I Nature, Form and Kinds of Agency (a-D)

8/13/2019 I Nature, Form and Kinds of Agency (a-D)

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G.R. No. 76931 May 29, 1991

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

G.R. No. 76933 May 29, 1991

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

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

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

PADILLA, J.: p

This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of Appeals in CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air Services and HotelRepresentatives, Inc." which affirmed, with modification, the decision 2 of the Regional Trial Court ofManila, Branch IV, which dismissed the complaint and granted therein defendant's counterclaim foragent's overriding commission and damages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrieroffering passenger and air cargo transportation in the Philippines, and Orient Air Services and HotelRepresentatives (hereinafter referred to as Orient Air), entered into a General Sales Agency

Agreement (hereinafter referred to as the Agreement), whereby the former authorized the latter toact as its exclusive general sales agent within the Philippines for the sale of air passengertransportation. Pertinent provisions of the agreement are reproduced, to wit:

WITNESSETH

In consideration of the mutual convenants herein contained, the parties hereto agreeas follows:

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General Sales Agentwithin the Philippines, including any United States military installation therein whichare not serviced by an Air Carrier Representation Office (ACRO), for the sale of airpassenger transportation. The services to be performed by Orient Air Services shallinclude:



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

(b) providing and maintaining a suitable area in its place of businessto be used exclusively for the transaction of the business of

American;

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

(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air Services with the priorwritten consent of American) in the assigned territory including ifrequired by American the control of remittances and commissionsretained; and

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

In connection with scheduled or non-scheduled air passenger transportation withinthe United States, neither Orient Air Services nor its sub-agents will perform servicesfor any other air carrier similar to those to be performed hereunder for Americanwithout the prior written consent of American. Subject to periodic instructions andcontinued consent from American, Orient Air Services may sell air passengertransportation to be performed within the United States by other scheduled aircarriers provided American does not provide substantially equivalent schedulesbetween the points involved.

xxx xxx xxx

4. Remittances

Orient Air Services shall remit in United States dollars to American the ticket stock orexchange orders, less commissions to which Orient Air Services is entitledhereunder, not less frequently than semi-monthly, on the 15th and last days of eachmonth for sales made during the preceding half month.

All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on exchange orders, less applicable commissions to whichOrient Air Services is entitled hereunder, are the property of American and shall beheld in trust by Orient Air Services until satisfactorily accounted for to American.

5. Commissions

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

(a) Sales agency commission



American will pay Orient Air Services a sales agency commission for all sales oftransportation by Orient Air Services or its sub-agents over American's services andany connecting through air transportation, when made on American's ticket stock,equal to the following percentages of the tariff fares and charges:

(i) For transportation solely between points within the United States

and between such points and Canada: 7% or such other rate(s) asmay be prescribed by the Air Traffic Conference of America.

(ii) For transportation included in a through ticket coveringtransportation between points other than those described above: 8%or such other rate(s) as may be prescribed by the International AirTransport Association.

(b) Overriding commission

In addition to the above commission American will pay Orient Air Services anoverriding commission of 3% of the tariff fares and charges for all sales of

transportation over American's service by Orient Air Service or its sub-agents.

xxx xxx xxx

10. Default

If Orient Air Services shall at any time default in observing or performing any of theprovisions of this Agreement or shall become bankrupt or make any assignment forthe benefit of or enter into any agreement or promise with its creditors or go intoliquidation, or suffer any of its goods to be taken in execution, or if it ceases to be inbusiness, this Agreement may, at the option of American, be terminated forthwithand American may, without prejudice to any of its rights under this Agreement, take

possession of any ticket forms, exchange orders, traffic material or other property orfunds belonging to American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or resolutions ofthe International Air Transport Association and the Air Traffic Conference of America,and such rules or resolutions shall control in the event of any conflict with theprovisions hereof.

xxx xxx xxx

13. Termination

American may terminate the Agreement on two days' notice in the event Orient AirServices is unable to transfer to the United States the funds payable by Orient AirServices to American under this Agreement. Either party may terminate the

Agreement without cause by giving the other 30 days' notice by letter, telegram orcable.

xxx xxx xxx 3



On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement byfailing to promptly remit the net proceeds of sales for the months of January to March 1981 in theamount of US $254,400.40, American Air by itself undertook the collection of the proceeds of ticketssold originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph13 thereof (Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit againstOrient Air with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary

Attachment or Garnishment, Mandatory Injunction and Restraining Order4

averring the aforesaidbasis for the termination of the Agreement as well as therein defendant's previous record of failures"to promptly settle past outstanding refunds of which there were available funds in the possession ofthe defendant, . . . to the damage and prejudice of plaintiff." 5

In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the materialallegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts,contending that after application thereof to the commissions due it under the Agreement, plaintiff infact still owed Orient Air a balance in unpaid overriding commissions. Further, the defendantcontended that the actions taken by American Air in the course of terminating the Agreement as wellas the termination itself were untenable, Orient Air claiming that American Air's precipitous conducthad occasioned prejudice to its business interests.

Finding that the record and the evidence substantiated the allegations of the defendant, the trialcourt ruled in its favor, rendering a decision dated 16 July 1984, the dispositive portion of whichreads:

WHEREFORE, all the foregoing premises considered, judgment is hereby renderedin favor of defendant and against plaintiff dismissing the complaint and holding thetermination made by the latter as affecting the GSA agreement illegal and improperand order the plaintiff to reinstate defendant as its general sales agent for passengertranportation in the Philippines in accordance with said GSA agreement; plaintiff isordered to pay defendant the balance of the overriding commission on total flownrevenue covering the period from March 16, 1977 to December 31, 1980 in theamount of US$84,821.31 plus the additional amount of US$8,000.00 by way of

proper 3% overriding commission per month commencing from January 1, 1981 untilsuch reinstatement or said amounts in its Philippine peso equivalent legallyprevailing at the time of payment plus legal interest to commence from the filing ofthe counterclaim up to the time of payment. Further, plaintiff is directed to paydefendant the amount of One Million Five Hundred Thousand (Pl,500,000.00) pesosas and for exemplary damages; and the amount of Three Hundred Thousand(P300,000.00) pesos as and by way of attorney's fees.

Costs against plaintiff. 7

On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27January 1986, affirmed the findings of the court a quo on their material points but with some

modifications with respect to the monetary awards granted. The dispositive portion of the appellatecourt's decision is as follows:

WHEREFORE, with the following modifications —

1) American is ordered to pay Orient the sum of US$53,491.11 representing thebalance of the latter's overriding commission covering the period March 16, 1977 toDecember 31, 1980, or its Philippine peso equivalent in accordance with the official



rate of exchange legally prevailing on July 10 , 1981, the date the counterclaim wasfiled ;

2) American is ordered to pay Orient the sum of US$7,440.00 as the latter'soverriding commission per month starting January 1, 1981 until date oftermination, May 9, 1981 or its Philippine peso equivalent in accordance with the

official rate of exchange legally prevailing on July 10 , 1981, the date the counterclaimwas filed

3) American is ordered to pay interest of 12% on said amounts from July 10, 1981the date the answer with counterclaim was filed, until full payment;

4) American is ordered to pay Orient exemplary damages of P200 ,000 .00 ;

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

the rest of the appealed decision is affirmed.

Costs against American. 8

American Air moved for reconsideration of the aforementioned decision, assailing the substancethereof and arguing for its reversal. The appellate court's decision was also the subject of a Motionfor Partial Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling withrespect to the monetary awards. The Court of Appeals, by resolution promulgated on 17 December1986, denied American Air's motion and with respect to that of Orient Air, ruled thus:

Orient's motion for partial reconsideration is denied insofar as it prays for affirmance ofthe trial court's award of exemplary damages and attorney's fees, but granted insofar asthe rate of exchange is concerned. The decision of January 27, 1986 is modified inparagraphs (1) and (2) of the dispositive part so that the payment of the sums mentionedtherein shall be at their Philippine peso equivalent in accordance with the official rate ofexchange legally prevailing on the date of actual payment . 9

Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air aspetitioner in G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution 10 of thisCourt dated 25 March 1987 both petitions were consolidated, hence, the case at bar.

The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overridingcommission. It is the stand of American Air that such commission is based only on sales of itsservices actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." Asbasis thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration,is quoted as follows:

5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services anoverriding commission of 3% of the tariff fees and charges for all sales of



transportation over American's services by Orient Air Services or its sub-agents. (Emphasis supplied)

Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former nothaving opted to appoint any sub-agents, it is American Air's contention that Orient Air can claimentitlement to the disputed overriding commission based only on ticketed sales. This is supposed to

be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the3% overriding commission, the sale must be made by Orient Air and the sale must be done with theuse of American Air's ticket stocks.

On the other hand, Orient Air contends that the contractual stipulation of a 3% overridingcommission covers the total revenue of American Air and not merely that derived from ticketed salesundertaken by Orient Air. The latter, in justification of its submission, invokes its designation asthe exclusive General Sales Agent of American Air, with the corresponding obligations arising fromsuch agency, such as, the promotion and solicitation for the services of its principal. In effect, byvirtue of such exclusivity, "all sales of transportation over American Air's services are necessarily byOrient Air." 11

It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must betaken into consideration to ascertain the meaning of its provisions. 12 The various stipulations in thecontract must be read together to give effect to all. 13 After a careful examination of the records, theCourt finds merit in the contention of Orient Air that the Agreement, when interpreted in accordancewith the foregoing principles, entitles it to the 3% overriding commission based on total revenue, oras referred to by the parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for thepromotion and marketing of American Air's services for air passenger transportation, and thesolicitation of sales therefor. In return for such efforts and services, Orient Air was to be paidcommissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares andcharges from sales by Orient Air when made on American Air ticket stock ; and second, an overridingcommission of 3% of tariff fares and charges for all sales of passenger transportation over American

Air services. It is immediately observed that the precondition attached to the first type of commissiondoes not obtain for the second type of commissions. The latter type of commissions would accrue forsales of American Air services made not on its ticket stock but on the ticket stock of other air carrierssold by such carriers or other authorized ticketing facilities or travel agents. To rule otherwise, i .e., tolimit the basis of such overriding commissions to sales from American Air ticket stock would eraseany distinction between the two (2) types of commissions and would lead to the absurd conclusionthat the parties had entered into a contract with meaningless provisions. Such an interpretation mustat all times be avoided with every effort exerted to harmonize the entire Agreement.

An additional point before finally disposing of this issue. It is clear from the records that American Airwas the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this"contract of adhesion" is to be taken "contra proferentem", i .e., construed against the party who

caused the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a contractshall not favor the party who caused theobscurity. 14 To put it differently, when several interpretations of a provision are otherwise equallyproper, that interpretation or construction is to be adopted which is most favorable to the party inwhose favor the provision was made and who did not cause the ambiguity. 15 We therefore agreewith the respondent appellate court's declaration that:



Any ambiguity in a contract, whose terms are susceptible of different interpretations, mustbe read against the party who drafted it. 16

We now turn to the propriety of American Air's termination of the Agreement. The respondentappellate court, on this issue, ruled thus:

It is not denied that Orient withheld remittances but such action finds justificationfrom paragraph 4 of the Agreement, Exh. F, which provides for remittances to

American less commissions to which Orient is entitled, and from paragraph 5(d)which specifically allows Orient to retain the full amount of its commissions. Since, asstated ante, Orient is entitled to the 3% override. American's premise, therefore, forthe cancellation of the Agreement did not exist. . . ."

We agree with the findings of the respondent appellate court. As earlier established, Orient Air wasentitled to an overriding commission based on total flown revenue. American Air's perception thatOrient Air was remiss or in default of its obligations under the Agreement was, in fact, a situationwhere the latter acted in accordance with the Agreement—that of retaining from the sales proceedsits accrued commissions before remitting the balance to American Air. Since the latter was still

obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining andrefusing to remit the sums claimed by American Air. The latter's termination of the Agreement was,therefore, without cause and basis, for which it should be held liable to Orient Air.

On the matter of damages, the respondent appellate court modified by reduction the trial court'saward of exemplary damages and attorney's fees. This Court sees no error in such modification and,thus, affirms the same.

It is believed, however, that respondent appellate court erred in affirming the rest of the decision ofthe trial court. We refer particularly to the lower court's decision ordering American Air to "reinstatedefendant as its general sales agent for passenger transportation in the Philippines in accordancewith said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Airto extend its personality to Orient Air. Such would be violative of the principles and essence ofagency, defined by law as a contract whereby "a person binds himself to render some service or todo something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OFTHE LATTER . 17 (emphasis supplied) In an agent-principal relationship, the personality of theprincipal is extended through the facility of the agent. In so doing, the agent, by legal fiction,becomes the principal, authorized to perform all acts which the latter would have him do. Such arelationship can only be effected with the consent of the principal, which must not, in any way, becompelled by law or by any court. The Agreement itself between the parties states that "either partymay terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram orcable." (emphasis supplied) We, therefore, set aside the portion of the ruling of the respondentappellate court reinstating Orient Air as general sales agent of American Air.

WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution ofthe respondent Court of Appeals, dated 27 January 1986 and 17 December 1986, respectively.Costs against petitioner American Air.

SO ORDERED.

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



Paras, J., took no part. Son is a partner in one of the counsel.

Sarmiento, J., is on leave.

Footnotes

1 Penned by Justice Serafin B. Camilon and concurred in by Justices Jose C.Campos, Jr. and Desiderio P. Jurado.

2 Penned by Judge Herminio C. Mariano.

3 Rollo, pp. 110-118.

4 Rollo, p. 102.

5 Ibid ., p. 104.

6 Ibid ., p. 121.

7 Rollo, p. 162.

8 Rollo, pp. 173-174.

9 Ibid ., p. 210.

10 Rollo, p. 212.

11 Rollo, p. 291.

12 NAESS Shipping Philippines, Inc. vs. NLRC, G.R. No. 73441, 4 September 1987,153 SCRA 657.

13 North Negros Sugar Co. vs. Compania General de Tabacos, No. L-9277, 29March 1957; Article 1374, Civil Code of the Philippines.

14 Equitable Banking Corporation vs. Intermediate Appellate Court, G.R. No. 74451,25 May 1988, 161 SCRA 518.

15 Government of the Philippine Islands vs. Derham Brothers and the International

Banking Corporation, 36 Phil. 960.



G.R. No. 179446 January 10, 2011

LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,vs.GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, Respondents.

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the August 24, 2007 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 82822, entitled "R&BInsurance Corporation v. Glodel Brokerage Corporation and Loadmasters Customs Services, Inc .,"which held petitioner Loadmasters Customs Services, Inc. (Loadmasters) liable to respondentGlodel Brokerage Corporation (Glodel) in the amount of P1,896,789.62 representing the insuranceindemnity which R&B Insurance Corporation (R&B Insurance) paid to the insured-consignee,Columbia Wire and Cable Corporation (Columbia).

THE FACTS:

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbiato insure the shipment of 132 bundles of electric copper cathodes against All Risks. On August 28,2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10,North Harbor, Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pierand the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services ofLoadmasters for the use of its delivery trucks to transport the cargoes to Columbia’swarehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employeddrivers and accompanied by its employed truck helpers. Six (6) truckloads of copper cathodes wereto be delivered to Balagtas, Bulacan, while the other six (6) truckloads were destined for LawangBato, Valenzuela City. The cargoes in six truckloads for Lawang Bato were duly delivered inColumbia’s warehouses there. Of the six (6) trucks en route to Balagtas, Bulacan, however, only five(5) reached the destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes,failed to deliver its cargo.

Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the coppercathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insuranceindemnity in the amount ofP1,903,335.39. After the requisite investigation and adjustment, R&BInsurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodelbefore the Regional Trial Court, Branch 14, Manila (RTC ), docketed as Civil Case No. 02-103040. Itsought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. Itclaimed that it had been subrogated "to the right of the consignee to recover from the party/partieswho may be held legally liable for the loss."2

http://www.lawphil.net/judjuris/juri2011/jan2011/gr_179446_2011.html#fnt1









On November 19, 2003, the RTC rendered a decision3 holding Glodel liable for damages for the lossof the subject cargo and dismissing Loadmasters’ counterclaim for damages and attorney’s feesagainst R&B Insurance. The dispositive portion of the decision reads:

WHEREFORE, all premises considered, the plaintiff having established by preponderance ofevidence its claims against defendant Glodel Brokerage Corporation, judgment is hereby rendered

ordering the latter:

1. To pay plaintiff R&B Insurance Corporation the sum of P1,896,789.62 as actual andcompensatory damages, with interest from the date of complaint until fully paid;

2. To pay plaintiff R&B Insurance Corporation the amount equivalent to 10% of the principalamount recovered as and for attorney’s fees plus P1,500.00 per appearance in Court;

3. To pay plaintiff R&B Insurance Corporation the sum of P22,427.18 as litigation expenses.

WHEREAS, the defendant Loadmasters Customs Services, Inc.’s counterclaim for damages andattorney’s fees against plaintiff are hereby dismissed.

With costs against defendant Glodel Brokerage Corporation.

SO ORDERED.4

Both R&B Insurance and Glodel appealed the RTC decision to the CA.

On August 24, 2007, the CA rendered the assailed decision which reads in part:

Considering that appellee is an agent of appellant Glodel, whatever liability the latter owes toappellant R&B Insurance Corporation as insurance indemnity must likewise be the amount it shall bepaid by appellee Loadmasters.

WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in that the appelleeLoadmasters is likewise held liable to appellant Glodel in the amount of P1,896,789.62 representingthe insurance indemnity appellant Glodel has been held liable to appellant R&B InsuranceCorporation.

Appellant Glodel’s appeal to absolve it from any liability is herein DISMISSED.

SO ORDERED.5

Hence, Loadmasters filed the present petition for review on certiorari before this Court presentingthe following

ISSUES

1. Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the factthat the latter respondent Glodel did not file a cross-claim against it (Loadmasters)?

2. Under the set of facts established and undisputed in the case, can petitionerLoadmasters be legally considered as an Agent of respondent Glodel?6


















To totally exculpate itself from responsibility for the lost goods, Loadmasters argues that it cannot beconsidered an agent of Glodel because it never represented the latter in its dealings with theconsignee. At any rate, it further contends that Glodel has no recourse against it for its (Glodel’s)failure to file a cross-claim pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure.

Glodel, in its Comment,7 counters that Loadmasters is liable to it under its cross-claim because the

latter was grossly negligent in the transportation of the subject cargo. With respect to Loadmasters’claim that it is already estopped from filing a cross-claim, Glodel insists that it can still do so even forthe first time on appeal because there is no rule that provides otherwise. Finally, Glodel argues thatits relationship with Loadmasters is that of Charter wherein the transporter (Loadmasters) is onlyhired for the specific job of delivering the merchandise. Thus, the diligence required in this case ismerely ordinary diligence or that of a good father of the family, not the extraordinary diligencerequired of common carriers.

R&B Insurance, for its part, claims that Glodel is deemed to have interposed a cross-claim againstLoadmasters because it was not prevented from presenting evidence to prove its position evenwithout amending its Answer. As to the relationship between Loadmasters and Glodel, it contendsthat a contract of agency existed between the two corporations.8

Subrogation is the substitution of one person in the place of another with reference to a lawful claimor right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim,including its remedies or securities.9 Doubtless, R&B Insurance is subrogated to the rights of theinsured to the extent of the amount it paid the consignee under the marine insurance, as providedunder Article 2207 of the Civil Code, which reads:

ART. 2207. If the plaintiff’s property has been insured, and he has received indemnity from theinsurance company for the injury or loss arising out of the wrong or breach of contract complainedof, the insurance company shall be subrogated to the rights of the insured against the wrong-doer orthe person who has violated the contract. If the amount paid by the insurance company does notfully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from theperson causing the loss or injury.

As subrogee of the rights and interest of the consignee, R&B Insurance has the right to seekreimbursement from either Loadmasters or Glodel or both for breach of contract and/or tort.

The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance for theamount of the indemnity it paid Columbia.

At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common carriersto determine their liability for the loss of the subject cargo. Under Article 1732 of the Civil Code,common carriers are persons, corporations, firms, or associations engaged in the business ofcarrying or transporting passenger or goods, or both by land, water or air for compensation, offeringtheir services to the public.

Based on the aforecited definition, Loadmasters is a common carrier because it is engaged in thebusiness of transporting goods by land, through its trucking service. It is a common carrier asdistinguished from a private carrier wherein the carriage is generally undertaken by specialagreement and it does not hold itself out to carry goods for the general public.10 The distinction issignificant in the sense that "the rights and obligations of the parties to a contract of private carriageare governed principally by their stipulations, not by the law on common carriers. "11























In the present case, there is no indication that the undertaking in the contract between Loadmastersand Glodel was private in character. There is no showing that Loadmasters solely and exclusivelyrendered services to Glodel.

In fact, Loadmasters admitted that it is a common carrier .12

In the same vein, Glodel is also considered a common carrier within the context of Article 1732. In itsMemorandum,13 it states that it "is a corporation duly organized and existing under the laws of theRepublic of the Philippines and is engaged in the business of customs brokering." It cannot beconsidered otherwise because as held by this Court in Schmitz Transport & Brokerage Corporationv. Transport Venture, Inc.,14 a customs broker is also regarded as a common carrier, thetransportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of theirbusiness and for reasons of public policy, to observe the extraordinary diligence in the vigilance overthe goods transported by them according to all the circumstances of such case, as required by

Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence, it is that extrememeasure of care and caution which persons of unusual prudence and circumspection observe for

securing and preserving their own property or rights.

15

This exacting standard imposed on commoncarriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who isat the mercy of the common carrier once the goods have been lodged for shipment .16 Thus, in caseof loss of the goods, the common carrier is presumed to have been at fault or to have actednegligently.17This presumption of fault or negligence, however, may be rebutted by proof that thecommon carrier has observed extraordinary diligence over the goods.

With respect to the time frame of this extraordinary responsibility, the Civil Code provides that theexercise of extraordinary diligence lasts from the time the goods are unconditionally placed in thepossession of, and received by, the carrier for transportation until the same are delivered, actually orconstructively, by the carrier to the consignee, or to the person who has a right to receive them.18

Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly andseverally liable to R & B Insurance for the loss of the subject cargo. Under Article 2194 of the NewCivil Code, "the responsibility of two or more persons who are liable for a quasi-delict is solidary."

Loadmasters’ claim that it was never privy to the contract entered into by Glodel with the consigneeColumbia or R&B Insurance as subrogee, is not a valid defense. It may not have a direct contractualrelation with Columbia, but it is liable for tort under the provisions of Article 2176 of the Civil Code onquasi-delicts which expressly provide:

ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence,is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existingcontractual relation between the parties, is called a quasi-delict and is governed by the provisions ofthis Chapter.

Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage Service, Inc. v.Phoenix Assurance Company of New York,/McGee & Co., Inc .19

where this Court held that a tortmay arise despite the absence of a contractual relationship, to wit:

We agree with the Court of Appeals that the complaint filed by Phoenix and McGee againstMindanao Terminal, from which the present case has arisen, states a cause of action. The presentaction is based on quasi-delict, arising from the negligent and careless loading and stowing of thecargoes belonging to Del Monte Produce. Even assuming that both Phoenix and McGee have only


































been subrogated in the rights of Del Monte Produce, who is not a party to the contract of servicebetween Mindanao Terminal and Del Monte, still the insurance carriers may have a cause of actionin light of the Court’s consistent ruling that the act that breaks the contr act may be also a tort.Infine, a liability for tort may arise even under a contract, where tort is that which breaches thecontract. In the present case, Phoenix and McGee are not suing for damages for injuries arisingfrom the breach of the contract of service but from the alleged negligent manner by which

Mindanao Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence ofcontractual relationship between Del Monte Produce and Mindanao Terminal, the allegation ofnegligence on the part of the defendant should be sufficient to establish a cause of action arisingfrom quasi-delict. [Emphases supplied]

In connection therewith, Article 2180 provides:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts oromissions, but also for those of persons for whom one is responsible.

x x x x

Employers shall be liable for the damages caused by their employees and household helpers actingwithin the scope of their assigned tasks, even though the former are not engaged in any business orindustry.

It is not disputed that the subject cargo was lost while in the custody of Loadmasters whoseemployees (truck driver and helper) were instrumental in the hijacking or robbery of the shipment. Asemployer, Loadmasters should be made answerable for the damages caused by its employees whoacted within the scope of their assigned task of delivering the goods safely to the warehouse.

Whenever an employee’s negligence causes damage or injury to another, there instantly arises apresumption juris tantum that the employer failed to exercise diligentissimi patris families in theselection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees.20 To avoid liabilityfor a quasi-delict committed by its employee, an employer must overcome the presumption bypresenting convincing proof that he exercised the care and diligence of a good father of a family inthe selection and supervision of his employee.21 In this regard, Loadmasters failed.

Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure thatLoadmasters would fully comply with the undertaking to safely transport the subject cargo to thedesignated destination. It should have been more prudent in entrusting the goods to Loadmasters bytaking precautionary measures, such as providing escorts to accompany the trucks in delivering thecargoes. Glodel should, therefore, be held liable with Loadmasters. Its defense of force majeure isunavailing.

At this juncture, the Court clarifies that there exists no principal-agent relationship between Glodeland Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides: "By the

contract of agency a person binds himself to render some service or to do something inrepresentation or on behalf of another, with the consent or authority of the latter." The elements of acontract of agency are: (1) consent, express or implied, of the parties to establish the relationship;(2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as arepresentative and not for himself; (4) the agent acts within the scope of his authority.22

Accordingly, there can be no contract of agency between the parties. Loadmasters neverrepresented Glodel. Neither was it ever authorized to make such representation. It is a settled rulethat the basis for agency is representation, that is, the agent acts for and on behalf of the principal















on matters within the scope of his authority and said acts have the same legal effect as if they werepersonally executed by the principal. On the part of the principal, there must be an actual intention toappoint or an intention naturally inferable from his words or actions, while on the part of the agent,there must be an intention to accept the appointment and act on it .23 Such mutual intent is notobtaining in this case.

What then is the extent of the respective liabilities of Loadmasters and Glodel? Each wrongdoer isliable for the total damage suffered by R&B Insurance. Where there are several causes for theresulting damages, a party is not relieved from liability, even partially. It is sufficient that thenegligence of a party is an efficient cause without which the damage would not have resulted. It is nodefense to one of the concurrent tortfeasors that the damage would not have resulted from hisnegligence alone, without the negligence or wrongful acts of the other concurrent tortfeasor. Asstated in the case of Far Eastern Shipping v. Court of Appeals,24

X x x. Where several causes producing an injury are concurrent and each is an efficient causewithout which the injury would not have happened, the injury may be attributed to all or any of thecauses and recovery may be had against any or all of the responsible persons although under thecircumstances of the case, it may appear that one of them was more culpable, and that the dutyowed by them to the injured person was not the same. No actor's negligence ceases to be aproximate cause merely because it does not exceed the negligence of other actors. Each wrongdoeris responsible for the entire result and is liable as though his acts were the sole cause of the injury.

There is no contribution between joint tortfeasors whose liability is solidary since both of them areliable for the total damage. Where the concurrent or successive negligent acts or omissions of two ormore persons, although acting independently, are in combination the direct and proximate cause ofa single injury to a third person, it is impossible to determine in what proportion each contributed tothe injury and either of them is responsible for the whole injury. Where their concurringnegligence resulted in injury or damage to a third party, they become joint tortfeasors and aresolidarily liable for the resulting damage under Article 2194 of the Civil Code. [Emphasis supplied]

The Court now resolves the issue of whether Glodel can collect from Loadmasters, it having failed to

file a cross-claim against the latter.1avvphi1

Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach of contract ofservice as the latter is primarily liable for the loss of the subject cargo. In this case, however, itcannot succeed in seeking judicial sanction against Loadmasters because the records disclose thatit did not properly interpose a cross-claim against the latter. Glodel did not even pray thatLoadmasters be liable for any and all claims that it may be adjudged liable in favor of R&BInsurance. Under the Rules, a compulsory counterclaim, or a cross-claim, not set up shall bebarred .25 Thus, a cross-claim cannot be set up for the first time on appeal.

For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid onequitable grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is applied

only in the absence of, and never against, statutory law or judicial rules of procedure."26

The Courtcannot be a lawyer and take the cudgels for a party who has been at fault or negligent.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 24, 2007 Decision of the Courtof Appeals isMODIFIED to read as follows:

WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services, Inc. andrespondent Glodel Brokerage Corporation jointly and severally liable to respondent R&B InsuranceCorporation for the insurance indemnity it paid to consignee Columbia Wire & Cable Corporation and



















ordering both parties to pay, jointly and severally, R&B Insurance Corporation a] the amountof P1,896,789.62 representing the insurance indemnity; b] the amount equivalent to ten (10%)percent thereof for attorney’s fees; and c] the amount of P22,427.18 for litigation expenses.

The cross-claim belatedly prayed for by respondent Glodel Brokerage Corporation against petitionerLoadmasters Customs Services, Inc. is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Associate Justice

Chairperson

ANTONIO EDUARDO B. NACHURA Associate Justice

DIOSDADO M. PERALTA Associate Justice

ROBERTO A. ABAD Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO Associate JusticeChairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, Icertify that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Cou rt’s Division.

RENATO C. CORONA Chief Justice

Footnotes

1 Rollo, pp. 33-48. Penned by Associate Justice Josefina Guevara-Salonga, with AssociateJustice Vicente Q. Roxas and Associate Justice Ramon R. Garcia, concurring.

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2 Petition for review on certiorari, p. 4; id. at 26.

3 Id.

4 Id. at 26-27.

5 Annex A, Petition, id. at 47.

6 Id. at 28.

7 Id. at 96.

8 Id. at 71-74.

9 Lorenzo Shipping Corporation v. Chubb and Sons, Inc., G.R. No. 147724, June 8, 2004,431 SCRA 266, 275, citing Black’s Law Dictionary (6th ed. 1990).

10 National Steel Corporation v. Court of Appeals, 347 Phil. 345, 361 (1997).

11 Lea Mer Industries, Inc. v. Malayan Insurance Co., Inc., 508 Phil. 656, 663 (2005),citing National Steel Corporation v. Court of Appeals, 347 Phil. 345, 362 (1997).

12 Pre-Trial Order dated September 5, 2002, records, p. 136.

13 Dated June 19, 2009, rollo, p. 178.

14 496 Phil. 437, 450 (2005), citing Calvo v. UCPB General Insurance Co., Inc., 429 Phil. 244(2002).

15

National Trucking and Forwarding Corporation v. Lorenzo Shipping Corporation, 491 Phil.151, 156 (2005), citing Black’s Law Dictionary (5th ed. 1979) 411.

16 Id.

17 Civil Code, Art. 1735.

18 Civil Code, Art. 1736.

19 G.R. No. 162467, May 8, 2009, 587 SCRA 429, 434, citing Air France v. Carrascoso, 124Phil.722, 739 (1966); Singson v. Bank of the Philippine Islands, 132 Phil. 597, 600(1968); Mr. & Mrs. Fabre, Jr. v. Court of Appeals, 328 Phil. 775, 785 (1996); PSBA v. Court

of Appeals, G.R. No. 84698, February 4, 1992, 205 SCRA 729, 734.20 Tan v. Jam Transit, Inc ., G.R. No. 183198, November 25, 2009, 605 SCRA 659, 675, citingDelsan Transport Lines, Inc. v. C & A Construction, Inc., 459 Phil. 156 (2003).

21 Id., citing Light Rail Transit Authority v. Navidad, 445 Phil. 31 (2003); Metro Manila TransitCorp. v. Court of Appeals, 435 Phil. 129 (2002).































































22 Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, April 23, 2007, 521SCRA 584, 593, citing Yu Eng Cho v. Pan American World Airways, Inc., 385 Phil. 453, 465(2000).

23 Yun Kwan Byung v. Philippine Amusement and Gaming Corporation, G.R. No. 163553,December 11, 2009, 608 SCRA 107, 130-131, citing Burdador v. Luz, 347 Phi. 654, 662

(1997); Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, April 23, 2007,521 SCRA 584, 593; Victorias Milling Co., Inc. v. Court of Appeals, 389 Phil. 184, 196(2000).

24 357 Phil 703, 751-752 (1998).

25 Section 2, Rule 9 of the 1997 Rules of Civil Procedure.

26 Causapin v. Court of Appeals, G.R. No. 107432, July 4, 1994, 233 SCRA 615, 625.


















G.R. No. 194128 December 7, 2011

WESTMONT INVESTMENT CORPORATION, Petitioner,vs.AMOS P. FRANCIA, JR., CECILIA ZAMORA, BENJAMIN FRANCIA, and PEARLBANKSECURITIES, INC.,Respondents.

D E C I S I O N

MENDOZA, J.:

At bench is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the (1)July 27, 2010 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 84725, which affirmed withmodification the September 27, 2004 Decision2 of the Regional Trial Court, Branch 56, Makati City(RTC) in Civil Case No. 01-507; and (2) its October 14, 2010 Resolution,3 which denied the motionfor the reconsideration thereof.

THE FACTS:

On March 27, 2001, respondents Amos P. Francia, Jr., Cecilia Zamora and Benjamin Francia (theFrancias) filed a Complaint for Collection of Sum of Money and Damages 4 arising from theirinvestments against petitioner Westmont Investment Corporation (Wincorp) and respondentPearlbank Securities Inc. (Pearlbank) before the RTC.

Wincorp and Pearlbank filed their separate motions to dismiss.5 Both motions were anchored on theground that the complaint of the Francias failed to state a cause of action. On July 16, 2001, afterseveral exchanges of pleadings, the RTC issued an order 6 dismissing the motions to dismiss ofWincorp and Pearlbank for lack of merit.

Wincorp then filed its Answer ,7 while Pearlbank filed its Answer with Counterclaim and Crossclaim

(against Wincorp).8

The case was set for pre-trial but before pre-trial conference could be held, Wincorp filed its Motionto Dismiss Crossclaim9 of Pearlbank to which the latter filed an opposition.10 The RTC deniedWincorp’s motion to dismiss crossclaim.11

The pre-trial conference was later conducted after the parties had filed their respective pre-trialbriefs. The parties agreed on the following stipulation of facts, as contained in the Pre-TrialOrder 12 issued by the RTC on April 17, 2002:

1. The personal and juridical circumstances of the parties meaning, the plaintiffs and bothcorporate defendants;

2. That plaintiffs caused the service of a demand letter on Pearl Bank on February 13, 2001marked as Exhibit E;

3. Plaintiffs do not have personal knowledge as to whether or not Pearl Bank indeedborrowed the funds allegedly invested by the plaintiff from Wincorp; and

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4. That the alleged confirmation advices which indicate Pearl Bank as allegedborrower of the funds allegedly invested by the plaintiffs in Wincorp do not bear thesignature or acknowledgment of Pearl Bank. (Emphases supplied)

After several postponements requested by Wincorp, trial on the merits finally ensued. The gist of thetestimony of Amos Francia, Jr. (Amos) is as follows:

1. Sometime in 1999, he was enticed by Ms. Lalaine Alcaraz, the bank manager ofWestmont Bank, Meycauayan, Bulacan Branch, to make an investment with Wincorp, thebank’s financial investment arm, as it was offering interest rates that were 3% to 5% higherthan regular bank interest rates. Due to the promise of a good return of investment, he wasconvinced to invest. He even invited his sister, Cecilia Zamora and his brother, BenjaminFrancia, to join him. Eventually, they placed their investment in the amountsof P1,420,352.72 and P 2,522,745.34 with Wincorp in consideration of a net interest rate of11% over a 43-day spread. Thereafter, Wincorp, through Westmont Bank, issued OfficialReceipt Nos. 47084413 and 470845,14 both dated January 27, 2000, evidencing the saidtransactions.15

2. When the 43-day placement matured, the Francias wanted to retire their investments butthey were told that Wincorp had no funds. Instead, Wincorp "rolled-over" their placementsand issued Confirmation Advices16 extending their placements for another 34 days. The saidconfirmation advices indicated the name of the borrower as Pearlbank. The maturity valueswere P 1,435,108.61 and P 2,548,953.86 with a due date of April 13, 2000.

3. On April 13, 2000, they again tried to get back the principal amount they invested plusinterest but, again, they were frustrated.17

4. Constrained, they demanded from Pearlbank18 their investments. There were severalattempts to settle the case, but all proved futile.

After the testimony of Amos Francia, Jr., the Francias filed their Formal Offer ofEvidence.19 Pearlbank filed its Comment/Objection,20 while Wincorp did not file any comment orobjection. After all the exhibits of the Francias were admitted for the purposes they were offered, theFrancias rested their case.

Thereafter, the case was set for the presentation of the defense evidence of Wincorp. On March 7,2003, three (3) days before the scheduled hearing, Wincorp filed a written motion to postpone thehearing on even date, as its witness, Antonio T. Ong, was unavailable because he had to attend acongressional hearing. Wincorp’s substitute witness, Atty. Nemesio Briones, was likewiseunavailable due to a previous commitment in the Securities and Exchange Commission.

The RTC denied Wincorp’s Motion to Postpone and considered it to have waived its right to presentevidence.21The Motion for Reconsideration of Wincorp was likewise denied.22

On August 14, 2003, Pearlbank filed its Demurrer to Evidence.23 The RTC granted the same in itsOrder 24 dated January 12, 2004. Hence, the complaint against Pearlbank was dismissed, while thecase was considered submitted for decision insofar as Wincorp was concerned.

On September 27, 2004, the RTC rendered a decision25 in favor of the Francias and held Wincorpsolely liable to them. The dispositive portion thereof reads:





















































WHEREFORE, judgment is rendered ordering defendant Westmont Investment Corporation to paythe plaintiffs, the following amounts:

1. P 3,984,062.47 representing the aggregate amount of investment placements made byplaintiffs, plus 11% per annum by way of stipulated interest, to be counted from 10 March2000 until fully paid; and

2. 10% of the above-mentioned amount as and for attorney’s fees and costs of suit.

SO ORDERED.

Wincorp then filed a motion for reconsideration, but it was denied by the RTC in its Order 26 datedNovember 10, 2004.

