3.
Bedia v White
The basic issue before us is the capacity in which petitioner Sylvia H.
Bedia entered into the subject contract with private respondent Emily A.
White. Both the trial court and the respondent court held she was acting
in her own personal behalf. She faults this finding as reversible error and
insists that she was merely acting as an agent.
The case arose when Bedia and White entered into a Participation
Contract[1] reading in full as follows:
THE STATE FAIR OF TEXAS '80
PARTICIPATION CONTRACT
PARTICIPANT (COMPANYNAM
E) EMILY WHITE
ENTERPRISES
I/We, the abovementioned company hereby agrees
to participate in the 1980 Dallas State Fair to be
held in Dallas, Texas on October 3 to October 19,
1980. I/We request for a 15 square meter booth
space worth $2,250.00 U.S. Dollars.
I/We further understand that this participation
contract shall be deemed non-cancellable after
payment of the said down payment, and that any
intention on our part to cancel the same shall
render whatever amount we have paid forfeited in
favor of HONTIVEROS & ASSOCIATED PRODUCERS
PHILIPPINE YIELDS, INC.
FOR THE ABOVE CONSIDERATION, I/We
understand that HONTIVEROS & ASSOCIATED
PRODUCERS PHIL. YIELDS, INC. shall: Reserve said
booth for our exclusive perusal; We also understand
that the above cost includes overall exterior booth
decoration and materials but does not include
interior designs which will be per our specifications
and expenses.
PARTICIPANT'S AUTHORIZED
SIGNATURE: PARTICIPATION
ACCEPTED BY:
(SGD.) EMILY
WHITE (SGD.) SYLVIA
H. BEDIA
DATE: 8/13/80 DATE:
Aug. 1, 1980
On August 10, 1986, White and her husband filed a complaint in the
Regional Trial Court of Pasay City for damages against Bedia and
Hontiveros & Associated Producers Phil. Yields, Inc. for damages caused
by their fraudulent violation of their agreement. She averred that Bedia
had approached her and persuaded her to participate in the State of
Texas Fair, and that she made a down payment of $500.00 to Bedia on
the agreed display space. In due time, she enplaned for Dallas with her
merchandise but was dismayed to learn later that the defendants had not
paid for or registered any display space in her name, nor were they
authorized by the state fair director to recruit participants. She said she
incurred losses as a result for which the defendants should be held
solidarily liable.[2]
In their joint answer, the defendants denied the plaintiff's allegation that
they had deceived her and explained that no display space was registered
in her name as she was only supposed to share the space leased by
Hontiveros in its name. She was not allowed to display her goods in that
space because she had not paid her balance of $1,750.00, in violation of
their contract. Bedia also made the particular averment that she did not
sign the Participation Contract on her own behalf but as an agent of
Hontiveros and that she had later returned the advance payment of
$500.00 to the plaintiff. The defendants filed their own counterclaim and
complained of malice on the part of the plaintiffs.[3]
In the course of the trial, the complaint against Hontiveros was dismissed
on motion of the plaintiffs.[4]
In his decision dated May 29, 1986, Judge Fermin Martin, Jr. found Bedia
liable for fraud and awarded the plaintiffs actual and moral damages plus
attorney's fees and the costs. The Court said:
In claiming to be a mere agent of Hontiveros &
Associated Producers Phil. Yields, Inc., defendant
Sylvia H. Bedia evidently attempted to escape
liability for herself. Unfortunately for her, the
"Participation Contract" is not actually in
representation or in the name of said corporation. It
is a covenant entered into by her in her personal
capacity, for no one may contract in the name of
another without being authorized by the latter, or
unless she has by law a right to represent her. (Art.
1347, new Civil Code)
Sustaining the trial court on this point, the respondent court[5] declared
in its decision dated March 30, 1990:
The evidence, on the whole, shows that she
definitely acted on her own. She represented herself
as authorized by the State of Texas to solicit and
assign booths at the Texas fair; she assured the
appellee that she could give her booth. Under
Articler 1883 of the New Civil Code, if the
agent acts in his own name, the principal has no
right of action against the persons with whom the
agent had contracted.
We do not share these views.
It is noteworthy that in her letter to the Minister of Trade dated
December 23, 1984, Emily White began:
I am a local exporter who was recruited by
Hontiveros & Associated Producers Phil. Yields,
Inc. to participate in the State Fair of Dallas, Texas
which was held last Oct. 3 to 19, 1980. Hontiveros &
Associated charged me US$150.00 per square meter
for display booth of said fair. I have paid an advance
of US$500.00 as partial payment for the
total space of 15 square meter of which is $2,250.00
(Two Thousand Two Hundred Fifty Dollars).[6]
As the Participation Contract was signed by Bedia, the above statement
was an acknowledgment by White that Bedia was only acting for
Hontiveros when it recruited her as a participant in the Texas State Fair
and charged her a partial payment of $500.00. This amount was to be
forfeited to Hontiveros in case of cancellation by her of the agreement.
The fact that the contract was typewritten on the letterhead stationery of
Hontiveros bolsters this conclusion in the absence of any showing that
said stationery had been illegally used by Bedia.
Significantly, Hontiveros itself has not repudiated Bedia's agency as it
would have if she had really not signed in its name. In the answer it filed
with Bedia, it did not deny the latter's allegation in Paragraph 4 thereof
that she was only acting as its agent when she solicited White's
participation. In fact, by filing the answer jointly with Bedia through their
common counsel, Hontiveros affirmed this allegation.
If the plaintiffs had any doubt about the capacity in which Bedia was
acting, what they should have done was verify the matter with
Hontiveros. They did not. Instead, they simply accepted Bedia's
representation that she was an agent of Hontiveros and dealt with her as
such. Under Article 1910 of the Civil Code, "the principal must comply
with all the obligations which the agent may have contracted within the
scope of his authority." Hence, the private respondents cannot now hold
Bedia liable for the acts performed by her for, and imputable to,
Hontiveros as her principal.
The plaintiffs' position became all the more untenable when they moved
on June 5, 1984, for the dismissal of the complaint against
Hontiveros,[7] leaving Bedia as the sole defendant. Hontiveros had
admitted as early as when it filed its answer that Bedia was acting as its
agent. The effect of the motion was to leave the plaintiffs without a cause
of action against Bedia for the obligation, if any, of Hontiveros.
Our conclusion is that since it has not been found that Bedia was acting
beyond the scope of her authority when she entered into the
Participation Contract on behalf of Hontiveros, it is the latter that should
be held answerable for any obligation arising from that agreement. By
moving to dismiss the complaint against Hontiveros, the plaintiffs
virtually disarmed themselves and forfeited whatever claims they might
have proved against the latter under the contract signed for it by Bedia. It
should be obvious that having waived these claims against the principal,
they cannot now assert them against the agent.
WHEREFORE, the appealed decision dated March 30, 1990, of the
respondent court is REVERSED and a new judgment is rendered
dismissing Civil Case No. 9246-P in the Regional Trial Court of Pasay City.
SO ORDERED.
4. PNB v Ritratto Group
In a petition for review on certiorari under Rule 45 of the Revised Rules
of Court, petitioner seeks to annul and set aside the Court of Appeals'
decision in C.A. CV G.R. S.P. No. 55374 dated March 27, 2000, affirming
the Order issuing a writ of preliminary injunction of the Regional Trial
Court of Makati, Branch 147 dated June 30, 1999, and its Order dated
October 4, 1999, which denied petitioner's motion to dismiss.
The antecedents of this case are as follows:
Petitioner Philippine National Bank is a domestic corporation organized
and existing under Philippine law. Meanwhile, respondents Ritratto
Group, Inc., Riatto International, Inc. and Dadasan General Merchandise
are domestic corporations, likewise, organized and existing under
Philippine law.
On May 29, 1996, PNB International Finance Ltd. (PNB-IFL) a subsidiary
company of PNB, organized and doing business in Hong Kong, extended a
letter of credit in favor of the respondents in the amount of
US$300,000.00 secured by real estate mortgages constituted over four (4)
parcels of land in Makati City. This credit facility was later increased
successively to US$1,140,000.00 in September 1996; to US$1,290,000.00
in November 1996; to US$1,425,000.00 in February 1997; and decreased
to US$1,421,316.18 in April 1998. Respondents made repayments of the
loan incurred by remitting those amounts to their loan account with
PNB-IFL in Hong Kong.
However, as of April 30, 1998, their outstanding obligations stood at
US$1,497,274.70. Pursuant to the terms of the real estate mortgages,
PNB-IFL, through its attorney-in-fact PNB, notified the respondents of the
foreclosure of all the real estate mortgages and that the properties
subject thereof were to be sold at a public auction on May 27, 1999 at the
Makati City Hall.
On May 25, 1999, respondents filed a complaint for injunction with
prayer for the issuance of a writ of preliminary injunction and/or
temporary restraining order before the Regional Trial Court of Makati.
The Executive Judge of the Regional Trial Court of Makati issued a
72-hour temporary restraining order. On May 28, 1999, the case was
raffled to Branch 147 of the Regional Trial Court of Makati. The trial
judge then set a hearing on June 8, 1999. At the hearing of the application
for preliminary injunction, petitioner was given a period of seven days to
file its written opposition to the application. On June 15, 1999, petitioner
filed an opposition to the application for a writ of preliminary injunction
to which the respondents filed a reply. On June 25, 1999, petitioner filed a
motion to dismiss on the grounds of failure to state a cause of action and
the absence of any privity between the petitioner and respondents. On
June 30, 1999, the trial court judge issued an Order for the issuance of a
writ of preliminary injunction, which writ was correspondingly issued on
July 14, 1999. On October 4, 1999, the motion to dismiss was denied by
the trial court judge for lack of merit.
Petitioner, thereafter, in a petition for certiorari and prohibition assailed
the issuance of the writ of preliminary injunction before the Court of
Appeals. In the impugned decision,1 the appellate court dismissed the
petition. Petitioner thus seeks recourse to this Court and raises the
following errors:
1.
THE COURT OF APPEALS PALPABLY ERRED IN NOT DISMISSING THE
COMPLAINT A QUO, CONSIDERING THAT BY THE ALLEGATIONS OF THE
COMPLAINT, NO CAUSE OF ACTION EXISTS AGAINST PETITIONER,
WHICH IS NOT A REAL PARTY IN INTEREST BEING A MERE
ATTORNEY-IN-FACT AUTHORIZED TO ENFORCE AN ANCILLARY
CONTRACT.
2.
THE COURT OF APPEALS PALPABLY ERRED IN ALLOWING THE TRIAL
COURT TO ISSUE IN EXCESS OR LACK OF JURISDICTION A WRIT OF
PRELIMINARY INJUNCTION OVER AND BEYOND WHAT WAS PRAYED
FOR IN THE COMPLAINT A QUO CONTRARY TO CHIEF OF STAFF, AFP VS.
GUADIZ JR., 101 SCRA 827.2
Petitioner prays, inter alia, that the Court of Appeals' Decision dated
March 27, 2000 and the trial court's Orders dated June 30, 1999 and
October 4, 1999 be set aside and the dismissal of the complaint in the
instant case.3
In their Comment, respondents argue that even assuming arguendo that
petitioner and PNB-IFL are two separate entities, petitioner is still the
party-in-interest in the application for preliminary injunction because it
is tasked to commit acts of foreclosing respondents'
properties.4 Respondents maintain that the entire credit facility is void as
it contains stipulations in violation of the principle of mutuality of
contracts.5 In addition, respondents justified the act of the court a quo in
applying the doctrine of "Piercing the Veil of Corporate Identity" by
stating that petitioner is merely an alter ego or a business conduit of
PNB-IFL.6
The petition is impressed with merit.
Respondents, in their complaint, anchor their prayer for injunction on
alleged invalid provisions of the contract:
GROUNDS
I We find, however, that the ruling in Koppel finds no application in the
THE DETERMINATION OF THE INTEREST RATES BEING LEFT TO THE
SOLE DISCRETION OF THE DEFENDANT PNB CONTRAVENES THE
PRINCIPAL OF MUTUALITY OF CONTRACTS.
II
THERE BEING A STIPULATION IN THE LOAN AGREEMENT THAT THE
RATE OF INTEREST AGREED UPON MAY BE UNILATERALLY MODIFIED
BY DEFENDANT, THERE WAS NO STIPULATION THAT THE RATE OF
INTEREST SHALL BE REDUCED IN THE EVENT THAT THE APPLICABLE
MAXIMUM RATE OF INTEREST IS REDUCED BY LAW OR BY THE
MONETARY BOARD.7
Based on the aforementioned grounds, respondents sought to enjoin and
restrain PNB from the foreclosure and eventual sale of the property in
order to protect their rights to said property by reason of void credit
facilities as bases for the real estate mortgage over the said property. 8
The contract questioned is one entered into between respondent and
PNB-IFL, not PNB. In their complaint, respondents admit that petitioner
is a mere attorney-in-fact for the PNB-IFL with full power and authority
to, inter alia, foreclose on the properties mortgaged to secure their loan
obligations with PNB-IFL. In other words, herein petitioner is an agent
with limited authority and specific duties under a special power of
attorney incorporated in the real estate mortgage. It is not privy to the
loan contracts entered into by respondents and PNB-IFL.
