MARCOS V.

PRIETO, Petitioner,
vs.
THE HON. COURT OF APPEALS (Former Ninth Division), HON. ROSE
MARY R. MOLINA-ALIM, In Her Capacity as Pairing Judge of Branch 67
of the RTC, First Judicial Region, Bauang, La Union, FAR EAST BANK &
TRUST COMPANY, now the BANK OF THE PHILIPPINE ISLANDS,
through ATTY. EDILBERTO B. TENEFRANCIA, and SPOUSES ANTONIO
and MONETTE PRIETO, Respondents.
DECISION
BERSAMIN, J.:
Ratification or confirmation may validate an act done in behalf of another
without authority from the latter. The effect is as if the latter did the act
himself.
Antecedents
On October 27, 1997, the Spouses Marcos V. Prieto (Marcos) and Susan M.
Prieto filed in the Regional Trial Court (RTC) in Bauang, La Union a
complaint against Far East Bank and Trust Company (FEBTC) and the
Spouses Antonio Prieto (Antonio) and Monette Prieto to declare the nullity of
several real estate mortgage contracts.1 The plaintiffs narrated that in
January 1996, they had executed a special power of attorney (SPA) to
authorize Antonio to borrow money from FEBTC, using as collateral their real
property consisting of a parcel of land located in Calumbaya, Bauang, La
Union (the property) and covered by Transfer Certificate of Title (TCT) No. T40223 of the Registry of Deeds of La Union; that defendant spouses, using
the property as collateral, had thereafter obtained from FEBTC a series of
loans totaling P5,000,000.00, evidenced by promissory notes, and secured
by separate real estate mortgage contracts; that defendant spouses had
failed to pay the loans, leading FEBTC to initiate the extra-judicial foreclosure
of the mortgages; that the foreclosure sale had been scheduled on October
31, 1997; and that the promissory notes and the real estate mortgage
contracts were in the name of defendant spouses for themselves alone, who
had incurred the obligations, rendering the promissory notes and the
mortgage contracts null and void ab initio.
The RTC issued a temporary restraining order (TRO), and set a preliminary
hearing on the application for the issuance of a writ of preliminary
injunction.2 The RTC eventually denied the application for the writ of
preliminary injunction on March 24, 1998;3 it later denied as well the plaintiffs
motion for reconsideration of the denial of the application. 4

On July 31, 2001 the RTC rendered its decision dismissing the
complaint,5 ruling that although the name of plaintiff Marcos (as registered
owner) did not appear in the real estate mortgage contracts, Marcos could
not be absolved of liability because he had no right of action against the
person with whom his agent had contracted; that the mortgage contracts,
even if entered into in the name of the agent, should be deemed made in his
behalf as the principal because the things involved belonged to the principal;
and that even assuming that Antonio had exceeded his authority as agent,
Marcos had ratified Antonios action by executing the letter of
acknowledgement dated September 12, 1996, making himself liable under
the premises.
Marcos received the decision on August 28, 2001, and filed a motion for
reconsideration on September 12, 2001, the last day for him to do so under
the Rules of Court.6 On November 19, 2001, the RTC denied the motion for
reconsideration.7 Marcos received the denial of the motion on November 21,
2001, but he filed his notice of appeal only on November 26, 2001. 8
On December 11, 2001, the RTC denied due course to the notice of appeal
for having been filed four days beyond the reglementary period for perfecting
the appeal.9
Marcos sought the reconsideration of the denial of due course to the notice
of appeal, but the RTC still denied his motion, reiterating that the failure to
perfect an appeal rendered the decision final and executory.10
On April 16, 2002, Marcos filed a petition for certiorari in the Court of Appeals
(CA), imputing grave abuse of discretion to the RTC in disallowing his notice
of appeal.11 He argued that his notice of appeal had been filed only two days
late, and that the delay should be treated only as excusable negligence
because at that time, he had been deprived of clear thinking due to the pain
and disappointment he and his wife had suffered over the failure of the
recent medical procedures they had undergone.12
On April 24, 2002, the CA Ninth Division, then composed of Associate Justice
Conrado M. Vasquez, Jr. as Chairman, and Associate Justice Andres B.
Reyes, Jr. and Associate Justice Mario L. Guaria III as Members, dismissed
the petition for certiorari, holding that Marcos had failed to perfect his appeal
on time, and that, consequently, the RTC did not commit any error or grave
abuse of discretion in issuing the challenged orders.13
Marcos sought reconsideration, but the CA denied the motion for
reconsideration on April 9, 2003.14

Hence, this appeal on certiorari.

The petition for review lacks merit.
First of all, Marcos submits that the CAs assailed resolution promulgated on
April 9, 2003 was signed only by Associate Justices Vasquez and Reyes, Jr.;
that Associate Justice Guaria III as the third Member did not sign the
resolution; that the absence of Associate Justice Guaria IIIs signature
revealed the lack of unanimity in the voting, rendering the resolution null and
void pursuant to Section 4 of the 1999 Internal Rules of the Court of
Appeals;15and that the CA should then have constituted a new Division of five
Members by selecting two additional Associate Justices by raffle. 16
We find the submission of Marcos to be without basis. Contrary to his
submission, Associate Justice Guaria III expressly concurred in the
resolution in question, as borne out by the copy itself of the assailed
resolution promulgated on April 9, 2003 attached to the petition for review as
"Enclosure A."17 Marcos could not have missed the signature of Associate
Justice Guaria III because it prominently appeared on the copy of the
assailed resolution beneath that of Associate Justice Vasquez and beside
that of Associate Justice Reyes, Jr.
Secondly, Marcos contends that the CA erred in rejecting his petition for
certiorari because his notice of appeal in the RTC had been tardy by only two
days, but his tardiness could be excused.
We cannot sustain the contention of petitioner. He himself conceded that his
filing of the notice of appeal had been tardy by two days. Thereby, he was
aware that he had lost his right to appeal the RTCs decision. As such, the
petition for certiorari he thereafter filed in the CA was designed to substitute
his loss of the right to appeal.
The CA justified its rejection of the petition for certiorari in the following
manner:
Admittedly, petitioner received the Decision in Civil Case No. 1114-BG dated
July 31, 2001 on August 28, 2001 and filed his motion for reconsideration on
the 15th day, or on September 12, 2001. Petitioner received the denial of his
motion for reconsideration on November 21, 2001, thereby leaving him with
only one (1) day to perfect an appeal. Unfortunately, the notice of appeal was
submitted only on November 26, 2001, or four (4) days beyond the
reglementary period.
To justify the late filing of his appeal, petitioner ratiocinated that on November
22, 2001, the last day of appeal, he brought his wife to Manila for an embryo

transfer and returned to San Fernando, Pampanga, on November 25, 2001.

Other than the bare allegations of the petitioner, however, the pretended
excusable neglect remained unsupported and uncorroborated. Worthy of
note still is that the notice of appeal submitted mentioned nothing about the
embryo transplant. Worse, the notice of appeal misleadingly averred that
petitioner is giving notice of his intention to appeal to this Court "from the
judgment entered therein by this Court on 19th November 2001, which was
received by plaintiffs on 21st day of November 2001," thereby making it
appear that the notice of appeal was indeed filed on time, stating that what
he received on November 21, 2001 was the Decision dated July 31, 2001,
not the denial of the reconsideration.
Apropos, when the trial court denied the notice of appeal, it did not commit
any error nor grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the challenged orders. No capricious or whimsical
exercise of judgment nor arbitrary or despotic manner exists in the issuance
of the assailed orders.
Not only that, petition for certiorari presupposes that petitioner is left with no
other plain, speedy and adequate remedy in the ordinary course of law like
an appeal or a petition from relief of judgment. Notably, petitioner failed to
avail of the petition for relief of judgment under Rule 38 of the Rules of Court,
and just like in an appeal, certiorari cannot be made a substitute for such
remedy.
On the plea for application for the liberality rule, it must be stressed that there
are certain procedural rules that must remain inviolable, like those setting the
period for perfecting an appeal. Doctrinally entrenched is that the right of
appeal is a statutory right and the one who seeks to avail that right must
comply with the statute or rules. The Rules, particularly the requirements for
perfecting an appeal within the reglementary period specified in the law, must
be strictly followed as they are considered indispensable interdictions against
needless delays and appeal in the manner and within the period permitted by
law is not only mandatory but also jurisdictional and the failure to perfect an
appeal renders the judgment of the court final and executory. Just as a losing
party has the right to file an appeal within the prescribed period, the winning
party also has the correlative right to enjoy the finality of the resolution of his
or her case. (Videogram Regulatory Board vs. Court of Appeals 265 SCRA
373 [1996]; Cabellan vs. Court of Appeals 304, SCRA 119 [1999]; Demata
vs. Court of Appeals, 303 SCRA 690 [1999)].
Consequently, failing to perfect an appeal within the time and manner
specified by law, deprives the appellate court of jurisdiction to alter the final
judgment much less entertain the appeal (Pedrosa vs. Hill, 257 SCRA 373
[1996]). Timeliness of an appeal is a jurisdictional caveat that not even the

Supreme Court can trifle with. (Bank of America, NT & SA vs. Gerochi, Jr.,
230 SCRA 9 [1994]).18
We can only sustain the CAs dismissal of the petition for certiorari. The
general rule is that a timely appeal is the remedy to obtain reversal or
modification of the judgment on the merits. This is true even if one of the
errors to be assigned on appeal is the lack of jurisdiction on the part of the
court rendering the judgment over the subject matter, or the exercise of
power by said court is in excess of its jurisdiction, or the making of its
findings of fact or of law set out in the decision is attended by grave abuse of
discretion.19 In other words, the perfection of an appeal within the
reglementary period is mandatory because the failure to perfect the appeal
within the time prescribed by the Rules of Court unavoidably renders the
judgment final as to preclude the appellate court from acquiring the
jurisdiction to review the judgment.20 We stress, too, that the statutory nature
of the right to appeal requires the appealing party to strictly comply with the
statutes or rules governing the perfection of the appeal because such
statutes or rules are considered indispensable interdictions against needless
delays and are instituted in favor of an orderly discharge of judicial business.
In the absence of highly exceptional circumstances warranting their
relaxation, therefore, the statutes or rules should remain inviolable. 21
And, thirdly, petitioners appeal would still not succeed even if the Court now
extends to him the retroactive application of the fresh period rule enunciated
in Neypes v. Court of Appeals,22 and reckon the perfection of his appeal from
the date of his receipt of the denial of his motion for reconsideration, thus
rendering his notice of appeal timely.
The complaint was anchored on the supposed failure of FEBTC to duly
investigate the authority of Antonio in contracting the "exceptionally and
relatively immense"23 loans amounting to P5,000,000.00. Marcos alleged
therein that his property had thereby become "unlawfully burdened by
unauthorized real estate mortgage contracts," 24because the loans and the
mortgage contracts had been incurred by Antonio and his wife only for
themselves, to the exclusion of petitioner.25 Yet, Marcos could not deny that
under the express terms of the SPA,26 he had precisely granted to Antonio as
his agent the authority to borrow money, and to transfer and convey the
property by way of mortgage to FEBTC; to sign, execute and deliver
promissory notes; and to receive the proceeds of the loans on the formers
behalf. In other words, the mortgage contracts were valid and enforceable
against petitioner, who was consequently fully bound by their terms.
Moreover, even if it was assumed that Antonios obtaining the loans in his
own name, and executing the mortgage contracts also in his own name had
exceeded his express authority under the SPA, Marcos was still liable to
FEBTC by virtue of his express ratification of Antonios act. Under Article

1898 of the Civil Code, the acts of an agent done beyond the scope of his
authority do not bind the principal unless the latter expressly or impliedly
ratifies the same.27
In agency, ratification is the adoption or confirmation by one person of an act
performed on his behalf by another without authority.1wphi1 The substance
of ratification is the confirmation after the act, amounting to a substitute for a
prior authority.28 Here, there was such a ratification by Marcos, as borne out
by his execution of the letter of acknowledgement on September 12,
1996,29 whose text is quoted in full, viz:
12 Sept. 1996 (handwritten)
FAR EAST BANK & TRUST COMPANY
San Fernando
La Union
Gentlemen:
It is my/our understanding that your Bank has granted a
DISCOUNTING Line/Loan in favor of SPS. ANTONIO & MONETTE
PRIETO over my/our real property located in Calumbayan, Bauang, La
Unionand covered by Transfer Certificate of Title No./s. 40223 of the Registry
of Deeds for La Union. This confirms that the said property/ies was/were
offered as collateral (illegible) SPS. ANTONIO & MONETTE
PRIETOS line/loan with my/our consent, and that I/we agree with all the
terms and conditions of the mortgage executed on the same. I/we further
confirm that the proceeds of the aforesaid Discounting Line line/loan was
released to SPS. MONETTE & ANTONIO PRIETO for his/her its own benefit.
We thank you for your support to SPS. MONETTE & ANTONIO.
Very truly yours,
(signed)
ATTY. MARCOS PRIETO30
But Marcos insists that the letter of acknowledgment was only a mere "letter
(written) on a mimeographic paper a mere scrap of paper, a document by
adhesion."31
The Court is confounded by Marcos dismissal of his own express written
ratification of Antonios act. Being himself a lawyer, Marcos was aware of the
import and consequences of the letter of acknowledgment. The Court cannot

agree with his insistence that the letter was worthless due to its being a
contract of adhesion. The letter was not a contract, to begin with, because it
was only a unilateral act of his. Secondly, his insistence was fallacious and
insincere because he knew as a lawyer that even assuming that the letter
could be treated as a contract of adhesion it was nonetheless effective and
binding like any other contract. The Court has consistently held that a
contract of adhesion was not prohibited for that reason. In Pilipino Telephone
Corporation v. Tecson, 32 for instance, the Court said that contracts of
adhesion were valid but might be occasionally struck down only if there was
a showing that the dominant bargaining party left the weaker party without
any choice as to be "completely deprived of an opportunity to bargain
effectively." That exception did not apply here, for, verily, Marcos, being a
lawyer, could not have been the weaker party. As the tenor of the of
acknowledgment indicated, he was fully aware of the meaning and sense of
every written word or phrase, as well as of the legal effect of his confirmation
thereby of his agents act. It is axiomatic that a mans act, conduct and
declaration, wherever made, if voluntary, are admissible against him, 33 for the
reason that it is fair to presume that they correspond with the truth, and it is
his fault if they do not.34
WHEREFORE, the Court AFFIRMS the resolution promulgated by the Court
of Appeals on April 24, 2002; and ORDERS petitioner to pay the costs of suit.

DECISION
QUISUMBING, J.:

This petition for review on certiorari seeks the reversal of the

Decision[1] and Resolution,[2] dated November 29, 2002 and August 5, 2003,
respectively, of the Court of Appeals in CA-G.R. CV No. 33568. The
appellate court had affirmed the Decision [3] dated October 10, 1989 of the
Regional Trial Court (RTC) of Manila, Branch 3, finding petitioner as
defendant and the co-defendants below jointly and severally liable to the
plaintiffs, now herein respondents.
The antecedent facts are as follows:
Respondent Teresita O. Pedroso is a policyholder of a 20-year
endowment life insurance issued by petitioner Filipinas Life Assurance

SO ORDERED.

Company (Filipinas Life). Pedroso claims Renato Valle was her insurance
FILIPINAS LIFE ASSURANCE COMPANY (now
AYALA LIFE ASSURANCE, INC.),
Petitioner,

- versus CLEMENTE
N.
PEDROSO,
TERESITA O. PEDROSO and JENNIFER N.
PALACIO thru her Attorney-in-Fact PONCIANO
C. MARQUEZ,
Respondents.

G.R. No. 159489

Present:

agent since 1972 and Valle collected her monthly premiums. In the first
week of January 1977, Valle told her that the Filipinas Life Escolta Office was
holding a promotional investment program for policyholders. It was offering

QUISUMBING, J., Chairperson,

8% prepaid interest a month for certain amounts deposited on a monthly
CARPIO,
basis. Enticed, she initially invested and issued a post-dated check
CARPIO MORALES,
TINGA, and
dated January 7, 1977 forP10,000.[4] In return, Valle issued Pedroso his
VELASCO, JR., JJ.
personal check for P800 for the 8%[5] prepaid interest and a Filipinas Life
Agents Receipt No. 807838.[6]
Promulgated:

February 4, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

Subsequently, she called the Escolta office and talked to Francisco

Alcantara, the administrative assistant, who referred her to the branch
manager, Angel Apetrior. Pedroso inquired about the promotional investment
and Apetrior confirmed that there was such a promotion. She was even told

she could push through with the check she issued. From the records, the

After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-

check, with the endorsement of Alcantara at the back, was deposited in the

defendants Valle, Apetrior and Alcantara jointly and solidarily liable to the

account of Filipinas Life with the Commercial Bank and Trust Company

respondents.

(CBTC), Escolta Branch.

