CASE DIGEST (Transportation Law): Necesito vs.

Paras
PRECILLANO NECESITO, ETC. vs. NATIVIDAD PARAS, ET AL.
G.R. No. L-10605, June 30, 1958)

FACTS:

A mother and her son boarded a passenger auto-truck of the Philippine Rabbit Bus
Lines. While entering a wooden bridge, its front wheels swerved to the right, the driver
lost control and the truck fell into a breast-deep creek. The mother drowned and the son
sustained injuries. These cases involve actions ex contractu against the owners of
PRBL filed by the son and the heirs of the mother. Lower Court dismissed the actions,
holding that the accident was a fortuitous event.

ISSUE:

Whether or not the carrier is liable for the manufacturing defect of the steering knuckle,
and whether the evidence discloses that in regard thereto the carrier exercised the
diligence required by law (Art. 1755, new Civil Code)

HELD:

Yes.

While the carrier is not an insurer of the safety of the passengers, the manufacturer of
the defective appliance is considered in law the agent of the carrier, and the good
repute of the manufacturer will not relieve the carrier from liability. The rationale of the
carrier’s liability is the fact that the passengers has no privity with the manufacturer of
the defective equipment; hence, he has no remedy against him, while the carrier has.
We find that the defect could be detected. The periodical, usual inspection of the
steering knuckle did not measure up to the “utmost diligence of a very cautious person”
as “far as human care and foresight can provide” and therefore the knuckle’s failure
cannot be considered a fortuitous event that exempts the carrier from responsibility.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-30056 August 30, 1988

MARCELO AGCAOILI, plaintiff-appellee
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellant.

Artemio L. Agcaoili for plaintiff-appellee.

Office of the Government Corporate Counsel for defendant-appellant.

NARVASA, J.:

The appellant Government Service Insurance System, (GSIS, for short) having
approved the application of the appellee Agcaoili for the purchase of a house and lot in
the GSIS Housing Project at Nangka Marikina, Rizal, subject to the condition that the
latter should forthwith occupy the house, a condition that Agacoili tried to fulfill but could
not for the reason that the house was absolutely uninhabitable; Agcaoili, after paying
the first installment and other fees, having thereafter refused to make further payment of
other stipulated installments until GSIS had made the house habitable; and appellant
having refused to do so, opting instead to cancel the award and demand the vacation by
Agcaoili of the premises; and Agcaoili having sued the GSIS in the Court of First
Instance of Manila for specific performance with damages and having obtained a
favorable judgment, the case was appealled to this Court by the GSIS. Its appeal must
fail.

The essential facts are not in dispute. Approval of Agcaoili's aforementioned application
for purchase 1 was contained in a letter 2 addressed to Agcaoili and signed by GSIS
Manager Archimedes Villanueva in behalf of the Chairman-General Manager, reading
as follows:

Please be informed that your application to purchase a house and lot in

our GSIS Housing Project at Nangka, Marikina, Rizal, has been approved
by this Office. Lot No. 26, Block No. (48) 2, together with the housing unit
constructed thereon, has been allocated to you.

You are, therefore, advised to occupy the said house immediately.

 If you fail to occupy the same within three (3) days from receipt of this
notice, your application shall be considered automatically disapproved and
the said house and lot will be awarded to another applicant.

Agcaoili lost no time in occupying the house. He could not stay in it, however, and had
to leave the very next day, because the house was nothing more than a shell, in such a
state of incompleteness that civilized occupation was not possible: ceiling, stairs, double
walling, lighting facilities, water connection, bathroom, toilet kitchen, drainage, were
inexistent. Agcaoili did however ask a homeless friend, a certain Villanueva, to stay in
the premises as some sort of watchman, pending completion of the construction of the
house. Agcaoili thereafter complained to the GSIS, to no avail.

