G.R. No.

L-30573 October 29, 1971

VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR.,
SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-respondent.

Teofilo Leonin for petitioners-appellants.

Osorio, Osorio & Osorio for respondent-appellee.

Teofilo P. Purisima in his own behalf as intervenor-respondent.

MAKASIAR, J.:

Petitioner-appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar,
Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority decision dated, March 12, 1969 of
the Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which sentenced the said Vicente M. Domingo to
pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with interest on both amounts from the date of the filing
of the complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and P500.00 as attorney's fees plus costs.

The following facts were found to be established by the majority of the Special Division of Five of the Court of Appeals:

In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency
to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00)
with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the 30-day duration of the agency or if
the property is sold by Vicente within three months from the termination of the agency to apurchaser to whom it was submitted by Gregorio
during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one copy was given to Vicente, while
the original and another copy were retained by Gregorio.

On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission.

Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter (Exhibit "B"). Vicente directed
Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon demand of Vicente, Oscar de
Leon issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar
de Leon confirmed his former offer to pay for the property at P1.20 per square meter in another letter, Exhibit "D". Subsequently, Vicente
asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C" was
amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house and lot at Denver Street, Quezon City which is
part of the purchase price. It was again amended to the effect that Oscar will vacate his house and lot on December 1, 1956, because his wife
was on the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year
1957 therein is a mere typographical error) and marked Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the
sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure
of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente.
Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest money. In the deed of sale was not
executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not
receive his money from his brother in the United States, for which reason he was giving up the negotiation including the amount of One
Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio aspropina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A"
marked habit "A-1" to the effect that Vicente was still committed to pay him 5% commission, if the sale is consummated within three months
after the expiration of the 30-day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a
purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore it to pieces.
Gregorio held his peace, not wanting to antagonize Vicente further, because he had still duplicate of Exhibit "A". From his meeting with Vicente,
Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he discovered Exhibit "G' deed of sale executed on September
17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down
payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his property to
the same buyer, Oscar de Leon and his wife, he demanded in writting payment of his commission on the sale price of One Hundred Nine
Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente went to him and asked him to
eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.0 In Vicente's
reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.

The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that Amparo Diaz, the vendee, being
the wife of Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar de Leon since husband and wife have common or
identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the consummation of the sale in favor of the
spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and
not as additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar de Leon with respect to
the additional earnest money, does not appear to have been answered by Oscar de Leon and therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to
Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter
Exhibit "4"; and that Vicente did not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of
demand of the 5% commission.

The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de Leon of
the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to
P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his commission on the sale price; (2) whether Vicente or Gregorio
should be liable directly to the intervenor Teofilo Purisima for the latter's share in the expected commission of Gregorio by reason of the sale;
and (3) whether the award of legal interest, moral and exemplary damages, attorney's fees and costs, was proper.

Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan Enriquez did not touch on these issues
which were extensively discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in his concurring opinion,
affirmed that it does not constitute breach of trust or fraud on the part of the broker and regarded same as merely part of the whole process of
bringing about the meeting of the minds of the seller and the purchaser and that the commitment from the prospect buyer that he would give
a reward to Gregorio if he could effect better terms for him from the seller, independent of his legitimate commission, is not fraudulent,
because the principal can reject the terms offered by the prospective buyer if he believes that such terms are onerous disadvantageous to him.
On the other hand, Justice Gatmaitan, with whom Justice Antonio Cafizares corner held the view that such an act on the part of Gregorio was
fraudulent and constituted a breach of trust, which should deprive him of his right to the commission.

The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal.1

Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil Code.

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may
have received by virtue of the agency, even though it may not be owing to the principal.

Every stipulation exempting the agent from the obligation to render an account shall be void.

xxx xxx xxx

Art. 1909. The agent is responsible not only for fraud but also for negligence, which shall be judged with more less rigor by
the courts, according to whether the agency was or was not for a compensation.

Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides that:

Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever he may have
received by virtue of the agency, even though what he has received is not due to the principal.

The modification contained in the first paragraph Article 1891 consists in changing the phrase "to pay" to "to deliver", which latter term is more
comprehensive than the former.

Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent condemning as void any
stipulation exempting the agent from the duty and liability imposed on him in paragraph one thereof.

Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code which reads thus:

Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with more or less severity by
the courts, according to whether the agency was gratuitous or for a price or reward.

The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker
in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account
to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as
of the strictest justice.2

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to
his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal,
even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual
damage.3 By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that
of being an agent for hisprincipal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that
the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame
for such a result by reason of his treachery or perfidy.

This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for failure to deliver sums of
money paid to him as an insurance agent for the account of his employer as required by said Article 1720, said insurance agent was convicted
estafa.4 An administrator of an estate was likewise under the same Article 1720 for failure to render an account of his administration to the
heirs unless the heirs consented thereto or are estopped by having accepted the correctness of his account previously rendered. 5

Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa for failure to deliver to his principal the total
amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from his
collections.6

A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money and property received by him for his client
despite his attorney's lien.7 The duty of a commission agent to render a full account his operations to his principal was reiterated in Duhart, etc.
vs. Macias.8

The American jurisprudence on this score is well-nigh unanimous.

Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been unfaithful,
the principal may recover back the commission paid, since an agent or broker who has been unfaithful is not entitled to any
compensation.

xxx xxx xxx

In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little vs.
Phipps (1911) 208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: "It is well settled that the agent is bound to exercise the
utmost good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a technical or arbitrary rule. It is a
rule founded on the highest and truest principles, of morality." Parker vs. McKenna (1874) LR 10,Ch(Eng) 96,118 ... If the
agent does not conduct himself with entire fidelity towards his principal, but is guilty of taking a secret profit or commission
in regard the matter in which he is employed, he loses his right to compensation on the ground that he has taken a position
wholly inconsistent with that of agent for his employer, and which gives his employer, upon discovering it, the right to treat
him so far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the
benefit of valuable services rendered by the agent, but the agent has only himself to blame for that result."

xxx xxx xxx

The intent with which the agent took a secret profit has been held immaterial where the agent has in fact entered into a
relationship inconsistent with his agency, since the law condemns the corrupting tendency of the inconsistent
relationship. Little vs. Phipps (1911) 94 NE 260.9

As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with
the subject matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for
himself in excess of his lawful compensation; and if he does so he may be held as a trustee and may be compelled to
account to his principal for all profits, advantages, rights, or privileges acquired by him in such dealings, whether in
performance or in violation of his duties, and be required to transfer them to his principal upon being reimbursed for his
expenditures for the same, unless the principal has consented to or ratified the transaction knowing that benefit or profit
would accrue or had accrued, to the agent, or unless with such knowledge he has allowed the agent so as to change his
condition that he cannot be put in status quo. The application of this rule is not affected by the fact that the principal did not
suffer any injury by reason of the agent's dealings or that he in fact obtained better results; nor is it affected by the fact that
there is a usage or custom to the contrary or that the agency is a gratuitous one. (Emphasis applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the amount of One Thousand Pesos
(P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his principal and undermined his
loyalty to his principal, who gave him partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of
exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms desired by his principal, the
broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer of the prospective
buyer to purchase the property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of
88,477 square meters, which is very much lower the the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred
Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal.

The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the task of merely
bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. Neither
would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and his
principal did not object therto. 11 Herein defendant-appellee Gregorio Domingo was not merely a middleman of the petitioner-appellant
Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein petitioner-appellant
was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective buyer; much less did he
consent to his agent's accepting such a gift.

The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the situation; because
the transaction, to be valid, must necessarily be with the consent of the husband Oscar de Leon, who is the administrator of their conjugal
assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part of and constituted the down
payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de
Leon who was the buyer.

As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission and must
return the part of the commission he received from his principal.

Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever amounts
Gregorio Domingo received by virtue of the transaction as his sub-agency contract was with Gregorio Domingo alone and not with Vicente
Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon
respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred
Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima.

Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious anxiety as well as wounded
feelings, petitioner-appellant Vicente Domingo should be awarded moral damages in the reasonable amount of One Thousand Pesos
(P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case has been pending for the
last fifteen (15) years from its filing on October 3, 1956.

WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing defendant-appellee Gregorio
Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos
(P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.

G.R. No. 3246 February 9, 1907

CADWALLADER & COMPANY, plaintiff-appellant,

vs.
SMITH, BELL & COMPANY and HENRY W. PEABODY & COMPANY, defendants-appellees.

Thomas E. Kepner for appellant.

Kinney, Odlin & Lawrence for appellees.

TRACEY, J.:

In this action the plaintiff, as assignee of the Pacific Export Lumber Company, sues for $3,486, United States currency, the differences between
the amount turned over to the company on account of a cargo of cedar piles consigned to the defendants as its agents and afterwards bought
by them, and the amount actually received by them on the subsequent sale thereof. The defendant were allowed by the court below a
counterclaim of $6,993.80, United States currency, from which was deducted $2,063.16 for the plaintiffs claim, leaving a balance in favor of the
defendants of $4,930.64, for the equipment of which, to wit, 9,861.28 pesos, judgment was entered. The defendants have not appealed. The
plaintiff took several exceptions, but on the argument its counsel stated that its contention was confined to the allowance by the trial court of
the commissions of the defendant on selling the piling.
In May 1902, the Pacific Export Lumber Company of Portland shipped upon the steamer Quito five hundred and eighty-one (581) piles to the
defendant, Henry W. Peabody & Company, at Manila, on the sale of which before storage the consignees were to receive a commission of one
half of whatever sum was obtained over $15 for each pile and 5 per cent of the price of the piles sold after storage. After the arrival of the
steamer on August 2, Peabody and Company wrote the agent of the Pacific Company at Shanghai that for lack of a demand the piles would
have to be sold at considerably less than $15 apiece; whereupon the company's agent directed them to make the best possible offer for the
piles, in response to which on August 5 they telegraphed him an offer of $12 apiece. It was accepted by him on August 6, in consequence of
which the defendant paid the Pacific Company $6,972.

It afterwards appeared that on July 9 Peabody & Company had entered into negotiations with the Insular Purchasing Agent for the sale for the
piles at $20 a piece, resulting of August 4 in the sale to the Government of two hundred and thirteen (213) piles at $19 each. More of them
were afterwards sold to the Government at the same figure and the remainder to other parties at carrying prices, the whole realizing to the
defendants $10,41.66, amounting to $3,445.66 above the amount paid by the defendant to the plaintiff therefor. Thus it is clear that at the
time when the agents were buying from their principal these piles at $12 apiece on the strength of their representation that no better price was
obtainable, they had already sold a substantial part of them at $19. In these transactions the defendant, Smith, Bell & Company, were
associated with the defendants, Henry W. Peabody & Company, who conducted the negotiations, and are consequently accountable with
them.

It is plaint that in concealing from their principal the negotiations with the Government, resulting in a sale of the piles at 19 a piece and in
misrepresenting the condition of the market, the agents committed a breach of duty from which they should benefit. The contract of sale to
themselves thereby induced was founded on their fraud and was subject to annulment by the aggrieved party. (Civil Code, articles 1265 and
1269.) Upon annulment the parties should be restored to their original position by mutual restitution. (Article 1303 and 1306.) Therefore the
defendants are not entitled to retain their commission realized upon the piles included under the contract so annulled. In respect of the 213
piles, which at the time of the making of this contract on August 5 they had already sold under the original agency, their commission should be
allowed.

The court below found the net amount due from the defendants to the plaintiff for the Quito piles, after deducting the expense of landing the
same and $543.10 commission, was $1,760.88, on which it allowed interest at the rate of 6 per cent from March 1, 1903. This amount should
be increased by the addition thereto of the amount of the commission disallowed, to wit, $331.17 giving $2,092.05. Interest computed on this
sum to the date of the entry of judgment below amounts to $359.77, which added to the principal sum makes $2,241.82, the amount of
plaintiff's claim, which is to be deducted from defendants' counterclaim of $6,993.80, leaving a balance of $4,541.98, equivalent to 9,083.96
pesos, the amount for which judgment below should have been entered in favor of the defendants.

Let the judgment of the Court of First Instance be modified accordingly, without costs to either party.

After expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter the record remanded to the court
below for proper action. So ordered.

G.R. No. L-18058 January 16, 1923

FABIOLA SEVERINO, plaintiff-appellee,

vs.
GUILLERMO SEVERINO, defendant-appellant.
FELICITAS VILLANUEVA, intervenor-appellee.

Serafin P. Hilado and A. P. Seva for appellant.

Jose Ma. Arroyo, Jose Lopez Vito, and Fisher and DeWitt for appellees.

OSTRAND, J.:

This is an action brought by the plaintiff as the alleged natural daughter and sole heir of one Melecio Severino, deceased, to compel the
defendant Guillermo Severino to convey to her four parcels of land described in the complaint, or in default thereof to pay her the sum of
P800,000 in damages for wrongfully causing said land to be registered in his own name. Felicitas Villanueva, in her capacity as administratrix of
the estate of Melecio Severino, has filed a complaint in intervention claiming in the same relief as the original plaintiff, except in so far as she
prays that the conveyance be made, or damages paid, to the estate instead of to the plaintiff Fabiola Severino. The defendant answered both
complaints with a general denial.

The lower court rendered a judgment recognizing the plaintiff Fabiola Severino as the acknowledged natural child of the said Melecio Severino
and ordering the defendant to convey 428 hectares of the land in question to the intervenor as administratrix of the estate of the said Melecio
Severino, to deliver to her the proceeds in his possession of a certain mortgage placed thereon by him and to pay the costs. From this judgment
only the defendant appeals.
The land described in the complaint forms one continuous tract and consists of lots Nos. 827, 828, 834, and 874 of the cadaster of Silay,
Province of Occidental Negros, which measure, respectively, 61 hectares, 74 ares, and 79 centiares; 76 hectares, 34 ares, and 79 centiares; 52
hectares, 86 ares, and 60 centiares and 608 hectares, 77 ares and 28 centiares, or a total of 799 hectares, 75 ares, and 46 centiares.

The evidence shows that Melecio Severino died on the 25th day of May, 1915; that some 428 hectares of the land were recorded in the
Mortgage Law Register in his name in the year 1901 by virtue of possessory information proceedings instituted on the 9th day of May of that
year by his brother Agapito Severino in his behalf; that during the lifetime of Melecio Severino the land was worked by the defendant,
Guillermo Severino, his brother, as administrator for and on behalf of the said Melecio Severino; that after Melecio's death, the defendant
Guillermo Severino continued to occupy the land; that in 1916 a parcel survey was made of the lands in the municipality of Silay, including the
land here in question, and cadastral proceedings were instituted for the registration of the lands titles within the surveyed area; that in the
cadastral proceedings the land here in question was described as four separate lots numbered as above stated; that Roque Hofilea, as lawyer
for Guillermo Severino, filed answers in behalf of the latter in said proceedings claiming the lots mentioned as the property of his client; that no
opposition was presented in the proceedings to the claims of Guillermo Severino and the court therefore decreed the title in his favor, in
pursuance of which decree certificates of title were issued to him in the month of March, 1917.

It may be further observed that at the time of the cadastral proceedings the plaintiff Fabiola Severino was a minor; that Guillermo Severino did
not appear personally in the proceedings and did not there testify; that the only testimony in support of his claims was that of his attorney
Hofilea, who swore that he knew the land and that he also knew that Guillermo Severino inherited the land from his father and that he, by
himself, and through his predecessors in interest, had possessed the land for thirty years.

The appellant presents the following nine assignments of error:

1. The trial court erred in admitting the evidence that was offered by plaintiff in order to establish the fact that said plaintiff was the
legally acknowledged natural child of the deceased Melecio Severino.

2. The trial court erred in finding that, under the evidence presented, plaintiff was the legally acknowledged natural child of Melecio
Severino.

3. The trial court erred in rejecting the evidence offered by defendant to establish the absence of fraud on his part in securing title to
the lands in Nacayao.

4. The trial court erred in concluding that the evidence adduced by plaintiff and intervenor established that defendant was guilty of
fraud in procuring title to the lands in question in his name.

5. The trial court erred in declaring that the land that was formerly placed in the name of Melecio Severino had an extent of either
434 or 428 hectares at the time of his death.

6. The trial court erred in declaring that the value of the land in litigation is P500 per hectare.

7. The trial court erred in granting the petition of the plaintiff for an attachment without first giving the defendant an opportunity to
be heard.

8. The trial court erred in ordering the conveyance of 428 hectares of land by defendant to the administratrix.

9. The trial court erred in failing or refusing to make any finding as to the defendant's contention that the petition for attachment was
utterly devoid of any reasonable ground.

