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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-5676 March 2, 1910

LIM TIU, LIM SUNTIAN and LIM KAENG JO, operating under the name of "Lim Juco y Compañia,"plaintiffs-appellants,vs.

RUIZ Y REMENTERIA, a concern operating under the name of "La Isla de Cuba," defendant-appellee.

Thos. D. Aitken, for appellants.Sanz & Opisso, for appellee.

JOHNSON, J.:

On the 6th day of July, 1908, the plaintiffs commenced an action against the defendants in the Court of First Instance of the city of Manila, alleging thatupon the 26th day of May, 1908, the 5th day of June, 1908, and the 12th day of June, 1908, they sold to the defendant certain merchandise,amounting to the sum of P1,043.57; that said amount was due and unpaid, and prayed judgment for said sum (P1,043.57) with interest and cost.

To this petition the defendants filed a general denial.

After hearing the evidence, the lower court, found as a fact that "the defendants purchased the merchandise in question from Domingo Tim Bun Liu and

paid the said Domingo Tim Bun Liu for the merchandise."

The lower court further said: "The conclusions are that the defendants have paid for the merchandise described in the complaint, and that they are notliable for payment for the value thereof," and rendered judgment in favor of the defendant and against the plaintiffs and dismissed said complaint, withcosts against the plaintiffs.

From this decision of the lower court the plaintiffs appealed and made the following assignments of error:

First. The lower court erred in holding as follows: "It also clearly appears that the defendants purchased the merchandise in question from Domingo TimBun Liu and paid Domingo Tim Bun Liu for the merchandise."

Second. The lower court erred in holding that the plaintiffs never notified the defendants, in any way, that their employee, Domingo Tim Bun Liu, couldsell their merchandise, but could not receive payment for it, and that the defendants never had notice that their business transactions with DomingoTim Bun Liu were by him as agent or employee of the plaintiffs.

Third. The court erred in holding that the plaintiffs accepted payment through Domingo Tim Bun Liu.

Fourth. The court erred in holding that "the defendants having in good faith purchased the goods upon an agreement to pay for them in merchandise oftheir own, under an agreement with the person from whom they received the goods, to so pay for them, could not be held responsible for the failure of the plaintiffs' employee to deliver to his employers, that which was received in payment."

Fifth. The court erred in admitting as evidence Exhibit D (1), Exhibit D (2), and Exhibit D (3).

Sixth. The court erred in dismissing the plaintiffs' complaint and in deciding in favor of the defendants.

Upon these assignments of error the plaintiffs and appellants present three questions:

First. Did the defendants purchase directly from the plaintiffs?

Second. If not, did the defendants have sufficient notice of Domingo Tim Bun Liu's relation with the plaintiffs to place them on their guard?

Third. If the last is answered affirmatively, then was the payment by the defendants to Domingo Tim Bun Liu, in something other than cash, binding onthe plaintiffs?

With reference to the first question, "Did the defendants purchase directly from the plaintiffs?" there is much conflict in the testimony. The lower courtanswered this question in the negative. It appears that the defendants had been buying merchandise from Domingo Tim Bun Liu for a period coveringseveral months, and paying for said merchandise in exchange, and from time to time settling their accounts by the defendants paying to the saidDomingo Tim Bun Liu the difference, if any, in his favor, and by Domingo paying to the defendants the difference of the accounts, if there was found tobe due them any balance on such settlements. The defendant claim that they had no knowledge or information that the merchandise which they werereceiving from Domingo Tim Bun Liu was the merchandise of the plaintiffs. This contention of the defendants is supported by the fact that during all of the period during which they were doing business with Domingo, their which they were kept with Domingo Tim Bun Liu, and not with the plaintiffs. The



plaintiffs contend that for certain of the merchandise sold by Domingo Tim Bun Liu to the defendants Domingo presented a bill in their favor. In thisproof the plaintiffs attempt to establish the fact that the defendants knew that they were dealing with them and not with Domingo Tim Bun Liu.

In answer to this contention, the defendants contend that the only bill Domingo presented to them for merchandise belonging to the plaintiffs was forthe purpose of showing that he, Domingo, was charging the defendants for the merchandise in question the same price which he had been obliged topay to the plaintiffs.

The fact is not disputed that Domingo Tim Bun Liu purchased all or nearly all of the goods which he sold to the defendants, from the plaintiffs. We thinka fair preponderance of the evidence shows that the defendants, in their dealings with Domingo Tim Bun Liu, believed that they were dealing with himand not with the plaintiffs. There is no proof that Domingo ever notified the defendants that he was acting as the agent of the plaintiffs. Neither doesthe proof show that the plaintiffs ever notified the defendants that Domingo Tim Bun Liu was acting as their agent in selling the merchandise inquestion. It is not disputed that the defendants have paid to Domingo Tim Bun Liu, in full, for all the merchandise which they purchased of him.

It being established by a preponderance of the evidence that Domingo Tim Bun Liu acted in his own name selling the merchandise to the defendants,and that the defendants fully believed that they were dealing with the said Domingo Tim Bun Liu, without any knowledge of the fact that he was theagent of the plaintiffs, and having paid him in full for the merchandise purchased, they are not liable to the plaintiffs, for said merchandise, even thoughit be admitted that Domingo Tim Bun Liu was in fact the agent of the plaintiffs in selling the merchandise in question. This is true whether thetransaction is covered by the provisions of the Civil Code (art. 1717) or by the provisions of the Commercial Code (art. 246). Said article 1717 provides:

When an agent acts in his own name the principal shall have no action against the persons with whom the agent has contracted, nor the saidpersons against the principal.

Said article 246 provides that: "When an agent transacts business in his own name, it shall not be necessary for him to state who is the principal, andhe shall be directly liable, as if the business were for his own account, to the persons with whom he transacts the same, said persons not having anyright of action against the principal, nor the latter against the former, the liabilities of the principal and the agent to each other reserved."

(Castle Brothers, Wolf & Sons vs. Go Juno, 7 Phil. Rep., 144; Pastell & Regordosa vs. Hollman & Co., 2 Phil. Rep., 235; 11 Manresa, 470;Munroe vs. Kearney, 17 Ohio, 572.)

Having reached the above conclusions, we deem it unnecessary to further discuss the assignments of error and the questions presented by theappellant.

In view of the foregoing reasons, the judgment of the lower court should be and is hereby affirmed. So ordered.

Arellano, C.J., Torres, Mapa, Carson and Moreland, JJ., concur.




Manila

EN BANC

G.R. No. L-25950 December 24, 1926

E. AWAD, plaintiff-appellant,vs.

FILMA MERCANTILE CO., INC., defendant-appellee.

M. H. de Joya and Ramon P. Gomez for appellant.Crossfield and O'Brien for appellee.

OSTRAND, J.:

Early in the month of September, 1924, the plaintiff, doing business in the Philippine Islands under the name of E. Awad & Co., delivered certainmerchandise of the invoice value of P11,140 to Chua Lioc, a merchant operating under the name of Hang Chua Co. in Manila, said merchandise to besold on commission by Chua Lioc. Representing himself as being the owner of the merchandise, Chua Lioc, on September 8, 1924, sold it to thedefendant for the sum of P12,155.60. He owed the Philippine Manufacturing Co., the sum of P3,480, which the defendant agreed to pay, and was alsoindebted to the defendant itself in the sum of P2,017.98. The total amount of the two debts, P5,497.98, was deducted from the purchase price, leaving

a balance of P6,657.52 which the defendant promised to pay to Chua Lioc on or before October 9, 1924.

The merchandise so purchased on September 9, was delivered to the defendant, who immediately offered it for sale. Three days later D. J. Awad, therepresentative of the plaintiff in the Philippine Islands; having ascertained that the goods entrusted to Chua Lioc was being offered for sale by thedefendant, obtained authorization from Chua Lioc to collect the sum of P11,707 from said defendant and informed the latter's treasurer of the factsabove set forth. On September 15, D. J. Awad, in behalf of E. Awad & Co., wrote a letter to the defendant corporation advising it that, inasmuch as themerchandise belonged to E. Awad & Co., the purchase price should be paid to them, to which letter, the defendant, on September 18, 1924, made thefollowing answer:

Messrs. E. AWAD & CO.

435 Juan Luna Manila.

GENTLEMEN: We are in receipt of your letter of September 15, 1924, in which you state that certain blankets and shirts were brought from you by the

Chinaman Chua Lioc under false pretenses on consignment, basis, and in which you say that the merchandise is yours and we should make payment toyou for said merchandise. In answer to your letter, we beg to say to you that the blankets and shirts in question, together with other merchandise, werepurchased and received by us from the Chinaman Chua Lioc on September 9, 1924, in the ordinary course of business, and that there is now due fromus to the said Chinaman a balance of P6,657.52, which is payable on October 9, 1924. In view of these facts, we are unable to comply with yourrequest, and would advise you, in case this Chinaman is indebted to you for said merchandise, to take the necessary steps through the Court to securethe payment of this balance due to him to your firm, inasmuch as if you do not do so, we shall be obliged to pay the balance which we owe for saidmerchandise directly to him.

Yours respectfully,

FILMA MERCHANTILE CO. INC

On the same date, September 18, 1924, the Philippine Trust Company, brought an action, civil case No. 26934, against Chua Lioc for the recovery of

the sum of P1,036.36 and under a writ of attachment garnished the balance due Chua Lioc from the defendant. On October 7, E. Awad also brought anaction, civil case No. 27016, against Chua Lioc for the recovery of the sum of P11,140, the invoice value of the merchandise above-mentioned and alsoobtained a writ of attachment under which notice of garnishment of the said aforesaid balance we served upon the herein defendant.

The complaint in the present action was filed on November 26, 1924, the plaintiff demanding payment of the same sum of P11,140 for which action hadalready been brought against Chua Lioc. The defendant, its answer, set up as special defense that it brought the merchandise in good faith and withoutany knowledge whether of the person from whom or the condition under which the said merchandise had been acquired by Chua Lioc or Hang ChuanCo.; that the defendant therefore had acquired title to the merchandise purchased; that the balance of P6,657.52, now in the hands of the defendanthad been attached in the two actions brought on September 18, and October 7, respectively, and garnishment served upon the defendant, whotherefore, holds the money subject to the orders of the court in the cases above-mentioned, but which sum the defendant is able and willing to pay atany time when the court decides to whom the money lawfully pertains.1awphil.net



Upon trial, the court below dismissed the case without costs on the ground that the plaintiff was only entitled to payment of the sum of P6,657.52, butwhich sum the defendant had the right to retain subject to the orders of the court in cases Nos. 26134 and 27016. From this judgment the plaintiff appealed.

The law applicable to the case is well settled. Article 246 of the Code of Commerce reads as follows:

When the agent transacts business in his own name, it shall not be necessary for him to state who is the principal and he shall be directlyliable, as if the business were for his own account, to the persons with whom he transacts the same, said persons not having any right of action against the principal, nor the latter against the former, the liabilities of the principal and of the agent to each other always beingreserved.

The rule laid down in the article quoted is contrary to the general rule in the United States as to purchases of merchandise from agents with undisclosedprincipal, but it has been followed in a number of cases and is the law in its jurisdiction. (Pastells & Regordosa vs. Hollman & Co., 2 Phil., 235; CastleBros., Wolf & Sons vs. Go-Juno, & Phil., 144; Lim Tiu vs. Ruiz y Rementeria, 15 Phil., 367.) But the appellant points out several circumstances which, inhis opinion, indicate that the defendant-appellee was aware of the condition under which the merchandise was entrusted to the agent Chua Lioc andtherefore did not purchase the goods in good faith. This, if true, would, of course, lead to a decision of the case in favor of the plaintiff, but there is, inour opinion, nothing conclusive about the circumstances referred to and they are not sufficient to overcome the presumption of good faith.

The appealed judgment is in accordance with the law and the facts and is affirmed with the costs against the appellant. So ordered.

Avanceña, C. J., Street, Malcolm, Villamor, Johns, Romualdez and Villa-Real, JJ., concur.




Manila

EN BANC

G.R. No. L-19540 January 29, 1923

WING KEE COMPRADORING COMPANY, plaintiff-appellant,vs.

THE BARK "MONONGAHELA," VICTOR S. FOX & CO., INC., owner of the bark Monongahela ,THE ADMIRAL LINE, and C. G. LOTHIGIUS, defendants-appellees.

Luciano de la Rosa for appellant.Schwarzkopf and Ohnich for appellees.

MALCOLM, J.:

The plaintiff in this case, Wing Kee Compradoring Company, seeks to recover from the defendants, principally the Admiral Line, as agent for the Bark Monongahela , the sum of P17,675.64, with interest and costs, on account of goods, wares, and merchandise sold and delivered by the plaintiff to thedefendants for the use of the crew of the Bark Monongahela . The case, as submitted to the appellate court, must be reconstructed as best it may, frompleadings not altogether clear and explicit, from facts taken in part from the decision of the trial court, and in part from the exhibits, the stenographicnotes not having been written up, and from the briefs on the questions of law which are involved.

Turning first to the pleadings, we find the plaintiff in its amended complaint praying for judgment against the defendants jointly and severally for thesum of P17,675.64, meaning, thereby, we presume, that it had a just and preferred claim upon and against the Bark Monongahela , and that the debtwas due from the Admiral Line, the agent; C. G. Lothigius, the captain of the boat; and the owners of the boat, either Victor S. Fox & Co., Inc., or theUnited States Shipping Board Emergency Fleet Corporation. Captain Lothigius and the Admiral Line answered. The owners were not cited to appear. Noaction against the bark was taken. Following the trial, judgment was rendered dismissing the complaint, without special finding as to costs. Turning nextto the facts, the exhibits of record show that beginning with March 16, 1921, and ending with August 16, 1921, various supplies were furnished the BarkMonongahela by Wing Kee Compradoring Company. Most of the bills for these goods are made out against the "Admiral Line, S.S. Monongahela ." All areconsidered by the master and the first steward. It appears, therefore, that the plaintiff was looking to the Admiral Line for payment.

The first requisitions for the supplies are on forms headed "The Admiral Line." Then follows Manila, the date, and the name, "Wing Kee CompradoringCo." Next is the order, reading: "Please deliver to S. S. Monongahela now lying at Bay, the following goods and send bills to the Admiral Line:". Afterthis goods are named. At the foot is found, "United States Shipping Board Emergency Fleet Corporation," although these words are erased in a few of the requisitions, "The Admiral Line (Pacific Steamship Co.) Operating Agents.By J. J. Armstrong." On the side of the requisitions in red ink is thefollowing: "Note: This requisition must be receipted by either Chief Officer, Chief Steward or Chief Engineer and returned to the Admiral Line, with sixcopies of invoice immediately after delivery of goods." After May 4, 1921, the requisitions seem to have been made out by the steward and the master.We deduce from these documents that the Admiral Line was the operating agent for Monongahela , and was responsible as such until the agency wasterminated.

In the Manila Daily Bulletin for August 2, 1921, appeared the following:

"Notice — Bark Monongahela — The undersigned hereby give notice that they are not responsible in any manner whatsoever for any indebtednessincurred by the Bark Monongahela , its Master and/or Crew — The Admiral Line." The trial judge found as a fact that on or before August 4, 1921, the Admiral Line had ceased to act as agent for the Monongahela . Nevertheless, supplies were furnished the Monongahela after these dates by the plaintiff.

Turning finally to the law, we find section 1 of Title 2 of our Code of Commerce, given up to the subject, "Owners of Vessels and Their Agents." The firstarticle in this section (art. 586), and the provision of law which in our judgment is controlling, reads:

The owner of a vessel and the agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair,equip, and provision the vessel , provided the creditor proves that the amount claimed was invested therein.

By agent is understood the person intrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be.

The civil law, in this respect, is not at all dissimilar to the common law. By the general law of the United States, as well as of England and of Europe, ithas been held, that when the agents buy in their own names, but really for the account of their principal, the seller has an option to look to either forpayment, unless (1) he trusted the agent exclusively; or (2) by the usage and understanding of the business the agent only is held; or (3) unless thespecial circumstances of the case show that only the agent was intended to be bound and the seller knew it or was chargeable with knowledge of it. Although the English rule that, where the agents buys in his own name for the account of a foreign principal, the agent only is bound appears not tohave been followed in the United States, yet the general doctrine is the same, that the seller has an option to resort to either. (Berwind vs.Schultz[1885], 25 Fed., 912.)

Applying more directly the law to the pleadings and the facts, it is f irst to be noted that the plaintiff has not followed out i ts allegation that it has a claimagainst the Bark Monongahela , and might not have prospered any way, considering the rather dubious doctrine announced in the case of Health vs.Steamer San Nicolas ([1907], 7 Phil., 532). Not only this, but the plaintiff has made no effort to bring the owner of the bark into the case and has



pushed with no enthusiasm its case against the captain of the boat. What apparently the plaintiff wants is for the Admiral Line, as the agent for the BarkMonongahela , to pay the claim, leaving the latter to reimburse itself, if sees fit, from the owners.

To all this appellee answers that as the agency has ceased, action cannot be brought against the Admiral Line. To our minds this is a rather far-fetchedargument, for, pursued to its logical conclusion, every agent for a vessel could thus avoid responsibility pursuant to article 568 of the Code of Commerce, by giving up its agency when threatened with suit to enforce the obligations of third parties. Moreover, the bills were presented when the Admiral Line was yet the agent.

In resume, therefore, we are of opinion and so hold that the Admiral Line, as agent for the Bark Monongahela , is liable to the plaintiff for suppliesfurnished the Monongahela between March 16, 1921 and August 2, 1921, but is not responsible for supplies furnished after that date. The mathematicaladditions show that the debt of the Admiral Line to the plaintiff amounts to P16,526.29.

In accordance with the foregoing, judgment is reversed, and the plaintiff shall have and recover from the defendant, the Admiral Line, the sum of P16,526.29, without interest and costs. So ordered.

Araullo, C. J., Street, Avanceña, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.




Manila

EN BANC

G.R. No. L-39037 October 30, 1933

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee,vs.

PAZ AGUDELO Y GONZAGA, ET AL., defendants.PAZ AGUDELO Y GONZAGA, appellant.

Hilado and Hilado and Norberto Romualdez for appellant.Roman J. Lacson for appellee.

VILLA-REAL, J.:

The defendant Paz Agudelo y Gonzaga appeals to this court from the judgment rendered by the Court of First Instance of Occidental Negros, thedispositive part of which reads as follows:

Wherefore, judgment is rendered herein absolving the defendant Mauro A. Garrucho from the complaint and ordering the defendant

Paz Agudelo y Gonzaga to pay to the plaintiff the sum of P31,091.55, Philippine currency, together with the interest on the balance of P20,774.73 at 8 per cent per annum of P4.55 daily from July 16, 1929, until fully paid, plus the sum of P1,500 as attorney's fees, and thecosts of this suit.

It is hereby ordered that in case the above sums adjudged in favor of the defendant by virtue of this judgment are not paid to thePhilippine National Bank or deposited in the office of the clerk of this court, for delivery to the plaintiff, within three months from the date of this decision, the provincial sheriff of Occidental Negros shall set at public auction the mortgaged properties described in annex E of thesecond amended complaint, and apply the proceeds thereof to the payment of the sums in question.

It is further ordered that in case the proceeds of the mortgaged properties are not sufficient to cover the amount of this judgment, awrit of execution be issued against any other property belonging to the defendant Paz Agudelo y Gonzaga, not otherwise exempt fromexecution, to cover the balance resulting therefrom.

In support of her appeal, the appellant assigns six alleged errors as committed by the trial court, which we shall discuss in the course of this

decision.

The following pertinent facts, which have been proven without dispute during the trial, are necessary for the decision of the questions raised inthe present appeal, to wit:

On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her nephew, Mauro A. Garrucho, the documentExhibit K conferring upon him a special power of attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner andform he might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod, Occidental Negros, consisting in lots Nos. 61and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the improvement thereon.

On December 22, 1920, Amparo A. Garrucho executed the document Exhibit H whereby she conferred upon her brother Mauro A Garrucho aspecial power of attorney sufficiently broad in scope to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he mightdeem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor to constitute a mortgage on theproperties belonging to the respective principals, to secure his obligations.

On December 23, 1920, Mauro A. Garrucho executed in the favor of the plaintiff entity, the Philippine National bank, the document Exhibit G,whereby he constituted a mortgage on lot No. 878 of the cadastral survey of Murcia, Occidental Negros, with all the improvements thereon, described intransfer certificate of title No. 2415 issued in the name of Amparo A. Garrucho, to secure the payment of credits, loans, commercial overdrafts, etc., notexceeding P6,000, together with interest thereon, which he might obtain from the aforesaid plaintiff entity, issuing the corresponding promissory note tothat effect.

During certain months of the year 1921 and 1922, Mauro A. Garrucho maintained a personal current account with the plaintiff bank in the formof a commercial credit withdrawable through checks (Exhibits S, 1 and T).

On August 24, 1931, the said Mauro A. Garrucho executed in favor of the plaintiff entity, the Philippine National Bank, the document Exhibit Jwhereby he constituted a mortgage on lots Nos. 61 and 207 of the cadastral survey of Bacolod together with the buildings and improvements thereon,



described in original certificates of title Nos. 2216 and 1148, respectively, issued in the name of Paz Agudelo y Gonzaga, to secure the payment of credits, loans and commercial overdrafts which the said bank might furnish him to the amount of P16,00, payable on August 24, 1922, executing thecorresponding promissory note to that effect.

The mortgage deeds Exhibit G and J as well as the corresponding promissory notes for P6,000 and P16,000, respectively, were executed inMauro A. Garrucho's own name and signed by him in his personal capacity, authorizing the mortgage creditor, the Philippine National Bank, to takepossession of the mortgaged properties, by means of force if necessary, in case he failed to comply with any of the conditions stipulated therein.

On January 4, 1922, the manager of the Iloilo branch of the Philippine National Bank notified Mauro A. Garrucho that his promissory note forP6,000 of 10 days within which to make payment thereof (Exhibit O).1awphil.net

On May 9, 1922, the said manager notified Mauro A. Garrucho that his commercial credit was closed from that date (Exhibit S).

Inasmuch as Mauro A. Garrucho had overdrawn his credit with the plaintiff-appellee, the said manager thereof, in a letter dated June 27, 1922(Exhibit T), requested him to liquidate his account amounting to P15,148.15, at the same time notifying him that his promissory note for P16,000 givingas security for the commercial overdraft in question, had fallen due some time since.

On July 15, 1922, Mauro A. Garrucho, executed in favor of the plaintiff entity the deed Exhibit C whereby he constituted a mortgage on lots Nos.61 and 207 of the cadastral survey of Bacolod, together with the improvements thereon, described in transfer certificates of title Nos. 2216 and 1148,respectively, issued in the name of Paz Agudelo y Gonzaga, and on lot No. 878 of the cadastral survey of Murcia, described in transfer certificate of titleNo. 2415, issued in the name of Amparo A. Garrucho.

In connection of the credits, loans, and commercial overdrafts amounting to P21,000 which had been granted him, Mauro A. Garrucho, on thesaid date July 15, 1922, executed the promissory note, Exhibit B, for P21,000 as a novation of the former promissory notes for P6,000 and P16,000,respectively.

In view of the aforesaid consolidated mortgage, Exhibit C, the Philippine National Bank, on the said date of July 15, 1922, cancelled themortgages constituted on lots Nos. 61, 207 and 878 described in Torrens titles Nos. 2216, 1148 and 2415, respectively.

On November 25, 1925, Amparo A. Garrucho sold lot No. 878 described in certificate of title No. 2415, to Paz Agudelo y Gonzaga (Exhibit M).