On appeal, the Court of Appeals affirmed the trial courts ruling and
Relying on the representations made by the petitioners duly

subsequently denied the motion for reconsideration.

authorized representatives Apetrior and Alcantara, as well as having known

agent Valle for quite some time, Pedroso waited for the maturity of her initial

Petitioner now comes before us raising a single issue:

investment. A month after, her investment of P10,000 was returned to her

WHETHER OR NOT THE COURT OF APPEALS

COMMITTED A REVERSIBLE ERROR AND GRAVELY
ABUSED ITS DISCRETION IN AFFIRMING THE DECISION
OF THE LOWER COURT HOLDING FLAC [FILIPINAS
LIFE] TO BE JOINTLY AND SEVERALLY LIABLE WITH ITS
CO-DEFENDANTS
ON
THE
CLAIM
OF
RESPONDENTS INSTEAD OF HOLDING ITS AGENT,
RENATO
VALLE,
SOLELY
LIABLE
TO
THE
RESPONDENTS.[10]

after she made a written request for its refund. The formal written request,
dated February 3, 1977, was written on an inter-office memorandum form of
Filipinas Life prepared by Alcantara.[7] To collect the amount, Pedroso
personally went to the Escolta branch where Alcantara gave her the P10,000
in cash. After a second investment, she made 7 to 8 more investments in
varying amounts, totaling P37,000 but at a lower rate of 5%[8] prepaid interest a
month. Upon maturity of Pedrosos subsequent investments, Valle would take
back from Pedroso the corresponding yellow-colored agents receipt he issued
to the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life
insurance policyholder, about the investment plan. Palacio made a total
investment ofP49,550[9] but at only 5% prepaid interest. However, when
Pedroso tried to withdraw her investment, Valle did not want to return
some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas
Life, despite demands, refused to return her money. With the assistance of

Simply put, did the Court of Appeals err in holding petitioner and its
co-defendants jointly and severally liable to the herein respondents?
Filipinas Life does not dispute that Valle was its agent, but claims
that it was only a life insurance company and was not engaged in the
business of collecting investment money. It contends that the investment
scheme offered to respondents by Valle, Apetrior and Alcantara was outside
the scope of their authority as agents of Filipinas Life such that, it cannot be
held liable to the respondents.[11]

their lawyer, they went to Filipinas Life Escolta Office to collect their
respective investments, and to inquire why they had not seen Valle for quite
some time. But their attempts were futile. Hence, respondents filed an
action for the recovery of a sum of money.

On the other hand, respondents contend that Filipinas Life

authorized Valle to solicit investments from them. In fact, Filipinas Lifes
official

documents

and

facilities

were

used

in

consummating

the

transactions. These transactions, according to respondents, were confirmed

by its officers Apetrior and Alcantara. Respondents assert they exercised all

still solidarily liable together with the agent if the principal allowed the agent

the diligence required of them in ascertaining the authority of petitioners

to act as though the agent had full powers. [15] In other words, the acts of an

agents; and it is Filipinas Life that failed in its duty to ensure that its agents

agent beyond the scope of his authority do not bind the principal, unless the

act within the scope of their authority.

principal ratifies them, expressly or impliedly.[16] Ratification in agency is the

adoption or confirmation by one person of an act performed on his behalf by

Considering the issue raised in the light of the submissions of the

another without authority.[17]

parties, we find that the petition lacks merit. The Court of Appeals committed
no reversible error nor abused gravely its discretion in rendering the assailed
decision and resolution.

Filipinas Life cannot profess ignorance of Valles acts. Even if Valles

representations were beyond his authority as a debit/insurance agent,
Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified

It appears indisputable that respondents Pedroso and Palacio had

Valles acts. It cannot even be denied that Filipinas Life benefited from the

invested P47,000 and P49,550, respectively. These were received by Valle

investments deposited by Valle in the account of Filipinas Life. In our

and remitted to Filipinas Life, using Filipinas Lifes official receipts, whose

considered view, Filipinas Life had clothed Valle with apparent authority;

authenticity were not disputed. Valles authority to solicit and receive

hence, it is now estopped to deny said authority. Innocent third persons

investments was also established by the parties. When respondents sought

should not be prejudiced if the principal failed to adopt the needed measures

confirmation, Alcantara, holding a supervisory position, and Apetrior, the

to prevent misrepresentation, much more so if the principal ratified his

branch manager, confirmed that Valle had authority. While it is true that a

agents acts beyond the latters authority. The act of the agent is considered

person dealing with an agent is put upon inquiry and must discover at his

that of the principal itself. Qui per alium facit per seipsum facere videtur. He

own peril the agents authority, in this case, respondents did exercise due

who does a thing by an agent is considered as doing it himself. [18]

diligence in removing all doubts and in confirming the validity of the

representations made by Valle.

WHEREFORE, the petition is DENIED for lack of merit. The

Decision and Resolution, dated November 29, 2002 and August 5, 2003,

Filipinas Life, as the principal, is liable for obligations contracted by

its agent Valle. By the contract of agency, a person binds himself to render

respectively, of the Court of Appeals in CA-G.R. CV No. 33568

are AFFIRMED.

some service or to do something in representation or on behalf of another,

with the consent or authority of the latter.[12] The general rule is that the

Costs against the petitioner.

principal is responsible for the acts of its agent done within the scope of its
authority, and should bear the damage caused to third persons. [13] When the
agent exceeds his authority, the agent becomes personally liable for the
damage.[14] But even when the agent exceeds his authority, the principal is

SO ORDERED.
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 Decision[1] of the Court of
Appeals dated 22 June 2001, and its Resolution[2] 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:

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:

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]

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 ofP95,000.00 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.

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]

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.

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 document[6] 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:

(Signed)
FLORENCIA C.
BALUYOT

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 Complaint[7] 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
contract[8] 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 delinquencyis now due for cancellation under its terms and
conditions.[12]

because of Atty. Linsangans delinquency, MMPCI validly cancelled the

contract.

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]

Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that

it was the formers obligation, as a party knowingly dealing with an alleged
agent, to determine the limitations of such agents authority, particularly when
such alleged agents actions were patently questionable. According to
MMPCI, Atty. Linsangan did not even bother to verify Baluyots authority or
ask copies of official receipts for his payments.[19]

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
ATTORNEYS 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 courts 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,

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 Baluyots 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]

The Court of Appeals affirmed the decision of the trial court. It upheld
the trial courts finding that Baluyot was an agent of MMPCI at the time the
disputed contract was entered into, having represented MMPCIs 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 Baluyots 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. Linsangans 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 MMPCIs 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 Baluyots authority. To repeat, Baluyots 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
agents 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 latters 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 agents 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.
Linsangans 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, MMPCIs 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
MMPCIs acceptance of the benefits of Baluyots 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 principals 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 principals
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 Baluyots Answer[48] 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 Baluyots statements in her
letter[50] 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. Linsangans 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.

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 Baluyots
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
MMPCIs 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 principals 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.

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 MMPCIs 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 Baluyots 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 MMPCIs application of some of
the checks to his account. However, the checks alone were not sufficient to
cover his obligations.

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.

If MMPCI was aware of the arrangement, it would have refused the

latters check payments for being insufficient. It would not have applied to his
account theP1,800.00 checks. Moreover, the fact that Baluyot had to
practically explain to MMPCIs 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]

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 formers 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 principals 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 Baluyots 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 MMPCIs 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. Linsangans 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 latters breach of their separate agreement. To
review, Baluyot obligated herself to pay P1,455.00 in addition to Atty.
Linsangans 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 Baluyots 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.

PUNO, J., Chairman,

AUSTRIA-MARTINEZ,
- versus -

TINGA, and
CHICONAZARIO, JJ.

ROXAS ELECTRIC AND

Promulgated:

CONSTRUCTION COMPANY, INC.,

Respondent.

August 12, 2004

x------------------------------------ --------------x

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.

CALLEJO, SR.,

DECISION

CALLEJO, SR., J.:

WOODCHILD HOLDINGS, INC.,

G.R. No. 140667

This is a petition for review on certiorari of the Decision [1] of the Court

Petitioner,

of Appeals in CA-G.R. CV No. 56125 reversing the Decision [2] of the Regional
Present:

Trial Court of Makati, Branch 57, which ruled in favor of the petitioner.

The Antecedents

The respondent Roxas Electric and Construction Company, Inc.

(RECCI), formerly the Roxas Electric and Construction Company, was
the owner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered
by Transfer Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2
covered by TCT No. 78086. A portion of Lot No. 491-A-3-B-1 which abutted
Lot No. 491-A-3-B-2 was a dirt road accessing to the Sumulong Highway,
Antipolo, Rizal.
At a special meeting on May 17, 1991, the respondents Board of
Directors approved a resolution authorizing the corporation, through its
president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 covered by TCT No.
78086, with an area of 7,213 square meters, at a price and under such terms
and conditions which he deemed most reasonable and advantageous to the
corporation; and to execute, sign and deliver the pertinent sales documents
and receive the proceeds of the sale for and on behalf of the company.[3]
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No.
491-A-3-B-2 covered by TCT No. 78086 on which it planned to construct its
warehouse building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1,
so that its 45-foot container van would be able to readily enter or leave the
property. In a Letter to Roxas dated June 21, 1991, WHI President Jonathan
Y. Dy offered to buy Lot No. 491-A-3-B-2 under stated terms and conditions
forP1,000 per square meter or at the price of P7,213,000.[4] One of the terms
incorporated in Dys offer was the following provision:

5.

This Offer to Purchase is made on the representation

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

The Vendor hereby undertakes and agrees, at its

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

Roxas indicated his acceptance of the offer on page 2 of the

deed. Less than a month later or on July 1, 1991, Roxas, as President of
RECCI, as vendor, and Dy, as President of WHI, as vendee, executed a
contract to sell in which RECCI bound and obliged itself to sell to Dy Lot No.
491-A-3-B-2 covered by TCT No. 78086 for P7,213,000.[6] On September 5,
1991, a Deed of Absolute Sale[7] in favor of WHI was issued, under which Lot
No. 491-A-3-B-2 covered by TCT No. 78086 was sold for P5,000,000, receipt
of which was acknowledged by Roxas under the following terms and
conditions:
The Vendor agree (sic), as it hereby agrees and
binds itself to give Vendee the beneficial use of and a right of
way from Sumulong Highway to the property herein
conveyed consists of 25 square meters wide to be used as
the latters egress from and ingress to and an additional 25
square meters in the corner of Lot No. 491-A-3-B-1, as
turning and/or maneuvering area for Vendees vehicles.
The Vendor agrees that in the event that the right of
way is insufficient for the Vendees use (ex entry of a 45-foot
container) the Vendor agrees to sell additional square
meters from its current adjacent property to allow the
Vendee full access and full use of the property.

On September 10, 1991, the Wimbeco Builders, Inc. (WBI) submitted

its quotation for P8,649,000 to WHI for the construction of the warehouse
building on a portion of the property with an area of 5,088 square meters.
[9]

WBI proposed to start the project on October 1, 1991 and to turn over the

building to WHI on February 29, 1992.[10]

In a Letter dated September 16, 1991, Ponderosa Leather Goods
Company, Inc. confirmed its lease agreement with WHI of a 5,000-squaremeter portion of the warehouse yet to be constructed at the rental rate of P65
per square meter. Ponderosa emphasized the need for the warehouse to be
ready

for

occupancy

before

April

1,

1992. [11] WHI

accepted

the

offer. However, WBI failed to commence the construction of the warehouse

in October 1, 1991 as planned because of the presence of squatters in the
property and suggested a renegotiation of the contract after the squatters

shall have been evicted.[12] Subsequently, the squatters were evicted from the

it. RECCI rejected the demand of WHI. WHI reiterated its demand in a

property.

Letter dated May 29, 1992. There was no response from RECCI.

On March 31, 1992, WHI and WBI executed a Letter-Contract for the
construction of the warehouse building for P11,804,160.[13] The contractor
started construction in April 1992 even before the building officials of Antipolo
City issued a building permit on May 28, 1992. After the warehouse was
finished, WHI issued on March 21, 1993 a certificate of occupancy by the
building official. Earlier, or on March 18, 1993, WHI, as lessor, and
Ponderosa, as lessee, executed a contract of lease over a portion of the
property for a monthly rental of P300,000 for a period of three years from
March 1, 1993 up to February 28, 1996.[14]
In the meantime, WHI complained to Roberto Roxas that the
vehicles of RECCI were parked on a portion of the property over which WHI
had been granted a right of way. Roxas promised to look into the matter. Dy
and Roxas discussed the need of the WHI to buy a 500-square-meter portion
of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as provided for in the
deed of absolute sale. However, Roxas died soon thereafter. On April 15,
1992, the WHI wrote the RECCI, reiterating its verbal requests to purchase a
portion of the said lot as provided for in the deed of absolute sale, and
complained about the latters failure to eject the squatters within the threemonth period agreed upon in the said deed.
The WHI demanded that the RECCI sell a portion of Lot No. 491-A3-B-1 covered by TCT No. 78085 for its beneficial use within 72 hours from
notice thereof, otherwise the appropriate action would be filed against

On June 17, 1992, the WHI filed a complaint against the RECCI with
the Regional Trial Court of Makati, for specific performance and damages,
and alleged, inter alia, the following in its complaint:
5.
The current adjacent property referred to in
the aforequoted paragraph of the Deed of Absolute Sale
pertains to the property covered by Transfer Certificate of
Title No. N-78085 of the Registry of Deeds of Antipolo, Rizal,
registered in the name of herein defendant Roxas Electric.
6.
Defendant Roxas Electric in patent violation
of the express and valid terms of the Deed of Absolute Sale
unjustifiably refused to deliver to Woodchild Holdings the
stipulated beneficial use and right of way consisting of 25
square meters and 55 square meters to the prejudice of the
plaintiff.
7.
Similarly, in as much as the 25 square meters
and 55 square meters alloted to Woodchild Holdings for its
beneficial use is inadequate as turning and/or maneuvering
area of its 45-foot container van, Woodchild Holdings
manifested its intention pursuant to para. 5 of the Deed of
Sale to purchase additional square meters from Roxas
Electric to allow it full access and use of the purchased
property, however, Roxas Electric refused and failed to merit
Woodchild Holdings request contrary to defendant Roxas
Electrics obligation under the Deed of Absolute Sale (Annex
A).
8.
Moreover, defendant, likewise, failed to eject
all existing squatters and occupants of the premises within
the stipulated time frame and as a consequence thereof,
plaintiffs planned construction has been considerably
delayed for seven (7) months due to the squatters who
continue to trespass and obstruct the subject property,
thereby Woodchild Holdings incurred substantial losses
amounting to P3,560,000.00 occasioned by the increased
cost of construction materials and labor.

ofP300,000.00 a month or P2,100,000.00 supposed income

from rentals of the subject property for seven (7) months.
10.
On April 15, 1992, Woodchild Holdings made
a final demand to Roxas Electric to comply with its
obligations and warranties under the Deed of Absolute Sale
but notwithstanding such demand, defendant Roxas Electric
refused and failed and continue to refuse and fail to heed
plaintiffs demand for compliance.
Copy of the demand letter dated April 15, 1992 is
hereto attached as Annex B and made an integral part
hereof.
11.
Finally, on 29 May 1991, Woodchild Holdings
made a letter request addressed to Roxas Electric to
particularly annotate on Transfer Certificate of Title No. N78085 the agreement under Annex A with respect to the
beneficial use and right of way, however, Roxas Electric
unjustifiably ignored and disregarded the same.
Copy of the letter request dated 29 May 1992 is
hereto attached as Annex C and made an integral part
hereof.
12.
By reason of Roxas Electrics continuous
refusal and failure to comply with Woodchild Holdings valid
demand for compliance under Annex A, the latter was
constrained to litigate, thereby incurring damages as and by
way of attorneys fees in the amount of P100,000.00 plus
costs of suit and expenses of litigation.[15]

The WHI prayed that, after due proceedings, judgment be rendered

in its favor, thus:
WHEREFORE, it is respectfully prayed that judgment
be rendered in favor of Woodchild Holdings and ordering
Roxas Electric the following:
a)

9.
Owing further to Roxas Electrics deliberate
refusal to comply with its obligation under Annex A,
Woodchild
Holdings
suffered
unrealized
income

to deliver to Woodchild Holdings the

beneficial use of the stipulated 25
square meters and 55 square meters;

b)

c)

d)

to sell to Woodchild Holdings additional

25 and 100 square meters to allow it
full access and use of the purchased
property pursuant to para. 5 of the
Deed of Absolute Sale;
to cause annotation on Transfer
Certificate of Title No. N-78085 the
beneficial use and right of way granted
to Woodchild Holdings under the Deed
of Absolute Sale;
to pay Woodchild Holdings the amount
of P5,660,000.00, representing actual
damages and unrealized income;

e)

to pay attorneys fees in the amount

of P100,000.00; and

f)

to pay the costs of suit.

Other reliefs just and equitable are prayed for.[16]

In its answer to the complaint, the RECCI alleged that it never

authorized its former president, Roberto Roxas, to grant the beneficial use of
any portion of Lot No. 491-A-3-B-1, nor agreed to sell any portion thereof or
create a lien or burden thereon. It alleged that, under the Resolution
approved on May 17, 1991, it merely authorized Roxas to sell Lot No. 491-A3-B-2 covered by TCT No. 78086. As such, the grant of a right of way and
the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No.
78085 in the said deed are ultra vires. The RECCI further alleged that the
provision therein that it would sell a portion of Lot No. 491-A-3-B-1 to the
WHI lacked the essential elements of a binding contract. [17]

In its amended answer to the complaint, the RECCI alleged that the
delay in the construction of its warehouse building was due to the failure of
the WHIs contractor to secure a building permit thereon. [18]
During the trial, Dy testified that he told Roxas that the petitioner was
buying a portion of Lot No. 491-A-3-B-1 consisting of an area of 500 square
meters, for the price of P1,000 per square meter.
On November 11, 1996, the trial court rendered judgment in favor of
the WHI, the decretal portion of which reads:
WHEREFORE,
directing defendant:

judgment

is

hereby

rendered

(1)
To allow plaintiff the beneficial use of the
existing right of way plus the stipulated 25 sq. m. and 55 sq.
m.;
(2)
To sell to plaintiff an additional area of 500
sq. m. priced at P1,000 per sq. m. to allow said plaintiff full
access and use of the purchased property pursuant to Par. 5
of their Deed of Absolute Sale;
(3)
To cause annotation on TCT No. N-78085 the
beneficial use and right of way granted by their Deed of
Absolute Sale;
(4)
To pay plaintiff the amount of P5,568,000
representing actual damages and plaintiffs unrealized
income;
(5)
To pay
attorneys fees; and

plaintiff P100,000

To pay the costs of suit.

