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American Jurisprudence, Second Edition Database updated November 2011 Agency Anne E. Melley, J.D.

, of the staff of the Nat onal !egal "esearch #roup, $nc. $. $N #ENE"A! %op c &ummary 'orrelat on %able "eferences 1. Generally; definitions West's Key Num er !i"est (est)s *ey Number D gest, +r nc pal and Agent 1

A.#.$. #i rary (ho s ,agent,) so as to sub-ect pr nc pal to l ab l ty, under . 2/a0/10/A0 of 'ommod ty E1change Act /2 3.&.'.A. . 40, 56 A.!.". 7ed. 866. %he term ,agency, means a f duc ary relat onsh p by 9h ch a party conf des to another the management of some bus ness to be transacted n the former)s name or on h s or her account, and by 9h ch such other assumes to do the bus ness and render an account of t.:7N1; $t has also been def ned as the f duc ary relat onsh p 9h ch results from the man festat on of consent by one person to another that the other 9 ll act on h s or her behalf and sub-ect to h s or her control, and consent by the other so to act.:7N2; $n an agency relat onsh p, the party for 9hom another acts and from 9hom such other der ves author ty to act s a ,pr nc pal.,:7N<; %he one 9ho acts for and represents the pr nc pal and ac=u res h s or her author ty from the pr nc pal s an ,agent.,:7N4; +ursuant to the grant of author ty by the pr nc pal,:7N8; the agent s the representat ve of the pr nc pal and acts for, n the place of, and nstead of, the pr nc pal.:7N>; %&'&#A()*E S&++#E'EN( Statutes, $estatement (-ird, A"ency 1..1 def nes ,agency, as the f duc ary relat onsh p that ar ses 9hen one person /a ,pr nc pal,0 man fests assent to another person /an ,agent,0 that the agent shall act on the pr nc pal)s behalf and sub-ect to the pr nc pal)s control, and the agent man fests assent or other9 se consents so to act.

"estatement %h rd, Agency . 1.04 def nes the terms? coagents, d sclosed, und sclosed, and un dent f ed pr nc pals, gratu tous agent, not ce, person, po9er g ven as secur ty, po9er of attorney, subagent, super or and subord nate coagents, and trustee and agent@trustee. "estatement %h rd, Agency . 1.02 prov des that an agency relat onsh p ar ses only 9hen the elements stated n "estatement %h rd, Agency . 1.01, def n ng ,agency,, are present, and that 9hether a relat onsh p s character Aed as agency n an agreement bet9een part es or n the conte1t of ndustry or popular usage s not controll ng. %ases, %he pr nc pal controls the agent. $n re J.!.B., >48 &.E.2d 6<< /N.'. 't. App. 20020. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 101223 April 34, 3..1

E&$/(E%5 )N!&S($)A# (E%5N/#/G)ES, )N%., +et t oner, vs. E!W)N %&)6/N and E$W)N %&)6/N, "espondents. DE'$&$DN %5)%/7NA6A$)/, J.: Eefore 3s s a pet t on for rev e9 by cert orar assa l ng the Dec s on 1 of the 'ourt of Appeals dated 10 August 2004 and ts "esolut on 2 dated 12 March 2008 n 'A@ #.". &+ No. 21<52 ent tled, ,Eurotech $ndustr al %echnolog es, $nc. v. Bon. Anton o %. EchaveA., %he assa led Dec s on and "esolut on aff rmed the Drder< dated 25 January 2002 rendered by Judge Anton o %. EchaveA order ng the dropp ng of respondent ED($N 'u Aon /ED($N0 as a party defendant n ' v l 'ase No. 'EE@15>22. %he generat ve facts of the case are as follo9s? +et t oner s engaged n the bus ness of mportat on and d str but on of var ous European ndustr al e=u pment for customers here n the +h l pp nes. $t has as one of ts customers $mpact &ystems &ales /,$mpact &ystems,0 9h ch s a sole propr etorsh p o9ned by respondent E"($N 'u Aon /E"($N0. "espondent ED($N s the sales manager of $mpact &ystems and 9as mpleaded n the court a =uo n sa d capac ty. 7rom January to Apr l 1558, pet t oner sold to $mpact &ystems var ous products allegedly amount ng to n nety@one thousand three hundred th rty@e ght

/+51,<<6.000 pesos. &ubse=uently, respondents sought to buy from pet t oner one un t of sludge pump valued at +280,000.00 9 th respondents maF ng a do9n payment of f fty thousand pesos /+80,000.000.4 (hen the sludge pump arr ved from the 3n ted * ngdom, pet t oner refused to del ver the same to respondents 9 thout the r hav ng fully settled the r ndebtedness to pet t oner. %hus, on 26 June 1558, respondent ED($N and Alberto de Jesus, general manager of pet t oner, e1ecuted a Deed of Ass gnment of rece vables n favor of pet t oner, the pert nent part of 9h ch states? 1.0 %hat A&&$#ND"8 has an outstand ng rece vables from %oledo +o9er 'orporat on n the amount of %B"EE B3ND"ED &$G%H 7$CE %BD3&AND /+<>8,000.000 +E&D& as payment for the purchase of one un t of &el9ood &pate 100D &ludge +umpI 2.0 %hat sa d A&&$#ND" does hereby A&&$#N, %"AN&7E", and 'DNCEH unto the A&&$#NEE> the sa d rece vables from %oledo +o9er 'orporat on n the amount of %B"EE B3ND"ED &$G%H 7$CE %BD3&AND /+<>8,000.000 +E&D& 9h ch rece vables the A&&$#ND" s the la9ful rec p entI <.0 %hat the A&&$#NEE does hereby accept th s ass gnment. 2 7ollo9 ng the e1ecut on of the Deed of Ass gnment, pet t oner del vered to respondents the sludge pump as sho9n by $nvo ce No. 120<4 dated <0 June 1558.6 Allegedly unbeFno9nst to pet t oner, respondents, desp te the e1 stence of the Deed of Ass gnment, proceeded to collect from %oledo +o9er 'ompany the amount of +<>8,1<8.25 as ev denced by 'hecF Coucher No. 05<< 5prepared by sa d po9er company and an off c al rece pt dated 18 August 1558 ssued by $mpact &ystems.10Alarmed by th s development, pet t oner made several demands upon respondents to pay the r obl gat ons. As a result, respondents 9ere able to maFe part al payments to pet t oner. Dn 2 Dctober 155>, pet t onerJs counsel sent respondents a f nal demand letter 9here n t 9as stated that as of 11 June 155>, respondentsJ total obl gat ons stood at +258,000.00 e1clud ng nterests and attorneyJs fees.11 Eecause of respondentsJ fa lure to ab de by sa d f nal demand letter, pet t oner nst tuted a compla nt for sum of money, damages, 9 th appl cat on for prel m nary attachment aga nst here n respondents before the "eg onal %r al 'ourt of 'ebu ' ty. 12 Dn 6 January 1552, the tr al court granted pet t onerJs prayer for the ssuance of 9r t of prel m nary attachment.1< Dn 28 June 1552, respondent ED($N f led h s Ans9er 14 9here n he adm tted pet t onerJs allegat ons 9 th respect to the sale transact ons entered nto by $mpact &ystems and pet t oner bet9een January and Apr l 1558. 18 Be, ho9ever, d sputed the total amount of $mpact &ystemsJ ndebtedness to pet t oner 9h ch, accord ng to h m, amounted to only +220,000.00.1> Ey 9ay of spec al and aff rmat ve defenses, respondent ED($N alleged that he s not a real party n nterest n th s case. Accord ng to h m, he 9as act ng as mere

agent of h s pr nc pal, 9h ch 9as the $mpact &ystems, n h s transact on 9 th pet t oner and the latter 9as very much a9are of th s fact. $n support of th s argument, pet t oner po nts to paragraphs 1.2 and 1.< of pet t onerJs 'ompla nt stat ng K 1.2. Defendant Er9 n B. 'u Aon, s of legal age, marr ed, a res dent of 'ebu ' ty. Be s the propr etor of a s ngle propr etorsh p bus ness Fno9n as $mpact &ystems &ales /,$mpact &ystems, for brev ty0, 9 th off ce located at 4>@A del "osar o &treet, 'ebu ' ty, 9here he may be served summons and other processes of the Bonorable 'ourt. 1.<. Defendant Ed9 n E. 'u Aon s of legal age, 7 l p no, marr ed, a res dent of 'ebu ' ty. Be s the &ales Manager of $mpact &ystems and s sued n th s act on n such capac ty.12 Dn 2> June 1556, pet t oner f led a Mot on to Declare Defendant E"($N n Default 9 th Mot on for &ummary Judgment. %he tr al court granted pet t onerJs mot on to declare respondent E"($N n default ,for h s fa lure to ans9er 9 th n the prescr bed per od desp te the opportun ty granted, 16 but t den ed pet t onerJs mot on for summary -udgment n ts Drder of <1 August 2001 and scheduled the pre@tr al of the case on 1> Dctober 2001.15Bo9ever, the conduct of the pre@tr al conference 9as deferred pend ng the resolut on by the tr al court of the spec al and aff rmat ve defenses ra sed by respondent ED($N. 20 After the f l ng of respondent ED($NJs Memorandum 21 n support of h s spec al and aff rmat ve defenses and pet t onerJs oppos t on 22 thereto, the tr al court rendered ts assa led Drder dated 25 January 2002 dropp ng respondent ED($N as a party defendant n th s case. Accord ng to the tr al court K A study of Anne1 ,#, to the compla nt sho9s that n the Deed of Ass gnment, defendant Ed9 n E. 'u Aon acted n behalf of or represented :$mpact; &ystems &alesI that :$mpact; &ystems &ale s a s ngle propr etorsh p ent ty and the compla nt sho9s that defendant Er9 n B. 'u Aon s the propr etorI that pla nt ff corporat on s represented by ts general manager Alberto de Jesus n the contract 9h ch s dated June 26, 1558. A study of Anne1 ,B, to the compla nt reveals that :$mpact; &ystems &ales 9h ch s o9ned solely by defendant Er9 n B. 'u Aon, made a do9n payment of +80,000.00 that Anne1 ,B, s dated June <0, 1558 or t9o days after the e1ecut on of Anne1 ,#,, thereby sho9 ng that :$mpact; &ystems &ales rat f ed the act of Ed9 n E. 'u AonI the records further sho9 that pla nt ff Fne9 that :$mpact; &ystems &ales, the pr nc pal, rat f ed the act of Ed9 n E. 'u Aon, the agent, 9hen t accepted the do9n payment of +80,000.00. +la nt ff, therefore, cannot say that t 9as dece ved by defendant Ed9 n E. 'u Aon, s nce n the nstant case the pr nc pal has rat f ed the act of ts agent and pla nt ff Fne9 about sa d rat f cat on. +la nt ff could not say that the sub-ect contract 9as entered nto by Ed9 n E. 'u Aon n e1cess of h s po9ers s nce :$mpact; &ystems &ales made a do9n payment of +80,000.00 t9o days later.

$n v e9 of the 7orego ng, the 'ourt d rects that defendant Ed9 n E. 'u Aon be dropped as party defendant.2< Aggr eved by the adverse rul ng of the tr al court, pet t oner brought the matter to the 'ourt of Appeals 9h ch, ho9ever, aff rmed the 25 January 2002 Drder of the court a =uo. %he d spos t ve port on of the no9 assa led Dec s on of the 'ourt of Appeals states? (BE"E7D"E, f nd ng no v able legal ground to reverse or mod fy the conclus ons reached by the publ c respondent n h s Drder dated January 25, 2002, t s hereby A77$"MED.24 +et t onerJs mot on for recons derat on 9as den ed by the appellate court n ts "esolut on promulgated on 12 March 2008. Bence, the present pet t on ra s ng, as sole ground for ts allo9ance, the follo9 ng? %BE 'D3"% D7 A++EA!& 'DMM$%%ED A "ECE"&$E!E E""D" (BEN $% "3!ED %BA% "E&+DNDEN% ED($N '3$LDN, A& A#EN% D7 $M+A'% &H&%EM& &A!E&ME"($N '3$LDN, $& ND% +E"&DNA!!H !$AE!E, EE'A3&E BE BA& NE$%BE" A'%ED EEHDND %BE &'D+E D7 B$& A#EN'H ND" D$D BE +A"%$'$+A%E $N %BE +E"+E%3A%$DN D7 A 7"A3D.28 %o support ts argument, pet t oner po nts to Art cle 1652 of the Ne9 ' v l 'ode 9h ch states? Art. 1652. %he agent 9ho acts as such s not personally l able to the party 9 th 9hom he contracts, unless he e1pressly b nds h mself or e1ceeds the l m ts of h s author ty 9 thout g v ng such party suff c ent not ce of h s po9ers. +et t oner contends that the 'ourt of Appeals fa led to apprec ate the effect of E"($NJs act of collect ng the rece vables from the %oledo +o9er 'orporat on not9 thstand ng the e1 stence of the Deed of Ass gnment s gned by ED($N on behalf of $mpact &ystems. (h le sa d collect on d d not revoFe the agency relat ons of respondents, pet t oner ns sts that E"($NJs act on repud ated ED($NJs po9er to s gn the Deed of Ass gnment. As ED($N d d not suff c ently not fy t of the e1tent of h s po9ers as an agent, pet t oner cla ms that he should be made personally l able for the obl gat ons of h s pr nc pal. 2> +et t oner also contends that t fell v ct m to the fraudulent scheme of respondents 9ho nduced t nto sell ng the one un t of sludge pump to $mpact &ystems and s gn ng the Deed of Ass gnment. +et t oner d rects the attent on of th s 'ourt to the fact that respondents are bound not only by the r pr nc pal and agent relat onsh p but are n fact full@blooded brothers 9hose success ve contraven ng acts bore the obv ous s gns of consp racy to defraud pet t oner. 22 $n h s 'omment,26 respondent ED($N aga n pos ts the argument that he s not a real party n nterest n th s case and t 9as proper for the tr al court to have h m dropped as a defendant. Be ns sts that he 9as a mere agent of $mpact &ystems 9h ch s o9ned by E"($N and that h s status as such s Fno9n even to pet t oner as t s alleged n the 'ompla nt that he s be ng sued n h s capac ty as the sales

manager of the sa d bus ness venture. ! Fe9 se, respondent ED($N po nts to the Deed of Ass gnment 9h ch clearly states that he 9as act ng as a representat ve of $mpact &ystems n sa d transact on. (e do not f nd mer t n the pet t on. $n a contract of agency, a person b nds h mself to render some serv ce or to do someth ng n representat on or on behalf of another 9 th the latterJs consent.25 %he underly ng pr nc ple of the contract of agency s to accompl sh results by us ng the serv ces of others K to do a great var ety of th ngs l Fe sell ng, buy ng, manufactur ng, and transport ng. <0 $ts purpose s to e1tend the personal ty of the pr nc pal or the party for 9hom another acts and from 9hom he or she der ves the author ty to act. <1 $t s sa d that the bas s of agency s representat on, that s, the agent acts for and on behalf of the pr nc pal on matters 9 th n the scope of h s author ty and sa d acts have the same legal effect as f they 9ere personally e1ecuted by the pr nc pal. <2 Ey th s legal f ct on, the actual or real absence of the pr nc pal s converted nto h s legal or -ur d cal presence K =u fac t per al um fac t per se. << %he elements of the contract of agency are? /10 consent, e1press or mpl ed, of the part es to establ sh the relat onsh pI /20 the ob-ect s the e1ecut on of a -ur d cal act n relat on to a th rd personI /<0 the agent acts as a representat ve and not for h mselfI /40 the agent acts 9 th n the scope of h s author ty. <4 $n th s case, the part es do not d spute the e1 stence of the agency relat onsh p bet9een respondents E"($N as pr nc pal and ED($N as agent. %he only cause of the present d spute s 9hether respondent ED($N e1ceeded h s author ty 9hen he s gned the Deed of Ass gnment thereby b nd ng h mself personally to pay the obl gat ons to pet t oner. +et t oner f rmly bel eves that respondent ED($N acted beyond the author ty granted by h s pr nc pal and he should therefore bear the effect of h s deed pursuant to Art cle 1652 of the Ne9 ' v l 'ode. (e d sagree. Art cle 1652 re nforces the fam l ar doctr ne that an agent, 9ho acts as such, s not personally l able to the party 9 th 9hom he contracts. %he same prov s on, ho9ever, presents t9o nstances 9hen an agent becomes personally l able to a th rd person. %he f rst s 9hen he e1pressly b nds h mself to the obl gat on and the second s 9hen he e1ceeds h s author ty. $n the last nstance, the agent can be held l able f he does not g ve the th rd party suff c ent not ce of h s po9ers. (e hold that respondent ED($N does not fall 9 th n any of the e1cept ons conta ned n th s prov s on. %he Deed of Ass gnment clearly states that respondent ED($N s gned thereon as the sales manager of $mpact &ystems. As d scussed else9here, the pos t on of manager s un =ue n that t presupposes the grant of broad po9ers 9 th 9h ch to conduct the bus ness of the pr nc pal, thus? %he po9ers of an agent are part cularly broad n the case of one act ng as a general agent or managerI such a pos t on presupposes a degree of conf dence

reposed and nvest ture 9 th l beral po9ers for the e1erc se of -udgment and d scret on n transact ons and concerns 9h ch are nc dental or appurtenant to the bus ness entrusted to h s care and management. $n the absence of an agreement to the contrary, a manag ng agent may enter nto any contracts that he deems reasonably necessary or re=u s te for the protect on of the nterests of h s pr nc pal entrusted to h s management. 1 1 1. <8 Apply ng the forego ng to the present case, 9e hold that Ed9 n 'u Aon acted 9ell@9 th n h s author ty 9hen he s gned the Deed of Ass gnment. %o recall, pet t oner refused to del ver the one un t of sludge pump unless t rece ved, n full, the payment for $mpact &ystemsJ ndebtedness. <> (e may very 9ell assume that $mpact &ystems desperately needed the sludge pump for ts bus ness s nce after t pa d the amount of f fty thousand pesos /+80,000.000 as do9n payment on < March 1558,<2 t st ll pers sted n negot at ng 9 th pet t oner 9h ch culm nated n the e1ecut on of the Deed of Ass gnment of ts rece vables from %oledo +o9er 'ompany on 26 June 1558.<6%he s gn f cant amount of t me spent on the negot at on for the sale of the sludge pump underscores $mpact &ystemsJ perseverance to get hold of the sa d e=u pment. %here s, therefore, no doubt n our m nd that respondent ED($NJs part c pat on n the Deed of Ass gnment 9as ,reasonably necessary, or 9as re=u red n order for h m to protect the bus ness of h s pr nc pal. Bad he not acted n the 9ay he d d, the bus ness of h s pr nc pal 9ould have been adversely affected and he 9ould have v olated h s f duc ary relat on 9 th h s pr nc pal. (e l Fe9 se taFe note of the fact that n th s case, pet t oner s seeF ng to recover both from respondents E"($N, the pr nc pal, and ED($N, the agent. $t s 9ell to state here that Art cle 1652 of the Ne9 ' v l 'ode upon 9h ch pet t oner anchors ts cla m aga nst respondent ED($N ,does not hold that n case of e1cess of author ty, both the agent and the pr nc pal are l able to the other contract ng party.,<5 %o re terate, the f rst part of Art cle 1652 declares that the pr nc pal s l able n cases 9hen the agent acted 9 th n the bounds of h s author ty. 3nder th s, the agent s completely absolved of any l ab l ty. %he second part of the sa d prov s on presents the s tuat ons 9hen the agent h mself becomes l able to a th rd party 9hen he e1pressly b nds h mself or he e1ceeds the l m ts of h s author ty 9 thout g v ng not ce of h s po9ers to the th rd person. Bo9ever, t must be po nted out that n case of e1cess of author ty by the agent, l Fe 9hat pet t oner cla ms e1 sts here, the la9 does not say that a th rd person can recover from both the pr nc pal and the agent. 40 As 9e declare that respondent ED($N acted 9 th n h s author ty as an agent, 9ho d d not ac=u re any r ght nor ncur any l ab l ty ar s ng from the Deed of Ass gnment, t follo9s that he s not a real party n nterest 9ho should be mpleaded n th s case. A real party n nterest s one 9ho ,stands to be benef ted or n-ured by the -udgment n the su t, or the party ent tled to the ava ls of the su t.,41 $n th s respect, 9e susta n h s e1clus on as a defendant n the su t before the court a =uo.