Not in conformity with the pronouncement of the RTC, Wincorp interposed an appeal with the CA,alleging the following arguments:

I. THE REGIONAL TRIAL COURT ERRED WHEN IT HELD THAT WINCORP AS AGENT

OF PLAINTIFFS-APPELLEES WAS LIABLE TO THE LATTER NOTWITHSTANDING THECLEAR WRITTEN AGREEMENT TO THE CONTRARY;

II. THE REGIONAL TRIAL COURT ALSO ERRED WHEN IT HELD THAT PEARLBANK,THE ACTUAL BORROWER AND RECIPIENT OF THE MONEY INVOLVED IS NOT LIABLETO THE PLAINTIFFS-APPELLEES; and

III. THE REGIONAL TRIAL COURT ERRED IN DISMISSING ALL TOGETHER THECROSS-CLAIM OF WINCORP AGAINST PEARLBANK.27

The CA affirmed with modification the ruling of the RTC in its July 27, 2010 Decision, the decretalportion of which reads:

WHEREFORE, premises considered, the present Appeal is DENIED. The Decision dated 27September 2004 of the Regional Trial Court, Branch 56, Makati City in Civil Case No. 01-507 ishereby AFFIRMED WITH MODIFICATION of the awards. Defendant-appellant Wincorp is herebyordered to pay plaintiffs-appellees the amounts of P 3,984,062.47 plus 11% per annum by way ofstipulated interest to be computed from 13 April 2000 until fully paid and P 100,000.00 as attorney’sfees and cost of suit."

SO ORDERED.

The CA explained:

After a careful and judicious scrutiny of the records of the present case, together with the applicablelaws and jurisprudence, this Court finds defendant-appellant Wincorp solely liable to pay the amountof P 3,984,062.47 plus 11% interest per annum computed from 10 March 2000 to plaintiffs-appellees.

Preliminarily, the Court will rule on the procedural issues raised to know what pieces of evidence willbe considered in this appeal.

Section 34, Rule 132 of th e Rules on Evidenc e states that:











"The court shall consider no evidence which has not been formally offered. The purpose for whichthe evidence is offered must be specified."

A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is toenable the trial judge to know the purpose or purposes for which the proponent is presenting the

evidence. On the other hand, this allows opposing parties to examine the evidence and object to itsadmissibility. Moreover, it facilitates review as the appellate court will not be required to reviewdocuments not previously scrutinized by the trial court. Evidence not formally offered during the trialcan not be used for or against a party litigant. Neither may it be taken into account on appeal.

The rule on formal offer of evidence is not a trivial matter. Failure to make a formal offer within aconsiderable period of time shall be deemed a waiver to submit it. Consequently, any evidence thathas not been offered shall be excluded and rejected.

Prescinding therefrom, the very glaring conclusion is that all the documents attached in the motionfor reconsideration of the decision of the trial court and all the documents attached in the defendant-appellant’s brief filed by defendant-appellant Wincorp cannot be given any probative weight or

credit for the sole reason that the said documents were not formally offered as evidence inthe trial court because to consider them at this stage will deny the other parties the right torebut them.

The arguments of defendant-appellant Wincorp that the plaintiffs-appellees made an erroneous offerof evidence as the documents were offered to prove what is contrary to its content and that theymade a violation of the parol evidence rule do not hold water.

It is basic in the rule of evidence that objection to evidence must be made after the evidence isformally offered. In case of documentary evidence, offer is made after all the witnesses of the partymaking the offer have testified, specifying the purpose for which the evidence is being offered. It isonly at this time, and not at any other, that objection to the documentary evidence may be made.

As to oral evidence, objection thereto must likewise be raised at the earliest possible time, that is,after the objectionable question is asked or after the answer is given if the objectionable issuebecomes apparent only after the answer was given.

x x x

In the case at bench, a perusal of the records shows that the plaintiffs-appellees have sufficientlyestablished their cause of action by preponderance of evidence. The fact that on 27 January 2000,plaintiffs-appellees placed their investment in the amounts of P 1,420,352.72 and P 2,522,754.34with defendant-appellant Wincorp to earn a net interest at the rate of 11% over a 43-day period wasdistinctly proved by the testimony of plaintiff-appellee Amos Francia, Jr. and supported by OfficialReceipt Nos. 470844 and 470845 issued by defendant-appellant Wincorp through Westmont Bank.

The facts that plaintiffs-appellees failed to get back their investment after 43 days and that theirinvestment was rolled over for another 34 days were also established by their oral evidence andconfirmed by the Confirmation Advices issued by defendant-appellant Wincorp, which indicate thattheir investment already amounted to P 1,435,108.61 and P 2,548,953.86 upon its maturity on 13

April 2000. Likewise, the fact that plaintiffs-appellees’ investment was not returned to them until thisdate by defendant-appellant Wincorp was proved by their evidence. To top it all, defendant-appellantWincorp never negated these established facts because defendant-appellant Wincorp’s claim is thatit received the money of plaintiffs-appellees but it merely acted as an agent of plaintiffs-appelleesand that the actual borrower of plaintiffs-appellees’ money is defendant-appellee PearlBank. Hence,



defendant-appellant Wincorp alleges that it should be the latter who must be held liable to theplaintiffs-appellees.

However, the contract of agency and the fact that defendant-appellee PearlBank actually receivedtheir money were never proven. The records are bereft of any showing that defendant-appelleePearlBank is the actual borrower of the money invested by plaintiffs-appellees as defendant-

appellant Wincorp never presented any evidence to prove the same.

Moreover, the trial court did not err in dismissing defendant-appellant Wincorp’s crossclaim asnothing in the records supports its claim. And such was solely due to defendant-appellant Wincorpbecause it failed to present any scintilla of evidence that would implicate defendant-appelleePearlBank to the transactions involved in this case. The fact that the name of defendant-appelleePearlBank was printed in the Confirmation Advices as the actual borrower does not automaticallymakes defendant-appellee PearlBank liable to the plaintiffs-appellees as nothing therein shows thatdefendant-appellee PearlBank adhered or acknowledged that it is the actual borrower of the amountspecified therein.

Clearly, the plaintiffs-appellees were able to establish their cause of action against defendant-

appellant Wincorp, while the latter failed to establish its cause of action against defendant-appelleePearlBank.

Hence, in view of all the foregoing, the Court finds defendant-appellant Wincorp solely liable to paythe amount ofP 3,984,062.47 representing the matured value of the plaintiffs-appellees’ investmentas of 13 April 2000 plus 11% interest per annum by way of stipulated interest counted from maturitydate (13 April 2000).

As to the award of attorney’s fees, this Court finds that the undeniable source of the presentcontroversy is the failure of defendant-appellant Wincorp to return the principal amount and theinterest of the investment money of plaintiffs-appellees, thus, the latter was forced to engage theservices of their counsel to protect their right. It is elementary that when attorney’s fees is awarded,they are so adjudicated, because it is in the nature of actual damages suffered by the party to whomit is awarded, as he was constrained to engage the services of a counsel to represent him for theprotection of his interest. Thus, although the award of attorney’s fees to plaintiffs -appellees waswarranted by the circumstances obtained in this case, this Court finds it equitable to reduce thesame from 10% of the total award to a fixed amount of P 100,000.00.28

Wincorp’s Motion f or Reconsideration was likewise denied by the CA in its October 14, 2010Resolution.29

Not in conformity, Wincorp seeks relief with this Court via this petition for review alleging that −

PLAINTIFFS-RESPONDENTS HAVE NO CAUSE OF ACTION AGAINST WINCORP AS THEEVIDENCE ON RECORD SHOWS THAT THE ACTUAL BENEFICIARY OF THE PROCEEDS OF

THE LOAN TRANSACTIONS WAS PEARLBANK

SUBSTANTIAL JUSTICE DICTATES THAT THE EVIDENCE PROFERRED BY WINCORPSHOULD BE CONSIDERED TO DETERMINE WHO, AMONG THE PARTIES, ARE LIABLE TOPLAINTIFFS-RESPONDENTS30

ISSUE














The core issue in this case is whether or not the CA is correct in finding Wincorp solely liable to paythe Francias the amount of P 3,984,062.47 plus interest of 11% per annum.

Quite clearly, the case at bench presents a factual issue.

As a rule, a petition for review under Rule 45 of the Rules of Court covers only questions of law.

Questions of fact are not reviewable and cannot be passed upon by this Court in the exercise of itspower to review. The distinction between questions of law and questions of fact is established.

A question of law exists when the doubt or difference centers on what the law is on a certain state offacts. A question of fact , on the other hand, exists if the doubt centers on the truth or falsity of thealleged facts.31 This being so, the findings of fact of the CA are final and conclusive and this Courtwill not review them on appeal.

While it goes without saying that only questions of law can be raised in a petition for review oncertiorari under Rule 45, the same admits of exceptions, namely: (1) when the findings are groundedentirely on speculations, surmises, or conjectures; (2) when the inference made is manifestlymistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when the

judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6) when

in making its findings, the same are contrary to the admissions of both appellant and appellee; (7)when the findings are contrary to those of the trial court; (8) when the findings are conclusionswithout citation of specific evidence on which they are based; (9) when the facts set forth in thepetition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; and(10) when the findings of fact are premised on the supposed absence of evidence and contradictedby the evidence on record.32

The Court finds that no cogent reason exists in this case to deviate from the general rule.

Wincorp insists that the CA should have based its decision on the express terms, stipulations, andagreements provided for in the documents offered by the Francias as the legal relationship of theparties was clearly spelled out in the very documents introduced by them which indicated that itmerely brokered the loan transaction between the Francias and Pearlbank.33

Wincorp would want the Court to rule that there was a contract of agency between it and theFrancias with the latter authorizing the former as their agent to lend money to Pearlbank. Accordingto Wincorp, the two Confirmation Advices presented as evidence by the Francias and admitted bythe court, were competent proof that the recipient of the loan proceeds was Pearlbank.34

The Court is not persuaded.

In a contract of agency, a person binds himself to render some service or to do something inrepresentation or on behalf of another with the latter’s consent.35 It is said that the underlyingprinciple of the contract of agency is to accomplish results by using the services of others – to do agreat variety of things. Its aim is to extend the personality of the principal or the party for whom

another acts and from whom he or she derives the authority to act. Its basis is representation.36

Significantly, the elements of the contract of agency are: (1) consent, express or implied, of theparties to establish the relationship; (2) the object is the execution of a juridical act in relation to athird person; (3) the agent acts as a representative and not for himself; (4) the agent acts within thescope of his authority.37

In this case, the principal-agent relationship between the Francias and Wincorp was not dulyestablished by evidence. The records are bereft of any showing that Wincorp merely brokered the































loan transactions between the Francias and Pearlbank and the latter was the actual recipient of themoney invested by the former. Pearlbank did not authorize Wincorp to borrow money for it. Neitherwas there a ratification, expressly or impliedly, that it had authorized or consented to saidtransaction.

As to Pearlbank, records bear out that the Francias anchor their cause of action against it merely on

the strength of the subject Confirmation Advices bearing the name "PearlBank" as the supposedborrower of their investments. Apparently, the Francias ran after Pearlbank only after learning thatWincorp was reportedly bankrupt.38 The Francias were consistent in saying that they only dealt withWincorp and not with Pearlbank. It bears noting that even in their Complaint and during the pre-trialconference, the Francias alleged that they did not have any personal knowledge if Pearlbank wasindeed the recipient/beneficiary of their investments.

Although the subject Confirmation Advices indicate the name of Pearlbank as the purportedborrower of the said investments, said documents do not bear the signature or acknowledgment ofPearlbank or any of its officers. This cannot prove the position of Wincorp that it was Pearlbankwhich received and benefited from the investments made by the Francias. There was not even apromissory note validly and duly executed by Pearlbank which would in any way serve as evidenceof the said borrowing.

Another significant point which would support the stand of Pearlbank that it was not the borrower ofwhatever funds supposedly invested by the Francias was the fact that it initiated, filed and pursuedseveral cases against Wincorp, questioning, among others, the latter’s acts of naming it as borrowerof funds from investors.39

1avvphi1

It bears stressing too that all the documents attached by Wincorp to its pleadings before the CAcannot be given any weight or evidentiary value for the sole reason that, as correctly observed bythe CA, these documents werenot formally offered as evidence in the trial court. To consider themnow would deny the other parties the right to examine and rebut them. Section 34, Rule 132 of theRules of Court provides:

Section 34. Offer of evidence —The court shall consider no evidence which has not been formallyoffered. The purpose for which the evidence is offered must be specified.

"The offer of evidence is necessary because it is the duty of the court to rest its findings of fact andits judgment only and strictly upon the evidence offered by the parties. Unless and until admitted bythe court in evidence for the purpose or purposes for which such document is offered, the same ismerely a scrap of paper barren of probative weight."40

The Court cannot, likewise, disturb the findings of the RTC and the CA as to the evidence presentedby the Francias. It is elementary that objection to evidence must be made after evidence is formallyoffered.41 It appears that Wincorp was given ample opportunity to file its Comment/Objection to theformal offer of evidence of the Francias but it chose not to file any.

All told, the CA committed no reversible error in rendering the assailed July 27, 2010 Decision and inissuing the challenged October 14, 2010 Resolution.

WHEREFORE, the petition is DENIED.

SO ORDERED.





















5 Id. at 23-33; 34-39.

6 Id. at 99-100.

7 Id. at 106-115.

8 Id. at 116-127.

9 Id. at 144-151.

10 Id. at 154-157.

11 Id. at 167.

12 Id. at 185-187.

13 Id. at 236.

14 Id. at 237.

15 TSN, June 26, 2002, pp. 5-14.

16 Records, pp. 16-17, 383; rollo, pp. 12-13.

17 TSN, June 26, 2002, pp. 15-18.

18 Records, pp. 18-19.

19 Id. at 219-235.

20 Id. at 274-276.

21 Id. at 298.

22 Id. at 325-326.

23 Id. at 332-337.

24 Id. at 371-373.

25 Id. at 381-384.

26 Id. at 550.

27Rollo, pp. 14-15.

28 Id. at 16-20.

29 Id. at 8-9.

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30 Id. at 33, 35.

31 Microsoft Corporation v. Maxicorp, Inc ., 481 Phil. 550, 561 (2004).

32 Macasero v. Southern Industrial Gases Philippines, G.R. No. 178524, January 30, 2009,577 SCRA 500, 504.

33 Rollo, p. 33.

34 Id. at 34.

35 Article 1868 of the Civil Code.

36 Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, April 23, 2007, 521SCRA 584, 592-593.

37 Id. at 593.

38 TSN, June 26, 2002, pp. 17-20.

39 Rollo, pp. 212-213.

40 Heirs of the Deceased Carmen Cruz-Zamora v. Multiwood International , Inc., G.R. No.146428, January 19, 2009, 576 SCRA 137, 145.

41 Sec. 36. Objection. – Objection to evidence offered orally must be made immediately afterthe offer is made.

Objection to a question propounded in the course of the oral examination of a witness shallbe made as soon as the grounds therefore shall become reasonable apparent.

An offer of evidence in writing shall be objected to within three (3) days after notice of theoffer unless a different period is allowed by the court.

In any case, the grounds for the objections must be specified. (Revised Rules on Evidence);

See also the case of Macasiray v. People, 353 Phil. 353 (1998).







































G.R. No. 174610 July 14, 2009

SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK RONAS, Petitioners,vs.SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, doing business under thestyle PAPA TRANSPORT SERVICES, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, is theDecision1dated 22 June 2006 and Resolution2 dated 7 September 2006 of the Court of Appeals inCA-G.R. CV No. 74987. The appellate court affirmed with modification the Decision 3 dated 22 April2002 of the Regional Trial Court (RTC), Branch 46, of Manila, in Civil Case No. 98-89047, grantingthe Complaint for Sum of Money of herein respondent Sprint Transport Services, Inc. (Sprint) afterthe alleged failure of herein petitioner Soriamont Steamship Agencies, Inc. (Soriamont) to return thechassis units it leased from Sprint and pay the accumulated rentals for the same.

The following are the factual and procedural antecedents:

Soriamont is a domestic corporation providing services as a receiving agent for line load contractorvessels. Patrick Ronas (Ronas) is its general manager.

On the other hand, Sprint is a domestic corporation engaged in transport services. Its co-respondentRicardo Cruz Papa (Papa) is engaged in the trucking business under the business name "PapaTransport Services" (PTS).

Sprint filed with the RTC on 2 June 1998 a Complaint4 for Sum of Money against Soriamont andRonas, docketed as Civil Case No. 98-89047. Sprint alleged in its Complaint that: (a) on 17

December 1993, it entered into a lease agreement, denominated as Equipment Lease Agreement(ELA) with Soriamont, wherein the former agreed to lease a number of chassis units to the latter forthe transport of container vans; (b) with authorization letters dated 19 June 1996 issued by Ronas onbehalf of Soriamont, PTS and another trucker, Rebson Trucking, were able to withdraw on 22 and25 June 1996, from the container yard of Sprint, two chassis units (subject equipment),5evidenced byEquipment Interchange Receipts No. 14215 and No. 14222; (c) Soriamont and Ronas failed to payrental fees for the subject equipment since 15 January 1997; (d) Sprint was subsequently informedby Ronas, through a letter dated 17 June 1997, of the purported loss of the subject equipmentsometime in June 1997; and (e) despite demands, Soriamont and Ronas failed to pay the rental feesfor the subject equipment, and to replace or return the same to Sprint.

Sprint, thus, prayed for the RTC to render judgment:

1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and severally, actual damages, inthe amount of Five Hundred Thirty-Seven Thousand Eight Hundred Pesos (P537,800.00)representing unpaid rentals and the replacement cost for the lost chassis units.

2. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount of Fifty-Three Thousand Five Hundred Four Pesos and Forty-Two centavos (P53,504.42) as interestand penalties accrued as of March 31, 1998 and until full satisfaction thereof.

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3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amountequivalent to twenty-five percent (25%) of the total amount claimed for and as attorney’s feesplus Two Thousand Pesos (P2,000.00) per court appearance.

4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6

Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim.7 Soriamontadmitted therein to having a lease agreement with Sprint, but only for the period 21 October 1993 to21 January 1994. It denied entering into an ELA with respondent Sprint on 17 December 1993 asalleged in the Complaint. Soriamont further argued that it was not a party-in-interest in Civil CaseNo. 98-89047, since it was PTS and Rebson Trucking that withdrew the subject equipment from thecontainer yard of Sprint. Ronas was likewise not a party-in-interest in the case since his actions,assailed in the Complaint, were executed as part of his regular functions as an officer of Soriamont.

Consistent with their stance, Soriamont and Ronas filed a Third-Party Complaint8 against Papa, whowas doing business under the name PTS. Soriamont and Ronas averred in their Third-PartyComplaint that it was PTS and Rebson Trucking that withdrew the subject equipments from thecontainer yard of Sprint, and failed to return the same. Since Papa failed to file an answer to the

Third-Party Complaint, he was declared by the RTC to be in default.

9

After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22 April 2002, findingSoriamont liable for the claim of Sprint, while absolving Ronas and Papa from any liability. Accordingto the RTC, Soriamont authorized PTS to withdraw the subject equipment. The dispositive portion ofthe RTC Decision reads:

WHEREFORE, judgment is hereby rendered in favor of [herein respondent] Sprint TransportServices, Inc. and against [herein petitioner] Soriamont Steamship Agencies, Inc., ordering the latterto pay the former the following:

Three hundred twenty thousand pesos (P320,000) representing the value of the two chassisunits with interest at the legal rate from the filing of the complaint;

Two hundred seventy thousand one hundred twenty four & 42/100 pesos (P270,124.42)representing unpaid rentals with interest at the legal rate from the filing of the complaint;

P20,000.00 as attorney’s fees.

The rate of interest shall be increased to 12% per annum once this decision becomes final andexecutory.

Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from liability .10

Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals, docketed as CA-G.R. CV No. 74987.

The Court of Appeals, in its Decision dated 22 June 2006, found the following facts to be borne outby the records: (1) Sprint and Soriamont entered into an ELA whereby the former leased chassisunits to the latter for the specified daily rates. The ELA covered the period 21 October 1993 to 21January 1994, but it contained an "automatic" renewal clause; (2) on 22 and 25 June 1996,Soriamont, through PTS and Rebson Trucking, withdrew Sprint Chassis 2-07 with Plate No. NUP-261 Serial No. ICAZ-165118, and Sprint Chassis 2-55 with Plate No. NUP-533 Serial MOTZ-160080,from the container yard of Sprint; (3) Soriamont authorized the withdrawal by PTS and RebsonTrucking of the subject equipment from the container yard of Sprint; and (4) the subject pieces ofequipment were never returned to Sprint. In a letter to Sprint dated 19 June 1997, Soriamont relayed























that it was still trying to locate the subject equipment, and requested the former to refrain fromreleasing more equipment to respondent PTS and Rebson Trucking.

Hence, the Court of Appeals decreed:

WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed, subject to

the modification that the specific rate of legal interest per annum on both the P320,000.00representing the value of the two chassis units, and on the P270,124.42 representing the unpaidrentals, is six percent (6%), to be increased to twelve percent (12%) from the finality of this Decisionuntil its full satisfaction.11

In a Resolution dated 7 September 2006, the Court of Appeals denied the Motion forReconsideration of Soriamont for failing to present any cogent and substantial matter that wouldwarrant a reversal or modification of its earlier Decision.

Aggrieved, Soriamont12 filed the present Petition for Review with the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN LIMITING AS SOLEISSUE FOR RESOLUTION OF WHETHER OR NOT AN AGENCY RELATIONSHIP EXISTEDBETWEEN PRIVATE RESPONDENT SPRINT TRANSPORT AND HEREIN PETITIONERSSORIAMONT STEAMSHIP AGENCIES AND PRIVATE RESPONDENT PAPA TRUCKING BUTTOTALLY DISREGARDING AND FAILING TO RULE ON THE LIABILITY OF PRIVATERESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. THE LIABILITY OF PRIVATERESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT OF THE THIRD-PARTYCOMPLAINT WAS TOTALLY IGNORED;

II.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING HEREINPETITIONERS STEAMSHIP AGENCIES SOLELY LIABLE. EVIDENCE ON RECORD SHOW THATIT WAS PRIVATE RESPONDENT PAPA TRUCKING WHICH WITHDREW THE SUBJECTCHASSIS. PRIVATE RESPONDENT PAPA TRUCKING WAS THE LAST IN POSSESSION OF THESAID SUBJECT CHASSIS AND IT SHOULD BE HELD SOLELY LIABLE FOR THE LOSSTHEREOF;

III.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT IGNORED AMATERIAL INCONSISTENCY IN THE TESTIMONY OF PRIVATE RESPONDENT SPRINTTRANSPORT’S WITNESS, MR. ENRICO G. VALENCIA. THE TESTIMONY OF MR. VALENCIAWAS ERRONEOUSLY MADE THE BASIS FOR HOLDING HEREIN PETITIONERS LIABLE FORTHE LOSS OF THE SUBJECT CHASSIS.

We find the Petition to be without merit.

The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized bySoriamont to secure possession of the subject equipment from Sprint, pursuant to the existing ELAbetween Soriamont and Sprint. The authorization issued by Soriamont to PTS established anagency relationship, with Soriamont as the principal and PTS as an agent. Resultantly, the actions











taken by PTS as regards the subject equipment were binding on Soriamont, making the latter liableto Sprint for the unpaid rentals for the use, and damages for the subsequent loss, of the subjectequipment.

Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw thesubject equipment from the container yard of Sprint. Although Soriamont admits that the

authorization letter dated 19 June 1996 was under its letterhead, said letter was actually meant forand sent to Harman Foods as shipper. It was then Harman Foods that tasked PTS to withdraw thesubject equipment from Sprint. Soriamont insists that the Court of Appeals merely presumed that anagency relationship existed between Soriamont and PTS, since there was nothing in the records toevidence the same. Meanwhile, there is undisputed evidence that it was PTS that withdrew and waslast in possession of the subject equipment. Soriamont further calls attention to the testimony ofEnrico Valencia (Valencia), a witness for Sprint, actually supporting the position of Soriamont thatPTS did not present any authorization from Soriamont when it withdrew the subject equipment fromthe container yard of Sprint. Assuming, for the sake of argument that an agency relationship did existbetween Soriamont and PTS, the latter should not have been exonerated from any liability. The actsof PTS that resulted in the loss of the subject equipment were beyond the scope of its authority assupposed agent of Soriamont. Soriamont never ratified, expressly or impliedly, such acts of PTS.

Soriamont is essentially challenging the sufficiency of the evidence on which the Court of Appealsbased its conclusion that PTS withdrew the subject equipment from the container yard of Sprint asan agent of Soriamont. In effect, Soriamont is raising questions of fact, the resolution of whichrequires us to re-examine and re-evaluate the evidence presented by the parties below.

Basic is the rule in this jurisdiction that only questions of law may be raised in a petition for reviewunder Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases broughtto it from the Court of Appeals is limited to reviewing errors of law, the findings of fact of theappellate court being conclusive. We have emphatically declared that it is not the function of thisCourt to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewingerrors of law that may have been committed by the lower court.13

These questions of fact were threshed out and decided by the trial court, which had the firsthandopportunity to hear the parties’ conflicting claims and to carefully weigh their respective sets ofevidence. The findings of the trial court were subsequently affirmed by the Court of Appeals. Wherethe factual findings of both the trial court and the Court of Appeals coincide, the same are binding onthis Court. We stress that, subject to some exceptional instances, only questions of law – notquestions of fact – may be raised before this Court in a petition for review under Rule 45 of theRevised Rules of Court.14

Given that Soriamont is precisely asserting in the instant Petition that the findings of fact of the Courtof Appeals are premised on the absence of evidence and are contradicted by the evidence onrecord,15 we accommodate Soriamont by going over the same evidence considered by the Court of

Appeals and the RTC.

In Republic v. Court of Appeals,16 we explained that:

In civil cases, the party having the burden of proof must establish his case by a preponderance ofevidence. Stated differently, the general rule in civil cases is that a party having the burden of proofof an essential fact must produce a preponderance of evidence thereon (I Moore on Facts, 4, cited inVicente J. Francisco, The Revised Rules of Court in the Philippines, Vol. VII, Part II, p. 542, 1973Edition). By preponderance of evidence is meant simply evidence which is of greater weight, or moreconvincing than that which is offered in opposition to it (32 C.J.S., 1051), The term 'preponderance



















of evidence' means the weight, credit and value of the aggregate evidence on either side and isusually considered to be synonymous with the terms `greater weight of evidence' or 'greater weight,of the credible evidence.' Preponderance of the evidence is a phrase which, in the last analysis,means probability of the truth. Preponderance of the evidence means evidence which is moreconvincing to the court as worthy of belief than that which is offered in opposition thereto. x x x." (20

Am. Jur., 1100-1101)

After a review of the evidence on record, we rule that the preponderance of evidence indeedsupports the existence of an agency relationship between Soriamont and PTS.

It is true that a person dealing with an agent is not authorized, under any circumstances, to trustblindly the agent’s statements as to the extent of his powers. Such person must not act negligentlybut must use reasonable diligence and prudence to ascertain whether the agent acts within thescope of his authority. The settled rule is that persons dealing with an assumed agent are bound attheir peril; and if they would hold the principal liable, they must ascertain not only the fact of agency,but also the nature and extent of authority, and in case either is controverted, the burden of proof isupon them to prove it. Sprint has successfully discharged this burden.

The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee, ofchassis units, explicitly authorized the latter to appoint a representative who shall withdraw andreturn the leased chassis units to Sprint, to wit:

EQUIPMENT LEASE AGREEMENTbetween

SPRINT TRANSPORT SERVICES, INC. (LESSOR) And

SORIAMONT STEAMSHIP AGENCIES, INC.(LESSEE)

TERMS and CONDITIONS

x x x x

4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished everytime a chassis is withdrawn and returned to a designated depot. The EIR relates the condition of thechassis at the point of on-hire/off-hire duly acknowledged by the LESSOR, Property Custodian andthe LESSEE’S authorized representative.

x x x x

5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEEauthorizes his representative to withdraw/return the chassis on his behalf. Only persons with a dulyaccomplished and signed authorization slip shall be entertained by the LESSOR for purposes ofwithdrawal/return of the chassis. The signatory in the Withdrawal/Return Slip has to be the signatory

of the corresponding Lease Agreement or the LESSEE’s duly authorizedrepresentative(s).17(Emphases ours.)

Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January1994, and no longer in effect at the time the subject pieces of equipment were reportedly withdrawnand lost by PTS. This contention of Soriamont is without merit, given that the same ELA expresslyprovides for the "automatic" renewal thereof in paragraph 24, which reads:







There shall be an automatic renewal of the contract subject to the same terms and conditions asstipulated in the original contract unless terminated by either party in accordance with paragraph no.23 hereof. However, in this case, termination will take effect immediately.18

There being no showing that the ELA was terminated by either party, then it was being automaticallyrenewed in accordance with the afore-quoted paragraph 24.

It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Truckingshould appear before Sprint in June 1996 with authorization letters, issued by Soriamont, for thewithdrawal of the subject equipment.19 On the witness stand, Valencia testified, as the operationsmanager of Sprint, as follows:

Atty. Porciuncula:

Q. Mr. Witness, as operation manager, are you aware of any transactions between SprintTransport Services, Inc. and the defendant Soriamont Steamship Agencies, Inc.?

A. Yes, Sir.

Q. What transactions are these, Mr. Witness?

A. They got from us chassis, Sir.

Court:

Q. Who among the two, who withdrew?

A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.

Atty. Porciuncula:

Q. And when were these chassis withdrawn, Mr. Witness?

A. June 1996, Sir.

Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassisunits from your container yard?

Witness:

Before they can withdraw the chassis they have to present withdrawal authority, Sir.

Atty. Porciuncula:

And what is this withdrawal authority?

A. This is to prove that they are authorizing their representative to get from us a chassis unit.

Q. And who is this authorization send to you, Mr. Witness?











A. Sometime a representative bring to our office the letter or the authorization or sometimethru fax, Sir.

Q. In this particular incident, Mr. Witness, how was it sent?

A. By fax, Sir.

Q. Is this standard operating procedure of Sprint Transport Services, Inc.?

A. Yes, Sir, if the trucking could not bring to our office the original copy of the authorizationthey have to send us thru fax, but the original copy of the authorization will be followed.

Atty. Porciuncula:

Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies, Inc.letter head with the headings Authorization, are these the same withdrawal authority that youmentioned awhile ago?

A. Yes, Sir.

Atty. Porciuncula:

Your Honor, at this point may we request that these documents identified by the witness bemarked as Exhibits JJ and KK, Your Honor.

Court:

Mark them.

x x x x

Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?

A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.

Q. And are these trucking companies authorized to withdraw these chassis units?

A. Yes, Sir, it was stated in the withdrawal authority.

Atty. Porciuncula:

Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ andKK, could you please go over the same and tell this Honorable Court where states there thatthe trucking companies which you mentioned awhile ago authorized to withdraw?

A. Yes, Sir, it is stated in this withdrawal authority.

Atty. Porciuncula:



At this juncture, Your Honor, may we request that the Papa trucking and Rebson truckingidentified by the witness be bracketed and mark as our Exhibits JJ-1 and KK-1, Your Honor.

Court:

Mark them. Are these documents have dates?

Atty. Porciuncula:

Yes, Your Honor, both documents are dated June 19, 1996.

Q. Mr. Witness, after this what happened next?

A. After they presented to us the withdrawal authority, we called up Soriamont Steamship Agencies, Inc. to verify whether the one sent to us through truck and the one sent to usthrough fax are one and the same.

Q. Then what happened next, Mr. Witness?

A. Then after the verification whether it is true, then we asked them to choose the chassisunits then my checker would see to it whether the chassis units are in good condition, thenafter that we prepared the outgoing Equipment Interchange Receipt, Sir.

Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment InterchangeReceipt means?

A. This is a document proving that the representative of Soriamont Steamship Agencies, Inc.really withdraw (sic) the chassis units, Sir.

x x x x

Atty. Porciuncula:

Q. Going back Mr. Witness, you mentioned awhile ago that your company issued outgoingEquipment Interchange Receipt?

A. Yes, Sir.

Q. Are there incoming Equipment Interchange Receipt Mr. Witness?

A. We have not made Incoming Equipment Interchange Receipt with respect to SoriamontSteamship Agencies, Inc., Sir.

Q. And why not, Mr. Witness?

A. Because they have not returned to us the two chassis units.20

In his candid and straightforward testimony, Valencia was able to clearly describe the standardoperating procedure followed in the withdrawal by Soriamont or its authorized representative of theleased chassis units from the container yard of Sprint. In the transaction involved herein,







authorization letters dated 19 June 1996 in favor of PTS and Rebson Trucking were faxed by Sprintto Soriamont, and were further verified by Sprint through a telephone call to Soriamont. Valencia’stestimony established that Sprint exercised due diligence in its dealings with PTS, as the agent ofSoriamont.

Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the withdrawal

of the subject equipment was not authorized by it, but by the shipper/consignee, Harman Foods,which actually designated PTS and Rebson Trucking as truckers. However, a scrutiny of theEquipment Interchange Receipts will show that these documents merely identified Harman Foods asthe shipper/consignee, and the location of said shipping line. It bears to stress that it was Soriamontthat had an existing ELA with Sprint, not Harman Foods, for the lease of the subject equipment.Moreover, as stated in the ELA, the outgoing Equipment Interchange Receipts shall be signed, uponthe withdrawal of the leased chassis units, by the lessee, Soriamont, or its authorized representative.In this case, we can only hold that the driver of PTS signed the receipts for the subject equipment asthe authorized representative of Soriamont, and no other.

Finally, the letter 21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of Soriamont, whichstated:

As we are currently having a problem with regards to the whereabouts of the subject trailers, may werequest your kind assistance in refraining from issuing any equipment to the above truckingcompanies.

reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis unitsfrom Sprint, hence, necessitating an express request from Soriamont for Sprint to discontinuerecognizing said authority. 1avvphi1

Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is liable for the loss of thesubject equipment, since PTS acted beyond its authority as agent. Soriamont cites Article 1897 ofthe Civil Code, which provides:

Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts,unless he expressly binds himself or exceeds the limits of his authority without giving such partysufficient notice of his powers.

The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any manner inexcess of its authority as agent, thus, resulting in the loss of the subject equipment. To recall, thesubject equipment was withdrawn and used by PTS with the authority of Soriamont. And for PTS tobe personally liable, as agent, it is vital that Soriamont be able to prove that PTS damaged or lostthe said equipment because it acted contrary to or in excess of the authority granted to it bySoriamont. As the Court of Appeals and the RTC found, however, Soriamont did not adduce anyevidence at all to prove said allegation. Given the lack of evidence that PTS was in any wayresponsible for the loss of the subject equipment, then, it cannot be held liable to Sprint, or even to

Soriamont as its agent. In the absence of evidence showing that PTS acted contrary to or in excessof the authority granted to it by its principal, Soriamont, this Court cannot merely presume PTS liableto Soriamont as its agent. The only thing proven was that Soriamont, through PTS, withdrew the twochassis units from Sprint, and that these have never been returned to Sprint.

Considering our preceding discussion, there is no reason for us to depart from the general rule thatthe findings of fact of the Court of Appeals and the RTC are already conclusive and binding upon us.







Finally, the adjustment by the Court of Appeals with respect to the applicable rate of legal interest ontheP320,000.00, representing the value of the subject equipment, and on the P270,124.42,representing the unpaid rentals awarded in favor of Sprint, is proper and with legal basis. Under

Article 2209 of the Civil Code, when an obligation not constituting a loan or forbearance of money isbreached, then an interest on the amount of damages awarded may be imposed at the discretion ofthe court at the rate of 6% per annum. Clearly, the monetary judgment in favor of Sprint does not

involve a loan or forbearance of money; hence, the proper imposable rate of interest is six (6%)percent. Further, as declared in Eastern Shipping Lines, Inc. v. Court of Appeals,22 the interim periodfrom the finality of the judgment awarding a monetary claim until payment thereof is deemed to beequivalent to a forbearance of credit. Eastern Shipping Lines, Inc. v. Court of Appeals 23 explained, towit:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts orquasi-delicts is breached, the contravenor can be held liable for damages. The provisionsunder Title XVIII on "Damages" of the Civil Code govern in determining the measure ofrecoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatorydamages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum ofmoney, i.e., a loan or forbearance of money, the interest due should be that whichmay have been stipulated in writing. Furthermore, the interest due shall itself earnlegal interest from the time it is judicially demanded. In the absence of stipulation, therate of interest shall be 12% per annum to be computed from default, i.e., from

judicial or extrajudicial demand under and subject to the provisions of Article 1169 ofthe Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,an interest on the amount of damages awarded may be imposed at the discretion ofthe court at the rate of 6% per annum. No interest, however, shall be adjudged on

unliquidated claims or damages except when or until the demand can be establishedwith reasonable certainty. Accordingly, where the demand is established withreasonable certainty, the interest shall begin to run from the time the claim is made

judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot beso reasonably established at the time the demand is made, the interest shall begin torun only from the date the judgment of the court is made (at which time thequantification of damages may be deemed to have been reasonably ascertained).The actual base for the computation of legal interest shall, in any case, be on theamount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final andexecutory, the rate of legal interest, whether the case falls under paragraph 1 or

paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,this interim period being deemed to be by then an equivalent to a forbearance ofcredit.

Consistent with the foregoing jurisprudence, and later on affirmed in more recent cases ,24 when the judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be12% per annum from such finality until its satisfaction, this interim period being deemed to be bythen an equivalent of a forbearance of credit. Thus, from the time the judgment becomes final untilits full satisfaction, the applicable rate of legal interest shall be twelve percent (12%).














WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby DENIED.The Decision dated 22 June 2006 and Resolution dated 7 September 2006 of the Court of Appealsin CA-G.R. CV No. 74987 are hereby AFFIRMED. Costs against petitioner Soriamont Steamship

Agencies, Inc.

SO ORDERED.

MINITA V. CHICO-NAZARIO Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO Associate Justice

Chairperson

CONCHITA CARPIO MORALES* Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice



I attest that the conclusions in the above Decision were reached in consultation before the case wasassigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO Associate JusticeChairperson, Third Division


Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, itis hereby certified that the conclusions in the above Decision were reached in consultation beforethe case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO Chief Justice

Footnotes

* Associate Justice Conchita Carpio Morales was designated to sit as additional memberreplacing Associate Justice Diosdado M. Peralta per raffle dated 25 May 2009.

1 Penned by Associate Justice Fernanda Lampas-Peralta with Associate Justices Eliezer R.delos Santos and Myrna Dimaranan-Vidal, concurring; rollo, pp. 60-75.

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2 Rollo, p. 91.

3 Issued by Judge Artemio S. Tipon; rollo, pp. 130-135.

4 Records, pp. 1-6.

5 Sprint Chassis 2-07 with Plate No. NUP-261 Serial No. ICAZ-165118 and Sprint Chassis 2-55 with Plate No. NUP-533 Serial No. MOTZ-160080.

