Phil. Yields, Inc. for damages caused by their fraudulent violation of their agreement.
G.R. No. 94050 November 21, 1991
SYLVIA H. BEDIA and HONTIVEROS & ASSOCIATED PRODUCERS PHILS.
YIELDS, INC., petitioners,
vs.
EMILY A. WHITE and HOLMAN T. WHITE, respondents.
Ramon A. Gonzales for petitioner of the Court.
Renato S. Corpuz for private respondents.
CRUZ, J.:
The basic issue before us is the capacity in which petitioner Sylvia H. Bedia entered
into the subject contract with private respondent Emily A. White. Both the trial court
and the respondent court held she was acting in her own personal behalf. She faults
this finding as reversible error and insists that she was merely acting as an agent.
The case arose when Bedia and White entered into a Participation Contract 1 reading
in full as follows:
THE STATE FAIR OF TEXAS '80
PARTICIPATION CONTRACT
PARTICIPANT (COMPANY NAME) EMILY WHITE
ENTERPRISES
I/We, the abovementioned company hereby agrees to participate in the 1980 Dallas
State Fair to be held in Dallas, Texas on October 3, to October 19,1980. I/We request
for a 15 square meter booth space worth $2,250.00 U.S. Dollars.
I/We further understand that this participation contract shall be deemed non-
cancellable after payment of the said down payment, and that any intention on our
part to cancel the same shall render whatever amount we have paid forfeited in favor
of HONTIVEROS & ASSOCIATED PRODUCERS PHILIPPINE YIELDS, INC.
FOR THE ABOVE CONSIDERATION, I/We understand the HONTIVEROS & ASSOCIATED
PRODUCERS PHIL. YIELDS, INC. shall: Reserve said booth for our exclusive perusal;
We also understand that the above cost includes overall exterior booth decoration and
materials but does not include interior designs which will be per our specifications and
expenses.
PARTICIPANT'S PARTICIPATION
AUTHORIZED SIGNATURE: ACCEPTED BY:
(SGD.) EMILY WHITE (SGD.) SYLVIA H. BEDIA
DATE: 8/13/80 DATE: Aug. 1, 1980
On August 10, 1986, White and her husband filed a complaint in the Regional Trial
Court of Pasay City for damages against Bedia and Hontiveros & Associated Producers
She averred that Bedia had approached her and persuaded her to participate in the
State of Texas Fair, and that she made a down payment of $500.00 to Bedia on the
agreed display space. In due time, she enplaned for Dallas with her merchandise but
was dismayed to learn later that the defendants had not paid for or registered any
display space in her name, nor were they authorized by the state fair director to recruit
participants. She said she incurred losses as a result for which the defendants should
be held solidarily liable. 2
In their joint answer, the defendants denied the plaintiff's allegation that they had
deceived her and explained that no display space was registered in her name as she
was only supposed to share the space leased by Hontiveros in its name. She was not
allowed to display her goods in that space because she had not paid her balance of
$1,750.00, in violation of their contract. Bedia also made the particular averment that
she did not sign the Participation Contract on her own behalf but as an agent of
Hontiveros and that she had later returned the advance payment of $500.00 to the
plaintiff. The defendants filed their own counterclaim and complained of malice on the
part of the plaintiffs. 3
In the course of the trial, the complaint against Hontiveros was dismissed on motion of the plaintiffs. 4
In his decision dated May 29, 1986, Judge Fermin Martin, Jr. found Bedia liable for fraud and awarded the plaintiffs actual and
moral damages plus attorney's fees and the costs. The court said:
In claiming to be a mere agent of Hontiveros & Associated Producers Phil. Yields, Inc., defendant Sylvia H. Bedia evidently
attempted to escape liability for herself. Unfortunately for her, the "Participation Contract" is not actually in representation or in
the name of said corporation. It is a covenant entered into by her in her personal capacity, for no one may contract in the name
of another without being authorized by the latter, or unless she has by law a right to represent her. (Art. 1347, new Civil Code)
Sustaining the trail court on this point, the respondent court 5 declared in its decision dated March 30, 1990:
The evidence, on the whole, shows that she definitely acted on her own. She
represented herself as authorized by the State of Texas to solicit and assign booths at
the Texas fair; she assured the appellee that she could give her booth. Under Article
1883 of the New Civil Code, if the agent acts in his own name, the principal has no
right of action against the persons with whom the agent had contracted.
We do not share these views.
It is noteworthy that in her letter to the Minister of Trade dated December 23,1984,
Emily White began:
I am a local exporter who was recruited by Hontiveros & Associated Producers Phil.
Yields, Inc. to participate in the State Fair of Dallas, Texas which was held last Oct. 3
to 19, 1980. Hontiveros & Associated charged me US$150.00 per square meter for
display booth of said fair. I have paid an advance of US$500.00 as partial payment for
the total space of 15 square meter of which is $2,250.00 (Two Thousand Two Hundred
Fifty Dollars). 6
As the Participation Contract was signed by Bedia, the above statement was an acknowledgment by White that Bedia was only
acting for Hontiveros when it recruited her as a participant in the Texas State Fair and charged her a partial payment of $500.00.
This amount was to be fortified to Hontiveros in case of cancellation by her of the agreement. The fact that the contract was
typewritten on the letterhead stationery of Hontiveros bolsters this conclusion in the absence of any showing that said stationery
had been illegally used by Bedia.

Significantly, Hontiveros itself has not repudiated Bedia's agency as it would have if she had really not signed in its name. In the
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE G.R. No
answer it filed with Bedia, it did not deny the latter's allegation in Paragraph 4 thereof that she was only acting as its agent when
ASSURANCE, INC.),
she solicited White's participation. In fact, by filing the answer jointly with Bedia through their common counsel, Hontiveros
Petitioner, Present:
affirmed this allegation.

If the plaintiffs had any doubt about the capacity in which Bedia was acting, what they should have done was verify the matter
with Hontiveros. They did not. Instead, they simply accepted Bedia's representation that she was an agent of Hontiveros and dealt QUISUM
with her as such. Under Article 1910 of the Civil Code, "the principal must comply with all the obligations which the agent may CARPIO
have contracted within the scope of his authority." Hence, the private respondents cannot now hold Bedia liable for the acts - versus - CARPIO
performed by her for, and imputable to, Hontiveros as her principal. TINGA,
VELASC
The plaintiffs' position became all the more untenable when they moved on June 5, 1984, for the dismissal of the complaint against
Hontiveros, 7
leaving Bedia as the sole defendant. Hontiveros had admitted as early as CLEMENTE N. PEDROSO,
when it filed its answer that Bedia was acting as its agent. The effect of the motion TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her
was to leave the plaintiffs without a cause of action against Bedia for the obligation, if Attorney-in-Fact PONCIANO C. MARQUEZ,
any, of Hontiveros. Respondents. Promulgated:
Our conclusion is that since it has not been found that Bedia was acting beyond the
February 4, 200
scope of her authority when she entered into the Participation Contract on behalf of
Hontiveros, it is the latter that should be held answerable for any obligation arising
from that agreement. By moving to dismiss the complaint against Hontiveros, the x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
plaintiffs virtually disarmed themselves and forfeited whatever claims they might have x
proved against the latter under the contract signed for it by Bedia. It should be obvious DECISION
that having waived these claims against the principal, they cannot now assert them
against the agent. QUISUMBING, J.:
WHEREFORE, the appealed decision dated March 30, 1990, of the respondent court is This petition for review on certiorari seeks the reversal of the Decision[if
!supportFootnotes][1][endif]
REVERSED and a new judgment is rendered dismissing Civil Case No. 9246-P in the and Resolution,[if !supportFootnotes][2][endif] dated November 29,
Regional Trial Court of Pasay City. 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[if !supportFootnotes][3][endif] dated
SO ORDERED. 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 Company (Filipinas Life). Pedroso
claims Renato Valle was her insurance 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
8% prepaid interest a month for certain amounts deposited on a monthly basis.