The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid
the first monthly installment and the incidental fees, 3 but refused to make further
payments until and unless the GSIS completed the housing unit. What the GSIS did
was to cancel the award and require Agcaoili to vacate the premises. 4 Agcaoili reacted
by instituting suit in the Court of First Instance of Manila for specific performance and
damages. 5 Pending the action, a written protest was lodged by other awardees of
housing units in the same subdivision, regarding the failure of the System to complete
construction of their own houses. 6 Judgment was in due course rendered , 7 on the
basis of the evidence adduced by Agcaoili only, the GSIS having opted to dispense with
presentation of its own proofs. The judgment was in Agcaoili's favor and contained the
following dispositions, 8 to wit:

1) Declaring the cancellation of the award (of a house and lot) in favor of
plaintiff (Mariano Agcaoili) illegal and void;

2) Ordering the defendant (GSIS) to respect and enforce the aforesaid

award to the plaintiff relative to Lot No. 26, Block No. (48) 2 of the
Government Service Insurance System (GSIS) low cost housing project at
Nangka Marikina, Rizal;

3) Ordering the defendant to complete the house in question so as to

make the same habitable and authorizing it (defendant) to collect the
monthly amortization thereon only after said house shall have been
completed under the terms and conditions mentioned in Exhibit A ;and

4) Ordering the defendant to pay P100.00 as damages and P300.00 as

and for attorney's fees, and costs.

Appellant GSIS would have this Court reverse this judgment on the argument that—

1) Agcaoili had no right to suspend payment of amortizations on account of the

incompleteness of his housing unit, since said unit had been sold "in the condition and
state of completion then existing ... (and) he is deemed to have accepted the same in
the condition he found it when he accepted the award;" and assuming indefiniteness of
 the contract in this regard, such circumstance precludes a judgment for specific
performance. 9

2) Perfection of the contract of sale between it and Agcaoili being conditioned upon the
latter's immediate occupancy of the house subject thereof, and the latter having failed to
comply with the condition, no contract ever came into existence between them ; 10

3) Agcaoili's act of placing his homeless friend, Villanueva, in possession, "without the
prior or subsequent knowledge or consent of the defendant (GSIS)" operated as a
repudiation by Agcaoili of the award and a deprivation of the GSIS at the same time of
the reasonable rental value of the property. 11

Agcaoili's offer to buy from GSIS was contained in a printed form drawn up by the latter,
entitled "Application to Purchase a House and/or Lot." Agcaoili filled up the form, signed
it, and submitted it.12 The acceptance of the application was also set out in a form
(mimeographed) also prepared by the GSIS. As already mentioned, this form sent to
Agcaoili, duly filled up, advised him of the approval of his "application to purchase a
house and lot in our GSIS Housing Project at NANGKA, MARIKINA, RIZAL," and that
"Lot No. 26, Block No. (48) 2, together with the housing unit constructed thereon, has
been allocated to you." Neither the application form nor the acceptance or approval form
of the GSIS — nor the notice to commence payment of a monthly amortizations, which
again refers to "the house and lot awarded" — contained any hint that the house was
incomplete, and was being sold "as is," i.e., in whatever state of completion it might be
at the time. On the other hand, the condition explicitly imposed on Agcaoili — "to occupy
the said house immediately," or in any case within three (3) days from notice, otherwise
his "application shall be considered automatically disapproved and the said house and
lot will be awarded to another applicant" — would imply that construction of the house
was more or less complete, and it was by reasonable standards, habitable, and that
indeed, the awardee should stay and live in it; it could not be interpreted as meaning
that the awardee would occupy it in the sense of a pioneer or settler in a rude
wilderness, making do with whatever he found available in the envirornment.

There was then a perfected contract of sale between the parties; there had been a
meeting of the minds upon the purchase by Agcaoili of a determinate house and lot in
the GSIS Housing Project at Nangka Marikina, Rizal at a definite price payable in
amortizations at P31.56 per month, and from that moment the parties acquired the right
to reciprocally demand performance. 13 It was, to be sure, the duty of the GSIS, as
seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for
the purpose contemplated ,14 in other words, to deliver the house subject of the contract
in a reasonably livable state. This it failed to do.

