G.R. No.

129459 September 29, 1998

SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner,
vs.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG,
ACL DEVELOPMENT CORP. and JNM REALTY AND DEVELOPMENT
CORP., respondents.
PANGANIBAN, J.:
May corporate treasurer, by herself and without any authorization from he board of
directors, validly sell a parcel of land owned by the corporation?. May the veil of corporate
fiction be pierced on the mere ground that almost all of the shares of stock of the
corporation are owned by said treasurer and her husband?
The Case
These questions are answered in the negative by this Court in resolving the Petition for
Review on Certioraribefore us, assailing the March 18, 1997 Decision 1 of the Court of
Appeals 2 in CA GR CV No. 46801 which, in turn, modified the July 18, 1994 Decision of the
Regional Trial Court of Makati, Metro Manila, Branch 63 3 in Civil Case No. 89-3511. The
RTC dismissed both the Complaint and the Counterclaim filed by the parties. On the other
hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the appealed decision is AFFIRMED
WITH MODIFICATION ordering defendant-appellee Nenita Lee Gruenberg
to REFUND or return to plaintiff-appellant the downpayment of
P100,000.00 which she received from plaintiff-appellant. There is no
pronouncement as to costs. 4
The petition also challenges the June 10, 1997 CA Resolution denying reconsideration.

The Facts
The facts as found by the Court of Appeals are as follows:
Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc.'s amended
complaint alleged that on 14 February 1989, plaintiff-appellant entered into an
agreement with defendant-appellee Motorich Sales Corporation for the transfer to
it of a parcel of land identified as Lot 30, Block 1 of the Acropolis Greens
Subdivision located in the District of Murphy, Quezon City. Metro Manila,
containing an area of Four Hundred Fourteen (414) square meters, covered by TCT
No. (362909) 2876: that as stipulated in the Agreement of 14 February 1989,
plaintiff-appellant paid the downpayment in the sum of One Hundred Thousand
(P100,000.00) Pesos, the balance to be paid on or before March 2, 1989; that on
March 1, 1989. Mr. Andres T. Co, president of plaintiff-appellant corporation, wrote

a letter to defendant-appellee Motorich Sales Corporation requesting for a

computation of the balance to be paid: that said letter was coursed through
defendant-appellee's broker. Linda Aduca, who wrote the computation of the
balance: that on March 2, 1989, plaintiff-appellant was ready with the amount
corresponding to the balance, covered by Metrobank Cashier's Check No. 004223,
payable to defendant-appellee Motorich Sales Corporation; that plaintiff-appellant
and defendant-appellee Motorich Sales Corporation were supposed to meet in the
office of plaintiff-appellant but defendant-appellee's treasurer, Nenita Lee
Gruenberg, did not appear; that defendant-appellee Motorich Sales Corporation
despite repeated demands and in utter disregard of its commitments had refused
to execute the Transfer of Rights/Deed of Assignment which is necessary to
transfer the certificate of title; that defendant ACL Development Corp. is
impleaded as a necessary party since Transfer Certificate of Title No. (362909)
2876 is still in the name of said defendant; while defendant JNM Realty &
Development Corp. is likewise impleaded as a necessary party in view of the fact
that it is the transferor of right in favor of defendant-appellee Motorich Sales
Corporation: that on April 6, 1989, defendant ACL Development Corporation and
Motorich Sales Corporation entered into a Deed of Absolute Sale whereby the
former transferred to the latter the subject property; that by reason of said
transfer, the Registry of Deeds of Quezon City issued a new title in the name of
Motorich Sales Corporation, represented by defendant-appellee Nenita Lee
Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate of Title No.
3571; that as a result of defendants-appellees Nenita Lee Gruenberg and Motorich
Sales Corporation's bad faith in refusing to execute a formal Transfer of
Rights/Deed of Assignment, plaintiff-appellant suffered moral and nominal
damages which may be assessed against defendants-appellees in the sum of Five
Hundred Thousand (500,000.00) Pesos; that as a result of defendants-appellees
Nenita Lee Gruenberg and Motorich Sales Corporation's unjustified and
unwarranted failure to execute the required Transfer of Rights/Deed of Assignment
or formal deed of sale in favor of plaintiff-appellant, defendants-appellees should
be assessed exemplary damages in the sum of One Hundred Thousand
(P100,000.00) Pesos; that by reason of defendants-appellees' bad faith in refusing
to execute a Transfer of Rights/Deed of Assignment in favor of plaintiff-appellant,
the latter lost the opportunity to construct a residential building in the sum of One
Hundred Thousand (P100,000.00) Pesos; and that as a consequence of
defendants-appellees Nenita Lee Gruenberg and Motorich Sales Corporation's bad
faith in refusing to execute a deed of sale in favor of plaintiff-appellant, it has
been constrained to obtain the services of counsel at an agreed fee of One
Hundred Thousand (P100,000.00) Pesos plus appearance fee for every
appearance in court hearings.
In its answer, defendants-appellees Motorich Sales Corporation and Nenita Lee
Gruenberg interposed as affirmative defense that the President and Chairman of
Motorich did not sign the agreement adverted to in par. 3 of the amended
complaint; that Mrs. Gruenberg's signature on the agreement (ref: par. 3 of
Amended Complaint) is inadequate to bind Motorich. The other signature, that of
Mr. Reynaldo Gruenberg, President and Chairman of Motorich, is required: that
plaintiff knew this from the very beginning as it was presented a copy of the

Transfer of Rights (Annex B of amended complaint) at the time the Agreement

(Annex B of amended complaint) was signed; that plaintiff-appellant itself drafted
the Agreement and insisted that Mrs. Gruenberg accept the P100,000.00 as
earnest money; that granting, without admitting, the enforceability of the
agreement, plaintiff-appellant nonetheless failed to pay in legal tender within the
stipulated period (up to March 2, 1989); that it was the understanding between
Mrs. Gruenberg and plaintiff-appellant that the Transfer of Rights/Deed of
Assignment will be signed only upon receipt of cash payment; thus they agreed
that if the payment be in check, they will meet at a bank designated by plaintiffappellant where they will encash the check and sign the Transfer of Rights/Deed.
However, plaintiff-appellant informed Mrs. Gruenberg of the alleged availability of
the check, by phone, only after banking hours.

In the light of the foregoing, the Court hereby renders judgment DISMISSING the
complaint at instance for lack of merit.
"Defendants" counterclaim is also DISMISSED for lack of basis. (Decision, pp. 78; Rollo, pp. 34-35)
For clarity, the Agreement dated February 14, 1989 is reproduced hereunder:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:

On the basis of the evidence, the court a quo rendered the judgment appealed
from[,] dismissing plaintiff-appellant's complaint, ruling that:

This Agreement, made and entered into by and between:

The issue to be resolved is: whether plaintiff had the right to compel defendants to
execute a deed of absolute sale in accordance with the agreement of February 14,
1989: and if so, whether plaintiff is entitled to damage.

MOTORICH SALES CORPORATION, a corporation duly organized and existing under and by
virtue of Philippine Laws, with principal office address at 5510 South Super Hi-way cor.
Balderama St., Pio del Pilar. Makati, Metro Manila, represented herein by its Treasurer,
NENITA LEE GRUENBERG, hereinafter referred to as the TRANSFEROR;

As to the first question, there is no evidence to show that defendant Nenita Lee
Gruenberg was indeed authorized by defendant corporation. Motorich Sales, to
dispose of that property covered by T.C.T. No. (362909) 2876. Since the property
is clearly owned by the corporation. Motorich Sales, then its disposition should be
governed by the requirement laid down in Sec. 40. of the Corporation Code of the
Philippines, to wit:
Sec. 40, Sale or other disposition of assets. Subject to the provisions of existing laws on
illegal combination and monopolies, a corporation may by a majority vote of its board of
directors . . . sell, lease, exchange, mortgage, pledge or otherwise dispose of all or
substantially all of its property and assets including its goodwill . . . when authorized by
the vote of the stockholders representing at least two third (2/3) of the outstanding capital
stock . . .
No such vote was obtained by defendant Nenita Lee Gruenberg for that proposed
sale[;] neither was there evidence to show that the supposed transaction was
ratified by the corporation. Plaintiff should have been on the look out under these
circumstances. More so, plaintiff himself [owns] several corporations (tsn dated
August 16, 1993, p. 3) which makes him knowledgeable on corporation matters.
Regarding the question of damages, the Court likewise, does not find substantial
evidence to hold defendant Nenita Lee Gruenberg liable considering that she did
not in anyway misrepresent herself to be authorized by the corporation to sell
the property to plaintiff (tsn dated September 27, 1991, p. 8).

and
SAN JUAN STRUCTURAL & STEEL FABRICATORS, a corporation duly organized and existing
under and by virtue of the laws of the Philippines, with principal office address at
Sumulong Highway, Barrio Mambungan, Antipolo, Rizal, represented herein by its
President, ANDRES T. CO, hereinafter referred to as the TRANSFEREE.
WITNESSETH, That:
WHEREAS, the TRANSFEROR is the owner of a parcel of land identified as Lot 30 Block 1 of
the ACROPOLIS GREENS SUBDIVISION located at the District of Murphy, Quezon City,
Metro Manila, containing an area of FOUR HUNDRED FOURTEEN (414) SQUARE METERS,
covered by a TRANSFER OF RIGHTS between JNM Realty & Dev. Corp. as the Transferor
and Motorich Sales Corp. as the Transferee;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have
agreed as follows:
1. That the purchase price shall be at FIVE THOUSAND TWO HUNDRED PESOS (P5,200.00)
per square meter; subject to the following terms:
a. Earnest money amounting to ONE HUNDRED THOUSAND PESOS (P100,000.00), will be
paid upon the execution of this agreement and shall form part of the total purchase price;
b. Balance shall be payable on or before March 2, 1989;

2. That the monthly amortization for the month of February 1989 shall be for the account
of the Transferor; and that the monthly amortization starting March 21, 1989 shall be for
the account of the Transferee;

The Issues
Before this Court, petitioner raises the following issues:

The transferor warrants that he [sic] is the lawful owner of the above-described property
and that there [are] no existing liens and/or encumbrances of whatsoever nature;

I. Whether or not the doctrine of piercing the veil of corporate fiction is applicable in
the instant case

In case of failure by the Transferee to pay the balance on the date specified on 1, (b), the
earnest money shall be forfeited in favor of the Transferor.

II. Whether or not the appellate court may consider matters which the parties failed
to raise in the lower court

That upon full payment of the balance, the TRANSFEROR agrees to execute a TRANSFER
OF RIGHTS/DEED OF ASSIGNMENT in favor of the TRANSFEREE.

III. Whether or not there is a valid and enforceable contract between the petitioner
and the respondent corporation

IN WITNESS WHEREOF, the parties have hereunto set their hands this 14th day of
February, 1989 at Greenhills, San Juan, Metro Manila, Philippines.

IV. Whether or not the Court of Appeals erred in holding that there is a valid
correction/substitution of answer in the transcript of stenographic note[s].

MOTORICH SALES CORPORATION SAN JUAN STRUCTURAL & STEEL FABRICATORS

V. Whether or not respondents are liable for damages and attorney's fees

TRANSFEROR TRANSFEREE

The Court synthesized the foregoing and will thus discuss them seriatim as follows:
[SGD.] [SGD.]

1. Was there a valid contract of sale between petitioner and Motorich?

By. NENITA LEE GRUENBERG By: ANDRES T. CO

Treasurer President

2. May the doctrine of piercing the veil of corporate fiction be applied to Motorich?
3. Is the alleged alteration of Gruenberg's testimony as recorded in the transcript of
stenographic notes material to the disposition of this case?

Signed In the presence of:

4. Are respondents liable for damages and attorney's fees?
[SGD.] [SGD.]
The Court's Ruling
6
The petition is devoid of merit.
In its recourse before the Court of Appeals, petitioner insisted:
First Issue: Validity of Agreement
1. Appellant is entitled to compel the appellees to execute a Deed of Absolute Sale in
accordance with the Agreement of February 14, 1989,
2. Plaintiff is entitled to damages.

As stated earlier, the Court of Appeals debunked petitioner's arguments and affirmed the
Decision of the RTC with the modification that Respondent Nenita Lee Gruenberg was
ordered to refund P100,000 to petitioner, the amount remitted as "downpayment" or
"earnest money." Hence, this petition before us. 8

Petitioner San Juan Structural and Steel Fabricators, Inc. alleges that on February 14,
1989, it entered through its president, Andres Co, into the disputed Agreement with
Respondent Motorich Sales Corporation, which was in turn allegedly represented by its
treasurer, Nenita Lee Gruenberg. Petitioner insists that "[w]hen Gruenberg and Co affixed
their signatures on the contract they both consented to be bound by the terms thereof."
Ergo, petitioner contends that the contract is binding on the two corporations. We do not
agree.

True, Gruenberg and Co signed on February 14, 1989, the Agreement, according to which
a lot owned by Motorich Sales Corporation was purportedly sold. Such contract, however,
cannot bind Motorich, because it never authorized or ratified such sale.
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. 10 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 bylaws 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, bylaws, or
relevant provisions of law. 11 Thus, this Court has held that "a corporate officer or agent
may represent and bind the corporation in transactions with third persons to the extent
that the authority to do so has been conferred upon him, and this includes powers which
have been intentionally conferred, and also such powers as, in the usual course of the
particular business, are incidental to, or may be implied from, the powers intentionally
conferred, powers added by custom and usage, as usually pertaining to the particular
officer or agent, and such apparent powers as the corporation has caused persons dealing
with the officer or agent to believe that it has conferred." 12
Furthermore, the Court has also recognized the rule that "persons dealing with an
assumed agent, whether the assumed agency be a general or special one 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 (Harry Keeler v. Rodriguez, 4 Phil. 19)." 13 Unless duly
authorized, a treasurer, whose powers are limited, cannot bind the corporation in a sale of
its assets. 14
In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita
Gruenberg, its treasurer, to sell the subject parcel of land. 15 Consequently, petitioner had
the burden of proving that Nenita Gruenberg was in fact authorized to represent and bind
Motorich in the transaction. Petitioner failed to discharge this burden. Its offer of evidence
before the trial court contained no proof of such authority. 16 It has not shown any
provision of said respondent's articles of incorporation, bylaws or board resolution to
prove that Nenita Gruenberg possessed such power.

That Nenita Gruenberg is the treasurer of Motorich does not free petitioner from the
responsibility of ascertaining the extent of her authority to represent the corporation.
Petitioner cannot assume that she, by virtue of her position, was authorized to sell the
property of the corporation. Selling is obviously foreign to a corporate treasurer's function,
which generally has been described as "to receive and keep the funds of the corporation,
and to disburse them in accordance with the authority given him by the board or the
properly authorized officers."17
Neither was such real estate sale shown to be a normal business activity of Motorich. The
primary purpose of Motorich is marketing, distribution, export and import in relation to a
general merchandising business. 18 Unmistakably, its treasurer is not cloaked with actual
or apparent authority to buy or sell real property, an activity which falls way beyond the
scope of her general authority.
Art. 1874 and 1878 of the Civil Code of the Philippines provides:
Art. 1874. When a sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing:
otherwise, the sale shall be void.
Art. 1878. Special powers of attorney are necessary in the following
case:
xxx xxx xxx
(5) To enter any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable
consideration;
xxx xxx xxx.
Petitioner further contends that Respondent Motorich has ratified said contract of sale
because of its "acceptance of benefits," as evidenced by the receipt issued by Respondent
Gruenberg. 19 Petitioner is clutching at straws.
As a general rule, the acts of corporate officers within the scope of their authority are
binding on the corporation. But when these officers exceed their authority, their actions
"cannot bind the corporation, unless it has ratified such acts or is estopped from
disclaiming them." 20
In this case, there is a clear absence of proof that Motorich ever authorized Nenita
Gruenberg, or made it appear to any third person that she had the authority, to sell its
land or to receive the earnest money. Neither was there any proof that Motorich ratified,
expressly or impliedly, the contract. Petitioner rests its argument on the receipt which,
however, does not prove the fact of ratification. The document is a hand-written one, not

a corporate receipt, and it bears only Nenita Gruenberg's signature. Certainly, this
document alone does not prove that her acts were authorized or ratified by Motorich.

ego or business conduit of a person or an instrumentality, agency or adjunct of another

corporation. 32

Art. 1318 of the Civil Code lists the requisites of a valid and perfected contract: "(1)
consent of the contracting parties; (2) object certain which is the subject matter of the
contract; (3) cause of the obligation which is established." As found by the trial
court 21 and affirmed by the Court of Appeals, 22 there is no evidence that Gruenberg was
authorized to enter into the contract of sale, or that the said contract was ratified by
Motorich. This factual finding of the two courts is binding on this Court. 23 As the consent
of the seller was not obtained, no contract to bind the obligor was perfected. Therefore,
there can be no valid contract of sale between petitioner and Motorich.

Thus, the Court has consistently ruled that "[w]hen the fiction is used as a means of
perpetrating a fraud or an illegal act or as vehicle for the evasion of an existing obligation,
the circumvention of statutes, the achievement or perfection of a monopoly or generally
the perpetration of knavery or crime, the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be lifted to allow for its
consideration merely as an aggregation of individuals." 33

Because Motorich had never given a written authorization to Respondent Gruenberg to

sell its parcel of land, we hold that the February 14, 1989 Agreement entered into by the
latter with petitioner is void under Article 1874 of the Civil Code. Being inexistent and void
from the beginning, said contract cannot be ratified. 24
Second Issue:
Piercing the Corporate Veil Not Justified
Petitioner also argues that the veil of corporate fiction of Motorich should be pierced,
because the latter is a close corporation. Since "Spouses Reynaldo L. Gruenberg and
Nenita R. Gruenberg owned all or almost all or 99.866% to be accurate, of the subscribed
capital stock" 25 of Motorich, petitioner argues that Gruenberg needed no authorization
from the board to enter into the subject contract. 26 It adds that, being solely owned by
the Spouses Gruenberg, the company can treated as a close corporation which can be
bound by the acts of its principal stockholder who needs no specific authority. The Court is
not persuaded.
First, petitioner itself concedes having raised the issue belatedly, 27 not having done so
during the trial, but only when it filed its sur-rejoinder before the Court of Appeals. 28 Thus,
this Court cannot entertain said issue at this late stage of the proceedings. It is wellsettled the points of law, theories and arguments not brought to the attention of the trial
court need not be, and ordinarily will not be, considered by a reviewing court, as they
cannot be raised for the first time on appeal. 29Allowing petitioner to change horses in
midstream, as it were, is to run roughshod over the basic principles of fair play, justice
and due process.
Second, even if the above mentioned argument were to be addressed at this time, the
Court still finds no reason to uphold it. True, one of the advantages of a corporate form of
business organization is the limitation of an investor's liability to the amount of the
investment. 30 This feature flows from the legal theory that a corporate entity is separate
and distinct from its stockholders. However, the statutorily granted privilege of a
corporate veil may be used only for legitimate purposes. 31 On equitable considerations,
the veil can be disregarded when it is utilized as a shield to commit fraud, illegality or
inequity; defeat public convenience; confuse legitimate issues; or serve as a mere alter

We stress that the corporate fiction should be set aside when it becomes a shield against
liability for fraud, illegality or inequity committed on third persons. The question of
piercing the veil of corporate fiction is essentially, then, a matter of proof. In the present
case, however, the Court finds no reason to pierce the corporate veil of Respondent
Motorich. Petitioner utterly failed to establish that said corporation was formed, or that it
is operated, for the purpose of shielding any alleged fraudulent or illegal activities of its
officers or stockholders; or that the said veil was used to conceal fraud, illegality or
inequity at the expense of third persons like petitioner.
Petitioner claims that Motorich is a close corporation. We rule that it is not. Section 96 of
the Corporation Code defines a close corporation as follows:
Sec. 96. Definition and Applicability of Title. A close corporation,
within the meaning of this Code, is one whose articles of incorporation
provide that: (1) All of the corporation's issued stock of all classes,
exclusive of treasury shares, shall be held of record by not more than a
specified number of persons, not exceeding twenty (20); (2) All of the
issued stock of all classes shall be subject to one or more specified
restrictions on transfer permitted by this Title; and (3) The corporation
shall not list in any stock exchange or make any public offering of any of
its stock of any class. Notwithstanding the foregoing, a corporation shall
be deemed not a close corporation when at least two-thirds (2/3) of its
voting stock or voting rights is owned or controlled by another
corporation which is not a close corporation within the meaning of this
Code. . . . .
The articles of incorporation 34 of Motorich Sales Corporation does not contain any
provision stating that (1) the number of stockholders shall not exceed 20, or (2) a
preemption of shares is restricted in favor of any stockholder or of the corporation, or (3)
listing its stocks in any stock exchange or making a public offering of such stocks is
prohibited. From its articles, it is clear that Respondent Motorich is not a close
corporation. 35 Motorich does not become one either, just because Spouses Reynaldo and
Nenita Gruenberg owned 99.866% of its subscribed capital stock. The "[m]ere ownership
by a single stockholder or by another corporation of all or capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporate personalities." 36 So,
too, a narrow distribution of ownership does not, by itself, make a close corporation.

Petitioner cites Manuel R. Dulay Enterprises, Inc. v. Court of Appeals 37 wherein the Court
ruled that ". . . petitioner corporation is classified as a close corporation and,
consequently, a board resolution authorizing the sale or mortgage of the subject property
is not necessary to bind the corporation for the action of its president." 38 But the factual
milieu in Dulay is not on all fours with the present case. In Dulay, the sale of real property
was contracted by the president of a close corporation with the knowledge and
acquiescence of its board of directors. 39 In the present case, Motorich is not a close
corporation, as previously discussed, and the agreement was entered into by the
corporate treasurer without the knowledge of the board of directors.
The Court is not unaware that there are exceptional cases where "an action by a director,
who singly is the controlling stockholder, may be considered as a binding corporate act
and a board action as nothing more than a mere formality." 40 The present case, however,
is not one of them.
As stated by petitioner, Spouses Reynaldo and Nenita Gruenberg own "almost 99.866%"
of Respondent Motorich.41 Since Nenita is not the sole controlling stockholder of Motorich,
the aforementioned exception does not apply. Grantingarguendo that the corporate veil of
Motorich is to be disregarded, the subject parcel of land would then be treated as conjugal
property of Spouses Gruenberg, because the same was acquired during their marriage.
There being no indication that said spouses, who appear to have been married before the
effectivity of the Family Code, have agreed to a different property regime, their property
relations would be governed by conjugal partnership of gains. 42 As a consequence, Nenita
Gruenberg could not have effected a sale of the subject lot because "[t]here is no coownership between the spouses in the properties of the conjugal partnership of gains.
Hence, neither spouse can alienate in favor of another his or interest in the partnership or
in any property belonging to it; neither spouse can ask for a partition of the properties
before the partnership has been legally dissolved." 43
Assuming further, for the sake of argument, that the spouses' property regime is the
absolute community of property, the sale would still be invalid. Under this regime,
"alienation of community property must have the written consent of the other spouse or
he authority of the court without which the disposition or encumbrance is void." 44 Both
requirements are manifestly absent in the instant case.
Third Issue: Challenged Portion of TSN Immaterial
Petitioner calls our attention to the following excerpt of the transcript of stenographic
notes (TSN):
Q Did you ever represent to Mr. Co that you were
authorized by the corporation to sell the property?
A Yes, sir.

45

Petitioner claims that the answer "Yes" was crossed out, and, in its place was written a
"No" with an initial scribbled above it. 46 This, however, is insufficient to prove that Nenita
Gruenberg was authorized to represent Respondent Motorich in the sale of its immovable
property. Said excerpt be understood in the context of her whole testimony. During her
cross-examination. Respondent Gruenberg testified:
Q So, you signed in your capacity as the treasurer?
[A] Yes, sir.
Q Even then you kn[e]w all along that you [were] not authorized?
A Yes, sir.
Q You stated on direct examination that you did not represent that you were
authorized to sell the property?
A Yes, sir.
Q But you also did not say that you were not authorized to sell the property, you
did not tell that to Mr. Co, is that correct?
A That was not asked of me.
Q Yes, just answer it.
A I just told them that I was the treasurer of the corporation and it [was] also the
president who [was] also authorized to sign on behalf of the corporation.
Q You did not say that you were not authorized nor did you say that you were
authorized?
A Mr. Co was very interested to purchase the property and he offered to put up a
P100,000.00 earnest money at that time. That was our first meeting. 47
Clearly then, Nenita Gruenberg did not testify that Motorich had authorized her to sell its
property. On the other hand, her testimony demonstrates that the president of Petitioner
Corporation, in his great desire to buy the property, threw caution to the wind by offering
and paying the earnest money without first verifying Gruenberg's authority to sell the lot.
Fourth Issue:
Damages and Attorney's Fees

Finally, petitioner prays for damages and attorney's fees, alleging that "[i]n an utter
display of malice and bad faith, respondents attempted and succeeded in impressing on
the trial court and [the] Court of Appeals that Gruenberg did not represent herself as
authorized by Respondent Motorich despite the receipt issued by the former specifically
indicating that she was signing on behalf of Motorich Sales Corporation. Respondent
Motorich likewise acted in bad faith when it claimed it did not authorize Respondent
Gruenberg and that the contract [was] not binding, [insofar] as it [was] concerned,
despite receipt and enjoyment of the proceeds of Gruenberg's act." 48Assuming that
Respondent Motorich was not a party to the alleged fraud, petitioner maintains that
Respondent Gruenberg should be held liable because she "acted fraudulently and in bad
faith [in] representing herself as duly authorized by [R]espondent [C]orporation." 49
As already stated, we sustain the findings of both the trial and the appellate courts that
the foregoing allegations lack factual bases. Hence, an award of damages or attorney's
fees cannot be justified. The amount paid as "earnest money" was not proven to have
redounded to the benefit of Respondent Motorich. Petitioner claims that said amount was
deposited to the account of Respondent Motorich, because "it was deposited with the
account of Aren Commercial c/o Motorich Sales Corporation." 50 Respondent Gruenberg,
however, disputes the allegations of petitioner. She testified as follows:
Q You voluntarily accepted the P100,000.00, as a
matter of fact, that was encashed, the check was
encashed.
A Yes. sir, the check was paid in my name and I
deposit[ed] it.
Q In your account?
A Yes, sir.