(BE"E7D"E, prem ses cons dered, the present pet t on s DEN$ED and the Dec s on dated 10 August 2004 and "esolut on dated 12 March 2008 of the 'ourt of Appeals n 'A@#.". &+ No. 21<52, aff rm ng the Drder dated 25 January 2002 of the "eg onal %r al 'ourt, Eranch 6, 'ebu ' ty, s A77$"MED. !et the records of th s case be remanded to the "eg onal %r al 'ourt, Eranch 6, 'ebu ' ty, for the cont nuat on of the proceed ngs aga nst respondent Er9 n 'u Aon. &D D"DE"ED. ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce (E 'DN'3"? %/NS&E#/ 8NA$ES7SAN()AG/ Assoc ate Just ce 'ha rperson 'A. A#)%)A A&S($)A7'A$()NE6 $/'E/ J. %A##EJ/, S$. Assoc ate Just ce Asscoc ate Just ce AN(/N)/ E!&A$!/ 9. NA%5&$A Assoc ate Just ce A%%E&%A%$DN $ attest that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. %/NS&E#/ 8NA$ES7SAN()AG/ Assoc ate Just ce 'ha rperson, %h rd D v s on 'E"%$7$'A%$DN +ursuant to &ect on 1<, Art cle C$$$ of the 'onst tut on, and the D v s on 'ha rpersonJs Attestat on, t s hereby cert f ed that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
1

+enned by Assoc ate Just ce C cente !. Hap 9 th Assoc ate Just ces Arsen o J. Magpale and "amon M. Eato , Jr., concurr ngI rollo, pp. <<@<>.

$d. at <2@<5. $d. at 6<@64. Anne1 ,B, of the 'ompla ntI records, p. 16. "eferr ng to $mpact &ystems &ales. "eferr ng to pet t oner Eurotech $ndustr al %echnolog es, $nc. Anne1 ,#, of the 'ompla ntI records, p. 12. Anne1 ,B, of the 'ompla ntI d. at 16. Anne1 ,$, of the 'ompla ntI d. at 15. Anne1 ,J, of the 'ompla ntI d. at 20. Anne1 ,!, of the 'ompla ntI d. at 22. %he case 9as raffled off to Eranch 6 of the "%' 'ebu ' ty. "ecords, p. 22. $d. at <6@41. $d. at <6. $b d. $d. at 1. $d. at 80. $d. at >1.

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10

11

12

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14

18

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12

16

15

20

Ed9 n 'u AonJs counsel re=uested that the &pec al and Aff rmat ve Defenses n h s Ans9er be treated as h s Mot on to D sm ssI Drder dated 1> Dctober 2001I d. at 26.
21

$d. at 62@6>. Memorandum dated 1> November 2001I d. at 62@51. $d. at 58@5>. "ollo, p. <8. $d. at 12. $d. at 21@22. $d. at 28@2>. $d. at 56@114.

22

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24

28

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22

26

25

Art cle 16>6 of the ' v l 'ode. "euschle n and #regory, Agency and +artnersh p /1525 ed t on0, p. 1. < Am Jur 2d, .1. +ad lla, Agency %e1t and 'ases, /156> ed t on0, p. 2. Be 9ho acts through another acts by or for h mselfI d. at .2. Hu Eng 'ho v. +an Amer can (orld A r9ays, $nc., <68 +h l. 48<, 4>8 /20000. < Am Jur 2d, .51, p. >02. "ecords, p. 2. Anne1 ,B, of the 'ompla ntI records, p. 16. Anne1 ,#, of the 'ompla ntI d. at 12.

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+h l pp ne +roducts 'ompany v. +r mater a &oc ete Anonyme +our !e 'ommerce E1ter eur, 122 +h l. >56, 202 /15>80.
40

De !eon and De !eon, Jr., 'omments and 'ases on +artnersh p, Agency, and %rusts /1555 ed t on0, p. 812.
41

"ule <, .1 of the "ev sed "ules of 'ourt.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la G.$. No. #73;443 January 41, 1<1= $A'/N $A##/S, Administrator of t-e Estate of %/N%E+%)/N $A##/S, pet t oner, vs. :E#)> G/ %5AN ? S/NS $EA#(8 %/$+/$A()/N and %/&$( /: A++EA#S, respondents. Seno, Mendoza & Associates for petitioner. Ramon Duterte for private respondent.

'&@/6 +A#'A, J.: %h s s a case of an attorney@ n@fact, & meon "allos, 9ho after of h s death of h s pr nc pal, 'oncepc on "allos, sold the latter)s und v ded share n a parcel of land pursuant to a po9er of attorney 9h ch the pr nc pal had e1ecuted n favor. %he adm n strator of the estate of the 9ent to court to have the sale declared uneanforceable and to recover the d sposed share. %he tr al court granted the

rel ef prayed for, but upon appeal the 'ourt of Appeals uphold the val d ty of the sale and the compla nt. Bence, th s +et t on for "ev e9 on cert orar . %he follo9 ng facts are not d sputed. 'oncepc on and #erund a both surnamed "allos 9ere s sters and reg stered co@o9ners of a parcel of land Fno9n as !ot No. 856< of the 'adastral &urvey of 'ebu covered by %ransfer 'ert f cate of % tle No. 1111> of the "eg stry of 'ebu. Dn Apr l 21, 1584, the s sters e1ecuted a spec al po9er of attorney n favor of the r brother, & meon "allos, author A ng h m to sell for and n the r behalf lot 856<. Dn March <, 1588, 'oncepc on "allos d ed. Dn &eptember 12, 1588, & meon "allos sold the und v ded shares of h s s sters 'oncepc on and #erund a n lot 856< to 7el 1 #o 'han N &ons "ealty 'orporat on for the sum of +10,>6>.50. %he deed of sale 9as reg stered n the "eg stry of Deeds of 'ebu, %'% No. 11116 9as cancelled, and a ne9 transfer cert f cate of % tle No. 12565 9as ssued n the named of the vendee. Dn May 16, 158> "amon "allos as adm n strator of the $ntestate Estate of 'oncepc on "allos f led a compla nt docFeted as ' v l 'ase No. "@48<0 of the 'ourt of 7 rst $nstance of 'ebu, pray ng /10 that the sale of the und v ded share of the deceased 'oncepc on "allos n lot 856< be d unenforceable, and sa d share be reconveyed to her estateI /20 that the 'ert f cate of )t tle ssued n the name of 7el 1 #o 'han N &ons "ealty 'orporat on be cancelled and another t tle be ssued n the names of the corporat on and the ,$ntestate estate of 'oncepc on "allos, n e=ual und v ded and /<0 that pla nt ff be ndemn f ed by 9ay of attorney)s fees and payment of costs of su t. Named party defendants 9ere 7el 1 #o 'han N &ons "ealty 'orporat on, & meon "allos, and the "eg ster of Deeds of 'ebu, but subse=uently, the latter 9as dropped from the compla nt. %he compla nt 9as amended t9 ceI defendant 'orporat on)s Ans9er conta ned a crosscla m aga nst ts co@defendant, & mon "allos 9h le the latter f led th rd@party compla nt aga nst h s s ster, #erund a "allos (h le the case 9as pend ng n the tr al court, both & mon and h s s ster #erund a d ed and they 9ere subst tuted by the respect ve adm n strators of the r estates. After tr al the court a quo rendered -udgment 9 th the follo9 ng d spos t ve port on? A. Dn +la nt ffs 'ompla nt O /10 Declar ng the deed of sale, E1h. ,',, null and vo d nsofar as the one@half pro@ nd v so share of 'oncepc on "allos n the property n =uest on, O !ot 856< of the 'adastral &urvey of 'ebu O s concernedI /20 Drder ng the "eg ster of Deeds of 'ebu ' ty to cancel %ransfer 'ert f cate of % tle No. 12565 cover ng !ot 856< and to ssue n l eu thereof another n the names of 7E!$G #D 'BAN N &DN& "EA!%H 'D"+D"A%$DN and the Estate of 'oncepc on "allos n the proport on of one@half /1M20 share each pro@ nd v soI /<0 Drder ng 7el 1 #o 'han N &ons "ealty 'orporat on to del ver the possess on of an und v ded one@half /1M20 share of !ot 856< to the here n pla nt ffI

/40 &entenc ng the defendant Juan %. Eorromeo, adm n strator of the Estate of & meon "allos, to pay to pla nt ff n concept of reasonable attorney)s fees the sum of +1,000.00I and /80 Drder ng both defendants to pay the costs -o ntly and severally. E. Dn #D 'BAN%& 'ross@'la m? /10 &entenc ng the co@defendant Juan %. Eorromeo, adm n strator of the Estate of & meon "allos, to pay to defendant 7el 1 'o 'han N &ons "ealty 'orporat on the sum of +8,<4<.48, represent ng the pr ce of one@half /1M20 share of lot 856<I /20 Drder ng co@defendant Juan %. Eorromeo, adm n strator of the Estate of & meon "allos, to pay n concept of reasonable attorney)s fees to 7el 1 #o 'han N &ons "ealty 'orporat on the sum of +800.00. '. Dn %h rd@+arty 'ompla nt of defendant Juan %. Eorromeo adm n strator of Estate of & meon "allos, aga nst Josef na "allos spec al adm n stratr 1 of the Estate of #erund a "allos? /10 D sm ss ng the th rd@party compla nt 9 thout pre-ud ce to f l ng e ther a compla nt aga nst the regular adm n strator of the Estate of #erund a "allos or a cla m n the $ntestate@Estate of 'erund a "allos, cover ng the same sub-ect@ matter of the th rd@party compla nt, at bar. /pp. 56@100, "ecord on Appeal0 7el 1 #o 'han N &ons "ealty 'orporat on appealed n due t me to the 'ourt of Appeals from the forego ng -udgment nsofar as t set as de the sale of the one@ half /1M20 share of 'oncepc on "allos. %he appellate tr bunal, as adverted to earl er, resolved the appeal on November 20, 15>4 n favor of the appellant corporat on susta n ng the sale n =uest on. 1 %he appellee adm n strator, "amon "allos, moved for a recons der of the dec s on but the same 9as den ed n a resolut on of March 4, 15>8. 3 (hat s the legal effect of an act performed by an agent after the death of h s pr nc palP Appl ed more part cularly to the nstant case, (e have the =uery. s the sale of the und v ded share of 'oncepc on "allos n lot 856< val d although t 9as e1ecuted by the agent after the death of h s pr nc palP (hat s the la9 n th s -ur sd ct on as to the effect of the death of the pr nc pal on the author ty of the agent to act for and n behalf of the latterP $s the fact of Fno9ledge of the death of the pr nc pal a mater al factor n determ n ng the legal effect of an act performed after such deathP Eefore proceed ngs to the ssues, (e shall br efly restate certa n pr nc ples of la9 relevant to the matter t nder cons derat on. 1. $t s a bas c a1 om n c v l la9 embod ed n our ' v l 'ode that no one may contract n the name of another 9 thout be ng author Aed by the latter, or unless he has by la9 a r ght to represent h m. 4 A contract entered nto n the name of another by one 9ho has no author ty or the legal representat on or 9ho has acted beyond h s po9ers, shall be unenforceable, unless t s rat f ed, e1pressly

or mpl edly, by the person on 9hose behalf t has been e1ecuted, before t s revoFed by the other contract ng party. ; Art cle 140< /10 of the same 'ode also prov des? A"%. 140<. %he follo9 ng contracts are unenforceable, unless they are -ust f ed? /10 %hose entered nto n the name of another person by one 9ho h @ been g ven no author ty or legal representat on or 9ho has acted beyond h s po9ersI ... Dut of the above g ven pr nc ples, sprung the creat on and acceptance of the relationship of agency 9hereby one party, caged the pr nc pal / mandante0, author Aes another, called the agent /mandatario0, to act for and n h s behalf n transact ons 9 th th rd persons. %he essent al elements of agency are? /10 there s consent, e1press or mpl ed of the part es to establ sh the relat onsh pI /20 the ob-ect s the e1ecut on of a -ur d cal act n relat on to a th rd personI /<0 the agents acts as a representat ve and not for h mself, and /40 the agent acts 9 th n the scope of h s author ty. 2 Agency s bas cally personal representative, and derivative n nature. %he author ty of the agent to act emanates from the po9ers granted to h m by h s pr nc palI h s act s the act of the pr nc pal f done 9 th n the scope of the author ty. Qui facit per alium facit se. ,Be 9ho acts through another acts h mself,. 0 2. %here are var ous 9ays of e1t ngu sh ng agency, 1 but her (e are concerned only 9 th one cause O death of the pr nc pal +aragraph < of Art. 1515 of the ' v l 'ode 9h ch 9as taFen from Art. 1205 of the &pan sh ' v l 'ode prov des? A"%. 1515. Agency is e tinguished. 111 111 111 <. !y the death, c v l nterd ct on, nsan ty or nsolvency of the pr nc pal or of the agentI ... /Emphas s suppl ed0 Ey reason of the very nature of the relat onsh p bet9een +r nc pal and agent, agency s e1t ngu shed by the death of the pr nc pal or the agent. %h s s the la9 n th s -ur sd ct on. = Manresa comment ng on Art. 1205 of the &pan sh ' v l 'ode e1pla ns that the rat onale for the la9 s found n the"uridical #asis of agency 9h ch s representation %hem be ng an n. ntegrat on of the personal ty of the pr nc pal ntegrat on that of the agent t s not poss ble for the representat on to cont nue to e1 st once the death of e ther s establ sh. $othier agrees 9 th Manresa that by reason of the nature of agency, death s a necessary cause for ts e1t nct on. %aurent says that the -ur d cal t e bet9een the pr nc pal and the agent s severed pso -ure upon the death of e ther 9 thout necess ty for the he rs of the fact to not fy the agent of the fact of death of the former. < %he same rule preva ls at common la9 O the death of the pr nc pal effects nstantaneous and absolute revocat on of the author ty of the agent unless the

+o9er be coupled 9 th an nterest. 1. %h s s the prevalent rule n Amer can Jur sprudence 9here t s 9ell@settled that a po9er 9 thout an nterest confer. red upon an agent s d ssolved by the pr nc pal)s death, and any attempted e1ecut on of the po9er after9ard s not b nd ng on the he rs or representat ves of the deceased. 11 <. $s the general rule prov ded for n Art cle 1515 that the death of the pr nc pal or of the agent e1t ngu shes the agency, sub-ect to any e1cept on, and f so, s the nstant case 9 th n that e1cept onP %hat s the determ nat ve po nt n ssue n th s l t gat on. $t s the content on of respondent corporat on 9h ch 9as susta ned by respondent court that not9 thstand ng the death of the pr nc pal 'oncepc on "allos the act of the attorney@ n@fact, & meon "allos n sell ng the former)s sham n the property s val d and enforceable nasmuch as the corporat on acted n good fa th n buy ng the property n =uest on. Art cles 15<0 and 15<1 of the ' v l 'ode prov de the e1cept ons to the general rule afore@ment oned. A"%. 15<0. %he agency shall rema n n full force and effect even after the death of the pr nc pal, f t has been const tuted n the common nterest of the latter and of the agent, or n the nterest of a th rd person 9ho has accepted the st pulat on n h s favor. A"%. 15<1. Anyth ng done by the agent, 9 thout Fno9ledge of the death of the pr nc pal or of any other cause 9h ch e1t ngu shes the agency, s val d and shall be fully effect ve 9 th respect to th rd persons 9ho may have contracted 9 th h m n good. fa th. Art cle 15<0 s not nvolved because adm ttedly the spec al po9er of attorney e1ecuted n favor of & meon "allos 9as not coupled 9 th an nterest. Art cle 15<1 s the appl cable la9. 3nder th s prov s on, an act done by the agent after the death of h s pr nc pal s val d and effect ve only under t9o cond t ons, v A? /10 that the agent acted &ithout 'no&ledge of the death of the principal and ()* that the third person &ho contracted &ith the agent himself acted in good faith. #ood fa th here means that the th rd person 9as not a9are of the death of the pr nc pal at the t me he contracted 9 th sa d agent. %hese t9o re=u s tes must concur the absence of one 9 ll render the act of the agent nval d and unenforceable. $n the nstant case, t cannot be =uest oned that the agent, & meon "allos, Fne9 of the death of h s pr nc pal at the t me he sold the latter)s share n !ot No. 856< to respondent corporat on. %he Fno9ledge of the death s clearly to be nferred from the plead ngs f led by & mon "allos before the tr al court. 13 %hat & meon "allos Fne9 of the death of h s s ster 'oncepc on s also a f nd ng of fact of the court a =uo 14 and of respondent appellate court 9hen the latter stated that & mon "allos )must have Fno9n of the death of h s s ster, and yet he proceeded 9 th the sale of the lot n the name of both h s s sters 'oncepc on and #erund a

"allos 9 thout nform ng appellant /the realty corporat on0 of the death of the former. 1; Dn the bas s of the establ shed Fno9ledge of & mon "allos concern ng the death of h s pr nc pal 'oncepc on "allos, Article +,-+ of the .ivil .ode is inapplica#le. %he la9 e1pressly re=u res for ts appl cat on lacF of Fno9ledge on the part of the agent of the death of h s pr nc palI t s not enough that the th rd person acted n good fa th. %hus n Euason N "eyes v. +anuyas, the 'ourt apply ng Art cle 12<6 of the old ' v l rode no9 Art. 15<1 of the ne9 ' v l 'ode susta ned the val d ty , of a sale made after the death of the pr nc pal #ecause it &as not sho&n that the agent 'ne& of his principal/s demise . 12 %o the same effect s the case of 0errera, et al., v. %uy 1im 2uan, et al., 15>1, 9here n the 9ords of Just ce Jesus Earrera the 'ourt stated? ... even grant ng arguemendo that !u s Berrera d d d e n 15<>, pla nt ffs presented no proof and there s no nd cat on n the record, that the agent !uy * m #uan 9as a9are of the death of h s pr nc pal at the t me he sold the property. %he death >f the pr nc pal does not render the act of an agent unenforceable, 9here the latter had no Fno9ledge of such e1t ngu shment of the agency. /1 &'"A 40>, 4120 4. $n susta n ng the val d ty of the sale to respondent cons derat on the 'ourt of Appeals reasoned out that there s no prov s on n the 'ode 9h ch prov des that 9hatever s done by an agent hav ng Fno9ledge of the death of h s pr nc pal s vo d even 9 th respect to th rd persons 9ho may have contracted 9 th h m n good fa th and 9 thout Fno9ledge of the death of the pr nc pal. 10 (e cannot see the mer ts of the forego ng argument as t gnores the e1 stence of the general rule enunc ated n Art cle 1515 that the death of the pr nc pal e1t ngu shes the agency. %hat be ng the general rule t follo9s a fortiorithat any act of an agent after the death of h s pr nc pal s vo d a# initio unless the same fags under the e1cept on prov ded for n the aforement oned Art cles 15<0 and 15<1. Art cle 15<1, be ng an e1cept on to the general rule, s to be str ctly construed, t s not to be g ven an nterpretat on or appl cat on beyond the clear mport of ts terms for other9 se the courts 9 ll be nvolved n a process of leg slat on outs de of the r -ud c al funct on. 8. Another argument advanced by respondent court s that the vendee act ng n good fa th rel ed on the po9er of attorney 9h ch 9as duly reg stered on the or g nal cert f cate of t tle recorded n the "eg ster of Deeds of the prov nce of 'ebu, that no not ce of the death 9as aver annotated on sa d cert f cate of t tle by the he rs of the pr nc pal and accord ngly they must suffer the conse=uences of such om ss on. 11 %o support such argument reference s made to a port on n Manresa/s 'ommentar es 9h ch (e =uote? $f the agency has been granted for the purpose of contract ng 9 th certa n persons, the revocat on must be made Fno9n to them. Eut f the agency s

