MARCOS V. PRIETO, Petitioner, vs.THE HON. COURT OF APPEALS (Former Ninth Division), HON. ROSE MARY R. MOLINA-ALIM, In Her Capacity as Pairing Judge of Branch 67 of the RTC, First Judicial Region, Bauang, La Union, FAR EAST BANK & TRUST COMPANY, now the BANK OF THE PHILIPPINE ISLANDS, through ATTY. EDILBERTO B. TENEFRANCIA, and SPOUSES ANTONIO and MONETTE PRIETO, Respondents.

D E C I S I O N

BERSAMIN, J.:

Ratification or confirmation may validate an act done in behalf of another without authority from the latter. The effect is as if the latter did the act himself.

Antecedents

On October 27, 1997, the Spouses Marcos V. Prieto (Marcos) and Susan M. Prieto filed in the Regional Trial Court (RTC) in Bauang, La Union a complaint against Far East Bank and Trust Company (FEBTC) and the Spouses Antonio Prieto (Antonio) and Monette Prieto to declare the nullity of several real estate mortgage contracts.1 The plaintiffs narrated that in January 1996, they had executed a special power of attorney (SPA) to authorize Antonio to borrow money from FEBTC, using as collateral their real property consisting of a parcel of land located in Calumbaya, Bauang, La Union (the property) and covered by Transfer Certificate of Title (TCT) No. T-40223 of the Registry of Deeds of La Union; that defendant spouses, using the property as collateral, had thereafter obtained from FEBTC a series of loans totaling P5,000,000.00, evidenced by promissory notes, and secured by separate real estate mortgage contracts; that defendant spouses had failed to pay the loans, leading FEBTC to initiate the extra-judicial foreclosure of the mortgages; that the foreclosure sale had been scheduled on October 31, 1997; and that the promissory notes and the real estate mortgage contracts were in the name of defendant spouses for themselves alone, who had incurred the obligations, rendering the promissory notes and the mortgage contracts null and void ab initio.

The RTC issued a temporary restraining order (TRO), and set a preliminary hearing on the application for the issuance of a writ of preliminary injunction.2 The RTC eventually denied the application for the writ of preliminary injunction on March 24, 1998;3 it later denied as well the plaintiffs’ motion for reconsideration of the denial of the application.4

On July 31, 2001 the RTC rendered its decision dismissing the complaint,5 ruling that although the name of plaintiff Marcos (as registered owner) did not appear in the real estate mortgage contracts, Marcos could not be absolved of liability because he had no right of action against the person with whom his agent had contracted; that the mortgage contracts, even if entered into in the name of the agent, should be deemed made in his behalf as the principal because the things involved belonged to the principal; and that even assuming that Antonio had exceeded his authority as agent, Marcos had ratified Antonio’s action by executing the letter of acknowledgement dated September 12, 1996, making himself liable under the premises.

Marcos received the decision on August 28, 2001, and filed a motion for reconsideration on September 12, 2001, the last day for him to do so under the Rules of Court.6 On November 19, 2001, the RTC denied the motion for reconsideration.7 Marcos received the denial of the motion on November 21, 2001, but he filed his notice of appeal only on November 26, 2001.8

On December 11, 2001, the RTC denied due course to the notice of appeal for having been filed four days beyond the reglementary period for perfecting the appeal.9

Marcos sought the reconsideration of the denial of due course to the notice of appeal, but the RTC still denied his motion, reiterating that the failure to perfect an appeal rendered the decision final and executory.10

On April 16, 2002, Marcos filed a petition for certiorari in the Court of Appeals (CA), imputing grave abuse of discretion to the RTC in disallowing his notice of appeal.11 He argued that his notice of appeal had been filed only two days late, and that the delay should be treated only as excusable negligence because at that time, he had been deprived of clear thinking due to the pain and disappointment he and his wife had suffered over the failure of the recent medical procedures they had undergone.12

On April 24, 2002, the CA Ninth Division, then composed of Associate Justice Conrado M. Vasquez, Jr. as Chairman, and Associate Justice Andres B. Reyes, Jr. and Associate Justice Mario L. Guariña III as Members, dismissed the petition for certiorari, holding that Marcos had failed to perfect his appeal on time, and that, consequently, the RTC did not commit any error or grave abuse of discretion in issuing the challenged orders.13

Marcos sought reconsideration, but the CA denied the motion for reconsideration on April 9, 2003.14

Hence, this appeal on certiorari.

The petition for review lacks merit.

First of all, Marcos submits that the CA’s assailed resolution promulgated on April 9, 2003 was signed only by Associate Justices Vasquez and Reyes, Jr.; that Associate Justice Guariña III as the third Member did not sign the resolution; that the absence of Associate Justice Guariña III’s signature revealed the lack of unanimity in the voting, rendering the resolution null and void pursuant to Section 4 of the 1999 Internal Rules of the Court of Appeals;15and that the CA should then have constituted a new Division of five Members by selecting two additional Associate Justices by raffle.16

We find the submission of Marcos to be without basis. Contrary to his submission, Associate Justice Guariña III expressly concurred in the resolution in question, as borne out by the copy itself of the assailed resolution promulgated on April 9, 2003 attached to the petition for review as "Enclosure A."17 Marcos could not have missed the signature of Associate Justice Guariña III because it prominently appeared on the copy of the assailed resolution beneath that of Associate Justice Vasquez and beside that of Associate Justice Reyes, Jr.

Secondly, Marcos contends that the CA erred in rejecting his petition for certiorari because his notice of appeal in the RTC had been tardy by only two days, but his tardiness could be excused.

We cannot sustain the contention of petitioner. He himself conceded that his filing of the notice of appeal had been tardy by two days. Thereby, he was aware that he had lost his right to appeal the RTC’s decision. As such, the petition for certiorari he thereafter filed in the CA was designed to substitute his loss of the right to appeal.

The CA justified its rejection of the petition for certiorari in the following manner:

Admittedly, petitioner received the Decision in Civil Case No. 1114-BG dated July 31, 2001 on August 28, 2001 and filed his motion for reconsideration on the 15th day, or on September 12, 2001. Petitioner received the denial of his motion for reconsideration on November 21, 2001, thereby leaving him with only one (1) day to perfect an appeal. Unfortunately, the notice of appeal was submitted only on November 26, 2001, or four (4) days beyond the reglementary period.

To justify the late filing of his appeal, petitioner ratiocinated that on November 22, 2001, the last day of appeal, he brought his wife to Manila for an embryo transfer and returned to San Fernando, Pampanga, on November 25, 2001. Other than the bare allegations of the petitioner, however, the pretended

excusable neglect remained unsupported and uncorroborated. Worthy of note still is that the notice of appeal submitted mentioned nothing about the embryo transplant. Worse, the notice of appeal misleadingly averred that petitioner is giving notice of his intention to appeal to this Court "from the judgment entered therein by this Court on 19th November 2001, which was received by plaintiffs on 21st day of November 2001," thereby making it appear that the notice of appeal was indeed filed on time, stating that what he received on November 21, 2001 was the Decision dated July 31, 2001, not the denial of the reconsideration.

Apropos, when the trial court denied the notice of appeal, it did not commit any error nor grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the challenged orders. No capricious or whimsical exercise of judgment nor arbitrary or despotic manner exists in the issuance of the assailed orders.

Not only that, petition for certiorari presupposes that petitioner is left with no other plain, speedy and adequate remedy in the ordinary course of law like an appeal or a petition from relief of judgment. Notably, petitioner failed to avail of the petition for relief of judgment under Rule 38 of the Rules of Court, and just like in an appeal, certiorari cannot be made a substitute for such remedy.

On the plea for application for the liberality rule, it must be stressed that there are certain procedural rules that must remain inviolable, like those setting the period for perfecting an appeal. Doctrinally entrenched is that the right of appeal is a statutory right and the one who seeks to avail that right must comply with the statute or rules. The Rules, particularly the requirements for perfecting an appeal within the reglementary period specified in the law, must be strictly followed as they are considered indispensable interdictions against needless delays and appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional and the failure to perfect an appeal renders the judgment of the court final and executory. Just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his or her case. (Videogram Regulatory Board vs. Court of Appeals 265 SCRA 373 [1996]; Cabellan vs. Court of Appeals 304, SCRA 119 [1999]; Demata vs. Court of Appeals, 303 SCRA 690 [1999)].

Consequently, failing to perfect an appeal within the time and manner specified by law, deprives the appellate court of jurisdiction to alter the final judgment much less entertain the appeal (Pedrosa vs. Hill, 257 SCRA 373 [1996]). Timeliness of an appeal is a jurisdictional caveat that not even the Supreme Court can trifle with. (Bank of America, NT & SA vs. Gerochi, Jr., 230 SCRA 9 [1994]).18

We can only sustain the CA’s dismissal of the petition for certiorari. The general rule is that a timely appeal is the remedy to obtain reversal or modification of the judgment on the merits. This is true even if one of the errors to be assigned on appeal is the lack of jurisdiction on the part of the court rendering the judgment over the subject matter, or the exercise of power by said court is in excess of its jurisdiction, or the making of its findings of fact or of law set out in the decision is attended by grave abuse of discretion.19 In other words, the perfection of an appeal within the reglementary period is mandatory because the failure to perfect the appeal within the time prescribed by the Rules of Court unavoidably renders the judgment final as to preclude the appellate court from acquiring the jurisdiction to review the judgment.20 We stress, too, that the statutory nature of the right to appeal requires the appealing party to strictly comply with the statutes or rules governing the perfection of the appeal because such statutes or rules are considered indispensable interdictions against needless delays and are instituted in favor of an orderly discharge of judicial business. In the absence of highly exceptional circumstances warranting their relaxation, therefore, the statutes or rules should remain inviolable.21

And, thirdly, petitioner’s appeal would still not succeed even if the Court now extends to him the retroactive application of the fresh period rule enunciated in Neypes v. Court of Appeals,22 and reckon the perfection of his appeal from the date of his receipt of the denial of his motion for reconsideration, thus rendering his notice of appeal timely.

The complaint was anchored on the supposed failure of FEBTC to duly investigate the authority of Antonio in contracting the "exceptionally and relatively immense"23 loans amounting to P5,000,000.00. Marcos alleged therein that his property had thereby become "unlawfully burdened by unauthorized real estate mortgage contracts,"24because the loans and the mortgage contracts had been incurred by Antonio and his wife only for themselves, to the exclusion of petitioner.25 Yet, Marcos could not deny that under the express terms of the SPA,26 he had precisely granted to Antonio as his agent the authority to borrow money, and to transfer and convey the property by way of mortgage to FEBTC; to sign, execute and deliver promissory notes; and to receive the proceeds of the loans on the former’s behalf. In other words, the mortgage contracts were valid and enforceable against petitioner, who was consequently fully bound by their terms.

Moreover, even if it was assumed that Antonio’s obtaining the loans in his own name, and executing the mortgage contracts also in his own name had exceeded his express authority under the SPA, Marcos was still liable to FEBTC by virtue of his express ratification of Antonio’s act. Under Article 1898 of the Civil Code, the acts of an agent done beyond the scope of his authority do not bind the principal unless the latter expressly or impliedly ratifies the same.27

In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by another without authority.1âwphi1 The substance of ratification is the confirmation after the act, amounting to a substitute for a prior authority.28 Here, there was such a ratification by Marcos, as borne out by his execution of the letter of acknowledgement on September 12, 1996,29 whose text is quoted in full, viz:

12 Sept. 1996   (handwritten)

FAR EAST BANK & TRUST COMPANYSan FernandoLa Union

Gentlemen:

It is my/our understanding that your Bank has granted a DISCOUNTING   Line/Loan in favor of SPS. ANTONIO & MONETTE PRIETO over my/our real property located in Calumbayan, Bauang, La Unionand covered by Transfer Certificate of Title No./s. 40223 of the Registry of Deeds for La  Union.  This confirms that the said property/ies was/were offered as collateral (illegible) SPS. ANTONIO & MONETTE PRIETO’S line/loan with my/our consent, and that I/we agree with all the terms and conditions of the mortgage executed on the same. I/we further confirm that the proceeds of the aforesaid Discounting Line line/loan was released to SPS. MONETTE & ANTONIO PRIETO   for his/her its own benefit.

We thank you for your support to SPS. MONETTE & ANTONIO.

Very truly yours,

(signed)ATTY. MARCOS PRIETO30

But Marcos insists that the letter of acknowledgment was only a mere "letter (written) on a mimeographic paper … a mere scrap of paper, a document by adhesion."31

The Court is confounded by Marcos’ dismissal of his own express written ratification of Antonio’s act. Being himself a lawyer, Marcos was aware of the import and consequences of the letter of acknowledgment. The Court cannot agree with his insistence that the letter was worthless due to its being a contract of adhesion. The letter was not a contract, to begin with, because it was only a unilateral act of his. Secondly, his insistence was fallacious and insincere because he knew as a lawyer that even assuming that the letter could be treated as a contract of adhesion it was nonetheless effective and

binding like any other contract. The Court has consistently held that a contract of adhesion was not prohibited for that reason. In Pilipino Telephone Corporation v. Tecson, 32 for instance, the Court said that contracts of adhesion were valid but might be occasionally struck down only if there was a showing that the dominant bargaining party left the weaker party without any choice as to be "completely deprived of an opportunity to bargain effectively." That exception did not apply here, for, verily, Marcos, being a lawyer, could not have been the weaker party. As the tenor of the of acknowledgment indicated, he was fully aware of the meaning and sense of every written word or phrase, as well as of the legal effect of his confirmation thereby of his agent’s act. It is axiomatic that a man’s act, conduct and declaration, wherever made, if voluntary, are admissible against him,33 for the reason that it is fair to presume that they correspond with the truth, and it is his fault if they do not.34

WHEREFORE, the Court AFFIRMS the resolution promulgated by the Court of Appeals on April 24, 2002; and ORDERS petitioner to pay the costs of suit.

SO ORDERED.

FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.),                             Petitioner,

      G.R. No. 159489

      Present:

- versus -

      QUISUMBING, J., Chairperson,      CARPIO,      CARPIO MORALES,      TINGA, and      VELASCO, JR., JJ.

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

      Promulgated:

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

DECISION

QUISUMBING, J.:

This petition for review on certiorari seeks the reversal of the

Decision[1] and Resolution,[2] dated November 29, 2002 and August 5, 2003,

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

appellate court had affirmed the Decision[3] dated October 10, 1989 of the

Regional Trial Court (RTC) of Manila, Branch 3, finding petitioner as

defendant and the co-defendants below jointly and severally liable to the

plaintiffs, now herein respondents.

          The antecedent facts are as follows:

          Respondent Teresita O. Pedroso is a policyholder of a 20-year

endowment life insurance issued by petitioner Filipinas Life Assurance

Company (Filipinas Life).  Pedroso claims Renato Valle was her insurance

agent since 1972 and Valle collected her monthly premiums.  In the first

week of January 1977, Valle told her that the Filipinas Life Escolta Office was

holding a promotional investment program for policyholders.  It was offering

8% prepaid interest a month for certain amounts deposited on a monthly

basis.  Enticed, she initially invested and issued a post-dated check

dated January 7, 1977 forP10,000.[4]  In return, Valle issued Pedroso his

personal check for P800 for the 8%[5] prepaid interest and a Filipinas Life

“Agent’s Receipt” No. 807838.[6]

Subsequently, she called the Escolta office and talked to Francisco

Alcantara, the administrative assistant, who referred her to the branch

manager, Angel Apetrior. Pedroso inquired about the promotional investment

and Apetrior confirmed that there was such a promotion.  She was even told

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

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

account of Filipinas Life with the Commercial Bank and Trust Company

(CBTC), Escolta Branch.

Relying on the representations made by the petitioner’s duly

authorized representatives Apetrior and Alcantara, as well as having known

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

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

after she made a written request for its refund.  The formal written request,

dated February 3, 1977, was written on an inter-office memorandum form of

Filipinas Life prepared by Alcantara.[7]  To collect the amount, Pedroso

personally went to the Escolta branch where Alcantara gave her the P10,000

in cash.  After a second investment, she made 7 to 8 more investments in

varying amounts, totaling P37,000 but at a lower rate of 5%[8] prepaid interest

a month. Upon maturity of Pedroso’s subsequent investments, Valle would

take back from Pedroso the corresponding yellow-colored agent’s receipt he

issued to the latter.

Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life

insurance policyholder, about the investment plan.  Palacio made a total

investment ofP49,550[9] but at only 5% prepaid interest.  However, when

Pedroso tried to withdraw her investment, Valle did not want to return

some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas

Life, despite demands, refused to return her money.  With the assistance of

their lawyer, they went to Filipinas Life Escolta Office to collect their

respective investments, and to inquire why they had not seen Valle for quite

some time.  But their attempts were futile.  Hence, respondents filed an

action for the recovery of a sum of money.

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

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

respondents.

On appeal, the Court of Appeals affirmed the trial court’s ruling and

subsequently denied the motion for reconsideration.

          Petitioner now comes before us raising a single issue:

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE DECISION OF THE LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND SEVERALLY LIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD OF HOLDING ITS AGENT, RENATO VALLE, SOLELY LIABLE TO THE RESPONDENTS . [10]

Simply put, did the Court of Appeals err in holding petitioner and its

co-defendants jointly and severally liable to the herein respondents?

