G.
ACTS OF ADMINISTRATION - While it is true that it was denominated as a general power of
FRANCISCO A. VELOSO, Petitioner, v. CA, AGLALOMA B.
ESCARIO, assisted by her husband GREGORIO L. ESCARIO,
the REGISTER OF DEEDS -MANILA, Respondent.
The special power of attorney can be included in the general power
when it is specified therein the act or transaction for which the special
power is required.
"Whether the instrument be denominated as "general power of
attorney" or "special power of attorney," what matters is the extent of
the power or powers contemplated upon the agent or attorney in fact.
If the power is couched in general terms, then such power cannot go
beyond acts of administration. However, where the power to sell is
specific, it not being merely implied, much less couched in general
terms, there cannot be any doubt that the attorney in fact may execute
a valid sale. An instrument may be captioned as "special power of
attorney" but if the powers granted are couched in general terms
without mentioning any specific power to sell or mortgage or to do other
specific acts of strict dominion, then in that case only acts of
administration may be deemed conferred."
FACTS:
Petitioner Francisco Veloso owns a parcel of land in Tondo,
Manila covered by a TCT issued by the Registry of Deeds-Manila.
- He acquired the subject property before he got married
from Philippine Building Corporation. Hence, the
property did not belong to the conjugal partnership.
- The said title was subsequently canceled and a new one
was issued in the name of Aglaloma B. Escario.
Subsequently, petitioner filed an action for annulment of
documents, reconveyance of property with damages and
preliminary injunction
- alleging that he was the absolute owner of the subject
property and he never authorized anybody to sell it.
- He alleged that when his wife left for abroad, he found
out that his copy was missing.
The transfer of property was supported by a General Power of
Attorney and Deed of Absolute Sale, executed by Irma Veloso,
wife of the petitioner.
Petitioner denied executing the power of attorney and alleged
that his signature was falsified.
- He also denied having known the supposed witnesses
in the execution of the power of attorney.
- Thus, he contended that the sale of the property, and
the subsequent transfer were null and void
Defendant Aglaloma Escario alleged that she was a buyer in good
faith and denied any knowledge of the alleged irregularity.
- She allegedly relied on the general power of attorney
which was sufficient in form and substance and was duly
notarized.
Witness for the plaintiff Atty. Julian G. Tubig denied any
participation in the execution of the general power of attorney, and
attested that he did not sign.
RTC: ruled in favor of Escaro as the lawful owner of the property
as she was deemed an innocent purchaser for value. The trial
court ruled that there was no need for a special power of attorney
when the special power was already mentioned in the general one.
CA: affirmed in toto the findings of the trial court.
ISSUE: Was the General Power of Attorney valid?
HELD: The assailed power of attorney was valid and regular on
its face.
- It was notarized and as such, it carries the evidentiary weight
conferred upon it with respect to its due execution.
attorney, a perusal thereof revealed that it stated an authority
to sell.
o "2. To buy or sell, hire or lease, mortgage or otherwise
hypothecate lands, tenements and hereditaments …."
- Thus, there was no need to execute a separate and special
power of attorney since the general power of attorney had
expressly authorized the agent or attorney in fact the power
to sell the subject property.
- The general power of attorney was accepted by the Register
of Deeds when the title to the subject property was canceled
and transferred in the name of private Respondent.
RE FALSIFIED SIGNATURE:
SC found that the basis presented by the petitioner was
inadequate to sustain his allegation of forgery. Mere variance of
the signatures cannot be considered as conclusive proof that the
same were forged. Forgery cannot be presumed.
RE INNOCENT PURCHASER FOR VALUE:
SC agrees with the conclusion of the lower court that private
respondent was an innocent purchaser for value. Respondent
Aglaloma relied on the power of attorney presented by petitioners
wife, Irma. Being the wife of the owner and having with her the title
of the property, there was no reason for the private respondent not
to believe in her authority. Moreover, the power of attorney was
notarized and as such, carried with it the presumption of its due
execution.
A purchaser in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in
such property and pays a full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or
interest of some other person in the property.
- The questioned power of attorney and deed of sale, were
notarized and therefore, presumed to be valid and duly
executed.
Atty. Tubig denied having notarized the said documents and
alleged that his signature had also been falsified. Just like the
petitioner, witness Atty. Tubig merely pointed out that his signature
was different from that in the power of attorney and deed of sale.
Even granting for the sake of argument, that the petitioners
signature was falsified and consequently, the power of attorney
and the deed of sale were null and void, such fact would not revoke
the title subsequently issued in favor of private respondent.
The right of an innocent purchaser for value must be
respected and protected, even if the seller obtained his title
through fraud. The REMEDY of the person prejudiced is to bring
an action for damages against those who caused or employed the
fraud, and if the latter are insolvent, an action against the
Treasurer of the Philippines may be filed for recovery of damages
against the Assurance Fund.
RE ESTOPPEL:
The trial court did not err in applying equitable estoppel in this
case. The principle of equitable estoppel states that where one or
two innocent persons must suffer a loss, he who by his conduct
made the loss possible must bear it. From the evidence adduced,
it should be the petitioner who should bear the loss.
The fact remains that the Certificate of Title, as well as other
documents necessary for the transfer of title were in the
possession of Irma, consequently leaving no doubt or any
suspicion on the part of the defendant as to her authority. Under
Section 55 of Act 496, Irma’s possession and production of the
TCT to defendant operated as conclusive authority from the
plaintiff to the Register of Deeds to enter a new certificate.
H. SPECIAL POWERS OF ATTORNEY
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 ORBETA vs. SENDIONG
FACTS:
On 24 March 1925, Simeona Montenegro sold to the spouses
Maximo Orbeta and Basilisa Teves (spouses Orbeta) a portion,
comprising of 4,622 square meters, of a parcel of land designated
as Lot 606 of the Cadastral Survey of the Municipality of
Dumaguete (subject land), by virtue of a document
denominated Escritura de Compra Venta.
- The subject land was exclusive of a 884-square meter
site occupied by the house of Simeona Montenegros
grandmother which was not included in the sale.
On 25 January 1934, Maximo Orbeta, in turn, sold to the
spouses Juan Sendiong and Exequila Castellanes the subject
land, with all the improvements existing thereon.
On 30 September 1968, upon the instance of the heirs of the
spouses Orbeta, Simeona Montenegro executed in their favor
a Deed of Confirmation of Sale and Quitclaim, acknowledging
and ratifying the sale of the subject land to the spouses Orbeta.
- On the same day, the said heirs executed an Extra-
judicial Settlement and Partition pertaining to the
estate of their mother, Basilisa Teves-Orbeta, which
deed included the latters alleged conjugal share in
the subject land consisting of 2,311 square meters.
In the meantime or on 29 December 1956, the spouses Juan
Sendiong and Exequila Castellanes donated the subject land
in favor of Luis Sendiong who therafter sold the easternmost
one-half (1/2) undivided portion thereof to the spouses
Pretzylou Sendiong on 9 June 1973.
- Apparently, Luis Sendiong kept the other undivided
half for himself.
Thereafter, Simeona Montenegro, having apparently lost
possession over the 884-square meter portion that was
excluded in the 1925 sale, filed a complaint on 25 May 1972
against Luis Sendiong for recovery of possession of the said
portion, and damages, which was docketed as Civil Case No.
5442 of the Court of First Instance of Negros Oriental.
The heirs of Basilisa Teves-Orbeta, for their part, filed a
complaint-in-intervention dated 26 December 1973, praying for
the recovery of possession of their portion in the subject land
comprising of 2,311 square meters.
- However, during the pendency of this case, the case
records were destroyed in a fire which razed the sala of
the RTC hearing the complaint.
- Said records were not reconstituted, and it seems the
complaint was never pursued.
On 18 May 1992, the heirs of Simeona Montenegro, as well as
the heirs of the spouses Orbeta herein petitioners
(petitioners) filed before the RTC of Negros Oriental a
complaint against Mr. & Mrs. Benedicto Pajulas, otherwise
known as the spouses Pretzylou Sendiong, for recovery of
possession, quieting of title and damages, with a prayer for
the issuance of a writ of preliminary injunction
- Petitioners asserted that Maximo Orbeta, whom they
claim as having sold the subject property to the spouses
Juan Sendiong and Exequila Castellanes without the
consent of his wife, could have conveyed only his
conjugal share in the property which comprised of 2,311
square meters or one-half of 4,622 square meters of the
subject land that Simeona Montenegro had actually sold
to spouses Orbeta.
- The heirs of Simeona Montenegro also reiterated their
claim over the 884-square meter portion that had been
excluded in the 1925 sale.
In their Complaint, petitioners prayed that they be declared
absolute co-owners of the subject property except for the 2,311.00
SQUARE METERS conveyed by Maximo Orbeta to Spouses Juan
Sendiong and Exequila Castellanes.
In their Answer, defendant spouses claimed that in the 1925 sale,
Simeona Montenegro had actually sold Lot 606 in its entirety,
including the aforementioned 884-square meters.
- Defendant spouses likewise claimed that since 25
January 1934, they, together with the estate of Luis
Sendiong, had been in peaceful and open possession,
in the concept of an owner and adverse to the whole
world, of the entire Lot 606.
- Pertinently to the present petition, they further alleged
that Lourdes Sendiong and herein respondent, Paul
Sendiong, being the heirs of Luis Sendiong, should be
impleaded as party defendants. Lourdes and Paul
Sendiong were children of Luis Sendiong.
On 17 November 1993, defendant spouses filed a motion to
dismiss on the ground of lack of cause of action, in view of the fact
that the heirs of Luis Sendiong have not been impleaded as
indispensable parties.
- In their vigorous opposition to said motion, petitioners
alleged that the heirs of Luis Sendiong are not
indispensable parties as they are not in possession of
the subject land which was the very issue in said case.
In its Order of 17 December 1993, the trial court denied the motion
to dismiss. The trial court, in its Order dated 31 January 1994, also
denied the defendant spouses motion for reconsideration.
On 22 November 1994, the defendant spouses filed a Motion to
Include Indispensable Parties, dated 21 November 1994, which
was opposed again by petitioners. In its Order, dated 13 March
1995, the trial court denied the aforesaid motion.
After petitioners had rested their case, defendant spouses again
filed a Motion to Include Indispensable Parties, which was
opposed likewise by petitioners. In support of their motion,
defendant-spouses submitted a position paper on 5 June 1997. On
3 December 1997, the trial court denied said motion for lack of
merit and trial ensued.
TRIAL COURT:
 The trial court found that what Simeona Montenegro had actually
sold in 1935 was the subject land, which did not include the 884-
square meter portion claimed by her heirs.
 Accordingly, it recognized the absolute ownership of the
Montenegro heirs over the said portion.
 The trial court also found that the spouses Juan Sendiong and
Exequila Castellanes could have only acquired ownership over
the conjugal share of Maximo Orbeta in the subject land
considering that the latter had sold the same in 1934 without the
consent of his spouse, Basilia Teves-Orbeta.
 The trial court also declared null and void the sale made by
Maximo Orbeta with respect to the conjugal share of his spouse,
and ordered the spouses Pretzylou and Genosa Sendiong to
restore to petitioners the title to and possession of their respective
shares in the subject land.
RESPONDENTS’ CONTENTION:
 Pretzylou and Genosa Sendiong sought to appeal the decision by
filing a Notice of Appeal, but the same was denied by the RTC on
the ground that the certificate of non forum-shopping was
signed by counsel and not by the Sendiongs themselves.
 On 28 August 2000, respondent, REPRESENTED BY HIS
ATTORNEY-IN-FACT AND DAUGHTER MAE A. SENDIONG,
filed a Petition for Annulment of Decision with a Prayer for a
Temporary Restraining Order and Writ of Preliminary
Injunction with the Court of Appeals, in respect to the decision in
Civil Case No. 10173.