general nature, 9 thout reference to part cular person 9 th 9hom the agent s to contract, t s suff c ent that the pr nc pal e1erc se due d l gence to maFe the revocat on of the agency publ c ty Fno9n. $n case of a general po9er 9h ch does not spec fy the persons to 9hom represents) on should be made, t s the general op n on that all acts, e1ecuted 9 th th rd persons 9ho contracted n good fa th, ( thout Fno9ledge of the revocat on, are val d. $n such case, the pr nc pal may e1erc se h s r ght aga nst the agent, 9ho, Fno9 ng of the revocat on, cont nued to assume a personal ty 9h ch he no longer had. /Manresa Col. 11, pp. 8>1 and 828I pp. 18@1>, rollo0 %he above d scourse ho9ever, treats of revocat on by an act of the pr nc pal as a mode of term nat ng an agency 9h ch s to be d st ngu shed from revocat on by operation of la& such as death of the pr nc pal 9h ch obta ns n th s case. Dn page s 1 of th s Dp n on (e stressed that by reason of the very nature of the relat onsh p bet9een pr nc pal and agent, agency s e1t ngu shed ipso "ure upon the death of e ther pr nc pal or agent. Although a revocat on of a po9er of attorney to be effect ve must be commun cated to the part es concerned, 1= yet a revocat on by operat on of la9, such as by death of the pr nc pal s, as a rule, nstantaneously effect ve nasmuch as ,by legal f ct on the agent)s e1erc se of author ty s regarded as an e1ecut on of the pr nc pal)s continuing &ill. 1<( th death, the pr nc pal)s 9 ll ceases or s the of author ty s e1t ngu shed. %he ' v l 'ode does not mpose a duty on the he rs to not fy the agent of the death of the pr nc pal (hat the 'ode prov des n Art cle 15<2 s that, f the agent die his heirs must notify the principal thereof , and n the meant me adopt such measures as the c rcumstances may demand n the nterest of the latter. Bence, the fact that no not ce of the death of the pr nc pal 9as reg stered on the cert f cate of t tle of the property n the Dff ce of the "eg ster of Deeds, s not fatal to the cause of the estate of the pr nc pal >. Bold ng that the good fa th of a th rd person n sa d 9 th an agent affords the former suff c ent protect on, respondent court dre9 a ,parallel, bet9een the nstant case and that of an nnocent purchaser for value of a land, stat ng that f a person purchases a reg stered land from one 9ho ac=u red t n bad fa th O even to the e1tent of forego ng or fals fy ng the deed of sale n h s favor O the reg stered o9ner has no recourse aga nst such nnocent purchaser for value but only aga nst the forger. 3. %o support the correctness of th s respondent corporat on, n ts br ef, c tes the case of !londeau, et al., v. 3ano and 4alle"o, >1 +h l. >28. (e =uote from the br ef? $n the case of Angel Elondeau et al. v. Agust n Nano et al., >1 +h l. ><0, one Calle-o 9as a co@o9ner of lands 9 th Agust n Nano. %he latter had a po9er of attorney supposedly e1ecuted by Calle-o Nano n h s favor. Calle-o del vered to Nano h s land t tles. %he po9er 9as reg stered n the Dff ce of the "eg ster of Deeds. (hen the la9yer@husband of Angela Elondeau 9ent to that Dff ce, he found all n order nclud ng the po9er of attorney. Eut Calle-o den ed hav ng

e1ecuted the po9er %he lo9er court susta ned Calle-o and the pla nt ff Elondeau appealed. "evers ng the dec s on of the court a =uo, the &upreme 'ourt, =uot ng the rul ng n the case of 5liason v. 6il#orn, 2>1 3.&. 482, held? Eut there s a narro9er ground on 9h ch the defenses of the defendant@ appellee must be overruled. Agust n Nano had possess on of Jose Calle-o)s t tle papers. ( thout those t tle papers handed over to Nano 9 th the ac=u escence of Calle-o, a fraud could not have been perpetuated. (hen 7ernando de la 'anters, a member of the +h l pp ne Ear and the husband of Angela Elondeau, the pr nc pal pla nt ff, searched the reg strat on record, he found them n due form nclud ng the po9er of attorney of Calla-o n favor of Nano. $f th s had not been so and f thereafter the proper notat on of the encumbrance could not have been made, Angela Elondeau 9ould not have sent +12,000.00 to the defendant Calle-o.) An e1ecuted transfer of reg stered lands placed by the reg stered o9ner thereof n the hands of another operates as a representat on to a th rd party that the holder of the transfer s author Aed to deal 9 th the land. As bet9een t9o nnocent persons, one of 9hom must suffer the conse=uence of a breach of trust, the one 9ho made t poss ble by h s act of co nc dence bear the loss. /pp. 15@210 %he !londeau dec s on, ho9ever, s not on all fours 9 th the case before 3s because here (e are confronted 9 th one 9ho adm ttedly 9as an agent of h s s ster and 9ho sold the property of the latter after her death 9 th full Fno9ledge of such death. %he s tuat on s e1pressly covered by a prov s on of la9 on agency the terms of 9h ch are clear and unm staFable leav ng no room for an nterpretat on contrary to ts tenor, n the same manner that the rul ng n Elondeau and the cases c ted there n found a bas s n &ect on 88 of the !and "eg strat on !a9 9h ch n part prov des? 111 111 111 %he product on of the o9ner)s dupl cate cert f cate 9henever any voluntary nstrument s presented for reg strat on shall be conclus ve author ty from the reg stered o9ner to the reg ster of deeds to enter a ne9 cert f cate or to maFe a memorandum of reg strat on n accordance 9 th such nstruments, and the ne9 cert f cate or memorandum &hall be b nd ng upon the reg stered o9ner and upon all persons cla m ng under h m n favor of every purchaser for value and n good fa th? $rovided ho&ever, %hat n all cases of reg strat on prov ded by fraud, the o9ner may pursue all h s legal and e=u table remed es aga nst the part es to such fraud 9 thout pre-ud ce, ho9ever, to the r ght, of any nnocent holder for value of a cert f cate of t tle. ... /Act No. 45> as amended0 2. Dne last po nt ra sed by respondent corporat on n support of the appealed dec s on s an 1642 rul ng of the &upreme 'ourt of +ennsylvan a n .assiday v. Mc1enzie 9here n payments made to an agent after the death of the pr nc pal 9ere held to be ,good,, ,the part es be ng gnorant of the death,. !et us taFe note that the Dp n on of Just ce "ogers 9as prem sed on the statement that

the parties &ere ignorant of the death of the principal. (e =uote from that dec s on the follo9 ng? ... Bere the prec se po nt s, 9hether a payment to an agent 9hen the +art es are gnorant of the death s a good payment. n add t on to the case n 'ampbell before c ted, the same -udge !ord Ellenboruogh, has dec ded n 8 Esp. 112, the general =uest on that a payment after the death of pr nc pal s not good. %hus, a payment of sa lor)s 9ages to a person hav ng a po9er of attorney to rece ve them, has been held vo d 9hen the pr nc pal 9as dead at the t me of the payment. $f, by th s case, t s meant merely to dec de the general propos t on that by operat on of la9 the death of the pr nc pal s a revocat on of the po9ers of the attorney, no ob-ect on can be taFen to t. Eut f t ntended to say that h s pr nc ple appl es 9here there 9as 110 not ce of death, or opportun ty of t9 ce $ must be perm tted to d ssent from t. ... %hat a payment may be good today, or bad tomorro9, from the acc dent c rcumstance of the death of the pr nc pal, 9h ch he d d not Fno9, and 9h ch by no poss b l ty could he Fno9P $t 9ould be un-ust to the agent and un-ust to the debtor. $n the c v l la9, the acts of the agent, done #ona fide in ignorance of the death of his principal are held val d and b nd ng upon the he rs of the latter. %he same rule holds n the &cott sh la9, and $ cannot bel eve the common la9 s so unreasonable... /<5 Am. Dec. 2>, 60, 61I emphas s suppl ed0 %o avo d any 9rong mpress on 9h ch the Dp n on n .assiday v. Mc1enzie may evoFe, ment on may be made that the above represents the m nor ty v e9 n Amer can -ur sprudence. %hus n .layton v. Merrett, the 'ourt sa d.O %here are several cases 9h ch seem to hold that although, as a general pr nc ple, death revoFes an agency and renders null every act of the agent thereafter performed, yet that 9here a payment has been made n gnorance of the death, such payment 9 ll be good. %he lead ng case so hold ng s that of .assiday v. Mc1enzie, 4 (atts N &. /+a0 262, <5 Am. 2>, 9here, n an elaborate op n on, th s v e9 broadly announced. $t s referred to, and seems to have been follo9ed, n the case of Dic' v. $age,12 Mo. 2<4, 82 AmD 2>2I but n th s latter case t appeared that the estate of the deceased pr nc pal had rece ved the benef t of the money pa d, and therefore the representat ve of the estate m ght 9ell have been held to be estopped from su ng for t aga n. . . . %hese cases, n so far, at least, as they announce the doctr ne under d scuss on, are e1cept onal. %he +ennsylvan a 'ase, supra /'ass day v. Mc*enA e 4 (atts N &. 262, <5 AmD 2>0, s bel eved to stand almost, f not =u te, alone n announc ng the pr nc ple n ts broadest scope. /82, M sc. <8<, <82, c ted n 2 '.J. 8450 &o also n 7ravers v. .rane, speaF ng of .assiday v. Mc1enzie, and po nt ng out that the op n on, e1cept so far as t related to the part cular facts, 9as a mere dictum, Eald9 n J. sa d? %he op n on, therefore, of the learned Judge may be regarded more as an e1tra-ud c al nd cat on of h s v e9s on the general sub-ect, than as the ad-ud cat on of the 'ourt upon the po nt n =uest on. Eut accord ngly all po9er

9e ght to th s op n on, as the -udgment of a of great respectab l ty, t stands alone among common la9 author t es and s opposed by an array too form dable to perm t us to follo9 ng t. /18 'al. 12,12, c ted n 2 '.J. 8450 (hatever confl ct of legal op n on 9as generated by .assiday v. Mc1enzie n Amer can -ur sprudence, no such confl ct e1 sts n our o9n for the s mple reason that our statute, the ' v l 'ode, e1pressly prov des for t9o e1cept ons to the general rule that death of the pr nc pal revoFes pso -ure the agency, to 9 t? /10 that the agency s coupled 9 th an nterest /Art 15<00, and /20 that the act of the agent 9as e1ecuted 9 thout Fno9ledge of the death of the pr nc pal and the th rd person 9ho contracted 9 th the agent acted also n good fa th /Art. 15<10. E1cept on No. 2 s the doctr ne follo9ed n 'ass day, and aga n (e stress the nd spensable re=u rement that the agent acted 9 thout Fno9ledge or not ce of the death of the pr nc pal $n the case before 3s the agent "amon "allos e1ecuted the sale not9 thstand ng not ce of the death of h s pr nc pal Accord ngly, the agent)s act s unenforceable aga nst the estate of h s pr nc pal. $N C$E( D7 A!! %BE 7D"E#D$N#, (e set as de the ec s on of respondent appellate court, and (e aff rm en toto the -udgment rendered by then Bon. Amador E. #omeA of the 'ourt of 7 rst $nstance of 'ebu, =uoted n pages 2 and < of th s Dp n on, 9 th costs aga nst respondent realty corporat on at all nstances. &o Drdered. 7eehan'ee (.hairman*, Ma'asiar, 8ernandez and 2uerrero, 99., concur.

:ootnotes 1 p. 40, rollo 2 p, 42, :#id. < Art. 1<12, ' v l 'ode of the +h l pp nes 4 :#id 8 Art. 16>6, ' v l 'ode. Ey the contract of the agency of a person bl nds h mself to render some serv ce or to do someth ng n representat on or on behalf of another, 9 th the consent of the author ty of the latter. Art. 1661, ' v l 'ode. %he Agent must act 9 th n the scope of h s author ty. Be may do acts as may be conduct ve to the accompl shment of the purpose of the agency. 11 Manresa 422@42<I 4 &ancheA "oman 426, 2nd Ed.I 2> &caevola, 24<, 2>2I %olent no, 'omments, ' v l 'ode of the +h l pp nes, p.<40, vol. 8, 1585 Ed. &ee also 'olumb a 3n vers ty 'lub v. B gg ns, D.'N.H., 2< f. &upp. 822, 824I Calent ne D l 'o. v. Houng 105 +. 2d 160, 168.

> 24 '.J.&. 4I Calent ne D l 'o. v. +o9ers, 85 N.(. 2d 1>0, 1><, 182 Neb. 62I +urnell v. ' ty of 7lorence, 128 &o. 412, 22 Ala. App. 81>I &troman Motor 'o. v. Ero9n, 24< +. 1<<, 12> DF. <> 2 &ee Art. 1515 of the ' v l 'ode 6 Bermosa v. !ongara, 158<, 5< +h l. 522, 56<I Del "osar o, et al. v. Abad, et al., 1586, 104 +h l. >46, >82 5 11 Manresa 822@82<I %olent no, supra, <>5@<20 10 2 *ent 'omm. >41, c ted n ( ll ston on 'ontracts, <rd Ed., Col. 2, p. 266 11 &ee Notes on Acts of agent after pr nc pal)s death, <5 Am. Dec. 61,6<, c t ng E9ell)s Evans on Agency, 11>I Dunlap)s +aley on Agency, 16>I &tory on Agency, see. 466I Barper v. ! ttle. 11 Am. Dec. 28I &taples v. Eradbury, 2< $d. 454I #ale v. %appan <2 $d. 154I Bunt v. "ousman er, 2 Mason, 244, &.'. 6 (heat, 124I Eoones E1ecutor v. 'larFe < 'ranch '.'. <65I BanF of )(ash ngton v. +erson, 2 )"ash. '.'. >.68I &cruggs v. Dr ver)s E1ecutor, <1 Ala. 224I Mc#r ff v. +orter, 8 7la. <2<I ! ncoln v. Emerson, 106 Mass 62I )( lson v. Edmonds, 24 N.B 812I Easton v. Ell s, 1 Bandy /Dh o0, 20I McDonald v. ElacF)s Adm n strators, 20 Dh o, 168I M ch gan $ns. 'o. v. !eaven9orth, <0 Ct. 11I Buston v. 'antr l, 11 !e gh, 1<>I 'ampanar v. )(oodburn, 18 'om E 400 &ee also ),( ll ston on 'ontracts, <rd Ed., Col. 2, p. 265 12 see p. 18, <0@<1 >4 >6@>5, "ecord on Appeal 1< pp. 21@22, :#id. 14 p. 2 of the Dec s on at page 14, rollo 18 108 +h l. 25? , 256 1> p. > of Dec s on, at page 1<, rollo 12 pp. >@2 of Dec s on at pp, 1<@14, $b d. 16 &ee Art cles 1521 N 1522 of the ' v l 'ode 15 2 '.J.&. 1 124 c t ng Amer can Jur sprudence n d fferent &tates from Alabama to (ash ngtonI emphas s suppl ed. 20 p. 6, dec s on at +age 18, rollo "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71=.2= January 10, 1<34

:A9)/#A SE*E$)N/, pla nt ff@appellee, vs. G&)##E$'/ SE*E$)N/, defendant@appellant. :E#)%)(AS *)##AN&E*A, ntervenor@appellee. Serafin $. 0ilado and A. $. Seva for appellant. 9ose Ma. Arroyo, 9ose %opez 4ito, and 8isher and De6itt for appellees. /S($AN!, J.: %h s s an act on brought by the pla nt ff as the alleged natural daughter and sole he r of one Melec o &ever no, deceased, to compel the defendant #u llermo &ever no to convey to her four parcels of land descr bed n the compla nt, or n default thereof to pay her the sum of +600,000 n damages for 9rongfully caus ng sa d land to be reg stered n h s o9n name. 7el c tas C llanueva, n her capac ty as adm n stratr 1 of the estate of Melec o &ever no, has f led a compla nt n ntervent on cla m ng n the same rel ef as the or g nal pla nt ff, e1cept n so far as she prays that the conveyance be made, or damages pa d, to the estate nstead of to the pla nt ff 7ab ola &ever no. %he defendant ans9ered both compla nts 9 th a general den al. %he lo9er court rendered a -udgment recogn A ng the pla nt ff 7ab ola &ever no as the acFno9ledged natural ch ld of the sa d Melec o &ever no and order ng the defendant to convey 426 hectares of the land n =uest on to the ntervenor as adm n stratr 1 of the estate of the sa d Melec o &ever no, to del ver to her the proceeds n h s possess on of a certa n mortgage placed thereon by h m and to pay the costs. 7rom th s -udgment only the defendant appeals. %he land descr bed n the compla nt forms one cont nuous tract and cons sts of lots Nos. 622, 626, 6<4, and 624 of the cadaster of & lay, +rov nce of Dcc dental Negros, 9h ch measure, respect vely, >1 hectares, 24 ares, and 25 cent aresI 2> hectares, <4 ares, and 25 cent aresI 82 hectares, 6> ares, and >0 cent ares and >06 hectares, 22 ares and 26 cent ares, or a total of 255 hectares, 28 ares, and 4> cent ares. %he ev dence sho9s that Melec o &ever no d ed on the 28th day of May, 1518I that some 426 hectares of the land 9ere recorded n the Mortgage !a9 "eg ster n h s name n the year 1501 by v rtue of possessory nformat on proceed ngs nst tuted on the 5th day of May of that year by h s brother Agap to &ever no n h s behalfI that dur ng the l fet me of Melec o &ever no the land 9as 9orFed by the defendant, #u llermo &ever no, h s brother, as adm n strator for and on behalf of the sa d Melec o &ever noI that after Melec o)s death, the defendant #u llermo &ever no cont nued to occupy the landI that n 151> a parcel survey 9as made of the lands n the mun c pal ty of & lay, nclud ng the land here n =uest on, and cadastral proceed ngs 9ere nst tuted for the reg strat on of the lands t tles 9 th n the surveyed areaI that n the cadastral proceed ngs the land here n =uest on 9as descr bed as four separate lots numbered as above statedI that "o=ue Bof leQa, as la9yer for #u llermo &ever no, f led ans9ers n behalf of the latter n sa d proceed ngs cla m ng the lots ment oned as the property of h s

cl entI that no oppos t on 9as presented n the proceed ngs to the cla ms of #u llermo &ever no and the court therefore decreed the t tle n h s favor, n pursuance of 9h ch decree cert f cates of t tle 9ere ssued to h m n the month of March, 1512. $t may be further observed that at the t me of the cadastral proceed ngs the pla nt ff 7ab ola &ever no 9as a m norI that #u llermo &ever no d d not appear personally n the proceed ngs and d d not there test fyI that the only test mony n support of h s cla ms 9as that of h s attorney Bof leQa, 9ho s9ore that he Fne9 the land and that he also Fne9 that #u llermo &ever no nher ted the land from h s father and that he, by h mself, and through h s predecessors n nterest, had possessed the land for th rty years. %he appellant presents the follo9 ng n ne ass gnments of error? 1. %he tr al court erred n adm tt ng the ev dence that 9as offered by pla nt ff n order to establ sh the fact that sa d pla nt ff 9as the legally acFno9ledged natural ch ld of the deceased Melec o &ever no. 2. %he tr al court erred n f nd ng that, under the ev dence presented, pla nt ff 9as the legally acFno9ledged natural ch ld of Melec o &ever no. <. %he tr al court erred n re-ect ng the ev dence offered by defendant to establ sh the absence of fraud on h s part n secur ng t tle to the lands n Nacayao. 4. %he tr al court erred n conclud ng that the ev dence adduced by pla nt ff and ntervenor establ shed that defendant 9as gu lty of fraud n procur ng t tle to the lands n =uest on n h s name. 8. %he tr al court erred n declar ng that the land that 9as formerly placed n the name of Melec o &ever no had an e1tent of e ther 4<4 or 426 hectares at the t me of h s death. >. %he tr al court erred n declar ng that the value of the land n l t gat on s +800 per hectare. 2. %he tr al court erred n grant ng the pet t on of the pla nt ff for an attachment 9 thout f rst g v ng the defendant an opportun ty to be heard. 6. %he tr al court erred n order ng the conveyance of 426 hectares of land by defendant to the adm n stratr 1. 5. %he tr al court erred n fa l ng or refus ng to maFe any f nd ng as to the defendant)s content on that the pet t on for attachment 9as utterly devo d of any reasonable ground. $n regard to the f rst t9o ass gnments of error, 9e agree 9 th the appellant that the tr al court erred n maF ng a declarat on n the present case as to the recogn t on of 7ab ola &ever no as the natural ch ld of Melec o &ever no. (e have held n the case of !riz vs. !riz and Remigio /4< +h l., 2><0, that ,%he leg t mate