Filipinas Life does not dispute that Valle was its agent, but claims

that it was only a life insurance company and was not engaged in the

business of collecting investment money.  It contends that the investment

scheme offered to respondents by Valle, Apetrior and Alcantara was outside

the scope of their authority as agents of Filipinas Life such that, it cannot be

held liable to the respondents.[11]

On the other hand, respondents contend that Filipinas Life

authorized Valle to solicit investments from them.  In fact, Filipinas Life’s

official documents and facilities were used in consummating the

transactions.  These transactions, according to respondents, were confirmed

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

the diligence required of them in ascertaining the authority of petitioner’s

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

act within the scope of their authority.

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

parties, we find that the petition lacks merit.  The Court of Appeals committed

no reversible error nor abused gravely its discretion in rendering the assailed

decision and resolution.

It appears indisputable that respondents Pedroso and Palacio had

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

and remitted to Filipinas Life, using Filipinas Life’s official receipts, whose

authenticity were not disputed.  Valle’s authority to solicit and receive

investments was also established by the parties.  When respondents sought

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

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

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

own peril the agent’s authority, in this case, respondents did exercise due

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

representations made by Valle.

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

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

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

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

principal is responsible for the acts of its agent done within the scope of its

authority, and should bear the damage caused to third persons.[13]  When the

agent exceeds his authority, the agent becomes personally liable for the

damage.[14]  But even when the agent exceeds his authority, the principal is

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

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

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

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

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

another without authority.[17]

Filipinas Life cannot profess ignorance of Valle’s acts.  Even if

Valle’s representations were beyond his authority as a debit/insurance agent,

Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified

Valle’s acts.  It cannot even be denied that Filipinas Life benefited from the

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

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

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

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

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

agent’s acts beyond the latter’s authority.  The act of the agent is considered

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

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

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

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

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

are AFFIRMED.

Costs against the petitioner.

SO ORDERED.

MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. PEDRO L. LINSANGAN, respondent.

D E C I S I O N

TINGA, J.:

For resolution in this case is a classic and interesting texbook question in the law on agency.

This is a petition for review assailing the Decision[1] of the Court of Appeals dated 22 June 2001, and its Resolution[2] dated 12 December 2001 in CA G.R. CV No. 49802 entitled “Pedro L. Linsangan v. Manila Memorial Cemetery, Inc. et al.,” finding Manila Memorial Park Cemetery, Inc.  (MMPCI) jointly and severally liable with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.

The facts of the case are as follows:

Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross Memorial Park owned by petitioner (MMPCI).  According to Baluyot, a former owner of a memorial lot under Contract No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights subject to reimbursement of the amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is made to the former buyer, the contract would be transferred to him.  Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the original buyer and to complete the down payment to MMPCI.[3] Baluyot issued handwritten and typewritten receipts for these payments.[4]

Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No. 28660, a new contract covering the subject lot in the name of the latter instead of old Contract No. 25012. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the old price of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about P75,000.00.[5]

Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00.  Atty. Linsangan objected to the new contract price, as the same was not the amount previously agreed upon. To convince Atty. Linsangan, Baluyot executed a document[6] confirming that while the contract price is P132,250.00, Atty. Linsangan  would  pay only the original price of P95,000.00.

The document reads in part:

The monthly installment will start April 6, 1985; the amount of P1,800.00 and the difference will be issued as discounted to conform to the previous price as previously agreed upon. ---P95,000.00

Prepared by:

(Signed)(MRS.) FLORENCIA C. BALUYOT

Agency ManagerHoly Cross Memorial Park

4/18/85

Dear Atty. Linsangan:

This will confirm our agreement that while the offer to purchase under Contract No. 28660 states that the total price of P132,250.00 your undertaking is to pay only the total sum ofP95,000.00 under the old price.  Further the total sum of P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985 has been credited in the total purchase price thereby leaving a balance of P75,162.00 on a monthly installment of P1,800.00 including interests (sic) charges for a period of five (5) years.

(Signed)FLORENCIA C.

BALUYOT

By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No. 118912.  As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00 each in favor of MMPCI.  The next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated checks in favor of MMPCI.

On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons the latter could not explain, and presented to him another proposal for the purchase of an equivalent property.  He refused the new proposal and insisted that Baluyot and MMPCI honor their undertaking.

For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed a Complaint[7] for Breach of Contract and Damages against the former.

Baluyot did not present any evidence.  For its part, MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the contract[8] because of non-payment of arrearages.[9] MMPCI stated that Baluyot was not an agent but an independent contractor, and as such was not authorized to represent MMPCI or to use its name except as to the extent expressly stated in the Agency Manager Agreement.[10] Moreover, MMPCI was not aware of the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment and monthly installments as indicated in the contract.[11] Official receipts showing the application of payment were turned over to Baluyot whom Atty. Linsangan had from the beginning allowed to receive the same in his behalf. Furthermore, whatever

misimpression that Atty. Linsangan may have had must have been rectified by the Account Updating Arrangement signed by Atty. Linsangan which states that he “expressly admits that Contract No. 28660 ‘on account of serious delinquency…is now due for cancellation under its terms and conditions.’’’[12]

The trial court held MMPCI and Baluyot jointly and severally liable.[13] It found that Baluyot was an agent of MMPCI and that the latter was estopped from denying this agency, having received and enchased the checks issued by Atty. Linsangan and given to it by Baluyot.  While MMPCI insisted that Baluyot was authorized to receive only the down payment, it allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently encashed.[14]

The dispositive portion of the decision reads:

WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of plaintiff declaring Contract No. 28660 as valid and subsisting and ordering defendants to perform their undertakings thereof which covers burial lot No. A11 (15), Block 83, Section Garden I, Holy Cross Memorial Park located at Novaliches, Quezon City. All payments made by plaintiff to defendants should be credited for his accounts.  NO DAMAGES, NO ATTORNEY’S FEES but with costs against the defendants.

The cross claim of defendant Manila Memorial Cemetery Incorporated as against defendant Baluyot is GRANTED up to the extent of the costs.

SO ORDERED.[15]

MMPCI appealed the trial court’s decision to the Court of Appeals.[16] It claimed that Atty. Linsangan is bound by the written contract with MMPCI, the terms of which were clearly set forth therein and read, understood, and signed by the former.[17] It also alleged that Atty. Linsangan, a practicing lawyer for over thirteen (13) years at the time he entered into the contract, is presumed to know his contractual obligations and is fully aware that he cannot belatedly and unilaterally change the terms of the contract without the consent, much less the knowledge of the other contracting party, which was MMPCI. And in this case, MMPCI did not agree to a change in the contract and in fact implemented the same pursuant to its clear terms. In view thereof, because of Atty. Linsangan’s delinquency, MMPCI validly cancelled the contract.

MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter exceeded the terms of her agency, neither did MMPCI ratify Baluyot’s acts.  It added that it cannot be charged with making any misrepresentation, nor of having allowed Baluyot to act as though she had full powers as the written contract expressly stated the terms and

conditions which Atty. Linsangan accepted and understood.  In canceling the contract, MMPCI merely enforced the terms and conditions imposed therein.[18]

Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the former’s obligation, as a party knowingly dealing with an alleged agent, to determine the limitations of such agent’s authority, particularly when such alleged agent’s actions were patently questionable. According to MMPCI, Atty. Linsangan did not even bother to verify Baluyot’s authority or ask copies of official receipts for his payments.[19]

The Court of Appeals affirmed the decision of the trial court.  It upheld the trial court’s finding that Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having represented MMPCI’s interest and acting on its behalf in the dealings with clients and customers. Hence, MMPCI is considered estopped when it allowed Baluyot to act and represent MMPCI even beyond her authority.[20] The appellate court likewise found that the acts of Baluyot bound MMPCI when the latter allowed the former to act for and in its behalf and stead.  While Baluyot’s authority “may not have been expressly conferred upon her, the same may have been derived impliedly by habit or custom, which may have been an accepted practice in the company for a long period of time.”[21] Thus, the Court of Appeals noted, innocent third persons such as Atty. Linsangan should not be prejudiced where the principal failed to adopt the needed measures to prevent misrepresentation.  Furthermore, if an agent misrepresents to a purchaser and the principal accepts the benefits of such misrepresentation, he cannot at the same time deny responsibility for such misrepresentation.[22] Finally, the Court of Appeals declared:

There being absolutely nothing on the record that would show that the court a quo overlooked, disregarded, or misinterpreted facts of weight and significance, its factual findings and conclusions must be given great weight and should not be disturbed by this Court on appeal.

WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed decision in Civil Case No. 88-1253 of the Regional Trial Court, National Capital Judicial Region, Branch 57 of Makati, is hereby AFFIRMED in toto.

SO ORDERED.[23]

MMPCI filed its Motion for Reconsideration,[24] but the same was denied for lack of merit.[25]

In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in disregarding the plain terms of the written contract and Atty. Linsangan’s failure to abide by the terms thereof, which justified its

cancellation. In addition, even assuming that Baluyot was an agent of MMPCI, she clearly exceeded her authority and Atty. Linsangan knew or should have known about this considering his status as a long-practicing lawyer. MMPCI likewise claims that the Court of Appeals erred in failing to consider that the facts and the applicable law do not support a judgment against Baluyot only “up to the extent of costs.”[26]

Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in fact faithfully performed his contractual obligations and complied with them in good faith for at least two years. [27] He claims that contrary to MMPCI’s position, his profession as a lawyer is immaterial to the validity of the subject contract and the case at bar.[28] According to him, MMPCI had practically admitted in its Petition that Baluyot was its agent, and thus, the only issue left to be resolved is whether MMPCI allowed Baluyot to act as though she had full powers to be held solidarily liable with the latter.[29]

We find for the petitioner MMPCI.

The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court is limited to reviewing only errors of law, not fact, unless the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts.[30] In BPI Investment Corporation v. D.G. Carreon Commercial Corporation,[31] this Court ruled:

There are instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed by the Supreme Court, such as (1) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings  are contrary to those of the trial court; (8) when the findings  of fact are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners’ main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals  are premised on the supposed absence of evidence and contradicted by the evidence on record.[32]

In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts of the case, as well as made conclusions devoid of evidentiary support, hence we review its findings of fact.

By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.[33] Thus, the elements of agency are (i)

consent, express or implied, of the parties to establish the relationship; (ii) the object is the execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and not for himself; and (iv) the agent acts within the scope of his authority.[34]

In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency Manager Agreement; an agency manager such as Baluyot is considered an independent contractor and not an agent.[35] However, in the same contract, Baluyot as agency manager was authorized to solicit and remit to MMPCI offers to purchase interment spaces belonging to and sold by the latter.[36] Notwithstanding the claim of MMPCI that Baluyot was an independent contractor, the fact remains that she was authorized to solicit solely for and in behalf of MMPCI.  As properly found both by the trial court and the Court of Appeals, Baluyot was an agent of MMPCI, having represented the interest of the latter, and having been allowed by MMPCI to represent it in her dealings with its clients/prospective buyers.

Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the contract procured by Atty. Linsangan and solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on forms provided by MMPCI.  The terms of the offer to purchase, therefore, are contained in such forms and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.

The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a total list price of P132,250.00.  Likewise, it was clearly stated therein that  “Purchaser agrees that he has read or has had read to him this agreement, that he understands its terms and conditions, and that there are no covenants, conditions, warranties or representations other than those contained herein.”[37] By signing the Offer to Purchase, Atty. Linsangan signified that he understood its contents.  That he and Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyot’s authority.  To repeat, Baluyot’s authority was limited only to soliciting purchasers.  She had no authority to alter the terms of the written contract provided by MMPCI.  The document/letter “confirming” the agreement that Atty. Linsangan would have to pay the old price was executed by Baluyot alone.  Nowhere is there any indication that the same came from MMPCI or any of its officers.

It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. [38] The basis for

agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. [39] If he does not make such an inquiry, he is chargeable with knowledge of the agent’s authority and his ignorance of that authority will not be any excuse.[40]

As noted by one author, the ignorance of a person dealing with an agent as to the scope of the latter’s authority is no excuse to such person and the fault cannot be thrown upon the principal.[41] A person dealing with an agent assumes the risk of lack of authority in the agent.  He cannot charge the principal by relying upon the agent’s assumption of authority that proves to be unfounded.  The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency.[42]

In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether Baluyot was authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI by her commitment with respect to such agreements.  Even if Baluyot was Atty. Linsangan’s friend and known to be an agent of MMPCI, her declarations and actions alone are not sufficient to establish the fact or extent of her authority.[43] Atty. Linsangan as a practicing lawyer for a relatively long period of time when he signed the contract should have been put on guard when their agreement was not reflected in the contract.  More importantly, Atty. Linsangan should have been alerted by the fact that Baluyot failed to effect the transfer of rights earlier promised, and was unable to make good her written commitment, nor convince MMPCI to assent thereto, as evidenced by several attempts to induce him to enter into other contracts for a higher consideration.  As properly pointed out by MMPCI, as a lawyer, a greater degree of caution should be expected of Atty. Linsangan especially in dealings involving legal documents. He did not even bother to ask for official receipts of his payments, nor inquire from MMPCI directly to ascertain the real status of the contract, blindly relying on the representations of Baluyot.  A lawyer by profession, he knew what he was doing when he signed the written contract, knew the meaning and value of every word or phrase used in the contract, and more importantly, knew the legal effects which said document produced. He is bound to accept responsibility for his negligence.

The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial court, MMPCI’s acts of accepting and encashing the checks issued by Atty. Linsangan as well as allowing Baluyot to receive checks drawn in the name of MMPCI confirm and ratify the contract of agency.  On the other hand, the Court of Appeals faulted MMPCI in failing to adopt measures to prevent misrepresentation, and declared that in view of MMPCI’s acceptance of the benefits of Baluyot’s misrepresentation, it can no longer deny responsibility therefor.

The Court does not agree.  Pertinent to this case are the following provisions of the Civil Code:

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal’s ratification.

Art. 1910.  The principal must comply with all the obligations that the agent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.

Art. 1911.  Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.

Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them, expressly or impliedly.  Only the principal can ratify; the agent cannot ratify his own unauthorized acts.  Moreover, the principal must have knowledge of the acts he is to ratify.[44]

Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.  The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to act as agent.  Thus, if material facts were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless of the parties between whom the question of ratification may arise.[45] Nevertheless, this principle does not apply if the principal’s ignorance of the material facts and circumstances was willful, or that the principal chooses to act in ignorance of the facts.[46] However, in the absence of circumstances putting a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is ignorant of the facts.[47]

No ratification can be implied in the instant case.

A perusal of Baluyot’s Answer[48] reveals that the real arrangement between her and Atty. Linsangan was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to shoulder the counterpart amount of P1,455.00 to meet the P3,255.00 monthly installments as indicated in the contract.  Thus, every time an installment falls due, payment was to be made through a check from Atty. Linsangan for P1,800.00 and a cash component of P1,455.00 from Baluyot.[49] However, it appears that while Atty. Linsangan issued the post-dated checks, Baluyot failed to come up with her part of the bargain.  This was supported by Baluyot’s statements in her

letter[50] to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after she received the copy of the Complaint.  In the letter, she admitted that she was remiss in her duties when she consented to Atty. Linsangan’s proposal that he will pay the old price while the difference will be shouldered by her.  She likewise admitted that the contract suffered arrearages because while Atty. Linsangan issued the agreed checks, she was unable to give her share of P1,455.00 due to her own financial difficulties. Baluyot even asked for compassion from MMPCI for the error she committed.

Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI is concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty. Linsangan and MMPCI’s authorized officer. The down payment of P19,838.00 given by Atty. Linsangan was in accordance with the contract as well.  Payments of P3,235.00 for at least two installments were likewise in accord with the contract, albeit made through a check and partly in cash.  In view of Baluyot’s failure to give her share in the payment, MMPCI received only P1,800.00 checks, which were clearly insufficient payment. In fact, Atty. Linsangan would have incurred arrearages that could have caused the earlier cancellation of the contract, if not for MMPCI’s application of some of the checks to his account.  However, the checks alone were not sufficient to cover his obligations.

If MMPCI was aware of the arrangement, it would have refused the latter’s check payments for being insufficient.  It would not have applied to his account theP1,800.00 checks.  Moreover, the fact that Baluyot had to practically explain to MMPCI’s Sales Manager the details of her “arrangement” with Atty. Linsangan and admit to having made an error in entering such arrangement confirm that MMCPI had no knowledge of the said agreement.  It was only when Baluyot filed her Answer that she claimed that MMCPI was fully aware of the agreement.

Neither is there estoppel in the instant case.  The essential elements of estoppel are (i) conduct of a party amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (iii) knowledge, actual or constructive, of the real facts.[51]

While there is no more question as to the agency relationship between Baluyot and MMPCI, there is no indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the authority to alter the standard contracts of the company. Neither is there any showing that prior to signing Contract No. 28660, MMPCI had any knowledge of Baluyot’s commitment to Atty. Linsangan.  One who claims the benefit of an estoppel on the ground that he has been misled by the representations of another must not have been misled through his own want of reasonable care and

circumspection.[52] Even assuming that Atty. Linsangan was misled by MMPCI’s actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent in his dealings with Baluyot, and could have easily determined, had he only been cautious and prudent, whether said agent was clothed with the authority to change the terms of the principal’s written contract. Estoppel must be intentional and unequivocal, for when misapplied, it can easily become a most convenient and effective means of injustice.[53] In view of the lack of sufficient proof showing estoppel, we refuse to hold MMPCI liable on this score.