 Respondent, as petitioner therein, alleged having learned of the
decision sought to be annulled only in 1999, as he was not made
a party thereto.
- Asserting his right to the property as an heir of Luis
Sendiong, respondent noted that the petitioners did not
implead him as a defendant in Civil Case No. 10173, and
that the trial court had refused to implead him as an
indispensable party despite repeated motions to that effect
by the defendants in the civil case.
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 - Private respondent argued that the decision in Civil Case
No. 10173 encroached on the hereditary rights of himself
and Lourdes Sendiong without having even given the
elementary courtesy of due process.
- On the premise that he and Lourdes Sendiong were
indispensable parties in Civil Case No. 10173 but not made
parties thereto, respondent invoked Rule 3, Section 7 of the
Rules of Civil Procedure and jurisprudence in positing that
the RTC decision was null and void.
PETITIONERS’S CONTENTION (BEFORE CA):
 Before the Court of Appeals, petitioners argued that the petition
for annulment of judgment was fatally infirm as the certification on
non-forum shopping was signed by the attorney-in-fact by virtue
of a General Power of Attorney.
 Petitioners also alleged that the rule on res judicatashould apply
considering that the issue on whether respondent is an
indispensable party had already been passed upon by the Court
of Appeals in the decision in C.A.-G.R. SP No. 48943, the petition
for certiorari filed by Pretzylou and Genosa Sendiong.
CA: Granted the petition for annulment of judgment and
nullified the decision in Civil Case No. 10173.
 It ruled that respondent and Lourdes Sendiong were indeed
indispensable parties in Civil Case No. 10173, considering that
the complaint had prayed that petitioners be declared as absolute
co-owners of the subject property.
 Moreover, petitioners had challenged the validity of the donation
of the subject property to Luis Sendiong, predecessor-in-interest
of respondent, and accordingly, any judgment regarding
petitioners claims would affect respondents interests in the
subject land.
 Citing jurisprudence, the appellate court ruled that the absence of
an indispensable party in a case renders ineffectual all the
proceedings subsequent to the filing of the complaint, including
the judgment, and that all subsequent actuations of the court are
null and void for want of authority to act, not only as to the absent
parties, but even as to those present.
 The Court of Appeals also ruled that the petition for annulment of
judgment was barred neither by estoppel, laches, res judicata nor
forum-shopping, contrary to the stance of petitioners.[12]
PETITIONERS’ CONTENTION (BEFORE SC):
- Petitioners also claim that respondents hereditary rights,
interests, and participation in the subject land would remain
undisturbed should the RTC decision be actually
implemented.
SC: Affirmed the appellate court’s ruling
 Respondents petition for annulment is grounded on lack of
jurisdiction, owing to the failure to implead the indispensable
parties. The cited ground is ample basis for annulment of
judgment.
- The joinder of all indispensable parties is a
condition sine qua non of the exercise of judicial power.
The absence of an indispensable party renders all
subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but
even as to those present.
 It takes no great degree of legal sophistication to realize that
respondents Paul Sendiong and Lourdes Sendiong were
indispensable parties to Civil Case No. 10173.
- Paul and Lourdes Sendiong derived their rights to
the subject property from their father Luis
Sendiong, who acquired the property by way of
donation from the spouses Juan Sendiong and
Exequila Castellanes, who in turn purchased the
property from Maximo Orbeta in 1934.
- The central thrust of the complaint in Civil Case No.
10173 was that Orbeta could have sold only his one-half
conjugal share, which of course is undivided, in the
subject land as his wife did not consent to the sale.
- Accordingly, the prayer in the complaint was that
petitioners be declared as the absolute co-owners of the
subject land, minus 2,311 square meters which they
claimed was the maximum which Maximo Orbeta could
have conveyed to Juan Sendiong and Exequila
Castellanes.
- If such thrust and prayer were to be upheld, as it was by
the RTC, then all the subsequent transmissions of the
subject land from 1934 would be affected, and the rights
of ownership acquired by the various successors-in-
interest accordingly diminished. This includes the rights
of Paul Sendiong and Lourdes Sendiong, who derived
their hereditary shares in the property from Luis
Sendiong.
 As held by the Court of Appeals on this point:
- This Court takes notice of the fact that, as can be
gleaned from their complaint, private respondents
prayed that they be declared as absolute co-owners
of Lot 606, except the 2,311 square meters conveyed by
Maximo Orbeta to spouses Juan Sendiong and Exequila
Castellanes.
- Indeed, private respondents admittedly recognize
petitioners interest over the subject land, being one of
the heirs of Luis Sendiong who acquired the subject land
by way of donation from spouses Juan Sendiong and
Exequila Castellanes, who in turn acquired the subject
land from Maximo Orbeta, the original vendee.
- Considering private respondents claim that said
donation is invalid, in effect, they admit that there is an
actual controversy or cloud in the title or ownership over
the subject land.
- This is telling proof that a complete adjudication or final
determination thereof would require that petitioner,
together with Lourdes Sendiong, be impleaded as
indispensable parties. Any judgment respecting private
respondents claim would, as a matter of course, affect
petitioners interests over the subject land.
- Petitioner, therefore, as an indispensable party, has the
right to assert his title over the subject land, and prove
the same on the basis of evidence that he might present
as against the intertwining and conflicting claims
interposed by private respondents and defendant-
spouses.
- Verily, as an heir of Luis Sendiong, the latter having
acquired the subject land from spouses Juan Sendiong
and Exequila Castellanes, petitioners right over his
share in the estate of his deceased father would be
adversely affected by the assailed decision declaring
private respondents heirs of Simeona Montenegro and
heirs of spouses Orbeta, as co-owners of the portion of
the subject land consisting of 884 square meters and
2,311 square meters, respectively, which consequently
encroached upon his share as heir of Luis Sendiong as
it involves a question of ownership and not merely of
possession.
- Needless to state, considering that the complaint
was for quieting of title of the subject land, said
heirs of Luis Sendiong should have been impleaded
as indispensable parties for the assailed decision to
bind and affect their interests.
- In like manner, when an action involves reconveyance
of property, owners of property over which
reconveyance is asserted are indispensable parties,
without whom no relief is available and without whom
the court can render no valid judgment and it is the duty
of the plaintiffs to implead all the necessary or
indispensable parties for the complete determination of
the action as a person not included as a party to a case
cannot be bound by the decision made by a court.
 Indeed, the Court could not see how or why respondent and
Lourdes Sendiong could not have been impleaded in Civil
Case No. 10173 before the RTC. In the answer filed by the
defendants in Civil Case No. 10173, the matter of the
indispensable inclusion of Paul and Lourdes Sendiong was
already raised.
- Petitioners could have easily amended their complaint
to that effect, but they did not.
3
 - The RTC could have required the inclusion of Paul and
Lourdes Sendiong as party-defendants, as prayed for by
the defendants, but it refused to do so.
- The shared intransigence of petitioners and the RTC in
refusing to implead Paul and Lourdes Sendiong has
resulted in the ignominy of a void decision.
 The foregoing premises considered, the Court cannot
seriously consider petitioners contention that respondents
hereditary rights, interests and participation over the subject
land would not be adversely affected by their complaint.
Petitioners allege that the question in Civil Case No. 10173
involves only the recovery of possession from Pretzylou Sendiong
of property which they allege is rightfully theirs.
 However, such allegation is belied by the very complaint,
which plainly prays that petitioners be adjudged absolute co-
owners of half of the subject land.
 Besides, as pointed out by the Court of Appeals, the RTC
itself ruled against the validity of the conveyance by Maximo
Orbeta to Juan Sendiong and Exequila Castellanes of the
whole property, a declaration that indubitably affects the
rights of all the successors-in-interests, including respondent.
Now, the matter of whether respondent is otherwise barred from
seeking the annulment of judgment by estoppel, laches, or
procedural infirmities.
 Neither laches nor estoppel serves as a bar. The petition for
annulment alleges that respondent learned of the existence
of Civil Case No. 10173 only in 1999, or one year after the
decision therein had been rendered.
- Since he was not impleaded in Civil Case No. 10173,
there is no basis to presume that respondent was
aware of the civil case during its pendency before
the RTC.
- Moreover, at the time respondent according to
petitioners learned of the civil case, there was no
pending appeal from the RTC decision therein,
the Notice of Appeal having been earlier denied.
- Under these circumstances, it would be difficult to
discern how in 1999 respondent could have still
participated in Civil Case No. 10173.
- There was no pending appeal to speak of which he
could have involved himself. Nor could have he
participated in the special civil action for certiorari, an
original action, then pending before the Court of
Appeals.
 Indeed, a petition for annulment of judgment was, at that
point, the only viable remedy for respondent to avail of, and it
was utilized only one year after respondent learned of the
existence of Civil Case No. 10173.
 Laches has been defined as the failure or neglect for an
unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have
been done earlier negligence or omission to assert a right
within a reasonable time, warranting presumption that the
party entitled to assert it has abandoned it or declined to
assert it.
- Considering that a petition for annulment of judgment
based on extrinsic fraud may be filed within four (4)
years from discovery of the fraud, a similar petition
based on lack of jurisdiction is generally not barred by
laches or estoppel if the petition is filed within one year
after petitioner learns of the questioned decision.
- This moreover holds true, as in this case, since
respondent is a foreign resident restrained by time and
distance to undertake an immediate and proximate
response, such as judicial recourse.
Petitioners argue that the petition for annulment of judgment is
barred by res judicata, as the issues on the alleged indispensability
of Paul Sendiong as party defendant before the [l]ower [c]ourt in
Civil Case No. 10173 and the validity of the [l]ower [c]ourts
Decision thereof [has] already been passed upon by the Honorable
Court of Appeals in its Decision in CA-G.R. SP No. 48943, as
aforestated. The argument as stated by the petitioners is barely
comprehensible, but there is no way the petition for annulment of
judgment could be barred by res judicata.
 To begin with, it is the height of sophistry to argue that res
judicata would bar a petition for annulment of judgment
whose, as in this case, prior judgment happens to be that
which is sought to be annulled.
- The petition for annulment of judgment precisely
challenges the validity of the first judgment, and to adopt
petitioners argument would lead to permanent
preclusion of annulment of judgment as a remedy.
Significantly, the reverse is true for the rationale
underlying annulment of judgment is incongruent with
the concept of res judicata.
- Hence, the action for annulment of judgment precludes
the defense of res judicata. The grounds for annulment
of judgment are either lack of jurisdiction or the presence
of extrinsic fraud in the rendition of the judgment sought
to be annulled.
- On the other hand, among the requisites of res
judicata are jurisdiction on the part of the court rendering
the first judgment over the parties and identity of causes
of action between the first and the second actions.
- Ineluctably, said requisites are absent. The first
judgment, in Civil Case No. 10173, pertains to the merits
of the action for recovery of possession, quieting of title,
and recovery of damages, whereas the cause of action
in the petition for annulment relates to the lack of
jurisdiction that marred the rendition of the first
judgment.
 The judgment in CA-G.R. SP No. 48943 is no bar to the
petition for annulment as well. There is neither identity of
parties or identity of causes of action as between the certiorari
petition and the petition for annulment of judgment.
- Petitioners claim that the alleged exclusion of
indispensable party Paul Sendiong had already been
ventilated before the [Court of Appeals] in CA-G.R. SP
No. 48943, . . . which was TERSELY DISMISSED per
Decision promulgated on June 30, 2000. The eleven-
page Decision of the Court of Appeals in CA-G.R. SP
No. 48943 hardly constitutes a terse dismissal except
perhaps in the land of the long-winded, but a perusal of
the said Decision reveals no discussion at all about
impleading Paul Sendiong in Civil Case No. 10173.
