agency cases.docx

8/11/2019 agency cases.docx

http://slidepdf.com/reader/full/agency-casesdocx 1/27

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,vs.COURT OF APPEALS and AMERICAN AIR-LINESINCORPORATED, respondents.

G.R. No. 76933 May 29, 1991

AMERICAN AIRLINES, INCORPORATED, petitioner,vs.COURT OF APPEALS and ORIENT AIR SERVICES & HOTELREPRESENTATIVES, INCORPORATED,respondents.

Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service andHotel Representatives, Inc.

Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA,J .: p

This case is a consolidation of two (2) petitions for review on certiorari ofa decision 1 of the Court of Appeals in CA-G.R. No. CV-04294, entitled"American Airlines, Inc. vs. Orient Air Services and Hotel Representatives,Inc." which affirmed, with modification, the decision 2 of the Regional TrialCourt of Manila, Branch IV, which dismissed the complaint and grantedtherein defendant's counterclaim for agent's overriding commission anddamages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering passenger and air cargotransportation in the Philippines, and Orient Air Services and HotelRepresentatives (hereinafter referred to as Orient Air), entered into aGeneral Sales Agency Agreement (hereinafter referred to as the

Agreement), whereby the former authorized the latter to act as itsexclusive general sales agent within the Philippines for the sale of airpassenger transportation. Pertinent provisions of the agreement are

reproduced, to wit:

WITNESSETH

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

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive GeneralSales Agent within the Philippines, including any United States military

installation therein which are not serviced by an Air CarrierRepresentation Office (ACRO), for the sale of air passengertransportation. The services to be performed by Orient Air Services shallinclude:

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

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

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

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

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



In connection with scheduled or non-scheduled air passengertransportation within the United States, neither Orient Air Services nor itssub-agents will perform services for any other air carrier s imilar to thoseto be performed hereunder for American without the prior written consentof American. Subject to periodic instructions and continued consent from

American, Orient Air Services may sell air passenger transportation to beperformed within the United States by other scheduled air carriersprovided American does not provide substantially equivalent schedules

between the points involved.

xxx xxx xxx

4. Remittances

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

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

5. Commissions

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

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for allsales of transportation by Orient Air Services or its sub-agents over

American's services and any connecting through air transportation, whenmade on American's ticket stock, equal to the following percentages ofthe tariff fares and charges:

(i) For transportation solely between points within the United States andbetween such points and Canada: 7% or such other rate(s) as may be

prescribed by the Air Traffic Conference of America.

(ii) For transportation included in a through ticket covering transportationbetween points other than those described above: 8% or such otherrate(s) as may be prescribed by the International Air Transport

Association.

(b) Overriding commission

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

xxx xxx xxx

10. Default

If Orient Air Services shall at any time default in observing or performingany of the provisions of this Agreement or shall become bankrupt ormake any assignment for the benefit of or enter into any agreement or

promise with its creditors or go into liquidation, or suffer any of its goodsto be taken in execution, or if it ceases to be in business, this Agreementmay, at the option of American, be terminated forthwith and Americanmay, without prejudice to any of its rights under this Agreement, takepossession of any ticket forms, exchange orders, traffic material or otherproperty or funds belonging to American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules orresolutions of the International Air Transport Association and the Air

Traffic Conference of America, and such rules or resolutions shall controlin the event of any conflict with the provisions hereof.

xxx xxx xxx

13. Termination

American may terminate the Agreement on two days' notice in the eventOrient Air Services is unable to transfer to the United States the fundspayable by Orient Air Services to American under this Agreement. Eitherparty may terminate the Agreement without cause by giving the other 30

days' notice by letter, telegram or cable.



xxx xxx xxx 3

On 11 May 1981, alleging that Orient Air had reneged on its obligationsunder the Agreement by failing to promptly remit the net proceeds ofsales for the months of January to March 1981 in the amount of US$254,400.40, American Air by itself undertook the collection of theproceeds of tickets sold originally by Orient Air and terminated forthwiththe Agreement in accordance with Paragraph 13 thereof (Termination).

Four (4) days later, or on 15 May 1981, American Air instituted suitagainst Orient Air with the Court of First Instance of Manila, Branch 24,for Accounting with Preliminary Attachment or Garnishment, MandatoryInjunction and Restraining Order 4 averring the aforesaid basis for thetermination of the Agreement as well as therein defendant's previous recordof failures "to promptly settle past outstanding refunds of which there wereavailable funds in the possession of the defendant, . . . to the damage andprejudice of plaintiff." 5

In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Airdenied the material allegations of the complaint with respect to plaintiff'sentitlement to alleged unremitted amounts, contending that after applicationthereof to the commissions due it under the Agreement, plaintiff in fact stillowed Orient Air a balance in unpaid overriding commissions. Further, thedefendant contended that the actions taken by American Air in the course ofterminating the Agreement as well as the termination itself were untenable,Orient Air claiming that American Air's precipitous conduct had occasionedprejudice to its business interests.

Finding that the record and the evidence substantiated the allegations ofthe defendant, the trial court ruled in its favor, rendering a decision dated16 July 1984, the dispositive portion of which reads:

WHEREFORE, all the foregoing premises considered, judgment ishereby rendered in favor of defendant and against plaintiff dismissing thecomplaint and holding the termination made by the latter as affecting theGSA agreement illegal and improper and order the plaintiff to reinstatedefendant as its general sales agent for passenger tranportation in thePhilippines in accordance with said GSA agreement; plaintiff is ordered topay defendant the balance of the overriding commission on total flownrevenue covering the period from March 16, 1977 to December 31, 1980in the amount of US$84,821.31 plus the additional amount ofUS$8,000.00 by way of proper 3% overriding commission per monthcommencing from January 1, 1981 until such reinstatement or saidamounts in its Philippine peso equivalent legally prevailing at the time ofpayment plus legal interest to commence from the filing of the

counterclaim up to the time of payment. Further, plaintiff is directed to paydefendant the amount of One Million Five Hundred Thousand(Pl,500,000.00) pesos as and for exemplary damages; and the amount ofThree Hundred Thousand (P300,000.00) pesos as and by way ofattorney's fees.

Costs against plaintiff. 7

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

WHEREFORE, with the following modifications —

1) American is ordered to pay Orient the sumof US$53,491.11 representing the balance of the latter's overridingcommission covering the period March 16, 1977 to December 31,

1980, or its Philippine peso equivalent in accordance with the official rateof exchange legally prevailing on July 10 , 1981, the date the counterclaimwas filed ;

2) American is ordered to pay Orient the sum of US$7,440.00 as thelatter's overriding commission per month starting January 1, 1981 untildate of termination, May 9, 1981 or its Philippine peso equivalent inaccordance with the official rate of exchange legally prevailing on July10 , 1981, the date the counterclaim was filed

3) American is ordered to pay interest of 12% on said amounts from July

10, 1981 the date the answer with counterclaim was filed, until fullpayment;

4) American is ordered to pay Orient exemplary damages ofP200 ,000 .00 ;

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

the rest of the appealed decision is affirmed.

Costs against American. 8



American Air moved for reconsideration of the aforementioned decision,assailing the substance thereof and arguing for i ts reversal. The appellatecourt's decision was also the subject of a Motion for PartialReconsideration by Orient Air which prayed for the restoration of the trialcourt's ruling with respect to the monetary awards. The Court of Appeals,by resolution promulgated on 17 December 1986, denied American Air'smotion and with respect to that of Orient Air, ruled thus:

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

Both parties appealed the aforesaid resolution and decision of therespondent court, Orient Air as petitioner in G.R. No. 76931 and

American Air as petitioner in G.R. No. 76933. By resolution 10 of this Court

dated 25 March 1987 both petitions were consolidated, hence, the case atbar.

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

5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient AirServices an overriding commission of 3% of the tariff fees and chargesfor all sales of transportation over American's services by Orient AirServices or its sub-agents. (Emphasis supplied)

Since Orient Air was allowed to carry only the ticket stocks of American

Air, and the former not having opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the

disputed overriding commission based only on ticketed sales. This issupposed to be the clear meaning of the underscored portion of theabove provision. Thus, to be entitled to the 3% overriding commission,the sale must be made by Orient Air and the sale must be done with theuse of American Air's ticket stocks.

On the other hand, Orient Air contends that the contractual stipulation ofa 3% overriding commission covers the total revenue of American Air and

not merely that derived from ticketed sales undertaken by Orient Air. Thelatter, in justification of its submission, invokes its designation asthe exclusive General Sales Agent of American Air, with thecorresponding obligations arising from such agency, such as, thepromotion and solicitation for the services of its principal. In effect, byvirtue of such exclusivity, "all sales of transportation over American Air'sservices are necessarily by Orient Air." 11

It is a well settled legal principle that in the interpretation of a contract, theentirety thereof must be taken into consideration to ascertain themeaning of its provisions. 12 The various stipulations in the contract must be

read together to give effect to all.13

After a careful examination of therecords, the Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles,entitles it to the 3% overriding commission based on total revenue, or asreferred to by the parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air'sservices for air passenger transportation, and the solicitation of salestherefor. In return for such efforts and services, Orient Air was to be paidcommissions of two (2) kinds: first, a sales agency commission, rangingfrom 7-8% of tariff fares and charges from sales by Orient Air when made

on American Air ticket stock ; and second, an overriding commission of3% of tariff fares and charges for all sales of passenger transportationover American Air services. It is immediately observed that theprecondition attached to the first type of commission does not obtain forthe second type of commissions. The latter type of commissions wouldaccrue for sales of American Air services made not on its ticket stock buton the ticket stock of other air carriers sold by such carriers or otherauthorized ticketing facilities or travel agents. To rule otherwise, i .e., tolimit the basis of such overriding commissions to sales from American Airticket stock would erase any distinction between the two (2) types ofcommissions and would lead to the absurd conclusion that the parties

had entered into a contract with meaningless provisions. Such an





FIRST DIVISION

G.R. No. 120465 September 9, 1999

WILLIAM UY and RODEL ROXAS, petitioners,vs.COURT OF APPEALS, HON. ROBERT BALAO and NATIONALHOUSING AUTHORITY, respondents.

