests.

Finding that the record and the evidence substantiated the allegations of the
defendant, the trial court ruled in its favor, rendering a decision dated 16 July
1984, the dispositive portion of which reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby


rendered in favor of defendant and against plaintiff dismissing the
complaint and holding the termination made by the latter as affecting the
GSA agreement illegal and improper and order the plaintiff to reinstate
defendant as its general sales agent for passenger tranportation in the
Philippines in accordance with said GSA agreement; plaintiff is ordered to
pay defendant the balance of the overriding commission on total flown
revenue covering the period from March 16, 1977 to December 31, 1980 in
the amount of US$84,821.31 plus the additional amount of US$8,000.00 by
way of proper 3% overriding commission per month commencing from
January 1, 1981 until such reinstatement or said amounts in its Philippine
peso equivalent legally prevailing at the time of payment plus legal interest
to commence from the filing of the counterclaim up to the time of payment.
Further, plaintiff is directed to pay defendant the amount of One Million Five
Hundred Thousand (Pl,500,000.00) pesos as and for exemplary damages;
and the amount of Three Hundred Thousand (P300,000.00) pesos as and
by way of attorney's fees.

Costs against plaintiff.7

On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision


promulgated on 27 January 1986, affirmed the findings of the court a quo on their
material points but with some modifications with respect to the monetary awards
granted. The dispositive portion of the appellate court's decision is as follows:

WHEREFORE, with the following modifications —

1) American is ordered to pay Orient the sum


of US$53,491.11 representing the balance of the latter's overriding
commission covering the period March 16, 1977 to December 31, 1980, or
its Philippine peso equivalent in accordance with the official rate of
exchange legally prevailing on July 10, 1981, the date the counterclaim
was filed;

2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's


overriding commission per month starting January 1, 1981 until date of
termination, May 9, 1981 or its Philippine peso equivalent in accordance
with the official rate of exchange legally prevailing on July 10, 1981, the
date the counterclaim was filed

3) American is ordered to pay interest of 12% on said amounts from July


10, 1981 the date the answer with counterclaim was filed, until full
payment;

4) American is ordered to pay Orient exemplary damages of P200,000.00;

5) American is ordered to pay Orient the sum of P25,000.00 as attorney's


fees.

the rest of the appealed decision is affirmed.

Costs against American.8

American Air moved for reconsideration of the aforementioned decision, assailing


the substance thereof and arguing for its reversal. The appellate court's decision
was also the subject of a Motion for Partial Reconsideration by Orient Air which
prayed for the restoration of the trial court's ruling with respect to the monetary
awards. The Court of Appeals, by resolution promulgated on 17 December 1986,
denied American Air's motion and with respect to that of Orient Air, ruled thus:

Orient's motion for partial reconsideration is denied insofar as it prays for


affirmance of the trial court's award of exemplary damages and attorney's
fees, but granted insofar as the rate of exchange is concerned. The
decision of January 27, 1986 is modified in paragraphs (1) and (2) of the
dispositive part so that the payment of the sums mentioned therein shall be
at their Philippine peso equivalent in accordance with the official rate of
exchange legally prevailing on the date of actual payment.9

Both parties appealed the aforesaid resolution and decision of the respondent
court, Orient Air as petitioner in G.R. No. 76931 and American Air as petitioner in
G.R. No. 76933. By resolution10 of this Court dated 25 March 1987 both petitions
were consolidated, hence, the case at bar.

The principal issue for resolution by the Court is the extent of Orient Air's right to
the 3% overriding commission. It is the stand of American Air that such
commission is based only on sales of its services actually negotiated or
transacted by Orient Air, otherwise referred to as "ticketed sales." As basis
thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which,
in reiteration, is quoted as follows:

5. Commissions

a) . . .

b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services
an overriding commission of 3% of the tariff fees and charges for all sales
of transportation over American's services by Orient Air Services or itssub-
agents. (Emphasis supplied)

Since Orient Air was allowed to carry only the ticket stocks of American Air, and
the former not having opted to appoint any sub-agents, it is American Air's
contention that Orient Air can claim entitlement to the disputed overriding
commission based only on ticketed sales. This is supposed to be the clear
meaning of the underscored portion of the above provision. Thus, to be entitled
to the 3% overriding commission, the sale must be made by Orient Air and the
sale must be done with the use of American Air's ticket stocks.

On the other hand, Orient Air contends that the contractual stipulation of a 3%
overriding commission covers the total revenue of American Air and not merely
that derived from ticketed sales undertaken by Orient Air. The latter, in
justification of its submission, invokes its designation as the exclusive General
Sales Agent of American Air, with the corresponding obligations arising from
such agency, such as, the promotion and solicitation for the services of its
principal. In effect, by virtue of such exclusivity, "all sales of transportation over
American Air's services are necessarily by Orient Air."11

It is a well settled legal principle that in the interpretation of a contract, the


entirety thereof must be taken into consideration to ascertain the meaning of its
provisions.12 The various stipulations in the contract must be read together to
give effect to all.13 After a careful examination of the records, the Court finds
merit in the contention of Orient Air that the Agreement, when interpreted in
accordance with the foregoing principles, entitles it to the 3% overriding
commission based on total revenue, or as referred to by the parties, "total flown
revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was
responsible for the promotion and marketing of American Air's services for air
passenger transportation, and the solicitation of sales therefor. In return for such
efforts and services, Orient Air was to be paid commissions of two (2) kinds: first,
a sales agency commission, ranging from 7-8% of tariff fares and charges from
sales by Orient Air when made on American Air ticket stock; and second, an
overriding commission of 3% of tariff fares and charges for all sales of passenger
transportation over American Air services. It is immediately observed that the
precondition attached to the first type of commission does not obtain for the
second type of commissions. The latter type of commissions would accrue for
sales of American Air services made not on its ticket stock but on the ticket stock
of other air carriers sold by such carriers or other authorized ticketing facilities or
travel agents. To rule otherwise, i.e., to limit the basis of such overriding
commissions to sales from American Air ticket stock would erase any distinction
between the two (2) types of commissions and would lead to the absurd
conclusion that the parties had entered into a contract with meaningless
provisions. Such an interpretation must at all times be avoided with every effort
exerted to harmonize the entire Agreement.
An additional point before finally disposing of this issue. It is clear from the
records that American Air was the party responsible for the preparation of the
Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be
taken "contra proferentem", i.e., construed against the party who caused the
ambiguity and could have avoided it by the exercise of a little more care. Thus,
Article 1377 of the Civil Code provides that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the obscurity. 14 To
put it differently, when several interpretations of a provision are otherwise equally
proper, that interpretation or construction is to be adopted which is most
favorable to the party in whose favor the provision was made and who did not
cause the ambiguity.15 We therefore agree with the respondent appellate court's
declaration that:

Any ambiguity in a contract, whose terms are susceptible of different


interpretations, must be read against the party who drafted it.16

We now turn to the propriety of American Air's termination of the Agreement. The
respondent appellate court, on this issue, ruled thus:

It is not denied that Orient withheld remittances but such action finds
justification from paragraph 4 of the Agreement, Exh. F, which provides for
remittances to American less commissions to which Orient is entitled, and
from paragraph 5(d) which specifically allows Orient to retain the full
amount of its commissions. Since, as stated ante, Orient is entitled to the
3% override. American's premise, therefore, for the cancellation of the
Agreement did not exist. . . ."

We agree with the findings of the respondent appellate court. As earlier


established, Orient Air was entitled to an overriding commission based on total
flown revenue. American Air's perception that Orient Air was remiss or in default
of its obligations under the Agreement was, in fact, a situation where the latter
acted in accordance with the Agreement—that of retaining from the sales
proceeds its accrued commissions before remitting the balance to American Air.
Since the latter was still obligated to Orient Air by way of such commissions.
Orient Air was clearly justified in retaining and refusing to remit the sums claimed
by American Air. The latter's termination of the Agreement was, therefore,
without cause and basis, for which it should be held liable to Orient Air.

On the matter of damages, the respondent appellate court modified by reduction


the trial court's award of exemplary damages and attorney's fees. This Court
sees no error in such modification and, thus, affirms the same.

It is believed, however, that respondent appellate court erred in affirming the rest
of the decision of the trial court.1âwphi1We refer particularly to the lower court's
decision ordering American Air to "reinstate defendant as its general sales agent
for passenger transportation in the Philippines in accordance with said GSA
Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect,
compels American Air to extend its personality to Orient Air. Such would be
violative of the principles and essence of agency, defined by law as a contract
whereby "a person binds himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENT OR AUTHORITY
OF THE LATTER .17 (emphasis supplied) In an agent-principal relationship, the
personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do. Such a relationship can only be effected
with the consent of the principal, which must not, in any way, be compelled by
law or by any court. The Agreement itself between the parties states that "either
party may terminate the Agreementwithout cause by giving the other 30 days'
notice by letter, telegram or cable." (emphasis supplied) We, therefore, set aside
the portion of the ruling of the respondent appellate court reinstating Orient Air as
general sales agent of American Air.

WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision
and resolution of the respondent Court of Appeals, dated 27 January 1986 and
17 December 1986, respectively. Costs against petitioner American Air.

SO ORDERED.

Melencio-Herrera, and Regalado, JJ., concur.


Paras, J., took no part. Son is a partner in one of the counsel.
Sarmiento, J., is on leave.

4. EUROTECH G.R. No. 167552


INDUSTRIAL
TECHNOLOGIES, INC., Present:
Petitioner,
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
CHICO-NAZARIO, and
NACHURA, JJ.

Promulgated:
EDWIN CUIZON and ERWIN
CUIZON, April 23, 2007
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision[1] of the Court of
Appeals dated 10 August 2004 and its Resolution[2] dated 17 March 2005 in CA-G.R. SP
No. 71397 entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.
Echavez. The assailed Decision and Resolution affirmed the Order[3] dated 29 January
2002rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN
Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various European


industrial equipment for customers here in the Philippines. It has as one of its customers
Impact Systems Sales (Impact Systems) which is a sole proprietorship owned by
respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to ninety-one thousand three hundred thirty-eight (P91,338.00)
pesos.Subsequently, respondents sought to buy from petitioner one unit of sludge pump
valued at P250,000.00 with respondents making a down payment of fifty thousand pesos
(P50,000.00).[4] When the sludge pump arrived from the United Kingdom, petitioner
refused to deliver the same to respondents without their having fully settled their
indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de
Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in
favor of petitioner, the pertinent part of which states:

1.) That ASSIGNOR[5] has an outstanding receivables from Toledo


Power Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (P365,000.00) PESOS as payment for the purchase of one unit
of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and
CONVEY unto the ASSIGNEE[6] the said receivables from Toledo Power
Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the
lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.[7]


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

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed


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

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

On 25 June 1997, respondent EDWIN filed his Answer[14] wherein he admitted


petitioners allegations with respect to the sale transactions entered into by Impact Systems
and petitioner between January and April 1995.[15] He, however, disputed the total amount
of Impact Systems indebtedness to petitioner which, according to him, amounted to
only P220,000.00.[16]

By way of special and affirmative defenses, respondent EDWIN alleged that he is


not a real party in interest in this case. According to him, he was acting as mere agent of
his principal, which was the Impact Systems, in his transaction with petitioner and the latter
was very much aware of this fact. In support of this argument, petitioner points to
paragraphs 1.2 and 1.3 of petitioners Complaint stating

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident


of Cebu City. He is the proprietor of a single proprietorship business known
as Impact Systems Sales (Impact Systems for brevity), with office located at
46-A del Rosario Street, Cebu City, where he may be served summons and
other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident


of Cebu City. He is the Sales Manager of Impact Systems and is sued in this
action in such capacity.[17]

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default


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

After the filing of respondent EDWINs Memorandum[21] in support of his special


and affirmative defenses and petitioners opposition[22] thereto, the trial court rendered its
assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant
in this case. According to the trial court

A study of Annex G to the complaint shows that in the Deed of


Assignment, defendant Edwin B. Cuizon acted in behalf of or represented
[Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship
entity and the complaint shows that defendant Erwin H. Cuizon is the
proprietor; that plaintiff corporation is represented by its general manager
Alberto de Jesus in the contract which is dated June 28, 1995. A study of
Annex H to the complaint reveals that [Impact] Systems Sales which is owned
solely by defendant Erwin H. Cuizon, made a down payment of P50,000.00
that Annex H is dated June 30, 1995 or two days after the execution of Annex
G, thereby showing that [Impact] Systems Sales ratified the act of Edwin B.
Cuizon; the records further show that plaintiff knew that [Impact] Systems
Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it
accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that
it was deceived by defendant Edwin B. Cuizon, since in the instant case the
principal has ratified the act of its agent and plaintiff knew about said
ratification. Plaintiff could not say that the subject contract was entered into
by Edwin B. Cuizon in excess of his powers since [Impact] Systems Sales
made a down payment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B.


