LAW ON AGENCY

Art. 1868. Concept and Definition of Agency

1. RALLOS v. FELIX GO CHAN & SONS REALTY CORP

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's undivided share in a
parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of the went to court to have the
sale declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals
uphold the validity of the sale and the complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of land known
as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters
executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March 3, 1955,
Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix
Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was
cancelled, and a new transfer certificate of Title No. 12989 was issued in the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the
Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and
said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and
another title be issued in the names of the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be
indemnified by way of attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint was amended twice; defendant
Corporation's Answer contained a crossclaim against its co-defendant, Simon Rallos while the latter filed third-party complaint against his sister,
Gerundia Rallos While the case was pending in the trial court, both Simon and his sister Gerundia died and they were substituted by the respective
administrators of their estates.

After trial the court a quo rendered judgment with the following dispositive portion:

A. On Plaintiffs Complaint —

(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso share of Concepcion Rallos in the property in question, — Lot
5983 of the Cadastral Survey of Cebu — is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No. 12989 covering Lot 5983 and to issue in lieu thereof another in
the names of FELIX GO CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos in the proportion of one-half (1/2) share each
pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to plaintiff in concept of reasonable attorney's fees
the sum of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly and severally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to defendant Felix Co Chan & Sons Realty
Corporation the sum of P5,343.45, representing the price of one-half (1/2) share of lot 5983;

(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay in concept of reasonable attorney's fees to Felix Go
Chan & Sons Realty Corporation the sum of P500.00.

C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos, against Josefina Rallos special administratrix of
the Estate of Gerundia Rallos:

(1) Dismissing the third-party complaint without prejudice to filing either a complaint against the regular administrator of the Estate of Gerundia Rallos or
a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing judgment insofar as it set aside the sale of
the one-half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the
appellant corporation sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved for a reconsider of the decision but the same
was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly to the instant case, We have the query.
is the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the agent after the death of his principal? What is
the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and in behalf of the latter? Is the fact of
knowledge of the death of the principal a material factor in determining the legal effect of an act performed after such death?

Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him. 3 A contract entered into in the name of another by one who has no authority or the legal representation or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party.4 Article 1403 (1) of the same Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who hi - been given no authority or legal representation or who has acted beyond his
powers; ...

Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are:
(1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third
person; (3) the agents acts as a representative and not for himself, and (4) the agent acts within the scope of his authority. 5

Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his
principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts
himself". 6

2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause — death of the principal Paragraph 3 of Art. 1919 of
the Civil Code which was taken from Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

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3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the principal or the agent. This is
the law in this jurisdiction.8

Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in the juridical basis of agency which
is representation Them being an in. integration of the personality of the principal integration that of the agent it is not possible for the representation to
continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a necessary cause
for its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon the death of either without necessity for
the heirs of the fact to notify the agent of the fact of death of the former. 9

The same rule prevails at common law — the death of the principal effects instantaneous and absolute revocation of the authority of the agent unless
the Power be coupled with an interest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled that a power without an interest
confer. red upon an agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding on the heirs or
representatives of the deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the agency, subject to any exception, and if
so, is the instant case within that exception? That is the determinative point in issue in this litigation. It is the contention of respondent corporation which
was sustained by respondent court that notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in
selling the former's sham in the property is valid and enforceable inasmuch as the corporation acted in good faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.

ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the
latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and
shall be fully effective with respect to third persons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective only under two
conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who contracted with the agent
himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said
agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the latter's share in Lot
No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the trial
court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of respondent appellate court
when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the sale of the lot in the name of both his
sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil Code is
inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not enough that
the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931 of the new
Civil Code sustained the validity , of a sale made after the death of the principal because it was not shown that the agent knew of his principal's
demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the record, that the agent Luy
Kim Guan was aware of the death of his principal at the time he sold the property. The death 6f the principal does not render the act of an agent
unenforceable, where the latter had no knowledge of such extinguishment of the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out that there is no provision in the Code which
provides that whatever is done by an agent having knowledge of the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the principal. 16

We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated in Article 1919 that the death of the
principal extinguishes the agency. That being the general rule it follows a fortiorithat any act of an agent after the death of his principal is void ab
initio unless the same fags under the exception provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the
general rule, is to be strictly construed, it is not to be given an interpretation or application beyond the clear import of its terms for otherwise the courts
will be involved in a process of legislation outside of their judicial function.

5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the power of attorney which was duly registered on
the original certificate of title recorded in the Register of Deeds of the province of Cebu, that no notice of the death was aver annotated on said certificate
of title by the heirs of the principal and accordingly they must suffer the consequences of such omission. 17

To support such argument reference is made to a portion in Manresa's Commentaries which We quote:

If the agency has been granted for the purpose of contracting with certain persons, the revocation must be made known to them. But if the agency is
general iii nature, without reference to particular person with whom the agent is to contract, it is sufficient that the principal exercise due diligence to
make the revocation of the agency publicity known.

In case of a general power which does not specify the persons to whom represents' on should be made, it is the general opinion that all acts, executed
with third persons who contracted in good faith, Without knowledge of the revocation, are valid. In such case, the principal may exercise his right against
the agent, who, knowing of the revocation, continued to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16,
rollo)

The above discourse however, treats of revocation by an act of the principal as a mode of terminating an agency which is to be distinguished from
revocation by operation of law such as death of the principal which obtains in this case. On page six of this Opinion We stressed that by reason of the
very nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal or agent. Although a
revocation of a power of attorney to be effective must be communicated to the parties concerned, 18 yet a revocation by operation of law, such as by
death of the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an execution of
the principal's continuing will. 19 With death, the principal's will ceases or is the of authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What the Code provides in Article 1932 is that, if the
agent die his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the
latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the property in the Office of the Register of
Deeds, is not fatal to the cause of the estate of the principal

6. Holding that the good faith of a third person in said with an agent affords the former sufficient protection, respondent court drew a "parallel" between
the instant case and that of an innocent purchaser for value of a land, stating that if a person purchases a registered land from one who acquired it in
bad faith — even to the extent of foregoing or falsifying the deed of sale in his favor — the registered owner has no recourse against such innocent
purchaser for value but only against the forger. 20

To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from
the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner of lands with Agustin Nano. The latter had a power
of attorney supposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power was registered in the Office of the
Register of Deeds. When the lawyer-husband of Angela Blondeau went to that Office, he found all in order including the power of attorney. But Vallejo
denied having executed the power The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the decision of the court a quo, the
Supreme Court, quoting the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of the defendant- appellee must be overruled. Agustin Nano had possession of Jose Vallejo's title
papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been perpetuated. When Fernando de
la Canters, a member of the Philippine Bar and the husband of Angela Blondeau, the principal plaintiff, searched the registration record, he found them
in due form including the power of attorney of Vallajo in favor of Nano. If this had not been so and if thereafter the proper notation of the encumbrance
could not have been made, Angela Blondeau would not have sent P12,000.00 to the defendant Vallejo.' An executed transfer of registered lands placed
by the registered owner thereof in the hands of another operates as a representation to a third party that the holder of the transfer is authorized to deal
with the land.

As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of
coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted with one who admittedly was an agent of
his sister and who sold the property of the latter after her death with full knowledge of such death. The situation is expressly covered by a provision of
law on agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in the same manner that the
ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary instrument is presented for registration shall be conclusive authority from the
registered owner to the register of deeds to enter a new certificate or to make a memorandum of registration in accordance with such instruments, and
the new certificate or memorandum Shall be binding upon the registered owner and upon all persons claiming under him in favor of every purchaser for
value and in good faith: Provided however, That in all cases of registration provided by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the right, of any innocent holder for value of a certificate of title. ... (Act No. 496 as
amended)

7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of the Supreme Court of Pennsylvania
in Cassiday v. McKenzie wherein payments made to an agent after the death of the principal were held to be "good", "the parties being ignorant of the
death". Let us take note that the Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the death of the
principal. We quote from that decision the following:

... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the death is a good payment. in addition to the case in
Campbell before cited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment after the death of principal is
not good. Thus, a payment of sailor's wages to a person having a power of attorney to receive them, has been held void when the principal was dead at
the time of the payment. If, by this case, it is meant merely to decide the general proposition that by operation of law the death of the principal is a
revocation of the powers of the attorney, no objection can be taken to it. But if it intended to say that his principle applies where there was 110 notice of
death, or opportunity of twice I must be permitted to dissent from it.

... That a payment may be good today, or bad tomorrow, from the accident circumstance of the death of the principal, which he did not know, and which
by no possibility could he know? It would be unjust to the agent and unjust to the debtor. In the civil law, the acts of the agent, done bona fide in
ignorance of the death of his principal are held valid and binding upon the heirs of the latter. The same rule holds in the Scottish law, and I cannot
believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be made that the above represents the minority
view in American jurisprudence. Thus in Clayton v. Merrett, the Court said.—

There are several cases which seem to hold that although, as a general principle, death revokes an agency and renders null every act of the agent
thereafter performed, yet that where a payment has been made in ignorance of the death, such payment will be good. The leading case so holding is
that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly announced. It is referred to, and
seems to have been followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter case it appeared that the estate of the deceased
principal had received the benefit of the money paid, and therefore the representative of the estate might well have been held to be estopped from suing
for it again. . . . These cases, in so far, at least, as they announce the doctrine under discussion, are exceptional. The Pennsylvania
Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in announcing the principle in its
broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far as it related to the particular facts, was a
mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his views on the general subject, than as the
adjudication of the Court upon the point in question. But accordingly all power weight to this opinion, as the judgment of a of great respectability, it stands
alone among common law authorities and is opposed by an array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for the simple
reason that our statute, the Civil Code, expressly provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency,
to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) that the act of the agent was executed without knowledge of the death of the
principal and the third person who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday,
and again We stress the indispensable requirement that the agent acted without knowledge or notice of the death of the principal In the case before Us
the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the agent's act is unenforceable against the
estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm en toto the judgment rendered by then Hon.
Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all
instances.
So Ordered.

2. ORIENT AIR SERVICES & HOTEL REPRESENTATIVES v. CA

This case is a consolidation of two (2) petitions for review on certiorari of a decision1 of the Court of Appeals in CA-G.R. No. CV-04294, entitled
"American Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc." which affirmed, with modification, the decision 2 of the Regional Trial
Court of Manila, Branch IV, which dismissed the complaint and granted therein defendant's counterclaim for agent's overriding commission and
damages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering passenger and air cargo transportation in the
Philippines, and Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air), entered into a General Sales Agency Agreement
(hereinafter referred to as the Agreement), whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for
the sale of air passenger transportation. Pertinent provisions of the agreement are reproduced, to wit:

WITNESSETH

In consideration of the mutual convenants herein contained, the parties hereto agree as follows:

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines, including any United States military
installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for the sale of air passenger transportation. The services to
be performed by Orient Air Services shall include:

(a) soliciting and promoting passenger traffic for the services of American and, if necessary, employing staff competent and sufficient to do so;

(b) providing and maintaining a suitable area in its place of business to be used exclusively for the transaction of the business of American;

(c) arranging for distribution of American's timetables, tariffs and promotional material to sales agents and the general public in the assigned territory;

(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air Services with the prior written consent of
American) in the assigned territory including if required by American the control of remittances and commissions retained; and

(e) holding out a passenger reservation facility to sales agents and the general public in the assigned territory.

In connection with scheduled or non-scheduled air passenger transportation within the United States, neither Orient Air Services nor its sub-agents will
perform services for any other air carrier similar to those to be performed hereunder for American without the prior written consent of American. Subject
to periodic instructions and continued consent from American, Orient Air Services may sell air passenger transportation to be performed within the
United States by other scheduled air carriers provided American does not provide substantially equivalent schedules between the points involved.

xxx xxx xxx

4. Remittances

Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less commissions to which Orient Air Services is
entitled hereunder, not less frequently than semi-monthly, on the 15th and last days of each month for sales made during the preceding half month.

All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on exchange orders, less applicable
commissions to which Orient Air Services is entitled hereunder, are the property of American and shall be held in trust by Orient Air Services until
satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its sub-agents as follows:

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for all sales of transportation by Orient Air Services or its sub-agents over American's
services and any connecting through air transportation, when made on American's ticket stock, equal to the following percentages of the tariff fares and
charges:

(i) For transportation solely between points within the United States and between such points and Canada: 7% or such other rate(s) as may be
prescribed by the Air Traffic Conference of America.
(ii) For transportation included in a through ticket covering transportation between points other than those described above: 8% or such other rate(s) as
may be prescribed by the International Air Transport Association.

(b) Overriding commission

In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of the tariff fares and charges for all sales of
transportation over American's service by Orient Air Service or its sub-agents.

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10. Default

If Orient Air Services shall at any time default in observing or performing any of the provisions of this Agreement or shall become bankrupt or make any
assignment for the benefit of or enter into any agreement or promise with its creditors or go into liquidation, or suffer any of its goods to be taken in
execution, or if it ceases to be in business, this Agreement may, at the option of American, be terminated forthwith and American may, without prejudice
to any of its rights under this Agreement, take possession of any ticket forms, exchange orders, traffic material or other property or funds belonging to
American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or resolutions of the International Air Transport Association and the Air Traffic
Conference of America, and such rules or resolutions shall control in the event of any conflict with the provisions hereof.

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13. Termination

American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to transfer to the United States the funds payable
by Orient Air Services to American under this Agreement. Either party may terminate the Agreement without cause by giving the other 30 days' notice by
letter, telegram or cable.

xxx xxx x x x3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the
months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold
originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof (Termination). Four (4) days later, or on 15 May
1981, American Air instituted suit against Orient Air with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and Restraining Order 4 averring the aforesaid basis for the termination of the Agreement as well as therein
defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available funds in the possession of the
defendant, . . . to the damage and prejudice of plaintiff." 5

In its Answer6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the complaint with respect to plaintiff's
entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement, plaintiff in fact still
owed Orient Air a balance in unpaid overriding commissions. Further, the defendant contended that the actions taken by American Air in the course of
terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned
prejudice to its business interests.

Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its favor, rendering a decision dated 16
July 1984, the dispositive portion of which reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of defendant and against plaintiff dismissing the complaint
and holding the termination made by the latter as affecting the GSA agreement illegal and improper and order the plaintiff to reinstate defendant as its
general sales agent for passenger tranportation in the Philippines in accordance with said GSA agreement; plaintiff is ordered to pay defendant the
balance of the overriding commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of
US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month commencing from January 1, 1981
until such reinstatement or said amounts in its Philippine peso equivalent legally prevailing at the time of payment plus legal interest to commence from
the filing of the counterclaim up to the time of payment. Further, plaintiff is directed to pay defendant the amount of One Million Five Hundred Thousand
(Pl,500,000.00) pesos as and for exemplary damages; and the amount of Three Hundred Thousand (P300,000.00) pesos as and by way of attorney's
fees.

Costs against plaintiff. 7

On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed the findings of the court a
quo on their material points but with some modifications with respect to the monetary awards granted. The dispositive portion of the appellate court's
decision is as follows:

WHEREFORE, with the following modifications —

1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's overriding commission covering the period March
16, 1977 to December 31, 1980, or its Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the
date the counterclaim was filed;

2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per month starting January 1, 1981 until date of
termination, May 9, 1981 or its Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the date
the counterclaim was filed

3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer with counterclaim was filed, until full payment;

4) American is ordered to pay Orient exemplary damages of P200,000.00;

5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.

the rest of the appealed decision is affirmed.

Costs against American.8

American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and arguing for its reversal. The appellate
court's decision was also the subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with
respect to the monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied American Air's motion and with respect
to that of Orient Air, ruled thus:

Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's award of exemplary damages and attorney's fees,
but granted insofar as the rate of exchange is concerned. The decision of January 27, 1986 is modified in paragraphs (1) and (2) of the dispositive part
so that the payment of the sums mentioned therein shall be at their Philippine peso equivalent in accordance with the official rate of exchange legally
prevailing on the date of actual payment.9

Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in G.R. No. 76931 and American Air as
petitioner in G.R. No. 76933. By resolution10 of this Court dated 25 March 1987 both petitions were consolidated, hence, the case at bar.

The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission. It is the stand of American Air that such
commission is based only on sales of its services actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." As basis
thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows:

5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff fees and charges for all sales of
transportation over American's services by Orient Air Services or itssub-agents. (Emphasis supplied)

Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any sub-agents, it is American
Air's contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales. This is supposed to be the clear
meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission, the sale must be made by Orient Air
and the sale must be done with the use of American Air's ticket stocks.

On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American Air and not
merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its designation as
the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the promotion and solicitation
for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American Air's services are necessarily by Orient
Air."11

It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain the meaning of
its provisions.12 The various stipulations in the contract must be read together to give effect to all. 13 After a careful examination of the records, the Court
finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding
commission based on total revenue, or as referred to by the parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air's services
for air passenger transportation, and the solicitation of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of
two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air ticket
stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air services. It is
immediately observed that the precondition attached to the first type of commission does not obtain for the second type of commissions. The latter type
of commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket stock of other air carriers sold by such
carriers or other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such overriding commissions to sales from
American Air ticket stock would erase any distinction between the two (2) types of commissions and would lead to the absurd conclusion that the parties
had entered into a contract with meaningless provisions. Such an interpretation must at all times be avoided with every effort exerted to harmonize the
entire Agreement.

An additional point before finally disposing of this issue. It is clear from the records that American Air was the party responsible for the preparation of the
Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken " contra proferentem", i.e., construed against the party who caused
the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the interpretation of
obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 14 To put it differently, when several interpretations of a
provision are otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to the party in whose favor the
provision was made and who did not cause the ambiguity.15 We therefore agree with the respondent appellate court's declaration that:

Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read against the party who drafted it. 16

We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate court, on this issue, ruled thus:

It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of the Agreement, Exh. F, which provides for
remittances to American less commissions to which Orient is entitled, and from paragraph 5(d) which specifically allows Orient to retain the full amount
of its commissions. Since, as stated ante, Orient is entitled to the 3% override. American's premise, therefore, for the cancellation of the Agreement did
not exist. . . ."

We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an overriding commission based on total
flown revenue. American Air's perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where the
latter acted in accordance with the Agreement—that of retaining from the sales proceeds its accrued commissions before remitting the balance to
American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to
remit the sums claimed by American Air. The latter's termination of the Agreement was, therefore, without cause and basis, for which it should be held
liable to Orient Air.

On the matter of damages, the respondent appellate court modified by reduction the trial court's award of exemplary damages and attorney's fees. This
Court sees no error in such modification and, thus, affirms the same.

It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial court.1âwphi1We refer particularly to the
lower court's decision ordering American Air to "reinstate defendant as its general sales agent for passenger transportation in the Philippines in
accordance with said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air. Such would be
violative of the principles and essence of agency, defined by law as a contract whereby "a person binds himself to render some service or to do
something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER . 17 (emphasis supplied) In an agent-
principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the
principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal,
which must not, in any way, be compelled by law or by any court. The Agreement itself between the parties states that "either party may terminate the
Agreementwithout cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore, set aside the portion of the
ruling of the respondent appellate court reinstating Orient Air as general sales agent of American Air.

WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the respondent Court of Appeals, dated 27 January
1986 and 17 December 1986, respectively. Costs against petitioner American Air.

SO ORDERED.

3. EUROTECH INDUSTRIAL TECHNOLOGIES, INC v. CUIZON

Before Us is a petition for review by certiorari assailing the Decision[1] of the Court of Appeals dated 10 August 2004 and its Resolution[2] dated 17 March

2005 in CA-G.R. SP No. 71397 entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez. The assailed Decision and Resolution

affirmed the Order[3] dated 29 January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a

party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various European industrial equipment for customers here in the Philippines. It

has as one of its customers Impact Systems Sales (Impact Systems) which is a sole proprietorship owned by respondent ERWIN Cuizon

(ERWIN).Respondent EDWIN is the sales manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-one thousand three hundred thirty-eight

(P91,338.00) pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with respondents making

a down payment of fifty thousand pesos (P50,000.00).[4] When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same

to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus,

general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner, the pertinent part of which states:

1.) That ASSIGNOR[5] has an outstanding receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE
THOUSAND (P365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE [6] the said receivables from Toledo Power
Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the
lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.[7]

Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown by Invoice No. 12034 dated 30 June

1995.[8]

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to collect from Toledo Power Company

the amount of P365,135.29 as evidenced by Check Voucher No. 0933 [9] prepared by said power company and an official receipt dated 15 August 1995

issued by Impact Systems.[10] Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a result,

respondents were able to make partial payments to petitioner. On 7 October 1996, petitioners counsel sent respondents a final demand letter wherein it

was stated that as of 11 June 1996, respondents total obligations stood at P295,000.00 excluding interests and attorneys fees.[11] Because of

respondents failure to abide by said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary

attachment against herein respondents before the Regional Trial Court of Cebu City.[12]

On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary attachment. [13]

On 25 June 1997, respondent EDWIN filed his Answer [14] wherein he admitted petitioners allegations with respect to the sale transactions entered into by

Impact Systems and petitioner between January and April 1995. [15] He, however, disputed the total amount of Impact Systems indebtedness to petitioner

which, according to him, amounted to only P220,000.00.[16]

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case. According to him, he was acting

as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact.In support

of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioners Complaint stating

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of a single proprietorship business
known as Impact Systems Sales (Impact Systems for brevity), with office located at 46-A del Rosario Street, Cebu City, where he may be
served summons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager of Impact Systems and is
sued in this action in such capacity.[17]

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. The trial court granted

petitioners motion to declare respondent ERWIN in default for his failure to answer within the prescribed period despite the opportunity granted [18] but it

denied petitioners motion for summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001.[19] However,
the conduct of the pre-trial conference was deferred pending the resolution by the trial court of the special and affirmative defenses raised by respondent

EDWIN.[20]

After the filing of respondent EDWINs Memorandum[21] in support of his special and affirmative defenses and petitioners opposition [22] thereto, the trial

court rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant in this case. According to the trial court

A study of Annex G to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of or represented
[Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon
is the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is dated June 28,
1995. A study of Annex H to the complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a
down payment of P50,000.00 that Annex H is dated June 30, 1995 or two days after the execution of Annex G, thereby showing that [Impact]
Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew that [Impact] Systems Sales, the principal,
ratified the act of Edwin B. Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was
deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff knew about said
ratification.Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact] Systems
Sales made a down payment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant. [23]

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however, affirmed the 29 January

2002 Order of the court a quo. The dispositive portion of the now assailed Decision of the Court of Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order
dated January 29, 2002, it is hereby AFFIRMED.[24]

Petitioners motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005. Hence, the present petition

raising, as sole ground for its allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT
OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE
SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD. [25]

To support its argument, petitioner points to Article 1897 of the New Civil Code which states:

Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of collecting the receivables from the Toledo Power

Corporation notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said collection did not

revoke the agency relations of respondents, petitioner insists that ERWINs action repudiated EDWINs power to sign the Deed of Assignment. As

EDWIN did not sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally liable for the obligations

of his principal.[26]

Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the one unit of sludge pump to Impact

Systems and signing the Deed of Assignment. Petitioner directs the attention of this Court to the fact that respondents are bound not only by their

principal and agent relationship but are in fact full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud

petitioner.[27]
In his Comment,[28] respondent EDWIN again posits the argument that he is not a real party in interest in this case and it was proper for the trial court to

have him dropped as a defendant. He insists that he was a mere agent of Impact Systems which is owned by ERWIN and that his status as such is

known even to petitioner as it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business

venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a representative of Impact Systems

in said transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latters

consent.[29] The underlying principle of the contract of agency is to accomplish results by using the services of others to do a great variety of things like

selling, buying, manufacturing, and transporting. [30] Its purpose is to extend the personality of the principal or the party for whom another acts and from

whom he or she derives the authority to act. [31] It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the

principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. [32] By

this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence qui facit per alium facit per se.[33]

The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of

a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. [34]

In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as agent. The

only cause of the present dispute is whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment thereby binding

himself personally to pay the obligations to petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority granted by his

principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. The same

provision, however, presents two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to

the obligation and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party

sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As discussed elsewhere, the

position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree
of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are
incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing
agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted
to his management. x x x.[35]

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. To

recall, petitioner refused to deliver the one unit of sludge pump unless it received, in full, the payment for Impact Systems indebtedness. [36] We may

very well assume that Impact Systems desperately needed the sludge pump for its business since after it paid the amount of fifty thousand pesos
(P50,000.00) as down payment on 3 March 1995,[37] it still persisted in negotiating with petitioner which culminated in the execution of the Deed of

Assignment of its receivables from Toledo Power Company on 28 June 1995. [38] The significant amount of time spent on the negotiation for the sale of

the sludge pump underscores Impact Systems perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that

respondent EDWINs participation in the Deed of Assignment was reasonably necessary or was required in order for him to protect the business of his

principal. Had he not acted in the way he did, the business of his principal would have been adversely affected and he would have violated his fiduciary

relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and EDWIN, the agent. It

is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim against respondent EDWIN does not hold that in

case of excess of authority, both the agent and the principal are liable to the other contracting party. [39] To reiterate, the first part of Article 1897 declares

that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is completely absolved of any

liability. The second part of the said provision presents the situations when the agent himself becomes liable to a third party when he expressly binds

himself or he exceeds the limits of his authority without giving notice of his powers to the third person. However, it must be pointed out that in case of

excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover from both the principal and

the agent.[40]

As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor incur any liability arising from the Deed

of Assignment, it follows that he is not a real party in interest who should be impleaded in this case. A real party in interest is one who stands to be

benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. [41] In this respect, we sustain his exclusion as a defendant in

the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and Resolution dated 17 March 2005 of

the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City,

is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of the proceedings against

respondent ERWIN CUIZON.

