Agency Cases

AGENCY CASES Judge Bastes Syllabus
What a person may do personally, he may do through another
G.R. No. L-‐15568 November 8, 1919
W. G. PHILPOTTS, petitioner,

vs.
PHILIPPINE MANUFACTURING COMPANY and F. N. BERRY, respondents.
Lawrence and Ross for petitioner.

CrossMield and O'Brien for defendants.

STREET, J.:
The petitioner, W. G. Philpotts, a stockholder in the Philippine Manufacturing Company, one of the respondents
herein, seeks by this proceeding to obtain a writ of mandamus to compel the respondents to permit the plaintiff,
in person or by some authorized agent or attorney, to inspect and examine the records of the business transacted
by said company since January 1, 1918. The petition is Miled originally in this court under the authority of section
515 of the Code of Civil Procedure, which gives to this tribunal concurrent jurisdiction with the Court of First
Instance in cases, among others, where any corporation or person unlawfully excludes the plaintiff from the use
and enjoyment of some right to which he is entitled. The respondents interposed a demurrer, and the controversy
is now before us for the determination of the questions thus presented.
The Mirst point made has reference to a supposed defect of parties, and it is said that the action can not be
maintained jointly against the corporation and its secretary without the addition of the allegation that the latter
is the custodian of the business records of the respondent company.
By the plain language of sections 515 and 222 of our Code of Civil Procedure, the right of action in such a
proceeding as this is given against the corporation; and the respondent corporation in this case was the only
absolutely necessary party. In the Ohio case of Cincinnati Volksblatt Co. vs. Hoffmister (61 Ohio St., 432; 48 L. R.
A., 735), only the corporation was named as defendant, while the complaint, in language almost identical with
that in the case at bar, alleged a demand upon and refusal by the corporation.
Nevertheless the propriety of naming the secretary of the corporation as a codefendant cannot be questioned,
since such ofMicial is customarily charged with the custody of all documents, correspondence, and records of a
corporation, and he is presumably the person against whom the personal orders of the court would be made
effective in case the relief sought should be granted. Certainly there is nothing in the complaint to indicate that
the secretary is an improper person to be joined. The petitioner might have named the president of the
corporation as a respondent also; and this ofMicial might be brought in later, even after judgment rendered, if
necessary to the effectuation of the order of the court.
Section 222 of our Code of Civil Procedure is taken from the California Code, and a decision of the California
Supreme Court — Barber vs. Mulford (117 Cal., 356) — is quite clear upon the point that both the corporation
and its ofMicers may be joined as defendants.
The real controversy which has brought these litigants into court is upon the question argued in connection with
the second ground of demurrer, namely, whether the right which the law concedes to a stockholder to inspect the
records can be exercised by a proper agent or attorney of the stockholder as well as by the stockholder in person.
There is no pretense that the respondent corporation or any of its ofMicials has refused to allow the petitioner
himself to examine anything relating to the affairs of the company, and the petition prays for a peremptory order
commanding the respondents to place the records of all business transactions of the company, during a speciMied
period, at the disposal of the plaintiff or his duly authorized agent or attorney, it being evident that the petitioner
desires to exercise said right through an agent or attorney. In the argument in support of the demurrer it is
conceded by counsel for the respondents that there is a right of examination in the stockholder granted under
section 51 of the Corporation Law, but it is insisted that this right must be exercised in person.
The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459, which reads as
follows: "The record of all business transactions of the corporation and the minutes of any meeting shall be open
to the inspection of any director, member or stockholder of the corporation at reasonable hours."
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This provision is to be read of course in connecting with the related provisions of sections 51 and 52, deMining the
duty of the corporation in respect to the keeping of its records.
Now it is our opinion, and we accordingly hold, that the right of inspection given to a stockholder in the provision
above quoted can be exercised either by himself or by any proper representative or attorney in fact, and either
with or without the attendance of the stockholder. This is in conformity with the general rule that what a man
may do in person he may do through another; and we Mind nothing in the statute that would justify us in
qualifying the right in the manner suggested by the respondents.
This conclusion is supported by the undoubted weight of authority in the United States, where it is generally held
that the provisions of law conceding the right of inspection to stockholders of corporations are to be liberally
construed and that said right may be exercised through any other properly authorized person. As was said in
Foster vs. White (86 Ala., 467), "The right may be regarded as personal, in the sense that only a stockholder may
enjoy it; but the inspection and examination may be made by another. Otherwise it would be unavailing in many
instances." An observation to the same effect is contained in Martin vs. Bienville Oil Works Co. (28 La., 204),
where it is said: "The possession of the right in question would be futile if the possessor of it, through lack of
knowledge necessary to exercise it, were debarred the right of procuring in his behalf the services of one who
could exercise it." In Deadreck vs. Wilson (8 Baxt. [Tenn.], 108), the court said: "That stockholders have the right
to inspect the books of the corporation, taking minutes from the same, at all reasonable times, and may be aided
in this by experts and counsel, so as to make the inspection valuable to them, is a principle too well settled to
need discussion." Authorities on this point could be accumulated in great abundance, but as they may be found
cited in any legal encyclopedia or treaties devoted to the subject of corporations, it is unnecessary here to refer to
other cases announcing the same rule.
In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable to say that
there are some things which a corporation may undoubtedly keep secret, notwithstanding the right of inspection
given by law to the stockholder; as for instance, where a corporation, engaged in the business of manufacture, has
acquired a formula or process, not generally known, which has proved of utility to it in the manufacture of its
products. It is not our intention to declare that the authorities of the corporation, and more particularly the
Board of Directors, might not adopt measures for the protection of such process form publicity. There is, however,
nothing in the petition which would indicate that the petitioner in this case is seeking to discover anything which
the corporation is entitled to keep secret; and if anything of the sort is involved in the case it may be brought out
at a more advanced stage of the proceedings.lawphil.net
The demurrer is overruled; and it is ordered that the writ of mandamus shall issue as prayed, unless within 5
days from notiMication hereof the respondents answer to the merits. So ordered.
G.R. No. L-‐24332 January 31, 1978
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.

MUÑOZ PALMA, J.:
This is a case of an attorney-‐in-‐fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold
the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had executed
in favor. The administrator of the estate of the went to court to have the sale declared uneanforceable and to
recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals
uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
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The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and registered
co-‐owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
CertiMicate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters executed a special power of
attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March
3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The
deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer
certiMicate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos Miled a complaint
docketed as Civil Case No. R-‐4530 of the Court of First Instance of Cebu, praying (1) that the sale of the undivided
share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share be reconveyed to her
estate; (2) that the CertiMicate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled
and another title be issued in the names of the corporation and the "Intestate estate of Concepcion Rallos" in
equal undivided and (3) that plaintiff be indemniMied by way of attorney's fees and payment of costs of suit.
Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds
of Cebu, but subsequently, the latter was dropped from the complaint. The complaint was amended twice;
defendant Corporation's Answer contained a crossclaim against its co-‐defendant, Simon Rallos while the latter
Miled third-‐party complaint against his sister, Gerundia Rallos While the case was pending in the trial court, both
Simon and his sister Gerundia died and they were substituted by the respective administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint —
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-‐half pro-‐indiviso share of
Concepcion Rallos in the property in question, — Lot 5983 of the Cadastral Survey of Cebu — is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer CertiMicate of Title No. 12989 covering Lot
5983 and to issue in lieu thereof another in the names of FELIX GO CHAN & SONS REALTY CORPORATION and
the Estate of Concepcion Rallos in the proportion of one-‐half (1/2) share each pro-‐indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided one-‐half
(1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to
plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-‐Claim:
(1) Sentencing the co-‐defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to
defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45, representing the price of one-‐half (1/2)
share of lot 5983;
(2) Ordering co-‐defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay in concept
of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the sum of P500.00.
C. On Third-‐Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos,

against JoseMina Rallos special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-‐party complaint without prejudice to Miling either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a claim in the Intestate-‐Estate of Cerundia Rallos, covering the
same subject-‐matter of the third-‐party complaint, at bar. (pp. 98-‐100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing
judgment insofar as it set aside the sale of the one-‐half (1/2) share of Concepcion Rallos. The appellate tribunal,
as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the appellant corporation sustaining
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the sale in question. 1 The appellee administrator, Ramon Rallos, moved for a reconsider of the decision but the
same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly
to the instant case, We have the query. is the sale of the undivided share of Concepcion Rallos in lot 5983 valid
although it was executed by the agent after the death of his principal? What is the law in this jurisdiction as to the
effect of the death of the principal on the authority of the agent to act for and in behalf of the latter? Is the fact of
knowledge of the death of the principal a material factor in determining the legal effect of an act performed after
such death?
Before proceedings to the issues, We shall brieMly restate certain principles of law relevant to the matter tinder
consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent him. 3 A contract
entered into in the name of another by one who has no authority or the legal representation or who has acted
beyond his powers, shall be unenforceable, unless it is ratiMied, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1) of the same
Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justiMied:
(1) Those entered into in the name of another person by one who hi -‐ been given no authority or legal
representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one
party, called the principal (mandante), authorizes another, called the agent (mandatario), to act for and in his
behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or
implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agents acts as a representative and not for himself, and (4) the agent acts within the scope
of his authority. 5
Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates
from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the
authority. Qui facit per alium facit se. "He who acts through another acts himself". 6
2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause —
death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish
Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis
supplied)
By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death
of the principal or the agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in the
juridical basis of agency which is representation Them being an integration of the personality of the principal
integration that of the agent it is not possible for the representation to continue to exist once the death of either
is establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a necessary cause for its
extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon the
death of either without necessity for the heirs of the fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law — the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the prevalent
rule in American Jurisprudence where it is well-‐settled that a power without an interest confer. red upon an
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agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding on
the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that exception? That is the
determinative point in issue in this litigation. It is the contention of respondent corporation which was sustained
by respondent court that notwithstanding the death of the principal Concepcion Rallos the act of the attorney-‐in-‐
fact, Simeon Rallos in selling the former's sham in the property is valid and enforceable inasmuch as the
corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-‐mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been
constituted in the common interest of the latter and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause
which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have
contracted with him in good faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos
was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is
valid and effective only under two conditions, viz: (1) that the agent acted without knowledge of the death of the
principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith here
means that the third person was not aware of the death of the principal at the time he contracted with said agent.
These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the
time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to
be inferred from the pleadings Miled by Simon Rallos before the trial court. 12 That Simeon Rallos knew of the
death of his sister Concepcion is also a Minding of fact of the court a quo 13 and of respondent appellate court
when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with
the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant
(the realty corporation) of the death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion
Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of
knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in
good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931
of the new Civil Code sustained the validity , of a sale made after the death of the principal because it was not
shown that the agent knew of his principal's demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim
Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no
indication in the record, that the agent Luy Kim Guan was aware of the death of his principal at the time he sold
the property. The death 6f the principal does not render the act of an agent unenforceable, where the latter had
no knowledge of such extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out that
there is no provision in the Code which provides that whatever is done by an agent having knowledge of the
death of his principal is void even with respect to third persons who may have contracted with him in good faith
and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated in
Article 1919 that the death of the principal extinguishes the agency. That being the general rule it follows a
fortiori that any act of an agent after the death of his principal is void ab initio unless the same falls under the
exceptions provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the
general rule, is to be strictly construed, it is not to be given an interpretation or application beyond the clear
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import of its terms for otherwise the courts will be involved in a process of legislation outside of their judicial
function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the
power of attorney which was duly registered on the original certiMicate of title recorded in the Register of Deeds
of the province of Cebu, that no notice of the death was aver annotated on said certiMicate of title by the heirs of
the principal and accordingly they must suffer the consequences of such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the revocation must be made
known to them. But if the agency is general in nature, without reference to particular person with whom the
agent is to contract, it is sufMicient that the principal exercise due diligence to make the revocation of the agency
publicly known.
In case of a general power which does not specify the persons to whom represents' on should be made, it is the
general opinion that all acts, executed with third persons who contracted in good faith, Without knowledge of the
revocation, are valid. In such case, the principal may exercise his right against the agent, who, knowing of the
revocation, continued to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp.
15-‐16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of terminating an agency
which is to be distinguished from revocation by operation of law such as death of the principal which obtains in
this case. On page six of this Opinion We stressed that by reason of the very nature of the relationship between
principal and agent, agency is extinguished ipso jure upon the death of either principal or agent. Although a
revocation of a power of attorney to be effective must be communicated to the parties concerned, 18 yet a
revocation by operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch
as "by legal Miction the agent's exercise of authority is regarded as an execution of the principal's continuing will.
19 With death, the principal's will ceases or is the of authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What
the Code provides in Article 1932 is that, if the agent die his heirs must notify the principal thereof, and
in the meantime adopt such measures as the circumstances may demand in the interest of the latter.
Hence, the fact that no notice of the death of the principal was registered on the certiAicate of title of the
property in the OfAice of the Register of Deeds, is not fatal to the cause of the estate of the principal
6. Holding that the good faith of a third person in said with an agent affords the former sufMicient
protection, respondent court drew a "parallel" between the instant case and that of an innocent purchaser for
value of a land, stating that if a person purchases a registered land from one who acquired it in bad faith — even
to the extent of foregoing or falsifying the deed of sale in his favor — the registered owner has no recourse
against such innocent purchaser for value but only against the forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v. Nano
and Vallejo, 61 Phil. 625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-‐owner of lands with
Agustin Nano. The latter had a power of attorney supposedly executed by Vallejo Nano in his favor. Vallejo
delivered to Nano his land titles. The power was registered in the OfMice of the Register of Deeds. When the
lawyer-‐husband of Angela Blondeau went to that OfMice, he found all in order including the power of attorney. But
Vallejo denied having executed the power The lower court sustained Vallejo and the plaintiff Blondeau appealed.
Reversing the decision of the court a quo, the Supreme Court, quoting the ruling in the case of Eliason v. Wilborn,
261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendant-‐ appellee must be overruled. Agustin
Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have been perpetuated. When Fernando de la Canters, a member of the
Philippine Bar and the husband of Angela Blondeau, the principal plaintiff, searched the registration record, he
found them in due form including the power of attorney of Vallajo in favor of Nano. If this had not been so and if
thereafter the proper notation of the encumbrance could not have been made, Angela Blondeau would not have
sent P12,000.00 to the defendant Vallejo.' An executed transfer of registered lands placed by the registered owner
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thereof in the hands of another operates as a representation to a third party that the holder of the transfer is
authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who
made it possible by his act of coincidence bear the loss. (pp. 19-‐21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted with
one who admittedly was an agent of his sister and who sold the property of the latter after her death with full
knowledge of such death. The situation is expressly covered by a provision of law on agency the terms of which
are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in the same manner that
the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land Registration Law which
in part provides:
xxx xxx xxx
The production of the owner's duplicate certiMicate whenever any voluntary instrument is presented for
registration shall be conclusive authority from the registered owner to the register of deeds to enter a new
certiMicate or to make a memorandum of registration in accordance with such instruments, and the new
certiMicate or memorandum Shall be binding upon the registered owner and upon all persons claiming under him
in favor of every purchaser for value and in good faith: Provided however, That in all cases of registration
provided by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the right, of any innocent holder for value of a certiMicate of title. ... (Act No. 496 as
amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of
the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the death
of the principal were held to be "good", "the parties being ignorant of the death". Let us take note that the
Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the death of the
principal. We quote from that decision the following:
... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the death is a good
payment. in addition to the case in Campbell before cited, the same judge Lord Ellenboruogh, has decided in 5
Esp. 117, the general question that a payment after the death of principal is not good. Thus, a payment of sailor's
wages to a person having a power of attorney to receive them, has been held void when the principal was dead at
the time of the payment. If, by this case, it is meant merely to decide the general proposition that by operation of
law the death of the principal is a revocation of the powers of the attorney, no objection can be taken to it. But if it
intended to say that his principle applies where there was 110 notice of death, or opportunity of twice I must be
permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident circumstance of the death of the
principal, which he did not know, and which by no possibility could he know? It would be unjust to the agent and
unjust to the debtor. In the civil law, the acts of the agent, done bona Mide in ignorance of the death of his principal
are held valid and binding upon the heirs of the latter. The same rule holds in the Scottish law, and I cannot
believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be made that
the above represents the minority view in American jurisprudence. Thus in Clayton v. Merrett, the Court said.—
There are several cases which seem to hold that although, as a general principle, death revokes an agency and
renders null every act of the agent thereafter performed, yet that where a payment has been made in ignorance
of the death, such payment will be good. The leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S.
(Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly announced. It is referred to, and seems to
have been followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter case it appeared that
the estate of the deceased principal had received the beneMit of the money paid, and therefore the representative
of the estate might well have been held to be estopped from suing for it again. . . . These cases, in so far, at least, as
they announce the doctrine under discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v.
McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in announcing the
principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)
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So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far as it
related to the particular facts, was a mere dictum, Baldwin J. said:
The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his views on
the general subject, than as the adjudication of the Court upon the point in question. But accordingly all power
weight to this opinion, as the judgment of a of great respectability, it stands alone among common law authorities
and is opposed by an array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)
Whatever conMlict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such
conMlict exists in our own for the simple reason that our statute, the Civil Code, expressly provides for two
exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit: (1) that the agency
is coupled with an interest (Art 1930), and (2) that the act of the agent was executed without knowledge of the
death of the principal and the third person who contracted with the agent acted also in good faith (Art. 1931).
Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable requirement that the
agent acted without knowledge or notice of the death of the principal In the case before Us the agent Ramon
Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the agent's act is
unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We afMirm en toto
the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2
and 3 of this Opinion, with costs against respondent realty corporation at all instances.
So Ordered.
G.R. No. 76931 May 29, 1991
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,

vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,

vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, INCORPORATED,
respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.
PADILLA, J.:
This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of Appeals in
CA-‐G.R. No. CV-‐04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc."
which afMirmed, with modiMication, the decision 2 of the Regional Trial Court of Manila, Branch IV, which
dismissed the complaint and granted therein defendant's counterclaim for agent's overriding commission and
damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering
passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives
(hereinafter referred to as Orient Air), entered into a General Sales Agency Agreement (hereinafter referred to as
the Agreement), whereby the former authorized the latter to act as its exclusive general sales agent within the
Philippines for the sale of air passenger transportation. Pertinent provisions of the agreement are reproduced, to
wit:
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WITNESSETH
In consideration of the mutual convenants herein contained, the parties hereto agree as follows:
1. Representation of American by Orient Air Services
Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines,
including any United States military installation therein which are not serviced by an Air Carrier Representation
OfMice (ACRO), for the sale of air passenger transportation. The services to be performed by Orient Air Services
shall include:
(a) soliciting and promoting passenger trafMic for the services of American and, if necessary, employing staff
competent and sufMicient to do so;
(b) providing and maintaining a suitable area in its place of business to be used exclusively for the
transaction of the business of American;
(c) arranging for distribution of American's timetables, tariffs and promotional material to sales agents and
the general public in the assigned territory;
(d) servicing and supervising of sales agents (including such sub-‐agents as may be appointed by Orient Air
Services with the prior written consent of American) in the assigned territory including if required by American
the control of remittances and commissions retained; and
(e) holding out a passenger reservation facility to sales agents and the general public in the assigned
territory.
In connection with scheduled or non-‐scheduled air passenger transportation within the United States, neither
Orient Air Services nor its sub-‐agents will perform services for any other air carrier similar to those to be
performed hereunder for American without the prior written consent of American. Subject to periodic
instructions and continued consent from American, Orient Air Services may sell air passenger transportation to
be performed within the United States by other scheduled air carriers provided American does not provide
substantially equivalent schedules between the points involved.
x x x x x x x x x
4. Remittances
Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less
commissions to which Orient Air Services is entitled hereunder, not less frequently than semi-‐monthly, on the
15th and last days of each month for sales made during the preceding half month.
All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on
exchange orders, less applicable commissions to which Orient Air Services is entitled hereunder, are the property
of American and shall be held in trust by Orient Air Services until satisfactorily accounted for to American.
5. Commissions
American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its
sub-‐agents as follows:
(a) Sales agency commission
American will pay Orient Air Services a sales agency commission for all sales of transportation by Orient Air
Services or its sub-‐agents over American's services and any connecting through air transportation, when made
on American's ticket stock, equal to the following percentages of the tariff fares and charges:
(i) For transportation solely between points within the United States and between such points and Canada:
7% or such other rate(s) as may be prescribed by the Air TrafMic Conference of America.
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(ii) For transportation included in a through ticket covering transportation between points other than those
described above: 8% or such other rate(s) as may be prescribed by the International Air Transport Association.
(b) Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of
the tariff fares and charges for all sales of transportation over American's service by Orient Air Service or its sub-‐
agents.
x x x x x x x x x
10. Default
If Orient Air Services shall at any time default in observing or performing any of the provisions of this Agreement
or shall become bankrupt or make any assignment for the beneMit of or enter into any agreement or promise with
its creditors or go into liquidation, or suffer any of its goods to be taken in execution, or if it ceases to be in
business, this Agreement may, at the option of American, be terminated forthwith and American may, without
prejudice to any of its rights under this Agreement, take possession of any ticket forms, exchange orders, trafMic
material or other property or funds belonging to American.
11. IATA and ATC Rules
The provisions of this Agreement are subject to any applicable rules or resolutions of the International Air
Transport Association and the Air TrafMic Conference of America, and such rules or resolutions shall control in the
event of any conMlict with the provisions hereof.
x x x x x x x x x
13. Termination
American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to transfer
to the United States the funds payable by Orient Air Services to American under this Agreement. Either party may
terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable.
x x x x x x x x x3
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to
promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient
Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof (Termination). Four (4)
days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance of
Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and
Restraining Order 4 averring the aforesaid basis for the termination of the Agreement as well as therein
defendant's previous record of failures "to promptly settle past outstanding refunds of which there were
available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff." 5
In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the
complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application
thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid
overriding commissions. Further, the defendant contended that the actions taken by American Air in the course
of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American
Air's precipitous conduct had occasioned prejudice to its business interests.
Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its
favor, rendering a decision dated 16 July 1984, the dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of defendant and
against plaintiff dismissing the complaint and holding the termination made by the latter as affecting the GSA
agreement illegal and improper and order the plaintiff to reinstate defendant as its general sales agent for
passenger tranportation in the Philippines in accordance with said GSA agreement; plaintiff is ordered to pay
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defendant the balance of the overriding commission on total Mlown revenue covering the period from March 16,
1977 to December 31, 1980 in the amount of US$84,821.31 plus the additional amount of US$8,000.00 by way of
proper 3% overriding commission per month commencing from January 1, 1981 until such reinstatement or said
amounts in its Philippine peso equivalent legally prevailing at the time of payment plus legal interest to
commence from the Miling of the counterclaim up to the time of payment. Further, plaintiff is directed to pay
defendant the amount of One Million Five Hundred Thousand (Pl,500,000.00) pesos as and for exemplary
damages; and the amount of Three Hundred Thousand (P300,000.00) pesos as and by way of attorney's fees.
Costs against plaintiff. 7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January
1986, afMirmed the Mindings of the court a quo on their material points but with some modiMications with respect
to the monetary awards granted. The dispositive portion of the appellate court's decision is as follows:
WHEREFORE, with the following modiMications —
1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's
overriding commission covering the period March 16, 1977 to December 31, 1980, or its Philippine peso
equivalent in accordance with the ofMicial rate of exchange legally prevailing on July 10, 1981, the date the
counterclaim was Miled;
2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per
month starting January 1, 1981 until date of termination, May 9, 1981 or its Philippine peso equivalent in
accordance with the ofMicial rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was
Miled
3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer with
counterclaim was Miled, until full payment;
4) American is ordered to pay Orient exemplary damages of P200,000.00;
5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.
the rest of the appealed decision is afMirmed.
Costs against American.8
American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and
arguing for its reversal. The appellate court's decision was also the subject of a Motion for Partial
Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with respect to the
monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied American Air's
motion and with respect to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration is denied insofar as it prays for afMirmance of the trial court's award of
exemplary damages and attorney's fees, but granted insofar as the rate of exchange is concerned. The decision of
January 27, 1986 is modiMied in paragraphs (1) and (2) of the dispositive part so that the payment of the sums
mentioned therein shall be at their Philippine peso equivalent in accordance with the ofMicial rate of exchange
legally prevailing on the date of actual payment. 9
Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in
G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution 10 of this Court dated 25 March
1987 both petitions were consolidated, hence, the case at bar.
The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission.
It is the stand of American Air that such commission is based only on sales of its services actually negotiated or
transacted by Orient Air, otherwise referred to as "ticketed sales." As basis thereof, primary reliance is placed
upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows:
5. Commissions
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a) . . .
b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of
the tariff fees and charges for all sales of transportation over American's services by Orient Air Services or its
sub-‐agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to
appoint any sub-‐agents, it is American Air's contention that Orient Air can claim entitlement to the disputed
overriding commission based only on ticketed sales. This is supposed to be the clear meaning of the underscored
portion of the above provision. Thus, to be entitled to the 3% overriding commission, the sale must be made by
Orient Air and the sale must be done with the use of American Air's ticket stocks.
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the
total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The
latter, in justiMication of its submission, invokes its designation as the exclusive General Sales Agent of American
Air, with the corresponding obligations arising from such agency, such as, the promotion and solicitation for the
services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American Air's
services are necessarily by Orient Air." 11
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into
consideration to ascertain the meaning of its provisions. 12 The various stipulations in the contract must be read
together to give effect to all. 13 After a careful examination of the records, the Court Minds merit in the contention
of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the
3% overriding commission based on total revenue, or as referred to by the parties, "total Mlown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion
and marketing of American Air's services for air passenger transportation, and the solicitation of sales therefor.
In return for such efforts and services, Orient Air was to be paid commissions of two (2) kinds: Mirst, a sales
agency commission, ranging from 7-‐8% of tariff fares and charges from sales by Orient Air when made on
American Air ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of
passenger transportation over American Air services. It is immediately observed that the precondition attached
to the Mirst type of commission does not obtain for the second type of commissions. The latter type of
commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket stock
of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents. To rule
otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would
erase any distinction between the two (2) types of commissions and would lead to the absurd conclusion that the
parties had entered into a contract with meaningless provisions. Such an interpretation must at all times be
avoided with every effort exerted to harmonize the entire Agreement.
An additional point before Minally disposing of this issue. It is clear from the records that American Air was the
party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of
adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the ambiguity and
could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the
interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.
14 To put it differently, when several interpretations of a provision are otherwise equally proper, that
interpretation or construction is to be adopted which is most favorable to the party in whose favor the provision
was made and who did not cause the ambiguity. 15 We therefore agree with the respondent appellate court's
declaration that:
Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read against the
party who drafted it. 16
We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate court,
on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action Minds justiMication from paragraph 4 of the
Agreement, Exh. F, which provides for remittances to American less commissions to which Orient is entitled, and
from paragraph 5(d) which speciMically allows Orient to retain the full amount of its commissions. Since, as stated
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ante, Orient is entitled to the 3% override. American's premise, therefore, for the cancellation of the Agreement
did not exist. . . ."
We agree with the Mindings of the respondent appellate court. As earlier established, Orient Air was entitled to an
overriding commission based on total Mlown revenue. American Air's perception that Orient Air was remiss or in
default of its obligations under the Agreement was, in fact, a situation where the latter acted in accordance with
the Agreement—that of retaining from the sales proceeds its accrued commissions before remitting the balance
to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was
clearly justiMied in retaining and refusing to remit the sums claimed by American Air. The latter's termination of
the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air.
On the matter of damages, the respondent appellate court modiMied by reduction the trial court's award of
exemplary damages and attorney's fees. This Court sees no error in such modiMication and, thus, afMirms the
same.
It is believed, however, that respondent appellate court erred in afMirming the rest of the decision of the trial
court.1âwphi1 We refer particularly to the lower court's decision ordering American Air to "reinstate defendant
as its general sales agent for passenger transportation in the Philippines in accordance with said GSA
Agreement."
By afMirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend
its personality to Orient Air. Such would be violative of the principles and essence of agency, deMined by law as a
contract whereby "a person binds himself to render some service or to do something in representation or on
behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER . 17 (emphasis supplied) In an agent-‐
principal relationship, the personality of the principal is extended through the facility of the agent. In so doing,
the agent, by legal Miction, becomes the principal, authorized to perform all acts which the latter would have him
do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be
compelled by law or by any court. The Agreement itself between the parties states that "either party may
terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or
cable." (emphasis supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of American Air.
WHEREFORE, with the foregoing modiMication, the Court AFFIRMS the decision and resolution of the respondent
Court of Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs against petitioner American
Air.
SO ORDERED.
G.R. No. 144805 June 8, 2006
EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,

vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A. and
FAR EAST BANK & TRUST COMPANY, Respondents.
D E C I S I O N
CALLEJO, SR., J.:
On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-‐G.R. CV No.
51022, which afMirmed the Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case No.
54887, as well as the Resolution2 of the CA denying the motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950, it
had been engaged in the manufacture of rooMing materials and pipe products. Its manufacturing operations were
conducted on eight parcels of land with a total area of 47,233 square meters. The properties, located in
Mandaluyong City, Metro Manila, were covered by Transfer CertiMicates of Title Nos. 451117, 451118, 451119,
451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation organized and registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the
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General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of ESAC.
Both had their ofMices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to
stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member of EC’s
Board of Directors, to dispose of the eight parcels of land. Adams engaged the services of realtor/broker Lauro G.
Marquez so that the properties could be offered for sale to prospective buyers. Glanville later showed the
properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the
Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to sell
the properties for P27,000,000.00 and that the terms of the sale were subject to negotiation.4
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his
brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez
apprised Glanville of the Litonjua siblings’ offer and relayed the same to Delsaux in Belgium, but the latter did not
respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/ counterproposal
to the offer of the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex to Glanville stating
that, based on the "Belgian/Swiss decision," the Minal offer was "US$1,000,000.00 and P2,500,000.00 to cover all
existing obligations prior to Minal liquidation."5
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the
counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter dated February 26, 1987,
conMirmed that the Litonjua siblings had accepted the counter-‐proposal of Delsaux. He also stated that the
Litonjua siblings would conMirm full payment within 90 days after execution and preparation of all documents of
sale, together with the necessary governmental clearances.6
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company,
Ermita Branch, and drafted an Escrow Agreement to expedite the sale.7
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be implemented.
In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with the buyer, which had given him
the impression that "he is prepared to press for a satisfactory conclusion to the sale."8 He also emphasized to
Delsaux that the buyers were concerned because they would incur expenses in bank commitment fees as a
consequence of prolonged period of inaction.9
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the political
situation in the Philippines had improved. Marquez received a telephone call from Glanville, advising that the sale
would no longer proceed. Glanville followed it up with a Letter dated May 7, 1987, conMirming that he had been
instructed by his principal to inform Marquez that "the decision has been taken at a Board Meeting not to sell the
properties on which Eternit Corporation is situated."10
Delsaux himself later sent a letter dated May 22, 1987, conMirming that the ESAC Regional OfMice had decided not
to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. Marquez

L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to conMirm ofMicially that our Group has decided not to proceed with the sale of the land which was
proposed to you.
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The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are (sic) concerned. Considering [the] new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations in
Manila. In fact, production has started again last week, and (sic) to recognize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later state,
we would consult you again.
x x x
Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)11
When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for damages
they had suffered on account of the aborted sale. EC, however, rejected their demand.
The Litonjuas then Miled a complaint for speciMic performance and damages against EC (now the Eterton Multi-‐
Resources Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. An amended
complaint was Miled, in which defendant EC was substituted by Eterton Multi-‐Resources Corporation; Benito C.
Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded as additional defendants on
account of their purchase of ESAC shares of stocks and were the controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in the
Philippines, it cannot be subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never
approved any resolution to sell subject properties nor authorized Marquez to sell the same; and the telex dated
October 28, 1986 of Jack Glanville was his own personal making which did not bind EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended complaint.
12 The fallo of the decision reads:
WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-‐Resources Corporation and
Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding sale between the plaintiffs and
said defendants.
The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-‐Resources Corporation and Eteroutremer, S.A. is also
dismissed for lack of merit.13
The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not
merely unenforceable, and as such, could not have been ratiMied by the principal. In any event, such ratiMication
cannot be given any retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the property
without a clear authorization from the corporation concerned, that is, through resolutions of the Board of
Directors and stockholders. The trial court also pointed out that the supposed sale involves substantially all the
assets of defendant EC which would result in the eventual total cessation of its operation.14
The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concluding that the real
estate broker in the instant case needed a written authority from appellee corporation and/or that said broker
had no such written authority; and (2) the lower court committed grave error of law in holding that appellee
corporation is not legally bound for speciMic performance and/or damages in the absence of an enabling
resolution of the board of directors."15 They averred that Marquez acted merely as a broker or go-‐between and
not as agent of the corporation; hence, it was not necessary for him to be empowered as such by any written
authority. They further claimed that an agency by estoppel was created when the corporation clothed Marquez
with apparent authority to negotiate for the sale of the properties. However, since it was a bilateral contract to
buy and sell, it was equivalent to a perfected contract of sale, which the corporation was obliged to consummate.
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15
In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were
Glanville and Delsaux authorized by its board of directors to offer the property for sale. Since the sale involved
substantially all of the corporation’s assets, it would necessarily need the authority from the stockholders.
On June 16, 2000, the CA rendered judgment afMirming the decision of the RTC. 16 The Litonjuas Miled a motion
for reconsideration, which was also denied by the appellate court.
The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article 1874
of the New Civil Code. Under Section 23 of the Corporation Code, he needed a special authority from EC’s board
of directors to bind such corporation to the sale of its properties. Delsaux, who was merely the representative of
ESAC (the majority stockholder of EC) had no authority to bind the latter. The CA pointed out that Delsaux was
not even a member of the board of directors of EC. Moreover, the Litonjuas failed to prove that an agency by
estoppel had been created between the parties.
In the instant petition for review, petitioners aver that
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED A
WRITTEN AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE NECESSARY
AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY
RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN APPARENT AUTHORITY, AND THUS HELD
THEM OUT TO THE PUBLIC AS POSSESSING POWER TO SELL THE SAID PROPERTIES.17
Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the parcels of
land and the improvements thereon for "US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to Minal
liquidation." Petitioners insist that they had accepted the counter-‐offer of respondent EC and that before the
counter-‐offer was withdrawn by respondents, the acceptance was made known to them through real estate
broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez to
validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his
authority was of a special and limited character in most respects. His only job as a broker was to look for a buyer
and to bring together the parties to the transaction. He was not authorized to sell the properties or to make a
binding contract to respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does not apply.
In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate both
the offer and counter-‐offer and their acceptance of respondent EC’s counter-‐offer, resulting in a perfected
contract of sale.
Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who was
the President and General Manager of respondent EC, and Delsaux, who was the Managing Director for ESAC
Asia, had the necessary authority to sell the subject property or, at least, had been allowed by respondent EC to
hold themselves out in the public as having the power to sell the subject properties. Petitioners identiMied such
evidence, thus:
1. The testimony of Marquez that he was chosen by Glanville as the then President and General Manager of
Eternit, to sell the properties of said corporation to any interested party, which authority, as hereinabove
discussed, need not be in writing.
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16
2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL MONTHS, from 1986
to 1987;
3. The COUNTER-‐OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;
4. The GOOD FAITH of Petitioners in believing Eternit’s offer to sell the properties as evidenced by the
Petitioners’ ACCEPTANCE of the counter-‐offer;
5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and that an
ESCROW agreement was drafted over the subject properties;
6. Glanville’s telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO BUY AND
SELL";
7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that Petitioners’ offer was
allegedly REJECTED by both Glanville and Delsaux.18
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-‐offer to petitioners’ offer and
thereafter reject such offer unless they were authorized to do so by respondent EC. Petitioners insist that Delsaux
conMirmed his authority to sell the properties in his letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to conMirm ofMicially that our Group has decided not to proceed with the sale of the land which was
proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are (sic) concerned. Considering the new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations in
Manila[.] [I]n fact production started again last week, and (sic) to reorganize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later stage
we would consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX19
Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly
permitted by respondent EC to sell the properties within the scope of an apparent authority. Petitioners insist
that respondents held themselves to the public as possessing power to sell the subject properties.
By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are proscribed
by Rule 45 of the Rules of Court. On the merits of the petition, respondents EC (now EMC) and ESAC reiterate
their submissions in the CA. They maintain that Glanville, Delsaux and Marquez had no authority from the
stockholders of respondent EC and its Board of Directors to offer the properties for sale to the petitioners, or to
any other person or entity for that matter. They assert that the decision and resolution of the CA are in accord
with law and the evidence on record, and should be afMirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux, conformed to
the written authority of Marquez to sell the properties. The authority of Glanville and Delsaux to bind respondent
EC is evidenced by the fact that Glanville and Delsaux negotiated for the sale of 90% of stocks of respondent EC to
Ruperto Tan on June 1, 1997. Given the signiMicance of their positions and their duties in respondent EC at the
time of the transaction, and the fact that respondent ESAC owns 90% of the shares of stock of respondent EC, a
formal resolution of the Board of Directors would be a mere ceremonial formality. What is important, petitioners
maintain, is that Marquez was able to communicate the offer of respondent EC and the petitioners’ acceptance
! of !113
17
thereof. There was no time that they acted without the knowledge of respondents. In fact, respondent EC never
repudiated the acts of Glanville, Marquez and Delsaux.
The petition has no merit.
Anent the Mirst issue, we agree with the contention of respondents that the issues raised by petitioner in this case
are factual. Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its agents
relative to the sale of the properties of respondent EC, and if so, the boundaries of their authority as agents, is a
question of fact. In the absence of express written terms creating the relationship of an agency, the existence of
an agency is a fact question.20 Whether an agency by estoppel was created or whether a person acted within the
bounds of his apparent authority, and whether the principal is estopped to deny the apparent authority of its
agent are, likewise, questions of fact to be resolved on the basis of the evidence on record.21 The Mindings of the
trial court on such issues, as afMirmed by the CA, are conclusive on the Court, absent evidence that the trial and
appellate courts ignored, misconstrued, or misapplied facts and circumstances of substance which, if considered,
would warrant a modiMication or reversal of the outcome of the case.22
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court because
the Court is not a trier of facts. It is not to re-‐examine and assess the evidence on record, whether testimonial and
documentary. There are, however, recognized exceptions where the Court may delve into and resolve factual
issues, namely:
(1) When the conclusion is a Minding grounded entirely on speculations, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when the Mindings of fact are conMlicting; (6) when
the Court of Appeals, in making its Mindings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the Mindings of the Court of Appeals are contrary to those of
the trial court; (8) when the Mindings of fact are conclusions without citation of speciMic evidence on which they
are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion; and (10) when the Mindings of fact of the Court
of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.23
We have reviewed the records thoroughly and Mind that the petitioners failed to establish that the instant case
falls under any of the foregoing exceptions. Indeed, the assailed decision of the Court of Appeals is supported by
the evidence on record and the law.
It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had
empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers and to
accept any counter-‐offer. Petitioners likewise failed to prove that their counter-‐offer had been accepted by
respondent EC, through Glanville and Delsaux. It must be stressed that when speciMic performance is sought of a
contract made with an agent, the agency must be established by clear, certain and speciMic proof.24
Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines, provides:
SEC. 23. The Board of Directors or Trustees. – Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation, who shall hold ofMice for one (1)
year and until their successors are elected and qualiMied.
Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is not
affected by the personal rights, obligations and transactions of the latter.25 It may act only through its board of
directors or, when authorized either by its by-‐laws or by its board resolution, through its ofMicers or agents in the
normal course of business. The general principles of agency govern the relation between the corporation and its
ofMicers or agents, subject to the articles of incorporation, by-‐laws, or relevant provisions of law.26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the
limitations prescribed by law and the Constitution, as follows:
SEC. 36. Corporate powers and capacity. – Every corporation incorporated under this Code has the power and
capacity:
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18
x x x x
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real
and personal property, including securities and bonds of other corporations, as the transaction of a lawful
business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by the
law and the Constitution.
The property of a corporation, however, is not the property of the stockholders or members, and as such, may not
be sold without express authority from the board of directors.27 Physical acts, like the offering of the properties
of the corporation for sale, or the acceptance of a counter-‐offer of prospective buyers of such properties and the
execution of the deed of sale covering such property, can be performed by the corporation only by ofMicers or
agents duly authorized for the purpose by corporate by-‐laws or by speciMic acts of the board of directors.28
Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to
the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of
such director, are not binding on the corporation.29
While a corporation may appoint agents to negotiate for the sale of its real properties, the Minal say will have to be
with the board of directors through its ofMicers and agents as authorized by a board resolution or by its by-‐laws.
30 An unauthorized act of an ofMicer of the corporation is not binding on it unless the latter ratiMies the same
expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting
to be an agent thereof but without written authority from the corporation is null and void. The declarations of
the agent alone are generally insufMicient to establish the fact or extent of his/her authority.31
By the contract of agency, a person binds himself to render some service or to do something in representation on
behalf of another, with the consent or authority of the latter.32 Consent of both principal and agent is necessary
to create an agency. The principal must intend that the agent shall act for him; the agent must intend to accept
the authority and act on it, and the intention of the parties must Mind expression either in words or conduct
between them.33
An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or his
failure to repudiate the agency knowing that another person is acting on his behalf without authority. Acceptance
by the agent may be expressed, or implied from his acts which carry out the agency, or from his silence or
inaction according to the circumstances.34 Agency may be oral unless the law requires a speciMic form.35
However, to create or convey real rights over immovable property, a special power of attorney is necessary.36
Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be
in writing, otherwise, the sale shall be void.37
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of
Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for
sale, for and in its behalf, the eight parcels of land owned by respondent EC including the improvements thereon.
The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock of respondent
ESAC, on June 1, 1997, cannot be used as basis for petitioners’ claim that he had likewise been authorized by
respondent EC to sell the parcels of land.
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who, in
turn, acted on the authority of respondent ESAC, through its Committee for Asia,38 the Board of Directors of
respondent ESAC,39 and the Belgian/Swiss component of the management of respondent ESAC.40 As such,
Adams and Glanville engaged the services of Marquez to offer to sell the properties to prospective buyers. Thus,
on September 12, 1986, Marquez wrote the petitioner that he was authorized to offer for sale the property for
P27,000,000.00 and the other terms of the sale subject to negotiations. When petitioners offered to purchase the
property for P20,000,000.00, through Marquez, the latter relayed petitioners’ offer to Glanville; Glanville had to
send a telex to Delsaux to inquire the position of respondent ESAC to petitioners’ offer. However, as admitted by
petitioners in their Memorandum, Delsaux was unable to reply immediately to the telex of Glanville because
Delsaux had to wait for conMirmation from respondent ESAC.41 When Delsaux Minally responded to Glanville on
February 12, 1987, he made it clear that, based on the "Belgian/Swiss decision" the Minal offer of respondent
ESAC was US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior to Minal liquidation.42 The
offer of Delsaux emanated only from the "Belgian/Swiss decision," and not the entire management or Board of
Directors of respondent ESAC. While it is true that petitioners accepted the counter-‐offer of respondent ESAC,
respondent EC was not a party to the transaction between them; hence, EC was not bound by such acceptance.
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19
While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were
members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly
authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to bind EC
to any agreement regarding the sale of the subject properties. Such board resolution is not a mere formality but is
a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks
of respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks of another, or
even all of such shares of stocks, taken alone, will not justify their being treated as one corporation.43
It bears stressing that in an agent-‐principal relationship, the personality of the principal is extended through the
facility of the agent. In so doing, the agent, by legal Miction, becomes the principal, authorized to perform all acts
which the latter would have him do. Such a relationship can only be effected with the consent of the principal,
which must not, in any way, be compelled by law or by any court.44
The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC
empowering Adams, Glanville or Delsaux to offer the properties for sale and to sell the said properties to the
petitioners. A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the
agents; statements as to the extent of his powers; such person must not act negligently but must use reasonable
diligence and prudence to ascertain whether the agent acts within the scope of his authority.45 The settled rule is
that, persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable,
to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to prove it.46 In this case, the petitioners failed to discharge their
burden; hence, petitioners are not entitled to damages from respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As gleaned
from the letter of Marquez to Glanville, on February 26, 1987, he conMirmed, for and in behalf of the petitioners,
that the latter had accepted such offer to sell the land and the improvements thereon. However, we agree with the
ruling of the appellate court that Marquez had no authority to bind respondent EC to sell the subject properties.
A real estate broker is one who negotiates the sale of real properties. His business, generally speaking, is only to
Mind a purchaser who is willing to buy the land upon terms Mixed by the owner. He has no authority to bind the
principal by signing a contract of sale. Indeed, an authority to Mind a purchaser of real property does not include
an authority to sell.47
Equally barren of merit is petitioners’ contention that respondent EC is estopped to deny the existence of a
principal-‐agency relationship between it and Glanville or Delsaux. For an agency by estoppel to exist, the
following must be established: (1) the principal manifested a representation of the agent’s authority or
knowingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such
representation; (3) relying upon such representation, such third person has changed his position to his
detriment.48 An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in turn, needs proof that the representations predated the action
taken in reliance.49 Such proof is lacking in this case. In their communications to the petitioners, Glanville and
Delsaux positively and unequivocally declared that they were acting for and in behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratiMied the transactions between the petitioners and respondent
ESAC, through Glanville, Delsaux and Marquez. The transactions and the various communications inter se were
never submitted to the Board of Directors of respondent EC for ratiMication.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.
SO ORDERED.
G.R. No. 149353 June 26, 2006
JOCELYN B. DOLES, Petitioner,