Likewise, this Court does not find favor in the Court of Appeals’ findings that “the authority of defendant Baluyot may not have been expressly conferred upon her; however, the same may have been derived impliedly by habit or custom which may have been an accepted practice in their company in a long period of time.”   A perusal of the records of the case fails to show any indication that there was such a habit or custom in MMPCI that allows its agents to enter into agreements for lower prices of its interment spaces, nor to assume a portion of the purchase price of the interment spaces sold at such lower price.  No evidence was ever presented to this effect.

As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660 between MMPCI and by Atty. Linsangan for the purchase of an interment space in the former’s cemetery.  The other is the agreement between Baluyot and Atty. Linsangan for the former to shoulder the amount P1,455.00, or the difference between P95,000.00, the original price, and P132,250.00, the actual contract price.

To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same.  It also bears emphasis that when the third person knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent.  If the said third person was aware of such limits of authority, he is to blame and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s ratification.[54]

This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty. Linsangan.  By affixing his signature in the contract, Atty. Linsangan assented to the terms and conditions thereof.  When Atty. Linsangan incurred delinquencies in payment, MMCPI merely enforced its rights under the said contract by canceling the same.

Being aware of the limits of Baluyot’s authority, Atty. Linsangan cannot insist on what he claims to be the terms of Contract No. 28660.  The agreement, insofar as the P95,000.00 contract price is concerned, is void and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable for damages under the same contract, since there is no evidence showing that Baluyot undertook to secure MMPCI’s ratification.  At best, the “agreement” between Baluyot and Atty. Linsangan bound only the two of

them.  As far as MMPCI is concerned, it bound itself to sell its interment space to Atty. Linsangan for P132,250.00 under Contract No. 28660, and had in fact received several payments in accordance with the same contract. If the contract was cancelled due to arrearages, Atty. Linsangan’s recourse should only be against Baluyot who personally undertook to pay the difference between the true contract price of P132,250.00 and the original proposed price of P95,000.00. To surmise that Baluyot was acting on behalf of MMPCI when she promised to shoulder the said difference would be to conclude that MMPCI undertook to pay itself the difference, a conclusion that is very illogical, if not antithetical to its business interests.

However, this does not preclude Atty. Linsangan from instituting a separate action to recover damages from Baluyot, not as an agent of MMPCI, but in view of the latter’s breach of their separate agreement.  To review, Baluyot obligated herself to pay P1,455.00 in addition to Atty. Linsangan’s P1,800.00 to complete the monthly installment payment under the contract, which, by her own admission, she was unable to do due to personal financial difficulties.  It is undisputed that Atty. Linsangan issued the P1,800.00 as agreed upon, and were it not for Baluyot’s failure to provide the balance, Contract No. 28660 would not have been cancelled.  Thus, Atty. Linsangan has a cause of action against Baluyot, which he can pursue in another case.

WHEREFORE, the instant petition is GRANTED.  The Decision of the Court of Appeals dated 22 June 2001 and its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the Decision in Civil Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause of action. No pronouncement as to costs.

SO ORDERED.

WOODCHILD HOLDINGS, INC.,                G.R. No. 140667                                  Petitioner,

                                             Present:                                                                                               PUNO, J., Chairman,                                                                             AUSTRIA-MARTINEZ,                  -   versus   -                                         CALLEJO, SR.,                                                                             TINGA, and

CHICO-NAZARIO, JJ.

  ROXAS ELECTRIC AND                             Promulgated:CONSTRUCTION COMPANY, INC.,                                  Respondent.                        August 12, 2004

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

D E C I S I O N  CALLEJO, SR., J.:  

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

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

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

petitioner. 

The Antecedents 

          The respondent Roxas Electric and Construction Company, Inc.

(RECCI), formerly the Roxas Electric and Construction Company, was the 

owner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered by

Transfer Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2

covered by TCT No. 78086.  A portion of Lot No. 491-A-3-B-1 which abutted

Lot No. 491-A-3-B-2 was a dirt road accessing to the Sumulong Highway,

Antipolo, Rizal. 

At a special meeting on May 17, 1991, the respondent’s Board of

Directors approved a resolution authorizing the corporation, through its

president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 covered by TCT No.

78086, with an area of 7,213 square meters, at a price and under such terms

and conditions which he deemed most reasonable and advantageous to the

corporation; and to execute, sign and deliver the pertinent sales documents

and receive the proceeds of the sale for and on behalf of the company.[3]

 

Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No.

491-A-3-B-2 covered by TCT No. 78086 on which it planned to construct its

warehouse building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1,

so that its 45-foot container van would be able to readily enter or leave the

property.  In a Letter to Roxas dated June 21, 1991, WHI President Jonathan

Y. Dy offered to buy Lot No. 491-A-3-B-2 under stated terms and conditions

forP1,000 per square meter or at the price of P7,213,000.[4]  One of the terms

incorporated in Dy’s offer was the following provision: 

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

 

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

deed.  Less than a month later or on July 1, 1991, Roxas, as President of

RECCI, as vendor, and Dy, as President of WHI, as vendee, executed a

contract to sell in which RECCI bound and obliged itself to sell to Dy Lot No.

491-A-3-B-2 covered by TCT No. 78086 for P7,213,000.[6]  On September 5,

1991, a Deed of Absolute Sale[7] in favor of WHI was issued, under which Lot

No. 491-A-3-B-2 covered by TCT No. 78086 was sold for P5,000,000, receipt

of which was acknowledged by Roxas under the following terms and

conditions: 

            The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the beneficial use of and a right of way from Sumulong Highway to the property herein conveyed consists of 25 square meters wide to be used as the latter’s egress from and ingress to and an additional 25 square meters in the corner of Lot No. 491-A-3-B-1, as turning and/or maneuvering area for Vendee’s vehicles.             The Vendor agrees that in the event that the right of way is insufficient for the Vendee’s use (ex entry of a 45-foot container) the Vendor agrees to sell additional square meters from its current adjacent property to allow the Vendee full access and full use of the property.

 …

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

 

          On September 10, 1991, the Wimbeco Builder’s, Inc. (WBI) submitted

its quotation for P8,649,000 to WHI for the construction of the warehouse

building on a portion of the property with an area of 5,088 square meters.

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

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

 

In a Letter dated September 16, 1991, Ponderosa Leather Goods

Company, Inc. confirmed its lease agreement with WHI of a 5,000-square-

meter portion of the warehouse yet to be constructed at the rental rate of P65

per square meter.  Ponderosa emphasized the need for the warehouse to be

ready for occupancy before April 1, 1992.[11]  WHI accepted the

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

in October 1, 1991 as planned because of the presence of squatters in the

property and suggested a renegotiation of the contract after the squatters

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

property. 

On March 31, 1992, WHI and WBI executed a Letter-Contract for the

construction of the warehouse building for P11,804,160.[13]  The contractor

started construction in April 1992 even before the building officials of Antipolo

City issued a building permit on May 28, 1992.  After the warehouse was

finished, WHI issued on March 21, 1993 a certificate of occupancy by the

building official.  Earlier, or on March 18, 1993, WHI, as lessor, and

Ponderosa, as lessee, executed a contract of lease over a portion of the

property for a monthly rental of P300,000 for a period of three years from

March 1, 1993 up to February 28, 1996.[14]

 

In the meantime, WHI complained to Roberto Roxas that the

vehicles of RECCI were parked on a portion of the property over which WHI

had been granted a right of way.  Roxas promised to look into the matter.  Dy

and Roxas discussed the need of the WHI to buy a 500-square-meter portion

of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as provided for in the

deed of absolute sale.  However, Roxas died soon thereafter.  On April 15,

1992, the WHI wrote the RECCI, reiterating its verbal requests to purchase a

portion of the said lot as provided for in the deed of absolute sale, and

complained about the latter’s failure to eject the squatters within the three-

month period agreed upon in the said deed. 

The WHI demanded that the RECCI sell a portion of Lot No. 491-A-

3-B-1 covered by TCT No. 78085 for its beneficial use within 72 hours from

notice thereof, otherwise the appropriate action would be filed against

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

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

 

On June 17, 1992, the WHI filed a complaint against the RECCI with

the Regional Trial Court of Makati, for specific performance and damages,

and alleged, inter alia, the following in its complaint:             5.         The “current adjacent property” referred to in the aforequoted paragraph of the Deed of Absolute Sale pertains to the property covered by Transfer Certificate of Title No. N-78085 of the Registry of Deeds of Antipolo, Rizal, registered in the name of herein defendant Roxas Electric.             6.         Defendant Roxas Electric in patent violation of the express and valid terms of the Deed of Absolute Sale unjustifiably refused to deliver to Woodchild Holdings the stipulated beneficial use and right of way consisting of 25 square meters and 55 square meters to the prejudice of the plaintiff.             7.         Similarly, in as much as the 25 square meters and 55 square meters alloted to Woodchild Holdings for its beneficial use is inadequate as turning and/or maneuvering area of its 45-foot container van, Woodchild Holdings manifested its intention pursuant to para. 5 of the Deed of Sale to purchase additional square meters from Roxas Electric to allow it full access and use of the purchased property, however, Roxas Electric refused and failed to merit Woodchild Holdings’ request contrary to defendant Roxas Electric’s obligation under the Deed of Absolute Sale (Annex “A”).             8.         Moreover, defendant, likewise, failed to eject all existing squatters and occupants of the premises within the stipulated time frame and as a consequence thereof, plaintiff’s planned construction has been considerably delayed for seven (7) months due to the squatters who continue to trespass and obstruct the subject property, thereby Woodchild Holdings incurred substantial losses amounting to P3,560,000.00 occasioned by the increased cost of construction materials and labor.             9.         Owing further to Roxas Electric’s deliberate refusal to comply with its obligation under Annex “A,” Woodchild Holdings suffered unrealized income

ofP300,000.00 a month or P2,100,000.00 supposed income from rentals of the subject property for seven (7) months.             10.       On April 15, 1992, Woodchild Holdings made a final demand to Roxas Electric to comply with its obligations and warranties under the Deed of Absolute Sale but notwithstanding such demand, defendant Roxas Electric refused and failed and continue to refuse and fail to heed plaintiff’s demand for compliance.             Copy of the demand letter dated April 15, 1992 is hereto attached as Annex “B” and made an integral part hereof.             11.       Finally, on 29 May 1991, Woodchild Holdings made a letter request addressed to Roxas Electric to particularly annotate on Transfer Certificate of Title No. N-78085 the agreement under Annex “A” with respect to the beneficial use and right of way, however, Roxas Electric unjustifiably ignored and disregarded the same.             Copy of the letter request dated 29 May 1992 is hereto attached as Annex “C” and made an integral part hereof.             12.       By reason of Roxas Electric’s continuous refusal and failure to comply with Woodchild Holdings’ valid demand for compliance under Annex “A,” the latter was constrained to litigate, thereby incurring damages as and by way of attorney’s fees in the amount of P100,000.00 plus costs of suit and expenses of litigation.[15]

 

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

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

a)    to deliver to Woodchild Holdings the beneficial use of the stipulated 25 square meters and 55 square meters;

 

b)    to sell to Woodchild Holdings additional 25 and 100 square meters to allow it full access and use of the purchased property pursuant to para. 5 of the Deed of Absolute Sale;

 c)    to cause annotation on Transfer

Certificate of Title No. N-78085 the beneficial use and right of way granted to Woodchild Holdings under the Deed of Absolute Sale;

 d)    to pay Woodchild Holdings the amount

of P5,660,000.00, representing actual damages and unrealized income;

 e)    to pay attorney’s fees in the amount

of P100,000.00; and f)     to pay the costs of suit.

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

  

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

authorized its former president, Roberto Roxas, to grant the beneficial use of

any portion of Lot No. 491-A-3-B-1, nor agreed to sell any portion thereof or

create a lien or burden thereon.  It alleged that, under the Resolution

approved on May 17, 1991, it merely authorized Roxas to sell Lot No. 491-A-

3-B-2 covered by TCT No. 78086.  As such, the grant of a right of way and

the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No.

78085 in the said deed are ultra vires.  The RECCI further alleged that the

provision therein that it would sell a portion of Lot No. 491-A-3-B-1 to the

WHI lacked the essential elements of a binding contract.[17]

 

In its amended answer to the complaint, the RECCI alleged that the

delay in the construction of its warehouse building was due to the failure of

the WHI’s contractor to secure a building permit thereon.[18]

 

During the trial, Dy testified that he told Roxas that the petitioner was

buying a portion of Lot No. 491-A-3-B-1 consisting of an area of 500 square

meters, for the price of P1,000 per square meter. 

On November 11, 1996, the trial court rendered judgment in favor of

the WHI, the decretal portion of which reads: 

WHEREFORE, judgment is hereby rendered directing defendant:

             (1)        To allow plaintiff the beneficial use of the existing right of way plus the stipulated 25 sq. m. and 55 sq. m.;             (2)        To sell to plaintiff an additional area of 500 sq. m. priced at P1,000 per sq. m. to allow said plaintiff full access and use of the purchased property pursuant to Par. 5 of their Deed of Absolute Sale;             (3)        To cause annotation on TCT No. N-78085 the beneficial use and right of way granted by their Deed of Absolute Sale;             (4)        To pay plaintiff the amount of P5,568,000 representing actual damages and plaintiff’s unrealized income;             (5)        To pay plaintiff P100,000 representing attorney’s fees; and

 To pay the costs of suit. SO ORDERED.[19]

 

The trial court ruled that the RECCI was estopped from disowning

the apparent authority of Roxas under the May 17, 1991 Resolution of its

Board of Directors.  The court reasoned that to do so would prejudice the

WHI which transacted with Roxas in good faith, believing that he had the

authority to bind the WHI relating to the easement of right of way, as well as

the right to purchase a portion of Lot No. 491-A-3-B-1 covered by TCT No.

78085. 

The RECCI appealed the decision to the CA, which rendered a

decision on November 9, 1999 reversing that of the trial court, and ordering

the dismissal of the complaint.  The CA ruled that, under the resolution of the

Board of Directors of the RECCI, Roxas was merely authorized to sell Lot

No. 491-A-3-B-2 covered by TCT No. 78086, but not to grant right of way in

favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to grant an option

to the petitioner to buy a portion thereof.  The appellate court also ruled that

the grant of a right of way and an option to the respondent were so lopsided

in favor of the respondent because the latter was authorized to fix the

location as well as the price of the portion of its property to be sold to the

respondent.  Hence, such provisions contained in the deed of absolute sale

were not binding on the RECCI.  The appellate court ruled that the delay in

the construction of WHI’s warehouse was due to its fault. 

The Present Petition

 

 

The petitioner now comes to this Court asserting that:

 I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ABSOLUTE SALE (EXH. “C”) IS ULTRA VIRES. 

II.THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A QUO ALLOWING THE PLAINTIFF-APPELLEE THE BENEFICIAL USE OF THE EXISTING RIGHT OF WAY PLUS THE STIPULATED 25 SQUARE METERS AND 55 SQUARE METERS BECAUSE THESE ARE VALID STIPULATIONS AGREED BY BOTH PARTIES TO THE DEED OF ABSOLUTE SALE (EXH. “C”). 

III.THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT OF APPEALS TO RULE THAT THE STIPULATIONS OF THE DEED OF ABSOLUTE SALE (EXH. “C”) WERE DISADVANTAGEOUS TO THE APPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS. 

IV.IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF PROPERTY WITHOUT DUE PROCESS BY THE ASSAILED DECISION. 

V.THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE APPELLANT TO EVICT THE SQUATTERS ON THE LAND AS AGREED IN THE DEED OF ABSOLUTE SALE (EXH. “C”). 

VI.THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A QUO DIRECTING THE DEFENDANT TO PAY THE PLAINTIFF THE AMOUNT OF P5,568,000.00 REPRESENTING ACTUAL DAMAGES AND PLAINTIFF’S UNREALIZED INCOME AS WELL AS ATTORNEY’S FEES.[20]

  

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

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

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

No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the option

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

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

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

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

petitioner for damages. 

          On the first issue, the petitioner avers that, under its Resolution of May

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

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

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

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

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

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

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

public highway.  The petitioner asserts that it agreed to buy the property

covered by TCT No. 78085 because of the grant by the respondent of a right

of way and an option in its favor to buy a portion of the property covered by

TCT No. 78085.  It contends that the respondent never objected to Roxas’

acceptance of its offer to purchase the property and the terms and conditions

therein; the respondent even allowed Roxas to execute the deed of absolute

sale in its behalf.  The petitioner asserts that the respondent even received

the purchase price of the property without any objection to the terms and

conditions of the said deed of sale.  The petitioner claims that it acted in good

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

respondent is estopped from assailing its terms and conditions.  The

petitioner notes that the respondent’s Board of Directors never approved any

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

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

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

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

and 651 of the New Civil Code. 