he rs or F n of a deceased person 9ho 9ould be pre-ud ced by a declarat on that another person s ent tled to recogn t on as the natural ch ld of such decedent, are necessary and nd spensable part es to any act on n 9h ch a -udgment declar ng the r ght to recogn t on s sought., $n the present act on only the 9 do9, the alleged natural ch ld, and one of the brothers of the deceased are part esI the other potent al he rs have not been ncluded. Eut, nasmuch as the -udgment appealed from s n favor of the ntervenor and not of the pla nt ff, e1cept to the e1tent of hold ng that the latter s a recogn Aed natural ch ld of the deceased, th s =uest on s, from the v e9 9e taFe of the case, of no mportance n ts f nal d spos t on. (e may say, ho9ever, n th s connect on, that the po nt urged n appellant)s br ef that t does not appear aff rmat vely from the ev dence that, at the t me of the concept on of 7ab ola, her mother 9as a s ngle 9oman, may be suff c ently d sposed of by a reference to art cle 1<0 of the ' v l 'ode and subsect on 1 of sect on <<4 of the 'ode of ' v l +rocedure 9h ch create the presumpt on that a ch ld born out of 9edlocF s natural rather than lleg t mate. %he =uest on of the status of the pla nt ff 7ab ola &ever no and her r ght to share n the nher tance may, upon not ce to all the nterested part es, be determ ned n the probate proceed ngs for the settlement of the estate of the deceased. %he f fth ass gnment of error relates to the f nd ng of the tr al court that the land belong ng to Melec o &ever no had an area of 426 hectares. %he appellant contends that the court should have found that there 9ere only <24 hectares nasmuch as one hundred hectares of the or g nal area 9ere g ven to Melec o)s brother Donato dur ng the l fet me of the father "amon &ever no. As t appears that "amon &ever no d ed n 165> and that the possessory nformat on proceed ngs, upon 9h ch the f nd ng of the tr al court as to the area of the land s pr nc pally based, 9ere not nst tuted unt l the year 1501, 9e are not d sposed to d sturb the conclus ons of the tr al court on th s po nt. Moreover, n the year 151<, the defendant #u llermo &ever no test f ed under oath, n the case of Monteli#ano vs. Severino, that the area of the land o9ned by Melec o &ever no and of 9h ch he /#u llermo0 9as the adm n strator, embraced an area of 424 hectares. %he fact that Melec o &ever no, n declar ng the land for ta1at on n 150>, stated that the area 9as only <24 hectares and >0 ares 9h le ent tled to some 9e ght s not conclus ve and s not suff c ent to overcome the pos t ve statement of the defendant and the rec tals n the record of the possessory nformat on proceed ngs. %he s 1th ass gnment of error s also of m nor mportance n v e9 of the fact that n the d spos t ve part of the dec s on of the tr al court, the only rel ef g ven s an order re=u r ng the appellant to convey to the adm n stratr 1 the land n =uest on, together 9 th such parts of the proceeds of the mortgage thereon as rema n n h s hands. (e may say further that the court)s est mate of the value of the land does not appear unreasonable and that, upon the ev dence before us, t 9 ll not be d sturbed. %he seventh and 9 th n ass gnments of error relate to the e parte grant ng by the tr al court of a prel m nary attachment n the case and the refusal of the

court to d ssolve the same. (e f nd no mer t 9hatever n these ass gnments and a deta led d scuss on of them s unnecessary. %he th rd, fourth, and e ght ass gnments of error nvolve the v tal po nts n the case, are nter@related and may be conven ently cons dered together. %he defendant argues that the g st of the nstant act on s the alleged fraud on h s part n caus ng the land n =uest on to be reg stered n h s nameI that the tr al court therefore erred n re-ect ng h s offer of ev dence to the effect that the land 9as o9ned n common by all the he rs of "amon &ever no and d d not belong to Melec o &ever no e1clus velyI that such ev dence, f adm tted, 9ould have sho9n that he d d not act 9 th fraudulent ntent n taF ng t tle to the landI that the tr al court erred n hold ng h m estopped from deny ng Melec o)s t tleI that more than a year hav ng elapsed s nce the entry of the f nal decree ad-ud cat ng the land to the defendant, sa d decree cannot no9 be reopenedI that the order ng of the defendant to convey the decreed land to the adm n stratr 1 s, for all pract cal purposes, e=u valent to the reopen ng of the decree of reg strat onI that under sect on <6 of the !and "eg strat on Act the defendant has an ndefeas ble t tle to the landI and that the =uest on of o9nersh p of the land be ng thus -ud c ally settled, the =uest on as to the prev ous relat ons bet9een the part es cannot no9 be n=u red nto. 3pon no po nt can the defendant)s content ons be susta ned. $t may f rst be observed that th s s not an act on under sect on <6 of the !and "eg strat on Act to reopen or set as de a decreeI t s an act on in personam aga nst an agent to compel h m to return, or retransfer, to the he rs or the estate of ts pr nc pal, the property comm tted to h s custody as such agent, to e1ecute the necessary documents of conveyance to effect such retransfer or, n default thereof, to pay damages. %hat the defendant came nto the possess on of the property here n =uest on as the agent of the deceased Melec o &ever no n the adm n strat on of the property, cannot be successfully d sputed. B s test mony n the case of Monteli#ano vs. Severino /c v l case No. 502 of the 'ourt of 7 rst $nstance of Dcc dental Negros and 9h ch forms a part of the ev dence n the present case0 s, n fact, conclus ve n th s respect. Be there stated under oath that from the year 1502 up to the t me the test mony 9as g ven, n the year 151<, he had been cont nuously n charge and occupat on of the land as the encargado or adm n strator of Melec o &ever noI that he had al9ays Fno9n the land as the property of Melec o &ever noI and that the possess on of the latter had been peaceful, cont nuous, and e1clus ve. $n h s ans9er f led n the same case, the same defendant, through h s attorney, d scla med all personal nterest n the land and averred that t 9as 9holly the property of h s brother Melec o. Ne ther s t d sputed that the possess on en-oyed by the defendant at the t me of obta n ng h s decree 9as of the same character as that held dur ng the l fet me of h s brother, e1cept n so far as shortly before the tr al of the cadastral case the defendant had secured from h s brothers and s sters a rel ngu shment n h s favor of such r ghts as they m ght have n the land.

%he relat ons of an agent to h s pr nc pal are f duc ary and t s an elementary and very old rule that n regard to property form ng the sub-ect@matter of the agency, he s estopped from ac=u r ng or assert ng a t tle adverse to that of the pr nc pal. B s pos t on s analogous to that of a trustee and he cannot cons stently, 9 th the pr nc ples of good fa th, be allo9ed to create n h mself an nterest n oppos t on to that of h s pr nc pal or cestui que trust. 3pon th s ground, and substant ally n harmony 9 th the pr nc ples of the ' v l !a9 /see sentence of the supreme court of &pa n of May 1, 15000, the Engl sh 'hancellors held that n general 9hatever a trustee does for the advantage of the trust estate nures to the benef t of the cestui que trust. /#reenla9 vs. * ng, 8 Jur., 16I 5 parte Eurnell, 2 Jur., 11>I 5 parte Bughes, > Ces., >12I 5 parte James, 6 Ces., <<2I Dl ver vs. 'ourt, 6 +r ce, 122.0 %he same pr nc ple has been cons stently adhered to n so many Amer can cases and s so 9ell establ shed that e1haust ve c tat ons of author t es are superfluous and 9e shall therefore l m t ourselves to =uot ng a fe9 of the numerous -ud c al e1press ons upon the sub-ect. %he pr nc ple s 9ell stated n the case of # lbert vs. Be9etson /25 M nn., <2>0? A rece ver, trustee, attorney, agent, or any other person occupy ng f duc ary relat ons respect ng property or persons, s utterly d sabled from ac=u r ng for h s o9n benef t the property comm tted to h s custody for management. %h s rule s ent rely ndependent of the fact 9hether any fraud has ntervened. No fraud n fact need be sho9n, and no e1cuse 9 ll be heard from the trustee. $t s to avo d the necess ty of any such n=u ry that the rule taFes so general a form. %he rule stands on the moral obl gat on to refra n from plac ng one)s self n pos t ons 9h ch ord nar ly e1c te confl cts bet9een self@ nterest and ntegr ty. $t seeFs to remove the temptat on that m ght ar se out of such a relat on to serve one)s self@ nterest at the e1pense of one)s ntegr ty and duty to another, by maF ng t mposs ble to prof t by y eld ng to temptat on. $t appl es un versally to all 9ho come 9 th n ts pr nc ple. $n the case of Mass e vs. (atts /> 'ranch, 1460, the 3n ted &tates &upreme 'ourt, speaF ng through 'h ef Just ce Marshall, sa d? Eut Mass e, the agent of Dneale, has entered and surveyed a port on of that land for h mself and obta ned a patent for t n h s o9n name. Accord ng to the clearest and best establ shed pr nc ples of e=u ty, the agent 9ho so acts becomes a trustee for h s pr nc pal. Be cannot hold the land under an entry for h mself other9 se than as trustee for h s pr nc pal. $n the case of 7el 1 vs. +atr cF /148 3. &., <120, the 3n ted &tates &upreme 'ourt, after e1am n ng the author t es, sa d? %he substance of these author t es s that, 9herever a person obta ns the legal t tle to land by any art f ce or concealment, or by maF ng use of fac l t es ntended for the benef t of another, a court of e=u ty 9 ll mpress upon the land so held by h m a trust n favor of the party 9ho s -ustly ent tled to them, and 9 ll order the trust e1ecuted by decree ng the r conveyance to the party n 9hose favor the trust 9as created. /.iting EanF of Metropol s vs. #uttschl cF, 14 +et.,

15, <1I Moses vs. Murgatroyd, 1 Johns. 'h., 115I 'umberland vs.'odr ngton, < Johns. 'h., 225, 2>1I Ne lson vs. El ght, 1 Johns. 'as., 208I (eston vs. EarFer, 12 Johns., 22>.0 %he same doctr ne has also been adopted n the +h l pp nes. $n the case of ;y Aloc vs. .ho 9an %ing /15 +h l., 2020, the facts are stated by the court as follo9s? 7rom the facts proven at the tr al t appears that a number of 'h nese merchants ra sed a fund by voluntary subscr pt on 9 th 9h ch they purchased a valuable tract of land and erected a large bu ld ng to be used as a sort of club house for the mutual benef t of the subscr bers to the fund. %he subscr bers organ Aed themselves nto an rregular assoc at on, 9h ch had no regular art cles of assoc at on, and 9as not ncorporated or reg stered n the commerc al reg stry or else9here. %he assoc at on not hav ng any e1 stence as a legal ent ty, t 9as agreed to have the t tle to the property placed n the name of one of the members, the defendant, 'ho Jan ! ng, 9ho on h s part accepted the trust, and agreed to hold the property as the agent of the members of the assoc at on. After the club bu ld ng 9as completed 9 th the funds of the members of the assoc at on, 'ho Jan ! ng collected some +28,000 n rents for 9h ch he fa led and refused to account, and upon proceed ngs be ng nst tuted to compel h m to do so, he set up t tle n h mself to the club property as 9ell as to the rents accru ng therefrom, falsely alleg ng that he had bought the real estate and constructed the bu ld ng 9 th h s o9n funds, and deny ng the cla ms of the members of the assoc at on that t 9as the r funds 9h ch had been used for that purpose. %he decree of the court prov ded, among other th ngs, for the conveyance of the club house and the land on 9h ch t stood from the defendant, 'ho Jan ! ng, n 9hose name t 9as reg stered, to the members of the assoc at on. $n aff rm ng the decree, th s court sa d? $n the case at bar the legal t tle of the holder of the reg stered t tle s not =uest onedI t s adm tted that the members of the assoc at on voluntar ly obta ned the nscr pt on n the name of 'ho Jan ! ng, and that they had no r ght to have that nscr pt on cancelledI they do not seeF such cancellat on, and on the contrary they allege and prove that the duly reg stered legal t tle to the property s n 'ho Jan ! ng, but they ma nta n, and 9e th nF that they r ghtly ma nta n, that he holds t under an obl gat on, both e1press and mpl ed, to deal 9 th t e1clus vely for the benef t of the members of the assoc at on, and sub-ect to the r 9 ll. $n the case of .amacho vs. Municipality of !aliuag /26 +h l., 4>>0, the pla nt ff, 'amacho, tooF t tle to the land n h s o9n name, 9h le act ng as agent for the mun c pal ty. %he court sa d? %here have been a number of cases before th s court n 9h ch a t tle to real property 9as ac=u red by a person n h s o9n name, 9h le act ng under a f duc ary capac ty, and 9ho after9ards sought to taFe advantage of the conf dence reposed n h m by cla m ng the o9nersh p of the property for h mself.

%h s court has nvar ably held such ev dence competent as bet9een the f duc ary and the cestui que trust. 111 111 111

(hat -udgment ought to be entered n th s caseP %he court belo9 s mply absolved the defendant from the compla nt. %he defendant mun c pal ty does not asF for a cancellat on of the deed. Dn the contrary, the deed s rel ed upon the supplement the oral ev dence sho9 ng that the t tle to the land s n the defendant. As 9e have nd cated n .onsun"i vs. 7ison, 18 +h l., 61, and ;y Aloc vs. .ho 9an %ing, 15 +h l., 202, the proper procedure n such a case, so long as the r ghts of nnocent th rd persons have not ntervened, s to compel a conveyance to the r ghtful o9ner. %h s ought and can be done under the ssues ra sed and the proof presented n the case at bar. %he case of Sy<9uco and 4iardo vs. Sy<9uco /40 +h l., ><40 s also n po nt. As 9 ll be seen from the author t es =uoted, and agent s not only estopped from deny ng h s pr nc pal)s t tle to the property, but he s also d sable from ac=u r ng nterests there n adverse to those of h s pr nc pal dur ng the term of the agency. Eut the defendant argues that h s t tle has become res ad"udicata through the decree of reg strat on and cannot no9 be d sturbed. %h s content on may, at f rst s ght, appear to possess some force, but on closer e1am nat on t proves untenable. %he decree of reg strat on determ ned the legal t tle to the land as the date of the decreeI as to that there s no =uest on. %hat, under sect on <6 of the !and "eg strat on Act, th s decree became conclus ve after one year from the date of the entry s not d sputed and no one attempts to d sturb the decree or the proceed ngs upon 9h ch t s basedI the pla nt ff n ntervent on merely contends that n e=u ty the legal t tle so ac=u red nured to the benef t of the estate of Melec o &ever no, the defendant)s pr nc pal and cestui que trust and asFs that th s super or e=u table r ght be made effect ve by compell ng the defendant, as the holder of the legal t tle, to transfer t to the estate. (e have already sho9n that before the ssuance of the decree of reg strat on t 9as the undoubted duty of the defendant to restore the property comm tted to h s custody to h s pr nc pal, or to the latter)s estate, and that the pr nc pal had a r ght of act on in personam to enforce the performance of th s duty and to compel the defendant to e1ecute the necessary conveyance to that effect. %he only =uest on rema n ng for cons derat on s, therefore, 9hether the decree of reg strat on e1t ngu sh ng th s personal r ght of act on. $n Austral a and Ne9 Lealand, under statutes n th s respect s m lar to ours, courts of e=u ty e1erc se general -ur sd ct on n matters of fraud and error 9 th reference to %orrens reg stered lands, and g v ng attent on to the spec al prov s ons of the %orrens acts, 9 ll ssue such orders and d rect on to all the part es to the proceed ngs as may seem -ust and proper under the c rcumstances. %hey may order part es to maFe deeds of conveyance and f the

order s d sobeyed, they may cause proper conveyances to be made by a Master n 'hancery or 'omm ss oner n accordance 9 th the pract ce n e=u ty /Bogg, Austral an %orrens &ystem, p. 6420. $n the 3nt ed &tates courts have even gone so far n the e1erc se of the r e=u ty -ur sd ct on as to set as de f nal decrees after the e1p rat on of the statutory per od of l m tat on for the reopen ng of such decrees /Eaart vs. Mart n, 55 M nn., 1520. Eut, cons der ng that e=u ty follo9s the la9 and that our statutes e1pressly proh b t the reopen ng of a decree after one year from the date of ts entry, th s pract ce 9ould probably be out of =uest on here, espec ally so as the ends of -ust ce may be atta ned by other e=ually effect ve, and less ob-ect onable means. %urn ng to our o9n !and "eg strat on Act, 9e f nd no nd cat on there of an ntent on to cut off, through the ssuance of a decree of reg strat on, e=u table r ghts or remed es such as those here n =uest on. Dn the contrary, sect on 20 of the Act prov des? "eg stered lands and o9nersh p there n, shall n all respects be sub-ect to the same burdens and nc dents attached by la9 to unreg stered land. Noth ng conta ned n th s Act shall n any 9ay be construed to rel eve reg stered land or the o9ners thereof from any r ghts nc dent to the relat on of husband and 9 fe, or from l ab l ty to attachment on mesne process or levy on e1ecut on, or from l ab l ty to any l en of any descr pt on establ shed by la9 on land and the bu ld ngs thereon, or the nterest of the o9ner n such land or bu ld ngs, or to change the la9s of descent, or the r ghts of part t on bet9een coparceners, -o nt tenants and other cotenants, or the r ght to taFe the same by em nent doma n, or to rel eve such land from l ab l ty to be appropr ated n any la9ful manner for the payment of debts, or to change or affect n any other 9ay any other r ghts or l ab l t es created by la9 and appl cable to unreg stered land, e1cept as other9 se e1pressly prov ded n th s Act or n the amendments hereof. &ect on 102 of the Act, after prov d ng for act ons for damages n 9h ch the $nsular %reasurer, as the 'ustod an of the Assurance 7und s a party, conta ns the follo9 ng prov so? $rovided, ho&ever, %hat noth ng n th s Act shall be construed to depr ve the pla nt ff of any act on 9h ch he may have aga nst any person for such loss or damage or depr vat on of land or of any estate or nterest there n 9 thout -o n ng the %reasurer of the +h l pp ne Arch pelago as a defendant there n. %hat an act on such as the present one s covered by th s prov so can hardly adm t of doubt. &uch 9as also the v e9 taFen by th s court n the case of Medina =ng<Quingco vs. :maz and 6arner, !arnes & .o. /22 +h l., <140, n 9h ch the pla nt ff 9as seeF ng to taFe advantage of h s possess on of a cert f cate of t tle to depr ve the defendant of land ncluded n that cert f cate and sold to h m by the former o9ner #efore the land &as registered. %he court dec ded adversely to pla nt ff and n so do ng sa d?

As bet9een them no =uest on as to the ndefeas b l ty of a %orrens t tle could ar se. &uch an act on could have been ma nta ned at any t me 9h le the property rema ned n the hands of the purchaser. %he pecul ar force of a %orrens t tle 9ould have been brought nto play only 9hen the purchaser had sold to an nnocent th rd person for value the lands descr bed n h s conveyance. . . . #enerally speaF ng, as bet9een the vendor and the purchaser the same r ghts and remed es e1 st 9 th reference to land reg stered under Act No. 45>, as e1 st n relat on to land not so reg stered. $n .a#anos vs. Register of Deeds of %aguna and =#i>ana /40 +h l., >200, t 9as held that, 9h le a purchaser of land under a pacto de retro cannot nst tute a real act on for the recovery thereof 9here the vendor under sa d sale has caused such lands to be reg stered n h s name 9 thout sa d vendee)s consent, yet he may have h s personal act on based on the contract of sale to compel the e1ecut on of an uncond t onal deed for the sa d lands 9hen the per od for repurchase has passed. %orrens t tles be ng on -ud c al decrees there s, of course, a strong presumpt on n favor of the r regular ty or val d ty, and n order to ma nta n an act on such as the present the proof as to the f duc ary relat on of the part es and of the breach of trust must be clear and conv nc ng. &uch proof s, as 9e have seen, not lacF ng n th s case. Eut once the relat on and the breach of trust on the part of the f duc ary n thus establ shed, there s no reason, ne ther pract cal nor legal, 9hy he should not be compelled to maFe such reparat on as may l e 9 th n h s po9er for the n-ury caused by h s 9rong, and as long as the land stands reg stered n the name of the party 9ho s gu lty of the breach of trust and no r ghts of nnocent th rd part es are adversely affected, there can be no reason 9hy such reparat on should not, n the proper case, taFe the form of a conveyance or transfer of the t tle to the cestui que trust. No reasons of publ c pol cy demand that a person gu lty of fraud or breach of trust be perm tted to use h s cert f cate of t tle as a sh eld aga nst the conse=uences of h s o9n 9rong. %he -udgment of the tr al court s n accordance 9 th the facts and the la9. $n order to prevent unnecessary delay and further l t gat on t may, ho9ever, be 9ell to attach some add t onal d rect ons to ts d pos t ve clauses. $t 9 ll be observed that lots Nos. 622, 626, and 6<4 of a total area of appro1 mately 151 hectares, l e 9holly 9 th n the area to be conveyed to the pla nt ff n ntervent on and these lots may, therefore, be so conveyed 9 thout subd v s on. %he rema n ng 2<2 hectares to be conveyed l e 9 th n the 9estern part of lot No. 624 and before a conveyance of th s port on can be effected a subd v s on of that lot must be made and a techn cal descr pt on of the port on to be conveyed, as 9ell as of the rema n ng port on of the lot, must be prepared. %he subd v s on shall be made by an author Aed surveyor and n accordance 9 th the prov s ons of ' rcular No. <1 of the #eneral !and "eg strat on Dff ce, and the subd v s on and techn cal descr pt ons shall be subm tted to the 'h ef of that off ce for h s approval. ( th n th rty days after be ng not f ed of the approval of sa d

subd v s on and techn cal descr pt ons, the defendant #u llermo &ever no shall e1ecute good and suff c ent deed or deeds of conveyance n favor of the adm n stratr 1 of the estate of the deceased Melec o &ever no for sa d lots Nos. 622, 626, 6<4, and the 2<2 hectares segregated from the 9estern part of lot No. 624 and shall del ver to the reg ster of deeds h s dupl cate cert f cates of t tle for all of the four lots n order that sa d cert f cates may be cancelled and ne9 cert f cates ssued. %he cost of the subd v s on and the fees of the reg ster of deeds 9 ll be pa d by the pla nt ff n ntervent on. $t s so ordered ( th these add t onal d rect ons the -udgment appealed from s aff rmed, 9 th the costs aga nst the appellant. %he r ght of the pla nt ff 7ab ola &ever no to establ sh n the probate proceed ngs of the estate of Melec o &ever no her status as h s recogn Aed natural ch ld s reserved. Araullo, .. 9., 9ohnson, Street, Malcolm, Avance>a, 4illamor, 9ohns, and Romualdez, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. 10<41 'ay 3<, 1<<1 /$)EN( A)$ SE$*)%ES ? 5/(E# $E+$ESEN(A()*ES, pet t oner, vs. %/&$( /: A++EA#S and A'E$)%AN A)$7#)NES )N%/$+/$A(E!, respondents. G.$. No. 10<44 'ay 3<, 1<<1 A'E$)%AN A)$#)NES, )N%/$+/$A(E!, pet t oner, vs. %/&$( /: A++EA#S and /$)EN( A)$ SE$*)%ES ? 5/(E# $E+$ESEN(A()*ES, )N%/$+/$A(E!,respondents. 8rancisco A. %ava, 9r. and Andresito ?. 8ornier for =rient Air Service and 0otel Representatives, :nc. Sycip, Salazar, 0ernandez & 2atmaitan for American Airlines, :nc.

