G.R. No.
129459 September 29, 1998 office of plaintiff-appellant but defendant-appellee's treasurer, Nenita Lee
SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner,
vs.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT
CORP. and JNM REALTY AND DEVELOPMENT CORP., respondents.
PANGANIBAN, J.:
May corporate treasurer, by herself and without any authorization from he board of directors, validly sell
a parcel of land owned by the corporation?. May the veil of corporate fiction be pierced on the mere
ground that almost all of the shares of stock of the corporation are owned by said treasurer and her
husband?
The Case
These questions are answered in the negative by this Court in resolving the Petition for Review
on Certiorari before us, assailing the March 18, 1997 Decision 1 of the Court of Appeals 2 in CA GR CV No.
46801 which, in turn, modified the July 18, 1994 Decision of the Regional Trial Court of Makati, Metro
Manila, Branch 633 in Civil Case No. 89-3511. The RTC dismissed both the Complaint and the
Counterclaim filed by the parties. On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the appealed decision is AFFIRMED WITH
MODIFICATION ordering defendant-appellee Nenita Lee Gruenberg to REFUND or
return to plaintiff-appellant the downpayment of P100,000.00 which she received
from plaintiff-appellant. There is no pronouncement as to costs. 4
The petition also challenges the June 10, 1997 CA Resolution denying reconsideration. 5
The Facts
The facts as found by the Court of Appeals are as follows:
Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc.'s amended
complaint alleged that on 14 February 1989, plaintiff-appellant entered into an
agreement with defendant-appellee Motorich Sales Corporation for the transfer to
it of a parcel of land identified as Lot 30, Block 1 of the Acropolis Greens
Subdivision located in the District of Murphy, Quezon City. Metro Manila,
containing an area of Four Hundred Fourteen (414) square meters, covered by TCT
No. (362909) 2876: that as stipulated in the Agreement of 14 February 1989,
plaintiff-appellant paid the downpayment in the sum of One Hundred Thousand
(P100,000.00) Pesos, the balance to be paid on or before March 2, 1989; that on
March 1, 1989. Mr. Andres T. Co, president of plaintiff-appellant corporation,
wrote a letter to defendant-appellee Motorich Sales Corporation requesting for a
computation of the balance to be paid: that said letter was coursed through
defendant-appellee's broker. Linda Aduca, who wrote the computation of the
balance: that on March 2, 1989, plaintiff-appellant was ready with the amount
corresponding to the balance, covered by Metrobank Cashier's Check No. 004223,
payable to defendant-appellee Motorich Sales Corporation; that plaintiff-appellant
and defendant-appellee Motorich Sales Corporation were supposed to meet in the
Gruenberg, did not appear; that defendant-appellee Motorich Sales Corporation
despite repeated demands and in utter disregard of its commitments had refused
to execute the Transfer of Rights/Deed of Assignment which is necessary to
transfer the certificate of title; that defendant ACL Development Corp. is
impleaded as a necessary party since Transfer Certificate of Title No. (362909)
2876 is still in the name of said defendant; while defendant JNM Realty &
Development Corp. is likewise impleaded as a necessary party in view of the fact
that it is the transferor of right in favor of defendant-appellee Motorich Sales
Corporation: that on April 6, 1989, defendant ACL Development Corporation and
Motorich Sales Corporation entered into a Deed of Absolute Sale whereby the
former transferred to the latter the subject property; that by reason of said
transfer, the Registry of Deeds of Quezon City issued a new title in the name of
Motorich Sales Corporation, represented by defendant-appellee Nenita Lee
Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate of Title No.
3571; that as a result of defendants-appellees Nenita Lee Gruenberg and Motorich
Sales Corporation's bad faith in refusing to execute a formal Transfer of
Rights/Deed of Assignment, plaintiff-appellant suffered moral and nominal
damages which may be assessed against defendants-appellees in the sum of Five
Hundred Thousand (500,000.00) Pesos; that as a result of defendants-appellees
Nenita Lee Gruenberg and Motorich Sales Corporation's unjustified and
unwarranted failure to execute the required Transfer of Rights/Deed of
Assignment or formal deed of sale in favor of plaintiff-appellant, defendants-
appellees should be assessed exemplary damages in the sum of One Hundred
Thousand (P100,000.00) Pesos; that by reason of defendants-appellees' bad faith
in refusing to execute a Transfer of Rights/Deed of Assignment in favor of plaintiff-
appellant, the latter lost the opportunity to construct a residential building in the
sum of One Hundred Thousand (P100,000.00) Pesos; and that as a consequence of
defendants-appellees Nenita Lee Gruenberg and Motorich Sales Corporation's bad
faith in refusing to execute a deed of sale in favor of plaintiff-appellant, it has been
constrained to obtain the services of counsel at an agreed fee of One Hundred
Thousand (P100,000.00) Pesos plus appearance fee for every appearance in court
hearings.
In its answer, defendants-appellees Motorich Sales Corporation and Nenita Lee
Gruenberg interposed as affirmative defense that the President and Chairman of
Motorich did not sign the agreement adverted to in par. 3 of the amended
complaint; that Mrs. Gruenberg's signature on the agreement (ref: par. 3 of
Amended Complaint) is inadequate to bind Motorich. The other signature, that of
Mr. Reynaldo Gruenberg, President and Chairman of Motorich, is required: that
plaintiff knew this from the very beginning as it was presented a copy of the
Transfer of Rights (Annex B of amended complaint) at the time the Agreement
(Annex B of amended complaint) was signed; that plaintiff-appellant itself drafted
the Agreement and insisted that Mrs. Gruenberg accept the P100,000.00 as
earnest money; that granting, without admitting, the enforceability of the
agreement, plaintiff-appellant nonetheless failed to pay in legal tender within the
stipulated period (up to March 2, 1989); that it was the understanding between
Mrs. Gruenberg and plaintiff-appellant that the Transfer of Rights/Deed of
Assignment will be signed only upon receipt of cash payment; thus they agreed
that if the payment be in check, they will meet at a bank designated by plaintiff-
appellant where they will encash the check and sign the Transfer of Rights/Deed.
However, plaintiff-appellant informed Mrs. Gruenberg of the alleged availability of
the check, by phone, only after banking hours.
On the basis of the evidence, the court a quo rendered the judgment appealed
from[,] dismissing plaintiff-appellant's complaint, ruling that:
The issue to be resolved is: whether plaintiff had the right to
compel defendants to execute a deed of absolute sale in
accordance with the agreement of February 14, 1989: and if
so, whether plaintiff is entitled to damage.
As to the first question, there is no evidence to show that
defendant Nenita Lee Gruenberg was indeed authorized by
defendant corporation. Motorich Sales, to dispose of that
property covered by T.C.T. No. (362909) 2876. Since the
property is clearly owned by the corporation. Motorich
Sales, then its disposition should be governed by the
requirement laid down in Sec. 40. of the Corporation Code
of the Philippines, to wit:
Sec. 40, Sale or other disposition of
assets. Subject to the provisions of
existing laws on illegal combination
and monopolies, a corporation may by
a majority vote of its board of
directors . . . sell, lease, exchange,
mortgage, pledge or otherwise
dispose of all or substantially all of its
property and assets including its
goodwill . . . when authorized by the
vote of the stockholders representing
at least two third (2/3) of the
outstanding capital stock . . .
No such vote was obtained by defendant Nenita Lee
Gruenberg for that proposed sale[;] neither was there
evidence to show that the supposed transaction was ratified
by the corporation. Plaintiff should have been on the look
out under these circumstances. More so, plaintiff himself
[owns] several corporations (tsn dated August 16, 1993, p.
3) which makes him knowledgeable on corporation matters.
Regarding the question of damages, the Court likewise, does
not find substantial evidence to hold defendant Nenita Lee
Gruenberg liable considering that she did not in anyway
misrepresent herself to be authorized by the corporation to
sell the property to plaintiff (tsn dated September 27, 1991,
p. 8).
In the light of the foregoing, the Court hereby renders
judgment DISMISSING the complaint at instance for lack of
merit.
"Defendants" counterclaim is also DISMISSED for lack of
basis. (Decision, pp. 7-8; Rollo, pp. 34-35)
For clarity, the Agreement dated February 14, 1989 is reproduced hereunder:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement, made and entered into by and between:
MOTORICH SALES CORPORATION, a corporation duly
organized and existing under and by virtue of Philippine
Laws, with principal office address at 5510 South Super Hi-
way cor. Balderama St., Pio del Pilar. Makati, Metro Manila,
represented herein by its Treasurer, NENITA LEE
GRUENBERG, hereinafter referred to as the TRANSFEROR;
— and —
SAN JUAN STRUCTURAL & STEEL FABRICATORS, a
corporation duly organized and existing under and by virtue
of the laws of the Philippines, with principal office address at
Sumulong Highway, Barrio Mambungan, Antipolo, Rizal,
represented herein by its President, ANDRES T. CO,
hereinafter referred to as the TRANSFEREE.
WITNESSETH, That:
WHEREAS, the TRANSFEROR is the owner of a parcel of land identified as Lot 30
Block 1 of the ACROPOLIS GREENS SUBDIVISION located at the District of Murphy,
Quezon City, Metro Manila, containing an area of FOUR HUNDRED FOURTEEN
(414) SQUARE METERS, covered by a TRANSFER OF RIGHTS between JNM Realty &
Dev. Corp. as the Transferor and Motorich Sales Corp. as the Transferee;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties
have agreed as follows:
1. That the purchase price shall be at FIVE THOUSAND TWO
HUNDRED PESOS (P5,200.00) per square meter; subject to
the following terms:
a. Earnest money amounting to ONE
HUNDRED THOUSAND PESOS
(P100,000.00), will be paid upon the
execution of this agreement and shall
form part of the total purchase price;
b. Balance shall be payable on or
before March 2, 1989;
 2. That the monthly amortization for the month of February Before this Court, petitioner raises the following issues:
1989 shall be for the account of the Transferor; and that the
monthly amortization starting March 21, 1989 shall be for
I. Whether or not the doctrine of piercing the veil of
the account of the Transferee;
corporate fiction is applicable in the instant case

The transferor warrants that he [sic] is the lawful owner of the above-described
II. Whether or not the appellate court may consider matters
property and that there [are] no existing liens and/or encumbrances of
which the parties failed to raise in the lower court
whatsoever nature;

III. Whether or not there is a valid and enforceable contract

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

IV. Whether or not the Court of Appeals erred in holding

That upon full payment of the balance, the TRANSFEROR agrees to execute a
that there is a valid correction/substitution of answer in the
TRANSFER OF RIGHTS/DEED OF ASSIGNMENT in favor of the TRANSFEREE.
transcript of stenographic note[s].

IN WITNESS WHEREOF, the parties have hereunto set their hands this 14th day of
V. Whether or not respondents are liable for damages and
February, 1989 at Greenhills, San Juan, Metro Manila, Philippines.
attorney's fees 9

MOTORICH SALES CORPORATION SAN JUAN STRUCTURAL & STEEL FABRICATORS

The Court synthesized the foregoing and will thus discuss them seriatim as follows:

TRANSFEROR TRANSFEREE
1. Was there a valid contract of sale between petitioner and
Motorich?
[SGD.] [SGD.]
2. May the doctrine of piercing the veil of corporate fiction
By. NENITA LEE GRUENBERG By: ANDRES T. CO be applied to Motorich?

Treasurer President 3. Is the alleged alteration of Gruenberg's testimony as

recorded in the transcript of stenographic notes material to
the disposition of this case?
Signed In the presence of:

4. Are respondents liable for damages and attorney's fees?

[SGD.] [SGD.]

The Court's Ruling

————————————— ———————————6

The petition is devoid of merit.

In its recourse before the Court of Appeals, petitioner insisted:

First Issue: Validity of Agreement

1. Appellant is entitled to compel the appellees to execute a
Deed of Absolute Sale in accordance with the Agreement of
February 14, 1989,
2. Plaintiff is entitled to damages. 7
As stated earlier, the Court of Appeals debunked petitioner's arguments and affirmed the Decision of the
RTC with the modification that Respondent Nenita Lee Gruenberg was ordered to refund P100,000 to
petitioner, the amount remitted as "downpayment" or "earnest money." Hence, this petition before us.8
The Issues
Petitioner San Juan Structural and Steel Fabricators, Inc. alleges that on February 14, 1989, it entered
through its president, Andres Co, into the disputed Agreement with Respondent Motorich Sales
Corporation, which was in turn allegedly represented by its treasurer, Nenita Lee Gruenberg. Petitioner
insists that "[w]hen Gruenberg and Co affixed their signatures on the contract they both consented to be
bound by the terms thereof." Ergo, petitioner contends that the contract is binding on the two
corporations. We do not agree.
True, Gruenberg and Co signed on February 14, 1989, the Agreement, according to which a lot owned by
Motorich Sales Corporation was purportedly sold. Such contract, however, cannot bind Motorich,
because it never authorized or ratified such sale.
A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly,
the property of the corporation is not the property of its stockholders or members and may not be sold
by the stockholders or members without express authorization from the corporation's board of
directors. 10 Section 23 of BP 68, otherwise known as the Corporation Code of the Philippines, provides;
Sec. 23. The Board of Directors or Trustees. — Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations controlled
and held by the board of directors or trustees to be elected from among the
holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are
elected and qualified.
Indubitably, a corporation may act only through its board of directors or, when authorized either by its
bylaws or by its board resolution, through its officers or agents in the normal course of business. The
general principles of agency govern the relation between the corporation and its officers or agents,
subject to the articles of incorporation, bylaws, or relevant provisions of law. 11 Thus, this Court has held
that "a corporate officer or agent may represent and bind the corporation in transactions with third
persons to the extent that the authority to do so has been conferred upon him, and this includes powers
which have been intentionally conferred, and also such powers as, in the usual course of the particular
business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by
custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as
the corporation has caused persons dealing with the officer or agent to believe that it has conferred." 12
Furthermore, the Court has also recognized the rule that "persons dealing with an assumed agent,
whether the assumed agency be a general or special one bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and
in case either is controverted, the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez,
4 Phil. 19)." 13 Unless duly authorized, a treasurer, whose powers are limited, cannot bind the
corporation in a sale of its assets. 14
In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita Gruenberg,
its treasurer, to sell the subject parcel of land. 15 Consequently, petitioner had the burden of proving that
Nenita Gruenberg was in fact authorized to represent and bind Motorich in the transaction. Petitioner
failed to discharge this burden. Its offer of evidence before the trial court contained no proof of such
authority. 16 It has not shown any provision of said respondent's articles of incorporation, bylaws or
board resolution to prove that Nenita Gruenberg possessed such power.
That Nenita Gruenberg is the treasurer of Motorich does not free petitioner from the responsibility of
ascertaining the extent of her authority to represent the corporation. Petitioner cannot assume that she,
by virtue of her position, was authorized to sell the property of the corporation. Selling is obviously
foreign to a corporate treasurer's function, which generally has been described as "to receive and keep
the funds of the corporation, and to disburse them in accordance with the authority given him by the
board or the properly authorized officers." 17
Neither was such real estate sale shown to be a normal business activity of Motorich. The primary
purpose of Motorich is marketing, distribution, export and import in relation to a general merchandising
business. 18Unmistakably, its treasurer is not cloaked with actual or apparent authority to buy or sell real
property, an activity which falls way beyond the scope of her general authority.
Art. 1874 and 1878 of the Civil Code of the Philippines provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing: otherwise, the sale shall be
void.
Art. 1878. Special powers of attorney are necessary in the following case:
xxx xxx xxx
(5) To enter any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
xxx xxx xxx.
Petitioner further contends that Respondent Motorich has ratified said contract of sale because of its
"acceptance of benefits," as evidenced by the receipt issued by Respondent Gruenberg. 19 Petitioner is
clutching at straws.
As a general rule, the acts of corporate officers within the scope of their authority are binding on the
corporation. But when these officers exceed their authority, their actions "cannot bind the corporation,
unless it has ratified such acts or is estopped from disclaiming them." 20
In this case, there is a clear absence of proof that Motorich ever authorized Nenita Gruenberg, or made
it appear to any third person that she had the authority, to sell its land or to receive the earnest money.
Neither was there any proof that Motorich ratified, expressly or impliedly, the contract. Petitioner rests
its argument on the receipt which, however, does not prove the fact of ratification. The document is a
hand-written one, not a corporate receipt, and it bears only Nenita Gruenberg's signature. Certainly, this
document alone does not prove that her acts were authorized or ratified by Motorich.
Art. 1318 of the Civil Code lists the requisites of a valid and perfected contract: "(1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established." As found by the trial court 21 and affirmed by the Court of
Appeals, 22 there is no evidence that Gruenberg was authorized to enter into the contract of sale, or that
the said contract was ratified by Motorich. This factual finding of the two courts is binding on this
Court. 23 As the consent of the seller was not obtained, no contract to bind the obligor was perfected.
Therefore, there can be no valid contract of sale between petitioner and Motorich.
Because Motorich had never given a written authorization to Respondent Gruenberg to sell its parcel of
land, we hold that the February 14, 1989 Agreement entered into by the latter with petitioner is void
under Article 1874 of the Civil Code. Being inexistent and void from the beginning, said contract cannot
be ratified. 24
Second Issue:
Piercing the Corporate Veil Not Justified
Petitioner also argues that the veil of corporate fiction of Motorich should be pierced, because the latter
is a close corporation. Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg owned all or
almost all or 99.866% to be accurate, of the subscribed capital stock" 25 of Motorich, petitioner argues
that Gruenberg needed no authorization from the board to enter into the subject contract. 26 It adds
that, being solely owned by the Spouses Gruenberg, the company can treated as a close corporation
which can be bound by the acts of its principal stockholder who needs no specific authority. The Court is
not persuaded.
First, petitioner itself concedes having raised the issue belatedly, 27 not having done so during the trial,
but only when it filed its sur-rejoinder before the Court of Appeals. 28 Thus, this Court cannot entertain
said issue at this late stage of the proceedings. It is well-settled the points of law, theories and
arguments not brought to the attention of the trial court need not be, and ordinarily will not be,
considered by a reviewing court, as they cannot be raised for the first time on appeal. 29 Allowing
petitioner to change horses in midstream, as it were, is to run roughshod over the basic principles of fair
play, justice and due process.
Second, even if the above mentioned argument were to be addressed at this time, the Court still finds no
reason to uphold it. True, one of the advantages of a corporate form of business organization is the
limitation of an investor's liability to the amount of the investment. 30 This feature flows from the legal
theory that a corporate entity is separate and distinct from its stockholders. However, the statutorily
granted privilege of a corporate veil may be used only for legitimate purposes. 31 On equitable
considerations, the veil can be disregarded when it is utilized as a shield to commit fraud, illegality or
inequity; defeat public convenience; confuse legitimate issues; or serve as a mere alter ego or business
conduit of a person or an instrumentality, agency or adjunct of another corporation. 32
Thus, the Court has consistently ruled that "[w]hen the fiction is used as a means of perpetrating a fraud
or an illegal act or as vehicle for the evasion of an existing obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation from the members or stockholders who compose it
will be lifted to allow for its consideration merely as an aggregation of individuals." 33
We stress that the corporate fiction should be set aside when it becomes a shield against liability for
fraud, illegality or inequity committed on third persons. The question of piercing the veil of corporate
fiction is essentially, then, a matter of proof. In the present case, however, the Court finds no reason to
pierce the corporate veil of Respondent Motorich. Petitioner utterly failed to establish that said
corporation was formed, or that it is operated, for the purpose of shielding any alleged fraudulent or
illegal activities of its officers or stockholders; or that the said veil was used to conceal fraud, illegality or
inequity at the expense of third persons like petitioner.
Petitioner claims that Motorich is a close corporation. We rule that it is not. Section 96 of the
Corporation Code defines a close corporation as follows:
Sec. 96. Definition and Applicability of Title. — A close corporation, within the
meaning of this Code, is one whose articles of incorporation provide that: (1) All of
the corporation's issued stock of all classes, exclusive of treasury shares, shall be
held of record by not more than a specified number of persons, not exceeding
twenty (20); (2) All of the issued stock of all classes shall be subject to one or more
specified restrictions on transfer permitted by this Title; and (3) The corporation
shall not list in any stock exchange or make any public offering of any of its stock of
any class. Notwithstanding the foregoing, a corporation shall be deemed not a
close corporation when at least two-thirds (2/3) of its voting stock or voting rights
is owned or controlled by another corporation which is not a close corporation
within the meaning of this Code. . . . .
The articles of incorporation 34 of Motorich Sales Corporation does not contain any provision stating that
(1) the number of stockholders shall not exceed 20, or (2) a preemption of shares is restricted in favor of
any stockholder or of the corporation, or (3) listing its stocks in any stock exchange or making a public
offering of such stocks is prohibited. From its articles, it is clear that Respondent Motorich is not a close
corporation. 35 Motorich does not become one either, just because Spouses Reynaldo and Nenita
Gruenberg owned 99.866% of its subscribed capital stock. The "[m]ere ownership by a single stockholder
or by another corporation of all or capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personalities." 36 So, too, a narrow distribution of ownership does
not, by itself, make a close corporation.
Petitioner cites Manuel R. Dulay Enterprises, Inc. v. Court of Appeals 37 wherein the Court ruled that ". . .
petitioner corporation is classified as a close corporation and, consequently, a board resolution
authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the
action of its president." 38 But the factual milieu in Dulay is not on all fours with the present case.
In Dulay, the sale of real property was contracted by the president of a close corporation with the
knowledge and acquiescence of its board of directors. 39 In the present case, Motorich is not a close
corporation, as previously discussed, and the agreement was entered into by the corporate treasurer
without the knowledge of the board of directors.
The Court is not unaware that there are exceptional cases where "an action by a director, who singly is
the controlling stockholder, may be considered as a binding corporate act and a board action as nothing
more than a mere formality." 40 The present case, however, is not one of them.
As stated by petitioner, Spouses Reynaldo and Nenita Gruenberg own "almost 99.866%" of Respondent
Motorich. 41Since Nenita is not the sole controlling stockholder of Motorich, the aforementioned
exception does not apply. Granting arguendo that the corporate veil of Motorich is to be disregarded,
the subject parcel of land would then be treated as conjugal property of Spouses Gruenberg, because
the same was acquired during their marriage. There being no indication that said spouses, who appear to
have been married before the effectivity of the Family Code, have agreed to a different property regime,
their property relations would be governed by conjugal partnership of gains. 42 As a consequence, Nenita
Gruenberg could not have effected a sale of the subject lot because "[t]here is no co-ownership between
the spouses in the properties of the conjugal partnership of gains. Hence, neither spouse can alienate in
favor of another his or interest in the partnership or in any property belonging to it; neither spouse can
ask for a partition of the properties before the partnership has been legally dissolved." 43
Assuming further, for the sake of argument, that the spouses' property regime is the absolute
community of property, the sale would still be invalid. Under this regime, "alienation of community
property must have the written consent of the other spouse or he authority of the court without which
the disposition or encumbrance is void." 44 Both requirements are manifestly absent in the instant case.
Third Issue: Challenged Portion of TSN Immaterial
Petitioner calls our attention to the following excerpt of the transcript of stenographic notes (TSN):
Q Did you ever represent to Mr. Co that you were
authorized by the corporation to sell the property?
A Yes, sir. 45
Petitioner claims that the answer "Yes" was crossed out, and, in its place was written a "No" with an
initial scribbled above it. 46 This, however, is insufficient to prove that Nenita Gruenberg was authorized
to represent Respondent Motorich in the sale of its immovable property. Said excerpt be understood in
the context of her whole testimony. During her cross-examination. Respondent Gruenberg testified:
 Q So, you signed in your capacity as the treasurer?
[A] Yes, sir.
Q Even then you kn[e]w all along that you [were] not
authorized?
A Yes, sir.
Q You stated on direct examination that you did not
represent that you were authorized to sell the property?
A Yes, sir.
Q But you also did not say that you were not authorized to
sell the property, you did not tell that to Mr. Co, is that
correct?
A That was not asked of me.
Q Yes, just answer it.
A I just told them that I was the treasurer of the corporation
and it [was] also the president who [was] also authorized to
sign on behalf of the corporation.
Q You did not say that you were not authorized nor did you
say that you were authorized?
A Mr. Co was very interested to purchase the property and
he offered to put up a P100,000.00 earnest money at that
time. That was our first meeting. 47
Clearly then, Nenita Gruenberg did not testify that Motorich had authorized her to sell its property. On
the other hand, her testimony demonstrates that the president of Petitioner Corporation, in his great
desire to buy the property, threw caution to the wind by offering and paying the earnest money without
first verifying Gruenberg's authority to sell the lot.
Fourth Issue:
Damages and Attorney's Fees
Finally, petitioner prays for damages and attorney's fees, alleging that "[i]n an utter display of malice and
bad faith, respondents attempted and succeeded in impressing on the trial court and [the] Court of
Appeals that Gruenberg did not represent herself as authorized by Respondent Motorich despite the
receipt issued by the former specifically indicating that she was signing on behalf of Motorich Sales
Corporation. Respondent Motorich likewise acted in bad faith when it claimed it did not authorize
Respondent Gruenberg and that the contract [was] not binding, [insofar] as it [was] concerned, despite
receipt and enjoyment of the proceeds of Gruenberg's act." 48 Assuming that Respondent Motorich was
not a party to the alleged fraud, petitioner maintains that Respondent Gruenberg should be held liable
because she "acted fraudulently and in bad faith [in] representing herself as duly authorized by
[R]espondent [C]orporation." 49
As already stated, we sustain the findings of both the trial and the appellate courts that the foregoing
allegations lack factual bases. Hence, an award of damages or attorney's fees cannot be justified. The
amount paid as "earnest money" was not proven to have redounded to the benefit of Respondent
Motorich. Petitioner claims that said amount was deposited to the account of Respondent Motorich,
because "it was deposited with the account of Aren Commercial c/o Motorich Sales
Corporation." 50 Respondent Gruenberg, however, disputes the allegations of petitioner. She testified as
follows:
Q You voluntarily accepted the P100,000.00, as a matter of
fact, that was encashed, the check was encashed.
A Yes. sir, the check was paid in my name and I deposit[ed]
it.
Q In your account?
A Yes, sir. 51
In any event, Gruenberg offered to return the amount to petitioner ". . . since the sale did not
push through." 52
Moreover, we note that Andres Co is not a neophyte in the world of corporate business. He has been the
president of Petitioner Corporation for more than ten years and has also served as chief executive of two
other corporate entities. 53 Co cannot feign ignorance of the scope of the authority of a corporate
treasurer such as Gruenberg. Neither can he be oblivious to his duty to ascertain the scope of
Gruenberg's authorization to enter into a contract to sell a parcel of land belonging to Motorich.
Indeed, petitioner's claim of fraud and bad faith is unsubstantiated and fails to persuade the Court.
Indubitably, petitioner appears to be the victim of its own officer's negligence in entering into a contract
with and paying an unauthorized officer of another corporation.
As correctly ruled by the Court of Appeals, however, Nenita Gruenberg should be ordered to return to
petitioner the amount she received as earnest money, as "no one shall enrich himself at the expense of
another." 54 a principle embodied in Article 2154 of Civil Code. 55 Although there was no binding relation
between them, petitioner paid Gruenberg on the mistaken belief that she had the authority to sell the
property of Motorich. 56 Article 2155 of Civil Code provides that "[p]ayment by reason of a mistake in the
contruction or application of a difficult question of law may come within the scope of the preceding
article."
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.
SO ORDERED.
G.R. No. 156262
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P.
TUAZON, Spouses ANASTACIO and MARY T. BUENAVENTURA,
Petitioners
- versus -
HEIRS OF BARTOLOME RAMOS, Respondents.
PANGANIBAN, J.:
Stripped of nonessentials, the present case involves the collection of a sum of money. Specifically, this
case arose from the failure of petitioners to pay respondents’ predecessor-in-interest. This fact was shown
by the non-encashment of checks issued by a third person, but indorsed by herein Petitioner Maria Tuazon
in favor of the said predecessor. Under these circumstances, to enable respondents to collect on the
indebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suit is directed, not
against the drawer, but against the debtor who indorsed the checks in payment of the obligation.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the July 31, 2002
Decision2 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 Decision3 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 attorney’s 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 Court’s Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Court’s 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. 8Petitioners 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 latter’s 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 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.11
This Court finds no reversible error in the findings of the courts a quothat 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.
MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. PEDRO L. LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in the law on agency.
This is a petition for review assailing the Decision[1] of the Court of Appeals dated 22 June 2001, and
its Resolution[2] dated 12 December 2001 in CA G.R. CV No. 49802 entitled Pedro L. Linsangan v. Manila
Memorial Cemetery, Inc. et al., finding Manila Memorial Park Cemetery, Inc. (MMPCI) jointly and severally
liable with Florencia C. Baluyot to respondent Atty. Pedro L. Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at
the Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a
memorial lot under Contract No. 25012 was no longer interested in acquiring the lot and had opted to sell
his rights subject to reimbursement of the amounts he already paid. The contract was for P95,000.00.
Baluyot reassured Atty. Linsangan that once reimbursement is made to the former buyer, the contract
would be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the
amount to be reimbursed to the original buyer and to complete the down payment to MMPCI.[3] Baluyot
issued handwritten and typewritten receipts for these payments.[4]
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No.
28660, a new contract covering the subject lot in the name of the latter instead of old Contract No. 25012.
Atty. Linsangan protested, but Baluyot assured him that he would still be paying the old price
of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about P75,000.00.[5]
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83,
Garden Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985
for the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan
objected to the new contract price, as the same was not the amount previously agreed upon. To convince
Atty. Linsangan, Baluyot executed a document[6] confirming that while the contract price is P132,250.00,
Atty. Linsangan would pay only the original price of P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount of P1,800.00 and the difference will be
issued as discounted to conform to the previous price as previously agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase under Contract No. 28660 states that
the total price of P132,250.00 your undertaking is to pay only the total sum of P95,000.00 under the old
price. Further the total sum of P19,838.00 already paid by you under O.R. # 118912 dated April 6, 1985
has been credited in the total purchase price thereby leaving a balance of P75,162.00 on a monthly
installment of P1,800.00 including interests (sic) charges for a period of five (5) years.
(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt No.
118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of P1,800.00 each
in favor of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated
checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled
for reasons the latter could not explain, and presented to him another proposal for the purchase of an
equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor their
undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed
a Complaint[7] for Breach of Contract and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was
cancelled conformably with the terms of the contract[8] because of non-payment of arrearages.[9] MMPCI
stated that Baluyot was not an agent but an independent contractor, and as such was not authorized to
represent MMPCI or to use its name except as to the extent expressly stated in the Agency Manager
Agreement.[10] Moreover, MMPCI was not aware of the arrangements entered into by Atty. Linsangan and
Baluyot, as it in fact received a down payment and monthly installments as indicated in the
contract.[11] Official receipts showing the application of payment were turned over to Baluyot whom Atty.
Linsangan had from the beginning allowed to receive the same in his behalf. Furthermore, whatever
misimpression that Atty. Linsangan may have had must have been rectified by the Account Updating
Arrangement signed by Atty. Linsangan which states that he expressly admits that Contract No. 28660 on
account of serious delinquencyis now due for cancellation under its terms and conditions.[12]
The trial court held MMPCI and Baluyot jointly and severally liable.[13] It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having received and enchased
the checks issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted that Baluyot was
authorized to receive only the down payment, it allowed her to continue to receive postdated checks from
Atty. Linsangan, which it in turn consistently encashed.[14]
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of plaintiff declaring
Contract No. 28660 as valid and subsisting and ordering defendants to perform their undertakings
thereof which covers burial lot No. A11 (15), Block 83, Section Garden I, Holy Cross Memorial Park
located at Novaliches, Quezon City. All payments made by plaintiff to defendants should be credited for
his accounts. NO DAMAGES, NO ATTORNEYS FEES but with costs against the defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated as against defendant Baluyot is
GRANTED up to the extent of the costs.
SO ORDERED.[15]
MMPCI appealed the trial courts decision to the Court of Appeals.[16] It claimed that Atty. Linsangan
is bound by the written contract with MMPCI, the terms of which were clearly set forth therein and read,
understood, and signed by the former.[17] It also alleged that Atty. Linsangan, a practicing lawyer for over
thirteen (13) years at the time he entered into the contract, is presumed to know his contractual
obligations and is fully aware that he cannot belatedly and unilaterally change the terms of the contract
without the consent, much less the knowledge of the other contracting party, which was MMPCI. And in
this case, MMPCI did not agree to a change in the contract and in fact implemented the same pursuant to
its clear terms. In view thereof, because of Atty. Linsangans delinquency, MMPCI validly cancelled the
contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter
exceeded the terms of her agency, neither did MMPCI ratify Baluyots acts. It added that it cannot be
charged with making any misrepresentation, nor of having allowed Baluyot to act as though she had full
powers as the written contract expressly stated the terms and conditions which Atty. Linsangan accepted
and understood. In canceling the contract, MMPCI merely enforced the terms and conditions imposed
therein.[18]
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the formers
obligation, as a party knowingly dealing with an alleged agent, to determine the limitations of such agents
authority, particularly when such alleged agents actions were patently questionable. According to MMPCI,
Atty. Linsangan did not even bother to verify Baluyots authority or ask copies of official receipts for his
payments.[19]
 The Court of Appeals affirmed the decision of the trial court. It upheld the trial courts finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having represented
MMPCIs interest and acting on its behalf in the dealings with clients and customers. Hence, MMPCI is
considered estopped when it allowed Baluyot to act and represent MMPCI even beyond her
authority.[20] The appellate court likewise found that the acts of Baluyot bound MMPCI when the latter
allowed the former to act for and in its behalf and stead. While Baluyots authority may not have been
expressly conferred upon her, the same may have been derived impliedly by habit or custom, which may
have been an accepted practice in the company for a long period of time.[21] Thus, the Court of Appeals
noted, innocent third persons such as Atty. Linsangan should not be prejudiced where the principal failed
to adopt the needed measures to prevent misrepresentation. Furthermore, if an agent misrepresents to a
purchaser and the principal accepts the benefits of such misrepresentation, he cannot at the same time
deny responsibility for such misrepresentation.[22] Finally, the Court of Appeals declared:
There being absolutely nothing on the record that would show that the court a quo overlooked,
disregarded, or misinterpreted facts of weight and significance, its factual findings and conclusions must
be given great weight and should not be disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed decision in Civil
Case No. 88-1253 of the Regional Trial Court, National Capital Judicial Region, Branch 57 of Makati, is
hereby AFFIRMED in toto.
SO ORDERED.[23]
MMPCI filed its Motion for Reconsideration,[24] but the same was denied for lack of merit.[25]
In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in
disregarding the plain terms of the written contract and Atty. Linsangans failure to abide by the terms
thereof, which justified its cancellation. In addition, even assuming that Baluyot was an agent of MMPCI,
she clearly exceeded her authority and Atty. Linsangan knew or should have known about this considering
his status as a long-practicing lawyer. MMPCI likewise claims that the Court of Appeals erred in failing to
consider that the facts and the applicable law do not support a judgment against Baluyot only up to the
extent of costs.[26]
Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in fact
faithfully performed his contractual obligations and complied with them in good faith for at least two
years.[27] He claims that contrary to MMPCIs position, his profession as a lawyer is immaterial to the validity
of the subject contract and the case at bar.[28] According to him, MMPCI had practically admitted in
its Petition that Baluyot was its agent, and thus, the only issue left to be resolved is whether MMPCI
allowed Baluyot to act as though she had full powers to be held solidarily liable with the latter.[29]
We find for the petitioner MMPCI.
The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court is
limited to reviewing only errors of law, not fact, unless the factual findings complained of are devoid of
support by the evidence on record or the assailed judgment is based on misapprehension of facts.[30] In BPI
Investment Corporation v. D.G. Carreon Commercial Corporation,[31] this Court ruled:
There are instances when the findings of fact of the trial court and/or Court of Appeals may be reviewed
by the Supreme Court, such as (1) when the conclusion is a finding grounded entirely on speculation,
surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3)
where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in
the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and
(10) the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.[32]
In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts
of the case, as well as made conclusions devoid of evidentiary support, hence we review its findings of
fact.
By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.[33]Thus, the elements
of agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is
the execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and not
for himself; and (iv) the agent acts within the scope of his authority.[34]
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency
Manager Agreement; an agency manager such as Baluyot is considered an independent contractor and
not an agent.[35] However, in the same contract, Baluyot as agency manager was authorized to solicit and
remit to MMPCI offers to purchase interment spaces belonging to and sold by the
latter.[36] Notwithstanding the claim of MMPCI that Baluyot was an independent contractor, the fact
remains that she was authorized to solicit solely for and in behalf of MMPCI. As properly found both by
the trial court and the Court of Appeals, Baluyot was an agent of MMPCI, having represented the interest
of the latter, and having been allowed by MMPCI to represent it in her dealings with its clients/prospective
buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the
contract procured by Atty. Linsangan and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained
on forms provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms
and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed
a total list price of P132,250.00. Likewise, it was clearly stated therein that Purchaser agrees that he has
read or has had read to him this agreement, that he understands its terms and conditions, and that there
are no covenants, conditions, warranties or representations other than those contained herein.[37] By
signing the Offer to Purchase, Atty. Linsangan signified that he understood its contents. That he and
Baluyot had an agreement different from that contained in the Offer to Purchase is of no moment, and
should not affect MMPCI, as it was obviously made outside Baluyots authority. To repeat, Baluyots
authority was limited only to soliciting purchasers. She had no authority to alter the terms of the written
contract provided by MMPCI. The document/letter confirming the agreement that Atty. Linsangan would
have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the same
came from MMPCI or any of its officers.
It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to establish it. [38] The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent.[39] If he does not make such an inquiry, he is chargeable with knowledge of the
agents authority and his ignorance of that authority will not be any excuse.[40]
As noted by one author, the ignorance of a person dealing with an agent as to the scope of the
latters authority is no excuse to such person and the fault cannot be thrown upon the principal.[41] A person
dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agents assumption of authority that proves to be unfounded. The principal, on the other
hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing
to ascertain the extent of his authority as well as the existence of his agency.[42]
In the instant case, it has not been established that Atty. Linsangan even bothered to inquire
whether Baluyot was authorized to agree to terms contrary to those indicated in the written contract,
much less bind MMPCI by her commitment with respect to such agreements. Even if Baluyot was Atty.
Linsangans friend and known to be an agent of MMPCI, her declarations and actions alone are not
sufficient to establish the fact or extent of her authority.[43] Atty. Linsangan as a practicing lawyer for a
relatively long period of time when he signed the contract should have been put on guard when their
agreement was not reflected in the contract. More importantly, Atty. Linsangan should have been alerted
by the fact that Baluyot failed to effect the transfer of rights earlier promised, and was unable to make
good her written commitment, nor convince MMPCI to assent thereto, as evidenced by several attempts
to induce him to enter into other contracts for a higher consideration. As properly pointed out by MMPCI,
as a lawyer, a greater degree of caution should be expected of Atty. Linsangan especially in dealings
involving legal documents. He did not even bother to ask for official receipts of his payments, nor inquire
from MMPCI directly to ascertain the real status of the contract, blindly relying on the representations of
Baluyot. A lawyer by profession, he knew what he was doing when he signed the written contract, knew
the meaning and value of every word or phrase used in the contract, and more importantly, knew the legal
effects which said document produced. He is bound to accept responsibility for his negligence.
The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial
court, MMPCIs acts of accepting and encashing the checks issued by Atty. Linsangan as well as allowing
Baluyot to receive checks drawn in the name of MMPCI confirm and ratify the contract of agency. On the
other hand, the Court of Appeals faulted MMPCI in failing to adopt measures to prevent
misrepresentation, and declared that in view of MMPCIs acceptance of the benefits of Baluyots
misrepresentation, it can no longer deny responsibility therefor.
The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and
the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is
aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he
undertook to secure the principals ratification.
Art. 1910. The principal must comply with all the obligations that the agent may have contracted within
the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the
agent if the former allowed the latter to act as though he had full powers.
Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he
ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own
unauthorized acts. Moreover, the principal must have knowledge of the acts he is to ratify.[44]
Ratification in agency is the adoption or confirmation by one person of an act performed on his
behalf by another without authority. The substance of the doctrine is confirmation after conduct,
amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at the
time of ratification of all the material facts and circumstances relating to the unauthorized act of the
person who assumed to act as agent. Thus, if material facts were suppressed or unknown, there can be no
valid ratification and this regardless of the purpose or lack thereof in concealing such facts and regardless
of the parties between whom the question of ratification may arise.[45] Nevertheless, this principle does
not apply if the principals ignorance of the material facts and circumstances was willful, or that the
principal chooses to act in ignorance of the facts.[46] However, in the absence of circumstances putting a
reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is ignorant
of the facts.[47]
No ratification can be implied in the instant case.
A perusal of Baluyots Answer[48] reveals that the real arrangement between her and Atty. Linsangan
was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to shoulder the
counterpart amount of P1,455.00 to meet the P3,255.00 monthly installments as indicated in the contract.
Thus, every time an installment falls due, payment was to be made through a check from Atty. Linsangan
for P1,800.00 and a cash component of P1,455.00 from Baluyot.[49] However, it appears that while Atty.
Linsangan issued the post-dated checks, Baluyot failed to come up with her part of the bargain. This was
supported by Baluyots statements in her letter[50] to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two
days after she received the copy of the Complaint. In the letter, she admitted that she was remiss in her
duties when she consented to Atty. Linsangans proposal that he will pay the old price while the difference
will be shouldered by her. She likewise admitted that the contract suffered arrearages because while Atty.
Linsangan issued the agreed checks, she was unable to give her share of P1,455.00 due to her own financial
difficulties. Baluyot even asked for compassion from MMPCI for the error she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI is
concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by Atty.
Linsangan and MMPCIs authorized officer. The down payment of P19,838.00 given by Atty. Linsangan was
in accordance with the contract as well. Payments of P3,235.00 for at least two installments were likewise
in accord with the contract, albeit made through a check and partly in cash. In view of Baluyots failure to
give her share in the payment, MMPCI received only P1,800.00 checks, which were clearly insufficient
payment. In fact, Atty. Linsangan would have incurred arrearages that could have caused the earlier
cancellation of the contract, if not for MMPCIs application of some of the checks to his account. However,
the checks alone were not sufficient to cover his obligations.
If MMPCI was aware of the arrangement, it would have refused the latters check payments for being
insufficient. It would not have applied to his account the P1,800.00 checks. Moreover, the fact that Baluyot
had to practically explain to MMPCIs Sales Manager the details of her arrangement with Atty. Linsangan
and admit to having made an error in entering such arrangement confirm that MMCPI had no knowledge
of the said agreement. It was only when Baluyot filed her Answer that she claimed that MMCPI was fully
aware of the agreement.
Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of a
party amounting to false representation or concealment of material facts or at least calculated to convey
the impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct shall be acted upon
by, or at least influence, the other party; and (iii) knowledge, actual or constructive, of the real facts.[51]
While there is no more question as to the agency relationship between Baluyot and MMPCI, there
is no indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the
authority to alter the standard contracts of the company. Neither is there any showing that prior to signing
Contract No. 28660, MMPCI had any knowledge of Baluyots commitment to Atty. Linsangan. One who
claims the benefit of an estoppel on the ground that he has been misled by the representations of another
must not have been misled through his own want of reasonable care and circumspection.[52] Even
assuming that Atty. Linsangan was misled by MMPCIs actuations, he still cannot invoke the principle of
estoppel, as he was clearly negligent in his dealings with Baluyot, and could have easily determined, had
he only been cautious and prudent, whether said agent was clothed with the authority to change the terms
of the principals written contract. Estoppel must be intentional and unequivocal, for when misapplied, it
can easily become a most convenient and effective means of injustice.[53] In view of the lack of sufficient
proof showing estoppel, we refuse to hold MMPCI liable on this score.
 Likewise, this Court does not find favor in the Court of Appeals findings that the authority of
defendant Baluyot may not have been expressly conferred upon her; however, the same may have been
derived impliedly by habit or custom which may have been an accepted practice in their company in a long
period of time. A perusal of the records of the case fails to show any indication that there was such a habit
or custom in MMPCI that allows its agents to enter into agreements for lower prices of its interment
spaces, nor to assume a portion of the purchase price of the interment spaces sold at such lower price. No
evidence was ever presented to this effect.
As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660
between MMPCI and by Atty. Linsangan for the purchase of an interment space in the formers cemetery.
The other is the agreement between Baluyot and Atty. Linsangan for the former to shoulder the
amount P1,455.00, or the difference between P95,000.00, the original price, and P132,250.00, the actual
contract price.
To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless
the latter ratifies the same. It also bears emphasis that when the third person knows that the agent was
acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the
said third person was aware of such limits of authority, he is to blame and is not entitled to recover
damages from the agent, unless the latter undertook to secure the principals ratification.[54]
This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty.
Linsangan. By affixing his signature in the contract, Atty. Linsangan assented to the terms and conditions
thereof. When Atty. Linsangan incurred delinquencies in payment, MMCPI merely enforced its rights
under the said contract by canceling the same.
Being aware of the limits of Baluyots authority, Atty. Linsangan cannot insist on what he claims to
be the terms of Contract No. 28660. The agreement, insofar as the P95,000.00 contract price is concerned,
is void and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable for damages under
the same contract, since there is no evidence showing that Baluyot undertook to secure MMPCIs
ratification. At best, the agreement between Baluyot and Atty. Linsangan bound only the two of them. As
far as MMPCI is concerned, it bound itself to sell its interment space to Atty. Linsangan for P132,250.00
under Contract No. 28660, and had in fact received several payments in accordance with the same
contract. If the contract was cancelled due to arrearages, Atty. Linsangans recourse should only be against
Baluyot who personally undertook to pay the difference between the true contract price of P132,250.00
and the original proposed price of P95,000.00. To surmise that Baluyot was acting on behalf of MMPCI
when she promised to shoulder the said difference would be to conclude that MMPCI undertook to pay
itself the difference, a conclusion that is very illogical, if not antithetical to its business interests.
However, this does not preclude Atty. Linsangan from instituting a separate action to recover
damages from Baluyot, not as an agent of MMPCI, but in view of the latters breach of their separate
agreement. To review, Baluyot obligated herself to pay P1,455.00 in addition to Atty. Linsangans P1,800.00
to complete the monthly installment payment under the contract, which, by her own admission, she was
unable to do due to personal financial difficulties. It is undisputed that Atty. Linsangan issued
the P1,800.00 as agreed upon, and were it not for Baluyots failure to provide the balance, Contract No.
28660 would not have been cancelled. Thus, Atty. Linsangan has a cause of action against Baluyot, which
he can pursue in another case.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22 June
2001 and its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the Decision in Civil
Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby REVERSED and SET ASIDE.
The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of cause of action. No pronouncement as to
costs.
SO ORDERED.
G.R. No. L-57339 December 29, 1983
AIR FRANCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE G. GANA (Deceased), CLARA A. GANA, RAMON GANA, MANUEL
GANA, MARIA TERESA GANA, ROBERTO GANA, JAIME JAVIER GANA, CLOTILDE VDA. DE AREVALO, and
EMILY SAN JUAN, respondents.
MELENCIO-HERRERA, J.:
In this petition for review on certiorari, petitioner AIR FRANCE assails the Decision of then respondent
Court of Appeals 1 promulgated on 15 December 1980 in CA-G.R. No. 58164-R, entitled "Jose G. Gana, et
al. vs. Sociedad Nacionale Air France", which reversed the Trial Court's judgment dismissing the
Complaint of private respondents for damages arising from breach of contract of carriage, and awarding
instead P90,000.00 as moral damages.
Sometime in February, 1970, the late Jose G. Gana and his family, numbering nine (the GANAS),
purchased from AIR FRANCE through Imperial Travels, Incorporated, a duly authorized travel agent, nine
(9) "open-dated" air passage tickets for the Manila/Osaka/Tokyo/Manila route. The GANAS paid a total
of US$2,528.85 for their economy and first class fares. Said tickets were bought at the then prevailing
exchange rate of P3.90 per US$1.00. The GANAS also paid travel taxes of P100.00 for each passenger.
On 24 April 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets
for the same route. At this time, the GANAS were booked for the Manila/Osaka segment on AIR FRANCE
Flight 184 for 8 May 1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22 May
1970. The aforesaid tickets were valid until 8 May 1971, the date written under the printed words "Non
valuable apres de (meaning, "not valid after the").
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the
Sta. Clara Lumber Company where Jose Gana was the Director and Treasurer, for the extension of the
validity of their tickets, which were due to expire on 8 May 1971. Teresita enlisted the help of Lee Ella
Manager of the Philippine Travel Bureau, who used to handle travel arrangements for the personnel of
the Sta. Clara Lumber Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE. The
tickets were returned to Ella who was informed that extension was not possible unless the fare
differentials resulting from the increase in fares triggered by an increase of the exchange rate of the US
dollar to the Philippine peso and the increased travel tax were first paid. Ella then returned the tickets to
Teresita and informed her of the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day before the expiry
date. In the morning of the very day of their scheduled departure on the first leg of their trip, Teresita
requested travel agent Ella to arrange the revalidation of the tickets. Ella gave the same negative answer
and warned her that although the tickets could be used by the GANAS if they left on 7 May 1971, the
tickets would no longer be valid for the rest of their trip because the tickets would then have expired on
8 May 1971. Teresita replied that it will be up to the GANAS to make the arrangements. With that
assurance, Ella on his own, attached to the tickets validating stickers for the Osaka/Tokyo flight, one a
JAL. sticker and the other an SAS (Scandinavian Airways System) sticker. The SAS sticker indicates
thereon that it was "Reevaluated by: the Philippine Travel Bureau, Branch No. 2" (as shown by a circular
rubber stamp) and signed "Ador", and the date is handwritten in the center of the circle. Then appear
under printed headings the notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status). expiry of this limit (parag. 3.1.2. ) ... That is the time allowed a passenger to begin and to complete his
Apparently, Ella made no more attempt to contact AIR FRANCE as there was no more time. trip (parags. 3.2 and 3.3.). ... A ticket can no longer be used for travel if its validity has expired before the
passenger completes his trip (parag. 3.5.1.) ... To complete the trip, the passenger must purchase a new
ticket for the remaining portion of the journey" (ibid.) 3
Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of 7 May 1971 on
board AIR FRANCE Flight 184 for Osaka, Japan. There is no question with respect to this leg of the trip.
From the foregoing rules, it is clear that AIR FRANCE cannot be faulted for breach of contract when it
dishonored the tickets of the GANAS after 8 May 1971 since those tickets expired on said date; nor when
However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the tickets because
it required the GANAS to buy new tickets or have their tickets re-issued for the Tokyo/Manila segment of
of their expiration, and the GANAS had to purchase new tickets. They encountered the same difficulty
their trip. Neither can it be said that, when upon sale of the new tickets, it imposed additional charges
with respect to their return trip to Manila as AIR FRANCE also refused to honor their tickets. They were
representing fare differentials, it was motivated by self-interest or unjust enrichment considering that an
able to return only after pre-payment in Manila, through their relatives, of the readjusted rates. They
increase of fares took effect, as authorized by the Civil Aeronautics Board (CAB) in April, 1971. This
finally flew back to Manila on separate Air France Frights on 19 May 1971 for Jose Gana and 26 May
procedure is well in accord with the IATA tariff rules which provide:
1971 for the rest of the family.