51

In any event, Gruenberg offered to return the amount to petitioner ". . . since the
sale did not push through." 52
Moreover, we note that Andres Co is not a neophyte in the world of corporate business. He
has been the president of Petitioner Corporation for more than ten years and has also
served as chief executive of two other corporate entities. 53 Co cannot feign ignorance of
the scope of the authority of a corporate treasurer such as Gruenberg. Neither can he be
oblivious to his duty to ascertain the scope of Gruenberg's authorization to enter into a
contract to sell a parcel of land belonging to Motorich.
Indeed, petitioner's claim of fraud and bad faith is unsubstantiated and fails to persuade
the Court. Indubitably, petitioner appears to be the victim of its own officer's negligence in
entering into a contract with and paying an unauthorized officer of another corporation.

As correctly ruled by the Court of Appeals, however, Nenita Gruenberg should be ordered
to return to petitioner the amount she received as earnest money, as "no one shall enrich
himself at the expense of another." 54 a principle embodied in Article 2154 of Civil
Code. 55 Although there was no binding relation between them, petitioner paid Gruenberg
on the mistaken belief that she had the authority to sell the property of Motorich. 56 Article
2155 of Civil Code provides that "[p]ayment by reason of a mistake in the contruction or
application of a difficult question of law may come within the scope of the preceding
article."
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.
SO ORDERED.

1. The sum of P1,750,050.00, with interests from the filing of the second amended
complaint;
2. The sum of P50,000.00, as attorneys fees;
3. The sum of P20,000.00, as moral damages
4. And to pay the costs of suit.
x x x x x x x x x[4]
The Facts

TUAZON V. RAMOS, GR NO 156262

PANGANIBAN, J.:
Stripped of nonessentials, the present case involves the collection of a sum of money.
Specifically, this case arose from the failure of petitioners to pay respondents
predecessor-in-interest. This fact was shown by the non-encashment of checks issued by a
third person, but indorsed by herein Petitioner Maria Tuazon in favor of the said
predecessor. Under these circumstances, to enable respondents to collect on the
indebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suit is
directed, not against the drawer, but against the debtor who indorsed the checks in
payment of the obligation.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, challenging the
July 31, 2002 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 46535. The
decretal portion of the assailed Decision reads:
WHEREFORE, the appeal is DISMISSED and the appealed decision is AFFIRMED.

On the other hand, the affirmed Decision[3] of Branch 34 of the Regional Trial Court (RTC)
of Gapan, Nueva Ecija, disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the
plaintiffs, as follows:

The facts are narrated by the CA as follows:

[Respondents] alleged that between the period of May 2, 1988 and June 5, 1988, spouses
Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from [the deceased
Bartolome] Ramos [predecessor-in-interest of respondents]. That of this [quantity,] x x x
only 4,437 cavans [have been paid for so far], leaving unpaid 3,889 cavans valued at
P1,211,919.00. In payment therefor, the spouses Tuazon issued x x x [several] Traders
Royal Bank checks.
xxxxxxxxx
[B]ut when these [checks] were encashed, all of the checks bounced due to insufficiency
of funds. [Respondents] advanced that before issuing said checks[,] spouses Tuazon
already knew that they had no available fund to support the checks, and they failed to
provide for the payment of these despite repeated demands made on them.
[Respondents] averred that because spouses Tuazon anticipated that they would be sued,
they conspired with the other [defendants] to defraud them as creditors by executing x x
x fictitious sales of their properties. They executed x x x simulated sale[s] [of three lots] in
favor of the x x x spouses Buenaventura x x x[,] as well as their residential lot and the
house thereon[,] all located at Nueva Ecija, and another simulated deed of sale dated July
12, 1988 of a Stake Toyota registered with the Land Transportation Office of Cabanatuan
City on September 7, 1988. [Co-petitioner] Melecio Tuazon, a son of spouses Tuazon,
registered a fictitious Deed of Sale on July 19, 1988 x x x over a residential lot located at
Nueva Ecija. Another simulated sale of a Toyota Willys was executed on January 25, 1988
in favor of their other son, [co-petitioner] Alejandro Tuazon x x x. As a result of the said
sales, the titles of these properties issued in the names of spouses Tuazon were cancelled
and new ones were issued in favor of the [co-]defendants spouses Buenaventura,
Alejandro Tuazon and Melecio Tuazon. Resultantly, by the said ante-dated and simulated
sales and the corresponding transfers there was no more property left registered in the
names of spouses Tuazon answerable to creditors, to the damage and prejudice of
[respondents].
For their part, defendants denied having purchased x x x rice from [Bartolome] Ramos.
They alleged that it was Magdalena Ramos, wife of said deceased, who owned and traded
the merchandise and Maria Tuazon was merely her agent. They argued that it was
Evangeline Santos who was the buyer of the rice and issued the checks to Maria Tuazon
as payments therefor. In good faith[,] the checks were received [by petitioner] from
Evangeline Santos and turned over to Ramos without knowing that these were not funded.
And it is for this reason that [petitioners] have been insisting on the inclusion of

Evangeline Santos as an indispensable party, and her non-inclusion was a fatal error.
Refuting that the sale of several properties were fictitious or simulated, spouses Tuazon
contended that these were sold because they were then meeting financial difficulties but
the disposals were made for value and in good faith and done before the filing of the
instant suit. To dispute the contention of plaintiffs that they were the buyers of the rice,
they argued that there was no sales invoice, official receipts or like evidence to prove this.
They assert that they were merely agents and should not be held answerable.[5]
The corresponding civil and criminal cases were filed by respondents against Spouses
Tuazon. Those cases were later consolidated and amended to include Spouses Anastacio
and Mary Buenaventura, with Alejandro Tuazon and Melecio Tuazon as additional
defendants. Having passed away before the pretrial, Bartolome Ramos was substituted by
his heirs, herein respondents.
Contending that Evangeline Santos was an indispensable party in the case, petitioners
moved to file a third-party complaint against her. Allegedly, she was primarily liable to
respondents, because she was the one who had purchased the merchandise from their
predecessor, as evidenced by the fact that the checks had been drawn in her name. The
RTC, however, denied petitioners Motion.
Since the trial court acquitted petitioners in all three of the consolidated criminal cases,
they appealed only its decision finding them civilly liable to respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed to prove the existence of an
agency between respondents and Spouses Tuazon. The appellate court disbelieved
petitioners contention that Evangeline Santos should have been impleaded as an
indispensable party. Inasmuch as all the checks had been indorsed by Maria Tuazon, who
thereby became liable to subsequent holders for the amounts stated in those checks,
there was no need to implead Santos.
Hence, this Petition.[6]
Issues
Petitioners raise the following issues for our consideration:
1. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not
agents of the respondents.
2. Whether or not the Honorable Court of Appeals erred in rendering judgment against the
petitioners despite x x x the failure of the respondents to include in their action
Evangeline Santos, an indispensable party to the suit.[7]

Well-entrenched is the rule that the Supreme Courts role in a petition under Rule 45 is
limited to reviewing errors of law allegedly committed by the Court of Appeals. Factual
findings of the trial court, especially when affirmed by the CA, are conclusive on the
parties and this Court.[8] Petitioners have not given us sufficient reasons to deviate from
this rule.
In a contract of agency, one binds oneself to render some service or to do something in
representation or on behalf of another, with the latters consent or authority.[9] The
following are the elements of agency: (1) the parties consent, express or implied, to
establish the relationship; (2) the object, which is the execution of a juridical act in
relation to a third person; (3) the representation, by which the one who acts as an agent
does so, not for oneself, but as a representative; (4) the limitation that the agent acts
within the scope of his or her authority.[10] As the basis of agency is representation, there
must be, on the part of the principal, an actual intention to appoint, an intention naturally
inferable from the principals words or actions. In the same manner, there must be an
intention on the part of the agent to accept the appointment and act upon it. Absent such
mutual intent, there is generally no agency.[11]
This Court finds no reversible error in the findings of the courts a quo that petitioners were
the rice buyers themselves; they were not mere agents of respondents in their rice
dealership. The question of whether a contract is one of sale or of agency depends on the
intention of the parties.[12]
The declarations of agents alone are generally insufficient to establish the fact or extent
of their authority.[13] The law makes no presumption of agency; proving its existence,
nature and extent is incumbent upon the person alleging it.[14] In the present case,
petitioners raise the fact of agency as an affirmative defense, yet fail to prove its
existence.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos for
collection of the amounts represented by the bounced checks, in a separate civil case that
they sought to be consolidated with the current one. If, as they claim, they were mere
agents of respondents, petitioners should have brought the suit against Santos for and on
behalf of their alleged principal, in accordance with Section 2 of Rule 3 of the Rules on
Civil Procedure.[15] Their filing a suit against her in their own names negates their claim
that they acted as mere agents in selling the rice obtained from Bartolome Ramos.

Second Issue:
Indispensable Party

The Courts Ruling

Petitioners argue that the lower courts erred in not allowing Evangeline Santos to be
impleaded as an indispensable party. They insist that respondents Complaint against
them is based on the bouncing checks she issued; hence, they point to her as the person
primarily liable for the obligation.

The Petition is unmeritorious.

First Issue:
Agency

We hold that respondents cause of action is clearly founded on petitioners failure to pay
the purchase price of the rice. The trial court held that Petitioner Maria Tuazon had
indorsed the questioned checks in favor of respondents, in accordance with Sections 31

and 63 of the Negotiable Instruments Law.[16] That Santos was the drawer of the checks
is thus immaterial to the respondents cause of action.
As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks
were to be accepted or paid, or both, according to their tenor; and that in case they were
dishonored, she would pay the corresponding amount.[17] After an instrument is
dishonored by nonpayment, indorsers cease to be merely secondarily liable; they become
principal debtors whose liability becomes identical to that of the original obligor. The
holder of a negotiable instrument need not even proceed against the maker before suing
the indorser.[18] Clearly, Evangeline Santos -- as the drawer of the checks -- is not an
indispensable party in an action against Maria Tuazon, the indorser of the checks.
Indispensable parties are defined as parties in interest without whom no final
determination can be had.[19] The instant case was originally one for the collection of the
purchase price of the rice bought by Maria Tuazon from respondents predecessor. In this
case, it is clear that there is no privity of contract between respondents and Santos.
Hence, a final determination of the rights and interest of the parties may be made without
any need to implead her.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.

MANILA MEMORIAL PARK CEMETERY, INC., petitioner,

vs.
PEDRO L. LINSANGAN, respondent.
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 Resolution2 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
document6 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:

G.R. No. 151319

November 22, 2004

(Signed)

(MRS.) FLORENCIA C. BALUYOT

Agency Manager
Holy 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 of P95,000.00 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 Complaint7for Breach of Contract and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660
was cancelled conformably with the terms of the contract 8 because of non-payment of
arrearages.9 MMPCI stated that Baluyot was not an agent but an independent contractor,
and as such was not authorized to represent MMPCI or to use its name except as to the
extent expressly stated in the Agency Manager Agreement. 10 Moreover, MMPCI was not
aware of the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact
received a down payment and monthly installments as indicated in the contract. 11 Official
receipts showing the application of payment were turned over to Baluyot whom Atty.
Linsangan had from the beginning allowed to receive the same in his behalf. Furthermore,
whatever misimpression that Atty. Linsangan may have had must have been rectified by
the Account Updating Arrangement signed by Atty. Linsangan which states that he
"expressly admits that Contract No. 28660 'on account of serious delinquencyis now due
for cancellation under its terms and conditions.''' 12

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 longpracticing 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.35However, 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.

powers granted by the principal. In this case, however, the agent is liable if he
undertook to secure the principal's ratification.

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

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

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

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.45Nevertheless, 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 Answer48 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 letter50 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 the P1,800.00
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.
G.R. No. L-57339 December 29, 1983
AIR FRANCE vs HONORABLE COURT OF APPEALS

MELENCIO-HERRERA, J.:
In this petition for review on certiorari, petitioner AIR FRANCE assails the Decision of then
respondent Court of Appeals 1 promulgated on 15 December 1980 in CA-G.R. No. 58164-R,
entitled "Jose G. Gana, et al. vs. Sociedad Nacionale Air France", which reversed the Trial
Court's judgment dismissing the Complaint of private respondents for damages arising
from breach of contract of carriage, and awarding instead P90,000.00 as moral damages.
Sometime in February, 1970, the late Jose G. Gana and his family, numbering nine (the
GANAS), purchased from AIR FRANCE through Imperial Travels, Incorporated, a duly
authorized travel agent, nine (9) "open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of US$2,528.85 for their
economy and first class fares. Said tickets were bought at the then prevailing exchange
rate of P3.90 per US$1.00. The GANAS also paid travel taxes of P100.00 for each
passenger.
On 24 April 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with
other tickets for the same route. At this time, the GANAS were booked for the
Manila/Osaka segment on AIR FRANCE Flight 184 for 8 May 1970, and for the Tokyo/Manila
return trip on AIR FRANCE Flight 187 on 22 May 1970. The aforesaid tickets were valid
until 8 May 1971, the date written under the printed words "Non valuable apres de
(meaning, "not valid after the").
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance of Teresita Manucdoc, a
Secretary of the Sta. Clara Lumber Company where Jose Gana was the Director and
Treasurer, for the extension of the validity of their tickets, which were due to expire on 8
May 1971. Teresita enlisted the help of Lee Ella Manager of the Philippine Travel Bureau,
who used to handle travel arrangements for the personnel of the Sta. Clara Lumber
Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE. The tickets
were returned to Ella who was informed that extension was not possible unless the fare
differentials resulting from the increase in fares triggered by an increase of the exchange
rate of the US dollar to the Philippine peso and the increased travel tax were first paid.
Ella then returned the tickets to Teresita and informed her of the impossibility of
extension.
In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day
before the expiry date. In the morning of the very day of their scheduled departure on the
first leg of their trip, Teresita requested travel agent Ella to arrange the revalidation of the
tickets. Ella gave the same negative answer and warned her that although the tickets
could be used by the GANAS if they left on 7 May 1971, the tickets would no longer be
valid for the rest of their trip because the tickets would then have expired on 8 May 1971.
Teresita replied that it will be up to the GANAS to make the arrangements. With that
assurance, Ella on his own, attached to the tickets validating stickers for the Osaka/Tokyo
flight, one a JAL. sticker and the other an SAS (Scandinavian Airways System) sticker. The
SAS sticker indicates thereon that it was "Reevaluated by: the Philippine Travel Bureau,

Branch No. 2" (as shown by a circular rubber stamp) and signed "Ador", and the date is
handwritten in the center of the circle. Then appear under printed headings the notations:
JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status). Apparently, Ella made no more
attempt to contact AIR FRANCE as there was no more time.
Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of 7 May
1971 on board AIR FRANCE Flight 184 for Osaka, Japan. There is no question with respect
to this leg of the trip.
However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the
tickets because of their expiration, and the GANAS had to purchase new tickets. They
encountered the same difficulty with respect to their return trip to Manila as AIR FRANCE
also refused to honor their tickets. They were able to return only after pre-payment in
Manila, through their relatives, of the readjusted rates. They finally flew back to Manila on
separate Air France Frights on 19 May 1971 for Jose Gana and 26 May 1971 for the rest of
the family.
On 25 August 1971, the GANAS commenced before the then Court of First Instance of
Manila, Branch III, Civil Case No. 84111 for damages arising from breach of contract of
carriage.
AIR FRANCE traversed the material allegations of the Complaint and alleged that the
GANAS brought upon themselves the predicament they found themselves in and assumed
the consequential risks; that travel agent Ella's affixing of validating stickers on the tickets
without the knowledge and consent of AIR FRANCE, violated airline tariff rules and
regulations and was beyond the scope of his authority as a travel agent; and that AIR
FRANCE was not guilty of any fraudulent conduct or bad faith.
On 29 May 1975, the Trial Court dismissed the Complaint based on Partial and Additional
Stipulations of Fact as wen as on the documentary and testimonial evidence.
The GANAS appealed to respondent Appellate Court. During the pendency of the appeal,
Jose Gana, the principal plaintiff, died.
On 15 December 1980, respondent Appellate Court set aside and reversed the Trial
Court's judgment in a Decision, which decreed:
WHEREFORE, the decision appealed from is set aside. Air France is hereby ordered to
pay appellants moral damages in the total sum of NINETY THOUSAND PESOS
(P90,000.00) plus costs. SO ORDERED. 2
Reconsideration sought by AIR FRANCE was denied, hence, petitioner's recourse before
this instance, to which we gave due course.
The crucial issue is whether or not, under the environmental milieu the GANAS have made
out a case for breach of contract of carriage entitling them to an award of damages.

We are constrained to reverse respondent Appellate Court's affirmative ruling thereon.

Pursuant to tariff rules and regulations of the International Air Transportation Association
(IATA), included in paragraphs 9, 10, and 11 of the Stipulations of Fact between the parties
in the Trial Court, dated 31 March 1973, an airplane ticket is valid for one year. "The
passenger must undertake the final portion of his journey by departing from the last point
at which he has made a voluntary stop before the expiry of this limit (parag. 3.1.2. ) ...
That is the time allowed a passenger to begin and to complete his trip (parags. 3.2 and
3.3.). ... A ticket can no longer be used for travel if its validity has expired before the
passenger completes his trip (parag. 3.5.1.) ... To complete the trip, the passenger must
purchase a new ticket for the remaining portion of the journey" (ibid.) 3
From the foregoing rules, it is clear that AIR FRANCE cannot be faulted for breach of
contract when it dishonored the tickets of the GANAS after 8 May 1971 since those tickets
expired on said date; nor when it required the GANAS to buy new tickets or have their
tickets re-issued for the Tokyo/Manila segment of their trip. Neither can it be said that,
when upon sale of the new tickets, it imposed additional charges representing fare
differentials, it was motivated by self-interest or unjust enrichment considering that an
increase of fares took effect, as authorized by the Civil Aeronautics Board (CAB) in April,
1971. This procedure is well in accord with the IATA tariff rules which provide:
6. TARIFF RULES
7. APPLICABLE FARE ON THE DATE OF DEPARTURE
3.1 General Rule.
All journeys must be charged for at the fare (or charge) in effect on the date on
which transportation commences from the point of origin. Any ticket sold prior to a
change of fare or charge (increase or decrease) occurring between the date of
commencement of the journey, is subject to the above general rule and must be
adjusted accordingly. A new ticket must be issued and the difference is to be
collected or refunded as the case may be. No adjustment is necessary if the
increase or decrease in fare (or charge) occurs when the journey is already
commenced. 4
The GANAS cannot defend by contending lack of knowledge of those rules since the
evidence bears out that Teresita, who handled travel arrangements for the GANAS, was
duly informed by travel agent Ella of the advice of Reno, the Office Manager of Air France,
that the tickets in question could not be extended beyond the period of their validity
without paying the fare differentials and additional travel taxes brought about by the
increased fare rate and travel taxes.
ATTY. VALTE
Q What did you tell Mrs. Manucdoc, in turn after being told this by Mr. Rillo?

A I told her, because that is the reason why they accepted again the tickets when
we returned the tickets spin, that they could not be extended. They could be
extended by paying the additional fare, additional tax and additional exchange
during that time.
Q You said so to Mrs. Manucdoc?
A Yes, sir." ...

The ruling relied on by respondent Appellate Court, therefore, in KLM. vs. Court of
Appeals, 65 SCRA 237 (1975), holding that it would be unfair to charge respondents
therein with automatic knowledge or notice of conditions in contracts of adhesion, is
inapplicable. To all legal intents and purposes, Teresita was the agent of the GANAS and
notice to her of the rejection of the request for extension of the validity of the tickets was
notice to the GANAS, her principals.
The SAS validating sticker for the Osaka/Tokyo flight affixed by Era showing reservations
for JAL. Flight 108 for 16 May 1971, without clearing the same with AIR FRANCE allegedly
because of the imminent departure of the GANAS on the same day so that he could not
get in touch with Air France 6 was certainly in contravention of IATA rules although as he
had explained, he did so upon Teresita's assurance that for the onward flight from Osaka
and return, the GANAS would make other arrangements.
Q Referring you to page 33 of the transcript of the last session, I had this
question which reads as follows: 'But did she say anything to you when you said
that the tickets were about to expire?' Your answer was: 'I am the one who asked
her. At that time I told her if the tickets being used ... I was telling her what about
their bookings on the return. What about their travel on the return? She told me
it is up for the Ganas to make the arrangement.' May I know from you what did
you mean by this testimony of yours?
A That was on the day when they were asking me on May 7, 1971 when they
were checking the tickets. I told Mrs. Manucdoc that I was going to get the
tickets. I asked her what about the tickets onward from the return from Tokyo,
and her answer was it is up for the Ganas to make the arrangement, because I
told her that they could leave on the seventh, but they could take care of that
when they arrived in Osaka.
Q What do you mean?
A The Ganas will make the arrangement from Osaka, Tokyo and Manila.
Q What arrangement?
A The arrangement for the airline because the tickets would expire on May 7, and
they insisted on leaving. I asked Mrs. Manucdoc what about the return onward

portion because they would be travelling to Osaka, and her answer was, it is up
to for the Ganas to make the arrangement.
Q Exactly what were the words of Mrs. Manucdoc when you told her that? If you
can remember, what were her exact words?
A Her words only, it is up for the Ganas to make the arrangement.
Q This was in Tagalog or in English?
A I think it was in English. ...

The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed
the GANAS to leave is not tantamount to an implied ratification of travel agent Ella's
irregular actuations. It should be recalled that the GANAS left in Manila the day before the
expiry date of their tickets and that "other arrangements" were to be made with respect
to the remaining segments. Besides, the validating stickers that Ella affixed on his own
merely reflect the status of reservations on the specified flight and could not legally serve
to extend the validity of a ticket or revive an expired one.
The conclusion is inevitable that the GANAS brought upon themselves the predicament
they were in for having insisted on using tickets that were due to expire in an effort,
perhaps, to beat the deadline and in the thought that by commencing the trip the day
before the expiry date, they could complete the trip even thereafter. It should be recalled
that AIR FRANCE was even unaware of the validating SAS and JAL. stickers that Ella had
affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted within
their contractual rights when they dishonored the tickets on the remaining segments of
the trip and when AIR FRANCE demanded payment of the adjusted fare rates and travel
taxes for the Tokyo/Manila flight. WHEREFORE, the judgment under review is hereby
reversed and set aside, and the Amended Complaint filed by private respondents hereby
dismissed. No costs. SO ORDERED.
SUNACE V. NLRC, GR 161757

DECISION

CARPIO MORALES, J.:

Petitioner, Sunace International Management Services (Sunace), a corporation

duly organized and existing under the laws of the Philippines, deployed to
Taiwan Divina A. Montehermozo (Divina) as a domestic helper under a 12-month
contract effective February 1, 1997.[1] The deployment was with the assistance
of a Taiwanese broker, Edmund Wang, President of Jet Crown International Co.,
Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued

working for her Taiwanese employer, Hang Rui Xiong, for two more years, after
which she returned to the Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint[2]
before the National Labor Relations Commission (NLRC) against Sunace, one
Adelaide Perez, the Taiwanese broker, and the employer-foreign principal
alleging that she was jailed for three months and that she was underpaid.

The following day or on February 15, 2000, Labor Arbitration Associate Regina
T. Gavin issued Summons[3] to the Manager of Sunace, furnishing it with a copy
of Divinas complaint and directing it to appear for mandatory conference on
February 28, 2000.

The scheduled mandatory conference was reset. It appears to have been

concluded, however.