In regard to the first two assignments of error, we agree with the appellant that the trial court erred in making a declaration in the present case
as to the recognition of Fabiola Severino as the natural child of Melecio Severino. We have held in the case of Briz vs. Briz and Remigio (43 Phil.,
763), that "The legitimate heirs or kin of a deceased person who would be prejudiced by a declaration that another person is entitled to
recognition as the natural child of such decedent, are necessary and indispensable parties to any action in which a judgment declaring the right
to recognition is sought." In the present action only the widow, the alleged natural child, and one of the brothers of the deceased are parties;
the other potential heirs have not been included. But, inasmuch as the judgment appealed from is in favor of the intervenor and not of the
plaintiff, except to the extent of holding that the latter is a recognized natural child of the deceased, this question is, from the view we take of
the case, of no importance in its final disposition. We may say, however, in this connection, that the point urged in appellant's brief that it does
not appear affirmatively from the evidence that, at the time of the conception of Fabiola, her mother was a single woman, may be sufficiently
disposed of by a reference to article 130 of the Civil Code and subsection 1 of section 334 of the Code of Civil Procedure which create the
presumption that a child born out of wedlock is natural rather than illegitimate. The question of the status of the plaintiff Fabiola Severino and
her right to share in the inheritance may, upon notice to all the interested parties, be determined in the probate proceedings for the settlement
of the estate of the deceased.
The fifth assignment of error relates to the finding of the trial court that the land belonging to Melecio Severino had an area of 428 hectares.
The appellant contends that the court should have found that there were only 324 hectares inasmuch as one hundred hectares of the original
area were given to Melecio's brother Donato during the lifetime of the father Ramon Severino. As it appears that Ramon Severino died in 1896
and that the possessory information proceedings, upon which the finding of the trial court as to the area of the land is principally based, were
not instituted until the year 1901, we are not disposed to disturb the conclusions of the trial court on this point. Moreover, in the year 1913,
the defendant Guillermo Severino testified under oath, in the case of Montelibano vs. Severino, that the area of the land owned by Melecio
Severino and of which he (Guillermo) was the administrator, embraced an area of 424 hectares. The fact that Melecio Severino, in declaring the
land for taxation in 1906, stated that the area was only 324 hectares and 60 ares while entitled to some weight is not conclusive and is not
sufficient to overcome the positive statement of the defendant and the recitals in the record of the possessory information proceedings.

The sixth assignment of error is also of minor importance in view of the fact that in the dispositive part of the decision of the trial court, the
only relief given is an order requiring the appellant to convey to the administratrix the land in question, together with such parts of the
proceeds of the mortgage thereon as remain in his hands. We may say further that the court's estimate of the value of the land does not
appear unreasonable and that, upon the evidence before us, it will not be disturbed.

The seventh and within assignments of error relate to the ex parte granting by the trial court of a preliminary attachment in the case and the
refusal of the court to dissolve the same. We find no merit whatever in these assignments and a detailed discussion of them is unnecessary.

The third, fourth, and eight assignments of error involve the vital points in the case, are inter-related and may be conveniently considered
together.

The defendant argues that the gist of the instant action is the alleged fraud on his part in causing the land in question to be registered in his
name; that the trial court therefore erred in rejecting his offer of evidence to the effect that the land was owned in common by all the heirs of
Ramon Severino and did not belong to Melecio Severino exclusively; that such evidence, if admitted, would have shown that he did not act with
fraudulent intent in taking title to the land; that the trial court erred in holding him estopped from denying Melecio's title; that more than a
year having elapsed since the entry of the final decree adjudicating the land to the defendant, said decree cannot now be reopened; that the
ordering of the defendant to convey the decreed land to the administratrix is, for all practical purposes, equivalent to the reopening of the
decree of registration; that under section 38 of the Land Registration Act the defendant has an indefeasible title to the land; and that the
question of ownership of the land being thus judicially settled, the question as to the previous relations between the parties cannot now be
inquired into.

Upon no point can the defendant's contentions be sustained. It may first be observed that this is not an action under section 38 of the Land
Registration Act to reopen or set aside a decree; it is an action in personam against an agent to compel him to return, or retransfer, to the heirs
or the estate of its principal, the property committed to his custody as such agent, to execute the necessary documents of conveyance to effect
such retransfer or, in default thereof, to pay damages.

That the defendant came into the possession of the property here in question as the agent of the deceased Melecio Severino in the
administration of the property, cannot be successfully disputed. His testimony in the case of Montelibano vs. Severino (civil case No. 902 of the
Court of First Instance of Occidental Negros and which forms a part of the evidence in the present case) is, in fact, conclusive in this respect. He
there stated under oath that from the year 1902 up to the time the testimony was given, in the year 1913, he had been continuously in charge
and occupation of the land as the encargado or administrator of Melecio Severino; that he had always known the land as the property of
Melecio Severino; and that the possession of the latter had been peaceful, continuous, and exclusive. In his answer filed in the same case, the
same defendant, through his attorney, disclaimed all personal interest in the land and averred that it was wholly the property of his brother
Melecio.

Neither is it disputed that the possession enjoyed by the defendant at the time of obtaining his decree was of the same character as that held
during the lifetime of his brother, except in so far as shortly before the trial of the cadastral case the defendant had secured from his brothers
and sisters a relinguishment in his favor of such rights as they might have in the land.

The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject-
matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a
trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his
principal or cestui que trust. Upon this ground, and substantially in harmony with the principles of the Civil Law (see sentence of the supreme
court of Spain of May 1, 1900), the English Chancellors held that in general whatever a trustee does for the advantage of the trust estate inures
to the benefit of the cestui que trust. (Greenlaw vs. King, 5 Jur., 18; Ex parte Burnell, 7 Jur., 116; Ex parte Hughes, 6 Ves., 617; Ex parte James, 8
Ves., 337; Oliver vs. Court, 8 Price, 127.) The same principle has been consistently adhered to in so many American cases and is so well
established that exhaustive citations of authorities are superfluous and we shall therefore limit ourselves to quoting a few of the numerous
judicial expressions upon the subject. The principle is well stated in the case of Gilbert vs. Hewetson (79 Minn., 326):

A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly
disabled from acquiring for his own benefit the property committed to his custody for management. This rule is entirely independent
of the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the trustee. It is to
avoid the necessity of any such inquiry that the rule takes so general a form. The rule stands on the moral obligation to refrain from
 placing one's self in positions which ordinarily excite conflicts between self-interest and integrity. It seeks to remove the temptation
that might arise out of such a relation to serve one's self-interest at the expense of one's integrity and duty to another, by making it
impossible to profit by yielding to temptation. It applies universally to all who come within its principle.

In the case of Massie vs. Watts (6 Cranch, 148), the United States Supreme Court, speaking through Chief Justice Marshall, said:

But Massie, the agent of Oneale, has entered and surveyed a portion of that land for himself and obtained a patent for it in his own
name. According to the clearest and best established principles of equity, the agent who so acts becomes a trustee for his principal.
He cannot hold the land under an entry for himself otherwise than as trustee for his principal.

In the case of Felix vs. Patrick (145 U. S., 317), the United States Supreme Court, after examining the authorities, said:

The substance of these authorities is that, wherever a person obtains the legal title to land by any artifice or concealment, or by
making use of facilities intended for the benefit of another, a court of equity will impress upon the land so held by him a trust in favor
of the party who is justly entitled to them, and will order the trust executed by decreeing their conveyance to the party in whose
favor the trust was created. (Citing Bank of Metropolis vs. Guttschlick, 14 Pet., 19, 31; Moses vs. Murgatroyd, 1 Johns. Ch., 119;
Cumberland vs.Codrington, 3 Johns. Ch., 229, 261; Neilson vs. Blight, 1 Johns. Cas., 205; Weston vs. Barker, 12 Johns., 276.)

The same doctrine has also been adopted in the Philippines. In the case of Uy Aloc vs. Cho Jan Ling (19 Phil., 202), the facts are stated by the
court as follows:

From the facts proven at the trial it appears that a number of Chinese merchants raised a fund by voluntary subscription with which
they purchased a valuable tract of land and erected a large building to be used as a sort of club house for the mutual benefit of the
subscribers to the fund. The subscribers organized themselves into an irregular association, which had no regular articles of
association, and was not incorporated or registered in the commercial registry or elsewhere. The association not having any existence
as a legal entity, it was agreed to have the title to the property placed in the name of one of the members, the defendant, Cho Jan
Ling, who on his part accepted the trust, and agreed to hold the property as the agent of the members of the association. After the
club building was completed with the funds of the members of the association, Cho Jan Ling collected some P25,000 in rents for
which he failed and refused to account, and upon proceedings being instituted to compel him to do so, he set up title in himself to the
club property as well as to the rents accruing therefrom, falsely alleging that he had bought the real estate and constructed the
building with his own funds, and denying the claims of the members of the association that it was their funds which had been used
for that purpose.

The decree of the court provided, among other things, for the conveyance of the club house and the land on which it stood from the defendant,
Cho Jan Ling, in whose name it was registered, to the members of the association. In affirming the decree, this court said:

In the case at bar the legal title of the holder of the registered title is not questioned; it is admitted that the members of the
association voluntarily obtained the inscription in the name of Cho Jan Ling, and that they had no right to have that inscription
cancelled; they do not seek such cancellation, and on the contrary they allege and prove that the duly registered legal title to the
property is in Cho Jan Ling, but they maintain, and we think that they rightly maintain, that he holds it under an obligation, both
express and implied, to deal with it exclusively for the benefit of the members of the association, and subject to their will.

In the case of Camacho vs. Municipality of Baliuag (28 Phil., 466), the plaintiff, Camacho, took title to the land in his own name, while acting as
agent for the municipality. The court said:

There have been a number of cases before this court in which a title to real property was acquired by a person in his own name, while
acting under a fiduciary capacity, and who afterwards sought to take advantage of the confidence reposed in him by claiming the
ownership of the property for himself. This court has invariably held such evidence competent as between the fiduciary and the cestui
que trust.

xxx xxx xxx

What judgment ought to be entered in this case? The court below simply absolved the defendant from the complaint. The defendant
municipality does not ask for a cancellation of the deed. On the contrary, the deed is relied upon the supplement the oral evidence
showing that the title to the land is in the defendant. As we have indicated in Consunji vs. Tison, 15 Phil., 81, and Uy Aloc vs. Cho Jan
Ling, 19 Phil., 202, the proper procedure in such a case, so long as the rights of innocent third persons have not intervened, is to
compel a conveyance to the rightful owner. This ought and can be done under the issues raised and the proof presented in the case at
bar.

The case of Sy-Juco and Viardo vs. Sy-Juco (40 Phil., 634) is also in point.
As will be seen from the authorities quoted, and agent is not only estopped from denying his principal's title to the property, but he is also
disable from acquiring interests therein adverse to those of his principal during the term of the agency. But the defendant argues that his title
has become res adjudicata through the decree of registration and cannot now be disturbed.

This contention may, at first sight, appear to possess some force, but on closer examination it proves untenable. The decree of registration
determined the legal title to the land as the date of the decree; as to that there is no question. That, under section 38 of the Land Registration
Act, this decree became conclusive after one year from the date of the entry is not disputed and no one attempts to disturb the decree or the
proceedings upon which it is based; the plaintiff in intervention merely contends that in equity the legal title so acquired inured to the benefit
of the estate of Melecio Severino, the defendant's principal and cestui que trust and asks that this superior equitable right be made effective by
compelling the defendant, as the holder of the legal title, to transfer it to the estate.

We have already shown that before the issuance of the decree of registration it was the undoubted duty of the defendant to restore the
property committed to his custody to his principal, or to the latter's estate, and that the principal had a right of action in personam to enforce
the performance of this duty and to compel the defendant to execute the necessary conveyance to that effect. The only question remaining for
consideration is, therefore, whether the decree of registration extinguishing this personal right of action.

In Australia and New Zealand, under statutes in this respect similar to ours, courts of equity exercise general jurisdiction in matters of fraud and
error with reference to Torrens registered lands, and giving attention to the special provisions of the Torrens acts, will issue such orders and
direction to all the parties to the proceedings as may seem just and proper under the circumstances. They may order parties to make deeds of
conveyance and if the order is disobeyed, they may cause proper conveyances to be made by a Master in Chancery or Commissioner in
accordance with the practice in equity (Hogg, Australian Torrens System, p. 847).

In the Untied States courts have even gone so far in the exercise of their equity jurisdiction as to set aside final decrees after the expiration of
the statutory period of limitation for the reopening of such decrees (Baart vs. Martin, 99 Minn., 197). But, considering that equity follows the
law and that our statutes expressly prohibit the reopening of a decree after one year from the date of its entry, this practice would probably be
out of question here, especially so as the ends of justice may be attained by other equally effective, and less objectionable means.

Turning to our own Land Registration Act, we find no indication there of an intention to cut off, through the issuance of a decree of registration,
equitable rights or remedies such as those here in question. On the contrary, section 70 of the Act provides:

Registered lands and ownership therein, shall in all respects be subject to the same burdens and incidents attached by law to
unregistered land. Nothing contained in this Act shall in any way be construed to relieve registered land or the owners thereof from
any rights incident to the relation of husband and wife, or from liability to attachment on mesne process or levy on execution, or from
liability to any lien of any description established by law on land and the buildings thereon, or the interest of the owner in such land
or buildings, or to change the laws of descent, or the rights of partition between coparceners, joint tenants and other cotenants, or
the right to take the same by eminent domain, or to relieve such land from liability to be appropriated in any lawful manner for the
payment of debts, or to change or affect in any other way any other rights or liabilities created by law and applicable to unregistered
land, except as otherwise expressly provided in this Act or in the amendments hereof.

Section 102 of the Act, after providing for actions for damages in which the Insular Treasurer, as the Custodian of the Assurance Fund is a party,
contains the following proviso:

Provided, however, That nothing in this Act shall be construed to deprive the plaintiff of any action which he may have against any
person for such loss or damage or deprivation of land or of any estate or interest therein without joining the Treasurer of the
Philippine Archipelago as a defendant therein.

That an action such as the present one is covered by this proviso can hardly admit of doubt. Such was also the view taken by this court in the
case of Medina Ong-Quingco vs. Imaz and Warner, Barnes & Co. (27 Phil., 314), in which the plaintiff was seeking to take advantage of his
possession of a certificate of title to deprive the defendant of land included in that certificate and sold to him by the former owner before the
land was registered. The court decided adversely to plaintiff and in so doing said:

As between them no question as to the indefeasibility of a Torrens title could arise. Such an action could have been maintained at any
time while the property remained in the hands of the purchaser. The peculiar force of a Torrens title would have been brought into
play only when the purchaser had sold to an innocent third person for value the lands described in his conveyance. . . . Generally
speaking, as between the vendor and the purchaser the same rights and remedies exist with reference to land registered under Act
No. 496, as exist in relation to land not so registered.

In Cabanos vs. Register of Deeds of Laguna and Obiana (40 Phil., 620), it was held that, while a purchaser of land under a pacto de retro cannot
institute a real action for the recovery thereof where the vendor under said sale has caused such lands to be registered in his name without said
vendee's consent, yet he may have his personal action based on the contract of sale to compel the execution of an unconditional deed for the
said lands when the period for repurchase has passed.
Torrens titles being on judicial decrees there is, of course, a strong presumption in favor of their regularity or validity, and in order to maintain
an action such as the present the proof as to the fiduciary relation of the parties and of the breach of trust must be clear and convincing. Such
proof is, as we have seen, not lacking in this case.

But once the relation and the breach of trust on the part of the fiduciary in thus established, there is no reason, neither practical nor legal, why
he should not be compelled to make such reparation as may lie within his power for the injury caused by his wrong, and as long as the land
stands registered in the name of the party who is guilty of the breach of trust and no rights of innocent third parties are adversely affected,
there can be no reason why such reparation should not, in the proper case, take the form of a conveyance or transfer of the title to the cestui
que trust. No reasons of public policy demand that a person guilty of fraud or breach of trust be permitted to use his certificate of title as a
shield against the consequences of his own wrong.

The judgment of the trial court is in accordance with the facts and the law. In order to prevent unnecessary delay and further litigation it may,
however, be well to attach some additional directions to its dipositive clauses. It will be observed that lots Nos. 827, 828, and 834 of a total area
of approximately 191 hectares, lie wholly within the area to be conveyed to the plaintiff in intervention and these lots may, therefore, be so
conveyed without subdivision. The remaining 237 hectares to be conveyed lie within the western part of lot No. 874 and before a conveyance
of this portion can be effected a subdivision of that lot must be made and a technical description of the portion to be conveyed, as well as of
the remaining portion of the lot, must be prepared. The subdivision shall be made by an authorized surveyor and in accordance with the
provisions of Circular No. 31 of the General Land Registration Office, and the subdivision and technical descriptions shall be submitted to the
Chief of that office for his approval. Within thirty days after being notified of the approval of said subdivision and technical descriptions, the
defendant Guillermo Severino shall execute good and sufficient deed or deeds of conveyance in favor of the administratrix of the estate of the
deceased Melecio Severino for said lots Nos. 827, 828, 834, and the 237 hectares segregated from the western part of lot No. 874 and shall
deliver to the register of deeds his duplicate certificates of title for all of the four lots in order that said certificates may be cancelled and new
certificates issued. The cost of the subdivision and the fees of the register of deeds will be paid by the plaintiff in intervention. It is so ordered

With these additional directions the judgment appealed from is affirmed, with the costs against the appellant. The right of the plaintiff Fabiola
Severino to establish in the probate proceedings of the estate of Melecio Severino her status as his recognized natural child is reserved.

G.R. No. L-20274 October 30, 1969

ELOY MIGUEL and DEMETRIO MIGUEL, petitioners,

vs.
THE COURT OF APPEALS and ANACLETA M. VDA. DE REYES, respondents.

Silvestre Br. Bello for petitioners.

Teofilo A. Leonin for respondent.

CASTRO, J.:

Petition for review on certiorari of the decision and the two resolutions of the Court of Appeals promulgated on May 10, July 23, and
September 5, all in the year 1962, in CA-G.R.-16497-R, entitled "Eloy Miguel and Demetrio Miguel, plaintiffs-appellees vs. Anacleta M. Vda. de
Reyes, defendant-appellant."

