Sevilla vs CA

G..R. No. L-41182-3 April 16, 1988

Employer-Employee Relationship
Facts: The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari.
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 November 24, 1961 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.
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 ordered both cases dismiss for lack of merit.
In her appeal, 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.
Issue: 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.?

Held: The trial court 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. 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. The respondent Court of Appeal rendered an affirmance.
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."
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.
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.
G.R. No. L-21601; December 28, 1968NIELSON & COMPANY, INC., plaintiff-appellant, vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.; ZALDIVAR, J.:
FACTS:
An operating agreement was executed before World War II (on 30 January 1937) between Nielson & Co. Inc.
and the Lepanto Consolidated Mining Co. whereby the former operated and managed the mining properties
owned by the latter for a management fee of P2,500.00 a month and a 10% participation in the net profits
resulting from the operation of the mining properties, for a period of 5 years.

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In the latter part of 1941, the parties agreed to renew the contract for another period of 5 years, but in the
mean time, the Pacific War broke out in December 1941.

In January 1942 operation of the mining properties was disrupted on account of the war. The mill, power plant,
supplies on hand, equipment, concentrates on hand and mines, were destroyed. The Japanese forces
thereafter occupied the mining properties, operated the mines during the continuance of the war.

After the mining properties were liberated from the Japanese forces, LEPANTO took possession thereof and
embarked in rebuilding and reconstructing the mines and mill. On 26 June 1948 the mines resumed operation
under the exclusive management of LEPANTO.

Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement arose between
NIELSON and LEPANTO over the status of the operating contract which as renewed expired in 1947. Under
the terms thereof, the management contract shall remain in suspense in case fortuitous event or force
majeure, such as war or civil commotion, adversely affects the work of mining and milling.

On 6 February 1958, NIELSON brought an action against LEPANTO to recover certain sums of money
representing damages allegedly suffered by the former in view of the refusal of the latter to comply with the
terms of a management contract.

The TC dismissed the complaint.

The SC reversed the decision. It held that the war suspended the contract by virtue of the force majeure
clause. And that the intention of the parties regarding the meaning and usage concerning the force
majeure clause meant the extension of the same for a period equivalent to the suspension.

In this motion for reconsideration, LEPANTO advances a new theory. It now asserts that the management
contract in question is a contract of agency such that it has the right to revoke and terminate the said contract,
as it did terminate the same, under the law of agency, and particularly pursuant to Article 1733 of the Old Civil
Code (Article 1920 of the New Civil Code).

ISSUE: WON the management contract is a contract of agency or a contract of lease of services.
HELD: Contract of lease of services
Contract of Agency v Contract of Lease of Services:
Article 1709 of the Old Civil Code, defining
contract of agency, provides
By the contract of agency, one person binds
himself to render some service or do
something for the account or at the request of
another."

Article 1544, defining contract of lease of service,

provides
"In a lease of work or services, one of the
parties binds himself to make or construct
something or to render a service to the other
for a price certain."

In both agency and lease of services one of the parties binds himself to render some service to the other party.
Agency, however, is distinguished from lease of work or services in that the basis of agency is representation,
while in the lease of work or services the basis is employment. The lessor of services does not represent his
employer, while the agent represents his principal. Further, agency is a preparatory contract, as agency "does not
stop with the agency because the purpose is to enter into other contracts."The most characteristic feature of an
agency relationship is the agent's power to bring about business relations between his principal and third persons.
"The agent is destined to execute juridical acts (creation, modification or extinction of relations with third parties).
Lease of services contemplate only material (non-juridical) acts."

Neilson not executing juridical acts:

Herein, the principal and paramount undertaking of Nielson under the management contract was the operation
and development of the mine and the operation of the mill. All the other undertakings mentioned in the contract
are necessary or incidental to the principal undertaking. In the performance of this principal undertaking Nielson
was not in any way executing juridical acts for Lepanto, destined to create, modify or extinguish business relations
between Lepanto and third persons. In other words, in performing its principal undertaking Nielson was not acting

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as an agent of Lepanto, in the sense that the term agent is interpreted under the law of agency, but as one who
was performing material acts for an employer, for a compensation.

Prior approval of LEPANTO required:

It is true that the management contract provides that Nielson would also act as purchasing agent of supplies and
enter into contracts regarding the sale of mineral, but the contract also provides that Nielson could not make any
purchase, or sell the minerals, without the prior approval of Lepanto. It is clear, therefore, that even in these cases
Nielson could not execute juridical acts which would bind Lepanto without first securing the approval of Lepanto.
Nielson, then, was to act only as an intermediary, not as an agent.

Detailed operating contract:

The statements in the annual report for 1936, and from the provision of paragraph XI of the Management contract,
that the employment by Lepanto of Nielson to operate and manage its mines was principally in consideration of
the know-how and technical services that Nielson offered Lepanto. The contract thus entered into pursuant to the
offer made by Nielson and accepted by Lepanto was a "detailed operating contract". It was not a contract of
agency. Nowhere in the record is it shown that Lepanto considered Nielson as its agent and that Lepanto
terminated the management contract because it had lost its trust and confidence in Nielson.