SO ORDERED.[19]

representing

The trial court ruled that the RECCI was estopped from disowning
the apparent authority of Roxas under the May 17, 1991 Resolution of its
Board of Directors. The court reasoned that to do so would prejudice the
WHI which transacted with Roxas in good faith, believing that he had the
authority to bind the WHI relating to the easement of right of way, as well as
the right to purchase a portion of Lot No. 491-A-3-B-1 covered by TCT No.
78085.
The RECCI appealed the decision to the CA, which rendered a
decision on November 9, 1999 reversing that of the trial court, and ordering
the dismissal of the complaint. The CA ruled that, under the resolution of the
Board of Directors of the RECCI, Roxas was merely authorized to sell Lot
No. 491-A-3-B-2 covered by TCT No. 78086, but not to grant right of way in
favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to grant an option
to the petitioner to buy a portion thereof. The appellate court also ruled that
the grant of a right of way and an option to the respondent were so lopsided
in favor of the respondent because the latter was authorized to fix the
location as well as the price of the portion of its property to be sold to the
respondent. Hence, such provisions contained in the deed of absolute sale
were not binding on the RECCI. The appellate court ruled that the delay in
the construction of WHIs warehouse was due to its fault.
The Present Petition

I.
THE COURT OF APPEALS ERRED IN HOLDING THAT
THE DEED OF ABSOLUTE SALE (EXH. C) IS ULTRA
VIRES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE RULING OF THE COURT A
QUO ALLOWING
THE
PLAINTIFF-APPELLEE
THE
BENEFICIAL USE OF THE EXISTING RIGHT OF WAY
PLUS THE STIPULATED 25 SQUARE METERS AND 55
SQUARE METERS BECAUSE THESE ARE VALID
STIPULATIONS AGREED BY BOTH PARTIES TO THE
DEED OF ABSOLUTE SALE (EXH. C).
III.
THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE
COURT OF APPEALS TO RULE THAT THE STIPULATIONS
OF THE DEED OF ABSOLUTE SALE (EXH. C) WERE
DISADVANTAGEOUS TO THE APPELLEE, NOR WAS
APPELLEE DEPRIVED OF ITS PROPERTY WITHOUT
DUE PROCESS.
IV.
IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF
PROPERTY WITHOUT DUE PROCESS BY THE ASSAILED
DECISION.
V.
THE DELAY IN THE CONSTRUCTION WAS DUE TO THE
FAILURE OF THE APPELLANT TO EVICT THE
SQUATTERS ON THE LAND AS AGREED IN THE DEED
OF ABSOLUTE SALE (EXH. C).
VI.
THE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE RULING OF THE COURT A
QUO DIRECTING THE DEFENDANT TO PAY THE
PLAINTIFF
THE
AMOUNT
OF P5,568,000.00
REPRESENTING ACTUAL DAMAGES AND PLAINTIFFS
UNREALIZED INCOME AS WELL AS ATTORNEYS FEES.
[20]

The petitioner now comes to this Court asserting that:

The threshold issues for resolution are the following: (a) whether the

faith, and contends that after having been benefited by the said sale, the

respondent is bound by the provisions in the deed of absolute sale granting

respondent is estopped from assailing its terms and conditions. The

to the petitioner beneficial use and a right of way over a portion of Lot

No.

petitioner notes that the respondents Board of Directors never approved any

491-A-3-B-1 accessing to the Sumulong Highway and granting the option to

resolution rejecting the deed of absolute sale executed by Roxas for and in

the petitioner to buy a portion thereof, and, if so, whether such agreement is

its behalf. As such, the respondent is obliged to sell a portion of Lot No. 491-

enforceable against the respondent; (b) whether the respondent failed to

A-3-B-1 covered by TCT No. 78085 with an area of 500 square meters at the

eject the squatters on its property within two weeks from the execution of the

price of P1,000 per square meter, based on its evidence and Articles 649 and

deed of absolute sale; and, (c) whether the respondent is liable to the

651 of the New Civil Code.

petitioner for damages.

For its part, the respondent posits that Roxas was not so authorized
On the first issue, the petitioner avers that, under its Resolution of May

under the May 17, 1991 Resolution of its Board of Directors to impose a

17, 1991, the respondent authorized Roxas, then its president, to grant a

burden or to grant a right of way in favor of the petitioner on Lot No. 491-A-3-

right of way over a portion of Lot No. 491-A-3-B-1 in favor of the petitioner,

B-1, much less convey a portion thereof to the petitioner. Hence, the

and an option for the respondent to buy a portion of the said property. The

respondent was not bound by such provisions contained in the deed of

petitioner contends that when the respondent sold Lot No. 491-A-3-B-2

absolute sale. Besides, the respondent contends, the petitioner cannot

covered by TCT No. 78086, it (respondent) was well aware of its obligation to

enforce its right to buy a portion of the said property since there was no

provide the petitioner with a means of ingress to or egress from the property

agreement in the deed of absolute sale on the price thereof as well as the

to the Sumulong Highway, since the latter had no adequate outlet to the

specific portion and area to be purchased by the petitioner.

public highway. The petitioner asserts that it agreed to buy the property
We agree with the respondent.

covered by TCT No. 78085 because of the grant by the respondent of a right
of way and an option in its favor to buy a portion of the property covered by
TCT No. 78085. It contends that the respondent never objected to Roxas
acceptance of its offer to purchase the property and the terms and conditions
therein; the respondent even allowed Roxas to execute the deed of absolute
sale in its behalf. The petitioner asserts that the respondent even received
the purchase price of the property without any objection to the terms and
conditions of the said deed of sale. The petitioner claims that it acted in good

In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,

[21]

we held that:
A corporation is a juridical person separate and
distinct from its stockholders or members. Accordingly, the
property of the corporation is not the property of its
stockholders or members and may not be sold by the
stockholders or members without express authorization from
the corporations board of directors. Section 23 of BP 68,
otherwise known as the Corporation Code of the Philippines,
provides:

SEC. 23. The Board of Directors or

Trustees. Unless otherwise provided in
this Code, the corporate powers of all
corporations formed under this Code shall
be exercised, all business conducted and all
property of such corporations controlled and
held by the board of directors or trustees to
be elected from among the holders of
stocks, or where there is no stock, from
among the members of the corporation, who
shall hold office for one (1) year and until
their successors are elected and qualified.
Indubitably, a corporation may act only through its
board of directors or, when authorized either by its by-laws
or by its board resolution, through its officers or agents in the
normal course of business. The general principles of agency
govern the relation between the corporation and its officers
or agents, subject to the articles of incorporation, by-laws, or
relevant provisions of law. [22]

Generally, the acts of the corporate officers within the scope of their
authority are binding on the corporation. However, under Article 1910 of the
New Civil Code, acts done by such officers beyond the scope of their
authority cannot bind the corporation unless it has ratified such acts
expressly or tacitly, or is estopped from denying them:
Art. 1910. The principal must comply with all the
obligations which the agent may have contracted within the
scope of his authority.
As for any obligation wherein the agent has
exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly.

In BA Finance Corporation v. Court of Appeals,[24] we also ruled that

persons dealing with an assumed agency, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature
and extent of authority, and in case either is controverted, the burden of proof
is upon them to establish it.
In this case, the respondent denied authorizing its then president
Roberto B. Roxas to sell a portion of Lot No. 491-A-3-B-1 covered by TCT
No. 78085, and to create a lien or burden thereon. The petitioner was thus
burdened to prove that the respondent so authorized Roxas to sell the same
and to create a lien thereon.
Central to the issue at hand is the May 17, 1991 Resolution of the
Board of Directors of the respondent, which is worded as follows:
RESOLVED, as it is hereby resolved, that the
corporation, thru the President, sell to any interested buyer,
its 7,213-sq.-meter property at the Sumulong Highway,
Antipolo, Rizal, covered by Transfer Certificate of Title No. N78086, at a price and on terms and conditions which he
deems most reasonable and advantageous to the
corporation;
FURTHER RESOLVED, that Mr. ROBERTO B.
ROXAS, President of the corporation, be, as he is hereby
authorized to execute, sign and deliver the pertinent sales
documents and receive the proceeds of sale for and on
behalf of the company.[25]

Thus, contracts entered into by corporate officers beyond the scope

Evidently, Roxas was not specifically authorized under the said

of authority are unenforceable against the corporation unless ratified by the

resolution to grant a right of way in favor of the petitioner on a portion of Lot

corporation.[23]

No. 491-A-3-B-1 or to agree to sell to the petitioner a portion thereof. The

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

Powers of attorney are generally construed strictly and courts will not

acts or conduct on the part of the principal and such acts or conduct of the

infer or presume broad powers from deeds which do not sufficiently include

principal must have been known and relied upon in good faith and as a result

property or subject under which the agent is to deal. [29] The general rule

of the exercise of reasonable prudence by a third person as claimant and

is that the power of attorney must be pursued within legal strictures, and the

such must have produced a change of position to its detriment. The

agent can neither go beyond it; nor beside it. The act done must be legally

apparent power of an agent is to be determined by the acts of the principal

identical with that authorized to be done.[30] In sum, then, the consent of the

and not by the acts of the agent.[33]

respondent to the assailed provisions in the deed of absolute sale was not
obtained; hence, the assailed provisions are not binding on it.

For the principle of apparent authority to apply, the petitioner was

burdened to prove the following: (a) the acts of the respondent justifying

We reject the petitioners submission that, in allowing Roxas to

belief in the agency by the petitioner; (b) knowledge thereof by the

execute the contract to sell and the deed of absolute sale and failing to reject

respondent which is sought to be held; and, (c) reliance thereon by the

or disapprove the same, the respondent thereby gave him apparent authority

petitioner consistent with ordinary care and prudence. [34] In this case, there is

to grant a right of way over Lot No. 491-A-3-B-1 and to grant an option for the

no evidence on record of specific acts made by the respondent [35] showing or

respondent to sell a portion thereof to the petitioner. Absent estoppel or

indicating that it had full knowledge of any representations made by Roxas to

ratification, apparent authority cannot remedy the lack of the written power

the petitioner that the respondent had authorized him to grant to the

required under the statement of frauds.[31] In addition, the petitioners fallacy

respondent an option to buy a portion of Lot No. 491-A-3-B-1 covered by

is its wrong assumption of the unproved premise that the respondent had full

TCT No. 78085, or to create a burden or lien thereon, or that the respondent

knowledge of all the terms and conditions contained in the deed of absolute

allowed him to do so.

sale when Roxas executed it.

The

petitioners

contention

that

by

receiving

and

retaining

It bears stressing that apparent authority is based on estoppel and

the P5,000,000 purchase price of Lot No. 491-A-3-B-2, the respondent

can arise from two instances: first, the principal may knowingly permit the

effectively and impliedly ratified the grant of a right of way on the adjacent lot,

agent to so hold himself out as having such authority, and in this way, the

Lot No. 491-A-3-B-1, and to grant to the petitioner an option to sell a portion

principal becomes estopped to claim that the agent does not have such

thereof, is barren of merit. It bears stressing that the respondent sold Lot No.

authority; second, the principal may so clothe the agent with the indicia of

491-A-3-B-2 to the petitioner, and the latter had taken possession of the

authority as to lead a reasonably prudent person to believe that he actually

property. As such, the respondent had the right to retain the P5,000,000, the

has such authority.[32] There can be no apparent authority of an agent without

purchase price of the property it had sold to the petitioner. For an act of the

principal to be considered as an implied ratification of an unauthorized act of

premises. It was only after receiving the said letter in April 1992 that the

an agent, such act must be inconsistent with any other hypothesis than that

respondent caused the eviction of the squatters, which thus cleared the way

he approved and intended to adopt what had been done in his name.

for the petitioners contractor to commence the construction of its warehouse

[36]

and secure the appropriate building permit therefor.

Ratification is based on waiver the intentional relinquishment of a

known right. Ratification cannot be inferred from acts that a principal has a
The petitioner could not be expected to file its application for a

right to do independently of the unauthorized act of the agent. Moreover, if a

writing is required to grant an authority to do a particular act, ratification of
that act must also be in writing. [37] Since the respondent had not ratified the
unauthorized acts of Roxas, the same are unenforceable. [38] Hence, by the
respondents retention of the amount, it cannot thereby be implied that it had
ratified the unauthorized acts of its agent, Roberto Roxas.

building permit before April 1992 because the squatters were still occupying
the property. Because of the respondents failure to cause their eviction as
agreed upon, the petitioners contractor failed to commence the construction
of the warehouse in October 1991 for the agreed price of P8,649,000. In the
meantime, costs of construction materials spiraled. Under the construction
contract entered into between the petitioner and the contractor, the petitioner

On the last issue, the petitioner contends that the CA erred in

was

obliged

to

pay P11,804,160,[39] including

the

additional

work

dismissing its complaint for damages against the respondent on its finding

costing P1,441,500, or a net increase of P1,712,980.[40] The respondent is

that the delay in the construction of its warehouse was due to its (petitioners)

liable for the difference between the original cost of construction and the

fault. The petitioner asserts that the CA should have affirmed the ruling of

increase thereon, conformably to Article 1170 of the New Civil Code, which

the trial court that the respondent failed to cause the eviction of the squatters

reads:

from the property on or before September 29, 1991; hence, was liable
for P5,660,000. The respondent, for its part, asserts that the delay in the
construction of the petitioners warehouse was due to its late filing of an
application for a building permit, only on May 28, 1992.
The petitioners contention is meritorious. The respondent does not
deny that it failed to cause the eviction of the squatters on or before
September 29, 1991. Indeed, the respondent does not deny the fact that
when the petitioner wrote the respondent demanding that the latter cause the
eviction of the squatters on April 15, 1992, the latter were still in the

Art. 1170. Those who in the performance of their

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

RURAL BANK OF MILAOR (CAMARINES SUR), petitioner,

vs.
FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIO,
FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON
OCFEMIA, respondents.
PANGANIBAN, J.:

The petitioner, likewise, lost the amount of P3,900,000 by way of

unearned income from the lease of the property to the Ponderosa Leather
Goods Company. The respondent is, thus, liable to the petitioner for the said
amount, under Articles 2200 and 2201 of the New Civil Code:
Art. 2200. Indemnification for damages shall
comprehend not only the value of the loss suffered, but also
that of the profits which the obligee failed to obtain.
Art. 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in good faith is
liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at
the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude,
the obligor shall be responsible for all damages which may
be reasonably attributed to the non-performance of the
obligation.

In sum, we affirm the trial courts award of damages and attorneys

fees to the petitioner.
IN LIGHT OF ALL THE FOREGOING, judgment is hereby

When a bank, by its acts and failure to act, has clearly clothed its manager
with apparent authority to sell an acquired asset in the normal course of
business, it is legally obliged to confirm the transaction by issuing a board
resolution to enable the buyers to register the property in their names. It has
a duty to perform necessary and lawful acts to enable the other parties to
enjoy all benefits of the contract which it had authorized.
The Case
Before this Court is a Petition for Review on Certiorari challenging the
December 18, 1998 Decision of the Court of Appeals 1 (CA) in CA-GR SP
No. 46246, which affirmed the May 20, 1997 Decision 2 of the Regional Trial
Court (RTC) of Naga City (Branch 28). The CA disposed as follows:
Wherefore, premises considered, the Judgment appealed from is
hereby AFFIRMED. Costs against the respondent-appellant. 3
The dispositive portion of the judgment affirmed by the CA ruled in this wise:
WHEREFORE, in view of all the foregoing findings, decision is
hereby rendered whereby the [petitioner] Rural Bank of Milaor
(Camarines Sur), Inc. through its Board of Directors is hereby
ordered to immediately issue a Board Resolution confirming the
Deed of Sale it executed in favor of Renato Ocfemia marked Exhibits
C, C-1 and C-2); to pay [respondents] the sum of FIVE HUNDRED
(P500.00) PESOS as actual damages; TEN THOUSAND
(P10,000.00) PESOS as attorney's fees; THIRTY THOUSAND
(P30,000.00) PESOS as moral damages; THIRTY THOUSAND
(P30,000.00) PESOS as exemplary damages; and to pay the costs. 4

rendered AFFIRMING the assailed Decision of the Court of Appeals WITH

MODIFICATION. The respondent is ordered to pay to the petitioner the
amount of P5,612,980 by way of actual damages and P100,000 by way of
attorneys fees. No costs.
SO ORDERED.