vs.
MA. AURA TINA ANGELES, Respondent.
D E C I S I O N
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20
AUSTRIA-‐MARTINEZ, J.:
This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the Decision1
dated April 30, 2001 of the Court of Appeals (CA) in C.A.-‐G.R. CV No. 66985, which reversed the Decision dated
July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution2 dated August 6,
2001 which denied petitioner’s Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) Miled with the RTC a complaint for SpeciMic Performance
with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-‐82716. Respondent alleged that
petitioner was indebted to the former in the concept of a personal loan amounting to P405,430.00 representing
the principal amount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute Sale",3 petitioner, as
seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with an area of 42
square meters, covered by Transfer CertiMicate of Title No. 382532,4 and located at a subdivision project known
as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this
property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure petitioner’s loan in
the sum of P337,050.00 with that entity; that as a condition for the foregoing sale, respondent shall assume the
undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the remainder of the 25 years
which began on September 3, 1994; that the property was at that time being occupied by a tenant paying a
monthly rent of P3,000.00; that upon veriMication with the NHMFC, respondent learned that petitioner had
incurred arrearages amounting to P26,744.09, inclusive of penalties and interest; that upon informing the
petitioner of her arrears, petitioner denied that she incurred them and refused to pay the same; that despite
repeated demand, petitioner refused to cooperate with respondent to execute the necessary documents and
other formalities required by the NHMFC to effect the transfer of the title over the property; that petitioner
collected rent over the property for the month of January 1997 and refused to remit the proceeds to respondent;
and that respondent suffered damages as a result and was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed money
from respondent, and averred that from June to September 1995, she referred her friends to respondent whom
she knew to be engaged in the business of lending money in exchange for personal checks through her capitalist
Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia
Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued personal checks in payment of the
loan; that the checks bounced for insufMiciency of funds; that despite her efforts to assist respondent to collect
from the borrowers, she could no longer locate them; that, because of this, respondent became furious and
threatened petitioner that if the accounts were not settled, a criminal case will be Miled against her; that she was
forced to issue eight checks amounting to P350,000 to answer for the bounced checks of the borrowers she
referred; that prior to the issuance of the checks she informed respondent that they were not sufMiciently funded
but the latter nonetheless deposited the checks and for which reason they were subsequently dishonored; that
respondent then threatened to initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that
she was forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid
criminal prosecution; that the said deed had no valid consideration; that she did not appear before a notary
public; that the Community Tax CertiMicate number on the deed was not hers and for which respondent may be
prosecuted for falsiMication and perjury; and that she suffered damages and lost rental as a result.
The RTC identiMied the issues as follows: Mirst, whether the Deed of Absolute Sale is valid; second; if valid, whether
petitioner is obliged to sign and execute the necessary documents to effect the transfer of her rights over the
property to the respondent; and third, whether petitioner is liable for damages.
On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for insufMiciency of
evidence. With costs against plaintiff.
SO ORDERED.
The RTC held that the sale was void for lack of cause or consideration:5
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21
Plaintiff Angeles’ admission that the borrowers are the friends of defendant Doles and further admission that the
checks issued by these borrowers in payment of the loan obligation negates [sic] the cause or consideration of
the contract of sale executed by and between plaintiff and defendant. Moreover, the property is not solely owned
by defendant as appearing in Entry No. 9055 of Transfer CertiMicate of Title No. 382532 (Annex A, Complaint),
thus:
"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico Doles on the
parcel of land described in this certiMicate of title by virtue of the special power of attorney to mortgage, executed
before the notary public, etc."
The rule under the Civil Code is that contracts without a cause or consideration produce no effect whatsoever.
(Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE DEED OF SALE
BETWEEN THE PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF EVIDENCE.6
On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads:
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the lower court
dated July 29, 1998 is REVERSED and SET ASIDE. A new one is entered ordering defendant-‐appellee to execute
all necessary documents to effect transfer of subject property to plaintiff-‐appellant with the arrearages of the
former’s loan with the NHMFC, at the latter’s expense. No costs.
SO ORDERED.
The CA concluded that petitioner was the borrower and, in turn, would "re-‐lend" the amount borrowed from the
respondent to her friends. Hence, the Deed of Absolute Sale was supported by a valid consideration, which is the
sum of money petitioner owed respondent amounting to P405,430.00, representing both principal and interest.
The CA took into account the following circumstances in their entirety: the supposed friends of petitioner never
presented themselves to respondent and that all transactions were made by and between petitioner and
respondent;7 that the money borrowed was deposited with the bank account of the petitioner, while payments
made for the loan were deposited by the latter to respondent’s bank account;8 that petitioner herself admitted in
open court that she was "re-‐lending" the money loaned from respondent to other individuals for proMit;9 and that
the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their
creditor and not the respondent.10
Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent, since the
same is considered just or legal if made to enforce one’s claim through competent authority under Article
133511 of the Civil Code;12 that with respect to the arrearages of petitioner on her monthly amortization with
the NHMFC in the sum of P26,744.09, the same shall be deemed part of the balance of petitioner’s loan with the
NHMFC which respondent agreed to assume; and that the amount of P3,000.00 representing the rental for
January 1997 supposedly collected by petitioner, as well as the claim for damages and attorney’s fees, is denied
for insufMiciency of evidence.13
On May 29, 2001, petitioner Miled her Motion for Reconsideration with the CA, arguing that respondent
categorically admitted in open court that she acted only as agent or representative of Arsenio Pua, the principal
Minancier and, hence, she had no legal capacity to sue petitioner; and that the CA failed to consider the fact that
petitioner’s father, who co-‐owned the subject property, was not impleaded as a defendant nor was he indebted to
the respondent and, hence, she cannot be made to sign the documents to effect the transfer of ownership over the
entire property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing matters had
already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner Miled the
present Petition and raised the following issues:
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22
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN HIS
BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14
Although, as a rule, it is not the business of this Court to review the Mindings of fact made by the lower courts,
jurisprudence has recognized several exceptions, at least three of which are present in the instant case, namely:
when the judgment is based on a misapprehension of facts; when the Mindings of facts of the courts a quo are
conMlicting; and when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, could justify a different conclusion.15 To arrive at a proper judgment, therefore, the Court
Minds it necessary to re-‐examine the evidence presented by the contending parties during the trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.
1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then she is not a
party to the loan; and that the Deed of Sale executed between her and the respondent in their own names, which
was predicated on that pre-‐existing debt, is void for lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in
money16 and that this sum indisputably pertains to the debt in issue. This Court has consistently held that a
contract of sale is null and void and produces no effect whatsoever where the same is without cause or
consideration.17 The question that has to be resolved for the moment is whether this debt can be considered as a
valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner "re-‐lends" the amount
borrowed from respondent to her friends: Mirst, the friends of petitioner never presented themselves to
respondent and that all transactions were made by and between petitioner and respondent;18 second; the
money passed through the bank accounts of petitioner and respondent;19 third, petitioner herself admitted that
she was "re-‐lending" the money loaned to other individuals for proMit;20 and fourth, the documentary evidence
shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent.
21
On the Mirst, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her
cross-‐examination:22
Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa Inocencio,
Zenaida Romulo, they are your friends?
witness:
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23
a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred.
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?
witness:
a. No, sir.
Atty. Diza:
q. Your friends and the plaintiff did not meet personally?
witness:
a. Yes, sir.
Atty. Diza:
q. You are intermediaries?
witness:
a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the name of
Arsenio Pua because the money came from Arsenio Pua.
x x x x
Atty. Diza:
q. Did the plaintiff knew [sic] that you will lend the money to your friends speciMically the one you mentioned [a]
while ago?
witness:
a. Yes, she knows the money will go to those persons.
Atty. Diza:
q. You are re-‐lending the money?
witness:
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24
a. Yes, sir.
Atty. Diza:
q. What proMit do you have, do you have commission?
witness:
a. Yes, sir.
Atty. Diza:
q. How much?
witness:
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent, the real
lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her cross
examination:23
Atty. Villacorta:
q. Who is this Arsenio Pua?
witness:
a. Principal Minancier, sir.
Atty. Villacorta:
q. So the money came from Arsenio Pua?
witness:
a. Yes, because I am only representing him, sir.
Other portions of the testimony of respondent must likewise be considered:24
Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
witness:
a. Yes, sir.
Court:
q. It is not your money?
witness:
a. Yes, Your Honor.
Atty. Villacorta:
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25
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are you aware of
that?
witness:
a. I am aware of that.
Atty. Villacorta:
q. More or less she [accommodated] several friends of the defendant?
witness:
a. Yes, sir, I am aware of that.
x x x x
Atty. Villacorta:
q. And these friends of the defendant borrowed money from you with the assurance of the defendant?
witness:
a. They go direct to Jocelyn because I don’t know them.
x x x x
Atty. Villacorta:
q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you her
friends who [are] in need of money issued check[s] to you? There were checks issued to you?
witness:
a. Yes, there were checks issued.
Atty. Villacorta:
q. By the friends of the defendant, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of your assistance, the friends of the defendant who are in need of money were able to obtain loan
to [sic] Arsenio Pua through your assistance?
witness:
a. Yes, sir.
Atty. Villacorta:
q. So that occasion lasted for more than a year?
witness:
a. Yes, sir.
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26
Atty. Villacorta:
q. And some of the checks that were issued by the friends of the defendant bounced, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with you?
witness:
a. Yes, sir.
Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed principal.
She is also estopped to deny that petitioner acted as agent for the alleged debtors, the friends whom she
(petitioner) referred.
This Court has afMirmed that, under Article 1868 of the Civil Code, the basis of agency is representation.25 The
question of whether an agency has been created is ordinarily a question which may be established in the same
way as any other fact, either by direct or circumstantial evidence. The question is ultimately one of intention.26
Agency may even be implied from the words and conduct of the parties and the circumstances of the particular
case.27 Though the fact or extent of authority of the agents may not, as a general rule, be established from the
declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her
agency both as against the asserted principal and the third persons interested in the transaction in which he or
she is engaged.28
In this case, petitioner knew that the Minancier of respondent is Pua; and respondent knew that the borrowers are
friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers,
did not present themselves to [respondent]" as evidence that negates the agency relationship—it is sufMicient
that petitioner disclosed to respondent that the former was acting in behalf of her principals, her friends whom
she referred to respondent. For an agency to arise, it is not necessary that the principal personally encounter the
third person with whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal
dealings where the principal need not personally know or meet the third person with whom her agent transacts:
precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent.29
In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are
representing someone else, and so both of them are estopped to deny the same. It is evident from the record that
petitioner merely refers actual borrowers and then collects and disburses the amounts of the loan upon which
she received a commission; and that respondent transacts on behalf of her "principal Minancier", a certain Arsenio
Pua. If their respective principals do not actually and personally know each other, such ignorance does not affect
their juridical standing as agents, especially since the very purpose of agency is to extend the personality of the
principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-‐lending" the money loaned from respondent to other
individuals for proMit, it must be stressed that the manner in which the parties designate the relationship is not
controlling. If an act done by one person in behalf of another is in its essential nature one of agency, the former is
the agent of the latter notwithstanding he or she is not so called.30 The question is to be determined by the fact
that one represents and is acting for another, and if relations exist which will constitute an agency, it will be an
agency whether the parties understood the exact nature of the relation or not.31
That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued
checks in payment of the loan in the name of Pua. If it is true that petitioner was "re-‐lending", then the checks
should have been drawn in her name and not directly paid to Pua.
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27
With respect to the second point, particularly, the Minding of the CA that the disbursements and payments for the
loan were made through the bank accounts of petitioner and respondent,
sufMice it to say that in the normal course of commercial dealings and for reasons of convenience and practical
utility it can be reasonably expected that the facilities of the agent, such as a bank account, may be employed, and
that a sub-‐agent be appointed, such as the bank itself, to carry out the task, especially where there is no
stipulation to the contrary.32
In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between
their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might have been backed up by another
consideration that is separate and distinct from the debt: respondent averred in her complaint and testiMied that
the parties had agreed that as a condition for the conveyance of the property the respondent shall assume the
balance of the mortgage loan which petitioner allegedly owed to the NHMFC.33 This Court in the recent past has
declared that an assumption of a mortgage debt may constitute a valid consideration for a sale.34
Although the record shows that petitioner admitted at the time of trial that she owned the property described in
the TCT,35 the Court must stress that the Transfer CertiMicate of Title No. 38253236 on its face shows that the
owner of the property which admittedly forms the subject matter of the Deed of Absolute Sale refers neither to
the petitioner nor to her father, Teodorico Doles, the alleged co-‐owner. Rather, it states that the property is
registered in the name of "Household Development Corporation." Although there is an entry to the effect that the
petitioner had been granted a special power of attorney "covering the shares of Teodorico Doles on the parcel of
land described in this certiMicate,"37 it cannot be inferred from this bare notation, nor from any other evidence on
the record, that the petitioner or her father held any direct interest on the property in question so as to validly
constitute a mortgage thereon38 and, with more reason, to effect the delivery of the object of the sale at the
consummation stage.39 What is worse, there is a notation that the TCT itself has been "cancelled."40
In view of these anomalies, the Court cannot entertain the possibility that respondent agreed to assume the
balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially since the record is bereft
of any factual Minding that petitioner was, in the Mirst place, endowed with any ownership rights to validly
mortgage and convey the property. As the complainant who initiated the case, respondent bears the burden of
proving the basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare
the sale void for lack of cause. And since the sale is void, the Court Minds it unnecessary to dwell on the issue of
whether duress or intimidation had been foisted upon petitioner upon the execution of the sale.
Moreover, even assuming the mortgage validly exists, the Court notes respondent’s allegation that the mortgage
with the NHMFC was for 25 years which began September 3, 1994. Respondent Miled her Complaint for SpeciMic
Performance in 1997. Since the 25 years had not lapsed, the prayer of respondent to compel petitioner to execute
necessary documents to effect the transfer of title is premature.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED and
SET ASIDE. The complaint of respondent in Civil Case No. 97-‐82716 is DISMISSED.
SO ORDERED.
G.R. No. 167552 April 23, 2007
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,

vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
D E C I S I O N
CHICO-‐NAZARIO, J.:
Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated 10 August
2004 and its Resolution2 dated 17 March 2005 in CA-‐G.R. SP No. 71397 entitled, "Eurotech Industrial
Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision and Resolution afMirmed the Order3 dated 29
! of !113
28
January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon
(EDWIN) as a party defendant in Civil Case No. CEB-‐19672.
The generative facts of the case are as follows:
Petitioner is engaged in the business of importation and distribution of various European industrial equipment
for customers here in the Philippines. It has as one of its customers Impact Systems Sales ("Impact Systems")
which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales
manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-‐
one thousand three hundred thirty-‐eight (P91,338.00) pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of Mifty
thousand pesos (P50,000.00).4 When the sludge pump arrived from the United Kingdom, petitioner refused to
deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28
June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner, the pertinent part of which states:
1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE
HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment for the purchase of one unit of Selwood
Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE6 the said receivables
from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00)
PESOS which receivables the ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.7
Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as
shown by Invoice No. 12034 dated 30 June 1995.8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to
collect from Toledo Power Company the amount of P365,135.29 as evidenced by Check Voucher No. 09339
prepared by said power company and an ofMicial receipt dated 15 August 1995 issued by Impact Systems.10
Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a
result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioner’s counsel
sent respondents a Minal demand letter wherein it was stated that as of 11 June 1996, respondents’ total
obligations stood at P295,000.00 excluding interests and attorney’s fees.11 Because of respondents’ failure to
abide by said Minal demand letter, petitioner instituted a complaint for sum of money, damages, with application
for preliminary attachment against herein respondents before the Regional Trial Court of Cebu City.12
On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of writ of preliminary attachment.
13
On 25 June 1997, respondent EDWIN Miled his Answer14 wherein he admitted petitioner’s allegations with
respect to the sale transactions entered into by Impact Systems and petitioner between January and April
1995.15 He, however, disputed the total amount of Impact Systems’ indebtedness to petitioner which, according
to him, amounted to only P220,000.00.16
By way of special and afMirmative defenses, respondent EDWIN alleged that he is not a real party in interest in
this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his
transaction with petitioner and the latter was very much aware of this fact. In support of this argument,
petitioner points to paragraphs 1.2 and 1.3 of petitioner’s Complaint stating –
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of a single
proprietorship business known as Impact Systems Sales ("Impact Systems" for brevity), with ofMice located at 46-‐
A del Rosario Street, Cebu City, where he may be served summons and other processes of the Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager
of Impact Systems and is sued in this action in such capacity.17
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29
On 26 June 1998, petitioner Miled a Motion to Declare Defendant ERWIN in Default with Motion for Summary
Judgment. The trial court granted petitioner’s motion to declare respondent ERWIN in default "for his failure to
answer within the prescribed period despite the opportunity granted"18 but it denied petitioner’s motion for
summary judgment in its Order of 31 August 2001 and scheduled the pre-‐trial of the case on 16 October 2001.19
However, the conduct of the pre-‐trial conference was deferred pending the resolution by the trial court of the
special and afMirmative defenses raised by respondent EDWIN.20
After the Miling of respondent EDWIN’s Memorandum21 in support of his special and afMirmative defenses and
petitioner’s opposition22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping
respondent EDWIN as a party defendant in this case. According to the trial court –
A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in
behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and
the complaint shows that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented
by its general manager Alberto de Jesus in the contract which is dated June 28, 1995. A study of Annex "H" to the
complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down
payment of P50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of Annex "G",
thereby showing that [Impact] Systems Sales ratiMied the act of Edwin B. Cuizon; the records further show that
plaintiff knew that [Impact] Systems Sales, the principal, ratiMied the act of Edwin B. Cuizon, the agent, when it
accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant
Edwin B. Cuizon, since in the instant case the principal has ratiMied the act of its agent and plaintiff knew about
said ratiMication. Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of
his powers since [Impact] Systems Sales made a down payment of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant.23
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which,
however, afMirmed the 29 January 2002 Order of the court a quo. The dispositive portion of the now assailed
Decision of the Court of Appeals states:
WHEREFORE, Minding no viable legal ground to reverse or modify the conclusions reached by the public
respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.24
Petitioner’s motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17
March 2005. Hence, the present petition raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN
CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE
HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION
OF A FRAUD.25
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufMicient notice of his
powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act of collecting the
receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed
by EDWIN on behalf of Impact Systems. While said collection did not revoke the agency relations of respondents,
petitioner insists that ERWIN’s action repudiated EDWIN’s power to sign the Deed of Assignment. As EDWIN did
not sufMiciently notify it of the extent of his powers as an agent, petitioner claims that he should be made
personally liable for the obligations of his principal.26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the
one unit of sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention
of this Court to the fact that respondents are bound not only by their principal and agent relationship but are in
fact full-‐blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud
petitioner.27
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30
In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interest in this
case and it was proper for the trial court to have him dropped as a defendant. He insists that he was a mere agent
of Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as it is
alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business venture.
Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a
representative of Impact Systems in said transaction.
We do not Mind merit in the petition.
In a contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another with the latter’s consent.29 The underlying principle of the contract of agency is to accomplish
results by using the services of others – to do a great variety of things like selling, buying, manufacturing, and
transporting.30 Its purpose is to extend the personality of the principal or the party for whom another acts and
from whom he or she derives the authority to act.31 It is said that the basis of agency is representation, that is,
the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have
the same legal effect as if they were personally executed by the principal.32 By this legal Miction, the actual or real
absence of the principal is converted into his legal or juridical presence – qui facit per alium facit per se.33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.34
In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as
principal and EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN exceeded his
authority when he signed the Deed of Assignment thereby binding himself personally to pay the obligations to
petitioner. Petitioner Mirmly believes that respondent EDWIN acted beyond the authority granted by his principal
and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party
with whom he contracts. The same provision, however, presents two instances when an agent becomes
personally liable to a third person. The Mirst is when he expressly binds himself to the obligation and the second is
when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party
sufMicient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions
contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact
Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad
powers with which to conduct the business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a
position presupposes a degree of conMidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental or appurtenant to the business
entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may
enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his
principal entrusted to his management. x x x.35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-‐within his authority when he
signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it
received, in full, the payment for Impact Systems’ indebtedness.36 We may very well assume that Impact Systems
desperately needed the sludge pump for its business since after it paid the amount of Mifty thousand pesos
(P50,000.00) as down payment on 3 March 1995,37 it still persisted in negotiating with petitioner which
culminated in the execution of the Deed of Assignment of its receivables from Toledo Power Company on 28 June
1995.38 The signiMicant amount of time spent on the negotiation for the sale of the sludge pump underscores
Impact Systems’ perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that
respondent EDWIN’s participation in the Deed of Assignment was "reasonably necessary" or was required in
order for him to protect the business of his principal. Had he not acted in the way he did, the business of his
principal would have been adversely affected and he would have violated his Miduciary relation with his principal.
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31
We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN,
the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which
petitioner anchors its claim against respondent EDWIN "does not hold that in case of excess of authority, both the
agent and the principal are liable to the other contracting party."39 To reiterate, the Mirst part of Article 1897
declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this,
the agent is completely absolved of any liability. The second part of the said provision presents the situations
when the agent himself becomes liable to a third party when he expressly binds himself or he exceeds the limits
of his authority without giving notice of his powers to the third person. However, it must be pointed out that in
case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third
person can recover from both the principal and the agent.40
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor
incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who
should be impleaded in this case. A real party in interest is one who "stands to be beneMited or injured by the
judgment in the suit, or the party entitled to the avails of the suit."41 In this respect, we sustain his exclusion as a
defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and
Resolution dated 17 March 2005 of the Court of Appeals in CA-‐G.R. SP No. 71397, afMirming the Order dated 29
January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of
the proceedings against respondent Erwin Cuizon.
SO ORDERED.
G.R. No. 148187 April 16, 2008
PHILEX MINING CORPORATION, petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
D E C I S I O N
YNARES-‐SANTIAGO, J.:
This is a petition for review on certiorari of the June 30, 2000 Decision1 of the Court of Appeals in CA-‐G.R. SP No.
49385, which afMirmed the Decision2 of the Court of Tax Appeals in C.T.A. Case No. 5200. Also assailed is the April
3, 2001 Resolution3 denying the motion for reconsideration.
The facts of the case are as follows:
On April 16, 1971, petitioner Philex Mining Corporation (Philex Mining), entered into an agreement4 with Baguio
Gold Mining Company ("Baguio Gold") for the former to manage and operate the latter’s mining claim, known as
the Sto. Nino mine, located in Atok and Tublay, Benguet Province. The parties’ agreement was denominated as
"Power of Attorney" and provided for the following terms:
4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to the MANAGERS
(Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts as from time to time may be
required by the MANAGERS within the said 3-‐year period, for use in the MANAGEMENT of the STO. NINO MINE.
The said ELEVEN MILLION PESOS (P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s
account in the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE, which is
left with the Sto. Nino PROJECT, shall be added to such owner’s account.
5. Whenever the MANAGERS shall deem it necessary and convenient in connection with the MANAGEMENT of
the STO. NINO MINE, they may transfer their own funds or property to the Sto. Nino PROJECT, in accordance with
the following arrangements:
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32
(a) The properties shall be appraised and, together with the cash, shall be carried by the Sto. Nino PROJECT as a
special fund to be known as the MANAGERS’ account.
(b) The total of the MANAGERS’ account shall not exceed P11,000,000.00, except with prior approval of the
PRINCIPAL; provided, however, that if the compensation of the MANAGERS as herein provided cannot be paid in
cash from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to the MANAGERS’ account.
(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until termination of this
Agency.
(d) The MANAGERS’ account shall not accrue interest. Since it is the desire of the PRINCIPAL to extend to the
MANAGERS the beneMit of subsequent appreciation of property, upon a projected termination of this Agency, the
ratio which the MANAGERS’ account has to the owner’s account will be determined, and the corresponding
proportion of the entire assets of the STO. NINO MINE, excluding the claims, shall be transferred to the
MANAGERS, except that such transferred assets shall not include mine development, roads, buildings, and similar
property which will be valueless, or of slight value, to the MANAGERS. The MANAGERS can, on the other hand,
require at their option that property originally transferred by them to the Sto. Nino PROJECT be re-‐transferred to
them. Until such assets are transferred to the MANAGERS, this Agency shall remain subsisting.
x x x x
12. The compensation of the MANAGER shall be Mifty per cent (50%) of the net proMit of the Sto. Nino PROJECT
before income tax. It is understood that the MANAGERS shall pay income tax on their compensation, while the
PRINCIPAL shall pay income tax on the net proMit of the Sto. Nino PROJECT after deduction therefrom of the
MANAGERS’ compensation.
x x x x
16. The PRINCIPAL has current pecuniary obligation in favor of the MANAGERS and, in the future, may incur
other obligations in favor of the MANAGERS. This Power of Attorney has been executed as security for the
payment and satisfaction of all such obligations of the PRINCIPAL in favor of the MANAGERS and as a means to
fulMill the same. Therefore, this Agency shall be irrevocable while any obligation of the PRINCIPAL in favor of the
MANAGERS is outstanding, inclusive of the MANAGERS’ account. After all obligations of the PRINCIPAL in favor of
the MANAGERS have been paid and satisMied in full, this Agency shall be revocable by the PRINCIPAL upon 36-‐
month notice to the MANAGERS.
17. Notwithstanding any agreement or understanding between the PRINCIPAL and the MANAGERS to the
contrary, the MANAGERS may withdraw from this Agency by giving 6-‐month notice to the PRINCIPAL. The
MANAGERS shall not in any manner be held liable to the PRINCIPAL by reason alone of such withdrawal.
Paragraph 5(d) hereof shall be operative in case of the MANAGERS’ withdrawal.
x x x x5
In the course of managing and operating the project, Philex Mining made advances of cash and property in
accordance with paragraph 5 of the agreement. However, the mine suffered continuing losses over the years
which resulted to petitioner’s withdrawal as manager of the mine on January 28, 1982 and in the eventual
cessation of mine operations on February 20, 1982.6
Thereafter, on September 27, 1982, the parties executed a "Compromise with Dation in Payment"7 wherein
Baguio Gold admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to pay the
same in three segments by Mirst assigning Baguio Gold’s tangible assets to petitioner, transferring to the latter
Baguio Gold’s equitable title in its Philodrill assets and Minally settling the remaining liability through properties
that Baguio Gold may acquire in the future.
On December 31, 1982, the parties executed an "Amendment to Compromise with Dation in Payment"8 where
the parties determined that Baguio Gold’s indebtedness to petitioner actually amounted to P259,137,245.00,
which sum included liabilities of Baguio Gold to other creditors that petitioner had assumed as guarantor. These
liabilities pertained to long-‐term loans amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank
of America NT & SA and Citibank N.A. This time, Baguio Gold undertook to pay petitioner in two segments by Mirst
assigning its tangible assets for P127,838,051.00 and then transferring its equitable title in its Philodrill assets
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33
for P16,302,426.00. The parties then ascertained that Baguio Gold had a remaining outstanding indebtedness to
petitioner in the amount of P114,996,768.00.
Subsequently, petitioner wrote off in its 1982 books of account the remaining outstanding indebtedness of
Baguio Gold by charging P112,136,000.00 to allowances and reserves that were set up in 1981 and
P2,860,768.00 to the 1982 operations.
In its 1982 annual income tax return, petitioner deducted from its gross income the amount of P112,136,000.00
as "loss on settlement of receivables from Baguio Gold against reserves and allowances."9 However, the Bureau of
Internal Revenue (BIR) disallowed the amount as deduction for bad debt and assessed petitioner a deMiciency
income tax of P62,811,161.39.
Petitioner protested before the BIR arguing that the deduction must be allowed since all requisites for a bad debt
deduction were satisMied, to wit: (a) there was a valid and existing debt; (b) the debt was ascertained to be
worthless; and (c) it was charged off within the taxable year when it was determined to be worthless.
Petitioner emphasized that the debt arose out of a valid management contract it entered into with Baguio Gold.
The bad debt deduction represented advances made by petitioner which, pursuant to the management contract,
formed part of Baguio Gold’s "pecuniary obligations" to petitioner. It also included payments made by petitioner
as guarantor of Baguio Gold’s long-‐term loans which legally entitled petitioner to be subrogated to the rights of
the original creditor.
Petitioner also asserted that due to Baguio Gold’s irreversible losses, it became evident that it would not be able
to recover the advances and payments it had made in behalf of Baguio Gold. For a debt to be considered
worthless, petitioner claimed that it was neither required to institute a judicial action for collection against the
debtor nor to sell or dispose of collateral assets in satisfaction of the debt. It is enough that a taxpayer exerted
diligent efforts to enforce collection and exhausted all reasonable means to collect.
On October 28, 1994, the BIR denied petitioner’s protest for lack of legal and factual basis. It held that the alleged
debt was not ascertained to be worthless since Baguio Gold remained existing and had not Miled a petition for
bankruptcy; and that the deduction did not consist of a valid and subsisting debt considering that, under the
management contract, petitioner was to be paid Mifty percent (50%) of the project’s net proMit.10
Petitioner appealed before the Court of Tax Appeals (CTA) which rendered judgment, as follows:
WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DENIED for lack of merit. The
assessment in question, viz: FAS-‐1-‐82-‐88-‐003067 for deMiciency income tax in the amount of P62,811,161.39 is
hereby AFFIRMED.
ACCORDINGLY, petitioner Philex Mining Corporation is hereby ORDERED to PAY respondent Commissioner of
Internal Revenue the amount of P62,811,161.39, plus, 20% delinquency interest due computed from February
10, 1995, which is the date after the 20-‐day grace period given by the respondent within which petitioner has to
pay the deMiciency amount x x x up to actual date of payment.
SO ORDERED.11
The CTA rejected petitioner’s assertion that the advances it made for the Sto. Nino mine were in the nature of a
loan. It instead characterized the advances as petitioner’s investment in a partnership with Baguio Gold for the
development and exploitation of the Sto. Nino mine. The CTA held that the "Power of Attorney" executed by
petitioner and Baguio Gold was actually a partnership agreement. Since the advanced amount partook of the
nature of an investment, it could not be deducted as a bad debt from petitioner’s gross income.
The CTA likewise held that the amount paid by petitioner for the long-‐term loan obligations of Baguio Gold could
not be allowed as a bad debt deduction. At the time the payments were made, Baguio Gold was not in default
since its loans were not yet due and demandable. What petitioner did was to pre-‐pay the loans as evidenced by
the notice sent by Bank of America showing that it was merely demanding payment of the installment and
interests due. Moreover, Citibank imposed and collected a "pre-‐termination penalty" for the pre-‐payment.
The Court of Appeals afMirmed the decision of the CTA.12 Hence, upon denial of its motion for reconsideration,13
petitioner took this recourse under Rule 45 of the Rules of Court, alleging that:
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34
I.
The Court of Appeals erred in construing that the advances made by Philex in the management of the Sto. Nino
Mine pursuant to the Power of Attorney partook of the nature of an investment rather than a loan.
II.
The Court of Appeals erred in ruling that the 50%-‐50% sharing in the net proMits of the Sto. Nino Mine indicates
that Philex is a partner of Baguio Gold in the development of the Sto. Nino Mine notwithstanding the clear
absence of any intent on the part of Philex and Baguio Gold to form a partnership.
III.
The Court of Appeals erred in relying only on the Power of Attorney and in completely disregarding the
Compromise Agreement and the Amended Compromise Agreement when it construed the nature of the advances
made by Philex.
IV.
The Court of Appeals erred in refusing to delve upon the issue of the propriety of the bad debts write-‐off.14
Petitioner insists that in determining the nature of its business relationship with Baguio Gold, we should not only
rely on the "Power of Attorney", but also on the subsequent "Compromise with Dation in Payment" and
"Amended Compromise with Dation in Payment" that the parties executed in 1982. These documents, allegedly
evinced the parties’ intent to treat the advances and payments as a loan and establish a creditor-‐debtor
relationship between them.
The petition lacks merit.
The lower courts correctly held that the "Power of Attorney" is the instrument that is material in determining the
true nature of the business relationship between petitioner and Baguio Gold. Before resort may be had to the two
compromise agreements, the parties’ contractual intent must Mirst be discovered from the expressed language of
the primary contract under which the parties’ business relations were founded. It should be noted that the
compromise agreements were mere collateral documents executed by the parties pursuant to the termination of
their business relationship created under the "Power of Attorney". On the other hand, it is the latter which
established the juridical relation of the parties and deMined the parameters of their dealings with one another.
The execution of the two compromise agreements can hardly be considered as a subsequent or
contemporaneous act that is reMlective of the parties’ true intent. The compromise agreements were executed
eleven years after the "Power of Attorney" and merely laid out a plan or procedure by which petitioner could
recover the advances and payments it made under the "Power of Attorney". The parties entered into the
compromise agreements as a consequence of the dissolution of their business relationship. It did not deMine that
relationship or indicate its real character.
An examination of the "Power of Attorney" reveals that a partnership or joint venture was indeed intended by the
parties. Under a contract of partnership, two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the proMits among themselves.15 While a corporation,
like petitioner, cannot generally enter into a contract of partnership unless authorized by law or its charter, it has
been held that it may enter into a joint venture which is akin to a particular partnership:
The legal concept of a joint venture is of common law origin. It has no precise legal deMinition, but it has been
generally understood to mean an organization formed for some temporary purpose. x x x It is in fact hardly
distinguishable from the partnership, since their elements are similar – community of interest in the business,
sharing of proMits and losses, and a mutual right of control. x x x The main distinction cited by most opinions in
common law jurisdictions is that the partnership contemplates a general business with some degree of
continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary
nature. x x x This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership
may be particular or universal, and a particular partnership may have for its object a speciMic undertaking. x x x It
would seem therefore that under Philippine law, a joint venture is a form of partnership and should be governed
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35
by the law of partnerships. The Supreme Court has however recognized a distinction between these two business
forms, and has held that although a corporation cannot enter into a partnership contract, it may however engage
in a joint venture with others. x x x (Citations omitted) 16
Perusal of the agreement denominated as the "Power of Attorney" indicates that the parties had intended to
create a partnership and establish a common fund for the purpose. They also had a joint interest in the proMits of
the business as shown by a 50-‐50 sharing in the income of the mine.
Under the "Power of Attorney", petitioner and Baguio Gold undertook to contribute money, property and
industry to the common fund known as the Sto. Niño mine.17 In this regard, we note that there is a substantive
equivalence in the respective contributions of the parties to the development and operation of the mine.
Pursuant to paragraphs 4 and 5 of the agreement, petitioner and Baguio Gold were to contribute equally to the
joint venture assets under their respective accounts. Baguio Gold would contribute P11M under its owner’s
account plus any of its income that is left in the project, in addition to its actual mining claim. Meanwhile,
petitioner’s contribution would consist of its expertise in the management and operation of mines, as well as the
manager’s account which is comprised of P11M in funds and property and petitioner’s "compensation" as
manager that cannot be paid in cash.
However, petitioner asserts that it could not have entered into a partnership agreement with Baguio Gold
because it did not "bind" itself to contribute money or property to the project; that under paragraph 5 of the
agreement, it was only optional for petitioner to transfer funds or property to the Sto. Niño project "(w)henever
the MANAGERS shall deem it necessary and convenient in connection with the MANAGEMENT of the STO. NIÑO
MINE."18
The wording of the parties’ agreement as to petitioner’s contribution to the common fund does not detract from
the fact that petitioner transferred its funds and property to the project as speciMied in paragraph 5, thus
rendering effective the other stipulations of the contract, particularly paragraph 5(c) which prohibits petitioner
from withdrawing the advances until termination of the parties’ business relations. As can be seen, petitioner
became bound by its contributions once the transfers were made. The contributions acquired an obligatory
nature as soon as petitioner had chosen to exercise its option under paragraph 5.
There is no merit to petitioner’s claim that the prohibition in paragraph 5(c) against withdrawal of advances
should not be taken as an indication that it had entered into a partnership with Baguio Gold; that the stipulation
only showed that what the parties entered into was actually a contract of agency coupled with an interest which
is not revocable at will and not a partnership.
In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the principal due to
an interest of a third party that depends upon it, or the mutual interest of both principal and agent.19 In this
case, the non-‐revocation or non-‐withdrawal under paragraph 5(c) applies to the advances made by petitioner
who is supposedly the agent and not the principal under the contract. Thus, it cannot be inferred from the
stipulation that the parties’ relation under the agreement is one of agency coupled with an interest and not a
partnership.
Neither can paragraph 16 of the agreement be taken as an indication that the relationship of the parties was one
of agency and not a partnership. Although the said provision states that "this Agency shall be irrevocable while
any obligation of the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS’ account,"
it does not necessarily follow that the parties entered into an agency contract coupled with an interest that
cannot be withdrawn by Baguio Gold.
It should be stressed that the main object of the "Power of Attorney" was not to confer a power in favor of
petitioner to contract with third persons on behalf of Baguio Gold but to create a business relationship between
petitioner and Baguio Gold, in which the former was to manage and operate the latter’s mine through the parties’
mutual contribution of material resources and industry. The essence of an agency, even one that is coupled with
interest, is the agent’s ability to represent his principal and bring about business relations between the latter and
third persons.20 Where representation for and in behalf of the principal is merely incidental or necessary for the
proper discharge of one’s paramount undertaking under a contract, the latter may not necessarily be a contract
of agency, but some other agreement depending on the ultimate undertaking of the parties.21
In this case, the totality of the circumstances and the stipulations in the parties’ agreement indubitably lead to
the conclusion that a partnership was formed between petitioner and Baguio Gold.
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36
First, it does not appear that Baguio Gold was unconditionally obligated to return the advances made by
petitioner under the agreement. Paragraph 5 (d) thereof provides that upon termination of the parties’ business
relations, "the ratio which the MANAGER’S account has to the owner’s account will be determined, and the
corresponding proportion of the entire assets of the STO. NINO MINE, excluding the claims" shall be transferred
to petitioner.22 As pointed out by the Court of Tax Appeals, petitioner was merely entitled to a proportionate
return of the mine’s assets upon dissolution of the parties’ business relations. There was nothing in the
agreement that would require Baguio Gold to make payments of the advances to petitioner as would be
recognized as an item of obligation or "accounts payable" for Baguio Gold.
Thus, the tax court correctly concluded that the agreement provided for a distribution of assets of the Sto. Niño
mine upon termination, a provision that is more consistent with a partnership than a creditor-‐debtor
relationship. It should be pointed out that in a contract of loan, a person who receives a loan or money or any
fungible thing acquires ownership thereof and is bound to pay the creditor an equal amount of the same kind and
quality.23 In this case, however, there was no stipulation for Baguio Gold to actually repay petitioner the cash and
property that it had advanced, but only the return of an amount pegged at a ratio which the manager’s account
had to the owner’s account.
In this connection, we Mind no contractual basis for the execution of the two compromise agreements in which
Baguio Gold recognized a debt in favor of petitioner, which supposedly arose from the termination of their
business relations over the Sto. Nino mine. The "Power of Attorney" clearly provides that petitioner would only
be entitled to the return of a proportionate share of the mine assets to be computed at a ratio that the manager’s
account had to the owner’s account. Except to provide a basis for claiming the advances as a bad debt deduction,
there is no reason for Baguio Gold to hold itself liable to petitioner under the compromise agreements, for any
amount over and above the proportion agreed upon in the "Power of Attorney".
Next, the tax court correctly observed that it was unlikely for a business corporation to lend hundreds of millions
of pesos to another corporation with neither security, or collateral, nor a speciMic deed evidencing the terms and
conditions of such loans. The parties also did not provide a speciMic maturity date for the advances to become due
and demandable, and the manner of payment was unclear. All these point to the inevitable conclusion that the
advances were not loans but capital contributions to a partnership.
The strongest indication that petitioner was a partner in the Sto Niño mine is the fact that it would receive 50%
of the net proMits as "compensation" under paragraph 12 of the agreement. The entirety of the parties’
contractual stipulations simply leads to no other conclusion than that petitioner’s "compensation" is actually its
share in the income of the joint venture.
Article 1769 (4) of the Civil Code explicitly provides that the "receipt by a person of a share in the proMits of a
business is prima facie evidence that he is a partner in the business." Petitioner asserts, however, that no such
inference can be drawn against it since its share in the proMits of the Sto Niño project was in the nature of
compensation or "wages of an employee", under the exception provided in Article 1769 (4) (b).24
On this score, the tax court correctly noted that petitioner was not an employee of Baguio Gold who will be paid
"wages" pursuant to an employer-‐employee relationship. To begin with, petitioner was the manager of the
project and had put substantial sums into the venture in order to ensure its viability and proMitability. By pegging
its compensation to proMits, petitioner also stood not to be remunerated in case the mine had no income. It is
hard to believe that petitioner would take the risk of not being paid at all for its services, if it were truly just an
ordinary employee.
Consequently, we Mind that petitioner’s "compensation" under paragraph 12 of the agreement actually constitutes
its share in the net proMits of the partnership. Indeed, petitioner would not be entitled to an equal share in the
income of the mine if it were just an employee of Baguio Gold.25 It is not surprising that petitioner was to receive
a 50% share in the net proMits, considering that the "Power of Attorney" also provided for an almost equal
contribution of the parties to the St. Nino mine. The "compensation" agreed upon only serves to reinforce the
notion that the parties’ relations were indeed of partners and not employer-‐employee.
All told, the lower courts did not err in treating petitioner’s advances as investments in a partnership known as
the Sto. Nino mine. The advances were not "debts" of Baguio Gold to petitioner inasmuch as the latter was under
no unconditional obligation to return the same to the former under the "Power of Attorney". As for the amounts
that petitioner paid as guarantor to Baguio Gold’s creditors, we Mind no reason to depart from the tax court’s
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37
factual Minding that Baguio Gold’s debts were not yet due and demandable at the time that petitioner paid the
same. Verily, petitioner pre-‐paid Baguio Gold’s outstanding loans to its bank creditors and this conclusion is
supported by the evidence on record.26
In sum, petitioner cannot claim the advances as a bad debt deduction from its gross income. Deductions for
income tax purposes partake of the nature of tax exemptions and are strictly construed against the taxpayer, who
must prove by convincing evidence that he is entitled to the deduction claimed.27 In this case, petitioner failed to
substantiate its assertion that the advances were subsisting debts of Baguio Gold that could be deducted from its
gross income. Consequently, it could not claim the advances as a valid bad debt deduction.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals in CA-‐G.R. SP No. 49385 dated June 30,
2000, which afMirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 5200 is AFFIRMED. Petitioner
Philex Mining Corporation is ORDERED to PAY the deMiciency tax on its 1982 income in the amount of
P62,811,161.31, with 20% delinquency interest computed from February 10, 1995, which is the due date given
for the payment of the deMiciency income tax, up to the actual date of payment.
SO ORDERED.
Liability of agent.
G.R. No. 45985 May 18, 1990
CHINA AIR LINES, LTD., petitioner,