          For its part, the respondent posits that Roxas was not so authorized

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

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

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

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

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

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

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

specific portion and area to be purchased by the petitioner. 

          We agree with the respondent. 

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

[21] we held that: 

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

            “SEC. 23.  The Board of Directors or Trustees. – Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall

be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year and until their successors are elected and qualified.”

 Indubitably, a corporation may act only through its

board of directors or, when authorized either by its by-laws or by its board resolution, through its officers or agents in the normal course of business.  The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. …[22]

 

          Generally, the acts of the corporate officers within the scope of their

authority are binding on the corporation.  However, under Article 1910 of the

New Civil Code, acts done by such officers beyond the scope of their

authority cannot bind the corporation unless it has ratified such acts

expressly or tacitly, or is estopped from denying them: 

            Art. 1910.  The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.             As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.

 

Thus, contracts entered into by corporate officers beyond the scope

of authority are unenforceable against the corporation unless ratified by the

corporation.[23]

 

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

persons dealing with an assumed agency, whether the assumed agency be a

general or special one, are bound at their peril, if they would hold the

principal liable, to ascertain not only the fact of agency but also the nature

and extent of authority, and in case either is controverted, the burden of proof

is upon them to establish it. 

          In this case, the respondent denied authorizing its then president

Roberto B. Roxas to sell a portion of Lot No. 491-A-3-B-1 covered by TCT

No. 78085, and to create a lien or burden thereon.  The petitioner was thus

burdened to prove that the respondent so authorized Roxas to sell the same

and to create a lien thereon. 

          Central to the issue at hand is the May 17, 1991 Resolution of the

Board of Directors of the respondent, which is worded as follows: 

            RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any interested buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo, Rizal, covered by Transfer Certificate of Title No. N-78086, at a price and on terms and conditions which he deems most reasonable and advantageous to the corporation;             FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be, as he is hereby authorized to execute, sign and deliver the pertinent sales documents and receive the proceeds of sale for and on behalf of the company.[25]

  

          Evidently, Roxas was not specifically authorized under the said

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

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

authority of Roxas, under the resolution, to sell Lot No. 491-A-3-B-2 covered

by TCT No. 78086 did not include the authority to sell a portion of the

adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights

thereon.  Neither may such authority be implied from the authority granted to

Roxas to sell Lot No. 491-A-3-B-2 to the petitioner “on such terms and

conditions which he deems most reasonable and advantageous.”  Under

paragraph 12, Article 1878 of the New Civil Code, a special power of attorney

is required to convey real rights over immovable property.[26]  Article 1358 of

the New Civil Code requires that contracts which have for their object the

creation of real rights over immovable property must appear in a public

document.[27]  The petitioner cannot feign ignorance of the need for Roxas to

have been specifically authorized in writing by the Board of Directors to be

able to validly grant a right of way and agree to sell a portion of Lot No. 491-

A-3-B-1.  The rule is that if the act of the agent is one which requires

authority in writing, those dealing with him are charged with notice of that

fact.[28]

 

Powers of attorney are generally construed strictly and courts will not

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

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

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

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

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

of the respondent to the assailed provisions in the deed of absolute sale was

not obtained; hence, the assailed provisions are not binding on it. 

We reject the petitioner’s submission that, in allowing Roxas to

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

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

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

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

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

required under the statement of frauds.[31]  In addition, the petitioner’s fallacy

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

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

sale when Roxas executed it. 

It bears stressing that apparent authority is based on estoppel and

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

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

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

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

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

has such authority.[32]  There can be no apparent authority of an agent

without acts or conduct on the part of the principal and such acts or conduct

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

allowed him to do so. 

The petitioner’s contention that by receiving and retaining

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

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

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

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

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

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

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

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

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

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

[36]  Ratification is based on waiver – the intentional relinquishment  of a

known right.  Ratification cannot be inferred from acts that a principal has a

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

writing is required to grant an authority to do a particular act, ratification of

that act must also be in writing.[37]  Since the respondent had not ratified the

unauthorized acts of Roxas, the same are unenforceable.[38]  Hence, by the

respondent’s retention of the amount, it cannot thereby be implied that it had

ratified the unauthorized acts of its agent, Roberto Roxas. 

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

dismissing its complaint for damages against the respondent on its finding

that the delay in the construction of its warehouse was due to its (petitioner’s)

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

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

from the property on or before September 29, 1991; hence, was liable

for P5,660,000.  The respondent, for its part, asserts that the delay in the

construction of the petitioner’s warehouse was due to its late filing of an

application for a building permit, only on May 28, 1992. 

The petitioner’s contention is meritorious.  The respondent does not

deny that it failed to cause the eviction of the squatters on or before

September 29, 1991.  Indeed, the respondent does not deny the fact that

when the petitioner wrote the respondent demanding that the latter cause the

eviction of the squatters on April 15, 1992, the latter were still in the

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

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

for the petitioner’s contractor to commence the construction of its warehouse

and secure the appropriate building permit therefor. 

The petitioner could not be expected to file its application for a

building permit before April 1992 because the squatters were still occupying

the property.  Because of the respondent’s failure to cause their eviction as

agreed upon, the petitioner’s contractor failed to commence the construction

of the warehouse in October 1991 for the agreed price of P8,649,000.  In the

meantime, costs of construction materials spiraled.  Under the construction

contract entered into between the petitioner and the contractor, the petitioner

was obliged to pay P11,804,160,[39] including the additional work

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

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

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

reads:

 Art. 1170.  Those who in the performance of their

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

 

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

unearned income from the lease of the property to the Ponderosa Leather

Goods Company.  The respondent is, thus, liable to the petitioner for the said

amount, under Articles 2200 and 2201 of the New Civil Code: 

Art. 2200.  Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain.

 Art. 2201.  In contracts and quasi-contracts, the

damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

 In case of fraud, bad faith, malice or wanton attitude,

the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.  

In sum, we affirm the trial court’s award of damages and attorney’s

fees to the petitioner. 

IN LIGHT OF ALL THE FOREGOING, judgment is hereby

rendered AFFIRMING the assailed Decision of the Court of Appeals WITH

MODIFICATION.  The respondent is ordered to pay to the petitioner the

amount of P5,612,980 by way of actual damages and P100,000 by way of

attorney’s fees.  No costs.           SO ORDERED.

RURAL BANK OF MILAOR (CAMARINES SUR), petitioner, vs.FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO, FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON OCFEMIA, respondents.

PANGANIBAN, J.:

When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an acquired asset in the normal course of business, it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the property in their names. It has a duty to perform necessary and lawful acts to enable the other parties to enjoy all benefits of the contract which it had authorized.

The Case

Before this Court is a Petition for Review on Certiorari challenging the December 18, 1998 Decision of the Court of Appeals 1 (CA) in CA-GR SP No. 46246, which affirmed the May 20, 1997 Decision 2 of the Regional Trial Court (RTC) of Naga City (Branch 28). The CA disposed as follows:

Wherefore, premises considered, the Judgment appealed from is hereby AFFIRMED. Costs against the respondent-appellant. 3

The dispositive portion of the judgment affirmed by the CA ruled in this wise:

WHEREFORE, in view of all the foregoing findings, decision is hereby rendered whereby the [petitioner] Rural Bank of Milaor (Camarines Sur), Inc. through its Board of Directors is hereby ordered to immediately issue a Board Resolution confirming the Deed of Sale it executed in favor of Renato Ocfemia marked Exhibits C, C-1 and C-2); to pay [respondents] the sum of FIVE HUNDRED (P500.00) PESOS as actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees; THIRTY THOUSAND (P30,000.00) PESOS as moral damages; THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages; and to pay the costs. 4

Also assailed is the February 26, 1999 CA Resolution 5 which denied petitioner's Motion for Reconsideration.

The Facts

The trial court's summary of the undisputed facts was reproduced in the CA Decision as follows:

This is an action for mandamus with damages. On April 10, 1996, [herein petitioner] was declared in default on motion of the [respondents] for failure to file an answer within the reglementary-period after it was duly served with summons. On April 26, 1996, [herein petitioner] filed a motion to set aside the order of default with objection thereto filed by [herein respondents].

On June 17, 1996, an order was issued denying [petitioner's] motion to set aside the order of default. On July 10, 1996, the defendant filed a motion for reconsideration of the order of June 17, 1996 with objection thereto by [respondents]. On July 12, 1996, an order was issued denying [petitioner's] motion for reconsideration. On July 31, 1996, [respondents] filed a motion to set case for hearing. A copy thereof was duly furnished the [petitioner] but the latter did not file any opposition and so [respondents] were allowed to present their evidence ex-parte. A certiorari case was filed by the [petitioner] with the Court of Appeals docketed as CA GR No. 41497-SP but the petition was denied in a decision rendered on March 31, 1997 and the same is now final.

The evidence presented by the [respondents] through the testimony of Marife O. Niño, one of the [respondents] in this case, show[s] that she is the daughter of Francisca Ocfemia, a co-[respondent] in this case, and the late Renato Ocfemia who died on July 23, 1994. The parents of her father, Renato Ocfemia, were Juanita Arellano Ocfemia and Felicisimo Ocfemia. Her other co-[respondents] Rowena O. Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her brothers and sisters.1âwphi1.nêt

Marife O. Niño knows the five (5) parcels of land described in paragraph 6 of the petition which are located in Bombon, Camarines Sur and that they are the ones possessing them which [were] originally owned by her grandparents, Juanita Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her grandparents, [respondents] mortgaged the said five (5) parcels of land and two (2) others to the [petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage (Exhs. A and A-1) and the Promissory Note (Exh. B).

The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged properties consisting of seven (7) parcels of land and so the mortgage was foreclosed and thereafter

ownership thereof was transferred to the [petitioner] bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are in the possession of the [respondents] because these five (5) parcels of land described in paragraph 6 of the petition were sold by the [petitioner] bank to the parents of Marife O. Niño as evidenced by a Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).

The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C), have not been, however transferred in the name of the parents of Merife O. Niño after they were sold to her parents by the [petitioner] bank because according to the Assessor's Office the five (5) parcels of land, subject of the sale, cannot be transferred in the name of the buyers as there is a need to have the document of sale registered with the Register of Deeds of Camarines Sur.

In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines Sur with the Deed of Sale (Exh. C) in order to have the same registered. The Register of Deeds, however, informed her that the document of sale cannot be registered without a board resolution of the [petitioner] Bank. Marife Niño then went to the bank, showed to if the Deed of Sale (Exh. C), the tax declaration and receipt of tax payments and requested the [petitioner] for a board resolution so that the property can be transferred to the name of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father of the other [respondents] having died already.

The [petitioner] bank refused her request for a board resolution and made many alibi[s]. She was told that the [petitioner] bank ha[d] a new manager and it had no record of the sale. She was asked and she complied with the request of the [petitioner] for a copy of the deed of sale and receipt of payment. The president of the [petitioner] bank told her to get an authority from her parents and other [respondents] and receipts evidencing payment of the consideration appearing in the deed of sale. She complied with said requirements and after she gave all these documents, Marife O. Niño was again told to wait for two (2) weeks because the [petitioner] bank would still study the matter.

After two (2) weeks, Marife O. Niño returned to the [petitioner] bank and she was told that the resolution of the board would not be released because the [petitioner] bank ha[d] no records from the old manager. Because of this, Marife O. Niño brought the matter to her lawyer and the latter wrote a letter on December 22, 1995 to the [petitioner] bank inquiring why no action was taken by the board of the request for the issuance of the resolution considering that the

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

On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter (Exh. D and D-1) informing the latter that the request for board resolution ha[d] already been referred to the board of directors of the [petitioner] bank with another request that the latter should be furnished with a certified machine copy of the receipt of payment covering the sale between the [respondents] and the [petitioner] (Exh. E). This request of the [petitioner] bank was already complied [with] by Marife O. Niño even before she brought the matter to her lawyer.

On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the [petitioner] bank informing the latter that they were already furnished the receipts the bank was asking [for] and that the [respondents] want[ed] already to know the stand of the bank whether the board [would] issue the required board resolution as the deed of sale itself already show[ed] that the [respondents were] clearly entitled to the land subject of the sale (Exh. F). The manager of the [petitioner] bank received the letter which was served personally to him and the latter told Marife O. Niño that since he was the one himself who received the letter he would not sign anymore a copy showing him as having already received said letter (Exh. F).

After several days from receipt of the letter (Exh. F) when Marife O. Niño went to the [petitioner] again and reiterated her request, the manager of the [petitioner] bank told her that they could not issue the required board resolution as the [petitioner] bank ha[d] no records of the sale. Because of this Merife O. Niño already went to their lawyer and ha[d] this petition filed.

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

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

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

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

Ruling of the Court of Appeals

The CA held that herein respondents were "able to prove their present cause of action" against petitioner. It ruled that the RTC had jurisdiction over the case, because (1) the Petition involved a matter incapable of pecuniary estimation; (2) mandamus fell within the jurisdiction of RTC; and (3) assuming that the action was for specific performance as argued by the petitioner, it was still cognizable by the said court.

Issues

In its Memorandum, 9 the bank posed the following questions:

1. Question of Jurisdiction of the Regional Trial Court. — Has a Regional Trial Court original jurisdiction over an action involving title to real property with a total assessed value of less than P20,000.00?

2. Question of Law. — May the board of directors of a rural banking corporation be compelled to confirm a deed of absolute sale of real property owned by the corporation which deed of sale was executed by the bank manager without prior authority of the board of directors of the rural banking corporation? 10

This Court's Ruling

The present Petition has no merit.

First Issue:Jurisdiction of the Regional Trial Court

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

should have been filed before a metropolitan trial court, a municipal trial court or a municipal circuit trial court.

We disagree. The well-settled rule is that jurisdiction is determined by the allegations of the complaint. 11 In the present case, the Petition for Mandamus filed by respondents before the trial court prayed that petitioner-bank be compelled to issue a board resolution confirming the Deed of Sale covering five parcels of unregistered land, which the bank manager had executed in their favor. The RTC has jurisdiction over such action pursuant to Section 21 of BP 129, which provides:

Sec. 21. Original jurisdiction in other cases. — Regional Trial Courts shall exercise original jurisdiction;

(1) in the issuance of writ of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction which may be enforced in any part of their respective regions; and

(2) In actions affecting ambassadors and other public ministers and consuls.

A perusal of the Petition shows that the respondents did not raise any question involving the title to the property, but merely asked that petitioner's board of directors be directed to issue the subject resolution. Moreover, the bank did not controvert the allegations in the said Petition. To repeat, the issue therein was not the title to the property; it was respondents' right to compel the bank to issue a board resolution confirming the Deed of Sale.

Second Issue:Authority of the Bank Manager

Respondents initiated the present proceedings, so that they could transfer to their names the subject five parcels of land; and subsequently, to mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother. For the property to be transferred in their names, however, the register of deeds required the submission of a board resolution from the bank confirming both the Deed of Sale and the authority of the bank manager, Fe S. Tena, to enter into such transaction. Petitioner refused. After being given the runaround by the bank, respondents sued in exasperation.

Allegations in the Petition for Mandamus Deemed Admitted

Respondents based their action before the trial court on the Deed of Sale, the substance of which was alleged in and a copy thereof was attached to the Petition for Mandamus. The Deed named Fe S. Tena as the

representative of the bank. Petitioner, however, failed to specifically deny under oath the allegations in that contract. In fact, it filed no answer at all, for which reason it was declared in default. Pertinent provisions of the Rules of Court read:

Sec. 7. Action or defense based on document. — Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

Sec. 8. How to contest genuineness of such documents.— When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but this provision does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. 12

In failing to file its answer specifically denying under oath the Deed of Sale, the bank admitted the due execution of the said contract. Such admission means that it acknowledged that Tena was authorized to sign the Deed of Sale on its behalf. 13 Thus, defenses that are inconsistent with the due execution and the genuineness of the written instrument are cut off by an admission implied from a failure to make a verified specific denial.

Other Acts of the Bank

In any event, the bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes due thereon. If the bank management believed that it had title to the property, it should have taken some measures to prevent the infringement or invasion of its title thereto and possession thereof.

Likewise, Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena, even though such agent is abusing her authority. 14 Clearly, persons dealing with her could not be blamed for

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

Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors. In varying language, existence of such authority is established, by proof of the course of business, the usages and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. So also,

. . . authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact exercised.

. . . Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business.

Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale, petitioner has failed to file an answer to the Petition below within the reglementary period, let alone present evidence controverting such authority. Indeed, when one of herein respondents, Marife S. Nino, went to the bank to ask for the board resolution, she was merely told to bring the receipts. The bank failed to categorically declare that Tena had no authority. This Court stresses the following:

. . . Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —

In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it presents itself to the third party with whom the contract is made. Naturally he can have little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the external manifestation of corporate consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability

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

In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority. 17

Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue the board resolution sought by respondent's. Having authorized her to sell the property, it behooves the bank to confirm the Deed of Sale so that the buyers may enjoy its full use.