Also assailed is the February 26, 1999 CA Resolution 5 which denied

petitioner's Motion for Reconsideration.
The Facts

The trial court's summary of the undisputed facts was reproduced in the CA
Decision as follows:
This is an action for mandamus with damages. On April 10, 1996,
[herein petitioner] was declared in default on motion of the
[respondents] for failure to file an answer within the reglementaryperiod after it was duly served with summons. On April 26, 1996,
[herein petitioner] filed a motion to set aside the order of default with
objection thereto filed by [herein respondents].
On June 17, 1996, an order was issued denying [petitioner's] motion
to set aside the order of default. On July 10, 1996, the defendant
filed a motion for reconsideration of the order of June 17, 1996 with
objection thereto by [respondents]. On July 12, 1996, an order was
issued denying [petitioner's] motion for reconsideration. On July 31,
1996, [respondents] filed a motion to set case for hearing. A copy
thereof was duly furnished the [petitioner] but the latter did not file
any opposition and so [respondents] were allowed to present their
evidence ex-parte. A certiorari case was filed by the [petitioner] with
the Court of Appeals docketed as CA GR No. 41497-SP but the
petition was denied in a decision rendered on March 31, 1997 and
the same is now final.
The evidence presented by the [respondents] through the testimony
of Marife O. Nio, one of the [respondents] in this case, show[s] that
she is the daughter of Francisca Ocfemia, a co-[respondent] in this
case, and the late Renato Ocfemia who died on July 23, 1994. The
parents of her father, Renato Ocfemia, were Juanita Arellano
Ocfemia and Felicisimo Ocfemia. Her other co-[respondents]
Rowena O. Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and
Winston Ocfemia are her brothers and sisters.1wphi1.nt
Marife O. Nio knows the five (5) parcels of land described in
paragraph 6 of the petition which are located in Bombon, Camarines
Sur and that they are the ones possessing them which [were]
originally owned by her grandparents, Juanita Arellano Ocfemia and
Felicisimo Ocfemia. During the lifetime of her grandparents,
[respondents] mortgaged the said five (5) parcels of land and two (2)
others to the [petitioner] Rural Bank of Milaor as shown by the Deed
of Real Estate Mortgage (Exhs. A and A-1) and the Promissory Note
(Exh. B).
The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were
not able to redeem the mortgaged properties consisting of seven (7)
parcels of land and so the mortgage was foreclosed and thereafter

ownership thereof was transferred to the [petitioner] bank. Out of the

seven (7) parcels that were foreclosed, five (5) of them are in the
possession of the [respondents] because these five (5) parcels of
land described in paragraph 6 of the petition were sold by the
[petitioner] bank to the parents of Marife O. Nio as evidenced by a
Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).
The aforementioned five (5) parcels of land subject of the deed of
sale (Exh. C), have not been, however transferred in the name of the
parents of Merife O. Nio after they were sold to her parents by the
[petitioner] bank because according to the Assessor's Office the five
(5) parcels of land, subject of the sale, cannot be transferred in the
name of the buyers as there is a need to have the document of sale
registered with the Register of Deeds of Camarines Sur.
In view of the foregoing, Marife O. Nio went to the Register of
Deeds of Camarines Sur with the Deed of Sale (Exh. C) in order to
have the same registered. The Register of Deeds, however, informed
her that the document of sale cannot be registered without a board
resolution of the [petitioner] Bank. Marife Nio then went to the bank,
showed to if the Deed of Sale (Exh. C), the tax declaration and
receipt of tax payments and requested the [petitioner] for a board
resolution so that the property can be transferred to the name of
Renato Ocfemia the husband of petitioner Francisca Ocfemia and
the father of the other [respondents] having died already.
The [petitioner] bank refused her request for a board resolution and
made many alibi[s]. She was told that the [petitioner] bank ha[d] a
new manager and it had no record of the sale. She was asked and
she complied with the request of the [petitioner] for a copy of the
deed of sale and receipt of payment. The president of the [petitioner]
bank told her to get an authority from her parents and other
[respondents] and receipts evidencing payment of the consideration
appearing in the deed of sale. She complied with said requirements
and after she gave all these documents, Marife O. Nio was again
told to wait for two (2) weeks because the [petitioner] bank would still
study the matter.
After two (2) weeks, Marife O. Nio returned to the [petitioner] bank
and she was told that the resolution of the board would not be
released because the [petitioner] bank ha[d] no records from the old
manager. Because of this, Marife O. Nio brought the matter to her
lawyer and the latter wrote a letter on December 22, 1995 to the
[petitioner] bank inquiring why no action was taken by the board of
the request for the issuance of the resolution considering that the

bank was already fully paid [for] the consideration of the sale since
January 1988 as shown by the deed of sale itself (Exh. D and D-1 ).

The trial court granted the Petition. As noted earlier, the CA affirmed the RTC
Decision.

On January 15, 1996 the [petitioner] bank answered [respondents']

lawyer's letter (Exh. D and D-1) informing the latter that the request
for board resolution ha[d] already been referred to the board of
directors of the [petitioner] bank with another request that the latter
should be furnished with a certified machine copy of the receipt of
payment covering the sale between the [respondents] and the
[petitioner] (Exh. E). This request of the [petitioner] bank was already
complied [with] by Marife O. Nio even before she brought the matter
to her lawyer.

Hence, this recourse. 7 In a Resolution dated June 23, 1999, this Court
issued a Temporary Restraining Order directing the trial court "to refrain and
desist from executing [pending appeal] the decision dated May 20, 1997 in
Civil Case No. RTC-96-3513, effective immediately until further orders from
this Court." 8

On January 23, 1996 [respondents'] lawyer wrote back the branch

manager of the [petitioner] bank informing the latter that they were
already furnished the receipts the bank was asking [for] and that the
[respondents] want[ed] already to know the stand of the bank
whether the board [would] issue the required board resolution as the
deed of sale itself already show[ed] that the [respondents were]
clearly entitled to the land subject of the sale (Exh. F). The manager
of the [petitioner] bank received the letter which was served
personally to him and the latter told Marife O. Nio that since he was
the one himself who received the letter he would not sign anymore a
copy showing him as having already received said letter (Exh. F).
After several days from receipt of the letter (Exh. F) when Marife O.
Nio went to the [petitioner] again and reiterated her request, the
manager of the [petitioner] bank told her that they could not issue the
required board resolution as the [petitioner] bank ha[d] no records of
the sale. Because of this Merife O. Nio already went to their lawyer
and ha[d] this petition filed.

Ruling of the Court of Appeals

The CA held that herein respondents were "able to prove their present cause
of action" against petitioner. It ruled that the RTC had jurisdiction over the
case, because (1) the Petition involved a matter incapable of pecuniary
estimation; (2) mandamus fell within the jurisdiction of RTC; and (3)
assuming that the action was for specific performance as argued by the
petitioner, it was still cognizable by the said court.
Issues
In its Memorandum, 9 the bank posed the following questions:
1. Question of Jurisdiction of the Regional Trial Court. Has a
Regional Trial Court original jurisdiction over an action involving title
to real property with a total assessed value of less than P20,000.00?
2. Question of Law. May the board of directors of a rural banking
corporation be compelled to confirm a deed of absolute sale of real
property owned by the corporation which deed of sale was executed
by the bank manager without prior authority of the board of directors
of the rural banking corporation? 10

The [respondents] are interested in having the property described in

paragraph 6 of the petition transferred to their names because their
mother and co-petitioner, Francisca Ocfemia, is very sickly and they
want to mortgage the property for the medical expenses of Francisca
Ocfemia. The illness of Francisca Ocfemia beg[a]n after her husband
died and her suffering from arthritis and pulmonary disease already
became serious before December 1995.

The present Petition has no merit.

Marife O. Nio declared that her mother is now in serious condition

and they could not have her hospitalized for treatment as they do not
have any money and this is causing the family sleepless nights and
mental anguish, thinking that their mother may die because they
could not submit her for medication as they do not have money. 6

Petitioner submits that the RTC had no jurisdiction over the case. Disputing
the ruling of the appellate court that the present action was incapable of
pecuniary estimation, petitioner argues that the matter in fact involved title to
real property worth less than P20,000. Thus, under RA 7691, the case should

This Court's Ruling

First Issue:
Jurisdiction of the Regional Trial Court

have been filed before a metropolitan trial court, a municipal trial court or a
municipal circuit trial court.
We disagree. The well-settled rule is that jurisdiction is determined by the
allegations of the complaint. 11 In the present case, the Petition for
Mandamus filed by respondents before the trial court prayed that petitionerbank be compelled to issue a board resolution confirming the Deed of Sale
covering five parcels of unregistered land, which the bank manager had
executed in their favor. The RTC has jurisdiction over such action pursuant to
Section 21 of BP 129, which provides:
Sec. 21. Original jurisdiction in other cases. Regional Trial Courts
shall exercise original jurisdiction;
(1) in the issuance of writ of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction which may be enforced in
any part of their respective regions; and
(2) In actions affecting ambassadors and other public ministers and
consuls.
A perusal of the Petition shows that the respondents did not raise any
question involving the title to the property, but merely asked that petitioner's
board of directors be directed to issue the subject resolution. Moreover, the
bank did not controvert the allegations in the said Petition. To repeat, the
issue therein was not the title to the property; it was respondents' right to
compel the bank to issue a board resolution confirming the Deed of Sale.
Second Issue:
Authority of the Bank Manager
Respondents initiated the present proceedings, so that they could transfer to
their names the subject five parcels of land; and subsequently, to mortgage
said lots and to use the loan proceeds for the medical expenses of their ailing
mother. For the property to be transferred in their names, however, the
register of deeds required the submission of a board resolution from the bank
confirming both the Deed of Sale and the authority of the bank manager, Fe
S. Tena, to enter into such transaction. Petitioner refused. After being given
the runaround by the bank, respondents sued in exasperation.
Allegations in the Petition for Mandamus Deemed Admitted
Respondents based their action before the trial court on the Deed of Sale,
the substance of which was alleged in and a copy thereof was attached to
the Petition for Mandamus. The Deed named Fe S. Tena as the

representative of the bank. Petitioner, however, failed to specifically deny

under oath the allegations in that contract. In fact, it filed no answer at all, for
which reason it was declared in default. Pertinent provisions of the Rules of
Court read:
Sec. 7. Action or defense based on document. Whenever an
action or defense is based upon a written instrument or document,
the substance of such instrument or document shall be set forth in
the pleading, and the original or a copy thereof shall be attached to
the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the
pleading.
Sec. 8. How to contest genuineness of such documents. When an
action or defense is founded upon a written instrument, copied in or
attached to the corresponding pleading as provided in the preceding
section, the genuineness and due execution of the instrument shall
be deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be the
facts; but this provision does not apply when the adverse party does
not appear to be a party to the instrument or when compliance with
an order for an inspection of the original instrument is refused. 12
In failing to file its answer specifically denying under oath the Deed of Sale,
the bank admitted the due execution of the said contract. Such admission
means that it acknowledged that Tena was authorized to sign the Deed of
Sale on its behalf. 13 Thus, defenses that are inconsistent with the due
execution and the genuineness of the written instrument are cut off by an
admission implied from a failure to make a verified specific denial.
Other Acts of the Bank
In any event, the bank acknowledged, by its own acts or failure to act, the
authority of Fe S. Tena to enter into binding contracts. After the execution of
the Deed of Sale, respondents occupied the properties in dispute and paid
the real estate taxes due thereon. If the bank management believed that it
had title to the property, it should have taken some measures to prevent the
infringement or invasion of its title thereto and possession thereof.
Likewise, Tena had previously transacted business on behalf of the bank,
and the latter had acknowledged her authority. A bank is liable to innocent
third persons where representation is made in the course of its normal
business by an agent like Manager Tena, even though such agent is abusing
her authority. 14 Clearly, persons dealing with her could not be blamed for

believing that she was authorized to transact business for and on behalf of
the bank. Thus, this Court has ruled in Board of Liquidators v. Kalaw: 15

fixed upon it by its agents in accordance with law; and we

would be sorry to announce a doctrine which would permit
the property of man in the city of Paris to be whisked out of
his hands and carried into a remote quarter of the earth
without recourse against the corporation whose name and
authority had been used in the manner disclosed in this
case. As already observed, it is familiar doctrine that if a
corporation knowingly permits one of its officers, or any other
agent, to do acts within the scope of an apparent authority,
and thus holds him out to the public as possessing power to
do those acts, the corporation will, as against any one who
has in good faith dealt with the corporation through such
agent, be estopped from denying his authority; and where it
is said "if the corporation permits this means the same as "if
the thing is permitted by the directing power of the
corporation." 16

Settled jurisprudence has it that where similar acts have been

approved by the directors as a matter of general practice, custom,
and policy, the general manager may bind the company without
formal authorization of the board of directors. In varying language,
existence of such authority is established, by proof of the course of
business, the usages and practices of the company and by the
knowledge which the board of directors has, or must be presumed to
have, of acts and doings of its subordinates in and about the affairs
of the corporation. So also,
. . . authority to act for and bind a corporation may be presumed from
acts of recognition in other instances where the power was in fact
exercised.
. . . Thus, when, in the usual course of business of a corporation, an
officer has been allowed in his official capacity to manage its affairs,
his authority to represent the corporation may be implied from the
manner in which he has been permitted by the directors to manage
its business.
Notwithstanding the putative authority of the manager to bind the bank in the
Deed of Sale, petitioner has failed to file an answer to the Petition below
within the reglementary period, let alone present evidence controverting such
authority. Indeed, when one of herein respondents, Marife S. Nino, went to
the bank to ask for the board resolution, she was merely told to bring the
receipts. The bank failed to categorically declare that Tena had no authority.
This Court stresses the following:
. . . Corporate transactions would speedily come to a standstill were
every person dealing with a corporation held duty-bound to
disbelieve every act of its responsible officers, no matter how regular
they should appear on their face. This Court has observed
in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that
In passing upon the liability of a corporation in cases of this
kind it is always well to keep in mind the situation as it
presents itself to the third party with whom the contract is
made. Naturally he can have little or no information as to
what occurs in corporate meetings; and he must necessarily
rely upon the external manifestation of corporate consent.
The integrity of commercial transactions can only be
maintained by holding the corporation strictly to the liability

In this light, the bank is estopped from questioning the authority of the bank
manager to enter into the contract of sale. If a corporation knowingly permits
one of its officers or any other agent to act within the scope of an apparent
authority, it holds the agent out to the public as possessing the power to do
those acts; thus, the corporation will, as against anyone who has in good
faith dealt with it through such agent, be estopped from denying the agent's
authority. 17
Unquestionably, petitioner has authorized Tena to enter into the Deed of
Sale. Accordingly, it has a clear legal duty to issue the board resolution
sought by respondent's. Having authorized her to sell the property, it
behooves the bank to confirm the Deed of Sale so that the buyers may enjoy
its full use.
The board resolution is, in fact, mere paper work. Nonetheless, it is paper
work necessary in the orderly operations of the register of deeds and the full
enjoyment of respondents' rights. Petitioner-bank persistently and
unjustifiably refused to perform its legal duty. Worse, it was less than candid
in dealing with respondents regarding this matter. In this light, the Court finds
it proper to assess the bank treble costs, in addition to the award of
damages.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision and
Resolution AFFIRMED. The Temporary Restraining Order issued by this
Court is hereby LIFTED. Treble costs against petitioner.
SO ORDERED.

KUE CUISON, doing business under the firm name and style"KUE
CUISON PAPER SUPPLY," petitioner,
vs.
THE COURT OF APPEALS, VALIANT INVESTMENT
ASSOCIATES, respondents.
Leighton R. Siazon for petitioner.
Melanio L. Zoreta for private respondent.

BIDIN, J.:
This petition for review assails the decision of the respondent Court of
Appeals ordering petitioner to pay private respondent, among others, the
sum of P297,482.30 with interest. Said decision reversed the appealed
decision of the trial court rendered in favor of petitioner.
The case involves an action for a sum of money filed by respondent against
petitioner anchored on the following antecedent facts:
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and
sale of newsprint, bond paper and scrap, with places of business at Baesa,
Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant
Investment Associates, on the other hand, is a partnership duly organized
and existing under the laws of the Philippines with business address at
Kalookan City.
From December 4, 1979 to February 15, 1980, private respondent delivered
various kinds of paper products amounting to P297,487.30 to a certain Lilian
Tan of LT Trading. The deliveries were made by respondent pursuant to
orders allegedly placed by Tiu Huy Tiac who was then employed in the
Binondo office of petitioner. It was likewise pursuant to Tiac's instructions that
the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid
for the merchandise by issuing several checks payable to cash at the specific
request of Tiu Huy Tiac. In turn, Tiac issued nine (9) postdated checks to
private respondent as payment for the paper products. Unfortunately, sad
checks were later dishonored by the drawee bank.
Thereafter, private respondent made several demands upon petitioner to pay
for the merchandise in question, claiming that Tiu Huy Tiac was duly
authorized by petitioner as the manager of his Binondo office, to enter into
the questioned transactions with private respondent and Lilian Tan. Petitioner
denied any involvement in the transaction entered into by Tiu Huy Tiac and

refused to pay private respondent the amount corresponding to the selling

price of the subject merchandise.
Left with no recourse, private respondent filed an action against petitioner for
the collection of P297,487.30 representing the price of the merchandise.
After due hearing, the trial court dismissed the complaint against petitioner
for lack of merit. On appeal, however, the decision of the trial court was
modified, but was in effect reversed by the Court of Appeals, the dispositive
portion of which reads:
WHEREFORE, the decision appealed from is MODIFIED in
that defendant-appellant Kue Cuison is hereby ordered to
pay plaintiff-appellant Valiant Investment Associates the sum
of P297,487.30 with 12% interest from the filing of the
complaint until the amount is fully paid, plus the sum of 7%
of the total amount due as attorney's fees, and to pay the
costs. In all other respects, the decision appealed from is
affirmed. (Rollo, p. 55)
In this petition, petitioner contends that:
THE HONORABLE COURT ERRED IN FINDING TIU HUY
TIAC AGENT OF DEFENDANT-APPELLANT CONTRARY
TO THE UNDISPUTED/ESTABLISHED FACTS AND
CIRCUMSTANCES.
THE HONORABLE COURT ERRED IN FINDING
DEFENDANT-APPELLANT LIABLE FOR AN OBLIGATION
UNDISPUTEDLY BELONGING TO TIU HUY TIAC.
THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDED
DECISION OF THE TRIAL COURT, (Rollo, p, 19)
The issue here is really quite simple whether or not Tiu Huy Tiac
possessed the required authority from petitioner sufficient to hold the latter
liable for the disputed transaction.
This petition ought to have been denied outright, forin the final analysis, it
raises a factual issue. It is elementary that in petitions for review under Rule
45, this Court only passes upon questions of law. An exception thereto
occurs where the findings of fact of the Court of Appeals are at variance with
the trial court, in which case the Court reviews the evidence in order to arrive
at the correct findings based on the records.