6. TARIFF RULES
On 25 August 1971, the GANAS commenced before the then Court of First Instance of Manila, Branch III,
Civil Case No. 84111 for damages arising from breach of contract of carriage.
7. APPLICABLE FARE ON THE DATE OF DEPARTURE
AIR FRANCE traversed the material allegations of the Complaint and alleged that the GANAS brought
upon themselves the predicament they found themselves in and assumed the consequential risks; that 3.1 General Rule.
travel agent Ella's affixing of validating stickers on the tickets without the knowledge and consent of AIR
FRANCE, violated airline tariff rules and regulations and was beyond the scope of his authority as a travel
All journeys must be charged for at the fare (or charge) in effect on the date on
agent; and that AIR FRANCE was not guilty of any fraudulent conduct or bad faith.
which transportation commences from the point of origin. Any ticket sold prior to
a change of fare or charge (increase or decrease) occurring between the date of
On 29 May 1975, the Trial Court dismissed the Complaint based on Partial and Additional Stipulations of commencement of the journey, is subject to the above general rule and must be
Fact as wen as on the documentary and testimonial evidence. adjusted accordingly. A new ticket must be issued and the difference is to be
collected or refunded as the case may be. No adjustment is necessary if the
increase or decrease in fare (or charge) occurs when the journey is already
The GANAS appealed to respondent Appellate Court. During the pendency of the appeal, Jose Gana, the
commenced. 4
principal plaintiff, died.

On 15 December 1980, respondent Appellate Court set aside and reversed the Trial Court's judgment in
a Decision, which decreed:
WHEREFORE, the decision appealed from is set aside. Air France is hereby ordered
to pay appellants moral damages in the total sum of NINETY THOUSAND PESOS
(P90,000.00) plus costs.
The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out
that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of
the advice of Reno, the Office Manager of Air France, that the tickets in question could not be extended
beyond the period of their validity without paying the fare differentials and additional travel taxes
brought about by the increased fare rate and travel taxes.
ATTY. VALTE

SO ORDERED. 2
Q What did you tell Mrs. Manucdoc, in turn after being told
this by Mr. Rillo?
Reconsideration sought by AIR FRANCE was denied, hence, petitioner's recourse before this instance, to
which we gave due course.
A I told her, because that is the reason why they accepted
again the tickets when we returned the tickets spin, that
The crucial issue is whether or not, under the environmental milieu the GANAS have made out a case for they could not be extended. They could be extended by
breach of contract of carriage entitling them to an award of damages. paying the additional fare, additional tax and additional
exchange during that time.
We are constrained to reverse respondent Appellate Court's affirmative ruling thereon.
Q You said so to Mrs. Manucdoc?
Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA),
included in paragraphs 9, 10, and 11 of the Stipulations of Fact between the parties in the Trial Court, A Yes, sir." ... 5
dated 31 March 1973, an airplane ticket is valid for one year. "The passenger must undertake the final
portion of his journey by departing from the last point at which he has made a voluntary stop before the
The ruling relied on by respondent Appellate Court, therefore, in KLM. vs. Court of Appeals, 65 SCRA 237 Q This was in Tagalog or in English?
(1975), holding that it would be unfair to charge respondents therein with automatic knowledge or
notice of conditions in contracts of adhesion, is inapplicable. To all legal intents and purposes, Teresita
A I think it was in English. ... 7
was the agent of the GANAS and notice to her of the rejection of the request for extension of the validity
of the tickets was notice to the GANAS, her principals.
The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to
leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. It should be
The SAS validating sticker for the Osaka/Tokyo flight affixed by Era showing reservations for JAL. Flight
recalled that the GANAS left in Manila the day before the expiry date of their tickets and that "other
108 for 16 May 1971, without clearing the same with AIR FRANCE allegedly because of the imminent
arrangements" were to be made with respect to the remaining segments. Besides, the validating stickers
departure of the GANAS on the same day so that he could not get in touch with Air France 6 was certainly
that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not
in contravention of IATA rules although as he had explained, he did so upon Teresita's assurance that for
legally serve to extend the validity of a ticket or revive an expired one.
the onward flight from Osaka and return, the GANAS would make other arrangements.

The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in for
Q Referring you to page 33 of the transcript of the last
having insisted on using tickets that were due to expire in an effort, perhaps, to beat the deadline and in
session, I had this question which reads as follows: 'But did
the thought that by commencing the trip the day before the expiry date, they could complete the trip
she say anything to you when you said that the tickets were
even thereafter. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL.
about to expire?' Your answer was: 'I am the one who asked
stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted
her. At that time I told her if the tickets being used ... I was
within their contractual rights when they dishonored the tickets on the remaining segments of the trip
telling her what about their bookings on the return. What
and when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the
about their travel on the return? She told me it is up for the
Tokyo/Manila flight.
Ganas to make the arrangement.' May I know from you
what did you mean by this testimony of yours?
WHEREFORE, the judgment under review is hereby reversed and set aside, and the Amended Complaint
filed by private respondents hereby dismissed.
A That was on the day when they were asking me on May 7,
1971 when they were checking the tickets. I told Mrs.
Manucdoc that I was going to get the tickets. I asked her No costs.
what about the tickets onward from the return from Tokyo,
and her answer was it is up for the Ganas to make the SO ORDERED.
arrangement, because I told her that they could leave on the
seventh, but they could take care of that when they arrived
in Osaka. G.R. No. 161757 January 25, 2006

Q What do you mean? SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S. DINOPOL, in his
A The Ganas will make the arrangement from Osaka, Tokyo capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City and DIVINA A.
and Manila. MONTEHERMOZO,Respondents.

