[G.R. No. 130148.

December 15, 1997]

JOSE BORDADOR and LYDIA

BORDADOR, Petitioners, v. BRIGIDA D. LUZ, ERNESTO M. LUZ
and NARCISO DEGANOS, Respondents.

DECISION

REGALADO, J.:

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

Court of Appeals in CA-G.R. CV No. 49175 affirming the adjudication
of the Regional Trial Court of Malolos, Bulacan which found private
respondent Narciso Deganos liable to petitioners for actual
damages, but absolved respondent spouses Brigida D. Luz and
Ernesto M. Luz of liability. Petitioners likewise belabor the
subsequent resolution of the Court of Appeals which denied their
motion for reconsideration of its challenged decision.

Petitioners were engaged in the business of purchase and sale of

jewelry and respondent Brigida D. Luz, also known as Aida D. Luz,
was their regular customer. On several occasions during the period
from April 27, 1987 to September 4, 1987, respondent Narciso
Deganos, the brother of Brigida D. Luz, received several pieces of
gold and jewelry from petitioners amounting
to P382,816.00. 1 These items and their prices were indicated in
seventeen receipts covering the same. Eleven of the receipts stated
that they were received for a certain Evelyn Aquino, a niece of
Deganos, and the remaining six indicated that they were received
for Brigida D. Luz. 2
cräläwvirtualibräry

Deganos was supposed to sell the items at a profit and thereafter

remit the proceeds and return the unsold items to petitioners.
Deganos remitted only the sum of P53,207.00. He neither paid the
balance of the sales proceeds, nor did he return any unsold item to
petitioners. By January 1990, the total of his unpaid account to
petitioners, including interest, reached the sum
of P725,463.98. 3 Petitioners eventually filed a complaint in
the barangay court against Deganos to recover said amount.
In the barangay  proceedings, Brigida D. Luz, who was not
impleaded in the case, appeared as a witness for Deganos and
ultimately, she and her husband, together with Deganos, signed a
compromise agreement with petitioners. In that compromise
agreement, Deganos obligated himself to pay petitioners, on
installment basis, the balance of his account plus interest thereon.
However, he failed to comply with his aforestated undertakings.

On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in

the Regional Trial Court of Malolos, Bulacan against Deganos and
Brigida D. Luz for recovery of a sum of money and damages, with
an application for preliminary attachment.4 Ernesto Luz was
impleaded therein as the spouse of Brigida.

Four years later, or on March 29, 1994, Deganos and Brigida D. Luz
were charged with estafa5 in the Regional Trial Court of Malolos,
Bulacan, which was docketed as Criminal Case No. 785-M-94. That
criminal case appears to be still pending in said trial court.

During the trial of the civil case, petitioners claimed that Deganos
acted as the agent of Brigida D. Luz when he received the subject
items of jewelry and, because he failed to pay for the same, Brigida,
as principal, and her spouse are solidarily liable with him therefor.

On the other hand, while Deganos admitted that he had an unpaid

obligation to petitioners, he claimed that the same was only in the
sum of P382,816.00 and not P725,463.98. He further asserted that
it was he alone who was involved in the transaction with the
petitioners; that he neither acted as agent for nor was he
authorized to act as an agent by Brigida D. Luz, notwithstanding the
fact that six of the receipts indicated that the items were received
by him for the latter. He further claimed that he never delivered any
of the items he received from petitioners to Brigida.

Brigida, on her part, denied that she had anything to do with the
transactions between petitioners and Deganos. She claimed that she
never authorized Deganos to receive any item of jewelry in her
behalf and, for that matter, neither did she actually receive any of
the articles in question.
After trial, the court below found that only Deganos was liable to
petitioners for the amount and damages claimed. It held that while
Brigida D. Luz did have transactions with petitioners in the past, the
items involved were already paid for and all that Brigida owed
petitioners was the sum of P21,483.00 representing interest on the
principal account which she had previously paid for.6 cräläwvirtualibräry

The trial court also found that it was petitioner Lydia Bordador who
indicated in the receipts that the items were received by Deganos
for Evelyn Aquino and Brigida D. Luz. 7 Said court was persuaded
that Brigida D. Luz was behind Deganos, but because there was no
memorandum to this effect, the agreement between the parties was
unenforceable under the Statute of Frauds. 8 Absent the required
memorandum or any written document connecting the respondent
Luz spouses with the subject receipts, or authorizing Deganos to act
on their behalf, the alleged agreement between petitioners and
Brigida D. Luz was unenforceable.

Deganos was ordered to pay petitioners the amount

of P725,463.98, plus legal interest thereon from June 25, 1990, and
attorneys fees. Brigida D. Luz was ordered to pay P21,483.00
representing the interest on her own personal loan. She and her co-
defendant spouse were absolved from any other or further
liability. 9
chanroblesvirtuallawlibrary

As stated at the outset, petitioners appealed the judgment of the

court a quo to the Court of Appeals which affirmed said
judgment. 10 The motion for reconsideration filed by petitioners was
subsequently dismissed, 11 hence the present recourse to this Court.

The primary issue in the instant petition is whether or not herein

respondent spouses are liable to petitioners for the latters claim for
money and damages in the sum of P725,463.98, plus interests and
attorneys fees, despite the fact that the evidence does not show
that they signed any of the subject receipts or authorized Deganos
to receive the items of jewelry on their behalf.

Petitioners argue that the Court of Appeals erred in adopting the

findings of the court a quo that respondent spouses are not liable to
them, as said conclusion of the trial court is contradicted by the
finding of fact of the appellate court that (Deganos) acted as agent
of his sister (Brigida Luz). 12 In support of this contention,
petitioners quoted several letters sent to them by Brigida D. Luz
wherein the latter acknowledged her obligation to petitioners and
requested for more time to fulfill the same. They likewise aver that
Brigida testified in the trial court that Deganos took some gold
articles from petitioners and delivered the same to her.

Both the Court of Appeals and the trial court, however, found as a
fact that the aforementioned letters concerned the previous
obligations of Brigida to petitioners, and had nothing to do with the
money sought to be recovered in the instant case. Such concurrent
factual findings are entitled to great weight, hence, petitioners
cannot plausibly claim in this appellate review that the letters were
in the nature of acknowledgments by Brigida that she was the
principal of Deganos in the subject transactions.

On the other hand, with regard to the testimony of Brigida

admitting delivery of the gold to her, there is no showing
whatsoever that her statement referred to the items which are the
subject matter of this case. It cannot, therefore, be validly said that
she admitted her liability regarding the same.

Petitioners insist that Deganos was the agent of Brigida D. Luz as

the latter clothed him with apparent authority as her agent and held
him out to the public as such, hence Brigida can not be permitted to
deny said authority to innocent third parties who dealt with Deganos
under such belief. 13 Petitioners further represent that the Court of
Appeals recognized in its decision that Deganos was an agent of
Brigida.14
cräläwvirtualibräry

The evidence does not support the theory of petitioners that

Deganos was an agent of Brigida D. Luz and that the latter should
consequently be held solidarily liable with Deganos in his obligation
to petitioners. While the quoted statement in the findings of fact of
the assailed appellate decision mentioned that Deganos ostensibly
acted as an agent of Brigida, the actual conclusion and ruling of the
Court of Appeals categorically stated that, (Brigida Luz) never
authorized her brother (Deganos) to act for and in her behalf in any
transaction with Petitioners x x x. 15 It is clear, therefore, that even
assuming arguendo  that Deganos acted as an agent of Brigida, the
latter never authorized him to act on her behalf with regard to the
transactions subject of this case.

The Civil Code provides:

Art. 1868. By the contract of agency a person binds himself to

render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.

The basis for agency is representation. Here, there is no showing

that Brigida consented to the acts of Deganos or authorized him to
act on her behalf, much less with respect to the particular
transactions involved. Petitioners attempt to foist liability on
respondent spouses through the supposed agency relation with
Deganos is groundless and ill-advised.

Besides, it was grossly and inexcusably negligent of petitioners to

entrust to Deganos, not once or twice but on at least six occasions
as evidenced by six receipts, several pieces of jewelry of substantial
value without requiring a written authorization from his alleged
principal. A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent. 16chanroblesvirtuallawlibrary

The records show that neither an express nor an implied agency

was proven to have existed between Deganos and Brigida D. Luz.
Evidently, Petitioners, who were negligent in their transactions with
Deganos, cannot seek relief from the effects of their negligence by
conjuring a supposed agency relation between the two respondents
where no evidence supports such claim.

Petitioners next allege that the Court of Appeals erred in ignoring

the fact that the decision of the court below, which it affirmed, is
null and void as it contradicted its ruling in CA-G.R. SP No. 39445
holding that there is sufficient evidence/proof against Brigida D. Luz
and Deganos for estafa in the pending criminal case. They further
aver that said appellate court erred in ruling against them in this
civil action since the same would result in an inevitable conflict of
decisions should the trial court convict the accused in the criminal
case.
By way of backdrop for this argument of petitioners, herein
respondents Brigida D. Luz and Deganos had filed a demurrer to
evidence and a motion for reconsideration in the aforestated
criminal case, both of which were denied by the trial court. They
then filed a petition for certiorari in the Court of Appeals to set aside
the denial of their demurrer and motion for reconsideration but, as
just stated, their petition therefor was dismissed.17 cräläwvirtualibräry

Petitioners now claim that the aforesaid dismissal by the Court of

Appeals of the petition in CA-G.R. SP No. 39445 with respect to the
criminal case is equivalent to a finding that there is sufficient
evidence in the estafa case against Brigida D. Luz and Deganos.
Hence, as already stated, petitioners theorize that the decision and
resolution of the Court of Appeals now being impugned in the case
at bar would result in a possible conflict with the prospective
decision in the criminal case. Instead of promulgating the present
decision and resolution under review, so they suggest, the Court of
Appeals should have awaited the decision in the criminal case, so as
not to render academic or preempt the same or, worse, create two
conflicting rulings. 18
cräläwvirtualibräry

Petitioners have apparently lost sight of Article 33 of the Civil Code

which provides that in cases involving alleged fraudulent acts, a civil
action for damages, entirely separate and distinct from the criminal
action, may be brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution and shall require
only a preponderance of evidence.

It is worth noting that this civil case was instituted four years before
the criminal case for estafa was filed, and that although there was a
move to consolidate both cases, the same was denied by the trial
court. Consequently, it was the duty of the two branches of the
Regional Trial Court concerned to independently proceed with the
civil and criminal cases. It will also be observed that a final
judgment rendered in a civil action absolving the defendant from
civil liability is no bar to a criminal action. 19
cräläwvirtualibräry

It is clear, therefore, that this civil case may proceed independently

of the criminal case 20 especially because while both cases are based
on the same facts, the quantum of proof required for holding the
parties liable therein differ. Thus, it is improvident of petitioners to
claim that the decision and resolution of the Court of Appeals in the
present case would be preemptive of the outcome of the criminal
case. Their fancied fear of possible conflict between the disposition
of this civil case and the outcome of the pending criminal case is
illusory.

Petitioners surprisingly postulate that the Court of Appeals had lost

its jurisdiction to issue the denial resolution dated August 18, 1997,
as the same was tainted with irregularities and badges of fraud
perpetrated by its court officers. 21 They charge that said appellate
court, through conspiracy and fraud on the part of its officers,
gravely abused its discretion in issuing that resolution denying their
motion for reconsideration. They claim that said resolution was
drafted by the  ponente, then signed and issued by the members of
the Eleventh Division of said court within one and a half days from
the elevation thereof by the division clerk of court to the office of
the ponente.

It is the thesis of petitioners that there was undue haste in issuing

the resolution as the same was made without waiting for the lapse
of the ten-day period for respondents to file their comment and for
petitioners to file their reply. It was allegedly impossible for the
Court of Appeals to resolve the issue in just one and a half days,
especially because its ponente, the late Justice Maximiano C.
Asuncion, was then recuperating from surgery and, that,
additionally, hundreds of more important cases were pending. 22 chanroblesvirtuallawlibrary

These lamentable allegation of irregularities in the Court of Appeals

and in the conduct of its officers strikes us as a desperate attempt
of petitioners to induce this Court to give credence to their
arguments which, as already found by both the trial and
intermediate appellate courts, are devoid of factual and legal
substance. The regrettably irresponsible attempt to tarnish the
image of the intermediate appellate tribunal and its judicial officers
through ad hominem imputations could well be contumacious, but
we are inclined to let that pass with a strict admonition that
petitioners refrain from indulging in such conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this
case affirming the trial courts decision. 23 Petitioners moved for
reconsideration and the Court of Appeals ordered respondents to file
a comment. Respondents filed the same on August 5, 1997 24 and
petitioners filed their reply to said comment on August 15,
1997. 25 The Eleventh Division of said court issued the questioned
resolution denying petitioners motion for reconsideration on August
18, 1997.26cräläwvirtualibräry

It is ironic that while some litigants malign the judiciary for being
supposedly slothful in disposing of cases, petitioners are making a
show of calling out for justice because the Court of Appeals issued a
resolution disposing of a case sooner than expected of it. They
would even deny the exercise of discretion by the appellate court to
prioritize its action on cases in line with the procedure it has
adopted in disposing thereof and in declogging its dockets. It is
definitely not for the parties to determine and dictate when and how
a tribunal should act upon those cases since they are not even
aware of the status of the dockets and the internal rules and policies
for acting thereon.

The fact that a resolution was issued by said court within a

relatively short period of time after the records of the case were
elevated to the office of the ponente cannot, by itself, be deemed
irregular. There is no showing whatsoever that the resolution was
issued without considering the reply filed by petitioners. In fact, that
brief pleading filed by petitioners does not exhibit any esoteric or
ponderous argument which could not be analyzed within an hour. It
is a legal presumption, born of wisdom and experience, that official
duty has been regularly performed; 27 that the proceedings of a
judicial tribunal are regular and valid, and that judicial acts and
duties have been and will be duly and properly performed. 28 The
burden of proving irregularity in official conduct is on the part of
petitioners and they have utterly failed to do so. It is thus
reprehensible for them to cast aspersions on a court of law on the
bases of conjectures or surmises, especially since one of the
petitioners appears to be a member of the Philippine Bar.
Lastly, petitioners fault the trial courts holding that whatever
contract of agency was established between Brigida D. Luz and
Narciso Deganos is unenforceable under the Statute of Frauds as
that aspect of this case allegedly is not covered thereby. 29 They
proceed on the premise that the Statute of Frauds applies only to
executory contracts and not to executed or to partially executed
ones. From there, they move on to claim that the contract involved
in this case was an executed contract as the items had already been
delivered by petitioners to Brigida D. Luz, hence, such delivery
resulted in the execution of the contract and removed the same
from the coverage of the Statute of Frauds.

Petitioners claim is speciously unmeritorious. It should be

emphasized that neither the trial court nor the appellate court
categorically stated that there was such a contractual relation
between these two respondents. The trial court merely said that if
there was such an agency existing between them, the same is
unenforceable as the contract would fall under the Statute of Frauds
which requires the presentation of a note or memorandum thereof
in order to be enforceable in court. That was merely a preparatory
statement of a principle of law. What was finally proven as a matter
of fact is that there was no such contract between Brigida D. Luz
and Narciso Deganos, executed or partially executed, and no
delivery of any of the items subject of this case was ever made to
the former.

WHEREFORE, no error having been committed by the Court of

Appeals in affirming the judgment of the court a quo,  its challenged
decision and resolution are hereby AFFIRMED and the instant
petition is DENIED,with double costs against petitioners

SO ORDERED.

[G.R. No. 25593. November 15, 1967.]

HOME INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES LINES

CO., ET AL., Defendants-Appellees.
 Quasha, Asperilla, Blanco, Zafra & Tayag, for Plaintiff-Appellant.

Ross, Selph, Salcedo, Del Rosario, Bito & Mesa for Defendants-Appellees.

SYLLABUS

1. ARRASTRE SERVICE; IMMUNITY OF GOVERNMENT FROM SUIT. — On grounds of

public policy, the Republic of the Philippines or its agencies may not be sued for the
performance of arrastre operations as a function necessarily incidental to the
governmental function of taxation.

2. REMEDIAL LAW; PRE-TRIAL UNDER THE NEW RULES DISTINGUISHED FROM THAT
OF THE OLD. — Section 1 of Rule 20 of the Revised Rules of Court, making pre-trial
mandatory partly provides that "in any action, after the last pleading has been filed, the
court shall direct the parties and their attorneys to appear before it for a conference."
This is different from Section 1 of Rule 25 of the old Rules of Court which provided that
"the court may in its discretion direct the attorneys for the parties to appear before it
for a conference." Section 2, Rule 20 of the new Rules of Court says that "a party who
fails to appear at a pre-trial conference may be non-suited or considered as in default."
This shows the purpose of the Rules to compel the parties to appear personally before
the Court to reach, if possible, a compromise. Accordingly, the court is given the
discretion to dismiss the case, should plaintiff not appear at the pre-trial.

3. ID.; COMPROMISE; REQUISITE THEREOF. — The Rules of Court require, for

attorneys to compromise the litigation of their clients, a "special authority" (Sec. 23,
Rule 138). And while the same does not state that the special authority be in writing,
the court has every reason to expect that, if not in writing, the same be duly
established by evidence other than the self-serving assertion of counsel himself that
such authority was verbally given him.

4. ID.; ID.; AUTHORITY TO COMPROMISE NOT PRESUMED. — Authority to compromise

a litigation cannot be lightly presumed. If, with good reason, the judge is not satisfied
that said authority exists, as in this case, dismissal of the suit for non-appearance of
plaintiff in pre-trial is sanctioned by the Rules of Court.

DECISION

BENGZON, J.P., J.:

Sometime in 1964, SS "Pioneer Moon" arrived in Manila and discharged unto the
custody of the Bureau of Customs, as arrastre operator, two hundred (200) cartons of
carbonized adding machine rolls consigned to Burroughs, Limited. When the cargo was
delivered to the consignee, however, several cartons were damaged. The consignee
claimed the P2,605.64 worth of damage from the Bureau of Customs, the United States
Lines Company, owner of the vessel, and the Home Insurance Company which had
insured the cargo. The latter paid the claim and demanded reimbursement from either
arrastre operator or the carrier. When both rejected the claim, the Home Insurance
Company, as subrogee, filed on June 11, 1965 an action against the Republic of the
Philippines, the Bureau of Customs and the United States Lines, in the alternative, for
the recovery of P2,605.64, with interest plus costs. chanroblesvirtuallawlibrary

Both defendants answered. The United States Lines disclaimed liability on the ground
that the damage was incurred while the cargo was in the possession of its co-
defendants. The Republic of the Philippines and the Bureau of Customs, after denial of
their motion to dismiss, answered and alleged among others, non-suability and
noncompliance with Act 3083, as amended by Commonwealth Act 327 which requires
money claims to be filed with the Auditor General.

On December 7, 1965, the date set for pre-trial, only the counsel for the plaintiff
appeared, who upon being asked for written authority to compromise, assured the
court that though he had no written authority, he had such authority verbally given by
the plaintiff. On the same day, the court dismissed the case for failure of the plaintiff to
appear at the pre-trial conference.

Its motion for reconsideration having been denied, plaintiff appealed to Us, claiming
that the lower court erred in dismissing the case for failure of the plaintiff to appear.

As against the Republic of the Philippines and the Bureau of Customs, the dismissal
must be sustained in the light of our decision in Mobil Philippines Exploration v.
Customs Arrastre Service and Bureau of Customs, L-23139, December 17, 1966 and
subsequent rulings, 1 where We held that on grounds of public policy, the Republic of
the Philippines or its agencies, may not be sued for the performance of arrastre
operations as a function necessarily incidental to the governmental function of taxation.

As regards the other defendant, Section 1 of Rule 20 of the Revised Rules of Court,
making pre-trial mandatory partly provides: ". . . in any action, after the last pleading
has been filed, the court shall direct the parties and their attorneys to appear before it
for a conference" (Emphasis supplied). This is different from Section 1 of Rule 25 of the
old Rules of Court which provided that "the court may in its discretion direct the
attorneys for the parties to appear before it for a conference. . ." (Emphasis supplied).
Section 2, Rule 20 of the new Rules of Court says that "a party who fails to appear at a
pre-trial conference may be non-suited or considered as in default." This shows the
purpose of the Rules to compel the parties to appear personally before the court to
reach, if possible, a compromise. Accordingly, the court is given the discretion to
dismiss the case should plaintiff not appear at the pre-trial.

Taking into consideration said purpose and spirit of the new Rules as well as the facts in
the present case, We find no reversible error committed by the court a quo in
dismissing the action for the reason that only plaintiff’s counsel appeared at the pre-
trial (and not plaintiff’s official representative also). True, said counsel asserted that he
had verbal authority to compromise the case. The Rules, however, require, for
attorneys to compromise the litigation of their clients, a "special authority" (Section 23,
Rule 138, Rules of Court). And while the same does not state that the special authority
be in writing, the court has every reason to expect that, if not in writing, the same be
duly established by evidence other than the self-serving assertion of counsel himself
that such authority was verbally given him. The court below, therefore, did not act
erroneously in proceeding to dismiss the case in spite of such manifestation of plaintiff’s
counsel. For, authority to compromise cannot lightly be presumed. And if, with good
reason, the judge is not satisfied that said authority exists, as in this case, dismissal of
the suit for non-appearance of plaintiff in pre-trial is sanctioned by the Rules. The
dismissal should therefore be sustained in toto, with respect to all the defendants. chanrobles.com:cralaw:nad

WHEREFORE, the appealed order of dismissal is affirmed, without costs. So ordered.

G.R. No. 102737 August 21, 1996

FRANCISCO A. VELOSO, petitioner,
vs.
COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L.
ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF MANILA, respondents.

TORRES, JR., J.:p

This petition for review assails the decision of the Court of Appeals, dated July 29, 1991, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED IN TOTO. Costs

against appellant. 1

The following are the antecedent facts:

Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of
Tondo, Manila, with an area of one hundred seventy seven (177) square meters and covered
by Transfer Certificate of Title No. 49138 issued by the Registry of Deeds of Manila.  The title 2

was registered in the name of Francisco A. Veloso, single,  on October 4, 1957.  The said
3 4

title was subsequently cancelled and a new one, Transfer Certificate of Title No. 180685,
was issued in the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24,
1988. 5

On August 24, 1988, petitioner Veloso filed an action for annulment of documents,
reconveyance of property with damages and preliminary injunction and/or restraining order.
The complaint, docketed as Civil Case No. 88-45926, was raffled to the Regional Trial Court,
Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of the subject
property and he never authorized anybody, not even his wife, to sell it. He alleged that he
was in possession of the title but when his wife, Irma, left for abroad, he found out that his
copy was missing. He then verified with the Registry of Deeds of Manila and there he
discovered that his title was already cancelled in favor of defendant Aglaloma Escario. The
transfer of property was supported by a General Power of Attorney  dated November 29, 6

1985 and Deed of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of
the petitioner and appearing as his attorney-in-fact, and defendant Aglaloma
Escario.  Petitioner Veloso, however, denied having executed the power of attorney and
7

alleged that his signature was falsified. He also denied having seen or even known
Rosemarie Reyes and Imelda Santos, the supposed witnesses in the execution of the power
of attorney. He vehemently denied having met or transacted with the defendant. Thus, he
contended that the sale of the property, and the subsequent transfer thereof, were null and
void. Petitioner Veloso, therefore, prayed that a temporary restraining order be issued to
prevent the transfer of the subject property; that the General Power of Attorney, the Deed of
Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled; and the subject
property be reconveyed to him.

Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and
denied any knowledge of the alleged irregularity. She allegedly relied on the general power
of attorney of Irma Veloso which was sufficient in form and substance and was duly
notarized. She contended that plaintiff (herein petitioner), had no cause of action against her.
In seeking for the declaration of nullity of the documents, the real party in interest was Irma
Veloso, the wife of the plaintiff. She should have been impleaded in the case. In fact,
Plaintiff's cause of action should have been against his wife, Irma. Consequently, defendant
Escario prayed for the dismissal of the complaint and the payment to her of damages. 8

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

During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the
subject property from the Philippine Building Corporation, as evidenced by a Deed of Sale
dated October 1, 1957.  He married Irma Lazatin on January 20, 1962.  Hence, the property
10 11

did not belong to their conjugal partnership. Plaintiff further asserted that he did not sign the
power of attorney and as proof that his signature was falsified, he presented Allied Bank
Checks Nos. 16634640, 16634641 and 16634643, which allegedly bore his genuine
signature.

Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the
general power of attorney. He attested that he did not sign thereon, and the same was never
entered in his Notarial Register on November 29, 1985.

In the decision of the trial court dated March 9, 1990,  defendant Aglaloma Escario was
12

adjudged the lawful owner of the property as she was deemed an innocent purchaser for
value. The assailed general power of attorney was held to be valid and sufficient for the
purpose. The trial court ruled that there was no need for a special power of attorney when
the special power was already mentioned in the general one. It also declared that plaintiff
failed to substantiate his allegation of fraud. The court also stressed that plaintiff was not
entirely blameless for although he admitted to be the only person who had access to the title
and other important documents, his wife was still able to possess the copy. Citing Section 55
of Act 496, the court held that Irma's possession and production of the certificate of title was
deemed a conclusive authority from the plaintiff to the Register of Deeds to enter a new
certificate. Then applying the principle of equitable estoppel, plaintiff was held to bear the
loss for it was he who made the wrong possible. Thus:

WHEREFORE, the Court finds for the defendants and against plaintiff —

a. declaring that there was a valid sale of the subject property in favor
of the defendant;
 b. denying all other claims of the parties for want of legal and factual
basis.

Without pronouncement as to costs.

SO ORDERED.

Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of Appeals.
The respondent court affirmed in toto the findings of the trial court.

Hence, this petition for review before Us.

This petition for review was initially dismissed for failure to submit an affidavit of service of a
copy of the petition on the counsel for private respondent.  A motion for reconsideration of
13

the resolution was filed but it was denied in are resolution dated March 30, 1992.  A second
14

motion for reconsideration was filed and in a resolution dated Aug. 3, 1992, the motion was
granted and the petition for review was reinstated. 15

A supplemental petition was filed on October 9, 1992 with the following assignment of errors:

The Court of Appeals committed a grave error in not finding that the forgery of the
power of attorney (Exh . "C") had been adequately proven, despite the preponderant
evidence, and in doing so, it has so far departed from the applicable provisions of law
and the decisions of this Honorable Court, as to warrant the grant of this petition for
review on certiorari.

II

There are principles of justice and equity that warrant a review of the decision.

III

The Court of Appeals erred in affirming the decision of the trial court which
misapplied the principle of equitable estoppel since the petitioner did not fail in his
duty of observing due diligence in the safekeeping of the title to the property.

We find petitioner's contentions not meritorious.

An examination of the records showed that the assailed power of attorney was valid and
regular on its face. It was notarized and as such, it carries the evidentiary weight conferred
upon it with respect to its due execution. While it is true that it was denominated as a general
power of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:

2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements

and hereditaments or other forms of real property, more specifically TCT No. 49138,
upon such terms and conditions and under such covenants as my said attorney shall
deem fit and proper. 16
Thus, there was no need to execute a separate and special power of attorney since the
general power of attorney had expressly authorized the agent or attorney in fact the power to
sell the subject property. The special power of attorney can be included in the general power
when it is specified therein the act or transaction for which the special power is required.

The general power of attorney was accepted by the Register of Deeds when the title to the
subject property was cancelled and transferred in the name of private respondent. In LRC
Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:

Whether the instrument be denominated as "general power of attorney" or "special

power of attorney", what matters is the extent of the power or powers contemplated
upon the agent or attorney in fact. If the power is couched in general terms, then
such power cannot go beyond acts of administration. However, where the power to
sell is specific, it not being merely implied, much less couched in general terms, there
can not be any doubt that the attorney in fact may execute a valid sale. An
instrument may be captioned as "special power of attorney" but if the powers granted
are couched in general terms without mentioning any specific power to sell or
mortgage or to do other specific acts of strict dominion, then in that case only acts of
administration may be deemed conferred.

Petitioner contends that his signature on the power of attorney was falsified. He also alleges
that the same was not duly notarized for as testified by Atty. Tubig himself, he did not sign
thereon nor was it ever recorded in his notarial register. To bolster his argument, petitioner
had presented checks, marriage certificate and his residence certificate to prove his alleged
genuine signature which when compared to the signature in the power of attorney, showed
some difference.

We found, however, that the basis presented by the petitioner was inadequate to sustain his
allegation of forgery. Mere variance of the signatures cannot be considered as conclusive
proof that the same were forged. Forgery cannot be presumed 7 Petitioner, however, failed
1

to prove his allegation and simply relied on the apparent difference of the signatures. His
denial had not established that the signature on the power of attorney was not his.

We agree with the conclusion of the lower court that private respondent was an innocent
purchaser for value. Respondent Aglaloma relied on the power of attorney presented by
petitioner's wife, Irma. Being the wife of the owner and having with her the title of the
property, there was no reason for the private respondent not to believe in her authority.
Moreover, the power of attorney was notarized and as such, carried with it the presumption
of its due execution. Thus, having had no inkling on any irregularity and having no
participation thereof, private respondent was a buyer in good faith. It has been consistently
held that a purchaser in good faith is one who buys property of another, without notice that
some other person has a right to, or interest in such property and pays a full and fair price for
the same, at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property. 18

Documents acknowledged before a notary public have the evidentiary weight with respect to
their due execution. The questioned power of attorney and deed of sale, were notarized and
therefore, presumed to be valid and duly executed. Atty. Tubig denied having notarized the
said documents and alleged that his signature had also been falsified. He presented
samples of his signature to prove his contention. Forgery should be proved by clear and
convincing evidence and whoever alleges it has the burden of proving the same. Just like the
petitioner, witness Atty. Tubig merely pointed out that his signature was different from that in
the power of attorney and deed of sale. There had never been an accurate examination of
the signature, even that of the petitioner. To determine forgery, it was held in Cesar
vs. Sandiganbayan  (quoting Osborn, The Problem of Proof) that:
19

The process of identification, therefore, must include the determination of the extent,
kind, and significance of this resemblance as well as of the variation. It then becomes
necessary to determine whether the variation is due to the operation of a different
personality, or is only the expected and inevitable variation found in the genuine
writing of the same writer. It is also necessary to decide whether the resemblance is
the result of a more or less skillful imitation, or is the habitual and characteristic
resemblance which naturally appears in a genuine writing. When these two questions
are correctly answered the whole problem of identification is solved.

Even granting for the sake of argument, that the petitioner's signature was falsified and
consequently, the power of attorney and the deed of sale were null and void, such fact would
not revoke the title subsequently issued in favor of private respondent Aglaloma. In Tenio-
Obsequio vs. Court of Appeals,  it was held, viz:
20

The right of an innocent purchaser for value must be respected and protected, even
if the seller obtained his title through fraud. The remedy of the person prejudiced is to
bring an action for damages against those who caused or employed the fraud, and if
the latter are insolvent, an action against the Treasurer of the Philippines may be
filed for recovery of damages against the Assurance Fund.

Finally; the trial court did not err in applying equitable estoppel in this case. The principle of
equitable estoppel states that where one or two innocent persons must suffer a loss, he who
by his conduct made the loss possible must bear it. From the evidence adduced, it should be
the petitioner who should bear the loss. As the court a quo found:

Besides, the records of this case disclosed that the plaintiff is not entirely free from
blame. He admitted that he is the sole person who has access to TCT No. 49138 and
other documents appertaining thereto (TSN, May 23, 1989, pp. 7-12) However, the
fact remains that the Certificate of Title, as well as other documents necessary for
the transfer of title were in the possession of plaintiff's wife, Irma L. Veloso,
consequently leaving no doubt or any suspicion on the part of the defendant as to
her authority. Under Section 55 of Act 496, as amended, Irma's possession and
production of the Certificate of Title to defendant operated as "conclusive authority
from the plaintiff to the Register of Deeds to enter a new certificate."
21

Considering the foregoing premises, we found no error in the appreciation of facts and
application of law by the lower court which will warrant the reversal or modification of the
appealed decision.

ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.

SO ORDERED.
G.R. No. L-23923             March 23, 1927

ANTONIO Ma. BARRETO, ET AL., plaintiffs-appellants,

vs.
AUGUSTO H. TUASON, ET AL., defendants-appellants.

Antonio Sanz for plaintiffs-appellants.

Araneta and Zaragoza and Fisher, DeWitt, Perkins and Brady for defendants-appellants.
Eusebio Orense for Benito, Consuelo and Rita by surname Legarda.
Ernesto Zaragoza for Emilia Tuason et al.
Feria and La O for the intervenors Estanislawa Arenas et al.

ROMUALDEZ, J.:

More than a century and a quarter ago, in the ancient town to Binondo, now one of the districts of
the City of Manila, Don Antonio Tuason founded a mayorazgo of strict agnation upon the third and
the remainder of the fifth of all his properties by an instrument executed to that end, duly approved
by the King of Spain in a cedula issued for that purpose.

It was therein provided, among other things, that the revenue of the properties so entailed, and all
such others as might be annexed thereto, should be distributed in the proportion of four-fifths for the
first born, and his successors, and one-fifth for the other eight children and other descendants of the
founder, mentioned in the instrument.

The plaintiffs allege that this disposition constituted a family trust (fideicomiso familiar) which
thereafter became subject to the provisions of article 4 of the Statute of Disentailment of October 11,
1820; that the defendants, and their predecessors, all of whom descend from the lines of the first
born, have so considered it and have been paying, up to the year 1921, sums of money on account
of the fifth of the revenue of the mayorazgo; that the defendants purchased in 1905 and 1915 the
rights of some of the beneficiaries for the said trust; that in the payments of the fifth of the revenue
mentioned, fraud was committed; that the plaintiffs, who are part of the descendants of four of the
eight children who were the beneficiaries of the fifth of the revenue, were without a copy of the
instrument of foundation, the protocol of the notary before whom it was acknowledged having
disappeared, and that for this reason they were unaware of their rights and were unable to discover
the fraud until the year 1922 in which the original of the said Royal Cedula was discovered in the
archives of Seville, Spain; that the defendants fraudulently obtained a Torrens title in their favor upon
the entailed real estate; that there are now no surviving descendants of four of the eight children of
the founder who are beneficiaries of the fifth of the revenue. Plaintiffs conclude by praying that
defendants be required to pay them, as damages, P500,000, that is, one-half of the family trust
administered by the latter, and that this liability be enforced against the properties described in
paragraph 31 of the complaint; that defendants render an account of the receipts, expenses and
profits of the said properties from February 4, 1874, when they took possession of them, until
December 31, 1921, and from January 1, 1922, until judgment is rendered; that the defendants,
jointly and severally, pay them their share of the liquidation of the product of said properties, after
deducting the amounts received on account by plaintiffs; that the defendants pay legal interest upon
such sums as may be adjudicated, computed from the filing of the complaint until the complete
payment of the amounts therein demanded.

The defendants interposed several defenses, in the first of which they alleged that the Royal
Cedula upon which the foundation rests and the Statutes of Disentailment are contrary to plaintiffs'
contentions. In their second defense they allege possession of a Torrens title to the property in
question, free from charges or encumbrances. The third defense is that of the prescription of the
action here brought. As a fourth defense the defendants Doña Paz Tuazon de Gonzales, Doña
Consuelo Tuason de Quimson, Don Juan Tuason and Doña Albina Tuason contend that they
inherited the share of their father Don Jose Maria Tuason in the properties constituting the
endowment of the mayorazgo; that proceedings were had for the administration of the testate estate
of the said deceased and a committee on claims appointed which performed its duty, but that no
claim whatever was presented by any of the plaintiffs; that the partition of the hereditary properties
was decreed and the proceedings in the estate declared to be finally concluded. By way of
counterclaim the defendants ask that plaintiffs return the pensions received after the year 1917 on
account of the revenue of the properties which constitute the mayorazgo, as the payments of such
pensions were improper.

The judgment of the Court of First Instance of Manila before which the case was tried dismisses the
complaint and the counterclaim, without costs.

Both parties appealed. The plaintiffs contend that the trial court erred —

(1) In holding that before the disentailment the possessors of entails were not mere
usufructuaries of the inalienable properties which constituted the entail.

(2) In weighing the evidence and in deciding that the provision made by the founder, Don
Antonio Tuason, in favor of his second-born children and their successors is not a family
trust.

(3) In confusing the charges and encumbrances referred to in article 7 of the Statute of
Disentailment with the allowances for support and pensions mentioned in article 10 of the
same statute.

(4) In failing to give effect to the allegations and evidence of fraud adduced by plaintiffs with
respect to the performance of the trust by defendants.

(5) In holding that the defendants were entitled to obtain, as they did obtain, a Torrens title
upon the real estate in question, and that the allegation of plaintiffs that they obtained it by
fraud is not supported by the evidence.

(6) In holding that even admitting that the plaintiffs are within the general denomination of
descendants of the founder of the mayorazgo they are not entitled to receive any part of the
revenue, it not having been demonstrated that they are poor.

(7) In denying the new trial prayed for by plaintiffs. The defendants assign as error the action
of the court in dismissing their counterclaim.

The principal undisputed facts which must be stated as a basis for disposing of the questions
presented are as follows:

The mayorazgo now under consideration was created February 25, 1794.

On the 4th of June of the same year, 1794, the founder, Don Antonio Tuason, died in Manila.

On August 20, 1795, the mayorazgo was approved by Royal Cedula.

On October 11, 1820, the Statute of Civil Disentailments was promulgated in Spain.
On October 31, 1863, a Royal Decree was issued extending to the overseas provinces the statutes
concerning civil disentailments and declaring them to be in force in such provinces from March 1,
1864.

On February 1, 1874, Don Jose Severo Tuason, at that time the possessor of the entail, executed a
will, respecting the mayorazgo and transmitting it as such to his first-born son, Don Jose Victorino
Tuason, and died the third day of the same month and year.

On February 4, 1874, an inventory was prepared of the properties left by Don Jose Severo Tuason,
among which the mayorazgo was mentioned.

On January 31, 1875, a liquidation and partition of the said properties was made, and the properties
of the mayorazgo were preserved and respected as entailed.

On January 25, 1878, Don Jose Victariano Tuason, the first-born son of the testator, who was at that
time thirteen years of age, died in Metz (formerly Germany, now France).

On August 7, 1896, the liquidation and partition of the property was registered.

On October 9, 1905, Don Jose Rocha y Ruiz sold to the heirs of Don Jose Severo Tuason his share
of the fifth of the revenue of the properties of the mayorazgo.

On November 16, 1916, Doña Remedios Aragon y Rocha also sold to the heirs of Don Jose Severo
Tuason her share of the fifth of the said revenues.

The books of the defendants show the receipts and disbursement relating to the real estate of
the mayorazgo (Exhibit 2) from January, 1904, until December, 1922. In each year items appear
under the heading, "Participations in one-fifth of the products." In the year 1905 an entry appears
"Purchase of rights as to one-fifth of products;" in the year 1906, "Purchase of rights to one-fifth of
the products;" in the year 1910, "Purchase of rights to one-fifth of the products," and in the year
1911 "Notary's fees for deed of assignment with respect to one-fifth of the products;" in the year
1912, "Notary's fees for deeds of assignment as to one-fifth of the product."

In the course of the trial the parties agreed upon certain facts by means of the following stipulation:

The parties to the trial the parties agreed upon certain facts by means of the following
stipulation:

The parties to the above entitled cause appear before this court and agree that the court
may consider as admitted, without the necessity of evidence, the following facts:

I. The facts alleged in paragraphs I, II, III, IV, V, VI, VII, VIII, IX, X, XI, XII, XIII, XIV, XV, XVI,
XVII, XVII, XIX, XX, XXI, XXII, XXIII, XXIV, XXV, XXVI, XXVII, XXVIII, XXIX, XXX, XXXI,
AND XXXII of the amended complaint dated November 7, 1923.

II. The facts alleged in paragraphs 3 and 4 of the first special defense in the answer to the
amended complaint, dated April 16, 1924.

III. That when Don Jose Severo Tuason died on February 3, 1874, all the properties which
constituted the mayorazgo passed to his first- born son, Don Jose Victoriano Tuason, in
accordance with his will, a certified copy of which is attached, marked as Exhibit 1.
IV. The facts alleged in paragraphs 6, 7, 8, 9, 10 and 11, with the exception of the allegation
contained in paragraphs 9 and 10 that the properties which constituted
the mayorazgo passed freely to Don Jose Victoriano Tuason, which is not accepted by
counsel for plaintiffs, as this is the question of law raised by complaint.