It sold a house to Agcaoili, and required him to immediately occupy it under pain of
cancellation of the sale. Under the circumstances there can hardly be any doubt that the
house contemplated was one that could be occupied for purposes of residence in
reasonable comfort and convenience. There would be no sense to require the awardee
to immediately occupy and live in a shell of a house, a structure consisting only of four
 walls with openings, and a roof, and to theorize, as the GSIS does, that this was what
was intended by the parties, since the contract did not clearly impose upon it the
obligation to deliver a habitable house, is to advocate an absurdity, the creation of an
unfair situation. By any objective interpretation of its terms, the contract can only be
understood as imposing on the GSIS an obligation to deliver to Agcaoili a reasonably
habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS
did not fulfill that obligation, and was not willing to put the house in habitable state, it
cannot invoke Agcaoili's suspension of payment of amortizations as cause to cancel the
contract between them. It is axiomatic that "(i)n reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him."15

Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili by the
claim that the latter had not complied with the condition of occupying the house within
three (3) days. The record shows that Agcaoili did try to fulfill the condition; he did try to
occupy the house but found it to be so uninhabitable that he had to leave it the following
day. He did however leave a friend in the structure, who being homeless and hence
willing to accept shelter even of the most rudimentary sort, agreed to stay therein and
look after it. Thus the argument that Agcaoili breached the agreement by failing to
occupy the house, and by allowing another person to stay in it without the consent of
the GSIS, must be rejected as devoid of merit.

Finally, the GSIS should not be heard to say that the agreement between it and Agcaoili
is silent, or imprecise as to its exact prestation Blame for the imprecision cannot be
imputed to Agcaoili; it was after all the GSIS which caused the contract to come into
being by its written acceptance of Agcaoili's offer to purchase, that offer being contained
in a printed form supplied by the GSIS. Said appellant having caused the ambiguity of
which it would now make capital, the question of interpretation arising therefrom, should
be resolved against it.

It will not do, however, to dispose of the controversy by simply declaring that the
contract between the parties had not been validly cancelled and was therefore still in
force, and that Agcaoili could not be compelled by the GSIS to pay the stipulated price
of the house and lot subject of the contract until and unless it had first completed
construction of the house. This would leave the contract hanging or in suspended
animation, as it were, Agcaoili unwilling to pay unless the house were first completed,
and the GSIS averse to completing construction, which is precisely what has been the
state of affairs between the parties for more than twenty (20) years now. On the other
hand, assuming it to be feasible to still finish the construction of the house at this time,
to compel the GSIS to do so so that Agcaoili's prestation to pay the price might in turn
be demanded, without modifying the price therefor, would not be quite fair. The cost to
the GSIS of completion of construction at present prices would make the stipulated
price disproportionate, unrealistic.

The situation calls for the exercise by this Court of its equity jurisdiction, to the end that
it may render complete justice to both parties.
 As we . . reaffirmed in Air Manila, Inc. vs. Court of Industrial Relations (83
SCRA 579, 589 [1978]). "(E)quity as the complement of legal jurisdiction
seeks to reach and do complete justice where courts of law, through the
inflexibility of their rules and want of power to adapt their judgments to the
special circumstances of cases, are incompetent so to do. Equity regards
the spirit of and not the letter, the intent and not the form, the substance
rather than the circumstance, as it is variously expressed by different
courts... " 16

In this case, the Court can not require specific performance of the contract in question
according to its literal terms, as this would result in inequity. The prevailing rule is that in
decreeing specific performance equity requires 17 —

... not only that the contract be just and equitable in its provisions, but that
the consequences of specific performance likewise be equitable and just.
The general rule is that this equitable relief will not be granted if, under the
circumstances of the case, the result of the specific enforcement of the
contract would be harsh, inequitable, oppressive, or result in an
unconscionable advantage to the plaintiff . .