6 Records, p. 5.

7 Id. at 30-34.

8 Id. at 50-53.

9 Order dated 15 January 1999; Records, p. 84.

10 Rollo, p. 134.

11 Id. at 74-75.

12 Patrick Ronas was named as a petitioner in the title, but he did not actually join Soriamontin the instant Petition considering that he was already absolved from any liability by the RTC.

13 Cristobal v. Court of Appeals, 353 Phil. 318, 326 (1998).

14 National Steel Corporation v. Court of Appeals, 347 Phil. 345, 365-366 (1997).

15 Generally, factual findings of the trial court, affirmed by the Court of Appeals, are final and

conclusive and may not be reviewed on appeal. The established exceptions are: (1) whenthe inference made is manifestly mistaken, absurd or impossible; (2) when there is graveabuse of discretion; (3) when the findings are grounded entirely on speculations, surmises orconjectures; (4) when the judgment of the Court of Appeals is based on misapprehension offacts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in makingits findings, went beyond the issues of the case and the same is contrary to the admissionsof both appellant and appellee; (7) when the findings of fact are conclusions without citationof specific evidence on which they are based; (8) when the Court of Appeals manifestlyoverlooked certain relevant facts not disputed by the parties and which, if properlyconsidered, would justify a different conclusion; and (9) when the findings of fact of the Courtof Appeals are premised on the absence of evidence and are contradicted by the evidenceon record. (Child Learning Center, Inc. v. Tagorio, G.R. No. 150920, 25 November 2005, 476SCRA 236, 241-242.)

16 G.R. No. 84966, 21 November 1991, 204 SCRA 160, 168-169.

17 Records, p. 9.

18 Id. at p. 13.

19 Id. at 213-214.

























































20 TSN, 4 August 2000, pp. 5-16.

21 Records, p. 178.

22 Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234SCRA 78.

23 Id. at 95-96.

24 National Power Corporation v. Alonzo-Legasto, G.R. No. 148318, 22 November 2004, 443SCRA 342, 376; Equitable Banking Corporation v. Sadac, G.R. No. 164772, 8 June 2006,490 SCRA 380, 423; Prudential Guarantee and Assurance, Inc. v. Trans-Asia ShippingLines, Inc., G.R. Nos. 151890/151991, 20 June 2006, 491 SCRA 411, 450.


















G.R. No. 175366 August 11, 2008

J-PHIL MARINE, INC. and/or JESUS CANDAVA and NORMAN SHIPPINGSERVICES, petitioners,vs.

NATIONAL LABOR RELATIONS COMMISSION and WARLITO E.DUMALAOG, respondents.

D E C I S I O N

CARPIO MORALES, J .:

Warlito E. Dumalaog (respondent), who served as cook aboard vessels plyingoverseas, filed on March 4, 2002 before the National Labor RelationsCommission (NLRC) a pro-forma complaint1 against petitioners ─ manning

agency J-Phil Marine, Inc. (J-Phil), its then president Jesus Candava, and itsforeign principal Norman Shipping Services ─ for unpaid money claims, mor aland exemplary damages, and attorney’s fees.

Respondent thereafter filed two amended pro forma complaints2 praying forthe award of overtime pay, vacation leave pay, sick leave pay, anddisability/medical benefits, he having, by his claim, contracted enlargement ofthe heart and severe thyroid enlargement in the discharge of his duties ascook which rendered him disabled.

Respondent’s total claim against petitioners was P864,343.30plus P117,557.60 representing interest and P195,928.66 representingattorney’s fees.3

By Decision4 of August 29, 2003, Labor Arbiter Fe Superiaso-Cellandismissed respondent’s complaint for lack of merit.

On appeal,5 the NLRC, by Decision of September 27, 2004, reversed theLabor Arbiter’s decision and awarded US$50,000.00 disability benefit torespondent. It dismissed respondent’s other claims, however, for lack of basis

or jurisdiction.6

Petitioners’ Motion for Reconsideration7

having been deniedby the NLRC,8 they filed a petition for certiorar i9 before the Court of Appeals.

By Resolution10 of September 22, 2005, the Court of Appeals dismissedpetitioners’ petition for, inter alia, failure to attach to the petition all materialdocuments, and for defective verification and certification. Petitioners’ Motion

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for Reconsideration of the appellate court’s Resolution was denied;11 hence,they filed the present Petition for Review on Certiorari.

During the pendency of the case before this Court, respondent, against theadvice of his counsel, entered into a compromise agreement with petitioners.

He thereupon signed a Quitclaim and Release subscribed and sworn tobefore the Labor Arbiter .12

On May 8, 2007, petitioners filed before this Court a Manifestation13 datedMay 7, 2007 informing that, inter alia, they and respondent had forged anamicable settlement.

On July 2, 2007, respondent’s counsel filed before this Court a Comment andOpposition (to Petitioners’ Manifestation of May 7, 2007)14 interposing noobjection to the dismissal of the petition but objecting to "the absolution" of

petitioners from paying respondent the total amount of Fifty Thousand USDollars (US$50,000.00) or approximately P2,300,000.00, the amount awardedby the NLRC, he adding that:

There being already a payment of P450,000.00, and invoking thedoctrine of parens patriae, we pray then [to] this Honorable SupremeCourt that the said amount be deducted from the [NLRC] judgmentaward of US$50,000.00, or approximately P2,300,000.00, andpetitioners be furthermore ordered to pay in favor of herein respondent[the] remaining balance thereof.

x x x x15 (Emphasis in the original; underscoring supplied)

Respondent’s counsel also filed before this Court, purportedly on behalf ofrespondent , a Comment16on the present petition.

The parties having forged a compromise agreement as respondent in fact hasexecuted a Quitclaim and Release, the Court dismisses the petition.

Article 227 of the Labor Code provides:

Any compromise settlement, including those involving labor standardlaws, voluntarily agreed upon by the parties with the assistance of theDepartment of Labor, shall be final and binding upon the parties. TheNational Labor Relations Commission or any court shall not assume

jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facieevidence that the settlement
























was obtained through fraud, misrepresentation, or coercion.(Emphasis and underscoring supplied)

In Olaybar v. NLRC ,17 the Court, recognizing the conclusiveness of

compromise settlements as a means to end labor disputes, held that Article

2037 of the Civil Code, which provides that "[a] compromise has upon theparties the effect and authority of res judicata," applies suppletorily to laborcases even if the compromise is not judicially approved.18

That respondent was not assisted by his counsel when he entered into thecompromise does not render it null and void. Eurotech Hair Systems, Inc. v.Go19 so enlightens:

A compromise agreement is valid as long as the consideration isreasonable and the employee signed the waiver voluntarily, with a full

understanding of what he was entering into. All that is required for thecompromise to be deemed voluntarily entered into is personal andspecific individual consent. Thus, contrary to respondent’s contention,the employee’s counsel need not be present at the time of the signing ofthe compromise agreement.20 (Underscoring supplied)

It bears noting that, as reflected earlier, the Quitclaim and Waiver wassubscribed and sworn to before the Labor Arbiter.

Respondent’s counsel nevertheless argues that "[t]he amount of Four

Hundred Fifty Thousand Pesos (P450,000.00) given to respondent on April 4,2007, as ‘full and final settlement of judgment award,’ is unconscionably low,and un-[C]hristian, to say the least."21 Only respondent, however, can impugnthe consideration of the compromise as being unconscionable.

The relation of attorney and client is in many respects one of agency, and thegeneral rules of agency apply to such relation.22 The acts of an agent aredeemed the acts of the principal only if the agent acts within the scope of hisauthority.23 The circumstances of this case indicate that respondent’s counselis acting beyond the scope of his authority in questioning the compromise

agreement.

That a client has undoubtedly the right to compromise a suit without theintervention of his lawyer 24 cannot be gainsaid, the only qualification beingthat if such compromise is entered into with the intent of defrauding the lawyerof the fees justly due him, the compromise must be subject to the saidfees.25 In the case at bar, there is no showing that respondent intended to





































defraud his counsel of his fees. In fact, the Quitclaim and Release, theexecution of which was witnessed by petitioner J-Phil’s president Eulalio C.Candava and one Antonio C. Casim, notes that the 20% attorney’s fees wouldbe "paid 12 April 2007 –P90,000."

WHEREFORE, the petition is, in light of all the foregoingdiscussion, DISMISSED.

Let a copy of this Decision be furnished respondent, Warlito E. Dumalaog, athis given address at No. 5-B Illinois Street, Cubao, Quezon City.

SO ORDERED.

CONCHITA CARPIO MORALES Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING Associate Justice

Chairperson

RENATO C. CORONA

Associate JusticePRESBITERO J. VELASCO, JR.

Associate Justice

ARTURO D. BRION Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in

consultation before the case was assigned to the writer of the opinion of theCourt’s Division.


Chairperson

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CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the DivisionChairperson’s Attestation, it is hereby certified that the conclusions in theabove Decision were reached in consultation before the case was assigned tothe writer of the opinion of the Court’s Division.


Footnotes

* Additional member in lieu of Justice Dante O. Tinga per Special OrderNo. 512 dated July 16, 2008.

1 NLRC records, p. 2.

2 Id. at 8, 50.

3 Dumalaog’s POSITION PAPER, NLRC records, pp. 18-21.

4 Id. at 115-125.

5 Id. at 132-156.

6 Decision of September 27, 2004, penned by NLRC CommissionerRomeo L. Go, with the concurrence of Commissioner Ernesto S.Dinopol and the dissent of Commissioner Roy V. Señeres. NLRCrecords (unnumbered pages).

7 NLRC records, unnumbered pages.

8 Ibid.

9 CA rollo, pp. 2-19.

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10 Penned by Court of Appeals Associate Justice Danilo B. Pine, withthe concurrences of Associate Justices Rosmari D. Carandang and

Arcangelita Romilla-Lontok. Id. at 48-50.

11 Penned by Court of Appeals Associate Justice Arcangelita M.

Romilla-Lontok, with the concurrence of Associate Justices Regalado E.Maambong and Rosmari D. Carandang, Id. at 215-216.

12 "Quitclaim and Release" dated April 4, 2007, NLRC records,unnumbered pages.

13 Rollo, pp. 226-228.

14 Id. at 241-243.

15

Id. at 242.16 Id. at 234-240.

17 G.R. No. 108713, October 28, 1994, 237 SCRA 819.

18 Id. at 823-824 (citations omitted).

19 G.R. No. 160913, August 31, 2006, 500 SCRA 611.

20

Id. at 618-619.21 Rollo, p. 241.

22 Uytengsu III v. Baduel , Adm. Case No. 5134, December 14, 2005,477 SCRA 621, 629 (citation omitted).

23 Vide Siredy Enterprises, Inc. v. Court of Appeals, 437 Phil. 580, 589(2002).

24 Vide Rustia v. Judge of First Instance of Batangas, 44 Phil. 62, 65(1922).

25 Vide Aro v. Nañawa etc., et al., 137 Phil. 745, 761 (1969).
















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G.R. No. 159489 February 4, 2008

FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), petitioner,vs.CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru herAttorney-in-Fact PONCIANO C. MARQUEZ, respondents.

DECISION

QUISUMBING, J .:

This petition for review on certiorari seeks the reversal of the Decision1 and Resolution,2 datedNovember 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No.33568. The appellate court had affirmed the Decision3 dated October 10, 1989 of the Regional TrialCourt (RTC) of Manila, Branch 3, finding petitioner as defendant and the co-defendants below jointlyand severally liable to the plaintiffs, now herein respondents.

The antecedent facts are as follows:

Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued bypetitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims Renato Valle was herinsurance agent since 1972 and Valle collected her monthly premiums. In the first week of January1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investmentprogram for policyholders. It was offering 8% prepaid interest a month for certain amounts depositedon a monthly basis. Enticed, she initially invested and issued a post-dated check dated January 7,1977 for P10,000.4 In return, Valle issued Pedroso his personal check forP800 for the 8%5 prepaidinterest and a Filipinas Life "Agent’s Receipt" No. 807838.6

Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrativeassistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the

promotional investment and Apetrior confirmed that there was such a promotion. She was even toldshe could "push through with the check" she issued. From the records, the check, with theendorsement of Alcantara at the back, was deposited in the account of Filipinas Life with theCommercial Bank and Trust Company (CBTC), Escolta Branch.

Relying on the representations made by the petitioner’s duly authorized representatives Apetrior and Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the maturityof her initial investment. A month after, her investment of P10,000 was returned to her after shemade a written request for its refund. The formal written request, dated February 3, 1977, waswritten on an inter-office memorandum form of Filipinas Life prepared by Alcantara.7 To collect theamount, Pedroso personally went to the Escolta branch where Alcantara gave her the P10,000 incash. After a second investment, she made 7 to 8 more investments in varying amounts,totaling P37,000 but at a lower rate of 5%8 prepaid interest a month. Upon maturity of Pedroso’s

subsequent investments, Valle would take back from Pedroso the corresponding yellow-coloredagent’s receipt he issued to the latter.

Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about theinvestment plan. Palacio made a total investment of P49,5509 but at only 5% prepaid interest.However, when Pedroso tried to withdraw her investment, Valle did not want to return some P17,000worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to returnher money. With the assistance of their lawyer, they went to Filipinas Life Escolta Office to collect

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their respective investments, and to inquire why they had not seen Valle for quite some time. Buttheir attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.

After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara jointly and solidarily liable to the respondents.

On appeal, the Court of Appeals affirmed the trial court’s ruling and subsequently denied the motionfor reconsideration.

Petitioner now comes before us raising a single issue:

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE DECISION OF THELOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND SEVERALLYLIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD OFHOLDING ITS AGENT, RENATO VALLE, SOLELY LIABLE TO THE RESPONDENTS.10

Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and

severally liable to the herein respondents?

Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life insurancecompany and was not engaged in the business of collecting investment money. It contends that theinvestment scheme offered to respondents by Valle, Apetrior and Alcantara was outside the scope oftheir authority as agents of Filipinas Life such that, it cannot be held liable to the respondents.11

On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investmentsfrom them. In fact, Filipinas Life’s official documents and facilities were used in consummating thetransactions. These transactions, according to respondents, were confirmed by its officers Apetriorand Alcantara. Respondents assert they exercised all the diligence required of them in ascertainingthe authority of petitioner’s agents; and it is Filipinas Life that failed in its duty to ensure that its

agents act within the scope of their authority.

Considering the issue raised in the light of the submissions of the parties, we find that the petitionlacks merit. The Court of Appeals committed no reversible error nor abused gravely its discretion inrendering the assailed decision and resolution.

It appears indisputable that respondents Pedroso and Palacio had invested P47,000 and P49,550,respectively. These were received by Valle and remitted to Filipinas Life, using Filipinas Life’s officialreceipts, whose authenticity were not disputed. Valle’s authority to solicit and receive investmentswas also established by the parties. When respondents sought confirmation, Alcantara, holding asupervisory position, and Apetrior, the branch manager, confirmed that Valle had authority. While itis true that a person dealing with an agent is put upon inquiry and must discover at his own peril theagent’s authority, in this case, respondents did exercise due diligence in removing all doubts and in

confirming the validity of the representations made by Valle.

Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the contract ofagency, a person binds himself to render some service or to do something in representation or onbehalf of another, with the consent or authority of the latter .12 The general rule is that the principal isresponsible for the acts of its agent done within the scope of its authority, and should bear thedamage caused to third persons.13 When the agent exceeds his authority, the agent becomespersonally liable for the damage.14 But even when the agent exceeds his authority, the principal isstill solidarily liable together with the agent if the principal allowed the agent to act as though the























agent had full powers.15 In other words, the acts of an agent beyond the scope of his authority do notbind the principal, unless the principal ratifies them, expressly or impliedly.16 Ratification in agency isthe adoption or confirmation by one person of an act performed on his behalf by another withoutauthority.17

Filipinas Life cannot profess ignorance of Valle’s acts. Even if Valle’s representations were beyond

his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly andknowingly ratified Valle’s acts. It cannot even be denied that Filipinas Life benefited from theinvestments deposited by Valle in the account of Filipinas Life. In our considered view, Filipinas Lifehad clothed Valle with apparent authority; hence, it is now estopped to deny said authority. Innocentthird persons should not be prejudiced if the principal failed to adopt the needed measures toprevent misrepresentation, much more so if the principal ratified his agent’s acts beyond the latter’sauthority. The act of the agent is considered that of the principal itself. Qui per alium facit perseipsum facere videtur . "He who does a thing by an agent is considered as doing it himself. "18

WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, datedNovember 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No.33568 are AFFIRMED.

Costs against the petitioner.

SO ORDERED.


WE CONCUR:

ANTONIO T. CARPIO Associate Justice

CONCHITA CARPIO MORALES Associate Justice

DANTE O. TINGA Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice


I attest that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Court’s Division.


Chairperson




















Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I

certify that the conclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Court’s Division.


Footnotes

1 Rollo, pp. 43-55. Penned by Associate Justice Renato C. Dacudao, with Associate JusticesEugenio S. Labitoria and Danilo B. Pine concurring.

2 Id. at 56.

3 Id. at 57-63. Penned by Judge Clemente M. Soriano.

4 Records, p. 246.

5 TSN, October 7, 1983, pp. 9-10.

6 Records, p. 248.

7 Id. at 247.

8 Supra note 5.

9 Records, pp. 253-264.

10 Rollo, p. 108.

11 Id. at 109.

12 CIVIL CODE, Art. 1868.

13 Lopez, et al. v. Hon. Alvendia, et al., 120 Phil. 1424, 1431-1432 (1964).

14 BA Finance Corporation v. Court of Appeals, G.R. No. 94566, July 3, 1992, 211 SCRA112, 118.

15 CIVIL CODE, Art. 1911.

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16 Id., Art. 1910. The principal must comply with all the obligations which the agent may havecontracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not boundexcept when he ratifies it expressly or tacitly.

17 Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R. No. 151319, November 22, 2004,443 SCRA 377, 394.

18 Prudential Bank v. Court of Appeals, G.R. No. 108957, June 14, 1993, 223 SCRA 350,357.




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G.R. No. 167552 April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,vs.EDWIN CUIZON and ERWIN CUIZON, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled,"Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision andResolution affirmed the Order 3 dated 29 January 2002 rendered by Judge Antonio T. Echavezordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No.CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various European industrialequipment for customers here in the Philippines. It has as one of its customers Impact SystemsSales ("Impact Systems") which is a sole proprietorship owned by respondent ERWIN Cuizon(ERWIN). Respondent EDWIN is the sales manager of Impact Systems and was impleaded in thecourt a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various products allegedly amountingto ninety-one thousand three hundred thirty-eight (P91,338.00) pesos. Subsequently, respondentssought to buy from petitioner one unit of sludge pump valued at P250,000.00 with respondentsmaking a down payment of fifty thousand pesos (P50,000.00).4 When the sludge pump arrived fromthe United Kingdom, petitioner refused to deliver the same to respondents without their having fully

settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto deJesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor ofpetitioner, the pertinent part of which states:

1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in theamount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as paymentfor the purchase of one unit of Selwood Spate 100D Sludge Pump;

2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE6 the said receivables from Toledo Power Corporation in the amount of THREEHUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the

ASSIGNOR is the lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.7

Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludgepump as shown by Invoice No. 12034 dated 30 June 1995.8

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment,proceeded to collect from Toledo Power Company the amount of P365,135.29 as evidenced byCheck Voucher No. 09339prepared by said power company and an official receipt dated 15 August

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1995 issued by Impact Systems.10 Alarmed by this development, petitioner made several demandsupon respondents to pay their obligations. As a result, respondents were able to make partialpayments to petitioner. On 7 October 1996, petitioner’s counsel sent respondents a final demandletter wherein it was stated that as of 11 June 1996, respondents’ total obligations stoodat P295,000.00 excluding interests and attorney’s fees.11 Because of respondents’ failure to abide bysaid final demand letter, petitioner instituted a complaint for sum of money, damages, with

application for preliminary attachment against herein respondents before the Regional Trial Court ofCebu City.12

On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of writ of preliminaryattachment.13

On 25 June 1997, respondent EDWIN filed his Answer 14 wherein he admitted petitioner’s allegationswith respect to the sale transactions entered into by Impact Systems and petitioner between Januaryand April 1995.15 He, however, disputed the total amount of Impact Systems’ indebtedness topetitioner which, according to him, amounted to only P220,000.00.16

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in

interest in this case. According to him, he was acting as mere agent of his principal, which was theImpact Systems, in his transaction with petitioner and the latter was very much aware of this fact. Insupport of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioner’s Complaint stating

–

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is theproprietor of a single proprietorship business known as Impact Systems Sales ("ImpactSystems" for brevity), with office located at 46-A del Rosario Street, Cebu City, where hemay be served summons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. Heis the Sales Manager of Impact Systems and is sued in this action in such capacity.17

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion forSummary Judgment. The trial court granted petitioner’s motion to declare respondent ERWIN indefault "for his failure to answer within the prescribed period despite the opportunity granted "18 but itdenied petitioner’s motion for summary judgment in its Order of 31 August 2001 and scheduled thepre-trial of the case on 16 October 2001.19However, the conduct of the pre-trial conference wasdeferred pending the resolution by the trial court of the special and affirmative defenses raised byrespondent EDWIN.20

After the filing of respondent EDWIN’s Memorandum21 in support of his special and affirmativedefenses and petitioner’s opposition22 thereto, the trial court rendered its assailed Order dated 29January 2002 dropping respondent EDWIN as a party defendant in this case. According to the trialcourt –

A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B.Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is asingle proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is theproprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in thecontract which is dated June 28, 1995. A study of Annex "H" to the complaint reveals that [Impact]Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down paymentof P50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of Annex "G",thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the records further



















































show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin B.Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff, therefore, cannotsay that it was deceived by defendant Edwin B. Cuizon, since in the instant case the principal hasratified the act of its agent and plaintiff knew about said ratification. Plaintiff could not say that thesubject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact]Systems Sales made a down payment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as partydefendant.23

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however, affirmed the 29 January 2002 Order of the court a quo. The dispositiveportion of the now assailed Decision of the Court of Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by thepublic respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.24

Petitioner’s motion for reconsideration was denied by the appellate court in its Resolution

promulgated on 17 March 2005. Hence, the present petition raising, as sole ground for its allowance,the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THATRESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON, ISNOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS

AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD.25

To support its argument, petitioner points to Article 1897 of the New Civil Code which states:

Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts,unless he expressly binds himself or exceeds the limits of his authority without giving such party

sufficient notice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act ofcollecting the receivables from the Toledo Power Corporation notwithstanding the existence of theDeed of Assignment signed by EDWIN on behalf of Impact Systems. While said collection did notrevoke the agency relations of respondents, petitioner insists that ERWIN’s action repudiatedEDWIN’s power to sign the Deed of Assignment. As EDWIN did not sufficiently notify it of the extentof his powers as an agent, petitioner claims that he should be made personally liable for theobligations of his principal.26

Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it intoselling the one unit of sludge pump to Impact Systems and signing the Deed of Assignment.Petitioner directs the attention of this Court to the fact that respondents are bound not only by their

principal and agent relationship but are in fact full-blooded brothers whose successive contraveningacts bore the obvious signs of conspiracy to defraud petitioner .27

In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interestin this case and it was proper for the trial court to have him dropped as a defendant. He insists thathe was a mere agent of Impact Systems which is owned by ERWIN and that his status as such isknown even to petitioner as it is alleged in the Complaint that he is being sued in his capacity as thesales manager of the said business venture. Likewise, respondent EDWIN points to the Deed of



























Assignment which clearly states that he was acting as a representative of Impact Systems in saidtransaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something in

representation or on behalf of another with the latter’s consent.29 The underlying principle of thecontract of agency is to accomplish results by using the services of others – to do a great variety ofthings like selling, buying, manufacturing, and transporting.30 Its purpose is to extend the personalityof the principal or the party for whom another acts and from whom he or she derives the authority toact.31 It is said that the basis of agency is representation, that is, the agent acts for and on behalf ofthe principal on matters within the scope of his authority and said acts have the same legal effect asif they were personally executed by the principal.32 By this legal fiction, the actual or real absence ofthe principal is converted into his legal or juridical presence – qui facit per alium facit per se.33

The elements of the contract of agency are: (1) consent, express or implied, of the parties toestablish the relationship; (2) the object is the execution of a juridical act in relation to a third person;(3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his

authority.

34

In this case, the parties do not dispute the existence of the agency relationship between respondentsERWIN as principal and EDWIN as agent. The only cause of the present dispute is whetherrespondent EDWIN exceeded his authority when he signed the Deed of Assignment thereby bindinghimself personally to pay the obligations to petitioner. Petitioner firmly believes that respondentEDWIN acted beyond the authority granted by his principal and he should therefore bear the effectof his deed pursuant to Article 1897 of the New Civil Code.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liableto the party with whom he contracts. The same provision, however, presents two instances when anagent becomes personally liable to a third person. The first is when he expressly binds himself to theobligation and the second is when he exceeds his authority. In the last instance, the agent can beheld liable if he does not give the third party sufficient notice of his powers. We hold that respondentEDWIN does not fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the salesmanager of Impact Systems. As discussed elsewhere, the position of manager is unique in that itpresupposes the grant of broad powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general agent ormanager; such a position presupposes a degree of confidence reposed and investiture with liberalpowers for the exercise of judgment and discretion in transactions and concerns which are incidental

or appurtenant to the business entrusted to his care and management. In the absence of anagreement to the contrary, a managing agent may enter into any contracts that he deemsreasonably necessary or requisite for the protection of the interests of his principal entrusted to hismanagement. x x x.35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authoritywhen he signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit ofsludge pump unless it received, in full, the payment for Impact Systems’ indebtedness.36 We mayvery well assume that Impact Systems desperately needed the sludge pump for its business since



































after it paid the amount of fifty thousand pesos (P50,000.00) as down payment on 3 March 1995 ,37 itstill persisted in negotiating with petitioner which culminated in the execution of the Deed of

Assignment of its receivables from Toledo Power Company on 28 June 1995.38The significantamount of time spent on the negotiation for the sale of the sludge pump underscores ImpactSystems’ perseverance to get hold of the said equipment. There is, therefore, no doubt in our mindthat respondent EDWIN’s participation in the Deed of Assignment was "reasonably necessary" or

was required in order for him to protect the business of his principal. Had he not acted in the way hedid, the business of his principal would have been adversely affected and he would have violated hisfiduciary relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both fromrespondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897 ofthe New Civil Code upon which petitioner anchors its claim against respondent EDWIN "does nothold that in case of excess of authority, both the agent and the principal are liable to the othercontracting party."39 To reiterate, the first part of Article 1897 declares that the principal is liable incases when the agent acted within the bounds of his authority. Under this, the agent is completelyabsolved of any liability. The second part of the said provision presents the situations when theagent himself becomes liable to a third party when he expressly binds himself or he exceeds thelimits of his authority without giving notice of his powers to the third person. However, it must bepointed out that in case of excess of authority by the agent, like what petitioner claims exists here,the law does not say that a third person can recover from both the principal and the agent .40

As we declare that respondent EDWIN acted within his authority as an agent, who did not acquireany right nor incur any liability arising from the Deed of Assignment, it follows that he is not a realparty in interest who should be impleaded in this case. A real party in interest is one who "stands tobe benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit."41 Inthis respect, we sustain his exclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No.71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City,

is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for thecontinuation of the proceedings against respondent Erwin Cuizon.

SO ORDERED.


WE CONCUR:


Chairperson

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

ROMEO J. CALLEJO, SR. Asscociate Justice
























I attest that the conclusions in the above Decision were reached in consultation before the case was

assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO Associate JusticeChairperson, Third Division


Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, itis hereby certified that the conclusions in the above Decision were reached in consultation beforethe case was assigned to the writer of the opinion of the Court’s Division.


Footnotes

1 Penned by Associate Justice Vicente L. Yap with Associate Justices Arsenio J. Magpaleand Ramon M. Bato , Jr., concurring; rollo, pp. 33-36.

2 Id. at 37-39.

3 Id. at 83-84.

4 Annex "H" of the Complaint; records, p. 18.

5 Referring to Impact Systems Sales.

6 Referring to petitioner Eurotech Industrial Technologies, Inc.

7 Annex "G" of the Complaint; records, p. 17.

8

Annex "H" of the Complaint; id. at 18.9 Annex "I" of the Complaint; id. at 19.

10 Annex "J" of the Complaint; id. at 20.

11 Annex "L" of the Complaint; id. at 22.

12 The case was raffled off to Branch 8 of the RTC Cebu City.

http://www.lawphil.net/judjuris/juri2007/apr2007/gr_167552_2007.html#rnt1






































13 Records, p. 27.

14 Id. at 38-41.

15 Id. at 38.

16 Ibid.

17 Id. at 1.

18 Id. at 50.

19 Id. at 61.

20 Edwin Cuizon’s counsel requested that the Special and Affirmative Defenses in his Answerbe treated as his Motion to Dismiss; Order dated 16 October 2001; id. at 78.

21 Id. at 82-86.

22 Memorandum dated 16 November 2001; id. at 87-91.

23 Id. at 95-96.

24 Rollo, p. 35.

25 Id. at 17.

26 Id. at 21-22.

27

Id. at 25-26.

28 Id. at 98-114.

29 Article 1868 of the Civil Code.

30 Reuschlein and Gregory, Agency and Partnership (1979 edition), p. 1.

31 3 Am Jur 2d, §1.

32 Padilla, Agency Text and Cases, (1986 edition), p. 2.

33 He who acts through another acts by or for himself; id. at §2.

34 Yu Eng Cho v. Pan American World Airways, Inc., 385 Phil. 453, 465 (2000).

35 3 Am Jur 2d, §91, p. 602.

36 Records, p. 2.











































































37 Annex "H" of the Complaint; records, p. 18.

38 Annex "G" of the Complaint; id. at 17.

39 Philippine Products Company v. Primateria Societe Anonyme Pour Le CommerceExterieur, 122 Phil. 698, 702 (1965).

40 De Leon and De Leon, Jr., Comments and Cases on Partnership, Agency, and Trusts(1999 edition), p. 512.

41 Rule 3, §1 of the Revised Rules of Court.


















G.R. No. 153057 August 7, 2006

MR. & MRS. GEORGE R. TAN, Petitioners,vs.G.V.T. ENGINEERING SERVICES, Acting through its Owner/ Manager GERINO V.TACTAQUIN, Respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is theJune 29, 2001 Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 59699 affirming withmodification the Decision of the Regional Trial Court (RTC) of Quezon City, Branch 81 in Civil CaseNo. Q-90-7405; and its Resolution 2promulgated on April 10, 2002 denying petitioners’ Motion forPartial Reconsideration.

The facts are as follows:

On October 18, 1989, the spouses George and Susan Tan (spouses Tan) entered into a contractwith G.V.T. Engineering Services (G.V.T.), through its owner/manager Gerino Tactaquin (Tactaquin)for the construction of their residential house at Ifugao St., La Vista, Quezon City. The contract pricewas P1,700,000.00. Since the spouses Tan have no knowledge about building construction, theyhired the services of Engineer Rudy Cadag (Cadag) to supervise the said construction. In the courseof the construction, the spouses Tan caused several changes in the plans and specifications andordered the deletion of some items in G.V.T.’s scope of work. This brought about differencesbetween the spouses Tan and Cadag, on one hand, and Tactaquin, on the other. Subsequently, thelatter stopped the construction of the subject house.

On December 4, 1990, G.V.T., through Tactaquin, filed a Complaint for specific performance and

damages against the spouses Tan and Cadag with the RTC of Quezon City contending that byreason of the changes in the plans and specifications of the construction project ordered by Cadagand the spouses Tan, it was forced to borrow money from third persons at exorbitant interest; thatseveral portions of their contract were deleted but only to be awarded later to other contractors; thatit suffered tremendous delay in the completion of the project brought about by the spouses Tan’sdelay in the delivery of construction materials on the jobsite; that all the aforementioned acts causedundue prejudice and damage to it.

In their Answer with Counterclaims, the spouses Tan and Cadag alleged, among others, that G.V.T.performed several defective works; that to avert further losses, the spouses Tan deleted someportions of the project covered by G.V.T.’s contract and awarded other portions to anothercontractor; that the changes ordered by the spouses Tan were agreed upon by the parties; thatG.V.T., being a mere single proprietorship has no legal personality and cannot be a party in a civil

action.

Trial ensued and the court a quo made the following factual findings:

To begin with, it is not disputed that there was delay in the delivery of the needed constructionmaterials which in turn caused tremendous delay in project completion. The documentary evidenceon record shows that plaintiff, practically during the entire period that he was working on the project,complained to defendants about the non-delivery on time of the materials on the project site (Exhs.













e) the amount of P17,000.00 as litigation expenses.

2. Dismissing defendants’ counterclaims.

Costs against defendants.

IT IS ORDERED. 6

Aggrieved by the trial court’s decision, the spouses Tan filed an appeal with the CA contending thatthe trial court erred in not dismissing the complaint on the ground that G.V.T. has no legal capacityto sue; in not finding that it was G.V.T. which caused the delay in the construction of the subjectresidential house; in awarding amounts in favor of G.V.T. representing the balance of the contractprice, retention fee, moral damages and attorney’s fees; and in finding Cadag jointly and severallyliable with the spouses Tan.

In its Decision of June 29, 2001, the CA affirmed with modification the judgment of the trial court, towit:

IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED by deleting theawards for moral damages, attorney’s fees and litigation expenses and dismissing the case againstappellant Rodovaldo Cadag. In all other respect, the challenged judgment is AFFIRMED. Costsagainst the appellant-spouses George and Susan Tan.

SO ORDERED. 7

Both parties filed their respective Motions for Partial Reconsideration but these were denied by theCA in its Resolution of April 10, 2002. 8

Hence, herein petition by the spouses Tan based on the following assignments of errors:

1. RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONERS DID NOTVIOLATE THEIR CONSTRUCTION AGREEMENT WITH THE PRIVATE RESPONDENT; HENCE,THEY CANNOT BE REQUIRED TO PAY THE AMOUNTS OF P366,340.00 REPRESENTING THEBALANCE OF THE CONTRACT PRICE OFP1,700,000.00 AND P49,578.56 REPRESENTING 5PERCENT RETENTION FEE.

x x x x

2. RESPONDENT COURT OF APPEALS LIKEWISE ERRED IN NOT ABSOLVING THEPETITIONERS FROM LIABILITY TO PRIVATE RESPONDENT.

x x x x

3. RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT ORDERING THE DISMISSAL OFCIVIL CASE NO. Q-90-7405 FOR LACK OF JURISDICTION ON THE PART OF THE LOWERCOURT. 9

Petitioners contend that since Tactaquin consented and acquiesced to the changes and alterationsmade in the plan of the subject house he cannot complain and discontinue the construction of thesaid house. Petitioners assert that it would be highly unfair and unjust for them to be required to paythe amount representing the cost of the remaining unfinished portion of the house after it was



















abandoned by Tactaquin, for to do so would enable the latter to unjustly enrich himself at theirexpense. With respect to the retention fee, petitioners argue that this amount is payable only afterthe house is completed and turned over to them. Since respondent never completed the constructionof the subject house, petitioners claim that they should not be required to pay the retention fee.Petitioners also contend that respondent failed to prove that it is entitled to actual damages.

As to the second assigned error, petitioners contend that since the CA dismissed the complaintagainst Cadag it follows that they should not also be held liable because they merely relied upon andfollowed the advice and instructions of Cadag whom they hired to supervise the construction of theirhouse.

Anent the last assigned error, petitioners argue that G.V.T., being a sole proprietorship, is not a juridical person and, hence, has no legal personality to institute the complaint with the trial court.Consequently, the trial court did not acquire jurisdiction over the case and all proceedings conductedby it are null and void. Petitioners contend that they raised this issue in their Answer to theComplaint and in their appeal to the CA.

In their Supplemental Petition, petitioners contend that under their contract with G.V.T., the latter

agreed to employ only labor in the construction of the subject house and that petitioners shall supplythe materials; that it was error on the part of the CA and the trial court to award the remainingbalance of the contract price in favor of respondent despite the fact that some items from the latter’sscope of work were deleted with its consent. Petitioners argue that since the above-mentioned itemswere deleted, it follows that respondent should not be compensated for the work which it has notaccomplished. Petitioners went further to claim that the value of the deleted items should, in fact, bededucted from the original contract price. As to the delay in the construction of the subject house,petitioners assert that said delay was attributable to respondent which failed to pay the wages of itsworkers who, in turn, refused to continue working; that petitioners were even forced to pay theworkers’ wages for the construction to continue.

In its Comment, respondent contends that the CA and the trial court are one in finding thatpetitioners are the ones responsible for breach of contract, for unjustifiably deleting items agreed

upon and delaying delivery of construction materials, and that these findings were never rebutted bycontrary evidence. Respondent asserts that findings of fact of the trial court especially when affirmedby the CA are conclusive on the Supreme Court when supported by the evidence on record and thatthe Supreme Court’s jurisdiction in cases brought before it from the CA via Rule 45 of the Rules ofCourt is limited to reviewing errors of law.

As to the second assigned error, respondent asserts that petitioners’ argument is fallacious becausethe court’s ruling absolving Cadag from liability is based on the fact that the ther e is no privity ofcontract between him and respondent. This, respondent argues, cannot be said with respect to itand petitioners.

As to the last assigned error, respondent quoted portions of this Court’s ruling in the case of Yao Ka

Sin Trading v. Court of Appeals [10] , as cited by the CA in its challenged Decision. In the said case,the Court basically held that no one has been misled by the error in the name of the party plaintiffand to send the case back to the trial court for amendment and new trial for the simple purpose ofchanging the name of the plaintiff is not justified considering that there would be, on re-trial, thesame complaint, answer, defense, interests, witnesses and evidence.

The Court finds the petition without merit.

The Court finds it proper to discuss first the issue regarding G.V.T.’s lack of legal personality to sue.