V. That none of the plaintiff received any pensions whatever as a charge against the revenue
or products of the properties which constituted the mayorazgo at the time when the same
passed into the hands of Don Jose Victoriano Tuason, and with the exception of those who
are mentioned in paragraph 2 of the counterclaim, none of them, nor their ancestors,
received any pensions whatever as a charge upon the revenues or products of the
properties which constituted the mayorazgo during the ten years prior to the date of the filing
of the original complaint.

VI. The facts alleged in paragraph 2 of the second special defense of said answer to the
amended complaint.

VII. The facts alleged in paragraphs 1, 2, 3, and 4 of the fourth special defense of the
defendants Doña Paz Tuazon de Gonzales, Doña Consuelo Tuason de Quimson, Don Juan
Tuason, Doña Albina Tuason contained in said answer to the amended complaint.

VIII. All the facts alleged in paragraph 2 of the counterclaim contained in the said answer to
the amended complaint.

IX. That the present assessed value of the Hacienda Santa Mesa-Diliman is three million five
hundred fifty thousand six hundred forty-six pesos (P3,550,646); of the Hacienda de
Mariquina one million five hundred seven thousand one hundred forty pesos (P1,507, 140);
that of the lots and buildings on Calle Rosario five hundred forty two thousand three hundred
eighty two pesos (P542,382); and solely for the purpose of the decision in this case it is
agreed that their real value as between a purchaser desiring to buy and a vendor willing to
sell said properties is the same as their assessed value.

X. That the revenue and expenses of the properties on calle Rosario are those shown in the
statement attached, marked as Exhibit 2, and that said statement is taken from the books of
the defendants.

XI. That the receipts and expenditures of the Hacienda Santa Mesa-

Diliman and Mariquina are also those which appear in the statement attached, marked as
Exhibit 2, and that said statement is taken from the books of the defendants.

XII. That the receipts and expenditure of the Haciendas Santa Mesa-

Diliman and Mariquina are also those which appear in the statement attached, marked as
Exhibit 3, which was also taken from the books of the defendants.

XIII. That the stipulation contained in the preceding paragraphs shall not prevent the plaintiffs
from impugning as improperly charged, any of the items appearing in said two statements.

XIV. That in the record of the testamentary estate of the late Don Juan Tuason, case No.
16031, above-mentioned, a document appears, a copy of which is annexed, marked as
Exhibit 4.
 XV. A copy of the deed of partition of the property of Don Jose Victoriano Tuason, is
attached and marked Exhibit 5.

XVI. That the plaintiffs, who, as admitted in paragraph 2 of the cross- complaint, collected
from the defendants the sums mentioned in said paragraph, did so upon receipts preprared
by Don Augusto Tuason, acting for himself and his brother, and worded as follows:

Received from Don Augusto Tuason the sum of * * * the part corresponding to me of the fifth
of the products of the properties of the Tuason mayorazgo corresponding to the current year.

XVI. That Don Jose Rocha y Ruiz Delgado, as the first party, and the brothers and sister,
Doña Teresa, Don Juan, Don Mariano, Don Demetrio and Don Augusto Tuason, as the
second parties, executed a contract of assignment of right marked Exhibit 6; and likewise
Doña Remedios Aragon y Rocha and the said brothers and sister entered into the contract of
assignment of rights marked Exhibit 7.

Manila, P. I., August 30, 1924.

ANTONIO SANZ and JOSE GALAN BLANCO

BY (Sgd.) ANTONIO SANZ

Attorneys for Plaintiffs
ARANETA & ZARAGOZA

BY (Sgd.) GREGORION ARANETA

Attorneys for Defendants

The various questions raised by the parties turn upon these fundamental points, namely, (a) the
nature of the mayorazgo; (b) the Statute of Disentailment and the conduct of the interested parties
and their effects; (c) defenses to this action alleged by defendants; and (d) the persons entitled to
the relief prayed for.

THE NATURE OF THIS "MAYORAZGO"

Its literal text, together with that of the Royal Cedula by which it was approved and confirmed, is as
follows:

Don Carlos, by the grace of God King of Castile, etc., whereas on behalf of you, Don Vicente
Dolores Tuason, Captain of Infantry of the Royal Armies, Lieutenant-Colonel of the Regiment
of the Prince Royal, of the City of Manila, a resident of the said city, Testamentary Executor
of your deceased father, Don Antonio Tuason, Lieutenant-Colonel of the said Royal Armies
and Colonel attached to the above-mentioned regiment, it was made known to me, on the
13th of April of the present year, that your said deceased father, on the 25th of February of
last year, founded a mayorazgo (estate tail) of strict agnation, upon one third and the
remainder of the fifth part of all his property, estate and effects which at that time were of the
value of one hundred and thirty-five thousand pesos, appointing you in the first place to
enjoy the same as his first-born, and after you take your place your eldest son and at his
death to succeed him his eldest son and so on, adding that although the wishes of Don
Antonio Tuason in regard to the accomplishment of said entail in all its parts were very keen,
he could not effectuate them on account of his death, but that the duty of carrying them into
effect had been imposed upon you not only on account of your appointment as Executor of
his Estate, but also as being the first one selected to possess the mayorazgo, with which
object, you and your seven brothers received during the lifetime of your father your
respective paternal legitimes; that your said father made explicit designation of the real
estate that was to be entailed with the advertence that if any amount should be lacking to
complete the full value of the third and the remainder of the fifth, it should be delivered in
cash to be invested in real estate specially in lands; that nothing more remained to be done,
according to the attached verified copy of the instrument establishing the said entail which
copied literally is as follows:

'I, Don Antonio Tuason, a resident of this Pueblo of Binondo, beyond the walls of the
City of Manila, in the Philippine Islands, Lieutenant- Colonel of Infantry of the Royal
Armies of H. M. the King, and Colonel attached to the Regiment of Militia of the
Prince Royal; being in good health according to my understanding and in the full use
of my senses and mental faculties, desiring on the one hand to recompense the good
services rendered to my person and my house by my eldest living son Don Vicente
Dolores Tuason, Captain of the Royal Armies, and Lieutenant Colonel of the above-
mentioned Regiment, and desiring on the other hand to insure in part the
permanence of my estate, without diminishing the legitimes of my other children, so
that they may fully enjoy them, and taking into consideration the evanescence of the
great family fortunes which have existed in these Islands on Account of their not
having been entailed, I have determined to established an entail or mayorazgo of the
third part and the remnant of the fifth part of all my property, as I have stated in my
last will and testament and in my codicils, and with this object in view, making use of
the right that has been by law conferred upon me, I execute this deed with the
following clauses and conditions subject in everything to whatever the
Royal Audiencia may determine and H. M. may decide, to all of which I now and
forever assent.

'First. Having taken stock and inventory of all the property of which I am now
possessed, in cash, real estate, jewelry and other things, I found myself to be the
possessor of an estate of the value of one hundred and thirty-five thousand pesos,
which after having deducted the third and the fifth, left me a remainder of seventy-
two thousand pesos, which I divided amongst my eight children, there corresponding
to each one of them the sum of nine thousand pesos, which sum was actually
delivered to each and every one of them, as shown by documents which I have in my
possession; and the third and the remnant of the fifth, I hereby devote to the
aforesaid entail, and if by accidents of time the total value of my property should
increase or diminish, so also shall the said capital of this entail, which never must be
allowed to exceed the total value of the said third and remainder of the fifth.

'Item.

'That the possessor of this entail or mayorazgo or betterment must take an oath
before the Court of Justice of the territory, to observe and perform all the clauses and
conditions contained herein, and if he should fail to observe and perform any of
them, either totally or in part, he shall lose his right to the mayorazgo, which shall
pass to the next successor.

'Item.

'That he must keep in his possession the original parchment Royal Patent of Nobility
of my house, and in case that it should be lost, he must immediately request a
certified copy thereof, from the Royal Audiencia, the Noble City, or the Court of
Justice of Tondo in whose offices it has been recorded and so likewise he must do
with the certificate of the coat of arms and insignia of my house, which have been
registered in the said Noble City.

'Item.

'He must uphold all the other rights and privileges conferred upon my house by the
aforesaid Royal Letters Patent and redress all wrongs in violation thereof which may
be committed or attempted against my legitimate descendants, bearing in mind that
one of my objects, in the establishment of this mayorazgo, is to uphold and defend
the honor that H. M. has designed to confer upon me, as a proof of the esteem in
which I hold those gracious honors and the deep gratitude I feel on account of them.

'Item.

'It shall be his duty to bear, as his first surname, my family name of Tuason, and so
shall he sign his name in all judicial and extrajudicial matters; he shall also display
my coat of arms upon all his crests and buildings and he who shall fail to do any of
these things, shall forfeit his right of succession to the mayorazgo, and I hereby
declare him excluded therefrom.

'Item.

'It shall be his duty to set apart one-fifth of the net revenue derive from the entail
each year, and that one-fifth part shall be divided into eight parts, giving one to each
of my eight children, and in their absence, to my grandchildren, but upon the
understanding that if one or more of my children should die without succession, the
part belonging to them shall be distributed among my grandchildren and other
descendants of mine according to their needs and as prudence may dictate to him,
so that, when the time arrives that none of my children or grandchildren are alive, it
shall then be always understood that said fifth part shall be applied to all those of my
descendants who are poor, the appointment to be made by him prudently according
to their needs and therefore the possessor of the entail is hereby charged to
discharge this duty with conscientious scruple.

'Item.

'That the holder of this mayorazgo, having legitimate sisters who may desire to marry
or to enter into some convent, shall assign to the former an appropriate marriage
portion, and shall defray, for those who may desire to become nuns, all the expenses
that may be necessary up to the moment that they take the veil, it being well
understood, nevertheless, that all these expenses shall be taken out of the profits
and never out of the capital.

'Item.

'Bearing in mind that the entailed houses and other real property belonging to
this mayorazgo may be in danger of fire, on account of their proximity to houses built
of nipa, bamboo, and other combustible materials, I order the possessor of
the mayorazgo to keep always in good condition the fire engine from Europe, which I
now have at my home, and which I bought for that purpose, at the cost of P110.
Under no excuse whatsoever, even in the case of a public calamity, must that engine
be taken out of my home, except for the purpose to which I destined it; and should it
ever deteriorate or become useless, he must immediately substitute it with another of
the same quality, the cost of which must be taken out of the earnings of
the mayorazgo; so that if through his guilty negligence any of the properties of
the mayorazgo should be destroyed by fire, as a penalty for his non-performance of
this condition, he shall be deprived of the mayorazgo and this shall pass to the next
succession but his successor shall be obliged to rebuild the property destroyed, and
the cost of this work shall be taken out of the entire earnings of this mayorazgo, if it
be necessary, but never out of the capital, so that he shall first apply the earnings of
the mayorazgo to whatever expenses may be necessary for the reconstruction of
that property, rather than to his own personal wants.

'Item.

'He shall also provide another fire engine at the expense of this mayorazgo, to the
value of P200, more or less, according to its size, and it shall always be kept in good
condition by the holder of this mayorazgo, with the object of rendering assistance to
the public with it; and in case of fire the said engine shall be handled by the servants
of the possessor, or by any other well known and expert persons; but if by reason of
this my desire to help the public in its need bickering and controversies should arise
or if the strange persons who are to handle the said engine should not do so with all
the care that such a delicate and expensive engine requires, or should it become a
cause of worry and unpleasantness for the possessor of the same, then this clause
shall not stand and have the effect that I intended it to have, but I earnestly caution
the holder of the mayorazgo to observe as faithfully as possible this my pious
request, and so attract the blessings of heaven, for it is my earnest desire that the
public shall never lack an engine so necessary as that fire engine, the cost, repair
and replacement of which must be taken out of the earnings of the mayorazgo. I also
enjoin the possessor of the mayorazgo to be pious and generous in his expenditures
for Divine Worship, the Service of the King, and the Public Welfare (without vanity)
so that the Lord may bless all his undertakings.

'Item.

'That the possessor of the mayorazgo must necessarily be a layman, and never a

member of any religious order under vow of chastity; and should he enter any
religious order while holding the mayorazgo, it shall ipso facto pass to his children.

'Item.

'That he must be a Roman Catholic Christian and free from the stigma of treason
against H. M. and the country, or that of any other infamous crime, and should he be
guilty of any of these crimes while holding the mayorazgo, it is my desire that he shall
be considered as having been excluded from the same one hour exactly before the
time he committed the said crime, and the mayorazgo shall pass to the next in the
order of succession which I establish in this document, and in the same way let
the mayorazgo be understood as having been lost to him who should dare to
mortgage it or in any other way impose or levy upon it any charge that may endanger
its existence and let everything that he may do against the said mayorazgo be
considered to be null and void.
'Item.

'As soon as the establishment of this mayorazgo shall be approved, I shall give and

deliver to him the value of the said third and fifth, deducting the amount that I may
consider it necessary to expend upon the charges on the fifth, and should this
amount deducted be found insufficient for it, the amount that may be lacking shall be
taken from the mayorazgo, but should it be found to be in excess of this
requirements, the surplus shall be returned to the funds of the mayorazgo.

'Item.

'The properties upon which I establish this entail are: My private residence, with
every thing that is contained within its fence, as well as the dependencies that are
built close to the said house and fence on the right hand locking towards the church
of this pueblo of Binondo, which are a shed, with a tile roof, having display tables; a
stone house and the lot of land that reaches put to the estero towards Calle Nueva of
this pueblo, all of its surrounded by a stone wall; the image of Our Lady of Soterrana
of Nieva, dressed in a cloth of beaten gold, and contained within its golden
tabernacle which is at this date in my private residence; and the organ which is also
in the reception room of my said residence. The value of my residence is declared in
my inventory taken the twelfth of October, seventeen hundred and seventy- nine,
adding to its the sum of P2,200 for the improvements made on it, and which have not
yet been completed; and the value of the other properties shall be their purchase
price according to their documents of sale, all of which property is absolutely free for
any encumbrance; and if any amount should be lacking to complete the full value of
the third and remainder of the fifth, it shall be delivered to the holder of
the mayorazgo, in cash, to be invested in real estate, especially in lands, which shall
also become capital of the mayorazgo; and if before the Royal approval of
the mayorazgo I should find some houses appropriate for this purpose, I shall buy
them for this object and I shall declare them to belong to the mayorazgo.

'Item.

'It shall be the unavoidable annual duty of the holder of this mayorazgo, to order
a novena of Our Lady of Soterrana (of my special devotion) to be made at the
Parochial Church of this pueblo of Binondo, setting up the corresponding candles in
Her altar, and on the last day of that novena to have a public procession of that
image through the streets of this pueblo, as I have been accustomed to do up to
now, with all possible ceremony, and for this purpose I now have in my hands the
sum of P2,000 belonging to this pious object (the (establishment of which has been
set forth in my aforesaid last will and testament), the earnings of which sum at the
rate of five per centum per annum, which are one hundred pesos, have been
destined to the preservation and maintenance of this act of devotion; he shall also
fulfill another pious trust in favor of the souls in Purgatory, to the same amount of two
thousand pesos, left by my deceased wife, in my possession, the interest whereof,
which is one hundred pesos, must be delivered to the parish priest of this pueblo to
say a collector of masses in the same church during the aforesaid novenary of our
Lady, giving six reales as alms to each of these priests for every mass, and if there
be any surplus money after the aforesaid novenary it is my will that it be totally spent
for masses in behalf of the souls in purgatory, and in order that from now henceforth
the needs of both these pious intentions be duly attended to, as being one of the
objects which I have had in mind in establishing this mayorazgo, it is my will that the
aforesaid sum of four thousand pesos belonging to the two above-mentioned pious
foundation be also entailed in the said mayorazgo. It is also my will that the jewelry of
gold, silver and diamonds belonging to the said image and estined exclusively to Her
cult, which I have actually in may possession at this date, and which are described in
a separte inventory, be also kept in his possession by the holder of the mayorazgo.

'Item.

'It is my will that all the property hereby entailed and all that which may be added to it
shall not be sold or alienated, in whole or in part, or charged or ecumbered or
mortgaged wit censos, or any other kind of encumbrance or charge; and if the
contrary is done it shall be void and he who shall have done it or attempted to do it
shall immediately lose the possession of the mayorazgo, and it shall pass out the
next in succession, who shall make demand for the annulment of the alienation
within thirty days; and if he shall fail to do so, he shall also lose the mayorazgo, and it
shall pass to the following possessor; and the same rule shall apply as to all the
possessors, and this clause shall be observed although ignorance of it be alleged.

'Item.

'To the enjoyment and possession of the mayorazgo I hereby call in the first place
my aforesaid son, Don Vicente Dolores Tuason, on account of the great service he
has rendered me, particulary in my old age, for which reason I consider him to have
been bettered upon valuable consideration, and threfore he shall enjoy the
possession of the same, upon the terms set forth, for all the days of his life, and after
his death his ldest son, if he be alive, shall succeed him, and in default of his eldest
son, he shall be succeeded by the ledest son or grandson of this said eldest son, and
so on, following the direct line of descent; and in the absence of any direct lineal
descendant of his eldest son, let the possession pass to the eldest living son of the
aforesaid Don Vicente, and should there be no son left alive, then to the eldest
grandson of his eldest son; and should the male line of my first born be completely
extinguished I desire that the mayorazgo shall pass unto the eldest son of my
deceased son, Don Santos Tuason, and observing in the succession this same order
of procedure, the descendants of my other sons shall in their turn be called to the
possessions of the mayoragzo in the successive order of the dates of their birth.
While there may remain a single male descendant of any of my male children no
female descendants of mine shall enter into the possession of the mayorazgo; for it
is my will that the said possession shall pass from male to male in strict agnation. But
should there be absolutely male descendant of the male line, let the descendant of
the female line enter into possession, observing the same order that has been
prescribed for the male line, and always giving preference to the male rather than to
the female; it being understood that in this order of succession the possession shall
be given to that one of my descendant most nearly related to the last lineal
descendant of my son Don Vicente who may have held the mayorazgo; and in this
aforesaid appointment females shall be qualifed to possess the mayorazgo; but the
males shall be always preferred to the female even though the latter may be an elder
sister; and in the absence of all descendants of the female line of my sons, let the
possession pass to the descendants of my daughters in the order of their birth,
starting with those ofmy eldest duaghter, Doña Esutaquia, and the order of this
succession shall be the same as that already prescribed for the male line.

'Item.
 'And should the line of my descendants of all kinds be absolutely and completely
extinguished, then the mayorazgo shall be applied to the maintenance of the
Regiment of the Militia of Mestizos Sangleyes, entitled of the "Prince Royal" or any
other body of soldiers of the same nationality which may be bearing arms in the
service of our King; but if at that time there should be in existence any Monastery for
descendants of that nationality, then from that time I deed in favor of it one-half of the
aforesaid mayorazgo; and should there not be at that time either of those two things,
let the whole mayorazgo revert to the Royal Treasury. And with these clauses,
conditions, and charges I hereby make, constitute and establish this mayorazgo,
constituting its lawful possessor the owner (Señor) thereof upon the terms set forth;
and it is my desire that it have all legal effect that other mayorazgos have and that it
should be so considered after obtaining the Royal Consent and not before, because
in establishing its clauses and conditions it has been my only aim to make them
known to the Royal Audiencia and to H. M. so that in view of the same they may alter
or modify them according to their will, with the understanding that I, as a faithful
vassal and obedient subject, hereby accept the establishment of
the mayorazgo under any terms and conditions that may meet with the approval of
H. M., in this pueblo of Binondo this 25th of February, 1794. Antonio Tuason.'

In view of which you concluded by praying that the said document, having been presented to me, I
should deign to approve, in each and every one of its terms, the above-mentioned entail of strict
agnation, which of the third and the remainder of the fifth of his property the aforesaid Don Antonio
Tuason established in favor of yourself as first-born son, and of your own and his other descendants
under the terms set forth therein, and requested that the corresponding royal permit be duly issued.
And bearing in mind the report of my Council of the Indies, and a letter from my Royal Audiencia of
Manila, dated July 22 of last year, declaring that the said Audiencia could find no objection to the
establishment of the above-mentioned entail and attaching thereto a certified copy of the document
in which the aforesaid entail was established, and in view furthermore of the reports received by me
from the Royal Exchequer and from my Fiscal, I have deigned to approve your request in
consideration of all the circumstances detailed above as well as of the services you rendered me by
paying me the sum of 8,800 reales as Half Annata.

Therefore, of my own volition, with full knowledge of all the facts, and by virtue of my Royal
Prerogative, of which I have decided to make use in the present instance, and of which I do make
use as King and natural Lord, recognizing no higher authority over me in regard to my temporal
power, I hereby do approve the establishment of the mayorazgo founded by your above-mentioned
father, Don Antonio Tuason, and I hereby declare it to be in effect henceforth forever, and I do ratify
and confirm henceforth the validity of the same, in the terms in which it was established, with all the
clauses, conditions, penalties and restitution provided for in the body of the said document, and do
obviate and overcome any all obstacles, fault or defects, of fact or of law, of form, order or
substance, that it may be necessary for me to validate in order to confirm and ratify the
said mayorazgo; and I ordain that all the foregoing be put into effect, fulfilled and observed,
notwithstanding any and all other laws, fueros, rights, usages, customs, pragmatics, and conditions
of these Kingdoms and Realms, as well as of the Indies, be they general or special, and whether
passed in parliament or otherwise, for should any such exist contrary hereto, I hereby repeal them
and declare them to be null and void in whatever may relate to the effect and validity of this Cedula,
although leaving them in full force and effect in regard to all other matters.

And by this my letter or its duly certified copy signed by a notary public I request my beloved son,
His Serene Highnes the Prince Don Fernando, and I order all the Infantes, Prelates, Dukes,
Marquises, Counts, Knights, Ricos Hombres, Priors of the orders, Comendadores, and Sub
Comendadores, Wardens of my Castles, my fortified houses and dwellings; the members of my
council, Presidents, Regents and Justices of my Royal Court of Justice, the Wardens and Sheriffs of
my House, Court and Chanceleries, all the Governors and Corregidores, Veinticuatros, Knights,
Squires, Officers and gentlemen, all the Majors, Naval Provosts and all of my Judges and Justiciars,
as well as all the other inhabitants of all my Cities, Towns and open places of these my Kingdoms
and Realms, and of the Indies and Islands of the Ocean Sea, not only those that exist at present, but
also those that may come into existence in the future (I order them I say) to observe and obey and to
enforce the observance and fulfillment of every thing that may be contained in this, my letter of
approval and confirmaion, in the exact terms in which it is set forth, and that upon no excuse or
cause whatsoever shall they oppose on their own part or allow others to oppose, any obstacles
whatever to the fulfillment of this my will; and let this my letter be registered in the "Contadurias
Generales de valores," Royal Exchequer and my Council of the Indies.

Dated in San Ildefonso, the 20th of August, 1795.

I, THE KING

At the beginning and on the left margin there is a note reading as follows:

Approving and confirming the mayorazgo founded by Don Antonio Tuason, late Lieutenant-

Colonel of the Royal Armies, and supernumerary Colonel of the Regiment of the Prince
Royal of the City of Manila, in the Philippine Islands, upon the terms and conditions therein
set forth.

Done in duplicate, countersigned by the Secretary, Don Antonio Ventura de Franco.

Neither the authenticity nor the due execution of the instrument above set forth has been disputed,
nor its solemn legalization and confirmation in strict accordance with the laws then in force.

The disagreement of the parties is as to whether the first-born possessor of the entail is or is not a
mere usufructuary and if the mayorazgo is or is not a trust (fideicomiso).

At first sight it might appear to be unnecessary to decide these questions, if plaintiffs' action is
based, as alleged, upon the right of their ancestors to a participation in the fifth of the revenue is a
fairly trust subject to article 4 of the Disentailing Law of October 11, 1820, such participation in the
revenue, by virtue of the provisions of that article, became converted into a participation in a fifth of
the properties of the mayorazgo. There would be no occasion for such condition and participation in
the property if the first-born possessor had, not only the usufruct, but also the naked ownership, nor
if the entail were not a trust.

Both parties agree, nevertheless, that the entail under consideration is a mayorazgo. Now what is
a mayorazgo? Let us take the definition given according to Gutierrez by Molina in his "Hispan
Primogeniis," accepted by the parties. It is as follows:

Majoratus est jus succedendi in bonis ea lege relictis ut in familia integra perpetuo
conserventur, proximoque cuique primogenito ordine succesivo deferantur. (Gutierrez
"Codigos," tomo 2, p. 207.)

(A mayorazgo is the right to succeed to the property left upon the condition that it be preserved
perpetually intact in the family and that it be transmitted in order of succession to each next first-
born.)
In the present foundation we find: Succession to the hereditary estate; the condition that the
properties be preserved perpetually intact in the family of the founder; the requirement that they shall
pass in the established order to each succeeding first-born.

Now let us see if the first-born possessor of the entail is or is not a mere usufructuary.

In the text of the instrument of foundation we see that the founder does not give to the first-born the
title of "owner" but only that of possessor, and that he applies this designation to him with frequent
insistence. In the seventeenth clause it is declared that it is the enjoyment and possession of
the mayorazgo (not the absolute ownership) to which the first-born is called. And when, in the
eighteenth clause he calls him "owner" (señor), the founder takes care to do so under express
limitation of the concept, for he says: "And with these clauses, conditions and charges I hereby
make, constitute and establish this mayorazgo, constituting its lawful possessor the owner (señor)
thereof upon the terms set forth . . . ." (Emphasis ours.)

With respect to the extent of the right of the first-born possessor of the mayorazgo upon the
properties thereof, this is what he said upon this subject in clauses 8 and 16, which we again
transcribe, as follows:

Id. It shall be his duty (that of the possessor of this mayorazgo) to preserve all the entailed
properties in good condition and to try to increase them as much as possible, and their
increase shall also be incorporated into the mayorazgo. . . . (Emphasis ours.)

It is my will that all the property hereby entailed and all that which may be added to it shall
not be sold or alienated, in whole or in part, or charged or encumbered or mortgaged with
censos, or any other kind of encumbrance or charge; and if the contrary is done it shall be
void and he who shall have done it or attempted to do it shall immediately lose
the possession of the mayorazgo, and it shall pass to the next in succession, who shall
make demand for the annulment of the alienation within thirty days; and if he shall fail to do
so, he shall also lose the mayorazgo, and it shall pass to the following possessor; and the
same rule shall apply as to all the possessors, and this clause shall be observed although
ignorance of it be alleged.

Consequently, the first-born, according to the terms of this foundation, has the "enjoyment and
possession" of the properties of the mayorazgo, but subject to the strict obligation of preserving them
intact, it being absolutely and severely forbidden to sell them, alienate them or encumber them in
any manner whatsover.

If his rights are limited in this manner it is our understanding that the first-born who enters into
possession of this mayorazgo does not acquire the dominium directum over the entailed properties,
but only their enjoyment, or, in other words, the dominium utile, and this is precisely what constitutes
a usufruct, which, as we know, is the right to enjoy the property of another with the obligation of
preserving its form and substance. (Jus alienis rebus untendi fruendi salva rerum substantia.)

But, if the first-born possessor is not vested with the ownership of the properties, whom is it vested?

It is vested perpetually in the descendants of the founder, in all their indefinite succession. This is
what is implied in Molina's definition which we have transcribed: ". . . Ut in familia integra perpetuo
conserventur . . . ."
Therefore it is that Alcubilla (Diccionario de la Administracion Espanola, vol. 7, p. 1000), in speaking
of the mayorazgo, begins by saying: "The mayorazgo was an entail of properties subject to the
ownership of a family with the prohibition of alienation." (Emphasis ours.)

Escriche, in his "Diccionario Razonado de Legislacion y Jurisprudencia," (vol. IV, p. 67) gives a
similar definition, which is as follows:

Mayorazgo. The right to succeed to entailed properties, that is, to properties subject
to perpetual ownership by some family, with the prohibition of alienation. (Emphasis ours.)

It is to be noted that both Alcubilla and Escriche, use the expression ownership of the family," and
not ownership of the first-born possessor."

That the possessor of mayorazgos were nothing more than usufructuaries, has been so decided by
the Supreme Court of Spain in its judgment of June 5, 1872, of which the part pertinent to this case
is as follows:

Up to the time of the publication of the Disentailing Law in 1836 [in the Philippines read
March 1, 1864] the possessors of entails and mayorazgos HAD ONLY THE RIGHT OF
USUFRUCT of the inalienable properties which constitute them, with the obligation of
performing the obligations imposed by the founder, for which reason they could only
renounce or transfer that same right and the powers granted them by the foundation.
(Capitals and brackets ours).

Let us pass to the second point. Is this mayorazgo a trust or not?

Counsel for defendants allege that the mayorazgo is an institution distinct from the trust
(fideicomiso), and that the entail here in question is a mayorazgo and not a trust.

It is true that the mayorazgo must be distinguished from the trust. But it is also true that the
differences between one and the other do not make the mayorazgo incompatible with the trust.
Gutierrez, in his work entitled, "Codigos o Estudios Fundamentales sobre el Derecho Civil Espanol,"
second volume, pages 191 and 192, second edition, says:

Mayorazgos have also been compared to trusts (fideicomisos), but we cannot believe that the
intention, in doing so, was to make no distinction between them. To say that they were introduced in
imitation of the fideicomisos and of the feuds not equivalent to the affirmation that they are either
one or the other. If it is necessary to seek out the antecedents of this institution, one must go to the
source of all of them—the Roman Law and the Germanic Law. The former gives us as our sole
model the fideicomiso; but knowing what this was, and the causes and effects of this testamentary
disposition, it would have been an error, impossible to our authors, to regard the fideicomiso as the
source from which the mayorazgos were derived. Let us see how Paraladorio explains the matter in
his Diferencias: 'The nature of the mayorazgo has such affinity with the fideicomiso that to some
extent Palacios, Rubios, Covarubias, Menchaca, etc., are not without justification for their
statement: Nihil aliud esse majoratum quam fideicommissum quoddam in perpetuum relictum cum
primogeniti praerogativa. Nevertheless they are to be distinguished, first because
the fideicomiso can be created by will or codicil only whereas the mayorazgo can be created by
contract; the fideicomisario (beneficiary) cannot take possession of the property by his own authority;
the successor to a mayorazgo, as soon as the condition of the instrument of foundation is complied
with, acquires the possession thereof. The mayorazgo is an institution sui generis, and it cannot be
said, simply because it possesses similarity to the fideicomiso, and at times may be governed by the
same rules of law, that they are one and the same thing.'(Dif. 18.)
As may be seen, these differences refer to the origin of the institution, to the form of its constitution
and to its enjoyment on the part of the beneficiary. These are details which do not divest
the mayorazgo of its nature as a fideicomiso, the essence of which, in concise terms, is nothing
more than the confiding of a thing to one in order that he may preserve it and deliver it to another
(fidei tuae committo). This in substance is what the mayorazgo is — the confiding of the entailed
properties to the first-born in order that he may preserve them for the family and deliver them to his
successor.

To both institutions is applicable this definition of the fidiecomiso, taken from Alcubilla (Diccionario
de la Administracion Española vol. 5, p. 635);

A form or manner of testamentary substitution by which the testator or trustor charges the

heir (trustee) to deliver a certain aliquot portion of the estate, or all thereof, to a third person
who receives the name of beneficiary (fideicomisario)

As every mayorazgo contains the essential elements of a fideicomiso, many writers, among who are
those whom we cite in this decision, when they speak of the fideicomiso in the sustitucion
fideicomisaria, cannot avoid directing in the sustitucion fideicomisaria, their attention to
the mayorazgo, and they compare the two institutions, seeking in them, not the essential common
elements which they recognize in them, and which have led them, by association of ideas, to think of
the one when studying the other, but rather reasons of distinction and difference because of their
essential generic similarity.

There were and there are still in the Spanish laws various forms of trust derived from the customary
law. Among such trusts, one successive and perpetual one arose, vested with the prerogative of
primogeniture, and involving the principle of masculinity. This is the mayorazgo.

Thus it is that Scaevola, in his work on the Civil Code, volume 13, pages 501 and 502 says:

But up to this point we have been speaking of temporary trusts. Now comes the turn of the
perpetual trusts, the most typical of which is the institution know by the name of mayorazgo.
(Emphasis ours.)

And on page 505 of the same volume, speaking of the tendency to perpetuate family Lustre and
traditions, the same writer makes the following statement:

From the nobles the tendency passed to the commons and the mayorazgo became general.
What did the mayorazgo come to be? The Roman SUSTITUCION FIDEICOMISARIA as to
its form; as to its substance the continuation of this substitution with the right of primigeniture
and the principle of masculinity. (Emphasis ours.)

In the "Enciclopedia Juridica Española," vol. 22 page 105, the distinguish collaborator, Don Jose
Buxade, in explaining the mayorazgo, makes the following observation:

This succession, predetermined by the founder or by the law, has some of the features of
the sustitucion fideicomisaria, some of the Germanic principle of masculinity and some of
feudal primogeniture, as has been stated by Señor Azcarate. (Emphasis ours.)

As we have observed in one of the citations which we have inserted, the writer Palacios Rubis, and
other mentioned by Parlodorio, did not hesitate to say, as he observes: "Nihil aliud esse majoratum
quam fideicomissum quoddam in perpetuum relictum cum, primogeniti praerogativa." (That
the mayorazgo is nothing but a certain trust left in perpetuity and with the preogative of
primogeniture.)

And this, in our opinion, is correct. The fideicomiso is the genus and the mayorazgo the species.
Not every fideicomiso is a mayorazgo, but every mayorazgo is a fideicomiso.

Analyzing the entail under consideration, we may say that it is a mayorazgo (from major natu, the
first-born) in that it is a right granted to each first-born to succeed to the entailed properties in order
to preserve them intact and perpetually in the family, and deliver them in the order of succession to
the following first-born. And it is a fideicomiso, in that it is a charge of confidence impose upon the
first-born usufructuary possessor to preserve the entailed properties in order to deliver in due time
the possession and enjoyment thereof to the succeeding first-born.

Leaving out of consideration for a moment its characteristic of perpetuity, which as we have seen,
does not alter its nature, this successive appointment, made in the foundation in the case at bar, to
the enjoyment of the dominium futile amounts to a call to the usufruct with which the second part of
article 787 of the Civil Code deals. We refer to it in order that a better understanding may be had of
the following language of Manresa in one of his commentaries upon that article, which is as follows:

But notwithstanding such authoritative opinions to the contrary, it is our understanding that if
the usufruct, like other rights, may be the subject matter of a substitution because the
testator is not bound to dispose jointly of the dominium directum and the dominium utile, or in
favor of a single person, it is unquestionable that when he called successively several
instituted heirs to the enjoyment of the dominium utile, the one first called has the character
of the trustee who is to deliver that right to the beneficiary when the time specified in the will
arrives and that therefore it constitutes a true fideicomiso. (Manresa, Spanish Civil Code, vol.
6, p. 172, edition of 1921.) (Empahsis ours.)

But counsel for defendants insist that this mayorazgo is not a fideicomiso.

Not let us examine the grounds upon which this conclusion rests.

They refer to the fact that both in the deed of foundation and in the Royal Cedula by which it was
conferred as well as in the complainant in this action, in the stipulation of facts and in plaintiffs brief,
it is not called a fideicomiso but a mayorazgo. But mayorazgo is the specific name, and if, as we
have said, the mayorazgo belongs to the genus of fideicomisos, because it is one of them, the mere
fact that the name fideicomiso was not given it is not equivalent to a denial that it is such.

Defendants' counsel point out several differences between the fideicomiso and the mayorazgo. We

have already stated that such differences do not make them mutually incompatible, and do not
deprive the mayorazgo of the trust characteristic inherent in its nature.

The fact that the creation of fideicomiso is not subject to the formalities required for mayorazgo; that
the latter might be founded by contract and are irrevocable in certain cases, while fideicomiso must
always be establishes by will and are revocable; that in mayorazgo the trustee is always a relative of
the founder, whereas in the ordinary fideicomiso it is not necessary that he should be; that in
the mayorazgo the one who is called to the entail, as soon as his rights vests, may take possession
of the properties without the necessity of a delivery, which is not the case with respect to
the fideicomiso—all these are differences in matters of detail which do not change the legal
condition of the property in eight case inasmuch as their owner confides them to a person for
preservation and delivery to another, which is the characteristic and fundamental aspect of
the mayorazgo which we must keep in much in order to determine whether the plaintiffs are or are
not entitled to the relief sought by them in the complaint in this case.

The fact that in the mayorazgo there is a perpetual entail of properties while in the

ordinary fideicomiso it is not temporary, does not support the theory of the defendant. We have
already observed that Scauvola refers to the mayorazgo does not deprive it of its nature as
a fideicomiso.

The fact that in the mayorazgos the possessor enjoys the properties, whereas under
ordinary fideicomiso he does not, is no reason for concluding that the mayorazgo is not
a fideicomiso. This difference as to the rights of the trustee in either case does not destroy the
nature of the charge of preserving the properties received in order to deliver them to the beneficiary.
We have already noted that in the mayorazgo the possessor of the entail is a mere usufructuary and
this only during the period of his tenancy.

It is not correct to state, as is asserted in the reply memorandum of the appellees, pages 2 and 3,
that the first-born or successive possessor of the mayorazgo are at one and the same
time trustees and beneficiaries. They are not both at the same time or with respect to the same
thing. While he possesses the mayorazgo, the first-born is a trustee, but he is not a beneficiary. If he
enjoys the properties he does not do so as either trustee or beneficiary but as a usufructuary heir.
During his possession of the entail he is the trustee and the owner called to succeed him in the
enjoyment and possession of the entail is the beneficiary or cestui que trust until his tenant begins,
and when it dies begin he ceases to be the cestui que trust and becomes the trustee. Consequently,
in the mayorazgo at any given moment the same distinction exists between the given functions and
rights of the interested parties as that which there is in the fideicomiso.

It is asserted in said memorandum and in the same place that in the mayorazgo the title to the
properties is vested in the first-born who possesses them, in view of his double character of trustee
and cestui que trust, while in the fideicomiso the title is not vested in the cestui que trust, but in the
trustee. This requires some explanation. The first-born possessor of the trust holds title to the
properties as trustee, not as cestui que trust; and enjoys the use of such properties as usufructuary,
not as cestui que trust; and this title under which he holds is not definitely vested in him. It is a trust
title, that is to say, essentially and inseparably conditioned upon the obligation of preserving the
property for the beneficiary. The same thing is true with respect to the title which the trustee holds to
the property in his care. The fact is cited that the Disentailing law of October 11, 1820, in
enumerating the entails which it abolishes, uses the terms, "mayorazgos," "fideicomiso"
"patronatos," etc., which, according to counsel for defendants, implies that the mayorazgo and
the fideicomiso are entails of different kinds. And so, truly, they are. The mayorazgo and
the fideicomiso are different entails, but the mayorazgo does not on that account cease to be a
species of fideicomiso. The purpose of the law was to abolish civil entails, and therefore, as
Gutierrez says in the passage cited in defendants' brief, "it was necessary to enumerate these acts
which differ somewhat from one another, although in the principal idea all are alike because they are
special forms of entail." (Vol. 2, "Codigos," p. 227.) (Emphasis ours.)

It is said in the brief of the defendants that it may be admitted that the mayorazgo is a
sustitucion fideicomisaria but not that the mayorazgo is a fideicomiso.

It cannot, however, be denied that the sustitucion fideicomasaria is nothing more than the
combination of the substitution and the fideicomiso. This is so stated by the distinguished author
Sanchez Roman in the passage which defendants cite in their brief (pages 35-40), and which is as
follows:
 It was later, when from the combination of these two institutions — the substitution and
the fideicomiso arose as a form completely distinct from the other classes of substitutions
known to the law — the vulgar, the pupilar, and the ejemplar — as a means of consolidating
the fortunes of families by preventing their dissolution and ruin. From the fideicomiso was
taken the designation of various persons through whose hands the estate was to pass
applying the doctrine of the substitution in the one called in the first place was entitled to the
use and enjoyment of the hereditary properties with the obligation of preserving them in
order to transmit them at this death to the one called in the second place as the substitute of
the first. The second tenant occupied the same position as the first tenant with respect to the
person designated in the third place, and so on successively. The in alienability of the
hereditary properties and a pre-established order of succession, which were the logical
consequence and development of those principles, constituted the elements of the entail and
it was sufficient to add to them, in the most advanced period of their history, the Germanic
principle of masculinity and the feudal principle of primogeniture, in order to establish
the mayorazgos — true outgrowths of the sustitucion fideicomisaria. (Vol. 6 [1st vol.], pp.
689, 690.) (Italics ours.)