vs.
COURT OF APPEALS, JOSE PAGSIBIGAN, PHILIPPINE AIR LINES, INC. and ROBERTO ESPIRITU, respondents.
G.R. No. 46036 May 18, 1990
PHILIPPINE AIR LINES, INC. and ROBERTO ESPIRITU, petitioners,

vs.
COURT OF APPEALS, JOSE PAGSIBIGAN and CHINA AIR LINES, LTD., respondents.
Balgos & Perez Law OfMices for petitioner China Air Lines, Ltd.
Siguion Reyna, Montecillo & Ongsiako for petitioners in G.R. No. 46036.
Syquia Law OfMices for Jose Pagsibigan.

REGALADO, J.:
These consolidated petitions seek the review of the decision of respondent court in CA-‐G.R. No. 53023-‐R entitled
"Jose E. Pagsibigan, Plaintiff-‐Appellant, vs. Philippine Air Lines, Inc. and Roberto Espiritu, Defendants-‐Appellants;
China Air Lines, Ltd., Defendant-‐Appellee," 1 the dispositive portion of which declares:
WHEREFORE, except for a modiMication of the judgment in the sense that the award of P20,000.00 in favor of the
plaintiff shall be in the concept of nominal damages instead of exemplary damages, and that defendant China Air
Lines, Ltd. shall likewise be liable with its two co-‐defendants in a joint and solidary capacity, the judgment
appealed from is hereby afMirmed in all other respects, without costs. 2
The challenged decision of respondent court contains a synthesis of the facts that spawned these cases and the
judgment of the court a quo which it afMirmed with modiMications, thus:
On June 4, 1968, plaintiff Jose E. Pagsibigan, then Vice-‐President and General Manager of Rentokil (Phils.) Inc., a
local Mirm dealing in insecticides, pesticides and related services appurtenant thereto, purchased a plane ticket
for a Manila-‐Taipei-‐Hongkong-‐Manila Mlight from the Transaire Travel Agency. The said agency, through its Cecille
! of !113
38
Baron, contacted the Manila Hotel branch of defendant Philippine Air Lines which at that time was a sales and
ticketing agent of defendant China Air lines. On June 6, 1968, PAL, through its ticketing clerk defendant Roberto
Espiritu, cut and issued PAL Ticket No. 01 7991 for a Manila-‐Taipei-‐Hongkong-‐Manila Mlight. According to the
plane ticket, the plaintiff was booked on CAL CI Flight No. 812 to depart from Manila for Taipei on June 10, 1968
at 17:20 hours (5:20 p.m.), Exhibit A.
On June 10, 1968, one hour before the scheduled time of the Mlight as stated in his ticket, the plaintiff arrived at
the airport to check in for CI Flight No. 812. Upon arriving at the airport, the plaintiff was informed that the plane
he was supposed to take for Taipei had left at 10:20 in the morning of that day. The PAL employees at the airport
made appropriate arrangements for the plaintiff to take PAL's Mlight to Taipei the following day, June 11, 1968.
The plaintiff took said Mlight and arrived in Taipei around noontime of the said date.
On July 8, 1968, the plaintiff, through counsel, made formal demand on defendant PAL, for moral damages in not
less than P125,000.00 for what the plaintiff allegedly suffered as a result of his failure to take the Mlight as stated
in his plane ticket. (Exhibit E) After a series of negotiations among the plaintiff, PAL and CAL failed to reach an
amicable settlement, the plaintiff instituted this action in the Court of First Instance of Rizal on September 22,
1969. In his complaint, plaintiff prays for the recovery of P125,000.00 as moral damages and P25,000.00 for and
as attorney's fees. The moral damages allegedly arose from the gross negligence of defendant Roberto Espiritu in
stating on the plane ticket that the time of departure was 17:20 hours, instead of 10:20 hours which was the
correct time of departure in the revised summer schedule of CAL. Plaintiff claims that by reason of his failure to
take the plane, he suffered besmirched reputation, embarrassment, mental anguish, wounded feelings and
sleepless nights, inasmuch as when he went to the airport, he was accompanied by his business associates, close
friends and relatives. He further averred that his trip to Taipei was for the purpose of conferring with a certain
Peng Siong Lim, President of the Union Taiwan Chemical Corporation, scheduled at 9:00 a.m. on June 11, 1968.
Defendant Philippine Air Lines alleged in its answer that the departure time indicated by Espiritu in the ticket
was furnished and conMirmed by the reservation ofMice of defendant China Air Lines. It further averred that CAL
had not informed PAL's Manila Hotel Branch of the revised schedule of its Mlight, nor provided it with revised
timetable; that when the travel agency sought to purchase the ticket for the plaintiff on CAL CI Flight No. 812 for
June 10, 1968, Espiritu who was then the ticketing clerk on duty, checked with the reservation ofMice of CAL on
the availability of space, the date and the time of said Mlight; that CAL's Dory Chan informed Espiritu that the
departure time of Flight No. 812 on June 10, 1968 was at 5:20 in the afternoon of said date. PAL asserted a cross-‐
claim against CAL for attorney's fees and for reimbursement of whatever amount the court may adjudge PAL to
be liable to the plaintiff. Defendant Espiritu adopted the defenses of his co-‐defendant PAL.
Defendant China Air Lines, for its part, disclaims liability for the negligence and incompetence of the employees
of PAL. It avers that it had revised its schedule since April 1, 1968, the same to be effective on April 20, 1968, and
the said revised schedule was adopted only after proper petition with and approval of the Civil Aeronautics
Board of which all airlines, including defendant PAL, were notiMied; that both printed copies of the international
timetable and of the mimeographed notices of the ofMicial schedule and Mlight departure schedules were
distributed to all its sales agents, including PAL, that after the effectivity of the new time schedules, PAL's Manila
Hotel ofMice had been issuing and selling tickets based on the revised time schedule; and that, assuming that the
plaintiff is entitled to recover damages, the liability is on PAL and not on CAL. A cross-‐claim was likewise asserted
by CAL against its co-‐defendant PAL.
After due trial, the Court a quo rendered judgment laying the blame for the erroneous entry in the ticket as to the
time of departure to defendant Roberto Espiritu, ticketing agent of defendant PAL, and that no employee of CAL
contributed to such erroneous entry. It was further ruled that the plaintiff had no reason to claim moral damages
but may be entitled to recover exemplary damages. The dispositive portion of the decision makes the following
adjudication:
WHEREFORE, premises considered, judgment is hereby rendered sentencing the defendants Philippine Air Lines,
Inc. and Roberto Espiritu, to pay to plaintiff Jose Pagsibigan jointly and severally, by way of exemplary damages,
the sum of Twenty Thousand Pesos (P20,000.00) plus Two Thousand Pesos (P2,000.00) as reimbursement for
attorney's fees and the costs.
The complaint is dismissed with respect to the defendant China Air Lines, Ltd. The cross-‐claim Miled by defendant
PAL and Espiritu against defendant CAL as well as the cross-‐claim Miled by the defendant CAL against defendant
PAL and Espiritu are also hereby dismissed. 3
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39
From said decision of the court below, all the parties, except China Air Lines, Ltd. appealed to respondent court
which, however, sustained the ruling of the trial court denying Pagsibigan's claim for moral damages. It
concluded that Roberto Espiritu did not act with malice or in bad faith in making a wrong entry of the time of
departure on the ticket, and that the mistake committed by Espiritu appears to be an honest one done in good
faith.
Respondent court also ruled out the claim for exemplary damages for lack of legal basis. Nonetheless, as earlier
noted, it awarded Pagsibigan P20,000.00 as nominal damages, under Article 2221 of the Civil Code, for the
vindication of a legal wrong committed against him. As regards the liability of the parties, respondent court held:
There can be little question as to the liability of PAL and Espiritu for the damage caused to the plaintiff due to the
erroneous entry in the plane ticket made by the latter. They seek to justify the erroneous statement as to the time
of departure on the ground that such was the time given by Dory Chan to Espiritu when the latter called up for
the reservation in favor of plaintiff. Aside from the fact that Dory Chan had vigorously disclaimed having given
such information to Espiritu, We are convinced that, as the trial court had found, CAL had no share in the error
committed by Espiritu in indicating the time of departure of Flight No. 812. PAL had shown through the
testimony of Carmen Ibazeta Gallaga, ticket representative of PAL at the Manila Hotel OfMice, that they received
circulars and timetables of airlines in the PAL main ofMice. It further appears that on two occasions, defendant
PAL cut and issued tickets for CAL based on the new schedule even before June 10, 1968. As a matter of fact, the
other entries of time departures in the ticket issued to the plaintiff are in accordance with the revised schedule,
and that the only error therein was with respect to the departure from Manila on June 10, 1968.
However, in proving that the fault lied with Espiritu, defendant CAL derives no solace nor gains an advantage. It
may not claim exemption from liability by reason thereof. Espiritu was an employee of PAL and whatever
negligence was committed by him is attributable to PAL. It is an admitted fact that PAL is an authorized agent of
CAL. In this relationship, the responsibility of defendant PAL for the tortious act of its agent or representative is
inescapable. . . .
xxx xxx xxx
A similar principle is recognized in our Civil Code in its Art. 2180 . . . . Unlike in the doctrine of respondeat
superior, however, the Civil Code permits the employer to escape this liability upon proof of having observed all
the diligence of a good father of a family to prevent the damage. We Mind the evidence of defendant CAL to be
insufMicient to overcome the presumption of negligence on its part for the act done by defendant Roberto
Espiritu. (Emphasis supplied)
The liability for the damage sustained by the plaintiff should, therefore, be borne by all of the defendants in a
joint and solidary capacity (Art. 2194). The liability of an employer under Art. 2180 is primary and direct. . . .
xxx xxx xxx
It appearing that defendant CAL, as employer or principal, did not contribute to the negligence committed by
defendants PAL and Roberto Espiritu, its liability to the plaintiff could be passed on to said defendants. Defendant
CAL, however, did not take an appeal and did not, therefore, take exception to the dismissal of its cross-‐claim
against defendants PAL and Espiritu. This serves as an obstacle for a rendition of judgment favorable to CAL on
its said counterclaim. 4
In its petition for review on certiorari in G.R. No. L-‐45985, petitioner China Air Lines, Ltd. (CAL) relied on the
following grounds:
1. A principal cannot be held liable, much less solidarily, for the negligence of the sub-‐agent, where the
former never participated in, ratiMied or authorized the latter's act or omission.
2. Dismissal of the cross-‐claim of petitioner against the private respondents Philippine Air Lines, Inc. and
Roberto Espiritu will not prevent the release of the petitioner from liability to the private respondent Pagsibigan.
3. The award of damages was unwarranted both legally and factually. 5
On their part, petitioners Philippine Air Lines, Inc. (PAL) and Roberto Espiritu made the following submissions in
G.R. No. L-‐46036, to wit:
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40
1. The respondent Court of Appeals erred in not holding that respondent China Air Lines, Ltd., being the
principal, is solely liable to respondent Pagsibigan.
2. The respondent Court of Appeals erred in awarding respondent Pagsibigan the sum of P20,000.00 as
nominal damages. 6
In G.R. No. L-‐45985, respondent Pagsibigan contends, by way of refutation, that CAL's liability is based on breach
of contract of transportation which was the proximate result of the negligence and/or error committed by PAL
and Espiritu; that even assuming that CAL has no share in the negligence of PAL and Espiritu, the liability of CAL
does not cease upon proof that it exercised all the diligence of a good father of a family in the selection and
supervision of its employees. Traversing such contentions, CAL argues that it can not be made liable under Article
2180 of the Civil Code because of the absence of employer-‐employee relationship between it and PAL.
On the other hand, in G.R. No. L-‐46036, respondent Pagsibigan claims that PAL is liable under Article 1909 of the
said code which holds an agent responsible not only for fraud but also for negligence which shall be judged with
more or less rigor by the courts, according to whether the agency was or was not for a compensation. PAL,
however, maintains that for lack of privity with Pagsibigan, the suit for breach of contract should have been
directed against CAL.
What surfaces as a procedural maneuver taken by respondent Pagsibigan in the course of the proceedings in
these cases has confused the real issues in the controversy subject of both petitions before us.
Respondent Pagsibigan has opted to seek redress by pursuing two remedies at the same time, that is, to enforce
the civil liability of CAL for breach of contract and, likewise, to recover from PAL and Espiritu for tort or culpa
aquiliana. What he has overlooked is the proscription against double recovery under Article 2177 of the Civil
Code which, while not preventing recourse to any appropriate remedy, prevents double relief for a single wrong.
To avoid inequitable effects under such conMluence of remedies, the true nature of the action instituted by
respondent Pagsibigan must be determined. A careful perusal of the complaint of respondent Pagsibigan will
readily disclose that the allegations thereof clearly and unmistakably make out a case for a quasi-‐delict in this
wise:
4. That at all pertinent times particularly in June of 1968, defendant China Air Lines Ltd. has been
operating regular scheduled Mlights to and from Manila, and has offered accommodations thereon through,
among others, defendant PAL as its authorized sales agent and/or ticketing agent, such that China Airlines Ltd. is
here impleaded as being the principal of defendant PAL;
5. That at all pertinent times, particularly in June of 1968, defendant Roberto Espiritu has been in the
employ of defendant PAL at its sales counter at the PAL Manila Hotel branch ofMice and is here impleaded as
defendant as being the proximate malfeasor in this cause of action;
xxx xxx xxx
12. That plaintiff missed the initial Manila-‐Taipei leg (CI Flight 812) on June 10, 1968, as set forth in his
ticket (Annex "A") solely and exclusively by reason of gross incompetence and inexcusable negligence amounting
to bad faith of defendant PAL — acting, through its sales representative, the defendant Roberto Espiritu, of its
Manila Hotel branch ofMice — in the discharge of its duties as sales agent and/or ticketing agent for defendant
China Airlines Ltd. as principal.
13. That as a direct result of culpable incompetence and negligence of defendant Roberto Espiritu as sales
representative of defendant PAL, plaintiff was unable to attend to previously scheduled business commitments in
Taipei . . . resulting in direct and indirect prejudice to plaintiff that has yet to be fully assessed; (Emphasis
supplied) 7
xxx xxx xxx
Had the intention of respondent Pagsibigan been to maintain an action based on breach of contract of carriage,
he could have sued CAL alone considering that PAL is not a real party to the contract. Moreover, in cases of such
! of !113
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nature, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All he
has to prove is the existence of the contract and the fact of its non-‐performance by the carrier. 8
The records disclose that the trial court delved much into the issues of who was at fault, and its decision is
primarily anchored on its factual Mindings regarding the civil liability arising from culpa aquiliana of the erring
party, to this effect:
Plaintiff said that the erroneous entry in his ticket which made it appear that his CAL Mlight of June 10, 1968 was
to be at 5:20 in the afternoon was due to the fault or negligence of PAL's Roberto Espiritu, a co-‐defendant herein,
as well as the employees of the defendant CAL. In making CAL co-‐responsible, plaintiff appears to rely on the
doctrine that the principal is responsible for the act of an agent done within the scope of the agency.
There is no proof extant that any of the employees of PAL had contributed to the erroneous entry in plaintiffs PAL
ticket for Taipei which placed his time of departure to 5:20 o'clock in the afternoon of June 10, 1968. Only
defendant Roberto Espiritu appears to be solely and exclusively responsible for such error and therefor the
conclusion becomes inevitable that CAL must be absolved from any blame because defendant Roberto Espiritu
who committed the error is not an employee or agent of the defendant CAL. 9
It, therefore, becomes evident that respondent Pagsibigan, having sensed that he can not hold CAL liable on a
quasi-‐delict, decided on appeal to instead make a sinistral detour, so to speak, by claiming that his action against
CAL is based on a breach of contract of carriage.
We can not permit respondent Pagsibigan to change his theory at this stage; it would be unfair to the adverse
party who would have no more opportunity to present further evidence, material to the new theory, which it
could have done had it been aware earlier of the new theory at the time of the hearing before the trial court. 10
There is indeed no basis whatsoever to hold CAL liable on a quasi-‐delict or culpa aquiliana. As hereinbefore
stated, the court a quo absolved CAL of any liability for fault or negligence. This Minding was shared by respondent
court when it concluded that defendant CAL did not contribute to the negligence committed by therein
defendants-‐appellants PAL and Roberto Espiritu.
Respondent Pagsibigan insists that CAL was barred from proving that it observed due diligence in the selection
and supervision of its employees. This argument is obviously misplaced. CAL is not the employer of PAL or
Espiritu. In Duavit vs. The Hon. Court of Appeals, et al., 11 we have stressed the need of Mirst establishing the
existence of an employer-‐employee relationship before an employer may be vicariously liable under Article 2180
of the Civil Code.
With respect to PAL and Espiritu, they disclaim any liability on the theory that the former is merely an agent of
CAL and that the suit should have been directed against CAL alone. There is no question that the contractual
relation between both airlines is one of agency. SufMice it to say, however, that in an action premised on the
employee's negligence, whereby respondent Pagsibigan seeks recovery for the resulting damages from both PAL
and Espiritu without qualiMication, what is sought to be imposed is the direct and primary liability of PAL as an
employer under said Article 2180.
When an injury is caused by the negligence of an employee, there instantly arises a presumption of law that there
was negligence on the part of the employer either in the selection of the employee or in the supervision over him
after such selection. The presumption, however, may be rebutted by a clear showing on the part of the employer
that it has exercised the care and diligence of a good father of a family in the selection and supervision of his
employee. 12
Hence, to escape solidary liability for the quasi-‐delict committed by Espiritu, it is imperative that PAL must
adduce sufMicient proof that it exercised such degree of care. PAL failed to overcome the presumption. As found by
respondent court, CAL had revised its schedule of Mlights since April 1, 1968; that after the Civil Aeronautics
Board had approved the revised schedule of Mlights, PAL was duly informed thereof and, in fact, PAL's Manila
Hotel branch ofMice had been issuing and selling tickets based on the revised time schedule before June 10, 1968.
PAL's main defense is that it is only an agent. As a general proposition, an agent who duly acts as such is not
personally liable to third persons. However, there are admitted exceptions, as in this case where the agent is
being sued for damages arising from a tort committed by his employee.
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The respondent court found that the mistake committed by Espiritu was done in good faith. While there is no
evidence that he acted with malice, we can not entirely condone his actuations. As an employee of PAL, the nature
of his functions requires him to observe for the protection of the interests of another person that degree of care,
precaution and vigilance which the circumstances justly demand. He committed a clear neglect of duty.
Ergo, for his negligence, Espiritu is primarily liable to respondent Pagsibigan under Article 2176 of the Civil Code.
For the failure of PAL to rebut the legal presumption of negligence in the selection and supervision of its
employee, it is also primarily liable under Article 2180 of the same code which explicitly provides that employers
shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry.
Under the aforesaid provision, all that is required is that the employee, by his negligence, committed a quasi-‐
delict which caused damage to another, and this sufMices to hold the employer primarily and solidarity
responsible for the tortious act of the employee. PAL, however, can demand from Espiritu reimbursement of the
amount which it will have to pay the offended party's claim. 13
On the issue of damages, we agree, except as to the amount, that nominal damages may be awarded to
respondent Pagsibigan to vindicate the legal wrong committed against him. It appearing that the wrong
committed was immediately rectiMied when PAL promptly booked him for the next morning's Mlight to Taipei
where he arrived before noon of June 11, 1968 and was able to attend his scheduled conference, and considering
the concept and purpose of nominal damages, the award of P20,000.00 must accordingly be reduced to an
amount equal or at least commensurate to the injury sustained.
WHEREFORE, the decision of respondent Court of Appeals is MODIFIED accordingly. China Air Lines, Ltd. is
hereby absolved from liability. Philippine Air Lines, Inc. and Roberto Espiritu are declared jointly and severally
liable to pay the sum of P10,000.00 by way of nominal damages, without prejudice to the right of Philippine Air
Lines, Inc. to recover from Roberto Espiritu reimbursement of the damages that it may pay respondent Jose
Pagsibigan.
SO ORDERED.
If an agent acts in his own behalf only, the principal is not bound.
G.R. No. 95703 August 3, 1992
RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner,

vs.
HON. COURT OF APPEALS, EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO,
respondents.
L.M. Maggay & Associates for petitioner.

GRIÑO-‐AQUINO, J.:
This petition for review seeks reversal of the decision dated September 18, 1990 of the Court of Appeals,
reversing the decision of the Regional Trial Court of Makati, Branch 150, which dismissed the private
respondents' complaint and awarded damages to the petitioner, Rural Bank of Bombon.
On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of attorney in
favor of RuMina S. Aquino authorizing him:
1. To secure a loan from any bank or lending institution for any amount or otherwise mortgage the
property covered by Transfer CertiMicate of Title No. S-‐79238 situated at Las Piñas, Rizal, the same being my
paraphernal property, and in that connection, to sign, or execute any deed of mortgage and sign other document
requisite and necessary in securing said loan and to receive the proceeds thereof in cash or in check and to sign
the receipt therefor and thereafter endorse the check representing the proceeds of loan. (p. 10, Rollo.)
! of !113
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Thereupon, Gallardo delivered to Aquino both the special power of attorney and her owner's copy of Transfer
CertiMicate of Title No. S-‐79238 (19963-‐A).
On August 26, 1981, a Deed of Real Estate Mortgage was executed by RuMino S. Aquino in favor of the Rural Bank
of Bombon (Camarines Sur), Inc. (hereafter, defendant Rural Bank) over the three parcels of land covered by TCT
No. S-‐79238. The deed stated that the property was being given as security for the payment of "certain loans,
advances, or other accommodations obtained by the mortgagor from the mortgagee in the total sum of Three
Hundred Fifty Thousand Pesos only (P350,000.00), plus interest at the rate of fourteen (14%) per annum . . ." (p.
11, Rollo).
On January 6, 1984, the spouses Ederlinda Gallardo and Daniel Manzo Miled an action against RuMino Aquino and
the Bank because Aquino allegedly left his residence at San Pascual, Hagonoy, Bulacan, and transferred to an
unknown place in Bicol. She discovered that Aquino Mirst resided at Sta. Isabel, Calabanga, Camarines Sur, and
then later, at San Vicente, Calabanga, Camarines Sur, and that they (plaintiffs) were allegedly surprised to
discover that the property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for
personal use and beneMit of Aquino; that the mortgagor in the deed was defendant Aquino instead of plaintiff
Gallardo whose address up to now is Manuyo, Las Piñas, M.M., per the title (TCT No. S-‐79238) and in the deed
vesting power of attorney to Aquino; that correspondence relative to the mortgage was sent to Aquino's address
at "Sta. Isabel, Calabanga, Camarines Sur" instead of Gallardo's postal address at Las Piñas, Metro Manila; and
that defendant Aquino, in the real estate mortgage, appointed defendant Rural Bank as attorney in fact, and in
case of judicial foreclosure as receiver with corresponding power to sell and that although without any express
authority from Gallardo, defendant Aquino waived Gallardo's rights under Section 12, Rule 39, of the Rules of
Court and the proper venue of the foreclosure suit.
On January 23, 1984, the trial court, thru the Honorable Fernando P. Agdamag, temporarily restrained the Rural
Bank "from enforcing the real estate mortgage and from foreclosing it either judicially or extrajudicially until
further orders from the court" (p.36, Rollo).
RuMino S. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a bank so that
he could use the proceeds to liquidate her obligation of P350,000 to him. The obligation to pay the Rural Bank
devolved on Gallardo. Of late, however, she asked him to pay the Bank but defendant Aquino set terms and
conditions which plaintiff did not agree to. Aquino asked for payment to him of moral damages in the sum of
P50,000 and lawyer's fees of P35,000.
The Bank moved to dismiss the complaint and Miled counter-‐claims for litigation expenses, exemplary damages,
and attorney's fees. It also Miled a crossclaim against Aquino for P350,000 with interest, other bank charges and
damages if the mortgage be declared unauthorized.
Meanwhile, on August 30, 1984, the Bank Miled a complaint against Ederlinda Gallardo and RuMino Aquino for
"Foreclosure of Mortgage" docketed as Civil Case No. 8330 in Branch 141, RTC Makati. On motion of the plaintiff,
the foreclosure case and the annulment case (Civil Case No. 6062) were consolidated.
On January 16, 1986, the trial court rendered a summary judgment in Civil Case No. 6062, dismissing the
complaint for annulment of mortgage and declaring the Rural Bank entitled to damages the amount of which will
be determined in appropriate proceedings. The court lifted the writ of preliminary injunction it previously
issued.
On April 23, 1986, the trial court, in Civil Case No. 8330, issued an order suspending the foreclosure proceedings
until after the decision in the annulment case (Civil Case No. 6062) shall have become Minal and executory.
The plaintiff in Civil Case No. 6062 appealed to the Court of Appeals, which on September 18, 1990, reversed the
trial court. The dispositive portion of the decision reads:
UPON ALL THESE, the summary judgment entered by the lower court is hereby REVERSED and in lieu thereof,
judgment is hereby RENDERED, declaring the deed of real estate mortgage dated August 26, 1981, executed
between RuMino S. Aquino with the marital consent of his wife Bibiana Aquino with the appellee Rural Bank of
Bombon, Camarines Sur, unauthorized, void and unenforceable against plaintiff Ederlinda Gallardo; ordering the
reinstatement of the preliminary injunction issued at the onset of the case and at the same time, ordering said
injunction made permanent.
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Appellee Rural Bank to pay the costs. (p. 46, Rollo.)
Hence, this petition for review by the Rural Bank of Bombon, Camarines Sur, alleging that the Court of Appeals
erred:
1. in declaring that the Deed of Real Estate Mortgage was unauthorized, void, and unenforceable against
the private respondent Ederlinda Gallardo; and
2. in not upholding the validity of the Real Estate Mortgage executed by RuMino S. Aquino as attorney-‐in-‐fact
for Gallardo, in favor of the Rural Bank of Bombon, (Cam. Sur), Inc.
Both assignments of error boil down to the lone issue of the validity of the Deed of Real Estate Mortgage dated
August 26, 1981, executed by RuMino S. Aquino, as attorney-‐in-‐fact of Ederlinda Gallardo, in favor of the Rural
Bank of Bombon (Cam. Sur), Inc.
The Rural Bank contends that the real estate mortgage executed by respondent Aquino is valid because he was
expressly authorized by Gallardo to mortgage her property under the special power of attorney she made in his
favor which was duly registered and annotated on Gallardo's title. Since the Special Power of Attorney did not
specify or indicate that the loan would be for Gallardo's beneMit, then it could be for the use and beneMit of the
attorney-‐in-‐fact, Aquino.
However, the Court of Appeals ruled otherwise. It held:
The Special Power of Attorney above quoted shows the extent of authority given by the plaintiff to defendant
Aquino. But defendant Aquino in executing the deed of Real Estate Mortgage in favor of the rural bank over the
three parcels of land covered by Gallardo's title named himself as the mortgagor without stating that his
signature on the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-‐in-‐fact.
At the beginning of the deed mention was made of "attorney-‐in-‐fact of Ederlinda H. Gallardo," thus: " (T)his
MORTGAGE executed by RuMino S. Aquino attorney in fact of Ederlinda H. Gallardo, of legal age, Filipino, married
to Bibiana Panganiban with postal address at Sta. Isabel . . .," but which of itself, was merely descriptive of the
person of defendant Aquino. Defendant Aquino even signed it plainly as mortgagor with the marital consent yet
of his wife Bibiana P. Aquino who signed the deed as "wife of mortgagor."
xxx xxx xxx
The three (3) promissory notes respectively dated August 31, 1981, September 23, 1981 and October 26, 1981,
were each signed by RuMino Aquino on top of a line beneath which is written "signature of mortgagor" and by
Bibiana P. Aquino on top of a line under which is written "signature of spouse," without any mention that
execution thereof was for and in behalf of the plaintiff as mortgagor. It results, borne out from what were written
on the deed, that the amounts were the personal loans of defendant Aquino. As pointed out by the appellant,
Aquino's wife has not been appointed co-‐agent of defendant Aquino and her signature on the deed and on the
promissory notes can only mean that the obligation was personally incurred by them and for their own personal
account.
The deed of mortgage stipulated that the amount obtained from the loans shall be used or applied only for
"Mishpond (bangus and sugpo production)." As pointed out by the plaintiff, the defendant Rural Bank in its
Answer had not categorically denied the allegation in the complaint that defendant Aquino in the deed of
mortgage was the intended user and beneMiciary of the loans and not the plaintiff. And the special power of
attorney could not be stretched to include the authority to obtain a loan in said defendant Aquino's own beneMit.
(pp. 40-‐41, Rollo.)
The decision of the Court of Appeals is correct. This case is governed by the general rule in the law of agency
which this Court, applied in "Philippine Sugar Estates Development Co. vs. Poizat," 48 Phil. 536, 538:
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property
executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the
mortgage, if he has not acted in the name of the principal. Neither is it ordinarily sufMicient that in the mortgage
! of !113
45
the agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own
name and has set his own hand and seal to the mortgage. This is especially true where the agent himself is a
party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of
the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and
deed of the principal, it is not valid as to the principal.
In view of this rule, Aquino's act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor,
without any indication that he was signing for and in behalf of the property owner, Ederlinda Gallardo, bound
himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-‐in-‐fact
of Gallardo. The Court of Appeals further observed:
It will also be observed that the deed of mortgage was executed on August 26, 1981 therein clearly stipulating
that it was being executed "as security for the payment of certain loans, advances or other accommodation
obtained by the Mortgagor from the Mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only
(P350,000.00)" although at the time no such loan or advance had been obtained. The promissory notes were
dated August 31, September 23 and October 26, 1981 which were subsequent to the execution of the deed of
mortgage. The appellant is correct in claiming that the defendant Rural Bank should not have agreed to extend or
constitute the mortgage on the properties of Gallardo who had no existing indebtedness with it at the time.
Under the facts the defendant Rural Bank appeared to have ignored the representative capacity of Aquino and
dealt with him and his wife in their personal capacities. Said appellee Rural Bank also did not conduct an inquiry
on whether the subject loans were to beneMit the interest of the principal (plaintiff Gallardo) rather than that of
the agent although the deed of mortgage was explicit that the loan was for purpose of the bangus and sugpo
production of defendant Aquino.
In effect, with the execution of the mortgage under the circumstances and assuming it to be valid but because the
loan taken was to be used exclusively for Aquino's business in the "bangus" and "sugpo" production, Gallardo in
effect becomes a surety who is made primarily answerable for loans taken by Aquino in his personal capacity in
the event Aquino defaults in such payment. Under Art. 1878 of the Civil Code, to obligate the principal as a
guarantor or surety, a special power of attorney is required. No such special power of attorney for Gallardo to be
a surety of Aquino had been executed. (pp. 42-‐43, Rollo.)
Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in
accordance with Article 1883 which provides:
Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with
whom the agent has contracted; neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the
transaction were his own, except when the contract involves things belonging to the principal.
The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at bar.
Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually acted in his personal capacity.
Involved herein are properties titled in the name of respondent Gallardo against which the Bank proposes to
foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity. Under these
circumstances, we hold, as we did in Philippine Sugar Estates Development Co. vs. Poizat, supra, that Gallardo's
property is not liable on the real estate mortgage:
There is no principle of law by which a person can become liable on a real mortgage which she never executed
either in person or by attorney in fact. It should be noted that this is a mortgage upon real property, the title to
which cannot be divested except by sale on execution or the formalities of a will or deed. For such reasons, the
law requires that a power of attorney to mortgage or sell real property should be executed with all of the
formalities required in a deed. For the same reason that the personal signature of Poizat, standing alone, would
not convey the title of his wife in her own real property, such a signature would not bind her as a mortgagor in
real property, the title to which was in her name. (p. 548.)
WHEREFORE, Minding no reversible error in the decision of the Court of Appeals, we AFFIRM it in toto. Costs
against the petitioner.
SO ORDERED.
! of !113
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A person must be authorized to bind another.
G.R. No. 95909 August 16, 1991
UNILAND RESOURCES, petitioner,

vs.
DEVELOPMENT BANK OF THE PHILIPPINES,* respondent.
Romeo G. Roxas for petitioner.