Q What arrangement? DECISION

A The arrangement for the airline because the tickets would
expire on May 7, and they insisted on leaving. I asked Mrs.
Manucdoc what about the return onward portion because
they would be travelling to Osaka, and her answer was, it is
up to for the Ganas to make the arrangement.
Q Exactly what were the words of Mrs. Manucdoc when you
told her that? If you can remember, what were her exact
words?
A Her words only, it is up for the Ganas to make the
arrangement.
CARPIO-MORALES, J.:
Petitioner, Sunace International Management Services (Sunace), a corporation duly organized and existing
under the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic
helper under a 12-month contract effective February 1, 1997.1The deployment was with the assistance of
a Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese
employer, Hang Rui Xiong, for two more years, after which she returned to the Philippines on February 4,
2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint2 before the National Labor
Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the
employer-foreign principal alleging that she was jailed for three months and that she was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate Regina T. Gavin issued
Summons3 to the Manager of Sunace, furnishing it with a copy of Divina’s complaint and directing it to
appear for mandatory conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been concluded, however.
On April 6, 2000, Divina filed her Position Paper4 claiming that under her original one-year contract and
the 2-year extended contract which was with the knowledge and consent of Sunace, the following
amounts representing income tax and savings were deducted:
Year Deduction for Income Tax Deduction for Savings
1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;5
and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999 were
not. On even date, Sunace, by its Proprietor/General Manager Maria Luisa Olarte, filed its Verified Answer
and Position Paper,6 claiming as follows, quoted verbatim:
COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24 months savings as she
already took back her saving already last year and the employer did not deduct any money from her salary,
in accordance with a Fascimile Message from the respondent SUNACE’s employer, Jet Crown International
Co. Ltd., a xerographic copy of which is herewith attached as ANNEX "2" hereof;
COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX AND PAYMENT OF ATTORNEY’S
FEES
4. There is no basis for the grant of tax refund to the complainant as the she finished her one year
contract and hence, was not illegally dismissed by her employer. She could only lay claim over the tax
refund or much more be awarded of damages such as attorney’s fees as said reliefs are available only
when the dismissal of a migrant worker is without just valid or lawful cause as defined by law or contract.
The rationales behind the award of tax refund and payment of attorney’s fees is not to enrich the
complainant but to compensate him for actual injury suffered. Complainant did not suffer injury, hence,
does not deserve to be compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE for monetary claims,
considering that she has been totally paid of all the monetary benefits due her under her Employment
Contract to her full satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the Taiwanese law, which
respondent SUNACE has no control and complainant has to obey and this Honorable Office has no
authority/jurisdiction to intervene because the power to tax is a sovereign power which the Taiwanese
Government is supreme in its own territory. The sovereign power of taxation of a state is recognized under
international law and among sovereign states.
7. That respondent SUNACE respectfully reserves the right to file supplemental Verified Answer and/or
Position Paper to substantiate its prayer for the dismissal of the above case against the herein respondent.
AND BY WAY OF -
x x x x (Emphasis and underscoring supplied)
Reacting to Divina’s Position Paper, Sunace filed on April 25, 2000 an ". . . answer to complainant’s position
paper"7 alleging that Divina’s 2-year extension of her contract was without its knowledge and consent,
hence, it had no liability attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy of each document was
annexed to said ". . . answer to complainant’s position paper."
To Sunace’s ". . . answer to complainant’s position paper," Divina filed a 2-page reply,8 without, however,
refuting Sunace’s disclaimer of knowledge of the extension of her contract and without saying anything
about the Release, Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunace’s claim that the extension of Divina’s contract for two more years was
without its knowledge and consent in this wise:
We reject Sunace’s submission that it should not be held responsible for the amount withheld because her
contract was extended for 2 more years without its knowledge and consent because as Annex "B"9shows,
Sunace and Edmund Wang have not stopped communicating with each other and yet the matter of the
contract’s extension and Sunace’s alleged non-consent thereto has not been categorically established.
What Sunace should have done was to write to POEA about the extension and its objection thereto, copy
furnished the complainant herself, her foreign employer, Hang Rui Xiong and the Taiwanese broker,
Edmund Wang.
And because it did not, it is presumed to have consented to the extension and should be liable for anything
that resulted thereform (sic).10(Underscoring supplied)
The Labor Arbiter rejected too Sunace’s argument that it is not liable on account of Divina’s execution of
a Waiver and Quitclaim and an Affidavit of Desistance. Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be
reduced to writing and signed by the parties and their respective counsel (sic), if any, before the Labor
Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily entered
into by the parties and after having explained to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before
whom the case is pending shall be approved by him, if after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and conditions of the settlement and that it
was entered into freely voluntarily (sic) by them and the agreement is not contrary to law, morals, and
public policy.
And because no consideration is indicated in the documents, we strike them down as contrary to law,
morals, and public policy.11
He accordingly decided in favor of Divina, by decision of October 9, 2000,12 the dispositive portion of which
reads:
Wherefore, judgment is hereby rendered ordering respondents SUNACE INTERNATIONAL SERVICES and
its owner ADELAIDA PERGE, both in their personal capacities and as agent of Hang Rui Xiong/Edmund
Wangto jointly and severally pay complainant DIVINA A. MONTEHERMOZO the sum of NT91,950.00 in its
peso equivalent at the date of payment, as refund for the amounts which she is hereby adjudged entitled
to as earlier discussed plus 10% thereof as attorney’s fees since compelled to litigate, complainant had to
engage the services of counsel.
SO ORDERED.13 (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,14affirmed the Labor Arbiter’s decision.
Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals which dismissed it outright
by Resolution of November 12, 2002,16 the full text of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of discretion on the part of the public
respondent amounting to lack of jurisdiction when the NLRC affirmed the Labor Arbiter’s finding that
petitioner Sunace International Management Services impliedly consented to the extension of the
contract of private respondent Divina A. Montehermozo. It is undisputed that petitioner was continually
communicating with private respondent’s foreign employer (sic). As agent of the foreign principal,
"petitioner cannot profess ignorance of such extension as obviously, the act of the principal extending
complainant(sic) employment contract necessarily bound it." Grave abuse of discretion is not present in
the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.17
SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on words in small letters and underscoring
supplied)
Its Motion for Reconsideration having been denied by the appellate court by Resolution of January 14,
2004,18 Sunace filed the present petition for review on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRC’s finding that Sunace knew of and impliedly
consented to the extension of Divina’s 2-year contract. It went on to state that "It is undisputed that
[Sunace] was continually communicating with [Divina’s] foreign employer." It thus concluded that "[a]s
agent of the foreign principal, ‘petitioner cannot profess ignorance of such extension as obviously, the act
of the principal extending complainant (sic) employment contract necessarily bound it.’"
Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese broker Wang, not with the foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the only basis of a finding
of continuous communication, reads verbatim:
xxxx
Regarding to Divina, she did not say anything about her saving in police station.
As we contact with her employer, she took back her saving already last years. And
they did not deduct any money from her salary. Or she will call back her employer
to check it again. If her employer said yes! we will get it back for her.
Thank you and best regards.
(Sgd.)
EdmundWang
President19
The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that Sunace
continually communicated with the foreign "principal" (sic) and therefore was aware of and had consented
to the execution of the extension of the contract is misplaced. The message does not provide evidence
that Sunace was privy to the new contract executed after the expiration on February 1, 1998 of the original
contract. That Sunace and the Taiwanese broker communicated regarding Divina’s allegedly withheld
savings does not necessarily mean that Sunace ratified the extension of the contract. As Sunace points out
in its Reply20 filed before the Court of Appeals,
As can be seen from that letter communication, it was just an information given to the petitioner that the
private respondent had t[aken] already her savings from her foreign employer and that no deduction was
made on her salary. It contains nothing about the extension or the petitioner’s consent thereto.21
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it was sent
to enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to appear on
February 28, 2000 for a mandatory conference following Divina’s filing of the complaint on February 14,
2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as obviously, the
act of its principal extending [Divina’s] employment contract necessarily bound it,22
it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal, employer
Xiong, not the other way around.23The knowledge of the principal-foreign employer cannot, therefore, be
imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot
be held solidarily liable for any of Divina’s claims arising from the 2-year employment extension. As the
New Civil Code provides,
Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights
and obligations arising from the contract are not transmissible by their nature, or by stipulation or by
provision of law.24
Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship
with its foreign principal when, after the termination of the original employment contract, the foreign
principal directly negotiated with Divina and entered into a new and separate employment contract in
Taiwan. Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly
with third persons.
thus applies.
In light of the foregoing discussions, consideration of the validity of the Waiver and Affidavit of Desistance
which Divina executed in favor of Sunace is rendered unnecessary.
WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court of Appeals are
hereby REVERSED and SET ASIDE. The complaint of respondent Divina A. Montehermozo against
petitioner is DISMISSED.
SO ORDERED.
G.R. No. L-24833 September 23, 1968
FIELDMEN'S INSURANCE CO., INC., petitioner,
vs.
MERCEDES VARGAS VDA. DE SONGCO, ET AL. and COURT OF APPEALS, respondents.
FERNANDO, J.:
An insurance firm, petitioner Fieldmen's Insurance Co., Inc., was not allowed to escape liability under a
common carrier insurance policy on the pretext that what was insured, not once but twice, was a private
vehicle and not a common carrier, the policy being issued upon the insistence of its agent who
discounted fears of the insured that his privately owned vehicle might not fall within its terms, the
insured moreover being "a man of scant education," finishing only the first grade. So it was held in a
decision of the lower court thereafter affirmed by respondent Court of Appeals. Petitioner in seeking the
review of the above decision of respondent Court of Appeals cannot be so sanguine as to entertain the
belief that a different outcome could be expected. To be more explicit, we sustain the Court of Appeals.
The facts as found by respondent Court of Appeals, binding upon us, follow: "This is a peculiar case.
Federico Songco of Floridablanca, Pampanga, a man of scant education being only a first grader ...,
owned a private jeepney with Plate No. 41-289 for the year 1960. On September 15, 1960, as such
private vehicle owner, he was induced by Fieldmen's Insurance Company Pampanga agent Benjamin
Sambat to apply for a Common Carrier's Liability Insurance Policy covering his motor vehicle ... Upon
paying an annual premium of P16.50, defendant Fieldmen's Insurance Company, Inc. issued on
September 19, 1960, Common Carriers Accident Insurance Policy No. 45-HO- 4254 ... the duration of
which will be for one (1) year, effective September 15, 1960 to September 15, 1961. On September 22,
1961, the defendant company, upon payment of the corresponding premium, renewed the policy by
extending the coverage from October 15, 1961 to October 15, 1962. This time Federico Songco's private
jeepney carried Plate No. J-68136-Pampanga-1961. ... On October 29, 1961, during the effectivity of the
renewed policy, the insured vehicle while being driven by Rodolfo Songco, a duly licensed driver and son
of Federico (the vehicle owner) collided with a car in the municipality of Calumpit, province of Bulacan,
as a result of which mishap Federico Songco (father) and Rodolfo Songco (son) died, Carlos Songco
(another son), the latter's wife, Angelita Songco, and a family friend by the name of Jose Manuel
sustained physical injuries of varying degree." 1
It was further shown according to the decision of respondent Court of Appeals: "Amor Songco, 42-year-
old son of deceased Federico Songco, testifying as witness, declared that when insurance agent
Benjamin Sambat was inducing his father to insure his vehicle, he butted in saying: 'That cannot be, Mr.
Sambat, because our vehicle is an "owner" private vehicle and not for passengers,' to which agent
Sambat replied: 'whether our vehicle was an "owner" type or for passengers it could be insured because
their company is not owned by the Government and the Government has nothing to do with their
company. So they could do what they please whenever they believe a vehicle is insurable' ... In spite of
the fact that the present case was filed and tried in the CFI of Pampanga, the defendant company did not
even care to rebut Amor Songco's testimony by calling on the witness-stand agent Benjamin Sambat, its
Pampanga Field Representative." 2
The plaintiffs in the lower court, likewise respondents here, were the surviving widow and children of
the deceased Federico Songco as well as the injured passenger Jose Manuel. On the above facts they
prevailed, as had been mentioned, in the lower court and in the respondent Court of
Appeals.1awphîl.nèt
The basis for the favorable judgment is the doctrine announced in Qua Chee Gan v. Law Union and Rock
Insurance Co., Ltd., 3 with Justice J. B. L. Reyes speaking for the Court. It is now beyond question that
where inequitable conduct is shown by an insurance firm, it is "estopped from enforcing forfeitures in its
favor, in order to forestall fraud or imposition on the insured." 4
As much, if not much more so than the Qua Chee Gan decision, this is a case where the doctrine of
estoppel undeniably calls for application. After petitioner Fieldmen's Insurance Co., Inc. had led the
insured Federico Songco to believe that he could qualify under the common carrier liability insurance
policy, and to enter into contract of insurance paying the premiums due, it could not, thereafter, in any
litigation arising out of such representation, be permitted to change its stand to the detriment of the
heirs of the insured. As estoppel is primarily based on the doctrine of good faith and the avoidance of
harm that will befall the innocent party due to its injurious reliance, the failure to apply it in this case
would result in a gross travesty of justice.
That is all that needs be said insofar as the first alleged error of respondent Court of Appeals is
concerned, petitioner being adamant in its far-from-reasonable plea that estoppel could not be invoked
by the heirs of the insured as a bar to the alleged breach of warranty and condition in the policy. lt would
now rely on the fact that the insured owned a private vehicle, not a common carrier, something which it
knew all along when not once but twice its agent, no doubt without any objection in its part, exerted the
utmost pressure on the insured, a man of scant education, to enter into such a contract.
Nor is there any merit to the second alleged error of respondent Court that no legal liability was incurred
under the policy by petitioner. Why liability under the terms of the policy 5 was inescapable was set forth
in the decision of respondent Court of Appeals. Thus: "Since some of the conditions contained in the
policy issued by the defendant-appellant were impossible to comply with under the existing conditions
at the time and 'inconsistent with the known facts,' the insurer 'is estopped from asserting breach of
such conditions.' From this jurisprudence, we find no valid reason to deviate and consequently hold that
the decision appealed from should be affirmed. The injured parties, to wit, Carlos Songco, Angelito
Songco and Jose Manuel, for whose hospital and medical expenses the defendant company was being
made liable, were passengers of the jeepney at the time of the occurrence, and Rodolfo Songco, for
whose burial expenses the defendant company was also being made liable was the driver of the vehicle
in question. Except for the fact, that they were not fare paying passengers, their status as beneficiaries
under the policy is recognized therein." 6
Even if it be assumed that there was an ambiguity, an excerpt from the Qua Chee Gan decision would
reveal anew the weakness of petitioner's contention. Thus: "Moreover, taking into account the well
known rule that ambiguities or obscurities must be strictly interpreted against the party that caused
them, the 'memo of warranty' invoked by appellant bars the latter from questioning the existence of the
appliances called for in the insured premises, since its initial expression, 'the undernoted appliances for
the extinction of fire being kept on the premises insured hereby, ... it is hereby warranted ...,' admits of
interpretation as an admission of the existence of such appliances which appellant cannot now
contradict, should the parol evidence rule apply." 7
To the same effect is the following citation from the same leading case: "This rigid application of the rule
on ambiguities has become necessary in view of current business practices. The courts cannot ignore
that nowadays monopolies, cartels and concentration of capital, endowed with overwhelming economic
power, manage to impose upon parties dealing with them cunningly prepared 'agreements' that the
weaker party may not change one whit, his participation in the 'agreement' being reduced to the
alternative to 'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats
d'adhesion), in contrast to those entered into by parties bargaining on an equal footing, such contracts
(of which policies of insurance and international bills of lading are prime examples) obviously call for
greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party
from abuses and imposition, and prevent their becoming traps for the unwary (New Civil Code. Article
24; Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 February 1942)." 8
The last error assigned which would find fault with the decision of respondent Court of Appeals insofar
as it affirmed the lower court award for exemplary damages as well as attorney's fees is, on its face, of
no persuasive force at all.
The conclusion that inescapably emerges from the above is the correctness of the decision of respondent
Court of Appeals sought to be reviewed. For, to borrow once again from the language of the Qua Chee
Gan opinion: "The contract of insurance is one of perfect good faith (uberima fides) not for the insured
alone,but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining
position carries with it stricter responsibility."9
This is merely to stress that while the morality of the business world is not the morality of institutions of
rectitude like the pulpit and the academe, it cannot descend so low as to be another name for guile or
deception. Moreover, should it happen thus, no court of justice should allow itself to lend its approval
and support.1awphîl.nèt
We have no choice but to recognize the monetary responsibility of petitioner Fieldmen's Insurance Co.,
Inc. It did not succeed in its persistent effort to avoid complying with its obligation in the lower court and
the Court of Appeals. Much less should it find any receptivity from us for its unwarranted and unjustified
plea to escape from its liability.
WHEREFORE, the decision of respondent Court of Appeals of July 20, 1965, is affirmed in its entirety.
Costs against petitioner Fieldmen's Insurance Co., Inc.
GR No. 94071
New Life Enterprises, et al. vs. Court of Appeals, et al.
REGALADO, J.:
This appeal by certiorari seeks the nullification of the decision[1] of respondent Court of Appeals in CA-
G.R. CV No. 13866 which reversed the decision of the Regional Trial Court, Branch LVII at Lucena City,
jointly deciding Civil Cases Nos. 6-84, 7-84 and 8-84 thereof and consequently ordered the dismissal of
the aforesaid actions filed by herein petitioners.
The undisputed background of this case as found by the court a quo and adopted by respondent court,
being sustained by the evidence on record, we hereby reproduce the same with approval.[2]
"The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business partnership
in the City of Lucena. Under the business name of New Life Enterprises, the partnership engaged in the
sale of construction materials at its place of business, a two storey building situated at Iyam, Lucena City.
The facts show that Julian Sy insured the stocks in trade of New Life Enterprises with Western Guaranty
Corporation, Reliance Surety and Insurance Co. Inc., and Equitable Insurance Corporation.
"On May 15, 1981, Western Guaranty Corporation issued Fire Insurance Policy No. 37201 in the amount
of P350,000.00. This policy was renewed on May 13, 1982.
"On July 30, 1981, Reliance Surety and Insurance Co., Inc. issued Fire Insurance Policy No. 69135 in the
amount of P300,000.00 (Renewed under Renewal Certificate No. 41997). An additional insurance was
issued by the same company on November 12, 1981 under Fire Insurance Policy No. 71547 in the
amount of P700,000.00.
"On February 8, 1982, Equitable Insurance Corporation issued Fire Insurance Policy No. 39328 in the
amount of P200,000.00.
"Thus when the building occupied by the New Life Enterprises was gutted by fire at about 2:00 o'clock in
the morning of October 19, 1982, the stocks in trade inside said building were insured against fire in the
total amount of P1,550,000.00. According to the certification issued by the Headquarters, Philippine
Constabulary/Integrated National Police, Camp Crame, the cause of fire was electrical in nature.
According to the plaintiffs, the building and the stocks inside were burned. After the fire, Julian Sy went
to the agent of Reliance Insurance whom he asked to accompany him to the office of the company so
that he can file his claim. He averred that in support of his claim, he submitted the fire clearance, the
insurance policies and inventory of stocks. He further testified that the three insurance companies are
sister companies, and as a matter of fact when he was following-up his claim with Equitable Insurance,
the Claims Manager told him to go first to Reliance Insurance and if said company agrees to pay, they
would also pay. The same treatment was given him by the other insurance companies. Ultimately, the
three insurance companies denied plaintiffs' claim for payment.
"In its letter of denial dated March 9, 1983, (Exhibit 'C' No. 8-84) Western Guaranty Corporation through
Claims Manager Bernard S. Razon told the plaintiff that his claim 'is denied for breach of policy
conditions.' Reliance Insurance purveyed the same message in its letter dated November 23, 1982 and
signed by Executive Vice-President Mary Dee Co (Exhibit 'C' No. 7-84) which said that "plaintiff's claim is
denied for breach of policy conditions." The letter of denial received by the plaintiff from Equitable
Insurance Corporation (Exhibit 'C' No. 6-84) was of the same tenor, as said letter dated February 22,
1983, and signed by Vice-President Elma R. Bondad, said 'we find that certain policy conditions were
violated, therefore, we regret, we have to deny your claim, as it is hereby denied in its entirety.'
"In relation to the case against Reliance Surety and Insurance Company, a certain Atty. Serafin D. Dator,
acting in behalf of the plaintiff, sent a letter dated February 13, 1983 (Exhibit 'G-1' No. 7-84) to Executive
Vice?President Mary Dee Co asking that he be informed as to the specific policy conditions allegedly
violated by the plaintiff. In her reply-letter dated March 30, 1983, Executive Vice-President Mary Dee Co
informed Atty. Dator that Julian Sy violated Policy Condition No. '3' which requires the insured to give
notice of any insurance or insurances already effected covering the stocks in trade."[3]
Because of the denial of their claims for payment by the three (3) insurance companies, petitioner filed
separate civil actions against the former before the Regional Trial Court of Lucena City, which cases were
consolidated for trial and thereafter the court below rendered its decision on December 19, 1986 with
the following disposition:
"WHEREFORE, judgment in the above-entitled cases is rendered in the following manner, viz:
1. In Civil Case No. 6-84, judgment is rendered for the plaintiff New Life Enterprises and against the
defendant Equitable Insurance Corporation ordering the latter to pay the former the sum of Two
Hundred Thousand (P200,000.00) Pesos and considering that payment of the claim of the insured has
been unreasonably denied, pursuant to Sec. 244 of the Insurance Code, defendant is further ordered to
pay the plaintiff attorney's fees in the amount of Twenty Thousand (P20,000.00) Pesos. All sums of
money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec. 244 of the
Insurance Code) from February 14, 1983, (91st day from November 16, 1982, when Sworn Statement of
Fire Claim was received from the insured) until they are fully paid;
2. In Civil Case No. 7-84, judgment is rendered for the plaintiff Julian Sy and against the defendant
Reliance Surety and Insurance Co., Inc., ordering the latter to pay the former the sum of P1,000,000.00
(P300,000.00 under Policy No. 69135 and P700,000.00 under Policy No. 71547) and considering that
payment of the claim of the insured has been unreasonably denied, pursuant to Sec. 244 of the
Insurance Code, defendant is further ordered to pay the plaintiff the amount of P100,000.00 as
attorney's fees.
All sums of money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec. 244
of the Insurance Code) from February 14, 1983, (91st day from November 16, 1982 when Sworn
Statement of Fire Claim was received from the insured) until they are fully paid;
3. In Civil Case No. 8-84, judgment is rendered for the plaintiff New Life Enterprises and against the
defendant Western Guaranty Corporation ordering the latter to pay the sum of P350,000.00 to the
Consolidated Bank and Trust Corporation, Lucena Branch, Lucena City, as stipulated on the face of Policy
No. 37201, and considering that payment of the aforementioned sum of money has been unreasonably
denied, pursuant to Sec. 244 of the Insurance Code, defendant is further ordered to pay the plaintiff
attorney's fees in the amount of P35,000.00.
All sums of money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec. 244
of the Insurance Code) from February 5, 1982, (91st day from 1st week of November 1983 when insured
filed formal claim for full indemnity according to adjuster Vetremar Dela Merced) until they are fully
paid."[4]
As aforestated, respondent Court of Appeals reversed said judgment of the trial court, hence this
petition the crux wherein is whether or not Conditions Nos. 3 and 27 of the insurance contracts were
violated by petitioners thereby resulting in their forfeiture of all the benefits thereunder.
Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is uniformly
contained in all the aforestated insurance contracts of herein petitioners, as follows:
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or
which may subsequently be effected, covering any of the property or properties consisting of stocks in
trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the
particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant to
Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or
damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition
shall not apply when the total insurance or insurances in force at the time of loss or damage is not more
than P200,000.00."[5]
Petitioners admit that the respective insurance policies issued by private respondents did not state or
endorse thereon the other insurance coverage obtained or subsequently effected on the same stocks in
trade for the loss of which compensation is claimed bypetitioners.[6] The policy issued by respondent
Western Guaranty Corporation (Western) did not declare respondent Reliance Surety and Insurance Co.,
Inc. (Reliance) and respondent Equitable Insurance Corporation (Equitable) as co-insurers on the same
stocks, while Reliance's policies covering the same stocks did not likewise declare Western and Equitable
as such co-insurers. It is further admitted by petitioners that Equitable's policy stated "nil" in the space
thereon requiring indication of any co-insurance although there were three (3) policies subsisting on the
same stocks in trade at the time of the loss, namely, that of Western in the amount of P350,000.00 and
two (2) policies of Reliance in the total amount of P1,000,000.00.[7]
In other words, the coverage by other insurance or co-insurance effected or subsequently arranged by
petitioners were neither stated nor endorsed in the policies of the three (3) private respondents,
warranting forfeiture of all benefits thereunder if we are to follow the express stipulation in the
aforequoted Policy Condition No. 3.
Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon
Alvarez (for Western) and Yap Kam Chuan (for Reliance and Equitable) knew about the existence of the
additional insurance coverage and that they were not informed about the requirement that such
other or additional insurance should be stated in the policy, as they have not even read said
policies.[8]These contentions cannot pass judicial muster.
The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to
the insurer any other insurance and its particulars which he may have effected on the same subject
matter. The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof
by the former, is not the "notice" that would estop the insurers from denying the claim. Besides, the so-
called theory of imputed knowledge, that is, knowledge of the agent is knowledge of the principal, aside
from being of dubious applicability here has likewise been roundly refuted by respondent court whose
factual findings we find acceptable.
Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez
regarding the co-insurance on the property, he contradicted himself by inexplicably claiming that he had
not read the terms of the policies; that Yap Dam Chuan could not likewise have obtained such knowledge
for the same reason, aside from the fact that the insurance with Western was obtained before those of
Reliance and Equitable; and that the conclusion of the trial court that Reliance and Equitable are "sister
companies" is an unfounded conjecture drawn from the mere fact that Yap Kam Chuan was an agent for
both companies which also had the same insurance claims adjuster. Availment of the services of the
same agents and adjusters by different companies is a common practice in the insurance business and
such facts do not warrant the speculative conclusion of the trial court.
Furthermore, when the words and language of documents are clear and plain or readily understandable
by an ordinary reader thereof, there is absolutely no room for interpretation or construction
anymore.[9] Courts are not allowed to make contracts for the parties; rather, they will intervene only
when the terms of the policy are ambiguous, equivocal, or uncertain.[10] The parties must abide by the
terms of the contract because such terms constitute the measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right of recovery from the insurer.[11]
While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed
liberally in favor of the insured and strictly against the insurer company, yet contracts of insurance, like
other contracts, are to be construed according to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and unambiguous, they must be taken and understood in
their plain, ordinary and popular sense.[12] Moreover, obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good faith.[13]
Petitioners should be aware of the fact that a party is not relieved of the duty to exercise the ordinary
care and prudence that would be exacted in relation to other contracts. The conformity of the insured to
the terms of the policy is implied from his failure to express any disagreement with what is provided
for.[14] It may be true that the majority rule, as cited by petitioners, is that insured persons may accept
policies without reading them, and that this is not negligence per se.[15] But, this is not without any
exception. It is and was incumbent upon petitioner Sy to read the insurance contracts, and this can be
reasonably expected of him considering that he has been a businessman since 1965[16] and the contract
concerns indemnity in case of loss in his money-making trade of which important consideration he could
not have been unaware as it was precisely the reason for his procuring the same.
We reiterate our pronouncement in Pioneer Insurance and Surety Corporation vs. Yap:[17]
"x x x 'And considering the terms of the policy which required the insured to declare other insurances,
the statement in question must be deemed to be a statement (warranty) binding on both insurer and
insured, that there were no other insurance on the property. x x x
`The annotation then, must be deemed to be a warranty that the property was not insured by any other
policy. Violation thereof entitled the insurer to rescind (Sec. 69, Insurance Act). Such misrepresentation
is fatal in the light of our views in Santa Ana vs. Commercial Union Assurance Company, Ltd., 55 Phil.
329. The materiality of non-disclosure of other insurance policies is not open to doubt.'
xxx
"The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus
avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the
situation in which a fire would be profitable to the insured. According to Justice Story: 'The insured has
no right to complain, for he assents to comply with all the stipulations on his side, in order to entitle
himself to the benefit of the contract, which, upon reason or principle, he has no right to ask the court to
dispense with the performance of his own part of the agreement, and yet to bind the other party to
obligations, which, but for those stipulations, would not have been entered into.'"
Subsequently, in the case of Pacific Banking Corporation vs. Court of Appeals, et al.,[18] we held:
"It is not disputed that the insured failed to reveal before the loss three other insurances. As found by
the Court of Appeals, by reason of said unrevealed insurances, the insured had been guilty of a false
declaration; a clear misrepresentation and a vital one because where the insured had been asked to
reveal but did not, that was deception. Otherwise stated, had the insurer known that there were many
co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the
insured was guilty of clear fraud (Rollo, p. 25).
"Petitioner's contention that the allegation of fraud is but a mere inference or suspicion is untenable. In
fact, concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself
when the facts alleged in the policy under clauses 'Co-Insurances Declared' and 'Other Insurance Clause'
are materially different from the actual number of co-insurances taken over the subject property.
Consequently, 'the whole foundation of the contract fails, the risk does not attach and the policy never
becomes a contract between the parties.' Representations of facts are the foundation of the contract
and if the foundation does not exist, the superstructure does not arise. Falsehood in such
representations is not shown to vary or add to the contract, or to terminate a contract which has once
been made, but to show that no contract has ever existed (Tolentino, Commercial Laws of the
Philippines, p. 991, Vol. II, 8th Ed.) A void or inexistent contract is one which has no force and effect from
the very beginning, as if it had never been entered into, and which cannot be validated either by time or
by ratification (Tongoy vs. C.A., 123 SCRA 99 (1983); Avila v. C.A. 145 SCRA, 1986).
"As the insurance policy against fire expressly required that notice should be given by the insured of
other insurance upon the same property, the total absence of such notice nullifies the policy."
To further warrant and justify the forfeiture of the benefits under the insurance contracts involved, we
need merely to turn to Policy Condition No. 15 thereof, which reads in part:
"15. x x x if any false declaration be made or used in support thereof, x x x all benefits under this Policy
shall be forfeited x x x."[19]
Additionally, insofar as the liability of respondent Reliance is concerned, it is not denied that the
complaint for recovery was filed in court by petitioners only on January 31, 1984, or after more than one
(1) year had elapsed from petitioners' receipt of the insurers' letter of denial on November 29, 1982.
Policy Condition No. 27 of their insurance contract with Reliance provides:
"27. Action or suit clause. - If a claim be made and rejected and an action or suit be not commenced
either in the Insurance Commission or any court of competent jurisdiction of notice of such rejection, or
in case of arbitration taking place as provided herein, within twelve (12) months after due notice of the
award made by the arbitrator or abitrators or umpire, then the claim shall for all purposes be deemed to
have been abandoned and shall not thereafter be recoverable hereunder."[20]
On this point, the trial court ruled:
"x x x However, because of the peculiar circumstances of this case, we hesitate in concluding that
plaintiff's right to ventilate his claim in court has been barred by reason of the time constraint provided
in the insurance contract. It is evident that after the plaintiff had received the letter of denial, he still
found it necessary to be informed of the specific causes or reasons for the denial of his claim, reason for
which his lawyer, Atty. Dator deemed it wise to send a letter of inquiry to the defendant which was
answered by defendant's Executive Vice-President in a letter dated March 30, 1983, x x x. Assuming,
gratuitously, that the letter of Executive Vice-President Mary Dee Co dated March 30, 1983, was
received by plaintiff on the same date, the period of limitation should start to run only from said date in
the spirit of fair play and equity. x x x"[21]
We have perforce to reject this theory of the court below for being contrary to what we have heretofore
declared:
"It is important to note the principle laid down by this Court in the case of Ang vs. Fulton Fire Insurance
Co. (2 SCRA 945 [1961]) to wit:
'The condition contained in an insurance policy that claims must be presented within one year after
rejection is not merely a procedural requirement but an important matter essential to a prompt
settlement of claims against insurance companies as it demands that insurance suits be brought by the
insured while the evidence as to the origin and cause of destruction have not yet disappeared.'
"In enunciating the above-cited principle, this Court had definitely settled the rationale for the necessity
of bringing suits against the Insurer within one year from the rejection of the claim. The contention of
the respondents that the one-year prescriptive period does not start to run until the petition for
reconsideration had been resolved by the insurer, runs counter to the declared purpose for requiring
that an action or suit be filed in the Insurance Commission or in a court of competent jurisdiction from
the denial of the claim. To uphold respondents' contention would contradict and defeat the very
principle which this Court had laid down. Moreover, it can easily be used by insured persons as a scheme
or device to waste time until any evidence which may be considered against them is destroyed.
xxx
"While in the Eagle Star case (96 Phil. 701), this Court uses the phrase 'final rejection', the same cannot
be taken to mean the rejection of a petition for reconsideration as insisted by respondents. Such was
clearly not the meaning contemplated by this Court. The insurance policy in said case provides that the
insured should file his claim first, with the carrier and then with the insurer. The 'final rejection' being
referred to in said case is the rejection by the insurance company."[22]
Furthermore, assuming arguendo, that petitioners felt the legitimate need to be clarified as to the policy
condition violated, there was a considerable lapse of time from their receipt of the insurer's clarificatory
letter dated March 30, 1983, up to the time the complaint was filed in court on January 31, 1984. The
one-year prescriptive period was yet to expire on November 29, 1983 or about eight (8) months from the
receipt of the clarificatory letter, but petitioners let the period lapse without bringing their action in
court. We accordingly find no "peculiar circumstances" sufficient to relax the enforcement of the one-
year prescriptive period and we, therefore, hold that petitioners' claim was definitely filed out of time.
WHEREFORE, finding no cogent reason to disturb the judgment of respondent Court of Appeals, the
same is hereby AFFIRMED.
SO ORDERED.
THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE COURT OF APPEALS and OSCAR
VENTANILLA, JR. and CARMEN GLORIA DIAZ, Respondents.
SYLLABUS
1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN IRREGULARITY DESPITE KOWLEDGE
THEREOF, DEEMED A RATIFICATION OF THE ACT OF THE AGENT. — In the case at bar, the Valencia realty
firm had clearly overstepped the bounds of its authority as agent — and for that matter, even the law —
when it undertook the double sale of the disputed lots. Such being the case, the principal, Manila
Remnant, would have been in the clear pursuant to Article 1897 of the Civil Code which states that" (t)he
agent who acts as such is not personally liable to that party with whom he contracts, unless he expressly
binds himself or exceeds the limits of his authority without giving such party sufficient notice of his
powers." However, the unique relationship existing between the principal and the agent at the time of
the dual sale must be underscored. Bear in mind that the president then of both firms was Artemio U.
Valencia, the individual directly responsible for the sale scam. Hence, despite the fact that the double
sale was beyond the power of the agent, Manila Remnant as principal was chargeable with the
knowledge or constructive notice of that fact and not having done anything to correct such an
irregularity was deemed to have ratified the same. (See Art. 1910, Civil Code.)
2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE AT BAR. — More in point, we
find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as
though it had plenary powers. Article 1911 of the Civil Code provides: "Even when the agent has
exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to
act as though he had full powers." The above-quoted article is new. It is intended to protect the rights of
innocent persons. In such a situation, both the principal and the agent may be considered as joint feasors
whose liability is joint and solidary (Verzosa v. Lim, 45 Phil. 416). Authority by estoppel has arisen in the
instant case because by its negligence, the principal, Manila Remnant, has permitted its agent, A.U.
Valencia and Co., to exercise powers not granted to it. That the principal might not have had actual
knowledge of the agent’s misdeed is of no moment.
DECISION
FERNAN, J.:
Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty members of the University of
the Philippines and renting a faculty unit, dreamed of someday owning a house and lot. Instead of
attaining this dream, they became innocent victims of deceit and found themselves in the midst of an
ensuing squabble between a subdivision owner and its real estate agent.
The facts as found by the trial court and adopted by the Appellate Court are as follows:chanrob1es
virtual 1aw library
Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated in Quezon City covered
by Transfer Certificates of Title Nos. 26400, 26401, 30783 and 31986 and constituting the subdivision
known as Capital Homes Subdivision Nos. I and II. On July 25, 1972, Manila Remnant and A.U. Valencia &
Co. Inc. entered into a written agreement entitled "Confirmation of Land Development and Sales
Contract" to formalize an earlier verbal agreement whereby for a consideration of 17 and 1/2% fee,
including sales commission and management fee, A.U. Valencia and Co., Inc. was to develop the
aforesaid subdivision with authority to manage the sales thereof, execute contracts to sell to lot buyers
and issue official receipts. 1
At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was Artemio
U. Valencia.cralawnad
On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two "contracts to sell" covering
Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract
price of P66,571.00 payable monthly for ten years. 2 As thus agreed in the contracts to sell, the
Ventanillas paid the down payments on the two lots even before the formal contract was signed on
March 3, 1970.
Ten (10) days after the signing of the contracts with the Ventanillas or on March 13, 1970, Artemio U.
Valencia, as President of Manila Remnant, and without the knowledge of the Ventanilla couple, sold Lots
1 and 2 of Block 17 again, this time in favor of Carlos Crisostomo, one of his sales agents without any
consideration. 3 Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila
Remnant while he kept in his files the contracts to sell in favor of the Ventanillas. All the amounts paid by
the Ventanillas were deposited in Valencia’s bank account.
Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly payments of the Ventanillas
were remitted to Manila Remnant as payments of Crisostomo for which the former issued receipts in
favor of Crisostomo. Since Valencia kept the receipts in his files and never transmitted the same to
Crisostomo, the latter and the Ventanillas remained ignorant of Valencia’s scheme. Thus, the Ventanillas
continued paying their monthly installments.chanrobles virtual lawlibrary
Subsequently, the harmonious business relationship between Artemio Valencia and Manila Remnant
ended. On May 30, 1973, Manila Remnant, through its General Manager Karl Landahl, wrote Artemio
Valencia informing him that Manila Remnant was terminating its existing collection agreement with his
firm on account of the considerable amount of discrepancies and irregularities discovered in its
collections and remittances by virtue of confirmations received from lot buyers. 4 As a consequence, on
June 6, 1973, Artemio Valencia was removed as President by the Board of Directors of Manila Remnant.
Therefore, from May of 1973, Valencia stopped transmitting Ventanilla’s monthly installments which at
that time had already amounted to P17,925.40 for Lot 1 and P18,141.95 for Lot 2, (which appeared in
Manila Remnant’s record as credited in the name of Crisostomo). 5
On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 of the then Court of First
Instance of Manila 6 to impugn the abrogation of their agency agreement. On June 10 and July 10, 1973,
said court ordered all lot buyers to deposit their monthly amortizations with the court. 7 But on July 17,
1973, A.U. Valencia and Co. wrote the Ventanillas that it was still authorized by the court to collect the
monthly amortizations and requested them to continue remitting their amortizations with the assurance
that said payments would be deposited later in court. 8 On May 22, 1974, the trial court issued an order
prohibiting A.U. Valencia and Co. from collecting the monthly installments. 9 On July 22, 1974 and
February 6, 1976 the same court ordered the Valencia firm to furnish the court with a complete list of all
lot buyers who had already made down payments to Manila Remnant before December 1972. 10
Valencia complied with the court’s order on August 6, 1974 by submitting a list which excluded the name
of the Ventanillas. 11
Since A.U. Valencia and Co. failed to forward its collections after May 1973, Manila Remnant caused on
August 20, 1976 the publication in the Times Journal of a notice cancelling the contracts to sell of some
lot buyers including that of Carlos Crisostomo in whose name the payments of the Ventanillas had been
credited. 12
To prevent the effective cancellation of their contracts, Artemio Valencia instigated on September 22,
1976 the filing by Carlos Crisostomo and seventeen (17) other lot vendees of a complaint for specific
performance with damages against Manila Remnant before the Court of First Instance of Quezon City.
The complaint alleged that Crisostomo had already paid a total of P17,922.40 and P18,136.85 on Lots 1
and 2, respectively. 13
It was not until March 1978 when the Ventanillas, after learning of the termination of the agency
agreement between Manila Remnant and A.U. Valencia & Co., decided to stop paying their amortizations
to the latter. The Ventanillas, believing that they had already remitted P37,007.00 for Lot 1 and
P36,911.00 for Lot 2 or a grand total, inclusive of interest, of P73,122.35 for the two lots, thereby leaving
a balance of P13,531.58 for Lot 1 and P13,540.22 for Lot 2, went directly to Manila Remnant and offered
to pay the entire outstanding balance of the purchase price. 14 To their shock and utter consternation,
they discovered from Gloria Caballes, an accountant of Manila Remnant, that their names did not appear
in the records of A.U. Valencia and Co. as lot buyers. Caballes showed the Ventanillas copies of the
contracts to sell in favor of Carlos Crisostomo, duly signed by Artemio U. Valencia as President of Manila
Remnant. 15 Whereupon, Manila Remnant refused the offer of the Ventanillas to pay for the remainder
of the contract price because they did not have the personality to do so. Furthermore, they were shown
the published Notice of Cancellation in the January 29, 1978 issue of the Times Journal rescinding the
contracts of delinquent buyers including Crisostomo.
Thus, on November 21, 1978, the Ventanillas commenced an action for specific performance, annulment
of deeds and damages against Manila Remnant, A.U. Valencia and Co. and Carlos Crisostomo before the
Court of First Instance of Quezon City, Branch 17-B. 16 Crisostomo was declared in default for failure to
file an answer.chanrobles.com:cralaw:red
On November 17, 1980, the trial court rendered a decision 1) declaring the contracts to sell issued in
favor of the Ventanillas valid and subsisting and annulling the contracts to sell in Crisostomo’s favor; 2)
ordering Manila Remnant to execute in favor of the Ventanillas an Absolute Deed of Sale free from all
liens and encumbrances; and 3) condemning defendants A.U. Valencia and Co. Inc., Manila Remnant and
Carlos Crisostomo jointly and severally to pay the Ventanillas the amount of P100,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 as attorney’s fees. The lower court also
added that if, for any legal reason, the transfer of the lots could no longer be effected, the defendants
should reimburse jointly and severally to the Ventanillas the total amount of P73,122.35 representing
the total amount paid for the two lots plus legal interest thereon from March 1970 plus damages as
aforestated. With regard to the cross claim of Manila Remnant against Valencia, the court found that
Manila Remnant could have not been dragged into this suit without the fraudulent manipulations of
Valencia. Hence, it adjudged A.U. Valencia and Co. to pay the Manila Remnant P5,000.00 as moral
damages and exemplary damages and P5,000.00 as attorney’s fees. 17
Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower court’s decision to the
Court of Appeals through separate appeals. On October 13, 1987, the Appellate Court affirmed in toto
the decision of the lower court. Reconsideration sought by petitioner Manila Remnant was denied,
hence the instant petition.
There is no question that the contracts to sell in favor of the Ventanilla spouses are valid and subsisting.
The only issue remaining is whether or not petitioner Manila Remnant should be held solidarily liable
together with A.U. Valencia and Co. and Carlos Crisostomo for the payment of moral, exemplary
damages and attorney’s fees in favor of the Ventanillas. 18
While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it believes
that it cannot be made jointly and severally liable with its agent A.U. Valencia and Co. since it was not
aware of the illegal acts perpetrated nor did it consent or ratify said acts of its agent.
The argument is devoid of merit.
In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its authority as agent
— and for that matter, even the law — when it undertook the double sale of the disputed lots. Such
being the case, the principal, Manila Remnant, would have been in the clear pursuant to Article 1897 of
the Civil Code which states that" (t)he agent who acts as such is not personally liable to that party with
whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers." chanrobles.com.ph : virtual law library
However, the unique relationship existing between the principal and the agent at the time of the dual
sale must be underscored. Bear in mind that the president then of both firms was Artemio U. Valencia,
the individual directly responsible for the sale scam. Hence, despite the fact that the double sale was
beyond the power of the agent, Manila Remnant as principal was chargeable with the knowledge or
constructive notice of that fact and not having done anything to correct such an irregularity was deemed
to have ratified the same. 19
More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its
agent to act as though it had plenary powers. Article 1911 of the Civil Code
provides:jgc:chanrobles.com.ph
"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the
former allowed the latter to act as though he had full powers." (Emphasis supplied)
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a
situation, both the principal and the agent may be considered as joint feasors whose liability is joint and
solidary. 20
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila
Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the
principal might not have had actual knowledge of the agent’s misdeed is of no moment. Consider the
following circumstances:chanrob1es virtual 1aw library
Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the sale and
disposition of the subdivision lots. As a disclosed principal in the contracts to sell in favor of the
Ventanilla couple, there was no doubt that they were in fact contracting with the principal. Section 7 of
the Ventanillas’ contracts to sell states:jgc:chanrobles.com.ph
"7. That all payments whether deposits, down payment and monthly installment agreed to be made by
the vendee shall be payable to A.U. Valencia and Co., Inc. It is hereby expressly understood that
unauthorized payments made to real estate brokers or agents shall be the sole and exclusive
responsibility and at the risk of the vendee and any and all such payments shall not be recognized by the
vendors unless the official receipts therefor shall have been duly signed by the vendors’ duly authorized
agent, A.U. Valencia and Co., Inc." (Emphasis supplied)
Indeed, once Manila Remnant had been furnished with the usual copies of the contracts to sell, its only
participation then was to accept the collections and pay the commissions to the agent. The latter had
complete control of the business arrangement. 21
Secondly, it is evident from the records that Manila Remnant was less than prudent in the conduct of its
business as a subdivision owner. For instance, Manila Remnant failed to take immediate steps to avert
any damage that might be incurred by the lot buyers as a result of its unilateral abrogation of the agency
contract. The publication of the cancelled contracts to sell in the Times Journal came three years after
Manila Remnant had revoked its agreement with A.U. Valencia and Co.chanrobles virtual lawlibrary
Moreover, Manila Remnant also failed to check the records of its agent immediately after the revocation
of the agency contract despite the fact that such revocation was due to reported anomalies in Valencia’s
collections. Altogether, as pointed out by the counsel for the Ventanillas, Manila Remnant could and
should have devised a system whereby it could monitor and require a regular accounting from A.U.
Valencia and Co., its agent. Not having done so, Manila Remnant has made itself liable to those who
have relied on its agent and the representation that such agent was clothed with sufficient powers to act
on behalf of the principal.
Even assuming that Manila Remnant was as much a victim as the other innocent lot buyers, it cannot be
gainsaid that it was precisely its negligence and laxity in the day to day operations of the real estate
business which made it possible for the agent to deceive unsuspecting vendees like the Ventanillas.
In essence, therefore, the basis for Manila Remnant’s solidary liability is estoppel which, in turn, is
rooted in the principal’s neglectfulness in failing to properly supervise and control the affairs of its agent
and to adopt the needed measures to prevent further misrepresentation. As a consequence, Manila
Remnant is considered estopped from pleading the truth that it had no direct hand in the deception
employed by its agent. 22
A final word. The Court cannot help but be alarmed over the reported practice of supposedly reputable
real estate brokers of manipulating prices by allowing their own agents to "buy" lots in their names in
the hope of reselling the same at a higher price to the prejudice of bona fide lot buyers, as precisely what
the agent had intended to happen in the present case. This is a serious matter that must be looked into
by the appropriate government housing authority.chanrobles.com.ph : virtual law library
WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals dated October 13,
1987 sustaining the decision of the Quezon City trial court dated November 17, 1980 is AFFIRMED. This
judgment is immediately executory. Costs against petitioner.
SO ORDERED.
G.R. No. L-55963 December 1, 1989
SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners,
vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents.
G.R. No. L-61045 December 1, 1989
NATIONAL IRRIGATION ADMINISTRATION, appellant,
vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.
PARAS, J.:
In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance of the decision dated
March 20, 1980 of the then Court of First Instance of Nueva Ecija, Branch VIII, at San Jose City and its
modification with respect to the denial of petitioner's claim for moral and exemplary damages and
attorneys fees.
In G.R. No. 61045, respondent National Irrigation Administration seeks the reversal of the aforesaid
decision of the lower court. The original appeal of this case before the Court of Appeals was certified to
this Court and in the resolution of July 7, 1982, it was docketed with the aforecited number. And in the
resolution of April 3, this case was consolidated with G.R. No. 55963.
It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and operated by respondent
National Irrigation Administration, a government agency bearing Plate No. IN-651, then driven officially
by Hugo Garcia, an employee of said agency as its regular driver, bumped a bicycle ridden by Francisco
Fontanilla, son of herein petitioners, and Restituto Deligo, at Maasin, San Jose City along the Maharlika
Highway. As a result of the impact, Francisco Fontanilla and Restituto Deligo were injured and brought to
the San Jose City Emergency Hospital for treatment. Fontanilla was later transferred to the Cabanatuan
Provincial Hospital where he died.
Garcia was then a regular driver of respondent National Irrigation Administration who, at the time of the
accident, was a licensed professional driver and who qualified for employment as such regular driver of
respondent after having passed the written and oral examinations on traffic rules and maintenance of
vehicles given by National Irrigation Administration authorities.
The within petition is thus an off-shot of the action (Civil Case No. SJC-56) instituted by petitioners-
spouses on April 17, 1978 against respondent NIA before the then Court of First Instance of Nueva Ecija,
Branch VIII at San Jose City, for damages in connection with the death of their son resulting from the
aforestated accident.
After trial, the trial court rendered judgment on March 20, 1980 which directed respondent National
Irrigation Administration to pay damages (death benefits) and actual expenses to petitioners. The
dispositive portion of the decision reads thus:
. . . . . Judgment is here rendered ordering the defendant National Irrigation
Administration to pay to the heirs of the deceased P12,000.00 for the death of
Francisco Fontanilla; P3,389.00 which the parents of the deceased had spent for
the hospitalization and burial of the deceased Francisco Fontanilla; and to pay the
costs. (Brief for the petitioners spouses Fontanilla, p. 4; Rollo, p. 132)
Respondent National Irrigation Administration filed on April 21, 1980, its motion for reconsideration of
the aforesaid decision which respondent trial court denied in its Order of June 13, 1980. Respondent
National Irrigation Administration thus appealed said decision to the Court of Appeals (C.A.-G.R. No.
67237- R) where it filed its brief for appellant in support of its position.
Instead of filing the required brief in the aforecited Court of Appeals case, petitioners filed the instant
petition with this Court.
The sole issue for the resolution of the Court is: Whether or not the award of moral damages, exemplary
damages and attorney's fees is legally proper in a complaint for damages based on quasi-delict which
resulted in the death of the son of herein petitioners.
Petitioners allege:
1. The award of moral damages is specifically allowable. under paragraph 3 of
Article 2206 of the New Civil Code which provides that the spouse, legitimate and
illegitimate descendants and ascendants of the deceased may demand moral
 damages for mental anguish by reason of the death of the deceased. Should moral
damages be granted, the award should be made to each of petitioners-
spouses individually and in varying amounts depending upon proof of mental and
depth of intensity of the same, which should not be less than P50,000.00 for each
of them.
2. The decision of the trial court had made an impression that respondent National
Irrigation Administration acted with gross negligence because of the accident and
the subsequent failure of the National Irrigation Administration personnel
including the driver to stop in order to give assistance to the, victims. Thus, by
reason of the gross negligence of respondent, petitioners become entitled to
exemplary damages under Arts. 2231 and 2229 of the New Civil Code.
3. Petitioners are entitled to an award of attorney's fees, the amount of which
(20%) had been sufficiently established in the hearing of May 23, 1979.
4. This petition has been filed only for the purpose of reviewing the findings of the
lower court upon which the disallowance of moral damages, exemplary damages
and attorney's fees was based and not for the purpose of disturbing the other
findings of fact and conclusions of law.
The Solicitor General, taking up the cudgels for public respondent National Irrigation Administration,
contends thus:
1. The filing of the instant petition is rot proper in view of the appeal taken by
respondent National Irrigation Administration to the Court of Appeals against the
judgment sought to be reviewed. The focal issue raised in respondent's appeal to
the Court of Appeals involves the question as to whether or not the driver of the
vehicle that bumped the victims was negligent in his operation of said vehicle. It
thus becomes necessary that before petitioners' claim for moral and exemplary
damages could be resolved, there should first be a finding of negligence on the
part of respondent's employee-driver. In this regard, the Solicitor General alleges
that the trial court decision does not categorically contain such finding.
2. The filing of the "Appearance and Urgent Motion For Leave to File Plaintiff-
Appellee's Brief" dated December 28, 1981 by petitioners in the appeal (CA-G.R.
No. 67237-R; and G. R. No.61045) of the respondent National Irrigation
Administration before the Court of Appeals, is an explicit admission of said
petitioners that the herein petition, is not proper. Inconsistent procedures are
manifest because while petitioners question the findings of fact in the Court of
Appeals, they present only the questions of law before this Court which posture
confirms their admission of the facts.
3. The fact that the parties failed to agree on whether or not negligence caused
the vehicular accident involves a question of fact which petitioners should have
brought to the Court of Appeals within the reglementary period. Hence, the
decision of the trial court has become final as to the petitioners and for this reason
alone, the petition should be dismissed.
4. Respondent Judge acted within his jurisdiction, sound discretion and in
conformity with the law.
5. Respondents do not assail petitioners' claim to moral and exemplary damages
by reason of the shock and subsequent illness they suffered because of the death
of their son. Respondent National Irrigation Administration, however, avers that it
cannot be held liable for the damages because it is an agency of the State
performing governmental functions and driver Hugo Garcia was a regular driver of
the vehicle, not a special agent who was performing a job or act foreign to his
usual duties. Hence, the liability for the tortious act should. not be borne by
respondent government agency but by driver Garcia who should answer for the
consequences of his act.
6. Even as the trial court touched on the failure or laxity of respondent National
Irrigation Administration in exercising due diligence in the selection and
supervision of its employee, the matter of due diligence is not an issue in this case
since driver Garcia was not its special agent but a regular driver of the vehicle.
The sole legal question on whether or not petitioners may be entitled to an award of moral and
exemplary damages and attorney's fees can very well be answered with the application of Arts. 2176 and
2180 of theNew Civil Code.
Art. 2176 thus provides:
Whoever by act omission causes damage to another, there being fault or
negligence, is obliged to pay for damage done. Such fault or negligence, if there is
no pre-existing cotractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter
Paragraphs 5 and 6 of Art. 21 80 read as follows:
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even the though
the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent.; but
not when the damage has been caused by the official to whom the task done
properly pertains, in which case what is provided in Art. 2176 shall be applicable.
The liability of the State has two aspects. namely:
1. Its public or governmental aspects where it is liable for the tortious acts of
special agents only.
2. Its private or business aspects (as when it engages in private enterprises) where
it becomes liable as an ordinary employer. (p. 961, Civil Code of the Philippines;
Annotated, Paras; 1986 Ed. ).
In this jurisdiction, the State assumes a limited liability for the damage caused by the tortious acts or
conduct of its special agent.
Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily assumed liability for acts done
through special agents. The State's agent, if a public official, must not only be specially commissioned to
do a particular task but that such task must be foreign to said official's usual governmental functions. If
the State's agent is not a public official, and is commissioned to perform non-governmental functions,
then the State assumes the role of an ordinary employer and will be held liable as such for its agent's
tort. Where the government commissions a private individual for a special governmental task, it is acting
through a special agent within the meaning of the provision. (Torts and Damages, Sangco, p. 347, 1984
Ed.)
Certain functions and activities, which can be performed only by the government, are more or less
generally agreed to be "governmental" in character, and so the State is immune from tort liability. On
the other hand, a service which might as well be provided by a private corporation, and particularly
when it collects revenues from it, the function is considered a "proprietary" one, as to which there may
be liability for the torts of agents within the scope of their employment.
The National Irrigation Administration is an agency of the government exercising proprietary functions,
by express provision of Rep. Act No. 3601. Section 1 of said Act provides:
Section 1. Name and domicile.-A body corporate is hereby created which shall be
known as the National Irrigation Administration, hereinafter called the NIA for
short, which shall be organized immediately after the approval of this Act. It shall
have its principal seat of business in the City of Manila and shall have
representatives in all provinces for the proper conduct of its business.
Section 2 of said law spells out some of the NIA's proprietary functions. Thus-
Sec. 2. Powers and objectives.-The NIA shall have the following powers and
objectives:
(a) x x x x x x x x x x x x x x x x x x
(b) x x x x x x x x x x x x x x x x x x
(c) To collect from the users of each irrigation system constructed by it such fees
as may be necessary to finance the continuous operation of the system and
reimburse within a certain period not less than twenty-five years cost of
construction thereof; and
(d) To do all such other tthings and to transact all such business as are directly or
indirectly necessary, incidental or conducive to the attainment of the above
objectives.
Indubitably, the NIA is a government corporation with juridical personality and not a mere agency of the
government. Since it is a corporate body performing non-governmental functions, it now becomes liable
for the damage caused by the accident resulting from the tortious act of its driver-employee. In this
particular case, the NIA assumes the responsibility of an ordinary employer and as such, it becomes
answerable for damages.
This assumption of liability, however, is predicated upon the existence of negligence on the part of
respondent NIA. The negligence referred to here is the negligence of supervision.
At this juncture, the matter of due diligence on the part of respondent NIA becomes a crucial issue in
determining its liability since it has been established that respondent is a government agency performing
proprietary functions and as such, it assumes the posture of an ordinary employer which, under Par. 5 of
Art. 2180, is responsible for the damages caused by its employees provided that it has failed to observe
or exercise due diligence in the selection and supervision of the driver.
It will be noted from the assailed decision of the trial court that "as a result of the impact, Francisco
Fontanilla was thrown to a distance 50 meters away from the point of impact while Restituto Deligo was
thrown a little bit further away. The impact took place almost at the edge of the cemented portion of the
road." (Emphasis supplied,) [page 26, Rollo]
The lower court further declared that "a speeding vehicle coming in contact with a person causes force
and impact upon the vehicle that anyone in the vehicle cannot fail to notice. As a matter of fact, the
impact was so strong as shown by the fact that the vehicle suffered dents on the right side of the radiator
guard, the hood, the fender and a crack on the radiator as shown by the investigation report (Exhibit "E").
(Emphasis supplied) [page 29, Rollo]
It should be emphasized that the accident happened along the Maharlika National Road within the city
limits of San Jose City, an urban area. Considering the fact that the victim was thrown 50 meters away
from the point of impact, there is a strong indication that driver Garcia was driving at a high speed. This
is confirmed by the fact that the pick-up suffered substantial and heavy damage as above-described and
the fact that the NIA group was then "in a hurry to reach the campsite as early as possible", as shown by
their not stopping to find out what they bumped as would have been their normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the reason that they were travelling
at a high speed within the city limits and yet the supervisor of the group, Ely Salonga, failed to caution
and make the driver observe the proper and allowed speed limit within the city. Under the situation,
such negligence is further aggravated by their desire to reach their destination without even checking
whether or not the vehicle suffered damage from the object it bumped, thus showing imprudence and
reckelessness on the part of both the driver and the supervisor in the group.
Significantly, this Court has ruled that even if the employer can prove the diligence in the selection and
supervision (the latter aspect has not been established herein) of the employee, still if he ratifies the
wrongful acts, or take no step to avert further damage, the employer would still be liable. (Maxion vs.
Manila Railroad Co., 44 Phil. 597).
Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August 31, 1970, 34 SCRA 618), this
Court held that a driver should be especially watchful in anticipation of others who may be using the
highway, and his failure to keep a proper look out for reasons and objects in the line to be traversed
constitutes negligence.
Considering the foregoing, respondent NIA is hereby directed to pay herein petitioners-spouses the
amounts of P12,000.00 for the death of Francisco Fontanilla; P3,389.00 for hospitalization and burial
expenses of the aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as exemplary damages
and attorney's fees of 20% of the total award.
SO ORDERED.
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. BULU CHOWDURY, accused-appellant.
DECISION
PUNO, J.:
In November 1995, Bulu Chowdury and Josephine Ong were charged before the Regional Trial Court of
Manila with the crime of illegal recruitment in large scale committed as follows:
"That sometime between the period from August 1994 to October 1994 in the City
of Manila, Philippines and within the jurisdiction of this Honorable Court, the
above-named accused, representing themselves to have the capacity to contract,
enlist and transport workers for employment abroad, conspiring, confederating
and mutually helping one another, did then and there willfully, unlawfully and
feloniously recruit the herein complainants: Estrella B. Calleja, Melvin C. Miranda
and Aser S. Sasis, individually or as a group for employment in Korea without first
obtaining the required license and/or authority from the Philippine Overseas
Employment Administration."[1]
They were likewise charged with three counts of estafa committed against private complainants.[2] The
State Prosecutor, however, later dismissed the estafa charges against Chowdury[3]and filed an amended
information indicting only Ong for the offense.[4]
Chowdury was arraigned on April 16, 1996 while Ong remained at large. He pleaded "not guilty" to the
charge of illegal recruitment in large scale.[5]
Trial ensued.
The prosecution presented four witnesses: private complainants Aser Sasis, Estrella Calleja and Melvin
Miranda, and Labor Employment Officer Abbelyn Caguitla.
Sasis testified that he first met Chowdury in August 1994 when he applied with Craftrade Overseas
Developers (Craftrade) for employment as factory worker in South Korea. Chowdury, a consultant of
Craftrade, conducted the interview. During the interview, Chowdury informed him about the
requirements for employment. He told him to submit his passport, NBI clearance, passport size picture
and medical certificate. He also required him to undergo a seminar. He advised him that placement
would be on a first-come-first-serve basis and urged him to complete the requirements immediately.
Sasis was also charged a processing fee of P25,000.00. Sasis completed all the requirements in
September 1994. He also paid a total amount of P16,000.00 to Craftrade as processing fee. All payments
were received by Ong for which she issued three receipts.[6] Chowdury then processed his papers and
convinced him to complete his payment.[7]
Sasis further said that he went to the office of Craftrade three times to follow up his application but he
was always told to return some other day. In one of his visits to Craftrades office, he was informed that
he would no longer be deployed for employment abroad. This prompted him to withdraw his payment
but he could no longer find Chowdury. After two unsuccessful attempts to contact him, he decided to file
with the Philippine Overseas Employment Administration (POEA) a case for illegal recruitment against
Chowdury. Upon verification with the POEA, he learned that Craftrade's license had already expired and
has not been renewed and that Chowdury, in his personal capacity, was not a licensed recruiter.[8]
Calleja testified that in June 1994, she applied with Craftrade for employment as factory worker in South
Korea. She was interviewed by Chowdury. During the interview, he asked questions regarding her marital
status, her age and her province. Toward the end of the interview, Chowdury told her that she would be
working in a factory in Korea. He required her to submit her passport, NBI clearance, ID pictures, medical
certificate and birth certificate. He also obliged her to attend a seminar on overseas employment. After
she submitted all the documentary requirements, Chowdury required her to pay P20,000.00 as
placement fee. Calleja made the payment on August 11, 1994 to Ong for which she was issued a
receipt.[9] Chowdury assured her that she would be able to leave on the first week of September but it
proved to be an empty promise. Calleja was not able to leave despite several follow-ups. Thus, she went
to the POEA where she discovered that Craftrade's license had already expired. She tried to withdraw
her money from Craftrade to no avail. Calleja filed a complaint for illegal recruitment against Chowdury
upon advice of POEA's legal counsel.[10]
Miranda testified that in September 1994, his cousin accompanied him to the office of Craftrade in
Ermita, Manila and introduced him to Chowdury who presented himself as consultant and interviewer.
Chowdury required him to fill out a bio-data sheet before conducting the interview. Chowdury told
Miranda during the interview that he would send him to Korea for employment as factory worker. Then
he asked him to submit the following documents: passport, passport size picture, NBI clearance and
medical certificate. After he complied with the requirements, he was advised to wait for his visa and to
pay P25,000.00 as processing fee. He paid the amount of P25,000.00 to Ong who issued receipts
therefor.[11] Craftrade, however, failed to deploy him. Hence, Miranda filed a complaint with the POEA
against Chowdury for illegal recruitment.[12]
Labor Employment Officer Abbelyn Caguitla of the Licensing Branch of the POEA testified that she
prepared a certification on June 9, 1996 that Chowdury and his co-accused, Ong, were not, in their
personal capacities, licensed recruiters nor were they connected with any licensed agency. She
nonetheless stated that Craftrade was previously licensed to recruit workers for abroad which expired on
December 15, 1993. It applied for renewal of its license but was only granted a temporary license
effective December 16, 1993 until September 11, 1994. From September 11, 1994, the POEA granted
Craftrade another temporary authority to process the expiring visas of overseas workers who have
already been deployed. The POEA suspended Craftrade's temporary license on December 6, 1994.[13]
For his defense, Chowdury testified that he worked as interviewer at Craftrade from 1990 until 1994. His
primary duty was to interview job applicants for abroad. As a mere employee, he only followed the
instructions given by his superiors, Mr. Emmanuel Geslani, the agencys President and General Manager,
and Mr. Utkal Chowdury, the agency's Managing Director. Chowdury admitted that he interviewed
private complainants on different dates. Their office secretary handed him their bio-data and thereafter
he led them to his room where he conducted the interviews. During the interviews, he had with him a
form containing the qualifications for the job and he filled out this form based on the applicant's
responses to his questions. He then submitted them to Mr. Utkal Chowdury who in turn evaluated his
findings. He never received money from the applicants. He resigned from Craftrade on November 12,
1994.[14]
Another defense witness, Emelita Masangkay who worked at the Accreditation Branch of the POEA
presented a list of the accredited principals of Craftrade Overseas Developers[15] and a list of processed
workers of Craftrade Overseas Developers from 1988 to 1994.[16]
The trial court found Chowdury guilty beyond reasonable doubt of the crime of illegal recruitment in
large scale. It sentenced him to life imprisonment and to pay a fine of P100,000.00. It further ordered
him to pay Aser Sasis the amount of P16,000.00, Estrella Calleja, P20,000.00 and Melvin
Miranda, P25,000.00. The dispositive portion of the decision reads:
 "WHEREFORE, in view of the foregoing considerations, the prosecution having
proved the guilt of the accused Bulu Chowdury beyond reasonable doubt of the
crime of Illegal Recruitment in large scale, he is hereby sentenced to suffer the
penalty of life imprisonment and a fine of P100,000.00 under Art. 39 (b) of the
New Labor Code of the Philippines. The accused is ordered to pay the
complainants Aser Sasis the amount of P16,000.00; Estrella Calleja the amount
of P20,000.00; Melvin Miranda the amount of P25,000.00."[17]
Chowdury appealed.
The elements of illegal recruitment in large scale are:
(1) The accused undertook any recruitment activity defined under Article 13 (b) or
any prohibited practice enumerated under Article 34 of the Labor Code;
(2) He did not have the license or authority to lawfully engage in the recruitment
and placement of workers; and
(3) He committed the same against three or more persons, individually or as a
group.[18]
The last paragraph of Section 6 of Republic Act (RA) 8042[19] states who shall be held liable for the
offense, thus:
"The persons criminally liable for the above offenses are the principals,
accomplices and accessories. In case of juridical persons, the officers having
control, management or direction of their business shall be liable."
The Revised Penal Code which supplements the law on illegal recruitment[20] defines who are the
principals, accomplices and accessories. The principals are: (1) those who take a direct part in the
execution of the act; (2) those who directly force or induce others to commit it; and (3) those who
cooperate in the commission of the offense by another act without which it would not have been
accomplished.[21] The accomplices are those persons who may not be considered as principal as defined
in Section 17 of the Revised Penal Code but cooperate in the execution of the offense by previous or
simultaneous act.[22] The accessories are those who, having knowledge of the commission of the crime,
and without having participated therein, either as principals or accomplices, take part subsequent to its
commission in any of the following manner: (1) by profiting themselves or assisting the offenders to
profit by the effects of the crime; (2) by concealing or destroying the body of the crime, or the effects or
instruments thereof, in order to prevent its discovery; and (3) by harboring, concealing, or assisting in
the escape of the principal of the crime, provided the accessory acts with abuse of his public functions or
whenever the author of the crime is guilty of treason, parricide, murder, or an attempt at the life of the
chief executive, or is known to be habitually guilty of some other crime.[23]
Citing the second sentence of the last paragraph of Section 6 of RA 8042, accused-appellant contends
that he may not be held liable for the offense as he was merely an employee of Craftrade and he only
performed the tasks assigned to him by his superiors. He argues that the ones who should be held liable
for the offense are the officers having control, management and direction of the agency.
As stated in the first sentence of Section 6 of RA 8042, the persons who may be held liable for illegal
recruitment are the principals, accomplices and accessories. An employee of a company or corporation
engaged in illegal recruitment may be held liable as principal, together with his employer,[24] if it is shown
that he actively and consciously participated in illegal recruitment.[25] It has been held that the existence
of the corporate entity does not shield from prosecution the corporate agent who knowingly and
intentionally causes the corporation to commit a crime. The corporation obviously acts, and can act, only
by and through its human agents, and it is their conduct which the law must deter. The employee or
agent of a corporation engaged in unlawful business naturally aids and abets in the carrying on of such
business and will be prosecuted as principal if, with knowledge of the business, its purpose and effect, he
consciously contributes his efforts to its conduct and promotion, however slight his contribution may
be.[26] The law of agency, as applied in civil cases, has no application in criminal cases, and no man can
escape punishment when he participates in the commission of a crime upon the ground that he simply
acted as an agent of any party.[27] The culpability of the employee therefore hinges on his knowledge of
the offense and his active participation in its commission. Where it is shown that the employee was
merely acting under the direction of his superiors and was unaware that his acts constituted a crime, he
may not be held criminally liable for an act done for and in behalf of his employer.[28]
The fundamental issue in this case, therefore, is whether accused-appellant knowingly and intentionally
participated in the commission of the crime charged.
We find that he did not.
Evidence shows that accused-appellant interviewed private complainants in the months of June, August
and September in 1994 at Craftrade's office. At that time, he was employed as interviewer of Craftrade
which was then operating under a temporary authority given by the POEA pending renewal of its
license.[29] The temporary license included the authority to recruit workers.[30] He was convicted based on
the fact that he was not registered with the POEA as employee of Craftrade. Neither was he, in his
personal capacity, licensed to recruit overseas workers. Section 10 Rule II Book II of the Rules and
Regulation Governing Overseas Employment (1991) requires that every change, termination
or appointment of officers, representatives and personnel of licensed agencies be registered with the
POEA. Agents or representatives appointed by a licensed recruitment agency whose appointments are
not previously approved by the POEA are considered "non-licensee " or "non-holder of authority" and
therefore not authorized to engage in recruitment activity.[31]
Upon examination of the records, however, we find that the prosecution failed to prove that accused-
appellant was aware of Craftrade's failure to register his name with the POEA and that he actively
engaged in recruitment despite this knowledge. The obligation to register its personnel with the POEA
belongs to the officers of the agency.[32] A mere employee of the agency cannot be expected to know the
legal requirements for its operation. The evidence at hand shows that accused-appellant carried out his
duties as interviewer of Craftrade believing that the agency was duly licensed by the POEA and he, in
turn, was duly authorized by his agency to deal with the applicants in its behalf. Accused-appellant in fact
confined his actions to his job description. He merely interviewed the applicants and informed them of
the requirements for deployment but he never received money from them. Their payments were
received by the agency's cashier, Josephine Ong. Furthermore, he performed his tasks under the
supervision of its president and managing director. Hence, we hold that the prosecution failed to prove
beyond reasonable doubt accused-appellant's conscious and active participation in the commission of
the crime of illegal recruitment. His conviction, therefore, is without basis.
This is not to say that private complainants are left with no remedy for the wrong committed against
them. The Department of Justice may still file a complaint against the officers having control,
management or direction of the business of Craftrade Overseas Developers (Craftrade), so long as the
offense has not yet prescribed. Illegal recruitment is a crime of economic sabotage which need to be
curbed by the strong arm of the law. It is important, however, to stress that the government's action
must be directed to the real offenders, those who perpetrate the crime and benefit from it.
IN VIEW WHEREOF, the assailed decision of the Regional Trial Court is REVERSED and SET ASIDE.
Accused-appellant is hereby ACQUITTED. The Director of the Bureau of Corrections is ordered to
RELEASE accused-appellant unless he is being held for some other cause, and to REPORT to this Court
compliance with this order within ten (10) days from receipt of this decision. Let a copy of this Decision
be furnished the Secretary of the Department of Justice for his information and appropriate action.
SO ORDERED.
G.R. No. 115849 January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO
RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE
JANOLO,respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of
letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over
101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If
so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International
Bank) repudiate such "apparent authority" after said contract has been deemed perfected? During the
pendency of a suit for specific performance, does the filing of a "derivative suit" by the majority
shareholders and directors of the distressed bank to prevent the enforcement or implementation of the
sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review
on certiorariunder Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994
of the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14,
1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages
awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award
in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other
aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed,
herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of
land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less,
covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937,
inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant
Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and
receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a
deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately
deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for
purposes of registration of the same deed and transfer of the six (6) titles in the names of the
plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio
Demetria the sums of P200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as
exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of
P400,000.00 for and by way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate
damages in the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the
petition was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their
respective memoranda and reply memoranda. The First Division transferred this case to the Third
Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions,
the Court assigned the case to the undersigned ponentefor the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner
Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the
Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times
material to this case, Head-Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set
aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision3 as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines JP M-P GUTIERREZ ENTERPRISES
acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, 142 Charisma St., Doña Andres II
Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The property Rosario, Pasig, Metro Manila
used to be owned by BYME Investment and Development Corporation which had them
mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria
Attention: JOSE O. JANOLO
and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that
purpose.
Dear Sir:
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's
legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna
Management Department of the defendant bank. The meeting was held pursuant to (formerly owned by Byme Industrial Corp.). Please be informed however that the bank's
plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff counter-offer is at P5.5 million for more than 101 hectares on lot basis.
Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank
through a letter dated August 30, 1987 (Exh. "B"), as follows: We shall be very glad to hear your position on the on the matter.