As to the merits of the case, it is a well-established rule that one who clothes
another with apparent authority as his agent and holds him out to the public
as such cannot be permitted to deny the authority of such person to act as
his agent, to the prejudice of innocent third parties dealing with such person
in good faith and in the honest belief that he is what he appears to be
(Macke, et al, v. Camps, 7 Phil. 553 (1907]; Philippine National Bank. v Court
of Appeals, 94 SCRA 357 [1979]). From the facts and the evidence on
record, there is no doubt that this rule obtains. The petition must therefore
fail.
It is evident from the records that by his own acts and admission, petitioner
held out Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo,
Binondo, Manila. More particularly, petitioner explicitly introduced Tiu Huy
Tiac to Bernardino Villanueva, respondent's manager, as his (petitioner's)
branch manager as testified to by Bernardino Villanueva. Secondly, Lilian
Tan, who has been doing business with petitioner for quite a while, also
testified that she knew Tiu Huy Tiac to be the manager of petitioner's Sto.
Cristo, Binondo branch. This general perception of Tiu Huy Tiac as the
manager of petitioner's Sto. Cristo store is even made manifest by the fact
that Tiu Huy Tiac is known in the community to be the "kinakapatid"
(godbrother) of petitioner. In fact, even petitioner admitted his close
relationship with Tiu Huy Tiac when he said that they are "like brothers"
(Rollo, p. 54). There was thus no reason for anybody especially those
transacting business with petitioner to even doubt the authority of Tiu Huy
Tiac as his manager in the Sto. Cristo Binondo branch.
In a futile attempt to discredit Villanueva, petitioner alleges that the former's
testimony is clearly self-serving inasmuch as Villanueva worked for private
respondent as its manager.
We disagree, The argument that Villanueva's testimony is self-serving and
therefore inadmissible on the lame excuse of his employment with private
respondent utterly misconstrues the nature of "'self-serving evidence" and
the specific ground for its exclusion. As pointed out by this Court in Co
v. Court of Appeals et, al., (99 SCRA 321 [1980]):
Self-serving evidence is evidence made by a party out of
court at one time; it does not include a party's testimony as a
witness in court. It is excluded on the same ground as any
hearsay evidence, that is the lack of opportunity for crossexamination by the adverse party, and on the consideration
that its admission would open the door to fraud and to
fabrication of testimony. On theother hand, a party's
testimony in court is sworn and affords the other party the
opportunity for cross-examination (emphasis supplied)

Petitioner cites Villanueva's failure, despite his commitment to do so on

cross-examination, to produce the very first invoice of the transaction
between petitioner and private respondent as another ground to discredit
Villanueva's testimony. Such failure, proves that Villanueva was not only
bluffing when he pretended that he can produce the invoice, but that
Villanueva was likewise prevaricating when he insisted that such prior
transactions actually took place. Petitioner is mistaken. In fact, it was
petitioner's counsel himself who withdrew the reservation to have Villanueva
produce the document in court. As aptly observed by the Court of Appeals in
its decision:
. . . However, during the hearing on March 3, 1981,
Villanueva failed to present the document adverted to
because defendant-appellant's counsel withdrew his
reservation to have the former (Villanueva) produce the
document or invoice, thus prompting plaintiff-appellant to rest
its case that same day (t.s.n., pp. 39-40, Sess. of March 3,
1981). Now, defendant-appellant assails the credibility of
Villanueva for having allegedly failed to produce even one
single document to show that plaintiff-appellant have had
transactions before, when in fact said failure of Villanueva to
produce said document is a direct off-shoot of the action of
defendant-appellant's counsel who withdrew his reservation
for the production of the document or invoice and which led
plaintiff-appellant to rest its case that very day. (Rollo, p.52)
In the same manner, petitioner assails the credibility of Lilian Tan by alleging
that Tan was part of an intricate plot to defraud him. However, petitioner
failed to substantiate or prove that the subject transaction was designed to
defraud him. Ironically, it was even the testimony of petitioner's daughter and
assistant manager Imelda Kue Cuison which confirmed the credibility of Tan
as a witness. On the witness stand, Imelda testified that she knew for a fact
that prior to the transaction in question, Tan regularly transacted business
with her father (petitioner herein), thereby corroborating Tan's testimony to
the same effect. As correctly found by the respondent court, there was no
logical explanation for Tan to impute liability upon petitioner. Rather, the
testimony of Imelda Kue Cuison only served to add credence to Tan's
testimony as regards the transaction, the liability for which petitioner wishes
to be absolved.
But of even greater weight than any of these testimonies, is petitioner's
categorical admission on the witness stand that Tiu Huy Tiac was the
manager of his store in Sto. Cristo, Binondo, to wit:
Court:

xxx xxx xxx

Q And who was managing the store in Sto.
Cristo?
A At first it was Mr. Ang, then later Mr. Tiu
Huy Tiac but I cannot remember the exact
year.
Q So, Mr. Tiu Huy Tiac took over the
management,.
A Not that was because every afternoon, I
was there, sir.
Q But in the morning, who takes charge?
A Tiu Huy Tiac takes charge of
management and if there (sic) orders for
newsprint or bond papers they are always
referred to the compound in Baesa, sir.
(t.s.n., p. 16, Session of January 20, 1981,
CA decision, Rollo, p. 50, emphasis
supplied).
Such admission, spontaneous no doubt, and standing alone, is sufficient to
negate all the denials made by petitioner regarding the capacity of Tiu Huy
Tiac to enter into the transaction in question. Furthermore, consistent with
and as an obvious indication of the fact that Tiu Huy Tiac was the manager of
the Sto. Cristo branch, three (3) months after Tiu Huy Tiac left petitioner's
employ, petitioner even sent, communications to its customers notifying them
that Tiu Huy Tiac is no longer connected with petitioner's business. Such
undertaking spoke unmistakenly of Tiu Huy Tiac's valuable position as
petitioner's manager than any uttered disclaimer. More than anything else,
this act taken together with the declaration of petitioner in open court amount
to admissions under Rule 130 Section 22 of the Rules of Court, to wit : "The
act, declaration or omission of a party as to a relevant fact may be given in
evidence against him." For well-settled is the rule that "a man's acts, conduct,
and declaration, wherever made, if voluntary, are admissible against him, for
the reason that it is fair to presume that they correspond with the truth, and it
is his fault if they do not. If a man's extrajudicial admissions are admissible
against him, there seems to be no reason why his admissions made in open
court, under oath, should not be accepted against him." (U.S. vs. Ching Po,
23 Phil. 578, 583 [1912];).

Moreover, petitioner's unexplained delay in disowning the transactions

entered into by Tiu Huy Tiac despite several attempts made by respondent to
collect the amount from him, proved all the more that petitioner was aware of
the questioned commission was tantamount to an admission by silence
under Rule 130 Section 23 of the Rules of Court, thus: "Any act or
declaration made in the presence of and within the observation of a party
who does or says nothing when the act or declaration is such as naturally to
call for action or comment if not true, may be given in evidence against him."
All of these point to the fact that at the time of the transaction Tiu Huy Tiac
was admittedly the manager of petitioner's store in Sto. Cristo, Binondo.
Consequently, the transaction in question as well as the concomitant
obligation is valid and binding upon petitioner.
By his representations, petitioner is now estopped from disclaiming liability
for the transaction entered by Tiu Huy Tiac on his behalf. It matters not
whether the representations are intentional or merely negligent so long as
innocent, third persons relied upon such representations in good faith and for
value As held in the case of Manila Remnant Co. Inc. v. Court of Appeals,
(191 SCRA 622 [1990]):
More in point, we find that by the principle of estoppel,
Manila Remnant is deemed to have allowed its agent to act
as though it had plenary powers. Article 1911 of the Civil
Code provides:
"Even when the agent has exceeded his
authority, the principal issolidarily liable with
the agent if the former allowed the latter to
act as though he had full powers."
(Emphasis supplied).
The above-quoted article is new. It is intended to protect the
rights of innocent persons. In such a situation, both the
principal and the agent may be considered as joint
tortfeasors whose liability is joint and solidary.
Authority by estoppel has arisen in the instant case because
by its negligence, the principal, Manila Remnant, has
permitted its agent, A.U. Valencia and Co., to exercise
powers not granted to it. That the principal might not have
had actual knowledge of theagent's misdeed is of no
moment.

Tiu Huy Tiac, therefore, by petitioner's own representations and

manifestations, became an agent of petitioner by estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon (Article 1431,
Civil Code of the Philippines). A party cannot be allowed to go back on his
own acts and representations to the prejudice of the other party who, in good
faith, relied upon them (Philippine National Bank v. Intermediate Appellate
Court, et al., 189 SCRA 680 [1990]).
Taken in this light,. petitioner is liable for the transaction entered into by Tiu
Huy Tiac on his behalf. Thus, even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if the former allowed
the latter to fact as though he had full powers (Article 1911 Civil Code), as in
the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal
(petitioner) in not turning over the proceeds of the transaction to the latter,
such fact cannot in any way relieve nor exonerate petitioner of his liability to
private respondent. For it is an equitable maxim that as between two
innocent parties, the one who made it possible for the wrong to be done
should be the one to bear the resulting loss (Francisco vs. Government
Service Insurance System, 7 SCRA 577 [1963]).

COUNTRY BANKERS
CORPORATION,
Petitioner,

G.R. No. 166044

Present:
- versus -

KEPPEL CEBU SHIPYARD, UNIMARINE

SHIPPING LINES, INC., PAUL RODRIGUEZ,
PETER
RODRIGUEZ,
ALBERT
HONTANOSAS, and BETHOVEN QUINAIN,
Respondents.

LEONARDO-DE CASTRO
Acting Chairperson,
BERSAMIN,
DEL CASTILLO,
VILLARAMA, JR., and
PERLAS-BERNABE,** JJ.
Promulgated:
June 18, 2012

x--------------------------------------------------x

Inasmuch as the fundamental issue of the capacity or incapacity of the

purported agent Tiu Huy Tiac, has already been resolved, the Court deems it
unnecessary to resolve the other peripheral issues raised by petitioner.
WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs
against petitioner.

INSURANCE

DECISION
LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari[1] to reverse and set aside

SO ORDERED.

the January 29, 2004 Decision[2] and October 28, 2004 Resolution[3] of the
Court of Appeals in CA-G.R. CV No. 58001, wherein the Court of Appeals
affirmed with modification the February 10, 1997 Decision [4] of the Regional
Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No. CBB-13447.
Hereunder are the undisputed facts as culled from the records of the
case.

2nd Installment

On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a

corporation engaged in the shipping industry, contracted the services of
Keppel Cebu Shipyard, formerly known as Cebu Shipyard and Engineering
Works, Inc. (Cebu Shipyard), for dry docking and ship repair works on its
vessel, the M/V Pacific Fortune.[5]
On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to
Unimarine

in

consideration

for

its

services,

which

amounted

P1,500,000.00

30 Jun 1992

Unimarine will deposit post-dated checks equivalent to the

above amounts in Philippine Peso and an additional check
amount of P385,000.00, representing 10% [Value Added
Tax] VAT on the above bill of P3,850,000.00. In the event
that Unimarine fails to make full payment on the above due
dates in US Dollars, the post-dated checks will be deposited
by CSEW in payment of the amounts owned by Unimarine
and Unimarine agree that the 10% VAT (P385,000.00) shall
also become payable to CSEW.

agreement were embodied in Cebu Shipyards February 18, 1992 letter to

Unimarine in consideration of the credit terms extended by

CSEW and the release of the vessel before full payment of
the above debt, agree to present CSEW surety bonds equal
to 120% of the value of the credit extended. The total bond
amount shall be P4,620,000.00.

the President/General Manager of Unimarine, Paul Rodriguez, who signed

Yours faithfully,

to P4,486,052.00.[6] Negotiations between Cebu Shipyard and Unimarine led

to the reduction of this amount to P3,850,000.00. The terms of this

his conformity to said letter, quoted in full below:

CEBU SHIPYARD & ENGG WORKS, INC

18 February 1992
Ref No.: LL92/0383
UNIMARINE SHIPPING LINES, INC.
C/O Autographics, Inc.
Gorordo Avenue, Lahug, Cebu City

(SGD)
SGD)______
SEET KENG TAT
RODRIGUEZ
Treasurer/VP-Admin.
ne Shipping

Attention:

Inc.[7]

Conforme:
(
PAUL
Unimari
Lines,

Mr. Paul Rodriguez

President/General Manager

This is to confirm our agreement on the shiprepair bills

charged for the repair of MV Pacific Fortune, our invoice no.
26035.

In compliance with the agreement, Unimarine, through Paul

Rodriguez, secured from Country Bankers Insurance Corp. (CBIC), through

The shiprepair bill (Bill No. 26035) is agreed at a negotiated

amount of P3,850,000.00 excluding VAT.

the latters agent, Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16)

Unimarine Shipping Lines, Inc. (Unimarine) will pay the

above amount of [P3,850,000.00] in US Dollars to be fixed at
the prevailing USDollar to Philippine Peso exchange rate at
the time of payment. The payment terms to be extended to
Unimarine is as follows:

of P3,000,000.00. The expiration of this surety bond was extended to

Installments
1st Installment

Amount
P2,350,000.00

Due Date
30 May 1992

29419[8] (the

surety

bond)

on

January

15,

1992

in

the

amount

January 15, 1993, through Endorsement No. 33152 [9] (the endorsement),
which was later on attached to and formed part of the surety bond. In
addition to this, Unimarine, on February 19, 1992, obtained another bond

from Plaridel Surety and Insurance Co. (Plaridel), PSIC Bond No. G (16)00365[10] in the amount of P1,620,000.00.

On June 24, 1992, Cebu Shipyard again faxed a message [14] to

Unimarine, to confirm Paul Rodriguezs promise that Unimarine will pay in full
theP3,850,000.00, in US Dollars on July 1, 1992.

On February 17, 1992, Unimarine executed a Contract of

Undertaking in favor of Cebu Shipyard. The pertinent portions of the contract
read as follows:

Since Unimarine failed to deliver on the above promise, Cebu

Shipyard, on July 2, 1992, through a faxed letter, asked Unimarine if the
payment could be picked up the next day. This was followed by another

Messrs, Uni-Marine Shipping Lines, Inc. (the Debtor) of

Gorordo Avenue, Cebu City hereby acknowledges that in
consideration of Cebu Shipyard & Engineering Works,
Inc. (Cebu Shipyard) at our request agreeing to release the
vessel specified in part A of the Schedule (name of vessel)
prior to the receipt of the sum specified in part B of the
Schedule (Moneys Payable) payable in respect of certain
works performed or to be performed by Cebu Shipyard
and/or its subcontractors and/or material and equipment
supplied or to be supplied by Cebu Shipyard and/or its
subcontractors in connection with the vessel for the party
specified in part C of the Schedule (the Debtor), we hereby
unconditionally, irrevocably undertake to make punctual
payment to Cebu Shipyard of the Moneys Payable on the
terms and conditions as set out in part B of the
Schedule. We likewise hereby expressly waive whatever
right of excussion we may have under the law and equity.
This contract shall be binding upon Uni-Marine Shipping
Lines, Inc., its heirs, executors, administrators, successors,
and assigns and shall not be discharged until all obligation of
this contract shall have been faithfully and fully performed by
the Debtor.[11]

faxed message on July 6, 1992, wherein Cebu Shipyard reminded Unimarine

of its promise to pay in full on July 28, 1992. On August 24, 1992, Cebu
Shipyard again faxed[15] Unimarine, to inform it that interest charges will have
to be imposed on their outstanding debt, and if it still fails to pay before
August 28, 1992, Cebu Shipyard will have to enforce payment against the
sureties and take legal action.
On November 18, 1992, Cebu Shipyard, through its counsel, sent
Unimarine a letter,[16] demanding payment, within seven days from receipt of
the letter, the amount of P4,859,458.00, broken down as follows:
B#26035 MV
FORTUNE
LESS: ADJUSTMENT:
CN#00515-03/19/92
52.00)

PACIFIC
4,486,052.00
(636,0
----------

-------3,850,0
Because Unimarine failed to remit the first installment when it became
due on May 30, 1992, Cebu Shipyard was constrained to deposit the peso
check corresponding to the initial installment of P2,350,000.00. The check,
however, was dishonored by the bank due to insufficient funds. [12] Cebu
Shipyard faxed a message to Unimarine, informing it of the situation, and
reminding it to settle its account immediately.[13]

00.00
Add:
26035

VAT

on
repair
385,000.00

bill

no.
----------

-------4,235,0
00.00
Add: Interest/penalty charges:
Debit
Note
02381
189,888.00

No.

Debit
02382

Note
434,570.00

No.

3.

----------

The issuance of the surety bond was not reported, and the
corresponding premiums were not remitted to CBIC. [22]

-------4,859,4
58.00[17]

CBIC added that its liability was extinguished when, without its
Due to Unimarines failure to heed Cebu Shipyards repeated
demands, Cebu Shipyard, through counsel, wrote the sureties CBIC [18] on
November 18, 1992, and Plaridel,[19] on November 19, 1992, to inform them
of Unimarines nonpayment, and to ask them to fulfill their obligations as
sureties, and to respond within seven days from receipt of the demand.

knowledge and consent, Cebu Shipyard and Unimarine novated their

agreement several times. Furthermore, CBIC stated that Cebu Shipyards
claim had already been paid or extinguished when Unimarine executed an
Assignment of Claims[23]of the proceeds of the sale of its vessel M/V Headline
in favor of Cebu Shipyard. CBIC also averred that Cebu Shipyards claim
had already prescribed as the endorsement that extended the surety bonds

However, even the sureties failed to discharge their obligations, and so

Cebu Shipyard filed a Complaint dated January 8, 1993, before the RTC,
Branch 18 of Cebu City, against Unimarine, CBIC, and Plaridel. This was
docketed as Civil Case No. CBB-13447.
CBIC, in its Answer,[20] said that Cebu Shipyards complaint states no
cause of action. CBIC alleged that the surety bond was issued by its agent,
Quinain, in excess of his authority. CBIC claimed that Cebu Shipyard should
have doubted the authority of Quinain to issue the surety bond based on the

expiry date, was not reported to CBIC. Finally, CBIC asseverated that if it
were held to be liable, its liability should be limited to the face value of the
bond and not for exemplary damages, attorneys fees, and costs of litigation.
[24]

Subsequently, CBIC filed a Motion to Admit Cross and Third Party

Complaint[25] against Unimarine, as cross defendant; Paul Rodriguez, Albert
Hontanosas, and Peter Rodriguez, as signatories to the Indemnity
Agreement they executed in favor of CBIC; and Bethoven Quinain, as the
agent who issued the surety bond and endorsement in excess of his

following:

authority, as third party defendants.[26]

1.