 In fact, the only mention made of respondent in the
aforesaid Decision was in the narration of facts. The
adjudication of CA-G.R. SP No. 48943, as expressed in
the Decision, was limited to the propriety of the denial of
the Notice of Appeal in Civil Case No. 10173. The appellate
court upheld the denial on the ground that there was no
written explanation as to why the Notice of Appeal was
served by registered mail instead of personal service.[22] No
other matter was discussed by the Court of Appeals therein,
certainly none on the merits of the Civil Case. In fact,
the Decision ends with the caveat: This Court is confronted
only with the procedural aspect of the case.
**Petitioners assert that respondent submitted a false certification
on non-forum shopping, primarily on the ground that the said
certification was signed not by respondent, but by his daughter,
Mae Sendiong, by authority of a General Power of Attorney, which
petitioners claim was not specified for the purpose of filing the
petition.
- However, A PERUSAL OF THE GENERAL POWER
OF ATTORNEY shows that Mae Sendiong is
empowered, among others, to execute, sign,
authenticate, and enter into any and all contracts and
agreements for me and in my name with any person or
entity, and to bring suit, defend and enter into
compromises in my name and stead, in connection with
4
 actions brought for or against me, of whatever nature
and kind.
The signing of the verification and certification of non-forum
shopping are covered under the said provisions of
the General Power of Attorney.
- A SPECIAL POWER OF ATTORNEY simply refers to a
clear mandate specifically authorizing the
performance of a specific power and of express acts
subsumed therein, and there is a specific authority
given to Mae Sendiong to sign her name in behalf of
Paul Sendiong in contracts and agreements and to
institute suits in behalf of her father.
- Neither would the fact that the document is
captioned General Power of Attorney militate
against its construction as granting specific powers
to the agent pertaining to the petition for annulment
of judgment she instituted in behalf of her father.
- As Justice Paras has noted, a general power of
attorney may include a special power if such special
power is mentioned or referred to in the general
power.
The certification of non-forum shopping in the petition for
annulment did not mention any other pending case or claim,
notwithstanding the fact that there was a pending motion for
reconsideration lodged before the Court of Appeals in CA-G.R. SP
No. 48943.
Yet the Court of Appeals also adequately discussed, in disputing
the claim that respondent had committed forum-shopping, why
there was no identity in rights or causes of action in the petition for
annulment of judgment and in the special civil action for certiorari.
Its conclusion is in concurrence with our earlier discussion on this
point in relation to res judicata.
- Accordingly, owing to the segregate identity in rights and
causes of action and the fact that respondent was not a
party to the certiorari petition, there was no indubitable
need for him to mention CA-G.R. SP No. 48943 in the
certification of non-forum shopping. In fact, there really
is no cause to definitively presume that he was aware of
the said case considering that he was not a party to its
antecedent civil case.
Petitioners argue that the petition for annulment should have been
dismissed outright for failing to cite the docket number of the case
in the lower court, pursuant to A.C. No. 28-91, promulgated as it
was to prevent forum-shopping or multiple filing of petitions and
complaints.
- This claim relies upon the mother of all technicalities, but
one which is not even supported by A.C. No. 28-91,
which provides that any violation of this Circular shall be
cause for the summary dismissal of the multiple
petition or complaint.
In short, dismissal of a petition for violation of A.C. No. 28-91
obtains only if the petition can be considered a multiple petition or
complaint, and not simply because the docket number of the lower
court case was not mentioned in the complaint.
- Besides, as pointed out by respondent, the docket
number of the lower court case is mentioned in the body
of the petition.
And even if A.C. No. 28-91 could be construed as authorizing the
dismissal of a petition for failing to state the docket number of the
lower court decision, the relative weight of all things must be
considered, particularly the degree of distress on respondent due
to the deprivation of his property without being afforded the
opportunity to defend his claims. When gauged against the denial
of respondents right to due process of law, the purported violation
by Paul Sendiong of A.C. No. 28-91 does not amount to a hill of
beans.
WHEREFORE, the Petition is DENIED and the assailed judgment
of the Court of Appeals is AFFIRMED. Costs against petitioners.
SHOPPERS PARADISE REALTY & DEVELOPMENT
CORPORATION vs. EFREN P. ROQUE, (VITUG, J)
FACTS:
Petitioner Shoppers Paradise Realty & Development
Corporation, represented by its president, Veredigno Atienza,
- entered into a 25 year lease with Dr. Felipe C. Roque, now
deceased, over a parcel of land, with an area of 2,036 square
meters, situated at Plaza Novaliches, Quezon City, covered
by TCT in the name of Dr. Roque.
- Petitioner issued to Dr. Roque a check for P250k by way of
reservation payment.
- Simultaneously, petitioner and Dr. Roque likewise entered
into an agreement for the construction, development and
operation of a commercial building complex on the property.
- Conformably with the agreement, petitioner issued a check
for another P250k down payment to Dr. Roque.
The contract of lease and the agreement, both notarized, were
to be annotated on TCT within sixty (60) days from 23 December
1993 or until 23 February 1994.
- The annotations, however, were never made because of the
untimely demise of Dr. Roque.
- The death of Dr. Roque on 10 February 1994 constrained
petitioner to deal with respondent Efren P. Roque, one of
the surviving children of the late Dr. Roque, but the
negotiations broke down due to some disagreements.
- In a letter, dated 3 November 1994, respondent advised
petitioner to desist from any attempt to enforce the
aforementioned contract of lease and memorandum of
agreement.
- On 15 February 1995, respondent filed a case for annulment
of the contract of lease and the memorandum of agreement,
with a prayer for the issuance of a preliminary injunction,
before the RTC
RESPONDENT’S ALLEGATION:
- that he had long been the absolute owner of the subject property
by virtue of a deed of donation inter vivos executed in his
favor by his parents, Dr. Roque and Elisa Roque, on 26
December 1978,
- and that the late Dr. Felipe Roque had no authority to enter into
the assailed agreements with petitioner.
- The donation was made in a public instrument duly
acknowledged by the donor-spouses before a notary public and
duly accepted on the same day by respondent before the notary
public in the same instrument of donation.
- The title to the property, however, remained in the name of Dr.
Felipe C. Roque, and it was only transferred to and in the name
of respondent sixteen years later, or on 11 May 1994, under TCT
No. 109754 of the Register of Deeds of Quezon City.
- Respondent, while he resided in the United States of America,
delegated to his father the mere administration of the property.
- Respondent came to know of the assailed contracts with
petitioner only after retiring to the Philippines upon the death of
his father.
RTC: ordered respondent to surrender TCT to the Register of
Deeds of Quezon City for the annotation of the questioned
Contract of Lease and Memorandum of Agreement.
CA: was not without substantial basis when it found petitioner to
have had knowledge of the donation at the time it entered into the
two agreements with Dr. Roque. During their negotiation,
petitioner, through its representatives, was apprised of the fact that
the subject property actually belonged to respondent.
RULING: The existence, albeit unregistered, of the donation in
favor of respondent is undisputed.
The trial court and the appellate court have not erred in holding
that the non-registration of a deed of donation does not affect its
validity.
5
- As being itself a mode of acquiring ownership, donation
results in an effective transfer of title over the property from
the donor to the donee.
- In donations of immovable property, the law requires for its
validity that it should be contained in a public document,
specifying therein the property donated and the value of the
charges which the donee must satisfy.
- The Civil Code provides, however, that titles of ownership, or
other rights over immovable property, which are not duly
inscribed or annotated in the Registry of Property (now
Registry of Land Titles and Deeds) shall not prejudice third
persons
- It is enough, between the parties to a donation of an
immovable property, that the donation be made in a public
document but, in order to bind third persons, the donation
must be registered in the registry of Property (Registry of
Land Titles and Deeds).
It was not shown that Dr. Felipe C. Roque had been an
authorized agent of respondent.
- In A CONTRACT OF AGENCY, the agent acts in
representation or in behalf of another with the consent of the
latter.
- Article 1878 of the Civil Code expresses that a special
power of attorney is necessary to lease any real property to
another person for more than one year.
- The lease of real property for more than one year is
considered not merely an act of administration but an act of
strict dominion or of ownership. A special power of attorney
is thus necessary for its execution through an agent.
The Court cannot accept petitioners argument that respondent is
guilty of laches.
- Laches, in its real sense, is the failure or neglect, for an
unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have
been done earlier; it is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned or declined to
assert it.
- Respondent learned of the contracts only in February 1994
after the death of his father, and in the same year, during
November, he assailed the validity of the agreements.
- Hardly, could respondent then be said to have neglected to
assert his case for unreasonable length of time.
- Neither is respondent estopped from repudiating the
contracts. The essential elements of estoppel in pais, in
relation to the party sought to be estopped, are:
1) a clear conduct amounting to false representation or
concealment of material facts or, at least, calculated to convey
the impression that the facts are otherwise than, and inconsistent
with, those which the party subsequently attempts to assert;
2) an intent or, at least, an expectation, that this conduct shall
influence, or be acted upon by, the other party; and
3) the knowledge, actual or constructive, by him of the real facts.
- With respect to the party claiming the estoppel, the conditions
he must satisfy are:
1) lack of knowledge or of the means of knowledge of the truth as
to the facts in question;
2) reliance, in good faith, upon the conduct or statements of the
party to be estopped; and
3) action or inaction based thereon of such character as to
change his position or status calculated to cause him injury or
prejudice
- It has not been shown that respondent intended to conceal
the actual facts concerning the property; more importantly,
petitioner has been shown not to be totally unaware of the
real ownership of the subject property.
SPOUSES ROLANDO and HERMINIA SALVADOR vs
SPOUSES ROGELIO AND ELIZABETH RABAJA and
ROSARIO GONZALES
FACTS:
Petitioner spouses Rolando and Herminia Salvador, are the sellers
over the parcel of land.
o The buyers, are respondent Spouses Rogelio and
Elizabeth Rabaja, with Rosario Gonzales as the seller’s
agent.
Sometime in July 1998, Spouses Rabaja learned that Spouses
Salvador were looking for a buyer of the subject property.
Petitioner Herminia Salvador personally introduced Gonzales to
them as the administrator of the said property. Spouses Salvador
even handed to Gonzales the owner’s duplicate certificate of title
over the subject property.
On July, 3, 1998, Spouses Rabaja made an initial payment of
P48,000.00 to Gonzales in the presence of Herminia. Gonzales
then presented the Special Power of Attorney, executed by
Rolando Salvador and dated July 24, 1998.
o On the same day, the parties executed the Contract to
Sell which stipulated that for a consideration of
P5,000,000.00,
o Spouses Salvador sold, transferred and conveyed in favor
of Spouses Rabaja the subject property.
o Spouses Rabaja made several payments totalling
P950,000.00, which were received by Gonzales
pursuant to the SPA provided earlier as evidenced by the
check vouchers signed by Gonzales and the improvised
receipts signed by Herminia.
Sometime in June 1999, however, Spouses Salvador complained
to Spouses Rabaja that they did not receive any payment from
Gonzales.
o This prompted Spouses Rabaja to suspend further
payment of the purchase price; and as a consequence,
they received a notice to vacate the subject property from
Spouses Salvador for non-payment of rentals.
Thereafter, Spouses Salvador instituted an action for ejectment
against Spouses Rabaja. In turn, Spouses Rabaja filed an action
for rescission of contract against Spouses Salvador and
Gonzales, the subject matter of the present petition.
Spouses Rabaja demanded the rescission of the contract to sell
praying that the amount of P950,000.00 they previously paid to
Spouses Salvador be returned to them. They likewise prayed that
damages be awarded due to the contractual breach committed by
Spouses Salvador.