On January 15, 1926, in the City of Manila, Paz Agudelo y Gonzaga signed the affidavit, Exhibit N, which reads as follows:

Know all men by these presents : That I, Paz Agudelo y Gonzaga, single, of age, and resident of the City of Manila, P. I., by thesepresent do hereby agree and consent to the transfer in my favor of lot No. 878 of the Cadastre of Murcia, Occidental Negros, P. I., by Miss Amparo A. Garrucho, as evidenced by the public instrument dated November 25, 1925, executed before the notary public Mr. Genaro B.Benedicto, and do hereby further agree to the amount of the lien thereon stated in the mortgage deed executed by Miss Amparo A. Garruchoin favor of the Philippine National Bank.

In testimony whereof, I hereunto affix my signature in the City of Manila, P.I., this 15th of January, 1926.

(Sgd.) PAZ AGUDELO Y GONZAGA.

Pursuant to the sale made by Amparo A. Garrucho in favor of Paz Agudelo y Gonzaga, of lot No. 878 of the cadastral survey of Murcia, describedin certificate of title No. 2145 issued in the name of said Amparo A. Garrucho, and to the affidavit, Exhibit N, transfer certificate of title No. 5369 wasissued in the name of Paz Agudelo y Gonzaga.

Without discussing and passing upon whether or not the powers of attorney issued in favor of Mauro A. Garrucho by his sister, Amparo A.Garrucho, and by his aunt, Paz Agudelo y Gonzaga, respectively, to mortgage their respective real estate, authorized him to obtain loans secured bymortgage in the properties in question, we shall consider the question of whether or not Paz Agudelo y Gonzaga is liable for the payment of the loansobtained by Mauro A. Garrucho from the Philippine National Bank for the security of which he constituted a mortgage on the aforesaid real estatebelonging to the defendant-appellant Paz Agudelo y Gonzaga.

Article 1709 of the Civil Code provides the following:

ART. 1709. By the contract of agency, one person binds himself to render some service, or to do something for the account or at therequest of another.

And article 1717 of the same Code provides as follows:

ART. 1717. When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agenthas contracted, or such persons against the principal.

In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. Casesinvolving things belonging to the principal are excepted.



The provisions of this article shall be understood to be without prejudice to actions between principal and agent.

Aside from the phrases "attorney in fact of h is sister, Amparo A. Garrucho, as evidenced by the power of attorney attached hereto" and "attorneyin fact of Paz Agudelo y Gonzaga" written after the name of Mauro A. Garrucho in the mortgage deeds, Exhibits G. and J, respectively, there is nothingin the said mortgage deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that heobtained the loans mentioned in the aforesaid mortgage deeds and constituted said mortgages as security for the payment of said loans, for theaccount and at the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases which simply described his legalpersonality, did not mean that Mauro A. Garrucho obtained the said loans and constituted the mortgages in question for the account, and at therequest, of his principals. From the titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in his personal capacity. Inthe aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the mortgage creditor Philippine National Bank as hisattorney in fact so that it might take actual and full possession of the mortgaged properties by means of force in case of violation of any of the

conditions stipulated in the respective mortgage contracts. If Mauro A. Garrucho acted in his capacity as mere attorney in fact of Amparo A. Garruchoand of Paz Agudelo y Gonzaga, he could not delegate his power, in view of the legal principle of "delegata potestas delegare non potest" (a delegatedpower cannot be delegated), inasmuch as there is nothing in the records to show that he has been expressly authorized to do so.

He executed the promissory notes evidencing the aforesaid loans, under his own signature, without authority from his principal and, therefore,were not binding upon the latter (2 Corpus Juris, pp. 630-637, par. 280). Neither is there anything to show that he executed the promissory notes inquestion for the account, and at the request, of his respective principals (8 Corpus Juris, pp. 157-158).

Furthermore, it is noted that the mortgage deeds, Exhibits C and J, were cancelled by the documents, Exhibits I and L, on July 15, 1922, and intheir stead the mortgage deed, Exhibit C, was executed, in which there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which shows that he obtained such credit fro himself in his personal capacity and secured the payment thereof by mortgage constitutedby him in his personal capacity, although on properties belonging to his principal Paz Agudelo y Gonzaga.

Furthermore, the promissory notes executed by Mauro A. Garrucho in favor of the Philippine National Bank, evidencing loans of P6,000 andP16,000 have been novated by the promissory notes for P21,000 (Exhibit B) executed by Mauro A. Garrucho, not only without express authority fromhis principal Paz Agudelo y Gonzaga but also under his own signature.

In the case of National Bank vs. Palma Gil (55 Phil., 639), this court laid down the following doctrine:

A promissory note and two mortgages executed by the agent for and on behalf of his principal, in accordance with a power of a ttorneyexecuted by the principal in favor of the agent, are valid, and as provided by article 1727 of contracted by the agent; but a mortgage on realproperty of the principal not made and signed in the name of the principal is not valid as to the principal.

It has been intimated, and the trial judge so stated. that it was the intention of the parties that Mauro A. Garrucho would execute the promissorynote, Exhibit B, and the mortgage deed, Exhibit C, in his capacity as attorney in facts of Paz Agudelo y Gonzaga, and that although the terms of theaforesaid documents appear to be contrary to the intention of the parties, such intention should prevail in accordance with article 1281 of the Civil Code.

Commenting on article 1281 of the Civil Code, Manresa, in his Commentaries to the Civil Code, says the following:

IV. Intention of the contracting parties; its appreciation . — In order that the intention may prevail, it is necessary that the question of interpretation be raised, either because the words used appear to be contrary thereto, or by the existence of overt acts opposed to suchwords, in which the intention of the contracting parties is made manifest. Furthermore, in order that it may prevail against the terms of thecontract, it must be clear or, in other words, besides the fact that such intention should be proven by admissible evidence, the latter must beof such charter as to carry in the mind of the judge an unequivocal conviction. This requisite as to the kind of evidence is laid down in thedecision relative to the Mortgage Law of September 30, 1891, declaring that article 1281 of the Civil Code gives preference to intention onlywhen it is clear. When the aforesaid circumstances is not present in a document, the only thing left for the register of deeds to do is tosuspend the registration thereof, leaving the solution of the problem to the free will of the parties or to the decision of the courts.

However, the evident intention which prevails against the defective wording thereof is not that of one of the parties, but the generalintent, which, being so, is to a certain extent equivalent to mutual consent, inasmuch as it was the result desired and intended by thecontracting parties. (8 Manresa, 3d edition, pp. 726 and 727.)

Furthermore, the records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the promissory note, Exhibit B, was for his

principal Paz Agudelo y Gonzaga. The special power of attorney, Exhibit K, does not authorize Mauro A. Garrucho to constitute a mortgage on the realestate of his principal to secure his personal obligations. Therefore, in doing so by virtue of the document, Exhibit C, he exceeded the scope if hisauthority and his principal is not liable for his acts. (2 Corpus Juris, p. 651; article 1714, Civil Code.)

It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz Agudelo y Gonzaga, the latter is responsiblefor the acts of the former although he acted in his own name, in accordance with the exception contained in article 1717 of the Civil Code. It would bean exception with the properties of his own name in connection with the properties of his principal, does so within the scope of his authority. It is notedthat Mauro A. Garrucho was not authorized to execute promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute amortgage on her real properties to secure such promissory notes. The plaintiff Philippine National Bank should know this inasmuch as it is in duty boundto ascertain the extent of the agent's authority before dealing with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personallyliable for the amount of the promissory note Exhibit B. (2 Corpus Juris, pp. 563-564.)

However, Paz Agudelo y Gonzaga in an affidavit dated January 15, 1926 (Exhibit AA), and in a letter dated January 16, 1926 (Exhibit Z), gaveher consent to the lien on lot No. 878 of the cadastre of Murcia, Occidental Negros, described in Torrens title No. 5369, the ownership of which was



transferred to her by her niece Amparo A. Garrucho. This acknowledgment, however, does not extend to lots Nos. 207 and 61 of the cadastral survey ofBacolod, described in transfer certificates of title Nos. 1148 and 2216, respectively, inasmuch as, although it is true that a mortgage is indivisible as tothe contracting parties and as top their successors in interest (article 1860, Civil Code), it is not so with respect to a third person who did not take partin the constitution thereof either personally or through an agent, inasmuch as he can make the acknowledgment thereof in the form and to the extenthe may deem convenient, on the ground that he is not in duty bound to acknowledge the said mortgage. Therefore, the only liability of the defendant-appellant Paz Agudelo y Gonzaga is that which arises from the aforesaid acknowledgment, but only with respect to the lien and not to the principalobligation secured by the mortgage acknowledged by her to have been constituted on said lot No. 878 of the cadastral survey of Murcia, OccidentalNegros. Such liability is not direct but a subsidiary one.

Having reach this contention, it is unnecessary to pass upon the other questions of law raised by the defendant- appellant in her brief and uponthe law cited therein.

In view of the foregoing consideration, we are of the opinion and so hold that when an agent negotiates a loan in his personal capacity andexecutes a promissory note under his own signature, without express authority from his principal, giving as security therefor real estate belonging to theletter, also in his own name and not in the name and representation of the said principal, the obligation do constructed by him is personal and does notbind his aforesaid principal.

Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary tothat of Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia, Occidental Negros, described in Torrens title No. 2415. However,inasmuch as the principal obligator, Mauro A. Garrucho, has been absolved from the complaint and the plaintiff- appellee has not appealed from the judgment absolving him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiaryobligation in view of the legal maxim that the accessory follows the principal. Wherefore, the defendant herein should also be absolved from thecomplaint which is hereby dismissed, with the costs against the appellee. So ordered.

Avanceña, C.J., Malcolm, Hull, and Imperial, JJ., concur.




Manila

EN BANC

G.R. No. L-10919 February 28, 1958

LORETO LORCA, plaintiff-appellant,vs.

JOSE S. DINEROS, defendant-appellee.

Pedro B. Puya for appellant.Manuel F. Zamora for appellee.

BENGZON, J.:

This action for damages against Deputy Sheriff Jose S. Dineros was dismissed by Hon. Pantaleon Pelayo, Judge of Iloilo, on the ground that it is theSheriff who is responsible, if at all — not this deputy.

Such decision resulted from a motion for judgment on the pleadings. The facts are short and simple:

Pursuant to a writ of execution issued in Civil Case No. 1062 entitled "Rosario Suero vs. Jose Morata" Jose S. Dineros as Deputy Sheriff and in the nameof the Sheriff sold at public auction to Jose Bermejo and Rosario Suero the property attached therein, disregarding the third-party claim of Loreto Lorca

(herein Plaintiff) who asserted ownership over said property. This suit for damages is the result of said auction sale. Defendant, in his answer, deniedliability, pointing out, that he had merely acted for and on behalf of Provincial Sheriff, Cipriano Cabaluna.

The appellant insists here that Dineros was responsible in view of sec. 334 of the Revised Administrative Code and sec. 15, Rule 39, Rules of Court,which provides as follows:

SEC. 334 — Right of Bonded Officer to require Bond from Deputy or assistant. — A sheriff or other accountable official may require any of hisdeputies or assistants, not bonded in the fidelity fund, to give an adequate personal bond as security against loss by reason of any wrongdoing on the part of such deputy or assistant. The taking of such security shall in no wise impair the independent civil liability of any of theparties.

. . . and in case the sheriff or attaching officer is sued for damages as a result of the attachment. . . .

In the light of section 330 of the Administrative Code we think the above provisions apply where the deputy acts in his own name or is guilty of active

malfeasance1 or possibly where he exceeds the limits of his agency. In this case it is clear from the certificate of sale attached to the complaint as AnnexC that Dineros acted all the time in the name of the Ex-Officio Provincial Sheriff of Iloilo; and no allegations of misfeasance are made. The Sheriff isliable to third persons on the acts of his deputy,2 in the same manner that the principal is responsible for the acts of his agent, that is why he is requiredto post a bond for "the benefit of whom it may concern," (Section 330, Revised Administrative Code) for instance the owners of property unlawfully soldby him on execution.3

The complaint should not have been dismissed, appellant argues, since the court could have included the Sheriff as party defendant, in line with Rule 3,section 11 of the Rules of Court. However, what should have been done was not "inclusion" as plaintiff asked, nor "exclusion" under said section 11. Itwas "substitution" of the deputy by the Sheriff. Anyway, the word "may" in said see. 11 implies direction of the court; and we are shown no reasonsindicating abuse thereof.

This is not the first time an action is dismissed for the reason that the agent — instead of his principal — was made the party defendant. (See Macias & Co. vs. Warner Barnes, 43 Phil., 155; Banque Generate Belge vs.Walter Bull & Co., 84 Phil., 164, 47 Off. Gaz., 138.)

Judgment affirmed, with costs against appellant.

Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ., concur.




Manila

EN BANC

G.R. No. L-13547 December 29, 1959

JOAQUIN T. ORTEGA, plaintiff-appellee,vs.

BAUANG FARMERS COOPERATIVE MARKETING ASSOCIATION, defendant-appellant.

Joaquin T. Ortega for appellee.Florentino G. Libatigue for appellant.

MONTEMAYOR, J.:

The defendant Bauang FACOMA (Farmers Coopeartive and Marketing Association) is appealing the decision of the Court of First Instance of La Union(Civil Case No. 2025), dated July 11, 1956, ordering it to pay to plaintiff Joaquin T. Ortega the sum of P3,136.10, with legal interest from the date of thefiling of the complaint, plus costs. The appeal was originally taken to the Court of Appeals, but by resolution of that Court dated January 29, 1958, theappeal was sent up to us because of its opinion "that the issues involved are purely legal, to wit: The propriety is not dismissing the case, the non-inclusion of the ACCFA and the applicability of Article 1883, New Civil Code."

The facts in this case are simple. On June 6, 1955, plaintiff sold and delivered to defendant 2,643 kilos of flue cured Virginia leaf tobacco valued atP7,136.10. On June 8 and June 13, 1955, defendant paid plaintiff the amount of P1,325.00 and P2,675.00, respectively, on account of the totalpurchase price, leaving a balance of P3,136.10, which the defendant in spite of repeated demands made upon it has failed and refused to pay. For thecollection of this balance, the present action was filed by plaintiff.

In its answer, defendant admitted the allegations of the complaint but set up the affirmative defense that the tobacco leaf bought by it from plaintiff was shipped and delivered to and received by the ACCFA (Agricultural Credit and Cooperative Financing Administration), in accordance with an agencycontract entered into between said ACCFA as principal, and the defendant Bauang FACOMA, as agent, for the purchase of local Virginia leaf tobacco,and that final liquidation had not been made between principal and agent. Shortly after filing its answer, defendant filed a "Motion to Bring in ThirdParty Defendant," attaching thereto its "Third Party Complaint" against the ACCFA praying that judgment be rendered against it for all sums that may beadjudged against defendant in favor of the plaintiff.

On May 12, 1956, plaintiff filed an "Opposition to Inclusion of Third-Party Defendant and Motion for Judgment on Pleadings." On May 14, 1956, the trialcourt, finding the ACCFA to be a necessary party in the case, granted the motion to bring it as a third-party defendant. On June 14, 1956, the ACCFAfiled a motion to strike out the third party complaint mainly on the ground that it was filed without leave of Court. On June 21, 1956, the trial court,presided by another Judge, granted the motion and ordered that "the third-party complaint be stricken out." On July 6, 1956, when the case was calledfor trial, the parties, plaintiff and defendant, filed the following stipulation of facts:

Come now the plaintiff and the defendant Bauang FACOMA, thru its undersigned Attorney and to this Honorable Court respectfully submit thefollowing stipulation of facts:

1. That the plaintiff admits that the Memorandum Agreement was entered into between defendant and the ACCFA, copy of which is attachedhereto at Annex 'A'.

2. That the plaintiff admits that on March 28, 1956, the ACCFA revoked said Memorandum of Agreement, copy of said Memorandum isherewith attached as Annex 'B'.

3. That the defendant Bauang FACOMA admits that at the time the plaintiff sold and delivered his tobacco to the Bauang FACOMA, the

plaintiff was not informed of the Agency existing between the ACCFA and the defendant Bauang FACOMA.

4. That the purchase invoice issued to plaintiff upon his delivery of the tobacco to the Bauang FACOMA does not mention nor disclose the ACCFA as being a party to the sale or in any way connected with the transaction, said form hav ing been standard receipt used by all FACOMAin 1955.

PREMISES CONSIDERED, it is respectfully prayed that the foregoing stipulation of facts be approved and made the basis of the decision of this Court as to the affirmative defenses alleged by the defendant. lawphi1.net

On the basis of the pleadings and the stipulation of facts above-reproduced, the trial court on July 11, 1956, rendered the appealed decision mentionedat the beginning of this opinion.

In support of its appeal, appellant makes the following assignment of errors:



I. The lower court erred in not dismissing the case against defendant.

II. The lower court erred in not including the Agricultural Credit and Cooperative Financing Administration (ACCFA) as third-party defendant.

III. The lower court erred in basing its decision on Article 1883 of the Civil Code.

Appellant invites our attention to Civil Case NO. 1024 for interpleader filed in the Court of First Instance of La Union, ent itled "ACCFA, plaintiff, vs. PioBombani, et al., defendants". Appellants assures the Tribunal that plaintiff Joaquin T. Ortega in the present case, was or is one of the defendants that inCase No. 1024, whose purpose was that all sellers of tobacco leaf brought by or for ACCFA in the year 1955, plaintiff Ortega herein among them, litigatefor the distribution and collection among themselves of the sum of P93,660.72, as the price of said tobacco leaf, placed at their disposal. The record

shows that in ACCFA's motion to strike out the third-party complaint filed against it in the present Case No. 1025, is included the following statement:

Moreover, the claim of plaintiff which is sought to be the basis of the third-party complaint is one of those included in Civil Case No. 1024 of this Court, entitled "ACCFA vs. Pio Bombani, et al.," (for interpleader) which, if given due course, should render it unnecessary for thenumerous claimants to ventilate their claims in separate ordinary civil actions. As the undersigned council has manifested in Civil Case No.1024, interpleader was resorted to precisely to obviate the multiplicity of suits, delay in the recovery of the claimants, unnecessary expenseon their part and waste of the valuable time of the Court.

Another fact cited by appellant in support of its appeal is that the P4,000.00 sum total of the two installments of P1,325.00 and P2,675.00 delivered toplaintiff on account of the total purchase price of P7,136.10 was actually paid by the ACCFA itself. From all this, appellant urges that not only was the ACCFA the real purchaser of the leaf tobacco involved sold by the plaintiff, but that it was also wil ling and ready to pay the balance sought to becollected in the present case.

On the other hand, plaintiff-appellee contends that the appealed decision is based on the fact that the defendant admitted having purchased andreceived from the plaintiff the Virginia leaf tobacco involved, valued at P7,136.10; that according to the stipulation of facts, plaintiff was not informed of the relation of principal and agent between the ACCFA and the Bauang FACOMA at the time of the purchase, and that the invoice covering the purchasewhich was issued to him neither mentions nor discloses the ACCFA as a party to the purchase; and on Article 1883 of the New Civil Code which providesthat if an agent acts in his own name, the principal has no right of action against the persons with whom said agent has contracted, neither have suchpersons against the principal, and that in such case, the agent is the one bound, as if the transaction were his own.

Considering the facts and circumstances surrounding this case, we are inclined to agree with the appellant. Although at the time of the purchase of thetobacco in question, the attention of the plaintiff was not called to the existence of the agency agreement between the ACCFA and the Bauang FACOMA,there is reason to believe that he actually knew that agency and that the tobacco leaf was purchased not on account of the Bauang FACOMA, butactually for the ACCFA, which is the agency of the Government charged with the purchase of Virginia leaf tobacco, in the implementation of the policy ofthe Government to buy all Virginia leaf tobacco grown locally, for purposes of aiding Virginia tobacco growers and to foster the tobacco industry. It is afact well known that the FACOMA (Farmers Cooperative and Marketing Association) as its name implies, is concerned mainly, if not exclusively, in thesale and marketing of the agricultural produce of the farmers. It is not engaged in the buy and sell business for profit. As already stated, installments onaccount of the total sales price was paid by the ACCFA, not by the defendant. Furthermore, the action for interpleader, Civil Case No. 1024 of the Courtof First Instance of La Union, which must have been filed ahead of the present Case No. 1025 in the same court, judging by its case number.was noticeto those persons that sold tobacco leaf in La Union in the year 1955, including plaintiff herein, that the ACCFA was the real buyer of said tobacco leaf

and that it was ready to pay the amount of said purchases. Again, the motion by the ACCFA to strike out the third-party complaint in this present casewith its statement above-reproduced emphasizes the policy of the Government to avoid multiplicity of suits, and the delay and expense involved inseparate actions to recover the purchase price of Virginia leaf tobacco by consolidating all said claims in one single action when possible.

In view of the foregoing, the appealed decision is hereby set aside and the case is ordered remanded to the trial court for further proceedings. Theorder of the trial court striking out the third-party complaint is set aside and the ACCFA should be included as a party in the "further proceedings"contemplated. No costs.

Paras, C. J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Endencia, Barrera, and Gutierres David, JJ., concur.




Manila

FIRST DIVISION

G.R. No. 95703 August 3, 1992

RURAL BANK OF BOMBON (CAMARINES SUR), INC., petitioner,vs.HON. COURT OF APPEALS, EDERLINDA M. GALLARDO, DANIEL MANZO and RUFINO S. AQUINO,respondents.

L.M. Maggay & Associates for petitioner.

GRIÑO-AQUINO, J.:

This petition for review seeks reversal of the decision dated September 18, 1990 of the Court of Appeals, reversing the decision of the Regional TrialCourt of Makati, Branch 150, which dismissed the private respondents' complaint and awarded damages to the petitioner, Rural Bank of Bombon.

On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a special power of attorney in favor of Rufina S. Aquino authorizinghim:

1. To secure a loan from any bank or lending institution for any amount or otherwise mortgage the property covered by TransferCertificate of Title No. S-79238 situated at Las Piñas, Rizal, the same being my paraphernal property, and in that connection, tosign, or execute any deed of mortgage and sign other document requisite and necessary in securing said loan and to receive theproceeds thereof in cash or in check and to sign the receipt therefor and thereafter endorse the check representing the proceeds of loan. (p. 10, Rollo .)

Thereupon, Gallardo delivered to Aquino both the special power of attorney and her owner's copy of Transfer Certificate of Title No. S-79238 (19963-A).

On August 26, 1981, a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural Bank of Bombon (Camarines Sur), Inc.(hereafter, defendant Rural Bank) over the three parcels of land covered by TCT No. S-79238. The deed stated that the property was being given assecurity for the payment of "certain loans, advances, or other accommodations obtained by the mortgagor from the mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00), plus interest at the rate of fourteen (14%) per annum . . ." (p. 11, Rollo ).

On January 6, 1984, the spouses Ederlinda Gallardo and Daniel Manzo filed an action against Rufino Aquino and the Bank because Aquino allegedly lefthis residence at San Pascual, Hagonoy, Bulacan, and transferred to an unknown place in Bicol. She discovered that Aquino first resided at Sta. Isabel,Calabanga, Camarines Sur, and then later, at San Vicente, Calabanga, Camarines Sur, and that they (plaintiffs) were allegedly surprised to discover thatthe property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for personal use and benefit of Aquino; that the mortgagorin the deed was defendant Aquino instead of plaintiff Gallardo whose address up to now is Manuyo, Las Piñas, M.M., per the title (TCT No. S-79238)and in the deed vesting power of attorney to Aquino; that correspondence relative to the mortgage was sent to Aquino's address at "Sta. Isabel,Calabanga, Camarines Sur" instead of Gallardo's postal address at Las Piñas, Metro Manila; and that defendant Aquino, in the real estate mortgage,appointed defendant Rural Bank as attorney in fact, and in case of judicial foreclosure as receiver with corresponding power to sell and that althoughwithout any express authority from Gallardo, defendant Aquino waived Gallardo's rights under Section 12, Rule 39, of the Rules of Court and the propervenue of the foreclosure suit.