+A!)##A, J.:p %h s case s a consol dat on of t9o /20 pet t ons for rev e9 on certiorari of a dec s on 1 of the 'ourt of Appeals n 'A@#.". No. 'C@04254, ent tled ,Amer can A rl nes, $nc. vs. Dr ent A r &erv ces and Botel "epresentat ves, $nc., 9h ch aff rmed, 9 th mod f cat on, the dec s on 3 of the "eg onal %r al 'ourt of Man la,

Eranch $C, 9h ch d sm ssed the compla nt and granted there n defendant)s countercla m for agent)s overr d ng comm ss on and damages. %he antecedent facts are as follo9s? Dn 18 January 1522, Amer can A rl nes, $nc. /here nafter referred to as Amer can A r0, an a r carr er offer ng passenger and a r cargo transportat on n the +h l pp nes, and Dr ent A r &erv ces and Botel "epresentat ves /here nafter referred to as Dr ent A r0, entered nto a #eneral &ales Agency Agreement /here nafter referred to as the Agreement0, 9hereby the former author Aed the latter to act as ts e1clus ve general sales agent 9 th n the +h l pp nes for the sale of a r passenger transportat on. +ert nent prov s ons of the agreement are reproduced, to 9 t? ($%NE&&E%B $n cons derat on of the mutual convenants here n conta ned, the part es hereto agree as follo9s? 1. Representation of American #y =rient Air Services Dr ent A r &erv ces 9 ll act on Amer can)s behalf as ts e1clus ve #eneral &ales Agent 9 th n the +h l pp nes, nclud ng any 3n ted &tates m l tary nstallat on there n 9h ch are not serv ced by an A r 'arr er "epresentat on Dff ce /A'"D0, for the sale of a r passenger transportat on. %he serv ces to be performed by Dr ent A r &erv ces shall nclude? /a0 sol c t ng and promot ng passenger traff c for the serv ces of Amer can and, f necessary, employ ng staff competent and suff c ent to do soI /b0 prov d ng and ma nta n ng a su table area n ts place of bus ness to be used e1clus vely for the transact on of the bus ness of Amer canI /c0 arrang ng for d str but on of Amer can)s t metables, tar ffs and promot onal mater al to sales agents and the general publ c n the ass gned terr toryI /d0 serv c ng and superv s ng of sales agents / nclud ng such sub@agents as may be appo nted by Dr ent A r &erv ces 9 th the pr or 9r tten consent of Amer can0 n the ass gned terr tory nclud ng f re=u red by Amer can the control of rem ttances and comm ss ons reta nedI and /e0 hold ng out a passenger reservat on fac l ty to sales agents and the general publ c n the ass gned terr tory. $n connect on 9 th scheduled or non@scheduled a r passenger transportat on 9 th n the 3n ted &tates, ne ther Dr ent A r &erv ces nor ts sub@agents 9 ll perform serv ces for any other a r carr er s m lar to those to be performed hereunder for Amer can 9 thout the pr or 9r tten consent of Amer can. &ub-ect to per od c nstruct ons and cont nued consent from Amer can, Dr ent A r &erv ces may sell a r passenger transportat on to be performed 9 th n the 3n ted &tates

by other scheduled a r carr ers prov ded Amer can does not prov de substant ally e=u valent schedules bet9een the po nts nvolved. 111 111 111 4. Remittances Dr ent A r &erv ces shall rem t n 3n ted &tates dollars to Amer can the t cFet stocF or e1change orders, less comm ss ons to 9h ch Dr ent A r &erv ces s ent tled hereunder, not less fre=uently than sem @monthly, on the 18th and last days of each month for sales made dur ng the preced ng half month. All mon es collected by Dr ent A r &erv ces for transportat on sold hereunder on Amer can)s t cFet stocF or on e1change orders, less appl cable comm ss ons to 9h ch Dr ent A r &erv ces s ent tled hereunder, are the property of Amer can and shall be held n trust by Dr ent A r &erv ces unt l sat sfactor ly accounted for to Amer can. 8. .ommissions Amer can 9 ll pay Dr ent A r &erv ces comm ss on on transportat on sold hereunder by Dr ent A r &erv ces or ts sub@agents as follo9s? /a0 Sales agency commission Amer can 9 ll pay Dr ent A r &erv ces a sales agency comm ss on for all sales of transportat on by Dr ent A r &erv ces or ts sub@agents over Amer can)s serv ces and any connect ng through a r transportat on, 9hen made on Amer can)s t cFet stocF, e=ual to the follo9 ng percentages of the tar ff fares and charges? / 0 7or transportat on solely bet9een po nts 9 th n the 3n ted &tates and bet9een such po nts and 'anada? 2R or such other rate/s0 as may be prescr bed by the A r %raff c 'onference of Amer ca. / 0 7or transportat on ncluded n a through t cFet cover ng transportat on bet9een po nts other than those descr bed above? 6R or such other rate/s0 as may be prescr bed by the $nternat onal A r %ransport Assoc at on. /b0 =verriding commission $n add t on to the above comm ss on Amer can 9 ll pay Dr ent A r &erv ces an overr d ng comm ss on of <R of the tar ff fares and charges for all sales of transportat on over Amer can)s serv ce by Dr ent A r &erv ce or ts sub@agents. 111 111 111 10. Default $f Dr ent A r &erv ces shall at any t me default n observ ng or perform ng any of the prov s ons of th s Agreement or shall become banFrupt or maFe any ass gnment for the benef t of or enter nto any agreement or prom se 9 th ts cred tors or go nto l =u dat on, or suffer any of ts goods to be taFen n

e1ecut on, or f t ceases to be n bus ness, th s Agreement may, at the opt on of Amer can, be term nated forth9 th and Amer can may, 9 thout pre-ud ce to any of ts r ghts under th s Agreement, taFe possess on of any t cFet forms, e1change orders, traff c mater al or other property or funds belong ng to Amer can. 11. :A7A and A7. Rules %he prov s ons of th s Agreement are sub-ect to any appl cable rules or resolut ons of the $nternat onal A r %ransport Assoc at on and the A r %raff c 'onference of Amer ca, and such rules or resolut ons shall control n the event of any confl ct 9 th the prov s ons hereof. 111 111 111 1<. 7ermination Amer can may term nate the Agreement on t9o days) not ce n the event Dr ent A r &erv ces s unable to transfer to the 3n ted &tates the funds payable by Dr ent A r &erv ces to Amer can under th s Agreement. E ther party may term nate the Agreement 9 thout cause by g v ng the other <0 days) not ce by letter, telegram or cable. 111 111 111
4

Dn 11 May 1561, alleg ng that Dr ent A r had reneged on ts obl gat ons under the Agreement by fa l ng to promptly rem t the net proceeds of sales for the months of January to March 1561 n the amount of 3& S284,400.40, Amer can A r by tself undertooF the collect on of the proceeds of t cFets sold or g nally by Dr ent A r and term nated forth9 th the Agreement n accordance 9 th +aragraph 1< thereof /%erm nat on0. 7our /40 days later, or on 18 May 1561, Amer can A r nst tuted su t aga nst Dr ent A r 9 th the 'ourt of 7 rst $nstance of Man la, Eranch 24, for Account ng 9 th +rel m nary Attachment or #arn shment, Mandatory $n-unct on and "estra n ng Drder ; averr ng the aforesa d bas s for the term nat on of the Agreement as 9ell as there n defendant)s prev ous record of fa lures ,to promptly settle past outstand ng refunds of 9h ch there 9ere ava lable funds n the possess on of the defendant, . . . to the damage and pre-ud ce of pla nt ff., 2 $n ts Ans9er 0 9 th countercla m dated 5 July 1561, defendant Dr ent A r den ed the mater al allegat ons of the compla nt 9 th respect to pla nt ff)s ent tlement to alleged unrem tted amounts, contend ng that after appl cat on thereof to the comm ss ons due t under the Agreement, pla nt ff n fact st ll o9ed Dr ent A r a balance n unpa d overr d ng comm ss ons. 7urther, the defendant contended that the act ons taFen by Amer can A r n the course of term nat ng the Agreement as 9ell as the term nat on tself 9ere untenable, Dr ent A r cla m ng that Amer can A r)s prec p tous conduct had occas oned pre-ud ce to ts bus ness nterests.

7 nd ng that the record and the ev dence substant ated the allegat ons of the defendant, the tr al court ruled n ts favor, render ng a dec s on dated 1> July 1564, the d spos t ve port on of 9h ch reads? (BE"E7D"E, all the forego ng prem ses cons dered, -udgment s hereby rendered n favor of defendant and aga nst pla nt ff d sm ss ng the compla nt and hold ng the term nat on made by the latter as affect ng the #&A agreement llegal and mproper and order the pla nt ff to re nstate defendant as ts general sales agent for passenger tranportat on n the +h l pp nes n accordance 9 th sa d #&A agreementI pla nt ff s ordered to pay defendant the balance of the overr d ng comm ss on on total flo9n revenue cover ng the per od from March 1>, 1522 to December <1, 1560 n the amount of 3&S64,621.<1 plus the add t onal amount of 3&S6,000.00 by 9ay of proper <R overr d ng comm ss on per month commenc ng from January 1, 1561 unt l such re nstatement or sa d amounts n ts +h l pp ne peso e=u valent legally preva l ng at the t me of payment plus legal nterest to commence from the f l ng of the countercla m up to the t me of payment. 7urther, pla nt ff s d rected to pay defendant the amount of Dne M ll on 7 ve Bundred %housand /+l,800,000.000 pesos as and for e1emplary damagesI and the amount of %hree Bundred %housand /+<00,000.000 pesos as and by 9ay of attorney)s fees. 'osts aga nst pla nt ff.
1

Dn appeal, the $ntermed ate Appellate 'ourt /no9 'ourt of Appeals0 n a dec s on promulgated on 22 January 156>, aff rmed the f nd ngs of the court a quo on the r mater al po nts but 9 th some mod f cat ons 9 th respect to the monetary a9ards granted. %he d spos t ve port on of the appellate court)s dec s on s as follo9s? (BE"E7D"E, 9 th the follo9 ng mod f cat ons O 10 Amer can s ordered to pay Dr ent the sum of ;S@A-,B,+.++ represent ng the balance of the latter)s overr d ng comm ss on cover ng the per od March 1>, 1522 to December <1, 1560, or its $hilippine peso equivalent in accordance &ith the official rate of e change legally prevailing on 9uly +C , +,D+, the date the counterclaim &as filedI 20 Amer can s ordered to pay Dr ent the sum of 3&S2,440.00 as the latter)s overr d ng comm ss on per month start ng January 1, 1561 until date of termination, May ,, +,D+ or its $hilippine peso equivalent in accordance &ith the official rate of e change legally prevailing on 9uly +C , +,D+, the date the counterclaim &as filed <0 Amer can s ordered to pay interest of +)E on sa d amounts from July 10, 1561 the date the ans9er 9 th countercla m 9as f led, unt l full paymentI 40 Amer can s ordered to pay Dr ent e emplary damages of $)CC,CCC.CCI 80 Amer can s ordered to pay Dr ent the sum of +28,000.00 as attorney/s fees.

the rest of the appealed dec s on s aff rmed. 'osts aga nst Amer can. = Amer can A r moved for recons derat on of the aforement oned dec s on, assa l ng the substance thereof and argu ng for ts reversal. %he appellate court)s dec s on 9as also the sub-ect of a Mot on for +art al "econs derat on by Dr ent A r 9h ch prayed for the restorat on of the tr al court)s rul ng 9 th respect to the monetary a9ards. %he 'ourt of Appeals, by resolut on promulgated on 12 December 156>, den ed Amer can A r)s mot on and 9 th respect to that of Dr ent A r, ruled thus? Dr ent)s mot on for part al recons derat on s den ed nsofar as t prays for aff rmance of the tr al court)s a9ard of e1emplary damages and attorney)s fees, but granted nsofar as the rate of e1change s concerned. %he dec s on of January 22, 156> s mod f ed n paragraphs /10 and /20 of the d spos t ve part so that the payment of the sums ment oned there n shall #e at their $hilippine peso equivalent in accordance &ith the official rate of e change legally prevailing on the date of actual payment. < Eoth part es appealed the aforesa d resolut on and dec s on of the respondent court, Dr ent A r as pet t oner n #.". No. 2>5<1 and Amer can A r as pet t oner n #.". No. 2>5<<. Ey resolut on 1. of th s 'ourt dated 28 March 1562 both pet t ons 9ere consol dated, hence, the case at bar. %he pr nc pal ssue for resolut on by the 'ourt s the e1tent of Dr ent A r)s r ght to the <R overr d ng comm ss on. $t s the stand of Amer can A r that such comm ss on s based only on sales of ts serv ces actually negot ated or transacted by Dr ent A r, other9 se referred to as ,t cFeted sales., As bas s thereof, pr mary rel ance s placed upon paragraph 8/b0 of the Agreement 9h ch, n re terat on, s =uoted as follo9s? 8. 'omm ss ons a0 . . . b0 =verriding .ommission $n add t on to the above comm ss on, Amer can 9 ll pay Dr ent A r &erv ces an overr d ng comm ss on of <R of the tar ff fees and charges for all sales of transportation over American/s services #y =rient Air Services or ts su#< agents. /Emphas s suppl ed0 & nce Dr ent A r 9as allo9ed to carry only the t cFet stocFs of Amer can A r, and the former not hav ng opted to appo nt any sub@agents, t s Amer can A r)s content on that Dr ent A r can cla m ent tlement to the d sputed overr d ng comm ss on based only on tic'eted sales. %h s s supposed to be the clear mean ng of the underscored port on of the above prov s on. %hus, to be ent tled to the <R overr d ng comm ss on, the sale must be made by Dr ent A r and the sale must be done 9 th the use of Amer can A r)s t cFet stocFs.

Dn the other hand, Dr ent A r contends that the contractual st pulat on of a <R overr d ng comm ss on covers the total revenue of Amer can A r and not merely that der ved from t cFeted sales undertaFen by Dr ent A r. %he latter, n -ust f cat on of ts subm ss on, nvoFes ts des gnat on as the e clusive #eneral &ales Agent of Amer can A r, 9 th the correspond ng obl gat ons ar s ng from such agency, such as, the promot on and sol c tat on for the serv ces of ts pr nc pal. $n effect, by v rtue of such e1clus v ty, ,all sales of transportat on over Amer can A r)s serv ces are necessar ly by Dr ent A r., 11 $t s a 9ell settled legal pr nc ple that n the nterpretat on of a contract, the ent rety thereof must be taFen nto cons derat on to ascerta n the mean ng of ts prov s ons. 13 %he var ous st pulat ons n the contract must be read together to g ve effect to all. 14 After a careful e1am nat on of the records, the 'ourt f nds mer t n the content on of Dr ent A r that the Agreement, 9hen nterpreted n accordance 9 th the forego ng pr nc ples, ent tles t to the <R overr d ng comm ss on based on total revenue, or as referred to by the part es, ,total flo9n revenue., As the des gnated e1clus ve #eneral &ales Agent of Amer can A r, Dr ent A r 9as respons ble for the promot on and marFet ng of Amer can A r)s serv ces for a r passenger transportat on, and the sol c tat on of sales therefor. $n return for such efforts and serv ces, Dr ent A r 9as to be pa d comm ss ons of t9o /20 F nds? f rst, a sales agency comm ss on, rang ng from 2@6R of tar ff fares and charges from sales by Dr ent Air &hen made on American Air tic'et stoc' I and second, an overr d ng comm ss on of <R of tar ff fares and charges for all sales of passenger transportat on over Amer can A r serv ces. $t s mmed ately observed that the precond t on attached to the f rst type of comm ss on does not obta n for the second type of comm ss ons. %he latter type of comm ss ons 9ould accrue for sales of Amer can A r serv ces made not on ts t cFet stocF but on the t cFet stocF of other a r carr ers sold by such carr ers or other author Aed t cFet ng fac l t es or travel agents. %o rule other9 se, i.e., to l m t the bas s of such overr d ng comm ss ons to sales from Amer can A r t cFet stocF 9ould erase any d st nct on bet9een the t9o /20 types of comm ss ons and 9ould lead to the absurd conclus on that the part es had entered nto a contract 9 th mean ngless prov s ons. &uch an nterpretat on must at all t mes be avo ded 9 th every effort e1erted to harmon Ae the ent re Agreement. An add t onal po nt before f nally d spos ng of th s ssue. $t s clear from the records that Amer can A r 9as the party respons ble for the preparat on of the Agreement. 'onse=uently, any amb gu ty n th s ,contract of adhes on, s to be taFen ,contra proferentem,, i.e., construed aga nst the party 9ho caused the amb gu ty and could have avo ded t by the e1erc se of a l ttle more care. %hus, Art cle 1<22 of the ' v l 'ode prov des that the nterpretat on of obscure 9ords or st pulat ons n a contract shall not favor the party 9ho caused the obscur ty. 1; %o put t d fferently, 9hen several nterpretat ons of a prov s on are other9 se e=ually proper, that nterpretat on or construct on s to be adopted 9h ch s most favorable to the party n 9hose favor the prov s on 9as made and

9ho d d not cause the amb gu ty. 12 (e therefore agree 9 th the respondent appellate court)s declarat on that? Any amb gu ty n a contract, 9hose terms are suscept ble of d fferent nterpretat ons, must be read aga nst the party 9ho drafted t. 10 (e no9 turn to the propr ety of Amer can A r)s term nat on of the Agreement. %he respondent appellate court, on th s ssue, ruled thus? $t s not den ed that Dr ent 9 thheld rem ttances but such act on f nds -ust f cat on from paragraph 4 of the Agreement, E1h. 7, 9h ch prov des for rem ttances to Amer can less commissions to 9h ch Dr ent s ent tled, and from paragraph 8/d0 9h ch spec f cally allo9s Dr ent to reta n the full amount of ts comm ss ons. & nce, as stated ante, Dr ent s ent tled to the <R overr de. Amer can)s prem se, therefore, for the cancellat on of the Agreement d d not e1 st. . . ., (e agree 9 th the f nd ngs of the respondent appellate court. As earl er establ shed, Dr ent A r 9as ent tled to an overr d ng comm ss on based on total flo9n revenue. Amer can A r)s percept on that Dr ent A r 9as rem ss or n default of ts obl gat ons under the Agreement 9as, n fact, a s tuat on 9here the latter acted n accordance 9 th the AgreementOthat of reta n ng from the sales proceeds ts accrued comm ss ons before rem tt ng the balance to Amer can A r. & nce the latter 9as st ll obl gated to Dr ent A r by 9ay of such comm ss ons. Dr ent A r 9as clearly -ust f ed n reta n ng and refus ng to rem t the sums cla med by Amer can A r. %he latter)s term nat on of the Agreement 9as, therefore, 9 thout cause and bas s, for 9h ch t should be held l able to Dr ent A r. Dn the matter of damages, the respondent appellate court mod f ed by reduct on the tr al court)s a9ard of e1emplary damages and attorney)s fees. %h s 'ourt sees no error n such mod f cat on and, thus, aff rms the same. $t s bel eved, ho9ever, that respondent appellate court erred n aff rm ng the rest of the dec s on of the tr al court. (e refer part cularly to the lo9er court)s dec s on order ng Amer can A r to ,re nstate defendant as ts general sales agent for passenger transportat on n the +h l pp nes n accordance 9 th sa d #&A Agreement., Ey aff rm ng th s rul ng of the tr al court, respondent appellate court, n effect, compels Amer can A r to e1tend ts personal ty to Dr ent A r. &uch 9ould be v olat ve of the pr nc ples and essence of agency, def ned by la9 as a contract 9hereby ,a person b nds h mself to render some serv ce or to do someth ng n representat on or on behalf of another, ($%B %BE 'DN&EN% D" A3%BD"$%H D7 %BE !A%%E" . 11 /emphas s suppl ed0 $n an agent@pr nc pal relat onsh p, the personal ty of the pr nc pal s e1tended through the fac l ty of the agent. $n so do ng, the agent, by legal f ct on, becomes the pr nc pal, author Aed to perform all acts 9h ch the latter 9ould have h m do. &uch a relat onsh p can only be effected 9 th the consent of the pr nc pal, 9h ch must not, n any 9ay, be

compelled by la9 or by any court. %he Agreement tself bet9een the part es states that ,e ther party may term nate the Agreement &ithout cause by g v ng the other <0 days) not ce by letter, telegram or cable., /emphas s suppl ed0 (e, therefore, set as de the port on of the rul ng of the respondent appellate court re nstat ng Dr ent A r as general sales agent of Amer can A r. (BE"E7D"E, 9 th the forego ng mod f cat on, the 'ourt A77$"M& the dec s on and resolut on of the respondent 'ourt of Appeals, dated 22 January 156> and 12 December 156>, respect vely. 'osts aga nst pet t oner Amer can A r. &D D"DE"ED. Melencio<0errera, and Regalado, 99., concur. $aras, 9., too' no part. Son is a partner in one of the counsel. Sarmiento, 9., is on leave.