On April 6, 2000, Divina filed her Position Paper[4] claiming that under her
original one-year contract and the 2-year extended contract which was with the
knowledge and consent of Sunace, the following amounts representing income
tax and savings were deducted:

and while the amounts deducted in 1997 were refunded to her, those deducted
in 1998 and 1999 were not. On even date, Sunace, by its Proprietor/General
Manager Maria Luisa Olarte, filed its Verified Answer and Position Paper,[6]
claiming as follows, quoted verbatim:
Year
Deduction for
Income Tax

COMPLAINANT IS NOT ENTITLED

FOR THE REFUND OF HER 24 MONTHS

Deduction for Savings

SAVINGS

1997

3. Complainant could not anymore claim nor entitled for the refund of her 24
months savings as she already took back her saving already last year and the
employer did not deduct any money from her salary, in accordance with a
Fascimile Message from the respondent SUNACEs employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith attached as
ANNEX 2 hereof;

NT10,450.00
NT23,100.00
1998
NT9,500.00

COMPLAINANT IS NOT ENTITLED

NT36,000.00
TO REFUND OF HER 14 MONTHS TAX
1999
AND PAYMENT OF ATTORNEYS FEES
NT13,300.00
NT36,000.00;[5]
4. There is no basis for the grant of tax refund to the complainant as the she
finished her one year contract and hence, was not illegally dismissed by her
employer. She could only lay claim over the tax refund or much more be
awarded of damages such as attorneys fees as said reliefs are available only
when the dismissal of a migrant worker is without just valid or lawful cause as
defined by law or contract.

The rationales behind the award of tax refund and payment of attorneys fees is
not to enrich the complainant but to compensate him for actual injury suffered.
Complainant did not suffer injury, hence, does not deserve to be compensated
for whatever kind of damages.

attaching to any claim arising therefrom, and Divina in fact executed a

Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance,
copy of each document was annexed to said . . . answer to complainants
position paper.

Hence, the complainant has NO cause of action against respondent SUNACE for
monetary claims, considering that she has been totally paid of all the monetary
benefits due her under her Employment Contract to her full satisfaction.

To Sunaces . . . answer to complainants position paper, Divina filed a 2-page

reply,[8] without, however, refuting Sunaces disclaimer of knowledge of the
extension of her contract and without saying anything about the Release,
Waiver and Quitclaim and Affidavit of Desistance.

6.
Furthermore, the tax deducted from her salary is in compliance with the
Taiwanese law, which respondent SUNACE has no control and complainant has
to obey and this Honorable Office has no authority/jurisdiction to intervene
because the power to tax is a sovereign power which the Taiwanese
Government is supreme in its own territory. The sovereign power of taxation of
a state is recognized under international law and among sovereign states.

The Labor Arbiter, rejected Sunaces claim that the extension of Divinas contract
for two more years was without its knowledge and consent in this wise:

We reject Sunaces submission that it should not be held responsible for the
amount withheld because her contract was extended for 2 more years without
its knowledge and consent because as Annex B[9] shows, Sunace and Edmund
Wang have not stopped communicating with each other and yet the matter of
the contracts extension and Sunaces alleged non-consent thereto has not been
categorically established.

7. That respondent SUNACE respectfully reserves the right to file supplemental

Verified Answer and/or Position Paper to substantiate its prayer for the
dismissal of the above case against the herein respondent. AND BY WAY OF -

x x x x (Emphasis and underscoring supplied)

Reacting to Divinas Position Paper, Sunace filed on April 25, 2000 an . . . answer
to complainants position paper[7] alleging that Divinas 2-year extension of her
contract was without its knowledge and consent, hence, it had no liability

What Sunace should have done was to write to POEA about the extension and
its objection thereto, copy furnished the complainant herself, her foreign
employer, Hang Rui Xiong and the Taiwanese broker, Edmund Wang.

And because it did not, it is presumed to have consented to the extension and
should be liable for anything that resulted thereform (sic).[10] (Underscoring
supplied)

The Labor Arbiter rejected too Sunaces argument that it is not liable on account
of Divinas execution of a Waiver and Quitclaim and an Affidavit of Desistance.
Observed the Labor Arbiter:

Should the parties arrive at any agreement as to the whole or any part of the
dispute, the same shall be reduced to writing and signed by the parties and
their respective counsel (sic), if any, before the Labor Arbiter.

The settlement shall be approved by the Labor Arbiter after being satisfied that
it was voluntarily entered into by the parties and after having explained to
them the terms and consequences thereof.

A compromise agreement entered into by the parties not in the presence of the
Labor Arbiter before whom the case is pending shall be approved by him, if
after confronting the parties, particularly the complainants, he is satisfied that
they understand the terms and conditions of the settlement and that it was
entered into freely voluntarily (sic) by them and the agreement is not contrary
to law, morals, and public policy.

And because no consideration is indicated in the documents, we strike them

down as contrary to law, morals, and public policy.[11]

Wherefore, judgment is hereby rendered ordering respondents SUNACE

INTERNATIONAL SERVICES and its owner ADELAIDA PERGE, both in their
personal capacities and as agent of Hang Rui Xiong/Edmund Wang to jointly and
severally pay complainant DIVINA A. MONTEHERMOZO the sum of NT91,950.00
in its peso equivalent at the date of payment, as refund for the amounts which
she is hereby adjudged entitled to as earlier discussed plus 10% thereof as
attorneys fees since compelled to litigate, complainant had to engage the
services of counsel.

SO ORDERED.[13] (Underescoring supplied)

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,[14] affirmed

the Labor Arbiters decision.

Via petition for certiorari,[15] Sunace elevated the case to the Court of Appeals
which dismissed it outright by Resolution of November 12, 2002,[16] the full
text of which reads:

The petition for certiorari faces outright dismissal.

He accordingly decided in favor of Divina, by decision of October 9, 2000,[12]

the dispositive portion of which reads:

The petition failed to allege facts constitutive of grave abuse of discretion on

the part of the public respondent amounting to lack of jurisdiction when the
NLRC affirmed the Labor Arbiters finding that petitioner Sunace International
Management Services impliedly consented to the extension of the contract of
private respondent Divina A. Montehermozo. It is undisputed that petitioner
was continually communicating with private respondents foreign employer
(sic). As agent of the foreign principal, petitioner cannot profess ignorance of
such extension as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it. Grave abuse of discretion is not
present in the case at bar.

ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.[17]

xxxx

SO ORDERED.

Regarding to Divina, she did not say anything about her saving in police
station. As we contact with her employer, she took back her saving already last
years. And they did not deduct any money from her salary. Or she will call back
her employer to check it again. If her employer said yes! we will get it back for
her.

(Emphasis on words in capital letters in the original; emphasis on words in

small letters and underscoring supplied)

Its Motion for Reconsideration having been denied by the appellate court by
Resolution of January 14, 2004,[18] Sunace filed the present petition for review
on certiorari.

Thank you and best regards.

(sgd.)
Edmund Wang

The Court of Appeals affirmed the Labor Arbiter and NLRCs finding that Sunace
knew of and impliedly consented to the extension of Divinas 2-year contract. It
went on to state that It is undisputed that [Sunace] was continually
communicating with [Divinas] foreign employer. It thus concluded that [a]s
agent of the foreign principal, petitioner cannot profess ignorance of such
extension as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it.

Contrary to the Court of Appeals finding, the alleged continuous communication

was with the Taiwanese broker Wang, not with the foreign employer Xiong.

The February 21, 2000 telefax message from the Taiwanese broker to Sunace,
the only basis of a finding of continuous communication, reads verbatim:

President[19]

The finding of the Court of Appeals solely on the basis of the above-quoted
telefax message, that Sunace continually communicated with the foreign
principal (sic) and therefore was aware of and had consented to the execution
of the extension of the contract is misplaced. The message does not provide
evidence that Sunace was privy to the new contract executed after the
expiration on February 1, 1998 of the original contract. That Sunace and the
Taiwanese broker communicated regarding Divinas allegedly withheld savings
does not necessarily mean that Sunace ratified the extension of the contract.
As Sunace points out in its Reply[20] filed before the Court of Appeals,

As can be seen from that letter communication, it was just an information given
to the petitioner that the private respondent had t[aken] already her savings
from her foreign employer and that no deduction was made on her salary. It
contains nothing about the extension or the petitioners consent thereto.[21]

of Divinas claims arising from the 2-year employment extension. As the New
Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs, except
in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law.[24]

Parenthetically, since the telefax message is dated February 21, 2000, it is safe
to assume that it was sent to enlighten Sunace who had been directed, by
Summons issued on February 15, 2000, to appear on February 28, 2000 for a
mandatory conference following Divinas filing of the complaint on February 14,
2000.

Respecting the Court of Appeals following dictum:

As agent of its foreign principal, [Sunace] cannot profess ignorance of such an
extension as obviously, the act of its principal extending [Divinas] employment
contract necessarily bound it,[22]

Furthermore, as Sunace correctly points out, there was an implied revocation of

its agency relationship with its foreign principal when, after the termination of
the original employment contract, the foreign principal directly negotiated with
Divina and entered into a new and separate employment contract in Taiwan.
Article 1924 of the New Civil Code reading

The agency is revoked if the principal directly manages the business entrusted
to the agent, dealing directly with third persons.

it too is a misapplication, a misapplication of the theory of imputed knowledge.

thus applies.

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace,
to the principal, employer Xiong, not the other way around.[23] The knowledge
of the principal-foreign employer cannot, therefore, be imputed to its agent
Sunace.

There being no substantial proof that Sunace knew of and consented to be

bound under the 2-year employment contract extension, it cannot be said to be
privy thereto. As such, it and its owner cannot be held solidarily liable for any

In light of the foregoing discussions, consideration of the validity of the Waiver

and Affidavit of Desistance which Divina executed in favor of Sunace is
rendered unnecessary.

WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court

of Appeals are hereby REVERSED and SET ASIDE. The complaint of respondent
Divina A. Montehermozo against petitioner is DISMISSED.

SO ORDERED.

The undisputed background of this case as found by the court a quo and adopted by
respondent court, being sustained by the evidence on record, we hereby reproduce the
same with approval. 2
The antecedents of this case show that Julian Sy and Jose Sy Bang have
formed a business partnership in the City of Lucena. Under the business
name of New Life Enterprises, the partnership engaged in the sale
of construction materials at its place of business, a two storey building
situated at Iyam, Lucena City. The facts show that Julian Sy insured the
stocks in trade of New Life Enterpriseswith Western Guaranty
Corporation, Reliance Surety and Insurance. Co., Inc., and Equitable
Insurance Corporation.
On May 15, 1981, Western Guaranty Corporation
issued Fire Insurance Policy No. 37201 in the amount of P350,000.00.
This policy was renewed on May, 13, 1982.
On July 30,1981, Reliance Surety and Insurance Co., Inc. issued Fire
Insurance Policy No. 69135 inthe amount of P300,000.00 (Renewed
under Renewal Certificate No. 41997) An additional
insurancewas issued by the same company on
November 12, 1981 under Fire Insurance Policy No. 71547 in the
amount of P700,000.00.
On February 8, 1982, Equitable Insurance
Corporation issued Fire Insurance Policy No. 39328 in the amount of
P200,000.00.

G.R. No. 94071 March 31, 1992

NEW LIFE ENTERPRISES and JULIAN SY, petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE
SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY
CORPORATION, respondents.

REGALADO, J.:
This appeal by certiorari seeks the nullification of the decision 1 of respondent Court of
Appeals in CA-G.R. CV No. 13866 which reversed the decision of the Regional Trial Court,
Branch LVII at Lucena City, jointly deciding Civil Cases Nos. 6-84, 7-84 and 8-84 thereof
and consequently ordered the dismissal of the aforesaid actions filed by herein
petitioners.

Thus when the building occupied by the New Life Enterprises

was gutted by fire at about 2:00
o'clockin the morning of October 19, 1982, the stocks in the
trade inside said building were insured against
fire in the total amount of P1,550,000.00.
According to the certification issued by the Headquarters,Philippine
Constabulary /Integrated National Police,
Camp Crame, the cause of fire was
electrical innature. According to the plaintiffs,
the building and the stocks inside were burned.
After the fire,Julian Sy went to the agent of
Reliance Insurance whom he asked to accompany him to the
office ofthe company so that he can file
his claim. He averred that in support of his claim, he
submitted thefire clearance, the insurance policies and inventory
of stocks. He further testified that the three insurance companies are
sister companies, and as a matter of fact when he was followingup hisclaim with Equitable Insurance, the Claims Manager told him to go
first to Reliance Insurance and ifsaid company agrees to pay, they would
also pay. The same treatment was given him by the otherinsurance
companies. Ultimately, the three insurance companies denied plaintiffs'
claim for payment.
In its letter of denial dated March 9, 1983, (Exhibit "C" No. 884) Western Guaranty Corporationthrough Claims Manager Bernard S. R

azon told the plaintiff that his claim "is

denied for breach ofpolicy conditions." Reliance Insurance purveyed the
same message in its letter dated November 23,
1982 and signed by Executive Vice-President Mary Dee
Co (Exhibit "C" No. 7-84) which said that "plaintiff's
claim is denied for breach of policy conditions."
The letter of denial received by the plaintifffrom Equitable Insurance
Corporation (Exhibit "C" No. 6-84) was of the same tenor, as said letter
dated February 22, 1983, and signed by Vice-President
Elma R. Bondad, said "we find that certain
policy conditions were violated, therefore, we regret,
we have to deny your claim, as it is hereby denied in its entirety."
In relation to the case against Reliance
Surety and Insurance Company, a certain Atty. Serafin
D.Dator, acting in behalf of the
plaintiff, sent a letter dated February 13, 1983 (Exhibit "G-l" No 784) toExecutive Vice-President Mary Dee Co asking that he
be informed as to the specific policy conditions allegedly
violated by the plaintiff. In her reply-letter dated March
30, 1983, Executive Vice-PresidentMary Dee Co informed Atty.
Dator that Julian Sy violated Policy Condition No.
"3" which requires theinsured
to give notice of any insurance or insurances already effected covering
the stocks in trade. 3
Because of the denial of their claims for payment by the three (3) insurance
companies, petitioner filed separate
civil actions against the former before the Regional Trial
Court of Lucena City, which cases were consolidated for trial,
and thereafter the court below rendered its decision on December 19, l986 with the
following disposition:
WHEREFORE, judgment in the above-entitled cases is rendered in the
following manner, viz:
1. In Civil Case No. 6-84, judgment is rendered for the
plaintiff New Life Enterprises and against the defendant Equitable
Insurance Corporation ordering the latter to pay the former the sum of
TwoHundred Thousand (P200,000.00) Pesos and
considering that payment of the claim of the insuredhas been unreason
ably denied, pursuant to Sec. 244 of the Insurance Code, defendant is fu
rtherordered to pay the plaintiff attorney's fees in the amount of Twenty
Thousand (P20,000.00) Pesos.All sums of money to be paid by virtue
hereof shall bear interest at 12% per annum (pursuant
to Sec.244 of the Insurance Code) from
February 14, 1983, (91st day from November 16,
1982, whenSworn Statement of Fire Claim
was received from the insured) until they are fully paid;
2. In Civil Case No. 784, judgment is rendered for the plaintiff Julian Sy and against
the defendantReliance Surety and Insurance Co.,

Inc., ordering the latter to pay the former the sum

ofP1,000,000.00 (P300,000.00 under Policy
No. 69135 and P700,000.00 under Policy No. 71547)
andconsidering that payment of the claim of the
insured has been unreasonably denied, pursuant to
Sec.244 of the Insurance Code, defendant is further ordered
to pay the plaintiff the amount of P100,000.00 as attorney's fees.
All sums of money to be paid by virtue hereof shall
bear interest at 12% per annum (pursuant to Sec.
244 of the Insurance Code) from February 14, 1983,
(91st day from November 16,
1982 whenSworn Statement of Fire Claim was received from the
insured) until they are fully paid;
3. In Civil Case No. 8-84, judgment is rendered for
the plaintiff New Life Enterprises and against thedefendant Western Gua
ranty Corporation ordering the latter to pay the sum of P350,000.00
to theConsolidated Bank and Trust Corporation,
Lucena Branch, Lucena City, as stipulated on the
face ofPolicy No. 37201, and considering that payment of the
aforementioned sum of money has been
unreasonably denied, pursuant to Sec. 244 of the Insurance Code,
defendant is further ordered topay the
plaintiff attorney's fees in the amount of P35,000.00.
All sums of money to be paid by virtue hereof shall bear interest at
12% per annum (pursuant to Sec. 244 of the Insurance
Code) from February 5, 1982, (91st day from 1st week of November
1983when insured filed formal claim for full indemnity according to
adjuster Vetremar Dela Merced) until they are fully paid. 4
As aforestated, respondent Court of Appeals reversed said judgment of the trial court,
hence this petition the cruxwherein is whether or not Conditions Nos. 3 and 27 of
the insurance contracts were violated by petitionersthereby resulting in
their forfeiture of all the benefits thereunder.
Condition No. 3 of said insurance policies, otherwise known as
the "Other Insurance Clause," is uniformlycontained in all the aforestated
insurance contracts of herein petitioners, as follows:
3. The insured shall give notice to the Company
of any insurance or insurances already effected, orwhich
may subsequently be effected, covering any of the property or
properties consisting of stocksin trade, goods in process
and/or inventories only hereby insured, and unless
such notice be givenand the particulars of such
insurance or insurances be stated therein or endorsed on this policy
pursuant to Section 50 of the Insurance
Code, by or on behalf of the Company
before the occurrenceof any loss or damage, all benefits
under this policy shall be deemed forfeited, provided however, that this

condition shall not apply when the total insurance or insurances in force
at the time of loss ordamage not more than P200,000.00. 5
Petitioners admit that the respective insurance policies
issued by private respondents did not state or endorse thereon
the other insurance coverage obtained or subsequently effected on the same stocks in
trade for the loss of which compensation is claimed by petitioners. 6 The policy
issued by respondent Western Guaranty Corporation(Western) did not
declare respondent Reliance Surety and Insurance Co., Inc. (Reliance) and respondent
Equitable Insurance Corporation (Equitable) as co-insurers on the same stocks,
while Reliance's Policies covering the same stocksdid not
likewise declare Western and Equitable as such co-insurers. It is
further admitted by petitioners that Equitable'spolicy stated "nil" in the space thereon
requiring indication of any co-insurance although there were three (3) policies subsisting
on the same stocks in trade at the time of the loss, namely, that of Western in
the amount of P350,000.00 andtwo (2) policies of Reliance in the total amount of
P1,000,000.00. 7
In other words, the coverage by other insurance or co-insurance effected
or subsequently arranged by petitioners were neither stated nor endorsed in the policies
of the three (3) private respondents, warranting forfeiture of all benefits
thereunder if we are to follow the express stipulation in the aforequoted Policy Condition
No. 3.
Petitioners contend that they are not to be blamed for the omissions,
alleging that insurance agent Leon Alvarez (for Western) and Yap Kam Chuan (for
Reliance and Equitable) knew about the existence of the additional insurance coverage
and that they were not informed about the requirement that such other or additional
insurance should be stated in the policy, as they have not even read policies. 8 These
contentions cannot pass judicial muster.
The terms of the contract are clear and unambiguous.
The insured is specifically required to disclose to the insurer any other insurance and its
particulars which he may have effected on the same subject matter. Theknowledge of
such insurance by the insurer's agents, even assuming the acquisition thereof by the
former, is notthe "notice" that would estop the insurers from denying the claim. Besides,
the so-called theory of imputed knowledge, that is, knowledge of the agent is
knowledge of the principal, aside from being
of dubious applicabilityhere has likewise been roundly
refuted by respondent court whose factual findings we find acceptable.
Thus, it points out that while petitioner Julian Sy
claimed that he had informed insurance agent Alvarez regarding the co-insurance on the
property, he contradicted himself by inexplicably claiming that he had not read the
termsof the policies; that Yap Dam Chuan could not likewise have obtained such
knowledge for the same reason, asidefrom the fact that
the insurance with Western was obtained before those of
Reliance and Equitable; and that theconclusion of
the trial court that Reliance and Equitable are "sister
companies" is an unfounded conjecture drawnfrom the mere fact that Yap Kam Chuan was
an agent for both companies which also had the
same insuranceclaims adjuster. Availment of the
services of the same agents and adjusters by different companies is a

commonpractice in the insurance business and such facts

do not warrant the speculative conclusion of the trial court.
Furthermore, when the words and language of documents are clear and plain
or readily understandable by an ordinary reader thereof, there is absolutely no room for
interpretation or construction anymore. 9 Courts are not allowed to make contracts
for the parties; rather, they will intervene
only when the terms of the policy are ambiguous, equivocal,
or uncertain. 10 The parties must abide by the
terms of the contract because such terms constitute the
measureof the insurer's liability and compliance therewith is a
condition precedent to the insured's right of recovery from the insurer.11
While it is a cardinal principle of insurance law that a policy or contract
of insurance is to be construed liberally
infavor of the insured and strictly against the insurer
company, yet contracts of insurance, like other contracts, are to be construed according
to the sense and meaning of the terms which
the parties themselves have used. Ifsuch terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary and popular
sense. 12 Moreover, obligations arising from contracts have the force of law between
the contracting parties and should becomplied with in good faith. 13
Petitioners should be aware of the fact that a party is not relieved of the duty to exercise
the ordinary care and prudence that would be exacted in relation to other contracts. The
conformity of the insured to the terms of the policy is implied from his failure to
express any disagreement with what is provided for. 14 It may be true that
themajority rule, as cited by petitioners, is that injured
persons may accept policies without reading them, and that this is not negligence per
se. 15 But, this is not without any exception. It is and was incumbent upon petitioner Sy
to read the insurance contracts, and this can be reasonably expected
of him considering that he has been a businessman since 1965 16 and the contract
concerns indemnity in case ofloss in his money-making trade of which important
consideration he could not have been unaware as it was pre-in case of loss in his moneymaking trade of which important consideration he could not have been unaware as it was
precisely the reason for his procuring the same.
We reiterate our pronouncement in Pioneer Insurance and Surety Corporation vs. Yap:

17

...
And considering the terms of the policy which required the insured to de
clare other insurances,the statement in question must be deemed to be
a statement (warranty) binding on both insurer and insured, that there
were no other insurance on the property. . . .
The annotation then, must be deemed
to be a warranty that the property was not insured by any other policy.
Violation thereof entitled the insurer to rescind (Sec. 69, Insurance
Act). Suchmisrepresentation is fatal in the light of our views in Santa
Ana vs. Commercial Union Assurance Company, Ltd., 55 Phil. 329.
The materiality of non-disclosure of other insurance policies is not open
to doubt.

xxx xxx xxx

The obvious purpose of the aforesaid requirement in the policy
is to prevent over-insurance and thus avert the perpetration of
fraud. The public, as well as the insurer, is interested in preventing the
situation in which a fire would be profitable to the insured. According to
Justice Story: "The insured has no right to complain, for he assents to
comply with all the stipulations on
his side, in order toentitle himself to the
benefit of the contract, which, upon reason or principle, he
has no right to askthe court to dispense with the
performance of his own part of the agreement, and yet to
bind theother party to obligations, which, but for those stipulations,
would not have been entered into."
Subsequently, in the case of Pacific Banking Corporation vs. Court of Appeals, et al.,
held:

18

we

It is not disputed that the insured failed to reveal before the

loss three other insurances. As found by the Court
of Appeals, by reason of said unrevealed insurances, the
insured had been guilty of a
falsedeclaration; a clear misrepresentation and a vital one because
where the insured had been asked to reveal
but did not, that was deception. Otherwise stated, had the
insurer known that there were many co-insurances, it could
have hesitated or plainly desisted from entering into such contract.
Hence, theinsured was guilty of clear fraud (Rollo, p. 25).
Petitioner's contention that the allegation of fraud is but
a mere inference or suspicion is untenable. In fact,
concrete evidence of fraud or false declaration by
the insured was furnished by the petitioner itself when the facts
alleged in the policy under clauses "Co-Insurances Declared" and
"OtherInsurance Clause" are materially different from the actual number
of co-insurances taken over
thesubject property. Consequently, "the whole foundation of the
contract fails, the
risk does not attachand the policy never becomes a contract between
the parties." Representations of facts are the
foundation of the contract and if the foundation does not
exist, the superstructure does
not arise.Falsehood in such representations is not shown to vary
or add to the contract, or to terminate a contract which has
once been made, but to show that no contract has ever
existed (Tolentino,Commercial Laws of the Philippines, p.
991, Vol. II, 8th Ed.,) A void or inexistent contract is one which has no
force and effect from the very beginning, as if it had
never been entered into, and which cannot be
validated either by time or by ratification (Tongoy vs. C.A., 123 SCRA 99
(1983); Avila v. C.A., 145 SCRA, 1986).

