EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner, vs. EDWIN CUIZON and ERWIN CUIZON, Respondents. D E C I S I O N CHICO-NAZARIO, J .: Before Us is a petition for review by certiorari assailing the Decision 1 of the Court of Appeals dated 10 August 2004 and its Resolution 2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision and Resolution affirmed the Order 3 dated 29 January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672. The generative facts of the case are as follows: PETITIONER is engaged in the business of importation and distribution of various European industrial equipment for customers here in the Philippines. It has as one of its customers Impact Systems Sales ("Impact Systems") which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). RESPONDENT EDWIN is the sales manager of Impact Systems and was impleaded in the court a quo in said capacity. From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-one thousand three hundred thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of fifty thousand pesos (P50,000.00). 4 When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner, the pertinent part of which states: 1.) That ASSIGNOR 5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump; 2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE 6 the said receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the lawful recipient; 3.) That the ASSIGNEE does hereby accept this assignment. 7
Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown by Invoice No. 12034 dated 30 June 1995. 8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to collect from Toledo Power Company the amount of P365,135.29 as evidenced by Check Voucher No. 0933 9 prepared by said power company and an official receipt dated 15 August 1995 issued by Impact Systems. 10 Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioners counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996, respondents total obligations stood at P295,000.00 excluding interests and attorneys fees. 11 Because of respondents failure to abide by said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment against herein respondents before the Regional Trial Court of Cebu City. 12
On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary attachment. 13
On 25 June 1997, respondent EDWIN filed his Answer 14 wherein he admitted petitioners allegations with respect to the sale transactions entered into by Impact Systems and petitioner between January and April 1995. 15 He, however, disputed the total amount of Impact Systems indebtedness to petitioner which, according to him, amounted to only P220,000.00. 16
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact. In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioners Complaint stating 1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of asingle proprietorship business known as Impact Systems Sales ("Impact Systems" for brevity), with office located at 46-A del Rosario Street, Cebu City, where he may be served summons and other processes of the Honorable Court. 1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager of Impact Systems and is sued in this action in such capacity. 17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. The trial court granted petitioners motion to declare respondent ERWIN in default "for his failure to answer within the prescribed period despite the opportunity granted" 18 but it denied petitioners motion for summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001. 19 However, the conduct of the pre-trial conference was deferred pending the resolution by the trial court of the special and affirmative defenses raised by respondent EDWIN. 20
After the filing of respondent EDWINs Memorandum 21 in support of his special and affirmative defenses and petitioners opposition 22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant in this case. According to the trial court A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is dated June 28, 1995. A study of Annex "H" to the complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down payment of P50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of Annex "G", thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff knew about said ratification. Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact] Systems Sales made a down payment of P50,000.00 two days later. In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant. 23
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however, affirmed the 29 January 2002 Order of the court a quo. The dispositive portion of the now assailed Decision of the Court of Appeals states: WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED. 24
Petitioners motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005. Hence, the present petition raising, as sole ground for its allowance, the following: THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD. 25
To support its argument, petitioner points to Article 1897 of the New Civil Code which states: Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of collecting the receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said collection did not revoke the agency relations of respondents, petitioner insists that ERWINs action repudiated EDWINs power to sign the Deed of Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally liable for the obligations of his principal. 26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the one unit of sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention of this Court to the fact that respondents are bound not only by their principal and agent relationship but are in fact full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud petitioner. 27
In his Comment, 28 respondent EDWIN again posits the argument that he is not a real party in interest in this case and it was proper for the trial court to have him dropped as a defendant. He insists that he was a mere agent of Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a representative of Impact Systems in said transaction. We do not find merit in the petition. In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latters consent. 29 The underlying principle of the contract of agency is to accomplish results by using the services of others to do a great variety of things like selling, buying, manufacturing, and transporting. 30 Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. 31 It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. 32 By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence qui facit per alium facit per se. 33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. 34
In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment thereby binding himself personally to pay the obligations to petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority granted by his principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code. We disagree. Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision. The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal, thus: The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management. x x x. 35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it received, in full, the payment for Impact Systems indebtedness. 36 We may very well assume that Impact Systems desperately needed the sludge pump for its business since after it paid the amount of fifty thousand pesos (P50,000.00) as down payment on 3 March 1995, 37 it still persisted in negotiating with petitioner which culminated in the execution of the Deed of Assignment of its receivables from Toledo Power Company on 28 June 1995. 38 The significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact Systems perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that respondent EDWINs participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to protect the business of his principal. Had he not acted in the way he did, the business of his principal would have been adversely affected and he would have violated his fiduciary relation with his principal. We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim against respondent EDWIN "does not hold that in case of excess of authority, both the agent and the principal are liable to the other contracting party." 39 To reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is completely absolved of any liability. The second part of the said provision presents the situations when the agent himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his authority without giving notice of his powers to the third person. However, it must be pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover from both the principal and the agent. 40
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who should be impleaded in this case. A real party in interest is one who "stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit." 41 In this respect, we sustain his exclusion as a defendant in the suit before the court a quo. WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED. Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of the proceedings against respondent Erwin Cuizon. SO ORDERED.
G.R. No. 120465 September 9, 1999 WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
KAPUNAN, J .: PETITIONERS William Uy and Rodel Roxas ARE AGENTS authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet TO RESPONDENT NATIONAL Housing Authority (NHA) to be utilized and developed as a housing project. On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land, however, only five were paid for by the NHA because of the report 1 it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three parcels of land. The NHA, through Resolution No. 2394, subsecguently offered the amount of P1.225 million to the landowners as daos perjuicios. On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages.1wphi1.nt Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in- fact and, therefore, not the real parties-in-interest in the action before the trial court. . . . In paragraph 4 of the complaint, plaintiffs alleged themselves to be "sellers' agents" for the several owners of the 8 lots subject matter of the case. Obsviously, William Uy and Rodel Roxas in filing this case acted as attorneys-in-fact of the lot owners who are the real parties in interest but who were omitted to be pleaded as party-plaintiffs in the case. This omission is fatal. Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of his principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court). When plaintiffs UY and Roxas sought payment of damages in their favor in view of the partial rescission of Resolution No. 1632 and the Deed of Absolute Sale covering TCT Nos. 10998, 10999 and 11292 (Prayer complaint, page 5, RTC records), it becomes obviously indispensable that the lot owners be included, mentioned and named as party-plaintiffs, being the real party-in-interest. UY and Roxas, as attorneys-in-fact or apoderados, cannot by themselves lawfully commence this action, more so, when the supposed special power of attorney, in their favor, was never presented as an evidence in this case. Besides, even if herein plaintiffs Uy and Roxas were authorized by the lot owners to commence this action, the same must still be filed in the name of the principal, (Filipino Industrial Corporation vs. San Diego, 23 SCRA 706 [1968]). As such indispensable party, their joinder in the action is mandatory and the complaint may be dismissed if not so impleaded (NDC vs. CA, 211 SCRA 422 [1992]). 2
Their motion for reconsideration having been denied, petitioners seek relief from this Court contending that: I. THE RESPONDENT CA ERRED IN DECLARING THAT RESPONDENT NHA HAD ANY LEGAL BASIS FOR RESCINDING THE SALE INVOLVING THE LAST THREE (3) PARCELS COVERED BY NHA RESOLUTION NO. 1632. II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HAD LEGAL BASIS TO RESCIND THE SUBJECT SALE, THE RESPONDENT CA NONETHELESS ERRED IN DENYING HEREIN PETITIONERS' CLAIM TO DAMAGES, CONTRARY TO THE PROVISIONS OF ART. 1191 OF THE CIVIL CODE. III. THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECT COMPLAINT FINDING THAT THE PETITIONERS FAILED TO JOIN AS INDISPENSABLE PARTY PLAINTIFF THE SELLING LOT-OWNERS. 3
We first resolve the issue raised in the the third assignment of error. Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly damaged by the termination of the contract. The damages prayed for were intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly incurred as a result of such termination. These damages consist mainly of "unearned income" and advances. 4 Petitioners, thus, attempt to distinguish the case at bar from those involving agents or apoderedos instituting actions in their own name but in behalf of their principals. 5 Petitioners in this case purportedly brought the action for damages in their own name and in their own behalf. We find this contention unmeritorious. Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. "Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. 6 Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. 7
Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the negative. The applicable substantive law in this case is Article 1311 of the Civil Code, which states: 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. . . . If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (Emphasis supplied.) Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. 8 The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. 9
Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals. Are petitioners assignees to the rights under the contract of sale? In McMicking vs. Banco Espaol-Filipino, 10 we held that the rule requiring every action to be prosecuted in the name of the real party-in-interest. . . . recognizes the assignments of rights of action and also recognizes that when one has a right of action assigned to him he is then the real party in interest and may maintain an action upon such claim or right. The purpose of [this rule] is to require the plaintiff to be the real party in interest, or, in other words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions by persons who have no interest in the result of the same. . . . Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract. We find the following declaration in Section 372 (1) of the Restatement of the Law on Agency (Second): 11
Sec. 372. Agent as Owner of Contract Right (1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promisee, maintain such action thereon maintain such action thereon as might a transferee having a similar interest. The Comment on subsection (1) states: a. Agent a transferee. One who has made a contract on behalf of another may become an assignee of the contract and bring suit against the other party to it, as any other transferee. The customs of business or the course of conduct between the principal and the agent may indicate that an agent who ordinarily has merely a security interest is a transferee of the principals rights under the contract and as such is permitted to bring suit. If the agent has settled with his principal with the understanding that he is to collect the claim against the obligor by way of reimbursing himself for his advances and commissions, the agent is in the position of an assignee who is the beneficial owner of the chose in action. He has an irrevocable power to sue in his principal's name. . . . And, under the statutes which permit the real party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by a settlement between the principal and the obligor if the latter has notice of the agent's interest. . . . Even though the agent has not settled with his principal, he may, by agreement with the principal, have a right to receive payment and out of the proceeds to reimburse himself for advances and commissions before turning the balance over to the principal. In such a case, although there is no formal assignment, the agent is in the position of a transferee of the whole claim for security; he has an irrevocable power to sue in his principal's name and, under statutes which permit the real party in interest to sue, he can maintain an action in his own name. Petitioners, however, have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]." Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring a favor to any third person. That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against respondent NHA. Section 372 (2) of the Restatement of the Law on Agency (Second) states: (2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach. The following Comment on the above subsection is illuminating: The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or nonperformance of the contract by the principal or by the other party thereto does not entitle him to maintain an action on his own behalf against the other party for its breach. An agent entitled to receive a commission from his principal upon the performance of a contract which he has made on his principal's account does not, from this fact alone, have any claim against the other party for breach of the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot maintain an action at law against a purchaser merely because he is entitled to have his compensation or advances paid out of the purchase price before payment to the principal. . . . Thus, in Hopkins vs. Ives, 12 the Supreme Court of Arkansas, citing Section 372 (2) above, denied the claim of a real estate broker to recover his alleged commission against the purchaser in an agreement to purchase property. In Goduco vs. Court of appeals, 13 this Court held that: . . . granting that appellant had the authority to sell the property, the same did not make the buyer liable for the commission she claimed. At most, the owner of the property and the one who promised to give her a commission should be the one liable to pay the same and to whom the claim should have been directed. . . . As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case. Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since the same would not bind the real parties-in- interest. 14
Nevertheless, to forestall further litigation on the substantive aspects of this case, we shall proceed to rule on me merits. 15
Petitioners submit that respondent NHA had no legal basis to "rescind" the sale of the subject three parcels of land. The existence of such legal basis, notwithstanding, petitioners argue that they are still entitled to an award of damages. Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. 16 The power to rescind, therefore, is given to the injured party. 17 Article 1191 states: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors, did not commit any breach, much less a substantial breach, 18 of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof. The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing.1wphi1.nt Cause is the essential reason which moves the contracting parties to enter into it. 19 In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. 20 Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. 21
For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor (petitioners' principals) in entering into the contract is to obtain the price. For the vendee, NHA, it is the acquisition of the land. 22 The motive of the NHA, on the other hand, is to use said lands for housing. This is apparent from the portion of the Deeds of Absolute Sale 23 stating: WHEREAS, under the Executive Order No. 90 dated December 17, 1986, the VENDEE is mandated to focus and concentrate its efforts and resources in providing housing assistance to the lowest thirty percent (30%) of urban income earners, thru slum upgrading and development of sites and services projects; WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by Letter of Instruction No. 630, prescribed slum improvement and upgrading, as well as the development of sites and services as the principal housing strategy for dealing with slum, squatter and other blighted communities; xxx xxx xxx WHEREAS, the VENDEE, in pursuit of and in compliance with the above- stated purposes offers to buy and the VENDORS, in a gesture of their willing to cooperate with the above policy and commitments, agree to sell the aforesaid property together with all the existing improvements there or belonging to the VENDORS; NOW, THEREFORE, for and in consideration of the foregoing premises and the terms and conditions hereinbelow stipulated, the VENDORS hereby, sell, transfer, cede and convey unto the VENDEE, its assigns, or successors-in-interest, a parcel of land located at Bo. Tadiangan, Tuba, Benguet containing a total area of FIFTY SIX THOUSAND EIGHT HUNDRED NINETEEN (56,819) SQUARE METERS, more or less . . . . Ordinarily, a party's motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In Liguez vs. Court of Appeals, 24 this Court, speaking through Justice J.B.L. REYES, HELD: . . . it is well to note, however, that Manresa himself (Vol. 8, pp. 641-642), while maintaining the distinction and upholding the inoperativeness of the motives of the parties to determine the validity of the contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the motives of either party. The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and December 4, 1946, holding that the motive may be regarded as causa when it predetermines the purpose of the contract. In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. Were the lands indeed unsuitable for housing as NHA claimed? We deem the findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale, thus: In Tadiangan, Tuba, the housing site is situated in an area of moderate topography. There [are] more areas of less sloping ground apparently habitable. The site is underlain by . . . thick slide deposits (4-45m) consisting of huge conglomerate boulders (see Photo No. 2) mix[ed] with silty clay materials. These clay particles when saturated have some swelling characteristics which is dangerous for any civil structures especially mass housing development. 25
Petitioners contend that the report was merely "preliminary," and not conclusive, as indicated in its title: MEMORANDUM TO: EDWIN G. DOMINGO Chief, Lands Geology Division FROM: ARISTOTLE A. RILLON Geologist II SUBJECT: Preliminary Assessment of Tadiangan Housing Project in Tuba, Benguet 26
Thus, page 2 of the report states in part: xxx xxx xxx Actually there is a need to conduct further geottechnical [sic] studies in the NHA property. Standard Penetration Test (SPT) must be carried out to give an estimate of the degree of compaction (the relative density) of the slide deposit and also the bearing capacity of the soil materials. Another thing to consider is the vulnerability of the area to landslides and other mass movements due to thick soil cover. Preventive physical mitigation methods such as surface and subsurface drainage and regrading of the slope must be done in the area. 27
We read the quoted portion, however, to mean only that further tests are required to determine the "degree of compaction," "the bearing capacity of the soil materials," and the "vulnerability of the area to landslides," since the tests already conducted were inadequate to ascertain such geological attributes. It is only in this sense that the assessment was "preliminary." Accordingly, we hold that the NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. 28 Article 1318 of the Civil Code states that: Art. 1318. There is no contract unless the following requisites concur: (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. (Emphasis supplied.) Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages. WHEREFORE, the instant petition is hereby DENIED. SO ORDERED.
G.R. No. 136433 December 6, 2006 ANTONIO B. BALTAZAR, petitioner, vs. HONORABLE OMBUDSMAN, EULOGIO M. MARIANO, JOSE D. JIMENEZ, JR., TORIBIO E. ILAO, JR. and ERNESTO R. SALENGA, respondents. The Case Ascribing grave abuse of discretion to respondent Ombudsman, this Petition for Review on Certiorari, 1 under Rule 45 pursuant to Section 27 of RA 6770, 2 seeks to reverse and set aside the November 26, 1997 Order 3 of the Office of the Special Prosecutor (OSP) in OMB-1-94-3425 duly approved by then Ombudsman Aniano Desierto on August 21, 1998, which recommended the dismissal of the Information 4 in Criminal Case No. 23661 filed before the Sandiganbayan against respondents Pampanga Provincial Adjudicator Toribio E. Ilao, Jr., Chief Legal Officer Eulogio M. Mariano and Legal Officer Jose D. Jimenez, Jr. (both of the DAR Legal Division in San Fernando, Pampanga), and Ernesto R. Salenga. The petition likewise seeks to set aside the October 30, 1998 Memorandum 5 of the OSP duly approved by the Ombudsman on November 27, 1998 which denied petitioner's Motion for Reconsideration. 6 Previously, the filing of the Information against said respondents was authorized by the May 10, 1996 Resolution 7 and October 3, 1996 Order 8 of the Ombudsman which found probable cause that they granted unwarranted benefits, advantage, and preference to respondent Salenga in violation of Section 3 (e) of RA 3019. 9
The Facts Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her Attorney-in-Fact Faustino R. Mercado leased the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period, that is, from August 7, 1990 to August 7, 1993. 10 Lessee Eduardo Lapid in turn sub-leased the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of the original lease, that is, from January 10, 1993 to August 7, 1993. 11 RESPONDENT Ernesto Salenga was hired by Eduardo Lapid as fishpond watchman (bante-encargado). In the sub-lease, Rafael Lopez rehired respondent Salenga. Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28, 1993 demand letter 12 to Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of the 10% share in the harvest. On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the last two (2) months of the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00. 13 This prompted respondent Salenga to file a Complaint 14 before the Provincial Agrarian Reform Adjudication Board (PARAB), Region III, San Fernando, Pampanga docketed as DARAB Case No. 552-P93 entitled Ernesto R. Salenga v. Rafael L. Lopez and Lourdes L. Lapid for Maintenance of Peaceful Possession, Collection of Sum of Money and Supervision of Harvest. The Complaint was signed by respondent Jose D. Jimenez, Jr., Legal Officer of the Department of Agrarian Reform (DAR) Region III Office in San Fernando, Pampanga, as counsel for respondent Salenga; whereas respondent Eulogio M. Mariano was the Chief Legal Officer of DAR Region III. The case was assigned to respondent Toribio E. Ilao, Jr., Provincial Adjudicator of DARAB, Pampanga. On May 10, 1993, respondent Salenga amended his complaint. 15 The amendments included a prayer for the issuance of a temporary restraining order (TRO) and preliminary injunction. However, before the prayer for the issuance of a TRO could be acted upon, on June 16, 1993, respondent Salenga filed a Motion to Maintain Status Quo and to Issue Restraining Order 16 which was set for hearing on June 22, 1993. In the hearing, however, only respondent Salenga with his counsel appeared despite notice to the other parties. Consequently, the ex-partepresentation of respondent Salengas evidence in support of the prayer for the issuance of a restraining order was allowed, since the motion was unopposed, and on July 21, 1993, respondent Ilao, Jr. issued a TRO. 17
Thereafter, respondent Salenga asked for supervision of the harvest, which the board sheriff did. Accordingly, defendants Lopez and Lapid received their respective shares while respondent Salenga was given his share under protest. In the subsequent hearing for the issuance of a preliminary injunction, again, only respondent Salenga appeared and presented his evidence for the issuance of the writ. Pending resolution of the case, Faustino Mercado, as Attorney-in-Fact of the fishpond owner Paciencia Regala, filed a motion to intervene which was granted by respondent Ilao, Jr. through the November 15, 1993 Order. After the trial, respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing the Complaint for lack of merit; but losing plaintiff, respondent Salenga, appealed the decision before the DARAB Appellate Board. Complaint Before the Ombudsman On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner Antonio Baltazar, an alleged nephew of Faustino Mercado, through a Complaint-Affidavit 18 against private respondents before the Office of the Ombudsman which was docketed as OMB-1-94-3425 entitled Antonio B. Baltazar v. Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao, Jr. and Ernesto Salenga for violation of RA 3019. Petitioner charged private respondents of conspiracy through the issuance of the TRO in allowing respondent Salenga to retain possession of the fishpond, operate it, harvest the produce, and keep the sales under the safekeeping of other private respondents. Moreover, petitioner maintains that respondent Ilao, Jr. had no jurisdiction to hear and act on DARAB Case No. 552-P93 filed by respondent Salenga as there was no tenancy relation between respondent Salenga and Rafael L. Lopez, and thus, the complaint was dismissible on its face. Through the December 14, 1994 Order, 19 the Ombudsman required private respondents to file their counter-affidavits, affidavits of their witnesses, and other controverting evidence. While the other respondents submitted their counter-affidavits, respondent ILAO, J R. instead filed his February 9, 1995 motion to dismiss, February 21, 1995 Reply, and March 24, 1995 Rejoinder. Ombudsmans Determination of Probable Cause On May 10, 1996, the Ombudsman issued a Resolution 20 finding cause to bring respondents to court, denying the motion to dismiss of respondent Ilao, Jr., and recommending the filing of an Information for violation of Section 3 (e) of RA 3019. Subsequently, respondent Ilao, Jr. filed his September 16, 1996 Motion for Reconsideration and/or Re-investigation 21 which was denied through the October 3, 1996 Order. 22 Consequently, the March 17, 1997 Information 23 was filed against all the private respondents before the Sandiganbayan which was docketed as Criminal Case No. 23661. Before the graft court, respondent Ilao, Jr. filed his May 19, 1997 Motion for Reconsideration and/or Re-investigation which was granted through the August 29, 1997 Order. 24 On September 8, 1997, respondent Ilao, Jr. subsequently filed his Counter-Affidavit 25 with attachments while petitioner did not file any reply-affidavit despite notice to him. The OSP of the Ombudsman conducted the re-investigation; and the result of the re-investigation was embodied in the assailed November 26, 1997 Order 26 which recommended the dismissal of the complaint in OMB-1-94-3425 against all private respondents. Upon review, the Ombudsman approved the OSPs recommendation on August 21, 1998. Petitioners Motion for Reconsideration 27 was likewise denied by the OSP through the October 30, 1998 Memorandum 28 which was approved by the Ombudsman on November 27, 1998. Consequently, the trial prosecutor moved orally before the Sandiganbayan for the dismissal of Criminal Case No. 23661 which was granted through the December 11, 1998 Order. 29
Thus, the instant petition is before us. The Issues Petitioner raises two assignments of errors, to wit: THE HONORABLE OMBUDSMAN ERRED IN GIVING DUE COURSE A MISPLACED COUNTER-AFFIDAVIT FILED AFTER THE TERMINATION OF THE PRELIMINARY INVESTIGATION AND/OR THE CASE WAS ALREADY FILED BEFORE THE SANDIGANBAYAN. ASSUMING OTHERWISE, THE HONORABLE OMBUDSMAN LIKEWISE ERRED IN REVERSING HIS OWN RESOLUTION WHERE IT WAS RESOLVED THAT ACCUSED AS PROVINCIAL AGRARIAN ADJUDICATOR HAS NO JURISDICTION OVER A COMPLAINT WHERE THERE EXIST [sic] NO TENANCY RELATIONSHIP CONSIDERING [sic] COMPLAINANT IS NOT A TENANT BUT A "BANTE-ENCARGADO" OR WATCHMAN-OVERSEER HIRED FOR A SALARY OF P3,000.00 PER MONTH AS ALLEGED IN HIS OWN COMPLAINT. 30
Before delving into the errors raised by petitioner, we first address the preliminary procedural issue of the authority and locus standi of petitioner to pursue the instant petition. Preliminary Issue: Legal Standing Locus standi is defined as "a right of appearance in a court of justice x x x on a given question." 31 In private suits, standing is governed by the "real-parties-in interest" rule found in Section 2, Rule 3 of the 1997 Rules of Civil Procedure which provides that "every action must be prosecuted or defended in the name of the real party in interest." Accordingly, the "real-party-in interest" is "the party who stands to be benefited or injured by the judgment in the suit or the party entitled to the avails of the suit." 32 Succinctly put, the plaintiffs standing is based on their own right to the relief sought. The records show that petitioner is a non-lawyer appearing for himself and conducting litigation in person. Petitioner instituted the instant case before the Ombudsman in his own name. In so far as the Complaint-Affidavit filed before the Office of the Ombudsman is concerned, there is no question on his authority and legal standing. Indeed, the Office of the Ombudsman is mandated to "investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient (emphasis supplied)." 33 The Ombudsman can act on anonymous complaints andmotu proprio inquire into alleged improper official acts or omissions from whatever source, e.g., a newspaper. 34 Thus, any complainant may be entertained by the Ombudsman for the latter to initiate an inquiry and investigation for alleged irregularities. However, filing the petition in person before this Court is another matter. The Rules allow a non-lawyer to conduct litigation in person and appear for oneself only when he is a party to a legal controversy. Section 34 of Rule 138 pertinently provides, thus: SEC. 34. By whom litigation conducted. In the court of a justice of the peace a party may conduct his litigation in person, with the aid of an agent or friend appointed by him for that purpose, or with the aid of an attorney. In any other court, a party may conduct his litigation personally or by aid of an attorney, and hisappearance must be either personal or by a duly authorized member of the bar (emphases supplied). Petitioner has no legal standing Is petitioner a party or a real party in interest to have the locus standi to pursue the instant petition? We answer in the negative. While petitioner may be the complainant in OMB-1-94-3425, he is not a real party in interest. Section 2, Rule 3 of the 1997 Rules of Civil Procedure stipulates, thus: SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. The same concept is applied in criminal and administrative cases. In the case at bar which involves a criminal proceeding stemming from a civil (agrarian) case, it is clear that petitioner is not a real party in interest. Except being the complainant, the records show that petitioner is a stranger to the agrarian case. It must be recalled that the undisputed owner of the fishpond is Paciencia Regala, who intervened in DARAB Case No. 552-P93 through her Attorney-in-Fact Faustino Mercado in order to protect her interest. The motion for intervention filed by Faustino Mercado, as agent of Paciencia Regala, was granted by respondent Provincial Adjudicator Ilao, Jr. through the November 15, 1993 Order in DARAB Case No. 552- P93. Agency cannot be further delegated Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special Power of Attorney 35 (SPA) from Faustino Mercado. However, such SPA is unavailing for petitioner. For one, petitioners principal, Faustino Mercado, is an agent himself and as such cannot further delegate his agency to another. Otherwise put, an agent cannot delegate to another the same agency. The legal maxim potestas delegata non delegare potest; a power once delegated cannot be re- delegated, while applied primarily in political law to the exercise of legislative power, is a principle of agency. 36 For another, a re-delegation of the agency would be detrimental to the principal as the second agent has no privity of contract with the former. In the instant case, petitioner has no privity of contract with Paciencia Regala, owner of the fishpond and principal of Faustino Mercado. Moreover, while the Civil Code under Article 1892 37 allows the agent to appoint a substitute, such is not the situation in the instant case. The SPA clearly delegates the agency to petitioner to pursue the case and not merely as a substitute. Besides, it is clear in the aforecited Article that what is allowed is a substitute and not a delegation of the agency. Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor is he a real party in interest in the criminal proceedings conducted by the Ombudsman as elevated to the Sandiganbayan. He is not a party who will be benefited or injured by the results of both cases. Petitioner: a stranger and not an injured private complainant Petitioner only surfaced in November 1994 as complainant before the Ombudsman. Aside from that, not being an agent of the parties in the agrarian case, he has no locus standi to pursue this petition. He cannot be likened to an injured private complainant in a criminal complaint who has direct interest in the outcome of the criminal case. More so, we note that the petition is not pursued as a public suit with petitioner asserting a "public right" in assailing an allegedly illegal official action, and doing so as a representative of the general public. He is pursuing the instant case as an agent of an ineffective agency. Petitioner has not shown entitlement to judicial protection Even if we consider the instant petition as a public suit, where we may consider petitioner suing as a "stranger," or in the category of a "citizen," or "taxpayer," still petitioner has not adequately shown that he is entitled to seek judicial protection. In other words, petitioner has not made out a sufficient interest in the vindication of the public order and the securing of relief as a "citizen" or "taxpayer"; more so when there is no showing that he was injured by the dismissal of the criminal complaint before the Sandiganbayan. Based on the foregoing discussion, petitioner indubitably does not have locus standi to pursue this action and the instant petition must be forthwith dismissed on that score. Even granting arguendo that he has locus standi, nonetheless, petitioner fails to show grave abuse of discretion of respondent Ombudsman to warrant a reversal of the assailed November 26, 1997 Order and the October 30, 1998 Memorandum. First Issue: Submission of Counter-Affidavit The Sandiganbayan, not the Ombudsman, ordered re-investigation On the substantive aspect, in the first assignment of error, petitioner imputes grave abuse of discretion on public respondent Ombudsman for allowing respondent Ilao, Jr. to submit his Counter-Affidavit when the preliminary investigation was already concluded and an Information filed with the Sandiganbayan which assumed jurisdiction over the criminal case. This contention is utterly erroneous. The facts clearly show that it was not the Ombudsman through the OSP who allowed respondent Ilao, Jr. to submit his Counter-Affidavit. It was the Sandiganbayan who granted the prayed for re-investigation and ordered the OSP to conduct the re- investigation through its August 29, 1997 Order, as follows: Considering the manifestation of Prosecutor Cicero Jurado, Jr. that accused Toribio E. Ilao, Jr. was not able to file his counter-affidavit in the preliminary investigation, there appears to be some basis for granting the motion of said accused for reinvestigation. WHEREFORE, accused Toribio E. Ilao, Jr. may file his counter-affidavit, with documentary evidence attached, if any, with the Office of the Special Prosecutor within then (10) days from today. The prosecution is ordered to conduct a reinvestigation within a period of thirty (30) days. 38 (Emphases supplied.) As it is, public respondent Ombudsman through the OSP did not exercise any discretion in allowing respondent Ilao, Jr. to submit his Counter-Affidavit. The OSP simply followed the graft courts directive to conduct the re-investigation after the Counter-Affidavit of respondent Ilao, Jr. was filed. Indeed, petitioner did not contest nor question the August 29, 1997 Order of the graft court. Moreover, petitioner did not file any reply-affidavit in the re-investigation despite notice. Re-investigation upon sound discretion of graft court Furthermore, neither can we fault the graft court in granting the prayed for re- investigation as it can readily be seen from the antecedent facts that respondent Ilao, Jr. was not given the opportunity to file his Counter-Affidavit. Respondent Ilao, Jr. filed a motion to dismiss with the Ombudsman but such was not resolved before the Resolutionfinding cause to bring respondents to trialwas issued. In fact, respondent Ilao, Jr.s motion to dismiss was resolved only through the May 10, 1996 Resolution which recommended the filing of an Information. Respondent Ilao, Jr.s Motion for Reconsideration and/or Re-investigation was denied and the Information was filed with the graft court. Verily, courts are given wide latitude to accord the accused ample opportunity to present controverting evidence even before trial as demanded by due process. Thus, we held in Villaflor v. Vivar that "[a] component part of due process in criminal justice, preliminary investigation is a statutory and substantive right accorded to the accused before trial. To deny their claim to a preliminary investigation would be to deprive them of the full measure of their right to due process." 39
Second Issue: Agrarian Dispute Anent the second assignment of error, petitioner contends that DARAB Case No. 552- P93 is not an agrarian dispute and therefore outside the jurisdiction of the DARAB. He maintains that respondent Salenga is not an agricultural tenant but a mere watchman of the fishpond owned by Paciencia Regala. Moreover, petitioner further argues that Rafael Lopez and Lourdes Lapid, the respondents in the DARAB case, are not the owners of the fishpond. Nature of the case determined by allegations in the complaint This argument is likewise bereft of merit. Indeed, as aptly pointed out by respondents and as borne out by the antecedent facts, respondent Ilao, Jr. could not have acted otherwise. It is a settled rule that jurisdiction over the subject matter is determined by the allegations of the complaint. 40 The nature of an action is determined by the material averments in the complaint and the character of the relief sought, 41 not by the defenses asserted in the answer or motion to dismiss. 42 Given that respondent Salengas complaint and its attachment clearly spells out the jurisdictional allegations that he is an agricultural tenant in possession of the fishpond and is about to be ejected from it, clearly, respondent Ilao, Jr. could not be faulted in assuming jurisdiction as said allegations characterize an agricultural dispute. Besides, whatever defense asserted in an answer or motion to dismiss is not to be considered in resolving the issue on jurisdiction as it cannot be made dependent upon the allegations of the defendant. Issuance of TRO upon the sound discretion of hearing officer As regards the issuance of the TRO, considering the proper assumption of jurisdiction by respondent Ilao, Jr., it can be readily culled from the antecedent facts that his issuance of the TRO was a proper exercise of discretion. Firstly, the averments with evidence as to the existence of the need for the issuance of the restraining order were manifest in respondent Salengas Motion to Maintain Status Quo and to Issue Restraining Order, 43 the attached Police Investigation Report, 44 and Medical Certificate. 45 Secondly, only respondent Salenga attended the June 22, 1993 hearing despite notice to parties. Hence, Salengas motion was not only unopposed but his evidence adduced ex-parte also adequately supported the issuance of the restraining order. Premises considered, respondent Ilao, Jr. has correctly assumed jurisdiction and properly exercised his discretion in issuing the TROas respondent Ilao, Jr. aptly maintained that giving due course to the complaint and issuing the TRO do not reflect the final determination of the merits of the case. Indeed, after hearing the case, respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing DARAB Case No. 552-P93 for lack of merit. Court will not review prosecutors determination of probable cause Finally, we will not delve into the merits of the Ombudsmans reversal of its initial finding of probable cause or cause to bring respondents to trial. Firstly, petitioner has not shown that the Ombudsman committed grave abuse of discretion in rendering such reversal. Secondly, it is clear from the records that the initial finding embodied in the May 10, 1996 Resolution was arrived at before the filing of respondent Ilao, Jr.s Counter-Affidavit. Thirdly, it is the responsibility of the public prosecutor, in this case the Ombudsman, to uphold the law, to prosecute the guilty, and to protect the innocent. Lastly, the function of determining the existence of probable cause is proper for the Ombudsman in this case and we will not tread on the realm of this executive function to examine and assess evidence supplied by the parties, which is supposed to be exercised at the start of criminal proceedings. In Perez v. Hagonoy Rural Bank, Inc., 46 as cited in Longos Rural Waterworks and Sanitation Association, Inc. v. Hon. Desierto, 47 we had occasion to rule that we cannot pass upon the sufficiency or insufficiency of evidence to determine the existence of probable cause. 48
WHEREFORE, the instant petition is DENIED for lack of merit, and the November 26, 1997 Order and the October 30, 1998 Memorandum of the Office of the Special Prosecutor in Criminal Case No. 23661 (OMB-1-94-3425) are hereby AFFIRMED IN TOTO, with costs against petitioner. SO ORDERED.
G.R. No. 119858 April 29, 2003 EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES, respondents. CARPIO, J .: The Case Petitioner Edward C. Ong ("petitioner") filed this petition for review on certiorari 1 to nullify the Decision 2 dated 27 October 1994 of the Court of Appeals in CA-G.R. C.R. No. 14031, and its Resolution 3 dated 18 April 1995, denying petitioner's motion for reconsideration. The assailed Decision affirmed in toto petitioner's conviction 4 by the Regional Trial Court of Manila, Branch 35, 5 on two counts of estafa for violation of the Trust Receipts Law, 6 as follows: WHEREFORE, judgment is rendered: (1) pronouncing accused EDWARD C. ONG guilty beyond reasonable doubt on two counts, as principal on both counts, of ESTAFA defined under No. 1 (b) of Article 315 of the Revised Penal Code in relation to Section 13 of Presidential Decree No. 115, and penalized under the 1st paragraph of the same Article 315, and sentenced said accused in each count to TEN (10) YEARS of prision mayor, as minimum, to TWENTY (20) YEARS of reclusion temporal, as maximum; (2) ACQUITTING accused BENITO ONG of the crime charged against him, his guilt thereof not having been established by the People beyond reasonable doubt; (3) Ordering accused Edward C. Ong to pay private complainant Solid Bank Corporation the aggregate sum of P2,976,576.37 as reparation for the damages said accused caused to the private complainant, plus the interest thereon at the legal rate and the penalty of 1% per month, both interest and penalty computed from July 15, 1991, until the principal obligation is fully paid; (4) Ordering Benito Ong to pay, jointly and severally with Edward C. Ong, the private complainant the legal interest and the penalty of 1% per month due and accruing on the unpaid amount of P1,449,395.71, still owing to the private offended under the trust receipt Exhibit C, computed from July 15, 1991, until the said unpaid obligation is fully paid; (5) Ordering accused Edward C. Ong to pay the costs of these two actions. SO ORDERED. 7
The Charge Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and Benito Ong with two counts ofestafa under separate Informations dated 11 October 1991. In Criminal Case No. 92-101989, the Information indicts petitioner and Benito Ong of the crime of estafa committed as follows: That on or about July 23, 1990, in the City of Manila, Philippines, the said accused, representing ARMAGRI International Corporation, conspiring and confederating together did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a corporation duly organized and existing under the laws of the Philippines located at Juan Luna Street, Binondo, this City, in the following manner, to wit: the said accused received in trust from said SOLIDBANK Corporation the following, to wit: 10,000 bags of urea valued at P2,050,000.00 specified in a Trust Receipt Agreement and covered by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil Corporation; under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or upon demand; but said accused, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully, unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,050,000.00 Philippine Currency. Contrary to law. In Criminal Case No. 92-101990, the Information likewise charges petitioner of the crime of estafa committed as follows: That on or about July 6, 1990, in the City of Manila, Philippines, the said accused, representing ARMAGRI International Corporation, did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a corporation duly organized and existing under the laws of the Philippines located at Juan Luna Street, Binondo, this City, in the following manner, to wit: the said accused received in trust from said SOLIDBANK Corporation the following goods, to wit: 125 pcs. Rear diff. assy RNZO 49" 50 pcs. Front & Rear diff assy. Isuzu Elof 85 units 1-Beam assy. Isuzu Spz all valued at P2,532,500.00 specified in a Trust Receipt Agreement and covered by a Domestic Letter of Credit No. DOM GD 90-006 in favor of the Metropole Industrial Sales with address at P.O. Box AC 219, Quezon City; under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or upon demand; but said accused, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully, unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,532,500.00 Philippine Currency. Contrary to law. Arraignment and Plea With the assistance of counsel, petitioner and Benito Ong both pleaded not guilty when arraigned. Thereafter, trial ensued. Version of the Prosecution The prosecution's evidence disclosed that on 22 June 1990, petitioner, representing ARMAGRI International Corporation 8 ("ARMAGRI"), applied for a letter of credit for P2,532,500.00 with SOLIDBANK Corporation ("Bank") to finance the purchase of differential assemblies from Metropole Industrial Sales. On 6 July 1990, petitioner, representing ARMAGRI, executed a trust receipt 9 acknowledging receipt from the Bank of the goods valued at P2,532,500.00. On 12 July 1990, petitioner and Benito Ong, representing ARMAGRI, applied for another letter of credit for P2,050,000.00 to finance the purchase of merchandise from Fertiphil Corporation. The Bank approved the application, opened the letter of credit and paid to Fertiphil Corporation the amount of P2,050,000.00. On 23 July 1990, petitioner, signing for ARMAGRI, executed another trust receipt 10 in favor of the Bank acknowledging receipt of the merchandise. Both trust receipts contained the same stipulations. Under the trust receipts, ARMAGRI undertook to account for the goods held in trust for the Bank, or if the goods are sold, to turn over the proceeds to the Bank. ARMAGRI also undertook the obligation to keep the proceeds in the form of money, bills or receivables as the separate property of the Bank or to return the goods upon demand by the Bank, if not sold. In addition, petitioner executed the following additional undertaking stamped on the dorsal portion of both trust receipts: I/We jointly and severally agreed to any increase or decrease in the interest rate which may occur after July 1, 1981, when the Central Bank floated the interest rates, and to pay additionally the penalty of 1% per month until the amount/s or installment/s due and unpaid under the trust receipt on the reverse side hereof is/are fully paid. 11
Petitioner signed alone the foregoing additional undertaking in the Trust Receipt for P2,253,500.00, while both petitioner and Benito Ong signed the additional undertaking in the Trust Receipt for P2,050,000.00. When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods to the Bank despite several demand letters. 12 Consequently, as of 31 May 1991, the unpaid account under the first trust receipt amounted to P1,527,180.66, 13 while the unpaid account under the second trust receipt amounted to P1,449,395.71. 14
Version of the Defense After the prosecution rested its case, petitioner and Benito Ong, through counsel, manifested in open court that they were waiving their right to present evidence. The trial court then considered the case submitted for decision. 15
The Ruling of the Court of Appeals Petitioner appealed his conviction to the Court of Appeals. On 27 October 1994, the Court of Appeals affirmed the trial court's decision in toto. Petitioner filed a motion for reconsideration but the same was denied by the Court of Appeals in the Resolution dated 18 April 1995. The Court of Appeals held that although petitioner is neither a director nor an officer of ARMAGRI, he certainly comes within the term "employees or other x x x persons therein responsible for the offense" in Section 13 of the Trust Receipts Law. The Court of Appeals explained as follows: It is not disputed that appellant transacted with the Solid Bank on behalf of ARMAGRI. This is because the Corporation cannot by itself transact business or sign documents it being an artificial person. It has to accomplish these through its agents. A corporation has a personality distinct and separate from those acting on its behalf. In the fulfillment of its purpose, the corporation by necessity has to employ persons to act on its behalf. Being a mere artificial person, the law (Section 13, P.D. 115) recognizes the impossibility of imposing the penalty of imprisonment on the corporation itself. For this reason, it is the officers or employees or other persons whom the law holds responsible. 16
The Court of Appeals ruled that what made petitioner liable was his failure to account to the entruster Bank what he undertook to perform under the trust receipts. The Court of Appeals held that ARMAGRI, which petitioner represented, could not itself negotiate the execution of the trust receipts, go to the Bank to receive, return or account for the entrusted goods. Based on the representations of petitioner, the Bank accepted the trust receipts and, consequently, expected petitioner to return or account for the goods entrusted. 17
The Court of Appeals also ruled that the prosecution need not prove that petitioner is occupying a position in ARMAGRI in the nature of an officer or similar position to hold him the "person(s) therein responsible for the offense." The Court of Appeals held that petitioner's admission that his participation was merely incidental still makes him fall within the purview of the law as one of the corporation's "employees or other officials or persons therein responsible for the offense." Incidental or not, petitioner was then acting on behalf of ARMAGRI, carrying out the corporation's decision when he signed the trust receipts. The Court of Appeals further ruled that the prosecution need not prove that petitioner personally received and misappropriated the goods subject of the trust receipts. Evidence of misappropriation is not required under the Trust Receipts Law. To establish the crime of estafa, it is sufficient to show failure by the entrustee to turn over the goods or the proceeds of the sale of the goods covered by a trust receipt. Moreover, the bank is not obliged to determine if the goods came into the actual possession of the entrustee. Trust receipts are issued to facilitate the purchase of merchandise. To obligate the bank to examine the fact of actual possession by the entrustee of the goods subject of every trust receipt will greatly impede commercial transactions. Hence, this petition. The Issues Petitioner seeks to reverse his conviction by contending that the Court of Appeals erred: 1. IN RULING THAT, BY THE MERE CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND SIGNED FOR THE ENTRUSTEE CORPORATION, PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE OFFENSE; AND 2. IN CONVICTING PETITIONER UNDER SPECIFICATIONS NOT ALLEGED IN THE INFORMATION. The Ruling of the Court The Court sustains the conviction of petitioner. First Assigned Error: Petitioner comes within the purview of Section 13 of the Trust Receipts Law. Petitioner contends that the Court of Appeals erred in finding him liable for the default of ARMAGRI, arguing that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the entrustee. Petitioner's arguments fail to persuade us. The pivotal issue for resolution is whether petitioner comes within the purview of Section 13 of the Trust Receipts Law which provides: x x x . If the violation is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the offense. (Emphasis supplied) We hold that petitioner is a person responsible for violation of the Trust Receipts Law. The relevant penal provision of the Trust Receipts Law reads: SEC. 13. Penalty Clause. - The failure of the entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article Three Hundred and Fifteen, Paragraph One (b), of Act Numbered Three Thousand Eight Hundred and Fifteen, as amended, otherwise known as the Revised Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense. (Emphasis supplied) The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the proceeds of the sale of the goods, or (2) return the goods covered by the trust receipts if the goods are not sold. 18 The mere failure to account or return gives rise to the crime which is malum prohibitum. 19 There is no requirement to prove intent to defraud. 20
The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships, associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent responsible for the violation of the Trust Receipts Law. In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of the Trust Receipts Law falls on the human agent responsible for the violation. Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for the failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts. The Bank released the goods to ARMAGRI upon execution of the trust receipts and as part of the loan transactions of ARMAGRI. The Bank had a right to demand from ARMAGRI payment or at least a return of the goods. ARMAGRI failed to pay or return the goods despite repeated demands by the Bank. It is a well-settled doctrine long before the enactment of the Trust Receipts Law, that the failure to account, upon demand, for funds or property held in trust is evidence of conversion or misappropriation. 21 Under the law, mere failure by the entrustee to account for the goods received in trust constitutes estafa. The Trust Receipts Law punishes dishonesty and abuse of confidence in the handling of money or goods to the prejudice of public order. 22 The mere failure to deliver the proceeds of the sale or the goods if not sold constitutes a criminal offense that causes prejudice not only to the creditor, but also to the public interest. 23 Evidently, the Bank suffered prejudice for neither money nor the goods were turned over to the Bank. The Trust Receipts Law expressly makes the corporation's officers or employees or other persons therein responsible for the offense liable to suffer the penalty of imprisonment. In the instant case, petitioner signed the two trust receipts on behalf of ARMAGRI 24 as the latter could only act through its agents. When petitioner signed the trust receipts, he acknowledged receipt of the goods covered by the trust receipts. In addition, petitioner was fully aware of the terms and conditions stated in the trust receipts, including the obligation to turn over the proceeds of the sale or return the goods to the Bank, to wit: Received, upon the TRUST hereinafter mentioned from SOLIDBANK CORPORATION (hereafter referred to as the BANK), the following goods and merchandise, the property of said BANK specified in the bill of lading as follows: x x x and in consideration thereof, I/we hereby agree to hold said goods in Trust for the said BANKand as its property with liberty to sell the same for its account but without authority to make any other disposition whatsoever of the said goods or any part thereof (or the proceeds thereof) either by way of conditional sale, pledge, or otherwise. In case of sale I/we agree to hand the proceeds as soon as received to the BANK to apply against the relative acceptance (as described above) and for the payment of any other indebtedness of mine/ours to SOLIDBANK CORPORATION. xxx xxx xxx. I/we agree to keep said goods, manufactured products, or proceeds thereof, whether in the form of money or bills, receivables, or accounts, separate and capable of identification as the property of the BANK. I/we further agree to return the goods, documents, or instruments in the event of their non-sale, upon demand or within ____ days, at the option of the BANK. xxx xxx xxx. (Emphasis supplied) 25
True, petitioner acted on behalf of ARMAGRI. However, it is a well-settled rule that THE LAW OF AGENCY governing civil cases has no application in criminal cases. When a person participates in the commission of a crime, he cannot escape punishment on the ground that he simply acted as an agent of another party. 26 In the instant case, the Bank accepted the trust receipts signed by petitioner based on petitioner's representations. It is the fact of being the signatory to the two trust receipts, and thus a direct participant to the crime, which makes petitioner a person responsible for the offense. Petitioner could have raised the defense that he had nothing to do with the failure to account for the proceeds or to return the goods. Petitioner could have shown that he had severed his relationship with ARMAGRI prior to the loss of the proceeds or the disappearance of the goods. Petitioner, however, waived his right to present any evidence, and thus failed to show that he is not responsible for the violation of the Trust Receipts Law. There is no dispute that on 6 July 1990 and on 23 July 1990, petitioner signed the two trust receipts 27 on behalf of ARMAGRI. Petitioner, acting on behalf of ARMAGRI, expressly acknowledged receipt of the goods in trust for the Bank. ARMAGRI failed to comply with its undertakings under the trust receipts. On the other hand, petitioner failed to explain and communicate to the Bank what happened to the goods despite repeated demands from the Bank. As of 13 May 1991, the unpaid account under the first and second trust receipts amounted to P1,527,180.60 and P1,449,395.71, respectively. 28
Second Assigned Error: Petitioner's conviction under the allegations in the two Informations for Estafa. Petitioner argues that he cannot be convicted on a new set of facts not alleged in the Informations. Petitioner claims that the trial court's decision found that it was ARMAGRI that transacted with the Bank, acting through petitioner as its agent. Petitioner asserts that this contradicts the specific allegation in the Informations that it was petitioner who was constituted as the entrustee and was thus obligated to account for the goods or its proceeds if sold. Petitioner maintains that this absolves him from criminal liability. We find no merit in petitioner's arguments. Contrary to petitioner's assertions, the Informations explicitly allege that petitioner, representing ARMAGRI, defrauded the Bank by failing to remit the proceeds of the sale or to return the goods despite demands by the Bank, to the latter's prejudice. As an essential element of estafa with abuse of confidence, it is sufficient that the Informations specifically allege that the entrustee received the goods. The Informations expressly state that ARMAGRI, represented by petitioner, received the goods in trust for the Bank under the express obligation to remit the proceeds of the sale or to return the goods upon demand by the Bank. There is no need to allege in the Informations in what capacity petitioner participated to hold him responsible for the offense. Under the Trust Receipts Law, it is sufficient to allege and establish the failure of ARMAGRI, whom petitioner represented, to remit the proceeds or to return the goods to the Bank. When petitioner signed the trust receipts, he claimed he was representing ARMAGRI. The corporation obviously acts only through its human agents and it is the conduct of such agents which the law must deter. 29 The existence of the corporate entity does not shield from prosecution the agent who knowingly and intentionally commits a crime at the instance of a corporation. 30
Penalty for the crime of Estafa. The penalty for the crime of estafa is prescribed in Article 315 of the Revised Penal Code, as follows: 1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty which may be imposed should not exceed twenty years. x x x . In the instant case, the amount of the fraud in Criminal Case No. 92-101989 is P1,527,180.66. In Criminal Case No. 92-101990, the amount of the fraud is P1,449,395.71. Since the amounts of the fraud in each estafa exceeds P22,000.00, the penalty of prision correccional maximum to prision mayor minimum should be imposed in its maximum period as prescribed in Article 315 of the Revised Penal Code. The maximum indeterminate sentence should be taken from this maximum period which has a duration of 6 years, 8 months and 21 days to 8 years. One year is then added for each additional P10,000.00, but the total penalty should not exceed 20 years. Thus, the maximum penalty for each count of estafa in this case should be 20 years. Under the Indeterminate Sentence Law, the minimum indeterminate sentence can be anywhere within the range of the penalty next lower in degree to the penalty prescribed by the Code for the offense. The minimum range of the penalty is determined without first considering any modifying circumstance attendant to the commission of the crime and without reference to the periods into which it may be subdivided. 31 The modifying circumstances are considered only in the imposition of the maximum term of the indeterminate sentence. 32 Since the penalty prescribed in Article 315 is prision correccional maximum to prision mayor minimum, the penalty next lower in degree would be prision correccional minimum to medium. Thus, the minimum term of the indeterminate penalty should be anywhere within 6 months and 1 day to 4 years and 2 months. 33
Accordingly, the Court finds a need to modify in part the penalties imposed by the trial court. The minimum penalty for each count of estafa should be reduced to four (4) years and two (2) months of prision correccional. As for the civil liability arising from the criminal offense, the question is whether as the signatory for ARMAGRI, petitioner is personally liable pursuant to the provision of Section 13 of the Trust Receipts Law. In Prudential Bank v. Intermediate Appellate Court, 34 the Court discussed the imposition of civil liability for violation of the Trust Receipts Law in this wise: It is clear that if the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty shall be imposed upon the directors, officers, employees or other officials or persons responsible for the offense. The penalty referred to is imprisonment, the duration of which would depend on the amount of the fraud as provided for in Article 315 of the Revised Penal Code. The reason for this is obvious: corporation, partnership, association or other juridical entities cannot be put in jail. However, it is these entities which are made liable for the civil liabilities arising from the criminal offense. This is the import of the clause 'without prejudice to the civil liabilities arising from the criminal offense'. (Emphasis supplied) In Prudential Bank, the Court ruled that the person signing the trust receipt for the corporation is not solidarily liable with the entrustee-corporation for the civil liability arising from the criminal offense. He may, however, be personally liable if he bound himself to pay the debt of the corporation under a separate contract of surety or guaranty. In the instant case, petitioner did not sign in his personal capacity the solidary guarantee clause 35 found on the dorsal portion of the trust receipts. Petitioner placed his signature after the typewritten words "ARMCO INDUSTRIAL CORPORATION" found at the end of the solidary guarantee clause. Evidently, petitioner did not undertake to guaranty personally the payment of the principal and interest of ARMAGRI's debt under the two trust receipts. In contrast, petitioner signed the stamped additional undertaking without any indication he was signing for ARMAGRI. Petitioner merely placed his signature after the additional undertaking. Clearly, what petitioner signed in his personal capacity was the stamped additional undertaking to pay a monthly penalty of 1% of the total obligation in case of ARMAGRI's default. In the additional undertaking, petitioner bound himself to pay "jointly and severally" a monthly penalty of 1% in case of ARMAGRI's default. 35 Thus, petitioner is liable to the Bank for the stipulated monthly penalty of 1% on the outstanding amount of each trust receipt. The penalty shall be computed from 15 July 1991, when petitioner received the demand letter, 36 until the debt is fully paid. WHEREFORE, the assailed Decision is AFFIRMED with MODIFICATION. In Criminal Case No. 92-101989 and in Criminal Case No. 92-101990, for each count of estafa, petitioner EDWARD C. ONG is sentenced to an indeterminate penalty of imprisonment from four (4) years and two (2) months of prision correctional as MINIMUM, to twenty (20) years of reclusion temporal as MAXIMUM. Petitioner is ordered to pay SOLIDBANK CORPORATION the stipulated penalty of 1% per month on the outstanding balance of the two trust receipts to be computed from 15 July 1991 until the debt is fully paid. SO ORDERED.