KAPUNAN, J.:

Petitioners William Uy and Rodel Roxas are agents authorized to selleight parcels of land by the owners thereof. By virtue of such authority,petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguetto respondent National Housing Authority (NHA) to be utilized anddeveloped as a housing project.

On February 14, 1989, the NHA Board passed Resolution No. 1632approving 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 aseries of Deeds of Absolute Sale covering the subject lands. Of the eightparcels of land, however, only five were paid for by the NHA because ofthe report 1 it received from the Land Geosciences Bureau of theDepartment of Environment and Natural Resources (DENR) that theremaining area is located at an active landslide area and therefore, notsuitable for development into a housing project.

On 22 November 1991, the NHA issued Resolution No. 2352 cancellingthe sale over the three parcels of land. The NHA, through Resolution No.2394, subsecguently offered the amount of P1.225 million to thelandowners asdaños perjuicios.

On 9 March 1992, petitioners filed before the Regional Trial Court (RTC)of Quezon City a Complaint for Damages against NHA and its GeneralManager 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 byNHA to petitioners as damages.1âwphi1.nêt

Upon appeal by petitioners, the Court of Appeals reversed the decision ofthe trial court and entered a new one dismissing the complaint. It heldthat since there was "sufficient justifiable basis" in cancelling the sale, "itsaw no reason" for the award of damages. The Court of Appeals alsonoted 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 thecase. Obsviously, William Uy and Rodel Roxas in filing this case acted asattorneys-in-fact of the lot owners who are the real parties in interest butwho were omitted to be pleaded as party-plaintiffs in the case. Thisomission is fatal. Where the action is brought by an attorney-in-fact of aland owner in his name, (as in our present action) and not in the name ofhis principal, the action was properly dismissed (Ferrer vs. Villamor, 60SCRA 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 favorin view of the partial rescission of Resolution No. 1632 and the Deed of

Absolute Sale covering TCT Nos. 10998, 10999 and 11292 (Prayercomplaint, page 5, RTC records), i t becomes obviously indispensablethat the lot owners be included, mentioned and named as party-plaintiffs,being the real party-in-interest. UY and Roxas, as attorneys-in-fact orapoderados, cannot by themselves lawfully commence this action, moreso, when the supposed special power of attorney, in their favor, wasnever presented as an evidence in this case. Besides, even if hereinplaintiffs Uy and Roxas were authorized by the lot owners to commencethis action, the same must still be filed in the name of the principal,(Filipino Industrial Corporation vs. San Diego, 23 SCRA 706 [1968]). Assuch indispensable party, their joinder in the action is mandatory and thecomplaint may be dismissed if not so impleaded (NDC vs. CA, 211 SCRA422 [1992]). 2

Their motion for reconsideration having been denied, petitioners seekrelief 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 BYNHA RESOLUTION NO. 1632.

II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HADLEGAL BASIS TO RESCIND THE SUBJECT SALE, THERESPONDENT CA NONETHELESS ERRED IN DENYING HEREINPETITIONERS' CLAIM TO DAMAGES, CONTRARY TO THEPROVISIONS OF ART. 1191 OF THE CIVIL CODE.

III. THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECTCOMPLAINT FINDING THAT THE PETITIONERS FAILED TO JOIN ASINDISPENSABLE 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 theirprincipals but in their own name as agents directly damaged by thetermination of the contract. The damages prayed for were intended notfor the benefit of their principals but to indemnify petitioners for the losses

they themselves allegedly incurred as a result of such termination. Thesedamages consist mainly of "unearned income" andadvances. 4 Petitioners, thus, attempt to distinguish the case at bar fromthose involving agents or apoderedos instituting actions in their own namebut in behalf of their principals. 5 Petitioners in this case purportedly broughtthe 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 beprosecuted 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 bythe judgment or the party entitled to the avails of the suit. "Interest, withinthe meaning of the rule, means material interest, an interest in the issueand to be affected by the decree, as distinguished from mere interest inthe question involved, or a mere incidental interest. 6 Cases construing thereal party-in-interest provision can be more easily understood if it is borne inmind that the true meaning of real party-in-interest may be summarized asfollows: An action shall be prosecuted in the name of the party who, by thesubstantive law, has the right sought to be enforced. 7

Do petitioners, under substantive law, possess the right they seek toenforce? We rule in the negative.

The applicable substantive law in this case is Article 1311 of the CivilCode, which states:

Contracts take effect only between the parties, their assigns, and heirs,except in case where the rights and obligations arising from the contractare not transmissible by their nature, or by stipulation, or by provision oflaw. . . .

If a contract should contain some stipulation in favor of a third person, hemay demand its fulfillment provided he communicated his acceptance tothe obligor before its revocation. A mere incidental benefit or interest of aperson is not sufficient. The contracting parties must have clearly anddeliberately conferred a favor upon a third person. (Emphasis supplied.)

Petitioners are not parties to the contract of sale between their principalsand NHA. They are mere agents of the owners of the land subject of thesale. As agents, they only render some service or do something inrepresentation or on behalf of their principals. 8 The rendering of suchservice 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 asagainst each other, the real parties-in-interest, either as plaintiff or defendant,in an action upon that contract must, generally, either be parties to saidcontract. 9

Neither has there been any allegation, much less proof, that petitionersare the heirs of their principals.

Are petitioners assignees to the rights under the contract of sale?In McMicking vs. Banco Español-Filipino, 10 we held that the rule requiringevery action to be prosecuted in the name of the real party-in-interest.

. . . recognizes the assignments of rights of action and also recognizesthat when one has a right of action assigned to him he is then the realparty in interest and may maintain an action upon such claim or right. Thepurpose of [this rule] is to require the plaintiff to be the real party ininterest, or, in other words, he must be the person to whom the proceedsof the action shall belong, and to prevent actions by persons who haveno interest in the result of the same. . . .

Thus, an agent, in his own behalf, may bring an action founded on acontract made for his principal, as an assignee of such contract. We findthe 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 aninterest in a contract which he makes on behalf of his principal can,although not a promisee, maintain such action thereon maintain suchaction 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 anothermay become an assignee of the contract and bring suit against the otherparty to it, as any other transferee. The customs of business or thecourse of conduct between the principal and the agent may indicate thatan agent who ordinarily has merely a security interest is a transferee ofthe principals rights under the contract and as such is permitted to bringsuit. If the agent has settled with his principal with the understanding thathe is to collect the claim against the obligor by way of reimbursing himselffor his advances and commissions, the agent is in the position of anassignee who is the beneficial owner of the chose in action. He has an

irrevocable power to sue in his principal's name. . . . And, under thestatutes which permit the real party in interest to sue, he can maintain anaction in his own name. This power to sue is not affected by a settlementbetween the principal and the obligor if the latter has notice of the agent'sinterest. . . . Even though the agent has not settled with his principal, hemay, by agreement with the principal, have a right to receive paymentand out of the proceeds to reimburse himself for advances andcommissions before turning the balance over to the principal. In such acase, although there is no formal assignment, the agent is in the positionof a transferee of the whole claim for security; he has an irrevocablepower to sue in his principal's name and, under statutes which permit thereal party in interest to sue, he can maintain an action in his own name.

Petitioners, however, have not shown that they are assignees of theirprincipals to the subject contracts. While they alleged that they madeadvances and that they suffered loss of commissions, they have notestablished any agreement granting them "the right to receive paymentand out of the proceeds to reimburse [themselves] for advances andcommissions before turning the balance over to the principal[s]."

Finally, it does not appear that petitioners are beneficiaries of astipulation pour autrui under the second paragraph of Article 1311 of theCivil 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 theiradvances because of the non-performance of the contract did not entitlethem to file the action below against respondent NHA. Section 372 (2) ofthe Restatement of the Law on Agency (Second) states:

(2) An agent does not have such an interest in a contract as to entitle himto maintain an action at law upon i t in his own name merely because heis 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 orsuffer loss by the performance or nonperformance of the contract by theprincipal or by the other party thereto does not entitle him to maintain anaction on his own behalf against the other party for its breach. An agententitled to receive a commission from his principal upon the performanceof a contract which he has made on his principal's account does not, fromthis 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 isnot a promisee cannot maintain an action at law against a purchasermerely because he is entitled to have his compensation or advances paidout of the purchase price before payment to the principal. . . .