Cuizon be dropped as party defendant.[23]

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court
of Appeals which, however, affirmed the 29 January 2002 Order of the court a quo.The
dispositive portion of the now assailed Decision of the Court of Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify the


conclusions reached by the public respondent in his Order dated January 29,
2002, it is hereby AFFIRMED.[24]

Petitioners motion for reconsideration was denied by the appellate court in its Resolution
promulgated on 17 March 2005. Hence, the present petition raising, as sole ground for its
allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR


WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT
OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT
PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED
BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE
IN THE PERPETUATION OF A FRAUD.[25]

To support its argument, petitioner points to Article 1897 of the New Civil Code which
states:

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

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

In his Comment,[28] respondent EDWIN again posits the argument that he is not a real party
in interest in this case and it was proper for the trial court to have him dropped as a
defendant. He insists that he was a mere agent of Impact Systems which is owned by
ERWIN and that his status as such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales manager of the said business
venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly
states that he was acting as a representative of Impact Systems in said transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something


in representation or on behalf of another with the latters consent.[29] The underlying
principle of the contract of agency is to accomplish results by using the services of others
to do a great variety of things like selling, buying, manufacturing, and transporting. [30]Its
purpose is to extend the personality of the principal or the party for whom another acts and
from whom he or she derives the authority to act.[31] It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within
the scope of his authority and said acts have the same legal effect as if they were personally
executed by the principal.[32] By this legal fiction, the actual or real absence of the principal
is converted into his legal or juridical presence qui facit per alium facit per se.[33]

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

In this case, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent. The only cause of the present
dispute is whether respondent EDWIN exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to
petitioner.Petitioner firmly believes that respondent EDWIN acted beyond the authority
granted by his principal and he should therefore bear the effect of his deed pursuant to
Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
presents two instances when an agent becomes personally liable to a third person. The first
is when he expressly binds himself to the obligation and the second is when he exceeds his
authority. In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. We hold that respondent EDWIN does not fall within any
of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales
manager of Impact Systems. As discussed elsewhere, the position of manager is unique in
that it presupposes the grant of broad powers with which to conduct the business of the
principal, thus:

The powers of an agent are particularly broad in the case of one acting
as a general agent or manager; such a position presupposes a degree of
confidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental or
appurtenant to the business entrusted to his care and management. In the
absence of an agreement to the contrary, a managing agent may enter into any
contracts that he deems reasonably necessary or requisite for the protection of
the interests of his principal entrusted to his management. x x x.[35]

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within
his authority when he signed the Deed of Assignment. To recall, petitioner refused to
deliver the one unit of sludge pump unless it received, in full, the payment for Impact
Systems indebtedness.[36] We may very well assume that Impact Systems desperately
needed the sludge pump for its business since after it paid the amount of fifty thousand
pesos (P50,000.00) as down payment on 3 March 1995,[37] it still persisted in negotiating
with petitioner which culminated in the execution of the Deed of Assignment of its
receivables from Toledo Power Company on 28 June 1995.[38] The significant amount of
time spent on the negotiation for the sale of the sludge pump underscores Impact Systems
perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind
that respondent EDWINs participation in the Deed of Assignment was reasonably
necessary or was required in order for him to protect the business of his principal. Had he
not acted in the way he did, the business of his principal would have been adversely
affected and he would have violated his fiduciary relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from
respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that
Article 1897 of the New Civil Code upon which petitioner anchors its claim against
respondent EDWIN does not hold that in case of excess of authority, both the agent and
the principal are liable to the other contracting party.[39] To reiterate, the first part of Article
1897 declares that the principal is liable in cases when the agent acted within the bounds
of his authority. Under this, the agent is completely absolved of any liability. The second
part of the said provision presents the situations when the agent himself becomes liable to
a third party when he expressly binds himself or he exceeds the limits of his authority
without giving notice of his powers to the third person. However, it must be pointed out
that in case of excess of authority by the agent, like what petitioner claims exists here, the
law does not say that a third person can recover from both the principal and the agent.[40]

As we declare that respondent EDWIN acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed of Assignment, it follows
that he is not a real party in interest who should be impleaded in this case. A real party in
interest is one who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.[41] In this respect, we sustain his exclusion as a defendant
in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decision
dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-
G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court,
Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch
8, Cebu City, for the continuation of the proceedings against respondent ERWIN
CUIZON.

SO ORDERED.

5. G.R. No. L-30573 October 29, 1971

VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO


VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR.,
SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitioners-
appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P.
PURISIMA, intervenor-respondent.

Teofilo Leonin for petitioners-appellants.

Osorio, Osorio & Osorio for respondent-appellee.

Teofilo P. Purisima in his own behalf as intervenor-respondent.

MAKASIAR, J.:

Petitioner-appellant Vicente M. Domingo, now deceased and represented by his


heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente
Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of
the majority decision dated, March 12, 1969 of the Special Division of Five of the
Court of Appeals affirming the judgment of the trial court, which sentenced the
said Vicente M. Domingo to pay Gregorio M. Domingo P2,307.50 and the
intervenor Teofilo P. Purisima P2,607.50 with interest on both amounts from the
date of the filing of the complaint, to pay Gregorio Domingo P1,000.00 as moral
and exemplary damages and P500.00 as attorney's fees plus costs.

The following facts were found to be established by the majority of the Special
Division of Five of the Court of Appeals:

In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo


granted Gregorio Domingo, a real estate broker, the exclusive agency to sell his
lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the
rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on
the total price, if the property is sold by Vicente or by anyone else during the 30-
day duration of the agency or if the property is sold by Vicente within three
months from the termination of the agency to apurchaser to whom it was
submitted by Gregorio during the continuance of the agency with notice to
Vicente. The said agency contract was in triplicate, one copy was given to
Vicente, while the original and another copy were retained by Gregorio.

On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look


for a buyer, promising him one-half of the 5% commission.

Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a


prospective buyer.

Oscar de Leon submitted a written offer which was very much lower than the
price of P2.00 per square meter (Exhibit "B"). Vicente directed Gregorio to tell
Oscar de Leon to raise his offer. After several conferences between Gregorio
and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956
as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C".
Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of
P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum
of P300.00. Oscar de Leon confirmed his former offer to pay for the property at
P1.20 per square meter in another letter, Exhibit "D". Subsequently, Vicente
asked for an additional amount of P1,000.00 as earnest money, which Oscar de
Leon promised to deliver to him. Thereafter, Exhibit "C" was amended to the
effect that Oscar de Leon will vacate on or about September 15, 1956 his house
and lot at Denver Street, Quezon City which is part of the purchase price. It was
again amended to the effect that Oscar will vacate his house and lot on
December 1, 1956, because his wife was on the family way and Vicente could
stay in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June
30, 1956 (the year 1957 therein is a mere typographical error) and marked
Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or
propina the sum of One Thousand Pesos (P1,000.00) for succeeding in
persuading Vicente to sell his lot at P1.20 per square meter or a total in round
figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One
Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither
did Oscar pay Vicente the additional amount of One Thousand Pesos
(P1,000.00) by way of earnest money. In the deed of sale was not executed on
August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as extended
by Vicente, Oscar told Gregorio that he did not receive his money from his
brother in the United States, for which reason he was giving up the negotiation
including the amount of One Thousand Pesos (P1,000.00) given as earnest
money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio
aspropina or gift. When Oscar did not see him after several weeks, Gregorio
sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A"
marked habit "A-1" to the effect that Vicente was still committed to pay him 5%
commission, if the sale is consummated within three months after the expiration
of the 30-day period of the exclusive agency in his favor from the execution of the
agency contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente
during the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore
it to pieces. Gregorio held his peace, not wanting to antagonize Vicente further,
because he had still duplicate of Exhibit "A". From his meeting with Vicente,
Gregorio proceeded to the office of the Register of Deeds of Quezon City, where
he discovered Exhibit "G' deed of sale executed on September 17, 1956 by
Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver
Street, Cubao, Quezon City, in favor Vicente as down payment by Oscar de Leon
on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus
learning that Vicente sold his property to the same buyer, Oscar de Leon and his
wife, he demanded in writting payment of his commission on the sale price of
One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also
conferred with Oscar de Leon, who told him that Vicente went to him and asked
him to eliminate Gregorio in the transaction and that he would sell his property to
him for One Hundred Four Thousand Pesos (P104,000.0 In Vicente's reply to
Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the
5% commission because he sold the property not to Gregorio's buyer, Oscar de
Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.

The Court of Appeals found from the evidence that Exhibit "A", the exclusive
agency contract, is genuine; that Amparo Diaz, the vendee, being the wife of
Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar
de Leon since husband and wife have common or identical interests; that
Gregorio and intervenor Teofilo Purisima were the efficient cause in the
consummation of the sale in favor of the spouses Oscar de Leon and Amparo
Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos
(P1,000.00) as "propina" or gift and not as additional earnest money to be given
to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar de Leon
with respect to the additional earnest money, does not appear to have been
answered by Oscar de Leon and therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid an additional earnest money
of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike
the first amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to
Vicente as earnest money, evidenced by the letter Exhibit "4"; and that Vicente
did not even mention such additional earnest money in his two replies Exhibits "I"
and "J" to Gregorio's letter of demand of the 5% commission.

The three issues in this appeal are (1) whether the failure on the part of Gregorio
to disclose to Vicente the payment to him by Oscar de Leon of the amount of
One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded
Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so
constitutes fraud as to cause a forfeiture of his commission on the sale price; (2)
whether Vicente or Gregorio should be liable directly to the intervenor Teofilo
Purisima for the latter's share in the expected commission of Gregorio by reason
of the sale; and (3) whether the award of legal interest, moral and exemplary
damages, attorney's fees and costs, was proper.

Unfortunately, the majority opinion penned by Justice Edilberto Soriano and


concurred in by Justice Juan Enriquez did not touch on these issues which were
extensively discussed by Justice Magno Gatmaitan in his dissenting opinion.
However, Justice Esguerra, in his concurring opinion, affirmed that it does not
constitute breach of trust or fraud on the part of the broker and regarded same as
merely part of the whole process of bringing about the meeting of the minds of
the seller and the purchaser and that the commitment from the prospect buyer
that he would give a reward to Gregorio if he could effect better terms for him
from the seller, independent of his legitimate commission, is not fraudulent,
because the principal can reject the terms offered by the prospective buyer if he
believes that such terms are onerous disadvantageous to him. On the other
hand, Justice Gatmaitan, with whom Justice Antonio Cafizares corner held the
view that such an act on the part of Gregorio was fraudulent and constituted a
breach of trust, which should deprive him of his right to the commission.

The duties and liabilities of a broker to his employer are essentially those which
an agent owes to his principal.1

Consequently, the decisive legal provisions are in found Articles 1891 and 1909
of the New Civil Code.

Art. 1891. Every agent is bound to render an account of his


transactions and to deliver to the principal whatever he may have
received by virtue of the agency, even though it may not be owing to
the principal.

Every stipulation exempting the agent from the obligation to render an


account shall be void.

xxx xxx xxx

Art. 1909. The agent is responsible not only for fraud but also for
negligence, which shall be judged with more less rigor by the courts,
according to whether the agency was or was not for a compensation.

Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil
Code which provides that:

Art. 1720. Every agent is bound to give an account of his transaction


and to pay to the principal whatever he may have received by virtue
of the agency, even though what he has received is not due to the
principal.
The modification contained in the first paragraph Article 1891 consists in
changing the phrase "to pay" to "to deliver", which latter term is more
comprehensive than the former.

Paragraph 2 of Article 1891 is a new addition designed to stress the highest


loyalty that is required to an agent — condemning as void any stipulation
exempting the agent from the duty and liability imposed on him in paragraph one
thereof.

Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726
of the old Spanish Civil Code which reads thus:

Art. 1726. The agent is liable not only for fraud, but also for
negligence, which shall be judged with more or less severity by the
courts, according to whether the agency was gratuitous or for a price
or reward.

The aforecited provisions demand the utmost good faith, fidelity, honesty, candor
and fairness on the part of the agent, the real estate broker in this case, to his
principal, the vendor. The law imposes upon the agent the absolute obligation to
make a full disclosure or complete account to his principal of all his transactions
and other material facts relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting the agent from such
an obligation and considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule but a rule
founded on the highest and truest principle of morality as well as of the strictest
justice.2

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or
personal benefit from the vendee, without revealing the same to his principal, the
vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to
collect the commission from his principal, even if the principal does not suffer any
injury by reason of such breach of fidelity, or that he obtained better results or
that the agency is a gratuitous one, or that usage or custom allows it; because
the rule is to prevent the possibility of any wrong, not to remedy or repair an
actual damage.3 By taking such profit or bonus or gift or propina from the vendee,
the agent thereby assumes a position wholly inconsistent with that of being an
agent for hisprincipal, who has a right to treat him, insofar as his commission is
concerned, as if no agency had existed. The fact that the principal may have
been benefited by the valuable services of the said agent does not exculpate the
agent who has only himself to blame for such a result by reason of his treachery
or perfidy.

This Court has been consistent in the rigorous application of Article 1720 of the
old Spanish Civil Code. Thus, for failure to deliver sums of money paid to him as
an insurance agent for the account of his employer as required by said Article
1720, said insurance agent was convicted estafa.4 An administrator of an estate
was likewise under the same Article 1720 for failure to render an account of his
administration to the heirs unless the heirs consented thereto or are estopped by
having accepted the correctness of his account previously rendered.5

Because of his responsibility under the aforecited article 1720, an agent is


likewise liable for estafa for failure to deliver to his principal the total amount
collected by him in behalf of his principal and cannot retain the commission
pertaining to him by subtracting the same from his collections.6

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

The American jurisprudence on this score is well-nigh unanimous.