The issue of the validity of the loan contracts is a matter between
PNB-IFL, the petitioner's principal and the party to the loan contracts,
and the respondents. Yet, despite the recognition that petitioner is a mere
agent, the respondents in their complaint prayed that the petitioner PNB
be ordered to re-compute the rescheduling of the interest to be paid by
them in accordance with the terms and conditions in the documents
evidencing the credit facilities, and crediting the amount previously paid
to PNB by herein respondents.9
Clearly, petitioner not being a part to the contract has no power to
re-compute the interest rates set forth in the contract. Respondents,
therefore, do not have any cause of action against petitioner.
The trial court, however, in its Order dated October 4, 1994, ruled that
since PNB-IFL, is a wholly owned subsidiary of defendant Philippine
National Bank, the suit against the defendant PNB is a suit against
PNB-IFL.10 In justifying its ruling, the trial court, citing the case of Koppel
Phil. Inc. vs. Yatco,11 reasoned that the corporate entity may be
disregarded where a corporation is the mere alter ego, or business
conduit of a person or where the corporation is so organized and
controlled and its affairs are so conducted, as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation. 12
We disagree.
The general rule is that as a legal entity, a corporation has a personality
distinct and separate from its individual stockholders or members, and is
not affected by the personal rights, obligations and transactions of the
latter.13 The mere fact that a corporation owns all of the stocks of another
corporation, taken alone is not sufficient to justify their being treated as
one entity. If used to perform legitimate functions, a subsidiary's separate
existence may be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective
business. The courts may in the exercise of judicial discretion step in to
prevent the abuses of separate entity privilege and pierce the veil of
corporate entity.
case at bar. In said case, this Court disregarded the separate existence of
the parent and the subsidiary on the ground that the latter was formed
merely for the purpose of evading the payment of higher taxes. In the
case at bar, respondents fail to show any cogent reason why the separate
entities of the PNB and PNB-IFL should be disregarded.
While there exists no definite test of general application in determining
when a subsidiary may be treated as a mere instrumentality of the parent
corporation, some factors have been identified that will justify the
application of the treatment of the doctrine of the piercing of the
corporate veil. The case of Garrett vs. Southern Railway Co.14 is
enlightening. The case involved a suit against the Southern Railway
Company. Plaintiff was employed by Lenoir Car Works and alleged that
he sustained injuries while working for Lenoir. He, however, filed a suit
against Southern Railway Company on the ground that Southern had
acquired the entire capital stock of Lenoir Car Works, hence, the latter
corporation was but a mere instrumentality of the former. The Tennessee
Supreme Court stated that as a general rule the stock ownership alone by
one corporation of the stock of another does not thereby render the
dominant corporation liable for the torts of the subsidiary unless the
separate corporate existence of the subsidiary is a mere sham, or unless
the control of the subsidiary is such that it is but an instrumentality or
adjunct of the dominant corporation. Said Court then outlined the
circumstances which may be useful in the determination of whether the
subsidiary is but a mere instrumentality of the parent-corporation:
The Circumstance rendering the subsidiary an instrumentality. It is
manifestly impossible to catalogue the infinite variations of fact that can
arise but there are certain common circumstances which are important
and which, if present in the proper combination, are controlling.
These are as follows:
(a) The parent corporation owns all or most of the capital stock of the
subsidiary.
(b) The parent and subsidiary corporations have common directors or
officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of the
subsidiary or otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or losses
of the subsidiary.
(g) The subsidiary has substantially no business except with the parent
corporation or no assets except those conveyed to or by the parent
corporation.
(h) In the papers of the parent corporation or in the statements of its
officers, the subsidiary is described as a department or division of the
parent corporation, or its business or financial responsibility is referred
to as the parent corporation's own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently
in the interest of the subsidiary but take their orders from the parent
corporation.
(k) The formal legal requirements of the subsidiary are not observed.
The Tennessee Supreme Court thus ruled:
In the case at bar only two of the eleven listed indicia occur, namely, the
ownership of most of the capital stock of Lenoir by Southern, and
possibly subscription to the capital stock of Lenoir. . . The complaint must
be dismissed.
Similarly, in this jurisdiction, we have held that the doctrine of piercing
the corporate veil is an equitable doctrine developed to address
situations where the separate corporate personality of a corporation is
abused or used for wrongful purposes. The doctrine applies when the
corporate fiction is used to defeat public convenience, justify wrong,
protect fraud or defend crime, or when it is made as a shield to confuse
the legitimate issues, or where a corporation is the mere alter ego or
business conduit of a person, or where the corporation is so organized
and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation. 15
In Concept Builders, Inc. v. NLRC,16 we have laid the test in determining
the applicability of the doctrine of piercing the veil of corporate fiction, to
wit:
1. Control, not mere majority or complete control, but complete
domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own.
2. Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest and, unjust act in contravention of plaintiffs legal
rights; and,
3. The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of.
The absence of any one of these elements prevents "piercing the
corporate veil." In applying the "instrumentality" or "alter ego" doctrine,
the courts are concerned with reality and not form, with how the
corporation operated and the individual defendant's relationship to the
operation.17
Aside from the fact that PNB-IFL is a wholly owned subsidiary of
petitioner PNB, there is no showing of the indicative factors that the
former corporation is a mere instrumentality of the latter are present.
Neither is there a demonstration that any of the evils sought to be
prevented by the doctrine of piercing the corporate veil exists.
Inescapably, therefore, the doctrine of piercing the corporate veil based
on the alter ego or instrumentality doctrine finds no application in the
case at bar.
In any case, the parent-subsidiary relationship between PNB and
PNB-IFL is not the significant legal relationship involved in this case since
the petitioner was not sued because it is the parent company of PNB-IFL.
Rather, the petitioner was sued because it acted as an attorney-in-fact of
PNB-IFL in initiating the foreclosure proceedings. A suit against an agent
cannot without compelling reasons be considered a suit against the
principal. Under the Rules of Court, every action must be prosecuted or
defended in the name of the real party-in-interest, unless otherwise
authorized by law or these Rules.18 In mandatory terms, the Rules require
that "parties-in-interest without whom no final determination can be had,
an action shall be joined either as plaintiffs or defendants."19 In the case
at bar, the injunction suit is directed only against the agent, not the
principal.
Anent the issuance of the preliminary injunction, the same must be lifted
as it is a mere provisional remedy but adjunct to the main suit. 20 A writ of
preliminary injunction is an ancillary or preventive remedy that may only
be resorted to by a litigant to protect or preserve his rights or interests
and for no other purpose during the pendency of the principal action. The
dismissal of the principal action thus results in the denial of the prayer
for the issuance of the writ. Further, there is no showing that
respondents are entitled to the issuance of the writ. Section 3, Rule 58, of
the 1997 Rules of Civil Procedure provides:
SECTION 3. Grounds for issuance of preliminary injunction. — A
preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance
of the act or acts complained of, or in requiring the performance of an act
or acts, either for a limited period or perpetually,
(b) That the commission, continuance or non-performance of the acts or
acts complained of during the litigation would probably work injustice to
the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is
attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject
of the action or proceeding, and tending to render the judgment
ineffectual.
Thus, an injunctive remedy may only be resorted to when there is a
pressing necessity to avoid injurious consequences which cannot be
remedied under any standard compensation.21 Respondents do not deny
their indebtedness. Their properties are by their own choice encumbered
by real estate mortgages. Upon the non-payment of the loans, which were
secured by the mortgages sought to be foreclosed, the mortgaged
properties are properly subject to a foreclosure sale. Moreover,
respondents questioned the alleged void stipulations in the contract only
when petitioner initiated the foreclosure proceedings. Clearly,
respondents have failed to prove that they have a right protected and
that the acts against which the writ is to be directed are violative of said
right.22 The Court is not unmindful of the findings of both the trial court
and the appellate court that there may be serious grounds to nullify the
provisions of the loan agreement. However, as earlier discussed,
respondents committed the mistake of filing the case against the wrong
party, thus, they must suffer the consequences of their error.
All told, respondents do not have a cause of action against the petitioner
as the latter is not privy to the contract the provisions of which
respondents seek to declare void. Accordingly, the case before the
Regional Trial Court must be dismissed and the preliminary injunction
issued in connection therewith, must be lifted.
IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The
assailed decision of the Court of Appeals is hereby REVERSED. The
Orders dated June 30, 1999 and October 4, 1999 of the Regional Trial
Court of Makati, Branch 147 in Civil Case No. 99-1037 are hereby
ANNULLED and SET ASIDE and the complaint in said case DISMISSED.
SO ORDERED.
11. Uniland Resources v DBP
In the law on agency, it is elementary that when the main transaction
between the principal parties does not materialize, the claim for
commission of the duly authorized broker is disallowed.1 How about the
instance when the sale was eventually consummated between parties
introduced by a middleman who, in the first place, had no authority,
express or implied, from the seller to broker the transaction? Should the
interloper be allowed a commission? On these simplified terms rests the
nature of the controversy on which this case turns.
As stated by the respondent Court of Appeals, 2 the ambient
circumstances of this case are as follows:
(1) [Petitioner] Uniland Resources is a private corporation engaged in
real estate brokerage and licensed as such (p. 2, Rec.), while [respondent]
DBP, as we all know [sic], is a government corporation engaged in finance
and banking in a proprietary capacity.
(2) Long before this case arose, Marinduque Mining Corporation
obtained a loan from the DBP and as security therefor, mortgaged certain
real properties to the latter, among them two lots located in Makati, M.M.,
described as follows:
(a) Corner lot, covered by TCT No. 114138, located at Pasong Tamo,
Makati with an area of 3,330 sq. mts. on which is constructed a
[four]-story concrete building, etc., which, for brevity, shall be called the
office building lot; and
(b) Lot covered by TCT No. 16279 with 12,355 sq. mts located at Pasong
Tamo, Makati, on which is constructed a concrete/steel warehouse, etc.,
which, for brevity, shall be called the warehouse lot.
The aforesaid lots had, however, been previously mortgaged by
Marinduque Mining Corp., to Caltex, and the mortgage in favor of DBP
was entered on their titles as a second mortgage (Pre-Trial Order, p. 37,
Rec.).
The account of the Marinduque Mining Corp., with the DBP was later
transferred to the Assets Privatization Trust (APT) pursuant to
Proclamation No. 50.
(3) For failure of the Marinduque Mining Corp. to pay its obligations to
Caltex, the latter foreclosed its mortgage on the aforesaid two lots (pp.
37-38, Rec.). APT on the other hand, to recover its investment on the
Marinduque Account, offered for sale to the public through DBP its right
of redemption on said two lots by public bidding (Exhs. "1" and "2").
(4) Considering, however, that Caltex had required that both lots be
redeemed, the bidding guidelines set by DBP provided that any bid to
purchase either of the two lots would be considered only should there be
two bids or a bid for the two items which, when combined, would fully
cover the sale of the two lots in question (Exh. "1").
(5) The aforesaid bidding was held on May 5, 1987 with only one bidder,
the Counsel Realty Corp. [an affiliate of Glaxo, Philippines, the client of
petitioner], which offered a bid only for the warehouse lot in the amount
of P23,900,000.00. Said bid was thus rejected by DBP.
(6) Seeing, however, that it would make a profit if it redeemed the two
lots and then offer them for sale, and as its right to redeem said lots from
Caltex would expire on May 8, 1987, DBP retrieved the account from APT
and, on the last day for the exercise of its right of redemption, May 8,
1987, redeemed said lots from Caltex for P33,096,321.62 (Exh. "5"), thus
acquiring them as its physical assets.
(7) In preparation for the sale of the two lots in question, DBP called a
pre-bidding conference wherein a new set of bidding guidelines were
formulated (Exh. "3"). Then, on July 30,1987, the public bidding for the
sale of the two lots was held and again, there was only one bidder, the
Charges Realty Corp. [another affiliate of Glaxo, Philippines], for only the
warehouse lot and for the amount of P24,070,000.00, which is slightly
higher than the amount previously offered by Counsel Realty Corp.,
therefor at the May 5, 1987 bidding (see Exh. "5," p. 1 00, Rec.). No bid
was submitted for the office building lot (id.).
(8) Notwithstanding that there was no bidder for the office building lot,
the DBP approved the sale of the warehouse lot to Charges Realty Corp.,
and on November 23, 1987, the proper documentation of the sale was
made (Exh. "D"). As for the office building lot, it was later sold by DBP in a
negotiated sale to the Bank of P.I. as trustee for the "Perpetual Care Fund
of the Manila Memorial Park" for P17,460,000.00, and proper
documentation of the sale was made on November 17, 1987 (Exh. "E" and
submarkings). The DBP admittedly paid the (five percent) broker's fee on
this sale to the DBP Management Corporation, which acted as broker for
said negotiated sale (p. 15, Appellant DBP's brief).
