I.

OBLIGATIONS AND LIABILITIES OF THE AGENT

G.R. No. 121824 January 29, 1998

BRITISH AIRWAYS, petitioner,

vs.
COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.

ROMERO, J.:

In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of
respondent Court of Appeals1 promulgated on September 7, 1995, which affirmed the award of
damages and attorney's fees made by the Regional Trial Court of Cebu, 7th Judicial Region,
Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party
complaint against Philippine Airlines (PAL).2

The material and relevant facts are as follows:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his
visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans. The latter, in
turn, purchased a ticket from BA where the following itinerary was indicated:3

CARRIER FLIGHT DATE TIME STATUS

MANILA MNL PR 310 Y 16 APR. 1730 OK

HONGKONG HKG BA 20 M 16 APR. 2100 OK

BOMBAY BOM BA 19 M 23 APR. 0840 OK

HONGKONG HKG PR 311 Y

MANILA MNL

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong
via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board
BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage
containing his clothings and personal effects, confident that upon reaching Hongkong, the same
would be transferred to the BA flight bound for Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and
that upon inquiry from the BA representatives, he was told that the same might have been
diverted to London. After patiently waiting for his luggage for one week, BA finally advised him
to file a claim by accomplishing the "Property Irregularity Report."4
Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages
and attorney's fees 5 against BA and Mr. Gumar before the trial court, docketed as Civil Case No.
CEB-9076.

On September 4, 1990, BA filed its answer with counter claim6 to the complaint raising, as special
and affirmative defenses, that Mahtani did not have a cause of action against it. Likewise, on
November 9, 1990, BA filed a third-party complaint 7 against PAL alleging that the reason for the
non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly
any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any
liability, arguing that there was, in fact, adequate time to transfer the luggage to BA facilities in
Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be
considered as transfer to BA.8

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in
favor of Mahtani, 9 the dispositive portion of which reads as follows:

WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the
defendant for which defendant is ordered to pay plaintiff the sum of Seven Thousand
(P7,000.00) Pesos for the value of the two (2) suit cases; Four Hundred U.S. ($400.00)
Dollars representing the value of the contents of plaintiff's luggage; Fifty Thousand
(P50,000.00) Pesos for moral and actual damages and twenty percent (20%) of the total
amount imposed against the defendant for attorney's fees and costs of this action.

The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED

for lack of cause of action.

SO ORDERED.

Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial court's
findings. Thus:

WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed
from to be in accordance with law and evidence, the same is hereby AFFIRMED in toto,
with costs against defendant-appellant.

SO ORDERED. 10

BA is now before us seeking the reversal of the Court of Appeals' decision.

In essence, BA assails the award of compensatory damages and attorney's fees, as well as the
dismissal of its third-party complaint against PAL.11

Regarding the first assigned issue, BA asserts that the award of compensatory damages in the
separate sum of P7,000.00 for the loss of Mahtani's two pieces of luggage was without basis since
Mahtani in his complaint12 stated the following as the value of his personal belongings:
 8. On the said travel, plaintiff took with him the following items and its corresponding
value, to wit:

1. personal belonging P10,000.00

2. gifts for his parents and relatives $5,000.00

Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided
for in the ticket, which reads:13

Liability for loss, delay, or damage to baggage is limited unless a higher value is declared
in advance and additional charges are paid:

1. For most international travel (including domestic corporations of international journeys)

the liability limit is approximately U.S. $9.07 per pound (U.S. $20.000) per kilo for checked
baggage and U.S. $400 per passenger for unchecked baggage.

Before we resolve the issues raised by BA, it is needful to state that the nature of an airline's
contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise
to its destination and a contract to transport passengers to their destination. A business intended
to serve the traveling public primarily, it is imbued with public interest, hence, the law governing
common carriers imposes an exacting standard.14 Neglect or malfeasance by the carrier's
employees could predictably furnish bases for an action for damages.15

In the instant case, it is apparent that the contract of carriage was between Mahtani and BA.
Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a
number of cases16 we have assessed the airlines' culpability in the form of damages for breach of
contract involving misplaced luggage.

In determining the amount of compensatory damages in this kind of cases, it is vital that the
claimant satisfactorily prove during the trial the existence of the factual basis of the damages and
its causal connection to defendant's acts.17

In this regard, the trial court granted the following award as compensatory damages:

Since plaintiff did not declare the value of the contents in his luggage and even failed to
show receipts of the alleged gifts for the members of his family in Bombay, the most that
can be expected for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars
($20.00) per kilo, or combined value of Four Hundred ($400.00) U.S. Dollars for Twenty
kilos representing the contents plus Seven Thousand (P7,000.00) Pesos representing the
purchase price of the two (2) suit cases.

However, as earlier stated, it is the position of BA that there should have been no separate award
for the luggage and the contents thereof since Mahtani failed to declare a separate higher
valuation for the luggage,18 and therefore, its liability is limited, at most, only to the amount
stated in the ticket.

Considering the facts of the case, we cannot assent to such specious argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed
to recover a greater amount. Article 22(1) of the Warsaw Convention,19 provides as follows:

xxx xxx xxx

(2) In the transportation of checked baggage and goods, the liability of the carrier shall
be limited to a sum of 250 francs per kilogram, unless the consignor has made, at time
the package was handed over to the carrier, a special declaration of the value at delivery
and has paid a supplementary sum if the case so requires. In that case the carrier will be
liable to pay a sum not exceeding the declared sum, unless he proves that the sum is
greater than the actual value to the consignor at delivery.

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an
amount in excess of the limits specified in the tariff which was filed with the proper authorities,
such tariff being binding, on the passenger regardless of the passenger's lack of knowledge
thereof or assent thereto.20 This doctrine is recognized in this jurisdiction.21

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion
contracts where the facts and circumstances justify that they should be disregarded.22

In addition, we have held that benefits of limited liability are subject to waiver such as when the
air carrier failed to raise timely objections during the trial when questions and answers regarding
the actual claims and damages sustained by the passenger were asked.23

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of
limited liability when it allowed Mahtani to testify as to the actual damages he incurred due to
the misplacement of his luggage, without any objection. In this regard, we quote the pertinent
transcript of stenographic notes of Mahtani's direct testimony:24

Q — How much are you going to ask from this court?

A — P100,000.00.

Q — What else?

A — Exemplary damages.

Q — How much?

A — P100,000.00.

Q — What else?

A — The things I lost, $5,000.00 for the gifts I lost and my personal
belongings, P10,000.00.

Q — What about the filing of this case?

 A — The court expenses and attorney's fees is 30%.

Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel
of the adverse party to be inadmissible for any reason, the latter has the right to object. However,
such right is a mere privilege which can be waived. Necessarily, the objection must be made at
the earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver
of objections.25 BA has precisely failed in this regard.

To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even
conducted his own cross-examination as well.26 In the early case of Abrenica v. Gonda,27 we ruled
that:

. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or objection
against the admission of any evidence must be made at the proper time, and that if not
so made it will be understood to have been waived. The proper time to make a protest or
objection is when, from the question addressed to the witness, or from the answer
thereto, or from the presentation of proof, the inadmissibility of evidence is, or may be
inferred.

Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled
to great respect.28 Since the actual value of the luggage involved appreciation of evidence, a task
within the competence of the Court of Appeals, its ruling regarding the amount is assuredly a
question of fact, thus, a finding not reviewable by this Court.29

As to the issue of the dismissal of BA's third-party complaint against PAL, the Court of Appeals
justified its ruling in this wise, and we quote:30

Lastly, we sustain the trial court's ruling dismissing appellant's third-party complaint
against PAL.

The contract of air transportation in this case pursuant to the ticket issued by appellant
to plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant
BA. When plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely
acting as a subcontractor or agent of BA. This is shown by the fact that in the ticket issued
by appellant to plaintiff-appellee, it is specifically provided on the "Conditions of Contract,"
paragraph 4 thereof that:

4. . . . carriage to be performed hereunder by several successive carriers

is regarded as a single operation.

The rule that carriage by plane although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passenger's ticket is considered the principal party and
the other carrier merely subcontractors or agent, is a settled issue.

We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko,31 we expounded on the
nature of a third-party complaint thus:
 The third-party complaint is, therefore, a procedural device whereby a "third party" who
is neither a party nor privy to the act or deed complained of by the plaintiff, may be
brought into the case with leave of court, by the defendant, who acts, as third-party
plaintiff to enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff's claim. The third-party complaint
is actually independent of and separate and distinct from the plaintiff's complaint. Were it
not for this provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-party. But the
Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his
separate cause of action in respect of plaintiff's claim against a third-party in the original
and principal case with the object of avoiding circuitry of action and unnecessary
proliferation of law suits and of disposing expeditiously in one litigation the entire subject
matter arising from one particular set of facts.

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their
contract of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which
the latter naturally denies. In other words, BA and PAL are blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusively
between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the former's
journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the "Conditions of
Contracts" of the ticket32 issued by BA to Mahtani confirms that the contract was one of
continuous air transportation from Manila to Bombay.

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a

single operation.

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from
Manila to Hongkong acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an
agent is also responsible for any negligence in the performance of its function.33 and is liable for
damages which the principal may suffer by reason of its negligent act.34 Hence, the Court of
Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its
agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air Transport
Association (IATA), wherein member airlines are regarded as agents of each other in the issuance
of the tickets and other matters pertaining to their relationship.35 Therefore, in the instant case,
the contractual relationship between BA and PAL is one of agency, the former being the principal,
since it was the one which issued the confirmed ticket, and the latter the agent.

Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German
Airlines v. Court of Appeals.36 In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda
covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines which
was to carry Antiporda to a specific destination "bumped" him off.
An action for damages was filed against Lufthansa which, however, denied any liability,
contending that its responsibility towards its passenger is limited to the occurrence of a mishap
on its own line. Consequently, when Antiporda transferred to Air Kenya, its obligation as a
principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent
for Air Kenya.

In rejecting Lufthansa's argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the principal in the contract of
carriage with Antiporda and remains to be so, regardless of those instances when actual
carriage was to be performed by various carriers. The issuance of confirmed Lufthansa
ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers
concretely attest to this.

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA
alone, and not PAL, since the latter was not a party to the contract. However, this is not to say
that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines,
Ltd. v. Court of Appeals,37 while not exactly in point, the case, however, illustrates the principle
which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as
an agent of another carrier, is also liable for its own negligent acts or omission in the performance
of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for
the purpose of ultimately determining who was primarily at fault as between them, is without
legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases
which would entail receiving the same or similar evidence for both cases and enforcing separate
judgments therefor. It must be borne in mind that the purpose of a third-party complaint is
precisely to avoid delay and circuitry of action and to enable the controversy to be disposed of in
one suit.38 It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it is
proven that the latter's negligence was the proximate cause of Mahtani's unfortunate experience,
instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No.
43309 dated September 7, 1995 is hereby MODIFIED, reinstating the third-party complaint filed
by British Airways dated November 9, 1990 against Philippine Airlines. No costs.

SO ORDERED.

G.R. No. 141485 June 30, 2005

PABLITO MURAO and NELIO HUERTAZUELA, petitioners,.

vs.
PEOPLE OF THE PHILIPPINES, respondent.

DECISION

CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, petitioners pray for
the reversal of the Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated 31 May
1999,1 affirming with modification the Judgment of the Regional Trial Court (RTC) of Puerto
Princesa City, Palawan, in Criminal Case No. 11943, dated 05 May 1997,2 finding petitioners guilty
beyond reasonable doubt of the crime of estafa under Article 315(1)(b) of the Revised Penal
Code.

Petitioner Pablito Murao is the sole owner of Lorna Murao Industrial Commercial Enterprises
(LMICE), a company engaged in the business of selling and refilling fire extinguishers, with
branches in Palawan, Naga, Legaspi, Mindoro, Aurora, Quezon, Isabela, and Laguna. Petitioner
Nelio Huertazuela is the Branch Manager of LMICE in Puerto Princesa City, Palawan.3

On 01 September 1994, petitioner Murao and private complainant Chito Federico entered into a
Dealership Agreement for the marketing, distribution, and refilling of fire extinguishers within
Puerto Princesa City.4 According to the Dealership Agreement, private complainant Federico, as
a dealer for LMICE, could obtain fire extinguishers from LMICE at a 50% discount, provided that
he sets up his own sales force, acquires and issues his own sales invoice, and posts a bond with
LMICE as security for the credit line extended to him by LMICE. Failing to comply with the
conditions under the said Dealership Agreement, private complainant Federico, nonetheless, was
still allowed to act as a part-time sales agent for LMICE entitled to a percentage commission from
the sales of fire extinguishers.5

The amount of private complainant Federico’s commission as sales agent for LMICE was under
contention. Private complainant Federico claimed that he was entitled to a commission equivalent
to 50% of the gross sales he had made on behalf of LMICE,6 while petitioners maintained that he
should receive only 30% of the net sales. Petitioners even contended that as company policy,
part-time sales agents were entitled to a commission of only 25% of the net sales, but since
private complainant Federico helped in establishing the LMICE branch office in Puerto Princesa
City, he was to receive the same commission as the full-time sales agents of LMICE, which was
30% of the net sales.7

Private complainant Federico’s first successful transaction as sales agent of LMICE involved two
fire extinguishers sold to Landbank of the Philippines (Landbank), Puerto Princesa City Branch,
for the price of ₱7,200.00. Landbank issued a check, dated 08 November 1993, pay to the order
of "L.M. Industrial Comm’l. Enterprises c/o Chito Federico," for the amount of ₱5,936.40,8 after
deducting from the original sales price the 15% discount granted by private complainant Federico
to Landbank and the 3% withholding tax. Private complainant Federico encashed the check at
Landbank and remitted only ₱2,436.40 to LMICE, while he kept ₱3,500.00 for himself as his
commission from the sale.9

Petitioners alleged that it was contrary to the standard operating procedure of LMICE that private
complainant Federico was named payee of the Landbank check on behalf of LMICE, and that
private complainant Federico was not authorized to encash the said check. Despite the supposed
irregularities committed by private complainant Federico in the collection of the payment from
Landbank and in the premature withholding of his commission from the said payment, petitioners
forgave private complainant Federico because the latter promised to make-up for his misdeeds
in the next transaction.10
Private complainant Federico, on behalf of LMICE, subsequently facilitated a transaction with the
City Government of Puerto Princesa for the refill of 202 fire extinguishers. Because of the
considerable cost, the City Government of Puerto Princesa requested that the transaction be split
into two purchase orders, and the City Government of Puerto Princesa shall pay for each of the
purchase orders separately.11 Pursuant to the two purchase orders, LMICE refilled and delivered
all 202 fire extinguishers to the City Government of Puerto Princesa: 154 units on 06 January
1994, 43 more units on 12 January 1994, and the last five units on 13 January 1994.12

The subject of this Petition is limited to the first purchase order, Purchase Order No. GSO-856,
dated 03 January 1994, for the refill of 99 fire extinguishers, with a total cost of ₱309,000.00.13 On
16 June 1994, the City Government of Puerto Princesa issued Check No. 611437 to LMICE to pay
for Purchase Order No. GSO-856, in the amount of ₱300,572.73, net of the 3% withholding
tax.14 Within the same day, petitioner Huertazuela claimed Check No. 611437 from the City
Government of Puerto Princesa and deposited it under the current account of LMICE with
PCIBank.15

On 17 June 1994, private complainant Federico went to see petitioner Huertazuela at the LMICE
branch office in Puerto Princesa City to demand for the amount of ₱154,500.00 as his commission
from the payment of Purchase Order No. GSO-856 by the City Government of Puerto Princesa.
Petitioner Huertazuela, however, refused to pay private complainant Federico his commission
since the two of them could not agree on the proper amount thereof.16

Also on 17 June 1994, private complainant Federico went to the police station to file an Affidavit-
Complaint for estafa against petitioners.17 Petitioners submitted their Joint Counter-Affidavit on
12 July 1994.18 The City Prosecution Office of Puerto Princesa City issued a Resolution, dated 15
August 1994, finding that a prima facie case for estafa existed against the petitioners and
recommending the filing of an information for estafa against both of them.19

The Information, docketed as Criminal Case No. 11943 and raffled to the RTC of Puerto Princesa
City, Palawan, Branch 52, reads as follows –

INFORMATION

The undersigned accuses PABLITO MURAO and NELIO C. HUERTAZUELA of the crime of ESTAFA,
committed as follows:

That on or about the 16th day of June, 1994, at Puerto Princesa City, Philippines, and within the
jurisdiction of this Honorable Court, the said accused, conspiring and confederating together and
mutually helping one another, after having received the amount of ₱309,000.00 as payment of
the 99 tanks of refilled fire extinguisher (sic) from the City Government of Puerto Princesa,
through deceit, fraud and misrepresentation, did then and there willfully, unlawfully and
feloniously defraud one Chito Federico in the following manner, to wit: said accused, well knowing
that Chito Federico agent of LM Industrial Commercial Enterprises is entitled to 50% commission
of the gross sales as per their Dealership Contract or the amount of ₱154,500.00 as his
commission for his sale of 99 refilled fire extinguishers worth ₱309,000.00, and accused once in
possession of said amount of ₱309,000.00 misappropriate, misapply and convert the amount of
₱154,500.00 for their own personal use and benefit and despite repeated demands made upon
them by complainant to deliver the amount of ₱154,500.00, accused failed and refused and still
fails and refuses to do so, to the damage and prejudice of said Chito Federico in the amount of
₱154,500.00, Philippine Currency.20

After holding trial, the RTC rendered its Judgment on 05 May 1997 finding petitioners guilty
beyond reasonable doubt as co-principals of the crime of estafa defined and penalized in Article
315(1)(b) of the Revised Penal Code. Estafa, under the said provision, is committed by –

ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means
mentioned hereinbelow . . .