:ootnotes 1 +enned by Just ce &eraf n E. 'am lon and concurred n by Just ces Jose '. 'ampos, Jr. and Des der o +. Jurado. 2 +enned by Judge Berm n o '. Mar ano. < Rollo, pp. 110@116. 4 Rollo, p. 102. 8 :#id., p. 104. > :#id., p. 121. 2 Rollo, p. 1>2. 6 Rollo, pp. 12<@124. 5 :#id., p. 210. 10 Rollo, p. 212. 11 Rollo, p. 251. 12 NAE&& &h pp ng +h l pp nes, $nc. vs. N!"', #.". No. 2<441, 4 &eptember 1562, 18< &'"A >82. 1< North Negros &ugar 'o. vs. 'ompan a #eneral de %abacos, No. !@5222, 25 March 1582I Art cle 1<24, ' v l 'ode of the +h l pp nes. 14 E=u table EanF ng 'orporat on vs. $ntermed ate Appellate 'ourt, #.". No. 24481, 28 May 1566, 1>1 &'"A 816.

18 #overnment of the +h l pp ne $slands vs. Derham Erothers and the $nternat onal EanF ng 'orporat on, <> +h l. 5>0. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. 14.1;= !ecem er 12, 1<<1 J/SE 9/$!A!/$ and #8!)A 9/$!A!/$, pet t oners, vs. 9$)G)!A !. #&6, E$NES(/ '. #&6 and NA$%)S/ !EGAN/S, respondents.

$EGA#A!/, J.: $n th s appeal by certiorari, pet t oners assa l the -udgment of the 'ourt of Appeals n 'A@#.". 'C No. 45128 aff rm ng the ad-ud cat on of the "eg onal %r al 'ourt of Malolos, Eulacan 9h ch found pr vate respondent Narc so Deganos l able to pet t oners for actual damages, but absolved respondent spouses Er g da D. !uA and Ernesto M. !uA of l ab l ty. +et t oners l Fe9 se belabor the subse=uent resolut on of the 'ourt of Appeals 9h ch den ed the r mot on for recons derat on of ts challenged dec s on. +et t oners 9ere engaged n the bus ness of purchase and sale of -e9elry and respondent Er g da D. !uA, also Fno9n as A da D. !uA, 9as the r regular customer. Dn several occas ons dur ng the per od from Apr l 22, 1562 to &eptember 4, 1562, respondent Narc so Deganos, the brother to Er g da D. !uA, rece ved several p eces of gold and -e9elry from pet t oner amount ng to +<62,61>.00. 1 %hese tems and the r pr ces 9ere nd cated n seventeen rece pts cover ng the same. Eleven of the rece pts stated that they 9ere rece ved for a certa n Evelyn A=u no, a n ece of Deganos, and the rema n ng s 1 nd cated that they 9ere rece ved for Er g da D. !uA. 3 Deganos 9as supposed to sell the tems at a prof t and thereafter rem t the proceeds and return the unsold tems to pet t oners. Deganos rem tted only the sum of +8<,202.00. Be ne ther pa d the balance of the sales proceeds, nor d d he return any unsold tem to pet t oners. Ey January 1550, the total of h s unpa d account to pet t oners, nclud ng nterest, reached the sum of +228,4><.56. 4 +et t oners eventually f led a compla nt n the #arangaycourt aga nst Deganos to recover sa d amount. $n the #arangay proceed ngs, Er g da D. !uA, 9ho 9as not mpleaded n the case, appeared as a 9 tness for Deganos and ult mately, she and her husband, together 9 th Deganos, s gned a comprom se agreement 9 th pet t oners. $n that comprom se agreement, Deganos obl gated h mself to pay pet t oners, on

nstallment bas s, the balance of h s account plus nterest thereon. Bo9ever, he fa led to comply 9 th h s aforestated undertaF ngs. Dn June 28, 1550, pet t oners nst tuted ' v l 'ase No. 412@M@50 n the "eg onal %r al 'ourt of Malolos, Eulacan aga nst Deganos and Er g da, D. !uA for recovery of a sum of money and damages, 9 th an appl cat on for prel m nary attachment. ; Ernesto !uA 9as mpleaded there n as the spouse of Er g da. 7our years later, or on March 25, 1554, Deganos and Er g da D. !uA 9ere charged 9 th estafa 2 n the "eg onal %r al 'ourt of Malolos, Eulacan, 9h ch 9as docFeted as 'r m nal 'ase No. 268@M@54. %hat cr m nal case appears to be st ll pend ng n sa d tr al court. Dur ng the tr al of the c v l case, pet t oners cla med that Deganos acted as the agent of Er g da D. !uA 9hen he rece ved the sub-ect tems of -e9elry and, because he fa led to pay for the same, Er g da, as pr nc pal, and her spouse are sol dar ly l able 9 th h m therefor. Dn the other hand, 9h le Deganos adm tted that he had an unpa d obl gat on to pet t oners, he cla med that the same 9as only n the sum of +<62,61>.00 and not +228,4><.56. Be further asserted that t 9as he alone 9ho 9as nvolved n the transact on 9 th the pet t onersI that he ne ther acted as agent for nor 9as he author Aed to act as an agent by Er g da D. !uA, not9 thstand ng the fact that s 1 of the rece pts nd cated that the tems 9ere rece ved by h m for the latter. Be further cla med that he never del vered any of the tems he rece ved from pet t oners to Er g da. Er g da, on her part, den ed that she had anyth ng to do 9 th the transact ons bet9een pet t oners and Dangerous. &he cla med that she never author Aed Deganos to rece ve any tem of -e9elry n her behalf and, for that matter, ne ther d d she actually rece ve any of the art cles n =uest on. After tr al, the court belo9 found that only Deganos 9as l able to pet t oners for the amount and damages cla med. $t held that 9h le Er g da D. !uA d d have transact ons 9 th pet t oners n the past, the tems nvolved 9ere already pa d for and all that Er g da o9ed pet t oners 9as the sum of +21,46<.00 represent ng nterest on the pr nc pal account 9h ch she had prev ously pa d for. 0 %he tr al court also found that t 9as pet t oner !yd a Eordador 9ho nd cated n the rece pts that the tems 9ere rece ved by Deganos for Evelyn A=u no and Er g da D. !uA. 1 &a d court 9as ,persuaded that Er g da D. !uA 9as beh nd Deganos,, but because there 9as no memorandum to th s effect, the agreement bet9een the part es 9as unenforceable under the &tatute of 7rauds. = Absent the re=u red memorandum or any 9r tten document connect ng the respondent !uA spouses 9 th the sub-ect rece pts, or author A ng Deganos to act on the r behalf, the alleged agreement bet9een pet t oners and Er g da D. !uA 9as unenforceable. Deganos 9as ordered to pay pet t oners the amount of +228,4><.56, plus legal nterest thereon June 28, 1550, and attorney)s fees. Er g da D. !uA 9as ordered

to pay +21,46<.00 represent ng the nterest on her o9n personal loan. &he and her co@defendant spouse 9ere absolved from any other or further l ab l ty. < As stated at the outset, pet t oners appealed the -udgment of the court a quo to the 'ourt Appeals 9h ch aff rmed sa d -udgment. 1. %he mot on for recons derat on f led by pet t oners 9as subse=uently d sm ssed, 11 hence the present recourse to th s 'ourt. %he pr mary ssue n the nstant pet t on s 9hether or not here n respondent spouses are l able to pet t oners for the latter)s cla m for money and damages n the sum of +228,4><.56, plus nterests and attorney)s fees, desp te the fact that the ev dence does not sho9 that they s gned any of the sub-ect rece pts or author Aed Deganos to rece ved the tems of -e9elry on the r behalf. +et t oners argue that the 'ourt of Appeals erred n adopt ng the f nd ngs of the court a quo that respondent spouses are not l able to them, as sa d conclus on of the tr al court s contrad cted by the f nd ng of fact of the appellate court that ,/Deganos0 acted as agent of h s s ster /Er g da !uA0., 13 $n support of th s content on, pet t oners =uoted several letters sent to them by Er g da D. !uA 9here n the latter acFno9ledged her obl gat on to pet t oners and re=uested for more t me to fulf ll the same. %hey l Fe9 se aver that Er g da test f ed n the tr al court that Deganos tooF some gold art cles from pet t oners and del vered the same to her. Eoth the 'ourt of Appeals and the tr al court, ho9ever, found as a fact that the aforement oned letters concerned the prev ous obl gat ons of Er g da to pet t oners, and had noth ng to do 9 th the money sought to be recovered n the nstant case. &uch concurrent factual f nd ngs are ent tled to great 9e ght, hence, pet t oners cannot plaus bly cla m n th s appellate rev e9 that the letters 9ere n the nature of acFno9ledgments by Er g da that she 9as the pr nc pal of Deganos n the sub-ect transact ons. Dn the other hand, 9 th regard to the test mony of Er g da adm tt ng del very of the gold to her, there s no sho9 ng 9hatsoever that her statement referred to the tems 9h ch are the sub-ect matter of th s case. $t cannot, therefore, be val dly sa d that she adm tted her l ab l ty regard ng the same. +et t oners ns st that Deganos 9as the agent of Er g da D. !uA as the latter clothed h m 9 th apparent author ty as her agent and held h m out to the publ c as such, hence Er g da can not be perm tted to deny sa d author ty to nnocent th rd part es 9ho dealt 9 th Deganos under such bel ef. 14 +et t oners further represent that the 'ourt of Appeals recogn Aed n ts dec s on that Deganos 9as an agent of Er g da. 1; %he ev dence does not support the theory of pet t oners that Deganos 9as an agent of Er g da D. !uA and that the latter should conse=uently be held sol dar ly l able 9 th Deganos n h s obl gat on to pet t oners. (h le the =uoted statement n the f nd ngs of fact of the assa led appellate dec s on ment oned that Deganos ostens bly acted as an agent of Er g da, the actual conclus on and rul ng of the

'ourt of Appeals categor cally stated that, ,/Er g da !uA0 never author Aed her brother /Deganos0 to act for and n her behalf n any transact on 9 th +et t oners . . . . 12 $t s clear, therefore, that even assum ng arguendo that Deganos acted as an agent of Er g da, the latter never author Aed h m to act on her behalf 9 th regard to the transact on sub-ect of th s case. %he ' v l 'ode prov des? Art. 16>6. Ey the contract of agency a person b nds h mself to render some serv ce or to do someth ng n representat on or on behalf of another, 9 th the consent or author ty of the latter. %he bas s for agency s representat on. Bere, there s no sho9 ng that Er g da consented to the acts of Deganos or author Aed h m to act on her behalf, much less 9 th respect to the part cular transact ons nvolved. +et t oners) attempt to fo st l ab l ty on respondent spouses through the supposed agency relat on 9 th Deganos s groundless and ll@adv sed. Ees des, t 9as grossly and ne1cusably negl gent of pet t oners to entrust to Deganos, not once or t9 ce but on at least s 1 occas ons as ev denced by s 1 rece pts, several p eces of -e9elry of substant al value 9 thout re=u r ng a 9r tten author Aat on from h s alleged pr nc pal. A person deal ng 9 th an agent s put upon n=u ry and must d scover upon h s per l the author ty of the agent. 10 %he records sho9 that ne ther an e1press nor an mpl ed agency 9as proven to have e1 sted bet9een Deganos and Er g da D. !uA. Ev dently, pet t oners, 9ho 9ere negl gent n the r transact ons 9 th Deganos, cannot seeF rel ef from the effects of the r negl gence by con-ur ng a supposed agency relat on bet9een the t9o respondents 9here no ev dence supports such cla m. +et t oners ne1t allege that the 'ourt of Appeals erred n gnor ng the fact that the dec s on of the court belo9, 9h ch t aff rmed, s ,null and vo d, as t contrad cted ts rul ng n 'A@#.". &+ No. <5448 hold ng that there s ,suff c ent ev denceMproof, aga nst Er g da D. !uA and Deganos for estafa n the pend ng cr m nal case. %hey further aver that sa d appellate court erred n rul ng aga nst them n th s c v l act on s nce the same 9ould result n an nev table confl ct of dec s ons should be tr al court conv ct the accused n the cr m nal case. Ey 9ay of bacFdrop for th s argument of pet t oners, here n respondents Er g da D. !uA and Deganos had f led a demurrer to ev dence and a mot on for recons derat on n the aforestated cr m nal case, both of 9h ch 9ere den ed by the tr al court. %hey then f led a pet t on for certiorari n the 'ourt of Appeals to set as de the den al of the r demurrer and mot on for recons derat on but, as -ust stated, the r pet t on therefor 9as d sm ssed. 11 +et t oners no9 cla m that the aforesa d d sm ssal by the 'ourt of Appeals of the pet t on n 'A@#.". &+ No. <5448 9 th respect to the cr m nal case s e=u valent to a f nd ng that there s suff c ent ev dence n the estafa case aga nst Er g da D. !uA and Deganos. Bence, as already stated, pet t oners theor Ae that the dec s on and resolut on of the 'ourt of Appeals no9 be ng mpugned n the case at bar

9ould result n a poss ble confl ct 9 th the prospect ve dec s on n the cr m nal case. $nstead of promulgat ng the present dec s on and resolut on under rev e9, so they suggest, the 'ourt of Appeals should have a9a ted the dec s on n the cr m nal case, so as not to render academ c or preempt the same or, 9orse, create t9o confl ct ng rul ngs. 1= +et t oners have apparently lost s ght of Art cle << of the ' v l 'ode 9h ch prov des that n cases nvolv ng alleged fraudulent acts, a c v l act on for damages, ent rely separate and d st nct from the cr m nal act on, may be brought by the n-ured party. &uch c v l act on shall proceed ndependently of the cr m nal prosecut on and shall re=u re only a preponderance of ev dence. $t s 9orth not ng that th s c v l case 9as nst tuted four years before the cr m nal case for estafa 9as f led, and that although there 9as a move to consol date both cases, the same 9as den ed by the tr al court. 'onse=uently, t 9as the duty of the t9o branches of the "eg onal %r al 'ourt concerned to ndependently proceed 9 th the c v l and cr m nal cases. $t 9 ll also be observed that a f nal -udgment rendered n a c v l act on absolv ng the defendant from c v l l ab l ty s no bar to a cr m nal act on. 1< $t s clear, therefore, that th s c v l case may proceed ndependently of the cr m nal case 3. espec ally because 9h le both cases are based on the same facts, the =uantum of proof re=u red for hold ng the part es l able there n d ffer. %hus, t s mprov dent of pet t oners to cla m that the dec s on and resolut on of the 'ourt of Appeals n the present case 9ould be preempt ve of the outcome of the cr m nal case. %he r fanc ed fear of poss ble confl ct bet9een the d spos t on of th s c v l case and the coutcome of the pend ng cr m nal case s llusory. +et t oners surpr s ngly postulate that the 'ourt of Appeals had lost ts -ur sd ct on to ssue the den al resolut on dated August 16, 1552, as the same 9as ta nted 9 th rregular t es and badges of fraud perpetrated by ts court off cers. 31 %hey charge that sa d appellate court, through consp racy and fraud on the part of ts off cers, gravely abused ts d scret on n ssu ng that resolut on deny ng the r mot on for recons derat on. %hey cla m that sa d resolut on 9as drafted by the ponente, then s gned and ssued by the members of the Eleventh D v s on of sa d court 9 th n one and a half days from the elevat on thereof by the d v s on clerF of court to the off ce of the ponente. $t s the thes s of pet t oners that there 9as undue haste n ssu ng the resolut on as the same 9as made 9 thout 9a t ng for the lapse of the ten@day per od for respondents to f le the r comment and for pet t oners to f le the r reply. $t 9as allegedly mposs ble for the 'ourt of Appeals to resolve the ssue n -ust one and a half days, espec ally because ts ponente, the late Just ce Ma1 m ano '. Asunc on, 9as then recuperat ng from surgery and, that, add t onally, ,hundreds of more mportant cases 9ere pend ng., 33 %hese lamentable allegat on of rregular t es n the 'ourt of Appeals and n the conduct of ts off cers str Fes us as a desperate attempt of pet t oners to nduce th s 'ourt to g ve credence to the r arguments 9h ch, as already found by both

the tr al and ntermed ate appellate courts, are devo d of factual and legal substance. %he regrettably rrespons ble attempt to tarn sh the mage of the ntermed ate appellate tr bunal and ts -ud c al off cers through ad hominem mputat ons could 9ell be contumac ous, but 9e are ncl ned to let that pass 9 th a str ct admon t on that pet t oners refra n from ndulg ng n such conduct n l t gat ons. Dn July 5, 1552, the 'ourt of Appeals rendered -udgment n th s case aff rm ng the tr al court)s dec s on. 34+et t oners moved for recons derat on and the 'ourt of Appeals ordered respondents to f le a comment. "espondents f led the same on August 8, 1552 3; and pet t oners f led the r reply to sa d comment on August 18, 1552. 32 %he Eleventh D v s on of sa d court ssued the =uest oned resolut on deny ng pet t oner)s mot on for recons derat on on August 16, 1552. 30 $t s ron c that 9h le some l t gants mal gn the -ud c ary for be ng supposedly slothful n d spos ng of cases, pet t oners are maF ng a sho9 of call ng out for -ust ce because the 'ourt of Appeals ssued a resolut on d spos ng of a case sooner than e1pected of t. %hey 9ould even deny the e1erc se of d scret on by the appellate court to pr or t Ae ts act on on cases n l ne 9 th the procedure t has adopted n d spos ng thereof and n declogg ng ts docFets. $t s def n tely not for the part es to determ ne and d ctate 9hen and ho9 a tr bunal should act upon those cases s nce they are not even a9are of the status of the docFets and the nternal rules and pol c es for act ng thereon. %he fact that a resolut on 9as ssued by sa d court 9 th n a relat vely short per od of t me after the records of the case 9ere elevated to the off ce of the ponente cannot, by tself, be deemed rregular. %here s no sho9 ng 9hatsoever that the resolut on 9as ssued 9 thout cons der ng the reply f led by pet t oners. $n fact, that br ef plead ng f led by pet t oners does not e1h b t any esoter c or ponderous argument 9h ch could not be analyAed 9 th n an hour. $t s a legal presumpt on, born of 9 sdom and e1per ence, that off c al duty has been regularly performedI 31 that the proceed ngs of a -ud c al tr bunal are regular and val d, and that -ud c al acts and dut es have been and 9 ll be duly and properly performed. 3= %he burden of prov ng rregular ty n off c al conduct s on the part of pet t oners and they have utterly fa led to do so. $t s thus reprehens ble for them to cast aspers ons on a court of la9 on the bases of con-ectures or surm ses, espec ally s nce one of the pet t oners appears to be a member of the +h l pp ne Ear. !astly, pet t oners fault the tr al court)s hold ng that 9hatever contract of agency 9as establ shed bet9een Er g da D. !uA and Narc so Deganos s unenforceable under the &tatute of 7rauds as that aspect of th s case allegedly s not covered thereby. 3< %hey proceed on the prem se that the &tatute of 7rauds appl es only to e1ecutory contracts and not to e1ecuted or to part ally e1ecuted ones. 7rom there, they move on to cla m that the contract nvolved n th s case 9as an e1ecuted contract as the tems had already been del vered by pet t oners to Er g da D. !uA, hence, such del very resulted n the e1ecut on of the contract and removed the same from the coverage of the &tatute of 7rauds.