Where a principal has paid an agent or broker a commission while


ignorant of the fact that the latter has been unfaithful, the principal
may recover back the commission paid, since an agent or broker who
has been unfaithful is not entitled to any compensation.

xxx xxx xxx

In discussing the right of the principal to recover commissions


retained by an unfaithful agent, the court in Little vs. Phipps (1911)
208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: "It is well settled
that the agent is bound to exercise the utmost good faith in his
dealings with his principal. As Lord Cairns said, this rule "is not a
technical or arbitrary rule. It is a rule founded on the highest and
truest principles, of morality." Parker vs. McKenna (1874) LR
10,Ch(Eng) 96,118 ... If the agent does not conduct himself with
entire fidelity towards his principal, but is guilty of taking a secret
profit or commission in regard the matter in which he is employed, he
loses his right to compensation on the ground that he has taken a
position wholly inconsistent with that of agent for his employer, and
which gives his employer, upon discovering it, the right to treat him so
far as compensation, at least, is concerned as if no agency had
existed. This may operate to give to the principal the benefit of
valuable services rendered by the agent, but the agent has only
himself to blame for that result."

xxx xxx xxx

The intent with which the agent took a secret profit has been held
immaterial where the agent has in fact entered into a relationship
inconsistent with his agency, since the law condemns the corrupting
tendency of the inconsistent relationship. Little vs. Phipps (1911) 94
NE 260.9

As a general rule, it is a breach of good faith and loyalty to his


principal for an agent, while the agency exists, so to deal with the
subject matter thereof, or with information acquired during the course
of the agency, as to make a profit out of it for himself in excess of his
lawful compensation; and if he does so he may be held as a
trustee and may be compelled to account to his principal for all
profits, advantages, rights, or privileges acquired by him in such
dealings, whether in performance or in violation of his duties, and be
required to transfer them to his principal upon being reimbursed for
his expenditures for the same, unless the principal has consented to
or ratified the transaction knowing that benefit or profit would accrue
or had accrued, to the agent, or unless with such knowledge he has
allowed the agent so as to change his condition that he cannot be put
in status quo. The application of this rule is not affected by the fact
that the principal did not suffer any injury by reason of the agent's
dealings or that he in fact obtained better results; nor is it affected by
the fact that there is a usage or custom to the contrary or that the
agency is a gratuitous one. (Emphasis applied.) 10

In the case at bar, defendant-appellee Gregorio Domingo as the broker, received


a gift or propina in the amount of One Thousand Pesos (P1,000.00) from the
prospective buyer Oscar de Leon, without the knowledge and consent of his
principal, herein petitioner-appellant Vicente Domingo. His acceptance of said
substantial monetary gift corrupted his duty to serve the interests only of his
principal and undermined his loyalty to his principal, who gave him partial
advance of Three Hundred Pesos (P300.00) on his commission. As a
consequence, instead of exerting his best to persuade his prospective buyer to
purchase the property on the most advantageous terms desired by his principal,
the broker, herein defendant-appellee Gregorio Domingo, succeeded in
persuading his principal to accept the counter-offer of the prospective buyer to
purchase the property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square
meters, which is very much lower the the price of P2.00 per square meter or One
Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00)
for said lot originally offered by his principal.

The duty embodied in Article 1891 of the New Civil Code will not apply if the
agent or broker acted only as a middleman with the task of merely bringing
together the vendor and vendee, who themselves thereafter will negotiate on the
terms and conditions of the transaction. Neither would the rule apply if the agent
or broker had informed the principal of the gift or bonus or profit he received from
the purchaser and his principal did not object therto. 11 Herein defendant-
appellee Gregorio Domingo was not merely a middleman of the petitioner-
appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and
agent of said petitioner-appellant only. And therein petitioner-appellant was not
aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio
Domingo from the prospective buyer; much less did he consent to his agent's
accepting such a gift.

The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of
Oscar de Leon, does not materially alter the situation; because the transaction, to
be valid, must necessarily be with the consent of the husband Oscar de Leon,
who is the administrator of their conjugal assets including their house and lot at
No. 40 Denver Street, Cubao, Quezon City, which were given as part of and
constituted the down payment on, the purchase price of herein petitioner-
appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still
Oscar de Leon who was the buyer.

As a necessary consequence of such breach of trust, defendant-appellee


Gregorio Domingo must forfeit his right to the commission and must return the
part of the commission he received from his principal.

Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from
Gregorio Domingo his one-half share of whatever amounts Gregorio Domingo
received by virtue of the transaction as his sub-agency contract was with
Gregorio Domingo alone and not with Vicente Domingo, who was not even
aware of such sub-agency. Since Gregorio Domingo received from Vicente
Domingo and Oscar de Leon respectively the amounts of Three Hundred Pesos
(P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand
Three Hundred Pesos (P1,300.00), one-half of the same, which is Six Hundred
Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima.

Because Gregorio Domingo's clearly unfounded complaint caused Vicente


Domingo mental anguish and serious anxiety as well as wounded feelings,
petitioner-appellant Vicente Domingo should be awarded moral damages in the
reasonable amount of One Thousand Pesos (P1,000.00) attorney's fees in the
reasonable amount of One Thousand Pesos (P1,000.00), considering that this
case has been pending for the last fifteen (15) years from its filing on October 3,
1956.

WHEREFORE, the judgment is hereby rendered, reversing the decision of the


Court of Appeals and directing defendant-appellee Gregorio Domingo: (1) to pay
to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as
moral damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to
pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to
pay the costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando,


Teehankee, Barredo and Villamor, JJ., concur.

6. G.R. No. 94753. April 7, 1993.

MANOTOK BROTHERS, INC., petitioner,


vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE JUDGE OF THE
REGIONAL TRIAL COURT OF MANILA (Branch VI), and SALVADOR
SALIGUMBA, respondents.
Antonio C. Ravelo for petitioner.

Remigio M. Trinidad for private respondent.

SYLLABUS

1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN ENTITLED' RULE;


APPLICATION IN CASE AT BAR. — In an earlier case, this Court ruled that
when there is a close, proximate and causal connection between the agent's
efforts and labor and the principal's sale of his property, the agent is entitled to a
commission. We agree with respondent Court that the City of Manila ultimately
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.

DECISION

CAMPOS, JR., J p:

Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed as


G.R. No. 94753 sought relief from this Court's Resolution dated May 3, 1989,
which reads:

"G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court of
Appeals). — Considering the manifestation of compliance by counsel for
petitioner dated April 14, 1989 with the resolution of March 13, 1989 which
required the petitioner to locate private respondent and to inform this Court of the
present address of said private respondent, the Court Resolved to DISMISS this
case, as the issues cannot be joined as private respondent's and counsel's
addresses cannot be furnished by the petitioner to this court." 1

In addition, petitioner prayed for the issuance of a preliminary injunction to


prevent irreparable injury to itself pending resolution by this Court of its cause.
Petitioner likewise urged this Court to hold in contempt private respondent for
allegedly adopting sinister ploy to deprive petitioner of its constitutional right to
due process.

Acting on said Petition, this Court in a Resolution 2 dated October 1, 1990 set
aside the entry of judgment made on May 3, 1989 in case G.R. No. 78898;
admitted the amended petition; and issued a temporary restraining order to
restrain the execution of the judgment appealed from.

The amended petition 3 admitted, by this Court sought relief from this Court's
Resolution abovequoted. In the alternative, petitioner 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 opportunity to be heard.

The facts as found by the appellate court, revealed that petitioner herein (then
defendant-appellant) is the owner of a certain 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. Jhocson Street, Sampaloc Manila.

By means of a letter 5 dated July 5, 1966, petitioner authorized herein private


respondent Salvador Saligumba to negotiate with the City of Manila the sale of
the aforementioned property for not less than P425,000.00. In the same writing,
petitioner agreed to pay private respondent a five percent (5%) commission in
the event the sale is finally consummated and paid.

Petitioner, on March 4, 1967, executed another letter 6 extending the authority of


private respondent for 120 days. Thereafter, another extension was granted to
him for 120 more days, as evidenced by another letter 7 dated June 26, 1967.

Finally, through another letter 8 dated November 16, 1967, the corporation with
Rufino Manotok, its President, as signatory, authorized private respondent to
finalize and consummate the sale of the property to the City of Manila for not less
than P410,000.00. With this letter came another extension of 180 days.

The Municipal Board of the City of Manila eventually, on April 26, 1968, passed
Ordinance No. 6603, appropriating the sum of P410,816.00 for the purchase of
the property which private respondent was authorized to sell. Said ordinance
however, was signed by the City Mayor only on May 17, 1968, one hundred
eighty three (183) days after the last letter of authorization.

On January 14, 1969, the parties signed the deed of sale of the subject property.
The initial payment of P200,000.00 having been made, the purchase price was
fully satisfied with a second payment on April 8, 1969 by a check in the amount
of P210,816.00.

Notwithstanding the realization of the sale, private respondent never received


any commission, which should have amounted to P20,554.50. This was due to
the refusal of petitioner to pay private respondent said amount as the former
does not recognize the latter's role as agent in the transaction.

Consequently, on June 29, 1969, private respondent filed a complaint against


petitioner, alleging that he had successfully negotiated the sale of the property.
He claimed that it was because of his efforts that the Municipal Board of Manila
passed Ordinance No. 6603 which appropriated the sum for the payment of the
property subject of the sale.

Petitioner claimed otherwise. It denied the claim of private respondent on the


following grounds: (1) private respondent would be entitled to a commission only
if the sale was consummated and the price paid within the period given in the
respective letters of authority; and (2) private respondent was not the person
responsible for the negotiation and consummation of the sale, instead it was
Filomeno E. Huelgas, the PTA president for 1967-1968 of the Claro M. Recto
High School. As a counterclaim, petitioner (then defendant-appellant) demanded
the sum of P4,000.00 as attorney's fees and for moral damages.

Thereafter, trial ensued. Private respondent, then plaintiff, testified as to the


efforts undertaken by him to ensure the consummation of the sale. He recounted
that it first began at a meeting with Rufino Manotok at the office of Fructuoso
Ancheta, principal of C.M. Recto High School. Atty. Dominador Bisbal, then
president of the PTA, was also present. The meeting was set precisely to ask
private respondent to negotiate the sale of the school lot and building to the City
of Manila. Private respondent then went to Councilor Mariano Magsalin, the
author of the Ordinance which appropriated the money for the purchase of said
property, to present the project. He also went to the Assessor's Office for
appraisal of the value of the property. While these transpired and his letters of
authority expired, Rufino Manotok always renewed the former's authorization
until the last was given, which was to remain in force until May 14, 1968. After
securing the report of the appraisal committee, he went to the City Mayor's
Office, which indorsed the matter to the Superintendent of City Schools of
Manila. The latter office approved the report and so private respondent went
back to the City Mayor's Office, which thereafter indorsed the same to the
Municipal Board for appropriation. Subsequently, on April 26, 1968, Ordinance
No. 6603 was passed by the Municipal Board for the appropriation of the sum
corresponding to the purchase price. Petitioner received the full payment of the
purchase price, but private respondent did not receive a single centavo as
commission.

Fructuoso Ancheta and Atty. Dominador Bisbal both testified acknowledging the
authority of private respondent regarding the transaction.

Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's


President, Rufino Manotok.

Huelgas testified to the effect that after being inducted as PTA president in
August, 1967 he followed up the sale from the start with Councilor Magsalin until
after it was approved by the Mayor on May 17, 1968. He. also said that he came
to know Rufino Manotok only in August, 1968, at which meeting the latter told
him that he would be given a "gratification" in the amount of P20,000.00 if the
sale was expedited.

Rufino Manotok confirmed that he knew Huelgas and that there was an
agreement between the two of them regarding the "gratification".

On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings from
1965 to 1967 but he never offered to help in the acquisition of said property.
Moreover, he testified that Huelgas was aware of the fact that it was private
respondent who was negotiating the sale of the subject property.

Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered
judgment sentencing petitioner and/or Rufino Manotok to pay unto private
respondent the sum of P20,540.00 by way of his commission fees with legal
interest thereon from the date of the filing of the complaint until payment. The
lower court also ordered petitioner to pay private respondent the amount of
P4,000.00 as and for attorney's fees. 9

Petitioner appealed said decision, but to no avail. Respondent Court of Appeals


affirmed the said ruling of the trial court. 10

Its Motion for Reconsideration having been denied by respondent appellate court
in a Resolution dated June 22, 1987, petitioner seasonably elevated its case on
Petition for Review on Certiorari on August 10, 1987 before this Court, docketed
as G.R. No. 78898.

Acting on said Petition, this Court issued a Minute Resolution 11 dated August
31, 1987 ordering private respondent to comment on said Petition.

It appearing that the abovementioned Resolution was returned unserved with the
postmaster's notation "unclaimed", this Court in another Resolution 12 dated
March 13, 1989, required petitioner to locate private respondent and to inform
this Court of the present address of private respondent within ten (10) days from
notice. As petitioner was unsuccessful in its efforts to locate private respondent, it
opted to manifest that private respondent's last address was the same as that
address to which this. Court's Resolution was forwarded.

Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing


petitioner's case on the ground that the issues raised in the case at bar cannot be
joined. Thus, the above-entitled case became final and executory by the entry of
judgment on May 3, 1989.

Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the


said judgment before the court of origin. Upon discovery of said development,
petitioner verified with the court of origin the circumstances by which private
respondent obtained knowledge of the resolution of this Court. Sensing a
fraudulent scheme employed by private respondent, petitioner then instituted this
instant Petition for Relief, on August 30, 1990. On September 13, 1990, said
petition was amended to include, in the alternative, its petition to re-file its
Petition for Certiorari (G.R. No. 78898).

The sole issue to be addressed in this petition is whether or not private


respondent is entitled to the five percent (5%) agent's commission.

It is petitioner's contention that as a broker, private respondent's job 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 vendor to an agreement with
respect to the sale, he is not entitled to a commission.

Private respondent, on the other hand, opposes petitioner's position maintaining


that it was because of his efforts that a purchase actually materialized between
the parties.

We rule in favor of private respondent.


At first sight, it would seem that private respondent is not entitled to any
commission as he was not successful in consummating the sale between the
parties, for the sole reason that when the Deed of Sale was finally executed, his
extended authority had already expired. By this alone, one might be misled to
believe that this case squarely falls within the ambit of the established principle
that a broker or agent is not entitled to any commission until he has successfully
done the job given to him. 13

Going deeper however into the case would reveal that it is within the coverage of
the exception rather than of the general rule, the exception being that enunciated
in the case of Prats vs. Court of Appeals. 14 In the said case, this Court ruled in
favor of claimant-agent, despite the expiration of his authority, when a sale was
finally consummated.

In its decision in the abovecited case, this Court said, that while it was
respondent court's (referring to the Court of Appeals) factual findings that
petitioner Prats (claimant-agent) was not the efficient procuring cause in bringing
about the sale (prescinding from the fact of expiration of his exclusive authority),
still petitioner was awarded compensation for his services. And We quote:

"In equity, however, the Court notes that petitioner had diligently taken steps to
bring back together respondent Doronila and the SSS,.

xxx xxx xxx

The court has noted on the other hand that Doronila finally sold the property to
the Social Security System at P3.25 per square meter which was the very same
price counter-offered by the Social Security System and accepted by him in July,
1967 when he alone was dealing exclusively with the said buyer long before
Prats came into the picture but that on the other hand Prats' efforts somehow
were instrumental in bringing them together again and finally consummating the
transaction at the same price of P3.25 per square meter, although such
finalization was after the expiration of Prats' extended exclusive authority.

xxx xxx xxx

Under the circumstances, the Court grants in equity the sum of One hundred
Thousand Pesos (P100,000.00) by way of compensation for his efforts and
assistance in the transaction, which however was finalized and consummated
after the expiration of his exclusive authority . . ." 15 (Emphasis supplied.).

From the foregoing, it follows then that private respondent herein, with more
reason, should be paid his commission, While in Prats vs. Court of Appeals, the
agent was not even the efficient procuring cause in bringing about the sale,
unlike in the case at bar, it was still held therein that the agent was entitled to
compensation. In the case at bar, private respondent is the efficient procuring
cause for without his efforts, the municipality would not have anything to pass
and the Mayor would not have anything to approve.
In an earlier case, 16 this Court ruled that when there is a close, proximate and
causal connection between the agent's efforts and labor and the principal's sale
of his property, the agent is entitled to a commission.

We agree with respondent Court that the City of Manila ultimately 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.

Contrary to what petitioner advances, the case of Danon vs. Brimo, 17 on which
it heavily anchors its justification for the denial of private respondent's claim, does
not apply squarely to the instant petition. Claimant-agent in said case fully
comprehended the possibility that he may not realize the agent's commission as
he was informed that another agent was also negotiating the sale and thus,
compensation will pertain to the one who finds a purchaser and eventually effects
the sale. Such is not the case herein. On the contrary, private respondent
pursued with his goal of seeing that the parties reach an agreement, on the belief
that he alone was transacting the business with the City Government as this was
what petitioner made it to appear.

While it may be true that Filomeno Huelgas followed up the matter with Councilor
Magsalin, the author of Municipal Ordinance No. 6603 and Mayor Villegas, his
intervention regarding the purchase came only after the ordinance had already
been passed — when the buyer has already agreed to the purchase and to the
price for which said property is to be paid. Without the efforts of private
respondent then, Mayor Villegas would have nothing to approve in the first place.
It was actually private respondent's labor that had set in motion the intervention
of the third party that produced the sale, hence he should be amply
compensated.

WHEREFORE, in the light of the foregoing and finding no reversible error


committed by respondent Court, the decision of the Court of Appeals is hereby
AFFIRMED. The temporary restraining order issued by this Court in its
Resolution dated October 1, 1990 is hereby lifted.

SO ORDERED.

Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

7. G.R. No. 76969 June 9, 1997


INLAND REALTY INVESTMENT SERVICE, INC. and ROMAN M. DE LOS
REYES, petitioners,
vs.
HON. COURT OF APPEALS, GREGORIO ARANETA, INC. and J. ARMANDO
EDUQUE, respondents.

HERMOSISIMA, JR., J.:

Herein petitioners Inland Realty Investment Service, Inc. (hereafter, "Inland


Realty") and Roman M. de los Reyes seek the reversal of the Decision1 of the
Intermediate Appellate Court (now Court of Appeals)2 which affirmed the trial
court's dismissal3 of petitioners' claim for unpaid agent's commission for
brokering the sales transaction involving 9,800 shares of stock in Architects'
Bldg., Inc. (hereafter, "Architects"') between private respondent Gregorio
Araneta, Inc. (hereafter, "Araneta, Inc.") as seller and Stanford Microsystems,
Inc. (hereafter, "Stanford") as buyer.

Petitioners come to us with a two-fold agenda: (1) to obtain from us a declaration


that the trial court and the respondent appellate court gravely erred when
appreciating the facts of the case by disregarding Exhibits "L," a Letter dated
October 28, 1976 signed by Gregorio Araneta II, renewing petitioners' authority to
act as sales agent for a period of thirty (30) days from same date, and Exhibit
"M," a Letter dated November 16, 1976 signed by petitioner de los Reyes,
naming four (4) other prospective buyers, respectively; and (2) to obtain from us
a categorical ruling that a broker is automatically entitled to the stipulated
commission merely upon securing for, and introducing to, the seller the particular
buyer who ultimately purchases from the former the object of the sale, regardless
of the expiration of the broker's contract of agency and authority to sell.

Before we proceed to address petitioners' objectives, there is a need to unfold


the facts of the case. For that purpose, we quote hereunder the findings of fact of
the Court of Appeals with which petitioners agree, except as to the respondent
appellate court's non-inclusion of the aforementioned Exhibits "L" and "M":

From the evidence, the following facts appear undisputed: On


September 16, 1975, defendant corporation thru its co-defendant
Assistant General Manager J. Armando Eduque, granted to plaintiffs
a 30-day authority to sell its . . . 9,800 shares of stock in Architects'
Bldg., Inc. as follows:

S
e
p
t
e
m
b
e
r
1
6
,
1
9
7
5

TO WHOM IT MAY CONCERN:

This is to authorize Mr. R.M. de los Reyes, representing


Inland Realty, to sell on a first come first served basis the
total holdings of Gregorio Araneta, Inc. in Architects'
[Bldg.], Inc. equivalent to 98% or 9,800 shares of stock at
the price of P1,500.00 per share for a period of 30 days.

(SGD.) J.
ARMANDO
EDUQUE

Asst.
General
Manager'

Plaintiff Inland Realty Investment Service, Inc. (Inland Realty for


short) is a corporation engaged [in], among others . . . the real estate
business [and] brokerages, duly licensed by the Bureau of Domestic
Trade . . . [Inland Realty] planned their sales campaign, sending
proposal letters to prospective buyers. One such prospective buyer to
whom a proposal letter was sent to was Stanford Microsystems, Inc. .
. . [that] counter-proposed to buy 9,800 shares offered at P1,000.00
per share or for a total of P9,800,000.00, P4,900,000.00 payable in
five years at 12% per annum interest until fully paid.

Upon plaintiffs' receipt of the said counter-proposal, it immediately


[sic] wrote defendant a letter to register Stanford Microsystems, Inc.
as one of its prospective buyers . . . Defendant Araneta, Inc., thru its
Assistant General Manager J. Armando Eduque, replied that the price
offered by Stanford was too low and suggested that plaintiffs see if
the price and terms of payment can be improved upon by Stanford . .
. Other prospective buyers were submitted to defendants among
whom were Atty. Maximo F. Belmonte and Mr. Joselito Hernandez.
The authority to sell given to plaintiffs by defendants was extended
several times: the first being on October 2, 1975, for 30 days from
said date (Exh. "J"), the second on October 28, 1975 for 30 days from
said date (Exh. "L") and on December 2, 1975 for 30 days from said
date (Exh. "K").
Plaintiff Roman de los Reyes, manager of Inland Realty's brokerage
division, who by contract with Inland Realty would be entitled to 1/2 of
the claim asserted herein, testified that when his company was
initially granted the authority to sell, he asked for an exclusive
authority and for a longer period but Armando Eduque would not give,
but according to this witness, the life of the authority could always be
extended for the purpose of negotiation that would be continuing.

On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock


[in] Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. for
P13,500,000.00 . . .

On September 6, 1977, plaintiffs demanded formally [from]


defendants, through a letter of demand, for payment of their 5%
broker['s] commission at P13,500,000.00 or a total amount of
P675,000.00 . . . which was declined by [defendants] on the ground
that the claim has no factual or legal basis.4

Ascribing merit to private respondents' defense that, after their authority to sell
expired thirty (30) days from December 2, 1975, or on January 1, 1976,
petitioners abandoned the sales transaction and were no longer privy to the
consummation and documentation thereof, the trial court dismissed petitioners'
complaint for collection of unpaid broker's commission.

Petitioners appealed, but the Court of Appeals was unswayed in the face of
evidence of the expiration of petitioners' agency contract and authority to sell on
January 1, 1976 and the consummation of the sale to Stanford on July 8, 1977 or
more than one (1) year and five (5) months after petitioners' agency contract and
authority to sell expired. Respondent appellate court dismissed petitioners'
appeal in this wise:

. . . The resolution would seem to hinge on the question of whether


plaintiff was instrumental in the final consummation of the sale to
Stanford which was the same name of the company submitted to
defendants as a prospective buyer although their price was
considered by defendant to be too low and defendants wrote to
plaintiff if the price may be improved upon by Stanford . . . This was
on October 13, 1975. After that, there was an extension for 30 days
from October 28, 1975 of the authority (Exh. "L") and another on
December 2, 1975 for another 30 days from the said date . . . . There
is nothing in the record or in the testimonial evidence that the
authority extended 30 days from the last date of extension was ever
reserved nor extended, nor has there been any communication made
to defendants that the plaintiff was actually negotiating with Stanford
a better price than what was previously offered by it . . . .

In fact there was no longer any agency after the last extension.
Certainly, the length of time which had transpired from the date of last
extension of authority to the final consummation of the sale with
Stanford of about one (1) year and five (5) months without any
communication at all from plaintiffs to defendants with respect to the
suggestion or defendants that Stanford's offer was too low and
suggested if plaintiffs may make it better. We have a case of proposal
and counter-proposal which would not constitute a definite closing of
the transaction just because it was plaintiff who solely suggested to
defendants the name of Stanford as buyer . . . .5

Unable to accept the dismissal of its claim for unpaid broker's commission,
petitioners filed the instant petition for review asking us (1) to pass upon the
factual issue of the alleged extension of their agency contract and authority to
sell and (2) to rule in favor of a broker's automatic entitlement to the stipulated
commission merely upon securing for, and introducing to, the seller, the
particular buyer who ultimately purchases from the former the object of the sale,
regardless of the expiration of the broker's contract of agency and authority to
sell.

We find for private respondents.

Petitioners take exception to the finding of the respondent Court of Appeals that
their contract of agency and authority to sell expired thirty (30) days from its last
renewal on December 2, 1975. They insist that, in the Letter dated October 28,
1976, Gregorio Araneta III, in behalf of Araneta, Inc., renewed petitioner Inland
Realty's authority to act as agent to sell the former's 9,800 shares in Architects'
for another thirty (30) days from same date. This Letter dated October 28, 1976,
petitioners claim, was marked as Exhibit "L" during the trial proceedings before
the trial court.

This claim is a blatant lie. In the first place, petitioners have conspicuously failed
to attach a certified copy of this Letter dated October 28, 1976. They have, in
fact, not attached even a machine copy thereof. All they gave this court is their
word that said Letter dated October 28, 1976 does exist, and on that basis, they
expect us to accordingly rule in their favor.

Such naivety, this court will not tolerate. We will not treat lightly petitioners'
attempt to mislead this court by claiming that the Letter dated October 28, 1976
was marked as Exhibit "L" by the trial court, when the truth is that the trial court
marked as Exhibit "L", and the respondent Court of Appeals considered as
Exhibit "L," private respondent Araneta, Inc.'s Letter dated October 28, 1975,
not 1976. Needless to say, this blatant attempt to mislead this court, is
contemptuous conduct that we sternly condemn.