As the insurance policy against fire expressly required that notice should
be given by the insured ofother insurance upon the same property,
the total absence of such notice nullifies the policy.
To further warrant and justify the forfeiture of the
benefits under the insurance contracts involved, we need
merelyto turn to Policy Condition No. 15 thereof, which reads in part:
15. . . . if any false declaration be made or used
in support thereof, . . . all benefits under this Policy shall be forfeited . . .
. 19
Additionally, insofar as the liability of respondent
Reliance is concerned, it is not denied that the complaint for recovery was filed in court by
petitioners only on January 31, 1984, or after more than one (1) year had
elapsedfrom petitioners' receipt of the insurers' letter of
denial on November 29, 1982. Policy Condition No. 27 of their insurance contract with
Reliance provides:
27. Action or suit
clause. If a claim be made and rejected and an action or suit be not c
ommenced
either in the Insurance Commission or any court of competent jurisdictio
n of notice of such rejection,or in case of arbitration taking place
as provided herein, within twelve (12) months after due
notice ofthe award made by the arbitrator or arbitrators
or umpire, then the claim shall for all purposes be
deemed to have been abandoned and shall not thereafter be
recoverable hereunder. 20
On this point, the trial court ruled:
. . . However, because of the peculiar circumstances of this case, we
hesitate
in concluding thatplaintiff's right to ventilate his claim in court has been
barred by reason of the time constraintprovided in the insurance contra
ct. It is evident that after the plaintiff had received
the letter of denial,he still found it necessary to be informed of the speci
fic causes or reasons for the denial of his claim,reason for which his
lawyer, Atty. Dator deemed it wise to send a
letter of inquiry to the defendantwhich was answered by
defendant's Executive Vice-President in a letter
dated March 30, 1983, . . .
.Assuming, gratuitously, that the letter of Executive Vice-President
Mary Dee Co dated March 30, 1983, was received by plaintiff
on the same date, the period of limitation should
start to run only fromsaid date in the spirit of fair play and equity. . . . 21
We have perforce to reject this theory of the court below for being contrary to what we
have heretofore declared:

It is important to note the principle laid down

by this Court in the case of Ang vs. Fulton Fire Insurance Co. (2
SCRA 945 [1961]) to wit:
The condition contained in an insurance policy that cla
ims must be presented within one year
after rejection is not merely a procedural requirement
but an important matter essential to a prompt
settlement of claims against insurance companies as
it demandsthat insurance suits be brought by
the insured while the evidence as to the
origin andcause of destruction have not yet
disappeared.
In enunciating the above-cited principle, this Court had definitely
settled the rationale for the
necessity of bringing suits against the Insurer
within one year from the rejection of the claim. The contention
of the respondents that the one-year prescriptive period does
not start to run until thepetition for reconsideration had been resolved b
y the insurer, runs counter to the declared purpose for requiring that an
action or suit be filed in the Insurance
Commission or in a court of competent
jurisdiction from the denial of the claim. To uphold respondents'
contention would contradict anddefeat the very principle which this
Court had laid down. Moreover, it can easily be used by insured persons
as a scheme or device to waste time
until any evidence which may be considered againstthem is destroyed.
xxx xxx xxx
While in the Eagle Star case (96 Phil. 701),
this Court uses the phrase "final rejection", the
samecannot be taken to mean the rejection of a petition
for reconsideration as insisted by respondents.
Such was clearly not the meaning contemplated by this Court. The insur
ance policy in said caseprovides that the insured should file his claim
first, with the carrier and then with the insurer.
The"final rejection" being referred to in said case is the rejection by the
insurance company. 22
Furthermore, assuming arguendo that petitioners felt the
legitimate need to be clarified as to the policy condition violated, there was a
considerable lapse of time from their receipt of the insurer's clarificatory letter dated
March 30, 1983, up to the time the complaint was filed in court on
January 31, 1984. The one-year prescriptive periodwas yet
to expire on November 29, 1983, or about eight (8) months from the
receipt of the clarificatory letter, butpetitioners let the
period lapse without bringing their action in court.
We accordingly find no "peculiarcircumstances" sufficient to
relax the enforcement of the one-year prescriptive period and
we, therefore, hold thatpetitioners' claim was definitely filed out of time.

WHEREFORE, finding no cogent reason to disturb the judgment

of respondent Court of Appeals, the same ishereby AFFIRMED.
SO ORDERED.

G.R. No. L-24833

September 23, 1968

FIELDMEN'S INSURANCE CO., INC., petitioner,

vs.
MERCEDES VARGAS VDA. DE SONGCO, ET AL. and COURT OF
APPEALS, respondents.
Jose S. Suarez for petitioner.
Eligio G. Lagman for respondents.

FERNANDO, J.:
An insurance firm, petitioner Fieldmen's Insurance Co., Inc., was not allowed to escape
liability under a common carrier insurance policy on the pretext that what was insured,
not once but twice, was a private vehicle and not a common carrier, the policy being
issued upon the insistence of its agent who discounted fears of the insured that his
privately owned vehicle might not fall within its terms, the insured moreover being "a man
of scant education," finishing only the first grade. So it was held in a decision of the lower
court thereafter affirmed by respondent Court of Appeals. Petitioner in seeking the review
of the above decision of respondent Court of Appeals cannot be so sanguine as to
entertain the belief that a different outcome could be expected. To be more explicit, we
sustain the Court of Appeals.
The facts as found by respondent Court of Appeals, binding upon us, follow: "This is a
peculiar case. Federico Songco of Floridablanca, Pampanga, a man of scant education
being only a first grader ..., owned a private jeepney with Plate No. 41-289 for the year
1960. On September 15, 1960, as such private vehicle owner, he was induced by
Fieldmen's Insurance Company Pampanga agent Benjamin Sambat to apply for a Common
Carrier's Liability Insurance Policy covering his motor vehicle ... Upon paying an annual
premium of P16.50, defendant Fieldmen's Insurance Company, Inc. issued on September
19, 1960, Common Carriers Accident Insurance Policy No. 45-HO- 4254 ... the duration of
which will be for one (1) year, effective September 15, 1960 to September 15, 1961. On
September 22, 1961, the defendant company, upon payment of the corresponding
premium, renewed the policy by extending the coverage from October 15, 1961 to
October 15, 1962. This time Federico Songco's private jeepney carried Plate No. J-68136Pampanga-1961. ... On October 29, 1961, during the effectivity of the renewed policy, the
insured vehicle while being driven by Rodolfo Songco, a duly licensed driver and son of
Federico (the vehicle owner) collided with a car in the municipality of Calumpit, province
of Bulacan, as a result of which mishap Federico Songco (father) and Rodolfo Songco (son)
died, Carlos Songco (another son), the latter's wife, Angelita Songco, and a family friend
by the name of Jose Manuel sustained physical injuries of varying degree." 1

It was further shown according to the decision of respondent Court of Appeals: "Amor
Songco, 42-year-old son of deceased Federico Songco, testifying as witness, declared that
when insurance agent Benjamin Sambat was inducing his father to insure his vehicle, he
butted in saying: 'That cannot be, Mr. Sambat, because our vehicle is an "owner" private
vehicle and not for passengers,' to which agent Sambat replied: 'whether our vehicle was
an "owner" type or for passengers it could be insured because their company is not
owned by the Government and the Government has nothing to do with their company. So
they could do what they please whenever they believe a vehicle is insurable' ... In spite of
the fact that the present case was filed and tried in the CFI of Pampanga, the defendant
company did not even care to rebut Amor Songco's testimony by calling on the witnessstand agent Benjamin Sambat, its Pampanga Field Representative." 2
The plaintiffs in the lower court, likewise respondents here, were the surviving widow and
children of the deceased Federico Songco as well as the injured passenger Jose Manuel.
On the above facts they prevailed, as had been mentioned, in the lower court and in the
respondent Court of Appeals.1awphl.nt
The basis for the favorable judgment is the doctrine announced in Qua Chee Gan v. Law
Union and Rock Insurance Co., Ltd., 3 with Justice J. B. L. Reyes speaking for the Court. It is
now beyond question that where inequitable conduct is shown by an insurance firm, it is
"estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on
the insured." 4
As much, if not much more so than the Qua Chee Gan decision, this is a case where the
doctrine of estoppel undeniably calls for application. After petitioner Fieldmen's Insurance
Co., Inc. had led the insured Federico Songco to believe that he could qualify under the
common carrier liability insurance policy, and to enter into contract of insurance paying
the premiums due, it could not, thereafter, in any litigation arising out of such
representation, be permitted to change its stand to the detriment of the heirs of the
insured. As estoppel is primarily based on the doctrine of good faith and the avoidance of
harm that will befall the innocent party due to its injurious reliance, the failure to apply it
in this case would result in a gross travesty of justice.
That is all that needs be said insofar as the first alleged error of respondent Court of
Appeals is concerned, petitioner being adamant in its far-from-reasonable plea that
estoppel could not be invoked by the heirs of the insured as a bar to the alleged breach of
warranty and condition in the policy. lt would now rely on the fact that the insured owned
a private vehicle, not a common carrier, something which it knew all along when not once
but twice its agent, no doubt without any objection in its part, exerted the utmost
pressure on the insured, a man of scant education, to enter into such a contract.
Nor is there any merit to the second alleged error of respondent Court that no legal
liability was incurred under the policy by petitioner. Why liability under the terms of the
policy 5 was inescapable was set forth in the decision of respondent Court of Appeals.
Thus: "Since some of the conditions contained in the policy issued by the defendantappellant were impossible to comply with under the existing conditions at the time and
'inconsistent with the known facts,' the insurer 'is estopped from asserting breach of such

conditions.' From this jurisprudence, we find no valid reason to deviate and consequently
hold that the decision appealed from should be affirmed. The injured parties, to wit, Carlos
Songco, Angelito Songco and Jose Manuel, for whose hospital and medical expenses the
defendant company was being made liable, were passengers of the jeepney at the time of
the occurrence, and Rodolfo Songco, for whose burial expenses the defendant company
was also being made liable was the driver of the vehicle in question. Except for the fact,
that they were not fare paying passengers, their status as beneficiaries under the policy is
recognized therein." 6
Even if it be assumed that there was an ambiguity, an excerpt from the Qua Chee
Gan decision would reveal anew the weakness of petitioner's contention. Thus: "Moreover,
taking into account the well known rule that ambiguities or obscurities must be strictly
interpreted against the party that caused them, the 'memo of warranty' invoked by
appellant bars the latter from questioning the existence of the appliances called for in the
insured premises, since its initial expression, 'the undernoted appliances for the extinction
of fire being kept on the premises insured hereby, ... it is hereby warranted ...,' admits of
interpretation as an admission of the existence of such appliances which appellant cannot
now contradict, should the parol evidence rule apply." 7
To the same effect is the following citation from the same leading case: "This rigid
application of the rule on ambiguities has become necessary in view of current business
practices. The courts cannot ignore that nowadays monopolies, cartels and concentration
of capital, endowed with overwhelming economic power, manage to impose upon parties
dealing with them cunningly prepared 'agreements' that the weaker party may not
change one whit, his participation in the 'agreement' being reduced to the alternative to
'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats
d'adhesion), in contrast to those entered into by parties bargaining on an equal footing,
such contracts (of which policies of insurance and international bills of lading are prime
examples) obviously call for greater strictness and vigilance on the part of courts of
justice with a view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps for the unwary (New Civil Code. Article 24; Sent. of Supreme
Court of Spain, 13 Dec. 1934, 27 February 1942)." 8
The last error assigned which would find fault with the decision of respondent Court of
Appeals insofar as it affirmed the lower court award for exemplary damages as well as
attorney's fees is, on its face, of no persuasive force at all.
The conclusion that inescapably emerges from the above is the correctness of the
decision of respondent Court of Appeals sought to be reviewed. For, to borrow once again
from the language of the Qua Chee Gan opinion: "The contract of insurance is one of
perfect good faith (uberima fides) not for the insured alone,but equally so for the insurer;
in fact, it is more so for the latter, since its dominant bargaining position carries with it
stricter responsibility." 9

This is merely to stress that while the morality of the business world is not the morality of
institutions of rectitude like the pulpit and the academe, it cannot descend so low as to be
another name for guile or deception. Moreover, should it happen thus, no court of justice
should allow itself to lend its approval and support.1awphl.nt
We have no choice but to recognize the monetary responsibility of petitioner Fieldmen's
Insurance Co., Inc. It did not succeed in its persistent effort to avoid complying with its
obligation in the lower court and the Court of Appeals. Much less should it find any
receptivity from us for its unwarranted and unjustified plea to escape from its liability.
WHEREFORE, the decision of respondent Court of Appeals of July 20, 1965, is affirmed in
its entirety. Costs against petitioner Fieldmen's Insurance Co., Inc.

[G.R. No. 82978. November 22, 1990.]

THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE COURT OF

APPEALS and OSCAR VENTANILLA, JR. and CARMEN GLORIA DIAZ, Respondents.

Bede S. Talingcos, for Petitioners.

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." The abovequoted 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
feasors whose liability is joint and solidary (Verzosa v. Lim, 45 Phil. 416).
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 the agents misdeed is of no moment.

Augusto Gatmaytan for Private Respondent.

DECISION
SYLLABUS

FERNAN, J.:
1.
CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN
IRREGULARITY DESPITE KOWLEDGE THEREOF, DEEMED A RATIFICATION OF THE
ACT OF THE AGENT. In the case at bar, the Valencia realty firm had clearly
overstepped the bounds of its authority as agent and for that matter, even
the law when it undertook the double sale of the disputed lots. Such being
the case, the principal, Manila Remnant, would have been in the clear pursuant
to Article 1897 of the Civil Code which states that" (t)he agent who acts as such
is not personally liable to that party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers." However, the unique relationship
existing between the principal and the agent at the time of the dual sale must
be underscored. Bear in mind that the president then of both firms was Artemio
U. Valencia, the individual directly responsible for the sale scam. Hence, despite
the fact that the double sale was beyond the power of the agent, Manila
Remnant as principal was chargeable with the knowledge or constructive notice
of that fact and not having done anything to correct such an irregularity was
deemed to have ratified the same. (See Art. 1910, Civil Code.)

2.
ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE
AT BAR. 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

Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty
members of the University of the Philippines and renting a faculty unit,
dreamed of someday owning a house and lot. Instead of attaining this dream,
they became innocent victims of deceit and found themselves in the midst of an
ensuing squabble between a subdivision owner and its real estate agent.

The facts as found by the trial court and adopted by the Appellate Court are as
follows:chanrob1es virtual 1aw library

Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated
in Quezon City covered by Transfer Certificates of Title Nos. 26400, 26401,
30783 and 31986 and constituting the subdivision known as Capital Homes
Subdivision Nos. I and II. On July 25, 1972, Manila Remnant and A.U. Valencia &
Co. Inc. entered into a written agreement entitled "Confirmation of Land
Development and Sales Contract" to formalize an earlier verbal agreement

whereby for a consideration of 17 and 1/2% fee, including sales commission and
management fee, A.U. Valencia and Co., Inc. was to develop the aforesaid
subdivision with authority to manage the sales thereof, execute contracts to
sell to lot buyers and issue official receipts. 1

At that time the President of both A.U. Valencia and Co. Inc. and Manila
Remnant Co., Inc. was Artemio U. Valencia.cralawnad

On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two
"contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar C.
Ventanilla and Carmen Gloria Diaz for the combined contract price of
P66,571.00 payable monthly for ten years. 2 As thus agreed in the contracts to
sell, the Ventanillas paid the down payments on the two lots even before the
formal contract was signed on March 3, 1970.

Ten (10) days after the signing of the contracts with the Ventanillas or on March
13, 1970, Artemio U. Valencia, as President of Manila Remnant, and without the
knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17 again, this
time in favor of Carlos Crisostomo, one of his sales agents without any
consideration. 3 Artemio Valencia then transmitted the fictitious Crisostomo
contracts to Manila Remnant while he kept in his files the contracts to sell in
favor of the Ventanillas. All the amounts paid by the Ventanillas were deposited
in Valencias bank account.

Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly
payments of the Ventanillas were remitted to Manila Remnant as payments of
Crisostomo for which the former issued receipts in favor of Crisostomo. Since
Valencia kept the receipts in his files and never transmitted the same to
Crisostomo, the latter and the Ventanillas remained ignorant of Valencias
scheme. Thus, the Ventanillas continued paying their monthly
installments.chanrobles virtual lawlibrary

Subsequently, the harmonious business relationship between Artemio Valencia

and Manila Remnant ended. On May 30, 1973, Manila Remnant, through its
General Manager Karl Landahl, wrote Artemio Valencia informing him that
Manila Remnant was terminating its existing collection agreement with his firm

on account of the considerable amount of discrepancies and irregularities

discovered in its collections and remittances by virtue of confirmations received
from lot buyers. 4 As a consequence, on June 6, 1973, Artemio Valencia was
removed as President by the Board of Directors of Manila Remnant. Therefore,
from May of 1973, Valencia stopped transmitting Ventanillas monthly
installments which at that time had already amounted to P17,925.40 for Lot 1
and P18,141.95 for Lot 2, (which appeared in Manila Remnants record as
credited in the name of Crisostomo). 5

On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19
of the then Court of First Instance of Manila 6 to impugn the abrogation of their
agency agreement. On June 10 and July 10, 1973, said court ordered all lot
buyers to deposit their monthly amortizations with the court. 7 But on July 17,
1973, A.U. Valencia and Co. wrote the Ventanillas that it was still authorized by
the court to collect the monthly amortizations and requested them to continue
remitting their amortizations with the assurance that said payments would be
deposited later in court. 8 On May 22, 1974, the trial court issued an order
prohibiting A.U. Valencia and Co. from collecting the monthly installments. 9 On
July 22, 1974 and February 6, 1976 the same court ordered the Valencia firm to
furnish the court with a complete list of all lot buyers who had already made
down payments to Manila Remnant before December 1972. 10 Valencia
complied with the courts order on August 6, 1974 by submitting a list which
excluded the name of the Ventanillas. 11

Since A.U. Valencia and Co. failed to forward its collections after May 1973,
Manila Remnant caused on August 20, 1976 the publication in the Times Journal
of a notice cancelling the contracts to sell of some lot buyers including that of
Carlos Crisostomo in whose name the payments of the Ventanillas had been
credited. 12

To prevent the effective cancellation of their contracts, Artemio Valencia

instigated on September 22, 1976 the filing by Carlos Crisostomo and
seventeen (17) other lot vendees of a complaint for specific performance with
damages against Manila Remnant before the Court of First Instance of Quezon
City. The complaint alleged that Crisostomo had already paid a total of
P17,922.40 and P18,136.85 on Lots 1 and 2, respectively. 13

It was not until March 1978 when the Ventanillas, after learning of the
termination of the agency agreement between Manila Remnant and A.U.
Valencia & Co., decided to stop paying their amortizations to the latter. The
Ventanillas, believing that they had already remitted P37,007.00 for Lot 1 and
P36,911.00 for Lot 2 or a grand total, inclusive of interest, of P73,122.35 for the
two lots, thereby leaving a balance of P13,531.58 for Lot 1 and P13,540.22 for
Lot 2, went directly to Manila Remnant and offered to pay the entire
outstanding balance of the purchase price. 14 To their shock and utter
consternation, they discovered from Gloria Caballes, an accountant of Manila
Remnant, that their names did not appear in the records of A.U. Valencia and
Co. as lot buyers. Caballes showed the Ventanillas copies of the contracts to
sell in favor of Carlos Crisostomo, duly signed by Artemio U. Valencia as
President of Manila Remnant. 15 Whereupon, Manila Remnant refused the offer
of the Ventanillas to pay for the remainder of the contract price because they
did not have the personality to do so. Furthermore, they were shown the
published Notice of Cancellation in the January 29, 1978 issue of the Times
Journal rescinding the contracts of delinquent buyers including Crisostomo.

Thus, on November 21, 1978, the Ventanillas commenced an action for specific
performance, annulment of deeds and damages against Manila Remnant, A.U.
Valencia and Co. and Carlos Crisostomo before the Court of First Instance of
Quezon City, Branch 17-B. 16 Crisostomo was declared in default for failure to
file an answer.chanrobles.com:cralaw:red

On November 17, 1980, the trial court rendered a decision 1) declaring the
contracts to sell issued in favor of the Ventanillas valid and subsisting and
annulling the contracts to sell in Crisostomos favor; 2) ordering Manila
Remnant to execute in favor of the Ventanillas an Absolute Deed of Sale free
from all liens and encumbrances; and 3) condemning defendants A.U. Valencia
and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and severally to pay
the Ventanillas the amount of P100,000.00 as moral damages, P100,000.00 as
exemplary damages, and P100,000.00 as attorneys fees. The lower court also
added that if, for any legal reason, the transfer of the lots could no longer be
effected, the defendants should reimburse jointly and severally to the
Ventanillas the total amount of P73,122.35 representing the total amount paid
for the two lots plus legal interest thereon from March 1970 plus damages as
aforestated. With regard to the cross claim of Manila Remnant against Valencia,
the court found that Manila Remnant could have not been dragged into this suit
without the fraudulent manipulations of Valencia. Hence, it adjudged A.U.
Valencia and Co. to pay the Manila Remnant P5,000.00 as moral damages and
exemplary damages and P5,000.00 as attorneys fees. 17

Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower
courts decision to the Court of Appeals through separate appeals. On October
13, 1987, the Appellate Court affirmed in toto the decision of the lower court.
Reconsideration sought by petitioner Manila Remnant was denied, hence the
instant petition.

There is no question that the contracts to sell in favor of the Ventanilla spouses
are valid and subsisting. The only issue remaining is whether or not petitioner
Manila Remnant should be held solidarily liable together with A.U. Valencia and
Co. and Carlos Crisostomo for the payment of moral, exemplary damages and
attorneys fees in favor of the Ventanillas. 18

While petitioner Manila Remnant has not refuted the legality of the award of
damages per se, it believes that it cannot be made jointly and severally liable
with its agent A.U. Valencia and Co. since it was not aware of the illegal acts
perpetrated nor did it consent or ratify said acts of its agent.

The argument is devoid of merit.

In the case at bar, the Valencia realty firm had clearly overstepped the bounds
of its authority as agent and for that matter, even the law when it
undertook the double sale of the disputed lots. Such being the case, the
principal, Manila Remnant, would have been in the clear pursuant to Article
1897 of the Civil Code which states that" (t)he agent who acts as such is not
personally liable to that party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers." chanrobles.com.ph : virtual law library

However, the unique relationship existing between the principal and the agent
at the time of the dual sale must be underscored. Bear in mind that the
president then of both firms was Artemio U. Valencia, the individual directly
responsible for the sale scam. Hence, despite the fact that the double sale was
beyond the power of the agent, Manila Remnant as principal was chargeable
with the knowledge or constructive notice of that fact and not having done
anything to correct such an irregularity was deemed to have ratified the same.
19

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:jgc:chanrobles.com.ph

"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." (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 feasors whose liability is joint and solidary. 20

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 the agents misdeed is of no moment. Consider the
following circumstances:chanrob1es virtual 1aw library

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia
and Co. in the sale and disposition of the subdivision lots. As a disclosed
principal in the contracts to sell in favor of the Ventanilla couple, there was no
doubt that they were in fact contracting with the principal. Section 7 of the
Ventanillas contracts to sell states:jgc:chanrobles.com.ph

"7.
That all payments whether deposits, down payment and monthly
installment agreed to be made by the vendee shall be payable to A.U. Valencia
and Co., Inc. It is hereby expressly understood that unauthorized payments
made to real estate brokers or agents shall be the sole and exclusive
responsibility and at the risk of the vendee and any and all such payments shall
not be recognized by the vendors unless the official receipts therefor shall have
been duly signed by the vendors duly authorized agent, A.U. Valencia and Co.,
Inc." (Emphasis supplied)

Indeed, once Manila Remnant had been furnished with the usual copies of the
contracts to sell, its only participation then was to accept the collections and
pay the commissions to the agent. The latter had complete control of the
business arrangement. 21

Secondly, it is evident from the records that Manila Remnant was less than
prudent in the conduct of its business as a subdivision owner. For instance,
Manila Remnant failed to take immediate steps to avert any damage that might
be incurred by the lot buyers as a result of its unilateral abrogation of the
agency contract. The publication of the cancelled contracts to sell in the Times
Journal came three years after Manila Remnant had revoked its agreement with
A.U. Valencia and Co.chanrobles virtual lawlibrary

Moreover, Manila Remnant also failed to check the records of its agent
immediately after the revocation of the agency contract despite the fact that
such revocation was due to reported anomalies in Valencias collections.
Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant
could and should have devised a system whereby it could monitor and require a
regular accounting from A.U. Valencia and Co., its agent. Not having done so,
Manila Remnant has made itself liable to those who have relied on its agent and
the representation that such agent was clothed with sufficient powers to act on
behalf of the principal.

Even assuming that Manila Remnant was as much a victim as the other innocent
lot buyers, it cannot be gainsaid that it was precisely its negligence and laxity
in the day to day operations of the real estate business which made it possible
for the agent to deceive unsuspecting vendees like the Ventanillas.

In essence, therefore, the basis for Manila Remnants solidary liability is

estoppel which, in turn, is rooted in the principals neglectfulness in failing to
properly supervise and control the affairs of its agent and to adopt the needed
measures to prevent further misrepresentation. As a consequence, Manila
Remnant is considered estopped from pleading the truth that it had no direct
hand in the deception employed by its agent. 22

A final word. The Court cannot help but be alarmed over the reported practice
of supposedly reputable real estate brokers of manipulating prices by allowing
their own agents to "buy" lots in their names in the hope of reselling the same
at a higher price to the prejudice of bona fide lot buyers, as precisely what the
agent had intended to happen in the present case. This is a serious matter that
must be looked into by the appropriate government housing
authority.chanrobles.com.ph : virtual law library

WHEREFORE, in view of the foregoing, the appealed decision of the Court of

Appeals dated October 13, 1987 sustaining the decision of the Quezon City trial
court dated November 17, 1980 is AFFIRMED. This judgment is immediately
executory. Costs against petitioner.