In the exercise of its equity jurisdiction, the Court may adjust the rights of parties in
accordance with the circumstances obtaining at the time of rendition of judgment, when
these are significantly different from those existing at the time of generation of those
rights.

The Court is not restricted to an adjustment of the rights of the parties as

they existed when suit was brought, but will give relief appropriate to
events occuring ending the suit. 18

While equitable jurisdiction is generally to be determined with reference to

the situation existing at the time the suit is filed, the relief to be accorded
by the decree is governed by the conditions which are shown to exist at
the time of making thereof, and not by the circumstances attending the
inception of the litigation. In making up the final decree in an equity suit
the judge may rightly consider matters arising after suit was brought.
Therefore, as a general rule, equity will administer such relief as the
nature, rights, facts and exigencies of the case demand at the close of the
trial or at the time of the making of the decree. 19

That adjustment is entirely consistent with the Civil Law principle that in the exercise of
rights a person must act with justice, give everyone his due, and observe honesty and
good faith. 20 Adjustment of rights has been held to be particularly applicable when there
has been a depreciation of currency.

Depreciation of the currency or other medium of payment contracted for

has frequently been held to justify the court in withholding specific
 performance or at least conditioning it upon payment of the actual value of
the property contracted for. Thus, in an action for the specific performance
of a real estate contract, it has been held that where the currency in which
the plaintiff had contracted to pay had greatly depreciated before
enforcement was sought, the relief would be denied unless the complaint
would undertake to pay the equitable value of the land. (Willard & Tayloe
[U.S.] 8 Wall 557,19 L. Ed 501; Doughdrill v. Edwards, 59 Ala 424) 21

In determining the precise relief to give, the Court will "balance the equities" or the
respective interests of the parties, and take account of the relative hardship that one
relief or another may occasion to them .22

The completion of the unfinished house so that it may be put into habitable condition, as
one form of relief to the plaintiff Agcaoili, no longer appears to be a feasible option in
view of the not inconsiderable time that has already elapsed. That would require an
adjustment of the price of the subject of the sale to conform to present prices of
construction materials and labor. It is more in keeping with the realities of the situation,
and with equitable norms, to simply require payment for the land on which the house
stands, and for the house itself, in its unfinished state, as of the time of the contract. In
fact, this is an alternative relief proposed by Agcaoili himself, i.e., "that judgment
issue . . (o)rdering the defendant (GSIS) to execute a deed of sale that would embody
and provide for a reasonable amortization of payment on the basis of the present actual
unfinished and uncompleted condition, worth and value of the said house. 23

WHEREFORE, the judgment of the Court a quo insofar as it invalidates and sets aside
the cancellation by respondent GSIS of the award in favor of petitioner Agcaoili of Lot
No. 26, Block No. (48) 2 of the GSIS low cost housing project at Nangka, Marikina,
Rizal, and orders the former to respect the aforesaid award and to pay damages in the
amounts specified, is AFFIRMED as being in accord with the facts and the law. Said
judgments is however modified by deleting the requirement for respondent GSIS "to
complete the house in question so as to make the same habitable," and instead it is
hereby ORDERED that the contract between the parties relative to the property above
described be modified by adding to the cost of the land, as of the time of perfection of
the contract, the cost of the house in its unfinished state also as of the time of perfection
of the contract, and correspondingly adjusting the amortizations to be paid by petitioner
Agcaoili, the modification to be effected after determination by the Court a quo of the
value of said house on the basis of the agreement of the parties, or if this is not possible
by such commissioner or commissioners as the Court may appoint. No pronouncement
as to costs.

SO ORDERED.

Cruz, Gancayco, Aquino and Medialdea, JJ., concur.

 Makati Dev’t Corp. v. Empire Insurance Co.