II

The Letter dated November 16, 1976, claimed by petitioners to have been
marked as Exhibit "M", has no probative value, considering that its very existence
remains under a heavy cloud of doubt and that hypothetically assuming its
existence, its alleged content, namely, a listing of four (4) other prospective
buyers, does not at all prove that the agency contract and authority to sell in
favor of petitioners was renewed or revived after it expired on January 1, 1976.
As in the case of the Letter dated October 28, 1976, petitioners have miserably
failed to attach any copy of the Letter dated November 16, 1976. A copy thereof
would not help petitioners' failing cause, anyway, especially considering that said
letter was signed by petitioner De los Reyes and would therefore take on the
nature of a self-serving document that has no evidentiary value insofar as
petitioners are concerned.

III

Finally, petitioners asseverate that, regardless of whether or not their agency


contract and authority to sell had expired, they are automatically entitled to their
broker's commission merely upon securing for and introducing to private
respondent Araneta, Inc. the buyer in the person of Stanford which ultimately
acquired ownership over Araneta, Inc.'s 9,800 shares in Architects'.

Petitioners' asseverations are devoid of merit.

It is understandable, though, why petitioners have resorted to a campaign for an


automatic and blanket entitlement to brokerage commission upon doing nothing
but submitting to private respondent Araneta, Inc., the name of Stanford as
prospective buyer of the latter's shares in Architects'. Of course petitioners would
advocate as such because precisely petitioners did nothing but submit Stanford's
name as prospective buyer. Petitioners did not succeed in outrightly selling said
shares under the predetermined terms and conditions set out by Araneta, Inc.,
e.g., that the price per share is P1,500.00. They admit that they could not
dissuade Stanford from haggling for the price of P1,000.00 per share with the
balance of 50% of the total purchase price payable in five (5) years at 12%
interest per annum. From September 16, 1975 to January 1, 1976, when
petitioners' authority to sell was subsisting, if at all, petitioners had nothing to
show that they actively served their principal's interests, pursued to sell the
shares in accordance with their principal's terms and conditions, and performed
substantial acts that proximately and causatively led to the consummation of the
sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.

The Court of Appeals cannot be faulted for emphasizing the lapse of more than
one (1) year and five (5) months between the expiration of petitioners' authority to
sell and the consummation of the sale to Stanford, to be a significant index of
petitioners' non-participation in the really critical events leading to the
consummation of said sale, i.e., the negotiations to convince Stanford to sell at
Araneta, Inc.'s asking price, the finalization of the terms and conditions of the
sale, the drafting of the deed of sale, the processing of pertinent documents, and
the delivery of the shares of stock to Stanford. Certainly, when the lapse of the
period of more than one (1) year and five (5) months between the expiration of
petitioners' authority to sell and the consummation of the sale, is viewed in the
context of the utter lack of evidence of petitioners' involvement in the negotiations
between Araneta, Inc. and Stanford during that period and in the subsequent
processing of the documents pertinent to said sale, it becomes undeniable that
the respondent Court of Appeals did not at all err in affirming the trial court's
dismissal of petitioners' claim for unpaid brokerage commission.

Petitioners were not the efficient procuring cause6 in bringing about the sale in
question an July 8, 1977 and are, therefore, not entitled to the stipulated broker's
commission of "5% on the total price."

WHEREFORE, the instant petition is HEREBY DISMISSED.

Costs against petitioners.

SO ORDERED.

8. [G.R. No. 143978. December 3, 2002]

MANUEL B. TAN, GREGG M. TECSON and ALEXANDER


SALDAA, petitioners, vs. EDUARDO R. GULLAS and NORMA S.
GULLAS, respondents.

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review seeking to set aside the decision[1] of the Court of
Appeals[2] in CA-G.R. CV No. 46539, which reversed and set aside the
decision[3] of the Regional Trial Court of Cebu City, Branch 22 in Civil Case No.
CEB-12740.
The records show that private respondents, Spouses Eduardo R. Gullas and
Norma S. Gullas, were the registered owners of a parcel of land in the Municipality
of Minglanilla, Province of Cebu, measuring 104,114 sq. m., with Transfer
Certificate of Title No. 31465.[4] On June 29, 1992, they executed a special power
of attorney[5] authorizing petitioners Manuel B. Tan, a licensed real estate
broker,[6] and his associates Gregg M. Tecson and Alexander Saldaa, to negotiate
for the sale of the land at Five Hundred Fifty Pesos (P550.00) per square meter,
at a commission of 3% of the gross price. The power of attorney was non-exclusive
and effective for one month from June 29, 1992.[7]
On the same date, petitioner Tan contacted Engineer Edsel Ledesma,
construction manager of the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters
of Mary), a religious organization interested in acquiring a property in the
Minglanilla area.
In the morning of July 1, 1992, petitioner Tan visited the property with Engineer
Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim and
Azucena Gaviola, representing the Sisters of Mary, to see private respondent
Eduardo Gullas in his office at the University of Visayas. The Sisters, who had
already seen and inspected the land, found the same suitable for their purpose
and expressed their desire to buy it.[8] However, they requested that the selling
price be reduced to Five Hundred Thirty Pesos (P530.00) per square meter instead
of Five Hundred Fifty Pesos (P550.00) per square meter. Private respondent
Eduardo Gullas referred the prospective buyers to his wife.
It was the first time that the buyers came to know that private respondent
Eduardo Gullas was the owner of the property. On July 3, 1992, private
respondents agreed to sell the property to the Sisters of Mary, and subsequently
executed a special power of attorney[9] in favor of Eufemia Caete, giving her the
special authority to sell, transfer and convey the land at a fixed price of Two
Hundred Pesos (P200.00) per square meter.
On July 17, 1992, attorney-in-fact Eufemia Caete executed a deed of sale in
favor of the Sisters of Mary for the price of Twenty Million Eight Hundred Twenty
Two Thousand Eight Hundred Pesos (P20,822,800.00), or at the rate of Two
Hundred Pesos (P200.00) per square meter.[10] The buyers subsequently paid the
corresponding taxes.[11] Thereafter, the Register of Deeds of Cebu Province issued
TCT No. 75981 in the name of the Sisters of Mary of Banneaux, Inc.[12]
Earlier, on July 3, 1992, in the afternoon, petitioners went to see private
respondent Eduardo Gullas to claim their commission, but the latter told them that
he and his wife have already agreed to sell the property to the Sisters of Mary.
Private respondents refused to pay the brokers fee and alleged that another group
of agents was responsible for the sale of land to the Sisters of Mary.
On August 28, 1992, petitioners filed a complaint[13] against the defendants for
recovery of their brokers fee in the sum of One Million Six Hundred Fifty Five
Thousand Four Hundred Twelve and 60/100 Pesos (P1,655,412.60), as well as
moral and exemplary damages and attorneys fees. They alleged that they were
the efficient procuring cause in bringing about the sale of the property to the Sisters
of Mary, but that their efforts in consummating the sale were frustrated by the
private respondents who, in evident bad faith, malice and in order to evade
payment of brokers fee, dealt directly with the buyer whom petitioners introduced
to them. They further pointed out that the deed of sale was undervalued obviously
to evade payment of the correct amount of capital gains tax, documentary stamps
and other internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners
claim, they were not the efficient procuring cause in bringing about the
consummation of the sale because another broker, Roberto Pacana, introduced
the property to the Sisters of Mary ahead of the petitioners.[14] Private respondents
maintained that when petitioners introduced the buyers to private respondent
Eduardo Gullas, the former were already decided in buying the property through
Pacana, who had been paid his commission. Private respondent Eduardo Gullas
admitted that petitioners were in his office on July 3, 1992, but only to ask for the
reimbursement of their cellular phone expenses.
In their reply and answer to counterclaim,[15] petitioners alleged that although
the Sisters of Mary knew that the subject land was for sale through various agents,
it was petitioners who introduced them to the owners thereof.
After trial, the lower court rendered judgment in favor of petitioners, the
dispositive portion of which reads:

WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is hereby


rendered for the plaintiffs and against the defendants. By virtue hereof, defendants
Eduardo and Norma Gullas are hereby ordered to pay jointly and severally plaintiffs
Manuel Tan, Gregg Tecson and Alexander Saldaa;

1) The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX HUNDRED
EIGHTY FOUR PESOS (P624,684.00) as brokers fee with legal interest at the rate of 6%
per annum from the date of filing of the complaint; and

2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees and costs of
litigation.

For lack of merit, defendants counterclaim is hereby DISMISSED.

IT IS SO ORDERED.[16]

Both parties appealed to the Court of Appeals. Private respondents argued that
the lower court committed errors of fact and law in holding that it was petitioners
efforts which brought about the sale of the property and disregarding the previous
negotiations between private respondent Norma Gullas and the Sisters of Mary
and Pacana. They further alleged that the lower court had no basis for awarding
brokers fee, attorneys fees and the costs of litigation to petitioners.[17]
Petitioners, for their part, assailed the lower courts basis of the award of brokers
fee given to them. They contended that their 3% commission for the sale of the
property should be based on the price of P55,180,420.00, or at P530.00 per square
meter as agreed upon and not on the alleged actual selling price of
P20,822,800.00 or at P200.00 per square meter, since the actual purchase price
was undervalued for taxation purposes. They also claimed that the lower court
erred in not awarding moral and exemplary damages in spite of its finding of bad
faith; and that the amount of P50,000.00 as attorneys fees awarded to them is
insufficient. Finally, petitioners argued that the legal interest imposed on their claim
should have been pegged at 12% per annum instead of the 6% fixed by the
court.[18]
The Court of Appeals reversed and set aside the lower courts decision and
rendered another judgment dismissing the complaint.[19]
Hence, this appeal.
Petitioners raise following issues for resolution:
I.

THE APPELLATE COURT GROSSLY ERRED IN THEIR FINDING THAT THE


PETITIONERS ARE NOT ENTITLED TO THE BROKERAGE COMMISSION.

II.
IN DISMISSING THE COMPLAINT, THE APPELLATE COURT HAS DEPRIVED
THE PETITIONERS OF MORAL AND EXEMPLARY DAMAGES, ATTORNEYS
FEES AND INTEREST IN THE FOREBEARANCE OF MONEY.

The petition is impressed with merit.


The records show that petitioner Manuel B. Tan is a licensed real estate broker,
and petitioners Gregg M. Tecson and Alexander Saldaa are his associates.
In Schmid and Oberly v. RJL Martinez Fishing Corporation,[20] we defined a broker
as one who is engaged, for others, on a commission, negotiating contracts relative
to property with the custody of which he has no concern; the negotiator between
other parties, never acting in his own name but in the name of those who employed
him. x x x a broker is one whose occupation is to bring the parties together, in
matters of trade, commerce or navigation. (Emphasis supplied)
During the trial, it was established that petitioners, as brokers, were authorized
by private respondents to negotiate for the sale of their land within a period of one
month reckoned from June 29, 1992. The authority given to petitioners was non-
exclusive, which meant that private respondents were not precluded from granting
the same authority to other agents with respect to the sale of the same property.
In fact, private respondent authorized another agent in the person of Mr. Bobby
Pacana to sell the same property. There was nothing illegal or amiss in this
arrangement, per se, considering the non-exclusivity of petitioners authority to sell.
The problem arose when it eventually turned out that these agents were
entertaining one and the same buyer, the Sisters of Mary.
As correctly observed by the trial court, the argument of the private respondents
that Pacana was the one entitled to the stipulated 3% commission is untenable,
considering that it was the petitioners who were responsible for the introduction of
the representatives of the Sisters of Mary to private respondent Eduardo Gullas.
Private respondents, however, maintain that they were not aware that their
respective agents were negotiating to sell said property to the same buyer.
Private respondents failed to prove their contention that Pacana began
negotiations with private respondent Norma Gullas way ahead of petitioners. They
failed to present witnesses to substantiate this claim. It is curious that Mrs. Gullas
herself was not presented in court to testify about her dealings with Pacana.
Neither was Atty. Nachura who was supposedly the one actively negotiating on
behalf of the Sisters of Mary, ever presented in court.
Private respondents contention that Pacana was the one responsible for the
sale of the land is also unsubstantiated. There was nothing on record which
established the existence of a previous negotiation among Pacana, Mrs. Gullas
and the Sisters of Mary. The only piece of evidence that the private respondents
were able to present is an undated and unnotarized Special Power of Attorney in
favor of Pacana. While the lack of a date and an oath do not necessarily render
said Special Power of Attorney invalid, it should be borne in mind that the contract
involves a considerable amount of money. Hence, it is inconsistent with sound
business practice that the authority to sell is contained in an undated and
unnotarized Special Power of Attorney. Petitioners, on the other hand, were given
the written authority to sell by the private respondents.
The trial courts evaluation of the witnesses is accorded great respect and
finality in the absence of any indication that it overlooked certain facts or
circumstances of weight and influence, which if reconsidered, would alter the result
of the case.[21]
Indeed, it is readily apparent that private respondents are trying to evade
payment of the commission which rightfully belong to petitioners as brokers with
respect to the sale. There was no dispute as to the role that petitioners played in
the transaction. At the very least, petitioners set the sale in motion. They were not
able to participate in its consummation only because they were prevented from
doing so by the acts of the private respondents. In the case of Alfred Hahn v. Court
of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW)[22] we ruled
that, An agent receives a commission upon the successful conclusion of a sale. On
the other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made. (Underscoring ours). Clearly,
therefore, petitioners, as brokers, should be entitled to the commission whether or
not the sale of the property subject matter of the contract was concluded through
their efforts.
Having ruled that petitioners are entitled to the brokers commission, we should
now resolve how much commission are petitioners entitled to?
Following the stipulation in the Special Power of Attorney, petitioners are
entitled to 3% commission for the sale of the land in question. Petitioners maintain
that their commission should be based on the price at which the land was offered
for sale, i.e., P530.00 per square meter. However, the actual purchase price for
which the land was sold was only P200.00 per square meter. Therefore, equity
considerations dictate that petitioners commission must be based on this price. To
rule otherwise would constitute unjust enrichment on the part of petitioners as
brokers.
In the matter of attorneys fees and expenses of litigation, we affirm the amount
of P50,000.00 awarded by the trial court to the petitioners.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The May
29, 2000 decision of the Court of Appeals is REVERSED and SET ASIDE. The
decision of the Regional Trial Court of Cebu City, Branch 22, in Civil Case No.
CEB-12740 ordering private respondents Eduardo Gullas and Norma S. Gullas to
pay jointly and severally petitioners Manuel B. Tan, Gregg Tecson and Alexander
Saldaa the sum of Six Hundred Twenty-Four Thousand and Six Hundred Eighty-
Four Pesos (P624,684.00) as brokers fee with legal interest at the rate of 6% per
annum from the filing of the complaint; and the sum of Fifty Thousand Pesos
(P50,000.00) as attorneys fees and costs of litigation, is REINSTATED.
SO ORDERED.
Vitug, and Carpio, JJ., concur.
Davide, Jr., C.J., (Chairman), no part due to close relationship to a party.
Azcuna, J., on official leave.
9. [G.R. No. 150678. February 18, 2005]

BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs.


COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO
and ESTELA A. FLOR, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review of the Decision[1] of the Court of Appeals (CA)
affirming in toto the Decision[2] of the Regional Trial Court (RTC) of Makati City,
Branch 135, in Civil Case No. 15664 which awarded to the respondents their 5%
brokers commission.
The facts are as follows:
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
to get back to him as soon as she would be able to find a property according to his
specifications.
Borbon relayed to her business associates and friends that she had a ready
buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a
mango plantation which was up for sale. She told Flor to confer with Medrano and
to give them a written authority to negotiate the sale of the property.[5] Thus, on
September 3, 1986, Medrano issued the Letter of Authority, as follows:
Mrs. Pacita G. Borbon & Miss Josefina E. Antonio
Campos Rueda Building
Tindalo, Makati, M.M.

Mrs. Estela A. Flor & Miss Maria Yumi S. Karasig


23 Mabini Street
Quezon City, M.M.

Dear Mesdames:

This letter will serve as your authority* to negotiate with any prospective buyer for the
sale of a certain real estate property more specifically a mango plantation which is
described more particularly therein below:

Location : Barrio Tulay-na-Patpat, Ibaan,


Batangas
Lot Area : 17 hectares (more or less) per
attached Appendix A
Improvements : 720 all fruit-bearing mango trees
(carabao variety) and other trees
Price : P 2,200,000.00

For your labor and effort in finding a purchaser thereof, I hereby bind myself to pay you a
commission of 5% of the total purchase price to be agreed upon by the buyer and seller.

Very truly yours,

(Sgd.)
B.R. Medrano
Owner

* Subject to price sale.[6]

The respondents arranged for an ocular inspection of the property together with
Lee which never materialized the first time was due to inclement weather; the next
time, no car was available for the tripping to Batangas.[7] Lee then called up Borbon
and told her that he was on his way to Lipa City to inspect another property, and
might as well also take a look at the property Borbon was offering. Since Lee was
in a hurry, the respondents could no longer accompany him at the time. Thus, he
asked for the exact address of the property and the directions on how to reach the
lot in Ibaan from Lipa City. Thereupon, Lee was instructed to get in touch with
Medranos daughter and also an officer of the bank, Mrs. Teresa Ganzon, regarding
the property.[8]
Two days after the visit, respondent Josefina Antonio called Lee to 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 property. Three weeks thereafter,
Antonio called Lee again to make a follow-up of the latters visit to Ibaan. Lee
informed her that he already purchased the property and had made a down
payment of P1,000,000.00. The remaining balance of P1,200,000.00 was to be
paid upon the approval of the incorporation papers of the corporation he was
organizing by the Securities and Exchange Commission. According to Antonio,
Lee asked her if they had already received their commission. She answered no,
and Lee expressed surprise over this.[9]
A Deed of Sale was eventually executed on November 6, 1986 between the
bank, represented by its President/General Manager Teresa M. Ganzon (as
Vendor) and KGB Farms, Inc., represented by Dominador Lee (as Vendee), for
the purchase price of P1,200,000.00.[10] Since the sale of the property was
consummated, the respondents asked from the petitioners their commission, or
5% of the purchase price. The petitioners refused to pay and offered a measly sum
of P5,000.00 each.[11] Hence, the respondents were constrained to file an action
against herein petitioners.
The petitioners alleged that Medrano issued the letter of authority in favor of all
the respondents, upon the representation of Flor that she had a prospective buyer.
Flor was the only person known to Medrano, and he had never met Borbon and
Antonio. Medrano had asked that the name of their prospective buyer be
immediately registered so as to avoid confusion later on, but Flor failed to do so.
Furthermore, the other officers of the bank had never met nor dealt with the
respondents in connection with the sale of the property. Ganzon also asked Lee if
he had an agent and the latter replied that he had none. The petitioners also denied
that the purchase price of the property was P2,200,000.00 and alleged that the
property only cost P1,200,000.00. The petitioners further contended that the letter
of authority signed by Medrano was not binding or enforceable against the bank
because the latter had a personality separate and distinct from that of Medrano.
Medrano, on the other hand, denied liability, considering that he was not the
registered owner of the property, but the bank. The petitioners, likewise, filed a
counterclaim as they were constrained to hire the services of counsel and suffered
damages.[12]
After the case was submitted for decision, Medrano died, but no substitution of
party was made at this time.[13]
The trial court resolved the case based on the following common issues:
1. Whether or not the letter of authority is binding and enforceable against
the defendant Bank only or both defendants; and
2. Whether or not the plaintiffs are entitled to any commission for the sale
of the subject property.[14]
On September 21, 1994, the trial court rendered a Decision in favor of the
respondents. The petitioners were ordered to pay, jointly and severally, the 5%
brokers commission to herein respondents. The trial court found that the letter of
authority was valid and binding as against Medrano and the Ibaan Rural bank.
Medrano signed the said letter for and in behalf of the bank, and as owner of the
property, promising to pay the respondents a 5% commission for their efforts in
looking for a purchaser of the property. He is, therefore, estopped from denying
liability on the basis of the letter of authority he issued in favor of the respondents.
The trial court further stated that the sale of the property could not have been
possible without the representation and intervention of the respondents. As such,
they are entitled to the brokers commission of 5% of the selling price
of P1,200,000.00 as evidenced by the deed of sale.[15]The fallo of the decision
reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the


plaintiffs and against the defendants, for the latter, jointly and severally:

1. To pay plaintiffs the sum of P60,000.00 representing their five percent (5%)
commission of the purchase price of the property sold based on Exh. D or 9 plus legal
interest from date of filing of the herein complaint until fully paid;

2. To pay plaintiffs the sum of P20,000.00 as and for attorneys fees;

3. To pay the plaintiffs the sum of P10,000.00 as litigation expenses;

4. To pay the costs of the proceedings.[16]


Unable to agree with the RTC decision, petitioner Ibaan Rural Bank filed its
notice of appeal.[17]
On October 10, 1994, the heirs of Bienvenido Medrano filed a Motion for
Reconsideration[18] praying that the late Bienvenido Medrano be substituted by his
heirs. They further prayed that the trial courts decision as far as Medrano was
concerned be set aside and dismissed considering his demise. The trial court
denied the motion for reconsideration.[19] Hence, the heirs of Medrano also filed
their notice of appeal.[20]
On appeal, the petitioners reiterated their stance that the letter of authority was
not binding and enforceable, as the same was signed by Medrano, who was not
actually the owner of the property. They refused to give the respondents any
commission, since the latter did not perform any act to consummate the sale. The
petitioners pointed out that the respondents (1) did not verify the real owner of the
property; (2) never saw the property in question; (3) never got in touch with the
registered owner of the property; and (4) neither did they perform any act of
assisting their buyer in having the property inspected and verified.[21] The
petitioners further raised the trial courts error in not dismissing the case against
Bienvenido Medrano considering his death.
On May 3, 2001, the CA promulgated the assailed decision affirming the finding
of the trial court that the letter of authority was valid and binding. Applying the
principle of agency, the appellate court ruled that Bienvenido Medrano constituted
the respondents as his agents, 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 the trial court did not err in finding that the respondents were the
procuring cause of the sale. Suffice it to state that were it not for the respondents,
Lee would not have known that there was a mango orchard offered for sale.
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 claim against the estate
of the deceased.
Undaunted by the CAs unfavorable decision, the petitioners filed the instant
petition, raising eight (8) assignments of errors, to wit:

I. THE COURT OF APPEALS ERRED WHEN IT FOUND THE PRIVATE


RESPONDENTS TO BE THE PROCURING CAUSE OF THE SALE;

II. THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE


LETTER-AUTHORITY OF PETITIONER MR. MEDRANO;

III. THE COURT OF APPEALS MADE A MISTAKE WHEN IT CORRECTLY


RECOGNIZED THE EXTENT OF THE PRIVATE RESPONDENTS
OBLIGATION AND AUTHORITY CONTAINED IN MEDRANOS LETTER-
AUTHORITY AND YET ERRONEOUSLY GRANTED THE PRIVATE-
RESPONDENTS DEMAND, NOTWITHSTANDING THE NON-
PERFORMANCE OF THEIR OBLIGATION THEREUNDER;

IV. THE COURT OF APPEALS ERRED IN PRESUMING BAD FAITH UPON


THE PETITIONERS;
V. THE COURT OF APPEALS ERRED IN PLACING THE BURDEN OF PROOF
UPON THE DEFENDANTS-PETITIONERS;

VI. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS


CONCLUSION WITH EVIDENCE AND INSTEAD RELIED ON
INFERENCE;

VII. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS


CONCLUSION WITH EVIDENCE AND MERELY RELIED ON
SPECULATION AND SURMISE;

VIII. THE COURT OF APPEALS MISAPPRECIATED THE FACTS PRESENTED


BEFORE IT, AND CONSEQUENTLY FAILED TO CONSIDER
REASONABLY THE TWO (2) BASIC ARGUMENTS OF THE
PETITIONERS.[22]

The petition is denied.


The records disclose that respondent Pacita Borbon is a licensed real estate
broker[23] and respondents Josefina Antonio and Estela A. Flor are her
associates.[24] A broker is generally defined as one who is engaged, for others, on
a commission, negotiating contracts relative to property with the custody of which
he has no concern; the negotiator between other parties, never acting in his own
name but in the name of those who employed him; he is strictly a middleman and
for some purposes the agent of both parties. A broker is one whose occupation is
to bring parties together, in matters of trade, commerce or navigation.[25] For the
respondents participation in finding a buyer for the petitioners property, the
petitioners refuse to pay them commission, asserting that they are not the efficient
procuring cause of the sale, and that the letter of authority signed by petitioner
Medrano is not binding against the petitioners.
Procuring cause is meant to be the proximate cause.[26] The term procuring
cause, in describing a brokers activity, refers to a cause originating a series of
events which, without break in their continuity, result in accomplishment of prime
objective of the employment of the broker producing a purchaser ready, willing and
able to buy real estate on the owners terms.[27] A broker will be regarded as the
procuring cause of a sale, so as to be entitled to commission, if his efforts are the
foundation on which the negotiations resulting in a sale are begun.[28] The broker
must be the 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 purchaser,
and the sale must proceed from his efforts acting as broker.[29]
Indeed, the evidence on record shows that the respondents were instrumental
in the sale of the property to Lee. Without their intervention, no sale could have
been consummated. They were the ones who set the sale of the subject land in
motion.[30] Upon being informed by Flor that Medrano was selling his mango
orchard, Borbon lost no time in informing Lee that they had found a property
according to his specifications. An ocular inspection of the property together with
Lee was immediately planned; unfortunately, it never pushed through for reasons
beyond the respondents control. Since Lee was in a hurry to see the property, he
asked the respondents the exact address and the directions on how to reach
Ibaan, Batangas. The respondents thereupon instructed him to look for Teresa
Ganzon, an officer of the Ibaan Rural Bank and the person to talk to regarding the
property. While the letter-authority issued in favor of the respondents was non-
exclusive, no evidence was adduced to show that there were other persons, aside
from the respondents, who informed Lee about the property for sale. Ganzon
testified that no advertisement was made announcing the sale of the lot, nor did
she give any authority to other brokers/agents to sell the subject property. [31] The
fact that it was Lee who personally called Borbon and asked for directions prove
that it was only through the respondents that Lee learned about the property for
sale.[32] Significantly, too, Ms. Teresa Ganzon testified that there were no other
persons other than the respondents who inquired from her about the sale of the
property to Lee.[33] It can thus be readily inferred that the respondents were the
only ones who knew about the property for sale and were responsible in leading a
buyer to its consummation. All these circumstances lead us to the inescapable
conclusion that the respondents were the procuring cause of the sale. When there
is a close, proximate and causal connection between the brokers efforts and the
principals sale of his property, the broker is entitled to a commission.[34]
The petitioners insist that the respondents are not entitled to any commission
since they did not actually perform any acts of negotiation as required in the letter-
authority. They refuse to pay the commission since according to them, the
respondents participation in the transaction was not apparent, if not nil. The
respondents did not even look at the property themselves; did not introduce the
buyer to the seller; did not hold any conferences with the buyer, nor take part in
concluding the sale. For the non-compliance of this obligation to negotiate, the
petitioners argue, the respondents are not entitled to any commission.
We find the argument specious. The letter of authority must be read as a whole
and not in its truncated parts. Certainly, it was not the intention of Medrano to
expect the respondents to do just that (to negotiate) when he issued the letter of
authority. The clear intention is to reward the respondents for procuring a buyer for
the property. Before negotiating a sale, a broker must first and foremost bring in a
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 eventually made.[35]The
essential feature of a brokers conventional employment is merely to procure a
purchaser for a property ready, able, and willing to buy at the price and on the
terms mutually agreed upon by the owner and the purchaser. And it is not a
prerequisite to the right to compensation that the broker conduct the negotiations
between the parties after they have been brought into contact with each other
through his efforts.[36] The case of Macondray v. Sellner[37] is quite instructive:

The business of a real estate broker or agent, generally, is only to find a purchaser, and
the settled rule as stated by the courts is that, in the absence of an express contract
between the broker and his principal, the implication generally is that the broker becomes
entitled to the usual commissions whenever he brings to his principal a party who is able
and willing to take the property and enter into a valid contract upon the terms then named
by the principal, although the particulars may be arranged and the matter negotiated and
completed between the principal and the purchaser directly.
Notably, there are cases where the right of the brokers to recover commissions
were upheld where they actually took no part in the negotiations, never saw the
customer, and even some in which they did nothing except advertise the property,
as long as it can be shown that they were the efficient cause of the sale.[38]
In the case at bar, the role of the respondents in the transaction is undisputed.
Whether or not they participated in the negotiations of the sale is of no moment.
Armed with an authority to procure a purchaser and with a license to act as broker,
we see no reason why the respondents can not recover compensation for their
efforts when, in fact, they are the procuring cause of the sale.[39]
Anent the validity of the letter-authority signed by Medrano, we find no
reversible error with the findings of the appellate and trial courts that the petitioners
are liable thereunder. Such factual findings deserve this Courts respect in the
absence of any cogent reason to reverse the same. Medranos obligation to pay
the respondents commission for their labor and effort in finding a purchaser or a
buyer for the described parcel of land is unquestionable. In the absence of fraud,
irregularity or illegality in its execution, such letter-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 commission on the flimsy excuse that he is not the
registered owner of the property. The evidence shows that he comported himself
to be the owner of the property. His testimony is quite telling:
Q Mr. Medrano, do you know any of the plaintiffs in this case, Pacita
Borbon, Josefina Antonio, and Stella (sic) F. Flor?
WITNESS
A I know only Stella (sic) F. Flor. The rest, I do not know them. I have
never met them, up to now.
Q How about the co-defendant Ibaan Rural Bank?
A I know co-defendant Ibaan Rural Bank, having been the founder and at
one time or another, I have served several capacities from President to
Chairman of the Board.
Q Are you familiar with a certain parcel of land located at Barrio Tulay na
Patpat, Ibaan, Batangas, with an area of 17 hectares?
A Yes, Sir. I used to own that property but later on mortgaged it to Ibaan
Rural Bank.
Q And what, if any, [did] the bank do to your property after you have
mortgaged the same to it?
A After many demands for payment or redemption of my mortgage, which
I failed to do so, the Ibaan Rural Bank sold it.
Q After it was foreclosed?
A Yes, Sir.
Q Do you recall having made any transaction with plaintiff Stella (sic) F.
Flor regarding the property?
A Yes, Sir. Since she is the first cousin of my wife, I remember [that] she
came to my office once and requested for a letter of authority which I
issued [in] September 1986, I think, and I gave her the letter of
authority.[40]
As to the liability of the bank, we quote with favor the disquisition of the
respondent court, to wit:

Further, the appellants cannot use the flimsy excuse (only to evade liability) that (w)hat
Mr. Medrano represented to the plaintiffs-appellees, without the knowledge or consent of
the defendant Bank, did not bind the Bank. Res inter alios acta alteri nocere non debet.
(page 8 of the Appellants Brief; page 35 of the Rollo). While it may be true that
technically the Ibaan Rural Bank did not authorize Bienvenido R. Medrano to sell the
land under litigation or that the latter was no longer an officer of the said bank, still, these
circumstances do not convince this Court fully well to absolve the bank. Note that, as
former President of the said bank, it is improbable that he (Bienvenido R. Medrano) was
completely oblivious of the developments therein. By reason of his past association with
the officers of the said bank (who are, in fact, his relatives), it is unbelievable that
Bienvenido R. Medrano could simply have issued the said letter of authority without the
knowledge of the said officers. Granting por aguendo that Bienvenido R. Medrano did
not act on behalf of the bank, however, We doubt that he had no financial and/or material
interest in the said sale a fact that could not possibly have eluded Our attention.[41]

From all the foregoing, there can be no other conclusion than the respondents
are indeed the procuring cause of the sale. If not for the respondents, Lee would
not have known about the mango plantation being sold by the petitioners. The sale
was consummated. The bank had profited from such transaction. It would certainly
be iniquitous if the respondents would not be rewarded their commission pursuant
to the letter of authority.
WHEREFORE, the petition is DENIED due course. The Decision of the Court
of Appeals is AFFIRMED.
SO ORDERED.
Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur.
Austria-Martinez, J., no part.

10. G.R. No. 144805 June 8, 2006

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,


vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES
CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUST
COMPANY, Respondents.

DECISION

CALLEJO, SR., J.:


On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 51022, which affirmed the Decision of the
Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case No. 54887, as
well as the Resolution2 of the CA denying the motion for reconsideration thereof.

The Eternit Corporation (EC) is a corporation duly organized and registered


under Philippine laws. Since 1950, it had been engaged in the manufacture of
roofing materials and 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 Glanville, an Australian citizen, was the General
Manager and President of EC, while Claude Frederick Delsaux was the Regional
Director for Asia of ESAC. Both had their offices in Belgium.

In 1986, the management of ESAC grew concerned about the political situation
in the Philippines and wanted to stop its operations in the country. The
Committee for Asia of ESAC instructed Michael Adams, a member of EC’s Board
of Directors, to dispose of the eight parcels of land. Adams engaged the 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.

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 declared that he was authorized to sell the
properties for P27,000,000.00 and that the terms of the sale were subject to
negotiation.4

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to
Eduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings
offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville
of the Litonjua siblings’ offer and relayed the same to Delsaux in Belgium, but the
latter did not respond. On October 28, 1986, Glanville telexed Delsaux in
Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua
siblings. It was only on February 12, 1987 that Delsaux sent a telex to Glanville
stating that, based on the "Belgian/Swiss decision," the final offer was
"US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to
final liquidation."5

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux.
Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with
Glanville, and in a Letter dated February 26, 1987, confirmed that the Litonjua
siblings had accepted the counter-proposal of Delsaux. He also stated that the
Litonjua siblings would confirm full payment within 90 days after execution and
preparation of all documents of sale, together with the necessary governmental
clearances.6
The Litonjua brothers deposited the amount of US$1,000,000.00 with the
Security Bank & Trust Company, Ermita Branch, and drafted an Escrow
Agreement to expedite the sale.7

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when
the sale would be implemented. In a telex dated April 22, 1987, Glanville
informed Delsaux that he had met with the buyer, which had given him the
impression that "he is prepared to press for a satisfactory conclusion to the
sale."8 He also emphasized to Delsaux that the buyers were concerned because
they would incur expenses in bank commitment fees as a consequence of
prolonged period of inaction.9

Meanwhile, with the assumption of Corazon C. Aquino as President of the


Republic of the Philippines, the political situation in the Philippines had improved.
Marquez received a telephone call from Glanville, advising that the sale would no
longer proceed. Glanville followed it up with a Letter dated May 7, 1987,
confirming that he had been instructed by his principal to inform Marquez that
"the decision has been taken at a Board Meeting not to sell the properties on
which Eternit Corporation is situated."10

Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC
Regional Office had decided not to proceed with the sale of the subject land, to
wit:

May 22, 1987

Mr. L.G. Marquez


L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines

Dear Sir:

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with
the sale of the land which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months)
and examined the position as far as the Philippines are (sic)
concerned. Considering [the] new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has
decided not to stop our operations in Manila. In fact, production has started again
last week, and (sic) to recognize the participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy
would change at a later state, we would consult you again.
xxx

Yours sincerely,

(Sgd.)
C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)11

When apprised of this development, the Litonjuas, through counsel, wrote EC,
demanding payment for damages they had suffered on account of the aborted
sale. EC, however, rejected their demand.

The Litonjuas then filed a complaint for specific performance and damages
against EC (now the Eterton Multi-Resources Corporation) and the Far East
Bank & Trust Company, and ESAC in the RTC of Pasig City. An amended
complaint was filed, in which defendant EC was substituted by Eterton Multi-
Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and
Deogracias G. Eufemio were impleaded as additional defendants on account of
their purchase of ESAC shares of stocks and were the controlling stockholders of
EC.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer
was not doing business in the Philippines, it cannot be subject to the jurisdiction
of Philippine courts; the Board and stockholders of EC never approved any
resolution to sell subject properties nor authorized Marquez to sell the same; and
the telex dated October 28, 1986 of Jack Glanville was his own personal making
which did not bind EC.

On July 3, 1995, the trial court rendered judgment in favor of defendants and
dismissed the amended complaint.12The fallo of the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-


Resources Corporation and Eteroutremer, S.A. is dismissed on the ground that
there is no valid and binding sale between the plaintiffs and said defendants.

The complaint as against Far East Bank and Trust Company is likewise
dismissed for lack of cause of action.

The counterclaim of Eternit Corporation now Eterton Multi-Resources


Corporation and Eteroutremer, S.A. is also dismissed for lack of merit.13

The trial court declared that since the authority of the agents/realtors was not in
writing, the sale is void and not merely unenforceable, and as such, could not
have been ratified by the principal. In any event, such ratification cannot be given
any retroactive effect. Plaintiffs could not assume that defendants had agreed to
sell the property without a clear authorization from the corporation concerned,
that is, through resolutions of the Board of Directors and stockholders. The trial
court also pointed out that the supposed sale involves substantially all the assets
of defendant EC which would result in the eventual total cessation of its
operation.14

The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court
erred in concluding that the real estate broker in the instant case needed a
written authority from appellee corporation and/or that said broker had no such
written authority; and (2) the lower court committed grave error of law in holding
that appellee corporation is not legally bound for specific performance and/or
damages in the absence of an enabling resolution of the board of
directors."15 They averred that Marquez acted merely as a broker or go-between
and not as agent of the corporation; hence, it was not necessary for him to be
empowered as such by any written authority. They further claimed that an
agency by estoppel was created when the 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
of sale, which the corporation was obliged to consummate.

In reply, EC alleged that Marquez had no written authority from the Board of
Directors to bind it; neither were Glanville and Delsaux authorized by its board of
directors to offer the property for sale. Since the sale involved substantially all of
the corporation’s assets, it would necessarily need the authority from the
stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the
RTC. 16 The Litonjuas filed a motion for reconsideration, which was also denied
by the appellate court.

The CA ruled that Marquez, who was a real estate broker, was a special agent
within the purview of Article 1874 of the New Civil Code. Under Section 23 of the
Corporation Code, he needed a special authority from EC’s board of directors to
bind such corporation to the sale of its properties. Delsaux, who was merely the
representative of ESAC (the majority stockholder of EC) had no authority to bind
the latter. The CA pointed out that Delsaux was not even a member of the board
of directors of EC. Moreover, the Litonjuas failed to prove that an agency by
estoppel had been created between the parties.

In the instant petition for review, petitioners aver that

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO


PERFECTED CONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN


HOLDING THAT MARQUEZ NEEDED A WRITTEN AUTHORITY FROM
RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.

III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND
DELSAUX HAVE THE NECESSARY AUTHORITY TO SELL THE SUBJECT
PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED
BY RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN
APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS
POSSESSING POWER TO SELL THE SAID PROPERTIES.17

Petitioners maintain that, based on the facts of the case, there was a perfected
contract of sale of the parcels of land and the improvements thereon for
"US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to final
liquidation." Petitioners insist that they had accepted the counter-offer of
respondent EC and that before the counter-offer was withdrawn by respondents,
the acceptance was made known to them through real estate broker Marquez.

Petitioners assert that there was no need for a written authority from the Board of
Directors of EC for Marquez to validly act as broker/middleman/intermediary. As
broker, Marquez was not an ordinary agent because his authority was of a
special and limited character in most respects. His only job as a 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 make a binding contract to respondent EC;
hence, petitioners argue, Article 1874 of the New Civil Code does not apply.

In any event, petitioners aver, what is important and decisive was that Marquez
was able to communicate both the offer and counter-offer and their acceptance
of respondent EC’s counter-offer, resulting in a perfected contract of sale.