During the Spanish regime and prior to July 26, 1894, Eloy Miguel, then single and resident of Laoag, Ilocos Norte, went to Isabela and for some
appreciable period of time stayed with his kinsman Juan Felipe in Barrio Ingud Norte, Municipality of Angadanan. There he spotted an
uncultivated parcel of land, one hectare of which he forthwith occupied, and then cleared and planted to corn. After the Philippine Revolution,
he returned to Laoag, Ilocos Norte and took a wife. In the early years of the ensuing American regime, Eloy Miguel returned to Ingud Norte with
his family, resettled on the same land, cultivated and planted it to rice, declared it for taxation purposes, and paid the annual realty taxes
thereon.

During the year 1932, Leonor Reyes, an ambulatory notary public and husband of the private respondent Anacleta M. Reyes, used to visit Barrio
Ingud Norte, looking for documents to notarize. He and Eloy Miguel became acquaintances. Later, Leonor Reyes asked Miguel if he wanted to
secure expeditiously a title to his landholding. Having received an affirmative answer and after Eloy Miguel had handed to him the tax
declaration and tax receipts covering the land, Leonor Reyes prepared and filed a homestead application in the name of Eloy Miguel and,
furthermore, promised to work for the early approval of the said application. Reyes handed to Miguel the receipt for the filing fee (exh. A)
corresponding to the homestead application, advising the latter to keep it, but he (Reyes) withheld other papers including the tax declaration
and tax receipts, assuring Miguel that he would return them as soon as the homestead patent was issued in Miguel's name. Reyes likewise
advised Miguel to cease paying the land taxes until the patent shall have been issued by the Bureau of Lands.

After a long wait and becoming impatient about the issuance of the promised title, Eloy Miguel inquired from Leonor Reyes about the status of
his application. Reyes promised to send a letter-tracer to the Bureau of Lands, and, in fact, asked Eloy Miguel to affix his thumbmark to a blank
paper upon which was supposed to be written a letter-tracer. However, World War II broke out in the Pacific, and Miguel did not hear of and
about his homestead application; after the war he had no way of ascertaining the outcome of his application because Leonor Reyes had died
meanwhile during the Japanese occupation of the Philippines.

For the services rendered and still to be rendered by Leonor Reyes in preparing the homestead application and in securing the issuance of the
correspondent patent, Miguel gave the former 1/5 of his yearly harvest from the land. After the death of Leonor Reyes Miguel continued to
deliver an equal number of cavanes of palay to the former's widow, Anacleta M. Vda. de Reyes, who likewise promised to help him secure the
necessary homestead patent.

Meanwhile, Demetrio Miguel helped his father, Eloy Miguel, clear and cultivate the land. Sometime in 1932, on the occasion of the marriage of
Demetrio, Eloy Miguel ceded to Demetrio 14 hectares of the southern portion of the land as a gift propter nuptias. Demetrio forthwith declared
the said portion for taxation purposes in his name, as evidenced by tax declaration 7408 (exh. G).

However, unknown to Eloy and Demetrio Miguel, Leonor Reyes on June 25, 1935 filed sales application 20240 in the name of his wife, Anacleta
M. Vda. de Reyes (hereinafter referred to as the private respondent), covering the same parcel of land occupied and cultivated by the Miguels
and the subject of Eloy Miguel's homestead-application. The sales application was duly acknowledged by the Bureau of Lands on June 29, 1935,
and a sale at public auction took place on August 3, 1939 whereat the private respondent was the sole bidder. The Director of lands awarded
the land to her on March 7, 1940, the value of which was to be paid on installments.

Sometime in 1950, the private respondent had the land surveyed by Maximo Lorenzo who, in the course of the survey, assured Eloy Miguel that
the land was being surveyed in the latter's name. The private respondent, who was present during the survey, made the same assurance to Eloy
Miguel. However, because his suspicions were aroused by the act of the private respondent of having the land surveyed, Eloy Miguel directed
his son, Demetrio, to inquire from the office of the district land officer of Ilagan, Isabela, about the status of his (Eloy's) homestead application.
Demetrio discovered that their land was covered by the sales application of the private respondent. Eloy Miguel forthwith filed on February 16,
1950 a protest with the Bureau of Lands against sales application 20240 of the private respondent. Consequently, on February 21, 1950, the
Director of Lands ordered an investigation. Hearing of the protest was scheduled for May 26, 1950 by deputy public lands inspector Alejandro
Ramos of Land District 4, Bureau of Lands, Ilagan, Isabela, but was postponed at the instance of the private respondent. The hearing was then
reset for February 10, 1951, by assistant public lands inspector Hilarion Briones. However, the Miguels had in the interim discovered that
notwithstanding their protest and the investigation ostensibly being conducted by the administrative branch of the Government, sales patent
V-522 and original certificate of title P-1433, covering the parcel of land in question, were granted and issued to the private respondent on
January 10, 1951 and January 22, 1951, respectively.

Consequently, on February 17, 1951 Eloy and Demetrio Miguel lodged a complaint with the Court of First Instance of Isabela against the private
respondent, Anacleta M. Vda. de Reyes, the Director of Lands, and the Register of Deeds of Isabela, for the annulment of sales patent V-522
and the cancellation of original certificate of title P-1433. That case, docketed as civil case 315 of the Court of First Instance of Isabela, was
dismissed by that court on grounds that the plaintiffs did not have personality to institute the action, and that it was prematurely filed the
Miguels not having exhausted all administrative remedies, more specifically not appealing to the Secretary of Agriculture and Natural Resources
from the grant by the Director of Land of the patent to the private respondent. On appeal to this Court, the dismissal was affirmed on the
second ground (G.R. No. L-4851, promulgated July 31, 1953).

On September 7, 1953, Eloy and Demetrio Miguel commenced the action (civil case 616) in the Court of First Instance of Isabela against the
private respondent to compel her to reconvey to them the land covered by the abovementioned patent and title. After due hearing, the trial
court found that Eloy Miguel "has always been, and up to this time, in physical possession of the whole tract of land in question under claim of
ownership thru occupancy, he having occupied and cultivated the land since the Spanish regime;" that he was a homestead applicant way back
in 1932 for the land possessed by him; that there exists a trust relationship Eloy Miguel would himself have personally attented to his own
application; and that, through fraud and misrepresentations, Leonor Reyes caused the filing and approval of an application and the issuance by
the Bureau of Lands of a sales patent covering the property in the name of his wife, the private respondent, without the consent and
knowledge of the Miguels. The lower court, however, held that reconveyance is not proper because the land in question is not the private
property of the Miguels since time immemorial but remains a part of the public domain, and instead declared that Eloy Miguel "should be given
priority to acquire the land under the foregoing premises, the court a quo rendered judgment ordering (1) the Director of Land to cancel patent
V-522 issued in the name of Anacleta M. Vda. de Reyes, (2) the Registrar of Deeds of Isabela to cancel original certificate of title P-1433 in the
name of Anacleta M. Vda. de Reyes and to return Patent V-522 to the Bureau of Lands, and (3) the Director of Lands to give due course to the
homestead application of Eloy Miguel over the land.

The private respondent appealed to the Court of Appeals (hereafter referred to as the respondent Court) which dismissed the complaint upon
the ground that the judgment appealed from could not and did not bind the Director of Lands and the Registrar of Deeds of Isabela who were
not parties thereto. Eloy and, Demetrio Miguel (hereafter referred to as the petitioners) filed a motion for reconsideration, wherein they
argued that while the trial court might have incurred error in the legal conclusions drawn from its own findings of fact, the respondent Court
was not legally precluded by the Rules of Court and applicable jurisprudence to modify the judgment of the trial court, so as to make it conform
to the evidence, and to grant the relief of reconveyance sought in the action, in which action the Director of Land and the Register of Deeds of
Isabela are not proper or necessary parties. The motion for reconsideration wag denied in an extended resolution of the respondent Court
Promulgated on July 23, 1962, which ruled that the petitioners should have appealed from the decision of the trial court. A second motion for
reconsideration was denied in a minute resolution dated September 5, 1962.
The petitioners are now before us on appeal by certiorari, assigning as errors (1) the Court of Appeals' holding that they should have appealed
from the decision of the trial court, and (2) its finding that, assuming that reconveyance in favor of the petitioners as mere appellees is still
proper, the cases cited in the latter's first motion for reconsideration are not in point.

It has been postulated and, we think, correctly that the Supreme Court is vested with ample authority to review matters not assigned as
errors in an appeal, if it finds that their consideration and resolution are indispensable or necessary in arriving at a just decision in a given
case.1 Thus, before passing upon the foregoing assigned errors, we shall first resolve in seriatim the matters raised in both the appealed
decision and resolutions of the respondent Court because to do so is imperative in arriving at a fair and equitable adjudication of this case.

1. The respondent Court points up the failure of the petitioners to present a petition for judicial confirmation of imperfect title, if they indeed
had been in possession of the land since July 26, 1894, in accordance with the Public Land Act. Eloy Miguel should not, however, be expected to
file such a petition because all along he was relying on the solemn assurances of Leonor Reyes and later his wife, the private respondent, that
they were in the process of securing a homestead patent for him.

2. The respondent Court observed in its decision that the evidence on the allegation that Leonor Reyes acted fraudulently in applying for the
purchase of the land and later transferring his right to his wife, is sharply conflicting, and that even granting that there was fraud in the
obtention of the issuance of the patent, any objection based on that ground should have been interposed within one year from the date of its
issuance.

We cannot give our approval to this view. As found by the court below, the petitioners have proven by preponderance of evidence the fraud
perpetrated by the private respondent and her husband on Eloy Miguel. The weight of evidence leans heavily in favor of the fact of occupation
by Eloy Miguel of the land from prior to July 26, 1894. This was the finding of the lower court which belies the private respondent's allegation
that Eloy Miguel entered as her tenant only in 1935. There is also the receipt, exh. A, evidencing the payment of a filing fee for a homestead
application, which receipt, in the session of Eloy Miguel, raises at least the presumption that he had filed a homestead application. That the
records of the Bureau of Lands or of any of its units, particularly the district land office at Ilagan, Isabela, do not show that such application was
ever filed, supports the petitioners' thesis, concurred in by the trial court, that the blank paper which Eloy Miguel thumbmarked at the behest
of Leonor Reyes was used by the latter to withdraw the formers application instead of to trace the application. Finally, there is the private
respondent's and her husband's act of misleading the Bureau of Lands by falsely stating in their application for a sales patent that there was no
improvement on the land, when, as found by the lower court, the land had already been cultivated and improved by Eloy Miguel since 1932, by
the latest. (This misleading statement, noted by the court a quo on exh. 15 dated March 28, 1939 of the private respondent, significantly, is not
impugned by the latter.) In fact, the lower court observed that the private respondent herself affirmed on the witness stand that Eloy Miguel
was in 1935 already working on the land, although supposedly as her tenant. Therefore, at the time the private respondent's sales patent
application was filed in 1935, Leonor Reyes and she led the Bureau of Lands to believe that the land was uncultivated and unoccupied by other
claimants. The very relevant question arises: Why did the Reyes spouses conceal from the Bureau of Lands the fact that the land was occupied
and being cultivated by the Miguels, when there existed no prohibition against having the land cultivated for them by tenants? There are only
two logical reasons for the mysterious conduct of the Reyes spouses. First, had they stated in their sales application that the whole parcel of
land was under cultivation by the petitioners, the Director of Lands would have in all probability discovered that the land applied for was
covered by the prior homestead application of Eloy Miguel and most likely would have disapproved the sales application of the private
respondent. Second, had a survey of the land been conducted earlier, this would have aroused the suspicions of Eloy Miguel earlier and
enabled him to discover much sooner the fraud perpetrated by Leonor Reyes before the sales application of the private respondent was given
due course. Indeed, the private respondent waited until she had just about paid all the installments on the land before ordering a final survey
thereof. It was this survey which aroused Eloy Miguel's suspicions and enabled him and his son to discover the fraud perpetrated upon them.

The respondent Court's holding that any objection based on fraud should have been interposed within one year from the date the issuance of
the sales patent has no relevance to the case at bar. This is an action for the enforcement of a constructive trust the ultimate object of which
is the reconveyance of property lost through breach of fiduciary relations and/or fraud. Therefore, it can be filed within four years from the
discovery of the fraud.2 And since the petitioners discovered the fraud committed against them by the Reyes spouses in 1950, they had until
1954 within which to bring this action. This action was seasonably instituted because the complaint was filed on September 7, 1953.

3. The respondent Court also held that the only remedy available at the time the action below was instituted was for the Government (through
the Solicitor General) to file an action for the reversion of the land to the public domain based on the illegality of the grant a suit which a
private person is not authorized to file. The foregoing rule is correct but inapplicable in this case, which, as earlier mentioned, is an action for
reconveyance of a piece of land through enforcement of a constructive trust. For this same reason, the provision of Land Administrative Order 6
of the Secretary of Agriculture and Natural Resources, cited in the respondent court's decision, is likewise inapt.

4. The respondent Court attributes error to the lower court's finding that Eloy Miguel filed a homestead application for the land in question,
stating that no other evidence was presented to show that such application was filed except the testimony of Eloy Miguel and the receipt for
the filing fee of a homestead application; and that if such application was really filed, some trace or tell-tale evidence of it would be extant, and
the application could have been easily reconstituted after the liberation in 1945 when the Government adopted a policy to enable all public
land applicants to reconstitute their applications. It is too well-settled to require any citation of authority that the lower Court's findings of fact
are entitled to considerable weight, especially with respect to the appreciation of the testimony of witnesses on the stand, since it was in the
best position to observe the demeanor of the witnesses. The testimony of Eloy Miguel regarding his filing of a homestead application over the
parcel of land as found by the lower court should not therefore lightly be brushed aside. The receipt, exh. A, for the filing of the
homestead application raises a presumption in favor of Eloy Miguel's having filed such an application. As earlier explained, if no trace of the
said application could be found among the records of the Bureau of Lands or of any of its units particularly the district land office at Ilagan,
Isabela, it is because through fraud i.e., by asking Eloy Miguel to thumbmark a blank piece of paper Leonor Reyes succeeded in
withdrawing the application of Miguel. And he did this to pave the way for his wife, the private respondent herein, herself to apply for the land
under a sales application. Of course, having relied on the assurances of the Reyes spouses that they would help him secure a homestead patent,
Eloy Miguel found no need to reconstitute his homestead application. It is not even farfetched to suppose that Miguel, being illiterate, never
even came to learn of the Government's policy of enabling public land applicants to reconstitute their applications.

5. Coming now to the assigned errors, the respondent Court's view is not correct that it cannot grant the relief of reconveyance because the
petitioners did not appeal from the decision of the lower court. There exist sufficient bases, hereinafter to be discussed, for the respondent
Court to award said relief in the exercise of its broad appellate powers to affirm, reverse or modify the judgment or order appealed from.

To start with, the petitioners cannot entirely be blamed if they thought it the better part of prudence not to appeal. For although it did not
incorporate a decree of reconveyance, still the decision of the court below was favorable to them because it vindicated their actual possession
of the land under a bona fide claim of ownership since the Spanish regime, and adjudged them as having a better right to the land and the
priority to own it under the Public Land Act. Besides, it was their legitimate desire to avoid incurring additional expenses incident to the
bringing of an appeal.

However, as appellees in the Court of Appeals, the petitioners pointedly called the attention of the respondent Court in their brief to several
questions decided against them in the court below. Thus, working on the theory that it was plain error for the trial court to order the Director
of Lands and the Register of Deeds of Isabela to implement its decision, the petitioners called the attention of the respondent Court to the
precise nature of the action below in which the Director of Lands and the Register of Deeds of Isabela need not be impleaded.

... The action in this case is reconveyance, the purpose of which is to compel the defendant to return to the plaintiffs-appellees the
land in question which she has acquired through fraudulent means. Such being the case, it would have been utterly improper for the
plaintiffs to have impleaded the Director of Lands or the Register of Deeds of Isabela inasmuch as the action is personal in nature
directed against the person of the defendant." .

The petitioners likewise called the attention of the respondent Court to the trust relationship existing between them, on one hand, and the
Reyes spouses, on the other, which was breached by the latter. Thus, to justify the reconveyance to them of the property, they stated that:

Moreover, a situation of trust has been created in the instant case between the plaintiff and the defendant-appellant deceased
husband upon whom the plaintiff Eloy Miguel relied through his (Reyes') representations that the corresponding title to said land
would be secured in favor of the plaintiff Eloy Miguel. The evidence likewise shows that the defendant Vda. de Reyes promised the
plaintiff to continue the work begun by her late husband with the ultimate result of securing the said homestead patent and title in
favor of the plaintiff Eloy Miguel. Inasmuch as the said promise was violated by the defendant who secretly worked toward the
acquisition of the said land for her own self, fraudulently and stealthily, no prescription can run as against plaintiffs' right to claim
ownership of the said property.

We held in one case that appellants need not make specific assignment of errors provided they discuss at length and assail in their brief the
correctness of the trial court's findings regarding the matter. Said discussion warrants the appellate court to rule upon the point because it
substantially complies with sec. 7, Rule 51 of the Revised Rules of Court, intended merely to compel the appellant to specify the questions
which he wants to raise and be disposed of in his appeal. A clear discussion regarding an error allegedly committed by the trial court
accomplishes the purpose of a particular assignment of error.3

Reasoning a fortiori from the above-cited authority, an appellee who occupies a purely defensive position and is not required to make
assignments of errors, need only discuss or call the attention of the appellate court in his brief to the issues erroneously decided against him by
the trial court.4 Here the petitioners (appellees in the Court of Appeals) stated quite explicitly in their brief that since the action was for
reconveyance, it was utterly improper to implead the Director of Lands and the Register of Deeds in effect calling the attention of the
respondent Court to a plain error committed by the trial court in ordering the Director of Lands and the Register of Deeds to nullify the sales
patent and original certificate of title issued to the private respondent. And, in discussing the trust relationship between the Miguels and the
Reyes spouses which was breached by the latter, the petitioners (as appellees) also clearly brought to the attention of the respondent Court a
valid ground disregarded by the lower court as a basis for granting the relief of reconveyance.