Enticed, she initially invested and issued a post-dated check dated January 7, 1977 for
P10,000.[if !supportFootnotes][4][endif] In return, Valle issued Pedroso his personal check for
P800 for the 8%[if !supportFootnotes][5][endif] prepaid interest and a Filipinas Life Agents
Receipt No. 807838.[if !supportFootnotes][6][endif]
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 check, with the endorsement of Alcantara at
the back, was deposited in the account of Filipinas Life with the Commercial Bank and
Trust Company (CBTC), Escolta Branch.
Relying on the representations made by the petitioners duly authorized
representatives Apetrior and Alcantara, as well as having known agent Valle for quite
some time, Pedroso waited for the maturity of her initial investment. A month after,
her investment of P10,000 was returned to her 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.[if
!supportFootnotes][7][endif] 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%[if !supportFootnotes][8][endif] 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 of P49,550[if
!supportFootnotes][9][endif] 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 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.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-
defendants Valle, Apetrior and Alcantara jointly and solidarily liable to the respondents.
On appeal, the Court of Appeals affirmed the trial courts ruling and
subsequently denied the motion for reconsideration.
Petitioner now comes before us raising a single issue:
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.[if
!supportFootnotes][10][endif]
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.[if
!supportFootnotes][11][endif]
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 the diligence required of them in ascertaining the authority of
petitioners agents; and it is Filipinas Life that failed in its duty to ensure that its agents
act within the scope of their authority.
Considering the issue raised in the light of the submissions of the 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.
It appears indisputable that respondents Pedroso and Palacio had invested
P47,000 and P49,550, respectively. These were received by Valle and remitted to
Filipinas Life, using Filipinas Lifes official receipts, whose authenticity were not
disputed. Valles authority to solicit and receive investments was also established by the
parties. When respondents sought confirmation, Alcantara, holding a supervisory
position, and Apetrior, the branch manager, confirmed that Valle had authority. While
it is true that a person dealing with an agent is put upon inquiry and must discover at
his own peril the agents authority, in this case, respondents did exercise due diligence
in removing all doubts and in confirming the validity of the representations made by
Valle.
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 some service
or to do something in representation or on behalf of another, with the consent or
authority of the latter.[if !supportFootnotes][12][endif] The general rule is that the 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.[if !supportFootnotes][13][endif] When the agent
exceeds his authority, the agent becomes personally liable for the damage.[if
!supportFootnotes][14][endif] But even when the agent exceeds his authority, the principal is
still solidarily liable together with the agent if the principal allowed the agent to act as
though the agent had full powers.[if !supportFootnotes][15][endif] In other words, the acts of
an agent beyond the scope of his authority do not bind the principal, unless the
principal ratifies them, expressly or impliedly.[if !supportFootnotes][16][endif] Ratification in
agency is the adoption or confirmation by one person of an act performed on his behalf
by another without authority.[if !supportFootnotes][17][endif]
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 Valles acts. It cannot even
be denied that Filipinas Life benefited from the investments deposited by Valle in the
account of Filipinas Life. In our considered view, Filipinas Life had clothed Valle with
apparent authority; hence, it is now estopped to deny said authority. Innocent third
persons should not be prejudiced if the principal failed to adopt the needed measures
to prevent misrepresentation, much more so if the principal ratified his agents acts
beyond the latters authority. The act of the agent is considered that of the principal
itself. Qui per alium facit per seipsum facere videtur. He who does a thing by an agent
is considered as doing it himself.[if !supportFootnotes][18][endif]
WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution,
dated November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in
CA-G.R. CV No. 33568 are AFFIRMED.
Costs against the petitioner.
SO ORDERED.
G.R. No. 107282 March 16, 1994
THE MANILA REMNANT CO., INC., petitioner,
vs.
HON. COURT OF APPEALS, AND SPS. OSCAR C. VENTANILLA AND CARMEN
GLORIA DIAZ, respondents.
Tabalingcos & Associates Law Office for petitioner.
Oscar C. Ventanilla, Jr. and Augusto Garmaitan for private respondents.
CRUZ, J.:
The present petition is an offshoot of our decision in Manila Remnant Co., Inc., (MRCI)
v. Court of Appeals, promulgated on November 22, 1990.
That case involved parcels of land in Quezon City which were owned by petitioner MRCI
and became the subject of its agreement with A.U. Valencia and Co., Inc., (AUVCI) by
virtue of which the latter was to act as the petitioner's agent in the development and
sale of the property. For a stipulated fee, AUVCI was to convert the lands into a
subdivision, manage the sale of the lots, execute contracts and issue official receipts
to the lot buyers. At the time of the agreement, the president of both MRCI and AUVCI
was Artemio U. Valencia.
Pursuant to the above agreement, AUVCI executed two contracts to sell dated March
3, 1970, covering Lots 1 and 2, Block 17, in favor of spouses Oscar C. Ventanilla and
Carmen Gloria Diaz for the combined contract price of P66,571.00, payable monthly in
ten years. After ten days and without the knowledge of the Ventanilla couple, Valencia,
as president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales
agents, without any consideration. Upon orders of Valencia, the monthly payments of
the Ventanillas were remitted to the MRCI as payments of Crisostomo, for which
receipts were issued in his name. The receipts were kept by Valencia without the
knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their
monthly installments.
On May 30, 1973, MRCI informed AUVCI that it was terminating their agreement
because of discrepancies discovered in the latter's collections and remittances. On June
6, 1973, Valencia was removed by the board of directors of MRCI as its president.
On November 21, 1978, the Ventanilla spouses, having learned of the supposed sale
of their lots to Crisostomo, commenced an action for specific performance, annulment
of deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc.,
and Carlos Crisostomo. It was docketed as Civil Case No. 26411 in the Court of First
Instance of Quezon City, Branch
7-B.
On November 17, 1980, the trial court rendered a decision declaring the contracts to
sell in favor of the Ventanillas valid and subsisting, and annulling the contract to sell in
favor of Crisostomo. It ordered the MRCI to execute an absolute deed of sale in favor
of the Ventanillas, free from all liens and encumbrances. Damages and attorney's fees
in the total amount of P210,000.00 were also awarded to the Ventanillas for which the
MRCI, AUVCI, and Crisostomo were held solidarily liable.
The lower court ruled further that if for any reason the transfer of the lots could not be
effected, the defendants would be solidarily liable to the Ventanillas for reimbursement
of the sum of P73,122.35, representing the amount paid for the two lots, and legal
interest thereon from March 1970, plus the decreed damages and attorney's fees.
Valencia was also held liable to MRCI for moral and exemplary damages and attorney's
fees.