Contract cannot be revoked at will:

From the provision of paragraph XI of the management contract, Lepanto could not terminate the agreement at
will. Lepanto could terminate or cancel the agreement by giving notice of termination ninety days in advance only
in the event that Nielson should prosecute in bad faith and not in accordance with approved mining practice the
operation and development of the mining properties of Lepanto. Lepanto could not terminate the agreement if
Nielson should cease to prosecute the operation and development of the mining properties by reason of acts of
God, strike and other causes beyond the control of Nielson. The management contract in question is not
revocable at the will of Lepanto. It is not a contract of agency as defined in Article 1709 of the old Civil Code, but a
contract of lease of services as defined in Article 1544 of the same Code. This contract cannot be unilaterally
revoked by Lepanto.

Dispositive: Lepanto to pay the appellant Nielson.

Ker and Co., LTD vs Lingad
GR No. L-20871 April 30, 1971
Facts:
CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise penalty
against Ker & Co. Ker and Co. requested for the cancellation of the assessment and filed a petition for review with the
Court of Tax Appeals. The CTA ruled that Ker and Co is liable as a commercial broker. Ker has a contract with US
rubber. Ker is the distributor of the said company. Ker was precluded from disposing the products elsewhere unless
there has been a written consent from the company. The prices, discounts, terms of payment, terms of delivery and
other conditions of sale were subject to change in the discretion of the Company.
Issue:
Whether the relationship of Ker and Co and US rubber was that of a vendor- vendee or principal-broker
Ruling:
The relationship of Ker and Co and US rubber was that of a principal-broker/ agency. Ker and Co is only an agent of
the US rubber because it can dispose of the products of the Company only to certain persons or entities and within
stipulated limits, unless excepted by the contract or by the Rubber Company, it merely receives, accepts and/or holds
upon consignment the products, which remain properties of the latter company, every effort shall be made by
petitioner to promote in every way the sale of the products and that sales made by petitioner are subject to approval
by the company. Since the company retained ownership of the goods, even as it delivered possession unto the dealer
for resale to customers, the price and terms of which were subject to the companys control, the relationship between
the company and the dealer is one of agency.
EN BANC
G.R. No. L-29917

December 29, 1928

JOSE M. KATIGBAK, Plaintiff-Appellee, vs. TAI HING CO., defendant.

PO SUN and PO CHING intervenors-appellants.

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Kapunan and Kapunan for intervenors-appellants.

Vicente Sotto for appellee.
VILLA-REAL, J.:
Po Sun Suy and Po Ching appeal to this court from the judgment of the Court of First Instance of Manila, the
dispositive part of which is as follows:
1.

Ordering the defendants Po Sun Suy and Po Ching, as lessees of the realty, to pay the plaintiff the sum of
P28,500, with legal interest from the filing of the complaint.

2.
Ordering the estate of the deceased Po Tecsi to pay the defendants Po Sun Suy and Po Ching, that they may,
in turn, pay the plaintiff upon this judgment the sum which represents the rents of te property unduly collected from the
occupants of said property by Po Tecsi while alive and by his administrator Po Sun Suy after his death, and not paid to
the plaintiff either by Po Tecsi, father of the defendant Po Sun Suy, or by the latter, or by defendant Po Ching. Said
sum thus collected, according to the testimony of the defendant Po Sun Suy (p. 147, t. s. n.) is P745, per month,
which, for nineteen months, amounts to P14,155. The balance of the rents, that is, the difference between the sum of
P1,500 for which the property was leased by the plaintiff to the defendants, and P745 which is the sum collected from
the occupants of the property each month by Po Tecsi and by the administrator of his estate must be for the account of
the defendants; and chanrobles virtual law library
3.

Ordering the defendants and the intervenor each to pay one-third of the costs of the action.

In support of their appeal the appellants assign seventeen errors which we shall take up in the course of this
decision.chanroblesvirtualawlibrary chanrobles virtual law library
The following facts have been proven by a preponderance of the evidence:chanrobles virtual law library
Gabino Barreto Po Ejap was the owner, with a Torrens title, of the land in litigation, with the improvements thereon.
This realty was subject to a mortgage lien in favor of the Philippine National Bank, executed on May 5, 1919, to secure
the payment of the sum of P60,000 with 7 per centum interest per annum. (Exhibit 9.) chanrobles virtual law library
On November 29, 1921, Po Tecsi executed a general power of attorney in favor of his brother Gabino Barreto Po Ejap,
empowering and authorizing him to perform on his behalf and as lawful agent, among other acts, the following: "To
buy, sell or barter, assign or admit in acquittance, or in any other manner to acquire or convey all sorts of property, real
and personal, businesses and industries, credits, rights and action belonging to me, for whatever prices and under the
conditions which he may stipulate, paying and receiving payment in cash or in installments, and to execute the proper
instruments with the formalities provided by the law." (Exhibit A.) chanrobles virtual law library
On December 15, 1921, Po Tecsi executed an instrument acknowledge an indebtedness to his brother Gabino Barreto
Po Ejap in the sum of P68,000, the price of the properties which the latter had sold to him. (Exhibit U-1.) On March 31,
1923, Gabino Barreto Po Ejap executed second mortgage on the aforesaid land with its improvements, in favor of
Antonio M. H. Limjenco for the sum of P140,000 and interest at 10 per centum per annum. (Exhibit 9.) chanrobles
virtual law library
On April 17, 1923, Gabino Barreto Po Ejap, sold the said land with its improvements to his brother Po Tecsi for the
sum of P10,000, subject to the same encumbrances. (Exhibit 9.) chanrobles virtual law library
On November 22, 1923, Gabino Barreto Po Ejap, making use of the power conferred on him by his brother Po Tecsi,
sold absolutely and forever to the herein plaintiff-appellee Jose M. Katigbak, the aforesaid land with its improvements
for the sum of P10,000, mentioning in the instrument executed to that end only the mortgage lien of P60,000 in favor
of the Philippine National Bank, and without recording either his power of attorney or the sale in the proper certificate
of title. Notwithstanding said sale Po Tecsi remained in possession of said property.chanroblesvirtualawlibrary
chanrobles virtual law library
On October 22, 1924, Po Tecsi leased a part of said land to Uy Chia for a periods of five years from October 1, 1923.
The contract drawn up to thatg end was recorded in the proper certificate of title. (Exhibit 2 and 9.) chanrobles virtual
law library
On August 24, 1924, Po Tecsi wrote to his brother Gabino Barreto Po Ejap complaining that he had been after him so
much for the forwarding of the rents of the property and explaining his precarious financial condition, telling him that
he did not collect the rents for himself, and promising to remit the balance after having paid all expenses of repairs