Moreover, the Rules of Court5 and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting
the lower court's jurisdiction over the subject matter, (2) plain errors 6 not specified, and (3) clerical errors. Certainly, the mandate contained in
the dispositive portion of the lower court's decision and addressed to the Director of Lands and the Register of Deeds, who were not parties to
the case, is a plain error which the respondent Court properly corrected. As aforenarrated, the petitioners (as appellees) brought this error to
the attention of the respondent Court. Another plain error which the respondent Court should have considered was the court a
quo's conclusion that the land in litigation was still part of the public domain, in the face of the parties' mutual allegations to the contrary and
despite the admitted fact that a sales patent and an original certificate of title over the land had already been issued, thus segregating the land
from the public domain and making it private land.
It is noteworthy that the complaint for reconveyance was not dismissed by the trial court. What it denied was merely the relief or remedy of
reconveyance. However, in its decision, the trial court made certain findings of fact which justified the relief of reconveyance e.g., that Eloy
Miguel "has always been, and up to this time, in physical possession of the whole tract of land in question under claim of ownership thru
occupancy, he having occupied and cultivated the land since the Spanish regime;" that there was a trust relationship between Eloy Miguel and
the Reyes spouses; and that the Reyes spouses have fraudulently and in bad faith breached that trust. Hence, in reiterating their positions
before the respondent Court on the private nature of the land, on the impropriety of impleading the Director of Lands and the Register of
Deeds of Isabela, and on the existence of a trust relationship between the petitioners and the Reyes spouses, the petitioners were in point of
fact inviting the respondent Court's attention to questions erroneously decided against them by the trial court, in the hope that the respondent
Court would render judgment in accordance with the facts adjudged by the trial court as proven.

If the complaint states a claim upon which any relief can be given, it is immaterial what the plaintiff has asked for in his prayer or
whether he has asked for the proper relief; the court will grant him the relief to which he is entitled under the facts proven (Kansas
City St. L. and C. R. Co. v. Alton R. Co., 5 Fed. Rules Service, p. 638; U.S. Circuit Court of Appeals, Seventh Circuit, Dec. 18, 1941).

On appeal to the respondent Court by the private respondent, the suit was, as it has always been in the court of origin, one for reconveyance.
And of course, the petitioners did not ask the respondent Court for an affirmative relief different from what was logically justified by the facts
found by and proven in the court a quo.

6. The respondent Court opined that the cases cited by the petitioners in their motion for reconsideration (i.e., Republic of the Philippines v.
Carle Heirs, L-12485, July 21, 1959, and Roco, et al. v. Gimeda L-11651, Dec. 27, 1958) are not applicable because they involved properties
which admittedly belonged to the parties entitled to reconveyance, unlike the herein petitioners who are mere public land applicants and have
not acquired title under the Public Land Act. Assuming the respondent Court to be correct, a legion of cases there are which can be cited in
favor of the petitioners' position. Since the law of trust has been more frequently applied in England and in the United States than it has been in
Spain, we may draw freely upon American precedents in determining the effects of trusts, especially so because the trusts known to American
and English equity jurisprudence are derived from thefidei commissa of the Roman Law and are based entirely upon civil law
principles.7 Furthermore, because the case presents problems not directly covered by statutory provisions or by Spanish or local precedents,
resort for their solution must be had to the underlying principles of the law on the subject. Besides, our Civil Code itself directs the adoption of
the principles of the general law of trusts, insofar as they are not in conflict with said Code, the Code of Commerce, the Rules of Court and
special laws.8

In holding that the cases cited by the petitioners in their motion for reconsideration (i,e., Republic of the Philippines v. Carle Heirs, supra, and
Roco, et al. v. Gimeda, supra) are inapplicable, the respondent Court advances the theory that an action for reconveyance based on
constructive trust will prosper only if the properties involved belong to the parties suing for and entitled to reconveyance. This is not entirely
accurate. In Fox v. Simons9 the plaintiff employed the defendant to assist him in obtaining oil leases in a certain locality in Illinois, the former
paying the latter a salary and his expenses. The defendant acquired some leases for the plaintiff and others for himself. Whereupon, the
plaintiff brought suit to compel the defendant to assign the leases which he had acquired for himself. The court found for the plaintiff, holding
that it was a breach of the defendant's fiduciary duty to purchase for himself the kind of property which he was employed to purchase for the
plaintiff. 10

It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil leases. He merely employed the defendant to
obtain them for him, but the latter obtained some for the plaintiff and some for himself. Yet, despite the absence of this former-ownership
circumstance, the court there did not hesitate to order the defendant to assign or convey the leases he obtained for himself to the plaintiff
because of the breach of fiduciary duty committed by said defendant. Indeed, there need only be a fiduciary relation and a breach of fiduciary
duty before reconveyance may be adjudged. In fact, a fiduciary may even be chargeable as a constructive trustee of property which he
purchases for himself, even though he has not undertaken to purchase it for the beneficiary if in purchasing it he was improperly competing
with the beneficiary.11

Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another and the other reposes confidence in him,
although there is no written contract or no contract at all. If the agent violates his duty as fiduciary, a constructive trust arises. It is immaterial
that there was no antecedent fiduciary relation and that it arose contemporaneously with the particular transaction. 12

In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel file a homestead application over the land and
offered his services in assisting the latter to secure a homestead patent. Eloy Miguel accepted Leonor Reyes' offer of services, thereby relying,
on his word and reposing confidence in him. And in payment for the services rendered by Leonor Reyes in preparing and filing the homestead
application and those still to be rendered by him in securing the homestead patent, Eloy Miguel delivered to Reyes 1/5 of his yearly harvest
from the said land. When Leonor Reyes died, the petitioners continued to deliver the same percentage of their annual harvest to the private
respondent who undertook to continue assisting the former to secure a homestead patent over said land. However, in breach of their fiduciary
duty and through fraud, Leonor Reyes and the private respondent filed a sales application and obtained a sales patent and ultimately an
original certificate of title over the same parcel of land. Therefore, following the ruling in Fox v. Simons, supra, the private respondent can be
compelled to reconvey or assign to the petitioners the parcel of land in the proportion of nine hectares in favor of Eloy Miguel and 14 hectares
in favor of Demetrio Miguel, respectively.

The private respondent argues that there is no violation of trust relationship because the petitioners could have participated in the public
bidding. She avers that the alleged fraud supposedly committed upon the petitioners, and on which the claim for reconveyance is founded, is
clearly of no moment because the sales patent in question was not the necessary consequence thereof, but rather, it was granted in
consideration of her being the highest bidder and the purchaser of the land. In refutation of the foregoing argument, it must be observed,
firstly, that the petitioners because of the fraud practised on them by the Reyes spouses never came to know about the public bidding in
which the land was offered for sale and therefore could not have participated therein. Had not the Reyes spouses misrepresented in their sales
application that the land was uncultivated and unoccupied, the Director of Lands would in all probability have found out about the occupancy
and cultivation of the said land by the petitioners and about Eloy Miguel's homestead application over the same, and consequently would have
denied the sales application of the Reyes spouses. Secondly, it may justifiably be postulated that equity will convert one who, for any reason
recognized by courts of equity as a ground for interference, has received legal title from the Government to lands, which in equity and by the
laws of Congress ought to have gone to another, into a trustee for such other and compel him to convey the legal title accordingly. 13 Thirdly,
Eloy Miguel could have very easily obtained title to the said parcel of land in either of two ways, had he not been inveigled by Leonor Reyes to
file a homestead application. Thus, since he is a natural-born Filipino citizen, who is not an owner of more than twenty-four hectares of land,
and who since prior to July 4, 1926 (under R.A. 782, approved June 21, 1952, occupation and cultivation since July 4, 1945, or prior thereto, is
deemed sufficient) has continuously occupied and cultivated a parcel of land not more than twenty-four hectares in area, he was entitled to
apply for a free patent for, or gratuitous grant, of said land. This is known as confirmation of imperfect or incomplete titles by administrative
legalization.14Or, since Eloy Miguel has possessed the land prior to July 26, 1894 and said possession has been continuous, uninterrupted, open,
adverse and in the concept of an owner, there is a presumption juris et de jure that all necessary conditions for a grant by the State have been
complied with, and he would have been by force of law entitled pursuant to the provisions of sec. 48(b) of the Public Land Act to the
registration of his title to the land. 15

ACCORDINGLY, the decision of the Court of Appeals of May 10, 1962 and its resolutions of July 23 and September 5, 1962, are set aside.
Another judgment is hereby entered, ordering the private respondent Anacleta M. Vda. de Reyes to convey the land subject matter of the
complaint, in fee simple, to the petitioners, in the proportion of nine (9) hectares in favor of Eloy Miguel and fourteen (14) hectares in favor of
Demetrio Miguel. In the event of failure of the said private respondent, for any reason whatsoever, to convey within thirty (30) days from the
date this judgment becomes final, it is hereby decreed that at the end of that period she will be automatically divested of her title to the
property in dispute, and this decision shall be authority for the Register of Deeds to forthwith cancel the original of the original certificate of
title P1433 in his office and the owner's copy thereof in the name of Anacleta M. Vda. de Reyes, and to issue in favor of Eloy Miguel and
Demetrio Miguel new Torrens titles over the land in the proportion above indicated. Costs against the private respondent Reyes.

EDUARDO B. OLAGUER, G.R. No. 158907

Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
CHICO-NAZARIO, and
NACHURA,* JJ.

EMILIO PURUGGANAN, JR. AND RAUL LOCSIN, Promulgated:

Respondents.
February 12, 2007
x--------------------------------------------------x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision,[1] dated 30 June 2003, promulgated by the
Court of Appeals, affirming the Decision of the Regional Trial Court, dated 26 July 1995, dismissing the petitioners suit.
The parties presented conflicting accounts of the facts.

EDUARDO B. OLAGUERS VERSION

Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday Corporation (Businessday) with a total par
value of P600,000.00, with Certificates of Stock No. 005, No. 028, No. 034, No. 070, and No. 100.[2] At the time he was employed with the
corporation as Executive Vice-President of Businessday, and President of Businessday Information Systems and Services and
of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in
the political opposition against the Marcos dictatorship.[3] Anticipating the possibility that petitioner would be arrested and detained by the
Marcos military, Locsin, Joaquin, and Hector Holifea had an unwritten agreement that, in the event that petitioner was arrested, they would
support the petitioners family by the continued payment of his salary.[4]Petitioner also executed a Special Power of Attorney (SPA), on 26 May
1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofilea for the purpose of selling or transferring petitioners shares of stock
with Businessday. During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his shares of stock, even before they
are sold, for the purpose of concealing that he was a stockholder of Businessday, in the event of a military crackdown against the
opposition.[5] The parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the Corporate Secretary
of Businessday, and at the same time, a notary public for Quezon City.[6]

On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search and Seizure Order and detained for
allegedly committing arson. During the petitioners detention, respondent Locsin ordered fellow respondent Purugganan to cancel the
petitioners shares in the books of the corporation and to transfer them to respondent Locsins name.[7]

As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an employee of Businessday, to Camp Crame where
the petitioner was detained, to pretend to borrow Certificate of Stock No. 100 for the purpose of using it as additional collateral
for Businessdays then outstanding loan with the National Investment and Development Corporation. When Fernando returned the borrowed
stock certificate, the word cancelled was already written therein. When the petitioner became upset, Fernando explained that this was merely
a mistake committed by respondent Locsins secretary.[8]

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular deposits, each amounting to P10,000.00,
to the Metropolitan Bank and Trust Company accounts of Manuel and Genaro Pantig, petitioners in-laws. The deposits were made on every
15th and 30th of the month.[9] Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to continue paying
after his arrest for the financial support of his family.[10] After receiving a total of P600,000.00, the payments stopped. Thereafter,
respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but
petitioner refused. [11]

On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no longer registered as stockholder
of Businessday in its corporate books. He also learned that Purugganan, as the Corporate Secretary of Businessday, had already recorded the
transfer of shares in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that respondents restore to him full
ownership of his shares of stock, they refused to do so. On 29 July 1986, petitioner filed a Complaint before the trial court against
respondents Purugganan and Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the shares,
and payment of damages.[12]

RESPONDENT RAUL LOCSINS VERSION

In his version of the facts, respondent Locsin contended that petitioner approached him and requested him to sell, and, if necessary, buy
petitioners shares of stock in Businessday, to assure support for petitioners family in the event that something should happen to him,
particularly if he was jailed, exiled or forced to go underground.[13] At the time petitioner was employed with Businessday,
respondent Locsin was unaware that petitioner was part of a group, Light-a-Fire Movement, which actively sought the overthrow of the Marcos
government through an armed struggle.[14] He denied that he made any arrangements to continue paying the petitioners salary in the event of
the latters imprisonment.[15]

When petitioner was detained, respondent Locsin tried to sell petitioners shares, but nobody wanted to buy them. Petitioners reputation as an
oppositionist resulted in the poor financial condition of Businessday and discouraged any buyers for the shares of stock.[16] In view of
petitioners previous instructions, respondent Locsin decided to buy the shares himself.Although the capital deficiency suffered
by Businessday caused the book value of the shares to plummet below par value, respondent Locsin, nevertheless, bought the shares at par
value.[17] However, he had to borrow from Businessday the funds he used in purchasing the shares from petitioner, and had to pay the
petitioner in installments of P10,000.00 every 15th and 30thof each month.[18]

The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It ruled that the sale of shares between
petitioner and respondent Locsin was valid.The trial court concluded that petitioner had intended to sell the shares of stock to anyone,
including respondent Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground; and that the SPA
drafted by the petitioner empowered respondent Locsin, and two other agents, to sell the shares for such price and under such terms and
conditions that the agents may deem proper. It further found that petitioner consented to have respondent Locsin buy the shares himself. It
also ruled that petitioner, through his wife, received from respondent Locsin the amount of P600,000.00 as payment for the shares of
stock.[19] The dispositive part of the trial courts Decision reads:

WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes of action and of the
facts alleged in his complaint, the instant suit is hereby ordered DISMISSED, without pronouncement as to costs.

[Herein respondents] counterclaims, however, are hereby DISMISSED, likewise, for dearth of substantial evidentiary
support.[20]

On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale. [21] It further ruled that
granting that there was no perfected contract of sale, petitioner, nevertheless, ratified the sale to respondent Locsin by his receipt of the
purchase price, and his failure to raise any protest over the said sale. [22] The Court of Appeals refused to credit the petitioners allegation that
the money his wife received constituted his salary from Businessday since the amount he received as his salary, P24,000.00 per month, did not
correspond to the amount he received during his detention, P20,000.00 per month (deposits of P10,000.00 on every 15th and 30th of each
month in the accounts of the petitioners in-laws). On the other hand, the total amount received, P600,000.00, corresponds to the aggregate par
value of petitioners shares in Businessday. Moreover, the financial condition of Businessday prevented it from granting any form of financial
assistance in favor of the petitioner, who was placed in an indefinite leave of absence, and, therefore, not entitled to any salary. [23]

The Court of Appeals also ruled that although the manner of the cancellation of the petitioners certificates of stock and the subsequent
issuance of the new certificate of stock in favor of respondent Locsin was irregular, this irregularity will not relieve petitioner of the
consequences of a consummated sale.[24]

Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsins claims for moral and exemplary damages
due to lack of supporting evidence.[25]

Hence, the present petition, where the following issues were raised:

I.

THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND
MR. LOCSIN OVER THE SHARES;

II.

THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR.
LOCSIN;

III.
THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONERS IN LAWS WERE NOT PETITIONERS
SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE SHARES;

IV.

THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED SALE OF THE SHARES AND
NOT THE CORPORATION; AND

V.

THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID ALTHOUGH THE
CANCELLATION OF THE SHARES WAS IRREGULAR.[26]

The petition is without merit.

The first issue that the petitioner raised is that there was no valid sale since respondent Locsinexceeded his authority under the SPA[27] issued in
his, Joaquin and Holifenas favor. He alleged that the authority of the afore-named agents to sell the shares of stock was limited to the following
conditions: (1) in the event of the petitioners absence and incapacity; and (2) for the limited purpose of applying the proceeds of the sale to the
satisfaction of petitioners subsisting obligations with the companies adverted to in the SPA.[28]

Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word absence to a condition wherein a person
disappears from his domicile, his whereabouts being unknown, without leaving an agent to administer his property, [29] citing Article 381 of the
Civil Code, the entire provision hereunder quoted:

ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to
administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to
represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired.

Petitioner also puts forward that the word incapacity would be limited to mean minority, insanity, imbecility, the state of being deaf-mute,
prodigality and civil interdiction.[30] He cites Article 38 of the Civil Code, in support of this definition, which is hereunder quoted:

ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere
restrictions on capacity to act, and do not exempt the incapacitated person, from certain obligations, as when the latter
arise from his acts or from property relations, such as easements.
Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered by the terms absence or incapacity, as
provided under the SPA he executed in favor of respondent Locsin.