From this decision, separate appeals were filed by Valencia and MRCI. The appellate
court, however, sustained the trial court in toto.
MRCI then filed before this Court a petition for certiorari to review the portion of the
decision of the Court of Appeals upholding the solidary liability of MRCI, AUVCI and
Carlos Crisostomo for the payment of moral and exemplary damages and attorney's
fees to the Ventanillas.
On November 22, 1990, this Court affirmed the decision by the Court of Appeals and
declared the judgment of the trial court immediately executory.
The Present Case
On January 25, 1991, the spouses Ventanilla filed with the trial court a motion for the
issuance of a writ of execution in Civil Case No. 26411. The writ was issued on May 3,
1991, and served upon MRCI on May 9, 1991.
In a manifestation and motion filed by MRCI with the trial court on May 24, 1991, the
petitioner alleged that the subject properties could not be delivered to the Ventanillas
because they had already been sold to Samuel Marquez on February 7, 1990, while
their petition was pending in this Court. Nevertheless, MRCI offered to reimburse the
amount paid by the respondents, including legal interest plus the aforestated damages.
MRCI also prayed that its tender of payment be accepted and all garnishments on their
accounts lifted.
The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees
but opposed the reimbursement offered by MRCI in lieu of the execution of the absolute
deed of sale. They contended that the alleged sale to Samuel Marquez was void,
fraudulent, and in contempt of court and that no claim of ownership over the properties
in question had ever been made by Marquez.
On July 19, 1991, Judge Elsie Ligot-Telan issued the following order:
To ensure that there is enough amount to cover the value of the lots involved if transfer
thereof to plaintiff may no longer be effected, pending litigation of said issue, the
garnishment made by the Sheriff upon the bank account of Manila Remnant may be
lifted only upon the deposit to the Court of the amount of P500,000.00 in cash.
MRCI then filed a manifestation and motion for reconsideration praying that it be
ordered to reimburse the Ventanillas in the amount of P263,074.10 and that the
garnishment of its bank deposit be lifted. This motion was denied by the trial court in
its order dated September 30, 1991. A second manifestation and motion filed by MRCI
was denied on December 18, 1991. The trial court also required MRCI to show cause
why it should not be cited for contempt for disobedience of its judgment.
These orders were questioned by MRCI in a petition for certiorari before the respondent
court on the ground that they were issued with grave abuse of discretion.
The Court of Appeals ruled that the contract to sell in favor of Marquez did not
constitute a legal impediment to the immediate execution of the judgment.
Furthermore, the cash bond fixed by the trial court for the lifting of the garnishment
was fair and reasonable because the value of the lot in question had increased
considerably. The appellate court also set aside the show-cause order and held that
the trial court should have proceeded under Section 10, Rule 39 of the Rules of Court
and not Section 9 thereof.1
In the petition now before us, it is submitted that the trial court and the Court of
Appeals committed certain reversible errors to the prejudice of MRCI.
The petitioner contends that the trial court may not enforce it garnishment order after
the monetary judgment for damages had already been satisfied and the amount for
reimbursement had already been deposited with the sheriff. Garnishment as a remedy
is intended to secure the payment of a judgment debt when a well-founded belief exists
that the erring party will abscond or deliberately render the execution of the judgment
nugatory. As there is no such situation in this case, there is no need for a garnishment
order.
It is also averred that the trial court gravely abused its discretion when it arbitrarily
fixed the amount of the cash bond for the lifting of the garnishment order at
P500,000.00.
MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a
legal impediment to the execution of the absolute deed of sale to the Ventanillas. At
the time of the sale to Marquez, the issue of the validity of the sale to the Ventanillas
had not yet been resolved. Furthermore, there was no specific injunction against the
petitioner re-selling the property.
Lastly, the petitioner insists that Marquez was a buyer in good faith and had a right to
rely on the recitals in the certificate of title. The subject matter of the controversy
having passed to an innocent purchaser for value, the respondent court erred in
ordering the execution of the absolute deed of sale in favor of the Ventanillas.
For their part, the respondents argue that the validity of the sale to them had already
been established even while the previous petition was still pending resolution. That
petition only questioned the solidary liability of MRCI to the Ventanillas. The portion of
the decision ordering the MRCI to execute an absolute deed of sale in favor of the
Ventanillas became final and executory when the petitioner failed to appeal it to the
Supreme Court. There was no need then for an order enjoining the petitioner from re-
selling the property in litigation.
They also point to the unusual lack of interest of Marquez in protecting and asserting
his right to the disputed property, a clear indication that the alleged sale to him was
merely a ploy of the petitioner to evade the execution of the absolute deed of sale in
their favor.
The petition must fail.
The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by
the parties. Even in the previous petition, the recognition of that contract was not
assigned as error of either the trial court or appellate court. The fact that the MRCI did
not question the legality of the award for damages to the Ventanillas also shows that
it even then already acknowledged the validity of the contract to sell in favor of the
private respondents.
On top of all this, there are other circumstances that cast suspicion on the validity, not
to say the very existence, of the contract with Marquez.
First, the contract to sell in favor of Marquez was entered into after the lapse of almost
ten years from the rendition of the judgment of the trial court upholding the sale to
the Ventanillas.
Second, the petitioner did not invoke the contract with Marquez during the hearing on
the motion for the issuance of the writ of execution filed by the private respondents. It
disclosed the contract only after the writ of execution had been served upon it.
Third, in its manifestation and motion dated December 21, 1990, the petitioner said it
was ready to deliver the titles to the Ventanillas provided that their counterclaims
against private respondents were paid or offset first. There was no mention of the
contract to sell with Marquez on February 7, 1990.
Fourth, Marquez has not intervened in any of these proceedings to assert and protect
his rights to the subject property as an alleged purchaser in good faith.
At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid,
it cannot prevail over the final and executory judgment ordering MRCI to execute an
absolute deed of sale in favor of the Ventanillas. No less importantly, the records do
not show that Marquez has already paid the supposed balance amounting to
P616,000.00 of the original price of over P800,000.00.2
The Court notes that the petitioner stands to benefit more from the supposed contract
with Marquez than from the contract with the Ventanillas with the agreed price of only
P66,571.00. Even if it paid the P210,000.00 damages to the private respondents as
decreed by the trial court, the petitioner would still earn more profit if the Marquez
contract were to be sustained.
We come now to the order of the trial court requiring the posting of the sum of
P500,000.00 for the lifting of its garnishment order.
While the petitioners have readily complied with the order of the trial court for the
payment of damages to the Ventanillas, they have, however, refused to execute the
absolute deed of sale. It was for the purpose of ensuring their compliance with this
portion of the judgment that the trial court issued the garnishment order which by its
term could be lifted only upon the filling of a cash bond of P500,000.00.
The petitioner questions the propriety of this order on the ground that it has already
partially complied with the judgment and that it has always expressed its willingness
to reimburse the amount paid by the respondents. It says that there is no need for a
garnishment order because it is willing to reimburse the Ventanillas in lieu of execution
of the absolute deed of sale.
The alternative judgment of reimbursement is applicable only if the conveyance of the
lots is not possible, but it has not been shown that there is an obstacle to such
conveyance. As the main obligation of the petitioner is to execute the absolute deed of
sale in favor of the Ventanillas, its unjustified refusal to do so warranted the issuance
of the garnishment order.