The quoted paragraph contains a statement made by other writers, which is that the mayorazgo is
an outgrowth of the sustitucion fideicomisaria. If the latter, according to the cited passage, is in turn a
combination of the sustitucion and of the fideicomiso, it follows that there is a fideicomiso in
the sustitucion fideicomisaria, just as there is in the outgrowth of the latter, which is the mayorazgo,
unless the fideicomiso disappeared when it was combined with the sustitucion and converted into
the sustitucion fideicomisaria, and also disappeared when the mayorazgo was developed from the
latter institution. But such is not the case, and we have already seen that the mayorazgo is in itself
a fideicomiso, that it is one of its species.

We are unable to find any sufficient reason for the abandonment of the conclusion that
the mayorazgo in question is in its essence a fideicomiso.

Now, within this foundation a special trust was established, consisting of the charge laid upon the
first-born possessor to set apart the fifth part of the net revenue of the properties each year, and to
distribute it among the eight younger children of the founder and other specified relatives.

This special trust is not an essential part of the mayorazgo — that is to say, the mayorazgo could
have existed just as well without it. It constitutes one of the provisions, one of the conditions imposed
upon the first-born possessor of a kind which is frequent in such cases and not prohibited by the law.
Gutierrez in the cited volume of his work, page 203, says:

The mayorazgo permits fair conditions; it would be difficult to determine, among the vast

number which have been invested by the capricious will of the founders, which are those
which merit this consideration and what are their effects.

Its legality and fairness cannot be doubted, inasmuch as this mayorazgo, including the
provision under consideration with respect to the fifth of the revenue, was solemnly approved
and confirmed by the King of Spain, who, in his Cedula issued for that purpose, inserted
together with the foundation instrument at the beginning of this decision, says in part:

* * * I do approve the establishment of the mayorazgo founded by your above-mentioned

father, Don Antonio Tuason, and I hereby declare it to be in effect from this moment
henceforth forever, and I do ratify and confirm henceforth the validity of the same in the
terms in which it was established with all the clauses, conditions, penalties and
restitutions provided for in the body of the said document . . . . (Emphasis ours.)
This special charge upon the fifth of the revenue constitutes the family trust to which Scaevola refers
in his cited work on the Civil Code, volume 13, pages 697, 698, wherein he says:

Family trusts. — The Act of 1820 distinguishes between mayorazgos and fideicomisos. In

the former there is a successive succession of certain persons, a transmission from one to
another; in the fideicomiso on the contrary there is only a corpus of properties, the revenues
from which are distributed annually, or at longer or shorter periods among groups of
persons. When this group is composed of relatives of the founder, the trust is called a family
trust. (Emphasis ours.)

It is true that the special charge which constitutes the family trust established in the entail now under
consideration, is different from the mayorazgo upon which it is based, and as Scaevola well says,
the Act of 1820 distinguishes one from the other by different precepts, applicable to each, as we
shall see hereafter. And they are different from one another even though in the essence both are
trusts. Applying to our case what is said by Scaevola in the citation we have just transcribed, it
follows that in the mayorazgo, properly so called, the usufructuaries, who are the first-born
possessors, succeed on another in the usufruct of the properties, and transmit them from one to the
other; that is to say, as Scaevola says, "there is a successive succession of certain persons, a
transmission from one to another;" and in the family trust there is the corpus of the property of the
ential, a fifth of the revenue of which is distributed annually among the relatives of the founder, which
is what Scaevola says in the cited passage. But in the passage he says: "In the trust
(fideicomiso) on the contrary there is only a corpus of properties," etc. He says "there is only" in
contradistinction to what there is in the mayorazgo, namely a succession of usufructuaries and the
transmission of the usufruct from one to the other; while in the family trust there is no such
succession of usufructuaries or such transmission of the usufruct, but only a corpus of properties, a
fifth of the revenue of which is distributed each year among the relatives of the founder.

It is true that in this family trust there is a succession of beneficiaries who are the first-born sons; but
this succession is inevitable in every perpetual family trust, because man's life is limited. And
certainly the existence of such an indefinite succession is to be anticipated in a perpetual family
trust, such as the one under consideration, as otherwise it would not have been one of the entails
abolished by the Act of October 11, 1820.

But counsel for defendants observes that the mayorazgo having been established upon all the
entailed properties, there cannot be a distinct and separate trust with respect to a part of the
revenue. He adds that there would have been such a separate trust if the founder had designated
certain properties which would constitute a fourth part (he probably meant to say four-fifths) and
the mayorazgo had been established upon this and that the family trust had been established upon
the remaining fifth.

We find no force in this suggestion. If the founder had designated certain properties constituting a
fifth of the entailed estate, in order that the revenue of that fifth might be distributed among his eight
younger children and other relatives, he could not have been sure whether the revenues of the fifth
of the entailed properties would constitute a fifth of the revenue of all such properties. His clearly
expressed intention, as shown by the deed of foundation, is that there shall be distributed not
the revenue from one-fifth of the properties, but a fifth of the revenue of all the properties
mentioned.

It is our opinion that such a charge with respect to the distribution of the fifth of the revenue
constitutes a family trust such as that described by the learned writer Scaevola in the citation above
set forth.
Therefore, with respect to the question raised by the parties concerning the nature of the foundation
which is the subject-matter of this action, our conclusions are as follows:

The first-born possessor of this mayorazgo is a mere usufructuary of the entailed properties.

This mayorazgo is, in its essence, a trust.

Annexed to this trust there is a special institution which constitutes a family trust.

With respect to the parties interested in these institutions so constituted by the present foundation,
we hold that in the mayorazgo as such, from the point of view of its nature as a trust, the trustor is
the founder; the trustee is successively each first-born possessor of the entail, from the time he
possesses and while he possesses it; the beneficiary or cestui que trust, in the first-born successor
called to possess the entail, and prior to the commencement of his possession; for as soon as his
possession commences, he becomes the trustee and the following first-born becomes the
beneficiary.

In the family trust instituted within this mayorazgo, and upon the fifth of the revenue, the trustor is the
founder himself; the trustee is also successively each first-born possessor of the entail from the time
he possesses it and while he possesses it; and the beneficiaries, or cestuis que trustent, are the
eight younger children of the founder and other relatives designated in the deed of foundation.

We deem it to be advisable to state, for the purpose of avoiding confusion, that we have adopted
here the nomenclature of the Civil Code in force (arts. 783, 784) in which the "fideicomisario" is the
beneficiary (cestui que trust), as distinguished from the meaning with which this word
"fideicomisario" has been used in the Spanish translation of sections 582-593, and 778 of the Code
of Civil Procedure, in which the idea is conveyed that the "fideicomisario" is the person charged with
the trust — that is, the "trustee" whom we designate as the "fiduciario."

DISENTAILING LAW; CONDUCT OF THE PARTIES; ITS EFFECTS

We have stated that on October 11, 1820, the Civil Disentailing Law was published in Spain, and
that this Act was extended to the Philippines of the 1st of March, 1864, by Royal Decree dated
October 31, 1863.

Articles 1, 2, 3, 4, 7 and 10 of the Statute of October 11, 1820, which contain the precepts pertinent
to the matters here in controversy, read as follows:

ARTICLE 1. All mayorazgos, fideicomisos, patronatos, and every other species of entail of

property, real personal, mixed or semoviente, censos, juros or of any other nature, are
hereby abolished, and the properties entailed are henceforth restored to the class of
absolutely free properties.

ART. 2. The present possessors of the entails abolished by the preceding article may at
once freely dispose of one-half of the properties of which they are composed; and after their
death the other half shall pass to the persons who would have been entitled to succeed
immediately to the mayorazgo if it had subsisted, so that he may also freely dispose of it as
the owner. This one-half reserved to the immediate successor shall never be liable for debts
contracted or which may be contracted by the present possessor.
ART. 3. For the purpose of carrying into effect the provisions of the preceding article,
whenever the present possessor may desire to alienate all or part of his one-half of the
properties heretofore entailed, a formal appraisal and division of all of them shall be made
with strict equality and with the intervention of the immediate successor; and if the latter
should be unknown, or should be subject to the patria potestas of the present possessor, the
Syndic Procurator of the town where the possessor resides shall intervene in his name,
without requiring for this any fees or emoluments whatever. If these requisites are not
complied with, the contract of alienation made shall be void.

ART. 4. As to family trust, the revenues of which are distributed among the relatives of the
founder, although they be of different lines, the appraisal and distribution of the properties of
the trust shall be made at once among the present recipients of the revenues in proportion to
that which they are receiving, and with the intervention of all of them; and each, as to the
part of the properties which is allotted to him, may freely dispose of one-half, reserving the
other half to the immediate successor in order that he may do likewise, in strict accordance
with the provisions of article 3.

ART. 5. With respect to elective mayorazgos, trusts or patronatos, when the election is

absolutely free, the present possessors may dispose as owners of all the properties; but if
the election must necessarily fall upon a member of some particular family, or community,
the possessors shall dispose of only one-half and shall reserve the other one-half to the end
that the successor who may be elected may do the same; the appraisal and division
prescribed by article 3 shall be made with the intervention of the Syndic Procurator.

xxx     xxx     xxx

ART. 7. The temporary, as well as the perpetual, charges to which all the properties of the
entail are subject in general, without special mortgage, shall be allotted with proportionate
equality to the properties distributed and partitioned, as herein provided, unless the
interested parties by common agreement, shall prefer some other method.

xxx     xxx     xxx

ART. 10. Be it likewise understood that he foregoing provisions shall be without prejudice to
the allowances for support (alimentos) or annuities (pensiones) which the present
possessors are required to pay to their mothers, widows, brothers, the immediate successor,
or other persons, in accordance with the foundations or private agreements, or judicial
decision. The properties heretofore entailed, although they may pass as free to other
owners, shall remain subject to the payment of such allowances for support (alimentos) or
annuities (pensiones) during the lifetime of those who are now receiving them, or while they
retain the right to receive them, unless the recipients of such allowances for support are
immediate successors, in which case they shall cease to enjoy them as soon as the present
possessors die. Thereafter the obligations now existing to pay such annuities (pensiones)
and allowances for support (alimentos) shall cease, but it is declared that if the present
possessors do not invest in such allowances for support (alimentos) and annuities
(pensiones) during the lifetime of those who are now receiving them, or while they retain the
right to receive them, unless the recipients of such allowances for support are immediate
successors, in which case they shall cease to enjoy them as soon as the present possessors
die. Thereafter the obligations now existing to pay such annuities (pensiones) and
allowances for support (alimentos) shall cease, but it is declared that if the present
possessors do not invest in such allowances for support (alimentos) and annuities
(pensiones), a net sixth part of the revenues of the mayorazgo, they shall be obliged to
 contribute up to this extent for the purpose of endowing their sisters and aiding their brothers
in proportion to their number and needs; and a like obligation shall rest upon the immediate
successors in respect to the one-half of the properties reserved to them.

xxx     xxx     xxx

ART. 14. No one hereafter, even though it be by way of betterment or upon any other title or
pretext, shall found any mayorazgo, fideicomiso, patronato, capellania, obra pia or any entail
whatsoever upon any kind of properties or rights, nor prohibit, directly or indirectly, their
alienation. Neither shall any one entail bank stock or other foreign funds. (Vol. 6,
"Legislacion Ultramarina," by Rodriguez San Pedro, page 72.)

Under the provisions of article 2 above set forth the possessors of mayorazgos from the time the Act
took effect were authorized to dispose freely of one-half of the entailed properties, the other one-half
being reserved in absolute ownership to the successor to the entail.

And in accordance with the provisions of article 4 of the same statute, the properties of the family
trust were required to be distributed among the recipients of revenues in proportion to their
respective participations.

Applying these articles to the foundation which is the object of the present case, and considering as
we do, that the charge relating to the distribution of one-fifth of the revenue constitutes a family trust,
it follows that for the purpose of carrying out the provisions contained in the entail under
consideration, without a breach of any of its conditions, it must be kept in mind that the participation
in the fifth of the revenues, by virtue of article 4 above-mentioned, and proportionately among the
recipients, became converted into a participation in the ownership of one-fifth of the properties; and
inasmuch as this fifth must be taken from the properties of the mayorazgo, it is evident that the
provisions contained in article 2 of the law with respect to the power of the first-born possessor to
freely dispose of one-half and to reserve the other one-half to his successor, must become operative
in our case, not upon all the properties of the entail, because one-fifth is assigned by article 4 above-
mentioned to the recipients of the fifth of the revenue, and their successors, but upon the remainder,
namely the four-fifths part of said properties.

Counsel for defendants, insisting in their opinion that this charge concerning the distribution of the
fifth of the revenues among the relatives of the founder is not a family trust, denies the applicability
of article 4 of the Disentailing Law, and affirms that such distribution of the fifth of the revenues
relates to the charges, allowances for support (alimentos) and annuities (pensiones) to which articles
7 and 10 of that statute apply.

Having arrived at the conclusion that this distribution of the fifth of the revenue is a family trust, it
appears to us that the application of article 4 of the Disentailing Law is inevitable as this article
expressly and unequivocally refers to "family trusts, the revenues of which are distributed among the
relatives of the founder."

With respect to the charges to which article 7 refers, counsel for defendants insist that these are
included in the pensions mentioned in article 10 and, for the purpose of supporting this assertion,
cite Gutierrez' Commentary upon article 7. To this counsel for plaintiff reply with an observation
which, in our judgment, successfully refutes defendants' proposition. This is what the plaintiffs say in
their additional brief, pages 5 and 6:

In his commentary on article 7 Gutierrez says, as stated in the brief of our opponents, that
"this provision was lacking in the draft, for article 5, with which it is most naturally connected,
 speaks of allowances for support and pensiones alimenticias, which, in the existing law, are
covered by a special article." From this citation we draw the conclusion that article 7 did not
exist in the original draft of the law; but on the other hand, the provisions of article 10 did
exist in the original draft, and it became necessary to increase it, in the bill article 10 and this
does not include what is included in article 7.

This fifth of the revenue, the distribution of which is required with respect to the family trust, cannot
be the same as the allowances for support or pensiones alimenticias, to which article 10 relates, for,
as observed by counsel for plaintiffs, the younger children, among whom in the first place this fifth of
the revenue was to be distributed, had already received their respective legitimes before
the mayorazgo was founded. At the beginning of the deed of foundation and in its first clause we
find that the founder says, among other things:

* * * and desiring, on the other hand, to secure in part the permanence of my estate, without
diminishing the legitimates of my other children . . . .

xxx     xxx     xxx

Having taken stock and inventory of all the property of which I am now possessed, in cash,
real estate, jewelry and other things, I found myself to be the possessor of an estate of the
value of one hundred and thirty-five thousand pesos, which after having deducted the third
and the fifth, left me a remainder of seventy-two thousand pesos which I divided among my
eight children, there corresponding to each of them the sum of nine thousand pesos which
sum was actually delivered to each and very one of them, as is shown by documents which I
have in my possession; and the third and the remainder of the fifth I hereby devote to the
aforesaid entail. . . . (Parenthesis and Emphasis ours.)

At all events article 10 refers to allowances for support or pensions in general; and even assuming
for the moment that the fifth of the revenues to be distributed among the younger children of the
founder and his other relatives should also be considered as an allowance for support or a pension,
this article would not be applicable because there is a special provision in article 4 which relates
specifically to family trust, the revenues of which are distributed among the relatives of the founder.
The legal maxim is: specialia generalibus derogant.

The same thing may be said with respect to article 7 which refers to "the temporary, as well as the
perpetual, charges to which all the properties of the entail are subject in general." Considering this
distribution of the fifth of the revenue as a charge in the broadest meaning of this word, we should
not apply article 7, which deals with charges in general, because there is another provision in article
4 which relates specifically to the distribution of revenues among the relatives of the founder.

Now, in accordance with the allegations contained in paragraph 5 of the first special defense (bill of
exceptions, p. 45), it was Don Jose Severo Tuason who possessed the mayorazgo on the 1st day of
March, 1864, on which date the Disentailing Law, to which reference has been made, became
operative in the Philippine Islands.

By virtue of the provisions of article 2 of that law, Don Jose Severo Tuason, the then possessor of
the entail, might on that date have freely disposed of one-half of the four-fifths of the properties of
the mayorazgo.

An in accordance with the provisions of article 4, he should have made an appraisal and distribution
of the fifth of the properties among the recipients of the revenues in proportion to their respective
participations, and each might have freely disposed of one-half of his participation, reserving the
other one-half for his immediate successor.

Nothing of this kind was done, however. Don Jose Severo Tuason continued to regard
the mayorazgo as subsisting and the properties as entailed. Thus it was that in his will, executed
February 1, 1874, he says, among other things:

Item. I declare that when I married my said wife my said wife my estate consisted of the sum
of $144,974.28, deducting the value of the entail I possess. (Clause 3, folio 2, Exhibit 1.)

Item. I declare that among my properties is included the entail which I have been enjoying
and which I inherited from my father, whom I trust is in glory on high, and which will pass in
the same order of its institution to my first born son, Don Jose Victoriano, subject to the
provisions of law now in force in the matter. (Clause 6, ditto, folio 3.) (Emphasis ours.)

This testator, as we have stated in the beginning, died on February 3, 1874.

His heirs and successors continued to respect the mayorazgo, as may be seen in the deed of
partition in the proceedings connected with the inventory, liquidation accounts and distribution of the
estate (Exhibit 3), judicially approved January 12, 1876, wherein it is said:

The $48,949.11 which is the value of the entailed properties which are to pass intact to the
immediate successor of the mayorazgo. (Folio 2, Exhibit 5.)

The first-born successor, Don Jose Victoriano Tuason, as stated above, died January 23, 1878, at
the age of 13 years. (Paragraph 6, first special defense.)

More than eighteen years afterward, on the 7th of August, 1896, the record of the partition above-
mentioned was registered.

It is also a proven fact, as stated at the beginning, that in the books of the defendants corresponding
to the time which has transpired since the year 1904, and up to the year 1922, entries appear
relating to expenses and receipts of the mayorazgo, participations in the fifth of the products,
purchases of rights to said fifth of the products, and fees for preparing deeds of assignment of the
said fifth of the products. That is to say, the parties interested in this foundation kept it in force in its
entirely from March 1, 1864, on which date the Disentailing Law of October 11, 1820, came into
effect in these Islands at least up to the end of the year 1922, one year, seven months and some
days before the commencement of the present action.

We consider it opportune to cite at this point an opinion of the Supreme Court of Spain concerning
the status of properties which formerly belonged to a mayorazgo but which are allowed to remain
undivided, in which it is said:

2. That the properties which belonged to a mayorazgo preserve their character as entailed

for the purposes of the partition, up to the time of delivery to the heir of the possessor and to
the immediate successor of the half which is due them respectively. (Judgment of the
Supreme Court of Spain, Oct. 29, 1857.)

Although this doctrine does not refer expressly to family trusts, we regard it as applicable to the
family trust annexed to the mayorazgo under consideration, as the same reason exists therefor. Ubi
eadem ratio ibi eadem juris dispositio.
Counsel for defendants allege that the properties of this foundation passed into the hands of the
heir, Jose Victoriano Tuason, completely free, one-half by testamentary inheritance and the other
half by virtue of article 2 of the Disentailing Law. This, however, was not the will of the testator, Don
Jose Severo Tuason, nor the will of his successors, all of whom respected the mayorazgo and held
it as subsisting de facto. In no event could the properties pass into the hands of the heir Jose
Victoriano Tuason completely free. It was necessary to preserve them intact until they were
appraised and the fifth part thereof had been segregated for distribution among the recipients of the
revenues and their immediate successors, in accordance with the provisions of article 4 of the
statute.

It is a fact that the trust subsisted and still subsists. The successive possessors of the entail have
preserved and preserve the properties of the mayorazgo respecting and distributing the fifth of the
revenue among the descendants of the younger children of the founder.

But the entail could not and cannot continue perpetually. Its abolition was decreed by the statute as
of the 1st day of March, 1864. Its perpetual survival would be contrary, not only to the Disentailing
Law of October 11, 1820, but also the Civil Code in force which, under articles 781 and 785,
paragraph 2, positively prohibits perpetual entails.

If up to the present time the entail in question subsists, this has been because the interested parties
have been maintaining it without proceeding to the appraisal and distribution of the entailed
properties, as required by articles 2 and 4 of the Disentailing Law; and in accordance with the
doctrine announced by the Supreme Court of Spain on October 29, 1857, above cited, the properties
of this mayorazgo, preserved de facto by the interested parties as entailed, legally retain this
character for the purposes of their partition, which must be effected in accordance with the statute of
October 11, 1920.

From what has been said it follows that since March 1, 1864, the date upon which the said
Disentailing Law came into force in the Philippine Islands, the successive possessors of the
properties of this mayorazgo constituted themselves trustees, charged with the administration and
preservation of the said properties and the distribution of the fifth of the revenue among the
descendants of the younger children of the founder. Consequently, after the entail was abolished,
one-half of the four-fifths of the properties of the mayorazgo continued subject to the trust in favor of
its beneficiaries, the heirs of Jose Victoriano Tuason, who was the one called to succeed
immediately to the mayorazgo on the date of its disentailment (article 2, Statute), and the fifth of the
said properties in favor of the beneficiaries, the recipients of the fifth of the revenue in accordance
with the foundation.

Summing up the effects produced with respect to this mayorazgo by the Disentailing Law on the one
hand, and the conduct of the interested parties on the other, we may say first, that the trust of the
naked ownership instituted in favor of the descendants of the founder indefinitely was abolished, in
consequence of the disentailment; and second, that the trust of the usufruct of the properties
became converted into a trust of the properties themselves, the beneficiaries being the same, but as
owners; that is to say, the first-born successor as to one-half of four-fifths of the said properties, and
the descendants of the younger children of the founder with respect to the remaining fifth.

In this case we are only concerned with the fifth of the properties which plaintiffs claim as
descendants of four of the eight younger children of the founder.

Hereinafter we shall determine the persons entitled to participate in the fifth of the properties of this
foundation and to what extent.
 LEGAL OBSTACLES ALLEGED

In addition to the arguments mentioned heretofore, counsel for defendants interpose as obstacles to
the action of plaintiffs the registration of the title to the properties of the mayorazgo in favor of the
defendants, mentioned in paragraph 11 of the first special defense, under Act No. 496, and the
prescription of this action. The defendants, Doña Paz Tuason de Gonzalez, Doña Consuelo Tuason
de Quimson, Don Juan Tuason and Doña Albina Tuason interpose as a defense to this action the
contention that the plaintiffs filed no claim whatever in the proceedings had upon the testamentary
estate of Don Juan Jose Tuason de la Paz, the father of the said defendants, which testamentary
proceedings were finally disposed of and filed June 25, 1920.

If, as we have found and decided, the successive possessors of the properties of
this mayorazgo were and have been mere trustees of the said properties, holding them in trust for
the benefit of the beneficiaries, part of whom are the recipients of the fifth of the revenues, and their
descendants, the registration of the title to said properties under Act No. 496 in favor of the said
defendants must be deemed to have been effected for the benefit of the beneficiaries of said
properties, part of whom are the present plaintiffs. The doctrine established by this court in the case
of Severino vs. Severino (44 Phil., 343), is applicable to this feature of the case.

Although the plaintiffs endeavored to demonstrate that the said defendants registered the title by
fraud, it is our opinion that the alleged fraud has not been proven in this action. Nevertheless, the
existence of fraud is unnecessary to warrant the declaration that registration of the title under Act
No. 496 is not a legal obstacle to this action brought by plaintiffs, and the adjudication in favor of
those among them who are entitled thereto of the portion pertaining to them of the properties so
registered. It was said in the case of Gilbert vs. Hewetson (79 Minn., 326), cited with approval in the
case of Severino vs. Severino, supra:

'A receiver, trustee attorney, agent, or any other person occupying fiduciary

relations respecting property or persons, is utterly disabled from acquiring for his own benefit
the property committed to his custody for management. This rule is entirely independent of
the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse
will be heard from the trustee.' (Emphasis ours.)

With respect to the plea of prescription, counsel for defendants contend that inasmuch as plaintiffs,
prior to the filing of the present complaint, had made no effort to enforce their rights since the 1st day
of March, 1864, their action is barred. But from the records it appears that up to the year 1922 the
defendants have been recognizing in the entries in their books, and in deeds, such as Exhibits 6 and
7, signed by Don Augusto Tuason de la Paz, as grantee, the rights of the descendants of the
younger children of the founder to the fifth of the revenue, and therefore the trust which this charge
implies; furthermore, said defendants made payments on account of the fifth of the revenue. These
acts of recognition and payments, made during the said period of time, prevent the operation of
prescription. (Section 50, Code of Civil Procedure.)

Furthermore, this being a case which deals with a trust which subsisted from the time of its
foundation and by virtue thereof up to March 1, 1864, and thereafter down to the present time by the
express will of the present parties, the defense of prescription cannot be entertained. By virtue of the
said trust the possession of the said defendants could not be regarded as a basis for an acquisitive
prescription in their favor against the plaintiffs because such possession has not been nor is it under
claim of ownership, but a title held in the name and on behalf of the beneficiaries, some of whom are
the plaintiffs in general. For this reason the defense of prescription cannot be enforced between the
trustee and the beneficiaries while the trust relations continue, as was impliedly held in the case of
the Government of the Philippine Islands vs. Abadilla (46 Phil., 642).
It is alleged by counsel for the defendants that in accordance with the stipulation of facts none of the
plaintiffs, nor their predecessors, with the exception of those mentioned in paragraph 2 of the
counterclaim, received any pensions whatever as a charge against the revenues of the property of
the entail for the ten years prior to the commencement of this action, and that for this reason the
action has prescribed. We have already stated that with respect to trust, such as the one here in
question, the defense of prescription cannot be maintained. From the 1st of March, 1864, the right of
the recipients of the fifth of the revenue, and their descendants, was not and is not limited to the
receipt of the fifth of the revenue, but, as we have said, includes a participation in the ownership of
one-fifth of the properties of the mayorazgo, and this right, by reason of the subsisting trust, has not
prescribed and is imprescriptible.

It is finally contended by the defendant heirs of the late Don Jose Tuason y de la Paz that the
plaintiffs did not file any claim whatever in the proceedings had upon the testamentary estate of the
said deceased, which said proceedings have been now finally ended. As the properties here in
question constitute a trust estate such proceedings cannot affect them, at least as to a fifth part,
because such properties were not and could not be the property of the said testator, who therefore
could not legally transmit them to his heirs. If the latter have already entered upon the enjoyment of
their various respective portions and have acquired a possession adverse to the rights of the
plaintiffs, this adverse possession cannot have legally commenced before the 19th of July, 1919,
when the court approved the partition of the properties of the said testamentary estate (paragraph 4,
fourth special defense). And even with respect to prescription, the time which has transpired
between the 19th of July, 1919, and the 22d of August, 1923, when this action was commenced, is
merely a little over four years, an insufficient time for the acquisitive prescription of real property.

Consequently, the contention of the defendants in their special defenses are not sufficient to destroy
plaintiffs' action or to prevent the exercise thereof.

PERSONS ENTITLED TO THE REMEDY

The recipients of the fifth of the revenues are indicated in the sixth clause of the instrument of
foundation, the text of which we again transcribe.

It shall be his duty to set apart one-fifth of the net revenue derived from the entail each year,
and that one-fifth part shall be divided into eight parts, giving one to each of my eight
children, and in their absence, to my grandchildren, but upon the understanding that if one or
more of my children should die without succession, the part belonging to them shall be
distributed among my grandchildren and other descendants of mine according to their needs
and as prudence may dictate to him, so that, when the time arrives that none of my children
or grandchildren are alive, it shall then be always understood that said fifth part shall be
applied to all those of my descendants who are poor, the apportionment to be made by him
prudently according to their needs and therefore the possessor of the entail is hereby
charged to discharge this duty with conscientious scruple.

One of the issues between the parties is whether plaintiffs are or are not included in the word
"grandchildren" (nietos) employed in the clause which has just been transcribed.

The precedent of the word "grandchildren" (nietos) is the Latin word nepos, which is defined in the
Latin-Spanish Etymological Dictionary, by Raimundo de Miguel, as follows:

Nepos, otis . . . Cic. Nieto; . . . Nepos ex filia, Cic. nieto (son of the daughter), . . .
Nepotes (plural) Virgil, posterity, descendants.
As we have observed in this explanation, in order to give the word "nepos" the meaning of "the son
of the daughter," Cicero added to it the explanatory phrase "ex filia."

The technical meaning of the word in the Roman Law coincides with this literal acceptation, as may
be observed in Title 19, Book 2 of the Institutions of Justiniani (D. Justiniani Institutionum, by Gomez
de la Serna, vol. 1, p. 595, 6th edition), where it is said: "Sui anten et necessarii haeredes sunt,
veluti filius filiave, NEPOS NEPTISVE EX FILIO," etc.

Thus we see that in order to express the idea that the word "nieto" or "nieta ("nepos neptisve") refers
to a "son or a daughter of a son," it was necessary to add the explanatory phrase "ex filio" (of the
son). Consequently, without this explanatory phrase the meaning of the word "nepos" (grandchild)
would be, in the broad acceptation, that which was given it by Virgil, namely; posterity, descendants.

This broad legal acceptation was carried into the Spanish language when the words "nepos" and
"nepotis" were hispanicized by being transformed into the word "nieto." Therefore, Alcubilla, in
defining this word in his work, "Diccionario de la Legislacion Española," (vol. 8, p. 373) says:

Nieto (grandson). The son of the son. Used with respect to the grandfather. The term is also
used by extension to include the word descendant in a given line to the third, fourth and
successive generations.

It is true that in the clause of the instrument which we have been considering, the word
"descendants" is also employed. But this word, taking into consideration the provisions of the deed
of foundation must be understood as referring to the descendants of the first born son who was the
possessor of the mayorazgo.

As may be inferred from the provisions of this foundation, considered as a whole, the intention of the
founder was to give to his descendants the usufruct of the properties of the mayorazgo, four-fifths to
the first-born possessor and his successors, and one-fifth to the eight younger children and their
successors.

We can see no sufficient reason for restricting here the meaning of the word "nietos" (grandchildren)
to sons of sons alone. From the instrument of foundation as a whole it does not appear that such
was the intention of the founder. We can see no reason why he should have limited the enjoyment of
the fifth of the revenue to his eight children and to the children of the latter without extending it to
their subsequent descendants, when, in dealing with the four-fifths of the revenue he extended the
enjoyment thereof not only to his first-born son, or to his grandson, the son and successor of the
former, but also to subsequent first-born children.

We do not find in the instrument of foundation, or elsewhere, any reason whatever for believing that
in addition to the striking inequality with respect to the apportionment of the usufruct (four-fifths for
one child and one-fifth for eight children) it was the purpose of the founder to still further limit the
grant to his eight children to their children as to the receipt of the fifth of the revenue, when in the
instrument itself (seventeenth clause) the founder provided that in case the male line of the
descendants of his first-born son, Don Vicente Dolores Tuason, should become extinct,
the mayorazgo should then revert to the eldest son of his deceased son, Don Santos Tuason (who is
one of the younger children), and that following the same order the descendants of his other male
children (the other younger children) should take by priority of birth, and that in the event of the
absence of male heirs of the male line, the heirs of the female line should succeed, and failing these,
the possession of the mayorazgo by order of birth should devolve upon the descendants of his
children (his younger children).
If the descendants of the younger children, subsequent to the grandchildren of the founder, are
granted under certain circumstances the right to possess the mayorazgo itself, with all its properties,
we do not see how it can be said that these descendants, subsequent to grandchildren, the sons of
sons, were prohibited from receiving a fifth of the revenues of said properties.

It is our understanding that the intention of the founder was not to restrict the grant of the usufruct of
the fifth of the revenue by limiting it to a certain number of generations of the younger children, but
that he intended to extend it to all of the descendants of the latter. If this is so we should apply to the
case the rule of law of the Partidas (Rule 28, Title 34, 7th Partida), which says: "Privilegia recipiunt
largum interpretationem voluntati consonan concedentis." (Privileges are to be interpreted with
liberality in accordance with the will of him who grants them.)

Furthermore, that the present plaintiffs are entitled to receive the fifth of the revenues has been
repeatedly recognized by the defendants when they purchased, in 1905, from Don Jose Rocha y
Ruiz, and in 1916 from Doña Remedios Aragon y Rocha their respective participations in the fifth of
the revenue, according to paragraph 16 of the stipulation of facts, and when in the years 1917 to
1921 the said defendants delivered to Don Antonio Maria Barretto y Rocha, and to Don Santiago,
Don Julio and Don Andres Rocha y Ruiz Delgado, and their sister, Doña Rosario; and in the years
1917 to 1922 to Doña Isabel, Doña Enriqueta, Doña Carmen, Don Antonio, Don Alfredo and Don
Clodoaldo Rocha y Pereyna, Don Francisco Beech y Rojo, Don Ciriaco, Don Cayetano, Don Pablo
Leon and Don Tomas Tuason, and to the minors Doña Consuelo, Don Juan, Doña Rosario and
Doña Carmen Tuason, and to Doña Victoria Rufina, Doña Ana Consolacion Tuason and Doña
Asuncion Romana Tuason widow of Caballero, their respective participations in the fifth of the
revenue, as appears from the cross-complaint of the defendants, admitted in paragraph 8 of the
stipulation of facts.

And it appears that the said Don Jose Rocha y Ruiz was the son of Don Lorenzo Rocha, a
grandson, in turn, of Doña Gregoria N. Tuason (Exhibit 6 and paragraphs 2 and 16 of the stipulation
of facts); that Doña Remedios Aragon y Rocha is a relative of the founder (Exhibit 7, admitted in
paragraph 16 of the stipulation of facts); and that the said recipients of the fifth of the revenue from
the year 1917 to 1921 and from the year 1917 to 1922, are all descendants of grandchildren of the
younger children of the founder. (Paragraph 2 to 20, admitted in paragraph 1 of the stipulation of
facts.)

But even supposing for a moment that the word "nietos" (grandchildren) used in the instrument of
foundation now before us, did not include these plaintiffs, we must keep in mind that the Disentailing
Law of October 11, 1820, when it became operative in the Philippines, on March 1, 1864, created
and adjudicated in favor of the then recipients of the fifth of the revenue of this mayorazgo the right
of ownership of one-half of the fifth of these properties under article 4 of the said Disentailing Law,
and vested the ownership of the other one-half in their immediate successors.

Consequently, even supposing that the receipt of such fifth of the revenue were limited to
grandsons, the sons of sons of the younger children of the founder, and supposing also that the
recipients of the said fifth of the revenues on March 1, 1864, were grandchildren, sons of sons of the
younger children of the founder, that is, the last recipients according to the restrictive hypothesis,
notwithstanding all this, the law, when giving to these recipients of the revenue a fifth of the property,
reserved one-half therefor for the immediate successors, who are the subsequent descendants of
said grandchildren, sons of sons of the younger children of the founder.

And such recipients of the fifth, whoever they may have been on March 1, 1864 — for they have not
been identified in the record — did not dispose of the participations which the law granted them in
and to the fifth of the properties of this mayorazgo, and at their death their said participations in the
property passed by operation of law to their heirs. On the other hand, their immediate successors —
the record does not show who they were — in whose favor the ownership of the other one-half of the
fifth of the properties was reserved, did not dispose of their participation, which, when said
immediate successors died, also passed to their heirs by operation of law.

And according to the facts admitted in this proceeding, the plaintiffs must be and are such heirs, both
of the then recipients and of their immediate successors, for they are the descendants in direct line
of both of them because they are descendants of the younger children of the founder.

The plaintiffs consequently are entitled to participate in the fifth of the properties of this mayorazgo,
whether they be considered or not as included in the word "grandchildren" employed in the
instrument of foundation. In the first case, because they are descendants in direct line of four of the
younger children, and in the second place because they are the descendants of the recipients of the
fifth of the revenue on March 1, 1864, and the immediate successors of the latter.

Passing to the amount of the participation which is due them respectively, for the purpose of
determining this point we must have regard to the intention of the founder, as it is expressed in the
instrument creating the mayorazgo. It was his will that the fifth of the revenue should be divided into
eight parts, and that to each of this children, other than his first-born, one part should be given. Upon
the death of each of these children, by virtue of the provisions of the instrument of foundation, and
by operation of law, their right to an eight part of the revenue which they received during their lifetime
was transmitted to their heirs. That is, each of these eight portions of the fifth of the revenue was
transmitted from succession to succession, within the stirps of each of the eight younger children
who died leaving succession. The heirs of a younger son or daughter could not legally participate in
the eight part corresponding to another stirps, as long as heirs in the direct line of this stirps,
survived; that is to say, each of the eight portions of the fifth, except those corresponding to younger
children born without succession. The heirs of a younger child could not legally participate in the
eight corresponding to another strips, while heirs of this stirps in the direct line survive. That is to
say, each one of the said eighth parts of the fifth, except those corresponding to the younger
children dying without succession, was preserved and transmitted from generation to generation
within each respective stirps.

This plan of division of participation, based upon the will of the founder and the precepts of the law,
is that which in our judgment must continue to prevail, and is that which we shall follow in
determining the proportion which corresponds to the plaintiffs in the half of the fifth of the properties
of this foundation.

Of the eight younger children four died without succession and the other four are the descendants of
the plaintiffs in this cause. Hence, four of the eight portions, that is, one-half of the fifth of the
properties of this foundation, belong to the plaintiffs herein under the plan of division which has just
been indicated. The other four portions, that is, the remaining one-half of the said fifth, which would
have corresponded to the stirps of the other four younger children, if they had died leaving
succession, accrue, so to speak, both to the descendants of the younger children leaving succession
and to the other descendants of the founder.

The distribution of this accretion is made in obedience to a plan distinct from that above indicated,
because the founder, foreseeing the contingency, did not prescribe a quota for each stirps of his
younger children, but ordered that it be delivered to descendants of both classes, without distinction
of lines or stirps. Consequently, this one-half in accretion should be distributed among the
descendants of the founder in general, who are the plaintiffs and some of the defendants, but
bearing in mind the different rights with which each heir participates, by reason of the greater or
lesser proximity of his relationship to the founder, for the purpose of determining if he is to inherit per
capita or per stripes. We say some of the defendants, because with the exception of the ten
mentioned in paragraph 5 of the complaint, the other defendants are either persons whose
relationship has not been determined (paragraph 6 of the complaint) or have refused to become
parties to this action (paragraph 30, of the complaint).

From what has been said it follows that one-half of the fifth of the properties corresponding to the
younger sons leaving succession, four-fortieth parts (4/40) of the whole of the properties of this
foundation must be divided into four equal portions, because one portion, or one-fortieth part (1/40)
corresponds to each stirps of the said four younger children. The other one-half of the said fifth, that
is to say, the other four-fortieth parts (4/40) of the whole of the properties of this foundation must be
distributed in general among the plaintiffs and some of the defendants, taking into consideration the
circumstances of their respective heirships.

These properties may be considered as having been appraised in accordance with provisions of
article 4 of the Disentailing Law, inasmuch as the parties, in paragraph 9 of the stipulation of facts,
have agreed that for all purposes relating to the decision of this cae, the total value of the properties
of this foundation is five million six hundred thousand one hundred sixty-eight pesos (P5,600,168).

The one-half of the fifth, or the four-fortieth parts (4/40) which are to be distributed equally between
the stirps of the four younger sons having descendants, is equivalent, according to that valuation of
the properties, to five hundred sixty thousand sixteen and 80/100 pesos (P560,016.80), or one
hundred forty thousand four and 20/100 pesos (P140,004.20), which is one-fortieth part (4/40) for
each stirps.

Of said four stirpes that of the younger son, Don Felix Bolois Tuason is represented among the
plaintiffs by Don Francisco Beech y Rojo, together with his aunts (cousins of his mother Doña Pilar
Rojo y Tuason, a great granddaughter of the said younger son), and therefore he inherits in
representation of his and mother; by Doña Teodora Benitez Tuason de Reyes; by Doña Romana
Fuentes de Salgado, and by Doña Urbana Francisco de Guevara. These three are great
granddaughters of the said younger son. Don Felix Bolois Tuason (paragraphs 12, 16, 23, 25 of the
complaint, admitted in paragraph 1 of the stipulation of facts). To each one of these four heirs
corresponds a fourth part of the fortieth part above-mentioned, of the assessed value of thirty-five
thousand one and 05/100 pesos (P35,001.05).