(9) After the aforesaid sale, [petitioner], through its President, wrote two
letters to [respondent DBP], the first through its Senior Vice President
(Exh. "C"), and, the second through its Vice Chairman (Exh. "4" [sic],
asking for the payment of its broker's fee in instrumenting the sale of its
(DBP's) warehouse lot to Charges Realty Corp. The claim was referred to
the Bidding Committee chaired by Amanda S. Guiam which met on
November 9, 1987, and which, on November 18, 1987, issued a decision
denying [petitioner's] claim (Exh. "5"). Hence, the instant case filed by
[petitioner] to recover from [respondent] DBP the aforesaid broker's fee.
After trial, the lower court, on October 25, 1988, rendered judgment
ORDERING [respondent DBP] to pay [petitioner] the sum of
P1,203,500,00 which is the equivalent of [five percent] broker's fee plus
legal interest thereto (sic) from the filing of the complaint on February 18,
1988 until fully paid and the sum of P50,000.00 as and for attorney's fees.
Costs against [respondent DBP]. (p. 122, Rec.).3
On appeal, the Court of Appeals reversed the judgment of the lower
court4 and dismissed the complaint. The motion for reconsideration filed
by petitioner was also subsequently denied.5
Petitioner is now before this Court alleging that the petition "RAISES A
QUESTION OF LAW IN THE SENSE THAT THE RESPONDENT COURT OF
APPEALS BASED ITS DECISION ONLY ON THE CONTROVERSIAL FACTS
FAVORABLE TO THE PRIVATE RESPONDENT DBP,6 primarily making
capital of the disparity between the factual conclusions of the trial court
and of the appellate court. Petitioner asserts that the respondent Court of
Appeals disregarded evidence in its favor consisting of its letters to
respondent DBP's higher officers sent prior to the bidding and sale,
wherein petitioner requested accreditation as a broker and, in the
process of informing that it had offered the DBP properties for sale, also
volunteered the name of its client, Glaxo, Philippines, as an interested
prospective buyer.7
The rule is that in petitions for certiorari as a mode of appeal, only
questions of law distinctly set forth may be raised. 8 Such questions have
been defined as those that do not call for any examination of the
probative value of the evidence presented by the parties. 9 Petitioner's
singular assignment of error would, however, have this Court go over the
facts of this case because it necessarily involves the examination of the
evidence and its subsequent reevaluation. Under the present proceeding,
the same, therefore, cannot be done.
It bears emphasizing that mere disagreement between the Court of
Appeals and the trial court as to the facts of a case does not of itself
warrant this Court's review of the same. It has been held that the doctrine
that the findings of fact made by the Court of Appeals, being conclusive in
nature, are binding on this Court, applies even if the Court of Appeals was
in disagreement with the lower court as to the weight of evidence with a
consequent reversal of its findings of fact, so long as the findings of the
Court of Appeals are borne out by the record or based on substantial
evidence.10 while the foregoing doctrine is not absolute, petitioner has
not sufficiently proved that his case falls under the known exceptions. 11
Be that as it may, the Court has perused the assailed decision of the Court
of Appeals and still finds the primary assertion of petitioner to be
unfounded. The Court of Appeals has addressed all the factual
contentions of petitioner and chose not to give credence to petitioner's
version. Moreover, the findings of the Court of Appeals are consistent
with, and sufficiently supported by, the records of this case.
It is obvious that petitioner was never able to secure the required
accreditation from respondent DBP to transact business on behalf of the
latter. The letters sent by petitioner to the higher officers of the DBP and
the APT are merely indicative of petitioner's desire to secure such
accreditation. At best these missives are self-serving; the most that they
prove is that they were sent by petitioner and received by respondent
DBP, which clearly never agreed to be bound thereto. As declared by the
trial court even when it found in favor of petitioner, there was no express
reply from the DBP or the APT as to the accreditation sought by
petitioner.12 From the very beginning, therefore, petitioner was aware
that it had no express authority from DBP to find buyers of its properties.
In its reply submitted pursuant to the resolution requiring the
same13 petitioner also invokes Article 1869 of the new Civil Code 14 in
contending that an implied agency existed. Petitioner argues that it
"should have been stopped, disauthorized and outrightly prevented from
dealing the 12,355 sq. m (with warehouse) [sic] by the DBP from the
inception."15 On the contrary, these steps were never necessary. In the
course of petitioner's dealings with the DBP, it was always made clear to
petitioner that only accredited brokers may look for buyers on behalf of
respondent DBP. This is not a situation wherein a third party was
prejudiced by the refusal of respondent DBP to recognize petitioner as its
broker. The controversy is only between the DBP and petitioner, to
whom it was emphasized in no uncertain terms that the arrangement
sought did not exist. Article 1869, therefore, has no room for operation in
this case.
Petitioner would also disparage the formality of accreditation as merely a
mechanical act, which requires not much discretion, as long as a person
or entity looks for a buyer [and] initiate or promote [sic] the interests of
the seller.16Being engaged in business, petitioner should do better to
adopt the opposite attitude and appreciate that formalities, such as the
need for accreditation, result from the evolution of sound business
practices for the protection and benefit of all parties concerned. They are
designed and adopted specifically to prevent the occurrence of situations
similar to that obtaining in this case.
More importantly, petitioner's stance goes against the basic axiom in Civil
Law that no one may contract in the name of another without being
authorized by the latter, unless the former has by law a right to represent
him.17 From this principle, among others, springs the relationship of
agency which, as with other contracts, is one founded on mutual consent:
the principal agrees to be bound by the acts of the agent and the latter in
turn consents to render service on behalf or in representation of the
principal.18
Petitioner, however, also invokes equity considerations, and in equity,
the Court recognizes the efforts of petitioner in bringing together
respondent DBP and an interested and financially-able buyer. While not
actively involved in the actual bidding and transfer of ownership of the
warehouse property, petitioner may be said to have initiated, albeit
without proper authority, the transaction that eventually took place. The
Court is also aware that respondent DBP was able to realize a substantial
profit from the sale of its two properties. While purely circumstantial,
there is sufficient reason to believe that the DBP became more confident
to venture and redeem the properties from the APT due to the presence
of a ready and willing buyer, as communicated and assured by petitioner.
In Prats v. Court of Appeals,19 there was a finding that the petitioner
therein as the agent was no longer the efficient procuring cause in
bringing about the sale proceeding from the fact of expiration of his
exclusive authority. There was therefore no basis in law to grant the
relief sought. Nevertheless, this Court in equity granted the sum of
P100,000.00, out of the P1,380,000.00 claimed as commission, by way of
compensation for the efforts and assistance rendered by the agent in the
transaction prior to the expiration of his authority. These consist in
offering the lot for sale to the eventual buyer, sending follow-up letters,
inviting the buyer to dinner and luncheon meetings, etc.
Parallel circumstances obtain in the case at bar. It was petitioner who
advised Glaxo, Philippines of the availability of the warehouse property
and aroused its interest over the same. Through petitioner, respondent
DBP was directly informed of the existence of an interested buyer.
Petitioner's persistence in communicating with respondent DBP
reinforced the seriousness of the offer. This piece of information no
doubt had a bearing on the subsequent decisions made by respondent
DBP as regards the disposition of its properties.
Petitioner claims the amount of P1,203,500.00 awarded by the trial court
as commission computed at five percent of the sale price of the
warehouse property. Under the foregoing disquisition and following the
precedent, as well as roughly the proportion, set in Prats, the Court in
equity grants petitioner the sum of One Hundred Thousand Pesos
(Pl00,000.00) for the role it played in the transaction between
respondent DBP and buyer Glaxo, Philippines. It is emphasized, however,
that the circumstances that came into play in this case do not meet the
minimum legal standards required for the existence of an agency
relationship and that the award is based purely on equity considerations.
Accordingly, petitioner's other arguments need not now be discussed.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the
MODIFICATION that in equity respondent DBP is ordered to pay
petitioner the amount of One Hundred Thousand Pesos (P100,000.00).
No pronouncement as to costs.
SO ORDERED.
11- Digest
FACTS:
Marinduque Mining Corporation got hold of a loan from the DBP and
mortgaged a warehouse lot and an office building lot previously
mortgaged by MMC to Caltex, and the mortgage in favor of DBP was
entered on their titles as a second mortgage. The account of the
Marinduque Mining Corp., with the DBP was later transferred to the
Assets Privatization Trust (APT).
Caltex foreclosed the mortgage due to the nonpayment of MMC. APT on
the other hand offered for sale to the public through DBP its right of
redemption on said two lots by public bidding. DBP subsequently
retrieved the account from APT and redeemed said lots from Caltex . A
public bidding for the sale of the two lots was held and the warehouse lot
was sold to Charges Realty Corp . The office building lot was later sold by

DBP to a different buyer. After the aforesaid sale, Uniland Resources
sent two letters to DBP asking for the payment of its broker's fee in
instrumenting the sale of it’s the warehouse lot to Charges Realty
Corp. Uniland filed a case to recover from DBP the broker's fee.
The Trial Court ordered DBP to pay the brokers’s fee to the
petitioner. On appeal, the Court of Appeals reversed the judgment of the
lower court ..
Issue:
Whether or not the petitioner there is a contract of agency between DBP
and Uniland in the sale of warehouse lot.
Held:
No. There is no contract of agency, express or implied. The petitioner was
never able to secure the required accreditation from respondent DBP to
transact business on behalf of the latter. It was always made clear to
petitioner that only accredited brokers may look for buyers on behalf of
respondent DBP. The contract of Agency is one founded on mutual
consent: the principal agrees to be bound by the acts of the agent and the
latter in turn consents to render service on behalf or in representation of
the principal.
12. Fortis v Gutierrez
Plaintiff, an employee of defendants during the years 1900, 1901, and
1902, brought this action to recover a balance due him as salary for the
year 1902. He alleged that he was entitled, as salary, to 5 per cent of the
net profits of the business of the defendants for said year. The complaint
also contained a cause of action for the sum of 600 pesos, money
expended by plaintiff for the defendants during the year 1903. The court
below, in its judgment, found that the contract had been made as claimed
by the plaintiff; that 5 per cent of the net profits of the business for the
year 1902 amounted to 26,378.68 pesos, Mexican currency; that the
plaintiff had received on account of such salary 12,811.75 pesos, Mexican
currency, and ordered judgment against the defendants for the sum
13,566.93 pesos, Mexican currency, with interest thereon from December
31, 1904. The court also ordered judgment against the defendants for the
600 pesos mentioned in the complaint, and intereat thereon. The total
judgment rendered against the defendants in favor of the plaintiff,
reduced to Philippine currency, amounted to P13,025.40. The defendants
moved for a new trial, which was denied, and they have brought the case
here by bill of exceptions.chanroblesvirtualawlibrary chanrobles virtual
law library
(1) The evidence is sufifcient to support the finding of the court below to
the effect that the plaintiff worked for the defendants during the year
1902 under a contract by which he was to receive as compensation 5 per
cent of the net profits of the business. The contract was made on the part
of the defendants by Miguel Alonzo Gutierrez. By the provisions of the
articles of partnership he was made one of the managers of the company,
with full power to transact all of the business thereof. As such manager
he had authority to make a contract of employment with the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library
(2) Before answering in the court below, the defendants presented a
motion that the complaint be made more definite and certain. This
motion was denied. To the order denying it the defendants excepted, and
they have assigned as error such ruling of the court below. There is
nothing in the record to show that the defendants were in any way
prejudiced by this ruling of the court below. If it were error it was error
without prejudice, and not ground for reversal. (Sec. 503, Code of Civil
Procedure.)chanrobles virtual law library
(3) It is claimed by the appellants that the contract alleged in the
complaint made the plaintiff a copartner of the defendants in the
business which they were carrying on. This contention can not bo
sustained. It was a mere contract of employnent. The plaintiff had no
voice nor vote in the management of the affairs of the company. The fact
that the compensation received by him was to be determined with
reference to the profits made by the defendants in their business did not
in any sense make by a partner therein. The articles of partnership
between the defendants provided that the profits should be divided
among the partners named in a certain proportion. The contract made
between the plaintiff and the then manager of the defendant partnership
did not in any way vary or modify this provision of the articles of
partnership. The profits of the business could not be determined until all
of the expenses had been paid. A part of the expenses to be paid for the
year 1902 was the salary of the plaintiff. That salary had to be deducted
before the net profits of the business, which were to be divided among
the partners, could be ascertained. It was undoubtedly necessary in order
to determine what the salary of the plaintiff was, to determine what the
profits of the business were, after paying all of the expenses except his,
but that determination was not the final determination of the net profits
of the business. It was made for the purpose of fixing the basis upon
which his compensation should be
determined.chanroblesvirtualawlibrary chanrobles virtual law library
(4) It was no necessary that the contract between the plaintiff and the
defendants should be made in writing. (Thunga Chui vs. Que Bentec, 1 1
Off. Gaz., 818, October 8, 1903.)chanrobles virtual law library
(5) It appearred that Miguel Alonzo Gutierrez, with whom the plaintiff
had made the contract, had died prior to the trial of the action, and the
defendants claim that by reasons of the provisions of section 383,
paragraph 7, of the Code of Civil Procedure, plaintiff could not be a
witness at the trial. That paragraph provides that parties to an action
against an executor or aministrator upon a claim or demand against the
estate of a deceased person can not testify as to any matter of fact
occurring before the death of such deceased person. This action was not
brought against the administrator of Miguel Alonzo, nor was it brought
upon a claim against his estate. It was brought against a partnership
which was in existence at the time of the trial of the action, and which
was juridical person. The fact that Miguel Alonzo had been a partner in
this company, and that his interest therein might be affected by the result
of this suit, is not sufficient to bring the case within the provisions of the
section above cited.chanroblesvirtualawlibrary chanrobles virtual law
library
(6) The plaintiff was allowed to testify against the objection and
exception of the defendants, that he had been paid as salary for the year
1900 a part of the profits of the business. This evidence was competent
for the purpose of corroborating the testimony of the plaintiff as to the
existence of the contract set out in the
complaint.chanroblesvirtualawlibrary chanrobles virtual law library
(7) The plaintiff was allowed to testify as to the contents of a certain
letter written by Miguel Glutierrez, one of the partners in the defendant
company, to Miguel Alonzo Gutierrez, another partner, which letter was
read to plaintiff by Miguel Alonzo. It is not necessary to inquire whether
the court committed an error in admitting this evidence. The case already
made by the plaintiff was in itself sufficient to prove the contract without
reference to this letter. The error, if any there were, was not prejudicial,
and is not ground for revesal. (Sec. 503, Code of Civil
Procedure.)chanrobles virtual law library
(8) For the purpose of proving what the profits of the defendants were
for the year 1902, the plaintiff presented in evidence the ledger of
defendants, which contained an entry made on the 31st of December,
1902, as follows:
Perdidas y Ganancias ...................................... a Varios Ps.