Thus, in Hopkins vs. Ives, 12 the Supreme Court of Arkansas, citing Section372 (2) above, denied the claim of a real estate broker to recover his allegedcommission 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 samedid 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 acommission should be the one liable to pay the same and to whom theclaim should have been directed. . . .

As petitioners are not parties, heirs, assignees, or beneficiaries of astipulation pour autrui under the contracts of sale, they do not, undersubstantive law, possess the right they seek to enforce. Therefore, theyare not the real parties-in-interest in this case.

Petitioners not being the real parties-in-interest, any decision renderedherein would be pointless since the same would not bind the real parties-



in-interest. 14

Nevertheless, to forestall further litigation on the substantive aspects ofthis 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 anaward of damages.

Petitioners confuse the cancellation of the contract by the NHA as arescission of the contract under Article 1191 of the Civil Code. The rightof rescission or, more accurately, resolution, of a party to an obligationunder Article 1191 is predicated on a breach of faith by the other partythat 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 rescissionof the obligation, with the payment of damages in either case. He mayalso seek rescission, even after he has chosen fulfillment, if the lattershould become impossible.

In this case, the NHA did not rescind the contract. Indeed, it did not havethe right to do so for the other parties to the contract, the vendors, did notcommit 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 theperformance thereof.

The cancellation, therefore, was not a rescission under Article 1191.Rather, the cancellation was based on the negation of the cause arisingfrom the realization that the lands, which were the object of the sale,were not suitable for housing.1âwphi1.nêt

Cause is the essential reason which moves the contracting parties toenter into it. 19 In other words, the cause is the immediate, direct andproximate reason which justifies the creation of an obligation through the willof the contracting parties.20 Cause, which is the essential reason for the

contract, should be distinguished from motive, which is the particular reasonof 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 thecontract is to obtain the price. For the vendee, NHA, it is the acquisitionof the land.22 The motive of the NHA, on the other hand, is to use said landsfor housing. This is apparent from the portion of the Deeds of Absolute

Sale23

stating:

WHEREAS, under the Executive Order No. 90 dated December 17,1986, the VENDEE is mandated to focus and concentrate its efforts andresources in providing housing assistance to the lowest thirty percent(30%) of urban income earners, thru slum upgrading and development ofsites and services projects;

WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended byLetter of Instruction No. 630, prescribed slum improvement andupgrading, as well as the development of sites and services as the

principal housing strategy for dealing with slum, squatter and otherblighted 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 theirwilling to cooperate with the above policy and commitments, agree to sellthe aforesaid property together with all the existing improvements thereor belonging to the VENDORS;

NOW, THEREFORE, for and in consideration of the foregoing premisesand the terms and conditions hereinbelow stipulated, the VENDORShereby, sell, transfer, cede and convey unto the VENDEE, its assigns, orsuccessors-in-interest, a parcel of land located at Bo. Tadiangan, Tuba,Benguet containing a total area of FIFTY SIX THOUSAND EIGHTHUNDRED NINETEEN (56,819) SQUARE METERS, more or less . . . .

Ordinarily, a party's motives for entering into the contract do not affect thecontract. However, when the motive predetermines the cause, the motivemay be regarded as the cause. In Liguez vs. Court of Appeals, 24 thisCourt, 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 themotives of the parties to determine the validity of the contract, expresslyexcepts from the rule those contracts that are conditioned upon theattainment of the motives of either party.

The same view is held by the Supreme Court of Spain, in its decisions ofFebruary 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 nothave entered into the contract were the lands not suitable for housing. Inother words, the quality of the land was an implied condition for the NHAto enter into the contract. On the part of the NHA, therefore, the motivewas 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 thesale, thus:

In Tadiangan, Tuba, the housing site is situated in an area of moderatetopography. There [are] more areas of less sloping ground apparentlyhabitable. The site is underlain by . . . thick slide deposits (4-45m)consisting of huge conglomerate boulders (see Photo No. 2) mix[ed] withsilty clay materials. These clay particles when saturated have someswelling characteristics which is dangerous for any civil structuresespecially mass housing development . 25

Petitioners contend that the report was merely "preliminary," and notconclusive, 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 inthe NHA property . Standard Penetration Test (SPT) must be carried outto give an estimate of the degree of compaction (the relative density) ofthe slide deposit and also the bearing capacity of the soil materials.

Another thing to consider is the vulnerability of the area to landslides andother mass movements due to thick soil cover. Preventive physicalmitigation methods such as surface and subsurface drainage andregrading of the slope must be done in the area. 27

We read the quoted portion, however, to mean only that further tests arerequired 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 suchgeological 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 resultedin the negation of the motive/cause thus rendering the contractinexistent. 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 orbeneficiaries to the contract of sale, they would not be entitled to anyaward of damages.

WHEREFORE, the instant petition is hereby DENIED.



SO ORDERED.

SECOND DIVISION[G.R. No. 130148. December 15, 1997]

JOSE BORDADOR and LYDIA BORDADOR, petit ioners,vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISODEGANOS, respondents .

D E C I S I O N

REGALADO, J .:

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

Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, wastheir regular customer. On several occasions during the period from April27, 1987 to September 4, 1987, respondent Narciso Deganos, thebrother of Brigida D. Luz, received several pieces of gold and jewelryfrom petitioners amounting to P382,816.00. [1] These items and theirprices were indicated in seventeen receipts covering the same. Elevenof the receipts stated that they were received for a certain Evelyn Aquino,

a niece of Deganos, and the remaining six indicated that they werereceived for Brigida D. Luz. [2]

Deganos was supposed to sell the items at a profit and thereafterremit the proceeds and return the unsold items to petitioners. Deganosremitted only the sum of P53,207.00. He neither paid the balance of thesales proceeds, nor did he return any unsold item to petitioners. ByJanuary 1990, the total of his unpaid account to petitioners, includinginterest, reached the sum ofP725,463.98. [3] Petitioners eventually filed acomplaint in the barangay court against Deganos to recover said amount.

In the barangay proceedings, Brigida D. Luz, who was notimpleaded in the case, appeared as a witness for Deganos andultimately, she and her husband, together with Deganos, signed acompromise agreement with petitioners. In that compromise agreement,Deganos obligated himself to pay petitioners, on installment basis, thebalance of his account plus interest thereon. However, he failed tocomply with his aforestated undertakings.

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

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

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

On the other hand, while Deganos admitted that he had an unpaidobligation to petitioners, he claimed that the same was only in the sum

of P382,816.00 and not P725,463.98. He further asserted that it was healone who was involved in the transaction with the petitioners; that he

http://sc.judiciary.gov.ph/jurisprudence/1997/dec1997/130148.htm#_edn1





















neither acted as agent for nor was he authorized to act as an agent byBrigida D. Luz, notwithstanding the fact that six of the receipts indicatedthat the items were received by him for the latter. He further claimed thathe never delivered any of the items he received from petitioners toBrigida.

Brigida, on her part, denied that she had anything to do with thetransactions between petitioners and Deganos. She claimed that shenever authorized Deganos to receive any item of jewelry in her behalfand, for that matter, neither did she actually receive any of the articles inquestion.

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

The trial court also found that it was petitioner Lydia Bordador whoindicated in the receipts that the items were received by Deganos for

Evelyn Aquino and Brigida D. Luz. [7] Said court was ―persuaded thatBrigida D. Luz was behind Deganos,‖ but because there was nomemorandum to this effect, the agreement between the parties wasunenforceable under the Statute of Frauds. [8] Absent the requiredmemorandum or any written document connecting the respondent Luzspouses with the subject receipts, or authorizing Deganos to act on theirbehalf, the alleged agreement between petitioners and Brigida D. Luzwas unenforceable.

Deganos was ordered to pay petitioners the amount of P725,463.98,plus legal interest thereon from June 25, 1990, and attorney‘sfees. Brigida D. Luz was ordered to pay P21,483.00 representing the

interest on her own personal loan. She and her co-defendant spousewere absolved from any other or further liability. [9]

As stated at the outset, petitioners appealed the judgment of thecourt a quo to the Court of Appeals which affirmed said judgment. [10] Themotion for reconsideration filed by petitioners was subsequentlydismissed, [11] hence the present recourse to this Court.

The primary issue in the instant petition is whether or not hereinrespondent spouses are liable to petitioners for the latter‘s claim formoney and damages in the sum of P725,463.98, plus interests andattorney‘s fees, despite the fact that the evidence does not show that

they signed any of the subject receipts or authorized Deganos to receivethe items of jewelry on their behalf.

Petitioners argue that the Court of Appeals erred in adopting thefindings of the court a quo that respondent spouses are not liable tothem, as said conclusion of the trial court is contradicted by the finding offact of the appellate court that ―(Deganos) acted as agent of his sister(Brigida Luz).‖ [12] In support of this contention, petitioners quoted severalletters sent to them by Brigida D. Luz wherein the latter acknowledgedher obligation to petitioners and requested for more time to fulfill thesame. They likewise aver that Brigida testified in the trial court that

Deganos took some gold articles from petitioners and delivered the sameto her.

