tHE BANK OF THE PHILIPPINE ISLANDS, plaintiff-
appellee,
vs.
GABRIELA ANDREA DE COSTER Y ROXAS, ET
AL., defendants.
LA ORDEN DE DOMINICOS or PP. PREDICADORES
DE LA PROVINCIA DEL SANTISIMO ROSARIO,
March 10, 1924, the plaintiff filed a complaint in
which it was alleged that it was a domestic
banking corporation with its principal office and
place of business in the City of Manila; that the
defendant Gabriela Andrea de Coster y Roxas
was the wife of the defendant Jean M. Poizat,
both of whom were residents of the City of
Manila; that the defendant J. M. Poizat and Co.
was a duly registered partnership with its
principal office and place of business in the City
of Manila; that the defendant La Orden de
Dominicos or PP. Predicadores de la Provincia
del Santisimo Rosario was a religious corporation
duly organized and existing under the laws of the
Philippine Islands with its principal office and
place of business in the City of Manila; that on
December 29, 1921, for value, the defendant
Gabriela Andrea de Coster y Roxas, having the
consent and permission of her husband, and he
acting as her agent, said defendants made to the
plaintiff a certain promissory note for P292,000,
payable one year after date, with interest of 9
per cent per annum, payable monthly, in which,
among other things, it is provided that in the
event of a suit or action, the defendants should
pay the further sum of P10,000, as attorney's
fees; that the note in question was a joint and
several note; that to secure the payment
thereof, the defendants Jean M. Poizat and J. M.
Poizat and Co. executed a chattel mortgage to
the plaintiff on the steamers Roger
Poizat and Gabrielle Poizat, with the machinery
and materials belonging to the Poizat Vegetable
Oil Mills and certain merchandise; that at the
same time and for the same purpose, the
defendant Gabriela Andrea de Coster y Roxas,
having the consent and permission of her
husband, and he acting as her agent, they
acknowledged and delivered to this plaintiff a
mortgage on certain real property lying and
being situated in the City of Manila, which is
specifically described in the mortgage; that the
real property was subject to a prior mortgage in
favor of La Orden de Dominicos or PP.
Predicadores de la Provincia del Santisimo
Rosario, hence it is made a party defendant; that
the note in question is long past due and owing.
The plaintiff having brought action against the
defendants on the note in the Court of First
Instance of the City of Manila, civil case No.
25218; that in such case the court rendered
judgment against the defendants Gabriela
Andrea de Coster y Roxas, Jean M. Poizat and J.
M. Poizat and Co. jointly and severally for
P292,000, with interest at the rate of 9 per cent
per annum from the 31st of August, 1923,
P10,000 as attorney's fees, and P2,500 for and in
account of insurance upon the steamer Gabrielle
Poizat, with interest on that amount from
February 9, 1924, at the rate of 9 per cent per
annum, and costs; that the said defendants have
not paid the judgment or any part thereof, and
that the full amount of the debt secured by the
mortgaged on the property described in the
complaint is now due and owing. Wherefore,
plaintiff prays for an order of the court to direct
the sheriff of the City of Manila to take
immediate possession of the property described
in the chattel mortgage and sell the same
according to the Chattel Mortgage Law; that the
property described in the real mortgage or so
much thereof as may be required to pay the
amount due the plaintiff be sold according to
law; that out of such sales plaintiff shall be paid
the amount due and owing it; and that such
defendants be adjudged to pay any remaining
deficiency.
Copies of the chattel and real mortgage are
attached to, and made a part of, the complaint
and marked, respectively, Exhibits A and B.
On April 24, 1924, the La Orden de Dominicos or
PP. Predicadores de la Provincia del Santisimo
Rosario appeared in the suit and filed the
following plea:
The defendant corporation, La Orden de
Dominicos or PP. Predicadores de la Provincia
del Santisimo Rosario, for answer to the
complaint, shows:
I. That the encumbrance above-mentioned, but
not determined in paragraph V of the complaint,
consisting of a first mortgage in favor of the
aforesaid religious corporation on the property
described in paragraph IV of the same complaint
is P125,000 with interest of 10 per cent per
annum;
II. That the mortgagors Jean M. Poizat and
Gabriela Andrea de Coster y Roxas, have not paid
the principal or the interest stipulated and
agreed upon from the 16th of December, 1921
up to the present date;
III. The interest due up to the 30th of April of the
present year 1924 amounts to a total sum of
P27,925.34.
Wherefore, it is prayed that the credit above-
mentioned be taken into account when the
second mortgage is foreclosed.
May 3, 1924, on motion of the plaintiff, for
failure to appear or answer, the defendants
Gabriela Andrea de Coster y Roxas and Jean M.
Poizat and J.M. Poizat & Co. were declared in
default.
Without giving any notice of the defendants Jean
M. Poizat, J.M. Poizat & Co. and Gabriela Andrea
de Coster y Roxas, and after the introduction of
evidence on the part of the plaintiff and the
defendant Dominican Fathers, on June 24, 1924,
the court rendered an opinion in substance and
to the effect that the plaintiff should have
judgment as prayed for in its complaint, and that
the Dominican Fathers should have judgment for
the amount of their claim, and that the property
should be sold and the proceeds applied to
satisfy the respective judgments.
About August 26, although her attorney, the
defendant Gabriela Andrea de Coster y Roxas
filed a motion in which she recites that she is the
legitimate wife of the defendant Jean M. Poizat;
that she had been absent from the Philippine
Islands and residing in the City of Paris from the
year 1908 to April 30, 1924, when she returned
to Manila; that at that time of the filing of the
complaint and the issuance of the summons, she
was absent from the Philippine Islands; that the
summons was delivered by the sheriff of the City
of Manila to her husband, and that through his
malicious negligence, default was taken and
judgment entered for the respective amounts;
that she never had any knowledge of the actual
facts until the latter part of July, 1924, when,
through the local newspapers, she learned that
a default judgment had been rendered against
her on July 28, 1924; that when she first knew of
that fact, she was unable to obtain the rendition
of accounts, because her husband had left the
Philippine Islands two days previous and gone to
Hongkong; that she then went to Hongkong and
learned that her husband had left there under a
false name and had gone to the port of
Singapore from whence he went to other places
unknown to thus defendant; that she then
returned to Manila, and that in August, 1924, she
came into possession of documents showing the
illegally of the notes and mortgage in question;
that she has a good and legal defense to the
action, which involves the validity of the order of
the Dominican Fathers in this, that their
mortgage does not guarantee any loan made to
this defendant; that it is a security only given for
a credit of a third person; that the mortgage was
executed without the marital consent of the
wife; and that he did not have nay authority to
make her liable as surety on the debt of a third
person; that as regards the notes to the plaintiff:
First, it does not represent any money paid to
the defendant by the bank; second, that it is
exclusively the personal debt of the defendants
Jean M. Poizat and J.M. Poizat & Co., third, that
it was executed by her husband, because the
bank desired more security for the payment of
her husband's debt to the bank; fourth, that it
was executed by her husband in excess of the
powers given to him under his power of
attorney; fifth, that it was executed as the result
of collusion between the bank and the
defendant liable for the obligation of a third
person. That as to the mortgage: First, it was
executed to secure a void obligation; second, it
does not guarantee any loan made to this
defendant; third, it was executed to secure a
void litigation; second, it does not guarantee any
loan made to third defendant; third, it was
executed without the express marital consent
which the law requires; fourth, it was executed
through collusion. That if the judgment is not set
aside, the defendant will suffer irreparable
injury; that through surprise and negligence, for
which she was not responsible, this defendant
was prevented from defending herself in this
action; that this is a case which comes under
section 113 of the Code of Civil Procedure. She
prays that the judgment annulled and set aside
and the case be reopened, and that she be
permitted to file an answer, and that the case be
tried on its merits, and that a final judgment be
rendered, absolving her from all liability.
The motion was based upon, and supported by,
the affidavit of the defendant wife, to which was
attached a large number of exhibits all of which
tended to support the motion.
After counter showings by the bank and the
Dominican Fathers and the arguments of
respective counsel, the motion to set aside and
vacate the judgment was denied. A motion for a
reconsideration was then made, and the motion
of the defendant to file an answer and make a
defense was again denied. The defendant
Gabriela Andrea de Coster y Roxas appeals,
assigning the following errors;
PART I action.
AS TO THE JURISDICTION
I. The lower court erred in holding that it had
acquired jurisdiction on the defendant Gabriela
Andrea de Coster y Roxas,
(1) There having been no service of the summons
on her in the manner required by section 396 of
the Code of Civil Procedure, she being absent
from the Philippine Islands at the time of the
filing of the complaint and of the issuance of the
summons in this case, and a resident of Paris,
France, where she had lived permanently and
continuously for fifteen years prior thereof, and
(2) There having been no se rive by publication in
the manner required by section 398 of the Code
of Civil Procedure.
II. The lower court erred in considering that in a
case where the wife is the only necessary party,
service of the summons on the husband, at a
place which is not "the usual place of residence"
of the wife and where the wife has never lived or
resided, is sufficient to give the court jurisdiction
on the person and property of the wife and to
render judgment by default against her.
III. The court erred in admitting and considering
evidence, outside of the sheriff's return, of the
fact that the husband of the defendant Gabriela
Andrea de Coster y Roxas was her attorney in
fact with power to appear for the defendant in
court.
IV. The court erred in holding that the non-
appearance of an agent of the defendant when
service of the summons has been made on him
not as the agent of the defendant but in other
capacity, will entitle the plaintiff who has
misstated the material jurisdictional facts of the
complaint to a judgment by default against the
principal.
V. The lower court erred in refusing to vacate a
judgment by default against the defendant
Gabriela Andrea de Coster y Roxas rendered on
a defective summons, served in a manner not
provided for by the law, and in a case where the
complaint shows that plaintiff has no right of
PART II
AS TO THE MERITS OF THE DEFENSE
I. The lower court erred, with abuse of
discretion, in holding that the negligence, if any,
of J.M. Poizat in not appearing on behalf of the
defendant Gabriela Andrea de Coster y Roxas,
can be imputed to this defendant, without
redress, and to the advantage of the plaintiff
bank who in collusion with said J.M. Poizat
caused the latter to contract beyond the scope
of his powers as agent of this defendant the
obligation which is the subject matter of this
case.
II. The lower court erred in holding that the relief
on the part of J.M. Poizat that there was no
defense against the claim of the plaintiff on an
obligation contracted by said J.M. Poizat
apparently as agent of the defendant Gabriela
Andrea de Coster y Roxas, but in truth beyond
the scope of his authority, and with knowledge
on the part of the plaintiff bank that he was so
acting beyond his powers, was such an error was
can be imputed to this defendant, and against
which she can obtain no redress.
III. The lower court erred in not holding that a
principal is not liable for an obligation contracted
by his agent beyond his power even when both
the creditor and the agent believed that the
latter was acting within the scope of his powers.
IV. The lower court erred in holding that because
the agent of the defendant Gabriela Andrea de
Coster y Roxas had power to appear for her in
court, his non-appearance could render this
defendant liable to a judgment by default, when
the record shows that there was no service of
the summons in accordance with any of the
forms of service provided by law.
V. The lower court erred in holding that J.M.
Poizat was summoned as agent of hi wife, the
defendant Gabriela Andrea de Coster y Roxas,
and was, in that capacity, notified of all the
decisions rendered in this case, there being
nothing in the record to support the truth of such
finding.
VI. The lower court erred in holding that in
contracting the obligations in favor of the
plaintiff Bank of the Philippine Islands and of the
defendant Orden de PP. Predicadores de la
Provincia del Santisimo Rosario, the agent of the
defendant Gabriela Andrea de Coster y Roxas
acted within the scope of his powers.
VII. The lower court erred in not holding that the
plaintiff Bank of the Philippine Islands and the
defendant Orden de PP. Predicadores de la
Provincia del Santisimo Rosario had knowledge
of the fact that J.M. Poizat in contracting the
respective obligations in their favor, pretending
to act as agent of the defendant Gabriela Andrea
de Coster y Roxas, was acting beyond the scope
of his powers as such agent.
VIII. The lower court erred in making the
following statement:
"It is however alleged, by the petitioner, that
these loans were obtained to pay debts, of
strangers. Even so, this would not render the
loan obtained by the attorney in fact null and
void. The circumstance that the agent used the
money, borrowed by him within the scope of his
powers, to purposes for which he was not
authorized by his principal, may entitle the latter
to demand from him the corresponding liability
for the damages suffered, but it cannot prejudice
the creditor and cause the nullity of the loan.
But, even admitting that the money borrowed
was used by Poizat to pay debts which did not
belong to his principal, even then, he would have
acted within his powers, since his principal,
together with the power to borrow money, had
given her agent power to loan any amount of
money, and the payment of the debts of a
stranger would amount to a loan made by the
agent on behalf of his principal to the person or
entity whose debt was paid with the money
obtained from the creditors."
IX. The lower court erred in applying to this case
the principle involved in the case of Palanca vs.
Smith, Bell and Co., 9 Phil., 131.
X. The court erred in supplying from its own
imagination facts which did not take place, of
which there is no evidence in the record, and
which the parties never claimed to have existed,
and then draw the conclusion that if under those
hypothetical facts the transaction between J.M.
Poizat and the Bank of the Philippine Islands
might have been legal, then the transaction as it
actually took place was also legal.
XI. The lower court erred in holding that
defendant has not alleged any of the grounds
enumerated in section 113 of the Code of Civil
Procedure.
XII. The lower court erred in holding that this
defendant-appellant has no meritorious defense
against the Dominican Order and the Bank of the
Philippine Islands.
XIII. The lower court erred in taking into
consideration Exhibit A appearing at pages 156-
165 of the bill of exceptions.
XIV. The lower court erred in denying the motion
filed by this defendant-appellant.
XV. The lower court has acted throughout these
proceedings with a clear abuse of discretion.
JOHNS, J.:
We will decide the case of the bank first
The petition of the appellant states under oath:
II. That this defendant has been absent from the
Philippine Islands and residing in the City of
Paris, France, since the year 1908 (1909), up to
April 30, 1924, on which date she arrived in this
City of Manila, Philippine Islands.
III. That at the time when the complaint in this
case was filed and the summons issued, she was
still absent from the Philippine Islands and had
no knowledge either of the filing of this action or
of the facts which led to it.
Under oath the plaintiff, through its acting
president, says:
I-II. That it admits the allegations contained in
paragraphs I and II of the aforesaid motion.
III. That it admits the first part of this paragraph,
to wit: That at the time that the complaint in the
above entitled case was filed, the defendant
Gabriela Andrea de Coster y Roxas was absent
from the Philippine Islands.
Paragraph 6 of section 396 of the Code of Civil
Procedure provides:
In all other cases, to the defendant personally, or
by leaving a copy at his usual place of residence,
in the hands of some person resident therein of
sufficient discretion to receive the same. But
service upon a corporation, as provided in
subsections one and two, may be made by
leaving the copy at the office of the proper
officer thereof if such officer cannot be found.
The return of the sheriff as to the service is as
follows:
On this date I have served a copy of the within
summons, and of the complaint attached, upon
Jean M. Poizat, personally, and the copies
corresponding to J.M. Poizat and Co., a company
duly organized under the laws of the Philippine
Islands, by delivering said copies to its President
Mr. Jean M. Poizat, personally, and the copies
corresponding to Gabriela Andrea de Coster y
Roxas, by leaving the same in the place of her
usual residence in the City of Manila and in the
hands of her husband, Mr. J.M. Poizat, a person
residing therein and of sufficient discretion to
receive it, personally.
Done at Manila, P.I., this 13th day of March,
1924.
RICARDO SUMMERS
Sheriff of Manila
By GREGORIO GARCIA
I hereby certify that on this date I have delivered
a copy of this summons and of the complaint
corresponding to the "La Orden de Dominicos or
PP. Predicadores de la Provincia del Santisimo
Rosario," through Father Pedro Pratt,
Procurador General of said Orden de Dominicos
or PP. Predicadores de la Provincia del Santisimo
Rosario, personally.
Manila, P.I., April 1, 1924.
RICARDO SUMMERS
Sheriff of Manila
By SIMEON D. SERDEÑA
It will be noted that the service of summons and
complaint was made on this defendant on the
13th day of March, 1924, and that it is a
stipulated fact that since the year 1908 and up to
April 30, 1924, she was "residing in the City of
Paris, France." Even so, it is contended that the
service was valid by reason of the fact that it was
made at the usual place of residence and abode
of the defendant husband, and that legally the
residence of the wife is that of the husband. That
contention is in direct conflict with the admission
of the plaintiff that since the year 1908 and up to
April 30, 1924, the wife was residing in the City
of Paris. The residence of the wife in the City of
Paris covered a period of sixteen years.
It may be that where in the ordinary course of
business the wife is absent from the residence of
husband on a pleasure trip or for business
reasons or to visit friends or relatives that, in the
nature of such things, the residence of the wife
would continue and remain to be that of the
husband. That is not this case. For sixteen years
the residence of the husband was in the City of
Manila, and the residence of the wife was in the
City of Paris.
Upon the admitted facts, we are clearly of the
opinion that the residence of the husband was
not the usual place of residence of the wife.
Giving full force and effect to the legal
presumption that the usual place of residence of
the wife is that of her husband, that presumption
is overcome by the admitted fact that the wife
was "residing in the City of Paris, France, since
the year 1908 up to April 30, 1924."
Without placing a limitation upon the length of
time sufficient to overcome the legal
presumption, suffice it to say that sixteen years
is amply sufficient.
It follows that the substituted service attempted
to be made under the provisions of section 396
of the Code of Civil Procedure is null and void,
and that by such service the court never acquired
jurisdiction of the person of the defendant wife.
In that event the plaintiff contends that under his
power of attorney, the husband was the general
agent of the wife with authority to accept service
of process for her and in her name, and that by
reason of the fact that the husband was duly
served and that he failed or neglected to appear
or answer, his actions and conduct were binding
on the defendant wife. Be that as it may, there is
nothing in the record tending to show that the
husband accepted service of any process for or
on account of his wife or as her agent, or that he
was acting for or representing her in his failure
and neglect to appear or answer.
The first appearance in court of the defendant
wife was made when she filed the motion of
August 26, 1924, in which she prays in legal
effect that the judgment against her be annulled
and set aside and the case reopened, and that
she be permitted to file an answer and to have
the case tried on its merits. That was a general
appearance as distinguished from a special
appearance. When she filed that motion asking
to be relieved from the legal force and effect of
the judgment, she submitted herself to the
jurisdiction of the court. If, in the first instance,
she had made a special appearance to question
only the jurisdiction of the court, and had not
appeared for any other or different purpose,
another and a different question would have
been presented. Having made a general
appearance for one purpose, she is now in court
for all purposes.
It is an elementary rule of law that as a condition
precedent, to entitle a party to relief from a
judgment "taken against him through his
mistake, inadvertence, surprise or excusable
neglect," that, among other things, he must
show to the court that he has a meritorious
defense. Based upon that legal principle the
bank contends that no such a showing has been
made by the defendant wife. That involves the
legal construction of the power of attorney
which, it is admitted, the wife gave to her
husband on August 25, 1903, which, among
other things material to this opinion, recites that
she gave to him:
Such full and ample power as required or
necessary, to the end that he may perform on my
behalf, and in my name and availing himself of all
my rights and actions, the following acts:
5. Loan or borrow any sums of money or fungible
things at the rate of interest and for the time and
under the conditions which he might deem
convenient, collecting or paying the capital or
the interest on their respective due dates;
executing and signing the corresponding public
or private documents related thereto, and
making all these transactions with or without
mortgages, pledges or personal guaranty.
6. Enter into any kind of contracts whether civil
or mercantile, giving due form thereof either by
private documents or public deeds with all
clauses and requisites provided by law for their
validity and effect, having due regard to the
nature of each contract.
7. Draw, endorse, accept, issue and negotiate
any drafts, bills of exchange, letters of credit,
letters of payment, bills, vales, promissory notes
and all kinds of documents representative of
value; paying or collecting the value thereof on
their respective due dates, or protesting them
for non-acceptance or non-payment, utilizing in
this case the rights granted by the Code of
Commerce now in force, in order to collect the
value thereof, interests, expenses and damages
against whomsoever should be liable therefor.
8. Institute before the competent courts the
corresponding action in justification of the
possession which I have or might have over any
real estate, filing the necessary pleadings,
evidencing them by means of documentary or
oral testimony admissible by law; accepting
notices and summons, and instituting all
necessary proceedings for the termination
thereof and the consequent inscription of said
action in the corresponding office of the Register
of Deeds, in the same manner in which I might
do if personally present and acting.
9. Represent me in all cases before the municipal
courts, justice of the peace courts, courts of first
instance, supreme court and all other courts of
regular or any other special jurisdiction,
appearing before them in any civil or criminal
proceedings, instituting and filing criminal and
ordinary civil actions, claims in intestate and
testamentary proceedings, insolvencies and
other actions provided by law; filing complaints,
answers, counterclaims, cross complaints,
criminal complaints and such other pleadings as
might be necessary; filing demurrers, taking and
offering judicial admissions, documentary,
expert, oral evidence, and others provided by
law, objecting to and opposing whatever
contrary actions are taken, offered and
presented; accepting notices, citations and
summons and acknowledging their receipt to the
proper judicial officials.
10. For to the end stated above and the incidents
related thereto, I confer on him ample and
complete power, binding myself in the most
solemn manner as required by law to recognize
as existing and valid all that he might do by virtue
hereof.
It is admitted that on December 29, 1921, the
defendant husband signed the name of the
defendant wife to the promissory note in
question, and that to secure the payment of the
note, upon the same date and as attorney in fact
for his wife, the husband signed the real
mortgage in question in favor of the bank, and
that the mortgage was duly executed.
Based upon such admissions, the bank
vigorously contends that the defendant wife has
not shown a meritorious defense. In fact that it
appears from her own showing that she does not
have a legal defense. It must be admitted that
upon the face of the instruments, that fact
appears to be true. To meet that contention, the
defendant wife points out, first, that the note in
question is a joint and several note, and, second,
that it appears from the evidence, which she
submitted, that she is nothing more than an
accommodation maker of the note. She also
submits evidence which tends to show:
First. That prior to July 25, 1921, Jean M. Poizat
was personally indebted to the Bank of the
Philippine Islands in the sum of P290,050.02
(Exhibit H, page 66, bill of exceptions);
Second. That on July 25, 1921, the personal
indebtedness of Jean M. Poizat was converted
into six promissory notes aggregating the sum of
P308,458.58 of which P16,180 were paid, leaving
an outstanding balance of P292,278.58 (Exhibits
D, E, F, G, H and I, pages 75-80, bill of
exceptions);
Third. That on December 29, 1921, the above
promissory notes were cancelled and
substituted by a joint and several note signed by
Jean M. Poizat in his personal capacity and as
agent of Gabriela Andrea de Coster y Roxas and
as member of the firm J.M. Poizat and Co.
In other words, that under the power of
attorney, the husband had no authority for and
on behalf of the wife to execute a joint and
several note or to make her liable as an
accommodation maker. That the debt in
question was a preexisting debt of her husband
and of the firm of J.M. Poizat and Co., to which
she was not a party, and for which she was under
no legal obligation to pay. That she never
borrowed any money from the bank, and that
previous to the signing of the note, she never
had any dealings with the bank and was not
indebted to the bank in any amount. That the
old, original debts of her husband and J.M. Poizat
and Co. to the bank, to which she was not a
party, were all taken up and merged in the new
note of December 29, 1921, in question, and that
at the time the note was signed, she did not
borrow any money, and that no money was
loaned by the bank to the makers of the note.
Assuming such facts to be true, it would be a
valid defense by the defendant wife to the
payment of the note. There is no claim or
pretense that the bank was misled or deceived.
If it had made an actual loan of P292,000 at the
time the note was executed, another and a
different question would be presented. In the
ordinary course of its business, the bank knew
that not a dollar was loaned or borrowed on the
strength of the note. It was given at the urgent
and pressing demand of the bank to obtain
security for the six different notes which it held
against J.M. Poizat and Co. and Jean M. Poizat of
date July 25, 1921, aggregating about P292,000,
and at the time it was given, those notes were
taken up and merged in the note of December
29, 1921, now in question. Upon the record
before us, there is no evidence that the
defendant wife was a party to the notes of July
25, 1921, or that she was under any legal liability
to pay them.
The note and mortgage in question show upon
their face that at the time they were executed,
the husband was attorney in fact for the
defendant wife, and the bank knew or should
have known the nature and extent of his
authority and the limitations upon his power.
You will search the terms and provisions of the
power of attorney in vain to find any authority
for the husband to make his wife liable as a
surety for the payment of the preexisting debt of
a third person.
Paragraph 5 of the power of attorney above
quoted authorizes the husband for in the name
of his wife to "loan or borrow any sums of money
or fungible things, etc." This should be construed
to mean that the husband had power only to
loan his wife's money and to borrow money for
or on account of his wife as her agent and
attorney in fact. That does not carry with it or
imply that he had the legal right to make his wife
liable as a surety for the preexisting debt of a
third person.
Paragraph 6 authorizes him to "enter into any
kind of contracts whether civil or mercantile,
giving due form thereof either by private
documents or public deeds, etc."
Paragraph 7 authorizes him to "draw, endorse,
accept, issue and negotiate any drafts, bills of
exchange, letters of credit, letters of payment,
bills, vales, promissory notes, etc."
The foregoing are the clauses in the power of
attorney upon which the bank relies for the
authority of the husband to execute promissory
notes for and on behalf of his wife and as her
agent.
It will be noted that there is no provision in either
of them which authorizes or empowers him to
sign anything or to do anything which would
make his wife liable as a surety for a preexisting
debt.
It is fundamental rule of construction that where
in an instrument powers and duties are specified
and defined, that all of such powers and duties
are limited and confined to those which are
specified and defined, and that all other powers
and duties are excluded.
Paragraph 8 of the power of attorney authorizes
the husband to institute, prosecute and defend
all actions or proceedings in a court of justice,
including "accepting notices and summons."
There is nothing in the record tending to show
that the husband accepted the service of any
notice or summons in the action on behalf of the
bank, and even so, if he had, it would not be a
defense to open up and vacate a judgment under
section 113 of the Code of Civil Procedure. The
same thing is true as to paragraph 9 of the power
of attorney.
The fact that an agent failed and neglected to
perform his duties and to represent the interests
of his principal is not a bar to the principal
obtaining legal relief for the negligence of her
agent, provided that the application for such a
relief is duly and properly made under the
provisions of section 113.
It is very apparent from the face of the
instrument that the whole purpose and intent of
the power of attorney was to empower and
authorize the husband to look after and protect
the interests of the wife and for her and in her
name to transact any and all of her business. But
nowhere does it provide or authorize him to
make her liable as a surety for the payment of
the preexisting debt of a third person.
Hence, it follows that the husband was not
authorized or empowered to sign the note in
question for and on behalf of the wife as her act
and deed, and that as to her the note is void for
want of power of her husband to execute it.
The same thing is true as to the real mortgage to
the bank. It was given to secure the note in
question and was not given for any other
purpose. The real property described in the
mortgage to the bank was and is the property of
the wife. The note being void as to her, it follows
that as to her the real mortgage to the bank is
also void for want of power to execute it.
It appears that before the motion in question
was filed, there were certain negotiations
between the bank and the attorney for the wife