G.R. No. L-21780, 30 June 1967

FACTS:

On March 31, 1959, the Makati Development Corporation sold to Rodolfo P. Andal a lot.
A so-called “special condition” contained in the deed of sale provides that “the
VENDEE/S shall commence the construction and complete at least 50% of
his/her/their/its residence on the property within two (2) years  to the satisfaction of the
VENDOR and, in the event of his/her/their/its failure to do so will be forfeited in favor of
the VENDOR by the mere fact of failure of the VENDEE/S to comply with this special
condition.” To ensure faithful compliance with this “condition,” Andal gave a surety bond
the sum of P12,000 in case Andal failed to comply with his obligation under the deed of
sale.

Andal did not build his house; instead, he sold the lot to Juan Carlos. As neither Andal
nor Juan Carlos built a house on the lot within the stipulated period, the Makati
Development Corporation, sent a notice of claim to the Empire Insurance Co. advising it
of Andal’s failure to comply with his undertaking. Demand for the payment was refused,
whereupon the Makati Development Corporation filed a complaint against the Empire
Insurance Co. to recover on the bond in the full amount, plus attorney’s fees. In due
time, the Empire Insurance Co. filed its answer with a third-party complaint against
Andal.

ISSUE:
WHETHER OR NOT Andal is entitled to pay the surety bond of Php12,000 as a penal
sanction.

RULING:
No. The so-called “special condition” in the deed of sale is, in reality, an obligation 1 — to
build a house at least 50 percent of which must be finished within two years. It was to
secure the performance of this obligation that a penal clause was inserted. Here the trial
court found that Juan Carlos had finished more than 50 percent of his house or barely a
month after the expiration of the stipulated period. There was, therefore, a partial
performance of the obligation within the meaning and intendment of article 1229. The
penal clause, in this case, was inserted not to indemnify the Makati Development
Corporation for any damage it might suffer as a result of a breach of the contract but
rather compel performance of the so-called “special condition” and thus encourage
home building among lot owners in the Urdaneta Village.

Considering that a house had been built shortly after the period stipulated, the
substantial, if tardy, performance of the obligation, having in view the purpose of the
penal clause, fully justified the trial court in reducing the penalty.
 The stipulation, in this case, to commence the construction and complete at least 50
percent of the vendee’s house within two years cannot be construed as imposing a
strictly personal obligation on Andal. To adopt such a construction would be to limit
Andal’s right to dispose of the lot. There is nothing in the deed of sale restricting Andal’s
right to sell the lot at least within the two-year period and we think it plain that a reading
of such a limitation on one of the rights of ownership must rest on more explicit
language in the contract. It cannot be left to mere inference.

G.R. No. 125862             April 15, 2004

FRANCISCO CULABA and DEMETRIA CULABA, doing business under the name
and style "Culaba Store", petitioners,
vs.
COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review under Rule 45 of the Revised Rules of Civil Procedure of the
Decision1 of the Court of Appeals in CA-G.R. CV No. 19836 affirming in toto the
Decision2 of the Regional Trial Court of Makati, Branch 138, in Civil Case No. 1033 for
collection of sum of money, and the Resolution 3 denying the motion for reconsideration
of the said decision.

The Undisputed Facts

The spouses Francisco and Demetria Culaba were the owners and proprietors of the
Culaba Store and were engaged in the sale and distribution of San Miguel Corporation’s
(SMC) beer products. SMC sold beer products on credit to the Culaba spouses in the
amount of P28,650.00, as evidenced by Temporary Credit Invoice No.
42943.4 Thereafter, the Culaba spouses made a partial payment of P3,740.00, leaving
 an unpaid balance of P24,910.00. As they failed to pay despite repeated demands,
SMC filed an action for collection of a sum of money against them before the RTC of
Makati, Branch 138.