1. With unfaithfulness or abuse of confidence, namely:

(a) …

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any

other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of or to
return the same, even though such obligation be totally or partially guaranteed by a bond;
or by denying having received such money, goods, or other property; . . .

In the same Judgment, the RTC expounded on its finding of guilt, thus –

For the afore-quoted provision of the Revised Penal Code to be committed, the following
requisites must concur:

1. That money, goods or other personal property be received by the offender in trust, or
on commission, or for administration, or under any other obligation involving the duty to
make delivery of, or to return, the same;

2. That there be misappropriation or conversion of such money or property by the

offender, or denial on his part of such receipt;

3. That such misappropriation or conversion or denial is to the prejudice of another; and

4. That there is demand made by the offended party to the offender. (Reyes, Revised
Penal Code of the Philippines, p. 716; Manuel Manahan, Jr. vs. Court of Appeals, Et Al.,
G.R. No. 111656, March 20, 1996)

All the foregoing elements are present in this case. The aborted testimony of Mrs. Norma Dacuan,
Cashier III of the Treasurer’s Office of the City of Puerto Princesa established the fact that indeed,
on June 16, 1994, co-accused Nelio Huertazuela took delivery of Check No. 611437 with face
value of ₱300,572.73, representing payment for the refill of 99 cylinders of fire extinguishers.
Although the relationship between complaining witness Chito Federico and LMIC is not fiduciary
in nature, still the clause "any other obligation involving the duty to make delivery of or to return"
personal property is broad enough to include a "civil obligation" (Manahan vs. C.A., Et. Al., Mar.
20, 1996).
The second element cannot be gainsaid. Both Pablito Murao and Nelio Huertazuela categorically
admitted that they did not give to Chito Federico his commission. Instead, they deposited the full
amount of the consideration, with the PCIBank in the Current Account of LMIC.

The refusal by the accused to give Chito Federico what ever percentage his commission
necessarily caused him prejudice which constitute the third element of estafa. Demand for
payment, although not an essential element of estafa was nonetheless made by the complainant
but was rebuffed by the accused. The fraudulent intent by the accused is indubitably indicated
by their refusal to pay Chito Federico any percentage of the gross sales as commission. If it were
true that what the dealer/sales Agent is entitled to by way of commission is only 30% of the gross
sales, then by all means the accused should have paid Chito Federico 30%. If he refused, they
could have it deposited in his name. In that way they may not be said to have misappropriated
for themselves what pertained to their Agent by way of commission.

WHEREFORE, premises considered judgment is hereby rendered finding the accused PABLITO
MURAO and NELIO HUERTAZUELA guilty beyond reasonable doubt as co-principals, of the crime
of estafa defined and penalized in Article 315 par. 1(b) of the Revised Penal Code, and applying
the provisions of the Indeterminate Sentence Law, both accused are hereby sentenced to an
indeterminate penalty ranging from a minimum of TWO (2) YEARS, FOUR (4) MONTHS and ONE
(1) DAY of prision correccional in its medium period, to a maximum of TWENTY (20) YEARS of
reclusion temporal in its maximum period; to pay Chito Federico, jointly and severally:

a. Sales Commission equivalent to

50% of ₱309,000.00 or ------------------- ₱154,500.00

with legal interest thereon from

June 17, 1994 until fully paid;

b. Attorney’s fees ---------------------------- ₱ 30,0000.00.21

Resolving the appeal filed by the petitioners before it, the Court of Appeals, in its Decision, dated
31 May 1999, affirmed the aforementioned RTC Judgment, finding petitioners guilty of estafa,
but modifying the sentence imposed on the petitioners. The dispositive portion of the Decision of
the Court of Appeals reads –

WHEREFORE, the appealed decision is hereby AFFIRMED with the MODIFICATION that appellants
PABLITO MURAO and NELIO HUERTAZUELA are hereby each sentenced to an indeterminate
penalty of eight (8) years and One (1) day of prision mayor, as minimum, to Twenty (20) years
of reclusion temporal, as maximum. The award for attorney’s fee of ₱30,000.00 is deleted
because the prosecution of criminal action is the task of the State prosecutors. All other aspects
of the appealed decision are maintained.22
When the Court of Appeals, in its Resolution, dated 19 January 2000,23 denied their Motion for
Reconsideration, petitioners filed the present Petition for Review24 before this Court, raising the
following errors allegedly committed by the Court of Appeals in its Decision, dated 31 May 1999
–

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED
THAT PETITIONERS ARE LIABLE FOR ESTAFA UNDER ARTICLE 315 1(B) OF THE REVISED PENAL
CODE UNDER THE FOREGOING SET OF FACTS, WHEN IT IS CLEAR FROM THE SAID
UNDISPUTED FACTS THAT THE LIABILITY IS CIVIL IN NATURE.

II

WITH DUE RESPECT, THE HONORABLE COURT ERRED WHEN IT UPHOLD (sic) PRIVATE
COMPLAINANT’S CLAIM THAT HE IS ENTITLED TO A FIFTY (50%) PERCENT COMMISSION
WITHOUT EVIDENCE TO SUPPORT SUCH CLAIM.

This Court finds the instant Petition impressed with merit. Absent herein are two essential
elements of the crime of estafa by misappropriation or conversion under Article 315(1)(b) of the
Revised Penal Code, namely: (1) That money, goods or other personal property be received by
the offender in trust, or on commission, or for administration, or under any other obligation
involving the duty to make delivery of, or to return, the same; and (2) That there be a
misappropriation or conversion of such money or property by the offender.

The findings of the RTC and the Court of Appeals that petitioners committed estafa rest on the
erroneous belief that private complainant Federico, due to his right to commission, already owned
50% of the amount paid by the City Government of Puerto Princesa to LMICE by virtue of Check
No. 611437, so that the collection and deposit of the said check by petitioners under the account
of LMICE constituted misappropriation or conversion of private complainant Federico’s
commission.

However, his right to a commission does not make private complainant Federico a joint
owner of the money paid to LMICE by the City Government of Puerto Princesa, but merely
establishes the relation of agent and principal.25 It is unequivocal that an agency existed between
LMICE and private complainant Federico. Article 1868 of the Civil Code defines agency as a special
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." Although
private complainant Federico never had the opportunity to operate as a dealer for LMICE under
the terms of the Dealership Agreement, he was allowed to act as a sales agent for LMICE. He can
negotiate for and on behalf of LMICE for the refill and delivery of fire extinguishers, which he, in
fact, did on two occasions – with Landbank and with the City Government of Puerto Princesa.
Unlike the Dealership Agreement, however, the agreement that private complainant Federico may
act as sales agent of LMICE was based on an oral agreement.26

As a sales agent, private complainant Federico entered into negotiations with prospective clients
for and on behalf of his principal, LMICE. When negotiations for the sale or refill of fire
extinguishers were successful, private complainant Federico prepared the necessary
documentation. Purchase orders, invoices, and receipts were all in the name of LMICE. It was
LMICE who had the primary duty of picking up the empty fire extinguishers, filling them up, and
delivering the refilled tanks to the clients, even though private complainant Federico personally
helped in hauling and carrying the fire extinguishers during pick-up from and delivery to clients.

All profits made and any advantage gained by an agent in the execution of his agency should
belong to the principal.27 In the instant case, whether the transactions negotiated by the sales
agent were for the sale of brand new fire extinguishers or for the refill of empty tanks, evidently,
the business belonged to LMICE. Consequently, payments made by clients for the fire
extinguishers pertained to LMICE. When petitioner Huertazuela, as the Branch Manager of LMICE
in Puerto Princesa City, with the permission of petitioner Murao, the sole proprietor of LMICE,
personally picked up Check No. 611437 from the City Government of Puerto Princesa, and
deposited the same under the Current Account of LMICE with PCIBank, he was merely collecting
what rightfully belonged to LMICE. Indeed, Check No. 611437 named LMICE as the lone payee.
Private complainant Federico may claim commission, allegedly equivalent to 50% of the payment
received by LMICE from the City Government of Puerto Princesa, based on his right to just
compensation under his agency contract with LMICE,28 but not as the automatic owner of the
50% portion of the said payment.

Since LMICE is the lawful owner of the entire proceeds of the check payment from the City
Government of Puerto Princesa, then the petitioners who collected the payment on behalf of
LMICE did not receive the same or any part thereof in trust, or on commission, or for
administration, or under any other obligation involving the duty to make delivery of, or to return,
the same to private complainant Federico, thus, the RTC correctly found that no fiduciary
relationship existed between petitioners and private complainant Federico. A fiduciary relationship
between the complainant and the accused is an essential element of estafa by misappropriation
or conversion, without which the accused could not have committed estafa.29

The RTC used the case of Manahan, Jr. v. Court of Appeals30 to support its position that even in
the absence of a fiduciary relationship, the petitioners still had the civil obligation to return and
deliver to private complainant Federico his commission. The RTC failed to discern the substantial
differences in the factual background of the Manahan case from the present Petition.
The Manahan case involved the lease of a dump truck. Although a contract of lease may not be
fiduciary in character, the lessee clearly had the civil obligation to return the truck to the lessor
at the end of the lease period; and failure of the lessee to return the truck as provided for in the
contract may constitute estafa. The phrase "or any other obligation involving the duty to make
delivery of, or to return the same" refers to contracts of bailment, such as, contract of lease of
personal property, contract of deposit, and commodatum, wherein juridical possession of the
thing was transferred to the lessee, depositary or borrower, and wherein the latter is obligated
to return the same thing.31

In contrast, the current Petition concerns an agency contract whereby the principal already
received payment from the client but refused to give the sales agent, who negotiated the sale,
his commission. As has been established by this Court in the foregoing paragraphs, LMICE had a
right to the full amount paid by the City Government of Puerto Princesa. Since LMICE, through
petitioners, directly collected the payment, then it was already in possession of the amount, and
no transfer of juridical possession thereof was involved herein. Given that private complainant
Federico could not claim ownership over the said payment or any portion thereof, LMICE had
nothing at all to deliver and return to him. The obligation of LMICE to pay private complainant
Federico his commission does not arise from any duty to deliver or return the money to its
supposed owner, but rather from the duty of a principal to give just compensation to its agent
for the services rendered by the latter.

Furthermore, the Court of Appeals, in its Decision, dated 31 May 1999, defined the words
"convert" and "misappropriate" in the following manner –

The High Court in Saddul v. Court of Appeals [192 SCRA 277] enunciated that the words "convert"
and "misappropriate" in the crime of estafa punished under Art. 315, par. 1(b) connote an act of
using or disposing of another’s property as if it were one’s own, or if devoting it to a purpose or
use different from that agreed upon. To misappropriate to one’s use includes, not only conversion
to one’s personal advantage, but also every attempt to dispose of the property of another without
right.32

Based on the very same definition, this Court finds that petitioners did not convert nor
misappropriate the proceeds from Check No. 611437 because the same belonged to LMICE, and
was not "another’s property." Petitioners collected the said check from the City Government of
Puerto Princesa and deposited the same under the Current Account of LMICE with PCIBank. Since
the money was already with its owner, LMICE, it could not be said that the same had been
converted or misappropriated for one could not very well fraudulently appropriate to himself
money that is his own.33

Although petitioners’ refusal to pay private complainant Federico his commission caused prejudice
or damage to the latter, said act does not constitute a crime, particularly estafa by conversion or
misappropriation punishable under Article 315(1)(b) of the Revised Penal Code. Without the
essential elements for the commission thereof, petitioners cannot be deemed to have committed
the crime.

While petitioners may have no criminal liability, petitioners themselves admit their civil liability to
the private complainant Federico for the latter’s commission from the sale, whether it be 30% of
the net sales or 50% of the gross sales. However, this Court is precluded from making a
determination and an award of the civil liability for the reason that the said civil liability of
petitioners to pay private complainant Federico his commission arises from a violation of the
agency contract and not from a criminal act.34 It would be improper and unwarranted for this
Court to impose in a criminal action the civil liability arising from a civil contract, which should
have been the subject of a separate and independent civil action.35

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated 31
May 1999, affirming with modification the Judgment of the RTC of Puerto Princesa City, Palawan,
in Criminal Case No. 11943, dated 05 May 1997, finding petitioners guilty beyond reasonable
doubt of estafa by conversion or misappropriation under Article 315(1)(b) of the Revised Penal
Code, and awarding the amount of ₱154,500.00 as sales commission to private complainant
Federico, is hereby REVERSED and SET ASIDE. A new Judgment is hereby entered ACQUITTING
petitioners based on the foregoing findings of this Court that their actions did not constitute the
crime of estafa by conversion or misappropriation under Article 315(1)(b) of the Revised Penal
Code. The cash bonds posted by the petitioners for their provisional liberty are hereby ordered
RELEASED and the amounts thereof RETURNED to the petitioners, subject to the usual accounting
and auditing procedures.

SO ORDERED.

G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner,

vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA
CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and Lucia Castillo.
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings & Loan Association, Inc.

CRUZ, J.:

This case, for all its seeming complexity, turns on a simple question of negligence. The facts,
pruned of all non-essentials, are easily told.

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the
Philippines and even abroad. Golden Savings and Loan Association was, at the time these events
happened, operating in Calapan, Mindoro, with the other private respondents as its principal
officers.