SO ORDERED.

4. BORDADOR v. LUZ

In this appeal by certiorari, petitioners assail the judgment of the Court of Appeals in CA-G.R. CV No. 49175 affirming the adjudication of the Regional
Trial Court of Malolos, Bulacan which found private respondent Narciso Deganos liable to petitioners for actual damages, but absolved respondent
spouses Brigida D. Luz and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent resolution of the Court of Appeals which denied their
motion for reconsideration of its challenged decision.

Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was their regular
customer. On several occasions during the period from April 27, 1987 to September 4, 1987, respondent Narciso Deganos, the brother of Brigida D. Luz,
received several pieces of gold and jewelry from petitioners amounting to P382,816.00. [1] These items and their prices were indicated in seventeen
receipts covering the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining six
indicated that they were received for Brigida D. Luz. [2]

Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners. Deganos remitted only
the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners. By January 1990, the total of
his unpaid account to petitioners, including interest, reached the sum of P725,463.98. [3] Petitioners eventually filed a complaint in the barangay court
against Deganos to recover said amount.
In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for Deganos and ultimately, she and her
husband, together with Deganos, signed a compromise agreement with petitioners. In that compromise agreement, Deganos obligated himself to pay
petitioners, on installment basis, the balance of his account plus interest thereon. However, he failed to comply with his aforestated undertakings.

On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos, Bulacan against Deganos and Brigida D. Luz for
recovery of a sum of money and damages, with an application for preliminary attachment.[4] Ernesto Luz was impleaded therein as the spouse of Brigida.

Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were charged with estafa [5] in the Regional Trial Court of Malolos, Bulacan, which
was docketed as Criminal Case No. 785-M-94. That criminal case appears to be still pending in said trial court.

During the trial of the civil case, petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he received the subject items of jewelry
and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable with him therefor.

On the other hand, while Deganos admitted that he had an unpaid obligation to petitioners, he claimed that the same was only in the sum
of P382,816.00 and not P725,463.98. He further asserted that it was he alone who was involved in the transaction with the petitioners; that he neither
acted as agent for nor was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts indicated that the items
were received by him for the latter. He further claimed that he never delivered any of the items he received from petitioners to Brigida.

Brigida, on her part, denied that she had anything to do with the transactions between petitioners and Deganos. She claimed that she never authorized
Deganos to receive any item of jewelry in her behalf and, for that matter, neither did she actually receive any of the articles in question.

After trial, the court below found that only Deganos was liable to petitioners for the amount and damages claimed. It held that while Brigida D. Luz did
have transactions with petitioners in the past, the items involved were already paid for and all that Brigida owed petitioners was the sum of P21,483.00
representing interest on the principal account which she had previously paid for.[6]

The trial court also found that it was petitioner Lydia Bordador who indicated in the receipts that the items were received by Deganos for Evelyn Aquino
and Brigida D. Luz. [7] Said court was persuaded that Brigida D. Luz was behind Deganos, but because there was no memorandum to this effect, the
agreement between the parties was unenforceable under the Statute of Frauds. [8] Absent the required memorandum or any written document
connecting the respondent Luz spouses with the subject receipts, or authorizing Deganos to act on their behalf, the alleged agreement between
petitioners and Brigida D. Luz was unenforceable.

Deganos was ordered to pay petitioners the amount of P725,463.98, plus legal interest thereon from June 25, 1990, and attorneys fees. Brigida D. Luz
was ordered to pay P21,483.00 representing the interest on her own personal loan. She and her co-defendant spouse were absolved from any other or
further liability. [9]
[10]
As stated at the outset, petitioners appealed the judgment of the court a quo to the Court of Appeals which affirmed said judgment. The motion for
reconsideration filed by petitioners was subsequently dismissed, [11] hence the present recourse to this Court.

The primary issue in the instant petition is whether or not herein respondent spouses are liable to petitioners for the latters claim for money and
damages in the sum of P725,463.98, plus interests and attorneys fees, despite the fact that the evidence does not show that they signed any of the
subject receipts or authorized Deganos to receive the items of jewelry on their behalf.

Petitioners argue that the Court of Appeals erred in adopting the findings of the court a quo that respondent spouses are not liable to them, as said
conclusion of the trial court is contradicted by the finding of fact of the appellate court that (Deganos) acted as agent of his sister (Brigida Luz). [12] In
support of this contention, petitioners quoted several letters sent to them by Brigida D. Luz wherein the latter acknowledged her obligation to petitioners
and requested for more time to fulfill the same. They likewise aver that Brigida testified in the trial court that Deganos took some gold articles from
petitioners and delivered the same to her.

Both the Court of Appeals and the trial court, however, found as a fact that the aforementioned letters concerned the previous obligations of Brigida to
petitioners, and had nothing to do with the money sought to be recovered in the instant case. Such concurrent factual findings are entitled to great
weight, hence, petitioners cannot plausibly claim in this appellate review that the letters were in the nature of acknowledgments by Brigida that she was
the principal of Deganos in the subject transactions.

On the other hand, with regard to the testimony of Brigida admitting delivery of the gold to her, there is no showing whatsoever that her statement
referred to the items which are the subject matter of this case. It cannot, therefore, be validly said that she admitted her liability regarding the same.

Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter clothed him with apparent authority as her agent and held him out to the
public as such, hence Brigida can not be permitted to deny said authority to innocent third parties who dealt with Deganos under such
belief. [13] Petitioners further represent that the Court of Appeals recognized in its decision that Deganos was an agent of Brigida. [14]

The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz and that the latter should consequently be held
solidarily liable with Deganos in his obligation to petitioners.While the quoted statement in the findings of fact of the assailed appellate decision
mentioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals categorically stated that,
(Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners x x x. [15] It is clear, therefore, that
even assuming arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with regard to the transactions
subject of this case.

The Civil Code provides:

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the
consent or authority of the latter.

The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of Deganos or authorized him to act on her behalf,
much less with respect to the particular transactions involved. Petitioners attempt to foist liability on respondent spouses through the supposed agency
relation with Deganos is groundless and ill-advised.

Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six occasions as evidenced by
six receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the agent. [16]
The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida D. Luz. Evidently,
petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed
agency relation between the two respondents where no evidence supports such claim.

Petitioners next allege that the Court of Appeals erred in ignoring the fact that the decision of the court below, which it affirmed, is null and void as it
contradicted its ruling in CA-G.R. SP No. 39445 holding that there is sufficient evidence/proof against Brigida D. Luz and Deganos for estafa in the
pending criminal case.They further aver that said appellate court erred in ruling against them in this civil action since the same would result in an
inevitable conflict of decisions should the trial court convict the accused in the criminal case.

By way of backdrop for this argument of petitioners, herein respondents Brigida D. Luz and Deganos had filed a demurrer to evidence and a motion for
reconsideration in the aforestated criminal case, both of which were denied by the trial court. They then filed a petition for certiorari in the Court of
Appeals to set aside the denial of their demurrer and motion for reconsideration but, as just stated, their petition therefor was dismissed. [17]

Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G.R. SP No. 39445 with respect to the criminal case is
equivalent to a finding that there is sufficient evidence in the estafa case against Brigida D. Luz and Deganos. Hence, as already stated, petitioners
theorize that the decision and resolution of the Court of Appeals now being impugned in the case at bar would result in a possible conflict with the
prospective decision in the criminal case. Instead of promulgating the present decision and resolution under review, so they suggest, the Court of
Appeals should have awaited the decision in the criminal case, so as not to render academic or preempt the same or, worse, create two conflicting
rulings. [18]

Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases involving alleged fraudulent acts, a civil action for
damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the
criminal prosecution and shall require only a preponderance of evidence.

It is worth noting that this civil case was instituted four years before the criminal case for estafa was filed, and that although there was a move to
consolidate both cases, the same was denied by the trial court.Consequently, it was the duty of the two branches of the Regional Trial Court concerned
to independently proceed with the civil and criminal cases. It will also be observed that a final judgment rendered in a civil action absolving the defendant
from civil liability is no bar to a criminal action. [19]

It is clear, therefore, that this civil case may proceed independently of the criminal case [20] especially because while both cases are based on the same
facts, the quantum of proof required for holding the parties liable therein differ. Thus, it is improvident of petitioners to claim that the decision and
resolution of the Court of Appeals in the present case would be preemptive of the outcome of the criminal case. Their fancied fear of possible conflict
between the disposition of this civil case and the outcome of the pending criminal case is illusory.

Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdiction to issue the denial resolution dated August 18, 1997, as the same was
tainted with irregularities and badges of fraud perpetrated by its court officers. [21] They charge that said appellate court, through conspiracy and fraud on
the part of its officers, gravely abused its discretion in issuing that resolution denying their motion for reconsideration. They claim that said resolution was
drafted by the ponente, then signed and issued by the members of the Eleventh Division of said court within one and a half days from the elevation
thereof by the division clerk of court to the office of the ponente.

It is the thesis of petitioners that there was undue haste in issuing the resolution as the same was made without waiting for the lapse of the ten-day
period for respondents to file their comment and for petitioners to file their reply. It was allegedly impossible for the Court of Appeals to resolve the issue
in just one and a half days, especially because its ponente, the late Justice Maximiano C. Asuncion, was then recuperating from surgery and, that,
additionally, hundreds of more important cases were pending. [22]

These lamentable allegation of irregularities in the Court of Appeals and in the conduct of its officers strikes us as a desperate attempt of petitioners to
induce this Court to give credence to their arguments which, as already found by both the trial and intermediate appellate courts, are devoid of factual
and legal substance. The regrettably irresponsible attempt to tarnish the image of the intermediate appellate tribunal and its judicial officers through ad
hominem imputations could well be contumacious, but we are inclined to let that pass with a strict admonition that petitioners refrain from indulging in
such conduct in litigations.

On July 9, 1997, the Court of Appeals rendered judgment in this case affirming the trial courts decision. [23] Petitioners moved for reconsideration and the
Court of Appeals ordered respondents to file a comment.Respondents filed the same on August 5, 1997 [24] and petitioners filed their reply to said
comment on August 15, 1997. [25] The Eleventh Division of said court issued the questioned resolution denying petitioners motion for reconsideration on
August 18, 1997.[26]

It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of cases, petitioners are making a show of calling out
for justice because the Court of Appeals issued a resolution disposing of a case sooner than expected of it. They would even deny the exercise of
discretion by the appellate court to prioritize its action on cases in line with the procedure it has adopted in disposing thereof and in declogging its
dockets. It is definitely not for the parties to determine and dictate when and how a tribunal should act upon those cases since they are not even aware
of the status of the dockets and the internal rules and policies for acting thereon.

The fact that a resolution was issued by said court within a relatively short period of time after the records of the case were elevated to the office of
the ponente cannot, by itself, be deemed irregular. There is no showing whatsoever that the resolution was issued without considering the reply filed by
petitioners. In fact, that brief pleading filed by petitioners does not exhibit any esoteric or ponderous argument which could not be analyzed within an
hour. It is a legal presumption, born of wisdom and experience, that official duty has been regularly performed; [27] that the proceedings of a judicial
tribunal are regular and valid, and that judicial acts and duties have been and will be duly and properly performed. [28] The burden of proving irregularity
in official conduct is on the part of petitioners and they have utterly failed to do so. It is thus reprehensible for them to cast aspersions on a court of law
on the bases of conjectures or surmises, especially since one of the petitioners appears to be a member of the Philippine Bar.

Lastly, petitioners fault the trial courts holding that whatever contract of agency was established between Brigida D. Luz and Narciso Deganos is
unenforceable under the Statute of Frauds as that aspect of this case allegedly is not covered thereby. [29] They proceed on the premise that the Statute
of Frauds applies only to executory contracts and not to executed or to partially executed ones. From there, they move on to claim that the contract
involved in this case was an executed contract as the items had already been delivered by petitioners to Brigida D. Luz, hence, such delivery resulted in
the execution of the contract and removed the same from the coverage of the Statute of Frauds.

Petitioners claim is speciously unmeritorious. It should be emphasized that neither the trial court nor the appellate court categorically stated that there
was such a contractual relation between these two respondents. The trial court merely said that if there was such an agency existing between them, the
same is unenforceable as the contract would fall under the Statute of Frauds which requires the presentation of a note or memorandum thereof in order
to be enforceable in court. That was merely a preparatory statement of a principle of law. What was finally proven as a matter of fact is that there was no
such contract between Brigida D. Luz and Narciso Deganos, executed or partially executed, and no delivery of any of the items subject of this case was
ever made to the former.

WHEREFORE, no error having been committed by the Court of Appeals in affirming the judgment of the court a quo, its challenged decision and
resolution are hereby AFFIRMED and the instant petition is DENIED, with double costs against petitioners

SO ORDERED.

5. DIZON v. CA

Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions of respondent Court of Appeals. What
seemed to be a simple ejectment suit was juxtaposed with procedural intricacies which finally found its way to this Court.

G. R. NO. 122544:

On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to Buy with
petitioners[1] (lessors) involving a 1,755.80 square meter parcel of land situated at corner MacArthur Highway and South "H" Street, Diliman, Quezon
City. The term of the lease was for one (1) year commencing from May 16, 1974 up to May 15, 1975. During this period, private respondent was granted
an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a monthly rental
of P3,000.00.

For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an action for ejectment (Civil
Case No. VIII-29155) on November 10, 1976 before the then City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII. On November 22,
1982, the City Court rendered judgment[2]ordering private respondent to vacate the leased premises and to pay the sum of P624,000.00 representing
rentals in arrears and/or as damages in the form of reasonable compensation for the use and occupation of the premises during the period of illegal
detainer from June 1976 to November 1982 at the monthly rental of P8,000.00, less payments made, plus 12% interest per annum from November 18,
1976, the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting December 1982, until private respondent fully vacates the
premises, and to pay P20,000.00 as and by way of attorney's fees.

Private respondent filed a certiorari petition praying for the issuance of a restraining order enjoining the enforcement of said judgment and dismissal of
the case for lack of jurisdiction of the City Court.

On September 26, 1984, the then Intermediate Appellate Court[3] (now Court of Appeals) rendered a decision[4]stating that:

"x x x, the alleged question of whether petitioner was granted an extension of the option to buy the property; whether such option, if any, extended the
lease or whether petitioner actually paid the alleged P300,000.00 to Fidela Dizon, as representative of private respondents in consideration of the option
and, whether petitioner thereafter offered to pay the balance of the supposed purchase price, are all merely incidental and do not remove the unlawful
detainer case from the jurisdiction of respondent court. In consonance with the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above matters
may be raised and decided in the unlawful detainer suit as, to rule otherwise, would be a violation of the principle prohibiting multiplicity of suits. (Original
Records, pp. 38-39)."

The motion for reconsideration was denied. On review, this Court dismissed the petition in a resolution dated June 19, 1985 and likewise denied private
respondent's subsequent motion for reconsideration in a resolution dated September 9, 1985.[5]

On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil Case No. Q-45541) an action for Specific
Performance and Fixing of Period for Obligation with prayer for the issuance of a restraining order pending hearing on the prayer for a writ of preliminary
injunction. It sought to compel the execution of a deed of sale pursuant to the option to purchase and the receipt of the partial payment, and to fix the
period to pay the balance. In an Order dated October 25, 1985, the trial court denied the issuance of a writ of preliminary injunction on the ground that
the decision of the then City Court for the ejectment of the private respondent, having been affirmed by the then Intermediate Appellate Court and the
Supreme Court, has become final and executory.

Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch 102 (Civil Case No. Q-46487) on November 15,
1985 a complaint for Annulment of and Relief from Judgment with injunction and damages. In its decision[6] dated May 12, 1986, the trial court dismissed
the complaint for annulment on the ground of res judicata, and the writ of preliminary injunction previously issued was dissolved. It also ordered private
respondent to pay P3,000.00 as attorney's fees. As a consequence of private respondent's motion for reconsideration, the preliminary injunction was
reinstated, thereby restraining the execution of the City Court's judgment on the ejectment case.

The two cases were thereafter consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a decision [7] was rendered dismissing private
respondent's complaint in Civil Case No. Q-45541 (specific performance case) and denying its motion for reconsideration in Civil Case No. 46487
(annulment of the ejectment case). The motion for reconsideration of said decision was likewise denied.

On appeal,[8] respondent Court of Appeals rendered a decision[9] upholding the jurisdiction of the City Court of Quezon City in the ejectment case. It also
concluded that there was a perfected contract of sale between the parties on the leased premises and that pursuant to the option to buy agreement,
private respondent had acquired the rights of a vendee in a contract of sale. It opined that the payment by private respondent of P300,000.00 on June
20, 1975 as partial payment for the leased property, which petitioners accepted (through Alice A. Dizon) and for which an official receipt was issued, was
the operative act that gave rise to a perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private respondent can therefore
assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the money in their behalf. The Court of Appeals went
further by stating that in fact, what was entered into was a "conditional contract of sale" wherein ownership over the leased property shall not pass to the
private respondent until it has fully paid the purchase price. Since private respondent did not consign to the court the balance of the purchase price and
continued to occupy the subject premises, it had the obligation to pay the amount of P1,700.00 in monthly rentals until full payment of the purchase
price. The dispositive portion of said decision reads:
"WHEREFORE, the appealed decision in Case No. 46487 is AFFIRMED. The appealed decision in Case No. 45541 is, on the other hand, ANNULLED
and SET ASIDE. The defendants-appellees are ordered to execute the deed of absolute sale of the property in question, free from any lien or
encumbrance whatsoever, in favor of the plaintiff-appellant, and to deliver to the latter the said deed of sale, as well as the owner's duplicate of the
certificate of title to said property upon payment of the balance of the purchase price by the plaintiff-appellant. The plaintiff-appellant is ordered to
pay P1,700.00 per month from June 1976, plus 6% interest per annum, until payment of the balance of the purchase price, as previously agreed upon
by the parties.

SO ORDERED."

Upon denial of the motion for partial reconsideration (Civil Case No. Q-45541) by respondent Court of Appeals, [10] petitioners elevated the
case via petition for certiorari questioning the authority of Alice A. Dizon as agent of petitioners in receiving private respondent's partial payment
amounting to P300,000.00 pursuant to the Contract of Lease with Option to Buy. Petitioners also assail the propriety of private respondent's exercise of
the option when it tendered the said amount on June 20, 1975 which purportedly resulted in a perfected contract of sale.

G. R. NO. 124741:

Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 38-29155 (ejectment case) to the Metropolitan Trial
Court (MTC), then City Court of Quezon City, Branch 38, for execution of the judgment [11] dated November 22, 1982 which was granted in a resolution
dated June 29, 1992. Private respondent filed a motion to reconsider said resolution which was denied.

Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary injunction and/or restraining order with this Court (G.R. Nos.
106750-51) which was dismissed in a resolution dated September 16, 1992 on the ground that the same was a refiled case previously dismissed for lack
of merit. On November 26, 1992, entry of judgment was issued by this Court.

On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the decision in Civil Case No. 38-29155 with the MTC of Quezon City,
Branch 38. On September 13, 1993, the trial court ordered the issuance of a third alias writ of execution. In denying private respondent's motion for
reconsideration, it ordered the immediate implementation of the third writ of execution without delay.

On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon City, Branch 104 a petition for certiorari and prohibition
with preliminary injunction/restraining order (SP. PROC. No. 93-18722) challenging the enforceability and validity of the MTC judgment as well as the
order for its execution.

On January 11, 1994, RTC of Quezon City, Branch 104 issued an order [12] granting the issuance of a writ of preliminary injunction upon private
respondent's posting of an injunction bond of P50,000.00.

Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners filed a petition [13] for certiorari and prohibition with a
prayer for a temporary restraining order and/or preliminary injunction with the Court of Appeals. In its decision,[14] the Court of Appeals dismissed the
petition and ruled that:

"The avowed purpose of this petition is to enjoin the public respondent from restraining the ejectment of the private respondent. To grant the petition
would be to allow the ejectment of the private respondent. We cannot do that now in view of the decision of this Court in CA-G.R. CV Nos. 25153-
54. Petitioners' alleged right to eject private respondent has been demonstrated to be without basis in the said civil case. The petitioners have been
shown, after all, to have no right to eject private respondents.

WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.

SO ORDERED."[15]

Petitioners' motion for reconsideration was denied in a resolution[16] by the Court of Appeals stating that:

"This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-appellant (private respondent herein) acquired the rights of a vendee
in a contract of sale, in effect, recognizing the right of the private respondent to possess the subject premises. Considering said decision, we should not
allow ejectment; to do so would disturb the status quo of the parties since the petitioners are not in possession of the subject property. It would be unfair
and unjust to deprive the private respondent of its possession of the subject property after its rights have been established in a subsequent ruling.

WHEREFORE, the motion for reconsideration is DENIED for lack of merit.

SO ORDERED."[17]

Hence, this instant petition.

We find both petitions impressed with merit.

First. Petitioners have established a right to evict private respondent from the subject premises for non-payment of rentals. The term of the Contract of
Lease with Option to Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during which the private respondent was given an option to
purchase said property at P3,000.00 per square meter. After the expiration thereof, the lease was for P3,000.00 per month.

Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and private respondent. However, since the rent was
paid on a monthly basis, the period of lease is considered to be from month to month in accordance with Article 1687 of the New Civil Code. [18] Where
the rentals are paid monthly, the lease, even if verbal may be deemed to be on a monthly basis, expiring at the end of every month pursuant to Article
1687, in relation to Article 1673 of the Civil Code. [19] In such case, a demand to vacate is not even necessary for judicial action after the expiration of
every month.[20]

When private respondent failed to pay the increased rental of P8,000.00 per month in June 1976, the petitioners had a cause of action to institute an
ejectment suit against the former with the then City Court. In this regard, the City Court (now MTC) had exclusive jurisdiction over the ejectment suit. The
filing by private respondent of a suit with the Regional Trial Court for specific performance to enforce the option to purchase did not divest the then City
Court of its jurisdiction to take cognizance over the ejectment case. Of note is the fact that the decision of the City Court was affirmed by both the
Intermediate Appellate Court and this Court.

Second. Having failed to exercise the option within the stipulated one-year period, private respondent cannot enforce its option to purchase
anymore. Moreover, even assuming arguendo that the right to exercise the option still subsists at the time private respondent tendered the amount on
June 20, 1975, the suit for specific performance to enforce the option to purchase was filed only on October 7, 1985 or more than ten (10) years after
accrual of the cause of action as provided under Article 1144 of the New Civil Code.[21]

In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the private respondent, as
lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit renewal of the contract of lease on a monthly
basis. The other terms of the original contract of lease which are revived in the implied new lease under Article 1670 of the New Civil Code [22] are only
those terms which are germane to the lessees right of continued enjoyment of the property leased. [23] Therefore, an implied new lease does not ipso
facto carry with it any implied revival of private respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the
lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien to the possession of
the lessee. Private respondents right to exercise the option to purchase expired with the termination of the original contract of lease for one year. The
rationale of this Court is that:

This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the lessee to continue enjoying
possession of the property for fifteen days after the expiration of the contract he is willing that such enjoyment shall be for the entire period
corresponding to the rent which is customarily paid in this case up to the end of the month because the rent was paid monthly. Necessarily, if the
presumed will of the parties refers to the enjoyment of possession the presumption covers the other terms of the contract related to such possession,
such as the amount of rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such presumption may be
indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a contract of lease. [24]

Third. There was no perfected contract of sale between petitioners and private respondent. Private respondent argued that it delivered the check
of P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant to the supposed authority given by petitioner Fidela Dizon, the payee
thereof. Private respondent further contended that petitioners filing of the ejectment case against it based on the contract of lease with option to buy
holds petitioners in estoppel to question the authority of petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment of the
purchase price constituted a valid exercise of the option to buy.

Under Article 1475 of the New Civil Code, the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts. Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. It bears stressing that the
absence of any of these essential elements negates the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it
must show its existence by competent proof.[25]

In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice A. Dizon) on the erroneous presumption that
the said amount tendered would constitute a perfected contract of sale pursuant to the contract of lease with option to buy. There was no valid consent
by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners alleged agent, and private
respondent. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority
of the agent.[26] As provided in Article 1868 of the New Civil Code, [27] there was no showing that petitioners consented to the act of Alice A. Dizon nor
authorized her to act on their behalf with regard to her transaction with private respondent. The most prudent thing private respondent should have done
was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a
supposed agency.

In Bacaltos Coal Mines vs. Court of Appeals,[28] we explained the rule in dealing with an agent:

Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he
is chargeable with knowledge of the agents authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent,
whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the
agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.

For the long years that private respondent was able to thwart the execution of the ejectment suit rendered in favor of petitioners, we now write finis to
this controversy and shun further delay so as to ensure that this case would really attain finality.

WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution dated October 19, 1995 in
CA-G.R. CV No. 25153-54, as well as the decision dated December 11, 1995 and the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the
Court of Appeals are hereby REVERSED andSET ASIDE.

Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22, 1982 in Civil Case No. VIII-
29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII as affirmed in the decision dated September 26, 1984 of the then
Intermediate Appellate Court (now Court of Appeals) and in the resolution dated June 19, 1985 of this Court.

However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through Alice A. Dizon on June 20,
1975.

SO ORDERED.

6. VICTORIAS MILLING CO., INC v. CA

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals dated February 24,
1994, in CA-G.R. CV No. 31717, as well as the respondent court's resolution of September 30, 1994 modifying said decision. Both decision and
resolution amended the judgment dated February 13, 1991, of the Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-118.

The facts of this case as found by both the trial and appellate courts are as follows:

St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co., Inc., (VMC). In the course of their dealings,
petitioner issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M, which gave rise to
the instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000 bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per
bag as "per sales order VMC Marketing No. 042 dated October 16, 1989."[1] The transaction it covered was a "direct sale."[2] The SLDR also contains an
additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO (warehouse)." [3]

On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC
issued one check dated October 25, 1989 and three checks postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had
been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of
authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR)
No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags."[4]

On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as payee. The latter, in turn, issued Official Receipt
No. 33743 dated October 27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside from SLDR No. 1214M, said checks also
covered SLDR No. 1213.

Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and was allowed to withdraw sugar. However, after
2,000 bags had been released, petitioner refused to allow further withdrawals of sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated
January 23, 1990 informing it that SLDR No. 1214M had been "sold and endorsed" to it but that it had been refused further withdrawals of sugar from
petitioner's warehouse despite the fact that only 2,000 bags had been withdrawn.[5] CSC thus inquired when it would be allowed to withdraw the
remaining 23,000 bags.

On January 31, 1990, petitioner replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already
dwithdrawn all the sugar covered by the cleared checks.[6]

On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags.

Seven days later, petitioner reiterated that all the sugar corresponding to the amount of STM's cleared checks had been fully withdrawn and hence, there
would be no more deliveries of the commodity to STM's account. Petitioner also noted that CSC had represented itself to be STM's agent as it had
withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of STM.

On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil Case No. 90-1118. Defendants were Teresita Ng Sy (doing business
under the name of St. Therese Merchandising) and herein petitioner. Since the former could not be served with summons, the case proceeded only
against the latter. During the trial, it was discovered that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who could not be reached
through summons.[7] CSC, however, did not bother to pursue its case against her, but instead used her as its witness.

CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR No. 1214M. Therefore, the latter had no justification for
refusing delivery of the sugar. CSC prayed that petitioner be ordered to deliver the 23,000 bags covered by SLDR No. 1214M and sought the award of
P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary damages, P2,200,000.00 as attorney's fees and litigation expenses.

Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000 bags.[8] Since STM had already drawn in full all the sugar
corresponding to the amount of its cleared checks, it could no longer authorize further delivery of sugar to CSC. Petitioner also contended that it had no
privity of contract with CSC.

Petitioner explained that the SLDRs, which it had issued, were not documents of title, but mere delivery receipts issued pursuant to a series of
transactions entered into between it and STM. The SLDRs prescribed delivery of the sugar to the party specified therein and did not authorize the
transfer of said party's rights and interests.

Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's co-conspirator to defraud it through a misrepresentation that CSC was
an innocent purchaser for value and in good faith. Petitioner then prayed that CSC be ordered to pay it the following sums: P10,000,000.00 as moral
damages; P10,000,000.00 as exemplary damages; and P1,500,000.00 as attorney's fees. Petitioner also prayed that cross-defendant STM be ordered
to pay it P10,000,000.00 in exemplary damages, and P1,500,000.00 as attorney's fees.

Since no settlement was reached at pre-trial, the trial court heard the case on the merits.

As earlier stated, the trial court rendered its judgment favoring private respondent CSC, as follows:

"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against defendant Victorias Milling Company:

"1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000 bags of refined sugar due under SLDR No. 1214;
"2) Ordering defendant Victorias Milling Company to pay the amount of P920,000.00 as unrealized profits, the amount of P800,000.00 as exemplary
damages and the amount of P1,357,000.00, which is 10% of the acquisition value of the undelivered bags of refined sugar in the amount of
P13,570,000.00, as attorney's fees, plus the costs.

"SO ORDERED."[9]

It made the following observations:

"[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase price of P15,950,000.00 of the 25,000 bags of sugar bought by
her covered by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the 25,000 bags of sugar bought by her covered by SLDR No. 1213
on the same date, October 16, 1989 (date of the two SLDRs) is duly supported by Exhibits C to C-15 inclusive which are post-dated checks dated
October 27, 1989 issued by St. Therese Merchandising in favor of Victorias Milling Company at the time it purchased the 50,000 bags of sugar covered
by SLDR No. 1213 and 1214. Said checks appear to have been honored and duly credited to the account of Victorias Milling Company because on
October 27, 1989 Victorias Milling Company issued official receipt no. 34734 in favor of St. Therese Merchandising for the amount of P31,900,000.00
(Exhibits B and B-1). The testimony of Teresita Ng Go is further supported by Exhibit F, which is a computer printout of defendant Victorias Milling
Company showing the quantity and value of the purchases made by St. Therese Merchandising, the SLDR no. issued to cover the purchase, the official
reciept no. and the status of payment. It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR No. 1214 the same has been fully paid as
indicated by the word 'cleared' appearing under the column of 'status of payment.'

"On the other hand, the claim of defendant Victorias Milling Company that the purchase price of the 25,000 bags of sugar purchased by St. Therese
Merchandising covered by SLDR No. 1214 has not been fully paid is supported only by the testimony of Arnulfo Caintic, witness for defendant Victorias
Milling Company. The Court notes that the testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase price has not been fully
paid and is not corroborated by any positive evidence. There is an insinuation by Arnulfo Caintic in his testimony that the postdated checks issued by the
buyer in payment of the purchased price were dishonored. However, said witness failed to present in Court any dishonored check or any replacement
check. Said witness likewise failed to present any bank record showing that the checks issued by the buyer, Teresita Ng Go, in payment of the purchase
price of the sugar covered by SLDR No. 1214 were dishonored."[10]

Petitioner appealed the trial courts decision to the Court of Appeals.

On appeal, petitioner averred that the dealings between it and STM were part of a series of transactions involving only one account or one general
contract of sale. Pursuant to this contract, STM or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM. SLDR
No. 21214M was only one of 22 SLDRs issued to STM and since the latter had already withdrawn its full quota of sugar under the said SLDR, CSC was
already precluded from seeking delivery of the 23,000 bags of sugar.

Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate and independent transactions and that the
details of the series of purchases were contained in a single statement with a consolidated summary of cleared check payments and sugar stock
withdrawals because this a more convenient system than issuing separate statements for each purchase.

The appellate court considered the following issues: (a) Whether or not the transaction between petitioner and STM involving SLDR No. 1214M was a
separate, independent, and single transaction; (b) Whether or not CSC had the capacity to sue on its own on SLDR No. 1214M; and (c) Whether or not
CSC as buyer from STM of the rights to 25,000 bags of sugar covered by SLDR No. 1214M could compel petitioner to deliver 23,000 bags allegedly
unwithdrawn.

On February 24, 1994, the Court of Appeals rendered its decision modifying the trial court's judgment, to wit:

"WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders defendant-appellant to:

"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No. 1214M;

" 2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the undelivered bags of refined sugar, as attorneys fees;

"3) Pay the costs of suit.

"SO ORDERED."[11]

Both parties then seasonably filed separate motions for reconsideration.

In its resolution dated September 30, 1994, the appellate court modified its decision to read:

"WHEREFORE, the Court hereby modifies the assailed judgment and orders defendant-appellant to:

"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No. 1214M;

"(2) Pay costs of suit.

"SO ORDERED."[12]
The appellate court explained the rationale for the modification as follows:

"There is merit in plaintiff-appellee's position.

"Exhibit F' We relied upon in fixing the number of bags of sugar which remained undelivered as 12,586 cannot be made the basis for such a finding. The
rule is explicit that courts should consider the evidence only for the purpose for which it was offered. (People v. Abalos, et al, 1 CA Rep 783). The
rationale for this is to afford the party against whom the evidence is presented to object thereto if he deems it necessary. Plaintiff-appellee is, therefore,
correct in its argument that Exhibit F' which was offered to prove that checks in the total amount of P15,950,000.00 had been cleared. (Formal Offer of
Evidence for Plaintiff, Records p. 58) cannot be used to prove the proposition that 12,586 bags of sugar remained undelivered.

"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and
36]) presented by plaintiff-appellee was to the effect that it had withdrawn only 2,000 bags of sugar from SLDR after which it was not allowed to withdraw
anymore. Documentary evidence (Exhibit I, Id., p. 78, Exhibit K, Id., p. 80) show that plaintiff-appellee had sent demand letters to defendant-appellant
asking the latter to allow it to withdraw the remaining 23,000 bags of sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged that
sugar delivery to the STM corresponded only to the value of cleared checks; and that all sugar corresponded to cleared checks had been withdrawn.
Defendant-appellant did not rebut plaintiff-appellee's assertions. It did not present evidence to show how many bags of sugar had been withdrawn
against SLDR No. 1214M, precisely because of its theory that all sales in question were a series of one single transaction and withdrawal of sugar
depended on the clearing of checks paid therefor.

"After a second look at the evidence, We see no reason to overturn the findings of the trial court on this point." [13]

Hence, the instant petition, positing the following errors as grounds for review:

"1. The Court of Appeals erred in not holding that STM's and private respondent's specially informing petitioner that respondent was authorized by buyer
STM to withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf," (emphasis in the original) private respondent's withdrawing 2,000 bags
of sugar for STM, and STM's empowering other persons as its agents to withdraw sugar against the same SLDR No. 1214M, rendered respondent like
the other persons, an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA 252, and precluded it from subsequently claiming and
proving being an assignee of SLDR No. 1214M and from suing by itself for its enforcement because it was conclusively presumed to be an agent (Sec.
2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, Civil Code).

" 2. The Court of Appeals erred in manifestly and arbitrarily ignoring and disregarding certain relevant and undisputed facts which, had they been
considered, would have shown that petitioner was not liable, except for 69 bags of sugar, and which would justify review of its conclusion of facts by this
Honorable Court.

" 3. The Court of Appeals misapplied the law on compensation under Arts. 1279, 1285 and 1626 of the Civil Code when it ruled that compensation
applied only to credits from one SLDR or contract and not to those from two or more distinct contracts between the same parties; and erred in denying
petitioner's right to setoff all its credits arising prior to notice of assignment from other sales or SLDRs against private respondent's claim as assignee
under SLDR No. 1214M, so as to extinguish or reduce its liability to 69 bags, because the law on compensation applies precisely to two or more distinct
contracts between the same parties (emphasis in the original).

"4. The Court of Appeals erred in concluding that the settlement or liquidation of accounts in Exh. F between petitioner and STM, respondent's admission
of its balance, and STM's acquiescence thereto by silence for almost one year did not render Exh. `F' an account stated and its balance binding.

"5. The Court of Appeals erred in not holding that the conditions of the assigned SLDR No. 1214, namely, (a) its subject matter being generic, and (b) the
sale of sugar being subject to its availability at the Nawaco warehouse, made the sale conditional and prevented STM or private respondent from
acquiring title to the sugar; and the non-availability of sugar freed petitioner from further obligation.

"6. The Court of Appeals erred in not holding that the "clean hands" doctrine precluded respondent from seeking judicial reliefs (sic) from petitioner, its
only remedy being against its assignor."[14]

Simply stated, the issues now to be resolved are:

(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as an
assignee.

(2)....Whether or not the Court of Appeals erred in applying the law on compensation to the transaction under SLDR No. 1214M so as to preclude
petitioner from offsetting its credits on the other SLDRs.

(3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar under SLDR No. 1214M was a conditional sale or a contract to sell
and hence freed petitioner from further obligations.

(4)....Whether or not the Court of Appeals committed an error of law in not applying the "clean hands doctrine" to preclude CSC from seeking judicial
relief.

The issues will be discussed in seriatim.

Anent the first issue, we find from the records that petitioner raised this issue for the first time on appeal. It is settled that an issue which was not raised
during the trial in the court below could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and
due process.[15] Nonetheless, the Court of Appeals opted to address this issue, hence, now a matter for our consideration.

Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's
agent. The pertinent portion of said letter reads:

"This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress supplied) the refined sugar covered by
Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags." [16]

The Civil Code defines a contract of agency as follows:

"Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with
the consent or authority of the latter."

It is clear from Article 1868 that the basis of agency is representation. [17] On the part of the principal, there must be an actual intention to appoint[18] or an
intention naturally inferable from his words or actions;[19] and on the part of the agent, there must be an intention to accept the appointment and act on it,
[20]
and in the absence of such intent, there is generally no agency.[21] One factor which most clearly distinguishes agency from other legal concepts is
control; one person - the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word "agency" has come to
connote control by the principal.[22] The control factor, more than any other, has caused the courts to put contracts between principal and agent in a
separate category.[23] The Court of Appeals, in finding that CSC, was not an agent of STM, opined:

"This Court has ruled that where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is
always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence, but also its
nature and extent (Antonio vs. Enriquez [CA], 51 O.G. 3536]. Here, defendant-appellant failed to sufficiently establish the existence of an agency relation
between plaintiff-appellee and STM. The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's) behalf"
should not be eyed as pointing to the existence of an agency relation ...It should be viewed in the context of all the circumstances obtaining. Although it
would seem STM represented plaintiff-appellee as being its agent by the use of the phrase "for and in our (STM's) behalf" the matter was cleared when
on 23 January 1990, plaintiff-appellee informed defendant-appellant that SLDFR No. 1214M had been "sold and endorsed" to it by STM (Exhibit I,
Records, p. 78). Further, plaintiff-appellee has shown that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by STM
to it ...A conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be made thus capacitating plaintiff-appellee to sue in its
own name, without need of joining its imputed principal STM as co-plaintiff." [24]

In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not an agent of STM. Private respondent
CSC was not subject to STM's control. The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered
from the whole scope and effect of the language employed.[25] That the authorization given to CSC contained the phrase "for and in our (STM's) behalf"
did not establish an agency. Ultimately, what is decisive is the intention of the parties.[26] That no agency was meant to be established by the CSC and
STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. [27] The use of the words "sold and
endorsed" means that STM and CSC intended a contract of sale, and not an agency. Hence, on this score, no error was committed by the respondent
appellate court when it held that CSC was not STM's agent and could independently sue petitioner.

On the second issue, proceeding from the theory that the transactions entered into between petitioner and STM are but serial parts of one account,
petitioner insists that its debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 of the Civil Code. [28] However, the trial
court found, and the Court of Appeals concurred, that the purchase of sugar covered by SLDR No. 1214M was a separate and independent transaction;
it was not a serial part of a single transaction or of one account contrary to petitioner's insistence. Evidence on record shows, without being rebutted, that
petitioner had been paid for the sugar purchased under SLDR No. 1214M. Petitioner clearly had the obligation to deliver said commodity to STM or its
assignee. Since said sugar had been fully paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and debtors of each other. No
reversible error could thereby be imputed to respondent appellate court when, it refused to apply Article 1279 of the Civil Code to the present case.

Regarding the third issue, petitioner contends that the sale of sugar under SLDR No. 1214M is a conditional sale or a contract to sell, with title to the
sugar still remaining with the vendor. Noteworthy, SLDR No. 1214M contains the following terms and conditions:

"It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of this document by the buyer/trader personally or through a
representative, title to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected and completed (stress supplied) and
buyer/trader assumes full responsibility therefore"[29]

The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon payment of the
purchase price. Said terms clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped from alleging the contrary. The contract
is the law between the contracting parties.[30] And where the terms and conditions so stipulated are not contrary to law, morals, good customs, public
policy or public order, the contract is valid and must be upheld.[31] Having transferred title to the sugar in question, petitioner is now obliged to deliver it to
the purchaser or its assignee.

As to the fourth issue, petitioner submits that STM and private respondent CSC have entered into a conspiracy to defraud it of its sugar. This conspiracy
is allegedly evidenced by: (a) the fact that STM's selling price to CSC was below its purchasing price; (b) CSC's refusal to pursue its case against
Teresita Ng Go; and (c) the authority given by the latter to other persons to withdraw sugar against SLDR No. 1214M after she had sold her rights under
said SLDR to CSC. Petitioner prays that the doctrine of "clean hands" should be applied to preclude CSC from seeking judicial relief. However, despite
careful scrutiny, we find here the records bare of convincing evidence whatsoever to support the petitioner's allegations of fraud. We are now
constrained to deem this matter purely speculative, bereft of concrete proof.

WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.

7. TUASON v. HEIRS OF B. RAMOS

Stripped of nonessentials, the present case involves the collection of a sum of money. Specifically, this case arose from the failure of petitioners to pay
respondents predecessor-in-interest. This fact was shown by the non-encashment of checks issued by a third person, but indorsed by herein Petitioner
Maria Tuazon in favor of the said predecessor. Under these circumstances, to enable respondents to collect on the indebtedness, the check drawer
need not be impleaded in the Complaint. Thus, the suit is directed, not against the drawer, but against the debtor who indorsed the checks in payment of
the obligation.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, challenging the July 31, 2002 Decision [2] of the Court of Appeals (CA) in CA-GR
CV No. 46535. The decretal portion of the assailed Decision reads:

WHEREFORE, the appeal is DISMISSED and the appealed decision is AFFIRMED.

On the other hand, the affirmed Decision[3] of Branch 34 of the Regional Trial Court (RTC) of Gapan, Nueva Ecija, disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the defendants spouses Leonilo
Tuazon and Maria Tuazon to pay the plaintiffs, as follows:

1. The sum of P1,750,050.00, with interests from the filing of the second amended complaint;

2. The sum of P50,000.00, as attorneys fees;

3. The sum of P20,000.00, as moral damages

4. And to pay the costs of suit.

x x x x x x x x x[4]

The Facts

The facts are narrated by the CA as follows:

[Respondents] alleged that between the period of May 2, 1988 and June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total of
8,326 cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest of respondents]. That of this [quantity,] x x x only 4,437
cavans [have been paid for so far], leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon issued x x
x [several] Traders Royal Bank checks.

xxxxxxxxx

[B]ut when these [checks] were encashed, all of the checks bounced due to insufficiency of funds. [Respondents] advanced that before issuing
said checks[,] spouses Tuazon already knew that they had no available fund to support the checks, and they failed to provide for the payment
of these despite repeated demands made on them.

[Respondents] averred that because spouses Tuazon anticipated that they would be sued, they conspired with the other [defendants] to
defraud them as creditors by executing x x x fictitious sales of their properties. They executed x x x simulated sale[s] [of three lots] in favor of
the x x x spouses Buenaventura x x x[,] as well as their residential lot and the house thereon[,] all located at Nueva Ecija, and another
simulated deed of sale dated July 12, 1988 of a Stake Toyota registered with the Land Transportation Office of Cabanatuan City on September
7, 1988. [Co-petitioner] Melecio Tuazon, a son of spouses Tuazon, registered a fictitious Deed of Sale on July 19, 1988 x x x over a residential
lot located at Nueva Ecija. Another simulated sale of a Toyota Willys was executed on January 25, 1988 in favor of their other son, [co-
petitioner] Alejandro Tuazon x x x. As a result of the said sales, the titles of these properties issued in the names of spouses Tuazon were
cancelled and new ones were issued in favor of the [co-]defendants spouses Buenaventura, Alejandro Tuazon and Melecio Tuazon.
Resultantly, by the said ante-dated and simulated sales and the corresponding transfers there was no more property left registered in the
names of spouses Tuazon answerable to creditors, to the damage and prejudice of [respondents].