G.R. No. 156262 July 14, 2005 MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and MARY T. BUENAVENTURA, Petitioners, vs. HEIRS OF BARTOLOME RAMOS, Respondents. D E C I S I O N PANGANIBAN, J .: Stripped of nonessentials, the present case involves the collection of a sum of money. Specifically, this case arose from the failure of petitioners to pay respondents predecessor-in-interest. This fact was shown by the non-encashment of checks issued by a third person, but indorsed by herein Petitioner Maria Tuazon in favor of the said predecessor. Under these circumstances, to enable respondents to collect on the indebtedness, the check drawer need not be impleaded in the Complaint. Thus, the suit is directed, not against the drawer, but against the debtor who indorsed the checks in payment of the obligation. The Case Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, challenging the July 31, 2002 Decision 2 of the Court of Appeals (CA) in CA-GR CV No. 46535. The decretal portion of the assailed Decision reads: "WHEREFORE, the appeal is DISMISSED and the appealed decision is AFFIRMED." On the other hand, the affirmed Decision 3 of Branch 34 of the Regional Trial Court (RTC) of Gapan, Nueva Ecija, disposed as follows: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as follows: "1. The sum of P1,750,050.00, with interests from the filing of the second amended complaint; "2. The sum of P50,000.00, as attorneys fees; "3. The sum of P20,000.00, as moral damages "4. And to pay the costs of suit. x x x x x x x x x" 4
The Facts The facts are narrated by the CA as follows: "[Respondents] alleged that between the period of May 2, 1988 and June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest of respondents]. That of this [quantity,] x x x only 4,437 cavans [have been paid for so far], leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses Tuazon issued x x x [several] Traders Royal Bank checks. x x x x x x x x x [B]ut when these [checks] were encashed, all of the checks bounced due to insufficiency of funds. [Respondents] advanced that before issuing said checks[,] spouses Tuazon already knew that they had no available fund to support the checks, and they failed to provide for the payment of these despite repeated demands made on them. "[Respondents] averred that because spouses Tuazon anticipated that they would be sued, they conspired with the other [defendants] to defraud them as creditors by executing x x x fictitious sales of their properties. They executed x x x simulated sale[s] [of three lots] in favor of the x x x spouses Buenaventura x x x[,] as well as their residential lot and the house thereon[,] all located at Nueva Ecija, and another simulated deed of sale dated July 12, 1988 of a Stake Toyota registered with the Land Transportation Office of Cabanatuan City on September 7, 1988. [Co-petitioner] Melecio Tuazon, a son of spouses Tuazon, registered a fictitious Deed of Sale on July 19, 1988 x x x over a residential lot located at Nueva Ecija. Another simulated sale of a Toyota Willys was executed on January 25, 1988 in favor of their other son, [co-petitioner] Alejandro Tuazon x x x. As a result of the said sales, the titles of these properties issued in the names of spouses Tuazon were cancelled and new ones were issued in favor of the [co-]defendants spouses Buenaventura, Alejandro Tuazon and Melecio Tuazon. Resultantly, by the said ante-dated and simulated sales and the corresponding transfers there was no more property left registered in the names of spouses Tuazon answerable to creditors, to the damage and prejudice of [respondents]. "For their part, defendants denied having purchased x x x rice from [Bartolome] Ramos. They alleged that it was Magdalena Ramos, wife of said deceased, who owned and traded the merchandise and Maria Tuazon was MERELY HER AGENT. They argued that it was Evangeline Santos who was the buyer of the rice and issued the checks to Maria Tuazon as payments therefor. In good faith[,] the checks were received [by petitioner] from Evangeline Santos and turned over to Ramos without knowing that these were not funded. And it is for this reason that [petitioners] have been insisting on the inclusion of Evangeline Santos as an indispensable party, and her non-inclusion was a fatal error. Refuting that the sale of several properties were fictitious or simulated, spouses Tuazon contended that these were sold because they were then meeting financial difficulties but the disposals were made for value and in good faith and done before the filing of the instant suit. To dispute the contention of plaintiffs that they were the buyers of the rice, they argued that there was no sales invoice, official receipts or like evidence to prove this. They assert that they were merely agents and should not be held answerable." 5
The corresponding civil and criminal cases were filed by respondents against Spouses Tuazon. Those cases were later consolidated and amended to include Spouses Anastacio and Mary Buenaventura, with Alejandro Tuazon and Melecio Tuazon as additional defendants. Having passed away before the pretrial, Bartolome Ramos was substituted by his heirs, herein respondents. Contending that Evangeline Santos was an indispensable party in the case, petitioners moved to file a third-party complaint against her. Allegedly, she was primarily liable to respondents, because she was the one who had purchased the merchandise from their predecessor, as evidenced by the fact that the checks had been drawn in her name. The RTC, however, denied petitioners Motion. Since the trial court acquitted petitioners in all three of the consolidated criminal cases, they appealed only its decision finding them civilly liable to respondents. Ruling of the Court of Appeals Sustaining the RTC, the CA held that petitioners had failed to prove the existence of an agency between respondents and Spouses Tuazon. The appellate court disbelieved petitioners contention that Evangeline Santos should have been impleaded as an indispensable party. Inasmuch as all the checks had been indorsed by Maria Tuazon, who thereby became liable to subsequent holders for the amounts stated in those checks, there was no need to implead Santos. Hence, this Petition. 6
Issues Petitioners raise the following issues for our consideration: "1. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not agents of the respondents. "2. Whether or not the Honorable Court of Appeals erred in rendering judgment against the petitioners despite x x x the failure of the respondents to include in their action Evangeline Santos, an indispensable party to the suit." 7
The Courts Ruling The Petition is unmeritorious. First Issue: Agency Well-entrenched is the rule that the Supreme Courts role in a petition under Rule 45 is limited to reviewing errors of law allegedly committed by the Court of Appeals. Factual findings of the trial court, especially when affirmed by the CA, are conclusive on the parties and this Court. 8 Petitioners have not given us sufficient reasons to deviate from this rule. In a contract of agency, one binds oneself to render some service or to do something in representation or on behalf of another, with the latters consent or authority. 9 The following are the elements of agency: (1) the parties consent, express or implied, to establish the relationship; (2) the object, which is the execution of a juridical act in relation to a third person; (3) the representation, by which the one who acts as an agent does so, not for oneself, but as a representative; (4) the limitation that the agent acts within the scope of his or her authority. 10 As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principals words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency. 11
This Court finds no reversible error in the findings of the courts a quo that petitioners were the rice buyers themselves; they were not mere agents of respondents in their rice dealership. The question of whether a contract is one of sale or of agency depends on the intention of the parties. 12
The declarations of agents alone are generally insufficient to establish the fact or extent of their authority. 13 The LAW MAKES NO PRESUMPTION OF AGENCY; proving its existence, nature and extent is incumbent upon the person alleging it. 14 In the present case, petitioners raise the fact of agency as an affirmative defense, yet fail to prove its existence. The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the amounts represented by the bounced checks, in a separate civil case that they sought to be consolidated with the current one. If, as they claim, they were mere agents of respondents, petitioners should have brought the suit against Santos for and on behalf of their alleged principal, in accordance with Section 2 of Rule 3 of the Rules on Civil Procedure. 15 Their filing a suit against her in their own names negates their claim that they acted as mere agents in selling the rice obtained from Bartolome Ramos. Second Issue: Indispensable Party Petitioners argue that the lower courts erred in not allowing Evangeline Santos to be impleaded as an indispensable party. They insist that respondents Complaint against them is based on the bouncing checks she issued; hence, they point to her as the person primarily liable for the obligation. We hold that respondents cause of action is clearly founded on petitioners failure to pay the purchase price of the rice. The trial court held that Petitioner Maria Tuazon had indorsed the questioned checks in favor of respondents, in accordance with Sections 31 and 63 of the Negotiable Instruments Law. 16 That Santos was the drawer of the checks is thus immaterial to the respondents cause of action. As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks were to be accepted or paid, or both, according to their tenor; and that in case they were dishonored, she would pay the corresponding amount. 17 After an instrument is dishonored by nonpayment, indorsers cease to be merely secondarily liable; they become principal debtors whose liability becomes identical to that of the original obligor. The holder of a negotiable instrument need not even proceed against the maker before suing the indorser. 18 Clearly, Evangeline Santos -- as the drawer of the checks -- is not an indispensable party in an action against Maria Tuazon, the indorser of the checks. Indispensable parties are defined as "parties in interest without whom no final determination can be had." 19 The instant case was originally one for the collection of the purchase price of the rice bought by Maria Tuazon from respondents predecessor. In this case, it is clear that there is no privity of contract between respondents and Santos. Hence, a final determination of the rights and interest of the parties may be made without any need to implead her. WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners. SO ORDERED.
G.R. No. 145817 October 19, 2011 URBAN BANK, INC, Petitioner, vs. MAGDALENO M. PEA, Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 145822 DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, and ERIC L. LEE, Petitioners, vs. MAGDALENO M. PEA, Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 162562 MAGDALENO M. PEA, Petitioner, vs. URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, P. SIERVO H. DIZON, ERIC L. LEE, BEN T. LIM, JR., CORAZON BEJASA, and ARTURO MANUEL, JR.,Respondents. D E C I S I O N SERENO, J .: These consolidated petitions began as a simple case for payment of services rendered and for reimbursement of costs. The case spun a web of suits and counter-suits because of: (1) the size of the award for agents fee rendered in favor of Atty. Magdaleno Pea (Pea) PhP24,000,000 rendered by the trial court; (2) the controversial execution of the full judgment award of PhP28,500,000 (agents fee plus reimbursement for costs and other damages) pending appeal; and (3) the finding of solidary liability against Urban Bank, Inc., and several of its corporate officers and directors together with the concomitant levying and sale in execution of the personal (even conjugal) properties of those officers and directors; and (4) the fact that assets with declared conservative values of at least PhP181 Million which, together with those with undeclared values could reach very much more than such amount, 1 were levied or sold on execution pending appeal to satisfy the PhP28.5 Million award in favor of Atty. Pea. Incidentally, two supersedeas bonds worth PhP80 Million (2.8 times the amount of the judgment) were filed by Urban Bank and some of its officers and directors to stay the execution pending appeal. Had the four attendant circumstances not afflicted the original case, it would have been an open-and-shut review where this Court, applying even just the minimum equitable principle against unjust enrichment would have easily affirmed the grant of fair recompense to Atty. Pea for services he rendered for Urban Bank if such had been ordered by the trial court. That Atty. Pea should be paid something by Urban Bank is not in dispute the Court of Appeals (CA) and the Regional Trial Court (RTC) of Bago City, agreed on that. What they disagreed on is the basis and the size of the award. The trial court claims that the basis is an oral contract of agency and the award should be PhP28,5000,000; while, the appellate court said that Atty. Pea can only be paid under the legal principle against unjust enrichment, and the total award in his favor should only amount to PhP3,000,000. In the eyes of the trial court, the controlling finding is that Atty. Pea should be believed when he testified that in a telephone conversation, the president of Urban Bank, Teodoro Borlongan, a respondent herein, agreed to pay him for his services 10% of the value of the property then worth PhP240,000,000, or PhP24,000,000. Costs and other awards additionally amount to PhP4,500,000, for a total award of PhP28,500,000 according to the trial court. To the Court of Appeals, such an award has no basis, as in fact, no contract of agency exists between Atty. Pea and Urban Bank. Hence, Atty. Pea should only be recompensed according to the principle of unjust enrichment, and that he should be awarded the amount of PhP3,000,000 only for his services and reimbursements of costs. The disparity in the size of the award given by the trial court vis--vis that of the Court of Appeals (PhP28,500,000 v. PhP3,000,000) must be placed in the context of the service that Atty. Pea proved that he rendered for Urban Bank. As the records bear, Atty. Peas services consisted of causing the departure of unauthorized sub-tenants in twenty-three commercial establishments in an entertainment compound along Roxas Boulevard. It involved the filing of ejectment suits against them, Peas personal defense in the counter-suits filed against him, his settlement with them to the tune of PhP1,500,000, which he advanced from his own funds, and his retention of security guardsand expenditure for other costs amounting to more or less PhP1,500,000. There is no claim by Atty. Pea of any service beyond those. He claims damages from the threats to his life and safety from the angry tenants, as well as a vexatious collection suit he had to face from a creditor-friend from whom he borrowed PhP3,000,000 to finance the expenses for the services he rendered Urban Bank. At the time the award of PhP28,500,000 by the trial court came out in 1999, the net worth of Urban Bank was PhP2,219,781,104. 2 While the bank would be closed by the Bangko Sentral ng Pilipinas (BSP) a year later for having unilaterally declared a bank holiday contrary to banking rules, there was no reason to believe that at the time such award came out it could not satisfy a judgment of PhP28,500,000, a sum that was only 1% of its net worth, and a miniscule 0.2% of its total assets of PhP11,933,383,630. 3 In fact, no allegation of impending insolvency or attempt to abscond was ever raised by Atty. Pea and yet, the trial court granted execution pending appeal. Interestingly, Pea had included as co-defendants with Urban Bank in the RTC case, several officers and board directors of Urban Bank. Not all board directors were sued, however. With respect to those included in the complaint, other than against Teodoro Borlongan, Corazon Bejasa, and Arturo Manuel, no evidence was ever offered as to their individual actions that gave rise to Atty. Peas cause of action the execution of the agency contract and its breach and yet, these officers and directors were made solidarily liable by the trial court with Urban Bank for the alleged breach of the alleged corporate contract of agency. Execution pending appeal was also granted against them for this solidary liability resulting in the levy and sale in execution pending appeal of not only corporate properties of Urban Bank but also personal properties of the individual bank officers and directors. It would have been interesting to find out what drove Atty. Pea to sue the bank officers and directors of Urban Bank and why he chose to sue only some, but not all of the board directors of Urban Bank, but there is nothing on the record with which this analysis can be pursued. Before us are: (a) the Petitions of Urban Bank (G. R. No. 145817) and the De Leon Group (G R. No. 145822) questioning the propriety of the grant of execution pending appeal, and (b) the Petition of Atty. Pea (G. R. No. 162562) assailing the CAs decision on the substantive merits of the case with respect to his claims of compensation based on an agency agreement. Ordinarily, the final resolution by the Supreme Court of an appeal from a trial court decision would have automatic, generally-understood consequences on an order issued by the trial court for execution pending appeal. But this is no ordinary case, and the magnitude of the disproportions in this case is too mind-boggling that this Court must exert extra effort to correct whatever injustices have been occasioned in this case. Thus, our dispositions will include detailed instructions for several judicial officials to implement. At core, these petitions can be resolved if we answer the following questions: 1. What is the legal basis for an award in favor of Pea for the services he rendered to Urban Bank? Should it be a contract of agency the fee for which was orally agreed on as Pea claims? Should it be the application of the Civil Code provisions on unjust enrichment? Or is it to be based on something else or a combination of the legal findings of both the RTC and the CA? How much should the award be? 2. Are the officers and directors of Urban Bank liable in their personal capacities for the amount claimed by Pea? 3. What are the effects of our answers to questions (1) and (2), on the various results of the execution pending appeal that happened here? Factual Background of the Controversy Urban Bank, Inc. (both petitioner and respondent in these two consolidated cases), 4 was a domestic Philippine corporation, engaged in the business of banking. 5 The eight individual respondents in G. R. No. 162562 were officers and members of Urban Banks board of directors, who were sued in their official and personal capacities. 6 On the other hand, Benjamin L. De Leon, Delfin C. Gonzalez, Jr., and Eric L. Lee, (hereinafter the de Leon Group), are the petitioners in G. R. No. 145822 and are three of the same bank officers and directors, who had separately filed the instant Petition before the Court. PETITIONER-RESPONDENT Atty. Magdaleno M. Pea (Pea) 7 is a lawyer by profession and was formerly a stockholder, director and corporate secretary of Isabel Sugar Company, Inc. (ISCI). 8
ISCI owned a parcel of land 9 located in Pasay City (the Pasay property). 10 In 1984, ISCI leased the Pasay property for a period of 10 years. 11 Without its consent 12 and in violation of the lease contract, 13 the lessee subleased the land to several tenants, who in turn put up 23 establishments, mostly beer houses and night clubs, inside the compound. 14 In 1994, a few months before the lease contract was to expire, ISCI informed the lessee 15 and his tenants 16 that the lease would no longer be renewed and that it intended to take over the Pasay property 17 for the purpose of selling it. 18
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban Bank executed a Contract to Sell, whereby the latter would pay ISCI the amount of PhP241,612,000 in installments for the Pasay property. 19 Both parties agreed that the final installment of PhP25,000,000 would be released by the bank upon ISCIs delivery of full and actual possession of the land, free from any tenants. 20 In the meantime, the amount of the final installment would be held by the bank in escrow. The escrow provision in the Contract to Sell, thus, reads: "The SELLER (ISCI) agrees that from the proceeds of the purchase prices of the subject Property (Pasay property), the BUYER (Urban Bank) shall withhold the amount of PHP 25,000,000.00 by way of escrow and shall release this amount to the SELLER only upon its delivery to the BUYER of the full and actual possession and control of the Subject Property, free from tenants, occupants, squatters or other structures or from any liens, encumbrances, easements or any other obstruction or impediment to the free use and occupancy by the buyer of the subject Property or its exercise of the rights to ownership over the subject Property, within a period of sixty (60) days from the date of payment by the BUYER of the purchase price of the subject Property net of the amounts authorized to be deducted or withheld under Item II (a) of this Contract. 21 (Emphasis supplied) ISCI then instructed Pea, who was its director and corporate secretary, to take over possession of the Pasay property 22 against the tenants upon the expiration of the lease. ISCIs president, Mr. Enrique G. Montilla III (Montilla), faxed a letter to Pea, confirming the latters engagement as the corporations agent to handle the eviction of the tenants from the Pasay property, to wit: 23
MEMORANDUM TO: Atty. Magdaleno M. Pena Director FROM: Enrique G. Montilla III President DATE: 26 November 1994 You are hereby directed to recover and take possession of the property of the corporation situated at Roxas Boulevard covered by TCT No. 5382 of the Register of Deeds for Pasay City immediately upon the expiration of the contract of lease over the said property on 29 November 1994. For this purpose you are authorized to engage the services of security guards to protect the property against intruders. You may also engage the services of a lawyer in case there is a need to go to court to protect the said property of the corporation. In addition you may take whatever steps or measures are necessary to ensure our continued possession of the property. (sgd.) ENRIQUE G. MONTILLA III President 24
On 29 November 1994, the day the lease contract was to expire, ISCI and Urban Bank executed a Deed of Absolute Sale 25 over the Pasay property for the amount agreed upon in the Contract to Sell, but subject to the above escrow provision. 26 The title to the land was eventually transferred to the name of Urban Bank on 05 December 1994. 27
On 30 November 1994, the lessee duly surrendered possession of the Pasay property to ISCI, 28 but the unauthorized sub-tenants refused to leave the area. 29 Pursuant to his authority from ISCI, Pea had the gates of the property closed to keep the sub-tenants out. 30 He also posted security guards at the property, 31 services for which he advanced payments. 32 Despite the closure of the gates and the posting of the guards, the sub-tenants would come back in the evening, force open the gates, and proceed to carry on with their businesses. 33 On three separate occasions, the sub-tenants tried to break down the gates of the property, threw stones, and even threatened to return and inflict greater harm on those guarding it. 34
In the meantime, a certain Marilyn G. Ong, as representative of ISCI, faxed a letter to Urban Bank addressed to respondent Corazon Bejasa, who was then the banks Senior Vice-President requesting the issuance of a formal authority for Pea. 35 Two days thereafter, Ms. Ong faxed another letter to the bank, this time addressed to its president, respondent Teodoro Borlongan. 36 She repeated therein the earlier request for authority for Pea, since the tenants were questioning ISCIs authority to take over the Pasay property. 37
In response to the letters of Ms. Ong, petitioner-respondent bank, through individual respondents Bejasa and Arturo E. Manuel Senior Vice-President and Vice-President, respectively advised Pea 38 that the bank had noted the engagement of his services by ISCI and stressed that ISCI remained as the lawyers principal. 39
To prevent the sub-tenants from further appropriating the Pasay property, 40 petitioner- respondent Pea, as director and representative of ISCI, filed a complaint for injunction 41 (the First Injunction Complaint) with the RTC-Pasay City. 42 Acting on ISCIs prayer for preliminary relief, the trial court favorably issued a temporary restraining order (TRO), 43 which was duly implemented. 44 At the time the First Injunction Complaint was filed, a new title to the Pasay property had already been issued in the name of Urban Bank. 45
On 19 December 1994, when "information reached the judge that the Pasay property had already been transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for the property. According to Pea, it was the first time that he was apprised of the sale of the land by ISCI and of the transfer of its title in favor of the bank." 46 It is not clear from the records how such information reached the judge or what the break-open order was in response to. On the same day that the TRO was recalled, petitioner-respondent Pea immediately contacted ISCIs president, Mr. Montilla, who in turn confirmed the sale of the Pasay property to Urban Bank. 47 Pea told Mr. Montilla that because of the break-open order of the RTC-Pasay City, he (Pea) would be recalling the security guards he had posted to secure the property. Mr. Montilla, however, asked him to suspend the planned withdrawal of the posted guards, so that ISCI could get in touch with petitioner- respondent bank regarding the matter. 48
Later that same day, Pea received a telephone call from respondent Bejasa. After Pea informed her of the situation, she allegedly told him that Urban Bank would be retaining his services in guarding the Pasay property, and that he should continue his efforts in retaining possession thereof. He insisted, however, on talking to the Banks president. Respondent Bejasa gave him the contact details of respondent Borlongan, then president of Urban Bank. 49
The facts regarding the following phone conversation and correspondences are highly- controverted. Immediately after talking to respondent Bejasa, Pea got in touch with Urban Banks president, RESPONDENT Borlongan. Pea explained that the policemen in Pasay City were sympathetic to the tenants and were threatening to force their way into the premises. He expressed his concern that violence might erupt between the tenants, the city police, and the security guards posted in the Pasay property. Respondent Borlongan supposedly assured him that the bank was going to retain his services, and that the latter should not give up possession of the subject land. Nevertheless, petitioner-respondent Pea demanded a written letter of authority from the bank. Respondent Borlongan acceded and instructed him to see respondent Bejasa for the letter. 50
In the same telephone conversation, respondent Borlongan allegedly asked Pea to maintain possession of the Pasay property and to represent Urban Bank in any legal action that might be instituted relative to the property. Pea supposedly demanded 10% of the market value of the property as compensation and attorneys fees and reimbursement for all the expenses incurred from the time he took over land until possession was turned over to Urban Bank. Respondent Borlongan purportedly agreed on condition that possession would be turned over to the bank, free of tenants, not later than four months; otherwise, Pea would lose the 10% compensation and attorneys fees. 51
Later that afternoon, Pea received the banks letter dated 19 December 1994, which was signed by respondents Bejasa and Manuel, and is quoted below: This is to confirm the engagement of your services as the authorized representative of Urban Bank, specifically to hold and maintain possession of our abovecaptioned property [Pasay property] and to protect the same from former tenants, occupants or any other person who are threatening to return to the said property and/or interfere with your possession of the said property for and in our behalf. You are likewise authorized to represent Urban Bank in any court action that you may institute to carry out the aforementioned duties, and to prevent any intruder, squatter or any other person not otherwise authorized in writing by Urban [B]ank from entering or staying in the premises. 52 (Emphasis supplied) On even date, ISCI sent Urban Bank a letter, which acknowledged ISCIs engagement of Pea and commitment to pay for any expenses that may be incurred in the course of his services. ISCIs letter reads: This has reference to your property located along Roxas Boulevard, Pasay City [Pasay property] which you purchased from Isabela Sugar Company under a Deed of Absolute Sale executed on December 1, 1994. In line with our warranties as the Seller of the said property and our undertaking to deliver to you the full and actual possession and control of said property, free from tenants, occupants or squatters and from any obstruction or impediment to the free use and occupancy of the property by Urban Bank, we have engaged the services of Atty. Magdaleno M. Pea to hold and maintain possession of the property and to prevent the former tenants or occupants from entering or returning to the premises. In view of the transfer of the ownership of the property to Urban Bank, it may be necessary for Urban Bank to appoint Atty. Pea likewise as its authorized representative for purposes of holding/maintaining continued possession of the said property and to represent Urban Bank in any court action that may be instituted for the abovementioned purposes. It is understood that any attorneys fees, cost of litigation and any other charges or expenses that may be incurred relative to the exercise by Atty. Pea of his abovementioned duties shall be for the account of Isabela Sugar Company and any loss or damage that may be incurred to third parties shall be answerable by Isabela Sugar Company. 53 (Emphasis supplied) The following narration of subsequent proceedings is uncontroverted. Pea then moved for the dismissal of ISCIs First Injunction Complaint, filed on behalf of ISCI, on the ground of lack of personality to continue the action, since the Pasay property, subject of the suit, had already been transferred to Urban Bank. 54 The RTC- Pasay City dismissed the complaint and recalled its earlier break-open order. 55
Thereafter, petitioner-respondent Pea, now in representation of Urban Bank, filed a separate complaint 56 (the Second Injunction Complaint) with the RTC-Makati City, to enjoin the tenants from entering the Pasay property. 57 Acting on Urban Banks preliminary prayer, the RTC-Makati City issued a TRO. 58
While the Second Injunction Complaint was pending, Pea made efforts to settle the issue of possession of the Pasay property with the sub-tenants. During the negotiations, he was exposed to several civil and criminal cases they filed in connection with the task he had assumed for Urban Bank, and he received several threats against his life. 59 The sub-tenants eventually agreed to stay off the property for a total consideration of PhP1,500,000. 60 Pea advanced the payment for the full and final settlement of their claims against Urban Bank. 61
Pea claims to have borrowed PhP3,000,000 from one of his friends in order to maintain possession thereof on behalf of Urban Bank. 62 According to him, although his creditor-friend granted him several extensions, he failed to pay his loan when it became due, and it later on became the subject of a separate collection suit for payment with interest and attorneys fees. 63 This collection suit became the basis for Atty. Peas request for discretionary execution pending appeal later on. On 07 February 1995, within the four-month period allegedly agreed upon in the telephone conversation, Pea formally informed Urban Bank that it could already take possession of the Pasay property. 64 There was however no mention of the compensation due and owed to him for the services he had rendered. On 31 March 1995, the bank subsequently took actual possession of the property and installed its own guards at the premises. 65
Pea thereafter made several attempts to contact respondents Borlongan and Bejasa by telephone, but the bank officers would not take any of his calls. On 24 January 1996, or nearly a year after he turned over possession of the Pasay property, Pea formally demanded from Urban Bank the payment of the 10% compensation and attorneys fees allegedly promised to him during his telephone conversation with Borlongan for securing and maintaining peaceful possession of the property. 66
Proceedings on the Complaint for Compensation On 28 January 1996, when Urban Bank refused to pay for his services in connection with the Pasay property, Pea filed a complaint 67 for recovery of agents compensation and expenses, damages and attorneys fees in RTC-Bago City in the province of Negros Occidental. 68 Interestingly, Pea sued only six out of the eleven members of the Board of the Directors of Urban Bank. 69 No reason was given why the six directors were selected and the others excluded from Peas complaint. In fact, as pointed out, Atty. Pea mistakenly impleaded as a defendant, Ben Y. Lim, Jr., who was never even a member of the Board of Directors of Urban Bank; while, Ben T. Lim, Sr., father and namesake of Ben Y. Lim, Jr., who had been a director of the bank, already passed away in 1997. 70
In response to the complaint of Atty. Pea, Urban Bank and individual bank officers and directors argued that it was ISCI, the original owners of the Pasay property, that had engaged the services of Pea in securing the premises; and, consequently, they could not be held liable for the expenses Pea had incurred. 71
On 28 May 1999, the RTC-Bago City 72 ruled in favor of Pea, after finding that an AGENCY RELATIONSHIP HAD INDEED BEEN CREATED between him and Urban Bank. The eight directors and bank officers were found to be solidarily liable with the bank for the payment of agencys fees. The trial court thus ordered Urban Bank and all eight defendant bank directors and officers whom Pea sued to pay the total amount of PhP28,500,000 (excluding costs of suit): WHEREFORE, premised from the foregoing, judgment is hereby rendered ordering defendants to pay plaintiff jointly and severally the following amounts: 1. P24,000,000 as compensation for plaintiffs services plus the legal rate of interest from the time of demand until fully paid; 2. P3,000,000 as reimbursement of plaintiffs expenses; 3. P1,000,000 as and for attorneys fees; 4. P500,000 as exemplary damages; 5. Costs of suit. SO ORDERED. 73
Urban Bank and the individual defendant bank directors and officers filed a common Notice of Appeal, 74 which was given due course. 75 In the appeal, they questioned the factual finding that an agency relationship existed between the bank and Pea. 76
Although they put up a single defense in the proceedings in the lower court, Urban Bank and individual defendants contracted different counsel and filed separate Briefs on appeal in the appellate court. In its Brief, 77 Urban Bank 78 assigned as errors the trial courts reliance on the purported oral contract of agency and Peas claims for compensation during the controverted telephone conversation with Borlongan, which were allegedly incredible. Meanwhile, Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (the De Leon Group), 79 the PETITIONERS in the instant Petition docketed as G. R. No. 145822, argued that, even on the assumption that there had been an agency contract with the bank, the trial court committed reversible error in holding them as bank directors solidarily liable with the corporation. 80
On the other hand, Teodoro Borlongan, Corazon M. Bejasa, Arturo Manuel, Jr., Ben Y. Lim, Jr., and P. Siervo H. Dizon (the Borlongan Group) 81 reiterated similar arguments as those of the De Leon Group, adding that the claimed compensation of 10% of the purchase price of the Pasay property was not reasonable. 82
Pea refuted all of their arguments 83 and prayed that the trial courts Decision be affirmed. 84
Acting favorably on the appeal, the Court of Appeals 85 annulled the Decision of the RTC-Bago City and ruled that no agency relationship had been created. Nevertheless, it ordered Urban Bank to reimburse Pea for his expenses and to give him reasonable compensation for his efforts in clearing the Pasay property of tenants in the amount of PhP3,000,000, but absolved the bank directors and officers from solidary liability. The dispositive portion of the CA decision reads as follows: WHEREFORE, in view of the foregoing considerations, the May 28, 2000 Decision [sic] and the October 19, 2000 [sic] Special Order of the RTC of Bago City, Branch 62, 86 are hereby ANNULLED AND SET ASIDE. However, the plaintiff-appellee [Pea] in CA GR CV No. 65756 is awarded the amount of P3 Million as reimbursement for his expenses as well as reasonable compensation for his efforts in clearing Urban Banks property of unlawful occupants. The award of exemplary damages, attorneys fees and costs of suit are deleted, the same not having been sufficiently proven. The petition for Indirect Contempt against all the respondents is DISMISSED for utter lack of merit. 87 (Emphasis supplied) Pea duly filed a Motion for Reconsideration of the unfavorable CA Decision. 88 The appellate court, however, denied his motion. 89 The CA Decision and Resolution were appealed by Pea to this Court, through one of the three consolidated Rule 45 Petitions before us (G. R. No. 162562). Execution Pending Appeal On 07 June 1999, prior to the filing of the notice of appeal of Urban Bank and individual bank officers, 90 Pea moved for execution pending appeal 91 of the Decision rendered by the RTC-Bago City, 92 which had awarded him a total of PhP28,500,000 in compensation and damages. 93
In supporting his prayer for discretionary execution, Pea cited the pending separate civil action for collection filed against him by his creditor-friend, who was demanding payment of a PhP3,000,000 loan. 94 According to Pea, he had used the proceeds of the loan for securing the banks Pasay property. No other reason for the prayer for execution pending appeal was given by Pea other than this collection suit. 95
In opposition to the motion, Urban Bank countered that the collection case was not a sufficient reason for allowing execution pending appeal. 96
On 29 October 1999, the RTC-Bago City, through Judge Henry J. Trocino, 97 favorably granted Peas motion and issued a Special Order authorizing execution pending appeal. 98 In accordance with this Special Order, Atty. Josephine Mutia-Hagad, the clerk of court and ex officio sheriff, issued a Writ of Execution 99 on the same day. 100 The Special Order and Writ of Execution were directed at the properties owned by Urban Bank as well as the properties of the eight individual bank directors and officers. On 04 November 1999, affected by the trial courts grant of execution pending appeal, Urban Bank 101 filed a Rule 65 Petition with the CA to enjoin the Special Order and Writ of Execution issued by the trial court with a prayer for a TRO. 102
On 09 November 1999, the appellate court favorably granted the TRO and preliminarily prohibited the implementation of the Special Order and Writ of Execution. 103
On 12 January 2000, the CA eventually granted Urban Banks Rule 65 Petition, and the RTCs Special Order and Writ of Execution, which permitted execution pending appeal, were annulled. The appellate court ruled: 104
WHEREFORE, the instant petition is GRANTED. The Special Order and writ of execution, both dated October 29, 1999, are ANNULLED and SET ASIDE. Respondents are directed to desist from further implementing the writ of execution and to lift the garnishment and levy made pursuant thereto. 105
On 02 February 2000, Pea moved for the reconsideration of the CAs Decision; 106 while petitioners filed their corresponding Comment/Opposition thereto. 107
During the pendency of Peas Motion for Reconsideration, Urban Bank declared a bank holiday on 26 April 2000 and was placed under receivership of the Philippine Deposit Insurance Corporation (PDIC). 108
In its Amended Decision dated 18 August 2000, the CA 109 favorably granted Peas Motion for Reconsideration, and reversed its earlier Decision to allow execution pending appeal. 110 The appellate court found that the bank holiday declared by the BSP after the promulgation of its earlier Decision, PDICs receivership of Urban Bank, and the imminent insolvency thereof constituted changes in the banks conditions that would justify execution pending appeal. 111
On 29 August 2000, Urban Bank and its officers moved for the reconsideration of the Amended Decision. 112 The De Leon Group subsequently filed several Supplemental Motions for Reconsideration. 113 Thereafter, respondents Teodoro Borlongan and Corazon M. Bejasa also filed their separate Supplemental Motion for Reconsideration, 114 as did petitioner Ben T. Lim, Jr. 115
On 19 October 2000, the Court of Appeals denied the motion for reconsideration for lack of merit and the other subsequent Supplemental Motions for Reconsideration for being filed out of time. 116 The appellate court also ordered Pea to post an indemnity bond. 117 The Amended Decision and the Resolution were the subjects of several Rule 45 Petitions filed by Urban Bank and individual petitioners (G. R. Nos. 145817, 145818 and 145822). On the same day the CA denied its Motion for Reconsideration, the De Leon Group immediately moved for the stay of execution pending appeal upon the filing of a supersedeas bond. 118
On 31 October 2000, the CA 119 granted the stay of the execution upon the filing by the De Leon Group of a PhP40,000,000 bond in favor of Pea. 120 Pea moved for the reconsideration of the stay order. 121
1avvphil In its Resolution dated 08 December 2000, 122 the appellate court denied Peas Motion for Reconsideration and a stay order over the execution pending appeal was issued in favor of the De Leon Group, after they had filed their supersedeas bond. 123 The stay of execution pending appeal, however, excluded Urban Bank. 124
On 08 December 2000, Pea posted his indemnity bond as required by the CA. 125
As mentioned earlier, Urban Bank, the De Leon Group, and the Borlongan Group filed around December 2000 separate Rule 45 Petitions in this Court, to assail the unfavorable CA Amended Decision and Resolution that affirmed the execution pending appeal. The details of these Rule 45 Petitions will be discussed in detail later on. In the meantime, Export and Industry Bank (EIB) submitted its proposal for rehabilitation of Urban Bank to the BSP, and requested that the troubled bank be removed from receivership of the PDIC. On 12 July 2001, or almost a year after the Court of Appeals amended its decision to allow execution pending appeal, the rehabilitation plan of Urban Bank was approved by the Monetary Board of the BSP. 126 Thus, the Monetary Board subsequently lifted PDICs statutory receivership of the bank. 127
On 14 September 2001, Urban Bank, trying to follow the lead of the De Leon Group, made a similar request with the Court of Appeals for approval of its own supersedeas bond, 128 for the same amount of PhP40,000,000, and prayed that the execution of the RTC-Bago Citys Decision against it be stayed as well. 129
Sometime in September and October 2001, Urban Bank began receiving notices of levy and garnishment over its properties. After it received Notice of the impending public execution sale of its shares in the Tagaytay Highlands International Golf Club, 130 Urban Bank reiterated its request for the approval of the supersedeas bond with the Court of Appeals and the issuance of the corresponding stay order. 131
The appellate court, however, merely noted Urban Banks motion on the ground that there was no showing whether a petition to the Supreme Court had been filed or given due course or denied. 132
After the denial by the Court of Appeals of Urban Banks motion for approval of its supersedeas bond, some of the levied properties of Urban Bank and the other bank officers were sold on public auction. The table below lists the properties that appear on record to have been levied and/or sold on execution pending appeal and the approximate value of some of these properties. They do not include properties covered by the Petition docketed as G. R. No. 145818. Table of Levied, Garnished and/or Executed Properties Pending Appeal 1avvphi1 Owner/ Defendant Property Description Estimated Value or Price at Public Auction Total Amount Remarks Urban Bank Three Club Shares Tagaytay Highlands International Golf Club 133
As of 06 December 1999, one share was selling at P1.6 Million. 134
4,800,000 Three Club Shares in Makati Sports, Club, Inc. (MSCI) [Covered by Stock Certificate Nos. A-1893, A- 2305 and B- 762] 135
As of 06 December 1999, MSCI Club Shares "A" and "B" were selling at PhP650,000 and PhP700,000, respectively. 136
2,000,000 137 Atty. Pea was one of the winning bidders in the auction sale together with his creditor friend, Roberto Ignacio, and Atty. Ramon Ereeta. 85 Condominium Units in the Urban Bank Plaza, Makati City 138
The highest bid price obtained for the condominium units was PhP1M at the time of the execution sale. 139
85,000,000 Intervenor Unimega purchased the 10 condominium units in the auction sale for P1M each or a total of P10 M. 140
A 155 sqm. condominium unit, Makati City (CCT No. 57697) 141
Estimates are based on report of Urban Bank 142
12,400,000 A 12.5 sqm. condominium parking space (Parking Three, Unit P-46) in Makati City (CCT No. 57698) 143
500,000 A 64,677 sqm. land in Tagaytay City (TCT No. 20471) 144
Value based on estimate of Urban Bank 145
35,572,350 Teodoro Borlongan One Club Share in Manila Polo Club (No. 3433) 146
Borlongans club share was estimated to be valued at P1,000,000. 147
1,000,000 Notice of Sale on Execution on Personal Property dated 25 August 2000 148
One Club Share in Subic Bay Yacht Club 149
One club share was estimated to be valued at P500,000. 150
500,000 One Club Share in Baguio Country Club 151
As of 06 December 1999, one share was selling at P870,000. 152
870,000 One Club Share in MSCI 153
As of 06 December 1999, MSCI Club Shares "A" and "B" were selling at PhP650,000 and PhP700,000 respectively. 154
650,000 Real Property 155 No estimate available on record.