Spouses Salvador filed their answer with counterclaim and cross-
claim contending that there was no meeting of the minds
between the parties and that the SPA in favor of Gonzales was
falsified.
o In fact, they filed a case for falsification against Gonzales,
but it was dismissed because the original of the alleged
falsified SPA could not be produced.
o They further averred that they did not receive any payment
from Spouses Rabaja through Gonzales.
GONZALES DEFENSE: Gonzales filed her answer stating that the
SPA was not falsified and that the payments of Spouses Rabaja
amounting to P950,000.00 were all handed over to Spouses
Salvador.
ISSUE: Whether or not contract could be rescinded and the
Rabajas are entitled to the return of the P950,000. – YES, entitled.
RULING:
Civil Law; Agency; A third person with whom the agent
wishes to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as
regards the agency.—
 Persons dealing with an agent must ascertain not only the fact
of agency, but also the nature and extent of the agent’s
authority.
6
  A third person with whom the agent wishes to contract on
behalf of the principal may require the presentation of the
power of attorney, or the instructions as regards the agency.
 The basis for agency is representation and a person dealing
with an agent is put upon inquiry and must discover on his own
peril the authority of the agent.
According to Article 1990 of the New Civil Code, insofar as
third persons are concerned, an act is deemed to have been
performed within the scope of the agent’s authority, if such
act is within the terms of the power of attorney, as written.
 In this case, Spouses Rabaja did not recklessly enter into a
contract to sell with Gonzales. They required her
presentation of the power of attorney before they
transacted with her principal. And when Gonzales
presented the SPA to Spouses Rabaja, the latter had no
reason not to rely on it.
o By introducing Gonzales personally to Spouses Rabaja
as the administrator of the subject property, it is by their
own ostensible acts, Spouses Salvador made third
persons believe that Gonzales was duly authorized to
administer, negotiate and sell the subject property. This
fact was even affirmed by Spouses Salvador themselves
in their petition where they stated that they had
authorized Gonzales to look for a buyer of their property.
 Considering that there was a valid SPA, then Spouses
Rabaja properly made payments to Gonzales, as agent of
Spouses Salvador and it was as if they paid to Spouses
Salvador.
 It is of no moment, insofar as Spouses Rabaja are
concerned, whether or not the payments were actually
remitted to Spouses Salvador. Any internal matter,
arrangement, grievance or strife between the principal and
the agent is theirs alone and should not affect third persons.
If Spouses Salvador did not receive the payments or they
wish to specifically revoke the SPA, then their recourse is to
institute a separate action against Gonzales.
I. POWER TO SELL AND RAISE MONEY
MACARIA ARGUELLES and the HEIRS OF THE DECEASED
PETRONIO ARGUELLES, Petitioners,
vs. MALARAYAT RURAL BANK, INC., Respondent.
FACTS:
The late Fermina M. Guia was the registered owner of Lot 3, a
parcel of agricultural land in Barrio Pinagkurusan, Alitagtag,
Batangas, with an area of 4,560 sqm, as evidenced by OCT No.
P-12930 of the RD of Batangas.
Fermina M. Guia sold the south portion of the land with an
approximate area of 1,350 sqm to the spouses Petronio and
Macaria Arguelles (Sps Arguelles).
- Although Sps. Arguelles immediately acquired
possession of the land, the Deed of Sale was neither
registered with the RD nor annotated on OCT No. P-
12930.
At the same time, Fermina M. Guia ordered her son Eddie Guia
and Eddie’s wife Teresita Guia (Sps. Guia) to subdivide the land
covered by OCT No. P-12930 into 3 lots and to apply for the
issuance of separate titles therefor, to wit: Lot 3-A, Lot 3-B, and
Lot 3-C.
Thereafter, she directed the delivery of the TCT corresponding to
Lot 3-C to the vendees of the unregistered sale or the Sps
Arguelles.
- However, despite their repeated demands, Sps.
Arguelles claimed that they never received the TCT
corresponding to Lot 3-C from the Sps. Guia.
Nevertheless, in accordance with the instructions of Fermina M.
Guia, Sps. Guia succeeded in cancelling OCT No. P-12930 on
August 15, 1994 and in subdividing the lot in the following manner:
Lot No. TCT No. Registered Owner
3-A T-83943 Fermina M. Guia
3-B T-83945 Spouses Datingaling
3-C T-83944 Fermina M. Guia6
Sps. Guia obtained a loan in the amount of ₱240,000 from the
respondent Malarayat Rural Bank and secured the loan with a
Deed of RENM over Lot 3-C.
- The loan and REM were made pursuant to the Special
Power of Attorney purportedly executed by the
registered owner of Lot 3-C, Fermina M. Guia, in
favor of the mortgagors, Sps. Guia.
Moreover, the REM and SPA were duly annotated in the
memorandum of encumbrances of TCT No. T-83944 covering Lot
3-C.
Sps. Arguelles alleged that it was only in 1997 or after 7 years from
the date of the unregistered sale that they discovered from the
Register of Deeds of Batangas City the following facts:
1) subdivision of Lot 3 into Lots 3-A, 3-B, and 3-C;
2) issuance of separate TCTs for each lot; and
3) the annotation of the REM and SPA over Lot 3-C
covered by TCT No. T-83944.
Two years thereafter, or on June 17, 1999, Sps. Arguelles
registered their adverse claim based on the unregistered sale
dated December 1, 1990 over Lot 3-C.
Sps. Arguelles filed a complaint for Annulment of Mortgage
and Cancellation of Mortgage Lien with Damages against the
respondent Malarayat Rural Bank with the RTC, Branch 86, of
Taal, Batangas.
- Sps Arguelles alleged ownership over the land that had
been mortgaged in favor of the respondent Malarayat
Rural Bank.
Malarayat Rural Bank filed an Answer with Counterclaim and
Cross-claimagainst cross-claim-defendant spouses Gui a wherein
it argued that the failure of the spouses Arguelles to register
the Deed of Sale dated December 1, 1990 was fatal to their
claim of ownership.
RTC: found that the spouses Guia were no longer the absolute
owners of the land described as Lot 3-C and covered by TCT No.
T-83944 at the time they mortgaged the same to the respondent
Malarayat Rural Bank in view of the unregistered sale in favor of
the vendee spouses Arguelles.
 RTC annulled the REM, the subsequent foreclosure sale, and
the corresponding issuance of the certificate of title.
 RTC declared that the respondent Malarayat Rural Bank was
not a mortgagee in good faith as it failed to exercise the
exacting degree of diligence required from banking
institutions.
CA: Reversed
ISSUES: WON respondent Malarayat Rural Bank is a mortgagee
in good faith who is entitled to protection on its mortgage lien
PETITIONER’S CONTENTION
 Arguelles imputed negligence on the part of Malarayat Rural
Bank when it approved the loan application of the spouses
Guia.
 They pointed out that the bank failed to conduct a thorough
ocular inspection of the land mortgaged and an extensive
investigation of the title of the registered owner. And since the
respondent Malarayat Rural Bank cannot be considered a
mortgagee in good faith, petitioners argued that the
unregistered sale in their favor takes precedence over the
duly registered mortgage lien.
7

RESPONDENT’S CONTENTION
 Malarayat Rural Bank claimed that it exercised the required
degree of diligence before granting the loan application. In
particular, it asserted the absence of any facts or
circumstances that can reasonably arouse suspicion in a
prudent person.
 Thus, the respondent Malarayat Rural Bank argued that it is
a mortgagee in good faith with a better right to the mortgaged
land as compared to the vendees to the unregistered sale.
RULING:
The ascertainment of good faith or the lack thereof, and the
determination of negligence are factual matters which lay
outside the scope of a petition for review on certiorari.
However, a recognized exception to this rule is when the RTC
and the CA have divergent findings of fact as in the case at
bar.—
 At the outset, we note that the issue of whether a mortgagee
is in good faith generally cannot be entertained in a petition
filed under Rule 45 of the 1997 Rules of Civil Procedure, as
amended.
 We find that the respondent Malarayat Rural Bank is not a
mortgagee in good faith. Therefore, the spouses Arguelles as
the vendees to the unregistered sale have a superior right to
the mortgaged land.
Where the mortgagor is not the registered owner of the
property but is merely an attorney-in-fact of the same, it is
incumbent upon the mortgagee to exercise greater care and
a higher degree of prudence in dealing with such mortgagor.
 Recently, in Land Bank of the Philippines v. Poblete, we
affirmed Bank of Commerce v. Spouses San Pablo, Jr.,
 Based on the evidence, Land Bank processed Maniego’s
loan application upon his presentation of OCT No. P-12026,
which was still under the name of Poblete. Land Bank even
ignored the fact that Kapantay previously used Poblete’s title
as collateral in its loan account with Land Bank.
 In Bank of Commerce v. San Pablo, Jr., held that when “the
person applying for the loan is other than the registered
owner of the real property being mortgaged, such fact should
have already raised a red flag and which should have induced
the Bank to make inquiries into and confirm the authority to
mortgage. A person who deliberately ignores a significant fact
that could create suspicion in an otherwise reasonable
person is not an innocent purchaser for value.”
The Supreme Court has consistently enjoined banks to exert
a higher degree of diligence, care, and prudence than
individuals in handling real estate transactions.—
 In a long line of cases, we have consistently enjoined banks
to exert a higher degree of diligence, care, and prudence than
individuals in handling real estate transactions.
 In Cruz v. Bancom Finance Corporation, we declared:
Respondent, however, is not an ordinary mortgagee; it is a
mortgagee-bank. As such, unlike private individuals, it is
expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A
banking institution is expected to exercise due diligence
before entering into a mortgage contract. The ascertainment
of the status or condition of a property offered to it as security
for a loan must be a standard and indispensable part of its
operations.
The rule that person dealing with registered lands can rely
solely on the certificate of title does not apply to banks.—
 In Ursal v. Court of Appeals, we held that where the
mortgagee is a bank, it cannot rely merely on the certificate
of title offered by the mortgagor in ascertaining the status of
mortgaged properties.
 Since its business is impressed with public interest, the
mortgagee-bank is duty-bound to be more cautious even in
dealing with registered lands. Indeed, the rule that person
dealing with registered lands can rely solely on the certificate
of title does not apply to banks.
 Thus, before approving a loan application, it is a standard
operating practice for these institutions to conduct an ocular
inspection of the property offered for mortgage and to verify
the genuineness of the title to determine the real owners
thereof.
 The apparent purpose of an ocular inspection is to protect the
“true owner” of the property as well as innocent third parties
with a right, interest or claim thereon from a usurper who may
have acquired a fraudulent certificate of title thereto.
 Pertinently, in Land Bank of the Philippines v. Poblete, we
ruled that “where the mortgagee acted with haste in granting
the mortgage loan and did not ascertain the ownership of the
land being mortgaged, as well as the authority of the
supposed agent executing the mortgage, it cannot be
considered an innocent mortgagee.”
 Since the subject land was not mortgaged by the owner
thereof and since the respondent Malarayat Rural Bank is not
a mortgagee in good faith, said bank is not entitled to
protection under the law. The unregistered sale in favor of the
spouses Arguelles must prevail over the mortgage lien of
respondent Malarayat Rural Bank.
ALVIN PATRIMONIO, Petitioner,
vs. NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN
III, Respondents.
FACTS:
Patrimonio and the respondent Napoleon Gutierrez (Gutierrez)
entered into a business venture under the name of Slam Dunk
Corporation (Slum Dunk), a production outfit that produced mini-
concerts and shows related to basketball.
Patrimonio was already then a decorated professional basketball
player while Gutierrez was a well-known sports columnist.
In the course of their business, Patrimonio pre-signed several
checks to answer for the expenses of Slam Dunk.