In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited
over a period of two months 38 treasury warrants with a total value of P1,755,228.37. They were
all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General
Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while the
others appeared to have been indorsed by their respective payees, followed by Gomez as second
indorser.1

On various dates between June 25 and July 16, 1979, all these warrants were subsequently
indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No.
2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the
branch office to the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing.2

More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times
to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was
meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over Gloria's
repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally
decided to allow Golden Savings to withdraw from the proceeds of the
warrants.3
The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on
July 13, 1979, in the amount of P310,000.00, and the third on July 16, 1979, in the amount of
P150,000.00. The total withdrawal was P968.000.00.4

In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account,
eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently
cleared warrants. The last withdrawal was made on July 16, 1979.

On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to make up the deficit in its account.

The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of
Mindoro.5 After trial, judgment was rendered in favor of Golden Savings, which, however, filed a
motion for reconsideration even as Metrobank filed its notice of appeal. On November 4, 1986,
the lower court modified its decision thus:

ACCORDINGLY, judgment is hereby rendered:

1. Dismissing the complaint with costs against the plaintiff;

2. Dissolving and lifting the writ of attachment of the properties of defendant Golden
Savings and Loan Association, Inc. and defendant Spouses Magno Castillo and Lucia
Castillo;

3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the
sum of P1,754,089.00 and to reinstate and credit to such account such amount existing
before the debit was made including the amount of P812,033.37 in favor of defendant
Golden Savings and Loan Association, Inc. and thereafter, to allow defendant Golden
Savings and Loan Association, Inc. to withdraw the amount outstanding thereon before
the debit;

4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc.
attorney's fees and expenses of litigation in the amount of P200,000.00.

5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo
attorney's fees and expenses of litigation in the amount of P100,000.00.

SO ORDERED.

On appeal to the respondent court,6 the decision was affirmed, prompting Metrobank to file this
petition for review on the following grounds:

1. Respondent Court of Appeals erred in disregarding and failing to apply the clear
contractual terms and conditions on the deposit slips allowing Metrobank to charge back
any amount erroneously credited.
 (a) Metrobank's right to charge back is not limited to instances where the checks
or treasury warrants are forged or unauthorized.

(b) Until such time as Metrobank is actually paid, its obligation is that of a mere
collecting agent which cannot be held liable for its failure to collect on the warrants.

2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank
is made to pay for warrants already dishonored, thereby perpetuating the fraud committed
by Eduardo Gomez.

3. Respondent Court of Appeals erred in not finding that as between Metrobank and
Golden Savings, the latter should bear the loss.

4. Respondent Court of Appeals erred in holding that the treasury warrants involved in
this case are not negotiable instruments.

The petition has no merit.

From the above undisputed facts, it would appear to the Court that Metrobank was indeed
negligent in giving Golden Savings the impression that the treasury warrants had been cleared
and that, consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his
account with it. Without such assurance, Golden Savings would not have allowed the withdrawals;
with such assurance, there was no reason not to allow the withdrawal. Indeed, Golden Savings
might even have incurred liability for its refusal to return the money that to all appearances
belonged to the depositor, who could therefore withdraw it any time and for any reason he saw
fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited
them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied
on Metrobank to determine the validity of the warrants through its own services. The proceeds
of the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to
withdraw them from its own deposit.7 It was only when Metrobank gave the go-signal that Gomez
was finally allowed by Golden Savings to withdraw them from his own account.

The argument of Metrobank that Golden Savings should have exercised more care in checking
the personal circumstances of Gomez before accepting his deposit does not hold water. It was
Gomez who was entrusting the warrants, not Golden Savings that was extending him a loan; and
moreover, the treasury warrants were subject to clearing, pending which the depositor could not
withdraw its proceeds. There was no question of Gomez's identity or of the genuineness of his
signature as checked by Golden Savings. In fact, the treasury warrants were dishonored allegedly
because of the forgery of the signatures of the drawers, not of Gomez as payee or indorser.
Under the circumstances, it is clear that Golden Savings acted with due care and diligence and
cannot be faulted for the withdrawals it allowed Gomez to make.

By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling
— more than one and a half million pesos (and this was 1979). There was no reason why it should
not have waited until the treasury warrants had been cleared; it would not have lost a single
centavo by waiting. Yet, despite the lack of such clearance — and notwithstanding that it had not
received a single centavo from the proceeds of the treasury warrants, as it now repeatedly
stresses — it allowed Golden Savings to withdraw — not once, not twice, but thrice — from
the uncleared treasury warrants in the total amount of P968,000.00

Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance
and it also wanted to "accommodate" a valued client. It "presumed" that the warrants had been
cleared simply because of "the lapse of one week."8 For a bank with its long experience, this
explanation is unbelievably naive.

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the
dorsal side of the deposit slips through which the treasury warrants were deposited by Golden
Savings with its Calapan branch. The conditions read as follows:

Kindly note that in receiving items on deposit, the bank obligates itself only as the
depositor's collecting agent, assuming no responsibility beyond care in selecting
correspondents, and until such time as actual payment shall have come into possession
of this bank, the right is reserved to charge back to the depositor's account any amount
previously credited, whether or not such item is returned. This also applies to
checks drawn on local banks and bankers and their branches as well as on this
bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft
or any other reason. (Emphasis supplied.)

According to Metrobank, the said conditions clearly show that it was acting only as a collecting
agent for Golden Savings and give it the right to "charge back to the depositor's account any
amount previously credited, whether or not such item is returned. This also applies to checks ". .
. which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft of any other
reason." It is claimed that the said conditions are in the nature of contractual stipulations and
became binding on Golden Savings when Gloria Castillo, as its Cashier, signed the deposit slips.

Doubt may be expressed about the binding force of the conditions, considering that they have
apparently been imposed by the bank unilaterally, without the consent of the depositor. Indeed,
it could be argued that the depositor, in signing the deposit slip, does so only to identify himself
and not to agree to the conditions set forth in the given permit at the back of the deposit slip.
We do not have to rule on this matter at this time. At any rate, the Court feels that even if the
deposit slip were considered a contract, the petitioner could still not validly disclaim responsibility
thereunder in the light of the circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to
be suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true.
On the contrary, Article 1909 of the Civil Code clearly provides that —

Art. 1909. — 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.

The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was
the clearance given by it that assured Golden Savings it was already safe to allow Gomez to
withdraw the proceeds of the treasury warrants he had deposited Metrobank misled Golden
Savings. There may have been no express clearance, as Metrobank insists (although this is
refuted by Golden Savings) but in any case that clearance could be implied from its allowing
Golden Savings to withdraw from its account not only once or even twice but three times. The
total withdrawal was in excess of its original balance before the treasury warrants were deposited,
which only added to its belief that the treasury warrants had indeed been cleared.

Metrobank's argument that it may recover the disputed amount if the warrants are not paid for
any reason is not acceptable. Any reason does not mean no reason at all. Otherwise, there would
have been no need at all for Golden Savings to deposit the treasury warrants with it for clearance.
There would have been no need for it to wait until the warrants had been cleared before paying
the proceeds thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests,
is not binding for being arbitrary and unconscionable. And it becomes more so in the case at bar
when it is considered that the supposed dishonor of the warrants was not communicated to
Golden Savings before it made its own payment to Gomez.

The belated notification aggravated the petitioner's earlier negligence in giving express or at least
implied clearance to the treasury warrants and allowing payments therefrom to Golden Savings.
But that is not all. On top of this, the supposed reason for the dishonor, to wit, the forgery of the
signatures of the general manager and the auditor of the drawer corporation, has not been
established.9 This was the finding of the lower courts which we see no reason to disturb. And as
we said in MWSS v. Court of Appeals:10

Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be
established by clear, positive and convincing evidence. This was not done in the present
case.

A no less important consideration is the circumstance that the treasury warrants in question are
not negotiable instruments. Clearly stamped on their face is the word "non-negotiable." Moreover,
and this is of equal significance, it is indicated that they are payable from a particular fund, to
wit, Fund 501.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are
pertinent:

Sec. 1. — Form of negotiable instruments. — An instrument to be negotiable must

conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise

indicated therein with reasonable certainty.
 xxx xxx xxx

Sec. 3. When promise is unconditional. — An unqualified order or promise to pay is

unconditional within the meaning of this Act though coupled with —

(a) An indication of a particular fund out of which reimbursement is to be made or a

particular account to be debited with the amount; or

(b) A statement of the transaction which gives rise to the instrument judgment.

But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants
makes the order or promise to pay "not unconditional" and the warrants themselves non-
negotiable. There should be no question that the exception on Section 3 of the Negotiable
Instruments Law is applicable in the case at bar. This conclusion conforms to Abubakar vs. Auditor
General11 where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable
instrument and is entitled to the rights and privileges of a holder in due course, free from
defenses. But this treasury warrant is not within the scope of the negotiable instrument
law. For one thing, the document bearing on its face the words "payable from the
appropriation for food administration, is actually an Order for payment out of "a particular
fund," and is not unconditional and does not fulfill one of the essential requirements of a
negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable
Instruments Law).

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed
that they were "genuine and in all respects what they purport to be," in accordance with Section
66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the
non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the
purpose of guaranteeing the genuineness of the warrants but merely to deposit them with
Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on
the back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed,
Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands,12 but we
feel this case is inapplicable to the present controversy.1âwphi1 That case involved checks
whereas this case involves treasury warrants. Golden Savings never represented that the warrants
were negotiable but signed them only for the purpose of depositing them for clearance. Also, the
fact of forgery was proved in that case but not in the case before us. Finally, the Court found the
Jai Alai Corporation negligent in accepting the checks without question from one Antonio Ramirez
notwithstanding that the payee was the Inter-Island Gas Services, Inc. and it did not appear that
he was authorized to indorse it. No similar negligence can be imputed to Golden Savings.

We find the challenged decision to be basically correct. However, we will have to amend it insofar
as it directs the petitioner to credit Golden Savings with the full amount of the treasury checks
deposited to its account.
The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez
was allowed to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor. The
amount he has withdrawn must be charged not to Golden Savings but to Metrobank, which must
bear the consequences of its own negligence. But the balance of P586,589.00 should be debited
to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount from
his deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To also credit
the balance to Golden Savings would unduly enrich it at the expense of Metrobank, let alone the
fact that it has already been informed of the dishonor of the treasury warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the
dispositive portion of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter
allowing defendant Golden Savings & Loan Association, Inc. to withdraw the amount
outstanding thereon, if any, after the debit.

SO ORDERED.

G.R. No. L-109937 March 21, 1994

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE
POOL, respondents.

Office of the Legal Counsel for petitioner.

Reyes, Santayana, Molo & Alegre for DBP Mortgage Redemption Insurance Pool.

QUIASON, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse
and set aside the decision of the Court of Appeals in CA-G.R CV No. 26434 and its resolution
denying reconsideration thereof.

We affirm the decision of the Court of Appeals with modification.

In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied
for a loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch.
As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and
released on August 11, 1987. From the proceeds of the loan, DBP deducted the amount of
P1,476.00 as payment for the MRI premium. On August 15, 1987, Dans accomplished and
submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool."

On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was
credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was
advised of the credit.

On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this
information to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP that
Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the
time of application.

On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husband's MRI
application. The DBP offered to refund the premium of P1,476.00 which the deceased had paid,
but Candida Dans refused to accept the same, demanding payment of the face value of the MRI
or an amount equivalent to the loan. She, likewise, refused to accept an ex gratia settlement of
P30,000.00, which the DBP later offered.

On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a
complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool
for "Collection of Sum of Money with Damages." Respondent Estate alleged that Dans became
insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of
application, required him to apply for MRI, and later collected the insurance premium thereon.
Respondent Estate therefore prayed: (1) that the sum of P139,500.00, which it paid under protest
for the loan, be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid;
and (3) that damages be awarded.

The DBP and the DBP MRI Pool separately filed their answers, with the former asserting a cross-
claim against the latter.

At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and exhibits submitted by
respondent Estate. As a result of these admissions, the trial court narrowed down the issues and,
without opposition from the parties, found the case ripe for summary judgment. Consequently,
the trial court ordered the parties to submit their respective position papers and documentary
evidence, which may serve as basis for the judgment.

On March 10, 1990, the trial court rendered a decision in favor of respondent Estate and against
DBP. The DBP MRI Pool, however, was absolved from liability, after the trial court found no privity
of contract between it and the deceased. The trial court declared DBP in estoppel for having led
Dans into applying for MRI and actually collecting the premium and the service fee, despite
knowledge of his age ineligibility. The dispositive portion of the decision read as follows:

WHEREFORE, in view of the foregoing consideration and in the furtherance of

justice and equity, the Court finds judgment for the plaintiff and against Defendant
DBP, ordering the latter:
 1. To return and reimburse plaintiff the amount of P139,500.00 plus legal rate of
interest as amortization payment paid under protest;

2. To consider the mortgage loan of P300,000.00 including all interest accumulated

or otherwise to have been settled, satisfied or set-off by virtue of the insurance
coverage of the late Juan B. Dans;

3. To pay plaintiff the amount of P10,000.00 as attorney's fees;

4. To pay plaintiff in the amount of P10,000.00 as costs of litigation and other

expenses, and other relief just and equitable.

The Counterclaims of Defendants DBP and DBP MRI POOL are hereby dismissed.
The Cross-claim of Defendant DBP is likewise dismissed (Rollo, p. 79)

The DBP appealed to the Court of Appeals. In a decision dated September 7, 1992, the appellate
court affirmed in toto the decision of the trial court. The DBP's motion for reconsideration was
denied in a resolution dated April 20, 1993.

Hence, this recourse.

II

When Dans applied for MRI, he filled up and personally signed a "Health Statement for DBP MRI
Pool" (Exh. "5-Bank") with the following declaration:

I hereby declare and agree that all the statements and answers contained herein
are true, complete and correct to the best of my knowledge and belief and form
part of my application for insurance. It is understood and agreed that no insurance
coverage shall be effected unless and until this application is approved and the full
premium is paid during my continued good health (Records, p. 40).

Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application
shall be approved by the insurance pool; and (2) when the full premium is paid during the
continued good health of the applicant. These two conditions, being joined conjunctively, must
concur.

Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool,
however, did not approve the application of Dans. There is also no showing that it accepted the
sum of P1,476.00, which DBP credited to its account with full knowledge that it was payment for
Dan's premium. There was, as a result, no perfected contract of insurance; hence, the DBP MRI
Pool cannot be held liable on a contract that does not exist.

The liability of DBP is another matter.

It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure MRI
coverage. Instead of allowing Dans to look for his own insurance carrier or some other form of
insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI coverage. When
Dan's loan was released on August 11, 1987, DBP already deducted from the proceeds thereof
the MRI premium. Four days latter, DBP made Dans fill up and sign his application for MRI, as
well as his health statement. The DBP later submitted both the application form and health
statement to the DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee,
DBP deducted 10 percent of the premium collected by it from Dans.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as
an insurance agent.

As an insurance agent, DBP made Dans go through the motion of applying for said insurance,
thereby leading him and his family to believe that they had already fulfilled all the requirements
for the MRI and that the issuance of their policy was forthcoming. Apparently, DBP had full
knowledge that Dan's application was never going to be approved. The maximum age for MRI
acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage
Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. "1-
Pool").

Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not
personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers."

The DBP is not authorized to accept applications for MRI when its clients are more than 60 years
of age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI coverage because
of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application
for MRI by collecting the insurance premium, and deducting its agent's commission and service
fee.

The liability of an agent who exceeds the scope of his authority depends upon whether the third
person is aware of the limits of the agent's powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by
the principal on the agent and he (third person) has been deceived by the non-disclosure thereof
by the agent, then the latter is liable for damages to him (V Tolentino, Commentaries and
Jurisprudence on the Civil Code of the Philippines, p. 422 [1992], citing Sentencia [Cuba] of
September 25, 1907). The rule that the agent is liable when he acts without authority is founded
upon the supposition that there has been some wrong or omission on his part either in
misrepresenting, or in affirming, or concealing the authority under which he assumes to act
(Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as the
non-disclosure of the limits of the agency carries with it the implication that a deception was
perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code
of the Philippines come into play.