with a view of a compromise or settlement of the
bank's claim against her, and that during such
negotiations, there was some evidence or
admissions on the part of her attorney that she
was liable for the bank's claim. It now contends
that as a result of such negotiations and
admissions, the wife is estopped to deny her
liability. but it also appears that during such
negotiations, both the wife and her attorney did
not have any knowledge of the actual facts, and
that she was then ignorant of the defense upon
which she now relies. Be that as it may, such
negotiations were more or less in the nature of a
compromise which was rejected by the bank,
and it appears that in any event both the wife
and her attorney did not have any knowledge of
the facts upon which they now rely as a defense.
There is no claim or pretense that the debt in
question was contracted for or on account of the
"usual daily expenses of the family, incurred by
the wife or by her order, with the tacit consent
of the husband," as provided for in article 1362
of the Civil Code. Neither is there any evidence
tending to show that the wife was legally liable
for any portion of the original debt evidence by
the note in question.
This decision as to the bank on this motion is
based on the assumption that the facts are true
as set forth and alleged in the petition to set
aside and vacate the judgment as to the wife, but
we are not making any finding as to the actual
truth of such facts. That remains for the
defendant wife to prove such alleged facts when
the case is tried on its merits.
It follows that the opinion of the lower court in
refusing to set aside and vacate the judgment of
the plaintiff bank against the defendant wife is
reversed, and that judgment is vacated and set
aside, and as to the bank the case is remanded
to the lower court, with leave for the wife to file
an answer to plaintiff's cause of action, and to
have the case tried on its merits and for any
further proceedings not inconsistent with this
opinion.
As to the judgment in favor of the Dominican
Fathers, it appears that their plea above quoted
in the statement of facts was filed on April 24,
1924. In that plea they say that they have a first
mortgage on the property described in
paragraph IV of the complaint for P125,000 with
interest at 10 per cent per annum. That the
mortgagors Jean M. Poizat and Gabriela Andrea
de Coster y Roxas have not paid the principal or
the stipulated interest from December 16, 1921,
to date, which up to the 30th day of April, 1924,
amounts to P27,925.34. Wherefore, it is prayed
that the credit above-mentioned be taken into
account when the second mortgage is
foreclosed.
No other plea of any kind, nature or description
was filed by it. The record shows that a copy of
this alleged plea was served upon the attorneys
for the plaintiff bank. There is nothing in the
record which shows or tends to show that a copy
of it was ever served on either one of the
defendants. Neither is there any evidence that
either of the defendants ever appeared in the
original action. In fact, judgment was rendered
against them by default.
Under such a state of facts, the judgment in favor
of the Dominican Fathers cannot be sustained. In
the first place, the plea above quoted filed on
April 24, 1924, would not be sufficient to sustain
a judgment. It does not even ask for a judgment
of the foreclosure of its mortgage. In the second
place, no copy of the plea was ever served upon
either of the defendants, who were the real
parties in interest, and against whom a judgment
was rendered for the full amount of the note and
the foreclosure of the mortgage. Such a
proceeding cannot be sustained on any legal
principle.
Unless waived, a defendant has a legal right to
service of process, to his day in court and to be
heard in his defense.
From what has been said, it follows that, if the
transaction between the Dominican Fathers and
Jean M. Poizat as attorney in fact for his wife was
an original one and the P125,000 was actually
loaned at the time the note and mortgage were
executed and the money was in good faith
delivered to the husband as the agent and
attorney in fact of the wife, it would then be a
valid exercise of the power given to the husband,
regardless of the question as to what he may
have done with the money.
Paragraph 5 of the power of attorney specifically
authorizes him to borrow money for and on
account of his wife and her name, "and making
all these transactions with or without mortgages,
pledges or personal guaranty."
It follows that the judgment of the lower court in
favor of La Orden de Dominicos or PP.
Predicadores de la Provincia del Santisimo
Rosario is reversed, without prejudice to its right
to either file an original suit to foreclose its
mortgage or to file a good and sufficient plea as
intervenor in the instant suit, setting forth the
facts upon which it relies for a judgment on its
note and the foreclosure of its mortgage, copies
of which should be served upon the defendants.
Neither party to recover costs. So ordered.
HE DIRECTOR OF PUBLIC WORKS, plaintiff-
appellee,
vs.
SING JUCO, ET AL., defendants.
SING JUCO, SING BENGCO and PHILIPPINE
NATIONAL BANK,
From Torrens certificate of title No. 1359 relating
to land in the municipality of Iloilo, it appears
that on September 28, 1920, the title of the
property described therein was owned, in
undivided shares, by Mariano de la Rama,
Gonzalo Mariano Tanboontien, Sing Juco and
Sing Bengco. The interest vested by said
certificate in Mariano de la Rama was
subsequently transferred to sale to Enrique
Enchaus. It further appears that on November
23, 1020, the owners of the property covered by
the said certificate conveyed it by way of a
mortgage to the Philippine National Bank for the
purpose of securing a credit in current account in
a mount not in excess of P170,000, with interest
at a rate of 12 percent per annum. The
indebtedness covered by this mortgage has not
been satisfied, and upon the date of the decision
of the court below it amounted to the sum of
P170,000, plus interest at 12 percent per annum
from November 24, 1920.
The land above referred to contains an area of
nearly 16 hectares, or to be exact, 158,589.44
square meters according to the certificate. It is
located on "Point Llorente" at the mouth of Iloilo
river, near the City of Iloilo, and it is of so low a
level that, prior to the improvement to which
reference is to be made, it was subject to
frequent flooding. In 1921, the Government of
the Philippine Islands was planning extensive
harbor improvements in this vicinity, requiring
extensive dredging by the Bureau of Public
Works in the mouth of said river. The conduct of
these dredging operations made it necessary for
the Director of Public Works to find a place of
deposit for the dirt and mud taken from the
place, or places, dredged. As the land already
referred to was low and easily accessible to the
spot where dredging was to be conducted, it was
obviously for the interest of the Government and
the said owners of the land that the material
taken out by the dredges should be deposited on
the said property. Accordingly, after preliminary
negotiations to this effect have been conducted,
a contract was made between the Director of
Public Works, representing the Government of
the Philippine Islands, and the four owners, M.
de la Rama, Sing Juco, G. M. Tanboontien, and
Seng Bengco, of which, as modified by some
respects by subsequent agreement, the
following features are noteworthy.
(1) The Bureau of Public Works agreed to deposit
the material to be dredged by it from the Iloilo
River, in connection with the contempted
improvement, upon the lot of the land, already
described as covered by certificate No. 1359, at
a price to be determined at the actual cost of the
filling, with certain surcharges to be determined
by the Director of Public Works. It was
contemplated in the original draft of the contract
that the Bureau would be able to furnish some
250,000 cubic meters of dredged material for
filling in the land, was limited to the material
which should be dredged from the river as a
result of the proposed improvement. To this
stipulation the four owners of the property
assented on March 14, 1921.
(2) With respect to the compensation it was
agreed that the amount due should be
determined by the Director of Public Works,
under certain conditions mentioned in the
contract, of an amount of not less that 20 nor
more than 75 centavos per cubic meter. It was
further agreed that, when the work should be
finished, the cost thereof should be paid by the
owners in 5 annual installments and that for
failure to pay such installment the whole of the
amount thereafter to accrue should become at
once due. This contract was noted in the Torrens
certificate of title on January 8, 1924.
In connection with the making of the contract
abovementioned, the, Director of Public Works
required a bond to be supplied by the owners in
the penal amount of P150,000, approximately
twice the estimated cost of the filling,
conditioned for the payment of the amount due
from the owners. This bond was executed
contemporaneously with the main contract; and
in connection therewith it should be noted that
one of the names appearing upon said contract
was that of "Casa Viuda de Tan Toco," purporting
to be signed by M. de la Rama.
The dredging operation were conducted by the
Bureau of Public Works in substantial
accomplice, we find, with the terms of said
agreement; and after the account with the
owners were liquidated and the amount due
from them determined, demand was made upon
them for the payment of the first installment. No
such payment was, however, made as a
consequence this action was instituted by the
Director of Public Works on October 14, 1926,
for the purpose of recovering the amount due to
the Government under the contract from the
original owners of the property from the sureties
whose names were signed to the contract of
suretyship, and to enforce the obligation as a
real lien upon the property. In said action the
Philippine National Bank was made a party
defendant, as having an interest under its prior
mortgage upon the property, while Enrique
Enchaus was made defendant as successor in
interest of M. de la Rama, and Tan Ong Sze
widow of Tan Toco, was also made defendant by
reason of her supposed liability derived from the
act of De la Rama in signing the firm "Casa Viuda
de Tan Toco" as a surety on bond. It was
noteworthy that in the complaint it was asked
that, in the enforcement of the government's
lien, the property should be sold "subject to the
first mortgage in favor of the Philippine National
Bank."
To this complaint different defenses were set up,
as follows: On behalf of the owners of the
property, it was contended that the government
has not complied with that contract, in that
dredged material deposited on the land had not
been sufficient in quantity to raise the level of
the land above high water, and that, as a
consequence, the land had not been much
benefited. It is therefore asserted that the
owners of the property are not obligated to pay
the filling operation. These defendants sought to
recover further damages by way of cross-
complaint for the same supposed breach of
contract on the part of the Government. On the
part of Viuda de Tan Toco the defense was
interposed that the name "Casa Viuda de Tan
Toco" signed to the contract of suretyship by
Mariano de la Rama was signed without
authority; while on the part of the Philippine
National Bank was asserted that the mortgage
credit pertaining to the bank is superior to the
Governments lien for improvement, and by way
of counterclaim the bank asked that its mortgage
be foreclosed for the amount of its mortgage
credit, and that the four mortgagors, Sing Juco,
Sing Bengco, M. de la Rama and G.M.
Tanboontien, be required to pay the amount due
to the bank, and that in case of their failure to do
so the mortgaged property should be sold and
the proceeds paid preferentially to the bank
upon its mortgage.
Upon hearing the cause the trial court, ignoring
that part of the original complaint wherein the
Government seeks to enforce its lien in
subordination to its first mortgage, made
pronouncements:
(1) Declaring Sing Juco, Sing Bengco, M. de la
Rama and G. M. Tanboontien indebted to the
Government in the amount of P70, 938, with
interest from the date of the filing of the
complaint, and requiring them to pay the said
sum to the plaintiff;
(2) Declaring, in effect, that the lien of the
Government for the filing improvement was
superior to the mortgage of the Philippine
National Bank; and finally
(3) Declaring the defendant Tan Ong Sze, Viuda
de Tan Toco, personally liable upon the contract
of suretyship, in case the four principal obligors
should not satisfy their indebtedness to the
Government, or if the land should not sell
enough to satisfy the same.
From this judgment various parties defendant
appealed as follows: All of the defendants,
except the Philippine National Bank, appealed
from so much of the decision as held that the
defendant owners and signatories to the
contract of suretyship has not been released by
non-performance of the contract on the part of
the Bureau of Public Works, and from the refusal
of the court to give to the defendant owners
damages for breach of contract on the part of
the Government. On the part of Tan Ong Sze,
Viuda de Tan Toco, error is assigned to the action
of the court in holding said defendant liable upon
the contract of suretyship. Finally, the Philippine
National Bank appealed from so much of the
decision as gave the lien of the Government for
improvement priority over the mortgagee
executed in favor of the bank.
Dealing with these contentions in the order
indicated, we find the contention of the
appellants (except the Philippine National Bank),
to the effect that the Director of Public Works
has failed to comply with the obligations
imposed upon the government by the contract,
is wholly untenable. By said contract, the
Government was not obligated to raise the land
on which the dredged material was deposited to
any specified level. The Government only
obligated itself upon said land the material
should be dredged from the mouth of the Iloilo
River in the course of the improvement
undertaken by the Government in and near that
place. Under the original contract as originally
drafted, the Government agreed to furnish
250,000 cubic meters, more or less, of dredged
material; but on Mar. 14, 1921, the owners of
the property indicated their acceptance of a
modification of the contract effected by the
Director of Public Works and the Secretary of
Commerce and Communications, in which it was
made clear that the material to be supplied
would be such only as should be dredged from
the river as a result of the proposed
improvement. In the endorsement of the
Director of Public Works, thus accepted by the
owners, it was made clear that the Bureau of
Public Works did not undertake to furnish
material to complete the filling of the land to any
specified level. Proof submitted on the part of
the owners tends to show that parts of the filled
land are still subject to inundation in rainy
weather; and it is contended, that the owners
have, for this reason, been able to sell in lots the
property to individual occupants. the sum of
P15,000, which is claimed upon this account, as
damages by the owners, is the amount of
interest alleged to have been accrued upon their
investment, owing to their inability to place the
land advantageously upon the market. The claim
is, as already suggested, untenable. There has
been no breach on the part of the Government
in fulfilling the contract. In fact it appears that
the Government deposited in the period covered
by the contract 236,460 cubic meters, and after
the amount thus deposited had been reduced by
21,840 cubic meters, owing to the natural
process of drying, the Bureau of Public Works
further deposited 53,000 cubic meters on the
same land. In this connection, the district
engineer testified that the filling which has been
charged to the owners at P70,938 actually cost
the Government the amount of P88,297.85. The
charge made for the work was evidently
computed on a very moderate basis; and the
owners of the property have no just ground of
complaint whatever.
The contention of Tan Ong Sze, widow of Tan
Toco, to the effect that she was not, and is not,
bound by the contract of suretyship, is our
pinion, well-founded. It will be remembered that
said contract purports to have been signed by
Mariano de la Rama, acting for this defendant
under the power of attorney. But the
Government has exhibited no power of attorney
which would authorize the creation, by the
attorney-in-fact, of an obligation in the nature of
suretyship binding upon this principal.
It is true that the Government introduced in
evidence 2 documents exhibiting powers of
attorney, conferred by these documents (Exhibit
K, identical with Exhibit 5) Mariano de la Rama
was given the power which reads as follows:
. . . and also for me and in my name to sign, seal
and execute, and as my act and deed deliver, any
lease or any other deed for the conveying any
real or personal property or the other matter or
thing wherein I am or may be personally
interested or concerned. And I do hereby further
authorize and empower my said attorney to
substitute and point any other attorney or
attorneys under him for the purposes aforesaid,
and the same again and pleasure to revoke; and
generally for me and in my name to do, perform,
and execute all and any other lawful and
reasonable acts and things whatsoever as fully
and effectually as I, the said Tan Ong Sze might
or could do if personally present.
In another document, (Exhibits L and M),
executed in favor of the same Mariano de la
Rama by his uncle Tan Lien Co, attorney-in-fact
of Tan Ong Sze, with power of substitution, there
appears the following:
. . . and also for her and for her name to sign, seal
and execute, and as her act and deed deliver, any
lease, release, bargain, sale, assignment,
conveyance or assurance, any other deed for the
conveying any real or personal property or other
matter or thing wherein she or may be
personally interested or concerned.
Neither of these powers officially confers upon
Mariano de la Rama the power to bind a principal
by a contract of suretyship. The clauses noted
relate more specifically to the execution of
contracts relating to property; and the more
general words at the close of the quoted clauses
should be interpreted, under the general
rule ejusdem generis, as referring to the
contracts of like character. Power to execute a
contract so exceptional a nature as a contract of
suretyship or guaranty cannot be inferred from
the general words contained in these powers.
In article 1827 of the Civil Code it is declared that
guaranty shall not be presumed; it must be
expressed and cannot be extended beyond its
specified limits. By analogy a power of attorney
to execute a contract of guaranty should not be
inferred from vague or general words, especially
when such words have their origin and
explanation in particular powers of a wholly
different nature. It results that the trial court was
in error in giving personal judgment against Tan
Ong Sze upon the bond upon which she was sued
in this case.
We now proceed to consider the last important
disputed question involved in this case, which is,
whether the indebtedness owing to the
Government under the contract for filling the
parcel of land already mentioned is entitled to
preference over the mortgage credit due to the
Philippine National Bank, as the trial judge held,
or whether on the contrary, the latter claim is
entitled to priority over the claim of the
Government Upon entering into the discussion
of the feature of the case it is well to recall the
fact that the bank's mortgage was registered in
the office of the Register of Deeds of the
province of Iloilo on November 26, 1920, while
the filing contract was registered on January 8,
1924, that is to say, there is a priority of more
than three years, in point of time, in the
inscription of the mortgage credit under the
filling contract was made an express lien upon
the property which was the subject of
improvement.
In the brief submitted in behalf of the bank it
appears to be assumed that the Government
credit under the filling contract is a true
refectionary credit (credito refacionario) under
subsection 2 of Article 1923 of the Civil Code. It
may be observed, however, that in a precise and
technical sense, this credit is not exactly of the
nature of the refectionary credit as known to the
civil law. In the civil law the refectionary credit is
primarily an indebtedness incurred in the repair
or reconstruction of something previously made,
such repair or reconstruction being made
necessary by the deterioration or destruction as
it formerly existed. The conception does not
ordinarily include an entirely new work, though
Spanish jurisprudence appears to have
sanctioned this broader conception in certain
cases as may be gathered from the decision in
the Enciclopedia Juridica Espanola (vol. 26, pp.
888-890) s. v. Refaccionario. The question
whether the credit we are considering falls
precisely under the conception of the
refectionary credit in the civil law is in this case
academic rather than practical, for the reason
that by the express terms of the filling contract
the credit was constituted a lien upon the
improved property. But assuming, as might be
tenable in the state of jurisprudence, that said
credit is a refectionary credit enjoying
preference under subsection 3 or article 1923 of
the Civil code , then the mortgage credit must be
given priority under subsection 2 of the article
1927 of the same code, for the reason that the
mortgage was registered first.
Possibly the simpler view of the situation is to
consider the Government's right under the
stipulation expressly making the credit a lien
upon the property, for it was certainly lawful for
the parties to the filling contract to declare the
credit a lien upon the property to be improved
— to the extent hereinafter define — whether
the credit precisely fulfills the conception of
refectionary credit or not. In this aspect we have
before us a competition between the real lien
created by the filling contract of the later
registration. The true solution to the problem is,
in our opinion, not open to doubt; and again the
result is that priority must be conceded to the
mortgage. The mortgage was created by the
lawful owners at a time when no other
competing interest existed in the property. The
lien of the mortgage therefore attached to the
fee, or unlimited interest of the owners in the
property. On the other hand, the lien created by
the filling contract was created after the
mortgage had been made and registered, and
therefore, after the owners of the property had
parted with the interest created by the
mortgage. The Government's lien owes its origin
to the contract, and derives its efficacy from the
volition of the contracting parties. But no party
can by contract create a right in another
intrinsically greater than that which he himself
possess. The owners, at the time this contract
was made, were owners of the equity of
redemption only and not of the entire interest in
the property, and the lien created by the
contract could only operate upon the equity of
redemption.
In this connection, we observed that, as the new
material was deposited from the Government
dredges upon the property in question, it
became an integral part of the soil and an
irremovable fixture; and the deposit having been
made under contract between the Government
and the owners of the equity of redemption,
without the concurrence of the mortgage
creditor in said contract the latter could not be
prejudiced thereby. The trial court, in declaring
that the Government's lien should have
preference over the mortgage, seems to have
proceeded upon the idea that, at the time the
mortgage was created, the new soil had yet been
deposited under the filling contract and that as a
consequence the mortgage lien should not been
considered as attaching to the value added by
deposit of the additional material. This
proposition, however, overlooks the fact that
the deposited material became an irremovable
fixture, by the act and intention of the parties to
the filling contract, and the lien of the mortgage
undoubtedly attached to the increment thus
spread over and affixed to the mortgaged land.
If the idea which prevailed in the trial court
should be accepted as law upon this point, the
result would be that a mortgage creditor could,
by the act of strangers, be entirely proved out of
his property by making of improvements to
which he has not assented. This cannot be
accepted as good law.
We may add that the case cannot, on this point,
be resolved favorably to the contention of the
Director of Public Works, upon the authority of
Unson vs. Urquijo, Zuluoaga and Escubi (50 Phil.,
160), for the reason that upon the deposit of the
dredged material on the land such material lost
its identity. In the case cited the machinery in
respect to which the vendor's preference was
upheld by this court retained its separate
existence and remained perfectly capable of
identification at all times.
From what it has been said it results that the
appealed judgment must be affirmed, and the
same is hereby affirmed, in dismissing, in effect,
the cross-complaint filed by some of the
defendants against the plaintiff, the Director of
Public Works. Such judgment is further affirmed
in its findings, which are not dispute, with
respect to the amount of the Government's
claim under the filling contract and the amount
of mortgage credit of the bank, as it is also
affirmed in respect to the joint and several
judgment entered in favor of the plaintiff against
Sing Juco, Sing Bengco, Tanboontien and
Mariano de la Rama Tanbunco (alias Mariano de
la Rama) for the amount due to the Government
Said judgment, however, must be reversed and
the same is being reversed in so far as it holds
that Tan Ong Sze, Viuda de Tan Toco, is liable
upon the contract of suretyship, and she is
hereby absolved from the complaint. The
judgment must also be reversed in so far as it
declares that the Government's lien under the
filling contract is entitled to priority over the
bank's mortgage. On the contrary it is hereby
declared that the bank's credit is entitled to
priority out of the proceeds of the foreclosure
sale, the residue, if any, to be applied to the
Government's lien created by the filling contract
and otherwise in accordance with law. For
further proceedings in conformity with this
opinion, the cause is hereby remanded to the
cause of origin, without pronouncements as to
costs. So ordered.
ROSA VILLA MONNA, plaintiff-appellee,
vs.
GUILLERMO GARCIA BOSQUE, ET AL.,
This action was instituted in the Court of First
Instance of Manila by Rosa Villa y Monna, widow
of Enrique Bota, for the purpose of recovering
from the defendants, Guillermo Garcia Bosque
and Jose Romar Ruiz, as principals, and from the
defendants R. G. France and F. H. Goulette, as
solidary sureties for said principals, the sum of
P20,509.71, with interest, as a balance alleged to
be due to the plaintiff upon the purchase price
of a printing establishment and bookstore
located at 89 Escolta, Manila, which had been
sold to Bosque and Ruiz by the plaintiff, acting
through her attorney in fact, one Manuel
Pirretas y Monros. The defendant Ruiz put in no
appearance, and after publication judgment by
default was entered against him. The other
defendants answered with a general denial and
various special defenses. Upon hearing the cause
the trial judge gave judgment in favor of the
plaintiff, requiring all of the defendants, jointly
and severally, to pay to the plaintiff the sum of
P19,230.01, as capital, with stipulated interest at
the rate of 7 per centum per annum, plus the
further sum of P1,279.70 as interest already
accrued and unpaid upon the date of the
institution of the action, with interest upon the
latter amount at the rate of 6 per centum per
annum. From this judgment Guillermo Garcia
Bosque, as principal, and R. G. France and F.H.
Goulette, as sureties. appealed.
It appears that prior to September 17, 1919, the
plaintiff, Rosa Villa y Monna, viuda de E. Bota,
was the owner of a printing establishment and
bookstore located at 89 Escolta, Manila, and
known as La Flor de Cataluna, Viuda de E.
Bota, with the machinery, motors, bindery, type
material furniture, and stock appurtenant
thereto. Upon the date stated, the plaintiff, then
and now a resident of Barcelona, Spain, acting
through Manuel Pirretas, as attorney in fact, sold
the establishment above-mentioned to the
defendants Guillermo Garcia Bosque and Jose
Pomar Ruiz, residents of the City of Manila, for
the stipulated sum of P55,000, payable as
follows: Fifteen thousand pesos (P15,000) on
November 1, next ensuing upon the execution of
the contract, being the date when the
purchasers were to take possession; ten
thousand pesos (P10,000) at one year from the
same date; fifteen thousand pesos (P15,000) at
two years; and the remaining fifteen thousand
pesos (P15,000) at the end of three years. By the
contract of sale the deferred installments bear
interest at the rate of 7 per centum per annum.
In the same document the defendants France
and Goulette obligated themselves as solidary
sureties with the principals Bosque and Ruiz, to
answer for any balance, including interest, which
should remain due and unpaid after the dates
stipulated for payment of said installments,
expressly renouncing the benefit of exhaustion
of the property of the principals. The first
installment of P15,000 was paid conformably to
agreement.
In the year 1920, Manuel Pirretas y Monros, the
attorney in fact of the plaintiff, absented himself
from the Philippine Islands on a prolonged visit
to Spain; and in contemplation of his departure
he executed a document, dated January 22,
1920, purporting to be a partial substitution of
agency, whereby he transferred to "the
mercantile entity Figueras Hermanos, or the
person, or persons, having legal representation
of the same," the powers that had been
previously conferred on Pirretas by the plaintiff
"in order that," so the document runs, "they may
be able to effect the collection of such sums of
money as may be due to the plaintiff by reason
of the sale of the bookstore and printing
establishment already mentioned, issuing for
such purpose the receipts, vouchers, letters of
payment, and other necessary documents for
whatever they shall have received and collected
of the character indicated."
When the time came for the payment of the
second installment and accrued interest due at
the time, the purchasers were unable to comply
with their obligation, and after certain
negotiations between said purchasers and one
Alfredo Rocha, representative of Figueras
Hermanos, acting as attorney in fact for the
plaintiff, an agreement was reached, whereby
Figueras Hermanos accepted the payment of
P5,800 on November 10, 1920, and received for
the balance five promissory notes payable,
respectively, on December 1, 1920, January 1,
1921, February 1, 1921, March 1, 1921, and April
1, 1921. The first three of these notes were in the
amount of P1,000 each, and the last two for
P2,000 each, making a total of P7,000. It was
furthermore agreed that the debtors should pay
9 per centum per annum on said deferred
installments, instead of the 7 per centum
mentioned in the contract of sale. These notes
were not paid promptly at maturity but the
balance due upon them was finally paid in full by
Bosque on December 24, 1921.
About this time the owners of the business La
Flor de Cataluña, appear to have converted it
into a limited partnership under the style of
Guillermo Garcia Bosque, S. en C.;" and presently
a corporation was formed to take over the
business under the name "Bota Printing
Company, Inc." By a document executed on April
21, 1922, the partnership appears to have
conveyed all its assets to this corporation for the
purported consideration of P15,000, Meanwhile
the seven notes representing the unpaid balance
of the second installment and interest were
failing due without being paid. Induced by this
dilatoriness on the part the debtor and
supposedly animated by a desire to get the
matter into better shape, M. T. Figueras entered
into the agreement attached as Exhibit 1 to the
answer of Bosque. In this document it is recited
that Guillermo Garcia Bosque. S. en C., is
indebted to Rosa Villa, viuda de E. Bota, in the
amount of P32,000 for which R. G. France and F.
H. Goulette are bound as joint and several
sureties, and that the partnership mentioned
had transferred all its assets to the Bota Printing
Company, Inc., of which one George Andrews
was a principal stockholder. It is then stipulated
that France and Goulette shall be relieved from
all liability on their contract as sureties and that
in lieu thereof the creditor, Doña Rosa Villa y
Monna, accepts the Bota Printing Company, Inc.,
as debtor to the extent of P20,000, which
indebtedness was expressly assumed by it, and
George Andrews as debtor to the extent of
P12,000, which he undertook to pay at the rate