For their part, defendants denied having purchased x x x rice from [Bartolome] Ramos. They alleged that it was Magdalena Ramos,
wife of said deceased, who owned and traded the merchandise and Maria Tuazon was merely her agent. They argued that it was Evangeline
Santos who was the buyer of the rice and issued the checks to Maria Tuazon as payments therefor. In good faith[,] the checks were received
[by petitioner] from Evangeline Santos and turned over to Ramos without knowing that these were not funded. And it is for this reason that
[petitioners] have been insisting on the inclusion of Evangeline Santos as an indispensable party, and her non-inclusion was a fatal error.
Refuting that the sale of several properties were fictitious or simulated, spouses Tuazon contended that these were sold because they were
then meeting financial difficulties but the disposals were made for value and in good faith and done before the filing of the instant suit. To
dispute the contention of plaintiffs that they were the buyers of the rice, they argued that there was no sales invoice, official receipts or like
evidence to prove this. They assert that they were merely agents and should not be held answerable.[5]

The corresponding civil and criminal cases were filed by respondents against Spouses Tuazon. Those cases were later consolidated and amended to
include Spouses Anastacio and Mary Buenaventura, with Alejandro Tuazon and Melecio Tuazon as additional defendants. Having passed away before
the pretrial, Bartolome Ramos was substituted by his heirs, herein respondents.
Contending that Evangeline Santos was an indispensable party in the case, petitioners moved to file a third-party complaint against her. Allegedly, she
was primarily liable to respondents, because she was the one who had purchased the merchandise from their predecessor, as evidenced by the fact that
the checks had been drawn in her name. The RTC, however, denied petitioners Motion.

Since the trial court acquitted petitioners in all three of the consolidated criminal cases, they appealed only its decision finding them civilly liable to
respondents.

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioners had failed to prove the existence of an agency between respondents and Spouses Tuazon. The
appellate court disbelieved petitioners contention that Evangeline Santos should have been impleaded as an indispensable party. Inasmuch as all the
checks had been indorsed by Maria Tuazon, who thereby became liable to subsequent holders for the amounts stated in those checks, there was no
need to implead Santos.

Hence, this Petition.[6]

Issues

Petitioners raise the following issues for our consideration:

1. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not agents of the respondents.

2. Whether or not the Honorable Court of Appeals erred in rendering judgment against the petitioners despite x x x the failure of
the respondents to include in their action Evangeline Santos, an indispensable party to the suit.[7]

The Courts Ruling

The Petition is unmeritorious.

First Issue:
Agency

Well-entrenched is the rule that the Supreme Courts role in a petition under Rule 45 is limited to reviewing errors of law allegedly committed by the Court
of Appeals. Factual findings of the trial court, especially when affirmed by the CA, are conclusive on the parties and this Court. [8] Petitioners have not
given us sufficient reasons to deviate from this rule.

In a contract of agency, one binds oneself to render some service or to do something in representation or on behalf of another, with the latters consent or
authority.[9] The following are the elements of agency: (1) the parties consent, express or implied, to establish the relationship; (2) the object, which is the
execution of a juridical act in relation to a third person; (3) the representation, by which the one who acts as an agent does so, not for oneself, but as a
representative; (4) the limitation that the agent acts within the scope of his or her authority. [10] As the basis of agency is representation, there must be, on
the part of the principal, an actual intention to appoint, an intention naturally inferable from the principals words or actions. In the same manner, there
must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency. [11]

This Court finds no reversible error in the findings of the courts a quo that petitioners were the rice buyers themselves; they were not mere agents of
respondents in their rice dealership. The question of whether a contract is one of sale or of agency depends on the intention of the parties. [12]

The declarations of agents alone are generally insufficient to establish the fact or extent of their authority. [13] The law makes no presumption of agency;
proving its existence, nature and extent is incumbent upon the person alleging it. [14] In the present case, petitioners raise the fact of agency as an
affirmative defense, yet fail to prove its existence.

The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the amounts represented by the bounced checks, in a
separate civil case that they sought to be consolidated with the current one. If, as they claim, they were mere agents of respondents, petitioners should
have brought the suit against Santos for and on behalf of their alleged principal, in accordance with Section 2 of Rule 3 of the Rules on Civil Procedure.
[15]
Their filing a suit against her in their own names negates their claim that they acted as mere agents in selling the rice obtained from Bartolome
Ramos.

Second Issue:
Indispensable Party

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

We hold that respondents cause of action is clearly founded on petitioners failure to pay the purchase price of the rice. The trial court held that Petitioner
Maria Tuazon had indorsed the questioned checks in favor of respondents, in accordance with Sections 31 and 63 of the Negotiable Instruments Law.
[16]
That Santos was the drawer of the checks is thus immaterial to the respondents cause of action.

As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks were to be accepted or paid, or both, according to their
tenor; and that in case they were dishonored, she would pay the corresponding amount. [17] After an instrument is dishonored by nonpayment, indorsers
cease to be merely secondarily liable; they become principal debtors whose liability becomes identical to that of the original obligor. The holder of a
negotiable instrument need not even proceed against the maker before suing the indorser. [18] Clearly, Evangeline Santos -- as the drawer of the checks --
is not an indispensable party in an action against Maria Tuazon, the indorser of the checks.

Indispensable parties are defined as parties in interest without whom no final determination can be had. [19] The instant case was originally one for the
collection of the purchase price of the rice bought by Maria Tuazon from respondents predecessor. In this case, it is clear that there is no privity of
contract between respondents and Santos. Hence, a final determination of the rights and interest of the parties may be made without any need to
implead her.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners.

SO ORDERED.

8. PATRIMONIO v. GUTIERREZ

Assailed in this petition for review on certiorari1 under Rule 45 of the Revised Rules of Court is the decision2 dated September 24, 2008 and the
resolution3 dated April 30, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 82301. The appellate court affirmed the decision of the Regional Trial
Court (RTC) of Quezon City, Branch 77, dismissing the complaint for declaration of nullity of loan filed by petitioner Alvin Patrimonio and ordering him to
pay respondent Octavio Marasigan III (Marasigan) the sum of ₱200,000.00.

The Factual Background

The facts of the case, as shown by the records, are briefly summarized below.

The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business venture under the name of Slam Dunk Corporation (Slum
Dunk), a production outfit that produced mini-concerts and shows related to basketball. Petitioner was already then a decorated professional basketball
player while Gutierrez was a well-known sports columnist.

In the course of their business, the petitioner pre-signed several checks to answer for the expenses of Slam Dunk. Although signed, these checks had
no payee’s name, date or amount. The blank checks were entrusted to Gutierrez with the specific instruction not to fill them out without previous
notification to and approval by the petitioner. According to petitioner, the arrangement was made so that he could verify the validity of the payment and
make the proper arrangements to fund the account.

In the middle of 1993, without the petitioner’s knowledge and consent, Gutierrez went to Marasigan (the petitioner’s former teammate), to secure a loan
in the amount of ₱200,000.00 on the excuse that the petitioner needed the money for the construction of his house. In addition to the payment of the
principal, Gutierrez assured Marasigan that he would be paid an interest of 5% per month from March to May 1994.

After much contemplation and taking into account his relationship with the petitioner and Gutierrez, Marasigan acceded to Gutierrez’ request and gave
him ₱200,000.00 sometime in February 1994. Gutierrez simultaneously delivered to Marasigan one of the blank checks the petitioner pre-signed with
Pilipinas Bank, Greenhills Branch, Check No. 21001764 with the blank portions filled out with the words "Cash" "Two Hundred Thousand Pesos Only",
and the amount of "₱200,000.00". The upper right portion of the check corresponding to the date was also filled out with the words "May 23, 1994" but
the petitioner contended that the same was not written by Gutierrez.

On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason "ACCOUNT CLOSED." It was later revealed that petitioner’s
account with the bank had been closed since May 28, 1993.

Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand letters to the petitioner asking for the payment of
₱200,000.00, but his demands likewise went unheeded. Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner, docketed as
Criminal Case No. 42816.

On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a Complaint for Declaration of Nullity of Loan and Recovery of
Damages against Gutierrez and co-respondent Marasigan. He completely denied authorizing the loan or the check’s negotiation, and asserted that he
was not privy to the parties’ loan agreement.

Only Marasigan filed his answer to the complaint. In the RTC’s order dated December 22, 1997,Gutierrez was declared in default.

The Ruling of the RTC

The RTC ruled on February 3,2003 in favor of Marasigan.4 It found that the petitioner, in issuing the pre-signed blank checks, had the intention of issuing
a negotiable instrument, albeit with specific instructions to Gutierrez not to negotiate or issue the check without his approval. While under Section 14 of
the Negotiable Instruments Law Gutierrez had the prima facie authority to complete the checks by filling up the blanks therein, the RTC ruled that he
deliberately violated petitioner’s specific instructions and took advantage of the trust reposed in him by the latter.

Nonetheless, the RTC declared Marasigan as a holder in due course and accordingly dismissed the petitioner’s complaint for declaration of nullity of the
loan. It ordered the petitioner to pay Marasigan the face value of the check with a right to claim reimbursement from Gutierrez.

The petitioner elevated the case to the Court of Appeals (CA), insisting that Marasigan is not a holder in due course. He contended that when Marasigan
received the check, he knew that the same was without a date, and hence, incomplete. He also alleged that the loan was actually between Marasigan
and Gutierrez with his check being used only as a security.

The Ruling of the CA

On September 24, 2008, the CA affirmed the RTC ruling, although premised on different factual findings. After careful analysis, the CA agreed with the
petitioner that Marasigan is not a holder in due course as he did not receive the check in good faith.
The CA also concluded that the check had been strictly filled out by Gutierrez in accordance with the petitioner’s authority. It held that the loan may not
be nullified since it is grounded on an obligation arising from law and ruled that the petitioner is still liable to pay Marasigan the sum of ₱200,000.00.

After the CA denied the subsequent motion for reconsideration that followed, the petitioner filed the present petition for review on certiorari under Rule
45 of the Revised Rules of Court.

The Petition

The petitioner argues that: (1) there was no loan between him and Marasigan since he never authorized the borrowing of money nor the check’s
negotiation to the latter; (2) under Article 1878 of the Civil Code, a special power of attorney is necessary for an individual to make a loan or borrow
money in behalf of another; (3) the loan transaction was between Gutierrez and Marasigan, with his check being used only as a security; (4) the check
had not been completely and strictly filled out in accordance with his authority since the condition that the subject check can only be used provided there
is prior approval from him, was not complied with; (5) even if the check was strictly filled up as instructed by the petitioner, Marasigan is still not entitled
to claim the check’s value as he was not a holder in due course; and (6) by reason of the bad faith in the dealings between the respondents, he is
entitled to claim for damages.

The Issues

Reduced to its basics, the case presents to us the following issues:

1. Whether the contract of loan in the amount of ₱200,000.00 granted by respondent Marasigan to petitioner, through respondent Gutierrez, may be
nullified for being void;

2. Whether there is basis to hold the petitioner liable for the payment of the ₱200,000.00 loan;

3. Whether respondent Gutierrez has completely filled out the subject check strictly under the authority given by the petitioner; and

4. Whether Marasigan is a holder in due course.

The Court’s Ruling

The petition is impressed with merit.

We note at the outset that the issues raised in this petition are essentially factual in nature. The main point of inquiry of whether the contract of loan may
be nullified, hinges on the very existence of the contract of loan – a question that, as presented, is essentially, one of fact. Whether the petitioner
authorized the borrowing; whether Gutierrez completely filled out the subject check strictly under the petitioner’s authority; and whether Marasigan is a
holder in due course are also questions of fact, that, as a general rule, are beyond the scope of a Rule 45 petition.

The rule that questions of fact are not the proper subject of an appeal by certiorari, as a petition for review under Rule 45 is limited only to questions of
law, is not an absolute rule that admits of no exceptions. One notable exception is when the findings off act of both the trial court and the CA are
conflicting, making their review necessary.5 In the present case, the tribunals below arrived at two conflicting factual findings, albeit with the same
conclusion, i.e., dismissal of the complaint for nullity of the loan. Accordingly, we will examine the parties’ evidence presented.

I. Liability Under the Contract of Loan

The petitioner seeks to nullify the contract of loan on the ground that he never authorized the borrowing of money. He points to Article 1878, paragraph 7
of the Civil Code, which explicitly requires a written authority when the loan is contracted through an agent. The petitioner contends that absent such
authority in writing, he should not be held liable for the face value of the check because he was not a party or privy to the agreement.

Contracts of Agency May be Oral Unless The Law Requires a Specific Form

Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter." Agency may be express, or implied from the acts of the principal, from
his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

As a general rule, a contract of agency may be oral.6 However, it must be written when the law requires a specific form, for example, in a sale of a piece
of land or any interest therein through an agent.

Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority before an agent can loan or borrow money in behalf of the
principal, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:

xxxx
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration.
(emphasis supplied)

Article 1878 does not state that the authority be in writing. As long as the mandate is express, such authority may be either oral or written. We
unequivocably declared in Lim Pin v. Liao Tian, et al.,7 that the requirement under Article 1878 of the Civil Code refers to the nature of the authorization
and not to its form. Be that as it may, the authority must be duly established by competent and convincing evidence other than the self serving assertion
of the party claiming that such authority was verbally given, thus:

The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in Rule 138 of the Rules of Court refer to the
nature of the authorization and not its form. The requirements are met if there is a clear mandate from the principal specifically authorizing the
performance of the act. As early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral or written,
the one vital thing being that it shall be express. And more recently, We stated that, if the special authority is not written, then it must be duly established
by evidence:

x x x the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special
authority be in writing the Court has every reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving
assertion of counsel himself that such authority was verbally given him.(Home Insurance Company vs. United States lines Company, et al., 21 SCRA
863; 866: Vicente vs. Geraldez, 52 SCRA 210; 225). (emphasis supplied).

The Contract of Loan Entered Into by Gutierrez in Behalf of the Petitioner Should be Nullified for Being Void; Petitioner is Not Bound by the Contract of
Loan.

A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of the petitioner.1âwphi1Records do not show that
the petitioner executed any special power of attorney (SPA) in favor of Gutierrez. In fact, the petitioner’s testimony confirmed that he never authorized
Gutierrez (or anyone for that matter), whether verbally or in writing, to borrow money in his behalf, nor was he aware of any such transaction:

ALVIN PATRIMONIO (witness)

ATTY. DE VERA: Did you give Nap Gutierrez any Special Power of Attorney in writing authorizing him to borrow using your money?

WITNESS: No, sir. (T.S.N., Alvin Patrimonio, Nov. 11, 1999, p. 105)8

xxxx

Marasigan however submits that the petitioner’s acts of pre-signing the blank checks and releasing them to Gutierrez suffice to establish that the
petitioner had authorized Gutierrez to fill them out and contract the loan in his behalf.

Marasigan’s submission fails to persuade us.

In the absence of any authorization, Gutierrez could not enter into a contract of loan in behalf of the petitioner. As held in Yasuma v. Heirs of De
Villa,9 involving a loan contracted by de Villa secured by real estate mortgages in the name of East Cordillera Mining Corporation, in the absence of an
SPA conferring authority on de Villa, there is no basis to hold the corporation liable, to wit:

The power to borrow money is one of those cases where corporate officers as agents of the corporation need a special power of attorney. In the case at
bar, no special power of attorney conferring authority on de Villa was ever presented. x x x There was no showing that respondent corporation ever
authorized de Villa to obtain the loans on its behalf.

xxxx

Therefore, on the first issue, the loan was personal to de Villa. There was no basis to hold the corporation liable since there was no authority, express,
implied or apparent, given to de Villa to borrow money from petitioner. Neither was there any subsequent ratification of his act.

xxxx

The liability arising from the loan was the sole indebtedness of de Villa (or of his estate after his death). (citations omitted; emphasis supplied).

This principle was also reiterated in the case of Gozun v. Mercado,10 where this court held:

Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to obtain a loan from him.

xxxx

Petitioner’s testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of his wife. While petitioner claims
that Lilian was authorized by respondent, the statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs.
Annie Mercado.
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and in behalf of respondent. She thus
bound herself in her personal capacity and not as an agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face
purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in
fact authorized to make the mortgage, if he has not acted in the name of the principal. x x x (emphasis supplied).

In the absence of any showing of any agency relations or special authority to act for and in behalf of the petitioner, the loan agreement Gutierrez entered
into with Marasigan is null and void. Thus, the petitioner is not bound by the parties’ loan agreement.

Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally sufficient because the authority to enter into a loan can
never be presumed. The contract of agency and the special fiduciary relationship inherent in this contract must exist as a matter of fact. The person
alleging it has the burden of proof to show, not only the fact of agency, but also its nature and extent. 11 As we held in People v. Yabut:12

Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut, Jr., in Caloocan City cannot, contrary to the holding of the
respondent Judges, be licitly taken as delivery of the checks to the complainant Alicia P. Andan at Caloocan City to fix the venue there. He did not take
delivery of the checks as holder, i.e., as "payee" or "indorsee." And there appears to beno contract of agency between Yambao and Andan so as to bind
the latter for the acts of the former. Alicia P. Andan declared in that sworn testimony before the investigating fiscal that Yambao is but her "messenger" or
"part-time employee." There was no special fiduciary relationship that permeated their dealings. For a contract of agency to exist, the consent of both
parties is essential, the principal consents that the other party, the agent, shall act on his behalf, and the agent consents so to act. It must exist as a fact.
The law makes no presumption thereof. The person alleging it has the burden of proof to show, not only the fact of its existence, but also its nature and
extent. This is more imperative when it is considered that the transaction dealt with involves checks, which are not legal tender, and the creditor may
validly refuse the same as payment of obligation.(at p. 630). (emphasis supplied)

The records show that Marasigan merely relied on the words of Gutierrez without securing a copy of the SPA in favor of the latter and without verifying
from the petitioner whether he had authorized the borrowing of money or release of the check. He was thus bound by the risk accompanying his trust on
the mere assurances of Gutierrez.

No Contract of Loan Was Perfected Between Marasigan And Petitioner, as The Latter’s Consent Was Not Obtained.

Another significant point that the lower courts failed to consider is that a contract of loan, like any other contract, is subject to the rules governing the
requisites and validity of contracts in general.13 Article 1318 of the Civil Code14enumerates the essential requisites for a valid contract, namely:

1. consent of the contracting parties;

2. object certain which is the subject matter of the contract; and

3. cause of the obligation which is established.

In this case, the petitioner denied liability on the ground that the contract lacked the essential element of consent. We agree with the petitioner. As we
explained above, Gutierrez did not have the petitioner’s written/verbal authority to enter into a contract of loan. While there may be a meeting of the
minds between Gutierrez and Marasigan, such agreement cannot bind the petitioner whose consent was not obtained and who was not privy to the loan
agreement. Hence, only Gutierrez is bound by the contract of loan.

True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell into the hands of Marasigan. This act, however, does not
constitute sufficient authority to borrow money in his behalf and neither should it be construed as petitioner’s grant of consent to the parties’ loan
agreement. Without any evidence to prove Gutierrez’ authority, the petitioner’s signature in the check cannot be taken, even remotely, as sufficient
authorization, much less, consent to the contract of loan. Without the consent given by one party in a purported contract, such contract could not have
been perfected; there simply was no contract to speak of.15

With the loan issue out of the way, we now proceed to determine whether the petitioner can be made liable under the check he signed.

II. Liability Under the Instrument

The answer is supplied by the applicable statutory provision found in Section 14 of the Negotiable Instruments Law (NIL) which states:

Sec. 14. Blanks; when may be filled.- Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie
authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the
paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any
such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it
is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and
within a reasonable time.

This provision applies to an incomplete but delivered instrument. Under this rule, if the maker or drawer delivers a pre-signed blank paper to another
person for the purpose of converting it into a negotiable instrument, that person is deemed to have prima facie authority to fill it up. It merely requires that
the instrument be in the possession of a person other than the drawer or maker and from such possession, together with the fact that the instrument is
wanting in a material particular, the law presumes agency to fill up the blanks.16
In order however that one who is not a holder in due course can enforce the instrument against a party prior to the instrument’s completion, two
requisites must exist: (1) that the blank must be filled strictly in accordance with the authority given; and (2) it must be filled up within a reasonable time.
If it was proven that the instrument had not been filled up strictly in accordance with the authority given and within a reasonable time, the maker can set
this up as a personal defense and avoid liability. However, if the holder is a holder in due course, there is a conclusive presumption that authority to fill it
up had been given and that the same was not in excess of authority.17

In the present case, the petitioner contends that there is no legal basis to hold him liable both under the contract and loan and under the check because:
first, the subject check was not completely filled out strictly under the authority he has given and second, Marasigan was not a holder in due course.

Marasigan is Not a Holder in Due Course

The Negotiable Instruments Law (NIL) defines a holder in due course, thus:

Sec. 52 — A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.(emphasis
supplied)

Section 52(c) of the NIL states that a holder in due course is one who takes the instrument "in good faith and for value." It also provides in Section 52(d)
that in order that one may be a holder in due course, it is necessary that at the time it was negotiated to him he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.

Acquisition in good faith means taking without knowledge or notice of equities of any sort which could beset up against a prior holder of the
instrument.18 It means that he does not have any knowledge of fact which would render it dishonest for him to take a negotiable paper. The absence of
the defense, when the instrument was taken, is the essential element of good faith.19

As held in De Ocampo v. Gatchalian:20

In order to show that the defendant had "knowledge of such facts that his action in taking the instrument amounted to bad faith," it is not necessary to
prove that the defendant knew the exact fraud that was practiced upon the plaintiff by the defendant's assignor, it being sufficient to show that the
defendant had notice that there was something wrong about his assignor's acquisition of title, although he did not have notice of the particular wrong that
was committed.

It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted with fraud. It is not necessary that he should know
the particulars or even the nature of the fraud, since all that is required is knowledge of such facts that his action in taking the note amounted bad faith.

The term ‘bad faith’ does not necessarily involve furtive motives, but means bad faith in a commercial sense. The manner in which the defendants
conducted their Liberty Loan department provided an easy way for thieves to dispose of their plunder. It was a case of "no questions asked." Although
gross negligence does not of itself constitute bad faith, it is evidence from which bad faith may be inferred. The circumstances thrust the duty upon the
defendants to make further inquiries and they had no right to shut their eyes deliberately to obvious facts. (emphasis supplied).

In the present case, Marasigan’s knowledge that the petitioner is not a party or a privy to the contract of loan, and correspondingly had no obligation or
liability to him, renders him dishonest, hence, in bad faith. The following exchange is significant on this point:

WITNESS: AMBET NABUS

Q: Now, I refer to the second call… after your birthday. Tell us what you talked about?

A: Since I celebrated my birthday in that place where Nap and I live together with the other crew, there were several visitors that included Danny Espiritu.
So a week after my birthday, Bong Marasigan called me up again and he was fuming mad. Nagmumura na siya. Hinahanap niya si… hinahanap niya si
Nap, dahil pinagtataguan na siya at sinabi na niya na kailangan I-settle na niya yung utang ni Nap, dahil…

xxxx

WITNESS: Yes. Sinabi niya sa akin na kailangan ayusin na bago pa mauwi sa kung saan ang tsekeng tumalbog… (He told me that we have to fix it up
before it…) mauwi pa kung saan…

xxxx

Q: What was your reply, if any?

A: I actually asked him. Kanino ba ang tseke na sinasabi mo?

(Whose check is it that you are referring to or talking about?)

Q: What was his answer?

A: It was Alvin’s check.

Q: What was your reply, if any?

A: I told him do you know that it is not really Alvin who borrowed money from you or what you want to appear…

xxxx

Q: What was his reply?