- Although signed, these checks had no payee’s name,
date or amount.
- The blank checks were entrusted to Gutierrez with the
specific instruction not to fill them out without
previous notification to and approval by Patrimonio.
- According to Patrimonio the arrangement was made so
that he could verify the validity of the payment and make
the proper arrangements to fund the account.
In the middle of 1993, without the Patrimonio’s knowledge and
consent, Gutierrez went to Marasigan (Patrimonio’s former
teammate), to secure a loan in the amount of ₱200,000.00 on the
excuse that Patrimonio needed the money for the construction of
his house.
- In addition to the payment of the principal, Gutierrez
assured Marasigan that he would be paid an interest of
5% per month from March to May 1994.
After much contemplation and taking into account his relationship
with Patrimonio and Gutierrez, Marasigan acceded to Gutierrez’
request and gave him ₱200,000.00 sometime in February 1994.
- Gutierrez simultaneously delivered to Marasigan one of
the blank checks Patrimonio’s pre-signed with Pilipinas
Bank, Greenhills Branch, Check No. 21001764 with the
blank portions filled out with the words "Cash" "Two
Hundred Thousand Pesos Only", and the amount of
"₱200,000.00".
- The upper right portion of the check corresponding to
the date was also filled out with the words "May 23,
1994" but the petitioner contended that the same was
not written by Gutierrez.
On May 24, 1994, Marasigan deposited the check but it was
dishonored for the reason "ACCOUNT CLOSED." It was later
revealed that Patrimonio’s account with the bank had been closed
since May 28, 1993.
8
 - Marasigan sought recovery from Gutierrez, to no avail.
He thereafter sent several demand letters to Patrimonio
asking for the payment of ₱200,000.00, but his demands
likewise went unheeded.
- Consequently, he filed a criminal case for violation of
B.P. 22 against Patrimonio, docketed as Criminal Case
No. 42816.
Patrimonio filed before the RTC a Complaint for Declaration of
Nullity of Loan and Recovery of Damages against Gutierrez and
co-respondent Marasigan.
- He completely denied authorizing the loan or the check’s
negotiation, and asserted that he was not privy to the
parties’ loan agreement.
Only Marasigan filed his answer to the complaint. In the RTC’s
order dated December 22, 1997, Gutierrez was declared in default.
RTC: In favor of Marasigan
- Found that Patrimonio, in issuing the pre-signed blank checks,
had the intention of issuing a negotiable instrument, albeit with
specific instructions to Gutierrez not to negotiate or issue the
check without his approval.
- While under Section 14 of the NIL, Gutierrez had the prima
facie authority to complete the checks by filling up the blanks
therein, the RTC ruled that he deliberately violated
Patrimonio’s specific instructions and took advantage of the
trust reposed in him by the latter.
- RTC declared Marasigan as a holder in due course and
accordingly dismissed the Patrimonio’s complaint for
declaration of nullity of the loan. It ordered Patrimonio to pay
Marasigan the face value of the check with a right to claim
reimbursement from Gutierrez.
CA: Affirm RTC.
PATRIMONIO’S CONTENTION
1) there was no loan between him and Marasigan since he never
authorized the borrowing of money nor the check’s negotiation to
the latter;
2) under Article 1878 of the Civil Code, a special power of attorney
is necessary for an individual to make a loan or borrow money in
behalf of another;
3) the loan transaction was between Gutierrez and Marasigan, with
his check being used only as a security;
4) the check had not been completely and strictly filled out in
accordance with his authority since the condition that the subject
check can only be used provided there is prior approval from him,
was not complied with;
5) even if the check was strictly filled up as instructed by the
petitioner, Marasigan is still not entitled to claim the check’s value
as he was not a holder in due course; and
6) by reason of the bad faith in the dealings between the
respondents, he is entitled to claim for damages.
ISSUES:
1) WON the contract of loan in the amount of ₱200,000.00 granted
by respondent Marasigan to petitioner, through respondent
Gutierrez, may be nullified for being void;
2) WON there is basis to hold the petitioner liable for the payment of
the ₱200,000.00 loan;
3) WON respondent Gutierrez has completely filled out the subject
check strictly under the authority given by the petitioner; and
4) WON Marasigan is a holder in due course
RULING:
Article 1868 of the Civil Code
- defines a contract of agency 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.”
- Agency may be express, or implied from the acts 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.
- As a general rule, a contract of agency may be oral.
However, it must be written when the law requires a
specific form, for example, in a sale of a piece of land or
any interest therein through an agent.
Article 1878, paragraph 7 of the Civil Code
- expressly requires a special power of authority before
an agent can loan or borrow money in behalf of the
principal, to wit:
o Art. 1878. Special powers of attorney are
necessary in the following cases: (7) To loan or
borrow money, unless the latter act be urgent
and indispensable for the preservation of the
things which are under administration.
- Article 1878 does not state that the authority be in
writing. As long as the mandate is express, such
authority may be either oral or written.
- We unequivocably declared in Lim Pin v. Liao Tian, et
al., that the requirement under Article 1878 of the Civil
Code refers to the nature of the authorization and not to
its form. Be that as it may, the authority must be duly
established by competent and convincing evidence
other than the self-serving assertion of the party
claiming that such authority was verbally given.
A contract of loan, like any other contract, is subject to the
rules governing the requisites and validity of contracts in
general.—
 Article 1318 of the Civil Code enumerates the essential
requisites for a valid contract, namely:
1) consent of the contracting parties;
2) object certain which is the subject matter of the contract;
and
3) cause of the obligation which is established.
 In this case, Patrimonio denied liability on the ground that the
contract lacked the essential element of consent. We agree
with Patrimonio
 As we explained above, Gutierrez did not have the
petitioner’s written/verbal authority to enter into a contract of
loan. While there may be a meeting of the minds between
Gutierrez and Marasigan, such agreement cannot bind the
petitioner whose consent was not obtained and who was not
privy to the loan agreement. Hence, only Gutierrez is bound
by the contract of loan.
While under the law, Gutierrez had a prima facie authority to
complete the check, such prima facie authority does not
extend to its use once the check is completed.—
 In other words, only the authority to complete the check is
presumed. Further, the law used the term “prima facie” to
underscore the fact that the authority which the law accords
to a holder is a presumption juris tantum only; hence, subject
to subject to contrary proof.
 Thus, evidence that there was no authority or that the
authority granted has been exceeded may be presented by
the maker in order to avoid liability under the instrument.
CASTILLO VS SECURITY BANK CORPORATION
Remedial Law’ Evidence; Notarized Documents; Defective
notarization will simply strip the document of its public character
and reduce it to a private instrument, but nonetheless, binding,
provided its validity is established by preponderance of evidence
- The appellate court aptly held that defective notarization will
simply strip the document of its public character and reduce
it to a private instrument, but nonetheless, binding, provided
its validity is established by preponderance of evidence.
- Art. 1358 of the Civil Code requires that the form of a
contract that transmits or extinguishes real rights over
immovable property should be in public document, yet the
failure to observe the proper form does not render the
transaction invalid.
- The necessity of a public document for said contracts is
only for convenience; it is not essential for validity or
enforceability. Even a sale of real property though not
contained in a public instrument or formal writing is
nevertheless valid and binding.
- Consequently, when there is a defect in the notarization of
a document, the clear and convincing evidentiary standard
originally attached to a duly-notarized document is
9
 dispensed with, and the measure to test the validity of such
document is preponderance of evidence.
FACTS:
Petitioner Leonardo C. Castillo and respondent Leon C.
Castillo, Jr. are siblings.
- Leon and Teresita Flores-Castillo (the Spouses Castillo)
were doing business under the name of JRC Poultry
Farms.
- Sometime in 1994, the Spouses Castillo obtained a loan
from respondent SBC in the amount of P45,000,000.00.
- To secure said loan, they executed a real estate
mortgage on August 5, 1994 over eleven (11) parcels of
land belonging to different members of the Castillo
family and which are all located in San Pablo City.
- They also procured a second loan5 amounting to
P2,500,000.00, which was covered by a mortgage on a
land in Pasay City.
Subsequently, the Spouses Castillo failed to settle the loan,
prompting SBC to proceed with the foreclosure of the properties.
- SBC was then adjudged as the winning bidder in the
foreclosure sale held on July 29, 1999.
- Thereafter, they were able to redeem the foreclosed
properties, with the exception of the lots covered by
Torrens Certificate of Title (TCT) Nos. 28302 and 28297.
On January 30, 2002, Leonardo filed a complaint for the partial
annulment of the real estate mortgage.
- He alleged that he owns the property covered by TCT
No. 28297
- that the Spouses Castillo used it as one of the collaterals
for a loan without his consent.
- He contested his supposed Special Power of Attorney
(SPA) in Leon’s favor, claiming that it is falsified.
- According to him, the date of issuance of his Community
Tax Certificate (CTC) as indicated on the notarization of
said SPA is January 11, 1993, when he only secured the
same on May 17, 1993.
- He also assailed the foreclosure of the lots under TCT
Nos. 20030 and 10073 which were still registered in the
name of their deceased father.
- Lastly, Leonardo attacked SBC’s imposition of penalty
and interest on the loans as being arbitrary and
unconscionable.
On the other hand, the Spouses Castillo insisted on the validity
of Leonardo’s SPA.
- They alleged that they incurred the loan not only for
themselves, but also for the other members of the
Castillo family who needed money at that time.
- Upon receipt of the proceeds of the loan, they
distributed the same to their family members, as agreed
upon.
- However, when the loan became due, their relatives
failed to pay their respective shares such that Leon was
forced to use his own money until SBC had to finally
foreclose the mortgage over the lots.
RTC OF SAN PABLO CITY: ruled in favor of Leonardo: they
declared null and void the Real Estate Mortgage, the
Memorandum Agreement and the Certificate of Sale. Both parties
elevated the case to the CA.
CA: denied Leonardo;s appeal and granted that of the Spouses
Castillo and SBC. It reversed and set aside the RTC decision: the
real estate mortgage is valid.
ISSUE: Was there a valid mortgage?
HELD:
The following are the LEGAL REQUISITES for a mortgage to be
valid:
(1) It must be constituted to secure the fulfillment of a principal
obligation;
(2) The mortgagor must be the absolute owner of the thing
mortgaged;
(3) The persons constituting the mortgage must have the free
disposal of their property, and in the absence thereof, they should
be legally authorized for the purpose.
Leonardo asserts that his signature in the SPA authorizing his
brother, Leon, to mortgage his property covered by TCT No. T-
28297 was falsified.
- He claims that he was in America at the time of its
execution.
- As proof of the forgery, he focuses on his alleged CTC
used for the notarization10 of the SPA on May 5, 1993
and points out that it appears to have been issued on
January 11, 1993 when, in fact, he only obtained it on
May 17, 1993.
- But it is a settled rule that allegations of forgery, like all
other allegations, must be proved by clear, positive, and
convincing evidence by the party alleging it.
- It should not be presumed, but must be established by
comparing the alleged forged signature with the genuine
signatures.
- Here, Leonardo simply relied on his self-serving
declarations and refused to present further
corroborative evidence, saying that the falsified
document itself is the best evidence.
- He did not even bother comparing the alleged forged
signature on the SPA with samples of his real and actual
signature.
- What he consistently utilized as lone support for his
allegation was the supposed discrepancy on the date of
issuance of his CTC as reflected on the subject SPA’s
notarial acknowledgment.
- On the contrary, in view of the great ease with which
CTCs are obtained these days, there is reasonable
ground to believe that, as the CA correctly observed, the
CTC could have been issued with the space for the date
left blank and Leonardo merely filled it up to
accommodate his assertions.