Both the Court of Appeals and the trial court, however, found as afact that the aforementioned letters concerned the previous obligations ofBrigida to petitioners, and had nothing to do with the money sought to berecovered in the instant case. Such concurrent factual findings areentitled to great weight, hence, petitioners cannot plausibly claim in thisappellate review that the letters were in the nature of acknowledgmentsby Brigida that she was the principal of Deganos in the subjecttransactions.

On the other hand, with regard to the testimony of Brigida admittingdelivery of the gold to her, there is no showing whatsoever that herstatement referred to the items which are the subject matter of thiscase. It cannot, therefore, be validly said that she admitted her liabilityregarding the same.

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

The evidence does not support the theory of petitioners thatDeganos was an agent of Brigida D. Luz and that the latter shouldconsequently be held solidarily liable with Deganos in his obligation topetitioners. While the quoted statement in the findings of fact of theassailed appellate decision mentioned that Deganos ostensibly acted asan agent of Brigida, the actual conclusion and ruling of the Court of

Appeals categorically stated that, ―(Brigida Luz) never authorized herbrother (Deganos) to act for and in her behalf in any transaction withPetitioners x x x.‖[15] It is clear, therefore, that evenassuming arguendo that Deganos acted as an agent of Brigida, the latternever authorized him to act on her behalf with regard to the transactions

subject of this case.










































The Civil Code provides:

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

The basis for agency is representation. Here, there is no showingthat Brigida consented to the acts of Deganos or authorized him to act on

her behalf, much less with respect to the particular transactionsinvolved. Petitioners‘ attempt to foist liability on respondent spousesthrough the supposed agency relation with Deganos is groundless and ill-advised.

Besides, it was grossly and inexcusably negligent of petitioners toentrust to Deganos, not once or twice but on at least six occasions asevidenced by six receipts, several pieces of jewelry of substantial valuewithout requiring a written authorization from his alleged principal. Aperson dealing with an agent is put upon inquiry and must discover uponhis peril the authority of the agent.[16]

The records show that neither an express nor an implied agencywas proven to have existed between Deganos and Brigida D.Luz. Evidently, petitioners, who were negligent in their transactions withDeganos, cannot seek relief from the effects of their negligence byconjuring a supposed agency relation between the two respondentswhere no evidence supports such claim.

Petitioners next allege that the Court of Appeals erred in ignoring thefact that the decision of the court below, which it affirmed, is ―null andvoid‖ as it contradicted its ruling in CA-G.R. SP No. 39445 holding thatthere is ―sufficient evidence/proof‖ against Brigida D. Luz and Deganosfor estafa in the pending criminal case. They further aver that said

appellate court erred in ruling against them in this civil action since thesame would result in an inevitable conflict of decisions should the trialcourt convict the accused in the criminal case.

By way of backdrop for this argument of petitioners, hereinrespondents Brigida D. Luz and Deganos had filed a demurrer toevidence and a motion for reconsideration in the aforestated criminalcase, both of which were denied by the trial court. They then filed apetition for certiorari in the Court of Appeals to set aside the denial oftheir demurrer and motion for reconsideration but, as just stated, theirpetition therefor was dismissed.[17]

Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G.R. SP No. 39445 with respect to the

criminal case is equivalent to a finding that there is sufficient evidence inthe estafa case against Brigida D. Luz and Deganos. Hence, as alreadystated, petitioners theorize that the decision and resolution of the Court of

Appeals now being impugned in the case at bar would result in a possibleconflict with the prospective decision in the criminal case. Instead ofpromulgating the present decision and resolution under review, so theysuggest, the Court of Appeals should have awaited the decision in thecriminal case, so as not to render academic or preempt the same or,

worse, create two conflicting rulings. [18]

Petitioners have apparently lost sight of Article 33 of the Civil Code

which provides that in cases involving alleged fraudulent acts, a civilaction for damages, entirely separate and distinct from the criminalaction, may be brought by the injured party. Such civil action shallproceed independently of the criminal prosecution and shall require onlya preponderance of evidence.

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

It is clear, therefore, that this civil case may proceed independentlyof the criminal case [20] especially because while both cases are based onthe same facts, the quantum of proof required for holding the partiesliable therein differ. Thus, it is improvident of petitioners to claim that thedecision and resolution of the Court of Appeals in the present case wouldbe preemptive of the outcome of the criminal case. Their fancied fear of

possible conflict between the disposition of this civil case and theoutcome of the pending criminal case is il lusory.

Petitioners surprisingly postulate that the Court of Appeals had lostits jurisdiction to issue the denial resolution dated August 18, 1997, asthe same was tainted with irregularities and badges of fraud perpetratedby its court officers. [21] They charge that said appellate court, throughconspiracy and fraud on the part of its officers, gravely abused itsdiscretion in issuing that resolution denying their motion forreconsideration. They claim that said resolution was drafted bythe ponente, then signed and issued by the members of the EleventhDivision of said court within one and a half days from the elevation

thereof by the division clerk of court to the office of the ponente.



























It is the thesis of petitioners that there was undue haste in issuingthe resolution as the same was made without waiting for the lapse of theten-day period for respondents to file their comment and for petitioners tofile their reply. It was allegedly impossible for the Court of Appeals toresolve the issue in just one and a half days, especially becauseits ponente, the late Justice Maximiano C. Asuncion, was thenrecuperating from surgery and, that, additionally, ―hundreds of moreimportant cases were pending.‖ [22]

These lamentable allegation of irregularities in the Court of Appealsand in the conduct of its officers strikes us as a desperate attempt ofpetitioners to induce this Court to give credence to their argumentswhich, as already found by both the trial and intermediate appellatecourts, are devoid of factual and legal substance. The regrettablyirresponsible attempt to tarnish the image of the intermediate appellatetribunal and its judicial officers through ad hominem imputations couldwell be contumacious, but we are inclined to let that pass with a strictadmonition that petitioners refrain from indulging in such conduct inlitigations.

On July 9, 1997, the Court of Appeals rendered judgment in thiscase affirming the trial court‘s decision. [23] Petitioners moved forreconsideration and the Court of Appeals ordered respondents to file acomment. Respondents filed the same on August 5, 1997 [24] andpetitioners filed their reply to said comment on August 15, 1997. [25] TheEleventh Division of said court issued the questioned resolution denyingpetitioner‘s motion for reconsideration on August 18, 1997.[26]

It is ironic that while some litigants malign the judiciary for beingsupposedly slothful in disposing of cases, petitioners are making a showof calling out for justice because the Court of Appeals issued a resolutiondisposing of a case sooner than expected of it. They would even deny

the exercise of discretion by the appellate court to prioritize its action oncases in line with the procedure it has adopted in disposing thereof and indeclogging its dockets. It is definitely not for the parties to determine anddictate when and how a tribunal should act upon those cases since theyare not even aware of the status of the dockets and the internal rules andpolicies for acting thereon.

The fact that a resolution was issued by said court within a relativelyshort period of time after the records of the case were elevated to theoffice of the ponente cannot, by itself, be deemed irregular. There is noshowing whatsoever that the resolution was issued without consideringthe reply filed by petitioners. In fact, that brief pleading filed by

petitioners does not exhibit any esoteric or ponderous argument whichcould not be analyzed within an hour. It is a legal presumption, born of

wisdom and experience, that official duty has been regularlyperformed; [27] that the proceedings of a judicial tribunal are regular andvalid, and that judicial acts and duties have been and will be duly andproperly performed. [28] The burden of proving irregularity in officialconduct is on the part of petitioners and they have utterly failed to doso. It is thus reprehensible for them to cast aspersions on a court of lawon the bases of conjectures or surmises, especially since one of thepetitioners appears to be a member of the Philippine Bar.

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

Petitioners‘ claim is speciously unmeritorious. It should beemphasized that neither the trial court nor the appellate courtcategorically stated that there was such a contractual relation betweenthese two respondents. The trial court merely said that if there was suchan agency existing between them, the same is unenforceable as thecontract would fall under the Statute of Frauds which requires thepresentation of a note or memorandum thereof in order to be enforceablein court. That was merely a preparatory statement of a principle oflaw. What was finally proven as a matter of fact is that there was no suchcontract between Brigida D. Luz and Narciso Deganos, executed orpartially executed, and no delivery of any of the items subject of this casewas ever made to the former.

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

SO ORDERED.



































FIRST DIVISION

[G.R. No. 123560. March 27, 2000]

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petit ioners , vs .PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLDSERVICES, INC., JULIETA CANILAO and CLAUDIATAGUNICAR, respondents .

D E C I S I O N

PUNO, J .:

This petition for review seeks a reversal of the 31 August 1995Decision[1] and 11 January 1998 Resolution[2] of the Court of Appealsholding private respondent Claudia Tagunicar solely liable for moral andexemplary damages and attorney‘s fees, and deleting the trial court‘saward for actual damages.

The facts as found by the trial court are as follows: Kycalrâ

"Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and AchillesMarketing. In connection with [this] business, he travels from time to timeto Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs boughtplane tickets (Exhs. A & B) from defendant Claudia Tagunicar whorepresented herself to be an agent of defendant Tourist World Services,Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco,U.S.A., for the amount of P25,000.00 per computation of said defendantClaudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to

Fairfield, New Jersey, U.S.A. to buy two (2) l ines of infrared heatingsystem processing textured plastic article (Exh. K).