Delfin C. Gonzales, Jr. One Club Share in Manila Polo Club (No. 3818) 156
Gonzales club share was estimated to be valued at P4,000,000. 157
4,000,000 Notice of Sale on Execution on Personal Property dated 25 August 2000 158
One Club Share in Baguio Country Club. 159
Gonzales club share was estimated to be valued at P1,077,000. 160
1,077,000 One Club Share in Alabang Country Club (Member No. 550) 161
Gonzales club share was estimated to be valued at P2,000,000. 162
2,000,000 30,585 shares of stock in D. C. Gonzales, Jr., Inc. 163
P20.00 per share 164
611,700 40 Shares of stock in D. C. Gonzales, Jr., Inc. 165
P50.00 per share 166
2,000 Benjamin L. de Leon One Club Share in Manila Polo Club (with Associate Membership) [No. 0597] 167
De Leons Share was estimated at P4 M for the share and P1.05 M for the associate membership. 168
5,050,000 Notice of Sale on Execution on Personal Property dated 25 August 2000 169
One Club Share in MSCI (Stock Certificate No. A-175) 170
De Leons share was estimated at P450,000. 171
450,000 One Club Share in Baguio Country Club (5523) 172
As of 06 December 1999, one share was selling at least P870,000. 173
870,000 P. Siervo G. Dizon
No records available as to properties levied, garnished or executed pending appeal. Eric L. Lee One Club Share in Manila Polo Club (2038) 174
Lees club share was estimated to be valued at P4,000,000. 175
4,000,000 Notice of Sale on Execution on Personal Property dated 25 August 2000 176
One Club Share in Manila Golf Club, Inc. 177
Lees club share was estimated to be valued at P15,750,000. 178
15,750,000 One Club Share in Sta. Elena Golf Club, Inc. (Class "A" Share) 179
Lees club share was estimated to be valued at P2,000,000. 180
2,000,000 Two Club Shares in Tagaytay Highlands Intl Golf Club, Inc. 181
Lees club shares were estimated to be valued at P1,000,000. 182
1,000,000 Notice of Sale on Execution on Personal Property dated 25 August 2000 183
One Club Share in Subic Yacht Club 184
Lees club share was estimated to be valued at P500,000. 185
500,000 60,757 Shares of stock in EQL Properties, Inc. 186
P20.00 per share 1,214,140 40 Shares of stock in EQL Properties, Inc. 187
P50.00 per share 2,000 Cash garnished from BPI Account 188
100,000 Ben T. Lim, Jr.
No records available as to properties levied, garnished or executed pending appeal. Corazon Bejasa Real Property 189
No estimated value.
Arturo Manuel, Jr., Real Property 190
No estimated value.
TOTAL VALUE 181,919,190 The sum of PhP181,919,190 does not include many other properties and it is not difficult to believe that the total value covered reached more than that. 191 In summary, the estimated values and/or purchase prices at the auction sale of the properties of Urban Bank and its officers amounted to no less than PhP181,919,190 already. This amounts to almost six times the value of the award given by the trial court. Otherwise stated, Pea, as judgment creditor, was overly secured by the levied and/or garnished properties for the amount of PhP28,500,000, where the judgment award was still subject of reversal on appeal. On 22 October 2001, Urban Bank, with respect to its pending Rule 45 Petition in this Court, moved for the approval of its PhP40,000,000 supersedeas bond 192 and requested that the Court stay the execution pending appeal. 193 Pea opposed the motion on the ground that it had already been rendered moot and academic by the sale of the properties of the bank. 194
On 23 October 2002, or almost a year after some of the condominium units were sold in a public auction, EIB, as the successor of Urban Bank, expressed to the sheriff of RTC- Bago City an intent to redeem the said condominium units. 195 Thus, EIB tendered three managers checks in the total amount of PhP22,108,800 196 to redeem the properties that were previously under the name of Urban Bank. 197 Although the trial court noted the banks Manifestation, 198 the sheriff returned the EIBs managers checks. Thus, on 29 October 2002, EIB, through a motion, was prompted to turn over the checks to the trial court itself. 199
When Urban Bank supposedly failed to redeem the condominium units according to the sheriff, 200 final Certificates of Sale were issued in favor of Unimega on 04 November 2002. 201 Upon the latters motion, RTC-Bago City, in its Order dated 13 November 2002, ordered the Register of Deeds of Makati to transfer the Condominium Certificates of Title to the name of Unimega. 202 It has not been shown, though, whether this Order was followed. This Court, acting on Urban Banks earlier motion to approve its supersedeas bond, granted the same in its Resolution dated 19 November 2001. 203 Pea moved for reconsideration of the approval, 204 but his motion was subsequently denied by the Court. 205
Proceedings in the Supreme Court (G. R. Nos. 145817, 145818 & 145822) On 21 December 2000, Urban Bank, 206 represented by its receiver, PDIC, 207 filed a Rule 45 Petition with this Court (docketed as G. R. No. 145817) to assail the CAs Amended Decision and Resolution granting execution pending appeal. 208 In response, Pea moved for the denial of the petition on the grounds of lack merit, violation of the rule against forum shopping, and non-payment of docket fees, among others. 209 In a separate Comment, 210 Pea also argued that the appellate court had committed no error when it considered the banks "imminent insolvency" as a good reason for upholding the validity of the execution pending appeal. On the other hand, the Borlongan Group 211 filed a separate Rule 45 Petition questioning the same Decision and Resolution, docketed as G. R. No. 145818. 212 This Court initially denied their petition on the ground that it failed to sufficiently show that the CA committed reversible order. 213 The Borlongan Group twice moved for the reconsideration of the denial of their petition; but the Court nonetheless denied both motions for lack of merit. 214 This denial of the petition in G. R. No. 145818 became final and executory, with the issuance of the Entry of Judgment. 215
Meanwhile, another Rule 45 Petition (G. R. No. 145822) 216 was filed by the De Leon Group, assailing the same Decisions of the appellate court. The Court also preliminarily denied this petition on the ground that the De Leon Group failed to file the appeal within the reglementary period and to pay certain fees. 217
Despite the denial of the Rule 45 Petition in G. R. No. 145822 filed by the De Leon Group, the Court nonetheless ordered that the case be consolidated with Urban Banks own Rule 45 Petition in G. R. No. 145817. 218 The Court subsequently gave due course to both of these petitions. 219 In compliance with the Courts Order, 220 Urban Bank 221 and the De Leon Group 222 filed their respective Memoranda. As detailed earlier, the Court granted and approved Urban Banks supersedeas bond and stayed the execution pending appeal. Considering the favorable stay of execution pending appeal, EIB, as the new owner and successor of Urban Bank, immediately wrote to tell 223 the corporate secretary of MSCI not to effect the cancellation or transfer of Urban Banks three MSCI stock certificates previously sold in a public auction. 224 In reply, MSCI explained that since there was no injunction or stay order, it had no other option but to comply with the trial courts Order for the transfer. Eventually, however, it could not effect the transfer of one of the shares to Pea because a club share had already been previously registered in his name, and the clubs bylaws prohibited a natural person from owning more than one share. 225 Meanwhile, one of the winning bidders in the public auction sale of the MSCI shares wrote to the latter to demand that the club share previously owned by Urban Bank be transferred to him. 226
On 04 February 2002, considering the conflicting claims of Urban Bank (through EIB) and the winning bidders of the club shares, MSCI filed a Motion for Clarification of the Courts Resolution staying the execution pending appeal. 227
In its Motion for Clarification dated 06 August 2002, Urban Bank likewise requested clarification of whether the stay order suspended, as well, its right to redeem the properties sold at a public auction. 228 The copy of Urban Banks motion for clarification intended for Pea was mistakenly sent to the wrong counsel. In its Resolution dated 13 November 2002, the Court explained that its earlier stay order prohibited the MSCI from transferring the shares, and that the one-year period for redemption of the banks properties was likewise suspended: WHEREFORE, the Court hereby RESOLVES to clarify that as a consequence of its approval of the supersedeas bond, the running of the one-year period for petitioner Urban Bank to redeem the properties sold at the public auctions held on October 4, 11 and 25, 2001 as well as the consolidation of the titles in favor of the buyers, is SUSPENDED OR STAYED. MSCI is also prohibited from transferring petitioner Urban Banks MSCI club shares to the winning bidders in the execution sale held on October 11, 2001. 229 (Emphasis supplied) On 09 December 2002, Pea moved that the Courts Resolution be recalled, because he was not given an opportunity to be heard on Urban Banks Motion for Clarification, which was sent to a different counsel. 230 Interposing its objection, the bank argued that the error in mistakenly sending the Motion for clarification to a different counsel was by sheer inadvertence, 231 but Pea was nonetheless aware of the motion, and that the Courts clarification did not create or diminish his rights in any case. 232
The Motion for Clarification filed by Urban Bank, the Courts Resolution dated 13 November 2002 and Peas Omnibus Motion praying for the recall of the said Resolution became the subject of an administrative case (Administrative Case No. 6332), which was treated as a separate matter and later on de-consolidated with the instant Petitions. 233 The Court had even called for an executive session 234 in which Pea, among others, appeared and was questioned by the then members of the Courts First Division, namely retired Chief Justice Hilario Davide, Justices Jose Vitug, Antonio Carpio and Adolfo Azcuna. Although the Petitions had earlier been assigned to Justice Carpio, he has since taken no part in the proceedings of this case and this resulted in the re-raffling of the Petitions. The transfer and unloading of the case by the subsequently assigned Justices as well as Peas numerous motions for inhibition and/or re-raffle has likewise cause considerable delay in the disposition of the instant Petitions and the Administrative Case. Unimega, which was the winning bidder of some of the publicly executed condominium units of Urban Bank, moved to intervene in the case and to have the Courts same Resolution suspending the one-year period of redemption of the properties be reconsidered. 235 Unimega claimed that ownership of the banks titles to the 10 condominium units had already been transferred to the former at the time the Court issued the Resolution; and, thus, there was no more execution to be suspended or stayed. Only Urban Bank 236 opposed the motion 237 of intervenor Unimega on the ground that the latter was not a buyer in good faith, and that the purchase price was grossly disproportional to the fair market value of the condominium units. 238
The Court eventually granted the Motion to Intervene considering that the intervenors title to the condominium units purchased at the public auction would be affected, favorably or otherwise, by the judgment of the Court in this case. However, it held in abeyance the resolution of intervenors Motion for Reconsideration, which might preempt the decision with respect to the propriety of execution pending appeal. 239 Thereafter, the bank adopted its earlier Opposition to the intervention as its answer to Unimegas petition-in-intervention. 240 Also in answer thereto, the De Leon Group adopted its earlier Manifestation and Comment. 241
Intervenor Unimega then requested that a writ of possession be issued in its favor covering the 10 condominium units sold during the public auction. 242 The Court required the parties to file their comments on the request. 243 The Lim 244 and Borlongan Groups 245 manifested separately that they would not be affected by a resolution of the request of intervenor Unimega, since the latter was not among the contending parties to the incident. Pea similarly interposed no objection to the issuance of the writ of possession. 246 In contrast, Urban Bank opposed the application of Unimega on the ground that the latter was not entitled to possession of the levied properties, because the rules of extrajudicial foreclosure were not applicable to execution sales under Rule 39, and that intervenor was also not a buyer in good faith. 247 In a similar vein, the De Leon Group opposed the application for a writ of possession, and further argued that the Court had already suspended the running of the one-year period of redemption in the execution sale. 248 Accordingly, intervenor Unimega countered that the right of redemption of the levied properties had already expired without having been exercised by the judgment debtor. 249
In summary, the Court shall resolve the substantial issues in the following: (a) the Petition of Pea (G. R. No. 162562) assailing the CAs decision on the substantive merits of the case with respect to his claims of compensation based on an agency agreement; and (b) the Petitions of Urban Bank (G. R. No. 145817) and the De Leon Group (G R. No. 145822) questioning the propriety of the grant of execution pending appeal. OUR RULING I Pea is entitled to payment for compensation for services rendered as agent of Urban Bank, but on the basis of the principles of unjust enrichment and quantum meruit, and not on the purported oral contract. The Court finds that Pea should be paid for services rendered under the agency relationship that existed between him and Urban Bank based on the civil law principle against unjust enrichment, but the amount of payment he is entitled to should be made, again, under the principle against unjust enrichment and on the basis of quantum meruit. In a contract of agency, agents bind themselves to render some service or to do something in representation or on behalf of the principal, with the consent or authority of the latter. 250 The basis of the civil law relationship of agency is representation, 251 the elements of which include the following: (a) the relationship is established by the parties consent, express or implied; (b) the object is the execution of a juridical act in relation to a third person; (c) agents act as representatives and not for themselves; and (d) agents act within the scope of their authority. 252
Whether or not an agency has been created is determined by the fact that one is representing and acting for another. 253 The LAW MAKES NO PRESUMPTION OF AGENCY; proving its existence, nature and extent is incumbent upon the person alleging it. 254
With respect to the status of Atty. Peas relationship with Urban Bank, the trial and the appellate courts made conflicting findings that shall be reconciled by the Court. On one end, the appellate court made a definitive ruling that no agency relationship existed at all between Pea and the bank, despite the services performed by Pea with respect to the Pasay property purchased by the bank. Although the Court of Appeals ruled against an award of agents compensation, it still saw fit to award Pea with Ph3,000,000 for expenses incurred for his efforts in clearing the Pasay property of tenants. 255 On the other extreme, the trial court heavily relied on the sole telephone conversation between Pea and Urban Banks President to establish that the principal-agent relationship created between them included an agreement to pay Pea the huge amount of PhP24,000,000. In its defense, Urban Bank insisted that Pea was never an agent of the bank, but an agent of ISCI, since the latter, as seller of the Pasay property committed to transferring it free from tenants. Meanwhile, Pea argues on the basis of his successful and peaceful ejectment of the sub-tenants, who previously occupied the Pasay property. Based on the evidence on records and the proceedings below, the Court concludes that Urban Bank constituted Atty. Pea as its agent to secure possession of the Pasay property. This conclusion, however, is not determinative of the basis of the amount of payment that must be made to him by the bank. The context in which the agency was created lays the basis for the amount of compensation Atty. Pea is entitled to. The transactional history and context of the sale between ISCI and Urban Bank of the Pasay property, and Atty. Peas participation in the transfer of possession thereof to Urban Bank provide crucial linkages that establish the nature of the relationship between the lawyer and the landowner-bank. The evidence reveals that at the time that the Contract to Sell was executed on 15 November 1994, and even when the Deed of Absolute Sale was executed two weeks later on 29 November 1994, as far as Urban Bank was concerned, Pea was nowhere in the picture. All discussions and correspondences were between the President and Corporate Secretary of Urban Bank, on one hand, and the President of ISCI, on the other. The title to the Pasay property was transferred to Urban Bank on 5 December 1994. Interestingly, Pea testifies that it was only on 19 December 1994 that he learned that the land had already been sold by ISCI to Urban Bank, notwithstanding the fact that Pea was a director of ISCI. Pea was not asked to render any service for Urban Bank, neither did he perform any service for Urban Bank at that point. ISCI undertook in the Contract to Sell, to physically deliver the property to Urban Bank, within 60 days from 29 November 1994, 256 under conditions of "full and actual possession and control ..., free from tenants, occupants, squatters or other structures or from any liens, encumbrances, easements or any other obstruction or impediment to the free use and occupancy by the buyer of the subject Property or its exercise of the rights to ownership over the subject Property...." 257 To guarantee this undertaking, ISCI agreed to the escrow provision where PhP25,000,000 (which is a little over 10% of the value of the Pasay property) would be withheld by Urban Bank from the total contract price until there is full compliance with this undertaking. Apparently to ensure that ISCI is able to deliver the property physically clean to Urban Bank, it was ISCIs president, Enrique Montilla who directed on 26 November 1994 one of its directors, Pea, to immediately recover and take possession of the property upon expiration of the contract of lease on 29 November 1994. 258 Pea thus first came into the picture as a director of ISCI who was constituted as its agent to recover the Pasay property against the lessee as well as the sub-tenants who were occupying the property in violation of the lease agreement. 259 He was able to obtain possession of the property from the lessee on the following day, but the unauthorized sub-tenants refused to vacate the property. It was only on 7 December 1994, that Urban Bank was informed of the services that Pea was rendering for ISCI. The faxed letter from ISCIs Marilyn Ong reads: Atty. Magdaleno M. Pea, who has been assigned by Isabela Sugar Company, Inc., to take charge of inspecting the tenants would like to request an authority similar to this from the Bank, as new owners. Can you please issue something like this today as he needs this. 260
Two days later, on 9 December 1994, ISCI sent Urban Bank another letter that reads: Dear Mr. Borlongan, I would like to request for an authorization from Urban Bank as per attached immediately as the tenants are questioning the authority of the people there who are helping us to take over possession of the property. (Emphasis supplied) 261
It is clear from the above that ISCI was asking Urban Bank for help to comply with ISCIs own contractual obligation with the bank under the terms of the sale of the Pasay property. Urban Bank could have ignored the request, since it was exclusively the obligation of ISCI, as the seller, to deliver a clean property to Urban Bank without any help from the latter. A full-bodied and confident interpretation of the contracts between ISCI and Urban Bank should have led the latter to inform the unauthorized sub-tenants that under its obligation as seller to Urban Bank, it was under duty and had continuing authority to recover clean possession of the property, despite the transfer of title. Yet, what unauthorized sub-tenant, especially in the kind of operations being conducted within the Pasay property, would care to listen or even understand such argument? Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble that it would reap in the process. In an apparent attempt to allow the efforts of ISCI to secure the property to succeed, it recognized Peas role in helping ISCI, but stopped short of granting him authority to act on its behalf. In response to the two written requests of ISCI, Urban Bank sent this letter to Pea on 15 December 1994: This is to advise you that we have noted the engagement of your services by Isabela Sugar Company to recover possession of the Roxas Boulevard property formerly covered by TCT No. 5382, effective November 29, 1994. It is understood that your services have been contracted by and your principal remains to be the Isabela Sugar Company, which as seller of the property and under the terms of our Contract to Sell dated November 29, 1994, has committed to deliver the full and actual possession of the said property to the buyer, Urban Bank, within the stipulated period. 262 (Emphasis supplied) Up to this point, it is unmistakable that Urban Bank was staying clear from making any contractual commitment to Pea and conveyed its sense that whatever responsibilities arose in retaining Pea were to be shouldered by ISCI. According to the RTC-Bago City, in the reversed Decision, Atty. Pea only knew of the sale between ISCI and Urban Bank at the time the RTC-Pasay City recalled the TRO and issued a break-open order: " when information reached the (Pasay City) judge that the Pasay property had already been transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for the property. According to Pea, it was the first time that he was apprised of the sale of the land by ISCI and of the transfer of its title in favor of the bank." 263
There is something contradictory between some of the trial courts factual findings and Peas claim that it was only on 19 December 1994 that he first learned of the sale of the property to Urban Bank. It is difficult to believe Pea on this point considering: (1) that he was a board director of ISCI and a sale of this significant and valuable property of ISCI requires the approval of the board of directors of ISCI; and (2) that ISCI twice requested Urban Bank for authority to be issued in his favor (07 and 9 December 1994), 12 and 10 days before 19 December 1994, since it would be contrary to human experience for Pea not to have been informed by an officer of ISCI beforehand that a request for authority for him was being sent to Urban Bank. The sequence of fast-moving developments, edged with a sense of panic, with respect to the decision of the RTC-Pasay City to recall the temporary restraining order and issue a break-open order on 19 December 1994 in the First Injunction Complaint, is highly enlightening to this Court. First, Pea allegedly called up the president of ISCI, Montilla, who, according to Pea, confirmed to him that the Pasay property had indeed been sold to Urban Bank. Second, Pea allegedly told Montilla that he (Pea) would be withdrawing his guards from the property because of the break-open order from the RTC-Pasay City. Third, Montilla requested Pea to suspend the withdrawal of the guards while ISCI gets in touch with Urban Bank. Fourth, apparently in view of Montillas efforts, Bejasa, an officer of Urban Bank called Pea and according to the latter, told him that Urban Bank would continue retaining his services and for him to please continue with his effort to secure the property. Fifth, this statement of Bejasa was not enough for Pea and he insisted that he be enabled to talk with no less than the President of Urban Bank, Borlongan. At this point, Bejasa gave him the phone number of Borlongan. Sixth, immediately after the conversation with Bejasa, Pea calls Borlongan and tells Borlongan that violence might erupt in the property because the Pasay City policemen, who were sympathetic to the tenants, were threatening to force their way through the property. At this point, if indeed this conversation took place, which Borlongan contests, what would have been the response of Borlongan? Any prudent president of a bank, which has just purchased a PhP240,000,000 property plagued by unauthorized and unruly sub-tenants of the previous owner, would have sought to continue the possession of ISCI, thru Pea, and he would have agreed to the reasonable requests of Pea. Borlongan could also have said that the problem of having the sub-tenants ejected is completely ISCIs and ISCI should resolve the matter on its own that without bothering the bank, with all its other problems. But the specter of violence, especially as night was approaching in a newly-bought property of Urban Bank, was not something that any publicly-listed bank would want publicized. To the extent that the violence could be prevented by the president of Urban Bank, it is expected that he would opt to have it prevented. But could such response embrace the following legal consequences as Pea claims to have arisen from the telephone conversation with Borlongan: (1) A contract of agency was created between Pea and Urban Bank whereby Borlongan agreed to retain the services of Pea directly; (2) This contract of agency was to be embodied in a written letter of authority from Urban Bank; and (3) The agency fee of Pea was to be 10% of the market value as "attorneys fees and compensation" and reimbursement of all expenses of Pea from the time he took over the land until possession is turned over to Urban Bank. This Court concludes that the legal consequences described in statements (1) and (2) above indeed took place and that the facts support them. However, the evidence does not support Peas claim that Urban Bank agreed to "attorneys fees and compensation" of 10% of the market value of the property. Urban Banks letter dated 19 December 1994 confirmed in no uncertain terms Peas designation as its authorized representative to secure and maintain possession of the Pasay property against the tenants. Under the terms of the letter, petitioner-respondent bank confirmed his engagement (a) "to hold and maintain possession" of the Pasay property; (b) "to protect the same from former tenants, occupants or any other person who are threatening to return to the said property and/or interfere with your possession of the said property for and in our behalf"; and (c) to represent the bank in any instituted court action intended to prevent any intruder from entering or staying in the premises. 264
These three express directives of petitioner-respondent banks letter admits of no other construction than that a specific and special authority was given to Pea to act on behalf of the bank with respect to the latters claims of ownership over the property against the tenants. Having stipulated on the due execution and genuineness of the letter during pretrial, 265 the bank is bound by the terms thereof and is subject to the necessary consequences of Peas reliance thereon. No amount of denial can overcome the presumption that we give this letter that it means what it says. In any case, the subsequent actions of Urban Bank resulted in the ratification of Peas authority as an agent acting on its behalf with respect to the Pasay property. By ratification, even an unauthorized act of an agent becomes an authorized act of the principal. 266
Both sides readily admit that it was Pea who was responsible for clearing the property of the tenants and other occupants, and who turned over possession of the Pasay property to petitioner-respondent bank. 267 When the latter received full and actual possession of the property from him, it did not protest or refute his authority as an agent to do so. Neither did Urban Bank contest Peas occupation of the premises, or his installation of security guards at the site, starting from the expiry of the lease until the property was turned over to the bank, by which time it had already been vested with ownership thereof. Furthermore, when Pea filed the Second Injunction Complaint in the RTC-Makati City under the name of petitioner-respondent bank, the latter did not interpose any objection or move to dismiss the complaint on the basis of his lack of authority to represent its interest as the owner of the property. When he successfully negotiated with the tenants regarding their departure from its Pasay property, still no protest was heard from it. After possession was turned over to the bank, the tenants accepted PhP1,500,000 from Pea, in "full and final settlement" of their claims against Urban Bank, and not against ISCI. 268
In all these instances, petitioner-respondent bank did not repudiate the actions of Pea, even if it was fully aware of his representations to third parties on its behalf as owner of the Pasay property. Its tacit acquiescence to his dealings with respect to the Pasay property and the tenants spoke of its intent to ratify his actions, as if these were its own. Even assuming arguendo that it issued no written authority, and that the oral contract was not substantially established, the bank duly ratified his acts as its agent by its acquiescence and acceptance of the benefits, namely, the peaceful turnover of possession of the property free from sub-tenants. Even if, however, Pea was constituted as the agent of Urban Bank, it does not necessarily preclude that a third party would be liable for the payment of the agency fee of Pea. Nor does it preclude the legal fact that Pea while an agent of Urban Bank, was also an agent of ISCI, and that his agency from the latter never terminated. This is because the authority given to Pea by both ISCI and Urban Bank was common to secure the clean possession of the property so that it may be turned over to Urban Bank. This is an ordinary legal phenomenon that an agent would be an agent for the purpose of pursuing a shared goal so that the common objective of a transferor and a new transferee would be met. Indeed, the Civil Code expressly acknowledged instances when two or more principals have granted a power of attorney to an agent for a common transaction. 269 The agency relationship between an agent and two principals may even be considered extinguished if the object or the purpose of the agency is accomplished. 270 In this case, Peas services as an agent of both ISCI and Urban Bank were engaged for one shared purpose or transaction, which was to deliver the property free from unauthorized sub- tenants to the new owner a task that Pea was able to achieve and is entitled to receive payment for. That the agency between ISCI and Pea continued, that ISCI is to shoulder the agency fee and reimbursement for costs of Pea, and that Urban Bank never agreed to pay him a 10% agency fee is established and supported by the following: First, the initial agency relationship between ISCI and Pea persisted. No proof was ever offered that the letter of 26 November 1994 of Mr. Montilla of ISCI to Pea, for the latter "to immediately recover and take possession of the property upon expiration of the contract of lease on 29 November 1994" was terminated. It is axiomatic that the appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent. 271 If it is true that the agency relationship was to be borne by Urban Bank alone, Pea should have demonstrated that his previous agency relationship with ISCI is incompatible with his new relationship with Urban Bank, and was thus terminated. Second, instead, what is on the record is that ISCI confirmed the continuation of this agency between Pea and itself and committed to pay for the services of Pea, in its letter to Urban Bank dated 19 December 1994 which reads: In line with our warranties as the Seller of the said property and our undertaking to deliver to you the full and actual possession and control of said property, free from tenants, occupants or squatters and from any obstruction or impediment to the free use and occupancy of the property by Urban Bank, we have engaged the services of Atty. Magdaleno M. Pea to hold and maintain possession of the property and to prevent the former tenants or occupants from entering or returning to the premises. In view of the transfer of the ownership of the property to Urban Bank, it may be necessary for Urban Bank to appoint Atty. Pea likewise as its authorized representative for purposes of holding/maintaining continued possession of the said property and to represent Urban Bank in any court action that may be instituted for the abovementioned purposes. It is understood that any attorneys fees, cost of litigation and any other charges or expenses that may be incurred relative to the exercise by Atty. Pea of his abovementioned duties shall be for the account of Isabela Sugar Company and any loss or damage that may be incurred to third parties shall be answerable by Isabela Sugar Company. 272 (Emphasis supplied) Third, Pea has never shown any written confirmation of his 10% agency fee, whether in a note, letter, memorandum or board resolution of Urban Bank. An agency fee amounting to PhP24,000,000 is not a trifling amount, and corporations do not grant their presidents unilateral authority to bind the corporation to such an amount, especially not a banking corporation which is closely supervised by the BSP for being a business seriously imbued with public interest. There is nothing on record except the self-serving testimony of Pea that Borlongan agreed to pay him this amount in the controverted telephone conversation. Fourth, while ordinarily, uncontradicted testimony will be accorded its full weight, we cannot grant full probative value to the testimony of Pea for the following reasons: (a) Pea is not a credible witness for testifying that he only learned of the sale of the property of 19 December 1994 when the acts of ISCI, of Urban Bank and his own up to that point all indicated that he must have known about the sale to Urban Bank; and (b) it is incredible that Urban Bank will agree to add another PhP24,000,000 to the cost of the property by agreeing to the agency fee demanded by Pea. No prudent and reasonable person would agree to expose his corporation to a new liability of PhP24,000,000 even if, in this case, a refusal would lead to the Pasay City policemen and unauthorized sub- tenants entering the guarded property and would possibly erupt in violence. Peas account of an oral agreement with Urban Bank for the payment of PhP24,000,000 is just too much for any court to believe. Whatever may be the agreement between Pea and ISCI for compensation is not before this Court. This is not to say, however, that Urban Bank has no liability to Pea. It has. Payment to him is required because the Civil Code demands that no one should be unjustly enriched at the expense of another. This payment is to be measured by the standards of quantum meruit. Amount of Compensation Agency is presumed to be for compensation. But because in this case we find no evidence that Urban Bank agreed to pay Pea a specific amount or percentage of amount for his services, we turn to the principle against unjust enrichment and on the basis of quantum meruit. Since there was no written agreement with respect to the compensation due and owed to Atty. Pea under the letter dated 19 December 1994, the Court will resort to determining the amount based on the well-established rules on quantum meruit. Agency is presumed to be for compensation. 273 Unless the contrary intent is shown, a person who acts as an agent does so with the expectation of payment according to the agreement and to the services rendered or results effected. 274 We find that the agency of Pea comprised of services ordinarily performed by a lawyer who is tasked with the job of ensuring clean possession by the owner of a property. We thus measure what he is entitled to for the legal services rendered. A stipulation on a lawyers compensation in a written contract for professional services ordinarily controls the amount of fees that the contracting lawyer may be allowed to collect, unless the court finds the amount to be unconscionable. 275 In the absence of a written contract for professional services, the attorneys fees are fixed on the basis of quantum meruit, 276 i.e., the reasonable worth of the attorneys services. 277 When an agent performs services for a principal at the latters request, the law will normally imply a promise on the part of the principal to pay for the reasonable worth of those services. 278 The intent of a principal to compensate the agent for services performed on behalf of the former will be inferred from the principals request for the agents. 279
In this instance, no extra-ordinary skills employing advanced legal training nor sophisticated legal maneuvering were required to be employed in ejecting 23 sub- tenants who have no lease contract with the property owner, and whose only authority to enter the premises was unlawfully given by a former tenant whose own tenancy has clearly expired. The 23 sub-tenants operated beer houses and nightclubs, ordinary retail establishments for which no sophisticated structure prevented easy entry. After Pea succeeded in locking the gate of the compound, the sub-tenants would open the padlock and resume their businesses at night. Indeed, it appears that only security guards, chains and padlocks were needed to keep them out. It was only the alleged connivance of Pasay City policemen that Peas ability to retain the possession was rendered insecure. And how much did it take Pea to enter into a settlement agreement with them and make all these problems go away? By Peas own account, PhP1,500,000 only. That means that each tenant received an average of PhP65,217.40 only. Surely, the legal services of Pea cannot be much more than what the sub-tenants were willing to settle for in the first place. We therefore award him the equivalent amount of PhP1,500,000 for the legal and other related services he rendered to eject the illegally staying tenants of Urban Banks property. The Court of Appeals correctly reversed the trial court and found it to have acted with grave abuse of discretion in granting astounding monetary awards amounting to a total of PhP28,500,000 without any basis. 280 For the lower court to have latched on to the self-serving claims of a telephone agreement as sufficient support for extending a multi- million peso award is highly irregular. Absent any clear basis for the amount of the lawyers compensation, the trial court should have instinctively resorted to quantum meruit, instead of insisting on a figure with circumstantial and spurious justification. We cannot also agree with the Decision penned by Judge Edgardo L. Catilo characterizing Penas 10% fee as believable because it is nearly congruent to the PhP25 Million retention money held in escrow for ISCI until a clean physical and legal turn-over of the property is effected: We now come to the reasonableness of the compensation prayed for by the plaintiff which is 10% of the current market value which defendants claim to be preposterous and glaringly excessive. Plaintiff [Pea] testified that defendant Borlongan agreed to such an amount and this has not been denied by Ted Borlongan. The term "current market value of the property" is hereby interpreted by the court to mean the current market value of the property at the time the contract was entered into. To interpret it in accordance with the submission of the plaintiff that it is the current market value of the property at the time payment is made would be preposterous. The only evidence on record where the court can determine the market value of the property at the time the contract of agency was entered into between plaintiff and defendant is the consideration stated in the sales agreement between Isabela Sugar Company, Inc. and Urban bank which is P241,612,000.00. Ten percent of this amount is a reasonable compensation of the services rendered by the plaintiff considering the "no cure, no pay" arrangement between the parties and the risks which plaintiff had to undertake. 281
In the first place, the Decision of Judge Catilo makes Peas demand of an agency fee of PhP24 Million, an additional burden on Urban Bank. The Decision does not make the retention money responsible for the same, or acquit Urban Bank of any liability to ISCI if it pays the PhP24 Million directly to Pena instead of ISCI. In the second place, the amount of money that is retained by transferees of property transactions while the transferor is undertaking acts to ensure a clean and peaceful transfer to the transferee does not normally approximate a one-to-one relationship to the services of ejecting unwanted occupants. They may be inclusive of other costs, and not only legal costs, with enough allowances for contingencies, and may take into consideration other liabilities as well. The amount can even be entirely arbitrary, and may have been caused by the practice followed by Urban Bank as advised by its officers and lawyers or by industry practice in cases where an expensive property has some tenancy problems. In other words, Judge Catilos statement is a non sequitur, is contrary to normal human experience, and sounds like an argument being made to fit Peas demand for a shocking pay-out. In any case, 10% of the purchase price of the Pasay property a staggering PhP24,161,200 is an unconscionable amount, which we find reason to reduce. Neither will the Court accede to the settlement offer of Pea to Urban Bank of at least PhP38,000,000 for alleged legal expenses incurred during the course of the proceedings, 282 an amount that he has not substantiated at any time. Lawyering is not a business; it is a profession in which duty to public service, not money, is the primary consideration. 283 The principle of quantum meruit applies if lawyers are employed without a price agreed upon for their services, in which case they would be entitled to receive what they merit for their services, or as much as they have earned. 284 In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, one may consider factors such as the time spent and extent of services rendered; novelty and difficulty of the questions involved; importance of the subject matter; skill demanded; probability of losing other employment as a result of acceptance of the proffered case; customary charges for similar services; amount involved in the controversy and the resulting benefits for the client; certainty of compensation; character of employment; and professional standing of the lawyer. 285
Hence, the Court affirms the appellate courts award of PhP3,000,000 to Pea, for expenses incurred corresponding to the performance of his services. An additional award of PhP1,500,000 is granted to him for the services he performed as a lawyer in securing the rights of Urban Bank as owner of the Pasay property. II The corporate officers and directors of Urban Bank are not solidarily or personally liable with their properties for the corporate liability of Urban Bank to Atty. Pea. The obligation to pay Peas compensation, however, falls solely on Urban Bank. Absent any proof that individual petitioners as bank officers acted in bad faith or with gross negligence or assented to a patently unlawful act, they cannot be held solidarily liable together with the corporation for services performed by the latters agent to secure possession of the Pasay property. Thus, the trial court had indeed committed grave abuse of discretion when it issued a ruling against the eight individual defendant bank directors and officers and its Decision should be absolutely reversed and set aside. A corporation, as a juridical entity, may act only through its directors, officers and employees. 286 Obligations incurred as a result of the acts of the directors and officers as corporate agents are not their personal liabilities but those of the corporation they represent. 287 To hold a director or an officer personally liable for corporate obligations, two requisites must concur: (1) the complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. 288 "To hold a director, a trustee or an officer personally liable for the debts of the corporation and, thus, pierce the veil of corporate fiction, bad faith or gross negligence by the director, trustee or officer in directing the corporate affairs must be established clearly and convincingly." 289
Pea failed to allege and convincingly show that individual defendant bank directors and officers assented to patently unlawful acts of the bank, or that they were guilty of gross negligence or bad faith. Contrary to his claim, the Complaint 290 in the lower court never alleged that individual defendants acquiesced to an unlawful act or were grossly negligent or acted in bad faith. 291 Neither is there any specific allegation of gross negligence or action in bad faith that is attributable to the individual defendants in performance of their official duties. In any event, Pea did not adduce any proof that the eight individual defendants performed unlawful acts or were grossly negligent or in bad faith. Aside from the general allegation that they were corporate officers or members of the board of directors of Urban Bank, no specific acts were alleged and proved to warrant a finding of solidary liability. At most, petitioners Borlongan, Bejasa and Manuel were identified as those who had processed the agency agreement with Pea through their telephone conversations with him and/or written authorization letter. Aside from Borlongan, Bejasa and Manuel, Atty. Pea in the complaint pointed to no specific act or circumstance to justify the inclusion of Delfin C. Gonzalez, Jr., Benjamin L. de Leon, P. Siervo H. Dizon, Eric L. Lee, and Ben T. Lim, Jr., except for the fact that they were members of the Board of Directors of Urban Bank at that time. That the five other members of the Board of Directors were excluded from Peas complaint highlights the peculiarity of their inclusion. What is more, the complaint mistakenly included Ben Y. Lim, Jr., who had not even been a member of the Board of Directors of Urban Bank. In any case, his father and namesake, Ben T. Lim, Sr., who had been a director of the bank at that time, had already passed away in 1997. In ruling for the solidary liability of the other bank directors, the decision of the trial court hinged solely on the purported admission of Arturo Manuel, Jr., that the transactions with Atty. Pea were approved by the Board of Directors: In this case, plaintiff testified as to the personal participation of defendants Ted Borlongan and Corazon Bejasa in the subject transaction. On the other hand, with respect to the other defendants, it was the defendants themselves, through witness Arturo Manuel, Jr., who admitted that all the transactions involved in this case were approved by the board of directors. Thus, the court has sufficient basis to hold the directors jointly and severally liable with defendant Urban Bank, Inc. 292 (Emphasis supplied) The Decision of the RTC-Bago City must be utterly rejected on this point because its conclusion of any cause of action, much less actual legal liability on the part of Urban Banks corporate officers and directors are shorn of any factual finding. That they assented to the transactions of the bank with respect to Atty. Peas services without any showing that these corporate actions were patently unlawful or that the officers were guilty of gross negligence or bad faith is insufficient to hold them solidarily liable with Urban Bank. It seems absurd that the trial court will hold the impleaded selected members of the Board of Directors only, but not the others who also purportedly approved the transactions. Neither is the reason behind the finding of "solidariness" with Urban Bank in such liability explained at all. It is void for completely being devoid of facts and the law on which the finding of liability is based. The Court of Appeals correctly rejected the claim of personal liability against the individual petitioners when it held as follows: The plaintiff-appellees complaint before the court a quo does not point to any particular act of either one or all of the defendants-appellants that will subject them to personal liability. His complaint merely asserts that defendant Borlongan and Atty. Bejasa acted for and in behalf of Urban Bank in securing his services in protecting the banks newly acquired property. Hence, We cannot allow the same. 293
Pea had argued that individual defendant bank directors and officers should be held personally and solidarily liable with petitioner-respondent bank, since they failed to argue for limited corporate liability. 294 The trial court subscribed to his reasoning and held that the failure to resort to the said defense constituted a waiver on the part of individual defendants. 295 The Court is not persuaded. As the complainant on the trial court level, Pea carried the burden of proving that the eight individual defendants performed specific acts that would make them personally liable for the obligations of the corporation. This he failed to do. He cannot capitalize on their alleged failure to offer a defense, when he had not discharged his responsibility of establishing their personal liabilities in the first place. This Court cannot sustain the individual liabilities of the bank officers when Pea, at the onset, has not persuasively demonstrated their assent to patently unlawful acts of the bank, or that they were guilty of gross negligence or bad faith, regardless of the weaknesses of the defenses raised. This is too basic a requirement that this Court must demand sufficient proof before we can disregard the separate legal personality of the corporation from its offices. Hence, only Urban Bank, not individual defendants, is liable to pay Peas compensation for services he rendered in securing possession of the Pasay property. Its liability in this case is, however, without prejudice to its possible claim against ISCI for reimbursement under their separate agreements. III Considering the absolute nullification of the trial courts Decision, the proceedings arising from the execution pending appeal based on the said Decision is likewise completely vacated. Since the trial courts main Decision awarding PhP28,500,000 in favor of Pea has been nullified above, the execution pending appeal attendant thereto, as a result, no longer has any leg to stand on and is thus completely vacated. To recall, prior to the filing of Urban Bank of its notice of appeal in the main case, 296 Pea moved on 07 June 1999 for execution pending appeal 297 of the Decision, 298 which had awarded him a total of PhP28,500,000 in compensation and damages. 299 In supporting his prayer for discretionary execution, Pea cited no other reason than the pending separate civil action for collection filed against him by a creditor, who was demanding payment of a PhP3,000,000 loan. 300 According to him, he had used the proceeds of the loan for securing the banks Pasay property. 301 In opposition to the motion, Urban Bank countered that the collection case was not a sufficient reason for allowing execution pending appeal. 302