Article 19 provides:

Every person must, in the exercise of his rights and in the performance of his
duties, act with justice give everyone his due and observe honesty and good faith.
 Article 20 provides:

Every person who, contrary to law, willfully or negligently causes damage to

another, shall indemnify the latter for the same.

Article 21 provides:

Any person, who willfully 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.

The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume
that were it not for DBP's concealment of the limits of its authority, Dans would have secured an
MRI from another insurance company, and therefore would have been fully insured by the time
he died, is highly speculative. Considering his advanced age, there is no absolute certainty that
Dans could obtain an insurance coverage from another company. It must also be noted that Dans
died almost immediately, i.e., on the nineteenth day after applying for the MRI, and on the
twenty-third day from the date of release of his loan.

One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he
has duly proved (Civil Code of the Philippines, Art. 2199). Damages, to be recoverable, must not
only be capable of proof, but must be actually proved with a reasonable degree of certainty
(Refractories Corporation v. Intermediate Appellate Court, 176 SCRA 539 [1989]; Choa Tek Hee
v. Philippine Publishing Co., 34 Phil. 447 [1916]). Speculative damages are too remote to be
included in an accurate estimate of damages (Sun Life Assurance v. Rueda Hermanos, 37 Phil.
844 [1918]).

While Dans is not entitled to compensatory damages, he is entitled to moral damages. No proof
of pecuniary loss is required in the assessment of said kind of damages (Civil Code of Philippines,
Art. 2216). The same may be recovered in acts referred to in Article 2219 of the Civil Code.

The assessment of moral damages is left to the discretion of the court according to the
circumstances of each case (Civil Code of the Philippines, Art. 2216). Considering that DBP had
offered to pay P30,000.00 to respondent Estate in ex gratia settlement of its claim and that DBP's
non-disclosure of the limits of its authority amounted to a deception to its client, an award of
moral damages in the amount of P50,000.00 would be reasonable.

The award of attorney's fees is also just and equitable under the circumstances (Civil Code of the
Philippines, Article 2208 [11]).

WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV

No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate
of Juan B. Dans the amount of P1,476.00 with legal interest from the date of the filing of the
complaint until fully paid; and (2) to PAY said Estate the amount of Fifty Thousand Pesos
(P50,000.00) as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
attorney's fees. With costs against petitioner.

SO ORDERED.
II. OBLIGATIONS AND LIABILITIES OF THE PRINCIPAL

G.R. No. L-19375 May 21, 1969

DY PEH, AND/OR VICTORY RUBBER MANUFACTURING,petitioner,

vs.
COLLECTOR OF INTERNAL REVENUE,respondent.

Rene A. Diokno for petitioner.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Felicisimo R. Rosete
and Special Attorney Alejandro B. Afurong for respondent.

DIZON,J.:

Petition filed by Dy Peh for the review of the decision and resolution of the Court of Tax Appeals
dated April 29 and December 23, 1961, respectively, in C.T.A. Case No. 538, ordering him to pay
deficiency percentage taxes in the total amount of P51,939,27.

The following facts are not disputed: .

Petitioner, during all the time material to this case, was engaged in the business of manufacturing
and selling rubber shoes and allied products in the city of Cebu, under the registered firm name
Victory Rubber Manufacturing.

Sometime in the year 1955 the Bureau of Internal Revenue unearthed anomalies committed in
the office of the Treasurer of the city of Cebu in connection with the payment of taxes by some
taxpayers, amongst them petitioner herein. As a result the respondent assessed against, and
demanded from petitioner the payment of the following sums: P4,725, including P100 as penalty,
P29,980, including P50 as penalty, and P17,425 including P50 as penalty, on January 27, 1956,
November 12, 1955 and November 12, 1955, respectively. This assessment was based upon short
payments in connection with taxes due from petitioner during the periods covered by the
assessment. The investigation of the anomalies disclosed that the amounts of the taxes allegedly
paid by him, as appearing in the original of every official receipt he had in his possession, were
bigger than the amounts appearing in the corresponding duplicate, triplicate and quadruplicate
copies thereof kept in the office of the City Treasurer of Cebu. Such discrepancies are hereunder
tabulated as follows:

Official Appearing in the Original Appearing in the Duplicate

Receipt Triplicate and/or
Number Date Amount Quadruplicate
 Re 1st cause of action Date Amount Difference

699004 4-20-54 P3,227.47 4-20-54 P227.47 P3,000.00

704201 7-20-54 3,681.41 7-20-54 681.41 3,000.00

709008 10-20-54 1,892.78 10-20-54 192.78 1,700.00

A-210319 1-20-55 2,575.46 1-20-55 175.46 2,400.00

A-218105 4-20-55 3,968.68 4-20-55 168.69 3,800.00

Re 2nd cause of action

1923194 4-21-52 P4,380.37 4-21-52 P380.37 P4,000.00

1972817 7-21-52 4,140.29 7-21-52 140.29 4,000.00

6399188 10-20-52 2,113.07 10-20-52 113.07 2,000.00

7769180 1-17-53 1,457.42 4-7-53 6.00 1,451.42

7778387 4-18-53 4,057.56 4-18-52 57.56 4,000.00

8423087 7-20-53 2,850.63 7-20-53 50.63 2,800.00

8470851 10-20-53 2,901.87 10-20-53 101.87 2,800.00

693613 1-20-54 2,996.26 1-20-54 96.26 2,900.00

Re 3rd cause of action

A-1709018 1-17-52 P3,815.18 1-17-52 P115.18 P3,700.00

Petitioner's contention below and here is this: since the checks issued by him covered in full the
amount due for each quarter, and were accepted and deposited by the City Treasurer of Cebu;
since the originals of the official receipts issued by the latter show that the full amount of the
taxes due from him had been paid, he must be deemed to have paid such taxesin full, and any
anomaly in the application of the amounts paid by him consisting in the diversion of part thereof
to pay the taxes of other taxpayers — whether attributable solely to employees in the office of
said Treasurer or to other parties — should not be held against him.

Respondent's contention, on the other hand, is that the amounts actually paid by petitioner were
those appearing on the duplicates, triplicates and quadruplicates of the official receipts mentioned
heretofore; that the originals thereof were falsified or altered to make them show payment in full
of the taxes due from petitioner.

In connection with the issues thus joined petitioner tried to prove that the payments in question
were made by him personally, while, on the other hand, respondent claimed that said payments
were made not by petitioner personally but by Tan Chuan Liong, his authorized agent in the
matter of payment of his taxes; that Bartolome Baguio, Chief of the Internal Revenue Division of
the City Treasurer's Office of Cebu, had allowed the wrongful practice of permitting Tan Chuan
Liong to prepare the official receipts in connection with tax payments made by him in behalf of
his merchant clients; that it was Tan Chuan Liong who applied a portion of the amounts given to
him by petitioner to pay tax obligations of other taxpayers, also his clients, and that therefore
petitioner's recourse is against him.lawphi1.ñet

Whether it was petitioner, in person, who made the payment of his taxes herein involved, or it
was his aforesaid agent, is manifestly a question of fact squarely resolved by the Court of Tax
Appeals as follows: "Petitioner sought to prove that he never employed Tan Chuan Liong as a
business agent in the payment of the tax in question. The preponderance of the evidence shows
otherwise. If, as alleged, petitioner paid the tax personally, why were the official receipts prepared
by Tan Chuan Liong and not by Bartolome Baguio or any authorized employee in the office of the
City Treasurer of Cebu? It appears that Tan Chuan Liong prepared the official receipts of
payments of taxpayers who employed him as business agent. It has not been shown that Tan
Chuan Liong prepared any official receipt covering payment of taxpayers other than those who
employed him business agent."

After ruling against petitioner on this question, the Court of Tax Appeals said further:

Even assuming that Tan Chuan Liong was not employed by petitioner as business agent,
petitioner is not entirely blameless. The records show that the payments were made by
checks. The number of the official receipts covering the payments are indicated on the
back of the checks. After the checks had been deposited and the amounts credited in
favor of the Government, the cancelled checks were returned to petitioner. Petitioner is,
therefore, charged with knowledge of the fact that the amount covered by each check
was applied in payment not only of his tax but also of taxes of other taxpayers, the
numbers of the official receipts covering which are indicated on the back of the check.
The fact that he accepted the cancelled checks without protest is evidence of his
acquiescence to the manner in which the amount covered by each check was applied by
the collecting officer. He cannot now be heard to complain.lawphi1.ñet

We can hardly add any other consideration to strengthen the lower court's ruling.

Another question of fact vital to this case is whether or not the official receipts in petitioner's
possession were falsified, and if so by whom.

In this connection, We believe it established as a fact that petitioner had employed Tan Chuan
Liong as a business agent in the matter of payment of his taxes. The testimonies of Bartolome
Baguio, Isidro Badana and Lauro Abalos on this matter (T.s.n. pp. 200-201, 472-473, 483-484,
501-503, 508-510, 525, 535-539) were corroborated by the statement and report of NBI
handwriting expert Felipe Logan. That Tan Chuan Liong, as such petitioner's agent, actually paid
to the government less than the amounts of the taxes due from petitioner is also fully proven by
their testimonies and the duplicate, triplicate and quadruplicate copies of the official receipts
which appear upon their face to be genuine or authentic. The same thing cannot be claimed for
the official receipts in question, because the lower court found that, as in the case ofTiu Bon Sin
vs. Collector etc., C.T.A. No. 286, andYap Pe Giok vs. Arañas, C.T.A. No. 533, appellant employed
the same business agent who misappropriated a portion of the amounts entrusted to him and
paid less than what was due from his principals. In plain words, the lower court expressed the
view that the official receipts in petitioner's hands did not reflect the truth.

The trial court's ruling upon these questions must be sustained pursuant to our consistent ruling
to the effect that in reviews of the nature of the present, only errors of law are reviewable by this
Court (G.R. L-12174, Maria B. Castro vs. Collector, April 26, 1962; G.R. L-9738, Blas Gutierrez, et
al. vs. Court of Tax Appeals; G.R. L-8556, Benito Sanchez vs. Commissioner of Customs, Sept.
30, 1957 and 54 O.G. No. 2, p. 361, Eugenie Perez vs. Court of Tax Appeals, G.R. L-10507, May
30, 1958; G.R. No. L-13387, Sy Chiuco vs. Collector, March 23, 1960; G.R. No. L-11622, Collector
vs. Fisher and G.R. No. L-1168, Fisher vs. Collector, January 28, 1961).

The foregoing disposes of the first two assignments of error submitted in petitioner's brief. In the
third, it is his contention that the Court a quo erred in holding that he is estopped from questioning
the misapplication of his payments.

This is only a corollary of the questions raised in the previous assignments of error. Inasmuch as
We have held in resolving the latter that, in point of fact, Tan Chuan Liong was petitioner's agent,
the conclusion must necessarily be that the agent's acts bind his principal; without prejudice, of
course, to the latter seeking recourse against him in an appropriate civil or criminal action.

The fourth and last assignment of error has been impliedly resolved adversely to petitioner in our
rulings upon the first three.

PREMISES CONSIDERED, the decision appealed from is hereby affirmed, with costs.

G.R. No. 151319 November 22, 2004

MANILA MEMORIAL PARK CEMETERY, INC., petitioner,

vs.
PEDRO L. LINSANGAN, respondent.

DECISION

TINGA, J.:

For resolution in this case is a classic and interesting texbook question in the law on agency.

This is a petition for review assailing the Decision1 of the Court of Appeals dated 22 June 2001,
and its Resolution2 dated 12 December 2001 in CA G.R. CV No. 49802 entitled "Pedro L. Linsangan
v. Manila Memorial Cemetery, Inc. et al.," finding Manila Memorial Park Cemetery, Inc. (MMPCI)
jointly and severally liable with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.
The facts of the case are as follows:

Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State
at the Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former
owner of a memorial lot under Contract No. 25012 was no longer interested in acquiring the lot
and had opted to sell his rights subject to reimbursement of the amounts he already paid. The
contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is made
to the former buyer, the contract would be transferred to him. Atty. Linsangan agreed and gave
Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer and to
complete the down payment to MMPCI.3 Baluyot issued handwritten and typewritten receipts for
these payments.4

Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No.
28660, a new contract covering the subject lot in the name of the latter instead of old Contract
No. 25012. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the
old price of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about
P75,000.00.5

Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83,
Garden Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6
April 1985 for the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00.
Atty. Linsangan objected to the new contract price, as the same was not the amount previously
agreed upon. To convince Atty. Linsangan, Baluyot executed a document6 confirming that while
the contract price is P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00.

The document reads in part:

The monthly installment will start April 6, 1985; the amount of P1,800.00 and the
difference will be issued as discounted to conform to the previous price as previously
agreed upon. --- P95,000.00

Prepared by:

(Signed)

(MRS.) FLORENCIA C. BALUYOT

Agency Manager
Holy Cross Memorial Park

4/18/85

Dear Atty. Linsangan:

This will confirm our agreement that while the offer to purchase under Contract No. 28660
states that the total price of P132,250.00 your undertaking is to pay only the total sum of
P95,000.00 under the old price. Further the total sum of P19,838.00 already paid by you
under O.R. # 118912 dated April 6, 1985 has been credited in the total purchase price
 thereby leaving a balance of P75,162.00 on a monthly installment of P1,800.00 including
interests (sic) charges for a period of five (5) years.

(Signed)

FLORENCIA C. BALUYOT

By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt
No. 118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of
P1,800.00 each in favor of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again
issued twelve (12) postdated checks in favor of MMPCI.

On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled
for reasons the latter could not explain, and presented to him another proposal for the purchase
of an equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI
honor their undertaking.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed
a Complaint7 for Breach of Contract and Damages against the former.

Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was
cancelled conformably with the terms of the contract8 because of non-payment of
arrearages.9 MMPCI stated that Baluyot was not an agent but an independent contractor, and as
such was not authorized to represent MMPCI or to use its name except as to the extent expressly
stated in the Agency Manager Agreement.10 Moreover, MMPCI was not aware of the arrangements
entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment and monthly
installments as indicated in the contract.11 Official receipts showing the application of payment
were turned over to Baluyot whom Atty. Linsangan had from the beginning allowed to receive
the same in his behalf. Furthermore, whatever misimpression that Atty. Linsangan may have had
must have been rectified by the Account Updating Arrangement signed by Atty. Linsangan which
states that he "expressly admits that Contract No. 28660 'on account of serious delinquency…is
now due for cancellation under its terms and conditions.'''12

The trial court held MMPCI and Baluyot jointly and severally liable.13 It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having received and
enchased the checks issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted
that Baluyot was authorized to receive only the down payment, it allowed her to continue to
receive postdated checks from Atty. Linsangan, which it in turn consistently encashed.14

The dispositive portion of the decision reads:

WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of

plaintiff declaring Contract No. 28660 as valid and subsisting and ordering defendants to
perform their undertakings thereof which covers burial lot No. A11 (15), Block 83, Section
Garden I, Holy Cross Memorial Park located at Novaliches, Quezon City. All payments
made by plaintiff to defendants should be credited for his accounts. NO DAMAGES, NO
ATTORNEY'S FEES but with costs against the defendants.
 The cross claim of defendant Manila Memorial Cemetery Incorporated as against
defendant Baluyot is GRANTED up to the extent of the costs.