On January 23, 1984, the trial court, thru the Honorable Fernando P. Agdamag, temporarily restrained the Rural Bank "from enforcing the real estatemortgage and from foreclosing it either judicially or extrajudicially until further orders from the court" (p.36, Rollo ).

Rufino S. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a bank so that he could use the proceeds to liquidateher obligation of P350,000 to him. The obligation to pay the Rural Bank devolved on Gallardo. Of late, however, she asked him to pay the Bank butdefendant Aquino set terms and conditions which plaintiff did not agree to. Aquino asked for payment to him of moral damages in the sum of P50,000and lawyer's fees of P35,000.

The Bank moved to dismiss the complaint and filed counter-claims for litigation expenses, exemplary damages, and attorney's fees. It also filed acrossclaim against Aquino for P350,000 with interest, other bank charges and damages if the mortgage be declared unauthorized.

Meanwhile, on August 30, 1984, the Bank filed a complaint against Ederlinda Gallardo and Rufino Aquino for "Foreclosure of Mortgage" docketed as CivilCase No. 8330 in Branch 141, RTC Makati. On motion of the plaintiff, the foreclosure case and the annulment case (Civil Case No. 6062) wereconsolidated.



On January 16, 1986, the trial court rendered a summary judgment in Civil Case No. 6062, dismissing the complaint for annulment of mortgage anddeclaring the Rural Bank entitled to damages the amount of which will be determined in appropriate proceedings. The court lifted the writ of preliminaryinjunction it previously issued.

On April 23, 1986, the trial court, in Civil Case No. 8330, issued an order suspending the foreclosure proceedings until after the decision in theannulment case (Civil Case No. 6062) shall have become final and executory.

The plaintiff in Civil Case No. 6062 appealed to the Court of Appeals, which on September 18, 1990, reversed the trial court. The dispositive portion of the decision reads:

UPON ALL THESE, the summary judgment entered by the lower court is hereby REVERSED and in lieu thereof, judgment is herebyRENDERED, declaring the deed of real estate mortgage dated August 26, 1981, executed between Rufino S. Aquino with the maritalconsent of his wife Bibiana Aquino with the appellee Rural Bank of Bombon, Camarines Sur, unauthorized, void and unenforceableagainst plaintiff Ederlinda Gallardo; ordering the reinstatement of the preliminary injunction issued at the onset of the case and atthe same time, ordering said injunction made permanent.

Appellee Rural Bank to pay the costs.(p. 46, Rollo .)

Hence, this petition for review by the Rural Bank of Bombon, Camarines Sur, alleging that the Court of Appeals erred:

1. in declaring that the Deed of Real Estate Mortgage was unauthorized, void, and unenforceable against the private respondentEderlinda Gallardo; and

2. in not upholding the validity of the Real Estate Mortgage executed by Rufino S. Aquino as attorney-in-fact for Gallardo, in favor of

the Rural Bank of Bombon, (Cam. Sur), Inc.

Both assignments of error boil down to the lone issue of the validity of the Deed of Real Estate Mortgage dated August 26, 1981, executed by Rufino S. Aquino, as attorney-in-fact of Ederlinda Gallardo, in favor of the Rural Bank of Bombon (Cam. Sur), Inc.

The Rural Bank contends that the real estate mortgage executed by respondent Aquino is valid because he was expressly authorized by Gallardo tomortgage her property under the special power of attorney she made in his favor which was duly registered and annotated on Gallardo's title. Since theSpecial Power of Attorney did not specify or indicate that the loan would be for Gallardo's benefit, then it could be for the use and benefit of theattorney-in-fact, Aquino.

However, the Court of Appeals ruled otherwise. It held:

The Special Power of Attorney above quoted shows the extent of authority given by the plaintiff to defendant Aquino. Butdefendant Aquino in executing the deed of Real Estate Mortgage in favor of the rural bank over the three parcels of land covered by

Gallardo's title named himself as the mortgagor without stating that his signature on the deed was for and in behalf of EderlindaGallardo in his capacity as her attorney-in-fact.

At the beginning of the deed mention was made of "attorney-in-fact of Ederlinda H. Gallardo," thus: " (T)his MORTGAGE executedby Rufino S. Aquino attorney in fact of Ederlinda H. Gallardo, of legal age, Filipino, married to Bibiana Panganiban with postaladdress at Sta. Isabel . . .," but which of itself, was merely descriptive of the person of defendant Aquino. Defendant Aquino evensigned it plainly as mortgagor with the marital consent yet of his wife Bibiana P. Aquino who signed the deed as "wife of mortgagor."

xxx xxx xxx

The three (3) promissory notes respectively dated August 31, 1981, September 23, 1981 and October 26, 1981, were each signedby Rufino Aquino on top of a line beneath which is written "signature of mortgagor" and by Bibiana P. Aquino on top of a line underwhich is written "signature of spouse," without any mention that execution thereof was for and in behalf of the plaintiff asmortgagor. It results, borne out from what were written on the deed, that the amounts were the personal loans of defendant

Aquino. As pointed out by the appellant, Aquino's wife has not been appointed co -agent of defendant Aquino and her signature onthe deed and on the promissory notes can only mean that the obligation was personally incurred by them and for their ownpersonal account.

The deed of mortgage stipulated that the amount obtained from the loans shall be used or applied only for "fishpond (bangus andsugpo production)." As pointed out by the plaintiff, the defendant Rural Bank in its Answer had not categorically denied theallegation in the complaint that defendant Aquino in the deed of mortgage was the intended user and beneficiary of the loans andnot the plaintiff. And the special power of attorney could not be stretched to include the authority to obtain a loan in said defendant Aquino's own benefit. (pp. 40-41, Rollo .)

The decision of the Court of Appeals is correct. This case is governed by the general rule in the law of agency which this Court, applied in "PhilippineSugar Estates Development Co. vs. Poizat," 48 Phil. 536, 538:



It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, itmust upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It isnot enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal.Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in factthe agent has acted in his own name and has set his own hand and seal to the mortgage. This is especially true where the agenthimself is a party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of theprincipal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, itis not valid as to the principal.

In view of this rule, Aquino's act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without any indication that he wassigning for and in behalf of the property owner, Ederlinda Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank and

not as the agent or attorney-in-fact of Gallardo. The Court of Appeals further observed:

It will also be observed that the deed of mortgage was executed on August 26, 1981 therein clearly stipulating that it was beingexecuted "as security for the payment of certain loans, advances or other accommodation obtained by the Mortgagor from theMortgagee in the total sum of Three Hundred Fifty Thousand Pesos only (P350,000.00)" although at the time no such loan oradvance had been obtained. The promissory notes were dated August 31, September 23 and October 26, 1981 which weresubsequent to the execution of the deed of mortgage. The appellant is correct in claiming that the defendant Rural Bank should nothave agreed to extend or constitute the mortgage on the properties of Gallardo who had no existing indebtedness with it at thetime.

Under the facts the defendant Rural Bank appeared to have ignored the representative capacity of Aquino and dealt with him andhis wife in their personal capacities. Said appellee Rural Bank also did not conduct an inquiry on whether the subject loans were tobenefit the interest of the principal (plaintiff Gallardo) rather than that of the agent although the deed of mortgage was explicit thatthe loan was for purpose of the bangus and sugpo production of defendant Aquino.

In effect, with the execution of the mortgage under the circumstances and assuming it to be valid but because the loan taken wasto be used exclusively for Aquino's business in the "bangus" and "sugpo" production, Gallardo in effect becomes a surety who ismade primarily answerable for loans taken by Aquino in his personal capacity in the event Aquino defaults in such payment. Under Art. 1878 of the Civil Code, to obligate the principal as a guarantor or surety, a special power of attorney is required. No suchspecial power of attorney for Gallardo to be a surety of Aquino had been executed. (pp. 42-43, Rollo .)

Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in accordance with Article 1883 whichprovides:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent hascontracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were hisown, except when the contract involves things belonging to the principal.

The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the case at bar. Herein respondent Aquino actedpurportedly as an agent of Gallardo, but actually acted in his personal capacity. Involved herein are properties titled in the name of respondent Gallardoagainst which the Bank proposes to foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity. Under these circumstances,we hold, as we did in Philippine Sugar Estates Development Co. vs. Poizat, supra , that Gallardo's property is not liable on the real estate mortgage:

There is no principle of law by which a person can become liable on a real mortgage which she never executed either in person orby attorney in fact. It should be noted that this is a mortgage upon real property, the title to which cannot be divested except bysale on execution or the formalities of a will or deed. For such reasons, the law requires that a power of attorney to mortgage orsell real property should be executed with all of the formalities required in a deed. For the same reason that the personal signatureof Poizat, standing alone, would not convey the title of his wife in her own real property, such a signature would not bind her as amortgagor in real property, the title to which was in her name. (p. 548.)

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, we AFFIRM it in toto . Costs against the petitioner.

SO ORDERED.

Cruz, Medialdea and Bellosillo, JJ., concur.




Manila

EN BANC

G.R. No. L-13471 January 12, 1920

VICENTE SY-JUCO and CIPRIANA VIARDO, plaintiffs-appellants,vs.

SANTIAGO V. SY-JUCO, defendant-appellant.

Sumulong and Estrada for plaintiffs and appellants.Delgado and Delgado for defendant and appellant.

AVANCEÑA, J.:

In 1902 the defendant was appointed by the plaintiffs administrator of their property and acted as such until June 30, 1916, when his authority wascancelled. The plaintiffs are defendant's father and mother who allege that during his administration the defendant acquired the property claimed in thecomplaint in his capacity as plaintiffs' administrator with their money and for their benefit. After hearing the case the trial court rendered his decision,the dispositive part of which is the following:

Wherefore, the court give judgment for the plaintiffs and orders:

1. That the defendant return to the plaintiffs the launch Malabon , in question, and execute all the necessary documents and instruments forsuch delivery and the registration in the records of the Custom House of said launch as plaintiffs' property;

2. That the defendant return to the plaintiffs the casco No. 2584, or pay to them the value thereof which has been fixed at the sum of P3,000and should the return of said casco be made, execute all the necessary instruments and documents for its registration in plaintiffs' name atthe Custom House; and

3. That the defendant return to the plaintiffs the automobile No. 2060 and execute the necessary instruments and documents for itsregistration at the Bureau of Public Works. And judgment is hereby given for the defendant absolving him from the complaint so far concerns:

1. The rendition of accounts of his administration of plaintiffs property;

2. The return of the casco No. 2545;

3. The return of the typewriting machine;

4. The return of the house occupied by the defendant; and

5. The return of the price of the piano in question.

Both parties appealed from this judgment.

In this instance defendant assigns three errors alleged to have been committed by the lower court in connection with the three items of the dispositivepart of the judgment unfavorable to him. We are of the opinion that the evidence sufficiently justifies the judgment against the defendant.

Regarding the launch Malabon , it appears that in July, 1914, the defendant bought it in his own name from the Pacific Commercial Co., and afterwardsregistered it at the Custom House. But his does not necessarily show that the defendant bought it for himself and with his own money, as he claims.

This transaction was within the agency which he had received from the plaintiffs. The fact that he has acted in his own name may be only, as webelieve it was, a violation of the agency on his part. As the plaintiffs' counsel truly say, the question is not in whose favor the document of sale of thelaunch is executed nor in whose name same was registered, but with whose money was said launch bought. The plaintiffs' testimony that it was boughtwith their money and for them is supported by the fact that, immediately after its purchase, the launch had to be repaired at their expense, althoughsaid expense was collected from the defendant. I the launch was not bought for the plaintiffs and with their money, it is not explained why they had topay for its repairs.

The defendant invokes the decision of this Court in the case of Martinez vs. Martinez (1 Phil. Rep., 647), which we do not believe is applicable to thepresent case. In said case, Martinez, Jr., bought a vessel in his own name and in his name registered it at the Custom House. This court then said thatalthough the funds with which the vessel was bought belonged to Martinez Sr., Martinez Jr. is its sole and exclusive owner. But in said case the relationof principal and agent, which exists between the plaintiffs and the defendant in the present case, did not exist between Martinez, Sr., and Martinez, Jr.By this agency the plaintiffs herein clothed the defendant with their representation in order to purchase the launch in question. However, the defendantacted without this representation and bought the launch in his own name thereby violating the agency. If the result of this transaction should be thatthe defendant has acquired for himself the ownership of the launch, it would be equivalent to sanctioning this violation and accepting its consequences.But not only must the consequences of the violation of this agency not be accepted, but the effects of the agency itself must be sought. If the



defendant contracted the obligation to but the launch for the plaintiffs and in their representation, but virtue of the agency, notwithstanding the factthat he bought it in his own name, he is obliged to transfer to the plaintiffs the rights he received from the vendor, and the plaintiffs are entitled to besubrogated in these rights.

There is another point of view leading us to the same conclusion. From the rule established in article 1717 of the Civil Code that, when an agency actsin his own name, the principal shall have no right of action against the person with whom the agent has contracted, cases involving things belonging tothe principal are excepted. According to this exception (when things belonging to the principal are dealt with) the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name (Decision of the Supreme Court of Spain, May 1, 1900).This means that in the case of this exception the agent's apparent representation yields to the principal's true representation and that, in reality and ineffect, the contract must be considered as entered into between the principal and the third person; and, consequently, if the obligations belong to theformer, to him alone must also belong the rights arising from the contract. The money with which the launch was bough having come from the plaintiff,

the exception established in article 1717 is applicable to the instant case.

Concerning the casco No. 2584, the defendant admits it was constructed by the plaintiff himself in the latter's ship-yard. Defendant's allegation that itwas constructed at his instance and with his money is not supported by the evidence. In fact the only proof presented to support this allegation is hisown testimony contradicted, on the on hand, by the plaintiffs' testimony and, on the other hand, rebutted by the fact that, on the date this casco wasconstructed, he did not have sufficient money with which to pay the expense of this construction.

As to the automobile No. 2060, there is sufficient evidence to show that its prices was paid with plaintiffs' money. Defendant's adverse allegation that itwas paid with his own money is not supported by the evidence. The circumstances under which, he says, this payment has been made, in order toshow that it was made with his own money, rather indicate the contrary. He presented in evidence his check-book wherein it appears that on March 24,1916, he issued a check for P300 and on the 27th of same month another for P400 and he says that the first installment was paid with said checks. Butit results that, in order to issue the check for P300 on March 24 of that year, he had to deposit P310 on that same day; and in order to issue the othercheck for P400 on the 27th of the same month, he deposited P390 on that same day. It was necessary for the defendant to make these deposits for onthose dates he had not sufficient money in the bank for which he could issue those checks. But, in order to pay for the price of the automobile, he couldhave made these payments directly with the money he deposited without the necessity of depositing and withdrawing it on the same day. If this action

shows something, it shows defendant's preconceived purpose of making it appear that he made the payment with his own funds deposited in the bank.

The plaintiffs, in turn, assign in this instance the following three errors alleged to have been committed by the lower court:

1. The court erred in not declaring that the plaintiffs did not sell to the defendant the casco No. 2545 and that they were its owners until itwas sunk in June, 1916.

2. The court erred in absolving the defendant from his obligation to render an account of his administration to the plaintiffs, and to pay to thelatter the amount of the balance due in their favor.

3. The court erred in not condemning the defendant to pay to the plaintiffs the value of the woods, windows and doors taken from theirlumber-year by the defendant and used in the construction of the house on calle Real of the barrio of La Concepcion, municipality of Malabon,Rizal.

Concerning the casco No. 2545, the lower court refrained from making any declaration about its ownership in view of the fact that this casco had beenleased and was sunk while in the lessee's hands before the complaint in this case was filed. The lower court, therefore, considered it unnecessary topass upon this point. We agree with the plaintiffs that the trial court should have made a pronouncement upon this casco . The lessee may beresponsible in damages for its loss, and it is of interest to the litigants in this case that it be determined who is the owner of said casco that may enforcethis responsibility of the lessee.

Upon an examination of the evidence relative to this casco , we find that it belonged to the plaintiffs and that the latter sold it afterwards to thedefendant by means of a public instrument. Notwithstanding plaintiffs' allegation that when they signed this instrument they were deceived, believing itnot to be an instrument of sale in favor of the defendant, nevertheless, they have not adduced sufficient proof of such deceit which would destroy thepresumption of truth which a public document carries with it. Attorney Sevilla, who acted as the notary in the execution of this instrument, testifying asa witness in the case, said that he never verified any document without first inquiring whether the parties knew its content. Our conclusion is thatthis casco was lawfully sold to the defendant by the plaintiffs.

Concerning the wood, windows and doors given by the plaintiffs to the defendant and used in the construction of the latter's house on calle Real of thebarrio of La Concepcion of the municipality of Malabon, Rizal, we find correct the trial Court's decision that they were given to the defendant as his andhis wife's property.

Concerning the rendition of accounts which the plaintiffs require of the defendant, we likewise find correct the trial court's decision absolving the latterfrom this petition, for it appears, from the plaintiffs' own evidence, that the defendant used to render accounts of his agency after each transactions, tothe plaintiffs' satisfaction.

From the foregoing considerations, we affirm the judgment appealed from in all its parts except in so far as the casco No. 2545 is concerned, and as tothis we declare that, it having been sold by the plaintiffs to the defendant, the latter is absolved. No special findings as to costs. So ordered.

Arellano, C.J., Torres, Johnson, Araullo, Street and Malcolm, JJ., concur.




Manila

SECOND DIVISION

G.R. No. 75640 April 5, 1990

NATIONAL FOOD AUTHORITY, (NFA), petitioner,vs.

INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING CORPORATION, respondents.

Zapanta, Gloton & Ulejorada for petitioner.

Sison, Ortiz & Associates for private respondents.

PARAS, J.:

This is a petition for review on certiorari made by National Food Authority (NFA for brevity) then known as the National Grains Authority or NGA fromthe decision 1 of the Intermediate Appellate Court affirming the decision 2of the trial court, the decretal portion of which reads:

WHEREFORE, defendants Gil Medalla and National Food Authority are ordered to pay jointly and severally the plaintiff:

a. the sum of P25,974.90, with interest at the legal rate from October 17, 1979 until the same is fully paid; and,

b. the sum of P10,000.00 as and for attorney's fees.

Costs against both defendants.

SO ORDERED. (p. 22, Rollo )

Hereunder are the undisputed facts as established by the then Intermediate Appellate Court (now Court of Appeals), viz :

On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered into a contract forhire of ship known as "MV Sea Runner" with defendant National Grains Authority. Under the said contract Medalla obligated totransport on the "MV Sea Runner" 8,550 sacks of rice belonging to defendant National Grains Authority from the port of San Jose,Occidental Mindoro, to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, plaintiff on October 17, 1979, wrote a letter requesting defendant NGAthat it be allowed to collect the amount stated in its statement of account (Exhibit "D"). The statement of account included not onlya claim for freightage but also claims for demurrage and stevedoring charges amounting to P93,538.70.

On November 5, 1979, plaintiff wrote again defendant NGA, this time specifically requesting that the payment for freightage andother charges be made to it and not to defendant Medalla because plaintiff was the owner of the vessel "MV Sea Runner" (Exhibit"E"). In reply, defendant NGA on November 16, 1979 informed plaintiff that it could not grant its request because the contract totransport the rice was entered into by defendant NGA and defendant Medalla who did not disclose that he was acting as a mereagent of plaintiff (Exhibit "F"). Thereupon on November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90,for freight services in connection with the shipment of 8,550 sacks of rice (Exhibit "A").

On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00 paid tohim by defendant NFA. Defendant Medalla, however, "ignored the demand."

Plaintiff was therefore constrained to file the instant complaint.

Defendant-appellant National Food Authority admitted that it entered into a contract with Gil Medalla whereby plaintiffs vessel "MVSea Runner" transported 8,550 sacks of rice of said defendant from San Jose, Mindoro to Manila.

For services rendered, the National Food Authority paid Gil Medalla P27,000.00 for freightage.

Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to this court on the sole issue as towhether it is jointly and severally liable with defendant Gil Medalla for freightage. (pp. 61-62, Rollo )



The appellate court affirmed the judgment of the lower court, hence, this appeal by way of certiorari , petitioner NFA submitting a lone issue to wit:whether or not the instant case falls within the exception of the general rule provided for in Art. 1883 of the Civil Code of the Philippines.

It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883) since it had no knowledge of the fact of agency betweenrespondent Superior Shipping and Medalla at the time when the contract was entered into between them (NFA and Medalla). Petitioner submits that"(A)n undisclosed principal cannot maintain an action upon a contract made by his agent unless such principal was disclosed in such contract. One whodeals with an agent acquires no right against the undisclosed principal."

Petitioner NFA's contention holds no water. It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior ShippingCorporation which owned the vessel "MV Sea Runner" that transported the sacks of rice belonging to petitioner NFA. The context of the law is clear. Art.1883, which is the applicable law in the case at bar provides:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent hascontracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal .

The provision of this article shall be understood to be without prejudice to the actions between the principal and agent.

Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principalalthough he does not assume the character of such agent and appears acting in his own name. In other words, the agent's apparent representationyields to the principal's true representation and that, in reality and in effect, the contract must be considered as entered into between the principal andthe third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract, then itcan also demand the enforcement of its rights arising from the contract.

WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED and the appealed decision is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.




Manila

FIRST DIVISION

G.R. No. 94566 July 3, 1992

BA FINANCE CORPORATION, petitioner,vs.HON. COURT OF APPEALS and TRADERS ROYAL BANK, respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the respondent appellate court which reversed the ruling of the trial court dismissing the caseagainst petitioner.

The antecedent facts are as follows:

On December 17, 1980, Renato Gaytano, doing business under the name Gebbs International, applied for and was granted a loan with respondentTraders Royal Bank in the amount of P60,000.00. As security for the payment of said loan, the Gaytano spouses executed a deed of suretyship wherebythey agreed to pay jointly and severally to respondent bank the amount of the loan including interests, penalty and other bank charges.

In a letter dated December 5, 1980 addressed to respondent bank, Philip Wong as credit administrator of BA Finance Corporation for and in behalf of the latter, undertook to guarantee the loan of the Gaytano spouses. The letter reads:

This is in reference to the application of Gebbs International for a twenty-five (25) month term loan of 60,000.00 with your Bank.

In this connection, please be advised that we unconditionally guarantee full payment in peso value the said accommodation (sic)upon non-payment by subject up to a maximum amount of P60,000.00.

Hoping this would meet your requirement and expedite the early processing of their application.

Thank you.

Very truly yours,BA FINANCE CORPORATION

(signed)PHILIP H.WONGCredit Administrator

(p. 12, Rollo )

Partial payments were made on the loan leaving an unpaid balance in the amount of P85,807.25. Since the Gaytano spouses refused to pay theirobligation, respondent bank filed with the trial court complaint for sum of money against the Gaytano spouses and petitioner corporation as alternativedefendant.

The Gaytano spouses did not present evidence for their defense. Petitioner corporation, on the other hand, raised the defense of lack of authority of itscredit administrator to bind the corporation.

On December 12, 1988, the trial court rendered a decision the dispositive portion of which states:

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of plaintiff and against defendants/Gaytano spouses, orderingthe latter to jointly and severally pay the plaintiff the following:



1) EIGHTY FIVE THOUSAND EIGHT HUNDRED SEVEN AND 25/100 (P85,807.25), representing the total unpaid balance withaccumulated interests, penalties and bank charges as of September 22, 1987, plus interests, penalties and bank charges thereafteruntil the whole obligation shall have been fully paid.