of P200 per month thereafter. To this contract
the name of the partnership Guillermo Garcia
Bosque, S. en C., was affixed by Guillermo Garcia
Bosque while the name of the Bota Printing
Company, Inc., was signed by G. Andrews, the
latter also signing in his individual capacity. The
name of the plaintiff was affixed by M.T. Figueras
in the following style: "p.p. Rosa Villa, viuda de E.
Bota, M. T. Figueras, party of the second part."
No question is made as to the authenticity of this
document or as to the intention of Figueras to
release the sureties; and the latter rely upon the
discharge as complete defense to the action. The
defendant Bosque also relies upon the same
agreement as constituting a novation such as to
relieve him from personal liability. All of the
defendants furthermore maintain that even
supposing that M. T. Figueras authority to
novate the original contract and discharge the
sureties therefrom, nevertheless the plaintiff has
ratified the agreement by accepting part
payment of the amount due thereunder with full
knowledge of its terms. In her amended
complaint the plaintiff asserts that Figueras had
no authority to execute the contract containing
the release (Exhibit 1) and that the same had
never been ratified by her.
The question thus raised as to whether the
plaintiff is bound by Exhibit 1 constitutes the
main controversy in the case, since if this point
should be determined in the affirmative the
plaintiff obviously has no right of action against
any of the defendants. We accordingly address
ourselves to this point first.
The partial substitution of agency (Exhibit B to
amended complaint) purports to confer on
Figueras Hermanos or the person or persons
exercising legal representation of the same all of
the powers that had been conferred on Pirretas
by the plaintiff in the original power of attorney.
This original power of attorney is not before us,
but assuming, as is stated in Exhibit B, that this
document contained a general power to Pirretas
to sell the business known as La Flor de
Cataluña upon conditions to be fixed by him and
power to collect money due to the plaintiff upon
any account, with a further power of
substitution, yet it is obvious upon the face of
the act of substitution (Exhibit B) that the sole
purpose was to authorize Figueras Hermanos to
collect the balance due to the plaintiff upon the
price of La Flor de Cataluña, the sale of which
had already been affected by Pirretas. The words
of Exhibit B on this point are quite explicit ("to
the end that the said lady may be able to collect
the balance of the selling price of the Printing
Establishment and Bookstore above-mentioned,
which has been sold to Messrs. Bosque and
Pomar"). There is nothing here that can be
construed to authorize Figueras Hermanos to
discharge any of the debtors without payment or
to novate the contract by which their obligation
was created. On the contrary the terms of the
substitution shows the limited extent of the
power. A further noteworthy feature of the
contract Exhibit 1 has reference to the
personality of the purported attorney in fact and
the manner in which the contract was signed.
Under the Exhibit B the substituted authority
should be exercised by the mercantile entity
Figueras Hermanos or the person duly
authorized to represent the same. In the actual
execution of Exhibit 1, M. T. Figueras intervenes
as purpoted attorney in fact without anything
whatever to show that he is in fact the legal
representative of Figueras Hermanos or that he
is there acting in such capacity. The act of
substitution conferred no authority whatever on
M. T. Figueras as an individual. In view of these
defects in the granting and exercise of the
substituted power, we agree with the trial judge
that the Exhibit 1 is not binding on the plaintiff.
Figueras had no authority to execute the
contract of release and novation in the manner
attempted; and apart from this it is shown that
in releasing the sureties Figueras acted contrary
to instructions. For instance, in a letter from
Figueras in Manila, dated March 4, 1922, to
Pirretas, then in Barcelona, the former stated
that he was attempting to settle the affair to the
best advantage and expected to put through an
arrangement whereby Doña Rosa would receive
P20,000 in cash, the balance to be paid in
installments, "with the guaranty of France and
Goulette." In his reply of April 29 to this letter,
Pirretas expresses the conformity of Doña Rosa
in any adjustment of the claim that Figueras
should see fit to make, based upon payment of
P20,000 in cash, the balance in installments,
payable in the shortest practicable periods, it
being understood, however, that the guaranty of
Messrs. France and Goulette should remain
intact. Again, on May 9, Pirretas repeats his
assurance that the plaintiff would be willing to
accept P20,000 down with the balance in
interest-bearing installments "with the guaranty
of France and Goulette." From this it is obvious
that Figueras had no actual authority whatever
to release the sureties or to make a novation of
the contract without their additional guaranty.
But it is asserted that the plaintiff ratified the
contract (Exhibit 1) by accepting and retaining
the sum of P14,000 which, it is asserted, was
paid by the Bota Printing Co., Inc., under that
contract. In this connection it should be noted
that when the firm of Guillermo Garcia Bosque,
S. en C., conveyed all it assets on April 21, 1922
to the newly formed corporation, Bota Printing
Co., Inc., the latter obligated itself to pay al the
debts of the partnership, including the sum of
P32,000 due to the plaintiff. On April 23,
thereafter, Bosque, acting for the Bota Printing
Co., Inc., paid to Figueras the sum of P8,000 upon
the third installment due to the plaintiff under
the original contract of sale, and the same was
credited by Figueras accordingly. On May 16 a
further sum of P5,000 was similarly paid and
credited; and on May 25, a further sum of P200
was likewise paid, making P14,000 in all. Now, it
will be remembered that in the contract (Exhibit
1), executed on May 17, 1922, the Bota Printing
Co., Inc., undertook to pay the sum of P20,00;
and the parties to the agreement considered
that the sum of P13,800 then already paid by the
Bota Printing Co., Inc., should be treated as a
partial satisfaction of the larger sum of P20,000
which the Bota Printing Co., Inc., had obligated
itself to pay. In the light of these facts the
proposition of the defendants to the effect that
the plaintiff has ratified Exhibit 1 by retaining the
sum of P14,000, paid by the Bota Printing Co.,
Inc., as above stated, is untenable. By the
assumption of the debts of its predecessor the
Bota Printing Co., Inc., had become a primary
debtor to the plaintiff; and she therefore had a
right to accept the payments made by the latter
and to apply the same to the satisfaction of the
third installment of the original indebtedness.
Nearly all of this money was so paid prior to the
execution of Exhibit 1 and although the sum of
P200 was paid a few days later, we are of the
opinion that the plaintiff was entitled to accept
and retain the whole, applying it in the manner
above stated. In other words the plaintiff may
lawfully retain that money notwithstanding her
refusal to be bound by Exhibit 1.
A contention submitted exclusively in behalf of
France and Goulette, the appellant sureties, is
that they were discharged by the agreement
between the principal debtor and Figueras
Hermanos, as attorney in fact for the plaintiff,
whereby the period for the payment of the
second installment was extended, without the
assent of the sureties, and new promissory notes
for unpaid balance were executed in the manner
already mentioned in this opinion. The execution
of these new promissory notes undoubtedly
constituted and extension of time as to the
obligation included therein, such as would
release a surety, even though of the solidary
type, under article 1851 of the Civil Code.
Nevertheless it is to be borne in mind that said
extension and novation related only to the
second installment of the original obligation and
interest accrued up to that time. Furthermore,
the total amount of these notes was afterwards
paid in full, and they are not now the subject of
controversy. It results that the extension thus
effected could not discharge the sureties from
their liability as to other installments upon which
alone they have been sued in this action. The
rule that an extension of time granted to the
debtor by the creditor, without the consent of
the sureties, extinguishes the latter's liability is
common both to Spanish jurisprudence and the
common law; and it is well settled in English and
American jurisprudence that where a surety is
liable for different payments, such as
installments of rent, or upon a series of
promissory notes, an extension of time as to one
or more will not affect the liability of the surety
for the others. (32 Cyc., 196; Hopkirk vs.
McConico, 1 Brock., 220; 12 Fed. Cas., No. 6696;
Coe vs. Cassidy, 72 N. Y., 133; Cohn vs. Spitzer,
129 N. Y. Supp., 104; Shephard Land Co. vs.
Banigan, 36 R. I., 1; I. J. Cooper Rubber Co. vs.
Johnson, 133 Tenn., 562; Bleeker vs. Johnson,
190, N. W. 1010.) The contention of the sureties
on this point is therefore untenable.
There is one stipulation in the contract (Exhibit
A) which, at first suggests a doubt as to propriety
of applying the doctrine above stated to the case
before us. We refer to cause (f) which declares
that the non-fulfillment on the part of the
debtors of the stipulation with respect to the
payment of any installment of the indebtedness,
with interest, will give to the creditor the right to
treat and declare all of said installments as
immediately due. If the stipulation had been to
the effect that the failure to pay any installment
when due would ipso facto cause to other
installments to fall due at once, it might be
plausibly contended that after default of the
payment of one installment the act of the
creditor in extending the time as to such
installment would interfere with the right of the
surety to exercise his legal rights against the
debtor, and that the surety would in such case
be discharged by the extension of time, in
conformity with articles 1851 and 1852 of the
Civil Code. But it will be noted that in the
contract now under consideration the
stipulation is not that the maturity of the later
installments shall be ipso facto accelerated by
default in the payment of a prior installment, but
only that it shall give the creditor a right to treat
the subsequent installments as due, and in this
case it does not appear that the creditor has
exercised this election. On the contrary, this
action was not instituted until after all of the
installments had fallen due in conformity with
the original contract. It results that the
stipulation contained in paragraph (f) does not
affect the application of the doctrine above
enunciated to the case before us.
Finally, it is contended by the appellant sureties
that they were discharged by a fraud practiced
upon them by the plaintiff in failing to require
the debtor to execute a mortgage upon the
printing establishment to secure the debt which
is the subject of this suit. In this connection t is
insisted that at the time France and Goulette
entered into the contract of suretyship, it was
represented to them that they would be
protected by the execution of a mortgage upon
the printing establishment by the purchasers
Bosque and Pomar. No such mortgage was in
fact executed and in the end another creditor
appears to have obtained a mortgage upon the
plant which is admitted to be superior to the
claim of the plaintiff. The failure of the creditor
to require a mortgage is alleged to operate as a
discharge of the sureties. With this insistence we
are unable to agree, for the reason that the proof
does not show, in our opinion, that the creditor,
on her attorney in fact, was a party to any such
agreement. On the other hand it is to be
collected from the evidence that the suggestion
that a mortgage would be executed on the plant
to secure the purchase price and that this
mortgage would operate for the protection of
the sureties came from the principal and not
from any representative of the plaintiff.
As a result of our examination of the case we find
no error in the record prejudicial to any of the
appellants, and the judgment appealed from will
be affirmed, So ordered, with costs against the
appellants.
GERMANN & CO., plaintiff-appellees,
vs.
DONALDSON, SIM & CO., defendants-appellants.
This is an incident of want of personality of the
plaintiff's attorney. The action is to recover a
sum claimed to be due for freight under a charter
party. It was brought by virtue of a general
power for suits, executed in Manila October 27,
1900, by Fernando Kammerzell, and purporting
to be a substitution in favor of several attorneys
of powers conferred upon Kammerzell in an
instrument executed in Berlin, Germany,
February 5, 1900, by Max Leonard Tornow, the
sole owner of the business carried on in Berlin
and Manila under the name of Gemann & Co.
The first-named instrument was authenticated
by a notary with the formalities required by the
domestic laws. The other was not so
authenticated. Both Tornow and Kammerzell are
citizens of Germany. Tornow is a resident of
Berlin and Kammerzell of Manila.
The defendants claim that the original power is
invalid under article 1280, No. 5, of the Civil
Code, which provides that powers for suits must
be contained in a public instrument. No claim is
made that the document was not executed with
the formalities required by the German law in
the case of such an instrument. We see no
reason why the general principle that the formal
validity of contracts is to be tested by the laws of
the country where they are executed should not
apply. (Civil Code, art. 11.)
The defendants also claim that the original
power can not be construed as conferring upon
Kammerzell authority to institute or defend
suits, from which contention, if correct, it would
of course follow that the delegated power is
invalid. In support of this contention reliance is
placed upon article 1713 of the Civil Code, by
which it is provided that "an agency stated in
general terms only includes acts of
administration," and that "in order to
compromise, alienate, mortgage, or to execute
any other act of strict ownership an express
commission is required."
It has been argued by counsel for the plaintiff
that these provisions of the domestic law are not
applicable to the case of an agency conferred, as
was that in question, by one foreigner upon
another in an instrument executed in the
country of which both were citizens. We shall not
pass upon this question, since we are clearly of
opinion that the instrument contains an explicit
grant of a power broad enough to authorize the
bringing of the present action, even assuming
the applicability of the domestic law as claimed
by the defendants. lawphil.net
By this instrument Tornow constitutes
Kammerzell his "true and lawful attorney with
full power to enter the firm name of Germann &
Co. in the Commercial Registry of the city of
Manila as a branch of the house of Germann &
Co. in Berlin, it being the purpose of this power
to invest said attorney will full legal powers and
authorization to direct and administer in the city
of Manila for us and in our name a branch of our
general commercial business of important and
exportation, for which purpose he may make
contracts of lease and employ suitable
assistants, as well as sign every kind of
documents, accounts, and obligations connected
with the business which may be necessary, take
charge in general of the receipt and delivery of
merchandise connected with the business, sign
all receipts for sums of money and collect them
and exact their payment by legal means, and in
general execute all the acts and things necessary
for the perfect carrying on of the business
committed to his charge in the same manner as
we could do ourselves if we were present in the
same place."
We should not be inclined to regard in institution
of a suit like the present, which appears to be
brought to collect a claim accruing in the
ordinary course of the plaintiff's business, as
properly belonging to the class of acts described
in article 1713 of the Civil Code as acts "of strict
ownership." It seems rather to be something
which is necessarily a part of the mere
administration of such a business as that
described in the instrument in question and only
incidentally, if at all, involving a power to dispose
of the title to property.
But whether regarded as an act of strict
ownership or not, it appears to be expressly and
specially authorized by the clause conferring the
power to "exact the payment" of sums of money
"by legal means." This must mean the power to
exact the payment of debts due the concern by
means of the institution of suits for their
recovery. If there could be any doubt as to the
meaning of this language taken by itself, it would
be removed by a consideration of the general
scope and purpose of the instrument in which it
occurs. (See Civil Code, art. 1286.) The main
object of the instrument is clearly to make
Kammerzell the manager of the Manila branch of
the plaintiff's business, with the same general
authority with reference to its conduct which his
principal would himself possess if he were
personally directing it. It can not be reasonably
supposed, in the absence of very clear language
to that effect, that it was the intention of the
principal to withhold from his agent a power so
essential to the efficient management of the
business entrusted to his control as that to sue
for the collection of debts.
FELIX FANLO AZNAR, Petitioner, v. W. F. NORRIS,
judge of the Court of First Instance of
Capiz, Respondent.
Alfredo Chicote, for Petitioner.
Hon. W . F . Norris, in his own behalf.
SYLLABUS
1. PLEADINGS AND PRACTICE; EXCEPTIONS. — An
exception to the final judgment entitles the party
excepting to bring the case before the appellate
court for review. Such an exception authorizes the
appellate court to determine whether or not the
decision is justified by the findings.
2. ID.; NOTICE OF JUDGMENT; ATTORNEY IN
FACT. — An attorney in fact of one of the parties
litigant is not the proper person upon whom to
serve a notice of the decision.
3. ATTORNEY AND CLIENT; AUTHORITY OF
ATTORNEY. — The fact that a second attorney
enters an appearance on behalf of a litigant does
not authorize a presumption that the authority of
the first attorney has been withdrawn.
April 30, 1903, Don Felix Fanlo presented to the
Supreme Court a petition in which he alleged that
on the 28th of February, 1903, judgment for the
defendant was rendered by the Court of First
Instance of Capiz, in a suit in which the petitioner
was plaintiff and one Rodriguez defendant; that the
petitioner received notice of the decision in the city
of Manila the 18th of March, 1903; that on the 25th
of the same month a written notice of his exception
to the said decision was mailed to the clerk of the
Court of First Instance of Capiz through the office
of the clerk of the Court of Manila; that on the 2d
day of April, 1903, a draft of a bill of exceptions
was mailed to the clerk of the Court of First
Instance of Capiz, which was duly received by the
judge of the said court, who refused to allow or
sign the same. Upon this facts the petitioner
prayed that the writ of mandamus issue, in
accordance with the provisions of section 499 of
the Code of Civil Procedure, requiring the
respondent judge to state his reasons for refusing
to allow and sign the said bill of exceptions.
The writ having issued, on March 29, 1904, the
respondent filed an answer, in which he admitted
that the petitioner had excepted to the judgment
in question as alleged in the petition, and stated
that he had "refused to sign the document alleged
to be a bill of exceptions for the reason that there
had been included therein, in addition to the
findings of fact and the judgment rendered in the
said cause, certain documents presented as
evidence at the trial i the Court of First Instance
and admitted as such without objection on the part
of the petitioner," and further "because said
alleged bill of exceptions is not in law such bill of
exceptions." The other facts are stated in the
opinion of the court.
DECISION
MAPA, J. :
Under the circumstances of the case we consider
that the exception to the judgment rendered
February 28, 1903, by the Court of First Instance
at Capiz in the case brought by the petitioner
against Rafael Rodriguez, and the bill of exceptions
presented by the petitioner in due time and
therefore produce the legal affects. By virtue of
this exception and the presentation of the bill of
exceptions, the right of the petitioner to have the
case brought before this court by bill of exceptions
was perfected.
The fact that the petitioner did not take ay
exceptions in the course of the trial is no obstacle
to this conclusion. Section 143 of the Code of Civil
Procedure does not establish any such
requirement, as erroneously contended by the
respondent in his answer. An exception to the final
decision, although it may be the only exception
taken in the course of the trial, as in the present
case by bill of exceptions to this court, provided
that the exception is taken as in this case within
the period and in the manner prescribed by the
law. The contention of the respondent upon this
point can not, therefor, supported.
Nor can we assent to his contention with respect to
the supposed lack of capacity on the part of the
attorney, Don Alfredo Chicote, to represent the
petitioner at the trial. He was the petitioner’s
attorney from the beginning, as appears from the
complaint signed by him, and it does not appear
that the plaintiff has withdrawn from Señor Chicote
his authority to continue to represent him in the
case. The intervention in the case of the attorney,
Don Jose Gay, does not in itself necessarily imply
such a result, because there is nothing to indicate
that he did not act with Mr. Chicote by delegation
from him, as was stated at the hearing. At all
events the utmost that could be said, even giving
the utmost possible scope to the supposition of the
respondent, would be that the plaintiff reemployed
Señor Chicote after having employed Mr. Gay, and
this the petitioner was certainly fully entitled to do
under the law. Upon this supposition there would
be no ground for questioning Mr. Chicote’s
authority.
Nor is there any merit in the contention of the
respondent that Don Vicente Alonso did not except
to the decision. An attempt was made to serve
notice of the decision upon this person and he
refused to accept the notice, stating that although
he was an attorney in fact of Don Felix Fanlo, he
believed he had no authority to represent him in
the case, as Señor Fanlo’s lawyers were those who
represented him, and that any notice to be given
should be given to them. From this answer it
clearly appears that Don Vicente Alonso, although
he had a power of attorney from the petitioner, had
not appeared for him and did not desire to appear
in the trial. This being so, it is obvious that he could
not be obliged to receive a notification against his
will, nor was he the person called upon to except
to the judgment, notice of which it was improperly
attempted to serve upon him.
It is not necessary to make a motion for a new trial
in order to be entitled to present a bill of
exceptions, as the respondent contends in his
answer. The error of such a theory is self-evident.
The motion for a new trial produces the effect of
giving this court authority to review the evidence
taken at the trial, but is not a requisite necessary
to the allowance of the bill of exceptions presented
in due time. In the latter case, that is to say, in
case no such motion has been made, the
jurisdiction of the court is limited solely to
determining the questions of law presented in the
bill of exceptions, upon the basis of the facts found
in the judgment of the trial court and those
admitted in the pleadings. (Sec. 497, Code of the
Civil Procedure.)
In the present case the petitioner made no motion
for a new trial, and consequently is not entitled to
include in his bill of exceptions the evidence taken
at the trial, either oral or documentary. The court
could not review them, as has been stated, and
therefore it would be entirely useless to bring them
here.
Consequently the projected bill of exceptions
presented by the petitioner is modified so as to
include only the following papers: (1) The
complaint filed by the plaintiff against Rafael
Rodriguez, pages 1 to 4 of the bill of exceptions;
(2) the answer of Rafael Rodriguez, pages 4 to 7
of the bill of exceptions; (3) the decision of the
court, on pages 12 to 16 of the bill; and (4) the
exception to the decision as expressed on page 16
of the bill, and the certificate of its allowance. No
part of the evidence taken at the trial can be
included in the bill of exceptions.
It is ordered that the bill of exceptions so modified
be certified in due form by the respondent judge.
RURAL BANK OF CALOOCAN, INC. and JOSE O.
DESIDERIO, JR., petitioners,
vs.
THE COURT OF APPEALS and MAXIMA
CASTRO, respondents.
DE CASTRO, * J.:
This is a petition for review by way of certiorari
of the decision 1 of the Court of Appeals in CA-
G.R. No. 39760-R entitled "Maxima Castro,
plaintiff-appellee, versus Severino Valencia, et
al., defendants; Rural Bank of Caloocan, Inc., Jose
Desiderio, Jr. and Arsenio Reyes, defendants-
appellants," which affirmed in toto the decision
of the Court of First Instance of Manila in favor
of plaintiff- appellee, the herein private
respondent Maxima Castro.
On December 7, 1959, respondent Maxima
Castro, accompanied by Severino Valencia, went
to the Rural Bank of Caloocan to apply for an
industrial loan. It was Severino Valencia who
arranged everything about the loan with the
bank and who supplied to the latter the personal
data required for Castro's loan application. On
December 11, 1959, after the bank approved the
loan for the amount of P3,000.00, Castro,
accompanied by the Valencia spouses, signed a
promissory note corresponding to her loan in
favor of the bank.
On the same day, December 11, 1959, the
Valencia spouses obtained from the bank an
equal amount of loan for P3,000.00. They signed
a promissory note (Exhibit "2") corresponding to
their loan in favor of the bank and had Castro
affixed thereon her signature as co-maker.
The two loans were secured by a real-estate
mortgage (Exhibit "6") on Castro's house and lot
of 150 square meters, covered by Transfer
Certificate of Title No. 7419 of the Office of the
Register of Deeds of Manila.
On February 13, 1961, the sheriff of Manila, thru
Acting Chief Deputy Sheriff Basilio Magsambol,
sent a notice of sheriff's sale addressed to
Castro, announcing that her property covered by
T.C.T. No. 7419 would be sold at public auction
on March 10, 1961 to satisfy the obligation
covering the two promissory notes plus interest
and attorney's fees.
Upon request by Castro and the Valencias and
with conformity of the bank, the auction sale
that was scheduled for March 10, 1961 was
postponed for April 10, 1961. But when April 10,
1961 was subsequently declared a special
holiday, the sheriff of Manila sold the property
covered by T.C.T. No. 7419 at a public auction
sale that was held on April 11, 1961, which was
the next succeeding business day following the
special holiday.
Castro alleged that it was only when she received
the letter from the Acting Deputy Sheriff on
February 13, 1961, when she learned for the first
time that the mortgage contract (Exhibit "6")
which was an encumbrance on her property was
for P6.000.00 and not for P3,000.00 and that she
was made to sign as co-maker of the promissory
note (Exhibit "2") without her being informed of
this.
On April 4, 1961, Castro filed a suit denominated
"Re: Sum of Money," against petitioners Bank
and Desiderio, the Spouses Valencia, Basilio
Magsambol and Arsenio Reyes as defendants in
Civil Case No. 46698 before the Court of First
Instance of Manila upon the charge, amongst
others, that thru mistake on her part or fraud on
the part of Valencias she was induced to sign as
co-maker of a promissory note (Exhibit "2") and
to constitute a mortgage on her house and lot to
secure the questioned note. At the time of filing
her complaint, respondent Castro deposited the
amount of P3,383.00 with the court a quo in full
payment of her personal loan plus interest.
In her amended complaint, Castro prayed,
amongst other, for the annulment as far as she is
concerned of the promissory note (Exhibit "2")
and mortgage (Exhibit "6") insofar as it exceeds
P3,000.00; for the discharge of her personal
obligation with the bank by reason of a deposit
of P3,383.00 with the court a quo upon the filing
of her complaint; for the annulment of the
foreclosure sale of her property covered by
T.C.T. No. 7419 in favor of Arsenio Reyes; and for
the award in her favor of attorney's fees,
damages and cost.
In their answers, petitioners interposed
counterclaims and prayed for the dismissal of
said complaint, with damages, attorney's fees
and costs. 2
The pertinent facts arrived from the stipulation
of facts entered into by the parties as stated by
respondent Court of Appeals are as follows:
Spawning the present litigation are the facts
contained in the following stipulation of facts
submitted by the parties themselves:
1. That the capacity and addresses of all the
parties in this case are admitted .
2. That the plaintiff was the registered owner of
a residential house and lot located at Nos. 1268-
1270 Carola Street, Sampaloc, Manila,
containing an area of one hundred fifty (150)
square meters, more or less, covered by T.C.T.
No. 7419 of the Office of the Register of Deeds
of Manila;
3. That the signatures of the plaintiff appearing
on the following documents are genuine:
a) Application for Industrial Loan with the Rural
Bank of Caloocan, dated December 7, 1959 in the
amount of P3,000.00 attached as Annex A of this
partial stipulation of facts;
b) Promissory Note dated December 11, 1959
signed by the plaintiff in favor of the Rural Bank
of Caloocan for the amount of P3,000.00 as per
Annex B of this partial stipulation of facts;
c) Application for Industrial Loan with the Rural
Bank of Caloocan, dated December 11, 1959,
signed only by the defendants, Severino Valencia
and Catalina Valencia, attached as Annex C, of
this partial stipulation of facts;
d) Promissory note in favor of the Rural Bank of
Caloocan, dated December 11, 1959 for the
amount of P3000.00, signed by the spouses
Severino Valencia and Catalina Valencia as
borrowers, and plaintiff Maxima Castro, as a co-
maker, attached as Annex D of this partial
stipulation of facts;
e) Real estate mortgage dated December 11,
1959 executed by plaintiff Maxima Castro, in
favor of the Rural Bank of Caloocan, to secure
the obligation of P6,000.00 attached herein as
Annex E of this partial stipulation of facts;
All the parties herein expressly reserved their
right to present any evidence they may desire on
the circumstances regarding the execution of the
above-mentioned documents.
4. That the sheriff of Manila, thru Acting Chief
Deputy Sheriff, Basilio Magsambol, sent a notice
of sheriff's sale, address to the plaintiff, dated
February 13, 1961, announcing that plaintiff's
property covered by TCT No. 7419 of the Register
of Deeds of the City of Manila, would be sold at
public auction on March 10, 1961 to satisfy the
total obligation of P5,728.50, plus interest,
attorney's fees, etc., as evidenced by the Notice
of Sheriff's Sale and Notice of Extrajudicial
Auction Sale of the Mortgaged property,
attached herewith as Annexes F and F-1,
respectively, of this stipulation of facts;
5. That upon the request of the plaintiff and
defendants-spouses Severino Valencia and
Catalina Valencia, and with the conformity of the
Rural Bank of Caloocan, the Sheriff of Manila
postponed the auction sale scheduled for March
10, 1961 for thirty (30) days and the sheriff re-
set the auction sale for April 10, 1961;
6. That April 10, 1961 was declared a special
public holiday; (Note: No. 7 is omitted upon
agreement of the parties.)
8. That on April 11, 1961, the Sheriff of Manila,
sold at public auction plaintiff's property covered
by T.C.T. No. 7419 and defendant, Arsenio Reyes,
was the highest bidder and the corresponding
certificate of sale was issued to him as per Annex
G of this partial stipulation of facts;
9. That on April 16, 1962, the defendant Arsenio
Reyes, executed an Affidavit of Consolidation of
Ownership, a copy of which is hereto attached as
Annex H of this partial stipulation of facts;
10. That on May 9, 1962, the Rural Bank of
Caloocan Incorporated executed the final deed
of sale in favor of the defendant, Arsenio Reyes,
in the amount of P7,000.00, a copy of which is
attached as Annex I of this partial stipulation of
facts;
11. That the Register of Deeds of the City of
Manila issued the Transfer Certificate of Title No.
67297 in favor of the defendant, Arsenio Reyes,
in lieu of Transfer Certificate of Title No. 7419
which was in the name of plaintiff, Maxima
Castro, which was cancelled;
12. That after defendant, Arsenio Reyes, had