A: Yes, it was Nap, pero tseke pa rin ni Alvin ang hawak ko at si Alvin ang maiipit dito.(T.S.N., Ambet Nabus, July 27, 2000; pp.65-71; emphasis
supplied)21

Since he knew that the underlying obligation was not actually for the petitioner, the rule that a possessor of the instrument is prima facie a holder in due
course is inapplicable. As correctly noted by the CA, his inaction and failure to verify, despite knowledge of that the petitioner was not a party to the loan,
may be construed as gross negligence amounting to bad faith.

Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally barred from recovery. The NIL does not provide
that a holder who is not a holder in due course may not in any case recover on the instrument. 22 The only disadvantage of a holder who is not in due
course is that the negotiable instrument is subject to defenses as if it were non-negotiable. 23 Among such defenses is the filling up blank not within the
authority.

On this point, the petitioner argues that the subject check was not filled up strictly on the basis of the authority he gave. He points to his instruction not to
use the check without his prior approval and argues that the check was filled up in violation of said instruction.

Check Was Not Completed Strictly Under The Authority Given by The Petitioner

Our own examination of the records tells us that Gutierrez has exceeded the authority to fill up the blanks and use the check.1âwphi1 To repeat,
petitioner gave Gutierrez pre-signed checks to be used in their business provided that he could only use them upon his approval. His instruction could
not be any clearer as Gutierrez’ authority was limited to the use of the checks for the operation of their business, and on the condition that the
petitioner’s prior approval be first secured.

While under the law, Gutierrez had a prima facie authority to complete the check, such prima facie authority does not extend to its use (i.e., subsequent
transfer or negotiation)once the check is completed. In other words, only the authority to complete the check is presumed. Further, the law used the term
"prima facie" to underscore the fact that the authority which the law accords to a holder is a presumption juris tantumonly; hence, subject to subject to
contrary proof. Thus, evidence that there was no authority or that the authority granted has been exceeded may be presented by the maker in order to
avoid liability under the instrument.

In the present case, no evidence is on record that Gutierrez ever secured prior approval from the petitioner to fill up the blank or to use the check. In his
testimony, petitioner asserted that he never authorized nor approved the filling up of the blank checks, thus:

ATTY. DE VERA: Did you authorize anyone including Nap Gutierrez to write the date, May 23, 1994?

WITNESS: No, sir.

Q: Did you authorize anyone including Nap Gutierrez to put the word cash? In the check?

A: No, sir.

Q: Did you authorize anyone including Nap Gutierrez to write the figure ₱200,000 in this check?

A: No, sir.

Q: And lastly, did you authorize anyone including Nap Gutierrez to write the words ₱200,000 only xx in this check?

A: No, sir. (T.S.N., Alvin Patrimonio, November 11, 1999).24

Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the authority when he used the check to pay the loan
he supposedly contracted for the construction of petitioner's house. This is a clear violation of the petitioner's instruction to use the checks for the
expenses of Slam Dunk. It cannot therefore be validly concluded that the check was completed strictly in accordance with the authority given by the
petitioner.

Considering that Marasigan is not a holder in due course, the petitioner can validly set up the personal defense that the blanks were not filled up in
accordance with the authority he gave. Consequently, Marasigan has no right to enforce payment against the petitioner and the latter cannot be obliged
to pay the face value of the check.

WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the petitioner Alvin Patrimonio's petition for review on certiorari. The
appealed Decision dated September 24, 2008 and the Resolution dated April 30, 2009 of the Court of Appeals are consequently ANNULLED AND SET
ASIDE. Costs against the respondents.

SO ORDERED.

9. YOSHIZAKI v. JOY TRANING CENTER OF AURORA

We resolve the petition for review on certiorari1 filed by petitioner Sally Yoshizaki to challenge the February 14, 2006 Decision 2 and the October 3, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 83773.

The Factual Antecedents

Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit religious educational institution. It was the registered owner of a
parcel of land and the building thereon (real properties) located in San Luis Extension Purok No. 1, Barangay Buhangin, Baler, Aurora. The parcel of
land was designated as Lot No. 125-L and was covered by Transfer Certificate of Title (TCT) No. T-25334.4

On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties, a Wrangler jeep, and other personal properties in favor of the
spouses Sally and Yoshio Yoshizaki. On the same date, a Deed of Absolute Sale 5 and a Deed of Sale of Motor Vehicle6 were executed in favor of the
spouses Yoshizaki. The spouses Johnson were members of Joy Training’s board of trustees at the time of sale. On December 7, 1998, TCT No. T-25334
was cancelled and TCT No. T-260527 was issued in the name of the spouses Yoshizaki.

On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V. Rubio, filed an action for the Cancellation of Sales and Damages
with prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki and the spouses
Johnson before the Regional Trial Court of Baler, Aurora (RTC).8 On January 4, 1999, Joy Training filed a Motion to Amend Complaint with the attached
Amended Complaint. The amended complaint impleaded Cecilia A. Abordo, officer-in-charge of the Register of Deeds of Baler, Aurora, as additional
defendant. The RTC granted the motion on the same date.9

In the complaint, Joy Training alleged that the spouses Johnson sold its properties without the requisite authority from the board of directors. 10 It assailed
the validity of a board resolution dated September 1, 199811 which purportedly granted the spouses Johnson the authority to sell its real properties. It
averred that only a minority of the board, composed of the spouses Johnson and Alexander Abadayan, authorized the sale through the resolution. It
highlighted that the Articles of Incorporation provides that the board of trustees consists of seven members, namely: the spouses Johnson, Reuben,
Carmencita Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino.12

Cecilia and the spouses Johnson were declared in default for their failure to file an Answer within the reglementary period. 13 On the other hand, the
spouses Yoshizaki filed their Answer with Compulsory Counterclaims on June 23, 1999. They claimed that Joy Training authorized the spouses Johnson
to sell the parcel of land. They asserted that a majority of the board of trustees approved the resolution. They maintained that the actual members of the
board of trustees consist of five members, namely: the spouses Johnson, Reuben, Alexander, and Abelardo. Moreover, Connie Dayot, the corporate
secretary, issued a certification dated February 20, 199814 authorizing the spouses Johnson to act on Joy Training’s behalf. Furthermore, they
highlighted that the Wrangler jeep and other personal properties were registered in the name of the spouses Johnson. 15 Lastly, they assailed the RTC’s
jurisdiction over the case. They posited that the case is an intra-corporate dispute cognizable by the Securities and Exchange Commission (SEC). 16

After the presentation of their testimonial evidence, the spouses Yoshizaki formally offered in evidence photocopies of the resolution and certification,
among others.17 Joy Training objected to the formal offer of the photocopied resolution and certification on the ground that they were not the best
evidence of their contents.18 In an Order19dated May 18, 2004, the RTC denied the admission of the offered copies.

The RTC Ruling

The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the real properties. However, it held that the sale was valid because
Joy Training authorized the spouses Johnson to sell the real properties. It recognized that there were only five actual members of the board of trustees;
consequently, a majority of the board of trustees validly authorized the sale. It also ruled that the sale of personal properties was valid because they
were registered in the spouses Johnson’s name.20

Joy Training appealed the RTC decision to the CA.

The CA Ruling

The CA upheld the RTC’s jurisdiction over the case but reversed its ruling with respect to the sale of real properties. It maintained that the present action
is cognizable by the RTC because it involves recovery of ownership from third parties.
It also ruled that the resolution is void because it was not approved by a majority of the board of trustees. It stated that under Section 25 of the
Corporation Code, the basis for determining the composition of the board of trustees is the list fixed in the articles of incorporation. Furthermore, Section
23 of the Corporation Code provides that the board of trustees shall hold office for one year and until their successors are elected and qualified. Seven
trustees constitute the board since Joy Training did not hold an election after its incorporation.

The CA did not also give any probative value to the certification. It stated that the certification failed to indicate the date and the names of the trustees
present in the meeting. Moreover, the spouses Yoshizaki did not present the minutes that would prove that the certification had been issued pursuant to
a board resolution.21 The CA also denied22 the spouses Yoshizaki’s motion for reconsideration, prompting Sally23 to file the present petition.

The Petition

Sally avers that the RTC has no jurisdiction over the case. She points out that the complaint was principally for the nullification of a corporate act. The
transfer of the SEC’s original and exclusive jurisdiction to the RTC24 does not have any retroactive application because jurisdiction is a substantive
matter.

She argues that the spouses Johnson were authorized to sell the parcel of land and that she was a buyer in good faith because she merely relied on
TCT No. T-25334. The title states that the spouses Johnson are Joy Training’s representatives.

She also argues that it is a basic principle that a party dealing with a registered land need not go beyond the certificate of title to determine the condition
of the property. In fact, the resolution and the certification are mere reiterations of the spouses Johnson’s authority in the title to sell the real properties.
She further claims that the resolution and the certification are not even necessary to clothe the spouses Johnson with the authority to sell the disputed
properties. Furthermore, the contract of agency was subsisting at the time of sale because Section 108 of Presidential Decree No. (PD) 1529 requires
that the revocation of authority must be approved by a court of competent jurisdiction and no revocation was reflected in the certificate of title. 25

The Case for the Respondent

In its Comment26 and Memorandum,27 Joy Training takes the opposite view that the RTC has jurisdiction over the case. It posits that the action is
essentially for recovery of property and is therefore a case cognizable by the RTC. Furthermore, Sally is estopped from questioning the RTC’s
jurisdiction because she seeks to reinstate the RTC ruling in the present case.

Joy Training maintains that it did not authorize the spouses Johnson to sell its real properties. TCT No. T-25334 does not specifically grant the authority
to sell the parcel of land to the spouses Johnson. It further asserts that the resolution and the certification should not be given any probative value
because they were not admitted in evidence by the RTC. It argues that the resolution is void for failure to comply with the voting requirements under
Section 40 of the Corporation Code. It also posits that the certification is void because it lacks material particulars.

The Issues

The case comes to us with the following issues:

1) Whether or not the RTC has jurisdiction over the present case; and

2) Whether or not there was a contract of agency to sell the real properties between Joy Training and the spouses Johnson.

3) As a consequence of the second issue, whether or not there was a valid contract of sale of the real properties between Joy Training and the spouses
Yoshizaki.

Our Ruling

We find the petition unmeritorious.

The RTC has jurisdiction over disputes concerning the application of the Civil Code

Jurisdiction over the subject matter is the power to hear and determine cases of the general class to which the proceedings before a court belong. 28 It is
conferred by law. The allegations in the complaint and the status or relationship of the parties determine which court has jurisdiction over the nature of
an action.29 The same test applies in ascertaining whether a case involves an intra-corporate controversy.30

The CA correctly ruled that the RTC has jurisdiction over the present case. Joy Training seeks to nullify the sale of the real properties on the ground that
there was no contract of agency between Joy Training and the spouses Johnson. This was beyond the ambit of the SEC’s original and exclusive
jurisdiction prior to the enactment of Republic Act No. 8799 which only took effect on August 3, 2000. The determination of the existence of a contract of
agency and the validity of a contract of sale requires the application of the relevant provisions of the Civil Code. It is a well-settled rule that "disputes
concerning the application of the Civil Code are properly cognizable by courts of general jurisdiction." 31 Indeed, no special skill requiring the SEC’s
technical expertise is necessary for the disposition of this issue and of this case.

The Supreme Court may review questions of fact in a petition for review on certiorari when the findings of fact by the lower courts are conflicting

We are aware that the issues at hand require us to review the pieces of evidence presented by the parties before the lower courts. As a general rule, a
petition for review on certiorari precludes this Court from entertaining factual issues; we are not duty-bound to analyze again and weigh the evidence
introduced in and considered by the lower courts. However, the present case falls under the recognized exception that a review of the facts is warranted
when the findings of the lower courts are conflicting.32 Accordingly, we will examine the relevant pieces of evidence presented to the lower court.

There is no contract of agency between Joy Training and the spouses Johnson to sell the parcel of land with its improvements

Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter." It may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

As a general rule, a contract of agency may be oral. However, it must be written when the law requires a specific form. 33 Specifically, Article 1874 of the
Civil Code provides that the contract of agency must be written for the validity of the sale of a piece of land or any interest therein. Otherwise, the sale
shall be void. A related provision, Article 1878 of the Civil Code, states that special powers of attorney are necessary to convey real rights over
immovable properties.

The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the
authorized act. We unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals34 that a special power of attorneymust express the
powers of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell real estate. When there is any
reasonable doubt that the language so used conveys such power, no such construction shall be given the document. The purpose of the law in requiring
a special power of attorney in the disposition of immovable property is to protect the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another and to caution the buyer to assure himself of the specific authorization of the putative agent. 35

In the present case, Sally presents three pieces of evidence which allegedly prove that Joy Training specially authorized the spouses Johnson to sell the
real properties: (1) TCT No. T-25334, (2) the resolution, (3) and the certification. We quote the pertinent portions of these documents for a thorough
examination of Sally’s claim. TCT No. T-25334, entered in the Registry of Deeds on March 5, 1998, states:

A parcel of land x x x is registered in accordance with the provisions of the Property Registration Decree in the name of JOY TRAINING CENTER OF
AURORA, INC., Rep. by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON, both of legal age, U.S. Citizen, and residents of P.O. Box 3246,
Shawnee, Ks 66203, U.S.A.36(emphasis ours)

On the other hand, the fifth paragraph of the certification provides:

Further, Richard A. and Linda J. Johnson were given FULL AUTHORITY for ALL SIGNATORY purposes for the corporation on ANY and all matters and
decisions regarding the property and ministry here. They will follow guidelines set forth according to their appointment and ministerial and missionary
training and in that, they will formulate and come up with by-laws which will address and serve as governing papers over the center and corporation.
They are to issue monthly and quarterly statements to all members of the corporation.37 (emphasis ours)

The resolution states:

We, the undersigned Board of Trustees (in majority) have authorized the sale of land and building owned by spouses Richard A. and Linda J. Johnson
(as described in the title SN No. 5102156 filed with the Province of Aurora last 5th day of March, 1998. These proceeds are going to pay outstanding
loans against the project and the dissolution of the corporation shall follow the sale. This is a religious, non-profit corporation and no profits or stocks are
issued.38 (emphasis ours)

The above documents do not convince us of the existence of the contract of agency to sell the real properties. TCT No. T-25334 merely states that Joy
Training is represented by the spouses Johnson. The title does not explicitly confer to the spouses Johnson the authority to sell the parcel of land and
the building thereon. Moreover, the phrase "Rep. by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON" 39 only means that the spouses Johnson
represented Joy Training in land registration.

The lower courts should not have relied on the resolution and the certification in resolving the case.1âwphi1 The spouses Yoshizaki did not produce the
original documents during trial. They also failed to show that the production of pieces of secondary evidence falls under the exceptions enumerated in
Section 3, Rule 130 of the Rules of Court.40 Thus, the general rule – that no evidence shall be admissible other than the original document itself when
the subject of inquiry is the contents of a document – applies.41

Nonetheless, if only to erase doubts on the issues surrounding this case, we declare that even if we consider the photocopied resolution and
certification, this Court will still arrive at the same conclusion.

The resolution which purportedly grants the spouses Johnson a special power of attorney is negated by the phrase "land and building owned by spouses
Richard A. and Linda J. Johnson."42 Even if we disregard such phrase, the resolution must be given scant consideration. We adhere to the CA’s position
that the basis for determining the board of trustees’ composition is the trustees as fixed in the articles of incorporation and not the actual members of the
board. The second paragraph of Section 2543 of the Corporation Code expressly provides that a majority of the number of trustees as fixed in the articles
of incorporation shall constitute a quorum for the transaction of corporate business.

Moreover, the certification is a mere general power of attorney which comprises all of Joy Training’s business. 44Article 1877 of the Civil Code clearly
states that "an agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or
that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited
management."45

The contract of sale is unenforceable

Necessarily, the absence of a contract of agency renders the contract of sale unenforceable;46 Joy Training effectively did not enter into a valid contract
of sale with the spouses Yoshizaki. Sally cannot also claim that she was a buyer in good faith. She misapprehended the rule that persons dealing with a
registered land have the legal right to rely on the face of the title and to dispense with the need to inquire further, except when the party concerned has
actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.47This rule applies when the ownership of
a parcel of land is disputed and not when the fact of agency is contested.

At this point, we reiterate the established principle that persons dealing with an agent must ascertain not only the fact of agency, but also the nature and
extent of the agent’s authority.48 A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the
power of attorney, or the instructions as regards the agency.49 The basis for agency is representation and a person dealing with an agent is put upon
inquiry and must discover on his own peril the authority of the agent. 50 Thus, Sally bought the real properties at her own risk; she bears the risk of injury
occasioned by her transaction with the spouses Johnson.

WHEREFORE, premises considered, the assailed Decision dated February 14, 2006 and Resolution dated October 3, 2006 of the Court of Appeals are
hereby AFFIRMED and the petition is hereby DENIED for lack of merit.

SO ORDERED.

10. JUSAYAN, ET. AL v. SOMBILLA

The Court resolves whether a lease of agricultural land between the respondent and the predecessor of the petitioners was a civil law lease or an
agricultural lease. The resolution is determinative of whether or not the Regional Trial Court (RTC) had original exclusive jurisdiction over the action
commenced by the predecessor of the petitioners against the respondent.

The Case

Under review on certiorari is the decision promulgated on October 20, 2003,1 whereby the Court of Appeals (CA) reversed the judgment in favor of the
petitioners rendered on April 13, 1999 in CAR Case No. 17117 entitled Timoteo Jusayan, Manuel Jusayan, Alfredo Jusayan and Michael Jusayan v.
Jorge Sombilla by the RTC, Branch 30, in Iloilo City.

Antecedents

Wilson Jesena (Wilson) owned four parcels of land situated in New Lucena, Iloilo. On June 20, 1970, Wilson entered into an agreement with respondent
Jorge Sombilla (Jorge),3 wherein Wilson designated Jorge as his agent to supervise the tilling and farming of his riceland in crop year 1970-1971. On
August 20, 1971, before the expiration of the agreement, Wilson sold the four parcels of land to Timoteo Jusayan (Timoteo). 4 Jorge and Timoteo verbally
agreed that Jorge would retain possession of the parcels of land and would deliver 110 cavans of palay annually to Timoteo without need for accounting
of the cultivation expenses provided that Jorge would pay the irrigation fees. From 1971 to 1983, Timoteo and Jorge followed the arrangement. In 1975,
the parcels of land were transferred in the names of Timoteo’s sons, namely; Manuel, Alfredo and Michael (petitioners). In 1984, Timoteo sent several
letters to Jorge terminating his administration and demanding the return of the possession of the parcels of land. 5

Due to the failure of Jorge to render accounting and to return the possession of the parcels of land despite demands, Timoteo filed on June 30, 1986 a
complaint for recovery of possession and accounting against Jorge in the RTC (CAR Case No. 17117). Following Timoteo’s death on October 4, 1991,
the petitioners substituted him as the plaintiffs.

In his answer,6 Jorge asserted that he enjoyed security of tenure as the agricultural lessee of Timoteo; and that he could not be dispossessed of his
landholding without valid cause.

Ruling of the RTC

In its decision rendered on April 13, 1999,7 the RTC upheld the contractual relationship of agency between Timoteo and Jorge; and ordered Jorge to
deliver the possession of the parcels of land to the petitioners.

Judgment of the CA

Jorge appealed to the CA.

In the judgment promulgated on October 20, 2003,8 the CA reversed the RTC and dismissed the case, declaring that the contractual relationship
between the parties was one of agricultural tenancy; and that the demand of Timoteo for the delivery of his share in the harvest and the payment of
irrigation fees constituted an agrarian dispute that was outside the jurisdiction of the RTC, and well within the exclusive jurisdiction of the Department of
Agriculture (DAR) pursuant to Section 3(d) of Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988).

Issues

The petitioners now appeal upon the following issues, namely:

a.) Whether or not the relationship between the petitioners and respondent is that of agency or agricultural leasehold; and
b.) Whether or not RTC, Branch 30, Iloilo City as Regional Trial Court and Court of Agrarian Relations, had jurisdiction over the herein case. 9
 Ruling of the Court

The petition for review lacks merit.

To properly resolve whether or not the relationship between Timoteo and Jorge was that of an agency or a tenancy, an analysis of the concepts of
agency and tenancy is in order.

In agency, the agent binds himself to render some service or to do something in representation or on behalf of the principal, with the consent or authority
of the latter.10 The basis of the civil law relationship of agency is representation,11 the elements of which are, namely: (a) the relationship is established
by the parties’ consent, express or implied; (b) the object is the execution of a juridical act in relation to a third person; (c) the agent acts as
representative and not for himself; and (d) the agent acts within the scope of his authority. 12 Whether or not an agency has been created is determined
by the fact that one is representing and acting for another.13 The law does not presume agency; hence, proving its existence, nature and extent is
incumbent upon the person alleging it.14chanRoblesvirtualLawlibrary

The claim of Timoteo that Jorge was his agent contradicted the verbal agreement he had fashioned with Jorge. By assenting to Jorge’s possession of
the land sans accounting of the cultivation expenses and actual produce of the land provided that Jorge annually delivered to him 110 cavans of palay
and paid the irrigation fees belied the very nature of agency, which was representation. The verbal agreement between Timoteo and Jorge left all
matters of agricultural production to the sole discretion of Jorge and practically divested Timoteo of the right to exercise his authority over the acts to be
performed by Jorge. While in possession of the land, therefore, Jorge was acting for himself instead of for Timoteo. Unlike Jorge, Timoteo did not benefit
whenever the production increased, and did not suffer whenever the production decreased. Timoteo’s interest was limited to the delivery of the 110
cavans of palay annually without any concern about how the cultivation could be improved in order to yield more produce.

On the other hand, to prove the tenancy relationship, Jorge presented handwritten receipts 15 indicating that the sacks of palay delivered to and received
by one Corazon Jusayan represented payment of rental. In this regard, rental was the legal term for the consideration of the lease. 16 Consequently, the
receipts substantially proved that the contractual relationship between Jorge and Timoteo was a lease.

Yet, the lease of an agricultural land can be either a civil law or an agricultural lease. In the civil law lease, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period that may be definite or indefinite. 17 In the agricultural lease, also termed as a
leasehold tenancy, the physical possession of the land devoted to agriculture is given by its owner or legal possessor (landholder) to another (tenant) for
the purpose of production through labor of the latter and of the members of his immediate farm household, in consideration of which the latter agrees to
share the harvest with the landholder, or to pay a price certain or ascertainable, either in produce or in money, or in both. 18 Specifically, in Gabriel v.
Pangilinan,19 this Court differentiated between a leasehold tenancy and a civil law lease in the following manner, namely: (1) the subject matter of a
leasehold tenancy is limited to agricultural land, but that of a civil law lease may be rural or urban property; (2) as to attention and cultivation, the law
requires the leasehold tenant to personally attend to and cultivate the agricultural land; the civil law lessee need not personally cultivate or work the thing
leased; (3) as to purpose, the landholding in leasehold tenancy is devoted to agriculture; in civil law lease, the purpose may be for any other lawful
pursuits; and(4) as to the law that governs, the civil law lease is governed by the Civil Code, but the leasehold tenancy is governed by special laws.

The sharing of the harvest in proportion to the respective contributions of the landholder and tenant, otherwise called share tenancy, 20 was abolished on
August 8, 1963 under Republic Act No. 3844. To date, the only permissible system of agricultural tenancy is leasehold tenancy, 21 a relationship wherein a
fixed consideration is paid instead of proportionately sharing the harvest as in share tenancy.