GANCAYCO, J.:p
In the law on agency, it is elementary that when the main transaction between the principal parties does not
materialize, the claim for commission of the duly authorized broker is disallowed. 1 How about the instance
when the sale was eventually consummated between parties introduced by a middleman who, in the Mirst place,
had no authority, express or implied, from the seller to broker the transaction? Should the interloper be allowed a
commission? On these simpliMied terms rests the nature of the controversy on which this case turns.
As stated by the respondent Court of Appeals, 2 the ambient circumstances of this case are as follows:
(1) [Petitioner] Uniland Resources is a private corporation engaged in real estate brokerage and licensed as
such (p. 2, Rec.), while [respondent] DBP, as we all know [sic], is a government corporation engaged in Minance
and banking in a proprietary capacity.
(2) Long before this case arose, Marinduque Mining Corporation obtained a loan from the DBP and as
security therefor, mortgaged certain real properties to the latter, among them two lots located in Makati, M.M.,
described as follows:
(a) Corner lot, covered by TCT No. 114138, located at Pasong Tamo, Makati with an area of 3,330 sq. mts. on
which is constructed a [four]-‐story concrete building, etc., which, for brevity, shall be called the ofMice building lot;
and
(b) Lot covered by TCT No. 16279 with 12,355 sq. mts located at Pasong Tamo, Makati, on which is
constructed a concrete/steel warehouse, etc., which, for brevity, shall be called the warehouse lot.
The aforesaid lots had, however, been previously mortgaged by Marinduque Mining Corp., to Caltex, and the
mortgage in favor of DBP was entered on their titles as a second mortgage (Pre-‐Trial Order, p. 37, Rec.).
The account of the Marinduque Mining Corp., with the DBP was later transferred to the Assets Privatization Trust
(APT) pursuant to Proclamation No. 50.
(3) For failure of the Marinduque Mining Corp. to pay its obligations to Caltex, the latter foreclosed its
mortgage on the aforesaid two lots (pp. 37-‐38, Rec.). APT on the other hand, to recover its investment on the
Marinduque Account, offered for sale to the public through DBP its right of redemption on said two lots by public
bidding (Exhs. "1" and "2").
(4) Considering, however, that Caltex had required that both lots be redeemed, the bidding guidelines set by
DBP provided that any bid to purchase either of the two lots would be considered only should there be two bids
or a bid for the two items which, when combined, would fully cover the sale of the two lots in question (Exh. "1").
(5) The aforesaid bidding was held on May 5, 1987 with only one bidder, the Counsel Realty Corp. [an
afMiliate of Glaxo, Philippines, the client of petitioner], which offered a bid only for the warehouse lot in the
amount of P23,900,000.00. Said bid was thus rejected by DBP.
(6) Seeing, however, that it would make a proMit if it redeemed the two lots and then offer them for sale, and
as its right to redeem said lots from Caltex would expire on May 8, 1987, DBP retrieved the account from APT
! of !113
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and, on the last day for the exercise of its right of redemption, May 8, 1987, redeemed said lots from Caltex for
P33,096,321.62 (Exh. "5"), thus acquiring them as its physical assets.
(7) In preparation for the sale of the two lots in question, DBP called a pre-‐bidding conference wherein a
new set of bidding guidelines were formulated (Exh. "3"). Then, on July 30,1987, the public bidding for the sale of
the two lots was held and again, there was only one bidder, the Charges Realty Corp. [another afMiliate of Glaxo,
Philippines], for only the warehouse lot and for the amount of P24,070,000.00, which is slightly higher than the
amount previously offered by Counsel Realty Corp., therefor at the May 5, 1987 bidding (see Exh. "5," p. 1 00,
Rec.). No bid was submitted for the ofMice building lot (id.).
(8) Notwithstanding that there was no bidder for the ofMice building lot, the DBP approved the sale of the
warehouse lot to Charges Realty Corp., and on November 23, 1987, the proper documentation of the sale was
made (Exh. "D"). As for the ofMice building lot, it was later sold by DBP in a negotiated sale to the Bank of P.I. as
trustee for the "Perpetual Care Fund of the Manila Memorial Park" for P17,460,000.00, and proper
documentation of the sale was made on November 17, 1987 (Exh. "E" and submarkings). The DBP admittedly
paid the (Mive percent) broker's fee on this sale to the DBP Management Corporation, which acted as broker for
said negotiated sale (p. 15, Appellant DBP's brief).
(9) After the aforesaid sale, [petitioner], through its President, wrote two letters to [respondent DBP], the Mirst
through its Senior Vice President (Exh. "C"), and, the second through its Vice Chairman (Exh. "4" [sic], asking for
the payment of its broker's fee in instrumenting the sale of its (DBP's) warehouse lot to Charges Realty Corp. The
claim was referred to the Bidding Committee chaired by Amanda S. Guiam which met on November 9, 1987, and
which, on November 18, 1987, issued a decision denying [petitioner's] claim (Exh. "5"). Hence, the instant case
Miled by [petitioner] to recover from [respondent] DBP the aforesaid broker's fee.
After trial, the lower court, on October 25, 1988, rendered judgment
ORDERING [respondent DBP] to pay [petitioner] the sum of P1,203,500,00 which is the equivalent of [Mive
percent] broker's fee plus legal interest thereto (sic) from the Miling of the complaint on February 18, 1988 until
fully paid and the sum of P50,000.00 as and for attorney's fees. Costs against [respondent DBP]. (p. 122, Rec.). 3
On appeal, the Court of Appeals reversed the judgment of the lower court 4 and dismissed the complaint. The
motion for reconsideration Miled by petitioner was also subsequently denied. 5
Petitioner is now before this Court alleging that the petition "RAISES A QUESTION OF LAW IN THE SENSE THAT
THE RESPONDENT COURT OF APPEALS BASED ITS DECISION ONLY ON THE CONTROVERSIAL FACTS
FAVORABLE TO THE PRIVATE RESPONDENT DBP, 6 primarily making capital of the disparity between the factual
conclusions of the trial court and of the appellate court. Petitioner asserts that the respondent Court of Appeals
disregarded evidence in its favor consisting of its letters to respondent DBP's higher ofMicers sent prior to the
bidding and sale, wherein petitioner requested accreditation as a broker and, in the process of informing that it
had offered the DBP properties for sale, also volunteered the name of its client, Glaxo, Philippines, as an
interested prospective buyer. 7
The rule is that in petitions for certiorari as a mode of appeal, only questions of law distinctly set forth may be
raised. 8 Such questions have been deMined as those that do not call for any examination of the probative value of
the evidence presented by the parties. 9 Petitioner's singular assignment of error would, however, have this
Court go over the facts of this case because it necessarily involves the examination of the evidence and its
subsequent reevaluation. Under the present proceeding, the same, therefore, cannot be done.
It bears emphasizing that mere disagreement between the Court of Appeals and the trial court as to the facts of a
case does not of itself warrant this Court's review of the same. It has been held that the doctrine that the Mindings
of fact made by the Court of Appeals, being conclusive in nature, are binding on this Court, applies even if the
Court of Appeals was in disagreement with the lower court as to the weight of evidence with a consequent
reversal of its Mindings of fact, so long as the Mindings of the Court of Appeals are borne out by the record or based
on substantial evidence. 10 while the foregoing doctrine is not absolute, petitioner has not sufMiciently proved
that his case falls under the known exceptions. 11
Be that as it may, the Court has perused the assailed decision of the Court of Appeals and still Minds the primary
assertion of petitioner to be unfounded. The Court of Appeals has addressed all the factual contentions of
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48
petitioner and chose not to give credence to petitioner's version. Moreover, the Mindings of the Court of Appeals
are consistent with, and sufMiciently supported by, the records of this case.
It is obvious that petitioner was never able to secure the required accreditation from respondent DBP to transact
business on behalf of the latter. The letters sent by petitioner to the higher ofMicers of the DBP and the APT are
merely indicative of petitioner's desire to secure such accreditation. At best these missives are self-‐serving; the
most that they prove is that they were sent by petitioner and received by respondent DBP, which clearly never
agreed to be bound thereto. As declared by the trial court even when it found in favor of petitioner, there was no
express reply from the DBP or the APT as to the accreditation sought by petitioner. 12 From the very beginning,
therefore, petitioner was aware that it had no express authority from DBP to Mind buyers of its properties.
In its reply submitted pursuant to the resolution requiring the same 13 petitioner also invokes Article 1869 of
the new Civil Code 14 in contending that an implied agency existed. Petitioner argues that it "should have been
stopped, disauthorized and outrightly prevented from dealing the 12,355 sq. m (with warehouse) [sic] by the
DBP from the inception." 15 On the contrary, these steps were never necessary. In the course of petitioner's
dealings with the DBP, it was always made clear to petitioner that only accredited brokers may look for buyers on
behalf of respondent DBP. This is not a situation wherein a third party was prejudiced by the refusal of
respondent DBP to recognize petitioner as its broker. The controversy is only between the DBP and petitioner, to
whom it was emphasized in no uncertain terms that the arrangement sought did not exist. Article 1869,
therefore, has no room for operation in this case.
Petitioner would also disparage the formality of accreditation as merely a mechanical act, which requires not
much discretion, as long as a person or entity looks for a buyer [and] initiate or promote [sic] the interests of the
seller. 16 Being engaged in business, petitioner should do better to adopt the opposite attitude and appreciate
that formalities, such as the need for accreditation, result from the evolution of sound business practices for the
protection and beneMit of all parties concerned. They are designed and adopted speciMically to prevent the
occurrence of situations similar to that obtaining in this case.
More importantly, petitioner's stance goes against the basic axiom in Civil Law that no one may contract in the
name of another without being authorized by the latter, unless the former has by law a right to represent him. 17
From this principle, among others, springs the relationship of agency which, as with other contracts, is one
founded on mutual consent: the principal agrees to be bound by the acts of the agent and the latter in turn
consents to render service on behalf or in representation of the principal. 18
Petitioner, however, also invokes equity considerations, and in equity, the Court recognizes the efforts of
petitioner in bringing together respondent DBP and an interested and Minancially-‐able buyer. While not actively
involved in the actual bidding and transfer of ownership of the warehouse property, petitioner may be said to
have initiated, albeit without proper authority, the transaction that eventually took place. The Court is also aware
that respondent DBP was able to realize a substantial proMit from the sale of its two properties. While purely
circumstantial, there is sufMicient reason to believe that the DBP became more conMident to venture and redeem
the properties from the APT due to the presence of a ready and willing buyer, as communicated and assured by
petitioner.
In Prats v. Court of Appeals, 19 there was a Minding that the petitioner therein as the agent was no longer the
efMicient procuring cause in bringing about the sale proceeding from the fact of expiration of his exclusive
authority. There was therefore no basis in law to grant the relief sought. Nevertheless, this Court in equity
granted the sum of P100,000.00, out of the P1,380,000.00 claimed as commission, by way of compensation for
the efforts and assistance rendered by the agent in the transaction prior to the expiration of his authority. These
consist in offering the lot for sale to the eventual buyer, sending follow-‐up letters, inviting the buyer to dinner and
luncheon meetings, etc.
Parallel circumstances obtain in the case at bar. It was petitioner who advised Glaxo, Philippines of the
availability of the warehouse property and aroused its interest over the same. Through petitioner, respondent
DBP was directly informed of the existence of an interested buyer. Petitioner's persistence in communicating
with respondent DBP reinforced the seriousness of the offer. This piece of information no doubt had a bearing on
the subsequent decisions made by respondent DBP as regards the disposition of its properties.
Petitioner claims the amount of P1,203,500.00 awarded by the trial court as commission computed at Mive
percent of the sale price of the warehouse property. Under the foregoing disquisition and following the
precedent, as well as roughly the proportion, set in Prats, the Court in equity grants petitioner the sum of One
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Hundred Thousand Pesos (Pl00,000.00) for the role it played in the transaction between respondent DBP and
buyer Glaxo, Philippines. It is emphasized, however, that the circumstances that came into play in this case do not
meet the minimum legal standards required for the existence of an agency relationship and that the award is
based purely on equity considerations. Accordingly, petitioner's other arguments need not now be discussed.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the MODIFICATION that in equity
respondent DBP is ordered to pay petitioner the amount of One Hundred Thousand Pesos (P100,000.00). No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-‐7089 August 31, 1954
DOMINGO DE LA CRUZ, plaintiff-‐appellant,

vs.
NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-‐appellees.
Conrado Rubio for appellant.

Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees.
MONTEMAYOR, J.:
The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern Theatrical
Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons
employed by it was the plaintiff DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard the
main entrance of the cine, to maintain peace and order and to report the commission of disorders within the
premises. As such guard he carried a revolver. In the afternoon of July 4, 1941, one Benjamin Martin wanted to
crash the gate or entrance of the movie house. Infuriated by the refusal of plaintiff De la Cruz to let him in without
Mirst providing himself with a ticket, Martin attacked him with a bolo. De la Cruz defendant himself as best he
could until he was cornered, at which moment to save himself he shot the gate crasher, resulting in the latter's
death.
For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First Instance of
Ilocos Norte. After a re-‐investigation conducted by the Provincial Fiscal the latter Miled a motion to dismiss the
complaint, which was granted by the court in January 1943. On July 8, 1947, De la Cruz was again accused of the
same crime of homicide, in Criminal Case No. 431 of the same Court. After trial, he was Minally acquitted of the
charge on January 31, 1948. In both criminal cases De la Cruz employed a lawyer to defend him. He demanded
from his former employer reimbursement of his expenses but was refused, after which he Miled the present action
against the movie corporation and the three members of its board of directors, to recover not only the amounts
he had paid his lawyers but also moral damages said to have been suffered, due to his worry, his neglect of his
interests and his family as well in the supervision of the cultivation of his land, a total of P15,000. On the basis of
the complaint and the answer Miled by defendants wherein they asked for the dismissal of the complaint, as well
as the agreed statement of facts, the Court of First Instance of Ilocos Norte after rejecting the theory of the
plaintiff that he was an agent of the defendants and that as such agent he was entitled to reimbursement of the
expenses incurred by him in connection with the agency (Arts. 1709-‐1729 of the old Civil Code), found that
plaintiff had no cause of action and dismissed the complaint without costs. De la Cruz appealed directly to this
Tribunal for the reason that only questions of law are involved in the appeal.
We agree with the trial court that the relationship between the movie corporation and the plaintiff was not that
of principal and agent because the principle of representation was in no way involved. Plaintiff was not employed
to represent the defendant corporation in its dealings with third parties. He was a mere employee hired to
perform a certain speciMic duty or task, that of acting as special guard and staying at the main entrance of the
movie house to stop gate crashers and to maintain peace and order within the premises. The question posed by
this appeal is whether an employee or servant who in line of duty and while in the performance of the task
assigned to him, performs an act which eventually results in his incurring in expenses, caused not directly by his
master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party
or stranger not in the employ of his employer, may recover said damages against his employer.
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The learned trial court in the last paragraph of its decision dismissing the complaint said that "after studying
many laws or provisions of law to Mind out what law is applicable to the facts submitted and admitted by the
parties, has found none and it has no other alternative than to dismiss the complaint." The trial court is right. We
confess that we are not aware of any law or judicial authority that is directly applicable to the present case, and
realizing the importance and far-‐reaching effect of a ruling on the subject-‐matter we have searched, though
vainly, for judicial authorities and enlightenment. All the laws and principles of law we have found, as regards
master and servants, or employer and employee, refer to cases of physical injuries, light or serious, resulting in
loss of a member of the body or of any one of the senses, or permanent physical disability or even death, suffered
in line of duty and in the course of the performance of the duties assigned to the servant or employee, and these
cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case
involving damages caused to an employee by a stranger or outsider while said employee was in the performance
of his duties, presents a novel question which under present legislation we are neither able nor prepared to
decide in favor of the employee.
In a case like the present or a similar case of say a driver employed by a transportation company, who while in
the course of employment runs over and inMlicts physical injuries on or causes the death of a pedestrian; and such
driver is later charged criminally in court, one can imagine that it would be to the interest of the employer to give
legal help to and defend its employee in order to show that the latter was not guilty of any crime either
deliberately or through negligence, because should the employee be Minally held criminally liable and he is found
to be insolvent, the employer would be subsidiarily liable. That is why, we repeat, it is to the interest of the
employer to render legal assistance to its employee. But we are not prepared to say and to hold that the giving of
said legal assistance to its employees is a legal obligation. While it might yet and possibly be regarded as a normal
obligation, it does not at present count with the sanction of man-‐made laws.
If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer,
naturally said employee may not recover the amount he may have paid a lawyer hired by him.
Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the expenses
incurred by him in remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but
rather by the Miling of the charge of homicide which made it necessary for him to defend himself with the aid of
counsel. Had no criminal charge been Miled against him, there would have been no expenses incurred or damage
suffered. So the damage suffered by plaintiff was caused rather by the improper Miling of the criminal charge,
possibly at the instance of the heirs of the deceased gate crasher and by the State through the Fiscal. We say
improper Miling, judging by the results of the court proceedings, namely, acquittal. In other words, the plaintiff
was innocent and blameless. If despite his innocence and despite the absence of any criminal responsibility on
his part he was accused of homicide, then the responsibility for the improper accusation may be laid at the door
of the heirs of the deceased and the State, and so theoretically, they are the parties that may be held responsible
civilly for damages and if this is so, we fail to see now this responsibility can be transferred to the employer who
in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the
whole affairs was that he employed plaintiff to perform a special duty or task, which task or duty was performed
lawfully and without negligence.
Still another point of view is that the damages incurred here consisting of the payment of the lawyer's fee did not
Mlow directly from the performance of his duties but only indirectly because there was an efMicient, intervening
cause, namely, the Miling of the criminal charges. In other words, the shooting to death of the deceased by the
plaintiff was not the proximate cause of the damages suffered but may be regarded as only a remote cause,
because from the shooting to the damages suffered there was not that natural and continuous sequence required
to Mix civil responsibility.
In view of the foregoing, the judgment of the lower court is afMirmed. No costs.
The essence of agency is that the agent renders service to the principal.
G.R. No. L-‐41182-‐3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-‐appellants,

vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA,
respondents-‐appellees.
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SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts
are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19,
1960 by and between Mrs. Segundina Noguera, party of the Mirst part; the Tourist World Service, Inc., represented
by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World
Service, Inc. leased the premises belonging to the party of the Mirst part at Mabini St., Manila for the former-‐s use
as a branch ofMice. In the said contract the party of the third part held herself solidarily liable with the party of the
part for the prompt payment of the monthly rental agreed on. When the branch ofMice was opened, the same was
run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought
in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World
Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival Mirm, the Philippine Travel Bureau, and, since the branch ofMice was
anyhow losing, the Tourist World Service considered closing down its ofMice. This was Mirmed up by two
resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the
Mirst abolishing the ofMice of the manager and vice-‐president of the Tourist World Service, Inc., Ermita Branch, and
the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located
at the said branch ofMice. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the
Branch OfMice premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no
longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the
mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch ofMice, and,
Minding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962
to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a complaint wall Miled by the herein appellants against the appellees
with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims.
For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without
prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the
court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her
counterclaim.
On June 17,1963, appellant Lina Sevilla reMiled her case against the herein appellees and after the issues were
joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were
jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which
was elevated the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-‐APPELLANT MRS.
LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT
(WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-‐EMPLOYEE RELATION
AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-‐APPELLANT MRS. LINA O. SEVILLA IS
ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-‐APPELLEE TOURIST WORLD
SERVICE, INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT
MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
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V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY
FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED
MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch ofMice on
Ermita;
2. Whether or not the padlocking of the ofMice by the Tourist World Service was actionable or not; and
3. Whether or not the lessee to the ofMice premises belonging to the appellee Noguera was appellees TWS
or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her
and appellee TWS with ofMices at the Ermita branch ofMice and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent Migure and wife of an eminent eye, ear and nose specialist as
well as a imediately columnist had been in the travel business prior to the establishment of the joint business
venture with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the
godmother of one of his children, with her own clientele, coming mostly from her own social circle (pp. 3-‐6 tsn.
February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the
premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee
Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera
(pp. 14-‐15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its
own, separate ofMice located at the Trade & Commerce Building; nor was she an employee thereof, having no
participation in nor connection with said business at the Trade & Commerce Building (pp. 16-‐18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business
(and not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She
shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof
aid retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. ofMice, paying for
the salary of an ofMice secretary, Miss Obieta, and other sundry expenses, aside from desicion the ofMice furniture
and supplying some of Mice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc.
shouldering the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs.
Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch
manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity
(p. 36 tsn. June 18, 1965-‐ testimony of appellee Eliseo Canilao pp. 38-‐39 tsn April 61965-‐testimony of corporate
secretary Gabino Canilao (pp-‐ 2-‐5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World
Service, Inc. and as such was designated manager. 1
xxx xxx xxx
The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World
Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises.
3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as
such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an afMirmance.
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The petitioners now claim that the respondent Court, in sustaining the lower court, erred. SpeciMically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING
THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE
AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF
HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY
BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST
WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP
AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD
SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B"
P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL
CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING-‐IN FACT NOT PASSING AND RESOLVING-‐APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE
WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD
NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and
Tourist World Service, Inc. The respondent Court of see Mit to rule on the question, the crucial issue, in its opinion
being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge
and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not
the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc.
unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch ofMice
of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" ofMice and that inferentially, she
had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend,
however, that relation between the between parties was one of joint venture, but concede that "whatever might
have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist
World Service and Canilao from taking the law into their own hands, 8 in reference to the padlocking now
questioned.
The Court Minds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc.,
maintains, that the relation between the parties was in the character of employer and employee, the courts would
have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of
Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-‐employee relation.
In general, we have relied on the so-‐called right of control test, "where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to be used in reaching
such end." 10 Subsequently, however, we have considered, in addition to the standard of right-‐of control, the
existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-‐employee relationship. 11
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54
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent
Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection
therewith. In the Mirst place, under the contract of lease covering the Tourist Worlds Ermita ofMice, she had bound
herself in solidum as and for rental payments, an arrangement that would be like claims of a master-‐servant
relationship. True the respondent Court would later minimize her participation in the lease as one of mere
guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee cannot be
made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability
thereof. In that event, the parties must be bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch ofMice was opened, the same was run
by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in
on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the
control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on
her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who
earns a Mixed salary usually, she earned compensation in Mluctuating amounts depending on her booking
successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee.
As we said, employment is determined by the right-‐of-‐control test and certain economic parameters. But titles
are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina
Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961,
she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch ofMice 14 in
effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint
venture, including a partnership, presupposes generally a of standing between the joint co-‐venturers or partners,
in which each party has an equal proprietary interest in the capital or property contributed 15 and where each
party exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold themselves
out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17in
lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita ofMice, she must have done so pursuant to a contract of agency. It
is the essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the
case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service,
Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla
herself based on her letter of November 28, 1961, pre-‐assumed her principal's authority as owner of the business
undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts,
that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the
intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency
having been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona
Mide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she
had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of
rentals. She continued the business, using her own name, after Tourist World had stopped further operations.
Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that
extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said,
cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, conMining itself to the telephone disconnection and
padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no
evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch ofMice. 20
Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them
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reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly
condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact
that Tourist World Service, Inc. was the lessee named in the lease con-‐tract did not accord it any authority to
terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this
Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily,
in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been
explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She
could not be ousted from possession as summarily as one would eject an interloper.
The Court is satisMied that from the chronicle of events, there was indeed some malevolent design to put the
petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival Mirm. To be sure, the
respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that
Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for
another company. What the evidence discloses, on the other hand, is that following such an information (that
Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing
the ofMice of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the
takeover of its branch ofMice properties. On January 3, 1962, the private respondents ended the lease over the
branch ofMice premises, incidentally, without notice to her.
It was only on June 4, 1962, and after ofMice hours signiMicantly, that the Ermita ofMice was padlocked, personally
by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World
Service. " 22 It is strange indeed that Tourist World Service, Inc. did not Mind such a need when it cancelled the
lease Mive months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to
inform her of the closure, but surely, it was aware that after ofMice hours, she could not have been anywhere near
the premises. Capping these series of "offensives," it cut the ofMice's telephone lines, paralyzing completely its
business operations, and in the process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived
to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist
World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded
for "breaches of contract where the defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla
from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority
of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof —
ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages
in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that
she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot
therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25
and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the
circumstances.
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WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by
the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the
sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.
SO ORDERED.
G.R. No. L-‐5486 August 17, 1910
JOSE DE LA PEA Y DE RAMON, plaintiff-‐appellant,

vs.
FEDERICO HIDALGO, defendant-‐appellant.
O'Brien and DeWitt, for plaintiff and appellant.