Favorably acting on Peas motion, the RTC-Bago City, through Judge Henry J. Trocino, 303 issued a Special Order authorizing execution pending appeal on the basis of Peas indebtedness to his creditor-friend. 304 In accordance with this Special Order, Atty. Josephine Mutia-Hagad, the clerk of court and ex officio sheriff, expeditiously issued a Writ of Execution on the same day. 305 The trial courts Special Order and Writ of Execution were the subjects of a Rule 65 Petition filed by Urban Bank with the CA. 306
Both the Special Order and Writ of Execution are nullified for two reasons: (1) Since the Decision of the RTC-Bago City is completely vacated, all its issuances pursuant to the Decision, including the Special Order and the Writ of Execution are likewise vacated; and (2) The Special Order authorizing execution pending appeal based on the collection suit filed against Atty. Pea had no basis under the Rules of Court, and the same infirmity thus afflicts the Writ of Execution issued pursuant thereto. Since the Decision of the RTC-Bago City is vacated, all orders and writs pursuant thereto are likewise vacated. Considering that the Special Order and Writ of Execution was a result of the trial courts earlier award of PhP28,500,000, the nullification or complete reversal of the said award necessarily translates to the vacation as well of the processes arising therefrom, including all the proceedings for the execution pending appeal. Considering the unconscionable award given by the trial court and the unjustified imposition of solidary liability against the eight bank officers, the Court is vacating the Decision of the RTC-Bago City Decision. The trial court erroneously made solidarily liable Urban Banks directors and officers without even any allegations, much less proof, of any acts of bad faith, negligence or malice in the performance of their duties. In addition, the trial court mistakenly anchored its astounding award of damages amounting PhP28,500,000 on the basis of the mere account of Atty. Pea of a telephone conversation, without even considering the surrounding circumstances and the sheer disproportion to the legal services rendered to the bank. A void judgment never acquires finality. 307 In contemplation of law, that void decision is deemed non-existent. 308 Quod nullum est, nullum producit effectum. 309 Hence, the validity of the execution pending appeal will ultimately hinge on the courts findings with respect to the decision in which the execution is based. Although discretionary execution can proceed independently while the appeal on the merits is pending, the outcome of the main case will greatly impact the execution pending appeal, especially in instances where as in this case, there is a complete reversal of the trial courts decision. Thus, if the decision on the merits is completely nullified, then the concomitant execution pending appeal is likewise without any effect. In fact, the Rules of Court expressly provide for the possibility of reversal, complete or partial, of a final judgment which has been executed on appeal. 310 Precisely, the execution pending appeal does not bar the continuance of the appeal on the merits, for the Rules of Court explicitly provide for restitution according to equity and justice in case the executed judgment is reversed on appeal. 311
Considering that the Decision of the RTC-Bago City has been completely vacated and declared null and void, it produces no effect whatsoever. Thus, the Special Order and its concomitant Writ of Execution pending appeal is likewise annulled and is also without effect. Consequently, all levies, garnishment and sales executed pending appeal are declared null and void, with the concomitant duty of restitution under the Rules of Court, as will be discussed later on. In any case, the trial courts grant of execution pending appeal lacks sufficient basis under the law and jurisprudence. We rule that the pendency of a collection suit by a third party creditor which credit was obtained by the winning judgment creditor in another case, is not a sufficiently good reason to allow execution pending appeal as the Rules of Court provide. Execution pending appeal is an extraordinary remedy allowed only when there are reasons to believe that the judgment debtor will not be able to satisfy the judgment debt if the appeals process will still have to be awaited. It requires proof of circumstances such as insolvency or attempts to escape, abscond or evade a just debt. In Florendo v. Paramount Insurance, Corp., 312 the Court explained that the execution pending appeal is an exception to the general rule that execution issues as a matter of right, when a judgment has become final and executory: As such exception, the courts discretion in allowing it must be strictly construed and firmly grounded on the existence of good reasons. "Good reasons," it has been held, consist of compelling circumstances that justify immediate execution lest the judgment becomes illusory. The circumstances must be superior, outweighing the injury or damages that might result should the losing party secure a reversal of the judgment. Lesser reasons would make of execution pending appeal, instead of an instrument of solicitude and justice, a tool of oppression and inequity. (Emphasis supplied) Indeed, the presence or the absence of good reasons remains the yardstick in allowing the remedy of execution pending appeal, which should consist of exceptional circumstances of such urgency as to outweigh the injury or damage that the losing party may suffer, should the appealed judgment be reversed later. 313 Thus, the Court held that even the financial distress of the prevailing company is not sufficient reason to call for execution pending appeal: In addressing this issue, the Court must stress that the execution of a judgment before its finality must be founded upon good reasons. The yardstick remains the presence or the absence of good reasons consisting of exceptional circumstances of such urgency as to outweigh the injury or damage that the losing party may suffer, should the appealed judgment be reversed later. Good reason imports a superior circumstance that will outweigh injury or damage to the adverse party. In the case at bar, petitioner failed to show "paramount and compelling reasons of urgency and justice." Petitioner cites as good reason merely the fact that "it is a small-time building contractor that could ill-afford the protracted delay in the reimbursement of the advances it made for the aforesaid increased costs of . . . construction of the [respondent's] buildings." Petitioner's allegedly precarious financial condition, however, is not by itself a jurisprudentially compelling circumstance warranting immediate execution. The financial distress of a juridical entity is not comparable to a case involving a natural person such as a very old and sickly one without any means of livelihood, an heir seeking an order for support and monthly allowance for subsistence, or one who dies. Indeed, the alleged financial distress of a corporation does not outweigh the long standing general policy of enforcing only final and executory judgments. Certainly, a juridical entity like petitioner corporation has, other than extraordinary execution, alternative remedies like loans, advances, internal cash generation and the like to address its precarious financial condition. (Emphasis supplied) In Philippine Bank of Communications v. Court of Appeals, 314 the Court denied execution pending appeal to a juridical entity which allegedly was in financial distress and was facing civil and criminal suits with respect to the collection of a sum of money. It ruled that the financial distress of the prevailing party in a final judgment which was still pending appeal may not be likened to the situation of a natural person who is ill, of advanced age or dying as to justify execution pending appeal: It is significant to stress that private respondent Falcon is a juridical entity and not a natural person. Even assuming that it was indeed in financial distress and on the verge of facing civil or even criminal suits, the immediate execution of a judgment in its favor pending appeal cannot be justified as Falcons situation may not be likened to a case of a natural person who may be ill or may be of advanced age. Even the danger of extinction of the corporation will not per se justify a discretionary execution unless there are showings of other good reasons, such as for instance, impending insolvency of the adverse party or the appeal being patently dilatory. But even as to the latter reason, it was noted in Aquino vs. Santiago (161 SCRA 570 [1988]), that it is not for the trial judge to determine the merit of a decision he rendered as this is the role of the appellate court. Hence, it is not within competence of the trial court, in resolving a motion for execution pending appeal, to rule that the appeal is patently dilatory and rely on the same as its basis for finding good reason to grant the motion. Only an appellate court can appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal which may have been issued by the trial court for other good reasons, or in cases where the motion for execution pending appeal is filed with the appellate court in accordance with Section 2, paragraph (a), Rule 39 of the 1997 Rules of Court. What is worse, only one case was actually filed against Falcon and this is the complaint for collection filed by Solidbank. The other cases are "impending", so it is said. Other than said Solidbank case, Falcons survival as a body corporate cannot be threatened by anticipated litigation. This notwithstanding, and even assuming that there was a serious threat to Falcons continued corporate existence, we hold that it is not tantamount nor even similar to an impending death of a natural person. The material existence of a juridical person is not on the same plane as that of human life. The survival of a juridical personality is clearly outweighed by the long standing general policy of enforcing only final and executory judgments. (Emphasis supplied) In this case, the trial court supported its discretionary grant of execution based on the alleged collection suit filed against Pea by his creditor friend for PhP3,000,000: It has been established that the plaintiff secured the loan for the purpose of using the money to comply with the mandate of defendant bank to hold and maintain possession of the parcel of land in Pasay City and to prevent intruders and former tenants from occupying the said property. The purpose of the loan was very specific and the same was made known to defendant bank through defendant Teodoro Borlongan. The loan was not secured for some other purpose. Truth to tell, the plaintiff accomplished his mission in clearing the property of tenants, intruders and squatters, long before the deadline given him by the defendant bank. The plaintiff was assured by no less than the President of defendant bank of the availability of funds for his compensation and reimbursement of his expenses. Had he been paid by defendant bank soon after he had fulfilled his obligation, he could have settled his loan obligation with his creditor. Defendants were benefitted by the services rendered by the plaintiff. While plaintiff has complied with the undertaking, the defendants, however, failed to perform their obligation to the plaintiff. The plaintiff stands to suffer greatly if the collection case against him is not addressed. Firstly, as shown in Exhibit "C", plaintiffs total obligation with Roberto Ignacio as of May 1999 is PhP24,192,000.00. This amount, if left unpaid, will continue to increase due to interest charges being imposed by the creditor to the prejudice of plaintiff. Secondly, a preliminary attachment has already been issued and this would restrict the plaintiff from freely exercising his rights over his property during the pendency of the case. In their opposition, defendants claim that plaintiffs indebtedness is a ruse, however, defendants failed to adduce evidence to support its claim. The court finds that the pendency of the case for collection of money against plaintiff is a good reason for immediate execution. 315
The mere fact that Atty. Pea was already subjected to a collection suit for payment of the loan proceeds he used to perform his services for Urban Bank is not an acceptable reason to order the execution pending appeal against the bank. Financial distress arising from a lone collection suit and not due to the advanced age of the party is not an urgent or compelling reason that would justify the immediate levy on the properties of Urban Bank pending appeal. That Pea would made liable in the collection suit filed by his creditor-friend would not reasonably result in rendering illusory the final judgment in the instant action for agents compensation. Peas purported difficulty in paying the loan proceeds used to perform his services does not outweigh the injury or damages that might result should Urban Bank obtain a reversal of the judgment, as it did in this case. Urban Bank even asserts that the collection suit filed against Pea was a mere ruse to provide justification for the execution pending appeal, no matter how flimsy. 316 As quoted above, the trial court noted Atty. Peas total obligation to his creditor-friend as of May 1999 was already the incredible amount of PhP24,192,000.00, even when the Complaint dated 03 April 1999 itself, which spawned the collection suit included only a prayer for payment of PhP3,500,000 with attorneys fees of PhP100,000. 317 It seems absurd that Atty. Pea would agree to obtaining a loan from his own friend, when the Promissory Notes provided for a penalty of 5% interest per month or 60% per annum for delay in the payment. 318 It sounds more like a creative justification of the immediate execution of the PhP28.5 Million judgment notwithstanding the appeal. In fact, the Court of Appeals noted Atty. Peas admission of sufficient properties to answer for any liability arising from the collection suit arising from his creditor-friend. In initially denying the execution pending appeal, the appellate court held that: On the other hand, private respondents claim that the only way he could pay his indebtedness to Roberto Ignacio is through the money that he expects to receive from petitioners in payment of his services is belied by his testimony at the hearing conducted by the trial court on the motion for execution pending appeal wherein petitioners were able to secure an admission from him that he has some assets which could be attached by Roberto Ignacio and that he would probably have other assets left even after the attachment. 319
Hence, to rule that a pending collection suit against Atty. Pea, which has not been shown to result in his insolvency, would be to encourage judgment creditors to indirectly and indiscriminately instigate collection suits or cite pending actions, related or not, as a "good reason" to routinely avail of the remedy of discretionary execution. 320 As an exception to the general rule on execution after final and executory judgment, the reasons offered by Atty. Pea to justify execution pending appeal must be strictly construed. Neither will the Court accept the trial courts unfounded assumption that Urban Banks appeal was merely dilatory, as in fact, the PhP28,500,000 award given by the trial court was overturned by the appellate court and eventually by this Court. Moreover, at the time the Special Order of Judge Henry Trocio of the RTC-Bago City came out in 1999, Urban Bank had assets worth more than PhP11 Billion and had a net worth of more than PhP2 Billion. There was no reason then to believe that Urban Bank could not satisfy a judgment of PhP28,500,000, a sum that was only 1% of its net worth, and 1/5 of 1% of its total assets of PhP11,933,383,630. 321 Urban Bank was even given a Solvency, Liquidity and Management Rating of 82.89 over 100 by no less than the BSP 322 and reportedly had liquid assets amounting to PhP2,036,878. 323 In fact, no allegation of impending insolvency or attempt to abscond was ever raised by Atty. Pea and yet, the trial court granted execution pending appeal. Since the original order granting execution pending appeal was completely void for containing no justifiable reason, it follows that any affirmance of the same by the Court of Appeals is likewise void. The Decision of the Court of Appeals in the case docketed as CA-G.R. SP No. 55667, finding a new reason for granting execution pending appeal, i.e., the receivership of Urban Bank, is likewise erroneous, notwithstanding this Courts ruling in Lee v. Trocino. 324 In accordance with the subsequent Resolution of the Court in abovementioned case of Lee v. Trocino, 325 we directly resolve the issue of the insufficiency of the reasons that led to the grant of execution pending appeal. In cases where the two or more defendants are made subsidiarily or solidarily liable by the final judgment of the trial court, discretionary execution can be allowed if all the defendants have been found to be insolvent. Considering that only Urban Bank, and not the other eight individual defendants, was later on considered by the Court of Appeals to have been "in danger of insolvency," is not sufficient reason to allow execution pending appeal, since the liability for the award to Pea was made (albeit, mistakenly) solidarily liable together with the bank officers. In Flexo Manufacturing Corp. v. Columbus Food, Inc., and Pacific Meat Company, Inc., 326 both Columbus Food, Inc., (Columbus Food) and Pacific Meat Company, Inc., (Pacific Meat) were found by the trial court therein to be solidarily liable to Flexo Manufacturing, Inc., (Flexo Manufacturing) for the principal obligation of PhP2,957,270.00. The lower court also granted execution pending appeal on the basis of the insolvency of Columbus Food, even if Pacific Meat was not found to be insolvent. Affirming the reversal ordered by the Court of Appeals, this Court ruled that since there was another party who was solidarily liable to pay for the judgment debt, aside from the insolvent Columbus Food, there was no good reason to allow the execution pending appeal: Regarding the state of insolvency of Columbus, the case of Philippine National Bank v. Puno, held: "While this Court in several cases has held that insolvency of the judgment debtor or imminent danger thereof is a good reason for discretionary execution, otherwise to await a final and executory judgment may not only diminish but may nullify all chances for recovery on execution from said judgment debtor, We are constrained to rule otherwise in this particular case. In the aforecited cases, there was either only one defeated party or judgment debtor who was, however, insolvent or there were several such parties but all were insolvent, hence the aforesaid rationale for discretionary execution was present. In the case at bar, it is undisputed that, assuming MMIC is insolvent, its co-defendant PNB is not. It cannot, therefore, be plausibly assumed that the judgment might become illusory; if MMIC cannot satisfy the judgment, PNB will answer for it. It will be observed that, under the dispositive portion of the judgment hereinbefore quoted, the liability of PNB is either subsidiary or solidary. Thus, when there are two or more defendants and one is not insolvent, the insolvency of a co-defendant is not a good reason to justify execution pending appeal if their liability under the judgment is either subsidiary or solidary. In this case, Pacific was adjudged to be solidarily liable with Columbus. Therefore, the latter is not the only party that may be answerable to Flexo. Its insolvency does not amount to a good reason to grant execution pending appeal. (Emphasis supplied) Similarly, the trial court in this case found Urban Bank and all eight individual bank officers solidarily liable to Atty. Pea for the payment of the PhP28,500,000 award. Hence, had the judgment been upheld on appeal, Atty. Pea could have demanded payment from any of the nine defendants. Thus, it was a mistake for the Court of Appeals to have affirmed execution pending appeal based solely on the receivership of Urban Bank, when there were eight other individual defendants, who were solidarily liable but were not shown to have been insolvent. Since Urban Banks co-defendants were not found to have been insolvent, there was no good reason for the Court of Appeals to immediately order execution pending appeal, since Atty. Peas award could have been satisfied by the eight other defendants, especially when the de Leon Group filed its supersedeas bond. It seems incongruous for Atty. Pea to be accorded the benefit of erroneously impleading several bank directors, who had no direct hand in the transaction, but at the same time, concentrating solely on Urban Banks inability to pay to justify execution pending appeal, regardless of the financial capacity of its other co-defendants. Worse, he capitalized on the insolvency and/or receivership of Urban Bank to levy or garnish properties of the eight other individual defendants, who were never shown to have been incapable of paying the judgment debt in the first place. The disposition on the execution pending appeal may have been different had Atty. Pea filed suit against Urban Bank alone minus the bank officers and the same bank was found solely liable for the award and later on declared under receivership. In addition, a judgment creditor of a bank, which has been ordered by the BSP to be subject of receivership, has to fall in line like every other creditor of the bank and file its claim under the proper procedures for banks that have been taken over by the PDIC. Under Section 30 of Republic Act No. 7653, otherwise known as the New Central Bank Act, which prevailed at that time, once a bank is under receivership, the receiver shall immediately gather and take charge of all the assets and liabilities of the bank and administer the same for the benefit of its creditors and all of the banks assets shall be considered as under custodial legis and exempt from any order of garnishment, levy, attachment or execution. 327 In the Minute Resolution of the Monetary Board of the BSP, Urban Bank was not only prevented from doing business in the Philippines but its asset and affairs were placed under receivership as provided for under the same law. 328 In fact, even Pea himself assured the PDIC, as receiver of Urban Bank, that he would not schedule or undertake execution sales of the banks assets for as long as the bank remains in receivership. 329 Until the approval of the rehabilitation or the initiation of the liquidation proceedings, all creditors of the bank under receivership shall stand on equal footing with respect to demanding satisfaction of their debts, and cannot be extended preferred status by an execution pending appeal with respect to the banks assets: [t]o execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other creditors. After the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the depositors and creditors. After its insolvency, one creditor cannot obtain an advantage or preference over another by an attachment, execution or otherwise. Until there is an approved rehabilitation or the initiation of the liquidation proceedings, creditors of the bank stand on equal footing with respect to demanding satisfaction of their debts, and cannot be afforded special treatment by an execution pending appeal with respect to the banks assets. 330 (Emphasis supplied) Moreover, assuming that the CA was correct in finding a reason to justify the execution pending appeal because of the supervening event of Urban Banks closure, the assumption by the EIB of the liabilities of Urban Bank meant that any execution pending appeal can be granted only if EIB itself is shown to be unable to satisfy Peas judgment award of PhP28,500,000. That is not at all the case. In just one particular sale on execution herein, EIB offered to answer in cash for a substantial part of Peas claims, as evidenced by EIBs capacity and willingness to redeem the executed properties (condominium units sold to intervenor Unimega) by tendering managers checks for more than PhP22 Million 331 which is already 77.57% of Peas total award from the trial court. 332 The fact that EIBs offer to take over Urban Bank means it was able to satisfy the BSPs concern that all legitimate liabilities of Urban Bank be duly discharged. As an exception to the general rule that only final judgments may be executed, 333 the grant of execution pending appeal must perforce be based on "good reasons." These reasons must consist of compelling or superior circumstances demanding urgency which will outweigh the injury or damages suffered, should the losing party secure a reversal of the judgment or final order. 334 The circumstances that would reasonably justify superior urgency, demanding interim execution of Peas claims for compensation and/or damages, have already been settled by the financial capacity of the eight other co-defendants, the approval of the supersedeas bonds, the subsequent takeover by EIB, and the successor banks stable financial condition, 335 which can answer for the judgment debt. Thus, Peas interest as a judgment creditor is already well-protected. While there is a general rule that a final and executory judgment in the main case will render moot and academic a petition questioning the exercise of the trial courts discretion in allowing execution pending appeal, we find it necessary to rule categorically on this question because of the magnitude of the aberrations that attended the execution pending appeal in the Decision of the RTC-Bago City. Irregularities in the Levy and Sale on Execution Pending Appeal Assuming that the Special Order granting execution pending appeal were valid, issues have been raised on alleged irregularities that mar the levy and sale on execution of the properties of Urban Bank and its officers and directors. Many of the facts have not been sufficiently litigated before the trial and appellate courts for us to fully rule on the issue, nevertheless, from what is on record, the following are the observations of this Court: First, contrary to the general rules on execution, no opportunity was given to Urban Bank or the other co-defendants to pay the judgment debt in cash or certified check. 336 Before proceeding on the levying and garnishing personal and real properties, demand must be made by the sheriff against the judgment debtors, Urban Bank and the eight other individual bank officers, for the immediate payment of the award subject of the execution pending appeal. It has not been shown whether Urban Bank and its officers and directors were afforded such an opportunity. Instead of garnishing personal properties of the bank, the sheriff inexplicably proceeded to levy substantial real properties of the bank and its officers at the onset. Second, assuming that Urban Bank and its officers did not possess sufficient cash or funds to pay for the judgment debt pending appeal, they should have been given the option to choose which of their properties to be garnished and/or levied. In this case, Urban Bank exercised its option by presenting to the sheriff various parcels of land, whose values amount to more than PhP76,882,925 and were sufficient to satisfy the judgment debt. 337 Among those presented by the bank, only the property located in Tagaytay was levied upon by the sheriff. 338 No sufficient reason was raised why the banks chosen properties were rejected or inadequate for purposes of securing the judgment debt pending appeal. Worse, the Sheriff proceeded with garnishing and levying on as many properties of Urban Bank and its officers, in disregard of their right to choose under the rules. Third, the public auction sales conducted in the execution pending appeal sold more properties of Urban Bank and the directors than what was sufficient to satisfy the debt. Indeed, the conservative value of the properties levied herein by the sheriff amounting to more than PhP181,919,190, consisting of prime condominium units in the heart of the Makati Business district, a lot in Tagaytay City, shares in exclusive clubs, and shares of stock, among others, was more than sufficient to answer for the PhP28,500,000 judgment debt six times over. Rather than stop when the properties sold had approximated the monetary award, the execution sale pending appeal continued and unduly benefitted Atty. Pea, who, as judgment creditor and, at times, the winning bidder, purchased most of the properties sold. Fourth, it was supremely disconcerting how Urban Bank, through its successor EIB, was unduly deprived of the opportunity to redeem the properties, even after presenting managers checks 339 equal to the purchase price of the condominium units sold at the execution sale. No reason was offered by the trial court 340 or the sheriff 341 for rejecting the redemption price tendered by EIB in order to recover the properties executed and sold in public auction pending appeal. Finally, the Court cannot turn a blind eye to the fact that there was already a sufficient supersedeas bond given to answer for whatever monetary award will be given in the end. To recall, the De Leon Group had already tendered a supersedeas bond of PhP40,000,000 in the Court of Appeals to prevent execution pending appeal over their properties. In fact, even Urban Bank tendered a separate supersedeas bond of equal amount with this Court, for a total of PhP80,000,000 to secure any judgment to be awarded to Atty. Pea. That execution sales over the properties of judgment debtors proceeded despite the three-fold value of securities compared to the amount of the award indicates bad faith, if not malice, with respect to the conduct of the execution pending appeal. Inasmuch as the RTC Decision has already been vacated and an independent finding has been made by this Court of the complete nullity of the order granting execution pending appeal, it follows that all acts pursuant to such order and its writ are also void. It does not follow however, that the Courts Decision in Co v. Sillador, 342 is nullified, inasmuch as an equally-important legal doctrine the immutability of Supreme Court final decisions is also to be considered. In any case, the factual circumstances and the ruling on that case were limited to the actions of Sheriff Allan Sillador with respect to properties levied under the same Special Order and Writ of Execution, which were subject of third party claims made by the spouses of Teodoro Borlongan, Corazon Bejasa and Arturo Manuel, Jr. 343 It does not encompass other specific events and acts committed in the course of the execution pending appeal that may warrant administrative or disciplinary actions. Having said that, this Court leaves it to the parties to explore avenues for redress in such a situation. The observation on the irregularities above-enumerated are made for the purpose of correcting the injustice that has been committed herein, by allowing the Court to pursue the question of who was responsible for such gross violation of the rules on execution, and for the Court to find measures to improve the safeguards against abuse of court processes. It is for this reason that the Office of the Court Administrator will be given a special task by the Court on this matter. Judge Henry Trocino of RTC-Bago City, who issued the Special Order and had supervisory authority over the proceedings of the execution pending appeal, would have been included under such administrative investigation by the Office of the Court Administrator, were it not for his retirement from the judicial service. The Courts Suspension Order of Execution Pending Appeal Acting on Atty. Peas Omnibus Motion dated 09 December 2002 344 and Unimegas Motion for Reconsideration dated 10 December 2002 345 with respect to the Courts Order dated 13 November 2002 346 that clarified the earlier stay order against the execution pending appeal, 347 the Court hereby denies both motions. The Court is fully correct in suspending the period for the running of the redemption period of the properties of Urban Bank and its officers and directors that were levied and subject of execution sale to satisfy the judgment debt in favor of Atty. Pea, the Court having conclusively determined that the supersedeas bond filed was sufficient and considering the subsequent finding that the said execution pending appeal lacks any sufficient ground for the grant thereof. As to the theory of Atty. Pea that the actuations of Justice Carpio, the then ponente of this case, in drafting the questioned Order should positively impact his motion for reconsideration of the same, the Court finds this argument utterly devoid of merit. In the first place, that questioned Order was not the decision of only a single member of the Court, Justice Carpio, but of the entire division to which he belonged, then composed of retired Chief Justice Hilario Davide, Justices Jose Vitug, Consuelo Ynares-Santiago and Adolfo Azcuna. This Order was affirmed by the same Division as its duly-promulgated order. In relation to this, the affirmation by the Division of this Order demonstrates that there is no truth to Atty. Peas claim that Justice Carpio fabricated the Order. In the second place, Atty. Peas claim of undue interest against Justice Carpio specifically with respect to the latter having the instant case transferred to his new Division, is based on ignorance of the system of assignment of cases in the Supreme Court. When a reorganization of the Court takes place in the form of a change in the composition of Divisions, due to the retirement or loss of a member, the Justices do not thereby lose their case assignments but bring the latter with them to their new Divisions. 348 The cases are then transferred to the Justices new Divisions, by way of the corresponding request from each justice. Each justice is in fact, required to make this request, otherwise the rollo of the cases of which he is Member-in-Charge will be retained by a Division in which he is no longer a member. Indeed, Atty. Peas imagination has gotten the better of him. Thirdly, his insinuation (which he denies) that Justice Carpio may have been bribed because the latter has a new Mercedes Benz 349 is highly offensive and has no place where his points should have been confined to legal reasons and arguments. Incidentally, Atty. Pea has voiced the fear in the Letter of Complaint filed in the Courts Committee on Ethics and Ethical Standards, 350 which he brought against the ponente of this Decision, that she will suppress material information regarding the issuance of the Order suspending the redemption period because of her close relationship to Justice Carpio. Contrary to this fear, this Decision is frontally disposing of this claim by stating that there is no basis to believe that the questioned Order was anything than the joint decision of the five members of the then First Division, and that his arguments in his motion to reconsider does not persuade this Court to vary in any form the questioned order. Moreover, our disposition of this case renders moot his motion to reconsider the order. It must be emphasized that the prolonged resolution of the procedural issue in the Petitions in G. R. Nos. 145817 and 145822 on the execution pending appeal is due in no small part to the delays arising from Peas peculiar penchant for filing successive motions for inhibition and re-raffle. 351 The Court cannot sanction Peas repeated requests for voluntary inhibition of members of the Court based on the sole ground of his own self-serving allegations of lack of faith and trust, and would like to reiterate, at this point, the policy of the Court not to tolerate acts of litigants who, for just about any conceivable reason, seek to disqualify a judge (or justice) for their own purpose, under a plea of bias, hostility, prejudice or prejudgment. 352 The Court cannot allow the unnecessary and successive requests for inhibition, lest it opens the floodgates to forum-shopping where litigants look for a judge more friendly and sympathetic to their cause than previous ones. 353
Restitution of the Banks Executed Properties The Court is still confronted with the supervening acts related to the execution pending appeal and the reversal of the award of damages, which affect the rights of the parties as well as of the intervenors to the case, specifically, intervenor Unimega. In completely resolving the differing claims and performing its educational function, the Court shall briefly encapsulate and restate the operational rules governing execution pending appeal when there has been a reversal of the trial courts Decision on the award of damages in order to guide the parties as well as the bench and bar in general. The necessity of making these detailed instructions is prompted by the most natural question an ordinary person with a sense of justice will ask after reading the facts: How can an obligation to pay for the services of a lawyer so that 23 unwanted tenants leave a corporation's property lead to the loss or the impairment of use of more than PhP181 Million worth of properties of that corporation and of its officers and directors? Obviously, this Court must undertake corrective actions swiftly. The rule is that, where the executed judgment is reversed totally or partially, or annulled on appeal or otherwise the trial court may, on motion, issue such orders of restitution or reparation of damages as equity and justice may warrant under the circumstances. 354 The Rules of Court precisely provides for restitution according to equity, in case the executed judgment is reversed on appeal. 355 "In an execution pending appeal, funds are advanced by the losing party to the prevailing party with the implied obligation of the latter to repay the former, in case the appellate court cancels or reduces the monetary award." 356
In disposing of the main case subject of these Petitions, the Court totally reversed the staggering amount of damages given by the trial court, and limited on a quantum meruit basis the agents compensation to PhP4,500,000 only. However, properties of Urban Bank and individual petitioners have been garnished and levied upon in the amount of supposedly more than PhP85,399,350. 357
Applying the foregoing rules, petitioner-respondent bank is entitled to complete and full restitution of its levied properties, subject to the payment of the PhP4,500,000. Meanwhile, petitioners bank officers, all of whom have not been found individually or solidarily liable, are entitled to full restitution of all their properties levied upon and garnished, since they have been exonerated from corporate liability with respect to the banks agency relationship with Pea. Considering the monetary award to Pea and the levy on and execution of some of its properties pending appeal, Urban Bank, now EIB, may satisfy the judgment in the main case and at the same time fully recover all the properties executed owing to the complete reversal of the trial courts awarded damages. It must immediately and fully pay the judgment debt before the entire lot of levied properties, subject of the execution pending appeal, is restored to it. 358
Due to the complete reversal of the trial courts award for damages, which was the basis of the Special Order and Writ of Execution allowing execution pending appeal, intervenor Unimega and other bidders who participated in the public auction sales are liable to completely restore to petitioner-respondent bank all of the properties sold and purchased therein. Although execution pending appeal is sanctioned under the rules and jurisprudence, when the executed decision is reversed, the premature execution is considered to have lost its legal bases. The situation necessarily requires equitable restitution to the party prejudiced thereby. 359 As a matter of principle, courts are authorized at any time to order the return of property erroneously ordered to be delivered to one party, if the order is found to have been issued without jurisdiction. 360
As a purchaser of properties under an execution sale, with an appeal on the main case still pending, intervenor Unimega knew or was bound to know that its title to the properties, purchased in the premature public auction sale, was contingent on the outcome of the appeal and could possibly be reversed. Until the judgment on the main case on which the execution pending appeal hinges is rendered final and executory in favor of the prevailing judgment creditor, it is incumbent on the purchasers in the execution sale to preserve the levied properties. They shall be personally liable for their failure to do so, especially if the judgment is reversed, as in this case. 361 In fact, if specific restitution becomes impracticable such as when the properties pass on to innocent third parties the losing party in the execution even becomes liable for the full value of the property at the time of its seizure, with interest. The Court has ruled: When a judgment is executed pending appeal and subsequently overturned in the appellate court, the party who moved for immediate execution should, upon return of the case to the lower court, be required to make specific restitution of such property of the prevailing party as he or any person acting in his behalf may have acquired at the execution sale. If specific restitution becomes impracticable, the losing party in the execution becomes liable for the full value of the property at the time of its seizure, with interest. While the trial court may have acted judiciously under the premises, its action resulted in grave injustice to the private respondents. It cannot be gainsaid that it is incumbent upon the plaintiffs in execution (Arandas) to return whatever they got by means of the judgment prior to its reversal. And if perchance some of the properties might have passed on to innocent third parties as happened in the case at bar, the Arandas are duty bound nonetheless to return the corresponding value of said properties as mandated by the Rules. (Emphasis supplied) 362
In this case, the rights of intervenor Unimega to the 10 condominium units bought during the public auction sale under the Special Order are rendered nugatory by the reversal of the award of unconscionable damages by the trial court. It cannot claim to be an innocent third-party purchaser of the levied condominium units, since the execution sale was precisely made pending appeal. It cannot simply assume that whatever inaction or delay was incurred in the process of the appeal of the main Decision would automatically render the remedy dilatory in character. 363 Whatever rights were acquired by intervenor Unimega from the execution sale under the trial courts Special Orders are conditional on the final outcome of the appeal in the main case. Unlike in auction sales arising from final and executory judgments, both the judgment creditor and the third parties who participate in auction sales pending appeal are deemed to knowingly assume and voluntarily accept the risks of a possible reversal of the decision in the main case by the appellate court. Therefore, intervenor Unimega is required to restore the condominium units to Urban Bank. Although the intervenor has caused the annotation of the sale and levied on the titles to those units, the titles have remained under the name of the bank, owing to the supersedeas bond it had filed and the Courts own orders that timely suspended the transfer of the titles and further execution pending appeal. The obligation to restore the properties to petitioner-respondent bank is, however, without prejudice to the concurrent right of intervenor Unimega to the return of the PhP10,000,000 the latter paid for the condominium units, which Pea received as judgment creditor in satisfaction of the trial courts earlier Decision. 364 Consequently, intervenors earlier request for the issuance of a writ of possession 365 over those units no longer has any leg to stand on. Not being entitled to a writ of possession under the present circumstances, Unimegas ex parte petition is consequently denied. Upon the reversal of the main Decision, the levied properties itself, subject of execution pending appeal must be returned to the judgment debtor, if those properties are still in the possession of the judgment creditor, plus compensation to the former for the deprivation and the use thereof. 366 The obligation to return the property itself is likewise imposed on a third-party purchaser, like intervenor Unimega, in cases wherein it directly participated in the public auction sale, and the title to the executed property has not yet been transferred. The third-party purchaser shall, however, be entitled to reimbursement from the judgment creditor, with interest. Considering the foregoing points, the Court adopts with modification the rules of restitution expounded by retired Justice Florenz D. Regalado in his seminal work on civil procedure, 367 which the appellate court itself cited earlier. 368 In cases in which restitution of the prematurely executed property is no longer possible, compensation shall be made in favor of the judgment debtor in the following manner: a. If the purchaser at the public auction is the judgment creditor, he must pay the full value of the property at the time of its seizure, with interest. b. If the purchaser at the public auction is a third party, and title to the property has already been validly and timely transferred to the name of that party, the judgment creditor must pay the amount realized from the sheriffs sale of that property, with interest. c. If the judgment award is reduced on appeal, the judgment creditor must return to the judgment debtor only the excess received over and above that to which the former is entitled under the final judgment, with interest. In summary, Urban Bank is entitled to complete restoration and return of the properties levied on execution considering the absolute reversal of the award of damages, upon the payment of the judgment debt herein amounting to PhP4,500,000, with interest as indicated in the dispositive portion. With respect to individual petitioners, they are entitled to the absolute restitution of their executed properties, except when restitution has become impossible, in which case Pea shall be liable for the full value of the property at the time of its seizure, with interest. Whether Urban Bank and the bank officers and directors are entitled to any claim for damages against Pea and his indemnity bond is best ventilated before the trial court, as prescribed under the procedural rules on execution pending appeal. WHEREFORE, the Court DENIES Atty. Magdaleno Peas Petition for Review dated 23 April 2004 (G. R. No. 162562) and AFFIRMS WITH MODIFICATION the Court of Appeals Decision dated 06 November 2003 having correctly found that the Regional Trial Court of Bago City gravely abused its discretion in awarding unconscionable damages against Urban Bank, Inc., and its officers. The Decision of the Regional Trial Court of Bago City dated 28 May 1999 is hence VACATED. Nevertheless, Urban Bank, Inc., is ORDERED to pay Atty. Pea the amount of PhP3,000,000 as reimbursement for his expenses and an additional PhP1,500,000 as compensation for his services, with interest at 6% per annum from 28 May 1999, without prejudice to the right of Urban Bank to invoke payment of this sum under a right of set-off against the amount of PhP25,000,000 that has been placed in escrow for the benefit of Isabela Sugar Company, Inc. The Complaint against the eight other individual petitioners, namely Teodoro Borlongan (+), Delfin C. Gonzales, Jr., Benjamin L. de Leon, P. Siervo G. Dizon, Eric L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and Arturo Manuel, Jr., is hereby DISMISSED. The Petitions for Review on Certiorari filed by petitioners Urban Bank (G. R. No. 145817) and Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (G. R. No. 145822) are hereby GRANTED under the following conditions: a. Urban Bank, Teodoro Borlongan, Delfin C. Gonzalez, Jr., Benjamin L. de Leon, P. Siervo H. Dizon, Eric L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and Arturo Manuel, Jr., (respondent bank officers) shall be restored to full ownership and possession of all properties executed pending appeal; b. If the property levied or garnished has been sold on execution pending appeal and Atty. Magdaleno Pea is the winning bidder or purchaser, he must fully restore the property to Urban Bank or respondent bank officers, and if actual restitution of the property is impossible, then he shall pay the full value of the property at the time of its seizure, with interest; c. If the property levied or garnished has been sold to a third party purchaser at the public auction, and title to the property has not been validly and timely transferred to the name of the third party, the ownership and possession of the property shall be returned to Urban Bank or respondent bank officers, subject to the third partys right to claim restitution for the purchase price paid at the execution sale against the judgment creditor; d. If the purchaser at the public auction is a third party, and title to the property has already been validly and timely transferred to the name of that party, Atty. Pea must pay Urban Bank or respondent bank officers the amount realized from the sheriffs sale of that property, with interest from the time the property was seized. The Omnibus Motion dated 09 December 2002 filed by Atty. Pea and Motion for Reconsideration dated 10 December 2002 filed by Unimega with respect to the Courts Order dated 13 November 2002 is hereby DENIED. The Office of the Court Administrator is ordered to conduct an investigation into the possible administrative liabilities of Atty. Josephine Mutia-Hagad, the then RTC-Bago Citys Clerk of Court, and Allan D. Sillador, the then Deputy Sheriff of Bago City, for the irregularities attending the execution pending appeal in this case, including all judicial officers or sheriffs in the various places in which execution was implemented, and to submit a report thereon within 120 days from receipt of this Decision. The Office of the Court Administrator is also directed to make recommendations for the prevention of abuses of judicial processes in relation to executions, especially those pending appeal, whether thru administrative circulars from this Court or thru a revision of the Rules of Court, within 30 days from submission of the report on administrative liabilities adverted to above. Let a copy of the Courts Decision in this case be sent to the Office of the Court Administrator. The Presiding Judge of RTC Bago City shall make a full report on all incidents related to the execution in this case, including all returns on the writ of execution herein. Because so much suspicious circumstances have attended the execution in this case by the Regional Trial Court of Bago City, the proceedings with respect to any restitution due and owing under the circumstances shall be transferred to the Regional Trial Court in the National Capital Region, Makati City, a court with venue to hear cases involving Urban Bank/Export and Industry Bank whose headquarters is located in Makati City. The Executive Judge of the Regional Trial Court of Makati City is ordered to include the execution of the Decision and the proceedings for the restitution of the case in the next available raffle. The Regional Trial Court of Makati City, to which the case shall be raffled, is hereby designated as the court that will fully implement the restorative directives of this Decision with respect to the execution of the final judgment, return of properties wrongfully executed, or the payment of the value of properties that can no longer be restored, in accordance with Section 5, Rule 39 of the Rules of Court. The parties are directed to address the implementation of this part of the Decision to the sala to which the case will be raffled. No pronouncement as to costs. SO ORDERED.