2) Attorney's fees at the stipulated rate of ten (10%) percent computed from the total obligation; and

3) The costs of suit.

The dismissal of the case against defendant BA Finance Corporation is hereby ordered without pronouncement as to cost.

SO ORDERED. (p. 31, Rollo )

Not satisfied with the decision, respondent bank appealed with the Court of Appeals. On March 13, 1990, respondent appellate court rendered judgmentmodifying the decision of the trial court as follows:

In view of the foregoing, the judgment is hereby rendered ordering the defendants Gaytano spouses and alternative defendant BAFinance Corporation, jointly and severally, to pay the plaintiff the amount of P85,807.25 as of September 8, 1987, includinginterests, penalties and other back (sic) charges thereon, until the full obligation shall have been fully paid. No pronouncement as tocosts.

SO ORDERED. (p. 27 Rollo )

Hence this petition was filed with the petitioner assigning the following errors committed by respondent appellate court:

1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONER IS JOINTLY AND SEVERALLY LIABLEWITH GAYTANO SPOUSES DESPITE ITS FINDINGS THAT THE LETTER GUARANTY (EXH. "C") IS "INVALID AT ITS INCEPTION";

2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE PETITIONER WAS GUILTY OF ESTOPPELDESPITE THE FACT THAT IT NEVER KNEW OF SUCH ALLEGED LETTER-GUARANTY;

3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT SUCH LETTER GUARANTY (EXHIBIT "C") BEINGPATENTLY ULTRA VIRES, IS UNENFORCEABLE;

4. THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING RELIEF ON PETITIONER'S COUNTERCLAIM(p. 10, Rollo ).

Since the issues are interrelated, it would be well to discuss them jointly.

Petitioner contends that the letter guaranty is ultra vires , and therefore unenforceable; that said letter-guaranty was issued by an employee of petitionercorporation beyond the scope of his authority since the petitioner itself is not even empowered by its articles of incorporation and by-laws to issueguaranties. Petitioner also submits that it is not guilty of estoppel to make it liable under the letter-guaranty because petitioner had no knowledge ornotice of such letter-guaranty; that the allegation of Philip Wong, credit administrator, that there was an audit was not supported by evidence of anyaudit report or record of such transaction in the office files.

We find the petitioner's contentions meritorious. It is a settled rule that persons dealing with an assumed agent, whether the assumed agency be ageneral or special one are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature andextent of authority, and in case either is controverted, the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19). Hence,the burden is on respondent bank to satisfactorily prove that the credit administrator with whom they transacted acted within the authority given to himby his principal, petitioner corporation. The only evidence presented by respondent bank was the testimony of Philip Wong, credit administrator, whotestified that he had authority to issue guarantees as can be deduced from the wording of the memorandum given to him by petitioner corporation onhis lending authority. The said memorandum which allegedly authorized Wong not only to approve and grant loans but also to enter into contracts of guaranty in behalf of the corporation, partly reads:

To: Philip H. Wong, SAMCredit Administrator

From: Hospicio B. Bayona, Jr., VP andHead of Credit Administration

Re: Lending Authority

I am pleased to delegate to you in your capacity as Credit Administrator the following lending limits:

a) P650,000.00 — Secured Loansb) P550,000.00 — Supported Loans



c) P350,000.00 — Truck Loans/Contracts/Leasesd) P350,000.00 — Auto Loan Contracts/Leasese) P350,000.00 — Appliance Loan Contractsf) P350,000.00 — Unsecured Loans

Total loans and/or credits [combination of (a) thru (f) extended to any one borrower including parents, affiliates and/or subsidiaries,should not exceed P750,000.00. In exercising the limits aforementioned, both direct and contingent commitments to theborrower(s) should be considered.

All loans must be within the Company's established lending guideline and policies.

xxx xxx xxx

LEVELS OF APPROVAL

All transactions in excess of any branch's limit must be recommended to you through the Official Credit Report for approval. If thetransaction exceeds your limit, you must concur in application before submitting it to the Vice President, Credit Administration forapproval or concurrence.

. . . (pp. 62-63, Rollo ) (Emphasis ours)

Although Wong was clearly authorized to approve loans even up to P350,000.00 without any security requirement, which is far above the amountsubject of the guaranty in the amount of P60,000.00, nothing in the said memorandum expressly vests on the credit administrator power to issueguarantees. We cannot agree with respondent's contention that the phrase "contingent commitment" set forth in the memorandum means guarantees.

It has been held that a power of attorney or authority of an agent should not be inferred from the use of vague or general words. Guaranty is notpresumed, it must be expressed and cannot be extended beyond its specified limits (Director v. Sing Juco, 53 Phil. 205). In one case, where it appearsthat a wife gave her husband power of attorney to loan money, this Court ruled that such fact did not authorize him to make her liable as a surety forthe payment of the debt of a third person (Bank of Philippine Islands v. Coster, 47 Phil. 594).

The sole allegation of the credit administrator in the absence of any other proof that he is authorized to bind petitioner in a contract of guaranty withthird persons should not be given weight. The representation of one who acts as agent cannot by itself serve as proof of his authority to act as agent orof the extent of his authority as agent (Velasco v. La Urbana, 58 Phil. 681). Wong's testimony that he had entered into similar transactions of guarantyin the past for and in behalf of the petitioner, lacks credence due to his failure to show documents or records of the alleged past transactions. Theactuation of Wong in claiming and testifying that he has the authority is understandable. He would naturally take steps to save himself from personalliability for damages to respondent bank considering that he had exceeded his authority. The rule is clear that an agent who exceeds his authority ispersonally liable for damages (National Power Corporation v. National Merchandising Corporation, Nos. L-33819 andL-33897, October 23, 1982, 117 SCRA 789).

Anent the conclusion of respondent appellate court that petitioner is estopped from alleging lack of authority due to its fai lure to cancel or disallow the

guaranty, We find that the said conclusion has no basis in fact. Respondent bank had not shown any evidence aside from the testimony of the creditadministrator that the disputed transaction of guaranty was in fact entered into the official records or files of petitioner corporation, which will shownotice or knowledge on the latter's part and its consequent ratification of the said transaction. In the absence of clear proof, it would be unfair to holdpetitioner corporation guilty of estoppel in allowing its credit administrator to act as though the latter had power to guarantee.

ACCORDINGLY, the petition is GRANTED and the assailed decision of the respondent appellate court dated March 13, 1990 is hereby REVERSED andSET ASIDE and another one is rendered dismissing the complaint for sum of money against BA Finance Corporation.

SO ORDERED.

Cruz, Griño-Aquino and Bellosillo, JJ., concur.




Manila

EN BANC

G.R. No. L-20567 July 30, 1965

PHILIPPINE NATIONAL BANK, petitioner,vs.

MANILA SURETY and FIDELITY CO., INC. and THE COURT OF APPEALS (Second Division), respondents.

Besa, Galang and Medina for petitioner.De Santos and Delfino for respondents.

REYES, J.B.L., J.:

The Philippine National Bank petitions for the review and reversal of the decision rendered by the Court of Appeals (Second Division), in its case CA-G.R.No. 24232-R, dismissing the Bank's complaint against respondent Manila Surety & Fidelity Co., Inc., and modifying the judgment of the Court of FirstInstance of Manila in its Civil Case No. 11263.

The material facts of the case, as found by the appellate Court, are as follows:

The Philippine National Bank had opened a letter of credit and advanced thereon $120,000.00 to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of

this amount, 2,000 tons worth P279,000.00 were released and delivered to Adams & Taguba Corporation (known as ATACO) under a trust receiptguaranteed by Manila Surety & Fidelity Co. up to the amount of P75,000.00. To pay for the asphalt, ATACO constituted the Bank its assignee andattorney-in-fact to receive and collect from the Bureau of Public Works the amount aforesaid out of funds payable to the assignor under Purchase OrderNo. 71947. This assignment (Exhibit "A") stipulated that:

The conditions of this assignment are as follows:

1. The same shall remain irrevocable until the said credit accomodation is fully liquidated.

2. The PHILIPPINE NATIONAL BANK is hereby appointed as our Attorney-in-Fact for us and in our name, place and stead, to collect and toreceive the payments to be made by virtue of the aforesaid Purchase Order, with full power and authority to execute and deliver on ourbehalf, receipt for all payments made to it; to endorse for deposit or encashment checks, money order and treasury warrants which said Bank may receive, and to apply said payments to the settlement of said credit accommodation.

This power of attorney shall also remain irrevocable until our total indebtedness to the said Bank have been fully liquidated. (Exhibit E)

ATACO delivered to the Bureau of Public Works, and the latter accepted, asphalt to the total value of P431,466.52. Of this amount the Bank regularlycollected, from April 21, 1948 to November 18, 1948, P106,382.01. Thereafter, for unexplained reasons, the Bank ceased to collect, until in 1952 itsinvestigators found that more moneys were payable to ATACO from the Public Works office, because the latter had allowed mother creditor to collectfunds due to ATACO under the same purchase order to a total of P311,230.41.

Its demands on the principal debtor and the Surety having been refused, the Bank sued both in the Court of First Instance of Manila to recover thebalance of P158,563.18 as of February 15, 1950, plus interests and costs.

On October 4, 1958, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. Ordering defendants, Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc., to pay plaintiff, Philippines National Bank, thesum of P174,462.34 as of February 24, 1956, minus the amount of P8,000 which defendant, Manila Surety Co., Inc. paid from March, 1956 toOctober, 1956 with interest at the rate of 5% per annum from February 25, 1956, until fully paid provided that the total amount that shouldbe paid by defendant Manila Surety Co., Inc., on account of this case shall not exceed P75,000.00, and to pay the costs;

2. Orderinq cross-defendant, Adams & Taguba Corporation, and third-party defendant, Pedro A. Taguba, jointly and severally, to pay crossand third-party plaintiff, Manila Surety & Fidelity Co., Inc., whatever amount the latter has paid or shall pay under this judgment;

3. Dismissing the complaint insofar as the claim for 17% special tax is concerned; and

4. Dismissing the counterclaim of defendants Adams & Taguba Corporation and Manila Surety & Fidelity Co., Inc.



From said decision, only the defendant Surety Company has duly perfected its appeal. The Central Bank of the Philippines did not appeal, whiledefendant ATACO failed to perfect its appeal.

The Bank recoursed to the Court of Appeals, which rendered an adverse decision and modified the judgment of the court of origin as to the surety'sliability. Its motions for reconsideration having proved unavailing, the Bank appealed to this Court.

The Court of Appeals found the Bank to have been negligent in having stopped collecting from the Bureau of Public Works the moneys falling due infavor of the principal debtor, ATACO, from and after November 18, 1948, before the debt was fully collected, thereby allowing such funds to be takenand exhausted by other creditors to the prejudice of the surety, and held that the Bank's negligence resulted in exoneration of respondent Manila Surety& Fidelity Company.

This holding is now assailed by the Bank. It contends the power of attorney obtained from ATACO was merely in additional security in its favor, and thatit was the duty of the surety, and not that of the creditor, owed see to it that the obligor fulfills his obligation, and that the creditor owed the surety noduty of active diligence to collect any, sum from the principal debtor, citing Judge Advocate General vs. Court of Appeals , G.R. No. L-10671, October 23,1958.

This argument of appellant Bank misses the point. The Court of Appeals did not hold the Bank answerable for negligence in failing to collect from the principal debtor but for its neglect in collecting the sums due to the debtor from the Bureau of Public Works, contrary to its duty as holder of anexclusive and irrevocable power of attorney to make such collections, since an agent is required to act with the care of a good father of a family (Civ.Code, Art. 1887) and becomes liable for the damages which the principal may suffer through his non-performance (Civ. Code, Art. 1884). Certainly, theBank could not expect that the Bank would diligently perform its duty under its power of attorney, but because they could not have collected from theBureau even if they had attempted to do so. It must not be forgotten that the Bank's power to collect was expressly made irrevocable , so that theBureau of Public Works could very well refuse to make payments to the principal debtor itself, and a fortiori reject any demands by the surety.

Even if the assignment with power of attorney from the principal debtor were considered as mere additional security still, by allowing the assigned funds

to be exhausted without notifying the surety, the Bank deprived the former of any possibility of recoursing against that security. The Bank therebyexonerated the surety, pursuant to Article 2080 of the Civil Code:

ART. 2080. — The guarantors, even though they be solidary , are released from their obligation whenever by come act of the creditor theycannot be subrogated to the rights, mortgages and preferences of the latter. (Emphasis supplied.)

The appellant points out to its letter of demand, Exhibit "K", addressed to the Bureau of Public Works, on May 5, 1949, and its letter to ATACO, Exhibit"G", informing the debtor that as of its date, October 31, 1949, its outstanding balance was P156,374.83. Said Exhibit "G" has no bearing on the issuewhether the Bank has exercised due diligence in collecting from the Bureau of Public Works, since the letter was addressed to ATACO, and the fundswere to come from elsewhere. As to the letter of demand on the Public Works office, it does not appear that any reply thereto was made; nor that thedemand was pressed, nor that the debtor or the surety were ever apprised that payment was not being made. The fact remains that because of theBank's inactivity the other creditors were enabled to collect P173,870.31, when the balance due to appellant Bank was only P158,563.18. The finding of negligence made by the Court of Appeals is thus not only conclusive on us but fully supported by the evidence.

Even if the Court of Appeals erred on the second reason it advanced in support of the decision now under appeal, because the rules on application of payments, giving preference to secured obligations are only operative in cases where there are several distinct debts, and not where there is only onethat is partially secured, the error is of no importance, since the principal reason based on the Bank's negligence furnishes adequate support to thedecision of the Court of Appeals that the surety was thereby released.

WHEREFORE, the appealed decision is affirmed, with costs against appellant Philippine National Bank.

Bengzon, C.J., Concepcion, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.Bautista Angelo and Barerra, JJ., took no part.




Manila

EN BANC

G.R. No. L-12743 August 25, 1917

THE UNITED STATES, plaintiff-appellee,vs.

DOMINGO REYES, defendant-appellant.

Antonio Bengson for appellant. Acting Attorney-General for appellee.

MALCOLM, J.:

This is an appeal from a judgment finding Domingo Reyes guilty of estafa and sentencing him to four months and one day of arresto mayor , to theaccessory penalties of the law, and to indemnify R. B. Blackman in the sum of P118, with subsidiary imprisonment in case of insolvency, and to pay thecosts.

Marked discrepancies in connection with the evidence, particularly that which concerns the figures, are to be noted. Accepting the findings of the trialcourt, we can summarize the facts as follows:

R. B. Blackman is a surveyor in the Province of Pangasinan. Domingo Reyes, the accused, also lives in that province. Blackman employed Reyes tocollect certain amounts due from twelve individuals for Blackman's work in connection with the survey of their lands. The total amount to be collectedby Reyes was P860. He only succeeded in collecting P540. He delivered to Blackman P368. He retained the balance, or P172. So far as good. Thedifficult point concerns the exact terms of the contract. It was merely an oral agreement between Blackman and Reyes. Blackman claims that he agreedto pay Reyes a commission of 10 per cent. Reyes claims that he was to receive a commission of 20 per cent. The trial court, in its decision, states that — "R. B. Blackman, agrimensor, dio al aqui acusado el encargo de cobrar algunas cuentas de honorarios devengados per mediciones practicadas por elcomo agrimensor, concediendole un 10 por ciento sobre todas las cobranzas." (R. B. Blackman, the surveyor, ordered the said accused to collect certaindebts due for surveying and offered a 10 per cent commission on all accounts collected.)

To return to the figures again, it will be noticed that if we accept the statements of Blackman, Reyes was entitled to 10 per cent of P540 (or P530), orP54, making P172 misappropriated, or, if we deduct his commission, P118. On the other hand, if we accept the statements of Reyes, then 20 per centof the total amount to be collected, P860, is exactly P172, the amount claimed to have been misappropriated.

There are a number of reasons which impel us to the conclusion that the defendant and appellant is guilty as charged. In the first place, in view of thediscrepancy in the evidence we are not disposed to set up our judgment as superior to that of the trial court. In the second place, conceding that Reyeswas to receive 20 per cent, this, unless some contrary and express stipulation was included, would not entitle him in advance to 20 per cent of theamount actually collected. In the third place, the right to receive a commission of either 10 or 20 per cent did not make to hold out any sum he chose.(Campbell vs. The State [1878], 35 Ohio St., 70.) In the fourth place, under the oral contract Reyes was an agent who was bound to pay to theprincipal all that he had received by virtue of the agency. (Civil Code, article 1720; U. S. vs. Kiene [1907], 7 Phil. Rep., 736.) And, lastly, since for allpractical purposes, the agency was terminated, the agent was under the obligation to turn over to the principal the amount collected, minus hiscommission on that amount. (U. S. vs. Schneer [1907], 7 Phil. Rep., 523.)

All the requisites of estafa as punished by article 535, paragraph 5, of the Penal Code, and as construed by the commentators, are here present. Theassignment of error relative to the nonproduction by the fiscal of the transcription of the preliminary investigation is not particularly important assecondary evidence was admitted and the substantial rights of the accused were not affected.

The judgment of the trial court being in accord with the facts and the law is hereby affirmed with the costs. So ordered.

Arellano, C.J., Johnson, Carson, Araullo and Street, JJ., concur.



[ G.R. No. L-9572, July 31, 1956 ]JOAQUIN GUZMAN, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, RESPONDENT.

D E C I S I O N

REYES, J.B.L., J.: Appeal by certiorari from the decision of the Court of Appeals finding appellant Joaquin Guzman guilty of the crime of qualified theft.The facts, as found by the Court of Appeals, are as follows:

"That accused Joaquin Guzman was a travelling sales agent of the New Life Commercial of Aparri, Cagayan. On March 2, 1953, Guzman leftManila with 45 cases of different assortments of La Tondeiia wine, in a truck driven by Andres Buenaventura, with Federico Cabacungan as

washing (helper), on their return trip to Aparri, by way of Ilocos Norte. Along the route, the accused made various cash sales of wine and whenthey reached Ballesteros, Cagayan, at about 3 o'clock in the afternoon of March 5, 1953, said accused had in his possession the amount of P4,873.62. Here, they parked their truck at the Sambrano Station and the accused left his companions until supper time at past 7:00 p.m. Whenthey retired for the night, driver Buenaventura and the accused occupied the driver's compartment of the truck, Buenaventura lying on the driver'sseat and the accused taking the upper deck with which the truck was provided (see photograph Exhibit. A). The washing, Cabacungan, slept in thebody of the 'truck where the wines were kept. There was a wall between the body of the truck and the driver's compartment; and on that night allthe windows were locked from inside. In the morning of March 6, 1953, accused Guzman told the driver that he lost the amount of P2,840.50,and his firearm license. Upon the advice of the driver, said accused reported the matter to the Chief o£ Police of Ballesteros, who gave him acertificate of loss of his firearm license. They were proceeding to their home journey when, at the outskirts of Ballesteros, they were met by a taxcollector and policeman Mariano David who told the accused to return to Ballesteros and execute an anidavit regarding the alleged theft. Beforethe accused returned to Ballesteros, he entrusted to the driver Buenaventura, the amount of Pl,630 in dash and a check for P403.12 under the properreceipt (Exhibit C), with the sales invoices, for delivery to the manager, Enrique Go, of the company of Aparri. Driver and washing continued the tripand arrived at Aparri between 3 and 4 o'clock in the afternoon of the same day. The driver delivered the money and invoices to Enrique Go andinformed the latter of the loss. Go reported the matter to the Philippine Constabulary. The PC investigators and Go picked the accused at his houseat Aparri at 8 o'clock in the morning, on March 7, 1953, after having failed to see him (accused) at Bal lesteros the previous night. Questioned at the PCbarracks as to how much money he still had, the accused stated that he had only P3, in his person. On March 10, 1953, the accused wrote to Go,

requesting him to defer the filing of the criminal complaint until March 16, 1953, on which date he promised to refund the amount lost (Exhibit G). OnMarch 17, 1953, the said accused paid the amount of P1,500 to Go. On April 1, 1953, the accused was prosecuted for theft for the shortage of P804.70." (Appellant's Brief, pp. 13-15.)

Appellant Guzman claims, first, that under the above findings of fact, he had committed only the crime of estafa; and second, as the crimesof estafa and theft are essentially different offenses, he should be acquitted of the present charge for qualified theft, although proceedings may befiled anew against him for the proper offense. We agree with appellant that under the above facts, the Court of Appeals erred in holding that he"had only the material or physical possession of the said merchandise or its proceeds, because he was not the owner thereof; he was simply holdingthe money for and in behalf of his employer".While it is true that appellant received the proceeds of his wine sales as travelling salesman for the complainant, for and in behalf of the latteras his principal, and that possession of the agent is possession of the principal, an agent, unlike a servant or messenger, has both the physicaland juridical possession of the goods received in agency, or the proceeds thereof, which takes the place of the goods after their sale by theagent. His duty to turn over the proceeds of the agency depends upon his discharge, as well as the result of the accounting between him and theprincipal; and he may set up his right of possession as against that of the principal until the agency is terminated.

The case cited by the Court of Appeals (People vs. Locson, 57 Phil., 325), in support of its theory that appellant only had the material possession of the merchandise he was selling for his principal, or their proceeds, is not in point. In said case, the receiving teller of a bank who misappropriated,money received by him for the bank, was held guilty of qualified theft on the theory that the possession of the teller is the possession of the bank.There is an essential distinction between the possession by a receiving teller of funds received from third persons paid to the bank, and an agentwho receives the proceeds of sales of merchandise delivered to him in agency by his principal. In the former case, payment by third personsto the teller is payment to the bank itself; the teller is a mere custodian or keeper of the funds received, and has no independent right or title toretain or possess the same as against the bank. An agent, on the other hand, can even assert, as against his own principal, an independent,autonomous, right to retain the money or goods received in consequence of the agency; as when they principal fails to reimburse him for advanceshe has made, and indemnify him for damages suffered without his fault (Article 1915, new Civil Code; Article 1730, old). As appellant converted to his own use proceeds of sales of merchandise delivered to him as agent, which he received in trust for and underobligation to deliver and turn over to his principal, he is guilty of the crime of estafa as defined by Article 315, paragraph 1, subparagraph (e), of theRevised Penal Code. This has been the consistent ruling of this Court in cases where a sales agent misappropriates or fails to turn over to hisprincipal proceeds of things or goods he was commissioned or authorized to sell for the latter. (U. S. vs.Reyes, 36 Phil., 791; U. S. vs. Lim, 36Phil., 682; People vs. Leachon, 56 Phil., 737).The next question is whether the present information for qualified theft alleges sufficient facts to sustain a conviction for estafa under Article 315,paragraph 1, subparagraph (b), of the Revised Penal Code. The information reads:

"The undersigned accuses Joaquin Guzman of the crime of Qualified Theft, defined and penalized under Articles 308 and 309, No. 3 in connectionwith Article 310 of the Revised Penal Code, as amended by Commonwealth Acts Nos. 273 and 417 and Republic Act No. 120, committed as follows:

That on or about the 6th day of March, 1953, in the municipality of Aparri, province of Cagayan, and within the jurisdiction of this Honorable Court,the said accused Joaquin Guzman, while in the employ of Enrique Go and with grave abuse of confidence did then and there, willfully, unlawfully,and feloniously, with intent to gain but without violence against or intimidation of persons nor force upon things, without the consent of the ownerEnrique Go alias Ngo Yat, take and carry away for his personal use and benefit the sum of eight hundred four pesos and seventy eentavos(P804.70) to the damages and prejudice of said Enrique Go altos Ngo Yat, in the amount of P804.70." (Original Records p. 22.)