E. Gutierrez Repilde, for defendant and appellant.
TORRES, J.:
On May 23, 1906, Jose dela Peña y de Ramon, and Vicenta de Ramon, in her own behalf and as the legal guardian
of her son Roberto de la Peña, Miled in the Court of First Instance of Manila a written complaint against of
Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, and, after the said complaint, already amended, had
been answered by the defendants Antonio and Francisco Hidalgo, and the other defendant, Federico Hidalgo, had
moved for the dismissal of this complaint, the plaintiff, Jose de la Peña y de Ramon, as the judicial administrator
of the estate of the deceased Jose de la Peña y Gomiz, with the consent of the court Miled a second amended
complaint prosecuting his action solely against Federico Hidalgo, who answered the same in writing on the 21st
of may and at the same time Miled a counterclaim, which was also answered by the defendant.
On October 22, 1907, the case was brought up for hearing and oral testimony was adduced by both parties, the
exhibits introduced being attached to the record. In view of such testimony and of documentary evidence, the
court, on March 24, 1908, rendered judgment in favor of the plaintiff-‐administrator for the sum of P13,606.19
and legal interest from the date of the Miling of the complaint on May 24, 1906, and the costs of the trial.
Both the plaintiff and the defendant Miled notice of appeal from this judgment and also asked for the annulment of
the same and for a new trial, on the ground that the evidence did not justify the said judgment and that the latter
was contrary to law. The defendant, on April 1, 1908, presented a written motion for new hearing, alleging the
discovery of new evidence favorable to him and which would necessarily inMluence the decision such evidence or
to introduce it at the trial of the case, notwithstanding the fact that he had used all due diligence. His petition was
accompanied by afMidavits from Attorney Eduardo Gutierrez Repilde and Federico Hidalgo, and was granted by
order of the court of the 4th of April.
At this stage of the proceedings and on August 10, 1908, the plaintiff Peña y De Ramon Miled a third amended
complaint, with the permission of the court, alleging, among other things, as a Mirst cause of action, that during
the period of time from November 12, 1887, to January 7, 1904, when Federico Hidalgo had possession of and
administered the following properties, to wit; one house and lot at No. 48 Calle San Luis; another house and lot at
No. 6 Calle Cortada; another house and lot at 56 Calle San Luis, and a fenced lot on the same street, all of the
district of Ermita, and another house and lot at No. 81 Calle Looban de Paco, belonging to his principal, Jose de la
Peña y Gomiz, according to the power of attorney executed in his favor and exhibited with the complaint under
letter A, the defendant, as such agent, collected the rents and income from the said properties, amounting to
P50,244, which sum, collected in partial amounts and on different dates, he should have deposited, in accordance
with the verbal agreement between the deceased and himself, the defendant, in the general treasury of the
Spanish Government at an interest of 5 per cent per annum, which interest on accrual was likewise to be
deposited in order that it also might bear interest; that the defendant did not remit or pay to Jose de la Peña y
Gomiz, during the latter's lifetime, nor to nay representative of the said De la Peña y Gomiz, the sum aforestated
nor any part thereof, with the sole exception of P1,289.03, nor has he deposited the unpaid balance of the said
sum in the treasury, according to agreement, wherefore he has become liable to his principal and to the
defendant-‐administrator for the said sum, together with its interest, which amounts to P72,548.24 and that,
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whereas the defendant has not paid over all nor any part of the last mentioned sum, he is liable for the same, as
well as for the interest thereon at 6 per cent per annum from the time of the Miling of the complaint, and for the
costs of the suit.
In the said amended complaint, the plaintiff alleged as a second cause of action: That on December 9, 1887,
Gonzalo Tuason deposited in the general treasury of the Spanish Government, to the credit of Peña y Gomiz, the
sum of 6,360 pesos, at 5 per cent interest per annum, and on December 20, 1888, the defendant, as the agent of
Peña y Gomiz, withdrew the said amount with its interest, that is, 6,751.60 pesos, and disposed of the same for
his own use and beneMit, without having paid all or any part of the said sum to Peña y Gomiz, or to the plaintiff
after the latter's death, notwithstanding the demands made upon him: wherefore the defendant now owes the
said sum of 6,751.60 pesos, with interest at the rate of 5 per cent per annum, compounded annually, from the
20th of December, 1888, to the time of the Miling of this complaint, and from the latter date at 6 per cent, in
accordance with law.
The complaint recites as a third cause of action: that, on or about November 25, 1887, defendant's principal, Peña
y Gomiz, on his voyage to Spain, remitted from Singapore, one of the ports to call, to Father Ramon Caviedas, a
Franciscan friar residing in this city, the sum of 6,000 pesos with the request to deliver the same, which he did, to
defendant, who, on receiving this money, appropriated it to himself and converted it to his own use and beneMit,
since he only remitted to Peña y Gomiz in Sapin, by draft, 737.24 pesos, on December 20, 1888; and, later, on
December 21, 1889, he likewise remitted by another draft 860 pesos, without having returned or paid the
balance of the said sum, notwithstanding the demands made upon him so to do: wherefore the defendant owes to
the plaintiff, for the third cause of action, the sum of P4,402.76, with interest at the rate of 5 per cent per annum,
compounded yearly, to the time of the Miling of the complaint and with interest at 6 per cent from that date, as
provided by law.
As a fourth cause of action the plaintiff alleges that, on or about January 23, 1904, on his arrival from Spain and
without having any knowledge or information of the true condition of affairs relative to the property of the
deceased Peña y Gomiz and its administration, he delivered and paid to the defendant at his request the sum of
P2,000, derived from the property of the deceased, which sum the defendant has not returned notwithstanding
the demands made upon him so to do.
Wherefore the plaintiff petitions the court to render judgment sentencing the defendant to pay, as Mirst cause of
action, the sum of P72,548.24, with interest thereon at the rate of 6 per cent per annum from May 24, 1906, the
date of the Miling of the complaint, and the costs; as a second cause of action, the sum of P15,774.19, with interest
at the rate of 6 per cent per annum from the said date of the Miling of the complaint, and costs; as a third cause of
action, P9,811.13, with interest from the aforesaid date, and costs; and, Minally, as a fourth cause of action, he
prays that the defendant be sentenced to refund the sum of P2,000, with interest thereon at the rate of 6 per cent
per annum from the 23d of January, 1904, and to pay the costs of trial.
The defendant, Federico Hidalgo, in his answer to the third amended complaint, sets forth: That he admits the
second, third, and fourth allegations contained in the Mirst, second, third, and fourth causes of action, and denies
generally and speciMically each one and all of the allegations contained in the complaint, with the exception of
those expressly admitted in his answer; that, as a special defense against the Mirst cause of action, he, the
defendant, alleges that on November 18, 1887, by virtue of the powers conferred upon him by Peña y Gomiz, he
took charge of the administration of the latter's property and administered the same until December 31, 1893,
when for reasons of health he ceased to discharge the duties of said position; that during the years 1889, 1890,
1891, and 1892, the defendant continually by letter requested Peña y Gomiz, his principal, to appoint a person to
substitute him in the administration of the latter's property, inasmuch as the defendant, for reasons of health,
was unable to continue in his trust; that, on March 22, 1894, the defendant Federico Hidalgo, because of serious
illness, was absolutely obliged to leave these Islands and embarked on the steamer Isla de Luzon for Sapin, on
which date the defendant notiMied his principal that, for the reason aforestated, he had renounced his powers and
turned over the administration of his property to Antonio Hidalgo, to whom he should transmit a power of
attorney for the fulMillment, in due form, of the trust that the defendant had been discharging since January 1,
1894, or else execute a power of attorney in favor of such other person as he might deem proper;
That prior to the said date of March 22, the defendant came, rendered accounts to his principal, and on the date
when he embarked for Spain rendered the accounts pertaining to the years 1892 and 1893, which were those
that yet remained to be forwarded, and transmitted to him a general statement of accounts embracing the period
from November 18, 1887, to December 31, 1893, with a balance of 6,774.50 pesos in favor of Peña y Gomiz,
which remained in the control of the acting administrator, Antonio Hidalgo; that from the 22nd of March, 1894,
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when the defendant left these Islands, to the date of his answer to the said complaint, he has not again intervened
nor taken any part directly or indirectly in the administration of the property of Peña y Gomiz, the latter's
administrator by express authorization having been Antonio Hidalgo, from January 1, 1894, to October, 1902,
who, on this latter date, delegated his powers to Francisco Hidalgo, who in turn administered the said property
until January 7, 1904; that the defendant, notwithstanding his having rendered, in 1894, all his accounts to Jose
Peña y Gomiz, again rendered to the plaintiff in 1904 those pertaining to the period from 1887 to December 31,
1893, which accounts the plaintiff approved without any protest whatever and received to his entire satisfaction
the balance due and the vouchers and documents and documents relating to the property of the deceased Peña y
Gomiz and issued to the defendant the proper acquaintance therefor.
As a special defense to the second cause of action, the defendant alleged that, on December 9, 1886, Jose de la
Peña y Gomiz himself deposited in the caja general de depositos (General Deposit Bank) the sum of 6,000 pesos,
at 6 per cent interest for the term of one year, in two deposit receipts of 3,000 pesos each, which two deposit
receipts, with the interest accrued thereon, amounted to 6,360 pesos, ad were collected by Gonzalo Tuason,
through indorsement by Peña y Gomiz, on December 9, 1887, and on this same date Tuason, in the name of Peña
y Gomiz, again deposited the said sum of 6,360 pesos in the General Deposit Bank, at the same rate of interest, for
the term of one year and in two deposit receipts of 3,180 pesos each, registered under Nos. 1336 and 1337; that,
on December 20, 1888, father Ramon Caviedas, a Franciscan friar, delivered to the defendant, Federico Hidalgo,
by order of De la Peña y Gomiz, the said two deposit receipts with the request to collect the interest due thereon
viz., 741.60 pesos an to remit it by draft on London, drawn in favor of De la Peña y Gomiz, to deposit again the
6,000 pesos in the said General Deposit Bank, for one year, in a single deposit, and in the latter's name, and to
deliver to him, the said Father Caviedas, the corresponding deposit receipt and the draft on London for their
transmittal to Peña y Gomiz: all of which was performed by the defendant who acquired the said draft in favor of
De la Peña y Gomiz from the Chartered Bank of India, Australia and China, on December 20, 1888, and delivered
the draft, together with the receipt from the General Deposit Bank, to Father Caviedas, and on the same date, by
letter, notiMied Peña y Gomiz of the transactions executed; that on December 20, 1889, the said Father Hidalgo, by
order of Peña y Gomiz, the aforesaid deposit receipt from the General Deposit Bank, with the request to remit, in
favor of his constituent, the interest thereon, amounting to 360 pesos, besides 500 pesos of the capital, that is
860 pesos in all, and to again deposit the rest, 5,500 pesos, in the General Deposit Bank for another year in Peña y
Gomiz's own name, and to deliver to Father Caviedas the deposit receipt and the draft on London, for their
transmittal to his constituent; all of which the defendant did; he again deposited the rest of the capital, 5,500
pesos, in the General Deposit Bank, in the name of Peña y Gomiz, for one year at 5 per cent interest, under
registry number 3,320, and obtained from the house of J. M. Tuason and Co. a draft on London for 860 pesos in
favor of Peña y Gomiz, on December 21, 1889, and thereupon delivered the said receipt and draft to Father
Caviedas, of which acts, when performed, the defendant advised Peña y Gomiz by letter of December 24, 1889'
and that, on December 20, 1890, the said Father Ramon Caviedas delivered to the defendant, by order of Peña y
Gomiz, the said deposit receipt for 5,500 pesos with the request that he withdraw from the General Deposit Bank
the capital and accrued interest, which amounted all together to 5,775 pesos, and that he deliver this amount to
Father Caviedas, which he did, in order that it might be remitted to Peña y Gomiz.
The defendant denied each of the allegations contained in the third cause of action, and avers that they are all
false and calumnious.
He likewise makes a general and speciMic denial of all the allegations of the fourth cause of action.
As a counterclaim the defendant alleges that Jose Peña y Gomiz owed and had not paid the defendant, up to the
date of his death, the sum of 4,000 pesos with interest at 6 per cent per annum, and 3,600 pesos, and on the
plaintiff's being presented with the receipt subscribed by his father, Peña y Gomiz, on the said date of January
15th, and evidencing his debt, plaintiff freely and voluntarily offered to exchange for the said receipt another
document executed by him, and transcribed in the complaint. Defendant further alleges that, up to the date of his
counterclaim, the plaintiff has not paid him the said sum, with the exception of 2,000 pesos. Wherefore the
defendant prays the court to render judgment absolving him from the complaint with the costs against the
plaintiff, and to adjudge that the latter shall pay to the defendant the sum 9,000 pesos, which he still owes
defendant, with legal interest thereon from the date of the counterclaim, to wit, May 21, 1907, and to grant such
other and further relief as may be just and equitable.
On the 25th of September, 1908, and subsequent dates, the new trial was held; oral testimony was adduced by
both parties, and the documentary evidence was attached to the record of the proceedings, which show that the
defendant objected and took exception to the introduction of certain oral and documentary evidence produced
by the plaintiff. On February 26, 1909, the court in deciding the case found that the defendant, Federico Hidalgo,
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as administrator of the estate of the deceased Peña y Gomiz, actually owed by the plaintiff, on the date of the
Miling of the complaint, the sum of P37,084.93; that the plaintiff was not entitled to recover any sum whatever
from the defendant for the alleged second, third, and fourth causes of action; that the plaintiff actually owed the
defendant, on the Miling of the complaint, the sum of P10,155, which the defendant was entitled to deduct from
the sum owing by him to the plaintiff. Judgment was therefore entered against the defendant, Federico Hidalgo,
for the payment of P26,629.93, with interest thereon at the rate of 6 per cent per annum from May 23, 1906, and
the costs of the trial.
Both parties Miled written exceptions to this judgment and asked, separately, for its annulment and that a new
trial be ordered, on the grounds that the Mindings of fact contained in the judgment were not supported nor
justiMied by the evidence produced, and because the said judgment was contrary to law, the defendant stating in
writing that his exception and motion for a new trial referred exclusively to that part of the judgment that was
condemnatory to him. By order of the 10th of April, 1909, the motions made by both parties were denied, to
which they excepted and announced their intention to Mile their respective bills of exceptions.
By written motions of the 24th of March, 1909, the plaintiff prayed for the execution of the said judgment, and
the defendant being informed thereof solicited a suspension of the issuance of the corresponding writ of
execution until his motion for a new trial should be decided or his bill of exceptions for the appeal be approved,
binding himself to give such bond as the court might Mix. The court, therefore, by order of the 25th of the same
month, granted the suspension asked for, conditioned upon the defendants giving a bond, Mixed at P34,000 by
another order of the same date, to guarantee compliance with the judgment rendered should it be afMirmed, or
with any other decision that might be rendered in the case by the Supreme Court. This bond was furnished by the
defendant on the 26th of the same month.
On April 16 and May 4, 1909, the defendant and the plaintiff Miled their respective bills of exceptions, which were
certiMied to and approved by order of May 8th and forwarded to the clerk of this court.
Before proceeding to examine the disputed facts to make such legal Mindings as follows from a consideration of
the same and of the questions of law to which such facts give rise, and for the purpose of avoiding confusion and
obtaining the greatest clearness and an easy comprehension of this decision, it is indispensable to premise: First,
that as before related, the original and Mirst complaint Miled by the plaintiff was drawn against Federico Hidalgo,
Antonio Hidalgo, and Francisco Hidalgo, the three persons who had successively administered the property of
Jose de la Peña y Gomiz, now deceased; but afterwards the action was directed solely against Federico Hidalgo, to
the exclusion of the other defendants, Antonio and Francisco Hidalgo, in the second and third amended
complaints, the latter of the date of August 10, 1908, after the issuance by the court of the order of April 4th of
the same year, granting the new trial solicited by the defendant on his being notiMied of the ruling of the 24th of
the previous month of March; second, that the administration of the property mentioned, from the time its owner
left these Islands and returned to Spain, lasted from November 18, 1887, to January 7, 1904; and third that, the
administration of the said Federico, Antonio, and Francisco Hidalgo, having lasted so long, it is necessary to
divide it into three periods in order to Mix the time during which they respectively administered De la Peña's
property: During the Mirst period, from November 18, 1887, to December 31, 1893, the property of the absent
Jose de la Peña y Gomiz was administered by his agent, Federico Hidalgo, under power of attorney; during the
second period, from January 1, 1894, to September, 1902, Antonio Hidalgo administered the said property, and
during the third period, from October, 1902, to January 7, 1904, Francisco Hidalgo was its administrator.
Before Jose de la Peña y Gomiz embarked for Spain, on November 12, 1887, he executed before a notary a power
of attorney in favor of Federico Hidalgo, Antonio L. Rocha, Francisco Roxas and Isidro Llado, so that, as his agents,
they might represent him and administer, in the order in which they were appointed, various properties he
owned and possessed in Manila. The Mirst agent, Federico Hidalgo, took charge of the administration of the said
property on the 18th of November, 1887.
After Federico Hidalgo had occupied the position of agent and administrator of De la Peña's property for several
years, the former wrote to the latter requesting him to designate a person who might substitute him in his said
position in the event of his being obliged to absent himself from these Islands, as one of those appointed in the
said power of attorney had died and the others did not wish to take charge of the administration of their
principal's property. The defendant, Hidalgo, stated that his constituent, Peña y Gomiz, did not even answer his
letters, to approve or object to the former's accounts, and did not appoint or designate another person who might
substitute the defendant in his administration of his constituent's property. These statements were neither
denied nor proven to be the record show any evidence tending to disapprove them, while it does show, attached
to the record and exhibited by the defendant himself, several letters written by Hidalgo and addressed to Peña y
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Gomiz, which prove the said statements, and also a letter from the priest Pedro Gomiz, a relative of the deceased
Jose de la Peña y Gomiz, addressed to Federico Hidalgo, telling the latter that the writer had seen among the
papers of the deceased several letters from the agent, Federico Hidalgo, in which the latter requested the
designation of a substitute, because he had to leave this country for Spain, and also asked for the approval or
disapproval of the accounts of his administration which had been transmitted to his constituent, Peña y Gomiz.
For reasons of health and by order of his physician, Federico Hidalgo was obliged, on March 22, 1894, to embark
for Spain, and, on preparing for his departure, he rendered the accounts of his administration corresponding to
the last quarters, up to December 31, 1893, not as yet transmitted, and forwarded them to his constituent with a
general statement of all the partial balances, which amounted to the sum total of 6,774.50 pesos, by letter of the
date of March 22, 1894, addressed to his principal, Peña y Gomiz. In this letter the defendant informed the latter
of the writer's intended departure from this country and of his having provisionally turned over the
administration of the said property to his cousin, Antonio Hidalgo, upon whom the writer had conferred a
general power of attorney, but asking, in case that this was not sufMicient, that Peña send to Antonio Hidalgo a
new power of attorney.
This notiMications is of the greatest importance in the decision of this case. The plaintiff avers that he found no
such letter among his father's papers after the latter's death, for which reason he did not have it in his
possession, but on the introduction of a copy thereof by the defendant at the trial, it was admitted without
objection by the plaintiff (p. 81 of the record); wherefore, in spite of the denial of the plaintiff and of his averment
of his not having found that said original among his father's papers, justice demands that it be concluded that this
letter of the 22d of March, 1894, was sent to, and was received by Jose de la Peña y Gomiz, during his lifetime, for
its transmittal, with inclosure of the last partial accounts of Federico Hidalgo's administration and of the general
resume of balances, being afMirmed by the defendant, the fact of the plaintiff's having found among his deceased
father's paper's the said resume which he exhibited at the trial, shows conclusively that it was received by the
deceased, as well as the letter of transmittal of the 22nd of March, 1894, one of the several letters written by
Hidalgo, which the said priest, Father Gomiz, afMirms that he saw among the papers of the deceased Peña, the
dates of which ran from 1890 to 1894; and it is also shown by the record that the defendant Hidalgo positively
asserted that the said letter of March was the only one that he wrote to Peña during the year 1894; From all of
which it is deduced that the constituent, Peña y Gomiz, was informed of the departure of his agent from these
Islands for reasons of health and because of the physician's advice, of the latter's having turned over the
administration of the property to Antonio Hidalgo, and of his agent's the defendant's petition that he send a new
power of attorney to the substitute.
The existence, amount the papers of the deceased, of the aforementioned statement of all accounts rendered,
which comprise the whole period of the administration of the property of the constituent by the defendant,
Federico Hidalgo, from November 18, 1887, to December 31, 1893 — a statement transmitted with the last
partial accounts which were a continuation of those already previously received — and the said letter of March
22, 1894, fully prove that Jose de la Peña y Gomiz also received the said letter, informed himself of its contents,
and had full knowledge that Antonio Hidalgo commenced to administer his property from January of that year.
They likewise prove that he did no see Mit to execute a new power of attorney in the letter's favor, nor to appoint
or designate a new agent to take charge of the administration of his property that had been abandoned by the
defendant, Federico Hidalgo.
From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that he had deMinitely
renounced his agency was duly terminated, according to the provisions of article 1732 of the Civil Code, because,
although in the said letter of March 22, 1894, the word "renounce" was not employed in connection with the
agency or power of attorney executed in his favor, yet when the agent informs his principal that for reasons of
health and by medical advice he is about to depart from the place where he is exercising his trust and where the
property subject to his administration is situated, abandons the property, turns it over a third party, without
stating when he may return to take charge of the administration, renders accounts of its revenues up to a certain
date, December 31, 1893, and transmits to his principal a general statement which summarizes and embraces all
the balances of his accounts since he began to exercise his agency to the date when he ceased to hold his trust,
and asks that a power of attorney in due form in due form be executed and transmitted to another person who
substituted him and took charge of the administration of the principal's property, it is then reasonable and just to
conclude that the said agent expressly and deMinitely renounced his agency, and it may not be alleged that the
designation of Antonio Hidalgo to take charge of the said administration was that of a mere proceed lasted for
more than Mifteen years, for such an allegation would be in conMlict with the nature of the agency.
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This renouncement was conMirmed by the subsequent procedure, as well as of the agent as of the principal, until
the latter died, on August 2, 1902, since the principal Peña did not disapprove the designation of Antonio Hidalgo,
nor did he appoint another, nor send a new power of attorney to the same, as he was requested to by the
previous administrator who abandoned his charge; and the trial record certainly contains no proof that the
defendant, since he left these Islands in March, 1894, until January, 1904, when he returned to this city, took any
part whatever, directly or even indirectly, in the said administration of the principal's property, while Antonio
Hidalgo was the only person who was in charge of the aforementioned administration of De la Peña y Gomiz's
property and the one who was to represent the latter in his business affairs, with his tacit consent. From all of
which it is perfectly concluded (unless here be proof to the contrary, and none appears in the record), that
Antonio Hidalgo acted in the matter of the administration of the property of Jose de la Peña y Gomiz by virtue of
an implied agency derived from the latter, in accordance with the provisions of article 1710 of the Civil Code.
The proof of the tacit consent of the principal, Jose de la Peña y Gomiz, the owner of the property administered —
a consent embracing the essential element of a legitimate agency, article 1710 before cited — consists in that
Peña, knowing that on account of the departure of Federico Hidalgo from the Philippines for reasons of health,
Antonio Hidalgo took charge of the administration of his property, for which Federico Hidalgo, his agent, who was
giving up his trust, requested him to send a new power of attorney in favor of the said Antonio Hidalgo,
nevertheless he, Jose de la Peña y Gomiz, saw Mit not to execute nor transmit any power of attorney whatever to
the new administrator of his property and remained silent for nearly nine years; and, in that the said principal,
being able to prohibit the party designated, Antonio Hidalgo, from continuing in the exercise of his position as
administrator, and being able to appoint another agent, did neither the one nor the other. Wherefore, in
permitting Antonio Hidalgo to administer his property in this city during such a number of years, it is inferred,
from the procedure and silence of the owner thereof, that he consented to have Antonio Hidalgo administer his
property, and in fact created in his favor an implied agency, as the true and legitimate administrator.
Antonio Hidalgo administered the aforementioned property of De la Peña y Gomiz, not in the character of
business manager, but as agent by virtue of an implied agency vested in him by its owner who was not unaware
of the fact, who knew perfectly well that the said Antonio Hidalgo took charge of the administration of that
property on account of the obligatory absence of his previous agent for whom it was an impossibility to continue
in the discharge of his duties.
It is improper to compare the case where the owner of the property is ignorant of the ofMicious management of
the third party, with the case where he had perfect knowledge of the management and administration of the
same, which administration and management, far from being opposed by him was indeed consented to by him
for nearly nine years, as was done by Peña y Gomiz. The administration and management, by virtue of an implied
agency, is essentially distinguished from that management of another's business, in this respect, that while the
former originated from a contract, the latter is derived only from a qausi-‐contract.
The implied agency is founded on the lack of contradiction or opposition, which constitutes simultaneous
agreement on the part of the presumed principal to the execution of the contract, while in the management of
another's business there is no simultaneous consent, either express or implied, but a Miction or presumption of
consent because of the beneMit received.
The distinction between an agency and a business management has been established by the jurisprudence of the
supreme court (of Spain) in its noteworthy decision of the 7th of July, 1881, setting up the following doctrine:
That laws 28 and 32, title 12 Partida 3, refer to the expenses incurred in things not one's own and without power
of attorney from those to whom they belong, and therefore the said laws are not applicable to this suit where the
petition of the plaintiff is founded on the verbal request made to him by the defendant or the latter's employees
to do some hauling, and where, consequently, questions that arise from a contract that produces reciprocal rights
and duties can not be governed by the said laws.
It being absolutely necessary for Federico Hidalgo to leave this city and abandon the administration of the
property of his principal, Peña y Gomiz, for reasons of health, he made delivery of the property and of his
administration to Antonio Hidalgo and gave notice of what he had done to his constituent, Peña, in order that the
latter might send a new power of attorney to Antonio Hidalgo, the person charged with the administration of the
property. Peña y Gomiz did not send the power of attorney requested, did not oppose or prohibit Antonio
Hidalgo's containing to administer his property, and consented to his doing so for nearly nine years.
Consequently the second administrator must be considered as a legitimate agent of the said principal, as a result
of the tacit agreement on the latter's part, and the previous agent, who necessarily abandoned and ceased to hold
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his position, as completely free and clear from the consequences and results of the second administration,
continued by a third party and accepted by his principal; for it is a fact, undenied nor even doubted, that the said
Mirst administrator had to abandon this country and the administration of Peña's property for reasons of health,
which made it possible for him to continue in the discharge of his duties without serious detriment to himself, his
conduct being in accordance with the provisions of article 1736 of the Civil Code.
In the power of attorney executed by Peña y Gomiz in this city on November 12, 1887, in favor of, among others,
Federico Hidalgo, no authority was conferred upon the latter by his principal to substitute the power or agency in
favor of another person; wherefore the agent could not, by virtue of the said power of attorney, appoint any
person to substitute or relieve him in the administration of the principal's property, for the lack of a clause of
substitution in the said instrument authorizing him so to do.
The designation of Antonio Hidalgo was not made as a result of substitution of the power of attorney executed by
Peña in favor of the defendant, but in order that the principal's property should not be abandoned, inasmuch as,
for the purposes of the discharge of the duties of administrator of the same, the agent, who was about to absent
himself from this city, requested his principal to send to the party, provisionally designated by the former, a new
power of attorney, for the reason that the general power of attorney which Federico Hidalgo had left, executed in
favor of his cousin Antonio Hidalgo, was so executed in his own name and for his own affairs, and not in the name
of Peña y Gomiz, as the latter had not authorized him to take such action.
If the owner of the property provisionally administered at the time by Antonio Hidalgo, saw Mit to keep silent,
even after having received the aforesaid letter of March 22, 1894, and during the lapse of nearly ten years,
without counter commanding or disapproving the designation of the person who took charge of the
administration of his property, knowing perfectly well that his previous agent was obliged, by sickness and
medical advice to leave this city where such property was situated, he is not entitled afterwards to hold amenable
the agent who had to abandon this country for good and valid reasons, inasmuch as the latter immediately
reported to his principal the action taken by himself and informed him of the person who had taken charge of the
administration of his property, which otherwise would have been left abandoned. From the time of that
notiMication the agent who, for legitimate cause, ceased to exercise his trust, was free and clear from the results
and consequences of the management of the person who substituted him with the consent, even only a tacit one,
of the principal, inasmuch as the said owner of the property could have objected to could have prohibited the
continuance in the administration thereof, of the party designated by his agent, and could have opportunely
appointed another agent or mandatory of his own conMidence to look after his property and if he did not do so, he
is obliged to abide by the consequences of his negligence and abandonment and has no right to claim damages
against his previous agent, who complied with his duty and did all that he could and ought to have done, in
accordance with the law.
The defendant Federico Hidalgo, having ceased in his administration of the property belonging to Peña y Gomiz,
on account of physical impossibility, which cessation he duly reported to his principal and also informed him of
the person who relieved him as such administrator, and for whom he had requested a new power of attorney, is
only liable for the results and consequences of his administration during the period when the said property was
in his charge, and therefore his liability can not extend beyond the period of his management, as his agency
terminated by the tacit or implied approval of his principal, judging from the latter's silence in neither objecting
to nor in anywise prohibiting Antonio Hidalgo's continuing to administer his property, notwithstanding the lapse
of the many years since he learned by letter of the action taken by his previous agent, Federico Hidalgo.
Moreover, this latter, in announcing the termination of his agency, transmitted the last partial accounts that he
had not rendered, up to December 31, 1893, together with a general statement of all the resulting balances
covering the period of his administration, and Jose de la Peña y Gomiz remained silent and offered no objection
whatever to the said accounts and did not manifest his disapproval of the same nor of the general statement,
which he must have received in April or may, 1894, to the time he died, in August, 1902; and when his son, the
plaintiff, came to this city in company with the defendant, Federico Hidalgo, they traveled together from Spain
and arrived in Manila during one of the early days of January, 1904, the former, for the purpose of taking charge
of the estate left by his father, and after the plaintiff had examined the accounts kept by Federico Hidalgo, his
deceased father's Mirst agent, he approved them and therefore issued in favor of the defendant the document,
Exhibit 5, found on page 936 of the second record of trial, dated January 15, 1904, in which Jose de la Peña y de
Ramon acknowledged having received from his deceased father's old agent the accounts, balances, and vouchers
to his entire satisfaction, and gave an acquittance in full settlement of the administration that had been
commended to the defendant Hidalgo.
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This document, written in the handwriting of the plaintiff, Peña y de Ramon, appears to be executed in a form
considered to be sufMicient by its author, and, notwithstanding the allegations of the said plaintiff, the record
contains no proof of any kind of Federico Hidalgo's having obtained it by coercion, intimidation, deceit, or fraud;
neither is its shown to have been duly impugned as false, criminally or civilly, for the statements therein made by
the plaintiff are too explicit and deMinite to allow, without proof of some vice or defect leading to nulliMication, of
its being considered as void and without value or legal effect.
With respect to the responsibility contracted by the defendant, as regards the payment of the balance shown by
the accounts rendered by him, it is not enough that the agent should have satisfactorily rendered the accounts
pertaining to his trust, but it is also indispensable that it be proved that he had paid to his principal, or to the
owner of the property administered, the balance resulting from his accounts. This balance, which was allowed in
the judgment appealed from, notwithstanding the allegations of the plaintiff, which were not deemed as
established, amounts to P6,774.50, according to the proofs adduced at the trial. It was the imperative duty of the
administrator, Federico Hidalgo, to transmit this sum to his principal, Jose de la Peña y Gomiz, as the Minal balance
of the accounts of his administration, struck on December 31, 1893, and by his failure so to do and delivery of the
said sum to his successor, Antonio Hidalgo, he acted improperly, and must pay the same to the plaintiff.
Antonio Hidalgo took charge of the administration of Peña y Gomiz's property from January, 1894, to September,
1902, that is, during the second period of administration of the several properties that belonged to the deceased
Peña.
Although the plaintiff, in his original complaint, had included the said Antonio Hidalgo as one of the responsible
defendants, yet he afterwards excluded him, as well from the second as from the third amended complaint, and
consequently the liability that might attach to Antonio Hidalgo was not discussed, nor was it considered in the
judgment of the lower court; neither can it be in the decision, for the reason that the said Antonio Hidalgo is not a
party to this suit. However, the said liability of Antonio Hidalgo is imputed to Federico Hidalgo, and so it is that, in
the complain t, the claim is made solely against Federico Hidalgo, in order that the latter might be adjudged to
pay the amounts which constitute the balance owing from him who might be responsible, Antonio Hidalgo,
during the period of this latter's administration.
Federico Hidalgo, in our opinion, could not and can not be responsible for the administration of the property that
belonged to the deceased Peña y Gomiz, which was administered by Antonio Hidalgo during eight years and
some months, that is, during the second period, because of the sole fact of his having turned over to the latter the
administration of the said property on his departure from this city of Spain. Neither law nor reason obliged
Federico Hidalgo to remain in this country at the cost of his health and perhaps of his life, even though he were
the administrator of certain property belonged to Peña y Gomiz, since the care of the property and interests of
another does not require sacriMice on the part of the agent of his own life and interests. Federico Hidalgo was
obliged to deliver the said property belonging to Peña y Gomiz to Antonio Hidalgo for good and valid reasons, and
reasons, and in proceeding in the manner aforesaid he complied with the duty required of him by law and justice
and acted as a diligent agent. If the principal, Jose de la Peña Gomiz, the owner of the property mentioned,
although informed opportunely of what had occurred saw Mit to keep silent, not to object to the arrangements
made, not to send the power of attorney requested by Federico Hidalgo in favor of Antonio Hidalgo, and took no
action nor made any inquiry whatever to ascertain how his property was being administered by the second
agent, although to the time of his death more than eight years had elapsed, the previous agent, who ceased in the
discharge of his duties, can in nowise be held liable for the consequences of such abandonment, nor for the
results of the administration of property by Antonio Hidalgo, for the reason that, since his departure from this
country, he has not had the least intervention nor even indirect participation in the aforementioned
administration of the said Antonio Hidalgo who, under the law, was the agent or administrator by virtue of an
implied agency, which is equivalent in its results to an express agency, executed by the owner of the property.
Consequently, Federico Hidalgo is not required to render accounts of the administration corresponding to the
second period mentioned, nor to pay the balance that such accounts may show to be owing.
At the Mirst trial of this cause, Federico Hidalgo, testiMied under oath that his principal, Jose Peña y Gomiz, did not
agree to the appointment of Antonio Hidalgo, chosen by the witness, not to such appointee's taking charge of the
administration of his property. Aside from the fact that the trial record does not show honor on what date Peña
expressed such disagreement it is certain that, in view of the theory of defense maintained by the defendant
Hidalgo could have said, by means of a no, that his principal did not agree to the appointment of the said Antonio
Hidalgo, and the intercalation of the word no in the statement quoted is more inexplicable in that the attorney for
the adverse party moved that the said answer be stricken from the record, as he objected to its appearing therein.
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Were it true that the principal Jose de la Peña by Gomiz, had neither agreed to the designation of Antonio Hidalgo,
nor to the latter's administering his property, he would immediately have appointed another agent and
administrator, since he knew that Federico Hidalgo had left the place where his property was situated and that it
would be abandoned, had he not wished that Antonio Hidalgo should continue to administer it. If the latter
continued in the administration of the property for so long a time, nearly nine years, it was because the said Peña
agreed and gave his consent to the acts performed by his outgoing agent, and for this reason the answer given by
Federico Hidalgo mistakenly, or not, that his principal, Peña, did not agree to the appointment of Antonio Hidalgo,
is immaterial and does not affect the terms of this decision.
If the defendant is not responsible for the results of the administration of said property administered by Antonio
Hidalgo during the second period before referred to, neither is he responsible for that performed during the third
period by Francisco Hidalgo, inasmuch as the latter was not even chosen by the defendant who, on October 1,
1902, when Francisco Hidalgo took charge of Peñas' property that had been turned over to him by Antonio
Hidalgo, was in Spain and had no knowledge of nor intervention in such delivery; wherefore the defendant can in
no manner be obliged to pay to the plaintiff any sum that may be found owing by Francisco Hidalgo.
The trial judge — taking into consideration that, by the evidence adduced at the hearing, it was proved that
Francisco Hidalgo rendered accounts to the plaintiff of the administration of the property in question during the
said third period, that is, for one year, three months, and someday, and that he delivered to the plaintiff the
balance of 1,280.03 pesos, for which the latter issued to the said third administrator the document Exhibit 2,
written in his own handwriting under date of January 7, 1904, and the signature which, afMixed by himself, he
admitted in his testimony was authentic, on its being exhibited to him — found that the plaintiff, Peña y de
Ramon, was not entitled to recover any sum whatever for the rents pertaining to the administration of his
property by the said Francisco Hidalgo.
All the reasons hereinbefore given relate to the Mirst cause of action, whereby claim is made against Federico
Hidalgo for the payment of the sum of P72,548.24 and interest at the rate of 6 per cent per centum, and they have
decided some of the errors assigned by the appellants in their briefs to the judgment appealed from.
Two amounts are have claimed which have one and the same origin, yet are based on two causes of action, the
second and the third alleged by the plaintiff; and although the latter, afterwards convinced by the truth and of the
impropriety of his claim, had to waive the said third cause of action during the second hearing of this cause (pp.
57 and 42 of the record of the evidence), the trial judge, on the grounds that the said second and third causes of
action refer to the same certiMicates of deposit of the treasury of the Spanish Government, found, in the judgment
appealed from, that the plaintiff was not entitled to recover anything for the aforesaid second and third causes of
action — a Minding that is proper and just, although qualiMied as erroneous by the plaintiff in his brief.
It appears, from the evidence taken in this cause, that Jose de la Peña y Gomiz, according to the certiMicates issued
by the chief of the division his lifetime, after having in 1882 withdrawn from the General Deposit Bank of the
Spanish Government a deposit of 17,000 pesos and its interest deposit any sum therein until December 9, 1886,
when he deposited two amounts of 3,000 pesos each, that is, 6,000 pesos in all, the two deposit receipts for the
same being afterwards endorsed in favor of Gonzalo Tuason. The latter, on December 9, 1887, withdrew the
deposit and took out the said two amounts, together with the interest due thereon, and on the same date
redeposited them in the sum of 6,360 pesos at 5 per cent per annum in the name of Jose de la Peña y Gomiz. On
the 20th of December of the following year, 1888, the defendant Hidalgo received from his principal, Peña y
Gomiz, through Father Ramon Caviedas, the two said letters of credit, in order that he might withdraw from the
General Deposit Bank the two amounts deposited, together with the interest due thereon, amounting to 741
pesos, and with this interest purchase a draft on London in favor of its owner and then redeposit the original
capital of 6,000 pesos. This, the defendant Hidalgo did and then delivered the draft and the deposit receipt to
Father Caviedas, of all of which transactions he informed his principal by letter of the same date, transcribed on
page 947 of the second trial record.
In the following year, 1889, Father Ramon Caviedas again delivered to the defendant Hidalgo the aforementioned
deposit receipt with the request to withdraw from the General Deposit bank the sum deposited and to purchase a
draft of 860 pesos on London in favor of their owner, Jose de la Peña y Gomiz, and, after deducting the cost of the
said draft from the capital and interest withdrawn from deposit, amounting to 6,360 pesos, to redeposit the
remainder, 5,500 pesos, in the bank mentioned, in accordance with the instructions from Peña y Gomiz: All of
which was done by the defendant Hidalgo, who delivered to Father Caviedas the receipt for the new deposit of
5,500 pesos as accredited by the reply-‐letter, transcribed on page 169 of the record, and by the letter addressed
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by Hidalgo to Peña, of the date of December 20 of that year and shown as an original exhibit by the plaintiff
himself on page 29 of the record of the evidence.
Lastly, in December, 1890, Father Caviedas, aforementioned, delivered to the defendant Hidalgo the said deposit
receipt for 5,500 pesos in order that he might withdraw this amount from deposit and deliver it with the interest
thereon to the former for the purpose of remitting it by draft to Jose de la Peña; this Hidalgo did, according to a
reply-‐letter from Father Caviedas, the original of which appears on page 979 of the Mile of exhibits and is copied
on page 171 of the trial record, and is apparently conMirmed by the latter in his sworn testimony.
So that the two amounts of 3,000 pesos each, expressed in two deposit receipts received from De la Peña y Gomiz
by Father Ramon Caviedas and afterwards delivered to Francisco Hidalgo for the successive operations of
remittance and redeposit in the bank before mentioned, are the same and only ones that were on deposit in the
said bank in the name of their owner, Peña y Gomiz. The defendant Hidalgo made two remittances by drafts of
London, one in 1888 for 741.60 pesos, through a draft purchased from the Chartered Bank, and another in 1889
for 860 pesos, through a draft purchased from the house of Tuason & Co., and both in favor of Peña y Gomiz, who
received through Father Ramon Caviedas the remainder, 5,500 pesos, of the sums deposited. For these reasons,
the trial judge was of the opinion that the certiMicates of deposit sent by Peña y Gomiz to Father Ramon Caviedas
and those received from the latter by the defendant Hidalgo were identicals, as were likewise the total amounts
expressed by the said receipts or certiMicates of deposit, from the sum of which were deducted the amounts
remitted to Peña y Gomiz and the remainder deposited after each anual operation until, Minally, the sum of 5,500
pesos was remitted to its owner, Peña y Gomiz, according to his instructions, through the said Father Caviedas.
The lower court, in concluding its judgment, found that the plaintiff was entitled to recover any sum whatever for
the said second and third causes of action, notwithstanding that, as hereinbefore stated, the said plaintiff
withdrew the third cause of action. This Minding of the court, with respect to the collection of the amounts of the
aforementioned deposit receipts, is perfectly legal and in accordance with justice, inasmuch as it is a sustained by
abundant and conclusive documentary evidence, which proves in an incontrovertible manner the
unrighteousness of the claim made by the plaintiff in twice seeking payment, by means of the said second and
third causes of action, of the said sum which, after various operations of deposit and remittance during three
years, was Minally returned with its interest to the possession of its owner, Peña y Gomiz.
From the trial had in this case, it also appears conclusively proved that Jose de la Peña y Gomiz owed, during his
lifetime, to Federico Hidalgo, 7,600 pesos, 4,000 pesos of which were to bear interest at the rate of 6 per cent per
annum, and the remainder without any interest, and that, notwithstanding the lapse of the period of three years,
from November, 1887, within which he bound himself to repay the amount borrowed, and in spite of his
creditor's demand of payment, made by registered letter, the original copy of which is on page 38 of the Mile of
exhibits and a transcription thereof on page 930 of the Mirst and second record of the evidence, the debt was not
paid up to the time of the debtor's death. For such reasons, the trial court, in the judgment appealed from, found
that there was a preponderance of evidence to prove that this loan had been made and that the plaintiff actually
owed the defendant the sum loaned, as well as the interest thereon, after deducting therefrom the 2,000 pesos
which the defendant received from the plaintiff on account of the credit, and that the former was entitled to
recover.
It appears from the pleadings and evidence at the trial that in January, 1904, on the arrival in this city of Federico
de la Peña de Ramon, and on the occasion of the latter's proceeding to examine the accounts previously rendered,
up to December 31, 1893, by the defendant Hidalgo to the plaintiff's father, then deceased, Hidalgo made demand
upon the plaintiff, Peña y de Ramon, for the payment of the said debt of his father, although the creditor Hidalgo
acceded to the requests of the plaintiff to grant the latter an extension of time until he should be able to sell one
of the properties of the estate. It was at that time, according to the defendant, that the plaintiff Peña took up the
instrument of indebtedness, executed by his deceased father during his lifetime, and delivered to the defendant
in exchange therefor the document of the date of January 15, 1904, found on page 924 of the second record of
evidence, whereby the plaintiff, Jose de la Peña, bound himself to pay his father's debt of 11,000 pesos, owing to
the defendant Hidalgo, out of the proceeds of the sale of some of the properties speciMied in the said document,
which was written and signed by the plaintiff in his own handwriting.
The plaintiff not only executed the said document acknowledging his father's debt and binding himself to settle it,
but also, several days after the sale of a lot belonging to the estate, paid to the creditor on account the sum of
2,000 pesos, according to the receipt issued by the latter and exhibited on page 108 of the Mirst record of
evidence.
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The said document, expressive of the obligation contracted by the plaintiff Peña y de Ramon that he would pay to
the defendant the debt of plaintiff's deceased father, amounting to 11,000 pesos, out of the proceeds from some
of the properties of the estate, has not been denied nor impugned as false; and not withstanding the averment
made by the plaintiff that when he signed he lacked information and knowledge of the true condition of the
affairs concerning Hidalgo's connection with the property that be absolutely no proof whatever is shown in the
trial record of the creditor's having obtained the said document through deceit or fraud — circumstances in a
certain manner incompatible with the explicit statements contained therein. For these reasons, the trial court,
weighing the whole of the evidence furnished by the record, found that the loan of the said 7,600 pesos was truly
and positively made, and that the plaintiff must pay the same to the defendant, with the interest thereon, and that
he was not entitled to recover the 2,000 pesos, as an undue payment made by him to the defendant creditor. For
the foregoing reason the others errors assigned by the plaintiff to the judgment appealed from are dismissed.
With respect to the obligation to pay the interest due on the amounts concerned in this decision, it must be borne
in mind that, as provided by article 1755 of the Civil Code, interest shall only be owed when it has been expressly
stipulated, and that should the debtor, who is obliged to pay a certain sum of money, be in default and fail to fulMill
the agreement made with his creditor, he must pay, as indemnity for losses and damages, the interest agreed
upon, and should there be no express stipulation, the legal interest (art. 1108 of the Civil Code); but, in order that
the debtor may be considered to be in default and obliged to pay the indemnity, it is required, as a general rule,
that his creditor shall demand of such debtor the fulMillment of his obligation, judicially or extrajudicially, except
in such cases as are limitedly speciMied in article 1100 of the Civil Code.
It was not expressly stipulated that either the balance of the last account rendered by the defendant Federico
Hidalgo in 1893, or the sum which the plaintiff bound himself to pay to the defendant, in the instrument of the
15th of January, 1904, should bear interest; nor is there proof that a judicial or extrajudicial demand was made,
on the part of the respective creditors concerned, until the date of complaint, on the part of the plaintiff, and that
of the counterclaim, on the part of the defendant. Therefore no legal interest is owing for the time prior to the
respectives dates of the complaint and counterclaim.
By virtue, then, of the reasons herein before set forth, it is proper, in our opinion, to adjudge, as we do hereby
adjudge, that the defendant, Federico Hidalgo, shall pay to the plaintiff, Jose de la Peña y de Ramon, as
administrator of the estate of the deceased Jose de la Peña y Gomiz, the sum of P6,774.50, and the legal interest
thereon at the rate of 6 per cent per annum from 23rd of May, 1906, the date of the Miling of the original complaint
in this case; that we should and hereby do declare that the said defendant Federico Hidalgo, is not bound to gibe
nor render accounts of the administration of the property of the said deceased Jose de la Peña y Gomiz
administered, respectively, by Antonio Hidalgo, from January, 1894, to September 30, 1902, and by Francisco
Hidalgo, from October 1, 1902, to January 7, 1904, and therefore the defendant, Federico Hidalgo, not being
responsible for the results of the administration of the said property administered by the said Antonio and
Francisco Hidalgo, we do absolve the said defendant from the complaint Miled by the plaintiff, in so far as it
concerns the accounts pertaining to the aforesaid two periods of administration and relates to the payment of the
balances resulting from such accounts; and that we should and hereby do absolve the defendant Hidalgo from the
complaint with respect to the demand for the payment of the sums of P15,774.19 and P2,000, with their
respective interests, on account of the second and the fourth cause of action, respectively, and because the
plaintiff renounced and withdrew his complaint, with respect to the third cause of action; and that we should and
do likewise adjudge, that the plaintiff, Jose de la Peña y de Ramon, shall pay to Federico Hidalgo, by reason of the
counterclaim, the sum of P9,000 with legal interest thereon at the rate of 6 per cent per annum from 21st of may,
1907, the date of the counterclaim.
The judgment appealed from, together with that part thereof relative to the statement it contains concerning the
equivalence between the Philippine peso and the Mexican peso, is afMirmed in so far as it is in agreement with the
Mindings of this decision, and the said judgment is reversed in so far as it is not in accordance herewith. No special
Minding is made as to costs assessed in either instance, and to the plaintiff is reserved any right that he may be
entitled to enforce against Antonio Hidalgo.
Act of agent is act of the principal
G.R. No. L-‐13471 January 12, 1920
VICENTE SY-‐JUCO and CIPRIANA VIARDO, plaintiffs-‐appellants,

vs.
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SANTIAGO V. SY-‐JUCO, defendant-‐appellant.
Sumulong and Estrada for plaintiffs and appellants.

Delgado and Delgado for defendant and appellant.
AVANCEÑA, J.:
In 1902 the defendant was appointed by the plaintiffs administrator of their property and acted as such until
June 30, 1916, when his authority was cancelled. The plaintiffs are defendant's father and mother who allege that
during his administration the defendant acquired the property claimed in the complaint in his capacity as
plaintiffs' administrator with their money and for their beneMit. After hearing the case the trial court rendered his
decision, the dispositive part of which is the following:
Wherefore, the court give judgment for the plaintiffs and orders:
1. That the defendant return to the plaintiffs the launch Malabon, in question, and execute all the necessary
documents and instruments for such delivery and the registration in the records of the Custom House of said
launch as plaintiffs' property;
2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value thereof which has been
Mixed at the sum of P3,000, and should the return of said casco be made, execute all the necessary instruments
and documents for its registration in plaintiffs' name at the Custom House; and
3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the necessary instruments and
documents for its registration at the Bureau of Public Works. And judgment is hereby given for the defendant
absolving him from the complaint so far concerns:
1. The rendition of accounts of his administration of plaintiffs property;
2. The return of the casco No. 2545;
3. The return of the typewriting machine;
4. The return of the house occupied by the defendant; and
5. The return of the price of the piano in question.
Both parties appealed from this judgment.
In this instance defendant assigns three errors alleged to have been committed by the lower court in connection
with the three items of the dispositive part of the judgment unfavorable to him. We are of the opinion that the
evidence sufMiciently justiMies the judgment against the defendant.
Regarding the launch Malabon, it appears that in July, 1914, the defendant bought it in his own name from the
PaciMic Commercial Co., and afterwards registered it at the Custom House. But his does not necessarily show that
the defendant bought it for himself and with his own money, as he claims. This transaction was within the agency
which he had received from the plaintiffs. The fact that he has acted in his own name may be only, as we believe it
was, a violation of the agency on his part. As the plaintiffs' counsel truly say, the question is not in whose favor
the document of sale of the launch is executed nor in whose name same was registered, but with whose money
was said launch bought. The plaintiffs' testimony that it was bought with their money and for them is supported
by the fact that, immediately after its purchase, the launch had to be repaired at their expense, although said
expense was collected from the defendant. I the launch was not bought for the plaintiffs and with their money, it
is not explained why they had to pay for its repairs.
The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil. Rep., 647), which we
do not believe is applicable to the present case. In said case, Martinez, Jr., bought a vessel in his own name and in
his name registered it at the Custom House. This court then said that although the funds with which the vessel
was bought belonged to Martinez Sr., Martinez Jr. is its sole and exclusive owner. But in said case the relation of
principal and agent, which exists between the plaintiffs and the defendant in the present case, did not exist
between Martinez, Sr., and Martinez, Jr. By this agency the plaintiffs herein clothed the defendant with their
! of !113
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representation in order to purchase the launch in question. However, the defendant acted without this
representation and bought the launch in his own name thereby violating the agency. If the result of this
transaction should be that the defendant has acquired for himself the ownership of the launch, it would be
equivalent to sanctioning this violation and accepting its consequences. But not only must the consequences of
the violation of this agency not be accepted, but the effects of the agency itself must be sought. If the defendant
contracted the obligation to but the launch for the plaintiffs and in their representation, but virtue of the agency,
notwithstanding the fact that he bought it in his own name, he is obliged to transfer to the plaintiffs the rights he
received from the vendor, and the plaintiffs are entitled to be subrogated in these rights.
There is another point of view leading us to the same conclusion. From the rule established in article 1717 of the
Civil Code that, when an agency acts in his own name, the principal shall have no right of action against the
person with whom the agent has contracted, cases involving things belonging to the principal are excepted.
According to this exception (when things belonging to the principal are dealt with) the agent is bound to the
principal although he does not assume the character of such agent and appears acting in his own name (Decision
of the Supreme Court of Spain, May 1, 1900). This means that in the case of this exception the agent's apparent
representation yields to the principal's true representation and that, in reality and in effect, the contract must be
considered as entered into between the principal and the third person; and, consequently, if the obligations
belong to the former, to him alone must also belong the rights arising from the contract. The money with which
the launch was bough having come from the plaintiff, the exception established in article 1717 is applicable to the
instant case.
Concerning the casco No. 2584, the defendant admits it was constructed by the plaintiff himself in the latter's
ship-‐yard. Defendant's allegation that it was constructed at his instance and with his money is not supported by
the evidence. In fact the only proof presented to support this allegation is his own testimony contradicted, on the
on hand, by the plaintiffs' testimony and, on the other hand, rebutted by the fact that, on the date this casco was
constructed, he did not have sufMicient money with which to pay the expense of this construction.
As to the automobile No. 2060, there is sufMicient evidence to show that its prices was paid with plaintiffs' money.
Defendant's adverse allegation that it was paid with his own money is not supported by the evidence. The
circumstances under which, he says, this payment has been made, in order to show that it was made with his
own money, rather indicate the contrary. He presented in evidence his check-‐book wherein it appears that on
March 24, 1916, he issued a check for P300 and on the 27th of same month another for P400 and he says that the
Mirst installment was paid with said checks. But it results that, in order to issue the check for P300 on March 24 of
that year, he had to deposit P310 on that same day; and in order to issue the other check for P400 on the 27th of
the same month, he deposited P390 on that same day. It was necessary for the defendant to make these deposits
for on those dates he had not sufMicient money in the bank for which he could issue those checks. But, in order to
pay for the price of the automobile, he could have made these payments directly with the money he deposited
without the necessity of depositing and withdrawing it on the same day. If this action shows something, it shows
defendant's preconceived purpose of making it appear that he made the payment with his own funds deposited
in the bank.
The plaintiffs, in turn, assign in this instance the following three errors alleged to have been committed by the
lower court:
1. The court erred in not declaring that the plaintiffs did not sell to the defendant the casco No. 2545 and that
they were its owners until it was sunk in June, 1916.
2. The court erred in absolving the defendant from his obligation to render an account of his administration to
the plaintiffs, and to pay to the latter the amount of the balance due in their favor.
3. The court erred in not condemning the defendant to pay to the plaintiffs the value of the woods, windows and
doors taken from their lumber-‐year by the defendant and used in the construction of the house on calle Real of
the barrio of La Concepcion, municipality of Malabon, Rizal.
Concerning the casco No. 2545, the lower court refrained from making any declaration about its ownership in
view of the fact that this casco had been leased and was sunk while in the lessee's hands before the complaint in
this case was Miled. The lower court, therefore, considered it unnecessary to pass upon this point. We agree with
the plaintiffs that the trial court should have made a pronouncement upon this casco. The lessee may be
responsible in damages for its loss, and it is of interest to the litigants in this case that it be determined who is the
owner of said casco that may enforce this responsibility of the lessee.
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Upon an examination of the evidence relative to this casco, we Mind that it belonged to the plaintiffs and that the
latter sold it afterwards to the defendant by means of a public instrument. Notwithstanding plaintiffs' allegation
that when they signed this instrument they were deceived, believing it not to be an instrument of sale in favor of
the defendant, nevertheless, they have not adduced sufMicient proof of such deceit which would destroy the
presumption of truth which a public document carries with it. Attorney Sevilla, who acted as the notary in the
execution of this instrument, testifying as a witness in the case, said that he never veriMied any document without
Mirst inquiring whether the parties knew its content. Our conclusion is that this casco was lawfully sold to the
defendant by the plaintiffs.
Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in the construction of
the latter's house on calle Real of the barrio of La Concepcion of the municipality of Malabon, Rizal, we Mind
correct the trial Court's decision that they were given to the defendant as his and his wife's property.
Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise Mind correct the
trial court's decision absolving the latter from this petition, for it appears, from the plaintiffs' own evidence, that
the defendant used to render accounts of his agency after each transactions, to the plaintiffs' satisfaction.
From the foregoing considerations, we afMirm the judgment appealed from in all its parts except in so far as the
casco No. 2545 is concerned, and as to this we declare that, it having been sold by the plaintiffs to the defendant,
the latter is absolved. No special Mindings as to costs. So ordered.
Authority to sell does not carry with it authority to sell on credit
GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., petitioner

vs.
THE INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS PHILIPPINE CORPORATION, respondents.

ABAD SANTOS, J.:
This is a petition to review a decision of the defunct Court of Appeals which afMirmed the judgment of the trial
court whereby:
... judgment is hereby rendered in favor of the plaintiff [E.R. Squibb & Sons Philippine Corporation], ordering the
defendant [Green Valley Poultry & Allied Products, Inc.] to pay the sum of P48,374.74 plus P96.00 with interest at
6% per annum from the Miling of this action; plus attorney's fees in the amount of P5,000.00 and to pay the costs.
On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text of which reads as follows:
E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied Products, Inc. as a
non-‐exclusive distributor for Squibb Veterinary Products, as recommended by Dr. Leoncio D. Rebong, Jr. and Dr.
J.G. Cruz, Animal Health Division Sales Supervisor.
As a distributor, Green Valley Poultry & Allied Products, Inc. wig be entitled to a discount as follows:
Feed Store Price (Catalogue)
Less 10%
Wholesale Price
Less 10%
Distributor Price
There are exceptions to the above price structure. At present, these are:
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1. Afsillin Improved — 40 lbs. bag
The distributor commission for this product size is 8% off P120.00
2. Narrow — Spectrum Injectible Antibiotics
These products are subject to price Mluctuations. Therefore, they are invoiced at net price per vial.
3. Deals and Special Offers are not subject to the above distributor price structure. A 5% distributor
commission is allowed when the distributor furnishes copies for each sale of a complete deal or special offer to a
feedstore, drugstore or other type of account.
Deals and Special Offers purchased for resale at regular price invoiced at net deal or special offer price.
Prices are subject to change without notice. Squibb will endeavor to advise you promptly of any price changes.
However, prices in effect at the tune orders are received by Squibb Order Department will apply in all instances.
Green Valley Poultry & Allied Products, Inc. win distribute only for the Central Luzon and Northern Luzon
including Cagayan Valley areas. We will not allow any transfer or stocks from Central Luzon and Northern Luzon
including Cagayan Valley to other parts of Luzon, Visayas or Mindanao which are covered by our other appointed
Distributors. In line with this, you will follow strictly our stipulations that the maximum discount you can give to
your direct and turnover accounts will not go beyond 10%.
It is understood that Green Valley Poultry and Allied Products, Inc. will accept turn-‐over orders from Squibb
representatives for delivery to customers in your area. If for credit or other valid reasons a turn-‐over order is not
served, the Squibb representative will be notiMied within 48 hours and hold why the order will not be served.
It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of P20,000.00 from a
mutually acceptable bonding company.
Payment for Purchases of Squibb Products will be due 60 days from date of invoice or the nearest business day
thereto. No payment win be accepted in the form of post-‐dated checks. Payment by check must be on current
dating.
It is mutually agreed that this non-‐exclusive distribution agreement can be terminated by either Green Valley
Poultry & Allied Products, Inc. or Squibb Philippines on 30 days notice.
I trust that the above terms and conditions will be met with your approval and that the distributor arrangement
will be one of mutual satisfaction.
If you are agreeable, please sign the enclosed three (3) extra copies of this letter and return them to this OfMice at
your earliest convenience.
Thank you for your interest and support of the products of E.R. Squibb & Sons Philippines Corporation. (Rollo, pp.
12-‐ 13.)
For goods delivered to Green Valley but unpaid, Squibb Miled suit to collect. The trial court as aforesaid gave
judgment in favor of Squibb which was afMirmed by the Court of Appeals.
In both the trial court and the Court of Appeals, the parties advanced their respective theories.
Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from
Squibb; that the goods received were on consignment only with the obligation to turn over the proceeds, less its
commission, or to return the goods ff not sold, and since it had sold the goods but had not been able to collect
from the purchasers thereof, the action was premature.
Upon the other hand, Squibb claimed that the contract was one of sale so that Green Valley was obligated to pay
for the goods received upon the expiration of the 60-‐day credit period.
Both courts below upheld the claim of Squibb that the agreement between the parties was a sales contract.
! of !113
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We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the
liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an agency to sell, it is
liable because it sold on credit without authority from its principal. The Civil Code has a provision exactly in
point. It reads:
Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be
entitled to any interest or beneMit, which may result from such sale.
WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is afMirmed with
costs against the petitioner.
SO ORDERED.
Breach of loyalty in agency
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR,
AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitioners-‐appellants,
vs.
GREGORIO M. DOMINGO, respondent-‐appellee, TEOFILO P. PURISIMA, intervenor-‐respondent.
TeoMilo Leonin for petitioners-‐appellants.
Osorio, Osorio & Osorio for respondent-‐appellee.
TeoMilo P. Purisima in his own behalf as intervenor-‐respondent.