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and cleaning up, together with the vouchers, so he could not blame him for anything. (Exhibits M and M-1.)chanrobles
virtual law library
In November, 1925, Po Tecsi, answering his brother Gabino Barreto Po Ejap, wrote to the latter telling him that in the
month of October, 1925, he had sent him a draft for the sum of P2,000, and was therefore surprised that he claimed
said rent. In said reply Po Tecsi also told his brother Gabino Barreto Po Ejap that if he wanted to lease the property in
question to Smith Bell & Co., he should not do so without first consulting him, because if someone offered him a
higher rent he wanted to exercise his right to lease it. (Exhibits N and N-1.) chanrobles virtual law library
On February 27, 1925, the mortgage on the land in question in favor of Antonio M. H. Limjenco for P140,000 was
cancelled, the cancellation being recorded on the proper certificate of title on June 11, 1927. (Exhibit X and 9.) Po
Tecsi died on November 26, 1926.chanroblesvirtualawlibrary chanrobles virtual law library
In December, 1926, Po Sun Suy, Po Tecsi's son, submitted to Gavino Barreto Po Ejap a liquidation of accounts
showing the rents collected on the property up to that month. (Exhibit P.) chanrobles virtual law library
On February 11, 1927, Po Sun Suy was appointed administrator of the estate of his deceased father, submitting an
inventory in which he included the land in discussion as one of the properties left by his deceased father, and
obtaining the transfer of the certificate of title in his name as said administrator.chanroblesvirtualawlibrary chanrobles
virtual law library
On February 14, 1927, Po Sun Yao alias Po Sun Suy, answering a letter from his uncle Gabino Barreto Po Ejap, told
the latter that times were bad, because the price of hemp had slumped, and the plantations had suffered damages,
and begged him to let him pay the rent later. (Exhibits C and C-1.)chanrobles virtual law library
On February 11, 1927, Gabino Barreto Po Ejap executed an instrument in favor of his son Po Sun Boo, assigning to
him all his rights and actions in the credit of P68,000 against Po Tecsi. (Exhibit U.) chanrobles virtual law library
On May 22, 1927, Jose M. Katigbak sold the property in question to Po Sun Boo for sum of P10,000. (Exhibit J.)
chanrobles virtual law library
On May 27, 1927, Po Sun Boo notified Po Sun Suy and Po Ching that he had purchased the land they occupied and
that from that date they were to deal with him concerning the payment of the rents thereof. (Exhibit I.) chanrobles
virtual law library
Ever since the property in discussion had been sold by Gabino Barreto Po Ejap to Jose M. Katigbak, the former had
administrated it, entering into an oral contract of lease with Po Tecsi, who occupied it at a monthly rental of P1,500,
payable in advance on the first day of each month. Later on, when Po Tecsi died, Po Sun Suy, as administrator of the
estate of his father Po Tecsi, continued renting said land on which stood Po Ching's store.chanroblesvirtualawlibrary
chanrobles virtual law library
As Po Tecsi had not paid a part of the rent due up to the time of his death, and Po Sun Suy, his son, the rent due from
his father's death until Jose M. Katigbak transferred the ownership thereof to Po Sun Boo on May 23, 1927, the
present action was brought in the Court of First Instance of Manila for the recovery of said rent which amounts to
P45,280, first against the commercial firm Tai Hing Co., and later against the members of said firm, Po Sun Suy and
Po Ching, by an amendment to the original complaint.chanroblesvirtualawlibrary chanrobles virtual law library
Po Sun Suy, as the judicial administrator of the estate of his deceased father Po Tecsi, filed an intervention praying
that judgment be rendered against Jose M. Katigbak, the plaintiff, declaring him not to be the owner of the property
described in the second paragraph of the complaint and, therefore, not entitled to the rents of the property in
question.chanroblesvirtualawlibrary chanrobles virtual law library
The first question to be determined in the present appeal is one of procedure, and that it whether or not the trial court
had jurisdiction to try the case, on its merits.chanroblesvirtualawlibrary chanrobles virtual law library
The appellants contend that they as intervenors, having raised the question of ownership, the solution of which is
necessary for the determination of the question of rent, the Court of First Instance of Manila had no jurisdiction to try
the case, the properties in question being situated in the municipality of Tacloban, Province of
Leyte.chanroblesvirtualawlibrary chanrobles virtual law library
An action for the recovery of rent is a personal action, and as such is transitory and may be instituted in the province
where the defendant or the plaintiff resides, at the election of the plaintiff (sec. 377, Act No. 190; Boga Tan Chiao Boc