Petitioners posit that the testimonial and documentary evidence on record amply
shows that Glanville, who was the President and General Manager of respondent
EC, and Delsaux, who was the Managing Director for ESAC Asia, had the
necessary authority to sell the subject property or, at least, had been allowed by
respondent EC to hold themselves out in the public as having the power to sell
the subject properties. Petitioners identified such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then


President and General Manager of Eternit, to sell the properties of said
corporation to any interested party, which authority, as hereinabove
discussed, need not be in writing.

2. The fact that the NEGOTIATIONS for the sale of the subject properties
spanned SEVERAL MONTHS, from 1986 to 1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its


properties to the Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternit’s offer to sell the


properties as evidenced by the Petitioners’ ACCEPTANCE of the counter-
offer;
5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00
with the Security Bank and that an ESCROW agreement was drafted over
the subject properties;

6. Glanville’s telex to Delsaux inquiring "WHEN WE (Respondents) WILL


IMPLEMENT ACTION TO BUY AND SELL";

7. More importantly, Exhibits "G" and "H" of the Respondents, which


evidenced the fact that Petitioners’ offer was allegedly REJECTED by both
Glanville and Delsaux.18

Petitioners insist that it is incongruous for Glanville and Delsaux to make a


counter-offer to petitioners’ offer and thereafter reject such offer unless they were
authorized to do so by respondent EC. Petitioners insist that Delsaux confirmed
his authority to sell the properties in his letter to Marquez, to wit:

Dear Sir,

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with
the sale of the land which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months)
and examined the position as far as the Philippines are (sic) concerned.
Considering the new political situation since the departure of MR. MARCOS and
a certain stabilization in the Philippines, the Committee has decided not to stop
our operations in Manila[.] [I]n fact production started again last week, and (sic)
to reorganize the participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy
would change at a later stage we would consult you again.

In the meantime, I remain

Yours sincerely,

C.F. DELSAUX19

Petitioners further emphasize that they acted in good faith when Glanville and
Delsaux were knowingly permitted by respondent EC to sell the properties within
the scope of an apparent authority. Petitioners insist that respondents held
themselves to the public as possessing power to sell the subject properties.

By way of comment, respondents aver that the issues raised by the petitioners
are factual, hence, are proscribed by Rule 45 of the Rules of Court. On the merits
of the petition, respondents EC (now EMC) and ESAC reiterate their submissions
in the CA. They maintain that Glanville, Delsaux and Marquez had no authority
from the stockholders of respondent EC and its Board of Directors to offer the
properties for sale to the petitioners, or to any other person or entity for that
matter. They assert that the decision and resolution of the CA are in accord with
law and the evidence on record, and should be affirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through


Glanville and Delsaux, conformed to the written authority of Marquez to sell the
properties. The authority of Glanville and Delsaux to bind respondent EC is
evidenced by the fact that Glanville and Delsaux negotiated for the sale of 90%
of stocks of respondent EC to Ruperto Tan on June 1, 1997. Given the
significance of their positions and their duties in respondent EC at the time of the
transaction, and the fact that respondent ESAC owns 90% of the shares of stock
of respondent EC, a formal resolution of the Board of Directors would be a mere
ceremonial formality. What is important, petitioners maintain, is that Marquez was
able to communicate the offer of respondent EC and the petitioners’ acceptance
thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville,
Marquez and Delsaux.

The petition has no merit.

Anent the first issue, we agree with the contention of respondents that the issues
raised by petitioner in this case are factual. Whether or not Marquez, Glanville,
and Delsaux were authorized by respondent EC to act as its agents relative to
the sale of the properties of respondent EC, and if so, the boundaries of their
authority as agents, is a question of fact. In the absence of express written terms
creating the relationship of an agency, the existence of an agency is a fact
question.20 Whether an agency by estoppel was created or whether a person
acted within the bounds of his apparent authority, and whether the principal is
estopped to deny the apparent authority of its agent are, likewise, questions of
fact to be resolved on the basis of the evidence on record.21 The findings of the
trial court on such issues, as affirmed by the CA, are conclusive on the Court,
absent evidence that the trial and appellate courts ignored, misconstrued, or
misapplied facts and circumstances of substance which, if considered, would
warrant a modification or reversal of the outcome of the case.22

It must be stressed that issues of facts may not be raised in the Court under Rule
45 of the Rules of Court because the Court is not a trier of facts. It is not to re-
examine and assess the evidence on record, whether testimonial and
documentary. There are, however, recognized exceptions where the Court may
delve into and resolve factual issues, namely:

(1) When the conclusion is a finding grounded entirely on speculations, surmises,


or conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and
appellee; (7) when the findings of the Court of Appeals are contrary to those of
the trial court; (8) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion; and (10) when the
findings of fact of the Court of Appeals are premised on the absence of evidence
and are contradicted by the evidence on record.23

We have reviewed the records thoroughly and find that the petitioners failed to
establish that the instant case falls under any of the foregoing exceptions.
Indeed, the assailed decision of the Court of Appeals is supported by the
evidence on record and the law.

It was the duty of the petitioners to prove that respondent EC had decided to sell
its properties and that it had empowered Adams, Glanville and Delsaux or
Marquez to offer the properties for sale to prospective buyers and to accept any
counter-offer. Petitioners likewise failed to prove that their counter-offer had been
accepted by respondent EC, through Glanville and Delsaux. It must be stressed
that when specific performance is sought of a contract made with an agent, the
agency must be established by clear, certain and specific proof.24

Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation


Code of the Philippines, provides:

SEC. 23. The Board of Directors or Trustees. – Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations
controlled and held by the board of directors or trustees to be elected from
among the holders of stocks, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year and until their
successors are elected and qualified.

Indeed, a corporation is a juridical person separate and distinct from its members
or stockholders and is not affected by the personal rights,

obligations and transactions of the latter.25 It may act only through its board of
directors or, when authorized either by its by-laws or by its board resolution,
through its officers or agents in the normal course of business. The general
principles of agency govern the relation between the corporation and its officers
or agents, subject to the articles of incorporation, by-laws, or relevant provisions
of law.26

Under Section 36 of the Corporation Code, a corporation may sell or convey its
real properties, subject to the limitations prescribed by law and the Constitution,
as follows:

SEC. 36. Corporate powers and capacity. – Every corporation incorporated


under this Code has the power and capacity:

xxxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge,


mortgage and otherwise deal with such real and personal property, including
securities and bonds of other corporations, as the transaction of a lawful
business of the corporation may reasonably and necessarily require, subject to
the limitations prescribed by the law and the Constitution.

The property of a corporation, however, is not the property of the stockholders or


members, and as such, may not be sold without express authority from the board
of directors.27 Physical acts, like the offering of the properties of the corporation
for sale, or the acceptance of a counter-offer of prospective buyers of such
properties and the execution of the deed of sale covering such property, can be
performed by the corporation only by officers or agents duly authorized for the
purpose by corporate by-laws or by specific acts of the board of
directors.28 Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but
not in the course of, or connected with, the performance of authorized duties of
such director, are not binding on the corporation.29

While a corporation may appoint agents to negotiate for the sale of its real
properties, the final say will have to be with the board of directors through its
officers and agents as authorized by a board resolution or by its by-laws.30 An
unauthorized act of an officer of the corporation is not binding on it unless the
latter ratifies the same expressly or impliedly by its board of directors. Any sale of
real property of a corporation by a person purporting to be an agent thereof but
without written authority from the corporation is null and void. The declarations of
the agent alone are generally insufficient to establish the fact or extent of his/her
authority.31

By the contract of agency, a person binds himself to render some service or to do


something in representation on behalf of another, with the consent or authority of
the latter.32 Consent of both principal and agent is necessary to create an
agency. The principal must intend that the agent shall act for him; the agent must
intend to accept the authority and act on it, and the intention of the parties must
find expression either in words or conduct between them.33

An agency may be expressed or implied from the act of the principal, from his
silence or lack of action, or his failure to repudiate the agency knowing that
another person is acting on his behalf without authority. Acceptance by the agent
may be expressed, or implied from his acts which carry out the agency, or from
his silence or inaction according to the circumstances.34 Agency may be oral
unless the law requires a specific form.35 However, to create or convey real rights
over immovable property, a special power of attorney is necessary. 36 Thus, when
a sale of a piece of land or any portion thereof is through an agent, the authority
of the latter shall be in writing, otherwise, the sale shall be void.37

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any
resolution of the Board of Directors of respondent EC empowering Marquez,
Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its
behalf, the eight parcels of land owned by respondent EC including the
improvements thereon. The bare fact that Delsaux may have been authorized to
sell to Ruperto Tan the shares of stock of respondent ESAC, on June 1, 1997,
cannot be used as basis for petitioners’ claim that he had likewise been
authorized by respondent EC to sell the parcels of land.

Moreover, the evidence of petitioners shows that Adams and Glanville acted on
the authority of Delsaux, who, in turn, acted on the authority of respondent
ESAC, through its Committee for Asia,38 the Board of Directors of respondent
ESAC,39 and the Belgian/Swiss component of the management of respondent
ESAC.40 As such, Adams and Glanville engaged the services of Marquez to offer
to sell the properties to prospective buyers. Thus, on September 12, 1986,
Marquez wrote the petitioner that he was authorized to offer for sale the property
for P27,000,000.00 and the other terms of the sale subject to negotiations. When
petitioners offered to purchase the property for P20,000,000.00, through
Marquez, the latter relayed petitioners’ offer to Glanville; Glanville had to send a
telex to Delsaux to inquire the position of respondent ESAC to petitioners’ offer.
However, as admitted by petitioners in their Memorandum, Delsaux was unable
to reply immediately to the telex of Glanville because Delsaux had to wait for
confirmation from respondent ESAC.41 When Delsaux finally responded to
Glanville on February 12, 1987, he made it clear that, based on the
"Belgian/Swiss decision" the final offer of respondent ESAC was
US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior to
final liquidation.42 The offer of Delsaux emanated only from the "Belgian/Swiss
decision," and not the entire management or Board of Directors of respondent
ESAC. While it is true that petitioners accepted the counter-offer of respondent
ESAC, respondent EC was not a party to the transaction between them; hence,
EC was not bound by such acceptance.

While Glanville was the President and General Manager of respondent EC, and
Adams and Delsaux were members of its Board of Directors, the three acted for
and in behalf of respondent ESAC, and not as duly authorized agents of
respondent EC; a board resolution evincing the grant of such authority is needed
to bind EC to any agreement regarding the sale of the subject properties. Such
board resolution is not a mere formality but is a condition sine qua non to bind
respondent EC. Admittedly, respondent ESAC owned 90% of the shares of
stocks of respondent EC; however, the mere fact that a corporation owns a
majority of the shares of stocks of another, or even all of such shares of stocks,
taken alone, will not justify their being treated as one corporation.43

It bears stressing that in an agent-principal relationship, the personality of the


principal is extended through the facility of the agent. In so doing, the agent, by
legal fiction, becomes the principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be effected with the consent of
the principal, which must not, in any way, be compelled by law or by any court.44

The petitioners cannot feign ignorance of the absence of any regular and valid
authority of respondent EC empowering Adams, Glanville or Delsaux to offer the
properties for sale and to sell the said properties to the petitioners. A person
dealing with a known agent is not authorized, under any circumstances, blindly to
trust the agents; statements as to the extent of his powers; such person must not
act negligently but must use reasonable diligence and prudence to ascertain
whether the agent acts within the scope of his authority. 45 The settled rule is that,
persons dealing with an assumed agent are bound at their peril, and if they would
hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to prove it.46 In this case, the petitioners failed to discharge
their burden; hence, petitioners are not entitled to damages from respondent EC.

It appears that Marquez acted not only as real estate broker for the petitioners
but also as their agent. As gleaned from the letter of Marquez to Glanville, on
February 26, 1987, he confirmed, for and in behalf of the petitioners, that the
latter had accepted such offer to sell the land and the improvements thereon.
However, we agree with the ruling of the appellate court that Marquez had no
authority to bind respondent EC to sell the subject properties. A real estate
broker is one who negotiates the sale of real properties. His business, generally
speaking, is only to find a purchaser who is willing to buy the land upon terms
fixed by the owner. He has no authority to bind the principal by signing a contract
of sale. Indeed, an authority to find a purchaser of real property does not include
an authority to sell.47

Equally barren of merit is petitioners’ contention that respondent EC is estopped


to deny the existence of a principal-agency relationship between it and Glanville
or Delsaux. For an agency by estoppel to exist, the following must be
established: (1) the principal manifested a representation of the agent’s authority
or knowlingly allowed the agent to assume such authority; (2) the third person, in
good faith, relied upon such representation; (3) relying upon such representation,
such third person has changed his position to his detriment.48 An agency by
estoppel, which is similar to the doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.49 Such proof is lacking in
this case. In their communications to the petitioners, Glanville and Delsaux
positively and unequivocally declared that they were acting for and in behalf of
respondent ESAC.

Neither may respondent EC be deemed to have ratified the transactions between


the petitioners and respondent ESAC, through Glanville, Delsaux and Marquez.
The transactions and the various communications inter se were never submitted
to the Board of Directors of respondent EC for ratification.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
Costs against the petitioners.

SO ORDERED.

ROMEO J. CALLEJO, SR.


Associate Justice