MAKASIAR, J.:
Petitioner-‐appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda.
de Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the
reversal of the majority decision dated, March 12, 1969 of the Special Division of Five of the Court of Appeals
afMirming the judgment of the trial court, which sentenced the said Vicente M. Domingo to pay Gregorio M.
Domingo P2,307.50 and the intervenor TeoMilo P. Purisima P2,607.50 with interest on both amounts from the
date of the Miling of the complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and
P500.00 as attorney's fees plus costs.
The following facts were found to be established by the majority of the Special Division of Five of the Court of
Appeals:
In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate
broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at
the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the
property is sold by Vicente or by anyone else during the 30-‐day duration of the agency or if the property is sold
by Vicente within three months from the termination of the agency to apurchaser to whom it was submitted by
Gregorio during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate,
one copy was given to Vicente, while the original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor TeoMilo P. Purisima to look for a buyer, promising him one-‐
half of the 5% commission.
Thereafter, TeoMilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter
(Exhibit "B"). Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956 as evidenced by Exhibit
"C", to which Vicente agreed by signing Exhibit "C". Upon demand of Vicente, Oscar de Leon issued to him a check
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in the amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00.
Oscar de Leon conMirmed his former offer to pay for the property at P1.20 per square meter in another letter,
Exhibit "D". Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which Oscar de
Leon promised to deliver to him. Thereafter, Exhibit "C" was amended to the effect that Oscar de Leon will vacate
on or about September 15, 1956 his house and lot at Denver Street, Quezon City which is part of the purchase
price. It was again amended to the effect that Oscar will vacate his house and lot on December 1, 1956, because
his wife was on the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a
document dated June 30, 1956 (the year 1957 therein is a mere typographical error) and marked Exhibit "D".
Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand Pesos
(P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round
Migure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not
disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of One Thousand Pesos
(P1,000.00) by way of earnest money. In the deed of sale was not executed on August 1, 1956 as stipulated in
Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his money
from his brother in the United States, for which reason he was giving up the negotiation including the amount of
One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00)
given to Gregorio as propina or gift. When Oscar did not see him after several weeks, Gregorio sensed something
Mishy. So, he went to Vicente and read a portion of Exhibit "A" marked habit "A-‐1" to the effect that Vicente was still
committed to pay him 5% commission, if the sale is consummated within three months after the expiration of the
30-‐day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a
purchaser brought by Gregorio to Vicente during the said 30-‐day period. Vicente grabbed the original of Exhibit
"A" and tore it to pieces. Gregorio held his peace, not wanting to antagonize Vicente further, because he had still
duplicate of Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the ofMice of the Register of Deeds
of Quezon City, where he discovered Exhibit "G' deed of sale executed on September 17, 1956 by Amparo Diaz,
wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down
payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning
that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he demanded in writting payment of
his commission on the sale price of One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also
conferred with Oscar de Leon, who told him that Vicente went to him and asked him to eliminate Gregorio in the
transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.0 In
Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5% commission
because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of
Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that
Amparo Diaz, the vendee, being the wife of Oscar de Leon the sale by Vicente of his property is practically a sale
to Oscar de Leon since husband and wife have common or identical interests; that Gregorio and intervenor
TeoMilo Purisima were the efMicient cause in the consummation of the sale in favor of the spouses Oscar de Leon
and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or
gift and not as additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter
addressed to Oscar de Leon with respect to the additional earnest money, does not appear to have been
answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de Leon's testimony
that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente,
unlike the Mirst amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money,
evidenced by the letter Exhibit "4"; and that Vicente did not even mention such additional earnest money in his
two replies Exhibits "I" and "J" to Gregorio's letter of demand of the 5% commission.
The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the
payment to him by Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for
having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so constitutes
fraud as to cause a forfeiture of his commission on the sale price; (2) whether Vicente or Gregorio should be
liable directly to the intervenor TeoMilo Purisima for the latter's share in the expected commission of Gregorio by
reason of the sale; and (3) whether the award of legal interest, moral and exemplary damages, attorney's fees and
costs, was proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan
Enriquez did not touch on these issues which were extensively discussed by Justice Magno Gatmaitan in his
dissenting opinion. However, Justice Esguerra, in his concurring opinion, afMirmed that it does not constitute
breach of trust or fraud on the part of the broker and regarded same as merely part of the whole process of
bringing about the meeting of the minds of the seller and the purchaser and that the commitment from the
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73
prospect buyer that he would give a reward to Gregorio if he could effect better terms for him from the seller,
independent of his legitimate commission, is not fraudulent, because the principal can reject the terms offered by
the prospective buyer if he believes that such terms are onerous disadvantageous to him. On the other hand,
Justice Gatmaitan, with whom Justice Antonio CaMizares corner held the view that such an act on the part of
Gregorio was fraudulent and constituted a breach of trust, which should deprive him of his right to the
commission.
The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. 1
Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil Code.
Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency, even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but also for negligence, which shall be judged with
more less rigor by the courts, according to whether the agency was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides that:
Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever
he may have received by virtue of the agency, even though what he has received is not due to the principal.
The modiMication contained in the Mirst paragraph Article 1891 consists in changing the phrase "to pay" to "to
deliver", which latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent —
condemning as void any stipulation exempting the agent from the duty and liability imposed on him in paragraph
one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code
which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with more or
less severity by the courts, according to whether the agency was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith, Midelity, honesty, candor and fairness on the part of the
agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the agent the
absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other
material facts relevant to the agency, so much so that the law as amended does not countenance any stipulation
exempting the agent from such an obligation and considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest
principle of morality as well as of the strictest justice. 2
Hence, an agent who takes a secret proMit in the nature of a bonus, gratuity or personal beneMit from the vendee,
without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and
forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury by
reason of such breach of Midelity, or that he obtained better results or that the agency is a gratuitous one, or that
usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an
actual damage. 3 By taking such proMit or bonus or gift or propina from the vendee, the agent thereby assumes a
position wholly inconsistent with that of being an agent for hisprincipal, who has a right to treat him, insofar as
his commission is concerned, as if no agency had existed. The fact that the principal may have been beneMited by
the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a
result by reason of his treachery or perMidy.
This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for
failure to deliver sums of money paid to him as an insurance agent for the account of his employer as required by
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said Article 1720, said insurance agent was convicted estafa. 4 An administrator of an estate was likewise under
the same Article 1720 for failure to render an account of his administration to the heirs unless the heirs
consented thereto or are estopped by having accepted the correctness of his account previously rendered. 5
Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa for failure to
deliver to his principal the total amount collected by him in behalf of his principal and cannot retain the
commission pertaining to him by subtracting the same from his collections. 6
A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money and property
received by him for his client despite his attorney's lien. 7 The duty of a commission agent to render a full
account his operations to his principal was reiterated in Duhart, etc. vs. Macias. 8
The American jurisprudence on this score is well-‐nigh unanimous.
Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been
unfaithful, the principal may recover back the commission paid, since an agent or broker who has been unfaithful
is not entitled to any compensation.
xxx xxx xxx
In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little
vs. Phipps (1911) 208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: "It is well settled that the agent is bound to
exercise the utmost good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a technical
or arbitrary rule. It is a rule founded on the highest and truest principles, of morality." Parker vs. McKenna (1874)
LR 10,Ch(Eng) 96,118 ... If the agent does not conduct himself with entire Midelity towards his principal, but is
guilty of taking a secret proMit or commission in regard the matter in which he is employed, he loses his right to
compensation on the ground that he has taken a position wholly inconsistent with that of agent for his employer,
and which gives his employer, upon discovering it, the right to treat him so far as compensation, at least, is
concerned as if no agency had existed. This may operate to give to the principal the beneMit of valuable services
rendered by the agent, but the agent has only himself to blame for that result."
xxx xxx xxx
The intent with which the agent took a secret proMit has been held immaterial where the agent has in fact entered
into a relationship inconsistent with his agency, since the law condemns the corrupting tendency of the
inconsistent relationship. Little vs. Phipps (1911) 94 NE 260. 9
As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to
deal with the subject matter thereof, or with information acquired during the course of the agency, as to make a
proMit out of it for himself in excess of his lawful compensation; and if he does so he may be held as a trustee and
may be compelled to account to his principal for all proMits, advantages, rights, or privileges acquired by him in
such dealings, whether in performance or in violation of his duties, and be required to transfer them to his
principal upon being reimbursed for his expenditures for the same, unless the principal has consented to or
ratiMied the transaction knowing that beneMit or proMit would accrue or had accrued, to the agent, or unless with
such knowledge he has allowed the agent so as to change his condition that he cannot be put in status quo. The
application of this rule is not affected by the fact that the principal did not suffer any injury by reason of the
agent's dealings or that he in fact obtained better results; nor is it affected by the fact that there is a usage or
custom to the contrary or that the agency is a gratuitous one. (Emphasis applied.) 10
In the case at bar, defendant-‐appellee Gregorio Domingo as the broker, received a gift or propina in the amount of
One Thousand Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent
of his principal, herein petitioner-‐appellant Vicente Domingo. His acceptance of said substantial monetary gift
corrupted his duty to serve the interests only of his principal and undermined his loyalty to his principal, who
gave him partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of
exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms
desired by his principal, the broker, herein defendant-‐appellee Gregorio Domingo, succeeded in persuading his
principal to accept the counter-‐offer of the prospective buyer to purchase the property at P1.20 per square meter
or One Hundred Nine Thousand Pesos (P109,000.00) in round Migure for the lot of 88,477 square meters, which is
very much lower the the price of P2.00 per square meter or One Hundred Seventy-‐Six Thousand Nine Hundred
Fifty-‐Four Pesos (P176,954.00) for said lot originally offered by his principal.
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The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a
middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or proMit he received from the purchaser and his principal did not
object therto. 11 Herein defendant-‐appellee Gregorio Domingo was not merely a middleman of the petitioner-‐
appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner-‐
appellant only. And therein petitioner-‐appellant was not aware of the gift of One Thousand Pesos (P1,000.00)
received by Gregorio Domingo from the prospective buyer; much less did he consent to his agent's accepting such
a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not
materially alter the situation; because the transaction, to be valid, must necessarily be with the consent of the
husband Oscar de Leon, who is the administrator of their conjugal assets including their house and lot at No. 40
Denver Street, Cubao, Quezon City, which were given as part of and constituted the down payment on, the
purchase price of herein petitioner-‐appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was
still Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-‐appellee Gregorio Domingo must forfeit his right
to the commission and must return the part of the commission he received from his principal.
TeoMilo Purisima, the sub-‐agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-‐half share
of whatever amounts Gregorio Domingo received by virtue of the transaction as his sub-‐agency contract was with
Gregorio Domingo alone and not with Vicente Domingo, who was not even aware of such sub-‐agency. Since
Gregorio Domingo received from Vicente Domingo and Oscar de Leon respectively the amounts of Three
Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred Pesos
(P1,300.00), one-‐half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio
Domingo to TeoMilo Purisima.
Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious
anxiety as well as wounded feelings, petitioner-‐appellant Vicente Domingo should be awarded moral damages in
the reasonable amount of One Thousand Pesos (P1,000.00) attorney's fees in the reasonable amount of One
Thousand Pesos (P1,000.00), considering that this case has been pending for the last Mifteen (15) years from its
Miling on October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing
defendant-‐appellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand
Pesos (P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay TeoMilo
Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
Agency is for compensation
JULIAN T. AGUNA, plaintiff-‐appellant,

vs.
ANTONIO LARENA, judicial administrator of the intestate estate of the deceased Mariano Larena, defendant-‐
appellee.
Ramirez & Ortigas for appellant.

Cardenas & Casal for appellee.

OSTRAND, J.:
This action is brought to recover the sum of P29,600 on two cause against the administrator of the estate of the
deceased Mariano Larena.
Upon his Mirst cause of action, the plaintiff claims the sum of P9,600, the alleged value of the services rendered by
him to said deceased as his agent in charge of the deceased's houses situated in Manila. Under the second cause
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of action the plaintiff alleges that one of the buildings belonging to the deceased and described in his complaint
was built by him with the consent of the deceased, and for that reason he is entitled to recover the sum disbursed
by him in its construction, amounting to P20,000.
From the evidence it appears undisputed that from February, 1922, to February, 1930, the plaintiff rendered
services to the deceased, consisting in the collection of the rents due from the tenants occupying the deceased's
houses in Manila and attending to the repair of said houses when necessary. He also took any such steps as were
necessary to enforce the payment of rents and all that was required to protect the interests of the deceased in
connection with said houses. The evidence also shows that during the time the plaintiff rendered his services, he
did not receive any compensation. It is, however, a fact admitted that during said period the plaintiff occupied a
house belonging to the deceased without paying any rent at all.
As to the building whose value is claimed by the plaintiff, the record shows that said building was really erected
on a parcel of land belonging to the deceased on Calle Victoria, Manila, and that the expenses for materials and
labor in the construction thereof were paid by the appellant, the construction having begun in 1926 and
terminated in 1928, but the ownership of the money interested in the building is in question.
Upon the Mirst cause the plaintiff-‐appellant insists that, the services having been rendered, an obligation to
compensate them must necessarily arise. The trial court held that the compensation for the services of the
plaintiff was the gratuitous use and occupation of some of the houses of the deceased by the plaintiff and his
family. This conclusion is correct. if it were true that the plaintiff and the deceased had an understanding to the
effect that the plaintiff was to receive compensation aside from the use and occupation of the houses of the
deceased, it cannot be explained how the plaintiff could have rendered services as he did for eight years without
receiving and claiming any compensation from the deceased.lawphil.net
As to the second cause, the evidence presented by the plaintiff is his own testimony, that of his witnesses, and
several documents, consisting of municipal permit, checks, vouchers, and invoices. The testimony of the
plaintiff's witnesses, the persons who sold the materials and furnished the labor, proves a few unimportant facts,
and as to the ownership of the money thus invested, there is only the testimony of the plaintiff-‐appellant, who
said that it all belonged to him and that his understanding with the deceased was that the latter would get the
rents of the house, and, upon his death, he would bequeath it to the plaintiff, but unfortunately, he died intestate.
This testimony, however, was objected to on the ground that it is prohibited by section 383, paragraph 7, of the
Code of Civil Procedure, which provides that the party to an action against an executor or administrator cannot
testify on any fact that took place before the death of the person against whose estate the claim is presented. The
lower court admitted this testimony but did not believe it. And certainly it cannot be believed, even assuming it to
be admissible, in view of the circumstances appearing undisputed in the record, namely, the fact that the plaintiff-‐
appellant did not have any source of income that could produce him such a large sum of money as that invested
in the construction of the house; and the fact that the deceased had more than the necessary amount to build the
house.
But above all, the facts appearing from Exhibit 40 are conclusive against the claim of the plaintiff-‐appellant.
Exhibit 40 is a book of accounts containing several items purporting to have been advanced by the deceased to
the plaintiff-‐appellant for the construction of the house. The plaintiff admitted that the Mirst two lines constituting
the heading of the account on the Mirst page were written by himself. Said two lines say: "Dinero Tomado a Don
Mariano Larena para la nueva casa." Appellant further admits that the Mirst entry in Exhibit 40 was made by him
and that the sum of P3,200 mentioned in the third entry was received by him. It is to be noted that the Mirst entry
is dated February 1, 1926, and the last is under the date of December 31, 1927. The other entries are admitted by
the plaintiff-‐appellant to have been made by the deceased. Finally the appellant admitted in cross-‐examination
that this book, Exhibit 40, was his and that whenever he received money from the deceased, he handed it to the
deceased in order that the latter might enter what he had received. The total of the items contained in this book
is P17, 834.72, which is almost the amount invested in the construction of the building. Furthermore, the items
entered in Exhibit 40, appear in Exhibit 41 as withdrawn by the deceased from his account with the Monte de
Piedad, and a corresponding entry appears in Exhibit 43 showing a deposit made by the plaintiff in his current
account with the Philippine National Bank. From all of this it is clear that the money invested in the construction
of the building in question did not belong to the plaintiff.
The appealed judgment is afMirmed, with the costs against the appellant. So ordered.
Stipulation granting authority to sell a mortgage is merely ancillary.
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BICOL SAVINGS AND LOAN ASSOCIATION, petitioner,

vs.
HON. COURT OF APPEALS, CORAZON DE JESUS, LYDIA DE JESUS, NELIA DE JESUS, JOSE DE JESUS, AND PABLO
DE JESUS, respondents.
Contreras & Associates for petitioner.
Reynaldo A. Feliciano for private respondents.

MELENCIO-‐HERRERA, J.:
This Petition for Review on certiorari was Miled by Bicol Savings and Loan Association, seeking the reversal of the
Decision ** of the respondent Court of Appeals in CA-‐G.R. CV No. 02213, dated 11 August 1 988, which ruled
adversely against it. The pleadings disclose the following factual milieu:
Juan de Jesus was the owner of a parcel of land, containing an area of 6,870 sq. ms., more or less, situated in Naga
City. On 31 March 1976, he executed a Special Power of Attorney in favor of his son, Jose de Jesus, "To negotiate,
mortgage my real property in any bank either private or public entity preferably in the Bicol Savings Bank, Naga
City, in any amount that may be agreed upon between the bank and my attorney-‐in-‐fact." (CA Decision, p. 44,
Rollo)
By virtue thereof, Jose de Jesus obtained a loan of twenty thousand pesos (P20,000.00) from petitioner bank on
13 April 1976. To secure payment, Jose de Jesus executed a deed of mortgage on the real property referred to in
the Special Power of Attorney, which mortgage contract carried, inter alia, the following stipulation:
b) If at any time the Mortgagor shall refuse to pay the obligations herein secured, or any of the
amortizations of such indebtedness when due, or to comply with any of the conditions and stipulations herein
agreed .... then all the obligations of the Mortgagor secured by this Mortgage, all the amortizations thereof shall
immediately become due, payable and defaulted and the Mortgagee may immediately foreclose this mortgage in
accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended, or Act No.
1508. For the purpose of extrajudicial foreclosure, the Mortgagor hereby appoints the Mortgagee his attorney-‐in-‐
fact to sell the property mortgaged. . . . (CA Decision, pp. 47-‐48, Rollo)
Juan de Jesus died in the meantime on a date that does not appear of record.
By reason of his failure to pay the loan obligation even during his lifetime, petitioner bank caused the mortgage
to be extrajudicially foreclosed on 16 November 1978. In the subsequent public auction, the mortgaged property
was sold to the bank as the highest bidder to whom a Provisional CertiMicate of Sale was issued.
Private respondents herein, including Jose de Jesus, who are all the heirs of the late Juan de Jesus, failed to
redeem the property within one year from the date of the registration of the Provisional CertiMicate of Sale on 21
November 1980. Hence, a DeMinite CertiMicate of Sale was issued in favor of the bank on 7 September 1982.
Notwithstanding, private respondents still negotiated with the bank for the repurchase of the property. Offers
and counter-‐offers were made, but no agreement was reached, as a consequence of which, the bank sold the
property instead to other parties in installments. Conditional deeds of sale were executed between the bank and
these parties. A Writ of Possession prayed for by the bank was granted by the Regional Trial Court.
On 31 January 1983 private respondents herein Miled a Complaint with the then Court of First Instance of Naga
City for the annulment of the foreclosure sale or for the repurchase by them of the property. That Court, noting
that the action was principally for the annulment of the DeMinite Deed of Sale issued to petitioner bank, dismissed
the case, ruling that the title of the bank over the mortgaged property had become absolute upon the issuance
and registration of the said deed in its favor in September 1982. The Trial Court also held that herein private
respondents were guilty of laches by failing to act until 31 January 1983 when they Miled the instant Complaint.
On appeal, the Trial Court was reversed by respondent Court of Appeals. In so ruling, the Appellate Court applied
Article 1879 of the Civil Code and stated that since the special power to mortgage granted to Jose de Jesus did not
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include the power to sell, it was error for the lower Court not to have declared the foreclosure proceedings -‐and
auction sale held in 1978 null and void because the Special Power of Attorney given by Juan de Jesus to Jose de
Jesus was merely to mortgage his property, and not to extrajudicially foreclose the mortgage and sell the
mortgaged property in the said extrajudicial foreclosure. The Appellate Court was also of the opinion that
petitioner bank should have resorted to judicial foreclosure. A Decision was thus handed down annulling the
extrajudicial foreclosure sale, the Provisional and DeMinite Deeds of Sale, the registration thereof, and the Writ of
Possession issued to petitioner bank.
From this ruling, the bank Miled this petition to which the Court gave due course.
The pivotal issue is the validity of the extrajudicial foreclosure sale of the mortgaged property instituted by
petitioner bank which, in turn hinges on whether or not the agent-‐son exceeded the scope of his authority in
agreeing to a stipulation in the mortgage deed that petitioner bank could extrajudicially foreclose the mortgaged
property.
Article 1879 of the Civil Code, relied on by the Appellate Court in ruling against the validity of the extrajudicial
foreclosure sale, reads:
Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not
include the power to sell.
We Mind the foregoing provision inapplicable herein.
The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract,
and not an auction sale resulting from extrajudicial foreclosure, which is precipitated by the default of a
mortgagor. Absent that default, no foreclosure results. The stipulation granting an authority to extrajudicially
foreclose a mortgage is an ancillary stipulation supported by the same cause or consideration for the mortgage
and forms an essential or inseparable part of that bilateral agreement (Perez v. Philippine National Bank, No.
L-‐21813, July 30, 1966, 17 SCRA 833, 839).
The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the
principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection.
That power survives the death of the mortgagor (Perez vs. PNB, supra). In fact, the right of the mortgagee bank to
extrajudicially foreclose the mortgage after the death of the mortgagor Juan de Jesus, acting through his attorney-‐
in-‐fact, Jose de Jesus, did not depend on the authorization in the deed of mortgage executed by the latter. That
right existed independently of said stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of
Court, which grants to a mortgagee three remedies that can be alternatively pursued in case the mortgagor dies,
to wit: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;
(2) to foreclose the mortgage judicially and prove any deMiciency as an ordinary claim; and (3) to rely on the
mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to Mile a
claim for any deMiciency. It is this right of extrajudicial foreclosure that petitioner bank had availed of, a right that
was expressly upheld in the same case of Perez v. Philippine National Bank (supra), which explicitly reversed the
decision in Pasno v. Ravina (54 Phil. 382) requiring a judicial foreclosure in the same factual situation. The Court
in the aforesaid PNB case pointed out that the ruling in the Pasno case virtually wiped out the third alternative,
which precisely includes extrajudicial foreclosure, a result not warranted by the text of the Rule.
It matters not that the authority to extrajudicially foreclose was granted by an attorney-‐in-‐fact and not by the
mortgagor personally. The stipulation in that regard, although ancillary, forms an essential part of the mortgage
contract and is inseparable therefrom. No creditor will agree to enter into a mortgage contract without that
stipulation intended for its protection.
Petitioner bank, therefore, in effecting the extrajudicial foreclosure of the mortgaged property, merely availed of a
right conferred by law. The auction sale that followed in the wake of that foreclosure was but a consequence
thereof.
WHEREFORE, the Decision of respondent Court of Appeals in CA-‐G.R. CV No. 02213 is SET ASIDE, and the
extrajudicial foreclosure of the subject mortgaged property, as well as the Deeds of Sale, the registration thereof,
and the Writ of Possession in petitioner bank's favor, are hereby declared VALID and EFFECTIVE.
SO ORDERED.
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Existence of GPA; no need for SPA
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 CertiMicate of Title No. 49138
issued by the Registry of Deeds of Manila. 2 The title was registered in the name of Francisco A. Veloso, single, 3
on October 4, 1957. 4 The said title was subsequently cancelled and a new one, Transfer CertiMicate 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 Miled 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 rafMled 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 veriMied 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 6 dated November 29, 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. 7 Petitioner
Veloso, however, denied having executed the power of attorney and alleged that his signature was falsiMied. 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 CertiMicate 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
sufMicient 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 testiMied that he acquired the subject property from
the Philippine Building Corporation, as evidenced by a Deed of Sale dated October 1, 1957. 10 He married Irma
Lazatin on January 20, 1962. 11 Hence, the property 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 falsiMied, he presented
Allied Bank Checks Nos. 16634640, 16634641 and 16634643, which allegedly bore his genuine signature.
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80
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, 12 defendant Aglaloma Escario was 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 sufMicient 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 certiMicate of title was deemed a conclusive authority from the plaintiff to the
Register of Deeds to enter a new certiMicate. 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 Minds 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 satisMied with the decision, petitioner Veloso Miled his appeal with the Court of Appeals. The respondent court
afMirmed in toto the Mindings of the trial court.
Hence, this petition for review before Us.
This petition for review was initially dismissed for failure to submit an afMidavit of service of a copy of the petition
on the counsel for private respondent. 13 A motion for reconsideration of the resolution was Miled but it was
denied in are resolution dated March 30, 1992. 14 A second motion for reconsideration was Miled and in a
resolution dated Aug. 3, 1992, the motion was granted and the petition for review was reinstated. 15
A supplemental petition was Miled on October 9, 1992 with the following assignment of errors:
I
The Court of Appeals committed a grave error in not Minding 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 afMirming 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 Mind 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:
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2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or
other forms of real property, more speciMically TCT No. 49138, upon such terms and conditions and under such
covenants as my said attorney shall deem Mit 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 speciMied 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 speciMic, 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 speciMic power to sell or mortgage or
to do other speciMic 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 falsiMied. He also alleges that the same was
not duly notarized for as testiMied 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 certiMicate and his residence
certiMicate 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 17 Petitioner, however, failed 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
falsiMied. 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 19 (quoting Osborn, The Problem of Proof) that:
The process of identiMication, therefore, must include the determination of the extent, kind, and signiMicance 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 identiMication is solved.
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Even granting for the sake of argument, that the petitioner's signature was falsiMied 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, 20 it was held, viz:
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
Miled 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 CertiMicate 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 CertiMicate of Title to defendant operated as "conclusive authority from the
plaintiff to the Register of Deeds to enter a new certiMicate." 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 modiMication of the appealed decision.
ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.
SO ORDERED.
Revocation of agency; when principal is liable.
MARIANO DIOLOSA and ALEGRIA VILLANUEVA-‐DIOLOSA, petitioners,

vs.
THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor of QUIN BATERNA REALTY),
respondents.
Enrique L. Soriano for petitioners.
Domingo Laurea for private respondent.

RELOVA, J.:
Appeal by certiorari from a decision of the then Court of Appeals ordering herein petitioners to pay private
respondent "the sum of P10,000.00 as damages and the sum of P2,000.00 as attorney's fees, and the costs."
This case originated in the then Court of First Instance of Iloilo where private respondents instituted a case of
recovery of unpaid commission against petitioners over some of the lots subject of an agency agreement that
were not sold. Said complaint, docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano Diolosa
and Alegria Villanueva-‐Diolosa", was dismissed by the trial court after hearing. Thereafter, private respondent
elevated the case to respondent court whose decision is the subject of the present petition.
The parties — petitioners and respondents-‐agree on the Mindings of facts made by respondent court which are
based largely on the pre-‐trial order of the trial court, as follows:
PRE-‐TRIAL ORDER
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When this case was called for a pre-‐trial conference today, the plaintiff, assisted by Atty. Domingo Laurea,
appeared and the defendants, assisted by Atty. Enrique Soriano, also appeared.
A. — During the pre-‐trial conference the parties, in addition to what have been admitted in the pleadings, have
agreed and admitted that the following facts are attendant in this case and that they will no longer adduce
evidence to prove them:
1. That the plaintiff was and still is a licensed real estate broker, and as such licensed real estate broker on
June 20, 1968, an agreement was entered into between him as party of the second part and the defendants
spouses as party of the Mirst part, whereby the former was constituted as exclusive sales agent of the defendants,
its successors, heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE
SUBDIVISION owned by the defendants, under the terms and conditions embodied in Exhibit "A", and pursuant to
said agreement (Exhibit "A"), the plaintiff acted for and in behalf of the defendants as their agent in the sale of the
lots included in the VILLA ALEGRE SUBDIVISION;
2. That on September 27, 1968, the defendants terminated the services of plaintiff as their exclusive sales
agent per letter marked as Exhibit "B", for the reason stated in the latter.
B. — During the trial of this case on the merit, the plaintiff will adduce by competent evidence the following facts:
1. That as a real estate broker, he had sold the lots comprised in several subdivisions, to wit: GreenMield
Subdivision, the Villa Beach Subdivision, the Juntado Subdivision, the St. Joseph Village, the Ledesma Subdivision,
the Brookside Subdivision, the Villa Alegre Subdivision, and Cecilia Subdivision, all in the City of Iloilo except St.
Joseph which is in Pavia Iloilo.
2. That the plaintiff, as a licensed real estate broker, has been seriously damaged by the action of the
defendants in rescinding, by Exhibit "B", the contract (Exhibit "A") for which the plaintiff suffered moral damages
in the amount of P50,000.00, damages to his good will in the amount of P100,000.00, for attorney's fees in the
amount of P10,000.00 to protect his rights and interests, plus exemplary damages to be Mixed by the Court.
3. That the plaintiff is entitled to a commission on the lots unsold because of the rescission of the contract.
C. — The defendants during the trial will ill prove by competent evidence the following:
1. That the plaintiff's complaint was Miled to make money out of the suit from defendants, to harrass and to
molest defendants;
2. That because of the unjustiMied and unfounded complaint of the plaintiff, the defendants suffered moral
damages in the amount of P50,000.00, and that for the public good, the court may order the plaintiff to pay the
defendants exemplary damages in the amount of P20,000.00, plus attorney's fees of P10,000.00.
D.— Contentions of the parties:
1. The plaintiff contends:
(a) That under the terms of the contract (Exhibit "A") the plaintiff had unrevocable authority to sell all the
lots included in the Villa Alegre Subdivision and to act as exclusive sales agent of the defendants until all the lots
shall have been disposed of;
(b) That the rescission of the contract under Exhibit "B", contravenes the agreement of the parties.
2. The defendants contend:
(a) That they were within their legal right to terminate the agency on the ground that they needed the
undisposed lots for the use of the family;
(b) That the plaintiff has no right in law to case for commission on lots that they have not sold.
E. — The parties hereby submit to the Court the following issues:
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1. Whether under the terms of Exhibit "A" the plaintiff has the irrevocable right to sen or dispose of all the
lots included within Villa Alegre Subdivision;
2. Can the defendants terminate their agreement with the plaintiff by a letter like Exhibit "B"?
F. — The plaintiff submitted the following exhibits which were admitted by the defendants:
Exhibit "A" — agreement entered into between the parties on June 20, 1968 whereby the plaintiff had the
authority to sell the subdivision lots included in Villa Alegre subdivision;
Exhibit "B" — Letter of the defendant Alegria V. Diolosa dated September 27, 1968 addressed to the plaintiff
terminating the agency and rescinding Exhibit "A" for the reason that the lots remained unsold lots were for
reservation for their grandchildren.
The Court will decide this case based on the facts admitted in the pleadings, those agreed by the parties during
the pre-‐trial conference, and those which they can prove during the trial of this case, in accordance with the
contention of the parties based on the issues submitted by them during the pre-‐trial conference.
SO ORDERED.
Iloilo City, Philippines, August 14, 1969.
(SGD) VALERIO V. ROVIRA

Judge
(pp. 22-‐25, Rollo)
The only issue in this case is whether the petitioners could terminate the agency agreement, Exhibit "A", without
paying damages to the private respondent. Pertinent portion of said Exhibit "A" reads:
That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple of VILLA ALEGRE
SUBDIVISION situated in the District of Mandurriao, Iloilo City, which parcel of land is more particularly
described as follows, to wit:
A parcel of land, Lot No. 2110-‐b-‐2-‐C, PSD 74002, Transfer CertiMicate of Title No. T_____ situated in the District of
Mandurriao, Iloilo, Philippines, containing an area of 39016 square meters, more or less, with improvements
thereon.
That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale of the lots of the above-‐
described subdivision, is engaging as their EXCLUSIVE SALES AGENT the PARTY OF THE SECOND PART, its
successors, heirs and assigns to dispose of, sell, cede, transfer and convey the above-‐described property in
whatever manner and nature the PARTY OF THE SECOND PART, with the concurrence of the PARTY OF THE
FIRST PART, may deem wise and proper under the premises, whether it be in cash or installment basis, until all
the subject property as subdivided is fully disposed of. (p. 7 of Petitioner's brief. Emphasis supplied).
Respondent court, in its decision which is the subject of review said:
Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate the agency
agreement, Exh. "A", at will without paying damages. The said agency agreement expressly stipulates ... until all
the subject property as subdivided is fully disposed of ..." The testimony of Roberto Malundo(t.s.n. p. 99) that the
plaintiff agreed to the intention of Mrs. Diolosa to reserve some lots for her own famay use cannot prevail over
the clear terms of the agency agreement. Moreover, the plaintiff denied that there was an agreement to reserve
any of the lots for the family of the defendants. (T.s.n. pp. 16).
There are twenty seven (27) lots of the subdivision remaining unsold on September 27, 1968 when the
defendants rescinded the agency agreement, Exhibit "A". On that day the defendants had only six grandchildren.
That the defendants wanted to reserve the twenty seven remaining lots for the six grandchildren is not a legal
reason for defendants rescind the agency agreement. Even if the grandchildren were to be given one lot each,
there would still be twenty-‐one lots available for sale. Besides it is undisputed that the defendants have other
lands which could be reserved for their grandchildren. (pp. 26-‐27, Rollo)
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The present appeal is manifestly without merit.
Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dispose of, sell, cede,
transfer and convey ... until out the subject property as subdivided is fully disposed of." The authority to sell is not
extinguished until all the lots have been disposed of. When, therefore, the petitioners revoked the contract with
private respondent in a letter, Exhibit "B" —
Dear Mr. Baterna:
Please be informed that we have Minally decided to reserve the remaining unsold lots, as of this date of our VILLA
ALEGRE Subdivision for our grandchildren.
In view thereof, notice is hereby served upon you to the effect that our agreement dated June 20, 1968 giving you
the authority to sell as exclusive sales agent of our subdivision is hereby rescinded.
Please be duly guided.
Very truly yours,
(SGD) ALEGRIA V. DIOLOSA

Subdivision Owner
(p. 11 of Petitioner's Brief)
they become liable to the private respondent for damages for breach of contract.
And, it may be added that since the agency agreement, Exhibit "A", is a valid contract, the same may be rescinded
only on grounds speciMied in Articles 1381 and 1382 of the Civil Code, as follows:
ART. 1381. The following contracts are rescissible:
(1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by
more than one-‐fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding
number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due
them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
ART. 1382. Payments made in a state of insolvency for obligations to whose fulMillment the debtor could not
be compelled at the time they were effected, are also rescissible."
In the case at bar, not one of the grounds mentioned above is present which may be the subject of an action of
rescission, much less can petitioners say that the private respondent violated the terms of their agreement-‐such
as failure to deliver to them (Subdivision owners) the proceeds of the purchase price of the lots.
ACCORDINGLY, the petition is hereby dismissed without pronouncement as to costs.
SO ORDERED.
Revocation of Agency.
FLORENTINO RALLOS, ET AL., plaintiff-‐appellee,
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vs.
TEODORO R. YANGCO, defendant-‐appellant.
Mariano Escueta, for appellant.

Martin M. Levering, for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of the Province of Cebu, the Hon. Adolph
Wislizenus presiding, in favor of the plaintiffs, in the sum of P1,537.08, with interest at 6 per cent per annum
from the month of July, 1909, with costs.
The defendant in this case on the 27th day of November, 1907, sent to the plaintiff Florentino Rallos, among
others, the following letter:
CIRCULAR NO. 1.
MANILA, November 27, 1907
MR. FLORENTINO RALLOS, Cebu.
DEAR SIR: I have the honor to inform you that I have on this date opened in my steamship ofMice at No. 163
Muelle de la Reina, Binondo, Manila, P. I., a shipping and commission department for buying and selling leaf
tobacco and other native products, under the following conditions:
1. When the consignment has been received, the consignor thereof will be credited with a sum not to
exceed two-‐thirds of the value of the goods shipped, which may be made available by acceptance of a draft or
written order of the consignor on Mive to ten day's sight, or by his ordering at his option a bill of goods. In the
latter case he must pay a commission of 2 per cent.
2. No draft or written order will be accepted without previous notice forwarding the consignment of goods
to guarantee the same.
3. Expenses of freight, hauling and everything necessary for duly executing the commission will be charged
in the commission.
4. All advances made under sections (1) and (3) shall bear interest at 10 per cent a year, counting by the
sale of the goods shipped or remittance of the amount thereof.
5. A commission of 2 ½ per cent will be collected on the amount realized from the sale of the goods
shipped.
6. A Payment will be made immediately after collection of the price of the goods shipped.
7. Orders will be taken for the purchase of general merchandise, ship-‐stores, cloths, etc., upon remittance of
the amount with the commission of 2 per cent on the total value of the goods bought. Expenses of freight,
hauling, and everything necessary for properly executing the commission will be charged to the consignor.
8. The consignor of the good may not Mix upon the consignee a longer period than four months, counting
from the date of receipt, for selling the same; with the understanding that after such period the consignee is
authorized to make the sale, so as to prevent the advance and cost of storage from amounting to more than the
actual value of said goods, as has often happened.
9. The shipment to the consignors of the goods ordered on account of the amount realized from the sale of
the goods consigned and of the goods bought on remittance of the value thereof, under sections (1) and (3), will
not be insured against risk by sea and land except on written order of the interested parties.
10. On all consignments of goods not insured according to the next preceding section, the consignors will
bear the risk.
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11. All the foregoing conditions will take effect only after this ofMice has acknowledged the consignor's
previous notice.
12. All other conditions and details will be furnished at the ofMice of the undersigned.
If you care to favor me with your patronage, my ofMice is at No. 163 Muelle de la Reinna, Binondo, Manila, P. I.,
under the name of "Teodoro R. Yangco." In this connection it gives me great pleasure to introduce to you Mr.
Florentino Collantes, upon whom I have conferred public power of attorney before the notary, Mr. Perfecto Salas
Rodriguez, dated November 16, 1907, to perform in my name and on my behalf all acts necessary for carrying out
my plans, in the belief that through his knowledge and long experience in the business, along with my
commercial connections with the merchants of this city and of the provinces, I may hope to secure the most
advantageous prices for my patrons. Mr. Collantes will sign by power of attorney, so I beg that you make due note
of his signature hereto afMixed.
Very respectfully,
(Sgd.) T. R. YANGCO.
(Sgd.) F. COLLANTES.
Accepting this invitation, the plaintiffs proceeded to do a considerable business with the defendant through the
said Collantes, as his factor, sending to him as agent for the defendant a good deal of produce to be sold on
commission. Later, and in the month of February, 1909, the plaintiffs sent to the said Collantes, as agent for the
defendant, 218 bundles of tobacco in the leaf to be sold on commission, as had been other produce previously.
The said Collantes received said tobacco and sold it for the sum of P1,744. The charges for such sale were
P206.96. leaving in the hands of said Collantes the sum of P1,537.08 belonging to the plaintiffs. This sum was,
apparently, converted to his own use by said agent.
It appears, however, that prior to the sending of said tobacco the defendant had severed his relations with
Collantes and that the latter was no longer acting as his factor. This fact was not known to the plaintiffs; and it is
conceded in the case that no notice of any kind was given by the defendant to the plaintiffs of the termination of
the relations between the defendant and his agent. The defendant refused to pay the said sum upon demand of
the plaintiffs, placing such refusal upon the ground that at the time the said tobacco was received and sold by
Collantes he was acting personally and not as agent of the defendant. This action was brought to recover said
sum.
As is seen, the only question for our decision is whether or not the plaintiffs, acting in good faith and without
knowledge, having sent produce to sell on commission to the former agent of the defendant, can recover of the
defendant under the circumstances above set forth. We are of the opinion that the defendant is liable. Having
advertised the fact that Collantes was his agent and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due
and timely notice thereof to the plaintiffs. Failing to do so, he is responsible to them for whatever goods may have
been in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the
termination of such relationship.
For these reasons the judgment appealed from is conMirmed, without special Minding as to costs.
Revocation of agency at will; express or implied
CMS LOGGING, INC., petitioner,

vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.