consolidated his title to the property as per T.C.T.
No. 67299, plaintiff filed a notice of lis pendens
with the Register of Deeds of Manila and the
same was annotated in the back of T.C.T. No.
67299 as per Annex J of this partial stipulation of
facts; and
13. That the parties hereby reserved their rights
to present additional evidence on matters not
covered by this partial stipulation of facts.
WHEREFORE, it is respectfully prayed that the
foregoing partial stipulation of facts be approved
and admitted by this Honorable Court.
As for the evidence presented during the trial,
We quote from the decision of the Court of
Appeals the statement thereof, as follows:
In addition to the foregoing stipulation of facts,
plaintiff claims she is a 70-year old widow who
cannot read and write the English language; that
she can speak the Pampango dialect only; that
she has only finished second grade (t.s.n., p. 4,
December 11, 1964); that in December 1959, she
needed money in the amount of P3,000.00 to
invest in the business of the defendant spouses
Valencia, who accompanied her to the
defendant bank for the purpose of securing a
loan of P3,000.00; that while at the defendant
bank, an employee handed to her several forms
already prepared which she was asked to sign on
the places indicated, with no one explaining to
her the nature and contents of the documents;
that she did not even receive a copy thereof; that
she was given a check in the amount of
P2,882.85 which she delivered to defendant
spouses; that sometime in February 1961, she
received a letter from the Acting Deputy Sheriff
of Manila, regarding the extrajudicial foreclosure
sale of her property; that it was then when she
learned for the first time that the mortgage
indebtedness secured by the mortgage on her
property was P6,000.00 and not P3,000.00; that
upon investigation of her lawyer, it was found
that the papers she was made to sign were:
(a) Application for a loan of P3,000.00 dated
December 7, 1959 (Exh. B-1 and Exh. 1);
(b) Promissory note dated December 11, 1959
for the said loan of P3,000.00 (Exh- B-2);
(c) Promissory note dated December 11, 1959
for P3,000.00 with the defendants Valencia
spouses as borrowers and appellee as co-maker
(Exh. B-4 or Exh. 2).
The auction sale set for March 10, 1961 was
postponed co April 10, 1961 upon the request of
defendant spouses Valencia who needed more
time within which to pay their loan of P3,000.00
with the defendant bank; plaintiff claims that
when she filed the complaint she deposited with
the Clerk of Court the sum of P3,383.00 in full
payment of her loan of P3,000.00 with the
defendant bank, plus interest at the rate of 12%
per annum up to April 3, 1961 (Exh. D).
As additional evidence for the defendant bank,
its manager declared that sometime in
December, 1959, plaintiff was brought to the
Office of the Bank by an employee- (t.s.n., p 4,
January 27, 1966). She wept, there to inquire if
she could get a loan from the bank. The claims
he asked the amount and the purpose of the loan
and the security to he given and plaintiff said she
would need P3.000.00 to be invested in a
drugstore in which she was a partner (t.s.n., p.
811. She offered as security for the loan her lot
and house at Carola St., Sampaloc, Manila, which
was promptly investigated by the defendant
bank's inspector. Then a few days later, plaintiff
came back to the bank with the wife of
defendant Valencia A date was allegedly set for
plaintiff and the defendant spouses for the
processing of their application, but on the day
fixed, plaintiff came without the defendant
spouses. She signed the application and the
other papers pertinent to the loan after she was
interviewed by the manager of the defendant.
After the application of plaintiff was made,
defendant spouses had their application for a
loan also prepared and signed (see Exh. 13). In
his interview of plaintiff and defendant spouses,
the manager of the bank was able to gather that
plaintiff was in joint venture with the defendant
spouses wherein she agreed to invest P3,000.00
as additional capital in the laboratory owned by
said spouses (t.s.n., pp. 16-17) 3
The Court of Appeals, upon evaluation of the
evidence, affirmed in toto the decision of the
Court of First Instance of Manila, the dispositive
portion of which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, the
Court renders judgment and:
(1) Declares that the promissory note, Exhibit '2',
is invalid as against plaintiff herein;
(2) Declares that the contract of mortgage,
Exhibit '6', is null and void, in so far as the
amount thereof exceeds the sum of P3,000.00
representing the principal obligation of plaintiff,
plus the interest thereon at 12% per annum;
(3) Annuls the extrajudicial foreclosure sale at
public auction of the mortgaged property held
on April 11, 1961, as well as all the process and
actuations made in pursuance of or in
implementation thereto;
(4) Holds that the total unpaid obligation of
plaintiff to defendant Rural Bank of Caloocan,
Inc., is only the amount of P3,000.00, plus the
interest thereon at 12% per annum, as of April 3,
1961, and orders that plaintiff's deposit of
P3,383.00 in the Office of the Clerk of Court be
applied to the payment thereof;
(5) Orders defendant Rural Bank of Caloocan,
Inc. to return to defendant Arsenio Reyes the
purchase price the latter paid for the mortgaged
property at the public auction, as well as
reimburse him of all the expenses he has
incurred relative to the sale thereof;
(6) Orders defendants spouses Severino D.
Valencia and Catalina Valencia to pay defendant
Rural Bank of Caloocan, Inc. the amount of
P3,000.00 plus the corresponding 12% interest
thereon per annum from December 11, 1960
until fully paid; and
Orders defendants Rural Bank of Caloocan, Inc.,
Jose Desiderio, Jr. and spouses Severino D.
Valencia and Catalina Valencia to pay plaintiff,
jointly and severally, the sum of P600.00 by way
of attorney's fees, as well as costs.
In view of the conclusion that the court has thus
reached, the counterclaims of defendant Rural
Bank of Caloocan, Inc., Jose Desiderio, Jr. and
Arsenio Reyes are hereby dismissed, as a
corollary
The Court further denies the motion of
defendant Arsenio Reyes for an Order requiring
Maxima Castro to deposit rentals filed on
November 16, 1963, resolution of which was
held in abeyance pending final determination of
the case on the merits, also as a consequence of
the conclusion aforesaid. 4
Petitioners Bank and Jose Desiderio moved for
the reconsideration 5 of respondent court's
decision. The motion having been denied, 6 they
now come before this Court in the instant
petition, with the following Assignment of
Errors, to wit:
I CASTRO OF P3,383.00 WITH THE COURT BELOW
THE COURT OF APPEALS ERRED IN UPHOLDING
THE PARTIAL ANNULMENT OF THE PROMISSORY
NOTE, EXHIBIT 2, AND THE MORTGAGE, EXHIBIT
6, INSOFAR AS THEY AFFECT RESPONDENT
MAXIMA CASTRO VIS-A-VIS PETITIONER BANK
DESPITE THE TOTAL ABSENCE OF EITHER
ALLEGATION IN THE COMPLAINT OR
COMPETENT PROOF IN THE EVIDENCE OF ANY
FRAUD OR OTHER UNLAWFUL CONDUCT
COMMITTED OR PARTICIPATED IN BY
PETITIONERS IN PROCURING THE EXECUTION OF
SAID CONTRACTS FROM RESPONDENT CASTRO.
II
THE COURT OF APPEALS ERRED IN IMPUTING
UPON AND CONSIDERING PREJUDICIALLY
AGAINST PETITIONERS, AS BASIS FOR THE
PARTIAL ANNULMENT OF THE CONTRACTS
AFORESAID ITS FINDING OF FRAUD
PERPETRATED BY THE VALENCIA SPOUSES UPON
RESPONDENT CASTRO IN UTTER VIOLATION OF
THE RES INTER ALIOS ACTA RULE.
III
THE COURT OF APPEAL ERRED IN NOT HOLDING
THAT, UNDER THE FACTS FOUND BY IT,
RESPONDENT CASTRO IS UNDER ESTOPPEL TO
IMPUGN THE REGULARITY AND VALIDITY OF HER
QUESTIONED TRANSACTION WITH PETITIONER
BANK.
IV
THE COURT OF APPEALS ERRED IN NOT FINDING
THAT, BETWEEN PETITIONERS AND
RESPONDENT CASTRO, THE LATTER SHOULD
SUFFER THE CONSEQUENCES OF THE FRAUD
PERPETRATED BY THE VALENCIA SPOUSES, IN AS
MUCH AS IT WAS THRU RESPONDENT CASTRO'S
NEGLIGENCE OR ACQUIESCENSE IF NOT ACTUAL
CONNIVANCE THAT THE PERPETRATION OF SAID
FRAUD WAS MADE POSSIBLE.
V
THE COURT OF APPEALS ERRED IN UPHOLDING
THE VALIDITY OF THE DEPOSIT BY RESPONDENT
AS A TENDER AND CONSIGNATION OF PAYMENT
SUFFICIENT TO DISCHARGE SAID RESPONDENT
FROM HER OBLIGATION WITH PETITIONER
BANK.
VI
THE COURT OF APPEALS ERRED IN NOT
DECLARING AS VALID AND BINDING UPON
RESPONDENT CASTRO THE HOLDING OF THE
SALE ON FORECLOSURE ON THE BUSINESS DAY
NEXT FOLLOWING THE ORIGINALLY SCHEDULED
DATE THEREFOR WHICH WAS DECLARED A
HOLIDAY WITHOUT NECESSITY OF FURTHER
NOTICE THEREOF.
The issue raised in the first three (3) assignment
of errors is whether or not respondent court
correctly affirmed the lower court in declaring
the promissory note (Exhibit 2) invalid insofar as
they affect respondent Castro vis-a-vis petitioner
bank, and the mortgage contract (Exhibit 6) valid
up to the amount of P3,000.00 only.
Respondent court declared that the consent of
Castro to the promissory note (Exhibit 2) where
she signed as co-maker with the Valencias as
principal borrowers and her acquiescence to the
mortgage contract (Exhibit 6) where she
encumbered her property to secure the amount
of P6,000.00 was obtained by fraud perpetrated
on her by the Valencias who had abused her
confidence, taking advantage of her old age and
ignorance of her financial need. Respondent
court added that "the mandate of fair play
decrees that she should be relieved of her
obligation under the contract" pursuant to
Articles 24 7 and 1332 8 of the Civil Code.
The decision in effect relieved Castro of any
liability to the promissory note (Exhibit 2) and
the mortgage contract (Exhibit 6) was deemed
valid up to the amount of P3,000.00 only which
was equivalent to her personal loan to the bank.
Petitioners argued that since the Valencias were
solely declared in the decision to be responsible
for the fraud against Castro, in the light of the res
inter alios acta rule, a finding of fraud
perpetrated by the spouses against Castro
cannot be taken to operate prejudicially against
the bank. Petitioners concluded that respondent
court erred in not giving effect to the promissory
note (Exhibit 2) insofar as they affect Castro and
the bank and in declaring that the mortgage
contract (Exhibit 6) was valid only to the extent
of Castro's personal loan of P3,000.00.
The records of the case reveal that respondent
court's findings of fraud against the Valencias is
well supported by evidence. Moreover, the
findings of fact by respondent court in the
matter is deemed final. 9 The decision declared
the Valencias solely responsible for the
defraudation of Castro. Petitioners' contention
that the decision was silent regarding the
participation of the bank in the fraud is,
therefore, correct.
We cannot agree with the contention of
petitioners that the bank was defrauded by the
Valencias. For one, no claim was made on this in
the lower court. For another, petitioners did not
submit proof to support its contention.
At any rate, We observe that while the Valencias
defrauded Castro by making her sign the
promissory note (Exhibit 2) and the mortgage
contract (Exhibit 6), they also misrepresented to
the bank Castro's personal qualifications in order
to secure its consent to the loan. This must be
the reason which prompted the bank to contend
that it was defrauded by the Valencias. But to
reiterate, We cannot agree with the contention
for reasons above-mentioned. However, if the
contention deserves any consideration at all, it is
in indicating the admission of petitioners that
the bank committed mistake in giving its consent
to the contracts.
Thus, as a result of the fraud upon Castro and the
misrepresentation to the bank inflicted by the
Valencias both Castro and the bank committed
mistake in giving their consents to the contracts.
In other words, substantial mistake vitiated their
consents given. For if Castro had been aware of
what she signed and the bank of the true
qualifications of the loan applicants, it is evident
that they would not have given their consents to
the contracts.
Pursuant to Article 1342 of the Civil Code which
provides:
Art. 1342. Misrepresentation by a third person
does not vitiate consent, unless such
misrepresentation has created substantial
mistake and the same is mutual.
We cannot declare the promissory note (Exhibit
2) valid between the bank and Castro and the
mortgage contract (Exhibit 6) binding on Castro
beyond the amount of P3,000.00, for while the
contracts may not be invalidated insofar as they
affect the bank and Castro on the ground of
fraud because the bank was not a participant
thereto, such may however be invalidated on the
ground of substantial mistake mutually
committed by them as a consequence of the
fraud and misrepresentation inflicted by the
Valencias. Thus, in the case of Hill vs.
Veloso, 10 this Court declared that a contract may
be annulled on the ground of vitiated consent if
deceit by a third person, even without
connivance or complicity with one of the
contracting parties, resulted in mutual error on
the part of the parties to the contract.
Petitioners argued that the amended complaint
fails to contain even a general averment of fraud
or mistake, and its mention in the prayer is
definitely not a substantial compliance with the
requirement of Section 5, Rule 8 of the Rules of
Court. The records of the case, however, will
show that the amended complaint contained a
particular averment of fraud against the
Valencias in full compliance with the provision of
the Rules of Court. Although, the amended
complaint made no mention of mistake being
incurred in by the bank and Castro, such mention
is not essential in order that the promissory note
(Exhibit 2) may be declared of no binding effect
between them and the mortgage (Exhibit 6) valid
up to the amount of P3,000.00 only. The reason
is that the mistake they mutually suffered was a
mere consequence of the fraud perpetrated by
the Valencias against them. Thus, the fraud
particularly averred in the complaint, having
been proven, is deemed sufficient basis for the
declaration of the promissory note (Exhibit 2)
invalid insofar as it affects Castro vis-a-vis the
bank, and the mortgage contract (Exhibit 6) valid
only up to the amount of P3,000.00.
The second issue raised in the fourth assignment
of errors is who between Castro and the bank
should suffer the consequences of the fraud
perpetrated by the Valencias.
In attributing to Castro an consequences of the
loss, petitioners argue that it was her negligence
or acquiescence if not her actual connivance that
made the fraud possible.
Petitioners' argument utterly disregards the
findings of respondent Court of Appeals wherein
petitioners' negligence in the contracts has been
aptly demonstrated, to wit:
A witness for the defendant bank, Rodolfo
Desiderio claims he had subjected the plaintiff-
appellee to several interviews. If this were true
why is it that her age was placed at 61 instead of
70; why was she described in the application
(Exh. B-1-9) as drug manufacturer when in fact
she was not; why was it placed in the application
that she has income of P20,000.00 when
according to plaintiff-appellee, she his not even
given such kind of information -the true fact
being that she was being paid P1.20 per picul of
the sugarcane production in her hacienda and
500 cavans on the palay production. 11
From the foregoing, it is evident that the bank
was as much , guilty as Castro was, of negligence
in giving its consent to the contracts. It
apparently relied on representations made by
the Valencia spouses when it should have
directly obtained the needed data from Castro
who was the acknowledged owner of the
property offered as collateral. Moreover,
considering Castro's personal circumstances –
her lack of education, ignorance and old age –
she cannot be considered utterly neglectful for
having been defrauded. On the contrary, it is
demanded of petitioners to exercise the highest
order of care and prudence in its business
dealings with the Valencias considering that it is
engaged in a banking business –a business
affected with public interest. It should have
ascertained Castro's awareness of what she was
signing or made her understand what obligations
she was assuming, considering that she was
giving accommodation to, without any
consideration from the Valencia spouses.
Petitioners further argue that Castro's act of
holding the Valencias as her agent led the bank
to believe that they were authorized to speak
and bind her. She cannot now be permitted to
deny the authority of the Valencias to act as her
agent for one who clothes another with
apparent authority as her agent is not permitted
to deny such authority.
The authority of the Valencias was only to
follow-up Castro's loan application with the
bank. They were not authorized to borrow for
her. This is apparent from the fact that Castro
went to the Bank to sign the promissory note for
her loan of P3,000.00. If her act had been
understood by the Bank to be a grant of an
authority to the Valencia to borrow in her behalf,
it should have required a special power of
attorney executed by Castro in their favor. Since
the bank did not, We can rightly assume that it
did not entertain the notion, that the Valencia
spouses were in any manner acting as an agent
of Castro.
When the Valencias borrowed from the Bank a
personal loan of P3,000.00 evidenced by a
promissory note (Exhibit 2) and mortgaged
(Exhibit 6) Castro's property to secure said loan,
the Valencias acted for their own behalf.
Considering however that for the loan in which
the Valencias appeared as principal borrowers, it
was the property of Castro that was being
mortgaged to secure said loan, the Bank should
have exercised due care and prudence by making
proper inquiry if Castro's consent to the
mortgage was without any taint or defect. The
possibility of her not knowing that she signed the
promissory note (Exhibit 2) as co-maker with the
Valencias and that her property was mortgaged
to secure the two loans instead of her own
personal loan only, in view of her personal
circumstances – ignorance, lack of education and
old age – should have placed the Bank on
prudent inquiry to protect its interest and that of
the public it serves. With the recent occurrence
of events that have supposedly affected
adversely our banking system, attributable to
laxity in the conduct of bank business by its
officials, the need of extreme caution and
prudence by said officials and employees in the
discharge of their functions cannot be over-
emphasized.
Question is, likewise, raised as to the propriety
of respondent court's decision which declared
that Castro's consignation in court of the amount
of P3,383.00 was validly made. It is contended
that the consignation was made without prior
offer or tender of payment to the Bank, and it
therefore, not valid. In holding that there is a
substantial compliance with the provision of
Article 1256 of the Civil Code, respondent court
considered the fact that the Bank was holding
Castro liable for the sum of P6,000.00 plus 12%
interest per annum, while the amount consigned
was only P3,000.00 plus 12% interest; that at the
time of consignation, the Bank had long
foreclosed the mortgage extrajudicially and the
sale of the mortgage property had already been
scheduled for April 10, 1961 for non-payment of
the obligation, and that despite the fact that the
Bank already knew of the deposit made by
Castro because the receipt of the deposit was
attached to the record of the case, said Bank had
not made any claim of such deposit, and that
therefore, Castro was right in thinking that it was
futile and useless for her to make previous offer
and tender of payment directly to the Bank only
in the aforesaid amount of P3,000.00 plus 12%
interest. Under the foregoing circumstances, the
consignation made by Castro was valid. if not
under the strict provision of the law, under the
more liberal considerations of equity.
The final issue raised is the validity or invalidity
of the extrajudicial foreclosure sale at public
auction of the mortgaged property that was held
on April 11, 1961.
Petitioners contended that the public auction
sale that was held on April 11, 1961 which was
the next business day after the scheduled date
of the sale on April 10, 1961, a special public
holiday, was permissible and valid pursuant to
the provisions of Section 31 of the Revised
Administrative Code which ordains:
Pretermission of holiday. – Where the day, or the
last day, for doing any act required or permitted
by law falls on a holiday, the act may be done on
the next succeeding business day.
Respondent court ruled that the aforesaid sale is
null and void, it not having been carried out in
accordance with Section 9 of Act No. 3135, which
provides:
Section 9. – Notice shall be given by posting
notices of the sale for not less than twenty days
in at least three public places of the municipality
or city where the property is situated, and if such
property is worth more than four hundred pesos,
such notice shall also be published once a week
for at least three consecutive weeks in a
newspaper of general circulation in the
municipality or city.
We agree with respondent court. The
pretermission of a holiday applies only "where
the day, or the last day for doing any act required
or permitted by law falls on a holiday," or when
the last day of a given period for doing an act falls
on a holiday. It does not apply to a day fixed by
an office or officer of the government for an act
to be done, as distinguished from a period of
time within which an act should be done, which
may be on any day within that specified period.
For example, if a party is required by law to file
his answer to a complaint within fifteen (15) days
from receipt of the summons and the last day
falls on a holiday, the last day is deemed moved
to the next succeeding business day. But, if the
court fixes the trial of a case on a certain day but
the said date is subsequently declared a public
holiday, the trial thereof is not automatically
transferred to the next succeeding business day.
Since April 10, 1961 was not the day or the last
day set by law for the extrajudicial foreclosure
sale, nor the last day of a given period but a date
fixed by the deputy sheriff, the aforesaid sale
cannot legally be made on the next succeeding
business day without the notices of the sale on
that day being posted as prescribed in Section 9,
Act No. 3135.
WHEREFORE, finding no reversible error in the
judgment under review, We affirm the same in
toto. No pronouncement as to cost.
SO ORDERED.
CONCHITA T. VDA. DE CHUA, THELMA CHUA,
assisted by her husband, CHARLIE DY, CHARLITO
CHUA, REYNALDO CHUA, SUSAN CHUA, ALEX
CHUA, EDDIE CHUA, SIMON CHUA, AND
ERNESTO CHUA, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT, VICENTE
GO, VICTORIA T. GO, AND HERMINIGILDA
HERRERA, respondents.
This is an appeal by certiorari under Rule 45 of
the Revised Rules of Court from the decision of
the Court of Appeals in AC-G.R. CV No. 67692
entitled "Conchita Vda. de Chua, et al. v.
Herminigilda Herrera, et al.," affirming with
modification the decision of the Court of First
Instance of Cebu in Civil Case No. R-16589.
The facts as found by the Court of Appeals, are
summarized as follows:
Sometime in 1950, defendant Herminigilda
Herrera executed a Contract of Lease (Exh. "A")
in favor of Tian On (sic) (or Sy Tian On) whereby
the former leased to the latter Lots. Nos. 620 and
7549 containing an area of 151 square meters,
located at Manalili Street (now V. Gullas Street)
Cebu City, for a term of ten (10) years, renewable
for another five (5) years. The contract of lease
(Exh. "A") contains a stipulation giving the lessee
an option to buy the leased property (Exh. A-2)
and that the lessor guarantees to leave the
possession of said property to the lessee for a
period of ten (10) years or as long as the lessee
faithfully fulfills the terms and conditions of their
contract (Exh. A-5).
In accordance with the said contract of lease, the
lessee, Tian On, erected a residential house on
the leased premises.
On February 2, 1954, or within four (4) years
from the execution of the said contract of lease
(Exh. "A"), the lessee, Sy Tian On, executed a
Deed of Absolute Sale of Building (Exh. "B") in
favor of Chua Bok, the predecessor-in-interest of
the plaintiffs herein, whereby the former sold to
the latter the aforesaid residential house for and
in consideration of the sum of P8,000.00.
Pertinent provisions of this deed of sale (Exh.
"B") read as follows:
. . . That with the sale of the said house and as a
legal consequence, I hereby assign all my rights
and privileges as a lessee of the lot on which the
said building is constructed together with its
corresponding obligations as contained and
expressly stipulated in the Contract of Lease
executed in 1950 between myself and the lot
owner, Herminigilda Herrera, to the said vendee,
Chua Bok who hereby accepts the said
assignment of the said lease and hereby
promises and bind himself to abide by all the
terms and conditions thereof, a copy of the
Lease Contract is hereby attached as
Appendix "A" and made a part hereof.
That the present sale is made with the
knowledge and express consent of the lot-owner
and lessor, Herminigilda Herrera who is
represented herein by her attorney-in-fact,
Vicenta R. de Reynes who hereby also honors the
annulment of the lease made by Sy Tian On in
favor of Chua Bok, and hereby promises and
binds herself to respect and abide by all the
terms and conditions of the lease contract which
is now assigned to the said Chua Bok.
IN WITNESS WHEREOF, the parties have
hereunto affixed their signatures on this 2nd day
of February 1954, in the City of Cebu, Philippines.
(Sgd.) CHUA BOK
Vendee-Lessee-Assignee
(Sgd.) SY TIAN ON
Vendor-Lessor-Assignor
HERMINIGILDA HERRERA
By:
(Sgd.) VICENTA R. DE REYNES
Attorney-in-fact
Lot-owner-Lessor
SIGNED IN THE PRESENCE OF:
(Sgd.) ILLEGIBLE
AND
(Sgd.) ILLEGIBLE
After the said sale transaction, Chua Bok and his
family
(plaintiffs herein) resided in the said residential
building and they faithfully and religiously paid
the rentals thereof.
When the Original Contract of Lease expired in
1960, Chua Bok and defendant Herminigilda
Herrera, through her alleged attorney-in-fact
executed the following —
CONTRACT OF LEASE.
THIS CONTRACT OF LEASE made and entered
into
this ___ day of August, 1960, in the City of Cebu,
Philippines, by and between:
HERMINIGILDA HERRERA, of legal age, single,
Filipino and a resident of Cebu City, Philippines,
hereinafter known as Party of the First Part;
and
CHUA BOK of legal age, married and a resident of
Cebu City, Philippines, hereinafter known as the
Party of the Second Part.
WITNESSETH:
That the Party of the First Part who is the owner
of a parcel of land located at Manalili Street,
Cebu City containing of an area of about 151
(One Hundred Fifty-One) square meters, more or
less, known as Lot. No. ________ of the
Cadastral Survey of Cebu, hereby lets and leases
unto the Party of the Second Part who hereby
accepts in lease the abovementioned lot under
the following terms and conditions:
1. That the term of this contract shall be for a
period of FIVE (5) years from August 1, 1960 to
August 1, 1965, at a monthly rental of SIXTY
PESOS (P60.00) Philippine Currency;
2. That the rental of P60.00 will be paid within
the first 10 days of every month, to the Party of
the First Part without express demand and in
advance;
xxx xxx xxx
4. That the Party of the Second Part is given an
option to buy the said leased premises if he is
qualified and when the Party of the First Part
decides to sell the same and that the Party of the
second Part is also given the option to renew the
Contract of Lease upon terms and conditions to
be agreed by both parties;
xxx xxx xxx
6. That it is hereby expressly reserved that
should the property leased be sold by the Party
of the First part to any other party, the terms and
conditions of this Contract shall be valid and will
continue for the duration of this contract. The
Third party shall be expressed (sic) bound to
respect the terms of this Contract of Lease;
xxx xxx xxx
That the parties herein, do hereby mutually and
reciprocally stipulate that they will comply with
the terms and conditions herein before set forth.
That the Party of the First Part hereby (sic) these
presents guarantees that she will leave the
property in the possession of the Party of the
Second Part for five (5) years or as long as the
Party of the second Part faithfully fulfills with the
terms and conditions herein set forth.
IN WITNESS WHEREOF, we have hereunto
affixed our signatures on this 9th day of
September, 1960, in the City of Cebu,
Philippines.
(Sgd.) CHUA BOK
Party of the Second Part
HERMINIGILDA HERRERA
By: Party of the First Part
(Sgd.) VICENTA R. DE REYNES
Attorney-in-Fact
SIGNED IN THE PRESENCE OF:
(Sgd.) ILLEGIBLE
(Sgd.) B.E. SUN
After the expiration of the contract of lease in
question (Exh. "C") the plaintiffs herein, who are
the successors-in-interest of Chua Bok (who had
meanwhile died) continued possession of the
premises up to
April 1978, with adjusted rental rate of
P1,000.00 (Exh. "D"); later readjusted to
P2,000.00.
On July 26, 1977, defendant Herrera through her
attorney-in-fact, Mrs. Luz Tormis, who was
authorized with a special power of attorney, sold
the lots in question to defendants-spouses,
Vicente and Victoria Go. The defendants-
spouses were able to have aforesaid sale
registered with the Register of Deeds of the City
of Cebu and the titles of the two parcels of land
were transferred in their names (Exhs. "5-
Herrera", or "5-Go" and
"6-Herrera" or "6-Go").
Thereafter, or on November 18, 1977, plaintiffs
filed the instant case seeking the annulment of
the said sale between Herminigilda Herrera and
spouses Vicente and Victoria Go, alleging that
the conveyance was in violation of the plaintiffs'
right of option to buy the leased premises as
provided in the Contract of Lease (Exh. "C") and
that the defendants-spouses acted in bad faith in
purchasing the said lots knowing fully well that
the said plaintiffs have the option to buy those
lots.
After due trial, the lower court rendered
judgment, the dispositive portion of which reads
as follows:
WHEREFORE, in view of the foregoing, this Court
ORDERS:
1) The DISMISSAL of plaintiffs' complaint, as
against defendant spouses GO;
2) The plaintiffs to VACATE Lot No. 620 and
Lot No. 7549, ownership over by which
defendants Vicente and Victoria Go being found
valid and legitimate, and to peacefully turn over
the same to said spouses, and to REMOVE the
building thereon at plaintiffs' own expense, or
such removal may be done by the declared land-
owners, likewise at plaintiffs' expense.
3) Defendant Herrera to pay the spouses Go, the
sum of P15,000.00 as reimbursement to them
for what they already paid to their lawyer;
4) Defendant Herrera to pay plaintiffs the sum of
P50,000.00 (later reduced to P20,000.00, on
motion of defendant Herrera, which the court a
quo granted) in concept of moral damages
suffered by the latter; and
5) Defendant Herrera to pay the costs of the
proceedings (Record on Appeal, pp. 229-230)
(Rollo, pp. 63-68).
Plaintiffs and defendant Herrera appealed from
the decision of the trial court to the Court of
Appeals.
In said court, plaintiffs-appellants claimed that
the trial court erred: (a) in dismissing their
complaint as against defendants-spouses Go, (b)
in ordering them to vacate the lots in question
and to remove the improvements they had
introduced in the premises, and (c) in ordering
the execution of the judgment pending appeal.
Defendant-appellant Herrera, on her part,
claimed that the trial court erred in ordering her
to pay P15,000.00 as attorney's fees to
defendants-spouses Go and P50,000.00 as moral
damages to plaintiffs-appellants.
The Court of Appeals affirmed with modification
the decision of the trial court, thus:
WHEREFORE, premises considered the appealed
decision is hereby MODIFIED by eliminating the
award of P20,000.00 moral damages in favor of
the plaintiffs-appellants, the award of
P15,000.00 attorney's fees in favor of
defendants-appellees (Go spouses) and the costs
of the proceedings. In all other respects the
appealed decision is hereby AFFIRMED (Rollo, p.
78).
In their petition filed with us, petitioners
(plaintiffs-appellants in AC-G.R. No. 67692) gave
up their demand for the nullification of the sale
of the lots in question to respondent-spouses Go
and limited their appeal to questioning the
affirmance by the Court of Appeals of the
decision of the trial court, ordering their
ejectment from the premises in question and the
demolition of the improvements introduced
thereon.
In support of their right to possess the premises
in question, petitioners rely on the contract of
lease (Exh. "C") entered into by and between
Chua Bok and Vicenta R. de Reynes, as attorney-
in-fact of respondent Herrera, as well as on the
tacit renewal thereof by respondent Herrera
(Rollo, pp. 35-48).
In declaring the contract of lease (Exh. "C") void,
the Court of Appeals noted that Vicenta R. de
Reynes was not armed with a special power of
attorney to enter into a lease contract for a
period of more than one year.
We agree with the Court of Appeals.
The lease contract (Exh. "C"), the linchpin of
petitioners' cause of action, involves the lease of