The stirps of Doña Gregoria M. Tuason is represented among the plaintiffs by Don Antonio Maria
Barretto y Rocha; by Doña Guadalupe Angelica Barretto, widow of Balbas; by Doña Isabel Rocha
Pereyra; by Doña Enriqueta Rocha Pereyra; by Don Alfredo Rocha Pereyna; by Don Clodoaldo
Rocha Pereyra; by Doña Carmen Rocha Pereyra de Beech; by Don Antonio Rocha Pereyra; by Don
Santiago Rocha y Ruiz Delgado; by Doña Rosario Rocha y Ruiz Delgado de Larroquete; by Don
Julio Rocha y Ruiz Delgado; by Don Andres Rocha y Ruiz Delgado; by Don Alfonso Rocha Uceda;
by Don Angel Rocha Rivera; by Doña Araceli Rocha Rivera; and by Doña Sara Rocha Rivera
(paragraphs 7 to 11 of the complaint, admitted by paragraph 1 of the stipulation of facts.) All these
said heirs of the stirps of Doña Gregoria M. Tuason, sixteen in number, are great grandchildren of
the said younger daugher, Doña Gregoria. To each one of them corresponds a sixteenth part of a
fortieth part of the whole of the properties, or one six-hundred-fortieth part (1/640) of the properties,
or eight thousand seven hundred fifty pesos and twenty-seven and one-fourth centavos (P8,750.27
and 1/4 centavo) of the total assessed value.

The stirps of Don Pablo Tuason is represented among the plaintiffs by heirs who participate in their
own right and by heirs who claim by representation because they inherit with relatives of the
generation of the same degree as their proximate ascendants. Among the former are Doña Ciriaca
Tuason; Don Cayetano Tuason; Don Pablo Leon Tuason; Don Tomas Mercado; Doña Victoria
Rufina Tuason; Doña Ana Consolacion Tuason; and Doña Asuncion Romana Tuason, widow of
Caballero. Among the heirs who take by representation are Don Gaston O'Farrell, who represents
his deceased father, Don Jose O'Farrell, Doña Remedios Ayala de Reyes and Doña Concepcion
Ayala, widow of Beltran, who represent their deceased mother, Doña Maria O'Farrell de Ayala; the
minors Doña Consuelo, Don Juan, Doña Rosario and Doña Carmen Tuason y Rosello, who inherit
in representation of their deceased father, Don Juan Tuason; and Don Vicente L. Legarda who
represents his deceased father Don Miguel Legarda Lerma (paragraphs 13 to 15, 20 to 22, and 24
of the complaint, admitted in paragraph 1 of the stipulation of facts). These heirs who inherit in their
own right; together with the persons represented by those who inherit by representation, make a
total of eleven great grandchildren of the said younger son Don Pablo Tuason. To each of said heirs
claiming in their own right and the persons represented by the others, corresponds an eleventh part
of a fortieth part of the total of the properties, namely, one four-hundred-and-fortieth part (1/440) of
the properties, or twelve thousand seven hundred twenty-seven pesos and sixty-five centavos and
five elevenths of a centavo (P12,727.65 and 5/11 the of a centavo) of the total assessed value.

The stirps of Don Santos Luciano Tuason is represented among the plaintiffs by Doña Cirila Tuason,
widow of Calvo; by Doña Mariana Aurelia Tuason; and by Don Santiago Alvarez. These three are all
of the same degree of relationship to the said younger son, whose great grandchildren they are
(paragraphs 17 to 19 of the complaint, admitted in paragraph 1 of the stipulation of facts). To each
one of these three heirs corresponds one-third of the fortieth part of the total of the properties, or one
one-hundred and twentieth part (1/20) of the properties, or forty-six thousand six hundred sixty-eight
pesos and six centavos and two-thirds of a centavo (P46,668.06 and 2/3 of a centavo) of the total
appraised value.

Of the other one-half of the fifth of these properties, and which is to be distributed in general, as we
have already said, between plaintiffs and some of the defendants, and which represents four-fortieth
parts (4/40), or P560,016.80, according to the appraised value, the heirs are the said plaintiffs, who
are thirty-three in number altogether, including those who inherit in their own right and those who are
to inherit by representation, plus ten defendants whose relationship to the founder is shown by the
records and who are parties to this action, their names being: Don Augusto Huberto Tuason y de la
Paz, Doña Maria Soterranea Tuason y de la Paz, Don Demeterio Asuncion Tuason y de la Paz, Don
Mariano Severo Tuason y de la Paz, Doña Teresa Eriberta Tuason y de la Paz, Don Angel Ordoñez
(alias Angel M. Tuason), Don Antonio M. Tuason, Doña Paz Tuason de Gonzalez, Doña Consuelo
Tuason de Quimson and Doña Rosario Gonzalez, widow of Tuason. (Paragraphs 5 and 26 of the
complaint, admitted in paragraph 1 of the stipulation of facts.) That is to say, this one-half of the fifth
is to be divided into one hundred forty-three equal parts, each portion being four one-thousand-
seven-hundred and twentieth parts (4/1720) or one four-hundred-and-thirtieth part (1/430) of the
whole of the properties, or thirteen thousand twenty-three pesos and sixty-four centavos and twenty-
eighth forty-three of a centavo (P13,023.64 and 28/43 of a centavo) of the appraised value for each
heir inheriting in his own right, and for each person represented by the heirs who inherit by
representation.

The plaintiffs who participate with the defendants in the half of the fifth of the properties are four
grandsons who share with their uncles who are great great grandsons. These four grandsons who
inherit by representation are the following: Don Gaston O'Farrell, Don Vicente L. Legarda and Don
Santiago Alvarez, who represent respectively their deceased fathers, for which reason their
participations are entire units; the sisters Doña Remedios and Doña Concepcion Ayala, who
participate jointly in one unit; so also the minors Doña Consuelo, Don Juan, Doña Rosario and Doña
Carmen Tuason y Rosello, who also receive jointly a single participation; and in like manner the
sisters Doña Cirila and Doña Martina Aurelia Tuason also participate jointly in one unit.
With respect to these three descendants of the younger son, Don Santos Luciano, the peculiarity
exists that within their stirps the three heirs receives equally, as all are of equal degree of
relationship with their common ancestor, the said younger son. But when they concur with the other
codescendants of the founder, their shares change because they inherit by representation, as they
concur with uncles, cousins of their fathers, the result being that in such case the participation of
Don Santiago Alvarez is entire, he being the sole representative of his father, while that of the two
sisters Doña Cirila and Doña Marina is one-half for each, because both of them represent their
father.

Don Jose Rocha y Ruiz and Doña Remedios Aragon y Rocha, also descendants of younger sons,
do not participate in the fifth of the properties because in 1905 and 1916 they respectively sold their
participations to the defendants. For this reason their names were not taken into consideration in the
distribution of the fifth of the properties in the preceding paragraphs.

Among the petition of the complaint in this case is one to the effect that the defendants, Augusto,
Demetrio, Mariano, Maria Soterranea and Teresa Tuason y de la Paz, and Messrs. Antonio Ma.
Tuason, Angel Ordoñez (alias Angel M. Tuason) be required to render an account of the receipts,
expenditures and profits of this entail from February 4, 1874, to January 1, 1922, and deliver to the
plaintiffs the part corresponding to the latter in the net revenue produced by the said properties,
deducting that which each of the plaintiffs may have received prior to the commencement of this
action.

With regard to these accounts the following agreement was made in the stipulation of facts:

xxx     xxx     xxx

10. That the receipts and expenses of the properties on Calle Rosario are those which appear in the
statement hereunto attached, marked Exhibit 2, and that said statement is taken from the books of
the defendants.

11. That the receipts and expenditures of the Haciendas Santa Mesa-Diliman and Mariquina
are also those which appear in the annexed statement, marked Exhibit 3, which is also taken
from the bloods of the defendants.

12. That the stipulation contained in the two preceding paragraphs shall not prevent the
parties plaintiffs from impugning, as incorrectly charged, any of the item which appear in the
said two statements.

The accounts mentioned include those of all the properties of this foundation, for the properties
mentioned in the paragraphs which have been transcribed above are those which constitute the
properties entailed by the founder, Don Antonio Tuason, as alleged in paragraph 31 of the
complaint, admitted in paragraph 1 of said stipulation of facts; and the said accounts, Exhibits 2 and
3, correspond to the period comprised between the 1st day of January, 1904, and the 31st of
December, 1922.

None of the items contained in these accounts having been successfully impugned, they must be
considered, and we shall consider them, as correct by virtue of the stipulation above inserted.

These accounts beginning January 1, 1904, and which are presumed to be the consequence and
continuation of those of previous years, having been admitted, it is our understanding that plaintiffs
cannot now legally claim an accounting for the time prior to the 1st of January, 1904.
The are, however, entitled to a liquidation of the accounts as to the expenses and revenues of said
properties, and to receive the corresponding revenue from the 1st of January, 1923, until the
defendants shall deliver to them their respective participations in the properties of this foundation.

Consequently, the plaintiffs are entitled to receive their respective participations in the fifth of the
revenue corresponding to the period which begins from the 1st of January, 1904, until the 31st of
December, 1922, in accordance with the accounts which appear in Exhibits 2 and 3.

Plaintiffs are also entitled to the rendition of an account of the income and products of the said
properties from the 1st of January, 1923, until such time as their participations in the properties of
this foundation are delivered to them, as also to receive that which pertains to them of the fifth of the
revenues of said properties during said period beginning with the 1st of January, 1923.

JUDGMENT

By virtue of the foregoing considerations and conclusions it is hereby ordered and decreed that the
decision of the Court of First Instance of Manila rendered herein be and it is reversed, and it is
declared that the plaintiffs are entitled to participate in a fifth of the properties of this foundation and
its revenues in the proportions and amounts hereinafter stated, and that the registration of the title to
the said properties under Act No. 496 is not an impediment to its division and the transfer to the
plaintiffs, as beneficiaries, of the portions which we shall determine; wherefore it is ordered:

First. That the defendants, Don Augusto, Don Demetrio, Don Mariano, Doña Maria Soterranea and
Doña Teresa Tuason y de la Paz and Don Antonio Ma. Tuason, Don Angel Ordoñez (alias Angel M.
Tuason), with the intervention of the plaintiffs, partition the properties of the foundation which is the
subject-matter of the present cause, and deliver the respective participations, or their value, to the
persons and in accordance with the amounts to be specified hereafter, to wit:

(a) To each of the four plaintiffs, Don Francisco Beech y Rojo, Doña Teodora Benitez Tuason de
Reyes, Doña Romana Fuentes de Salgado and Doña Urbana Francisco de Guevera, a fourth of a
fortieth part of all the properties of this foundation, or its respective appraised value of thirty-five
thousand one pesos and five centavos (P35,001.05) as their participation in the one-half of the fifth
of the properties in conjunction with their codescendants of the younger sons; and one-forty-third
part of the other one-half of the fifth or four-fortieth parts of the said properties, or its appraised value
of thirteen thousand twenty-three pesos and sixty four centavos and twenty-eight forty-thirds of a
centavo (P13,023.64 and 28/43 of a centavo) as their participation in the other one-half of the fifth of
the properties in conjunction with the other descendants of the founder.

(b) To each of the sixteen plaintiffs, Don Antonio Maria Barretto y Rocha, Doña Guadalupe Angelica
Barretto, widow of Balbas, Doña Isabel Rocha Pereyna, Doña Enriqueta Rocha Pereyna, Don
Alfredo Rocha Pereyna, Don Clodoaldo Rocha Pereyna, Doña Carmen Rocha Pereyna de Beech,
Don Antonio Rocha Pereyna, Don Santiago Rocha y Ruiz Delgado, Doña Rosario Rocha y Ruiz
Delgado de Larroquete, Don Julio Rocha y Ruiz Delgado, Don Andres Rocha y Ruiz Delgado, Don
Alfonso Rocha Uceda, Don Angel Rocha Rivera, Doña Araceli Rocha Rivera and Doña Sara Rocha
Rivera, one-sixteenth of a fortieth part of all the properties of this foundation, or its appraised value
of eight thousand seven hundred fifth pesos and twenty-six centavos and one-fourth of a centavo
(P8,750.26 and 1/4 of a centavo); and furthermore a forty-third part of the other half of the fifth of
said properties, or its appraised value, of thirteen thousand twenty-three pesos and sixty four
centavos and twenty-eight forty-thirds of a centavo (P13,023.64 and 28/43 of a centavo), the
adjudication being made upon the same grounds as the adjudications in the preceding paragraph.
(c) To each of the nine plaintiffs Doña Ciriaca Tuason, Don Cayetano Tuason, Don Pablo Tuason,
Don Tomas Mercado, Doña Victoria Rufina Tuason, Doña Ana Consolacion Tuason, Doña Asuncion
Romana Tuason, widow of Caballero, Don Gaston O'Farrell and Don Vicente L. Legarda one-tenth
of a fortieth part of all the properties of this foundation, or its appraised value of twelve thousand
seven hundred twenty-seven pesos and sixty-five centavos and five elevenths of a centavo
(P12,727.65 and 5/11 of a centavo); and furthermore a forty-third part of the other half of the fifth of
said properties, or its appraised value of thirteen thousand twenty-three pesos and sixty-four
centavos and twenty-eight forty-thirds of a centavo (P13,023.64 and 28/43 of a centavo), upon the
same two grounds as those which constitute the basis of the adjudications made in paragraph A of
this judgment.

(d) Jointly to the two plaintiffs, Doña Remedios Ayala de Reyes and Doña Concepcion Ayala, widow
of Beltran, in equal parts, also one-tenth (for the two, not one for each one) of a fortieth part of all the
properties of this foundation, or its appraised value of twelve thousand seven hundred twenty-seven
pesos and sixty-seven centavos and three elevenths of a centavo (P12,727.67 and 3/11 of a
centavo); and also a forty-third part (for the said two plaintiffs) of the other half of the fifth of said
properties, or its appraised value of thirteen thousand twenty-three pesos and sixty-four centavos
and twenty-eight forty-thirds of a centavo (P13,023.64 and 28/43 of a centavo) upon the same two
grounds as those which constitute the basis of the adjudications made in paragraph A of the present
judgment.

(e) Jointly to the four minors, Doña Consuelo, Don Juan, Doña Rosario and Doña Carmen Tuason y
Rosello, in equal parts, one-tenth (for the four, not for each) of a fortieth part of all the properties of
this foundation, or its appraised value of twelve thousand seven hundred twenty-seven pesos and
sixty-five centavos and five elevenths of a centavo (P12,727.65 and 5/11 of a centavo); and also a
forty-third part (for the said four plaintiffs) of the other half of the fifth of said properties, or its
appraised value of thirteen thousand twenty-three pesos and sixty-four centavos and twenty-eight-
forty-thirds of a centavo (P13,023.64 and 28/43 of a centavo), upon the same two grounds as those
which constitute the basis of the adjudication made in paragraph A of this judgment.

(f) To each of the three plaintiffs, Doña Cirila Tuason, widow of Calvo, Doña Marina Aurelia Tuason
and Don Santiago Alvarez, one-third of a fortieth part of the whole of the properties of this
foundation, or its appraised value of forty-six thousand six hundred sixty-eight pesos and six
centavos and two thirds of a centavo (P46,668.08 and 2/3 of a centavo); and furthermore to the two
sisters Doña Cirila Tuason, widow of Calvo, and Doña Martina Aurelia Tuason, jointly, a forty-third
part of the other half of the fifth of said properties, or its appraised value of thirteen thousand twenty-
three pesos and sixty-four centavos and twenty-eight forty-thirds of a centavo (P13,023.64 and
28/43 of a centavo); and to Don Santiago Alvarez a forty-third of the said other half of the fifth of said
properties, or its appraised value of thirteen thousand twenty-three pesos and sixty-four centavos
and twenty-eight forty-thirds of a centavo (P13,023.64 and 28/43 of a centavo), all on the same two
grounds as those which constitute the basis of the adjudications made in paragraph A of the present
judgment.

Second. That the defendant deliver to the plaintiffs named in paragraphs A, B, C, D, E and F of the
present judgment and in the same proportion established for the distribution made in said
paragraphs A, B, C, D, E and in the first part of paragraph F, the portions which respectively pertain
to the said plaintiffs of the fifth of the revenues of this mayorazgo, as shown by Exhibits 2 and 3,
from the 1st of January, 1904, to the 31st of December, 1922: Provided, That the plaintiffs
mentioned in paragraph 2 of the cross-complaint of the defendants have already received their share
of the revenue, and shall not receive it again for the years specified in said counter-claim.
Third. That the defendants render an account of the revenues of the properties of this entail from
January 1, 1923, until they deliver to plaintiffs their respective participations in said properties, in
accordance with paragraphs A, B, C, D, E and F of the present dispositive part, and that they deliver
to the plaintiffs named in said paragraphs, in the proportion therein specified, their participations in
the fifth of the revenues of said properties corresponding to the said period of time following January
1, 1923.

Fourth. That the partition of the real estate herein decreed shall be carried out in accordance with
the provisions of section 184 of the Code of Civil Procedure, and section 84 of Act No. 496 by
causing a technical description to be made of the portions partitioned, and by the execution by the
defendants of the proper deeds of conveyance and the delivery to the registrar of the corresponding
certificates of title for the issuance of new certificates of title in favor of the defendants.

Fifth. That in case the parties should not agree as to the manner in which such partition is to be
effected, the court below, in this proceeding, shall appoint commissioners to that effect, all in
accordance with the provisions of section 184 of the Code of Civil Procedure, and other applicable
provisions of the Code of Civil Procedure.

No judgment will be entered as to costs. So ordered.

Avanceña, C.J., Street, Malcolm, Villamor, Ostrand, Johns and Villa-Real, JJ., concur.

RESOLUTION ON MOTION OF RECONSIDERATION

October 5, 1926

ROMUALDEZ, J.:

Upon examination of the motion for reconsideration of our decision, the printed briefs of the
defendants, the petitions of the intervenors presented by various persons and the pleadings pro and
con, this court finds the following:

MOTION FOR RECONSIDERATION

Counsel for defendants insist upon their contention maintained from the beginning and disposed of
in our decision. They raise some points in their briefs, however, which require a few brief-remarks.

The word "lord" does not necessarily mean "owner" or "proprietor." The word "lordship," derived from
"lord," has its own definition in the law, according to which, among other things, it means "usufruct."
(Law 1, Title 28, partida 3.)

In the case of Natividad vs. Gabino (36 Phil., 663), the meaning of the words "possessor" and "lord,"
and whether or not they are equivalent to "owner" and "proprietor," are not discussed it simply
declares the ordinary meaning of the words "property" and "dominion" which are not questioned here
as they are not used in the deed of foundation.

The case of Edroso vs. Sablan, (25 Phil., 295) deals with reservable property which cannot be
compared with entailed property. The ownership of reservable property passes to the reservor,
subject only to a resolutory condition, namely, that there be reservees; the ownership of entailed
property does not pass to the first-born, but only its usufruct. The reservor may, under certain
conditions alienate the reservable property (arts. 974-976, Civil Code); the first-born possessor
cannot dispone of the entailed property and, in the case under consideration, he is expressly and
strictly prohibited from alienating or even encumbering it.

The passage from Gutierrez on page 23 of the brief is a part of the commentaries by said author in
the course of his exposition of the various opinions of Law 6, Title 17, Book 10 of the Novisima
Recopilacion (a compilation of laws promulgated subsequent to the creation of this mayorazgo) in
regard to improvements made on entailed property. The fact is that this author calls possessors
of mayorazgos "usufructuaries" in commenting on article 10 of the Disentailing Law in his "Codigos
Españoles," vol. 2, p. 343, 1868 ed.

The quotation from Molina on page 29 of the brief is the opinion of said author upon the examination
of a hypothetical case propounded by him, to wit: Relinquo talem rem Titio ad alimenta (I bequeath
such and such a thing to Titus for support.) But this same writer, in comparing the possession of
a mayorazgo with a usufructuary in his work "De Primogeniorum Origine ac Natura," Book 1, p. 59,
2d column, 1757 ed., says Ex quo infertur, majoratus possessores usufructuario esse adacquatus,
non autem e converso (from which it follows that the possessor of a mayorazgo is the same as a
usufructuary although not vice versa).

The decision of the Supreme Court of Spain of October 29, 1859, invoked in support of the
reconsideration, had reference to the scope of the Disentailing Law when the possessor of
disentailed property, by virtue of said law, had no successor to whom to deliver the ownership of half
of said property. The power which in said case is recognized by the courts in said possessor to
dispose of the half that might belong to the successor, if there be any, does not arise from his status
as possessor and mere usufructuary of the mayorazgo, but from the disentailment itself of the
properties which, by virtue of the law, passed in full ownership to their possessors and successors
and recipients of their fruits.

The fact that a mayorazgo might be created by contract as well as by will does not, as already stated
in our decision, deprive it of its nature of a fideicomiso. Furthermore, it must be noted that
this mayorazgo, rather than a Donation inter vivos, is an act mortis causa by virtue of which the
founder disposed of the remainder of all of his property. He had already delivered to his eight
children their legitimes, reserving only the third of free disposal and the remainder of the fifth of the
portion destined to betterment, in order to create this mayorazgo upon such remainder, thus
definitely disposing of all of his property. Such remainder is what the founder himself calls
"betterment" (clauses 2 and 16 of the foundation), whereby he indicates that this mayorazgo is the
last complement of the testamentary dispositions alluded to by him in the deed of foundation, this
document thus constituting a testamentary memorial, for the validity and efficacy of which, as an
act mortis causa, the laws in force at that time required no special form provided the same was duly
identified. With respect to the form of this testamentary act there is, besides, the circumstance that
the founder was a military man and as such had the power to dispone of his property mortis causa,
without being subjected to the forms provided for in the Ordenanzas del Ejercito of 1768, confirmed
by the Royal Cedula of October 24, 1778 and Law 8, Title 18, Book 10, Novisima Recopilacion (5
Manresa Civil Code, pp. 218, 219, 1905 ed.)

The person entitled to possess entailed property had the right to bring an action for the recovery
thereof upon his legitimate right to possess such property and not in his capacity as a mere
usufructuary. This is called a vincular action established by the Law 45 of Toro, which became Law
1, Title 24, Book 11, Novisima Recopilacion. Its exercise does not imply nor prove the title to the
properties sought to be recovered; it was a right correlative to the right to possess similar to that of
an administrator who has the right of action to recover the possession of property under his
administration.
The doctrine enunciated in the decision of the Supreme Court of Spain of June 5, 1872, cited in our
opinion, to the effect that possessors of mayorazgos are mere usufructuaries, is not obiter dictum.
Such declaration was necessary in that decision because whether or not the possessors of the
entailed properties were the owners or merely usufructuaries, was one of the fundamental points
discussed there, as appears in the first resultando (finding of fact) and in the
second considerando (conclusion of law).

It is incorrect to say that the Spanish authorities maintain that a mayorazgo is not a fideicomiso. We
have cited varios authorities in our decision who compare a mayorazgo with a fideicomiso. Molina,
himself, in the same passage cited by counsel for the defendants on page 29 of their brief, cannot
help calling the possessor of a mayorazgo a fideicomisario (trustee). (Molina "De Primogeniorum
Origine ac Natura," Book 1, p. 151).

Naturally, Spanish writers and decisions do not confuse — cannot confuse — a fideicomiso with
a mayorazgo, just as the concept of a human being cannoit be confused with that of a man,
inasmuch as every man is a human being, but every human being is not a man. Every mayorazgo is
a fideicomiso, but every fideicomiso is not a mayorazgo.

We are of the opinion that our decision answers and sufficiently disposes of the other questions
raised in said brief as to whether or not the charge to distribute the fifth of the revenues of the
entailed properties constitutes a family trust; whether or not article 4 of the Disentailing Law is
applicable to this mayorazgo; whether or not the right of action which the plaintiffs might have had
has prescribed, and the effects of the registration of the entailed properties under Act No. 496.

Resolving, therefore, said motion for reconsideration, we reiterate the following conclusions,
declaring finally:

(1) That the first-born possessor of this mayorazgo was a mere usufructuary of the entailed
properties.

(2) That this mayorazgo was a fideicomiso.

(3) That the charge to distribute the fifth of the revenues from said properties was a family
trust.

(4) That article 4 of the Disentailing Law of October 11, 1820 is applicable to the present
case.

(5) That the fifth of the properties into which, by virtue of said law, the fifth of the revenue
was converted on March 1, 1864, when the Disentailing Law became effective in the
Philippines, has remained and subsists as a fideicomiso up to the present date.

(6) That the plaintiffs' right of action has not prescribed.

(7) That the registration of the entailed properties under Act No. 496 must, with respect to the
fifth of the said properties conserved up to the present time as a fideicomiso, be held to have
been made in favor of the beneficiaries of said fifth part.

(8) That the plaintiffs, as well as any other descendants of the founder, are entitled to
participate in the fifth of the properties of this mayorazgo in accordance with the sixth clause
of the deed of foundation and article 4 of the Desentailing Law.
 (9) The pronouncement made in our decision with respect as to the amount of the
participation of each claimant shall be set aside in view of the motions of the intervenors
which we are about to examine.

RE PLEADINGS OF INTERVENTION

After the promulgation of our decision sworn petitions of intervention were presented by Estanislao
Arenas Tuason, widow of Julian La O et al., another Benito Legarda et. al., and another by Emilia
Tuason et al.

The first two claim to be descendants of the younger children of the founder and who, if their
allegations are proven, belong to the same class as the original plaintiffs.

In view of the fact that said petitions do not rebut the fundamental conclusions of our decision and
are limited to the allegation of the right to participate in the fifth of the properties, it is our opinion, in
accordance with the provisions of section 121 and similar provisions of the Code of Civil Procedure,
it is but just to grant said petitioners the opportunity to duly establish their alleged rights.

The third petition was presented by Emilia Tuason et al., who claim to be descendants of some of
the brothers of the deceased Jose Severo Tuason, possessor of the mayorazgo up to February 3,
1874, and the others of the first born possessor Vicente Tuason.

Of those petitioners, Emilia Tuason, widow of Rocha Maria Rocha de Despujolis, Marquis of Oliver,
Jose Ma. Rato, Eloisa O'Farrell y Patiño, Sofia O'Farrell y Patiño, Maria de la Concepcion, Luis Vidal
y Tuason, Pedro Baños and the now deceased Juan O'Farrell y Patiño, father and grandfather,
respectively (accordingly to the petition of intervention) of the intervenors surnamed O'Farrell y
Codero and O'Farrell y Montesinos, the deceased Antonio Vidal, father, according to said petition, of
the intervenor Maria Vidal y Delgado had been included as defendants in this case and were
summoned by publication and declared in default in view of not having appeared nor answered the
complaint.

It is alleged in the petition, however, that their failure to intervene in the case was due to the fact that
the plaintiffs in paragraph 41 of their complaint only claimed a half of the fifth of the properties and
that they believed the other half belong to the descendants of the younger children of the founder's
first-born, by which allegation the right of the intervenors to receive their pensions from one-half of
the said fifth remained tact.

While the limitation of the plaintiffs' claim in said paragraph 41 of the amended complaint does not
appear sufficient for us to deviate from the result of the evidence, nor the provisions of the law
applicable to this case, nor to disregard their prayer at the end of said complaint that they be granted
any other just and equitable remedy, and for such reasons we have had to adjudicate to them not
only a half of the fifth of the property, but also the other half in common with the defendants; yet, in
view of the fact that these intervenors, who have been declared in default on account of said
paragraph 41 of the complaint, were justified in believing that only a half of the fifth of the properties
were in litigation in this cause, it is our opinion, in view of these considerations and the petitions of
intervention referred to above, that it is but just to set aside the distribution made in our decision
thereby granting these petitioner the opportunity to intervene in this cause and to establish and
defend their rights, and permitting the original plaintiffs, in justice to their rights, to amend the
allegations of their complaint.
Finally, in justice to the defendants, the plaintiffs and the intervenors must take the necessary steps
to include as parties to this cause, all of the persons who may have the right to participate in the said
fifth of the properties of this foundation.

ORDER

In view of the foregoing, it is ordered:

(a) That the motion for reconsideration filed by counsel for the defendants is denied in so far as it is
incompatible with the fundamental conclusions we have arrived at in the present cause and
enumerated in the preceding resolution.

(b) That the dispositive part of our decision in this cause be set aside.

(c) That the record in the present case, together with the petitions of intervention mentioned, be
returned to the Court of First Instance of Manila in order that the new parties may intervene in this
cause and prove their alleged rights, and that the original plaintiffs may, if they so desire, amend
their complaint.

(d) That the plaintiffs take the necessary steps to include as parties to this cause all such known and
unknown persons who may have the right to participate in the said fifth part of the properties of this
foundation, requiring them to appear and prove their rights.

(e) That said Court First Instance proceed to try this cause and render judgment as to the amount to
which the original parties and those who may intervene may be entitled as their participation in the
fifth of the properties of this mayorazgo.

(f) That the stipulation of facts subscribed on August 30, 1924 by Attorneys Sanz and Blanco on
behalf of the plaintiffs and Araneta & Zaragoza on behalf of the defendants, for all intents and
purposes and with respect to the parties affected, is held as subsisting, as well as the oral and
documentary evidence presented by the parties during the original trial of the cause, the original
parties as well as those who hereafter may intervene, being entitled to introduce such additional
evidence as they may desire upon the subject-matter of the trial herein ordered.

No express pronouncement a to costs. So ordered.

Avanceña, J., Street, Ostrand and Johns, JJ., concur.

Separate Opinions

JOHNSON, J., with whom concur VILLAMOR and VILLA-REAL, JJ., concurring:

I concur in the granting of a new trial. In my opinion, however, in as much a new parties have been
admitted and a new trial has been ordered, the doors should be opened wide for the trial of every
issue presented within the four corner of the case, except that the evidence already adduced should
stand as a part of the new record. I do not believe that the parties in a new trial should be shambled
by doctrines which might be rendered useless by the new facts which might be brought into the
case. The intervention having been allowed, the intervenors should be given a full and free
opportunity to defend their rights unhampered by jurisprudence announced upon facts, the effect
and operation of which may have been entirely changed by facts adduced during the new trial.

STREET, J., concurring:

While in the main I fully endorse the conclusions reached in the admirable exposition of this case
contained in the original opinion written by Mr. Justice Romualdez, and while I concur in the return of
the case to the court of origin, in conformity with the present resolution, I wish to take advantage of
this occasion to refer to a minor feature of the case which is, under this resolution, designedly left
open for further consideration in the court below. The point is one in which an antagonism will be
presented between the interests of two classes of claimants, and as to which those defendants who
are holders of the legal title to the trust property can have no real concern, supposing the capital
issue arising between them and the different classes of claimants to have been finally decided
contrary to their contentions. I refer of course to the antagonism of interest between those
descendants of the original founder who are younger offshoots from the preferred line, and those
descendants of the founder who have sprung from four of the younger children of the founder, this
latter being the class in whose behalf the original action was instituted. Heretofore no issue has been
made between the two classes of claimants here referred to, but unless their conflicting interest are
composed by mutual agreement, the lower court will be called upon to settle the matter; and
although said court is left free, under the present resolution, to determine the conflicting interests of
said two classes of person as a question of first impression, it will nevertheless be confronted with
certain observations in the original opinion which in my opinion will be further investigation.

The question arises upon the interpretation of the item of the royal cedula creating the entail in
which is defined the duty of the holder of the entail with respect to the disposition of one-fifth of the
net revenue derived from the entail. This item may be here quoted as follows:

'Item.

'It shall be his duty to set apart one-fifth of the net revenue derived from the entail each year,
and that one-fifth part shall be divided into eight parts, giving one to each of my eight
children, and upon failure of such, to my grandchildren, but upon the understanding that if
one or more of my children should die without succession, the part belonging to them shall
be distributed among my grandchildren and other descendants of mine according to their
needs and as prudence may dictate to him, so that, when the time arrives that none of my
children or grandchildren are alive, it shall then be always understood that said fifth part shall
be applied to all those of my descendants who are poor, the apportionment to be made by
him prudently according to their needs and therefore the possessor of the entails is hereby
charged to discharged this duty with a conscientious scruple.

To understand the application of this provision to the facts of the case before us, it is necessary to
bear in mind that the founder had nine children, and that four of the younger eight have no living
descendants. On the other hand, four of there younger children have living descendants, being
represented in the present litigation by the original plaintiffs. There are also now in existence some
persons representing the younger offshoots (segundones) of the preferred line. Some of these latter
were named as defendants in the original complaint, but they allowed judgment to be taken by
default. The case will now be opened as to these in the Court of First Instance and they, as well as
other new claimants, will be at liberty there to present whatever contentions they may see fit to
make.

As may be gathered from the petition of intervention filed in behalf of the younger offshoots
(segundones) of the preferred line, they claim to be entitled to an undivided one-tenth interest in the
income of the entailed property, this being that half of the fifth which formerly pertained to the four
younger children of the founder whose lines have become extinct. On the other hand, the original
plaintiffs, consisting of the descendants of the four younger children of the founder whose lines are
represented by living descendants, will probably insist that they are entitled to all that was conceded
to them in the original decision of this court, that is, one-tenth, or four-fortieths, as pertaining to the
plaintiffs' four ancestors, per stripes, and one-tenth, or four-fortieths, as pertaining to the plaintiffs in
common with all other descendants of the founder other than the holders of the legal title.

Now I submit that something can be said in favor of a simpler solution of the problem, which would
establish the conclusion that the entire fifth now under discussion pertains to all the descendants of
the founder other than the holders of the legal title, including of course the younger offshoots of the
preferred line, and due allowance being of course made for transfers and surrenders. The point here
suggested depends upon the interpretation of the word nietos in the Spanish original of the Item of
the foundation quoted above, and which is there translated "grandchildren." In the original decision
this court sustains the view that nietos, as first used in the quoted Item, means descendants. It is my
personal opinion that nietos ought to be here taken in the strict sense of grandchildren, and not in
the secondary sense of descendants.

If this be true, it follows that all of the descendants of the founder other than the present holders of
the legal title to the trust property together constitute a single constituency of beneficiaries, and all of
these descendants are on precisely the same footing, their rights being derived from the closing
words of the paragraph above quoted, which are these: "when the time arrives that none of my
children or grandchildren are alive, it shall then be always understood that said fifth part shall be
applied to all those of my descendants who are poor, the apportionment to be made by him
prudently according to their needs and therefore the possessor of the entail is hereby charged to
discharge this duty with conscientious scruple."

It will be noted that the trust thus established was intended for the relief of those of the founder's
descendants who should be poor; and as long as the trust subsisted only those who were deemed
by the possessor of the entail to be needy could share in the benefits of the trust. But when the trust
is terminated, the distribution must be made among all members of the constituency, and not
exclusively among the needy, for every member of the constituency of beneficiaries, even including
the wealthy, had an interest in the maintenance of the trust while it subsisted and is entitled to share
in the distribution of the trust fund when the trust is ended.

As the entire dispositive part of our former decision is abrogated by the present resolution, the
different classes of beneficiaries will in fact be entirely free in presenting their conflicting claims
before the lower court and the latter will be entirely unhampered in passing upon those claims. As I
understood as adhering to the doctrine expressed in the original decision so far as affects the title of
the defendants only, without prejudice to the conflicting rights of the different claimants as among
themselves.

G.R. No. L-9608             August 7, 1915

DIEGO LIÑAN, plaintiff-appellee,
vs.
MARCOS P. PUNO, ET AL., defendants-appellants.

Mariano Escueta for appellants.

S. Lopez for appellee.
JOHNSON, J.:

The facts upon which the decision in this case depends are as follows:

(1) The the plaintiff, in the month of May, 1908, and for a long time prior thereto, was the owner of a
certain parcel of land particularly described in paragraph 2 of the complaint.

(2) That on the 16th day of May, 1908, the plaintiff executed the following document, which
conferred upon the defendant Marcos P. Puno the power, duties and obligations therein contained:

I, Diego Liñan, of age, married, a resident of Daet, Province of Ambos Camarines, Philippine
Islands, and at the present time temporarily residing in this city of Tarlac, capital of the
Province of Tarlac, P.I., set forth that I hereby confer sufficient power, such as the law
requires, upon Mr. Marcos P. Puno, likewise a resident of this city of Tarlac, capital of the
Province of Tarlac, in order that in my name and representation he may administer the
interest I possess within this municipality of Tarlac, purchase, sell, collect and pay, as well as
sue and be sued before any authority, appear before the courts of justice and administrative
officers in any proceeding or business concerning the good administration and advancement
of my said interests, and may, in necessary cases, appoint attorneys at law or attorneys in
fact to represent him.

The meaning, purport, and power conferred by this document constitute the very gist of the present
action.

(3) That in June, 1911, the defendant Puno, for the sum of P800, sold and delivered said parcel of
land to the other defendants.

The plaintiff alleges that the said document (Exhibit A) did not confer upon the defendant Puno the
power to sell the land and prayed that the sale be set aside; that the land be returned to him,
together with damages.

The defendants at first presented a demurrer to the complaint, which was overruled. To the order
overruling the demurrer the defendants duly excepted. They later answered. In their answer they first
denied generally and specially all of the important facts stated in the complaint. In their special
answer or defense they admitted the sale of the land by Puno to the other defendants and alleged
that the same was a valid sale and prayed to be relieved from the liability under the complaint, with
their costs.

Upon the issue thus presented the lower court decided: (1) That the document Exhibit A did not give
Puno authority to sell the land; (2) that the sale was illegal and void; (3) That defendants should
return to the land to the plaintiff; and (4) That the defendants should pay to the plaintiff the sum of
P1,000 as damages, P400 of which the defendant Puno should alone be responsible for, and to pay
the costs.

From that decision the defendants appealed to this court and made the following assignments of
error:

I. The lower court erred in overruling the demurrer filed by the appellants to the complaints.
 II. The lower court erred in holding that the appellant Marcos P. Puno was not authorized to
sell the land in question and that the sale executed by the said Marcos P. Puno to the other
appellants, Enrique, Vicente, Aquilina and Remedios, surnamed Maglanok, is null and void.

III. The lower court erred in ordering the appellee, Diego Liñan, to return to the appellants,
Enrique, Vicente, Aquilina, and Remedios Maglanok the sum of P800, the selling price of the
land question.

III. And, finally, the lower court erred in sentencing the appellants to pay to the appellee the
sum of P1,000, the value of the products collected, and to pay the costs.

IV. And, finally, the lower court erred in sentencing the appellant to pay to the appellee the
sum of P1,000, the value of the products collected, and to pay the costs.

With reference to the first assignment of error, we are of the opinion that the facts stated in the
opinion are sufficient to constitute a cause of action.

With reference to the second assignment of error, the plaintiff alleges that the power of attorney, as
contained in Exhibit A, did not authorize the defendant Puno had full and complete power and
authority to do what he did. The lower court held that Exhibit A only gave Puno power and authority
to administer the land; that he was not authorized to sell it. Omitting the purely explanatory parts of
Exhibit A, it reads as follows: "I, Diego Liñan, ... set forth that I ... confer sufficient power, such as the
law requires, upon Mr. Marcos P. Puno ... in order that in my name and representation he may
administer ... purchase, sell, collect and pay ... in any proceeding or business concerning the good
administration and advancement of my said interests, and may, in necessary cases, appoint at law
or attorneys in fact to represent him."

Contracts of agency as well as general powers of attorney must be interpreted in accordance with
the language used by the parties. the real intention of the parties is primarily to be determined from
the language used. The intention is to be gathered from the whole instrument. In case of doubt
resort must be had to the situation, surroundings and relations of the parties. Whenever it is
possible, effect is to be given to every word and clause used by the parties. It is to be presumed that
the parties said what they intended to say and that they used each word or clause with some
purpose and that purpose is, if possible, to be ascertained and enforced. The intention of the parties
must be sustained rather than defeated. If the contract be open to two constructions, one of which
would uphold while the other would overthrow it, the former is to be chosen. So, if by one
construction the contract would be illegal, and by another equally permissible construction it would
be lawful, the latter must be adopted. The acts of the parties in carrying out the contract will be
presumed to be done in good faith. The acts of the parties will be presumed to have been done in
conformity with and not contrary to the intent of the contract. The meaning of generals words must
be construed with reference to the specific object to be accomplished and limited by the recitals
made in reference to such object.

With these general observations in mind, ,let us examine the terms of the power conferred upon the
defendant Puno (Exhibit A) and ascertain, if possible, what was the real intent of the plaintiff. The
lower court held that the "only power conferred was the power to administer." Reading the contract
we find it says that the plaintiff "I confer ... power ... that ... he may administer ... purchase, sell,
collect and pay ... in any proceeding or business concerning the good administration and
advancement of my said interests." The words "administer, purchase, sell," etc., seem to be used
coordinately. Each has equal force with the other. There seems to be no good reason for saying that
Puno had authority to administer and not to sell when "to sell" was as advantageous to the plaintiff in
the administration of his affairs as "to administer." To hold that the power was "to administer" only
when the power "to sell" was equally conferred would be to give to special words of the contract a
special and limited meaning to the exclusion of other general words of equal import.