G.R. No. 149353 June 26, 2006 JOCELYN B. DOLES, Petitioner, vs. MA. AURA TINA ANGELES, Respondent. D E C I S I O N AUSTRIA-MARTINEZ, J .: This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the Decision 1 dated April 30, 2001 of the Court of Appeals (CA) in C.A.-G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution 2 dated August 6, 2001 which denied petitioners Motion for Reconsideration. The antecedents of the case follow: On April 1, 1997, Ma. Aura Tina Angeles (RESPONDENT) filed with the RTC a complaint for Specific Performance with Damages against Jocelyn B. Doles (PETITIONER), docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the former in the concept of a personal loan amounting to P405,430.00 representing theprincipal amount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute Sale", 3 petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with an area of 42 square meters, covered by Transfer Certificate of Title No. 382532, 4 and located at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure petitioners loan in the sum ofP337,050.00 with that entity; that as a condition for the foregoing sale, respondent shall assume the undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the remainder of the 25 years which began on September 3, 1994; that the property was at that time being occupied by a tenant paying a monthly rent ofP3,000.00; that upon verification with the NHMFC, respondent learned that petitioner had incurred arrearages amounting to P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her arrears, petitioner denied that she incurred them and refused to pay the same; that despite repeated demand, petitioner refused to cooperate with respondent to execute the necessary documents and other formalities required by the NHMFC to effect the transfer of the title over the property; that petitioner collected rent over the property for the month of January 1997 and refused to remit the proceeds to respondent; and that respondent suffered damages as a result and was forced to litigate. Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed money from respondent, and averred that from June to September 1995, she referred her friends to respondent whom she knew to be engaged in the business of lending money in exchange for personal checks through her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued personal checks in payment of the loan; that the checks bounced for insufficiency of funds; that despite her efforts to assist respondent to collect from the borrowers, she could no longer locate them; that, because of this, respondent became furious and threatened petitioner that if the accounts were not settled, a criminal case will be filed against her; that she was forced to issue eight checks amounting to P350,000 to answer for the bounced checks of the borrowers she referred; that prior to the issuance of the checks she informed respondent that they were not sufficiently funded but the latter nonetheless deposited the checks and for which reason they were subsequently dishonored; that respondent then threatened to initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that she was forced by respondent to execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid consideration; that she did not appear before a notary public; that the Community Tax Certificate number on the deed was not hers and for which respondent may be prosecuted for falsification and perjury; and that she suffered damages and lost rental as a result. The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if valid, whether petitioner is obliged to sign and execute the necessary documents to effect the transfer of her rights over the property to the respondent; and third, whether petitioner is liable for damages. On July 29, 1998, the RTC rendered a decision the dispositive portion of which states: WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for insufficiency of evidence. With costs against plaintiff. SO ORDERED. The RTC held that the sale was void for lack of cause or consideration: 5
Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and further admission that the checks issued by these borrowers in payment of the loan obligation negates [sic] the cause or consideration of the contract of sale executed by and between plaintiff and defendant. Moreover, the property is not solely owned by defendant as appearing in Entry No. 9055 of Transfer Certificate of Title No. 382532 (Annex A, Complaint), thus: "Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico Doles on the parcel of land described in this certificate of title by virtue of the special power of attorney to mortgage, executed before the notary public, etc." The rule under the Civil Code is that contracts without a cause or consideration produce no effect whatsoever. (Art. 1352, Civil Code). Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of error: THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF EVIDENCE. 6
On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads: WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new one is entered ordering defendant-appellee to execute all necessary documents to effect transfer of subject property to plaintiff-appellant with the arrearages of the formers loan with the NHMFC, at the latters expense. No costs. SO ORDERED. The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amount borrowed from the respondent to her friends. Hence, the Deed of Absolute Sale was supported by a valid consideration, which is the sum of money petitioner owed respondent amounting to P405,430.00, representing both principal and interest. The CA took into account the following circumstances in their entirety: the supposed friends of petitioner never presented themselves to respondent and that all transactions were made by and between petitioner and respondent; 7 that the money borrowed was deposited with the bank account of the petitioner, while payments made for the loan were deposited by the latter to respondents bank account; 8 that petitioner herself admitted in open court that she was "re-lending" the money loaned from respondent to other individuals for profit; 9 and that the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent. 10
Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent, since the same is considered just or legal if made to enforce ones claim through competent authority under Article 1335 11 of the Civil Code; 12 that with respect to the arrearages of petitioner on her monthly amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed part of the balance of petitioners loan with the NHMFC which respondent agreed to assume; and that the amount of P3,000.00 representing the rental for January 1997 supposedly collected by petitioner, as well as the claim for damages and attorneys fees, is denied for insufficiency of evidence. 13
On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing that respondent categorically admitted in open court that SHE ACTED ONLY AS AGENT or representative of Arsenio Pua, the principal financier and, hence, she had no legal capacity to sue petitioner; and that the CA failed to consider the fact that petitioners father, who co-owned the subject property, was not impleaded as a defendant nor was he indebted to the respondent and, hence, she cannot be made to sign the documents to effect the transfer of ownership over the entire property. On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing matters had already been passed upon. On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner filed the present Petition and raised the following issues: I. WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT. II. WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR. III. WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE. 14
Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower courts, jurisprudence has recognized several exceptions, at least three of which are present in the instant case, namely: when the judgment is based on a misapprehension of facts; when the findings of facts of the courts a quo are conflicting; and when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion. 15 To arrive at a proper judgment, therefore, the Court finds it necessary to re-examine the evidence presented by the contending parties during the trial of the case. The Petition is meritorious. The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration. 1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then she is not a party to the loan; and that the Deed of Sale executed between her and the respondent in their own names, which was predicated on that pre-existing debt, is void for lack of consideration. Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in money 16 and that this sum indisputably pertains to the debt in issue. This Court has consistently held that a contract of sale is null and void and produces no effect whatsoever where the same is without cause or consideration. 17 The question that has to be resolved for the moment is whether this debt can be considered as a valid cause or consideration for the sale. To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends" the amount borrowed from respondent to her friends: first, the friends of petitioner never presented themselves to respondent and that all transactions were made by and between petitioner and respondent; 18 second; the money passed through the bank accounts of petitioner and respondent; 19 third, petitioner herself admitted that she was "re-lending" the money loaned to other individuals for profit; 20 and fourth, the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent. 21
On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her cross-examination: 22
Atty. Diza: q. You also mentioned that you were not the one indebted to the plaintiff? witness: a. Yes, sir. Atty. Diza: q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa Inocencio, Zenaida Romulo, they are your friends? witness: a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred. Atty. Diza: q. And you have transact[ed] with the plaintiff? witness: a. Yes, sir. Atty. Diza: q. What is that transaction? witness: a. To refer those persons to Aura and to refer again to Arsenio Pua, sir. Atty. Diza: q. Did the plaintiff personally see the transactions with your friends? witness: a. No, sir. Atty. Diza: q. Your friends and the plaintiff did not meet personally? witness: a. Yes, sir. Atty. Diza: q. You are intermediaries? witness: a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the name of Arsenio Pua because the money came from Arsenio Pua. x x x x Atty. Diza: q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one you mentioned [a] while ago? witness: a. Yes, she knows the money will go to those persons. Atty. Diza: q. You are re-lending the money? witness: a. Yes, sir. Atty. Diza: q. What profit do you have, do you have commission? witness: a. Yes, sir. Atty. Diza: q. How much? witness: a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir. Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent, the real lender. But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her cross examination: 23
Atty. Villacorta: q. Who is this Arsenio Pua? witness: a. Principal financier, sir. Atty. Villacorta: q. So the money came from Arsenio Pua? witness: a. Yes, because I am only representing him, sir. Other portions of the testimony of respondent must likewise be considered: 24
Atty. Villacorta: q. So it is not actually your money but the money of Arsenio Pua? witness: a. Yes, sir. Court: q. It is not your money? witness: a. Yes, Your Honor. Atty. Villacorta: q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are you aware of that? witness: a. I am aware of that. Atty. Villacorta: q. More or less she [accommodated] several friends of the defendant? witness: a. Yes, sir, I am aware of that. x x x x Atty. Villacorta: q. And these friends of the defendant borrowed money from you with the assurance of the defendant? witness: a. They go direct to Jocelyn because I dont know them. x x x x Atty. Villacorta: q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you her friends who [are] in need of money issued check[s] to you? There were checks issued to you? witness: a. Yes, there were checks issued. Atty. Villacorta: q. By the friends of the defendant, am I correct? witness: a. Yes, sir. Atty. Villacorta: q. And because of your assistance, the friends of the defendant who are in need of money were able to obtain loan to [sic] Arsenio Pua through your assistance? witness: a. Yes, sir. Atty. Villacorta: q. So that occasion lasted for more than a year? witness: a. Yes, sir. Atty. Villacorta: q. And some of the checks that were issued by the friends of the defendant bounced, am I correct? witness: a. Yes, sir. Atty. Villacorta: q. And because of that Arsenio Pua got mad with you? witness: a. Yes, sir. Respondent is estopped TO DENY THAT SHE HERSELF ACTED AS AGENT of a certain Arsenio Pua, her disclosed principal. She is also estopped to deny that petitioner acted as agent for the alleged debtors, the friends whom she (petitioner) referred. This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is representation. 25 The question of whether an agency has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial evidence. The question is ultimately one of intention. 26 Agency may even be implied from the words and conduct of the parties and the circumstances of the particular case. 27 Though the fact or extent of authority of the agents may not, as a general rule, be established from the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her agency both as against the asserted principal and the third persons interested in the transaction in which he or she is engaged. 28
In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers are friends of petitioner. The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers, did not present themselves to [respondent]" as evidence that negates the agency relationshipit is sufficient that petitioner disclosed to respondent that the former was acting in behalf of her principals, her friends whom she referred to respondent. For an agency to arise, it is not necessary that the principal personally encounter the third person with whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal dealings where the principal need not personally know or meet the third person with whom her agent transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent. 29
In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are representing someone else, AND SO BOTH OF THEM ARE ESTOPPED TO DENY THE SAME. It is evident from the record that petitioner merely refers actual borrowers and then collects and disburses the amounts of the loan upon which she received a commission; and that respondent transacts on behalf of her "principal financier", a certain Arsenio Pua. If their respective principals do not actually and personally know each other, such ignorance does not affect their juridical standing as agents, especially since the very purpose of agency is to extend the personality of the principal through the facility of the agent. With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent to other individuals for profit, it must be stressed that the manner in which the parties designate the relationship is not controlling. If an act done by one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called. 30 The question is to be determined by the fact that one represents and is acting for another, and if relations exist which will constitute an agency, it will be an agency whether the parties understood the exact nature of the relation or not. 31
That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued checks in payment of the loan in the name of Pua. If it is true that petitioner was "re-lending", then the checks should have been drawn in her name and not directly paid to Pua. With respect to the second point, particularly, the finding of the CA that the disbursements and payments for the loan were made through the bank accounts of petitioner and respondent, suffice it to say that in the normal course of commercial dealings and for reasons of convenience and practical utility it can be reasonably expected that the facilities of the agent, such as a bank account, may be employed, and that a sub-agent be appointed, such as the bank itself, to carry out the task, especially where there is no stipulation to the contrary. 32
In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration. 2. A further scrutiny of the record shows, however, that the sale might have been backed up by another consideration that is separate and distinct from the debt: respondent averred in her complaint and testified that the parties had agreed that as a condition for the conveyance of the property the respondent shall assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC. 33 This Court in the recent past has declared that an assumption of a mortgage debt may constitute a valid consideration for a sale. 34
Although the record shows that petitioner admitted at the time of trial that she owned the property described in the TCT, 35 the Court must stress that the Transfer Certificate of Title No. 382532 36 on its face shows that the owner of the property which admittedly forms the subject matter of the Deed of Absolute Sale refers neither to the petitioner nor to her father, Teodorico Doles, the alleged co-owner. Rather, it states that the property is registered in the name of "Household Development Corporation." Although there is an entry to the effect that the petitioner had been granted a special power of attorney "covering the shares of Teodorico Doles on the parcel of land described in this certificate," 37 it cannot be inferred from this bare notation, nor from any other evidence on the record, that the petitioner or her father held any direct interest on the property in question so as to validly constitute a mortgage thereon 38 and, with more reason, to effect the delivery of the object of the sale at the consummation stage. 39 What is worse, there is a notation that the TCT itself has been "cancelled." 40
In view of these anomalies, the Court cannot entertain the possibility that respondent agreed to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially since the record is bereft of any factual finding that petitioner was, in the first place, endowed with any ownership rights to validly mortgage and convey the property. As the complainant who initiated the case, respondent bears the burden of proving the basis of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the sale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the sale. Moreover, even assuming the mortgage validly exists, the Court notes respondents allegation that the mortgage with the NHMFC was for 25 years which began September 3, 1994. Respondent filed her Complaint for Specific Performance in 1997. Since the 25 years had not lapsed, the prayer of respondent to compel petitioner to execute necessary documents to effect the transfer of title is premature. WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED andSET ASIDE. The complaint of respondent in Civil Case No. 97-82716 is DISMISSED. SO ORDERED.
G.R. Nos. L-22951 and L-22952 January 31, 1967 ALLIED FREE WORKERS' UNION (PLUM), petitioner, vs. COMPAIA MARITIMA, Manager JOSE C. TEVES, and COURT OF INDUSTRIAL RELATIONS, respondents. ----------------------------- G.R. No. L-22971 January 31, 1967 COMPAIA MARITIMA and Manager JOSE C. TEVES, petitioners, vs. ALLIED FREEWORKERS' (PLUM) and COURT OF INDUSTRIAL RELATIONS, respondents. L-22951 and 22952: Vicente A. Rafael and Associates for petitioner. Rafael Dinglasan for respondents. Mariano B. Tuason for respondent Court of Industrial Relations. L-22971: Rafael Dinglasan for petitioner. Vicente A. Rafael and Associates for respondents. Mariano B. Tuason for respondent Court of Industrial Relations. BENGZON, J.P., J .: The three cases before this Court are the respective appeals separately taken by the parties hereto from an order 1 of the Court of Industrial Relations en banc affirming its trial judge's decision, rendered on November 4, 1963, in CIR Case 175-MC and CIR Case 426-ULP. Thus L-22971 is the appeal of MARITIMA 2 in CIR Case 175-MC; L- 22952 isAFWU's appeal in the same case; and L-22951 refers to AFWU's3 appeal in CIR Case 426-ULP. Since these cases were jointly tried and decided in the court a quo and they involve the same fundamental issue the presence or absence of employer-employee relationship they are jointly considered herein. MARITIMA is a local corporation engaged in the shipping business. TEVES is its branch manager in the port of Iligan City. And AFWU is duly registered legitimate labor organization with 225 members. On August 11, 1952, MARITIMA, through Teves, entered into a CONTRACT 4 with AFWU the terms of which We reproduce: ARRASTRE AND STEVEDORING CONTRACT KNOW ALL MEN BY THESE PRESENTS: This CONTRACT made and executed this 11th day of August, 1952, in the City of Iligan, Philippines, by and between the COMPAIA MARITIMA Iligan Branch, represented by its Branch Manager in Iligan City, and the ALLIED FREE WORKERS' UNION, a duly authorizedlabor union, represented by its President: WITNESSETH. 1. That the Compaia MARITIMA hereby engage the services of the Allied Free Workers' Union to do and perform all the work of stevedoring and arrastre services of all its vessels or boats calling in the port of Iligan City, beginning August 12, 1952. 2. That the Compaia MARITIMA shall not be liable for the payment of the services rendered by the Allied Free Workers' Union, for the loading, unloading and deliveries of cargoes as same is payable by the owners and consignees of cargoes, as it has been the practice in the port of Iligan City. 3. That the Allied Free Workers' Union shall be responsible for the damages that may be caused to the cargoes in the course of their handling. 4. That this CONTRACT is good and valid for a period of one (1) month from August 12, 1952, but same may be renewed by agreement of the parties; however Compaia MARITIMA reserves the right to revoke this CONTRACT even before the expiration of the term, if and when the Allied Free Workers' Unionfails to render good service. IN WITNESS WHEREOF, we hereunto sign this presents in the City of Iligan, Philippines, this 11th day of August, 1952. (SGD) SALVADOR T. LLUCH President Allied Free Workers' Union Iligan City (SGD) JOSE C. TEVES Branch Manager Compaia Maritima Iligan City SIGNED IN THE PRESENCE OF: 1. (SGD) JOSE CUETO 2. (SGD) SERGIO OBACH. During the first month of the existence of the CONTRACT , AFWU rendered satisfactory service. So, MARITIMA, through Teves, verbally renewed the same. This harmonious relations between MARITIMA and AFWU lasted up to the latter part of 1953 when the former complained to the latter of unsatisfactory and inefficient service by the laborers doing the arrastre and stevedoring work. This deteriorating situation was admitted as a fact by AFWU'spresident. To remedy the situation since MARITIMA's business was being adversely affected Teves was forced to hire extra laborers from among "stand-by" workers not affiliated to any union to help in the stevedoring and arrastre work. The wages of these extra laborers were paid by MARITIMA through separate vouchers and not byAFWU. Moreover, said wages were not charged to the consignees or owners of the cargoes. On July 23, 1954, AFWU presented to MARITIMA a written proposal 5 for a collective bargaining agreement. This demand embodied certain terms and conditions of employment different from the provisions of theCONTRACT . No reply was made by MARITIMA. On August 6, 1954, AFWU instituted proceedings in the Industrial Court 6 praying that it be certified as the sole and exclusive bargaining agent in the bargaining unit composed of all the laborers doing the arrastre and stevedoring work in connection with MARITIMA's vessels in Iligan City. MARITIMA answered, alleging lack of employer-employee relationship between the parties. On August 24, 1954, MARITIMA informed AFWU of the termination of the CONTRACT because of the inefficient service rendered by the latter which had adversely affected its business. The termination was to take effect as of September 1, 1954. MARITIMA then contracted with the Iligan Stevedoring Union for the arrastre and stevedoring work. The latter agreed to perform the work subject to the same terms and conditions of the CONTRACT . The new agreement was to be carried out on September 1, 1954. On August 26, 1954, upon the instance of AFWU, MARITIMA found itself charged before the Industrial Court 7 of unfair labor practices under Sec. 4(a), (1), (3), (4) and (6) of Rep. Act No. 875. MARITIMA answered, again denying the employer- employee relationship between the parties. On September 1, 1954, members of AFWU, together with those of the Mindanao Workers Alliance a sister union formed a picket line at the wharf of Iligan City, thus preventing the Iligan Stevedoring Union from carrying out the arrastre and stevedoring work it contracted for. 8 This picket lasted for nine days. On September 9, 1954, MARITIMA filed an action 9 to rescind the CONTRACT , enjoin AFWU members from doing arrastre and stevedoring work in connection with its, vessels, and for recovery of damages against AFWU and its officers. Incidentally, this civil case has been the subject of three proceedings already which have reached this Court. The first 10 involved a preliminary injunction issued therein on September 9, 1954, by the trial court prohibiting AFWU from interfering in any manner with the loading and unloading of cargoes from MARITIMA's vessels. This injunction was lifted that very evening upon the filing of a counter bond by AFWU. Subsequently, a motion to dissolve said counterbond was filed by MARITIMA but the hearing on this incident was enjoined by Us on March 15, 1955, upon the institution of the petition for prohibition and injunction in said L-8876. 11 Meanwhile,AFWU members-laborers were able to continue the arrastre and stevedoring work in connection with MARITIMA'svessels. On December 5, 1960, the CFI decision in the civil case was promulgated. It ordered the rescission of theCONTRACT and permanently enjoined AFWU members from performing work in connection with MARITIMA'svessels. AFWU then filed its notice of appeal, appeal bond and record on appeal. 12 The subsequent incidents thereto gave rise to the two other proceedings which have previously reached Us here. On January 6, 1961, upon motion of MARITIMA ,an order of execution pending appeal and a writ of injunction against AFWU was issued by the trial court in the civil case. This enabled MARITIMA to engage the services of the Mindanao Arrastre Service to do the arrastre and stevedoring work on January 8, 1961. However, AFWU filed a petition for certiorari, injunction and prohibition 13 here and on January 18, 1961, was able to secure a writ of preliminary injunction ordering the maintenance of the status quo prior to January 6, 1961. Thus, after January 18, 1961, AFWU laborers were again back doing the same work as before. The third incident that reached US 14 involved an order of the same trial court in the same civil case, dated January 11, 1961, which amended some clerical errors in the original decision of December 5, 1960. Upon motion ofMARITIMA, the trial court, on March 24, 1962, issued an order for the execution of the decision of January 11, 1961, since AFWU did not appeal therefrom, and on March 31, 1962, a writ of execution ousting the 225 AFWU members-laborers from their work in connection with the loading and unloading of cargoes was issued and a levy on execution upon the properties of AFWU was effected. Accordingly, on April 1, 1962, MARITIMA was again able to engage the services of the Mindanao Arrastre Service. On April 16, 1962, upon the institution of the petition for certiorari, injunction, prohibition and mandamus, a preliminary injunction was issued by Us against the orders of March 24 and 31, 1962. But then, on May 16, 1962, upon motion of MARITIMA this preliminary injunction was lifted by Us insofar as it related to the execution of the order ousting the AFWU laborers from the stevedoring and arrastre work in connection with the MARITIMA vessels. 15 Such then was the status of things. On November 4, 1963, after almost 10 years of hearing the two cases jointly, the Industrial Court finally rendered its decision. The dispositive part provided: IN VIEW OF ALL THE FOREGOING CIRCUMSTANCES, the complaint of the union for unfair labor practices against the Compaia MARITIMA and/or its agent Jose C. Teves and the Iligan Stevedoring Union and/or Sergio Obach is hereby dismissed for lack of substantial evidence and merit. In pursuance of the provisions of Section 12 of Republic Act 875 and the Rules of this court on certification election, the Honorable, the Secretary of Labor or any of his authorized representative is hereby requested to conduct certification election among all the workers and/or stevedores working in the wharf of Iligan City who are performing stevedoring and arrastre service aboard Compaia MARITIMA vessels docking at Iligan City port in order to determine their representative for collective bargaining with the employer, whether their desire to be represented by the petitioner Allied Free Workers Union or neither [sic]; and upon termination of the said election, the result thereof shall forthwith be submitted to this court for further consideration. The union present payroll may be utilized in determining the qualified voters, with the exclusion of all supervisors. SO ORDERED. As already indicated, the fundamental issue involved in these cases before Us consists in whether there is an employer-employee relationship between MARITIMA, on the one hand, and AFWU and/or its members-laborers who do the actual stevedoring and arrastre work on the other hand. THE UNFAIR LABOR PRACTICE CASE (L-22951 * [CIR Case 426-ULP]) Petitioner AFWU's proposition is that the court a quo erred (1) in concluding that MARITIMA had not refused to bargain collectively with it, as the majority union; (2) in not finding that MARITIMA had committed acts of discrimination, interferences and coercions upon its members-laborers, and (3) in concluding that the CONTRACTmay not be interferred with even if contrary to law or public policy. It is true that MARITIMA admits that it did not answer AFWU's proposal for a collective bargaining agreement. From this it does not necessarily follow that it is guilty of unfair labor practice. Under the law 16 the duty to bargain collectively arises only between the "employer" and its "employees". Where neither party is an "employer" nor an "employee" of the other, no such duty would exist. Needless to add, where there is no duty to bargain collectively the refusal to bargain violates no right. So, the question is: Under the CONTRACT , was MARITIMA the "employer" and AFWU and/or its members the "employees" with respect to one another? The court a quo held that under the CONTRACT , AFWU was an independent contractor of MARITIMA. This conclusion was based on the following findings of fact, which We can no longer disturb, stated in the CIR decision: 7. ... The petitioner union operated as a labor contractor under the so-called "cabo" system; and as such it has a complete set of officers and office personnel (Exhs. "F" and "F-1") and its organizational structure includes the following: General President, with the following under him one vice-president, legal counsel, general treasurer, general manager and the board of directors. Under the general manager is the secretary, the auditor, and the office staff composing of the general foreman, general checker, general timekeeper, and the respective subordinates like assistant foreman, capataz, assistant general checker, field checker, office timekeeper, and field timekeeper all appointed by the general manager of the union and are paid in accordance with the union payroll exclusively prepared by the union in the office. (See t.s.n. pp. 32-36, June 9, 1960; pp. 78-80, February 16, 1961; pp. 26-28, August 9, 1960). The payrolls where laborers are listed and paid were prepared by the union itself without the intervention or control of the respondent company and/or its agent at Iligan City. The respondent never had any knowledge of the individual names of laborers and/or workers listed in the union payroll or in their roster of membership. 8. The union engaged the services of their members in undertaking the work of arrastre and stevedoringeither to haul shippers' goods from their warehouses in Iligan City to the MARITIMA boat or from the boat to the different consignees. The charges for such service were known by the union and collected by them through their bill collector. This is shown by the preparation of the union forms known as "conduci" or delivery receipts. These "conduci" or receipts contain informations as to the number and/or volume of cargoes handled by the union, the invoice number, the name of the vessel and the number of bills of lading covering the cargoes to be delivered. Those delivery receipts are different and separate from the bills of lading and delivery receipts issued by the company to the consignees or shippers. Cargoes carried from the warehouses to the boat or from the boat to the consignees were always accompanied by the union checker who hand-carry the "conduci". Once goods are delivered to their destination the union through its bill collectors prepare the bills of collection and the charges thereon are collected by the union bill collectors who are employees of the union and not of the respondent. The respondent had no intervention whatsoever in the collection of those charges as the same are clearly indicated and described in the labor CONTRACT , Exhibit "A". There were, however, instances when the respondents were requested to help the union in the collection of charges forservices rendered by members of the union when fertilizers and gasoline drums were loaded aboard the Compaia MARITIMA boats. This was necessary in order to facilitate the collection of freight and handling charges from the government for auditing purposes. When cargoes are to be loaded, the shipper usually notifies the petitioner union when to load their cargoes aboard Compaia MARITIMA boats calling in the port of Iligan City; and when a boat docks in said port, the union undertakes to haul the said shipper's goods to the boat. In doing this work, the union employs their own trucks or other vehicles or conveyance from shipper's warehouse to the boat or vice-versa. The respondent has no truck of any kind for the service of hauling cargoes because such service is included in the CONTRACT executed between the parties. (See Exh. "A"). 9. The union members who were hired by the union to perform arrastre and stevedoring work on respondents' vessels at Iligan port were being supervised and controlled by the general foreman of the petitioner union or by any union assistant or capataz responsible for the execution of the labor CONTRACT when performing arrastre and/or stevedoring work aboard vessels of the Compaia MARITIMA docking at Iligan City. The foreman assigned their laborers to perform the required work aboard vessels of the respondent. For instance, when a boat arrives, the general foreman requests the cargo report from the chief mate of the vessel in order to determine where the cargoes are located in the hold of the boat and to know the destination of these cargoes. All the laborers and/or workers hired for said work are union members and are only responsible to their immediate chief who are officers and/or employees of the union. The respondent firm have their own separate representatives like checkers who extend aid to the union officers and members in checking the different cargoes unloaded or loaded aboard vessels of the Compaia MARITIMA. There were no instances where offices and employees of the respondent Compaia MARITIMA and/or its agent had INTERFERRED in the giving of instructions to the laborers performing the arrastre and/or stevedoring work either aboard vessels or at the wharf of Iligan City. As contractor, the union does not receive instructions as to what to do, how to do, and works without specific instructions. They have no fixed hours of work required by the MARITIMA. 10. While cargoes were in transit either from the warehouse to the boat or from the boat to the different consignees, any losses or damages caused with the said cargoes were charged to the account of the union; and the union likewise imposed the penalty or fine to any employee who caused or committed the damages to cargoes in transit. Other disciplinary measures imposed on laborers performing the said work were exercised by the general foreman of the union who has blanket authority from the union general manager to exercise disciplinary control over their members who were assigned to perform the work in a group of laborers assigned by the union to perform loading or unloading cargoes when a Compaia MARITIMA boat docked at Iligan City. The respondents have not at any time interferred in the imposition of disciplinary action upon the laborers who are members of the union. In one instance, under this situation, the president of the union himself dismissed one inefficient laborer found to have been performing inefficient service at the time(t.s.n. pp. 17-18, February 15, 1961). x x x x x x x x x 13. Erring laborers and/or workers who are affiliates of the union were directly responsible to the union and never to the respondent. Respondent cannot, therefore, discipline and/or dismiss these erring workers of the union. (Emphasis supplied) And in absolving MARITIMA of the unfair labor charge on this point, the court a quo concluded: From the foregoing circumstances and findings, the Court is of the opinion that no substantial evidence has been presented to sustain the charge of unfair labor practice acts as alleged to have been committed by herein respondent. The Court finds no interference in the union activities, if any, of the members of the Allied Free Workers Union as these persons engaged in the stevedoring and arrastre service were employed by the Allied Free Workers Union as independent contractor subject to the terms and conditions of their then existing labor CONTRACT Exhibit "A". To construe the CONTRACT otherwise would tend to disregard the rights and privileges of the parties intended by them in their CONTRACT . (Exhibit "A"). This Court believes that it may not interfere in the implementation of the said labor CONTRACT in the absence of abuse by one party to the prejudice of the other. ... Further, the Court finds that the petitioner, aside from its labor CONTRACT (See Exhibit "A") with the respondent Compaia MARITIMA also has other labor contracts with other shipping firms on the stevedoring and arrastre work; and that this CONTRACT obligated the petitioner as an independent labor contractor to undertake the arrastre and stevedoring service on Compaia MARITIMA boats docking at Iligan City Port. The petitioner is an independent contractor as defined in the CONTRACT Exhibit "A" and in the evidence submitted by the parties. "An INDEPENDENT CONTRACTOR is one who, in rendering services, exercises an independent employment or occupation and represents the will of his employer only as to the results of his work and not as to the means whereby it is accomplished; one who exercising an independent employment, contracts to do a piece of work according to his own methods, without being subject to the control of his employer except as to the result of his work; and who engaged to perform a certain service for another, according to his own manner and methods, free from the control and direction of his employer in all matters connected with the performance of the service except as to the result of the work." (see 56 C.J.S. pp. 41-43; Cruz, et al. vs. Manila Hotel et al., G.R. No. L-9110, April 30, 1957). These factors were present in the relation of the parties as described in their CONTRACT Exhibit "A". x x x x x x x x x In Viaa vs. Al Lagadan et al., G.R. No. L-8967, May 31, 1956, the Supreme Court states the rule as follows. 'IN DETERMINING THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP, the following elements are generally considered, namely: (1) the selection and engagement of the employees; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct although the latter is the most important element (35 Am. Jur. 445). Assuming that the share received by the deceased could partake of the nature of wages on which we need not and do not express our view and that the second element, therefore, exists in the case at bar, the record does not contain any specific data regarding the third and fourth elements.' The clear implication of the decision of the Supreme Court is that if the defendant has no power of control which, according to the Supreme Court, is the "most important element" there is no employer-employee relationship. (Emphasis supplied) The conclusion thus reached by the court a quo is in full accord with the facts and the applicable jurisprudence. We totally agree with the court a quo that AFWU WAS AN INDEPENDENT CONTRACTOR. And an independent contractor is not an "employee". 17
Neither is there any direct employment relationship between MARITIMA and the laborers. The latter have no separate individual contracts with MARITIMA. In fact, the court a quo found that it was AFWU that hired them. Their only possible connection with MARITIMA is through AFWU which contracted with the latter. Hence, they could not possibly be in a better class than AFWU which dealt with MARITIMA. 18
In this connection, it is interesting to note that the facts as found by the court a quo strongly indicate that it is AFWUitself who is the "employer" of those laborers. The facts very succinctly show that it was AFWU, through its officers, which (1) selected and hired the laborers, (2) paid their wages, (3) exercised control and supervision over them, and (4) had the power to discipline and dismiss them. These are the very elements constituting an employer-employee relationship. 19
Of course there is no legal impediment for a union to be an "employer". 20 Under the particular facts of this case, however, AFWU appears to be more of a distinct and completely autonomous business group or association. Its organizational structure and operational system is no different from other commercial entities on the same line. It even has its own bill collectors and trucking facilities. And that it really is engaged in business is shown by the fact that it had arrastre and stevedoring contracts with other shipping firms in Iligan City. Now, in its all-out endeavor to make an "employer" out of MARITIMA, AFWU citing an impressive array of jurisprudence, even goes to the extent of insisting that it be considered a mere "AGENT" of MARITIMA. Suffice it to say on this point that an agent can not represent two conflicting interests that are diametrically opposed. And that the cases sought to be relied upon did not involve representatives of opposing interests. Anent the second point raised: AFWU claims that the court a quo found that acts of interferences and discriminations were committed by MARITIMA against the former's members simply for their union affiliation. 21 However, nowhere in the 32-page decision of the court a quo can any such finding be found. On the contrary, said court made the following finding: 18. There is no showing that this new union, the Iligan Stevedoring Union, was organized with the help of the branch manager Jose C. Teves. The organizer of the union like Messrs. Sergio Obach, Labayos and Atty. Obach and their colleagues have never sought the intervention, help or aid of the respondent CompaiaMARITIMA or its branch manager Teves in the formation and/or organization of the said Iligan Stevedoring Union. It appears that these people have had previous knowledge and experience in handling stevedoring and in the arrastre service prior to the employment of the Allied Free Workers Union in the Iligan port. The charge of union interference and domination finds no support from the evidence. (Emphasis supplied) More worthy of consideration is the suggestion that the termination of the CONTRACT was in bad faith. First of all, contrary to AFWU's sweeping statement, the court a quo did not find that the termination of the CONTRACT was "in retaliation to AFWU's demand for collective bargaining. On the contrary, the court a quo held that MARITIMA'sauthority to terminate the CONTRACT was rightfully exercised: 21. The evidence does not show substantially any act of interference in the union membership or activities of the petitioner union. The rescission of their CONTRACT is not a union interference contemplated in the law. x x x x x x x x x x x x Further, the Court is satisfied that there is no act or acts of discrimination as claimed by herein petitioner to have been committed by the respondent firm or its branch manager Teves. Evidence is clear that Teves, in representation of the principal, the respondent Compaia MARITIMA, has also acted, in good faith in implementing the provisions of their existent CONTRACT (Exhibit "A"), and when he advised the union of the rescission of the said CONTRACT effective August 31, 1954, he did so in the concept that the employer firm may so terminate their contract pursuant to paragraph 4 of Exhibit "A" which at the time was the law controlling between them. ... (Emphasis supplied) We are equally satisfied that the real reason for the termination of the CONTRACT was AFWU's inefficient service. The court a quo drew its conclusion from the following findings: 11. During the first month of the existence of the labor CONTRACT Exhibit 'A', the petitioner union rendered satisfactory service. Under this situation, the Compaia MARITIMA's representative at Iligan City was authorized to renew verbally with the extension of the CONTRACT Exhibit "A" from month to month basis after the first month of its expiration. This situation of harmony lasted up to the latter part of 1953 when the Compaia MARITIMA and its branch manager agent complained to the union of the unsatisfactory service of the union laborers hired to load and unload cargoes aboard Compaia MARITIMA boats. This deteriorating situation was admitted as a fact by the union president (See Exhs. "3", "3-A" and "3-B"; See also t.s.n. pp. 65-66, August 9, 1960). 12. There was a showing that the laborers employed by the union were inefficient in performing their jobs, and the business of the respondent company in Iligan City suffered adversely during the year 1954; and this was due to the fact that respondents' vessels were forced to leave cargoes behind in order not to disrupt the schedule of departures. The Union laborers were slow in loading and/or unloading freight from which the respondent Compaia MARITIMA secured its income and/or profits. At times, cargoes were left behind because of the union's failure to load them before vessel's departure. In order to solve this inefficiency of the complaining union, the branch manager of the Compaia MARITIMA was forced to hire extra laborers from among 'stand-by' workers not affiliated to any union for the purpose of helping in the stevedoring and arrastre work on their vessels because, at that time, the union was not performing and/or rendering efficient service in the loading and unloading of cargoes. ... x x x x x x x x x 14. Because of the deterioration of the Service rendered to the respondent, the branch manager of the respondent Compaia MARITIMA informed the union of its intention to rescind the CONTRACT Exhibit "A" because the company had been suffering losses for such inefficient service. (See Exhibit "N"). Respondent Teves reported to the MARITIMA's head office on the financial losses of the company in its operations. (See Exhibits 'Y', 'Y-1' to 'X-5'). 15. On August 24, 1954, branch manager Jose C. Teves of the Iligan City MARITIMA Branch, wrote the petitioner union informing them of the termination of their CONTRACT , Exhibit "A". (See Exhibit "N"). This step was taken after the company found the union lagging behind their work under the CONTRACT , so much so that MARITIMA boats have to leave on schedule without loading cargoes already contacted to be transported. (Emphasis supplied) Perhaps, AFWU might say that this right to terminate appearing in paragraph 4 of the CONTRACT is contrary to law, morals, good customs, public order, or public policy. 22 However, it has not adduced any argument to demonstrate such point. Moreover, there is authority to the effect that the insertion in a CONTRACT for personal services of a resolutory condition permitting the cancellation of the CONTRACT by one of the contracting parties is valid. 23 Neither would the termination constitute "union- busting". Oceanic Air Products vs. CIR, 24 cited by AFWU is not in point. That case presupposes an employer-employee relationship between the parties disputants a basis absolutely wanting in this case. AFWU's third point is again that MARITIMA's act of terminating the CONTRACT constituted union interference. As stated, the court a quo found as a fact that there is no sufficient evidence of union interference. And no reason or argument has been advanced to show that the fact of said termination alone constituted union interference. THE CERTIFICATION ELECTION CASE (L-22952 ** & L-22971 [CIR Case No. 175-MC]). In the certification ejection case, the court a quo directed the holding of a certification election among the laborers then doing arrastre and stevedoring work. Both MARITIMA and AFWU have appealed from that ruling. The latter maintains that the lower court should have directly certified it as the majority union, entitled to represent all the workers in the arrastre and stevedoring work unit, whereas MARITIMA contends that said court could not even have correctly ordered a certification election considering that there was an absence of employer-employee relationship between it and said laborers. There is no question that certification election could not have been proper during the existence of the CONTRACT in view of the court a quo's finding that there was no employment relationship thereunder between the parties. But after the termination of the CONTRACT on August 31, 1954, what was the nature of the relationship betweenMARITIMA and the laborers-members of AFWU? From the finding that after the rescission of the CONTRACT , MARITIMA continued to avail of the services of AFWUthe court a quo concluded that there came about an implied employer-employee relationship between the parties. This conclusion cannot be sustained. First of all, it is contradicted by the established facts. In its findings of fact, the court a quo observed that after the rescission, the AFWU laborers continued working in accordance with the "cabo" system, which was the prevailing custom in the place. Said the court: 20. After the rescission of the CONTRACT Exhibit "A" on August 31, 1954, the Allied Free Workers Union and its members were working or performing the work of arrastre and stevedoring service aboard 'vessels of the Compaia MARITIMA docking at Iligan City port under the 'cabo system' then prevailing in that teritory; and the customs and conditions then prevailing were observed by the parties without resorting to the conditions of the former labor contract Exhibit "A". (Emphasis supplied) Under the "CABO" SYSTEM, the union was an independent contractor. This is shown by the court a quo's own finding that prior to the CONTRACT between MARITIMA and AFWU, the former had an oral arrastre and stevedoring agreement with another union. This agreement was also based on the "cabo" system. As found by the court a quo: 4. That prior to the execution of Exhibit "A", the arrastre and stevedoring work was performed by the Iligan Wharf Laborers Union headed by one Raymundo Labayos under a verbal agreement similar to the nature and contents of Exhibit "A"; and this work continued from 1949 to 1952. 5. Under the oral CONTRACT , the Iligan Laborers Union acting as an independent labor contractor engaged [in] the services of its members as laborers to perform the contract work of arrastre and stevedoring service aboard vessels of the Compaia MARITIMA calling and docking at Iligan City; and for the services therein rendered the union charged shippers and/or consignees in accordance with the consignment or place, and the proceeds thereof shall be shared by the union members in accordance with the union's internal rules and regulations. This system of work is locally known as the 'cabo system'. The laborers who are members of the union and hired for the arrastre and stevedoring work were paid on union payrolls and the Compaia MARITIMA has had nothing to do with the preparation of the same. 6. Because of unsatisfactory service rendered by the Iligan Wharf Labor Union headed by Labayos, the Compaia MARITIMA through its agent in Iligan City cancelled their oral contractor and entered into a new contractor, Exhibit "A" with the Allied Free Workers Union (PLUM) now petitioner in this case. The terms and conditions of the same continued and was similar to the oral contractor entered into with the union headed by Labayos. ... 7. The cancellation of the oral contract with the Iligan Wharf Labor Union headed by Labayos was due to the inefficient service rendered by the said union. The labor contract entered into by the petitioner herein (Exh. "A") was negotiated through the intervention of Messrs. Salvador Lluch, Mariano Ll Badelles, Laurentino Ll. Badelles, Nicanor T. Halivas and Raymundo Labayos. The contract was prepared by their legal panel and after several negotiations, respondent Teves reluctantly signed the said written contract with the union with the assurance however that the same arrange previously had with the former union regarding the performance and execution of the arrastre and stevedoring contract be followed in accordance with the custom of such kind of work at Iligan City. The petitioner union, operated as a labor contractor under the so-called "cabor" system; ... (Emphasis supplied) From the above findings, it is evident that, insofar as the working arrangement was concerned, there was no real difference between the CONTRACT and the prior oral agreement. Both were based on the "cabo" system. Under both, (1) the union was an independent contractor which engaged the services of its members as laborers; (2) the charges against the consignees and owners of cargoes were made directly by the union; and (3) the laborers were paid on union payrolls and MARITIMA had nothing to do with the preparation of the same. These are the principal characteristics of the "cabo" system on which the parties based their relationship after the termination of theCONTRACT. Hence, since the parties observed the "cabo" system after the rescission of the CONTRACT, and since the characteristics of said system show that the contracting union was an independent contractor, it is reasonable to assume that AFWU continued being an independent contractor of MARITIMA. And, being an independent contractor, it could not qualify as an "employee". With more reason would be true with respect to the laborers. Moreover, there is no evidence at all regarding the characteristics of the working arrangement between AFWU andMARITIMA after the termination of the CONTRACT. All we have to go on is the court a quo's finding that the "cabo" system was observed a system that negatives employment relationship. The four elements generally regarded as indicating the employer-employee relationship or at the very least, the element of "control" must be shown to sustain the conclusion that there came about such relationship. The lack of such a showing in the case at bar is fatal to AFWU's contention. Lastly, to uphold the court a quo's conclusion would be tantamount to the imposition of an employer-employee relationship against the will of MARITIMA. This cannot be done, since it would violate MARITIMA's exclusive prerogative to determine whether it should enter into an employment CONTRACT or not, i.e, whether it should hire others or not. 25 In Pampanga Bus Co. vs. Pambusco Employees' Union, 26 We said: x x x The general right to make a contract in relation to one's business is an essential part of the liberty of the citizens protected by the due process clause of the constitution. The right of a laborer to sell his labor to such person as he may choose is, in its essence, the same as the right of an employer to purchase labor from any person whom it chooses. The employer and the employee have thus an equality of right guaranteed by the constitution. 'If the employer can compel the employee to work against the latter's will, this is servitude. If the employee can compel the employer to give him work against the employer's will, this is oppression (Emphasis supplied) . Therefore, even if the AFWU laborers continued to perform arrastre and stevedoring work after August 31, 1954, it cannot be correctly concluded as did the court a quo that an employer-employee relationship even impliedly at that arose when before there never had been any. Indeed, it would appeal unreasonable and unjust to force such a relationship upon MARITIMA when it had clearly and continuously manifested its intention not to have any more business relationship whatsoever with AFWU because of its inefficient service. It was only to comply with injunctions and other judicial mandates that MARITIMA continued to abide by the status quo, extending in fact and in effect the operation of the MARITIMA contract. The only remaining question now is whether, in the particular context of what We have said, the lower court's ruling ordering a certification election can be sustained. As already stated, the duty to bargain collectively exists only between the "employer" and its "employees". However, the actual negotiations which may possibly culminate in a concrete collective bargaining contract are carried on between the "employer" itself and the official representativeof the "employees" 27 in most cases, the majority labor union. Since the only function of a certification election is to determine, with judicial sanction, who this official representative or spokesman of the "employees" will be, 28 the order for certification election in question cannot be sustained. There being no employer-employee relationship between the parties disputants, there is neither a "duty to bargain collectively" to speak of. And there being no such duty, to hold certification elections would be pointless. There is no reason to select a representative to negotiate when there can be no negotiations in the first place. We therefore hold that where as in this case there is no duty to bargain collectively, it is not proper to hold certification elections in connection therewith. The court a quo's objective in imposing the employer-employee relationship may have been to do away with the "cabo" system which, although not illegal, is in its operation regarded as disadvantageous to the laborers and stevedores. The rule however remains that the end cannot justify the means. For an action to be sanctioned by the courts, the purpose must not only be good but the means undertaken must also be lawful. A true and sincere concern for the welfare of AFWU members-laborers would call for reforms within AFWU itself, if the evil of the so-called "cabo" system is to be eliminated. As We suggested in Bermiso vs. Hijos de Escao, 29 the remedy against the "cabo" system need not be sought in the courts but in the laborers themselves who should organize into a closely-knit union "which would secure the privileges that the members desire thru the election of officers among themselves who would not exploit them." Wherefore, the appealed decision of the Court of Industrial Relations is hereby affirmed insofar as it dismissed the charge of unfair labor practice in CIR Case 426-ULP, but reversed and set aside insofar as it ordered the holding of a certification election in CIR Case No. 175-MC, and the petition for certification in said case should be, as it is hereby, dismissed. No costs. So ordered.
A.C. No. 959 July 30, 1971 PEDRO OPAREL, SR., complainant, vs. ATTY. DOMINADOR ABARIA, respondent. R E S O L UT I O N
FERNANDO, J .: This administrative proceeding was started by Pedro Oparel, Sr., who identified himself as a pauper in his complaint filed with this Court on August 27, 1970 against RESPONDENT Dominador Abaria, a member of the Philippine Bar. The charge was that respondent, whose services were retained to assist complainant recover damages from his employer for injuries suffered, acted dishonestly. Apparently, a settlement was reached, complainant having been made to sign a receipt in the sum of P500.00 for his claim, out of which was deducted P55.00 as attorney's fees, when the truth, according to the complaint, was that respondent did receive the much larger amount of P5,000.00. In a resolution of September 14, 1970, the respondent was required to file an answer within ten days from notice. It was duly filed on October 19, 1970 with a vehement denial on the part of the respondent, alleging that the complaint was "irresponsible, baseless and [should] not merit even the scantiest consideration" of this Court. He further alleged that while complainant was asking only for P200.00, he was able to secure a settlement from the employer in the sum of P500.00, admitting that he was given as fees the aforesaid AMOUNT of P55.00. He accounted for the alleged sum of P5,000.00 by stating that P3,500 was spent by the employer for plaintiff's operation and medical bills, another P1,000.00 given to complainant's family during his confinement in the hospital, and then the P500.00 received in cash by way of additional settlement. He prayed that the complaint be dismissed. This Court, in a resolution of October 23, 1970, referred the matter to the Solicitor General for investigation, report and recommendation. Such report and recommendation was submitted on June 2, 1971. It was therein stated that the city fiscal of Bacolod City, who was designated to act as investigator, as the parties were residents of the place, submitted on March 2, 1971 a report recommending dismissal due to the desistance of complainant. It appeared that when the case was called for investigation on February 17, 1971, the complainant manifested that he was no longer interested in pushing through his complaint against respondent. In his affidavit of desistance, he admitted that the administrative charge arose out of a misunderstanding between him and respondent. He likewise admitted that there was no deception practiced on him by respondent when he was made to sign the affidavit of September 20, 1966 wherein it appeared that the amount received by him was P500.00, no mention being made therein of the other P4,500.00 which, as noted in the answer of respondent, consisted of P3,500.00 for expenses incurred for complainant's operation and medical bills and P1,000.00 given to his family for support while he was staying in the hospital. The Solicitor General agreed with such a recommendation and prayed that the case be dismissed. While it would appear that under the circumstances no case lies against respondent Dominador Abaria, it is not amiss to impress on members of the Bar that the utmost care be taken to minimize occasions for any misunderstanding between them and their clients. The relationship being one of confidence, there is ever present the need for the latter being adequately and fully informed of the mode and manner in which their interest is defended. They should not be left in the dark. They are entitled to the fullest disclosure of why certain steps are taken and why certain matters are either included or excluded from the documents they are made to sign. It is only thus that their faith in counsel may remain unimpaired. Where, as did happen here, the client happens to be poor and unlettered, seeking to enforce what he considers his just demands against an employer, it is even more imperative that matters be explained to him with all precision and clarity. More than that, no effort should be spared for him to get fully what he is entitled to under the law. The same zeal should characterize a lawyer's efforts as when he is defending the rights of property. As it is, there is even the fear that a lawyer works harder when he appears for men of substance. To show how unfounded is such a suspicion, he must exert his utmost, whoever be his client. More specifically, in a case like the present, he should not invite loss of trust by inadvertence or even by a failure to use the simplest and most understandable language in communicating matters. For he may lend himself to the suspicion that he is lacking in candor and may be taking undue advantage of his client for his own profit and advantage in any dealing with the adverse party. At any rate, with complainant having been satisfied with the explanation of respondent, he could not be justly charged of being recreant to his trust for personal gain. The dismissal of this case is therefore warranted. WHEREFORE, the administrative case filed by Pedro Oparel, Sr. against respondent Dominador Abaria is dismissed.