"On said date, only the passage from Manila to Hongkong, then to Tokyo,were confirmed. [PAA] Flight 002 from Tokyo to San Francisco was on"RQ" status, meaning "on request". Per instruction of defendant ClaudiaTagunicar, plaintiffs returned after a few days for the confirmation of theTokyo-San Francisco segment of the trip. After calling up Canilao ofTWSI, defendant Tagunicar told plaintiffs that their flight is now confirmedall the way. Thereafter, she attached the confirmation stickers on theplane tickets (Exhs. A & B).

"A few days before the scheduled flight of plaintiffs, their son, Adrian Yu,called the Pan Am office to verify the status of the flight. According tosaid Adrian Yu, a personnel of defendant Pan Am told him over thephone that plaintiffs‘ booking[s] are confirmed.

"On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5)days. They left Hongkong for Tokyo on July 28, 1978. Upon their arrivalin Tokyo, they called up Pan-Am office for reconfirmation of their flight toSan Francisco. Said office, however, informed them that their names arenot in the manifest. Since plaintiffs were supposed to leave on the 29th ofJuly, 1978, and could not remain in Japan for more than 72 hours, they

were constrained to agree to accept airline tickets for Taipei instead, peradvise of JAL officials. This is the only option left to them becauseNorthwest Airlines was then on strike, hence, there was no chance forthe plaintiffs to obtain airline seats to the United States within 72 hours.Plaintiffs paid for these tickets.

"Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus,they were forced to return back to× Manila on August 3, 1978, instead ofproceeding to the× States. [Japan] Air Lines (JAL) refunded the plaintiffsthe difference of the price for Tokyo-Taipei [and] Tokyo-San Francisco(Exhs. I & J) in the total amount of P2,602.00.

http://sc.judiciary.gov.ph/jurisprudence/2000/mar2000/123560.html#_ftn1





http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Manila



http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20States










"In view of their failure to reach Fairfield, New Jersey, Radiant HeatEnterprises, Inc. cancelled Yu Eng Cho‘s option to buy the two lines ofinfra-red heating system (Exh. K). The agreement was for him to inspectthe equipment and make final arrangement[s] with the said company notlater than August 7, 1978. From this business transaction, plaintiff YuEng Cho expected to realize a profit of P300,000.00 to P400,000.00."

"[A] scrutiny of defendants‘ respective evidence reveals the following:

"Plaintiffs, who were intending to go to the× States, were referred todefendant Claudia Tagunicar, an independent travel solicitor, for thepurchase of their plane tickets. As such travel solicitor, she helps in theprocessing of travel papers like passport, plane tickets, booking ofpassengers and some assistance at the airport. She is known todefendants Pan-Am, TWSI/Julieta Canilao, because she has beendealing with them in the past years. Defendant Tagunicar advisedplaintiffs to take Pan-Am because× Airlines was then on strike andplaintiffs are passing Hongkong, Tokyo, then× Francisco and Pan-Amhas a flight from× Tokyo to San Francisco. After verifying from defendant

TWSI, thru Julieta Canilao, she informed plaintiffs that the fare would beP25,093.93 giving them a discount of P738.95 (Exhs. C, C-1). Plaintiffs,however, gave her a check in the amount of P25,000.00 only for the tworound trip tickets. Out of this transaction,× Tagunicar received a 7%commission and 1% commission for defendant TWSI.

Defendant Claudia Tagunicar purchased the two round-trip Pan-Amtickets from defendant Julieta Canilao with the following schedules:

Origin Destination Airline Date Time/Travel

Manila Hongkong CX900 7-23-78 1135/1325hrsHongkong Tokyo CS500 7-28-78 1615/2115hrs

Tokyo San Francisco PA002 7-29-78 1930/1640hrs

The use of another airline, like in this case it is× Pacific out of Manila, isallowed, although the tickets issued are Pan-Am tickets, as long as it is inconnection with a Pan-Am flight. When the two (2) tickets (Exhs. A & B)were issued to plaintiffs, the letter "RQ" appears below the printed word"status" for the flights from× Tokyo to San Francisco which means "underrequest," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduleddeparture, defendant× Tagunicar received several calls from the plaintiffs

inquiring about the status of their bookings. Tagunicar in turn called upTWSI/Canilao to verify; and if × Canilao would answer that the bookingsare not yet confirmed, she would relate that to the plaintiffs. CalrkyÓ

"Defendant Tagunicar claims that on July 13, 1978, a few days before thescheduled flight, plaintiff Yu Eng Cho personally went to her office,pressing her about their flight. She called up defendant× Canilao, and thelatter told her "o sige× Claudia, confirm na." She even noted this in her

index card (Exh. L), that it was× Julieta who confirmed the booking (Exh.L-1). It was then that she allegedly attached the confirmation stickers(Exhs. 2, 2-B TWSI) to the tickets. These stickers came from TWSI.

Defendant Tagunicar alleges that it was only in the first week of August,1978 that she learned from Adrian Yu, son of plaintiffs, that the latterwere not able to take the flight from×Tokyo to San Francisco, U.S.A. Aftera few days, said Adrian Yu came over with a gentleman and a lady, whoturned out to be a lawyer and his secretary. Defendant Tagunicar claimsthat plaintiffs were asking for her help so that they could file an actionagainst Pan- Am. Because of plaintiffs‘ promise she will not be involved,

she agreed to sign the affidavit (Exh. M) prepared by the lawyer. Mesmä

Defendants TWSI/Canilao denied having confirmed the Tokyo-SanFrancisco segment of plaintiffs‘ flight because flights then were reallytight because of the on-going strike at× Airlines. Defendant ClaudiaTagunicar is very much aware that [said] particular segment was notconfirmed, because on the very day of plaintiffs‘departure,× Tagunicar called up TWSI from the airport; defendantCanilao asked her why she attached stickers on the tickets when in factthat portion of the flight was not yet confirmed. Neither TWSI nor Pan-Amconfirmed the flight and never authorized defendant× Tagunicar to attachthe confirmation stickers. In fact, the confirmation stickers used by

defendant Tagunicar are stickers exclusively for use of Pan-Am only.Furthermore, if it is the travel agency that confirms the booking, the IATAnumber of said agency should appear on the validation or confirmationstickers. The IATA number that appears on the stickers attached toplaintiffs‘ tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when infact TWSI‘s IATA number is 2-83-0770 (Exhs. 5, 5-A TWSI)."[3]

A complaint for damages was filed by petitioners against privaterespondents Pan American World Airways, Inc.(Pan Am), Tourist WorldServices, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar(Tagunicar) for expenses allegedly incurred such as costs of tickets and

hotel accommodations when petitioners were compelled to stay inHongkong and then in× Tokyo by reason of the non-confirmation of their





http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Airlines



http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Francisco




http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Tokyo



http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Tagunicar




http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Pacific











http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Canilao








http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Claudia




http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Julieta













































booking with Pan-Am. In a Decision dated November 14, 1991, theRegional Trial Court of Manila, Branch 3, held the defendants jointly andseverally liable, except defendant Julieta Canilao, thus: ScslxÓ

"WHEREFORE, judgment is hereby rendered for the plaintiffs andordering defendants Pan American World Airways, Inc., Tourist WorldServices, Inc. and Claudia Tagunicar, jointly and severally, to payplaintiffs the sum of P200,000.00 as actual damages, minus P2,602.00

already refunded to the plaintiffs; P200,000.00 as moral damages;P100,000.00 as exemplary damages; an amount equivalent to 20% ofthe award for and as attorney‘s fees, plus the sum of P30,000.00 aslitigation expenses.

Defendants‘ counterclaims are hereby dismissed for lack of merit.

SO ORDERED."

Only respondents Pan Am and Tagunicar appealed to the× Court of Appeals. On 11 August 1995, the appellate court rendered judgment

modifying the amount of damages awarded, holding private respondentTagunicar solely liable therefor, and absolving respondents Pan Am andTWSI from any and all l iability, thus: Slxsä c

"PREMISES CONSIDERED, the decision of the Regional Trial Court ishereby SET ASIDE and a new one entered declaring appellant Tagunicarsolely liable for:

1) Moral damages in the amount of P50,000.00;

2) Exemplary damages in the amount of P25,000.00; and

3) Attorney‘s fees in the amount of P10,000.00 plus costs of suit.

The award of actual damages is hereby DELETED.

SO ORDERED."

In so ruling, respondent court found that Tagunicar is an independenttravel solicitor and is not a duly authorized agent or representative ofeither Pan Am or TWSI. It held that their business transactions are notsufficient to consider Pan Am as the principal, and Tagunicar and TWSI

as its agent and sub-agent, respectively. It further held that Tagunicar

was not authorized to confirm the bookings of, nor issue validationstickers to, herein petitioners and hence, Pan Am and TWSI cannot beheld responsible for her actions. Finally, it deleted the award for actualdamages for lack of proof.

Hence this petition based on the following assignment of errors: slxä mis

1. the Court of Appeals, in reversing the decision of the trial court,

misapplied the ruling in Nicos Industrial Corporation vs. Court of Appeals,et. al. [206 SCRA 127]; and

2. the findings of the Court of Appeals that petitioners‘ ticket reservationsin question were not confirmed and that there is no agency relationshipamong PAN-AM, TWSI and Tagunicar are contrary to the judicialadmissions of PAN-AM, TWSI and Tagunicar and likewise contrary to thefindings of fact of the trial court.