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vs. Sajo Vecina, 11 Phil., 409). With respect to the collection of rents, then, the Court of First Instance of Manila had
jurisdiction to try the action instituted to that end.chanroblesvirtualawlibrary chanrobles virtual law library
The question of ownership was raised by the intervenors who thereby submitted to the jurisdiction of the Court of First
Instance of Manila and, according to the doctrine laid down in the case of Manila Railroad Company vs. AttorneyGeneral (20 Phil., 523), a Court of First Instance having full and unlimited jurisdiction over realty situated in the
Philippine Islands, a Court of First Instance of a province may try a case concerning realty situated in another province
so long as no objection is entered to said court's exercise of its jurisdiction. The intervenors having submitted to the
jurisdiction of the court by filing a third-party claim, in which they raised the question of ownership of the premises, the
rent of which it is sought to recover, they cannot consistently object to the exercise of said
jurisdiction.chanroblesvirtualawlibrary chanrobles virtual law library
Having decided the question of the court's jurisdiction with respect to the venue, we shall pass on to the question of
the ownership of the land involved herein.chanroblesvirtualawlibrary chanrobles virtual law library
In first place, it is contended by the appellants that Gabino Barreto Po Ejap was not authorized under the power
executed by Po Tecsi in his favor to sell said land, for the reason that said power had been executed before Gabino
Barreto Po Ejap sold said land to his brother Po Tecsi.chanroblesvirtualawlibrary chanrobles virtual law library
We do not think that on this point the pertinent part of the power of attorney we have quoted above could give rise to
any doubt. The power is general and authorizes Gabino Po Ejap to sell any kind of realty "belonging" (pertenezcan) to
the principal. The use of the subjunctive "pertenezcan" (might belong) and not the indicative "pertenecen" (belong),
means that Po Tecsi meant not only the property he had at the time of the execution of the power, but also such as the
might afterwards have during the time it was in force. (2 Corpus Juris, p. 614.) chanrobles virtual law library
The appellants also contend that said power of attorney not having been registered in the registry of deeds, the
authority granted therein to sell realty registered in accordance with the Torrens system is ineffective, and the sale of
the property in question made by Gabino Barreto Po Ejap in favor of Jose M. Katigbak by virtue of said power has no
more effect than that of a contract to transfer or sell.chanroblesvirtualawlibrary chanrobles virtual law library
Inasmuch as in accordance with section 39 of said Act No. 496, "Every applicant receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of
title for value in good faith, shall hold the same free of all incumbrance except noted on said certificate," every
document which in any manner affects the registered land is ineffective unless it is recorded in the registry of deeds.
But such inefficacy only refers to third persons who, in good faith, may have acquired some right to the registered
land.chanroblesvirtualawlibrary chanrobles virtual law library
While it is true that a power of attorney not recorded in the registry of deeds is ineffective in order than an agent or
attorney-in-fact may validly perform acts in the name of his principal, and that any act performed by the agent by virtue
of said with respect to the land is ineffective against a third person who, in good faith, may have acquired a right
thereto, it does, however, bind the principal to acknowledge the acts performed by his attorney-in-fact regarding said
property (sec. 50, Act No. 496).chanroblesvirtualawlibrary chanrobles virtual law library
In the present case, while it is true that the non-registration of the power of attorney executed by Po Tecsi in favor of
his brother Gabino Barreto Po Ejap prevents the sale made by the latter of the litigated land in favor of Jose M.
Katigbak from being recorded in the registry of deeds, it is not ineffective to compel Tecsi to acknowledge said
sale.chanroblesvirtualawlibrary chanrobles virtual law library
From the fact that said power and sale were not recorded in the registry of deeds, and from the omission of any
mention in the deed of sale of the mortgage lien in favor of Antonio M. H. Limjenco, and the lease of a part of said land
in favor of Uy Chia, the appellants deduce that said sale is fraudulent.chanroblesvirtualawlibrary chanrobles virtual law
library
The record contains many indication that Po Tecsi was not unaware of said sale. His several letters complaining of the
pressing demands of his brother Gabino Barreto Po Ejap to send him the rents of the land, his promises to send them
to him, and the remittance of the same were a tacit acknowledgment that he occupied the land in question no longer
as an owner but only as lessee.chanroblesvirtualawlibrary chanrobles virtual law library
The appellants have tried to explain the remittance of said rents to Gabino Barreto Po Ejap by Po Tecsi, saying that
they were in payment of a debt which the latter owed the former for certain property which said Gabino Barreto Po
Ejap had sold to Po Tecsi. But there is nothing in any of said letters to indicate that said rents were sent on account of
said debt.chanroblesvirtualawlibrary chanrobles virtual law library