SO ORDERED.

G.R. No. L-55963 December 1, 1989

employment as such regular driver of respondent after having passed the written and oral
examinations on traffic rules and maintenance of vehicles given by National Irrigation
Administration authorities.

SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners,

vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents.

The within petition is thus an off-shot of the action (Civil Case No. SJC-56) instituted by
petitioners-spouses on April 17, 1978 against respondent NIA before the then Court of
First Instance of Nueva Ecija, Branch VIII at San Jose City, for damages in connection with
the death of their son resulting from the aforestated accident.

G.R. No. L-61045 December 1, 1989

After trial, the trial court rendered judgment on March 20, 1980 which directed respondent
National Irrigation Administration to pay damages (death benefits) and actual expenses to
petitioners. The dispositive portion of the decision reads thus:

NATIONAL IRRIGATION ADMINISTRATION, appellant,

vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.

. . . . . Judgment is here rendered ordering the defendant National

Irrigation Administration to pay to the heirs of the deceased P12,000.00
for the death of Francisco Fontanilla; P3,389.00 which the parents of the
deceased had spent for the hospitalization and burial of the deceased
Francisco Fontanilla; and to pay the costs. (Brief for the petitioners
spouses Fontanilla, p. 4; Rollo, p. 132)

Cecilio V. Suarez, Jr. for Spouses Fontanilla.

Felicisimo C. Villaflor for NIA.

PARAS, J.:
In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance of the
decision dated March 20, 1980 of the then Court of First Instance of Nueva Ecija, Branch
VIII, at San Jose City and its modification with respect to the denial of petitioner's claim for
moral and exemplary damages and attorneys fees.
In G.R. No. 61045, respondent National Irrigation Administration seeks the reversal of the
aforesaid decision of the lower court. The original appeal of this case before the Court of
Appeals was certified to this Court and in the resolution of July 7, 1982, it was docketed
with the aforecited number. And in the resolution of April 3, this case was consolidated
with G.R. No. 55963.

Respondent National Irrigation Administration filed on April 21, 1980, its motion for
reconsideration of the aforesaid decision which respondent trial court denied in its Order
of June 13, 1980. Respondent National Irrigation Administration thus appealed said
decision to the Court of Appeals (C.A.-G.R. No. 67237- R) where it filed its brief for
appellant in support of its position.
Instead of filing the required brief in the aforecited Court of Appeals case, petitioners filed
the instant petition with this Court.
The sole issue for the resolution of the Court is: Whether or not the award of moral
damages, exemplary damages and attorney's fees is legally proper in a complaint for
damages based on quasi-delict which resulted in the death of the son of herein
petitioners.
Petitioners allege:

It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and operated by
respondent National Irrigation Administration, a government agency bearing Plate No. IN651, then driven officially by Hugo Garcia, an employee of said agency as its regular
driver, bumped a bicycle ridden by Francisco Fontanilla, son of herein petitioners, and
Restituto Deligo, at Maasin, San Jose City along the Maharlika Highway. As a result of the
impact, Francisco Fontanilla and Restituto Deligo were injured and brought to the San Jose
City Emergency Hospital for treatment. Fontanilla was later transferred to the Cabanatuan
Provincial Hospital where he died.
Garcia was then a regular driver of respondent National Irrigation Administration who, at
the time of the accident, was a licensed professional driver and who qualified for

1. The award of moral damages is specifically allowable. under

paragraph 3 of Article 2206 of the New Civil Code which provides that
the spouse, legitimate and illegitimate descendants and ascendants of
the deceased may demand moral damages for mental anguish by
reason of the death of the deceased. Should moral damages be granted,
the award should be made to each of petitionersspouses individually and in varying amounts depending upon proof of
mental and depth of intensity of the same, which should not be less
than P50,000.00 for each of them.

2. The decision of the trial court had made an impression that

respondent National Irrigation Administration acted with gross
negligence because of the accident and the subsequent failure of the
National Irrigation Administration personnel including the driver to stop
in order to give assistance to the, victims. Thus, by reason of the gross
negligence of respondent, petitioners become entitled to exemplary
damages under Arts. 2231 and 2229 of the New Civil Code.
3. Petitioners are entitled to an award of attorney's fees, the amount of
which (20%) had been sufficiently established in the hearing of May 23,
1979.
4. This petition has been filed only for the purpose of reviewing the
findings of the lower court upon which the disallowance of moral
damages, exemplary damages and attorney's fees was based and not
for the purpose of disturbing the other findings of fact and conclusions
of law.
The Solicitor General, taking up the cudgels for public respondent National Irrigation
Administration, contends thus:
1. The filing of the instant petition is rot proper in view of the appeal
taken by respondent National Irrigation Administration to the Court of
Appeals against the judgment sought to be reviewed. The focal issue
raised in respondent's appeal to the Court of Appeals involves the
question as to whether or not the driver of the vehicle that bumped the
victims was negligent in his operation of said vehicle. It thus becomes
necessary that before petitioners' claim for moral and exemplary
damages could be resolved, there should first be a finding of negligence
on the part of respondent's employee-driver. In this regard, the Solicitor
General alleges that the trial court decision does not categorically
contain such finding.
2. The filing of the "Appearance and Urgent Motion For Leave to File
Plaintiff-Appellee's Brief" dated December 28, 1981 by petitioners in the
appeal (CA-G.R. No. 67237-R; and G. R. No.61045) of the respondent
National Irrigation Administration before the Court of Appeals, is an
explicit admission of said petitioners that the herein petition, is not
proper. Inconsistent procedures are manifest because while petitioners
question the findings of fact in the Court of Appeals, they present only
the questions of law before this Court which posture confirms their
admission of the facts.
3. The fact that the parties failed to agree on whether or not negligence
caused the vehicular accident involves a question of fact which
petitioners should have brought to the Court of Appeals within the
reglementary period. Hence, the decision of the trial court has become

final as to the petitioners and for this reason alone, the petition should
be dismissed.
4. Respondent Judge acted within his jurisdiction, sound discretion and
in conformity with the law.
5. Respondents do not assail petitioners' claim to moral and exemplary
damages by reason of the shock and subsequent illness they suffered
because of the death of their son. Respondent National Irrigation
Administration, however, avers that it cannot be held liable for the
damages because it is an agency of the State performing governmental
functions and driver Hugo Garcia was a regular driver of the vehicle, not
a special agent who was performing a job or act foreign to his usual
duties. Hence, the liability for the tortious act should. not be borne by
respondent government agency but by driver Garcia who should answer
for the consequences of his act.
6. Even as the trial court touched on the failure or laxity of respondent
National Irrigation Administration in exercising due diligence in the
selection and supervision of its employee, the matter of due diligence is
not an issue in this case since driver Garcia was not its special agent but
a regular driver of the vehicle.
The sole legal question on whether or not petitioners may be entitled to an award of moral
and exemplary damages and attorney's fees can very well be answered with the
application of Arts. 2176 and 2180 of theNew Civil Code.
Art. 2176 thus provides:
Whoever by act omission causes damage to another, there being fault
or negligence, is obliged to pay for damage done. Such fault or
negligence, if there is no pre-existing cotractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter
Paragraphs 5 and 6 of Art. 21 80 read as follows:
Employers shall be liable for the damages caused by their employees
and household helpers acting within the scope of their assigned tasks,
even the though the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special
agent.; but not when the damage has been caused by the official to
whom the task done properly pertains, in which case what is provided in
Art. 2176 shall be applicable.

The liability of the State has two aspects. namely:

1. Its public or governmental aspects where it is liable for the tortious
acts of special agents only.
2. Its private or business aspects (as when it engages in private
enterprises) where it becomes liable as an ordinary employer. (p. 961,
Civil Code of the Philippines; Annotated, Paras; 1986 Ed. ).
In this jurisdiction, the State assumes a limited liability for the damage caused by the
tortious acts or conduct of its special agent.
Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily assumed liability
for acts done through special agents. The State's agent, if a public official, must not only
be specially commissioned to do a particular task but that such task must be foreign to
said official's usual governmental functions. If the State's agent is not a public official, and
is commissioned to perform non-governmental functions, then the State assumes the role
of an ordinary employer and will be held liable as such for its agent's tort. Where the
government commissions a private individual for a special governmental task, it is acting
through a special agent within the meaning of the provision. (Torts and Damages, Sangco,
p. 347, 1984 Ed.)
Certain functions and activities, which can be performed only by the government, are
more or less generally agreed to be "governmental" in character, and so the State is
immune from tort liability. On the other hand, a service which might as well be provided
by a private corporation, and particularly when it collects revenues from it, the function is
considered a "proprietary" one, as to which there may be liability for the torts of agents
within the scope of their employment.
The National Irrigation Administration is an agency of the government exercising
proprietary functions, by express provision of Rep. Act No. 3601. Section 1 of said Act
provides:
Section 1. Name and domicile.-A body corporate is hereby created which
shall be known as the National Irrigation Administration, hereinafter
called the NIA for short, which shall be organized immediately after the
approval of this Act. It shall have its principal seat of business in the City
of Manila and shall have representatives in all provinces for the proper
conduct of its business.

(b) x x x x x x x x x x x x x x x x x x
(c) To collect from the users of each irrigation system constructed by it
such fees as may be necessary to finance the continuous operation of
the system and reimburse within a certain period not less than twentyfive years cost of construction thereof; and
(d) To do all such other tthings and to transact all such business as are
directly or indirectly necessary, incidental or conducive to the
attainment of the above objectives.
Indubitably, the NIA is a government corporation with juridical personality and not a mere
agency of the government. Since it is a corporate body performing non-governmental
functions, it now becomes liable for the damage caused by the accident resulting from the
tortious act of its driver-employee. In this particular case, the NIA assumes the
responsibility of an ordinary employer and as such, it becomes answerable for damages.
This assumption of liability, however, is predicated upon the existence of negligence on
the part of respondent NIA. The negligence referred to here is the negligence of
supervision.
At this juncture, the matter of due diligence on the part of respondent NIA becomes a
crucial issue in determining its liability since it has been established that respondent is a
government agency performing proprietary functions and as such, it assumes the posture
of an ordinary employer which, under Par. 5 of Art. 2180, is responsible for the damages
caused by its employees provided that it has failed to observe or exercise due diligence in
the selection and supervision of the driver.
It will be noted from the assailed decision of the trial court that "as a result of the impact,
Francisco Fontanilla wasthrown to a distance 50 meters away from the point of
impact while Restituto Deligo was thrown a little bit further away. The impact took place
almost at the edge of the cemented portion of the road." (Emphasis supplied,) [page 26,
Rollo]
The lower court further declared that "a speeding vehicle coming in contact with a person
causes force and impact upon the vehicle that anyone in the vehicle cannot fail to notice.
As a matter of fact, the impact was so strong as shown by the fact that the vehicle
suffered dents on the right side of the radiator guard, the hood, the fender and a crack on
the radiator as shown by the investigation report (Exhibit "E"). (Emphasis supplied) [page
29, Rollo]

Section 2 of said law spells out some of the NIA's proprietary functions. ThusSec. 2. Powers and objectives.-The NIA shall have the following powers
and objectives:
(a) x x x x x x x x x x x x x x x x x x

It should be emphasized that the accident happened along the Maharlika National Road
within the city limits of San Jose City, an urban area. Considering the fact that the victim
was thrown 50 meters away from the point of impact, there is a strong indication that
driver Garcia was driving at a high speed. This is confirmed by the fact that the pick-up
suffered substantial and heavy damage as above-described and the fact that the NIA

group was then "in a hurry to reach the campsite as early as possible", as shown by their
not stopping to find out what they bumped as would have been their normal and initial
reaction.
Evidently, there was negligence in the supervision of the driver for the reason that they
were travelling at a high speed within the city limits and yet the supervisor of the group,
Ely Salonga, failed to caution and make the driver observe the proper and allowed speed
limit within the city. Under the situation, such negligence is further aggravated by their
desire to reach their destination without even checking whether or not the vehicle
suffered damage from the object it bumped, thus showing imprudence and reckelessness
on the part of both the driver and the supervisor in the group.
Significantly, this Court has ruled that even if the employer can prove the diligence in the
selection and supervision (the latter aspect has not been established herein) of the
employee, still if he ratifies the wrongful acts, or take no step to avert further damage, the
employer would still be liable. (Maxion vs. Manila Railroad Co., 44 Phil. 597).
Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August 31, 1970, 34
SCRA 618), this Court held that a driver should be especially watchful in anticipation of
others who may be using the highway, and his failure to keep a proper look out for
reasons and objects in the line to be traversed constitutes negligence.
Considering the foregoing, respondent NIA is hereby directed to pay herein petitionersspouses the amounts of P12,000.00 for the death of Francisco Fontanilla; P3,389.00 for
hospitalization and burial expenses of the aforenamed deceased; P30,000.00 as moral
damages; P8,000.00 as exemplary damages and attorney's fees of 20% of the total
award.
SO ORDERED.

They were likewise charged with three counts of estafa committed against
private complainants.[2] The State Prosecutor, however, later dismissed the
estafa charges against Chowdury[3] and filed an amended information indicting
only Ong for the offense.[4]

Chowdury was arraigned on April 16, 1996 while Ong remained at large. He
pleaded "not guilty" to the charge of illegal recruitment in large scale.[5]

Trial ensued.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. BULU CHOWDURY, accusedappellant.

The prosecution presented four witnesses: private complainants Aser Sasis,

Estrella Calleja and Melvin Miranda, and Labor Employment Officer Abbelyn
Caguitla.

DECISION

PUNO, J.:

In November 1995, Bulu Chowdury and Josephine Ong were charged before the
Regional Trial Court of Manila with the crime of illegal recruitment in large scale
committed as follows:

"That sometime between the period from August 1994 to October 1994 in the
City of Manila, Philippines and within the jurisdiction of this Honorable Court,
the above-named accused, representing themselves to have the capacity to
contract, enlist and transport workers for employment abroad, conspiring,
confederating and mutually helping one another, did then and there willfully,
unlawfully and feloniously recruit the herein complainants: Estrella B. Calleja,
Melvin C. Miranda and Aser S. Sasis, individually or as a group for employment
in Korea without first obtaining the required license and/or authority from the
Philippine Overseas Employment Administration."[1]

Sasis testified that he first met Chowdury in August 1994 when he applied with
Craftrade Overseas Developers (Craftrade) for employment as factory worker in
South Korea. Chowdury, a consultant of Craftrade, conducted the interview.
During the interview, Chowdury informed him about the requirements for
employment. He told him to submit his passport, NBI clearance, passport size
picture and medical certificate. He also required him to undergo a seminar. He
advised him that placement would be on a first-come-first-serve basis and
urged him to complete the requirements immediately. Sasis was also charged a
processing fee of P25,000.00. Sasis completed all the requirements in
September 1994. He also paid a total amount of P16,000.00 to Craftrade as
processing fee. All payments were received by Ong for which she issued three
receipts.[6] Chowdury then processed his papers and convinced him to
complete his payment.[7]

Sasis further said that he went to the office of Craftrade three times to follow
up his application but he was always told to return some other day. In one of his
visits to Craftrades office, he was informed that he would no longer be deployed
for employment abroad. This prompted him to withdraw his payment but he
could no longer find Chowdury. After two unsuccessful attempts to contact him,
he decided to file with the Philippine Overseas Employment Administration
(POEA) a case for illegal recruitment against Chowdury. Upon verification with
the POEA, he learned that Craftrade's license had already expired and has not

been renewed and that Chowdury, in his personal capacity, was not a licensed
recruiter.[8]

Calleja testified that in June 1994, she applied with Craftrade for employment
as factory worker in South Korea. She was interviewed by Chowdury. During the
interview, he asked questions regarding her marital status, her age and her
province. Toward the end of the interview, Chowdury told her that she would be
working in a factory in Korea. He required her to submit her passport, NBI
clearance, ID pictures, medical certificate and birth certificate. He also obliged
her to attend a seminar on overseas employment. After she submitted all the
documentary requirements, Chowdury required her to pay P20,000.00 as
placement fee. Calleja made the payment on August 11, 1994 to Ong for which
she was issued a receipt.[9] Chowdury assured her that she would be able to
leave on the first week of September but it proved to be an empty promise.
Calleja was not able to leave despite several follow-ups. Thus, she went to the
POEA where she discovered that Craftrade's license had already expired. She
tried to withdraw her money from Craftrade to no avail. Calleja filed a complaint
for illegal recruitment against Chowdury upon advice of POEA's legal counsel.
[10]

Miranda testified that in September 1994, his cousin accompanied him to the
office of Craftrade in Ermita, Manila and introduced him to Chowdury who
presented himself as consultant and interviewer. Chowdury required him to fill
out a bio-data sheet before conducting the interview. Chowdury told Miranda
during the interview that he would send him to Korea for employment as
factory worker. Then he asked him to submit the following documents:
passport, passport size picture, NBI clearance and medical certificate. After he
complied with the requirements, he was advised to wait for his visa and to pay
P25,000.00 as processing fee. He paid the amount of P25,000.00 to Ong who
issued receipts therefor.[11] Craftrade, however, failed to deploy him. Hence,
Miranda filed a complaint with the POEA against Chowdury for illegal
recruitment.[12]

Labor Employment Officer Abbelyn Caguitla of the Licensing Branch of the POEA
testified that she prepared a certification on June 9, 1996 that Chowdury and
his co-accused, Ong, were not, in their personal capacities, licensed recruiters
nor were they connected with any licensed agency. She nonetheless stated that
Craftrade was previously licensed to recruit workers for abroad which expired
on December 15, 1993. It applied for renewal of its license but was only granted
a temporary license effective December 16, 1993 until September 11, 1994.
From September 11, 1994, the POEA granted Craftrade another temporary

authority to process the expiring visas of overseas workers who have already
been deployed. The POEA suspended Craftrade's temporary license on
December 6, 1994.[13]

For his defense, Chowdury testified that he worked as interviewer at Craftrade

from 1990 until 1994. His primary duty was to interview job applicants for
abroad. As a mere employee, he only followed the instructions given by his
superiors, Mr. Emmanuel Geslani, the agencys President and General Manager,
and Mr. Utkal Chowdury, the agency's Managing Director. Chowdury admitted
that he interviewed private complainants on different dates. Their office
secretary handed him their bio-data and thereafter he led them to his room
where he conducted the interviews. During the interviews, he had with him a
form containing the qualifications for the job and he filled out this form based
on the applicant's responses to his questions. He then submitted them to Mr.
Utkal Chowdury who in turn evaluated his findings. He never received money
from the applicants. He resigned from Craftrade on November 12, 1994.[14]

Another defense witness, Emelita Masangkay who worked at the Accreditation

Branch of the POEA presented a list of the accredited principals of Craftrade
Overseas Developers[15] and a list of processed workers of Craftrade Overseas
Developers from 1988 to 1994.[16]

The trial court found Chowdury guilty beyond reasonable doubt of the crime of
illegal recruitment in large scale. It sentenced him to life imprisonment and to
pay a fine of P100,000.00. It further ordered him to pay Aser Sasis the amount
of P16,000.00, Estrella Calleja, P20,000.00 and Melvin Miranda, P25,000.00. The
dispositive portion of the decision reads:

"WHEREFORE, in view of the foregoing considerations, the prosecution having

proved the guilt of the accused Bulu Chowdury beyond reasonable doubt of the
crime of Illegal Recruitment in large scale, he is hereby sentenced to suffer the
penalty of life imprisonment and a fine of P100,000.00 under Art. 39 (b) of the
New Labor Code of the Philippines. The accused is ordered to pay the
complainants Aser Sasis the amount of P16,000.00; Estrella Calleja the amount
of P20,000.00; Melvin Miranda the amount of P25,000.00."[17]

Chowdury appealed.

The elements of illegal recruitment in large scale are:

accomplices, take part subsequent to its commission in any of the following

manner: (1) by profiting themselves or assisting the offenders to profit by the
effects of the crime; (2) by concealing or destroying the body of the crime, or
the effects or instruments thereof, in order to prevent its discovery; and (3) by
harboring, concealing, or assisting in the escape of the principal of the crime,
provided the accessory acts with abuse of his public functions or whenever the
author of the crime is guilty of treason, parricide, murder, or an attempt at the
life of the chief executive, or is known to be habitually guilty of some other
crime.[23]

(1) The accused undertook any recruitment activity defined under Article 13 (b)
or any prohibited practice enumerated under Article 34 of the Labor Code;

(2) He did not have the license or authority to lawfully engage in the
recruitment and placement of workers; and

(3) He committed the same against three or more persons, individually or as a

group.[18]

The last paragraph of Section 6 of Republic Act (RA) 8042[19] states who shall
be held liable for the offense, thus:

"The persons criminally liable for the above offenses are the principals,
accomplices and accessories. In case of juridical persons, the officers having
control, management or direction of their business shall be liable."

The Revised Penal Code which supplements the law on illegal recruitment[20]
defines who are the principals, accomplices and accessories. The principals are:
(1) those who take a direct part in the execution of the act; (2) those who
directly force or induce others to commit it; and (3) those who cooperate in the
commission of the offense by another act without which it would not have been
accomplished.[21] The accomplices are those persons who may not be
considered as principal as defined in Section 17 of the Revised Penal Code but
cooperate in the execution of the offense by previous or simultaneous act.[22]
The accessories are those who, having knowledge of the commission of the
crime, and without having participated therein, either as principals or

Citing the second sentence of the last paragraph of Section 6 of RA 8042,

accused-appellant contends that he may not be held liable for the offense as he
was merely an employee of Craftrade and he only performed the tasks assigned
to him by his superiors. He argues that the ones who should be held liable for
the offense are the officers having control, management and direction of the
agency.

As stated in the first sentence of Section 6 of RA 8042, the persons who may be
held liable for illegal recruitment are the principals, accomplices and
accessories. An employee of a company or corporation engaged in illegal
recruitment may be held liable as principal, together with his employer,[24] if it
is shown that he actively and consciously participated in illegal recruitment.
[25] It has been held that the existence of the corporate entity does not shield
from prosecution the corporate agent who knowingly and intentionally causes
the corporation to commit a crime. The corporation obviously acts, and can act,
only by and through its human agents, and it is their conduct which the law
must deter. The employee or agent of a corporation engaged in unlawful
business naturally aids and abets in the carrying on of such business and will
be prosecuted as principal if, with knowledge of the business, its purpose and
effect, he consciously contributes his efforts to its conduct and promotion,
however slight his contribution may be.[26] The law of agency, as applied in
civil cases, has no application in criminal cases, and no man can escape
punishment when he participates in the commission of a crime upon the ground
that he simply acted as an agent of any party.[27] The culpability of the
employee therefore hinges on his knowledge of the offense and his active
participation in its commission. Where it is shown that the employee was
merely acting under the direction of his superiors and was unaware that his
acts constituted a crime, he may not be held criminally liable for an act done for
and in behalf of his employer.[28]

The fundamental issue in this case, therefore, is whether accused-appellant

knowingly and intentionally participated in the commission of the crime
charged.

We find that he did not.

Evidence shows that accused-appellant interviewed private complainants in the

months of June, August and September in 1994 at Craftrade's office. At that
time, he was employed as interviewer of Craftrade which was then operating
under a temporary authority given by the POEA pending renewal of its license.
[29] The temporary license included the authority to recruit workers.[30] He
was convicted based on the fact that he was not registered with the POEA as
employee of Craftrade. Neither was he, in his personal capacity, licensed to
recruit overseas workers. Section 10 Rule II Book II of the Rules and Regulation
Governing Overseas Employment (1991) requires that every change,
termination or appointment of officers, representatives and personnel of
licensed agencies be registered with the POEA. Agents or representatives
appointed by a licensed recruitment agency whose appointments are not
previously approved by the POEA are considered "non-licensee " or "non-holder
of authority" and therefore not authorized to engage in recruitment activity.
[31]

Upon examination of the records, however, we find that the prosecution failed
to prove that accused-appellant was aware of Craftrade's failure to register his
name with the POEA and that he actively engaged in recruitment despite this
knowledge. The obligation to register its personnel with the POEA belongs to
the officers of the agency.[32] A mere employee of the agency cannot be
expected to know the legal requirements for its operation. The evidence at
hand shows that accused-appellant carried out his duties as interviewer of
Craftrade believing that the agency was duly licensed by the POEA and he, in
turn, was duly authorized by his agency to deal with the applicants in its behalf.
Accused-appellant in fact confined his actions to his job description. He merely
interviewed the applicants and informed them of the requirements for
deployment but he never received money from them. Their payments were
received by the agency's cashier, Josephine Ong. Furthermore, he performed his
tasks under the supervision of its president and managing director. Hence, we
hold that the prosecution failed to prove beyond reasonable doubt accusedappellant's conscious and active participation in the commission of the crime of
illegal recruitment. His conviction, therefore, is without basis.