real property for a period of more than one year.
The contract was entered into by the agent of
the lessor and not the lessor herself. In such a
case, the law requires that the agent be armed
with a special power of attorney to lease the
premises.
Article 1878 of the New Civil Code, in pertinent
part, provides:
Special Power of Attorney are necessary in the
following cases:
xxx xxx xxx
(8) To lease any real property to another person
for more than one year.
It is true that respondent Herrera allowed
petitioners to occupy the leased premises after
the expiration of the lease contract (Exh. "C")
and under
Article 1670 of the Civil Code of the Philippines,
a tacit renewal of the lease (tacita reconduccion)
is deemed to have taken place. However, as held
in Bernardo M. Dizon v. Ambrosio Magsaysay,
57 SCRA 250 (1974), a tacit renewal is limited
only to the terms of the contract which are
germane to the lessee's right of continued
enjoyment of the property and does not extend
to alien matters, like the option to buy the leased
premises.
In said case, Magsaysay leased to Dizon a parcel
of land for a term of two years, expiring on April
1, 1951. Under the lease contract, Dizon was
given the preferential right to purchase the land
under the same conditions as those offered to
other buyers. After the lease contract expired,
Dizon continued to occupy the leased premises
and to pay the monthly rentals, which
Magsaysay accepted. On March 24, 1954, Dizon
learned that Magsaysay had sold the property to
a third party without giving him the opportunity
to exercise the preferential right to purchase
given him under the lease contract. Dizon then
filed an action against Magsaysay and the buyer
to annul the sale of the property or in the
alternative, to recover damages from
Magsaysay. The trial court dismissed the action
and the Court of Appeals affirmed the dismissal.
In the Supreme Court, Dizon claimed that a new
lease contract was impliedly created when
Magsaysay allowed him to continue to occupy
the premises after the expiration of the original
lease contract and that the other terms of the
said contract, including the lessee's preferential
right to purchase, were deemed revived. Dizon
invoked Article 1670 of the Civil Code of the
Philippines, which provides:
Art. 1670. If at the end of the contract the lessee
should continue enjoying the thing leased for
fifteen days with the acquiescence of the lessor,
and unless a notice to the contrary by either
party has previously been given, it is understood
that there is an implied new lease, not for the
period of the original contract, but for the time
established in Articles 1682 and 1687. The other
terms of the original contract shall be
revived (Emphasis supplied).
We dismissed Dizon's appeal and sustained the
interpretation of the Court of Appeals that "the
other terms of the original contract" mentioned
in Article 1670, are only those terms which are
germane to the lessee's right of continued
enjoyment of the property leased. We held:
This is a reasonable construction of the
provision, which is based on the presumption
that when the lessor allows the lessee to
continue enjoying possession of the property for
fifteen days after the expiration of the contract
he is willing that such enjoyment shall be for the
entire period corresponding to the rent which is
customarily paid — in this case up to the end of
the month because the rent was paid monthly.
Necessarily, if the presumed will of the parties
refers to the enjoyment of possession, the
presumption covers the other terms of the
contract related to such possession, such as the
amount of the rental, the date when it must be
paid, the care of the property, the responsibility
of repairs, etc. But no such presumption may be
indulged in with respect to special agreements
which by nature are foreign to the right of
occupancy or enjoyment inherent in a contract
of lease.
Petitioners also question the jurisdiction of the
trial court in Civil Case No. R-16589 in ordering
their ejectment from the leased premises and
the removal of the improvements introduced
thereon by them. They claim that the action in
Civil Case No. R-16589 was for the annulment of
the sale of the property by defendant Herrera to
defendants-spouses Go, and not an appropriate
case for an ejectment. The right of possession of
petitioners of the leased premises was squarely
put in issue by defendants-spouse Go in their
counterclaim to petitioner's complaint, where
they asked that ". . . the plaintiff should vacate
their premises as soon as feasible or as the
Honorable Court may direct" (Record on Appeal,
CA-G.R. No. 67692-R; p. 45).
The said counterclaim in effect was an accion
publiciana for the recovery of the possession of
the leased premises.
Clearly the Court of First Instance had
jurisdiction over actions which involve the
possession of real property or any interest
therein, except forcible entry and detainer
actions (Section 44[b], Judiciary Act of 1948;
Concepcion v. Presiding Judge, Br. V, CFI Bulacan,
119 SCRA 222 [1982]).
A counterclaim is considered a complaint, only
this time, it is the original defendant who
becomes the plaintiff (Valisno v. Plan, 143 SCRA
502 [1986]). It stands on the same footing and is
to be tested by the same rules as if it were an
independent action. Hence, the same rules on
jurisdiction in an independent action apply to a
counterclaim (Vivar v. Vivar, 8 SCRA 847 [1963];
Calo v. Ajax International, Inc. v. 22 SCRA 996
[1968]; Javier v. Intermediate Appellate Court,
171 SCRA 605 [1989]; Quiason, Philippine Courts
and Their Jurisdictions, 1993 ed., p. 203).
Finally, petitioners claim that the Court of
Appeals erred in eliminating the award of moral
damages in the amount of P20,000.00 given to
them by the trial court (Rollo, pp. 48-52). The
elimination of said award is a logical
consequence of the finding that petitioners had
no right of option to purchase the leased
premises that can be enforced against
respondent Herrera.
WHEREFORE, the petition is DENIED.
SO ORDERED.
COSMIC LUMBER
CORPORATION, petitioner, vs. COURT
OF APPEALS and ISIDRO
PEREZ, respondents.
DECISION
BELLOSILLO, J.:
COSMIC LUMBER CORPORATION
through its General Manager executed
on 28 January 1985 a Special Power of
Attorney appointing Paz G. Villamil-
Estrada as attorney-in-fact -
x x x to initiate, institute and file any
court action for the ejectment of third
persons and/or squatters of the entire
lot 9127 and 443 and covered by TCT
Nos. 37648 and 37649, for the said
squatters to remove their houses and
vacate the premises in order that the
corporation may take material
possession of the entire lot, and for this
purpose, to appear at the pre-trial
conference and enter into any
stipulation of facts and/or compromise
agreement so far as it shall protect the
rights and interest of the corporation in
the aforementioned lots.[1]
On 11 March 1985 Paz G. Villamil-
Estrada, by virtue of her power of
attorney, instituted an action for the
ejectment of private respondent Isidro
Perez and recover the possession of a
portion of Lot No. 443 before the
Regional Trial Court of Dagupan,
docketed as Civil Case No. D-7750.[2]
On 25 November 1985 Villamil-Estrada
entered into a Compromise Agreement
with respondent Perez, the terms of
which follow:
1. That as per relocation sketch plan
dated June 5, 1985 prepared by
Engineer Rodolfo dela Cruz the area at
present occupied by defendant
wherein his house is located is 333
square meters on the easternmost part
of lot 443 and which portion has been
occupied by defendant for several years
now;
2. That to buy peace said defendant
pays unto the plaintiff through herein
attorney-in-fact the sum of P26,640.00
computed at P80.00/square meter;
3. That plaintiff hereby recognizes
ownership and possession of the
defendant by virtue of this compromise
agreement over said portion of 333
square m. of lot 443 which portion will
be located on the easternmost part as
indicated in the sketch as annex A;
4. Whatever expenses of subdivision,
registration, and other incidental
expenses shall be shouldered by the
defendant.[3]
On 27 November 1985 the
Compromise Agreement was approved
by the trial court and judgment was
rendered in accordance therewith.[4]
Although the decision became final and
executory it was not executed within
the 5-year period from date of its
finality allegedly due to the failure of
petitioner to produce the owners
duplicate copy of Title No. 37649
needed to segregate from Lot No. 443
the portion sold by the attorney-in-fact,
Paz G. Villamil-Estrada, to private
respondent under the compromise
agreement. Thus on 25 January
1993 respondent filed a complaint to
revive the judgment, docketed as Civil
Case No. D-10459.[5]
Petitioner asserts that it was only when
the summons in Civil Case No. D-10459
for the revival of judgment was served
upon it that it came to know of the
compromise agreement entered into
between Paz G. Villamil-Estrada and
respondent Isidro Perez upon which the
trial court based its decision of 26 July
1993 in Civil Case No. D-
7750. Forthwith, upon learning of the
fraudulent transaction, petitioner
sought annulment of the decision of the
trial court before respondent Court of
Appeals on the ground that the
compromise agreement was void
because: (a) the attorney-in-fact did
not have the authority to dispose of,
sell, encumber or divest the plaintiff of
its ownership over its real property or
any portion thereof; (b) the authority of
the attorney-in-fact was confined to the
institution and filing of an ejectment
case against third persons/squatters on
the property of the plaintiff, and to
cause their eviction therefrom; (c) while
the special power of attorney made
mention of an authority to enter into a
compromise agreement, such authority
was in connection with, and limited to,
the eviction of third persons/squatters
thereat, in order that the corporation
may take material possession of the
entire lot; (d) the amount of P26,640.00
alluded to as alleged consideration of
said agreement was never received by
the plaintiff; (e) the private defendant
acted in bad faith in the execution of
said agreement knowing fully well the
want of authority of the attorney-in-
fact to sell, encumber or dispose of the
real property of plaintiff; and, (f) the
disposal of a corporate property
indispensably requires a Board
Resolution of its Directors, a fact which
is wanting in said Civil Case No. D-7750,
and the General Manager is not the
proper officer to encumber a corporate
property.[6]
On 29 October 1993 respondent court
dismissed the complaint on the basis of
its finding that not one of the grounds
for annulment, namely, lack of
jurisdiction, fraud or illegality was
shown to exist.[7] It also denied the
motion for reconsideration filed by
petitioner, discoursing that the alleged
nullity of the compromise judgment on
the ground that petitioners attorney in
fact Villamit-Estrada was not
authorized to sell the subject property
may be raised as a defense in the
execution of the compromise judgment
as it does not bind petitioner, but not as
a ground for annulment of judgment
because it does not affect the
jurisdiction of the trial court over the
action nor does it amount to extrinsic
fraud.[8]
Petitioner challenges this verdict. It
argues that the decision of the trial
court is void because the compromise
agreement upon which it was based is
void. Attorney-in-fact Villamil-Estrada
did not possess the authority to sell or
was she armed with a Board Resolution
authorizing the sale of its property. She
was merely empowered to enter into a
compromise agreement in the recovery
suit she was authorized to file against
persons squatting on Lot No. 443, such
authority being expressly confined to
the ejectment of third persons or
squatters of x x x lot x x x (No.) 443 x x x
for the said squatters to remove their
houses and vacate the premises in order
that the corporation may take material
possession of the entire lot x x x x
We agree with petitioner. The authority
granted Villamil-Estrada under the
special power of attorney was explicit
and exclusionary: for her to institute
any action in court to eject all persons
found on Lots Nos. 9127 and 443 so that
petitioner could take material
possession thereof, and for this
purpose, to appear at the pre-trial and
enter into any stipulation of facts
and/or compromise agreement but
only insofar as this was protective of
the rights and interests of petitioner in
the property. Nowhere in this
authorization was Villamil-Estrada
granted expressly or impliedly any
power to sell the subject property nor a
portion thereof.Neither can a
conferment of the power to sell be
validly inferred from the specific
authority to enter into a compromise
agreement because of the explicit
limitation fixed by the grantor that the
compromise entered into shall only
be so far as it shall protect the rights
and interest of the corporation in the
aforementioned lots. In the context of
the specific investiture of powers to
Villamil-Estrada, alienation by sale of an
immovable certainly cannot be deemed
protective of the right of petitioner to
physically possess the same, more so
when the land was being sold for a price
of P80.00 per square meter, very much
less than its assessed value of P250.00
per square meter, and considering
further that petitioner never received
the proceeds of the sale.
When the sale of a piece of land or any
interest thereon is through an agent,
the authority of the latter shall be in
writing; otherwise, the sale shall be
void.[9] Thus the authority of an agent to
execute a contract for the sale of real
estate must be conferred in writing and
must give him specific authority, either
to conduct the general business of the
principal or to execute a binding
contract containing terms and
conditions which are in the contract he
did execute.[10] A special power of
attorney is necessary to enter into any
contract by which the ownership of an
immovable is transmitted or acquired
either gratuitously or for a valuable
consideration.[11] The express mandate
required by law to enable an appointee
of an agency (couched) in general terms
to sell must be one that expressly
mentions a sale or that includes a sale
as a necessary ingredient of the act
mentioned.[12] For the principal to
confer the right upon an agent to sell
real estate, a power of attorney must so
express the powers of the agent in clear
and unmistakable language. When
there is any reasonable doubt that the
language so used conveys such power,
no such construction shall be given the
document.[13]
It is therefore clear that by selling to
respondent Perez a portion of
petitioners land through a compromise
agreement, Villamil-Estrada acted
without or in obvious authority. The
sale ipso jure is consequently void. So is
the compromise agreement. This being
the case, the judgment based thereon
is necessarily void. Antipodal to the
opinion expressed by respondent court
in resolving petitioners motion for
reconsideration, the nullity of the
settlement between Villamil-Estrada
and Perez impaired the jurisdiction of
the trial court to render its decision
based on the compromise
agreement. In Alviar v. Court of First
Instance of La Union,[14] the Court held -
x x x x this court does not hesitate to
hold that the judgment in question is
null and void ab initio. It is not binding
upon and cannot be executed against
the petitioners. It is evident that the
compromise upon which the judgment
was based was not subscribed by them
x x x x Neither could Attorney Ortega
bind them validly in the compromise
because he had no special authority x x
xx
As the judgment in question is null and
void ab initio, it is evident that the court
acquired no jurisdiction to render it,
much less to order the execution
thereof x x x
x x x x A judgment, which is null and
void ab initio, rendered by a court
without jurisdiction to do so, is without
legal efficacy and may properly be
impugned in any proceeding by the
party against whom it is sought to be Under authority of Sec. 9, par. (2), of
enforced x x x x B.P. Blg. 129, a party may now petition
the Court of Appeals to annul and set
This ruling was adopted in Jacinto v.
aside judgments of Regional Trial
Montesa,[15] by Mr. Justice J.B.L. Reyes,
Courts.[16] Thus, the Intermediate
a much-respected authority on civil law,
Appellate Court (now Court of Appeals)
where the Court declared that a
shall exercise x x x x (2) Exclusive
judgment based on a compromise
original jurisdiction over action for
entered into by an attorney without
annulment of judgments of the
specific authority from the client is
Regional Trial Courts x x x x However,
void. Such judgment may be impugned
certain requisites must first be
and its execution restrained in any
established before a final and executory
proceeding by the party against whom
judgment can be the subject of an
it is sought to be enforced. The Court
action for annulment. It must either be
also observed that a defendant against
void for want of jurisdiction or for lack
whom a judgment based on a
of due process of law, or it has been
compromise is sought to be enforced
obtained by fraud.[17]
may file a petition for certiorari to
quash the execution. He could not Conformably with law and the above-
move to have the compromise set aside cited authorities, the petition to annul
and then appeal from the order of the decision of the trial court in Civil
denial since he was not a party to the Case No. D-7750 before the Court of
compromise. Thus it would appear that Appeals was proper. Emanating as it did
the obiter of the appellate court that from a void compromise agreement,
the alleged nullity of the compromise the trial court had no jurisdiction to
agreement should be raised as a render a judgment based thereon.[18]
defense against its enforcement is not
It would also appear, and quite contrary
legally feasible. Petitioner could not be
to the finding of the appellate court
in a position to question the
that the highly reprehensible conduct
compromise agreement in the action to
of attorney-in-fact Villamil-Estrada in
revive the compromise judgment since
Civil Case No. 7750 constituted an
it was never privy to such
extrinsic or collateral fraud by reason of
agreement. Villamil-Estrada who
which the judgment rendered thereon
signed the compromise agreement may
should have been struck down. Not all
have been the attorney-in-fact but she
the legal semantics in the world can
could not legally bind petitioner thereto
becloud the unassailable fact that
as she was not entrusted with a special
petitioner was deceived and betrayed
authority to sell the land, as required in
by its attorney-in-fact. Villamil-Estrada
Art. 1878, par. (5), of the Civil Code.
deliberately concealed from petitioner,
her principal, that a compromise opponent.[19] Fraud is extrinsic where
agreement had been forged with the the unsuccessful party has been
end-result that a portion of petitioners prevented from exhibiting fully his case,
property was sold to the deforciant, by fraud or deception practiced on him
literally for a song. Thus completely by his opponent, as by keeping him
kept unaware of its agents artifice, away from court, a false promise of a
petitioner was not accorded even a compromise; or where the defendant
fighting chance to repudiate the never had knowledge of the suit, being
settlement so much so that the kept in ignorance by the acts of the
judgment based thereon became final plaintiff; or where an attorney
and executory. fraudulently or without authority
connives at his defeat; these and similar
For sure, the Court of Appeals restricted
cases which show that there has never
the concept of fraudulent acts within
been a real contest in the trial or
too narrow limits. Fraud may assume
hearing of the case are reasons for
different shapes and be committed in
which a new suit may be sustained to
as many different ways and here lies
set aside and annul the former
the danger of attempting to define
judgment and open the case for a new
fraud. For man in his ingenuity and
and fair hearing.[20]
fertile imagination will always contrive
new schemes to fool the unwary. It may be argued that petitioner knew
of the compromise agreement since the
There is extrinsic fraud within the
principal is chargeable with and bound
meaning of Sec. 9, par. (2), of B.P. Blg.
by the knowledge of or notice to his
129, where it is one the effect of which
agent received while the agent was
prevents a party from hearing a trial, or
acting as such. But the general rule is
real contest, or from presenting all of
intended to protect those who exercise
his case to the court, or where it
good faith and not as a shield for unfair
operates upon matters, not pertaining
dealing. Hence there is a well-
to the judgment itself, but to the
established exception to the general
manner in which it was procured so that
rule as where the conduct and dealings
there is not a fair submission of the
of the agent are such as to raise a clear
controversy.In other words, extrinsic
presumption that he will not
fraud refers to any fraudulent act of the
communicate to the principal the facts
prevailing party in the litigation which is
in controversy.[21] The logical reason for
committed outside of the trial of the
this exception is that where the agent is
case, whereby the defeated party has
committing a fraud, it would be
been prevented from exhibiting fully his
contrary to common sense to presume
side of the case by fraud or deception
or to expect that he would
practiced on him by his
communicate the facts to the
principal. Verily, when an agent is
engaged in the perpetration of a fraud
upon his principal for his own exclusive
benefit, he is not really acting for the
principal but is really acting for himself,
entirely outside the scope of his
agency.[22] Indeed, the basic tenets of
agency rest on the highest
considerations of justice, equity and fair
play, and an agent will not be permitted
to pervert his authority to his own
personal advantage, and his act in
secret hostility to the interests of his
principal transcends the power
afforded him.[23]
WHEREFORE, the petition is
GRANTED. The decision and resolution
of respondent Court of Appeals dated
29 October 1993 and 10 March 1994,
respectively, as well as the decision of
the Regional Trial Court of Dagupan City
in Civil Case No. D-7750 dated 27
November 1985, are NULLIFIED and SET
ASIDE. The Compromise Agreement
entered into between Attorney-in-fact
Paz G. Villamil-Estrada and respondent
Isidro Perez is declared VOID. This is
without prejudice to the right of
petitioner to pursue its complaint
against private respondent Isidro Perez
in Civil Case No. D-7750 for the recovery
of possession of a portion of Lot No.
443.
FRANCISCO A. VELOSO, petitioner, vs.
COURT OF APPEALS, AGLALOMA B.
ESCARIO, assisted by her husband
GREGORIO L. ESCARIO, the REGISTER
OF DEEDS FOR THE CITY OF
MANILA, respondents.
DECISION
TORRES, JR., J.:
This petition for review assails the
decision of the Court of Appeals, dated
July 29, 1991, the dispositive portion of
which reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED IN TOTO. Costs against appellant.[1]
The following are the antecedent facts:
Petitioner Francisco Veloso was the
owner of a parcel of land situated in the
district of Tondo, Manila, with an area
of one hundred seventy seven (177)
square meters and covered by Transfer
Certificate of Title No. 49138 issued by
the Registry of Deeds of Manila. The [2]
title was registered in the name of
Francisco A. Veloso, single, on October
[3]
4, 1957. The said title was
[4]
subsequently canceled and a new one,
Transfer Certificate of Title No. 180685,
was issued in the name of Aglaloma B.
Escario, married to Gregorio L. Escario,
on May 24, 1988. [5]
On August 24, 1988, petitioner Veloso
filed an action for annulment of
documents, reconveyance of property
with damages and preliminary
injunction and/or restraining
order. The complaint, docketed as Civil
Case No. 88-45926, was raffled to the
Regional Trial Court, Branch 45,
Manila. Petitioner alleged therein that
he was the absolute owner of the
subject property and he never
authorized anybody, not even his wife,
to sell it. He alleged that he was in
possession of the title but when his
wife, Irma, left for abroad, he found out
that his copy was missing. He then
verified with the Registry of Deeds of
Manila and there he discovered that his
title was already canceled in favor of
defendant Aglaloma Escario.The
transfer of property was supported by a
General Power of Attorney dated [6]
November 29, 1985 and Deed of
Absolute Sale, dated November 2,
1987, executed by Irma Veloso, wife of
the petitioner and appearing as his
attorney-in-fact, and defendant
Aglaloma Escario. Petitioner Veloso,
[7]
however, denied having executed the
power of attorney and alleged that his
signature was falsified. He also denied
having seen or even known Rosemarie
Reyes and Imelda Santos, the supposed
witnesses in the execution of the power
of attorney. He vehemently denied
having met or transacted with the
defendant. Thus, he contended that the
sale of the property, and the
subsequent transfer thereof, were null
and void.Petitioner Veloso, therefore,
prayed that a temporary restraining
order be issued to prevent the transfer
of the subject property; that the
General Power of Attorney, the Deed of
Absolute Sale and the Transfer
Certificate of Title No. 180685 be
annulled; and the subject property be
reconveyed to him.
Defendant Aglaloma Escario in her
answer alleged that she was a buyer in
good faith and denied any knowledge
of the alleged irregularity. She allegedly
relied on the general power of attorney
of Irma Veloso which was sufficient in
form and substance and was duly
notarized. She contended that plaintiff
(herein petitioner), had no cause of
action against her. In seeking for the
declaration of nullity of the documents,
the real party in interest was Irma
Veloso, the wife of the plaintiff. She
should have been impleaded in the
case. In fact, Plaintiffs cause of action
should have been against his wife,
Irma. Consequently, defendant Escario
prayed for the dismissal of the
complaint and the payment to her of
damages. [8]
Pre-trial was conducted. The sole issue
to be resolved by the trial court was
whether or not there was a valid sale of
the subject property. [9]
During the trial, plaintiff (herein
petitioner) Francisco Veloso testified
that he acquired the subject property
from the Philippine Building
Corporation, as evidenced by a Deed of
Sale dated October 1, 1957. He [10]
married Irma Lazatin on January 20,
1962. Hence, the property did not
[11]
belong to their conjugal
partnership. Plaintiff further asserted
that he did not sign the power of
attorney and as proof that his signature
was falsified, he presented Allied Bank
Checks Nos. 16634640, 16634641 and
16634643, which allegedly bore his
genuine signature.
Witness for the plaintiff Atty. Julian G.
Tubig denied any participation in the
execution of the general power of
attorney. He attested that he did not
sign thereon, and the same was never
entered in his Notarial Register on
November 29, 1985.
In the decision of the trial court dated
March 9, 1990, defendant Aglaloma
[12]
Escaro was adjudged the lawful owner
of the property as she was deemed an
innocent purchaser for value. The
assailed general power of attorney was
held to be valid and sufficient for the
purpose. The trial court ruled that there
was no need for a special power of
attorney when the special power was
already mentioned in the general
one. It also declared that plaintiff failed
to substantiate his allegation of
fraud. The court also stressed that
plaintiff was not entirely blameless for
although he admitted to be the only
person who had access to the title and
other important documents, his wife
was still able to possess the copy. Citing
Section 55 of Act 496, the court held
that Irmas possession and production
of the certificate of title was deemed a
conclusive authority from the plaintiff
to the Register of Deeds to enter a new
certificate. Then applying the principle
of equitable estoppel, plaintiff was held
to bear the loss for it was he who made
the wrong possible. Thus:
WHEREFORE, the Court finds for the
defendants and against plaintiff-
a. declaring that there was a valid sale
of the subject property in favor of the
defendant;
b. denying all other claims of the parties
for want of legal and factual basis.
Without pronouncement as to costs.
SO ORDERED.
Not satisfied with the decision,
petitioner Veloso filed his appeal with
the Court of Appeals. The respondent
court affirmed in totothe findings of the
trial court.
Hence, this petition for review before
us.
This petition for review was initially
dismissed for failure to submit an
affidavit of service of a copy of the
petition on the counsel for private
respondent. A[13]
motion for
reconsideration of the resolution was
filed but it was denied in a resolution
dated March 30, 1992. A second
[14]
motion for reconsideration was filed
and in a resolution dated Aug. 3, 1992,
the motion was granted and the
petition for review was reinstated. [15]
A supplemental petition was filed on
October 9, 1992 with the following
assignment of errors:
I
The Court of Appeals committed a
grave error in not finding that the
forgery of the power of attorney (Exh.
C) had been adequately proven, despite
the preponderant evidence, and in
doing so, it has so far departed from the
applicable provisions of law and the
decisions of this Honorable Court, as to
warrant the grant of this petition for
review on certiorari.
II
There are principles of justice and
equity that warrant a review of the
decision.
III
The Court of Appeals erred in affirming
the decision of the trial court which
misapplied the principle of equitable
estoppel since the petitioner did not fail
in his duty of observing due diligence in
the safekeeping of the title to the
property.
We find petitioners contentions not
meritorious.
An examination of the records showed
that the assailed power of attorney was
valid and regular on its face. It was
notarized and as such, it carries the
evidentiary weight conferred upon it
with respect to its due execution. While
it is true that it was denominated as a
general power of attorney, a perusal
thereof revealed that it stated an
authority to sell, to wit:
2. To buy or sell, hire or lease, mortgage
or otherwise hypothecate lands,
tenements and hereditaments or other
forms of real property, more
specifically TCT No. 49138, upon such
terms and conditions and under such
covenants as my said attorney shall
deem fit and proper. [16]
Thus, there was no need to execute a
separate and special power of attorney
since the general power of attorney had
expressly authorized the agent or
attorney in fact the power to sell the
subject property. The special power of
attorney can be included in the general
power when it is specified therein the
act or transaction for which the special
power is required.
The general power of attorney was
accepted by the Register of Deeds when
the title to the subject property was
canceled and transferred in the name of
private respondent. In LRC Consulta No.
123, Register of Deeds of Albay, Nov.
10, 1956, it stated that:
Whether the instrument be
denominated as general power of
attorney or special power of attorney,
what matters is the extent of the power
or powers contemplated upon the
agent or attorney in fact. If the power is
couched in general terms, then such
power cannot go beyond acts of
administration. However, where the
power to sell is specific, it not being
merely implied, much less couched in
general terms, there can not be any
doubt that the attorney in fact may
execute a valid sale. An instrument may
be captioned as special power of
attorney but if the powers granted are
couched in general terms without
mentioning any specific power to sell or
mortgage or to do other specific acts of
strict dominion, then in that case only
acts of administration may be deemed
conferred.
Petitioner contends that his signature
on the power of attorney was
falsified. He also alleges that the same
was not duly notarized for as testified
by Atty. Tubig himself, he did not sign
thereon nor was it ever recorded in his
notarial register. To bolster his
argument, petitioner had presented
checks, marriage certificate and his
residence certificate to prove his
alleged genuine signature which when
compared to the signature in the power
of attorney, showed some difference.
petitioners wife, Irma. Being the wife of
the owner and having with her the title
of the property, there was no reason for
the private respondent not to believe in
her authority. Moreover, the power of
attorney was notarized and as such,
carried with it the presumption of its
due execution. Thus, having had no
inkling on any irregularity and having no
participation thereof, private
respondent was a buyer in good faith. It
has been consistently held that a
purchaser in good faith is one who buys
property of another, without notice
that some other person has a right to,
or interest in such property and pays a
full and fair price for the same, at the
time of such purchase, or before he has
notice of the claim or interest of some
other person in the property. [18]