- Also, upon careful examination, the handwriting
appearing on the space for the date of issuance is
different from that on the computation of fees, which in
turn was consistent with the rest of the writings on the
document.
- He did not likewise attempt to show any evidence that
would back up his claim that at the time of the execution
of the SPA on May 5, 1993, he was actually in America
and therefore could not have possibly appeared and
signed the document before the notary.
And even if the Court were to assume, simply for the sake of
argument, that Leonardo indeed secured his CTC only on May 17,
1993, this does not automatically render the SPA invalid.
- The appellate court aptly held that defective
notarization will simply strip the document of its
public character and reduce it to a private
instrument, but nonetheless, binding, provided its
validity is established by preponderance of evidence.
- Article 1358 of the Civil Code requires that the form of
a contract that transmits or extinguishes real rights over
immovable property should be in a public document, yet
the failure to observe the proper form does not render
the transaction invalid.
- The necessity of a public document for said contracts is
only for convenience; it is not essential for validity or
enforceability.
- Even a sale of real property, though not contained in a
public instrument or formal writing, is nevertheless valid
and binding, for even a verbal contract of sale or real
estate produces legal effects between the parties.
- Consequently, when there is a defect in the notarization
of a document, the clear and convincing evidentiary
standard originally attached to a duly-notarized
document is dispensed with, and the measure to test the
validity of such document is preponderance of evidence.
10
Here, the preponderance of evidence indubitably tilts in favor of
the respondents, still making the SPA binding between the parties
even with the aforementioned assumed irregularity.
- There are several telling circumstances that would
clearly demonstrate that Leonardo was aware of the
mortgage and he indeed executed the SPA to entrust
Leon with the mortgage of his property.
- Leon had in his possession all the titles covering the
eleven (11) properties mortgaged, including that of
Leonardo.
- Leonardo and the rest of their relatives could not have
just blindly ceded their respective TCTs to Leon. It is
likewise ridiculous how Leonardo seemed to have been
totally oblivious to the status of his property for eight (8)
long years, and would only find out about the mortgage
and foreclosure from a nephew who himself had
consented to the mortgage of his own lot.
- Considering the lapse of time from the alleged forgery
on May 5, 1993 and the mortgage on August 5, 1994, to
the foreclosure on July 29, 1999, and to the supposed
discovery in 2001, it appears that the suit is a mere
afterthought or a last-ditch effort on Leonardo’s part to
extend his hold over his property and to prevent SBC
from consolidating ownership over the same.
- More importantly, Leonardo himself admitted on cross-
examination that he granted Leon authority to mortgage,
only that, according to him, he thought it was going to
be with China Bank, and not SBC.
- But as the CA noted, there is no mention of a certain
bank in the subject SPA with which Leon must
specifically deal. Leon, therefore, was simply acting
within the bounds of the SPA’s authority when he
mortgaged the lot to SBC.
True, banks and other financing institutions, in entering into
mortgage contracts, are expected to exercise due diligence. The
ascertainment of the status or condition of a property offered to it
as security for a loan must be a standard and indispensable part
of its operations.
- In this case, however, no evidence was presented to
show that SBC was remiss in the exercise of the
standard care and prudence required of it or that it was
negligent in accepting the mortgage.
- SBC could not likewise be faulted for relying on the
presumption of regularity of the notarized SPA when it
entered into the subject mortgage agreement.
K. LIMITATION ON AUTHORITY
NPC V NATIONAL MERCHANDISING
FACTS:
NAMERCO is the representative of New York firm International
Commodities Corporation.
- NAMERCO and NPC executed a contract for purchase
by NPC from the NY firm 4K long tons of crude sulfur for
its Ma. Cristina Fertilizer Plant for 450K.
- Domestic Insurance Company executed a performance
bond in favor of NPC to guarantee the seller's obligation.
The contract stipulated that sulfur was to be delivered at Iligan
City within 60 days from notice of establishment of a letter of
credit and failure would subject the seller and the surety to pay
liquidated damages.
On November 12, 1956, NPC advised President of Namerco of the
opening on Nov. 8 of a letter of credit.
- The notice was received by the NY firm on Nov. 15.
- Thus the deadline was set on January 15.
- NY firm was not able to supply and consequently, the
NPC had to shut down the fertilizer plant.
NPC informed Namerco that non-availability of vessel does not
excuse nonperformance.
- On May 8, 1957, the Government Corporation Counsel
rescinded the contract of the sale and later demanded
from Namerco payment of 360K as liquidated damages.
Demand was made upon the surety also.
The NPC sued the NY firm, Namerco and the insurance company
for liquidated damages.
- The TC dismissed the case against the NY firm as it had
no jurisdiction over it.
- It ordered the respondents to pay liquidated damages.
- Meanwhile, Melvin Wallick, the assignee of the NY firm
sued Namerco.
- But this case the TC dismissed.
NAMERCO contends that the delivery of the sulfur conditioned on
the availability of a vessel to carry the shipment and acted within
the scope of authority as agent when it signed the contract of
sale.
ISSUES:
1. WON the delivery of the sulfur was conditioned on the availability of
a vessel. NO
2. WON NAMERCO acted within the bounds of its authority. NO
3. WON the stipulation for liquidated damages was enforceable despite
a finding that the contract was executed by the agent in excess of its
authority. YES
4. WON Domestic Insurance Company is liable to NPC. YES
RULING:
1. The invitation to bid issued by NPC provides that non-availability
of a steamer to transport the sulfur is not a ground for non-payment
of the liquidated damages in case of nonperformance.
NAMERCO's own bid was even more explicitly.
- True that the NY firm said that the sale was subject to
availability of a steamer but NAMERCO did not
disclose this to NPC.
2. NAMERCO acted beyond the bounds of its authority
because it violated its principal's cabled instructions
(1) that the delivery of the sulfur should be C&F Manila and not
C&F Iligan City;
(2) that the sale be subject to the availability of a steamer and
(3) that the seller should be allowed to withdraw right away the
full amount of the letter of credit and not merely 80% thereof.
NAMERCO is liable for damages pursuant to CC1897 which
provides that the agent who exceed the limits of his authority
without giving the party with whom he contracts sufficient notice of
his powers is personally liable to such party.
- The NY firm bluntly told NAMERCO that the latter was
never authorized to enter into the contract and that it
acted contrary to the repeated instructions of the former.
- Manresa says that the agent who exceeds the limits of
his authority is personally liable and the third person who
contracts with the agent in such a case would be
defrauded if he would not be allowed to sue the agent.
3. Article 1403 refers to the unenforceability of the contract
against the principal.
- Here, the contract containing the stipulation is not being
enforced against the principal but against the agent and
its surety.
- CC 1897 implies that the agent who acts in excess of his
authority is personally liable to the party with whom he
contracted.
- CC 1898 does not apply as NPC was unaware of the
limitations on the powers granted by the NY firm to
NAMERCO.
NAMERCO never disclosed to NPC the cabled or written
instructions of its principal.
- For that reason and because NAMERCO exceeded the
limits of its authority, it virtually acted in its own name
and not as agent and it is, therefore bound by the
contract of sale which, however is not enforceable
against its principal.
11

4. It was NAMERCO that actually solicited the bond from the
insurance company and as earlier explained, NAMERCO is being
held liable under the contract because it virtually acted in its
own name.
- It became the principal in the performance of the bond.
The insurance company acted as a surety for
NAMERCO.
- Rule is that want of authority of the person who executes
an obligation as the agent or representative of the
principal will not as a general rule, affect the surety's
liability thereon, especially in the absence of fraud, even
though the obligation is not binding on the principal.
LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN
MERCADO, JR., represented by their Attorney-In-Fact,
ALFREDO M. PEREZ, petitioners vs. ALLIED BANKING
CORPORATION, respondent
FACTS:
Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her
lifetime, owned several pieces of real property situated in different
provinces of the Philippines.
Respondent, on the other hand, is a banking institution duly
authorized as such under the Philippine laws.
On 28 May 1992, Perla executed a Special Power of Attorney
(SPA) in favor of her husband, Julian D. Mercado (Julian) over
several pieces of real property registered under her name,
authorizing the latter to perform the following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease
and deal otherwise over the different parcels of land
described hereinafter, to wit:
xx
b) Susana Heights, Muntinlupa covered by
Transfer Certificates of Title Nos. T-108954 600 Square
Meters and RT-106338 805 Square Meters of the
Registry of Deeds of Pasig (now Makati);
xx
2. To sign for and in my behalf any act of strict dominion
or ownership any sale, disposition, mortgage, lease or any
other transactions including quit-claims, waiver and
relinquishment of rights in and over the parcels of land situated
in General Trias, Cavite, covered by Transfer Certificates of
Title Nos. T-112254 and T-112255 of the Registry of Deeds of
Cavite, in conjunction with his co-owner and in the person
ATTY. AUGUSTO F. DEL ROSARIO;
3. To exercise any or all acts of strict dominion or ownership
over the above-mentioned properties, rights and interest
therein.
On the strength of the aforesaid SPA, Julian, on 12 December
1996, obtained a loan from the respondent in the amount
of P3,000,000.00, secured by real estate mortgage constituted
on TCT No. RT-18206 (106338) which covers a parcel of land with
an area of 805 square meters, registered with the Registry of
Deeds of Quezon City
Still using the subject property as security, Julian obtained an
additional loan from the respondent in the sum
of P5,000,000.00, evidenced by a Promissory Note he executed
on 5 February 1997 as another real estate mortgage
It appears, however, that there was no property identified in the
SPA as TCT No. RT 18206 (106338) and registered with
the Registry of Deeds of Quezon City.
- What was identified in the SPA instead was the property
covered by TCT No. RT-106338 registered with
the Registry of Deeds of Pasig.
Subsequently, Julian defaulted on the payment of his loan
obligations.
- Thus, respondent initiated extra-judicial foreclosure
proceedings over the subject property which was
subsequently sold at public auction wherein the
respondent was declared as the highest bidder
On 23 March 1999, petitioners initiated with the RTC an action
for the annulment of REM constituted over the subject
property on the ground that the same was not covered by the SPA
and that the said SPA, at the time the loan obligations were
contracted, no longer had force and effect since it was previously
revoked by Perla as evidenced by the Revocation of SPA signed
by the latter
In the absence of authority to do so, the REM constituted by
Julian over the subject property was null and void;
- thus, petitioners likewise prayed that the subsequent
extra-judicial foreclosure proceedings and the auction
sale of the subject property be also nullified.
In its Answer with Compulsory Counterclaim, respondent averred
that, contrary to petitioners allegations, the SPA in favor of Julian
included the subject property, covered by one of the titles specified
in paragraph 1(b) thereof, TCT No. RT- 106338 registered with
the Registry of Deeds of Pasig (now Makati).
- The subject property was purportedly registered
previously under TCT No. T-106338, and was only
subsequently reconstituted as TCT RT-18206
(106338).
- Moreover, TCT No. T-106338 was actually registered
with the Registry of Deeds of Quezon City and not
before the Registry of Deeds of Pasig (now Makati).
- Respondent explained that the discrepancy in the
designation of the Registry of Deeds in the SPA was
merely an error that must not prevail over the clear
intention of Perla to include the subject property in the
said SPA.
- In sum, the property referred to in the SPA Perla
executed in favor of Julian as covered by TCT No.
106338 of the Registry of Deeds of Pasig (now
Makati) and the subject property in the case at bar,
covered by RT 18206 (106338) of the Registry of
Deeds of Quezon City, are one and the same.
RTC: Rendered in favor of the petitioners and against
the respondent Bank:
 Rendered a Decision declaring the REM constituted over the
subject property null and void, for Julian was not authorized
by the terms of the SPA to mortgage the same.