Article 315, paragraph 1, subparagraph (6), on the other hand, provides:



"Surindling (estafa ). — Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:* * * * * * *

(2) With unfaithfulness or abuse of confidence, namely:

* * * * * * *

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

Under the above definition of estafa, it is an essential element of the crime that the money or goods misappropriated or converted by the accused tothe prejudice of another was received by him "in trust or on commission, or for administration, or under any other obligation involving the duty tomake delivery of, or to retain the same". No such allegation appears in the above information. Consequently, we agree with appellant that he cannot be convicted thereunder of the crime of estafa as defined by the article above.Wherefore, the decision appealed from is reversed, and appellant Joaquin Guzman acquitted of the crime of qualified theft. Appellant should,however, be held in custody pending the filing of another information against him for estafa under Article 315, paragraph 1, subparagraph (6), of the Revised Penal Code. Without costs in this instance. So ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angela, Labrador, Concepcion, Endencia, andFelix, JJ., concur.



SECOND DIVISION

[G.R. No. 109595. April 27, 2000]

CRISTETA CHUA-BURCE, petitioner, vs. COURT OF APPEALS AND PEOPLE OF THE PHILIPPINES, respondents .

D E C I S I O N

QUISUMBING, J .:

Subject of the present appeal by certiorari is the decision dated November 27, 1992 of the Court of Appeals in CA-G.R. CR No. 12037, (a) affirming in toto the trial court’s decision finding petitioner guilty of estafa, and (b) denying her Motion for Reconsideration in a Resolution dated March 25, 1993.The Regional Trial Court, Calapan, Oriental Mindoro, Branch 40, rendered a joint decision finding petitioner guilty of estafa under Article 315, par. 1 (b)of the Revised Penal Code, in Criminal Case No. C-2313, and likewise found petitioner liable for the amount of P150,000.00 in Civil Case No. R-3733.Only the criminal case is before us for review. Â h Y

The uncontroverted facts, as found by the Court of Appeals, are as follows:

On August 16, 1985, Ramon Rocamora, the Manager (of Metropolitan Bank and Trust Company, Calapan Branch, Oriental Mindoro) requested FructuosoPeñaflor, Assistant Cashier, to conduct a physical bundle count of the cash inside the vault, which should total P4,000,000.00, more or less. During thisinitial cash count, they discovered a shortage of fifteen bundles of One Hundred Pesos denominated bills totalling P150,000.00. The One Hundred Pesobills actually counted was P3,850,000.00 as against the balance of P4,000,000.00 in the Cash in Vault (CIV) Summary Sheet, or a total shortage of P150,000.00. The next day, to determine if there was actually a shortage, a re-verification of the records and documents of the transactions in the bank was conducted. There was still a shortage of P150,000.00.

The bank initiated investigations totalling f our (4) in all. The first was by Ramon Rocamora, the Manager. The second was by the bank’s internalauditors headed by Antonio Batungbakal. Then, the bank’s Department of Internal Affairs conducted an independent investigatio n. Thereafter, theNational Bureau of Investigation (NBI) came in to investigate. All of these investigations concluded that there was a shortage of P150,000.00, and theperson primarily responsible was the bank’s Cash Custodian, Cristeta Chua-Burce, the herein accused. Jksm

On November 4, 1985, unable to satisfactorily explain the shortage of P150,000.00, the accused’s service with the bank was terminated.

To recover the missing amount, Metropolitan Bank and Trust Company (Metrobank) filed a Civil Case for Sum of Money and Damages with Preliminary Attachment and Garnishment docketed as Civil Case No. R-3733 against petitioner and her husband, Antonio Burce. Esm

Prior to the filing of the Answer, the following Information for Estafa was filed against petitioner:

"That on or about the 16th day of August 1985, and for a period prior and subsequent thereto, the above-named accused, with

unfaithfulness or abuse of confidence, and with intent to defraud, did then and there wilfully, unlawfully, and feloniously, in hercapacity as Cash Custodian of the Metrobank, Calapan Branch, take from the Bank’s Vault the amount of ONE HUNDRED FIFTY

THOUSAND (P150,000.00) PESOS, which is under her direct custody and/or accountability, misappropriate and convert to her ownpersonal use and benefit, without the knowledge and consent of the offended party, despite repeated demands for her to accountand/or return the said amount, she refused and failed, and still fails and refuses to the damage and prejudice of the Metrobank,Calapan Branch, in the aforementioned amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS.

Contrary to Article 315 of the Revised Penal Code.

Calapan, Oriental Mindoro, November 27, 1985."[1]

Both civil and criminal cases were raffled to the same branch of the Regional Trial Court of Calapan, Oriental Mindoro, Branch 40. Esmsc

Thereafter, petitioner moved for the suspension of the criminal case on the ground of the existence of a prejudicial question, viz., that the resolution of

the civil case was determinative of her guilt or innocence in the criminal case.[2] The trial court, over the vehement opposition of the private and publicprosecutors, granted the motion and suspended the trial of the criminal case.[3] On petition for certiorari to the Court of Appeals, the appellate courtruled that there was no prejudicial question.[4]

Petitioner was arraigned and assisted by counsel de parte , entered a plea of not guilty.[5] While the trial of the criminal case was suspended, the trial of the civil case continued. At the time of arraignment, the civil case was already submitted for decision. Hence, during the pre-trial conference of thecriminal case, the parties agreed to adopt their respective evidence in the civil case as their respective evidence in the criminal case .[6] The trial courtordered the parties to submit their written agreement pursuant to Section 4 of Rule 118 of the Rules of Court. [7] Thereafter, petitioner, duly assisted byher counsel, with the conforme of the public prosecutor, entered into the following pre-trial agreement:[8]

"COMES NOW, the accused, assisted by counsel, and unto this Honorable Court most respectfully submits this Pre-Trial agreement:

1. That the evidence already adduced by the plaintiff in Civil Case No. R-3733 will be adopted by the prosecution as its evidence inCriminal Case No. C-2313;

http://sc.judiciary.gov.ph/jurisprudence/2000/apr2000/109595.html#_ftn1


































2. That the evidence to be adduced by the defendant in Civil Case No. R-3733 will also be adopted as evidence for the defense inCriminal Case No. C-2313.

WHEREFORE, premises considered, it is prayed that the foregoing pre-trial agreement be admitted in compliance with the Order of this Court dated April 19, 1988.

RESPECTFULLY SUBMITTED.

Calapan, Oriental Mindoro, August 20, 1990.

CRISTETA CHUA-BURCE (sgd.)

Accused

Assisted By:

RODRIGO C. DIMAYACYAC (sgd.)

Defense Counsel

San Vicente, Calapan

Oriental Mindoro

IBP O.R. No. 292575

May 11, 1990

Quezon City

With Conformity:

EMMANUEL S. PANALIGAN (sgd.)

Prosecuting Fiscal

Pursuant to the pre-trial agreement, the public prosecutor filed a Motion to Adopt Evidence .[9] Both the pre-trial agreement and said Motion weregranted by the trial court.[10]

On March 18, 1991, the trial court rendered a consolidated decision [11] finding petitioner (a) guilty of estafa under Article 315 (1) (b) of the RevisedPenal Code in the criminal case, and (b) liable for the amount of P150,000.00 in the civil case. The dispositive portion of decision provides -

- In Criminal Case No. C-2313 -

WHEREFORE, the Court hereby finds the accused Cristeta Chua-Burce guilty beyond reasonable doubt of the crime of Estafa,punishable under Art. 315, paragraph 1 (b) of the Revised Penal Code, which imposes a penalty of prision correccional in itsmaximum period to prision mayor in its minimum period but considering that the amount involved exceeds P22,000.00, the penaltyprovided for shall be imposed in its maximum period, adding one year for each additional P10,000.00, but the total amount not toexceed twenty years. Esmmis

Applying the Indeterminate Sentence Law, the imposable penalty shall be one degree lower as minimum of arresto mayor with apenalty range of One Month and One Day to Six Months, as minimum to prision mayor in its maximum period, as maximum, or apenalty of Six years to Twelve Years. Considering the mitigating circumstance of voluntary surrender, the court hereby imposesupon the accused to suffer imprisonment from SIX (6) MONTHS of arresto mayor in its maximum period, as minimum, to EIGHT (8) YEARS of prision mayor, in its minimum period, as maximum. The civil liability shall not be imposed in this case due to a separatecivil action. Esmso

- In Civil Case No. R-3733 -

WHEREFORE, judgment is hereby rendered in favor of the plaintiff Metrobank, ordering defendants Cristeta Chua-Burce and Antonio Burce, spouses, to pay Metrobank the amount of P150,000.00 representing the amount misappropriated with the legal rat eof six percent (6%) per annum from August 15, 1985 until fully paid and to pay the costs of suit.














SO ORDERED."

Petitioner seasonably appealed her conviction in the criminal case to the Court of Appeals. Petitioner filed a separate appeal in the civil case.

In a decision dated November 27, 1992,[12] the Court of Appeals affirmed the trial court’s decision in toto . Petitioner’s Motion for Reconsideration waslikewise denied.[13] Hence, the recourse to this Court. Msesm

Petitioner raises the following issues:[14]

1. IS THE RESULT OF POLYGRAPH EXAMINATION ADMISSIBLE IN EVIDENCE?

2. CAN THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT ADMIT IN EVIDENCE THE EVIDENCE WHICH WAS ALREADY DENIED ADMISSION IN THE ORDER OF THE FORMER JUDGE OF THE SAME COURT?

3. DOES PRIMA FACIE PRESUMPTION OF MISAPPROPRIATION OR CONVERSION EXISTS (sic) AGAINST THE PETITIONER WHENTHERE WERE OTHER PERSONS WHO HAD DIRECT AND GREATER ACCESS IN THE CASH-IN-VAULT?

4. IS RULE 111 SECTION 2 (a) OF THE REVISED RULES ON CRIMINAL PROCEDURE APPLICABLE IN (sic)THE CASE AT BAR?

5. WAS THERE A VALID PROCEEDING WHEN THE FISCAL WAS NOT ACTUALLY PRESENT AND DID NOT CONTROL AND SUPERVISETHE PROSECUTION OF THE CASE? Exsm

In gist, (1) petitioner contends that the trial court erred in taking into account the results of the polygraph examination as circumstantial evidence of

guilt considering the inherent unreliability of such tests, and the fact that the previous trial judge who handled the case already ruled such evidence asinadmissible; (2) petitioner insists that there can be no presumption of misappropriation when there were other persons who had access to the cash invault; and (3) petitioner questions the validity of the trial of criminal case considering that the pre-trial agreement dispensed with the intervention of thepublic prosecutor in a full-blown trial of the criminal case. Kyle

The Office of the Solicitor General, for the State, contends that the guilt of petitioner has been proven beyond reasonable doubt by the following factswhich were duly established during trial - first, petitioner was the cash custodian who was directly responsible and accountable for the cash-in-vault. Second, the other persons who had access to the vault facilities never used the duplicate keys to open the safety deposit boxes and the cash safefrom where the P100.00 bill denominations were located. In fact, the duplicate keys were offered in evidence still in their sealedenvelopes. Third, alterations and superimposition on the cash-in-vault summary sheet were made by petitioner to cover the cash shortage. Lastly, therewas a valid joint trial of the civil and criminal cases.

The crucial issues, in our mind, are (1) whether there was a valid trial of the criminal case, and (2) whether the elements of the crime of estafa under Article 315 (1) (b) of the Revised Penal Code were duly proven beyond reasonable doubt. Kycalr

First, petitioner assails the validity of the proceedings in the trial court on the ground that the public prosecutor did not intervene and present anyevidence during the trial of the criminal case. The records clearly show that the pre-trial agreement was prepared by petitioner with the conforme of thepublic prosecutor. Thereafter, petitioner filed a consolidated memorandum for both civil and criminal cases. Section 5 of Rule 110[15] requires that allcriminal actions shall be prosecuted under the direction and control of the public prosecutor. The rationale behind the rule is "to prevent malicious orunfounded prosecutions by private persons."[16] The records show that the public prosecutor actively participated in the prosecution of the criminal casefrom its inception. It was during pre-trial conference when the parties agreed to adopt their respective evidence in the civil case to the criminal case.This is allowed under Section 2 (e) of Rule 118 of the Rules of Cour t[17] which provides that during pre-trial conference, the parties shall consider "suchother matters as will promote a fair and expeditious trial." The parties, in compliance with Section 4 of Rule 118 , [18] reduced to writing such agreement.Petitioner, her counsel, and the public prosecutor signed the agreement. Petitioner is bound by the pre-trial agreement, and she cannot now belatedlydisavow its contents.[19]

On the second issue. Petitioner was charged with the crime of estafa under Article 315 (1) (b) of the Revised Penal Code .[20] In general, the elements of estafa are: (1) that the accused defrauded another (a) by abuse of confidence or (b) by means of deceit; and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third person.[21] Deceit is not an essential requisite of estafa with abuse of confidence, since thebreach of confidence takes the place of the fraud or deceit, which is a usual element in the other estafas . [22]

The elements of estafa through conversion or misappropriation under Art. 315 (1) (b) of the Revised Penal Code are: [23]

(1) that personal property is received in trust, on commission, for administration or under any other circumstance involving the dutyto make delivery of or to return the same, even though the obligation is guaranteed by a bond;

(2) that there is conversion or diversion of such property by the person who has so received it or a denial on his part that hereceived it;

(3) that such conversion, diversion or denial is to the injury of another and

(4) that there be demand for the return of the property.



















































Have the foregoing elements been met in the case at bar? We find the first element absent. When the money, goods, or any other personal property is received by the offender from the offended party (1) in trust or (2) on commission or (3) foradministration , the offender acquires both material orphysical possession and juridical possession of the thing received.[24] Juridical possession means a possession which gives the transferee a right over thething which the transferee may set up even against the owner.[25] In this case, petitioner was a cash custodian who was primarily responsible for thecash-in-vault. Her possession of the cash belonging to the bank is akin to that of a bank teller, both being mere bank employees.Calrky

In People v. Locson ,[26] the receiving teller of a bank misappropriated the money received by him for the bank. He was found liable for qualified theft onthe theory that the possession of the teller is the possession of the bank. We explained inLocson that -

"The money was in the possession of the defendant as receiving teller of the bank, and the possession of the defendant was thepossession of the bank. When the defendant, with grave abuse of confidence, removed the money and appropriated it to his ownuse without the consent of the bank, there was the taking or apoderamiento contemplated in the definition of the crime of theft."[27

In the subsequent case of Guzman v. Court of Appeals ,[28] a travelling sales agent misappropriated or failed to return to his principal the proceeds of things or goods he was commissioned or authorized to sell. He was, however, found liable for estafa under Article 315 (1) (b) of the Revised PenalCode, and not qualified theft. In the Guzman case, we explained the distinction between possession of a bank teller and an agent for purposes of determining criminal liability -

"The case cited by the Court of Appeals (People vs. Locson, 57 Phil. 325), in support of its theory that appellant only had thematerial possession of the merchandise he was selling for his principal, or their proceeds, is not in point. In said case, the receivingteller of a bank who misappropriated money received by him for the bank, was held guilty of qualified theft on the theory that thepossession of the teller is the possession of the bank. There is an essential distinction between the possession by a receiving tellerof funds received from third persons paid to the bank, and an agent who receives the proceeds of sales of merchandise delivered tohim in agency by his principal. In the former case, payment by third persons to the teller is payment to the bank itself; the teller isa mere custodian or keeper of the funds received, and has no independent right or title to retain or possess the same as against thebank. An agent, on the other hand, can even assert, as against his own principal, an independent, autonomous, right to retainmoney or goods received in consequence of the agency; as when the principal fails to reimburse him for advances he has made,and indemnify him for damages suffered without his fault (Article 1915, [N]ew Civil Code; Article 1730, old)." Mesm

Petitioner herein being a mere cash custodian had no juridical possession over the missing funds. Hence, the element of juridical possession beingabsent, petitioner cannot be convicted of the crime of estafa under Article 315, No. 1 (b) of the Revised Penal Code.[29]

WHEREFORE, the petition is hereby granted and petitioner is ACQUITTED of the crime of estafa under Article 315 (1) (b) of the Revised Penal Code.Petitioner is ordered RELEASED from custody unless she is being held for some other lawful cause. No costs. Slx

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.


























SECOND DIVISION

[G.R. No. 141485. June 30, 2005]

PABLITO MURAO and NELIO HUERTAZUELA, petitioners, vs . PEOPLE OF THE PHILIPPINES, respondent .

D E C I S I O N

CHICO-NAZARIO, J .:

In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, petitioners pray for the reversal of the Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated 31 May 1999,[1] affirming with modification the Judgment of the Regional Trial Court (RTC) of Puerto PrincesaCity, Palawan, in Criminal Case No. 11943, dated 05 May 1997,[2] finding petitioners guilty beyond reasonable doubt of the crime of estafa under Article315(1)(b) of the Revised Penal Code.

Petitioner Pablito Murao is the sole owner of Lorna Murao Industrial Commercial Enterprises (LMICE), a company engaged in the business ofselling and refilling fire extinguishers, with branches in Palawan, Naga, Legaspi, Mindoro, Aurora, Quezon, Isabela, and Laguna. Petitioner NelioHuertazuela is the Branch Manager of LMICE in Puerto Princesa City, Palawan.[3]

On 01 September 1994, petitioner Murao and private complainant Chito Federico entered into a Dealership Agreement for the marketing,distribution, and refilling of fire extinguishers within Puerto Princesa City .[4] According to the Dealership Agreement, private complainant Federico, as adealer for LMICE, could obtain fire extinguishers from LMICE at a 50% discount, provided that he sets up his own sales force, acquires and issues his

own sales invoice, and posts a bond with LMICE as security for the credit line extended to him by LMICE. Failing to comply with the conditions undethe said Dealership Agreement, private complainant Federico, nonetheless, was still allowed to act as a part-time sales agent for LMICE entitled to apercentage commission from the sales of fire extinguishers.[5]

The amount of private complainant Federico’s commission as sales agent for LMICE was under contention. Private complainant Fed erico claimedthat he was entitled to a commission equivalent to 50% of the gross sales he had made on behalf of LMICE , [6] while petitioners maintained that heshould receive only 30% of the net sales. Petitioners even contended that as company policy, part-time sales agents were entitled to a commission oonly 25% of the net sales, but since private complainant Federico helped in establishing the LMICE branch office in Puerto Princesa City, he was toreceive the same commission as the full-time sales agents of LMICE, which was 30% of the net sales.[7]

Private complainant Federico’s first successful transaction as sales agent of LMICE involved two fire extinguishers sold to L andbank of thePhilippines (Landbank), Puerto Princesa City Branch, for the price of P7,200.00. Landbank issued a check, dated 08 November 1993, pay to the order o ―L.M. Industrial Comm’l. Enterprises c/o Chito Federico,‖ for the amount of P5,936.40,[8] after deducting from the original sales price the 15% discountgranted by private complainant Federico to Landbank and the 3% withholding tax. Private complainant Federico encashed the check at Landbank andremitted only P2,436.40 to LMICE, while he kept P3,500.00 for himself as his commission from the sale.[9]

Petitioners alleged that it was contrary to the standard operating procedure of LMICE that private complainant Federico was named payee of theLandbank check on behalf of LMICE, and that private complainant Federico was not authorized to encash the said check. Despite the supposedirregularities committed by private complainant Federico in the collection of the payment from Landbank and in the premature withholding of hiscommission from the said payment, petitioners forgave private complainant Federico because the latter promised to make-up for his misdeeds in thenext transaction.[10]

Private complainant Federico, on behalf of LMICE, subsequently facilitated a transaction with the City Government of Puerto Princesa for the refillof 202 fire extinguishers. Because of the considerable cost, the City Government of Puerto Princesa requested that the transaction be split into twopurchase orders, and the City Government of Puerto Princesa shall pay for each of the purchase orders separately .[11] Pursuant to the two purchaseorders, LMICE refilled and delivered all 202 fire extinguishers to the City Government of Puerto Princesa: 154 units on 06 January 1994, 43 more unitson 12 January 1994, and the last five units on 13 January 1994 .[12]

The subject of this Petition is limited to the first purchase order, Purchase Order No. GSO-856, dated 03 January 1994, for the refill of 99 fireextinguishers, with a total cost of P309,000.00.[13] On 16 June 1994, the City Government of Puerto Princesa issued Check No. 611437 to LMICE to payfor Purchase Order No. GSO-856, in the amount of P300,572.73, net of the 3% withholding tax .[14] Within the same day, petitioner Huertazuela claimedCheck No. 611437 from the City Government of Puerto Princesa and deposited it under the current account of LMICE with PCIBank .[15]

On 17 June 1994, private complainant Federico went to see petitioner Huertazuela at the LMICE branch office in Puerto Princesa City to demandfor the amount of P154,500.00 as his commission from the payment of Purchase Order No. GSO-856 by the City Government of Puerto Princesa.Petitioner Huertazuela, however, refused to pay private complainant Federico his commission since the two of them could not agree on the properamount thereof .[16]

Also on 17 June 1994, private complainant Federico went to the police station to file an Affidavit -Complaint for estafa againspetitioners.[17] Petitioners submitted their Joint Counter-Affidavit on 12 July 1994.[18] The City Prosecution Office of Puerto Princesa City issued aResolution, dated 15 August 1994, finding that a prima facie case for estafa existed against the petitioners and recommending the filing of aninformation for estafa against both of them.[19]

The Information, docketed as Criminal Case No. 11943 and raffled to the RTC of Puerto Princesa City, Palawan, Branch 52, reads as follows –

I N F O R M A T I O N

The undersigned accuses PABLITO MURAO and NELIO C. HUERTAZUELA of the crime of ESTAFA, committed as follows:

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That on or about the 16 th day of June, 1994, at Puerto Princesa City, Philippines, and within the jurisdiction of this Honorable Court, the said accused,conspiring and confederating together and mutually helping one another, after having received the amount of P309,000.00 as payment of the 99 tanksof refilled fire extinguisher (sic ) from the City Government of Puerto Princesa, through deceit, fraud and misrepresentation, did then and there willfully,unlawfully and feloniously defraud one Chito Federico in the following manner, to wit: said accused, well knowing that Chito Federico agent of LMIndustrial Commercial Enterprises is entitled to 50% commission of the gross sales as per their Dealership Contract or the amount of P154,500.00 as hiscommission for his sale of 99 refilled fire extinguishers worth P309,000.00, and accused once in possession of said amount of P309,000.00misappropriate, misapply and convert the amount of P154,500.00 for their own personal use and benefit and despite repeated demands made uponthem by complainant to deliver the amount of P154,500.00, accused failed and refused and still fails and refuses to do so, to the damage and prejudiceof said Chito Federico in the amount of P154,500.00, Philippine Currency.[20]

After holding trial, the RTC rendered its Judgment on 05 May 1997 finding petitioners guilty beyond reasonable doubt as co -principals of the crime

of estafa defined and penalized in Article 315(1)(b) of the Revised Penal Code. Estafa, under the said provision, is committed by –

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

1. With unfaithfulness or abuse of confidence, namely:

(a) …

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

In the same Judgment, the RTC expounded on its finding of guilt, thus –

For the afore-quoted provision of the Revised Penal Code to be committed, the following requisites must concur:

1. That money, goods or other personal property be received by the offender in trust, or on commission, or for administration, or underany other obligation involving the duty to make delivery of, or to return, the same;

2. That there be misappropriation or conversion of such money or property by the offender, or denial on his part of such receipt;

3. That such misappropriation or conversion or denial is to the prejudice of another; and

4. That there is demand made by the offended party to the offender. (Reyes, Revised Penal Code of the Philippines, p. 716; ManuelManahan, Jr. vs. Court of Appeals, Et Al., G.R. No. 111656, March 20, 1996)

All the foregoing elements are present in this case. The aborted testimony of Mrs. Norma Dacuan, Cashier III of the Treasurer’s Office of the City of

Puerto Princesa established the fact that indeed, on June 16, 1994, co-accused Nelio Huertazuela took delivery of Check No. 611437 with face valueof P300,572.73, representing payment for the refill of 99 cylinders of fire extinguishers. Although the relationship between complaining witness ChitoFederico and LMIC is not fiduciary in nature, still the clause ―any other obligation involving the duty to make delivery of or to return‖ personal propertyis broad enough to include a ―civil obligation‖ (Manahan vs. C.A., Et. Al., Mar. 2 0, 1996).