The record contains no allegation on proof that Puno acted in bad faith or fraudulently in selling the
land. It will be presumed that he acted in good faith and in accordance with his power as he
understood it. That his interpretation of his power, as gathered from the contract (Exhibit A), is
tenable cannot, we believe, be successfully denied. In view of that fact and view of the fact that, so
far as the record shows, the other defendants acted in good faith, we are of the opinion that the
contract, liberally construed, as we think it should be, justifies the interpretation given it by Puno. In
reaching this conclusion, we have taken into account the fact that the plaintiff delayed his action to
annul said sale from the month of June, 1911, until the 15th of February, 1913. Neither have we
overlooked the fact in the brief of the appellants that the plaintiff has not returned, nor offered to
return, nor indicated a willingness to return, the purchase price. (Art. 1308 of the Civil Code;
Manikis vs. Blas, No. 7585.1).

In view of all the foregoing, we are of the opinion that the lower court committed the error
complained of in the second assignment, and, without discussing the other assignments of error, we
are of the opinion, and so hold, that the judgment of the lower court should be and is hereby revoked
and that the appellants should be relieved from all liability under the complaint. Without any finding
as to costs, it is so ordered.

Arellano, C.J., Torres, Carson, and Araullo, JJ., concur.

Separate Opinions

TRENT, J., dissenting:

The power of attorney, the identity of the land sold, the fact of sale, and the identity of the parties are
admitted.

I agree with the majority that "the meaning, purport, and power conferred by this document (Exhibit
A, the power of attorney) constitute the very gist of the present action," and that the acted in good
faith. But I cannot see how "the fact that the plaintiff delayed his action to annul said sale from the
month of June, 1911, to February, 15, 1913," and the fact that the appellants have charged in their
brief that the "plaintiff has not returned, nor offered, to return, ,nor indicated a willingness to return
the purchase price," can affect in any way the issues involved in this case. the record shows that the
land is situated in the Province of Tarlac and the plaintiff lives in the Province of Ambos Camarines.
The record fails to show whether or not the plaintiff has returned, or offered to return, or is willing to
return to the vendees the purchase price of the land. The charge in appellant's brief that the plaintiff
has not done these things is not proof and should not be taken as establishing a fact or facts.

The controlling question is, Was Puno authorized under the power of attorney, which is set out in full
in the majority opinion, to sell the real estate of his principal? The solution of this question must
depend solely and exclusively upon the language used in that power of attorney Exhibit A. There is
no claim that the plaintiff enlarged the powers of his agent Puno after the execution of Exhibit A or
that he ratified the sale in question after it had been made.

Article 1713 of the Civil Code reads:

 An agency in general only includes acts of administration.

In order to compromise, alienate, mortgage, or to execute any other act of a strict ownership
an express commission is required.

The power to compromise does not give authority to place the matter in the hands of
arbitrators or amicable compromisers.

The Director General de los Registros, in its resolution of November 20, 1900 (90 Juris. Civ., 677),
construed a power of attorney given by a father to his son, authorizing the latter to administer the
property of his principal, "to lease and to rent his principal's reality to the persons and for the time,
price and conditions he deems best, and also to make ejectments, to sign documents, to make
collections, to make changes in anything belonging to his principal, and to compromise any
questions that may arise." Under color of this authority, the son leased for a period of twelve years
several parcels of land and charged several other parcels with pensiones de censos in favor of a
third person. I quote from the syllabus: "In the present case, the lessor was authorized by his
principal to lease and to rent the latter's realty to the persons and for the price, time and conditions
that seemed best to him, and such authorization must be understood to have been granted for the
simple contract of lease, which produces only personal obligations, and consequently cannot be
regarded as extended, without express command, to the stipulation of such conditions as might alter
the nature of the contract by transforming it into a partial conveyance of ownership in the things
leased, as happened in said case, wherein the agent has thereby exceeded the limits of his agency."

A quite similar power of attorney was disposed of in the same manner in the resolution of October
26, 1904 (99 Juris. Civ., 245) where an agent leased property for thirty years under color of authority
to lease the property "for the time, price, and conditions" which he might think desirable.

In the Resolution of April 5, 1907 (Juris. Civ., 68), the facts were as follows: A power of attorney
executed by a wife authorized her husband to administer a vineyard belonging to her as might be
necessary for its preservation, improvement, and increase. Under this power the husband entered
into an agreement with several other adjoining owners with reference to the irrigation of their
respective properties by means of an aqueduct. To insure the accomplishment of various
stipulations inserted in this contract, the various parties thereto hypothecated their respective
properties and sought to have the same inscribed in the property registry. Registration was denied
on the ground, among others, that the power of attorney in question did not authorize the husband to
perform any act of strict ownership, but only those of administration.

In commenting upon article 1713, Manresa quotes approvingly from Goyena as follows: "As Garcia
Goyena says, 'The law, which must look after the interests of all, cannot permit a man to express
himself in vague and general way with reference to the right he confers upon another for the
purposes of alienation or hypothecation, whereby he might easily be despoiled of all he possessed
and be brought to ruin; such excessive authority must be set down in the most formal and explicit
terms; and when this is not done, the law reasonably presumes that the principal did not mean to
confer it.' " (Vol. 11, p. 460.)

Bonel, in commenting upon the same article, says: "Our code, in looking after the interests of all and
thereby furnishing a proof of common sense, does not permit a vague expression in a general and
indefinite manner of the right one confers upon another to make alienations and hypothecations, for
in this way a man could with good faith on his part be despoiled of all he possessed and be brought
to ruin; hence it provides that such excessive authority must be set down in the most favorable and
explicit terms; and when this is not done, reason and common sense induce the presumption that
the principal did not mean to confer it." (Vol. 4, p. 728.)
The supreme court of Louisiana, which also interprets the civil law, was considering the following
power of attorney in Lafourche Transportation Co. vs. Pugh (52 La. Ann., 1517); "We ... have
appointed, ... (defendant) our true and lawful agent and attorney in fact, for us, and in our name,
place and stead, to manage, control, take charge of, compromise and do any and all things,
necessary and requisite, touching and concerning our interests in the succession of the late Robert
Lawrence Pugh, and to make any and all settlements for us, and in our behalf, with the legatees
under the last will and testament of the said R. L. Pugh, vesting our said attorney and agent with full
power and authority, to do any and all acts that we might do if personally present . . .."

The remarks of the court are brief and instructive; "It further appears that, neither at the date of the
execution of the note and act of mortgage sued on, nor any at any other time, has W.W. Pugh held
any other procuration, the attempt the prove the contrary having failed. there is no doubt that, at the
time that the note and act or mortgage were executed, he supposed that the power of attorney held
by him conferred the authority which he undertook to exercise, but the bare reading of it shows that it
did not."

In Lord vs. Sherman (2 Cal., 498), a power of attorney authorized an agent to "attend to all business
affairs appertaining to real or personal estate, bank business, or business at the customhouse, or
insurance or law business, or the commencement, settlement, or defending any suit or suits in law or
equity. Also for me and in my name, place, and stead, to sign, seal, execute, and deliver all and any
instrument under seal that he may think proper in and about my said business, either individually or
as a member of the firm of Shermans & Stork. Also to settle, compromise, and adjust, pay and
discharge all claims and demands, accounts due or owing to me, or from me, or in which I am
interested, and give all proper receipts or discharges therefor, whether under seal or not; and to
attend to all my business for me of any name or nature, whether real or personal, that may arise
during my absence, and whether to use my name in and about the same, the same as I could do if
personally present. Also to make, indorse, or accept any drafts, bills of exchange, or promissory
notes. Also to settle and adjust all claims, etc." The court said: "The power of attorney contains no
authority to convey real estate, eo nomine. The power given `to attend to all business affairs
appertaining to real or personal estate' is too indefinite to sustain a transfer or real estate, more
particularly that acquired long subsequent to its execution."

In Billings vs. Morrow (7 Cal., 171), a power of attorney was in question which authorized the agent
"for me and in my name to superintend my real and personal estate, to make contracts, to settle
outstanding debts, and generally to do all things that concern my interest in any way, real or
personal whatsoever, giving my said attorney full power to use my name to release others or bind
myself, as he may deem proper and expedient; ..." The court said: "It requires but a glance at this
instrument to perceive that no authority is contained in it to convey real estate. The power is limited
and special, and cannot be extended by implication to other acts more important in their character
than those expressly provided in the body of the instrument. The rule may be thus stated; that where
the authority to perform specific acts is given in the power, and general words are also employed,
such words are limited to the particular acts authorized."

In Clark & Skyles on Agency, section 213, it is said: All powers conferrred upon an agent by a formal
instrument are to receive a strict interpretation, and the authority is never extended by intendment or
construction beyond that which is given in terms or is necessary for carrying the authority into effect,
and that authority must be strictly pursued."

Upon the same point Story says in his work on Agency, section 68: "Indeed formal instruments of
this sort are ordinarily subjected to a strict interpretation, and the authority is never extended beyond
that which is given in terms, or which is necessary and proper for carrying the authority so given into
full effect."
In Reynolds vs. Rowley (4 La. Ann., 396), it was said: "We take it for granted that, under the
common law as with us, powers of attorneys are subjected to a strict interpretation, and that the
authority is never extended beyond that which is given in terms, or which is necessary and proper for
carrying the authority so given into full effect; that language, however general in its form, when used
in connection with a particular subject matter, will be presumed to be used in subordination to that
matter, and therefore is to be construed and limited accordingly; that a general power to buy
property for the constituent, or to make any contracts, and do any other acts whatever, which he
could if personally present, must be construed to apply only to buying or contracting connected with
his ordinary business, and would not authorize any contracts of an extraordinary character to be
made."

In Clark & Skyles on Agency, section 227, it is said: "In order that an agent may have authority to sell
real estate it is necessary that such authority should be clearly and distinctly given to him, in such a
manner that a reasonably prudent person would have no hesitancy in seeing that such a power was
given. We have herefore seen that all written powers will be strictly construed and will not be
extended beyond their obvious purpose; and unless power to sell real estate is clearly given to him,
the agent cannot sell it."

In sections 261 to 265 of the same work, the general scope of powers delegated by the authority to
manage the business of the principal is discussed. It is there stated that aside from the particular
facts and circumstances surrounding the parties, it is a general rule that an agency
to manage implies authority to with the property or in the business what has previously been done
by the principals, or by others with their express or implied consent; or further to do what is
necessary or usual and customary to do with the property, or in business of the same kind in the
same locality. But the power to dispose of the business or embark on some unusual enterprise with
the principal's capital is not included in such an agency.

The rule that formal powers of attorney must be strictly construed and limited in their scope to what
is expressly stated and to such incidental powers as may be necessary in the fulfillment of the
powers expressly given is well settled, both in Anglo-American and in the civil law. The authorities
supporting this doctrine are legion. So, general expressions conferring power an agent, such as "to
do any and every act," "do and transact all manner of business," to lease real property "for the time,
price and with the conditions which he deems desirable," "attend to all business affairs appertaining
to real or personal estate," "to my real and personal estate," "to superintend my real and personal
estate" are to be construed in subordination to the express powers granted, and not to refer to other
unusual or extraordinary powers of which no mention is made in the instrument. In addition to the
cases given above which illustrate the rule, many others may be found in the books of the same
character. Likewise, it is a rule uniformly stated that the power to sell real estate must necessarily be
express, and cannot be implied from any general language used.

Let us now examine the power of attorney executed by the plaintiff and see if, according to the rules
stated, it can be held to include the power to sell real estate. There is no description of the plaintiff's
property in Tarlac. The document simply designates his property as "interests." This, of course,
would ordinarily be taken to include every species of property, real or personal, owned by him in that
municipality. That the power to administer these "interests" is expressly delegated admits of no
denial, as well as to the power to appear in court, the power to engage counsel, and to appoint sub-
agents. But we are interested in determining if the power is expressly delegated (for that is the only
manner in which it could have been given) to sell real estate. The grammatical construction of the
instrument admits of its division into two portions, as follows: "(a) He may administer such interests
as I possess within this municipality of Tarlac; (b) And may buy, sell, collect, and pay, ... in any way
whatsoever for the good administration and furtherance of my said interests."
Certainly, the power to sell real estate is not expressly delegated in the first division. True, in the
second section are the words "buy," "sell," "in any way whatsoever," and which, standing alone,
might easily refer to either real or personal property or both. But these powers are restricted by the
stated purpose for which the grant is given; that is, "for the good administration and furtherance of
my said interests." This qualifying phrase brings these general words "buy" and "sell" "in any way
whatsoever" down to the level of administrative acts. The agent may buy or sell for the good
administration and furtherance of the principal's interests, but he may not sell those interests
themselves. As a matter of fact, the second division is but little more than a repetition of the first, with
the added feature that it enumerates a number of those powers customarily incident to the
management of a principal's business by his agent.

It develops that the plaintiff owned a parcel of agricultural land in the municipality of Tarlac. This was
one of the "interests" which the defendant Puno was to "administer." Manifestly, the power to "buy"
seed, farming implements, and material for the repair and preservation of that land, and the power to
"sell" its products were incidental powers of a general power of management of such an "interest."
The full extent of the plaintiff's business "interests" in the municipality of Tarlac is not disclosed by
the record. But it is clear that he was not engaged in the business of buying and selling real estate.
Assuming that his "interests" in the said municipality were of almost any other description, it is
evident that the sale of real estate by the defendant agent was an extraordinary act, not capable of
being classified as an act of administration. I am unable to discover any express delegation of power
to sell "real estate" in the document in question. Not only is "real estate" not expressly mentioned,
but the words "buy" and "sell," which, it is argued, delegate that power, are, by the grammatical
construction of the document, subordinated to the "good administration and furtherance" of the
plaintiff's "interests."

For the foregoing reasons I do not agree to the disposition of this case.

[G.R. NO. 158907 : February 12, 2007]

EDUARDO B. OLAGUER, Petitioner, v. EMILIO PURUGGANAN, JR. AND RAUL

LOCSIN, Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of the
Regional Trial Court, dated 26 July 1995, dismissing the petitioner's suit.

The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUER'S VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday
Corporation (Businessday) with a total par value of P600,000.00, with Certificates of Stock No. 005,
No. 028, No. 034, No. 070, and No. 100.2 At the time he was employed with the corporation as
Executive Vice-President of Businessday, and President of Businessday Information Systems and
Services and of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin
(Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition against the Marcos
dictatorship.3 Anticipating the possibility that petitioner would be arrested and detained by the Marcos
military, Locsin, Joaquin, and Hector Holifeña had an unwritten agreement that, in the event that
petitioner was arrested, they would support the petitioner's family by the continued payment of his
salary.4 Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his
attorneys-in-fact Locsin, Joaquin and Hofileña for the purpose of selling or transferring petitioner's
shares of stock with Businessday. During the trial, petitioner testified that he agreed to execute the
SPA in order to cancel his shares of stock, even before they are sold, for the purpose of concealing
that he was a stockholder of Businessday, in the event of a military crackdown against the
opposition.5 The parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was
then the Corporate Secretary of Businessday, and at the same time, a notary public for Quezon City.6

On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search
and Seizure Order and detained for allegedly committing arson. During the petitioner's detention,
respondent Locsin ordered fellow respondent Purugganan to cancel the petitioner's shares in the books
of the corporation and to transfer them to respondent Locsin's name.7

As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an
employee of Businessday, to Camp Crame where the petitioner was detained, to pretend to borrow
Certificate of Stock No. 100 for the purpose of using it as additional collateral for Businessday's then
outstanding loan with the National Investment and Development Corporation. When Fernando
returned the borrowed stock certificate, the word "cancelled" was already written therein. When the
petitioner became upset, Fernando explained that this was merely a mistake committed by respondent
Locsin's secretary.8

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular
deposits, each amounting to P10,000.00, to the Metropolitan Bank and Trust Company accounts of
Manuel and Genaro Pantig, petitioner's in-laws. The deposits were made on every 15th and 30th of
the month.9 Petitioner alleged that these funds consisted of his monthly salary, which Businessday
agreed to continue paying after his arrest for the financial support of his family.10 After receiving a
total of P600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to ask
petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but petitioner
refused.11

On 16 January 1986, petitioner was finally released from detention. He then discovered that he was
no longer registered as stockholder of Businessday in its corporate books. He also learned that
Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer of shares
in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that
respondents restore to him full ownership of his shares of stock, they refused to do so. On 29 July
1986, petitioner filed a Complaint before the trial court against respondents Purugganan and Locsin to
declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the
shares, and payment of damages.12

RESPONDENT RAUL LOCSIN'S VERSION

In his version of the facts, respondent Locsin contended that petitioner approached him and requested
him to sell, and, if necessary, buy petitioner's shares of stock in Businessday, to assure support for
petitioner's family in the event that something should happen to him, particularly if he was jailed,
exiled or forced to go underground.13 At the time petitioner was employed with Businessday,
respondent Locsin was unaware that petitioner was part of a group, Light-a-Fire Movement, which
actively sought the overthrow of the Marcos government through an armed struggle.14 He denied that
he made any arrangements to continue paying the petitioner's salary in the event of the latter's
imprisonment.15

When petitioner was detained, respondent Locsin tried to sell petitioner's shares, but nobody wanted
to buy them. Petitioner's reputation as an oppositionist resulted in the poor financial condition of
Businessday and discouraged any buyers for the shares of stock.16 In view of petitioner's previous
instructions, respondent Locsin decided to buy the shares himself. ςηαñrοblεš  Î½Î¹r† Ï…αl  lαω  lιbrαrà ¿

Although the capital deficiency suffered by Businessday caused the book value of the shares to
plummet below par value, respondent Locsin, nevertheless, bought the shares at par value.17 However,
he had to borrow from Businessday the funds he used in purchasing the shares from petitioner, and
had to pay the petitioner in installments of P10,000.00 every 15th and 30th of each month.18

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It
ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial court
concluded that petitioner had intended to sell the shares of stock to anyone, including respondent
Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground;
and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to
sell the shares for such price and under such terms and conditions that the agents may deem proper.
It further found that petitioner consented to have respondent Locsin buy the shares himself. It also
ruled that petitioner, through his wife, received from respondent Locsin the amount of P600,000.00 as
payment for the shares of stock.19 The dispositive part of the trial court's Decision reads:

WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes
of action and of the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED,
without pronouncement as to costs.

[Herein respondents'] counterclaims, however, are hereby DISMISSED, likewise, for dearth of
substantial evidentiary support.20

On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected
contract of sale.21 It further ruled that granting that there was no perfected contract of sale, petitioner,
nevertheless, ratified the sale to respondent Locsin by his receipt of the purchase price, and his failure
to raise any protest over the said sale.22 The Court of Appeals refused to credit the petitioner's
allegation that the money his wife received constituted his salary from Businessday since the amount
he received as his salary, P24,000.00 per month, did not correspond to the amount he received during
his detention, P20,000.00 per month (deposits of P10,000.00 on every 15th and 30th of each month
in the accounts of the petitioner's in-laws). On the other hand, the total amount
received, P600,000.00, corresponds to the aggregate par value of petitioner's shares in Businessday.
Moreover, the financial condition of Businessday prevented it from granting any form of financial
assistance in favor of the petitioner, who was placed in an indefinite leave of absence, and, therefore,
not entitled to any salary.23

The Court of Appeals also ruled that although the manner of the cancellation of the petitioner's
certificates of stock and the subsequent issuance of the new certificate of stock in favor of respondent
Locsin was irregular, this irregularity will not relieve petitioner of the consequences of a consummated
sale.24

Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsin's
claims for moral and exemplary damages due to lack of supporting evidence.25

Hence, the present petition, where the following issues were raised:

I.

THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE

BETWEEN PETITIONER AND MR. LOCSIN OVER THE SHARES;

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF

THE SHARES TO MR. LOCSIN;

 III.

THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONER'S IN LAWS

WERE NOT PETITIONER'S SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE

SHARES;

IV.

THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED SALE

OF THE SHARES AND NOT THE CORPORATION; AND

V.

THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID

ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR.26

The petition is without merit.

The first issue that the petitioner raised is that there was no valid sale since respondent Locsin
exceeded his authority under the SPA27 issued in his, Joaquin and Holifena's favor. He alleged that the
authority of the afore-named agents to sell the shares of stock was limited to the following conditions:
(1) in the event of the petitioner's absence and incapacity; and (2) for the limited purpose of applying
the proceeds of the sale to the satisfaction of petitioner's subsisting obligations with the companies
adverted to in the SPA.28

Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word
"absence" to a condition wherein "a person disappears from his domicile, his whereabouts being
unknown, without leaving an agent to administer his property,"29 citing Article 381 of the Civil Code,
the entire provision hereunder quoted:

ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without
leaving an agent to administer his property, the judge, at the instance of an interested party, a
relative, or a friend, may appoint a person to represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the
absentee has expired.

Petitioner also puts forward that the word "incapacity" would be limited to mean "minority, insanity,
imbecility, the state of being deaf-mute, prodigality and civil interdiction."30 He cites Article 38 of the
Civil Code, in support of this definition, which is hereunder quoted:

ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil
interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person, from
certain obligations, as when the latter arise from his acts or from property relations, such as
easements.

Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered
by the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent
Locsin.
Petitioner's arguments are unpersuasive. It is a general rule that a power of attorney must be strictly
construed; the instrument will be held to grant only those powers that are specified, and the agent
may neither go beyond nor deviate from the power of attorney. However, the rule is not absolute and
should not be applied to the extent of destroying the very purpose of the power. If the language will
permit, the construction that should be adopted is that which will carry out instead of defeat the
purpose of the appointment. Clauses in a power of attorney that are repugnant to each other should
be reconciled so as to give effect to the instrument in accordance with its general intent or
predominant purpose. Furthermore, the instrument should always be deemed to give such powers as
essential or usual in effectuating the express powers.31

In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil
Code and of "incapacity" under Article 38 of the same Code negates the effect of the power of
attorney by creating absurd, if not impossible, legal situations. Article 381 provides the necessarily
stringent standards that would justify the appointment of a representative by a judge. Among the
standards the said article enumerates is that no agent has been appointed to administer the property.
In the present case, petitioner himself had already authorized agents to do specific acts of
administration and thus, no longer necessitated the appointment of one by the court. Likewise,
limiting the construction of "incapacity" to "minority, insanity, imbecility, the state of being a deaf-
mute, prodigality and civil interdiction," as provided under Article 38, would render the SPA
ineffective. Article 1919(3) of the Civil Code provides that the death, civil interdiction, insanity or
insolvency of the principal or of the agent extinguishes the agency. It would be equally incongruous, if
not outright impossible, for the petitioner to require himself to qualify as a minor, an imbecile, a deaf-
mute, or a prodigal before the SPA becomes operative. In such cases, not only would he be prevented
from appointing an agent, he himself would be unable to administer his property.

On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for a
reasonable construction, that is, "the state of not being present" and the "inability to act," given the
context that the SPA authorizes the agents to attend stockholders' meetings and vote in behalf of
petitioner, to sell the shares of stock, and other related acts. This construction covers the situation
wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32

Petitioner's contention that the shares may only be sold for the sole purpose of applying the proceeds
of the sale to the satisfaction of petitioner's subsisting obligations to the company is far-fetched. The
construction, which will carry out the purpose, is that which should be applied. Petitioner had not
submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor
could he have considered incurring any debts since he admitted that, at the time of its execution, he
was concerned about his possible arrest, death and disappearance. The language of the SPA clearly
enumerates, as among those acts that the agents were authorized to do, the act of applying the
proceeds of the sale of the shares to any obligations petitioner might have against the Businessday
group of companies. This interpretation is supported by the use of the word "and" in enumerating the
authorized acts, instead of phrases such as "only for," "for the purpose of," "in order to" or any similar
terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of
paying any liabilities with the Businessday group of companies.

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the
shares to respondent Locsin for the price of P600,000.00. This argument is unsustainable. Petitioner
received from respondent Locsin, through his wife and in-laws, the installment payments for a total
of P600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after
1982 when petitioner demanded the return of the shares. The petitioner's claim that he did not
instruct respondent Locsin to deposit the money to the bank accounts of his in-laws fails to prove that
petitioner did not give his consent to the sale since respondent Locsin was authorized, under the SPA,
to negotiate the terms and conditions of the sale including the manner of payment. Moreover, had
respondent Locsin given the proceeds directly to the petitioner, as the latter suggested in this petition,
the proceeds were likely to have been included among petitioner's properties which were confiscated
by the military. Instead, respondent Locsin deposited the money in the bank accounts of petitioner's
in-laws, and consequently, assured that the petitioner's wife received these amounts. Article 1882 of
the Civil Code provides that the limits of an agent's authority shall not be considered exceeded should
it have been performed in a manner more advantageous to the principal than that specified by him.
In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin
had not asked the petitioner to endorse and deliver the shares of stock, and (2) when Rebecca
Fernando asked the petitioner to endorse and deliver the certificates of stock, but petitioner refused
and even became upset.33 In either case, both statements only prove that petitioner refused to honor
his part as seller of the shares, even after receiving payments from the buyer. Had the petitioner not
known of or given his consent to the sale, he would have given back the payments as soon as
Fernando asked him to endorse and deliver the certificates of stock, an incident which unequivocally
confirmed that the funds he received, through his wife and his in-laws, were intended as payment for
his shares of stocks. Instead, petitioner held on to the proceeds of the sale after it had been made
clear to him that respondent Locsin had considered the P600,000.00 as payment for the shares, and
asked petitioner, through Fernando, to endorse and deliver the stock certificates for cancellation.

As regards the third issue, petitioner's allegation that the installment payments he was adjudged to
have received for the shares were actually salaries which Businessday promised to pay him during his
detention is unsupported and implausible. Petitioner received P20,000.00 per month through his in-
laws; this amount does not correspond to his monthly salary at P24,000.00.34 Nor does the amount
received correspond to the amount which Businessday was supposed to be obliged to pay petitioner,
which was only P45,000.00 to P60,000.00 per annum.35 Secondly, the petitioner's wife did not receive
funds from respondent Locsin or Businessday for the entire duration of petitioner's detention. Instead,
when the total amount received by the petitioner reached the aggregate amount of his shares at par
value - - P600,000.00 - - the payments stopped. Petitioner even testified that when respondent Locsin
denied knowing the petitioner soon after his arrest, he believed respondent Locsin's commitment to
pay his salaries during his detention to be nothing more than lip-service.36

Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of
Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive
"salaries" for work he will not perform, which is not a demandable debt since petitioner was on an
extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article
748 of the Civil Code, if the value of the personal property donated exceeds P5,000.00, the donation
and the acceptance shall have to be made in writing. Otherwise, the donation will be void. In the
present case, petitioner admitted in his testimony38 that such arrangement was not made in writing
and, hence, is void.

The fact that some of the deposit slips and communications made to petitioner's wife contain the
phrase "household expenses" does not disprove the sale of the shares. The money was being
deposited to the bank accounts of the petitioner's in-laws, and not to the account of the petitioner or
his wife, precisely because some of his property had already been confiscated by the military. Had
they used the phrase "sale of shares," it would have defeated the purpose of not using their own bank
accounts, which was to conceal from the military any transaction involving the petitioner's property.

Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not
respondent Locsin, was the party to the transaction. The curious facts that the payments were
received on the 15th and 30th of each month and that the payor named in the checks was
Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained cash
advances from the company, paid to him on the 15th and 30th of the month, so that he can pay
petitioner for the shares. To support his claim, he presented Businessday's financial records and the
testimony of Leo Atienza, the Company's Accounting Manager. When asked why the term "shares of
stock" was used for the entries, instead of "cash advances," Atienza explained that the term "shares of
stock" was more specific rather than the broader phrase "cash advances."39 More to the point, had the
entries been for "shares of stock," the issuance of shares should have been reflected in the stock and
transfer books of Businessday, which the petitioner presented as evidence. Instead the stock and
transfer books reveal that the increase in respondent Locsin's shares was a result of the cancellation
and transfer of petitioner's shares in favor of respondent Locsin.

Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed
shares of stock is void since it contravenes Article 1491 of the Civil Code, which provides that:
ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:

x    x    x

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the
consent of the principal has been given; x x x.

It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as
agent for another cannot be permitted to deal in the agency matter on his own account and for his
own benefit without the consent of his principal, freely given, with full knowledge of every detail
known to the agent which might affect the transaction.40 The prohibition against agents purchasing
property in their hands for sale or management is, however, clearly, not absolute. It does not apply
where the principal consents to the sale of the property in the hands of the agent or administrator.>41

In the present case, the parties have conflicting allegations. While respondent Locsin averred that
petitioner had permitted him to purchase petitioner's shares, petitioner vehemently denies having
known of the transaction. However, records show that petitioner's position is less credible than that
taken by respondent Locsin given petitioner's contemporaneous and subsequent acts.42 In 1980, when
Fernando returned a stock certificate she borrowed from the petitioner, it was marked "cancelled."
Although the petitioner alleged that he was furious when he saw the word cancelled, he had not
demanded the issuance of a new certificate in his name. Instead of having been put on his guard,
petitioner remained silent over this obvious red flag and continued receiving, through his wife,
payments which totalled to the aggregate amount of the shares of stock valued at par. When the
payments stopped, no demand was made by either petitioner or his wife for further payments.

From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price
of P600,000.00 for the shares of stock, and had in fact facilitated the implementation of the terms of
the payment by providing respondent Locsin, through petitioner's wife, with the information on the
bank accounts of his in-laws. Petitioner's wife and his son even provided receipts for the payments
that were made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction
and not an act of gratuity.

Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were
fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the name of the
buyer, respondent Locsin, without the petitioner delivering to the buyer his certificates of stock.
Section 63 of the Corporation Code provides that:

Sec.63. Certificate of stock and transfer of shares.' xxx Shares of stock so issued are personal
property and may be transferred by delivery of the certificate or certificates indorsed by the owner or
his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation showing the names of the parties to the transaction, the date of the transfer, the number
of the certificate or certificates and the number of shares transferred. (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of shares - the delivery of the
endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this rule
cannot be applied in the present case without causing the injustice sought to be avoided. As had been
amply demonstrated, there was a valid sale of stocks. Petitioner's failure to deliver the shares to their
rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly profit himself by
denying the validity of such sale. Thus, while the manner of the cancellation of petitioner's certificates
of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular, we
must, nonetheless, declare the validity of the sale between the parties. Neither does this irregularity
prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had intended to
conceal his being a stockholder of Businessday.44 The cancellation of his name from the stock and
transfer book, even before the shares were actually sold, had been done with his consent. As earlier
explained, even the subsequent sale of the shares in favor of Locsin had been done with his consent.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed
Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of
the shares of stock in favor of respondent Locsin. No costs.

SO ORDERED.

[G.R. NO. 140667 : August 12, 2004]

WOODCHILD HOLDINGS, INC., Petitioner, v. ROXAS ELECTRIC AND

CONSTRUCTION COMPANY, INC., Respondent.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals in CA-
G.R. CV No. 56125 reversing the Decision2 of the Regional Trial Court of Makati, Branch
57, which ruled in favor of the petitioner.

The Antecedents

The respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the
Roxas Electric and Construction Company, was the

owner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer
Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2 covered by TCT No.
78086. A portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt
road accessing to the Sumulong Highway, Antipolo, Rizal.

At a special meeting on May 17, 1991, the respondent's Board of Directors approved a
resolution authorizing the corporation, through its president, Roberto B. Roxas, to sell
Lot No. 491-A-3-B-2 covered by TCT No. 78086, with an area of 7,213 square meters,
at a price and under such terms and conditions which he deemed most reasonable and
advantageous to the corporation; and to execute, sign and deliver the pertinent sales
documents and receive the proceeds of the sale for and on behalf of the company.3

Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-3-B-2 covered
by TCT No. 78086 on which it planned to construct its warehouse building, and a
portion of the adjoining lot, Lot No. 491-A-3-B-1, so that its 45-foot container van
would be able to readily enter or leave the property. In a Letter to Roxas dated June
21, 1991, WHI President Jonathan Y. Dy offered to buy Lot No. 491-A-3-B-2 under
stated terms and conditions for P1,000 per square meter or at the price of
P7,213,000.4 One of the terms incorporated in Dy's offer was the following provision:

5. This Offer to Purchase is made on the representation and warranty of the

OWNER/SELLER, that he holds a good and registrable title to the property, which shall
be conveyed CLEAR and FREE of all liens and encumbrances, and that the area of 7,213
square meters of the subject property already includes the area on which the right of
way traverses from the main lot (area) towards the exit to the Sumulong Highway as
shown in the location plan furnished by the Owner/Seller to the buyer. Furthermore, in
the event that the right of way is insufficient for the buyer's purposes (example: entry
of a 45-foot container), the seller agrees to sell additional square meter from his
current adjacent property to allow the buyer to full access and full use of the property.5

Roxas indicated his acceptance of the offer on page 2 of the deed. Less than a month
later or on July 1, 1991, Roxas, as President of RECCI, as vendor, and Dy, as President
of WHI, as vendee, executed a contract to sell in which RECCI bound and obliged itself
to sell to Dy Lot No. 491-A-3-B-2 covered by TCT No. 78086 for P7,213,000.6 On
September 5, 1991, a Deed of Absolute Sale7 in favor of WHI was issued, under which
Lot No. 491-A-3-B-2 covered by TCT No. 78086 was sold for P5,000,000, receipt of
which was acknowledged by Roxas under the following terms and conditions:

The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the
beneficial use of and a right of way from Sumulong Highway to the property herein
conveyed consists of 25 square meters wide to be used as the latter's egress from and
ingress to and an additional 25 square meters in the corner of Lot No. 491-A-3-B-1, as
turning and/or maneuvering area for Vendee's vehicles.

The Vendor agrees that in the event that the right of way is insufficient for the Vendee's
use (ex entry of a 45-foot container) the Vendor agrees to sell additional square meters
from its current adjacent property to allow the Vendee full access and full use of the
property.

The Vendor hereby undertakes and agrees, at its account, to defend the title of the
Vendee to the parcel of land and improvements herein conveyed, against all claims of
any and all persons or entities, and that the Vendor hereby warrants the right of the
Vendee to possess and own the said parcel of land and improvements thereon and will
defend the Vendee against all present and future claims and/or action in relation
thereto, judicial and/or administrative. In particular, the Vendor shall eject all existing
squatters and occupants of the premises within two (2) weeks from the signing hereof.
In case of failure on the part of the Vendor to eject all occupants and squatters within
the two-week period or breach of any of the stipulations, covenants and terms and
conditions herein provided and that of contract to sell dated 1 July 1991, the Vendee
shall have the right to cancel the sale and demand reimbursement for all payments
made to the Vendor with interest thereon at 36% per annum.8

On September 10, 1991, the Wimbeco Builder's, Inc. (WBI) submitted its quotation for
P8,649,000 to WHI for the construction of the warehouse building on a portion of the
property with an area of 5,088 square meters.9 WBI proposed to start the project on
October 1, 1991 and to turn over the building to WHI on February 29, 1992.10

In a Letter dated September 16, 1991, Ponderosa Leather Goods Company, Inc.
confirmed its lease agreement with WHI of a 5,000-square-meter portion of the
warehouse yet to be constructed at the rental rate of P65 per square meter. Ponderosa
emphasized the need for the warehouse to be ready for occupancy before April 1,
1992.11 WHI accepted the offer. However, WBI failed to commence the construction of
the warehouse in October 1, 1991 as planned because of the presence of squatters in
the property and suggested a renegotiation of the contract after the squatters shall
have been evicted.12 Subsequently, the squatters were evicted from the property.

On March 31, 1992, WHI and WBI executed a Letter-Contract for the construction of
the warehouse building for P11,804,160.13 The contractor started construction in April
1992 even before the building officials of Antipolo City issued a building permit on May
28, 1992. After the warehouse was finished, WHI issued on March 21, 1993 a certificate
of occupancy by the building official. Earlier, or on March 18, 1993, WHI, as lessor, and
Ponderosa, as lessee, executed a contract of lease over a portion of the property for a
monthly rental of P300,000 for a period of three years from March 1, 1993 up to
February 28, 1996.14

In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were
parked on a portion of the property over which WHI had been granted a right of way.
Roxas promised to look into the matter. Dy and Roxas discussed the need of the WHI to
buy a 500-square-meter portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as
provided for in the deed of absolute sale. However, Roxas died soon thereafter. On April
15, 1992, the WHI wrote the RECCI, reiterating its verbal requests to purchase a
portion of the said lot as provided for in the deed of absolute sale, and complained
about the latter's failure to eject the squatters within the three-month period agreed
upon in the said deed.

The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085 for its beneficial use within 72 hours from notice thereof, otherwise the
appropriate action would be filed against it. RECCI rejected the demand of WHI. WHI
reiterated its demand in a Letter dated May 29, 1992. There was no response from
RECCI.

On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial
Court of Makati, for specific performance and damages, and alleged, inter alia, the
following in its complaint:

5. The "current adjacent property" referred to in the aforequoted paragraph of the Deed
of Absolute Sale pertains to the property covered by Transfer Certificate of Title No. N-
78085 of the Registry of Deeds of Antipolo, Rizal, registered in the name of herein
defendant Roxas Electric.

6. Defendant Roxas Electric in patent violation of the express and valid terms of the
Deed of Absolute Sale unjustifiably refused to deliver to Woodchild Holdings the
stipulated beneficial use and right of way consisting of 25 square meters and 55 square
meters to the prejudice of the plaintiff.

7. Similarly, in as much as the 25 square meters and 55 square meters alloted to

Woodchild Holdings for its beneficial use is inadequate as turning and/or maneuvering
area of its 45-foot container van, Woodchild Holdings manifested its intention pursuant
to para. 5 of the Deed of Sale to purchase additional square meters from Roxas Electric
to allow it full access and use of the purchased property, however, Roxas Electric
refused and failed to merit Woodchild Holdings' request contrary to defendant Roxas
Electric's obligation under the Deed of Absolute Sale (Annex "A").
8. Moreover, defendant, likewise, failed to eject all existing squatters and occupants of
the premises within the stipulated time frame and as a consequence thereof, plaintiff's
planned construction has been considerably delayed for seven (7) months due to the
squatters who continue to trespass and obstruct the subject property, thereby
Woodchild Holdings incurred substantial losses amounting to P3,560,000.00 occasioned
by the increased cost of construction materials and labor.

9. Owing further to Roxas Electric's deliberate refusal to comply with its obligation
under Annex "A," Woodchild Holdings suffered unrealized income of P300,000.00 a
month or P2,100,000.00 supposed income from rentals of the subject property for
seven (7) months.

10. On April 15, 1992, Woodchild Holdings made a final demand to Roxas Electric to
comply with its obligations and warranties under the Deed of Absolute Sale but
notwithstanding such demand, defendant Roxas Electric refused and failed and continue
to refuse and fail to heed plaintiff's demand for compliance.

Copy of the demand letter dated April 15, 1992 is hereto attached as Annex "B" and
made an integral part hereof.

11. Finally, on 29 May 1991, Woodchild Holdings made a letter request addressed to
Roxas Electric to particularly annotate on Transfer Certificate of Title No. N-78085 the
agreement under Annex "A" with respect to the beneficial use and right of way,
however, Roxas Electric unjustifiably ignored and disregarded the same.

Copy of the letter request dated 29 May 1992 is hereto attached as Annex "C" and
made an integral part hereof.

12. By reason of Roxas Electric's continuous refusal and failure to comply with
Woodchild Holdings' valid demand for compliance under Annex "A," the latter was
constrained to litigate, thereby incurring damages as and by way of attorney's fees in
the amount of P100,000.00 plus costs of suit and expenses of litigation.15

The WHI prayed that, after due proceedings, judgment be rendered in its favor, thus:

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of Woodchild

Holdings and ordering Roxas Electric the following:

a) to deliver to Woodchild Holdings the beneficial use of the stipulated 25 square

meters and 55 square meters;

b) to sell to Woodchild Holdings additional 25 and 100 square meters to allow it full
access and use of the purchased property pursuant to para. 5 of the Deed of Absolute
Sale;

c) to cause annotation on Transfer Certificate of Title No. N-78085 the beneficial use
and right of way granted to Woodchild Holdings under the Deed of Absolute Sale;
d) to pay Woodchild Holdings the amount of P5,660,000.00, representing actual
damages and unrealized income;

e) to pay attorney's fees in the amount of P100,000.00; and cralawlibrary

f) to pay the costs of suit.