This is not to say that private complainants are left with no remedy for the
wrong committed against them. The Department of Justice may still file a
complaint against the officers having control, management or direction of the
business of Craftrade Overseas Developers (Craftrade), so long as the offense
has not yet prescribed. Illegal recruitment is a crime of economic sabotage
which need to be curbed by the strong arm of the law. It is important, however,
to stress that the government's action must be directed to the real offenders,
those who perpetrate the crime and benefit from it.

IN VIEW WHEREOF, the assailed decision of the Regional Trial Court is

REVERSED and SET ASIDE. Accused-appellant is hereby ACQUITTED. The
Director of the Bureau of Corrections is ordered to RELEASE accused-appellant
unless he is being held for some other cause, and to REPORT to this Court
compliance with this order within ten (10) days from receipt of this decision.
Let a copy of this Decision be furnished the Secretary of the Department of
Justice for his information and appropriate action.

SO ORDERED.

G.R. No. 115849

January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the

Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA,
and JOSE JANOLO,respondents.

2. Ordering defendant Producers Bank of the Philippines, upon finality of this

decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in
favor of said plaintiffs a deed of absolute sale over the aforementioned six (6)
parcels of land, and to immediately deliver to the plaintiffs the owner's copies of
T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the
same deed and transfer of the six (6) titles in the names of the plaintiffs;

DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an
exchange of letters and/or in a meeting with the buyers constitute a perfected and
enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the
doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed
conservator of Producers Bank (now First Philippine International Bank) repudiate such
"apparent authority" after said contract has been deemed perfected? During the
pendency of a suit for specific performance, does the filing of a "derivative suit" by the
majority shareholders and directors of the distressed bank to prevent the enforcement or
implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant
Petition for review oncertiorari under Rule 45 of the Rules of Court, to set aside the
Decision promulgated January 14, 1994 of the respondent Court of Appeals 1 in CA-G.R CV
No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for
reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of
the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and
the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed
against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion
are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos
C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand,
is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6)
parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101
hectares, more or less, covered by and embraced in Transfer Certificates of Title
Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between
the plaintiffs as buyers and the defendant Producers Bank for an agreed price of
Five and One Half Million (P5,500,000.00) Pesos;

3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo
and Demetrio Demetria the sums of P200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of
P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount
of P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and
moderate damages in the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to surrejoinder, the petition was given due course in a Resolution dated January 18, 1995.
Thence, the parties filed their respective memoranda and reply memoranda. The First
Division transferred this case to the Third Division per resolution dated October 23, 1995.
After carefully deliberating on the aforesaid submissions, the Court assigned the case to
the undersigned ponente for the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines;
petitioner Bank, for brevity) is a banking institution organized and existing under the laws
of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity)
is of legal age and was, at all times material to this case, Head-Manager of the Property
Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the
assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought
to be set aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision 3 as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the
Philippines acquired six parcels of land with a total area of 101 hectares located
at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos.

T-106932 to T-106937. The property used to be owned by BYME Investment and

Development Corporation which had them mortgaged with the bank as collateral
for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted
to purchase the property and thus initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME
investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera,
Manager of the Property Management Department of the defendant bank. The
meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16,
1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of
defendant Rivera, made a formal purchase offer to the bank through a letter
dated August 30, 1987 (Exh. "B"), as follows:

August 30, 1987

T-106936

187,114 sq. m.

T-106937

481,481 sq. m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND

(P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.

The Producers Bank of the Philippines

Makati, Metro Manila

(3) On September 1, 1987, defendant Rivera made on behalf of the bank a

formal reply by letter which is hereunder quoted (Exh. "C"):

Attn. Mr. Mercurio Q. Rivera

Manager, Property Management Dept.
September 1, 1987

Gentleman:
I have the honor to submit my formal offer to purchase your properties covered
by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101
hectares, more or less.

TCT NO.

AREA

JP M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doa Andres II
Rosario, Pasig, Metro Manila
Attention: JOSE O. JANOLO
Dear Sir:

T-106932

113,580 sq. m.

T-106933

70,899 sq. m.

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta.
Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed
however that the bank's counter-offer is at P5.5 million for more than 101
hectares on lot basis.
We shall be very glad to hear your position on the on the matter.

T-106934

52,246 sq. m.

Best regards.
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted
reply, wrote (Exh. "D"):

T-106935

96,768 sq. m.

Attention: Atty. Demetrio Demetria

September 17, 1987

Dear Sir:

Producers Bank
Paseo de Roxas
Makati, Metro Manila

Your proposal to buy the properties the bank foreclosed from Byme investment
Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly
created committee for submission to the newly designated Acting Conservator of
the bank.

Attention: Mr. Mercurio Rivera

For your information.

Gentlemen:

(7) What thereafter transpired was a series of demands by the plaintiffs for
compliance by the bank with what plaintiff considered as a perfected contract of
sale, which demands were in one form or another refused by the bank. As
detailed by the trial court in its decision, on November 17, 1987, plaintiffs
through a letter to defendant Rivera (Exhibit "G") tendered payment of the
amount of P5.5 million "pursuant to (our) perfected sale agreement." Defendants
refused to receive both the payment and the letter. Instead, the parcels of land
involved in the transaction were advertised by the bank for sale to any interested
buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of the
documents on what was considered as a "perfected agreement." Thus:

In reply to your letter regarding my proposal to purchase your 101-hectare lot

located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now
propose to buy the said lot at P4.250 million in CASH..
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What
took place was a meeting on September 28, 1987 between the plaintiffs and Luis
Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the
BYME lawyer, attended the meeting. Two days later, or on September 30, 1987,
plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"):

Mr. Mercurio Rivera

Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila

The Producers Bank of the Philippines

Paseo de Roxas, Makati
Metro Manila

Dear Mr. Rivera:

Attention: Mr. Mercurio Rivera

This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase
your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT
No. T-106932 to 106937.

Re: 101 Hectares of Land

in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you
that we are accepting your offer for us to purchase the property at Sta. Rosa,
Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE
MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed
under conservatorship by the Central Bank since 1984) was replaced by an
Acting Conservator in the person of defendant Leonida T. Encarnacion. On
November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter
(Exh. "F"):

From the documents at hand, it appears that your counter-offer dated September
1, 1987 of this same lot in the amount of P5.5 million was accepted by our client
thru a letter dated September 30, 1987 and was received by you on October 5,
1987.
In view of the above circumstances, we believe that an agreement has been
perfected. We were also informed that despite repeated follow-up to
consummate the purchase, you now refuse to honor your commitment. Instead,
you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to
consummate and execute the necessary actions/documentation within three (3)
days from your receipt hereof. We are ready to remit the agreed amount of P5.5
million at your advice. Otherwise, we shall be constrained to file the necessary
court action to protect the interest of our client.
We trust that you will be guided accordingly.

(8) Defendant bank, through defendant Rivera, acknowledged receipt of the

foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"),
that said letter has been "referred . . . to the office of our Conservator for proper
disposition" However, no response came from the Acting Conservator. On
December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L"
and "L-1"), this time through the Acting Conservator, defendant Encarnacion.
Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC
Check No. 258387 in the amount of P5.5 million as our agreed purchase price of
the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935,
106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of
P5.5 Million as the purchase price of the said lots. Please inform us of the date of
documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on
May 3, 1988, plaintiff, through counsel, made a final demand for compliance by
the bank with its obligations under the considered perfected contract of sale
(Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply
letter dated May 12, 1988 (Annex "4" of defendant's answer to amended
complaint), the defendants through Acting Conservator Encarnacion repudiated
the authority of defendant Rivera and claimed that his dealings with the
plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal.
On that basis, the defendants justified the refusal of the tenders of payment and
the non-compliance with the obligations under what the plaintiffs considered to
be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with
damages against the bank, its Manager Rivers and Acting Conservator
Encarnacion. The basis of the suit was that the transaction had with the bank
resulted in a perfected contract of sale, The defendants took the position that
there was no such perfected sale because the defendant Rivera is not authorized
to sell the property, and that there was no meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip
Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court,
alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a
substantial interest in resisting the complaint. On July 8, 1991, the trial court
issued an order denying the motion to intervene on the ground that it was filed
after trial had already been concluded. It also denied a motion for

reconsideration filed thereafter. From the trial court's decision, the Bank,
petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals
which subsequently affirmed with modification the said judgment. Henry Co did
not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted
in place of Demetria and Janolo, in view of the assignment of the latters' rights in the
matter in litigation to said private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry
Co and several other stockholders of the Bank, through counsel Angara Abello Concepcion
Regala and Cruz, filed an action (hereafter, the "Second Case") purportedly a
"derivative suit" with the Regional Trial Court of Makati, Branch 134, docketed as Civil
Case No. 92-1606, against Encarnacion, Demetria and Janolo "to declare any perfected
sale of the property as unenforceable and to stop Ejercito from enforcing or implementing
the sale"4 In his answer, Janolo argued that the Second Case was barred by litis
pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial
conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the
Case Without Prejudice. "Private respondent opposed this motion on the ground, among
others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this motion is still
pending in the Makati RTC.
In their Petition6 and Memorandum7, petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected
between Ejercito (in substitution of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract
of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the
power to overrule or revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the
evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground 8 that:
I.

Petitioners have engaged in forum shopping.

conservator and other defendants but which is the subject of a pending Motion to Dismiss
Without Prejudice.9

II.
The factual findings and conclusions of the Court of Appeals are supported by the
evidence on record and may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between
Demetria and Janolo (substituted by; respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being
estopped from repudiating the agency and the contract, has no authority to
revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as
follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of
frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority
of the bank officers and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court
promulgated Revised Circular No. 28-91 requiring that a party "must certify under
oath . . . [that] (a) he has not (t)heretofore commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is
pending" in said courts or agencies. A violation of the said circular entails sanctions that
include the summary dismissal of the multiple petitions or complaints. To be sure,
petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the
record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati,
Branch 134, involving a derivative suit filed by stockholders of petitioner Bank against the

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners
are guilty of actual forum shopping because the instant petition pending before this Court
involves "identical parties or interests represented, rights asserted and reliefs sought (as
that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second
Case. In fact, the issues in the two cases are so interwined that a judgement or resolution
in either case will constitute res judicata in the other." 10
On the other hand, petitioners explain

11

that there is no forum-shopping because:

1) In the earlier or "First Case" from which this proceeding arose, the Bank was
impleaded as a defendant, whereas in the "Second Case" (assuming the Bank is
the real party in interest in a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation
under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank
president and attached to the Petition identifies the action as a "derivative suit,"
it "does not mean that it is one" and "(t)hat is a legal question for the courts to
decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law. 12,
where non-resident litigants are given the option to choose the forum or place wherein to
bring their suit for various reasons or excuses, including to secure procedural advantages,
to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more
friendly venue. To combat these less than honorable excuses, the principle of forum non
conveniens was developed whereby a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and
the parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party
attempts to have his action tried in a particular court or jurisdiction where he feels he will
receive the most favorable judgment or verdict." Hence, according to Words and
Phrases14, "a litigant is open to the charge of "forum shopping" whenever he chooses a
forum with slight connection to factual circumstances surrounding his suit, and litigants
should be encouraged to attempt to settle their differences without imposing undue
expenses and vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a
choice of venues, as it was originally understood in conflicts of laws, but also to a choice
of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a
plaintiff to commence personal actions "where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the

election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for
example, are given a choice of pursuing civil liabilities independently of the criminal,
arising from the same set of facts. A passenger of a public utility vehicle involved in a
vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal each
remedy being available independently of the others although he cannot recover more
than once.
In either of these situations (choice of venue or choice of remedy), the litigant
actually shops for a forum of his action, This was the original concept of the term
forum shopping.
Eventually, however, instead of actually making a choice of the forum of their
actions, litigants, through the encouragement of their lawyers, file their actions
in all available courts, or invoke all relevant remedies simultaneously. This
practice had not only resulted to (sic) conflicting adjudications among different
courts and consequent confusion enimical (sic) to an orderly administration of
justice. It had created extreme inconvenience to some of the parties to the
action.
Thus, "forum shopping" had acquired a different concept which is unethical
professional legal practice. And this necessitated or had given rise to the
formulation of rules and canons discouraging or altogether prohibiting the
practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as a
legitimate device for solving problems has been abused and mis-used to assure scheming
litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as
already mentioned, promulgated Circular 28-91. And even before that, the Court had
prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had
struck down in several cases 16 the inveterate use of this insidious malpractice. Forum
shopping as "the filing of repetitious suits in different courts" has been condemned by
Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs.
Heirs of Orval Hughes, et al.,"as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one
forum, a party seeks a favorable opinion (other than by appeal or certiorari) in
another. The principle applies not only with respect to suits filed in the courts but
also in connection with litigations commenced in the courts while an
administrative proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where the
court in which the second suit was brought, has no jurisdiction. 18
The test for determining whether a party violated the rule against forum shopping has
been laid dawn in the 1986 case of Buan vs. Lopez 19, also by Chief Justice Narvasa, and
that is, forum shopping exists where the elements of litis pendentia are present or where
a final judgment in one case will amount to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No. 8636563 identity of parties, or at least such parties as represent the same interests
in both actions, as well as identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and the identity on the two preceding
particulars is such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res adjudicata in the action
under consideration: all the requisites, in fine, of auter action pendant.
xxx

xxx

xxx

As already observed, there is between the action at bar and RTC Case No. 8636563, an identity as regards parties, or interests represented, rights asserted
and relief sought, as well as basis thereof, to a degree sufficient to give rise to
the ground for dismissal known as auter action pendant or lis pendens. That
same identity puts into operation the sanction of twin dismissals just mentioned.
The application of this sanction will prevent any further delay in the settlement of
the controversy which might ensue from attempts to seek reconsideration of or
to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which
appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the
same party against whom another action or actions for the alleged violation of the same
right and the enforcement of the same relief is/are still pending, the defense of litis
pendencia in one case is bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest. In either case,
forum shopping could be cited by the other party as a ground to ask for summary
dismissal of the two 20 (or more) complaints or petitions, and for imposition of the other
sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action
against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second
Case, it is obvious that there exist identity of parties or interests represented, identity of
rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant
petition was filed by the buyer (herein private respondent and his predecessors-ininterest) against the seller (herein petitioners) to enforce the alleged perfected sale of real
estate. On the other hand, the complaint 21 in the Second Case seeks to declare such
purported sale involving the same real property "as unenforceable as against the Bank",
which is the petitioner herein. In other words, in the Second Case, the majority
stockholders, in representation of the Bank, are seeking to accomplish what the Bank
itself failed to do in the original case in the trial court. In brief, the objective or the relief
being sought, though worded differently, is the same, namely, to enable the petitioner
Bank to escape from the obligation to sell the property to respondent. In Danville
Maritime, Inc. vs. Commission on Audit. 22, this Court ruled that the filing by a party of two
apparently different actions, but with the same objective,constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner
impleaded different respondents therein PNOC in the case before the lower
court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letterdirective of the COA dated October 10, 1988 and to direct said body to approve

the Memorandum of Agreement entered into by and between the PNOC and
petitioner, while in the complaint before the lower court petitioner seeks to
enjoin the PNOC from conducting a rebidding and from selling to other parties
the vessel "T/T Andres Bonifacio", and for an extension of time for it to comply
with the paragraph 1 of the memorandum of agreement and damages. One can
see that although the relief prayed for in the two (2) actions are ostensibly
different, the ultimate objective in both actions is the same, that is, approval of
the sale of vessel in favor of petitioner and to overturn the letter-directive of the
COA of October 10, 1988 disapproving the sale. (emphasis supplied).
In an earlier case

23

but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action
for certiorari and prohibition in this Court despite the pendency of their action in
the Makati Regional Trial Court, is a species of forum-shopping. Both actions
unquestionably involve the same transactions, the same essential facts and
circumstances. The petitioners' claim of absence of identity simply because the
PCGG had not been impleaded in the RTC suit, and the suit did not involve
certain acts which transpired after its commencement, is specious. In the RTC
action, as in the action before this Court, the validity of the contract to purchase
and sell of September 1, 1986, i.e., whether or not it had been efficaciously
rescinded, and the propriety of implementing the same (by paying the pledgee
banks the amount of their loans, obtaining the release of the pledged shares,
etc.) were the basic issues. So, too, the relief was the same: the prevention of
such implementation and/or the restoration of the status quo ante. When the
acts sought to be restrained took place anyway despite the issuance by the Trial
Court of a temporary restraining order, the RTC suit did not become functus
oficio. It remained an effective vehicle for obtention of relief; and petitioners'
remedy in the premises was plain and patent: the filing of an amended and
supplemental pleading in the RTC suit, so as to include the PCGG as defendant
and seek nullification of the acts sought to be enjoined but nonetheless done.
The remedy was certainly not the institution of another action in another forum
based on essentially the same facts, The adoption of this latter recourse renders
the petitioners amenable to disciplinary action and both their actions, in this
Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests
represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name
parties in the First Case, they represent the same interest and entity, namely, petitioner
Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal
interest in the matter in controversy. They are not principally or even subsidiarily liable;
much less are they direct parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders
are bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit
"for and in behalf of the Producers Bank of the Philippines" 24. Indeed, this is the very
essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of
the corporation wherein he holdsstock in order to protect or vindicate corporate
rights, whenever the officials of the corporation refuse to sue, or are the ones to

be sued or hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party, with the corporation as the real party
in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case,
petitioners, quite strangely, sought to deny that the Second Case was a derivative suit,
reasoning that it was brought, not by the minority shareholders, but by Henry Co et al.,
who not only own, hold or control over 80% of the outstanding capital stock, but also
constitute the majority in the Board of Directors of petitioner Bank. That being so, then
they really represent the Bank. So, whether they sued "derivatively" or directly, there is
undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank
is separate and distinct from its shareholders. But the rulings of this Court are consistent:
"When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally the perpetration of knavery or
crime, the veil with which the law covers and isolates the corporation from the members
or stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded, we now
add the instant case, and declare herewith that the corporate veil cannot be used to
shield an otherwise blatant violation of the prohibition against forum-shopping.
Shareholders, whether suing as the majority in direct actions or as the minority in a
derivative suit, cannot be allowed to trifle with court processes, particularly where, as in
this case, the corporation itself has not been remiss in vigorously prosecuting or
defending corporate causes and in using and applying remedies available to it. To rule
otherwise would be to encourage corporate litigants to use their shareholders as fronts to
circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs sought,
"because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the
other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial
Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to
him, commences a new action against the plaintiff instead of filing a
responsive pleading in the other case setting forth therein, as causes of
action, specific denials, special and affirmative defenses or even counterclaims,
Thus, Velhagen's and King's motion to dismiss Civil Case No. 91-2069 by no
means negates the charge of forum-shopping as such did not exist in the first
place. (emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could
not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting
between Victronics and the present suit. In the former, as underscored in the abovequoted Court ruling, the defendants did not file anyresponsive pleading in the first case. In
other words, they did not make any denial or raise any defense or counter-claim therein In

the case before us however, petitioners filed a responsive pleading to the complaint as
a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counterclaims in their
responsive pleadings, the petitioners became plaintiffs themselves in the original case,
giving unto themselves the very remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and parties-litigant by a party who asks
different courts and/or administrative agencies to rule on the same or related causes
and/or to grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different fora upon the same
issue. In this case, this is exactly the problem: a decision recognizing the perfection and
directing the enforcement of the contract of sale will directly conflict with a possible
decision in the Second Case barring the parties front enforcing or implementing the said
sale. Indeed, a final decision in one would constitute res judicata in the other 28.
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the
only sanction possible now is the dismissal of both cases with prejudice, as the other
sanctions cannot be imposed because petitioners' present counsel entered their
appearance only during the proceedings in this Court, and the Petition's
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the
Second Case to show good faith in observing Circular 28-91. The Lawyers who filed the
Second Case are not before us; thus the rudiments of due process prevent us from motu
propio imposing disciplinary measures against them in this Decision. However, petitioners
themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow
the rules against forum-shopping and not to trifle with court proceedings and processes
They are warned that a repetition of the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely
because of forum-shopping but also because of the substantive issues raised, as will be
discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the
basis of the facts established, a perfected contract of sale as the ultimate issue. Holding
that a valid contract has been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by
the defendant bank as acquired assets consisting of six (6) parcels of land
specifically identified under Transfer Certificates of Title Nos. T-106932 to T106937. It is likewise beyond cavil that the bank intended to sell the property. As
testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was
looking for buyers of the property. It is definite that the plaintiffs wanted to
purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the
defendant bank, in early August 1987. The procedure in the sale of acquired
assets as well as the nature and scope of the authority of Rivera on the matter is
clearly delineated in the testimony of Rivera himself, which testimony was relied
upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30,
1990. pp. 19-20):

A: The procedure runs this way: Acquired assets was turned over to me
and then I published it in the form of an inter-office memorandum
distributed to all branches that these are acquired assets for sale. I was
instructed to advertise acquired assets for sale so on that basis, I have
to entertain offer; to accept offer, formal offer and upon having been
offered, I present it to the Committee. I provide the Committee with
necessary information about the property such as original loan of the
borrower, bid price during the foreclosure, total claim of the bank, the
appraised value at the time the property is being offered for sale and
then the information which are relative to the evaluation of the bank to
buy which the Committee considers and it is the Committee that
evaluate as against the exposure of the bank and it is also the
Committee that submit to the Conservator for final approval and once
approved, we have to execute the deed of sale and it is the Conservator
that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose
of buying the property, dealt with and talked to the right person. Necessarily, the
agenda was the price of the property, and plaintiffs were dealing with the bank
official authorized to entertain offers, to accept offers and to present the offer to
the Committee before which the said official is authorized to discuss information
relative to price determination. Necessarily, too, it being inherent in his authority,
Rivera is the officer from whom official information regarding the price, as
determined by the Committee and approved by the Conservator, can be had.
And Rivera confirmed his authority when he talked with the plaintiff in August
1987. The testimony of plaintiff Demetria is clear on this point (TSN of May
31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio
Rivera, did you ask him point-blank his authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked
him how long it would take because he was saying that the matter of
pricing will be passed upon by the committee. And when I asked him
how long it will take for the committee to decide and he said the
committee meets every week. If I am not mistaken Wednesday and in
about two week's (sic) time, in effect what he was saying he was not the
one who was to decide. But he would refer it to the committee and he
would relay the decision of the committee to me.
Q Please answer the question.
A He did not say that he had the authority (.) But he said he would
refer the matter to the committee and he would relay the decision to me
and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which
Luis Co was the Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the
authority and the duties of Rivera and the bank's internal procedure in the
matter of the sale of bank's assets. As advised by Rivera, the plaintiffs made a

formal offer by a letter dated August 20, 1987 stating that they would buy at the
price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera
who was tasked to convey and accept such offers. Considering an aspect of the
official duty of Rivera as some sort of intermediary between the plaintiffs-buyers
with their proposed buying price on one hand, and the bank Committee, the
Conservator and ultimately the bank itself with the set price on the other, and
considering further the discussion of price at the meeting of August resulting in a
formal offer of P3.5 Million in cash, there can be no other logical conclusion than
that when, on September 1, 1987, Rivera informed plaintiffs by letter that "the
bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis,"
such counter-offer price had been determined by the Past Due Committee and
approved by the Conservator after Rivera had duly presented plaintiffs' offer for
discussion by the Committee of such matters as original loan of borrower, bid
price during foreclosure, total claim of the bank, and market value. Tersely put,
under the established facts, the price of P5.5 Million was, as clearly worded in
Rivera's letter (Exh. "E"), the official and definitive price at which the bank was
selling the property.
There were averments by defendants below, as well as before this Court, that the
P5.5 Million price was not discussed by the Committee and that price. As
correctly characterized by the trial court, this is not credible. The testimonies of
Luis Co and Jose Entereso on this point are at best equivocal and considering the
gratuitous and self-serving character of these declarations, the bank's
submission on this point does not inspire belief. Both Co ad Entereso, as
members of the Past Due Committee of the bank, claim that the offer of the
plaintiff was never discussed by the Committee. In the same vein, both Co and
Entereso openly admit that they seldom attend the meetings of the Committee.
It is important to note that negotiations on the price had started in early August
and the plaintiffs had already offered an amount as purchase price, having been
made to understand by Rivera, the official in charge of the negotiation, that the
price will be submitted for approval by the bank and that the bank's decision will
be relayed to plaintiffs. From the facts, the official bank price. At any rate, the
bank placed its official, Rivera, in a position of authority to accept offers to buy
and negotiate the sale by having the offer officially acted upon by the bank. The
bank cannot turn around and later say, as it now does, that what Rivera states as
the bank's action on the matter is not in fact so. It is a familiar doctrine, the
doctrine of ostensible authority, 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, he estopped from denying his authority
(Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357,
369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract
as follows: "(1) Consent of the contracting parties; (2) Object certain which is the subject
matter of the contract; (3) Cause of the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of
the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101
hectares, more or less, and covered by Transfer Certificates of Title Nos. T-106932 to T106937. There is, however, a dispute on the first and third requisites.