August 30, 1987 Best regards.

The Producers Bank of the Philippines (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote
Makati, Metro Manila (Exh. "D"):

Attn. Mr. Mercurio Q. Rivera September 17, 1987

Manager, Property Management Dept.

Producers Bank
Gentleman: Paseo de Roxas
Makati, Metro Manila
I have the honor to submit my formal offer to purchase your properties covered by titles
listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less. Attention: Mr. Mercurio Rivera

TCT NO. AREA Gentlemen:

T-106932 113,580 sq. m.
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta.
T-106933 70,899 sq. m.
Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot
T-106934 52,246 sq. m. at P4.250 million in CASH..
T-106935 96,768 sq. m.
T-106936 187,114 sq. m. Hoping that this proposal meets your satisfaction.

T-106937 481,481 sq. m.

(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place
was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the
cash. meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through
Rivera, the following letter (Exh. "E"):
Kindly contact me at Telephone Number 921-1344.
The Producers Bank of the Philippines
Paseo de Roxas, Makati
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by
Metro Manila
letter which is hereunder quoted (Exh. "C"):

Attention: Mr. Mercurio Rivera

September 1, 1987
 Re: 101 Hectares of Land
in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are
accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by
Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND
(P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed under
conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the
person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote
plaintiff Demetria the following letter (Exh. "F"):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located
at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for
submission to the newly designated Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the
bank with what plaintiff considered as a perfected contract of sale, which demands were in
one form or another refused by the bank. As detailed by the trial court in its decision, on
November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered
payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement."
Defendants refused to receive both the payment and the letter. Instead, the parcels of land
involved in the transaction were advertised by the bank for sale to any interested buyer (Exh,
"H" and "H-1"). Plaintiffs demanded the execution by the bank of the documents on what was
considered as a "perfected agreement." Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-
hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to
106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of
this same lot in the amount of P5.5 million was accepted by our client thru a letter dated
September 30, 1987 and was received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We
were also informed that despite repeated follow-up to consummate the purchase, you now
refuse to honor your commitment. Instead, you have advertised for sale the same lot to
others.
In behalf of our client, therefore, we are making this formal demand upon you to
consummate and execute the necessary actions/documentation within three (3) days from
your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice.
Otherwise, we shall be constrained to file the necessary court action to protect the interest of
our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter
and stated, in its communication of December 2, 1987 (Exh. "I"), that said letter has been
"referred . . . to the office of our Conservator for proper disposition" However, no response
came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second
tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant
Encarnacion. Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No.
258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot
covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered
under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5
Million as the purchase price of the said lots. Please inform us of the date of documentation
of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988,
plaintiff, through counsel, made a final demand for compliance by the bank with its
obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by the
trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of
defendant's answer to amended complaint), the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with
the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that
 basis, the defendants justified the refusal of the tenders of payment and the non-compliance The Court of Appeals erred in declaring that the conservator does not have the power to
with the obligations under what the plaintiffs considered to be a perfected contract of sale. overrule or revoke acts of previous management.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the IV.
bank, its Manager Rivers and Acting Conservator Encarnacion. The basis of the suit was that
the transaction had with the bank resulted in a perfected contract of sale, The defendants
The findings and conclusions of the Court of Appeals do not conform to the evidence on
took the position that there was no such perfected sale because the defendant Rivera is not
record.
authorized to sell the property, and that there was no meeting of the minds as to the price.

On the other hand, petitioners prayed for dismissal of the instant suit on the ground8 that:
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar
Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as
owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in I.
resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to
intervene on the ground that it was filed after trial had already been concluded. It also denied Petitioners have engaged in forum shopping.
a motion for reconsideration filed thereafter. From the trial court's decision, the Bank,
petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which
subsequently affirmed with modification the said judgment. Henry Co did not appeal the II.
denial of his motion for intervention.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of record and may no longer be questioned in this case.
Demetria and Janolo, in view of the assignment of the latters' rights in the matter in litigation to said
private respondent. III.

On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several The Court of Appeals correctly held that there was a perfected contract between Demetria
other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an and Janolo (substituted by; respondent Ejercito) and the bank.
action (hereafter, the "Second Case") — purportedly a "derivative suit" — with the Regional Trial Court
of Makati, Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to
declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or IV.
implementing the sale"4 In his answer, Janolo argued that the Second Case was barred by litis
pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in The Court of Appeals has correctly held that the conservator, apart from being estopped from
the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. repudiating the agency and the contract, has no authority to revoke the contract of sale.
"Private respondent opposed this motion on the ground, among others, that plaintiff's act of forum
shopping justifies the dismissal of both cases, with prejudice."5 Private respondent, in his memorandum,
The Issues
averred that this motion is still pending in the Makati RTC.

From the foregoing positions of the parties, the issues in this case may be summed up as follows:
In their Petition6 and Memorandum7 , petitioners summarized their position as follows:

1) Was there forum-shopping on the part of petitioner Bank?

I.

2) Was there a perfected contract of sale between the parties?