We found, however, that the basis

Documents acknowledged before a
presented by the petitioner was
notary public have the evidentiary
inadequate to sustain his allegation of
weight with respect to their due
forgery. Mere variance of the
execution. The questioned power of
signatures cannot be considered as
attorney and deed of sale, were
conclusive proof that the same were
notarized and therefore, presumed to
forged. Forgery cannot be
be valid and duly executed. Atty. Tubig
presumed. Petitioner, however, failed
[17]

denied having notarized the said

to prove his allegation and simply relied
on the apparent difference of the
signatures. His denial had not
established that the signature on the
power of attorney was not his.
We agree with the conclusion of the
lower court that private respondent
was an innocent purchaser for
value. Respondent Aglaloma relied on
the power of attorney presented by
documents and alleged that his
signature had also been falsified. He
presented samples of his signature to
prove his contention. Forgery should be
proved by clear and convincing
evidence and whoever alleges it has the
burden of proving the same. Just like
the petitioner, witness Atty. Tubig
merely pointed out that his signature
was different from that in the power of
attorney and deed of sale. There had
never been an accurate examination of
the signature, even that of the
petitioner. To determine forgery, it was
held in Cesar vs.
Sandiganbayan (quoting Osborn, The
[19]
Problem of Proof) that:
The process of identification, therefore,
must include the determination of the
extent, kind, and significance of this
resemblance as well as of the
variation. It then becomes necessary to
determine whether the variation is due
to the operation of a different
personality, or is only the expected and
inevitable variation found in the
genuine writing of the same writer. It is
also necessary to decide whether the
resemblance is the result of a more or
less skillful imitation, or is the habitual
and characteristic resemblance which
naturally appears in a genuine
writing. When these two questions are
correctly answered the whole problem
of identification is solved.
Even granting for the sake of argument,
that the petitioners signature was
falsified and consequently, the power
of attorney and the deed of sale were
null and void, such fact would not
revoke the title subsequently issued in
favor of private respondent
Aglaloma. In the case of Tenio-
Obsequio vs. Court of Appeals, it was
[20]
held, viz.:
The right of an innocent purchaser for
value must be respected and protected,
even if the seller obtained his title
through fraud. The remedy of the
person prejudiced is to bring an action
for damages against those who caused
or employed the fraud, and if the latter
are insolvent, an action against the
Treasurer of the Philippines may be
filed for recovery of damages against
the Assurance Fund.
Finally, the trial court did not err in
applying equitable estoppel in this
case. The principle of equitable
estoppel states that where one or two
innocent persons must suffer a loss, he
who by his conduct made the loss
possible must bear it. From the
evidence adduced, it should be the
petitioner who should bear the loss. As
the court a quo found:
Besides, the records of this case
disclosed that the plaintiff is not
entirely free from blame. He admitted
that he is the sole person who has
access to TCT No. 49138 and other
documents appertaining thereto (TSN,
May 23, 1989, pp. 7-12). However, the
fact remains that the Certificate of Title,
as well as other documents necessary
for the transfer of title were in the
possession of plaintiffs wife, Irma L.
Veloso, consequently leaving no doubt
or any suspicion on the part of the
defendant as to her authority. Under
Section 55 of Act 496, as amended,
Irmas possession and production of the
Certificate of Title to defendant
operated as conclusive authority from
the plaintiff to the Register of Deeds to
enter a new certificate.[21]
Considering the foregoing premises,
We found no error in the appreciation
of facts and application of law by the
lower court that will warrant the
reversal or modification of the
appealed decision.
ACCORDINGLY, the petition for review
is hereby DENIED for lack of merit.
CLARA RODRIGUEZ,
JULIANA ASBAN, and
DEMETRIO
MIARNADA, Plaintiffs-
Appellees, v.CATALINO
PAMINTUAN and MANUELA
DE JESUS, Defendants-
Appellants.
On the 21st of March, 1903, the
defendant, Manuela de Jesus,
the owner of the three parcels
of land and sugar mill described
in the complaint, executed
power of attorney in favor of her
husband Catalino Pamintuan,
authorizing him to borrow
money in such amount and
upon such terms and conditions
as he might deem proper, and
to secure payment of the loan
by a mortgage on her property.
On the 1st day of June, 1903,
the husband executed in favor
of Pedro Rodriguez (since
deceased, leaving the plaintiffs
as his testamentary heirs) an
instrument duly acknowledged
before a notary public,
purporting on its face to be a
deed of sale of the lands
described in the complaint, for
the sum of P5,000 with a
reserved right in the vendor to
repurchase these lands at any
time within ten years from the
date of the deed, and to
continue occupying them under
as annual rental of
120 pilones of sugar. This
action was instituted on the 2d
day of September, 1914, to
recover possession of the land
and payment of the annual
rental due thereon. The
defendant husband admitted
the execution of the document
purporting to be a deed of sale,
but alleged that the real
purpose and intent of the
parties in the execution of the
document was to secure
payment of the indebtedness by
a mortgage upon the lands
mentioned therein, and that the
instrument would not be
enforced as a deed of sale; this
instrument, together with deeds
in favor of his wife and the
power of attorney executed by
her, having been delivered to
the lender of the money merely
for the purpose of binding his
wife and her lands for the account of interest during the
payment of the life of the loan; and further that
indebtedness. chanroblesv irt ualawli bra ry chan roble s virtual la w libra ry appropriate relief be granted
the plaintiffs providing for the
The defendant, Manuela de
recovery of the loan as a debt
Jesus, entered a general denial
secured by a mortgage on the
of all the allegations of the
lands described in the
complaint, and on her behalf it
contract.
was alleged by her attorney ad
chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

litem that she was of unsound The trial judge held that
mind at the time when the although the defendant,
various transactions evidenced Manuela de Jesus, was shown to
by these instruments are be an ignorant old woman, the
alleged to have taken place. chanrob lesvi rtual awlib rary cha nrob les evidence failed to establish the
allegations of her attorney ad
virtua l law lib rary

Before the case came on trial,

litem as to her unsoundness of
the plaintiffs filed an amended
mind at the time of the
complaint, wherein they
execution of the power of
abandoned the position taken
attorney in favor of his
by them in their original
husband. He also held that the
complaint, and alleged that the
evidence of record conclusively
true intention and
establishes the execution of the
understanding of the parties in
power of attorney, and of the
the execution of the instrument
instrument purporting to be a
purporting to be a deed of sale
deed of sale with the right of
with the right to repurchase
repurchase reserved to the
reserved in favor of the vendor
vendor, and further that the
was to provide written evidence
defendants have repaid neither
of a loan of P5,000 and to
the principal (P5,000) received
furnish security for its
by the husband at the time of
repayment from the properties
the execution of the instrument,
mentioned therein. The prayer
nor any part of the annual
of the amended complaint is for
payment of 120 pilones of
the amount of the loan, P5,000,
sugar provided for in the
and interest thereon at the rate
contract, nor its equivalent in
of P900 per annum, the
money, except only the sum of
equivalent of 120 pilones of
P300, payment of which is
sugar at the rate of P7.50
admitted by the plaintiffs.
the pilon, less the sum of P300,
chanroble svirtualawl ibra ry chan roble s virtual law lib rary

the total amount paid on

Upon these findings of fact 50 pilones of sugar at the rate
authorizing the plaintiffs to of P6 the pilon. chanroblesvi rtua lawlib rary ch anroble s virtual law l ib rary

amend their amended

We are of opinion, however,
complaint and substitute
that plaintiffs are not entitled to
therefor the original complaint
a judgment for a recovery of the
setting up the purchase by
lands in question, but the
Rodriguez of the lands in
judgment should be entered in
question with the right to
their favor for the sum of
repurchase reserved to the
P5,000 together with interest
vendor, the trial court gave
thereon at the rate of P720 a
judgment in favor of the
year from the date of the
plaintiffs for the recovery of the
execution of the document
possession of the land in
purporting to be a deed of sale,
question and for the recovery of
until paid, less P300, receipt of
1,440 pilones of sugar which he
which is acknowledged by the
took to be the total amount due
plaintiffs.
under the contract for the
chanroble svi rtualaw lib rary chan rob les vi rtual law lib rary

twelve full years which had
expired from the date of the
contract to the date of the
judgment, less 50 pilones of
sugar which he found to be
equivalent of P300 admittedly
paid on account thereof, at the
rate of P6 a pilon.
chanrob les vi rtual law lib rary
The power of attorney from the
defendant wife in favor of the
defendant husband authorized
merely:
By means of a mortgage of my
real property, to borrow and
lend sums in cash, at such
interest and for such periods