G.R. No. 161757 January 25, 2006 SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S. DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City and DIVINA A. MONTEHERMOZO,Respondents. D E C I S I O N CARPIO MORALES, J .: PETITIONER, Sunace International Management Services (SUNACE), a corporation duly organized and existing under the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper under a 12-month contract effective February 1, 1997. 1 The deployment was with the assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd. After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to the Philippines on February 4, 2000. Shortly after her return or on February 14, 2000, Divina filed a complaint 2 before the National Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign principal alleging that she was jailed for three months and that she was underpaid. The following day or on February 15, 2000, Labor Arbitration Associate Regina T. Gavin issued Summons 3 to the Manager of Sunace, furnishing it with a copy of Divinas complaint and directing it to appear for mandatory conference on February 28, 2000. The scheduled mandatory conference was reset. It appears to have been concluded, however. On April 6, 2000, Divina filed her Position Paper 4 claiming that under her original one- year contract and the 2-year extended contract which was with the knowledge and consent of Sunace, the following amounts representing income tax and savings were deducted: 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 SUNACEs 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 ATTORNEYS 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 attorneys fees as said reliefs are available only when the dismissal of a migrant worker is without just valid or lawful cause as defined by law or contract. The rationales behind the award of tax refund and payment of attorneys fees is not to enrich the complainant but to compensate him for actual injury suffered. Complainant did not suffer injury, hence, does not deserve to be compensated for whatever kind of damages. 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 Divinas Position Paper, Sunace filed on April 25, 2000 an ". . . answer to complainants position paper" 7 alleging that Divinas 2-year extension of her contract was without its knowledge and consent, hence, it had no liability attaching to any claim arising therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy of each document was annexed to said ". . . answer to complainants position paper." To Sunaces ". . . answer to complainants position paper," Divina filed a 2-page reply, 8 without, however, refuting Sunaces disclaimer of knowledge of the extension of her contract and without saying anything about the Release, Waiver and Quitclaim and Affidavit of Desistance. The Labor Arbiter, rejected Sunaces claim that the extension of Divinas contract for two more years was without its knowledge and consent in this wise: We reject Sunaces submission that it should not be held responsible for the amount withheld because her contract was extended for 2 more years without its knowledge and consent because as Annex "B" 9 shows, Sunace and Edmund Wang have not stopped communicating with each other and yet the matter of the contracts extension andSunaces 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 Sunaces argument that it is not liable on account of Divinas execution of a Waiver and Quitclaim and an Affidavit of Desistance. Observed the Labor Arbiter: Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be reduced to writing and signed by the parties and their respective counsel (sic), if any, before the Labor Arbiter. The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily entered into by the parties and after having explained to them the terms and consequences thereof. A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before whom the case is pending shall be approved by him, if after confronting the parties, particularly the complainants, he is satisfied that they understand the terms and conditions of the settlement and that it was entered into freely voluntarily (sic) by them and the agreement is not contrary to law, morals, and public policy. And because no consideration is indicated in the documents, we strike them down as contrary to law, morals, and public policy. 11
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 Wang to jointly and severally pay complainant DIVINA A. MONTEHERMOZO the sum of NT91,950.00 in its peso equivalent at the date of payment, as refund for the amounts which she is hereby adjudged entitled to as earlier discussed plus 10% thereof as attorneys fees since compelled to litigate, complainant had to engage the services of counsel. SO ORDERED. 13 (Underescoring supplied) On appeal of Sunace, the NLRC, by Resolution of April 30, 2002, 14 affirmed the Labor Arbiters decision. Via petition for certiorari, 15 Sunace elevated the case to the Court of Appeals which dismissed it outright by Resolution of November 12, 2002, 16 the full text of which reads: The petition for certiorari faces outright dismissal. The petition failed to allege facts constitutive of grave abuse of discretion on the part of the public respondent amounting to lack of jurisdiction when the NLRC affirmed the Labor Arbiters finding that petitioner Sunace International Management Services impliedly consented to the extension of the contract of private respondent Divina A. Montehermozo. It is undisputed that petitioner was continually communicating with private respondents foreign employer (sic). As agent of the foreign principal, "petitioner cannot profess ignorance of such extension as obviously, the act of the principal extending complainant (sic) employment contract necessarily bound it." Grave abuse of discretion is not present in the case at bar. ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED. 17
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 NLRCs finding that Sunace knew of and impliedly consented to the extension of Divinas 2-year contract. It went on to state that "It is undisputed that [Sunace] was continually communicating with [Divinas] foreign employer." It thus concluded that "[a]s agent of the foreign principal, petitioner cannot profess ignorance of such extension as obviously, the act of the principal extending complainant (sic) employment contract necessarily bound it." Contrary to the Court of Appeals finding, the alleged continuous communication was with the Taiwanese brokerWang, 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: x x x x 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.) Edmund Wang President 19
The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that Sunace continually communicated with the foreign "principal" (sic) and therefore was aware of and had consented to the execution of the extension of the contract is misplaced. The message does not provide evidence that Sunace was privy to the new contract executed after the expiration on February 1, 1998 of the original contract. That Sunace and the Taiwanese broker communicated regarding Divinas allegedly withheld savings does not necessarily mean that Sunace ratified the extension of the contract. As Sunace points out in its Reply 20 filed before the Court of Appeals, As can be seen from that letter communication, it was just an information given to the petitioner that the private respondent had t[aken] already her savings from her foreign employer and that no deduction was made on her salary. It contains nothing about the extension or the petitioners consent thereto. 21
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it was sent to enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to appear on February 28, 2000 for a mandatory conference following Divinas filing of the complaint on February 14, 2000. Respecting the Court of Appeals following dictum: As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as obviously, the act of its principal extending [Divinas] employment contract necessarily bound it, 22
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. 23 The knowledge of the principal-foreign employer cannot, therefore, be imputed to its agent Sunace. There being no substantial proof that Sunace knew of and consented to be bound under the 2-year employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be held solidarily liable for any of Divinas claims arising from the 2-year employment extension. As the New Civil Code provides, Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. 24
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 herebyREVERSED and SET ASIDE. The complaint of respondent Divina A. Montehermozo against petitioner isDISMISSED. SO ORDERED.
G.R. No. 117356 June 19, 2000 VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents. D E C I S I O N QUISUMBING, J .: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of theCourt of Appeals dated February 24, 1994, in CA- G.R. CV No. 31717, as well as the respondent court's resolution of September 30, 1994 modifying said decision. Both decision and resolution amended the judgment dated February 13, 1991, of the Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-118. The facts of this case as found by both the trial and appellate courts are as follows: St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M, which gave rise to the instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000 bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per bag as "per sales order VMC Marketing No. 042 dated October 16, 1989." 1 The transaction it covered was a "direct sale." 2 The SLDR also contains an additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO (warehouse)." 3
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated October 25, 1989 and three checks postdated November 13, 1989 in payment. That same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25,000 bags." 4
On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside from SLDR No. 1214M, said checks also covered SLDR No. 1213. Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been released, petitioner refused to allow further withdrawals of sugar against SLDR No. 1214M. CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR No. 1214M had been "sold and endorsed" to it but that it had been refused further withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000 bags had been withdrawn. 5 CSC thus inquired when it would be allowed to withdraw the remaining 23,000 bags. On January 31, 1990, petitioner replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because STM had already dwithdrawn all the sugar covered by the cleared checks. 6
On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags. Seven days later, petitioner reiterated that all the sugar corresponding to the amount of STM's cleared checks had been fully withdrawn and hence, there would be no more deliveries of the commodity to STM's account. Petitioner also noted that CSC had represented itself to be STM's agent as it had withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of STM. On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil Case No. 90-1118. Defendants were Teresita Ng Sy (doing business under the name of St. Therese Merchandising) and herein petitioner. Since the former could not be served with summons, the case proceeded only against the latter. During the trial, it was discovered that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who could not be reached through summons. 7 CSC, however, did not bother to pursue its case against her, but instead used her as its witness. CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR No. 1214M. Therefore, the latter had no justification for refusing delivery of the sugar. CSC prayed that petitioner be ordered to deliver the 23,000 bags covered by SLDR No. 1214M and sought the award of P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary damages, P2,200,000.00 as attorney's fees and litigation expenses. Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000 bags. 8 Since STM had already drawn in full all the sugar corresponding to the amount of its cleared checks, it could no longer authorize further delivery of sugar to CSC. Petitioner also contended that it had no privity of contract with CSC. Petitioner explained that the SLDRs, which it had issued, were not documents of title, but mere delivery receipts issued pursuant to a series of transactions entered into between it and STM. The SLDRs prescribed delivery of the sugar to the party specified therein and did not authorize the transfer of said party's rights and interests. Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's co- conspirator to defraud it through a misrepresentation that CSC was an innocent purchaser for value and in good faith. Petitioner then prayed that CSC be ordered to pay it the following sums: P10,000,000.00 as moral damages; P10,000,000.00 as exemplary damages; and P1,500,000.00 as attorney's fees. Petitioner also prayed that cross-defendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and P1,500,000.00 as attorney's fees. Since no settlement was reached at pre-trial, the trial court heard the case on the merits. As earlier stated, the trial court rendered its judgment favoring private respondent CSC, as follows: "WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against defendant Victorias Milling Company: "1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000 bags of refined sugar due under SLDR No. 1214; "2) Ordering defendant Victorias Milling Company to pay the amount of P920,000.00 as unrealized profits, the amount of P800,000.00 as exemplary damages and the amount of P1,357,000.00, which is 10% of the acquisition value of the undelivered bags of refined sugar in the amount of P13,570,000.00, as attorney's fees, plus the costs. "SO ORDERED." 9
It made the following observations: "[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase price of P15,950,000.00 of the 25,000 bags of sugar bought by her covered by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the 25,000 bags of sugar bought by her covered by SLDR No. 1213 on the same date, October 16, 1989 (date of the two SLDRs) is duly supported by Exhibits C to C-15 inclusive which are post-dated checks dated October 27, 1989 issued by St. Therese Merchandising in favor of Victorias Milling Company at the time it purchased the 50,000 bags of sugar covered by SLDR No. 1213 and 1214. Said checks appear to have been honored and duly credited to the account of Victorias Milling Company because on October 27, 1989 Victorias Milling Company issued official receipt no. 34734 in favor of St. Therese Merchandising for the amount of P31,900,000.00 (Exhibits B and B-1). The testimony of Teresita Ng Go is further supported by Exhibit F, which is a computer printout of defendant Victorias Milling Company showing the quantity and value of the purchases made by St. Therese Merchandising, the SLDR no. issued to cover the purchase, the official reciept no. and the status of payment. It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR No. 1214 the same has been fully paid as indicated by the word 'cleared' appearing under the column of 'status of payment.' "On the other hand, the claim of defendant Victorias Milling Company that the purchase price of the 25,000 bags of sugar purchased by St. Therese Merchandising covered by SLDR No. 1214 has not been fully paid is supported only by the testimony of Arnulfo Caintic, witness for defendant Victorias Milling Company. The Court notes that the testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase price has not been fully paid and is not corroborated by any positive evidence. There is an insinuation by Arnulfo Caintic in his testimony that the postdated checks issued by the buyer in payment of the purchased price were dishonored. However, said witness failed to present in Court any dishonored check or any replacement check. Said witness likewise failed to present any bank record showing that the checks issued by the buyer, Teresita Ng Go, in payment of the purchase price of the sugar covered by SLDR No. 1214 were dishonored." 10
Petitioner appealed the trial courts decision to the Court of Appeals. On appeal, petitioner averred that the dealings between it and STM were part of a series of transactions involving only one account or one general contract of sale. Pursuant to this contract, STM or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM. SLDR No. 21214M was only one of 22 SLDRs issued to STM and since the latter had already withdrawn its full quota of sugar under the said SLDR, CSC was already precluded from seeking delivery of the 23,000 bags of sugar. Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate and independent transactions and that the details of the series of purchases were contained in a single statement with a consolidated summary of cleared check payments and sugar stock withdrawals because this a more convenient system than issuing separate statements for each purchase. The appellate court considered the following issues: (a) Whether or not the transaction between petitioner and STM involving SLDR No. 1214M was a separate, independent, and single transaction; (b) Whether or not CSC had the capacity to sue on its own on SLDR No. 1214M; and (c) Whether or not CSC as buyer from STM of the rights to 25,000 bags of sugar covered by SLDR No. 1214M could compel petitioner to deliver 23,000 bags allegedly unwithdrawn. On February 24, 1994, the Court of Appeals rendered its decision modifying the trial court's judgment, to wit: "WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders defendant-appellant to: "1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No. 1214M; "2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the undelivered bags of refined sugar, as attorneys fees; "3) Pay the costs of suit. "SO ORDERED." 11
Both parties then seasonably filed separate motions for reconsideration. In its resolution dated September 30, 1994, the appellate court modified its decision to read: "WHEREFORE, the Court hereby modifies the assailed judgment and orders defendant- appellant to: "(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No. 1214M; "(2) Pay costs of suit. "SO ORDERED." 12
The appellate court explained the rationale for the modification as follows: "There is merit in plaintiff-appellee's position. "Exhibit F' We relied upon in fixing the number of bags of sugar which remained undelivered as 12,586 cannot be made the basis for such a finding. The rule is explicit that courts should consider the evidence only for the purpose for which it was offered. (People v. Abalos, et al, 1 CA Rep 783). The rationale for this is to afford the party against whom the evidence is presented to object thereto if he deems it necessary. Plaintiff-appellee is, therefore, correct in its argument that Exhibit F' which was offered to prove that checks in the total amount of P15,950,000.00 had been cleared. (Formal Offer of Evidence for Plaintiff, Records p. 58) cannot be used to prove the proposition that 12,586 bags of sugar remained undelivered. "Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and 36]) presented by plaintiff- appellee was to the effect that it had withdrawn only 2,000 bags of sugar from SLDR after which it was not allowed to withdraw anymore. Documentary evidence (Exhibit I, Id., p. 78, Exhibit K, Id., p. 80) show that plaintiff-appellee had sent demand letters to defendant-appellant asking the latter to allow it to withdraw the remaining 23,000 bags of sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged that sugar delivery to the STM corresponded only to the value of cleared checks; and that all sugar corresponded to cleared checks had been withdrawn. Defendant-appellant did not rebut plaintiff-appellee's assertions. It did not present evidence to show how many bags of sugar had been withdrawn against SLDR No. 1214M, precisely because of its theory that all sales in question were a series of one single transaction and withdrawal of sugar depended on the clearing of checks paid therefor. "After a second look at the evidence, We see no reason to overturn the findings of the trial court on this point." 13
Hence, the instant petition, positing the following errors as grounds for review: "1. The Court of Appeals erred in not holding that STM's and private respondent's specially informing petitioner that respondent was authorized by buyer STM to withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf," (emphasis in the original) private respondent's withdrawing 2,000 bags of sugar for STM, and STM's empowering other persons as its agents to withdraw sugar against the same SLDR No. 1214M, rendered respondent like the other persons, an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA 252, and precluded it from subsequently claiming and proving being an assignee of SLDR No. 1214M and from suing by itself for its enforcement because it was conclusively presumed to be an agent (Sec. 2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, Civil Code). "2. The Court of Appeals erred in manifestly and arbitrarily ignoring and disregarding certain relevant and undisputed facts which, had they been considered, would have shown that petitioner was not liable, except for 69 bags of sugar, and which would justify review of its conclusion of facts by this Honorable Court. "3. The Court of Appeals misapplied the law on compensation under Arts. 1279, 1285 and 1626 of the Civil Code when it ruled that compensation applied only to credits from one SLDR or contract and not to those from two or more distinct contracts between the same parties; and erred in denying petitioner's right to setoff all its credits arising prior to notice of assignment from other sales or SLDRs against private respondent's claim as assignee under SLDR No. 1214M, so as to extinguish or reduce its liability to 69 bags, because the law on compensation applies precisely to two or more distinct contracts between the same parties (emphasis in the original). "4. The Court of Appeals erred in concluding that the settlement or liquidation of accounts in Exh. F between petitioner and STM, respondent's admission of its balance, and STM's acquiescence thereto by silence for almost one year did not render Exh. `F' an account stated and its balance binding. "5. The Court of Appeals erred in not holding that the conditions of the assigned SLDR No. 1214, namely, (a) its subject matter being generic, and (b) the sale of sugar being subject to its availability at the Nawaco warehouse, made the sale conditional and prevented STM or private respondent from acquiring title to the sugar; and the non-availability of sugar freed petitioner from further obligation. "6. The Court of Appeals erred in not holding that the "clean hands" doctrine precluded respondent from seeking judicial reliefs (sic) from petitioner, its only remedy being against its assignor." 14
Simply stated, the issues now to be resolved are: (1)....Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence, estopped to sue upon SLDR No. 1214M as an assignee. (2)....Whether or not the Court of Appeals erred in applying the law on compensation to the transaction under SLDR No. 1214M so as to preclude petitioner from offsetting its credits on the other SLDRs. (3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar under SLDR No. 1214M was a conditional sale or a contract to sell and hence freed petitioner from further obligations. (4)....Whether or not the Court of Appeals committed an error of law in not applying the "clean hands doctrine" to preclude CSC from seeking judicial relief. The issues will be discussed in seriatim. Anent the first issue, we find from the records that petitioner raised this issue for the first time on appeal.1avvphi1 It is settled that an issue which was not raised during the trial in the court below could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process. 15 Nonetheless, the Court of Appeals opted to address this issue, hence, now a matter for our consideration. Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion of said letter reads: "This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress supplied) the refined sugar covered by Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total quantity of 25, 000 bags." 16
The Civil Code defines a contract of agency as follows: "Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter." It is clear from Article 1868 that the basis of agency is representation. 17 On the part of the principal, there must be an actual intention to appoint 18 or an intention naturally inferable from his words or actions; 19 and on the part of the agent, there must be an intention to accept the appointment and act on it, 20 and in the absence of such intent, there is generally no agency. 21 One factor which most clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word "agency" has come to connote control by the principal. 22 The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category. 23 The Court of Appeals, in finding that CSC, was not an agent of STM, opined: "This Court has ruled that where the relation of agency is dependent upon the acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burden of proof resting upon the persons alleging the agency, to show not only the fact of its existence, but also its nature and extent (Antonio vs. Enriquez[CA], 51 O.G. 3536]. Here, defendant-appellant failed to sufficiently establish the existence of an agency relation between plaintiff-appellee and STM. The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's) behalf" should not be eyed as pointing to the existence of an agency relation ...It should be viewed in the context of all the circumstances obtaining. Although it would seem STM represented plaintiff-appellee as being its agent by the use of the phrase "for and in our (STM's) behalf" the matter was cleared when on 23 January 1990, plaintiff- appellee informed defendant-appellant that SLDFR No. 1214M had been "sold and endorsed" to it by STM (Exhibit I, Records, p. 78). Further, plaintiff-appellee has shown that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by STM to it ...A conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be made thus capacitating plaintiff-appellee to sue in its own name, without need of joining its imputed principal STM as co-plaintiff." 24
In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not an agent of STM. Private respondent CSC was not subject to STM's control. The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed. 25 That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention of the parties. 26 That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. 27 The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an agency. Hence, on this score, no error was committed by the respondent appellate court when it held that CSC was not STM's agent and could independently sue petitioner. On the second issue, proceeding from the theory that the transactions entered into between petitioner and STM are but serial parts of one account, petitioner insists that its debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 of the Civil Code. 28 However, the trial court found, and the Court of Appeals concurred, that the purchase of sugar covered by SLDR No. 1214M was a separate and independent transaction; it was not a serial part of a single transaction or of one account contrary to petitioner's insistence. Evidence on record shows, without being rebutted, that petitioner had been paid for the sugar purchased under SLDR No. 1214M. Petitioner clearly had the obligation to deliver said commodity to STM or its assignee. Since said sugar had been fully paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and debtors of each other. No reversible error could thereby be imputed to respondent appellate court when, it refused to apply Article 1279 of the Civil Code to the present case. Regarding the third issue, petitioner contends that the sale of sugar under SLDR No. 1214M is a conditional sale or a contract to sell, with title to the sugar still remaining with the vendor. Noteworthy, SLDR No. 1214M contains the following terms and conditions: "It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of this document by the buyer/trader personally or through a representative, title to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected and completed (stress supplied) and buyer/trader assumes full responsibility therefore" 29
The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon payment of the purchase price. Said terms clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped from alleging the contrary. The contract is the law between the contracting parties. 30 And where the terms and conditions so stipulated are not contrary to law, morals, good customs, public policy or public order, the contract is valid and must be upheld. 31 Having transferred title to the sugar in question, petitioner is now obliged to deliver it to the purchaser or its assignee. As to the fourth issue, petitioner submits that STM and private respondent CSC have entered into a conspiracy to defraud it of its sugar. This conspiracy is allegedly evidenced by: (a) the fact that STM's selling price to CSC was below its purchasing price; (b) CSC's refusal to pursue its case against Teresita Ng Go; and (c) the authority given by the latter to other persons to withdraw sugar against SLDR No. 1214M after she had sold her rights under said SLDR to CSC. Petitioner prays that the doctrine of "clean hands" should be applied to preclude CSC from seeking judicial relief. However, despite careful scrutiny, we find here the records bare of convincing evidence whatsoever to support the petitioner's allegations of fraud. We are now constrained to deem this matter purely speculative, bereft of concrete proof. WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED.
G.R. No. L-8169 January 29, 1957 THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner, vs. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First Division),respondents. Ross, Selph, Carrascoso & Janda for petitioner. J. A. Wolfson and Manuel Y. Macias for respondents. PADILLA, J .: Appeal by certiorari under Rule 46 to review a judgment of the Court of Appeals which reversed that of the Court of First Instance of Manila and sentenced ". . . the defendants-appellees to pay, jointly and severally, the plaintiffs-appellants the sum of P1,651.38, with legal interest from December 6, 1947 (Gutierrez vs. Gutierrez, 56 Phil., 177, 180), and the costs in both instances." The Court of Appeals found the following: Inasmuch as both the Plaintiffs-Appellants and the Defendant-Appellee, the Shell Company of the Philippine Islands, Ltd. accept the statement of facts made by the trial court in its decision and appearing on pages 23 to 37 of the Record on Appeal, we quote hereunder such statement: This is an action for recovery of sum of money, based on alleged negligence of the defendants. It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on September 3, 1947 to the Shell Gasoline and Service Station, located at the corner of Marques de Comillas and Isaac Peral Streets, Manila, for washing, greasing and spraying. The operator of the station, having agreed to do service upon payment of P8.00, the car was placed on a hydraulic lifter under the direction of the personnel of the station. What happened to the car is recounted by Perlito Sison, as follows: Q. Will you please describe how they proceeded to do the work? A. Yes, sir. The first thing that was done, as I saw, was to drive the car over the lifter. Then by the aid of the two grease men they raised up my car up to six feet high, and then washing was done. After washing, the next step was greasing. Before greasing was finished, there is a part near the shelf of the right fender, right front fender, of my car to be greased, but the the grease men cannot reached that part, so the next thing to be done was to loosen the lifter just a few feet lower. Then upon releasing the valve to make the car lower, a little bit lower . . . Q. Who released the valve? A. The greasemen, for the escape of the air. As the escape of the air is too strong for my ear I faced backward. I faced toward Isaac Peral Street, and covered my ear. After the escaped of the air has been finished, the air coming out from the valve, I turned to face the car and I saw the car swaying at that time, and just for a few second the car fell., (t.s.n. pp. 22- 23.) The case was immediately reported to the Manila Adjustor Company, the adjustor of the firemen's Insurance Company and the Commercial Casualty Insurance Company, as the car was insured with these insurance companies. After having been inspected by one Mr. Baylon, representative of the Manila Adjustor Company, the damaged car was taken to the shops of the Philippine Motors, Incorporated, for repair upon order of the Firemen's Insurance Company and the Commercial Casualty Company, with the consent of Salvador R. Sison. The car was restored to running condition after repairs amounting to P1,651.38, and was delivered to Salvador R. Sison, who, in turn made assignments of his rights to recover damages in favor of the Firemen's Insurance Company and the Commercial Casualty Insurance Company. On the other hand, the fall of the car from the hydraulic lifter has been explained by Alfonso M. Adriano, a greaseman in the Shell Gasoline and Service Station, as follows: Q. Were you able to lift the car on the hydraulic lifter on the occasion, September 3, 1947? A. Yes, sir. Q. To what height did you raise more or less? A. More or less five feet, sir. Q. After lifting that car that height, what did you do with the car? A. I also washed it, sir. Q. And after washing? A. I greased it. Q. On that occasion, have you been able to finish greasing and washing the car? A. There is one point which I could not reach. Q. And what did you do then? A. I lowered the lifter in order to reach that point. Q. After lowering it a little, what did you do then? A. I pushed and pressed the valve in its gradual pressure. Q. Were you able to reach the portion which you were not able to reach while it was lower? A. No more, sir. Q. Why? A. Because when I was lowering the lifter I saw that the car was swinging and it fell. THE COURT. Why did the car swing and fall? WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.) The position of Defendant Porfirio de la Fuente is stated in his counter-statement of facts which is hereunder also reproduced: In the afternoon of September 3, 1947, an automobile belonging to the plaintiff Salvador Sison was brought by his son, Perlito Sison, to the gasoline and service station at the corner of Marques de Comillas and Isaac Peral Streets, City of Manila, Philippines, owned by the defendant The Shell Company of the Philippine Islands, Limited, but operated by the defendant Porfirio de la Fuente, for the purpose of having said car washed and greased for a consideration of P8.00 (t.s.n., pp. 19-20.) Said car was insured against loss or damage by Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for the sum of P10,000 (Exhibits "A', "B", and "D"). The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through his two employees, Alfonso M. Adriano, as greaseman and one surnamed de los Reyes, a helper and washer (t.s.n., pp. 65-67). To perform the job the car was carefully and centrally placed on the platform of the lifter in the gasoline and service station aforementioned before raising up said platform to a height of about 5 feet and then the servicing job was started. After more than one hour of washing and greasing, the job was about to be completed except for an ungreased portion underneath the vehicle which could not be reached by the greasemen. So, the lifter was lowered a little by Alfonso M. Adriano and while doing so, the car for unknown reason accidentally fell and suffered damage to the value of P1, 651.38 (t.s.n., pp. 65-67). The insurance companies after paying the sum of P1,651.38 for the damage and charging the balance of P100.00 to Salvador Sison in accordance with the terms of the insurance contract, have filed this action together with said Salvador Sison for the recovery of the total amount of the damage from the defendants on the ground of negligence (Record on Appeal, pp. 1-6). The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his separate answer and contended further that the accidental fall of the car was caused by unforseen event (Record on Appeal, pp. 17-19). The owner of the car forthwith notified the insurers who ordered their adjustor, the Manila Adjustor Company, to investigate the incident and after such investigation the damaged car, upon order of the insures and with the consent of the owner, was brought to the shop of the Philippine Motors, Inc. The car was restored to running condition after thereon which amounted to P1,651.38 and returned to the owner who assigned his right to collect the aforesaid amount to the Firemen's Insurance Company and the Commercial Casualty Insurance Company. On 6 December 1947 the insures and the owner of the car brought an action in the Court of First Instance of Manila against the Shell Company of the Philippines, Ltd. and Porfirio de la Fuente to recover from them, jointly and severally, the sum of P1,651.38, interest thereon at the legal rate from the filing of the complaint until fully paid, the costs. After trial the Court dismissed the complaint. The plaintiffs appealed. The Court of Appeals reversed the judgment and sentenced the defendant to pay the amount sought to be recovered, legal interest and costs, as stated at the beginning of this opinion. In arriving at the conclusion that on 3 September 1947 when the car was brought to the station for servicing Profirio de la Fuente, the operator of the gasoline and service station, was an agent of the Shell Company of the Philippines, Ltd., the Court of Appeals found that . . . De la Fuente owned his position to the Shell Company which could remove him terminate his services at any time from the said Company, and he undertook to sell the Shell Company's products exculusively at the said Station. For this purpose, De la Fuente was placed in possession of the gasoline and service station under consideration, and was provided with all the equipments needed to operate it, by the said Company, such as the tools and articles listed on Exhibit 2 which the hydraulic lifter (hoist) and accessories, from which Sison's automobile fell on the date in question (Exhibit 1 and 2). These equipments were delivered to De la Fuente on a so-called loan basis. The Shell Company took charge of its care and maintenance and rendered to the public or its customers at that station for the proper functioning of the equipment. Witness Antonio Tiongson, who was sales superintendent of the Shell Company, and witness Augusto Sawyer, foreman of the same Company, supervised the operators and conducted periodic inspection of the Company's gasoline and service station, the service station in question inclusive. Explaining his duties and responsibilities and the reason for the loan, Tiongson said: "mainly of the supervision of sales or (of) our dealers and rountinary inspection of the equipment loaned by the Company" (t.s.n., 107); "we merely inquire about how the equipments are, whether they have complaints, and whether if said equipments are in proper order . . .", (t.s.n., 110); station equipments are "loaned for the exclusive use of the dealer on condition that all supplies to be sold by said dealer should be exclusively Shell, so as a concession we loan equipments for their use . . .," "for the proper functioning of the equipments, we answer and see to it that the equipments are in good running order usable condition . . .," "with respect to the public." (t.s.n., 111-112). De la Fuente, as operator, was given special prices by the Company for the gasoline products sold therein. Exhibit 1 Shell, which was a receipt by Antonio Tiongson and signed by the De la Fuente, acknowledging the delivery of equipments of the gasoline and service station in question was subsequently replaced by Exhibit 2 Shell, an official from of the inventory of the equipment which De la Fuente signed above the words: "Agent's signature" And the service station in question had been marked "SHELL", and all advertisements therein bore the same sign. . . . . . . De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did remove him as it pleased; that all the equipments needed to operate the station was owned by the Defendant Company which took charge of their proper care and maintenance, despite the fact that they were loaned to him; that the Defendant company did not leave the fixing of price for gasoline to De la Fuente; on the other hand, the Defendant company had complete control thereof; and that Tiongson, the sales representative of the Defendant Company, had supervision over De la Fuente in the operation of the station, and in the sale of Defendant Company's products therein. . . . Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the operator; and that the receipt signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the company and not an independent contractor should not be disturbed. To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties, should there be a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their respective obligation stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter. It was admitted by the operator of the gasoline and service station that "the car was carefully and centrally placed on the platform of the lifter . . ." and the Court of Appeals found that . . . the fall of Appellant Sison's car from the hydraulic lift and the damage caused therefor, were the result of the jerking and swaying of the lift when the valve was released, and that the jerking was due to some accident and unforeseen shortcoming of the mechanism itself, which caused its faulty or defective operation or functioning, . . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the normal and ordinary conduct of his business as operator of his co- appellee's service station, and that the jerking and swaying of the hydraulic lift which caused the fall of the subject car were due to its defective condition, resulting in its faulty operation. . . . As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable. Moreover, the company undertook to "answer and see to it that the equipments are in good running order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to make a thorough check up of the hydraulic lifter and the check up made by its mechanic was "merely routine" by raising "the lifter once or twice and after observing that the operator was satisfactory, he (the mechanic) left the place." The latter was negligent and the company must answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter. The judgment under review is affirmed, with costs against the petitioner.
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 court 2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance. The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state: I THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW. II THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8) III THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING- APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS. IV THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the between parties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in reference to the padlocking now questioned. The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we have relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end." 10 Subsequently, however, we have considered, in addition to the standard of 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 solidumas 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. 17 in lieu of a distinct partnership name. It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership.. But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages. As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor. The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper. The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without notice to her. It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein. This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play. We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and analogous cases: xxx xxx xxx (10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35. The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity. Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor. The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the circumstances. 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. Costs against said private respondents. SO ORDERED.
G.R. No. 102784 February 28, 1996 ROSA LIM, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents. D E C I S I O N HERMOSISIMA, JR., J .: This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No. 10290, entitled "People v. Rosa Lim," promulgated on August 30, 1991. On January 26, 1989, an Information for ESTAFA was filed against PETITIONER Rosa Lim before Branch 92 of the Regional Trial Court of Quezon City. 1 The Information reads: That on or about the 8th day of October 1987, in Quezon City, Philippines and within the jurisdiction of this Honorable Court, the said accused with intent to gain, with unfaithfulness and/or abuse of confidence, did, then and there, wilfully, unlawfully and feloniously defraud one VICTORIA SUAREZ, in the following manner, to wit: on the date and place aforementioned said accused got and received in trust from said complainant one (1) ring 3.35 solo worth P169,000.00, Philippine Currency, with the obligation to sell the same on commission basis and to turn over the proceeds of the sale to said complainant or to return said jewelry if unsold, but the said accused once in possession thereof and far from complying with her obligation despite repeated demands therefor, misapplied, misappropriated and converted the same to her own personal use and benefit, to the damage and prejudice of the said offended party in the amount aforementioned and in such other amount as may be awarded under the provisions of the Civil Code. CONTRARY TO LAW. 2
After arraignment and trial on the merits, the trial court rendered judgment, the dispositive portion of which reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered: 1. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of estafa as defined and penalized under Article 315, paragraph 1(b) of the Revised Penal Code; 2. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and TWO (2) MONTHS of prision correccional as minimum, to TEN (10) YEARS of prision mayor as maximum; 3. Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its value in the amount of P169,000 without subsidiary imprisonment in case insolvency; and 4. To pay costs. 3
On appeal, the Court of Appeals affirmed the judgment of conviction with the modification that the penalty imposed shall be six (6) years, eight (8) months and twenty-one (21) days to twenty (20) years in accordance with Article 315, paragraph 1 of the Revised Penal Code. 4
Petitioner filed a motion for reconsideration before the appellate court on September 20, 1991, but the motion was denied in a Resolution dated November 11, 1991. In her final bid to exonerate herself, petitioner filed the instant petition for review alleging the following grounds: I THE RESPONDENT COURT VIOLATED THE CONSTITUTION, THE RULES OF COURT AND THE DECISION OF THIS HONORABLE COURT IN NOT PASSING UPON THE FIRST AND THIRD ASSIGNED ERRORS IN PETITIONER'S BRIEF; II THE RESPONDENT COURT FAILED TO APPLY THE PRINCIPLE THAT THE PAROL EVIDENCE RULE WAS WAIVED WHEN THE PRIVATE PROSECUTOR CROSS-EXAMINED THE PETITIONER AND AURELIA NADERA AND WHEN COMPLAINANT WAS CROSS-EXAMINED BY THE COUNSEL FOR THE PETITIONER AS TO THE TRUE NATURE OF THE AGREEMENT BETWEEN THE PARTIES WHEREIN IT WAS DISCLOSED THAT THE TRUE AGREEMENT OF THE PARTIES WAS A SALE OF JEWELRIES AND NOT WHAT WAS EMBODIED IN THE RECEIPT MARKED AS EXHIBIT "A" WHICH WAS RELIED UPON BY THE RESPONDENT COURT IN AFFIRMING THE JUDGMENT OF CONVICTION AGAINST HEREIN PETITIONER; and III THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE PRINCIPLE ENUNCIATED BY THIS HONORABLE COURT TO THE EFFECT THAT "ACCUSATION" IS NOT, ACCORDING TO THE FUNDAMENTAL LAW, SYNONYMOUS WITH GUILT: THE PROSECUTION MUST OVERTHROW THE PRESUMPTION OF INNOCENCE WITH PROOF OF GUILT BEYOND REASONABLE DOUBT. TO MEET THIS STANDARD, THERE IS NEED FOR THE MOST CAREFUL SCRUTINY OF THE TESTIMONY OF THE STATE, BOTH ORAL AND DOCUMENTARY, INDEPENDENTLY OF WHATEVER DEFENSE IS OFFERED BY THE ACCUSED. ONLY IF THE JUDGE BELOW AND THE APPELLATE TRIBUNAL COULD ARRIVE AT A CONCLUSION THAT THE CRIME HAD BEEN COMMITTED PRECISELY BY THE PERSON ON TRIAL UNDER SUCH AN EXACTING TEST SHOULD SENTENCE THUS REQUIRED THAT EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT. THE PROOF AGAINST HIM MUST SURVIVE THE TEST OF REASON; THE STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY JUDGMENT. (People v. Austria, 195 SCRA 700) 5
Herein the pertinent facts as alleged by the prosecution. On or about October 8, 1987, PETITIONER Rosa Lim who had come from Cebu received from private RESPONDENT Victoria Suarez the following two pieces of jewelry; one (1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00, to be sold on commission basis. The agreement was reflected in a receipt marked as Exhibit "A" 6 for the prosecution. The transaction took place at the Sir Williams Apartelle in Timog Avenue, Quezon City, where Rosa Lim was temporarily billeted. On December 15, 1987, PETITIONER returned the bracelet to Vicky Suarez, but failed to return the diamond ring or to turn over the proceeds thereof if sold. As a result, private complainant, aside from making verbal demands, wrote a demand letter 7 to petitioner asking for the return of said ring or the proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter 8 to private respondent's counsel alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in September, 1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315, par l(b) of the Revised Penal Code for which the petitioner herein stands convicted. Petitioner has a different version. Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October 1987, together with one Aurelia Nadera, who introduced petitioner to private respondent, and that they were lodged at the Williams Apartelle in Timog, Quezon City. Petitioner denied that the transaction was for her to sell the two pieces of jewelry on commission basis. She told Mrs. Suarez that she would consider buying the pieces of jewelry far her own use and that she would inform the private complainant of such decision before she goes back to Cebu. Thereafter, the petitioner took the pieces of jewelry and told Mrs. Suarez to prepare the "necessary paper for me to sign because I was not yet prepare (d) to buy it." 9 After the document was prepared, petitioner signed it. To prove that she did not agree to the terms of the receipt regarding the sale on commission basis, petitioner insists that she signed the aforesaid document on the upper portion thereof and not at the bottom where a space is provided for the signature of the person(s) receiving the jewelry. 10
On October 12, 1987 before departing for Cebu, PETITIONER called up Mrs. Suarez by telephone in order to inform her that she was no longer interested in the ring and bracelet. Mrs. Suarez replied that she was busy at the time and so, she instructed the petitioner to give the pieces of jewelry to Aurelia Nadera who would in turn give them back to the private complainant. The petitioner did as she was told and gave the two pieces of jewelry to Nadera as evidenced by a handwritten receipt, dated October 12, 1987. 11
Two issues need to be resolved: First, what was the real transaction between Rosa Lim and Vicky Suarez a contract of agency to sell on commission basis as set out in the receipt or a sale on credit; and, second, was the subject diamond ring returned to Mrs. Suarez through Aurelia Nadera? Petitioner maintains that she cannot be liable for estafa since she never received the jewelries in trust or on commission basis from Vicky Suarez. The real agreement between her and the private respondent was a sale on credit with Mrs. Suarez as the owner-seller and petitioner as the buyer, as indicated by the bet that petitioner did not sign on the blank space provided for the signature of the person receiving the jewelry but at the upper portion thereof immediately below the description of the items taken. 12
The contention is far from meritorious. The receipt marked as Exhibit "A" which establishes a contract of agency to sell on commission basis between Vicky Suarez and Rosa Lim is herein reproduced in order to come to a proper perspective: THIS IS TO CERTIFY, that I received from Vicky Suarez PINATUTUNAYAN KO na aking tinanggap kay ___________ the following jewelries: ang mga alahas na sumusunod: Description Mga Uri Price Halaga l ring 3.35 dolo P 169,000.00 1 bracelet 9;170,000.00 total Kabuuan P 339,000.00 in good condition, to be sold in CASH ONLY within . . . days from date of signing this receipt na nasa mabuting kalagayan upang ipagbili ng KALIWAAN (ALCONTADO) lamang sa loob ng . . . araw mula ng ating pagkalagdaan: if I could not sell, I shall return all the jewelry within the period mentioned above; if I would be able to sell, I shall immediately deliver and account the whole proceeds of sale thereof to the owner of the jewelries at his/her residence; my compensation or commission shall be the over-price on the value of each jewelry quoted above. I am prohibited to sell any jewelry on credit or by installment; deposit, give for safekeeping: lend, pledge or give as security or guaranty under any circumstance or manner, any jewelry to other person or persons. kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na panahong nakatala sa itaas; kung maipagbili ko naman ay dagli kong isusulit at ibibigay ang buong pinagbilhan sa may-ari ng mga alahas sa kanyang bahay tahanan; ang aking gantimpala ay ang mapapahigit na halaga sa nakatakdang halaga sa itaas ng bawat alahas HINDI ko ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan ang alin mang alahas, ilalagak, ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit sa anong paraan ang alin mang alahas sa ibang mga tao o tao. I sign my name this . . . day of . . . 19 . . . at Manila, NILALAGDAAN ko ang kasunduang ito ngayong ika _____ ng dito sa Maynila. ___________________ Signature of Persons who received jewelries (Lagda ng Tumanggap ng mga Alahas) Address: . . . . . . . . . . . . Rosa Lim's signature indeed appears on the upper portion of the receipt immediately below the description of the items taken: We find that this fact does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that may arise from their breach. This is clear from Article 1356 of the New Civil Code which provides: Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. . . . However, there are some provisions of the law which require certain formalities for particular contracts. The FIRST is when the form is required for the validity of the contract; the SECOND is when it is required to make the contract effective as against third parties such as those mentioned in Articles 1357 and 1358; and the THIRD is when the form is required for the purpose of proving the existence of the contract, such as those provided in the Statute of Frauds in article 1403. 13 A contract of agency to sell on commission basis does not belong to any of these three categories, hence it is valid and enforceable in whatever form it may be entered into. Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto. This is in the case of notarial wills found in Article 805 of the Civil Code, to wit: Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself . . . . The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin. . . . In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis, thus making the position of petitioner's signature thereto immaterial. Petitioner insists, however, that the diamond ring had been returned to Vicky Suarez through Aurelia Nadera, thus relieving her of any liability. Rosa Lim testified to this effect on direct examination by her counsel: Q: And when she left the jewelries with you, what did you do thereafter? A: On October 12, I was bound for Cebu. So I called up Vicky through telephone and informed her that I am no longer interested in the bracelet and ring and that I will just return it. Q: And what was the reply of Vicky Suarez? A: She told me that she could not come to the apartelle since she was very busy. So, she asked me if Aurelia was there and when I informed her that Aurelia was there, she instructed me to give the pieces of jewelry to Aurelia who in turn will give it back to Vicky. Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera? A: Yes, Your Honor. 14
This was supported by Aurelia Nadera in her direct examination by petitioner's counsel: Q: Do you know if Rosa Lim in fact returned the jewelries? A: She gave the jewelries to me. Q: Why did Rosa Lim give the jewelries to you? A: Rosa Lim called up Vicky Suarez the following morning and told Vicky Suarez that she was going home to Cebu and asked if she could give the jewelries to me. Q: And when did Rosa Lim give to you the jewelries? A: Before she left for Cebu. 15
On rebuttal, these testimonies were belied by Vicky Suarez herself: Q: It has been testified to here also by both Aurelia Nadera and Rosa Lim that you gave authorization to Rosa Lim to turn over the two (2) pieces of jewelries mentioned in Exhibit "A" to Aurelia Nadera, what can you say about that? A: That is not true sir, because at that time Aurelia Nadera is highly indebted to me in the amount of P140,000.00, so if I gave it to Nadera, I will be exposing myself to a high risk. 16<
The issue as to the return of the ring boils down to one of credibility. Weight of evidence is not determined mathematically by the numerical superiority of the witnesses testifying to a given fact. It depends upon its practical effect in inducing belief on the part of the judge trying the case. 17 In the case at bench, both the trial court and the Court of Appeals gave weight to the testimony of Vicky Suarez that she did not authorize Rosa Lim to return the pieces of jewelry to Nadera. The respondent court, in affirming the trial court, said: . . . This claim (that the ring had been returned to Suarez thru Nadera) is disconcerting. It contravenes the very terms of Exhibit A. The instruction by the complaining witness to appellant to deliver the ring to Aurelia Nadera is vehemently denied by the complaining witness, who declared that she did not authorize and/or instruct appellant to do so. And thus, by delivering the ring to Aurelia without the express authority and consent of the complaining witness, appellant assumed the right to dispose of the jewelry as if it were hers, thereby committing conversion, a clear breach of trust, punishable under Article 315, par. 1(b), Revised Penal Code. We shall not disturb this finding of the respondent court. It is well settled that we should not interfere with the judgment of the trial court in determining the credibility of witnesses, unless there appears in the record some fact or circumstance of weight and influence which has been overlooked or the significance of which has been misinterpreted. The reason is that the trial court is in a better position to determine questions involving credibility having heard the witnesses and having observed their deportment and manner of testifying during the trial. 18
Article 315, par. 1(b) of the Revised Penal Code provides: Art. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by: xxx xxx xxx (b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property. xxx xxx xxx The elements of estafa with abuse of confidence under this subdivision are as follows. (1) That money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; (2) That there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; (3) That such misappropriation or conversion or denial is to the prejudice of another; and (4) That there is a demand made by the offended party to the offender (Note: The 4th element is not necessary when there is evidence of misappropriation of the goods by the defendant) 19
All the elements of estafa under Article 315, Paragraph 1(b) of the Revised Penal Code, are present in the case at bench. First, the receipt marked as Exhibit "A" proves that petitioner Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be sold on commission basis. Second, petitioner misappropriated or converted the jewelry to her own use; and, third, such misappropriation obviously caused damage and prejudice to the private respondent. WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioner. SO ORDERED.