527,573.66 Utilidades liquidas obtenidas durante el
ano y que abonamos conforme a la proporcion que
hemos establecido segun el convenio de sociedad.
The defendant presented as a witness on, the subject of profits Miguel
Gutierrez, one of the defendants, who testiffied, among other things, that
there were no profits during the year 1902, but, on the contrary, that the
company suffered considerable loss during that year. We do not think the
evidence of this witnees sufficiently definite and certain to overcome the
positive evidence furnished by the books of the defendants
themselves.chanroblesvirtualawlibrarychanrobles virtual law library
(9) In reference to the cause of action relating to the 600 pesos, it
appears that the plaintiff left the employ of the defendants on the 19th of
Macrh, 1903; that at their request he went to Hongkong, and was there
for about two months looking after the business of the defendants in the
matter of the repair of a certain steamship. The appellants in their brief
say that the plaintiff is entitled to no compensation for his services thus
rendered, because by the provisions of article 1711 of the Civil Code, in
the absence of an agreement to the contrary, the contract of agency is
supposed to be gratuitous. That article i not applicable to this case,
because the amount of 600 pesos not claimed as compensation for
services but as a reimbursment for money expended by the plaintiff in
the business of the defendants. The article of the code that is applicable is
article 1728.chanroblesvirtualawlibrary chanrobles virtual law library
The judgment of the court below is affirmed, with the costs, of this
instance against the appellants. After the expiration of twenty days from
the date of this decision let final judgment be entered herein, and ten
days thereafter let the case be remanded to the lower court for execution.
So ordered.chanroblesvirtualawlibrary chanrobles virtual law library
13-Digest
Facts:
Plaintiff Fortis is an employee of defendant Gutierrez Hermanos.
Theformer brought an action to recover a balance due him as salary
forthe year 1902. He also alleged that he was entitled, as salary, to 5
percent of the net profits of the business of the defendants for said year.
The complaint also contained a cause of action for the sum of 600pesos,
money expended by plaintiff for the defendants during the year1903. The
lower court ruled in favor of the plaintiff. The total judgmentrendered
amounted to P13, 025.40, which was reduced to Philippinecurrency. The
defendants moved for new trial but were denied. They brought the case
in the SC thru bill of exceptions; the appellants(defendants) alleged that
that the contract made the plaintiff acopartner of the defendants in the
business, which they were carrying on.
Issue: WON the plaintiff is a co-partner of the defendants in the business.
Ruling:
NO. It was a mere contract of employment. The plaintiff had neithervoice
nor vote in the management of the affairs of the company. Thefact that
the compensation received by him was to be determined withreference
to the profits made by the defendants in their business didnot in any
sense make by a partner therein. The articles of partnershipbetween the
defendants provided that the profits should be dividedamong the
partners named in a certain proportion. The contract madebetween the
plaintiff and the then manager of the defendantpartnership did not in any
way vary or modify this provision of thearticles of partnership.
13. Albaladejo v Philippine Refining Co.
This action was instituted in the Court of First Instance of the Province of
Albay by Albaladejo y Cia., S. en C., to recover a sum of money from the
Philippine Refining Co., as successor to the Visayan Refining Co., two
causes of action being stated in the complaint. Upon hearing the cause the
trial judge absolved the defendant from the first cause of action but gave
judgment for the plaintiff to recover the sum of P49,626.68, with costs,
upon the second cause of action. From this judgment the plaintiff
appealed with respect to the action taken upon the first cause of action,
and the defendant appealed with respect to the action taken upon the
second cause of action. It results that, by the appeal of the two parties, the
decision of the lower court is here under review as regards the action
taken upon both grounds of action set forth in the complaint.
It appears that Albaladejo y Cia. is a limited partnership, organized in
conformity with the laws of these Islands, and having its principal place
of business at Legaspi, in the Province of Albay; and during the
transactions which gave origin to this litigation said firm was engaged in
the buying and selling of the products of the country, especially copra,
and in the conduct of a general mercantile business in Legaspi and in
other places where it maintained agencies, or sub-agencies, for the
prosecution of its commercial enterprises.
The Visayan Refining Co. is a corporation organized under the laws of the
Philippine Islands; and prior to July 9, 1920, it was engaged in operating
its extensive plant at Opon, Cebu, for the manufacture of coconut oil.
On August 28, 1918, the plaintiff made a contract with the Visayan
Refining Co., the material parts of which are as follows:
Memorandum of Agreement Re Purchase of Copra. — This memorandum
of agreement, made and entered into by and between Albaladejo y
Compania, S. en C., of Legaspi, Province of Albay, Philippine Islands, party
of the first part, and the Visayan Refining Company, Inc., of Opon,
Province of Cebu, Philippine Islands, party of the second part,
Witnesseth That. — Whereas, the party of the first part is engaged in the
purchase of copra in the Province of Albay; and Whereas, the party of the
second part is engaged in the business of the manufacture of coconut oil,
or which purpose it must continually purchase large quantities of copra;
Now, Therefore, in consideration of the premises and covenants
hereinafter set forth, the said parties have agreed and do hereby contract
and agree as follows, to wit:
1. The party of the first part agrees and binds itself to sell to the party of
the second part, and the party of the second part agrees and binds itself
to buy from the party of the first part, for a period of one (1) year from
the date of these presents, all the copra purchased by the party of the
first part in Province of Albay.
2. The party of the second part agrees to pay the party of the first part for
the said copra the market price thereof in Cebu at date (of) purchase,
deducting, however, from such price the cost of transportation by sea to
the factory of the party of second part at Opon, Cebu, the amount
deducted to be ascertained from the rates established, from time to time,
by the public utility commission, or such entity as shall succeed to its
functions, and also a further deduction for the shrinkage of the copra
from the time of its delivery to the party of the second part to its arrival
at Opon, Cebu, plus one-half of a real per picul in the event the copra is
delivered to boats which will unload it on the pier of the party of the
second part at Opon, Cebu, plus one real per picul in the event that the
party of the first part shall employ its own capital exclusively in its
purchase.
3. During the continuance of this contract the party of the second part
will not appoint any other agent for the purchase of copra in Legaspi, nor
buy copra from any vendor in Legaspi.
4. The party of the second part will, so far as practicable, keep the party
of the first part advised of the prevailing prices paid for copra in the Cebu
market.
5. The party of the second part will provide transportation by sea to Opon,
Cebu, for the copra delivered to it by the party of the first part, but the
party of the first part must deliver such copra to the party of the second
part free on board the boats of the latter's ships or on the pier alongside
the latter's ships, as the case may be.
Pursuant to this agreement the plaintiff, during the year therein
contemplated, bought copra extensively for the Visayan Refining Co. At
the end of said year both parties found themselves satisfied with the
existing arrangement, and they therefore continued by tacit consent to
govern their future relations by the same agreement. In this situation
affairs remained until July 9, 1920, when the Visayan Refining Co. closed
down its factory at Opon and withdrew from the copra market.
When the contract above referred to was originally made, Albaladejo y
Cia. apparently had only one commercial establishment, i.e., that at
Legaspi; but the large requirements of the Visayan Refining Co. for copra
appeared so far to justify the extension of the plaintiff's business that
during the course of the next two or three years it established some
twenty agencies, or subagencies, in various ports and places of the
Province of Albay and neighboring provinces.
After the Visayan Refining Co. had ceased to buy copra, as above stated, of
which fact the plaintiff was duly notified, the supplies of copra already
purchased by the plaintiff were gradually shipped out and accepted by
the Visayan Refining Co., and in the course of the next eight or ten months
the accounts between the two parties were liquidated. The last account
rendered by the Visayan Refining Co. to the plaintiff was for the month of
April, 1921, and it showed a balance of P288 in favor of the defendant.
Under date of June 25, 1921, the plaintiff company addressed a letter
from Legaspi to the Philippine Refining Co. (which had now succeeded to
the rights and liabilities of the Visayan Refining Co.), expressing its
approval of said account. In this letter no dissatisfaction was expressed
by the plaintiff as to the state of affairs between the parties; but about six
weeks thereafter the present action was begun.
Upon reference to paragraph five of the contract reproduced above it will
be seen that the Visayan Refining Co. obligated itself to provide
transportation by sea to Opon, Cebu, for the copra which should be
delivered to it by the plaintiff; and the first cause of action set forth in the
complaint is planted upon the alleged negligent failure of the Visayan
Refining Co. to provide opportune transportation for the copra collected
by the plaintiff and deposited for shipment at various places. In this
connection we reproduce the following allegations from the complaint:
6. That, from the month of September, 1918, until the month of June,
1920, the plaintiff opportunely advised the Visayan of the stocks that the
former had for shipment, and, from time to time, requested the Visayan
to send vessels to take up said stocks; but that the Visayan culpably and
negligently allowed a great number of days to elapse before sending the
boats for the transportation of the copra to Opon, Cebu, and that due to
the fault and negligence of the Visayan, the stocks of copra prepared for
shipment by the plaintiff had to remain an unnecessary length of time in
warehouses and could not be delivered to the Visayan, nor could they be
transmitted to this latter because of the lack of boats, and that for this
reason the copra gathered by the plaintiff and prepared for delivery to
the Visayan suffered the diminishment of weight herein below specified,
through shrinkage or excessive drying, and, in consequence thereof, an
important diminishment in its value.
xxx xxx xxx
8. That the diminishment in weight suffered as shrinkage through
excessive drying by all the lots of copra sold by the plaintiff to the
Visayan, due to the fault and negligence of the Visayan in the sending of
boats to take up said copra, represents a total of 9,695 piculs and 56 cates,
the just and reasonable value of which, at the rates fixed by the purchaser
as the price in its liquidation, is a total of two hundred and one thousand,
five hundred and ninety-nine pesos and fifty-three centavos
(P201,599.53), Philippine currency, in which amount the plaintiff has
been damaged and injured by the negligent and culpable acts and
omissions of the Visayan, as herein above stated and alleged.
In the course of the appealed decision the trial judge makes a careful
examination of the proof relative to the movements of the fleet of boats
maintained by the Visayan Refining Co. for the purpose of collecting
copra from the various ports where it was gathered for said company, as
well as of the movements of other boats chartered or hired by said
company for the same purpose; and upon consideration of all the facts
revealed in evidence, his Honor found that the Visayan Refining Co. had
used reasonable promptitude in its efforts to get out the copra from the
places where it had been deposited for shipment, notwithstanding
occasional irregularities due at times to the condition of the weather as
related to transportation by sea and at other times to the inability of the
Visayan Refining Co. to dispatch boats to the more remote ports. This
finding of the trial judge, that no negligence of the kind alleged can
properly be imputed to the Visayan Refining Co., is in our opinion
supported by the proof.