Garnishment is a species of attachment for reaching credits belonging to the judgment
debtor and owing to him from a stranger to the litigation.3 It is an attachment by means
of which the plaintiff seeks to subject to his claim property of the defendant in the
hands of a third person or money owed by such third person or garnishee to the
defendant.4 The rules on attachment also apply to garnishment proceedings.
A garnishment order shall be lifted if it established that:
(a) the party whose accounts have been garnished has posted a counterbond or has
made the requisite cash deposit;5
(b) the order was improperly or irregularly issued6 as where there is no ground for
garnishment7 or the affidavit and/or bond filed therefor are defective or insufficient;8
(c) the property attached is exempt from execution, hence exempt from preliminary
attachment9 or
(d) the judgment is rendered against the attaching or garnishing creditor.10
Partial execution of the judgment is not included in the above enumeration of the legal
grounds for the discharge of a garnishment order. Neither does the petitioner's
willingness to reimburse render the garnishment order unnecessary. As for the
counterbond, the lower court did not err when it fixed the same at P500,000.00. As
correctly pointed out by the respondent court, that amount corresponds to the current
fair market value of the property in litigation and was a reasonable basis for
determining the amount of the counterbond.
Regarding the refusal of the petitioner to execute the absolute deed of sale, Section 10
of Rule 39 of the Rules of Court reads as follows:
Sec. 10. Judgment for specific act; vesting title If a judgment directs a party to
execute a conveyance of land, or to deliver deeds or other documents, or to perform
any other specific act, and the party fails to comply within the time specified, the court
may direct the act to be done at the cost of the disobedient party by some other person
appointed by the court and the act when so done shall have like effect as if done by
the party. If real or personal property is within the Philippines, the court in lieu of
directing a conveyance thereof may enter judgment divesting the title of any party and
vesting it in others and such judgment shall have the force and effect of a conveyance
executed in due form of law.
Against the unjustified refusal of the petitioner to accept payment of the balance of the
contract price, the remedy of the respondents is consignation, conformably to the
following provisions of the Civil Code:
Art. 1256. If the creditor to whom tender of payment has been made refuses without
just cause to accept it, the debtor shall be released from responsibility by the
consignation of the thing or sum due. . .
Art. 1258. Consignation shall be made by depositing the things due at the disposal of
the judicial authority, before whom the tender of payment shall be proved, in a proper
case, and the announcement of the consignation in other cases.
The consignation having been made, the interested parties shall also be notified
thereof.
Art. 1260. Once the consignation has been duly made, the debtor may ask the judge
to order the cancellation of the obligation.
Accordingly, upon consignation by the Ventanillas of the sum due, the trial court may
enter judgment canceling the title of the petitioner over the property and transferring
the same to the respondents. This judgment shall have the same force and effect as
conveyance duly executed in accordance with the requirements of the law.
In sum, we find that:
1. No legal impediment exists to the execution, either by the petitioner or the trial
court, of an absolute deed of sale of the subject property in favor of the respondent
Ventanillas; and
2. The lower court did not abuse its discretion when it required the posting of a
P500,000.00 cash bond for the lifting of the garnishment order.
WHEREFORE, the petition is DENIED and the challenged decision of the Court of
Appeals is AFFIRMED in toto, with costs against the petitioner. It is so ordered.

G.R. No. 115838 July 18, 2002
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners,
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari1 seeking to annul the Decision of the
Court of Appeals2 dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto
the decision3 of the Regional Trial Court of Quezon City, Branch 80, in Civil Case No.
Q-89-2631. The trial court disposed as follows:
"WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro
jointly and solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney's fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued
petitioners Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro
("Corazon" for brevity) to collect the unpaid balance of his broker's commission from
the De Castros.4 The Court of Appeals summarized the facts in this wise:
"x x x. Appellants5 were co-owners of four (4) lots located at EDSA corner New York
and Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit
"A-1, p. 144, Records), appellee6 was authorized by appellants to act as real estate
broker in the sale of these properties for the amount of P23,000,000.00, five percent
(5%) of which will be given to the agent as commission. It was appellee who first found
Times Transit Corporation, represented by its president Mr. Rondaris, as prospective
buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually,
sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee
received from appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon emerged. Appellee
apparently felt short changed because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid
by Times Transit Corporation to appellants for the two (2) lots, and that it was he who
introduced the buyer to appellants and unceasingly facilitated the negotiation which
ultimately led to the consummation of the sale. Hence, he sued below to collect the
balance of P303,606.24 after having received P48,893.76 in advance.1wphi1.nt
On the other hand, appellants completely traverse appellee's claims and essentially
argue that appellee is selfishly asking for more than what he truly deserved as
commission to the prejudice of other agents who were more instrumental in the
consummation of the sale. Although appellants readily concede that it was appellee
who first introduced Times Transit Corp. to them, appellee was not designated by them
as their exclusive real estate agent but that in fact there were more or less eighteen
(18) others whose collective efforts in the long run dwarfed those of appellee's,
considering that the first negotiation for the sale where appellee took active
participation failed and it was these other agents who successfully brokered in the
second negotiation. But despite this and out of appellants' "pure liberality, beneficence
and magnanimity", appellee nevertheless was given the largest cut in the commission
(P48,893.76), although on the principle of quantum meruit he would have certainly
been entitled to less. So appellee should not have been heard to complain of getting
only a pittance when he actually got the lion's share of the commission and worse, he
should not have been allowed to get the entire commission. Furthermore, the purchase
price for the two lots was only P3.6 million as appearing in the deed of sale and not
P7.05 million as alleged by appellee. Thus, even assuming that appellee is entitled to
the entire commission, he would only be getting 5% of the P3.6 million, or
P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as agent in
the sale of two lots in Cubao, Quezon City. The handwritten authorization letter signed
by Constante clearly established a contract of agency between Constante and Artigo.
Thus, Artigo sought prospective buyers and found Times Transit Corporation ("Times
Transit" for brevity). Artigo facilitated the negotiations which eventually led to the sale
of the two lots. Therefore, the Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the contract of agency.
Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure
to implead as indispensable parties the other co-owners of the two lots. The Court of
Appeals explained that it is not necessary to implead the other co-owners since the
action is exclusively based on a contract of agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial court did not err in admitting
parol evidence to prove the true amount paid by Times Transit to the De Castros for
the two lots. The Court of Appeals ruled that evidence aliunde could be presented to
prove that the actual purchase price was P7.05 million and not P3.6 million as appearing
in the deed of sale. Evidence aliunde is admissible considering that Artigo is not a party,
but a mere witness in the deed of sale between the De Castros and Times Transit. The
Court of Appeals explained that, "the rule that oral evidence is inadmissible to vary the
terms of written instruments is generally applied only in suits between parties to the
instrument and strangers to the contract are not bound by it." Besides, Artigo was not
suing under the deed of sale, but solely under the contract of agency. Thus, the Court
of Appeals upheld the trial court's finding that the purchase price was P7.05 million and
not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD
INDISPENSABLE PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT
ARTIGO'S CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES, AND
ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to implead
other co-owners as indispensable parties
The De Castros argue that Artigo's complaint should have been dismissed for failure to
implead all the co-owners of the two lots. The De Castros claim that Artigo always knew
that the two lots were co-owned by Constante and Corazon with their other siblings
Jose and Carmela whom Constante merely represented. The De Castros contend that
failure to implead such indispensable parties is fatal to the complaint since Artigo, as
agent of all the four co-owners, would be paid with funds co-owned by the four co-
owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the court's action in
the litigation, and without whom no final determination of the case can be had.7 The
joinder of indispensable parties is mandatory and courts cannot proceed without their
presence.8 Whenever it appears to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of the court to stop the trial and
order the inclusion of such party.9
However, the rule on mandatory joinder of indispensable parties is not applicable to
the instant case.