 The court a quo likewise ordered that the foreclosure
proceedings and the auction sale conducted pursuant to the
void REM, be nullified.
CA: Reversed the RTC Decision and upheld the validity of the
REM constituted over the subject property on the strength of the
SPA.
 The appellate court declared that Perla intended the subject
property to be included in the SPA she executed in favor of
Julian, and that her subsequent revocation of the said SPA,
not being contained in a public instrument, cannot bind third
persons.
ISSUES:
1) WHETHER OR NOT THERE WAS A VALID MORTGAGE
CONSTITUTED OVER SUBJECT PROPERTY.
2) WHETHER OR NOT THERE WAS A VALID REVOCATION OF
THE SPA.
3) WHETHER OR NOT THE RESPONDENT WAS A
MORTGAGEE-IN- GOOD FAITH.
HELD:
I.
 For a mortgage to be valid, Article 2085 of the Civil Code
enumerates the following essential requisites:
Art. 2085. The following requisites are essential to the
contracts of pledge and mortgage:
12
 (1) That they be constituted to secure the fulfillment of a
principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of
the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage
have the free disposal of their property, and in the absence
thereof, that they be legally authorized for the purpose.
Third persons who are not parties to the principal obligation
may secure the latter by pledging or mortgaging their own
property.
 In the case at bar, it was Julian who obtained the loan
obligations from respondent which he secured with the
mortgage of the subject property.
- However, since it was not Perla who personally
mortgaged her own property to secure Julians loan
obligations with respondent, we proceed to determining
if she duly authorized Julian to do so on her behalf.
 Under Article 1878 of the Civil Code, a special power of
attorney is necessary in cases where real rights over
immovable property are created or conveyed
- In the SPA executed by Perla in favor of Julian on 28
May 1992, the latter was conferred with the authority
to sell, alienate, mortgage, lease and deal otherwise
the different pieces of real and personal property
registered in Perlas name.
- The SPA likewise authorized Julian [t]o exercise any
or all acts of strict dominion or ownership over the
identified properties, and rights and interest therein.
- The existence and due execution of this SPA by Perla
was not denied or challenged by petitioners.
 There is no question therefore that Julian was vested with the
power to mortgage the pieces of property identified in the
SPA.
- However, as to whether the subject property was
among those identified in the SPA, so as to render
Julians mortgage of the same valid, is a question we
still must resolve.
 Petitioners insist that the subject property was not included in
the SPA, considering that it contained an exclusive
enumeration of the pieces of property over which Julian had
authority, and these include only:
1) TCT No. T-53618, with an area of 3,522 square meters,
located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro;
2) TCT No. T-46810, with an area of 3,953 square meters,
located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro;
3) TCT No. T-53140, with an area of 177 square meters,
located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro;
4) TCT No. T-21403, with an area of 263 square
meters, located at Calapan, Oriental Mindoro, and
registered with the Registry of Deeds of Oriental Mindoro;
5) TCT No. T- 46807, with an area of 39 square meters,
located at Calapan, Oriental Mindoro, and registered with
the Registry of Deeds of Oriental Mindoro;
6) TCT No. T-108954, with an area of 690 square meters and
located at Susana Heights, Muntinlupa;
7) RT-106338 805 Square Meters registered with the Registry
of Deeds of Pasig (now Makati); and
8) Personal Property consisting of a 1983 Car with Vehicle
Registration No. R-16381, Model 1983, Make Toyota, and
Engine No. T- 2464.
 Nowhere is it stated in the SPA that Julians authority extends
to the subject property covered by TCT No. RT 18206
(106338) registered with the Registry of Deeds of Quezon
City.
- Consequently, the act of Julian of constituting a
mortgage over the subject property is
unenforceable for having been done without
authority.
 Respondent, on the other hand, mainly hinges its argument
on the declarations made by the Court of Appeals that there
was no property covered by TCT No. 106338 registered with
the Registry of Deeds of Pasig (now Makati); but there
exists a property, the subject property herein, covered
by TCT No. RT-18206 (106338) registered with the Registry
of Deeds of Quezon City.
- Further verification would reveal that TCT No. RT-
18206 is merely a reconstitution of TCT No.
106338, and the property covered by both certificates of
title is actually situated in Quezon City and not Pasig.
- From the foregoing circumstances, respondent argues
that Perla intended to include the subject property in the
SPA, and the failure of the instrument to reflect the
recent TCT Number or the exact designation of the
Registry of Deeds, should not defeat Perlas clear
intention.
 After an examination of the literal terms of the SPA, we find
that the subject property was not among those
enumerated therein.
- There is no obvious reference to the subject property
covered by TCT No. RT-18206 (106338) registered with
the Registry of Deeds of Quezon City.
 Equally relevant is the rule that a power of attorney must
be strictly construed and pursued.
- The instrument will be held to grant only those powers
which are specified therein, and the agent may
neither go beyond nor deviate from the power of
attorney.
- Where powers and duties are specified and defined
in an instrument, all such powers and duties are
limited and are confined to those which are
specified and defined, and all other powers and
duties are excluded
- This is but in accord with the disinclination of courts to
enlarge the authority granted beyond the powers
expressly given and those which incidentally flow or
derive therefrom as being usual and reasonably
necessary and proper for the performance of such
express powers.
 In this case, we are not convinced that the property covered
by TCT No. 106338 registered with the Registry of Deeds of
Pasig (now Makati) is the same as the subject property
covered by TCT No. RT-18206 (106338) registered with the
Registry of Deeds of Quezon City.
- The records of the case are stripped of supporting
proofs to verify the respondents claim that the two titles
cover the same property.
- It failed to present any certification from the Registries
of Deeds concerned to support its assertion.
- Neither did respondent take the effort of submitting and
making part of the records of this case copies of TCTs
No. RT-106338 of the Registry of Deeds of Pasig (now
Makati) and RT-18206 (106338) of the Registry of
Deeds of Quezon City, and closely comparing the
technical descriptions of the properties covered by the
said TCTs.
- The bare and sweeping statement of respondent that
the properties covered by the two certificates of title are
one and the same contains nothing but empty
imputation of a fact that could hardly be given any
evidentiary weight by this Court.
 Having arrived at the conclusion that Julian was not conferred
by Perla with the authority to mortgage the subject property
under the terms of the SPA, the real estate mortgages
Julian executed over the said property are therefore
unenforceable.
II.
13
 Assuming arguendo that the subject property was indeed
included in the SPA executed by Perla in favor of Julian, the
said SPA was revoked by virtue of a public instrument
executed by Perla on 10 March 1993.
 Moreover, an agency is extinguished, among others, by
its revocation (Article 1999, New Civil Code of the
Philippines). The principal may revoke the agency at will,
and compel the agent to return the document evidencing
the agency. Such revocation may be express or implied
(Article 1920, supra)
- In this case, the revocation of the agency or Special
Power of Attorney is expressed and by a public
document executed on March 10, 1993.
- The Register of Deeds of Quezon City was even notified
that any attempt to mortgage or sell the property
covered by TCT No. 106338 located at No. 21 Hillside
Drive, Blue Ridge, Quezon City must have the full
consent documented in the form of a special power of
attorney duly authenticated at the Philippine Consulate
General, New York City, N.Y., U.S.A.
- The non-annotation of the revocation of the Special
Power of Attorney on TCT No. RT-18206 is of no
consequence as far as the revocations existence and
legal effect is concerned since actual notice is always
superior to constructive notice.
- The actual notice of the revocation relayed to defendant
Registry of Deeds of Quezon City is not denied by either
the Registry of Deeds of Quezon City or the defendant
Bank.
 Given that Perla revoked the SPA as early as 10 March 1993,
and that she informed the Registry of Deeds of Quezon City
of such revocation in a letter dated 23 January 1996 and
received by the latter on 7 February 1996, then third parties
to the SPA are constructively notified that the same had
been revoked and Julian no longer had any authority to
mortgage the subject property.
- Although the revocation may not be annotated on TCT
No. RT-18206 (106338), as the RTC pointed out, neither
the Registry of Deeds of Quezon City nor respondent
denied that Perlas 23 January 1996 letter was received
by and filed with the Registry of Deeds of Quezon City.
- Respondent would have undoubtedly come across said
letter if it indeed diligently investigated the subject
property and the circumstances surrounding its
mortgage.
III.
Whether the respondent is a mortgagee-in-good faith - NO
 [Settled is the rule that] a person dealing with registered lands
[is not required] to inquire further than what the Torrens title
on its face indicates. This rule, however, is not absolute but
admits of exceptions. Thus, while its is true, x x x that a
person dealing with registered lands need not go beyond
the certificate of title, it is likewise a well-settled rule that
a purchaser or mortgagee cannot close his eyes to facts
which should put a reasonable man on his guard, and
then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor or
mortgagor.
 By putting blinders on its eyes, and by refusing to see the
patent defect in the scope of Julians authority, easily
discernable from the plain terms of the SPA, respondent
cannot now claim to be an innocent mortgagee.
L. PERSONAL LIABILITY OF AGENT AND PRINCIPAL
MARITIME AGENCIES & SECURITIES, INC. VS CA
FACTS:
Of the total shipment, 5,400.04 MT was for the account of Atlas
Fertilizer Company as consignee, 3,400.04 to be discharged in
Manila and the remaining 2,000 MT in Cebu.
- The goods were insured by the consignee with the
Union Insurance Society of Canton, Ltd. for
P6,779,214.00 against all risks.
- Maritime Agencies & Services, Inc. was appointed as
the charterer's agent and Macondray Company, Inc.
as the owner's agent.
The vessel arrived in Manila, and unloaded part of the consignee's
goods, then proceeded to Cebu, to discharge the rest of the cargo.
The consignee filed a formal claim against Maritime, copy
furnished Macondray, for the amount of P87,163.54, representing
C & F value of the 1,383 shortlanded bags.
- The consignee yet filed another formal claim, this time
against Viva Customs Brokerage, for the amount of
P36,030.23, representing the value of 574 bags of net
unrecovered spillage.
- These claims having been rejected, the consignee then
went to Union, which on demand paid the total indemnity
of P113,123.86 pursuant to the insurance contract.
- As subrogee of the consignee, Union then filed, a
complaint for reimbursement of this amount, with legal
interest and attorney's fees, against Hongkong Island
Company, Ltd., Maritime Agencies & Services, Inc.
and/or Viva Customs Brokerage.
- However, the complaint was amended to drop Viva and
implead Macondray Company, Inc. as a new defendant.
TRIAL COURT: rendered judgment holding the defendants liable.
Petitioner appealed the decision to the COURT OF APPEALS, the
decision appealed from is modified.
Maritime and Union filed separate motions for reconsideration
which were both denied. The movants are now before us to
question the decision of the respondent court.
In G.R. No. 77638, Maritime pleads non-liability on the ground that it
was only the charterer's agent and should not answer for whatever
responsibility might have attached to the principal. It also argues that
the respondent court erred in applying Articles 1734 and 1735 of the
Civil Code in determining the charterer's liability.
In G.R. No. 77674, Union asks for the modification of the decision of
the respondent court so as to make Maritime solidarily and solely liable,
its principal not having been impleaded and so not subject to the
jurisdiction of our courts.
These two cases were consolidated and given due course, the parties
being required to submit simultaneous memoranda. All complied,
including Hongkong Island Company, Ltd., and Macondray Company,
Inc., although they pointed out that they were not involved in the
petitions.
ISSUE: WON the agents appointed can be held liable solidarily
RULING:
As regards the goods damaged or lost during unloading, the
charterer is liable therefor,
- having assumed this activity under the charter party
"free of expense to the vessel."