The nature of the bond undertaking (guarantee payment), and

the amount involved.

2.

The surety bond could only be issued in favor of the

Department of Public Works and Highways, as stamped on the
upper right portion of the face of the bond. [21] This stamp was
covered by documentary stamps.

CBIC claimed that Paul Rodriguez, Albert Hontanosas, and Peter

Rodriguez executed an Indemnity Agreement, wherein they bound
themselves, jointly and severally, to indemnify CBIC for any amount it may
sustain or incur in connection with the issuance of the surety bond and the
endorsement.[27] As for Quinain, CBIC alleged that he exceeded his authority

as stated in the Special Power of Attorney, wherein he was authorized to

Paul Rodriguez admitted that Unimarine failed to pay Cebu Shipyard

solicit business and issue surety bonds not exceeding P500,000.00 but only

for the repairs it did on M/V Pacific Fortune, despite the extensions granted

in favor of the Department of Public Works and Highways, National Power

to Unimarine. He claimed that he signed the Indemnity Agreement because

Corporation, and other government agencies.[28]

he trusted Quinain that it was a mere pre-requisite for the issuance of the
surety bond. He added that he did not bother to read the documents and he
was

On August 23, 1993, third party defendant Hontanosas filed his

Answer

with

Counterclaim,

to

the

Cross

and

Third

Party

Complaint. Hontanosas claimed that he had no financial interest in

Unimarine and was neither a stockholder, director nor an officer of

not

aware

of

the

consequences

of

signing

an

Indemnity

Agreement. Paul Rodriguez also alleged to not having noticed the limitation
Valid only in favor of DPWH stamped on the surety bond. [31] However, Paul
Rodriguez did not contradict the fact that Unimarine failed to pay Cebu
Shipyard its obligation.[32]

Unimarine. He asseverated that his relationship to Unimarine was limited to

his capacity as a lawyer, being its retained counsel. He further denied having
any participation in the Indemnity Agreement executed in favor of CBIC, and

CBIC presented Dakila Rianzares, the Senior Manager of its

alleged that his signature therein was forged, as he neither signed it nor

Bonding Department. Her duties included the evaluation and approval of all

appeared before the Notary Public who acknowledged such undertaking. [29]

applications for and reviews of bonds issued by their agents, as authorized

under the Special Power of Attorney and General Agency Contract of
CBIC. Rianzares testified that she only learned of the existence of CBIC

Various witnesses were presented by the parties during the course of

the trial of the case. Myrna Obrinaga testified for Cebu Shipyard. She was
the Chief Accountant in charge of the custody of the documents of the
company. She corroborated Cebu Shipyards allegations and produced in
court the documents to support Cebu Shipyards claim. She also testified
that while it was true that the proceeds of the sale of Unimarines vessel, M/V
Headline, were assigned to Cebu Shipyard, nothing was turned over to them.
[30]

Surety Bond No. G (16) 29419 when she received the summons for this
case. Upon investigation, she found out that the surety bond was not
reported to CBIC by Quinain, the issuing agent, in violation of their General
Agency Contract, which provides that all bonds issued by the agent be
reported to CBICs office within one week from the date of issuance. She
further stated that the surety bond issued in favor of Unimarine was issued
beyond Quinains authority. Rianzares added that she was not aware that an
endorsement pertaining to the surety bond was also issued by Quinain. [33]

After the trial, the RTC was faced with the lone issue of whether or

The RTC held that CBIC, in its capacity as surety is bound with its

not CBIC was liable to Cebu Shipyard based on Surety Bond No. G (16)

principal jointly and severally to the extent of the surety bond it issued in

29419.[34]

favor of [Cebu Shipyard] because although the contract of surety is in

essence secondary only to a valid principal obligation, his liability to [the]
creditor is said to be direct, primary[,] and absolute, in other words, he is

On February 10, 1997, the RTC rendered its Decision, the fallo of

bound by the principal.[36] The RTC added:

which reads:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff Cebu Shipyard & Engineering Works,
Incorporated and against the defendants:

1.
Ordering the defendants Unimarine Shipping
Lines, Incorporated, Country Bankers Insurance Corporation
and Plaridel Surety and Insurance Corporation to pay plaintiff
jointly and severally the amount of P4,620,000.00 equivalent
to the value of the surety bonds;

Solidary obligations on the part of Unimarine and

CBIC having been established and expressly stated in the
Surety Bond No. 29419 (Exh. C), [Cebu Shipyard],
therefore, is entitled to collect and enforce said obligation
against any and or both of them, and if and when CBIC
pays, it can compel its co-defendant Unimarine to reimburse
to it the amount it has paid.[37]

The RTC found CBICs contention that Quinain acted in excess of his
authority in issuing the surety bond untenable. The RTC held that CBIC is
bound by the surety bond issued by its agent who acted within the apparent

2.
Ordering further defendant Unimarine to pay
plaintiff the amount of P259,458.00 to complete its entire
obligation of P4,859,458.00;

3.
To pay plaintiff jointly and severally the amount
of P100,000.00 in attorneys fees and litigation expenses;

scope of his authority. The RTC said:

[A]s far as third persons are concerned, an act is deemed to
have been performed within the scope of the agents
authority, if such act is within the terms of the powers of
attorney as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding
between the principal and the agent.[38]

All the defendants appealed this Decision to the Court of Appeals.

4.
For Cross defendant Unimarine Shipping
Lines, Incorporated and Third party defendants Paul
Rodriguez, Peter Rodriguez and Alber[t] Hontanosas: To
indemnify jointly and severally, cross plaintiff and third party
plaintiff Country Bankers Insurance Corporation whatever
amount the latter is made to pay to plaintiff.[35]

Unimarine, Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas

argued that Unimarines obligation under Bill No. 26035 had been
extinguished by novation, as Cebu Shipyard had agreed to accept the
proceeds of the sale of the M/V Headline as payment for the ship repair
works it did on M/V Pacific Fortune. Paul Rodriguez and Peter Rodriguez

added that such novation also freed them from their liability under the
Indemnity Agreement they signed in favor of CBIC. Albert Hontanosas in

I.
Whether or not UNIMARINE is liable to [Cebu
Shipyard] for a sum of money arising from the ship-repair
contract;

turn reiterated that he did not sign the Indemnity Agreement. [39][SC1]
CBIC, in its Appellants Brief,[40] claimed that the RTC erred in
enforcing its liability on the surety bond as it was issued in excess of

II.
Whether or not the obligation of UNIMARINE to
[Cebu Shipyard] has been extinguished by novation;

Quinains authority. Moreover, CBIC averred, its liability under such surety
had

been

extinguished

by

reasons

of

novation,

payment,

and

prescription. CBIC also questioned the RTCs order, holding it jointly and
severally liable with Unimarine and Plaridel for the amount of P4,620,000.00,

III.
Whether or not Defendant-Appellant CBIC, allegedly
being the Surety of UNIMARINE is liable under Surety Bond
No. 29419[;]

a sum larger than the face value of CBIC Surety Bond No. G (16) 29419, and
why the RTC did not hold Quinain liable to indemnify CBIC for whatever
amount it was ordered to pay Cebu Shipyard.
On January 29, 2004, the Court of Appeals promulgated its decision,
with the following dispositive portion:
WHEREFORE, in view of the foregoing, the
respective appeal[s] filed by Defendants-Appellants
Unimarine Shipping Lines, Inc. and Country Bankers
Insurance
Corporation;
Cross-Defendant-Appellant
Unimarine Shipping Lines, Inc. and; Third-Party DefendantsAppellants Paul Rodriguez, Peter Rodriguez and Albert
Hontanosas are hereby DENIED. The decision of the RTC
in Civil Case No. CEB-13447 dated February 10, 1997
is AFFIRMED with modification that Mr. Bethoven Quinain,
CBICs agent is hereby held jointly and severally liable with
CBIC by virtue of Surety Bond No. 29419 executed in favor
of plaintiff-appellee CSEW.[41]

IV.
Whether
or
not
Cross
Defendant-Appellant
UNIMARINE and Third-Party Defendants-Appellants Paul
Rodriguez, Peter Rodriguez, Albert Hontanosas and ThirdParty Defendant Bethoven Quinain are liable by virtue of the
Indemnity Agreement executed between them and Cross
and Third Party Plaintiff CBIC;

V.
Whether or not Plaintiff-Appellee [Cebu Shipyard] is
entitled to the award of P100,000.00 in attorneys fees and
litigation expenses.[42]

The Court of Appeals held that it was duly proven that Unimarine
was liable to Cebu Shipyard for the ship repair works it did on the formers
M/V Pacific Fortune. The Court of Appeals dismissed CBICs contention of
novation for lack of merit. [43] CBIC was held liable under the surety bond as

In its decision, the Court of Appeals resolved the following issues, as it

had summarized from the parties pleadings:

there was no novation on the agreement between Unimarine and Cebu

Shipyard that would discharge CBIC from its obligation. The Court of
Appeals also did not allow CBIC to disclaim liability on the ground that
Quinain exceeded his authority because third persons had relied upon

Quinains representation, as CBICs agent. [44] Quinain was, however, held

solidarily liable with CBIC under Article 1911 of the Civil Code. [45]

1911 OF THE CIVIL CODE TO HOLD PETITIONER

LIABLE FOR THE ACTS DONE BY ITS AGENT IN
EXCESS OF AUTHORITY.
B.

Anent the liability of the signatories to the Indemnity Agreement, the

Court of Appeals held Paul Rodriguez, Peter Rodriguez, and Albert
Hontanosas jointly and severally liable thereunder. The Court of Appeals
rejected Hontanosass claim that his signature in the Indemnity Agreement
was forged, as he was not able to prove it.[46]

THE HONORABLE COURT OF APPEALS SERIOUSLY

ERRED IN HOLDING THAT AN EXTENSION OF THE
PERIOD FOR THE PERFORMANCE OF AN OBLIGATION
GRANTED BY THE CREDITOR TO THE PRINCIPAL
DEBTOR IS NOT SUFFICIENT TO RELEASE THE
SURETY.
C.

The Court of Appeals affirmed the award of attorneys fees and

litigation expenses to Cebu Shipyard since it was able to clearly establish the
defendants liability, which they tried to dodge by setting up defenses to
release themselves from their obligation.[47]

ASSUMING THAT PETITIONER IS LIABLE UNDER THE

BOND, THE HONORABLE COURT OF APPEALS
NONETHELESS SERIOUSLY ERRED IN AFFIRMING THE
SOLIDARY LIABILITY OF PETITIONER BEYOND THE
VALUE OF THE BOND.
D.

CBIC[48]and

Unimarine,

together

with

third

party

defendants-

appellants[49] filed their respective Motions for Reconsideration. This was,

however, denied by the Court of Appeals in its October 28, 2004 Resolution

THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING PETITIONER JOINTLY AND SEVERALLY
LIABLE FOR ATTORNEYS FEES IN THE AMOUNT
OF P100,000.00.[51]

for lack of merit.

Issue
Unimarine elevated its case to this Court via a petition for review
on certiorari, docketed as G.R. No. 166023, which was denied in a
Resolution dated January 19, 2005.[50]

The crux of the controversy lies in CBICs liability on the surety bond
Quinain issued to Unimarine, in favor of Cebu Shipyard.

The lone petitioner in this case, CBIC, is now before this Court,

CBIC avers that the Court of Appeals erred in interpreting and applying

seeking the reversal of the Court of Appeals decision and resolution on the

the rules governing the contract of agency. It argued that the Special Power

following grounds:

of Attorney granted to Quinain clearly set forth the extent and limits of his
authority with regard to businesses he can transact for and in behalf of
A.

THE HONORABLE COURT OF APPEALS SERIOUSLY

ERRED IN APPLYING THE PROVISIONS OF ARTICLE

CBIC. CBIC added that it was incumbent upon Cebu Shipyard to inquire and
look into the power of authority conferred to Quinain. CBIC said:

The authority to bind a principal as a guarantor or surety is

one of those powers which requires a Special Power of
Attorney pursuant to Article 1878 of the Civil Code. Such
power could not be simply assumed or inferred from the
mere existence of an agency. A person who enters into a
contract of suretyship with an agent without confirming the
extent of the latters authority does so at his peril. x x x. [52]

The fact that Quinain was an agent of CBIC was never put in
issue. What has always been debated by the parties is the extent of
authority or, at the very least, apparent authority, extended to Quinain by
CBIC to transact insurance business for and in its behalf.
In a contract of agency, a person, the agent, binds himself to

CBIC claims that the foregoing is true even if Quinain was granted
the authority to transact in the business of insurance in general, as the
authority to bind the principal in a contract of suretyship could
[53]

nonetheless never be presumed.

Thus, CBIC claims, that:

[T]hird persons seeking to hold the principal liable for

transactions entered into by an agent should establish the
following, in case the same is controverted:
6.6.1. The fact or existence of the agency.
6.6.2. The nature and extent of authority.[54]

represent another, the principal, with the latters consent or authority.

[57]

Thus, agency is based on representation, where the agent acts for and in

behalf of the principal on matters within the scope of the authority conferred
upon him.[58] Such acts have the same legal effect as if they were personally
done by the principal. By this legal fiction of representation, the actual or
legal absence of the principal is converted into his legal or juridical
presence.[59]
The RTC applied Articles 1900 and 1911 of the Civil Code in holding
CBIC liable for the surety bond. It held that CBIC could not be allowed to

To go a little further, CBIC said that the correct Civil Code provision

disclaim liability because Quinains actions were within the terms of the

to apply in this case is Article 1898. CBIC asserts that Cebu Shipyard was

special power of attorney given to him. [60] The Court of Appeals agreed that

charged with knowledge of the extent of the authority conferred on Mr.

CBIC could not be permitted to abandon its obligation especially since third

Quinain by its failure to perform due diligence investigations.

[55]

persons had relied on Quinains representations. It based its decision on

Article 1911 of the Civil Code and found CBIC to have been negligent and

Cebu Shipyard, in its Comment

[56]

first assailed the propriety of the

less than prudent in conducting its insurance business for its failure to

petition for raising factual issues. In support, Cebu Shipyard claimed that the

supervise and monitor the acts of its agents, to regulate the distribution of its

Court of Appeals application of Article 1911 of the Civil Code was founded on

insurance

findings of facts that CBIC now disputes. Thus, the question is not purely of

misrepresentations of its agents.[61]

forms,

and

to

devise

schemes

to

prevent

fraudulent

law.
Discussion

This 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
principals ratification.
Art. 1900. So far as third persons are concerned,
an act is deemed to have been performed within the scope
of the agents authority, if such act is within the terms of the
power of attorney, as written, even if the agent has in fact
exceeded the limits of his authority according to an
understanding between the principal and the agent.

exceeded the scope of his authority only if Quinains act of issuing Surety
Bond No. G (16) 29419 is deemed to have been performed within the written
terms of the power of attorney he was granted. [64]
However, contrary to what the RTC held, the Special Power of
Attorney accorded to Quinain clearly states the limits of his authority and
particularly provides that in case of surety bonds, it can only be issued in
favor of the Department of Public Works and Highways, the National Power

Art. 1902. A third person with whom the agent

wishes to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as
regards the agency. Private or secret orders and instructions
of the principal do not prejudice third persons who have
relied upon the power of attorney or instructions shown to
them.

Corporation, and other government agencies; furthermore, the amount of the

Art. 1910. The principal must comply with all the

obligations which the agent may have contracted within the
scope of his authority.

That,
COUNTRY
BANKERS
INSURANCE
CORPORATION, a corporation duly organized and existing
under and by virtue of the laws of the Philippines, with head
offices at 8th Floor, G.F. Antonino Building, T.M. Kalaw Street,
Ermita, Manila, now and hereinafter referred to as the
Company hereby appoints BETHOVEN B. QUINAIN with
address at x x x to be its General Agent and Attorney-in-Fact,
for and in its place, name and stead, and for its own use and
benefit, to do and perform the following acts and things:

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.

Our law mandates an agent to act within the scope of his authority.
[62]

In the case at bar, CBIC could be held liable even if Quinain

surety bond is limited to P500,000.00, to wit:

SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:

1.
To conduct, manage, carry on and transact
insurance business as usually pertains to a General Agency
of Fire, Personal Accident, Bond, Marine, Motor Car (Except
Lancer).

The scope of an agents authority is what appears in the written terms of

the power of attorney granted upon him. [63] Under Article 1878(11) of the Civil
Code, a special power of attorney is necessary to obligate the principal as
a guarantor or surety.

2.
To accept, underwrite and subscribe policies of
insurance for and in behalf of the Company under the terms
and conditions specified in the General Agency Contract
executed and entered into by and between it and its said
Attorney-in-Fact subject to the following Schedule of Limits:

d.

MARINE:

xxxx

e.
-

SCHEDULE OF LIMITS

BONDS:

xxxx

a.

FIRE:
Surety Bond (in favor of Dept. of Pub. Works and
xxxx
other.

Highways, Natl. Power Corp. &

500,000.00
Government agencies)[65]

b.

PERSONAL ACCIDENT:

xxxx
CBIC does not anchor its defense on a secret agreement, mutual
understanding, or any verbal instruction to Quinain. CBICs stance is
c.

MOTOR CAR:

grounded on its contract with Quinain, and the clear, written terms
therein. This Court finds that the terms of the foregoing contract specifically
provided for the extent and scope of Quinains authority, and Quinain has

xxxx

indeed exceeded them.