There is no dispute that Constante appointed Artigo in a handwritten note dated
January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent
commission. The authority was on a first come, first serve basis. The authority reads
in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real estate broker in
connection with the sale of our property located at Edsa Corner New York & Denver,
Cubao, Quezon City.
Asking price P 23,000,000.00 with 5% commission as agent's fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis CAC"
Constante signed the note as owner and as representative of the other co-owners.
Under this note, a contract of agency was clearly constituted between Constante and
Artigo. Whether Constante appointed Artigo as agent, in Constante's individual or
representative capacity, or both, the De Castros cannot seek the dismissal of the case
for failure to implead the other co-owners as indispensable parties. The De Castros
admit that the other co-owners are solidarily liable under the contract of
agency,10 citing Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to the agent for all the consequences of
the agency.
The solidary liability of the four co-owners, however, militates against the De Castros'
theory that the other co-owners should be impleaded as indispensable parties. A noted
commentator explained Article 1915 thus
"The rule in this article applies even when the appointments were made by the
principals in separate acts, provided that they are for the same transaction. The
solidarity arises from the common interest of the principals, and not from
the act of constituting the agency. By virtue of this solidarity, the agent can
recover from any principal the whole compensation and indemnity owing to
him by the others. The parties, however, may, by express agreement, negate this
solidary responsibility. The solidarity does not disappear by the mere partition effected
by the principals after the accomplishment of the agency.
If the undertaking is one in which several are interested, but only some create the
agency, only the latter are solidarily liable, without prejudice to the effects of
negotiorum gestio with respect to the others. And if the power granted includes various
transactions some of which are common and others are not, only those interested in
each transaction shall be liable for it."11
When the law expressly provides for solidarity of the obligation, as in the liability of co-
principals in a contract of agency, each obligor may be compelled to pay the entire To accept Constante's version of the story is to open the floodgates of fraud and deceit.
obligation.12 The agent may recover the whole compensation from any one of the co- A seller could always pretend rejection of the offer and wait for sometime for others to
principals, as in this case. 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
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the
that the alleged `second group' are the employees of the buyer, Times
solidary debtors. This article reads:
Transit and they have not bettered the offer secured by Mr. Artigo for P7
Art. 1216. The creditor may proceed against any one of the solidary debtors or some million.
or all of them simultaneously. The demand made against one of them shall not be an
It is to be noted also that while Constante was too particular about the unrenewed real
obstacle to those which may subsequently be directed against the others, so long as
estate broker's license of Mr. Artigo, he did not bother at all to inquire as to the licenses
the debt has not been fully collected.
of Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40)."15 (Emphasis supplied)
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.13
In any event, we find that the 5 percent real estate broker's commission is reasonable
that
and within the standard practice in the real estate industry for transactions of this
"x x x solidarity does not make a solidary obligor an indispensable party in a nature.
suit filed by the creditor. Article 1216 of the Civil Code says that the creditor `may
The De Castros also contend that Artigo's inaction as well as failure to protest estops
proceed against anyone of the solidary debtors or some or all of them simultaneously'."
him from recovering more than what was actually paid him. The De Castros cite Article
(Emphasis supplied)
1235 of the Civil Code which reads:
Second Issue: whether Artigo's claim has been extinguished by full payment,
Art. 1235. When the obligee accepts the performance, knowing its incompleteness and
waiver or abandonment
irregularity, and without expressing any protest or objection, the obligation is deemed
The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was fully complied with.
given "his proportionate share and no longer entitled to any balance." According to
The De Castros' reliance on Article 1235 of the Civil Code is misplaced. Artigo's
them, Artigo was just one of the agents involved in the sale and entitled to a
acceptance of partial payment of his commission neither amounts to a waiver of the
"proportionate share" in the commission. They assert that Artigo did absolutely nothing
balance nor puts him in estoppel. This is the import of Article 1235 which was explained
during the second negotiation but to sign as a witness in the deed of sale. He did not
in this wise:
even prepare the documents for the transaction as an active real estate broker usually
does. "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 De Castros' arguments are flimsy.
the mere receipt of a partial payment is not equivalent to the required
A contract of agency which is not contrary to law, public order, public policy, morals or acceptance of performance as would extinguish the whole obligation."16
good custom is a valid contract, and constitutes the law between the parties.14 The (Emphasis supplied)
contract of agency entered into by Constante with Artigo is the law between them and
There is thus a clear distinction between acceptance and mere receipt. In this case, it
both are bound to comply with its terms and conditions in good faith.
is evident that Artigo merely received the partial payment without waiving the balance.
The mere fact that "other agents" intervened in the consummation of the sale and were Thus, there is no estoppel to speak of.
paid their respective commissions cannot vary the terms of the contract of agency
The De Castros further argue that laches should apply because Artigo did not file his
granting Artigo a 5 percent commission based on the selling price. These "other agents"
complaint in court until May 29, 1989, or almost four years later. Hence, Artigo's claim
turned out to be employees of Times Transit, the buyer Artigo introduced to the De
for the balance of his commission is barred by laches.
Castros. This prompted the trial court to observe:
Laches means the failure or neglect, for an unreasonable and unexplained length of
"The alleged `second group' of agents came into the picture only during the so-called
time, to do that which by exercising due diligence could or should have been done
`second negotiation' and it is amusing to note that these (sic) second group, prominent
earlier. It is negligence or omission to assert a right within a reasonable time,
among whom are Atty. Del Castillo and Ms. Prudencio, happened to be employees of
warranting a presumption that the party entitled to assert it either has abandoned it or
Times Transit, the buyer of the properties. And their efforts were limited to convincing
declined to assert it.17
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). 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
xxx
the trial court, Artigo demanded in April and July of 1985 the payment of his
commission by Constante on the basis of the selling price of P7.05 million but there
was no response from Constante.18 After it became clear that his demands for payment
have fallen on deaf ears, Artigo decided to sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency, must be brought within
ten years from the time the right of action accrues.19 The right of action accrues from
the moment the breach of right or duty occurs. From this moment, the creditor can
institute the action even as the ten-year prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within the ten-year prescriptive
period. The De Castros, however, still maintain that Artigo's cause of action is barred
by laches. Laches does not apply because only four years had lapsed from the time of
the sale in June 1985. Artigo made a demand in July 1985 and filed the action in court
on May 29, 1989, well within the ten-year prescriptive period. This does not constitute
an unreasonable delay in asserting one's right. The Court has ruled, "a delay within
the prescriptive period is sanctioned by law and is not considered to be a
delay that would bar relief."21 In explaining that laches applies only in the absence
of a statutory prescriptive period, the Court has stated -
"Laches is recourse in equity. Equity, however, is applied only in the absence,
never in contravention, of statutory law. Thus, laches, cannot, as a rule, be
used to abate a collection suit filed within the prescriptive period mandated
by the Civil Code."22
Clearly, the De Castros' defense of laches finds no support in law, equity or
jurisprudence.