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The appellant deny that there has been any contract of lease between Po Tecsi and Gabino Barreto Po Ejap of the
lands in question, for the reason that there exists no document to evidence it. The evidence is clear that the rents were
payable in advance on the first day of each month. If this is so, then there is no need of a contract to prove the
existence of the lease.chanroblesvirtualawlibrary chanrobles virtual law library
Upon the death of Po Tecsi on November 26, 1926, his son Po Sun Suy succeeded him it the possession of the land
and was appointed administrator of his father's estate on February 11, 1927. On February 14, 1927, he wrote to his
uncle, Gabino Barreto Po Ejap, in answer to the latter's letter to send him what he collected of the rents of the house,
saying that the price of hemp had suddenly dropped, his motor boat had been grounded, and his abaca plantations
had suffered damages, promising to send the rents later on.chanroblesvirtualawlibrary chanrobles virtual law library
Po Tecsi occupied the land as lesse from November 22, 1923, until his death on November 26, 1926, having paid up
the rents accrued until October 22, 1925, and leaving unpaid the rents due and accrued from that date until his death,
a the rate of P1,500 per month. From the latter date estate of his father Po Tecsi, and continued to collect the rents of
said land from the lessees, amounting to P745.
It does not clearly appear from what date the land was leased to the defendants Po Sun Suy and Po Ching for the
sum of P1,500 a month. If Po Tecsi had rented it until his death, then the defendants Po Sun Suy and Po Ching could
not have rented it until after the death of Po Tecsi.chanroblesvirtualawlibrary chanrobles virtual law library
The rights of the sub-lessee Uy Chia, whose lease for five years from October 1, 1923, was duly recorded in the
registry of deeds, are valid, for it does not appear that he had only knowledge of the sale of the subleased property in
favor of Jose M. Katigbak, which sale, as we have said, has not been recorded in the registry of deeds and cannot,
therefore, affect the rights of third persons acquired in good faith and duly registered.chanroblesvirtualawlibrary
chanrobles virtual law library
To summarize, then: the sale made on November 22, 1923, by Gabino Barreto Po Ejap, as attorney-in-fact of Po
Tecsi, in favor of Jose M. Katigbak of the land in question is valid; after said sale, Po Tecsi leased the property sold,
from Gabino Barreto Po Ejap, who administered it in the name of Jose M. Katigbak, at a rental of P1,500 per month,
payable in advance, leaving unpaid the rents accrued from that date until his death which occurred on November 26,
1926, having paid the accrued rents up to October 22, 1925; from November 26, 1926, the defendants Po Sun Suy
and Po Ching leased said land for the sum of P1,500 per month; on February 11, 1927, Po Sun Suy was appointed
administrator of the estate of his father Po Tecsi, and filed with the court an inventory of said estate including the land
in question; and on May 23, 1927, Jose M. Katigbak sold the same property to Po Sun Boo.chanroblesvirtualawlibrary
chanrobles virtual law library
The claim for rents due and unpaid by Po Tecsi, deceased, and proceedings for the settlement of whose estate have
been instituted, should be presented to the committee on claims and appraisal appointed in said intestate proceeding
in accordance with the provisions of section 703 of the Code of Civil Procedure and cannot be collected by an ordinary
action.chanroblesvirtualawlibrary chanrobles virtual law library
As to the rents accrued and unpaid since the death of Po Tecsi, his son Po Sun Suy, as administrator of his property,
having included said property in the inventory of the latter, the same is in custodia legis, and hence, the rents collected
by said administrator of said property are also in custodia legis. The claim then of Jose M. Katigbak for the rents
accrued and unpaid up to the date when said property was sold to Po Sun Boo, as well as the accrued and unpaid
rents from the time the latter acquired it up to the present date, must be presented in the court taking cognizance of
the intestate proceeding for the settlement of Po Tecsi's estate.chanroblesvirtualawlibrary chanrobles virtual law library
For the foregoing, we are of opinion and so hold: (1) That Jose M. Katigbak was the absolute owner of the property in
controversy, subject to the encumbrances on the same appearing in the registry of deeds; (2) that his claim for the
rents of the property in litigation accrued and unpaid by Po Tecsi before his death must be presented to the committee
on claims and appraisal appointed in the intestate proceedings for the settlement of the estate of said Po Tecsi; (3)
that the claim of Jose M. Katigbak for the rents of the said property collected by Po Sun Suy, as administrator of the
porperty of the intestate estate of his father Po Tecsi, must be presented to the court having cognizance of said
intestate proceedings.chanroblesvirtualawlibrary chanrobles virtual law library
By virtue whereof, and with the modifications above indicated, the judgment appealed from is affirmed, without special
pronouncement as to costs. So ordered.chanroblesvirtualawlibrary chanrobles virtual law library
Avancea, C. J., Johnson, Villamor, Ostrand, Johns and Romualdez, JJ., concur.
Separate Opinions

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MALCOLM, J., dissenting:

Until the rules formally annouced in Briones vs. Garcia ([1919]), 40 Phil., 68) relating to the approval of bills of
exceptions, an authority often followed, shall be reconsidered and set aside, the said rules should be given
indiscriminate application to all cases, and this being done in the instant case, the petition presented on behalf of the
appellee should be decided in favor of the petition, with the result that the appeal should be ordered dismissed.
FIRST DIVISION

G.R. No. 70909 January 5, 1994

CONCHITA T. VDA. DE CHUA, THELMA CHUA, assisted by her husband, CHARLIE DY, CHARLITO CHUA,
REYNALDO CHUA, SUSAN CHUA, ALEX CHUA, EDDIE CHUA, SIMON CHUA, AND ERNESTO CHUA, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT, VICENTE GO, VICTORIA T. GO, AND HERMINIGILDA HERRERA,
respondents.
Alberto R. de Joya for petitioners.
Zosa & Quijano Law Offices and Expedito P. Bugarin for private respondents.