Upon the point of the loss of weight of the copra by shrinkage, the trial
judge found that this is a product which necessarily undergoes
considerable shrinkage in the process of drying, and intelligent witnesses
who are conversant with the matter testified at the trial that shrinkage of
cobra varies from twenty to thirty per centum of the original gross
weight. It is agreed that the shrinkage shown in all of the copra which the
plaintiff delivered to the Visayan Refining Co. amounted to only 8.187 per
centum of the whole, an amount which is notably below the normal. This
showing was undoubtedly due in part, as the trial judge suggests, to the
fact that in purchasing the copra directly from the producers the
plaintiff's buyers sometimes estimated the picul at sixty-eight kilos, or
somewhat less, but in no case at the true weight of 63.25 kilos. The
plaintiff was therefore protected in a great measure from loss by
shrinkage by purchasing upon a different basis of weight from that upon
which he sold, otherwise the shrinkage shown in the result must have
been much greater than that which actually appeared. But even
considering this fact, it is quite evident that the demonstrated shrinkage
of 8.187 per centum was extremely moderate average; and this fact goes
to show that there was no undue delay on the part of the Visayan
Refining Co. in supplying transportation for the copra collected by the
plaintiff.
In the course of his well-reasoned opinion upon this branch of the case,
the trial judge calls attention to the fact that it is expressly provided in
paragraph two of the contract that the shrinkage of copra from the time
of its delivery to the party of the second part till its arrival at Opon should
fall upon the plaintiff, from whence it is to be interfered that the parties
intended that the copra should be paid for according to its weight upon
arrival at Opon regardless of its weight when first purchased; and such
appears to have been the uniform practice of the parties in settling their
accounts for the copra delivered over a period of nearly two years.
From what has been said it follows that the first cause of action set forth
in the complaint is not well founded, and the trial judge committed no
error in absolving the plaintiff therefrom.
It appears that in the first six months of the year 1919, the plaintiff found
that its transactions with the Visayan Refining Co. had not been
productive of reasonable profit, a circumstance which the plaintiff
attributed to loss of weight or shrinkage in the copra from the time of
purchase to its arrival at Opon; and the matter was taken up with the
officials of said company, with the result that a bounty amounting to
P15,610.41 was paid to the plaintiff by the Visayan Refining Co. In the
ninth paragraph of the complaint the plaintiff alleges that this payment
was made upon account of shrinkage, for which the Visayan Refining Co.
admitted itself to be liable; and it is suggested that the making of this
payment operated as a recognition on the part of the Visayan refining Co.
of the justice of the plaintiff's claim with respect to the shrinkage in all
subsequent transactions. With this proposition we cannot agree. At most
the payment appears to have been made in recognition of an existing
claim, without involving any commitment as to liability on the part of the
defendant in the future; and furthermore it appears to have been in the
nature of a mere gratuity given by the company in order to encourage the
plaintiff and to assure that the plaintiff's organization would be kept in an
efficient state for future activities. It is certain that no general liability for
plaintiff's losses was assumed for the future; and the defendant on more
than one occasion thereafter expressly disclaimed liability for such
losses.
As already stated purchases of copra by the defendant were suspended in
the month of July, 1920. At this time the plaintiff had an expensive
organization which had been built up chiefly, we suppose, with a view to
the buying of copra; and this organization was maintained practically
intact for nearly a year after the suspension of purchases by the Visayan
Refining Co. Indeed in October, 1920, the plaintiff added an additional
agency at Gubat to the twenty or more already in existence. As a second
cause of action the plaintiff seeks to recover the sum of P110,000, the
alleged amount expended by the plaintiff in maintaining and extending
its organization as above stated. As a basis for the defendant's liability in
this respect it is alleged that said organization was maintained and
extended at the express request, or requirement, of the defendant, in
conjunction with repeated assurances that the defendant would soon
resume activity as a purchaser of copra.
With reference to this cause of action the trial judge found that the
plaintiff, as claimed, had incurred expenses at the request of the
defendant and upon its representation that the plaintiff would be fully
compensated therefor in the future. Instead, however, of allowing the
plaintiff the entire amount claimed, his Honor gave judgment for only
thirty per centum of said amount, in view of the fact that the plaintiff's
transactions in copra had amounted in the past only to about thirty per
centum of the total business transacted by it. Estimated upon this basis,
the amount recognized as constituting a just claim was found to be
P49,626.68, and for this amount judgment was rendered against the
defendant.
The discussion of this branch of the appeal involves the sole question
whether the plaintiff's expense in maintaining and extending its
organization for the purchase of copra in the period between July, 1920,
to July, 1921, were incurred at the instance and request of the defendant,
or upon any promise of the defendant to make the expenditure good. A
careful examination of the evidence, mostly of a documentary character,
is, in our opinion, convincing that the supposed liability does not exist.
By recurring to paragraph four of the contract between the plaintiff and
the Visayan Refining Co. it will be seen that the latter agreed to keep the
plaintiff advised of the prevailing prices paid for the copra in the Cebu
market. In compliance with this obligation the Visayan Refining Co. was
accustomed to send out "trade letters" from time to time its various
clients in the southern provinces of whom the plaintiff was one. In these
letters the manager of the company was accustomed to make comment
upon the state of the market and to give such information as might be of
interest or value to the recipients of the letters. From the series of letters
thus sent to Albaladejo y Cia. during the latter half of 1920, we here
reproduce the following excerpts:
(Letter of July 2, 1920, from K.B. Day, General Manager of the Visayan
Refining Co., to Albaladejo y Cia.)
The copra market is still very weak. I have spent the past two weeks in
Manila studying conditions and find that practically no business at all is
being done. A few of the mills having provincial agents are accepting
small deliveries, but I do not suppose that 500 piculs of copra are
changing hands a day. Buyers are offering from P13 to P15, depending on
quality, and sellers are offering to sell at anywhere from P16 to P18, but
no business can be done for the simple reason that the banks will not
lend the mills any money to buy copra with at this time.
Reports from the United States are to the effect that the oil market is in a
very serious and depressed condition and that large quantities of oil
cannot be disposed of at any price.
xxx xxx xxx
Under this conditions it is imperative that this mill buy no more copra
than it can possibly help at the present time. We are not anxious to
compete, nor do we wish to purchase same in competition with others.
We do, however, desire to keep our agents doing business and trust that
they will continue to hold their parroquianos (customers), buying only
minimum quantities at present.
The local market has not changed since last week, and our liquidating
price is P14.
(Letter of July 9, 1920, from Visayan Refining Co. to Albaladejo y Cia.)
Notify your subagents to drop out of the market temporarily. We do not
desire to purchase at present.
(Letter of July 10, 1920, from K. B. Day, General Manager, to Albaladejo y
Cia.)
The market continues to grow weaker. Conditions are so uncertain that
this company desires to drop out of the copra market until conditions
have a chance to readjust themselves. We request therefore that our
agents drop out of active competition for copra temporarily. Stocks that
are at present on hand will, of course, be liquidated, but no new stocks
should be acquired. Agents should do their best to keep their
organizations together temporarily, for we expect to be in the market
again soon stronger than ever. We expect the cooperation of agents in
making this effective; and if they give us this cooperation, we will
endeavor to see that they do not lose by the transaction in the long run.
This company has been receiving copra from its agents for a long time at
prices which have netted it a loss. The company has been supporting its
agents during this period. It now expects the same support from its
agents. Agents having stocks actually on hand in their bodegas should
telegraph us the quantity immediately and we will protect same. But
stocks not actually in bodegas cannot be considered.
(Letter of July 17, 1920, from K.B. Day to Albaladejo y Cia.)
Conditions have changed very little in the copra market since last
reports. . . . We are in the same position as last week and are out of the
market.
For the benefit of our agents, we wish to explain in a few words just why
we are have been forced to close down our mill until the arrival of a boat
to load some of our stocks on hand. We have large stocks of copra. The
market for oil is so uncertain that we do not care to increase these stocks
until such time as we know that the market has touched the bottom. As
soon as this period of uncertainty is over, we expect to be in the market
again stronger than ever, but it is only the part of business wisdom to
play safe at such times as these.
Owing to the very small amounts of copra now in the provinces, we do
not think that our agents will lose anything by our being out of the
market. On the contrary, the producers of copra will have a chance to
allow their nuts to mature on the trees so that the quality of copra which
you will receive when we again are in the market should be much better
than what you have been receiving in the past. Due to the high prices and
scarcity of copra a large proportion of the copra we have received has
been made from unripe coconuts and in order to keep revenue coming in
the producers have kept harvesting these coconuts without giving them a
chance to reach maturity. This period now should give them the chance
to let their nuts ripen and should give you a better copra in the future
which will shrink less and be more satisfactory both from your
standpoint and ours. Please do all you can to assist us at this time. We
shall greatly appreciate your cooperation.lawphi1.net
(Letter of August 7, 1920, from H.U. Umstead, Assistant General Manager,
to Albaladejo y Cia.)
The copra situation in Manila remains unchanged and the outlook is still
uncertain. Arrivals continue small.
We are still out of the market and are not yet in a position to give you
buying orders. We trust, however, that within the next few days weeks
we may be able to reenter the market and resume our former activity.
xxx xxx xxx
While we are not of the market we have no objection whatever to our
agents selling copra to other purchasers, if by doing so they are able to
keep themselves in the market and retain their parroquianos (customers).
We do not, however, wish you to use our money, for this purpose, nor do
we want you to buy copra on speculation with the idea in mind that we
will take it off of your hands at high prices when we reenter the market.
We wish to warn you against this now so that you will not be working
under any misapprehension.
In this same mail, we are sending you a notice of change of organization.
In your dealings with us hereafter, will you kindly address all
communications to the Philippine Refining Corporation, Cebu, which you
will understand will be delivered to us.
(Letter of August 21, 1920, from Philippine Refining Corporation, by K.B.
Day, to Albaladejo y Cia.)
We are not yet in the market, but, as we have indicated before, are
hopeful of renewing our activities soon. We shall advise all our agents
seasonably of our return to the market. . . .
We are preparing new form of agreement between ourselves and our
agents and hope to have them completed in time to refer them to our
agents in the course of the next week or ten days.
All agents should endeavor to liquidate outstanding advances at this time
because this is a particularly good time to clean out old accounts and be
on a business basis when we return to the market. We request that our
agents concentrate their attention on this point during the coming
week.lawphi1.net
(Letter of October 16, 1920, from K.B. Day, Manager, to Albaladejo y Cia.)
Copra in Manila and coconut oil in the United States have taken a severe
drop during the past week. The Cebu price seems to have remained
unchanged, but we look for an early drop in the local market.
We have received orders from our president in New York to buy no more
copra until the situation becomes more favorable. We had hoped and
expected to be in the market actively before this time, but this most
unexpected reaction in the market makes the date of our entry in it more
doubtful.
With this in view, we hereby notify our agents that we can accept no
more copra and advance no more money until we have permission from
our president to do so. We request, therefore, that you go entirely out of
the market, so far as we are concerned, with the exception of receiving
copra against outstanding accounts.
In case any agent be compelled to take in copra and desire to send same
to us, we will be glad to sell same for him to the highest bidder in Cebu.
We will make no charge for our services in this connection, but the copra
must be forwarded to us on consignment only so that we will not appear
as buyers and be required to pay the internal-revenue tax.
We are extremely sorry to be compelled to make the present
announcement to you, but the market is such that our president does not
deem it wise for us to purchase copra at present, and, with this in view,
we have no alternative other than to comply with his orders. We hope
that our agents will realize the spirit in which these orders are given, and
will do all they can to remain faithful to us until such time as we can
reenter the market, which we hope and believe will be within a
comparatively short time.
(Special Letter of October 16, 1920, from Philippine Refining Corporation,
by K.B. Day, to Albaladejo y Cia.)
We have received very strict instructions from New York temporarily to
suspend the purchase of copra, and of course we must comply therewith.
However, should you find yourselves obliged to buy copra in connection
with your business activities, and cannot dispose of it advantageously in
Cebu, we shall be glad to receive your copra under the condition that we
shall sell it in the market on your account to the highest bidder, or, in
other words, we offer you our services free, to sell your copra to the best
possible advantages that the local market may offer, provided that, in
doing so, we be not obliged to accept your copra as a purchase when
there be no market for this product.
Whenever you find yourselves obliged to buy copra in order to liquidate
pending advances, we can accept it provided that, so long as present
conditions prevail, we be not required to make further cash advances.
We shall quote no further from letters written by the management of the
Philippine Refining Corporation to the plaintiff, as we find nothing in the
correspondence which reflects an attitude different from that reflected in
the matter above quoted. It is only necessary to add that the hope so
frequently expressed in the letters, to the effect that the Philippine
Refining Corporation would soon enter the market as a buyer of copra on
a more extensive scale than its predecessor, was not destined to be
realized, and the factory at Opon remained closed.
But it is quite obvious that there is nothing in these letters on which to
hold the defendant liable for the expenses incurred by the plaintiff in
keeping its organization intact during the period now under
consideration. Nor does the oral testimony submitted by the plaintiff
materially change the situation in any respect. Furthermore, the
allegation in the complaint that one agency in particular (Gubat) had
been opened on October 1, 1920, at the special instance and request of
the defendant, is not at all sustained by the evidence.