G.R. No. L-27134 February 28, 1986 COMPANIA MARITIMA, plaintiff-appellant, vs. JOSE C. LIMSON, defendant-appellant. Jose W. Diokno and Sergio Guadiz for plaintiff-appellant. Jose Gutierrez and Agustin Ferrer for defendant-appellant.
PATAJO, J .: This an appeal from a decision of the Court of First Instance of Manila 1 holding plaintiff Compania Maritima LIABLE TO DEFENDANT in the amount of P441,339.01 representing the difference between the claim of plaintiff for unpaid passage and freight charges for shipments of hogs and cattle on plaintiff's vessels for the period from October 1957 to February 1961 and the claim of defendant for the purchase price of foodstuffs sold by defendant to plaintiff, payments on account of freight not accounted for by plaintiff and rebate to which defendant was entitled on the aforesaid freight charges. On October 8, 1962, PLAINTIFF Compania Maritima filed a complaint against DEFENDANT J ose C. Limson for collection of the sum of P44,701.54 representing the balance of defendant's unpaid accounts for passage and freight on shipments of hogs, cattle and carabaos abroad plaintiff's vessel from various ports of Visayas and Mindanao for the period from October 1957 to February 1961. Attached to said complaint was the statement of account supporting plaintiff's claim for unpaid passage and freight. Defendant filed a motion for bill of particulars asking that plaintiff attach to the complaint the bins of lading referred to in said statement of account in order to enable defendant to answer plaintiff's complaint. Plaintiff opposed said motion. The Court however ordered plaintiff to attach photostat copies of the bills of lading upon which the statement of account was based. Plaintiff's motion for reconsideration of said order was denied by the Court but upon motion of plaintiff said order was modified to allow plaintiff to attach duplicate originals of the bills of lading instead of photostat copies thereof. On July 16, 1963, DEFENDANT filed his answer to the complaint denying any liability to plaintiff. Defendant alleged that he had already fully paid for all the shipments he made and that a number of the bills of lading submitted by plaintiff as basis of its claim are not properly chargeable to defendant since he was not the shipper nor had he authorized said shipments which were made by parties other than those for whom defendant is liable or who had been duly authorized by defendant to make said shipments. Defendant further set up a counterclaim for the refund of the rebate to which he was entitled to pursuant to an agreement that he had with plaintiff for shipments made by him from Davao, Cotabato, Dadiangas, Iligan and Masbate and for cost of foodstuffs sold or delivered to plaintiff in the total amount of P411,477.45. Since the case involved primarily questions of accounting, upon motion of plaintiff, without the opposition of defendant, the Court appointed a commissioner to examine the accounts involved before the Court proceed with the hearing of the case. Anselmo T. del Rosario, a certified public accountant, was thus appointed by the Court. On October 29, 1963, Mr. del Rosario submitted his report to the Court. The salient points in said report showed that with respect to the claim of defendant against plaintiff, the same was in the total amount of P676,416.05 broken down as follows: For purchases of foodstuffs................ P433,237.75 Freight adjustments.............................. 8,170.45 Cash payments made by defendant... P235,007.85 P676,416.05 On the other hand, the claim of the plaintiff totalled P545,394.24 based on 1,521 bills of lading examined by him of which 267 were signed by defendant totaling P67,061.66; 3 bills signed by representative of defendant totaling Pl,148.10; 91 bills signed by a certain "Perry" with Jose Limson, the defendant, as shipper and consignee totaling P61,981.00; 149 bills signed by said "Perry" for others as shippers and consignee totaling P46,869.60; 16 bills signed by others totaling P5,180.70; 662 bills unsigned totaling P260,170.23 and 333 bills missing totaling P102,982.46. According to the Commissioner defendant can be held liable only for the 267 bills signed by him and the 3 bills signed by his representative in the total amount of P68,209.79. The bills examined by the Commissioner had been classified and regrouped by him into (1) original bills of lading signed by defendant or his agent; (2) original bills of lading without signature of defendant or his agent; and (3) charges with no original bills of lading, to wit: (1) Original bills of lading duly signed by defendant or his agent.................... P68,209.76 (2) Original bills of lading without the signature of defendant............ 310,317.21 (3) No original bills of lading............... 166,867.28 Said Commissioner recommended that only the amount of P68,209.76 supported by original bills of lading signed by defendant or his agent is properly chargeable to defendant. After hearing the lower Court rendered judgment based principally on the report of the Commissioner. The Court, however, held that defendant was liable for the bills of lading without originals involving a total of P166,867.26 but liable on the bills of lading which had not been signed by him or his authorized representative. The Court sustained defendant's claim that "Perry" was not his authorized representative. Thus the lower Court rendered judgment sentencing plaintiff to pay defendant the sum of P441,339.01 with interest thereon at the legal rate from the date of the filing of the counterclaim plus P5,000.00 as attorney's fees. The amount of P441,339.01 is computed as follows: Amount to defendant: Freight adjustments.............. P 8,170.45 Cash payments.................... 235,007.85 Foodstuffs and supplies delivered 433,237.75 Total............. P676,416.05 Deduct amount to plaintiff on bills of lading signed by defendant or his authorized representative.................... 68,209.76 Bills of lading without originals but supported by other copies of said bills of lading........ 166,867.28 Total.................. 235,077.04 Balance due defendant...............P441,339.01 From said decision both plaintiff and defendant appealed to this Court, plaintiff assigning six assignment of errors, to wit: I The Trial Court erred in finding that the report of the Commissioner is fully supported by the documentary evidence presented in this case. II The Trial Court erred in concurring with the Commissioner that without the supporting original documents, the customer's subsidiary ledger cards are not sufficient and reliable. III The Trial Court erred in holding that the Commissioner is right in disallowing bills of lading not signed either by defendant or his authorized representatives, instead of holding that the corresponding freight charges for said bills of lading were probably debited in defendant's charge account. IV The Trial Court erred in finding that the fact that no periodic statements of account furnished, Limson was kept in the dark as to the true status of his account with plaintiff. V The Trial Court erred in finding that there is a balance of P441,339.01 due the defendant, said sum with interest thereon from the date of the filing of the counterclaim plus P5,000.00 as attorney's fees and costs. VI The Trial Court erred in dismissing the complaint and in not sentencing the defendant to pay the plaintiff the sum of P44,701.54 representing the unpaid balance of defendant's charge account with plaintiff plus legal interest thereon from the filing of the complaint, and the sum of P2,000.00 and Pl,000.00 as attomey's fees and expenses of litigating respectively incurred by the plaintiff. while defendant assigned one sole assignment of error: I The Trial Court erred in declaring appellant Limson liable in the amount of P166,867.28 for freighters and in deducting the same from his claim against Maritima." We find that the Court a quo erred in rejecting the bins of lading signed by "Perry" where defendant appeared shipper or consignee, those signed by "Perry" where persons other than defendant-appellant as shipper and the bills of lading unsigned by defendant. With regards to the 91 controverted bills of lading signed by "Perry" with Limson as shipper or consignee in the total amount of P61,981.50, witness Cabling testified that the signatures therein are those of Cipriano Magtibay alias "Perry" who took delivery of the cargoes stated therein after signing the delivery receipts. He testified thus: These are all the signatures of Perry. I know it to be his because oftentimes he goes there to get the deliver y orders and he signed as "Perry" in my presence. His real name is Cipriano Magtibay. I allowed delivery of the Cargoes to him because he was the regular representative of Mr. Limson." (t.s.n., pp. 12-13, Nov. 19, 1964) On the other hand, Nolasco Cruz Ilagan, delivery order clerk of Compania Maritima, testified to this wise: In issuing these delivery orders, I get the data from the manifests or from the bills of lading. I know the defendant Limson in this case. He is now in the Court room. I knew him since the middle of 1956 up to 1961 when I was assigned in the Terminal Office of Maritima. I came to know him because Mr. Cabling introduced to us that he is a regular shipper of hogs, cattles, carabaos coming from the southern ports. As a clerk, I prepared the delivery orders for these cargoes to be delivered to Mr. Limson or his authorized representatives. I will mention some of his representatives: For hog the authorized representative is Cipriano Magtibay or Perry; and for cattles, carabaos and cows, is Eye, Mario, Mr. Marcelino Tinoco and others whom I don't remember the names. When these representatives of Mr. Limson take delivery of the shipments, I let them sign the delivery orders. I prepared the delivery orders as soon as Mr. Limson himself or his authorized representative go to our office and present the bills of lading. In case where there is no original bill of lading, delivery order is effected also only when authorized by Mr. Cabling, basing on the manifests. The boat gives us the manifest as soon as it arrives. (t.s.n. 255-256, Mar. 10/65 & 256-260, Mar. 10/65. Even though the name of the shipper is not Mr. Limson or the consignee is not Mr. Limson, I prepared delivery orders by authorization of Mr. Cabling. (pp. 260-261 Id). The authorized representative to receive for hogs was Mr. Cipriano Magtibay alias "Perry". He signs the delivery orders by the name of "Perry". (p. 261 Id.) We were also the ones who put on the delivery orders the statement "account Limson". We put that to indicate the cargo is chargeable to Mr. Limson, so that the accounting department would know that the shipment is chargeable to Mr. Limson." (pp. 263-265 Id.) I am familiar with the signature of Perry, In these two bunches of delivery orders, I find that the signature appearing therein is that of Perry, the authorized representative of Limson. These delivery orders were signed by Perry in my presence. I know that Mr. Perry or Magtibay is the authorized representative of Mr. Limson because he was introduced to us by Limson himself that he is the one authorized by him to get his cargoes. He was authorized only to sign delivery orders for hogs. I also knew that Tinoco, Eye, Mario and other were also authorized by Limson to receive shipment for him (pp. 265-270 Id). These other persons who were authorized representatives to receive big cattles signed delivery orders in my presence. The delivery orders were requested by Eye, Mario, and Tinoco, the authorized representatives. I know personally that these men are the authorized representatives for Limson. (pp. 270-275, Id.) (Plaintiff's brief, pp. 35-37). Regarding the 16 controverted bills of lading signed by persons other than "Perry" with freight charges totalling P5,180.70, Ilagan testified that the representatives that signed the delivery receipts and took delivery of the cargoes thereof were Limson's agents. Ilagan testified thus: As clerk, I prepared the delivery orders for those cargoes to be delivered to Mr. Limson or his authorized representatives. For hogs the authorized representative was Cipriano Magtibay; and for cattle, carabaos and cows the authorized representatives were Eye, Mario, Tinoco and others who I cannot recall the names. (t.s.n. pp. 260-261, Nov. 1/65). These other persons who were authorized representatives to receive cattle signed delivery receipts in my presence. The delivery orders were requested by Eye, Mario and Tinoco, the authorized representatives. I know personally that these men are the authorized representative for Limson. (pp,27-275, Id.). (Emphasis supplied). With respect to the 662 unsigned bills of lading with freight charges totaling P260,170.23, delivery receipts were issued upon delivery of the shipments. Cabling and Ilagan who were presented the plaintiff as witnesses testified that the ordinary procedure at plaintiff's terminal office was to require the surrender of the original bill of lading, but when the bill of lading cannot be surrendered because it had not arrived or received by the consignee or assignee, the delivery of the cargo was authorized just the same, and the delivery receipt was prepared based on the ship's cargo manifests or ship's copy of the bill of lading. This accommodation was specially given Limson, because defendant was a regular shipper and ship chandler of plaintiff, and was a compadre of Cabling. Besides, said hogs and cattle had to be unloaded and released from the pier for they cannot be kept there long, after having been on board for several days because they might die. (t.s.n. pp. 320323, March 10, 1965). Regarding the 149 controverted bills of lading in the name of other persons as shippers or consignees and signed by Perry in the total amount of P46,869.60, it was established that said bills of lading were for cattle and hogs-purchased by the defendant from his "viajeros" in Manila which were delivered to and received by defendant, and for which he had to pay the freight charges, where in turn, he deducted from the purchase price the corresponding cost of freight; or were for cattle or hogs that belonged to Marcelino Tinoco from whom defendant had made arrangements for paying the purchase price of said Tinoco's cargo partly with the freight costs for which defendant agreed to be debited in his charge account with Maritima. These facts were admitted by the defendant himself when he testified on direct and cross-examination, supra. This was also confirmed by the testimony of Cabling. And now, corroborating the above facts as testified, Pagkalinawan, another witness for the plaintiff, testified thus: I know Mr. Limson, He is also a meat dealer. As ship's chandler he supplies foodstuffs, meat, to Maritima ships. I came to know Mr. Limson when Mr. Tinoco introduced me to him. Mr. Limson was getting meat from Mr. Tinoco at that time. It was cow and carabao meat. These cow and carabao meat which Mr. Limson used to get from Tinoco came from the Visayas to Manila. They were brought by the Maritima ships and those were the cows and carabaos that I took delivery at that time. I do not pay the freight for the delivery of these cows and carabaos. I was allowed by the Compania Maritima to take delivery of these cows and carabaos of Mr. Tinoco without paying the freight because the freights win be charged to Mr. Limson. These freight charges that I did not pay for the shipment of cows and carabaos of Mr. Tinoco were charged against Mr. Limson. These freight charges that were charged against Mr. Limson in his account in the Maritima were credited as payment of Mr. Limson to the meat that he gets from Mr. Tinoco. (t.s.n. pp. 6-14, April 20, 1966). I am not the only one who received the cows and carabaos of Mr. Tinoco at the Maritima. There were many more, Mario Valencia, Remy and one whom I know only as Ben Negro. (t.s.n. pp. 14-15, April 30, 1966). Sometimes Marcelino Tinoco himself takes the cargo, I used to accompany him, and I am the one signing the delivery permit. Sometimes he does too. He does not pay the freight because it is charged against the account of Mr. Limson. (t.s.n. pp. 15-20, April 20, 1966). I have occasions taking delivery of the cows and carabaos of Mr. Tinoco even if there was no original bill of lading and the freight of which were charged against Mr. Limson. The office makes true copies of the bills of lading for the originals which could not be produced. Just the same I could take delivery of the said cows and carabaos. (t.s.n. pp. 20-21, Id). In all occasions that I withdrew the cows and carabaos of Mr. Tinoco for which I signed the delivery receipts there were corresponding original bills of lading or copies of the bills of lading which were made even if the original bills could not be produced (t.s.n. pp. 2-3, May 6, 1966). Mr. Limson signed these bills of lading that I have presented to him. Those that were not, I was the one who signed it, When the unloading takes place at nights I just call him up by telephone. (t.s.n., p. 3, Id). For the shipments of Mr. Marcelino Tinoco, I was the one who gets the delivery order. But if I am not around, my companions get them. However, if he is there at the pier, he himself receives his shipments. (t.s.n. pp. 9- 11, Id.) All shipments of Mr. Tinoco are vales of Mr. Limson. If I do not have the bills of lading, that were signed by Mr. Limson, I can still get the delivery in this manner. If the shipments takes place at night and I could not get the signature of Mr. Limson, I simply call him up thru the telephone who in turn directs me to call on Mr. Cabling and Mr. Cabling used to tell me to sign the bills of lading because he and Mr. Limson had already an arrangement. " (t.s.n. pp. 17-18, Id.) Plaintiff also presented Exhibits B-276 to 1018 in the total amount of P81,462.92, bills of lading not in the name of defendant Limson, but which Limson himself signed, thereby proving that defendant took delivery of shipments in the names of others, shipper or consignee, and which the corresponding charges were debited to his account. The simpler way to determine how much is the total claim of plaintiff against defendant is to compute the amount of the freight on the face of the bills of lading supporting the statement of account attached to the complaint and deducting therefrom the rebates to which defendant is entitled to under the special arrangement made between defendant and Mr. F.J. Garay of Compania Maritima dated March 27, 1957. According to the statement of account submitted by plaintiff and attached to the complaint, the total of freight charges due from defendant is P698,159.14 (Annex "A" Complaint). This is the amount due based on what is charged in the bills of lading. It did not reflect the rebates because said bills of lading were prepared in the field offices of plaintiff where the special arrangement entitling defendant to rebate had not been transmitted. According to the report of the Commissioner, the total rebate to which defendant will be entitled to is P127,418.89 (Supplementary Report dated January 27, 1964, Exhibit 7-B). According to said Commissioner, he arrived at such amount in the following manner: I selected the freightage from Davao comprised of 340 shipments from October 15, 1957, up to February 11, 1961. 340 shipments, and I used P4.50 as the freightage from Davao to Manila. Now I used the P5.00 as you requested, and that is the difference. In other words, the Commissioner summed up the total number of hogs involved in the 340 shipments from Davao which must be some 50,692 hogs. The difference was arrived at, thus- 50,692 hogs multiplied by P5.00 per head = P253,460.00 less: 50,692 hogs multiplied by P4.50 per head = P228,114.00 P25,346.00 The difference, (P25,346.00) subtracted from the original computation of P152,764.89 resulted to the reduced rebate of P127,418.89 (Supplementary Report, supra). However, instead of merely verifying the accuracy of the above-stated computation, the special rates, supra, accorded Limson was individually applied in computing the freightage due from Limson's shipments, as itemized in the "Spread of Charges made to Limson's account" (Commissioner's report, Exh. " 7 "), and arrived at the following:
Total freight charges (special rates used for shipments from ports as provided for in the Agreement)............................................ P517,842.30 Total freight charges (Limson's shipments (rates used as com- puted in port of origin) from ports other than those stated in the Agreement...................................... 69,025.66 Total charges to Limson's Account............................................... P586,867.96 In other words, the total freight over-charges which may be due Limson is (P698,159.14 less P586,867.96) P111,291.18 and not P127,418.91 as reported by the Commissioner. To be added to said rebate of P111,291.18 are the cash payment made by defendant of P235,007.85, freight adjustment of Pl,138.45 and cost of foodstuffs purchased by plaintiff from defendant of P411,982.35 (from the total of P433,237.75 representing the amount of said purchase deduct P21,255.40 which had been billed twice), all of which would total P759,419.83. Deducting from said amount, the total of freight charges in favor of plaintiff as per the statement of account attached as Annex "A" to the complaint of P698,159.14 would give a balance of P61,260.69 in favor of defendant. It may be noted that in his answer to the complaint defendant stated that the total of his claim against plaintiff for the cost of foodstuffs delivered is P411,477.45 (par. 22, Answer of Defendant, page 68, Record on Appeal). Now, turning to defendant's sole assignment of error, namely, that the Trial Court erred in declaring defendant liable in the amount of P166,867.20 representing the amount covered by bills of lading where the originals had been presented. With respect to defendant's sole assignment of errors, namely, that Court a quo erred in declaring defendant liable in the amount of P166,867.28 which represents charges for freight where the originals of the bills of lading were not submitted, We find merit in the contention of plaintiff that the respondent Court correctly held defendant liable for said amount because the same actually represented freight charges based on the carbon originals of the ship's copy of the bills of lading where Limson appeared as consignee in the amount of P84,529.42 and those based on the ship's cargo manifests, where defendant appeared as consignee in the amount of P81,874.10. Respondent Court admitted in evidence said copies of the bills of lading which were not considered by the Commissioner because they are not actually the original copy of the bill of lading. The Commissioner accepted only the originals of the bills of lading because he did not consider even duplicate originals duly signed as originals. The ship's copies of the bills of lading and the cargo manifests were substantiated by other supporting documents which were found after the report of the Commissioner from among the records salvaged from the San Nicolas bodega fire or which were found among the records kept on plaintiff's terminal office. Said documents were presented in lieu of corresponding original of the consignee's copy of bill of lading which could not be submitted to the Commissioner nor presented as plaintiff's evidence to the Court because they were lost or destroyed during the remodelling of plaintiff's office building or during the fire at plaintiff's bodega at San Nicolas where they were brought for safekeeping. All said documents were presented as evidence to prove that all the freight charges for the shipments evidence thereby were duly earned by plaintiff and were properly debited in defendant's charge account. Apparently, the Commissioner rejected plaintiff's claims which were not actually supported by the original of the bills of lading notwithstanding the fact that duplicate original of the said documents and other secondary evidence such as the ship cargo manifests have been presented as evidence. As stated above, witnesses Cabling and Ilagan testified that the practice was that when the originals of the bins of lading could not be surrendered because they have not yet been received by the consignee, the delivery of the cargo was nevertheless authorized and a delivery receipt was prepared on the basis of the ship's cargo manifests or the ship's copy of the bills of lading. This only shows that the ship's cargo manifests or the ship's copy of the bills of lading can be accepted as evidence of shipments made by defendant since he was allowed to accept delivery of said shipments even without presented his copy of the bill of lading. By way of recapitulation, the total of freight charges due plaintiff based on the freight charges appearing on the face of the bills of lading supporting the statement of account attached to the complaint is P698,159.14. Deduct from said amount the following:
(1) Rebate................................................................... P111,291.18 (2) Cash payments made by defendant................. 235,007.85 (3) Freight adjustment.............................................. 1,138.45 (4) Cost of foodstuffs purchased from defendant..411,982.35 Total.......................... P759,419.83 would show a balance in favor of defendant of P61,260.69. Presented otherwise, the total freight charges due plaintiff after deducting the rebate to which defendant is entitled to is P586,867.96. (.698,159.14 minus P111,291.18). Against said freight charges of P586,867.96 defendant should be credited: (1) Cash payment............................... P235,007.85 (2) Freight adjustment........................ 1,138.45 (3) Cost of foodstuffs........................ P411,982.35 Total............................. P648,128.65
giving a balance in favor of defendant of P61,260.69. WHEREFORE, the decision of the Court a quo is hereby MODIFIED and judgment rendered against plaintiff on defendant's counterclaim for the amount of P61,260.69. In an other respects, the appealed decision is hereby AFFIRMED. No pronouncement as to cost. SO ORDERED.
G.R. No. 150128 August 31, 2006 LAUREANO T. ANGELES, Petitioner, vs. PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES, 1 Respondents. D E C I S I O N GARCIA, J .: Under consideration is this petition for review under Rule 45 of the Rules of Court assailing and seeking to set aside the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 54062, to wit: 1. Decision 2 dated June 4, 2001, affirming an earlier decision of the Regional Trial Court (RTC) of Quezon City, Branch 79, which dismissed the complaint for specific performance and damages thereat commenced by the petitioner against the herein respondents; and 2. Resolution 3 dated September 17, 2001, denying the petitioner's motion for reconsideration. The facts: On May 5, 1980, the RESPONDENT Philippine National Railways (PNR) informed a certain Gaudencio Romualdez (Romualdez, hereinafter) that it has accepted the latters offer to buy, on an "AS IS, WHERE IS" basis, the PNRs scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively, for the total amount of P96,600.00. After paying the stated purchase price, Romualdez addressed a letter to Atty. Cipriano Dizon, PNRs Acting Purchasing Agent. Bearing date May 26, 1980, the letter reads: Dear Atty. Dizon: This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me. For this reason, I have given her the original copy of the award, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO. Thank you for your cooperation. Very truly yours, (Sgd.) Gaudencio Romualdez The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles, petitioner's now deceased wife. That very same day May 26, 1980 Lizette requested the PNR to transfer the location of withdrawal for the reason that the scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However, the PNR subsequently suspended the withdrawal in view of what it considered as documentary discrepancies coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac. Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00. The PNR, however, refused to pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn which, at P2,100.00 per metric ton, were worth P114,781.80, an amount that exceeds the claim for refund. On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate secretary, Rodolfo Flores, among others, for specific performance and damages before the Regional Trial Court of Quezon City. In it, they prayed that PNR be directed to deliver 46 metric tons of scrap/unserviceable rails and to pay them damages and attorney's fees. Issues having been joined following the filing by PNR, et al., of their answer, trial ensued. Meanwhile, Lizette W. Angeles passed away and was substituted by her heirs, among whom is her husband, herein petitioner Laureno T. Angeles. On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not the real parties-in-interest, rendered judgment dismissing their complaint for lack of cause of action. As held by the court, Lizette was merely a representative of Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latter's rights with respect to the award. Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the threshold hereof, in its decision of June 4, 2001, dismissed the appeal and affirmed that of the trial court. The affirmatory decision was reiterated by the CA in its resolution of September 17, 2001, denying the petitioners motion for reconsideration. Hence, the petitioners present recourse on the submission that the CA erred in affirming the trial court's holding that petitioner and his spouse, as plaintiffs a quo, had no cause of action as they were not the real parties-in-interest in this case. We DENY the petition. At the crux of the issue is the matter of how the aforequoted May 26, 1980 letter of Romualdez to Atty. Dizon of the PNR should be taken: was it meant to designate, or has it the effect of designating, Lizette W. Angeles as a mere agent or as an assignee of his (Romualdez's) interest in the scrap rails awarded to San Juanico Enterprises? The CAs conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but merely an agent whose authority was limited to the withdrawal of the scrap rails, hence, without personality to sue. WHERE AGENCY EXISTS, the third party's (in this case, PNR's) liability on a contract is to the principal and not to the agent and the relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must, generally, be a contracting party. The legal situation is, however, DIFFERENT WHERE AN AGENT IS CONSTITUTED AS AN ASSIGNEE. In such a case, the agent may, in his own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also recognizes that when one has a right assigned to him, he is then the real party-in-interest and may maintain an action upon such claim or right. 4
Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26, 1980, it is at once apparent that Lizette was to act just as a "representative" of Romualdez in the "withdrawal of rails," and not an assignee. For perspective, we reproduce the contents of said letter: This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO x x x to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me. For this reason, I have given her the original copy of the award, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO. (Emphasis added) If Lizette was without legal standing to sue and appear in this case, there is more reason to hold that her petitioner husband, either as her conjugal partner or her heir, is also without such standing. Petitioner makes much of the fact that the terms "agent" or "attorney-in-fact" were not used in the Romualdez letter aforestated. It bears to stress, however, that the words "principal" and "agent," are not the only terms used to designate the parties in an agency relation. The agent may also be called an attorney, proxy, delegate or, as here,representative. It cannot be over emphasized that Romualdez's use of the active verb "authorized," instead of "assigned," indicated an intent on his part to keep and retain his interest in the subject matter. Stated a bit differently, he intended to limit Lizettes role in the scrap transaction to being the representative of his interest therein. Petitioner submits that the second paragraph of the Romualdez letter, stating - "I have given [Lizette] the original copy of the award x x x which will indicate my waiver of rights, interests and participation in favor of Lizette R. Wijanco" - clarifies that Lizette was intended to be an assignee, and not a mere agent. We are not persuaded. As it were, the petitioner conveniently omitted an important phrase preceding the paragraph which would have put the whole matter in context. The phrase is "For this reason," and the antecedent thereof is his (Romualdez) having appointed Lizette as his representative in the matter of the withdrawal of the scrap items. In fine, the key phrase clearly conveys the idea that Lizette was given the original copy of the contract award to enable her to withdraw the rails as Romualdezs authorized representative. Article 1374 of the Civil Code provides that the various stipulations of a contract shall be read and interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. In fine, the real intention of the parties is primarily to be determined from the language used and gathered from the whole instrument. When put into the context of the letter as a whole, it is abundantly clear that the rights which Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency relation that he had established for the withdrawal of the rails. At any rate, any doubt as to the intent of Romualdez generated by the way his letter was couched could be clarified by the acts of the main players themselves. Article 1371 of the Civil Code provides that to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. In other words, in case of doubt, resort may be made to the situation, surroundings, and relations of the parties. The fact of agency was, as the trial court aptly observed, 5 confirmed in subsequent letters from the Angeles spouses in which they themselves refer to Lizette as "authorized representative" of San Juanico Enterprises. Mention may also be made that the withdrawal receipt which Lizette had signed indicated that she was doing so in a representative capacity. One professing to act as agent for another is estopped to deny his agency both as against his asserted principal and third persons interested in the transaction which he engaged in. Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another. The appellate court, and before it, the trial court, had peremptorily determined that Lizette, with respect to the withdrawal of the scrap in question, was acting for Romualdez. And with the view we take of this case, there were substantial pieces of evidence adduced to support this determination. The desired reversal urged by the petitioner cannot, accordingly, be granted. For, factual findings of the trial court, adopted and confirmed by the CA, are, as a rule, final and conclusive and may not be disturbed on appeal. 6 So it must be here. Petitioner maintains that the Romualdez letter in question was not in the form of a special power of attorney, implying that the latter had not intended to merely authorize his wife, Lizette, to perform an act for him (Romualdez). The contention is specious. In the absence of statute, no form or method of execution is required for a VALID POWER OF ATTORNEY; it may be in any form clearly showing on its face the agents authority. 7
A POWER OF ATTORNEY is only but an instrument in writing by which a person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts on behalf of the principal. The written authorization itself is the power of attorney, and this is clearly indicated by the fact that it has also been called a "letter of attorney." Its primary purpose is not to define the authority of the agent as between himself and his principal but to evidence the authority of the agent to third parties with whom the agent deals. 8 The letter under consideration is sufficient to constitute a power of attorney. Except as may be required by statute, A POWER OF ATTORNEY IS VALID ALTHOUGH NO NOTARY PUBLIC INTERVENED IN ITS EXECUTION. 9
A power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney. 10 Contextually, all that Lizette was authorized to do was to withdraw the unserviceable/scrap railings. Allowing her authority to sue therefor, especially in her own name, would be to read something not intended, let alone written in the Romualdez letter. Finally, the petitioner's claim that Lizette paid the amount of P96,000.00 to the PNR appears to be a mere afterthought; it ought to be dismissed outright under the estoppel principle. In earlier proceedings, petitioner himself admitted in his complaint that it was Romualdez who paid this amount. WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED. Costs against the petitioner. SO ORDERED.
G.R. No. 171460 July 24, 2007 LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR., represented by their Attorney-In-Fact, ALFREDO M. PEREZ, Petitioners, vs. ALLIED BANKING CORPORATION, Respondent. D E C I S I O N CHICO-NAZARIO, J .: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners Lillian N. Mercado, Cynthia M. Fekaris and Julian Mercado, Jr., represented by their Attorney-In-Fact, Alfredo M. Perez, seeking to reverse and set aside the Decision 1 of the Court of Appeals dated 12 October 2005, and its Resolution 2 dated 15 February 2006 in CA-G.R. CV No. 82636. The Court of Appeals, in its assailed Decision and Resolution, reversed the Decision 3 of the Regional Trial Court (RTC) of Quezon City, Branch 220 dated 23 September 2003, declaring the deeds of real estate mortgage constituted on TCT No. RT-18206 (106338) null and void. The dispositive portion of the assailed Court of Appeals Decision thus reads: WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a new judgment is hereby entered dismissing the [petitioners] complaint. 4
PETITIONERS are heirs of Perla N. Mercado (Perla). Perla, during her lifetime, owned several pieces of real property situated in different provinces of the Philippines. RESPONDENT, on the other hand, is a banking institution duly authorized as such under the Philippine laws. On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian) over several pieces of real property registered under her name, authorizing the latter to perform the following acts: 1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over the different parcels of land described hereinafter, to wit: a) Calapan, Oriental Mindoro Properties covered by Transfer Certificates of Title Nos. T-53618 - 3,522 Square Meters, T-46810 3,953 Square Meters, T-53140 177 Square Meters, T-21403 263 square Meters, T- 46807 39 Square Meters of the Registry of Deeds of Oriental Mindoro; b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title Nos. T-108954 600 Square Meters and RT-106338 805 Square Meters of the Registry of Deeds of Pasig (now Makati); c) Personal property 1983 Car with Vehicle Registration No. R-16381; Model 1983; Make Toyota; Engine No. T- 2464 2. To sign for and in my behalf any act of strict dominion or ownership any sale, disposition, mortgage, lease or any other transactions including quit-claims, waiver and relinquishment of rights in and over the parcels of land situated in General Trias, Cavite, covered by Transfer Certificates of Title Nos. T-112254 and T-112255 of the Registry of Deeds of Cavite, in conjunction with his co- owner and in the person ATTY. AUGUSTO F.DEL ROSARIO; 3. To exercise any or all acts of strict dominion or ownership over the above- mentioned properties, rights and interest therein. (Emphasis supplied.) On the strength of the aforesaid SPA, Julian, on 12 December 1996, obtained a loan from the respondent in the amount of P3,000,000.00, secured by real estate mortgage constituted on TCT No. RT-18206 (106338) which covers a parcel of land with an area of 805 square meters, registered with the Registry of Deeds of Quezon City (subject property). 5
Still using the subject property as security, J ulian obtained an additional loan from the respondent in the sum ofP5,000,000.00, evidenced by a Promissory Note 6 he executed on 5 February 1997 as another real estate mortgage (REM). It appears, however, that there was no property identified in the SPA as TCT No. RT 18206 (106338) and registered with the Registry of Deeds of Quezon City. What was identified in the SPA instead was the property covered by TCT No. RT-106338 registered with the Registry of Deeds of Pasig. Subsequently, Julian defaulted on the payment of his loan obligations. Thus, RESPONDENT initiated extra-judicial foreclosure proceedings over the subject property which was subsequently sold at public auction wherein the respondent was declared as the highest bidder as shown in the Sheriffs Certificate of Sale dated 15 January 1998. 7
On 23 March 1999, petitioners initiated with the RTC an action for the annulment of REM constituted over the subject property on the ground that the same was not covered by the SPA and that the said SPA, at the time the loan obligations were contracted, no longer had force and effect since it was previously revoked by Perla on 10 March 1993, as evidenced by the Revocation of SPA signed by the latter. 8
Petitioners likewise alleged that together with the copy of the Revocation of SPA, Perla, in a Letter dated 23 January 1996, notified the Registry of Deeds of Quezon City that any attempt to mortgage or sell the subject property must be with her full consent documented in the form of an SPA duly authenticated before the Philippine Consulate General in New York. 9
In the absence of authority to do so, the REM constituted by Julian over the subject property was null and void; thus, petitioners likewise prayed that the subsequent extra-judicial foreclosure proceedings and the auction sale of the subject property be also nullified. In its Answer with Compulsory Counterclaim, 10 respondent averred that, contrary to petitioners allegations, the SPA in favor of Julian included the subject property, covered by one of the titles specified in paragraph 1(b) thereof, TCT No. RT- 106338 registered with the Registry of Deeds of Pasig (now Makati). The subject property was purportedly registered previously under TCT No. T-106338, and was only subsequently reconstituted as TCT RT-18206 (106338). Moreover, TCT No. T-106338 was actually registered with the Registry of Deeds of Quezon City and not before the Registry of Deeds of Pasig (now Makati). Respondent explained that the discrepancy in the designation of the Registry of Deeds in the SPA was merely an error that must not prevail over the clear intention of Perla to include the subject property in the said SPA. In sum, the property referred to in the SPA Perla executed in favor of Julian as covered by TCT No. 106338 of the Registry of Deeds of Pasig (now Makati) and the subject property in the case at bar, covered by RT 18206 (106338) of the Registry of Deeds of Quezon City, are one and the same. On 23 September 2003, the RTC rendered a Decision declaring the REM constituted over the subject property null and void, for Julian was not authorized by the terms of the SPA to mortgage the same. The court a quo likewise ordered that the foreclosure proceedings and the auction sale conducted pursuant to the void REM, be nullified. The dispositive portion of the Decision reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the [herein petitioners] and against the [herein respondent] Bank: 1. Declaring the Real Estate Mortgages constituted and registered under Entry Nos. PE-4543/RT-18206 and 2012/RT-18206 annotated on TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and VOID; 2. Declaring the Sheriffs Sale and Certificate of Sale under FRE No. 2217 dated January 15, 1998 over the property covered by TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and VOID; 3. Ordering the defendant Registry of Deeds of Quezon City to cancel the annotation of Real Estate Mortgages appearing on Entry Nos. PE-4543/RT- 18206 and 2012/RT-18206 on TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City; 4. Ordering the [respondent] Bank to deliver/return to the [petitioners] represented by their attorney-in-fact Alfredo M. Perez, the original Owners Duplicate Copy of TCT No. RT-18206 (106338) free from the encumbrances referred to above; and 5. Ordering the [respondent] Bank to pay the [petitioners] the amount of P100,000.00 as for attorneys fees plus cost of the suit. The other claim for damages and counterclaim are hereby DENIED for lack of merit. 11
Aggrieved, respondent appealed the adverse Decision before the Court of Appeals. In a Decision dated 12 October 2005, the Court of Appeals reversed the RTC Decision and upheld the validity of the REM constituted over the subject property on the strength of the SPA. The appellate court declared that Perla intended the subject property to be included in the SPA she executed in favor of Julian, and that her subsequent revocation of the said SPA, not being contained in a public instrument, cannot bind third persons. The Motion for Reconsideration interposed by the petitioners was denied by the Court of Appeals in its Resolution dated 15 February 2006. Petitioners are now before us assailing the Decision and Resolution rendered by the Court of Appeals raising several issues, which are summarized as follows: I WHETHER OR NOT THERE WAS A VALID MORTGAGE CONSTITUTED OVER SUBJECT PROPERTY. II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE SPA. III WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN- GOOD FAITH. For a mortgage to be valid, Article 2085 of the Civil Code enumerates the following essential requisites: Art. 2085. The following requisites are essential to the contracts of pledge and mortgage: (1) That they be constituted to secure the fulfillment of a principal obligation; (2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with the mortgage of the subject property. The property mortgaged was owned by his wife, Perla, considered a third party to the loan obligations between Julian and respondent. It was, thus, a situation recognized by the last paragraph of Article 2085 of the Civil Code afore-quoted. However, since it was not Perla who personally mortgaged her own property to secure Julians loan obligations with respondent, we proceed to determining if she duly authorized Julian to do so on her behalf. Under Article 1878 of the Civil Code, a SPECIAL POWER OF ATTORNEY is necessary in cases where real rights over immovable property are created or conveyed. 12 In the SPA executed by Perla in favor of Julian on 28 May 1992, the latter was conferred with the authority to "sell, alienate, mortgage, lease and deal otherwise" the different pieces of real and personal property registered in Perlas name. The SPA likewise authorized Julian "[t]o exercise any or all acts of strict dominion or ownership" over the identified properties, and rights and interest therein. The existence and due execution of this SPA by Perla was not denied or challenged by petitioners. There is no question therefore that Julian was vested with the power to mortgage the pieces of property identified in the SPA. However, as to whether the subject property was among those identified in the SPA, so as to render Julians mortgage of the same valid, is a question we still must resolve. Petitioners insist that the subject property was not included in the SPA, considering that it contained an exclusive enumeration of the pieces of property over which Julian had authority, and these include only: (1) TCT No. T-53618, with an area of 3,522 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (2) TCT No. T-46810, with an area of 3,953 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (3) TCT No. T-53140, with an area of 177 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (4) TCT No. T-21403, with an area of 263 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (5) TCT No. T- 46807, with an area of 39 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (6) TCT No. T-108954, with an area of 690 square meters and located at Susana Heights, Muntinlupa; (7) RT-106338 805 Square Meters registered with the Registry of Deeds of Pasig (now Makati); and (8) Personal Property consisting of a 1983 Car with Vehicle Registration No. R-16381, Model 1983, Make Toyota, and Engine No. T- 2464. Nowhere is it stated in the SPA that Julians authority extends to the subject property covered by TCT No. RT 18206 (106338) registered with the Registry of Deeds of Quezon City. Consequently, the act of Julian of constituting a mortgage over the subject property is unenforceable for having been done without authority. Respondent, on the other hand, mainly hinges its argument on the declarations made by the Court of Appeals that there was no property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now Makati); but there exists a property, the subject property herein, covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. Further verification would reveal that TCT No. RT- 18206 is merely a reconstitution of TCT No. 106338, and the property covered by both certificates of title is actually situated in Quezon City and not Pasig. From the foregoing circumstances, respondent argues that Perla intended to include the subject property in the SPA, and the failure of the instrument to reflect the recent TCT Number or the exact designation of the Registry of Deeds, should not defeat Perlas clear intention. After an examination of the literal terms of the SPA, we find that the subject property was NOT among those enumerated therein. There is no obvious reference to the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. There was also nothing in the language of the SPA from which we could deduce the intention of Perla to include the subject property therein. We cannot attribute such alleged intention to Perla who executed the SPA when the language of the instrument is bare of any indication suggestive of such intention. Contrariwise, to adopt the intent theory advanced by the respondent, in the absence of clear and convincing evidence to that effect, would run afoul of the express tenor of the SPA and thus defeat Perlas true intention. In cases where the terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence to ascertain the true intent of the parties, is not countenanced. As aptly stated in the case of JMA House, Incorporated v. Sta. Monica Industrial and Development Corporation, 13 thus: [T]he law is that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it [in] any other intention that would contradict its main import. The clear terms of the contract should never be the subject matter of interpretation. Neither abstract justice nor the rule on liberal interpretation justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract or obligation not assumed simply or merely to avoid seeming hardships. The true meaning must be enforced, as it is to be presumed that the contracting parties know their scope and effects. 14
Equally relevant is the rule that a POWER OF ATTORNEY MUST BE STRICTLY CONSTRUED AND PURSUED. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney. 15 Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded. 16 This is but in accord with the disinclination of courts to enlarge the authority granted beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual and reasonably necessary and proper for the performance of such express powers. 17
Even the commentaries of renowned Civilist Manresa 18 supports a strict and limited construction of the terms of a power of attorney: The law, which must look after the interests of all, cannot permit a man to express himself in a vague and general way with reference to the right he confers upon another for the purpose of alienation or hypothecation, whereby he might be despoiled of all he possessed and be brought to ruin, such excessive authority must be set down in the most formal and explicit terms, and when this is not done, the law reasonably presumes that the principal did not mean to confer it. In this case, we are not convinced that the property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now Makati) is the same as the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City
. The records of the case are stripped of supporting proofs to verify the respondents claim that the two titles cover the same property. It failed to present any certification from the Registries of Deeds concerned to support its assertion. Neither did respondent take the effort of submitting and making part of the records of this case copies of TCTs No. RT-106338 of the Registry of Deeds of Pasig (now Makati) and RT-18206 (106338) of the Registry of Deeds of Quezon City, and closely comparing the technical descriptions of the properties covered by the said TCTs. The bare and sweeping statement of respondent that the properties covered by the two certificates of title are one and the same contains nothing but empty imputation of a fact that could hardly be given any evidentiary weight by this Court. Having arrived at the conclusion that Julian was not conferred by Perla with the authority to mortgage the subject property under the terms of the SPA, the real estate mortgages Julian executed over the said property are therefore unenforceable. Assuming arguendo that the subject property was indeed included in the SPA executed by Perla in favor of Julian, the said SPA was revoked by virtue of a public instrument executed by Perla on 10 March 1993. To address respondents assertion that the said revocation was unenforceable against it as a third party to the SPA and as one who relied on the same in good faith, we quote with approval the following ruling of the RTC on this matter: Moreover, an agency is extinguished, among others, by its revocation (Article 1999, New Civil Code of the Philippines). The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied (Article 1920, supra). In this case, the revocation of the agency or Special Power of Attorney is expressed and by a public document executed on March 10, 1993. The Register of Deeds of Quezon City was even notified that any attempt to mortgage or sell the property covered by TCT No. [RT-18206] 106338 located at No. 21 Hillside Drive, Blue Ridge, Quezon City must have the full consent documented in the form of a special power of attorney duly authenticated at the Philippine Consulate General, New York City, N.Y., U.S.A. The non-annotation of the revocation of the Special Power of Attorney on TCT No. RT- 18206 is of no consequence as far as the revocations existence and legal effect is concerned since actual notice is always superior to constructive notice. The actual notice of the revocation relayed to defendant Registry of Deeds of Quezon City is not denied by either the Registry of Deeds of Quezon City or the defendant Bank. In which case, there appears no reason why Section 52 of the Property Registration Decree (P.D. No. 1529) should not apply to the situation. Said Section 52 of P.D. No. 1529 provides: "Section 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the Office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering. (Pres. Decree No. 1529, Section 53) (emphasis ours) It thus developed that at the time the first loan transaction with defendant Bank was effected on December 12, 1996, there was on record at the Office of the Register of Deeds of Quezon City that the special power of attorney granted Julian, Sr. by Perla had been revoked. That notice, works as constructive notice to third parties of its being filed, effectively rendering Julian, Sr. without authority to act for and in behalf of Perla as of the date the revocation letter was received by the Register of Deeds of Quezon City on February 7, 1996. 19
Given that Perla revoked the SPA as early as 10 March 1993, and that she informed the Registry of Deeds of Quezon City of such revocation in a letter dated 23 January 1996 and received by the latter on 7 February 1996, then third parties to the SPA are constructively notified that the same had been revoked and Julian no longer had any authority to mortgage the subject property. Although the revocation may not be annotated on TCT No. RT-18206 (106338), as the RTC pointed out, neither the Registry of Deeds of Quezon City nor respondent denied that Perlas 23 January 1996 letter was received by and filed with the Registry of Deeds of Quezon City. Respondent would have undoubtedly come across said letter if it indeed diligently investigated the subject property and the circumstances surrounding its mortgage. The final issue to be threshed out by this Court is whether the respondent is a mortgagee-in-good faith. Respondent fervently asserts that it exercised reasonable diligence required of a prudent man in dealing with the subject property. Elaborating, respondent claims to have carefully verified Julians authority over the subject property which was validly contained in the SPA. It stresses that the SPA was annotated at the back of the TCT of the subject property. Finally, after conducting an investigation, it found that the property covered by TCT No. 106338, registered with the Registry of Deeds of Pasig (now Makati) referred to in the SPA, and the subject property, covered by TCT No. 18206 (106338) registered with the Registry of Deeds of Quezon City, are one and the same property. From the foregoing, respondent concluded that Julian was indeed authorized to constitute a mortgage over the subject property. We are unconvinced. The property listed in the real estate mortgages Julian executed in favor of PNB is the one covered by "TCT#RT-18206(106338)." On the other hand, the Special Power of Attorney referred to TCT No. "RT-106338 805 Square Meters of the Registry of Deeds of Pasig now Makati." The palpable difference between the TCT numbers referred to in the real estate mortgages and Julians SPA, coupled with the fact that the said TCTs are registered in the Registries of Deeds of different cities, should have put respondent on guard. Respondents claim of prudence is debunked by the fact that it had conveniently or otherwise overlooked the inconsistent details appearing on the face of the documents, which it was relying on for its rights as mortgagee, and which significantly affected the identification of the property being mortgaged. In Arrofo v. Quio, 20 we have elucidated that: [Settled is the rule that] a person dealing with registered lands [is not required] to inquire further than what the Torrens title on its face indicates. This rule, however, is not absolute but admits of exceptions. Thus, while its is true, x x x that a person dealing with registered lands need not go beyond the certificate of title, it is likewise a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man on his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to face up the fact that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendors or mortgagors title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with the measure of precaution which may be required of a prudent man in a like situation. By putting blinders on its eyes, and by refusing to see the patent defect in the scope of Julians authority, easily discernable from the plain terms of the SPA, respondent cannot now claim to be an innocent mortgagee. Further, in the case of Abad v. Guimba, 21 we laid down the principle that where the mortgagee does not directly deal with the registered owner of real property, the law requires that a higher degree of prudence be exercised by the mortgagee, thus: While [the] one who buys from the registered owner does not need to look behind the certificate of title, one who buys from [the] one who is not [the] registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term "purchaser." 22
This principle is applied more strenuously when the mortgagee is a bank or a banking institution. Thus, in the case of Cruz v. Bancom Finance Corporation, 23 we ruled: Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations. 24
Hence, considering that the property being mortgaged by Julian was not his, and there are additional doubts or suspicions as to the real identity of the same, the respondent bank should have proceeded with its transactions with Julian only with utmost caution. As a bank, respondent must subject all its transactions to the most rigid scrutiny, since its business is impressed with public interest and its fiduciary character requires high standards of integrity and performance. 25 Where respondent acted in undue haste in granting the mortgage loans in favor of Julian and disregarding the apparent defects in the latters authority as agent, it failed to discharge the degree of diligence required of it as a banking corporation.1awphil Thus, even granting for the sake of argument that the subject property and the one identified in the SPA are one and the same, it would not elevate respondents status to that of an innocent mortgagee. As a banking institution, jurisprudence stringently requires that respondent should take more precautions than an ordinary prudent man should, to ascertain the status and condition of the properties offered as collateral and to verify the scope of the authority of the agents dealing with these. Had respondent acted with the required degree of diligence, it could have acquired knowledge of the letter dated 23 January 1996 sent by Perla to the Registry of Deeds of Quezon City which recorded the same. The failure of the respondent to investigate into the circumstances surrounding the mortgage of the subject property belies its contention of good faith. On a last note, we find that the real estate mortgages constituted over the subject property are unenforceable and not null and void, as ruled by the RTC. It is best to reiterate that the said mortgage was entered into by Julian on behalf of Perla without the latters authority and consequently, unenforceable under Article 1403(1) of the Civil Code. Unenforceable contracts are those which cannot be enforced by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity. 26 An unenforceable contract may be ratified, expressly or impliedly, by the person in whose behalf it has been executed, before it is revoked by the other contracting party. 27 Without Perlas ratification of the same, the real estate mortgages constituted by Julian over the subject property cannot be enforced by any action in court against Perla and/or her successors in interest. In sum, we rule that the contracts of real estate mortgage constituted over the subject property covered by TCT No. RT 18206 (106338) registered with the Registry of Deeds of Quezon City are unenforceable. Consequently, the foreclosure proceedings and the auction sale of the subject property conducted in pursuance of these unenforceable contracts are null and void. This, however, is without prejudice to the right of the respondent to proceed against Julian, in his personal capacity, for the amount of the loans. WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered by the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The Decision dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch 220, in Civil Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED with modification that the real estate mortgages constituted over TCT No. RT 18206 (106338) are not null and void but UNENFORCEABLE. No costs. SO ORDERED.