The board resolution is, in fact, mere paper work. Nonetheless, it is paper work necessary in the orderly operations of the register of deeds and the full enjoyment of respondents' rights. Petitioner-bank persistently and unjustifiably refused to perform its legal duty. Worse, it was less than candid in dealing with respondents regarding this matter. In this light, the Court finds it proper to assess the bank treble costs, in addition to the award of damages.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. The Temporary Restraining Order issued by this Court is hereby LIFTED. Treble costs against petitioner.

SO ORDERED.

KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY," petitioner, vs.THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.

Leighton R. Siazon for petitioner.

Melanio L. Zoreta for private respondent.

 

BIDIN, J.:

This petition for review assails the decision of the respondent Court of Appeals ordering petitioner to pay private respondent, among others, the sum of P297,482.30 with interest. Said decision reversed the appealed decision of the trial court rendered in favor of petitioner.

The case involves an action for a sum of money filed by respondent against petitioner anchored on the following antecedent facts:

Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap, with places of business at Baesa, Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates, on the other hand, is a partnership duly organized and existing under the laws of the Philippines with business address at Kalookan City.

From December 4, 1979 to February 15, 1980, private respondent delivered various kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac who was then employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued nine (9) postdated checks to private respondent as payment for the paper products. Unfortunately, sad checks were later dishonored by the drawee bank.

Thereafter, private respondent made several demands upon petitioner to pay for the merchandise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned transactions with private respondent and Lilian Tan. Petitioner denied any involvement in the transaction entered into by Tiu Huy Tiac and

refused to pay private respondent the amount corresponding to the selling price of the subject merchandise.

Left with no recourse, private respondent filed an action against petitioner for the collection of P297,487.30 representing the price of the merchandise. After due hearing, the trial court dismissed the complaint against petitioner for lack of merit. On appeal, however, the decision of the trial court was modified, but was in effect reversed by the Court of Appeals, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is MODIFIED in that defendant-appellant Kue Cuison is hereby ordered to pay plaintiff-appellant Valiant Investment Associates the sum of P297,487.30 with 12% interest from the filing of the complaint until the amount is fully paid, plus the sum of 7% of the total amount due as attorney's fees, and to pay the costs. In all other respects, the decision appealed from is affirmed. (Rollo, p. 55)

In this petition, petitioner contends that:

THE HONORABLE COURT ERRED IN FINDING TIU HUY TIAC AGENT OF DEFENDANT-APPELLANT CONTRARY TO THE UNDISPUTED/ESTABLISHED FACTS AND CIRCUMSTANCES.

THE HONORABLE COURT ERRED IN FINDING DEFENDANT-APPELLANT LIABLE FOR AN OBLIGATION UNDISPUTEDLY BELONGING TO TIU HUY TIAC.

THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDED DECISION OF THE TRIAL COURT, (Rollo, p, 19)

The issue here is really quite simple — whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold the latter liable for the disputed transaction.

This petition ought to have been denied outright, forin the final analysis, it raises a factual issue. It is elementary that in petitions for review under Rule 45, this Court only passes upon questions of law. An exception thereto occurs where the findings of fact of the Court of Appeals are at variance with the trial court, in which case the Court reviews the evidence in order to arrive at the correct findings based on the records.

As to the merits of the case, it is a well-established rule that one who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be (Macke, et al, v. Camps, 7 Phil. 553 (1907]; Philippine National Bank. v Court of Appeals, 94 SCRA 357 [1979]). From the facts and the evidence on record, there is no doubt that this rule obtains. The petition must therefore fail.

It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo, Binondo, Manila. More particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva, respondent's manager, as his (petitioner's) branch manager as testified to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the manager of petitioner's Sto. Cristo, Binondo branch. This general perception of Tiu Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the fact that Tiu Huy Tiac is known in the community to be the "kinakapatid" (godbrother) of petitioner. In fact, even petitioner admitted his close relationship with Tiu Huy Tiac when he said that they are "like brothers" (Rollo, p. 54). There was thus no reason for anybody especially those transacting business with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the Sto. Cristo Binondo branch.

In a futile attempt to discredit Villanueva, petitioner alleges that the former's testimony is clearly self-serving inasmuch as Villanueva worked for private respondent as its manager.

We disagree, The argument that Villanueva's testimony is self-serving and therefore inadmissible on the lame excuse of his employment with private respondent utterly misconstrues the nature of "'self-serving evidence" and the specific ground for its exclusion. As pointed out by this Court in Co v. Court of Appeals et, al., (99 SCRA 321 [1980]):

Self-serving evidence is evidence made by a party out of court at one time; it does not include a party's testimony as a witness in court. It is excluded on the same ground as any hearsay evidence, that is the lack of opportunity for cross-examination by the adverse party, and on the consideration that its admission would open the door to fraud and to fabrication of testimony. On theother hand, a party's testimony in court is sworn and affords the other party the opportunity for cross-examination (emphasis supplied)

Petitioner cites Villanueva's failure, despite his commitment to do so on cross-examination, to produce the very first invoice of the transaction between petitioner and private respondent as another ground to discredit Villanueva's testimony. Such failure, proves that Villanueva was not only bluffing when he pretended that he can produce the invoice, but that Villanueva was likewise prevaricating when he insisted that such prior transactions actually took place. Petitioner is mistaken. In fact, it was petitioner's counsel himself who withdrew the reservation to have Villanueva produce the document in court. As aptly observed by the Court of Appeals in its decision:

. . . However, during the hearing on March 3, 1981, Villanueva failed to present the document adverted to because defendant-appellant's counsel withdrew his reservation to have the former (Villanueva) produce the document or invoice, thus prompting plaintiff-appellant to rest its case that same day (t.s.n., pp. 39-40, Sess. of March 3, 1981). Now, defendant-appellant assails the credibility of Villanueva for having allegedly failed to produce even one single document to show that plaintiff-appellant have had transactions before, when in fact said failure of Villanueva to produce said document is a direct off-shoot of the action of defendant-appellant's counsel who withdrew his reservation for the production of the document or invoice and which led plaintiff-appellant to rest its case that very day. (Rollo, p.52)

In the same manner, petitioner assails the credibility of Lilian Tan by alleging that Tan was part of an intricate plot to defraud him. However, petitioner failed to substantiate or prove that the subject transaction was designed to defraud him. Ironically, it was even the testimony of petitioner's daughter and assistant manager Imelda Kue Cuison which confirmed the credibility of Tan as a witness. On the witness stand, Imelda testified that she knew for a fact that prior to the transaction in question, Tan regularly transacted business with her father (petitioner herein), thereby corroborating Tan's testimony to the same effect. As correctly found by the respondent court, there was no logical explanation for Tan to impute liability upon petitioner. Rather, the testimony of Imelda Kue Cuison only served to add credence to Tan's testimony as regards the transaction, the liability for which petitioner wishes to be absolved.

But of even greater weight than any of these testimonies, is petitioner's categorical admission on the witness stand that Tiu Huy Tiac was the manager of his store in Sto. Cristo, Binondo, to wit:

Court:

xxx xxx xxx

Q And who was managing the store in Sto. Cristo?

A At first it was Mr. Ang, then later Mr. Tiu Huy Tiac but I cannot remember the exact year.

Q So, Mr. Tiu Huy Tiac took over the management,.

A Not that was because every afternoon, I was there, sir.

Q But in the morning, who takes charge?

A Tiu Huy Tiac takes charge of management and if there (sic) orders for newsprint or bond papers they are always referred to the compound in Baesa, sir. (t.s.n., p. 16, Session of January 20, 1981, CA decision, Rollo, p. 50, emphasis supplied).

Such admission, spontaneous no doubt, and standing alone, is sufficient to negate all the denials made by petitioner regarding the capacity of Tiu Huy Tiac to enter into the transaction in question. Furthermore, consistent with and as an obvious indication of the fact that Tiu Huy Tiac was the manager of the Sto. Cristo branch, three (3) months after Tiu Huy Tiac left petitioner's employ, petitioner even sent, communications to its customers notifying them that Tiu Huy Tiac is no longer connected with petitioner's business. Such undertaking spoke unmistakenly of Tiu Huy Tiac's valuable position as petitioner's manager than any uttered disclaimer. More than anything else, this act taken together with the declaration of petitioner in open court amount to admissions under Rule 130 Section 22 of the Rules of Court, to wit : "The act, declaration or omission of a party as to a relevant fact may be given in evidence against him." For well-settled is the rule that "a man's acts, conduct, and declaration, wherever made, if voluntary, are admissible against him, for the reason that it is fair to presume that they correspond with the truth, and it is his fault if they do not. If a man's extrajudicial admissions are admissible against him, there seems to be no reason why his admissions made in open court, under oath, should not be accepted against him." (U.S. vs. Ching Po, 23 Phil. 578, 583 [1912];).

Moreover, petitioner's unexplained delay in disowning the transactions entered into by Tiu Huy Tiac despite several attempts made by respondent to collect the amount from him, proved all the more that petitioner was aware of the questioned commission was tantamount to an admission by silence under Rule 130 Section 23 of the Rules of Court, thus: "Any act or declaration made in the presence of and within the observation of a party who does or says nothing when the act or declaration is such as naturally to call for action or comment if not true, may be given in evidence against him."

All of these point to the fact that at the time of the transaction Tiu Huy Tiac was admittedly the manager of petitioner's store in Sto. Cristo, Binondo. Consequently, the transaction in question as well as the concomitant obligation is valid and binding upon petitioner.

By his representations, petitioner is now estopped from disclaiming liability for the transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the representations are intentional or merely negligent so long as innocent, third persons relied upon such representations in good faith and for value As held in the case of Manila Remnant Co. Inc. v. Court of Appeals, (191 SCRA 622 [1990]):

More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides:

"Even when the agent has exceeded his authority, the principal issolidarily liable with the agent if the former allowed the latter to act as though he had full powers." (Emphasis supplied).

The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the principal and the agent may be considered as joint tortfeasors whose liability is joint and solidary.

Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual knowledge of theagent's misdeed is of no moment.

Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own acts and representations to the prejudice of the other party who, in good faith, relied upon them (Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).

Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy Tiac on his behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to fact as though he had full powers (Article 1911 Civil Code), as in the case at bar.

Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner) in not turning over the proceeds of the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of his liability to private respondent. For it is an equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss (Francisco vs. Government Service Insurance System, 7 SCRA 577 [1963]).

Inasmuch as the fundamental issue of the capacity or incapacity of the purported agent Tiu Huy Tiac, has already been resolved, the Court deems it unnecessary to resolve the other peripheral issues raised by petitioner.

WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs against petitioner.

SO ORDERED.

COUNTRY BANKERS INSURANCE CORPORATION,                     Petitioner,

- versus -

KEPPEL CEBU SHIPYARD, UNIMARINE SHIPPING LINES, INC., PAUL RODRIGUEZ, PETER RODRIGUEZ, ALBERT HONTANOSAS, and BETHOVEN QUINAIN,                    Respondents.

G.R. No. 166044

Present:

LEONARDO-DE CASTRO,       Acting Chairperson,BERSAMIN,DEL CASTILLO,VILLARAMA, JR., andPERLAS-BERNABE,** 

Promulgated:

June 18, 2012

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

D E C I S I O N  LEONARDO-DE CASTRO, J.:  

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

the January 29, 2004 Decision[2] and October 28, 2004 Resolution[3] of the

Court of Appeals in CA-G.R. CV No. 58001, wherein the Court of Appeals

affirmed with modification the February 10, 1997 Decision[4] of the Regional

Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No. CBB-13447.

 

          Hereunder are the undisputed facts as culled from the records of the

case.

 

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

corporation engaged in the shipping industry, contracted the services of

Keppel Cebu Shipyard, formerly known as Cebu Shipyard and Engineering

Works, Inc. (Cebu Shipyard), for dry docking and ship repair works on its

vessel, the M/V Pacific Fortune.[5] 

 

On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to

Unimarine in consideration for its services, which amounted

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

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

agreement were embodied in Cebu Shipyard’s February 18, 1992 letter to

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

his conformity to said letter, quoted in full below:

 18 February 1992Ref No.:   LL92/0383 UNIMARINE SHIPPING LINES, INC.C/O Autographics, Inc.Gorordo Avenue, Lahug, Cebu City Attention:        Mr. Paul Rodriguez                        President/General Manager This is to confirm our agreement on the shiprepair bills charged for the repair of MV Pacific Fortune, our invoice no. 26035. The shiprepair bill (Bill No. 26035) is agreed at a negotiated amount of P3,850,000.00 excluding VAT. Unimarine Shipping Lines, Inc. (“Unimarine”) will pay the above amount of [P3,850,000.00] in US Dollars to be fixed at the prevailing USDollar to Philippine Peso exchange rate at the time of payment.  The payment terms to be extended to Unimarine is as follows: 

Installments Amount Due Date1st Installment P2,350,000.00 30 May 19922nd Installment P1,500,000.00 30 Jun 1992

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

to 120% of the value of the credit extended.  The total bond amount shall be P4,620,000.00. Yours faithfully, CEBU SHIPYARD & ENG’G WORKS, INC         Conforme:         (SGD)                                                                                         ( SGD)______                                    SEET KENG TAT                                                      PAUL RODRIGUEZTreasurer/VP-Admin.                                                  Unimarine Shipping                                                                                    Lines, Inc.[7]

  

In compliance with the agreement, Unimarine, through Paul

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

the latter’s agent, Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16)

29419[8] (the surety bond) on January 15, 1992 in the amount

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

January 15, 1993, through Endorsement No. 33152[9] (the endorsement),

which was later on attached to and formed part of the surety bond.  In

addition to this, Unimarine, on February 19, 1992, obtained another bond

from Plaridel Surety and Insurance Co. (Plaridel), PSIC Bond No. G (16)-

00365[10] in the amount of P1,620,000.00. 

 

On February 17, 1992, Unimarine executed a Contract of

Undertaking in favor of Cebu Shipyard.  The pertinent portions of the contract

read as follows:

 Messrs, Uni-Marine Shipping Lines, Inc. (“the Debtor”) of Gorordo Avenue, Cebu City hereby acknowledges that in consideration of Cebu Shipyard & Engineering Works, Inc. (“Cebu Shipyard”) at our request agreeing to release the vessel specified in part A of the Schedule (“name of vessel”) prior to the receipt of the sum specified in part B of the

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

  

          Because Unimarine failed to remit the first installment when it became

due on May 30, 1992, Cebu Shipyard was constrained to deposit the peso

check corresponding to the initial installment of P2,350,000.00.  The check,

however, was dishonored by the bank due to insufficient funds.[12]  Cebu

Shipyard faxed a message to Unimarine, informing it of the situation, and

reminding it to settle its account immediately.[13]

         

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

Unimarine, to confirm Paul Rodriguez’s promise that Unimarine will pay in full

theP3,850,000.00, in US Dollars on July 1, 1992.

 

Since Unimarine failed to deliver on the above promise, Cebu

Shipyard, on July 2, 1992, through a faxed letter, asked Unimarine if the

payment could be picked up the next day.  This was followed by another

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

of its promise to pay in full on July 28, 1992.  On August 24, 1992, Cebu

Shipyard again faxed[15] Unimarine, to inform it that interest charges will have

to be imposed on their outstanding debt, and if it still fails to pay before

August 28, 1992, Cebu Shipyard will have to enforce payment against the

sureties and take legal action.

 

On November 18, 1992, Cebu Shipyard, through its counsel, sent

Unimarine a letter,[16] demanding payment, within seven days from receipt of

the letter, the amount of P4,859,458.00, broken down as follows:

 B#26035   MV PACIFIC FORTUNE                                   4,486,052.00LESS: ADJUSTMENT:CN#00515-03/19/92                                                     (636,052.00)                                                                                    ------------------                                                                                     3,850,000.00Add: VAT on repair bill no. 26035                               385,000.00                                                                                    ------------------                                                                                    4,235,000.00Add: Interest/penalty charges:          Debit Note No. 02381                                         189,888.00          Debit Note No. 02382                                         434,570.00                                                                                    ------------------                                                                                    4,859,458.00[17]

  

          Due to Unimarine’s failure to heed Cebu Shipyard’s repeated

demands, Cebu Shipyard, through counsel, wrote the sureties CBIC[18] on

November 18, 1992, and Plaridel,[19] on November 19, 1992, to inform them

of Unimarine’s nonpayment, and to ask them to fulfill their obligations as

sureties, and to respond within seven days from receipt of the demand.

 

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

Cebu Shipyard filed a Complaint dated January 8, 1993, before the RTC,

Branch 18 of Cebu City, against Unimarine, CBIC, and Plaridel.  This was

docketed as Civil Case No. CBB-13447.   

 

          CBIC, in its Answer,[20] said that Cebu Shipyard’s complaint states no

cause of action.  CBIC alleged that the surety bond was issued by its agent,

Quinain, in excess of his authority.  CBIC claimed that Cebu Shipyard should

have doubted the authority of Quinain to issue the surety bond based on the

following:

 

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

the amount involved.

2.     The surety bond could only be issued in favor of the

Department of Public Works and Highways, as stamped on the

upper right portion of the face of the bond.[21]  This stamp was

covered by documentary stamps.