The second element cannot be gainsaid. Both Pablito Murao and Nelio Huertazuela categorically admitted that they did not give to Chito Federico hiscommission. Instead, they deposited the full amount of the consideration, with the PCIBank in the Current Account of LMIC.

…

The refusal by the accused to give Chito Federico what ever percentage his commission necessarily caused him prejudice which constitute the thirdelement of estafa. Demand for payment, although not an essential element of estafa was nonetheless made by the complainant but was rebuffed bythe accused. The fraudulent intent by the accused is indubitably indicated by their refusal to pay Chito Federico any percentage of the gross sales ascommission. If it were true that what the dealer/sales Agent is entitled to by way of commission is only 30% of the gross sales, then by all means the

accused should have paid Chito Federico 30%. If he refused, they could have it deposited in his name. In that way they may not be said to havemisappropriated for themselves what pertained to their Agent by way of commission.

…

WHEREFORE, premises considered judgment is hereby rendered finding the accused PABLITO MURAO and NELIO HUERTAZUELA guilty beyondreasonable doubt as co-principals, of the crime of estafa defined and penalized in Article 315 par. 1(b) of the Revised Penal Code, and applying theprovisions of the Indeterminate Sentence Law, both accused are hereby sentenced to an indeterminate penalty ranging from a minimum of TWO (2) YEARS, FOUR (4) MONTHS and ONE (1) DAY of prision correccional in its medium period, to a maximum of TWENTY (20) YEARS of reclu sion temporalin its maximum period; to pay Chito Federico, jointly and severally:

a. Sales Commission equivalent to

50% of P309,000.00 or ------------------ - P154,500.00







with legal interest thereon fromJune 17, 1994 until fully paid;

b. Attorney’s fees ---------------- ------------ P 30,0000.00.[21]

Resolving the appeal filed by the petitioners before it, the Court of Appeals, in its Decision, dated 31 May 1999, affirmed the aforementioned RTCJudgment, finding petitioners guilty of estafa, but modifying the sentence imposed on the petitioners. The dispositive portion of the Decision of theCourt of Appeals reads –

WHEREFORE, the appealed decision is hereby AFFIRMED with the MODIFICATION that appellants PABLITO MURAO and NELIO HUERTAZUELA are

hereby each sentenced to an indeterminate penalty of eight (8) years and One (1) day of prision mayor , as minimum, to Twenty (20) years of reclusion temporal , as maximum. The award for attorney’s fee of P30,000.00 is deleted because the prosecution of criminal action is the task of the Stateprosecutors. All other aspects of the appealed decision are maintained.[22]

When the Court of Appeals, in its Resolution, dated 19 January 2000,[23] denied their Motion for Reconsideration, petitioners filed the presenPetition for Review[24] before this Court, raising the following errors allegedly committed by the Court of Appeals in its Decision, dated 31 May 1999 –

I

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT PETITIONERS ARE LIABLE FOR ESTAFA UNDER ARTICLE 315 1(B) OF THE REVISED PENAL CODE UNDER THE FOREGOING SET OF FACTS, WHEN IT IS CLEAR FROM THE SAID UNDISPUTED FACTSTHAT THE LIABILITY IS CIVIL IN NATURE.

II

WITH DUE RESPECT, THE HONORABLE COURT ERRED WHEN IT UPHOLD (sic ) PRIVATE COMPLAINANT’S CLAIM THAT HE IS ENTITLED TO A FIFTY

(50%) PERCENT COMMISSION WITHOUT EVIDENCE TO SUPPORT SUCH CLAIM.

This Court finds the instant Petition impressed with merit. Absent herein are two essential elements of the crime of estafa by misappropriation oconversion under Article 315(1)(b) of the Revised Penal Code, namely: (1) That money, goods or other personal property be received by the offender intrust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; and (2) Thatthere be a misappropriation or conversion of such money or property by the offender.

The findings of the RTC and the Court of Appeals that petitioners committed estafa rest on the erroneous belief that private complainant Federico,due to his right to commission, already owned 50% of the amount paid by the City Government of Puerto Princesa to LMICE by virtue of Check No.611437, so that the collection and deposit of the said check by petitioners under the account of LMICE constituted misappropriation or conversion ofprivate complainant Federico’s commission.

However, his right to a commission does not make private complainant Federico a joint owner of the money paid to LMICE by theCity Government of Puerto Princesa, but merely establishes the relation of agent and principal. [25] It is unequivocal that an agency existed between

LMICE and private complainant Federico. Article 1868 of the Civi l Code defines agency as a special contract whereby ―a person binds himself to rendersome service or to do something in representation or on behalf of another, with the consent or authority of the latter.‖ Although private complainanFederico never had the opportunity to operate as a dealer for LMICE under the terms of the Dealership Agreement, he was allowed to act as a salesagent for LMICE. He can negotiate for and on behalf of LMICE for the refill and delivery of fire extinguishers, which he, in fact, did on two occasions –with Landbank and with the City Government of Puerto Princesa. Unlike the Dealership Agreement, however, the agreement that private complainanFederico may act as sales agent of LMICE was based on an oral agreement.[26]

As a sales agent, private complainant Federico entered into negotiations with prospective clients for and on behalf of his principal, LMICE. Whennegotiations for the sale or refill of fire extinguishers were successful, private complainant Federico prepared the necessary documentation. Purchaseorders, invoices, and receipts were all in the name of LMICE. It was LMICE who had the primary duty of picking up the empty fire extinguishers, fill ingthem up, and delivering the refilled tanks to the clients, even though private complainant Federico personally helped in hauling and carrying the fireextinguishers during pick-up from and delivery to clients.

All profits made and any advantage gained by an agent in the execution of his agency should belong to the principal. [27] In the instant casewhether the transactions negotiated by the sales agent were for the sale of brand new fire extinguishers or for the refill of empty tanks, evidently, thebusiness belonged to LMICE. Consequently, payments made by clients for the fire extinguishers pertained to LMICE. When petitioner Huertazuela, asthe Branch Manager of LMICE in Puerto Princesa City, with the permission of petitioner Murao, the sole proprietor of LMICE, personally picked up CheckNo. 611437 from the City Government of Puerto Princesa, and deposited the same under the Current Account of LMICE with PCIBank, he was merelycollecting what rightfully belonged to LMICE. Indeed, Check No. 611437 named LMICE as the lone payee. Private complainant Federico may claimcommission, allegedly equivalent to 50% of the payment received by LMICE from the City Government of Puerto Princesa, based on his right to justcompensation under his agency contract with LMICE,[28] but not as the automatic owner of the 50% portion of the said payment.

Since LMICE is the lawful owner of the entire proceeds of the check payment from the City Government of Puerto Princesa, then the petitionerswho collected the payment on behalf of LMICE did not receive the same or any part thereof in trust, or on commission, or for administration, or underany other obligation involving the duty to make delivery of, or to return, the same to private complainant Federico, thus, the RTC correctly found thatno fiduciary relationship existed between petitioners and private complainant Federico. A fiduciary relationship between the complainant and theaccused is an essential element of estafa by misappropriation or conversion, without which the accused could not have committed estafa .[29]

The RTC used the case of Manahan, Jr. v. Court of Appeals [30] to support its position that even in the absence of a fiduciary relationship, thepetitioners still had the civil obligation to return and deliver to private complainant Federico his commission. The RTC failed to discern the substantiadifferences in the factual background of the Manahan case from the present Petition. The Manahan case involved the lease of a dump truck. Althougha contract of lease may not be fiduciary in character, the lessee clearly had the civil obligation to return the truck to the lessor at the end of the lease



























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period; and failure of the lessee to return the truck as provided for in the contract may constitute estafa. The phrase ―or any other obligation involvingthe duty to make delivery of, or to return the same‖ refers to contracts of bailment, such as, c ontract of lease of personal property, contract of deposit,and commodatum , wherein juridical possession of the thing was transferred to the lessee, depositary or borrower, and wherein the latter is obligated toreturn the same thing.[31]

In contrast, the current Petition concerns an agency contract whereby the principal already received payment from the client but refused to givethe sales agent, who negotiated the sale, his commission. As has been established by this Court in the foregoing paragraphs, LMICE had a right to thefull amount paid by the City Government of Puerto Princesa. Since LMICE, through petitioners, directly collected the payment, then it was already inpossession of the amount, and no transfer of juridical possession thereof was involved herein. Given that private complainant Federico could not claimownership over the said payment or any portion thereof, LMICE had nothing at all to deliver and return to him. The obligation of LMICE to pay privatecomplainant Federico his commission does not arise from any duty to deliver or return the money to its supposed owner, but rather from the duty of aprincipal to give just compensation to its agent for the services rendered by the latter.

Furthermore, the Court of Appeals, in its Decision, dated 31 May 1999, defined the words ―convert‖ and ―misappropriate‖ in the following manne –

The High Court in Saddul v. Court of Appeals [192 SCRA 277] enunciated that the words ―convert‖ and ―misappropriate‖ in the crime of estafa punished

under Art. 315, par. 1(b) connote an act of using or disposing of another’s property as if it were one’s own, or if devoting it to a purpose or use differentfrom that agreed upon. To misappropriate to one’s use includes, not only conversion to one’s personal advantage, but also every attempt to dispose o f the property of another without right.[32]

Based on the very same definition, this Court finds that petitioners did not convert nor misappropriate the proceeds from Check No. 611437 because thesame belonged to LMICE, and was not ―another’s property.‖ Petitioners collected t he said check from the City Government of Puerto Princesa anddeposited the same under the Current Account of LMICE with PCIBank. Since the money was already with its owner, LMICE, it could not be said thatthe same had been converted or misappropriated for one could not very well fraudulently appropriate to himself money that is his own . [33]

Although petitioners’ refusal to pay private complainant Federico his commission caused prejudice or damage to the latter, said act does no

constitute a crime, particularly estafa by conversion or misappropriation punishable under Article 315(1)(b) of the Revised Penal Code. Without theessential elements for the commission thereof, petitioners cannot be deemed to have committed the crime.

While petitioners may have no criminal liability, petitioners themselves admit their civil liability to the private complaina nt Federico for the latter’s

commission from the sale, whether it be 30% of the net sales or 50% of the gross sales. However, this Court is precluded from making a determinationand an award of the civil liability for the reason that the said civil liability of petitioners to pay private complainant Federico his commission arises from aviolation of the agency contract and not from a criminal act .[34] It would be improper and unwarranted for this Court to impose in a criminal action thecivil liability arising from a civil contract, which should have been the subject of a separate and independent civil action . [35]

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CR No. 21134, dated 31 May 1999, affirming with modification theJudgment of the RTC of Puerto Princesa City, Palawan, in Criminal Case No. 11943, dated 05 May 1997, finding petitioners guilty beyond reasonabledoubt of estafa by conversion or misappropriation under Article 315(1)(b) of the Revised Penal Code, and awarding the amount of P154,500.00 as salescommission to private complainant Federico, is hereby REVERSED and SET ASIDE. A new Judgment is hereby entered ACQUITTING petitioners basedon the foregoing findings of this Court that their actions did not constitute the crime of estafa by conversion or misappropriation under Article 315(1)(b)of the Revised Penal Code. The cash bonds posted by the petitioners for their provisional liberty are hereby ordered RELEASED and the amountsthereof RETURNED to the petitioners, subject to the usual accounting and auditing procedures.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
























Manila

EN BANC

G.R. No. 3188 March 12, 1907

THE UNITED STATES, plaintiff-appellee,vs.

ALEC KIENE, defendant-appellant.

Hartigan, Marple, Rohde & Gutierrez for appellant. Attorney-General Araneta for appellee.

CARSON, J.:

The defendant was an insurance agent. As such agent there was paid over to him for the account of his employers, the China Mutual Life InsuranceCompany, the sum of 1,539.20 pesos, Philippine currency, which he failed and refused to turn over to them. For his failure and refusal so to do, he wasconvicted of the crime of estafa in the Court of First Instance of the city Manila in sentenced to be imprisoned for one year and six months in Bilibid, andto pay the costs of the trial.

The facts as stated above were fully established at the trial of the case; the accused offered no evidence on his own behalf and rest his appealsubstantially upon the alleged failure of the prosecution to establish the existence of a duty or obligation imposed on the defendant to turn over his

principal the funds which he is charged with appropriating to his own use.

Counsel for the defendant contends that the trial court erroneously admitted in evidence a certain document purporting to be a contract of agencysigned by the defendant. The name of the accused is attached to this document, and one of the witnesses, the district agent of the China Mutual LifeInsurance Company, stated that it was the contract of agency it purported to be, but failed to state specifically that the signature attached thereto wasthe signature of the defendant, though he declared that he knew his signature and had seen him write it on various occasions.

An examination of the record seems to indicate that the failure of the witness to expressly identify the signature of the defendant attached to thedocument was due to an oversight, but however this may be, it is contented that the execution of the document was not formally established, and thetrial court erred in taking into consideration one of its provisions whereby the defendant appears to have expressly obligated himself to deliver to theChina Mutual Life Insurance Company the funds collected on its account, without deduction for any purpose whatever.

We do not deem it necessary to review the action of the court in admitting this document in evidence, because we are of opinion that the obligation of the defendant to deliver the funds in question to his employers is determined by the provision of article 1720 of the Civil Code, which is as follows:

Every agent is bound to give an account of his transactions and to pay to the principal all that he may have received by virtue of the agency,even though what has been received is not owed to the principal.

Nothing to the contrary appearing in the record, and the existence of the agency and the collection of the funds on account of the principal having beenestablished, the obligation to deliver these funds to the principal must be held to have been imposed upon the agent by virtue of the contract of agency.

Counsel for the appellant further contented that the court erred in admitting in evidence a certain letter written by the defendant wherein he admittedthe collection of certain funds on account of his principal, but we think that the execution of this letter was conclusively established, and that it wasproperly admitted, being pertinent and material to the issue in the case.

There were other objections to the admission of certain testimony at the trial of the case, but we find no error in the proceedings prejudicial to the realrights of the accused, and it is unnecessary to discuss the assignments of error based on these objections.

The crime of which the accused was convicted is defined and penalized in paragraph 5 of article 535, read together with paragraph 3 of article 534, of the Penal Code, and the penalty prescribed is that of presidio correccional in its minimum and medium degrees. There being no aggravating orextenuating circumstance to be taken into consideration, this penalty should be imposed in its medium degree ,which, in accordance with the provisionsof article 82 of the said code, is from one year eight months and twenty-one days to two years eleven months and ten days of presidio correccional . Thetrial court imposed the penalty of one year and six months of imprisonment in Bilibid, and failed to impose the accessory penalties prescribed by law,and this sentence should therefore be reversed, and is hereby reversed, and instead thereof we impose the penalty of one year eight months andtwenty-one days' imprisonment ( presidio correccional ), together with the accessory penalties prescribed by law, and the payment to the agents of theChina Mutual Life Insurance Company, Limited, of the sum of 1,550.30 pesos, Philippine currency, with subsidiary imprisonment in case of insolvency,and the costs in both instances. After the expiration of ten days let judgment be entered in accordance herewith, and ten days thereafter let the case beremanded to the lower court for proper action. So ordered.

Arellano, C.J., Torres, Mapa, Willard and Tracey, JJ., concur.




Manila

EN BANC April 7, 1924

In re H. V. BAMBERGER

OSTRAND, J.:

At the instance of the Attorney-General, disbarment proceedings have been instituted against Attorney H. V. Bamberger for alleged malpractice in hisprofession. The matter has been investigated by the provincial fiscal of Iloilo, aided by an assistant attorney of the Bureau of Justice, and after receivingconsiderable testimony and other evidence, and after hearing the respondent, the fiscal summarizes the facts found as follows:

First. That Mr. H. V. Bamberger was attorney for the plaintiff in the case No. 4076 of the Court of First Instance of Iloilo "S. M. Berger,plaintiff vs. Enrique de Valera, defendant" regarding a certain sum of money.

Second. That Mr. Bemberger took possession of the personal property attached by the plaintiff in said case, as well as other personal propertynot attached, and the respondent disposed of a certain amount of steel bars which the defendant Enrique de Valera had deposited with theChairman King Chio.

Third. That Mr. Bamberger, as he admitted in his answer and statement, has disposed of a lot 83 tins of canned peas at the price of 10centavos per tin and one case of catchup at the price P10, without due authorization.

Fourth. That while all the merchandise was in the possession of Mr. H. V. Bamberger, the respondent, he collected and received the amountof P2,178.82 as he admitted, either from debtor of Enrique de Valera, especially the Chinaman King Chio, or for having disposed of somemerchandise. It is also an admitted fact by him that he is accountable fro P1,187 to S. M. Berger & Co.

Fifth. That Mr. Bamberger has, on various occasions, required either by Mr. Block, in the name of S. M. Berger & Co., or by Messrs. S. M.Berger & Co. themselves, to render an immediate accounting which he has disregarded without any reasonable cause.

Sixth. That Mr. H. V. Bamberger, since the civil case No. 4076 above referred to has been decided, on July 22, 1921, and completelydeterminated as per the stipulation and agreement, Exhibit T and the answer of the defendant admitting all and every one of the allegationsin the amended complaint of the plaintiff, has not made any effort to render an accounting to S. M. Berger nor has he been willing to send ordeliver to his client the money collected at any time.

Seventh. That the excuse of the respondent that he could not render an accounting to his client because Mr. Cedrum did not give him a list ofthe merchandise taken by the latter and because Mr. Berger took with him the receipt of King Chio, Exhibit H, and certain notes in connection

with King Chio's account, is not admissible:

(a ) Because Mr. Cendrum declared that he furnished Mr. Bemberger with the list in question, and the respondent made a note in hisbook of the merchandise turned over.

(b ) Because the evidence of the complaint shows clearly that Mr. Bamberger never asked Mr. Berger for Exhibit H and other noteshe needed to render his account and if Mr. Berger [Bamberger] had written to Mr. Berger for the papers he needed for hisaccounting, Mr. Berger would have, of course, given them to him with pleasure.

(c ) Because if we were true that he could not give a complete accounting in regard to King Chio's account without such papers andnotes, it is not understood why he prepared and acknowledge before a notary the document Exhibit 2, which is an assignment of the account owed to King Chio by the Talisay-Silay Milling Co. amounting to P5,390. This document was executed on April 25, 1922.

Upon the facts stated the fiscal recommends that the respondent be suspended from the practice of law.

The findings quoted are amply supported by the evidence. Whether the respondent, after deducting proper attorney's fees, owes his client anyconsiderable sum of money, we need not here decide; that must be determined an another and different proceeding. But attorneys are bound topromptly account to their clients for money or property received by them as such, and the fact that an attorney has a lien for fees on money in hishands does not relieve him from liability. (6 C. J., 693.) Notwithstanding repeated demands on the part of his client, the defendant has for several yearsfailed to render an accounting of the money received by him on behalf of his client and the excuses offered for his failure to do so are so inadequate asto merit no consideration. The respondent is clearly guilty of professional misconduct in falling to account to S. M. Berger & Co. for money received byhim as attorney for the latter.

It is therefore ordered that H. V. Bamberger be and he hereby is suspended from his office of lawyer for the period of six months beginning with thedate upon which he is notified of this order.

Araullo, C. J., Johnson, Street, Avanceña, Johns and Romualdez, JJ., concur.



FIRST DIVISION

[G.R. No. 130423. November 18, 2002]

VIRGIE SERONA, petitioner, vs . HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents .

D E C I S I O N

YNARES-SANTIAGO, J .:

During the period from July 1992 to September 1992, Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be sold oncommission basis. By oral agreement of the parties, petitioner shall remit payment or return the pieces of jewelry if not sold to Quilatan, both within 30days from receipt of the items.

Upon petitioner’s failure to pay on September 24, 1992, Quilatan required her to execute an acknowledgment receipt (Exhibit B ) indicating theiagreement and the total amount due, to wit:

Ako, si Virginia Serona, nakatira sa Mother Earth Subd., Las Pinas, ay kumuha ng mga alahas kay Gng. Leonida Quilatan na may kabuohang halaga naP567,750.00 para ipagbili para ako magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa kanya ang mga nasabing alahas kung hindi mabibilisa loob ng 30 araw.

Las Pinas, September 24, 1992.[1]

The receipt was signed by petitioner and a witness, Rufina G. Navarette.

Unknown to Quilatan, petitioner had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on commission basis. Petitionewas not able to collect payment from Labrador, which caused her to likewise fail to pay her obligation to Quilatan.

Subsequently, Quilatan, through counsel, sent a formal letter of demand [2] to petitioner for failure to settle her obligation. Quilatan executed acomplaint affidavit[3] against petitioner before the Office of the Assistant Provincial Prosecutor. Thereafter, an information for estafa under Article 315paragraph 1(b)[4] of the Revised Penal Code was filed against petitioner, which was raffled to Branch 255 of the Regional Trial Court of Las Pinas. Theinformation alleged:

That on or about and sometime during the period from July 1992 up to September 1992, in the Municipality of Las Pinas, Metro Manila, Philippines, andwithin the jurisdiction of this Honorable Court, the said accused received in trust from the complainant Leonida E. Quilatan various pieces of jewelry inthe total value of P567,750.00 to be sold on commission basis under the express duty and obligation of remitting the proceeds thereof to the said

complainant if sold or returning the same to the latter if unsold but the said accused once in possession of said various pieces of jewelry, withunfaithfulness and abuse of confidence and with intent to defraud, did then and there willfully, unlawfully and feloniously misappropriate and convertthe same for her own personal use and benefit and despite oral and written demands, she failed and refused to account for said jewelry or the proceedsof sale thereof, to the damage and prejudice of complainant Leonida E. Quilatan in the aforestated total amount of P567,750.00.

CONTRARY TO LAW.[5]

Petitioner pleaded not guilty to the charge upon arraignment.[6] Trial on the merits thereafter ensued.

Quilatan testified that petitioner was able to remit P100,000.00 and returned P43,000.00 worth of jewelriy; [7] that at the start, petitioner wasprompt in settling her obligation; however, subsequently the payments were remitted late; [8] that petitioner still owed her in the amount ofP424,750.00.[9]

On the other hand, petitioner admitted that she received several pieces of jewelry from Quilatan and that she indeed failed to pay for the same.She claimed that she entrusted the pieces of jewelry to Marichu Labrador who failed to pay for the same, thereby causing her to default in paying

Quilatan.

[10]

She presented handwritten receipts (Exhibits 1 & 2)

[11]

evidencing payments made to Quilatan prior to the filing of the criminal case.Marichu Labrador confirmed that she received pieces of jewelry from petitioner worth P441,035.00. She identified an acknowledgment receip

(Exhibit 3)[12] signed by her dated July 5, 1992 and testified that she sold the jewelry to a person who absconded without paying her. Labrador alsoexplained that in the past, she too had directly transacted with Quilatan for the sale of jewelry on commission basis; however, due to her outstandingaccount with the latter, she got jewelry from petitioner instead.[13]

On November 17, 1994, the trial court rendered a decision finding petitioner guilty of estafa , the dispositive portion of which reads:

WHEREFORE, in the light of the foregoing, the court finds the accused Virgie Serona guilty beyond reasonable doubt, and as the amountmisappropriated is P424,750.00 the penalty provided under the first paragraph of Article 315 of the Revised Penal Code has to be imposed which shallbe in the maximum period plus one (1) year for every additional P10,000.00.