G.R. No. 114311 November 29, 1996 COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEAL and ISIDRO PEREZ, respondents.
BELLOSILLO, J .: COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney appointing Paz G. Villamil- Estrada as attorney-in-fact . . . to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots. On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of PRIVATE RESPONDENT Isidro Perez and recover the possession of a portion of Lot No. 443 before the Regional Trial Court of Dagupan, docketed as Civil Case No. D-7750. 2
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with RESPONDENT Perez, the terms of which follow: 1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo dela Cruz the area at present occupied by defendant wherein his house is located is 333 square meters on the easternmost part of lot 443 and which portion has been occupied by defendant for several years now; 2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of P26,640.00 computed at P80.00/square meter; 3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this compromise agreement over said portion of 333 square m. of lot 443 which portion will be located on the easternmost part as indicated in the sketch as annex A; 4. Whatever expenses of subdivision, registration, and other incidental expenses shall be shouldered by the defendant. 3
On 27 November 1985 the "Compromise Agreement" was approved by the trial court and judgment was rendered in accordance therewith. 4
Although the decision became final and executory it was not executed within the 5-year period from date of its finality allegedly due to the failure of petitioner to produce the owner's duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise agreement. Thus on 25 January 1993 respondent filed a complaint to revive the judgment, docketed as Civil Case No. D-10459. 5
Petitioner asserts that it was only when the summons in Civil Case No. D- 10459 for the revival of judgment was served upon it that it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon which the trial court based its decision of 26 July 1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent transaction, PETITIONER sought annulment of the decision of the trial court before respondent Court of Appeals on the ground that the compromise agreement was void because: (a) the attorney-in-fact did not have the authority to dispose of, sell, encumber or divest the plaintiff of its ownership over its real property or any portion thereof; (b) the authority of the attorney-in-fact was confined to the institution and filing of an ejectment case against third persons/squatters on the property of the plaintiff, and to cause their eviction therefrom; (c) while the special power of attorney made mention of an authority to enter into a compromise agreement, such authority was in connection with, and limited to, the eviction of third persons/squatters thereat, in order that "the corporation may take material possession of the entire lot;" (d) the amount of P26,640.00 alluded to as alleged consideration of said agreement was never received by the plaintiff; (e) the private defendant acted in bad faith in. the execution of said agreement knowing fully well the want of authority of the attorney-in-fact to sell, encumber or dispose of the real property of plaintiff; and, (f) the disposal of a corporate property indispensably requires a Board Resolution of its Directors, a fact which is wanting in said Civil Case No. D-7750, and the General Manager is not the proper officer to encumber a corporate property. 6
On 29 October 1993 RESPONDENT COURT dismissed the complaint on the basis of its finding that not one of the grounds for annulment, namely, lack of jurisdiction, fraud or illegality was shown to exist. 7 It also denied the motion for reconsideration filed by petitioner, discoursing that the alleged nullity of the compromise judgment on the ground that petitioner's attorney-in-fact Villamil- Estrada was not authorized to sell the subject propety may be raised as a defense in the execution of the compromise judgment as it does not bind petitioner, but not as a ground for annulment of judgment because it does not affect the jurisdiction of the trial court over the action nor does it amount to extrinsic fraud. 8
Petitioner challenges this verdict. It argues that the decision of the trial court is void because the compromise agreement upon which it was based is void. Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was she armed with a Board Resolution authorizing the sale of its property. She was merely empowered to enter into a compromise agreement in the recovery suit she was authorized to file against persons squatting on Lot No. 443, such authority being expressly confined to the "ejectment of third persons or squatters of . . . lot . . . (No.) 443 . . . for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot . . ." We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary: for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was protective of the rights and interests of petitioner in the property. Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof. Neither can a conferment of the power to sell be validly inferred from the specific authority "to enter into a compromise agreement" because of the explicit limitation fixed by the grantor that the compromise entered into shall only be "so far as it shall protect the rights and interest of the corporation in the aforementioned lots." In the context of the specific investiture of powers to Villamil-Estrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale. WHEN THE SALE OF A PIECE OF LAND OR ANY INTEREST THEREON IS THROUGH AN AGENT, the authority of the latter shall be in writing; otherwise, the SALE SHALL BE VOID. 9 Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. 10 A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. 11 The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. 12 For the principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. 13
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. This being the case, the judgment based thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving petitioner's motion for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its decision based on the compromise agreement. In Alviar v. Court of First Instance of La Union, 14 the Court held . . . this court does not hesitate to hold that the judgment in question is null and void ab initio. It is not binding upon and cannot be executed against the petitioners. It is evident that the compromise upon which the judgment was based was not subscribed by them . . . Neither could Attorney Ortega bind them validly in the compromise because he had no special authority . . . As the judgment in question is null and void ab initio, it is evident that the court acquired no jurisdiction to render it, much less to order the execution thereof . . . . . . A judgment, which is null and void ab initio, rendered by a court without jurisdiction to do so, is without legal efficacy and may properly be impugned in any proceeding by the party against whom it is sought to be enforced . . . This ruling was adopted in Jacinto v. Montesa, 15 by Mr. Justice J. B.L. Reyes, a much-respected authority on civil law, where the Court declared that a judgment based on a compromise entered into by an attorney without specific authority from the client is void. Such judgment may be impugned and its execution restrained in any proceeding by the party against whom it is sought to be enforced. The Court also observed that a defendant against whom a judgment based on a compromise is sought to be enforced may file a petition for certiorari to quash the execution. He could not move to have the compromise set aside and then appeal from the order of denial since he was not a party to the compromise. Thus it would appear that the obiter of the appellate court that the alleged nullity of the compromise agreement should be raised as a defense against its enforcement is not legally feasible. Petitioner could not be in a position to question the compromise agreement in the action to revive the compromise judgment since it was never privy to such agreement. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact but she could not legally bind petitioner thereto as she was not entrusted with a special authority to sell the land, as required in Art. 1878, par. (5), of the Civil Code. Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of Appeals to annul and set aside judgments of Regional Trial Courts. 16 "Thus, the Intermediate Appellant Court (now Court of Appeals) shall exercise . . . (2) Exclusive original jurisdiction over action for annulment of judgments of the Regional Trial Courts . . ." However, certain requisites must first be established before a final and executory judgment can be the subject of an action for annulment. It must either be void for want of jurisdiction or for lack of due process of law, or it has been obtained by fraud. 17
Conformably with law and the above-cited authorities, the petition to annul the decision of the trial court in Civil Case No. D-7750 before the Court of Appeals was proper. Emanating as it did from a void compromise agreement, the trial court had no jurisdiction to render a judgment based thereon. 18
It would also appear, and quite contrary to the finding of the appellate court, that the highly reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic or collateral fraud by reason of which the judgment rendered thereon should have been struck down. Not all the legal semantics in the world can becloud the unassailable fact that petitioner was deceived and betrayed by its attorney-in-fact, Villamil-Estrada deliberately concealed from petitioner, her principal, that a compromise agreement had been forged with the end-result that a portion of petitioner's property was sold to the deforciant, literally for a song. Thus completely kept unaware of its agent's artifice, petitioner was not accorded even a fighting chance to repudiate the settlement so much so that the judgment based thereon became final and executory. For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. Fraud may assume different shapes and be committed in as many different ways and here lies the danger of attempting to define fraud. For man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary. There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining to the judgment itself, but to the manner in which it was procured so that there is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case, whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception practiced on him by his opponent. 19 Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority connives at his defeat; these and similar cases which show that there has never been a real contest in the trial or hearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the case for a new and fair hearing. 20
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence there is a well-established exception to the general rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. 21 The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal. Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency. 22 Indeed, the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and his act in secret hostility to the interests of his principal transcends the power afforded him. 23
WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of Appeals dated 29 October 1993 and 10 March 1994, respectively, as well as the decision of the Regional Trial Court of Dagupan City in Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED and SET ASIDE. The "Compromise Agreement" entered into between Attorney-in-fact Paz G. Villamil-Estrada and respondent Isidro Perez is declared VOID. This is without prejudice to the right of petitioner to pursue its complaint against private respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession of a portion of Lot No. 443. SO ORDERED.
G.R. No. 163720 December 16, 2004 GENEVIEVE LIM, petitioner, vs. FLORENCIO SABAN, respondents.
D E C I S I O N
TINGA, J .: Before the Court is a Petition for Review on Certiorari assailing the Decision 1 dated October 27, 2003 of the Court of Appeals, Seventh Division, in CA-G.R. V No. 60392. 2
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City (the "lot"), entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with RESPONDENT Florencio Saban (Saban) on February 8, 1994. Under the Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to include the amounts needed for payment of taxes, transfer of title and other expenses incident to the sale, as well as Sabans commission for the sale. 3
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the PETITIONER Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the lot as indicated in theDeed of Absolute Sale is Two Hundred Thousand Pesos (P200,000.00). 4 It appears, however, that the vendees agreed to purchase the lot at the price of Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale. After the sale, Lim remitted to Saban the amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due on the transaction as well as Fifty Thousand Pesos (P50,000.00) as brokers commission. 5 Lim also issued in the name of Saban four postdated checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos (P236,743.00). These checks were Bank of the Philippine Islands (BPI) Check No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No. 1112647 dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, 1994 for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994 for P168,000.00. Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to "extend another partial payment" for the lot in his (Ybaezs) favor. After the four checks in his favor were dishonored upon presentment, Saban filed a Complaint for collection of sum of money and damages against Ybaez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3, 1994. 7 The case was assigned to Branch 20 of the RTC. In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos (P400,000.00) from the price set by Ybaez. Of the total purchase price of P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims agent, and P113,257.00 was given to Saban to cover taxes and other expenses incidental to the sale. Lim also issued four (4) postdated checks 8 in favor of Saban for the remaining P236,743.00. 9
Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the actual selling price of the lot from Ybaez and because he was not a licensed real estate broker. Ybaez was able to convince Lim to cancel all four checks. Saban further averred that Ybaez and Lim connived to deprive him of his sales commission by withholding payment of the first three checks. He also claimed that Lim failed to make good the fourth check which was dishonored because the account against which it was drawn was closed. In his Answer, Ybaez claimed that Saban was not entitled to any commission because he concealed the actual selling price from him and because he was not a licensed real estate broker. Lim, for her part, argued that she was not privy to the agreement between Ybaez and Saban, and that she issued stop payment orders for the three checks because Ybaez requested her to pay the purchase price directly to him, instead of coursing it through Saban. She also alleged that she agreed with Ybaez that the purchase price of the lot was only P200,000.00. Ybaez died during the pendency of the case before the RTC. Upon motion of his counsel, the trial court dismissed the case only against him without any objection from the other parties. 10
On May 14, 1997, the RTC rendered its Decision 11 dismissing Sabans complaint, declaring the four (4) checks issued by Lim as stale and non-negotiable, and absolving Lim from any liability towards Saban. Saban appealed the trial courts Decision to the Court of Appeals. On October 27, 2003, the appellate court promulgated its Decision 12 reversing the trial courts ruling. It held that Saban was entitled to his commission amounting to P236,743.00. 13
The Court of Appeals ruled that Ybaezs revocation of his contract of agency with Saban was invalid because the agency was coupled with an interest and Ybaez effected the revocation in bad faith in order to DEPRIVE Saban of his commission and to keep the profits for himself. 14
The appellate court found that Ybaez and Lim connived to deprive Saban of his commission. It declared that Lim is liable to pay Saban the amount of the purchase price of the lot corresponding to his commission because she issued the four checks knowing that the total amount thereof corresponded to Sabans commission for the sale, as the agent of Ybaez. The appellate court further ruled that, in issuing the checks in payment of Sabans commission, Lim acted as an accommodation party. She signed the checks as drawer, without receiving value therefor, for the purpose of lending her name to a third person. As such, she is liable to pay Saban as the holder for value of the checks. 15
Lim filed a Motion for Reconsideration of the appellate courts Decision, but her Motion was denied by the Court of Appeals in a Resolution dated May 6, 2004. 16
Not satisfied with the decision of the Court of Appeals, Lim filed the present petition. Lim argues that the appellate court ignored the fact that after paying her agent and remitting to Saban the amounts due for taxes and transfer of title, she paid the balance of the purchase price directly to Ybaez. 17
She further contends that she is not liable for Ybaezs debt to Saban under the Agency Agreement as she is not privy thereto, and that Saban has no one but himself to blame for consenting to the dismissal of the case against Ybaez and not moving for his substitution by his heirs. 18
Lim also assails the findings of the appellate court that she issued the checks as an accommodation party for Ybaez and that she connived with the latter to deprive Saban of his commission. 19
Lim prays that should she be found liable to pay Saban the amount of his commission, she should only be held liable to the extent of one-third (1/3) of the amount, since she had two co-vendees (the Spouses Lim) who should share such liability. 20
In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00, which consisted of theP200,000.00 which would be paid to Ybaez, the P50,000.00 due to her broker, the P113,257.00 earmarked for taxes and other expenses incidental to the sale and Sabans commission as broker for Ybaez. According to Saban, Lim assumed the obligation to pay him his commission. He insists that Lim and Ybaez connived to unjustly deprive him of his commission from the negotiation of the sale. 21
The issues for the Courts resolution are whether Saban is entitled to receive his commission from the sale; and, assuming that Saban is entitled thereto, whether it is Lim who is liable to pay Saban his sales commission. The Court gives due course to the petition, but agrees with the result reached by the Court of Appeals. The Court affirms the appellate courts finding that the AGENCY WAS NOT REVOKED since Ybaez requested that Lim make stop payment orders for the checks payable to Saban only after the consummation of the sale on March 10, 1994. At that time, Saban had already performed his obligation as Ybaezs agent when, through his (Sabans) efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim. To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency with Ybaez which expressly states that Saban would be entitled to any excess in the purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes and other incidental expenses of the sale. 22
In Macondray & Co. v. Sellner, 23 the Court recognized the right of a broker to his commission for finding a suitable buyer for the sellers property even though the seller himself consummated the sale with the buyer. 24 The Court held that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the brokers efforts. In Infante v. Cunanan, et al., 25 the Court upheld the right of the brokers to their commissions although the seller revoked their authority to act in his behalf after they had found a buyer for his properties and negotiated the sale directly with the buyer whom he met through the brokers efforts. The Court ruled that the sellers withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers of their commissions as the sellers duly constituted agents. The pronouncements of the Court in the aforecited cases are applicable to the present case, especially considering that Saban had completely performed his obligations under his contract of agency with Ybaez by finding a suitable buyer to preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees. Moreover, the contract of agency very clearly states that Saban is entitled to the excess of the mark-up of the price of the lot after deducting Ybaezs share of P200,000.00 and the taxes and other incidental expenses of the sale. However, the Court does not agree with the appellate courts pronouncement that Sabans agency was one coupled with an interest. Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Stated differently, AN AGENCY IS DEEMED AS ONE COUPLED WITH AN INTEREST where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agents interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. WHEN AN AGENTS INTEREST IS CONFINED TO EARNING HIS AGREED COMPENSATION, the agency is not one coupled with an interest, since an agents interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship. 26
Sabans entitlement to his commission having been settled, the Court must now determine whether Lim is the proper party against whom Saban should address his claim. Sabans right to receive compensation for negotiating as broker for Ybaez arises from the Agency Agreement between them. Lim is not a party to the contract. However, the record reveals that she had knowledge of the fact that Ybaez set the price of the lot at P200,000.00 and that the P600,000.00the price agreed upon by her and Sabanwas more than the amount set by Ybaez because it included the amount for payment of taxes and for Sabans commission as broker for Ybaez. According to the trial court, Lim made the following payments for the lot: P113,257.00 for taxes, P50,000.00 for her broker, and P400.000.00 directly to Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos (P563,257.00). 27 Lim, on the other hand, claims that on March 10, 1994, the date of execution of theDeed of Absolute Sale, she paid directly to Ybaez the amount of One Hundred Thousand Pesos (P100,000.00) only, and gave to Saban P113,257.00 for payment of taxes and P50,000.00 as his commission, 28 and One Hundred Thirty Thousand Pesos (P130,000.00) on June 28, 1994, 29 or a total of Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for his part, acknowledged that Lim and her co-vendees paid him P400,000.00 which he said was the full amount for the sale of the lot. 30 It thus appears that he receivedP100,000.00 on March 10, 1994, acknowledged receipt (through Saban) of the P113,257.00 earmarked for taxes and P50,000.00 for commission, and received the balance of P130,000.00 on June 28, 1994. Thus, a total ofP230,000.00 went directly to Ybaez. Apparently, although the amount actually paid by Lim was P393,257.00, Ybaez rounded off the amount to P400,000.00 and waived the difference. Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies her claim that she and her co-vendees did not agree to purchase the lot at P600,000.00. If she did not agree thereto, there would be no reason for her to issue those checks which is the balance of P600,000.00 less the amounts of P200,000.00 (due to Ybaez),P50,000.00 (commission), and the P113,257.00 (taxes). The only logical conclusion is that Lim changed her mind about agreeing to purchase the lot at P600,000.00 after talking to Ybaez and ultimately realizing that Sabans commission is even more than what Ybaez received as his share of the purchase price as vendor. Obviously, this change of mind resulted to the prejudice of Saban whose efforts led to the completion of the sale between the latter, and Lim and her co-vendees. This the Court cannot countenance. The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for the facts therein are similar to the circumstances of the present case. In that case, Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots and the house built thereon for Thirty Thousand Pesos (P30,000.00) . She promised to pay them five percent (5%) of the purchase price plus whatever overprice they may obtain for the property. Cunanan and Mijares offered the properties to Pio Noche who in turn expressed willingness to purchase the properties. Cunanan and Mijares thereafter introduced Noche to Infante. However, the latter told Cunanan and Mijares that she was no longer interested in selling the property and asked them to sign a document stating that their written authority to act as her agents for the sale of the properties was already cancelled. Subsequently, Infante sold the properties directly to Noche for Thirty One Thousand Pesos (P31,000.00). The Court upheld the right of Cunanan and Mijares to their commission, explaining that [Infante] had changed her mind even if respondent had found a buyer who was willing to close the deal, is a matter that would not give rise to a legal consequence if [Cunanan and Mijares] agreed to call off the transaction in deference to the request of [Infante]. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned without according the party prejudiced the reward which is due him. This is the situation in which [Cunanan and Mijares] were placed by [Infante]. [Infante] took advantage of the services rendered by [Cunanan and Mijares], but believing that she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of cancellation.This act of subversion cannot be sanctioned and cannot serve as basis for [Infante] to escape payment of the commission agreed upon. 31
The appellate court therefore had sufficient basis for concluding that Ybaez and Lim connived to deprive Saban of his commission by dealing with each other directly and reducing the purchase price of the lot and leaving nothing to compensate Saban for his efforts. Considering the circumstances surrounding the case, and the undisputed fact that Lim had not yet paid the balance of P200,000.00 of the purchase price of P600,000.00, it is just and proper for her to pay Saban the balance ofP200,000.00. Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his asking price of P200,000.00, Saban may claim such excess from Ybaezs estate, if that remedy is still available, 32 in view of the trial courts dismissal of Sabans complaint as against Ybaez, with Sabans express consent, due to the latters demise on November 11, 1994. 33
The appellate court however erred in ruling that Lim is liable on the checks because she issued them as an accommodation party. Section 29 of the Negotiable Instruments Law defines an accommodation party as a person "who has signed the negotiable instrument as maker, drawer, acceptor or indorser, without receiving value therefor, for the purpose of lending his name to some other person." The accommodation party is liable on the instrument to a holder for value even though the holder at the time of taking the instrument knew him or her to be merely an accommodation party. The accommodation party may of course seek reimbursement from the party accommodated. 34
As gleaned from the text of Section 29 of the Negotiable Instruments Law, the accommodation party is one who meets all these three requisites, viz: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and (3) he signed for the purpose of lending his name to some other person. In the case at bar, while Lim signed as drawer of the checks she did not satisfy the two other remaining requisites. The absence of the second requisite becomes pellucid when it is noted at the outset that Lim issued the checks in question on account of her transaction, along with the other purchasers, with Ybaez which was a sale and, therefore, a reciprocal contract. Specifically, she drew the checks in payment of the balance of the purchase price of the lot subject of the transaction. And she had to pay the agreed purchase price in consideration for the sale of the lot to her and her co-vendees. In other words, the amounts covered by the checks form part of the cause or consideration from Ybaezs end, as vendor, while the lot represented the cause or consideration on the side of Lim, as vendee. 35 Ergo, Lim received value for her signature on the checks. Neither is there any indication that Lim issued the checks for the purpose of enabling Ybaez, or any other person for that matter, to obtain credit or to raise money, thereby totally debunking the presence of the third requisite of an accommodation party. WHEREFORE, in view of the foregoing, the petition is DISMISSED. SO ORDERED.
G.R. No. L-30573 October 29, 1971 VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO, all surnamed DOMINGO, petitioners-appellants, vs. GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor- respondent. Teofilo Leonin for petitioners-appellants. Osorio, Osorio & Osorio for respondent-appellee. Teofilo P. Purisima in his own behalf as intervenor-respondent.
MAKASIAR, J .: PETITIONER-APPELLANT Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority decision dated, March 12, 1969 of the Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which sentenced the said Vicente M. Domingo to pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with interest on both amounts from the date of the filing of the complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and P500.00 as attorney's fees plus costs. The following facts were found to be established by the majority of the Special Division of Five of the Court of Appeals: In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo GRANTED Gregorio Domingo, a real estate broker, the EXCLUSIVE AGENCY TO SELL his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the 30-day duration of the agency or if the property is sold by Vicente within three months from the termination of the agency to a purchaser to whom it was submitted by Gregorio during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one copy was given to Vicente, while the original and another copy were retained by Gregorio. On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission. Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer. Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter(Exhibit "B"). Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by signing Exhibit "C". Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square meter in another letter, Exhibit "D". Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C" was amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house and lot at Denver Street, Quezon City which is part of the purchase price. It was again amended to the effect that Oscar will vacate his house and lot on December 1, 1956, because his wife was on the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a document dated June 30, 1956 (the year 1957 therein is a mere typographical error) and marked Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest money. In the deed of sale was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his money from his brother in the United States, for which reason he was giving up the negotiation including the amount of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio aspropina or gift. When Oscar did not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit "A" marked habit "A-1" to the effect that Vicente was still committed to pay him 5% commission, if the sale is consummated within three months after the expiration of the 30-day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to antagonize Vicente further, because he had still duplicate of Exhibit "A". From his meeting with Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he discovered Exhibit "G' deed of sale executed on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he demanded in writting payment of his commission on the sale price of One Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon, who told him that Vicente went to him and asked him to eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.0 In Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon. The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon the sale by Vicente of his property is practically a sale to Oscar de Leon since husband and wife have common or identical interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and not as additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter addressed to Oscar de Leon with respect to the additional earnest money, does not appear to have been answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de Leon's testimony that he paid an additional earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of One Thousand Pesos (P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit "4"; and that Vicente did not even mention such additional earnest money in his two replies Exhibits "I" and "J" to Gregorio's letter of demand of the 5% commission. The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de Leon of the amount of One Thousand Pesos (P1,000.00) as gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his commission on the sale price; (2) whether Vicente or Gregorio should be liable directly to the intervenor Teofilo Purisima for the latter's share in the expected commission of Gregorio by reason of the sale; and (3) whether the award of legal interest, moral and exemplary damages, attorney's fees and costs, was proper. Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan Enriquez did not touch on these issues which were extensively discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in his concurring opinion, affirmed that it does not constitute breach of trust or fraud on the part of the broker and regarded same as merely part of the whole process of bringing about the meeting of the minds of the seller and the purchaser and that the commitment from the prospect buyer that he would give a reward to Gregorio if he could effect better terms for him from the seller, independent of his legitimate commission, is not fraudulent, because the principal can reject the terms offered by the prospective buyer if he believes that such terms are onerous disadvantageous to him. On the other hand, Justice Gatmaitan, with whom Justice Antonio Cafizares corner held the view that such an act on the part of Gregorio was fraudulent and constituted a breach of trust, which should deprive him of his right to the commission. The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. 1
Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil Code. Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void. xxx xxx xxx Art. 1909. The agent is responsible not only for fraud but also for negligence, which shall be judged with more less rigor by the courts, according to whether the agency was or was not for a compensation. Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides that: Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever he may have received by virtue of the agency, even though what he has received is not due to the principal. The modification contained in the first paragraph Article 1891 consists in changing the phrase "to pay" to "to deliver", which latter term is more comprehensive than the former. Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent condemning as void any stipulation exempting the agent from the duty and liability imposed on him in paragraph one thereof. Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code which reads thus: Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with more or less severity by the courts, according to whether the agency was gratuitous or for a price or reward. The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. The duty of an agent is likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as of the strictest justice. 2
Hence, AN AGENT WHO TAKES A SECRET PROFIT in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. 3 By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for failure to deliver sums of money paid to him as an insurance agent for the account of his employer as required by said Article 1720, said insurance agent was convicted estafa. 4 An administrator of an estate was likewise under the same Article 1720 for failure to render an account of his administration to the heirs unless the heirs consented thereto or are estopped by having accepted the correctness of his account previously rendered. 5
Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa for failure to deliver to his principal the total amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from his collections. 6
A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money and property received by him for his client despite his attorney's lien. 7 The duty of a commission agent to render a full account his operations to his principal was reiterated in Duhart, etc. vs. Macias. 8
The American jurisprudence on this score is well-nigh unanimous. Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been unfaithful, the principal may recover back the commission paid, since an agent or broker who has been unfaithful is not entitled to any compensation. xxx xxx xxx In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court in Little vs. Phipps (1911) 208 Mass. 331, 94 NE 260, 34 LRA (NS) 1046, said: "It is well settled that the agent is bound to exercise the utmost good faith in his dealings with his principal. As Lord Cairns said, this rule "is not a technical or arbitrary rule. It is a rule founded on the highest and truest principles, of morality." Parker vs. McKenna (1874) LR 10,Ch(Eng) 96,118 ... If the agent does not conduct himself with entire fidelity towards his principal, but is guilty of taking a secret profit or commission in regard the matter in which he is employed, he loses his right to compensation on the ground that he has taken a position wholly inconsistent with that of agent for his employer, and which gives his employer, upon discovering it, the right to treat him so far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the benefit of valuable services rendered by the agent, but the agent has only himself to blame for that result." xxx xxx xxx The intent with which the agent took a secret profit has been held immaterial where the agent has in fact entered into a relationship inconsistent with his agency, since the law condemns the corrupting tendency of the inconsistent relationship. Little vs. Phipps (1911) 94 NE 260. 9
As a GENERAL RULE, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with the subject matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for himself in excess of his lawful compensation; and if he does so he may be held as a trustee and may be compelled to account to his principal for all profits, advantages, rights, or privileges acquired by him in such dealings, whether in performance or in violation of his duties, and be required to transfer them to his principal upon being reimbursed for his expenditures for the same, unless the principal has consented to or ratified the transaction knowing that benefit or profit would accrue or had accrued, to the agent, or unless with such knowledge he has allowed the agent so as to change his condition that he cannot be put in status quo. The application of this rule is not affected by the fact that the principal did not suffer any injury by reason of the agent's dealings or that he in fact obtained better results; nor is it affected by the fact that there is a usage or custom to the contrary or that the agency is a gratuitous one. (Emphasis applied.) 10 In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his principal and undermined his loyalty to his principal, who gave him partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms desired by his principal, the broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer of the prospective buyer to purchase the property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of 88,477 square meters, which is very much lower the the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00) for said lot originally offered by his principal. The duty embodied in Article 1891 of the New Civil Code WILL NOT APPLY if the agent or broker acted only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and his principal did not object therto. 11 Herein defendant-appellee Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the buyer Oscar de Leon. He was the broker and agent of said petitioner- appellant only. And therein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00) received by Gregorio Domingo from the prospective buyer; much less did he consent to his agent's accepting such a gift. The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the situation; because the transaction, to be valid, must necessarily be with the consent of the husband Oscar de Leon, who is the administrator of their conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part of and constituted the down payment on, the purchase price of herein petitioner-appellant's lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de Leon who was the buyer. As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission and must return the part of the commission he received from his principal. Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever amounts Gregorio Domingo received by virtue of the transaction as his sub-agency contract was with Gregorio Domingo alone and not with Vicente Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00), one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima. Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental anguish and serious anxiety as well as wounded feelings, petitioner-appellant Vicente Domingo should be awarded moral damages in the reasonable amount of One Thousand Pesos (P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00), considering that this case has been pending for the last fifteen (15) years from its filing on October 3, 1956. WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing defendant-appellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos (P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the costs.
G.R. No. 102737 August 21, 1996 FRANCISCO A. VELOSO, petitioner, vs. COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR THE CITY OF MANILA, respondents.
TORRES, JR., J .:p This petition for review assails the decision of the Court of Appeals, dated July 29, 1991, the dispositive portion of which reads: WHEREFORE, the decision appealed from is hereby AFFIRMED IN TOTO. Costs against appellant. 1
The following are the antecedent facts: PETITIONER Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an area of one hundred seventy seven (177) square meters and covered by Transfer Certificate of Title No. 49138 issued by the Registry of Deeds of Manila. 2 The title was registered in the name of Francisco A. Veloso,single, 3 on October 4, 1957. 4 The said title was subsequently cancelled and a new one, Transfer Certificate of Title No. 180685, was issued in the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988. 5
On August 24, 1988, PETITIONER VELOSO filed an action for annulment of documents, reconveyance of property with damages and preliminary injunction and/or restraining order. The complaint, docketed as Civil Case No. 88-45926, was raffled to the Regional Trial Court, Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of the subject property and he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the title but when his wife, Irma, left for abroad, he found out that his copy was missing. He then verified with the Registry of Deeds of Manila and there he discovered that his title was already cancelled in favor of defendant Aglaloma Escario. The transfer of property was supported by a GENERAL POWER OF ATTORNEY 6 dated November 29, 1985 and Deed of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the petitioner and appearing as his attorney-in-fact, and defendant Aglaloma Escario. 7 Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature was falsified. He also denied having seen or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in the execution of the power of attorney. He vehemently denied having met or transacted with the defendant. Thus, he contended that the sale of the property, and the subsequent transfer thereof, were null and void. Petitioner Veloso, therefore, prayed that a temporary restraining order be issued to prevent the transfer of the subject property; that the General Power of Attorney, the Deed of Absolute Sale and the Transfer Certificate of Title No. 180685 be annulled; and the subject property be reconveyed to him. DEFENDANT Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge of the alleged irregularity. She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in form and substance and was duly notarized. She contended that plaintiff (herein petitioner), had no cause of action against her. In seeking for the declaration of nullity of the documents, the real party in interest was Irma Veloso, the wife of the plaintiff. She should have been impleaded in the case. In fact, Plaintiff's cause of action should have been against his wife, Irma. Consequently, defendant Escario prayed for the dismissal of the complaint and the payment to her of damages. 8
Pre-trial was conducted. The sole issue to be resolved by the trial court was whether or not there was a valid sale of the subject property. 9
During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the subject property from the Philippine Building Corporation, as evidenced by a Deed of Sale dated October 1, 1957. 10 He married Irma Lazatin on January 20, 1962. 11 Hence, the property did not belong to their conjugal partnership. Plaintiff further asserted that he did not sign the power of attorney and as proof that his signature was falsified, he presented Allied Bank Checks Nos. 16634640, 16634641 and 16634643, which allegedly bore his genuine signature. Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the general power of attorney. He attested that he did not sign thereon, and the same was never entered in his Notarial Register on November 29, 1985. In the decision of the trial court dated March 9, 1990, 12 defendant Aglaloma Escario was adjudged the lawful owner of the property as she was deemed an innocent purchaser for value. The assailed general power of attorney was held to be valid and sufficient for the purpose. The trial court ruled that there was no need for a special power of attorney when the special power was already mentioned in the general one. It also declared that plaintiff failed to substantiate his allegation of fraud. The court also stressed that plaintiff was not entirely blameless for although he admitted to be the only person who had access to the title and other important documents, his wife was still able to possess the copy. Citing Section 55 of Act 496, the court held that Irma's possession and production of the certificate of title was deemed a conclusive authority from the plaintiff to the Register of Deeds to enter a new certificate. Then applying the principle of equitable estoppel, plaintiff was held to bear the loss for it was he who made the wrong possible. Thus: WHEREFORE, the Court finds for the defendants and against plaintiff a. declaring that there was a valid sale of the subject property in favor of the defendant; b. denying all other claims of the parties for want of legal and factual basis. Without pronouncement as to costs. SO ORDERED. Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of Appeals. The respondent court affirmed in toto the findings of the trial court. Hence, this petition for review before Us. This petition for review was initially dismissed for failure to submit an affidavit of service of a copy of the petition on the counsel for private respondent. 13 A motion for reconsideration of the resolution was filed but it was denied in are resolution dated March 30, 1992. 14 A second motion for reconsideration was filed and in a resolution dated Aug. 3, 1992, the motion was granted and the petition for review was reinstated. 15
A supplemental petition was filed on October 9, 1992 with the following assignment of errors: I The Court of Appeals committed a grave error in not finding that the forgery of the power of attorney (Exh . "C") had been adequately proven, despite the preponderant evidence, and in doing so, it has so far departed from the applicable provisions of law and the decisions of this Honorable Court, as to warrant the grant of this petition for review on certiorari. II There are principles of justice and equity that warrant a review of the decision. III The Court of Appeals erred in affirming the decision of the trial court which misapplied the principle of equitable estoppel since the petitioner did not fail in his duty of observing due diligence in the safekeeping of the title to the property. We find petitioner's contentions NOT meritorious. An examination of the records showed that the assailed power of attorney was valid and regular on its face. It was notarized and as such, it carries the evidentiary weight conferred upon it with respect to its due execution. While it is true that it was denominated as a GENERAL POWER OF ATTORNEY, a perusal thereof revealed that it stated an authority to sell, to wit: 2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said attorney shall deem fit and proper. 16
Thus, there was NO NEED TO EXECUTE A SEPARATE AND SPECIAL POWER OF ATTORNEY since the general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property. The SPECIAL POWER OF ATTORNEY CAN BE INCLUDED IN THE GENERAL POWER when it is specified therein the act or transaction for which the special power is required. The general power of attorney was accepted by the Register of Deeds when the title to the subject property was cancelled and transferred in the name of private respondent. In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that: Whether the instrument be denominated as "GENERAL POWER OF ATTORNEY" or "SPECIAL POWER OF ATTORNEY", what matters is the extent of the power or powers contemplated upon the agent or attorney in fact. IF THE POWER IS COUCHED IN GENERAL TERMS, then such power cannot go beyond acts of administration. HOWEVER, WHERE THE POWER TO SELL IS SPECIFIC, it not being merely implied, much less couched in general terms, there can not be any doubt that the attorney in fact may execute a valid sale. An instrument may be captioned as "special power of attorney" but if the powers granted are couched in general terms without mentioning any specific power to sell or mortgage or to do other specific acts of strict dominion, then in that case only acts of administration may be deemed conferred. Petitioner contends that his signature on the power of attorney was falsified. He also alleges that the same was not duly notarized for as testified by Atty. Tubig himself, he did not sign thereon nor was it ever recorded in his notarial register. To bolster his argument, petitioner had presented checks, marriage certificate and his residence certificate to prove his alleged genuine signature which when compared to the signature in the power of attorney, showed some difference. We found, however, that the basis presented by the petitioner was inadequate to sustain his allegation of forgery. Mere variance of the signatures cannot be considered as conclusive proof that the same were forged. Forgery cannot be presumed 1 7 Petitioner, however, failed to prove his allegation and simply relied on the apparent difference of the signatures. His denial had not established that the signature on the power of attorney was not his. We agree with the conclusion of the lower court that private respondent was an innocent purchaser for value. Respondent Aglaloma relied on the power of attorney presented by petitioner's wife, Irma. Being the wife of the owner and having with her the title of the property, there was no reason for the private respondent not to believe in her authority. Moreover, the power of attorney was notarized and as such, carried with it the presumption of its due execution. Thus, having had no inkling on any irregularity and having no participation thereof, private respondent was a buyer in good faith. It has been consistently held that a purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property. 18
Documents acknowledged before a notary public have the evidentiary weight with respect to their due execution. The questioned power of attorney and deed of sale, were notarized and therefore, presumed to be valid and duly executed. Atty. Tubig denied having notarized the said documents and alleged that his signature had also been falsified. He presented samples of his signature to prove his contention. Forgery should be proved by clear and convincing evidence and whoever alleges it has the burden of proving the same. Just like the petitioner, witness Atty. Tubig merely pointed out that his signature was different from that in the power of attorney and deed of sale. There had never been an accurate examination of the signature, even that of the petitioner. To determine forgery, it was held in Cesar vs. Sandiganbayan 19 (quoting Osborn, The Problem of Proof) that: The process of identification, therefore, must include the determination of the extent, kind, and significance of this resemblance as well as of the variation. It then becomes necessary to determine whether the variation is due to the operation of a different personality, or is only the expected and inevitable variation found in the genuine writing of the same writer. It is also necessary to decide whether the resemblance is the result of a more or less skillful imitation, or is the habitual and characteristic resemblance which naturally appears in a genuine writing. When these two questions are correctly answered the whole problem of identification is solved. Even granting for the sake of argument, that the petitioner's signature was falsified and consequently, the power of attorney and the deed of sale were null and void, such fact would not revoke the title subsequently issued in favor of private respondent Aglaloma. In Tenio-Obsequio vs. Court of Appeals, 20 it was held, viz: The right of an innocent purchaser for value must be respected and protected, even if the seller obtained his title through fraud. The remedy of the person prejudiced is to bring an action for damages against those who caused or employed the fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed for recovery of damages against the Assurance Fund. Finally; the trial court did not err in applying equitable estoppel in this case. The principle of equitable estoppel states that where one or two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it. From the evidence adduced, it should be the petitioner who should bear the loss. As the court a quo found: Besides, the records of this case disclosed that the plaintiff is not entirely free from blame. He admitted that he is the sole person who has access to TCT No. 49138 and other documents appertaining thereto (TSN, May 23, 1989, pp. 7-12) However, the fact remains that the Certificate of Title, as well as other documents necessary for the transfer of title were in the possession of plaintiff's wife, Irma L. Veloso, consequently leaving no doubt or any suspicion on the part of the defendant as to her authority. Under Section 55 of Act 496, as amended, Irma's possession and production of the Certificate of Title to defendant operated as "conclusive authority from the plaintiff to the Register of Deeds to enter a new certificate." 21
Considering the foregoing premises, we found no error in the appreciation of facts and application of law by the lower court which will warrant the reversal or modification of the appealed decision. ACCORDINGLY, the petition for review is hereby DENIED for lack of merit. SO ORDERED.