We note that in his letter of July 10, 1920, Mr. Day suggested that if the
various purchasing agents of the Visayan Refining Co. would keep their
organization intact, the company would endeavor to see that they should
not lose by the transaction in the long run. These words afford no
sufficient basis for the conclusion, which the trial judge deduced
therefrom, that the defendant is bound to compensate the plaintiff for the
expenses incurred in maintaining its organization. The correspondence
sufficiently shows on its face that there was no intention on the part of
the company to lay a basis for contractual liability of any sort; and the
plaintiff must have understood the letters in that light. The parties could
undoubtedly have contracted about it, but there was clearly no intention
to enter into contractual relation; and the law will not raise a contract by
implication against the intention of the parties. The inducement held
forth was that, when purchasing should be resumed, the plaintiff would
be compensated by the profits then to be earned for any expense that
would be incurred in keeping its organization intact. It is needless to say
that there is no proof showing that the officials of the defendant acted in
bad faith in holding out this hope.
In the appellant's brief the contention is advanced that the contract
between the plaintiff and the Visayan Refining Co. created the relation of
principal and agent between the parties, and the reliance is placed upon
article 1729 of the Civil Code which requires the principal to indemnify
the agent for damages incurred in carrying out the agency. Attentive
perusal of the contract is, however, convincing to the effect that the
relation between the parties was not that of principal and agent in so far
as relates to the purchase of copra by the plaintiff. It is true that the
Visayan Refining Co. made the plaintiff one of its instruments for the
collection of copra; but it is clear that in making its purchases from the
producers the plaintiff was buying upon its own account and that when it
turned over the copra to the Visayan Refining Co., pursuant to that
agreement, a second sale was effected. In paragraph three of the contract
it is declared that during the continuance of this contract the Visayan
Refining Co. would not appoint any other agent for the purchase of copra
in Legaspi; and this gives rise indirectly to the inference that the plaintiff
was considered its buying agent. But the use of this term in one clause of
the contract cannot dominate the real nature of the agreement as
revealed in other clauses, no less than in the caption of the agreement
itself. In some of the trade letters also the various instrumentalities used
by the Visayan Refining Co. for the collection of copra are spoken of as
agents. But this designation was evidently used for convenience; and it is
very clear that in its activities as a buyer the plaintiff was acting upon its
own account and not as agents, in the legal sense, of the Visayan Refining
Co. The title to all of the copra purchased by the plaintiff undoubtedly
remained in it until it was delivered by way of subsequent sale to said
company.
For the reasons stated we are of the opinion that no liability on the part
of the defendant is shown upon the plaintiff's second cause of action, and
the judgment of the trial court on this part of the case is erroneous.
The appealed judgment will therefore be affirmed in so far as it absolves
the defendant from the first cause of action and will be reversed in so far
as it gives judgment against the defendant upon the second cause of
action; and the defendant will be completely absolved from the complaint.
So ordered, without express findings as to costs of either instance.
14-Digest
Albaladejo y Cia v. Philippine Refining Co. (12/20/1923)
D: The use of the term “agent” in one clause of the contract cannot
dominate the real nature of the agreement as revealed in other
clauses, no less than in the caption of the agreement itself.
Facts:
1. Albaladejo y Cia, a limited partnership engaged in the buying
and selling of the products of the country esp. copra, entered
into a Memorandum of Agreement with Visayan Refining
Company (VRC), an organization engaged in the manufacture
of coconut oil. Said MOA contained the following stipulations:
a) VRC bound itself to but from Cia all copra purchased by
Cia in the province of Albay for a period of 1 year from
the date of MOA
b) VRC bound itself to pay Cia the Cebu market price of
copra deducting, however, price of the cost of
transportation by sea to VRC factory
c) VRC will not appoint any other agent for the purchase of
copra in Legaspi nor buy copra from any vendor in
Legaspi
d) VRC will keep CIA advised of the prevailing prices paid
for said copra in Cebu market
e) VRC to provide transportation by sea to Opon, Cebu for
the delivery of copra by Cia
2. Due to satisfaction on both parties from the arrangement, the
agreement continued even after the 1 year period by tacit
consent of both parties
3. During this time, Cia expanded its business due to the large
requirements/demand of copra from VRC
4. However, VRC eventually closed down its factory in Opon and
withdrew from the copra market. VRC was succeeded by
Philippine Refining Company (PRC)
5. Accounts between Cia and PRC were liquidated
6. Thereafter, Cia filed a complaint against PRC for recovery of
money. Cia alleged that due to VRC’s negligence in sending
boats for transportation to Opon of the copra products, said
copra suffered a diminishment of weight through shrinkage
and excessive drying and consequently, copra diminished its
value. 201k was the amount claimed by Cia for damages.
Furthermore, Cia claimed expenses from VRC for maintaining
and expanding its organization as these were incurred at the
VRC’s promise to Cia to make the expenditure good.
Issue: (1) WON VRC is liable for the alleged diminution of copa
Held: No
Ratio:
1. Copra is a product that necessarily undergoes shrinkage in the
process of drying.
2. It is found out that the shrinking of copra delivered by Cia to
VRC amounted to only 8.18% of the whole. This is notably
below the normal.
3. This fact goes to show that there was no delay on part of VRC
in supplying transportation
Issue: WON VRC is principal which is liable to the expenses incurred by
the “agent” Cia in carrying out the agency
Held: No
Ratio:
1. Relation between VRC and Cia is not one of principal and agent
in so far as this relates to the purchase of copra by Cia
2. True that VRC made Cia one of its instruments for the
collection of Copra but it is clear that in making its purchases
from the producers, Cia was buying on its own account and
when it turned over to VRC pursuant to the agreement, a
second sale was effected.
3. The use of the term “agent” for the purchase of copra, cannot
dominate the real nature of the agreement as revaled in other
clauses of the contract.

15. ConstanteDe Castro v CA
The Case
Before us is a Petition for Review on Certiorari [1] seeking to annul
the Decision of the Court of Appeals[2] dated May 4, 1994 in CA-G.R. CV No.
37996, which affirmed in toto the decision[3] of the Regional Trial Court of
Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court
disposed as follows:
WHEREFORE, the Court finds defendants Constante and Corazon Amor
de Castro jointly and solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorneys fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991.
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo (Artigo for
brevity) sued petitioners Constante A. De Castro (Constante for brevity)
and Corazon A. De Castro (Corazon for brevity) to collect the unpaid
balance of his brokers commission from the De Castros.[4] The Court of
Appeals summarized the facts in this wise:
x x x. Appellants[5] were co-owners of four (4) lots located at EDSA corner
New York and Denver Streets in Cubao, Quezon City. In a letter dated
January 24, 1984 (Exhibit A-1, p. 144, Records), appellee[6] was
authorized by appellants to act as real estate broker in the sale of these
properties for the amount of P23,000,000.00, five percent (5%) of which
will be given to the agent as commission. It was appellee who first found
Times Transit Corporation, represented by its president Mr. Rondaris, as
prospective buyer which desired to buy two (2) lots only, specifically lots
14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and
15 was consummated. Appellee received from appellants P48,893.76 as
commission.
It was then that the rift between the contending parties soon emerged.
Appellee apparently felt short changed because according to him, his
total commission should be P352,500.00 which is five percent (5%) of
the agreed price of P7,050,000.00 paid by Times Transit Corporation to
appellants for the two (2) lots, and that it was he who introduced the
buyer to appellants and unceasingly facilitated the negotiation which
ultimately led to the consummation of the sale. Hence, he sued below to
collect the balance of P303,606.24 after having received P48,893.76 in
advance.
On the other hand, appellants completely traverse appellees claims and
essentially argue that appellee is selfishly asking for more than what he
truly deserved as commission to the prejudice of other agents who were
more instrumental in the consummation of the sale. Although appellants
readily concede that it was appellee who first introduced Times Transit
Corp. to them, appellee was not designated by them as their exclusive
real estate agent but that in fact there were more or less eighteen (18)
others whose collective efforts in the long run dwarfed those of appellees,
considering that the first negotiation for the sale where appellee took
active participation failed and it was these other agents who successfully
brokered in the second negotiation. But despite this and out of appellants
pure liberality, beneficence and magnanimity, appellee nevertheless was
given the largest cut in the commission (P48,893.76), although on the
principle of quantum meruit he would have certainly been entitled to less.
So appellee should not have been heard to complain of getting only a
pittance when he actually got the lions share of the commission and
worse, he should not have been allowed to get the entire commission.
Furthermore, the purchase price for the two lots was only P3.6 million as
appearing in the deed of sale and not P7.05 million as alleged by appellee.
Thus, even assuming that appellee is entitled to the entire commission,
he would only be getting 5% of the P3.6 million, or P180,000.00.
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo
to act as agent in the sale of two lots in Cubao, Quezon City. The
handwritten authorization letter signed by Constante clearly established
a contract of agency between Constante and Artigo. Thus, Artigo sought
prospective buyers and found Times Transit Corporation (Times Transit
for brevity).Artigo facilitated the negotiations which eventually led to the
sale of the two lots. Therefore, the Court of Appeals decided that Artigo is
entitled to the 5% commission on the purchase price as provided in the
contract of agency.
Second. The Court of Appeals ruled that Artigos complaint is not
dismissible for failure to implead as indispensable parties the other
co-owners of the two lots. The Court of Appeals explained that it is not
necessary to implead the other co-owners since the action is exclusively
based on a contract of agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial court
did not err in admitting parol evidence to prove the true amount paid by
Times Transit to the De Castros for the two lots.The Court of Appeals
ruled that evidence aliunde could be presented to prove that the actual
purchase price was P7.05 million and not P3.6 million as appearing in the
deed of sale.Evidence aliunde is admissible considering that Artigo is not
a party, but a mere witness in the deed of sale between the De Castros
and Times Transit. The Court of Appeals explained that, the rule that oral
evidence is inadmissible to vary the terms of written instruments is
generally applied only in suits between parties to the instrument and
strangers to the contract are not bound by it. Besides, Artigo was not
suing under the deed of sale, but solely under the contract of
agency. Thus, the Court of Appeals upheld the trial courts finding that the
purchase price was P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR
FAILURE TO IMPLEAD INDISPENSABLE
PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON
THE GROUND THAT ARTIGOS CLAIM HAS BEEN
EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
 V. SANCTIONING AN AWARD OF MORAL DAMAGES
AND ATTORNEYS FEES;
VI. NOT AWARDING THE DE CASTROS MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEYS FEES.
The Courts Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to
implead other co-owners as indispensable parties
The De Castros argue that Artigos complaint should have been
dismissed for failure to implead all the co-owners of the two lots. The De
Castros claim that Artigo always knew that the two lots were co-owned
by Constante and Corazon with their other siblings Jose and Carmela
whom Constante merely represented. The De Castros contend that failure
to implead such indispensable parties is fatal to the complaint since
Artigo, as agent of all the four co-owners, would be paid with funds
co-owned by the four co-owners.
The De Castros contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by
the courts action in the litigation, and without whom no final
determination of the case can be had.[7] The joinder of indispensable
parties is mandatory and courts cannot proceed without their
presence.[8] Whenever it appears to the court in the course of a
proceeding that an indispensable party has not been joined, it is the duty
of the court to stop the trial and order the inclusion of such party. [9]
However, the rule on mandatory joinder of indispensable parties is
not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the properties of the De
Castros for P23 million at a 5 percent commission. The authority was on
a first come, first serve basis. The authority reads in full:
24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real estate
broker in connection with the sale of our property located at Edsa Corner
New York & Denver, Cubao, Quezon City.
Asking price P23,000,000.00 with
5% commission as agents fee.
C
.C. de Castro
o The De Castros claim that Artigo was fully paid on June 14, 1985,
wner & representing
c any balance. According to them, Artigo was just one of the agents
o-owners
This authority is on a first-come
First serve basis CAC
Constante signed the note as owner and as representative of the
other co-owners. Under this note, a contract of agency was clearly
constituted between Constante and Artigo. Whether Constante appointed
Artigo as agent, in Constantes individual or representative capacity, or
both, the De Castros cannot seek the dismissal of the case for failure to
implead the other co-owners as indispensable parties. The De Castros
admit that the other co-owners are solidarily liable under the
contract of agency,[10] citing Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for
all the consequences of the agency.
The solidary liability of the four co-owners, however, militates against
the De Castros theory that the other co-owners should be impleaded as
indispensable parties. A noted commentator explained Article 1915 thus
The rule in this article applies even when the appointments were made
by the principals in separate acts, provided that they are for the same
transaction. The solidarity arises from the common interest of the
principals, and not from the act of constituting the agency. By virtue
of this solidarity, the agent can recover from any principal the whole
compensation and indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear by the mere partition
effected by the principals after the accomplishment of the agency.
If the undertaking is one in which several are interested, but only some
create the agency, only the latter are solidarily liable, without prejudice
to the effects of negotiorum gestio with respect to the others. And if the
power granted includes various transactions some of which are common
and others are not, only those interested in each transaction shall be
liable for it.[11]
When the law expressly provides for solidarity of the obligation, as
in the liability of co-principals in a contract of agency, each obligor may
be compelled to pay the entire obligation.[12]The agent may recover the
whole compensation from any one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may
sue any of the solidary debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The demand made against
one of them shall not be an obstacle to those which may subsequently be
directed against the others, so long as the debt has not been fully
collected.