The defendant-spouses denied any liability, claiming that they had already paid the
plaintiff in full on four separate occasions. To substantiate this claim, the defendants
presented four (4) Temporary Charge Sales (TCS) Liquidation Receipts, as follows:

April 19, 1983 Receipt No. for P8,0005

27331

April 22, 1983 Receipt No. for P9,0006

27318

April 27, 1983 Receipt No. for P4,5007

27339

April 30, 1983 Receipt No. for P3,4108

27346

Defendant Francisco Culaba testified that he made the foregoing payments to an SMC
supervisor who came in an SMC van. He was then showed a list of customers’
accountabilities which included his account. The defendant, in good faith, then paid to
the said supervisor, and he was, in turn, issued genuine SMC liquidation receipts.

For its part, SMC submitted a publisher’s affidavit9 to prove that the entire booklet of
TCSL Receipts bearing Nos. 27301-27350 were reported lost by it, and that it caused
the publication of the notice of loss in the July 9, 1983 issue of the Daily Express, as
follows:

NOTICE OF LOSS

OUR CUSTOMERS ARE HEREBY INFORMED THAT TEMPORARY CHARGE

SALES LIQUIDATION RECEIPTS WITH SERIAL NOS. 27301-27350 HAVE
BEEN LOST.

ANY TRANSACTION, THEREFORE, ENTERED INTO WITH THE USE OF THE

ABOVE RECEIPTS WILL NOT BE HONORED.

SAN MIGUEL CORPORATION

BEER DIVISION
Makati Beer Region10

The Trial Court’s Ruling

After trial on the merits, the trial court rendered judgment in favor of SMC, and held the
Culaba spouses liable on the balance of its obligation, thus:

Wherefore, judgment is hereby rendered in favor of the plaintiff, as follows:

1. Ordering defendants to pay the amount of P24,910.00 plus legal interest of 6%

per annum from April 12, 1983 until the whole amount is fully paid;

2. Ordering defendants to pay 20% of the amount due to plaintiff as and for
attorney’s fees plus costs.

SO ORDERED.11

According to the trial court, it was unusual that defendant Francisco Culaba forgot the
name of the collector to whom he made the payments and that he did not require the
said collector to print his name on the receipts. The court also noted that although they
were part of a single booklet, the TCS Liquidation Receipts submitted by the defendants
did not appear to have been issued in their natural sequence. Furthermore, they were
part of the lost booklet receipts, which the public was duly warned of through the Notice
of Loss the plaintiff caused to be published in a daily newspaper. This confirmed the
plaintiff’s claim that the receipts presented by the defendants were spurious ones.

The Case on Appeal

On appeal, the appellants interposed the following assignment of errors:

THE TRIAL COURT ERRED IN FINDING THAT THE RECEIPTS PRESENTED

BY DEFENDANTS EVIDENCING HIS PAYMENTS TO PLAINTIFF SAN
MIGUEL CORPORATION, ARE SPURIOUS.

II

THE TRIAL COURT ERRED IN CONCLUDING THAT PLAINTIFF-APPELLEE

HAS SUFFICIENTLY PROVED ITS CAUSE OF ACTION AGAINST THE
DEFENDANTS.

III

THE TRIAL COURT ERRED IN ORDERING DEFENDANTS TO PAY 20% OF

THE AMOUNT DUE TO PLAINTIFF AS ATTORNEY’S FEES. 12

The appellants asserted that while the trial court’s observations were true, it was the
usual business practice in previous transactions between them and SMC. The SMC
previously honored receipts not bearing the salesman’s name. According to appellant
 Francisco Culaba, he even lost some of the receipts, but did not encounter any
problems.

According to appellant Francisco, he could not be faulted for paying the SMC collector
who came in a van and was in uniform, and that any regular customer would, without
any apprehension, transact with such an SMC employee. Furthermore, the respective
receipts issued to him at the time he paid on the four occasions mentioned had not yet
then been declared lost. Thus, the subsequent publication in a daily newspaper
declaring the booklets lost did not affect the validity and legality of the payments made.
Accordingly, by its actuations, the SMC was estopped from questioning the legality of
the payments and had no cause of action against the appellants.