In Teodoro v. Macaraeg,22 this Court has synthesized the elements of agricultural tenancy to wit: (1) the object of the contract or the relationship is an
agricultural land that is leased or rented for the purpose of agricultural production; (2) the size of the landholding is such that it is susceptible of personal
cultivation by a single person with the assistance of the members of his immediate farm household; (3) the tenant-lessee must actually and personally
till, cultivate or operate the land, solely or with the aid of labor from his immediate farm household; and (4) the landlord-lessor, who is either the lawful
owner or the legal possessor of the land, leases the same to the tenant-lessee for a price certain or ascertainable either in an amount of money or
produce.

It can be gleaned that in both civil law lease of an agricultural land and agricultural lease, the lessor gives to the lessee the use and possession of the
land for a price certain. Although the purpose of the civil law lease and the agricultural lease may be agricultural cultivation and production, the distinctive
attribute that sets a civil law lease apart from an agricultural lease is the personal cultivation by the lessee. An agricultural lessee cultivates by himself
and with the aid of those of his immediate farm household. Conversely, even when the lessee is in possession of the leased agricultural land and paying
a consideration for it but is not personally cultivating the land, he or she is a civil law lessee.

The only issue remaining to be resolved is whether or not Jorge personally cultivated the leased agricultural land.

Cultivation is not limited to the plowing and harrowing of the land, but includes the various phases of farm labor such as the maintenance, repair and
weeding of dikes, paddies and irrigation canals in the landholding. Moreover, it covers attending to the care of the growing plants, 23 and grown plants like
fruit trees that require watering, fertilizing, uprooting weeds, turning the soil, fumigating to eliminate plant pests 24 and all other activities designed to
promote the growth and care of the plants or trees and husbanding the earth, by general industry, so that it may bring forth more products or
fruits.25 In Tarona v. Court of Appeals,26 this Court ruled that a tenant is not required to be physically present in the land at all hours of the day and night
provided that he lives close enough to the land to be cultivated to make it physically possible for him to cultivate it with some degree of constancy.

Nor was there any question that the parcels of agricultural land with a total area of 7.9 hectares involved herein were susceptible of cultivation by a
single person with the help of the members of his immediate farm household. As the Court has already observed, an agricultural land of an area of four
hectares,27 or even of an area as large as 17 hectares,28 could be personally cultivated by a tenant by himself or with help of the members of his farm
household.

It is elementary that he who alleges the affirmative of the issue has the burden of proof. 29 Hence, Jorge, as the one claiming to be an agricultural tenant,
had to prove all the requisites of his agricultural tenancy by substantial evidence.30 In that regard, his knowledge of and familiarity with the landholding,
its production and the instances when the landholding was struck by drought definitely established that he personally cultivated the land. 31 His ability to
farm the seven hectares of land despite his regular employment as an Agricultural Technician at the Municipal Agriculture Office 32 was not physically
impossible for him to accomplish considering that his daughter, a member of his immediate farm household, was cultivating one of the parcels of the
land.33 Indeed, the law did not prohibit him as the agricultural lessee who generally worked the land himself or with the aid of member of his immediate
household from availing himself occasionally or temporarily of the help of others in specific jobs. 34 In short, the claim of the petitioners that the
employment of Jorge as an Agricultural Technician at the Municipal Agriculture Office disqualified him as a tenant lacked factual or legal basis.

Section 7 of Republic Act No. 3844 provides that once there is an agricultural tenancy, the agricultural tenant’s right to security of tenure is recognized
and protected. The landowner cannot eject the agricultural tenant from the land unless authorized by the proper court for causes provided by law.
Section 36 of Republic Act No. 3844, as amended by Republic Act No. 6389, enumerates the several grounds for the valid dispossession of the
tenant.35It is underscored, however, that none of such grounds for valid dispossession of landholding was attendant in Jorge’s case.

Although the CA has correctly categorized Jorge’s case as an agrarian dispute, it ruled that the RTC lacked jurisdiction over the case based on Section
50 of Republic Act No. 6657, which vested in the Department of Agrarian Reform (DAR) the primary jurisdiction to determine and adjudicate agrarian
reform matters and the exclusive original jurisdiction over all matters involving the implementation of agrarian reform except disputes falling under the
exclusive jurisdiction of the Department of Agriculture and the Department of Environment and Natural Resources.

We hold that the CA gravely erred. The rule is settled that the jurisdiction of a court is determined by the statute in force at the time of the
commencement of an action.36 In 1980, upon the passage of Batas Pambansa Blg. 129 (Judiciary Reorganization Act), the Courts of Agrarian Relations
were integrated into the Regional Trial Courts and the jurisdiction of the Courts of Agrarian Relations was vested in the Regional Trial Courts. 37 It was
only on August 29, 1987, when Executive Order No. 229 took effect, that the general jurisdiction of the Regional Trial Courts to try agrarian reform
matters was transferred to the DAR. Therefore, the RTC still had jurisdiction over the dispute at the time the complaint was filed in the RTC on June 30,
1986.

WHEREFORE, the Court GRANTS the petition for review on certiorari by PARTIALLY AFFIRMING the decision of the Court of Appeals to the extent
that it upheld the tenancy relationship of the parties; DISMISSES the complaint for recovery of possession and accounting; and ORDERS the petitioners
to pay the costs of suit.

The parties are ordered to comply with their undertakings as agricultural lessor and agricultural lessee.

SO ORDERED.

Article 1869 – Kinds of Agency; Form of Agency

1. LIM v. CA

CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS ARE OBLIGATORY IN WHATEVER FORM ENTERED; PLACE OF SIGNATURE
IMMATERIAL; PARTY BOUND THEREON THE MOMENT SHE AFFIXED HER SIGNATURE. - Rosa Lims signature indeed appears on the upper
portion of the receipt immediately below the description of the items taken. We find that this fact does not have the effect of altering the terms of the
transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto on
the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the
terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from their breach. This is clear from Article 1356 of the
New Civil Code which provides: Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for
their validity are present. In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis,
thus making the position of petitioners signature thereto immaterial.

ID.; ID.; CONTRACT OF AGENCY; NO FORMALITIES REQUIRED. - There are some provisions of the law which require certain formalities for
particular contracts. The first is when the form is required for the validity of the contract; the second is when it is required to make the contract effective
as against the third parties such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the purppose of proving the
existence of the contract, such as those provided in the Statute of Frauds in Article 1403. A contract of agency to sell on commission basis does not
belong to any of these three categories, hence, it is valid and enforceable in whatever form it may be entered into.

This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No. 10290, entitled People v. Rosa Lim, promulgated on August 30,
1991.

On January 26, 1989, an Information for Estafa was filed against petitioner Rosa Lim before Branch 92 of the Regional Trial Court of Quezon City.
[1]
The Information reads:

That on or about the 8th day of October 1987, in Quezon City, Philippines and within the jurisdiction of this Honorable Court, the said accused with intent
to gain, with unfaithfulness and/or abuse of confidence, did, then and there, wilfully, unlawfully and feloniously defraud one VICTORIA SUAREZ, in the
following manner, to wit: on the date and place aforementioned said accused got and received in trust from said complainant one (1) ring 3.35 solo worth
P169,000.00, Philippine Currency, with the obligation to sell the same on commission basis and to turn over the proceeds of the sale to said complainant
or to return said jewelry if unsold, but the said accused once in possession thereof and far from complying with her obligation despite repeated demands
therefor, misapplied, misappropriated and converted the same to her own personal use and benefit, to the damage and prejudice of the said offended
party in the amount aforementioned and in such other amount as may be awarded under the provisions of the Civil Code.

CONTRARY TO LAW.[2]

After arraignment and trial on the merits, the trial court rendered judgment, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of estafa as defined and penalized under Article 315, paragraph 1(b) of
the Revised Penal Code;

2. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and TWO (2) MONTHS of prision correccional as minimum, to TEN (10)
YEARS of prision mayor as maximum;

3. Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its value in the amount of P169,000 without subsidiary imprisonment in
case of insolvency; and

4. To pay costs.[3]

On appeal, the Court of Appeals affirmed the Judgment of conviction with the modification that the penalty imposed shall be six (6) years, eight (8)
months and twenty- one (21) days to twenty (20) years in accordance with Article 315, paragraph 1 of the Revised Penal Code. [4]

Petitioner filed a motion for reconsideration before the appellate court on September 20, 1991, but the motion was denied in a Resolution dated
November 11, 1991.

In her final bid to exonerate herself, petitioner filed the instant petition for review alleging the following grounds:

THE RESPONDENT COURT VIOLATED THE CONSTITUTION, THE RULES OF COURT AND THE DECISION OF THIS HONORABLE COURT IN
NOT PASSING UPON THE FIRST AND THIRD ASSIGNED ERRORS IN PETITIONERS BRIEF;

II

THE RESPONDENT COURT FAILED TO APPLY THE PRINCIPLE THAT THE PAROL EVIDENCE RULE WAS WAIVED WHEN THE PRIVATE
PROSECUTOR CROSS-EXAMINED THE PETITIONER AND AURELIA NADERA AND WHEN COMPLAINANT WAS CROSS-EXAMINED BY THE
COUNSEL FOR THE PETITIONER AS TO THE TRUE NATURE OF THE AGREEMENT BETWEEN THE PARTIES WHEREIN IT WAS DISCLOSED
THAT THE TRUE AGREEMENT OF THE PARTIES WAS A SALE OF JEWELRIES AND NOT WHAT WAS EMBODIED IN THE RECEIPT MARKED AS
EXHIBIT A WHICH WAS RELIED UPON BY THE RESPONDENT COURT IN AFFIRMING THE JUDGMENT OF CONVICTION AGAINST HEREIN
PETITIONER; and

III

THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE PRINCIPLE ENUNCIATED BY THIS HONORABLE COURT TO THE EFFECT
THAT ACCUSATION IS NOT, ACCORDING TO THE FUNDAMENTAL LAW, SYNONYMOUS WITH GUILT: THE PROSECUTION MUST OVERTHROW
THE PRESUMPTION OF INNOCENCE WITH PROOF OF GUILT BEYOND REASONABLE DOUBT. TO MEET THIS STANDARD, THERE IS NEED
FOR THE MOST CAREFUL SCRUTINY OF THE TESTIMONY OF THE STATE, BOTH ORAL AND DOCUMENTARY, INDEPENDENTLY OF
WHATEVER DEFENSE IS OFFERED BY THE ACCUSED. ONLY IF THE JUDGE BELOW AND THE APPELLATE TRIBUNAL COULD ARRIVE AT A
CONCLUSION THAT THE CRIME HAD BEEN COMMITTED PRECISELY BY THE PERSON ON TRIAL UNDER SUCH AN EXACTING TEST SHOULD
SENTENCE THUS REQUIRED THAT EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT. THE PROOF AGAINST HIM MUST SURVIVE THE
TEST OF REASON, THE STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY JUDGMENT. (People v. Austria, 195 SCRA 700)[5]

Herein the pertinent facts as alleged by the prosecution.

On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu received from private respondent Victoria Suarez the following two
pieces of jewelry: one (1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00, to be sold on commission basis. The
agreement was reflected in a receipt marked as Exhibit A [6] for the prosecution. The transaction took place at the Sir Williams Apartelle in Timog Avenue,
Quezon City, where Rosa Lim was temporarily billeted.

On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to return the diamond ring or to turn over the proceeds thereof
if sold. As a result, private complainant, aside from making verbal demands, wrote a demand letter [7] to petitioner asking for the return of said ring or the
proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter [8] to private respondents counsel alleging that Rosa Lim had returned
both ring and bracelet to Vicky Suarez sometime in September, 1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as
the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315, par. 1(b) of the Revised Penal Code for which
the petitioner herein stands convicted.

Petitioner has a different version.

Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October 1987, together with one Aurelia Nadera, who introduced
petitioner to private respondent, and that they were lodged at the Williams Apartelle in Timog, Quezon City. Petitioner denied that the transaction was for
her to sell the two pieces of jewelry on commission basis. She told Mrs. Suarez that she would consider buying the pieces of jewelry for her own use and
that she would inform the private complainant of such decision before she goes back to Cebu. Thereafter, the petitioner took the pieces of jewelry and
told Mrs. Suarez to prepare the necessary paper for me to sign because I was not yet prepare(d) to buy it. [9] After the document was prepared, petitioner
signed it. To prove that she did not agree to the terms of the receipt regarding the sale on commission basis, petitioner insists that she signed the
aforesaid document on the upper portion thereof and not at the bottom where a space is provided for the signature of the person(s) receiving the jewelry.
[10]

On October 12, 1987 before departing for Cebu, petitioner called up Mrs. Suarez by telephone in order to inform her that she was no longer
interested in the ring and bracelet. Mrs. Suarez replied that she was busy at the time and so, she instructed the petitioner to give the pieces of jewelry to
Aurelia Nadera who would in turn give them back to the private complainant. The petitioner did as she was told and gave the two pieces of jewelry to
Nadera as evidenced by a handwritten receipt, dated October 12, 1987.[11]

Two issues need to be resolved: First, what was the real transaction between Rosa Lim and Vicky Suarez - a contract of agency to sell on
commission basis as set out in the receipt or a sale on credit; and, second, was the subject diamond ring returned to Mrs. Suarez through Aurelia
Nadera?

Petitioner maintains that she cannot be liable for estafa since she never received the jewelries in trust or on commission basis from Vicky
Suarez. The real agreement between her and the private respondent was a sale on credit with Mrs. Suarez as the owner-seller and petitioner as the
buyer, as indicated by the fact that petitioner did not sign on the blank space provided for the signature of the person receiving the jewelry but at the
upper portion thereof immediately below the description of the items taken.[12]

The contention is far from meritorious.

The receipt marked as Exhibit A which establishes a contract of agency to sell on commission basis between Vicky Suarez and Rosa Lim is herein
reproduced in order to come to a proper perspective:

THIS IS TO CERTIFY, that I received from Vicky Suarez PINATUTUNAYAN KO na aking tinanggap kay _______________ the following jewelries:
ang mga alahas na sumusunod:

Description Price
Mga Uri Halaga

1 ring 3.35 dolo P 169,000.00

1 bracelet 170.000.00
total Kabuuan P 339.000.00

in good condition, to be sold in CASH ONLY within . . .days from date of signing this receipt na nasa mabuting kalagayan upang ipagbili ng KALIWAAN
(ALCONTADO) lamang sa loob ng. . . araw mula ng ating pagkalagdaan:

if I could not sell, I shall return all the jewelry within the period mentioned above; if I would be able to sell, I shall immediately deliver and account the
whole proceeds of sale thereof to the owner of the jewelries at his/her residence; my compensation or commission shall be the over-price on the value of
each jewelry quoted above. I am prohibited to sell any jewelry on credit or by installment; deposit, give for safekeeping; lend, pledge or give as security
or guaranty under any circumstance or manner, any jewelry to other person or persons.

kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na panahong nakatala sa itaas; kung maipagbili ko naman ay dagli kong
isusulit at ibibigay ang buong pinagbilhan sa may-ari ng mga alahas sa kanyang bahay tahanan; ang aking gantimpala ay ang mapapahigit na halaga sa
nakatakdang halaga sa itaas ng bawat alahas HIND I ko ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan ang alin mang alahas, ilalagak,
ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit sa anong paraan ang alin mang alahas sa ibang mga tao o tao.

I sign my name this . . . day of. . . 19 . . . at Manila, NILALAGDAAN ko ang kasunduang ito ngayong ika____ ng dito sa Maynila.

Signature of Persons who

received jewelries (Lagda
ng Tumanggap ng mga
Alahas)

Address: . . . . . . . . . . .

Rosa Lims signature indeed appears on the upper portion of the receipt immediately below the description of the items taken. We find that this fact
does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does
it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her
signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise
from their breach. This is clear from Article 1356 of the New Civil Code which provides:

Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. x x x.

However, there are some provisions of the law which require certain formalities for particular contracts. The first is when the form is required for the
validity of the contract; the second is when it is required to make the contract effective as against third parties such as those mentioned in Articles 1357
and 1358; and the third is when the form is required for the purpose of proving the existence of the contract, such as those provided in the Statute of
Frauds in Article 1403.[13] A contract of agency to sell on commission basis does not belong to any of these three categories, hence it is valid and
enforceable in whatever form it may be entered into.

Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto. This is
in the case of notarial wills found in Article 805 of the Civil Code, to wit:

Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself x x x.

The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each and every
page thereof, except the last, on the left margin x x x.
 In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis, thus making the
position of petitioners signature thereto immaterial.

Petitioner insists, however, that the diamond ring had been returned to Vicky Suarez through Aurelia Nadera, thus relieving her of any
liability. Rosa Lim testified to this effect on direct examination by her counsel:

Q: And when she left the jewelries with you, what did you do thereafter?

A: On October 12, I was bound for Cebu. So I called up Vicky through telephone and informed her that I am no longer interested in the
bracelet and ring and that 1 will just return it.

Q: And what was the reply of Vicky Suarez?

A: She told me that she could not come to the apartelle since she was very busy. So, she asked me if Aurelia was there and when I informed
her that Aurelia was there, she instructed me to give the pieces of jewelry to Aurelia who in turn will give it back to Vicky.

Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera?

A: Yes, Your Honor.[14]

This was supported by Aurelia Nadera in her direct examination by petitioners counsel:

Q: Do you know if Rosa Lim in fact returned the jewelries ?

A: She gave the jewelries to me.

Q: Why did Rosa Lim give the jewelries to you?

A: Rosa Lim called up Vicky Suarez the following morning and told Vicky Suarez that she was going home to Cebu and asked if she could
give the jewelries to me.

Q: And when did Rosa Lim give to you the jewelries?

A: Before she left for Cebu.[15]

On rebuttal, these testimonies were belied by Vicky Suarez herself:

Q: It has been testified to here also by both Aurelia Nadera and Rosa Lim that you gave authorization to Rosa Lim to turn over the two (2)
pieces of jewelries mentioned in Exhibit A to Aurelia Nadera, what can you say about that?

A:. That is not true sir, because at that time Aurelia Nadera is highly indebted to me in the amount of P 140,000.00, so if I gave it to Nadera, I
will be exposing myself to a high risk.[16]

The issue as to the return of the ring boils down to one of credibility. Weight of evidence is not determined mathematically by the numerical
superiority of the witnesses testifying to a given fact. It depends upon its practical effect in inducing belief on the part of the judge trying the case. [17] In
the case at bench, both the trial court and the Court of Appeals gave weight to the testimony of Vicky Suarez that she did not authorize Rosa Lim to
return the pieces of jewelry to Nadera. The respondent court, in affirming the trial court, said:

x x x This claim (that the ring had been returned to Suarez thru Nadera) is disconcerting. It contravenes the very terms of Exhibit A. The instruction by
the complaining witness to appellant to deliver the ring to Aurelia Nadera is vehemently denied by the complaining witness, who declared that she did
not authorize and/or instruct appellant to do so. And thus, by delivering the ring to Aurelia without the express authority and consent of the complaining
witness, appellant assumed the right to dispose of the jewelry as if it were hers, thereby committing conversion, a clear breach of trust, punishable under
Article 315, par. 1(b), Revised Penal Code.

We shall not disturb this finding of the respondent court. It is well settled that we should not interfere with the judgment of the trial court in
determining the credibility of witnesses, unless there appears in the record some fact or circumstance of weight and influence which has been
overlooked or the significance of which has been misinterpreted. The reason is that the trial court is in a better position to determine questions involving
credibility having heard the witnesses and having observed their deportment and manner of testifying during the trial. [18]

Article 315, par. 1(b) of the Revised Penal Code provides:

ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:

xxx xxx xxx

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on
commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation
be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property.

xxx xxx xxx

The elements of estafa with abuse of confidence under this subdivision are as follows: (1) That money, goods, or other personal property be
received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return,
the same; (2) That there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; (3) That such
misappropriation or conversion or denial is to the prejudice of another; and (4) That there is a demand made by the offended party to the offender (Note:
The 4th element is not necessary when there is evidence of misappropriation of the goods by the defendant). [19]

All the elements of estafa under Article 315, Paragraph 1(b) of the Revised Penal Code, are present in the case at bench. First, the receipt marked
as Exhibit A proves that petitioner Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be sold on commission basis. Second, petitioner
misappropriated or converted the jewelry to her own use; and, third, such misappropriation obviously caused damage and prejudice to the private
respondent.

WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

2. EQUITABLE PCI BANK v. KU

Can a person be evicted by virtue of a decision rendered in an ejectment case where she was not joined as a party?This was the issue that confronted
the Court of Appeals, which resolved the issue in the negative. To hold the contrary, it said, would violate due process. Given the circumstances of the
present case, petitioner Equitable PCI Bank begs to differ. Hence, this petition.

On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc., and Ku Giok Heng, as Vice-President/General Manager of the
same corporation, mortgaged the subject property to the Equitable Banking Corporation, now known as Equitable PCI Bank to secure Noddy Inc.s loan
to Equitable. The property, a residential house and lot located in La Vista, Quezon City, was registered in respondents name.

Noddy, Inc. subsequently failed to pay the loan secured by the mortgage, prompting petitioner to foreclose the property extrajudicially. As the winning
bidder in the foreclosure sale, petitioner was issued a certificate of sale.Respondent failed to redeem the property. Thus, on December 10, 1984, the
Register of Deeds canceled the Transfer Certificate of Title in the name of respondent and a new one was issued in petitioners name.

On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City Metropolitan Trial Court (MeTC) against respondents father Ku
Giok Heng. Petitioner alleged that it allowed Ku Giok Heng to remain in the property on the condition that the latter pay rent. Ku Giok Hengs failure to
pay rent prompted the MeTC to seek his ejectment. Ku Giok Heng denied that there was any lease agreement over the property.

On December 8, 1994, the MeTC rendered a decision in favor of petitioner and ordered Ku Giok Heng to, among other things, vacate the premises. It
ruled:

x x x for his failure or refusal to pay rentals despite proper demands, the defendant had not established his right for his continued possession of or stay
in the premises acquired by the plaintiff thru foreclosure, the title of which had been duly transferred in the name of the plaintiff. The absence of lease
agreement or agreement for the payment of rentals is of no moment in the light of the prevailing Supreme Court ruling on the matter. Thus: It is settled
that the buyer in foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one (1) year after the
registration of the sale is as such he is entitled to the possession of the property and the demand at any time following the consolidation of ownership
and the issuance to him of a new certificate of title. The buyer can, in fact, demand possession of the land even during the redemption period except that
he has to post a bond in accordance with Section 7 of Act No. 3155 as amended. Possession of the land then becomes an absolute right of the
purchaser as confirmed owner. Upon proper application and proof of title, the issuance of a writ of possession becomes a ministerial duty of the
court. (David Enterprises vs. IBAA[,] 191 SCRA 116).[1]

Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and his daughter, respondent Rosita Ku, filed on December 20, 1994, an action
before the Regional Trial Court (RTC) of Quezon City to nullify the decision of the MeTC. Finding no merit in the complaint, the RTC on September 13,
1999 dismissed the same and ordered the execution of the MeTC decision.

Respondent filed in the Court of Appeals (CA) a special civil action for certiorari assailing the decision of the RTC. She contended that she was not made
a party to the ejectment suit and was, therefore, deprived of due process.The CA agreed and, on March 31, 2000, rendered a decision enjoining the
eviction of respondent from the premises.

On May 10, 2000, Equitable PCI Bank filed in this Court a motion for an extension of 30 days from May 10, 2000 or until June 9, 2000 to file its petition
for review of the CA decision. The motion alleged that the Bank received the CA decision on April 25, 2000. [2] The Court granted the motion for a 30-day
extension counted from the expiration of the reglementary period and conditioned upon the timeliness of the filing of [the] motion [for extension]. [3]

On June 13, 2000,[4] Equitable Bank filed its petition, contending that there was no need to name respondent Rosita Ku as a party in the action for
ejectment since she was not a resident of the premises nor was she in possession of the property.