3.     The issuance of the surety bond was not reported, and the

corresponding premiums were not remitted to CBIC.[22]

 

CBIC added that its liability was extinguished when, without its

knowledge and consent, Cebu Shipyard and Unimarine novated their

agreement several times.  Furthermore, CBIC stated that Cebu Shipyard’s

claim had already been paid or extinguished when Unimarine executed an

Assignment of Claims[23]of the proceeds of the sale of its vessel M/V Headline

in favor of Cebu Shipyard.  CBIC also averred that Cebu Shipyard’s claim

had already prescribed as the endorsement that extended the surety bond’s

expiry date, was not reported to CBIC.  Finally, CBIC asseverated that if it

were held to be liable, its liability should be limited to the face value of the

bond and not for exemplary damages, attorney’s fees, and costs of litigation.

[24] 

 

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

Complaint[25] against Unimarine, as cross defendant; Paul Rodriguez, Albert

Hontanosas, and Peter Rodriguez, as signatories to the Indemnity

Agreement they executed in favor of CBIC; and Bethoven Quinain, as the

agent who issued the surety bond and endorsement in excess of his

authority, as third party defendants.[26]

 

CBIC claimed that Paul Rodriguez, Albert Hontanosas, and Peter

Rodriguez executed an Indemnity Agreement, wherein they bound

themselves, jointly and severally, to indemnify CBIC for any amount it may

sustain or incur in connection with the issuance of the surety bond and the

endorsement.[27]  As for Quinain, CBIC alleged that he exceeded his authority

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

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

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

Corporation, and other government agencies.[28]

 

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

Answer with Counterclaim, to the Cross and Third Party

Complaint.  Hontanosas claimed that he had no financial interest in

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

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

his capacity as a lawyer, being its retained counsel.  He further denied

having any participation in the Indemnity Agreement executed in favor of

CBIC, and alleged that his signature therein was forged, as he neither signed

it nor appeared before the Notary Public who acknowledged such

undertaking.[29]

 

Various witnesses were presented by the parties during the course

of the trial of the case.  Myrna Obrinaga testified for Cebu Shipyard.  She

was the Chief Accountant in charge of the custody of the documents of the

company.  She corroborated Cebu Shipyard’s allegations and produced in

court the documents to support Cebu Shipyard’s claim.  She also testified

that while it was true that the proceeds of the sale of Unimarine’s vessel, M/V

Headline, were assigned to Cebu Shipyard, nothing was turned over to them.

[30]

 

Paul Rodriguez admitted that Unimarine failed to pay Cebu Shipyard

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

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

he trusted Quinain that it was a mere pre-requisite for the issuance of the

surety bond.  He added that he did not bother to read the documents and he

was not aware of the consequences of signing an Indemnity

Agreement.  Paul Rodriguez also alleged to not having noticed the limitation

“Valid only in favor of DPWH” stamped on the surety bond.[31]  However, Paul

Rodriguez did not contradict the fact that Unimarine failed to pay Cebu

Shipyard its obligation.[32]

 

CBIC presented Dakila Rianzares, the Senior Manager of its

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

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

under the Special Power of Attorney and General Agency Contract of

CBIC.  Rianzares testified that she only learned of the existence of CBIC

Surety Bond No. G (16) 29419 when she received the summons for this

case.  Upon investigation, she found out that the surety bond was not

reported to CBIC by Quinain, the issuing agent, in violation of their General

Agency Contract, which provides that all bonds issued by the agent be

reported to CBIC’s office within one week from the date of issuance.  She

further stated that the surety bond issued in favor of Unimarine was issued

beyond Quinain’s authority.  Rianzares added that she was not aware that an

endorsement pertaining to the surety bond was also issued by Quinain.[33]

 

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

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

29419.[34]

           

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

which reads:

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

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

 2.      Ordering further defendant Unimarine to pay

plaintiff the amount of P259,458.00 to complete its entire obligation of P4,859,458.00; 

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

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

  

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

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

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

essence secondary only to a valid principal obligation, his liability to [the]

creditor is said to be direct, primary[,] and absolute, in other words, he is

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

 Solidary obligations on the part of Unimarine and

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

  

The RTC found CBIC’s contention that Quinain acted in excess of

his authority in issuing the surety bond untenable.  The RTC held that CBIC

is bound by the surety bond issued by its agent who acted within the

apparent scope of his authority.  The RTC said:

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

  

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

 

Unimarine, Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas

argued that Unimarine’s obligation under Bill No. 26035 had been

extinguished by novation, as Cebu Shipyard had agreed to accept the

proceeds of the sale of the M/V Headline as payment for the ship repair

works it did on M/V Pacific Fortune.  Paul Rodriguez and Peter Rodriguez

added that such novation also freed them from their liability under the

Indemnity Agreement they signed in favor of CBIC.  Albert Hontanosas in

turn reiterated that he did not sign the Indemnity Agreement.[39] [SC1]  

 

CBIC, in its Appellant’s Brief,[40] claimed that the RTC erred in

enforcing its liability on the surety bond as it was issued in excess of

Quinain’s authority.  Moreover, CBIC averred, its liability under such surety

had been extinguished by reasons of novation, payment, and

prescription.  CBIC also questioned the RTC’s order, holding it jointly and

severally liable with Unimarine and Plaridel for the amount of P4,620,000.00,

a sum larger than the face value of CBIC Surety Bond No. G (16) 29419, and

why the RTC did not hold Quinain liable to indemnify CBIC for whatever

amount it was ordered to pay Cebu Shipyard.

 

On January 29, 2004, the Court of Appeals promulgated its decision,

with the following dispositive portion:

             WHEREFORE, in view of the foregoing, the respective appeal[s] filed by Defendants-Appellants Unimarine Shipping Lines, Inc. and Country Bankers Insurance Corporation; Cross-Defendant-Appellant Unimarine Shipping Lines, Inc. and; Third-Party Defendants-Appellants Paul Rodriguez, Peter Rodriguez and Albert Hontanosas are hereby DENIED.  The decision of the RTC in Civil Case No. CEB-13447 dated February 10, 1997 is AFFIRMED with modification that Mr. Bethoven Quinain, CBIC’s agent is hereby held jointly and severally liable with CBIC by virtue of Surety Bond No. 29419 executed in favor of plaintiff-appellee CSEW.[41]

  

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

had summarized from the parties’ pleadings:

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

 II.          Whether or not the obligation of UNIMARINE  to [Cebu Shipyard] has been extinguished by novation; III.       Whether or not Defendant-Appellant CBIC, allegedly being the Surety of UNIMARINE is liable under Surety Bond No. 29419[;] IV.       Whether or not Cross Defendant-Appellant UNIMARINE and Third-Party Defendants-Appellants Paul Rodriguez, Peter Rodriguez, Albert Hontanosas and Third-Party Defendant Bethoven Quinain are liable by virtue of the Indemnity Agreement executed between them and Cross and Third Party Plaintiff CBIC; V.          Whether or not Plaintiff-Appellee [Cebu Shipyard] is entitled to the award of P100,000.00 in attorney’s fees and litigation expenses.[42]

  

The Court of Appeals held that it was duly proven that Unimarine

was liable to Cebu Shipyard for the ship repair works it did on the former’s

M/V Pacific Fortune.  The Court of Appeals dismissed CBIC’s contention of

novation for lack of merit.[43]  CBIC was held liable under the surety bond as

there was no novation on the agreement between Unimarine and Cebu

Shipyard that would discharge CBIC from its obligation.  The Court of

Appeals also did not allow CBIC to disclaim liability on the ground that

Quinain exceeded his authority because third persons had relied upon

Quinain’s representation, as CBIC’s agent.[44]  Quinain was, however, held

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

 

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

Court of Appeals held Paul Rodriguez, Peter Rodriguez, and Albert

Hontanosas jointly and severally liable thereunder.  The Court of Appeals

rejected Hontanosas’s claim that his signature in the Indemnity Agreement

was forged, as he was not able to prove it.[46]

 

          The Court of Appeals affirmed the award of attorney’s fees and

litigation expenses to Cebu Shipyard since it was able to clearly establish the

defendants’ liability, which they tried to dodge by setting up defenses to

release themselves from their obligation.[47]

 

          CBIC[48]and Unimarine, together with third party defendants-

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

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

for lack of merit.

 

          Unimarine elevated its case to this Court via a petition for review

on certiorari, docketed as G.R. No. 166023, which was denied in a

Resolution dated January 19, 2005.[50]

 

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

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

following grounds:

 A. 

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN APPLYING THE PROVISIONS OF ARTICLE 1911 OF THE CIVIL CODE TO HOLD PETITIONER LIABLE FOR THE ACTS DONE BY ITS AGENT IN EXCESS OF AUTHORITY. 

B. 

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

C.

 ASSUMING THAT PETITIONER IS LIABLE UNDER THE BOND, THE HONORABLE COURT OF APPEALS NONETHELESS SERIOUSLY ERRED IN AFFIRMING THE SOLIDARY LIABILITY OF PETITIONER BEYOND THE VALUE OF THE BOND. 

D. 

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER JOINTLY AND SEVERALLY LIABLE FOR ATTORNEY’S FEES IN THE AMOUNT OF P100,000.00.[51]

  

Issue 

The crux of the controversy lies in CBIC’s liability on the surety bond

Quinain issued to Unimarine, in favor of Cebu Shipyard.

 

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

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

of Attorney granted to Quinain clearly set forth the extent and limits of his

authority with regard to businesses he can transact for and in behalf of

CBIC.  CBIC added that it was incumbent upon Cebu Shipyard to inquire and

look into the power of authority conferred to Quinain.  CBIC said:

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

  

CBIC claims that the foregoing is true even if Quinain was granted

the authority to transact in the business of insurance in general, as “the

authority to bind the principal in a contract of suretyship could

nonetheless never be presumed.”[53]  Thus, CBIC claims, that:

 [T]hird persons seeking to hold the principal liable for transactions entered into by an agent should establish the following, in case the same is controverted:             6.6.1.  The fact or existence of the agency.            6.6.2.  The nature and extent of authority.[54]

  

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

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

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

Quinain by its failure to perform due diligence investigations.”[55]

         

Cebu Shipyard, in its Comment[56] first assailed the propriety of the

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

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

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

of law.

         Discussion

 

          The fact that Quinain was an agent of CBIC was never put in

issue.  What has always been debated by the parties is the extent of

authority or, at the very least, apparent authority, extended to Quinain by

CBIC to transact insurance business for and in its behalf.

 

In a contract of agency, a person, the agent, binds himself to

represent another, the principal, with the latter’s consent or authority.

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

behalf of the principal on matters within the scope of the authority conferred

upon him.[58]  Such “acts have the same legal effect as if they were personally

done by the principal.  By this legal fiction of representation, the actual or

legal absence of the principal is converted into his legal or juridical

presence.”[59] 

 

The RTC applied Articles 1900 and 1911 of the Civil Code in holding

CBIC liable for the surety bond.  It held that CBIC could not be allowed to

disclaim liability because Quinain’s actions were within the terms of the

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

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

persons had relied on Quinain’s representations.  It based its decision on

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

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

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

insurance forms, and to devise schemes to prevent fraudulent

misrepresentations of its agents.[61]  

 

This Court does not agree.  Pertinent to this case are the following

provisions of the Civil Code:

 Art. 1898. If the agent contracts in the name of the

principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal.  In this case, however, the agent is liable if he undertook to secure the principal’s ratification. 

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

Art. 1902.  A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency.  Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown to them. 

Art. 1910.  The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. 

As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. 

Art. 1911.  Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.  

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

[62]  The scope of an agent’s authority is what appears in the written terms of

the power of attorney granted upon him.[63]  Under Article 1878(11) of the

Civil Code, a special power of attorney is necessary to obligate the

principal as a guarantor or surety.

 

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

exceeded the scope of his authority only if Quinain’s act of issuing Surety

Bond No. G (16) 29419 is deemed to have been performed within the written

terms of the power of attorney he was granted.[64] 

 

However, contrary to what the RTC held, the Special Power of

Attorney accorded to Quinain clearly states the limits of his authority and

particularly provides that in case of surety bonds, it can only be issued in

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

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

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

 SPECIAL POWER OF ATTORNEY

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

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

 2.      To accept, underwrite and subscribe policies of

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

-          SCHEDULE OF LIMITS    - a.       FIRE:

 x x x x 

b.      PERSONAL ACCIDENT: x x x x

 c.       MOTOR CAR:

 x x x x

  

d.      MARINE: x x x x

  

e.       BONDS: x x x x

 Surety Bond   (in favor of Dept. of Pub. Works and                        Highways, Nat’l. Power Corp. & other….     500,000.00                             Government agencies)[65]

  

CBIC does not anchor its defense on a secret agreement, mutual

understanding, or any verbal instruction to Quinain.  CBIC’s stance is

grounded on its contract with Quinain, and the clear, written terms

therein.  This Court finds that the terms of the foregoing contract specifically

provided for the extent and scope of Quinain’s authority, and Quinain has

indeed exceeded them.

 

Under Articles 1898 and 1910, an agent’s act, even if done beyond

the scope of his authority, may bind the principal if he ratifies them, whether

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

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

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

agency, this Court said:

 Ratification in agency is the adoption or confirmation

by one person of an act performed on his behalf by another without authority.  The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority.  Ordinarily, the principal must have full knowledge at the time of ratification of all the material facts

and circumstances relating to the unauthorized act of the person who assumed to act as agent.  Thus, if material facts were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless of the parties between whom the question of ratification may arise.  Nevertheless, this principle does not apply if the principal’s ignorance of the material facts and circumstances was willful, or that the principal chooses to act in ignorance of the facts.  However, in the absence of circumstances putting a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is ignorant of the facts.[67] (Emphases supplied.)

  

Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s

testimony that it was unaware of the existence of Surety Bond No. G (16)

29419 and Endorsement No. 33152.  There were no allegations either that

CBIC should have been put on alert with regard to Quinain’s business

transactions done on its behalf.  It is clear, and undisputed therefore, that

there can be no ratification in this case, whether express or implied.

 

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

which is necessary for the protection of third persons.  It states that the

principal is solidarily liable with the agent even when the latter has exceeded

his authority, if the principal allowed him to act as though he had full

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

established:

 

1.     The principal manifested a representation of the agent’s

authority or knowingly allowed the agent to assume such

authority;

2.     The third person, in good faith, relied upon such

representation;  and

3.     Relying upon such representation, such third person has

changed his position to his detriment.[68]

 

In Litonjua, Jr. v. Eternit Corp.,[69] this Court said that “[a]n agency by

estoppel, which is similar to the doctrine of apparent authority, requires proof

of reliance upon the representations, and that, in turn, needs proof that the

representations predated the action taken in reliance.”[70] 

 

This Court cannot agree with the Court of Appeals’ pronouncement

of negligence on CBIC’s part.  CBIC not only clearly stated the limits of its

agents’ powers in their contracts, it even stamped its surety bonds with the

restrictions, in order to alert the concerned parties.  Moreover, its company

procedures, such as reporting requirements, show that it has designed a

system to monitor the insurance contracts issued by its agents.  CBIC cannot

be faulted for Quinain’s deliberate failure to notify it of his transactions with

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

Unimarine to Quinain.

 

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

stated that CBIC let the public, or specifically Unimarine, believe that Quinain

had the authority to issue a surety bond in favor of companies other than the

Department of Public Works and Highways, the National Power Corporation,

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

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

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

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

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

reasonable care and circumspection.[71]

 

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

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

Linsangan,[72] this Court held:

 It is a settled rule that persons dealing with an agent

are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it.  The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.  If he does not make such an inquiry, he is chargeable with knowledge of the agent’s authority and his ignorance of that authority will not be any excuse.  

In the same case, this Court added:

 [T]he ignorance of a person dealing with an agent as to the scope of the latter’s authority is no excuse to such person and the fault cannot be thrown upon the principal. A person dealing with an agent assumes the risk of lack of authority in the agent.  He cannot charge the principal by relying upon the agent’s assumption of authority that proves to be unfounded.  The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency.[73]

  

Unimarine undoubtedly failed to establish that it even bothered to

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

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

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

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

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

prove Quinain’s authority to contract business for CBIC, such as their

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

with the Indemnity Agreement, Paul Rodriguez signed it on Quinain’s mere

assurance and without truly understanding the consequences of the terms of

the said agreement.  Moreover, both Unimarine and Paul Rodriguez could

have inquired directly from CBIC to verify the validity and effectivity of the

surety bond and endorsement; but, instead, they blindly relied on the

representations of Quinain.  As this Court held in Litonjua, Jr. v. Eternit Corp.

[74]:

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

  

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

its liability on Surety Bond No. G (16) 29419 and Endorsement No.

33152. This Court sees no need to dwell on the other grounds propounded

by CBIC in support of its prayer.

 

          WHEREFORE, this petition is hereby GRANTED and the complaint

against CBIC is DISMISSED for lack of merit.  The January 29,

2004 Decision and October 28, 2004 Resolution of the Court of Appeals

in CA-G.R. CV No. 58001 is MODIFIED insofar as it affirmed CBIC’s liability

on Surety Bond No. G (16) 29419 and Endorsement No. 33152. 

 SO ORDERED. 

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners, vs. COURT OF APPEALS and FRANCISCO ARTIGO,respondents.