Anent the issue of attorney’s fees, the order of the trial court for payment thereof is
without basis. According to the appellant, the provision for attorney’s fees is a
contingent fee, already provided for in the SMC’s contract with the law firm. To further
order them to pay 20% of the amount due as attorney’s fees is double payment,
tantamount to undue enrichment and therefore improper. 13

The appellee, for its part, contended that the primary issue in the case at bar revolved
around the basic and fundamental principles of agency. 14 It was incumbent upon the
defendants-appellants to exercise ordinary prudence and reasonable diligence to verify
and identify the extent of the alleged agent’s authority. It was their burden to establish
the true identity of the assumed agent, and this could not be established by mere
representation, rumor or general reputation. As they utterly failed in this regard, the
appellants must suffer the consequences.

The Court of Appeals affirmed the decision of the trial court, thus:

In the face of the somewhat tenuous evidence presented by the appellants, we

cannot fault the lower court for giving more weight to appellee’s testimonial and
documentary evidence, all of which establish with some degree of
preponderance the existence of the account sued upon.

ALL CONSIDERED, we cannot find any justification to reject the factual findings
of the lower court to which we must accord respect, for which reason, the
judgment appealed from is hereby AFFIRMED in all respects.

SO ORDERED.15

Hence, the instant petition.

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

I. WHETHER OR NOT THE RESPONDENT HAD PROVEN BY

PREPONDERANT EVIDENCE THAT IT HAD PROPERLY AND TIMELY
NOTIFIED PETITIONER OF LOST BOOKLET OF RECEIPTS
 II. WHETHER OR NOT RESPONDENT HAD PROVEN BY PREPONDERANT
EVIDENCE THAT PETITIONER WAS REMISS IN THE PAYMENT OF HIS
ACCOUNTS TO ITS AGENT.16

According to the petitioners, receiving receipts from the private respondent’s agents
instead of its salesmen was a usual occurrence, as they had been operating the store
since 1979. Thus, on four occasions in April 1983, when an agent of the respondent
came to the store wearing an SMC uniform and driving an SMC van, petitioner
Francisco Culaba, without question, paid his accounts. He received the receipts without
fear, as they were similar to what he used to receive before. Furthermore, the
petitioners assert that, common experience will attest that unless the attention of the
customers is called for, they would not take note of the serial number of the receipts.

The petitioners contend that the private respondent advertised its warning to the public
only after the damage was done, or on July 9, 1993. Its belated notice showed its
glaring lack of interest or concern for its customers’ welfare, and, in sum, its negligence.

Anent the second issue, petitioner Francisco Culaba avers that the agent to whom the
accounts were paid had all the physical and material attributes or indications of a
representative of the private respondent, leaving no doubt that he was duly authorized
by the latter. Petitioner Francisco Culaba’s testimony that "he does not necessarily
check the contents of the receipts issued to him except for the amount indicated if [the]
same accurately reflects his actual payment" is a common attitude of customers. He
could, thus, not be faulted for paying the private respondent’s agent on four occasions.
Petitioner Francisco Culaba asserts that he made the payment in good faith, to an agent
who issued SMC receipts which appeared to be genuine. Thus, according to the
petitioners, they had duly paid their obligation in accordance with Articles 1240 and
1242 of the New Civil Code.

The private respondent, for its part, avers that the burden of proving payment is with the
debtor, in consonance with the express provision of Article 1233 of the New Civil Code.
The petitioners miserably failed to prove the self-serving allegation that they already
paid their liability to the private respondent. Furthermore, under normal circumstances,
an obligor would not just pay a substantial amount to someone whom he saw for the
first time, without even asking for the latter’s name.

The Ruling of the Court

The petition is dismissed.