Petitioners raised the issue of G.V.T.’s lack of legal personality to be a party in a civil action as adefense in their Answer with Counterclaims and, thus, are not estopped from raising this issuebefore the CA or this Court. 11 It is true that G.V.T. Engineering Services, being a sole proprietorship,is not vested with a legal personality to bring suit or defend an action in court. A perusal of therecords of the present case shows that respondent’s complaint filed with the trial court as well as its

Appellee’s Brief submitted to the CA and its Comment filed before this Court are all captioned as

"G.V.T. Engineering Services acting through its owner/manager Gerino V. Tactaquin". In fact, thefirst paragraph of the complaint refers to G.V.T. as the plaintiff. On this basis, it can be inferred thatG.V.T. was the one which filed the complaint and that it is only acting through its proprietor.However, subsequent allegations in the complaint show that the suit is actually brought byTactaquin. Averments therein refer to the plaintiff as a natural person. In fact, one of the prayers inthe complaint is for the recovery of moral damages by reason of "his sufferings, mental anguish,moral shock, sleepless nights, serious anxiety and besmirch[ed] reputation as an Engineer andContractor." It is settled that, as a rule, juridical persons are not entitled to moral damages because,unlike a natural person, it cannot experience physical suffering or such sentiments as woundedfeelings, serious anxiety, mental anguish or moral shock. 12 From these, it can be inferred that it wasactually Tactaquin who is the complainant. As such, the proper caption should have been "GerinoTactaquin doing business under the name and style of G.V.T. Engineering Services", as is usuallydone in cases filed involving sole proprietorships. Nonetheless, these are matters of form and the

Court finds the defect merely technical, which does not, in any way, affect its jurisdiction.

This Court has held time and again that rules of procedure should be viewed as mere tools designedto aid the courts in the speedy, just and inexpensive determination of the cases beforethem. 13 Liberal construction of the rules and the pleadings is the controlling principle to effectsubstantial justice. 14 In fact, this Court is not impervious to instances when rules of procedure mustyield to the loftier demands of substantial justice and equity.15 Citing Aguam v. Court of Appeals [16] ,this Court held in Barnes v. Quijano [17] that:

The law abhors technicalities that impede the cause of justice. The court's primary duty is to renderor dispense justice. "A litigation is not a game of technicalities." "Lawsuits unlike duels are not to bewon by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and

becomes its great hindrance and chief enemy, deserves scant consideration from courts." Litigationsmust be decided on their merits and not on technicality. Every party litigant must be afforded theamplest opportunity for the proper and just determination of his cause, free from the unacceptableplea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon wherethe policy of the court is to encourage hearings of appeals on their merits and the rules of procedureought not to be applied in a very rigid, technical sense; rules of procedure are used only to helpsecure, not override substantial justice. It is a far better and more prudent course of action for thecourt to excuse a technical lapse and afford the parties a review of the case on appeal to attain theends of justice rather than dispose of the case on technicality and cause a grave injustice to theparties, giving a false impression of speedy disposal of cases while actually resulting in more delay,if not a miscarriage of justice. 18

More importantly, there is no showing that respondent’s failure to place the correct caption in thecomplaint or to amend the same later resulted in any prejudice on the part of petitioners. Thus, thisCourt held as early as the case of Alonso v. Villamor , 19 that:

No one has been misled by the error in the name of the party plaintiff. If we should by reason of thiserror send this case back for amendment and new trial, there would be on the retrial the samecomplaint, the same answer, the same defense, the same interests, the same witnesses, and thesame evidence. The name of the plaintiff would constitute the only difference between the old trialand the new. In our judgment there is not enough in a name to justify such action. 20



































In the same manner, it would be an unjustifiable abandonment of the principles laid down in theabove-mentioned cases if the Court would nullify the proceedings had in the present case by thelower and appellate courts on the simple ground that the complaint filed with the trial court was notproperly captioned.

Coming to the merits of the case, the Court finds for the respondent.

As to the first assigned error, respondent did not refute petitioners’ contention that he gave hisconsent and acquiesced to the decision of petitioners to change or alter the construction plan of thesubject house. However, respondent contends that he did not agree to the deletions made bypetitioners of some of the items of work covered by their contract. Both the trial and appellate courtsgave credence to respondent’s contention when they ruled that petitioners were guilty of "deletingseveral major items from plaintiff’s (herein respondent’s) scope of work" 21 or "of unjustifiably deletingitems agreed upon in the construction agreement and delaying the delivery of constructionmaterials" 22 thereby forcing respondent to withdraw from the project. From these acts of petitioners,both the trial and appellate courts made categorical findings that petitioners are the ones guilty ofbreach of contract.

The Court upholds the factual findings of the trial and appellate courts with respect to petitioners’ liability for breach of their contract with respondent. Questions of facts are beyond the pale of Rule45 of the Rules of Court as a petition for review may only raise questions of law. 23 Moreover, factualfindings of the trial court, particularly when affirmed by the Court of Appeals, are generally binding onthis Court. 24 More so, as in this case, where petitioners have failed to show that the courts belowoverlooked or disregarded certain facts or circumstances of such import as would have altered theoutcome of the case. 25 The Court, thus, finds no reason to set aside the lower courts’ factualfindings.

An examination of the records shows that respondent, indeed, refused to give his consent to theabovementioned deletions as evidenced by his letters dated November 10, 1990 26 and November23, 1990 27 addressed to the spouses Tan. Moreover, petitioners’ delay in the delivery ofconstruction materials is also evidenced by the minutes of the meeting held among the

representatives of petitioners and respondent on May 5, 1990 28 as well as the letter of respondent topetitioners dated June 15, 1990. 29

Having resolved that petitioners are guilty of breach of contract, the next question is whether theyare liable to pay the amounts of P366,340.00 and P49,578.56, which supposedly represent thebalance of the price of their contract with respondent and 5% retention fee, respectively.

There is no question that petitioners are liable for damages for having breached their contract withrespondent. Article 1170 of the Civil Code provides that those who in the performance of theirobligations are guilty of fraud, negligence or delay and those who in any manner contravene thetenor thereof are liable for damages. Moreover, the Court agrees with the trial court that under

Article 1234 of the Civil Code, if the obligation has been substantially performed in good faith, the

obligor may recover as though there had been a strict and complete fulfillment less damagessuffered by the obligee. In the present case, it is not disputed that respondent withdrew from theproject on November 23, 1990. Prior to such withdrawal, respondents gave to petitioners its 22ndBilling, dated October 29, 1990, where the approximated percentage of work completed as of thatdate was 74% and the portion of the contract paid by petitioners so far was P1,265,660.60. 30 Thiswas not disputed by petitioners. Hence, respondent was able to establish that he has substantiallyperformed his obligation in good faith.











































It is also established that a substantial part of the remaining items of work which were supposed tobe done by respondent were deleted by petitioners from his scope of work and awarded to othercontractors, thus, forcing him to withdraw from the contract. These works include the following: 1)soil poisoning; 2) T & G ceiling and flooring; 3) wood parquet; 4) vitrified floor tiles; 5) glazed andunglazed tiles; 6) washout; 7) marble flooring; 8) vinyl flooring; 9) plywood sheeting; 10) plain GIsheets; 11) cement tiles; 12) skylights; 13) Fixtures electrical works; and, 14) Fixtures and

accessories and plumbing works. 31

The Court finds no cogent reason to depart from the ruling of the trial court, as affirmed by the CA,that since petitioners are guilty of breach of contract by deleting the above-mentioned items fromrespondent’s scope of work, the value of the said items should be credited in respondent’s favor. It isestablished that if the above-mentioned deleted items would have been performed by respondent,as it should have been pursuant to their contract, the construction is already 96%completed. 32 Hence, respondent should be paid 96% of the total contract price of P1,700,000,or P1,632,000.00. The Court agrees with the trial court that since petitioners already paidrespondent the total amount of P1,265,660.00, the former should be held liable to pay the balanceofP366,340.00.

As to the 5% retention fee which respondent seeks to recover, petitioners do not deny that they haveretained the same in their custody. The only contention petitioners advance is that respondent is notentitled to recover this fee because it is stipulated under their contract that petitioners shall only givethem to respondent upon completion of the project and the same is turned over to them. In thepresent case, respondent was not able to complete the project. However, his failure to complete hisobligation under the contract was not due to his fault but because he was forced to withdrawtherefrom by reason of the breach committed by petitioners. Nonetheless, as earlier discussed, atthe time that respondent withdrew from the contract, he has already performed in good faith asubstantial portion of his obligation. Considering that he was not at fault, the law provides that he isentitled to recover as though there has been a strict and complete fulfillment of his obligation. 33 Onthis basis, the Court finds no error in the ruling of the trial and appellate courts that respondent isentitled to the recovery of 5% retention fee.

The Court finds that respondent was only able to establish the amount of P20,772.05, which is thesum of all the retention fees appearing in the bills presented by respondent in evidence. 34 Settled isthe rule that actual or compensatory damages cannot be presumed but must be proved withreasonable degree of certainty. 35 A court cannot rely on speculations, conjectures or guesswork asto the fact of damage but must depend upon competent proof that they have indeed been sufferedby the injured party and on the basis of the best evidence obtainable as to the actual amountthereof. 36 It must point out specific facts that could provide the gauge for measuring whatevercompensatory or actual damages were borne. 37 Considering that the documentary evidencepresented by respondent to prove the sum of retention fees sought to be recovered totals an amountwhich is less than that granted by the trial court, it is only proper to reduce such award in accordancewith the evidence presented.

As to the second assigned error, it is wrong for petitioners to argue that since Cadag, whom theyhired to supervise the construction of their house, was absolved by the court from liability, theyshould not also be held liable.

The Court finds no error on the part of the CA in ruling that it is a basic principle in civil law, onrelativity of contracts, that contracts can only bind the parties who had entered into it and it cannotfavor or prejudice third persons. Contracts take effect only between the parties, their successors ininterest, heirs and assigns. 38Moreover, every cause of action ex contractu must be founded upon acontract, oral or written, either express or implied. 39 In the present case, the complaint for specific








































Footnotes

1 Penned by Justice Conrado M. Vasquez, Jr. and concurred in by Justices Martin S.

Villarama, Jr. and Sergio L. Pestaño.

2 Id.

3 RTC Decision, original records, pp. 470-472.

4 Id. at 472.

5 Penned by then Judge Wenceslao I. Agnir, Jr., now retired Justice of the Court of Appeals.

6 RTC Decision, supra, pp. 475-476.

7 CA records, p. 170.

8 Id. at 214.

9 Rollo, pp. 14-18.

10 G.R. No. 53820, June 15, 1992, 209 SCRA 763.

11 Records, pp. 77, 82.

12 Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center-Bicol Christian

College of Medicine, (AMEC-BCCM), G.R. No. 141994, January 17, 2005, 448 SCRA 413,435.

13 Sanchez v. Court of Appeals, 452 Phil. 665, 673 (2003).

14 Id.

15 Remulla v. Manlongat , G.R. No. 148189, November 11, 2004, 442 SCRA 226, 233.

16 388 Phil. 587 (2000).

17 G.R. No. 160753, June 28, 2005, 461 SCRA 533.

18 Id. at 540.

19 16 Phil. 315 (1910).

20 Id. at 321.

21 RTC Decision, records, p. 472.


































































22 CA Decision, CA rollo, p. 168.

23 National Power Corporation v. Court of Appeals, G.R. No. 106804, August 12, 2004, 436SCRA 195, 208.

24 Id.

25 Metro Manila Transit Corporation v. Court of Appeals, 435 Phil. 129, 138 (2002).

26 Exhibit "B," Plaintiff’s Exhibits (separate folder), p. 31.

27 Exhibit "B-1," Plaintiff’s Exhibits, p. 32.

28 Exhibit "H-5," Plaintiffs Exhibits, p. 65.

29 Exhibit "D," Plaintiff’s Exhibits, p. 38.

30 Exhibit "F," Plaintiff’s Exhibits, p. 52.

31 Exhibit "I," Plaintiff’s Exhibits, p. 68.

32 Id.

33 Civil Code, Article 1234, supra.

34 Exhibits "L" to "L-24" which corresponds to item IV(a) of Defendants’ Exhibits "22-I," "22-J,""22-O," "22-P," "22-S," "22-U," "22-Z," "22-BB," "22-FF," "22-JJ," "22-MM," "22-PP," "22-TT,""22-ZZ," "22-FFF," "22-III," "22-LLL," "22-PPP," "22-CCCC," "22-RRRR," "22-SSSS," "22-TTTTT," "22-YYYYY" and "22-DDDDDD," Defendants’ Additional Exhibits, separate folder,pp. 26, 27, 32, 33, 36, 38, 43, 45, 49, 53, 56, 59, 63, 69, 75, 78, 81, 85, 98, 113, 114, 141,146 and 151.

35 Saguid v. Security Finance, Inc., G.R. 159467, December 9, 2005, 477 SCRA 256, 275.

36 Lagon v. Hooven Comalco Industries, Inc ., 402 Phil. 404, 424-425 (2001).

37 Id. at 425.

38 Civil Code, Article 1311.

39 Smith Bell and Company v. Court of Appeals, 335 Phil. 194, 202 (1997).

40 Siredy Enterprises Inc. v. Court of Appeals, 437 Phil. 580, 592 (2002).

41 Id.































































G.R. No. 149353 June 26, 2006

JOCELYN B. DOLES, Petitioner ,vs. MA. AURA TINA ANGELES, Respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioningthe Decision1dated April 30, 2001 of the Court of Appeals (CA) in C.A.-G.R. CV No. 66985, whichreversed the Decision dated July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City ofManila; and the CA Resolution2 dated August 6, 2001 which denied petitioner’s Motion forReconsideration.

The antecedents of the case follow:

On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for SpecificPerformance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the former in the concept of a personalloan amounting to P405,430.00 representing the principal amount and interest; that on October 5,1996, by virtue of a "Deed of Absolute Sale",3 petitioner, as seller, ceded to respondent, as buyer, aparcel of land, as well as the improvements thereon, with an area of 42 square meters, covered byTransfer Certificate of Title No. 382532,4 and located at a subdivision project known as CamellaTownhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; thatthis property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to securepetitioner’s loan in the sum of P337,050.00 with that entity; that as a condition for the foregoing sale,respondent shall assume the undue balance of the mortgage and pay the monthly amortizationof P4,748.11 for the remainder of the 25 years which began on September 3, 1994; that the propertywas at that time being occupied by a tenant paying a monthly rent of P3,000.00; that uponverification with the NHMFC, respondent learned that petitioner had incurred arrearages amountingto P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her arrears,petitioner denied that she incurred them and refused to pay the same; that despite repeateddemand, petitioner refused to cooperate with respondent to execute the necessary documents andother formalities required by the NHMFC to effect the transfer of the title over the property; thatpetitioner collected rent over the property for the month of January 1997 and refused to remit theproceeds to respondent; and that respondent suffered damages as a result and was forced tolitigate.

Petitioner, then defendant, while admitting some allegations in the Complaint, denied that sheborrowed money from respondent, and averred that from June to September 1995, she referred herfriends to respondent whom she knew to be engaged in the business of lending money in exchange

for personal checks through her capitalist Arsenio Pua. She alleged that her friends, namely,Zenaida Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden,borrowed money from respondent and issued personal checks in payment of the loan; that thechecks bounced for insufficiency of funds; that despite her efforts to assist respondent to collect fromthe borrowers, she could no longer locate them; that, because of this, respondent became furiousand threatened petitioner that if the accounts were not settled, a criminal case will be filed againsther; that she was forced to issue eight checks amounting to P350,000 to answer for the bouncedchecks of the borrowers she referred; that prior to the issuance of the checks she informedrespondent that they were not sufficiently funded but the latter nonetheless deposited the checks

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The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amountborrowed from the respondent to her friends. Hence, the Deed of Absolute Sale was supported by avalid consideration, which is the sum of money petitioner owed respondent amountingto P405,430.00, representing both principal and interest.

The CA took into account the following circumstances in their entirety: the supposed friends of

petitioner never presented themselves to respondent and that all transactions were made by andbetween petitioner and respondent;7 that the money borrowed was deposited with the bank accountof the petitioner, while payments made for the loan were deposited by the latter to respondent’s bankaccount;8 that petitioner herself admitted in open court that she was "re-lending" the money loanedfrom respondent to other individuals for profit;9 and that the documentary evidence shows that theactual borrowers, the friends of petitioner, consider her as their creditor and not the respondent .10

Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiateconsent, since the same is considered just or legal if made to enforce one’s claim through competentauthority under Article 133511of the Civil Code;12 that with respect to the arrearages of petitioner onher monthly amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed partof the balance of petitioner’s loan with the NHMFC which respondent agreed to assume; and that theamount of P3,000.00 representing the rental for January 1997 supposedly collected by petitioner, aswell as the claim for damages and attorney’s fees, is denied for insufficiency of evidence.13

On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing thatrespondent categorically admitted in open court that she acted only as agent or representative of

Arsenio Pua, the principal financier and, hence, she had no legal capacity to sue petitioner; and thatthe CA failed to consider the fact that petitioner’s father, who co-owned the subject property, was notimpleaded as a defendant nor was he indebted to the respondent and, hence, she cannot be madeto sign the documents to effect the transfer of ownership over the entire property.

On August 6, 2001, the CA issued its Resolution denying the motion on the ground that theforegoing matters had already been passed upon.

On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitionerfiled the present Petition and raised the following issues:

I.

WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THERESPONDENT.

II.

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TOCOLLECT DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE

DEBTOR.

III.

WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14

Although, as a rule, it is not the business of this Court to review the findings of fact made by thelower courts, jurisprudence has recognized several exceptions, at least three of which are present in

































the instant case, namely: when the judgment is based on a misapprehension of facts; when thefindings of facts of the courts a quo are conflicting; and when the CA manifestly overlooked certainrelevant facts not disputed by the parties, which, if properly considered, could justify a differentconclusion.15 To arrive at a proper judgment, therefore, the Court finds it necessary to re-examinethe evidence presented by the contending parties during the trial of the case.

The Petition is meritorious.

The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.

1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, thenshe is not a party to the loan; and that the Deed of Sale executed between her and the respondent intheir own names, which was predicated on that pre-existing debt, is void for lack of consideration.

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a pricecertain in money16 and that this sum indisputably pertains to the debt in issue. This Court hasconsistently held that a contract of sale is null and void and produces no effect whatsoever wherethe same is without cause or consideration.17 The question that has to be resolved for the moment is

whether this debt can be considered as a valid cause or consideration for the sale.

To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends"the amount borrowed from respondent to her friends: first, the friends of petitioner never presentedthemselves to respondent and that all transactions were made by and between petitioner andrespondent;18 second; the money passed through the bank accounts of petitioner andrespondent;19 third, petitioner herself admitted that she was "re-lending" the money loaned to otherindividuals for profit;20 and fourth, the documentary evidence shows that the actual borrowers, thefriends of petitioner, consider her as their creditor and not the respondent.21

On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant,during her cross-examination:22

Atty. Diza:

q. You also mentioned that you were not the one indebted to the plaintiff?

witness:

a. Yes, sir.

Atty. Diza:

q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria

Luisa Inocencio, Zenaida Romulo, they are your friends?

witness:

a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were justreferred.

Atty. Diza:



































q. And you have transact[ed] with the plaintiff?

witness:

a. Yes, sir.

Atty. Diza:

q. What is that transaction?

witness:

a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.

Atty. Diza:

q. Did the plaintiff personally see the transactions with your friends?

witness:

a. No, sir.

Atty. Diza:

q. Your friends and the plaintiff did not meet personally?

witness:

a. Yes, sir.

Atty. Diza:

q. You are intermediaries?

witness:

a. We are both intermediaries. As evidenced by the checks of the debtors they weredeposited to the name of Arsenio Pua because the money came from Arsenio Pua.

x x x x

Atty. Diza:

q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the oneyou mentioned [a] while ago?

witness:

a. Yes, she knows the money will go to those persons.



Atty. Diza:

q. You are re-lending the money?

witness:

a. Yes, sir.

Atty. Diza:

q. What profit do you have, do you have commission?

witness:

a. Yes, sir.

Atty. Diza:

q. How much?

witness:

a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none,sir.

Based on the foregoing, the CA concluded that petitioner is the real borrower, while therespondent, the real lender.

But as correctly noted by the RTC, respondent, then plaintiff, made the following admission

during her cross examination:

23

Atty. Villacorta:

q. Who is this Arsenio Pua?

witness:

a. Principal financier, sir.

Atty. Villacorta:

q. So the money came from Arsenio Pua?

witness:

a. Yes, because I am only representing him, sir.

Other portions of the testimony of respondent must likewise be considered:24

Atty. Villacorta:











q. So it is not actually your money but the money of Arsenio Pua?

witness:

a. Yes, sir.

Court:

q. It is not your money?

witness:

a. Yes, Your Honor.

Atty. Villacorta:

q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodatesomebody, are you aware of that?

witness:

a. I am aware of that.

Atty. Villacorta:

q. More or less she [accommodated] several friends of the defendant?

witness:

a. Yes, sir, I am aware of that.

x x x x

Atty. Villacorta:

q. And these friends of the defendant borrowed money from you with the assurance of thedefendant?

witness:

a. They go direct to Jocelyn because I don’t know them.

x x x x

Atty. Villacorta:

q. And is it not also a fact Madam witness that everytime that the defendant borrowed moneyfrom you her friends who [are] in need of money issued check[s] to you? There were checksissued to you?



witness:

a. Yes, there were checks issued.

Atty. Villacorta:

q. By the friends of the defendant, am I correct?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And because of your assistance, the friends of the defendant who are in need of moneywere able to obtain loan to [sic] Arsenio Pua through your assistance?

witness:

a. Yes, sir.

Atty. Villacorta:

q. So that occasion lasted for more than a year?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And some of the checks that were issued by the friends of the defendant bounced, am Icorrect?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And because of that Arsenio Pua got mad with you?

witness:

a. Yes, sir.

Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, herdisclosed principal. She is also estopped to deny that petitioner acted as agent for the allegeddebtors, the friends whom she (petitioner) referred.







ARTEMIO V. PANGANIBAN Chief JusticeChairperson


ROMEO J. CALLEJO, SR. Asscociate Justice



Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions inthe above Decision were reached in consultation before the case was assigned to the writer of theopinion of the Court’s Division.

ARTEMIO V. PANGANIBAN Chief Justice

Footnotes

1 Penned by Associate Justice Fermin A. Martin (now retired), with Associate Justices Portia Aliño-Hormachuelos and Mercedes Gozo-Dadole, concurring.

2 Penned by Associate Justice Mercedes Gozo-Dadole (vice retired Justice Fermin A. Martin,Jr.), with Associate Justices Portia Aliño-Hormachuelos and Marina L. Buzon (new ThirdMember).

3 Exhibit "B", records, p. 9.

4 Exhibit "A"; records, p 7.

5 RTC Decision, at 7-8.

6 CA records, p. 19.

7 CA Decision, rollo, pp. 52-54.

8

Id. at 54-55.

9 Id. at 9.

10 Id. at 9-10.

11 Article 1335 of the Civil Code provides:

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Art. 1335. There is violence when in order to wrest consent, serious or irresistibleforce is employed.

There is intimidation when one of the contracting parties is compelled by areasonable and well-grounded fear of an imminent and grave evil upon his person orproperty, or upon the person or property of his spouse, descendants or ascendants,

to give his consent.

x x x x

A threat to enforce one's claim through competent authority, if the claim is just orlegal, does not vitiate consent . (emphasis supplied).

12 CA Decision, at 10-12.

13 Id. at 12.

14 Rollo, p. 81.

15 See Rivera v. Roman, G.R. No. 142402, September 20, 2005, 470 SCRA 276; The InsularLife Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, April 28, 2004, 428SCRA 79, 86; Aguirre v. Court of Appeals, G.R. No. 122249, January 29, 2004, 421 SCRA310, 319; C & S Fishfarm Corporation v. Court of Appeals, 442 Phil. 279 (2002).

16 The fourth paragraph of the Deed of Absolute Sale reads: "NOW THEREFORE, for and inconsideration of the sum of FOUR HUNDRED FIVE THOUSAND FOUR HUNDRED THIRTYPESOS ONLY (P 405,430.00) Philippine Currency, the Seller hereby SELLS, TRANSFERSand CONVEYS to the Buyer, his heirs, successors or assigns, the above-described parcel ofland together with all the improvements thereon." Exhibit "B".

17

See Zulueta v. Wong , G.R. No. 153514, June 8, 2005, 459 SCRA 671; Buenaventura v.Court of Appeals, G.R. No. 126376, November 20, 2003, 416 SCRA 263; Montecillo v.Reynes, 434 Phil. 456 (2002);Cruz v. Bancom Finance Co., 429 Phil. 224 (2002); Rongavillav. Court of Appeals, 355 Phil. 720 (1998);Bagnas v. Court of Appeals, G.R. No. 38498,

August 10, 1989, 176 SCRA 159; Civil Code (1950) Arts. 1352, 1458 & 1471.

18 CA Decision, at 5-7; rollo, p. 48.

19 Id. at 7-8.

20 Id. at 9.

21

Id. at 9-10.

22 TSN, March 23, 1998, pp. 15-18, 20-21.

23 TSN, January 29, 1998, p. 18.

24 Id. at 19-23.










































25 See Amon Trading Co. v. Court of Appeals, G.R. No. 158585, December 13,2005; Victorias Milling Co., Inc. v. Court of Appeals, 389 Phil. 184 (2000); Civil Code (1950),

Art. 1868.

26 See Victorias Milling Co., Inc. v. Court of Appeals, id. citing Connell v. McLoughlin, 28 Or.230, 42 P. 218;Halladay v. Underwood , 90 Ill. App. 130; Internal Trust Co. v. Bridges, 57 F.

753; Hector M. De Leon & Hector M. De Leon, Jr. Comments and Cases on Partnership, Agency, and Trusts, 356-57 (1999).

27 Civil Code (1950), Arts. 1869-72.

28 De Leon & De Leon, Jr., supra note 24, at 409.

29 Id. at 349, citing Orient Air Services & Hotel Representatives v. Court of Appeals, 274 Phil.926 (1991).

30 Id. at 356, citing Cia v. Phil. Refining Co., 45 Phil. 556, December 20, 1923; 5 Arturo M.Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 398 (1991).

31 See Cia v. Phil. Refining Co., id. citing 3 Am. Jur. 2d., 430-31.

32 Civil Code (1950), Arts. 1892-93.

33 Paragraph 6 of respondent’s complaint reads:

6. On October 5. 1996 after defendant continuously failed to settle her personalobligation to plaintiff, defendant offered to pay plaintiff by way of ceding the above-described property on condition that plaintiff would assume the balance of themortgage and pay the monthly amortization of P4,748.11 for the remainder of the 25years to which the latter agreed; x x x

Annex "D" of the Petition, Rollo, p. 39. Respondent testified as follows:

Q. At the time of the sale, can you tell to this Court whether the defendant [is] stillindebted to the [NHMFC]?

A. I am aware that she is indebted.

Q. Is there any agreement with respect to the obligation of the defendant to theNHMFC?

A. We have a verbal agreement that I will be the one to assume the balance.

Q. When you speak of balance what are you talking to? [sic]

A. Undue [sic] balance, sir.

TSN, January 13, 1998, at 14 (emphasis supplied).

34 See Bravo-Guerrero v. Bravo, G.R. No. 152658, July 29, 2005, 465 SCRA 244.

































35 TSN, February 26, 1998, pp. 5-6.

36 Exhibit "A"; Rollo, p. 17.

37 Id. Exhibit "A-1"; Rollo, p. 72.

38 Civil Code (1950), Art. 2085(3).

39 See Gonzales v. Toledo, G.R. No. 149465, December 8, 2003, 417 SCRA 260; Tsai v.Court of Appeals, 418 Phil. 606 (2001); Philippine Bank of Communications v. Court of

Appeals, et al., 418 Phil. 606 (2001);Noel v. Court of Appeals, 310 Phil. 89 (1995); Segura v.Segura, 165 SCRA 368, 375 (1988).

40 Exhibit "A"; Rollo, p. 71.























conflicts brought about by the numerous mining claimants scrambling for gold that lies beneath itsbosom.

On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces ofgold in Mount Diwata, filed a Declaration of Location (DOL) for six mining claims in the area.

Camilo Banad and some other natives pooled their skills and resources and organized the BaliteCommunal Portal Mining Cooperative (Balite).3

On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements withBanad and his group.

From November 1983 to February 1984, several individual applications for mining locations overmineral land covering certain parts of the Diwalwal gold rush area were filed with the Bureau ofMines and Geo-Sciences (BMG).

On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areasadjacent to the area covered by the DOL of Banad and his group. After realizing that the area

encompassed by its mining claims is a forest reserve within the coverage of Proclamation No. 369issued by Governor General Davis, MMC abandoned the same and instead applied for aprospecting permit with the Bureau of Forest Development (BFD).

On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectarestraversing the municipalities of Monkayo and Cateel, an area within the forest reserve underProclamation No. 369. The permit embraced the areas claimed by Apex and the other individualmining claimants.

On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10March 1986, the BMG issued to MCC Exploration Permit No. 133 (EP 133).

Discovering the existence of several mining claims and the proliferation of small-scale miners in thearea covered by EP 133, MMC thus filed on 11 April 1986 before the BMG a Petition for theCancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and themining claims of Apex were within an established and existing forest reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation No. 369 and that pursuant to Presidential Decree No.463,4 acquisition of mining rights within a forest reserve is through the application for a permit toprospect with the BFD and not through registration of a DOL with the BMG.

On 23 September 1986, Apex filed a motion to dismiss MMC’s petition alleging that its mining claimsare not within any established or proclaimed forest reserve, and as such, the acquisition of miningrights thereto must be undertaken via registration of DOL with the BMG and not through the filing ofapplication for permit to prospect with the BFD.

On 9 December 1986, BMG dismissed MMC’s petition on the ground that the area covered by the Apex mining claims and MMC’s permit to explore was not a forest reservation. It further declared nulland void MMC’s EP 133 and sustained the validity of Apex mining claims over the disputed area.

MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources(DENR).











On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG anddeclared MMC’s EP 133 valid and subsisting.

Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex thenfiled an appeal before the Office of the President. On 27 July 1989, the Office of the President,through Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia,5 dismissed Apex’s appeal

and affirmed the DENR ruling.

Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605entitled, "Apex Mining Co., Inc. v. Garcia."6 On 16 July 1991, this Court rendered a Decision against

Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiringmining rights therein is by initially applying for a permit to prospect with the BFD and not through aregistration of DOL with the BMG.

On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale miningpurposes.

As DAO No. 66 declared a portion of the contested area open to small scale miners, several miningentities filed applications for Mineral Production Sharing Agreement (MPSA).

On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSAapplication which was denied by the BMG on the grounds that the area applied for is within the areacovered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA under DAONo. 82,7 Series of 1990.

On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellationof EP 133 and for the admission of their MPSA Application. The Petition was docketed as REDMines Case No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite intervened andlikewise sought the cancellation of EP 133.

On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation(SEM), a domestic corporation which is alleged to be a 100% -owned subsidiary of MMC.

On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that waslater on rejected.

On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133,which was also denied by reason of the pendency of RED Mines Case No. 8-8-94. On 1 September1995, SEM filed another MPSA application.

On 20 October 1995, BMG accepted and registered SEM’s MPSA application and the Deed of Assignment over EP 133 executed in its favor by MMC. SEM’s application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEM’s application, the following filed beforethe BMG their adverse claims or oppositions:

a) MAC Case No. 004 (XI) – JB Management Mining Corporation;

b) MAC Case No. 005(XI) – Davao United Miners Cooperative;















c) MAC Case No. 006(XI) – Balite Integrated Small Scale Miner’s Cooperative;

d) MAC Case No. 007(XI) – Monkayo Integrated Small Scale Miner’s Association, Inc.(MISSMA);

e) MAC Case No. 008(XI) – Paper Industries Corporation of the Philippines;

f) MAC Case No. 009(XI) – Rosendo Villafor, et al.;

g) MAC Case No. 010(XI) – Antonio Dacudao;

h) MAC Case No. 011(XI) – Atty. Jose T. Amacio;

i) MAC Case No. 012(XI) – Puting-Bato Gold Miners Cooperative;

j) MAC Case No. 016(XI) – Balite Communal Portal Mining Cooperative;

k) MAC Case No. 97-01(XI) – Romeo Altamera, et al.8

To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:

(a) The adverse claims on MPSAA No. 128; and

(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94.9

On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition forCancellation of EP 133 issued to MMC, the PA relied on the ruling in Apex Mining Co., Inc. v.Garcia,10 and opined that EP 133 was valid and subsisting. It also declared that the BMG Director,under Section 99 of the Consolidated Mines Administrative Order implementing Presidential DecreeNo. 463, was authorized to issue exploration permits and to renew the same without limit.

With respect to the adverse claims on SEM’s MPSAA No. 128, the PA ruled that adverse claimants’petitions were not filed in accordance with the existing rules and regulations governing adverseclaims because the adverse claimants failed to submit the sketch plan containing the technicaldescription of their respective claims, which was a mandatory requirement for an adverse claim thatwould allow the PA to determine if indeed there is an overlapping of the area occupied by them andthe area applied for by SEM. It added that the adverse claimants were not claim owners but mereoccupants conducting illegal mining activities at the contested area since only MMC or its assigneeSEM had valid mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia.11 Also,it maintained that the adverse claimants were not qualified as small-scale miners under DENRDepartment Administrative Order No. 34 (DAO No. 34),12 or the Implementing Rules and Regulation

of Republic Act No. 7076 (otherwise known as the "People’s Small-Scale Mining Act of 1991"), asthey were not duly licensed by the DENR to engage in the extraction or removal of minerals from theground, and that they were large-scale miners. The decretal portion of the PA resolutionpronounces:

VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Expoloration Permit No. 133 is herebyreiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.13



























Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board(MAB). In a Decision dated 6 January 1998, the MAB considered erroneous the dismissal by the PAof the adverse claims filed against MMC and SEM over a mere technicality of failure to submit asketch plan. It argued that the rules of procedure are not meant to defeat substantial justice as theformer are merely secondary in importance to the latter. Dealing with the question on EP 133’svalidity, the MAB opined that said issue was not crucial and was irrelevant in adjudicating the

appealed case because EP 133 has long expired due to its non-renewal and that the holder of thesame, MMC, was no longer a claimant of the Agusan-Davao-Surigao Forest Reserve havingrelinquished its right to SEM. After it brushed aside the issue of the validity of EP 133 for beingirrelevant, the MAB proceeded to treat SEM’s MPSA application over the disputed area as anentirely new and distinct application. It approved the MPSA application, excluding the areasegregated by DAO No. 66, which declared 729 hectares within the Diwalwal area as non-forestlands open for small-scale mining. The MAB resolved:

WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June1997 is hereby VACATED and a new one entered in the records of the case as follows:

1. SEM’s MPSA application is hereby given due course subject to the full and strictcompliance of the provisions of the Mining Act and its Implementing Rules and Regulations;

2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by thesmall-scale miners on or before August 1, 1987 as determined by the Provincial MiningRegulatory Board (PMRB), is hereby excluded from the area applied for by SEM;

3. A moratorium on all mining and mining-related activities, is hereby imposed until such timethat all necessary procedures, licenses, permits, and other requisites as provided for by RA7076, the Mining Act and its Implementing Rules and Regulations and all other pertinentlaws, rules and regulations are complied with, and the appropriate environmental protectionmeasures and safeguards have been effectively put in place;

4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scaleminers to continue to negotiate in good faith and arrive at an agreement beneficial to all. Inthe event of SEM’s strict and full compliance with all the requirements of the Mining Act andits Implementing Rules and Regulations, and the concurrence of the small-scale minersactually occupying and actively mining the area, SEM may apply for the inclusion of portionsof the areas segregated under paragraph 2 hereof, to its MPSA application. In this light,subject to the preceding paragraph, the contract between JB [JB Management MiningCorporation] and SEM is hereby recognized.14

Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by theexclusion of 729 hectares from its MPSA application, likewise appealed. Apex filed a Motion forLeave to Admit Petition for Intervention predicated on its right to stake its claim over the Diwalwalgold rush which was granted by the Court. These cases, however, were remanded to the Court of

Appeals for proper disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Courtof Appeals consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.

In the assailed Decision15 dated 13 March 2002, the Court of Appeals affirmed in toto the decision ofthe PA and declared null and void the MAB decision.

The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of itsassignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary ofMMC, ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent of MMC, the











assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMC’sduly designated agent. Thus, despite the non-renewal of EP 133 on 6 July 1994, the Court of

Appeals deemed it relevant to declare EP 133 as valid since MMC’s mining rights were validlytransferred to SEM prior to its expiration.

The Court of Appeals also ruled that MMC’s right to explore under EP 133 is a property right which

the 1987 Constitution protects and which cannot be divested without the holder’s consent. Itstressed that MMC’s failure to proceed with the extraction and utilization of minerals did not diminishits vested right to explore because its failure was not attributable to it.

Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 ofPresidential Decree No. 463, the Court of Appeals concluded that the issuance of DAO No. 66 wasdone by the DENR Secretary beyond his power for it is the President who has the sole power towithdraw from the forest reserve established under Proclamation No. 369 as non-forest land formining purposes. Accordingly, the segregation of 729 hectares of mining areas from the coverage ofEP 133 by the MAB was unfounded.

The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he

awarded the 729 hectares segregated from the coverage area of EP 133 to other corporations whowere not qualified as small-scale miners under Republic Act No. 7076.

As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submitthe sketch plan to the PA, which is a jurisdictional requirement, was fatal to their appeal. It likewisestated the Villaflor and company’s mining claims, which were based on their alleged rights underDAO No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decisiondecreed:

WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation isGRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision ofthe Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and the assailed MAB Decision ishereby SET ASIDE and declared as NULL and VOID.16

Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and MAB.

During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No.297 dated 25 November 2002. This proclamation excluded an area of 8,100 hectares located inMonkayo, Compostela Valley, and proclaimed the same as mineral reservation and asenvironmentally critical area. Subsequently, DENR Administrative Order No. 2002-18 was issueddeclaring an emergency situation in the Diwalwal gold rush area and ordering the stoppage of allmining operations therein. Thereafter, Executive Order No. 217 dated 17 June 2003 was issued bythe President creating the National Task Force Diwalwal which is tasked to address the situation inthe Diwalwal Gold Rush Area.

In G.R. No. 152613 and No. 152628, Apex raises the following issues:

I

WHETHER OR NOT SOUTHEAST MINDANAO GOLD MINING’S [SEM] E.P. 133 IS NULL ANDVOID DUE TO THE FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS ANDCONDITIONS PRESCRIBED IN EP 133.









III. Whether or not the subsequent acts of the executive department such as the issuance ofProclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite’s claims overthe Diwalwal Gold Rush Area.

On the first issue, Apex takes exception to the Court of Appeals’ ruling upholding the validity ofMMC’s EP 133 and its subsequent transfer to SEM asserting that MMC failed to comply with the

terms and conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost theirrights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in itspermit. First, MMC failed to comply with the mandatory work program, to complete exploration work,and to declare a mining feasibility. Second, it reneged on its duty to submit an EnvironmentalCompliance Certificate. Third, it failed to comply with the reportorial requirements. Fourth, it violatedthe terms of EP 133 when it assigned said permit to SEM despite the explicit proscription against itstransfer.

Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No.8220 which caused its exploration permit to lapse because DAO No. 82 mandates holders ofexploration permits to file a Letter of Intent and a MPSA application not later than 17 July 1991. Itsaid that because EP 133 expired prior to its assignment to SEM, SEM’s MPSA application shouldhave been evaluated on its own merit.

As regards the Court of Appeals recognition of SEM’s vested right over the disputed area, Apexbewails the same to be lacking in statutory bases. According to Apex, Presidential Decree No. 463and Republic Act No. 7942 impose upon the claimant the obligation of actually undertakingexploration work within the reserved lands in order to acquire priority right over the area. MMC, Apexclaims, failed to conduct the necessary exploration work, thus, MMC and its successor-in-interestSEM lost any right over the area.

In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is anexpired and void permit which cannot be made the basis of SEM’s MPSA application.

Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of thetransfer of EP 133 because the transfer directly violates the express condition of the explorationpermit stating that "it shall be for the exclusive use and benefit of the permittee or his duly authorizedagents." It added that while MMC is the permittee, SEM cannot be considered as MMC’s dulydesignated agent as there is no proof on record authorizing SEM to represent MMC in its businessdealings or undertakings, and neither did SEM pursue its interest in the permit as an agent of MMC.

According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not make the latterthe duly authorized agent of MMC since the concept of an agent under EP 133 is not equivalent tothe concept of assignee. It finds fault in the assignment of EP 133 which lacked the approval of theDENR Secretary in contravention of Section 25 of Republic Act No. 794221 requiring his approval fora valid assignment or transfer of exploration permit to be valid.

SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB

relate to factual and evidentiary matters which this Court cannot inquire into in an appeal bycertiorari.

The established rule is that in the exercise of the Supreme Court’s power of review, the Court notbeing a trier of facts, does not normally embark on a re-examination of the evidence presented bythe contending parties during the trial of the case considering that the findings of facts of the Court of

Appeals are conclusive and binding on the Court.22 This rule, however, admits of exceptions asrecognized by jurisprudence, to wit:














(1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when theinference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse ofdiscretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings offacts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues ofthe case, or its findings are contrary to the admissions of both the appellant and the appellee; (7)when the findings are contrary to the trial court; (8) when the findings are conclusions without citation

of specific evidence on which they are based; (9) when the facts set forth in the petition as well as inthe petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings offact are premised on the supposed absence of evidence and contradicted by the evidence onrecord; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputedby the parties, which, if properly considered, would justify a different conclusion.23

Also, in the case of Manila Electric Company v. Benamira,24 the Court in a Petition for Review onCertiorari, deemed it proper to look deeper into the factual circumstances of the case since the Courtof Appeal’s findings are at odds to those of the National Labor Relations Commission (NLRC). Justlike in the foregoing case, it is this Court’s considered view that a re-evaluation of the attendant factssurrounding the present case is appropriate considering that the findings of the MAB are in conflictwith that of the Court of Appeals.

I

At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133pursuant to a Deed of Assignment dated 16 February 1994.25

EP 133 is subject to the following terms and conditions26 :

1. That the permittee shall abide by the work program submitted with the application orstatements made later in support thereof, and which shall be considered as conditions andessential parts of this permit;

2. That permittee shall maintain a complete record of all activities and accounting of allexpenditures incurred therein subject to periodic inspection and verification at reasonableintervals by the Bureau of Mines at the expense of the applicant;

3. That the permittee shall submit to the Director of Mines within 15 days after the end ofeach calendar quarter a report under oath of a full and complete statement of the work donein the area covered by the permit;

4. That the term of this permit shall be for two (2) years to be effective from this date,renewable for the same period at the discretion of the Director of Mines and upon request ofthe applicant;

5. That the Director of Mines may at any time cancel this permit for violation of its provision

or in case of trouble or breach of peace arising in the area subject hereof by reason ofconflicting interests without any responsibility on the part of the government as toexpenditures for exploration that might have been incurred, or as to other damages thatmight have been suffered by the permittee; and

6. That this permit shall be for the exclusive use and benefit of the permittee or his dulyauthorized agents and shall be used for mineral exploration purposes only and for no otherpurpose.



















Under Section 9027 of Presidential Decree No. 463, the applicable statute during the issuance of EP133, the DENR Secretary, through Director of BMG, is charged with carrying out the said law. Also,under Commonwealth Act No. 136, also known as "An Act Creating The Bureau of Mines," whichwas approved on 7 November 1936, the Director of Mines has the direct charge of the administrationof the mineral lands and minerals, and of the survey, classification, lease or any other form ofconcession or disposition thereof under the Mining Act.28 This power of administration includes the

power to prescribe terms and conditions in granting exploration permits to qualified entities. Thus, inthe grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in layingdown the terms and conditions attendant thereto.

Condition number 6 categorically states that the permit shall be for the exclusive use and benefit ofMMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former isthe duly authorized agent of the latter. For a contract of agency to exist, it is essential that theprincipal consents that the other party, the agent, shall act on its behalf, and the agent consents soas to act.29 In the case of Yu Eng Cho v. Pan American World Airways, Inc. ,30 this Court had theoccasion to set forth the elements of agency, viz:

(1) consent, express or implied, of the parties to establish the relationship;

(2) the object is the execution of a juridical act in relation to a third person;

(3) the agent acts as a representative and not for himself;

(4) the agent acts within the scope of his authority.

The existence of the elements of agency is a factual matter that needs to be established or provenby evidence. The burden of proving that agency is extant in a certain case rests in the party whosets forth such allegation. This is based on the principle that he who alleges a fact has the burden ofproving it.31 It must likewise be emphasized that the evidence to prove this fact must be clear,positive and convincing.32

In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agencyactually exists between them so as to allow SEM to use and benefit from EP 133 as the agent ofMMC. SEM did not claim nor submit proof that it is the designated agent of MMC to represent thelatter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent ofMMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, itgoes without saying that the assignment or transfer of the permit in favor of SEM is null and void asit directly contravenes the terms and conditions of the grant of EP 133.

Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on hisown behalf but on behalf of his principal.33 While in assignment, there is total transfer orrelinquishment of right by the assignor to the assignee.34 The assignee takes the place of the

assignor and is no longer bound to the latter. The deed of assignment clearly stipulates:

1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR fromthe ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the

ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area situated in Monkayo,Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and

Application for a Permit to Prospect in Bunawan, Agusan del Sur respectively.35







































Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it isreadily obvious that the assignment by MMC of EP 133 in favor of SEM did not make the latter theformer’s agent. Such assignment involved actual transfer of all rights and obligations MMC haveunder the permit in favor of SEM, thus, making SEM the permittee. It is not a mere grant of authorityto SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC’s rights over thepermit. Hence, the assignment in question did not make SEM the authorized agent of MMC to make

use and benefit from EP 133.

The condition stipulating that the permit is for the exclusive use of the permittee or its dulyauthorized agent is not without any reason. Exploration permits are strictly granted to entities orindividuals possessing the resources and capability to undertake mining operations. Without such acondition, non-qualified entities or individuals could circumvent the strict requirements under the lawby the simple expediency acquiring the permit from the original permittee.

We cannot lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary ofMMC, is automatically an agent of MMC.

A corporation is an artificial being created by operation of law, having the right of succession and the

powers, attributes, and properties expressly authorized by law or incident to its existence.

36

It is anartificial being invested by law with a personality separate and distinct from those of the personscomposing it as well as from that of any other legal entity to which it may be related.37 Resultantly,absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.

The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize theprohibited transfer or assignment of EP 133. It stresses that SEM is just a business conduit of MMC,hence, the distinct legal personalities of the two entities should not be recognized. True, thecorporate mask may be removed when the corporation is just an alter ego or a mere conduit of aperson or of another corporation.38 For reasons of public policy and in the interest of justice, thecorporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequitycommitted against a third person.39 However, this Court has made a caveat in the application of thedoctrine of piercing the corporate veil. Courts should be mindful of the milieu where it is to be

applied. Only in cases where the corporate fiction was misused to such an extent that injustice, fraudor crime was committed against another, in disregard of its rights may the veil be pierced andremoved. Thus, a subsidiary corporation may be made to answer for the liabilities and/or illegalitiesdone by the parent corporation if the former was organized for the purpose of evading obligationsthat the latter may have entered into. In other words, this doctrine is in place in order to expose andhold liable a corporation which commits illegal acts and use the corporate fiction to avoid liabilityfrom the said acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicleto commit prohibited acts because these acts are the ones which the doctrine seeks to prevent.

To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permitin favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit.To allow SEM to avail itself of this doctrine and to approve the validity of the assignment is

tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.

Quite apart from the above, a cursory consideration of the mining law pertinent to the case, will,indeed, demonstrate the infraction committed by MMC in its assignment of EP 133 to SEM.

Presidential Decree No. 463, enacted on 17 May 1974, otherwise known as the Mineral ResourcesDevelopment Decree, which governed the old system of exploration, development, and utilization ofmineral resources through "license, concession or lease" prescribed:



















SEC. 97. Assignment of Mining Rights. – A mining lease contract or any interest therein shall not betransferred, assigned, or subleased without the prior approval of the Secretary: Provided, That suchtransfer, assignment or sublease may be made only to a qualified person possessing the resourcesand capability to continue the mining operations of the lessee and that the assignor has compliedwith all the obligations of the lease: Provided, further, That such transfer or assignment shall be dulyregistered with the office of the mining recorder concerned. (Emphasis supplied.)

The same provision is reflected in Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995, which is the new law governing the exploration, development and utilization of thenatural resources, which provides:

SEC. 25. Transfer or Assignment. - An exploration permit may be transferred or assigned to aqualified person subject to the approval of the Secretary upon the recommendation of the Director.

The records are bereft of any indication that the assignment bears the imprimatur of the Secretary ofthe DENR. Presidential Decree No. 463, which is the governing law when the assignment wasexecuted, explicitly requires that the transfer or assignment of mining rights, including the right toexplore a mining area, must be with the prior approval of the Secretary of DENR. Quite

conspicuously, SEM did not dispute the allegation that the Deed of Assignment was made withoutthe prior approval of the Secretary of DENR. Absent the prior approval of the Secretary of DENR,the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provisionof Presidential Decree No. 463.

An added significant omission proved fatal to MMC/SEM’s cause. While it is true that the case of Apex Mining Co., Inc. v. Garcia40 settled the issue of which between Apex and MMC validly acquiredmining rights over the disputed area, such rights, though, had been extinguished by subsequentevents. Records indicate that on 6 July 1993, EP 133 was extended for 12 months or until 6 July1994.41 MMC never renewed its permit prior and after its expiration. Thus, EP 133 expired by non-renewal.

With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area.SEM, on the other hand, has not acquired any right to the said area because the transfer of EP 133in its favor is invalid. Hence, both MMC and SEM have not acquired any vested right over the4,941.6759 hectares which used to be covered by EP 133.

II

The Court of Appeals theorizes that DAO No. 66 was issued beyond the power of the DENRSecretary since the power to withdraw lands from forest reserves and to declare the same as anarea open for mining operation resides in the President.

Under Proclamation No. 369 dated 27 February 1931, the power to convert forest reserves as non-forest reserves is vested with the DENR Secretary. Proclamation No. 369 partly states:

From this reserve shall be considered automatically excluded all areas which had already beencertified and which in the future may be proclaimed as classified and certified lands and approved bythe Secretary of Agriculture and Natural Resources.42

However, a subsequent law, Commonwealth Act No. 137, otherwise known as "The Mining Act"which was approved on 7 November 1936 provides:














Sec. 14. Lands within reservations for purposes other than mining, which, after such reservation ismade, are found to be more valuable for their mineral contents than for the purpose for which thereservation was made, may be withdrawn from such reservations by the President with theconcurrence of the National Assembly, and thereupon such lands shall revert to the public domainand be subject to disposition under the provisions of this Act.

Unlike Proclamation No. 369, Commonwealth Act No. 137 vests solely in the President, with theconcurrence of the National Assembly, the power to withdraw forest reserves found to be morevaluable for their mineral contents than for the purpose for which the reservation was made andconvert the same into non-forest reserves. A similar provision can also be found in PresidentialDecree No. 463 dated 17 May 1974, with the modifications that (1) the declaration by the Presidentno longer requires the concurrence of the National Assembly and (2) the DENR Secretary merelyexercises the power to recommend to the President which forest reservations are to be withdrawnfrom the coverage thereof. Section 8 of Presidential Decree No. 463 reads:

SEC. 8. Exploration and Exploitation of Reserved Lands. – When lands within reservations, whichhave been established for purposes other than mining, are found to be more valuable for theirmineral contents, they may, upon recommendation of the Secretary be withdrawn from suchreservation by the President and established as a mineral reservation.

Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Courtis constrained to rule that said administrative order was issued not in accordance with the laws.Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations, is null and voidas, verily, the DENR Secretary has no power to convert forest reserves into non-forest reserves.

III

It is the contention of Apex that its right over the Diwalwal gold rush area is superior to that of MMCor that of SEM because it was the first one to occupy and take possession of the area and the first torecord its mining claims over the area.

For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area,particularly in the 729 hectares small-scale mining area, has entitled it to file its MPSA. Balite claimsthat its MPSA application should have been given preference over that of SEM because it was filedahead.

The MAB, on the other hand, insists that the issue on who has superior right over the disputed areahas become moot and academic by the supervening events. By virtue of Proclamation No. 297dated 25 November 2002, the disputed area was declared a mineral reservation.

Proclamation No. 297 excluded an area of 8,100 hectares located in Monkayo, Compostela Valley,and proclaimed the same as mineral reservation and as environmentally critical area, viz:

WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of public land situated inthe then provinces of Davao, Agusan and Surigao, with an area of approximately 1,927,400hectares, were withdrawn from settlement and disposition, excluding, however, those portions whichhad been certified and/or shall be classified and certified as non-forest lands;

WHEREAS, gold deposits have been found within the area covered by Proclamation No. 369, in theMunicipality of Monkayo, Compostela Valley Province, and unregulated small to medium-scale



mining operations have, since 1983, been undertaken therein, causing in the process seriousenvironmental, health, and peace and order problems in the area;

WHEREAS, it is in the national interest to prevent the further degradation of the environment and toresolve the health and peace and order problems spawned by the unregulated mining operations inthe said area;

WHEREAS, these problems may be effectively addressed by rationalizing mining operations in thearea through the establishment of a mineral reservation;

WHEREAS, after giving due notice, the Director of Mines and Geoxciences conducted publichearings on September 6, 9 and 11, 2002 to allow the concerned sectors and communities to airtheir views regarding the establishment of a mineral reservation in the place in question;

WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the President may, upon therecommendation of the Director of Mines and Geosciences, through the Secretary of Environmentand Natural Resources, and when the national interest so requires, establish mineral reservationswhere mining operations shall be undertaken by the Department directly or thru a contractor;

WHEREAS, as a measure to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection, the President may, pursuant to Presidential DecreeNo. 1586, as amended, proclaim and declare certain areas in the country as environmentally critical;

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, uponrecommendation of the Secretary of the Department of Environment and Natural Resources(DENR), and by virtue of the powers vested in me by law, do hereby exclude certain parcel of landlocated in Monkayo, Compostela Valley, and proclaim the same as mineral reservation and asenvironmentally critical area, with metes and bound as defined by the following geographicalcoordinates;

x x x x

with an area of Eight Thousand One Hundred (8,100) hectares, more or less. Mining operations inthe area may be undertaken either by the DENR directly, subject to payment of just compensationthat may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existingrights, if any.

The DENR shall formulate and issue the appropriate guidelines, including the establishment of anenvironmental and social fund, to implement the intent and provisions of this Proclamation.

Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in theexploration, development and utilization of the natural resources of the country.43 With this policy, theState may pursue full control and supervision of the exploration, development and utilization of thecountry’s natural mineral resources. The options open to the State are through direct undertaking orby entering into co-production, joint venture, or production-sharing agreements, or by entering intoagreement with foreign-owned corporations for large-scale exploration, development andutilization.44 Thus, Article XII, Section 2, of the 1987 Constitution, specifically states:

SEC. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, allforces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other naturalresources are owned by the State. With the exception of agricultural lands, all other natural











resources shall not be alienated. The exploration, development, and utilization of natural resourcesshall be under the full control and supervision of the State. The State may directly undertake suchactivities, or it may enter into co-production, joint venture, or production-sharing agreements withFilipino citizens, or corporations or associations at least sixty per centum of whose capital is ownedby such citizens. Such agreements may be for a period not exceeding twenty-five years, renewablefor not more than twenty-five years, and under such terms and conditions as may be provided by

law. x x x

x x x x

The President may enter into agreements with foreign-owned corporations involving either technicalor financial assistance for large-scale exploration, development, and utilization of minerals,petroleum, and other mineral oils according to the general terms and conditions provided by law,based on real contributions to the economic growth and general welfare of the country. x x x(Underscoring supplied.)

Recognizing the importance of the country’s natural resources, not only for national economicdevelopment, but also for its security and national defense, Section 5 of Republic Act No. 7942

empowers the President, when the national interest so requires, to establish mineral reservationswhere mining operations shall be undertaken directly by the State or through a contractor.

To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAONo. 2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal Gold Rush

Area and ordering the stoppage of all mining operations therein.

The issue on who has priority right over the disputed area is deemed overtaken by the abovesubsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18,both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in theDiwalwal Mineral Reservation are now, therefore, within the full control of the State through theexecutive branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either directlyundertake the exploration, development and utilization of the area or it can enter into agreementswith qualified entities, viz:

SEC 5. Mineral Reservations. – When the national interest so requires, such as when there is aneed to preserve strategic raw materials for industries critical to national development, or certainminerals for scientific, cultural or ecological value, the President may establish mineral reservationsupon the recommendation of the Director through the Secretary. Mining operations in existingmineral reservations and such other reservations as may thereafter be established, shall beundertaken by the Department or through a contractor x x x .

It is now up to the Executive Department whether to take the first option, i.e., to undertake directlythe mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not beprecluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to

the gnawing complexities generated by the gold rush. The State need be guided only by thedemands of public interest in settling on this option, as well as its material and logisticfeasibility.45 The State can also opt to award mining operations in the mineral reservation to privateentities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies withthe Executive Department over which courts will not interfere.

WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLYGRANTED, thus:







1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals, dated 13March 2002, and hereby declare that EP 133 of MMC has EXPIRED on 7 July 1994 and thatits subsequent transfer to SEM on 16 February 1994 is VOID.

2. We AFFIRM the finding of the Court of Appeals in the same Decision declaring DAO No.66 illegal for having been issued in excess of the DENR Secretary’s authority.

Consequently, the State, should it so desire, may now award mining operations in the disputed areato any qualified entity it may determine. No costs.

SO ORDERED.


WE CONCUR:

ARTEMIO V. PANGANIBAN

Chief JusticeChairperson


MA. ALICIA AUSTRIA-MARTINEZ Asscociate Justice

ROMEO J. CALLEJO, SR. Associate Justice


Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions inthe above Decision were reached in consultation before the case was assigned to the writer of theopinion of the Court’s Division.


Footnotes

1

Records, Vol. 2, pp. 7-11.2 Id., Vol.1, p. 90.

3 Rollo of G.R. No. 152619-20, p. 68.

4 Sec. 13. Areas Closed to Mining Location. - No prospecting and exploration shall beallowed:















a) In military, or other Government reservations except when authorized by theproper Government agency concerned; x x x. (Apex Mining Co., Inc. v. Garcia, G.R.No. 92605, 16 July 1991, 199 SCRA 278, 284.)

5 Now Associate Justice of the Supreme Court.

6 Supra note 4.

7 It provides for the procedural guidelines on the award of MPSA through negotiation. Itfurther sets forth the requirements that applicants for MPSA applications shall comply andsubmit before the proper authority.

8 Rollo of G.R. No. 152870-71, pp. 144-146.

9 Id. at 76.

10 Supra note 4.

11 Id.

12 DAO No. 34 defines small-scale miners as "Filipino citizens who individually or in thecompany of other Filipino citizens, voluntarily form a cooperative duly licensed by the DENRto engage, under the terms and conditions of a contract/license in the extraction or removalof minerals or ore-bearing materials from the ground."

13 Rollo of G.R. No. 152870-71, p. 161.

14 Rollo of G.R. No. 152870-71, pp. 141-142.

15 Penned by Associate Justice Alicia L. Santos with Associate Justices Cancio C. Garcia

and Marina L. Buzon, concurring.

16 Rollo of G.R. No. 152619-20, p. 55.

17 Rollo of G.R. No. 152613 and No. 152628, p. 731.

18 Id. at 703-704.

19 Rollo of G.R. No. 152870-71, p. 916.

20 Otherwise known as the Procedural Guidelines On the Award Of Mineral ProductionSharing Agreement (MPSA) Through Negotiation provides:

Section 3. Submission of Letter of Intent (LOIs) and MPSAs.

The following shall submit their LOIs and MPSAs within two (2) years from theeffectivity of DENR A.O. 57 or until July 17, 1991.

1. Declaration of Location (DOL) holders, mining lease applicants,exploration permitees, quarry applicants and other mining applicants whose



















































mining/quarry applications have not been perfected prior to the effectivity ofDENR Administrative Order No. 57.

2. All holders of DOL acquired after the effectivity of DENR A.O. No. 57.

x x x x

Failure to submit letters of intent and MPSA applications/proposals within theprescribed period shall cause the abandonment of mining, quarry and sand andgravel claims.

21 Republic Act No. 7942 is also known as the "Philippine Mining Act of 1995."

22 New City Builders, Inc. v. National Labor Relations Commission, G.R. No. 149281, 15June 2005, 460 SCRA 220, 227.

23 The Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, 28 April2004, 428 SCRA 79, 86; Manila Electric Company v. Benamira, G.R. No. 145271, 14 July

2005, 463 SCRA 331, 347-348; Aguirre v. Court of Appeals, G.R. No. 122249, 29 January2004, 421 SCRA 310, 319.

24 Manila Electric Company v. Benamira, id.

25 Records, Vol. 2, pp. 351-353.

26 Id. at 84-85.

27 Executive Officer.- The Secretary, through the Director, shall be the Executive Officercharged with carrying out the provisions of this Decree. x x x.

28 Commonwealth Act No. 136, Section 3.

29 People v. Yabut, G.R. No. L-42902, 29 April 1977, 76 SCRA 624, 630.

30 G.R. No. 123560, 27 March 2000, 328 SCRA717, 728.

31 Asia Traders Insurance Corporation v. Court of Appeals, G.R. No. 152537, 16 February2004, 423 SCRA 114, 120.

32 Id.

33 Yu Eng Cho v. Pan American World Airways, Inc., supra note 30.

34 Philippine National Bank v. Court of Appeals, 338 Phil. 795, 817-818 (1997).

35 Records, Vol. 2, p. 352.

36 Corporation Code, Section 2.

37 Yu v. National Labor Relations Commission, 315 Phil. 107, 123 (1995).






















































38 Lim v. Court of Appeals, 380 Phil. 60, 76 (2000).

39 Philippine National Bank v. Andrada Electric & Engineering Company, 430 Phil. 882, 894(2002).

40 Supra note 4.

41 Records, Vol. 2, p. 255.

42 Id. at 7.

43 Miners Association of the Philippines, Inc. v. Hon. Factoran, Jr., 310 Phil. 113, 130-131(1995).

44 Id.; Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative, 429Phil. 668, 683 (2002).

45 Id.



























G.R. No. 144805 June 8, 2006

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,vs.ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION),ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 51022, which affirmed the Decision of the Regional Trial Court (RTC), Pasig City,Branch 165, in Civil Case No. 54887, as well as the Resolution2 of the CA denying the motion forreconsideration thereof.

The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws.Since 1950, it had been engaged in the manufacture of roofing materials and pipe products. Its

manufacturing operations were conducted on eight parcels of land with a total area of 47,233 squaremeters. The properties, located in Mandaluyong City, Metro Manila, were covered by TransferCertificates of Title Nos. 451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125under the name of Far East Bank & Trust Company, as trustee. Ninety (90%) percent of the sharesof stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized andregistered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the GeneralManager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia ofESAC. Both had their offices in Belgium.

In 1986, the management of ESAC grew concerned about the political situation in the Philippinesand wanted to stop its operations in the country. The Committee for Asia of ESAC instructed Michael

Adams, a member of EC’s Board of Directors, to dispose of the eight parcels of land. Adamsengaged the services of realtor/broker Lauro G. Marquez so that the properties could be offered forsale to prospective buyers. Glanville later showed the properties to Marquez.

Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B.Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquezdeclared that he was authorized to sell the properties for P27,000,000.00 and that the terms of thesale were subject to negotiation.4

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr.,and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the propertyfor P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings’ offer and relayed thesame to Delsaux in Belgium, but the latter did not respond. On October 28, 1986, Glanville telexedDelsaux in Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua siblings. It

was only on February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the"Belgian/Swiss decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover allexisting obligations prior to final liquidation."5

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr.accepted the counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter datedFebruary 26, 1987, confirmed that the Litonjua siblings had accepted the counter-proposal ofDelsaux. He also stated that the Litonjua siblings would confirm full payment within 90 days after























execution and preparation of all documents of sale, together with the necessary governmentalclearances.6

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & TrustCompany, Ermita Branch, and drafted an Escrow Agreement to expedite the sale.7

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would beimplemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with thebuyer, which had given him the impression that "he is prepared to press for a satisfactory conclusionto the sale."8 He also emphasized to Delsaux that the buyers were concerned because they wouldincur expenses in bank commitment fees as a consequence of prolonged period of inaction.9

Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of thePhilippines, the political situation in the Philippines had improved. Marquez received a telephone callfrom Glanville, advising that the sale would no longer proceed. Glanville followed it up with a Letterdated May 7, 1987, confirming that he had been instructed by his principal to inform Marquez that"the decision has been taken at a Board Meeting not to sell the properties on which EternitCorporation is situated."10

Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Officehad decided not to proceed with the sale of the subject land, to wit:

May 22, 1987

Mr. L.G. MarquezL.G. Marquez, Inc.334 Makati Stock Exchange Bldg.6767 Ayala AvenueMakati, Metro ManilaPhilippines

Dear Sir:

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the landwhich was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and examined theposition as far as the Philippines are (sic) concerned. Considering [the] new political situation sincethe departure of MR. MARCOS and a certain stabilization in the Philippines, the Committee hasdecided not to stop our operations in Manila. In fact, production has started again last week, and(sic) to recognize the participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy would change at alater state, we would consult you again.

x x x

Yours sincerely,























(Sgd.)C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)11

When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment

for damages they had suffered on account of the aborted sale. EC, however, rejected their demand.

The Litonjuas then filed a complaint for specific performance and damages against EC (now theEterton Multi-Resources Corporation) and the Far East Bank & Trust Company, and ESAC in theRTC of Pasig City. An amended complaint was filed, in which defendant EC was substituted byEterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan andDeogracias G. Eufemio were impleaded as additional defendants on account of their purchase ofESAC shares of stocks and were the controlling stockholders of EC.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doingbusiness in the Philippines, it cannot be subject to the jurisdiction of Philippine courts; the Board andstockholders of EC never approved any resolution to sell subject properties nor authorized Marquez

to sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own personalmaking which did not bind EC.

On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed theamended complaint.12The fallo of the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporationand Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding sale betweenthe plaintiffs and said defendants.

The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of causeof action.

The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer,S.A. is also dismissed for lack of merit.13

The trial court declared that since the authority of the agents/realtors was not in writing, the sale isvoid and not merely unenforceable, and as such, could not have been ratified by the principal. In anyevent, such ratification cannot be given any retroactive effect. Plaintiffs could not assume thatdefendants had agreed to sell the property without a clear authorization from the corporationconcerned, that is, through resolutions of the Board of Directors and stockholders. The trial courtalso pointed out that the supposed sale involves substantially all the assets of defendant EC whichwould result in the eventual total cessation of its operation.14

The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concludingthat the real estate broker in the instant case needed a written authority from appellee corporationand/or that said broker had no such written authority; and (2) the lower court committed grave errorof law in holding that appellee corporation is not legally bound for specific performance and/ordamages in the absence of an enabling resolution of the board of directors."15 They averred thatMarquez acted merely as a broker or go-between and not as agent of the corporation; hence, it wasnot necessary for him to be empowered as such by any written authority. They further claimed thatan agency by estoppel was created when the corporation clothed Marquez with apparent authority tonegotiate for the sale of the properties. However, since it was a bilateral contract to buy and sell, itwas equivalent to a perfected contract of sale, which the corporation was obliged to consummate.






















In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it;neither were Glanville and Delsaux authorized by its board of directors to offer the property for sale.Since the sale involved substantially all of the corporation’s assets, it would necessarily need theauthority from the stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. 16 The Litonjuas

filed a motion for reconsideration, which was also denied by the appellate court.

The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article 1874 of the New Civil Code. Under Section 23 of the Corporation Code, he needed a specialauthority from EC’s board of directors to bind such corporation to the sale of its properties. Delsaux,who was merely the representative of ESAC (the majority stockholder of EC) had no authority tobind the latter. The CA pointed out that Delsaux was not even a member of the board of directors ofEC. Moreover, the Litonjuas failed to prove that an agency by estoppel had been created betweenthe parties.

In the instant petition for review, petitioners aver that

I

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTEDCONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZNEEDED A WRITTEN AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BEPERFECTED.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVETHE NECESSARY AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT THE VERYLEAST, WERE KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO ACTS WITHINTHE SCOPE OF AN APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC ASPOSSESSING POWER TO SELL THE SAID PROPERTIES.17

Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale ofthe parcels of land and the improvements thereon for "US$1,000,000.00 plus P2,500,000.00 tocover obligations prior to final liquidation." Petitioners insist that they had accepted the counter-offerof respondent EC and that before the counter-offer was withdrawn by respondents, the acceptancewas made known to them through real estate broker Marquez.

Petitioners assert that there was no need for a written authority from the Board of Directors of EC forMarquez to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinaryagent because his authority was of a special and limited character in most respects. His only job asa broker was to look for a buyer and to bring together the parties to the transaction. He was notauthorized to sell the properties or to make a binding contract to respondent EC; hence, petitionersargue, Article 1874 of the New Civil Code does not apply.











In any event, petitioners aver, what is important and decisive was that Marquez was able tocommunicate both the offer and counter-offer and their acceptance of respondent EC’s counter -offer, resulting in a perfected contract of sale.

Petitioners posit that the testimonial and documentary evidence on record amply shows thatGlanville, who was the President and General Manager of respondent EC, and Delsaux, who was

the Managing Director for ESAC Asia, had the necessary authority to sell the subject property or, atleast, had been allowed by respondent EC to hold themselves out in the public as having the powerto sell the subject properties. Petitioners identified such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then President andGeneral Manager of Eternit, to sell the properties of said corporation to any interested party,which authority, as hereinabove discussed, need not be in writing.

2. The fact that the NEGOTIATIONS for the sale of the subject propertiesspanned SEVERAL MONTHS, from 1986 to 1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the

Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternit’s offer to sell the properties asevidenced by the Petitioners’ ACCEPTANCE of the counter-offer;

5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the SecurityBank and that an ESCROW agreement was drafted over the subject properties;

6. Glanville’s telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO BUY AND SELL";

7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that

Petitioners’ offer was allegedly REJECTED by both Glanville and Delsaux.18

Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer topetitioners’ offer and thereafter reject such offer unless they were authorized to do so by respondentEC. Petitioners insist that Delsaux confirmed his authority to sell the properties in his letter toMarquez, to wit:

Dear Sir,

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the land

which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and examined theposition as far as the Philippines are (sic) concerned. Considering the new political situation sincethe departure of MR. MARCOS and a certain stabilization in the Philippines, the Committee hasdecided not to stop our operations in Manila[.] [I]n fact production started again last week, and (sic)to reorganize the participation in the Corporation.







We regret that we could not make a deal with you this time, but in case the policy would change at alater stage we would consult you again.

In the meantime, I remain

Yours sincerely,

C.F. DELSAUX19

Petitioners further emphasize that they acted in good faith when Glanville and Delsaux wereknowingly permitted by respondent EC to sell the properties within the scope of an apparentauthority. Petitioners insist that respondents held themselves to the public as possessing power tosell the subject properties.

By way of comment, respondents aver that the issues raised by the petitioners are factual, hence,are proscribed by Rule 45 of the Rules of Court. On the merits of the petition, respondents EC (nowEMC) and ESAC reiterate their submissions in the CA. They maintain that Glanville, Delsaux andMarquez had no authority from the stockholders of respondent EC and its Board of Directors to offer

the properties for sale to the petitioners, or to any other person or entity for that matter. They assertthat the decision and resolution of the CA are in accord with law and the evidence on record, andshould be affirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux,conformed to the written authority of Marquez to sell the properties. The authority of Glanville andDelsaux to bind respondent EC is evidenced by the fact that Glanville and Delsaux negotiated for thesale of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997. Given the significance oftheir positions and their duties in respondent EC at the time of the transaction, and the fact thatrespondent ESAC owns 90% of the shares of stock of respondent EC, a formal resolution of theBoard of Directors would be a mere ceremonial formality. What is important, petitioners maintain, isthat Marquez was able to communicate the offer of respondent EC and the petitioners’ acceptancethereof. There was no time that they acted without the knowledge of respondents. In fact,respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.

The petition has no merit.

Anent the first issue, we agree with the contention of respondents that the issues raised by petitionerin this case are factual. Whether or not Marquez, Glanville, and Delsaux were authorized byrespondent EC to act as its agents relative to the sale of the properties of respondent EC, and if so,the boundaries of their authority as agents, is a question of fact. In the absence of express writtenterms creating the relationship of an agency, the existence of an agency is a factquestion.20 Whether an agency by estoppel was created or whether a person acted within thebounds of his apparent authority, and whether the principal is estopped to deny the apparentauthority of its agent are, likewise, questions of fact to be resolved on the basis of the evidence on

record.21 The findings of the trial court on such issues, as affirmed by the CA, are conclusive on theCourt, absent evidence that the trial and appellate courts ignored, misconstrued, or misapplied factsand circumstances of substance which, if considered, would warrant a modification or reversal of theoutcome of the case.22

It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules ofCourt because the Court is not a trier of facts. It is not to re-examine and assess the evidence onrecord, whether testimonial and documentary. There are, however, recognized exceptions where theCourt may delve into and resolve factual issues, namely:


















(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2)when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is graveabuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when thefindings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond theissues of the case and the same is contrary to the admissions of both appellant and appellee; (7)when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the

findings of fact are conclusions without citation of specific evidence on which they are based; (9)when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties,which, if properly considered, would justify a different conclusion; and (10) when the findings of factof the Court of Appeals are premised on the absence of evidence and are contradicted by theevidence on record.23

We have reviewed the records thoroughly and find that the petitioners failed to establish that theinstant case falls under any of the foregoing exceptions. Indeed, the assailed decision of the Court of

Appeals is supported by the evidence on record and the law.

It was the duty of the petitioners to prove that respondent EC had decided to sell its properties andthat it had empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale toprospective buyers and to accept any counter-offer. Petitioners likewise failed to prove that theircounter-offer had been accepted by respondent EC, through Glanville and Delsaux. It must bestressed that when specific performance is sought of a contract made with an agent, the agencymust be established by clear, certain and specific proof .24

Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of thePhilippines, provides:

SEC. 23. The Board of Directors or Trustees. – Unless otherwise provided in this Code, thecorporate powers of all corporations formed under this Code shall be exercised, all businessconducted and all property of such corporations controlled and held by the board of directors ortrustees to be elected from among the holders of stocks, or where there is no stock, from among themembers of the corporation, who shall hold office for one (1) year and until their successors are

elected and qualified.

Indeed, a corporation is a juridical person separate and distinct from its members or stockholdersand is not affected by the personal rights,

obligations and transactions of the latter .25 It may act only through its board of directors or, whenauthorized either by its by-laws or by its board resolution, through its officers or agents in the normalcourse of business. The general principles of agency govern the relation between the corporationand its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions oflaw.26

Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties,

subject to the limitations prescribed by law and the Constitution, as follows:

SEC. 36. Corporate powers and capacity. – Every corporation incorporated under this Code has thepower and capacity:

x x x x

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwisedeal with such real and personal property, including securities and bonds of other corporations, as



















the transaction of a lawful business of the corporation may reasonably and necessarily require,subject to the limitations prescribed by the law and the Constitution.

The property of a corporation, however, is not the property of the stockholders or members, and assuch, may not be sold without express authority from the board of directors.27 Physical acts, like theoffering of the properties of the corporation for sale, or the acceptance of a counter-offer of

prospective buyers of such properties and the execution of the deed of sale covering such property,can be performed by the corporation only by officers or agents duly authorized for the purpose bycorporate by-laws or by specific acts of the board of directors.28 Absent such validdelegation/authorization, the rule is that the declarations of an individual director relating to theaffairs of the corporation, but not in the course of, or connected with, the performance of authorizedduties of such director, are not binding on the corporation.29

While a corporation may appoint agents to negotiate for the sale of its real properties, the final saywill have to be with the board of directors through its officers and agents as authorized by a boardresolution or by its by-laws.30 An unauthorized act of an officer of the corporation is not binding on itunless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of realproperty of a corporation by a person purporting to be an agent thereof but without written authorityfrom the corporation is null and void. The declarations of the agent alone are generally insufficient toestablish the fact or extent of his/her authority.31

By the contract of agency, a person binds himself to render some service or to do something inrepresentation on behalf of another, with the consent or authority of the latter .32 Consent of both

principal and agent is necessary to create an agency. The principal must intend that the agent shallact for him; the agent must intend to accept the authority and act on it, and the intention of the

parties must find expression either in words or conduct between them.33

An agency may be expressed or implied from the act of the principal, from his silence or lack ofaction, or his failure to repudiate the agency knowing that another person is acting on his behalfwithout authority. Acceptance by the agent may be expressed, or implied from his acts which carryout the agency, or from his silence or inaction according to the circumstances.34 Agency may be oral

unless the law requires a specific form.35 However, to create or convey real rights over immovableproperty, a special power of attorney is necessary.36 Thus, when a sale of a piece of land or anyportion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the saleshall be void.37

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of theBoard of Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, tosell, let alone offer for sale, for and in its behalf, the eight parcels of land owned by respondent ECincluding the improvements thereon. The bare fact that Delsaux may have been authorized to sell toRuperto Tan the shares of stock of respondent ESAC, on June 1, 1997, cannot be used as basis forpetitioners’ claim that he had likewise been authorized by respondent EC to sell the parcels of land.

Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority ofDelsaux, who, in turn, acted on the authority of respondent ESAC, through its Committee for Asia,38 the Board of Directors of respondent ESAC,39 and the Belgian/Swiss component of themanagement of respondent ESAC.40 As such, Adams and Glanville engaged the services ofMarquez to offer to sell the properties to prospective buyers. Thus, on September 12, 1986,Marquez wrote the petitioner that he was authorized to offer for sale the property forP27,000,000.00and the other terms of the sale subject to negotiations. When petitioners offered to purchase theproperty for P20,000,000.00, through Marquez, the latter relayed petitioners’ offer to Glanville;Glanville had to send a telex to Delsaux to inquire the position of respondent ESAC to petitioners’


























































offer. However, as admitted by petitioners in their Memorandum, Delsaux was unable to replyimmediately to the telex of Glanville because Delsaux had to wait for confirmation from respondentESAC.41 When Delsaux finally responded to Glanville on February 12, 1987, he made it clear that,based on the "Belgian/Swiss decision" the final offer of respondent ESAC was US$1,000,000.00plus P2,500,000.00 to cover all existing obligations prior to final liquidation.42 The offer of Delsauxemanated only from the "Belgian/Swiss decision," and not the entire management or Board of

Directors of respondent ESAC. While it is true that petitioners accepted the counter-offer ofrespondent ESAC, respondent EC was not a party to the transaction between them; hence, EC wasnot bound by such acceptance.

While Glanville was the President and General Manager of respondent EC, and Adams and Delsauxwere members of its Board of Directors, the three acted for and in behalf of respondent ESAC, andnot as duly authorized agents of respondent EC; a board resolution evincing the grant of suchauthority is needed to bind EC to any agreement regarding the sale of the subject properties. Suchboard resolution is not a mere formality but is a condition sine qua non to bind respondent EC.

Admittedly, respondent ESAC owned 90% of the shares of stocks of respondent EC; however, themere fact that a corporation owns a majority of the shares of stocks of another, or even all of suchshares of stocks, taken alone, will not justify their being treated as one corporation .43

It bears stressing that in an agent-principal relationship, the personality of the principal is extendedthrough the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal,authorized to perform all acts which the latter would have him do. Such a relationship can only beeffected with the consent of the principal, which must not, in any way, be compelled by law or by anycourt.44

The petitioners cannot feign ignorance of the absence of any regular and valid authority ofrespondent EC empowering Adams, Glanville or Delsaux to offer the properties for sale and to sellthe said properties to the petitioners. A person dealing with a known agent is not authorized, underany circumstances, blindly to trust the agents; statements as to the extent of his powers; suchperson must not act negligently but must use reasonable diligence and prudence to ascertainwhether the agent acts within the scope of his authority.45 The settled rule is that, persons dealing

with an assumed agent are bound at their peril, and if they would hold the principal liable, toascertain not only the fact of agency but also the nature and extent of authority, and in case either iscontroverted, the burden of proof is upon them to prove it .46 In this case, the petitioners failed todischarge their burden; hence, petitioners are not entitled to damages from respondent EC.

It appears that Marquez acted not only as real estate broker for the petitioners but also as theiragent. As gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed, forand in behalf of the petitioners, that the latter had accepted such offer to sell the land and theimprovements thereon. However, we agree with the ruling of the appellate court that Marquez hadno authority to bind respondent EC to sell the subject properties. A real estate broker is one whonegotiates the sale of real properties. His business, generally speaking, is only to find a purchaserwho is willing to buy the land upon terms fixed by the owner. He has no authority to bind the principalby signing a contract of sale. Indeed, an authority to find a purchaser of real property does notinclude an authority to sell.47

Equally barren of merit is petitioners’ contention that respondent EC is estopped to deny theexistence of a principal-agency relationship between it and Glanville or Delsaux. For an agency byestoppel to exist, the following must be established: (1) the principal manifested a representation ofthe agent’s authority or knowlingly allowed the agent to assume such authority; (2) the third person,in good faith, relied upon such representation; (3) relying upon such representation, such thirdperson has changed his position to his detriment.48 An agency by estoppel, which is similar to the



































doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn,needs proof that the representations predated the action taken in reliance.49 Such proof is lacking inthis case. In their communications to the petitioners, Glanville and Delsaux positively andunequivocally declared that they were acting for and in behalf of respondent ESAC.

Neither may respondent EC be deemed to have ratified the transactions between the petitioners and

respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the variouscommunications inter se were never submitted to the Board of Directors of respondent EC forratification.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against thepetitioners.

SO ORDERED.

ROMEO J. CALLEJO, SR. Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Chief JusticeChairperson

(On leave)CONSUELO YNARES-SANTIAGO

Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ Asscociate Justice



Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions inthe above decision were reached in consultation before the case was assigned to the writer of theopinion of the Court’s Division.


Footnotes

1 Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate JusticesFermin A. Martin, Jr. and Salvador J. Valdez, Jr. (retired), concurring; rollo, pp. 40-53.

2 Rollo, pp. 54-55.













3 Id. at 11, 61.

4 Id. at 394-395.

5 Id. at 396.

6 Id. at 397-398.

7 Id. at 240.

8 Id. at 241.

9 Id.

10 Id. at 399.

11 Id. at 349-400.

12 Id. at 163-175.

13 Id. at 174-175.

14 Id. at 173-174.

15 Id. at 47-48.

16 Id. at 40-53.

17 Id. at 15.

18 Id. at 29-30.

19 Id. at 30-31.

20 Weathersby v. Gore, 556 F.2d 1247 (1977).

21 Cavic v. Grand Bahama Development Co., Ltd., 701 F.2d 879 (1983).

22 Culaba v. Court of Appeals, G.R. No. 125862, April 15, 2004, 427 SCRA 721, 729;Litonjua v. Fernandez, G.R. No. 148116, April 14, 2004, 427 SCRA 478, 489.

23 Nokom v. National Labor Relations Commission, 390 Phil. 1228, 1242-1243 (2000).(citations omitted)

24 Blair v. Sheridan, 10 S.E. 414 (1889).

26 San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 357 Phil. 631, 644(1998).








































































27 Traders Royal Bank v. Court of Appeals, G.R. No. 78412, September 26, 1989, 177 SCRA788, 792.

28 BPI Leasing Corporation v. Court of Appeals, G.R. No. 127624, November 18, 2003, 416SCRA 4, 11.

29 AF Realty & Development, Inc. v. Dieselman Freight Services, Co., 424 Phil. 446, 454(2002).

30 De Liano v. Court of Appeals, 421 Phil. 1033, 1052 (2001).

31 Litonjua v. Fernandez, supra note 22, at 493.

32 Article 1868, new civil code.

33 Ellison v. Hunsinger, 75 S.E. 2d. 884 (1953); Dominion Insurance Corporation v. Court of Appeals, 426 Phil. 620, 626 (2002).

34 civil code, Art. 1870.

35 civil code, Art. 1869, paragraph 2.

36 civil code, Art. 1878(12).

37 civil code, Art. 1874.

38 Exhibits "H" and "H-1," rollo, p. 166.

39 Exhibits "G" and "G-1," id.

40 Exhibits "C" and "C-1," id. at 165.

41 Rollo, p. 396.

42 Exhibits "C" and "C-1," rollo, p. 165.

43 Philippine National Bank v. Ritratto Group, Inc., supra note 25, at 503.

44 Orient Air Services and Hotel Representatives v. Court of Appeals, 274 Phil. 927, 939(1991).

45

Hill v. Delta Loan and Finance Company, 277 S.W. 2d 63, 65.

46 Litonjua v. Fernandez, supra note 22, at 494; Culaba v. Court of Appeals, supra note 22, at730; BA Finance Corporation v. Court of Appeals, G.R. No. 94566, July 3, 1992, 211 SCRA112, 116.

47 Donnan v. Adams, 71 S.W. 580.

48 Carolina-Georgia Carpet and Textiles, Inc. v. Pelloni, 370 So. 2d 450 (1979).





































































G.R. No. 158585 December 13, 2005

Amon trading corporation and juliana marketing, Petitioners,vs.HON. COURT OF APPEALS and TRI-REALTY DEVELOPMENT AND CONSTRUCTIONCORPORATION,Respondents.

D E C I S I O N

CHICO-NAZARIO, J .:

This is an appeal by certiorari from the Decision1 dated 28 November 2002 of the Court of Appeals inCA-G.R. CV No. 60031, reversing the Decision of the Regional Trial Court of Quezon City, Branch104, and holding petitioners Amon Trading Corporation and Juliana Marketing to be solidarily liablewith Lines & Spaces Interiors Center (Lines & Spaces) in refunding private respondent Tri-RealtyDevelopment and Construction Corporation (Tri-Realty) the amount corresponding to the value ofundelivered bags of cement.

The undisputed facts:

Private respondent Tri-Realty is a developer and contractor with projects in Bulacan and QuezonCity. Sometime in February 1992, private respondent had difficulty in purchasing cement needed forits projects. Lines & Spaces, represented by Eleanor Bahia Sanchez, informed private respondentthat it could obtain cement to its satisfaction from petitioners, Amon Trading Corporation and itssister company, Juliana Marketing. On the strength of such representation, private respondentproceeded to order from Sanchez Six Thousand Fifty (6,050) bags of cement from petitioner AmonTrading Corporation, and from Juliana Marketing, Six Thousand (6,000) bags at P98.00/bag.

Private respondent, through Mrs. Sanchez of Lines & Spaces, paid in advance the amountof P592,900.00 through Solidbank Manager’s Check No. 0011565 payable to Amon Trading

Corporation, and the amount of P588,000.00 payable to Juliana Marketing, through SolidbankManager’s Check No. 0011566. A certain "Weng Chua" signed the check vouchers for Lines &Spaces while Mrs. Sanchez issued receipts for the two manager’s checks. Private respondentlikewise paid to Lines & Spaces an advance fee for the 12,050 cement bags at the rateof P7.00/bag, or a total of P84,350.00, in consideration of the facilitation of the orders and certaintyof delivery of the same to the private respondent. Solidbank Manager’s Check Nos. 0011565 and0011566 were paid by Sanchez to petitioners.

There were deliveries to private respondent from Amon Trading Corporation and Juliana Marketingof 3,850 bags and 3,000 bags, respectively, during the period from April to June 1992. However, thebalance of 2,200 bags from Amon Trading Corporation and 3,000 bags from Juliana Marketing, or atotal of 5,200 bags, was not delivered. Private respondent, thus, sent petitioners written demandsbut in reply, petitioners stated that they have already refunded the amount of undelivered bags of

cement to Lines and Spaces per written instructions of Eleanor Sanchez.

Left high and dry, with news reaching it that Eleanor Sanchez had already fled abroad, privaterespondent filed this case for sum of money against petitioners and Lines & Spaces.

Petitioners plead in defense lack of right or cause of action, alleging that private respondent had noprivity of contract with them as it was Lines & Spaces/Tri-Realty, through Mrs. Sanchez, that orderedor purchased several bags of cement and paid the price thereof without informing them of anyspecial arrangement nor disclosing to them that Lines & Spaces and respondent corporation are







distinct and separate entities. They added that there were purchases or orders made by Lines &Spaces/Tri-Realty which they were about to deliver, but were cancelled by Mrs. Sanchez and theconsideration of the cancelled purchases or orders was later reimbursed to Lines & Spaces. Therefund was in the form of a check payable to Lines & Spaces.

Lines & Spaces denied in its Answer that it is represented by Eleanor B. Sanchez and pleads in

defense lack of cause of action and in the alternative, it raised the defense that it was only anintermediary between the private respondent and petitioners.2 Soon after, though, counsel for Lines& Spaces moved to withdraw from the case for the reason that its client was beyond contact.

On 29 January 1998, the Regional Trial Court of Quezon City, Branch 104, found Lines & Spacessolely liable to private respondent and absolved petitioners of any liability. The dispositive portion ofthe trial court’s Decision reads:

Wherefore, judgment is hereby rendered ordering defendant Lines and Spaces Interiors Center asfollows: to pay plaintiff on the complaint the amount of P47,950.00 as refund of the fee for theundelivered 5,200 bags of cement at the rate of P7.00 per bag; the amount of P509,600.00 for therefund of the price of the 5,200 undelivered bags of cement at P98.00 per bag; the amount of

P2,000,000.00 for compensatory damages; as well as the amount of P639,387.50 as attorney’sfees; and to pay Amon Trading and Juliana Marketing, Inc. on the crossclaim the sum ofP200,000.00 as attorney’s fees.3

Private Respondent Tri-Realty partially appealed from the trial court’s decision absolving AmonTrading Corporation and Juliana Marketing of any liability to Tri-Realty. In the presently assailedDecision, the Court of Appeals reversed the decision of the trial court and held petitioners AmonTrading Corporation and Juliana Marketing to be jointly and severally liable with Lines & Spaces forthe undelivered bags of cement. The Court of Appeals disposed-

WHEREFORE, premises considered, the decision of the court a quo is hereby REVERSED ANDSET ASIDE, and another one is entered ordering the following:

Defendant-appellee Amon Trading Corporation is held liable jointly and severally with defendant-appellee Lines and Spaces Interiors Center in the amount of P215,600.00 for the refund of the priceof 2,200 undelivered bags of cement.

Defendant-appellee Juliana Marketing is held liable jointly and severally with defendant-appelleeLines and Spaces Interiors Center in the amount of P294,000.00 for the refund of the price of 3,000undelivered bags of cement.

The defendant-appellee Lines and Spaces Interiors Center is held solely in the amount ofP47,950.00 as refund of the fee for the 5,200 undelivered bags of cement to the plaintiff-appellantTri-Realty Development and Construction Corporation.

The awards of compensatory damages and attorney’s fees are DELETED.

The cross claim of defendants-appellees Amon Trading Corporation and Juliana Marketing isDISMISSED for lack of merit.

No pronouncement as to costs.4















Pained by the ruling, petitioners elevated the case to this Court via the present petition for review tochallenge the Decision and Resolution of the Court of Appeals on the following issues:

I. WHETHER OR NOT THERE WAS A CONTRACT OF AGENCY BETWEEN LINES AND SPACESINTERIOR CENTER AND RESPONDENT;

II. WHETHER OR NOT PETITIONERS AND RESPONDENT HAS PRIVITY OF CONTRACT.5

At the focus of scrutiny is the issue of whether or not the Court of Appeals committed reversible errorin ruling that petitioners are solidarily liable with Lines & Spaces. The key to unlocking this issue is todetermine whether or not Lines & Spaces is the private respondent’s agent and whether or not thereis privity of contract between petitioners and private respondent.

We shall consider these issues concurrently as they are interrelated.

Petitioners, in their brief, zealously make a case that there was no contract of agency between Lines& Spaces and private respondent.6 Petitioners strongly assert that they did not have a hint that Lines& Spaces and Tri-Realty are two different and distinct entities inasmuch as Eleanor Sanchez whom

they have dealt with just represented herself to be from Lines & Spaces/Tri-Realty when she placedher order for the delivery of the bags of cement. Hence, no privity of contract can be said to existbetween petitioners and private respondent.7

Private respondent, on the other hand, goes over the top in arguing that contrary to their claim ofinnocence, petitioners had knowledge that Lines & Spaces, as represented by Eleanor Sanchez,was a separate and distinct entity from tri-realty.8 Then, too, private respondent stirs up support forits contention that contrary to petitioners' claim, there was privity of contract between privaterespondent and petitioners.9

Primarily, there was no written contract entered into between petitioners and private respondent forthe delivery of the bags of cement. As gleaned from the records, and as private respondent itself

admitted in its Complaint, private respondent agreed with Eleanor Sanchez of Lines & Spaces forthe latter to source the cement needs of the former in consideration of P7.00 per bag of cement. It isworthy to note that the payment in manager’s checks was made to Eleanor Sanchez of Lines &Spaces and was not directly paid to petitioners. While the manager’s check issued by respondentcompany was eventually paid to petitioners for the delivery of the bags of cement, there is obviouslynothing from the face of said manager’s check to hint that private respondent was the one makingthe payments. There was likewise no intimation from Sanchez that the purchase order placed by herwas for private respondent’s benefit. The meeting of minds, therefore, was between privaterespondent and Eleanor Sanchez of Lines & Spaces. This contract is distinct and separate from thecontract of sale between petitioners and Eleanor Sanchez who represented herself to be from Lines& Spaces/Tri-Realty, which, per her representation, was a single account or entity.

The records bear out, too, Annex "A" showing a check voucher payable to Amon Trading

Corporation for the 6,050 bags of cement received by a certain "Weng Chua" for Mrs. EleanorSanchez of Lines & Spaces, and Annex "B" which is a check voucher bearing the name of JulianaMarketing as payee, but was received again by said "Weng Chua." Nowhere from the face of thecheck vouchers is it shown that petitioners or any of their authorized representatives received thepayments from respondent company.

Also on record are the receipts issued by Lines & Spaces, signed by Eleanor Bahia Sanchez,covering the said manager’s checks. As Engr. Guido Ganhinhin of respondent Tri-Realty testified, it























was Lines & Spaces, not petitioners, which issued to them a receipt for the two (2) manager’schecks. Thus-

Q: And what is your proof that Amon and Juliana were paid of the purchases through manager’schecks?

A: Lines & Spaces who represented Amon Trading and Juliana Marketing issued us receipts for thetwo (2) manager’s checks we paid to Amon Trading and Juliana Marketing Corporation.

…

Q: I am showing to you check no. 074 issued by Lines & Spaces Interiors Center, what relation hasthis check to that check you mentioned earlier?

A: Official Receipt No. 074 issued by Lines & Spaces Interiors Center was for the P592,900.00 wepaid to Amon Trading Corporation for 6,050 bags of cement.

Q: Now there appears a signature in that receipt above the printed words authorized signature,

whose signature is that?

A: The signature of Mrs. Eleanor Bahia Sanchez, the representative of Lines and Spaces.

Q: Why do you know that that is her signature?

A: She is quite familiar with me and I saw her affix her signature upon issuance of thereceipt.10 (Emphasis supplied.)

Without doubt, no vinculum could be said to exist between petitioners and private respondent.

There is likewise nothing meaty about the assertion of private respondent that inasmuch as the

delivery receipts as well as the purchase order were for the account of Lines & Spaces/Tri-Realty,then petitioners should have been placed on guard that it was private respondent which is theprincipal of Sanchez. In China Banking Corp. v. Members of the Board of Trustees, HomeDevelopment Mutual Fund 11 and the later case of Romulo, Mabanta, Buenaventura, Sayoc and Delos Angeles v. Home Development Mutual Fund ,12 the term "and/or" was held to mean that effectshall be given to both the conjunctive "and" and the disjunctive "or"; or that one word or the othermay be taken accordingly as one or the other will best effectuate the intended purpose. It wasaccordingly ordinarily held that in using the term "and/or" the word "and" and the word "or" are to beused interchangeably.

By analogy, the words "Lines & Spaces/Tri-Realty" mean that effect shall be given to both Lines &Spaces and Tri-Realty or that Lines & Spaces and Tri-Realty may be used interchangeably. Hence,

petitioners were not remiss when they believed Eleanor Sanchez’s representation that "Lines &Spaces/Tri-Realty" refers to just one entity. There was, therefore, no error attributable to petitionerswhen they refunded the value of the undelivered bags of cement to Lines & Spaces only .

There is likewise a dearth of evidence to show that the case at bar is an open-and-shut case ofagency between private respondent and Lines & Spaces. Neither Eleanor Sanchez nor Lines &Spaces was an agent for private respondent, but rather a supplier for the latter’s cement needs. TheCivil Code defines a contract of agency as follows:















Art. 1868 . By the contract of agency a person binds himself to render some service or to dosomething in representation or on behalf of another, with the consent or authority of the latter.

In a bevy of cases such as the avuncular case of Victorias Milling Co., Inc. v. Court of Appeals,13 theCourt decreed from Article 1868 that the basis of agency is representation.

. . . On the part of the principal, there must be an actual intention to appoint or an intention naturallyinferable from his words or actions and on the part of the agent, there must be an intention to acceptthe appointment and act on it, and in the absence of such intent, there is generally no agency. Onefactor which most clearly distinguishes agency from other legal concepts is control; one person - theagent - agrees to act under the control or direction of another - the principal. Indeed, the very word"agency" has come to connote control by the principal. The control factor, more than any other, hascaused the courts to put contracts between principal and agent in a separate category.

Here, the intention of private respondent, as the Executive Officer of respondent corporation testifiedon, was merely for Lines & Spaces, through Eleanor Sanchez, to supply them with the needed bagsof cement.

Q: Do you know the defendant Lines & Spaces in this case?

A: Yes, sir.

Q: How come you know this defendant?

A: Lines & Spaces represented by Eleanor Bahia Sanchez offered to supply us cement when therewas scarcity of cement experienced in our projects.14 (Emphasis supplied)

We cannot go along the Court of Appeals’ disquisition that Amon Trading Corporation and JulianaMarketing should have required a special power of attorney form when they refunded Eleanor B.Sanchez the cost of the undelivered bags of cement. All the quibbling about whether Lines & Spaces

acted as agent of private respondent is inane because as illustrated earlier, petitioners took ordersfrom Eleanor Sanchez who, after all, was the one who paid them the manager’s checks for thepurchase of cement. Sanchez represented herself to be from Lines & Spaces/Tri-Realty, purportedlya single entity. Inasmuch as they have never directly dealt with private respondent and there is nopaper trail on record to guide them that the private respondent, in fact, is the beneficiary, petitionershad no reason to doubt the request of Eleanor Sanchez later on to refund the value of theundelivered bags of cement to Lines & Spaces. Moreover, the check refund was payable to Lines &Spaces, not to Sanchez, so there was indeed no cause to suspect the scheme.

The fact that the deliveries were made at the construction sites of private respondent does not byitself raise suspicion that petitioners were delivering for private respondent. There was no sufficientshowing that petitioners knew that the delivery sites were that of private respondent and for anotherthing, the deliveries were made by petitioners’ men who have no business nosing around their

client’s affairs.

Parenthetically, Eleanor Sanchez has absconded to the United States of America and the story ofwhat happened to the check refund may be forever locked with her. Lines & Spaces, in its Answer tothe Complaint, washed its hands of the apparent ruse perpetuated by Sanchez, but argues that if atall, it was merely an intermediary between petitioners and private respondent. With no other way out,Lines & Spaces was a no-show at the trial proceedings so that eventually, its counsel had towithdraw his appearance because of his client’s vanishing act. Left wi th an empty bag, so to speak,private respondent now puts the blame on petitioners. But this Court finds plausible the stance of











petitioners that they had no inkling of the deception that was forthcoming. Indeed, without anycontract or any hard evidence to show any privity of contract between it and petitioners, privaterespondent’s claim against petitioners lacks legal foothold.

Considering the vagaries of the case, private respondent brought the wrong upon itself. As adeptlysurmised by the trial court, between petitioners and private respondent, it is the latter who had made

possible the wrong that was perpetuated by Eleanor Sanchez against it so it must bear its own loss.It is in this sense that we must apply the equitable maxim that "as between two innocent parties, theone who made it possible for the wrong to be done should be the one to bear the resultingloss."15 First , private respondent was the one who had reposed too much trust on Eleanor Sanchezfor the latter to source its cement needs. Second , it failed to employ safety nets to steer clear of therip-off. For such huge sums of money involved in this case, it is surprising that a corporation such asprivate respondent would pay its construction materials in advance instead of in credit thus openinga window of opportunity for Eleanor Sanchez or Lines & Spaces to pocket the remaining balance ofthe amount paid corresponding to the undelivered materials. Private respondent likewise paid inadvance the commission of Eleanor Sanchez for the materials that have yet to be delivered so itreally had no means of control over her.Finally , there is no paper trail linking private respondent topetitioners thereby leaving the latter clueless that private respondent was their true client. Privaterespondent should have, at the very least, required petitioners to sign the check vouchers or to issuereceipts for the advance payments so that it could have a hold on petitioners. In this case, it was therepresentative of Lines & Spaces who signed the check vouchers. For its failure to establish any ofthese deterrent measures, private respondent incurred the risk of not being able to recoup the valueof the materials it had paid good money for.

WHEREFORE, the present petition is hereby GRANTED. Accordingly, the Decision and theResolution dated 28 November 2002 and 10 June 2003, of the Court of Appeals in CA-G.R CV No.60031, are hereby REVERSED andSET ASIDE. The Decision dated 29 January 1998 of theRegional Trial Court of Quezon City, Branch 104, in Civil Case Q-92-14235 is hereby REINSTATED.No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

DANTE O. TINGA

Associate Justice








I attest that the conclusions in the above Decision were reached in consultation before the case wasassigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Associate Justice

Chairman, Second Division


Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman’s Attestation, it ishereby certified that the conclusions in the above Decision were reached in consultation before thecase was assigned to the writer of the opinion of the Court’s Division.

HILARIO G. DAVIDE, JR.

Chief Justice

Footnotes

1 Penned by Associate Justice Amelita G. Tolentino with Associate Justices Eubulo G.Verzola and Candido V. Rivera, concurring. Rollo, pp. 24-30.

2

CA Rollo, p. 41.3 CA Rollo, p. 45.

4 Rollo, pp. 29-30.

5 Rollo, p. 13.

6 Rollo, p. 15.

7 Rollo, p. 13.

8

Rollo, p. 125.

9 Rollo, p. 125.

10 TSN, 08 February 1995, pp. 9-10.

11 G.R. No. 131787, 19 May 1999, 307 SCRA 443.

12 G.R. No. 131082, 19 June 2000, 333 SCRA 777.









































G.R. No. 123560 March 27, 2000

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,vs.PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETACANILAO and CLAUDIA TAGUNICAR, respondents.

PUNO, J .:

This petition for review seeks a reversal of the 31 August 1995 Decision 1 and 11 January 1998Resolution 2 of the Court of Appeals holding private respondent Claudia Tagunicar solely liable formoral and exemplary damages and attorney's fees, and deleting the trial court's award for actualdamages.

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

Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. Inconnection with [this] business, he travels from time to time to Malaysia, Taipei and

Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A & B) from defendantClaudia Tagunicar who represented herself to be an agent of defendant Tourist WorldServices, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., forthe amount of P25,000.00 per computation of said defendant Claudia Tagunicar (Exhs. C &C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy to two (2) linesof infrared heating system processing textured plastic article (Exh. K).

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

A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Amoffice to verify the status of the flight. According to said Adrian Yu, a personnel of defendantPan Am told him over the phone that plaintiffs' booking[s] are confirmed.

On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They leftHongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Amoffice for reconfirmation of their flight to San Francisco. Said office, however, informed themthat their names are not in the manifest. Since plaintiffs were supposed to leave on the 29thof July, 1978, and could not remain in Japan for more than 72 hours, they were constrainedto agree to accept airline tickets for Taipei instead, per advise of JAL officials. This is the onlyoption left to them because Northwest Airlines was then on strike, hence, there was no

chance for the plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffspaid for these tickets.

Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced toreturn back to Manila on August 3, 1978, instead of proceeding to the United States. [Japan]

Air Lines (JAL) refunded the plaintiffs the difference of the price for Tokyo-Taipei [and]Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00.

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In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc.cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system (Exh. K). Theagreement was for him to inspect the equipment and make final arrangement[s] with the saidcompany not later than August 7, 1978. From this business transaction, plaintiff Yu Eng Choexpected to realize a profit of P300,000.00 to P400,000.00.

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

Plaintiffs, who were intending to go to the United States, were referred to defendant ClaudiaTagunicar, an independent travel solicitor, for the purchase of their plane tickets. As suchtravel solicitor, she helps in the processing of travel papers like passport, plane tickets,booking of passengers and some assistance at the airport. She is known to defendants Pan-

Am, TWSI/Julieta Canilao, because she has been dealing with them in the past years.Defendant Tagunicar advised plaintiffs to take Pan-Am because Northwest Airlines was thenon strike and plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Am has aflight from Tokyo to San Francisco. After verifying from defendant TWSI, thru Julieta Canilao,she informed plaintiffs that the fare would be P25,093.93 giving them a discount of P738.95(Exhs. C, C-1). Plaintiffs, however, gave her a check in the amount of P25,000.00 only forthe two round trip tickets. Out of this transaction, Tagunicar received a 7% commission and1% commission for defendant TWSI.

Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendantJulieta Canilao with the following schedules:

Origin Destination Airline Date Time/Travel

Manila Hongkong CX900 7-23-78 1135/1325hrs

Hongkong Tokyo CS500 7-28-78 1615/2115hrs

Tokyo San Francisco PA00

2

7-29-

78

1930/1640hrs

The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed,although the tickets issued are Pan-Am tickets, as long as it is in connection with a Pan-Amflight. When the two (2) tickets (Exhs. A & B) were issued to plaintiffs, the letter "RQ"appears below the printed word "status" for the flights from Tokyo to San Francisco whichmeans "under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduled departure,defendant Tagunicar received several calls from the plaintiffs inquiring about the status oftheir bookings. Tagunicar in turn called up TWSI/Canilao to verify; and if Canilao wouldanswer that the bookings are not yet confirmed, she would relate that to the plaintiffs.

Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight,plaintiff Yu Eng Cho personally went to her office, pressing her about their flight. She called

up defendant Julieta Canilao, and the latter told her "o sige Claudia, confirm na." She evennoted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh. L-1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) tothe tickets. These stickers came from TWSI.

Defendant Tagunicar alleges that it was only in the first week of August, 1978 that shelearned from Adrian Yu, son of plaintiffs, that the latter were not able to take the flight fromTokyo to San Francisco, U.S.A. After a few days, said Adrian Yu came over with agentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar

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claims that plaintiffs were asking for her help so that they could file an action against Pan- Am. Because of plaintiffs' promise she will not be involved, she agreed to sign the affidavit(Exh. M) prepared by the lawyer.

Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment ofplaintiffs' flight because flights then were really tight because of the on-going strike at

Northwest Airlines. Defendant Claudia Tagunicar is very much aware that [said] particularsegment was not confirmed, because on the very day of plaintiffs' departure, Tagunicarcalled up TWSI from the airport; defendant Canilao asked her why she attached stickers onthe tickets when in fact that portion of the flight was not yet confirmed. Neither TWSI norPan-Am confirmed the flight and never authorized defendant Tagunicar to attach theconfirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar arestickers exclusively for use of Pan-Am only. Furthermore, if it is the travel agency thatconfirms the booking, the IATA number of said agency should appear on the validation orconfirmation stickers. The IATA number that appears on the stickers attached to plaintiffs'tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSI's IATA number is2-83-0770 (Exhs. 5, 5-A TWSI). 3

A complaint for damages was filed by petitioners against private respondents Pan American World Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and ClaudiaTagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and hotelaccommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reasonof the non-confirmation of their booking with Pan-Am. In a Decision dated November 14, 1991, theRegional Trial Court of Manila, Branch 3, held the defendants jointly and severally liable, exceptdefendant Julieta Canilao, thus:

WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan American World Airways, Inc., Tourist World Services, Inc. and Claudia Tagunicar, jointlyand severally, to pay plaintiffs the sum of P200,000.00 as actual damages, minus P2,602.00already refunded to the plaintiffs; P200,000.00 as moral damages; P100,000.00 asexemplary damages; an amount equivalent to 20% of the award for and as attorney's fees,

plus the sum of P30,000.00 as litigation expenses.

Defendants' counterclaims are hereby dismissed for lack of merit.

SO ORDERED.

Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, theappellate court rendered judgment modifying the amount of damages awarded, holding privaterespondent Tagunicar solely liable therefor, and absolving respondents Pan Am and TWSI from anyand all liability, thus:

PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE

and a new one entered declaring appellant Tagunicar solely liable for:

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

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

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







The award of actual damages is hereby DELETED.

SO ORDERED.

In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a dulyauthorized agent or representative of either Pan Am or TWSI. It held that their business transactions

are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent andsub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of,nor issue validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be heldresponsible for her actions. Finally, it deleted the award for actual damages for lack of proof.

Hence this petition based on the following assignment of errors:

1. the Court of Appeals, in reversing the decision of the trial court, misapplied the rulingin Nicos Industrial Corporation vs. Court of Appeals, et. al . [206 SCRA 127]; and

2. the findings of the Court of Appeals that petitioners' ticket reservations in question werenot confirmed and that there is no agency relationship among PAN-AM, TWSI and Tagunicar

are contrary to the judicial admissions of PAN-AM, TWSI and Tagunicar and likewisecontrary to the findings of fact of the trial court.

We affirm.

I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of theCourt of Appeals, the decision of the trial court conforms to the standards of an ideal decision setin Nicos Industrial Corporation, et . al . vs. Court of Appeals, et . al ., 4 as "that which, with welcomeeconomy of words, arrives at the factual findings, reaches the legal conclusions, renders its rulingand, having done so, ends." It is averred that the trial court's decision contains a detailed statementof the relevant facts and evidence adduced by the parties which thereafter became the bases for thecourt's conclusions.

A careful scrutiny of the decision rendered by the trial court will show that after narrating theevidence of the parties, it proceeded to dispose of the case with a one-paragraph generalization, towit:

On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan- Am is the principal, and defendants TWSI and Tagunicar, its authorized agent and sub-agent, respectively. Consequently, defendants Pan-Am, TWSI and Claudia Tagunicar shouldbe held jointly and severally liable to plaintiffs for damages. Defendant Julieta Canilao, whoacted in her official capacity as Office Manager of defendant TWSI should not be heldpersonally liable. 5

The trial court's finding of facts is but a summary of the testimonies of the witnesses and thedocumentary evidence presented by the parties. It did not distinctly and clearly set forth, norsubstantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar

jointly and severally liable. In Del Mundo vs. CA, et al . 6 where the trial court, after summarizing theconflicting asseverations of the parties, disposed of the kernel issue in just two (2) paragraphs, weheld:

It is understandable that courts, with their heavy dockets and time constraints, often findthemselves with little to spare in the preparation of decisions to the extent most desirable.

















existence of the agency relationship cannot be established on its sole basis. The declarations of theagent alone are generally insufficient to establish the fact or extent of his authority. 18 In addition, asbetween the negative allegation of respondents Canilao and Tagunicar that neither is an agent norprincipal of the other, and the affirmative allegation of petitioners that an agency relationship exists, itis the latter who have the burden of evidence to prove their allegation, 19 failing in which, their claimmust necessarily fail.

We stress that respondent Tagunicar categorically denied in open court that she is a duly authorizedagent of TWSI, and declared that she is an independent travel agent. 20 We have consistently ruledthat in case of conflict between statements in the affidavit and testimonial declarations, the lattercommand greater weight. 21

As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" whichshow that Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7" 22 is the TicketSales Report submitted by TWSI to Pan Am reflecting the commissions received by TWSI as anagent of Pan Am. Exhibit "7-A" 23 is a listing of the routes taken by passengers who were audited toTWSI's sales report. Exhibit "8" 24 is a receipt issued by TWSI covering the payment made byTagunicar for the tickets she bought from TWSI. These documents cannot justify the decision thatTagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testifiedthat when she pays TWSI, she already deducts in advance her commission and merely gives the netamount to TWSI. 25 From all sides of the legal prism, the transaction is simply a contract of salewherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients.

III. Petitioners included respondent Pan Am in the complainant on the supposition that since TWSI isits duly authorized agent, and respondent Tagunicar is an agent of TWSI, then Pan Am should alsobe held responsible for the acts of respondent Tagunicar. Our disquisitions above show that thiscontention lacks factual and legal bases. Indeed, there is nothing in the records to show thatrespondent Tagunicar has been employed by Pan Am as its agent, except the bare allegation ofpetitioners. The real motive of petitioners in suing Pan Am appears in its Amended Complaint that"[d]efendants TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs theamounts herein sought to be recovered, and in such event, defendant Pan Am, being their ultimate

principal, is primarily and/or subsidiary liable to pay the said amounts to plaintiffs." 26

This lendscredence to respondent Tagunicar's testimony that she was persuaded to execute an affidavitimplicating respondents because petitioners knew they would not be able to get anything of valuefrom her. In the past, we have warned that this Court will not tolerate an abuse of judicial process bypassengers in order to pry on international airlines for damage awards, like "trophies in a safari." 27

This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they werebumped off in Tokyo. If petitioners were of the honest belief that Pan Am was responsible for themisfortune which beset them, there is no evidence to show that they lodged a protest with Pan Am'sTokyo office immediately after they were refused passage for the flight to San Francisco, or evenupon their arrival in Manila. The testimony of petitioner Yu Eng Cho in this regard is of title value, viz :

Atty. Jalandoni: . . .

q Upon arrival at the Tokyo airport, what did you do if any in connection with yourschedule[d] trip?

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











































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

a We have to leave the next day 29th.

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

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

x x x x x x x x x

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

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

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

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

x x x x x x x x x

q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you inlieu of the tickets to San Francisco?

a No, sir.

q Why not?

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

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

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

x x x x x x x x x

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

a Because there is no chance for us to go to the United States within 72 hours because

during that time Northwest Airlines [was] on strike so the seats are very scarce. So theyadvised me better left (sic ) before the 72 hours otherwise you will have trouble with theJapanese immigration.

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

a Yes, sir. 28 (emphasis supplied)







It grinds against the grain of human experience that petitioners did not insist that they be allowed toboard, considering that it was then doubly difficult to get seats because of the ongoing Northwest

Airlines strike. It is also perplexing that petitioners readily accepted whatever the Tokyo office had tooffer as an alternative. Inexplicably too, no demand letter was sent to respondents TWSI andCanilao. 29 Nor was a demand letter sent to respondent Pan Am. To say the least, the motive ofpetitioners in suing Pan Am is suspect.

We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to justify petitioners' claim for damages. Mere refusal to accede to the passenger's wishes does notnecessarily translate into damages in the absence of bad faith. 30 The settled rule is that the lawpresumes good faith such that any person who seeks to be awarded damages due to acts ofanother has the burden of proving that the latter acted in bad faith or with ill motive. 31 In the case atbar, we find the evidence presented by petitioners insufficient to overcome the presumption of goodfaith. They have failed to show any wanton, malevolent or reckless misconduct imputable torespondent Pan Am in its refusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan

Am could not have acted in bad faith because petitioners did not have confirmed tickets and moreimportantly, they were not in the passenger manifest.