Other reliefs just and equitable are prayed for.16

In its answer to the complaint, the RECCI alleged that it never authorized its former
president, Roberto Roxas, to grant the beneficial use of any portion of Lot No. 491-A-3-
B-1, nor agreed to sell any portion thereof or create a lien or burden thereon. It alleged
that, under the Resolution approved on May 17, 1991, it merely authorized Roxas to
sell Lot No. 491-A-3-B-2 covered by TCT No. 78086. As such, the grant of a right of
way and the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No.
78085 in the said deed are ultra vires. The RECCI further alleged that the provision
therein that it would sell a portion of Lot No. 491-A-3-B-1 to the WHI lacked the
essential elements of a binding contract.17

In its amended answer to the complaint, the RECCI alleged that the delay in the
construction of its warehouse building was due to the failure of the WHI's contractor to
secure a building permit thereon.18

During the trial, Dy testified that he told Roxas that the petitioner was buying a portion
of Lot No. 491-A-3-B-1 consisting of an area of 500 square meters, for the price of
P1,000 per square meter.

On November 11, 1996, the trial court rendered judgment in favor of the WHI, the
decretal portion of which reads:

WHEREFORE, judgment is hereby rendered directing defendant:

(1) To allow plaintiff the beneficial use of the existing right of way plus the stipulated 25
sq. m. and 55 sq. m.;

(2) To sell to plaintiff an additional area of 500 sq. m. priced at P1,000 per sq. m. to
allow said plaintiff full access and use of the purchased property pursuant to Par. 5 of
their Deed of Absolute Sale;

(3) To cause annotation on TCT No. N-78085 the beneficial use and right of way
granted by their Deed of Absolute Sale;

(4) To pay plaintiff the amount of P5,568,000 representing actual damages and
plaintiff's unrealized income;

(5) To pay plaintiff P100,000 representing attorney's fees; and cralawlibrary

To pay the costs of suit.

SO ORDERED.19

The trial court ruled that the RECCI was estopped from disowning the apparent
authority of Roxas under the May 17, 1991 Resolution of its Board of Directors. The
court reasoned that to do so would prejudice the WHI which transacted with Roxas in
good faith, believing that he had the authority to bind the WHI relating to the easement
of right of way, as well as the right to purchase a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085.

The RECCI appealed the decision to the CA, which rendered a decision on November 9,
1999 reversing that of the trial court, and ordering the dismissal of the complaint. The
CA ruled that, under the resolution of the Board of Directors of the RECCI, Roxas was
merely authorized to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, but not to
grant right of way in favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to
grant an option to the petitioner to buy a portion thereof. The appellate court also ruled
that the grant of a right of way and an option to the respondent were so lopsided in
favor of the respondent because the latter was authorized to fix the location as well as
the price of the portion of its property to be sold to the respondent. Hence, such
provisions contained in the deed of absolute sale were not binding on the RECCI. The
appellate court ruled that the delay in the construction of WHI's warehouse was due to
its fault.

The Present Petition

The petitioner now comes to this Court asserting that:

I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ABSOLUTE SALE
(EXH. "C") IS ULTRA VIRES.

II.

THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT
A QUO ALLOWING THE PLAINTIFF-APPELLEE THE BENEFICIAL USE OF THE EXISTING
RIGHT OF WAY PLUS THE STIPULATED 25 SQUARE METERS AND 55 SQUARE METERS
BECAUSE THESE ARE VALID STIPULATIONS AGREED BY BOTH PARTIES TO THE DEED
OF ABSOLUTE SALE (EXH. "C").

III.

THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT OF APPEALS TO RULE

THAT THE STIPULATIONS OF THE DEED OF ABSOLUTE SALE (EXH. "C") WERE
DISADVANTAGEOUS TO THE APPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS
PROPERTY WITHOUT DUE PROCESS.

IV.
IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF PROPERTY WITHOUT DUE
PROCESS BY THE ASSAILED DECISION.

V.

THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE APPELLANT TO
EVICT THE SQUATTERS ON THE LAND AS AGREED IN THE DEED OF ABSOLUTE SALE
(EXH. "C").

VI.

THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT
A QUO DIRECTING THE DEFENDANT TO PAY THE PLAINTIFF THE AMOUNT OF
P5,568,000.00 REPRESENTING ACTUAL DAMAGES AND PLAINTIFF'S UNREALIZED
INCOME AS WELL AS ATTORNEY'S FEES.20

The threshold issues for resolution are the following: (a) whether the respondent is
bound by the provisions in the deed of absolute sale granting to the petitioner beneficial
use and a right of way over a portion of Lot

No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the option to the
petitioner to buy a portion thereof, and, if so, whether such agreement is enforceable
against the respondent; (b) whether the respondent failed to eject the squatters on its
property within two weeks from the execution of the deed of absolute sale; and, (c)
whether the respondent is liable to the petitioner for damages.

On the first issue, the petitioner avers that, under its Resolution of May 17, 1991, the
respondent authorized Roxas, then its president, to grant a right of way over a portion
of Lot No. 491-A-3-B-1 in favor of the petitioner, and an option for the respondent to
buy a portion of the said property. The petitioner contends that when the respondent
sold Lot No. 491-A-3-B-2 covered by TCT No. 78086, it (respondent) was well aware of
its obligation to provide the petitioner with a means of ingress to or egress from the
property to the Sumulong Highway, since the latter had no adequate outlet to the
public highway. The petitioner asserts that it agreed to buy the property covered by
TCT No. 78085 because of the grant by the respondent of a right of way and an option
in its favor to buy a portion of the property covered by TCT No. 78085. It contends that
the respondent never objected to Roxas' acceptance of its offer to purchase the
property and the terms and conditions therein; the respondent even allowed Roxas to
execute the deed of absolute sale in its behalf. The petitioner asserts that the
respondent even received the purchase price of the property without any objection to
the terms and conditions of the said deed of sale. The petitioner claims that it acted in
good faith, and contends that after having been benefited by the said sale, the
respondent is estopped from assailing its terms and conditions. The petitioner notes
that the respondent's Board of Directors never approved any resolution rejecting the
deed of absolute sale executed by Roxas for and in its behalf. As such, the respondent
is obliged to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 with an
area of 500 square meters at the price of P1,000 per square meter, based on its
evidence and Articles 649 and 651 of the New Civil Code.
For its part, the respondent posits that Roxas was not so authorized under the May 17,
1991 Resolution of its Board of Directors to impose a burden or to grant a right of way
in favor of the petitioner on Lot No. 491-A-3-B-1, much less convey a portion thereof to
the petitioner. Hence, the respondent was not bound by such provisions contained in
the deed of absolute sale. Besides, the respondent contends, the petitioner cannot
enforce its right to buy a portion of the said property since there was no agreement in
the deed of absolute sale on the price thereof as well as the specific portion and area to
be purchased by the petitioner.

We agree with the respondent.

In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,21 we held that:

A corporation is a juridical person separate and distinct from its stockholders or

members. Accordingly, the property of the corporation is not the property of its
stockholders or members and may not be sold by the stockholders or members without
express authorization from the corporation's board of directors. Section 23 of BP 68,
otherwise known as the Corporation Code of the Philippines, provides:

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

Indubitably, a corporation may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or agents
in the normal course of business. The general principles of agency govern the relation
between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law. - 22

Generally, the acts of the corporate officers within the scope of their authority are
binding on the corporation. However, under Article 1910 of the New Civil Code, acts
done by such officers beyond the scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or tacitly, or is estopped from denying them:

Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.

Thus, contracts entered into by corporate officers beyond the scope of authority are
unenforceable against the corporation unless ratified by the corporation.23

In BA Finance Corporation v. Court of Appeals,24 we also ruled that persons dealing with
an assumed agency, whether the assumed agency be a general or special one, are
bound at their peril, if they would hold the principal liable, to ascertain not only the fact
of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it.

In this case, the respondent denied authorizing its then president Roberto B. Roxas to
sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, and to create a lien or
burden thereon. The petitioner was thus burdened to prove that the respondent so
authorized Roxas to sell the same and to create a lien thereon.

Central to the issue at hand is the May 17, 1991 Resolution of the Board of Directors of
the respondent, which is worded as follows:

RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any
interested buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo,
Rizal, covered by Transfer Certificate of Title No. N-78086, at a price and on terms and
conditions which he deems most reasonable and advantageous to the corporation;

FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be, as
he is hereby authorized to execute, sign and deliver the pertinent sales documents and
receive the proceeds of sale for and on behalf of the company.25

Evidently, Roxas was not specifically authorized under the said resolution to grant a
right of way in favor of the petitioner on a portion of Lot No. 491-A-3-B-1 or to agree to
sell to the petitioner a portion thereof. The authority of Roxas, under the resolution, to
sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority to sell
a portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights
thereon. Neither may such authority be implied from the authority granted to Roxas to
sell Lot No. 491-A-3-B-2 to the petitioner "on such terms and conditions which he
deems most reasonable and advantageous." Under paragraph 12, Article 1878 of the
New Civil Code, a special power of attorney is required to convey real rights over
immovable property.26 Article 1358 of the New Civil Code requires that contracts which
have for their object the creation of real rights over immovable property must appear in
a public document.27 The petitioner cannot feign ignorance of the need for Roxas to
have been specifically authorized in writing by the Board of Directors to be able to
validly grant a right of way and agree to sell a portion of Lot No. 491-A-3-B-1. The rule
is that if the act of the agent is one which requires authority in writing, those dealing
with him are charged with notice of that fact.28

Powers of attorney are generally construed strictly and courts will not infer or presume
broad powers from deeds which do not sufficiently include property or subject under
which the agent is to deal.29 The general rule is that the power of attorney must be
pursued within legal strictures, and the agent can neither go beyond it; nor beside it.
The act done must be legally identical with that authorized to be done.30 In sum, then,
the consent of the respondent to the assailed provisions in the deed of absolute sale
was not obtained; hence, the assailed provisions are not binding on it.

We reject the petitioner's submission that, in allowing Roxas to execute the contract to
sell and the deed of absolute sale and failing to reject or disapprove the same, the
respondent thereby gave him apparent authority to grant a right of way over Lot No.
491-A-3-B-1 and to grant an option for the respondent to sell a portion thereof to the
petitioner. Absent estoppel or ratification, apparent authority cannot remedy the lack of
the written power required under the statement of frauds.31 In addition, the petitioner's
fallacy is its wrong assumption of the unproved premise that the respondent had full
knowledge of all the terms and conditions contained in the deed of absolute sale when
Roxas executed it.

It bears stressing that apparent authority is based on estoppel and can arise from two
instances: first, the principal may knowingly permit the agent to so hold himself out as
having such authority, and in this way, the principal becomes estopped to claim that
the agent does not have such authority; second, the principal may so clothe the agent
with the indicia of authority as to lead a reasonably prudent person to believe that he
actually has such authority.32 There can be no apparent authority of an agent without
acts or conduct on the part of the principal and such acts or conduct of the principal
must have been known and relied upon in good faith and as a result of the exercise of
reasonable prudence by a third person as claimant and such must have produced a
change of position to its detriment. The apparent power of an agent is to be determined
by the acts of the principal and not by the acts of the agent.33

For the principle of apparent authority to apply, the petitioner was burdened to prove
the following: (a) the acts of the respondent justifying belief in the agency by the
petitioner; (b) knowledge thereof by the respondent which is sought to be held; and,
(c) reliance thereon by the petitioner consistent with ordinary care and prudence.34 In
this case, there is no evidence on record of specific acts made by the
respondent35 showing or indicating that it had full knowledge of any representations
made by Roxas to the petitioner that the respondent had authorized him to grant to the
respondent an option to buy a portion of Lot No. 491-A-3-B-1 covered by TCT No.
78085, or to create a burden or lien thereon, or that the respondent allowed him to do
so.

The petitioner's contention that by receiving and retaining the P5,000,000 purchase
price of Lot No. 491-A-3-B-2, the respondent effectively and impliedly ratified the grant
of a right of way on the adjacent lot, Lot No. 491-A-3-B-1, and to grant to the
petitioner an option to sell a portion thereof, is barren of merit. It bears stressing that
the respondent sold Lot No. 491-A-3-B-2 to the petitioner, and the latter had taken
possession of the property. As such, the respondent had the right to retain the
P5,000,000, the purchase price of the property it had sold to the petitioner. For an act
of the principal to be considered as an implied ratification of an unauthorized act of an
agent, such act must be inconsistent with any other hypothesis than that he approved
and intended to adopt what had been done in his name.36 Ratification is based on
waiver - the intentional relinquishment of a known right. Ratification cannot be inferred
from acts that a principal has a right to do independently of the unauthorized act of the
agent. Moreover, if a writing is required to grant an authority to do a particular act,
ratification of that act must also be in writing.37 Since the respondent had not ratified
the unauthorized acts of Roxas, the same are unenforceable.38 Hence, by the
respondent's retention of the amount, it cannot thereby be implied that it had ratified
the unauthorized acts of its agent, Roberto Roxas.

On the last issue, the petitioner contends that the CA erred in dismissing its complaint
for damages against the respondent on its finding that the delay in the construction of
its warehouse was due to its (petitioner's) fault. The petitioner asserts that the CA
should have affirmed the ruling of the trial court that the respondent failed to cause the
eviction of the squatters from the property on or before September 29, 1991; hence,
was liable for P5,660,000. The respondent, for its part, asserts that the delay in the
construction of the petitioner's warehouse was due to its late filing of an application for
a building permit, only on May 28, 1992.

The petitioner's contention is meritorious. The respondent does not deny that it failed to
cause the eviction of the squatters on or before September 29, 1991. Indeed, the
respondent does not deny the fact that when the petitioner wrote the respondent
demanding that the latter cause the eviction of the squatters on April 15, 1992, the
latter were still in the premises. It was only after receiving the said letter in April 1992
that the respondent caused the eviction of the squatters, which thus cleared the way
for the petitioner's contractor to commence the construction of its warehouse and
secure the appropriate building permit therefor.

The petitioner could not be expected to file its application for a building permit before
April 1992 because the squatters were still occupying the property. Because of the
respondent's failure to cause their eviction as agreed upon, the petitioner's contractor
failed to commence the construction of the warehouse in October 1991 for the agreed
price of P8,649,000. In the meantime, costs of construction materials spiraled. Under
the construction contract entered into between the petitioner and the contractor, the
petitioner was obliged to pay P11,804,160,39 including the additional work costing
P1,441,500, or a net increase of P1,712,980.40 The respondent is liable for the
difference between the original cost of construction and the increase thereon,
conformably to Article 1170 of the New Civil Code, which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof, are
liable for damages.

The petitioner, likewise, lost the amount of P3,900,000 by way of unearned income
from the lease of the property to the Ponderosa Leather Goods Company. The
respondent is, thus, liable to the petitioner for the said amount, under Articles 2200
and 2201 of the New Civil Code:

Art. 2200. Indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain.

Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible
for all damages which may be reasonably attributed to the non-performance of the
obligation.

In sum, we affirm the trial court's award of damages and attorney's fees to the
petitioner.
IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered AFFIRMING the
assailed Decision of the Court of Appeals WITH MODIFICATION. The respondent is
ordered to pay to the petitioner the amount of P5,612,980 by way of actual damages
and P100,000 by way of attorney's fees. No costs.

SO ORDERED.

G.R. No. 148116             April 14, 2004

ANTONIO K. LITONJUA and AURELIO K. LITONJUA, JR., petitioners,

vs.
MARY ANN GRACE FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA, represented by
GREGORIO T. ELEOSIDA, HEIRS OF DOMINGO B. TICZON, represented by MARY MEDIATRIX
T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ,
DOMINIC TICZON, JOSEFINA LUISA PIAMONTE, JOHN DOES and JANE DOES, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. CV No.
1 

64940, which reversed and set aside the June 23, 1999 Decision of the Regional Trial Court of
2 

Pasig City, Branch 68, in Civil Case No. 65629, as well as its Resolution dated April 30, 2001
denying the petitioners’ motion for reconsideration of the aforesaid decision.

The heirs of Domingo B. Ticzon are the owners of a parcel of land located in San Pablo City,
3 

covered by Transfer Certificate of Title (TCT) No. T-36766 of the Register of Deeds of San Pablo
City. On the other hand, the heirs of Paz Ticzon Eleosida, represented by Gregorio T. Eleosida, are
4 

the owners of a parcel of land located in San Pablo City, covered by TCT No. 36754, also of the
Register of Deeds of San Pablo City. 5

The Case for the Petitioners

Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers,
offered to sell to the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua, Jr., the parcels of land
covered by TCT Nos. 36754 and 36766. The petitioners were shown a locator plan and copies of the
titles showing that the owners of the properties were represented by Mary Mediatrix Fernandez and
Gregorio T. Eleosida, respectively. The brokers told the petitioners that they were authorized by
respondent Fernandez to offer the property for sale. The petitioners, thereafter, made two ocular
inspections of the property, in the course of which they saw some people gathering coconuts.
In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez and the two
brokers at the petitioners’ office in Mandaluyong City. The petitioners and respondent Fernandez
6 

agreed that the petitioners would buy the property consisting of 36,742 square meters, for the price
of P150 per square meter, or the total sum of P5,098,500. They also agreed that the owners would
shoulder the capital gains tax, transfer tax and the expenses for the documentation of the sale. The
petitioners and respondent Fernandez also agreed to meet on December 8, 1995 to finalize the sale.
It was also agreed upon that on the said date, respondent Fernandez would present a special power
of attorney executed by the owners of the property, authorizing her to sell the property for and in
their behalf, and to execute a deed of absolute sale thereon. The petitioners would also remit the
purchase price to the owners, through respondent Fernandez. However, only Agapito Fisico
attended the meeting. He informed the petitioners that respondent Fernandez was encountering
some problems with the tenants and was trying to work out a settlement with them. After a few
7 

weeks of waiting, the petitioners wrote respondent Fernandez on January 5, 1995, demanding that
their transaction be finalized by January 30, 1996. 8

When the petitioners received no response from respondent Fernandez, the petitioners sent her
another Letter dated February 1, 1996, asking that the Deed of Absolute Sale covering the property
9 

be executed in accordance with their verbal agreement dated November 27, 1995. The petitioners
also demanded the turnover of the subject properties to them within fifteen days from receipt of the
said letter; otherwise, they would have no option but to protect their interest through legal means.

Upon receipt of the above letter, respondent Fernandez wrote the petitioners on February 14,
1996 and clarified her stand on the matter in this wise:
10 

1) It is not true I agreed to shoulder registration fees and other miscellaneous expenses, etc.
I do not recall we ever discussed about them. Nonetheless, I made an assurance at that time
that there was no liens/encumbrances and tenants on my property (TCT – 36755).

2) It is not true that we agreed to meet on December 8, 1995 in order to sign the Deed of
Absolute Sale. The truth of the matter is that you were the one who emphatically stated that
you would prepare a Contract to Sell and requested us to come back first week of December
as you would be leaving the country then. In fact, what you were demanding from us was to
apprise you of the status of the property, whether we would be able to ascertain that there
are really no tenants. Ms. Alimario and I left your office, but we did not assure you that we
would be back on the first week of December.

Unfortunately, some people suddenly appeared and claiming to be "tenants" for the entire
properties (including those belonging to my other relatives.) Another thing, the Barangay
Captain now refuses to give a certification that our properties are not tenanted.

Thereafter, I informed my broker, Ms. Lulu Alimario, to relay to Mr. Agapito that due to the
appearance of "alleged tenants" who are demanding for a one-hectare share, my cousin and
I have thereby changed our mind and that the sale will no longer push through. I specifically
instructed her to inform you thru your broker that we will not be attending the meeting to be
held sometime first week of December.

In view thereof, I regret to formally inform you now that we are no longer selling the property
until all problems are fully settled. We have not demanded and received from you any
earnest money, thereby, no obligations exist. In the meantime, we hope that in the future we
will eventually be able to transact business since we still have other properties in San Pablo
City.
11
Appended thereto was a copy of respondent Fernandez’ letter to the petitioners dated January 16,
1996, in response to the latter’s January 5, 1996 letter.
12

On April 12, 1996, the petitioners filed the instant Complaint for specific performance with
damages against respondent Fernandez and the registered owners of the property. In their
13 

complaint, the petitioners alleged, inter alia, the following:

4. On 27 November 1995, defendants offered to sell to plaintiffs two (2) parcels of land
covered by Transfer Certificates of Title Nos. 36766 and 36754 measuring a total of 36,742
square meters in Barrio Concepcion, San Pablo City. … After a brief negotiation, defendants
committed and specifically agreed to sell to plaintiffs 33,990 square meters of the two (2)
aforementioned parcels of land at P150.00 per square meter.

5. The parties also unequivocally agreed to the following:

(a) The transfer tax and all the other fees and expenses for the titling of the subject property
in plaintiffs’ names would be for defendants’ account.

(b) The plaintiffs would pay the entire purchase price of P5,098,500.00 for the
aforementioned 33,990 square meters of land in plaintiffs’ office on 8 December 1995.

6. Defendants repeatedly assured plaintiffs that the two (2) subject parcels of land were free
from all liens and encumbrances and that no squatters or tenants occupied them.

7. Plaintiffs, true to their word, and relying in good faith on the commitment of defendants,
pursued the purchase of the subject parcels of lands. On 5 January 1996, plaintiffs sent a
letter of even date to defendants, … setting the date of sale and payment on 30 January
1996.

7.1 Defendants received the letter on 12 January 1996 but did not reply to it.

8. On 1 February 1996, plaintiffs again sent a letter of even date to defendants demanding
execution of the Deed of Sale.

8.1 Defendants received the same on 6 February 1996. Again, there was no reply.
Defendants thus reneged on their commitment a second time.

9. On 14 February 1996, defendant Fernandez sent a written communication of the same

date to plaintiffs enclosing therein a copy of her 16 January 1996 letter to plaintiffs which
plaintiffs never received before. Defendant Fernandez stated in her 16 January 1996 letter
that despite the meeting of minds among the parties over the 33,990 square meters of land
for P150.00 per square meter on 27 November 1995, defendants suddenly had a change of
heart and no longer wished to sell the same. Paragraph 6 thereof unquestionably shows
defendants’ previous agreement as above-mentioned and their unjustified breach of their
obligations under it. …

10. Defendants cannot unilaterally, whimsically and capriciously cancel a perfected contract
to sell. …

11. Plaintiffs intended to use the subject property for their subdivision project to support
plaintiffs’ quarry operations, processing of aggregate products and manufacture of
 construction materials. Consequently, by reason of defendants’ failure to honor their just
obligations, plaintiffs suffered, and continue to suffer, actual damages, consisting in
unrealized profits and cost of money, in the amount of at least P5 Million.

12. Plaintiffs also suffered sleepless nights and mental anxiety on account of defendants’
fraudulent actuations for which reason defendants are liable to plaintiffs for moral damages
in the amount of at least P1.5 Million.

13. By reason of defendants’ above-described fraudulent actuations, plaintiffs, despite their

willingness and ability to pay the agreed purchase price, have to date been unable to take
delivery of the title to the subject property. Defendants acted in a wanton, fraudulent and
malevolent manner in violating the contract to sell. By way of example or correction for the
public good, defendants are liable to plaintiff for exemplary damages in the amount of
P500,000.00.

14. Defendants’ bad faith and refusal to honor their just obligations to plaintiffs constrained
the latter to litigate and to engage the services of undersigned counsel for a fee in the
amount of at least P250,000.00. 14

The petitioners prayed that, after due hearing, judgment be rendered in their favor ordering the
respondents to –

(a) Secure at defendants’ expense all clearances from the appropriate government agencies
that will enable defendants to comply with their obligations under the Contract to Sell;

(b) Execute a Contract to Sell with terms agreed upon by the parties;

(c) Solidarily pay the plaintiffs the following amounts:

1. P5,000,000.00 in actual damages;

2. P1,500,000.00 in moral damages;

3. P500,000.00 in exemplary damages;

4. P250,000.00 in attorney’s fees. 15

On July 5, 1996, respondent Fernandez filed her Answer to the complaint. She claimed that while
16 

the petitioners offered to buy the property during the meeting of November 27, 1995, she did not
accept the offer; thus, no verbal contract to sell was ever perfected. She specifically alleged that the
said contract to sell was unenforceable for failure to comply with the statute of frauds. She also
maintained that even assuming arguendo that she had, indeed, made a commitment or promise to
sell the property to the petitioners, the same was not binding upon her in the absence of any
consideration distinct and separate from the price. She, thus, prayed that judgment be rendered as
follows:

1. Dismissing the Complaint, with costs against the plaintiffs;

2. On the COUNTERCLAIM, ordering plaintiffs to pay defendant moral damages in the

amount of not less than P2,000,000.00 and exemplary damages in the amount of not less
 than P500,000.00 and attorney’s fees and reimbursement expenses of litigation in the
amount of P300,000.00. 17

On September 24, 1997, the trial court, upon motion of the petitioners, declared the other
respondents in default for failure to file their responsive pleading within the reglementary period. At18 

the pre-trial conference held on March 2, 1998, the parties agreed that the following issues were to
be resolved by the trial court: (1) whether or not there was a perfected contract to sell; (2) in the
event that there was, indeed, a perfected contract to sell, whether or not the respondents breached
the said contract to sell; and (3) the corollary issue of damages. 19

Respondent Fernandez testified that she requested Lourdes Alimario to look for a buyer of the
properties in San Pablo City "on a best offer basis." She was later informed by Alimario that the
petitioners were interested to buy the properties. On November 27, 1995, along with Alimario and
another person, she met with the petitioners in the latter’s office and told them that she was at the
conference merely to hear their offer, that she could not bind the owners of the properties as she
had no written authority to sell the same. The petitioners offered to buy the property at P150 per
square meter. After the meeting, respondent Fernandez requested Joy Marquez to secure a
barangay clearance stating that the property was free of any tenants. She was surprised to learn that
the clearance could not be secured. She contacted a cousin of hers, also one of the owners of the
property, and informed him that there was a prospective buyer of the property but that there were
tenants thereon. Her cousin told her that he was not selling his share of the property and that he was
not agreeable to the price of P150 per square meter. She no longer informed the other owners of the
petitioners’ offer. Respondent Fernandez then asked Alimario to apprise the petitioners of the
foregoing developments, through their agent, Agapito Fisico. She was surprised to receive a letter
from the petitioners dated January 5, 1996. Nonetheless, she informed the petitioners that she had
changed her mind in pursuing the negotiations in a Letter dated January 18, 1996. When she
received petitioners’ February 1, 1996 Letter, she sent a Reply-Letter dated February 14, 1996.

After trial on the merits, the trial court rendered judgment in favor of the petitioners on June 23,
1999, the dispositive portion of which reads:
20 

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of
plaintiffs ANTONIO K. LITONJUA and AURELIO K. LITONJUA and against defendants
MARY MEDIATRIX T. FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA, represented by
GREGORIO T. ELEOSIDA, JOHN DOES and JANE DOES; HEIRS OF DOMINGO B.
TICZON, represented by MARY MEDIATRIX T. FERNANDEZ, CRISTETA TICZON,
EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ, DOMINIC TICZON, JOSEFINA
LUISA PIAMONTE, JOHN DOES and JANE DOES, ordering defendants to:

1. execute a Contract of Sale and/or Absolute Deed of Sale with the terms agreed
upon by the parties and to secure all clearances from the concerned government
agencies and removal of any tenants from the subject property at their expense to
enable defendants to comply with their obligations under the perfected agreement to
sell; and

2. pay to plaintiffs the sum of Two Hundred Thousand (P200,000.00) Pesos as and
by way of attorney’s fees.
21

On appeal to the Court of Appeals, the respondents ascribed the following errors to the court a quo:

I. THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A PERFECTED

CONTRACT OF SALE OF THE TWO LOTS ON NOVEMBER 27, 1995.
 II. THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL CONTRACT OF
SALE AS CLAIMED BY PLAINTIFFS-APPELLEES ANTONIO LITONJUA AND AURELIO
LITONJUA WAS UNENFORCEABLE.

III. THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF DEFENDANT-
APPELLANT FERNANDEZ DATED JANUARY 16, 1996 WAS A CONFIRMATION OF THE
PERFECTED SALE AND CONSTITUTED AS WRITTEN EVIDENCE THEREOF.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL POWER OF
ATTORNEY WAS REQUIRED IN ORDER THAT DEFENDANT-APPELLANT FERNANDEZ
COULD NEGOTIATE THE SALE ON BEHALF OF THE OTHER REGISTERED CO-
OWNERS OF THE TWO LOTS.

V. THE LOWER COURT ERRED IN AWARDING ATTORNEY’S FEES IN THE

DISPOSITIVE PORTION OF THE DECISION WITHOUT STATING THE BASIS IN THE
TEXT OF SAID DECISION. 22

On February 28, 2001, the appellate court promulgated its decision reversing and setting aside the
judgment of the trial court and dismissing the petitioners’ complaint, as well as the respondents’
counterclaim. The appellate court ruled that the petitioners failed to prove that a sale or a contract to
23 

sell over the property between the petitioners and the private respondent had been perfected.

Hence, the instant petition for review on certiorari under Rule 45 of the Revised Rules of Court.

The petitioners submit the following issues for the Court’s resolution:

A. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN

THE PARTIES.

B. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE

STATUTE OF FRAUDS.

C. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE BENEFITED

BY THE ASSAILED DECISION OF THE COURT OF APPEALS. 24

The petition has no merit.

The general rule is that the Court’s jurisdiction under Rule 45 of the Rules of Court is limited to the
review of errors of law committed by the appellate court. As the findings of fact of the appellate court
are deemed continued, this Court is not duty-bound to analyze and calibrate all over again the
evidence adduced by the parties in the court a quo. This rule, however, is not without exceptions,
25 

such as where the factual findings of the Court of Appeals and the trial court are conflicting or
contradictory. Indeed, in this case, the findings of the trial court and its conclusion based on the said
26 

findings contradict those of the appellate court. However, upon careful review of the records of this
case, we find no justification to grant the petition. We, thus, affirm the decision of the appellate court.

On the first and second assignment of errors, the petitioners assert that there was a perfected
contract of sale between the petitioners as buyers and the respondents-owners, through respondent
Fernandez, as sellers. The petitioners contend that the perfection of the said contract is evidenced
by the January 16, 1996 Letter of respondent Fernandez. The pertinent portions of the said letter
27 

are as follows:
 … [M]y cousin and I have thereby changed our mind and that the sale will no longer push
through. I specifically instructed her to inform you thru your broker that we will not be
attending the meeting to be held sometime first week of December.

In view thereof, I regret to formally inform you now that we are no longer selling the
property until all problems are fully settled. We have not demanded and received from you
any earnest money, thereby, no obligations exist… 28

The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract,
thus, removing it from the coverage of the statute of frauds. The letter specifically makes reference
to a sale which respondent Fernandez agreed to initially, but which the latter withdrew because of
the emergence of some people who claimed to be tenants on both parcels of land. According to the
petitioners, the respondents-owners, in their answer to the complaint, as well as respondent
Fernandez when she testified, admitted the authenticity and due execution of the said letter.
Besides, when the petitioner Antonio Litonjua testified on the contract of sale entered into between
themselves and the respondents-owners, the latter did not object thereto. Consequently, the
respondents-owners thereby ratified the said contract of sale. The petitioners thus contend that the
appellate court’s declaration that there was no perfected contract of sale between the petitioners and
the respondents-owners is belied by the evidence, the pleadings of the parties, and the law.

The petitioners’ contention is bereft of merit. In its decision, the appellate court ruled that the Letter
of respondent Fernandez dated January 16, 1996 is hardly the note or memorandum contemplated
under Article 1403(2)(e) of the New Civil Code, which reads:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or secondary evidence of its contents:

(e) An agreement for the leasing for a longer period than one year, or for the sale of
real property or of an interest therein. 29

The appellate court based its ruling on the following disquisitions:

In the case at bar, the letter dated January 16, 1996 of defendant-appellant can hardly be
said to constitute the note or memorandum evidencing the agreement of the parties to enter
into a contract of sale as it is very clear that defendant-appellant as seller did not accept the
condition that she will be the one to pay the registration fees and miscellaneous expenses
and therein also categorically denied she had already committed to execute the deed of sale
as claimed by the plaintiffs-appellees. The letter, in fact, stated the reasons beyond the
control of the defendant-appellant, why the sale could no longer push through – because of
the problem with tenants. The trial court zeroed in on the statement of the defendant-
appellant that she and her cousin changed their minds, thereby concluding that defendant-
appellant had unilaterally cancelled the sale or backed out of her previous commitment.
 However, the tenor of the letter actually reveals a consistent denial that there was any such
commitment on the part of defendant-appellant to sell the subject lands to plaintiffs-
appellees. When defendant-appellant used the words "changed our mind," she was clearly
referring to the decision to sell the property at all (not necessarily to plaintiffs-appellees) and
not in selling the property to herein plaintiffs-appellees as defendant-appellant had not yet
made the final decision to sell the property to said plaintiffs-appellees. This conclusion is
buttressed by the last paragraph of the subject letter stating that "we are no longer selling the
property until all problems are fully settled." To read a definite previous agreement for the
sale of the property in favor of plaintiffs-appellees into the contents of this letter is to unduly
restrict the freedom of the contracting parties to negotiate and prejudice the right of every
property owner to secure the best possible offer and terms in such sale transactions. We
believe, therefore, that the trial court committed a reversible error in finding that there was a
perfected contract of sale or contract to sell under the foregoing circumstances. Hence, the
defendant-appellant may not be held liable in this action for specific performance with
damages. 30

In Rosencor Development Corporation vs. Court of Appeals, the term "statute of frauds" is
31 

descriptive of statutes which require certain classes of contracts to be in writing. The statute does
not deprive the parties of the right to contract with respect to the matters therein involved, but merely
regulates the formalities of the contract necessary to render it enforceable. The purpose of the
statute is to prevent fraud and perjury in the enforcement of obligations, depending for their
existence on the unassisted memory of witnesses, by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged. The statute is satisfied
or, as it is often stated, a contract or bargain is taken within the statute by making and executing a
note or memorandum of the contract which is sufficient to state the requirements of the statute. The 32 

application of such statute presupposes the existence of a perfected contract. However, for a note or
memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and
partly in parol. The note or memorandum must contain the names of the parties, the terms and
conditions of the contract and a description of the property sufficient to render it capable of
identification. Such note or memorandum must contain the essential elements of the contract
33 

expressed with certainty that may be ascertained from the note or memorandum itself, or some other
writing to which it refers or within which it is connected, without resorting to parol evidence. To be
34 

binding on the persons to be charged, such note or memorandum must be signed by the said party
or by his agent duly authorized in writing.35

In City of Cebu v. Heirs of Rubi, we held that the exchange of written correspondence between the
36 

parties may constitute sufficient writing to evidence the agreement for purposes of complying with
the statute of frauds.

In this case, we agree with the findings of the appellate court that there was no perfected contract of
sale between the respondents-owners, as sellers, and the petitioners, as buyers.

There is no documentary evidence on record that the respondents-owners specifically authorized

respondent Fernandez to sell their properties to another, including the petitioners. Article 1878 of the
New Civil Code provides that a special power of attorney is necessary to enter into any contract by
which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration, or to create or convey real rights over immovable property, or for any other act of
37  38 

strict dominion. Any sale of real property by one purporting to be the agent of the registered owner
39 

without any authority therefor in writing from the said owner is null and void. The declarations of the
40 

agent alone are generally insufficient to establish the fact or extent of her authority. In this case, the
41 

only evidence adduced by the petitioners to prove that respondent Fernandez was authorized by the
respondents-owners is the testimony of petitioner Antonio Litonjua that respondent Fernandez
openly represented herself to be the representative of the respondents-owners, and that she
42 

promised to present to the petitioners on December 8, 1996 a written authority to sell the
properties. However, the petitioners’ claim was belied by respondent Fernandez when she testified,
43 

thus:

Q Madam Witness, what else did you tell to the plaintiffs?

A I told them that I was there representing myself as one of the owners of the properties, and
I was just there to listen to his proposal because that time, we were just looking for the best
offer and I did not have yet any written authorities from my brother and sisters and relatives. I
cannot agree on anything yet since it is just a preliminary meeting, and so, I have to secure
authorities and relate the matters to my relatives, brother and sisters, sir.

Q And what else was taken up?

A Mr. Antonio Litonjua told me that they will be leaving for another country and he requested
me to come back on the first week of December and in the meantime, I should make an
assurance that there are no tenants in our properties, sir.44

The petitioners cannot feign ignorance of respondent Fernandez’ lack of authority to sell the
properties for the respondents-owners. It must be stressed that the petitioners are noted
businessmen who ought to be very familiar with the intricacies of business transactions, such as the
sale of real property.

The settled rule is that persons dealing with an assumed agent are bound at their peril, and if they
would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent
of authority, and in case either is controverted, the burden of proof is upon them to prove it. In this
45 

case, respondent Fernandez specifically denied that she was authorized by the respondents-owners
to sell the properties, both in her answer to the complaint and when she testified. The Letter dated
January 16, 1996 relied upon by the petitioners was signed by respondent Fernandez alone, without
any authority from the respondents-owners. There is no evidence on record that the respondents-
owners ratified all the actuations of respondent Fernandez in connection with her dealings with the
petitioners. As such, said letter is not binding on the respondents as owners of the subject
properties.

Contrary to the petitioners’ contention, the letter of January 16, 1996 is not a note or memorandum
46 

within the context of Article 1403(2) because it does not contain the following: (a) all the essential
terms and conditions of the sale of the properties; (b) an accurate description of the property subject
of the sale; and, (c) the names of the respondents-owners of the properties. Furthermore, the letter
made reference to only one property, that covered by TCT No. T-36755.

We note that the petitioners themselves were uncertain as to the specific area of the properties they
were seeking to buy. In their complaint, they alleged to have agreed to buy from the respondents-
owners 33,990 square meters of the total acreage of the two lots consisting of 36,742 square
meters. In their Letter to respondent Fernandez dated January 5, 1996, the petitioners stated that
they agreed to buy the two lots, with a total area of 36,742 square meters. However, in their Letter
47 

dated February 1, 1996, the petitioners declared that they agreed to buy a portion of the properties
consisting of 33,990 square meters. When he testified, petitioner Antonio Litonjua declared that the
48 

petitioners agreed to buy from the respondents-owners 36,742 square meters at P150 per square
meter or for the total price of P5,098,500.49
The failure of respondent Fernandez to object to parol evidence to prove (a) the essential terms and
conditions of the contract asserted by the petitioners and, (b) her authority to sell the properties for
the respondents-registered owners did not and should not prejudice the respondents-owners who
had been declared in default. 50

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the appellate court is
AFFIRMED IN TOTO. Costs against the petitioners.

SO ORDERED.

G.R. No. 123560             March 27, 2000

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,

vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA
CANILAO and CLAUDIA TAGUNICAR, respondents.

PUNO, J.:

This petition for review seeks a reversal of the 31 August 1995 Decision  and 11 January 1998
1 

Resolution  of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for
2 

moral and exemplary damages and attorney's fees, and deleting the trial court's award for actual
damages.

The facts as found by the trial court are as follows:

Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In
connection with [this] business, he travels from time to time to Malaysia, Taipei and
Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A & B) from defendant
Claudia Tagunicar who represented herself to be an agent of defendant Tourist World
Services, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., for
the amount of P25,000.00 per computation of said defendant Claudia Tagunicar (Exhs. C &
C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy to two (2) lines
of infrared heating system processing textured plastic article (Exh. K).

On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed.
[PAA] Flight 002 from Tokyo to San Francisco was on "RQ" status, meaning "on request".
Per instruction of defendant Claudia Tagunicar, plaintiffs returned after a few days for the
confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of
TWSI, defendant Tagunicar told plaintiffs that their flight is now confirmed all the way.
Thereafter, she attached the confirmation stickers on the plane tickets (Exhs. A & B).

A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am
office to verify the status of the flight. According to said Adrian Yu, a personnel of defendant
Pan Am told him over the phone that plaintiffs' booking[s] are confirmed.

On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left
Hongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Am
office for reconfirmation of their flight to San Francisco. Said office, however, informed them
that their names are not in the manifest. Since plaintiffs were supposed to leave on the 29th
of July, 1978, and could not remain in Japan for more than 72 hours, they were constrained
to agree to accept airline tickets for Taipei instead, per advise of JAL officials. This is the only
option left to them because Northwest Airlines was then on strike, hence, there was no
chance for the plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffs
paid for these tickets.

Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to
return back to Manila on August 3, 1978, instead of proceeding to the United States. [Japan]
Air Lines (JAL) refunded the plaintiffs the difference of the price for Tokyo-Taipei [and]
Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00.

In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc.
cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system (Exh. K). The
agreement was for him to inspect the equipment and make final arrangement[s] with the said
company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng Cho
expected to realize a profit of P300,000.00 to P400,000.00.