Under Articles 1898 and 1910, an agents act, even if done beyond
the scope of his authority, may bind the principal if he ratifies them, whether

expressly or tacitly. It must be stressed though that only the principal, and

powers. However, for an agency by estoppel to exist, the following must be

not the agent, can ratify the unauthorized acts, which the principal must have

established:

knowledge of.[66] Expounding on the concept and doctrine of ratification in

agency, this Court said:
1.
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. Nevertheless, this principle does not apply if the
principals ignorance of the material facts and circumstances
was willful, or that the principal chooses to act in ignorance
of the facts. 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.[67] (Emphases supplied.)

The principal manifested a representation of the agents

authority or knowingly allowed the agent to assume such
authority;

2.

The

third

person,

in

good

faith,

relied

upon

such

representation; and
3.

Relying upon such representation, such third person has

changed his position to his detriment.[68]

In Litonjua, Jr. v. Eternit Corp., [69] this Court said that [a]n agency by
estoppel, which is similar to the doctrine of apparent authority, requires proof
of reliance upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance. [70]

Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs

testimony that it was unaware of the existence of Surety Bond No. G (16)
29419 and Endorsement No. 33152. There were no allegations either that
CBIC should have been put on alert with regard to Quinains business
transactions done on its behalf. It is clear, and undisputed therefore, that
there can be no ratification in this case, whether express or implied.

This Court cannot agree with the Court of Appeals pronouncement

of negligence on CBICs part. CBIC not only clearly stated the limits of its
agents powers in their contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties. Moreover, its company
procedures, such as reporting requirements, show that it has designed a
system to monitor the insurance contracts issued by its agents. CBIC cannot

Article 1911, on the other hand, is based on the principle of estoppel,

which is necessary for the protection of third persons. It states that the
principal is solidarily liable with the agent even when the latter has exceeded
his authority, if the principal allowed him to act as though he had full

be faulted for Quinains deliberate failure to notify it of his transactions with

Unimarine. In fact, CBIC did not even receive the premiums paid by
Unimarine to Quinain.

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.[73]

Furthermore, nowhere in the decisions of the lower courts was it

stated that CBIC let the public, or specifically Unimarine, believe that Quinain
had the authority to issue a surety bond in favor of companies other than the
Department of Public Works and Highways, the National Power Corporation,

Unimarine undoubtedly failed to establish that it even bothered to

and other government agencies. Neither was it shown that CBIC knew of the

inquire if Quinain was authorized to agree to terms beyond the limits

existence of the surety bond before the endorsement extending the life of the

indicated in his special power of attorney. While Paul Rodriguez stated that

bond, was issued to Unimarine. For one to successfully claim the benefit of

he has done business with Quinain more than once, he was not able to show

estoppel on the ground that he has been misled by the representations of

that he was misled by CBIC as to the extent of authority it granted

another, he must show that he was not misled through his own want of

Quinain. Paul Rodriguez did not even allege that he asked for documents to

reasonable care and circumspection.

[71]

prove Quinains authority to contract business for CBIC, such as their

contract of agency and power of attorney. It is also worthy to note that even

It is apparent that Unimarine had been negligent or less than prudent

with the Indemnity Agreement, Paul Rodriguez signed it on Quinains mere

in its dealings with Quinain. In Manila Memorial Park Cemetery, Inc. v.

assurance and without truly understanding the consequences of the terms of

Linsangan,

[72]

this Court held:

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. 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. If he does not make such an
inquiry, he is chargeable with knowledge of the agents
authority and his ignorance of that authority will not be any
excuse.

In the same case, this Court added:

[T]he ignorance of a person dealing with an agent as to the
scope of the latters authority is no excuse to such person
and the fault cannot be thrown upon the principal. 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 agents assumption of authority that proves to be
unfounded. The principal, on the other hand, may act on the

the said agreement. Moreover, both Unimarine and Paul Rodriguez could
have inquired directly from CBIC to verify the validity and effectivity of the
surety bond and endorsement; but, instead, they blindly relied on the
representations of Quinain. As this Court held in Litonjua, Jr. v. Eternit Corp.
[74]

:
A person dealing with a known agent is not authorized,
under any circumstances, blindly to trust the agents;
statements as to the extent of his powers; such person must
not act negligently but must use reasonable diligence and
prudence to ascertain whether the agent acts within the
scope of his authority. The settled rule is that, persons
dealing with an assumed agent are bound at their peril, and
if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority,
and in case either is controverted, the burden of proof is
upon them to prove it. In this case, the petitioners failed to
discharge their burden; hence, petitioners are not entitled to
damages from respondent EC.[75]

In light of the foregoing, this Court is constrained to release CBIC from

Quezon City, Metro Manila, December 20, 1991.

its liability on Surety Bond No. G (16) 29419 and Endorsement No.
33152. This Court sees no need to dwell on the other grounds propounded

The Antecedent Facts

by CBIC in support of its prayer.

WHEREFORE, this petition is hereby GRANTED and the complaint
against

CBIC

is DISMISSED for

lack

of

merit. The January

29,

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 brokers commission from the De Castros. [4] The Court of Appeals
summarized the facts in this wise:

2004 Decision and October 28, 2004 Resolution of the Court of Appeals
in CA-G.R. CV No. 58001 is MODIFIED insofar as it affirmed CBICs liability
on Surety Bond No. G (16) 29419 and Endorsement No. 33152.
SO ORDERED.
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
CASTRO, petitioners, vs. COURT OF APPEALS and FRANCISCO
ARTIGO,respondents.
DECISION
CARPIO, J.:

The Case
Before us is a Petition for Review on Certiorari [1] seeking to annul the
Decision of the Court of Appeals[2] dated May 4, 1994 in CA-G.R. CV No.
37996, which affirmed in toto the decision[3] 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 attorneys fees;
d) To pay the cost of this suit.

x x x. Appellants[5] 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), appellee [6] 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.
On the other hand, appellants completely traverse appellees 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 appellees, 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 lions 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 Artigos complaint is not
dismissible for failure to implead as indispensable parties the other coowners 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 courts 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-ININTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON
THE GROUND THAT ARTIGOS CLAIM HAS BEEN
EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;
V.
VI.

SANCTIONING AN AWARD
AND ATTORNEYS FEES;

OF

MORAL

DAMAGES

NOT AWARDING THE DE CASTROS MORAL AND

EXEMPLARY DAMAGES, AND ATTORNEYS FEES.

The Courts 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 Artigos 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
courts 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 P23,000,000.00 with
5% commission as agents 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 Constantes 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 ofnegotiorum 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 Artigos 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 Constantes 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 brokers 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 brokers commission is
reasonable and within the standard practice in the real estate industry for
transactions of this nature.
The De Castros also contend that Artigos 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. Artigos 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, Artigos 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 Artigos claim was filed within the ten-year
prescriptive period. The De Castros, however, still maintain that Artigos
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 ones 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 courts 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 Appeals[24] 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.
Fourth Issue: whether award of moral damages and attorneys fees is
proper
The De Castros claim that Artigo failed to prove that he is entitled to
moral damages and attorneys 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
attorneys fees in favor of Artigo. The award of damages and attorneys 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, attorneys fees are awarded in instances where the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly
valid, just and demandable claim.[27] There is no reason to disturb the trial
courts 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 P45,000.00 in
attorneys 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 brokers 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.

GOLD STAR MINING CO., INC., petitioner,

vs.
MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA JIMENA, AURORA
JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE JIMENA, JOYCE
JIMENA, as legal heirs of the deceased VICTOR JIMENA, and JOSE
HIDALGO, respondents.

Emiliano S. Samson and R. Balderrama-Samson for petitioner.

Leandro Sevilla and Ramon C. Aquino for respondents.
REYES, J.B.L., J.:
From an affirmance in toto by the Court of Appeals1 of a decision of the Court
of First Instance of Manila,2specifically the portion thereof condemning Gold
Star Mining Co., Inc. to pay Marta Lim Vda. de Jimena, et al., the sum of
P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction
this appeal is taken.
It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to
turn to Victor Jimena one-half (1/2) of the proceeds from all mining claims
that he would purchase with the money to be advanced by the latter. This
agreement was later on modified (in a 1939 notarial instrument duly
registered with the Register of Deeds of Marinduque in his capacity as
mining recorder) so as to include in the equal sharing arrangement not only
the proceeds from several mining claims, which by that time had already
been purchased by Lincallo with various sums totalling P5,800.00 supplied
by Jimena, but also the lands constituting the same, and so as to bind
thereby their "heirs, assigns, or legal representatives." Apparently, the mining
rights over part of the claims were assigned by Lincallo to Gold Star Mining
Co., Inc., sometime before World War Il because in 1950 the corporation paid
him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.
On several occasions thereafter, the mining claims in question were made
subject-matter of contracts entered into by Lincallo in his own name and for
his benefit alone without the slightest intimation of Jimena's interests over the
same. Thus, on 19 September 1951, Lincallo and one Alejandro Marquez, as
separate owners of particular mining claims, entered into an agreement with
Gold Star Mining Co., Inc., the assignee thereof, regarding allotment to
Lincallo of 45% of the royalties due from the corporation. Four months later,
Lincallo, Marquez and Congressman Panfilo Manguerra, again as owners,
leased certain mining claims to Jacob Cabarrus, who, in turn, transferred to
Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By
virtue of still another contract executed by these lessors on 29 February
1952, 43% of the royalties due from Marinduque Iron Mines Agents, Inc.,
were agreed upon to be paid to Lincallo.
As early as August, 1939 and down to September, 1952, Jimena repeatedly
apprised Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc.,
of his interests over the mining claims so assigned and/or leased by Lincallo
and, accordingly, demanded recognition and payment of his one-half share in
all the royalties, allocated and paid and, thereafter, to be paid to the latter.
Both corporations, however, ignored Jimena's demands.

Payment of the P5,800 advanced for the purchase of the mining claims, as
well as the one-half share in the royalties paid by the two corporations, were
also repeatedly demanded by Jimena from Lincallo. Acknowledging Jimena's
contractual claim, Lincallo off and on promised to settle his obligations. And
on 14 July 1952, Lincallo promised for the last time, to settle everything on or
before the 30th day of the same month.
Lincallo, however, did not only fail to settle his accounts with Jimena but
transferred on 16 August 1952, a month after he promised to pay Jimena, 35
of his 45% share in the royalties due from Gold Star Mining Co., Inc., to one
Gregorio Tolentino, a salaried employee, for an alleged consideration of
P10,000.00.
On 2 September 1954, Jimena commenced a suit against Lincallo for
recovery of his advances and his one-half share in the royalties. Gold Star
Mining Co., Inc., and Marinduque Iron Mines, Inc., together with Tolentino,
were later joined as defendants.

(a) as successors in interest of Victor Jimena to be entitled to

1/2 of the 45% share of the royalties of defendant Lincallo
under the latter's contract with Gold Star, Exh. D or Exh. D-l,
dated September 19, 1951;
(b) to 1/2 of the 43% shares of the rental of defendant
Lincallo under his contract with Jesus (Jacob) Cabarrus
assigned to Marinduque Iron Mines, and his contract with
Alejandro Marquez, dated December 5, 1951, and February
29, 1952, Exhs. J and J-1; .
(c) and condemning defendants Gold Star and Marinduque
Iron Mines to pay direct to plaintiffs said 1/2 shares of the
royalties until said contracts are terminated;
2. Condemning defendant Lincallo to pay unto plaintiffs, as
successors in interest of Victor Jimena

On 17 September 1954, the trial court issued, upon petition of Jimena, a writ
of preliminary injunction restraining Gold Star Mining Co., Inc., and
Marinduque Iron Mines Agents, Inc., from paying royalties during the
pendency of the case to Lincallo, his assigns or legal representatives.
Despite the injunction, however, Gold Star Mining Co., Inc., was found out to
have paid P30, 691.92 to Lincallo and Tolentino. Said corporation claimed
later on (on appeal) that the injunction had been superseded and/or
dissolved on 25 May 1955 by the trial court's grant of Jimena's petition for a
writ of preliminary attachment "to supersede the writ of preliminary injunction
previously issued." But as the grant was conditioned upon filing of a bond to
be approved by the trial court, no writ of attachment was issued because the
bond offered by Jimena was disapproved.3

(a) the sum of P5,800 with legal interest from the date of the
filing of the complaint;

Jimena and Tolentino died successively during the pendency of the case in
the trial court and were, accordingly, substituted by their respective widows
and children.

(d) P1,000.00 as attorneys fees;

After a protracted trial, the lower court rendered a decision, the dispositive
portion of which reads as follows:
IN VIEW WHEREOF, judgment is rendered:
1. Declaring the plaintiffs

(b) the sum of P40,167.52 which is the 1/2 share of the

royalties paid by Gold Star unto Lincallo as of the September
14, 1957;
(c) the sum of P3,235.64 which is the 1/2 share of Jimena on
the rentals amounting to P6,471.27 corresponding to
Lincallo's share paid by Marinduque Iron Mines unto Lincallo
from December, 1951 to August 25, 1954; under Exhibit N;

3. Declaring that the deed of sale, Exh. H, dated August 16, 1952,
between defendant Lincallo and Gregorio Tolentino was effective and
transferred only 1/2 of the 45% (43%) share of Lincallo, and ordering
Gold Star Mining Company to make payment hereafter unto
plaintiffs, pursuant to this decision on the royalties due unto Lincallo,
notwithstanding the cession unto Tolentino, so that of the royalties
due unto Lincallo 1/2 should always be paid by Gold Star unto
plaintiffs notwithstanding said session, Exh. H, unto Tolentino by
Lincallo;
4. Judgment is also rendered condemning the estate of Gregorio
Tolentino but not the heirs personally, to pay unto plaintiffs the sum of

P24,386.51 with legal interest from the date of the filing of the
complaint against Gregorio Tolentino.
5. Judgment is rendered condemning defendant Gold Star Mining
Company to pay to plaintiffs solidarily with Lincallo and to be
imputed to Lincallo's liability under this judgment unto Jimena, the
sum of P30,691.92;
6. Judgment is rendered condemning defendant Marinduque Iron
Mines to pay unto plaintiffs the sum of P7,330.36;
7. The counterclaims of defendants are dismissed;
8. Costs against defendant Lincallo.
SO ORDERED. (Emphasis supplied.)
From this judgment, all four defendants, namely, Lincallo, the widow and
children of Tolentino, and the two corporations, appealed to the Court of
Appeals. The appeal interposed by Marinduque Iron Mines Agents, Inc., was,
however, withdrawn, while that of Lincallo was dismissed for the failure to file
brief. Pending outcome of the appeal, the royalties due from Gold Star
Mining Co., Inc., were required to be deposited with the trial court, as per
order of 17 June 1958 issued by the same court. In compliance therewith,
Gold Star Mining Co., Inc., made a judicial deposit in the amount of
P30,691.92.
On 8 October 1965, the Court of Appeals handed down a decision sustaining
in its entirety that of the trial court. Gold Star Mining Co., Inc., moved for
reconsideration of said decision insofar as its adjudged solidary liability with
Lincallo to pay to the Jimenas the sum of P30,691.92 "for flagrant violation of
the injunction" was concerned. The motion was denied. Hence, the present
appeal.

Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals'
decision finding that respondents Jimenas have a cause of action against it,
and condemning it to pay the sum of P30,691.92 for violation of an allegedly
non-existent injunction, are reversible errors. Reasons: As to respondents
Jimena's cause of action, the same does not allegedly appear in the
complaint filed against petitioner corporation. And as to the P30,691.92
penalty for violation of the injunction, the same can not allegedly be imposed
because (1) the sum of P30,691.92 was not prayed for, (2) the injunction in
question had already been superseded and/or dissolved by the trial court's
grant of Jimena's petition for writ of preliminary attachment; and (3) the
corporation was never charged, heard, nor found guilty in accordance with,
and pursuant to, the provisions, of Rule 64 of the (Old) Rules of Court.
We are of the same opinion with the Court of Appeals that respondents
Jimenas have a cause of action against petitioner corporation and that the
latter's joinder as one of the defendants before the trial court is fitting and
proper. Said the Court of Appeals, and we adopt the same:
There first assigned error is the Trial Court erred in not dismissing
this instant action as "there is no privity of contract between Gold
Star and Jimena." This contention is without merit.
The situation at bar is similar to the status of the first and second
mortgagees of a duly registered real estate mortgage. While there
exists no privity of contract between them, yet the common subjectmatter supplies the juridical link.
Here the evidence overwhelmingly established that Jimena made
prewar and postwar demands upon Gold Star for the payment of his
1/2 share of the royalties but all in vain so he (Jimena) was
constrained to implead Gold Star because it refused to recognize his
right.
Jimena now seeks for accounting of the royalties paid by Gold Star
to Lincallo, and for direct payment to himself of his share of the
royalties. This relief cannot be granted without joining the Gold Star
specially in the face of the attitude it had displayed towards Jimena.
Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor
de mi deudor es deudor mio," this legal maxim finds sanction in
Article 1177, new Civil Code which provides that "creditors, after
having pursued the property in possession of the debtor to satisfy
their claims, may exercise all the rights and bring all the actions of
the latter (debtor) for the same purpose, save those which are

inherent in his person; they may also impugn the acts which the
debtor may have done to defraud them (1111)."
From another standpoint, equally valid and acceptable, it can be said
that Lincallo, in transferring the mining claims to Gold Star (without
disclosing that Jimena was a co-owner although Gold Star had
knowledge of the fact as shown by the proofs heretofore mentioned)
acted as Jimena's agent with respect to Jimena's share of the
claims.
Under such conditions, Jimena has an action against Gold Star,
pursuant to Article 1883, New Civil Code, which provides that the
principal may sue the person with whom the agent dealt with in his
(agent's) own name, when the transaction "involves things belonging
to the principal."
As counsel for Jimena has correctly contended, "the remedy of
garnishment suggested by Gold Star is utterly inadequate for the
enforcement of Jimena's right against Lincallo because Jimena
wanted an accounting and wanted to receive directly his share of the
royalties from Gold Star. That recourse is not open to Jimena unless
Gold Star is made a party in this action."
Coming now to the violation of the injunction, we observe that the facts speak
for themselves. Considering that no writ of preliminary attachment was
issued by the trial court, the condition for its issuance not having been met by
Jimena, nothing can be said to have superseded the writ of preliminary
injunction in question. The preliminary injunction was, therefore, subsisting
and evidently violated by petitioner corporation when it paid the sum of
P30,691.92 to Lincallo and Tolentino.
Gold Star Mining Co., Inc., insists that it may not be penalized for breach of
the injunction, issued by the court of origin, without prior written charge for
indirect contempt, and due hearing, citing section 3 of Rule 64 of the old
Rules of Court, now Rule 71 of the Revised Rules. We fail to see any merit in
this contention, as it misses the true nature and intent of the award of
P30,691.92 to Jimena, payable by Gold Star and Lincallo's estate.
Said award is not so much a penalty against petitioner as a decree of
restitution, in order to make the violated injunction effective, as it should be,
by placing the parties in the same condition as if the injunction had been fully
obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction and had
not paid to Lincallo the royalties of P30,691.92, such amount would now be
available for the satisfaction of the claims of Jimena and his heirs against
Lincallo. By sentencing Gold Star Mining Co., Inc., to pay, for the account of

Lincallo, the sum aforesaid, the court merely endeavoured to prevent its
award from being rendered pro tanto nugatory and ineffective, and thus
make it conformable to law and justice.
That the questioned award was not intended to be a penalty against
appellant Gold Star Mining Co., Inc., is shown by the provision in the
judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to
Lincallo's liability under this judgment." The court thus left the way open for
Gold Star Mining Co., Inc., to recover later the whole amount from Lincallo,
whether by direct action against him or by deducting it from the royalties that
may fall due under his 1951 contract with appellant.
That the recovery of this particular amount was not specifically sought in the
complaint is of no moment, since the complaint prayed in general for "other
equitable relief."
WHEREFORE, finding no reversible error in the decision appealed from, the
same is affirmed, with costs against petitioner-appellant, Gold Star Mining
Co., Inc.
Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando
and Capistrano, JJ., concur.
Zaldivar, J., is on leave.