Third issue: whether the determination of the purchase price was made in
violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of the evidence
adduced in the trial court to determine whether the actual selling price of the two lots
was P7.05 million and not P3.6 million. The De Castros contend that it is erroneous to
base the 5 percent commission on a purchase price of P7.05 million as ordered by the
trial court and the appellate court. The De Castros insist that the purchase price is P3.6
million as expressly stated in the deed of sale, the due execution and authenticity of
which was admitted during the trial.
The De Castros believe that the trial and appellate courts committed a mistake in
considering incompetent evidence and disregarding the best evidence and parole
evidence rules. They claim that the Court of Appeals erroneously affirmed sub silentio
the trial court's reliance on the various correspondences between Constante and Times
Transit which were mere photocopies that do not satisfy the best evidence rule.
Further, these letters covered only the first negotiations between Constante and Times
Transit which failed; hence, these are immaterial in determining the final purchase
price.
The De Castros further argue that if there was an undervaluation, Artigo who signed
as witness benefited therefrom, and being equally guilty, should be left where he
presently stands. They likewise claim that the Court of Appeals erred in relying on
evidence which were not offered for the purpose considered by the trial court.
Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove that the purchase
price was P7.05 Million. Finally, they argue that the courts a quo erred in giving
credence to the perjured testimony of Artigo. They want the entire testimony of Artigo
rejected as a falsehood because he was lying when he claimed at the outset that he
was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the trial court and
affirmed by the Court of Appeals, or P3.6 Million as claimed by the De Castros, is a
question of fact and not of law. Inevitably, this calls for an inquiry into the facts and
evidence on record. This we can not do.
It is not the function of this Court to re-examine the evidence submitted by the parties,
or analyze or weigh the evidence again.23 This Court is not the proper venue to consider
a factual issue as it is not a trier of facts. In petitions for review on certiorari as a mode
of appeal under Rule 45, a petitioner can only raise questions of law. Our
pronouncement in the case of Cormero vs. Court of Appeals24 bears reiteration:
"At the outset, it is evident from the errors assigned that the petition is anchored on a
plea to review the factual conclusion reached by the respondent court. Such task
however is foreclosed by the rule that in petitions for certiorari as a mode of appeal,
like this one, only questions of law distinctly set forth may be raised. These questions
have been defined as those that do not call for any examination of the probative value
of the evidence presented by the parties. (Uniland Resources vs. Development Bank of
the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119
Phil. 531; Hernandez vs. Court of Appeals, 149 SCRA 67). And when this court is asked
to go over the proof presented by the parties, and analyze, assess and weigh them to
ascertain if the trial court and the appellate court were correct in according superior
credit to this or that piece of evidence and eventually, to the totality of the evidence of
one party or the other, the court cannot and will not do the same. (Elayda vs. Court of
Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any showing that the findings
complained of are totally devoid of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion, such findings must stand, for
this court is not expected or required to examine or contrast the oral and documentary
evidence submitted by the parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991]
citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966])."
We find no reason to depart from this principle. The trial and appellate courts are in a
much better position to evaluate properly the evidence. Hence, we find no other
recourse but to affirm their finding on the actual purchase price.1wphi1.nt
Fourth Issue: whether award of moral damages and attorney's fees is proper
The De Castros claim that Artigo failed to prove that he is entitled to moral damages
and attorney's fees. The De Castros, however, cite no concrete reason except to say
that they are the ones entitled to damages since the case was filed to harass and extort
money from them.
Law and jurisprudence support the award of moral damages and attorney's fees in
favor of Artigo. The award of damages and attorney's fees is left to the sound discretion
of the court, and if such discretion is well exercised, as in this case, it will not be
disturbed on appeal.25 Moral damages may be awarded when in a breach of contract
the defendant acted in bad faith, or in wanton disregard of his contractual obligation.26
On the other hand, attorney's fees are awarded in instances where "the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim."27 There is no reason to disturb the trial court's finding that
"the defendants' lack of good faith and unkind treatment of the plaintiff in refusing to
give his due commission deserve censure." This warrants the award of P25,000.00 in
moral damages and P 45,000.00 in attorney's fees. The amounts are, in our view, fair
and reasonable. Having found a buyer for the two lots, Artigo had already performed
his part of the bargain under the contract of agency. The De Castros should have
exercised fairness and good judgment in dealing with Artigo by fulfilling their own part
of the bargain - paying Artigo his 5 percent broker's commission based on the actual
purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of
Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.
SO ORDERED.
[G.R. No. 79688. February 1, 1996]
PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner, vs. COURT OF
APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED
JARDINICO, respondents.
DECISION
PANGANIBAN, J.:
Is a lot buyer who constructs improvements on the wrong property erroneously
delivered by the owners agent, a builder in good faith? This is the main issue resolved
in this petition for review on certiorari to reverse the Decision[if !supportFootnotes][1][endif] of
the Court of Appeals[if !supportFootnotes][2][endif] in CA-G.R. SP No. 11040, promulgated on
August 20, 1987.
By resolution dated November 13, 1995, the First Division of this Court resolved to
transfer this case (along with several others) to the Third Division. After due
deliberation and consultation, the Court assigned the writing of this Decision to the
undersigned ponente.
The Facts
The facts, as found by respondent Court, are as follows:
Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II
and located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975,
respondent Eldred Jardinico bought the rights to the lot from Robillo. At that time, Lot
9 was vacant.
Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod
City on December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was
then that he discovered that improvements had been introduced on Lot 9 by
respondent Wilson Kee, who had taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same
subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent
of petitioner. Under the Contract to Sell on Installment, Kee could possess the lot even
before the completion of all installment payments. On January 20, 1975, Kee paid
CTTEI the relocation fee of P50.00 and another P50.00 on January 27, 1975, for the
preparation of the lot plan. These amounts were paid prior to Kees taking actual
possession of Lot 8. After the preparation of the lot plan and a copy thereof given to
Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kees wife,
Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by Octaviano
was Lot 9. Thereafter, Kee proceeded to construct his residence, a store, an auto repair
shop and other improvements on the lot.
After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties
tried to reach an amicable settlement, but failed.
On January 30, 1981, Jardinicos lawyer wrote Kee, demanding that the latter remove
all improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed
with the Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for
ejectment with damages against Kee.
Kee, in turn, filed a third-party complaint against petitioner and CTTEI.
The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI.
It further ruled that petitioner and CTTEI could not successfully invoke as a defense
the failure of Kee to give notice of his intention to begin construction required under
paragraph 22 of the Contract to Sell on Installment and his having built a sari-sari store
without. the prior approval of petitioner required under paragraph 26 of said contract,
saying that the purpose of these requirements was merely to regulate the type of
improvements to be constructed on the lot[if !supportFootnotes][3][endif].
However, the MTCC found that petitioner had already rescinded its contract with Kee
over Lot 8 for the latters failure to pay the installments due, and that Kee had not
contested the rescission. The rescission was effected in 1979, before the complaint was
instituted. The MTCC concluded that Kee no longer had any right over the lot subject
of the contract between him and petitioner. Consequently, Kee must pay reasonable
rentals for the use of Lot 9, and, furthermore, he cannot claim reimbursement for the
improvements he introduced on said lot.