Petitioners allege that "there is no counter-offer made by the Bank, and any supposed
counter-offer which Rivera (or Co) may have made is unauthorized. Since there was no
counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and
Janolo) to accept." 30 They disputed the factual basis of the respondent Court's findings
that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered
P5.5 million. We have perused the evidence but cannot find fault with the said Court's
findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact if there be
any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial
court as well) chose to believe the evidence presented by respondent more than that
presented by petitioners is not by itself a reversible error. In fact, such findings merit
serious consideration by this Court, particularly where, as in this case, said courts
carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals,
let us review the question of Rivera's authority to act and petitioner's allegations that the
P5.5 million counter-offer was extinguished by the P4.25 million revised offer of Janolo.
Here, there are questions of law which could be drawn from the factual findings of the
respondent Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or
apparent. The doctrine of "apparent authority", with special reference to banks, was laid
out in Prudential Bank vs. Court of Appeals31, where it was held that:
Conformably, we have declared in countless decisions that the principal is liable
for obligations contracted by the agent. The agent's apparent representation
yields to the principal's true representation and the contract is considered as
entered into between the principal and the third person (citing National Food
Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of
the bank or in the course of dealings of the officers in their
representative capacity but not for acts outside the scape of their
authority (9 C.J.S., p. 417). A bank holding out its officers and agents as
worthy of confidence will not be permitted to profit by the frauds they
may thus be enabled to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for such
frauds even though no benefit may accrue to the bank therefrom (10
Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to
innocent third persons where the representation is made in the course
of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his
principal or some other person, for his own ultimate benefit (McIntosh v.
Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a
fiduciary relationship with the public and their stability depends on the
confidence of the people in their honesty and efficiency. Such faith will be eroded
where banks do not exercise strict care in the selection and supervision of its
employees, resulting in prejudice to their depositors.

From the evidence found by respondent Court, it is obvious that petitioner Rivera has
apparent or implied authority to act for the Bank in the matter of selling its acquired
assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material
to this case, Manager of the Property Management Department of the Bank". By
his own admission, Rivera was already the person in charge of the Bank's
acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the
Bank. And during the initial meeting between the buyers and Rivera, the latter
suggested that the buyers' offer should be no less than P3.3 million (TSN, April
26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million
(TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property
for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers'
proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the
final price of the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September
28, 1994, during which the Bank's offer of P5.5 million was confirmed by Rivera
(TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and
officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p.
35);
(h) In its newspaper advertisements and announcements, the Bank referred to
Rivera as the officer acting for the Bank in relation to parties interested in buying
assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in
the Bank's advertisements offering for sale the property in question (cf. Exhs. "S"
and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32, the
Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it
held that the apparent authority of the officer of the Bank of P.I. in charge of acquired
assets is borne out by similar circumstances surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through
documents and testimony which seek to establish Rivera's actual authority. These pieces
of evidence, however, are inherently weak as they consist of Rivera's self-serving
testimony and various inter-office memoranda that purport to show his limited actual
authority, of which private respondent cannot be charged with knowledge. In any event,
since the issue is apparent authority, the existence of which is borne out by the

respondent Court's findings, the evidence of actual authority is immaterial insofar as the
liability of a corporation is concerned 33.
Petitioners also argued that since Demetria and Janolo were experienced lawyers and
their "law firm" had once acted for the Bank in three criminal cases, they should be
charged with actual knowledge of Rivera's limited authority. But the Court of Appeals in its
Decision (p. 12) had already made a factual finding that the buyers had no notice of
Rivera's actual authority prior to the sale. In fact, the Bank has not shown that they acted
as its counsel in respect to any acquired assets; on the other hand, respondent has
proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers
(not a professional partnership), one of whose members (Atty. Susana Parker) acted in
said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the
letter dated September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They
disputed the respondent Court's finding that "there was a meeting of minds when on 30
September 1987 Demetria and Janolo through Annex "L" (letter dated September 30,
1987) "accepted" Rivera's counter offer of P5.5 million under Annex "J" (letter dated
September 17, 1987)", citing the late Justice Paras35, Art. 1319 of the Civil Code 36 and
related Supreme Court rulings starting with Beaumont vs. Prieto 37.
However, the above-cited authorities and precedents cannot apply in the instant case
because, as found by the respondent Court which reviewed the testimonies on this point,
what was "accepted" by Janolo in his letter dated September 30, 1987 was the Bank's
offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by
Rivera and Co during their meeting on September 28, 1987. Note that the said letter of
September 30, 1987 begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of Rivera
and Co that the September 28, 1987 meeting "was meant to have the offerors improve on
their position of P5.5. million."38However, both the trial court and the Court of Appeals
found petitioners' testimonial evidence "not credible", and we find no basis for changing
this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common
finding that private respondents' evidence is more in keeping with truth and logic that
during the meeting on September 28, 1987, Luis Co and Rivera "confirmed that the P5.5
million price has been passed upon by the Committee and could no longer be lowered
(TSN of April 27, 1990, pp. 34-35)"39. Hence, assuming arguendo that the counter-offer of
P4.25 million extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5
million price during the September 28, 1987 meeting revived the said offer. And by virtue
of the September 30, 1987 letter accepting thisrevived offer, there was a meeting of the
minds, as the acceptance in said letter was absolute and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's
authority and action, particularly the latter's counter-offer of P5.5 million, as being
"unauthorized and illegal" came only on May 12, 1988 or more than seven (7) months
after Janolo' acceptance. Such delay, and the absence of any circumstance which might
have justifiably prevented the Bank from acting earlier, clearly characterizes the
repudiation as nothing more than a last-minute attempt on the Bank's part to get out of a
binding contractual obligation.

Taken together, the factual findings of the respondent Court point to an implied admission
on the part of the petitioners that the written offer made on September 1, 1987 was
carried through during the meeting of September 28, 1987. This is the conclusion
consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million
was raised for the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that
points of law, theories, issues of fact and arguments not adequately brought to
the attention of the trial court need not be, and ordinarily will not be, considered
by a reviewing court, as they cannot be raised for the first time on appeal
(Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592). 40
. . . It is settled jurisprudence that an issue which was neither averred in the
complaint nor raised during the trial in the court below cannot be raised for the
first time on appeal as it would be offensive to the basic rules of fair play, justice
and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147
SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425
[1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August
30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense, private
respondent was not given an opportunity in the trial court to controvert the same through
opposing evidence. Indeed, this is a matter of due process. But we passed upon the issue
anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat
that, on the basis of the evidence already in the record and as appreciated by the lower
courts, the inevitable conclusion is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?

The respondent Court could have added that the written communications commenced not
only from September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that,
taken together, these letters constitute sufficient memoranda since they include the
names of the parties, the terms and conditions of the contract, the price and a description
of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September
28, 1987 did constitute a "new" offer which was accepted by Janolo on September 30,
1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to
object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence,
petitioners by such utter failure to object are deemed to have waived any defects of
the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article
1403, are ratified by the failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the
reaffirmation of the counter-offer of P5.5 million is a plenty and the silence of
petitioners all throughout the presentation makes the evidence binding on them thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because
Atty. Demetria told me to accompany him we were able to meet Luis Co at the
Bank.
xxx

xxx

xxx

Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.

42

The petition alleged :

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5
million during the meeting of 28 September 1987, and it was this verbal offer
that Demetria and Janolo accepted with their letter of 30 September 1987, the
contract produced thereby would be unenforceable by action there being no
note, memorandum or writing subscribed by the Bank to evidence such contract.
(Please see article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and the
plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves,
formal contracts of sale. They are however clear embodiments of the fact that a
contract of sale was perfected between the parties, such contract being binding
in whatever form it may have been entered into (case citations omitted). Stated
simply, the banks' letter of September 1, 1987, taken together with plaintiffs'
letter dated September 30, 1987, constitute in law a sufficient memorandum of a
perfected contract of sale.

Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr.
Mercurio Rivera is the final price and that is the price they intends (sic) to have,
sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that
the defendant Rivera's counter-offer of 5.5 million was the defendant's bank (sic)
final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.

A He said he will wait for the position of Atty. Demetria, sir.

The Fourth Issue: May the Conservator Revoke

the Perfected and Enforceable Contract.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co of the
defendant Bank?
A We went straight to the point because he being a busy person, I told him if the
amount of P5.5 million could still be reduced and he said that was already passed
upon by the committee. What the bank expects which was contrary to what Mr.
Rivera stated. And he told me that is the final offer of the bank P5.5 million and
we should indicate our position as soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said that
was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his
office.
Q For the record, your Honor please, will you tell this Court who was with Mr. Co
in his Office in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic)
the counter offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which
offer we accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

It is not disputed that the petitioner Bank was under a conservator placed by the Central
Bank of the Philippines during the time that the negotiation and perfection of the contract
of sale took place. Petitioners energetically contended that the conservator has the power
to revoke or overrule actions of the management or the board of directors of a bank,
under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as
follows:
Whenever, on the basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a non-bank
financial intermediary performing quasi-banking functions is in a state of
continuing inability or unwillingness to maintain a state of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary Board
may appoint a conservator to take charge of the assets, liabilities, and the
management of that institution, collect all monies and debts due said institution
and exercise all powers necessary to preserve the assets of the institution,
reorganize the management thereof, and restore its viability. He shall have the
power to overrule or revoke the actions of the previous management and board
of directors of the bank or non-bank financial intermediary performing quasibanking functions, any provision of law to the contrary notwithstanding, and such
other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate
the perfected contract of sale was raised for the first time in this Petition as this was
not litigated in the trial court or Court of Appeals. As already stated earlier, issues not
raised and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be
raised for the first time on appeal as it would be offensive to the basic rules of fair play,
justice and due process."43
In the second place, there is absolutely no evidence that the Conservator, at the time the
contract was perfected, actually repudiated or overruled said contract of sale. The Bank's
acting conservator at the time, Rodolfo Romey, never objected to the sale of the property
to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator
Encarnacion, who took over from Romey after the sale was perfected on September 30,
1987 (Annex V, petition) which unilaterally repudiated not the contract but the
authority of Rivera to make a binding offer and which unarguably came months after
the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:

Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached
by the Committee and it is not within his power to reduce this amount. What can
you say to that statement that the amount of P5.5 million was reached by the
Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co
and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that
September 28, 1987 meeting, sir.

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila

[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

Dear Atty. Zarate:

This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and
Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your
clients nor perfected a "contract to sell and buy" with any of them for the
following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and
approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank
Senior Manager Perfecto M. Pascua detailed the functions of Property
Management Department (PMD) staff and officers (Annex A.), you will
immediately read that Manager Mr. Mercurio Rivera or any of his subordinates
has no authority, power or right to make any alleged counter-offer. In short, your
lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates
Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as
amended), only the Board of Directors/Conservator may authorize the sale of any
property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by
any of the bank conservators (starting January, 1984) to sell the aforesaid
property to any of your clients. Apparently, what took place were just preliminary
discussions/consultations between him and your clients, which everyone
knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients,
as the same is patently violative of corporate and banking laws. We believe that
this is more than sufficient legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are
official, legal and in accordance with law. We also have no personal interest in
any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching
powers to the conservator of a bank, it must be pointed out that such powers must be
related to the "(preservation of) the assets of the bank, (the reorganization of) the
management thereof and (the restoration of) its viability." Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the
Constitution 44. If the legislature itself cannot revoke an existing valid contract, how can it
delegate such non-existent powers to the conservator under Section 28-A of said law?

Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts
that are, under existing law, deemed to be defective i.e., void, voidable, unenforceable
or rescissible. Hence, the conservator merely takes the place of a bank's board of
directors. What the said board cannot do such as repudiating a contract validly entered
into under the doctrine of implied authority the conservator cannot do either.
Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of
the Bank. His authority would be only to bring court actions to assail such contracts as
he has already done so in the instant case. A contrary understanding of the law would
simply not be permitted by the Constitution. Neither by common sense. To rule otherwise
would be to enable a failing bank to become solvent, at the expense of third parties, by
simply getting the conservator to unilaterally revoke all previous dealings which had one
way or another or come to be considered unfavorable to the Bank, yielding nothing to
perfected contractual rights nor vested interests of the third parties who had dealt with
the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court,
findings of fact by the Court of Appeals are not reviewable by the Supreme Court.
In Andres vs. Manufacturers Hanover & Trust Corporation, 45, we held:
. . . The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in
Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals
is limited to reviewing and revising the errors of law imputed to it, its findings of
the fact being conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30,
1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has
emphatically declared that "it is not the function of the Supreme Court to analyze
or weigh such evidence all over again, its jurisdiction being limited to reviewing
errors of law that might have been committed by the lower court" (Tiongco v. De
la Merced, G. R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of
Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of
Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596). "Barring,
therefore, a 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" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17,
1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals

46

, we held:

The resolution of this petition invites us to closely scrutinize the facts of the case,
relating to the sufficiency of evidence and the credibility of witnesses presented.
This Court so held that it is not the function of the Supreme Court to analyze or
weigh such evidence all over again. The Supreme Court's jurisdiction is limited to
reviewing errors of law that may have been committed by the lower court. The
Supreme Court is not a trier of facts. . . .

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp. 47:
The Court has consistently held that the factual findings of the trial court, as well
as the Court of Appeals, are final and conclusive and may not be reviewed on
appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding
grounded entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a
misapprehension of facts; when the findings went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee.
After a careful study of the case at bench, we find none of the above grounds
present to justify the re-evaluation of the findings of fact made by the courts
below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and
Insurance Company Inc. vs.Hon. Court of Appeals, et al. 48 is equally applicable to the
present case:
We see no valid reason to discard the factual conclusions of the appellate court, .
. . (I)t is not the function of this Court to assess and evaluate all over again the
evidence, testimonial and documentary, adduced by the parties, particularly
where, such as here, the findings of both the trial court and the appellate court
on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings
and conclusions which were not only contrary to the evidence on record but have no
bases at all," specifically the findings that (1) the "Bank's counter-offer price of P5.5
million had been determined by the past due committee and approved by conservator
Romey, after Rivera presented the same for discussion" and (2) "the meeting with Co was
not to scale down the price and start negotiations anew, but a meeting on the already
determined price of P5.5 million" Hence, citing Philippine National Bank vs. Court of
Appeals 49, petitioners are asking us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals

50

, thus:

There can be no other logical conclusion than that when, on September 1, 1987,
Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million
for more than 101 hectares on lot basis, "such counter-offer price had been
determined by the Past Due Committee and approved by the Conservator after
Rivera had duly presented plaintiffs' offer for discussion by the Committee . . .
Tersely put, under the established fact, the price of P5.5 Million was, as clearly
worded in Rivera's letter (Exh. "E"), the official and definitive price at which the
bank was selling the property. (p. 11, CA Decision)
xxx

xxx

xxx

. . . The argument deserves scant consideration. As pointed out by plaintiff,

during the meeting of September 28, 1987 between the plaintiffs, Rivera and
Luis Co, the senior vice-president of the bank, where the topic was the possible
lowering of the price, the bank official refused it and confirmed that the P5.5

Million price had been passed upon by the Committee and could no longer be
lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point,
characterizing it as "not credible" and "at best equivocal and considering the gratuitous
and self-serving character of these declarations, the bank's submissions on this point do
not inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator
Rodolfo Romey to testify on their behalf, as he would have been in the best position to
establish their thesis. Under the rules on evidence 51, such suppression gives rise to the
presumption that his testimony would have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence
was deemed insufficient by both the trial court and the respondent Court, and instead, it
was respondent's submissions that were believed and became bases of the conclusions
arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by
the lower courts are valid and correct. But the petitioners are now asking this Court to
disturb these findings to fit the conclusion they are espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings
of fact by the Court of Appeals 52. We have studied both the records and the CA Decision
and we find no such exceptions in this case. On the contrary, the findings of the said Court
are supported by a preponderance of competent and credible evidence. The inferences
and conclusions are seasonably based on evidence duly identified in the Decision. Indeed,
the appellate court patiently traversed and dissected the issues presented before it,
lending credibility and dependability to its findings. The best that can be said in favor of
petitioners on this point is that the factual findings of respondent Court did not correspond
to petitioners' claims, but were closer to the evidence as presented in the trial court by
private respondent. But this alone is no reason to reverse or ignore such factual findings,
particularly where, as in this case, the trial court and the appellate court were in common
agreement thereon. Indeed, conclusions of fact of a trial judge as affirmed by the Court
of Appeals are conclusive upon this Court, absent any serious abuse or evident lack of
basis or capriciousness of any kind, because the trial court is in a better position to
observe the demeanor of the witnesses and their courtroom manner as well as to examine
the real evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the raising of
issues for the first time on appeal [viz., the extinguishment of the Bank's offer of P5.5
million and the conservator's powers to repudiate contracts entered into by the Bank's
officers] which per se could justify the dismissal of the present case. We did not limit
ourselves thereto, but delved as well into the substantive issues the perfection of the
contract of sale and its enforceability, which required the determination of questions of
fact. While the Supreme Court is not a trier of facts and as a rule we are not required to
look into the factual bases of respondent Court's decisions and resolutions, we did so just
the same, if only to find out whether there is reason to disturb any of its factual findings,
for we are only too aware of the depth, magnitude and vigor by which the parties through
their respective eloquent counsel, argued their positions before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is operating
abnormally under a government-appointed conservator and "there is need to rehabilitate
the Bank in order to get it back on its feet . . . as many people depend on (it) for
investments, deposits and well as employment. As of June 1987, the Bank's overdraft with
the Central Bank had already reached P1.023 billion . . . and there were (other) offers to
buy the subject properties for a substantial amount of money." 53
While we do not deny our sympathy for this distressed bank, at the same time, the Court
cannot emotionally close its eyes to overriding considerations of substantive and
procedural law, like respect for perfected contracts, non-impairment of obligations and
sanctions against forum-shopping, which must be upheld under the rule of law and blind
justice.
This Court cannot just gloss over private respondent's submission that, while the subject
properties may currently command a much higher price, it is equally true that at the time
of the transaction in 1987, the price agreed upon of P5.5 million was reasonable,
considering that the Bank acquired these properties at a foreclosure sale for no more than
P3.5 million 54. That the Bank procrastinated and refused to honor its commitment to sell
cannot now be used by it to promote its own advantage, to enable it to escape its binding
obligation and to reap the benefits of the increase in land values. To rule in favor of the
Bank simply because the property in question has algebraically accelerated in price
during the long period of litigation is to reward lawlessness and delays in the fulfillment of
binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous
proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the
Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner
Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of
the same or similar acts will be dealt with more severely. Costs against petitioners.
SO ORDERED.

G.R. No. 167812

December 19, 2006

JESUS M. GOZUN, petitioner,

vs.
JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO, respondent.

DECISION
CARPIO MORALES, J.:
On challenge via petition for review on certiorari is the Court of Appeals Decision of
December 8, 2004 and Resolution of April 14, 2005 in CA-G.R. CV No. 76309 1 reversing
the trial courts decision2 against Jose Teofilo T. Mercado a.k.a. Don Pepito Mercado
(respondent) and accordingly dismissing the complaint of Jesus M. Gozun (petitioner).

Petitioner thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a
complaint15 against respondent to collect the remaining amount of P1,177,906 plus
"inflationary adjustment" and attorneys fees.
In his Answer with Compulsory Counterclaim,16 respondent denied having transacted with
petitioner or entering into any contract for the printing of campaign materials. He alleged
that the various campaign materials delivered to him were represented as donations from
his family, friends and political supporters. He added that all contracts involving his
personal expenses were coursed through and signed by him to ensure compliance with
pertinent election laws.

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga.
Upon respondents request, petitioner, owner of JMG Publishing House, a printing shop
located in San Fernando, Pampanga, submitted to respondent draft samples and price
quotation of campaign materials.

On petitioners claim that Lilian, on his (respondents) behalf, had obtained from him a
cash advance of P253,000, respondent denied having given her authority to do so and
having received the same.

By petitioners claim, respondents wife had told him that respondent already approved
his price quotation and that he could start printing the campaign materials, hence, he did
print campaign materials like posters bearing respondents photograph, 3 leaflets
containing the slate of party candidates,4 sample ballots,5 poll watcher identification
cards,6 and stickers.

At the witness stand, respondent, reiterating his allegations in his Answer, claimed that
petitioner was his over-all coordinator in charge of the conduct of seminars for volunteers
and the monitoring of other matters bearing on his candidacy; and that while his
campaign manager, Juanito "Johnny" Cabalu (Cabalu), who was authorized to approve
details with regard to printing materials, presented him some campaign materials, those
were partly donated.17

Given the urgency and limited time to do the job order, petitioner availed of the services
and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his
daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively. 7
Petitioner delivered the campaign materials to respondents headquarters along GapanOlongapo Road in San Fernando, Pampanga.8
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano (Lilian) obtained
from petitioner "cash advance" of P253,000 allegedly for the allowances of poll watchers
who were attending a seminar and for other related expenses. Lilian acknowledged on
petitioners 1995 diary9 receipt of the amount.10
Petitioner later sent respondent a Statement of Account 11 in the total amount
of P2,177,906 itemized as follows:P640,310 for JMG Publishing House; P837,696 for Metro
Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash
advance" obtained by Lilian.
On August 11, 1995, respondents wife partially paid P1,000,000 to petitioner who issued
a receipt12 therefor.
Despite repeated demands and respondents promise to pay, respondent failed to settle
the balance of his account to petitioner.
Petitioner and respondent being compadres, they having been principal sponsors at the
weddings of their respective daughters, waited for more than three (3) years for
respondent to honor his promise but to no avail, compelling petitioner to endorse the
matter to his counsel who sent respondent a demand letter. 13 Respondent, however, failed
to heed the demand.14

When confronted with the official receipt issued to his wife acknowledging her payment to
JMG Publishing House of the amount of P1,000,000, respondent claimed that it was his
first time to see the receipt, albeit he belatedly came to know from his wife and Cabalu
that the P1,000,000 represented "compensation [to petitioner] who helped a lot in the
campaign as a gesture of goodwill."18
Acknowledging that petitioner is engaged in the printing business, respondent explained
that he sometimes discussed with petitioner strategies relating to his candidacy, he
(petitioner) having actively volunteered to help in his campaign; that his wife was not
authorized to enter into a contract with petitioner regarding campaign materials as she
knew her limitations; that he no longer questioned the P1,000,000 his wife gave petitioner
as he thought that it was just proper to compensate him for a job well done; and that he
came to know about petitioners claim against him only after receiving a copy of the
complaint, which surprised him because he knew fully well that the campaign materials
were donations.19
Upon questioning by the trial court, respondent could not, however, confirm if it was his
understanding that the campaign materials delivered by petitioner were donations from
third parties.20
Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign
material is donated, it must be so stated on its face, acknowledged that nothing of that
sort was written on all the materials made by petitioner. 21
As adverted to earlier, the trial court rendered judgment in favor of petitioner, the
dispositive portion of which reads:

WHEREFORE, the plaintiff having proven its (sic) cause of action by

preponderance of evidence, the Court hereby renders a decision in favor of the
plaintiff ordering the defendant as follows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum
from the filing of this complaint until fully paid;
2. To pay the sum of P50,000.00 as attorneys fees and the costs of suit.
SO ORDERED.22
Also as earlier adverted to, the Court of Appeals reversed the trial courts decision and
dismissed the complaint for lack of cause of action.
In reversing the trial courts decision, the Court of Appeals held that other than
petitioners testimony, there was no evidence to support his claim that Lilian was
authorized by respondent to borrow money on his behalf. It noted that the
acknowledgment receipt23 signed by Lilian did not specify in what capacity she received
the money. Thus, applying Article 131724 of the Civil Code, it held that petitioners claim
for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing House P640,310, Metro Angeles
Printing P837,696, and St. Joseph Printing Press P446,900, the appellate court, noting
that since the owners of the last two printing presses were not impleaded as parties to the
case and it was not shown that petitioner was authorized to prosecute the same in their
behalf, held that petitioner could not collect the amounts due them.
Finally, the appellate court, noting that respondents wife had paid P1,000,000 to
petitioner, the latters claim ofP640,310 (after excluding the P253,000) had already been
settled.
Hence, the present petition, faulting the appellate court to have erred:
1. . . . when it dismissed the complaint on the ground that there is no evidence,
other than petitioners own testimony, to prove that Lilian R. Soriano was
authorized by the respondent to receive the cash advance from the petitioner in
the amount of P253,000.00.
xxxx
2. . . . when it dismissed the complaint, with respect to the amounts due to the
Metro Angeles Press and St. Joseph Printing Press on the ground that the
complaint was not brought by the real party in interest.
x x x x25
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.26 Contracts entered into in the name of another person by one who has been given

no authority or legal representation or who has acted beyond his powers are classified as
unauthorized contracts and are declared unenforceable, unless they are ratified. 27
Generally, the agency may be oral, unless the law requires a specific form. 28 However, a
special power of attorney is necessary for an agent to, as in this case, borrow money,
unless it be urgent and indispensable for the preservation of the things which are under
administration.29 Since nothing in this case involves the preservation of things under
administration, a determination of whether Soriano had the special authority to borrow
money on behalf of respondent is in order.
Lim Pin v. Liao Tian, et al.30 held that the requirement of a special power of attorney refers
to the nature of the authorization and not to its form.
. . . The requirements are met if there is a clear mandate from the principal
specifically authorizing the performance of the act. As early as 1906, this Court
in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be
either oral or written. The one thing vital being that it shall be express. And more
recently, We stated that, if the special authority is not written, then it must
be duly established by evidence:
"the Rules require, for attorneys to compromise the litigation of their clients, a
special authority. And while the same does not state that the special authority be
in writing the Court has every reason to expect that, if not in writing, the same
be duly established by evidence other than the self-serving assertion of counsel
himself that such authority was verbally given him." 31 (Emphasis and
underscoring supplied)
Petitioner submits that his following testimony suffices to establish that respondent had
authorized Lilian to obtain a loan from him, viz:
Q : Another caption appearing on Exhibit "A" is cash advance, it states given on
3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado,
amount P253,000.00, will you kindly tell the Court and explain what does that
caption means?
A : It is the amount representing the money borrowed from me by the
defendant when one morning they came very early and talked to me and
told me that they were not able to go to the bank to get money for the
allowances of Poll Watchers who were having a seminar at the headquarters plus
other election related expenses during that day, sir.
Q : Considering that this is a substantial amount which according to you was
taken by Lilian Soriano, did you happen to make her acknowledge the amount at
that time?
A : Yes, sir.32 (Emphasis supplied)
Petitioners testimony failed to categorically state, however, whether the loan was made
on behalf of respondent or of his wife. While petitioner claims that Lilian was authorized
by respondent, the statement of account marked as Exhibit "A" states that the amount
was received by Lilian "in behalf of Mrs. Annie Mercado."