We find nothing in the record and conditions as he may deem

which would justify us in proper, and to collect or to pay
disturbing the findings of fact by the principal and interest
the trial judge as to the thereon when due.
execution of the instruments
This language cannot be
relied upon by the plaintiffs; the
construed as sufficient authority
receipt by the defendant of the
to sell the real estate of the
sum of P5,000 mentioned
wife, and there is nothing in the
therein; and their failure to
record which even tends to
repay that amount or any sum
disclose that she did in fact
whatever under the terms of the
authorize her husband to sell
contract except the sum of
her lands, or ratified his action
P300, the equivalent in cash of
in executing a deed of sale
therefor. It follows that neither The instrument was not
she nor her lands would be recorded in the mortgage
bound by the instrument registry, and it cannot therefore
purporting on its face to be a be given the effect of a legal
deed of sale of these lands, if mortgage, but we are of opinion
that instrument set forth the that the contract which is
true nature of the proved to have been entered
transaction. chanroblesvi rtualaw lib rary cha nrob les vi rtua l law lib rary into by the husband acting by
authority of, and on behalf of
We are well satisfied, however,
his wife, may be and should be
upon a review of the whole
enforced in accordance with the
record, that, acting under and
real intent of the parties so far
by virtue of the powers
as innocent third persons are
conferred upon him by his wife,
not adversely affected thereby;
the husband did in fact borrow
that is to say, that it should be
P5,000 from Rodriguez, the
deemed to be a valid
plaintiffs' predecessor in
instrument, evidencing the loan
interest, and that he executed a
of the money mentioned therein
public instrument purporting to
and binding the property for the
be a deed of sale, with a
payment of the indebtedness,
reserved right of repurchase, by
but without prejudice to the
way of security for the
right of "third persons,"
repayment of the loan, with the
including innocent purchasers
understanding that although
for value. The doctrine in this
title to the land had been
regard is quite fully set forth,
conveyed to him he would hold
with extensive citation of
the land merely as security, and
authority in the case ofCuyugan
would reconvey it upon receipt
vs. Santos (34 Phil. Rep., 100),
of payment. The conduct and
and reference to that case
testimony of both the husband
renders extended discussion of
and wife support our ruling as to
the principles involved
the true nature of the
unnecessary at this time. We
transaction, and the filing of the
insert, nevertheless, an extract
amended complaint by the
from that opinion wherein, after
plaintiffs, setting forth this
a review of American and
version of the transaction in full
Spanish authorities, we
detail, greatly strengthens our
summarized the doctrine in two
confidence in its truth and
short paragraphs:
accuracy. chanroblesvi rtua lawlib rary cha nro bles vi rtua l law lib ra ry
In the light of these elementary
and basic principles of the code
there can be no question, in the
absence of express statutory
prohibition, as to the validity of
an agreement or understanding
whereby the lender of money,
who as security for the
repayment of the loan has
taken a deed to land, absolute
on its face or in the form of a
deed reserving a mere right of
repurchase to the vendor,
obligates himself to hold such
deed, not as evidence of a
contract of sale but by way of
security for the repayment of
the debt; and that unless the
rights of innocent third persons
have intervened, the lender of
the money may be compelled to
comply specifically with the
terms of such an agreement,
whether it be oral or written;
and further, that he will not be
permitted, in violation of its
terms, to set up title in himself
or to assert a claim of absolute
ownership.
chan roble svirtualawl ibra ry
If the parties actually enter into
such an agreement, the lender
of the money is legally and
morally bound to fulfill it. Of
course such an oral contract
does not give the borrower a
real right in the lands unless it
is executed in compliance with
the formalities prescribed by
law. If entered into orally, it
creates a mere personal
obligation which no wise affects
the lands, and if the lender
conveys the lands to innocent
third persons, the borrower
must content himself with a
mere right of action for
damages against the lender, for
failure to comply with his
agreement. But so long as the
land remains in the hands of the
lender, the borrower may
demand the fulfillment of the
agreement, and a mere lack of
any of the formalities prescribed
under the Spanish Code for the
execution of contracts affecting
real estate will not defeat his
right to have the contract
fulfilled, as the lender may be
compelled in appropriate
proceedings to execute the
contract with the necessary
prescribed formalities.
In this connection it may be well
to add the following extract
from a decision of the supreme
court of Spain dealing with the
provisions of articles 1278,
chan roble s virtual law lib rary
1279, and 1280 of the Civil
Code touching the conditions
essential to the validity of
contracts, and the necessity for
the execution of certain
contracts, including
conveyances of real estate, in
public documents:
Neither this article, the In this appeal certified to this Court by the Court
of Appeals as involving purely legal issues, we
preceding one, nor the following
hold that a special power of attorney to
one requires that the exercise of mortgage real estate is limited to such authority
the action to compel the to mortgage and does not bind the grantor
execution of the deed must personally to other obligations contracted by the
precede the bringing of the grantee, in the absence of any ratification or
other similar act that would estop the grantor
action derived from the from questioning or disowning such other
contract. (Decisions of July 4, obligations contracted by the grantee.
1899, and October 19, 1901).
Plaintiff bank filed this action on February 10,
Twenty days hereafter let 1961 against defendant Maximo Sta. Maria and
his six brothers and sisters, defendants-
judgment be entered reversing
appellants, Valeriana, Emeteria, Teofilo, Quintin,
the judgment entered in the Rosario and Leonila, all surnamed Sta. Maria,
court below without costs in this and the Associated Insurance & Surety Co., Inc.
instance, and ten days as surety, for the collection of certain amounts
thereafter let the record be representing unpaid balances on two
agricultural sugar crop loans due allegedly from
returned to the court below defendants. 1
where judgment will be entered
The said sugar crop loans were obtained by
in favor of the plaintiffs and
defendant Maximo Sta. Maria from plaintiff bank
against the defendants, for the under a special power of attorney, executed in
sum of P5,000 together with his favor by his six brothers and sisters,
interest thereon at the rate of defendants-appellants herein, to mortgage a 16-
P720 a year from the 1st of odd hectare parcel of land, jointly owned by all
of them, the pertinent portion of which reads as
June, 1903, until paid, less follows:
P300, and providing for the sale
of the land in question and the That we, VALERIANA, EMETERIA, TEOFILO,
QUINTIN, ROSARIO and LEONILA all surnamed
application of the proceeds of STA. MARIA, sole heirs of our deceased parents
the sale, so far as may be CANDIDO STA. MARIA and FRANCISCA DE LOS
necessary to the judgment REYES, all of legal age, Filipinos, and residents of
indebtedness. So ordered. chanroble svi rtualaw lib rary chan rob les vi rtual law lib rary
Dinalupihan, Bataan, do hereby name,
constitute and appoint Dr. MAXIMO STA. MARIA,
PHILIPPINE NATIONAL BANK, plaintiff-appellee, of legal age, married, and residing at
vs. Dinalupihan, Bataan to be our true and lawful
MAXIMO STA. MARIA, ET AL., defendant, attorney of and in our place, name and stead to
VALERIANA, EMETERIA, TEOFILO, QUINTIN, mortgage, or convey as security to any bank,
ROSARIO and LEONILA, all surnamed STA. company or to any natural or juridical person,
MARIA,defendants-appellants. our undivided shares over a certain parcel of land
together the improvements thereon which
Tomas Besa and Jose B. Galang for plaintiff-
parcel of land is more particularly described as
appellee.
follows, to wit:
G.P. Nuguid, Jr. for defendants-appellants.
TEEHANKEE, J.:
"Situated in the Barrio of Pinulot, Municipality of
Dinalupihan, Bataan, containing an area of
16.7249 hectares and bounded as follows to wit:
North by property of Alejandro Benito; on the
Northeast, by public land and property of Tomas
Tulop; on the southeast, by property of Ramindo
Agustin; on the southwest, by properties of Jose
V. Reyes and Emilio Reyes; and on the northwest,
by excluded portion claimed by Emilio Reyes."
of which parcel of land aforementioned we are
together with our said attorney who is our
brother, the owners in equal undivided shares as
evidenced by Transfer Certificate of Title No. T-
2785 of the Registry of Deeds of Bataan dated
Feb. 26th 1951. (Exh. E)2
In addition, Valeriana Sta. Maria alone also
executed in favor of her brother, Maximo, a
special power of attorney to borrow money and
mortgage any real estate owned by her, granting
him the following authority:
For me and in my name to borrow money and
make, execute, sign and deliver mortgages of
real estate now owned by me standing in my
name and to make, execute, sign and deliver any
and all promissory notes necessary in the
premises. (Exh. E-I)3
By virtue of the two above powers, Maximo Sta.
Maria applied for two separate crop loans, for
the 1952-1953 and 1953-1954 crop years, with
plaintiff bank, one in the amount of P15,000.00,
of which only the sum of P13,216.11 was actually
extended by plaintiff, and the other in the
amount of P23,000.00, of which only the sum of
P12,427.57 was actually extended by plaintiff. As
security for the two loans, Maximo Sta. Maria
executed in his own name in favor of plaintiff
bank two chattel mortgages on the standing
crops, guaranteed by surety bonds for the full
authorized amounts of the loans executed by the
Associated Insurance & Surety Co., Inc. as surety
with Maximo Sta. Maria as principal. The records
of the crop loan application further disclose that
among the securities given by Maximo for the
loans were a "2nd mortgage on 25.3023 Has. of
sugarland, including sugar quota rights therein"
including, the parcel of land jointly owned by
Maximo and his six brothers and sisters herein
for the 1952-1953 crop loan, with the notation
that the bank already held a first mortgage on
the same properties for the 1951-1952 crop loan
of Maximo, 4 and a 3rd mortgage on the same
properties for the 1953-1954 crop loan. 5
The trial court rendered judgment in favor of
plaintiff and against defendants thus:1äwphï1.ñët
WHEREFORE premises considered, judgment is
hereby rendered condemning the defendant
Maximo R. Sta. Maria and his co-defendants
Valeriana, Quintin, Rosario, Emeteria, Teofilo,
and Leonila all surnamed Sta. Maria and the
Associated Insurance and Surety Company, Inc.,
jointly and severally, to pay the plaintiff, the
Philippine National Bank, Del Carmen Branch, as
follows:
1. On the first cause of action, the sum of
P8,500.72 with a daily interest of P0.83 on
P6,100.00 at 6% per annum beginning August 21,
1963 until fully paid;
2. On the second cause of action, the sum of
P14,299.79 with a daily interest of P1.53 on
P9,346.44 at 6% per annum until fully paid; and
3. On both causes of action the further sum
equivalent to 10% of the total amount due as
attorney's fee as of the date of the execution of
this decision, and the costs.6
Defendant Maximo Sta. Maria and his surety,
defendant Associated Insurance & Surety Co.,
Inc. who did not resist the action, did not appeal
the judgment. This appeals been taken by his six
brothers and sisters, defendants-appellants who
reiterate in their brief their main contention in
their answer to the complaint that under this
special power of attorney, Exh. E, they had not
given their brother, Maximo, the authority to
borrow money but only to mortgage the real
estate jointly owned by them; and that if they
are liable at all, their liability should not go
beyond the value of the property which they had
authorized to be given as security for the loans
obtained by Maximo. In their answer,
defendants-appellants had further contended
that they did not benefit whatsoever from the
loans, and that the plaintiff bank's only recourse
against them is to foreclose on the property
which they had authorized Maximo to mortgage.
We find the appeal of defendants-appellants,
except for defendant Valeriana Sta. Maria who
had executed another special power of attorney,
Exh. E-1, expressly authorizing Maximo to
borrow money on her behalf, to be well taken.
1. Plaintiff bank has not made out a cause of
action against defendants-appellants (except
Valeriana), so as to hold them liable for the
unpaid balances of the loans obtained by
Maximo under the chattel mortgages executed
by him in his own name alone. In the early case
of Bank of P.I. vs. De Coster, this Court, in holding
that the broad power of attorney given by the
wife to the husband to look after and protect the
wife's interests and to transact her business did
not authorize him to make her liable as a surety
for the payment of the pre-existing debt of a
third person, cited the fundamental construction
rule that "where in an instrument powers and
duties are specified and defined, that all of such
powers and duties are limited andconfined to
those which are specified and defined, and all
other powers and duties are excluded." 7 This is
but in accord with the disinclination of courts to
enlarge an authority granted beyond the powers
expressly given and those which incidentally
flow or derive therefrom as being usual or
reasonably necessary and proper for the
performance of such express powers. Even
before the filing of the present action, this Court
in the similar case of De Villa vs. Fabricante 8 had
already ruled that where the power of attorney
given to the husband by the wife was limited to
a grant of authority to mortgage a parcel of land
titled in the wife's name, the wife may not be
held liable for the payment of the mortgage debt
contracted by the husband, as the authority to
mortgage does not carry with it the authority to
contract obligation. This Court thus held in the
said case:
Appellant claims that the trial court erred in
holding that only Cesario A. Fabricante is liable
to pay the mortgage debt and not his wife who
is exempt from liability. The trial court said:
"Only the defendant Cesario A. Fabricante is
liable for the payment of this amount because it
does not appear that the other defendant Maria
G. de Fabricante had authorized Cesario A.
Fabricante to contract the debt also in her name.
The power of attorney was not presented and it
is to be presumed that the power (of attorney)
was limited to a grant of authority to Cesario A.
Fabricante to mortgage the parcel of land
covered by Transfer Certificate of Title in the
name of Maria G. de Fabricante.
We went over the contents of the deed of
mortgage executed by Cesario Fabricante in
favor of Appellant on April 18, 1944, and there is
really nothing therein from which we may infer
that Cesario was authorized by his wife to
construct the obligation in her name. The deed
shows that the authority was limited to the
execution of the mortgage insofar as the
property of the wife is concerned. There is a
difference between authority to mortgage and
authority to contract obligation. Since the power
of attorney was not presented as evidence, the
trial court was correct in presuming that the
power was merely limited to a grant of authority
to mortgage unless the contrary is shown.9
2. The authority granted by defendants-
appellants (except Valeriana) unto their brother,
Maximo, was merely to mortgage the property
jointly owned by them. They did not grant
Maximo any authority to contract for any loans
in their names and behalf. Maximo alone, with
Valeriana who authorized him to borrow money,
must answer for said loans and the other
defendants-appellants' only liability is that the
real estate authorized by them to be mortgaged
would be subject to foreclosure and sale to
respond for the obligations contracted by
Maximo. But they cannot be held personally
liable for the payment of such obligations, as
erroneously held by the trial court.
3. The fact that Maximo presented to the
plaintiff bank Valeriana's additional special
power of attorney expressly authorizing him to
borrow money, Exh. E-1, aside from the
authority to mortgage executed by Valeriana
together with the other defendants-appellants
also in Maximo's favor, lends support to our view
that the bank was not satisfied with the
authority to mortgage alone. For otherwise, such
authority to borrow would have been deemed
unnecessary and a surplusage. And having failed
to require that Maximo submit a similar
authority to borrow, from the other defendants-
appellants, plaintiff, which apparently was
satisfied with the surety bond for repayment put
up by Maximo, cannot now seek to hold said
defendants-appellants similarly liable for the
unpaid loans. Plaintiff's argument that "a
mortgage is simply an accessory contract, and
that to effect the mortgage, a loan has to be
secured" 10 falls, far short of the mark. Maximo
had indeed, secured the loan on his own account
and the defendants-appellants had authorized
him to mortgage their respective undivided
shares of the real property jointly owned by
them as security for the loan. But that was the
extent of their authority land consequent
liability, to have the real property answer for the
loan in case of non-payment. It is not unusual in
family and business circles that one would allow
his property or an undivided share in real estate
to be mortgaged by another as security, either as
an accommodation or for valuable
consideration, but the grant of such authority
does not extend to assuming personal liability,
much less solidary liability, for any loan secured
by the grantee in the absence of express
authority so given by the grantor.
4. The outcome might be different if there had
been an express ratification of the loans by
defendants-appellants or if it had been shown
that they had been benefited by the crop loans
so as to put them in estoppel. But the burden of
establishing such ratification or estoppel falls
squarely upon plaintiff bank. It has not only
failed to discharge this burden, but the record
stands undisputed that defendant-appellant
Quintin Sta. Maria testified that he and his co-
defendants executed the authority to mortgage
"to accommodate (my) brother Dr. Maximo Sta.
Maria ... and because he is my brother, I signed
it to accommodate him as security for whatever
he may apply as loan. Only for that land, we gave
him as, security" and that "we brothers did not
receive any centavo as benefit." 11 The record
further shows plaintiff bank itself admitted
during the trial that defendants-appellants "did
not profit from the loan" and that they "did not
receive any money (the loan proceeds) from
(Maximo)." 12 No estoppel, therefore, can be
claimed by plaintiff as against defendants-
appellants.
5. Now, as to the extent of defendant Valeriana
Sta. Maria's liability to plaintiff. As already stated
above, Valeriana stands liable not merely on the
mortgage of her share in the property, but also
for the loans which Maximo had obtained from
plaintiff bank, since she had expressly granted
Maximo the authority to incur such loans. (Exh.
E-1.) Although the question has not been raised
in appellants' brief, we hold that Valeriana's
liability for the loans secured by Maximo is
not joint and several or solidary as adjudged by
the trial court, but only joint, pursuant to the
provisions of Article 1207 of the Civil Code that
"the concurrence ... of two or more debtors in
one and the same obligation does not imply that
... each one of the (debtors) is bound to render
entire compliance with the prestation. There is a
solidary liability only when the obligation
expressly so states, or when the law or the
nature of the obligation requires solidarity." It
should be noted that in the additional special
power of attorney, Exh. E-1, executed by
Valeriana, she did not grant Maximo the
authority to bind her solidarity with him on any
loans he might secure thereunder.
6. Finally, as to the 10% award of attorney's fees,
this Court believes that considering the
resources of plaintiff bank and the fact that the
principal debtor, Maximo Sta. Maria, had not
contested the suit, an award of five (5%) per cent
of the balance due on the principal, exclusive of
interests, i.e., a balance of P6,100.00 on the first
cause of action and a balance of P9,346.44 on
the second cause of action, per the bank's
statements of August 20, 1963, (Exhs. Q-1 and
BB-1, respectively) should be sufficient.
WHEREFORE, the judgment of the trial court
against defendants-appellants Emeteria, Teofilo,
Quintin, Rosario and Leonila, all surnamed Sta.
Maria is hereby reversed and set aside, with
costs in both instances against plaintiff. The
judgment against defendant-appellant Valeriana
Sta. Maria is modified in that her liability is held
to be joint and not solidary, and the award of
attorney's fees is reduced as set forth in the
preceding paragraph, without costs in this
instance.
.R. No. L-13063 April 30, 1959
FELIX DE VILLA, plaintiff-appellant,
vs.
CESARIO A. FABRICANTE, ET AL., defendants-
appellees.
M. H. de Joya and Ed. Espinosa Antona for
appellant.
Cesario A. Fabricante for appellees.
BAUTISTA ANGELO, J.:
Plaintiff filed this action before the Court of First
Instance of Camarines Sur to foreclose the
mortgage executed by defendants covering two
parcels of land situated in the same province.
Defendants, after having been duly served with
summons, filed a motion to dismiss, which was
sustained, but, on appeal, this Court set aside the
sustaining order and remanded the case to the
trial court for further proceedings.
As defendants failed to answer the complaint
within the reglementary period, they were
declared in default, and forthwith, plaintiff
presented his evidence. Thereupon, the trial
court rendered decision ordering Cesario A.
Fabricante to pay the plaintiff the sum of
P16,666.66 (as amended), with interest at the
rate of 6 per cent per annum from April 18, 1944
and, upon his failure to pay the same within the
period of 90 days, to have the property covered
by Transfer Certificate of Title No. RT-29 (50) sold
for the satisfaction of the judgment. With regard
to the property covered by Transfer Certificate
of Title No. 15, the foreclosure of the mortgage
was not decreed it appearing that the property
had been sold to the spouses Jose Jacob and
Cecilia Baduria and they were not made parties
defendant in the case. From this decision,
plaintiff appealed to the Court of Appeals, but
because the amount involved is more than
P50,000.00, the case was certified to us under
Section 17 of Republic Act. No. 296.
Appellant claims that the trial court erred in
holding that only Cesario A. Fabricante is liable
to pay the mortgage debt and not his wife who
is exempt from liability. The trial court said:
"Only the defendant Cesario A. Fabricante is
liable for the payment of this amount because it
does not appear that the other defendant Maria
G. de Fabricante had authorized Cesario A.
Fabricante to contract the debt also in her name.
The power of attorney was not presented and it
is to be presumed that the power was limited to
a grant of authority to Cesario A. Fabricante to
mortgage the parcel of land covered by Transfer
Certificate of Title in the name of Maria G. de
Fabricante."
We went over the contents of the deed of
mortgage executed by Cesario Fabricante in
favor of appellant on April 18, 1944, and there is
really nothing therein from which we may infer
that Cesario was authorized by his wife to
contract the obligation in her name. The deed
shows that the authority was limited to the
execution of the mortgage insofar as the
property of the wife is concerned. There is a
difference between authority to mortgage and
authority to contract obligation. Since the power
of attorney was not presented as evidence, the
trial court was correct in presuming that the
power was merely limited to a grant of authority
to mortgage unless the contrary is shown.
Appellant also contends that the trial court erred
in applying the Ballantyne Scale of Values in
determining the liability of the appellee and in
consequently ordering him to pay merely the
sum of P16,666.66 instead of the sum of
P150,000.00 as stated in the contract. The
conditions under which the loan of P150,000.00
shall be paid appear in the contract of mortgage
as follows.
(1) That the right to redeem this mortgage shall
begin after the lapse of four (4) years from the
date hereof, and shall be within two years from
the lapse of the said four years; in other words,
the period of redemption shall begin from April
19, 1948, and shall last until April, 1950.
(2) That the interest of six per cent (6) per annum
of the principal sum of ONE HUNDRED AND FIFTY
THOUSAND PESOS accumulated and shall be
added to the principal sum at the end of the said
period, such that at the beginning of the fifth
year or on April 19, 1948, the total mortgage
indebtedness shall be ONE HUNDRED AND
EIGHTY-SIX THOUSAND PESOS (P186,000.00),
which shall bear the interest of six per cent (6)
per annum payable at the end of each year until
the total indebtedness is fully paid.
It thus appears from the contract that the
appellee can only repay the loan within two
years after the lapse of four years from date
thereof, or from April 19, 1948 to April 19, 1950.
This period falls after the liberation of the
Philippines, and following the ruling laid down by
this Court in a long line of decisions, the loan
shall be paid in accordance with the currency
then prevailing on the date of maturity.1 Thus, in
the case of Londres vs. The National Life
Insurance Company of the Philippines, 94 Phil.,
672, this Court said:
Accordingly, as decided by the Supreme Court in
other cases, where the parties have agreed that
the payment of the obligation shall be made in
the currency that would prevail by the end of the
stipulated period, and this takes place after
liberation, the obligation shall be paid in
accordance with the currency then prevailing, or
Philippine currency. (Roño vs. Gomez, 46 Off.
Gaz., Sup. 11, 339; Gomez vs. Tabia, 47 Off. Gaz.,
641). Therefore, the present claim should be
paid in accordance with the present legal tender
or the Philippine currency. (Vol. II. o. 4, pp. 220-
221, JURISPRUDENCE, April 30, 1954.)
The loan should therefore be paid in accordance
with the present currency, and not in accordance
with the Ballantyne Scale of Values as
erroneously applied by the trial court. This
means that the appellee should pay to plaintiff
the sum of P150,000.00 according to the present
legal tender, plus 6 per cent interest thereon
from the filing of the complaint. With regard to
the compounding of interest as stipulated in the
contract, we consider it unreasonable and so it
should be disregarded. Evidently, appellee has
been persuaded to enter into this onerous
stipulation in view of his financial precarious
situation.
With regard to the expenses incurred be
appellant in securing the reconstitution of the
certificates of title covering the properties
mortgaged which were lost during the liberation,
we agree with the trial court that said expenses
are not within the purview of the contract for the
right thereto merely refers to any suit or judicial
proceeding that may affect the title or
ownership of said properties. The reconstitution
of title is not of the nature therein contemplated.
It appears that the land covered by Transfer
Certificate of Title No. 15 in the name of Maria
G. Fabricante had already been cancelled and in
lieu thereof a new one was issued in the name of
Jose Jacob and Cecilia Baduria because the
property was sold to the latter during the period
of the mortgage. The encumbrance was however
annotated on the back of the new certificate of
title. Nevertheless, when this foreclosure case
was instituted, only the mortgagor was included,
while the subsequent purchasers were not made
parties defendants. For this reason, the trial
court found that the foreclosure of the mortgage
insofar as said parcel is concerned cannot be
decreed in view of the non-inclusion of said
purchasers. This is now assigned as error.
This contention must be overruled, for we agree
with the trial court that said purchasers are
necessary parties to this action. This is clear from
Section 1, Rule 70, of the Rules of the Court
which provides that "All persons having or
claiming an interest in the premises subordinate
in the right to that of the holder of the mortgage
. . . shall be made defendants in the action." And
this Court has held that if the mortgaged
property is sold to another person, the mortgage
debtor, as well as the person to whom it is sold,
must both be made defendants.2
Wherefore, with the modification that appellee
Cesario A. Fabricante be ordered to pay plaintiff
the sum of P150,000.00, plus 6 per cent interest
thereon from the filing of the complaint, the
decision appealed from is affirmed in all other
respects, without pronouncement as to costs.
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
TAN ONG SZE, Viuda de Tan Toco, defendant-
appellant.
The plaintiff is a domestic corporation with its
principal office and place of business in the City
of Manila. The defendant is a Chinese citizen.
The complaint alleges that the defendant
received from the plaintiff a loan of P300,000,
for which she executed and delivered to the
plaintiff her certain promissory note dated May
23, 1922, a copy of which is set out and made a
parts of the complaint. That to secure its
payment with interests thereon at the rate of 9
per cent per annum, the defendant executed to
the plaintiff a mortgage on certain real property
in the City and Province of Iloilo, which
instrument was duly registered in the registry of
deeds of that province, a copy of which is
attached to, and made a part of, the complaint,
marked Exhibit A. That the mortgage provided
that if the terms or conditions, the plaintiff could
foreclose it, for which it should receive the
further sum of 10 per cent of the amount due
and owing for and on account of attorney's fees,
expenses and costs. That the amount of
defendant's debt to the plaintiff with interest
until November 14, 1924, was P357,075.80, no
part of which has been paid, and the plaintiff
prays for judgment against the defendant for the
amount of the debt with interest and attorney's
fees, and that the property described in the
mortgage be sold and the proceeds of sale
applied to the satisfaction of the debt, and for
the judgment over for any deficiency which may
remain, and for costs.
For answer the defendant made a general and
specific denial under oath as to the genuineness
and execution of both the note and the
mortgage and of the debt.
At the first trial the lower court dismissed the
complaint for and on account of the failure of the
plaintiff to present the original document, the
power of attorney, upon which its action was
based. From that judgment the plaintiff
appealed to this court which on December 31,
1927,1 sustained that decision of the lower court
upon the legal questions involved, but due to the
importance of the case and in the interest of
justice, it ordered a new trial, and remanded the
case to the lower court, with leave to the plaintiff
to present the power of attorney and such other
evidence as it might have and wish to present. A
second trial was then had, and the lower court
rendered judgment in favor of the plaintiff and
against the defendant for the sum of
P414,333.35, with interest at the rate of P66.67
a day from April 1, 1927, and for the further sum
of 5 per cent of that amount as attorney's fees,
and that the defendant should pay the judgment
on or before November 18, 1928, and for failure
to do so, the property described in the mortgage
should be sold and the proceeds of sale applied
to the satisfaction of the judgment, and for any
deficiency, the plaintiff might have judgment
over, for which execution should issue, and also
for costs.
On appeal the defendant assigns the following
errors:
I. The trial court erred in declaring that the
power of attorney, Exhibit K, conferred upon Tan
Bunco the authority to borrow money and
mortgage the defendant's properties.
II. The trial court erred in assuming that Tan
Bunco has mortgaged the defendant's
properties to the plaintiff, has executed the
promissory note, Exhibit B, and has received the
value thereof.
III. The trial court erred in not declaring that even
supposing that the mortgage, Exhibit E, and the
promissory note, Exhibit B had been executed by
Tan Bunco, nevertheless, the defendant is not
liable for the amount of said note and the
mortgage does not affect her properties.
IV. The trial court erred in declaring that the
defendant has ratified the acts of Tan Bunco and
has been benefited by them.
V. The trial court erred in not dismissing the
complaint, in sentencing the defendant to pay to
the plaintiff the amounts stated in its judgement
and in ordering the foreclosure sale of the
defendant's properties upon her failure to pay
said amounts in full.
JOHNS, J.:p
The defendant at all the times alleged was the
owner of two parcels of land in the City and
Province of Iloilo, known as lots Nos. 279 and
572, of the Iloilo cadastral survey, evidenced by
certificate of title No. 329. September 14, 1916,
in Amoy, China, she executed before the United
States Vice Consul at that place the power of
attorney, known in the record as Exhibit K, in
which she made and constituted Tan Bunco as
her attorney-in-fact, the material provisions of
which are as follows:
Know all men by these presents,
That I, Tan Ong Sze (Chinese characters) widow
of late Tan Tek Co (Chinese characters) of Ng
Chung Village in the Tong An District, Chuancho,
Perfecture, who died in H.T. 2d year 8th month
3d day (6th September, 1910) have made
ordained, constituted and appointed, and by
these presents do make, ordain, constitute and
appoint Tan Bunco (Chinese characters) to be my
lawful attorney of the shop Hock Bee (Chinese
characters) at Iloilo, Philippine Islands, . . . and
also for me and in my name to sign, seal and
execute, and as my act and deed, deliver, any
lease, any other deed for the conveying and real
or personal property or other matter or thing
wherein I am or may be personally interested or
concerned. And I do hereby further authorize
and empower my said attorney to substitute and
appoint any other attorney or attorneys under
him, for the purpose aforesaid and the same
again and pleasure to revoke (and generally for
me and in my name to do, perform and execute
all and every other lawful and reasonable acts
and things whatsoever as fully and effectually as
I the said Tan Ong Sze (———) might or could do
if personally present. And I do hereby ratify and
confirm all and whatsoever my said attorneys or
attorney or his or their substitute or substitutes,
or any of them, shall lawfully do, or cause to be
done, in or about the premises, by virtue of these
presents. It is apparent that a clerical error was
made in the preparation of the instrument or an
error was made in its translation, and in so far as
it is material to this opinion, it should read:
1 . . . and also for me and in my name to sign, seal
and execute, and as my act and deed, deliver any
lease, any other deed for conveying any real or
personal property or other matter or thing
wherein I am or may be personally interested or
concerned;
2 . . . and also for me and my name to sign, seal
and execute, and as my act and deed, deliver any
lease, any other deed for the conveying of any
real or personal property or other matter or
thing wherein I am or may be personally
interested or concerned.
It is very apparent that the words "for the
conveying and real or personal property" should
read for the conveying of real or personal
property." That is to say, the defendant executed
a power of attorney to Tan Bunco in which she
vested him with the power "for me and in my
name to sign, seal and execute, and as my act
and deed, deliver any lease, any other deed for
conveying any real or personal property" or "any
other deed for the conveying of any real or
personal property."
Plaintiff's complaint is founded upon the
promissory note, known in the record as Exhibit
B, which purports to have been executed in Iloilo
on May 23, 1922, by her attorney-in-fact under
and by virtue of the power of attorney above
described, and the mortgage which purports to
have executed to plaintiff to secure the payment
of the note, known in the record as Exhibit E.
The question is thus squarely presented whether
or not under his power the attorney-in-fact had
the authority to execute the promissory note or
to execute the mortgage on real property to
secure its payment. It will be noted that the
language used in the power of attorney is
confined and limited to the authority "to sign,
seal and execute, and as my act and deed, deliver
any lease, any other deed of conveying any real
or personal property," or "to sign, seal and
execute, as my act and deed, deliver any lease,
any other deed for the conveying of any real or
personal property." Hence, does this power
carry with it and imply the authority of the
attorney- in-fact to borrow money and to
execute the promissory note to the defendant
and mortgage her real property to secure its
payment?
In an exhaustive opinion the lower court held
that the power to convey real property carried
with it the power to mortgage, and the
defendant was liable on both the note and the
mortgage.
Cyclopedia of Law and Procedure, vol. 31, p.
1390, says:
(II) TO MORTGAGE OR PLEDGE. Authority to
mortgage the property of a principal is rarely to
be inferred. It is not to be implied from general
authority to manage, or even to sell, the
principal's property.
Under which, in the notes, decisions are cited
from the Supreme Courts of California, Florida,
Kansas, Missouri, South Carolina, and Texas, and
it is said:
The power to sell and convey lands as a general
rule carries no implied power to charge the
principal with the responsibilities and liabilities
of a mortgagor. (Citing decisions from the