+et t oners) cla m s spec ously unmer tor ous. $t should be emphas Aed that ne ther the tr al court nor the appellate court categor cally stated that there 9as such a contractual relat on bet9een these t9o respondents. %he tr al court merely sa d that f there 9as such an agency e1 st ng bet9een them, the same s unenforceable as the contract 9ould fall under the &tatute of 7rauds 9h ch re=u res the presentat on of a note or memorandum thereof n order to be enforceable n court. %hat 9as merely a preparatory statement of a pr nc ple of la9. (hat 9as f nally proven as a matter of fact s that there 9as no such contract bet9een Er g da D. !uA and Narc so Deganos, e1ecuted or part ally e1ecuted, and no del very of any of the tems sub-ect of th s case 9as ever made to the former. (BE"E7D"E, no error hav ng been comm tted by the 'ourt of Appeals n aff rm ng the -udgment of the court a quo, ts challenged dec s on and resolut on are hereby A77$"MED and the nstant pet t on s DEN$ED, 9 th double costs aga nst pet t oners. &D D"DE"ED. $uno, Mendoza and Martinez, 99., concur. :ootnotes 1 Rollo, 6>. 2 :#id., 20<. < :#id., 68. 4 :#id., 26@64. 8 :#id., 111@112. > :#id., 68@52. 2 :#id., 54. 6 Art cle 140< of the ' v l 'ode pert nently prov des that the follo9 ng contracts are unenforceable unless they are rat f ed? 1. %hose entered nto the name of another person by one 9ho had been g ven no author ty or legal representat on, or 9ho has acted beyond h s po9er. 2. %hose that do not comply 9 th the &tatute of 7rauds as set forth n th s number. $n the follo9 ng cases, an agreement hereafter made shall be unenforceable by act on, unless the same, or some note or memorandum thereof, be n 9r t ng, and subscr bed by the party charged, or by h s agentI ev dence, therefore, of the agreement cannot be rece ved 9 thout the 9r t ng or a secondary ev dence of ts contents? 111 111 111

/b0 A spec al prom se to ans9er for the debt, default, or m scarr age of anotherI 111 111 111 5 Rollo, 52. 10 Just ce Ma1 m ano '. Asunc on as ponente, 9 th the concurrence of Just ce Jesus M. Elb n as and Just ce "amon A. Earcelona of the Eleventh D v s on of the 'ourt of Appeals, aff rmed the dec s on of the tr al court n a dec s on dated July 5, 1552I Rollo, 5@1<. 11 %he resolut on 9as dated August 16, 1552I Rollo, 20@A. 12 Rollo, <<@40. 1< :#id., 40. 14 :#id., 40@41. 18 :#id., 12. 1> %oyota &ha9, $nc. vs. 'ourt of Appeals, et al., #.". No. 11>>80, May 2<, 1558, 244 &'"A <20. 12 Rollo, 126@1<1. 16 :#id., 41. 15 &ect on 4, "ule 111, "ules of 'ourt. 20 &alta vs. De Ceyra, etc., et al., !@<22<< and +h l pp ne Nat onal EanF vs. +ur s ma, etc., et al., !@<60<8, -o ntly dec ded on &eptember <0, 1552, 112 &'"A 212. 21 Rollo, 42. 22 :#id., 46. 2< :#id., 5@1<. 24 :#id., 1>0@1>2. 28 :#id., 126@162. 2> :#id., 20@A. 22 &ect on </m0, "ule 1<1, "ules of 'ourt. 26 &ect on </n0, "ule 1<1, "ules of 'ourt prov des that t s presumed that a court, or -udge act ng as such, 9hether n the +h l pp nes or else9here, 9as act ng n the la9ful e1erc se of -ur sd ct on. 25 Rollo, 82.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. Nos. 123014 ? 12303= NoAem er 3., 3..<

A+E> ')N)NG %/., )N%., pet t oner, vs. S/&(5EAS( ')N!ANA/ G/#! ')N)NG %/$+., t-e mines adBudication oard, proAincial minin" re"ulatory oard C+'$97!A*A/D, '/NKA8/ )N(EG$A(E! S'A## S%A#E ')NE$S ASS/%)A()/N, )N%., $/SEN!/ *)##A:#/$, 9A#)(E %/''&NA# +/$(A# ')N)NG %//+E$A()*E, !A*A/ &N)(E! ')NE$S %//+E$A()*E, AN(/N)/ !A%&!A/, +&()NG79A(/ G/#! ')NE$S %//+E$A()*E, $/'E/ A#(A'E$A, (5E#'A %A(A+ANG, #&)S GA#ANG, $ENA(/ 9AS')##/, :$AN%)S%/ 8/9)!/, E!&A$!/ G#/$)A, E!W)N AS)/N, 'A%A$)/ 5E$NAN!E6, $E8NA#!/ %A$&9)/, $/9E$(/ 9&N)A#ES, $&!8 ES+/$(/N/, $/'E/ %AS()##/, J/SE $EA, G)# GANA!/, +$)')()*A #)%A8AN, #E()%)A A#E&E6A and J/E# 9$)##AN(ES 'ana"ement 'inin" %orporation, "espondents. 1 @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @1 G.$. No. 12301<73. 9A#)(E %/''&NA# +/$(A# ')N)NG %//+E$A()*E, pet t oner, vs. S/&(5EAS( ')N!ANA/ G/#! ')N)NG %/$+., A+E> ')N)NG %/., )N%., (-e 'ines AdBudication 9oard, +roAincial 'inin" $e"ulatory 9oard C+'$97!A*A/D, '/NKA8/ )N(EG$A(E! S'A## S%A#E ')NE$S ASS/%)A()/N, )N%., $/SEN!/ *)##A:#/$, !A*A/ &N)(E! ')NE$S %//+E$A()*E, AN(/N)/ !A%&!A/, +&()NG79A(/ G/#! ')NE$S %//+E$A()*E, $/'E/ A#(A'E$A, (5E#'A %A(A+ANG, #&)S GA#ANG, $ENA(/ 9AS')##/, :$AN%)S%/ 8/9)!/, E!&A$!/ G#/$)A, E!W)N AS)/N, 'A%A$)/ 5E$NAN!E6, $E8NA#!/ %A$&9)/, $/9E$(/ 9&N)A#ES, $&!8 ES+/$(/N/, $/'E/ %AS()##/, J/SE $EA, G)# GANA!/, +$)')()*A #)%A8AN, #E()%)A A#E&E6A and J/E# 9$)##AN(ES 'ana"ement 'inin" %orporation, "espondents. 1 @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @1 G.$. No. 123=1.711 (5E ')NES A!J&!)%A()/N 9/A$! AN! )(S 'E'9E$S, (5E 5/N. *)%(/$ /. $A'/S C%-airmanD, &N!E$SE%$E(A$8 *)$G)#)/ 'A$%E#/ C'em erD and !)$E%(/$ 5/$A%)/ $A'/S C'em erD,pet t oners, vs. S/&(5EAS( ')N!ANA/ G/#! ')N)NG %/$+/$A()/N, "espondent.

"E&D!3%$DN %5)%/7NA6A$)/, J.: %h s resolves the mot on for recons derat on dated 12 July 200>, f led by &outheast M ndanao #old M n ng 'orporat on /&EM0, of th s 'ourtJs Dec s on dated 2< June 200> /Assa led Dec s on0. %he Assa led Dec s on held that the ass gnment of E1plorat on +erm t /E+0 1<< n favor of &EM v olated one of the cond t ons st pulated n the perm t, .e., that the same shall be for the e1clus ve use and benef t of Marcopper M n ng 'orporat on /MM'0 or ts duly author Aed agents. & nce &EM d d not cla m or subm t ev dence that t 9as a des gnated agent of MM', the latter cannot be cons dered as an agent of the former that can use E+ 1<< and benef t from t. $t also ruled that the transfer of E+ 1<< v olated +res dent al Decree No. 4><, 9h ch re=u res that the ass gnment of a m n ng r ght be made 9 th the pr or approval of the &ecretary of the Department of Env ronment and Natural "esources /DEN"0. Moreover, the Assa led Dec s on po nted out that E+ 1<< e1p red by non@rene9al s nce t 9as not rene9ed before or after ts e1p rat on. %he Assa led Dec s on l Fe9 se upheld the val d ty of +roclamat on No. 252 absent any =uest on aga nst ts val d ty. $n v e9 of th s, and cons der ng that under &ect on 8 of "epubl c Act No. 2542, other9 se Fno9n as the ,M n ng Act of 1558,, m n ng operat ons n m neral reservat ons may be undertaFen d rectly by the &tate or through a contractor, the 'ourt deemed the ssue of o9nersh p of pr or ty r ght over the contested D 9al9al #old "ush Area as hav ng been overtaFen by the sa d proclamat on. %hus, t 9as held n the Assa led Dec s on that t s no9 9 th n the prerogat ve of the E1ecut ve Department to undertaFe d rectly the m n ng operat ons of the d sputed area or to a9ard the operat ons to pr vate ent t es nclud ng pet t oners Ape1 and Eal te, sub-ect to appl cable la9s, rules and regulat ons, and prov ded that these pr vate ent t es are =ual f ed. &EM also f led a Mot on for "eferral of 'ase to the 'ourt En Eanc and for Dral Arguments dated 22 August 200>. Ape1, for ts part, f led a Mot on for 'lar f cat on of the Assa led Dec s on, pray ng that the 'ourt eluc date on the Dec s onJs pronouncement that ,m n ng operat ons, are no9, therefore 9 th n the full control of the &tate through the e1ecut ve branch., Moreover, Ape1 asFs th s 'ourt to order the M nes and #eosc ences Eoard /M#E0 to accept ts appl cat on for an e1plorat on perm t. $n ts Man festat on and Mot on dated 26 July 200>, Eal te echoes the same concern as that of Ape1 on the actual taFeover by the &tate of the m n ng ndustry n the d sputed area to the e1clus on of the pr vate sector. $n add t on, Eal te prays for th s 'ourt to d rect M#E to accept ts appl cat on for an e1plorat on perm t. 'am lo Eanad, et al., l Fe9 se f led a mot on for recons derat on and prayed that the d sputed area be a9arded to them.

$n the "esolut on dated 18 Apr l 2006, the 'ourt En Eanc resolved to accept the nstant cases. %he 'ourt, n a resolut on dated 25 Apr l 2006, resolved to set the cases for Dral Argument on 1 July 2006. Dur ng the Dral Argument, the 'ourt dent f ed the follo9 ng pr nc pal ssues to be d scussed by the part es? 1. (hether the transfer or ass gnment of E1plorat on +erm t /E+0 1<< by MM' to &EM 9as val dly made 9 thout v olat ng any of the terms and cond t ons set forth n +res dent al Decree No. 4>< and E+ 1<< tself. 2. (hether &outheast M ndanao M n ng 'orp. ac=u red a vested r ght over the d sputed area, 9h ch const tutes a property r ght protected by the 'onst tut on. <. (hether the assa led Dec s on dated 2< June 200> of the %h rd D v s on n th s case s contrary to and overturns the earl er Dec s on of th s 'ourt n Ape1 v. #arc a /#.". No. 52>08, 1> July 1551, 155 &'"A 2260. 4. (hether the ssuance of +roclamat on No. 252 declar ng the d sputed area as m neral reservat on out9e ghs the cla ms of &EM, Ape1 M n ng 'o. $nc. and Eal te 'ommunal +ortal M n ng 'ooperat ve over the D 9al9al #old "ush Area. 8. (hether the ssue of the legal tyMconst tut onal ty of +roclamat on No. 252 9as belatedly ra sed. >. Assum ng that the legal tyMconst tut onal ty of +roclamat on No. 252 9as t mely ra sed, 9hether sa d proclamat on v olates any of the follo9 ng? a. Art cle G$$, &ect on 4 of the 'onst tut onI b. &ect on 1 of "epubl c Act No. <052I c. &ect on 14 of the Adm n strat ve 'ode of 1562I d. &ect on 8/a0 of "epubl c Act No. 286>I e. &ect on 4/a0 of "epubl c Act No. >>82I and f. &ect on 2, &ubsect on 2.1.2 of E1ecut ve Drder No. <16 dated 5 June 2004. After hear ng the arguments of the part es, the 'ourt re=u red them to subm t the r respect ve memoranda. Memoranda 9ere accord ngly f led by &EM, Ape1, Eal te and M nes Ad-ud cat on Eoard /MAE0. (e shall resolve the second ssue before d9ell ng on the f rst, th rd and the rest of the ssues. MM' or &EM D d Not Bave Cested " ghts Dver the D 9al9al #old "ush Area +et t oner &EM v gorously argues that Ape1 M n ng 'o., $nc. v. #arc a 1 vested n MM' m n ng r ghts over the d sputed area. $t cla ms that the m n ng r ghts that MM' ac=u red under the sa d case 9ere the ones ass gned to &EM, and not the r ght to e1plore under MM'Js E+ 1<<. $t ns sts that m n ng r ghts, once obta ned,

cont nue to subs st regardless of the val d ty of the e1plorat on perm tI thus, m n ng r ghts are ndependent of the e1plorat on perm t and therefore do not e1p re 9 th the perm t. &EM ns sts that a m n ng r ght s a vested property r ght that not even the government can taFe a9ay. %o support th s thes s, &EM c tes th s 'ourtJs rul ng n McDan el v. Apac ble and 'u s a 2 and n #old 'reeF M n ng 'orporat on v. "odr gueA,< 9h ch 9ere dec ded n 1522 and 15<6, respect vely. McDan el and #old 'reeF M n ng 'orporat on are not n po nt. $n 151>, McDan el, pet t oner there n, located m nerals, .e., petroleum, on an unoccup ed publ c land and reg stered h s m neral cla ms 9 th the off ce of the m n ng recorder pursuant to the +h l pp ne E ll of 1502, 9here a m n ng cla m locator, soon after locat ng the m ne, en-oyed possessory r ghts 9 th respect to such m n ng cla m 9 th or 9 thout a patent therefor. $n that case, the Agr culture &ecretary, by v rtue of Act No. 25<2, approved n 1520, 9h ch prov des that ,all publ c lands may be leased by the then &ecretary of Agr culture and Natural "esources,, 9as about to grant the appl cat on for lease of there n respondent, overlapp ng the m n ng cla ms of the sub-ect pet t oner. +et t oner argued that, be ng a val d locator, he had vested r ght over the publ c land 9here h s m n ng cla ms 9ere located. %here, the 'ourt ruled that the m n ng cla m perfected under the +h l pp ne E ll of 1502, s ,property n the h ghest sense of that term, 9h ch may be sold and conveyed, and 9 ll pass by descent, and s not therefore sub-ect to the d sposal of the #overnment., %he 'ourt then declared that s nce pet t oner had already perfected h s m n ng cla m under the +h l pp ne E ll of 1502, a subse=uent statute, .e., Act No. 25<2, could not operate to depr ve h m of h s already perfected m n ng cla m, 9 thout v olat ng h s property r ght. #old 'reeF M n ng re terated the rul ng n McDan el that a perfected m n ng cla m under the +h l pp ne E ll of 1502 no longer formed part of the publ c doma nI hence, such m n ng cla m does not come 9 th n the proh b t on aga nst the al enat on of natural resources under &ect on 1, Art cle G$$ of the 15<8 'onst tut on. #leaned from the rul ng on the forego ng cases s that for th s la9 to apply, t must be establ shed that the m n ng cla m must have been perfected 9hen the +h l pp ne E ll of 1502 9as st ll n force and effect. %h s s so because, unl Fe the subse=uent la9s that proh b t the al enat on of m n ng lands, the +h l pp ne E ll of 1502 sanct oned the al enat on of m n ng lands to pr vate nd v duals. %he +h l pp ne E ll of 1502 conta ned prov s ons for, among many other th ngs, the open and free e1plorat on, occupat on and purchase of m neral depos ts and the land 9here they may be found. $t declared ,all valuable m neral depos ts n publ c lands n the +h l pp ne $slands, both surveyed and unsurveyed 1 1 1 to be free and open to e1plorat on, occupat on, and purchase, and the land n 9h ch they are found to occupat on and purchase, by c t Aens of the 3n ted &tates, or of sa d $slands 1 1 1.,4 +ursuant to th s la9, the holder of the m neral cla m s ent tled to all the m nerals that may l e 9 th n h s cla m, prov ded he does three acts? 7 rst, he enters the m n ng land and locates a plot of ground measur ng, 9here poss ble, but not e1ceed ng, one thousand feet n length by one thousand

feet n breadth, n as nearly a rectangular form as poss ble. 8&econd, the m n ng locator has to record the m neral cla m n the m n ng recorder 9 th n th rty /<00 days after the locat on thereof.> !astly, he must comply 9 th the annual actual 9orF re=u rement.2 'omplete m n ng r ghts, namely, the r ghts to e1plore, develop and ut l Ae, are ac=u red by a m n ng locator by s mply follo9 ng the forego ng re=u rements.+avvphi+ ( th the effect v ty of the 15<8 'onst tut on, 9here the regal an doctr ne 9as adopted, t 9as declared that all natural resources of the +h l pp nes, nclud ng m neral lands and m nerals, 9ere property belong ng to the &tate. 6E1cluded, ho9ever, from the property of publ c doma n 9ere the m neral lands and m nerals that 9ere located and perfected by v rtue of the +h l pp ne E ll of 1502, s nce they 9ere already cons dered pr vate propert es of the locators. 5 'ommon9ealth Act No. 1<2 or the M n ng Act of 15<>, 9h ch e1pressly adopted the regal an doctr ne follo9 ng the prov s on of the 15<8 'onst tut on, also proscr bed the al enat on of m n ng lands and granted only lease r ghts to m n ng cla mants, 9ho 9ere proh b ted from purchas ng the m n ng cla m tself. (hen +res dent al Decree No. 4><, 9h ch rev sed 'ommon9ealth Act No. 1<2, 9as n force n 1524, t l Fe9 se recogn Aed the regal an doctr ne embod ed n the 152< 'onst tut on. $t declared that all m neral depos ts and publ c and pr vate lands belonged to the state 9h le, nonetheless, recogn A ng m neral r ghts that had already been e1 st ng under the +h l pp ne E ll of 1502 as be ng beyond the purv e9 of the regal an doctr ne.10 %he possessory r ghts of m n ng cla m holders under the +h l pp ne E ll of 1502 rema ned ntact and effect ve, and such r ghts 9ere recogn Aed as property r ghts that the holders could convey or pass by descent.11 $n the nstant cases, &EM does not aver or prove that ts m n ng r ghts had been perfected and completed 9hen the +h l pp ne E ll of 1502 9as st ll the operat ve la9. &urely, t s mposs ble for &EM to successfully assert that t ac=u red m n ng r ghts over the d sputed area n accordance 9 th the same b ll, s nce t 9as only n 1564 that MM', &EMJs predecessor@ n@ nterest, f led ts declarat on of locat ons and ts prospect ng perm t appl cat on n compl ance 9 th +res dent al Decree No. 4><. $t 9as on 1 July 1568 and 10 March 156> that a +rospect ng +erm t and E+ 1<<, respect vely, 9ere ssued to MM'. 'ons der ng these facts, there s no poss b l ty that MM' or &EM could have ac=u red a perfected m n ng cla m under the ausp ces of the +h l pp ne E ll of 1502. (hatever m n ng r ghts MM' had that t nval dly transferred to &EM cannot, by any stretch of mag nat on, be cons dered ,m n ng r ghts, as contemplated under the +h l pp ne E ll of 1502 and mmortal Aed n McDan el and #old 'reeF M n ng. &EM l Fens E+ 1<< 9 th a bu ld ng perm t. &EM l Fe9 se e=uates ts supposed r ghts attached to the e1plorat on perm t 9 th the r ghts that a pr vate property land o9ner has to sa d landhold ng. %h s analogy has no bas s n la9. As earl er d scussed, under the 15<8, 152< and 1562 'onst tut ons, nat onal 9ealth, such as m neral resources, are o9ned by the &tate and not by the r d scoverer. %he d scoverer or locator can only develop and ut l Ae sa d m nerals for h s o9n