QUIASON, J.:
This is an appeal by certiorari under Rule 45 of the Revised Rules of Court from the decision of the Court of Appeals
in AC-G.R. CV No. 67692 entitled "Conchita Vda. de Chua, et al. v. Herminigilda Herrera, et al.," affirming with
modification the decision of the Court of First Instance of Cebu in Civil Case No. R-16589.
The facts as found by the Court of Appeals, are summarized as follows:
Sometime in 1950, defendant Herminigilda Herrera executed a Contract of Lease (Exh. "A") in favor of Tian On (sic)
(or Sy Tian On) whereby the former leased to the latter Lots. Nos. 620 and 7549 containing an area of 151 square
meters, located at Manalili Street (now V. Gullas Street) Cebu City, for a term of ten (10) years, renewable for another
five (5) years. The contract of lease (Exh. "A") contains a stipulation giving the lessee an option to buy the leased
property (Exh. A-2) and that the lessor guarantees to leave the possession of said property to the lessee for a period
of ten (10) years or as long as the lessee faithfully fulfills the terms and conditions of their contract (Exh. A-5).
In accordance with the said contract of lease, the lessee, Tian On, erected a residential house on the leased
premises.
On February 2, 1954, or within four (4) years from the execution of the said contract of lease (Exh. "A"), the lessee, Sy
Tian On, executed a Deed of Absolute Sale of Building (Exh. "B") in favor of Chua Bok, the predecessor-in-interest of
the plaintiffs herein, whereby the former sold to the latter the aforesaid residential house for and in consideration of the
sum of P8,000.00. Pertinent provisions of this deed of sale (Exh. "B") read as follows:
. . . That with the sale of the said house and as a legal consequence, I hereby assign all my rights and privileges as a
lessee of the lot on which the said building is constructed together with its corresponding obligations as contained and
expressly stipulated in the Contract of Lease executed in 1950 between myself and the lot owner, Herminigilda
Herrera, to the said vendee, Chua Bok who hereby accepts the said assignment of the said lease and hereby
promises and bind himself to abide by all the terms and conditions thereof, a copy of the Lease Contract is hereby
attached as
Appendix "A" and made a part hereof.
That the present sale is made with the knowledge and express consent of the lot-owner and lessor, Herminigilda
Herrera who is represented herein by her attorney-in-fact, Vicenta R. de Reynes who hereby also honors the
annulment of the lease made by Sy Tian On in favor of Chua Bok, and hereby promises and binds herself to respect
and abide by all the terms and conditions of the lease contract which is now assigned to the said Chua Bok.

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IN WITNESS WHEREOF, the parties have hereunto affixed their signatures on this 2nd day of February 1954, in the
City of Cebu, Philippines.
(Sgd.) CHUA BOK
Vendee-Lessee-Assignee
(Sgd.) SY TIAN ON
Vendor-Lessor-Assignor
HERMINIGILDA HERRERA
By:
(Sgd.) VICENTA R. DE REYNES
Attorney-in-fact
Lot-owner-Lessor
SIGNED IN THE PRESENCE OF:
(Sgd.) ILLEGIBLE
AND
(Sgd.) ILLEGIBLE
After the said sale transaction, Chua Bok and his family
(plaintiffs herein) resided in the said residential building and they faithfully and religiously paid the rentals thereof.
When the Original Contract of Lease expired in 1960, Chua Bok and defendant Herminigilda Herrera, through her
alleged attorney-in-fact executed the following
CONTRACT OF LEASE.
THIS CONTRACT OF LEASE made and entered into
this ___ day of August, 1960, in the City of Cebu, Philippines, by and between:
HERMINIGILDA HERRERA, of legal age, single, Filipino and a resident of Cebu City, Philippines, hereinafter known
as Party of the First Part;
and
CHUA BOK of legal age, married and a resident of Cebu City, Philippines, hereinafter known as the Party of the
Second Part.
WITNESSETH:
That the Party of the First Part who is the owner of a parcel of land located at Manalili Street, Cebu City containing of
an area of about 151 (One Hundred Fifty-One) square meters, more or less, known as Lot. No. ________ of the
Cadastral Survey of Cebu, hereby lets and leases unto the Party of the Second Part who hereby accepts in lease the
abovementioned lot under the following terms and conditions:
1.
That the term of this contract shall be for a period of FIVE (5) years from August 1, 1960 to August 1, 1965, at
a monthly rental of SIXTY PESOS (P60.00) Philippine Currency;
2.
That the rental of P60.00 will be paid within the first 10 days of every month, to the Party of the First Part
without express demand and in advance;
xxx

xxx

xxx

4.
That the Party of the Second Part is given an option to buy the said leased premises if he is qualified and
when the Party of the First Part decides to sell the same and that the Party of the second Part is also given the option
to renew the Contract of Lease upon terms and conditions to be agreed by both parties;