- The difficulty is that Transcontinental has not been
impleaded in these cases and so is beyond our
jurisdiction. The liability imposable upon it cannot be
borne by Maritime which, as a mere agent, is not
answerable for injury caused by its principal. It is a well-
settled principle that the agent shall be liable for the act
or omission of the principal only if the latter is
undisclosed.
Union seeks to hold Maritime liable as ship agent on the basis of
the ruling of this Court in the case of Switzerland General
Insurance Co., Ltd. v. Ramirez.
- However, we do not find that case is applicable.
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 - In that case, the charterer represented itself on the face
of the bill of lading as the carrier.
- The vessel owner and the charterer did not stipulate in
the Charter party on their separate respective liabilities
for the cargo.
- The loss/damage to the cargo was sustained while it
was still on board or under the custody of the vessel.
- As the charterer was itself the carrier, it was made liable
for the acts of the ship captain who was responsible for
the cargo while under the custody of the vessel.
As for the charterer's agent,
- the evidence showed that it represented the vessel
when it took charge of the unloading of the cargo and
issued cargo receipts (or tally sheets) in its own name.
- Claims against the vessel for the losses/damages
sustained by that cargo were also received and
processed by it.
- As a result, the charterer's agent was also considered a
ship agent and so was held to be solidarily liable with
its principal.
The facts in the cases at bar are different.
- The charterer did not represent itself as a carrier and
indeed assumed responsibility ability only for the
unloading of the cargo, i.e, after the goods were already
outside the custody of the vessel.
- In supervising the unloading of the cargo and issuing
Daily Operations Report and Statement of Facts
indicating and describing the day-to-day discharge of
the cargo, Maritime acted in representation of the
charterer and not of the vessel.
- It thus cannot be considered a ship agent. As a mere
charterer's agent, it cannot be held solidarily liable with
Transcontinental for the losses/damages to the cargo
outside the custody of the vessel.
- Notably, Transcontinental was disclosed as the
charterer's principal and there is no question that
Maritime acted within the scope of its authority.
WHEREFORE, the decision of the respondent court is SET ASIDE
and that of the trial court is REINSTATED as above modified. The
parties shall bear their respective costs.
A. IN GENERAL
PHILIPPINE NATIONAL BANK v. MANILA SURETY &
FIDELITY CO. INC
FACTS:
The PNB opened a letter of credit and advanced $120,000.00 to
Edington Oil Refinery for 8,000 tons of hot asphalt, of which 2,000
tons worth P279,000.00 were delivered to Adams & Taguba Corp.
(ATACO) under a trust receipt guaranteed by Manila Surety &
Fidelity Co.
o To pay for the asphalt ATACO constituted PNB its
assignee and attorney-in-fact to receive and
collect payments from the Bureau of Public
Works.
ATACO delivered asphalt worth P431,466.52 to the Bureau of
Public Works, PNB regularly collected the payments amounting to
P106,382.01, until they ceased to collect payments.
Then in 1962 PNB found that there were more payables to ATACO
from the Bureau of Public Works.
o PNB sued ATACO and the Surety, to recover the
balance of P158,563.18 when their demands for
payment were refused.
TRIAL COURT: Ordered ATACO and the Surety to pay PNB the
sum of P174,462.34, and the total amount payable by the Surety
shall not exceed P75,000.00.
 PNB recoursed to the COURT OF APPEALS, which
rendered an adverse decision and modified the
judgement of the court of origin as to the Surety’s
liability. Motions for reconsideration were also denied.
ISSUE:
Whether or not it is the duty of the surety and not that of the
creditor, to see to it that the obligor fulfills his obligation, and that
the creditor owed the surety no duty of active diligence to collect
any sum from the principal debtor.
RULING:
 The Court of Appeals did not hold the bank answerable for
negligence in failing to collect from the principal debtor but for
its negligence in collecting the sum due to the debtor from the
Bureau of Public Works, contrary to its duty as holder of an
exclusive and irrevocable power of attorney to make such
collections, since an agent is required to act with care of a
good father of a family and becomes liable for the damages
which the principal may suffer through his non performance.
 Even if the assignment with power of attorney from the
principal debtor were considered as more additional security,
by allowing the assigned funds to be exhausted without
notifying the surety, the Bank deprived the former of any
possibility of recoursing against that security. The Bank
exonerated the surety, pursuant to Art. 2080 0f the Civil Code
which states:
The guarantors, even though they be solidarily, are released from
their obligation whenever by come act of the creditor they cannot
be subrogated to the rights, mortgages and preferences of the
latter.
Agency; Duty of agent to act with the care of a good father of
a family.—
 An agent is required to act with the care of a good father of a
family and becomes liable for the damages which the
principal may suffer through his non-performance.
Bank liable for neglect in collecting sums due its debtor.—
 A bank is answerable for negligence in failing to collect the
sums due its debtor from the latter’s own debtor, contrary to
said bank’s duty as holder of an exclusive and irrevocable
power of attorney to make such collections.
BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS,
GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.
FACTS:
 On April 16, 1989, Mahtani decided to visit his relatives in
Bombay, India. In anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his travel
plans. The latter, in turn, purchased a ticket from BA
- Since BA had no direct flights from Manila to Bombay,
Mahtani had to take a flight to Hongkong via PAL, and
upon arrival in Hongkong he had to take a connecting
flight to Bombay on board BA.
 Prior to his departure, Mahtani checked in at the PAL counter
in Manila his two pieces of luggage containing his clothings
and personal effects, confident that upon reaching
Hongkong, the same would be transferred to the BA flight
bound for Bombay
 Unfortunately, when Mahtani arrived in Bombay he
discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that the
same might have been diverted to London. After patiently
waiting for his luggage for one week, BA finally advised him
to file a claim by accomplishing the Property Irregularity
Report.
 Back in the PH, specifically on June 11, 1990, Mahtani filed
his complaint for damages and attorney’s fees against BA
and Mr. Gumar before the trial court, docketed as Civil Case
No. CEB-9076.
- BA filed its answer with counter claim to the complaint
raising, as special and affirmative defenses, that
Mahtani did not have a cause of action against it.
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 - Likewise, on November 9, 1990, BA filed a third-party
complaint against PAL alleging that the reason for the
non-transfer of the luggage was due to the latters late
arrival in Hongkong, thus leaving hardly any time for the
proper transfer of Mahtanis luggage to the BA aircraft
bound for Bombay.
 PAL filed its answer to the 3rd-party complaint, wherein it
disclaimed any liability, arguing that there was, in fact,
adequate time to transfer the luggage to BA facilities in
Hongkong. Furthermore, the transfer of the luggage to
Hongkong authorities should be considered as transfer to BA.
TC: rendered its decision in favor of Mahtani
CA: Affirmed TC
ISSUE: WON the award of compensatory damages and attorney’s
fees, as well as the dismissal of its third-party complaint against
PAL proper?
BA’S CONTENTION:
 BA asserts that the award of compensatory damages in the
separate sum of P7K for the loss of Mahtani’s two pieces
of luggage was without basis since Mahtani in his complaint
stated the following as the value of his personal belongings:
8. On said travel, plaintiff took with him the following items
and its corresponding value, to wit:
1. personal belonging - - - - - - - - - - - - - - P10,000.00
2. gifts for his parents and relatives - - - - - $5,000.00
 Moreover, he failed to declare a higher valuation with respect
to his luggage, a condition provided for in the ticket, which
reads:
Liability for loss, delay, or damage to baggage is limited
unless a higher value is declared in advance and
additional charges are paid:
1. For most international travel (including domestic
corporations of international journeys) the liability
limit is approximately U.S. $9.07 per pound (U.S.
$20.00) per kilo for checked baggage and U.S. $400
per passenger for unchecked baggage.
RULING:
Common Carriers; Air Transportation; The nature of an
airline’s contract of carriage partakes of two types, namely: a
contract to deliver a cargo or mechandise to its destination
and a contract to transport passengers to their destination.—
 A business intended to serve the travelling public primarily, it
is imbued with public interest, hence, the law governing
common carriers imposes an exacting standard. Neglect or
malfeasance by the carrier’s employees could predictably
furnish bases for an action for damages.
 In the instant case, it is apparent that the contract of carriage
was between Mahtani and BA. Moreover, it is indubitable that
his luggage never arrived in Bombay on time. Therefore, as
in a number of cases we have assessed the airlines
culpability in the form of damages for breach of contract
involving misplaced luggage.
In determining the amount of compensatory damages in
breach of contract involving misplaced luggage, it is vital that
the claimant satisfactorily prove during the trial the existence
of the factual basis of the damages and its causal connection
to defendant’s acts.
 In the instant case, it is apparent that the contract of carriage
was between Mahtani and BA. Moreover, it is indubitable that
his luggage never arrived in Bombay on time. Therefore, as
in a number of cases we have assessed the airlines’
culpability in the form of damages for breach of contract
involving misplaced luggage.
Warsaw Convention; In a contract of air carriage, a
declaration by the passenger of a higher value is needed to
recover a greater amount.—
 Admittedly, in a contract of air carriage a declaration by the
passenger of a higher value is needed to recover a greater
amount. Article 22(1) of the Warsaw Convention, provides as
follows: “(2) In the transportation of checked baggage and
goods, the liability of the carrier shall be limited to a sum of
250 francs per kilogram, unless the consignor has made, at
the time the packages was handed over to the carrier, a
special declaration of the value at delivery and has paid a
supplementary sum if the case so requires. In that case the
carrier will be liable to pay a sum not exceeding the declared
sum, unless he proves that the sum is greater than the actual
value to the consignor at delivery.”
Tariffs; An air carrier is not liable for the loss of baggage in
an amount in excess of the limits specified in the tariff which
was filed with the proper authorities, such tariff being binding
on the passenger regardless of the passenger’s lack of
knowledge thereof or assent thereto.—
 This doctrine is recognized in this jurisdiction.
Pleadings and Practice; Waivers; Benefits of limited liability
are subject to waiver such as when the air carrier failed to
raise timely objections during the trial when questions and
answers regarding the actual claims and damages sustained
by the passenger were asked.—
 Notwithstanding the foregoing, we have, nevertheless, ruled
against blind reliance on adhesion contracts where the facts
and circumstances justify that they should be disregarded.
 Given the foregoing postulates, the inescapable conclusion is
that BA had waived the defense of limited liability when it
allowed Mahtani to testify as to the actual damages he
incurred due to the misplacement of his luggage, without any
objection
 In this regard, we quote the pertinent transcript of
stenographic notes of Mahtanis direct testimony:[
Q - How much are you going to ask from this court?
A - P100,000.00.
Q - What else?
A - Exemplary damages.
Q - How much?
A - P100,000.00.
Q - What else?
A - The things I lost, $5,000.00 for the gifts I lost and my
personal belongings, P10,000.00.
Q - What about the filing of this case?
A - The court expenses and attorneys fees is 30%.
Air Transportation; Agency; Damages; An agent is also
responsible for any negligence in the performance of its
function and is liable for damages which the principal may
suffer by reason of its negligent act.—
 Parenthetically, the Court of Appeals should have been
cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of its
function and is liable for damages which the principal may
suffer by reason of its negligent act. Hence, the Court of
Appeals erred when it opined that BA, being the principal, had
no cause of action against PAL, its agent or subcontractor.
International Air Transport Association (IATA); Member
airlines of the IATA are regarded as agents of each other in
the issuance of the tickets and other matters pertaining to
their relationship.—
 Also, it is worth mentioning that both BA and PAL are
members of the International Air Transport Association
(IATA), wherein member airlines are regarded as agents of
each other in the issuance of the tickets and other matters
pertaining to their relationship. Therefore, in the instant case,
the contractual relationship between BA and PAL is one of
agency, the former being the principal, since it was the one
which issued the confirmed ticket, and the latter the agent.
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