Petitioners arguments are unpersuasive. It is a general rule that a power of attorney must be strictly construed; the instrument will be held to
grant only those powers that are specified, and the agent may neither go beyond nor deviate from the power of attorney. However, the rule is
not absolute and should not be applied to the extent of destroying the very purpose of the power. If the language will permit, the construction
that should be adopted is that which will carry out instead of defeat the purpose of the appointment. Clauses in a power of attorney that are
repugnant to each other should be reconciled so as to give effect to the instrument in accordance with its general intent or predominant
purpose. Furthermore, the instrument should always be deemed to give such powers as essential or usual in effectuating the express
powers.[31]

In the present case, limiting the definitions of absence to that provided under Article 381 of the Civil Code and of incapacity under Article 38 of
the same Code negates the effect of the power of attorney by creating absurd, if not impossible, legal situations. Article 381 provides the
necessarily stringent standards that would justify the appointment of a representative by a judge. Among the standards the said article
enumerates is that no agent has been appointed to administer the property. In the present case, petitioner himself had already authorized
agents to do specific acts of administration and thus, no longer necessitated the appointment of one by the court. Likewise, limiting the
construction of incapacity to minority, insanity, imbecility, the state of being a deaf-mute, prodigality and civil interdiction, as provided under
Article 38, would render the SPA ineffective. Article 1919(3) of the Civil Code provides that the death, civil interdiction, insanity or insolvency of
the principal or of the agent extinguishes the agency. It would be equally incongruous, if not outright impossible, for the petitioner to require
himself to qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes operative. In such cases, not only would he be
prevented from appointing an agent, he himself would be unable to administer his property.

On the other hand, defining the terms absence and incapacity by their everyday usage makes for a reasonable construction, that is, the state of
not being present and the inability to act, given the context that the SPA authorizes the agents to attend stockholders meetings and vote in
behalf of petitioner, to sell the shares of stock, and other related acts. This construction covers the situation wherein petitioner was arrested
and detained. This much is admitted by petitioner in his testimony.[32]

Petitioners contention that the shares may only be sold for the sole purpose of applying the proceeds of the sale to the satisfaction of
petitioners subsisting obligations to the company is far-fetched. The construction, which will carry out the purpose, is that which should be
applied. Petitioner had not submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor could he have
considered incurring any debts since he admitted that, at the time of its execution, he was concerned about his possible arrest, death and
disappearance. The language of the SPA clearly enumerates, as among those acts that the agents were authorized to do, the act of applying the
proceeds of the sale of the shares to any obligations petitioner might have against the Businessday group of companies. This interpretation is
supported by the use of the word and in enumerating the authorized acts, instead of phrases such as only for, for the purpose of, in order to or
any similar terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of paying any liabilities with
the Businessday group of companies.

Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the shares to respondent Locsin for the price
of P600,000.00. This argument is unsustainable. Petitioner received from respondent Locsin, through his wife and in-laws, the installment
payments for a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982 when petitioner
demanded the return of the shares. The petitioners claim that he did not instruct respondent Locsin to deposit the money to the bank accounts
of his in-laws fails to prove that petitioner did not give his consent to the sale since respondent Locsin was authorized, under the SPA, to
negotiate the terms and conditions of the sale including the manner of payment. Moreover, had respondent Locsingiven the proceeds directly
to the petitioner, as the latter suggested in this petition, the proceeds were likely to have been included among petitioners properties which
were confiscated by the military. Instead, respondent Locsin deposited the money in the bank accounts of petitioners in-laws, and
consequently, assured that the petitioners wife received these amounts. Article 1882 of the Civil Code provides that the limits of an agents
authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified
by him.

In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin had not asked the petitioner to endorse
and deliver the shares of stock, and (2) when Rebecca Fernando asked the petitioner to endorse and deliver the certificates of stock, but
petitioner refused and even became upset.[33] In either case, both statements only prove that petitioner refused to honor his part as seller of
the shares, even after receiving payments from the buyer. Had the petitioner not known of or given his consent to the sale, he would have
given back the payments as soon as Fernando asked him to endorse and deliver the certificates of stock, an incident which unequivocally
confirmed that the funds he received, through his wife and his in-laws, were intended as payment for his shares of stocks. Instead, petitioner
held on to the proceeds of the sale after it had been made clear to him that respondent Locsinhad considered the P600,000.00 as payment for
the shares, and asked petitioner, through Fernando, to endorse and deliver the stock certificates for cancellation.

As regards the third issue, petitioners allegation that the installment payments he was adjudged to have received for the shares were actually
salaries which Businessday promised to pay him during his detention is unsupported and implausible. Petitioner received P20,000.00 per month
through his in-laws; this amount does not correspond to his monthly salary at P24,000.00.[34]Nor does the amount received correspond to the
amount which Businessday was supposed to be obliged to pay petitioner, which was only P45,000.00 to P60,000.00 per annum.[35]Secondly, the
petitioners wife did not receive funds from respondent Locsin or Businessdayfor the entire duration of petitioners detention. Instead, when the
total amount received by the petitioner reached the aggregate amount of his shares at par value -- P600,000.00 -- the payments
stopped. Petitioner even testified that when respondent Locsin denied knowing the petitioner soon after his arrest, he believed
respondent Locsins commitment to pay his salaries during his detention to be nothing more than lip-service.[36]
Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of Businessday in favor of petitioner, would be
void. An arrangement whereby petitioner will receive salaries for work he will not perform, which is not a demandable debt since petitioner
was on an extended leave of absence, constitutes a donation under Article 726 [37] of the Civil Code. Under Article 748 of the Civil Code, if the
value of the personal property donated exceeds P5,000.00, the donation and the acceptance shall have to be made in writing.Otherwise, the
donation will be void. In the present case, petitioner admitted in his testimony [38] that such arrangement was not made in writing and, hence, is
void.

The fact that some of the deposit slips and communications made to petitioners wife contain the phrase household expenses does not disprove
the sale of the shares. The money was being deposited to the bank accounts of the petitioners in-laws, and not to the account of the petitioner
or his wife, precisely because some of his property had already been confiscated by the military. Had they used the phrase sale of shares, it
would have defeated the purpose of not using their own bank accounts, which was to conceal from the military any transaction involving the
petitioners property.

Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not respondent Locsin, was the party to the
transaction. The curious facts that the payments were received on the 15 th and 30th of each month and that the payor named in the checks
was Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained cash advances from the company, paid to
him on the 15th and 30th of the month, so that he can pay petitioner for the shares. To support his claim, he presented Businessdaysfinancial
records and the testimony of Leo Atienza, the Companys Accounting Manager.When asked why the term shares of stock was used for the
entries, instead of cash advances, Atienza explained that the term shares of stock was more specific rather than the broader phrase cash
advances.[39] More to the point, had the entries been for shares of stock, the issuance of shares should have been reflected in the stock and
transfer books of Businessday, which the petitioner presented as evidence. Instead the stock and transfer books reveal that the increase in
respondent Locsins shares was a result of the cancellation and transfer of petitioners shares in favor of respondent Locsin.

Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed shares of stock is void since it contravenes
Article 1491 of the Civil Code, which provides that:

ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another:

xxxx

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal
has been given; x x x.
It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent for another cannot be permitted to
deal in the agency matter on his own account and for his own benefit without the consent of his principal, freely given, with full knowledge of
every detail known to the agent which might affect the transaction. [40] The prohibition against agents purchasing property in their hands for
sale or management is, however, clearly, not absolute. It does not apply where the principal consents to the sale of the property in the hands of
the agent or administrator.[41]

In the present case, the parties have conflicting allegations. While respondent Locsin averred that petitioner had permitted him to purchase
petitioners shares, petitioner vehemently denies having known of the transaction. However, records show that petitioners position is less
credible than that taken by respondent Locsin given petitioners contemporaneous and subsequent acts.[42] In 1980, when Fernando returned a
stock certificate she borrowed from the petitioner, it was marked cancelled. Although the petitioner alleged that he was furious when he saw
the word cancelled, he had not demanded the issuance of a new certificate in his name. Instead of having been put on his guard, petitioner
remained silent over this obvious red flag and continued receiving, through his wife, payments which totalled to the aggregate amount of the
shares of stock valued at par. When the payments stopped, no demand was made by either petitioner or his wife for further payments.

From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of P600,000.00 for the shares of stock, and
had in fact facilitated the implementation of the terms of the payment by providing respondent Locsin, through petitioners wife, with the
information on the bank accounts of his in-laws. Petitioners wife and his son even provided receipts for the payments that were made to them
by respondent Locsin,[43] a practice that bespeaks of an onerous transaction and not an act of gratuity.

Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent, and, therefore, illegal. In the
present case, the shares were transferred in the name of the buyer, respondent Locsin, without the petitioner delivering to the buyer his
certificates of stock. Section 63 of the Corporation Code provides that:

Sec.63. Certificate of stock and transfer of shares. xxx Shares of stock so issued are personal property and may be
transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally
authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is
recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates and the number of shares transferred. (Emphasis provided.)

The aforequoted provision furnishes the procedure for the transfer of shares the delivery of the endorsed certificates, in order to prevent the
fraudulent transfer of shares of stock. However, this rule cannot be applied in the present case without causing the injustice sought to be
avoided. As had been amply demonstrated, there was a valid sale of stocks. Petitioners failure to deliver the shares to their rightful buyer is a
breach of his duty as a seller, which he cannot use to unjustly profit himself by denying the validity of such sale. Thus, while the manner of the
cancellation of petitioners certificates of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular, we
must, nonetheless, declare the validity of the sale between the parties. Neither does this irregularity prove that the transfer was fraudulent. In
his testimony, petitioner admitted that they had intended to conceal his being a stockholder of Businessday.[44] The cancellation of his name
from the stock and transfer book, even before the shares were actually sold, had been done with his consent. As earlier explained, even the
subsequent sale of the shares in favor of Locsin had been done with his consent.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMSthe assailed Decision of the Court of Appeals, promulgated
on 30 June 2003, affirming the validity of the sale of the shares of stock in favor of respondent Locsin. No costs.

SO ORDERED.

G.R. No. L-30573 October 29, 1971

VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR.,
SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-respondent.

Teofilo Leonin for petitioners-appellants.

Osorio, Osorio & Osorio for respondent-appellee.

Teofilo P. Purisima in his own behalf as intervenor-respondent.

MAKASIAR, J.:

Petitioner-appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar,
Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority decision dated, March 12, 1969 of
the Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which sentenced the said Vicente M. Domingo to
pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with interest on both amounts from the date of the filing
of the complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and P500.00 as attorney's fees plus costs.

The following facts were found to be established by the majority of the Special Division of Five of the Court of Appeals:

In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency
to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00)
with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the 30-day duration of the agency or if
the property is sold by Vicente within three months from the termination of the agency to apurchaser to whom it was submitted by Gregorio
during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one copy was given to Vicente, while
the original and another copy were retained by Gregorio.

On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission.

Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter (Exhibit "B"). Vicente directed
Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon demand of Vicente, Oscar de
Leon issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar
de Leon confirmed his former offer to pay for the property at P1.20 per square meter in another letter, Exhibit "D". Subsequently, Vicente
asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C" was
amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house and lot at Denver Street, Quezon City which is
part of the purchase price. It was again amended to the effect that Oscar will vacate his house and lot on December 1, 1956, because his wife
was on the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year
1957 therein is a mere typographical error) and marked Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the
sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure
of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente.
Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest money. In the deed of sale was not
executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not
receive his money from his brother in the United States, for which reason he was giving up the negotiation including the amount of One
Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio aspropina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A"
marked habit "A-1" to the effect that Vicente was still committed to pay him 5% commission, if the sale is consummated within three months
after the expiration of the 30-day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a
purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore it to pieces.
Gregorio held his peace, not wanting to antagonize Vicente further, because he had still duplicate of Exhibit "A". From his meeting with Vicente,
Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he discovered Exhibit "G' deed of sale executed on September
17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down
payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his property to
the same buyer, Oscar de Leon and his wife, he demanded in writting payment of his commission on the sale price of One Hundred Nine
Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente went to him and asked him to
eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.0 In Vicente's
reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.

The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that Amparo Diaz, the vendee, being
the wife of Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar de Leon since husband and wife have common or
identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the consummation of the sale in favor of the
spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and
not as additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar de Leon with respect to
the additional earnest money, does not appear to have been answered by Oscar de Leon and therefore there is no writing or document
supporting Oscar de Leon's testimony that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to
Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter
Exhibit "4"; and that Vicente did not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of
demand of the 5% commission.

The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de Leon of
the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to
P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his commission on the sale price; (2) whether Vicente or Gregorio
should be liable directly to the intervenor Teofilo Purisima for the latter's share in the expected commission of Gregorio by reason of the sale;
and (3) whether the award of legal interest, moral and exemplary damages, attorney's fees and costs, was proper.

Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan Enriquez did not touch on these issues
which were extensively discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in his concurring opinion,
affirmed that it does not constitute breach of trust or fraud on the part of the broker and regarded same as merely part of the whole process of
bringing about the meeting of the minds of the seller and the purchaser and that the commitment from the prospect buyer that he would give
a reward to Gregorio if he could effect better terms for him from the seller, independent of his legitimate commission, is not fraudulent,
because the principal can reject the terms offered by the prospective buyer if he believes that such terms are onerous disadvantageous to him.
On the other hand, Justice Gatmaitan, with whom Justice Antonio Cafizares corner held the view that such an act on the part of Gregorio was
fraudulent and constituted a breach of trust, which should deprive him of his right to the commission.

The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal.1

Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil Code.

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may
have received by virtue of the agency, even though it may not be owing to the principal.

Every stipulation exempting the agent from the obligation to render an account shall be void.

xxx xxx xxx

Art. 1909. The agent is responsible not only for fraud but also for negligence, which shall be judged with more less rigor by
the courts, according to whether the agency was or was not for a compensation.

Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides that:

Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever he may have
received by virtue of the agency, even though what he has received is not due to the principal.
The modification contained in the first paragraph Article 1891 consists in changing the phrase "to pay" to "to deliver", which latter term is more
comprehensive than the former.

Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent condemning as void any
stipulation exempting the agent from the duty and liability imposed on him in paragraph one thereof.

Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code which reads thus:

Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with more or less severity by
the courts, according to whether the agency was gratuitous or for a price or reward.

The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker
in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account
to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as
of the strictest justice.2

Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to
his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal,
even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual
damage.3 By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that
of being an agent for hisprincipal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that
the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame
for such a result by reason of his treachery or perfidy.

This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for failure to deliver sums of
money paid to him as an insurance agent for the account of his employer as required by said Article 1720, said insurance agent was convicted
estafa.4 An administrator of an estate was likewise under the same Article 1720 for failure to render an account of his administration to the
heirs unless the heirs consented thereto or are estopped by having accepted the correctness of his account previously rendered.5

Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa for failure to deliver to his principal the total
amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from his
collections.6

A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money and property received by him for his client
despite his attorney's lien.7 The duty of a commission agent to render a full account his operations to his principal was reiterated in Duhart, etc.
vs. Macias.8

The American jurisprudence on this score is well-nigh unanimous.

Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been unfaithful,
the principal may recover back the commission paid, since an agent or broker who has been unfaithful is not entitled to any
compensation.

xxx xxx xxx

In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little vs.
Phipps (1911) 208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: "It is well settled that the agent is bound to exercise the
utmost good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a technical or arbitrary rule. It is a
rule founded on the highest and truest principles, of morality." Parker vs. McKenna (1874) LR 10,Ch(Eng) 96,118 ... If the
agent does not conduct himself with entire fidelity towards his principal, but is guilty of taking a secret profit or commission
in regard the matter in which he is employed, he loses his right to compensation on the ground that he has taken a position
wholly inconsistent with that of agent for his employer, and which gives his employer, upon discovering it, the right to treat
him so far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the
benefit of valuable services rendered by the agent, but the agent has only himself to blame for that result."

xxx xxx xxx

 The intent with which the agent took a secret profit has been held immaterial where the agent has in fact entered into a
relationship inconsistent with his agency, since the law condemns the corrupting tendency of the inconsistent
relationship. Little vs. Phipps (1911) 94 NE 260.9

As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with
the subject matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for
himself in excess of his lawful compensation; and if he does so he may be held as a trustee and may be compelled to
account to his principal for all profits, advantages, rights, or privileges acquired by him in such dealings, whether in
performance or in violation of his duties, and be required to transfer them to his principal upon being reimbursed for his
expenditures for the same, unless the principal has consented to or ratified the transaction knowing that benefit or profit
would accrue or had accrued, to the agent, or unless with such knowledge he has allowed the agent so as to change his
condition that he cannot be put in status quo. The application of this rule is not affected by the fact that the principal did not
suffer any injury by reason of the agent's dealings or that he in fact obtained better results; nor is it affected by the fact that
there is a usage or custom to the contrary or that the agency is a gratuitous one. (Emphasis applied.) 10

In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the amount of One Thousand Pesos
(P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his principal and undermined his
loyalty to his principal, who gave him partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of
exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms desired by his principal, the
broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer of the prospective
buyer to purchase the property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of
88,477 square meters, which is very much lower the the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred
Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal.

The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the task of merely
bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. Neither
would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and his
principal did not object therto. 11 Herein defendant-appellee Gregorio Domingo was not merely a middleman of the petitioner-appellant
Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein petitioner-appellant
was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective buyer; much less did he
consent to his agent's accepting such a gift.

The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the situation; because
the transaction, to be valid, must necessarily be with the consent of the husband Oscar de Leon, who is the administrator of their conjugal
assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part of and constituted the down
payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de
Leon who was the buyer.

As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission and must
return the part of the commission he received from his principal.

Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever amounts
Gregorio Domingo received by virtue of the transaction as his sub-agency contract was with Gregorio Domingo alone and not with Vicente
Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon
respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred
Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima.

Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious anxiety as well as wounded
feelings, petitioner-appellant Vicente Domingo should be awarded moral damages in the reasonable amount of One Thousand Pesos
(P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case has been pending for the
last fifteen (15) years from its filing on October 3, 1956.

WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing defendant-appellee Gregorio
Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos
(P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
ANTONIO B. BALTAZAR, G.R. No. 136433
Petitioner,

Present:
- versus -

QUISUMBING, J., Chairperson, CARPIO,

CARPIO MORALES,
HONORABLE OMBUDSMAN, EULOGIO M. MARIANO, TINGA, and
JOSE D. JIMENEZ, JR., TORIBIO E. ILAO, JR. and ERNESTO VELASCO, JR., JJ.
R. SALENGA,
Respondents. Promulgated:

December 6, 2006

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

DECISION

VELASCO, JR., J.:

The Case

Ascribing grave abuse of discretion to respondent Ombudsman, this Petition for Review on Certiorari, [1] under Rule 45 pursuant to
Section 27 of RA 6770,[2] seeks to reverse and set aside the November 26, 1997 Order[3] of the Office of the Special Prosecutor (OSP) in OMB-1-
94-3425 duly approved by then Ombudsman Aniano Desierto on August 21, 1998, which recommended the dismissal of the Information [4] in
Criminal Case No. 23661 filed before the Sandiganbayan against respondents Pampanga Provincial Adjudicator Toribio E. Ilao, Jr., Chief Legal
Officer Eulogio M. Mariano and Legal Officer Jose D. Jimenez, Jr. (both of the DAR Legal Division in San Fernando, Pampanga), and Ernesto R.
Salenga. The petition likewise seeks to set aside the October 30, 1998 Memorandum [5] of the OSP duly approved by the Ombudsman on
November 27, 1998 which denied petitioner's Motion for Reconsideration. [6] Previously, the filing of the Information against said respondents
was authorized by the May 10, 1996 Resolution[7] and October 3, 1996 Order[8] of the Ombudsman which found probable cause that they
granted unwarranted benefits, advantage, and preference to respondent Salenga in violation of Section 3 (e) of RA 3019. [9]

The Facts

Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga.Her Attorney-in-Fact Faustino R. Mercado leased
the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period, that is, from August 7, 1990 to August 7, 1993.[10] Lessee Eduardo
Lapid in turn sub-leased the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of the original lease, that is,
from January 10, 1993 to August 7, 1993.[11] Respondent Ernesto Salenga was hired by Eduardo Lapid as fishpond watchman (bante-
encargado). In the sub-lease, Rafael Lopez rehired respondent Salenga.

Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28, 1993 demand letter[12] to
Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of the 10% share in the harvest.

On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the last two (2) months of
the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00. [13] This prompted respondent
Salenga to file a Complaint[14] before the Provincial Agrarian Reform Adjudication Board (PARAB), Region III, San Fernando, Pampanga docketed
as DARAB Case No. 552-P93 entitled Ernesto R. Salenga v. Rafael L. Lopez and Lourdes L. Lapid for Maintenance of Peaceful Possession,
Collection of Sum of Money and Supervision of Harvest.The Complaint was signed by respondent Jose D. Jimenez, Jr., Legal Officer of the
Department of Agrarian Reform (DAR) Region III Office in San Fernando, Pampanga, as counsel for respondent Salenga; whereas respondent
Eulogio M. Mariano was the Chief Legal Officer of DAR Region III. The case was assigned to respondent Toribio E. Ilao, Jr., Provincial Adjudicator
of DARAB, Pampanga.

On May 10, 1993, respondent Salenga amended his complaint. [15] The amendments included a prayer for the issuance of a temporary
restraining order (TRO) and preliminary injunction. However, before the prayer for the issuance of a TRO could be acted upon, on June 16,
1993, respondent Salenga filed a Motion to Maintain Status Quo and to Issue Restraining Order[16] which was set for hearing on June 22,
1993. In the hearing, however, only respondent Salenga with his counsel appeared despite notice to the other parties.Consequently, the ex-
parte presentation of respondent Salengas evidence in support of the prayer for the issuance of a restraining order was allowed, since the
motion was unopposed, and on July 21, 1993, respondent Ilao, Jr. issued a TRO.[17]

Thereafter, respondent Salenga asked for supervision of the harvest, which the board sheriff did. Accordingly, defendants Lopez and
Lapid received their respective shares while respondent Salenga was given his share under protest. In the subsequent hearing for the issuance
of a preliminary injunction, again, only respondent Salenga appeared and presented his evidence for the issuance of the writ.

Pending resolution of the case, Faustino Mercado, as Attorney-in-

Fact of the fishpond owner Paciencia Regala, filed a motion to intervene which was granted by respondent Ilao, Jr. through the November 15,
1993 Order. After the trial, respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing the Complaint for lack of merit; but losing
plaintiff, respondent Salenga, appealed the decision before the DARAB Appellate Board.

Complaint Before the Ombudsman

On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner Antonio Baltazar, an
alleged nephew of Faustino Mercado, through a Complaint-Affidavit[18] against private respondents before the Office of the Ombudsman which
was docketed as OMB-1-94-3425 entitled Antonio B. Baltazar v. Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao, Jr. and Ernesto Salenga for
violation of RA 3019. Petitioner charged private respondents of conspiracy through the issuance of the TRO in allowing respondent Salenga to
retain possession of the fishpond, operate it, harvest the produce, and keep the sales under the safekeeping of other private
respondents. Moreover, petitioner maintains that respondent Ilao, Jr. had no jurisdiction to hear and act on DARAB Case No. 552-P93 filed by
respondent Salenga as there was no tenancy relation between respondent Salenga and Rafael L. Lopez, and thus, the complaint was dismissible
on its face.

Through the December 14, 1994 Order,[19] the Ombudsman required private respondents to file their counter-affidavits, affidavits of
their witnesses, and other controverting evidence. While the other respondents submitted their counter-affidavits, respondent Ilao, Jr. instead
filed his February 9, 1995 motion to dismiss, February 21, 1995 Reply, and March 24, 1995 Rejoinder.

Ombudsmans Determination of Probable Cause

On May 10, 1996, the Ombudsman issued a Resolution[20] finding cause to bring respondents to court, denying the motion to dismiss
of respondent Ilao, Jr., and recommending the filing of an Information for violation of Section 3 (e) of RA 3019. Subsequently, respondent Ilao,
Jr. filed his September 16, 1996 Motion for Reconsideration and/or Re-investigation[21] which was denied through the October 3,
1996 Order.[22] Consequently, the March 17, 1997 Information[23] was filed against all the private respondents before the Sandiganbayan which
was docketed as Criminal Case No. 23661.

Before the graft court, respondent Ilao, Jr. filed his May 19, 1997 Motion for Reconsideration and/or Re-investigation which was
granted through the August 29, 1997Order.[24] On September 8, 1997, respondent Ilao, Jr. subsequently filed his Counter-Affidavit[25] with
attachments while petitioner did not file any reply-affidavit despite notice to him. The OSP of the Ombudsman conducted the re-investigation;
and the result of the re-investigation was embodied in the assailed November 26, 1997 Order[26] which recommended the dismissal of the
complaint in OMB-1-94-3425 against all private respondents. Upon review, the Ombudsman approved the OSPs recommendation on August
21, 1998.

Petitioners Motion for Reconsideration[27] was likewise denied by the OSP through the October 30, 1998 Memorandum[28] which was
approved by the Ombudsman on November 27, 1998. Consequently, the trial prosecutor moved orally before the Sandiganbayan for the
dismissal of Criminal Case No. 23661 which was granted through the December 11, 1998 Order. [29]

Thus, the instant petition is before us.

The Issues

Petitioner raises two assignments of errors, to wit:

THE HONORABLE OMBUDSMAN ERRED IN GIVING DUE COURSE A MISPLACED COUNTER-AFFIDAVIT FILED AFTER
THE TERMINATION OF THE PRELIMINARY INVESTIGATION AND/OR THE CASE WAS ALREADY FILED BEFORE THE
SANDIGANBAYAN.

ASSUMING OTHERWISE, THE HONORABLE OMBUDSMAN LIKEWISE ERRED IN REVERSING HIS OWN RESOLUTION
WHERE IT WAS RESOLVED THAT ACCUSED AS PROVINCIAL AGRARIAN ADJUDICATOR HAS NO JURISDICTION OVER A
COMPLAINT WHERE THERE EXIST [sic] NO TENANCY RELATIONSHIP CONSIDERING [sic] COMPLAINANT IS NOT A
TENANT BUT A BANTE-ENCARGADO OR WATCHMAN-OVERSEER HIRED FOR A SALARY OF P3,000.00 PER MONTH AS
ALLEGED IN HIS OWN COMPLAINT.[30]
 Before delving into the errors raised by petitioner, we first address the preliminary procedural issue of the authority and locus
standi of petitioner to pursue the instant petition.

Preliminary Issue: Legal Standing

Locus standi is defined as a right of appearance in a court of justice x x x on a given question.[31] In private suits, standing is governed
by the real-parties-in interest rule found in Section 2, Rule 3 of the 1997 Rules of Civil Procedure which provides that every action must be
prosecuted or defended in the name of the real party in interest. Accordingly, the real-party-in interest is the party who stands to be benefited
or injured by the judgment in the suit or the party entitled to the avails of the suit. [32] Succinctly put, the plaintiffs standing is based on their
own right to the relief sought.
The records show that petitioner is a non-lawyer appearing for himself and conducting litigation in person. Petitioner instituted the
instant case before the Ombudsman in his own name. In so far as the Complaint-Affidavit filed before the Office of the Ombudsman is
concerned, there is no question on his authority and legal standing. Indeed, the Office of the Ombudsman is mandated to investigate and
prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or
omission appears to be illegal, unjust, improper or inefficient (emphasis supplied). [33] The Ombudsman can act on anonymous complaints
and motu proprio inquire into alleged improper official acts or omissions from whatever source, e.g., a newspaper. [34] Thus, any complainant
may be entertained by the Ombudsman for the latter to initiate an inquiry and investigation for alleged irregularities.

However, filing the petition in person before this Court is another matter. The Rules allow a non-lawyer to conduct litigation in person
and appear for oneself only when he is a party to a legal controversy. Section 34 of Rule 138 pertinently provides, thus:

SEC. 34. By whom litigation conducted. In the court of a justice of the peace a party may conduct his litigation in
person, with the aid of an agent or friend appointed by him for that purpose, or with the aid of an attorney. In any
other court, a party may conduct his litigation personally or by aid of an attorney, and his appearance must be
either personal or by a duly authorized member of the bar (emphases supplied).

Petitioner has no legal standing

Is petitioner a party or a real party in interest to have the locus standi to pursue the instant petition? We answer in the negative.

While petitioner may be the complainant in OMB-1-94-3425, he is not a real party in interest. Section 2, Rule 3 of the 1997 Rules of
Civil Procedure stipulates, thus:

SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the real party in interest.

The same concept is applied in criminal and administrative cases.

In the case at bar which involves a criminal proceeding stemming from a civil (agrarian) case, it is clear that petitioner is not a real
party in interest. Except being the complainant, the records show that petitioner is a stranger to the agrarian case. It must be recalled that the
undisputed owner of the fishpond is Paciencia Regala, who intervened in DARAB Case No. 552-P93 through her Attorney-in-Fact Faustino
Mercado in order to protect her interest. The motion for intervention filed by Faustino Mercado, as agent of Paciencia Regala, was granted by
respondent Provincial Adjudicator Ilao, Jr. through the November 15, 1993 Order in DARAB Case No. 552-P93.

Agency cannot be further delegated

Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special Power of
Attorney[35] (SPA) from Faustino Mercado. However, such SPA is unavailing for petitioner. For one, petitioners principal, Faustino Mercado, is an
agent himself and as such cannot further delegate his agency to another. Otherwise put, an agent cannot delegate to another the same
agency. The legal maxim potestas delegata non delegare potest; a power once delegated cannot be re-delegated, while applied primarily in
political law to the exercise of legislative power, is a principle of agency. [36] For another, a re-delegation of the agency would be detrimental to
the principal as the second agent has no privity of contract with the former. In the instant case, petitioner has no privity of contract with
Paciencia Regala, owner of the fishpond and principal of Faustino Mercado.

Moreover, while the Civil Code under Article 1892[37] allows the agent to appoint a substitute, such is not the situation in the instant
case. The SPA clearly delegates the agency to petitioner to pursue the case and not merely as a substitute. Besides, it is clear in the aforecited
Article that what is allowed is a substitute and not a delegation of the agency.

Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor is he a real party in interest in the criminal
proceedings conducted by the Ombudsman as elevated to the Sandiganbayan. He is not a party who will be benefited or injured by the results
of both cases.
Petitioner: a stranger and not an injured private complainant

Petitioner only surfaced in November 1994 as complainant before the Ombudsman.Aside from that, not being an agent of the parties
in the agrarian case, he has no locus standi to pursue this petition. He cannot be likened to an injured private complainant in a criminal
complaint who has direct interest in the outcome of the criminal case.
More so, we note that the petition is not pursued as a public suit with petitioner asserting a public right in assailing an allegedly illegal
official action, and doing so as a representative of the general public. He is pursuing the instant case as an agent of an ineffective agency.

Petitioner has not shown entitlement to judicial protection

Even if we consider the instant petition as a public suit, where we may consider petitioner suing as a stranger, or in the category of a
citizen, or taxpayer, still petitioner has not adequately shown that he is entitled to seek judicial protection. In other words, petitioner has not
made out a sufficient interest in the vindication of the public order and the securing of relief as a citizen or taxpayer; more so when there is no
showing that he was injured by the dismissal of the criminal complaint before the Sandiganbayan.

Based on the foregoing discussion, petitioner indubitably does not have locus standi to pursue this action and the instant petition
must be forthwith dismissed on that score. Even granting arguendo that he has locus standi, nonetheless, petitioner fails to show grave abuse
of discretion of respondent Ombudsman to warrant a reversal of the assailed November 26, 1997 Order and the October 30, 1998
Memorandum.

First Issue: Submission of Counter-Affidavit

The Sandiganbayan, not the Ombudsman, ordered re-investigation

On the substantive aspect, in the first assignment of error, petitioner imputes grave abuse of discretion on public respondent
Ombudsman for allowing respondent Ilao, Jr. to submit his Counter-Affidavit when the preliminary investigation was already concluded and an
Information filed with the Sandiganbayan which assumed jurisdiction over the criminal case. This contention is utterly erroneous.

The facts clearly show that it was not the Ombudsman through the OSP who allowed respondent Ilao, Jr. to submit his Counter-
Affidavit. It was the Sandiganbayan who granted the prayed for re-investigation and ordered the OSP to conduct the re-investigation through
its August 29, 1997 Order, as follows:

Considering the manifestation of Prosecutor Cicero Jurado, Jr. that accused Toribio E. Ilao, Jr. was not able to file his
counter-affidavit in the preliminary investigation, there appears to be some basis for granting the motion of said
accused for reinvestigation.

WHEREFORE, accused Toribio E. Ilao, Jr. may file his counter-affidavit, with documentary evidence attached, if any,
with the Office of the Special Prosecutor within then (10) days from today. The prosecution is ordered to conduct a
reinvestigationwithin a period of thirty (30) days.[38] (Emphases supplied.)

As it is, public respondent Ombudsman through the OSP did not exercise any discretion in allowing respondent Ilao, Jr. to submit his
Counter-Affidavit. The OSP simply followed the graft courts directive to conduct the re-investigation after the Counter-Affidavit of respondent
Ilao, Jr. was filed. Indeed, petitioner did not contest nor question the August 29, 1997 Order of the graft court. Moreover, petitioner did not file
any reply-affidavit in the re-investigation despite notice.

Re-investigation upon sound discretion of graft court

Furthermore, neither can we fault the graft court in granting the prayed for re-investigation as it can readily be seen from the
antecedent facts that respondent Ilao, Jr. was not given the opportunity to file his Counter-Affidavit. Respondent Ilao, Jr. filed a motion to
dismiss with the Ombudsman but such was not resolved before the Resolutionfinding cause to bring respondents to trialwas issued. In fact,
respondent Ilao, Jr.s motion to dismiss was resolved only through the May 10, 1996 Resolution which recommended the filing of an
Information. Respondent Ilao, Jr.s Motion for Reconsideration and/or Re-investigation was denied and the Information was filed with the graft
court.

Verily, courts are given wide latitude to accord the accused ample opportunity to present controverting evidence even before trial as
demanded by due process. Thus, we held in Villaflor v. Vivar that [a] component part of due process in criminal justice, preliminary
investigation is a statutory and substantive right accorded to the accused before trial. To deny their claim to a preliminary investigation would
be to deprive them of the full measure of their right to due process.[39]

Second Issue: Agrarian Dispute

Anent the second assignment of error, petitioner contends that DARAB Case No. 552-P93 is not an agrarian dispute and therefore
outside the jurisdiction of the DARAB. He maintains that respondent Salenga is not an agricultural tenant but a mere watchman of the fishpond
owned by Paciencia Regala. Moreover, petitioner further argues that Rafael Lopez and Lourdes Lapid, the respondents in the DARAB case, are
not the owners of the fishpond.