In not a few cases, this Court did not hesitable to hold an airline liable for damages for having actedin bad faith in refusing to accommodate a passenger who had a confirmed ticket and whose nameappeared in the passenger manifest. In Ortigas Jr . v . Lufthansa German Airlines Inc., 32 we ruled thatthere was a valid and binding contract between the airline and its passenger after finding thatvalidating sticker on the passenger's ticket had the letters "O.K." appearing in the "Res. Status" boxwhich means "space confirmed" and that the ticket is confirmed or validated. In Pan American World

Airways Inc . v . IAC, et al . 33 where a would-be-passenger had the necessary ticket, baggage claimand clearance from immigration all clearly showing that she was a confirmed passenger andincluded in the passenger manifest and yet was denied accommodation in said flight, we awardeddamages. In Armovit , et al . v . CA, et al ., 34 we upheld the award of damages made against an airlinefor gross negligence committed in the issuance of tickets with erroneous entries as to the time offlight. In Alitalia Airways v . CA, et al ., 35we held that when airline issues a ticket to a passengerconfirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger

has every right to expect that he would fly on that flight and on that date. If he does not, then thecarrier opens itself to a suit for breach of contract of carriage. And finally, an award of damages washeld proper in the case of Zalamea, et al . v . CA, et al ., 36 where a confirmed passenger included inthe manifest was denied accommodation in such flight.

On the other hand, the respondent airline in Sarreal , Sr . v . Japan Airlines Co., Ltd ., 37 was held notliable for damages where the passenger was not allowed to board the plane because his ticket hadnot been confirmed. We ruled that "[t]he stub that the lady employee put on the petitioner's ticketshowed among other coded items, under the column "status" the letters "RQ" — which wasunderstood to mean "Request." Clearly, this does not mean a confirmation but only a request. JALTraffic Supervisor explained that it would have been different if what was written in the stub were theletter "ok" in which case the petitioner would have been assured of a seat on said flight. But in thiscase, the petitioner was more of a wait-listed passenger than a regularly booked passenger."

In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers andtheir names were not listed in the passenger manifest. In other words, this is not a case where Pan

Am bound itself to transport petitioners and thereafter reneged on its obligation. Hence, respondentairline cannot be held liable for damages.

IV. We hold that respondent Court of Appeals correctly rules that the tickets were never confirmedfor good reasons: (1) The persistent calls made by respondent Tagunicar to Canilao, and those






































made by petitioners at the Manila, Hongkong and Tokyo offices in Pan Am, are eloquent indicationsthat petitioners knew that their tickets have not been confirmed. For, as correctly observed by Pan

Am, why would one continually try to have one's ticket confirmed if it had already been confirmed?(2) The validation stickers which respondent Tagunicar attached to petitioners' tickets were thoseintended for the exclusive use of airline companies. She had no authority to use them. Hence, saidvalidation stickers, wherein the word "OK" appears in the status box, are not valid and binding. (3)

The names of petitioners do not appear in the passengers manifest. (4) Respondent Tagunicar's"Exhibit 1" 38shows that the status of the San Francisco-New York segment was "Ok", meaning itwas confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5)Respondent Canilao testified that on the day that petitioners were to depart for Hongkong,respondent Tagunicar called her from the airport asking for confirmation of the Tokyo-San Franciscoflight, and that when she told respondent Tagunicar that she should not have allowed petitioners toleave because their tickets have not been confirmed, respondent Tagunicar merely said "Bahalana." 39 This was never controverted nor refuted by respondent Tagunicar. (6) To prove that it reallydid not confirm the bookings of petitioners, respondent Canilao pointed out that the validationstickers which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770stamped on it, whereas the IATA number of TWSI is 28-30770. 40

Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresentingto petitioners that their tickets have been confirmed. Her culpability, however, was properlymitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on the confirmation oftheir tickets with Pan Am because he doubted the confirmation made by respondentTagunicar. 41 This is clear proof that petitioners knew that they might be bumped off at Tokyo whenthey decided to proceed with the trip. Aware of this risk, petitioners exerted efforts to confirm theirtickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we find the modification as tothe amount of damages awarded just and equitable under the circumstances.

WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners. 1âwphi1.nêt

SO ORDERED.

Davide, Jr., C.J., Kapunan and Pardo, JJ., concur.

Ynares-Santiago, J., took no part.

Footnotes

1 Penned by Associate Justice Antonio M. Martinez, with Consuelo Ynares-Santiago andRuben T. Reyes, JJ., concurring; Rollo, 35-49.

2 Ibid ., 51.

3 Original Records, 647-650.

4 206 SCRA 127 (1992).

5 Original Record, 650.

































6 240 SCRA 348 (1995).

7 New Civil Code, Article 1868.

8 Tolentino, Civil Code of the Phils., Vol. V, 1992 ed., p. 396.

9 BA Finance v. CA, et al ., 211 SCRA 112 (1992).

10 People v. Diaz, 262 SCRA 723 (1996).

11 People v. Gondora, 265 SCRA 408 (1996).

12 TSN, December 16, 1982, pp. 17-19.

13 TSN, September 29, 1983, pp. 12-13.

14 TSN, December 16, 1982, p. 17.

15 TSN, September 29, 1983, pp. 16-17.

16 TSN, July 22, 1983, p. 43.

17 Ibid ., p, 38.

18 Reuschlein & Gregory, The Law of Agency and Partnership, 1990, Second ed., p. 28; BAFinance v. CA,et al ., 211 SCRA 112 (1992).

19 Martinez v. NLRC, et al ., 272 SCRA 793 (1997).

20

TSN, July 22, 1983, p. 44; August 12, 1983, pp. 6-7.

21 People v. Aliposa, 263 SCRA 471 (1996).

22 Original Records, p. 448.

23 Ibid ., 449.

24 Ibid ., 450.

25 TSN, July 22, 1983, p. 50.


27 Alitalia Airways vs. CA, et al ., 187 SCRA 763 (1990).

28 TSN, August 20, 1981, pp. 18-28.

29 TSN, November 23, 1983, p. 35.











































































30 Air France v. CA, et al ., 171 SCRA 399 (1989).

31 Ford Phils., Inc. v. CA, et al ., 267 SCRA 320 (1997).

32 64 SCRA 610 (1975).

65 153 SCRA 521 (1987).

34 184 SCRA 476 (1990).

35 187 SCRA 763 (1990).

36 228 SCRA 23 (1993).

37 207 SCRA 359 (1992).


39 TSN, November 23, 1983, pp. 29-31.

40 Ibid ., p. 14.

41 TSN, August 27, 1981, p. 42.







































G.R. No. L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,vs.FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.

Seno, Mendoza & Associates for petitioner.

Ramon Duterte for private respondent.

MUÑOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal,Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power ofattorney which the principal had executed in favor. The administrator of the estate of the went tocourt to have the sale declared uneanforceable and to recover the disposed share. The trial court

granted the relief prayed for, but upon appeal the Court of Appeals uphold the validity of the sale andthe complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sistersand registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebucovered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, thesisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing himto sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12,1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was

registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfercertificate of Title No. 12989 was issued in the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed acomplaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) thatthe sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable,and said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name ofFelix Go Chan & Sons Realty Corporation be cancelled and another title be issued in the names ofthe corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) thatplaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named partydefendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register ofDeeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint wasamended twice; defendant Corporation's Answer contained a crossclaim against its co-defendant,

Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While thecase was pending in the trial court, both Simon and his sister Gerundia died and they weresubstituted by the respective administrators of their estates.

After trial the court a quo rendered judgment with the following dispositive portion:

A. On Plaintiffs Complaint —



(1) Declaring the deed of sale, Exh. "C", null and void insofar as theone-half pro-indiviso share of Concepcion Rallos in the property inquestion, — Lot 5983 of the Cadastral Survey of Cebu — isconcerned;

(2) Ordering the Register of Deeds of Cebu City to cancel Transfer

Certificate of Title No. 12989 covering Lot 5983 and to issue in lieuthereof another in the names of FELIX GO CHAN & SONS REALTYCORPORATION and the Estate of Concepcion Rallos in theproportion of one-half (1/2) share each pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver thepossession of an undivided one-half (1/2) share of Lot 5983 to theherein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administrator of theEstate of Simeon Rallos, to pay to plaintiff in concept of reasonableattorney's fees the sum of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly and severally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo, administrator ofthe Estate of Simeon Rallos, to pay to defendant Felix Co Chan &Sons Realty Corporation the sum of P5,343.45, representing theprice of one-half (1/2) share of lot 5983;

(2) Ordering co-defendant Juan T. Borromeo, administrator of theEstate of Simeon Rallos, to pay in concept of reasonable attorney's

fees to Felix Go Chan & Sons Realty Corporation the sum ofP500.00.

C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estateof Simeon Rallos, against Josefina Rallos special administratrix of the Estate ofGerundia Rallos:

(1) Dismissing the third-party complaint without prejudice to filing either a complaintagainst the regular administrator of the Estate of Gerundia Rallos or a claim in theIntestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from theforegoing judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion Rallos.The appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor ofthe appellant corporation sustaining the sale in question. 1 The appellee administrator, RamonRallos, moved for a reconsider of the decision but the same was denied in a resolution of March 4,1965. 2

What is the legal effect of an act performed by an agent after the death of his principal? Appliedmore particularly to the instant case, We have the query. is the sale of the undivided share of





between the principal and the agent is severed ipso jure upon the death of either without necessityfor the heirs of the fact to notify the agent of the fact of death of the former. 9

The same rule prevails at common law — the death of the principal effects instantaneous andabsolute revocation of the authority of the agent unless the Power be coupled with aninterest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled that a power

without an interest confer. red upon an agent is dissolved by the principal's death, and anyattempted execution of the power afterward is not binding on the heirs or representatives of thedeceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agentextinguishes the agency, subject to any exception, and if so, is the instant case within thatexception? That is the determinative point in issue in this litigation. It is the contention of respondentcorporation which was sustained by respondent court that notwithstanding the death of the principalConcepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham in theproperty is valid and enforceable inasmuch as the corporation acted in good faith in buying theproperty in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.

ART. 1930. The agency shall remain in full force and effect even after the death ofthe principal, if it has been constituted in the common interest of the latter and of theagent, or in the interest of a third person who has accepted the stipulation in hisfavor.

ART. 1931. Anything done by the agent, without knowledge of the death of theprincipal or of any other cause which extinguishes the agency, is valid and shall befully effective with respect to third persons who may have contracted with him ingood. faith.

Article 1930 is not involved because admittedly the special power of attorney executed in favor ofSimeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the death ofhis principal is valid and effective only under two conditions, viz: (1) that the agent acted withoutknowledge of the death of the principal and (2) that the third person who contracted with the agenthimself acted in good faith. Good faith here means that the third person was not aware of the deathof the principal at the time he contracted with said agent. These two requisites must concur theabsence of one will render the act of the agent invalid and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of hisprincipal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. Theknowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the

trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of factof the court a quo 13 and of respondent appellate court when the latter stated that Simon Rallos 'musthave known of the death of his sister, and yet he proceeded with the sale of the lot in the name ofboth his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation)of the death of the former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his principalConcepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for itsapplication lack of knowledge on the part of the agent of the death of his principal; it is not enough



that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a salemade after the death of the principal because it was not shown that the agent knew of his principal'sdemise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where inthe words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presentedno proof and there is no indication in the record, that the agent Luy Kim Guan wasaware of the death of his principal at the time he sold the property. The death 6f theprincipal does not render the act of an agent unenforceable, where the latter had noknowledge of such extinguishment of the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasonedout that there is no provision in the Code which provides that whatever is done by an agent havingknowledge of the death of his principal is void even with respect to third persons who may havecontracted with him in good faith and without knowledge of the death of the principal. 16

We cannot see the merits of the foregoing argument as it ignores the existence of the general rule

enunciated in Article 1919 that the death of the principal extinguishes the agency. That being thegeneral rule it follows a fortiori that any act of an agent after the death of his principal is void abinitio unless the same fags under the exception provided for in the aforementioned Articles 1930 and1931. Article 1931, being an exception to the general rule, is to be strictly construed, it is not to begiven an interpretation or application beyond the clear import of its terms for otherwise the courts willbe involved in a process of legislation outside of their judicial function.

5. Another argument advanced by respondent court is that the vendee acting in good faith relied onthe power of attorney which was duly registered on the original certificate of title recorded in theRegister of Deeds of the province of Cebu, that no notice of the death was aver annotated on saidcertificate of title by the heirs of the principal and accordingly they must suffer the consequences ofsuch omission. 17

To support such argument reference is made to a portion in Manresa's Commentaries which Wequote:

If the agency has been granted for the purpose of contracting with certain persons,the revocation must be made known to them. But if the agency is general iii nature,without reference to particular person with whom the agent is to contract, it issufficient that the principal exercise due diligence to make the revocation of theagency publicity known.

In case of a general power which does not specify the persons to whom represents'on should be made, it is the general opinion that all acts, executed with third personswho contracted in good faith, Without knowledge of the revocation, are valid. In such

case, the principal may exercise his right against the agent, who, knowing of therevocation, continued to assume a personality which he no longer had. (ManresaVol. 11, pp. 561 and 575; pp. 15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a mode ofterminating an agency which is to be distinguished from revocation by operation of law such asdeath of the principal which obtains in this case. On page six of this Opinion We stressed that byreason of the very nature of the relationship between principal and agent, agency isextinguished ipso jure upon the death of either principal or agent. Although a revocation of a power



of attorney to be effective must be communicated to the parties concerned, 18 yet a revocation byoperation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuchas "by legal fiction the agent's exercise of authority is regarded as an execution of theprincipal's continuing will. 19With death, the principal's will ceases or is the of authority isextinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principalWhat the Code provides in Article 1932 is that, if the agent die his heirs must notify the principalthereof , and in the meantime adopt such measures as the circumstances may demand in theinterest of the latter. Hence, the fact that no notice of the death of the principal was registered on thecertificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause of theestate of the principal

6. Holding that the good faith of a third person in said with an agent affords the former sufficientprotection, respondent court drew a "parallel" between the instant case and that of an innocentpurchaser for value of a land, stating that if a person purchases a registered land from one whoacquired it in bad faith — even to the extent of foregoing or falsifying the deed of sale in his favor — the registered owner has no recourse against such innocent purchaser for value but only against theforger. 20

To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, etal., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejowas a co-owner of lands with Agustin Nano. The latter had a power of attorneysupposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his landtitles. The power was registered in the Office of the Register of Deeds. When thelawyer-husband of Angela Blondeau went to that Office, he found all in orderincluding the power of attorney. But Vallejo denied having executed the power Thelower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing thedecision of the court a quo, the Supreme Court, quoting the ruling in the case

of Eliason v. Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of thedefendant- appellee must be overruled. Agustin Nano hadpossession of Jose Vallejo's title papers. Without those title papershanded over to Nano with the acquiescence of Vallejo, a fraud couldnot have been perpetuated. When Fernando de la Canters, amember of the Philippine Bar and the husband of Angela Blondeau,the principal plaintiff, searched the registration record, he found themin due form including the power of attorney of Vallajo in favor ofNano. If this had not been so and if thereafter the proper notation ofthe encumbrance could not have been made, Angela Blondeau would

not have sent P12,000.00 to the defendant Vallejo.' An executedtransfer of registered lands placed by the registered owner thereof inthe hands of another operates as a representation to a third party thatthe holder of the transfer is authorized to deal with the land.

As between two innocent persons, one of whom must suffer theconsequence of a breach of trust, the one who made it possible byhis act of coincidence bear the loss. (pp. 19-21)



The Blondeau decision, however, is not on all fours with the case before Us because here We areconfronted with one who admittedly was an agent of his sister and who sold the property of the latterafter her death with full knowledge of such death. The situation is expressly covered by a provisionof law on agency the terms of which are clear and unmistakable leaving no room for an interpretationcontrary to its tenor, in the same manner that the ruling in Blondeau and the cases cited thereinfound a basis in Section 55 of the Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntaryinstrument is presented for registration shall be conclusive authority from theregistered owner to the register of deeds to enter a new certificate or to make amemorandum of registration in accordance with such instruments, and the newcertificate or memorandum Shall be binding upon the registered owner and upon allpersons claiming under him in favor of every purchaser for value and in goodfaith: Provided however , That in all cases of registration provided by fraud, the ownermay pursue all his legal and equitable remedies against the parties to such fraudwithout prejudice, however, to the right, of any innocent holder for value of acertificate of title. ... (Act No. 496 as amended)

7. One last point raised by respondent corporation in support of the appealed decision is an 1842ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to anagent after the death of the principal were held to be "good", "the parties being ignorant of thedeath". Let us take note that the Opinion of Justice Rogers was premised on the statement thatthe parties were ignorant of the death of the principal. We quote from that decision the following:

... Here the precise point is, whether a payment to an agent when the Parties areignorant of the death is a good payment. in addition to the case in Campbell beforecited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117, the generalquestion that a payment after the death of principal is not good. Thus, a payment ofsailor's wages to a person having a power of attorney to receive them, has been held

void when the principal was dead at the time of the payment. If, by this case, it ismeant merely to decide the general proposition that by operation of law the death ofthe principal is a revocation of the powers of the attorney, no objection can be takento it. But if it intended to say that his principle applies where there was 110 notice ofdeath, or opportunity of twice I must be permitted to dissent from it.

... That a payment may be good today, or bad tomorrow, from the accidentcircumstance of the death of the principal, which he did not know, and which by nopossibility could he know? It would be unjust to the agent and unjust to the debtor. Inthe civil law, the acts of the agent, done bona fide in ignorance of the death of his

principal are held valid and binding upon the heirs of the latter. The same rule holdsin the Scottish law, and I cannot believe the common law is so unreasonable... (39

Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mentionmay be made that the above represents the minority view in American jurisprudence. Thusin Clayton v. Merrett , the Court said.—

There are several cases which seem to hold that although, as a general principle,death revokes an agency and renders null every act of the agent thereafterperformed, yet that where a payment has been made in ignorance of the death, such



payment will be good. The leading case so holding is that of Cassiday v. McKenzie, 4Watts & S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadlyannounced. It is referred to, and seems to have been followed, in the case of Dick v.Page,17 Mo. 234, 57 AmD 267; but in this latter case it appeared that the estate ofthe deceased principal had received the benefit of the money paid, and therefore therepresentative of the estate might well have been held to be estopped from suing for

it again. . . . These cases, in so far, at least, as they announce the doctrine underdiscussion, are exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie 4Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone inannouncing the principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J.549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion,except so far as it related to the particular facts, was a mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as anextrajudicial indication of his views on the general subject, than as the adjudication ofthe Court upon the point in question. But accordingly all power weight to this opinion,as the judgment of a of great respectability, it stands alone among common lawauthorities and is opposed by an array too formidable to permit us to following it. (15Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for the simple reason that our statute, the CivilCode, expressly provides for two exceptions to the general rule that death of the principal revokesipso jure the agency, to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) thatthe act of the agent was executed without knowledge of the death of the principal and the thirdperson who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is thedoctrine followed in Cassiday, and again We stress the indispensable requirement that the agentacted without knowledge or notice of the death of the principal In the case before Us the agentRamon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the

agent's act is unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, andWe affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of FirstInstance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realtycorporation at all instances.

So Ordered.

Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

Footnotes

1 p. 40, rollo

2 p, 42, Ibid.

3 Art. 1317, Civil Code of the Philippines



4 Ibid

5 Art. 1868, Civil Code. By the contract of the agency of a person blinds himself torender some service or to do something in representation or on behalf of another,with the consent of the authority of the latter.

Art. 1881, Civil Code. The Agent must act within the scope of his authority. He maydo acts as may be conductive to the accomplishment of the purpose of the agency.

11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 26 Scaevola, 243, 262;Tolentino, Comments, Civil Code of the Philippines, p.340, vol. 5, 1959 Ed.

See also Columbia University Club v. Higgins, D.CN.Y., 23 f. Supp. 572, 574;Valentine Oil Co. v. Young 109 P. 2d 180, 185.

6 74 C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, 157 Neb. 87;Purnell v. City of Florence, 175 So. 417, 27 Ala. App. 516; Stroman Motor Co. v.Brown, 243 P. 133, 126 Ok. 36

7 See Art. 1919 of the Civil Code

8 Hermosa v. Longara, 1953, 93 Phil. 977, 983; Del Rosario, et al. v. Abad, et al.,1958, 104 Phil. 648, 652

9 11 Manresa 572-573; Tolentino, supra, 369-370

10 2 Kent Comm. 641, cited in Williston on Contracts, 3rd Ed., Vol. 2, p. 288

11 See Notes on Acts of agent after principal's death, 39 Am. Dec. 81,83, citingEwell's Evans on Agency, 116; Dunlap's Paley on Agency, 186; Story on Agency,

see. 488; Harper v. Little. 11 Am. Dec. 25; Staples v. Bradbury, 23 Id. 494; Gale v.Tappan 37 Id. 194; Hunt v. Rousmanier, 2 Mason, 244, S.C. 8 Wheat, 174; BoonesExecutor v. Clarke 3 Cranch C.C. 389; Hank of 'Washington v. Person, 2 'Rash. C.C.6.85; Scruggs v. Driver's Executor, 31 Ala. 274; McGriff v. Porter, 5 Fla. 373; Lincolnv. Emerson, 108 Mass 87; 'Wilson v. Edmonds, 24 N.H 517; Easton v. Ellis, 1 Handy(Ohio), 70; McDonald v. Black's Administrators, 20 Ohio, 185; Michigan Ins. Co. v.Leavenworth, 30 Vt. 11; Huston v. Cantril, 11 Leigh, 136; Campanari v. 'Woodburn,15 Com B 400

See also ',Williston on Contracts, 3rd Ed., Vol. 2, p. 289

12 see p. 15, 30-31 64 68-69, Record on Appeal

13 pp. 71-72, Ibid.

14 p. 7 of the Decision at page 14, rollo

15 105 Phil. 79:i, 798

16 p. 6 of Decision, at page 13, rollo



17 pp. 6-7 of Decision at pp, 13-14, Ibid.

18 See Articles 1921 & 1922 of the Civil Code

19 2 C.J.S. 1 174 citing American Jurisprudence in different States from Alabama toWashington; emphasis supplied.

20 p. 8, decision at Page 15, rollo



G.R. No. 175409 September 7, 2011

PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioner,vs.EXPLORER MARITIME CO., LTD., OWNER OF THE VESSEL M/V "EXPLORER", WALLEMPHILS. SHIPPING, INC., ASIAN TERMINALS, INC. AND FOREMOST INTERNATIONAL PORT

SERVICES, INC., Respondents.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals dated July20, 2006 in CA-G.R. CV No. 78834, which affirmed the Order 2 of Branch 37, Regional Trial Court(RTC) of Manila dated February 14, 2001 dismissing the Complaint for failure of the plaintiff toprosecute the same for an unreasonable length of time.

On March 22, 1995, petitioner Philippine Charter Insurance Corporation (PCIC), as insurer-

subrogee, filed with the RTC of Manila a Complaint against respondents, to wit: the unknown ownerof the vessel M/V "Explorer" (common carrier), Wallem Philippines Shipping, Inc. (ship agent), AsianTerminals, Inc. (arrastre), and Foremost International Port Services, Inc. (broker). PCIC sought torecover from the respondents the sum of P342,605.50, allegedly representing the value of lost ordamaged shipment paid to the insured, interest and attorney’s fees. The case was docketed as CivilCase No. 95-73340 and was raffled to Branch 37. On the same date, PCIC filed a similar caseagainst respondents Wallem Philippines Shipping, Inc., Asian Terminals, Inc., and ForemostInternational Port Services, Inc., but, this time, the fourth defendant is "the unknown owner of thevessel M/V "Taygetus." This second case was docketed as Civil Case No. 95-73341 and was raffledto Branch 38.

Respondents filed their respective answers with counterclaims in Civil Case No. 95-73340, pendingbefore Branch 37. PCIC later filed its answer to the counterclaims. On September 18, 1995, PCICfiled an ex parte motion to set the case for pre-trial conference, which was granted by the trial courtin its Order dated September 26, 1995. However, before the scheduled date of the pre-trialconference, PCIC filed on September 19, 1996 its Amended Complaint. The "Unknown Owner" ofthe vessel M/V "Explorer" and Asian Terminals, Inc. filed anew their respective answers withcounterclaims.

Foremost International Port Services, Inc. filed a Motion to Dismiss, which was later denied by thetrial court in an Order dated December 4, 1996.

On December 5, 2000, respondent common carrier, "the Unknown Owner" of the vessel M/V"Explorer," and Wallem Philippines Shipping, Inc. filed a Motion to Dismiss on the ground that PCICfailed to prosecute its action for an unreasonable length of time. PCIC allegedly filed its Opposition,

claiming that the trial court has not yet acted on its Motion to Disclose which it purportedly filed onNovember 19, 1997. In said motion, PCIC supposedly prayed for the trial court to order respondentWallem Philippines Shipping, Inc. to disclose the true identity and whereabouts of defendant"Unknown Owner of the Vessel M/V ‘Explorer.’"

On February 14, 2001, the trial court issued an Order dismissing Civil Case No. 95-73340 for failureof petitioner to prosecute for an unreasonable length of time. Upon receipt of the order of dismissalon March 20, 2001, PCIC allegedly realized that its Motion to Disclose was inadvertently filed withBranch 38 of the RTC of Manila, where the similar case involving the vessel M/V "Taygetus" (Civil

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Case No. 95-73341) was raffled to, and not with Branch 37, where the present case (Civil Case No.95-73340) was pending.

Thus, PCIC filed a Motion for Reconsideration of the February 14, 2001 Order, explaining that itsMotion to Disclose was erroneously filed with Branch 38. PCIC claimed that the mistake stemmedfrom the confusion created by an error of the docket section of the RTC of Manila in stamping the

same docket number to the simultaneously filed cases. According to PCIC, it believed that it was stillpremature to move for the setting of the pre-trial conference with the Motion to Disclose still pendingresolution. On May 6, 2003, the trial court issued the Order denying PCIC’s Motion forReconsideration.

On May 21, 2003, PCIC, through new counsel, appealed to the Court of Appeals. On July 20, 2006,the Court of Appeals rendered the assailed Decision affirming the February 14, 2001 Order of theRTC. On November 6, 2006, the Court of Appeals issued its Resolution3 denying PCIC’s Motion forReconsideration.

Hence, this Petition for Review on Certiorari. On June 27, 2007, this Court required the counsel ofthe "Unknown Owner" of the vessel M/V Explorer and Wallem Philippines Shipping, Inc. to submit

proof of identification of the owner of said vessel.

4

On September 17, 2007, this Court, pursuant tothe information provided by Wallem Philippines Shipping, Inc., directed its Division Clerk of Court tochange "Unknown Owner" to "Explorer Maritime Co., Ltd." in the title of this case.5

In affirming the dismissal of Civil Case No. 95-73340, the Court of Appeals held that PCIC shouldhave filed a motion to resolve the Motion to Disclose after a reasonable time from its allegederroneous filing. PCIC could have also followed up the status of the case by making inquiries on thecourt’s action on their motion, instead of just waiting for any resolution from the court for more thanthree years. The appellate court likewise noted that the Motion to Disclose was not the onlyerroneous filing done by PCIC’s former counsel, the Linsangan Law Office. The records of the caseat bar show that on November 16, 1997, said law office filed with Branch 37 a Pre-trial Brief for thecase captioned as "Philippine Charter Insurance Corporation v. Unknown Owners of the Vessel MV‘Taygetus’, et al., Civil Case No. 95-73340." The firm later filed a Manifestation and Motion stating

that the same was intended for Civil Case No. 95-73341 which was pending before Branch 38. Allthese considered, the Court of Appeals ruled that PCIC must bear the consequences of its counsel’sinaction and negligence, as well as its own. 6

PCIC claims that the merits of its case warrant that it not be decided on technicalities. Furthermore,PCIC claims that its former counsel merely committed excusable negligence when it erroneouslyfiled the Motion to Disclose with the wrong branch of the court where the case is pending.

The basis for the dismissal by the trial court of Civil Case No. 95-73340 is Section 3, Rule 17 andSection 1, Rule 18 of the Rules of Court, which respectively provide:

Section 3. Dismissal due to the fault of the plaintiff. – If, for no justifiable cause, the plaintiff fails to

appear on the date of the presentation of his evidence in chief on the complaint, or to prosecute hisaction for an unreasonable length of time, or to comply with these Rules or any order of the court,the complaint may be dismissed upon motion of the defendant or upon the court’s own motion,without prejudice to the right of the defendant to prosecute his counterclaim in the same or in aseparate action. This dismissal shall have the effect of adjudication upon the merits, unlessotherwise declared by the court.

x x x x


















Section 1. When conducted. – After the last pleading has been served and filed, it shall be the dutyof the plaintiff to promptly move ex parte that the case be set for pre-trial.

In the fairly recent case of Espiritu v. Lazaro,7 this Court, in affirming the dismissal of a case forfailure to prosecute on account of the omission of the plaintiff therein to move to set the case for pre-trial for almost one year from their receipt of the Answer, issued several guidelines in effecting such

dismissal:

Respondents Lazaro filed the Cautionary Answer with Manifestation and Motion to File aSupplemental/Amended Answer on July 19, 2002, a copy of which was received by petitioners on

August 5, 2002. Believing that the pending motion had to be resolved first, petitioners waited for thecourt to act on the motion to file a supplemental answer. Despite the lapse of almost oneyear ,8 petitioners kept on waiting, without doing anything to stir the court into action.

In any case, petitioners should not have waited for the court to act on the motion to file asupplemental answer or for the defendants to file a supplemental answer. As previously stated, therule clearly states that the case must be set for pre-trial after the last pleading is served and filed.Since respondents already filed a cautionary answer and [petitioners did not file any reply to it] the

case was already ripe for pre-trial.

It bears stressing that the sanction of dismissal may be imposed even absent any allegation andproof of the plaintiff's lack of interest to prosecute the action, or of any prejudice to the defendantresulting from the failure of the plaintiff to comply with the rules. The failure of the plaintiff toprosecute the action without any justifiable cause within a reasonable period of time will give rise tothe presumption that he is no longer interested in obtaining the relief prayed for.

In this case, there was no justifiable reason for petitioners' failure to file a motion to set the case forpre-trial. Petitioners' stubborn insistence that the case was not yet ripe for pre-trial is erroneous.

Although petitioners state that there are strong and compelling reasons justifying a liberal applicationof the rule, the Court finds none in this case. The burden to show that there are compelling reasonsthat would make a dismissal of the case unjustified is on petitioners, and they have not adduced anysuch compelling reason.9 (Emphases supplied.)

In the case at bar, the alleged Motion to Disclose was filed on November 19, 1997. Respondentsfiled the Motion to Dismiss on December 5, 2000. By that time, PCIC’s inaction was thus alreadyalmost three years. There is therefore no question that the failure to prosecute in the case at bar wasfor an unreasonable length of time. Consequently, the Complaint may be dismissed even absent anyallegation and proof of the plaintiff's lack of interest to prosecute the action, or of any prejudice to thedefendant resulting from the failure of the plaintiff to comply with the rules. The burden is now onPCIC to show that there are compelling reasons that would render the dismissal of the caseunjustified.

The only explanation that the PCIC can offer for its omission is that it was waiting for the resolution

of its Motion to Disclose, which it allegedly filed with another branch of the court. According to PCIC,it was premature for it to move for the setting of the pre-trial conference before the resolution of theMotion to Disclose.

We disagree. Respondent Explorer Maritime Co., Ltd., which was then referred to as the "UnknownOwner of the vessel M/V ‘Explorer,’" had already been properly impleaded pursuant to Section 14,Rule 3 of the Rules of Court, which provides:















Section 14. Unknown identity or name of defendant – Whenever the identity or name of a defendantis unknown, he may be sued as the unknown owner, heir, devisee, or by such other designation asthe case may require; when his identity or true name is discovered, the pleading must be amendedaccordingly.

In the Amended Complaint, PCIC alleged that defendant "Unknown Owner of the vessel M/V

‘Explorer’" is a foreign corporation whose identity or name or office address are unknown to PC ICbut is doing business in the Philippines through its local agent, co-defendant Wallem PhilippinesShipping, Inc., a domestic corporation.10 PCIC then added that both defendants may be served withsummons and other court processes in the address of Wallem Philippines Shipping, Inc.,11 whichwas correctly done12 pursuant to Section 12, Rule 14 of the Rules of Court, which provides:

Sec. 12. Service upon foreign private juridical entity. – When the defendant is a foreign private juridical entity which has transacted business in the Philippines, service may be made on its residentagent designated in accordance with law for that purpose, or, if there be no such agent, on thegovernment official designated by law to that effect, or on any of its officers or agents within thePhilippines.

As all the parties have been properly impleaded, the resolution of the Motion to Disclose wasunnecessary for the purpose of setting the case for pre-trial. 1avvphi1

Furthermore, Section 3, Rule 3 of the Rules of Court likewise provides that an agent acting in hisown name and for the benefit of an undisclosed principal may sue or be sued without joining theprincipal except when the contract involves things belonging to the principal. Since Civil Case No.95-73340 was an action for damages, the agent may be properly sued without impleading theprincipal. Thus, even assuming that petitioner had filed its Motion to Disclose with the proper court,its pendency did not bar PCIC from moving for the setting of the case for pre-trial as required underRule 18, Section 1 of the Rules of Court.13

Indeed, we find no error on the part of the lower courts in not giving credit to the purportedlyerroneously filed Motion to Disclose. The only document presented by PCIC to prove the same, aphotocopy thereof attached to their Motion for Reconsideration with the RTC, is highly suspicious.Said photocopy14 of the Motion to Disclose contains an explanation why the same was filed throughregistered mail. However, it was also stamped as "RECEIVED" by the RTC on November 19,1997,15 indicating that said attachment was a receiving copy. The receiving copy was not signed byany court personnel16 and does not contain any proof of service on the parties. The Motion sets thehearing thereon on the same date of its filing, November 19, 1997.17

1âwphi 1

Likewise, PCIC’s attempt to shift the blame to the docket section of the RTC of Manila, whichallegedly stamped the same docket number to Civil Case No. 95-73340 (involving M/V Explorer) andCivil Case No. 95-73341 (involving M/V Taygetus), is completely unfounded. A perusal of theComplaint in the case at bar shows that it was correctly stamped Civil Case No. "95-73340," and thebranch number was correctly written as 37.18 PCIC did not bother to attach the alleged complaint

filed in Branch 38 involving M/V Taygetus. However, it does not escape our attention that PCIC in itsown pleadings repeatedly refer to the case pending in Branch 38 as Civil Case No. 95-73341,contrary to its claim that the two cases were docketed with the same number. In all, PCIC failed toadequately account how its counsel could have mistakenly filed the Motion intended for Branch 37 inBranch 38. Worse, said counsel also allegedly only discovered the error after three years from thefiling of the Motion to Disclose. Such a circumstance could have only occurred if both PCIC and itscounsel had indeed been uninterested and lax in prosecuting the case.





































We therefore hold that the RTC was correct in dismissing Civil Case No. 95-73340 for failure of theplaintiff to prosecute the same for an unreasonable length of time. As discussed by the Court of

Appeals, PCIC could have filed a motion for the early resolution of their Motion to Disclose after theapparent failure of the court to do so. If PCIC had done so, it would possibly have discovered theerror in the filing of said motion much earlier. Finally, it is worth noting that the defendants also havethe right to the speedy disposition of the case; the delay of the pre-trial and the trial might cause the

impairment of their defenses.19

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals dated July 20, 2006 inCA-G.R. CV No. 78834 is hereby AFFIRMED.

Costs against petitioner Philippine Charter Insurance Corporation.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO Associate Justice

WE CONCUR:

RENATO C. CORONA Chief JusticeChairperson

LUCAS P. BERSAMIN

Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

MARTIN S. VILLARAMA, JR. Associate Justice


Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the aboveDecision had been reached in consultation before the case was assigned to the writer of the opinionof the Court’s Division.

RENATO C. CORONA Chief Justice

Footnotes

1 Rollo, pp. 33-40; penned by Associate Justice Jose Catral Mendoza (now a member of thisCourt) with Associate Justices Elvi John S. Asuncion and Arturo G. Tayag, concurring.

2 CA rollo, p. 36.




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3 Rollo, p. 43.

4 Id. at 90.

5 Id. at 110a.

6 Id. at 38-39.

7 G.R. No. 181020, November 25, 2009, 605 SCRA 566.

8 The trial court in the cited case dismissed the complaint on July 24, 2003, slightly less thanone year from the plaintiff’s receipt of the Cautionary Answer on August 5, 2002. (Id. at 570.)

9 Id. at 572-573.

10 Records, p. 75.

11 Id.

12 Id. at 37.

13 Rule 18, Section 1 provides that "[a]fter the last pleading has been served and filed, it shallbe the duty of the plaintiff to promptly move ex parte that the case be set for pretrial."

14 Records, pp. 141-144.

15 Id. at 141.

16 Id.

17 Id.

18 Id. at 1.

19 See Olave v. Mistas, G.R. No. 155193, November 26, 2004, 444 SCRA 479, 493.






















































G.R. No. 77638 July 12, 1990

MARITIME AGENCIES & SERVICES, INC., petitioner,vs.COURT OF APPEALS, and UNION INSURANCE SOCIETY OF CANTON, LTD., respondents.

G.R. No. 77674 July 12, 1990

UNION INSURANCE SOCIETY OF CANTON, LTD., petitioner,vs.COURT OF APPEALS, HONGKONG ISLAND CO., LTD., MARITIME AGENCIES & SERVICES,INC., and/or VIVA CUSTOMS BROKERAGE, respondents.

Del Rosario & Del Rosario for petitioner in G.R. No. 77638.

Zapa Aguillardo & Associates for petitioner in G.R. No. 77674.

Bito, Misa & Lozada for Hongkong Island Co. Ltd. and Macondray & Co., Inc.