SO ORDERED.15

MMPCI appealed the trial court's decision to the Court of Appeals.16 It claimed that Atty. Linsangan
is bound by the written contract with MMPCI, the terms of which were clearly set forth therein
and read, understood, and signed by the former.17 It also alleged that Atty. Linsangan, a practicing
lawyer for over thirteen (13) years at the time he entered into the contract, is presumed to know
his contractual obligations and is fully aware that he cannot belatedly and unilaterally change the
terms of the contract without the consent, much less the knowledge of the other contracting
party, which was MMPCI. And in this case, MMPCI did not agree to a change in the contract and
in fact implemented the same pursuant to its clear terms. In view thereof, because of Atty.
Linsangan's delinquency, MMPCI validly cancelled the contract.

MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter
exceeded the terms of her agency, neither did MMPCI ratify Baluyot's acts. It added that it cannot
be charged with making any misrepresentation, nor of having allowed Baluyot to act as though
she had full powers as the written contract expressly stated the terms and conditions which Atty.
Linsangan accepted and understood. In canceling the contract, MMPCI merely enforced the terms
and conditions imposed therein.18

Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the former's
obligation, as a party knowingly dealing with an alleged agent, to determine the limitations of
such agent's authority, particularly when such alleged agent's actions were patently questionable.
According to MMPCI, Atty. Linsangan did not even bother to verify Baluyot's authority or ask
copies of official receipts for his payments.19

The Court of Appeals affirmed the decision of the trial court. It upheld the trial court's finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having
represented MMPCI's interest and acting on its behalf in the dealings with clients and customers.
Hence, MMPCI is considered estopped when it allowed Baluyot to act and represent MMPCI even
beyond her authority.20 The appellate court likewise found that the acts of Baluyot bound MMPCI
when the latter allowed the former to act for and in its behalf and stead. While Baluyot's authority
"may not have been expressly conferred upon her, the same may have been derived impliedly by
habit or custom, which may have been an accepted practice in the company for a long period of
time."21 Thus, the Court of Appeals noted, innocent third persons such as Atty. Linsangan should
not be prejudiced where the principal failed to adopt the needed measures to prevent
misrepresentation. Furthermore, if an agent misrepresents to a purchaser and the principal
accepts the benefits of such misrepresentation, he cannot at the same time deny responsibility
for such misrepresentation.22 Finally, the Court of Appeals declared:

There being absolutely nothing on the record that would show that the court a quo overlooked,
disregarded, or misinterpreted facts of weight and significance, its factual findings and
conclusions must be given great weight and should not be disturbed by this Court on appeal.
 WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed
decision in Civil Case No. 88-1253 of the Regional Trial Court, National Capital Judicial
Region, Branch 57 of Makati, is hereby AFFIRMED in toto.

SO ORDERED.23

MMPCI filed its Motion for Reconsideration,24 but the same was denied for lack of merit.25

In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in
disregarding the plain terms of the written contract and Atty. Linsangan's failure to abide by the
terms thereof, which justified its cancellation. In addition, even assuming that Baluyot was an
agent of MMPCI, she clearly exceeded her authority and Atty. Linsangan knew or should have
known about this considering his status as a long-practicing lawyer. MMPCI likewise claims that
the Court of Appeals erred in failing to consider that the facts and the applicable law do not
support a judgment against Baluyot only "up to the extent of costs."26

Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in
fact faithfully performed his contractual obligations and complied with them in good faith for at
least two years.27 He claims that contrary to MMPCI's position, his profession as a lawyer is
immaterial to the validity of the subject contract and the case at bar.28 According to him, MMPCI
had practically admitted in its Petition that Baluyot was its agent, and thus, the only issue left to
be resolved is whether MMPCI allowed Baluyot to act as though she had full powers to be held
solidarily liable with the latter.29

We find for the petitioner MMPCI.

The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court
is limited to reviewing only errors of law, not fact, unless the factual findings complained of are
devoid of support by the evidence on record or the assailed judgment is based on
misapprehension of facts.30 In BPI Investment Corporation v. D.G. Carreon Commercial
Corporation,31 this Court ruled:

There are instances when the findings of fact of the trial court and/or Court of Appeals
may be reviewed by the Supreme Court, such as (1) when the conclusion is a finding
grounded entirely on speculation, surmises and conjectures; (2) when the inference made
is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both appellant
and appellee; (7) when the findings are contrary to those of the trial court; (8) when the
findings of fact are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioners' main and
reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court
of Appeals are premised on the supposed absence of evidence and contradicted by the
evidence on record.32
In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts
of the case, as well as made conclusions devoid of evidentiary support, hence we review its
findings of fact.

By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.33 Thus, the
elements of agency are (i) consent, express or implied, of the parties to establish the relationship;
(ii) the object is the execution of a juridical act in relation to a third person; (iii) the agent acts
as a representative and not for himself; and (iv) the agent acts within the scope of his authority.34

In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency
Manager Agreement; an agency manager such as Baluyot is considered an independent
contractor and not an agent.35 However, in the same contract, Baluyot as agency manager was
authorized to solicit and remit to MMPCI offers to purchase interment spaces belonging to and
sold by the latter.36 Notwithstanding the claim of MMPCI that Baluyot was an independent
contractor, the fact remains that she was authorized to solicit solely for and in behalf of MMPCI.
As properly found both by the trial court and the Court of Appeals, Baluyot was an agent of
MMPCI, having represented the interest of the latter, and having been allowed by MMPCI to
represent it in her dealings with its clients/prospective buyers.

Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the
contract procured by Atty. Linsangan and solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained
on forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in
such forms and, when signed by the buyer and an authorized officer of MMPCI, becomes binding
on both parties.

The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI
showed a total list price of P132,250.00. Likewise, it was clearly stated therein that "Purchaser
agrees that he has read or has had read to him this agreement, that he understands its terms
and conditions, and that there are no covenants, conditions, warranties or representations other
than those contained herein."37 By signing the Offer to Purchase, Atty. Linsangan signified that
he understood its contents. That he and Baluyot had an agreement different from that contained
in the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made
outside Baluyot's authority. To repeat, Baluyot's authority was limited only to soliciting
purchasers. She had no authority to alter the terms of the written contract provided by MMPCI.
The document/letter "confirming" the agreement that Atty. Linsangan would have to pay the old
price was executed by Baluyot alone. Nowhere is there any indication that the same came from
MMPCI or any of its officers.

It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold
the principal liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to establish it.38 The
basis for agency is representation and a person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.39 If he does not make such an inquiry, he
is chargeable with knowledge of the agent's authority and his ignorance of that authority will not
be any excuse.40
As noted by one author, the ignorance of a person dealing with an agent as to the scope of the
latter's authority is no excuse to such person and the fault cannot be thrown upon the
principal.41 A person dealing with an agent assumes the risk of lack of authority in the agent. He
cannot charge the principal by relying upon the agent's assumption of authority that proves to be
unfounded. The principal, on the other hand, may act on the presumption that third persons
dealing with his agent will not be negligent in failing to ascertain the extent of his authority as
well as the existence of his agency.42

In the instant case, it has not been established that Atty. Linsangan even bothered to inquire
whether Baluyot was authorized to agree to terms contrary to those indicated in the written
contract, much less bind MMPCI by her commitment with respect to such agreements. Even if
Baluyot was Atty. Linsangan's friend and known to be an agent of MMPCI, her declarations and
actions alone are not sufficient to establish the fact or extent of her authority.43 Atty. Linsangan
as a practicing lawyer for a relatively long period of time when he signed the contract should
have been put on guard when their agreement was not reflected in the contract. More
importantly, Atty. Linsangan should have been alerted by the fact that Baluyot failed to effect the
transfer of rights earlier promised, and was unable to make good her written commitment, nor
convince MMPCI to assent thereto, as evidenced by several attempts to induce him to enter into
other contracts for a higher consideration. As properly pointed out by MMPCI, as a lawyer, a
greater degree of caution should be expected of Atty. Linsangan especially in dealings involving
legal documents. He did not even bother to ask for official receipts of his payments, nor inquire
from MMPCI directly to ascertain the real status of the contract, blindly relying on the
representations of Baluyot. A lawyer by profession, he knew what he was doing when he signed
the written contract, knew the meaning and value of every word or phrase used in the contract,
and more importantly, knew the legal effects which said document produced. He is bound to
accept responsibility for his negligence.

The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial
court, MMPCI's acts of accepting and encashing the checks issued by Atty. Linsangan as well as
allowing Baluyot to receive checks drawn in the name of MMPCI confirm and ratify the contract
of agency. On the other hand, the Court of Appeals faulted MMPCI in failing to adopt measures
to prevent misrepresentation, and declared that in view of MMPCI's acceptance of the benefits of
Baluyot's misrepresentation, it can no longer deny responsibility therefor.

The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of the powers granted by the principal.
In this case, however, the agent is liable if he undertook to secure the principal's
ratification.

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

As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.
 Art. 1911. 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.

Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he
ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own
unauthorized acts. Moreover, the principal must have knowledge of the acts he is to ratify.44

Ratification in agency is the adoption or confirmation by one person of an act performed on his
behalf by another without authority. The substance of the doctrine is confirmation after conduct,
amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge
at the time of ratification of all the material facts and circumstances relating to the unauthorized
act of the person who assumed to act as agent. Thus, if material facts were suppressed or
unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in
concealing such facts and regardless of the parties between whom the question of ratification
may arise.45 Nevertheless, this principle does not apply if the principal's ignorance of the material
facts and circumstances was willful, or that the principal chooses to act in ignorance of the
facts.46 However, in the absence of circumstances putting a reasonably prudent man on inquiry,
ratification cannot be implied as against the principal who is ignorant of the facts.47

No ratification can be implied in the instant case.

A perusal of Baluyot's Answer48 reveals that the real arrangement between her and Atty.
Linsangan was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to
shoulder the counterpart amount of P1,455.00 to meet the P3,255.00 monthly installments as
indicated in the contract. Thus, every time an installment falls due, payment was to be made
through a check from Atty. Linsangan for P1,800.00 and a cash component of P1,455.00 from
Baluyot.49 However, it appears that while Atty. Linsangan issued the post-dated checks, Baluyot
failed to come up with her part of the bargain. This was supported by Baluyot's statements in her
letter50 to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after she received the copy
of the Complaint. In the letter, she admitted that she was remiss in her duties when she consented
to Atty. Linsangan's proposal that he will pay the old price while the difference will be shouldered
by her. She likewise admitted that the contract suffered arrearages because while Atty. Linsangan
issued the agreed checks, she was unable to give her share of P1,455.00 due to her own financial
difficulties. Baluyot even asked for compassion from MMPCI for the error she committed.

Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI
is concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by
Atty. Linsangan and MMPCI's authorized officer. The down payment of P19,838.00 given by Atty.
Linsangan was in accordance with the contract as well. Payments of P3,235.00 for at least two
installments were likewise in accord with the contract, albeit made through a check and partly in
cash. In view of Baluyot's failure to give her share in the payment, MMPCI received only P1,800.00
checks, which were clearly insufficient payment. In fact, Atty. Linsangan would have incurred
arrearages that could have caused the earlier cancellation of the contract, if not for MMPCI's
application of some of the checks to his account. However, the checks alone were not sufficient
to cover his obligations.

If MMPCI was aware of the arrangement, it would have refused the latter's check payments for
being insufficient. It would not have applied to his account the P1,800.00 checks. Moreover, the
fact that Baluyot had to practically explain to MMPCI's Sales Manager the details of her
"arrangement" with Atty. Linsangan and admit to having made an error in entering such
arrangement confirm that MMCPI had no knowledge of the said agreement. It was only when
Baluyot filed her Answer that she claimed that MMCPI was fully aware of the agreement.

Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct
of a party amounting to false representation or concealment of material facts or at least calculated
to convey the impression that the facts are otherwise than, and inconsistent with, those which
the party subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct
shall be acted upon by, or at least influence, the other party; and (iii) knowledge, actual or
constructive, of the real facts.51

While there is no more question as to the agency relationship between Baluyot and MMPCI, there
is no indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot
had the authority to alter the standard contracts of the company. Neither is there any showing
that prior to signing Contract No. 28660, MMPCI had any knowledge of Baluyot's commitment to
Atty. Linsangan. One who claims the benefit of an estoppel on the ground that he has been misled
by the representations of another must not have been misled through his own want of reasonable
care and circumspection.52 Even assuming that Atty. Linsangan was misled by MMPCI's actuations,
he still cannot invoke the principle of estoppel, as he was clearly negligent in his dealings with
Baluyot, and could have easily determined, had he only been cautious and prudent, whether said
agent was clothed with the authority to change the terms of the principal's written contract.
Estoppel must be intentional and unequivocal, for when misapplied, it can easily become a most
convenient and effective means of injustice.53 In view of the lack of sufficient proof showing
estoppel, we refuse to hold MMPCI liable on this score.

Likewise, this Court does not find favor in the Court of Appeals' findings that "the authority of
defendant Baluyot may not have been expressly conferred upon her; however, the same may
have been derived impliedly by habit or custom which may have been an accepted practice in
their company in a long period of time." A perusal of the records of the case fails to show any
indication that there was such a habit or custom in MMPCI that allows its agents to enter into
agreements for lower prices of its interment spaces, nor to assume a portion of the purchase
price of the interment spaces sold at such lower price. No evidence was ever presented to this
effect.

As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660
between MMPCI and by Atty. Linsangan for the purchase of an interment space in the former's
cemetery. The other is the agreement between Baluyot and Atty. Linsangan for the former to
shoulder the amount P1,455.00, or the difference between P95,000.00, the original price, and
P132,250.00, the actual contract price.

To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless
the latter ratifies the same. It also bears emphasis that when the third person knows that the
agent was acting beyond his power or authority, the principal cannot be held liable for the acts
of the agent. If the said third person was aware of such limits of authority, he is to blame and is
not entitled to recover damages from the agent, unless the latter undertook to secure the
principal's ratification.54
This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty.
Linsangan. By affixing his signature in the contract, Atty. Linsangan assented to the terms and
conditions thereof. When Atty. Linsangan incurred delinquencies in payment, MMCPI merely
enforced its rights under the said contract by canceling the same.

Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on what he claims
to be the terms of Contract No. 28660. The agreement, insofar as the P95,000.00 contract price
is concerned, is void and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable
for damages under the same contract, since there is no evidence showing that Baluyot undertook
to secure MMPCI's ratification. At best, the "agreement" between Baluyot and Atty. Linsangan
bound only the two of them. As far as MMPCI is concerned, it bound itself to sell its interment
space to Atty. Linsangan for P132,250.00 under Contract No. 28660, and had in fact received
several payments in accordance with the same contract. If the contract was cancelled due to
arrearages, Atty. Linsangan's recourse should only be against Baluyot who personally undertook
to pay the difference between the true contract price of P132,250.00 and the original proposed
price of P95,000.00. To surmise that Baluyot was acting on behalf of MMPCI when she promised
to shoulder the said difference would be to conclude that MMPCI undertook to pay itself the
difference, a conclusion that is very illogical, if not antithetical to its business interests.

However, this does not preclude Atty. Linsangan from instituting a separate action to recover
damages from Baluyot, not as an agent of MMPCI, but in view of the latter's breach of their
separate agreement. To review, Baluyot obligated herself to pay P1,455.00 in addition to Atty.
Linsangan's P1,800.00 to complete the monthly installment payment under the contract, which,
by her own admission, she was unable to do due to personal financial difficulties. It is undisputed
that Atty. Linsangan issued the P1,800.00 as agreed upon, and were it not for Baluyot's failure
to provide the balance, Contract No. 28660 would not have been cancelled. Thus, Atty. Linsangan
has a cause of action against Baluyot, which he can pursue in another case.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22
June 2001 and its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the
Decision in Civil Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby
REVERSED and SET ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of
cause of action. No pronouncement as to costs.