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
PAZ AGUDELO Y GONZAGA, ET AL., defendants.
PAZ AGUDELO Y GONZAGA, appellant.
Hilado and Hilado and Norberto Romualdez for appellant.
Roman J. Lacson for appellee.

VILLA-REAL, J.:
The defendant Paz Agudelo y Gonzaga appeals to this court from the
judgment rendered by the Court of First Instance of Occidental Negros, the
dispositive part of which reads as follows:
Wherefore, judgment is rendered herein absolving the defendant
Mauro A. Garrucho from the complaint and ordering the defendant
Paz Agudelo y Gonzaga to pay to the plaintiff the sum of P31,091.55,

Philippine currency, together with the interest on the balance of

P20,774.73 at 8 per cent per annum of P4.55 daily from July 16,
1929, until fully paid, plus the sum of P1,500 as attorney's fees, and
the costs of this suit.
It is hereby ordered that in case the above sums adjudged in favor of
the defendant by virtue of this judgment are not paid to the Philippine
National Bank or deposited in the office of the clerk of this court, for
delivery to the plaintiff, within three months from the date of this
decision, the provincial sheriff of Occidental Negros shall set at
public auction the mortgaged properties described in annex E of the
second amended complaint, and apply the proceeds thereof to the
payment of the sums in question.
It is further ordered that in case the proceeds of the mortgaged
properties are not sufficient to cover the amount of this judgment, a
writ of execution be issued against any other property belonging to
the defendant Paz Agudelo y Gonzaga, not otherwise exempt from
execution, to cover the balance resulting therefrom.
In support of her appeal, the appellant assigns six alleged errors as
committed by the trial court, which we shall discuss in the course of this
decision.
The following pertinent facts, which have been proven without dispute during
the trial, are necessary for the decision of the questions raised in the present
appeal, to wit:
On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga
executed in favor of her nephew, Mauro A. Garrucho, the document Exhibit K
conferring upon him a special power of attorney sufficiently broad in scope to
enable him to sell, alienate and mortgage in the manner and form he might
deem convenient, all her real estate situated in the municipalities of Murcia
and Bacolod, Occidental Negros, consisting in lots Nos. 61 and 207 of the
cadastral survey of Bacolod, Occidental Negros, together with the
improvement thereon.
On December 22, 1920, Amparo A. Garrucho executed the document Exhibit
H whereby she conferred upon her brother Mauro A Garrucho a special
power of attorney sufficiently broad in scope to enable him to sell, alienate,
mortgage or otherwise encumber, in the manner and form he might deem
convenient, all her real estate situated in the municipalities of Murcia and
Bago, Occidental Negros.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A.

Garrucho to contract any loan nor to constitute a mortgage on the properties
belonging to the respective principals, to secure his obligations.
On December 23, 1920, Mauro A. Garrucho executed in the favor of the
plaintiff entity, the Philippine National bank, the document Exhibit G, whereby
he constituted a mortgage on lot No. 878 of the cadastral survey of Murcia,
Occidental Negros, with all the improvements thereon, described in transfer
certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to
secure the payment of credits, loans, commercial overdrafts, etc., not
exceeding P6,000, together with interest thereon, which he might obtain from
the aforesaid plaintiff entity, issuing the corresponding promissory note to that
effect.
During certain months of the year 1921 and 1922, Mauro A. Garrucho
maintained a personal current account with the plaintiff bank in the form of a
commercial credit withdrawable through checks (Exhibits S, 1 and T).
On August 24, 1931, the said Mauro A. Garrucho executed in favor of the
plaintiff entity, the Philippine National Bank, the document Exhibit J whereby
he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of
Bacolod together with the buildings and improvements thereon, described in
original certificates of title Nos. 2216 and 1148, respectively, issued in the
name of Paz Agudelo y Gonzaga, to secure the payment of credits, loans
and commercial overdrafts which the said bank might furnish him to the
amount of P16,00, payable on August 24, 1922, executing the corresponding
promissory note to that effect.
The mortgage deeds Exhibit G and J as well as the corresponding
promissory notes for P6,000 and P16,000, respectively, were executed in
Mauro A. Garrucho's own name and signed by him in his personal capacity,
authorizing the mortgage creditor, the Philippine National Bank, to take
possession of the mortgaged properties, by means of force if necessary, in
case he failed to comply with any of the conditions stipulated therein.
On January 4, 1922, the manager of the Iloilo branch of the Philippine
National Bank notified Mauro A. Garrucho that his promissory note for
P6,000 of 10 days within which to make payment thereof (Exhibit
O).1awphil.net
On May 9, 1922, the said manager notified Mauro A. Garrucho that his
commercial credit was closed from that date (Exhibit S).
Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiffappellee, the said manager thereof, in a letter dated June 27, 1922 (Exhibit

T), requested him to liquidate his account amounting to P15,148.15, at the

same time notifying him that his promissory note for P16,000 giving as
security for the commercial overdraft in question, had fallen due some time
since.
On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity
the deed Exhibit C whereby he constituted a mortgage on lots Nos. 61 and
207 of the cadastral survey of Bacolod, together with the improvements
thereon, described in transfer certificates of title Nos. 2216 and 1148,
respectively, issued in the name of Paz Agudelo y Gonzaga, and on lot No.
878 of the cadastral survey of Murcia, described in transfer certificate of title
No. 2415, issued in the name of Amparo A. Garrucho.
In connection of the credits, loans, and commercial overdrafts amounting to
P21,000 which had been granted him, Mauro A. Garrucho, on the said date
July 15, 1922, executed the promissory note, Exhibit B, for P21,000 as a
novation of the former promissory notes for P6,000 and P16,000,
respectively.
In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine
National Bank, on the said date of July 15, 1922, cancelled the mortgages
constituted on lots Nos. 61, 207 and 878 described in Torrens titles Nos.
2216, 1148 and 2415, respectively.
On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in
certificate of title No. 2415, to Paz Agudelo y Gonzaga (Exhibit M).
On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed
the affidavit, Exhibit N, which reads as follows:
Know all men by these presents: That I, Paz Agudelo y Gonzaga,
single, of age, and resident of the City of Manila, P. I., by these
present do hereby agree and consent to the transfer in my favor of
lot No. 878 of the Cadastre of Murcia, Occidental Negros, P. I., by
Miss Amparo A. Garrucho, as evidenced by the public instrument
dated November 25, 1925, executed before the notary public Mr.
Genaro B. Benedicto, and do hereby further agree to the amount of
the lien thereon stated in the mortgage deed executed by Miss
Amparo A. Garrucho in favor of the Philippine National Bank.
In testimony whereof, I hereunto affix my signature in the City of
Manila, P.I., this 15th of January, 1926.
(Sgd.) PAZ AGUDELO Y GONZAGA.

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y

Gonzaga, of lot No. 878 of the cadastral survey of Murcia, described in
certificate of title No. 2145 issued in the name of said Amparo A. Garrucho,
and to the affidavit, Exhibit N, transfer certificate of title No. 5369 was issued
in the name of Paz Agudelo y Gonzaga.
Without discussing and passing upon whether or not the powers of attorney
issued in favor of Mauro A. Garrucho by his sister, Amparo A. Garrucho, and
by his aunt, Paz Agudelo y Gonzaga, respectively, to mortgage their
respective real estate, authorized him to obtain loans secured by mortgage in
the properties in question, we shall consider the question of whether or not
Paz Agudelo y Gonzaga is liable for the payment of the loans obtained by
Mauro A. Garrucho from the Philippine National Bank for the security of
which he constituted a mortgage on the aforesaid real estate belonging to the
defendant-appellant Paz Agudelo y Gonzaga.
Article 1709 of the Civil Code provides the following:
ART. 1709. By the contract of agency, one person binds himself to
render some service, or to do something for the account or at the
request of another.
And article 1717 of the same Code provides as follows:
ART. 1717. When an agent acts in his own name, the principal shall
have no right of action against the persons with whom the agent has
contracted, or such persons against the principal.
In such case, the agent is directly liable to the person with whom he
has contracted, as if the transaction were his own. Cases involving
things belonging to the principal are excepted.
The provisions of this article shall be understood to be without
prejudice to actions between principal and agent.
Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as
evidenced by the power of attorney attached hereto" and "attorney in fact of
Paz Agudelo y Gonzaga" written after the name of Mauro A. Garrucho in the
mortgage deeds, Exhibits G. and J, respectively, there is nothing in the said
mortgage deeds to show that Mauro A. Garrucho is attorney in fact of
Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that he obtained
the loans mentioned in the aforesaid mortgage deeds and constituted said
mortgages as security for the payment of said loans, for the account and at
the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The
above-quoted phrases which simply described his legal personality, did not

mean that Mauro A. Garrucho obtained the said loans and constituted the
mortgages in question for the account, and at the request, of his principals.
From the titles as well as from the signatures therein, Mauro A. Garrucho,
appears to have acted in his personal capacity. In the aforesaid mortgage
deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the
mortgage creditor Philippine National Bank as his attorney in fact so that it
might take actual and full possession of the mortgaged properties by means
of force in case of violation of any of the conditions stipulated in the
respective mortgage contracts. If Mauro A. Garrucho acted in his capacity as
mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga,
he could not delegate his power, in view of the legal principle of "delegata
potestas delegare non potest" (a delegated power cannot be delegated),
inasmuch as there is nothing in the records to show that he has been
expressly authorized to do so.
He executed the promissory notes evidencing the aforesaid loans, under his
own signature, without authority from his principal and, therefore, were not
binding upon the latter (2 Corpus Juris, pp. 630-637, par. 280). Neither is
there anything to show that he executed the promissory notes in question for
the account, and at the request, of his respective principals (8 Corpus Juris,
pp. 157-158).
Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were
cancelled by the documents, Exhibits I and L, on July 15, 1922, and in their
stead the mortgage deed, Exhibit C, was executed, in which there is
absolutely no mention of Mauro A. Garrucho being attorney in fact of
anybody, and which shows that he obtained such credit fro himself in his
personal capacity and secured the payment thereof by mortgage constituted
by him in his personal capacity, although on properties belonging to his
principal Paz Agudelo y Gonzaga.
Furthermore, the promissory notes executed by Mauro A. Garrucho in favor
of the Philippine National Bank, evidencing loans of P6,000 and P16,000
have been novated by the promissory notes for P21,000 (Exhibit B) executed
by Mauro A. Garrucho, not only without express authority from his principal
Paz Agudelo y Gonzaga but also under his own signature.
In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid
down the following doctrine:

A promissory note and two mortgages executed by the agent for and
on behalf of his principal, in accordance with a power of attorney
executed by the principal in favor of the agent, are valid, and as
provided by article 1727 of contracted by the agent; but a mortgage
on real property of the principal not made and signed in the name of
the principal is not valid as to the principal.
It has been intimated, and the trial judge so stated. that it was the intention of
the parties that Mauro A. Garrucho would execute the promissory note,
Exhibit B, and the mortgage deed, Exhibit C, in his capacity as attorney in
facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid
documents appear to be contrary to the intention of the parties, such
intention should prevail in accordance with article 1281 of the Civil Code.
Commenting on article 1281 of the Civil Code, Manresa, in his
Commentaries to the Civil Code, says the following:
IV. Intention of the contracting parties; its appreciation. In order
that the intention may prevail, it is necessary that the question of
interpretation be raised, either because the words used appear to be
contrary thereto, or by the existence of overt acts opposed to such
words, in which the intention of the contracting parties is made
manifest. Furthermore, in order that it may prevail against the terms
of the contract, it must be clear or, in other words, besides the fact
that such intention should be proven by admissible evidence, the
latter must be of such charter as to carry in the mind of the judge an
unequivocal conviction. This requisite as to the kind of evidence is
laid down in the decision relative to the Mortgage Law of September
30, 1891, declaring that article 1281 of the Civil Code gives
preference to intention only when it is clear. When the aforesaid
circumstances is not present in a document, the only thing left for the
register of deeds to do is to suspend the registration thereof, leaving
the solution of the problem to the free will of the parties or to the
decision of the courts.
However, the evident intention which prevails against the defective
wording thereof is not that of one of the parties, but the general
intent, which, being so, is to a certain extent equivalent to mutual
consent, inasmuch as it was the result desired and intended by the
contracting parties. (8 Manresa, 3d edition, pp. 726 and 727.)
Furthermore, the records do not show that the loan obtained by Mauro A.
Garrucho, evidenced by the promissory note, Exhibit B, was for his principal
Paz Agudelo y Gonzaga. The special power of attorney, Exhibit K, does not
authorize Mauro A. Garrucho to constitute a mortgage on the real estate of

his principal to secure his personal obligations. Therefore, in doing so by

virtue of the document, Exhibit C, he exceeded the scope if his authority and
his principal is not liable for his acts. (2 Corpus Juris, p. 651; article 1714,
Civil Code.)
It is further claimed that inasmuch as the properties mortgaged by Mauro A.
Garrucho belong to Paz Agudelo y Gonzaga, the latter is responsible for the
acts of the former although he acted in his own name, in accordance with the
exception contained in article 1717 of the Civil Code. It would be an
exception with the properties of his own name in connection with the
properties of his principal, does so within the scope of his authority. It is
noted that Mauro A. Garrucho was not authorized to execute promissory
notes even in the name of his principal Paz Agudelo y Gonzaga, nor to
constitute a mortgage on her real properties to secure such promissory
notes. The plaintiff Philippine National Bank should know this inasmuch as it
is in duty bound to ascertain the extent of the agent's authority before dealing
with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is
personally liable for the amount of the promissory note Exhibit B. (2 Corpus
Juris, pp. 563-564.)
However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926
(Exhibit AA), and in a letter dated January 16, 1926 (Exhibit Z), gave her
consent to the lien on lot No. 878 of the cadastre of Murcia, Occidental
Negros, described in Torrens title No. 5369, the ownership of which was
transferred to her by her niece Amparo A. Garrucho. This acknowledgment,
however, does not extend to lots Nos. 207 and 61 of the cadastral survey of
Bacolod, described in transfer certificates of title Nos. 1148 and 2216,
respectively, inasmuch as, although it is true that a mortgage is indivisible as
to the contracting parties and as top their successors in interest (article 1860,
Civil Code), it is not so with respect to a third person who did not take part in
the constitution thereof either personally or through an agent, inasmuch as
he can make the acknowledgment thereof in the form and to the extent he
may deem convenient, on the ground that he is not in duty bound to
acknowledge the said mortgage. Therefore, the only liability of the defendant-

appellant Paz Agudelo y Gonzaga is that which arises from the aforesaid
acknowledgment, but only with respect to the lien and not to the principal
obligation secured by the mortgage acknowledged by her to have been
constituted on said lot No. 878 of the cadastral survey of Murcia, Occidental
Negros. Such liability is not direct but a subsidiary one.
Having reach this contention, it is unnecessary to pass upon the other
questions of law raised by the defendant- appellant in her brief and upon the
law cited therein.
In view of the foregoing consideration, we are of the opinion and so hold that
when an agent negotiates a loan in his personal capacity and executes a
promissory note under his own signature, without express authority from his
principal, giving as security therefor real estate belonging to the letter, also in
his own name and not in the name and representation of the said principal,
the obligation do constructed by him is personal and does not bind his
aforesaid principal.
Wherefore, it is hereby held that the liability constructed by the aforesaid
defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary to that of
Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia,
Occidental Negros, described in Torrens title No. 2415. However, inasmuch
as the principal obligator, Mauro A. Garrucho, has been absolved from the
complaint and the plaintiff- appellee has not appealed from the judgment
absolving him, the law does not afford any remedy whereby Paz Agudelo y
Gonzaga may be required to comply with the said subsidiary obligation in
view of the legal maxim that the accessory follows the principal. Wherefore,
the defendant herein should also be absolved from the complaint which is
hereby dismissed, with the costs against the appellee. So ordered.
Avancea, C.J., Malcolm, Hull, and Imperial, JJ., concur.