NOCON, J.:
This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CA-‐G.R.
No. 47763-‐R which afMirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case
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No. 56355 dismissing the complaint Miled by petitioner CMS Logging, Inc. (CMS, for brevity) against private
respondent D.R. Aguinaldo Corporation (DRACOR, for brevity) and ordering the former to pay the latter
attorney's fees in the amount of P1,000.00 and the costs.
The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business,
while private respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August
28, 1957, CMS and DRACOR entered into a contract of agency 1 whereby the former appointed the latter as its
exclusive export and sales agent for all logs that the former may produce, for a period of Mive (5) years. The
pertinent portions of the agreement, which was drawn up by DRACOR, 2 are as follows:
1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority,
subject to the conditions and limitations hereinafter set forth, to sell and export under a Mirm sales contract
acceptable to SISON, all logs produced by SISON for a period of Mive (5) years commencing upon the execution of
the agreement and upon the terms and conditions hereinafter provided and DRACOR hereby accepts such
appointment;
xxx xxx xxx
3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON
with the buyers and arrange the procurement and schedules of the vessel or vessels for the shipment of SISON's
logs in accordance with SISON's written requests, but DRACOR shall not in anyway [sic] be liable or responsible
for any delay, default or failure of the vessel or vessels to comply with the schedules agreed upon;
xxx xxx xxx
9. It is expressly agreed by the parties hereto that DRACOR shall receive Mive (5%) per cent commission of
the gross sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted from the
proceeds of any and/or all moneys received by DRACOR for and in behalf and for the account of SISON;
By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of
logs in Japan, from September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's president, Atty.
Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that
DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or liaison ofMicer in
selling CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the
buyer of the logs. Under this arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled
to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid
the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as
this tantamount to DRACOR receiving double compensation for the services it rendered.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several
Mirms in Japan without the aid or intervention of DRACOR.
CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR
counterclaimed for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese
Mirms. In its reply, CMS averred as a defense to the counterclaim that DRACOR had retained the sum of
P101,167.59 as part of its commission for the sales made by CMS. 5 Thus, as its counterclaim to DRACOR's
counterclaim, CMS demanded DRACOR return the amount it unlawfully retained. DRACOR later Miled an amended
counterclaim, alleging that the balance of its commission on the sales made by CMS was P42,630.82, 6 thus
impliedly admitting that it retained the amount alleged by CMS.
In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received
the commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan, though the trial court stated that
"Shinko was able to collect the total amount of $77,264.67 US Dollars (Exhs. M and M-‐1)." 7 The counterclaim
was likewise dismissed, as it was shown that DRACOR had waived its rights to the balance of its commission in a
letter dated February 2, 1963 to Atty. Carlos Moran Sison, president of CMS. 8 From said decision, only CMS
appealed to the Court of Appeals.
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The Court of Appeals, in a 3 to 2 decision, 9 afMirmed the dismissal of the complaint since "[t]he trial court could
not have made a categorical Minding that Shinko collected commissions from the buyers of Sison's logs in Japan,
and could not have held that Sison is entitled to recover from Dracor the amount collected by Shinko as
commissions, plaintiff-‐appellant having failed to prove by competent evidence its claims." 10
Moreover, the appellate court held:
There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-‐appellee out of its own
commission of 5%, as indicated in the letter of its president to the president of Sison, dated February 2, 1963
(Exhibit "N"), and in the Agreement between Aguinaldo Development Corporation (ADECOR) and Shinko Trading
Co., Ltd. (Exhibit "9"). Daniel R. Aguinaldo stated in his said letter:
. . . , I informed you that if you wanted to pay me for the service, then it would be no more than at the standard
rate of 5% commission because in our own case, we pay our Japanese agents 2-‐1/2%. Accordingly, we would only
add a similar amount of 2-‐1/2% for the service which we would render you in the Philippines. 11
Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of
Appeals erred in not making a complete Mindings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez,
regarding the admission by Shinko's president and director that it collected a commission of U.S. $1.00 per 1,000
board feet of logs from the Japanese buyers, is admissible against DRACOR; (3) that the statement of DRACOR's
chief legal counsel in his memorandum dated May 31, 1965, Exhibit "K", is an admission that Shinko was able to
collect the commission in question; (4) that the fact that Shinko received the questioned commissions is deemed
admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court when it failed to reply to Atty.
Carlos Moran Sison's letter dated February 6, 1962; (5) that DRACOR is not entitled to its 5% commission arising
from the direct sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its
dealings with CMS.
With regard to CMS's arguments concerning whether or not Shinko received the commission in question, We Mind
the same unmeritorious.
To begin with, these arguments question the Mindings of fact made by the Court of Appeals, which are Minal and
conclusive and can not be reviewed on appeal to the Supreme Court. 12
Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison
in Japan, 13 there is no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67
as commission arising from the sale of CMS's logs to various Japanese Mirms.
The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro
R. Dominguez to the effect that Shinko's president and director told him that Shinko received a commission of
U.S. $1.00 for every 1,000 board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of
Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata was not presented to testify on his letter.
CMS's other evidence have little or no probative value at all. The statements made in the memorandum of Atty.
Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel
R. Aguinaldo, 16 president of DRACOR, and the reply-‐letter dated January 9, 1964 17 by DRACOR's counsel Atty.
V. E. Del Rosario to CMS's demand letter dated September 25, 1963 can not be categorized as admissions that
Shinko did receive the commissions in question.
The alleged admission made by Atty. Ciocon, to wit —
Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of
67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only
can not be considered as such since the statement was made in the context of questioning CMS's tally of logs
delivered to various Japanese Mirms.
Similarly, the statement of Daniel R. Aguinaldo, to wit —
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. . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for
certain services which Shinko must have satisfactorily performed for them in Japan otherwise they would not
have paid Shinko
and that of Atty. V. E. Del Rosario,
. . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less
question, the right of Shinko Trading Co., Ltd. with which our client debt directly, to whatever beneMits it might
have derived form the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no
justiMication for your client's contention that these beneMits, whether they can be considered as commissions paid
by Toyo Menka Kaisha to Shinko Trading, are to be regarded part of the gross sales.
can not be considered admissions that Shinko received the questioned commissions since neither statements
declared categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS's
logs.
As correctly stated by the appellate court:
It is a rule that "a statement is not competent as an admission where it does not, under a reasonable
construction, appear to admit or acknowledge the fact which is sought to be proved by it". An admission or
declaration to be competent must have been expressed in deMinite, certain and unequivocal language (Bank of the
Philippine Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18
CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions
in question when it failed to respond to Atty. Carlos Moran Sison's letter dated February 6, 1963, is not supported
by the evidence. DRACOR did in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of
F.A. Novenario, 19 which stated:
This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is
at present out of the country.
xxx xxx xxx
We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the
payment was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing
to do with it.
The Minding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US
Dollars," can not be given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and
"M-‐1".
Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled
thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part
of the gross sales of CMS's logs.
However, We Mind merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled
to its commission from the sales made by CMS to Japanese Mirms.
The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and
may be availed of even if the period Mixed in the contract of agency as not yet expired. 21 As the principal has this
absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from
such revocation, 22 unless it is shown that such was done in order to evade the payment of agent's commission.
23
In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese Mirms. Yet, during the
existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese Mirms.
This act constituted an implied revocation of the contract of agency under Article 1924 of the Civil Code, which
provides:
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Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent,
dealing directly with third persons.
In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the act of a
contractor, who, after executing powers of attorney in favor of another empowering the latter to collect whatever
amounts may be due to him from the Government, and thereafter demanded and collected from the government
the money the collection of which he entrusted to his attorney-‐in-‐fact, constituted revocation of the agency in
favor of the attorney-‐in-‐fact.
Since the contract of agency was revoked by CMS when it sold its logs to Japanese Mirms without the intervention
of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to
retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be
entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of
the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of
the agent's commission.
Regarding CMS's contention that the Court of Appeals erred in not Minding that DRACOR had committed acts of
fraud and bad faith, We Mind the same unmeritorious. Like the contention involving Shinko and the questioned
commissions, the Mindings of the Court of Appeals on the matter were based on its appreciation of the evidence,
and these Mindings are binding on this Court.
In Mine, We afMirm the ruling of the Court of Appeals that there is no evidence to support CMS's contention that
Shinko earned a separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's
logs. However, We reverse the ruling of the Court of Appeals with regard to DRACOR's right to retain the amount
of P101,536.77 as part of its commission from the sale of logs by CMS, and hold that DRACOR has no right to its
commission. Consequently, DRACOR is hereby ordered to remit to CMS the amount of P101,536.77.
WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de
ofMicio.
SO ORDERED.
When principal may sue the person with whom the agent dealt with.
GOLD STAR MINING CO., INC., petitioner,

vs.
MARTA LIM-‐JIMENA, CARLOS JIMENA, GLORIA JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE
JIMENA, JOYCE JIMENA, as legal heirs of the deceased VICTOR JIMENA, and JOSE HIDALGO, respondents.
Emiliano S. Samson and R. Balderrama-‐Samson for petitioner.

Leandro Sevilla and Ramon C. Aquino for respondents.
REYES, J.B.L., J.:
From an afMirmance in toto by the Court of Appeals1 of a decision of the Court of First Instance of Manila,2
speciMically the portion thereof condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda. de Jimena, et al., the
sum of P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction this appeal is taken.
It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-‐half
(1/2) of the proceeds from all mining claims that he would purchase with the money to be advanced by the latter.
This agreement was later on modiMied (in a 1939 notarial instrument duly registered with the Register of Deeds
of Marinduque in his capacity as mining recorder) so as to include in the equal sharing arrangement not only the
proceeds from several mining claims, which by that time had already been purchased by Lincallo with various
sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and so as to bind thereby
their "heirs, assigns, or legal representatives." Apparently, the mining rights over part of the claims were assigned
by Lincallo to Gold Star Mining Co., Inc., sometime before World War Il because in 1950 the corporation paid him
P5,000 in consideration of, and as a quitclaim for, pre-‐war royalties.
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On several occasions thereafter, the mining claims in question were made subject-‐matter of contracts entered
into by Lincallo in his own name and for his beneMit alone without the slightest intimation of Jimena's interests
over the same. Thus, on 19 September 1951, Lincallo and one Alejandro Marquez, as separate owners of
particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the assignee thereof,
regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later, Lincallo,
Marquez and Congressman PanMilo Manguerra, again as owners, leased certain mining claims to Jacob Cabarrus,
who, in turn, transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By virtue of
still another contract executed by these lessors on 29 February 1952, 43% of the royalties due from Marinduque
Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.
As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold Star Mining Co., Inc.,
and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned and/or leased by
Lincallo and, accordingly, demanded recognition and payment of his one-‐half share in all the royalties, allocated
and paid and, thereafter, to be paid to the latter. Both corporations, however, ignored Jimena's demands.
Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-‐half share in the
royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo. Acknowledging
Jimena's contractual claim, Lincallo off and on promised to settle his obligations. And on 14 July 1952, Lincallo
promised for the last time, to settle everything on or before the 30th day of the same month.
Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a month
after he promised to pay Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co., Inc., to one
Gregorio Tolentino, a salaried employee, for an alleged consideration of P10,000.00.
On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and his one-‐half
share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with Tolentino, were
later joined as defendants.
On 17 September 1954, the trial court issued, upon petition of Jimena, a writ of preliminary injunction
restraining Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royalties during the
pendency of the case to Lincallo, his assigns or legal representatives. Despite the injunction, however, Gold Star
Mining Co., Inc., was found out to have paid P30, 691.92 to Lincallo and Tolentino. Said corporation claimed later
on (on appeal) that the injunction had been superseded and/or dissolved on 25 May 1955 by the trial court's
grant of Jimena's petition for a writ of preliminary attachment "to supersede the writ of preliminary injunction
previously issued." But as the grant was conditioned upon Miling of a bond to be approved by the trial court, no
writ of attachment was issued because the bond offered by Jimena was disapproved.3
Jimena and Tolentino died successively during the pendency of the case in the trial court and were, accordingly,
substituted by their respective widows and children.
After a protracted trial, the lower court rendered a decision, the dispositive portion of which reads as follows:
IN VIEW WHEREOF, judgment is rendered:
1. Declaring the plaintiffs —
(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of the royalties of
defendant Lincallo under the latter's contract with Gold Star, Exh. D or Exh. D-‐l, dated September 19, 1951;
(b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract with Jesus (Jacob)
Cabarrus assigned to Marinduque Iron Mines, and his contract with Alejandro Marquez, dated December 5, 1951,
and February 29, 1952, Exhs. J and J-‐1; .
(c) and condemning defendants Gold Star and Marinduque Iron Mines to pay direct to plaintiffs said 1/2
shares of the royalties until said contracts are terminated;
2. Condemning defendant Lincallo to pay unto plaintiffs, as successors in interest of Victor Jimena —
(a) the sum of P5,800 with legal interest from the date of the Miling of the complaint;
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(b) the sum of P40,167.52 which is the 1/2 share of the royalties paid by Gold Star unto Lincallo as of the
September 14, 1957;
(c) the sum of P3,235.64 which is the 1/2 share of Jimena on the rentals amounting to P6,471.27
corresponding to Lincallo's share paid by Marinduque Iron Mines unto Lincallo from December, 1951 to August
25, 1954; under Exhibit N;
(d) P1,000.00 as attorneys fees;
3. Declaring that the deed of sale, Exh. H, dated August 16, 1952, between defendant Lincallo and Gregorio
Tolentino was effective and transferred only 1/2 of the 45% (43%) share of Lincallo, and ordering Gold Star
Mining Company to make payment hereafter unto plaintiffs, pursuant to this decision on the royalties due unto
Lincallo, notwithstanding the cession unto Tolentino, so that of the royalties due unto Lincallo 1/2 should always
be paid by Gold Star unto plaintiffs notwithstanding said session, Exh. H, unto Tolentino by Lincallo;
4. Judgment is also rendered condemning the estate of Gregorio Tolentino but not the heirs personally, to
pay unto plaintiffs the sum of P24,386.51 with legal interest from the date of the Miling of the complaint against
Gregorio Tolentino.
5. Judgment is rendered condemning defendant Gold Star Mining Company to pay to plaintiffs solidarily
with Lincallo and to be imputed to Lincallo's liability under this judgment unto Jimena, the sum of P30,691.92;
6. Judgment is rendered condemning defendant Marinduque Iron Mines to pay unto plaintiffs the sum of
P7,330.36;
7. The counterclaims of defendants are dismissed;
8. Costs against defendant Lincallo.
SO ORDERED. (Emphasis supplied.)
From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, and the two
corporations, appealed to the Court of Appeals. The appeal interposed by Marinduque Iron Mines Agents, Inc.,
was, however, withdrawn, while that of Lincallo was dismissed for the failure to Mile brief. Pending outcome of the
appeal, the royalties due from Gold Star Mining Co., Inc., were required to be deposited with the trial court, as per
order of 17 June 1958 issued by the same court. In compliance therewith, Gold Star Mining Co., Inc., made a
judicial deposit in the amount of P30,691.92.
On 8 October 1965, the Court of Appeals handed down a decision sustaining in its entirety that of the trial court.
Gold Star Mining Co., Inc., moved for reconsideration of said decision insofar as its adjudged solidary liability
with Lincallo to pay to the Jimenas the sum of P30,691.92 "for Mlagrant violation of the injunction" was
concerned. The motion was denied. Hence, the present appeal.
Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals' decision Minding that respondents Jimenas
have a cause of action against it, and condemning it to pay the sum of P30,691.92 for violation of an allegedly
non-‐existent injunction, are reversible errors. Reasons: As to respondents Jimena's cause of action, the same does
not allegedly appear in the complaint Miled against petitioner corporation. And as to the P30,691.92 penalty for
violation of the injunction, the same can not allegedly be imposed because (1) the sum of P30,691.92 was not
prayed for, (2) the injunction in question had already been superseded and/or dissolved by the trial court's grant
of Jimena's petition for writ of preliminary attachment; and (3) the corporation was never charged, heard, nor
found guilty in accordance with, and pursuant to, the provisions, of Rule 64 of the (Old) Rules of Court.
We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause of action against
petitioner corporation and that the latter's joinder as one of the defendants before the trial court is Mitting and
proper. Said the Court of Appeals, and we adopt the same:
There Mirst assigned error is the Trial Court erred in not dismissing this instant action as "there is no privity of
contract between Gold Star and Jimena." This contention is without merit.
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The situation at bar is similar to the status of the Mirst and second mortgagees of a duly registered real estate
mortgage. While there exists no privity of contract between them, yet the common subject-‐matter supplies the
juridical link.
Here the evidence overwhelmingly established that Jimena made prewar and postwar demands upon Gold Star
for the payment of his 1/2 share of the royalties but all in vain so he (Jimena) was constrained to implead Gold
Star because it refused to recognize his right.
Jimena now seeks for accounting of the royalties paid by Gold Star to Lincallo, and for direct payment to himself
of his share of the royalties. This relief cannot be granted without joining the Gold Star specially in the face of the
attitude it had displayed towards Jimena.
Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudor mio," this legal
maxim Minds sanction in Article 1177, new Civil Code which provides that "creditors, after having pursued the
property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of
the latter (debtor) for the same purpose, save those which are inherent in his person; they may also impugn the
acts which the debtor may have done to defraud them (1111)."
From another standpoint, equally valid and acceptable, it can be said that Lincallo, in transferring the mining
claims to Gold Star (without disclosing that Jimena was a co-‐owner although Gold Star had knowledge of the fact
as shown by the proofs heretofore mentioned) acted as Jimena's agent with respect to Jimena's share of the
claims.
Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883, New Civil Code, which
provides that the principal may sue the person with whom the agent dealt with in his (agent's) own name, when
the transaction "involves things belonging to the principal."
As counsel for Jimena has correctly contended, "the remedy of garnishment suggested by Gold Star is utterly
inadequate for the enforcement of Jimena's right against Lincallo because Jimena wanted an accounting and
wanted to receive directly his share of the royalties from Gold Star. That recourse is not open to Jimena unless
Gold Star is made a party in this action."
Coming now to the violation of the injunction, we observe that the facts speak for themselves. Considering that
no writ of preliminary attachment was issued by the trial court, the condition for its issuance not having been
met by Jimena, nothing can be said to have superseded the writ of preliminary injunction in question. The
preliminary injunction was, therefore, subsisting and evidently violated by petitioner corporation when it paid
the sum of P30,691.92 to Lincallo and Tolentino.
Gold Star Mining Co., Inc., insists that it may not be penalized for breach of the injunction, issued by the court of
origin, without prior written charge for indirect contempt, and due hearing, citing section 3 of Rule 64 of the old
Rules of Court, now Rule 71 of the Revised Rules. We fail to see any merit in this contention, as it misses the true
nature and intent of the award of P30,691.92 to Jimena, payable by Gold Star and Lincallo's estate.
Said award is not so much a penalty against petitioner as a decree of restitution, in order to make the violated
injunction effective, as it should be, by placing the parties in the same condition as if the injunction had been fully
obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction and had not paid to Lincallo the royalties of
P30,691.92, such amount would now be available for the satisfaction of the claims of Jimena and his heirs against
Lincallo. By sentencing Gold Star Mining Co., Inc., to pay, for the account of Lincallo, the sum aforesaid, the court
merely endeavoured to prevent its award from being rendered pro tanto nugatory and ineffective, and thus make
it conformable to law and justice.
That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is shown
by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to Lincallo's
liability under this judgment." The court thus left the way open for Gold Star Mining Co., Inc., to recover later the
whole amount from Lincallo, whether by direct action against him or by deducting it from the royalties that may
fall due under his 1951 contract with appellant.
That the recovery of this particular amount was not speciMically sought in the complaint is of no moment, since
the complaint prayed in general for "other equitable relief."
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WHEREFORE, Minding no reversible error in the decision appealed from, the same is afMirmed, with costs against
petitioner-‐appellant, Gold Star Mining Co., Inc.
Responsibility of two agents.
PEDRO MARTINEZ, plaintiff-‐appellee,

vs.
ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.
Fernando de la Cantera for appellant.

O'Brien and DeWitt for appellee.
ARELLANO, C.J.:
On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a private
document, acknowledged that they had received the same with the agreement, as stated by them, "that we are to
invest the amount in a store, the proMits or losses of which we are to divide with the former, in equal shares."
The plaintiff Miled a complaint on April 25, 1907, in order to compel the defendants to render him an accounting
of the partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong
Pong Co alone appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him
and to Ong Lay of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was
the one who had managed the business, and that nothing had resulted therefrom save the loss of the capital of
P1,500, to which loss the plaintiff agreed.
The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to
the plaintiff one-‐half of the said capital of P1,500 which, together with Ong Lay, he had received from the plaintiff,
to wit, P750, plus P90 as one-‐half of the proMits, calculated at the rate of 12 per cent per annum for the six months
that the store was supposed to have been open, both sums in Philippine currency, making a total of P840, with
legal interest thereon at the rate of 6 per cent per annum, from the 12th of June, 1901, when the business
terminated and on which date he ought to have returned the said amount to the plaintiff, until the full payment
thereof with costs.
From this judgment Ong Pong Co appealed to this court, and assigned the following errors:
1. For not having taken into consideration the fact that the reason for the closing of the store was the ejectment
from the premises occupied by it.
2. For not having considered the fact that there were losses.
3. For holding that there should have been proMits.
4. For having applied article 1138 of the Civil Code.
5. and 6. For holding that the capital ought to have yielded proMits, and that the latter should be calculated 12 per
cent per annum; and
7. The Mindings of the ejectment.
As to the Mirst assignment of error, the fact that the store was closed by virtue of ejectment proceedings is of no
importance for the effects of the suit. The whole action is based upon the fact that the defendants received
certain capital from the plaintiff for the purpose of organizing a company; they, according to the agreement, were
to handle the said money and invest it in a store which was the object of the association; they, in the absence of a
special agreement vesting in one sole person the management of the business, were the actual administrators
thereof; as such administrators they were the agent of the company and incurred the liabilities peculiar to every
agent, among which is that of rendering account to the principal of their transactions, and paying him everything
they may have received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of them has
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rendered such account nor proven the losses referred to by Ong Pong Co; they are therefore obliged to refund the
money that they received for the purpose of establishing the said store — the object of the association. This was
the principal pronouncement of the judgment.
With regard to the second and third assignments of error, this court, like the court below, Minds no evidence that
the entire capital or any part thereof was lost. It is no evidence of such loss to aver, without proof, that the effects
of the store were ejected. Even though this were proven, it could not be inferred therefrom that the ejectment
was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital
belonging to the enterprise.
With regard to the possible proMits, the Minding of the court below are based on the statements of the defendant
Ong Pong Co, to the effect that "there were some proMits, but not large ones." This court, however, does not Mind
that the amount thereof has been proven, nor deem it possible to estimate them to be a certain sum, and for a
given period of time; hence, it can not admit the estimate, made in the judgment, of 12 per cent per annum for the
period of six months.
Inasmuch as in this case nothing appears other than the failure to fulMill an obligation on the part of a partner
who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent
is responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an
obligation to pay in cash, there are no other losses than the legal interest, which interest is not due except from
the time of the judicial demand, or, in the present case, from the Miling of the complaint. (Arts. 1108 and 1100,
Civil Code.) We do not consider that article 1688 is applicable in this case, in so far as it provides "that the
partnership is liable to every partner for the amounts he may have disbursed on account of the same and for the
proper interest," for the reason that no other money than that contributed as is involved.
As in the partnership there were two administrators or agents liable for the above-‐named amount, article 1138
of the Civil Code has been invoked; this latter deals with debts of a partnership where the obligation is not a joint
one, as is likewise provided by article 1723 of said code with respect to the liability of two or more agents with
respect to the return of the money that they received from their principal. Therefore, the other errors assigned
have not been committed.
In view of the foregoing judgment appealed from is hereby afMirmed, provided, however, that the defendant Ong
Pong Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at the rate of 6 per cent per
annum from the time of the Miling of the complaint, and the costs, without special ruling as to the costs of this
instance. So ordered.
Authority of agent to novate must be express.
TRAVEL WIDE ASSOCIATED SALES (PHILS.), INC., and TRANS WORLD AIRLINES, INC., petitioners,
vs.
COURT OF APPEALS, DECISION SYSTEMS CORPORATION and MANUEL A. ALCUAZ, JR., respondents.
Guerrero and Torres for petitioner Trans World Airlines, Inc.
Santos, Calcetas-‐Santos & Associates for Travel World Associated Sales (Phils.), Inc.
Carpio, Villaraza & Cruz for respondent Manuel Alcuaz.
Marius V. Sanqui for private respondent DSC.

CRUZ, J.:p
What started out as an ordinary complaint for damages has developed into a controversy on procedure over
which the Regional Trial Court and the Court of Appeals have not agreed. The petitioners are now before us and
ask that the issue be resolved.
The material facts are brieMly related.
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Sometime in March 1975, Decision Systems Corporation and its President, Manuel A. Alcuaz, Jr., Miled a complaint
in the Regional Trial Court of Manila alleging that defendants Travel Wide Associated Sales (Phils.), Inc. and Trans
World Airlines, Inc. had failed to comply with their obligations under Travel Pass '73 U.S.A., a package deal
consisting of a TWA ticket to Los Angeles, New York and Boston, in the United States, and hotel accommodations,
for which the plaintiffs had made the corresponding payment in Manila.
Acting on a motion to dismiss Miled by TWA on May 16, 1975, on the ground that the complaint did not state a
cause of action, the trial court ordered the plaintiffs to amend their complaint and particularize their averments.
The plaintiffs complied on June 27, 1975. On July 7, 1975, and July 11, 1975, respectively, TWA and Travel Wide
Miled separate motions to dismiss on the ground that the amended complaint still did not state a cause of action.
Both motions were denied on July 11, 1975, the trial court holding that the allegations were now "sufMiciently
particular."
On September 5, 1975, the defendants Miled a joint answer in which they alleged the special defense that they
were not the real parties-‐in-‐interest because they had acted only as agents of a disclosed principal. They
reiterated this argument at the pre-‐trial held on October 27, 1975. Subsequently, they Miled a Joint Motion for
Preliminary Hearing of Special Defense, which was opposed by the Plaintiffs on the ground that the special
defense was barred, not having been raised in the two motions to dismiss the amended complaint. The joint
motion was nevertheless granted.
After the preliminary hearing, Judge Bernardo P. Fernandez issued his order dated September 13, 1976,
dismissing the complaint. 1 His Minding was that Travel Wide was only the general agent of TWA and that the
latter was only an agent of a disclosed principal, namely, Tour Services, Inc. As neither of the defendants was a
real party-‐in-‐interest, there could be no cause of action against them.
The motion for its reconsideration having been denied, the order was elevated to the then Intermediate Appellate
Court, which, on June 30, 1983, reversed the trial court. 2 The record does not show why the separate motions
for reconsideration Miled by the appellees were resolved only on January 27, 1987. At any rate, the petitioners
have seasonably come to this Court to ask for the reversal instead of the respondent court and the reinstatement
of the order of the trial court.
We Mind that the Court of Appeals did not err in setting aside the order of dismissal and remanding the case for
further proceedings. We disagree, however, with the reason for its decision.
The respondent court held that the appellees should have pleaded the special defense that they were not real
parties-‐in-‐interest in their motion to dismiss, conformably to the omnibus motion rule. Not having done so, they
are deemed to have waived that ground, which therefore could not be used as the basis of the motion to dismiss.
The omnibus motion rule embodied in Rule 15, Section 8, of the Rules of Court reads as follows:
Sec. 8. Omnibus motion. — A motion attacking a pleading or a proceeding shall include all objections then
available, and all objections not so included shall be deemed waived.
This is reiterated in Rule 9, Section 2, which also provides for the exceptions thus:
Sec. 2. Defenses and objections not pleaded deemed waived. — Defenses and objections not pleaded either in a
motion to dismiss or in an answer are deemed waived, except the failure to state a cause of action which may be
alleged in a latter pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial on the
merits; but in the last instance, the motion shall be disposed of as provided in section 5, Rule 10 in the light of any
evidence which may have been received. Whenever it appears that the court has no jurisdiction over the subject
matter, it shall dismiss the action.
The petitioners invoke Rule 16, Section 1, of the Rules of Court and argue that "the defense of not being a real
party-‐in-‐interest" is not one of the grounds enumerated therein for a motion to dismiss. Consequently, they could
not have pleaded it in their motion to dismiss but only in their answer as a special defense.
There seems to be a misconception here of the term "real party-‐in-‐interest."
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As deMined, a real party-‐in-‐interest is the party who stands to be beneMited or injured by the judgment in the suit,
or the party entitled to the avails of the suit. 3 Rule 3, Section 2, of the Rules of Court provides explicitly that
"every action must be prosecuted and defended in the name of the real party-‐in-‐ interest." The party-‐in-‐interest is
one who prosecutes or defends and is beneMited or injured. The term applies not only to the plaintiff but to the
defendant, and the suit may be dismissed if neither of them is a real party-‐in-‐interest. 4 If the suit is not brought
in the name of or against the real party-‐in-‐interest, a motion to dismiss may be Miled on the ground that the
complaint states no cause of action. 5
Indeed, even if the special defense was not invoked in the motion to dismiss, it would still not be deemed waived
because it is one of the two exceptions mentioned in Rule 9, Section 2, to the omnibus motion rule. The Mirst is
lack of jurisdiction, which can be invoked any time, even on appeal. The second is lack of a cause of action, which
can be raised even during the trial on the merits.
It is understandable if in granting the motion for a preliminary hearing on the special defense, the trial judge
relied on Rule 16, Section 5, of the Rules of Court, providing as follows:
Section 5. Pleading grounds as afMirmative defenses. — Any of the grounds for dismissal provided for in
this rule, except improper venue, may be pleaded as an afMirmative defense, and a preliminary hearing may be
had thereon as if a motion to dismiss had been Miled.
However, the following doctrine laid down in The Heirs of Juliana Clavano v. Genato 6 should have guided him to
the contrary, and correct, conclusion:
Besides, under this section a preliminary hearing may be had on the afMirmative defenses as if a motion to dismiss
had been Miled. During such preliminary hearing evidence may be admitted. Nevertheless, We believe that the
respondent Judge committed an error in conducting a preliminary hearing on the private respondent's
afMirmative defenses. It is a well-‐settled rule that in a motion to dismiss based on the ground that the complaint
fails to state a cause of action, the question submitted to the court for determination is the sufMiciency of the
allegations in the complaint itself. Whether those allegations are true or not is beside the point, for their truth is
hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court render a
valid judgment in accordance with the prayer of the complaint? Stated otherwise, the sufMiciency of the cause of
action must appear on the face of the complaint in order to sustain a dismissal on this ground. No extraneous
matter may be considered nor facts not alleged, which would require evidence and therefore must be raised as
defenses and await the trial. In other words, to determine the sufMiciency of the cause of action, only the facts
alleged in the complaint, and no others should be considered.
The respondent Judge departed from this rule in conducting a hearing and in receiving evidence in support of the
private respondent's afMirmative defense, that is, lack of cause of action.
But despite all the foregoing observations, we feel that the trial court may also have erred in holding that the
petitioners were mere agents of a disclosed principal and so could not be held liable on the complaint.
In disclaiming liability, the petitioners point to the stipulation on Responsibility in the Travel Pass '73 Plan
brochure that "Tour Services, Inc. and/or their agents" are acting "as agents for the passengers." They stress
further that the Miscellaneous Charge Order issued to Alcuaz indicated that the amount of $218.00 was payable
to Tour Services, Inc. and not to either of them. This would mean that, if at all, they were acting as agents of Tour
Services, Inc. and not as principal obligors.
Without arriving at any factual conclusion, the Court believes it would be useful to make a careful appraisal of the
evidence, particularly the terms and conditions of the brochure distributed by the petitioners and the
signiMicance of the Miscellaneous Charges Order which was issued by TWA. We note that even the trial court
observed the active participation of TWA in the promotion of the travel pass plan as an additional source of
revenue for its airline business.
It is also worth noting that if the petitioners were indeed acting as agents of the passengers, as the brochure
stipulates, they could still be held liable under Article 1909 of the Civil Code, which provides:
The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor
by the courts, according to whether the agency was or was not for a compensation.
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The private respondent * is entitled to prove that the petitioners did not provide adequately for the pre-‐paid
hotel accommodations of Alcuaz, who had to incur additional expenses and was compelled to cut short his
business trip because of his depleted dollar allocation. It was not established that the petitioners received any
conMirmation of the hotel reservations they sent and yet they did not follow up their request nor did they inform
Alcuaz that they had not received conMirmation. This procedure should have been followed by the petitioners as
so provided in the Travel Pass '73 USA
We sustain the respondent court in ruling that the trial court should not have dismissed the complaint, albeit nor
for the reasons given in the challenged decision. Our Minding is that, because the petitioners are real parties-‐in-‐
interest as defendants in the suit below, the motion to dismiss for lack of a cause of action should not have been
granted.
WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.
Death of principal does not render unenforceable an act of agent who was unaware of such death
NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR, plaintiffs-‐appellants,

vs.
LUY KIM GUAN and LINO BANGAYAN, defendants-‐appellees.
T. de los Santos for plaintiffs-‐appellants.

Rafael C. Climaco and Abelardo S. Fernandez for defendants-‐appellees.
BARRERA, J.:
This is an appeal from the decision of the Court of First Instance of Zamboanga City (a) dismissing plaintiff-‐
appellant's complaint for the recovery of three (3) parcels of land and their produce in the sum of P320,000.00;
and (b) instead, sentencing plaintiff to pay P2,000.00 for attorney's fees and P1,000.00 for expenses of litigation,
to defendant Lino Bangayan, and P2,000.00 as attorney's fees and P500.00 as expenses of litigation, to the other
defendant Luy Kim Guan.
The pertinent facts as found by the trial court and upon which its decision was predicated are set forth in the
following portion of the decision appealed from:
The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and who died in China
sometime after he went to that country in the last part of 1931 or early part of 1932. The said Luis Herrera in his
lifetime was the owner of three (3) parcels of land and their improvements, known as Lots 1740, 4465 and 4467
of Expediente No. 5, G.L.R.O. Record 477 and the area, nature, improvements and bound of each and every of
these three (3) lots are sufMiciently described in the complaint Miled by the plaintiffs.
Before leaving for China, however, Luis Herrera executed on December 1, 1931, a deed of General Power of
Attorney, Exhibit 'B', which authorized and empowered the defendant Kim Guan, among others to administer and
sell the properties of said Luis Herrera.
Lot 1740 was originally covered by Original CertiMicate Title 8601 registered in the name of Luis Herrera, married
to GO Bang. This lot was sold by the defendant Luy Kim in his capacity as attorney-‐in-‐fact of the deceased Luis
Her to Luy Chay on September 11, 1939, as shown in Exhibit "2", corresponding deed of sale. Transfer CertiMicate
of Title 3162, Exhibit "3", was issued to Luy Chay by virtue of deed of sale. On August 28, 1941, to secure a loan of
P2,00 a deed of mortgage to the Zamboanga Mutual Building and Association was executed by Luy Chay, Exhibit
"4". On January 31, 1947, the said Luy Chay executed a deed of sale, Exhibit "E", in favor of Lino Bangayan. By
virtue of this Transfer CertiMicate of Title T-‐2567 was issued to Lino Bangayan on June 24, 1949, Exhibit "1":
Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go Bang, under Original
CertiMicate of Title No. 0-‐14360, Exhibit "5". On December 1, 1931, Luis Herrera sold one-‐half (½) undivided
share and to Herrera and Go Bang, the other half (½), as shown by Exhibit "12" and Exhibit "12-‐A", the latter an
annotation made the Register of Deeds of the City of Zamboanga, in which stated as follows:
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Cancelado el presente CertiMicado en virtud de una escritura de traspaso y en su lugar se ha expedido el

CertiMicado de T No. 494-‐(T-‐13045) del Tomo 2 del Libro de CertiMicado de Transferencias.
(Fdo) R. D. MACROHON