The MTCC thus disposed:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:
1. Defendant Wilson Kee is ordered to vacate tithe premises of Lot 9, covered by TCT
No. 106367 and to remove all structures and improvements he introduced thereon;
2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P 15.00
a day computed from the time this suit was filed on March 12, 1981 until he actually
vacates the premises. This amount shall bear interests (sic) at the rate of 12 per cent
(sic) per annum.
3. Third-Party Defendant CT. Torres Enterprises, Inc. and Pleasantville Subdivision are
ordered to pay the plaintiff jointly and severally the sum of P3,000.00 as attorneys fees
and P700.00 as cost and litigation expenses.[if !supportFootnotes][4][endif]
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner
and CTTEI were not at fault or were not negligent, there being no preponderant
evidence to show that they directly participated in the delivery of Lot 9 to Kee.[if
!supportFootnotes][5][endif]
It found Kee a builder in bad faith. It further ruled that even
assuming arguendo that Kee was acting in good faith, he was, nonetheless, guilty of
unlawfully usurping the possessory right of Jardinico over Lot 9 from the time he was
served with notice to vacate said lot, and thus was liable for rental.
The RTC thus disposed:
WHEREFORE, the decision appealed from is affirmed with respect to the order against
the defendant to vacate the premises of Lot No. 9 covered by Transfer Certificate of
Title No. T-106367 of the land records of Bacolod City; the removal of all structures
and improvements introduced thereon at his expense and the payment to plaintiff (sic)
the sum of Fifteen (P 15.00) Pesos a day as reasonable rental to be computed from
January 30, 1981, the date of the demand, and not from the date of the filing of the
complaint, until he had vacated (sic) the premises, with interest thereon at 12% per
annum. This Court further renders judgment against the defendant to pay the plaintiff
the sum of Three Thousand (P3,000.00) Pesos as attorneys fees, plus costs of litigation.
The third-party complaint against Third-Party Defendants Pleasantville Development
Corporation and C.T. Torres Enterprises, Inc. is dismissed. The order against Third-
Party Defendants to pay attorneys fees to plaintiff and costs of litigation is reversed.[if
!supportFootnotes][6][endif]
Following the denial of his motion for reconsideration on October 20, 1986, Kee
appealed directly to the Supreme Court, which referred the matter to the Court of
Appeals.
The appellate court ruled that Kee was a builder in good faith, as he was unaware of
the mix-up when he began construction of the improvements on Lot 8. It further ruled
that the erroneous delivery was due to the negligence of CTTEI, and that such wrong
delivery was likewise imputable to its principal, petitioner herein. The appellate court
also ruled that the award of rentals was without basis.
Thus, the Court of Appeals disposed:
WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and
judgment is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the improvements he
introduced on Lot 9, and is entitled to the rights granted him under Articles 448, 546
and 548 of the New Civil Code.
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are solidarily liable under the following circumstances:
a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove
these structures, the third-party defendants shall answer for all demolition expenses
and the value of the improvements thus destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer
for the amount representing the value of Lot 9 that Kee should pay to Jardinico.
3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are ordered to pay in solidum the amount of P3,000.00 to Jardinico as
attorneys fees, as well as litigation expenses.
4. The award of rentals to Jardinico is dispensed with.
Furthermore, the case is REMANDED to the court of origin for the determination of the
actual value of the improvements and the property (Lot 9), as well as for further
proceedings in conformity with Article 448 of the New Civil Code.[if !supportFootnotes][7][endif]
Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.
The Issues
The petition submitted the following grounds to justify a review of the respondent
Courts Decision, as follows:
1. The Court of Appeals has decided the case in a way probably not in accord with law
or the the (sic) applicable decisions of the Supreme Court on third-party complaints,
by ordering third-party defendants to pay the demolition expenses and/or price of the
land;
2. The Court of Appeals has so far departed from the accepted course of judicial
proceedings, by granting to private respondent-Kee the rights of a builder in good faith
in excess of what the law provides, thus enriching private respondent Kee at the
expense of the petitioner;
3. In the light of the subsequent events or circumstances which changed the rights of
the parties, it becomes imperative to set aside or at least modify the judgment of the
Court of Appeals to harmonize with justice and the facts;
4. Private respondent-Kee in accordance with the findings of facts of the lower court is
clearly a builder in bad faith, having violated several provisions of the contract to sell
on installments;
5. The decision of the Court of Appeals, holding the principal, Pleasantville Development
Corporation (liable) for the acts made by the agent in excess of its authority is clearly
in violation of the provision of the law;
6. The award of attorneys fees is clearly without basis and is equivalent to putting a
premium in (sic) court litigation.
From these grounds, the issues could be re-stated as follows:
(1) Was Kee a builder in good faith?
(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.?
and
(3) Is the award of attorneys fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the RTCs ruling that
Kee was a builder in bad faith.
Petitioner fails to persuade this Court to abandon the findings and conclusions of the
Court of Appeals that Kee was a builder in good faith. We agree with the following
observation of the Court of Appeals:
The roots of the controversy can be traced directly to the errors committed by CTTEI,
when it pointed the wrong property to Wilson Kee and his wife. It is highly improbable
that a purchaser of a lot would knowingly and willingly build his residence on a lot
owned by another, deliberately exposing himself and his family to the risk of being
ejected from the land and losing all improvements thereon, not to mention the social
humiliation that would follow.
Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining
the identity of his property. Lot 8 is covered by Transfer Certificate of Title No. T-69561,
while Lot 9 is identified in Transfer Certificate of Title No. T-106367. Hence, under the
Torrens system of land registration, Kee is presumed to have knowledge of the metes
and bounds of the property with which he is dealing. x x x
xxx xxx xxx
But as Kee is a layman not versed in the technical description of his property, he had
to find a way to ascertain that what was described in TCT No. 69561 matched Lot 8.
Thus, he went to the subdivision developers agent and applied and paid for the
relocation of the lot, as well as for the production of a lot plan by CTTEIs geodetic
engineer. Upon Kees receipt of the map, his wife went to the subdivision site
accompanied by CTTEIs employee, Octaviano, who authoritatively declared that the
land she was pointing to was indeed Lot 8. Having full faith and confidence in the
reputation of CTTEI, and because of the companys positive identification of the
property, Kee saw no reason to suspect that there had been a misdelivery. The steps
Kee had taken to protect his interests were reasonable. There was no need for him to
have acted ex-abundantia cautela, such as being present during the geodetic engineers
relocation survey or hiring an independent geodetic engineer to countercheck for
errors, for the final delivery of subdivision lots to their owners is part of the regular
course of everyday business of CTTEI. Because of CTTEIs blunder, what Kee had hoped
to forestall did in fact transpire. Kees efforts all went to naught.[if !supportFootnotes][8][endif]
Good faith consists in the belief of the builder that the land he is building on is his and
his ignorance of any defect or flaw in his title.[if !supportFootnotes][9][endif] And as good faith
is presumed, petitioner has the burden of proving bad faith on the part of Kee.[if
!supportFootnotes][10][endif]
At the time he built improvements on Lot 8, Kee believed that said lot was what he
bought from petitioner. He was not aware that the lot delivered to him was not Lot 8.
Thus, Kees good faith. Petitioner failed to prove otherwise.