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xxx

xxx

xxx

6.
That it is hereby expressly reserved that should the property leased be sold by the Party of the First part to
any other party, the terms and conditions of this Contract shall be valid and will continue for the duration of this
contract. The Third party shall be expressed (sic) bound to respect the terms of this Contract of Lease;
xxx

xxx

xxx

That the parties herein, do hereby mutually and reciprocally stipulate that they will comply with the terms and
conditions herein before set forth. That the Party of the First Part hereby (sic) these presents guarantees that she will
leave the property in the possession of the Party of the Second Part for five (5) years or as long as the Party of the
second Part faithfully fulfills with the terms and conditions herein set forth.
IN WITNESS WHEREOF, we have hereunto affixed our signatures on this 9th day of September, 1960, in the City of
Cebu, Philippines.
(Sgd.) CHUA BOK
Party of the Second Part
HERMINIGILDA HERRERA
By:
Party of the First Part
(Sgd.) VICENTA R. DE REYNES
Attorney-in-Fact
SIGNED IN THE PRESENCE OF:
(Sgd.) ILLEGIBLE
(Sgd.) B.E. SUN
After the expiration of the contract of lease in question (Exh. "C") the plaintiffs herein, who are the successors-ininterest of Chua Bok (who had meanwhile died) continued possession of the premises up to
April 1978, with adjusted rental rate of P1,000.00 (Exh. "D"); later readjusted to P2,000.00.
On July 26, 1977, defendant Herrera through her attorney-in-fact, Mrs. Luz Tormis, who was authorized with a special
power of attorney, sold the lots in question to defendants-spouses, Vicente and Victoria Go. The defendants-spouses
were able to have aforesaid sale registered with the Register of Deeds of the City of Cebu and the titles of the two
parcels of land were transferred in their names (Exhs. "5-Herrera", or "5-Go" and
"6-Herrera" or "6-Go").
Thereafter, or on November 18, 1977, plaintiffs filed the instant case seeking the annulment of the said sale between
Herminigilda Herrera and spouses Vicente and Victoria Go, alleging that the conveyance was in violation of the
plaintiffs' right of option to buy the leased premises as provided in the Contract of Lease (Exh. "C") and that the
defendants-spouses acted in bad faith in purchasing the said lots knowing fully well that the said plaintiffs have the
option to buy those lots.
After due trial, the lower court rendered judgment, the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing, this Court ORDERS:
1)

The DISMISSAL of plaintiffs' complaint, as against defendant spouses GO;

2)
The plaintiffs to VACATE Lot No. 620 and
Lot No. 7549, ownership over by which defendants Vicente and Victoria Go being found valid and legitimate, and to
peacefully turn over the same to said spouses, and to REMOVE the building thereon at plaintiffs' own expense, or
such removal may be done by the declared land-owners, likewise at plaintiffs' expense.
3)
Defendant Herrera to pay the spouses Go, the sum of P15,000.00 as reimbursement to them for what they
already paid to their lawyer;
4)
Defendant Herrera to pay plaintiffs the sum of P50,000.00 (later reduced to P20,000.00, on motion of
defendant Herrera, which the court a quo granted) in concept of moral damages suffered by the latter; and

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5)

Defendant Herrera to pay the costs of the proceedings (Record on Appeal, pp. 229-230) (Rollo, pp. 63-68).

Plaintiffs and defendant Herrera appealed from the decision of the trial court to the Court of Appeals.
In said court, plaintiffs-appellants claimed that the trial court erred: (a) in dismissing their complaint as against
defendants-spouses Go, (b) in ordering them to vacate the lots in question and to remove the improvements they had
introduced in the premises, and (c) in ordering the execution of the judgment pending appeal. Defendant-appellant
Herrera, on her part, claimed that the trial court erred in ordering her to pay P15,000.00 as attorney's fees to
defendants-spouses Go and P50,000.00 as moral damages to plaintiffs-appellants.
The Court of Appeals affirmed with modification the decision of the trial court, thus:
WHEREFORE, premises considered the appealed decision is hereby MODIFIED by eliminating the award of
P20,000.00 moral damages in favor of the plaintiffs-appellants, the award of P15,000.00 attorney's fees in favor of
defendants-appellees (Go spouses) and the costs of the proceedings. In all other respects the appealed decision is
hereby AFFIRMED (Rollo, p. 78).
In their petition filed with us, petitioners (plaintiffs-appellants in AC-G.R. No. 67692) gave up their demand for the
nullification of the sale of the lots in question to respondent-spouses Go and limited their appeal to questioning the
affirmance by the Court of Appeals of the decision of the trial court, ordering their ejectment from the premises in
question and the demolition of the improvements introduced thereon.
In support of their right to possess the premises in question, petitioners rely on the contract of lease (Exh. "C") entered
into by and between Chua Bok and Vicenta R. de Reynes, as attorney-in-fact of respondent Herrera, as well as on the
tacit renewal thereof by respondent Herrera (Rollo, pp. 35-48).
In declaring the contract of lease (Exh. "C") void, the Court of Appeals noted that Vicenta R. de Reynes was not armed
with a special power of attorney to enter into a lease contract for a period of more than one year.
We agree with the Court of Appeals.
The lease contract (Exh. "C"), the linchpin of petitioners' cause of action, involves the lease of real property for a
period of more than one year. The contract was entered into by the agent of the lessor and not the lessor herself. In
such a case, the law requires that the agent be armed with a special power of attorney to lease the premises.
Article 1878 of the New Civil Code, in pertinent part, provides:
Special Power of Attorney are necessary in the following cases:
xxx

xxx

xxx

(8)

To lease any real property to another person for more than one year.