SO ORDERED.

G.R. No. 153743. March 18, 2005

NORMA B. DOMINGO, Petitioners,

vs.
YOLANDA ROBLES; and MICHAEL MALABANAN ROBLES, MARICON MALABANAN
ROBLES, MICHELLE MALABANAN ROBLES, All Minors Represented by Their Mother,
YOLANDA ROBLES, Respondents.

DECISION

PANGANIBAN, J.:
Forgery must be proven by the party alleging it; it cannot be presumed. To prevent a forged
transfer from being registered, the Torrens Act requires, as a prerequisite to registration, the
production of the owner’s certificate of title and the instrument of conveyance. A registered owner
who places in the hands of another an executed document of transfer of registered land effectively
represents to a third party that the holder of such document is authorized to deal with the
property.1

The Case

Before us is a Petition for Review2 under Rule 45 of the Rules of Court, challenging the May 27,
2002 Decision3 of the Court of Appeals (CA) in CA-GR CV No. 53842. The decretal portion of the
assailed Decision reads:

"IN VIEW OF ALL THE FOREGOING, [there being] no reversible error in the challenged decision,
the same is hereby AFFIRMED, in toto, and the instant appeal ordered DISMISSED. Costs
against the [petitioner]."4

On the other hand, the affirmed Decision5 of the Regional Trial Court (RTC), Branch 272 of
Marikina, disposed as follows:

"WHEREFORE, premises considered, the complaint subject of this decision is hereby

DISMISSED."6

The Facts

The facts are narrated by the CA as follows:

"The historical backdrop shows that [petitioner] and her husband, Valentino Domingo, were the
registered owners of Lot 19, Block 1, subdivision plan (LRC) Psd-15706 located at Cristina
Subdivision, Concepcion, Marikina and covered by Transfer Certificate of Title No. 53412. On this
lot, [Petitioner] Norma B. Domingo discontinued the construction of her house allegedly for failure
of her husband to send the necessary financial support. So, she decided to dispose of the
property.

"A friend, Flor Bacani, volunteered to act as [petitioner’s] agent in selling the lot. Trusting Bacani,
[petitioner] delivered their owner’s copy of Transfer Certificate of Title No. 53412 to him (Bacani).
Later, the title was said to have been lost. In the petition for its reconstitution, [petitioner] gave
Bacani all her receipts of payment for real estate taxes. At the same time, Bacani asked
[petitioner] to sign what she recalled was a record of exhibits. Thereafter, [petitioner] waited
patiently but Bacani did not show up any more.

"On November 1, 1994, [Petitioner] Norma Domingo visited the lot and was surprised to see the
[respondents] (Robles, for short) starting to build a house on the subject lot. A verification with
the Register of Deeds revealed that the reconstituted Transfer Certificate of Title No. 53412 had
already been cancelled with the registration of a Deed of Absolute Sale dated May 9, 1991 signed
by Norma B. Domingo and her husband Valentino Domingo, as sellers, and [Respondent] Yolanda
Robles, for herself and representing the other minor [respondents], as buyers. As a consequence,
Transfer Certificate of Title No. 201730 was issued on June 10, 1991 in the name of [Respondent]
Robles.

"Claiming not to have met any of the [respondents] nor having signed any sale over the property
in favor of anybody (her husband being abroad at the time), [petitioner] assumed that the Deed
of Absolute Sale dated May 9, 1991 is a forgery and, therefore, could not validly transfer
ownership of the lot to the [respondents]. Hence, the case for the nullity thereof and its
reconveyance.

"[Respondents] Robles responded alleging to be buyers in good faith and for value. They narrate
that the subject lot was offered to them by Flor Bacani, as the agent of the owners; that after
some time when they were already prepared to buy the lot, Bacani introduced to them the
supposed owners and agreed on the sale; then, on May 9, 1991, Bacani and the introduced seller
presented a Deed of Absolute Sale already signed by Valentino and Norma Domingo needing only
her (Robles’) signature. Presented likewise at that meeting, where she paid full purchase price,
was the original of the owner’s duplicate of Transfer Certificate of Title No. 53412.

"Then sometime later, [Respondents] Robles contracted to sell the lot in issue in favor of spouses
Danilo and Herminigilda Deza for ₱250,000.00. [Respondent] Yolanda Robles even had to secure
a guardianship authority over the persons and properties of her minor children from the Regional
Trial Court of Pasig in JDRC No. 2614. When only ₱20,000.00 remained unpaid of the total
purchase price under the contract to sell, payment was stopped because of the letter received by
Yolanda Robles that [petitioner] intends to sue her.

"After due proceedings, the [Regional Trial Court] rendered its Decision dated May 13, 1996,
dismissing the complaint."7

Ruling of the Court of Appeals

The CA held that respondents were purchasers in good faith and for value. According to its
findings, (a) the sale was admittedly made through petitioner’s agent; (b) as Domingo’s agent,
Bacani brought with him the original of the owner’s duplicate Certificate of Title of the property
and some receipts; (c) the reconstituted title presented to the buyers was free from any liens,
encumbrances or adverse interests of other persons; and (d) the land was unoccupied. Petitioner
was not able to present, against these established facts, any evidence to prove that respondents
had prior knowledge of any other person’s right to or interest over the property in question.

Hence, this Petition.8

Issue

Petitioner submits this sole issue for our consideration:

"To determine whether or not the petitioner is entitled to her claims, the issue worthy of
consideration by the Honorable Court in the instant case is WHO IS A PURCHASER IN GOOD
FAITH?"9

The Court’s Ruling

The Petition has no merit.

Sole Issue:

Acquisition of Valid Title

It is a well-established principle that factual findings of the trial court, when affirmed by the Court
of Appeals, are binding on this Court.10 Petitioner has given this Court no cogent reason to deviate
from this rule; on the contrary, the findings of the courts a quo are amply supported by the
evidence on record.

Petitioner claims that her signature and that of her husband were forged in the Deed of Absolute
Sale transferring the property from the Domingo spouses to respondent. Relying on the general
rule that a forged deed is void and conveys no title,11 she assails the validity of the sale.

It is a well-settled rule, however, that a notarized instrument enjoys a prima facie presumption
of authenticity and due execution.12 Clear and convincing evidence must be presented to
overcome such legal presumption. Forgery cannot be presumed; hence, it was incumbent upon
petitioner to prove it.13 This, she failed to do. On this point, the CA observed:

"x x x. What surprises the Court is that a comparison of the signature of appellant Norma Domingo
in the Deed of Absolute Sale in favor of the appellees and the signature in the verification of the
complaint manifest a striking similarity to the point that without any contrary proof, it would be
safe to conclude that said signatures were written by one and the same person. Sadly, appellant
left that matter that way without introducing counteracting evidence. x x x"14

Petitioner also failed to convince the trial court that the person with whom Respondent Yolanda
Robles transacted was in fact not Valentino Domingo. Except for her insistence that her husband
was out of the country, petitioner failed to present any other clear and convincing evidence that
Valentino was not present at the time of the sale. Bare allegations, unsubstantiated by evidence,
are not equivalent to proof.15

Petitioner now stresses the issue of good faith on the part of respondents. In the absence of a
finding of fraud and a consequent finding of authenticity and due execution of the Deed of
Absolute Sale, a discussion of whether respondents were purchasers in good faith is wholly
unnecessary. Without a clear and persuasive substantiation of bad faith, a presumption of good
faith in their favor stands.16

The sale was admittedly made with the aid of Bacani, petitioner’s agent, who had with him the
original of the owner’s duplicate Certificate of Title to the property, free from any liens or
encumbrances. The signatures of Spouses Domingo, the registered owners, appear on the Deed
of Absolute Sale. Petitioner’s husband met with Respondent Yolanda Robles and received
payment for the property. The Torrens Act requires, as a prerequisite to registration, the
production of the owner’s certificate of title and the instrument of conveyance. The registered
owner who places in the hands of another an executed document of transfer of registered land
effectively represents to a third party that the holder of such document is authorized to deal with
the property.17
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

SO ORDERED.

G.R. No. 171052 January 28, 2008

PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), petitioner,

vs.
CARMELA ESTRADA/CARA HEALTH SERVICES, respondent.

DECISION

NACHURA, J.:

This petition for review on certiorari assails the Decision1 dated June 16, 2005 of the Court of
Appeals (CA) in CA-G.R. CV No. 66040 which affirmed in toto the Decision2 dated October 8, 1999
of the Regional Trial Court (RTC), Branch 135, of Makati City in an action for breach of contract
and damages filed by respondent Carmela Estrada, sole proprietor of Cara Health Services,
against Philippine Health-Care Providers, Inc. (Maxicare).

The facts, as found by the CA and adopted by Maxicare in its petition, follow:

[Maxicare] is a domestic corporation engaged in selling health insurance plans whose

Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle, and
Sales/Marketing Manager Josephine Cabrera were impleaded as defendants-appellants.

On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela Estrada
who was doing business under the name of CARA HEALTH [SERVICES] to promote and
sell the prepaid group practice health care delivery program called MAXICARE Plan with
the position of Independent Account Executive. [Maxicare] formally appointed [Estrada]
as its "General Agent," evidenced by a letter-agreement dated February 16, 1991. The
letter agreement provided for plaintiff-appellee’s [Estrada’s] compensation in the form of
commission, viz.:

Commission

In consideration of the performance of your functions and duties as specified in

this letter-agreement, [Maxicare] shall pay you a commission equivalent to 15 to
18% from individual, family, group accounts; 2.5 to 10% on tailored fit plans; and
10% on standard plans of commissionable amount on corporate accounts from all
membership dues collected and remitted by you to [Maxicare].

[Maxicare] alleged that it followed a "franchising system" in dealing with its agents
whereby an agent had to first secure permission from [Maxicare] to list a prospective
company as client. [Estrada] alleged that it did apply with [Maxicare] for the MERALCO
account and other accounts, and in fact, its franchise to solicit corporate accounts,
MERALCO account included, was renewed on February 11, 1991.
Plaintiff-appellee [Estrada] submitted proposals and made representations to the officers
of MERALCO regarding the MAXICARE Plan but when MERALCO decided to subscribe to
the MAXICARE Plan, [Maxicare] directly negotiated with MERALCO regarding the terms
and conditions of the agreement and left plaintiff-appellee [Estrada] out of the discussions
on the terms and conditions.

On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan and
signed a Service Agreement directly with [Maxicare] for medical coverage of its qualified
members, i.e.: 1) the enrolled dependent/s of regular MERALCO executives; 2) retired
executives and their dependents who have opted to enroll and/or continue their
MAXICARE membership up to age 65; and 3) regular MERALCO female executives
(exclusively for maternity benefits). Its duration was for one (1) year from December 1,
1991 to November 30, 1992. The contract was renewed twice for a term of three (3) years
each, the first started on December 1, 1992 while the second took effect on December 1,
1995.

The premium amounts paid by MERALCO to [Maxicare] were alleged to be the following:
a) P215,788.00 in December 1991; b) P3,450,564.00 in 1992; c) P4,223,710.00 in 1993;
d) P4,782,873.00 in 1994; e) P5,102,108.00 in 1995; and P2,394,292.00 in May 1996. As
of May 1996, the total amount of premium paid by MERALCO to [Maxicare]
was P20,169,335.00.

On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from

[Maxicare] that it be paid commissions for the MERALCO account and nine (9) other
accounts. In reply, [Maxicare], through counsel, denied [Estrada’s] claims for commission
for the MERALCO and other accounts because [Maxicare] directly negotiated with
MERALCO and the other accounts(,) and that no agent was given the go signal to
intervene in the negotiations for the terms and conditions and the signing of the service
agreement with MERALCO and the other accounts so that if ever [Maxicare] was indebted
to [Estrada], it was only for P1,555.00 and P43.l2 as commissions on the accounts of
Overseas Freighters Co. and Mr. Enrique Acosta, respectively.

[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its officers with the
Regional Trial Court (RTC) of Makati City, docketed as Civil Case No. 93-935, raffled to
Branch 135.

Defendants-appellants [Maxicare] and its officers filed their Answer with Counterclaim on
September 13, 1993 and their Amended Answer with Counterclaim on September 28,
1993, alleging that: plaintiff-appellee [Estrada] had no cause of action; the cause of
action, if any, should be is against [Maxicare] only and not against its officers; CARA
HEALTH’s appointment as agent under the February 16, 1991 letter-agreement to
promote the MAXICARE Plan was for a period of one (1) year only; said agency was not
renewed after the expiration of the one (1) year period; [Estrada] did not intervene in the
negotiations of the contract with MERALCO which was directly negotiated by MERALCO
with [Maxicare]; and [Estrada’s] alleged other clients/accounts were not accredited with
[Maxicare] as required, since the agency contract on the MAXICARE health plans were not
renewed. By way of counterclaim, defendants-appellants [Maxicare] and its officers
claimed P100,000.00 in moral damages for each of the officers of [Maxicare] impleaded
 as defendant, P100,000.00 in exemplary damages, P100,000.00 in attorney’s fees,
and P10,000.00 in litigation expenses.3

After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay Estrada
actual damages in the amount equivalent to 10% of P20,169,335.00, representing her
commission for the total premiums paid by Meralco to Maxicare from the year 1991 to 1996, plus
legal interest computed from the filing of the complaint on March 18, 1993, and attorney’s fees
in the amount of P100,000.00.

On appeal, the CA affirmed in toto the RTC’s decision. In ruling for Estrada, both the trial and
appellate courts held that Estrada was the "efficient procuring cause" in the execution of the
service agreement between Meralco and Maxicare consistent with our ruling in Manotok Brothers,
Inc. v. Court of Appeals.4

Undaunted, Maxicare comes to this Court and insists on the reversal of the RTC Decision as
affirmed by the CA, raising the following issues, to wit:

1. Whether the Court of Appeals committed serious error in affirming Estrada’s entitlement
to commissions for the execution of the service agreement between Meralco and Maxicare.

2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive
renewals of the service agreement effective on December 1, 19925 and December 1,
1995.6

We are in complete accord with the trial and appellate courts’ ruling. Estrada is entitled to
commissions for the premiums paid under the service agreement between Meralco and Maxicare
from 1991 to 1996.

Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when
affirmed by the appellate court, are accorded the highest degree of respect and are considered
conclusive between the parties.7 A review of such findings by this Court is not warranted except
upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial
court are grounded entirely on speculation, surmises or conjectures; (2) when a lower court’s
inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court
go beyond the issues of the case, or fail to notice certain relevant facts which, if properly
considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6)
when the findings of fact are conclusions without mention of the specific evidence on which they
are based, are premised on the absence of evidence, or are contradicted by evidence on
record.8 None of the foregoing exceptions which would warrant a reversal of the assailed decision
obtains in this instance.

Maxicare urges us that both the RTC and CA failed to take into account the stipulations contained
in the February 19, 1991 letter agreement authorizing the payment of commissions only upon
satisfaction of twin conditions, i.e., collection and contemporaneous remittance of premium dues
by Estrada to Maxicare. Allegedly, the lower courts disregarded Estrada’s admission that the
negotiations with Meralco failed. Thus, the flawed application of the "efficient procuring cause"
doctrine enunciated in Manotok Brothers, Inc. v. Court of Appeals,9 and the erroneous conclusion
upholding Estrada’s entitlement to commissions on contracts completed without her participation.

We are not persuaded.