[A] scrutiny of defendants' respective evidence reveals the following:

Plaintiffs, who were intending to go to the United States, were referred to defendant Claudia
Tagunicar, an independent travel solicitor, for the purchase of their plane tickets. As such
travel solicitor, she helps in the processing of travel papers like passport, plane tickets,
booking of passengers and some assistance at the airport. She is known to defendants Pan-
Am, TWSI/Julieta Canilao, because she has been dealing with them in the past years.
Defendant Tagunicar advised plaintiffs to take Pan-Am because Northwest Airlines was then
on strike and plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Am has a
flight from Tokyo to San Francisco. After verifying from defendant TWSI, thru Julieta Canilao,
she informed plaintiffs that the fare would be P25,093.93 giving them a discount of P738.95
(Exhs. C, C-1). Plaintiffs, however, gave her a check in the amount of P25,000.00 only for
the two round trip tickets. Out of this transaction, Tagunicar received a 7% commission and
1% commission for defendant TWSI.

Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendant
Julieta Canilao with the following schedules:

Origin Destination Airline Date Time/Travel

Manila Hongkong CX900 7-23- 1135/1325hrs

78 

Hongkong Tokyo CS500 7-28- 1615/2115hrs

78 

Tokyo San Francisco PA00 7-29- 1930/1640hrs

2  78 

The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed,
although the tickets issued are Pan-Am tickets, as long as it is in connection with a Pan-Am
flight. When the two (2) tickets (Exhs. A & B) were issued to plaintiffs, the letter "RQ"
appears below the printed word "status" for the flights from Tokyo to San Francisco which
means "under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduled departure,
defendant Tagunicar received several calls from the plaintiffs inquiring about the status of
their bookings. Tagunicar in turn called up TWSI/Canilao to verify; and if Canilao would
answer that the bookings are not yet confirmed, she would relate that to the plaintiffs.
 Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight,
plaintiff Yu Eng Cho personally went to her office, pressing her about their flight. She called
up defendant Julieta Canilao, and the latter told her "o sige Claudia, confirm na." She even
noted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh. L-
1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) to
the tickets. These stickers came from TWSI.

Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she
learned from Adrian Yu, son of plaintiffs, that the latter were not able to take the flight from
Tokyo to San Francisco, U.S.A. After a few days, said Adrian Yu came over with a
gentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar
claims that plaintiffs were asking for her help so that they could file an action against Pan-
Am. Because of plaintiffs' promise she will not be involved, she agreed to sign the affidavit
(Exh. M) prepared by the lawyer.

Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment of

plaintiffs' flight because flights then were really tight because of the on-going strike at
Northwest Airlines. Defendant Claudia Tagunicar is very much aware that [said] particular
segment was not confirmed, because on the very day of plaintiffs' departure, Tagunicar
called up TWSI from the airport; defendant Canilao asked her why she attached stickers on
the tickets when in fact that portion of the flight was not yet confirmed. Neither TWSI nor
Pan-Am confirmed the flight and never authorized defendant Tagunicar to attach the
confirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar are
stickers exclusively for use of Pan-Am only. Furthermore, if it is the travel agency that
confirms the booking, the IATA number of said agency should appear on the validation or
confirmation stickers. The IATA number that appears on the stickers attached to plaintiffs'
tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSI's IATA number is
2-83-0770 (Exhs. 5, 5-A TWSI).  3

A complaint for damages was filed by petitioners against private respondents Pan American World
Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia
Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and hotel
accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason
of the non-confirmation of their booking with Pan-Am. In a Decision dated November 14, 1991, the
Regional Trial Court of Manila, Branch 3, held the defendants jointly and severally liable, except
defendant Julieta Canilao, thus:

WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan
American World Airways, Inc., Tourist World Services, Inc. and Claudia Tagunicar, jointly
and severally, to pay plaintiffs the sum of P200,000.00 as actual damages, minus P2,602.00
already refunded to the plaintiffs; P200,000.00 as moral damages; P100,000.00 as
exemplary damages; an amount equivalent to 20% of the award for and as attorney's fees,
plus the sum of P30,000.00 as litigation expenses.

Defendants' counterclaims are hereby dismissed for lack of merit.

SO ORDERED.

Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the
appellate court rendered judgment modifying the amount of damages awarded, holding private
respondent Tagunicar solely liable therefor, and absolving respondents Pan Am and TWSI from any
and all liability, thus:
 PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE
and a new one entered declaring appellant Tagunicar solely liable for:

1) Moral damages in the amount of P50,000.00;

2) Exemplary damages in the amount of P25,000.00; and

3) Attorney's fees in the amount of P10,000.00 plus costs of suit.

The award of actual damages is hereby DELETED.

SO ORDERED.

In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a duly
authorized agent or representative of either Pan Am or TWSI. It held that their business transactions
are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent and
sub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of,
nor issue validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held
responsible for her actions. Finally, it deleted the award for actual damages for lack of proof.

Hence this petition based on the following assignment of errors:

1. the Court of Appeals, in reversing the decision of the trial court, misapplied the ruling
in Nicos Industrial Corporation vs. Court of Appeals, et. al. [206 SCRA 127]; and

2. the findings of the Court of Appeals that petitioners' ticket reservations in question were
not confirmed and that there is no agency relationship among PAN-AM, TWSI and Tagunicar
are contrary to the judicial admissions of PAN-AM, TWSI and Tagunicar and likewise
contrary to the findings of fact of the trial court.

We affirm.

I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of the
Court of Appeals, the decision of the trial court conforms to the standards of an ideal decision set
in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et. al.,  as "that which, with welcome
4 

economy of words, arrives at the factual findings, reaches the legal conclusions, renders its ruling
and, having done so, ends." It is averred that the trial court's decision contains a detailed statement
of the relevant facts and evidence adduced by the parties which thereafter became the bases for the
court's conclusions.

A careful scrutiny of the decision rendered by the trial court will show that after narrating the
evidence of the parties, it proceeded to dispose of the case with a one-paragraph generalization, to
wit:

On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan-
Am is the principal, and defendants TWSI and Tagunicar, its authorized agent and sub-
agent, respectively. Consequently, defendants Pan-Am, TWSI and Claudia Tagunicar should
be held jointly and severally liable to plaintiffs for damages. Defendant Julieta Canilao, who
acted in her official capacity as Office Manager of defendant TWSI should not be held
personally liable. 
5
The trial court's finding of facts is but a summary of the testimonies of the witnesses and the
documentary evidence presented by the parties. It did not distinctly and clearly set forth, nor
substantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar
jointly and severally liable. In Del Mundo vs. CA, et al.  where the trial court, after summarizing the
6 

conflicting asseverations of the parties, disposed of the kernel issue in just two (2) paragraphs, we
held:

It is understandable that courts, with their heavy dockets and time constraints, often find
themselves with little to spare in the preparation of decisions to the extent most desirable.
We have thus pointed out that judges might learn to synthesize and to simplify their
pronouncements. Nevertheless, concisely written such as they may be, decisions must still
distinctly and clearly express, at least in minimum essence, its factual and legal bases.

For failing to explain clearly and well the factual and legal bases of its award of moral damages, we
set it aside in said case. Once more, we stress that nothing less than Section 14 of Article VIII of the
Constitution requires that "no decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based." This is demanded by the due
process clause of the Constitution. In the case at bar, the decision of the trial court leaves much to
be desired both in form and substance. Even while said decision infringes the Constitution, we will
not belabor this infirmity and rather examine the sufficiency of the evidence submitted by the
petitioners.

II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing
agent of Pan Am. Proceeding from this premise, they contend that TWSI and Pan Am should be
held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that the existence of
the agency relationship has been established by the judicial admissions allegedly made by
respondents herein, to wit: (1) the admission made by Pan Am in its Answer that TWSI is its
authorized ticket agent; (2) the affidavit executed by Tagunicar where she admitted that she is a duly
authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received commissions
from ticket sales made by Tagunicar.

We do not agree. By the contract of agency, a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.  The
7 

elements of agency are: (1) consent, express or implied, of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.  It is a settled
8 

rule that persons dealing with an assumed agent are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority,
and in case either is controverted, the burden of proof is upon them to establish it.  9

In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she
is an authorized agent of TWSI. This affidavit, however, has weak probative value in light of
respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex parte, are
almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of
suggestion and inquiries. Their infirmity as a species of evidence is a matter of judicial experience
and are thus considered inferior to the testimony given in court.  Further, affidavits are not complete
10 

reproductions of what the declarant has in mind because they are generally prepared by the
administering officer and the affiant simply signs them after the same have been read to
her.  Respondent Tagunicar testified that her affidavit was prepared and typewritten by the secretary
11 

of petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the
latter went to see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo
brought his notarial seal and notarized the affidavit of the same day.  The circumstances under
12 
which said affidavit was prepared put in doubt petitioners' claim that it was executed voluntarily by
respondent Tagunicar. It appears that the affidavit was prepared and was based on the answers
which respondent Tagunicar gave to the questions propounded to her by Atty. Acebedo.  They 13 

never told her that the affidavit would be used in a case to be filed against her.  They even assured
14 

her that she would not be included as defendant if she agreed to execute the affidavit.  Respondent 15 

Tagunicar was prevailed upon by petitioners' son and their lawyer to sign the affidavit despite her
objection to the statement therein that she was an agent of TWSI. They assured her that "it is
immaterial"16 and that "if we file a suit against you we cannot get anything from you."  This purported
17 

admission of respondent Tagunicar cannot be used by petitioners to prove their agency relationship.
At any rate, even if such affidavit is to be given any probative value, the existence of the agency
relationship cannot be established on its sole basis. The declarations of the agent alone are
generally insufficient to establish the fact or extent of his authority.  In addition, as between the
18 

negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the
other, and the affirmative allegation of petitioners that an agency relationship exists, it is the latter
who have the burden of evidence to prove their allegation,  failing in which, their claim must
19 

necessarily fail.

We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized
agent of TWSI, and declared that she is an independent travel agent.  We have consistently ruled
20 

that in case of conflict between statements in the affidavit and testimonial declarations, the latter
command greater weight.  21

As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" which
show that Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7"  is the Ticket 22 

Sales Report submitted by TWSI to Pan Am reflecting the commissions received by TWSI as an
agent of Pan Am. Exhibit "7-A"  is a listing of the routes taken by passengers who were audited to
23 

TWSI's sales report. Exhibit "8"  is a receipt issued by TWSI covering the payment made by
24 

Tagunicar for the tickets she bought from TWSI. These documents cannot justify the decision that
Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified
that when she pays TWSI, she already deducts in advance her commission and merely gives the net
amount to TWSI.  From all sides of the legal prism, the transaction is simply a contract of sale
25 

wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients.

III. Petitioners included respondent Pan Am in the complainant on the supposition that since TWSI is
its duly authorized agent, and respondent Tagunicar is an agent of TWSI, then Pan Am should also
be held responsible for the acts of respondent Tagunicar. Our disquisitions above show that this
contention lacks factual and legal bases. Indeed, there is nothing in the records to show that
respondent Tagunicar has been employed by Pan Am as its agent, except the bare allegation of
petitioners. The real motive of petitioners in suing Pan Am appears in its Amended Complaint that
"[d]efendants TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs the
amounts herein sought to be recovered, and in such event, defendant Pan Am, being their ultimate
principal, is primarily and/or subsidiary liable to pay the said amounts to plaintiffs."  This lends
26 

credence to respondent Tagunicar's testimony that she was persuaded to execute an affidavit
implicating respondents because petitioners knew they would not be able to get anything of value
from her. In the past, we have warned that this Court will not tolerate an abuse of judicial process by
passengers in order to pry on international airlines for damage awards, like "trophies in a safari."  27

This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they were
bumped off in Tokyo. If petitioners were of the honest belief that Pan Am was responsible for the
misfortune which beset them, there is no evidence to show that they lodged a protest with Pan Am's
Tokyo office immediately after they were refused passage for the flight to San Francisco, or even
upon their arrival in Manila. The testimony of petitioner Yu Eng Cho in this regard is of title value, viz:
Atty. Jalandoni: . . .

q Upon arrival at the Tokyo airport, what did you do if any in connection with your
schedule[d] trip?

a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am office in
Tokyo to reconfirm my flight, but they told me that our names were not listed in the manifest,
so next morning, very early in the morning I went to the airport, Pan Am office in the airport
to verify and they told me the same and we were not allowed to leave.

q You were scheduled to be in Tokyo for how long Mr. Yu?

a We have to leave the next day 29th.

q In other words, what was your status as a passenger?

a Transient passengers. We cannot stay for more than 72 hours.

x x x           x x x          x x x

q As a consequence of the fact that you claimed that the Pan Am office in Tokyo told you
that your names were not in the manifest, what did you do, if any?

a I ask[ed] them if I can go anywhere in the State? They told me I can go to LA via Japan
Airlines and I accepted it.

q Do you have the tickets with you that they issued for Los Angels?

a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei.

x x x           x x x          x x x

q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you in
lieu of the tickets to San Francisco?

a No, sir.

q Why not?

a The Japanese Airlines said that there were no more available seats.

q And as a consequence of that, what did you do, if any?

a I am so much scared and worried, so the Japanese Airlines advised us to go to Taipei and
I accepted it.

x x x           x x x          x x x

q Why did you accept the Japan Airlines offer for you to go to Taipei?
 a Because there is no chance for us to go to the United States within 72 hours because
during that time Northwest Airlines [was] on strike so the seats are very scarce. So they
advised me better left (sic) before the 72 hours otherwise you will have trouble with the
Japanese immigration.

q As a consequence of that you were force[d] to take the trip to Taipei?

a Yes, sir.  (emphasis supplied)

28 

It grinds against the grain of human experience that petitioners did not insist that they be allowed to
board, considering that it was then doubly difficult to get seats because of the ongoing Northwest
Airlines strike. It is also perplexing that petitioners readily accepted whatever the Tokyo office had to
offer as an alternative. Inexplicably too, no demand letter was sent to respondents TWSI and
Canilao.  Nor was a demand letter sent to respondent Pan Am. To say the least, the motive of
29 

petitioners in suing Pan Am is suspect.

We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to
justify petitioners' claim for damages. Mere refusal to accede to the passenger's wishes does not
necessarily translate into damages in the absence of bad faith.  The settled rule is that the law
30 

presumes good faith such that any person who seeks to be awarded damages due to acts of
another has the burden of proving that the latter acted in bad faith or with ill motive.  In the case at
31 

bar, we find the evidence presented by petitioners insufficient to overcome the presumption of good
faith. They have failed to show any wanton, malevolent or reckless misconduct imputable to
respondent Pan Am in its refusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan
Am could not have acted in bad faith because petitioners did not have confirmed tickets and more
importantly, they were not in the passenger manifest.

In not a few cases, this Court did not hesitable to hold an airline liable for damages for having acted
in bad faith in refusing to accommodate a passenger who had a confirmed ticket and whose name
appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines Inc.,  we ruled that
32 

there was a valid and binding contract between the airline and its passenger after finding that
validating sticker on the passenger's ticket had the letters "O.K." appearing in the "Res. Status" box
which means "space confirmed" and that the ticket is confirmed or validated. In Pan American World
Airways Inc. v. IAC, et al.  where a would-be-passenger had the necessary ticket, baggage claim
33 

and clearance from immigration all clearly showing that she was a confirmed passenger and
included in the passenger manifest and yet was denied accommodation in said flight, we awarded
damages. In Armovit, et al. v. CA, et al.,  we upheld the award of damages made against an airline
34 

for gross negligence committed in the issuance of tickets with erroneous entries as to the time of
flight. In Alitalia Airways v. CA, et al.,  we held that when airline issues a ticket to a passenger
35 

confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger
has every right to expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage. And finally, an award of damages was
held proper in the case of Zalamea, et al. v. CA, et al.,  where a confirmed passenger included in
36 

the manifest was denied accommodation in such flight.

On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd.,  was held not
37 

liable for damages where the passenger was not allowed to board the plane because his ticket had
not been confirmed. We ruled that "[t]he stub that the lady employee put on the petitioner's ticket
showed among other coded items, under the column "status" the letters "RQ" — which was
understood to mean "Request." Clearly, this does not mean a confirmation but only a request. JAL
Traffic Supervisor explained that it would have been different if what was written in the stub were the
letter "ok" in which case the petitioner would have been assured of a seat on said flight. But in this
case, the petitioner was more of a wait-listed passenger than a regularly booked passenger."

In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers and
their names were not listed in the passenger manifest. In other words, this is not a case where Pan
Am bound itself to transport petitioners and thereafter reneged on its obligation. Hence, respondent
airline cannot be held liable for damages.

IV. We hold that respondent Court of Appeals correctly rules that the tickets were never confirmed
for good reasons: (1) The persistent calls made by respondent Tagunicar to Canilao, and those
made by petitioners at the Manila, Hongkong and Tokyo offices in Pan Am, are eloquent indications
that petitioners knew that their tickets have not been confirmed. For, as correctly observed by Pan
Am, why would one continually try to have one's ticket confirmed if it had already been confirmed?
(2) The validation stickers which respondent Tagunicar attached to petitioners' tickets were those
intended for the exclusive use of airline companies. She had no authority to use them. Hence, said
validation stickers, wherein the word "OK" appears in the status box, are not valid and binding. (3)
The names of petitioners do not appear in the passengers manifest. (4) Respondent Tagunicar's
"Exhibit 1"  shows that the status of the San Francisco-New York segment was "Ok", meaning it was
38 

confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5)
Respondent Canilao testified that on the day that petitioners were to depart for Hongkong,
respondent Tagunicar called her from the airport asking for confirmation of the Tokyo-San Francisco
flight, and that when she told respondent Tagunicar that she should not have allowed petitioners to
leave because their tickets have not been confirmed, respondent Tagunicar merely said "Bahala
na."  This was never controverted nor refuted by respondent Tagunicar. (6) To prove that it really
39 

did not confirm the bookings of petitioners, respondent Canilao pointed out that the validation
stickers which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770
stamped on it, whereas the IATA number of TWSI is 28-30770.  40

Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresenting
to petitioners that their tickets have been confirmed. Her culpability, however, was properly
mitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on the confirmation of
their tickets with Pan Am because he doubted the confirmation made by respondent
Tagunicar.  This is clear proof that petitioners knew that they might be bumped off at Tokyo when
41 

they decided to proceed with the trip. Aware of this risk, petitioners exerted efforts to confirm their
tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we find the modification as to
the amount of damages awarded just and equitable under the circumstances.

WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners. 1âwphi1.nêt

SO ORDERED.

G.R. No. 105562 September 27, 1993

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON,

DINA LORENA AYO, CELIA CALUMBAG and LUCIA
LONTOK, Petitioners, vs. HON. COURT OF APPEALS and THE
INSULAR LIFE ASSURANCE COMPANY, LIMITED, Respondents.
Mariano V. Ampil, Jr. for petitioners. chanrobles virtual law library

Ramon S. Caguiao for private respondent.

DAVIDE, JR., J.:

This is an appeal by certiorari to review and set aside the Decision

of the public respondent Court of Appeals in CA-G.R. SP No.
22950 1and its Resolution denying the petitioners' motion for
reconsideration. 2The challenged decision modified the decision of
the Insurance Commission in IC Case
No. RD-058. 3 chanrobles virtual law library

The petitioners were the complainants in IC Case No. RD-058, an

administrative complaint against private respondent Insular Life
Assurance Company, Ltd. (hereinafter Insular Life), which was filed
with the Insurance Commission on 20 September 1989. 4They
prayed therein that after due proceedings, Insular Life "be ordered
to pay the claimants their insurance claims" and that "proper
sanctions/penalties be imposed on" it "for its deliberate, feckless
violation of its contractual obligations to the complainants, and of
the Insurance Code." 5Insular Life's motion to dismiss the complaint
on the ground that "the claims of complainants are all respectively
beyond the jurisdiction of the Insurance Commission as provided in
Section 416 of the Insurance Code," 6having been denied in the
Order of 14 November 1989, 7it filed its answer on 5 December
1989. 8Thereafter, hearings were conducted on various dates. chanroblesvirtualawlibrary chanrobles virtual law library

On 20 June 1990, the Commission rendered its decision 9in favor of

the complainants, the dispositive portion of which reads as follows:

WHEREFORE, this Commission merely orders the respondent

company to: chanrobles virtual law library

a) Pay a fine of FIVE HUNDRED PESOS (P500.00) a day from the

receipt of a copy of this Decision until actual payment thereof; chanrobles virtual law library

b) Pay and settle the claims of DINA AYO and LUCIA LONTOK, for
P50,000.00 and P40,000.00, respectively; chanrobles virtual law library
c) Notify henceforth it should notify individual beneficiaries
designated under any Group Policy, in the event of the death of
insured(s), where the corresponding claims are filed by the
Policyholder; chanrobles virtual law library

d) Show cause within ten days why its other responsible officers
who have handled this case should not be subjected to disciplinary
and other administrative sanctions for deliberately releasing to
Capt. Nuval the check intended for spouses ALARCON, in the
absence of any Special Power of Attorney for that matter, and for
negligence with respect to the release of the other five checks. chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED. 10 chanrobles virtual law library

In holding for the petitioners, the Insurance Commission made the

following findings and conclusions:

After taking into consideration the evidences [sic], testimonial and

documentary for the complainants and the respondent, the
Commission finds that; First: The respondent erred in appreciating
that the powers of attorney executed by five (5) of the several
beneficiaries convey absolute authority to Capt. Nuval, to demand,
receive, receipt and take delivery of insurance proceeds from
respondent Insular Life. A cursory reading of the questioned powers
of authority would disclosed [sic] that they do not contain in
unequivocal and clear terms authority to Capt. Nuval to obtain,
receive, receipt from respondent company insurance proceeds
arising from the death of the seaman-insured. On the contrary, the
said powers of attorney are couched in terms which could easily
arouse suspicion of an ordinary
man. . . .
chanroblesvirtualawlibrary chanrobles virtual law library

Second: The testimony of the complainants' rebuttal witness,

Mrs. Trinidad Alarcon, who declared in no uncertain terms that
neither she nor her husband, executed a special power of attorney
in favor of Captain Rosendo Nuval, authorizing him to claim,
receive, receipt and take delivery of any insurance proceeds from
Insular Life arising out of the death of their insured/seaman son, is
not convincingly refuted. chanroblesvirtualawlibrary chanrobles virtual law library
Third: Respondent Insular Life did not observe Section 180 of the
Insurance Code, when it issued or released two checks in the
amount of P150,000.00 for the three minor children (P50,000.00
each) of complainant, Dina Ayo and another check of P40,000.00
for minor beneficiary Marissa Lontok, daughter of another
complainant Lucia Lontok, there being no showing of any court
authorization presented or the requisite bond posted. chanroblesvirtualawlibrary chanrobles virtual law library

Section 180 is quotes [sic] partly as follows:

. . . In the absence of a judicial guardian, the father, or in the

latter's absence or incapacity, the mother of any minor, who is an
insured or a beneficiary under a contract of life, health or accident
insurance, may exercise, in behalf of said minor, any right, under
the policy, without necessity of court authority or the giving of a
bond where the interest of the minor in the particular act involved
does not exceed twenty thousand pesos . . . . 11

Insular Life appealed the decision to the public respondent which

docketed the case as CA-G.R. SP No. 22950. The appeal urged the
appellate court to reverse the decision because the Insurance
Commission (a) had no jurisdiction over the case considering that
the claims exceeded P100,000.00,
(b) erred in holding that the powers of attorney relied upon by
Insular Life were insufficient to convey absolute authority to Capt.
Nuval to demand, receive and take delivery of the insurance
proceeds pertaining to the petitioners, (c) erred in not giving credit
to the version of Insular Life that the power of attorney supposed to
have been executed in favor of the Alarcons was missing, and
(d) erred in holding that Insular Life was liable for violating Section
180 of the Insurance Code for having released to the surviving
mothers the insurance proceeds pertaining to the beneficiaries who
were still minors despite the failure of the former to obtain a court
authorization or to post a bond. chanroblesvirtualawlibrary chanrobles virtual law library

On 10 October 1991, the public respondent rendered a

decision, 12the decretal portion of which reads:
WHEREFORE, the decision appealed from is modified by eliminating
therefrom the award to Dina Ayo and Lucia Lontok in the amounts
of P50,000.00 and P40,000.00, respectively. 13 chanrobles virtual law library

It found the following facts to have been duly established:

It appears that on 23 September 1983, Prime Marine Services, Inc.

(PMSI, for brevity), a crewing/manning outfit, procured Group
PoIicy
No. G-004694 from respondent-appellant Insular Life Assurance
Co., Ltd. to provide life insurance coverage to its sea-based
employees enrolled under the plan. On 17 February 1986, during
the effectivity of the policy, six covered employees of the PMSI
perished at sea when their vessel, M/V Nemos, a Greek cargo
vessel, sunk somewhere in El Jadida, Morocco. They were survived
by complainants-appellees, the beneficiaries under the policy. chanroblesvirtualawlibrary chanrobles virtual law library

Following the tragic demise of their loved ones, complainants-

appellees sought to claim death benefits due them and, for this
purpose, they approached the President and General Manager of
PMSI, Capt. Roberto Nuval. The latter evinced willingness to assist
complainants-appellees to recover Overseas Workers Welfare
Administration (OWWA) benefits from the POEA and to work for the
increase of their PANDIMAN and other benefits arising from the
deaths of their husbands/sons. They were thus made to execute,
with the exception of the spouses Alarcon, special powers of
attorney authorizing Capt. Nuval to, among others, "follow up, ask,
demand, collect and receive" for their benefit indemnities of sums of
money due them relative to the sinking of M/V Nemos. By virtue of
these written powers of attorney, complainants-appellees were able
to receive their respective death benefits. Unknown to them,
however, the PMSI, in its capacity as employer and policyholder of
the life insurance of its deceased workers, filed with respondent-
appellant formal claims for and in behalf of the beneficiaries,
through its President, Capt. Nuval. Among the documents submitted
by the latter for the processing of the claims were five special
powers of attorney executed by complainants-appellees. On the
basis of these and other documents duly submitted, respondent-
appellant drew against its account with the Bank of the Philippine
Islands on 27 May 1986 six (6) checks, four for P200,00.00 each,
one for P50,000.00 and another for P40,00.00, payable to the order
of complainants-appellees. These checks were released to the
treasurer of PMSI upon instructions of
Capt. Nuval over the phone to Mr. Mariano Urbano, Assistant
Department Manager for Group Administration Department of
respondent-appellant. Capt. Nuval, upon receipt of these checks
from the treasurer, who happened to be his son-in-law, endorsed
and deposited them in his account with the Commercial Bank of
Manila, now Boston Bank. chanroblesvirtualawlibrary chanrobles virtual law library

On 3 July 1989, after complainants-appellees learned that they

were entitled, as beneficiaries, to life insurance benefits under a
group policy with respondent-appellant, they sought to recover
these benefits from Insular Life but the latter denied their claim on
the ground that the liability to complainants-appellees was already
extinguished upon delivery to and receipt by PMSI of the six (6)
checks issued in their names. 14 chanrobles virtual law library

On the basis thereof, the public respondent held that the Insurance
Commission had jurisdiction over the case on the ground that
although some of the claims exceed P100,000.00, the petitioners
had asked for administrative sanctions against Insular Life which are
within the Commission's jurisdiction to grant; hence, "there was
merely a misjoinder of causes of action . . . and, like misjoinder of
parties, it is not a ground for the dismissal of the action as it does
not affect the other reliefs prayed for." 15It also rejected Insular
Life's claim that the Alarcons had submitted a special power of
attorney which they (Insular Life) later misplaced. chanroblesvirtualawlibrary chanrobles virtual law library

On the other hand, the public respondent ruled that the powers of
attorney, Exhibits "1" to "5," relied upon by Insular Life were
sufficient to authorize Capt. Nuval to receive the proceeds of the
insurance pertaining to the beneficiaries. It stated:

When the officers of respondent-appellant read these written

powers, they must have assumed Capt. Nuval indeed had authority
to collect the insurance proceeds in behalf of the beneficiaries who
duly affixed their signatures therein. The written power is specific
enough to define the authority of the agent to collect any sum of
money pertaining to the sinking of the fatal vessel. Respondent-
appellant interpreted this power to include the collection of
insurance proceeds in behalf of the beneficiaries concerned. We
believe this is a reasonable interpretation even by an officer of
respondent-appellant unschooled in the law. Had respondent
appellant, consulted its legal department it would not have received
a contrary view. There is nothing in the law which mandates a
specific or special power of attorney to be executed to collect
insurance proceeds. Such authority is not included in the
enumeration of Art. 1878 of the New Civil Code. Neither do we
perceive collection of insurance claims as an act of strict dominion
as to require a special power of attorney. Moreover, respondent-
appellant had no reason to doubt Capt. Nuval. Not only was he
armed with a seemingly genuine authorization, he also appeared to
be the proper person to deal with respondent-appellant being the
President and General Manager of the PMSI, the policyholder with
whom respondent-appellant always dealt. The fact that there was a
verbal agreement between complainants-appellees and Capt. Nuval
limiting the authority of the latter to claiming specified death
benefits cannot prejudice the insurance company which relied on
the terms of the powers of attorney which on their face do not
disclose such limitation. Under the circumstances, it appearing that
complainants-appellees have failed to point to a positive provision of
law or stipulation in the policy requiring a specific power of attorney
to be presented, respondents-appellant's reliance on the written
powers was in order and it cannot be penalized for such an act. 16 chanrobles virtual law library

Insofar as the minor children of Dina Ayo and Lucia Lontok were
concerned, it ruled that the requirement in Section 180 of the
Insurance Code which provides in part that:

In the absence of a judicial guardian, the father, or in the latter's

absence or incapacity, the mother, of any minor, who is an insured
or a beneficiary under a contract of life, health or accident
insurance, may exercise, in behalf of said minor, any right under
the policy, without necessity of court authority or the giving of a
bond, where the interest of the minor in the particular act involved
does not exceed twenty thousand pesos. Such a right, may include,
but shall not be limited to, obtaining a policy loan, surrendering the
policy, receiving the proceeds of the policy, and giving the minor's
consent to any transaction on the policy.

has been amended by the Family Code 17which grants the father

and mother joint legal guardianship over the property of their
unemancipated common child without the necessity of a court
appointment; however, when the market value of the property or
the annual income of the child exceeds P50,000.00, the parent
concerned shall be required to put up a bond in such amount as the
court may determine.

Hence, this petition for review on certiorari which we gave due

course after the private respondent had filed the required comment
thereon and the petitioners their reply to the comment. chanroblesvirtualawlibrary chanrobles virtual law library

We rule for the petitioners. chanroblesvirtualawlibrary chanrobles virtual law library

We have carefully examined the specific powers of attorney,

Exhibits "1" to "5," which were executed by petitioners Luz Pineda,
Lucia B. Lontok, Dina Ayo, Celia Calumag, and Marilyn Montenegro,
respectively, on 14 May 1986 18 and uniformly granted to Capt.
Rosendo Nuval the following powers:

To follow-up, ask, demand, collect and receipt for my benefit

indemnities or sum of money due me relative to the sinking of M.V.
NEMOS in the vicinity of El Jadida, Casablanca, Morocco on the
evening of February 17, 1986; and chanrobles virtual law library

To sign receipts, documents, pertinent waivers of indemnities or

other writings of whatsoever nature with any and all third persons,
concerns and entities, upon terms and conditions acceptable to my
said attorney.

We agree with the Insurance Commission that the special powers of

attorney "do not contain in unequivocal and clear terms authority to
Capt. Nuval to obtain, receive, receipt from respondent company
insurance proceeds arising from the death of the seaman-insured.
On the contrary, the said powers of attorney are couched in terms
which could easily arouse suspicion of an ordinary man." 19The
holding of the public respondent to the contrary is principally
premised on its opinion that:

[t]here is nothing in the law which mandates a specific or special

power of attorney to be executed to collect insurance proceeds.
Such authority is not included in the enumeration of art. 1878 of the
New Civil Code. Neither do we perceive collection of insurance
claims as an act of strict dominion as to require a special power of
attorney.

If this be so, then they could not have been meant to be a general
power of attorney since Exhibits "1" to "5" are special powers of
attorney. The execution by the principals of special powers of
attorney, which clearly appeared to be in prepared forms and only
had to be filled up with their names, residences, dates of execution,
dates of acknowledgment and others, excludes any intent to grant a
general power of attorney or to constitute a universal agency. Being
special powers of attorney, they must be strictly construed.

Certainly, it would be highly imprudent to read into the special

powers of attorney in question the power to collect and receive the
insurance proceeds due the petitioners from Group Policy No. G-
004694. Insular Life knew that a power of attorney in favor of Capt.
Nuval for the collection and receipt of such proceeds was a deviation
from its practice with respect to group policies. Such practice was
testified to by Mr. Marciano Urbano, Insular Life's Assistant Manager
of the Group Administrative Department, thus:

ATTY. CAGUIOA:

Can you explain to us why in this case, the claim was filed by a
certain Capt. Noval [sic]? chanrobles virtual law library

WITNESS: chanrobles virtual law library

a The practice of our company in claim pertaining to group

insurance, the policyholder is the one who files the claim for the
beneficiaries of the deceased. At that time, Capt. Noval [sic] is the
President and General Manager of Prime Marine. chanroblesvirtualawlibrary chanrobles virtual law library
q What is the reason why policyholders are the ones who file the
claim and not the designated beneficiaries of the employees of the
policyholders?chanrobles virtual law library

a Yes because group insurance is normally taken by the employer

as an employee-benefit program and as such, the benefit should be
awarded by the policyholder to make it appear that the benefit
really is given by the employer. 20

On cross-examination, Urbano further elaborated that even

payments, among other things, are coursed through the
policyholder:

q What is the corporate concept of group insurance insofar as

Insular Life is concerned?

WITNESS:

a Group insurance is a contract where a group of individuals are

covered under one master contract. The individual underwriting
characteristics of each individual is not considered in the
determination of whether the individual is insurable or not. The
contract is between the policyholder and the insurance company. In
our case, it is Prime Marine and Insular Life. We do not have
contractual obligations with the individual employees; it is between
Prime Marine and Insular Life. chanroblesvirtualawlibrary chanrobles virtual law library

q And so it is part of that concept that all inquiries, follow-up,

payment of claims, premium billings, etc.  should always be coursed
thru the policyholder?

a Yes that is our practice. chanroblesvirtualawlibrary chanrobles virtual law library

q And when you say claim payments should always be coursed thru
the policyholder, do you require a power of attorney to be
presented by the policyholder or not?

a Not necessarily. chanroblesvirtualawlibrary chanrobles virtual law library

q In other words, under a group insurance policy like the one in this
case, Insular Life could pay the claims to the policyholder himself
even without the presentation of any power of attorney from the
designated beneficiaries?

xxx xxx xxx

WITNESS: chanrobles virtual law library

a No. Sir. chanroblesvirtualawlibrary chanrobles virtual law library

ATTY. AMPIL: chanrobles virtual law library

q Why? Is this case, the present case different from the cases which
you answered that no power of attorney is necessary in claims
payments? chanrobles virtual law library

WITNESS: chanrobles virtual law library

a We did not pay Prime Marine; we paid the beneficiaries. chanroblesvirtualawlibrary chanrobles virtual law library

q Will you now tell the Honorable Commission why you did not pay
Prime Marine and instead paid the beneficiaries, the designated
beneficiaries?

xxx xxx xxx

ATTY. AMPIL:

I will rephrase the question.

q Will you tell the Commission what circumstances led you to pay
the designated beneficiaries, the complainants in this case, instead
of the policyholder when as you answered a while ago, it is your
practice in group insurance that claims payments, etc., are coursed
thru the policyholder? chanrobles virtual law library

WITNESS: chanrobles virtual law library

a It is coursed but, it is not paid to the policyholder. chanroblesvirtualawlibrary chanrobles virtual law library
q And so in this case, you gave the checks to the policyholder only
coursing them thru said policyholder? chanrobles virtual law library

a That is right, Sir. chanroblesvirtualawlibrary chanrobles virtual law library

q Not directly to the designated beneficiaries? chanrobles virtual law library

a Yes, Sir. 21

This practice is usual in the group insurance business and is

consistent with the jurisprudence thereon in the State of California -
from whose laws our Insurance Code has been mainly patterned -
which holds that the employer-policyholder is the agent of the
insurer.chanroblesvirtualawlibrary chanrobles virtual law library

Group insurance is a comparatively new form of insurance. In the

United States, the first modern group insurance policies appear to
have been issued in 1911 by the Equitable Life Assurance
Society. 22Group insurance is essentially a single insurance contract
that provides coverage for many individuals. In its original and most
common form, group insurance provides life or health insurance
coverage for the employees of one employer. chanroblesvirtualawlibrary chanrobles virtual law library

The coverage terms for group insurance are usually stated in a

master agreement or policy that is issued by the insurer to a
representative of the group or to an administrator of the insurance
program, such as an employer. 23The employer acts as a functionary
in the collection and payment of premiums and in performing
related duties. Likewise falling within the ambit of administration of
a group policy is the disbursement of insurance payments by the
employer to the employees. 24Most policies, such as the one in this
case, require an employee to pay a portion of the premium, which
the employer deducts from wages while the remainder is paid by
the employer. This is known as a contributory plan as compared to
a non-contributory plan where the premiums are solely paid by the
employer. chanroblesvirtualawlibrary chanrobles virtual law library

Although the employer may be the titular or named insured, the

insurance is actually related to the life and health of the employee.
Indeed, the employee is in the position of a real party to the master
policy, and even in a non-contributory plan, the payment by the
employer of the entire premium is a part of the total compensation
paid for the services of the employee. 25Put differently, the labor of
the employees is the true source of the benefits, which are a form
of additional compensation to them. chanroblesvirtualawlibrary chanrobles virtual law library

It has been stated that every problem concerning group insurance

presented to a court should be approached with the purpose of
giving to it every legitimate opportunity of becoming a social agency
of real consequence considering that the primary aim is to provide
the employer with a means of procuring insurance protection for his
employees and their families at the lowest possible cost, and in so
doing, the employer creates goodwill with his employees, enables
the employees to carry a larger amount of insurance than they
could otherwise, and helps to attract and hold a permanent class of
employees. 26 chanrobles virtual law library

In Elfstrom vs.  New York Life Insurance Company, 27the California

Supreme Court explicitly ruled that in group insurance policies, the
employer is the agent of the insurer. Thus:

We are convinced that the employer is the agent of the insurer in

performing the duties of administering group insurance policies. It
cannot be said that the employer acts entirely for its own benefit or
for the benefit of its employees in undertaking administrative
functions. While a reduced premium may result if the employer
relieves the insurer of these tasks, and this, of course, is
advantageous to both the employer and the employees, the insurer
also enjoys significant advantages from the arrangement. The
reduction in the premium which results from employer-
administration permits the insurer to realize a larger volume of
sales, and at the same time the insurer's own administrative costs
are markedly reduced.

xxx xxx xxx chanrobles virtual law library

The most persuasive rationale for adopting the view that the
employer acts as the agent of the insurer, however, is that the
employee has no knowledge of or control over the employer's
actions in handling the policy or its administration. An agency
relationship is based upon consent by one person that another shall
act in his behalf and be subject to his control. It is clear from the
evidence regarding procedural techniques here that the insurer-
employer relationship meets this agency test with regard to the
administration of the policy, whereas that between the employer
and its employees fails to reflect true agency. The insurer directs
the performance of the employer's administrative acts, and if these
duties are not undertaken properly the insurer is in a position to
exercise more constricted control over the employer's conduct.

In Neider vs.  Continental Assurance Company, 28which was cited

in Elfstrom, it was held that:

[t]he employer owes to the employee the duty of good faith and

due care  in attending to the policy, and that the employer should
make clear to the employee anything required of him to keep the
policy in effect, and the time that the obligations are due. In its
position as administrator of the policy, we feel also that the
employer should be considered as the agent of the insurer, and any
omission of duty  to the employee in its administration should
be attributable to the insurer.