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Applying the Indeterminate Sentence Law, the said accused is hereby sentenced to suffer the penalty of imprisonment ranging from FOUR (4) YEARSand ONE (1) DAY of prision correccional as minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as maximum; to pay the sum of P424,750.00 as cost for the unreturned jewelries; to suffer the accessory penalties provided by law; and to pay the costs.

SO ORDERED.[14]

Petitioner appealed to the Court of Appeals, which affirmed the judgment of conviction but modified the penalty as follows:

WHEREFORE, the appealed decision finding the accused-appellant guilty beyond reasonable doubt of the crime of estafa is hereby AFFIRMED with thefollowing MODIFICATION:

Considering that the amount involved is P424,750.00, the penalty should be imposed in its maximum period adding one (1) year for each additionalP10,000.00 albeit the total penalty should not exceed Twenty (20) Years (Art. 315). Hence, accused-appellant is hereby SENTENCED to suffer thepenalty of imprisonment ranging from Four (4) Years and One (1) Day of Prision Correccional as minimum to Twenty (20) Years of Reclusion Temporal .

SO ORDERED.[15]

Upon denial of her motion for reconsideration,[16] petitioner filed the instant petition under Rule 45, alleging that:

I

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS AN ABUSE OF CONFIDENCE ON THE PART OF PETITIONER IN ENTRUSTING THE SUBJECT JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO PROSPECTIVE BUYERS.

II

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS MISAPPROPRIATION OR CONVERSION ON THE PART OFPETITIONER WHEN SHE FAILED TO RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE COMPLAINANT.[17]

Petitioner argues that the prosecution failed to establish the elements of estafa as penalized under Article 315, par. 1(b) of the Revised PenaCode. In particular, she submits that she neither abused the confidence reposed upon her by Quilatan nor converted or misappropriated the subject jewelry; that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not violate her undertaking with Quilatan. Moreoverpetitioner delivered the jewelry to Labrador under the same terms upon which it was originally entrusted to her. It was established that petitioner hadnot derived any personal benefit from the loss of the jewelry. Consequently, it cannot be said that she misappropriated or converted the same.

We find merit in the petition.

The elements of estafa through misappropriation or conversion as defined in Article 315, par. 1(b) of the Revised Penal Code are: (1) that themoney, good or other personal property is received by the offender in trust, or on commission, or for administration, or under any other obligationinvolving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion of such money or property by theoffender or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; and (4) that there isa demand made by the offended party on the offender.[18] While the first, third and fourth elements are concededly present, we find the second elementof misappropriation or conversion to be lacking in the case at bar.

Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation by delivering the jewelry to a sub-agent for saleon commission basis. We are unable to agree with the lower courts’ conclusion that this fact alone is sufficient ground for holding that petitionerdisposed of the jewelry ―as if it were hers, thereby committing conversion and a clear breach of trust. ‖ [19]

It must be pointed out that the law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the absenceof an express agreement to the contrary between the agent and the principal .[20] In the case at bar, the appointment of Labrador as petitioner’s sub

agent was not expressly prohibited by Quilatan, as the acknowledgment receipt, Exhibit B, does not contain any such limitation. Neither does it appearthat petitioner was verbally forbidden by Quilatan from passing on the jewelry to another person before the acknowledgment receipt was executed or atany other time. Thus, it cannot be said that peti tioner’s act of entrusting the jewelry to Labrador is characterized by abuse of confidence because suchan act was not proscribed and is, in fact, legally sanctioned.

The essence of estafa under Article 315, par. 1(b) is the appropriation or conversion of money or property received to the prejudice of the owner.

The words ―convert‖ and ―misappropriated‖ connote an act of using or disposing of another’s property as if it were one’s own, or of devoting it to apurpose or use different from that agreed upon. To misappropriate for one’s own use includes not only conversion to one’s personal advantage, but alsoevery attempt to dispose of the property of another without right.[21]

In the case at bar, it was established that the inability of petitioner as agent to comply with her duty to return either the pieces of jewelry or theproceeds of its sale to her principal Quilatan was due, in turn, to the failure of Labrador to abide by her agreement with petitioner. Notably, Labradortestified that she obligated herself to sell the jewelry in behalf of petitioner also on commission basis or to return the same if not sold. In other wordsthe pieces of jewelry were given by petitioner to Labrador to achieve the very same end for which they were delivered to her in the first place.Consequently, there is no conversion since the pieces of jewelry were not devoted to a purpose or use different from that agreed upon.

Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador ―without right.‖ Aside from the fact that nocondition or limitation was imposed on the mode or manner by which petitioner was to effect the sale, it is also consistent with usual practice for theseller to necessarily part with the valuables in order to find a buyer and allow inspection of the items for sale.

In People v. Nepomuceno ,[22] the accused-appellant was acquitted of estafa on facts similar to the instant case. Accused-appellant thereinundertook to sell two diamond rings in behalf of the complainant on commission basis, with the obligation to return the same in a few days if not sold.







































However, by reason of the fact that the rings were delivered also for sale on commission to sub-agents who failed to account for the rings or theproceeds of its sale, accused-appellant likewise failed to make good his obligation to the complainant thereby giving rise to the charge of estafa . Inabsolving the accused-appellant of the crime charged, we held:

Where, as in the present case, the agents to whom personal property was entrusted for sale, conclusively proves the inability to return the same issolely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good faith, and for the same purpose for whichit was received; there being no prohibition to do so and the chattel being delivered to the subagent before the owner demands its return or before suchreturn becomes due, we hold that the first agent can not be held guilty of estafa by either misappropriation or conversion. The abuse of confidence thatis characteristic of this offense is missing under the circumstances.[23]

Accordingly, petitioner herein must be acquitted. The lower courts’ reliance on People v. Flore s [24] and U.S. v. Pane s [25] to justify petitioner’s

conviction is misplaced , considering that the factual background of the cited cases differ from those which obtain in the case at bar. In Flores , theaccused received a ring to sell under the condition that she would return it the following day if not sold and without authority to retain thering or to give it to a sub-agent. The accused in Panes,meanwhile, was obliged to return the jewelry he received upon demand, but passed on thesame to a sub-agent even after demand for its return had already been made . In the foregoing cases, it was held that there was conversion ormisappropriation.

Furthermore, in Lim v. Court of Appeals ,[26] the Court, citing Nepomuceno and the case of People v. Trinidad ,[27] held that:

In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere negligence in permitting another totake advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315, paragraph 1-b, of the Revised Penal Code; unless of course the evidence should disclose that the agent acted in conspiracy or connivance with the one who carried out the actual misappropriation, then theaccused would be answerable for the acts of his co-conspirators. If there is no such evidence, direct or circumstantial, and if the proof is clear that theaccused herself was the innocent victim of her sub-agent’s faithlessness, her acquittal is in order.[28] (Italics copied)

Labrador admitted that she received the jewelry from petitioner and sold the same to a third person. She further acknowledged that she owed

petitioner P441,035.00, thereby negating any criminal intent on the part of petitioner. There is no showing that petitioner derived personal benefit fromor conspired with Labrador to deprive Quilatan of the jewelry or its value. Consequently, there is no estafa within contemplation of the law.

Notwithstanding the above, however, petitioner is not entirely free from any liability towards Quilatan. The rule is that an accused acquittedof estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. Then too, an agent who is not prohibited fromappointing a sub-agent but does so without express authority is responsible for the acts of the sub-agent .[29] Considering that the civil action for therecovery of civil liability arising from the offense is deemed instituted with the criminal action , [30] petitioner is liable to pay complainant Quilatan thevalue of the unpaid pieces of jewelry.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CR No. 17222 dated April 30,1997 and its resolutiondated August 28, 1997 are REVERSED and SET ASIDE. Petitioner Virgie Serona is ACQUITTED of the crime charged, but is held civilly liable in theamount of P424,750.00 as actual damages, plus legal interest, without subsidiary imprisonment in case of insolvency.

SO ORDERED.

Davide, Jr., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.




































Manila

FIRST DIVISION

G.R. No. 137162 January 24, 2007

CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA, IGNACIO E. RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely, ALEJANDRINO R. BALOLOY and BAYANI R. BALOLOY, Petitioners,

vs.RUFINA LIM, Respondent.

D E C I S I O N

AZCUNA, J.:

This is an appeal by certiorari1 to annul and set aside the Decision and Resolution of the Court of Appeals (CA) dated October 26, 1998 and January 11,1999, respectively, in CA-G.R. CV No. 48282, entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al."

The facts2 appear as follows:

Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real property, with preliminary injunction and issuance of [a hold-departureorder] from the Philippines against Ignacio E. Rubio. Respondent amended her complaint to include specific performance and damages.

In her amended complaint, respondent averred inter alia that she bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio [and] the heirsof Luz Baloloy, namely: Alejandrino, Bayani, and other co-heirs; that said vendors executed a contract of sale dated April 10, 1990 in her favor; thatIgnacio Rubio and the heirs of Luz Baloloy received [a down payment] or earnest money in the amount of P102,169.86 and P450,000, respectively; thatit was agreed in the contract of sale that the vendors would secure certificates of title covering their respective hereditary shares; that the balance of the purchase price would be paid to each heir upon presentation of their individual certificate[s] of [title]; that Ignacio Rubio refused to receive theother half of the down payment which is P[100,000]; that Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of titlecovering his share on the two lots; that with respect to the heirs of Luz Baloloy, they also refused and still refuse to perform the delivery of the twocertificates of title covering their share in the disputed lots; that respondent was and is ready and willing to pay Ignacio Rubio and the heirs of LuzBaloloy upon presentation of their individual certificates of title, free from whatever lien and encumbrance;

As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have alr eady been sold by Ignacio Rubio to respondent, it is allegedthat a simulated deed of sale involving said lots was effected by Ignacio Rubio in her favor; and that the simulated deed of sale by Rubio to Escueta hasraised doubts and clouds over respondent’ s title.

In their separate amended answers, petitioners denied the material allegations of the complaint and alleged inter alia the following:

For the heirs of Luz Baloloy (Baloloys for brevity):

Respondent has no cause of action, because the subject contract of sale has no more force and effect as far as the Baloloys are concerned, since theyhave withdrawn their offer to sell for the reason that respondent failed to pay the balance of the purchase price as orally promised on or before May 1,1990.

For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity):

Respondent has no cause of action, because Rubio has not entered into a contract of sale with her; that he has appointed his daughter Patricia Llamasto be his attorney-in-fact and not in favor of Virginia Rubio Laygo Lim (Lim for brevity) who was the one who represented him in the sale of thedisputed lots in favor of respondent; that the P100,000 respondent claimed he received as down payment for the lots is a simple transaction by way of

a loan with Lim.

The Baloloys failed to appear at the pre-trial. Upon motion of respondent, the trial court declared the Baloloys in default. They then filed a motion to liftthe order declaring them in default, which was denied by the trial court in an order dated November 27, 1991. Consequently, respondent was allowed toadduce evidence ex parte. Thereafter, the trial court rendered a partial decision dated July 23, 1993 against the Baloloys, the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of [respondent] and against [petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute an [Absolute] Deedof Sale over their hereditary share in the properties covered by TCT No. 74392 and TCT No. 74394, after payment to them by [respondent] the amountof P[1,050,000] or consignation of said amount in Court. [For] failure of [petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the AbsoluteDeed of Sale over their hereditary share in the property covered by TCT No. T-74392 and TCT No. T-74394 in favor of [respondent], the Clerk of Courtis ordered to execute the necessary Absolute Deed of Sale in behalf of the Baloloys in favor of [respondent,] with a consideration ofP[1,500,000].Further[,] [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral damages in the amount

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of P[50,000] and P[20,000] for attorney’s fees. The adverse claim annotated at the back of TCT No. T-74392 and TCT No. T-74394[,] insofar as theshares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is] ordered cancelled.

With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy.

SO ORDERED.3

The Baloloys filed a petition for relief from judgment and order dated July 4, 1994 and supplemental petition dated July 7, 1994. This was denied by thetrial court in an order dated September 16, 1994. Hence, appeal to the Court of Appeals was taken challenging the order denying the petition for relief.

Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial court rendered its assailed Decision, as follows:

IN VIEW OF THE FOREGOING, the complaint [and] amended complaint are dismissed against [petitioners] Corazon L. Escueta, Ignacio E. Rubio[,] andthe Register of Deeds. The counterclaim of [petitioners] [is] also dismissed. However, [petitioner] Ignacio E. Rubio is ordered to return to the[respondent], Rufina Lim[,] the amount of P102,169.80[,] with interest at the rate of six percent (6%) per annum from April 10, [1990] until the sameis fully paid. Without pronouncement as to costs.

SO ORDERED.4

On appeal, the CA affirmed the trial court’s order and partial decision, but reversed the later decision. The dispositive por tion of its assailed Decisionreads:

WHEREFORE, upon all the foregoing premises considered, this Court rules:

1. the appeal of the Baloloys from the Order denying the Petition for Relief from Judgment and Orders dated July 4, 1994 and SupplementalPetition dated July 7, 1994 is DISMISSED. The Order appealed from is AFFIRMED.

2. the Decision dismissing [respondent’s] complaint is REVERSED and SET ASIDE and a new one is entered. Accordingly,

a. the validity of the subject contract of sale in favor of [respondent] is upheld.

b. Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the balance of the purchase price by[respondent] within 30 days from the receipt of the entry of judgment of this Decision.

c. the contracts of sale between Rubio and Escueta involving Rubio’s share in the disputed properties is declared NULL and VOID.

d. Rubio and Escueta are ordered to pay jointly and severally the [respondent] the amount ofP[20,000] as moral damages

and P[20,000] as attorney’s fees.

3. the appeal of Rubio and Escueta on the denial of their counterclaim is DISMISSED.

SO ORDERED.5

Petitioners’ Motion for Reconsideration of the CA Decision was denied. Hence, this petition.

The issues are:

I

THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM JUDGMENT FILED BY THE BALOLOYS.

II

THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN AWARDING MORAL DAMAGES AND ATTORNEY’S FEES INFAVOR OF RESPONDENT RUFINA L. LIM CONSIDERING THAT:

A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN VIRGINIA LAYGO-LIM AND RUFINA LIM.

B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO SELL AND NOT A CONTRACT OFSALE.

C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER THE CONTRACT TO SELL THEREBY WARRANTING THECANCELLATION THEREOF.















D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO THE CONTRACT OF SALE WITH IGNACIO E. RUBIO.

III

THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND CORAZON L. ESCUETA IS VALID.

IV

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS’ COUNTERCLAIMS.

Briefly, the issue is whether the contract of sale between petitioners and respondent is valid.

Petitioners argue, as follows:

First, the CA did not consider the circumstances surrounding petitioners’ failure to appear at the pre -trial and to file the petition for relief on time.

As to the failure to appear at the pre-trial, there was fraud, accident and/or excusable neglect, because petitioner Bayani was in the United States.There was no service of the notice of pre-trial or order. Neither did the former counsel of record inform him. Consequently, the order declaring him indefault is void, and all subsequent proceedings, orders, or decision are void.

Furthermore, petitioner Alejandrino was not clothed with a power of attorney to appear on behalf of Bayani at the pre-trial conference.

Second, the sale by Virginia to respondent is not binding. Petitioner Rubio did not authorize Virginia to transact business in his behalf pertaining to the

property. The Special Power of Attorney was constituted in favor of Llamas, and the latter was not empowered to designate a substitute attorney-in-fact. Llamas even disowned her signature appearing on the "Joint Special Power of Attorney," which constituted Virginia as her true and lawful attorney-in-fact in selling Rubio’s properties.

Dealing with an assumed agent, respondent should ascertain not only the fact of agency, but also the nature and extent of the former’s aut hority.Besides, Virginia exceeded the authority for failing to comply with her obligations under the "Joint Special Power of Attorney."

The amount encashed by Rubio represented not the down payment, but the payment of respondent’s debt. His acceptance and encas hment of thecheck was not a ratification of the contract of sale.

Third, the contract between respondent and Virginia is a contract to sell, not a contract of sale. The real character of the contract is not the title given,but the intention of the parties. They intended to reserve ownership of the property to petitioners pending full payment of the purchase price. Togetherwith taxes and other fees due on the properties, these are conditions precedent for the perfection of the sale. Even assuming that the contract isambiguous, the same must be resolved against respondent, the party who caused the same.

Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the right to sell his properties to Escueta who exercised duediligence in ascertaining ownership of the properties sold to her. Besides, a purchaser need not inquire beyond what appears in a Torrens title.

The petition lacks merit. The contract of sale between petitioners and respondent is valid. lawphil.net

Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy. In the Baloloys’ answer to the original complaint and ame nded complaint,the allegations relating to the personal circumstances of the Baloloys are clearly admitted.

"An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof." 6 The "factual admission inthe pleadings on record [dispenses] with the need x x x to present evidence to prove the admitted fact. "7 It cannot, therefore, "be controverted by theparty making such admission, and [is] conclusive"8 as to them. All proofs submitted by them "contrary thereto or inconsistent therewith should beignored whether objection is interposed by a party or not."9 Besides, there is no showing that a palpable mistake has been committed in their admissionor that no admission has been made by them.

Pre-trial is mandatory.10 The notices of pre-trial had been sent to both the Baloloys and their former counsel of record. Being served with notice, he is"charged with the duty of notifying the party represented by him."11 He must "see to it that his client receives such notice and attends the pre-trial."12 What the Baloloys and their former counsel have alleged instead in their Motion to Lift Order of As In Default dated December 11, 1991 is thebelated receipt of Bayani Baloloy’s special power of attorney in favor of their former counsel, not that they have not receiv ed the notice or beeninformed of the scheduled pre-trial. Not having raised the ground of lack of a special power of attorney in their motion, they are now deemed to havewaived it. Certainly, they cannot raise it at this late stage of the proceedings. For lack of representation, Bayani Baloloy was properly declared in default.

Section 3 of Rule 38 of the Rules of Court states:

SEC. 3.Time for filing petition; contents and verification. – A petition provided for in either of the preceding sections of this Rule must be verified, filedwithin sixty (60) days after the petitioner learns of the judgment, final order, or other proceeding to be set aside, and not more than six (6) monthsafter such judgment or final order was entered, or such proceeding was taken; and must be accompanied with affidavits showing the fraud, accident,































mistake, or excusable negligence relied upon, and the facts constituting the petitioner’s good and substantial cause of actio n or defense, as the casemay be.

There is no reason for the Baloloys to ignore the effects of the above-cited rule. "The 60-day period is reckoned from the time the party acquiredknowledge of the order, judgment or proceedings and not from the date he actually read the same."13 As aptly put by the appellate court:

The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr., the former counsel of record of the Baloloys received acopy of the partial decision dated June 23, 1993 on April 5, 1994. At that time, said former counsel is still their counsel of record. The reckoning of the60 day period therefore is the date when the said counsel of record received a copy of the partial decision which was on April 5, 1994. The petition forrelief was filed by the new counsel on July 4, 1994 which means that 90 days have already lapsed or 30 days beyond the 60 day period. Moreover, therecords further show that the Baloloys received the partial decision on September 13, 1993 as evidenced by Registry return cards which bear thenumbers 02597 and 02598 signed by Mr. Alejandrino Baloloy.

The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaid reglementary period to file a petition for relief from judgment[,] included inits petition the two Orders dated May 6, 1994 and June 29, 1994. The first Order denied Baloloys’ motion to fix the period within which plaintiffs-appellants pay the balance of the purchase price. The second Order refers to the grant of partial execution, i.e. on the aspect of damages. These Ordersare only consequences of the partial decision subject of the petition for relief, and thus, cannot be considered in the determination of the reglementaryperiod within which to file the said petition for relief.

Furthermore, no fraud, accident, mistake, or excusable negligence exists in order that the petition for relief may be granted. 14 There is no proof of extrinsic fraud that "prevents a party from having a trial x x x or from presenting all of his case to the court"15 or an "accident x x x which ordinaryprudence could not have guarded against, and by reason of which the party applying has probably been impaired in his rights. "16 There is also no proof of either a "mistake x x x of law"17 or an excusable negligence "caused by failure to receive notice of x x x the trial x x x that it would not be necessaryfor him to take an active part in the case x x x by relying on another person to attend to the case for him, when such other person x x x was chargeablewith that duty x x x, or by other circumstances not involving fault of the moving party."18

Article 1892 of the Civil Code provides:

Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsi ble for the acts of thesubstitute:

(1) When he was not given the power to appoint one x x x.

Applying the above-quoted provision to the special power of attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas, it is c lear thatshe is not prohibited from appointing a substitute. By authorizing Virginia Lim to sell the subject properties, Patricia merely acted within the limits of theauthority given by her father, but she will have to be "responsible for the acts of the sub-agent, "19 among which is precisely the sale of the subjectproperties in favor of respondent.

Even assuming that Virginia Lim has no authority to sell the subject properties, the contract she executed in favor of respondent is not void, but simply

unenforceable, under the second paragraph of Article 1317 of the Civil Code which reads:

Art. 1317. x x x

A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall beunenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the othercontracting party.

Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what he received was a loan, not the down payment for thesale of the subject properties. His acceptance and encashment of the check, however, constitute ratification of the contract of sale and "produce theeffects of an express power of agency."20"[H]is action necessarily implies that he waived his right of action to avoid the contract, and, consequently, italso implies the tacit, if not express, confirmation of the said sale effected" by Virginia Lim in favor of respondent.

Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. "The doctrine of estoppel applicable to petitioners

here is not only that which prohibits a party from assuming inconsistent positions, based on the principle of election, but that which precludes him fromrepudiating an obligation voluntarily assumed after having accepted benefits therefrom. To countenance such repudiation would be contrary to equity,and would put a premium on fraud or misrepresentation."21

Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has the title to the subject properties passed to the latter upondelivery of the thing sold, but there is also no stipulation in the contract that states the ownership is to be reserved in or "retained by the vendor untilfull payment of the price."22

Applying Article 1544 of the Civil Code, a second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’stitle, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the firstbuyer’s title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.23 Even theargument that a purchaser need not inquire beyond what appears in a Torrens title does not hold water. A perusal of the certificates of title alone willreveal that the subject properties are registered in common, not in the individual names of the heirs.















































Nothing in the contract "prevents the obligation of the vendor to convey title from becoming effective "24 or gives "the vendor the right to unilaterallyresolve the contract the moment the buyer fails to pay within a fixed period."25 Petitioners themselves have failed to deliver their individual certificatesof title, for which reason it is obvious that respondent cannot be expected to pay the stipulated taxes, fees, and expenses.

"[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as: (1) consent or meeting of the minds; (2)determinate subject matter; and (3) price certain in money or its equivalent. "26 Ignacio Rubio, the Baloloys, and their co-heirs sold their hereditaryshares for a price certain to which respondent agreed to buy and pay for the subject properties. "The offer and the acceptance are concurrent, since theminds of the contracting parties meet in the terms of the agreement."27

In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the price and as proof of the perfection of the contract.28 Itconstitutes an advance payment to "be deducted from the total price. "29

Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be transferred to the vendee upon actual or constructive deliverythereof."30 In the present case, there is actual delivery as manifested by acts simultaneous with and subsequent to the contract of sale when respondentnot only took possession of the subject properties but also allowed their use as parking terminal for jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive delivery.

Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having sold them to respondent. "[I]n a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded x x x. "31 The records donot show that Ignacio Rubio asked for a rescission of the contract. What he adduced was a belated revocation of the special power of attorney heexecuted in favor of Patricia Llamas. "In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price atthe time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as nodemand for rescission of the contract has been made upon him either judicially or by a notarial act."32

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48282, dated

October 26, 1998 and January 11, 1999, respectively, are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.








































Manila

EN BANC

G.R. No. L-38479 November 20, 1933

QUINTIN DE BORJA, judicial administrator of the intestate estate of the deceased Marcelo de Borja,plaintiff-appellant,vs.

FRANCISCO DE BORJA, defendant-appellant.

M.H. de Joya and Quintin Paredes for plaintiff-appellant.Jose de Borja for defendant-appellant.

IMPERIAL, J.:

The plaintiff herein, in his capacity as judicial administrator of the estate of the deceased Marcelo de Borja, instituted this action of the Court of First Instance of Rizal, to recover from the defendant the sum of P61,376.56 which, according to the amended complaint, the said defendant owed theaforesaid deceased, for the certain sums of money loaned to and collected by him from other persons with the obligation to render an accountingthereof to the said deceased.

In his amended answer, the defendant interposed various counterclaims for alleged sums of money owed by him by the aforesaid deceased.

After the trial thereof and the presentation of voluminous evidence therein, the trial court reached the conclusion and held that, from his variouscauses of action, the plaintiff was entitled to recover the sum of P33,218.86 from the defendant, and that, by way of counterclaim, the said defendant inturn was entitled to collect the sum of P39,683 from the plaintiff, and rendered judgment in favor of the defendant in the sum of P6,464.14 with legalinterest thereon from the date of the counterclaim, with the costs. Both parties appealed therefrom. lawphil.net

The trial court made a very careful analysis of the oral and documentary evidence presented therein, and from the preponderance thereof,inferred the findings of fact stated in its decision. We are convicted that, from the evidence presented, the liquidation made by the trial court is thenearest approach to its findings of fact, and for this reason we do not feel inclined to alter or modify it.

The plaintiff-appellant's contention that the counterclaims presented by the defendant have already prescribed, is untenable. The counterclaimsin question are based on instruments in writing marked Exhibit 1 to 6. The period of prescription thereof is not six (6) years, as claimed, but ten (10)years, in accordance with the provisions of section 43 (1) of the Code of Civil Procedure.

Neither is the plaintiff entitled to the interest claimed by him upon the alleged sums loaned to and collected by the defendant from variouspersons for his deceased father. In all the aforementioned transactions, the defendant acted in his capacity as attorney-in-fact of his deceased father,and there being no evidence showing that he converted the money entrusted to him to his own use, he is not liable for interest thereon, in accordancewith the provisions of article 1742 of the Civil Code.

The defendant-appellant's claim to the effect that he is entitled to collect the rents for the use of the earthen jar factory and the buildingsthereof, is, likewise, unfounded. The trial court held that all there existed between the parties was a mere gratuitous commodatum and that the mostthat the deceased bound himself to do was to pay the taxes on the properties in question. There is nothing in the records of the case to justify reversingthe judgment rendered therein.

The judgment appealed from being, in our opinion, in accordance with the law and sufficiently supported by a preponderance of the evidencepresented therein, it is hereby affirmed, without special pronouncement as to the costs of this instance. So ordered.

Avanceña, C.J., Malcolm, Villa-Real, and Hull, JJ., concur.




Manila

THIRD DIVISION

G.R. No. 167812 December 19, 2006

JESUS M. GOZUN, petitioner,vs.

JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO MERCADO, respondent

D E C I S I O N

CARPIO MORALES, J .:

On challenge via petition for review on certiorari is the Court of Appeals’ Decision of December 8, 2004 and Resolution of Ap ril 14, 2005 in CA-G.R. CVNo. 763091 reversing the trial court’s decision2 against Jose Teofilo T. Mercado a.k.a. Don Pepito Mercado (respondent) and accordingly dismissing thecomplaint of Jesus M. Gozun (petitioner).

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondent’s reques t, petitioner, owner of JMG PublishingHouse, a printing shop located in San Fernando, Pampanga, submitted to respondent draft samples and price quotation of campaign materials.

By petitioner’s claim, respondent’s wife had told him that respondent already approved his price quotation and that he could start printing the campaignmaterials, hence, he did print campaign materials like posters bearing respondent’s photograph,3 leaflets containing the slate of partycandidates,4 sample ballots,5 poll watcher identification cards,6 and stickers.

Given the urgency and limited time to do the job order, petitioner availed of the services and facilities of Metro Angeles Printing and of St. JosephPrinting Press, owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively. 7

Petitioner delivered the campaign materials to respondent’s headquarters along Gapan-Olongapo Road in San Fernando, Pampanga.8

Meanwhile, on March 31, 1995, respondent’s sister-in-law, Lilian Soriano (Lilian) obtained from petitioner "cash advance" of P253,000 allegedly for theallowances of poll watchers who were attending a seminar and for other related expenses. Lilian acknowledged on petitioner’s 1995 diary9 receipt of theamount.10

Petitioner later sent respondent a Statement of Account11 in the total amount of P2,177,906 itemized as follows:P640,310 for JMG PublishingHouse; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash advance" obtained by Lilian.

On August 11, 1995, respondent’s wife partially paid P1,000,000 to petitioner who issued a receipt12 therefor.

Despite repeated demands and respondent’s promise to pay, respondent failed to settle the balance of his account to petitione r.

Petitioner and respondent being compadres , they having been principal sponsors at the weddings of their respective daughters, waited for more thanthree (3) years for respondent to honor his promise but to no avail, compelling petitioner to endorse the matter to his counsel who sent respondent ademand letter.13 Respondent, however, failed to heed the demand.14

Petitioner thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a complain t15 against respondent to collect the remainingamount of P1,177,906 plus "inflationary adjustment" and attorney’s fees.

In his Answer with Compulsory Counterclaim,16 respondent denied having transacted with petitioner or entering into any contract for the printing of

campaign materials. He alleged that the various campaign materials delivered to him were represented as donations from his family, friends and politicalsupporters. He added that all contracts involving his personal expenses were coursed through and signed by him to ensure compliance with pertinentelection laws.

On petitioner’s claim that Lilian, on his (respondent’s) behalf, had obtained from him a cash advance of P253,000, respondent denied having given herauthority to do so and having received the same.

At the witness stand, respondent, reiterating his al legations in his Answer, claimed that petitioner was his over-all coordinator in charge of the conductof seminars for volunteers and the monitoring of other matters bearing on his candidacy; and that while his campaign manager, Juanito "Johnny"Cabalu (Cabalu), who was authorized to approve details with regard to printing materials, presented him some campaign materials, those were partlydonated.17

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When confronted with the official receipt issued to his wife acknowledging her payment to JMG Publishing House of the amount of P1,000,000,respondent claimed that it was his first time to see the receipt, albeit he belatedly came to know from his wife and Cabalu that the P1,000,000represented "compensation [to petitioner] who helped a lot in the campaign as a gesture of goodwill. "18

Acknowledging that petitioner is engaged in the printing business, respondent explained that he sometimes discussed with peti tioner strategies relatingto his candidacy, he (petitioner) having actively volunteered to help in his campaign; that his wife was not authorized to enter into a contract withpetitioner regarding campaign materials as she knew her limitations; that he no longer questioned the P1,000,000 his wife gave petitioner as he thoughtthat it was just proper to compensate him for a job well done; and that he came to know about petitioner’s claim against him only after receiving a copyof the complaint, which surprised him because he knew fully well that the campaign materials were donations .19

Upon questioning by the trial court, respondent could not, however, confirm if it was his understanding that the campaign materials delivered bypetitioner were donations from third parties.20

Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign material is donated, it must be so stated on its face, acknowledgedthat nothing of that sort was written on all the materials made by petitioner .21

As adverted to earlier, the trial court rendered judgment in favor of petit ioner, the dispositive portion of which reads:

WHEREFORE, the plaintiff having proven its (sic) cause of action by preponderance of evidence, the Court hereby renders a decision in favorof the plaintiff ordering the defendant as follows:

1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum from the filing of this complaint until fully paid;

2. To pay the sum of P50,000.00 as attorney’s fees and the costs of suit.

SO ORDERED.22

Also as earlier adverted to, the Court of Appeals reversed the trial court’s decision and dismissed the complaint for lack of cause of action.

In reversing the trial court’s decision, the Court of Appeals held that other than petitioner’s testimony, there was no evide nce to support his claim thatLilian was authorized by respondent to borrow money on his behalf. It noted that the acknowledgment receipt23 signed by Lilian did not specify in whatcapacity she received the money. Thus, applying Article 1317 24 of the Civil Code, it held that petitioner’s claim for P253,000 is unenforceable.

On the accounts claimed to be due JMG Publishing House – P640,310, Metro Angeles Printing – P837,696, and St. Joseph Printing Press – P446,900, theappellate court, noting that since the owners of the last two printing presses were not impleaded as parties to the case and it was not shown thatpetitioner was authorized to prosecute the same in their behalf, held that petitioner could not collect the amounts due them.

Finally, the appellate court, noting that respondent’s wife had paid P1,000,000 to petitioner, the latter’s claim ofP640,310 (after excluding the P253,000)

had already been settled.

Hence, the present petition, faulting the appellate court to have erred:

1. . . . when it dismissed the complaint on the ground that there is no evidence, other than petitioner’s own t estimony, to prove that Lilian R.Soriano was authorized by the respondent to receive the cash advance from the petitioner in the amount of P253,000.00.

x x x x

2. . . . when it dismissed the complaint, with respect to the amounts due to the Metro Angeles Press and St. Joseph Printing Press on theground that the complaint was not brought by the real party in interest.

x x x x25

By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consentor authority of the latter.26 Contracts entered into in the name of another person by one who has been given no authority or legal representation or whohas acted beyond his powers are classified as unauthorized contracts and are declared unenforceable, unless they are ratified .27

Generally, the agency may be oral, unless the law requires a specific form.28 However, a special power of attorney is necessary for an agent to, as inthis case, borrow money, unless it be urgent and indispensable for the preservation of the things which are under administration .29 Since nothing in thiscase involves the preservation of things under administration, a determination of whether Soriano had the special authority to borrow money on behalf of respondent is in order.

Lim Pin v. Liao Tian, et al .30 held that the requirement of a special power of attorney refers to the nature of the authorization and not to its form.

. . . The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. As early as1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral or written. The one thing vital






















































being that it shall be express. And more recently, We stated that, if the special authority is not written, then it must be duly established byevidence:

"…the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that thespecial authority be in writing the Court has every reason to expect that, if not in writing, the same be duly established by evidence otherthan the self-serving assertion of counsel himself that such authority was verbally given him."31 (Emphasis and underscoring supplied)

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

Q : Another caption appearing on Exhibit "A" is cash advance, it states given on 3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs.

Annie Mercado, amount P253,000.00, will you kindly tell the Court and explain what does that caption means?

A : It is the amount representing the money borrowed from me by the defendant when one morning they came very early andtalked to me and told me that they were not able to go to the bank to get money for the allowances of Poll Watchers who were having aseminar at the headquarters plus other election related expenses during that day, sir.

Q : Considering that this is a substantial amount which according to you was taken by Lilian Soriano, did you happen to make heracknowledge the amount at that time?

A : Yes, sir.32 (Emphasis supplied)

Petitioner’s testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of his wi fe. While petitioner claimsthat Lilian was authorized by respondent, the statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs. Annie Mercado."

Invoking Article 187333 of the Civil Code, petitioner submits that respondent informed him that he had authorized Lilian to obtain the loan, hence,following Macke v. Camp s 34 which holds that one who clothes another with apparent authority as his agent, and holds him out to the publicas such, respondent cannot be permitted to deny the authority.

Petitioner’s submission does not persuade. As the appellate court observed:

. . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to support his claim unfortunately only indicates the TwoHundred Fifty Three Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31 March 1995, but without specifying for whatreason the said amount was delivered and in what capacity did Lilian R. Soriano received [sic] the money. The note reads:

"3-31-95

261,120 ADVANCE MONEY FOR TRAINEE –

RECEIVED BY

RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO HUNDRED FIFTY THREE THOUSAND PESOS

(SIGNED)

LILIAN R. SORIANO

3-31-95"

Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. Under Article 1317 of the New CivilCode, a person cannot be bound by contracts he did not authorize to be entered into his behalf .35 (Underscoring supplied)

It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and in behalf of respondent. Shethus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its facepurport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was infact authorized to make the mortgage, if he has not acted in the name of the principal. x x x36 (Emphasis and underscoring supplied)

On the amount due him and the other two printing presses, petitioner explains that he was the one who personally and directly contracted withrespondent and he merely sub-contracted the two printing establishments in order to deliver on time the campaign materials ordered by respondent.

Respondent counters that the claim of sub-contracting is a change in petitioner’s theory of the case which is not allowed on appeal.



























In Oco v. Limbaring ,37 this Court ruled:

The parties to a contract are the real parties in interest in an action upon it, as consistently held by the Court. Only the contracting parties arebound by the stipulations in the contract; they are the ones who would benefit from and could violate it. Thus, one who is not a party to acontract, and for whose benefit it was not expressly made, cannot maintain an action on it. One cannot do so, even if the contract performedby the contracting parties would incidentally inure to one's benefit .38 (Underscoring supplied)

In light thereof, petitioner is the real party in interest in this case. The trial court’s findings on the matter were affi rmed by the appellate court.39 Iterred, however, in not declaring petitioner as a real party in interest insofar as recovery of the cost of campaign materials made by petitioner’s motherand sister are concerned, upon the wrong notion that they should have been, but were not, impleaded as plaintiffs.

In sum, respondent has the obligation to pay the total cost of printing his campaign materials delivered by petitioner in the total of P1,924,906, less thepartial payment of P1,000,000, or P924,906.

WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the Resolution dated April 14, 2005 of the Court of Appeals arehereby REVERSED and SET ASIDE.

The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is REINSTATED mutatis mutandis, in light of the foregoingdiscussions. The trial court’s decision is modified in that the amount payable by respondent to petitioner is reduced to P924,906.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Tinga, and Velasco, Jr., JJ., concur.















[G.R. No. 114311. November 29, 1996]

COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEALS and ISIDRO PEREZ, respondents.

D E C I S I O N

BELLOSILLO, J .:

COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact -

x x x to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 andcovered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporationmay take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots .[1]

On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private respondent IsidroPerez and recover the possession of a portion of Lot No. 443 before the Regional Trial Court of Dagupan, docketed as Civil Case No. D-7750 .[2]

On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez, the terms of which follow:

1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo dela Cruz the area at present occupied bydefendant wherein his house is located is 333 square meters on the easternmost part of lot 443 and which portion has been occupied bydefendant for several years now;

2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of P26,640.00 computedat P80.00/square meter;

3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this compromise agreement over said portion of 333 square m. of lot 443 which portion will be located on the easternmost part as indicated in the sketch as annex A;

4. Whatever expenses of subdivision, registration, and other incidental expenses shall be shouldered by the defendant .[3]

On 27 November 1985 the ―Compromise Agreement‖ was approved by the trial court and judgment was rendered in accordance there with.[4]

Although the decision became final and executory it was not executed within the 5-year period from date of i ts finality allegedly due to the failureof petitioner to produce the owner’s duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the portion sold by the attorney-in-factPaz G. Villamil-Estrada, to private respondent under the compromise agreement. Thus on25 January 1993 respondent filed a complaint to revive the judgment, docketed as Civil Case No. D-10459.[5]

Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival of judgment was served upon it that it came toknow of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon which the trial court based its

decision of 26 July 1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent transaction, petitioner sought annulment of the decision othe trial court before respondent Court of Appeals on the ground that the compromise agreement was void because: (a) the attorney-in-fact did nohave the authority to dispose of, sell, encumber or divest the plaintiff of its ownership over its real property or any portion thereof; (b) the authority ofthe attorney-in-fact was confined to the institution and filing of an ejectment case against third persons/squatters on the property of the plaintiff, and tocause their eviction therefrom; (c) while the special power of attorney made mention of an authority to enter into a compromise agreement, suchauthority was in connection with, and limited to, the eviction of third persons/squatters thereat, in order that ―the corporation may take materiapossession of the entire lot;‖ (d) the amount of P26,640.00 alluded to as alleged consideration of said agreement was never received by the plaintiff(e) the private defendant acted in bad faith in the execution of said agreement knowing fully well the want of authority of the attorney-in-fact to sell,encumber or dispose of the real property of plaintiff; and, (f) the disposal of a corporate property indispensably requires a Board Resolution of itsDirectors, a fact which is wanting in said Civil Case No. D-7750, and the General Manager is not the proper officer to encumber a corporate property .[6]

On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that not one of the grounds for annulment, namely, lackof jurisdiction, fraud or illegality was shown to exist.[7] It also denied the motion for reconsideration filed by petitioner, discoursing that the allegednullity of the compromise judgment on the ground that petitioner’s attorney in fact Villamit -Estrada was not authorized to sell the subject property maybe raised as a defense in the execution of the compromise judgment as it does not bind petitioner, but not as a ground for annulment of judgmentbecause it does not affect the jurisdiction of the trial court over the action nor does it amount to extrinsic fraud. [8]

Petitioner challenges this verdict. It argues that the decision of the trial court is void because the compromise agreement upon which it wasbased is void. Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was she armed with a Board Resolution authorizing the sale of itsproperty. She was merely empowered to enter into a compromise agreement in the recovery suit she was authorized to file against persons squattingon Lot No. 443, such authority being expressly confined to the ―ejectment of third persons or squatters of x x x lot x x x (No.) 443 x x x for the saidsquatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot x x x x ‖

We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary: for her toinstitute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material possession thereof, and for thispurpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was protective of therights and interests of petitioner in the property. Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to sell thesubject property nor a portion thereof. Neither can a conferment of the power to sell be validly inferred from the specific authority ―to enter into acompromise agreement‖ because of the explicit limitation fixed by the grantor that the compromise entered into shall only be ―so far as it shall protec

the rights and interest of the corporation in the aforementioned lots.‖ In the context of the specific investiture of powers to Villamil-Estrada, alienationby sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was

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being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further thatpetitioner never received the proceeds of the sale.

When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the saleshall be void.[9] Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specificauthority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in thecontract he did execute.[10] A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted oracquired either gratuitously or for a valuable consideration.[11] The express mandate required by law to enable an appointee of an agency (couched) ingeneral terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned .[12] For theprincipal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakablelanguage. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document.[13]

It is therefore clear that by selling to respondent Perez a portion of petitioner’s land through a compromise agreement, Villamil-Estrada actedwithout or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. This being the case, the judgment basedthereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving petitioner’s motion for reconsideration, the nullity of thesettlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its decision based on the compromiseagreement. In Alviar v. Court of First Instance of La Union ,[14] the Court held -

x x x x this court does not hesitate to hold that the judgment in question is null and void ab initio. It is not binding upon and cannot beexecuted against the petitioners. It is evident that the compromise upon which the judgment was based was not subscribed by them x x xx Neither could Attorney Ortega bind them validly in the compromise because he had no special authority x x x x

As the judgment in question is null and void ab initio , it is evident that the court acquired no jurisdiction to render it, much less to order theexecution thereof x x x

x x x x A judgment, which is null and void ab initio , rendered by a court without jurisdiction to do so, is without legal efficacy and mayproperly be impugned in any proceeding by the party against whom it is sought to be enforced x x x x

This ruling was adopted in Jacinto v. Montesa ,[15] by Mr. Justice J.B.L. Reyes, a much-respected authority on civil law, where the Court declared

that a judgment based on a compromise entered into by an attorney without specific authority from the client is void. Such judgment may be impugnedand its execution restrained in any proceeding by the party against whom it is sought to be enforced. The Court also observed that a defendant againswhom a judgment based on a compromise is sought to be enforced may file a petition for certiorari to quash the execution. He could not move to havethe compromise set aside and then appeal from the order of denial since he was not a party to the compromise. Thus it would appear that the obiter othe appellate court that the alleged nullity of the compromise agreement should be raised as a defense against its enforcement is not legallyfeasible. Petitioner could not be in a position to question the compromise agreement in the action to revive the compromise judgment since it wasnever privy to such agreement. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact but she could not legallybind petitioner thereto as she was not entrusted with a special authority to sell the land, as required in Art. 1878, par. (5), of the Civil Code.

Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of Appeals to annul and set aside judgments of RegionaTrial Courts.[16] ―Thus, the Intermediate Appellate Court (now Court of Appeals) shall exercise x x x x (2) Exclusive original jurisdiction over action foannulment of judgments of the Regional Trial Courts x x x x‖ However, certain requisites must first be established before a final and executory judgment can be the subject of an action for annulment. It must either be void for want of jurisdiction or for lack of due process of law, or it has beenobtained by fraud.[17]

Conformably with law and the above-cited authorities, the petition to annul the decision of the trial court in Civil Case No. D-7750 before the Court

of Appeals was proper. Emanating as it did from a void compromise agreement, the trial court had no jurisdiction to render a judgment basedthereon.[18]

It would also appear, and quite contrary to the finding of the appellate court that the highly reprehensible conduct of attorney-in-fact VillamilEstrada in Civil Case No. 7750 constituted an extrinsic or collateral fraud by reason of which the judgment rendered thereon should have been struckdown. Not all the legal semantics in the world can becloud the unassailable fact that petitioner was deceived and betrayed by its attorney-in-fact. Villamil-Estrada deliberately concealed from petitioner, her principal, that a compromise agreement had been forged with the end-result that aportion of petitioner’s property was sold to the deforciant, literally for a song. Thus completely kept unaware of its agent’s artifice, petitioner was notaccorded even a fighting chance to repudiate the settlement so much so that the judgment based thereon became final and executory.

For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. Fraud may assume different shapes and becommitted in as many different ways and here lies the danger of attempting to define fraud. For man in his ingenuity and fertile imagination will alwayscontrive new schemes to fool the unwary.

There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party from hearing atrial, or real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining to the judgment itself, but to themanner in which it was procured so that there is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act o

the prevailing party in the litigation which is committed outside of the trial of the case, whereby the defeated party has been prevented from exhibitingfully his side of the case by fraud or deception practiced on him by his opponent. [19] Fraud is extrinsic where the unsuccessful party has been preventedfrom exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of acompromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorneyfraudulently or without authority connives at his defeat; these and similar cases which show that there has never been a real contest in the trial orhearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the case for a new and faihearing.[20]

It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of ornotice to his agent received while the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not as ashield for unfair dealing. Hence there is a well-established exception to the general rule as where the conduct and dealings of the agent are such as toraise a clear presumption that he will not communicate to the principal the facts in controversy .[21] The logical reason for this exception is that where theagent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to theprincipal. Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not really acting for theprincipal but is really acting for himself, entirely outside the scope of his agency. [22] Indeed, the basic tenets of agency rest on the highest



























































considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and his act insecret hostility to the interests of his principal transcends the power afforded him.[23]

WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of Appeals dated 29 October 1993 and 10 March 1994respectively, as well as the decision of the Regional Trial Court of Dagupan City in Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED andSET ASIDE. The ―Compromise Agreement‖ entered into between Attorney-in-fact Paz G. Villamil-Estrada and respondent Isidro Perez is declared VOID. This is without prejudice to the right of petitioner to pursue its complaint against pri vate respondent Isidro Perez in Civil Case No. D-7750 for therecovery of possession of a portion of Lot No. 443.

SO ORDERED.

Padilla, (Chairman), Vitug, and Hermosisima, Jr., JJ., concur.

Kapunan, J., no part, having participated in the CA's Decision.





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