Nature of the case determined by allegations in the complaint

This argument is likewise bereft of merit. Indeed, as aptly pointed out by respondents and as borne out by the antecedent facts,
respondent Ilao, Jr. could not have acted otherwise. It is a settled rule that jurisdiction over the subject matter is determined by the allegations
of the complaint.[40] The nature of an action is determined by the material averments in the complaint and the character of the relief
sought,[41] not by the defenses asserted in the answer or motion to dismiss. [42] Given that respondent Salengas complaint and its attachment
clearly spells out the jurisdictional allegations that he is an agricultural tenant in possession of the fishpond and is about to be ejected from it,
clearly, respondent Ilao, Jr. could not be faulted in assuming jurisdiction as said allegations characterize an agricultural dispute. Besides,
whatever defense asserted in an answer or motion to dismiss is not to be considered in resolving the issue on jurisdiction as it cannot be made
dependent upon the allegations of the defendant.

Issuance of TRO upon the sound discretion of hearing officer

As regards the issuance of the TRO, considering the proper assumption of jurisdiction by respondent Ilao, Jr., it can be readily culled
from the antecedent facts that his issuance of the TRO was a proper exercise of discretion. Firstly, the averments with evidence as to the
existence of the need for the issuance of the restraining order were manifest in respondent Salengas Motion to Maintain Status Quo and to
Issue Restraining Order,[43] the attached Police Investigation Report,[44] and Medical Certificate.[45] Secondly, only respondent Salenga attended
the June 22, 1993 hearing despite notice to parties. Hence, Salengas motion was not only unopposed but his evidence adduced ex-parte also
adequately supported the issuance of the restraining order.
Premises considered, respondent Ilao, Jr. has correctly assumed jurisdiction and properly exercised his discretion in issuing the TROas
respondent Ilao, Jr. aptly maintained that giving due course to the complaint and issuing the TRO do not reflect the final determination of the
merits of the case. Indeed, after hearing the case, respondent Ilao, Jr.rendered a Decision on May 29, 1995 dismissing DARAB Case No. 552-P93
for lack of merit.

Court will not review prosecutors determination of probable cause

Finally, we will not delve into the merits of the Ombudsmans reversal of its initial finding of probable cause or cause to bring
respondents to trial. Firstly, petitioner has not shown that the Ombudsman committed grave abuse of discretion in rendering such
reversal.Secondly, it is clear from the records that the initial finding embodied in the May 10, 1996Resolution was arrived at before the filing of
respondent Ilao, Jr.s Counter-Affidavit. Thirdly, it is the responsibility of the public prosecutor, in this case the Ombudsman, to uphold the law,
to prosecute the guilty, and to protect the innocent. Lastly, the function of determining the existence of probable cause is proper for the
Ombudsman in this case and we will not tread on the realm of this executive function to examine and assess evidence supplied by the parties,
which is supposed to be exercised at the start of criminal proceedings. In Perez v. Hagonoy Rural Bank, Inc.,[46] as cited in Longos Rural
Waterworks and Sanitation Association, Inc. v. Hon. Desierto,[47] we had occasion to rule that we cannot pass upon the sufficiency or
insufficiency of evidence to determine the existence of probable cause.[48]

WHEREFORE, the instant petition is DENIED for lack of merit, and the November 26, 1997 Order and the October 30, 1998
Memorandum of the Office of the Special Prosecutor in Criminal Case No. 23661 (OMB-1-94-3425) are hereby AFFIRMED IN TOTO, with costs
against petitioner.

SO ORDERED.

G.R. No. L-21036 June 30, 1977

COMMISSIONER OF CUSTOMS and COLLECTOR OF CUSTOMS FOR MANILA and CONRADO SOLEDAD, EDMUNDO POSTRERO, MAXIMINO
ABRUGENA, GERONIMO DERILO, SANTOS GUINTO and EUSTAQUIO MARANAN, as employees and duly authorized representatives of the
House of Representatives, Congress of the Philippines, petitioners,
vs.
HON. JUDGE GAUDENCIO CLORIBEL, as Presiding Judge of Branch VI, Court of First Instance of Manila, and JOSE and SUSANA
COCHINGYAN, respondents.

Solicitor General Arturo A. Alafriz Assistant Solicitor General Pacifico P. de Castro, Solicitor Alejandro B. Afurong, Special Attorney Jose T. Viduya
and Attorney Ceferino de los Santos for petitioners.

Lino M. Patajo and Ramon Encarnacion, Jr. for private respondents.

BARREDO, J.:
Petition for certiorari and prohibition to annul and set aside several orders of respondent court all of which together in effect: (1) permitted ex-
parte private respondents Jose and Susana Conchingyan to file a third-party complaint for mandamus against petitioners in a special civil. action
for declaratory relief in which said Cochingyans were defendants and which was already tried and almost ready for decision; on the same day,
(2) admitted said third-party complaint and (8) further issued immediately a writ of preliminary mandatory injunction likewise ex-parte; and
which (4) were intended to enforce said writ of injunction.

There was pending before respondent court as Civil Case No. 52318, entitled Macario M. Ofilada vs. Reparations Commission, Jose Cochingyan
and Susana Cochingyan, a special civil action for declaratory relief, wherein Ofilada, as the Second Receiver of the World War II Veterans
Enterprises, Inc. (Warvets) in Civil Case No. 34998, likewise pending in another Branch of the Court of First Instance of Manila, sought a judicial
declaration as to whether, under the allocation granted to said Warvets to purchase reparations goods, the conversion into pesos of the dollar
prices of said goods should be at the rate of two pesos to one dollar or at the prevailing market rate at the time for payment, which would be
much higher. Civil Case No. 34998 was a minority suit filed by certain stockholders of Warvets alleging irregularities in the management and
disposition of the goods being purchased by the corporation by virtue of the aforementioned allocation, hence the need for receivers, of which
there were two, the first being one Ramon E. Saura and the second, Ofilada. In the same Civil Case No. 34998, an order had been issued on
October 9, 1962 ordering Ofilada to deliver to the Cochingyans the second shipment of goods under Warvets' allocation. (The Cochingyans had
a contract with Warvets regarding said goods.) It appears, however, that a motion for the reconsideration of the just mentioned order of
October 9, 1962 had been filed and was still unresolved when on February 9, 1963, the Honorable Judge Francisco Arca (now deceased) issued
the following order:

Considering all the foregoing, the Court is of the opinion that the petition of Atty. Magno to defer action on the motion for
contempt against the intervenors should be granted until after it can be definitely known whether or not the parties can
settle this case amicably. Resolutions on all pending incidents, such as the motion for reconsideration of the order
authorizing the release of the second shipment, and the motions for the release of the third, fourth and fifth shipments, are
also held in abeyance until such time that the Court knows the result of the pending settlement being negotiated among the
parties.

In view of all the above, the Court hereby orders that all incidents pending resolution be held in abeyance until after the
parties have definitely decided whether they are going to settle this case or not. (Emphasis supplied.)

It was shortly after the issuance of this order which in effect freezed the order of release of October 9, 1962, that the incidents subject of the
instant petition took place. On February 13, 1963, the Cochingyans filed in Civil Case No. 52318 then already tried although not yet decided by
Judge Gaudencio Cloribel (now also deceased) who on February 9, 1963 had written the Secretary of Justice asking for permission to go on
leave for a week starting February 12, 1973 but who later changed the starting date to February 13, 1973- an ex-parte motion asking permission
to file a third party complaint which was forthwith granted. On the same day, another motion was filed asking for immediate admission of the
third party complaint, which likewise, was forthwith granted. The third-party complaint included in the prayer, among other reliefs, the
following:

1. Immediately upon the filing of the herein third-party complaint this Honorable Court issue a writ of preliminary
mandatory injunction ex-parte, without notice to the other parties, ordering the third-party defendants Commissioner of
Customs and Collector of Customs and Reparations Commission to release immediately to the third-party plaintiffs the
balance of the 202 packages of rayon clothing forming part of the shipment of consumer goods originally consigned to the
Reparations Commission which arrived in Manila aboard the SS GUILLERMO on September 10, 1962, and which to the
present are still under the custody and possession of the Collector of Customs and Commissioner of Customs, upon the
filing of a bond by the third-party plaintiffs in such amount as may be fixed by this Honorable Court to pay for any damages
that the third-party defendants may suffer should this Honorable Court find that issuance of the preliminary mandatory
injunction is not proper. (Page 87, Record.)

Without loss of time and without hearing the third-party defendants, the following order, was issued on the same day, February 12, 1963:

In a verified third-party complaint for mandamus against the Commissioner of Customs, the Collector of Customs and
others, third party plaintiffs Jose and Susana Cochingyan, doing business under the name and style "The Catholic Church
Mart", alleged that a shipment of 402 packages of rayon cloth which was procured by the Reparations Commission to cover
an allocation granted by the Commission to the World War II Veterans Enterprises (WARVETS for reparation consumer
goods from Japan arrived in Manila on September 10, 1962, consigned to the Reparations Commission; that this Court in
Civil Case No. 34998 entitled "Pilar Normandy et al., vs. Calixto Duque, et al." authorized in its order of October 9, 1962, the
Second Receiver of WARVETS, Mr. Macario M. Ofilada, to release said goods to Jose and Susana Cochingyan; that pursuant
to said order of October 9, 1962, Mr. Ofilada, in his capacity as second receiver of WARVETS, signed a contract of absolute
sale with the Reparations Commission covering the described reparation consumer goods and paid in full the purchase price
of said goods; that after receiving full payment of the purchase price of said goods the Commission instead of releasing the
goods from customs and delivering them requested the Collector of Customs to verify and make an appraisal of the value of
the goods and complying with said request, the Collector of Customs opened and inspected each and all of the bales and
packages compromising said shipment; that after completing said inspection and verification the Collector of Customs
advised the third-party plaintiffs herein that the shipment cannot be released unless the advance sales' tax due on the
goods be first paid; that said Collector of Customs also advised the Reparations Commission that the goods, being
 reparations goods and as such owned by the Philippine Government, cannot be subject to seizure or forfeiture proceedings;
that of the 402 packages the Commissioner and Collector of Customs have released to the said third-party plaintiffs only
200 packages but have retained 202 packages supposedly to secure the payment of advance sales tax assessed on the
shipment as recomputed on the basis of an opinion of the Collector of Internal Revenue; that notwithstanding the fact that
there are no unpaid liens fines, surcharges taxes (except the advance sales tax the payment of which was tendered by third-
party plaintiffs and refused and the amount deposited with the Clerk of this Court) customs duties, and consular fees (of
which the goods are exempt under Section 14 of the Reparations Law) and notwithstanding the fact that there are no
pending proceedings for the seizure and forfeiture of the goods for the same have been imported by the Reparations
Commission which made the proper declaration of entry therefor, third-party defendants Commissioner of Customs and
Collector of Customs have refused without any legal reason or justification whatsoever to release and deliver the balance of
the shipment to the third-party plaintiffs; that the duty of the Collector of Customs and Commissioner of Customs to deliver
or release said goods to third- party plaintiffs is clear as under the circumstances above recited said officials have no
discretion to decide whether or not to release said goods.

Third-party plaintiffs further alleged that the delay in the release of the goods to them has caused and will cause them grave
and irreparable damage and injury; and unless a writ of preliminary injunction were to be issued ex-parte they will suffer
greater and grave damages.

WHEREFORE, finding the petition for the issuance of a writ of preliminary injunction to be meritorious, the same is hereby
granted, and upon the filing by the third-party plaintiffs of a bond in the sum of P5,000.00 to answer for all damages that
the third-party defendants may sustain by reason of this injunction if it be finally decided that the third-party plaintiffs are
not entitled thereto, let a writ of preliminary mandatory injunction be issued ordering the third-party defendants
Commissioner of Customs, Collector of Customs, and the Reparations Commission, their representatives, agents,
subordinates and other persons acting in their behalf to release and deliver immediately the third-party plaintiffs Jose and
Susana Cochingyan, doing business under the name and style 'The Catholic, Church Mart the 202 packages of rayon cloth
presently in their possession, custody and/or control, which goods are part of the shipment of reparation consumer goods
which arrived in Manila aboard the SS Guillermo from Japan consigned to the Reparations Commission.

SO ORDERED.

The writ issued pursuant to this order was served on the Law Division of the Bureau of Customs at 4:55 o'clock in the afternoon of the same
day, February 12, 1963. But compliance therewith did not materialize. A motion to lift the writ was filed, and in the meanwhile, the Chairman of
the Committee on Reparations of the House of Representatives, which was then investigating the implementation of the Warvets allocation,
asserted jurisdiction over the goods by ordering the Collector of Customs to deliver the same to the Sergeant-at-Arms of the House.
Respondent court denied the motion to lift and threatened the agents of the Committee on Reparations, herein co-petitioners, with contempt.
Still, there was no release. The goods were, therefore, still unreleased to the Cochingyans when the petition now at bar was filed.

We deem it unnecessary to dwell on the many interesting issues extensively and brilliantly discussed by distinguished counsel of both
petitioners and respondents. In Our view of this case, the only question We have to resolve in order to dispose of it is whether or not
respondent court gravely abused its discretion in allowing the filing of and in admitting the third-party complaint of the Cochingyans. In the
affirmative, it should follow that the writ of preliminary mandatory injunction in question would have no legal basis, as also all subsequent
orders of respondent court tending to enforce the same. And it is Our considered opinion and so We hold that it was highly irregular and totally
unwarranted for respondent court to have allowed said third-party complaint. The circumstances surrounding the allowance and admission
thereof indicate that respondent court's action was hasty, baseless and arbitrary.

As already stated, Civil Case No. 52318 was a special civil action for declaratory relief under Rule 66 of the Rules of 1940 which were in force
when it was filed. The only purpose thereof was to secure from the court the proper interpretation or construction of the reparations contract
between the Reparations Commission and Warvets in regard to the rate of conversion of the dollar to the peso of the purchase price Warvets
had to pay No positive or affirmative, much less any material relief, was 'using sought therein. Indeed, it is in the very nature of a 'declaratory
relief special civil action that "the Relief is confined to a case of actual controversy within the Court's jurisdiction, without the need of
injunction, execution or other relief beyond the adjudication of the legal rights which are the subject of controversy between the parties." ( 3
Moran, Comments on the Rules of Court, p. 146, 1970 ed.) In other words, the plaintiff Ofilada in said case did not, as he could not pray for
anything to be award or granted to him. Now, as regards the nature and purpose of a third-party complaint, Section 1 of Rule 12 of the Rules of
1940 provided:

SECTION 1. Claim against one not a party to an action. When a defendant claims to be entitled against a person not a
party to the action, hereinafter called the third-party defendant, to contribution, indemnity, subrogation or any other relief,
in respect of the plaintiff' claim, he may file, with leave of court, against such person a pleading which shall state the nature
of his claim and shall be called the third-party complaint.

It is obvious from this definition that a third-party complaint is inconceivable when the main case is one for nothing more' than a declaratory
relief. In a third-party complaint, the defendant or third-party plaintiff is supposed to seek contribution, indemnity, subrogation or any other
relief from the third-party defendant is respect to the claim of the plaintiff against him. In the case at bar, what possible relief could the
Cochingyans, as defendants in Civil Case No. 52318, for declaratory relief, have asked for by way of contribution, indemnity, subrogation or any
other relief from those they have named third-party defendants, the Collector of Customs, Commissioner of Customs, Reparations Commission,
their co-defendant and Macario Ofilada, the very plaintiff, in respect to the construction or interpretation that Ofilada was asking the court to
make? At the risk of quoting again part thereof, the complete prayer in the third-party complaint in question reads thus:

1. Immediately upon the filing of the herein third-party complaint this Honorable Court issue a writ of preliminary
mandatory injunction ex-parte, without notice to the other parties, ordering the third-party defendants Commissioner of
Customs and Collector of Customs and Reparations Commission to release immediately the third-party plaintiffs the balance
of the 202 packages of rayon clothing forming part of the shipment of consumer goods originally consigned to the
Reparations Commission which arrived in Manila aboard the SS GUILLERMO on September 10, 1962, and which to the
present are still under the custody and possession of the collector of Customs and Commissioner of Customs upon the filing
of a bond by the third-party plaintiffs in such amount as may be fixed by this Honorable Court to pay for any damages that
the third-party defendants may suffer should this Honorable Court find that issuance of the preliminary mandatory
injunction is not proper.

2. That after hearing on the merits this Honorable Court confirm and make final its order of mandatory preliminary
injunction.

The third-party plaintiffs further pray for such other relief as may be just and equitable under the premises. (Pp. 87-88,
Record.)

According to Moran:

Tests of Propriety.The test to determine whether the claim for indemnity in a third-party complaint in respect to plaintiff's
claim is proper, are (a) whether it arises out of the same transaction on which plaintiff's claim is based; or whether the
third-party's claim, although arising out of another or different contract or transaction, is connected with plaintiff's claim;
(U.S. Commercial Co. v. Guevara, et al., 48 O.G. 612.) (b) whether the third-party defendant would be liable to the plaintiff
or to the defendant for all or part of the plaintiffs claim against the original defendant, although the third- party defendant's
liability arises out of another transaction; or (e) whether the third-party defendant may assert any defense which the third-
party plaintiff has, or may have, against plaintiff's claim. (Capayas v. Court of First Instance, 77 Phil. 181.) Failing these tests,
the complaint is improper. ... (1 Moran, Comments on the Rules of Court, p. 281, 1970 ed.)

It is thus too evident to call for more elaborate discussion that respondent court s action in allowing the filing of Cochingyans' third-party
complaint completely disregarded, due presumably to ignorance thereof, the basic concepts of the remedies of declaratory relief and third-
party complaint.