The ruling in Elfstrom was subsequently reiterated in the cases

of Bass vs.  John Hancock Mutual Life Insurance
Co. 29and Metropolitan Life Insurance Co.  vs.  State Board of
Equalization. 30
chanrobles virtual law library

In the light of the above disquisitions and after an examination of

the facts of this case, we hold that PMSI, through its President and
General Manager, Capt. Nuval, acted as the agent of Insular Life.
The latter is thus bound by the misconduct of its agent. chanroblesvirtualawlibrary chanrobles virtual law library

Insular Life, however, likewise recognized Capt. Nuval as the

attorney-in-fact of the petitioners. Unfortunately, through its official,
Mr. Urbano, it acted imprudently and negligently in the premises by
relying without question on the special power of attorney. In Strong
vs.  Repide, 31this Court ruled that it is among the established
principles in the civil law of Europe as well as the common law of
American that third persons deal with agents at their peril and are
bound to inquire as to the extent of the power of the agent with
whom they contract. And in Harry E.  Keller Electric
Co.  vs.  Rodriguez, 32this Court, quoting Mechem on
Agency, 33stated that:

The person dealing with an agent must also act with ordinary
prudence and reasonable diligence. Obviously, if he knows or has
good reason to believe that the agent is exceeding his authority, he
cannot claim protection. So if the suggestions of probable
limitations be of such a clear and reasonable quality, or if the
character assumed by the agent is of such a suspicious or
unreasonable nature, or if the authority which he seeks to exercise
is of such an unusual or improbable character, as would suffice to
put an ordinarily prudent man upon his guard, the party dealing
with him may not shut his eyes to the real state of the case, but
should either refuse to deal with the agent at all, or should
ascertain from the principal the true condition of affairs. (emphasis
supplied)

Even granting for the sake of argument that the special powers of
attorney were in due form, Insular Life was grossly negligent in
delivering the checks, drawn in favor of the petitioners, to a party
who is not the agent mentioned in the special power of attorney.
library
chanroblesvirtualawlibrary chanrobles virtual law

Nor can we agree with the opinion of the public respondent that
since the shares of the minors in the insurance proceeds are less
than P50,000.00, then under Article 225 of the Family Code their
mothers could receive such shares without need of either court
appointments as guardian or the posting of a bond. It is of the view
that said Article had repealed the third paragraph of Section 180 of
the Insurance Code. 34The pertinent portion of Article 225 of the
Family Code reads as follows:

Art. 225. The father and the mother shall jointly exercise legal
guardianship over the property of their unemancipated common
child without the necessity of a court appointment. In case of
disagreement, the father's decision shall prevail, unless there is
judicial order to the contrary.
chanroblesvirtualawlibrary chanrobles virtual law library

Where the market value of the property or the annual income of the
child exceeds P50,000, the parent concerned shall be required to
furnish a bond in such amount as the court may determine, but not
less than ten per centum (10%) of the value of the property or
annual income, to guarantee the performance of the obligations
prescribed for general guardians.

It is clear from the said Article that regardless of the value of the
unemancipated common child's property, the father and
mother ipso jure become the legal guardian of the child's property.
However, if the market value of the property or the annual income
of the child exceeds P50,000.00, a bond has to be posted by the
parents concerned to guarantee the performance of the obligations
of a general guardian. chanroblesvirtualawlibrary chanrobles virtual law library

It must, however, be noted that the second paragraph of Article 225

of the Family Code speaks of the "market value of the property or
the annual income of the child," which means, therefore, the
aggregate of the child's property or annual income; if this exceeds
P50,000.00, a bond is required. There is no evidence that the share
of each of the minors in the proceeds of the group policy in question
is the minor's only property. Without such evidence, it would not be
safe to conclude that, indeed, that is his only property. chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the instant petition is GRANTED. The Decision of

10 October 1991 and the Resolution of 19 May 1992 of the public
respondent in CA-G.R. SP No. 22950 are SET ASIDE and the
Decision of the Insurance Commission in IC Case No. RD-058 is
REINSTATED. chanroblesvirtualawlibrary chanrobles virtual law library

Costs against the private respondent. chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

G.R. No. 176405             August 20, 2008

LEO WEE, petitioner,
vs.
GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE CASTRO and FELOMINA
UBAN) and MARTINIANA DE CASTRO, respondents.

DECISION
CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court filed
by petitioner Leo Wee, seeking the reversal and setting aside of the Decision2 dated 19 September 2006
and the Resolution3 dated 25 January 2007 of the Court of Appeals in CA-G.R. SP No. 90906. The
appellate court, in its assailed Decision, reversed the dismissal of Civil Case. No. 1990, an action for
ejectment instituted by respondent George de Castro, on his own behalf and on behalf of Annie de
Castro, Felomina de Castro Uban and Jesus de Castro4 against petitioner, by the Municipal Trial Court
(MTC) of Alaminos City, which was affirmed by the Regional Trial Court (RTC), Branch 54, Alaminos City,
Pangasinan; and, ruling in favor of the respondents, ordered the petitioner to vacate the subject property.
In its assailed Resolution dated 25 January 2007, the Court of Appeals refused to reconsider its earlier
Decision of 19 September 2006.

In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil Case No. 1990,
respondents alleged that they are the registered owners of the subject property, a two-storey building
erected on a parcel of land registered under Transfer Certificate of Title (TCT) No. 16193 in the Registry
of Deeds of Pangasinan, described and bounded as follows:

A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot 13033-D, Psd-
018529, LRC Rec. No. ____) situated in Pob., Alaminos City; bounded on the NW. along line 1-2
by Lot 13035-D-1 of the subdivision plan; on the NE. along line 2-3 by Vericiano St.; on the SE.
along line 3-4 by Lot 13033-D-2 of the subdivision plan; on the SW. along line 4-1 by Lot 575,
Numeriano Rabago. It is coverd by TCT No. 16193 of the Register of Deeds of Pangasinan
(Alaminos City) and declared for taxation purposes per T.D. No. 2075, and assessed in the sum
of P93,400.00.6

Respondents rented out the subject property to petitioner on a month to month basis for P9,000.00 per
month.7 Both parties agreed that effective 1 October 2001, the rental payment shall be increased
from P9,000.00 to P15,000.00. Petitioner, however, failed or refused to pay the corresponding increase
on rent when his rental obligation for the month of 1 October 2001 became due. The rental dispute was
brought to the Lupon Tagapagpamayapa of Poblacion, Alaminos, Pangasinan, in an attempt to amicably
settle the matter but the parties failed to reach an agreement, resulting in the issuance by
the Barangay Lupon of a Certification to file action in court on 18 January 2002. On 10 June 2002,
respondent George de Castro sent a letter to petitioner terminating their lease agreement and demanding
that the latter vacate and turn over the subject property to respondents. Since petitioner stubbornly
refused to comply with said demand letter, respondent George de Castro, together with his siblings and
co-respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro, filed the Complaint for
ejectment before the MTC.

It must be noted, at this point, that although the Complaint stated that it was being filed by all of the
respondents, the Verification and the Certificate of Non-Forum Shopping were signed by respondent
George de Castro alone. He would subsequently attach to his position paper filed before the MTC on 28
October 2002 the Special Powers of Attorney (SPAs) executed by his sisters Annie de Castro and
Felomina de Castro Uban dated 7 February 2002 and 14 March 2002 respectively, authorizing him to
institute the ejectment case against petitioner.

Petitioner, on the other hand, countered that there was no agreement between the parties to increase the
monthly rentals and respondents' demand for an increase was exorbitant. The agreed monthly rental was
only for the amount of P9,000.00 and he was religiously paying the same every month. Petitioner then
argued that respondents failed to comply with the jurisdictional requirement of conciliation before
the Barangay  Lupon prior to the filing of Civil Case. No. 1990, meriting the dismissal of their Complaint
therein. The Certification to file action issued by the Barangay Lupon appended to the respondents'
Complaint merely referred to the issue of rental increase and not the matter of ejectment. Petitioner
asserted further that the MTC lacked jurisdiction over the ejectment suit, since respondents' Complaint
was devoid of any allegation that there was an "unlawful withholding" of the subject property by the
petitioner.8

During the Pre-Trial Conference9 held before the MTC, the parties stipulated that in May 2002, petitioner
tendered to respondents the sum of P9,000.00 as rental payment for the month of January 2002;
petitioner paid rentals for the months of October 2001 to January 2002 but only in the amount
of P9,000.00 per month; respondents, thru counsel, sent a letter to petitioner on 10 June 2002 terminating
their lease agreement which petitioner ignored; and the Barangay Lupon did issue a Certification to file
action after the parties failed to reach an agreement before it.

After the submission of the parties of their respective Position Papers, the MTC, on 21 November 2002,
rendered a Decision10 dismissing respondents' Complaint in Civil Case No. 1990 for failure to comply with
the prior conciliation requirement before the Barangay Lupon. The decretal portion of the MTC Decision
reads:

WHEREFORE, premised considered, judgment is hereby rendered ordering the dismissal of this
case. Costs against the [herein respondents].

On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54,
promulgated its Decision11 dated 27 June 2005 affirming the dismissal of respondents' Complaint for
ejectment after finding that the appealed MTC Decision was based on facts and law on the matter. The
RTC declared that since the original agreement entered into by the parties was for petitioner to pay only
the sum of P9.000.00 per month for the rent of the subject property, and no concession was reached by
the parties to increase such amount to P15.000.00, petitioner cannot be faulted for paying only the
originally agreed upon monthly rentals. Adopting petitioner's position, the RTC declared that respondents'
failure to refer the matter to the Barangay court for conciliation process barred the ejectment case,
conciliation before the Lupon being a condition sine qua non in the filing of ejectment suits. The RTC
likewise agreed with petitioner in ruling that the allegation in the Complaint was flawed, since respondents
failed to allege that there was an "unlawful withholding" of possession of the subject property, taking out
Civil Case No. 1990 from the purview of an action for unlawful detainer. Finally, the RTC decreed that
respondents' Complaint failed to comply with the rule that a co-owner could not maintain an action without
joining all the other co-owners. Thus, according to the dispositive portion of the RTC Decision:

WHEREFORE the appellate Court finds no cogent reason to disturb the findings of the court a
quo. The Decision dated November 21, 2002 appealed from is hereby AFFIRMED IN TOTO.12

Undaunted, respondents filed a Petition for Review on Certiorari13 with the Court of Appeals where it was
docketed as CA-G.R. SP No. 90906. Respondents argued in their Petition that the RTC gravely erred in
ruling that their failure to comply with the conciliation process was fatal to their Complaint, since it is only
respondent George de Castro who resides in Alaminos City, Pangasinan, while respondent Annie de
Castro resides in Pennsylvania, United States of America (USA); respondent Felomina de Castro Uban,
in California, USA; and respondent Jesus de Castro, now substituted by his wife, Martiniana, resides in
Manila. Respondents further claimed that the MTC was not divested of jurisdiction over their Complaint
for ejectment because of the mere absence therein of the term "unlawful withholding" of their subject
property, considering that they had sufficiently alleged the same in their Complaint, albeit worded
differently. Finally, respondents posited that the fact that only respondent George de Castro signed the
Verification and the Certificate of Non-Forum Shopping attached to the Complaint was irrelevant since the
other respondents already executed Special Powers of Attorney (SPAs) authorizing him  to act as their
attorney-in-fact in the institution of the ejectment suit against the petitioner.

On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents' Petition and
ordering petitioner to vacate the subject property and turn over the same to respondents. The Court of
Appeals decreed:
 WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision
dated June 27, 2005 issued by the RTC of Alaminos City, Pangasinan, Branch 54, is REVERSED
and SET ASIDE. A new one is hereby rendered ordering [herein petitioner] Leo Wee to
SURRENDER and VACATE the leased premises in question as well as to pay the sum of
P15,000.00 per month reckoned from March, 2002 until he shall have actually turned over the
possession thereof to petitioners plus the rental arrearages of P30,000.00 representing unpaid
increase in rent for the period from October, 2001 to February, 2002, with legal interest at 6% per
annum to be computed from June 7, 2002 until finality of this decision and 12% thereafter until full
payment thereof. Respondent is likewise hereby ordered to pay petitioners the amount
of P20,000.00 as and for attorney's fees and the costs of suit.14

In a Resolution dated 25 January 2007, the appellate court denied the Motion for Reconsideration
interposed by petitioner for lack of merit.

Petitioner is now before this Court via the Petition at bar, making the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT

CONCILIATION PROCESS IS NOT A JURISDICTIONAL REQUIREMENT THAT NON-
COMPLIANCE THEREWITH DOES NOT AFFECT THE JURISDICTION IN EJECTMENT CASE;

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE

SUFFICIENCY OF THE ALLEGATIONS IN THE COMPLAINT FOR EJECTMENT DESPITE THE
WANT OF ALLEGATION OF "UNLAWFUL WITHOLDING PREMISES" (sic) QUESTIONED BY
PETITIONER;

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FILING
OF THE COMPLAINT OF RESPONDENT GEORGE DE CASTRO WITHOUT JOINING ALL HIS
OTHER CO-OWNERS OVER THE SUBJECT PROPERTY IS PROPER;

IV.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING SUPREME

COURT CIRCULAR NO. 10 WHICH DIRECTS A PLEADER TO INDICATE IN HIS PLEADINGS
HIS OFFICIAL RECEIPT OF HIS PAYMENT OF HIS IBP DUES.15

Petitioner avers that respondents failed to go through the conciliation process before the Barangay
Lupon, a jurisdictional defect that bars the legal action for ejectment. The Certification to file action dated
18 January 2002 issued by the Barangay Lupon, appended by the respondents to their Complaint in Civil
Case No. 1990, is of no moment, for it attested only that there was confrontation between the parties on
the matter of rental increase but not on unlawful detainer of the subject property by the petitioner. If it was
the intention of the respondents from the very beginning to eject petitioner from the subject property, they
should have brought up the alleged unlawful stay of the petitioner on the subject property for conciliation
before the Barangay Lupon.

The barangay justice system was established primarily as a means of easing up the congestion of cases
in the judicial courts. This could be accomplished through a proceeding before the barangay courts which,
according to the one who conceived of the system, the late Chief Justice Fred Ruiz Castro, is essentially
arbitration in character; and to make it truly effective, it should also be compulsory. With this primary
objective of the barangay justice system in mind, it would be wholly in keeping with the underlying
philosophy of Presidential Decree No. 1508 (Katarungang Pambarangay Law), which would be better
served if an out-of-court settlement of the case is reached voluntarily by the parties.16 To ensure this
objective, Section 6 of Presidential Decree No. 1508 requires the parties to undergo a conciliation
process before the Lupon Chairman  or the  Pangkat ng Tagapagkasundo as a precondition to filing a
complaint in court subject to certain exceptions. The said section has been declared compulsory in
nature.17

Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The Local Government
Code), which took effect on 1 January 1992.

The pertinent provisions of the Local Government Code making conciliation a precondition to the filing of
complaints in court are reproduced below:

SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No complaint, petition,

action, or proceeding involving any matter within the authority of the lupon shall be filed or
instituted directly in court or any other government office for adjudication, unless there has been a
confrontation between the parties before the lupon chairman or the pangkat, and that no
conciliation or settlement has been reached as certified by the lupon secretary or pangkat
secretary as attested to by the lupon or pangkat chairman or unless the settlement has been
repudiated by the parties thereto.

(b) Where parties may go directly to court. - The parties may go directly to court in the following
instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal liberty calling for habeas
corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary injunction,
attachment, delivery of personal property, and support pendente lite; and

(4) Where the action may otherwise be barred by the statute of limitations.

(c) Conciliation among members of indigenous cultural communities. - The customs and traditions
of indigenous cultural communities shall be applied in settling disputes between members of the
cultural communities.

SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The lupon of each
barangay shall have authority to bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except:

(a) Where one party is the government or any subdivision or instrumentality thereof;

(b) Where one party is a public officer or employee, and the dispute relates to the performance of
his official functions;

(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five
thousand pesos (P5,000.00);

(d) Offenses where there is no private offended party;

 (e) Where the dispute involves real properties located in different cities or municipalities unless
the parties thereto agree to submit their differences to amicable settlement by an appropriate
lupon;

(f) Disputes involving parties who actually reside in barangays of different cities or municipalities,
except where such barangay units adjoin each other and the parties thereto agree to submit their
differences to amicable settlement by an appropriate lupon;

(g) Such other classes of disputes which the President may determine in the interest of justice or
upon the recommendation of the Secretary of Justice.

There is no question that the parties to this case appeared before the Barangay Lupon for conciliation
proceedings. There is also no dispute that the only matter referred to the Barangay Lupon for conciliation
was the rental increase, and not the ejectment of petitioner from the subject property. This is apparent
from a perusal of the Certification to file action in court issued by the Barangay  Lupon on 18 January
2002, to wit:

CERTIFICATION TO FILE COMPLAINTS

This is to certify that:

1. There was personal confrontation between parties before the barangay Lupon regarding
rental increase of a commercial building but conciliation failed;

2. Therefore, the corresponding dispute of the above-entitled case may now be filed in
Court/Government Office.18 (Emphasis ours.)

The question now to be resolved by this Court is whether the Certification dated 18 January 2002 issued
by the Barangay Lupon stating that no settlement was reached by the parties on the matter of rental
increase sufficient to comply with the prior conciliation requirement under the Katarungang
Pambarangay Law to authorize the respondents to institute the ejectment suit against petitioner.

The Court rules affirmatively.

While it is true that the Certification to file action dated 18 January 2002 of the Barangay Lupon refers
only to rental increase and not to the ejectment of petitioner from the subject property, the submission of
the same for conciliation before the Barangay Lupon constitutes sufficient compliance with the provisions
of the Katarungang Pambarangay Law. Given the particular circumstances of the case at bar, the
conciliation proceedings for the amount of monthly rental should logically and reasonably include also the
matter of the possession of the property subject of the rental, the lease agreement, and the violation of
the terms thereof.

We now proceed to discuss the meat of the controversy.

The contract of lease between the parties did not stipulate a fixed period. Hence, the parties agreed to the
payment of rentals on a monthly basis. On this score, Article 1687 of the Civil Code provides:

Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to
week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However, even
though a monthly rent is paid, and no period for the lease has been set, the courts may fix a
longer term for the lease after the lessee has occupied the premises for over one year. If the rent
is weekly, the courts may likewise determine a longer period after the lessee has been in
 possession for over six months. In case of daily rent, the courts may also fix a longer period after
the lessee has stayed in the place for over one month. (Emphasis supplied.)

The rentals being paid monthly, the period of such lease is deemed terminated at the end of each month.
Thus, respondents have every right to demand the ejectment of petitioners at the end of each month, the
contract having expired by operation of law. Without a lease contract, petitioner has no right of
possession to the subject property and must vacate the same. Respondents, thus, should be allowed to
resort to an action for ejectment before the MTC to recover possession of the subject property from
petitioner.

Corollarily, petitioner's ejectment, in this case, is only the reasonable consequence of his unrelenting
refusal to comply with the respondents' demand for the payment of rental increase agreed upon by both
parties. Verily, the lessor's right to rescind the contract of lease for non-payment of the demanded
increased rental was recognized by this Court in Chua v. Victorio19:

The right of rescission is statutorily recognized in reciprocal obligations, such as contracts of

lease. In addition to the general remedy of rescission granted under Article 1191 of the Civil
Code, there is an independent provision granting the remedy of rescission for breach of any of
the lessor or lessee's statutory obligations. Under Article 1659 of the Civil Code, the aggrieved
party may, at his option, ask for (1) the rescission of the contract; (2) rescission and
indemnification for damages; or (3) only indemnification for damages, allowing the contract to
remain in force.

Payment of the rent is one of a lessee's statutory obligations, and, upon non-payment by
petitioners of the increased rental in September 1994, the lessor acquired the right to avail
of any of the three remedies outlined above. (Emphasis supplied.)

Petitioner next argues that respondent George de Castro cannot maintain an action for ejectment against
petitioner, without joining all his co-owners.

Article 487 of the New Civil Code is explicit on this point:

ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful
detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership
(accion de reivindicacion). As explained by the renowned civilist, Professor Arturo M. Tolentino20:

A co-owner may bring such an action, without the necessity of joining all the other co-
owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all . If
the action is for the benefit of the plaintiff alone, such that he claims possession for himself and
not for the co-ownership, the action will not prosper. (Emphasis added.)
In the more recent case of  Carandang v. Heirs of De Guzman,21 this Court declared that a co-owner is not
even a necessary party to an action for ejectment, for complete relief can be afforded even in his
absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant
to Article 487 of the Civil Code and the relevant jurisprudence, any one of them may bring an
action, any kind of action for the recovery of co-owned properties. Therefore, only one of the co-
owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an
indispensable party thereto. The other co-owners are not indispensable parties. They are not
even necessary parties, for a complete relief can be afforded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all co-owners.

Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special Power of
Attorney, giving respondent George de Castro the authority to initiate Civil Case No. 1990.

A power of attorney is an instrument in writing by which one person, as principal, appoints another as his
agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the
principal. The written authorization itself is the power of attorney, and this is clearly indicated by the fact
that it has also been called a "letter of attorney."22

Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in any way
affect the validity of the action for ejectment instituted by respondent George de Castro. This also
disposes of petitioner's contention that respondent George de Castro lacked the authority to sign the
Verification and the Certificate of Non-Forum Shopping. As the Court ruled in Mendoza  v. Coronel23:

We likewise hold that the execution of the certification against forum shopping by the
attorney-in-fact in the case at bar is not a violation of the requirement that the parties must
personally sign the same. The attorney-in-fact, who has authority to file, and who actually filed
the complaint as the representative of the plaintiff co-owner, pursuant to a Special Power of
Attorney, is a party to the ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court includes
the representative of the owner in an ejectment suit as one of the parties authorized to institute
the proceedings. (Emphasis supplied.)

Failure by respondent George de Castro to attach the said SPAs to the Complaint is innocuous, since it is
undisputed that he was granted by his sisters the authority to file the action for ejectment against
petitioner prior to the institution of Civil Case No. 1990. The SPAs in his favor were respectively executed
by respondents Annie de Castro and Felomina de Castro Uban on 7 February 2002 and 14 March 2002;
while Civil Case No. 1990 was filed by respondent George de Castro on his own behalf and on behalf of
his siblings only on 1 July 2002, or way after he was given by his siblings the authority to file said action.
The Court quotes with approval the following disquisition of the Court of Appeals:

Moreover, records show that [herein respondent] George de Castro was indeed authorized by his
sisters Annie de Castro and Felomina de Castro Uban, to prosecute the case in their behalf as
shown by the Special Power of Attorney dated February 7, 2002 and March 14, 2002. That these
documents were appended only to [respondent George de Castro's] position paper is of no
moment considering that the authority conferred therein was given prior to the institution of the
complaint in July, 2002. x x x.24

Respondent deceased Jesus de Castro's failure to sign the Verification and Certificate of Non-Forum
Shopping may be excused since he already executed an Affidavit25 with respondent George de Castro
that he had personal knowledge of the filing of Civil Case No. 1990. In Torres v. Specialized Packaging
Development Corporation,26 the Court ruled that the personal signing of the verification requirement was
deemed substantially complied with when, as in the instant case, two out of 25 real parties-in-interest,
who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the
petition, signed the verification attached to it.

In the same vein, this Court is not persuaded by petitioner's assertion that respondents' failure to allege
the jurisdictional fact that there was "unlawful withholding" of the subject property was fatal to their cause
of action.

It is apodictic that what determines the nature of an action as well as which court has jurisdiction over it
are the allegations in the complaint and the character of the relief sought. In an unlawful detainer case,
the defendant's possession was originally lawful but ceased to be so upon the expiration of his right to
possess. Hence, the phrase "unlawful withholding" has been held to imply possession on the part of
defendant, which was legal in the beginning, having no other source than a contract, express or implied,
and which later expired as a right and is being withheld by defendant.27

In Barba v. Court of Appeals,28 the Court held that although the phrase "unlawfully withholding" was not
actually used by therein petitioner in her complaint, the Court held that her allegations, nonetheless,
amounted to an unlawful withholding of the subject property by therein private respondents, because they
continuously refused to vacate the premises even after notice and demand.

In the Petition at bar, respondents alleged in their Complaint that they are the registered owners of the
subject property; the subject property was being occupied by the petitioner pursuant to a monthly lease
contract; petitioner refused to accede to respondents' demand for rental increase; the respondents sent
petitioner a letter terminating the lease agreement and demanding that petitioner vacate and turn over the
possession of the subject property to respondents; and despite such demand, petitioner failed to
surrender the subject property to respondents.29 The Complaint sufficiently alleges the unlawful
withholding of the subject property by petitioner, constitutive of unlawful detainer, although the exact
words "unlawful withholding" were not used. In an action for unlawful detainer, an allegation that the
defendant is unlawfully withholding possession from the plaintiff is deemed sufficient, without necessarily
employing the terminology of the law.30

Petitioner's averment that the Court of Appeals should have dismissed respondents' Petition in light of the
failure of their counsel to attach the Official Receipt of his updated payment of Integrated Bar of the
Philippines (IBP) dues is now moot and academic, since respondents' counsel has already duly complied
therewith. It must be stressed that judicial cases do not come and go through the portals of a court of law
by the mere mandate of technicalities.31 Where a rigid application of the rules will result in a manifest
failure or miscarriage of justice, technicalities should be disregarded in order to resolve the case. 32

Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for the payment of back
rentals, attorney's fees and cost of the suit. Respondents must be duly indemnified for the loss of income
from the subject property on account of petitioner's refusal to vacate the leased premises.

WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 19 September
2006 and Resolution dated 25 January 2007 of the Court of Appeals in CA-G.R. SP No. 90906 are
hereby AFFIRMED in toto. Costs against petitioner.

SO ORDERED.

G.R. No. L-67889 October 10, 1985

PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and TERESITA NACIANCENO, respondents.

Payawal, Jimenez & Associates for petitioners.

Nelson A. Loyola for private respondent.

GUTIERREZ, JR., J.:

This is a petition for review of the decision of the Intermediate Appellate Court affirming in toto the
judgment of the Court of First Instance of Manila, Branch XXI, which ordered the petitioner to pay
respondent the thirty percent (30%) commission on 15,666 pieces of Philippine flags worth
P936,960.00, moral damages, attorney's fees and the costs of the suit.

Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then
Department of Education and Culture, hereinafter called Department, to purchase without public
bidding, one million pesos worth of national flags for the use of public schools throughout the
country. The respondent was able to expedite the approval of the purchase by hand-carrying the
different indorsements from one office to another, so that by the first week of September, 1974, all
the legal requirements had been complied with, except the release of the purchase orders. When
Nacianceno was informed by the Chief of the Budget Division of the Department that the purchase
orders could not be released unless a formal offer to deliver the flags in accordance with the
required specifications was first submitted for approval, she contacted the owners of the United Flag
Industry on September 17, 1974. The next day, after the transaction was discussed, the following
document (Exhibit A) was drawn up:

Mrs. Tessie Nacianceno,

This is to formalize our agreement for you to represent United Flag Industry to deal
with any entity or organization, private or government in connection with the
marketing of our products-flags and all its accessories.

For your service, you will be entitled to a commission of thirty

(30%) percent.

Signed
Mr. Primitive Siasat
Owner and Gen. Manager

On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The
next day, on October 17, 1974, the respondent's authority to represent the United Flag Industry was
revoked by petitioner Primitivo Siasat.

According to the findings of the courts below, Siasat, after receiving the payment of P469,980.00 on
October 23, 1974 for the first delivery, tendered the amount of P23,900.00 or five percent (5%) of the
amount received, to the respondent as payment of her commission. The latter allegedly protested.
She refused to accept the said amount insisting on the 30% commission agreed upon. The
respondent was prevailed upon to accept the same, however, because of the assurance of the
petitioners that they would pay the commission in full after they delivered the other half of the order.
The respondent states that she later on learned that petitioner Siasat had already received payment
for the second delivery of 7,833 flags. When she confronted the petitioners, they vehemently denied
receipt of the payment, at the same time claiming that the respondent had no participation
whatsoever with regard to the second delivery of flags and that the agency had already been
revoked.

The respondent originally filed a complaint with the Complaints and Investigation Office in
Malacañang but when nothing came of the complaint, she filed an action in the Court of First
Instance of Manila to recover the following commissions: 25%, as balance on the first delivery and
30%, on the second delivery.

The trial court decided in favor of the respondent. The dispositive portion of the decision reads as
follows:

WHEREFORE, judgment is hereby rendered sentencing Primitivo Siasat to pay to

the plaintiff the sum of P281,988.00, minus the sum P23,900.00, with legal interest
from the date of this decision, and ordering the defendants to pay jointly and
solidarily the sum of P25,000.00 as moral damages, and P25,000.00 as attorney's
fees, also with legal interest from the date of this decision, and the costs.

The decision was affirmed in toto by the Intermediate Appellate Court. After their motion for
reconsideration was denied, the petitioners went to this Court on a petition for review on August 6,
1984.

In assailing the appellate court's decision, the petition tenders the following arguments: first, the
authorization making the respondent the petitioner's representative merely states that she could deal
with any entity in connection with the marketing of their products for a commission of 30%. There
was no specific authorization for the sale of 15,666 Philippine flags to the Department; second, there
were two transactions involved evidenced by the separate purchase orders and separate delivery
receipts, Exhibit 6-C for the purchase and deliver on October 16, 1974, and Exhibits 7 to 7-C, for the
purchase and delivery on November 6, 1974. The revocation of agency effected by the parties with
mutual consent on October 17, 1974, therefore, forecloses the respondent's claim of 30%
commission on the second transaction; and last, there was no basis for the granting of attorney's
fees and moral damages because there was no showing of bad faith on the part of the petitioner. It
was respondent who showed bad faith in denying having received her commission on the first
delivery. The petitioner's counterclaim, therefore, should have been granted.

This petition was initially dismissed for lack of merit in a minute resolution.On a motion for
reconsideration, however,this Court give due course to the petition on November 14, 1984.

After a careful review of the records, we are constrained to sustain with some modifications the
decision of the appellate court.

We find respondent's argument regarding respondent's incapacity to represent them in the

transaction with the Department untenable. There are several kinds of agents. To quote a
commentator on the matter:

An agent may be (1) universal: (2) general, or (3) special. A universal; agent is one
authorized to do all acts for his principal which can lawfully be delegated to an agent.
 So far as such a condition is possible, such an agent may be said to have universal
authority. (Mec. Sec. 58).

A general agent is one authorized to do all acts pertaining to a business of a certain

kind or at a particular place, or all acts pertaining to a business of a particular class
or series. He has usually authority either expressly conferred in general terms or in
effect made general by the usages, customs or nature of the business which he is
authorized to transact.

An agent, therefore, who is empowered to transact all the business of his principal of
a particular kind or in a particular place, would, for this reason, be ordinarily deemed
a general agent. (Mec Sec. ,30).

A special agent is one authorized to do some particular act or to act upon some
particular occasion. lie acts usually in accordance with specific instructions or under
limitations necessarily implied from the nature of the act to be done. (Mec. Sec. 61)
(Padilla, Civil Law The Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).

One does not have to undertake a close scrutiny of the document embodying the agreement
between the petitioners and the respondent to deduce that the 'latter was instituted as a general
agent. Indeed, it can easily be seen by the way general words were employed in the agreement that
no restrictions were intended as to the manner the agency was to be carried out or in the place
where it was to be executed. The power granted to the respondent was so broad that it practically
covers the negotiations leading to, and the execution of, a contract of sale of petitioners'
merchandise with any entity or organization.

There is no merit in petitioners' allegations that the contract of agency between the parties was
entered into under fraudulent representation because respondent "would not disclose the agency
with which she was supposed to transact and made the petitioner believe that she would be dealing
with The Visayas", and that "the petitioner had known of the transactions and/or project for the said
purchase of the Philippine flags by the Department of Education and Culture and precisely it was the
one being followed up also by the petitioner."

If the circumstances were as claimed by the petitioners, they would have exerted efforts to protect
their interests by limiting the respondent's authority. There was nothing to prevent the petitioners
from stating in the contract of agency that the respondent could represent them only in the Visayas.
Or to state that the Department of Education and Culture and the Department of National Defense,
which alone would need a million pesos worth of flags, are outside the scope of the agency. As the
trial court opined, it is incredible that they could be so careless after being in the business for fifteen
years.

A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that
"when the terms of an agreement have been reduced to writing, it is to be considered as containing
all such terms, and, therefore, there can be between the parties and their successors-in-interest, no
evidence of the terms of the agreement other than the contents of the writing", except in cases
specifically mentioned in the same rule. Petitioners have failed to show that their agreement falls
under any of these exceptions. The respondent was given ample authority to transact with the
Department in behalf of the petitioners. Equally without merit is the petitioners' proposition that the
transaction involved two separate contracts because there were two purchase orders and two
deliveries. The petitioners' evidence is overcome by other pieces of evidence proving that there was
only one transaction.
The indorsement of then Assistant Executive Secretary Roberto Reyes to the Budget Commission
on September 3, 1974 (Exhibit "C") attests to the fact that out of the total budget of the Department
for the fiscal year 1975, "P1,000,000.00 is for the purchase of national flags." This is also reflected in
the Financial and Work Plan Request for Allotment (Exhibit "F") submitted by Secretary Juan Manuel
for fiscal year 1975 which however, divided the allocation and release of the funds into three,
corresponding to the second, third, and fourth quarters of the said year. Later correspondence
between the Department and the Budget Commission (Exhibits "D" and "E") show that the first
allotment of P500.000.00 was released during the second quarter. However, due to the necessity of
furnishing all of the public schools in the country with the Philippine flag, Secretary Manuel
requested for the immediate release of the programmed allotments intended for the third and fourth
quarters. These circumstances explain why two purchase orders and two deliveries had to be made
on one transaction.

The petitioners' evidence does not necessarily prove that there were two separate transactions.
Exhibit "6" is a general indorsement made by Secretary Manuel for the purchase of the national flags
for public schools. It contains no reference to the number of flags to be ordered or the amount of
funds to be released. Exhibit "7" is a letter request for a "similar authority" to purchase flags from the
United Flag Industry. This was, however, written by Dr. Narciso Albarracin who was appointed
Acting Secretary of the Department after Secretary Manuel's tenure, and who may not have known
the real nature of the transaction.

If the contracts were separate and distinct from one another, the whole or at least a substantial part
of the government's supply procurement process would have been repeated. In this case, what were
issued were mere indorsements for the release of funds and authorization for the next purchase.

Since only one transaction was involved, we deny the petitioners' contention that respondent
Nacianceno is not entitled to the stipulated commission on the second delivery because of the
revocation of the agency effected after the first delivery. The revocation of agency could not prevent
the respondent from earning her commission because as the trial court opined, it came too late, the
contract of sale having been already perfected and partly executed.

In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this
Court held:

We do not mean to question the general doctrine as to the power of a principal to

revoke the authority of his agent at will, in the absence of a contract fixing the
duration of the agency (subject, however, to some well defined exceptions). Our
ruling is that at the time fixed by the manager of the plaintiff company for the
termination of the negotiations, the defendant real estate agent had already earned
the commissions agreed upon, and could not be deprived thereof by the arbitrary
action of the plaintiff company in declining to execute the contract of sale for some
reason personal to itself.

The principal cannot deprive his agent of the commission agreed upon by cancelling the agency
and, thereafter, dealing directly with the buyer. (Infante v. Cunanan, 93 Phil. 691).

The appellate courts citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49 O.G. 1507)
is correct:

The appellee is entitled to recovery. No citation is necessary to show that the general
law of contracts the equitable principle of estoppel. and the expense of another,
uphold payment of compensation for services rendered.
There is merit, however, in the petitioners' contention that the agent's commission on the first
delivery was fully paid. The evidence does not sustain the respondent's claim that the petitioners
paid her only 5% and that their right to collect another 25% commission on the first delivery must be
upheld.

When respondent Nacianceno asked the Malacanang Complaints and Investigation Office to help
her collect her commission, her statement under oath referred exclusively to the 30% commission on
the second delivery. The statement was emphatic that "now" her demand was for the 30%
commission on the (second) release of P469,980.00. The demand letter of the respondent's lawyer
dated November 13, 1984 asked petitioner Siasat only for the 30% commission due from the second
delivery. The fact that the respondent demanded only the commission on the second delivery
without reference to the alleged unpaid balance which was only slightly less than the amount
claimed can only mean that the commission on the first delivery was already fully paid, Considering
the sizeable sum involved, such an omission is too glaringly remiss to be regarded as an oversight.

Moreover, the respondent's authorization letter (Exhibit "5") bears her signature with the handwritten
words "Fully Paid", inscribed above it.

The respondent contested her signature as a forgery, Handwriting experts from two government
agencies testified on the matter. The reason given by the trial court in ruling for the respondent is too
flimsy to warrant a finding of forgery.

The court stated that in thirteen documents presented as exhibits, the private respondent signed her
name as "Tessie Nacianceno" while in this particular instance, she signed as "T. Nacianceno."

The stated basis is inadequate to sustain the respondent's allegation of forgery. A variance in the
manner the respondent signed her name can not be considered as conclusive proof that the
questioned signature is a forgery. The mere fact that the respondent signed thirteen documents
using her full name does not rule out the possibility of her having signed the notation "Fully Paid",
with her initial for the given came and the surname written in full. What she was signing was a mere
acknowledgment.

This leaves the expert testimony as the sole basis for the verdict of forgery.

In support of their allegation of full payment as evidenced by the signed authorization letter (Exhibit
"5-A"), the petitioners presented as witness Mr. Francisco Cruz. Jr., a senior document examiner of
the Philippine Constabulary Crime laboratory. In rebuttal, the respondent presented Mr. Arcadio
Ramos, a junior document examiner of the National Bureau of Investigation.

While the experts testified in a civil case, the principles in criminal cases involving forgery are
applicable. Forgery cannot be presumed. It must be proved.

In Borromeo v. Court of Appeals (131 SCRA 318, 326) we held that:

xxx xxx xxx

... Where the evidence, as here, gives rise to two probabilities, one consistent with
the defendant's innocence and another indicative of his guilt, that which is favorable
to the accused should be considered. The constitutional presumption of innocence
continues until overthrown by proof of guilt beyond reasonable doubt, which requires
moral certainty which convinces and satisfies the reason and conscience of those
 who are to act upon it. (People v. Clores, et al., 125 SCRA 67; People v. Bautista, 81
Phil. 78).

We ruled in another case that where the supposed expert's testimony would constitute the sole
ground for conviction and there is equally convincing expert testimony to the contrary, the
constitutional presumption of innocence must prevail. (Lorenzo Ga. Cesar v. Hon. Sandiganbayan
and People of the Philippines, 134 SCRA 105). In the present case, the circumstances earlier
mentioned taken with the testimony of the PC senior document examiner lead us to rule against
forgery.

We also rule against the respondent's allegation that the petitioners acted in bad faith when they
revoked the agency given to the respondent.

Fraud and bad faith are matters not to be presumed but matters to be alleged with sufficient facts.
To support a judgment for damages, facts which justify the inference of a lack or absence of good
faith must be alleged and proven. (Bacolod-Murcia Milling Co., Inc. vs. First Farmers Milling Co.,
Inc., Etc., 103 SCRA 436).

There is no evidence on record from which to conclude that the revocation of the agency was
deliberately effected by the petitioners to avoid payment of the respondent's commission. What
appears before us is only the petitioner's use in court of such a factual allegation as a defense
against the respondent's claim. This alone does not per se make the petitioners guilty of bad faith for
that defense should have been fully litigated.

Moral damages cannot be awarded in the absence of a wrongful act or omission or of fraud or bad
faith. (R & B Surety & Insurance Co., Inc. vs. Intermediate Appellate Court, 129 SCRA 736).

We therefore, rule that the award of P25,000.00 as moral damages is without basis.

The additional award of P25,000.00 damages by way of attorney's fees, was given by the courts
below on the basis of Article 2208, Paragraph 2, of the Civil Code, which provides: "When the
defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interests;" attorney's fees may be awarded as damages. (Pirovano et al. v.
De la Rama Steamship Co., 96 Phil. 335).

The underlying circumstances of this case lead us to rule out any award of attorney's fees. For one
thing, the respondent did not come to court with completely clean hands. For another, the petitioners
apparently believed they could legally revoke the agency in the manner they did and deal directly
with education officials handling the purchase of Philippine flags. They had reason to sincerely
believe they did not have to pay a commission for the second delivery of flags.

We cannot close this case without commenting adversely on the inexplicably strange procurement
policies of the Department of Education and Culture in its purchase of Philippine flags. There is no
reason why a shocking 30% of the taxpayers' money should go to an agent or facilitator who had no
flags to sell and whose only work was to secure and handcarry the indorsements of education and
budget officials. There are only a few manufacturers of flags in our country with the petitioners
claiming to have supplied flags for our public schools on earlier occasions. If public bidding was
deemed unnecessary, the Department should have negotiated directly with flag manufacturers.
Considering the sad plight of underpaid and overworked classroom teachers whose pitiful salaries
and allowances cannot sometimes be paid on time, a P300,000.00 fee for a P1,000,000.00
purchase of flags is not only clearly unnecessary but a scandalous waste of public funds as well.
WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are
ordered to pay the respondent the amount of ONE HUNDRED FOURTY THOUSAND NINE
HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her commission on the second delivery
of flags with legal interest from the date of the trial court's decision. No pronouncement as to costs.

SO ORDERED.