Contrary to Maxicare’s assertion, the trial and the appellate courts carefully considered the factual
backdrop of the case as borne out by the records. Both courts were one in the conclusion that
Maxicare successfully landed the Meralco account for the sale of healthcare plans only by virtue
of Estrada’s involvement and participation in the negotiations. The assailed Decision aptly states:

There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling

[Maxicare’s] health insurance plan to Meralco. Plaintiff-appellee [Estrada’s] efforts
consisted in being the first to offer the Maxicare plan to Meralco, using her connections
with some of Meralco Executives, inviting said executives to dinner meetings, making
submissions and representations regarding the health plan, sending follow-up letters, etc.

These efforts were recognized by Meralco as shown by the certification issued by its
Manpower Planning and Research Staff Head Ruben A. Sapitula on September 5, 1991,
to wit:

"This is to certify that Ms. Carmela Estrada has initiated talks with us since
November 1990 with regards (sic) to the HMO requirements of both our rank and
file employees, managers and executives, and that it was favorably recommended
and the same be approved by the Meralco Management Committee."

xxxx

This Court finds that plaintiff-appellee [Estrada’s] efforts were instrumental in introducing
the Meralco account to [Maxicare] in regard to the latter’s Maxicare health insurance plans.
Plaintiff-appellee [Estrada] was the efficient "intervening cause" in bringing about the
service agreement with Meralco. As pointed out by the trial court in its October 8, 1999
Decision, to wit:

"xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs.
Lopez and Guingona of Meralco, PHPI would still be an anonymity. xxx"10

Under the foregoing circumstances, we are hard pressed to disturb the findings of the RTC, which
the CA affirmed.

We cannot overemphasize the principle that in petitions for review on certiorari under Rules 45
of the Rules of Court, only questions of law may be put into issue. Questions of fact are not
cognizable by this Court. The finding of "efficient procuring cause" by the CA is a question of fact
which we desist from passing upon as it would entail delving into factual matters on which such
finding was based. To reiterate, the rule is that factual findings of the trial court, especially those
affirmed by the CA, are conclusive on this Court when supported by the evidence on record.11

The jettisoning of the petition is inevitable even upon a close perusal of the merits of the case.
First. Maxicare’s contention that Estrada may only claim commissions from membership dues
which she has collected and remitted to Maxicare as expressly provided for in the letter-
agreement does not convince us. It is readily apparent that Maxicare is attempting to evade
payment of the commission which rightfully belongs to Estrada as the broker who brought the
parties together. In fact, Maxicare’s former Chairman Roberto K. Macasaet testified that Maxicare
had been trying to land the Meralco account for two (2) years prior to Estrada’s entry in
1990.12 Even without that admission, we note that Meralco’s Assistant Vice-President, Donatila
San Juan, in a letter13 dated January 21, 1992 to then Maxicare President Pedro R. Sen,
categorically acknowledged Estrada’s efforts relative to the sale of Maxicare health plans to
Meralco, thus:

Sometime in 1989, Meralco received a proposal from Philippine Health-Care Providers,

Inc. (Maxicare) through the initiative and efforts of Ms. Carmela Estrada, who introduced
Maxicare to Meralco. Prior to this time, we did not know that Maxicare is a major health
care provider in the country. We have since negotiated and signed up with Maxicare to
provide a health maintenance plan for dependents of Meralco executives, effective
December 1, 1991 to November 30, 1992.

At the very least, Estrada penetrated the Meralco market, initially closed to Maxicare, and laid the
groundwork for a business relationship. The only reason Estrada was not able to participate in
the collection and remittance of premium dues to Maxicare was because she was prevented from
doing so by the acts of Maxicare, its officers, and employees.

In Tan v. Gullas,14 we had occasion to define a broker and distinguish it from an agent, thus:

[O]ne who is engaged, for others, on a commission, negotiating contracts relative to

property with the custody of which he has no concern; the negotiator between the other
parties, never acting in his own name but in the name of those who employed him. [A]
broker is one whose occupation is to bring the parties together, in matter of trade,
commerce or navigation.15

An agent receives a commission upon the successful conclusion of a sale. On the other
hand, a broker earns his pay merely by bringing the buyer and the seller together, even
if no sale is eventually made.16

In relation thereto, we have held that the term "procuring cause" in describing a broker’s activity,
refers to a cause originating a series of events which, without break in their continuity, result in
the accomplishment of the prime objective of the employment of the broker—producing a
purchaser ready, willing and able to buy on the owner’s terms.17 To be regarded as the "procuring
cause" of a sale as to be entitled to a commission, a broker’s efforts must have been the
foundation on which the negotiations resulting in a sale began.18 Verily, Estrada was instrumental
in the sale of the Maxicare health plans to Meralco. Without her intervention, no sale could have
been consummated.

Second. Maxicare next contends that Estrada herself admitted that her negotiations with Meralco
failed as shown in Annex "F" of the Complaint.
The chicanery and disingenuousness of Maxicare’s counsel is not lost on this Court. We observe
that this Annex "F" is, in fact, Maxicare’s counsel’s letter dated April 10, 1992 addressed to
Estrada. The letter contains a unilateral declaration by Maxicare that the efforts initiated and
negotiations undertaken by Estrada failed, such that the service agreement with Meralco was
supposedly directly negotiated by Maxicare. Thus, the latter effectively declares that Estrada is
not the "efficient procuring cause" of the sale, and as such, is not entitled to commissions.

Our holding in Atillo III v. Court of Appeals,19 ironically the case cited by Maxicare to bolster its
position that the statement in Annex "F" amounted to an admission, provides a contrary answer
to Maxicare’s ridiculous contention. We intoned therein that in spite of the presence of judicial
admissions in a party’s pleading, the trial court is still given leeway to consider other evidence
presented.20 We ruled, thus:

As provided for in Section 4 of Rule 129 of the Rules of Court, the general rule that a
judicial admission is conclusive upon the party making it and does not require proof admits
of two exceptions: 1) when it is shown that the admission was made through palpable
mistake, and 2) when it is shown that no such admission was in fact made. The latter
exception allows one to contradict an admission by denying that he made such an
admission.

For instance, if a party invokes an "admission" by an adverse party, but cites the
admission "out of context," then the one making the admission may show that he
made no "such" admission, or that his admission was taken out of context.

This may be interpreted as to mean "not in the sense in which the admission is
made to appear." That is the reason for the modifier "such."21

In this case, the letter, although part of Estrada’s Complaint, is not, ipso facto, an admission of
the statements contained therein, especially since the bone of contention relates to Estrada’s
entitlement to commissions for the sale of health plans she claims to have brokered. It is more
than obvious from the entirety of the records that Estrada has unequivocally and consistently
declared that her involvement as broker is the proximate cause which consummated the sale
between Meralco and Maxicare.

Moreover, Section 34,22 Rule 132 of the Rules of Court requires the purpose for which the
evidence is offered to be specified. Undeniably, the letter was attached to the Complaint, and
offered in evidence, to demonstrate Maxicare’s bad faith and ill will towards Estrada.23

Even a cursory reading of the Complaint and all the pleadings filed thereafter before the RTC, CA,
and this Court, readily show that Estrada does not concede, at any point, that her negotiations
with Meralco failed. Clearly, Maxicare’s assertion that Estrada herself does not pretend to be the
"efficient procuring cause" in the execution of the service agreement between Meralco and
Maxicare is baseless and an outright falsehood.

After muddling the issues and representing that Estrada made an admission that her negotiations
with Meralco failed, Maxicare’s counsel then proceeds to cite a case which does not, by any stretch
of the imagination, bolster the flawed contention.
We, therefore, ADMONISH Maxicare’s counsel, and, in turn, remind every member of the Bar that
the practice of law carries with it responsibilities which are not to be trifled with. Maxicare’s
counsel ought to be reacquainted with Canon 1024 of the Code of Professional Responsibility,
specifically, Rule 10.02, to wit:

Rule 10.02 – A lawyer shall not knowingly misquote or misrepresent the contents of a
paper, the language or the argument of opposing counsel, or the text of a decision or
authority, or knowingly cite as law a provision already rendered inoperative by repeal or
amendment, or assert as a fact that which has not been proved.

Third. Finally, we likewise affirm the uniform ruling of the RTC and CA that Estrada is entitled to
10% of the total amount of premiums paid25 by Meralco to Maxicare as of May 1996. Maxicare’s
argument that assuming Estrada is entitled to commissions, such entitlement only covers the
initial year of the service agreement and should not include the premiums paid for the succeeding
renewals thereof, fails to impress. Considering that we have sustained the lower courts’ factual
finding of Estrada’s close, proximate and causal connection to the sale of health plans, we are
not wont to disturb Estrada’s complete entitlement to commission for the total premiums paid
until May 1996 in the amount of P20,169,335.00.

WHEREFORE, premises considered and finding no reversible error committed by the Court of
Appeals, the petition is hereby DENIED. Costs against the petitioner.

SO ORDERED.

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

MANOTOK BROTHERS, INC., petitioner,

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

Antonio C. Ravelo for petitioner.

Remigio M. Trinidad for private respondent.

SYLLABUS

1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN ENTITLED' RULE; APPLICATION IN CASE
AT BAR. — In an earlier case, this Court ruled that when there is a close, proximate and causal
connection between the agent's efforts and labor and the principal's sale of his property, the
agent is entitled to a commission. We agree with respondent Court that the City of Manila
ultimately became the purchaser of petitioner's property mainly through the efforts of private
respondent. Without discounting the fact that when Municipal Ordinance No. 6603 was signed by
the City Mayor on May 17, 1968, private respondent's authority had already expired, it is to be
noted that the ordinance was approved on April 26, 1968 when private respondent's authorization
was still in force. Moreover, the approval by the City Mayor came only three days after the
expiration of private respondent's authority. It is also worth emphasizing that from the records,
the only party given a written authority by petitioner to negotiate the sale from July 5, 1966 to
May 14, 1968 was private respondent.

DECISION

CAMPOS, JR., J p:

Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed as G.R. No. 94753
sought relief from this Court's Resolution dated May 3, 1989, which reads:

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

In addition, petitioner prayed for the issuance of a preliminary injunction to prevent irreparable
injury to itself pending resolution by this Court of its cause. Petitioner likewise urged this Court
to hold in contempt private respondent for allegedly adopting sinister ploy to deprive petitioner
of its constitutional right to due process.

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

The amended petition 3 admitted, by this Court sought relief from this Court's Resolution
abovequoted. In the alternative, petitioner begged leave of court to re-file its Petition for Certiorari
4 (G.R. No. 78898) grounded on the allegation that petitioner was deprived of its opportunity to
be heard.

The facts as found by the appellate court, revealed that petitioner herein (then defendant-
appellant) is the owner of a certain parcel of land and building which were formerly leased by the
City of Manila and used by the Claro M. Recto High School, at M.F. Jhocson Street, Sampaloc
Manila.

By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent
Salvador Saligumba to negotiate with the City of Manila the sale of the aforementioned property
for not less than P425,000.00. In the same writing, petitioner agreed to pay private respondent
a five percent (5%) commission in the event the sale is finally consummated and paid.

Petitioner, on March 4, 1967, executed another letter 6 extending the authority of private
respondent for 120 days. Thereafter, another extension was granted to him for 120 more days,
as evidenced by another letter 7 dated June 26, 1967.

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

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

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

Notwithstanding the realization of the sale, private respondent never received any commission,
which should have amounted to P20,554.50. This was due to the refusal of petitioner to pay
private respondent said amount as the former does not recognize the latter's role as agent in the
transaction.

Consequently, on June 29, 1969, private respondent filed a complaint against petitioner, alleging
that he had successfully negotiated the sale of the property. He claimed that it was because of
his efforts that the Municipal Board of Manila passed Ordinance No. 6603 which appropriated the
sum for the payment of the property subject of the sale.

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

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

Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's President, Rufino
Manotok.

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

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

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

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

Petitioner appealed said decision, but to no avail. Respondent Court of Appeals affirmed the said
ruling of the trial court. 10

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

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

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

Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioner's case on
the ground that the issues raised in the case at bar cannot be joined. Thus, the above-entitled
case became final and executory by the entry of judgment on May 3, 1989.
Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the said judgment
before the court of origin. Upon discovery of said development, petitioner verified with the court
of origin the circumstances by which private respondent obtained knowledge of the resolution of
this Court. Sensing a fraudulent scheme employed by private respondent, petitioner then
instituted this instant Petition for Relief, on August 30, 1990. On September 13, 1990, said petition
was amended to include, in the alternative, its petition to re-file its Petition for Certiorari (G.R.
No. 78898).

The sole issue to be addressed in this petition is whether or not private respondent is entitled to
the five percent (5%) agent's commission.

It is petitioner's contention that as a broker, private respondent's job is to bring together the
parties to a transaction. Accordingly, if the broker does not succeed in bringing the minds of the
purchaser and the vendor to an agreement with respect to the sale, he is not entitled to a
commission.

Private respondent, on the other hand, opposes petitioner's position maintaining that it was
because of his efforts that a purchase actually materialized between the parties.

We rule in favor of private respondent.

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

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

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

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

xxx xxx xxx

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

xxx xxx xxx

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

From the foregoing, it follows then that private respondent herein, with more reason, should be
paid his commission, While in Prats vs. Court of Appeals, the agent was not even the efficient
procuring cause in bringing about the sale, unlike in the case at bar, it was still held therein that
the agent was entitled to compensation. In the case at bar, private respondent is the efficient
procuring cause for without his efforts, the municipality would not have anything to pass and the
Mayor would not have anything to approve.

In an earlier case, 16 this Court ruled that when there is a close, proximate and causal connection
between the agent's efforts and labor and the principal's sale of his property, the agent is entitled
to a commission.

We agree with respondent Court that the City of Manila ultimately became the purchaser of
petitioner's property mainly through the efforts of private respondent. Without discounting the
fact that when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968,
private respondent's authority had already expired, it is to be noted that the ordinance was
approved on April 26, 1968 when private respondent's authorization was still in force. Moreover,
the approval by the City Mayor came only three days after the expiration of private respondent's
authority. It is also worth emphasizing that from the records, the only party given a written
authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was private
respondent.

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

While it may be true that Filomeno Huelgas followed up the matter with Councilor Magsalin, the
author of Municipal Ordinance No. 6603 and Mayor Villegas, his intervention regarding the
purchase came only after the ordinance had already been passed — when the buyer has already
agreed to the purchase and to the price for which said property is to be paid. Without the efforts
of private respondent then, Mayor Villegas would have nothing to approve in the first place. It
was actually private respondent's labor that had set in motion the intervention of the third party
that produced the sale, hence he should be amply compensated.
WHEREFORE, in the light of the foregoing and finding no reversible error committed by
respondent Court, the decision of the Court of Appeals is hereby AFFIRMED. The temporary
restraining order issued by this Court in its Resolution dated October 1, 1990 is hereby lifted.

SO ORDERED.

G.R. No. 115838 July 18, 2002

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners,

vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.

CARPIO, J.:

The Case

Before us is a Petition for Review on Certiorari1 seeking to annul the Decision of the Court of
Appeals2 dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision3 of the
Regional Trial Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court
disposed as follows:

"WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro jointly
and solidarily liable to plaintiff the sum of:

a) P303,606.24 representing unpaid commission;

b) P25,000.00 for and by way of moral damages;

c) P45,000.00 for and by way of attorney's fees;

d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991."

The Antecedent Facts

On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners
Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity)
to collect the unpaid balance of his broker's commission from the De Castros.4 The Court of
Appeals summarized the facts in this wise:

"x x x. Appellants5 were co-owners of four (4) lots located at EDSA corner New York and
Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1,
p. 144, Records), appellee6 was authorized by appellants to act as real estate broker in
the sale of these properties for the amount of P23,000,000.00, five percent (5%) of which
will be given to the agent as commission. It was appellee who first found Times Transit
Corporation, represented by its president Mr. Rondaris, as prospective buyer which desired
 to buy two (2) lots only, specifically lots 14 and 15. Eventually, sometime in May of 1985,
the sale of lots 14 and 15 was consummated. Appellee received from
appellants P48,893.76 as commission.