CRUZ, J .:

Transcontinental Fertilizer Company of London chartered from Hongkong Island Shipping Companyof Hongkong the motor vessel named "Hongkong Island" for the shipment of 8073.35 MT (gross)bagged urea from Novorossisk, Odessa, USSR to the Philippines, the parties signing for thispurpose a Uniform General Charter dated August 9, 1979. 1

Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as consignee,3,400.04 to be discharged in Manila and the remaining 2,000 MT in Cebu. 2 The goods were insured

by the consigneewith the Union Insurance Society of Canton, Ltd. for P6,779,214.00 against all risks. 3

Maritime Agencies & Services, Inc. was appointed as the charterer's agent and MacondrayCompany, Inc. as the owner's agent. 4

The vessel arrived in Manila on October 3, 1979, and unloaded part of the consignee's goods, thenproceeded to Cebu on October 19, 1979, to discharge the rest of the cargo. On October 31, 1979,the consignee filed a formal claim against Maritime, copy furnished Macondray, for the amount ofP87,163.54, representing C & F value of the 1,383 shortlanded bags. 5 On January 12, 1980, theconsignee filed another formal claim, this time against Viva Customs Brokerage, for the amount ofP36,030.23, representing the value of 574 bags of net unrecovered spillage. 6

These claims having been rejected, the consignee then went to Union, which on demand paid thetotal indemnity of P113,123.86 pursuant to the insurance contract. As subrogee of the consignee,Union then filed on September 19, 1980, a complaint for reimbursement of this amount, with legalinterest and attorney's fees, against Hongkong Island Company, Ltd., Maritime Agencies & Services,Inc. and/or Viva Customs Brokerage. 7 On April 20, 1981, the complaint was amended to drop Vivaand implead Macondray Company, Inc. as a new defendant. 8



On January 4, 1984, after trial, the trial court rendered judgment holding the defendants liable asfollows:

(a) defendants Hongkong Island Co., Ltd., and its local agent Macondray & Co., Inc.to pay the plaintiff the sum of P87,163.54 plus 12% interest from April 20, 1981 untilthe whole amount is fully paid, P1,000.00 as attorney's fees and to pay one-half (1/2)

of the costs; and

(b) defendant Maritime Agencies & Services, Inc., to pay the plaintiff the sum ofP36,030.23, plus 12% interest from April 20, 1981 until the whole amount is fully paid,P600.00 as attorney's fees and to pay one-half (1/2) of the costs. 9

Petitioner appealed the decision to the Court of Appeals, which rendered a decision on November28, 1986, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is modified, finding the chartererTranscontinental Fertilizer Co., Ltd. represented by its agent Maritime Agencies &Services, Inc. liable for the amount of P87,163.54 plus interest at 12% plus attorney'sfees of P1,000.00. Defendant Hongkong Island Co., Ltd. represented by Macondray Co.,Inc. are accordingly exempted from any liability. 10

Maritime and Union filed separate motions for reconsideration which were both denied. The movantsare now before us to question the decision of the respondent court.

In G.R. No. 77638, Maritime pleads non-liability on the ground that it was only the charterer's agentand should not answer for whatever responsibility might have attached to the principal. It also arguesthat the respondent court erred in applying Articles 1734 and 1735 of the Civil Code in determiningthe charterer's liability.

In G.R. No. 77674, Union asks for the modification of the decision of the respondent court so as tomake Maritime solidarily and solely liable, its principal not having been impleaded and so not subject

to the jurisdiction of our courts.

These two cases were consolidated and given due course, the parties being required to submitsimultaneous memoranda. All complied, including Hongkong Island Company, Ltd., and MacondrayCompany, Inc., although they pointed out that they were not involved in the petitions.

There are three general categories of charters, to wit, the demise or "bareboat charter," the timecharter and the voyage charter.

A demise involves the transfer of full possession and control of the vessel for the period covered bythe contract, the charterer obtaining the right to use the vessel and carry whatever cargo it chooses,while manning and supplying the ship as well. 11

A time charter is a contract to use a vessel for a particular period of time, the charterer obtaining theright to direct the movements of the vessel during the chartering period, although the owner retainspossession and control. 12

A voyage charter is a contract for the hire of a vessel for one or a series of voyages usually for thepurpose of transporting goods for the charterer. The voyage charter is a contract of affreightmentand is considered a private carriage. 13



Tested by those definitions, the agreement entered into in the cases at bar should be considered.This brings us to the basic question of who, in this kind of charter, shall be liable for the cargo.

A voyage charter being a private carriage, the parties may freely contract respecting liability fordamage to the goods and other matters. The basic principle is that "the responsibility for cargo lossfalls on the one who agreed to perform the duty involved" in accordance with the terms of most

voyage charters.14

This is true in the present cases where the charterer was responsible for loading, stowage anddischarging at the ports visited, while the owner was responsible for the care of the cargo during thevoyage. Thus, Par. 2 of the Uniform General Charter read:

2. Owners are to be responsible for loss of or damage to the goods or for delay indelivery of the goods only in case the loss, damage or delay has been caused by theimproper or negligent stowage of the goods or by personal want of due diligence onthe part of the Owners or their Manager to make the vessel in all respects seaworthyand to secure that she is properly manned, equipped and supplied or by the personalact or default of the Owners or their Manager.

And the Owners are responsible for no loss or damage or delay arising from anyother cause whatsoever, even from the neglect or default of the Captain or crew orsome other person employed by the Owners onboard or ashore for whose acts theywould, but for this clause, be responsible, or from unseaworthiness of the vessel onloading or commencement of the voyage or at any time whatsoever.

Damage caused by contact with or leakage, smell or evaporation from other goods orby the inflammable or explosive nature or insufficient package of other goods not tobe considered as caused by improper or negligent stowage, even if in fact socaused.

while Clause 17 of Additional Clauses to Charter party provided:

The cargo shall be loaded, stowed and discharged free of expense to the vesselunder the Master's supervision. However, if required at loading and discharging portsthe vessel is to give free use of winches and power to drive them gear, runners andropes. Also slings, as on board. Shore winchmen are to be employed and they are tobe for Charterers' or Shippers' or Receivers' account as the case may be. Vessel isalso to give free use of sufficient light, as on board, if required for night work. Timelost through breakdown of winches or derricks is not to count as laytime.

In Home Insurance Co. v . American Steamship Agencies, Inc ., 15 the trial court rejected similarstipulations as contrary to public policy and, applying the provisions of the Civil Code on commoncarriers and of the Code of Commerce on the duties of the ship captain, held the vessel liable in

damages for loss of part of the cargo it was carrying. This Court reversed, declaring as follows:

The provisions of our Civil Code on common carriers were taken from Anglo- American law. Under American jurisprudence, a common carrier undertaking to carrya special cargo or chartered to a special person only, becomes a private carrier. As aprivate carrier, a stipulation exempting the owner from liability for the negligence ofits agent is not against public policy, and is deemed valid.



Such doctrine we find reasonable. The Civil Code provisions on common carriersshould not be applied where the carrier is not acting as such but as a private carrier.The stipulation in the charter party absolving the owner from liability for loss due tothe negligence of its agent would be void only if the strict public policy governingcommon carriers is applied. Such policy has no force where the public at large is notinvolved, as in the case of a ship totally chartered for the use of a single party.

Nevertheless, this ruling cannot benefit Hongkong, because there was no showing in that case thatthe vessel was at fault. In the cases at bar, the trial court found that 1,383 bags were shortlanded,which could only mean that they were damaged or lost on board the vessel before unloading of theshipment. It is not denied that the entire cargo shipped by the charterer in Odessa was covered by aclean bill of lading. 16 As the bags were in good order when received in the vessel, the presumptionis that they were damaged or lost during the voyage as a result of their negligent improper stowage.For this the ship owner should be held liable.

But we do agree that the period for filing the claim is one year, in accordance with the Carriage ofGoods by Sea Act. This was adopted and embodied by our legislature in Com. Act No. 65 which, asa special law, prevails over the general provisions of the Civil Code on prescription of actions.Section 3(6) of that Act provides as follows:

In any event, the carrier and the ship shall be discharged from all liability in respect ofloss or damage unless suit is brought within one year after delivery of the goods orthe date when the goods should have been delivered; Provided, that if a notice ofloss for damage; either apparent or concealed, is not given as provided for in thissection, that fact shall not effect or prejudice the right of the shipper to bring suitwithin one year after the delivery of the goods or the date when the goods shouldhave been delivered.

This period was applied by the Court in the case of Union Carbide, Philippines, Inc . v . ManilaRailroad Co., 17where it was held:

Under the facts of this case, we held that the one-year period was correctly reckonedby the trial court from December 19, 1961, when, as agreed upon by the parties andas shown in the tally sheets, the cargo was discharged from the carrying vessel anddelivered to the Manila Port Service. That one-year period expired on December 19,1962. Inasmuch as the action was filed on December 21, 1962, it was barred by thestatute of limitations.

The one-year period in the cases at bar should commence on October 20, 1979, when the last itemwas delivered to the consignee. 18 Union's complaint was filed against Hongkong on September 19,1980, but tardily against Macondray on April 20, 1981. The consequence is that the action isconsidered prescribed as far as Macondray is concerned but not against its principal, which is whatmatters anyway.

As regards the goods damaged or lost during unloading, the charterer is liable therefor, havingassumed this activity under the charter party "free of expense to the vessel." The difficulty is thatTranscontinental has not been impleaded in these cases and so is beyond our jurisdiction. Theliability imposable upon it cannot be borne by Maritime which, as a mere agent, is not answerable forinjury caused by its principal. It is a well-settled principle that the agent shall be liable for the act oromission of the principal only if the latter is undisclosed. 19



Union seeks to hold Maritime liable as ship agent on the basis of the ruling of this Court in the caseof Switzerland General Insurance Co., Ltd . v . Ramirez . 20 However, we do not find that case isapplicable.

In that case, the charterer represented itself on the face of the bill of lading as the carrier. The vesselowner and the charterer did not stipulate in the Charter party on their separate respective liabilities

for the cargo. The loss/damage to the cargo was sustained while it was still on board or under thecustody of the vessel. As the charterer was itself the carrier, it was made liable for the acts of theship captain who was responsible for the cargo while under the custody of the vessel.

As for the charterer's agent, the evidence showed that it represented the vessel when it took chargeof the unloading of the cargo and issued cargo receipts (or tally sheets) in its own name. Claimsagainst the vessel for the losses/damages sustained by that cargo were also received andprocessed by it. As a result, the charterer's agent was also considered a ship agent and so was heldto be solidarily liable with its principal.

The facts in the cases at bar are different. The charterer did not represent itself as a carrier andindeed assumed responsibility ability only for the unloading of the cargo, i .e, after the goods were

already outside the custody of the vessel. In supervising the unloading of the cargo and issuing DailyOperations Report and Statement of Facts indicating and describing the day-to-day discharge of thecargo, Maritime acted in representation of the charterer and not of the vessel. It thus cannot beconsidered a ship agent. As a mere charterer's agent, it cannot be held solidarily liable withTranscontinental for the losses/damages to the cargo outside the custody of the vessel. Notably,Transcontinental was disclosed as the charterer's principal and there is no question that Maritimeacted within the scope of its authority.

Hongkong and Macondray point out in their memorandum that the appealed decision is not assailedinsofar as it favors them and so has become final as to them. We do not think so. First of all, we notethat they were formally impleaded as respondents in G.R No. 77674 and submitted their commentand later their memorandum, where they discussed at length their position vis-a-vis the claims of theother parties. Secondly, we reiterate the rule that even if issues are not formally and specifically

raised on appeal, they may nevertheless be considered in the interest of justice for a proper decisionof the case.i•t•c -aüslThus, we have held that:

Besides, an unassigned error closely related to the error properly assigned, or uponwhich the determination of the question raised by the error properly assigned isdependent, will be considered by the appellate court notwithstanding the failure toassign it as error.

At any rate, the Court is clothed with ample authority to review matters, even if they arenot assigned as errors in their appeal, if it finds that their consideration is necessary inarriving at a just decision of the case. 21

xxx xxx xxx

Issues, though not specifically raised in the pleadings in the appellate court, may, in theinterest of justice, be properly considered by said court in deciding a case, if they arequestions raised in the trial court and are matters of record having some bearing on theissue submitted which the parties failed to raise or the lower court ignore(d). 22

xxx xxx xxx



While an assignment of error which is required by law or rule of court has been heldessential to appellate review, and only those assigned will be considered, there are anumber of cases which appear to accord to the appellate court a broad discretionarypower to waive this lack of proper assignment of errors and consider errors notassigned. 23

In his decision dated January 4, 1984, Judge Artemon de Luna of the Regional Trial Court of Manilaheld:

The Court, on the basis of the evidence, finds nothing to disprove the finding of themarine and cargo surveyors that of the 66,390 bags of urea fertilizer, 65,547 bagswere "discharged ex-vessel" and there were "shortlanded" "1,383 bags", valued atP87,163.54. This sum should be the principal and primary liability and responsibilityof the carrying vessel. Under the contract for the transportation of goods, the vessel'sresponsibility commence upon the actual delivery to, and receipt by the carrier or itsauthorized agent, until its final discharge at the port of Manila. Defendant HongkongIsland Co., Ltd., as "shipowner" and represented by the defendant Macondray & Co.,Inc., as its local agent in the Philippines, should be responsible for the value of thebags of urea fertilizer which were shortlanded.

The remainder of the claim in the amount of P36,030.23, representing the value ofthe 574 bags of unrecovered spillages having occurred after the shipment wasdischarged from the vessel unto the ex-lighters as well as during the discharge fromthe lighters to the truck which transported the shipment to the consignee'swarehouses should be for the account of the defendant Maritime Agencies &Services, Inc.

We affirm the factual findings but must modify the legal conclusions. As previously discussed, theliability of Macondray can no longer be enforced because the claim against it has prescribed; and asfor Maritime, it cannot be held liable for the acts of its known principal resulting in injury to Union.The interest must also be reduced to the legal rate of 6%, conformably to our ruling in Reformina

v . Tomol 24

and Article 2209 of the Civil Code, and should commence, not on April 20, 1981, but onSeptember 19, 1980, date of the filing of the original complaint.

WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court isREINSTATED as above modified. The parties shall bear their respective costs.

SO ORDERED.

Narvasa, C.J., Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1 Original Records, pp. 24-31.

2 Ibid ., pp. 65-66.

3 Id ., pp. 67-68.





G.R. No. L-25301 October 26, 1968

GOLD STAR MINING CO., INC., petitioner,vs.MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA JIMENA, AURORA JIMENA, JAIME JIMENA,DANTE JIMENA, JORGE JIMENA, JOYCE JIMENA, as legal heirs of the deceased VICTOR

JIMENA, and JOSE HIDALGO, respondents.

Emiliano S. Samson and R. Balderrama-Samson for petitioner.Leandro Sevilla and Ramon C. Aquino for respondents.

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

From an affirmance in toto by the Court of Appeals1 of a decision of the Court of First Instance ofManila,2specifically the portion thereof condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda.de Jimena, et al., the sum of P30,691.92 solidarily with Ananias Isaac Lincallo for violation of aninjunction this appeal is taken.

It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimenaone-half (1/2) of the proceeds from all mining claims that he would purchase with the money to beadvanced by the latter. This agreement was later on modified (in a 1939 notarial instrument dulyregistered with the Register of Deeds of Marinduque in his capacity as mining recorder) so as toinclude in the equal sharing arrangement not only the proceeds from several mining claims, which bythat time had already been purchased by Lincallo with various sums totalling P5,800.00 supplied byJimena, but also the lands constituting the same, and so as to bind thereby their "heirs, assigns, orlegal representatives." Apparently, the mining rights over part of the claims were assigned byLincallo to Gold Star Mining Co., Inc., sometime before World War Il because in 1950 thecorporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.

On several occasions thereafter, the mining claims in question were made subject-matter ofcontracts entered into by Lincallo in his own name and for his benefit alone without the slightestintimation of Jimena's interests over the same. Thus, on 19 September 1951, Lincallo and one

Alejandro Marquez, as separate owners of particular mining claims, entered into an agreement withGold Star Mining Co., Inc., the assignee thereof, regarding allotment to Lincallo of 45% of theroyalties due from the corporation. Four months later, Lincallo, Marquez and Congressman PanfiloManguerra, again as owners, leased certain mining claims to Jacob Cabarrus, who, in turn,transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By virtue ofstill another contract executed by these lessors on 29 February 1952, 43% of the royalties due fromMarinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.

As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold StarMining Co., Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims soassigned and/or leased by Lincallo and, accordingly, demanded recognition and payment of his one-

half share in all the royalties, allocated and paid and, thereafter, to be paid to the latter. Bothcorporations, however, ignored Jimena's demands.

Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-halfshare in the royalties paid by the two corporations, were also repeatedly demanded by Jimena fromLincallo. Acknowledging Jimena's contractual claim, Lincallo off and on promised to settle hisobligations. And on 14 July 1952, Lincallo promised for the last time, to settle everything on or beforethe 30th day of the same month.



Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August1952, a month after he promised to pay Jimena, 35 of his 45% share in the royalties due from GoldStar Mining Co., Inc., to one Gregorio Tolentino, a salaried employee, for an alleged consideration ofP10,000.00.

On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and

his one-half share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc.,together with Tolentino, were later joined as defendants.

On 17 September 1954, the trial court issued, upon petition of Jimena, a writ of preliminary injunctionrestraining Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royaltiesduring the pendency of the case to Lincallo, his assigns or legal representatives. Despite theinjunction, however, Gold Star Mining Co., Inc., was found out to have paid P30, 691.92 to Lincalloand Tolentino. Said corporation claimed later on (on appeal) that the injunction had beensuperseded and/or dissolved on 25 May 1955 by the trial court's grant of Jimena's petition for a writof preliminary attachment "to supersede the writ of preliminary injunction previously issued." But asthe grant was conditioned upon filing of a bond to be approved by the trial court, no writ ofattachment was issued because the bond offered by Jimena was disapproved.3

Jimena and Tolentino died successively during the pendency of the case in the trial court and were,accordingly, substituted by their respective widows and children.

After a protracted trial, the lower court rendered a decision, the dispositive portion of which reads asfollows:

IN VIEW WHEREOF, judgment is rendered:

1. Declaring the plaintiffs —

(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of

the royalties of defendant Lincallo under the latter's contract with Gold Star, Exh. D orExh. D-l, dated September 19, 1951;

(b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract withJesus (Jacob) Cabarrus assigned to Marinduque Iron Mines, and his contract with

Alejandro Marquez, dated December 5, 1951, and February 29, 1952, Exhs. J and J-1; .

(c) and condemning defendants Gold Star and Marinduque Iron Mines to pay directto plaintiffs said 1/2 shares of the royalties until said contracts are terminated;

2. Condemning defendant Lincallo to pay unto plaintiffs, as successors in interest of VictorJimena —

(a) the sum of P5,800 with legal interest from the date of the filing of the complaint;

(b) the sum of P40,167.52 which is the 1/2 share of the royalties paid by Gold Starunto Lincallo as of the September 14, 1957;



(c) the sum of P3,235.64 which is the 1/2 share of Jimena on the rentals amountingto P6,471.27 corresponding to Lincallo's share paid by Marinduque Iron Mines untoLincallo from December, 1951 to August 25, 1954; under Exhibit N;

(d) P1,000.00 as attorneys fees;

3. Declaring that the deed of sale, Exh. H, dated August 16, 1952, between defendantLincallo and Gregorio Tolentino was effective and transferred only 1/2 of the 45% (43%)share of Lincallo, and ordering Gold Star Mining Company to make payment hereafter untoplaintiffs, pursuant to this decision on the royalties due unto Lincallo, notwithstanding thecession unto Tolentino, so that of the royalties due unto Lincallo 1/2 should always be paidby Gold Star unto plaintiffs notwithstanding said session, Exh. H, unto Tolentino by Lincallo;

4. Judgment is also rendered condemning the estate of Gregorio Tolentino but not the heirspersonally, to pay unto plaintiffs the sum of P24,386.51 with legal interest from the date ofthe filing of the complaint against Gregorio Tolentino.

5. Judgment is rendered condemning defendant Gold Star Mining Company to pay to

plaintiffs solidarily with Lincallo and to be imputed to Lincallo's liability under this judgmentunto Jimena, the sum of P30,691.92 ;

6. Judgment is rendered condemning defendant Marinduque Iron Mines to pay unto plaintiffsthe sum of P7,330.36;

7. The counterclaims of defendants are dismissed;

8. Costs against defendant Lincallo.

SO ORDERED. (Emphasis supplied.)

From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, andthe two corporations, appealed to the Court of Appeals. The appeal interposed by Marinduque IronMines Agents, Inc., was, however, withdrawn, while that of Lincallo was dismissed for the failure tofile brief. Pending outcome of the appeal, the royalties due from Gold Star Mining Co., Inc., wererequired to be deposited with the trial court, as per order of 17 June 1958 issued by the same court.In compliance therewith, Gold Star Mining Co., Inc., made a judicial deposit in the amount ofP30,691.92.

On 8 October 1965, the Court of Appeals handed down a decision sustaining in its entirety that ofthe trial court. Gold Star Mining Co., Inc., moved for reconsideration of said decision insofar as itsadjudged solidary liability with Lincallo to pay to the Jimenas the sum of P30,691.92 "for flagrantviolation of the injunction" was concerned. The motion was denied. Hence, the present appeal.

Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals' decision finding thatrespondents Jimenas have a cause of action against it, and condemning it to pay the sum ofP30,691.92 for violation of an allegedly non-existent injunction, are reversible errors. Reasons: As torespondents Jimena's cause of action, the same does not allegedly appear in the complaint filedagainst petitioner corporation. And as to the P30,691.92 penalty for violation of the injunction, thesame can not allegedly be imposed because (1) the sum of P30,691.92 was not prayed for, (2) theinjunction in question had already been superseded and/or dissolved by the trial court's grant ofJimena's petition for writ of preliminary attachment; and (3) the corporation was never charged,



heard, nor found guilty in accordance with, and pursuant to, the provisions, of Rule 64 of the (Old)Rules of Court.

We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause ofaction against petitioner corporation and that the latter's joinder as one of the defendants before thetrial court is fitting and proper. Said the Court of Appeals, and we adopt the same:

There first assigned error is the Trial Court erred in not dismissing this instant action as"there is no privity of contract between Gold Star and Jimena." This contention is withoutmerit.

The situation at bar is similar to the status of the first and second mortgagees of a dulyregistered real estate mortgage. While there exists no privity of contract between them, yetthe common subject-matter supplies the juridical link.

Here the evidence overwhelmingly established that Jimena made prewar and postwardemands upon Gold Star for the payment of his 1/2 share of the royalties but all in vain so he(Jimena) was constrained to implead Gold Star because it refused to recognize his right.

Jimena now seeks for accounting of the royalties paid by Gold Star to Lincallo, and for directpayment to himself of his share of the royalties. This relief cannot be granted without joiningthe Gold Star specially in the face of the attitude it had displayed towards Jimena.

Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudormio," this legal maxim finds sanction in Article 1177, new Civil Code which provides that"creditors, after having pursued the property in possession of the debtor to satisfy theirclaims, may exercise all the rights and bring all the actions of the latter (debtor) for the samepurpose, save those which are inherent in his person; they may also impugn the acts whichthe debtor may have done to defraud them (1111)."

From another standpoint, equally valid and acceptable, it can be said that Lincallo, intransferring the mining claims to Gold Star (without disclosing that Jimena was a co-owneralthough Gold Star had knowledge of the fact as shown by the proofs heretofore mentioned)acted as Jimena's agent with respect to Jimena's share of the claims.

Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883,New Civil Code, which provides that the principal may sue the person with whom the agentdealt with in his (agent's) own name, when the transaction "involves things belonging to theprincipal."

As counsel for Jimena has correctly contended, "the remedy of garnishment suggested byGold Star is utterly inadequate for the enforcement of Jimena's right against Lincallobecause Jimena wanted an accounting and wanted to receive directly his share of the

royalties from Gold Star. That recourse is not open to Jimena unless Gold Star is made aparty in this action."

Coming now to the violation of the injunction, we observe that the facts speak for themselves.Considering that no writ of preliminary attachment was issued by the trial court, the condition for itsissuance not having been met by Jimena, nothing can be said to have superseded the writ ofpreliminary injunction in question. The preliminary injunction was, therefore, subsisting and evidentlyviolated by petitioner corporation when it paid the sum of P30,691.92 to Lincallo and Tolentino.



Gold Star Mining Co., Inc., insists that it may not be penalized for breach of the injunction, issued bythe court of origin, without prior written charge for indirect contempt, and due hearing, citing section3 of Rule 64 of the old Rules of Court, now Rule 71 of the Revised Rules. We fail to see any merit inthis contention, as it misses the true nature and intent of the award of P30,691.92 to Jimena,payable by Gold Star and Lincallo's estate.

Said award is not so much a penalty against petitioner as a decree of restitution, in order to makethe violated injunction effective, as it should be, by placing the parties in the same condition as if theinjunction had been fully obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction andhad not paid to Lincallo the royalties of P30,691.92, such amount would now be available for thesatisfaction of the claims of Jimena and his heirs against Lincallo. By sentencing Gold Star MiningCo., Inc., to pay, for the account of Lincallo, the sum aforesaid, the court merely endeavoured toprevent its award from being rendered pro tanto nugatory and ineffective, and thus make itconformable to law and justice.

That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co.,Inc., is shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is " tobe imputed to Lincallo's liability under this judgment ." The court thus left the way open for Gold StarMining Co., Inc., to recover later the whole amount from Lincallo, whether by direct action againsthim or by deducting it from the royalties that may fall due under his 1951 contract with appellant.

That the recovery of this particular amount was not specifically sought in the complaint is of nomoment, since the complaint prayed in general for "other equitable relief."

WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, withcosts against petitioner-appellant, Gold Star Mining Co., Inc.

Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano,JJ., concur.Zaldivar, J., is on leave.

Footnotes

1 CA-G.R. No. 23598-R.

2 Civil Case No. 23893.

3 Jimena's "Ex-Parte Petition for Approval of Bond for Issuance of Attachment" was deniedby the trial court as per the latter's order of 14 October 1955 (Records on Appeal, pages

116-117).



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. PantaleonPelayo, Judge of Iloilo, on the ground that it is the Sheriff who is responsible, if at all — not thisdeputy.

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 name of the Sheriff sold at public auction toJose Bermejo and Rosario Suero the property attached therein, disregarding the third-party claim ofLoreto Lorca (herein Plaintiff) who asserted ownership over said property. This suit for damages isthe result of said auction sale. Defendant, in his answer, denied liability, pointing out, that he hadmerely 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 orother accountable official may require any of his deputies or assistants, not bonded in thefidelity fund, to give an adequate personal bond as security against loss by reason of any

wrong doing on the part of such deputy or assistant. The taking of such security shall in nowise impair the independent civil liability of any of the parties.

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

In the light of section 330 of the Administrative Code we think the above provisions apply where thedeputy acts in his own name or is guilty of active malfeasance1 or possibly where he exceeds thelimits of his agency. In this case it is clear from the certificate of sale attached to the complaint as

Annex C that Dineros acted all the time in the name of the Ex-Officio Provincial Sheriff of Iloilo; andno allegations of misfeasance are made. The Sheriff is liable to third persons on the acts of hisdeputy,2 in the same manner that the principal is responsible for the acts of his agent, that is why heis required to post a bond for "the benefit of whom it may concern," (Section 330, Revised

Administrative Code) for instance the owners of property unlawfully sold by him on execution.3

The complaint should not have been dismissed, appellant argues, since the court could haveincluded 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" undersaid section 11. It was "substitution" of the deputy by the Sheriff. Anyway, the word "may" in saidsee. 11 implies direction of the court; and we are shown no reasons indicating abuse thereof.



This is not the first time an action is dismissed for the reason that the agent — instead of hisprincipal — 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.

Footnotes

1 Cf. Singh Sulce, 49 Phil., 563.

2 Basco vs. Gonzales, 59 Phil., 1, 6; Singh vs. Sulce, supra.

3 Walker vs. McMicking, 14 Phil, 668; Osorio vs. Cortes, 24 Phil., 653;Basco vs. Gonzales supra.





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 was prompt in settling her obligation; however, subsequently thepayments were remitted late;8that petitioner still owed her in the amount of P424,750.00.9

On the other hand, petitioner admitted that she received several pieces of jewelry from Quilatan andthat she indeed failed to pay for the same. She claimed that she entrusted the pieces of jewelry toMarichu Labrador who failed to pay for the same, thereby causing her to default in payingQuilatan.10 She presented handwritten receipts (Exhibits 1 & 2)11 evidencing payments made toQuilatan 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 receipt (Exhibit 3)12 signed by her dated July 5, 1992 and testifiedthat she sold the jewelry to a person who absconded without paying her. Labrador also explainedthat in the past, she too had directly transacted with Quilatan for the sale of jewelry on commissionbasis; however, due to her outstanding account with the latter, she got jewelry from petitionerinstead.13

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

WHEREFORE, in the light of the foregoing, the court finds the accused Virgie Serona guilty beyondreasonable doubt, and as the amount misappropriated is P424,750.00 the penalty provided underthe first paragraph of Article 315 of the Revised Penal Code has to be imposed which shall be in themaximum period plus one (1) year for every additional P10,000.00.

Applying the Indeterminate Sentence Law, the said accused is hereby sentenced to suffer thepenalty of imprisonment ranging from FOUR (4) YEARS and ONE (1) DAY of prision correccional asminimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as maximum; to pay the sum ofP424,750.00 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 modifiedthe penalty as follows:

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

Considering that the amount involved is P424,750.00, the penalty should be imposed in its maximumperiod adding one (1) year for each additional P10,000.00 albeit the total penalty should not exceedTwenty (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 asminimum 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 SUBJECTJEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO PROSPECTIVEBUYERS.

II

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WASMISAPPROPRIATION OR CONVERSION ON THE PART OF PETITIONER WHEN SHE FAILEDTO 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 Penal Code. In particular, she submits that she neither abusedthe 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 herundertaking with Quilatan. Moreover, petitioner delivered the jewelry to Labrador under the same

terms upon which it was originally entrusted to her. It was established that petitioner had not derivedany personal benefit from the loss of the jewelry. Consequently, it cannot be said that shemisappropriated 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) ofthe Revised Penal Code are: (1) that the money, good or other personal property is received by theoffender in trust, or on commission, or for administration, or under any other obligation involving theduty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion ofsuch money or property by the offender or denial on his part of such receipt; (3) that suchmisappropriation or conversion or denial is to the prejudice of another; and (4) that there is ademand made by the offended party on the offender.18 While the first, third and fourth elements areconcededly present, we find the second element of misappropriation or conversion to be lacking inthe case at bar.

Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation bydelivering the jewelry to a sub-agent for sale on commission basis. We are unable to agree with thelower courts’ conclusion that this fact alone is sufficient ground for holding that petitioner disposed ofthe 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 agentof a substitute or sub-agent in the absence of an express agreement to the contrary between theagent and the principal.20 In the case at bar, the appointment of Labrador as petitioner’s sub-agentwas not expressly prohibited by Quilatan, as the acknowledgment receipt, Exhibit B, does not

contain any such limitation. Neither does it appear that petitioner was verbally forbidden by Quilatanfrom passing on the jewelry to another person before the acknowledgment receipt was executed orat any other time. Thus, it cannot be said that petitioner’s act of entrusting the jewelry to Labrador ischaracterized by abuse of confidence because such an act was not proscribed and is, in fact, legallysanctioned.

The essence of estafa under Article 315, par. 1(b) is the appropriation or conversion of money orproperty received to the prejudice of the owner. The words "convert" and "misappropriated" connotean act of using or disposing of another’s property as if it were one’s own, or of devoting it to a



purpose or use different from that agreed upon. To misappropriate for one’s own use includes notonly conversion to one’s personal advantage, but also every attempt to dispose of the property ofanother without right.21

In the case at bar, it was established that the inability of petitioner as agent to comply with her dutyto return either the pieces of jewelry or the proceeds of its sale to her principal Quilatan was due, in

turn, to the failure of Labrador to abide by her agreement with petitioner. Notably, Labrador testifiedthat she obligated herself to sell the jewelry in behalf of petitioner also on commission basis or toreturn the same if not sold. In other words, the pieces of jewelry were given by petitioner to Labradorto 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 differentfrom 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 no condition or limitation was imposed on the mode ormanner 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 itemsfor sale.

In People v. Nepomuceno,22 the accused-appellant was acquitted of estafa on facts similar to theinstant case. Accused-appellant therein undertook to sell two diamond rings in behalf of thecomplainant 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 the proceeds of its sale, accused-appellant likewisefailed 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 is solely due to malfeasance of a subagent towhom the first agent had actually entrusted the property in good faith, and for the same purpose forwhich it 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 such return becomes due, we hold that thefirst agent can not be held guilty of estafa by either misappropriation or conversion. The abuse ofconfidence that is characteristic of this offense is missing under the circumstances.23

Accordingly, petitioner herein must be acquitted. The lower courts’ reliance on People v. Flores24 andU.S. v. Panes25 to justify petitioner’s conviction is misplaced, considering that the factual backgroundof the cited cases differ from those which obtain in the case at bar. In Flores, the accused received aring to sell under the condition that she would return it the following day if not sold and withoutauthority to retain the ring or to give it to a sub-agent. The accused in Panes, meanwhile, wasobliged to return the jewelry he received upon demand, but passed on the same to a sub-agent evenafter demand for its return had already been made. In the foregoing cases, it was held that there wasconversion or misappropriation.

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

In cases of estafa the profit or gain must be obtained by the accused personally, through his ownacts, and his mere negligence in permitting another to take advantage or benefit from the entrustedchattel cannot constitute estafa under Article 315, paragraph 1-b, of the Revised Penal Code; unlessof course the evidence should disclose that the agent acted in conspiracy or connivance with theone who carried out the actual misappropriation, then the accused would be answerable for the acts



of his co-conspirators. If there is no such evidence, direct or circumstantial, and if the proof is clearthat the accused herself was the innocent victim of her sub-agent’s faithlessness, her acquittal is inorder.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 from orconspired with Labrador to deprive Quilatan of the jewelry or its value. Consequently, there is noestafa 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 acquitted of estafa may nevertheless be held civilly liable where the factsestablished by the evidence so warrant. Then too, an agent who is not prohibited from appointing asub-agent but does so without express authority is responsible for the acts of the sub-agent.29 Considering that the civil action for the recovery of civil liability arising from the offense isdeemed instituted with the criminal action,30 petitioner is liable to pay complainant Quilatan the valueof 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 resolution dated 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 incase of insolvency.

SO ORDERED.

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

Footnotes

1 Rollo, p. 42.

2 RTC Records, p. 8.

3 Ibid., at 6.

4 ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the meansmentioned hereinbelow shall be punished by:

x x x x x x x x x

1. With unfaithfulness or abuse of confidence, namely:

x x x x x x x x x





22 CA 46 O. G. 6128 (1949).

23 Ibid., at 6135.

24 47 O.G. 6210 (1949).

25 37 Phil. 116 (1917).

26 271 SCRA 12 (1997).

27 CA 53 O.G. 731 (1956).

28 Op. cit., note 26 at 20.

29 Op. cit., note 20.

30 Revised Rules of Criminal Procedure, Rule 111, Section 1(a).



G.R. No. L-20136 June 23, 1965

IN RE: PETITION FOR ISSUANCE OF SEPARATE CERTIFICATE OF TITLE.JOSE A. SANTOS Y Diaz, petitioner-appellant,vs.ANATOLIO BUENCONSEJO, ET AL., respondents-appellees.

Segundo C. Mastrili for petitioner-appellant.Manuel Calleja Rafael S. Lucila and Jose T. Rubio for respondents-appellees.

CONCEPCION, J.:

Petitioner Jose A. Santos y Diaz seeks the reversal of an order of the Court of First Instance of Albay, denying his petition, filed in Cadastral Case No. M-2197, LRC Cad. Rec. No. 1035, for thecancellation of original certificate of title No. RO-3848 (25322), issued in the name of AnatolioBuenconsejo, Lorenzo Bon and Santiago Bon, and covering Lot No. 1917 of the Cadastral Survey ofTabaco, Albay, and the issuance in lieu thereof, of a separate transfer certificate of title in his name,covering part of said Lot No. 1917, namely Lot No. 1917-A of Subdivision Plan PSD-63379.

The main facts are not disputed. They are set forth in the order appealed from, from which we quote:

It appears that the aforementioned Lot No. 1917 covered by Original Certificate of Title No.RO-3848 (25322) was originally owned in common by Anatolio Buenconsejo to the extent of½ undivided portion and Lorenzo Bon and Santiago Bon to the extent of the other ½ (Exh.B); that Anatolio Buenconsejo's rights, interests and participation over the portionabovementioned were on January 3, 1961 and by a Certificate of Sale executed by theProvincial Sheriff of Albay, transferred and conveyed to Atty. Tecla San Andres Ziga,awardee in the corresponding auction sale conducted by said Sheriff in connection with theexecution of the decision of the Juvenile Delinquency and Domestic Relations Court in CivilCase No. 25267, entitled "Yolanda Buenconsejo, et al. vs. Anatolio Buenconsejo"; that onDecember 26, 1961 and by a certificate of redemption issued by the Provincial Sheriff of

Albay, the rights, interest, claim and/or or participation which Atty. Tecla San Andres Zigamay have acquired over the property in question by reason of the aforementioned auctionsale award, were transferred and conveyed to the herein petitioner in his capacity as

Attorney-in-fact of the children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo,Elena Buenconsejo and Azucena Buenconsejo (Exh. C).

It would appear, also, that petitioner Santos had redeemed the aforementioned share of AnatolioBuenconsejo, upon the authority of a special power of attorney executed in his favor by the childrenof Anatolio Buenconsejo; that relying upon this power of attorney and redemption made by him,Santos now claims to have acquired the share of Anatolio Buenconsejo in the aforementioned LotNo. 1917; that as the alleged present owner of said share, Santos caused a subdivision plan of saidLot No. 1917 to be made, in which the portion he claims as his share thereof has been marked as

Lot No. 1917-A; and that he wants said subdivision at No. 1917-A to be segregated from Lot No.1917 and a certificate of title issued in his name exclusively for said subdivision Lot No. 1917-A.

As correctly held by the lower court, petitioner's claim is clearly untenable, for: (1) said special powerof attorney authorized him to act on behalf of the children of Anatolio Buenconsejo, and, hence, itcould not have possibly vested in him any property right in his own name; (2) the children of AnatolioBuenconsejo had no authority to execute said power of attorney, because their father is still aliveand, in fact, he and his wife opposed the petition of Santos; (3) in consequence of said power ofattorney (if valid) and redemption, Santos could have acquired no more than the share pro



indiviso of Anatolio Buenconsejo in Lot No. 1917, so that petitioner cannot — without the conformityof the other co-owners (Lorenzo and Santiago Bon), or a judicial decree of partition issued pursuantto the provisions of Rule 69 of the new Rules of Court (Rule 71 of the old Rules of Court) which havenot been followed By Santos — adjudicate to himself in fee simple a determinate portion of said LotNo. 1917, as his share therein, to the exclusion of the other co-owners.

Inasmuch as the appeal is patently devoid of merit, the order appealed from is hereby affirmed, withtreble cost against petitioner-appellant Jose A. Santos y Diaz. It is so ordered.

Bengzon, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.Bautista Angelo, Barrera and Paredes, JJ., took no part.

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