Invoking Article 187333 of the Civil Code, petitioner submits that respondent informed him
that he had authorized Lilian to obtain the loan, hence, following Macke v. Camps34 which
holds that one who clothes another with apparent authority as his agent, and
holds him out to the public as such, respondent cannot be permitted to deny the
authority.
Petitioners submission does not persuade. As the appellate court observed:
. . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to
support his claim unfortunately only indicates the Two Hundred Fifty Three
Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31
March 1995, but without specifying for what reason the said amount was
delivered and in what capacity did Lilian R. Soriano received [sic] the money. The
note reads:
"3-31-95
261,120 ADVANCE MONEY FOR TRAINEE
RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO HUNDRED FIFTY
THREE THOUSAND PESOS
(SIGNED)
LILIAN R. SORIANO
3-31-95"
Nowhere in the note can it be inferred that defendant-appellant was connected
with the said transaction. Under Article 1317 of the New Civil Code, a person
cannot be bound by contracts he did not authorize to be entered into his
behalf.35 (Underscoring supplied)
It bears noting that Lilian signed in the receipt in her name alone, without indicating
therein that she was acting for and in behalf of respondent. She thus bound herself in her
personal capacity and not as an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage
on real property executed by an agent, it must upon its face purport to be made, signed
and sealed in the name of the principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal. x x x36 (Emphasis and underscoring supplied)
On the amount due him and the other two printing presses, petitioner explains that he
was the one who personally and directly contracted with respondent and he merely subcontracted the two printing establishments in order to deliver on time the campaign
materials ordered by respondent.

Respondent counters that the claim of sub-contracting is a change in petitioners theory of

the case which is not allowed on appeal.
In Oco v. Limbaring,37 this Court ruled:
The parties to a contract are the real parties in interest in an action upon it, as
consistently held by the Court. Only the contracting parties are bound by the
stipulations in the contract; they are the ones who would benefit from and could
violate it. Thus, one who is not a party to a contract, and for whose benefit it was
not expressly made, cannot maintain an action on it. One cannot do so, even if
the contract performed by the contracting parties would incidentally inure to
one's benefit.38 (Underscoring supplied)
In light thereof, petitioner is the real party in interest in this case. The trial courts findings
on the matter were affirmed by the appellate court.39 It erred, however, in not declaring
petitioner as a real party in interest insofar as recovery of the cost of campaign materials
made by petitioners mother and sister are concerned, upon the wrong notion that they
should have been, but were not, impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his campaign
materials delivered by petitioner in the total of P1,924,906, less the partial payment
of P1,000,000, or P924,906.
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the
Resolution dated April 14, 2005 of the Court of Appeals are hereby REVERSED and SET
ASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is
REINSTATED mutatis mutandis, in light of the foregoing discussions. The trial courts
decision is modified in that the amount payable by respondent to petitioner is reduced
to P924,906.
SO ORDERED.

REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in

his capacity as former Chief of the Intelligence Service, Armed Forces of the
Philippines (ISAFP), and former Commanding General, Presidential Security
Group (PSG), and MAJ. DAVID B. DICIANO, in his capacity as an Officer of ISAFP
and former member of the PSG, petitioners, vs. HON. VICTORINO EVANGELISTA,
in his capacity as Presiding Judge, Regional Trial Court, Branch 223, Quezon
City, and DANTE LEGASPI, represented by his attorney-in-fact, Paul Gutierrez,
respondents.
DECISION
PUNO, J.:

The case at bar stems from a complaint for damages, with prayer for the
issuance of a writ of preliminary injunction, filed by private respondent Dante
Legaspi, through his attorney-in-fact Paul Gutierrez, against petitioners Gen.
Jose M. Calimlim, Ciriaco Reyes and Maj. David Diciano before the Regional Trial
Court (RTC) of Quezon City.[1]

The Complaint alleged that private respondent Legaspi is the owner of a land
located in Bigte, Norzagaray, Bulacan. In November 1999, petitioner Calimlim,
representing the Republic of the Philippines, and as then head of the
Intelligence Service of the Armed Forces of the Philippines and the Presidential
Security Group, entered into a Memorandum of Agreement (MOA) with one
Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in
Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness.[2]
It was further alleged that thereafter, Reyes, together with petitioners, started,
digging, tunneling and blasting works on the said land of Legaspi. The
complaint also alleged that petitioner Calimlim assigned about 80 military
personnel to guard the area and encamp thereon to intimidate Legaspi and
other occupants of the area from going near the subject land.

On February 15, 2000, Legaspi executed a special power of attorney (SPA)

appointing his nephew, private respondent Gutierrez, as his attorney-in-fact.
Gutierrez was given the power to deal with the treasure hunting activities on
Legaspis land and to file charges against those who may enter it without the
latters authority.[3] Legaspi agreed to give Gutierrez 40% of the treasure that
may be found in the land.

On February 29, 2000, Gutierrez filed a case for damages and injunction against
petitioners for illegally entering Legaspis land. He hired the legal services of
Atty. Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza
shall be entitled to 30% of Legaspis share in whatever treasure may be found in
the land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as
appearance fee per court hearing and defray all expenses for the cost of the
litigation.[4] Upon the filing of the complaint, then Executive Judge Perlita J.
Tria Tirona issued a 72-hour temporary restraining order (TRO) against
petitioners.

The case[5] was subsequently raffled to the RTC of Quezon City, Branch 223,
then presided by public respondent Judge Victorino P. Evangelista. On March 2,
2000, respondent judge issued another 72-hour TRO and a summary hearing for
its extension was set on March 7, 2000.

On March 14, 2000, petitioners filed a Motion to Dismiss[6] contending: first,

there is no real party-in-interest as the SPA of Gutierrez to bring the suit was
already revoked by Legaspi on March 7, 2000, as evidenced by a Deed of
Revocation,[7] and, second, Gutierrez failed to establish that the alleged armed
men guarding the area were acting on orders of petitioners. On March 17, 2000,
petitioners also filed a Motion for Inhibition[8] of the respondent judge on the
ground of alleged partiality in favor of private respondent.

On March 23, 2000, the trial court granted private respondents application for a
writ of preliminary injunction on the following grounds: (1) the diggings and
blastings appear to have been made on the land of Legaspi, hence, there is an
urgent need to maintain the status quo to prevent serious damage to Legaspis
land; and, (2) the SPA granted to Gutierrez continues to be valid.[9] The trial
court ordered thus:

WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT
plaintiffs application for a writ of preliminary injunction. Upon plaintiffs filing of
an injunction bond in the amount of ONE HUNDRED THOUSAND PESOS
(P100,000.00), let a Writ of Preliminary Injunction issue enjoining the
defendants as well as their associates, agents or representatives from
continuing to occupy and encamp on the land of the plaintiff LEGASPI as well as
the vicinity thereof; from digging, tunneling and blasting the said land of
plaintiff LEGASPI; from removing whatever treasure may be found on the said
land; from preventing and threatening the plaintiffs and their representatives
from entering the said land and performing acts of ownership; from threatening
the plaintiffs and their representatives as well as plaintiffs lawyer.

On even date, the trial court issued another Order[10] denying petitioners
motion to dismiss and requiring petitioners to answer the complaint. On April 4,
2000, it likewise denied petitioners motion for inhibition.[11]

On appeal, the Court of Appeals affirmed the decision of the trial court.[12]

Hence this petition, with the following assigned errors:

WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE

RESPONDENT GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY LEGASPI.

II

WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.

III

WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM

FURTHER PROCEEDING WITH THE CASE.

We find no merit in the petition.

On the first issue, petitioners claim that the special power of attorney of
Gutierrez to represent Legaspi has already been revoked by the latter. Private
respondent Gutierrez, however, contends that the unilateral revocation is
invalid as his agency is coupled with interest.

We agree with private respondent.

Art. 1868 of the Civil Code provides that by the contract of agency, an agent
binds himself to render some service or do something in representation or on
behalf of another, known as the principal, with the consent or authority of the
latter.[13]

A contract of agency is generally revocable as it is a personal contract of

representation based on trust and confidence reposed by the principal on his
agent. As the power of the agent to act depends on the will and license of the
principal he represents, the power of the agent ceases when the will or
permission is withdrawn by the principal. Thus, generally, the agency may be
revoked by the principal at will.[14]

However, an exception to the revocability of a contract of agency is when it is

coupled with interest, i.e., if a bilateral contract depends upon the agency.[15]
The reason for its irrevocability is because the agency becomes part of another
obligation or agreement. It is not solely the rights of the principal but also that
of the agent and third persons which are affected. Hence, the law provides that
in such cases, the agency cannot be revoked at the sole will of the principal.

In the case at bar, we agree with the finding of the trial and appellate courts
that the agency granted by Legaspi to Gutierrez is coupled with interest as a
bilateral contract depends on it. It is clear from the records that Gutierrez was
given by Legaspi, inter alia, the power to manage the treasure hunting
activities in the subject land; to file any case against anyone who enters the
land without authority from Legaspi; to engage the services of lawyers to carry
out the agency; and, to dig for any treasure within the land and enter into
agreements relative thereto. It was likewise agreed upon that Gutierrez shall be
entitled to 40% of whatever treasure may be found in the land. Pursuant to this
authority and to protect Legaspis land from the alleged illegal entry of
petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the
case for damages and injunction against petitioners. As payment for legal
services, Gutierrez agreed to assign to Atty. Adaza 30% of Legaspis share in
whatever treasure may be recovered in the subject land. It is clear that the
treasure that may be found in the land is the subject matter of the agency; that
under the SPA, Gutierrez can enter into contract for the legal services of Atty.
Adaza; and, thus Gutierrez and Atty. Adaza have an interest in the subject
matter of the agency, i.e., in the treasures that may be found in the land. This
bilateral contract depends on the agency and thus renders it as one coupled
with interest, irrevocable at the sole will of the principal Legaspi.[16] When an
agency is constituted as a clause in a bilateral contract, that is, when the
agency is inserted in another agreement, the agency ceases to be revocable at

the pleasure of the principal as the agency shall now follow the condition of the
bilateral agreement.[17] Consequently, the Deed of Revocation executed by
Legaspi has no effect. The authority of Gutierrez to file and continue with the
prosecution of the case at bar is unaffected.

On the second issue, we hold that the issuance of the writ of preliminary
injunction is justified. A writ of preliminary injunction is an ancilliary or
preventive remedy that is resorted to by a litigant to protect or preserve his
rights or interests and for no other purpose during the pendency of the
principal action.[18] It is issued by the court to prevent threatened or
continuous irremediable injury to the applicant before his claim can be
thoroughly studied and adjudicated.[19] Its aim is to preserve the status quo
ante until the merits of the case can be heard fully, upon the applicants
showing of two important conditions, viz.: (1) the right to be protected prima
facie exists; and, (2) the acts sought to be enjoined are violative of that right.
[20]

It is crystal clear that at the hearing for the issuance of a writ of preliminary
injunction, mere prima facie evidence is needed to establish the applicants
rights or interests in the subject matter of the main action.[21] It is not
required that the applicant should conclusively show that there was a violation
of his rights as this issue will still be fully litigated in the main case.[22] Thus,
an applicant for a writ is required only to show that he has an ostensible right
to the final relief prayed for in his complaint. [23]

In the case at bar, we find that respondent judge had sufficient basis to issue
the writ of preliminary injunction. It was established, prima facie, that Legaspi
has a right to peaceful possession of his land, pendente lite. Legaspi had title
to the subject land. It was likewise established that the diggings were
conducted by petitioners in the enclosed area of Legaspis land. Whether the
land fenced by Gutierrez and claimed to be included in the land of Legaspi
covered an area beyond that which is included in the title of Legaspi is a factual
issue still subject to litigation and proof by the parties in the main case for
damages. It was necessary for the trial court to issue the writ of preliminary
injunction during the pendency of the main case in order to preserve the rights
and interests of private respondents Legaspi and Gutierrez.

Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of
preliminary injunction may be issued when it is established:

(a) that the applicant is entitled to the relief demanded, the whole or part of
such relief consists in restraining the commission or continuance of the act or
acts complained of, or in requiring the performance of an act or acts, either for
a limited period or perpetually;

(b) that the commission, continuance or non-performance of the act or acts

complained of during the litigation would probably work injustice to the
applicant; or

(c) that a party, court, agency or a person is doing, threatening, or is

attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject of the
action or proceeding, and tending to render the judgment ineffectual.

On the third issue, petitioners charge that the respondent judge lacked the
neutrality of an impartial judge. They fault the respondent judge for not giving
credence to the testimony of their surveyor that the diggings were conducted
outside the land of Legaspi. They also claim that respondent judges rulings on
objections raised by the parties were biased against them.

We have carefully examined the records and we find no sufficient basis to hold
that respondent judge should have recused himself from hearing the case.
There is no discernible pattern of bias on the rulings of the respondent judge.
Bias and partiality can never be presumed. Bare allegations of partiality will not
suffice in an absence of a clear showing that will overcome the presumption
that the judge dispensed justice without fear or favor.[24] It bears to stress
again that a judges appreciation or misappreciation of the sufficiency of
evidence adduced by the parties, or the correctness of a judges orders or
rulings on the objections of counsels during the hearing, without proof of
malice on the part of respondent judge, is not sufficient to show bias or
partiality. As we held in the case of Webb vs. People,[25] the adverse and
erroneous rulings of a judge on the various motions of a party do not
sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it
must be shown that the bias and prejudice stemmed from an extrajudicial
source and result in an opinion on the merits on some basis other than what the

judge learned from his participation in the case. Opinions formed in the course
of judicial proceedings, although erroneous, as long as based on the evidence
adduced, do not prove bias or prejudice. We also emphasized that repeated
rulings against a litigant, no matter how erroneously, vigorously and
consistently expressed, do not amount to bias and prejudice which can be a
bases for the disqualification of a judge.

Finally, the inhibition of respondent judge in hearing the case for damages has
become moot and academic in view of the latters death during the pendency of
the case. The main case for damages shall now be heard and tried before
another judge.

IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q00-40115, dated March 23 and April 4, 2000, are AFFIRMED. The presiding judge
of the Regional Trial Court of Quezon City to whom Civil Case No. Q-00-40115
was assigned is directed to proceed with dispatch in hearing the main case for
damages. No pronouncement as to costs.
G.R. No. L-41182-3 April 16, 1988

SO ORDERED.

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,

vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO,
and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal
by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for
the appellees) entered into on Oct. 19, 1960 by and between Mrs.
Segundina Noguera, party of the first part; the Tourist World Service,
Inc., represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former-s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the

part for the prompt payment of the monthly rental agreed on. When the
branch office was opened, the same was run by the herein appellant
Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any
fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA
0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE,
INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN
FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with
a rival firm, the Philippine Travel Bureau, and, since the branch office
was anyhow losing, the Tourist World Service considered closing down
its office. This was firmed up by two resolutions of the board of directors
of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13),
the first abolishing the office of the manager and vice-president of the
Tourist World Service, Inc., Ermita Branch, and the second,authorizing
the corporate secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further appears that on
Jan. 3, 1962, the contract with the appellees for the use of the Branch
Office premises was terminated and while the effectivity thereof was
Jan. 31, 1962, the appellees no longer used it. As a matter of fact
appellants used it since Nov. 1961. Because of this, and to comply with
the mandate of the Tourist World Service, the corporate secretary
Gabino Canilao went over to the branch office, and, finding the premises
locked, and, being unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of the Tourist World
Service. When neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a complaint wall filed by
the herein appellants against the appellees with a prayer for the
issuance of mandatory preliminary injunction. Both appellees answered
with counterclaims. For apparent lack of interest of the parties therein,
the trial court ordered the dismissal of the case without prejudice.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT

MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A
MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE,
INC. EVEN AS AGAINST THE LATTER.

The appellee Segundina Noguera sought reconsideration of the order

dismissing her counterclaim which the court a quo, in an order dated
June 8, 1963, granted permitting her to present evidence in support of
her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of appellant
Lina Sevilla were jointly heard following which the court a quo ordered
both cases dismiss for lack of merit, on the basis of which was elevated
the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD
NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A.
MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S
FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT
MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the
telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World
Service was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the
appellee Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness
venture was entered into by and between her and appellee TWS with
offices at the Ermita branch office and that she was not an employee of
the TWS to the end that her relationship with TWS was one of a joint
business venture appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure
and wife of an eminent eye, ear and nose specialist as
well as a imediately columnist had been in the travel
business prior to the establishment of the joint
business venture with appellee Tourist World Service,
Inc. and appellee Eliseo Canilao, her compadre, she
being the godmother of one of his children, with her

own clientele, coming mostly from her own social

circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease
agreement dated 19 October 1960 (Exh. 'A') covering
the premises at A. Mabini St., she expressly
warranting and holding [sic] herself 'solidarily' liable
with appellee Tourist World Service, Inc. for the prompt
payment of the monthly rentals thereof to other
appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary
from appellee Tourist World Service, Inc., which had its
own, separate office located at the Trade & Commerce
Building; nor was she an employee thereof, having no
participation in nor connection with said business at
the Trade & Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her
own passengers, her own bookings her own business
(and not for any of the business of appellee Tourist
World Service, Inc.) obtained from the airline
companies. She shared the 7% commissions given by
the airline companies giving appellee Tourist World
Service, Lic. 3% thereof aid retaining 4% for herself
(pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the
expenses of maintaining the A. Mabini St. office,
paying for the salary of an office secretary, Miss
Obieta, and other sundry expenses, aside from
desicion the office furniture and supplying some of
fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and
other expenses in consideration for the 3% split in the
co procured by appellant Mrs. Sevilla (p. 35 tsn Feb.
16,1965).
6. It was the understanding between them that
appellant Mrs. Sevilla would be given the title of
branch manager for appearance's sake only (p. 31 tsn.
Id.), appellee Eliseo Canilao admit that it was just a
title for dignity (p. 36 tsn. June 18, 1965- testimony of
appellee Eliseo Canilao pp. 38-39 tsn April 61965testimony of corporate secretary Gabino Canilao (pp2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager. 1
xxx xxx xxx
The trial court 2 held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative
to terminate the lease and padlock the premises. 3 It likewise found the petitioner, Lina
Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was
bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an
affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred.
Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD
SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA
... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE
PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE),
IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE
RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE
PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO
WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY
BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS
CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON
RELATIONS.
IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER
CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT
LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR
REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation
between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule
on the question, the crucial issue, in its opinion being "whether or not the padlocking of
the premises by the Tourist World Service, Inc. without the knowledge and consent of the
appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether
or not the evidence for the said appellant supports the contention that the appellee
Tourist World Service, Inc. unilaterally and without the consent of the appellant
disconnected the telephone lines of the Ermita branch office of the appellee Tourist World
Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was
a mere employee, being "branch manager" of its Ermita "branch" office and that
inferentially, she had no say on the lease executed with the private respondent,
Segundina Noguera. The petitioners contend, however, that relation between the between
parties was one of joint venture, but concede that "whatever might have been the true
relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist
World Service and Canilao from taking the law into their own hands, 8 in reference to the
padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent,
Tourist World Service, Inc., maintains, that the relation between the parties was in the
character of employer and employee, the courts would have been without jurisdiction to
try the case, labor disputes being the exclusive domain of the Court of Industrial
Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an
employer-employee relation. In general, we have relied on the so-called right of control
test, "where the person for whom the services are performed reserves a right to control
not only the end to be achieved but also the means to be used in reaching such
end." 10 Subsequently, however, we have considered, in addition to the standard of rightof control, the existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, in determining the existence of an employeremployee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the
private respondent Tourist World Service, Inc., either as to the result of the enterprise or
as to the means used in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound herself insolidum as and for
rental payments, an arrangement that would be like claims of a master-servant
relationship. True the respondent Court would later minimize her participation in the lease
as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in
any case, a true employee cannot be made to part with his own money in pursuance of
his employer's business, or otherwise, assume any liability thereof. In that event, the
parties must be bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was
opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World
Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina
Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control
of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business,
obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she
retained 4% in commissions from airline bookings, the remaining 3% going to Tourist
World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo,
Tourist World's employee. As we said, employment is determined by the right-of-control
test and certain economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a
joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize
the existence of such a relation. In her letter of November 28, 1961, she expressly
'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch
office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which
the business was run. A joint venture, including a partnership, presupposes generally a of
standing between the joint co-venturers or partners, in which each party has an equal
proprietary interest in the capital or property contributed 15 and where each party
exercises equal rights in the conduct of the business. 16 furthermore, the parties did not
hold themselves out as partners, and the building itself was embellished with the electric
sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have
done so pursuant to a contract of agency. It is the essence of this contract that the agent
renders services "in representation or on behalf of another. 18 In the case at bar, Sevilla
solicited airline fares, but she did so for and on behalf of her principal, Tourist World
Service, Inc. As compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November 28, 1961,

pre-assumed her principal's authority as owner of the business undertaking. We are

convinced, considering the circumstances and from the respondent Court's recital of facts,
that the ties had contemplated a principal agent relationship, rather than a joint
managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is
one coupled with an interest, the agency having been created for mutual interest, of the
agent and the principal. 19 It appears that Lina Sevilla is a bona fidetravel agent herself,
and as such, she had acquired an interest in the business entrusted to her. Moreover, she
had assumed a personal obligation for the operation thereof, holding herself solidarily
liable for the payment of rentals. She continued the business, using her own name, after
Tourist World had stopped further operations. Her interest, obviously, is not to the
commissions she earned as a result of her business transactions, but one that extends to
the very subject matter of the power of management delegated to her. It is an agency
that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the
revocation complained of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the
telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the
holding of the Court of Appeals that there is 'no evidence showing that the Tourist World
Service, Inc. disconnected the telephone lines at the branch office. 20Yet, what cannot be
denied is the fact that Tourist World Service, Inc. did not take pains to have them
reconnected. Assuming, therefore, that it had no hand in the disconnection now
complained of, it had clearly condoned it, and as owner of the telephone lines, it must
shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking
incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease
con-tract did not accord it any authority to terminate that contract without notice to its
actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the
petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and
necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger
to that contract having been explicitly named therein as a third party in charge of rental
payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as
summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some
malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures
that she had worked for a rival firm. To be sure, the respondent court speaks of alleged
business losses to justify the closure '21 but there is no clear showing that Tourist World
Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had
moonlit for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another company), Tourist
World's board of directors adopted two resolutions abolishing the office of 'manager" and
authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover

of its branch office properties. On January 3, 1962, the private respondents ended the
lease over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was
padlocked, personally by the respondent Canilao, on the pretext that it was necessary to
Protect the interests of the Tourist World Service. " 22 It is strange indeed that Tourist World
Service, Inc. did not find such a need when it cancelled the lease five months earlier.
While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to
inform her of the closure, but surely, it was aware that after office hours, she could not
have been anywhere near the premises. Capping these series of "offensives," it cut the
office's telephone lines, paralyzing completely its business operations, and in the process,
depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish
Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to
elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the
private respondent, Tourist World Service, Inc., should be sentenced to pay damages.
Under the Civil Code, moral damages may be awarded for "breaches of contract where
the defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral
injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the
power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation
to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and
analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34,
and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond
for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no
evidence has been shown that she had connived with Tourist World Service, Inc. in the
disconnection and padlocking incidents. She cannot therefore be held liable as a
cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as
exemplary damages,25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be
just, fair, and reasonable under the circumstances.

25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary
damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution
issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET
ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are
ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of

SO ORDERED.