The petitioners question the findings of the Court of Appeals as to whether the payment
of the petitioners’ obligation to the private respondent was properly made, thus,
extinguishing the same. This is clearly a factual issue, and beyond the purview of the
Court to delve into. This is in consonance with the well-settled rule that findings of fact
of the trial court, especially when affirmed by the Court of Appeals, are accorded the
highest degree of respect, and generally will not be disturbed on appeal. Such findings
 are binding and conclusive on the Court. 17 Furthermore, it is not the Court’s function
under Rule 45 of the Rules of Court, as amended, to review, examine and evaluate or
weigh the probative value of the evidence presented. 18

To reiterate, the issue being raised by the petitioners does not involve a question of law,
but a question of fact, not cognizable by this Court in a petition for review under Rule
45. The jurisdiction of the Court in such a case is limited to reviewing only errors of law,
unless the factual findings being assailed are not supported by evidence on record or
the impugned judgment is based on a misapprehension of facts. 19

A careful study of the records of the case reveal that the appellate court affirmed the
trial court’s factual findings as follows:

First. Receipts Nos. 27331, 27318, 27339 and 27346 were included in the private
respondent’s lost booklet, which loss was duly advertised in a newspaper of general
circulation; thus, the private respondent could not have officially issued them to the
petitioners to cover the alleged payments on the dates appearing thereon.

Second. There was something amiss in the way the receipts were issued to the
petitioners, as one receipt bearing a higher serial number was issued ahead of another
receipt bearing a lower serial number, supposedly covering a later payment. The
petitioners failed to explain the apparent mix-up in these receipts, and no attempt was
made in this regard.

Third. The fact that the salesman’s name was invariably left blank in the four receipts
and that the petitioners could not even remember the name of the supposed impostor
who received the said payments strongly argue against the veracity of the petitioners’
claim.

We find no cogent reason to reverse the said findings.

The dismissal of the petition is inevitable even upon close perusal of the merits of the
case.

Payment is a mode of extinguishing an obligation. 20 Article 1240 of the Civil Code

provides that payment shall be made to the person in whose favor the obligation has
been constituted, or his successor-in-interest, or any person authorized to receive it. 21 In
this case, the payments were purportedly made to a "supervisor" of the private
respondent, who was clad in an SMC uniform and drove an SMC van. He appeared to
be authorized to accept payments as he showed a list of customers’ accountabilities
and even issued SMC liquidation receipts which looked genuine. Unfortunately for
petitioner Francisco Culaba, he did not ascertain the identity and authority of the said
supervisor, nor did he ask to be shown any identification to prove that the latter was,
indeed, an SMC supervisor. The petitioners relied solely on the man’s representation
that he was collecting payments for SMC. Thus, the payments the petitioners claimed
 they made were not the payments that discharged their obligation to the private
respondent.

The basis of agency is representation.22 A person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. 23 In the instant case,
the petitioners’ loss could have been avoided if they had simply exercised due diligence
in ascertaining the identity of the person to whom they allegedly made the payments.
The fact that they were parting with valuable consideration should have made them
more circumspect in handling their business transactions. Persons dealing with an
assumed agent are bound at their peril 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.24 The petitioners in this case failed to discharge this burden,
considering that the private respondent vehemently denied that the payments were
accepted by it and were made to its authorized representative.

Negligence is the omission to do something which a reasonable man, guided by those

considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something, which a prudent and reasonable man would not do. 25 In the case at
bar, the most prudent thing the petitioners should have done was to ascertain the
identity and authority of the person who collected their payments. Failing this, the
petitioners cannot claim that they acted in good faith when they made such payments.
Their claim therefor is negated by their negligence, and they are bound by its
consequences. Being negligent in this regard, the petitioners cannot seek relief on the
basis of a supposed agency.26

WHEREFORE, the instant petition is hereby DENIED. The assailed Decision dated April
16, 1996, and the Resolution dated July 19, 1996 of the Court of Appeals are
AFFIRMED. Costs against the petitioners.

SO ORDERED.

Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.