It is true that respondent Herrera allowed petitioners to occupy the leased premises after the expiration of the lease
contract (Exh. "C") and under
Article 1670 of the Civil Code of the Philippines, a tacit renewal of the lease (tacita reconduccion) is deemed to have
taken place. However, as held in Bernardo M. Dizon v. Ambrosio Magsaysay, 57 SCRA 250 (1974), a tacit renewal is
limited only to the terms of the contract which are germane to the lessee's right of continued enjoyment of the property
and does not extend to alien matters, like the option to buy the leased premises.
In said case, Magsaysay leased to Dizon a parcel of land for a term of two years, expiring on April 1, 1951. Under the
lease contract, Dizon was given the preferential right to purchase the land under the same conditions as those offered
to other buyers. After the lease contract expired, Dizon continued to occupy the leased premises and to pay the
monthly rentals, which Magsaysay accepted. On March 24, 1954, Dizon learned that Magsaysay had sold the
property to a third party without giving him the opportunity to exercise the preferential right to purchase given him
under the lease contract. Dizon then filed an action against Magsaysay and the buyer to annul the sale of the property
or in the alternative, to recover damages from Magsaysay. The trial court dismissed the action and the Court of
Appeals affirmed the dismissal. In the Supreme Court, Dizon claimed that a new lease contract was impliedly created
when Magsaysay allowed him to continue to occupy the premises after the expiration of the original lease contract and
that the other terms of the said contract, including the lessee's preferential right to purchase, were deemed revived.
Dizon invoked Article 1670 of the Civil Code of the Philippines, which provides:

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Art. 1670.
If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with
the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is
understood that there is an implied new lease, not for the period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original contract shall be revived (Emphasis supplied).
We dismissed Dizon's appeal and sustained the interpretation of the Court of Appeals that "the other terms of the
original contract" mentioned in Article 1670, are only those terms which are germane to the lessee's right of continued
enjoyment of the property leased. We held:
This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the
lessee to continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing
that such enjoyment shall be for the entire period corresponding to the rent which is customarily paid in this case up
to the end of the month because the rent was paid monthly. Necessarily, if the presumed will of the parties refers to
the enjoyment of possession, the presumption covers the other terms of the contract related to such possession, such
as the amount of the rental, the date when it must be paid, the care of the property, the responsibility of repairs, etc.
But no such presumption may be indulged in with respect to special agreements which by nature are foreign to the
right of occupancy or enjoyment inherent in a contract of lease.
Petitioners also question the jurisdiction of the trial court in Civil Case No. R-16589 in ordering their ejectment from the
leased premises and the removal of the improvements introduced thereon by them. They claim that the action in Civil
Case No. R-16589 was for the annulment of the sale of the property by defendant Herrera to defendants-spouses Go,
and not an appropriate case for an ejectment. The right of possession of petitioners of the leased premises was
squarely put in issue by defendants-spouse Go in their counterclaim to petitioner's complaint, where they asked that ".
. . the plaintiff should vacate their premises as soon as feasible or as the Honorable Court may direct" (Record on
Appeal, CA-G.R. No. 67692-R; p. 45).
The said counterclaim in effect was an accion publiciana for the recovery of the possession of the leased premises.
Clearly the Court of First Instance had jurisdiction over actions which involve the possession of real property or any
interest therein, except forcible entry and detainer actions (Section 44[b], Judiciary Act of 1948; Concepcion v.
Presiding Judge, Br. V, CFI Bulacan, 119 SCRA 222 [1982]).
A counterclaim is considered a complaint, only this time, it is the original defendant who becomes the plaintiff (Valisno
v. Plan, 143 SCRA 502 [1986]). It stands on the same footing and is to be tested by the same rules as if it were an
independent action. Hence, the same rules on jurisdiction in an independent action apply to a counterclaim (Vivar v.
Vivar, 8 SCRA 847 [1963]; Calo v. Ajax International, Inc. v. 22 SCRA 996 [1968]; Javier v. Intermediate Appellate
Court, 171 SCRA 605 [1989]; Quiason, Philippine Courts and Their Jurisdictions, 1993 ed., p. 203).
Finally, petitioners claim that the Court of Appeals erred in eliminating the award of moral damages in the amount of
P20,000.00 given to them by the trial court (Rollo, pp. 48-52). The elimination of said award is a logical consequence
of the finding that petitioners had no right of option to purchase the leased premises that can be enforced against
respondent Herrera.
WHEREFORE, the petition is DENIED.
SO ORDERED.
Cruz, Davide, Jr. and Bellosillo, JJ., concur.

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