We affirm.

I. The first issue deserves scant consideration. Petitioners contend thatcontrary to the ruling of the Court of Appeals, the decision of the trialcourt conforms to the standards of an ideal decision set in NicosIndustrial Corporation, et. al. vs. Court of Appeals, et. al.,[4] as "thatwhich, with welcome economy of words, arrives at the factual findings,reaches the legal conclusions, renders its ruling and, having done so,ends." It is averred that the trial court‘s decision contains a detailedstatement of the relevant facts and evidence adduced by the partieswhich thereafter became the bases for the court‘s conclusions.

A careful scrutiny of the decision rendered by the trial court will show that

after narrating the evidence of the parties, it proceeded to dispose of thecase with a one-paragraph generalization, to wit: Missdaa

"On the basis of the foregoing facts, the Court is constrained to concludethat defendant Pan-Am is the principal, and defendants TWSI andTagunicar, its authorized agent and sub-agent, respectively.Consequently, defendants Pan-Am, TWSI and Claudia Tagunicar shouldbe held jointly and severally liable to plaintiffs for damages. DefendantJulieta Canilao, who acted in her official capacity as Office Manager ofdefendant TWSI should not be held personally liable."[5]

The trial court‘s finding of facts is but a summary of the testimonies of thewitnesses and the documentary evidence presented by the parties. It did

http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Court














not distinctly and clearly set forth, nor substantiate, the factual and legalbases for holding respondents TWSI, Pan Am and Tagunicar jointly andseverally liable. In Del Mundo vs. CA, et al .[6] where the trial court, aftersummarizing the conflicting asseverations of the parties, disposed of thekernel issue in just two (2) paragraphs, we held: SdaÓ adsc

"It is understandable that courts, with their heavy dockets and timeconstraints, often find themselves with little to spare in the preparation of

decisions to the extent most desirable. We have thus pointed out that judges might learn to synthesize and to simplify their pronouncements.Nevertheless, concisely written such as they may be, decisions must stilldistinctly and clearly express, at least in minimum essence, its factualand legal bases."

For failing to explain clearly and well the factual and legal bases of itsaward of moral damages, we set it aside in said case. Once more, westress that nothing less than Section 14 of Article VIII of the Constitutionrequires that "no decision shall be rendered by any court withoutexpressing therein clearly and distinctly the facts and the law on which it

is based." This is demanded by the due process clause of theConstitution. In the case at bar, the decision of the trial court leaves muchto be desired both in form and substance. Even while said decisioninfringes the Constitution, we will not belabor this infirmity and ratherexamine the sufficiency of the evidence submitted by thepetitioners. RtcÓ spped

II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI isa duly authorized ticketing agent of Pan Am. Proceeding from thispremise, they contend that TWSI and Pan Am should be held liable asprincipals for the acts of Tagunicar. Petitioners stubbornly insist that theexistence of the agency relationship has been established by the judicial

admissions allegedly made by respondents herein, to wit: (1) theadmission made by Pan Am in its Answer that TWSI is its authorizedticket agent; (2) the affidavit executed by Tagunicar where she admittedthat she is a duly authorized agent of TWSI; and (3) the admission madeby Canilao that TWSI received commissions from ticket sales made byTagunicar. Korteä

We do not agree. By the contract of agency, a person binds himself torender some service or to do something in representation or on behalf ofanother, with the consent or authority of the latter .[7]The elements ofagency 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 athird person; (3) the agent acts as a representative and not for himself;

(4) the agent acts within the scope of his authority.[8] It is a settled rulethat persons dealing with an assumed agent are bound at their peril, ifthey would hold the principal liable, to ascertain not only the fact ofagency but also the nature and extent of authority, and in case either iscontroverted, the burden of proof is upon them to establish it.[9]

In the case at bar, petitioners rely on the affidavit of respondentTagunicar where she stated that she is an authorized agent of TWSI.

This affidavit, however, has weak probative value in light of respondentTagunicar‘s testimony in court to the contrary. Affidavits, being taken ex

parte, are almost always incomplete and often inaccurate, sometimesfrom partial suggestion, or for want of suggestion and inquiries. Theirinfirmity as a species of evidence is a matter of judicial experience andare thus considered inferior to the testimony given in court.[10] Further,affidavits are not complete reproductions of what the declarant has inmind because they are generally prepared by the administering officerand the affiant simply signs them after the same have been read toher .[11] Respondent Tagunicar testified that her affidavit was preparedand typewritten by the secretary of petitioners‘ lawyer, Atty. Acebedo,who both came with Adrian Yu, son of petitioners, when the latter went tosee her at her office. This was confirmed by Adrian Yu who testified that

Atty. Acebedo brought his notarial seal and notarized the affidavit of thesame day.[12] The circumstances under which said affidavit was preparedput in doubt petitioners‘ claim that it was executed voluntarily byrespondent Tagunicar. It appears that the affidavit was prepared and wasbased on the answers which respondent Tagunicar gave to the questionspropounded to her by Atty. Acebedo.[13] They never told her that theaffidavit would be used in a case to be filed against her .[14] They evenassured her that she would not be included as defendant if she agreed toexecute the affidavit.[15] Respondent Tagunicar was prevailed upon bypetitioners‘ son and their lawyer to sign the affidavit despite her objection

to the statement therein that she was an agent of TWSI. They assuredher that "it is immaterial"[16] and that "if we file a suit against you wecannot get anything from you."[17] This purported admission of respondentTagunicar cannot be used by petitioners to prove their agencyrelationship. At any rate, even if such affidavit is to be given anyprobative value, the existence of the agency relationship cannot beestablished on its sole basis. The declarations of the agent alone aregenerally insufficient to establish the fact or extent of his authority.[18] Inaddition, as between the negative allegation of respondents Canilao andTagunicar that neither is an agent nor principal of the other, and theaffirmative allegation of petitioners that an agency relationship exists, it isthe latter who have the burden of evidence to prove theirallegation,[19] failing in which, their claim must necessarily fail. Sclawä


























































We stress that respondent Tagunicar categorically denied in open courtthat she is a duly authorized agent of TWSI, and declared that she is anindependent travel agent.[20] We have consistently ruled that in case ofconflict between statements in the affidavit and testimonial declarations,the latter command greater weight.[21]

As further proofs of agency, petitioners call our attention to TWSI‘sExhibits "7", "7-A", and "8" which show that Tagunicar and TWSI received

sales commissions from Pan Am. Exhibit "7"[22]

is the Ticket Sales Reportsubmitted by TWSI to Pan Am reflecting the commissions received byTWSI as an agent of Pan Am. Exhibit "7-A"[23] is a listing of the routestaken by passengers who were audited to TWSI‘s sales report. Exhibit"8"[24] is a receipt issued by TWSI covering the payment made byTagunicar for the tickets she bought from TWSI. These documentscannot justify the deduction that Tagunicar was paid a commission eitherby TWSI or Pan Am. On the contrary, Tagunicar testified that when shepays TWSI, she already deducts in advance her commission and merelygives the net amount to TWSI.[25] From all sides of the legal prism, thetransaction is simply a contract of sale wherein Tagunicar buys airlinetickets from TWSI and then sells it at a premium to her clients. ScÓ lex

III. Petitioners included respondent Pan Am in the complaint on thesupposition that since TWSI is its duly authorized agent, and respondentTagunicar is an agent of TWSI, then Pan Am should also be heldresponsible for the acts of respondent Tagunicar. Our disquisitions aboveshow that this contention lacks factual and legal bases. Indeed, there isnothing in the records to show that respondent Tagunicar has beenemployed by Pan Am as i ts agent, except the bare allegation ofpetitioners. The real motive of petitioners in suing Pan Am appears in its

Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicarmay not be financially capable of paying plaintiffs the amounts herein

sought to be recovered, and in such event, defendant Pan Am, beingtheir ultimate principal, is primarily and/or subsidiarily liable to pay saidamounts to plaintiffs."[26] This lends credence to respondent Tagunicar‘stestimony that she was persuaded to execute an affidavit implicatingrespondents because petitioners knew they would not be able to getanything of value from her. In the past, we have warned that this Courtwill not tolerate an abuse of the judicial process by passengers in order topry on international airlines for damage awards, like "trophies in asafari."[27]

This meritless suit against Pan Am becomes more glaring with

petitioners‘ inaction after they were bumped off in Tokyo. If petitionerswere of the honest belief that Pan Am was responsible for the misfortune

which beset them, there is no evidence to show that they lodged aprotest with Pan Am‘s Tokyo office immediately after they were refusedpassage for the flight to San Francisco, or even upon their arrival inManila. The testimony of petitioner Yu Eng Cho in this regard is of littlevalue, viz .:

"Atty. Jalandoni: x x x

q Upon arrival at the Tokyo airport, what did you do if any in connectionwith your schedule[d] trip?

a I went to the Hotel, Holiday Inn and from there I immediately called upPan Am office in Tokyo to reconfirm my flight, but they told me that ournames were not listed in the manifest, so next morning, very early in themorning I went to the airport, Pan Am office in the airport to verify andthey told me the same and we were not allowed to leave.