The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito
(in substitution of Demetria and Janolo) and the bank.
3) Assuming there was, was the said contract enforceable under the statute of frauds?
II.
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank
officers and/or to revoke the said contract?
The Court of Appeals erred in declaring the existence of an enforceable contract of sale
between the parties.
5) Did the respondent Court commit any reversible error in its findings of facts?
III.
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated
Revised Circular No. 28-91 requiring that a party "must certify under oath . . . [that] (a) he has not
(t)heretofore commenced any other action or proceeding involving the same issues in the Supreme
Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such
action or proceeding is pending" in said courts or agencies. A violation of the said circular entails
sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure,
petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the
pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving
a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants
but which is the subject of a pending Motion to Dismiss Without Prejudice. 9
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of
actual forum shopping because the instant petition pending before this Court involves "identical parties
or interests represented, rights asserted and reliefs sought (as that) currently pending before the
Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so
interwined that a judgement or resolution in either case will constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping because:
1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as
a defendant, whereas in the "Second Case" (assuming the Bank is the real party in interest in
a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation under the
circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and
attached to the Petition identifies the action as a "derivative suit," it "does not mean that it is
one" and "(t)hat is a legal question for the courts to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law.12 , where non-
resident litigants are given the option to choose the forum or place wherein to bring their suit for various
reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to
avoid overcrowded dockets, or to select a more friendly venue. To combat these less than honorable
excuses, the principle of forum non conveniens was developed whereby a court, in conflicts of law cases,
may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and
the parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his
action tried in a particular court or jurisdiction where he feels he will receive the most favorable
judgment or verdict." Hence, according to Words and Phrases14 , "a litigant is open to the charge of
"forum shopping" whenever he chooses a forum with slight connection to factual circumstances
surrounding his suit, and litigants should be encouraged to attempt to settle their differences without
imposing undue expenses and vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of
venues, as it was originally understood in conflicts of laws, but also to a choice of remedies. As to the
first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions
"where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of
the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved
parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising
from the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue
on culpa contractual, culpa aquiliana or culpa criminal — each remedy being available independently of
the others — although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops
for a forum of his action, This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions,
litigants, through the encouragement of their lawyers, file their actions in all available courts,
or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic)
conflicting adjudications among different courts and consequent confusion enimical (sic) to
an orderly administration of justice. It had created extreme inconvenience to some of the
parties to the action.
Thus, "forum shopping" had acquired a different concept — which is unethical professional
legal practice. And this necessitated or had given rise to the formulation of rules and canons
discouraging or altogether prohibiting the practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device
for solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already
mentioned, promulgated Circular 28-91. And even before that, the Court had prescribed it in the Interim
Rules and Guidelines issued on January 11, 1983 and had struck down in several cases 16 the inveterate
use of this insidious malpractice. Forum shopping as "the filing of repetitious suits in different courts"
has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources,
et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party
seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies
not only with respect to suits filed in the courts but also in connection with litigations
commenced in the courts while an administrative proceeding is pending, as in this case, in
order to defeat administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where the court in
which the second suit was brought, has no jurisdiction.18
The test for determining whether a party violated the rule against forum shopping has been laid dawn in
the 1986 case of Buan vs. Lopez 19 , also by Chief Justice Narvasa, and that is, forum shopping exists
where the elements of litis pendentia are present or where a final judgment in one case will amount
to res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of
parties, or at least such parties as represent the same interests in both actions, as well as
identity of rights asserted and relief prayed for, the relief being founded on the same facts,
 and the identity on the two preceding particulars is such that any judgment rendered in the
other action, will, regardless of which party is successful, amount to res adjudicata in the
action under consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an
identity as regards parties, or interests represented, rights asserted and relief sought, as well
as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter
action pendant or lis pendens. That same identity puts into operation the sanction of twin
dismissals just mentioned. The application of this sanction will prevent any further delay in
the settlement of the controversy which might ensue from attempts to seek reconsideration
of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which appear
persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party
against whom another action or actions for the alleged violation of the same right and the enforcement
of the same relief is/are still pending, the defense of litis pendencia in one case is bar to the others; and,
a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In
either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal
of the two 20 (or more) complaints or petitions, and for imposition of the other sanctions, which are
direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is
obvious that there exist identity of parties or interests represented, identity of rights or causes and
identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was
filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint 21 in
the Second Case seeks to declare such purported sale involving the same real property "as
unenforceable as against the Bank", which is the petitioner herein. In other words, in the Second Case,
the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself
failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though
worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to
sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22 , this Court ruled
that the filing by a party of two apparently different actions, but with the same objective, constituted
forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different
respondents therein — PNOC in the case before the lower court and the COA in the case
before this Court and sought what seems to be different reliefs. Petitioner asks this Court to
set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said
body to approve the Memorandum of Agreement entered into by and between the PNOC and
petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC
from conducting a rebidding and from selling to other parties the vessel "T/T Andres
Bonifacio", and for an extension of time for it to comply with the paragraph 1 of the
memorandum of agreement and damages. One can see that although the relief prayed for in
the two (2) actions are ostensibly different, the ultimate objective in both actions is the same,
that is, approval of the sale of vessel in favor of petitioner and to overturn the letter-directive
of the COA of October 10, 1988 disapproving the sale. (emphasis supplied).
In an earlier case 23 but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and
prohibition in this Court despite the pendency of their action in the Makati Regional Trial
Court, is a species of forum-shopping. Both actions unquestionably involve the same
transactions, the same essential facts and circumstances. The petitioners' claim of absence of
identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did
not involve certain acts which transpired after its commencement, is specious. In the RTC
action, as in the action before this Court, the validity of the contract to purchase and sell of
September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety
of implementing the same (by paying the pledgee banks the amount of their loans, obtaining
the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same:
the prevention of such implementation and/or the restoration of the status quo ante. When
the acts sought to be restrained took place anyway despite the issuance by the Trial Court of
a temporary restraining order, the RTC suit did not become functus oficio. It remained an
effective vehicle for obtention of relief; and petitioners' remedy in the premises was plain and
patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include
the PCGG as defendant and seek nullification of the acts sought to be enjoined but
nonetheless done. The remedy was certainly not the institution of another action in another
forum based on essentially the same facts, The adoption of this latter recourse renders the
petitioners amenable to disciplinary action and both their actions, in this Court as well as in
the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented.
Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they
represent the same interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the
matter in controversy. They are not principally or even subsidiarily liable; much less are they direct
parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a
"derivative suit". In the caption itself, petitioners claim to have brought suit "for and in behalf of the
Producers Bank of the Philippines" 24 . Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holdsstock in order to protect or vindicate corporate rights, whenever
the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of
the corporation. In such actions, the suing stockholder is regarded as a nominal party, with
the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite
strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not
by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank.
That being so, then they really represent the Bank. So, whether they sued "derivatively" or directly, there
is undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate
and distinct from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged
as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from
the members or stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the
instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant
violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in
direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes,
particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or
defending corporate causes and in using and applying remedies available to it. To rule otherwise would
be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules
against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that
there is identity of parties, causes of action and reliefs sought, "because it (the Bank) was the defendant
in the (first) case while it was the plaintiff in the other (Second Case)",citing as authority Victronics
Computers, Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to him,
commences a new action against the plaintiff — instead of filing a responsive pleading in the
other case — setting forth therein, as causes of action, specific denials, special and affirmative
defenses or even counterclaims, Thus, Velhagen's and King's motion to dismiss Civil Case No.
91-2069 by no means negates the charge of forum-shopping as such did not exist in the first
place. (emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have
chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting
between Victronics and the present suit. In the former, as underscored in the above-quoted Court ruling,
the defendants did not file any responsive pleading in the first case. In other words, they did not make
any denial or raise any defense or counter-claim therein In the case before us however, petitioners filed
a responsive pleading to the complaint — as a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter–claims in their responsive pleadings,
the petitioners became plaintiffs themselves in the original case, giving unto themselves the very
remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is
the vexation caused the courts and parties-litigant by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or to grant the same or substantially
the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue. In this case, this is exactly the problem: a decision recognizing the
perfection and directing the enforcement of the contract of sale will directly conflict with a possible
decision in the Second Case barring the parties front enforcing or implementing the said sale. Indeed, a
final decision in one would constitute res judicata in the other 28 .
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction
possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed
because petitioners' present counsel entered their appearance only during the proceedings in this Court,
and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of
the Second Case to show good faith in observing Circular 28-91. The Lawyers who filed the Second Case
are not before us; thus the rudiments of due process prevent us from motu propio imposing disciplinary
measures against them in this Decision. However, petitioners themselves (and particularly Henry Co, et
al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with
court proceedings and processes They are warned that a repetition of the same will be dealt with more
severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of
forum-shopping but also because of the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the
facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has
been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant
bank as acquired assets consisting of six (6) parcels of land specifically identified under
Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the
bank intended to sell the property. As testified to by the Bank's Deputy Conservator, Jose
Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs
wanted to purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the defendant bank,
in early August 1987. The procedure in the sale of acquired assets as well as the nature and
scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera
himself, which testimony was relied upon by both the bank and by Rivera in their appeal
briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I
published it in the form of an inter-office memorandum distributed to all branches
that these are acquired assets for sale. I was instructed to advertise acquired
assets for sale so on that basis, I have to entertain offer; to accept offer, formal
offer and upon having been offered, I present it to the Committee. I provide the
Committee with necessary information about the property such as original loan of
the borrower, bid price during the foreclosure, total claim of the bank, the
appraised value at the time the property is being offered for sale and then the
information which are relative to the evaluation of the bank to buy which the
Committee considers and it is the Committee that evaluate as against the
exposure of the bank and it is also the Committee that submit to the Conservator
for final approval and once approved, we have to execute the deed of sale and it is
the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the
property, dealt with and talked to the right person. Necessarily, the agenda was the price of
the property, and plaintiffs were dealing with the bank official authorized to entertain offers,
to accept offers and to present the offer to the Committee before which the said official is
authorized to discuss information relative to price determination. Necessarily, too, it being
inherent in his authority, Rivera is the officer from whom official information regarding the
price, as determined by the Committee and approved by the Conservator, can be had. And
Rivera confirmed his authority when he talked with the plaintiff in August 1987. The
testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
 Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did
you ask him point-blank his authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked him how
long it would take because he was saying that the matter of pricing will be passed
upon by the committee. And when I asked him how long it will take for the
committee to decide and he said the committee meets every week. If I am not
mistaken Wednesday and in about two week's (sic) time, in effect what he was
saying he was not the one who was to decide. But he would refer it to the
committee and he would relay the decision of the committee to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he said he would refer the
matter to the committee and he would relay the decision to me and he did just
like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co
was the Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and
the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's
assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20,
1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the
attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering
an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-
buyers with their proposed buying price on one hand, and the bank Committee, the
Conservator and ultimately the bank itself with the set price on the other, and considering
further the discussion of price at the meeting of August resulting in a formal offer of P3.5
Million in cash, there can be no other logical conclusion than that when, on September 1,
1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for
more than 101 hectares on lot basis," such counter-offer price had been determined by the
Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower,
bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the
established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"),
the official and definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million
price was not discussed by the Committee and that price. As correctly characterized by the
trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are
at best equivocal and considering the gratuitous and self-serving character of these
declarations, the bank's submission on this point does not inspire belief. Both Co ad Entereso,
as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was
never discussed by the Committee. In the same vein, both Co and Entereso openly admit that
they seldom attend the meetings of the Committee. It is important to note that negotiations
on the price had started in early August and the plaintiffs had already offered an amount as
purchase price, having been made to understand by Rivera, the official in charge of the
negotiation, that the price will be submitted for approval by the bank and that the bank's
decision will be relayed to plaintiffs. From the facts, the official bank price. At any rate, the
bank placed its official, Rivera, in a position of authority to accept offers to buy and negotiate
the sale by having the offer officially acted upon by the bank. The bank cannot turn around
and later say, as it now does, that what Rivera states as the bank's action on the matter is not
in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation
knowingly permits one of its officers, or any other agent, to do acts within the scope of an
apparent authority, and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith dealt with the corporation
through such agent, he estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577,
583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of Appeals,
G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1)
Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3)
Cause of the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels
of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and
third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer
which Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank,
there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept." 30 They disputed the
factual basis of the respondent Court's findings that there was an offer made by Janolo for P3.5 million,
to which the Bank counter-offered P5.5 million. We have perused the evidence but cannot find fault with
the said Court's findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact — if there
be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well)
chose to believe the evidence presented by respondent more than that presented by petitioners is not
by itself a reversible error. In fact, such findings merit serious consideration by this Court, particularly
where, as in this case, said courts carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the
question of Rivera's authority to act and petitioner's allegations that the P5.5 million counter-offer was
extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into the contractual elements
of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine
of "apparent authority", with special reference to banks, was laid out in Prudential Bank vs. Court of
Appeals31 , where it was held that:
Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the
principal's true representation and the contract is considered as entered into between the
principal and the third person (citing National Food Authority vs. Intermediate Appellate
Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or
in the course of dealings of the officers in their representative capacity but not for
acts outside the scape of their authority (9 C.J.S., p. 417). A bank holding out its
officers and agents as worthy of confidence will not be permitted to profit by the
frauds they may thus be enabled to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for such frauds even
though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114).
 Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his
principal or some other person, for his own ultimate benefit (McIntosh v. Dakota
Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary
relationship with the public and their stability depends on the confidence of the people in
their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care
in the selection and supervision of its employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or
implied authority to act for the Bank in the matter of selling its acquired assets. This evidence includes
the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case,
Manager of the Property Management Department of the Bank". By his own admission,
Rivera was already the person in charge of the Bank's acquired assets (TSN, August 6, 1990,
pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And
during the initial meeting between the buyers and Rivera, the latter suggested that the
buyers' offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July
1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5
million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to
buy the property for P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of
the Bank (TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994,
during which the Bank's offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp.
34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed Rivera's
statement as to the finality of the Bank's counter-offer of P5.5 million (TSN, January 16, 1990,
p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the
officer acting for the Bank in relation to parties interested in buying assets owned/acquired
by the Bank. In fact, Rivera was the officer mentioned in the Bank's advertisements offering
for sale the property in question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32 , the Court, through
Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority
of the officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances
surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and
testimony which seek to establish Rivera's actual authority. These pieces of evidence, however, are
inherently weak as they consist of Rivera's self-serving testimony and various inter-office memoranda
that purport to show his limited actual authority, of which private respondent cannot be charged with
knowledge. In any event, since the issue is apparent authority, the existence of which is borne out by the
respondent Court's findings, the evidence of actual authority is immaterial insofar as the liability of a
corporation is concerned 33 .
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm"
had once acted for the Bank in three criminal cases, they should be charged with actual knowledge of
Rivera's limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual
finding that the buyers had no notice of Rivera's actual authority prior to the sale. In fact, the Bank has
not shown that they acted as its counsel in respect to any acquired assets; on the other hand,
respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers
(not a professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal
cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated
September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They disputed the respondent
Court's finding that "there was a meeting of minds when on 30 September 1987 Demetria and Janolo
through Annex "L" (letter dated September 30, 1987) "accepted" Rivera's counter offer of P5.5 million
under Annex "J" (letter dated September 17, 1987)", citingthe late Justice Paras35 , Art. 1319 of the Civil
Code 36 and related Supreme Court rulings starting with Beaumont vs. Prieto 37 .
However, the above-cited authorities and precedents cannot apply in the instant case because, as found
by the respondent Court which reviewed the testimonies on this point, what was "accepted" by Janolo in
his letter dated September 30, 1987 was the Bank's offer of P5.5 million as confirmed and reiterated to
Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that
the said letter of September 30, 1987 begins with"(p)ursuant to our discussion last 28 September 1987 . .
.
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that
the September 28, 1987 meeting "was meant to have the offerors improve on their position of P5.5.
million."38 However, both the trial court and the Court of Appeals found petitioners' testimonial evidence
"not credible", and we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that
private respondents' evidence is more in keeping with truth and logic — that during the meeting on
September 28, 1987, Luis Co and Rivera "confirmed that the P5.5 million price has been passed upon by
the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35)"39 . Hence,
assuming arguendo that the counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis
Co's reiteration of the said P5.5 million price during the September 28, 1987 meeting revived the said
offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there was a meeting of
the minds, as the acceptance in said letter was absolute and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and action,
particularly the latter's counter-offer of P5.5 million, as being "unauthorized and illegal" came only on
May 12, 1988 or more than seven (7) months after Janolo' acceptance. Such delay, and the absence of
any circumstance which might have justifiably prevented the Bank from acting earlier, clearly
characterizes the repudiation as nothing more than a last-minute attempt on the Bank's part to get out
of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of
the petitioners that the written offer made on September 1, 1987 was carried through during the
meeting of September 28, 1987. This is the conclusion consistent with human experience, truth and
good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for the
first time on appeal and should thus be disregarded.
The respondent Court could have added that the written communications commenced not only from
September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that, taken together, these letters
constitute sufficient memoranda — since they include the names of the parties, the terms and
conditions of the contract, the price and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did
constitute a "new" offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds
will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's
counter-offer of P5.5 million. Hence, petitioners — by such utter failure to object — are deemed to have
waived any defects of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are
This Court in several decisions has repeatedly adhered to the principle that points of law,
ratified by the failure to object to the presentation of oral evidence to prove the same, or by
theories, issues of fact and arguments not adequately brought to the attention of the trial
the acceptance of benefits under them.
court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot
be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145
SCRA 592).40 As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the
counter-offer of P5.5 million is a plenty — and the silence of petitioners all throughout the presentation
makes the evidence binding on them thus;
. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor
raised during the trial in the court below cannot be raised for the first time on appeal as it
would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA, A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria
153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development told me to accompany him we were able to meet Luis Co at the Bank.
Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R.
77029, August 30, 1990).41
xxx xxx xxx

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not
Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
given an opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is
a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on
purely procedural grounds, and we repeat that, on the basis of the evidence already in the record and as A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
appreciated by the lower courts, the inevitable conclusion is simply that there was a perfected contract
of sale. Q What price?

The Third Issue: Is the Contract Enforceable?
The petition alleged42 :
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the
meeting of 28 September 1987, and it was this verbal offer that Demetria and Janolo
accepted with their letter of 30 September 1987, the contract produced thereby would be
unenforceable by action — there being no note, memorandum or writing subscribed by the
Bank to evidence such contract. (Please see article 1403[2], Civil Code.)
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is
the final price and that is the price they intends (sic) to have, sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant
Rivera's counter-offer of 5.5 million was the defendant's bank (sic) final offer?

Upon the other hand, the respondent Court in its Decision (p, 14) stated:
A He said in a day or two, he will make final acceptance, sir.

. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs'
acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of Q What is the response of Mr. Luis Co?.
sale. They are however clear embodiments of the fact that a contract of sale was perfected
between the parties, such contract being binding in whatever form it may have been entered A He said he will wait for the position of Atty. Demetria, sir.
into (case citations omitted). Stated simply, the banks' letter of September 1, 1987, taken
together with plaintiffs' letter dated September 30, 1987, constitute in law a sufficient
memorandum of a perfected contract of sale. [Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
 Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A We went straight to the point because he being a busy person, I told him if the amount of
P5.5 million could still be reduced and he said that was already passed upon by the
committee. What the bank expects which was contrary to what Mr. Rivera stated. And he told
me that is the final offer of the bank P5.5 million and we should indicate our position as soon
as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said that was it. Atty.
Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office.
Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter
offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we
accepted, the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the
Committee and it is not within his power to reduce this amount. What can you say to that
statement that the amount of P5.5 million was reached by the Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co and the
group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that September 28, 1987 meeting,
sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the
Philippines during the time that the negotiation and perfection of the contract of sale took place.
Petitioners energetically contended that the conservator has the power to revoke or overrule actions of
the management or the board of directors of a bank, under Section 28-A of Republic Act No. 265
(otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a non-bank financial intermediary
performing quasi-banking functions is in a state of continuing inability or unwillingness to
maintain a state of liquidity deemed adequate to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator to take charge of the assets,
liabilities, and the management of that institution, collect all monies and debts due said
institution and exercise all powers necessary to preserve the assets of the institution,
reorganize the management thereof, and restore its viability. He shall have the power to
overrule or revoke the actions of the previous management and board of directors of the
bank or non-bank financial intermediary performing quasi-banking functions, any provision of
law to the contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the perfected
contract of sale was raised for the first time in this Petition — as this was not litigated in the trial court or
Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let alone
in the Court of Appeals, "cannot be raised for the first time on appeal as it would be offensive to the
basic rules of fair play, justice and due process."43
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The Bank's acting conservator at the
time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What
petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey
after the sale was perfected on September 30, 1987 (Annex V, petition) which unilaterally repudiated —
not the contract — but the authority of Rivera to make a binding offer — and which unarguably came
months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria
regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor
perfected a "contract to sell and buy" with any of them for the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by
former Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M.
Pascua detailed the functions of Property Management Department (PMD) staff and officers
(Annex A.), you will immediately read that Manager Mr. Mercurio Rivera or any of his
subordinates has no authority, power or right to make any alleged counter-offer. In short,
your lawyer-clients did not deal with the authorized officers of the bank.
 Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa
Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board
of Directors/Conservator may authorize the sale of any property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by any of the
bank conservators (starting January, 1984) to sell the aforesaid property to any of your
clients. Apparently, what took place were just preliminary discussions/consultations between
him and your clients, which everyone knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same
is patently violative of corporate and banking laws. We believe that this is more than
sufficient legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal
and in accordance with law. We also have no personal interest in any of the properties of the
Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be related to the "(preservation of)
the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its
viability." Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation
of perfected transactions, otherwise they would infringe against the non-impairment clause of the
Constitution 44 . If the legislature itself cannot revoke an existing valid contract, how can it delegate such
non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are,
under existing law, deemed to be defective — i.e., void, voidable, unenforceable or rescissible. Hence,
the conservator merely takes the place of a bank's board of directors. What the said board cannot do —
such as repudiating a contract validly entered into under the doctrine of implied authority — the
conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate
valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts
— as he has already done so in the instant case. A contrary understanding of the law would simply not
be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a
failing bank to become solvent, at the expense of third parties, by simply getting the conservator to
unilaterally revoke all previous dealings which had one way or another or come to be considered
unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the third
parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by
the Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover &
Trust Corporation, 45 , we held:
. . . The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs.
Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition
for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the Supreme
Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the
errors of law imputed to it, its findings of the fact being conclusive " [Chan vs. Court of
Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions].
This Court has emphatically declared that "it is not the function of the Supreme Court to
analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors
of law that might have been committed by the lower court" (Tiongco v. De la Merced, G. R.
No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April
28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20, 1984,
127 SCRA 596). "Barring, therefore, a showing that the findings complained of are totally
devoid of support in the record, or that they are so glaringly erroneous as to constitute
serious abuse of discretion, such findings must stand, for this Court is not expected or
required to examine or contrast the oral and documentary evidence submitted by the
parties" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973]
[at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to
the sufficiency of evidence and the credibility of witnesses presented. This Court so held that
it is not the function of the Supreme Court to analyze or weigh such evidence all over again.
The Supreme Court's jurisdiction is limited to reviewing errors of law that may have been
committed by the lower court. The Supreme Court is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp. 47 :
The Court has consistently held that the factual findings of the trial court, as well as the Court
of Appeals, are final and conclusive and may not be reviewed on appeal. Among the
exceptional circumstances where a reassessment of facts found by the lower courts is allowed
are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when
there is grave abuse of discretion in the appreciation of facts; when the judgment is premised
on a misapprehension of facts; when the findings went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee. After a careful study of
the case at bench, we find none of the above grounds present to justify the re-evaluation of
the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company
Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to the present case:
 We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not
the function of this Court to assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties, particularly where, such as here, the findings of both
the trial court and the appellate court on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and conclusions
which were not only contrary to the evidence on record but have no bases at all," specifically the
findings that (1) the "Bank's counter-offer price of P5.5 million had been determined by the past due
committee and approved by conservator Romey, after Rivera presented the same for discussion" and (2)
"the meeting with Co was not to scale down the price and start negotiations anew, but a meeting on the
already determined price of P5.5 million" Hence, citingPhilippine National Bank vs. Court of Appeals 49 ,
petitioners are asking us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals 50 , thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera
informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than 101
hectares on lot basis, "such counter-offer price had been determined by the Past Due
Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer
for discussion by the Committee . . . Tersely put, under the established fact, the price of P5.5
Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at
which the bank was selling the property. (p. 11, CA Decision)
xxx xxx xxx
. . . The argument deserves scant consideration. As pointed out by plaintiff, during the
meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-
president of the bank, where the topic was the possible lowering of the price, the bank official
refused it and confirmed that the P5.5 Million price had been passed upon by the Committee
and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as
"not credible" and "at best equivocal and considering the gratuitous and self-serving character of these
declarations, the bank's submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo
Romey to testify on their behalf, as he would have been in the best position to establish their thesis.
Under the rules on evidence 51 , such suppression gives rise to the presumption that his testimony would
have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed
insufficient by both the trial court and the respondent Court, and instead, it was respondent's
submissions that were believed and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower
courts are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit
the conclusion they are espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the
Court of Appeals 52 . We have studied both the records and the CA Decision and we find no such
exceptions in this case. On the contrary, the findings of the said Court are supported by a preponderance
of competent and credible evidence. The inferences and conclusions are seasonably based on evidence
duly identified in the Decision. Indeed, the appellate court patiently traversed and dissected the issues
presented before it, lending credibility and dependability to its findings. The best that can be said in
favor of petitioners on this point is that the factual findings of respondent Court did not correspond to
petitioners' claims, but were closer to the evidence as presented in the trial court by private respondent.
But this alone is no reason to reverse or ignore such factual findings, particularly where, as in this case,
the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact
of a trial judge — as affirmed by the Court of Appeals — are conclusive upon this Court, absent any
serious abuse or evident lack of basis or capriciousness of any kind, because the trial court is in a better
position to observe the demeanor of the witnesses and their courtroom manner as well as to examine
the real evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the raising of issues for the
first time on appeal [viz., the extinguishment of the Bank's offer of P5.5 million and the conservator's
powers to repudiate contracts entered into by the Bank's officers] — which per se could justify the
dismissal of the present case. We did not limit ourselves thereto, but delved as well into the substantive
issues — the perfection of the contract of sale and its enforceability, which required the determination
of questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to
look into the factual bases of respondent Court's decisions and resolutions, we did so just the same, if
only to find out whether there is reason to disturb any of its factual findings, for we are only too aware
of the depth, magnitude and vigor by which the parties through their respective eloquent counsel,
argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and "there is need to rehabilitate the Bank in order to get it back on
its feet . . . as many people depend on (it) for investments, deposits and well as employment. As of June
1987, the Bank's overdraft with the Central Bank had already reached P1.023 billion . . . and there were
(other) offers to buy the subject properties for a substantial amount of money." 53
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot
emotionally close its eyes to overriding considerations of substantive and procedural law, like respect for
perfected contracts, non-impairment of obligations and sanctions against forum-shopping, which must
be upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the
price agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at
a foreclosure sale for no more than P3.5 million 54 . That the Bank procrastinated and refused to honor its
commitment to sell cannot now be used by it to promote its own advantage, to enable it to escape its
binding obligation and to reap the benefits of the increase in land values. To rule in favor of the Bank
simply because the property in question has algebraically accelerated in price during the long period of
litigation is to reward lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court
cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby
DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for
engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with
more severely. Costs against petitioners.
SO ORDERED.
G.R. No. 167812
JESUS M. GOZUN, Petitioner
- versus -
JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO, Respondent.
CARPIO MORALES, J.:
On challenge via petition for review on certiorari is the Court of Appeals Decision of December 8, 2004 and
Resolution of April 14, 2005 in CA-G.R. CV No. 76309[1] reversing the trial courts decision[2] against
Jose Teofilo T. Mercado a.k.a. Don Pepito Mercado (respondent) and accordingly dismissing the complaint
of Jesus M. Gozun (petitioner).
In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondents
request, petitioner, owner of JMG Publishing House, a printing shop located in San Fernando, Pampanga,
submitted to respondent draft samples and price quotation of campaign materials.
By petitioners claim, respondents wife had told him that respondent already approved his price
quotation and that he could start printing the campaign materials, hence, he did print campaign materials
like posters bearing respondents photograph,[3] leaflets containing the slate of party candidates,[4] sample
ballots,[5] poll watcher identification cards,[6] and stickers.
Given the urgency and limited time to do the job order, petitioner availed of the services and
facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his daughter
Jennifer Gozun and mother Epifania Macalino Gozun, respectively.[7]
Petitioner delivered the campaign materials to respondents headquarters along Gapan-
Olongapo Road in San Fernando, Pampanga.[8]
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano (Lilian) obtained from
petitioner cash advance of P253,000 allegedly for the allowances of poll watchers who were attending a
seminar and for other related expenses. Lilian acknowledged on petitioners 1995 diary[9] receipt of the
amount.[10]
Petitioner later sent respondent a Statement of Account[11]
in the total amount of P2,177,906
itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900
for St. Joseph Printing Press; and P253,000, the cash advance obtained by Lilian.
On August 11, 1995, respondents wife partially paid P1,000,000 to petitioner who issued a
receipt[12] therefor.
Despite repeated demands and respondents promise to pay, respondent failed to settle the
balance of his account to petitioner.
Petitioner and respondent being compadres, they having been principal sponsors at the
weddings of their respective daughters, waited for more than three (3) years for respondent to honor his
promise but to no avail, compelling petitioner to endorse the matter to his counsel who sent respondent
a demand letter.[13] Respondent, however, failed to heed the demand.[14]
Petitioner thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a
complaint[15] against respondent to collect the remaining amount of P1,177,906 plus inflationary
adjustment and attorneys fees.
In his Answer with Compulsory Counterclaim,[16] respondent denied having transacted with
petitioner or entering into any contract for the printing of campaign materials. He alleged that the various
campaign materials delivered to him were represented as donations from his family, friends and political
supporters. He added that all contracts involving his personal expenses were coursed through and signed
by him to ensure compliance with pertinent election laws.
On petitioners claim that Lilian, on his (respondents) behalf, had obtained from him a cash
advance of P253,000, respondent denied having given her authority to do so and having received the
same.
At the witness stand, respondent, reiterating his allegations in his Answer, claimed that petitioner was his
over-all coordinator in charge of the conduct of seminars for volunteers and the monitoring of other
matters bearing on his candidacy; and that while his campaign manager, Juanito Johnny Cabalu (Cabalu),
who was authorized to approve details with regard to printing materials, presented him some campaign
materials, those were partly donated.[17]
When confronted with the official receipt issued to his wife acknowledging her payment to JMG Publishing
House of the amount of P1,000,000, respondent claimed that it was his first time to see the receipt, albeit
he belatedly came to know from his wife and Cabalu that the P1,000,000 represented compensation [to
petitioner] who helped a lot in the campaign as a gesture of goodwill.[18]
Acknowledging that petitioner is engaged in the printing business, respondent explained that
he sometimes discussed with petitioner strategies relating to his candidacy, he (petitioner) having actively
volunteered to help in his campaign; that his wife was not authorized to enter into a contract with
petitioner regarding campaign materials as she knew her limitations; that he no longer questioned
the P1,000,000 his wife gave petitioner as he thought that it was just proper to compensate him for a job
well done; and that he came to know about petitioners claim against him only after receiving a copy of the
complaint, which surprised him because he knew fully well that the campaign materials were donations.[19]
Upon questioning by the trial court, respondent could not, however, confirm if it was his
understanding that the campaign materials delivered by petitioner were donations from third parties.[20]
Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign material is
donated, it must be so stated on its face, acknowledged that nothing of that sort was written on all the
materials made by petitioner.[21]
As adverted to earlier, the trial court rendered judgment in favor of petitioner,
the dispositive portion of which reads:
WHEREFORE, the plaintiff having proven its (sic) cause of action by preponderance
of evidence, the Court hereby renders a decision in favor of the plaintiff ordering
the defendant as follows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per
annum from the filing of this complaint until fully paid;
2. To pay the sum of P50,000.00 as attorneys fees and the costs of suit.
SO ORDERED.[22]
Also as earlier adverted to, the Court of Appeals reversed the trial courts decision and dismissed
the complaint for lack of cause of action.