D E C I S I O N

CARPIO, J.:

The Case

Before us is a Petition for Review on Certiorari[1] seeking to annul the Decision of the Court of Appeals[2] dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto  the decision[3] of the Regional Trial Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631.  The trial court disposed as follows:

“WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro jointly and solidarily liable to plaintiff the sum of:

a) P303,606.24 representing unpaid commission;b) P25,000.00 for and by way of moral damages;c) P45,000.00 for and by way of attorney’s fees;

d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991.”

The Antecedent Facts

On May 29, 1989, private respondent Francisco Artigo (“Artigo” for brevity) sued petitioners Constante A. De Castro (“Constante” for brevity) and Corazon A.  De Castro (“Corazon” for brevity) to collect the unpaid balance of his broker’s commission from the De Castros.[4] The Court of Appeals summarized the facts in this wise:

“x x x.  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 appellee’s claims and essentially argue that appellee is selfishly asking for more than what he truly deserved as commission to the prejudice of other agents who were more instrumental in the consummation of the sale.  Although appellants readily concede that it was appellee who first introduced Times Transit Corp. to them, appellee was not designated by them as their exclusive real estate agent but that in fact there were more or less eighteen (18) others whose collective efforts in the long run dwarfed those of appellee’s, considering that the first negotiation for the sale where appellee took active participation failed and it was these other agents who successfully brokered in the second negotiation.  But despite this and out of appellants’ “pure liberality, beneficence and magnanimity”, appellee nevertheless was given the largest cut in the commission (P48,893.76), although on the principle of quantum meruit he would have certainly been entitled to less. So appellee should not have been heard to complain of getting only a pittance when he actually got the lion’s share of the commission and worse, he should not have been allowed to get the entire commission. Furthermore, the purchase price for the two lots was only P3.6 million as appearing in the deed of sale and not P7.05 million as alleged by appellee. Thus, even assuming that appellee is entitled to the entire commission, he would only be getting 5% of the P3.6 million, or P180,000.00.”

Ruling of the Court of Appeals

The Court of Appeals affirmed in toto the decision of the trial court.

First.  The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of two lots in Cubao, Quezon City.  The handwritten authorization letter signed by Constante clearly established a contract of agency between Constante and Artigo. Thus, Artigo sought prospective

buyers and found Times Transit Corporation (“Times Transit” for brevity).  Artigo facilitated the negotiations which eventually led to the sale of the two lots.  Therefore, the Court of Appeals decided that Artigo is entitled to the 5% commission on the purchase price as provided in the contract of agency.

Second.  The Court of Appeals ruled that Artigo’s complaint is not dismissible for failure to implead as indispensable parties the other co-owners of the two lots. The Court of Appeals explained that it is not necessary to implead the other co-owners since the action is exclusively based on a contract of agency between Artigo and Constante.

Third.  The Court of Appeals likewise declared that the trial court did not err in admitting parol evidence to prove the true amount paid by Times Transit to the De Castros for the two lots.  The Court of Appeals ruled that evidence aliunde could be presented to prove that the actual purchase price was P7.05 million and not P3.6 million as appearing in the deed of sale.   Evidence aliunde is admissible considering that Artigo is not a party, but a mere witness in the deed of sale between the De Castros and Times Transit.  The Court of Appeals explained that, “the rule that oral evidence is inadmissible to vary the terms of written instruments is generally applied only in suits between parties to the instrument and strangers to the contract are not bound by it.” Besides, Artigo was not suing under the deed of sale, but solely under the contract of agency.  Thus, the Court of Appeals upheld the trial court’s finding that the purchase price was P7.05 million and not P3.6 million.

Hence, the instant petition.

The Issues

According to petitioners, the Court of Appeals erred in - 

I.   NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-INTEREST;

II.  NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT ARTIGO’S CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR ABANDONMENT;

III. CONSIDERING INCOMPETENT EVIDENCE;

IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;

V. SANCTIONING AN AWARD OF MORAL DAMAGES AND   ATTORNEY’S FEES;

VI. NOT AWARDING THE DE CASTRO’S MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY’S FEES. 

The Court’s Ruling

The petition is bereft of merit.

First Issue:  whether the complaint merits dismissal for failure to implead other co-owners as indispensable parties

The De Castros argue that Artigo’s complaint should have been dismissed for failure to implead all the co-owners of the two lots.   The De Castros claim that Artigo always knew that the two lots were co-owned by Constante and Corazon with their other siblings Jose and Carmela whom Constante merely represented.  The De Castros contend that failure to implead such indispensable parties is fatal to the complaint since Artigo, as agent of all the four co-owners, would be paid with funds co-owned by the four co-owners.

The De Castros’ contentions are devoid of legal basis.

An indispensable party is one whose interest will be affected by the court’s action in the litigation, and without whom no final determination of the case can be had.[7] The joinder of indispensable parties is mandatory and courts cannot proceed without their presence.[8] Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party.[9]

However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case.

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent commission.  The authority was on a first come, first serve basis.  The authority reads in full:

“24 Jan. 84

To Whom It May Concern:

This is to state that Mr. Francisco Artigo is authorized as our real estate broker in connection with the sale of our property located at Edsa Corner New York & Denver, Cubao, Quezon City.

Asking price P23,000,000.00 with5% commission as agent’s fee.

C.C. de Castroowner &

representingco-owners

This authority is on a first-comeFirst serve basis –CAC”

Constante signed the note as owner and as representative of the other co-owners.  Under this note, a contract of agency was clearly constituted between Constante and Artigo.  Whether Constante appointed Artigo as agent, in Constante’s individual or representative capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as indispensable parties.  The De Castros admit that the other co-owners are solidarily liable under the contract of agency,[10] citing Article 1915 of the Civil Code, which reads:

Art. 1915.  If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency.

The solidary liability of the four co-owners, however, militates against the De Castros’ theory that the other co-owners should be impleaded as indispensable parties.  A noted commentator explained Article 1915 thus –

“The rule in this article applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction.  The solidarity arises from the common interest of the principals, and not from the act of constituting the agency.  By virtue of this solidarity, the agent can recover from any principal the whole compensation and indemnity owing to him by the others.  The parties, however, may, by express agreement, negate this solidary responsibility.  The solidarity does not disappear by the mere partition effected by the principals after the accomplishment of the agency.

If the undertaking is one in which several are interested, but only some create the agency, only the latter are solidarily liable, without prejudice to the effects ofnegotiorum gestio with respect to the others.  And if the power

granted includes various transactions some of which are common and others are not, only those interested in each transaction shall be liable for it.”[11]

When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation.[12] The agent may recover the whole compensation from any one of the co-principals, as in this case.

Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors.  This article reads:

Art. 1216.  The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.  The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.

Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.[13] that –

“x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor.  Article 1216 of the Civil Code says that the creditor `may proceed against anyone of the solidary debtors or some or all of them simultaneously’.” (Emphasis supplied)

Second Issue:  whether Artigo’s claim has been extinguished by full payment, waiver or abandonment

The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given “his proportionate share and no longer entitled to any balance.” According to them, Artigo was just one of the agents involved in the sale and entitled to a “proportionate share” in the commission.  They assert that Artigo did absolutely nothing during the second negotiation but to sign as a witness in the deed of sale.  He did not even prepare the documents for the transaction as an active real estate broker usually does.

The De Castros’ arguments are flimsy.

A contract of agency which is not contrary to law, public order, public policy, morals or good custom is a valid contract, and constitutes the law between the parties.[14] The contract of agency entered into by Constante with Artigo is the law between them and both are bound to comply with its terms and conditions in good faith.

The mere fact that “other agents” intervened in the consummation of the sale and were paid their respective commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent commission based on the

selling price.  These “other agents” turned out to be employees of Times Transit, the buyer Artigo introduced to the De Castros.   This prompted the trial court to observe:

“The alleged `second group’ of agents came into the picture only during the so-called `second negotiation’ and it is amusing to note that these (sic) second group, prominent among whom are Atty. Del Castillo and Ms. Prudencio, happened to be employees of Times Transit, the buyer of the properties. And their efforts were limited to convincing Constante to ‘part away’ with the properties because the redemption period of the foreclosed properties is around the corner, so to speak. (tsn. June 6, 1991).

x x x

To accept Constante’s 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 broker’s 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 broker’s commission is reasonable and within the standard practice in the real estate industry for transactions of this nature.

The De Castros also contend that Artigo’s 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.  Artigo’s 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, Artigo’s 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 Artigo’s claim was filed within the ten-year prescriptive period.  The De Castros, however, still maintain that Artigo’s cause of action is barred by laches.  Laches does not apply because only four years had lapsed from the time of the sale in June 1985.  Artigo made a demand in July 1985 and filed the action in court on May 29, 1989, well within the ten-year prescriptive period.  This does not constitute an unreasonable delay in asserting one’s right. The Court has ruled, “a delay within the prescriptive period is sanctioned by law and is not considered to be a delay that would bar relief.”[21] In explaining that laches applies only in the absence of a statutory prescriptive period, the Court has stated -

“Laches is recourse in equity.  Equity, however, is applied only in the absence, never in contravention, of statutory law.  Thus, laches, cannot, as a rule, be used to abate a collection suit filed within the prescriptive period mandated by the Civil Code.”[22]

Clearly, the De Castros’ defense of laches finds no support in law, equity or jurisprudence.

Third issue: whether the determination of the purchase price was made in violation of the Rules on Evidence

The De Castros want the Court to re-examine the probative value of the evidence adduced in the trial court to determine whether the actual selling price of the two lots was P7.05 million and not P3.6 million.  The De Castros contend that it is erroneous to base the 5 percent commission on a purchase price of P7.05 million as ordered by the trial court and the appellate court.  The De Castros insist that the purchase price is P3.6 million as expressly stated in the deed of sale, the due execution and authenticity of which was admitted during the trial.

The De Castros believe that the trial and appellate courts committed a mistake in considering incompetent evidence and disregarding the best evidence and parole evidence rules.  They claim that the Court of Appeals erroneously affirmed sub silentio the trial court’s reliance on the various correspondences between Constante and Times Transit which were mere photocopies that do not satisfy the best evidence rule.  Further, these letters covered only the first negotiations between Constante and Times Transit which failed; hence, these are immaterial in determining the final purchase price.

The De Castros further argue that if there was an undervaluation, Artigo who signed as witness benefited therefrom, and being equally guilty, should be left where he presently stands.  They likewise claim that the Court of Appeals erred in relying on evidence which  were not offered for the purpose considered by the trial court. Specifically, Exhibits “B”, “C”, “D” and “E” were not offered to prove that the purchase price was P7.05 Million.  Finally, they argue that the courts a quo erred in giving credence to the perjured testimony of Artigo.  They want the entire testimony of Artigo rejected as a falsehood because he was lying when he claimed at the outset that he was a licensed real estate broker when he was not.

Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by the Court of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not of law.  Inevitably, this calls for an inquiry into the facts and evidence on record.  This we can not do.

It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze or weigh the evidence again.[23] This Court is not the proper venue to consider a factual issue as it is not a trier of facts.  In petitions for review on certiorari as a mode of appeal under Rule 45, a petitioner can only raise questions of law.  Our pronouncement in the case of Cormero vs. Court of 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 attorney’s fees is proper

The De Castros claim that Artigo failed to prove that he is entitled to moral damages and attorney’s fees.  The De Castros, however, cite no concrete reason except to say that they are the ones entitled to damages since the case was filed to harass and extort money from them.

Law and jurisprudence support the award of moral damages and attorney’s fees in favor of Artigo.  The award of damages and attorney’s fees is left to the sound discretion of the court, and if such discretion is well

exercised, as in this case, it will not be disturbed on appeal. [25] Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or in wanton disregard of his contractual obligation.[26] On the other hand, attorney’s fees are awarded in instances where “the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim.”[27] There is no reason to disturb the trial court’s finding that “the defendants’ lack of good faith and unkind treatment of the plaintiff in refusing to give his due commission deserve censure.” This warrants the award of P25,000.00 in moral damages and P45,000.00 in attorney’s fees.  The amounts are, in our view, fair and reasonable.  Having found a buyer for the two lots, Artigo had already performed his part of the bargain under the contract of agency.  The De Castros should have exercised fairness and good judgment in dealing with Artigo by fulfilling their own part of the bargain - paying Artigo his 5 percent broker’s commission based on the actual purchase price of the two lots.

WHEREFORE, the petition is denied for lack of merit.  The Decision of the Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.

SO ORDERED.

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

Emiliano S. Samson and R. Balderrama-Samson for petitioner.Leandro Sevilla and Ramon C. Aquino for respondents.

REYES, J.B.L., J.:

From an affirmance in toto by the Court of Appeals1 of a decision of the Court of First Instance of Manila,2specifically the portion thereof condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda. de Jimena, et al., the sum of P30,691.92 solidarily with Ananias Isaac Lincallo for violation of an injunction this appeal is taken.

It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half (1/2) of the proceeds from all mining claims that he would purchase with the money to be advanced by the latter. This agreement was later on modified (in a 1939 notarial instrument duly

registered with the Register of Deeds of Marinduque in his capacity as mining recorder) so as to include in the equal sharing arrangement not only the proceeds from several mining claims, which by that time had already been purchased by Lincallo with various sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and so as to bind thereby their "heirs, assigns, or legal representatives." Apparently, the mining rights over part of the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime before World War Il because in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.

On several occasions thereafter, the mining claims in question were made subject-matter of contracts entered into by Lincallo in his own name and for his benefit alone without the slightest intimation of Jimena's interests over the same. Thus, on 19 September 1951, Lincallo and one Alejandro Marquez, as separate owners of particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the assignee thereof, regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later, Lincallo, Marquez and Congressman Panfilo Manguerra, again as owners, leased certain mining claims to Jacob Cabarrus, who, in turn, transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By virtue of still another contract executed by these lessors on 29 February 1952, 43% of the royalties due from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.

As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned and/or leased by Lincallo and, accordingly, demanded recognition and payment of his one-half share in all the royalties, allocated and paid and, thereafter, to be paid to the latter. Both corporations, however, ignored Jimena's demands.

Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo. Acknowledging Jimena's contractual claim, Lincallo off and on promised to settle his obligations. And on 14 July 1952, Lincallo promised for the last time, to settle everything on or before the 30th day of the same month.

Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a month after he promised to pay Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co., Inc., to one Gregorio Tolentino, a salaried employee, for an alleged consideration of P10,000.00.

On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and his one-half share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with Tolentino, were later joined as defendants.

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

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

After a protracted trial, the lower court rendered a decision, the dispositive portion of which reads as follows:

IN VIEW WHEREOF, judgment is rendered:

1. Declaring the plaintiffs —

(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of the royalties of defendant Lincallo under the latter's contract with Gold Star, Exh. D or Exh. D-l, dated September 19, 1951;

(b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract with Jesus (Jacob) Cabarrus assigned to Marinduque Iron Mines, and his contract with Alejandro Marquez, dated December 5, 1951, and February 29, 1952, Exhs. J and J-1; .

(c) and condemning defendants Gold Star and Marinduque Iron Mines to pay direct to plaintiffs said 1/2 shares of the royalties until said contracts are terminated;

2. Condemning defendant Lincallo to pay unto plaintiffs, as successors in interest of Victor Jimena —

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

(b) the sum of P40,167.52 which is the 1/2 share of the royalties paid by Gold Star unto Lincallo as of the September 14, 1957;

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

(d) P1,000.00 as attorneys fees;

3. Declaring that the deed of sale, Exh. H, dated August 16, 1952, between defendant Lincallo and Gregorio Tolentino was effective and transferred only 1/2 of the 45% (43%) share of Lincallo, and ordering Gold Star Mining Company to make payment hereafter unto plaintiffs, pursuant to this decision on the royalties due unto Lincallo, notwithstanding the cession unto Tolentino, so that of the royalties due unto Lincallo 1/2 should always be paid by Gold Star unto plaintiffs notwithstanding said session, Exh. H, unto Tolentino by Lincallo;

4. Judgment is also rendered condemning the estate of Gregorio Tolentino but not the heirs personally, to pay unto plaintiffs the sum of P24,386.51 with legal interest from the date of the filing of the complaint against Gregorio Tolentino.

5. Judgment is rendered condemning defendant Gold Star Mining Company to pay to plaintiffs solidarily with Lincallo and to be imputed to Lincallo's liability under this judgment unto Jimena, the sum of P30,691.92;

6. Judgment is rendered condemning defendant Marinduque Iron Mines to pay unto plaintiffs the sum of P7,330.36;

7. The counterclaims of defendants are dismissed;

8. Costs against defendant Lincallo.

SO ORDERED. (Emphasis supplied.)

From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, and the two corporations, appealed to the Court of Appeals. The appeal interposed by Marinduque Iron Mines Agents, Inc., was, however, withdrawn, while that of Lincallo was dismissed for the failure to file brief. Pending outcome of the appeal, the royalties due from Gold Star Mining Co., Inc., were required to be deposited with the trial court, as per order of 17 June 1958 issued by the same court. In compliance therewith, Gold Star Mining Co., Inc., made a judicial deposit in the amount of P30,691.92.