It was then that the rift between the contending parties soon emerged. Appellee
apparently felt short changed because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid by
Times Transit Corporation to appellants for the two (2) lots, and that it was he who
introduced the buyer to appellants and unceasingly facilitated the negotiation which
ultimately led to the consummation of the sale. Hence, he sued below to collect the
balance of P303,606.24 after having received P48,893.76 in advance.1âwphi1.nêt

On the other hand, appellants completely traverse appellee's claims and essentially argue
that appellee is selfishly asking for more than what he truly deserved as commission to
the prejudice of other agents who were more instrumental in the consummation of the
sale. Although appellants readily concede that it was appellee who first introduced Times
Transit Corp. to them, appellee was not designated by them as their exclusive real estate
agent but that in fact there were more or less eighteen (18) others whose collective efforts
in the long run dwarfed those of appellee's, considering that the first negotiation for the
sale where appellee took active participation failed and it was these other agents who
successfully brokered in the second negotiation. But despite this and out of appellants'
"pure liberality, beneficence and magnanimity", appellee nevertheless was given the
largest cut in the commission (P48,893.76), although on the principle of quantum
meruit he would have certainly been entitled to less. So appellee should not have been
heard to complain of getting only a pittance when he actually got the lion's share of the
commission and worse, he should not have been allowed to get the entire commission.
Furthermore, the purchase price for the two lots was only P3.6 million as appearing in the
deed of sale and not P7.05 million as alleged by appellee. Thus, even assuming that
appellee is entitled to the entire commission, he would only be getting 5% of the P3.6
million, or P180,000.00."

Ruling of the Court of Appeals

The Court of Appeals affirmed in toto the decision of the trial court.

First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of
two lots in Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly
established a contract of agency between Constante and Artigo. Thus, Artigo sought prospective
buyers and found Times Transit Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots. Therefore, the Court of Appeals
decided that Artigo is entitled to the 5% commission on the purchase price as provided in the
contract of agency.

Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure to implead
as indispensable parties the other co-owners of the two lots. The Court of Appeals explained that
it is not necessary to implead the other co-owners since the action is exclusively based on a
contract of agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol
evidence to prove the true amount paid by Times Transit to the De Castros for the two lots. The
Court of Appeals ruled that evidence aliunde could be presented to prove that the actual purchase
price was P7.05 million and not P3.6 million as appearing in the deed of sale. Evidence aliunde is
admissible considering that Artigo is not a party, but a mere witness in the deed of sale between
the De Castros and Times Transit. The Court of Appeals explained that, "the rule that oral
evidence is inadmissible to vary the terms of written instruments is generally applied only in suits
between parties to the instrument and strangers to the contract are not bound by it." Besides,
Artigo was not suing under the deed of sale, but solely under the contract of agency. Thus, the
Court of Appeals upheld the trial court's finding that the purchase price was P7.05 million and not
P3.6 million.

Hence, the instant petition.

The Issues

According to petitioners, the Court of Appeals erred in -

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD

INDISPENSABLE PARTIES-IN-INTEREST;

II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT
ARTIGO'S CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;

III. CONSIDERING INCOMPETENT EVIDENCE;

IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;

V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEY'S FEES;

VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES, AND
ATTORNEY'S FEES.

The Court's Ruling

The petition is bereft of merit.

First Issue: whether the complaint merits dismissal for failure to implead other co-
owners as indispensable parties

The De Castros argue that Artigo's complaint should have been dismissed for failure to implead
all the co-owners of the two lots. The De Castros claim that Artigo always knew that the two lots
were co-owned by Constante and Corazon with their other siblings Jose and Carmela whom
Constante merely represented. The De Castros contend that failure to implead such indispensable
parties is fatal to the complaint since Artigo, as agent of all the four co-owners, would be paid
with funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.

An indispensable party is one whose interest will be affected by the court's action in the litigation,
and without whom no final determination of the case can be had.7 The joinder of indispensable
parties is mandatory and courts cannot proceed without their presence.8 Whenever it appears to
the court in the course of a proceeding that an indispensable party has not been joined, it is the
duty of the court to stop the trial and order the inclusion of such party.9

However, the rule on mandatory joinder of indispensable parties is not applicable to the instant
case.

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24,
1984 to sell the properties of the De Castros for P23 million at a 5 percent commission. The
authority was on a first come, first serve basis. The authority reads in full:

"24 Jan. 84

To Whom It May Concern:

This is to state that Mr. Francisco Artigo is authorized as our real estate broker in
connection with the sale of our property located at Edsa Corner New York & Denver,
Cubao, Quezon City.

Asking price P 23,000,000.00 with 5% commission as agent's fee.

C.C. de Castro
owner & representing
co-owners

This authority is on a first-come

First serve basis –CAC"

Constante signed the note as owner and as representative of the other co-owners. Under this
note, a contract of agency was clearly constituted between Constante and Artigo. Whether
Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners
as indispensable parties. The De Castros admit that the other co-owners are solidarily
liable under the contract of agency,10 citing Article 1915 of the Civil Code, which reads:

Art. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences of the
agency.
The solidary liability of the four co-owners, however, militates against the De Castros' theory that
the other co-owners should be impleaded as indispensable parties. A noted commentator
explained Article 1915 thus –

"The rule in this article applies even when the appointments were made by the principals
in separate acts, provided that they are for the same transaction. The solidarity arises
from the common interest of the principals, and not from the act of constituting
the agency. By virtue of this solidarity, the agent can recover from any principal
the whole compensation and indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary responsibility. The solidarity
does not disappear by the mere partition effected by the principals after the
accomplishment of the agency.

If the undertaking is one in which several are interested, but only some create the agency,
only the latter are solidarily liable, without prejudice to the effects of negotiorum
gestio with respect to the others. And if the power granted includes various transactions
some of which are common and others are not, only those interested in each transaction
shall be liable for it."11

When the law expressly provides for solidarity of the obligation, as in the liability of co-principals
in a contract of agency, each obligor may be compelled to pay the entire obligation.12 The agent
may recover the whole compensation from any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary
debtors. This article reads:

Art. 1216. The creditor may proceed against any one of the solidary debtors or some or
all of them simultaneously. The demand made against one of them shall not be an obstacle
to those which may subsequently be directed against the others, so long as the debt has
not been fully collected.

Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.13 that –

"x x x solidarity does not make a solidary obligor an indispensable party in a

suit filed by the creditor. Article 1216 of the Civil Code says that the creditor `may
proceed against anyone of the solidary debtors or some or all of them simultaneously'."
(Emphasis supplied)

Second Issue: whether Artigo's claim has been extinguished by full payment, waiver
or abandonment

The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given "his
proportionate share and no longer entitled to any balance." According to them, Artigo was just
one of the agents involved in the sale and entitled to a "proportionate share" in the commission.
They assert that Artigo did absolutely nothing during the second negotiation but to sign as a
witness in the deed of sale. He did not even prepare the documents for the transaction as an
active real estate broker usually does.
The De Castros' arguments are flimsy.

A contract of agency which is not contrary to law, public order, public policy, morals or good
custom is a valid contract, and constitutes the law between the parties.14 The contract of agency
entered into by Constante with Artigo is the law between them and both are bound to comply
with its terms and conditions in good faith.

The mere fact that "other agents" intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting Artigo a 5
percent commission based on the selling price. These "other agents" turned out to be employees
of Times Transit, the buyer Artigo introduced to the De Castros. This prompted the trial court to
observe:

"The alleged `second group' of agents came into the picture only during the so-called
`second negotiation' and it is amusing to note that these (sic) second group, prominent
among whom are Atty. Del Castillo and Ms. Prudencio, happened to be employees of
Times Transit, the buyer of the properties. And their efforts were limited to convincing
Constante to 'part away' with the properties because the redemption period of the
foreclosed properties is around the corner, so to speak. (tsn. June 6, 1991).

xxx

To accept Constante's version of the story is to open the floodgates of fraud and deceit.
A seller could always pretend rejection of the offer and wait for sometime for others to
renew it who are much willing to accept a commission far less than the original
broker. The immorality in the instant case easily presents itself if one has to
consider that the alleged `second group' are the employees of the buyer, Times
Transit and they have not bettered the offer secured by Mr. Artigo for P7
million.

It is to be noted also that while Constante was too particular about the unrenewed real
estate broker's license of Mr. Artigo, he did not bother at all to inquire as to the licenses
of Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40)."15 (Emphasis supplied)

In any event, we find that the 5 percent real estate broker's commission is reasonable and within
the standard practice in the real estate industry for transactions of this nature.

The De Castros also contend that Artigo's inaction as well as failure to protest estops him from
recovering more than what was actually paid him. The De Castros cite Article 1235 of the Civil
Code which reads:

Art. 1235. When the obligee accepts the performance, knowing its incompleteness and
irregularity, and without expressing any protest or objection, the obligation is deemed
fully complied with.

The De Castros' reliance on Article 1235 of the Civil Code is misplaced. Artigo's acceptance of
partial payment of his commission neither amounts to a waiver of the balance nor puts him in
estoppel. This is the import of Article 1235 which was explained in this wise:
 "The word accept, as used in Article 1235 of the Civil Code, means to take as satisfactory
or sufficient, or agree to an incomplete or irregular performance. Hence, the mere
receipt of a partial payment is not equivalent to the required acceptance of
performance as would extinguish the whole obligation."16 (Emphasis supplied)

There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident
that Artigo merely received the partial payment without waiving the balance. Thus, there is no
estoppel to speak of.

The De Castros further argue that laches should apply because Artigo did not file his complaint
in court until May 29, 1989, or almost four years later. Hence, Artigo's claim for the balance of
his commission is barred by laches.

Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do
that which by exercising due diligence could or should have been done earlier. It is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.17

Artigo disputes the claim that he neglected to assert his rights. He was appointed as agent on
January 24, 1984. The two lots were finally sold in June 1985. As found by the trial court, Artigo
demanded in April and July of 1985 the payment of his commission by Constante on the basis of
the selling price of P7.05 million but there was no response from Constante.18 After it became
clear that his demands for payment have fallen on deaf ears, Artigo decided to sue on May 29,
1989.

Actions upon a written contract, such as a contract of agency, must be brought within ten years
from the time the right of action accrues.19 The right of action accrues from the moment the
breach of right or duty occurs. From this moment, the creditor can institute the action even as
the ten-year prescriptive period begins to run.20

The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De
Castros, however, still maintain that Artigo's cause of action is barred by laches. Laches does not
apply because only four years had lapsed from the time of the sale in June 1985. Artigo made a
demand in July 1985 and filed the action in court on May 29, 1989, well within the ten-year
prescriptive period. This does not constitute an unreasonable delay in asserting one's right. The
Court has ruled, "a delay within the prescriptive period is sanctioned by law and is not
considered to be a delay that would bar relief."21 In explaining that laches applies only in
the absence of a statutory prescriptive period, the Court has stated -

"Laches is recourse in equity. Equity, however, is applied only in the absence,

never in contravention, of statutory law. Thus, laches, cannot, as a rule, be used
to abate a collection suit filed within the prescriptive period mandated by the
Civil Code."22

Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence.

Third issue: whether the determination of the purchase price was made in violation
of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of the evidence adduced in the
trial court to determine whether the actual selling price of the two lots was P7.05 million and
not P3.6 million. The De Castros contend that it is erroneous to base the 5 percent commission
on a purchase price of P7.05 million as ordered by the trial court and the appellate court. The De
Castros insist that the purchase price is P3.6 million as expressly stated in the deed of sale, the
due execution and authenticity of which was admitted during the trial.

The De Castros believe that the trial and appellate courts committed a mistake in considering
incompetent evidence and disregarding the best evidence and parole evidence rules. They claim
that the Court of Appeals erroneously affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit which were mere photocopies that do
not satisfy the best evidence rule. Further, these letters covered only the first negotiations
between Constante and Times Transit which failed; hence, these are immaterial in determining
the final purchase price.

The De Castros further argue that if there was an undervaluation, Artigo who signed as witness
benefited therefrom, and being equally guilty, should be left where he presently stands. They
likewise claim that the Court of Appeals erred in relying on evidence which were not offered for
the purpose considered by the trial court. Specifically, Exhibits "B", "C", "D" and "E" were not
offered to prove that the purchase price was P7.05 Million. Finally, they argue that the courts a
quo erred in giving credence to the perjured testimony of Artigo. They want the entire testimony
of Artigo rejected as a falsehood because he was lying when he claimed at the outset that he
was a licensed real estate broker when he was not.

Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by
the Court of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not
of law. Inevitably, this calls for an inquiry into the facts and evidence on record. This we can not
do.

It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze
or weigh the evidence again.23 This Court is not the proper venue to consider a factual issue as
it is not a trier of facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a
petitioner can only raise questions of law. Our pronouncement in the case of Cormero vs. Court
of Appeals24 bears reiteration:

"At the outset, it is evident from the errors assigned that the petition is anchored on a
plea to review the factual conclusion reached by the respondent court. Such task however
is foreclosed by the rule that in petitions for certiorari as a mode of appeal, like this one,
only questions of law distinctly set forth may be raised. These questions have been defined
as those that do not call for any examination of the probative value of the evidence
presented by the parties. (Uniland Resources vs. Development Bank of the Philippines,
200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119 Phil. 531; Hernandez
vs. Court of Appeals, 149 SCRA 67). And when this court is asked to go over the proof
presented by the parties, and analyze, assess and weigh them to ascertain if the trial court
and the appellate court were correct in according superior credit to this or that piece of
evidence and eventually, to the totality of the evidence of one party or the other, the court
cannot and will not do the same. (Elayda vs. Court of Appeals, 199 SCRA 349 [1991]).
Thus, in the absence of any showing that the findings complained of are totally devoid of
 support in the record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this court is not expected or required to
examine or contrast the oral and documentary evidence submitted by the parties. (Morales
vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa Ana vs. Hernandez, 18 SCRA 973
[1966])."

We find no reason to depart from this principle. The trial and appellate courts are in a much
better position to evaluate properly the evidence. Hence, we find no other recourse but to affirm
their finding on the actual purchase price.1âwphi1.nêt

Fourth Issue: whether award of moral damages and attorney's fees is proper

The De Castros claim that Artigo failed to prove that he is entitled to moral damages and
attorney's fees. The De Castros, however, cite no concrete reason except to say that they are the
ones entitled to damages since the case was filed to harass and extort money from them.

Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo.
The award of damages and attorney's fees is left to the sound discretion of the court, and if such
discretion is well exercised, as in this case, it will not be disturbed on appeal.25 Moral damages
may be awarded when in a breach of contract the defendant acted in bad faith, or in wanton
disregard of his contractual obligation.26 On the other hand, attorney's fees are awarded in
instances where "the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim."27 There is no reason to disturb the trial court's
finding that "the defendants' lack of good faith and unkind treatment of the plaintiff in refusing
to give his due commission deserve censure." This warrants the award of P25,000.00 in moral
damages and P 45,000.00 in attorney's fees. The amounts are, in our view, fair and reasonable.
Having found a buyer for the two lots, Artigo had already performed his part of the bargain under
the contract of agency. The De Castros should have exercised fairness and good judgment in
dealing with Artigo by fulfilling their own part of the bargain - paying Artigo his 5 percent broker's
commission based on the actual purchase price of the two lots.

WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated
May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.

SO ORDERED.