In reversing the trial courts decision, the Court of Appeals held that other than petitioners
testimony, there was no evidence to support his claim that Lilian was authorized by respondent to borrow
money on his behalf. It noted that the acknowledgment receipt[23] signed by Lilian did not specify in what
capacity she received the money. Thus, applying Article 1317[24] of the Civil Code, it held that petitioners
claim for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing House P640,310, Metro Angeles Printing P837,696, and
St. Joseph Printing Press P446,900, the appellate court, noting thatsince the owners of the last two printing
presses were not impleaded as parties to the case and it was not shown that petitioner was authorized to
prosecute the same in their behalf, held that petitioner could not collect the amounts due them.
Finally, the appellate court, noting that respondents wife had paid P1,000,000 to petitioner, the latters
claim of P640,310 (after excluding the P253,000) had already been settled.
Hence, the present petition, faulting the appellate court to have erred:
1. . . . when it dismissed the complaint on the ground that there is no evidence,
other than petitioners own testimony, to prove that Lilian R. Soriano was
authorized by the respondent to receive the cash advance from the petitioner
in the amount of P253,000.00.
xxxx
2. . . . when it dismissed the complaint, with respect to the amounts due to the
Metro Angeles Press and St. Joseph Printing Press on the ground that the
complaint was not brought by the real party in interest.
x x x x[25]
By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.[26] Contracts entered
into in the name of another person by one who has been given no authority or legal representation or who
has acted beyond his powers are classified as unauthorized contracts and are declared unenforceable,
unless they are ratified.[27]
Generally, the agency may be oral, unless the law requires a specific form.[28] However, a special
power of attorney is necessary for an agent to, as in this case, borrow money, unless it be urgent and
indispensable for the preservation of the things which are under administration.[29] Since nothing in this
case involves the preservation of things under administration, a determination of whether Soriano had the
special authority to borrow money on behalf of respondent is in order.
Lim Pin v. Liao Tian, et al.[30] held that the requirement of a special power of attorney refers to
the nature of the authorization and not to its form.
. . . The requirements are met if there is a clear mandate from the principal
specifically authorizing the performance of the act. As early as 1906, this Court
in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either
oral or written. The one thing vital being that it shall be express. And more recently,
We stated that, if the special authority is not written, then it must be duly
established by evidence:
the Rules require, for attorneys to compromise the litigation of their
clients, a special authority. And while the same does not state that the
special authority be in writing the Court has every reason to expect that,
if not in writing, the same be duly established by evidence other than the
self-serving assertion of counsel himself that such authority was verbally
given him.[31] (Emphasis and underscoring supplied)
Petitioner submits that his following testimony suffices to establish that respondent had
authorized Lilian to obtain a loan from him, viz:
Q : Another caption appearing on Exhibit A is cash advance, it states given on 3-31-
95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado,
amount P253,000.00, will you kindly tell the Court and explain what does
that caption means?
A : It is the amount representing the money borrowed from me by the defendant
when one morning they came very early and talked to me and told me
that they were not able to go to the bank to get money for the
allowances of Poll Watchers who were having a seminar at the
headquarters plus other election related expenses during that day, sir.
Q : Considering that this is a substantial amount which according to you was taken
by Lilian Soriano, did you happen to make her acknowledge the amount
at that time?
A : Yes, sir.[32] (Emphasis supplied)
Petitioners testimony failed to categorically state, however, whether the loan was made on behalf of
respondent or of his wife. While petitioner claims that Lilian was authorized by respondent, the statement
of account marked as Exhibit A states that the amount was received by Lilian in behalf of Mrs. Annie
Mercado.
Invoking Article 1873[33] of the Civil Code, petitioner submits that respondent informed him that he had
authorized Lilian to obtain the loan, hence, following Macke v. Camps[34] which holds that one who clothes
another with apparent authority as his agent, and holds him out to the public as such, respondent cannot
be permitted to deny the authority.
Petitioners submission does not persuade. As the appellate court observed:
. . . Exhibit B [the receipt issued by petitioner] presented by plaintiff-appellee to
support his claim unfortunately only indicates the Two Hundred Fifty Three
Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31 March
1995, but without specifying for what reason the said amount was delivered and in
what capacity did Lilian R. Soriano received [sic] the money. The note reads:
3-31-95
261,120 ADVANCE MONEY FOR TRAINEE
RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO
HUNDRED FIFTY THREE THOUSAND PESOS
(SIGNED)
LILIAN R. SORIANO
3-31-95

Nowhere in the note can it be inferred that defendant-appellant was connected
with the said transaction. Under Article 1317 of the New Civil Code, a person cannot
be bound by contracts he did not authorize to be entered into his
behalf.[35] (Underscoring supplied)
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was
acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent
of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport to be
made, signed and sealed in the name of the principal, otherwise, it will bind the
agent only. It is not enough merely that the agent was in fact authorized to make
the mortgage, if he has not acted in the name of the principal. x x x[36] (Emphasis and
underscoring supplied)
On the amount due him and the other two printing presses, petitioner explains that he was the one who
personally and directly contracted with respondent and he merely sub-contracted the two printing
establishments in order to deliver on time the campaign materials ordered by respondent.
Respondent counters that the claim of sub-contracting is a change in petitioners theory of the case which
is not allowed on appeal.
In Oco v. Limbaring,[37] this Court ruled:
The parties to a contract are the real parties in interest in an action upon it, as
consistently held by the Court. Only the contracting parties are bound by the
stipulations in the contract; they are the ones who would benefit from and could
violate it. Thus, one who is not a party to a contract, and for whose benefit it was
not expressly made, cannot maintain an action on it. One cannot do so, even if the
contract performed by the contracting parties would incidentally inure to one's
benefit.[38] (Underscoring supplied)
In light thereof, petitioner is the real party in interest in this case. The trial courts findings on the matter
were affirmed by the appellate court.[39] It erred, however, in not declaring petitioner as a real party in
interest insofar as recovery of the cost of campaign materials made by petitioners mother and sister are
concerned, upon the wrong notion that they should have been, but were not, impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his campaign materials delivered by
petitioner in the total of P1,924,906, less the partial payment of P1,000,000, or P924,906.
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the
Resolution dated April 14, 2005 of the Court of Appeals are hereby REVERSED and SET ASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is
REINSTATED mutatis mutandis, in light of the foregoing discussions. The trial courts decision
is MODIFIED in that the amount payable by respondent to petitioner is reduced to P924,906.
SO ORDERED.
REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his capacity as former
Chief of the Intelligence Service, Armed Forces of the Philippines (ISAFP), and former
Commanding General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his
capacity as an Officer of ISAFP and former member of the PSG, petitioners, vs. HON.
VICTORINO EVANGELISTA, in his capacity as Presiding Judge, Regional Trial Court, Branch 223,
Quezon City, and DANTE LEGASPI, represented by his attorney-in-fact, Paul
Gutierrez, respondents.
DECISION
PUNO, J.:
The case at bar stems from a complaint for damages, with prayer for the issuance of a writ of
preliminary injunction, filed by private respondent Dante Legaspi, through his attorney-in-fact Paul
Gutierrez, against petitioners Gen. Jose M. Calimlim, Ciriaco Reyes and Maj. David Diciano before the
Regional Trial Court (RTC) of Quezon City.[1]
The Complaint alleged that private respondent Legaspi is the owner of a land located in Bigte,
Norzagaray, Bulacan. In November 1999, petitioner Calimlim, representing the Republic of the Philippines,
and as then head of the Intelligence Service of the Armed Forces of the Philippines and the Presidential
Security Group, entered into a Memorandum of Agreement (MOA) with one Ciriaco Reyes. The MOA
granted Reyes a permit to hunt for treasure in a land in Bigte, Norzagaray, Bulacan. Petitioner Diciano
signed the MOA as a witness.[2] It was further alleged that thereafter, Reyes, together with petitioners,
started, digging, tunneling and blasting works on the said land of Legaspi. The complaint also alleged that
petitioner Calimlim assigned about 80 military personnel to guard the area and encamp thereon to
intimidate Legaspi and other occupants of the area from going near the subject land.
On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew,
private respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal with the
treasure hunting activities on Legaspis land and to file charges against those who may enter it without the
latters authority.[3] Legaspi agreed to give Gutierrez 40% of the treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for
illegally entering Legaspis land. He hired the legal services of Atty. Homobono Adaza. Their contract
provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspis share in whatever treasure may
be found in the land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance fee per
court hearing and defray all expenses for the cost of the litigation.[4] Upon the filing of the complaint, then
Executive Judge Perlita J. Tria Tirona issued a 72-hour temporary restraining order (TRO) against
petitioners.
The case[5] was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by public
respondent Judge Victorino P. Evangelista. On March 2, 2000, respondent judge issued another 72-hour
TRO and a summary hearing for its extension was set on March 7, 2000.
On March 14, 2000, petitioners filed a Motion to Dismiss[6] contending: first, there is no real party-
in-interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7, 2000, as
evidenced by a Deed of Revocation,[7] and, second, Gutierrez failed to establish that the alleged armed
men guarding the area were acting on orders of petitioners. On March 17, 2000, petitioners also filed a
Motion for Inhibition[8] of the respondent judge on the ground of alleged partiality in favor of private
respondent.
On March 23, 2000, the trial court granted private respondents application for a writ of preliminary
injunction on the following grounds: (1) the diggings and blastings appear to have been made on the land
of Legaspi, hence, there is an urgent need to maintain the status quo to prevent serious damage to
Legaspis land; and, (2) the SPA granted to Gutierrez continues to be valid.[9] The trial court ordered thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT plaintiffs application for a
writ of preliminary injunction. Upon plaintiffs filing of an injunction bond in the amount of ONE
HUNDRED THOUSAND PESOS (P100,000.00), let a Writ of Preliminary Injunction issue enjoining the
defendants as well as their associates, agents or representatives from continuing to occupy and encamp
on the land of the plaintiff LEGASPI as well as the vicinity thereof; from digging, tunneling and blasting
the said land of plaintiff LEGASPI; from removing whatever treasure may be found on the said land; from
preventing and threatening the plaintiffs and their representatives from entering the said land and
performing acts of ownership; from threatening the plaintiffs and their representatives as well as
plaintiffs lawyer.
On even date, the trial court issued another Order[10] denying petitioners motion to dismiss and
requiring petitioners to answer the complaint. On April 4, 2000, it likewise denied petitioners motion for
inhibition.[11]
On appeal, the Court of Appeals affirmed the decision of the trial court.[12]
Hence this petition, with the following assigned errors:
I as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE RESPONDENT GUTIERREZ HAS
BEEN EFFECTIVELY REVOKED BY LEGASPI.
II
WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
III
WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER PROCEEDING
WITH THE CASE.
We find no merit in the petition.
On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent
Legaspi has already been revoked by the latter. Private respondent Gutierrez, however, contends that the
unilateral revocation is invalid as his agency is coupled with interest.
We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render
some service or do something in representation or on behalf of another, known as the principal, with the
consent or authority of the latter.[13]
A contract of agency is generally revocable as it is a personal contract of representation based on
trust and confidence reposed by the principal on his agent. As the power of the agent to act depends on
the will and license of the principal he represents, the power of the agent ceases when the will or
permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at
will.[14]
However, an exception to the revocability of a contract of agency is when it is coupled with
interest, i.e., if a bilateral contract depends upon the agency.[15] The reason for its irrevocability is because
the agency becomes part of another obligation or agreement. It is not solely the rights of the principal but
also that of the agent and third persons which are affected. Hence, the law provides that in such cases,
the agency cannot be revoked at the sole will of the principal.
In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted
by Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It is clear from the
records that Gutierrez was given by Legaspi, inter alia, the power to manage the treasure hunting
activities in the subject land; to file any case against anyone who enters the land without authority from
Legaspi; to engage the services of lawyers to carry out the agency; and, to dig for any treasure within
the land and enter into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be
entitled to 40% of whatever treasure may be found in the land. Pursuant to this authority and to protect
Legaspis land from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza
to prosecute the case for damages and injunction against petitioners. As payment for legal services,
Gutierrez agreed to assign to Atty. Adaza 30% of Legaspis share in whatever treasure may be recovered
in the subject land. It is clear that the treasure that may be found in the land is the subject matter of the
agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and,
thus Gutierrez and Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures
that may be found in the land. This bilateral contract depends on the agency and thus renders it as one
coupled with interest, irrevocable at the sole will of the principal Legaspi.[16] When an agency is constituted
ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the
bilateral agreement.[17] Consequently, the Deed of Revocation executed by Legaspi has no effect. The
authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected.
On the second issue, we hold that the issuance of the writ of preliminary injunction is justified. A
writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to by a litigant to protect
or preserve his rights or interests and for no other purpose during the pendency of the principal
action.[18] It is issued by the court to prevent threatened or continuous irremediable injury to the applicant
before his claim can be thoroughly studied and adjudicated.[19] Its aim is to preserve the status quo
ante until the merits of the case can be heard fully, upon the applicants showing of two important
conditions, viz.: (1) the right to be protected prima facie exists; and, (2) the acts sought to be enjoined are
violative of that right.[20]
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary injunction
may be issued when it is established:
(a) that the applicant is entitled to the relief demanded, the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring
the performance of an act or acts, either for a limited period or perpetually;
(b) that the commission, continuance or non-performance of the act or acts complained of during
the litigation would probably work injustice to the applicant; or
(c) that a party, court, agency or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.
It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction, mere prima
facie evidence is needed to establish the applicants rights or interests in the subject matter of the main
action.[21] It is not required that the applicant should conclusively show that there was a violation of his
rights as this issue will still be fully litigated in the main case.[22]Thus, an applicant for a writ is required
only to show that he has an ostensible right to the final relief prayed for in his complaint. [23]
 In the case at bar, we find that respondent judge had sufficient basis to issue the writ of preliminary
injunction. It was established, prima facie, that Legaspi has a right to peaceful possession of his
land, pendente lite. Legaspi had title to the subject land. It was likewise established that the diggings were
conducted by petitioners in the enclosed area of Legaspis land. Whether the land fenced by Gutierrez and
claimed to be included in the land of Legaspi covered an area beyond that which is included in the title
of Legaspi is a factual issue still subject to litigation and proof by the parties in the main case for
damages. It was necessary for the trial court to issue the writ of preliminary injunction during the
pendency of the main case in order to preserve the rights and interests of private respondents Legaspi and
Gutierrez.
On the third issue, petitioners charge that the respondent judge lacked the neutrality of an impartial
judge. They fault the respondent judge for not giving credence to the testimony of their surveyor that the
diggings were conducted outside the land of Legaspi. They also claim that respondent judges rulings on
objections raised by the parties were biased against them.
We have carefully examined the records and we find no sufficient basis to hold that respondent
judge should have recused himself from hearing the case. There is no discernible pattern of bias on the
rulings of the respondent judge. Bias and partiality can never be presumed. Bare allegations of partiality
will not suffice in an absence of a clear showing that will overcome the presumption that the judge
dispensed justice without fear or favor.[24] It bears to stress again that a judges appreciation or
misappreciation of the sufficiency of evidence adduced by the parties, or the correctness of a judges orders
or rulings on the objections of counsels during the hearing, without proof of malice on the part of
respondent judge, is not sufficient to show bias or partiality. As we held in the case of Webb vs.
People,[25] the adverse and erroneous rulings of a judge on the various motions of a party do not
sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it must be shown that the bias
and prejudice stemmed from an extrajudicial source and result in an opinion on the merits on some basis
other than what the judge learned from his participation in the case. Opinions formed in the course of
judicial proceedings, although erroneous, as long as based on the evidence adduced, do not prove bias or
prejudice. We also emphasized that repeated rulings against a litigant, no matter how erroneously,
vigorously and consistently expressed, do not amount to bias and prejudice which can be a bases for the
disqualification of a judge.
Finally, the inhibition of respondent judge in hearing the case for damages has become moot and
academic in view of the latters death during the pendency of the case. The main case for damages shall
now be heard and tried before another judge.
IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115, dated
March 23 and April 4, 2000, are AFFIRMED. The presiding judge of the Regional Trial Court of Quezon City
to whom Civil Case No. Q-00-40115 was assigned is directed to proceed with dispatch in hearing the main
case for damages. No pronouncement as to costs.
SO ORDERED.
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari.
The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera,
party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo
Canilao as party of the second part, and hereinafter referred to as appellants, the
Tourist World Service, Inc. leased the premises belonging to the party of the first
part at Mabini St., Manila for the former-s use as a branch office. In the said
contract the party of the third part held herself solidarily liable with the party of
the part for the prompt payment of the monthly rental agreed on. When the
branch office was opened, the same was run by the herein appellant Una 0. Sevilla
payable to Tourist World Service Inc. by any airline for any fare brought in on the
efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld
by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival firm,
the Philippine Travel Bureau, and, since the branch office was anyhow losing, the
Tourist World Service considered closing down its office. This was firmed up by
two resolutions of the board of directors of Tourist World Service, Inc. dated Dec.
2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-
president of the Tourist World Service, Inc., Ermita Branch, and the
second,authorizing the corporate secretary to receive the properties of the Tourist
World Service then located at the said branch office. It further appears that on Jan.
3, 1962, the contract with the appellees for the use of the Branch Office premises
was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees
no longer used it. As a matter of fact appellants used it since Nov. 1961. Because
of this, and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office, and, finding
the premises locked, and, being unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her employees could enter the
locked premises, a complaint wall filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory preliminary injunction. Both
appellees answered with counterclaims. For apparent lack of interest of the
parties therein, the trial court ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing
her counterclaim which the court a quo, in an order dated June 8, 1963, granted
permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein
appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly
heard following which the court a quo ordered both cases dismiss for lack of merit,
on the basis of which was elevated the instant appeal on the following assignment
of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
 II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S
ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE
MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE
SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA
O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF
DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE
LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT
TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY
TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S
RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF
THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA
O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone line
at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita
branch office and that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture appellant made
declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife
of an eminent eye, ear and nose specialist as well as a
imediately columnist had been in the travel business prior to
the establishment of the joint business venture with
appellee Tourist World Service, Inc. and appellee Eliseo
Canilao, her compadre, she being the godmother of one of
his children, with her own clientele, coming mostly from her
own social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement
dated 19 October 1960 (Exh. 'A') covering the premises at A.
Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for
the prompt payment of the monthly rentals thereof to other
appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from
appellee Tourist World Service, Inc., which had its own,
separate office located at the Trade & Commerce Building;
nor was she an employee thereof, having no participation in
nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own
passengers, her own bookings her own business (and not for
any of the business of appellee Tourist World Service, Inc.)
obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee
Tourist World Service, Lic. 3% thereof aid retaining 4% for
herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of
maintaining the A. Mabini St. office, paying for the salary of
an office secretary, Miss Obieta, and other sundry expenses,
aside from desicion the office furniture and supplying some
of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and other
expenses in consideration for the 3% split in the co procured
by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant
Mrs. Sevilla would be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.), appellee Eliseo
Canilao admit that it was just a title for dignity (p. 36 tsn.
June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-
39 tsn April 61965-testimony of corporate secretary Gabino
Canilao (pp- 2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee
of the appellee Tourist World Service, Inc. and as such was designated manager.1
xxx xxx xxx
The trial court2 held for the private respondent on the premise that the private respondent, Tourist
World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock
the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World
Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of
Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically,
they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE
KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O.
SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE
SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF
DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES
TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED
THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A"
P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT
VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST
WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla
and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue,
in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc.
without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of
damages prayed for and whether or not the evidence for the said appellant supports the contention that
the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant
disconnected the telephone lines of the Ermita branch office of the appellee Tourist World Service,
Inc.7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee,
being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease
executed with the private respondent, Segundina Noguera. The petitioners contend, however, that
relation between the between parties was one of joint venture, but concede that "whatever might have
been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist
World Service and Canilao from taking the law into their own hands, 8 in reference to the padlocking now
questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World
Service, Inc., maintains, that the relation between the parties was in the character of employer and
employee, the courts would have been without jurisdiction to try the case, labor disputes being the
exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to
statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee
relation. In general, we have relied on the so-called right of control test, "where the person for whom
the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end." 10Subsequently, however, we have considered, in addition to
the standard of right-of control, the existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, in determining the existence of an employer-employee
relationship.11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used
in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita
office, she had bound herself in solidum as and for rental payments, an arrangement that would be like
claims of a master-servant relationship. True the respondent Court would later minimize her
participation in the lease as one of mere guaranty, 12 that does not make her an employee of Tourist
World, since in any case, a true employee cannot be made to part with his own money in pursuance of
his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be
bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline
for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in
pursuing the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then,
who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her
booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's
employee. As we said, employment is determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting
Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership.
And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of
November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the
operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the
manner in which the business was run. A joint venture, including a partnership, presupposes generally a
of standing between the joint co-venturers or partners, in which each party has an equal proprietary
interest in the capital or property contributed 15 and where each party exercises equal rights in the
conduct of the business.16 furthermore, the parties did not hold themselves out as partners, and the
building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct
partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services "in representation or on behalf
of another.18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her
principal's authority as owner of the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that the ties had contemplated a This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had
principal agent relationship, rather than a joint managament or a partnership.. perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and
fair play.
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent,
interest, the agency having been created for mutual interest, of the agent and the principal. 19 It appears Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages
that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23
business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof,
holding herself solidarily liable for the payment of rentals. She continued the business, using her own
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to
name, after Tourist World had stopped further operations. Her interest, obviously, is not to the
Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to
commissions she earned as a result of her business transactions, but one that extends to the very subject
her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof —
matter of the power of management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the
petitioner, Lina Sevilla, to damages. ART. 21. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.24
As we have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of
Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the ART. 2219. Moral damages25 may be recovered in the following and analogous
telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that Tourist World Service, cases:
Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it xxx xxx xxx
must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the
fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any
authority to terminate that contract without notice to its actual occupant, and to padlock the premises in
such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the
business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a
stranger to that contract having been explicitly named therein as a third party in charge of rental
payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as
one would eject an interloper.
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same
damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been
shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking
incidents. She cannot therefore be held liable as a cotortfeasor.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put
the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be
sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no
clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact
that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another company), Tourist World's board of
directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate
secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On
January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally,
without notice to her.
The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary
damages, 25and P5,000.00 as nominal 26 and/or temperate27 damages, to be just, fair, and reasonable
under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31,
1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent,
Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the
petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for
exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, Costs against said private respondents.
personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the
Tourist World Service. " 22It is strange indeed that Tourist World Service, Inc. did not find such a need SO ORDERED.
when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that
it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours,
she could not have been anywhere near the premises. Capping these series of "offensives," it cut the
office's telephone lines, paralyzing completely its business operations, and in the process, depriving
Sevilla articipation therein.