q You were scheduled to be in Tokyo for how long Mr. Yu?

a We have to leave the next day 29th.

q In other words, what was your status as a passenger?

a Transient passengers. We cannot stay there for more than 72 hours.

x x x x x x x x x

q As a consequence of the fact that you claimed that the Pan Am office inTokyo told you that your names were not in the manifest, what did youdo, if any?

a I ask[ed] them if I can go anywhere in the States? They told me I cango to LA via Japan Airlines and I accepted it.

q Do you have the tickets with you that they issued for Los Angeles?

a It was taken by the Japanese Airlines instead they issue[d] me a ticketto Taipei.

x x x x x x x x x



































q Were you able to take the trip to Los Angeles via Pan Am tickets thatwas issued to you in lieu of the tickets to San Francisco?

a No, sir.

q Why not?

a The Japanese Airlines said that there were no more available seats.

q And as a consequence of that, what did you do, if any?

a I am so much scared and worried, so the Japanese Airlinesadvised us to go to Taipei and I accepted it.

x x x x x x x x x

q Why did you accept the Japan Airlines offer for you to go to Taipei?

a Because there is no chance for us to go to the United States within 72hours because during that time Northwest Airlines [was] on strike so theseats are very scarce. So they advised me better left (sic) before the 72hours otherwise you will have trouble with the Japanese immigration.

q As a consequence of that you were force[d] to take the trip to Taipei?

a Yes, sir."[28] (emphasis supplied)

It grinds against the grain of human experience that petitioners did notinsist that they be allowed to board, considering that it was then doublydifficult to get seats because of the ongoing Northwest Airlines strike. It isalso perplexing that petitioners readily accepted whatever the Tokyooffice had to offer as an alternative. Inexplicably too, no demand letterwas sent to respondents TWSI and Canilao.[29] Nor was a demand lettersent to respondent Pan Am. To say the least, the motive of petitioners insuing Pan Am is suspect. xä law

We hasten to add that it is not sufficient to prove that Pan Am did notallow petitioners to board to justify petitioners‘ claim for damages. Mererefusal to accede to the passenger‘s wishes does not necessarilytranslate into damages in the absence of bad faith.[30] The settled rule isthat the law presumes good faith such that any person who seeks to be

awarded damages due to acts of another has the burden of proving that

the latter acted in bad faith or with ill motive.[31] In the case at bar, we findthe evidence presented by petitioners insufficient to overcome thepresumption of good faith. They have failed to show any wanton,malevolent or reckless misconduct imputable to respondent Pan Am in itsrefusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan

Am could not have acted in bad faith because petitioners did not haveconfirmed tickets and more importantly, they were not in the passengermanifest. Scä

In not a few cases, this Court did not hesitable to hold an airline liable fordamages for having acted in bad faith in refusing to accommodate apassenger who had a confirmed ticket and whose name appeared in thepassenger manifest. In Ortigas Jr. v. Lufthansa German AirlinesInc .[32] we ruled that there was a valid and binding contract between theairline and its passenger after finding that validating sticker on thepassenger‘s ticket had the letters "O.K." appearing in the ‗Res. Status‘box which means "space confirmed" and that the ticket is confirmed orvalidated. InPan American World Airways Inc. v. IAC, et al .[33] where awould-be-passenger had the necessary ticket, baggage claim andclearance from immigration all clearly showing that she was a confirmedpassenger and included in the passenger manifest and yet was deniedaccommodation in said flight, we awarded damages. In Armovit, et al. v.CA, et al.,[34] we upheld the award of damages made against an airlinefor gross negligence committed in the issuance of tickets with erroneousentries as to the time of flight. In Alitalia Airways v. CA, et al .,[35] we heldthat when airline issues a ticket to a passenger confirmed on a particularflight, on a certain date, a contract of carriage arises, and the passengerhas every right to expect that he would fly on that flight and on that date.If he does not, then the carrier opens itself to a suit for breach of contractof carriage. And finally, an award of damages was held proper in thecase of Zalamea, et al. v. CA, et al.,[36] where a confirmed passenger

included in the manifest was denied accommodation in suchflight. ScmisÓ

On the other hand, the respondent airline in Sarreal, Sr. v. Japan AirlinesCo., Ltd.,[37] was held not liable for damages where the passenger wasnot allowed to board the plane because his ticket had not beenconfirmed. We ruled that "[t]he stub that the lady employee put on thepetitioner‘s ticket showed among other coded items, under the column"status" the letters "RQ" – which was understood to mean "Request."Clearly, this does not mean a confirmation but only a request. JAL TrafficSupervisor explained that it would have been different if what was writtenon the stub were the letter "ok" in which case the petitioner would havebeen assured of a seat on said flight. But in this case, the petitioner was










































more of a wait-listed passenger than a regularly bookedpassenger." MisÓ sc

In the case at bar, petitioners‘ ticket were on "RQ" status. They were notconfirmed passengers and their names were not listed in the passengermanifest. In other words, this is not a case where Pan Am bound itself totransport petitioners and thereafter reneged on its obligation. Hence,respondent airline cannot be held liable for damages. MisÓ spped

IV. We hold that respondent Court of Appeals correctly ruled that thetickets were never confirmed for good reasons: (1) The persistent callsmade by respondent Tagunicar to Canilao, and those made bypetitioners at the Manila, Hongkong and Tokyo offices of Pan Am, areeloquent indications that petitioners knew that their tickets have not beenconfirmed. For, as correctly observed by Pan Am, why would onecontinually try to have one‘s ticket confirmed if it had already beenconfirmed? (2) The validation stickers which respondent Tagunicarattached to petitioners‘ tickets were those intended for the exclusive useof airline companies. She had no authority to use them. Hence, saidvalidation stickers, wherein the word "OK" appears in the status box, arenot valid and binding. (3) The names of petitioners do not appear in thepassenger manifest. (4) Respondent Tagunicar‘s "Exhibit 1"[38] showsthat the status of the San Francisco-New York segment was "Ok",meaning it was confirmed, but that the status of the Tokyo-San Franciscosegment was still "on request". (5) Respondent Canilao testified that onthe day that petitioners were to depart for Hongkong, respondentTagunicar called her from the airport asking for confirmation of the Tokyo-San Francisco flight, and that when she told respondent Tagunicar thatshe should not have allowed petitioners to leave because their ticketshave not been confirmed, respondent Tagunicar merely said "Bahalana."[39] This was never controverted nor refuted by respondent Tagunicar.

(6) To prove that it really did not confirm the bookings of petitioners,respondent Canilao pointed out that the validation stickers whichrespondent Tagunicar attached to the tickets of petitioners had IATA No.2-82-0770 stamped on it, whereas the IATA number of TWSI is 28-30770.[40]

Undoubtedly, respondent Tagunicar should be liable for having acted inbad faith in misrepresenting to petitioners that their tickets have beenconfirmed. Her culpability, however, was properly mitigated. Petitioner YuEng Cho testified that he repeatedly tried to follow up on the confirmationof their tickets with Pan Am because he doubted the confirmation made

by respondent Tagunicar .

[41]

This is clear proof that petitioners knew thatthey might be bumped off at Tokyo when they decided to proceed with

the trip. Aware of this risk, petitioners exerted efforts to confirm theirtickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, wefind the modification as to the amount of damages awarded just andequitable under the circumstances. Sppedâ

WHEREFORE, the decision appealed from is hereby AFFIRMED. Costagainst petitioners. Joä spped

SO ORDERED

SECOND DIVISION

[G.R. No. 117356. June 19, 2000]

VICTORIAS MILLING CO., INC., petit ioner, vs. COURT OFAPPEALS and CONSOLIDATED SUGARCORPORATION, 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 Rulesof Court assailing the decision of the Court of Appeals dated February24, 1994, in CA-G.R. CV No. 31717, as well as the respondent court'sresolution of September 30, 1994 modifying said decision. Both decisionand resolution amended the judgment dated February 13, 1991, of theRegional 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 areas 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 50kilograms and priced at P638.00 per bag as "per sales order VMCMarketing No. 042 dated October 16, 1989."[1] The transaction it coveredwas a "direct sale."[2] The SLDR also contains an additional note whichreads: "subject for (sic) availability of a (sic) stock at NAWACO

(warehouse)."

[3]

On October 25, 1989, STM sold to private respondent ConsolidatedSugar Corporation (CSC) its rights in SLDR No. 1214M for P14,750,000.00. CSC issued one check dated October 25, 1989 and threechecks postdated November 13, 1989 in payment. That same day, CSCwrote petitioner that it had been authorized by STM to withdraw the sugarcovered by SLDR No. 1214M. Enclosed in the letter were a copy ofSLDR No. 1214M and a letter of authority from STM authorizing CSC "towithdraw for and in our behalf the refined sugar covered by ShippingList/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 ofP31,900,000.00 with petitioner as payee. The latter, in turn, issuedOfficial Receipt No. 33743 dated October 27, 1989 acknowledgingreceipt of the said checks in payment of 50,000 bags. Aside from SLDRNo. 1214M, said checks also covered SLDR No. 1213.