Moreover, respondent court also paid no heed to the requirement of Section 2 of Rule 12 of the 1940 Rules to the effect that: "Before the
service of his answer a defendant may move ex parte or, after the service of his answer, on notice to the plaintiff, for leave as third- party
plaintiff to file a complaint against a third-party defendant." In the present case, it is a fact that the motions of the Cochingyans for leave to file
their third-party complaint and for the admission thereof were granted ex parte notwithstanding that the trial of the case had already been
terminated.

IN CONSEQUENCE OF THE FOREGOING, We have no other alternative than to declare as We do declare null and void all the orders herein
complained of. 1 They are all hereby set aside and respondent court is enjoined to desist from carrying any of them into effect, Costs against
respondents Jose and Susana Cochingyan.

G.R. No. 112576 October 26, 1994

(CA-GR CV No. 26571)

METROPOLITAN BANK AND TRUST COMPANY, petitioner,

vs.
THE HON. COURT OF APPEALS, RURAL BANK OF PADRE GARCIA, INC. and ISABEL R. KATIGBAK, respondents.

Makalintal, Barot, Torres & Ibarra for petitioner.

Fornier, Lava & Fornier for private respondents.

ROMERO, J.:
This petition for certiorari seeks to annul the decision of respondent Court of Appeals dated October 29, 1992 in CA GR CV No. 26571
affirming the decision of the Regional Trial Court of Lipa, Batangas Branch XIII for damages, and the Resolution dated November 11, 1993
denying petitioner's motion for reconsideration of the aforesaid decision.

The case emanated from a dispute between the Rural Bank of Padre Garcia, Inc. (RBPG) and Metropolitan Bank and Trust Company (MBTC)
relative to a credit memorandum dated April 5, 1982 from the Central Bank in the amount of P304,000.00 in favor of RBPG.

The records show that Isabel Katigbak is the president and director of RBPG, owning 65% of the shares thereof. Metropolitan Bank and Trust
Company (MBTC) is the rural bank's depository bank, where Katigbak maintains current accounts with MBTC's main office in Makati as well as
its Lipa City branch.

On April 6, 1982, MBTC received from the Central Bank a credit memo dated April 5, 1982 that its demand deposit account was credited with
P304,000.00 for the account of RBPG, representing loans granted by the Central Bank to RBPG. On the basis of said credit memo, Isabel
Katigbak issued several checks against its account with MBTC in the total amount of P300,000.00, two (2) of which (Metrobank Check Nos. 0069
and 0070) were payable to Dr. Felipe C. Roque and Mrs. Eliza Roque for P25,000.00 each. Said checks issued to Dr. and Mrs. Roque were
deposited by the Roques with the Philippine Banking Corporation, Novaliches Branch in Quezon City. When these checks were forwarded to
MBTC on April 12, 1982 for payment (six (6) days from receipt of the Credit Memo), the checks were returned by MBTC with the annotations
"DAIF TNC" (Drawn Against Insufficient Funds Try Next Clearing) so they were redeposited on April 14, 1982. These
were however again dishonored and returned unpaid for the following reason: "DAIF TNC NO ADVICE FROM CB."

After the second dishonor of the two (2) checks, Dr. Felipe Roque, a member of the Board of Directors of Philippine Banking Corporation,
allegedly went to the Office of Antonio Katigbak, an officer of RBPG, chiding him for the bouncing checks. In order to appease the doctor, RBPG
paid Dr. Roque P50,000.00 in cash to replace the aforesaid checks.

On April 13, 1982, Isabel Katigbak who was in Hongkong on a

business-vacation trip together with her sons Alfredo and Antonio, both of whom were also officers of RBPG, received overseas phone calls
from Mrs. Maris Katigbak-San Juan at her residence in San Lorenzo Village, Makati, informing Isabel Katigbak that a certain Mr. Rizal Dungo,
Assistant Cashier of MBTC insisted on talking to her (Mrs. San Juan), berating her about the checks which bounced, saying "Nag-issue kayo ng
tseke, wala namang pondo," even if it was explained to Mr. Dungo that Mrs. San Juan was not in any way connected with RBPG.

Mrs. Katigbak testified that she informed Mrs. San Juan to request defendant MBTC to check and verify the records regarding the
aforementioned Central Bank credit memo for P304,000.00 in favor of RBPG as she was certain that the checks were sufficiently covered by the
CB credit memo as early as April 6, 1994, but the following day, Mrs. San Juan received another insulting call from Mr. Dungo ("Bakit kayo nag-
issue ng tseke na wala namang pondo, Three Hundred Thousand na.")1 When Mrs. San Juan explained to him the need to verify the records
regarding the Central Bank memo, he merely brushed it aside, telling her sarcastically that he was very sure that no such credit memo existed.
Mrs. San Juan was constrained to place another long distance call to Mrs. Katigbak in Hongkong that evening. Tense and angered, the Katigbaks
had to cut short their Hongkong stay with their respective families and flew back to Manila, catching the first available flight on April 15, 1982.

Immediately upon arrival, Mrs. Katigbak called up MBTC, through a

Mr. Cochico, for a re-examination of the records of MBTC regarding the Central Bank credit memo dated April 5, 1982 for P304,000.00. Mr.
Dungo, to whom Cochico handed over the phone, allegedly arrogantly said: "Bakit kayo magagalit, wala naman kayong pondo?" These remarks
allegedly so shocked Mrs. Katigbak that her blood pressure rose to a dangerous level and she had to undergo medical treatment at the Makati
Medical Center for two (2) days.

Metrobank not only dishonored the checks issued by RBPG, the latter was issued four (4) debit memos representing service and penalty
charges for the returned checks.

RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC of Lipa, Batangas Branch XIII against the Metropolitan Bank and Trust
Company for damages on April 26, 1983.

The ultimate facts as alleged by the defendant MBTC in its answer are as follows: that on April 6, 1982, its messenger, Elizer Gonzales, received
from the Central Bank several credit advices on rural bank accounts, which included that of plaintiff RBPG in the amount of P304,000.00; that
due to the inadvertence of said messenger, the credit advice issued in favor of plaintiff RBPG was not delivered to the department in charge of
processing the same; consequently, when MBTC received from the clearing department the checks in question, the stated balance in RBPG's
account was only P5,498.58 which excluded the unprocessed credit advice of P304,000.00 resulting in the dishonor of the aforementioned
checks; that as regards the P304,000.00 which was
a re-discounting loan from the Central Bank, the same was credited only on April 15, 1982 after the Central Bank finally confirmed that a credit
advice was indeed issued in favor of RBPG; that after the confirmation, MBTC credited the amount of the credit advice to plaintiff RBPG's
account and thru its officers, allegedly conveyed personally on two occasions its apologies to plaintiffs to show that the bank and its officers
acted with no deliberate intent on their part to cause injury or damage to plaintiffs, explaining the circumstances that gave rise to the bouncing
checks situation. Metrobank's negligence arising from their messenger's misrouting of the credit advice resulting in the return of the checks in
question, despite daily reporting of credit memos and a corresponding daily radio message confirmation, (as shown by Exhibit "I," the
Investigation Report of the bank's Mr. Valentino Elevado) and Mr. Dungo's improper handling of clients led to the messenger's dismissal from
service and Mr. Dungo's transfer from Metro Manila to Mindoro.

The threshold issue was whether or not, under the facts and circumstances of the case, plaintiff may be allowed to recover actual, moral and
exemplary damages, including attorney's fees, litigation expenses and the costs of the suit. On August 25, 1989, the RTC of Lipa City rendered a
decision2 in favor of plaintiffs and against the defendant MBTC, ordering the latter to:

1. pay plaintiff Isabel Katigbak P50,000.00 as temperate damages;

2. pay P500,000.00 as moral damages, considering that RBPG's credit standing and business reputation were damaged by
the wrongful acts of defendant's employees, coupled with the rude treatment received by Isabel Katigbak at the hands of
Mr. Dungo, all of which impelled her to seek medical treatment;

3. pay P100,000.00 as attorney's fees and litigation expenses; and.

4. pay the costs of suit.

The lower court did not award actual damages in the amount of P50,000.00 representing the amount of the two (2) checks payable to Dr. Felipe
C. Roque and Mrs. Elisa Roque for P25,000 each, as it found no showing that Mr. Antonio Katigbak who allegedly paid the amount was actually
reimbursed by plaintiff RBPG. Moreover, the court held that no actual damages could have been suffered by plaintiff RBPG because on April 15,
1982, the Central Bank credit advice in the amount of P304,000 which included the two (2) checks issued to the Roque spouses in the sum of
P50,000.00 were already credited to the account of RBPG and the service, as well as penalty charges, were all reversed.

MBTC appealed from the decision to the Court of Appeals in CA GR CV No. 26571, alleging that the trial court erred in awarding temperate
and moral damages, as well as attorney's fees, plus costs and expenses of litigation without factual or legal basis therefor.

On October 29, 1992, the Court of Appeals rendered a decision3 affirming that of the trial court, except for the deletion of the award of
temperate damages, the reduction of moral damages from P500,000.00 to P50,000.00 in favor of RBPG and P100,000.00 for Isabel Katigbak and
P50,000.00, as attorney's fees. Plaintiffs-appellees filed a motion for reconsideration of the decision, questioning the deletion of the award of
temperate damages and the reduction of the award of moral damages and attorney's fees. The motion was denied.

MBTC filed this petition, presenting the following issues for resolution:

1. whether or not private respondents RBPG and Isabel Rodriguez are legally entitled to moral damages and attorney's fees,
and

2. assuming that they are so entitled, whether or not the amounts awarded are excessive and unconscionable.

The petition is devoid of merit.

The case at bench was instituted to seek damages caused by the dishonor through negligence of respondent bank's checks which were actually
sufficiently funded, and the insults from petitioner bank's officer directed against private respondent Isabel R. Katigbak. The presence of malice
and the evidence of besmirched reputation or loss of credit and business standing, as well as a reappraisal of its probative value, involves
factual matters which, having been already thoroughly discussed and analyzed in the courts below, are no longer reviewable here. While this
rule admits of exceptions, this case does not fall under any of these.

There is no merit in petitioner's argument that it should not be considered negligent, much less be held liable for damages on account of the
inadvertence of its bank employee as Article 1173 of the Civil Code only requires it to exercise the diligence of a good pater familias.

As borne out by the records, the dishonoring of the respondent's checks committed through negligence by the petitioner bank on April 6, 1982
was rectified only on April 15, 1992 or nine (9) days after receipt of the credit memo. Clearly, petitioner bank was remiss in its duty and
obligation to treat private respondent's account with the highest degree of care, considering the fiduciary nature of their relationship. The bank
is under obligation to treat the accounts of its depositors with meticulous care, whether such account consists only of a few hundred pesos or
of millions. It must bear the blame for failing to discover the mistake of its employee despite the established procedure requiring bank papers
to pass through bank personnel whose duty it is to check and countercheck them for possible errors. 4 Responsibility arising from negligence in
the performance of every kind of obligation is demandable.5 While the bank's negligence may not have been attended with malice and bad
faith, nevertheless, it caused serious anxiety, embarrassment and humiliation to private respondents for which they are entitled to recover
reasonable moral damages.6

As the records bear out, insult was added to injury by petitioner bank's issuance of debit memoranda representing service and penalty charges
for the returned checks, not to mention the insulting remarks from its Assistant Cashier.
In the case of Leopoldo Araneta v. Bank of America,7 we held that:

The financial credit of a businessman is a prized and valuable asset, it being a significant part of the foundation of his
business. Any adverse reflection thereon constitutes some financial loss to him. As stated in the case of Atlanta National
Bank vs. Davis, 96 Ga 334, 23 SE 190, citing 2 Morse Banks, Sec. 458, "it can hardly be possible that a customer's check can
be wrongfully refused payment without some impeachment of his credit, which must in fact be an actual injury, though he
cannot, from the nature of the case, furnish independent, distinct proof thereof".

It was established that when Mrs. Katigbak learned that her checks were not being honored and Mr. Dungo repeatedly made the insulting
phone calls, her wounded feelings and the mental anguish suffered by her caused her blood pressure to rise beyond normal limits,
necessitating medical attendance for two (2) days at a hospital.

The damage to private respondents' reputation and social standing entitles them to moral damages. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar
injury.8 Temperate or moderate damages which are more than nominal but less than compensatory damages, may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with
certainty.9 Temperate damages may be allowed in cases where from the nature of the case, definite proof of pecuniary loss cannot be adduced,
although the court is convinced that there has been such loss. The appellate court, however, justified its deletion when MBTC reasoned out that
the amount of P50,000.00 is not part of the relief prayed for in the complaint, aside from the fact that the amount allegedly suffered by Mrs.
Katigbak is susceptible of proof. 10

Moral and temperate damages which are not susceptible of pecuniary estimation are not awarded to penalize the petitioner but to
compensate the respondents for injuries suffered as a result of the former's fault and negligence, taking into account the latter's credit and
social standing in the banking community, particularly since this is the very first time such humiliation has befallen private respondents. The
amount of such losses need not be established with exactitude, precisely due to their nature. 11

The carelessness of petitioner bank, aggravated by the lack of promptness in repairing the error and the arrogant attitude of the bank officer
handling the matter, justifies the grant of moral damages, which are clearly not excessive and unconscionable.

Moreover, considering the nature and extent of the services rendered by private respondent's counsel, both in the trial and appellate courts,
the Court deems it just and equitable that attorney's fees in the amount of P50,000.00 be awarded.

WHEREFORE, the decision of respondent Court of Appeals is AFFIRMED in all respects.

SO ORDERED.

G.R. No. 34642 September 24, 1931

FABIOLA SEVERINO, accompanied by her husband RICARDO VERGARA, plaintiffs-appellees,

vs.
GUILLERMO SEVERINO, ET AL., defendants.
ENRIQUE ECHAUS, appellant.

R. Nepomuceno for appellant.

Jacinto E. Evidente for appellees.

STREET, J.:

This action was instituted in the Court of First Instance of the Province of Iloilo by Fabiola Severino, with whom is joined her husband Ricardo
Vergara, for the purpose of recovering the sum of P20,000 from Guillermo Severino and Enrique Echaus, the latter in the character of guarantor
for the former. Upon hearing he cause the trial court gave judgment in favor of the plaintiffs to recover the sum of P20,000 with lawful from
November 15, 1929, the date of the filing of the complaint, with costs. But it was declared that execution of this judgment should issue first
against the property of Guillermo Severino, and if no property should be found belonging to said defendant sufficient to satisfy the judgment in
whole or in part, execution for the remainder should be issued against the property of Enrique Echaus as guarantor. From this judgment the
defendant Echaus appealed, but his principal, Guillermo Severino, did not.

The plaintiff Fabiola Severino is the recognized natural daughter of Melecio Severino, deceased, former resident of Occidental Negros. Upon the
death of Melecio Severino a number of years ago, he left considerable property and litigation ensued between his widow, Felicitas Villanueva,
and Fabiola Severino, on the one part, and other heirs of the deceased on the other part. In order to make an end of this litigation a
compromise was effected by which Guillermo Severino, a son of Melecio Severino, took over the property pertaining to the estate of his father
at the same time agreeing to pay P100,000 to Felicitas Villanueva and Fabiola Severino. This sum of money was made payable, first, P40,000 in
cash upon the execution of the document of compromise, and the balance in three several payments of P20,000 at the end of one year; two
years, and three years respectively. To this contract the appellant Enrique Echaus affixed his name as guarantor. The first payment of P40,000
was made on July 11, 1924, the date when the contract of compromise was executed; and of this amount the plaintiff Fabiola Severino received
the sum of P10,000. Of the remaining P60,000, all as yet unpaid, Fabiola Severino is entitled to the sum of P20,000.

It appears that at the time of the compromise agreement above-mentioned was executed Fabiola Severino had not yet been judicially
recognized as the natural daughter of Melecio Severino, and it was stipulated that the last P20,000 corresponding to Fabiola and the last P5,000
corresponding to Felicitas Villanueva should retained on deposit until the definite status of Fabiola Severino as natural daughter of Melecio
Severino should be established. The judicial decree to this effect was entered in the Court of First Instance of Occidental Negros on June 16,
1925, and as the money which was contemplated to be held in suspense has never in fact been paid to the parties entitled thereto, it results
that the point respecting the deposit referred to has ceased to be of moment.

The proof shows that the money claimed in this action has never been paid and is still owing to the plaintiff; and the only defense worth noting
in this decision is the assertion on the part of Enrique Echaus that he received nothing for affixing his signature as guarantor to the contract
which is the subject of suit and that in effect the contract was lacking in consideration as to him.

The point is not well taken. A guarantor or surety is bound by the same consideration that makes the contract effective between the principal
parties thereto. (Pyle vs. Johnson, 9 Phil., 249.) The compromise and dismissal of a lawsuit is recognized in law as a valuable consideration; and
the dismissal of the action which Felicitas Villanueva and Fabiola Severino had instituted against Guillermo Severino was an adequate
consideration to support the promise on the part of Guillermo Severino to pay the sum of money stipulated in the contract which is the subject
of this action. The promise of the appellant Echaus as guarantor therefore binding. It is never necessary that the guarantor or surety should
receive any part of the benefit, if such there be, accruing to his principal. But the true consideration of this contract was the detriment suffered
by the plaintiffs in the former action in dismissing that proceeding, and it is immaterial that no benefit may have accrued either to the principal
or his guarantor.

The judgment appealed from is in all respects correct, and the same will be affirmed, with costs against the appellant. So ordered.