Thus, the Court has ruled in Operators Incorporated vs. American
Biscuit Co., Inc.[13] that
x x x solidarity does not make a solidary obligor an indispensable
party in a suit filed by the creditor. Article 1216 of the Civil Code says
that the creditor `may proceed against anyone of the solidary debtors or
some or all of them simultaneously. (Emphasis supplied)
Second Issue: whether Artigos claim has been extinguished by full
payment, waiver or abandonment
that is, Artigo was given his proportionate share and no longer entitled to
involved in the sale and entitled to a proportionate share in the
commission. They assert that Artigo did absolutely nothing during the
second negotiation but to sign as a witness in the deed of sale. He did not
even prepare the documents for the transaction as an active real estate
broker usually does.
The De Castros arguments are flimsy.
A contract of agency which is not contrary to law, public order,
public policy, morals or good custom is a valid contract, and constitutes
the law between the parties.[14] The contract of agency entered into by
Constante with Artigo is the law between them and both are bound to
comply with its terms and conditions in good faith.
The mere fact that other agents intervened in the consummation of
the sale and were paid their respective commissions cannot vary the
terms of the contract of agency granting Artigo a 5 percent commission
based on the selling price. These other agents turned out to be employees
of Times Transit, the buyer Artigo introduced to the De Castros. This
prompted the trial court to observe:
The alleged `second group of agents came into the picture only during
the so-called `second negotiation and it is amusing to note that these (sic)
second group, prominent among whom are Atty. Del Castillo and Ms.
Prudencio, happened to be employees of Times Transit, the buyer of the
properties. And their efforts were limited to convincing Constante to part
away with the properties because the redemption period of the
foreclosed properties is around the corner, so to speak. (tsn. June 6,
1991).
xxx
To accept Constantes version of the story is to open the floodgates of
fraud and deceit. A seller could always pretend rejection of the offer and
wait for sometime for others to renew it who are much willing to accept a
commission far less than the original broker. The immorality in the
instant case easily presents itself if one has to consider that the
alleged `second group are the employees of the buyer, Times Transit
and they have not bettered the offer secured by Mr. Artigo for P7
million.
It is to be noted also that while Constante was too particular about the
unrenewed real estate brokers license of Mr. Artigo, he did not bother at
all to inquire as to the licenses of Prudencio and Castillo. (tsn, April 11,
1991, pp. 39-40).[15] (Emphasis supplied)
In any event, we find that the 5 percent real estate brokers commission is
reasonable and within the standard practice in the real estate industry
for transactions of this nature.
The De Castros also contend that Artigos inaction as well as failure
to protest estops him from recovering more than what was actually paid
him. The De Castros cite Article 1235 of the Civil Code which reads:
Art. 1235. When the obligee accepts the performance, knowing its
incompleteness and irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
The De Castros reliance on Article 1235 of the Civil Code is
misplaced. Artigos acceptance of partial payment of his commission
neither amounts to a waiver of the balance nor puts him in estoppel. This
is the import of Article 1235 which was explained in this wise:
The word accept, as used in Article 1235 of the Civil Code, means to take
as satisfactory or sufficient, or agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial payment is not
equivalent to the required acceptance of performance as would
extinguish the whole obligation.[16] (Emphasis supplied)
There is thus a clear distinction between acceptance and
mere receipt. In this case, it is evident that Artigo merely received the
partial payment without waiving the balance. Thus, there is no estoppel
to speak of.
The De Castros further argue that laches should apply because
Artigo did not file his complaint in court until May 29, 1989, or almost
four years later. Hence, Artigos claim for the balance of his commission is
barred by laches.
Laches means the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due diligence
could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to assert
it.[17]
Artigo disputes the claim that he neglected to assert his rights. He
was appointed as agent on January 24, 1984. The two lots were finally
sold in June 1985. As found by the trial court, Artigo demanded in April
and July of 1985 the payment of his commission by Constante on the
basis of the selling price of P7.05 million but there was no response from
Constante.[18] After it became clear that his demands for payment have
fallen on deaf ears, Artigo decided to sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency, must
be brought within ten years from the time the right of action
accrues.[19] The right of action accrues from the moment the breach of
right or duty occurs. From this moment, the creditor can institute the
action even as the ten-year prescriptive period begins to run.[20]
The De Castros admit that Artigos claim was filed within the
ten-year prescriptive period. The De Castros, however, still maintain that
Artigos cause of action is barred by laches. Laches does not apply because
only four years had lapsed from the time of the sale in June 1985. Artigo
made a demand in July 1985 and filed the action in court on May 29, 1989,
well within the ten-year prescriptive period. This does not constitute an
unreasonable delay in asserting ones right. The Court has ruled, a delay
within the prescriptive period is sanctioned by law and is not
considered to be a delay that would bar relief.[21] In explaining that
laches applies only in the absence of a statutory prescriptive period, the
Court has stated -
Laches is recourse in equity. Equity, however, is applied only in the
absence, never in contravention, of statutory law. Thus, laches, cannot,
as a rule, be used to abate a collection suit filed within the
prescriptive period mandated by the Civil Code.[22]
Clearly, the De Castros defense of laches finds no support in law,
equity or jurisprudence.
Third issue: whether the determination of the purchase price was
made in violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative value
of the evidence adduced in the trial court to determine whether the
actual selling price of the two lots was P7.05 million and not P3.6
million. The De Castros contend that it is erroneous to base the 5 percent
commission on a purchase price of P7.05 million as ordered by the trial
court and the appellate court. The De Castros insist that the purchase
price is P3.6 million as expressly stated in the deed of sale, the due
execution and authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts
committed a mistake in considering incompetent evidence and
disregarding the best evidence and parole evidence rules. They claim that
the Court of Appeals erroneously affirmed sub silentio the trial courts
reliance on the various correspondences between Constante and Times
Transit which were mere photocopies that do not satisfy the best
evidence rule. Further, these letters covered only the first negotiations
between Constante and Times Transit which failed; hence, these are
immaterial in determining the final purchase price.
The De Castros further argue that if there was an undervaluation,
Artigo who signed as witness benefited therefrom, and being equally
guilty, should be left where he presently stands.They likewise claim that
the Court of Appeals erred in relying on evidence which were not offered
for the purpose considered by the trial court. Specifically, Exhibits B, C, D
and E were not offered to prove that the purchase price was P7.05
Million. Finally, they argue that the courts a quo erred in giving credence
to the perjured testimony of Artigo. They want the entire testimony of
Artigo rejected as a falsehood because he was lying when he claimed at
the outset that he was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by
the trial court and affirmed by the Court of Appeals, or P3.6 Million as
claimed by the De Castros, is a question of fact and not of law. Inevitably,
this calls for an inquiry into the facts and evidence on record. This we can
not do.
It is not the function of this Court to re-examine the evidence
submitted by the parties, or analyze or weigh the evidence again. [23] This
Court is not the proper venue to consider a factual issue as it is not a trier
of facts. In petitions for review on certiorari as a mode of appeal under
Rule 45, a petitioner can only raise questions of law. Our pronouncement
in the case of Cormero vs. Court of Appeals[24] bears reiteration:
At the outset, it is evident from the errors assigned that the petition is
anchored on a plea to review the factual conclusion reached by the
respondent court. Such task however is foreclosed by the rule that in
petitions for certiorari as a mode of appeal, like this one, only questions
of law distinctly set forth may be raised. These questions have been
defined as those that do not call for any examination of the probative
value of the evidence presented by the parties. (Uniland Resources vs.
Development Bank of the Philippines, 200 SCRA 751 [1991] citing
Goduco vs. Court of appeals, et al., 119 Phil. 531; Hernandez vs. Court of
Appeals, 149 SCRA 67). And when this court is asked to go over the proof
presented by the parties, and analyze, assess and weigh them to ascertain
if the trial court and the appellate court were correct in according
superior credit to this or that piece of evidence and eventually, to the
totality of the evidence of one party or the other, the court cannot and
will not do the same. (Elayda vs. Court of Appeals, 199 SCRA 349
[1991]). Thus, in the absence of any showing that the findings
complained of are totally devoid of support in the record, or that they are
so glaringly erroneous as to constitute serious abuse of discretion, such
findings must stand, for this court is not expected or required to examine
or contrast the oral and documentary evidence submitted by the
parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa
Ana vs. Hernandez, 18 SCRA 973 [1966]).
We find no reason to depart from this principle. The trial and
appellate courts are in a much better position to evaluate properly the
evidence. Hence, we find no other recourse but to affirm their finding on
the actual purchase price.
Fourth Issue: whether award of moral damages and attorneys fees is
proper
The De Castros claim that Artigo failed to prove that he is entitled
to moral damages and attorneys fees. The De Castros, however, cite no
concrete reason except to say that they are the ones entitled to damages
since the case was filed to harass and extort money from them.
Law and jurisprudence support the award of moral damages and
attorneys fees in favor of Artigo. The award of damages and attorneys
fees is left to the sound discretion of the court, and if such discretion is
well exercised, as in this case, it will not be disturbed on appeal. [25] Moral
damages may be awarded when in a breach of contract the defendant
acted in bad faith, or in wanton disregard of his contractual
obligation.[26] On the other hand, attorneys fees are awarded in instances
where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiffs plainly valid, just and demandable claim.[27] There is
no reason to disturb the trial courts finding that the defendants lack of
good faith and unkind treatment of the plaintiff in refusing to give his due
commission deserve censure. This warrants the award of P25,000.00 in
moral damages and P45,000.00 in attorneys fees. The amounts are, in our
view, fair and reasonable. Having found a buyer for the two lots, Artigo
had already performed his part of the bargain under the contract of
agency. The De Castros should have exercised fairness and good
judgment in dealing with Artigo by fulfilling their own part of the bargain
- paying Artigo his 5 percent brokers commission based on the actual
purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision
of the Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is
AFFIRMED in toto.
SO ORDERED.
15-Digest
FACTS:Private respondent Artigo sued petitioners Constante and Amor
De Castro to collect the unpaid
balance of his broker’s commission from the De Castros.
The appellants, De Castros, were co-owners of 4 lots in Cubao, Quezon
City. The appellee,Artigo, was authorized by appellants to act as real
estate broker in the sale of these properties for theamount of
P23,000,000.00, 5% of which will be given to the agent as commission.
Appellee first foundthe Times Transit Corporation and 2 lots were sold.
In return, he received P48,893.76 as commission.Appellee apparently felt
short changed because according to him, his total commission shouldbe
P352,500.00 which is 5% of the agreed price of P7,050,000.00 paid by
Times Transit Corporation toappellants for the 2 lots and that it was he
who introduced the buyer to appellants and unceasinglyfacilitated the
negotiation which ultimately led to the consummation of the sale. Hence,
he sued tocollect the balance of P303,606.24 after having received
P48,893.76 in advance.Appellants argued that appellee is selfishly asking
for more than what he truly deserved ascommission to the prejudice of
other agents who were more instrumental to the consummation of
thesale and that there were more or less 18 others who took active
efforts.
The De Castros argued that Artigo’s complaint should have been
dismissed for failure to implead
all the co owners of the 2 lots. . The De Castros contend that failure to
implead such indispensableparties is fatal to the complaint since Artigo,
as agent of all the four co-owners, would be paid withfunds co-owned by
the four co-owners.It was shown also that Constante Amor De Castro
signed the authorization of Artigo as ownerand representative of
the co-owners.
ISSUE:Whether or not the complaint merits dismissal for failure to
implead other co-owners asindispensable parties
HELD:
No. The De Castros’ contentions are devoid of legal basis. The CA
explained that it is
notnecessary to implead the co-owners since the action is exclusively
based on a contract of agencybetween Artigo and Constante. The rule on
mandatory joinder of indispensable parties is not applicableto the instant
case.Constante signed the note as owner and as representative of the
other co-owners. Under thisnote, a contract of agency was clearly
constituted between Constante and Artigo. Whether Constante
appointed Artigo as agent, in Constante’s individual or representative
capacity, or both, th
e De Castroscannot seek the dismissal of the case for failure to implead
the other co-owners as indispensableparties. The De Castros admit that
the other co-owners are solidarily liable under the contract ofagency,
citing Article 1915 of the Civil Code, which reads:Art. 1915. If two or
more persons have appointed an agent for a common transaction
orundertaking, they shall be solidarily liable to the agent for all
the consequences of the agency.The solidary liability of the four
co-owners, however
, militates against the De Castros’ theory
that the other co-owners should be impleaded as indispensable parties.
When the law expressly provides for solidarity of the obligation, as in the
liability of co-principalsin a contract of agency, each obligor may be
compelled to pay the entire obligation. The agent mayrecover the whole
compensation from any one of the co-principals, as in this case.Indeed,
Article 1216 of the Civil Code provides that a creditor may sue any of the
solidarydebtors. This article reads:Art. 1216. The creditor may proceed
against any one of the solidary debtors or some or all ofthem
simultaneously. The demand made against one of them shall not be an
obstacle to thosewhich may subsequently be directed against the others,
so long as the debt has not been fullycollected.