Private respondent CSC surrendered SLDR No. 1214M to the petitioner'sNAWACO warehouse and was allowed to withdraw sugar. However, after2,000 bags had been released, petitioner refused to allow furtherwithdrawals of sugar against SLDR No. 1214M. CSC then sent petitioner

a letter dated January 23, 1990 informing it that SLDR No. 1214M hadbeen "sold and endorsed" to it but that it had been refused furtherwithdrawals of sugar from petitioner's warehouse despite the fact thatonly 2,000 bags had been withdrawn.[5] CSC thus inquired when it wouldbe allowed to withdraw the remaining 23,000 bags.

On January 31, 1990, petitioner replied that it could not allow any furtherwithdrawals of sugar against SLDR No. 1214M because STM hadalready 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 tothe amount of STM's cleared checks had been fully withdrawn andhence, there would be no more deliveries of the commodity to STM'saccount. Petitioner also noted that CSC had represented itself to beSTM'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) andherein petitioner. Since the former could not be served with summons,the case proceeded only against the latter. During the trial, it wasdiscovered that Teresita Ng Go who testified for CSC was the sameTeresita Ng Sy who could not be reached through summons.[7] CSC,however, did not bother to pursue its case against her, but instead usedher as its witness.

CSC's complaint alleged that STM had fully paid petitioner for the sugarcovered by SLDR No. 1214M. Therefore, the latter had no justification forrefusing delivery of the sugar. CSC prayed that petitioner be ordered todeliver the 23,000 bags covered by SLDR No. 1214M and sought theaward of P1,104,000.00 in unrealized profits, P3,000,000.00 asexemplary damages, P2,200,000.00 as attorney's fees and litigationexpenses.

Petitioner's primary defense a quo was that it was an unpaid seller for the23,000 bags.[8] Since STM had already drawn in full all the sugarcorresponding to the amount of its cleared checks, it could no longerauthorize further delivery of sugar to CSC. Petitioner also contended thatit had no privity of contract with CSC.

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

Petitioner also alleged that CSC did not pay for the SLDR and wasactually STM's co-conspirator to defraud it through a misrepresentationthat 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

http://sc.judiciary.gov.ph/jurisprudence/2000/june2000/117356.htm#_ftn1






































2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, CivilCode).

" 2. The Court of × Appeals erred in manifestly and arbitrarily ignoring anddisregarding certain relevant and undisputed facts which, had they beenconsidered, would have shown that petitioner was not l iable, except for69 bags of sugar, and which would justify review of its conclusion of factsby this Honorable Court.

" 3. The Court of × Appeals misapplied the law on compensationunder × Arts. 1279, 1285 and 1626 of the× Code when it ruled thatcompensation applied only to credits from one SLDR or contract and notto those from two or more distinct contracts between the same parties;and erred in denying petitioner's right to setoff all its credits arising priorto notice of assignment from other sales or SLDRs against privaterespondent's claim as assignee under SLDR No. 1214M, so as toextinguish or reduce its liability to 69 bags, because the law oncompensation applies precisely to two or more distinct contractsbetween the same parties (emphasis in the original).

"4. The Court of Appeals erred in concluding that the settlement orliquidation of accounts in Exh. ‗F‘ between petitioner and STM,respondent's admission of its balance, and STM's acquiescence theretoby silence for almost one year did not render Exh. ̀ F' an account statedand its balance binding.

"5. The Court of Appeals erred in not holding that the conditions of theassigned SLDR No. 1214, namely, (a) its subject matter being generic,and (b) the sale of sugar being subject to its availability atthe× Nawaco warehouse, made the sale conditional and prevented STMor 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) frompetitioner, 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 CSCwas 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 oncompensation to the transaction under SLDR No. 1214M so as topreclude petitioner from offsetting its credits on the other SLDRs.

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

(4)....Whether or not the× Court of Appeals committed an error of law innot 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 thisissue for the first time on appeal. It is settled that an issue which was notraised during the trial in the court below could not be raised for the firsttime on appeal as to do so would be offensive to the basic rules of fairplay, 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 towithdraw sugar against SLDR No. 1214M to show that the latter wasSTM's agent. The pertinent portion of said letter reads:

"This is to authorize Consolidated Sugar Corporation or its representativeto withdraw for and in our behalf (stress supplied) the refined sugarcovered 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 rendersome service or to do something in representation or on behalf ofanother, with the consent or authority of the latter."

It is clear from Article 1868 that the basis of agency isrepresentation.[17] On the part of the principal, there must be an actualintention to appoint[18] or an intention naturally inferable from his words oractions;[19] and on the part of the agent, there must be an intention toaccept the appointment and act on it,[20] and in the absence of such

intent, there is generally no agency.

[21]

One factor which most clearlydistinguishes agency from other legal concepts is control; one person -

http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Appeals








http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Arts




http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Code




http://search.conduit.com/Results.aspx?ctid=CT3327494&searchsource=55&UM=2&q=%20Nawaco





























































the agent - agrees to act under the control or direction of another - theprincipal. Indeed, the very word "agency" has come to connote control bythe principal.[22] The control factor, more than any other, has caused thecourts to put contracts between principal and agent in a separatecategory.[23] The Court of × Appeals, in finding that CSC, was not anagent 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 uponthe persons alleging the agency, to show not only the fact of itsexistence, but also its nature and extent (Antonio vs. Enriquez [CA], 51O.G. 3536]. Here, defendant-appellant failed to sufficiently establish theexistence of an agency relation between plaintiff-appellee and STM. Thefact 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 tothe existence of an agency relation ...It should be viewed in the context ofall the circumstances obtaining. Although it would seem STMrepresented 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 thatSLDFR No. 1214M had been "sold and endorsed" to it by STM (Exhibit I,Records, p. 78). Further, plaintiff-appellee has shown that the 25, 000bags of sugar covered by the SLDR No. 1214M were sold andtransferred by STM to it ... A conclusion that there was a valid sale andtransfer to plaintiff-appellee may, therefore, be made thus capacitatingplaintiff-appellee to sue in its own name, without need of joining itsimputed principal STM as co-plaintiff."[24]

In the instant case, it appears plain to us that private respondent CSCwas a buyer of the SLDFR form, and not an agent of STM. Private

respondent CSC was not subject to STM's control. The question ofwhether a contract is one of sale or agency depends on the intention ofthe parties as gathered from the whole scope and effect of the languageemployed.[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 wasmeant to be established by the CSC and STM is clearly shown by CSC'scommunication to petitioner that SLDR No. 1214M had been "sold andendorsed" to it.[27] The use of the words "sold and endorsed" means thatSTM and CSC intended a contract of sale, and not an agency. Hence, onthis score, no error was committed by the respondent appellate courtwhen it held that CSC was not STM's agent and could independently suepetitioner.

On the second issue, proceeding from the theory that the transactionsentered into between petitioner and STM are but serial parts of oneaccount, petitioner insists that its debt has been offset by its claim forSTM's unpaid purchases, pursuant to Article 1279 of the CivilCode.[28] However, the trial court found, and the Court of Appealsconcurred, that the purchase of sugar covered by SLDR No. 1214M wasa separate and independent transaction; it was not a serial part of asingle transaction or of one account contrary to petitioner's insistence.

Evidence on record shows, without being rebutted, that petitioner hadbeen paid for the sugar purchased under SLDR No. 1214M. Petitionerclearly had the obligation to deliver said commodity to STM or itsassignee. Since said sugar had been fully paid for, petitioner and CSC,as assignee of STM, were not mutually creditors and debtors of eachother. No reversible error could thereby be imputed to respondentappellate court when, it refused to apply Article 1279 of the Civil Code tothe present case.

Regarding the third issue, petitioner contends that the sale of sugarunder SLDR No. 1214M is a conditional sale or a contract to sell, withtitle 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 refinedsugar and/or receipt of this document by the buyer/trader personally orthrough a representative, title to refined sugar is transferred tobuyer/trader and delivery to him/it is deemed effected andcompleted (stress supplied) and buyer/trader assumes full responsibilitytherefore…"[29]

The aforequoted terms and conditions clearly show that petitionertransferred 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 acontract to sell. Petitioner is now estopped from alleging the contrary.The contract is the law between the contracting parties.[30] And where theterms and conditions so stipulated are not contrary to law, morals, goodcustoms, public policy or public order, the contract is valid and must beupheld.[31] Having transferred title to the sugar in question, petitioner isnow obliged to deliver it to the purchaser or its assignee.

As to the fourth issue, petitioner submits that STM and privaterespondent 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 i ts purchasing price; (b) CSC's refusal to pursueits case against Teresita Ng Go; and (c) the authority given by the latter
















































to other persons to withdraw sugar against SLDR No. 1214M after shehad sold her rights under said SLDR to CSC. Petitioner prays that thedoctrine of "clean hands" should be applied to preclude CSC fromseeking judicial relief. However, despite careful scrutiny, we find here therecords bare of convincing evidence whatsoever to support thepetitioner's allegations of fraud. We are now constrained to deem thismatter purely speculative, bereft of concrete proof.

WHEREFORE, the instant petition is DENIED for lack of merit. Costsagainst petitioner.

SO ORDERED.

Date post:	02-Jun-2018
Category:	Documents
Upload:	icee-alcala-tarca
View:	229 times
Download:	0 times

agency cases.docx

Documents