The petition is meritorious.

Generally, no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment rendered by the
court.[5] Nevertheless, a judgment in an ejectment suit is binding not only upon the defendants in the suit but also against those not made parties thereto,
if they are:

a) trespassers, squatters or agents of the defendant fraudulently occupying the property to frustrate the judgment;

b) guests or other occupants of the premises with the permission of the defendant;

c) transferees pendente lite;

d) sub-lessees;

e) co-lessees; or

f) members of the family, relatives and other privies of the defendant. [6]

Thus, even if respondent were a resident of the property, a point disputed by the parties, she is nevertheless bound by the judgment of the MeTC in the
action for ejectment despite her being a non-party thereto. Respondent is the daughter of Ku Giok Heng, the defendant in the action for ejectment.

Respondent nevertheless claims that the petition is defective. The bank alleged in its petition that it received a copy of the CA decision on April 25,
2000. A Certification dated June 6, 2000 issued by the Manila Central Post Office reveals, however, that the copy was duly delivered to and received by
Joel Rosales (Authorized Representative) on April 24, 2000.[7] Petitioners motion for extension to file this petition was filed on May 10, 2000, sixteen
(16) days from the petitioners receipt of the CA decision (April 24, 2000) and one (1) day beyond the reglementary period for filing the petition for review
(May 9, 2000).

Petitioner however maintains its honest representation of having received [a copy of the decision] on April 25, 2000. [8] Appended as Annex A to
petitioners Reply is an Affidavit[9] dated October 27, 2000 and executed by Joel Rosales, who was mentioned in the Certification as having received the
decision. The Affidavit states:

(1) I am an employee of Unique Industrial & Allied Services, Inc. (Unique) a corporation duly organized and existing under Philippine laws with principal
place of business at 1206 Vito Cruz St., Malate, Manila, and I am assigned with the Equitable PCI Bank, Mail and Courier Department, Equitable PCI
Bank Tower II, cor. Makati Avenue and H.V. dela Costa St., Makati City, Metro Manila;

(2) Under the contract of services between the Bank and Unique, it is my official duty and responsibility to receive and pick-up from the Manila Central
Post Office (CPO) the various mails, letters, correspondence, and other mail matters intended for the banks various departments and offices at Equitable
Bank Building, 262 Juan Luna St., Binondo, Manila. This building, however, also houses various other offices or tenants not related to the Bank.

(3) I am not the constituted agent of Curato Divina Mabilog Niedo Magturo Pagaduan Law Office whose former address is at Rm. 405 4/F Equitable
Bank Bldg., 262 Juan Luna St., Binondo, Manila, for purposes of receiving their incoming mail matters; neither am I any such agent of the various other
tenants of the said Building. On occasions when I receive mail matters for said law office, it is only to help them receive their letters promptly.

(4) On April 24, 2000, I received the registered letter sent by the Court of Appeals, covered by Registry Receipt No. 125234 and Delivery No. 4880 (copy
of envelope attached as Annex A) together with other mail matters, and brought them to the Mail and Courier Department;

(5) After sorting out these mail matters, on April 25, 2000, I erroneously recorded them on page 422 of my logbook as having been received by me on
said dated April 25, 2000 (copy of page 422 is attached as Annex B).

(6) On April 27, 2000, this letter was sent by the Mail and Courier Department to said Law Office whose receiving clerk Darwin Bawar opened the letter
and stamped on the Notice of Judgment their actual date of receipt: April 27, 2000 (copy of the said Notice with the date so stamped is attached as
Annex C).

(7) On May 8, 2000, Atty. Roland A. Niedo of said law office inquired from me as to my actual date of receipt of this letter, and I informed him that based
on my logbook, I received it on April 25, 2000.

(8) I discovered this error only on September 6, 2000, when I was informed by Atty. Niedo that Postmaster VI Alfredo C. Mabanag, Jr. of the Central Post
Office, Manila, issued a certification that I received the said mail on April 24, 2000.

(9) I hereby confirm that this error was caused by an honest mistake.

Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who was not an agent of its counsels law office, did not constitute notice to its counsel,
as required by Sections 2[10] and 10,[11] Rule 13 of the Rules of Court. To support this contention, petitioner cites Philippine Long Distance Telephone Co.
vs. NLRC.[12] In said case, the bailiff served the decision of the National Labor Relations Commission at the ground floor of the building of the petitioner
therein, the Philippine Long Distance Telephone Co., rather than on the office of its counsel, whose address, as indicated in the notice of the decision,
was on the ninth floor of the building. We held that:

x x x practical considerations and the realities of the situation dictate that the service made by the bailiff on March 23, 1981 at the ground floor of the
petitioners building and not at the address of record of petitioners counsel on record at the 9 th floor of the PLDT building cannot be considered a valid
service. It was only when the Legal Services Division actually received a copy of the decision on March 26, 1981 that a proper and valid service may be
deemed to have been made. x x x.

Applying the foregoing provisions and jurisprudence, petitioner submits that actual receipt by its counsel was on April 27, 2000, not April 25,
2000. Following the argument to its logical conclusion, the motion for extension to file the petition for review was even filed two (2) days before the lapse
of the 15-day reglementary period. That counsel treated April 25, 2000 and not April 27, 2000 as the date of receipt was purportedly intended to obviate
respondents possible argument that the 15-day period had to be counted from April 25, 2000.

The Court is not wholly convinced by petitioners argument. The Affidavit of Joel Rosales states that he is not the constituted agent of Curato Divina
Mabilog Nedo Magturo Pagaduan Law Office. An agency may be express but it may also be implied from the acts of the principal, from his silence, or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.[13] Likewise, acceptance by the
agent may also be express, although it may also be implied from his acts which carry out the agency, or from his silence or inaction according to the
circumstances.[14] In this case, Joel Rosales averred that [o]n occasions when I receive mail matters for said law office, it is only to help them receive
their letters promptly, implying that counsel had allowed the practice of Rosales receiving mail in behalf of the former. There is no showing that counsel
had objected to this practice or took steps to put a stop to it. The facts are, therefore, inadequate for the Court to make a ruling in petitioners favor.

Assuming the motion for extension was indeed one day late, petitioner urges the Court, in any event, to suspend its rules and admit the petition in the
interest of justice. Petitioner invokes Philippine National Bank vs. Court of Appeals,[15] where the petition was filed three (3) days late. The Court held:

It has been said time and again that the perfection of an appeal within the period fixed by the rules is mandatory and jurisdictional. But, it is always in the
power of this Court to suspend its own rules, or to except a particular case from its operation, whenever the purposes of justice require it. Strong
compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof warrant the suspension of the rules.

The Court proceeded to enumerate cases where the rules on reglementary periods were suspended. Republic vs. Court of Appeals[16] involved a delay
of six days; Siguenza vs. Court of Appeals,[17] thirteen days; Pacific Asia Overseas Shipping Corporation vs. NLRC,[18] one day; Cortes vs. Court of
Appeals,[19] seven days; Olacao vs. NLRC,[20] two days; Legasto vs. Court of Appeals,[21] two days; and City Fair Corporation vs. NLRC,[22] which also
concerned a tardy appeal.

The Court finds these arguments to be persuasive, especially in light of the merits of the petition.

WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The decision of the Court of Appeals is REVERSED.

SO ORDERED.

3. CONDE v. CA

An appeal by certiorari from the Decision of respondent Court of Appeals 1 (CA-G.R. No. 48133- R) affirming the judgment of the Court of First Instance
of Leyte, Branch IX, Tacloban City (Civil Case No. B-110), which dismissed petitioner's Complaint for Quieting of Title and ordered her to vacate the
property in dispute and deliver its possession to private respondents Ramon Conde and Catalina Conde.

The established facts, as found by the Court of Appeals, show that on 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner Dominga
Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural land located in Maghubas
Burauen Leyte, (Lot 840), with an approximate area of one (1) hectare, to Casimira Pasagui, married to Pio Altera (hereinafter referred to as the Alteras),
for P165.00. The "Pacto de Retro Sale" further provided:

... (4) if at the end of 10 years the said land is not repurchased, a new agreement shall be made between the parties and in no case
title and ownership shall be vested in the hand of the party of the SECOND PART (the Alteras).

xxx xxx xxx (Exhibit "B")

On 17 April 1941, the Cadastral Court of Leyte adjudicated Lot No. 840 to the Alteras "subject to the right of redemption by Dominga Conde, within ten
(10) years counting from April 7, 1983, after returning the amount of P165.00 and the amounts paid by the spouses in concept of land tax ... " (Exhibit
"1"). Original Certificate of Title No. N-534 in the name of the spouses Pio Altera and Casimira Pasagui, subject to said right of repurchase, was
transcribed in the "Registration Book" of the Registry of Deeds of Leyte on 14 November 1956 (Exhibit "2").

On 28 November 1945, private respondent Paciente Cordero, son-in-law of the Alteras, signed a document in the Visayan dialect, the English translation
of which reads:

MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND SOLD WITH REPURCHASE WHICH DOCUMENT GOT LOST

WE, PIO ALTERA and PACIENTE CORDERO, both of legal age, and residents of Burauen Leyte, Philippines, after having been
duly sworn to in accordance with law free from threats and intimidation, do hereby depose and say:

1. That I, PIO ALTERA bought with the right of repurchase two parcels of land from DOMINGA CONDE,
BERNARDO CONDE AND MARGARITA CONDE, all brother and sisters.

2. That these two parcels of land were all inherited by the three.

3. That the document of SALE WITH THE RIGHT OF REPURCHASE got lost in spite of the diligent efforts to
locate the same which was lost during the war.

4. That these two parcels of land which was the subject matter of a Deed of Sale with the Right of Repurchase
consists only of one document which was lost.

5. Because it is about time to repurchase the land, I have allowed the representative of Dominga Conde,
Bernardo Conde and Margarita Conde in the name of EUSEBIO AMARILLE to repurchase the same.

6. Now, this very day November 28, 1945, 1 or We have received together with Paciente Cordero who is my
son-in-law the amount of ONE HUNDRED SIXTY-FIVE PESOS (P165. 00) Philippine Currency of legal tender
which was the consideration in that sale with the right of repurchase with respect to the two parcels of land.

That we further covenant together with Paciente Cordero who is my son-in-law that from this day the said Dominga Conde,
Bernardo Conde and Margarita Conde will again take possession of the aforementioned parcel of land because they repurchased
the same from me. If and when their possession over the said parcel of land be disturbed by other persons, I and Paciente Cordero
who is my son-in-law will defend in behalf of the herein brother and sisters mentioned above, because the same was already
repurchased by them.

IN WITNESS WHEREOF, I or We have hereunto affixed our thumbmark or signature to our respective names below this document
or memorandum this 28th day of November 1945 at Burauen Leyte, Philippines, in the presence of two witnesses.

PIO ALTERA (Sgd.) PACIENTE CORDERO

 WITNESSES:

1. (SGD.) TEODORO C. AGUILLON

To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a signatory to the deed. Petitioner maintains that
because Pio Altera was very ill at the time, Paciente Cordero executed the deed of resale for and on behalf of his father-in-law. Petitioner further states
that she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose.

The pacto de retro document was eventually found.

On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde, who are also private respondents herein. Their
relationship to petitioner does not appear from the records. Nor has the document of sale been exhibited.

Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January 1969, in the Court of First Instance of Leyte,
Branch IX, Tacloban City, a Complaint (Civil Case No. B-110), against Paciente Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina
T. Conde, and Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real property and declaration of ownership.

Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation of his father-in-law Pio Altera, who was
seriously sick on that occasion, and of his mother-in-law who was in Manila at the time, and that Cordero received the repurchase price of P65.00.

Private respondents, for their part, adduced evidence that Paciente Cordero signed the document of repurchase merely to show that he had no objection
to the repurchase; and that he did not receive the amount of P165.00 from petitioner inasmuch as he had no authority from his parents-in-law who were
the vendees-a-retro.

After trial, the lower Court rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to vacate the property in dispute
and deliver its peaceful possession to the defendants Ramon Conde and Catalina T. Conde".

On appeal, the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of repurchase in view of the
fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera, the vendee-a-retro, and that there is nothing in said
document to show that Cordero was specifically authorized to act for and on behalf of the vendee a retro, Pio Altera.

Reconsideration having been denied by the Appellate Court, the case is before us on review.

There is no question that neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that there was no formal authorization from the
vendees for Paciente Cordero to act for and on their behalf.

Of significance, however, is the fact that from the execution of the repurchase document in 1945, possession, which heretofore had been with the
Alteras, has been in the hands of petitioner as stipulated therein. Land taxes have also been paid for by petitioner yearly from 1947 to 1969 inclusive
(Exhibits "D" to "D-15"; and "E"). If, as opined by both the Court a quo and the Appellate Court, petitioner had done nothing to formalize her repurchase,
by the same token, neither have the vendees-a-retro done anything to clear their title of the encumbrance therein regarding petitioner's right to
repurchase. No new agreement was entered into by the parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to exercise their
right of redemption after ten years. If, as alleged, petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from his illness,
neither did the Alteras repudiate the deed that their son-in-law had signed. Thus, an implied agency must be held to have been created from their silence
or lack of action, or their failure to repudiate the agency. 2

Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was executed, to
1969, when she instituted this action, or for 24 years, the Alteras must be deemed to have incurred in laches. 3 That petitioner merely took advantage of
the abandonment of the land by the Alteras due to the separation of said spouses, and that petitioner's possession was in the concept of a tenant,
remain bare assertions without proof.

Private respondents Ramon Conde and Catalina Conde, to whom Pio Altera sold the disputed property in 1965, assuming that there was, indeed, such a
sale, cannot be said to be purchasers in good faith. OCT No. 534 in the name of the Alteras specifically contained the condition that it was subject to the
right of repurchase within 10 years from 1938. Although the ten-year period had lapsed in 1965 and there was no annotation of any repurchase by
petitioner, neither had the title been cleared of that encumbrance. The purchasers were put on notice that some other person could have a right to or
interest in the property. It behooved Ramon Conde and Catalina Conde to have looked into the right of redemption inscribed on the title, and particularly
the matter of possession, which, as also admitted by them at the pre-trial, had been with petitioner since 1945.

Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he acknowledged the receipt
of P165.00 and assumed the obligation to maintain the repurchasers in peaceful possession should they be "disturbed by other persons". It was
executed in the Visayan dialect which he understood. He cannot now be allowed to dispute the same. "... If the contract is plain and unequivocal in its
terms he is ordinarily bound thereby. It is the duty of every contracting party to learn and know its contents before he signs and delivers it." 4

There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to indicate that he had no objection to
petitioner's right of repurchase. Besides, he would have had no personality to object. To uphold his oral testimony on that point, would be a departure
from the parol evidence rule 5 and would defeat the purpose for which the doctrine is intended.

... The purpose of the rule is to give stability to written agreements, and to remove the temptation and possibility of perjury, which
would be afforded if parol evidence was admissible. 6
In sum, although the contending parties were legally wanting in their respective actuations, the repurchase by petitioner is supported by the admissions
at the pre-trial that petitioner has been in possession since the year 1945, the date of the deed of repurchase, and has been paying land taxes thereon
since then. The imperatives of substantial justice, and the equitable principle of laches brought about by private respondents' inaction and neglect for 24
years, loom in petitioner's favor.

WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and petitioner is hereby declared the owner of the
disputed property. If the original of OCT No. N-534 of the Province of Leyte is still extant at the office of the Register of Deeds, then said official is hereby
ordered to cancel the same and, in lieu thereof, issue a new Transfer Certificate of Title in the name of petitioner, Dominga Conde.

No costs.

SO ORDERED.

4. VILORIA v. CONTINENTAL AIRINES, INC.

This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009 Decision 1 of the Special Thirteenth Division of the Court of
Appeals (CA) in CA-G.R. CV No. 88586 entitled “Spouses Fernando and Lourdes Viloria v. Continental Airlines, Inc.,” the dispositive portion of which
states:

WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April 2006, awarding US$800.00 or its peso equivalent
at the time of payment, plus legal rate of interest from 21 July 1997 until fully paid, [P]100,000.00 as moral damages, [P]50,000.00
as exemplary damages, [P]40,000.00 as attorney’s fees and costs of suit to plaintiffs-appellees is hereby REVERSED and SET
ASIDE.

Defendant-appellant’s counterclaim is DENIED.

Costs against plaintiffs-appellees.

SO ORDERED.2

On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision, giving due course to the complaint for sum of money
and damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against respondent
Continental Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to such complaint.

On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife, Lourdes, two (2) round trip airline tickets from
San Diego, California to Newark, New Jersey on board Continental Airlines. Fernando purchased the tickets at US$400.00 each from a travel agency
called “Holiday Travel” and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando agreed to buy the said tickets
after Mager informed them that there were no available seats at Amtrak, an intercity passenger train service provider in the United States. Per the
tickets, Spouses Viloria were scheduled to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997.

Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6, 1997. Mager informed him that flights to
Newark via Continental Airlines were already fully booked and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air
called for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a refund. Mager, however, denied
his request as the subject tickets are non-refundable and the only option that Continental Airlines can offer is the re-issuance of new tickets within one
(1) year from the date the subject tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound Station where he saw an Amtrak station nearby.
Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased. Fernando then
purchased two (2) tickets for Washington, D.C.

From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her that she had misled them into buying the
Continental Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated his demand for a refund but Mager was firm in
her position that the subject tickets are non-refundable.

Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a refund and alleging that Mager had deluded them
into purchasing the subject tickets.3

In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had been referred to the Customer Refund Services of
Continental Airlines at Houston, Texas.4

In a letter dated March 24, 1998, Continental Micronesia denied Fernando’s request for a refund and advised him that he may take the subject tickets to
any Continental ticketing location for the re-issuance of new tickets within two (2) years from the date they were issued. Continental Micronesia informed
Fernando that the subject tickets may be used as a form of payment for the purchase of another Continental ticket, albeit with a re-issuance fee. 5

On June 17, 1999, Fernando went to Continental’s ticketing office at Ayala Avenue, Makati City to have the subject tickets replaced by a single round trip
ticket to Los Angeles, California under his name. Therein, Fernando was informed that Lourdes’ ticket was non-transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also informed that a round trip ticket to Los Angeles was US$1,867.40 so he would have to pay what will not be
covered by the value of his San Diego to Newark round trip ticket.

In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no longer wished to have them replaced. In addition to
the dubious circumstances under which the subject tickets were issued, Fernando claimed that CAI’s act of charging him with US$1,867.40 for a round
trip ticket to Los Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes’ ticket, breached its undertaking under its
March 24, 1998 letter.6

On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to refund the money they used in the purchase of the
subject tickets with legal interest from July 21, 1997 and to pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages
and P250,000.00 as attorney’s fees.7

CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject tickets are non-refundable; (b) Fernando
cannot insist on using the ticket in Lourdes’ name for the purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager
is not a CAI employee, CAI is not liable for any of her acts; (d) CAI, its employees and agents did not act in bad faith as to entitle Spouses Viloria to
moral and exemplary damages and attorney’s fees. CAI also invoked the following clause printed on the subject tickets:

3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i) provisions
contained in this ticket, (ii) applicable tariffs, (iii) carrier’s conditions of carriage and related regulations which are made part hereof
(and are available on application at the offices of carrier), except in transportation between a place in the United States or Canada
and any place outside thereof to which tariffs in force in those countries apply.8

According to CAI, one of the conditions attached to their contract of carriage is the non-transferability and non-refundability of the subject tickets.

The RTC’s Ruling

Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses Viloria are entitled to a refund in view of Mager’s
misrepresentation in obtaining their consent in the purchase of the subject tickets.9 The relevant portion of the April 3, 2006 Decision states:

Continental Airlines agent Ms. Mager was in bad faith when she was less candid and diligent in presenting to plaintiffs spouses their
booking options. Plaintiff Fernando clearly wanted to travel via AMTRAK, but defendant’s agent misled him into purchasing
Continental Airlines tickets instead on the fraudulent misrepresentation that Amtrak was fully booked. In fact, defendant Airline did
not specifically denied (sic) this allegation.

Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into buying Continental Airline tickets on Ms. Mager’s
misleading misrepresentations. Continental Airlines agent Ms. Mager further relied on and exploited plaintiff Fernando’s need and
told him that they must book a flight immediately or risk not being able to travel at all on the couple’s preferred date. Unfortunately,
plaintiffs spouses fell prey to the airline’s and its agent’s unethical tactics for baiting trusting customers.” 10

Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is CAI’s agent, hence, bound by her bad faith and misrepresentation. As far as
the RTC is concerned, there is no issue as to whether Mager was CAI’s agent in view of CAI’s implied recognition of her status as such in its March 24,
1998 letter.

The act of a travel agent or agency being involved here, the following are the pertinent New Civil Code provisions on agency:

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.

Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or
his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

Agency may be oral, unless the law requires a specific form.

As its very name implies, a travel agency binds itself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter. This court takes judicial notice of the common services rendered by travel
agencies that represent themselves as such, specifically the reservation and booking of local and foreign tours as well as the
issuance of airline tickets for a commission or fee.

The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses on July 21, 1997 were no different from those
offered in any other travel agency. Defendant airline impliedly if not expressly acknowledged its principal-agent relationship with Ms.
Mager by its offer in the letter dated March 24, 1998 – an obvious attempt to assuage plaintiffs spouses’ hurt feelings. 11

Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the subject tickets within two (2) years from their date of
issue when it charged Fernando with the amount of US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use
Lourdes’ ticket. Specifically:
 Tickets may be reissued for up to two years from the original date of issue. When defendant airline still charged plaintiffs spouses
US$1,867.40 or more than double the then going rate of US$856.00 for the unused tickets when the same were presented within
two (2) years from date of issue, defendant airline exhibited callous treatment of passengers. 12

The Appellate Court’s Ruling

On appeal, the CA reversed the RTC’s April 3, 2006 Decision, holding that CAI cannot be held liable for Mager’s act in the absence of any proof that a
principal-agent relationship existed between CAI and Holiday Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the
fact of agency, failed to present evidence demonstrating that Holiday Travel is CAI’s agent. Furthermore, contrary to Spouses Viloria’s claim, the
contractual relationship between Holiday Travel and CAI is not an agency but that of a sale.

Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in turn a ticketing agent of Holiday Travel who was
in turn a ticketing agent of Continental Airlines. Proceeding from this premise, they contend that Continental Airlines should be held
liable for the acts of Mager. The trial court held the same view.

We do not agree. By the contract of agency, a person binds him/herself to render some service or to do something in representation
or on behalf of another, with the consent or authority of the latter. The elements of agency are: (1) consent, express or implied, of
the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts
as a representative and not for him/herself; and (4) the agent acts within the scope of his/her authority. As the basis of agency is
representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the
principal’s words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and
act upon it. Absent such mutual intent, there is generally no agency. It is likewise a settled rule that persons dealing with an
assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. Agency is never
presumed, neither is it created by the mere use of the word in a trade or business name. We have perused the evidence and
documents so far presented. We find nothing except bare allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in
behalf of Continental Airlines. From all sides of legal prism, the transaction in issue was simply a contract of sale, wherein Holiday
Travel buys airline tickets from Continental Airlines and then, through its employees, Mager included, sells it at a premium to
clients.13

The CA also ruled that refund is not available to Spouses Viloria as the word “non-refundable” was clearly printed on the face of the subject tickets,
which constitute their contract with CAI. Therefore, the grant of their prayer for a refund would violate the proscription against impairment of contracts.

Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher amount of US$1,867.40 for a round trip ticket to
Los Angeles. According to the CA, there is no compulsion for CAI to charge the lower amount of US$856.00, which Spouses Viloria claim to be the fee
charged by other airlines. The matter of fixing the prices for its services is CAI’s prerogative, which Spouses Viloria cannot intervene. In particular:

It is within the respective rights of persons owning and/or operating business entities to peg the premium of the services and items
which they provide at a price which they deem fit, no matter how expensive or exhorbitant said price may seem vis-à-vis those of the
competing companies. The Spouses Viloria may not intervene with the business judgment of Continental Airlines. 14

The Petitioners’ Case

In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the latter’s reversal of the RTC’s April 3, 2006 Decision
allegedly lacks factual and legal bases. Spouses Viloria claim that CAI acted in bad faith when it required them to pay a higher amount for a round trip
ticket to Los Angeles considering CAI’s undertaking to re-issue new tickets to them within the period stated in their March 24, 1998 letter. CAI likewise
acted in bad faith when it disallowed Fernando to use Lourdes’ ticket to purchase a round trip to Los Angeles given that there is nothing in Lourdes’ ticket
indicating that it is non-transferable. As a common carrier, it is CAI’s duty to inform its passengers of the terms and conditions of their contract and
passengers cannot be bound by such terms and conditions which they are not made aware of. Also, the subject contract of carriage is a contract of
adhesion; therefore, any ambiguities should be construed against CAI. Notably, the petitioners are no longer questioning the validity of the subject
contracts and limited its claim for a refund on CAI’s alleged breach of its undertaking in its March 24, 1998 letter.

The Respondent’s Case

In its Comment, CAI claimed that Spouses Viloria’s allegation of bad faith is negated by its willingness to issue new tickets to them and to credit the
value of the subject tickets against the value of the new ticket Fernando requested. CAI argued that Spouses Viloria’s sole basis to claim that the price at
which CAI was willing to issue the new tickets is unconscionable is a piece of hearsay evidence – an advertisement appearing on a newspaper stating
that airfares from Manila to Los Angeles or San Francisco cost US$818.00.15 Also, the advertisement pertains to airfares in September 2000 and not to
airfares prevailing in June 1999, the time when Fernando asked CAI to apply the value of the subject tickets for the purchase of a new one. 16 CAI
likewise argued that it did not undertake to protect Spouses Viloria from any changes or fluctuations in the prices of airline tickets and its only obligation
was to apply the value of the subject tickets to the purchase of the newly issued tickets.

With respect to Spouses Viloria’s claim that they are not aware of CAI’s restrictions on the subject tickets and that the terms and conditions that are
printed on them are ambiguous, CAI denies any ambiguity and alleged that its representative informed Fernando that the subject tickets are non-
transferable when he applied for the issuance of a new ticket. On the other hand, the word “non-refundable” clearly appears on the face of the subject
tickets.

CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency relationship exists between them. As an
independent contractor, Holiday Travel was without capacity to bind CAI.

Issues

To determine the propriety of disturbing the CA’s January 30, 2009 Decision and whether Spouses Viloria have the right to the reliefs they prayed for, this
Court deems it necessary to resolve the following issues:

a. Does a principal-agent relationship exist between CAI and Holiday Travel?

b. Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI bound by the acts of Holiday
Travel’s agents and employees such as Mager?

c. Assuming that CAI is bound by the acts of Holiday Travel’s agents and employees, can the representation of Mager as
to unavailability of seats at Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in the purchase of
the subject tickets?

d. Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable?

e. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested by Fernando?

f. Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply the value of the subject tickets
in the purchase of new ones when it refused to allow Fernando to use Lourdes’ ticket and in charging a higher price for a
round trip ticket to Los Angeles?

This Court’s Ruling

I. A principal-agent relationship exists between CAI and Holiday Travel.

With respect to the first issue, which is a question of fact that would require this Court to review and re-examine the evidence presented by the parties
below, this Court takes exception to the general rule that the CA’s findings of fact are conclusive upon Us and our jurisdiction is limited to the review of
questions of law. It is well-settled to the point of being axiomatic that this Court is authorized to resolve questions of fact if confronted with contrasting
factual findings of the trial court and appellate court and if the findings of the CA are contradicted by the evidence on record. 17

According to the CA, agency is never presumed and that he who alleges that it exists has the burden of proof. Spouses Viloria, on whose shoulders
such burden rests, presented evidence that fell short of indubitably demonstrating the existence of such agency.

We disagree. The CA failed to consider undisputed facts, discrediting CAI’s denial that Holiday Travel is one of its agents. Furthermore, in erroneously
characterizing the contractual relationship between CAI and Holiday Travel as a contract of sale, the CA failed to apply the fundamental civil law
principles governing agency and differentiating it from sale.

In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court explained the nature of an agency and spelled out the essential elements thereof:

Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, called the
principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third
persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself,
and (4) the agent acts within the scope of his authority.

Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates from the powers
granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se.
"He who acts through another acts himself."19

Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second elements are present as CAI does not deny that
it concluded an agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of carriage with third persons on CAI’s behalf. The
third element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is CAI and not Holiday Travel who is
bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that CAI has not made any
allegation that Holiday Travel exceeded the authority that was granted to it. In fact, CAI consistently maintains the validity of the contracts of carriage that
Holiday Travel executed with Spouses Viloria and that Mager was not guilty of any fraudulent misrepresentation. That CAI admits the authority of Holiday
Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24, 1998 and March 24, 1998 letters, where it impliedly
recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI that it was Holiday Travel who
issued to them the subject tickets, CAI did not deny that Holiday Travel is its authorized agent.
Prior to Spouses Viloria’s filing of a complaint against it, CAI never refuted that it gave Holiday Travel the power and authority to conclude contracts of
carriage on its behalf. As clearly extant from the records, CAI recognized the validity of the contracts of carriage that Holiday Travel entered into with
Spouses Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this constitutes an unequivocal testament to
Holiday Travel’s authority to act as its agent. This Court cannot therefore allow CAI to take an altogether different position and deny that Holiday Travel is
its agent without condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who
relied on good faith on CAI’s acts in recognition of Holiday Travel’s authority. Estoppel is primarily based on the doctrine of good faith and the avoidance
of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice. 20 Estoppel
bars CAI from making such denial.

As categorically provided under Article 1869 of the Civil Code, “[a]gency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.”

Considering that the fundamental hallmarks of an agency are present, this Court finds it rather peculiar that the CA had branded the contractual
relationship between CAI and Holiday Travel as one of sale. The distinctions between a sale and an agency are not difficult to discern and this Court, as
early as 1970, had already formulated the guidelines that would aid in differentiating the two (2) contracts. In Commissioner of Internal Revenue v.
Constantino,21 this Court extrapolated that the primordial differentiating consideration between the two (2) contracts is the transfer of ownership or title
over the property subject of the contract. In an agency, the principal retains ownership and control over the property and the agent merely acts on the
principal’s behalf and under his instructions in furtherance of the objectives for which the agency was established. On the other hand, the contract is
clearly a sale if the parties intended that the delivery of the property will effect a relinquishment of title, control and ownership in such a way that the
recipient may do with the property as he pleases.

Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the
price and terms of which were subject to the company's control, the relationship between the company and the dealer is one of
agency, tested under the following criterion:

“The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the
establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or
agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the
attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as
an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell
is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the
right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales
made. 1 Mechem on Sales, Sec. 43; 1 Mechem on Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1.”
(Salisbury v. Brooks, 94 SE 117, 118-119)22

As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is a sale is certainly confounding, considering that CAI
is the one bound by the contracts of carriage embodied by the tickets being sold by Holiday Travel on its behalf. It is undisputed that CAI and not Holiday
Travel who is the party to the contracts of carriage executed by Holiday Travel with third persons who desire to travel via Continental Airlines, and this
conclusively indicates the existence of a principal-agent relationship. That the principal is bound by all the obligations contracted by the agent within the
scope of the authority granted to him is clearly provided under Article 1910 of the Civil Code and this constitutes the very notion of agency.

II. In actions based on quasi-delict, a principal can only be held liable for the tort
committed by its agent’s employees if it has been established by preponderance of
evidence that the principal was also at fault or negligent or that the principal
exercise control and supervision over them.

Considering that Holiday Travel is CAI’s agent, does it necessarily follow that CAI is liable for the fault or negligence of Holiday Travel’s employees?
Citing China Air Lines, Ltd. v. Court of Appeals, et al.,23 CAI argues that it cannot be held liable for the actions of the employee of its ticketing agent in the
absence of an employer-employee relationship.

An examination of this Court’s pronouncements in China Air Lines will reveal that an airline company is not completely exonerated from any liability for
the tort committed by its agent’s employees. A prior determination of the nature of the passenger’s cause of action is necessary. If the passenger’s cause
of action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by the employee of the airline company’s agent,
there must be an independent showing that the airline company was at fault or negligent or has contributed to the negligence or tortuous conduct
committed by the employee of its agent. The mere fact that the employee of the airline company’s agent has committed a tort is not sufficient to hold the
airline company liable. There is no vinculum juris between the airline company and its agent’s employees and the contractual relationship between the
airline company and its agent does not operate to create a juridical tie between the airline company and its agent’s employees. Article 2180 of the Civil
Code does not make the principal vicariously liable for the tort committed by its agent’s employees and the principal-agency relationship per se does not
make the principal a party to such tort; hence, the need to prove the principal’s own fault or negligence.

On the other hand, if the passenger’s cause of action for damages against the airline company is based on contractual breach or culpa contractual, it is
not necessary that there be evidence of the airline company’s fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air
France vs. Gillego,24 “in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at
fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.”

Spouses Viloria’s cause of action on the basis of Mager’s alleged fraudulent misrepresentation is clearly one of tort or quasi-delict, there being no pre-
existing contractual relationship between them. Therefore, it was incumbent upon Spouses Viloria to prove that CAI was equally at fault.
However, the records are devoid of any evidence by which CAI’s alleged liability can be substantiated. Apart from their claim that CAI must be held liable
for Mager’s supposed fraud because Holiday Travel is CAI’s agent, Spouses Viloria did not present evidence that CAI was a party or had contributed to
Mager’s complained act either by instructing or authorizing Holiday Travel and Mager to issue the said misrepresentation.

It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and conditions of the subject contracts, which Mager
entered into with them on CAI’s behalf, in order to deny Spouses Viloria’s request for a refund or Fernando’s use of Lourdes’ ticket for the re-issuance of
a new one, and simultaneously claim that they are not bound by Mager’s supposed misrepresentation for purposes of avoiding Spouses Viloria’s claim
for damages and maintaining the validity of the subject contracts. It may likewise be argued that CAI cannot deny liability as it benefited from Mager’s
acts, which were performed in compliance with Holiday Travel’s obligations as CAI’s agent.

However, a person’s vicarious liability is anchored on his possession of control, whether absolute or limited, on the tortfeasor. Without such control, there
is nothing which could justify extending the liability to a person other than the one who committed the tort. As this Court explained in Cangco v. Manila
Railroad Co.:25

With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is competent for the
legislature to elect — and our Legislature has so elected — to limit such liability to cases in which the person upon whom such an
obligation is imposed is morally culpable or, on the contrary, for reasons of public policy, to extend that liability, without regard
to the lack of moral culpability, so as to include responsibility for the negligence of those persons whose acts or
omissions are imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over
them. The legislature which adopted our Civil Code has elected to limit extra-contractual liability — with certain well-defined
exceptions — to cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may
consist in having failed to exercise due care in one's own acts, or in having failed to exercise due care in the selection and control of
one's agent or servants, or in the control of persons who, by reasons of their status, occupy a position of dependency with respect to
the person made liable for their conduct.26 (emphasis supplied)

It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by preponderant evidence. The existence of control
or supervision cannot be presumed and CAI is under no obligation to prove its denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled
in Jayme v. Apostol,28 that:

In Belen v. Belen, this Court ruled that it was enough for defendant to deny an alleged employment relationship. The defendant is
under no obligation to prove the negative averment. This Court said:

“It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff, and that
if he fails satisfactorily to show the facts upon which he bases his claim, the defendant is under no obligation to
prove his exceptions. This [rule] is in harmony with the provisions of Section 297 of the Code of Civil Procedure
holding that each party must prove his own affirmative allegations, etc.”29 (citations omitted)

Therefore, without a modicum of evidence that CAI exercised control over Holiday Travel’s employees or that CAI was equally at fault, no liability can be
imposed on CAI for Mager’s supposed misrepresentation.

III. Even on the assumption that CAI may be held liable for the acts of
Mager, still, Spouses Viloria are not entitled to a refund. Mager’s statement
cannot be considered a causal fraud that would justify the annulment of the
subject contracts that would oblige CAI to indemnify Spouses Viloria and
return the money they paid for the subject tickets.

Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is
considered voidable and may be annulled within four (4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are
obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract, including their fruits and interest.

On the basis of the foregoing and given the allegation of Spouses Viloria that Fernando’s consent to the subject contracts was supposedly secured by
Mager through fraudulent means, it is plainly apparent that their demand for a refund is tantamount to seeking for an annulment of the subject contracts
on the ground of vitiated consent.

Whether the subject contracts are annullable, this Court is required to determine whether Mager’s alleged misrepresentation constitutes causal fraud.
Similar to the dispute on the existence of an agency, whether fraud attended the execution of a contract is factual in nature and this Court, as discussed
above, may scrutinize the records if the findings of the CA are contrary to those of the RTC.

Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced
to enter into a contract which, without them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante),
not merely the incidental (dolo incidente), inducement to the making of the contract.30 In Samson v. Court of Appeals,31 causal fraud was defined as “a
deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other.” 32

Also, fraud must be serious and its existence must be established by clear and convincing evidence. As ruled by this Court in Sierra v. Hon. Court of
Appeals, et al.,33 mere preponderance of evidence is not adequate:
 Fraud must also be discounted, for according to the Civil Code:

Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which without them, he would not have agreed to.

Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been
employed by both contracting parties.

To quote Tolentino again, the “misrepresentation constituting the fraud must be established by full, clear, and convincing evidence,
and not merely by a preponderance thereof. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to
lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The
circumstances of each case should be considered, taking into account the personal conditions of the victim.” 34

After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has not been satisfactorily established as causal in
nature to warrant the annulment of the subject contracts. In fact, Spouses Viloria failed to prove by clear and convincing evidence that Mager’s
statement was fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to New Jersey on
August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about this; and (c) that she purposely informed them otherwise.

This Court finds the only proof of Mager’s alleged fraud, which is Fernando’s testimony that an Amtrak had assured him of the perennial availability of
seats at Amtrak, to be wanting. As CAI correctly pointed out and as Fernando admitted, it was possible that during the intervening period of three (3)
weeks from the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other passengers may have cancelled their
bookings and reservations with Amtrak, making it possible for Amtrak to accommodate them. Indeed, the existence of fraud cannot be proved by mere
speculations and conjectures. Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person is innocent of
crime or wrong" and that "private transactions have been fair and regular."35Spouses Viloria failed to overcome this presumption.

IV. Assuming the contrary, Spouses Viloria are nevertheless deemed to have ratified
the subject contracts.

Even assuming that Mager’s representation is causal fraud, the subject contracts have been impliedly ratified when Spouses Viloria decided to exercise
their right to use the subject tickets for the purchase of new ones. Under Article 1392 of the Civil Code, “ratification extinguishes the action to annul a
voidable contract.”

Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:

Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the
reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute
an act which necessarily implies an intention to waive his right.

Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance
and retention of benefits flowing therefrom.36

Simultaneous with their demand for a refund on the ground of Fernando’s vitiated consent, Spouses Viloria likewise asked for a refund based on CAI’s
supposed bad faith in reneging on its undertaking to replace the subject tickets with a round trip ticket from Manila to Los Angeles.

In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on contractual breach. Resolution, the action referred to
in Article 1191, is based on the defendant’s breach of faith, a violation of the reciprocity between the parties 37 and in Solar Harvest, Inc. v. Davao
Corrugated Carton Corporation,38 this Court ruled that a claim for a reimbursement in view of the other party’s failure to comply with his obligations under
the contract is one for rescission or resolution.

However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution, all the
elements to make the contract valid are present; in annulment, one of the essential elements to a formation of a contract, which is consent, is absent. In
resolution, the defect is in the consummation stage of the contract when the parties are in the process of performing their respective obligations; in
annulment, the defect is already present at the time of the negotiation and perfection stages of the contract. Accordingly, by pursuing the remedy of
rescission under Article 1191, the Vilorias had impliedly admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A
party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are
enjoined from taking inconsistent positions.39

V. Contracts cannot be rescinded for a slight or casual breach.

CAI cannot insist on the non-transferability of the subject tickets.

Considering that the subject contracts are not annullable on the ground of vitiated consent, the next question is: “Do Spouses Viloria have the right to
rescind the contract on the ground of CAI’s supposed breach of its undertaking to issue new tickets upon surrender of the subject tickets?”

Article 1191, as presently worded, states:

 The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him.

The injured party may choose between the fulfilment and the rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles
1385 and 1388 and the Mortgage Law.

According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it refused to apply the value of Lourdes’ ticket for
Fernando’s purchase of a round trip ticket to Los Angeles and in requiring him to pay an amount higher than the price fixed by other airline companies.

In its March 24, 1998 letter, CAI stated that “non-refundable tickets may be used as a form of payment toward the purchase of another Continental ticket
for $75.00, per ticket, reissue fee ($50.00, per ticket, for tickets purchased prior to October 30, 1997).”

Clearly, there is nothing in the above-quoted section of CAI’s letter from which the restriction on the non-transferability of the subject tickets can be
inferred. In fact, the words used by CAI in its letter supports the position of Spouses Viloria, that each of them can use the ticket under their name for the
purchase of new tickets whether for themselves or for some other person.

Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject tickets for the purchase of a round trip ticket
between Manila and Los Angeles that he was informed that he cannot use the ticket in Lourdes’ name as payment.

Contrary to CAI’s claim, that the subject tickets are non-transferable cannot be implied from a plain reading of the provision printed on the subject tickets
stating that “[t]o the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (a) provisions contained
in this ticket, x x x (iii) carrier’s conditions of carriage and related regulations which are made part hereof (and are available on application at the offices
of carrier) x x x.” As a common carrier whose business is imbued with public interest, the exercise of extraordinary diligence requires CAI to inform
Spouses Viloria, or all of its passengers for that matter, of all the terms and conditions governing their contract of carriage. CAI is proscribed from taking
advantage of any ambiguity in the contract of carriage to impute knowledge on its passengers of and demand compliance with a certain condition or
undertaking that is not clearly stipulated. Since the prohibition on transferability is not written on the face of the subject tickets and CAI failed to inform
Spouses Viloria thereof, CAI cannot refuse to apply the value of Lourdes’ ticket as payment for Fernando’s purchase of a new ticket.

CAI’s refusal to accept Lourdes’ ticket for the purchase of a new ticket for Fernando
is only a casual breach.

Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a contract will not
be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in
making the agreement.40 Whether a breach is substantial is largely determined by the attendant circumstances. 41

While CAI’s refusal to allow Fernando to use the value of Lourdes’ ticket as payment for the purchase of a new ticket is unjustified as the non-
transferability of the subject tickets was not clearly stipulated, it cannot, however be considered substantial. The endorsability of the subject tickets is not
an essential part of the underlying contracts and CAI’s failure to comply is not essential to its fulfillment of its undertaking to issue new tickets upon
Spouses Viloria’s surrender of the subject tickets. This Court takes note of CAI’s willingness to perform its principal obligation and this is to apply the
price of the ticket in Fernando’s name to the price of the round trip ticket between Manila and Los Angeles. CAI was likewise willing to accept the ticket in
Lourdes’ name as full or partial payment as the case may be for the purchase of any ticket, albeit under her name and for her exclusive use. In other
words, CAI’s willingness to comply with its undertaking under its March 24, 1998 cannot be doubted, albeit tainted with its erroneous insistence that
Lourdes’ ticket is non-transferable.

Moreover, Spouses Viloria’s demand for rescission cannot prosper as CAI cannot be solely faulted for the fact that their agreement failed to consummate
and no new ticket was issued to Fernando. Spouses Viloria have no right to insist that a single round trip ticket between Manila and Los Angeles should
be priced at around $856.00 and refuse to pay the difference between the price of the subject tickets and the amount fixed by CAI. The petitioners failed
to allege, much less prove, that CAI had obliged itself to issue to them tickets for any flight anywhere in the world upon their surrender of the subject
tickets. In its March 24, 1998 letter, it was clearly stated that “[n]on-refundable tickets may be used as a form of payment toward the purchase of another
Continental ticket”42 and there is nothing in it suggesting that CAI had obliged itself to protect Spouses Viloria from any fluctuation in the prices of tickets
or that the surrender of the subject tickets will be considered as full payment for any ticket that the petitioners intend to buy regardless of actual price
and destination. The CA was correct in holding that it is CAI’s right and exclusive prerogative to fix the prices for its services and it may not be compelled
to observe and maintain the prices of other airline companies.43

The conflict as to the endorsability of the subject tickets is an altogether different matter, which does not preclude CAI from fixing the price of a round trip
ticket between Manila and Los Angeles in an amount it deems proper and which does not provide Spouses Viloria an excuse not to pay such price,
albeit subject to a reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had the concomitant obligation to pay
whatever is not covered by the value of the subject tickets whether or not the subject tickets are transferable or not.
There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged with a higher rate. The only evidence the
petitioners presented to prove that the price of a round trip ticket between Manila and Los Angeles at that time was only $856.00 is a newspaper
advertisement for another airline company, which is inadmissible for being “hearsay evidence, twice removed.” Newspaper clippings are hearsay if they
were offered for the purpose of proving the truth of the matter alleged. As ruled in Feria v. Court of Appeals,:44

[N]ewspaper articles amount to “hearsay evidence, twice removed” and are therefore not only inadmissible but without any probative
value at all whether objected to or not, unless offered for a purpose other than proving the truth of the matter asserted. In this case,
the news article is admissible only as evidence that such publication does exist with the tenor of the news therein stated. 45 (citations
omitted)

The records of this case demonstrate that both parties were equally in default; hence, none of them can seek judicial redress for the cancellation or
resolution of the subject contracts and they are therefore bound to their respective obligations thereunder. As the 1st sentence of Article 1192 provides:

Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably
tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (emphasis supplied)

Therefore, CAI’s liability for damages for its refusal to accept Lourdes’ ticket for the purchase of Fernando’s round trip ticket is offset by Spouses Viloria’s
liability for their refusal to pay the amount, which is not covered by the subject tickets. Moreover, the contract between them remains, hence, CAI is duty
bound to issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the subject tickets and Spouses Viloria are obliged to pay
whatever amount is not covered by the value of the subject tickets.

This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals.46 Thus:

Since both parties were in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank failed to
comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay
his P17,000.00 debt within 3 years as stipulated, they are both liable for damages.

Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations, the liability
of the first infractor shall be equitably tempered by the courts. WE rule that the liability of Island Savings Bank for damages in not
furnishing the entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for
not paying his overdue P17,000.00 debt. x x x.47

Another consideration that militates against the propriety of holding CAI liable for moral damages is the absence of a showing that the latter acted
fraudulently and in bad faith. Article 2220 of the Civil Code requires evidence of bad faith and fraud and moral damages are generally not recoverable
in culpa contractual except when bad faith had been proven.48 The award of exemplary damages is likewise not warranted. Apart from the requirement
that the defendant acted in a wanton, oppressive and malevolent manner, the claimant must prove his entitlement to moral damages. 49

WHEREFORE, premises considered, the instant Petition is DENIED.

SO ORDERED.