Supreme Courts of Kansas, Michigan, Minnesota,
North Dakota, Wisconsin, and a large number of
English authorities.)
And on page 1395, it is said:
(IV) TO LEND OR BORROW MONEY. Power to
lend or borrow money, like most other special
power of an agent, it is not to be inferred without
clear evidence of such a grant.
And on page 1396, it is said:
. . . And when the authority is conferred whether
expressly or impliedly, it must be exercised
within the limits prescribed, and burdens
assumed by the agent but not authorized by the
principal cannot bind the latter. . . . No authority
to borrow money is to be implied from a power
to lend, nor merely from a power to act for the
principal in his business generally or in other
specific matters.
And in the notes, it is said:
. . . The authority to borrow money, conferred on
an agent, must be created by express terms or
necessarily implied from the nature of the
agency, for authority to borrow money is one of
the most dangerous powers a principal can
confer upon an agent.
Thus such power is not to be implied from the
power to manage the principal's business, even
though with authority to buy goods on credit
(Hayness vs. Carpenter, 86 Mo. App., 30;
Bickford vs. Menier, 107 N.Y., 490; 14 N.E., 438
(reversing 36 Hun., 446); Weekes vs. A.F.
Shapleigh hardware Co., 23 Tex. Civ. App., 577;
57 S. W.., 67; Spooner vs. Thompson, 48 Vt., 259
), or from authority to draw checks to make the
payments for property bought by the agent
(Mordhurst vs. Boies, 24 Iowa, 99).
Ruling Case Law, vol. 21, p. 885, says:
An instrument empowering an attorney, among
other things, 'to buy and sell real estate, and in
my name to receive and execute all necessary
contracts and conveyances therefor,' does not
authorize such attorney to sell and convey lands
to which, as the record shows, the principal had
acquired title before execution of the power. . . .
The attorney may not mortgage the property;
nor has he authority to execute an option.
The case of Hawzhurst vs. Rathgeb (51 Pacific,
846), decided by the Supreme Court of
California, is square in point. The syllabus laid
down this rule:
2. The language, in a power of attorney, to sell,
transfer and release two certain mortgages . . .;
to endorse and transfer the notes secured by
said mortgages; to sell and transfer my claims for
said notes and mortgages . . .; and to receive
payments . . . and give acquittances thereof,' —
confers the power to sell and transfer the title to
the securities absolutely, or to collect them, but
does not confer power to pledge them.
3. The act of an attorney in fact in pledging
securities, when his authority only gave him
power to sell or collect, is void.
And the opinion says:
The effect of this language was to confer a power
to sell and transfer the title to the securities
absolutely, or if not so sold, to collect them from
the estate of Kunz. There is nothing in the
language which by any proper construction
purports to confer a power to pledge or
hypothecate the securities for any purpose, or to
borrow money thereon. The words 'sell and
transfer,' as there used, are of no broader
signification than the words 'sell and convey,'
used with reference to a conveyance of real
estate ; and the latter, employed as the
operative words in a power to convey land, do
not carry authority to mortgage or otherwise
dispose of the property.
The case of Minnesota Stoneware Co. vs.
McCrossen, 110 Wisconsin, 316; 84 American
State Reports, p. 927, in the syllabus says:
A POWER OF ATTORNEY TO SELL AND CONVEY
real estate does not include a power to
mortgage.
POWER OF ATTORNEY — INTERPRETATION. — A
written instrument, not ambiguous either in its
literal sense or in the application of its language
to the subject or purpose thereof, must be taken
to mean what it says.
In that case the language in the power was this:
In my name, place and stead to sell and convey
any real estate and personal property which I
may now own or may hereafter acquire in the
State of Wisconsin and Washington.
Construing which, the court, on page 928 of the
opinion says:
The power of attorney was a mere power to sell
and convey, importing authority to sell out for
cash and not power to mortgage. That is
elementary: Jones on Mortgages, sec. 129;
Devlin on Deeds, sec. 363a; Morris vs. Watson,
15 Minn., 212; Colesbury vs. Dart, 61 Ga., 620;
Wood vs. Goodridge, 6 Cush., 117; 52 Am. Dec.,
771; Hoyt vs. Jaques, 129 Mass., 286; Perry on
Trusts, sec. 768. No departure from such general
rule, worthy of consideration, we venture to say,
can be found.
And in the case of Campbell vs. Foster Home
Association, 26 L. R. A.., p. 117; 163 Pa., 609, the
Supreme Court of the States says:
1. A power to mortgage land is not included in a
power of attorney to sell and convey, uncoupled
with any interest in the land or the fund.
And on page 122, among other authorities, the
opinion quotes with approval the decision of
Justice Cooley, in Jeffrey vs. Hursh (49 Mich., 31)
in which it is said:
J. M. Hursh had power to sell the land, but not to
mortgage it. The power is not to be extended by
construction. The principal determines for
himself what authority he will confirm upon his
agent, and there can be no implication from his
authorizing a sale of his lands that he intends
that his agent may at discretion charge him with
the responsibilities and duties of a mortgagor.
In fact the authorities are overwhelming that the
power to sell and convey does not carry with it
or imply the power to borrow money or to
execute a mortgage on real property.
The lower court in its opinion holds that, legally
speaking, a mortgage is a conveyance and that
the power to convey carries with it the power to
mortgage. The theory is not sustained by any
authority. By its express terms and provisions
the instrument itself, upon which plaintiff relies,
provides for the foreclosure of the mortgage,
and the whole purpose and tenor of plaintiff's
complaint is to foreclose the mortgage. If in truth
and in fact it was a conveyance of the legal title
to the property, there would be no reason why
the plaintiff should apply to the court to
foreclose it as a mortgage.
The authorities cited in the opinion of the lower
court are not point, and that is specially true of
47 California, 242,2 in which the syllabus says:
CONSTRUCTION OF POWER OF ATTORNEY. — A
power of attorney in which the principal
authorizes the agent to make contracts, to settle
outstanding debts, and generally to do all things
that concern his interest in any way, real and
personal, to use the principal's name to release
others, to bind the principal as he may deem
proper and expedient, and making the agent as
his general attorney and agent, and ratifying and
confirming whatever the attorney may do by
virtue of the power, authorizes the attorney to
execute a lease of the principal's real estate for a
term exceeding one year, and to execute any
instrument affecting the real estate of the
principal, unless, it may be, a conveyance of it.
It will be noted that this case was decided in
January, 1874.
Note the marked distinction between the
powers conferred in that case and in this. Yet it
was there held that the agent did not have the
power to convey. The case was decided in
January, 1874
The lower court also cites 46 California,
603,3 from a reading of which it will be found
that the real question involved in that case was
the priority of mortgages which involved the
construction of section 1215 of the Code which
defines the terms of the conveyance:
As embracing every instrument in writing by
which any estate or interest in real property is
created, aliened, mortgaged or incumbered, or
by which the title to any property maybe
affected, except wills.
It did not involve the construction of a power of
attorney, and neither of those cases are even
mentioned in the decision of that court above
quoted, which was rendered January 5, 1898.
The case of Golinsky vs. Allison (46 Pacific, 295),
also decided by the Supreme Court of California
on October 7,1896, is a square in point. The
syllabus says:
1. A power of attorney to an agent authorizing
him to 'superintend' property of his principals,
and to 'preserve, manage, sell, and dispose of'
the same, and to 'manage, work, sell, and
dispose of' other property, did not confer
authority on the agent to execute a promissory
note in the name of his principals, or to mortgage
their property to secure the same, though the
note was given in settlement of an antecedent
debt contracted by the agent in the
management of the property.
And in the opinion it is said:
A power of attorney, like any other instrument,
is to be construed according to the natural
import of its language; and the authority which
the principal has conferred upon his agent is not
to be extended by implication beyond the
natural and ordinary significance of the terms in
which that authority has been given. The
attorney has only such authority as the principal
has chosen to confer upon him, and one dealing
with him must ascertain at his own risk whether
his acts will bind the principal. By the above
letter of attorney given by Allison and Sackett to
Barron, he had the authority to 'superintend' the
property of his principals, and to ' preserve,
manage, sell, and dispose of the same, and also
to locate mill sites, mining claims, and water
rights, and to manage, work, sell, and dispose of
them.' A power to sell and convey real estate
does not authorize the attorney to mortgage it.
(Jeffrey vs. Hursh, 49 Mich., 31;12 N. W. ., 898;
Wood vs. Goodridge, 6 Cush., 117; Brown vs.
Rouse, 93 Cal., 237; 28 Pac., 1044.) For an
exhaustive discussion of the subject, see
Campbell vs. Association (163 Pa. St., 609; 30
Atl., 222,224). 'The power is not to be extended
by construction. The principal determines for
himself what authority he will confer upon his
agent, and there can be no implication, from his
authorizing a sale of his lands, that he intends
that his agent may, at discretion, charged him
with the responsibilities and duties of a
mortgagor.
No authority of any court has been cited and
none will ever be found holding that a power "to
sign, seal, and execute, and as may act and deed,
deliver, any lease, any other deed for conveying
any real or personal property" or "to sign, seal,
and execute, and as my act and deed, deliver,
any lease, any other deed for conveying of any
real or personal property," or any similar
language, standing alone and within itself,
carries with it or implies the power to borrow
money or to execute a real mortgage to secure
the payment of a debt.
The trial court also found that by her actions and
conduct, the defendant had ratified and
approved the acts of her agent in the execution
of both the note and the mortgage. Upon that
point, we have read and reread the record, and
there is no legal evidenced to sustain that
finding. In fact there is nothing in the record
which shows or tends to show that the
defendant ever knew of the execution or the
existence of the note or the mortgage, or that
she ever had any knowledge of the transaction in
question.
With all due respect to the exhaustive opinion of
the lower court, we are clearly of the opinion
that it is fundamentally wrong, and that there is
no legal principle upon which can be sustained,
from which it follows that the judgment from the
lower court must be reversed. It is true that on
the former appeal and in the interest of justice,
this case was remanded to the lower court, with
leave to the plaintiff to introduced the power of
attorney in question and any other evidence
which it might have to sustain its cause of action
and that there should be an end to litigation. Be
that as it may, the amount involved is now about
one half million pesos, and it is apparent that the
Bank acted in good faith.
The judgment of the lower court is reversed and
the complaint is dismissed, but for such reasons
and in the interest of justice, such dismissal is
without prejudice to any legal rights or remedies,
of any kind or nature, which the plaintiff may
have against the defendant, with costs in favor
of the appellant. So ordered.
N.TDEEN, plaintiff-appellee,
vs.
PACIFIC COMMERCIAL CO., defendant-
appellant.
It is undisputed that the plaintiff is a resident of
Cebu and duly licensed as real estate broker in
the Philippine Islands. That the Pacific
Commercial Company, to which we will
hereafter refer as the Company, is a duly
organized corporation and authorized to do
business in the Philippine Islands, with its
principal office and place of business in the city
of Manila. That it has numerous branch houses,
one of which is in Cebu, and does more or less
business all over the Philippine Islands. That the
defendant L.J. Francisco is a resident of Cebu and
the local manager of the Company at that place.
That at the time specified, the Company was the
owner of a concrete cement warehouse in
sections 4 and 5 of block 6 on the water front of
Cebu, which is used and rented as a bodega. That
H.B. Pond was a resident of Manila and the vice-
president and general manager of the Company.
That on October 15, 1919, he wrote a letter to
Francisco at Cebu, enclosing a blueprint of the
property which the Company owned there, and
stating that it was offered for the sum of
P300,000 and our warehouse P100,000," in
which he further said: "If this property is sold
arrangements will of course have to be made to
protect us and also to protect the leases at
present on the property of the Cebu Warehouse
Co. As you know, it is our plan to occupy the
warehouse at present leased to Messrs. Macleod
and Co. which adjoins our Cebu Office. Will you
please look around Cebu and see if you can find
buyers for this property?"
December 1, 1919, Francisco wrote the following
letter to the plaintiff:
I attach blueprint which will show P. C. C.
properties for sale on the waterfront. Dr. Pond is
familiar with the terms of the Government
leases. They were to run for 100 years, I believe,
from 1910, and are subject to re-valuation each
ten years. Dr. Pond has recently investigated the
subject and will give you details, I am sure.
Block No. 4. — The Pacific Commercial Company
has for sale sections Nos. 1, 2, and 3. The area is
given in the sections. Sections Nos. 1 and 2 are at
present occupied by Stevenson and Co. and
section No. 3, by Macleod and Co. Stevenson and
Co. pay P750 a month for section 1 and 2, and
Macleod and Company pay P375, for section No.
3. The Pacific Commercial Company is asking
P200,000 net to them for these three sections.
Our offer to any one is that these three sections
are subject to leases with Macleod and Co. and
Stevenson and Co. These leases expire
December 31, 1921.
Block No. 6. — The Pacific Commercial Company
now owns and occupies a bodega on areas Nos.
4 and 5 in Block No. 6. The areas are given on the
blueprint.
The Pacific Commercial Company is placing this
property for sale at P100,000 net to them.
In case a sale is consummated it must be
understood that we shall be permitted to
continue to occupy this warehouse for a
reasonable length of time in order that we may
secure other bodega space and arrange the
transfer of our hemp press, etc."
December 12, 1919, the plaintiff wrote the
following letter to Francisco:
Re the sale of Bodegas as per your letter of Dec.
1st/19, I beg to inform you that I have set the ball
rolling. Am I right in assuming that there is no
other person authorized to offer these Bodegas
for sale? I, furthermore, beg to request that no
prices be given to any person directly, but any
inquiries made be referred to me.
It appears that, as Francisco construed the letter
of vice-president Pond to him of date October
15th, he did not think it prudent for the
Company to dispose of its property in section 4
and 5 of block 6 in Cebu, and that on December
tenth, he wrote to Pond, as vice-president,
advising against the sale. December 16th, vice-
president Pond wrote a letter to Francisco, in
which, among other things, he said:
Your letter leads me to believe that you have
misunderstood the basis on which we were
considering the sale of your warehouse No. 2. In
selling this warehouse we have, therefore,
considered all along that it would be only on the
understanding that we shall be permitted to
occupy this warehouse until the lease of
Macleod and Company on their present
premises expires. On any other basis it would of
course be foolish for us to dispose of the
property.
In view of recent developments I suggest that
you discontinue making any efforts to dispose of
warehouse No. 2. We shall take up our future
policy in connection with our warehouses in
Cebu at the time Mr. Loewenstain and I visit
Cebu in January.
This letter was received by Francisco at Cebu on
the morning of December 19th, and he at once
telephoned the plaintiff the substance of the
letter, and that the property was withdrawn
from the market.
December 19th, the plaintiff wrote Francisco, as
manager of the Company, the following letter:
With reference to our telephone conversation
this morning, the deal for the sale of your
Bodega has gone so far and in accordance with
the terms of your letter to me, that I don't see
how I can repudiate the agreement I have made
with the buyer. The entire transaction will be
terminated and the money paid to you within
ten days or less.
On the same day, Francisco, as manager, wrote
the plaintiff the following letter:
I have your letter of the 19th of December with
reference to the sale of our Warehouse No. 2. As
soon as we receive the offer it will be placed
before our Manila Executives for acceptance.
I beg to state — outside of this particular deal —
that this property was withdrawn from sale in
accordance with the instructions received today
from our Manila Office.
And on December 20th, wrote him another
letter, the material portions of which are as
follows:
Replying to your letters of December 19th and
December 20th, we beg to state that our offer to
you to negotiate on our behalf a sale of
waterfront property in Cebu was subject to
confirmation of the agreement to sell by our
head office in Manila. This branch has no
authority to close a deal of this character without
express approval of the Manila office and in fact
assignment of the lease to the land must be
approved by the Bureau of Lands. On December
19th the writer telephoned you and talked to
you withdrawing this property from sale and you
replied on the same day by letter that the deal
for the sale had gone too far for you to then
withdraw your offer. Not until December 20th
was a definite offer made to us and then you
quoted a price of P100,000 in cash and stated
that the money would be paid as soon as the
necessary documents are drawn up. We again
call your attention to the fact that the necessary
documents cannot be drawn up until the Manila
office approves this sale, that is to say, you were
notified before you closed with the person who
is now offering to buy that the writer alone was
not authorized to consummate this sale.
A lease of this character for this period is
essential to consummate this deal for the reason
that the Pacific Commercia Company is now
occupying the property was are discussing and
no other suitable bodega space is available in
Cebu and will not be, according to our
information, until about December 31, 1921, and
the Company does not propose to be put out
into the street. The writer regrets that you
misunderstood his letter of December 1st which
was intended to have you secure offers which
were to be submitted and forwarded to Manila.
...
The plaintiff claiming that he had a buyer who
was able, ready and willing to purchase the
property and pay P120,000 for it, and the
Company refusing to sell and convey the
property, after certain negotiations, for the
purpose of trying to settle the dispute between
them, the plaintiff commenced this action.
The complaint alleges that on December 1, 1919,
the defendant Francisco, as manager of the
defendant Company, and complying with its
instructions, offered in writing to plaintiff for
sale sections 4 and 5 of block of 6 of the Cebu
Reclaimed Lands for the sum of P100,000, "and
utilized in effect plaintiff in his capacity already
cited to negotiate the sale of the property."
That said defendant, L. J. Francisco, in offering
and recommending to plaintiff the negotiation
for the sale of the property already mentioned,
agreed with the latter that, if he could sell said
property for the fixed sum of P100,000, the
plaintiff would receive, as remuneration for his
services in the negotiation of the sale, any
amount which could be obtained from the buyer
in excess of the said sum, whatever may be the
value of the difference.
That on the 18th of December, 1919, the plaintiff
effected the negotiation of the sale said
warehouse, and promised in the name of his
principal with the Roman Catholic Bishop of
Cebu, that he would sell to him for the sum of
P120,000 the warehouse referred to, having
closed the agreement with the Roman Catholic
Bishop referred to on the same date; and that
the defendant L. J. Francisco was immediately
notified of the execution of this agreement.
It is then alleged that the defendants "have
refused to pay the plaintiff his commission of
P20,000, notwithstanding the demands made by
the plaintiff, which sum is due and payable by
the defendants jointly and severally."
As a second cause of action, the plaintiff alleges
in substance that the defendants have formed a
conspiracy to defeat plaintiff's claim against the
Company, and to place all liability upon the
defendant Francisco.
The defendants filed a general demurrer to the
complaint which was overruled. An answer was
then filed, in which they admit the formal
allegations of the complaint, and make a general
denial of all the others. Testimony was taken
upon such issues, and the trial court dismissed
the action as to Francisco, and rendered a
judgment against the Company for P20,000, with
interest and costs, from which is appealed,
making eighteen assignments of error. The
plaintiff did not appeal.
Although the trial court found for the plaintiff
and against the Company, and there is a sharp
conflict in much of the evidence, there is no
dispute about any of the matters above stated.
Neither is there any allegation or proof that
Francisco was an officer or director of the
Company, or that he had any authority to convey
the property, or that his signature was necessary
to the conveyance. It is also undisputed that the
fee to the property was in the Government, and
that the Company had a ninety-nine-year lease
from the Government, dating from 1910, subject
to certain terms and provisions, among which
was the fact that the lease could not be assigned
without the consent of the Government. It is also
undisputed that at the time in question Mr. Pond
was vice-president and general manager of the
Company, and that his signature was necessary
to any conveyance of real property. In fact, he
was the only officer of the Company in the
Philippine Islands who had authority to make
such a conveyance.
The defendant Francisco, being only the local
manager of the branch office of the Company at
Cebu and not an officer or director, unless
otherwise empowered, would not have any
authority to sell or convey the real property of
the Company, or make a contract for a sale or
conveyance. That power was primarily vested in
the Board of Directors and the executive officers
of the Company, and it appears from the record
that at the time of the alleged acts, it was
delegated to, and vested in, Mr. Pond, who was
the vice-president and general manager of the
Company, and that he alone was authorized by
the Board of Directors to exercise that power.
Francisco, as local manager, not having any
authority to make contracts for the sale or
conveyance of the real property of the Company,
his authority, if any, must come from the
Company or Pond, its general manager. Any
authority of Francisco must be found in the letter
to him of October 15, 1919, from vice-president
Pond, in which, after speaking of the value of
relative areas, and that the value of the property
in question would figure out P100,000, he says:
"If this property is sold arrangements will of
course have to be made to protect us and also to
protect the leases at present, on the property of
the Cebu Warehouse Co. As you know, it is our
plan to occupy the warehouse at present leased
to Messrs. Macleod and Co. which adjoins our
Cebu Office. Will you please look around Cebu
and see if you can find buyers for this property."
By the express terms of this letter, the authority
of Francisco was limited to "look around Cebu
and see if you can find buyers for this property."
It did not authorize him to sell the property or to
contract for its sale. His instructions were to look
around and see if he could find a buyer. Again,
the letter clearly says that an agreement will
"have to be made to protect us and also to
protect the leases at present on the property of
the Cebu Warehouse Co." That it was the plan of
the Company to occupy the warehouse which
adjoint its Cebu office. By the very terms of the
latter, any sale of the property was subject to the
approval of the home office at Manila, and no
sale could be made without its approval, and yet,
under the record, any authority of Francisco to
sell or contract for the sale of the property must
be found in this letter. This letter was followed
by the one of Francisco to the plaintiff of
December 1, 1919, above quoted, which was
written on the stationery of the Company, and is
signed merely "L. J. Francisco." The letterhead
shows upon its face that the head office of the
Company is in Manila, and that it has branch
offices at Sydney, Kobe, Cebu, Iloilo and
Zamboanga. After stating that the property is
held under Government leases and placing the
value of the property at P200,000 on block 4, this
letter says: The Company "now owns and
occupies a bodega on areas Nos. 4 and 5 in block
No. 6. The areas are given on the blueprint," and
it "is placing this property for sale at P100,000
net to them." Also, that in the event of a sale, "it
must be understood that we shall be permitted
to continue to occupy this warehouse for a
reasonable length of time in order that we may
secure other bodega space and arrange the
transfer of our hemp press, etc." Here again, this
letter expressly says any sale of the property
would be conditional. Although this letter is not
as clear and explicit on that point as that of vice-
president Pond of October 15th, it does clearly
point out that, as one of the conditions of the
sale, the Company must have an agreement
satisfactory to it for the continued possession of
the property. By the very terms of this letter, the
right was reserved to the Company to say what
terms would be and would not be satisfactory,
and what would be a reasonable length of time,
for its continued possession of the property. The
power to do that was never delegated by the
Company, or in the letter to Deen. Again, the
plaintiff either knew or it was his business to
know that he was dealing with a corporation
which had executive officers and a board of
directors, and whose principal office was in
Manila, and that Francisco was not an officer or
director of the corporation, and that he was only
a local manager of the Company's property at
Cebu, and that as such he had no legal right to
sell or contract to sell the real property of the
Company, and that any power which he had or
claimed to have in such matters must be
expressly conferred.
In Mechem on Agency, 2d ed., vol. 1, section 797,
it is said:
Authority to sell rather than merely to find a
purchaser; mere broker no authority to make a
binding contract. — It is to be noted also that the
case here contemplated is that in which the
agent is really authorized to sell, and not merely
employed to find a purchaser to whom the
principal may sell. The distinction is one of
consequence, because one employed as a mere
real estate broker to `sell' land, even though
employed by writing, is usually held to have no
power to make a binding contract (much less a
deed of conveyance), but is confined to the
finding of a person ready, willing and able to buy
from the principal on the terms proposed by
him. . . .
In section 800, the same author says:
Mere preliminary correspondence or
negotiations not enough to confer authority. —
It is obvious also that before the questions here
suggested can be determined, the authority
intended to be conferred must be completely
agreed upon and vested. If, therefore, the
dealings between the principal and the agent
have not passed beyond the stage of preliminary
correspondence, if the terms upon which the
authority is to be executed or the property sold
are not yet fully determined, if further
communications are to be had with the principal,
or further assent given, before the authority is to
be exercised, and the like, there can ordinarily be
no present authority to sell in such wise as to
bind the principal.
It is Horn-Book law that a person dealing with an
agent is put upon inquiry as to the power and
authority of the agent.
Corpus Juris, vol. 2, p. 562, section 204, says:
Duty of third person to ascertain authority;
general rule. — It follows from the above rules
that as a general rule every person who
undertakes to deal with an alleged agent is, by
the mere fact of the agency, put upon inquiry,
and must discover at his peril that it is in its
nature and extent sufficient to permit the agent
to do the proposed act, and that its source can
be traced to the will of the alleged principal,
particularly where he is dealing with an agent
whose authority he knows to be special, or
where it is his first transaction with the agent, or
the circumstances connected with the agency
are such as should put him on inquiry, as where
it appears from the circumstances of the
particular business that the interests of the
agent and principal are necessarily adverse, or
that the authority is of an unusual, improbable,
or extraordinary nature. Such a person is to be
regarded as dealing with the power before him,
and must, at his peril, observe that the act done
by the agent is legally identical with the act
authorized by the power.
Source of information. — The person dealing
with the agent should ascertain the extent of his
authority from the principal, or from some other
person who will have a motive to tell the truth in
the interests of the principal, and he cannot rely
upon the agent's statement or assumption of
authority, or upon the mere presumption of
authority.
Failure to inquire. — If such person makes no
inquiry but chooses to rely on the agent's
statements he is chargeable with knowledge of
the agent's authority, and his ignorance of its
extent will be no excuse to him, and the fault
cannot be thrown upon the principal who never
authorized the act or contract, although he was
careless in reposing confidence in his agent.
Section 207 says:
Where authority is, or required to be, in writing.
— Where a third person dealing with an agent
has knowledge that his authority must
necessarily be in writing in order to bind the
principal, it is his duty to ascertain whether the
agent has such authority and whether it is in
proper form; and where there is written
authority, whether it is required or not, and such
person has, or is charged with knowledge
thereof, it is his duty to ascertain the nature and
extent of the authority conferred, and whether
the agent is acting within its scope, unless he is
excused from inspecting the written authority by
a statement from the principal himself defining
the authority. When the authority is by law
required to be in writing he is charged with
knowledge of that fact, and of the limitations
upon the agent's power contained in such
writing. . . .
The same rule is laid down in Mechem on
Agency, vol. 1, section 758.
As a matter of law, it must follow, upon the
undisputed facts, that the plaintiff does not have
a cause of action against the Company. The
lower court dismissed the case as to the
defendant Francisco. The plaintiff did not appeal,
and that decision is now final. In the final analysis
of the facts, Francisco did nothing more than to
advise and represent to the plaintiff that this
Company was willing to sell the property in
question for P100,000, and on condition that the
Company would have the right to continue in the
use and possession of the property upon such
terms and conditions, and for such a length of
time, as the Company would approve. That
statement was true when it was made, and upon
a change in the policy of the Company, Francisco
at once notified the plaintiff.
The judgment of the lower court against the
defendant Pacific Commercial Company will be
reversed, and one entered here in favor of the
Company and against the plaintiff for the costs
and disbursements of this action.
CORAZON CH. VELOSO Y RICABLANCA and
ROBUSTIANO M. ROSALES, plaintiff-appellee,
vs.
LA URBANA, Mutual Building and Loan
Association, and JOSE MARIA DEL
MAR, defendants.
LA URBANA, Mutual Building and Loan
Association,
The plaintiffs herein brought this action to annul
certain mortgages constituted by Jose Maria del
Mar in the name of the plaintiff, Corazon Ch.
Veloso in favor of the defendant corporation,
and recover damages amounting to P2,000 from
the defendants.
La Urbana, one of the defendants herein,
appealed from the judgment rendered in this
case, the dispositive part of which reads as
follows:
For the reasons above stated, the deeds of
mortgage executed by Jose del Mar in the name
of Corazon Ch. Veloso in favor of La Urbana are
declared null and void in so far as they purport
to bind the plaintiffs or their property; the sale
of the said property to La Urbana by virtue of
these mortgages is also hereby declared null and
void; and it is further ordered and adjudged that
the registration of the said deeds in the office of
the register of deeds of Manila be cancelled, and
that La Urbana and Jose del Mar pay the costs of
this suit.
This decision is without prejudice to any right of
action which La Urbana may have against Jose
Maria del Mar or the Insular Treasurer, or both,
under the provisions of sections 99 to 107 of Act
No. 496. So ordered. lawphil.net
The plaintiff Corazon Ch. Veloso was the owner
of certain undivided portions of the five parcels
of land in question together with the
improvements thereon, situated in the City of
Manila, and described in certificates of title Nos.
5767 and 33360. In the month of May, 1929, the
defendant herein Jose Maria del Mar, plaintiff's
brother-in-law, forged two powers of attorney
purporting to have been executed by the
plaintiffs, as husband and wife, conferring upon
him ample authority to mortgage the plaintiff's
participation in the aforementioned properties
described in said certificates of title. These
powers of attorney were duly registered in the
office of the register of deeds. Acting under
these powers of attorney, Del Mar succeeded in
mortgaging the plaintiff's participations to La
Previsora Filipina. On February 6, 1929, he
cancelled said mortgage and transferred it to the
defendant La Urbana which granted him a loan
of P10,600. Upon mortgaging the said
participations of the plaintiff to the aforesaid
defendant, Del Mar delivered to the mortgage
creditor the owner's duplicates of the
certificates of title whereon the mortgage in
question was noted. On November 14 of the
same year. Del Mar obtained from the same
defendant an additional loan, of P2,875 and
executing another mortgage deed which was
likewise noted or, the aforesaid duplicates of the
certificates of title. Del Mar later violated the
conditions of the mortgages whereupon La
Urbana foreclosed them and purchased the said
properties at public auction for the sum of
P10,051.82 which was the total amount of Del
Mar's indebtedness at that time. The plaintiffs
herein learned of del Mar's fraudulent
transactions from the advertisement of the sale
thereof, and in addition to this civil action, they
instituted criminal proceedings against him
resulting in his conviction of the crime of
falsification and the imposition upon him of a
sentence of two (2) years, four (4) months and
one (1) day of prision correccional.
In view of the foregoing facts, the court held that
pursuant to article 1714 of the Civil Code and
under the Torrens Act in force in this jurisdiction,
the forged powers of attorney prepared by Del
Mar were without force and effects and that the
registration of the mortgages constituted by
virtue thereof were likewise null and void and
without force and effect, and that they could not
in any way prejudice the rights of the plaintiff as
the registered owners of her participations in the
properties in question.
The defendant-appellant herein assign various
alleged errors in its brief consideration thereof.
Inasmuch as Del Mar is not the registered owner
of the mortgaged properties and inasmuch as
the appellant was fully aware of the fact that it
was dealing with him on the strength of the
alleged powers of attorney purporting to have
been conferred upon him by the plaintiff, it was
its duty to ascertain the genuineness of said
instruments and not the said powers of attorney
appeared to have been registered. In view of its
failure to proceed in this manner, it acted
negligently and should suffer the consequences
and damages resulting from such transactions. lawph!l.net

Every person dealing with an agent is put upon

inquiry, and must discover upon his peril the
authority of the agent, and this is specially true
where the act of the agent is of an unusual
nature.
If a person makes no inquiry, he is chargeable
with knowledge of the agent's authority, and his
ignorance of that authority will not be any
excuse. (Deen vs. Pacific Commercial Co., 42
Phil., 738.)
Persons dealing with an assumed agent, whether
the assumed agency be a general or special one,
are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the
agency but the nature and extent of the
authority, and in case either is controverted, the
burden of proof is upon them to establish it.
(Harry E. Keeler Electric Co. vs. Rodriguez, 44
Phil., 19.)
As has been noted at the beginning, the court
reserved to the appellant any right of action it
might have against Del Mar and the Insular
Treasurer under the provisions of sections 99 to
107 of Act 496. We deem it unnecessary to
repeat such reservation in this decision. At all
events, the appellant may exercise such right of
action without the necessity of such reservation
if the facts of the case so warrant.
Wherefore, the judgment appealed from is
hereby affirmed, with the costs against the
appellant. So ordered.