Registrador de Titulos
Ciudad de Zamboanga
On July 23, 1937, Luis Herrera thru his attorney-‐in-‐fact Luy Kim Guan, one of the defendants, sold to Nicomedes
Salazar his one half (½) participation in these two (2) lots, as shown in Exhibit "C", the corresponding deed of
sale for P3,000.00 Transfer CertiMicate of Title No. T-‐494-‐(T-‐13045) was is to Nicomedes Salazar and to the
defendant Luy Kim Guan, Exhibit '7'. On August 4, 1937, the defendant Luy Kim Guan Nicomedes Salazar
executed a deed of mortgage in favor of Bank of the Philippine Islands to secure a loan of P3,500.00, Exhibit '6'.
On August 17, 1937, the defendant Luy Kim Guan and Nicomedes Salazar sold Lot 4465 to Carlos Eijansantos for
the sum of P100.00 as shown in Exhibit "9", the corresponding deed of sale, and Transfer CertiMicate of Title No.
T-‐2653 was issued on September 7, 1939 to Carlos Eijansantos, Exhibit "10". Nicomedes Salazar sold his one half
(½) interest on Lot 4467 to the defendant Lino Bangayan for P3,000.00 on February 22, 1949, Exhibit 'B', and the
corresponding Transfer CertiMicate of Title T-‐2654 was issued to Lino Bangayan and to Luy Kim Guan, both are
co-‐owners in equal shares, Exhibit "8". Opinion of the City Attorney, Exhibit "p", and an afMidavit of Atty. Jose T.
Atilano, Exhibit "O", state that Lino Bangayan is a Filipino citizen.
As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but as to the speciMic and
precise date of his death the evidence of both parties failed to show.
It is the contention of plaintiff-‐appellant that all the transactions mentioned in the preceding quoted portion of
the decision were fraudulent and were executed after the death of Luis Herrera and, consequently, when the
power of attorney was no longer operative. It is also claimed that the defendants Lino Bangayan and Luy Kim
Guan who now claim to be the owners of Lots Nos. 1740 and 4467 are Chinese by nationality and, therefore, are
disqualiMied to acquire real properties. Plaintiff-‐appellant, in addition, questions the supposed deed of sale
allegedly executed by Luis Herrera on December 1, 1931 in favor of defendant Luy Kim Guan, conveying one-‐half
interest on the two lots, Nos. 4465 and 4467, asserting that what was actually executed on that date, jointly with
the general power of attorney, was a lease contract over the same properties for a period of 20 years for which
Luy Kim Guan paid the sum of P2,000.00.
We Mind all the contentions of plaintiff-‐appellant untenable. Starting with her claim that the second deed executed
on December 1, 1931 by Luis Herrera was a lease contract instead of a deed of sale as asserted by defendant Luy
Kim Guan, we Mind that the only evidence in support of her contention is her own testimony and that of her
husband to the effect that the deceased Luis Herrera showed the said document to them, and they remembered
the same to be a lease contract on the three properties for a period of 20 years in consideration of P2,000.00.
Their testimony was sought to be corroborated by the declaration of the clerk of Atty. Enrique A. Fernandez, who
allegedly notarized the document. Outside of this oral testimony, given more than 23 years after the supposed
instrument was read by them, no other evidence was adduced. On the other hand, defendant Luy Kim Gua
produced in evidence a certiMication1 signed by the Register of Deeds of Dipolog, Zamboanga (Exh. 11) to the
effect that a deed of sale, dated December 1, 1931, was execute by Luis Herrera in favor of Luy Kim Guan and
entered in the Primary Book No. 4 as duly registered on September 30, 1936 under Original CertiMicate of Title
No. 14360. It is to be noted that the deed of sale was registered shortly after the issuance in the name of Luis
Herrera of Origin CertiMicate of Title No. 14360 pursuant to Decree No. 59093, covering the two lots, Nos. 4465
and 4467 (Exh. 5) dated April 7, 1936. In virtue of said deed of sale of December 1, 1931, Original CertiMicate of
Title No. 1436 was cancelled and Transfer CertiMicate of Title No. 1304 (Exh. 12) in the names of the conjugal
partnership of the spouses Luis Herrera and Go Bang, one-‐half share, an Luy Kim Guan, single, one-‐half share,
was issued on September 30, 1936. Later, or on July 23, 1937, Luy Kim Guan, in his capacity as attorney-‐in-‐fact of
Luis Herrera, sold the half interest of the latter in the two parcels o land, in favor of Nicomedes Salazar,
whereupon TCT No. 13045 was cancelled and TCT No. RT-‐657 (494-‐T-‐13045 (Exh. 7) was issued in the names of
Luy Kim Guan an Nicomedes Salazar in undivided equal shares. On August 4, 1937, both Luy Kim Guan and
Nicomedes Salazar mortgaged the two parcels in favor of the Bank of the Philippine Islands for the sum of
P3,500.00 (Exh. 6). On August 17, 1937, Nicomedes Salazar and Luy Kim Gua sold their respective shares in Lot
No. 4465 to Carlo Eijansantos (Exh. 9), subject to the mortgage, resulting in the issuance of TCT No. 2653 (Exh.
10) covering the entire lot No. 4465 in the name of said Carlos Eijansantos. On February 23, 1949, Nicomedes
Salazar sold his shall share in Lot No. 4467 to Lino Bangayan, as a consequence of which, TCT No. 2654 (Exh. B)
was issued covering said Lot No. 4467 in the names of Luy Kim Guan and Lino Bangayan in undivided equal
shares.
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With respect to Lot No. 1740, the same was sold by Luy Kim Guan, in his capacity as attorney-‐in-‐fact of Luis
Herrera, on September 11, 1939 to Luy Chay (See Exh. 2) who, in August, 1941, mortgaged the same (Exh. 4) to
the Zamboanga Mutual Loan and Building Association (See TCT No. 3162 [Exh. 3] issued in the name of Luy
Chay). Later on, Luy Chay sold the entire lot to defendant Lino Bangayan by virtue of the deed of sale dated
January 31, 1947 (Exh. E), and as a consequence thereof, TCT No. 2567 was issued in the name of said vendee.
(See Exh. 1). As a result of these various transactions, duly recorded in the corresponding ofMice of the Register of
Deeds, and covered by appropriate transfer certiMicates of title, the properties are now registered in the following
manner: Lot No. 1740, in the name of Lino Bangayan; Lot No. 4465, in the name of Carlos Eijansantos; and Lot No.
4467, in the names of Lino Bangayan and Luy Kim Guan in undivided equal shares.
In the face of these documentary evidence presented by the defendants, the trial court correctly upheld the
contention of the defendants as against that of plaintiff-‐appellant who claims that the second deed executed by
Luis Herrera in 1931 was a lease contract. It is pertinent to note what the lower court stated in this regard, that
is, if the second deed executed by Luis Herrera was a lease contract covering, the 3 lots in question for a period of
twenty (20) years, there would have been no purpose for him to constitute Luy Kim Guan as. his attorney-‐in-‐fact
to administer and take charge of the same properties already covered by the lease contract.
Coming now to the contention that these transactions are null and void and of no effect because they were
executed by the attorney-‐in-‐fact after the death of his Principal, sufMice it to say that as found by the lower court,
the date of death of Luis Herrera has not been satisfactorily proven. The only evidence presented by the Plaintiff-‐
appellant in this respect is a supposed letter received from a certain "Candi", dated at Amoy in November, 1936,
purporting to give information that Luis Herrera (without mentioning his name) had died in August of that year.
This piece of evidence was properly rejected by the lower court for lack of identiMication. the other hand, we have
the testimony of the witness Chung Lian to the effect that when he was in Amoy the year 1940, Luis Herrera
visited him and had a conversation with him, showing that the latter was still alive at the time. Since the
documents had been executed the attorney-‐in-‐fact one in 1937 and the other in 1939, it is evident, if we are to
believe this testimony, that the documents were executed during the lifetime of the principal. Be that as it may,
even granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication
in the record, that the age Luy Kim Guan was aware of the death of his prince at the time he sold the property.
The death of the principal does not render the act of an agent unenforceable, where the latter had no knowledge
of such extinguishment the agency.2
Appellants also raise the question of the legality of the titles acquired by Luy Chay and Lino Bangayan, on ground
that they are disqualiMied to acquire real properties in the Philippines. This point is similarly without me because
there is no evidence to support the claim. In fact, in the deed of sale as well as in TCT No. 3162 issued to Luy Chay,
the latter was referred to as a citizen of the Philippines. Nevertheless, the lower court acknowledged the
probability that Luy Chay could have been actually a Chinese citizens.3 At any rate, the property was
subsequently purchased by Lino Bangayan, as a result which TCT No. 3162 in the name of Luy Chay was
cancelled and another certiMicate (TCT No. T-‐2567) was issued in favor of said vendee.
As to Bangayan's qualiMication, the lower court held that said defendant had sufMiciently established his Philippine
citizenship through Exhibit P, concurred in by the Secretary of Justice. We Mind no reason to disturb such ruling.
With respect to Luy Kim Guan, while it is true that he is a Chinese citizen, nevertheless, inasmuch as he acquired
his one-‐half share in Lot No. 4467 in 1931, long before the Constitution was adopted, his ownership can not be
attacked on account of his citizenship.
Appellants, in this appeal, contest the judgment of the court a quo awarding defendants Lino Bangayan and Luy
Kim Guan attorney's fees in the sum of P2,000.00 each, and expenses of litigation in the amounts of P1,000.00
and P500.00, respectively. We agree with the appellant in this regard.
This Court has laid down the rule that in the absence of stipulation, a winning party may be awarded attorney's
fees only in case plaintiff's action or defendant's stand is so untenable as to amount to gross and evident bad
faith.4 The same thing however, can not be said of the case at bar. As a matter of fact, the trial court itself declared
that the complaint was Miled in good faith. Attorney's fees, therefore, can not be awarded to defendants simply
because the judgment was favorable to them and adverse to plaintiff, for it may amount to imposing a premium
on the right to redress grievances in court. And so with expenses of litigation. A winning party may be entitled to
expenses of litigation only where he, by reason of plaintiff's clearly unjustiMiable claims or defendant's
unreasonable refusal to his demands, was compelled to incur said expenditures. Evidently, the facts of this case
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do not warrant the granting of such litigation expenses to defendants. In the absence of proof that the action was
intended for reasons other than honest, we may agree with the trial court that the same must have been
instituted by plaintiffs in their belief that they have a valid cause against the defendants.
WHEREFORE, and with the above modiMication, the decision appealed from is hereby afMirmed in all other
respects without prejudice to appellants' right to demand from the agent (Luy Kim Guan) an accounting of
proceeds of the agency, if such right is still available. No costs. So ordered.
When principal is solidarily liable with agent.
THE MANILA REMNANT CO., INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and OSCAR
VENTANILLA, JR. and CARMEN GLORIA DIAZ, respondents.
Bede S. Talingcos for petitioners.
Augusto Gatmaytan for private respondent.
SYLLABUS
1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN IRREGULARITY DESPITE KNOWLEDGE
THEREOF, DEEMED A RATIFICATION OF THE ACT OF THE AGENT. — In the case at bar, the Valencia realty Mirm
had clearly overstepped the bounds of its authority as agent — and for that matter, even the law — when it
undertook the double sale of the disputed lots. Such being the case, the principal, Manila Remnant, would have
been in the clear pursuant to Article 1897 of the Civil Code which states that "(t)he agent who acts as such is not
personally liable to that party with whom he contracts, unless he expressly binds himself or exceeds the limits of
his authority without giving such party sufMicient notice of his powers." However, the unique relationship existing
between the principal and the agent at the time of the dual sale must be underscored. Bear in mind that the
president then of both Mirms was Artemio U. Valencia, the individual directly responsible for the sale scam. Hence,
despite the fact that the double sale was beyond the power of the agent, Manila Remnant as principal was
chargeable with the knowledge or constructive notice of that fact and not having done anything to correct such
an irregularity was deemed to have ratiMied the same. (See Art. 1910, Civil Code.)
2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE AT BAR. — More in point, we Mind
that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had
plenary powers. Article 1911 of the Civil Code provides: "Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers."
The above-‐quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both
the principal and the agent may be considered as joint feasors whose liability is joint and solidary (Verzosa vs.
Lim, 45 Phil. 416). Authority by estoppel has arisen in the instant case because by its negligence, the principal,
Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the
principal might not have had actual knowledge of the agent's misdeed is of no moment.
D E C I S I O N
FERNAN, C.J p:
Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty members of the University of the
Philippines and renting a faculty unit, dreamed of someday owning a house and lot. Instead of attaining this
dream, they became innocent victims of deceit and found themselves in the midst of an ensuing squabble
between a subdivision owner and its real estate agent.
The facts as found by the trial court and adopted by the Appellate Court are as follows:
Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated in Quezon City covered by
Transfer CertiMicates of Title Nos. 26400, 26401, 30783 and 31986 and constituting the subdivision known as
Capital Homes Subdivision Nos. I and II. On July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered
into a written agreement entitled "ConMirmation of Land Development and Sales Contract" to formalize an earlier
verbal agreement whereby for a consideration of 17 and 1/2% fee, including sales commission and management
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fee, A.U. Valencia and Co., Inc. was to develop the aforesaid subdivision with authority to manage the sales
thereof, execute contracts to sell to lot buyers and issue ofMicial receipts. 1
At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was Artemio U. Valencia.
LexLib
On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two "contracts to sell" covering Lots 1 and
2 of Block 17 in favor of Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of
P66,571.00 payable monthly for ten years. 2 As thus agreed in the contracts to sell, the Ventanillas paid the down
payments on the two lots even before the formal contract was signed on March 3, 1970.
Ten (10) days after the signing of the contracts with the Ventanillas or on March 13, 1970, Artemio U. Valencia, as
President of Manila Remnant, and without the knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17
again, this time in favor of Carlos Crisostomo, one of his sales agents without any consideration. 3 Artemio
Valencia then transmitted the Mictitious Crisostomo contracts to Manila Remnant while he kept in his Miles the
contracts to sell in favor of the Ventanillas. All the amounts paid by the Ventanillas were deposited in Valencia's
bank account.
Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly payments of the Ventanillas were
remitted to Manila Remnant as payments of Crisostomo for which the former issued receipts in favor of
Crisostomo. Since Valencia kept the receipts in his Miles and never transmitted the same to Crisostomo, the latter
and the Ventanillas remained ignorant of Valencia's scheme. Thus, the Ventanillas continued paying their monthly
installments. cdphil
Subsequently, the harmonious business relationship between Artemio Valencia and Manila Remnant ended. On
May 30, 1973, Manila Remnant, through its General Manager Karl Landahl, wrote Artemio Valencia informing
him that Manila Remnant was terminating its existing collection agreement with his Mirm on account of the
considerable amount of discrepancies and irregularities discovered in its collections and remittances by virtue of
conMirmations received from lot buyers. 4 As a consequence, on June 6, 1973, Artemio Valencia was removed as
President by the Board of Directors of Manila Remnant. Therefore, from May of 1973, Valencia stopped
transmitting Ventanilla's monthly installments which at that time had already amounted to P17,925.40 for Lot 1
and P18,141.95 for Lot 2, (which appeared in Manila Remnant's record as credited in the name of Crisostomo). 5
On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 of the then Court of First Instance
of Manila 6 to impugn the abrogation of their agency agreement. On June 10 and July 10, 1973, said court ordered
all lot buyers to deposit their monthly amortizations with the court. 7 But on July 17, 1973, A.U. Valencia and Co.
wrote the Ventanillas that it was still authorized by the court to collect the monthly amortizations and requested
them to continue remitting their amortizations with the assurance that said payments would be deposited later
in court. 8 On May 22, 1974, the trial court issued an order prohibiting A.U. Valencia and Co. from collecting the
monthly installments. 9 On July 22, 1974 and February 6, 1976 the same court ordered the Valencia Mirm to
furnish the court with a complete list of all lot buyers who had already made down payments to Manila Remnant
before December 1972. 10 Valencia complied with the court's order on August 6, 1974 by submitting a list which
excluded the name of the Ventanillas. 11
Since A.U. Valencia and Co. failed to forward its collections after May 1973, Manila Remnant caused on August 20,
1976 the publication in the Times Journal of a notice cancelling the contracts to sell of some lot buyers including
that of Carlos Crisostomo in whose name the payments of the Ventanillas had been credited. 12
To prevent the effective cancellation of their contracts, Artemio Valencia instigated on September 22, 1976 the
Miling by Carlos Crisostomo and seventeen (17) other lot vendees of a complaint for speciMic performance with
damages against Manila Remnant before the Court of First Instance of Quezon City. The complaint alleged that
Crisostomo had already paid a total of P17,922.40 and P18,136.85 on Lots 1 and 2, respectively. 13
It was not until March 1978 when the Ventanillas, after learning of the termination of the agency agreement
between Manila Remnant and A.U. Valencia & Co., decided to stop paying their amortizations to the latter. The
Ventanillas, believing that they had already remitted P37,007.00 for Lot 1 and P36,911.00 for Lot 2 or a grand
total, inclusive of interest, of P73,122.35 for the two lots, thereby leaving a balance of P13,531.58 for Lot 1 and
P13,540.22 for Lot 2, went directly to Manila Remnant and offered to pay the entire outstanding balance of the
purchase price. 14 To their shock and utter consternation, they discovered from Gloria Caballes, an accountant of
Manila Remnant, that their names did not appear in the records of A.U. Valencia and Co. as lot buyers. Caballes
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showed the Ventanillas copies of the contracts to sell in favor of Carlos Crisostomo, duly signed by Artemio U.
Valencia as President of Manila Remnant. 15 Whereupon, Manila Remnant refused the offer of the Ventanillas to
pay for the remainder of the contract price because they did not have the personality to do so. Furthermore, they
were shown the published Notice of Cancellation in the January 29, 1978 issue of the Times Journal rescinding
the contracts of delinquent buyers including Crisostomo.
Thus, on November 21, 1978, the Ventanillas commenced an action for speciMic performance, annulment of deeds
and damages against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo before the Court of First
Instance of Quezon City, Branch 17-‐B. 16 Crisostomo was declared in default for failure to Mile an answer. LibLex
On November 17, 1980, the trial court rendered a decision 1) declaring the contracts to sell issued in favor of the
Ventanillas valid and subsisting and annulling the contracts to sell in Crisostomo's favor; 2) ordering Manila
Remnant to execute in favor of the Ventanillas an Absolute Deed of Sale free from all liens and encumbrances; and
3) condemning defendants A.U. Valencia and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally
to pay the Ventanillas the amount of P100,000.00 as moral damages, P100,000.00 as exemplary damages, and
P100,000.00 as attorney's fees. The lower court also added that if, for any legal reason, the transfer of the lots
could no longer be effected, the defendants should reimburse jointly and severally to the Ventanillas the total
amount of P73,122.35 representing the total amount paid for the two lots plus legal interest thereon from March
1970 plus damages as aforestated. With regard to the cross claim of Manila Remnant against Valencia, the court
found that Manila Remnant could have not been dragged into this suit without the fraudulent manipulations of
Valencia. Hence, it adjudged A.U. Valencia and Co. to pay the Manila Remnant P5,000.00 as moral damages and
exemplary damages and P5,000.00 as attorney's fees. 17

Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower court's decision to the Court of
Appeals through separate appeals. On October 13, 1987, the Appellate Court afMirmed in toto the decision of the
lower court. Reconsideration sought by petitioner Manila Remnant was denied, hence the instant petition.
There is no question that the contracts to sell in favor of the Ventanilla spouses are valid and subsisting. The only
issue remaining is whether or not petitioner Manila Remnant should be held solidarily liable together with A.U.
Valencia and Co. and Carlos Crisostomo for the payment of moral, exemplary damages and attorney's fees in favor
of the Ventanillas. 18
While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes that it
cannot be made jointly and severally liable with its agent A.U. Valencia and Co. since it was not aware of the illegal
acts perpetrated nor did it consent or ratify said acts of its agent.
The argument is devoid of merit.
In the case at bar, the Valencia realty Mirm had clearly overstepped the bounds of its authority as agent — and for
that matter, even the law — when it undertook the double sale of the disputed lots. Such being the case, the
principal, Manila Remnant, would have been in the clear pursuant to Article 1897 of the Civil Code which states
that "(t)he agent who acts as such is not personally liable to that party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufMicient notice of his
powers." prLL
However, the unique relationship existing between the principal and the agent at the time of the dual sale must
be underscored. Bear in mind that the president then of both Mirms was Artemio U. Valencia, the individual
directly responsible for the sale scam. Hence, despite the fact that the double sale was beyond the power of the
agent, Manila Remnant as principal was chargeable with the knowledge or constructive notice of that fact and not
having done anything to correct such an irregularity was deemed to have ratiMied the same. 19
More in point, we Mind that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to
act as though it had plenary powers. Article 1911 of the Civil Code provides:
"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers." (Emphasis supplied)
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The above-‐quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both
the principal and the agent may be considered as joint feasors whose liability is joint and solidary. 20
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has
permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have
had actual knowledge of the agent's misdeed is of no moment. Consider the following circumstances:
Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the sale and disposition of
the subdivision lots. As a disclosed principal in the contracts to sell in favor of the Ventanilla couple, there was no
doubt that they were in fact contracting with the principal. Section 7 of the Ventanillas' contracts to sell states:
"7. That all payments whether deposits, down payment and monthly installment agreed to be made by the
vendee shall be payable to A.U. Valencia and Co., Inc. It is hereby expressly understood that unauthorized
payments made to real estate brokers or agents shall be the sole and exclusive responsibility and at the risk of
the vendee and any and all such payments shall not be recognized by the vendors unless the ofMicial receipts
therefor shall have been duly signed by the vendors' duly authorized agent, A.U. Valencia and Co., Inc." (Emphasis
supplied)
Indeed, once Manila Remnant had been furnished with the usual copies of the contracts to sell, its only
participation then was to accept the collections and pay the commissions to the agent. The latter had complete
control of the business arrangement. 21
Secondly, it is evident from the records that Manila Remnant was less than prudent in the conduct of its business
as a subdivision owner. For instance, Manila Remnant failed to take immediate steps to avert any damage that
might be incurred by the lot buyers as a result of its unilateral abrogation of the agency contract. The publication
of the cancelled contracts to sell in the Times Journal came three years after Manila Remnant had revoked its
agreement with A.U. Valencia and Co. Cdpr
Moreover, Manila Remnant also failed to check the records of its agent immediately after the revocation of the
agency contract despite the fact that such revocation was due to reported anomalies in Valencia's collections.
Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant could and should have devised a
system whereby it could monitor and require a regular accounting from A.U. Valencia and Co., its agent. Not
having done so, Manila Remnant has made itself liable to those who have relied on its agent and the
representation that such agent was clothed with sufMicient powers to act on behalf of the principal.
Even assuming that Manila Remnant was as much a victim as the other innocent lot buyers, it cannot be gainsaid
that it was precisely its negligence and laxity in the day to day operations of the real estate business which made
it possible for the agent to deceive unsuspecting vendees like the Ventanillas.
In essence, therefore, the basis for Manila Remnant's solidary liability is estoppel which, in turn, is rooted in the
principal's neglectfulness in failing to properly supervise and control the affairs of its agent and to adopt the
needed measures to prevent further misrepresentation. As a consequence, Manila Remnant is considered
estopped from pleading the truth that it had no direct hand in the deception employed by its agent. 22
A Minal word. The Court cannot help but be alarmed over the reported practice of supposedly reputable real
estate brokers of manipulating prices by allowing their own agents to "buy" lots in their names in the hope of
reselling the same at a higher price to the prejudice of bona Mide lot buyers, as precisely what the agent had
intended to happen in the present case. This is a serious matter that must be looked into by the appropriate
government housing authority. prLL
WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals dated October 13, 1987
sustaining the decision of the Quezon City trial court dated November 17, 1980 is AFFIRMED. This judgment is
immediately executory. Costs against petitioner.
SO ORDERED.
||| (Manila Remnant Co., Inc. v. Court of Appeals, G.R. No. 82978, [November 22, 1990], 269 PHIL 643-‐653)
! of !113
106
An undisclosed principal can sue third person with whom agent dealt with
NATIONAL FOOD AUTHORITY, (NFA), petitioner, vs. INTERMEDIATE APPELLATE COURT, SUPERIOR (SG)
SHIPPING CORPORATION, respondents.
Zapanta, Gloton & Ulejorada for petitioner.
Sison, Ortiz & Associates for private respondents.
SYLLABUS
CIVIL LAW; SPECIAL CONTRACT; AGENCY; AGENT ACTING IN HIS OWN NAME; PRINCIPAL CANNOT MAINTAIN
AN ACTION WITH THE PARTY CONTRACTED; EXCEPTION; CASE AT BAR. — It is contended by petitioner NFA
that it is not liable under the exception to the rule (Art. 1883) since it had no knowledge of the fact of agency
between respondent Superior Shipping and Medalla at the time when the contract was entered into between
them (NFA and Medalla). Petitioner submits that "(A)n undisclosed principal cannot maintain an action upon a
contract made by his agent unless such principal was disclosed in such contract. One who deals with an agent
acquires no right against the undisclosed principal." Petitioner NFA's contention holds no water. It is an
undisputed fact that Gil Medalla was a commission agent of respondent Superior Shipping Corporation which
owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to petitioner NFA. The context of
the law is clear. Art. 1883, is the applicable law in the case at bar. Consequently, when things belonging to the
principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principal
although he does not assume the character of such agent and appears acting in his own name. In other words, the
agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the
contract must be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy
Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract, then it can
also demand the enforcement of its rights arising from the contract.
D E C I S I O N
PARAS, J p:
This is a petition for review on certiorari made by National Food Authority (NFA for brevity) then known as the
National Grains Authority or NGA from the decision 1 of the Intermediate Appellate Court afMirming the decision
2 of the trial court, the decretal portion of which reads:
"WHEREFORE, defendants Gil Medalla and National Food Authority are ordered to pay jointly and severally the
plaintiff:
a. the sum of P25,974.90, with interest at the legal rate from October 17, 1979 until the same is fully paid; and,
b. the sum of P10,000.00 as and for attorney's fees.
"Costs against both defendants.
"SO ORDERED." (p. 22, Rollo)
Hereunder are the undisputed facts as established by the then Intermediate Appellate Court (now Court of
Appeals), viz:
"On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered
into a contract for hire of ship known as "MV Sea Runner" with defendant National Grains Authority. Under the
said contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice belonging to defendant
National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.
"Upon completion of the delivery of rice at its destination, plaintiff on October 17, 1979, wrote a letter requesting
defendant NGA that it be allowed to collect the amount stated in its statement of account (Exhibit "D"). The
statement of account included not only a claim for freightage but also claims for demurrage and stevedoring
charges amounting to P93,538.70.
! of !113
107
"On November 5, 1979, plaintiff wrote again defendant NGA, this time speciMically requesting that the payment
for freightage and other charges be made to it and not to defendant Medalla because plaintiff was the owner of
the vessel "MV Sea Runner" (Exhibit "E"). In reply, defendant NGA on November 16, 1979 informed plaintiff that
it could not grant its request because the contract to transport the rice was entered into by defendant NGA and
defendant Medalla who did not disclose that he was acting as a mere agent of plaintiff (Exhibit "F"). Thereupon
on November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90, for freight services in
connection with the shipment of 8,550 sacks of rice (Exhibit "A").
"On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of
P27,000.00 paid to him by defendant NFA. Defendant Medalla, however, 'ignored the demand.'
"Plaintiff was therefore constrained to Mile the instant complaint.
"Defendant-‐appellant National Food Authority admitted that it entered into a contract with Gil Medalla whereby
plaintiffs vessel 'MV Sea Runner' transported 8,550 sacks of rice of said defendant from San Jose, Mindoro to
Manila.
"For services rendered, the National Food Authority paid Gil Medalla P27,000.00 for freightage.
"Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to this court on the
sole issue as to whether it is jointly and severally liable with defendant Gil Medalla for freightage." (pp. 61-‐62,
Rollo)
The appellate court afMirmed the judgment of the lower court, hence, this appeal by way of certiorari, petitioner
NFA submitting a lone issue to wit: whether or not the instant case falls within the exception of the general rule
provided for in Art. 1883 of the Civil Code of the Philippines.
It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883) since it had no
knowledge of the fact of agency between respondent Superior Shipping and Medalla at the time when the
contract was entered into between them (NFA and Medalla). Petitioner submits that "(A)n undisclosed principal
cannot maintain an action upon a contract made by his agent unless such principal was disclosed in such
contract. One who deals with an agent acquires no right against the undisclosed principal."
Petitioner NFA's contention holds no water. It is an undisputed fact that Gil Medalla was a commission agent of
respondent Superior Shipping Corporation which owned the vessel "MV Sea Runner" that transported the sacks
of rice belonging to petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law in the
case at bar provides: cdll
"Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom
the agent has contracted; neither have such persons against the principal.
"In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the
transaction were his own, except when the contract involves things belonging to the principal.
"The provision of this article shall be understood to be without prejudice to the actions between the principal
and agent."
Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with,
the agent is bound to the principal although he does not assume the character of such agent and appears acting in
his own name. In other words, the agent's apparent representation yields to the principal's true representation
and that, in reality and in effect, the contract must be considered as entered into between the principal and the
third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his
duties under the contract, then it can also demand the enforcement of its rights arising from the contract.
WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED and the appealed decision is hereby
AFFIRMED.
SO ORDERED.
||| (National Food Authority v. Intermediate Appellate Court, G.R. No. 75640, [April 5, 1990], 263 PHIL 46-‐50)
! of !113
108
Operation of the doctrine of promissory estoppel.
PHILIPPINE NATIONAL BANK, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT (First Civil
Cases Division) and ROMEO ALCEDO, respondents.
Juan D. Diaz, Benjamin C. Del Rosario and Pedro R. Lazo for petitioner.
Carlos S. Ayeng, Augustus C. Rallos and Orlando S. Ayeng for private respondent.
D E C I S I O N
GRIÑO-‐AQUINO, J p:
This is a petition for certiorari which seeks to set aside: (a) the decision dated November 29, 1983 of the
Intermediate Appellate Court (now Court of Appeals) in CA-‐G.R. CV No. 68021 which afMirmed the decision of the
Court of First Instance of Negros Occidental (now Regional Trial Court), Branch IV, Bacolod City, in Civil Case No.
11393; and (b) respondent court's resolution dated February 29,1984 denying petitioner Philippine National
Bank's (PNB for short) motion for reconsideration.
The facts of the case are the following:
On March 20, 1968, Leticia de la Vina-‐Sepe executed a real estate mortgage in favor of PNB, San Carlos Branch,
over a lot registered in her name under TCT No. T-‐31913 to secure the payment of a sugar crop loan of P3,400.
Later, Leticia Sepe, acting as attorney-‐in-‐fact for her brother-‐in-‐law, private respondent Romeo Alcedo, executed
an amended real estate mortgage to include his (Alcedo's) Lot No. 1626 (being a portion of Lot No. 1402, covered
by TCT 52705 of the Isabela Cadastre) as additional collateral for Sepe's increased loan of P16,500 (pp. 5-‐6,
PNB's Brief, p. 74, Rollo). Leticia Sepe and private respondent Alcedo verbally agreed to split Mifty-‐Mifty (50-‐50)
the proceeds of the loan (p. 94, Rollo) but failing to receive his one-‐half share from her, Alcedo wrote a letter on
May 12,1970 to the PNB, San Carlos Branch, revoking the Special Power of Attorney which he had given to Leticia
Sepe to mortgage his Lot No. 1626 (p. 95, Rollo).
Replying on May 22, 1970, the PNB Branch Manager, Jose T. Gellegani, advised Alcedo that his land had already
been included as collateral for Sepe's 1970-‐71 sugar crop loan, which the latter had already availed of,
nevertheless, he assured Alcedo that the bank would exclude his lot as collateral for Sepe's forthcoming
(1971-‐72) sugar crop loan (p. 95, Rollo). The letter reads:
"May 22, 1970.
"Mr. Romeo Alcedo

Mamballo, M. Padilla
Negros Occidental
"Dear Mr. Alcedo:
"This is to acknowledge receipt of your letter dated May 12, 1970, requesting us to revoke the 'Special Power of
Attorney' you have executed in favor of Mrs. Leticia de la Vina-‐Sepe, on February 18, 1969, on Lot No. 1402,
Isabela Cadastre, covered by Transfer CertiMicate of Title No. 52705, with an area of 20.9200 hectares.
"In this connection, we wish to advise you that the aforementioned parcel of land had been included as collateral
to secure the 1970-‐71 sugar crop loan of Mrs. Leticia de la Vina-‐Sepe, which she had already availed of In view of
your late request, please be advised and assured that we shall exclude the aforementioned lot as a collateral of
Leticia de la Vina-‐Sepe in our recommendation for her 1971-‐72 sugar crop loan.
"For your information, we enclose a copy of our letter to Mrs. Sepe, which is self-‐explanatory.
"Thank you.
"Very truly yours,

"(Sgd.) JOSE T. GELLEGANI
! of !113
109
"Manager"
(pp. 6-‐7, Record on Appeal, p. 75, Rollo.)
On the same day, May 22, 1970, PNB advised Sepe in writing to replace Lot No. 1402 with another collateral of
equal or higher value.
"May 22, 1970

"Mrs. Leticia de la Vina-‐Sepe
Canla-‐on City
"Dear Mrs. Sepe:
"We wish to advice you that Mr. Romeo Alcedo, in a letter written to us, has plans to revoke the 'Special Power of
Attorney' he executed in 1969 in your favor, affecting Lot No. 1402, Isabela Cadastre, covered by Transfer
CertiMicate of Title No. 52705 with an area of 20.9200 Hectares. Our record shows that this parcel of land is
mortgaged to us to secure the agricultural sugar crop loans we have granted you.
"Mr. Alcedo made us understand that this said property shall serve as security for your 1969/70 sugar crop loan
only. As it already secures your 1970-‐71 crop loan, which you have already availed, the same may be excluded as
security for future crop loans. In the meantime, it is requested that you replace Lot No. 1402, above-‐mentioned,
with the same or more appraised value. Cdpr
"Kindly call on us regarding this matter at your earliest convenience.
"Thank you.
"Very truly yours,

"(Sgd.) JOSE T. GELLEGANI
"Manager"
(pp. 7-‐8, Record on Appeal, p. 75, Rollo.)
Despite the above advice from PNB, Sepe was still able to obtain an additional loan from PNB increasing her debt
of P16,500 to P56,638.69 on the security of Alcedo's property as collateral. On January 15,1974, Alcedo received
two (2) letters from PNB: (1) informing him of Sepe's failure to pay her loan in the total amount of P56,638.69;
and (2) giving him six (6) days to settle Sepe's outstanding obligation, as otherwise, foreclosure proceedings
would be commenced against his property (p. 33, Rollo). Alcedo requested Sepe to pay her accounts to forestall
foreclosure proceedings against his property, but to no avail (p. 15, Rollo).
On April 17, 1974, Alcedo sued Sepe and PNB in the Court of First Instance of Negros Occidental for collection
and injunction with damages (p. 33, Rollo).
During the pendency of the case, PNB Miled in the OfMice of the Sheriff at Pasig, Metro Manila, a petition for
extrajudicial foreclosure of its real estate mortgage on Alcedo's land. On November 19, 1974, the property was
sold to PNB as the highest bidder in the sale. The corresponding Sheriff's CertiMicate of Sale was issued to the
Bank (p. 33, Rollo).
On October 18, 1975, Alcedo Miled an amended complaint against Leticia and her husband Elias Sepe, and the
Provincial Sheriff of Negros Occidental praying additionally for annulment of the extrajudicial foreclosure sale
and reconveyance of the land to him free from liens and encumbrances, with damages.
With leave of court, Alcedo Miled a second amended complaint withdrawing his action to collect his one-‐half share
(amounting to P28,319.34) out of the proceeds of the sugar crop loans obtained by Sepe (p. 34, Rollo).
In its answer, PNB alleged that it had no knowledge of the agreement between Mrs. Sepe and Alcedo to split the
crop loan proceeds between them. It required Sepe to put up other collaterals when it granted her an additional
loan because Alcedo informed the Bank that he was revoking the Special Power of Attorney he gave Sepe; that the
revocation was not formalized in accordance with law; and that in any event, the revocation of the Special Power
of Attorney on May 12, 1970 by Alcedo did not impair the real estate mortgage earlier executed on April 28, 1969
by Sepe in favor of the Bank (p. 36, Rollo).
On March 14, 1980, the trial court rendered judgment in favor of Alcedo —
"1. Declaring the public auction sale and the certiMicate of sale executed by the Provincial Sheriff of Negros
Occidental relative to Lot No. 1626, Isabela Cadastre (TCT No. T-‐52705), as null and void;
! of !113
110
"2. Ordering the defendant Philippine National Bank to reconvey to plaintiff the title to aforesaid Lot No. 1626
free from all liens and encumbrances relative to the loans obtained by defendant Leticia de la Vina-‐Sepe;
"3. Ordering defendant spouses Leticia de la Vina-‐Sepe and Elias Sepe and the Philippine National Bank, in
solidum, to pay to the plaintiff moral damages in the sum of P10,000.00, and another sum of P5,000.00 as
attorney's fees and expenses of litigation;
"4. On the cross-‐claim of defendant PNB against Leticia de la Vina-‐Sepe, considering that no evidence has been
adduced regarding the updated actual accountability of the latter with the former, it is hereby directed that PNB
proceed to collect against the cross-‐defendant whatever outstanding obligation the latter owes the former arising
from transactions in connection with the instant case.
"No pronouncement as to costs." (pp. 10-‐11, Rollo.).
The bank appealed but to no avail for on November 29, 1983, the Intermediate Appellate Court afMirmed in toto
the judgment of the trial court (p. 54, Rollo.) The appellate court reasoned out that the Bank was estopped from
foreclosing the mortgage on Alcedo's lot to pay Sepe's 1971-‐72 sugar crop loan, after having assured Alcedo on
May 22, 1970 "that we shall exclude the aforementioned lot as a collateral of Leticia de la Vina-‐Sepe in our
recommendation for her 1971-‐72 sugar crop loan" (p. 37, Rollo). The Court of Appeals held:
". . . Plaintiff-‐appellee's letter was unequivocal and clear to the effect that defendant Leticia de la Vina Sepe was
no longer empowered to bind, encumber or mortgage his property. Although We may not hold this revocation to
retroact to April 28, 1969 which was the date of the original mortgage, We can neither interpret it in any other
way than that from the moment of notice to the PNB, it was the absolute intention of the owner to withdraw all
authority from said defendant to further bind or encumber his property. This was clearly understood by the
defendant-‐appellant PNB. There was no question on its part that Leticia de la Vina Sepe was no longer authorized
to offer plaintiff-‐appellee's property as collateral for her contract of mortgage with the PNB. Defendant-‐appellant,
therefore, acknowledged this revocation of the agency and in no uncertain terms assured the plaintiff-‐appellee
that indeed, the latter's property will no longer be accepted by it as collateral for the sugar crop loan of the
aforementioned defendant for the year 1971 to 1972. This meeting of the minds between the plaintiff-‐appellee
and defendant-‐appellant took place not through verbal communications only, but in writing, as shown by their
letters dated May 12, 1970 and May 22, 1970, respectively. . . .
"xxx xxx xxx

". . . To Our minds, the aforementioned act and declaration of defendant-‐appellant PNB as embodied in said letter
binds said bank under the principle of estoppel by deed and deMined as follows:

"'A doctrine in American jurisprudence whereby a party creating an appearance of fact which is not true is held
bound by that appearance as against another person who has acted on the faith of it. (Strong v. Gutierrez Repide,
6 Phil. 685).
which is provided for in Articles 1431 and 1433 of the New Civil Code in conjunction with Section 3, paragraph
(a), Rule 131 of the Rules of Court, all of which provide: LLjur
"'Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon.'
"'Art. 1433. Estoppel may be in pais or by deed.'
"'Sec. 3. Conclusive presumptions. — The following are instances of conclusive presumptions:
" '(a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act, or omission, be permitted to falsify it.'
and which was enunciated in the following decisions of the Supreme Court:
! of !113
111
" 'Whenever a party has, by his own declaration, act or omission intentionally and deliberately led another to
believe a particular thing true and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act, or omission, be permitted to falsify it.
" 'Estoppel arises when one, by his acts, representations, or admissions, or by his silence when he ought to speak
out, intentionally or through culpable negligence induces another to believe certain facts to exist and such other
rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the
existence of such facts (Huyatid v. Huyatid, 47265-‐R, Jan. 4, 1928).
" 'The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its
purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to
whom they were directed and who reasonably relied thereon. Said doctrine springs from equitable principles
and the equities of the case. It is designed to aid the law in the administration of justice where without its aid
injustice might result.' (Philippine National Bank v. Court of Appeals, L-‐30831, November 21, 1979, 94 SCRA
368).
"By its letter dated May 22,1970, defendant-‐appellant PNB led plaintiff-‐appellee to believe that his property
covered by TCT T-‐52705 would no longer be included as collateral in the sugar crop loan of defendant Leticia de
la Vina Sepe for the year 1971-‐72. It led said plaintiff-‐appellee to believe that his property as of said year will no
longer be encumbered and will be free from any lien or mortgage. Plaintiff-‐appellee had the right to rely on said
belief, because of the aforementioned act and declaration of defendant-‐appellant bank. Under the laws and
jurisprudence aforequoted, defendant-‐appellant bank can no longer be allowed to deny or falsify its act or
declaration, or to renege from it. This is one of the conclusive presumptions provided for by the Rules of
Court." (pp. 37, 38-‐39, Rollo.).
PNB seeks a review of that decision on the grounds that:
1. the doctrine of promissory estoppel does not apply to this case;
2. PNB was a mortgagee in good faith and for value; and
3. PNB adduced substantial evidence in support of its cross-‐claim against defendant Leticia Sepe (p. 15, Rollo).
These issues boil down to whether or not PNB validly foreclosed the real estate mortgage on Alcedo's property
despite notice of Alcedo's revocation of the Special Power of Attorney authorizing Leticia Sepe to mortgage his
property as security for her sugar crop loans and despite the Bank's written assurance to Alcedo that it would
exclude his property as collateral for Sepe's future loan obligations. cdll
After careful deliberation, the Court is not persuaded to disturb the decisions of the trial court and the Court of
Appeals in this case.
We agree with the opinion of the appellate court that under the doctrine of promissory estoppel enunciated in
the case of Republic Flour Mills, Inc. vs. Central Bank, L-‐23542, August 11, 1979, the act and assurance given by
the PNB to Alcedo "that we shall exclude the aforementioned lot [Lot No. 1402] as a collateral of Leticia de la
Vina-‐Sepe in our recommendation for her 1971-‐72 sugar crop loan" (p. 37, Rollo) is binding on the bank. Having
given that assurance, the bank may not turn around and do the exact opposite of what it said it would not do. One
may not take inconsistent positions (Republic vs. Court of Appeals, 133 SCRA 505). A party may not go back on
his own acts and representations to the prejudice of the other party who relied upon them (Lazo vs. Republic
Surety & Insurance Co., Inc., 31 SCRA 329.).
In the case of Philippine National Bank vs. Court of Appeals (94 SCRA 357), where the bank manager assured the
heirs of the debtor-‐mortgagor that they would be allowed to pay the remaining obligation of their deceased
parents, the Supreme Court held that the bank must abide by its representations.
"On equitable principles, particularly on the ground of estoppel, we must rule against petitioner Bank. The
doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its
purpose is to forbid one to speak against its own act, representations, or commitments to the injury of one to
whom they were directed and who reasonably relied thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to aid the law in the administration of justice where without
! of !113
112
its aid injustice might result. It has been applied by this Court wherever and whenever the special circumstances
of a case so demands."
In the case at bar, since PNB had promised to exclude Alcedo's property as collateral for Sepe's 1971-‐72 sugar
crop loan, it should have released the property to Alcedo. The mortgage which Sepe gave to the bank on Alcedo's
lot as collateral for her 1971-‐72 sugar crop loan was null and void for having been already disauthorized by
Alcedo. Since Alcedo's property secured only P13,100.00 of Sepe's 1970-‐71 sugar crop loan of P16,500.00
(because P3,400 was secured by Sepe's own property), Alcedo's property may be held to answer for only the
unpaid balance, if any, of Sepe's 1970-‐71 loan, but not the 1971-‐72 crop loan.
While Article 1358 of the New Civil Code requires that the revocation of Alcedo's Special Power of Attorney to
mortgage his property should appear in a public instrument:
"Art. 1358. The following must appear in a public document:
(1) Acts or contracts which have for their object the creation, transmission, modiMication or extinguishment of
real rights over immovable property; sales of real property or of an interest therein are governed by Articles
1403, No. 2 and 1405."
nevertheless, a revocation embodied in a private writing is valid and binding between the parties (Doliendo v.
Depino, 12 Phil. 758; Hawaiian-‐Philippines Co. vs. Hernaez, 45 Phil. 746) for —
"The legalization by a public writing and the recording of the same in the registry are not essential requisites of a
contract entered into, as between the parties, but mere conditions of form or solemnities which the law imposes
in order that such contract may be valid as against third persons, and to insure that a publicly executed and
recorded agreement shall be respected by the latter." (Alano, et al. vs. Babasa, 10 Phil. 511.)
The PNB acted with bad faith in proceeding against Alcedo's property to satisfy Sepe's unpaid 1971-‐72 sugar
crop loan. The extrajudicial foreclosure being null and void ab initio, the certiMicate of sale which the Sheriff
delivered to PNB as the highest bidder at the sale is also null and void.
WHEREFORE, Minding no reversible error in the decision of the Court of Appeals, the petition for review is denied
for lack of merit.
SO ORDERED.
||| (Philippine National Bank v. Intermediate Appellate Court, G.R. No. 66715, [September 18, 1990], 267 PHIL
720-‐730)
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113

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AGENCY CASES Judge Bastes Syllabus

G.R. No. L-­‐15568 November 8, 1919

W. G. PHILPOTTS, petitioner,

Lawrence and Ross for petitioner.

G.R. No. L-­‐24332 January 31, 1978

Seno, Mendoza & Associates for petitioner.

Ramon Duterte for private respondent.

MUÑOZ PALMA, J.:

Hence, this Petition for Review on certiorari.

B. On GO CHANTS Cross-­‐Claim:

C. On Third-­‐Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos,

ART. 1919. Agency is extinguished.

xxx xxx xxx

xxx xxx xxx

G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,

G.R. No. 76933 May 29, 1991

AMERICAN AIRLINES, INCORPORATED, petitioner,

The antecedent facts are as follows:

1. Representation of American by Orient Air Services

(a) Sales agency commission

(b) Overriding commission

11. IATA and ATC Rules

Costs against plaintiff. 7

WHEREFORE, with the following modiMications —

the rest of the appealed decision is afMirmed.

Costs against American.8

G.R. No. 144805 June 8, 2006

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

CALLEJO, SR., J.:

May 22, 1987

Mr. L.G. Marquez

Re: Land of Eternit Corporation

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

In the instant petition for review, petitioners aver that

Re: Land of Eternit Corporation

In the meantime, I remain

The petition has no merit.

G.R. No. 149353 June 26, 2006

JOCELYN B. DOLES, Petitioner,

The antecedents of the case follow:

The Petition is meritorious.

q. And you have transact[ed] with the plaintiff?

q. What is that transaction?

q. Your friends and the plaintiff did not meet personally?

q. You are intermediaries?

q. You are re-­‐lending the money?

q. What proMit do you have, do you have commission?

q. Who is this Arsenio Pua?

a. Principal Minancier, sir.

q. So the money came from Arsenio Pua?

a. Yes, because I am only representing him, sir.

q. It is not your money?

a. Yes, Your Honor.

a. I am aware of that.

a. Yes, sir, I am aware of that.

a. They go direct to Jocelyn because I don’t know them.

a. Yes, there were checks issued.

q. By the friends of the defendant, am I correct?

G.R. No. L-‐15568 November 8, 1919

G.R. No. L-‐24332 January 31, 1978

B. On GO CHANTS Cross-‐Claim:

C. On Third-‐Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos,

q. You are re-‐lending the money?

G.R. No. L-‐7089 August 31, 1954

DOMINGO DE LA CRUZ, plaintiff-‐appellant,

G.R. No. L-‐41182-‐3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-‐appellants,

G.R. No. L-‐5486 August 17, 1910

JOSE DE LA PEA Y DE RAMON, plaintiff-‐appellant,

G.R. No. L-‐13471 January 12, 1920

VICENTE SY-‐JUCO and CIPRIANA VIARDO, plaintiffs-‐appellants,

SANTIAGO V. SY-‐JUCO, defendant-‐appellant.

TeoMilo Leonin for petitioners-‐appellants.

Osorio, Osorio & Osorio for respondent-‐appellee.

TeoMilo P. Purisima in his own behalf as intervenor-‐respondent.

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

JULIAN T. AGUNA, plaintiff-‐appellant,