On 8 October 1965, the Court of Appeals handed down a decision sustaining in its entirety that of the trial court. Gold Star Mining Co., Inc., moved for reconsideration of said decision insofar as its adjudged solidary liability with Lincallo to pay to the Jimenas the sum of P30,691.92 "for flagrant violation of the injunction" was concerned. The motion was denied. Hence, the present appeal.

Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals' decision finding that respondents Jimenas have a cause of action against it, and condemning it to pay the sum of P30,691.92 for violation of an allegedly non-existent injunction, are reversible errors. Reasons: As to respondents Jimena's cause of action, the same does not allegedly appear in the complaint filed against petitioner corporation. And as to the P30,691.92 penalty for violation of the injunction, the same can not allegedly be imposed because (1) the sum of P30,691.92 was not prayed for, (2) the injunction in question had already been superseded and/or dissolved by the trial court's grant of Jimena's petition for writ of preliminary attachment; and (3) the corporation was never charged, heard, nor found guilty in accordance with, and pursuant to, the provisions, of Rule 64 of the (Old) Rules of Court.

We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause of action against petitioner corporation and that the latter's joinder as one of the defendants before the trial court is fitting and proper. Said the Court of Appeals, and we adopt the same:

There first assigned error is the Trial Court erred in not dismissing this instant action as "there is no privity of contract between Gold Star and Jimena." This contention is without merit.

The situation at bar is similar to the status of the first and second mortgagees of a duly registered real estate mortgage. While there exists no privity of contract between them, yet the common subject-matter supplies the juridical link.

Here the evidence overwhelmingly established that Jimena made prewar and postwar demands upon Gold Star for the payment of his 1/2 share of the royalties but all in vain so he (Jimena) was constrained to implead Gold Star because it refused to recognize his right.

Jimena now seeks for accounting of the royalties paid by Gold Star to Lincallo, and for direct payment to himself of his share of the royalties. This relief cannot be granted without joining the Gold Star specially in the face of the attitude it had displayed towards Jimena.

Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudor mio," this legal maxim finds sanction in Article 1177, new Civil Code which provides that "creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter (debtor) for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them (1111)."

From another standpoint, equally valid and acceptable, it can be said that Lincallo, in transferring the mining claims to Gold Star (without disclosing that Jimena was a co-owner although Gold Star had knowledge of the fact as shown by the proofs heretofore mentioned) acted as Jimena's agent with respect to Jimena's share of the claims.

Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883, New Civil Code, which provides that the principal may sue the person with whom the agent dealt with in his (agent's) own name, when the transaction "involves things belonging to the principal."

As counsel for Jimena has correctly contended, "the remedy of garnishment suggested by Gold Star is utterly inadequate for the enforcement of Jimena's right against Lincallo because Jimena wanted an accounting and wanted to receive directly his share of the royalties from Gold Star. That recourse is not open to Jimena unless Gold Star is made a party in this action."

Coming now to the violation of the injunction, we observe that the facts speak for themselves. Considering that no writ of preliminary attachment was issued by the trial court, the condition for its issuance not having been met by Jimena, nothing can be said to have superseded the writ of preliminary injunction in question. The preliminary injunction was, therefore, subsisting

and evidently violated by petitioner corporation when it paid the sum of P30,691.92 to Lincallo and Tolentino.

Gold Star Mining Co., Inc., insists that it may not be penalized for breach of the injunction, issued by the court of origin, without prior written charge for indirect contempt, and due hearing, citing section 3 of Rule 64 of the old Rules of Court, now Rule 71 of the Revised Rules. We fail to see any merit in this contention, as it misses the true nature and intent of the award of P30,691.92 to Jimena, payable by Gold Star and Lincallo's estate.

Said award is not so much a penalty against petitioner as a decree of restitution, in order to make the violated injunction effective, as it should be, by placing the parties in the same condition as if the injunction had been fully obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction and had not paid to Lincallo the royalties of P30,691.92, such amount would now be available for the satisfaction of the claims of Jimena and his heirs against Lincallo. By sentencing Gold Star Mining Co., Inc., to pay, for the account of Lincallo, the sum aforesaid, the court merely endeavoured to prevent its award from being rendered pro tanto nugatory and ineffective, and thus make it conformable to law and justice.

That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to Lincallo's liability under this judgment." The court thus left the way open for Gold Star Mining Co., Inc., to recover later the whole amount from Lincallo, whether by direct action against him or by deducting it from the royalties that may fall due under his 1951 contract with appellant.

That the recovery of this particular amount was not specifically sought in the complaint is of no moment, since the complaint prayed in general for "other equitable relief."

WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, with costs against petitioner-appellant, Gold Star Mining Co., Inc.

Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concur.Zaldivar, J., is on leave.

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs.

PAZ AGUDELO Y GONZAGA, ET AL., defendants. PAZ AGUDELO Y GONZAGA, appellant.

Hilado and Hilado and Norberto Romualdez for appellant.Roman J. Lacson for appellee.

 

VILLA-REAL, J.:

The defendant Paz Agudelo y Gonzaga appeals to this court from the judgment rendered by the Court of First Instance of Occidental Negros, the dispositive part of which reads as follows:

Wherefore, judgment is rendered herein absolving the defendant Mauro A. Garrucho from the complaint and ordering the defendant Paz Agudelo y Gonzaga to pay to the plaintiff the sum of P31,091.55, Philippine currency, together with the interest on the balance of P20,774.73 at 8 per cent per annum of P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500 as attorney's fees, and the costs of this suit.

It is hereby ordered that in case the above sums adjudged in favor of the defendant by virtue of this judgment are not paid to the Philippine National Bank or deposited in the office of the clerk of this court, for delivery to the plaintiff, within three months from the date of this decision, the provincial sheriff of Occidental Negros shall set at public auction the mortgaged properties described in annex E of the second amended complaint, and apply the proceeds thereof to the payment of the sums in question.

It is further ordered that in case the proceeds of the mortgaged properties are not sufficient to cover the amount of this judgment, a writ of execution be issued against any other property belonging to the defendant Paz Agudelo y Gonzaga, not otherwise exempt from execution, to cover the balance resulting therefrom.

In support of her appeal, the appellant assigns six alleged errors as committed by the trial court, which we shall discuss in the course of this decision.

The following pertinent facts, which have been proven without dispute during the trial, are necessary for the decision of the questions raised in the present appeal, to wit:

On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her nephew, Mauro A. Garrucho, the document Exhibit K conferring upon him a special power of attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod, Occidental Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the improvement thereon.

On December 22, 1920, Amparo A. Garrucho executed the document Exhibit H whereby she conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure his obligations.

On December 23, 1920, Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine National bank, the document Exhibit G, whereby he constituted a mortgage on lot No. 878 of the cadastral survey of Murcia, Occidental Negros, with all the improvements thereon, described in transfer certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to secure the payment of credits, loans, commercial overdrafts, etc., not exceeding P6,000, together with interest thereon, which he might obtain from the aforesaid plaintiff entity, issuing the corresponding promissory note to that effect.

During certain months of the year 1921 and 1922, Mauro A. Garrucho maintained a personal current account with the plaintiff bank in the form of a commercial credit withdrawable through checks (Exhibits S, 1 and T).

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the plaintiff entity, the Philippine National Bank, the document Exhibit J whereby he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod together with the buildings and improvements thereon, described in original certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y Gonzaga, to secure the payment of credits, loans and commercial overdrafts which the said bank might furnish him to the amount of P16,00, payable on August 24, 1922, executing the corresponding promissory note to that effect.

The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for P6,000 and P16,000, respectively, were executed in Mauro A. Garrucho's own name and signed by him in his personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to take possession of the mortgaged properties, by means of force if necessary, in case he failed to comply with any of the conditions stipulated therein.

On January 4, 1922, the manager of the Iloilo branch of the Philippine National Bank notified Mauro A. Garrucho that his promissory note for P6,000 of 10 days within which to make payment thereof (Exhibit O).1awphil.net

On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed from that date (Exhibit S).

Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiff-appellee, the said manager thereof, in a letter dated June 27, 1922 (Exhibit T), requested him to liquidate his account amounting to P15,148.15, at the same time notifying him that his promissory note for P16,000 giving as security for the commercial overdraft in question, had fallen due some time since.

On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed Exhibit C whereby he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod, together with the improvements thereon, described in transfer certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described in transfer certificate of title No. 2415, issued in the name of Amparo A. Garrucho.

In connection of the credits, loans, and commercial overdrafts amounting to P21,000 which had been granted him, Mauro A. Garrucho, on the said date July 15, 1922, executed the promissory note, Exhibit B, for P21,000 as a novation of the former promissory notes for P6,000 and P16,000, respectively.

In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine National Bank, on the said date of July 15, 1922, cancelled the mortgages constituted on lots Nos. 61, 207 and 878 described in Torrens titles Nos. 2216, 1148 and 2415, respectively.

On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of title No. 2415, to Paz Agudelo y Gonzaga (Exhibit M).

On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which reads as follows:

Know all men by these presents: That I, Paz Agudelo y Gonzaga, single, of age, and resident of the City of Manila, P. I., by these present do hereby agree and consent to the transfer in my favor of lot No. 878 of the Cadastre of Murcia, Occidental Negros, P. I., by Miss Amparo A. Garrucho, as evidenced by the public instrument dated November 25, 1925, executed before the notary public Mr. Genaro B. Benedicto, and do hereby further agree to the amount of the lien thereon stated in the mortgage deed executed by Miss Amparo A. Garrucho in favor of the Philippine National Bank.

In testimony whereof, I hereunto affix my signature in the City of Manila, P.I., this 15th of January, 1926.

(Sgd.) PAZ AGUDELO Y GONZAGA.          

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y Gonzaga, of lot No. 878 of the cadastral survey of Murcia, described in certificate of title No. 2145 issued in the name of said Amparo A. Garrucho, and to the affidavit, Exhibit N, transfer certificate of title No. 5369 was issued in the name of Paz Agudelo y Gonzaga.

Without discussing and passing upon whether or not the powers of attorney issued in favor of Mauro A. Garrucho by his sister, Amparo A. Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to mortgage their respective real estate, authorized him to obtain loans secured by mortgage in the properties in question, we shall consider the question of whether or not Paz Agudelo y Gonzaga is liable for the payment of the loans obtained by Mauro A. Garrucho from the Philippine National Bank for the security of which he constituted a mortgage on the aforesaid real estate belonging to the defendant-appellant Paz Agudelo y Gonzaga.

Article 1709 of the Civil Code provides the following:

ART. 1709. By the contract of agency, one person binds himself to render some service, or to do something for the account or at the request of another.

And article 1717 of the same Code provides as follows:

ART. 1717. When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agent has contracted, or such persons against the principal.

In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. Cases involving things belonging to the principal are excepted.

The provisions of this article shall be understood to be without prejudice to actions between principal and agent.

Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as evidenced by the power of attorney attached hereto" and "attorney in fact of Paz Agudelo y Gonzaga" written after the name of Mauro A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively, there is nothing in the said mortgage deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that he obtained the loans mentioned in the aforesaid mortgage deeds and constituted said mortgages as security for the payment of said loans, for the account and at the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases which simply described his legal personality, did not mean that Mauro A. Garrucho obtained the said loans and constituted the mortgages in question for the account, and at the request, of his principals. From the titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in his personal capacity. In the aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the mortgage creditor Philippine National Bank as his attorney in fact so that it might take actual and full possession of the mortgaged properties by means of force in case of violation of any of the conditions stipulated in the respective mortgage contracts. If Mauro A. Garrucho acted in his capacity as mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, he could not delegate his power, in view of the legal principle of "delegata potestas delegare non potest" (a delegated power cannot be delegated), inasmuch as there is nothing in the records to show that he has been expressly authorized to do so.

He executed the promissory notes evidencing the aforesaid loans, under his own signature, without authority from his principal and, therefore, were not binding upon the latter (2 Corpus Juris, pp. 630-637, par. 280). Neither is there anything to show that he executed the promissory notes in question for the account, and at the request, of his respective principals (8 Corpus Juris, pp. 157-158).

Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents, Exhibits I and L, on July 15, 1922, and in their stead the mortgage deed, Exhibit C, was executed, in which there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which shows that he obtained such credit fro himself in his personal capacity and secured the payment thereof by mortgage constituted

by him in his personal capacity, although on properties belonging to his principal Paz Agudelo y Gonzaga.

Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National Bank, evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for P21,000 (Exhibit B) executed by Mauro A. Garrucho, not only without express authority from his principal Paz Agudelo y Gonzaga but also under his own signature.

In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:

A promissory note and two mortgages executed by the agent for and on behalf of his principal, in accordance with a power of attorney executed by the principal in favor of the agent, are valid, and as provided by article 1727 of contracted by the agent; but a mortgage on real property of the principal not made and signed in the name of the principal is not valid as to the principal.

It has been intimated, and the trial judge so stated. that it was the intention of the parties that Mauro A. Garrucho would execute the promissory note, Exhibit B, and the mortgage deed, Exhibit C, in his capacity as attorney in facts of Paz Agudelo y Gonzaga, and that although the terms of the aforesaid documents appear to be contrary to the intention of the parties, such intention should prevail in accordance with article 1281 of the Civil Code.

Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says the following:

IV. Intention of the contracting parties; its appreciation. — In order that the intention may prevail, it is necessary that the question of interpretation be raised, either because the words used appear to be contrary thereto, or by the existence of overt acts opposed to such words, in which the intention of the contracting parties is made manifest. Furthermore, in order that it may prevail against the terms of the contract, it must be clear or, in other words, besides the fact that such intention should be proven by admissible evidence, the latter must be of such charter as to carry in the mind of the judge an unequivocal conviction. This requisite as to the kind of evidence is laid down in the decision relative to the Mortgage Law of September 30, 1891, declaring that article 1281 of the Civil Code gives preference to intention only when it is clear. When the aforesaid circumstances is not present in a document, the only thing left for the register of deeds to do is to suspend the registration thereof, leaving

the solution of the problem to the free will of the parties or to the decision of the courts.

However, the evident intention which prevails against the defective wording thereof is not that of one of the parties, but the general intent, which, being so, is to a certain extent equivalent to mutual consent, inasmuch as it was the result desired and intended by the contracting parties. (8 Manresa, 3d edition, pp. 726 and 727.)

Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the promissory note, Exhibit B, was for his principal Paz Agudelo y Gonzaga. The special power of attorney, Exhibit K, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal to secure his personal obligations. Therefore, in doing so by virtue of the document, Exhibit C, he exceeded the scope if his authority and his principal is not liable for his acts. (2 Corpus Juris, p. 651; article 1714, Civil Code.)

It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz Agudelo y Gonzaga, the latter is responsible for the acts of the former although he acted in his own name, in accordance with the exception contained in article 1717 of the Civil Code. It would be an exception with the properties of his own name in connection with the properties of his principal, does so within the scope of his authority. It is noted that Mauro A. Garrucho was not authorized to execute promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute a mortgage on her real properties to secure such promissory notes. The plaintiff Philippine National Bank should know this inasmuch as it is in duty bound to ascertain the extent of the agent's authority before dealing with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally liable for the amount of the promissory note Exhibit B. (2 Corpus Juris, pp. 563-564.)

However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 (Exhibit AA), and in a letter dated January 16, 1926 (Exhibit Z), gave her consent to the lien on lot No. 878 of the cadastre of Murcia, Occidental Negros, described in Torrens title No. 5369, the ownership of which was transferred to her by her niece Amparo A. Garrucho. This acknowledgment, however, does not extend to lots Nos. 207 and 61 of the cadastral survey of Bacolod, described in transfer certificates of title Nos. 1148 and 2216, respectively, inasmuch as, although it is true that a mortgage is indivisible as to the contracting parties and as top their successors in interest (article 1860, Civil Code), it is not so with respect to a third person who did not take part in the constitution thereof either personally or through an agent, inasmuch as he can make the acknowledgment thereof in the form and to the extent he may deem convenient, on the ground that he is not in duty bound to

acknowledge the said mortgage. Therefore, the only liability of the defendant-appellant Paz Agudelo y Gonzaga is that which arises from the aforesaid acknowledgment, but only with respect to the lien and not to the principal obligation secured by the mortgage acknowledged by her to have been constituted on said lot No. 878 of the cadastral survey of Murcia, Occidental Negros. Such liability is not direct but a subsidiary one.

Having reach this contention, it is unnecessary to pass upon the other questions of law raised by the defendant- appellant in her brief and upon the law cited therein.

In view of the foregoing consideration, we are of the opinion and so hold that when an agent negotiates a loan in his personal capacity and executes a promissory note under his own signature, without express authority from his principal, giving as security therefor real estate belonging to the letter, also in his own name and not in the name and representation of the said principal, the obligation do constructed by him is personal and does not bind his aforesaid principal.

Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia, Occidental Negros, described in Torrens title No. 2415. However, inasmuch as the principal obligator, Mauro A. Garrucho, has been absolved from the complaint and the plaintiff- appellee has not appealed from the judgment absolving him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiary obligation in view of the legal maxim that the accessory follows the principal. Wherefore, the defendant herein should also be absolved from the complaint which is hereby dismissed, with the costs against the appellee. So ordered.

Avanceña, C.J., Malcolm, Hull, and Imperial, JJ., concur.