VIII. 2. Tuazon v Orosco
On November 19, 1888, Juan de Vargas y Amaya, the defendant's
husband, executed a power of attorney to Enrique Grupe, authorizing him,
among other things, to dispose of all his property, and particularly of a
certain house and lot known as No. 24 Calle Nueva, Malate, in the city of
Manila, for the price at which it was actually sold. He was also authorized
to mortgage the house for the purpose of securing the payment of any
amount advanced to his wife, Dolores Orozco de Rivero, who, inasmuch
as the property had been acquired with funds belonging to the conjugal
partnership, was a necessary party to its sale or incumbrance.
On the 21st of January, 1890, Enrique Grupe and Dolores Orozco de
Rivero obtained a loan from the plaintiff secured by a mortgage on the
property referred to in the power of attorney. In the caption of the
instrument evidencing the debt it is stated that Grupe and Dolores
Orozco appeared as the parties of the first part and Gonzalo Tuason, the
plaintiff, as the party of the second part; that Grupe acted for himself and
also in behalf of Juan Vargas by virtue of the power granted him by the
latter, and that Dolores Orozco appeared merely for the purpose of
complying with the requirement contained in the power of attorney. In
the body of the instrument the following appears:
1. Enrique Grupe acknowledges to have this day received from Gonzalo
Tuason as a loan, after deducting therefrom the interest agreed upon, the
sum of 3,500 pesos in cash, to his entire satisfaction, which sum he
promises to pay within one year from the date hereof.
2. Grupe also declares that of the 3,500 pesos, he has delivered to Dolores
Orozco the sum of 2,200 pesos, having retained the remaining 1,300
pesos for use in his business; that notwithstanding this distribution of the
amount borrowed, he assumes liability for the whole sum of 3,500 pesos,
which he promises to repay in current gold or silver coin, without
discount, in this city on the date of the maturity of the loan, he otherwise
to be liable for all expenses incurred and damages suffered by his
creditor by reason of his failure to comply with any or all of the
conditions stipulated herein, and to pay further interest at the rate of 1
per cent per month from the date of default until the debt is fully paid.
3. Grupe pledges as special security for the payment of the debt 13 shares
of stock in the "Compañia de los Tranvias de Filipinas," which shares he
has delivered to his creditor duly indorsed so that the latter in case of his
insolvency may dispose of the same without any further formalities.
4. To secure the payment of the 2,200 pesos delivered to Dolores Orozco
as aforesaid he specially mortgages the house and lot No. 24, Calle Nueva,
Malate, in the city of Manila (the same house referred to in the power at
attorney executed by Vargas to Grupe).
5. Dolores Orozco states that, in accordance with the requirement
contained in the power of attorney executed by Vargas to Grupe, she
appears for the purpose of confirming the mortgage created upon the
property in question.
6. Gonzalo Tuason does hereby accept all rights and actions accruing to
him under his contract.
This instrument was duly recorded in the Registry of Property, and it
appears therefrom that Enrique Grupe, as attorney in fact for Vargas,
received from the plaintiff a loan of 2,200 pesos and delivered the same
to the defendant; that to secure its payment he mortgaged the property
of his principal with defendant's consent as required in the power of
attorney. He also received 1,300 pesos. This amount he borrowed for his
own use. The recovery of this sum not being involved in this action, it will
not be necessary to refer to it in this decision. The complaint refers only
to the 2,200 pesos delivered to the defendant under the terms of the
agreement.
The defendant denies having received this sum, but her denial can not
overcome the proof to the contrary contained in the agreement. She was
one of the parties to that instrument and signed it. This necessarily
implies an admission on her part that the statements in the agreement
relating to her are true. She executed another act which corroborates the
delivery to her of the money in question — that is, her personal
intervention in the execution of the mortgage and her statement in the
deed that the mortgage had been created with her knowledge and
consent. The lien was created precisely upon the assumption that she had
received that amount and for the purpose of securing its payment.
In addition to this the defendant wrote a letter on October 23, 1903, to
the attorneys for the plaintiff promising to pay the debt on or before the
5th day of November following. The defendant admits the authenticity of
this letter, which is a further evidence of the fact that she had received
the amount in question. Thirteen years had elapsed since she signed the
mortgage deed. During all this time she never denied having received the
money. On the contrary, she promised to settle within a short time. The
only explanation that we can find for this is that she actually received the
money as set forth in the instrument.
The fact that the defendant received the money from her husband's agent
and not from the creditor does not affect the validity of the mortgage in
view of the conditions contained in the power of attorney under which
the mortgage was created. Nowhere does it appear in this power that the
money was to be delivered to her by the creditor himself and not through
the agent or any other person. The important thing was that she should
have received the money. This we think is fully established by the record.
This being an action for the recovery of the debt referred to, the court
below properly admitted the instrument executed January 21, 1890,
evidencing the debt.
The appellant claims that the instrument is evidence of a debt personally borne in mind in case the proceeds of the mortgaged property be not
incurred by Enrique Grupe for his own benefit, and not incurred for the sufficient to ay the debt and interest thereon. The judgment of the court
benefit of his principal, Vargas, as alleged in the complaint. As a matter of below should be modified in so far as it holds the defendant personally
fact, Grupe, by the terms of the agreement, bound himself personally to liable for the payment of the debt.
pay the debt. The appellant's contention however, can not be sustained.
The agreement, so far as that amount is concerned, was signed by Grupe The judgment thus modified is affirmed and the defendant is hereby
as attorney in fact for Vargas. Pursuant to instructions contained in the ordered to pay to the plaintiff the sum of 2,200 pesos as principal,
power of attorney the money was delivered to Varga's wife, the together with interest thereon from the 21st day of January, 1891, until
defendant in this case. To secure the payment of the debt, Varga's the debt shall have been fully discharged. The appellant shall pay the
property was mortgaged. His wife took part in the execution of the costs of this appeal.
mortgage as required in the power of attorney. A debt thus incurred by
the agent is binding directly upon the principal, provided the former
acted, as in the present case, within the scope of his authority. (Art. 1727 After the expiration of ten days let judgment be entered in accordance
of the Civil Code.) The fact that the agent has also bound himself to pay herewith and let the case be remanded to the court below for execution.
the debt does not relieve from liability the principal for whose benefit the So ordered.
debt was incurred. The individual liability of the agent constitutes in the
present case a further security in favor of the creditor and does not affect
or preclude the liability of the principal. In the present case the latter's
liability was further guaranteed by a mortgage upon his property. The
law does not provide that the agent can not bind himself personally to
the fulfillment of an obligation incurred by him in the name and on behalf
of his principal. On the contrary, it provides that such act on the part of
an agent would be valid. (Art. 1725 of the Civil Code.)
2-Digest
The above mortgage being valid and having been duly recorded in the Tuason v. Orozco
Register of Property, directly subjects the property thus encumbered,
whoever its possessor may be, to the fulfillment of the obligation for the
security of which it was created. (Art. 1876 of the Civil Code and art. 105
February 10, 1906Mapaalycat
of the Mortgage Law.) This presents another phase of the question. Under
the view we have taken of the case it is practically of no importance
whether or not Enrique Grupe bound himself personally to pay the debt
in question. Be this as it may and assuming that Vargas, though principal SUMMARY:
in the agency, was not the principal debtor, the right in rem arising from
the mortgage would have justified the creditor in bringing his action Vargas, husband of Dolores Orozco, executed a Power of Attorney in
directly against the property encumbered had he chosen to foreclose the favor of Enrique Grupe, authorizing the latter: (1) to dispose of all his
mortgage rather than to sue Grupe, the alleged principal debtor. This property, particularly, a house and lot; and (2) to mortgage thehouse for
would be true irrespective of the personal liability incurred by Grupe. the purpose of securing the payment of any amount advanced toDolores.
The result would be practically the same even though it were admitted Grupe and Orozco obtained a loan from Gonzalo Tuason. Theinstrument
that appellant's contention is correct. evidencing the debt was duly recorded in the Registry of Property, and it
appears therefrom that Grupe, as attorney in fact forVargas, received
from Tuason a loan of P2,200 and delivered the same tothe Orozco; and
The appellant also alleges that Enrique Grupe pledged to the plaintiff
that to secure its payment, he mortgaged the property of Varga
thirteen shares of stock in the "Compañia de los Tranvias de Filipinas" to
secure the payment of the entire debt, and contends that it must be s with Orozco’s consent.
shown what has become of these shares, the value of which might be
amply sufficient to pay the debt, before proceeding to foreclose the But Orozco denies having received the loan.
mortgage. This contention can not be sustained in the face of the law
above quoted to the effect that a mortgage directly subjects the property
encumbered, whoever its possessor may be, to the fulfillment of the
obligation for the security of which it was created. Moreover it was DOCTRINE:
incumbent upon the appellant to show that the debt had been paid with
those shares. Payment is not presumed but must be proved. It is a A debt this incurred by the agent is binding directly upon theprincipal,
defense which the defendant may interpose. It was therefore her duty to provided the former acted, as in the present case, within thescope of his
show this fact affirmatively. She failed, however, to do so. authority. (Art. 1727) The fact that the agent has also boundhimself to
pay the debt does not relieve from liability the principal forwhose benefit
the debt was incurred. The individual liability of the agent constitutes
The appellant's final contention is that in order to render judgment only a further security in favor of the creditor. The law does not provide
against the mortgaged property it would be necessary that the minor that the agent cannot bind himself personally to the fulfillment of an
children of Juan de Vargas be made parties defendant in this action, they obligation incurred by him in the name and on behalf of his principal.(Art.
having an interest in the property. Under article 154 of the Civil Code, 1725)
which was in force at the time of the death of Vargas, the defendant had
the parental authority over her children and consequently the legal
representation of their persons and property. (Arts. 155 and 159 of the
Civil Code.) It can not be said, therefore, that they were not properly FACTS:
represented at the trial. Furthermore this action was brought against the
defendant in her capacity as administratrix of the estate of the deceased In 1888, (principal) Juan Vargas, husband of defendant DoloresOrozco,
Vargas. She did not deny in her answer that she was such administratix. executed a Power of Attorney in favor of (agent) Enrique
Grupe,authorizing the latter: (1) to dispose of all his property, in
particular, a houseand lot situated at 24 Calle Nueva, Malate; and (2) to
Vargas having incurred this debt during his marriage, the same should
mortgage the house forthe purpose of securing the payment of any
not be paid out of property belonging to the defendant exclusively but
amount advanced to Dolores.In January 1980, Enrique Grupe and Dolores
from that pertaining to the conjugal partnership. This fact should be
Orozco obtained a loanfrom plaintiff Gonzalo Tuason. The instrument
evidencing the debt was dulyrecorded in the Registry of Property, and it
appears therefrom that EnriqueGrupe, as attorney in fact for Vargas,
received from Tuason a loan of P2,200and delivered the same to the
defendant; and that to secure its payment, he

mortgaged the property of Vargas with Orozco’s consent.

But Orozco denieshaving received the loan.

ISSUE + RATIO:

Orozco’s denial cannot o

vercome the proof to the contrary in theagreement. Orozco was one of

the parties to the January 1980 instrument and signed it. This implied an
admission on her part that the statementsrelating to her in the
agreement are true. She also personally intervened inthe execution of the
mortgage and stated in the deed that the mortgage hasbeen created with
her knowledge and consent. The lien was createdprecisely on the
assumption that she had received the amount for thepurpose of securing
its payment. In addition to this, she wrote a letter to theattorneys of
Tuason promising to pay the debt. Thirteen years have elapsedsince she
signed the mortgage deed. During all this time, she never deniedhaving
received the money. On the contrary, she promised to settle. The
onlyexplanation is that she actually received the money.The fact that

Orozco received the money from Grupe, her husband’s

agent, and not from Tuason himself does not affect the validity of
themortgage. Nowhere does it appear in the Power that the money was
to bedelivered to her by the creditor himself. The important thing was
that sheshould have received the money.Orozco claims that the
instrument is evidence of a debt personallyincurred by Grupe for his own
benefit, and not incurred for the benefit of Vargas. This contention cannot
be sustained. The agreement was signed byGrupe as attorney in fact for
Vargas. A debt this incurred by the agent isbinding directly upon the
principal, provided the former acted, as in thepresent case, within the
scope of his authority. (Art. 1727) The fact that theagent has also bound
himself to pay the debt does not relieve from liabilitythe principal for
whose benefit the debt was incurred. The individualliability of the agent
constitutes only a further security in favor of thecreditor. The law does
not provide that the agent cannot bind himself personally to the
fulfillment of an obligation incurred by him in the nameand on behalf of
his principal. (Art. 1725)The mortgage being valid and duly recorded in
the Registry of Property, directly subjects the property to the fulfillment
of the obligationfor the security of which it was created. It is of no
importance whether or not Grupe bound himself personally to pay the
debt in question. The right in remarising from the mortgage would have
justified the creditor in bringing hisaction directly against the property
encumbered, had he chosen to foreclosethe mortgage rather than to sue
Grupe.

RULING:

Orozco is ordered to pay Tuason