To demonstrate Kees bad faith, petitioner points to Kees violation of paragraphs 22
and 26 of the Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on whether Kee was a builder
in good faith, that is, on his state of mind at the time he built the improvements on Lot
9. These alleged violations may give rise to petitioners cause of action against Kee
under the said contract (contractual breach), but may not be bases to negate the
presumption that Kee was a builder in good faith.
Petitioner also points out that, as found by the trial court, the Contract of Sale on
Installment covering Lot 8 between it and Kee was rescinded long before the present
action was instituted. This has no relevance on the liability of petitioner, as such fact
does not negate the negligence of its agent in pointing out the wrong lot to Kee. Such
circumstance is relevant only as it gives Jardinico a cause of action for unlawful detainer
against Kee.
Petitioner next contends that Kee cannot claim that another lot was erroneously pointed
out to him because the latter agreed to the following provision in the Contract of Sale
on Installment, to wit:
13. The Vendee hereby declares that prior to the execution of his contract he/she has
personally examined or inspected the property made subject-matter hereof, as to its
location, contours, as well as the natural condition of the lots and from the date hereof
whatever consequential change therein made due to erosion, the said Vendee shall
bear the expenses of the necessary fillings, when the same is so desired by him/her.[if
!supportFootnotes][11][endif]
The subject matter of this provision of the contract is the change of the location,
contour and condition of the lot due to erosion. It merely provides that the vendee,
having examined the property prior to the execution of the contract, agrees to shoulder
the expenses resulting from such change.
We do not agree with the interpretation of petitioner that Kee contracted away his right
to recover damages resulting from petitioners negligence. Such waiver would be
contrary to public policy and cannot be allowed. Rights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good customs, or
prejudicial to a third person with a right recognized by law.[if !supportFootnotes][12][endif]
The Second Issue: Petitioners Liability
Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed by
the RTC after ruling that there was no evidence from which fault or negligence on the
part of petitioner and CTTEI can be inferred. The Court of Appeals disagreed and found
CTTEI negligent for the erroneous delivery of the lot by Octaviano, its employee.
Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the
erroneous delivery of Lot 9 to Kee was an act which was clearly outside the scope of
its authority, and consequently, CTTEI alone should be liable. It asserts that while
[CTTEI] was authorized to sell the lot belonging to the herein petitioner, it was never
authorized to deliver the wrong lot to Kee.[if !supportFootnotes][13][endif]
Petitioners contention is without merit.
The rule is that the principal is responsible for the acts of the agent, done within the
scope of his authority, and should bear the damage caused to third persons.[if
!supportFootnotes][14][endif] On the other hand, the agent who exceeds his authority is
personally liable for the damage.[if !supportFootnotes][15][endif]
CTTEI was acting within its authority as the sole real estate representative of petitioner
when it made the delivery to Kee. In acting within its scope of authority, it was,
however, negligent. It is this negligence that is the basis of petitioners liability, as
principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.
Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July
24, 1987 entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico
and Kee did not inform the Court of Appeals of such deal.
The deed of sale contained the following provision:
1. That Civil Case No. 3815 entitled Jardinico vs. Kee which is now pending appeal with
the Court of Appeals, regardless of the outcome of the decision shall be mutually
disregarded and shall not be pursued by the parties herein and shall be considered
dismissed and without effect whatsoever;[if !supportFootnotes][16][endif]
Kee asserts though that the terms and conditions in said deed of sale are strictly for
the parties thereto and that (t)here is no waiver made by either of the parties in said
deed of whatever favorable judgment or award the honorable respondent Court of
Appeals may make in their favor against herein petitioner Pleasantville Development
Corporation and/or private respondent C.T. Torres Enterprises, Inc.[if
!supportFootnotes][17][endif]
Obviously, the deed of sale can have no effect on the liability of petitioner. As we have
earlier stated, petitioners liability is grounded on the negligence of its agent. On the
other hand, what the deed of sale regulates are the reciprocal rights of Kee and
Jardinico; it stressed that they had reached an agreement independent of the outcome
of the case.
Petitioner further assails the following holding of the Court of Appeals:
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are solidarily liable under the following circumstances:
a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove
these structures, the third-party defendants shall answer for all demolition expenses
and the value of the improvements thus destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer
for the amount representing the value of Lot 9 that Kee should pay to Jardinico.[if
!supportFootnotes][18][endif]
Petitioner contends that if the above holding would be carried out, Kee would be
unjustly enriched at its expense. In other words, Kee would be -able to own the lot, as
buyer, without having to pay anything on it, because the aforequoted portion of
respondent Courts Decision would require petitioner and CTTEI jointly and solidarily to
answer or reimburse Kee there for.
We agree with petitioner.
Petitioners liability lies in the negligence of its agent CTTEI. For such negligence, the
petitioner should be held liable for damages. Now, the extent and/or amount of
damages to be awarded is a factual issue which should be determined after evidence
is adduced. However, there is no showing that such evidence was actually presented
in the trial court; hence no damages could now be awarded.
The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner
in good faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of the
Civil Code). It was error for the Court of Appeals to make a slight modification in the
application of such law, on the ground of equity. At any rate, as it stands now, Kee and
Jardinico have amicably settled through their deed of sale their rights and obligations
with regards to Lot 9. Thus, we delete items 2 (a) and (b) of the dispositive portion of
the Court of Appeals Decision [as reproduced above] holding petitioner and CTTEI
solidarily liable.
The Third Issue: Attorneys Fees
The MTCC awarded Jardinico attorneys fees and costs in the amount of P3,000.00 and
P700.00, respectively, as prayed for in his complaint. The RTC deleted the award,
consistent with its ruling that petitioner was without fault or negligence. The Court of
Appeals, however, reinstated the award of attorneys fees after ruling that petitioner
was liable for its agents negligence.
The award of attorneys fees lies within the discretion of the court and depends upon
the circumstances of each case.[if !supportFootnotes][19][endif] We shall not interfere with the
discretion of the Court of Appeals. Jardinico was compelled to litigate for the protection
of his interests and for the recovery of damages sustained as a result of the negligence
of petitioners agent.[if !supportFootnotes][20][endif]
In sum, we rule that Kee is a builder in good faith. The disposition of the Court of
Appeals that Kee is entitled to the rights granted him under Articles 448, 546 and 548
of the New Civil Code is deleted, in view of the deed of sale entered into by Kee and
Jardinico, which deed now governs the rights of Jardinico and Kee as to each other.
There is also no further need, as ruled by the appellate Court, to remand the case to
the court of origin for determination of the actual value of the improvements and the
property (Lot 9), as well as for further proceedings in conformity with Article 448 of
the New Civil Code.
WHEREFORE, the petition is partially GRANTED. The Decision of the Court of
Appeals is hereby MODIFIED as follows:
(1) Wilson Kee is declared a builder in good faith;
(2) Petitioner Pleasantville Development Corporation and respondent C.T. Tones
Enterprises, Inc. are declared solidarily liable for damages due to negligence; however,
since the amount and/or extent of such damages was not proven during the trial, the
same cannot now be quantified and awarded;
(3) Petitioner Pleasantville Develpment Corporation and respondent C.T. Torres
Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to Jardinico
as attorneys fees, as well as litigation expenses; and
(4) The award of rentals to Jardinico is dispensed with.
SO ORDERED.