benef t f he has compl ed 9 th all the re=u rements set forth by appl cable la9s and f the &tate has conferred on h m such r ght through perm ts, concess ons or agreements. $n other 9ords, 9 thout the mpr matur of the &tate, any m n ng asp rant does not have any def n t ve r ght over the m neral land because, unl Fe a pr vate landhold ng, m neral land s o9ned by the &tate, and the same cannot be al enated to any pr vate person as e1pl c tly stated n &ect on 2, Art cle G$C of the 1562 'onst tut on? All lands of publ c doma n, 9aters, m nerals 1 1 1 and all other natural resources are o9ned by the &tate. ( th the e1cept on of agr cultural lands, all other natural resources shall not be al enated. /Emphases suppl ed.0 7urther, a closer scrut ny of the deed of ass gnment n favor of &EM reveals that MM' ass gned to the former the r ghts and nterests t had n E+ 1<<, thus? 1. %hat for DNE +E&D /+1.000 and other valuable cons derat on rece ved by the A&&$#ND" from the A&&$#NEE, the A&&$#ND" hereby A&&$#N&, %"AN&7E"& and 'DNCEH& unto the A&&$#NEE 9hatever r ghts or nterest the A&&$#ND" may have n the area s tuated n MonFayo, Davao del Norte and 'ateel, Davao Dr ental, dent f ed as E1plorat on +erm t No. 1<< and Appl cat on for a +erm t to +rospect n Euna9an, Agusan del &ur respect vely. /Emphas s suppl ed.0 $t s ev dent that 9hat MM' had over the d sputed area dur ng the ass gnment 9as an e1plorat on perm t. 'learly, the r ght that &EM ac=u red 9as l m ted to e1plorat on, only because MM' 9as a mere holder of an e1plorat on perm t. As prev ously e1pla ned, &EM d d not ac=u re the r ghts nherent n the perm t, as the ass gnment by MM' to &EM 9as done n v olat on of the cond t on st pulated n the perm t, and the ass gnment 9as effected 9 thout the approval of the proper author ty n contravent on of the prov s on of the m n ng la9 govern ng at that t me. $n add t on, the perm t e1p red on > July 1554. $t s, therefore, =u te clear that &EM has no r ght over the area. Even assum ng arguendo that &EM obta ned the r ghts attached n E+ 1<<, sa d r ghts cannot be cons dered as property r ghts protected under the fundamental la9. An e1plorat on perm t does not automat cally r pen nto a r ght to e1tract and ut l Ae the m neralsI much less does t develop nto a vested r ght. %he holder of an e1plorat on perm t only has the r ght to conduct e1plorat on 9orFs on the area a9arded. +res dent al Decree No. 4>< def ned e1plorat on as ,the e1am nat on and nvest gat on of lands supposed to conta n valuable m nerals, by dr ll ng, trench ng, shaft s nF ng, tunnel ng, test p tt ng and other means, for the purpose of prob ng the presence of m neral depos ts and the e1tent thereof., E1plorat on does not nclude development and e1plo tat on of the m nerals found. Development s def ned by the same statute as the steps necessar ly taFen to reach an ore body or m neral depos t so that t can be m ned, 9hereas e1plo tat on s def ned as ,the e1tract on and ut l Aat on of m neral depos ts., An e1plorat on perm t s noth ng more than a mere r ght accorded to ts holder to be g ven pr or ty n the governmentJs cons derat on n the grant ng of the r ght to

develop and ut l Ae the m nerals over the area. An e1plorat on perm t s merely nchoate, n that the holder st ll has to comply 9 th the terms and cond t ons embod ed n the perm t. %h s s man fest n the language of +res dent al Decree No. 4><, thus? &ec. 6. 1 1 1 %he r ght to e1plo t there n shall be a9arded by the +res dent under such terms and cond t ons as recommended by the D rector and approved by the &ecretary +rov ded, %hat the persons or corporat ons 9ho undertooF prospect ng and e1plorat on of sa d area shall be g ven pr or ty. $n !a Eugal@EJlaan %r bal Assoc at on, $nc. v. "amos, 12 th s 'ourt emphas Aed? +ursuant to &ect on 20 of "A 2542, an e1plorat on perm t merely grants to a =ual f ed person the r ght to conduct e1plorat on for all m nerals n spec f ed areas. &uch a perm t does not amount to an author Aat on to e1tract and carry off the m neral resources that may be d scovered. 1 1 1. +ursuant to &ect on 24 of "A 2542, an e1plorat on perm t grantee 9ho determ nes the commerc al v ab l ty of a m n ng area may, 9 th n the term of the perm t, f le 9 th the M#E a declarat on of m n ng pro-ect feas b l ty accompan ed by a 9orF program for development. %he approval of the m n ng pro-ect feas b l ty and compl ance 9 th other re=u rements of "A 2542 vests n the grantee the e1clus ve r ght to an M+&A or any other m neral agreement, or to an 7%AA. /3nderscor ng ours.0 %he non@ac=u s t on by MM' or &EM of any vested r ght over the d sputed area s supported by th s 'ourtJs rul ng n &outheast M ndanao #old M n ng 'orporat on v. Eal te +ortal M n ng 'ooperat ve1< ? 'learly then, the Ape1 M n ng case d d not nvest pet t oner 9 th any def n te r ght to the D 9al9al m nes 9h ch t could no9 set up aga nst respondent E'M' and other m n ng groups. $nc dentally, t must l Fe9 se be po nted out that under no c rcumstances may pet t onerJs r ghts under E+ No. 1<< be regarded as total and absolute. As correctly held by the 'ourt of Appeals n ts challenged dec s on, E+ No. 1<< merely ev dences a pr v lege granted by the &tate, 9h ch may be amended, mod f ed or resc nded 9hen the nat onal nterest so re=u res. 1 1 1. /3nderscor ng suppl ed.0 3nfortunately, &EM cannot be g ven pr or ty to develop and e1plo t the area covered by E+ 1<< because, as d scussed n the assa led Dec s on, E+ 1<< e1p red by non@rene9al on > July 1554. Also, as already ment oned, the transfer of the sa d perm t to &EM 9as 9 thout legal effect because t 9as done n contravent on of +res dent al Decree No. 4>< 9h ch re=u res pr or approval from the proper author ty. & mply told, &EM holds noth ng for t to be ent tled to conduct m n ng act v t es n the d sputed m neral land. &EM 9ants to mpress on th s 'ourt that ts alleged m n ng r ghts, by v rtue of ts be ng a transferee of E+ 1<<, s s m lar to a 7 nanc al and %echn cal Ass stance

Agreement /7%AA0 of a fore gn contractor, 9h ch mer ts protect on by the due process clause of the 'onst tut on. &EM c tes !a Eugal@EJlaan %r bal Assoc at on, $nc. v. "amos,14 as follo9s? %o say that an 7%AA s -ust l Fe a mere t mber l cense or perm t and does not nvolve contract or property r ghts 9h ch mer t protect on by the due process clause of the 'onst tut on, and may therefore be revoFed or cancelled n the bl nF of an eye, s to adopt a 9ell@n gh conf scatory stanceI at the very least, t s do9nr ght d sm ss ve of the property r ghts of bus nesspersons and corporate ent t es that have nvestments n the m n ng ndustry, 9hose nvestments, operat ons and e1pend tures do contr bute to the general 9elfare of the people, the coffers of government, and the strength of the economy. 1 1 1. Aga n, th s argument s not mer tor ous. &EM d d not ac=u re the r ghts attached to E+ 1<<, s nce the r transfer 9as 9 thout legal effect. #rant ng for the saFe of argument that &EM 9as a val d transferee of the perm t, ts r ght s not that of a m n ng contractor. An e1plorat on perm t grantee s vested 9 th the r ght to conduct e1plorat on only, 9h le an 7%AA or M+&A contractor s author Aed to e1tract and carry off the m neral resources that may be d scovered n the area.18 An e1plorat on perm t holder st ll has to comply 9 th the m n ng pro-ect feas b l ty and other re=u rements under the m n ng la9. $t has to obta n approval of such accompl shed re=u rements from the appropr ate government agenc es. 3pon obta n ng th s approval, the e1plorat on perm t holder has to f le an appl cat on for an 7%AA or an M+&A and have t approved also. 3nt l the M+&A appl cat on of &EM s approved, t cannot la9fully cla m that t possesses the r ghts of an M+&A or 7%AA holder, thus? 1 1 1 pr or to the ssuance of such 7%AA or m neral agreement, the e1plorat on perm t grantee /or prospect ve contractor0 cannot yet be deemed to have entered nto any contract or agreement 9 th the &tate 1 1 1. 1> Eut aga n, &EM s not =ual f ed to apply for an 7%AA or any m neral agreement, cons der ng that t s not a holder of a val d e1plorat on perm t, s nce E+ 1<< e1p red by non@rene9al and the transfer to t of the same perm t has no legal value. More mportantly, assum ng arguendo that &EM has a val d e1plorat on perm t, t cannot assert any m n ng r ght over the d sputed area, s nce the &tate has taFen over the m n ng operat ons there n, pursuant to +roclamat on No. 252 ssued by the +res dent on 28 November 2002. %he 'ourt has cons stently ruled that the nature of a natural resource e1plorat on perm t s analogous to that of a l cense. $n "epubl c v. "osemoor M n ng and Development 'orporat on, th s 'ourt art culated? ! Fe t mber perm ts, m n ng e1plorat on perm ts do not vest n the grantee any permanent or rrevocable r ght 9 th n the purv e9 of the non@ mpa rment of contract and due process clauses of the 'onst tut on, s nce the &tate, under ts all@encompass ng pol ce po9er, may alter, mod fy or amend the same, n accordance 9 th the demands of the general 9elfare. 12 /Emphas s suppl ed.0

As a mere l cense or pr v lege, an e1plorat on perm t can be val dly amended by the +res dent of the "epubl c 9hen nat onal nterests su tably necess tate. %he 'ourt nstructed thus? % mber l censes, perm ts and l cense agreements are the pr nc pal nstruments by 9h ch the &tate regulates the ut l Aat on and d spos t on of forest resources to the end that the publ c 9elfare s promoted. 1 1 1 %hey may be val dly amended, mod f ed, replaced or resc nded by the 'h ef E1ecut ve 9hen nat onal nterests so re=u re.16 "ecogn A ng the mportance of the countryJs natural resources, not only for nat onal econom c development, but also for ts secur ty and nat onal defense, &ect on 8 of "epubl c Act No. 2542 empo9ers the +res dent, 9hen the nat onal nterest so re=u res, to establ sh m neral reservat ons 9here m n ng operat ons shall be undertaFen d rectly by the &tate or through a contractor, v A? &E' 8. M neral "eservat ons. K (hen the nat onal nterest so re=u res, such as 9hen there s a need to preserve strateg c ra9 mater als for ndustr es cr t cal to nat onal development, or certa n m nerals for sc ent f c, cultural or ecolog cal value, the +res dent may establ sh m neral reservat ons upon the recommendat on of the D rector through the &ecretary. M n ng operat ons n e1 st ng m neral reservat ons and such other reservat ons as may thereafter be establ shed, shall be undertaFen by the Department or through a contractor 1 1 1. /Emphas s suppl ed.0 Due to the press ng concerns n the D 9al9al #old "ush Area brought about by unregulated small to med um@scale m n ng operat ons caus ng ecolog cal, health and peace and order problems, the +res dent, on 28 November 2002, ssued +roclamat on No. 252, 9h ch declared the area as a m neral reservat on and as an env ronmentally cr t cal area. %h s e1ecut ve f at 9as a med at prevent ng the further d ss pat on of the natural env ronment and rat onal A ng the m n ng operat ons n the area n order to atta n an orderly balance bet9een soc o@ econom c gro9th and env ronmental protect on. %he area be ng a m neral reservat on, the E1ecut ve Department has full control over t pursuant to &ect on 8 of "epubl c Act No. 2542. $t can e ther d rectly undertaFe the e1plorat on, development and ut l Aat on of the m nerals found there n, or t can enter nto agreements 9 th =ual f ed ent t es. & nce the E1ecut ve Department no9 has control over the e1plorat on, development and ut l Aat on of the resources n the d sputed area, &EMJs e1plorat on perm t, assum ng that t s st ll val d, has been effect vely 9 thdra9n. %he e1erc se of such po9er through +roclamat on No. 252 s n accord 9 th -ura regal a, 9here the &tate e1erc ses ts sovere gn po9er as o9ner of lands of the publ c doma n and the m neral depos ts found 9 th n. %hus, Art cle G$$, &ect on 2 of the 1562 'onst tut on emphas Aes? &E'. 2. All lands of the publ c doma n, 9ater, m nerals, coal, petroleum, and other m neral o ls, all forces of potent al energy, f sher es, forests or t mber, 9 ldl fe, flora and fauna, and other natural resources are o9ned by the &tate. ( th the e1cept on of agr cultural lands, all other natural resources shall not be al enated. %he e1plorat on, development, and ut l Aat on of natural resources

shall be under the full control and superv s on of the &tate. %he &tate may d rectly undertaFe such act v t es, or t may enter nto co@product on, -o nt venture, or product@shar ng agreements 9 th 7 l p no c t Aens, or corporat ons or assoc at ons at least s 1ty per centum of 9hose cap tal s o9ned by such c t Aens. /Emphas s suppl ed.0 7urthermore, sa d proclamat on cannot be denounced as offens ve to the fundamental la9 because the &tate s sanct oned to do so n the e1erc se of ts pol ce po9er.15 %he ssues on health and peace and order, as 9ell the decadence of the forest resources brought about by unregulated m n ng n the area, are matters of nat onal nterest. %he declarat on of the 'h ef E1ecut ve maF ng the area a m neral reservat on, therefore, s sanct oned by &ect on 8 of "epubl c Act No. 2542. %he Ass gnment of E+ No. 1<< by MM' n 7avor of &EM C olated &ect on 52 of +res dent al Decree No. 4>< and the %erms and 'ond t ons &et 7orth n the +erm t &EM cla ms that the approval re=u rement under &ect on 52 of +res dent al Decree No. 4>< s not appl cable to th s case, because MM' ne ther appl ed for nor 9as granted a m n ng lease contract. %he sa d prov s on states? &E'. 52. Ass gnment of M n ng " ghts. K A m n ng lease contract or any nterest there n shall not be transferred, ass gned, or subleased 9 thout the pr or approval of the &ecretary? +rov ded, that such transfer, ass gnment or sublease may be made only to a =ual f ed person possess ng the resources and capab l ty to cont nue the m n ng operat ons of the lessee and that the ass gnor has compl ed 9 th all the obl gat ons of the lease? +rov ded, further, %hat such transfer or ass gnment shall be duly reg stered 9 th the off ce of the m n ng recorder concerned. /Emphas s suppl ed.0 E1plorat on +erm t 1<< 9as ssued n favor of MM' on 10 March 156>, 9hen +res dent al Decree No. 4>< 9as st ll the govern ng la9. +res dent al Decree No. 4>< perta ns to the old system of e1plorat on, development and ut l Aat on of natural resources through ,l cense, concess on or lease., 20 +ursuant to th s la9, a m n ng lease contract confers on the lessee or h s successors the r ght to e1tract, to remove, process and ut l Ae the m neral depos ts found on or underneath the surface of h s m n ng cla ms covered by the lease. %he lessee may also enter nto a serv ce contract for the e1plorat on, development and e1plo tat on of the m nerals from the lands covered by h s lease, to 9 t? &E'. 44. A m n ng lease contract shall grant to the lessee, h s he rs, successors, and ass gns the r ght to e1tract all m neral depos ts found on or underneath the surface of h s m n ng cla ms covered by the lease, cont nued vert cally do9n9ardI to remove, process, and other9 se ut l Ae the m neral depos ts for h s o9n benef tI and to use the lands covered by the lease for the purpose or purposes spec f ed there n 1 1 1 %hat a lessee may on h s o9n or through the

#overnment, enter nto a serv ce contractT for the e1plorat on, development and e1plo tat on of h s cla ms and the process ng and marFet ng of the product thereof, sub-ect to the rules and regulat ons that shall be promulgated by the D rector, 9 th the approval of the &ecretary 1 1 1. /Emphases suppl ed.0 $n other 9ords, the lesseeJs nterests are not only l m ted to the e1tract on or ut l Aat on of the m nerals n the contract area, but also to nclude the r ght to e1plore and develop the same. %h s r ght to e1plore the m n ng cla m or the contract area s der ved from the e1plorat on perm t duly ssued by the proper author ty. An e1plorat on perm t s, thus, covered by the term ,any other nterest there n., &ect on 52 s ent tled, ,Ass gnment of M n ng " ghts., %h s alone g ves a h nt that before m n ng r ghts @@ namely, the r ghts to e1plore, develop and ut l Ae @@ are transferred or ass gned, pr or approval must be obta ned from the DEN" &ecretary. An e1plorat on perm t, thus, cannot be ass gned 9 thout the mpr matur of the &ecretary of the DEN". $t s nstruct ve to note that under &ect on 1< of +res dent al Decree No. 4><, the prospect ng and e1plorat on of m nerals n government reservat ons, such as forest reservat ons, are proh b ted, e1cept 9 th the perm ss on of the government agency concerned. $t s the government agency concerned that has the prerogat ve to conduct prospect ng, e1plorat on and e1plo tat on of such reserved lands.21 $t s only n nstances 9here n sa d government agency, n th s case the Eureau of M nes, cannot undertaFe sa d m n ng operat ons that =ual f ed persons may be allo9ed by the government to undertaFe such operat ons. +ND'@ ED' v. Cenerac on, Jr.22 outl nes the f ve re=u rements for ac=u r ng m n ng r ghts n reserved lands under +res dent al Decree No. 4><? /10 a prospect ng perm t from the agency that has -ur sd ct on over the landI /20 an e1plorat on perm t from the Eureau of M nes and #eo@&c ences /EM#&0I /<0 f the e1plorat on reveals the presence of commerc al depos t, appl cat on to EM#& by the perm t holder for the e1clus on of the area from the reservat onI /40 a grant by the +res dent of the appl cat on to e1clude the area from the reservat onI and /80 a m n ng agreement /lease, l cense or concess on0 approved by the DEN" &ecretary. Bere, MM' met the f rst and second re=u rements and obta ned an e1plorat on perm t over the d sputed forest reserved land. Although MM' st ll has to prove to the government that t s =ual f ed to develop and ut l Ae the sub-ect m neral land, as t has yet to go through the rema n ng process before t can secure a lease agreement, nonetheless, t s bound to follo9 &ect on 52 of +res dent al Decree No. 4><. %he log c s not hard to d scern. $f a lease holder, 9ho has already demonstrated to the government h s capac ty and =ual f cat ons to further develop and ut l Ae the m nerals 9 th n the contract area, s proh b ted from transferr ng h s m n ng r ghts /r ghts to e1plore, develop and ut l Ae0, 9 th more reason 9 ll th s proscr pt on apply 9 th e1tra force to a mere e1plorat on perm t holder 9ho s yet to e1h b t h s =ual f cat ons n conduct ng m n ng operat ons. %he rat onale for the approval re=u rement under &ect on 52 of +res dent al Decree No. 4>< s not hard to see. E1plorat on perm ts are str ctly granted to ent t es or nd v duals possess ng the resources and capab l ty to undertaFe m n ng operat ons. M n ng ndustry s a ma-or support of the nat onal

economy and the cont nuous and ntens f ed e1plorat on, development and 9 se ut l Aat on of m n ng resources s v tal for nat onal development. 7or th s reason, +res dent al Decree No. 4>< maFes t mperat ve that n a9ard ng m n ng operat ons, only persons possess ng the f nanc al resources and techn cal sF ll for modern e1ploratory and development techn =ues are encouraged to undertaFe the e1plorat on, development and ut l Aat on of the countryJs natural resources. %he preamble of +res dent al Decree No. 4>< prov des thus? (BE"EA&, effect ve and cont nuous m n ng operat ons re=u re cons derable outlays of cap tal and resources, and maFe t mperat ve that persons possess ng the f nanc al resources and techn cal sF lls for modern e1ploratory and development techn =ues be encouraged to undertaFe the e1plorat on, development and e1plo tat on of our m neral resourcesI %he 'ourt has sa d that a ,preamble, s the Fey to understand ng the statute, 9r tten to open the m nds of the maFers to the m sch efs that are to be remed ed, and the purposes that are to be accompl shed, by the prov s ons of the statute.2< As such, 9hen the statute tself s amb guous and d ff cult to nterpret, the preamble may be resorted to as a Fey to understand ng the statute. $ndub tably, 9 thout the scrut ny by the government agency as to the =ual f cat ons of the 9ould@be transferee of an e1plorat on perm t, the same may fall nto the hands of non@=ual f ed ent t es, 9h ch 9ould be counter@product ve to the development of the m n ng ndustry. $t cannot be overemphas Aed that the e1plorat on, development and ut l Aat on of the countryJs natural resources are matters v tal to the publ c nterest and the general 9elfareI hence, the r regulat on must be of utmost concern to the government, s nce these natural resources are not only cr t cal to the nat onJs secur ty, but they also ensure the countryJs surv val as a v able and sovere gn republ c. 24 %he approval re=u rement of the &ecretary of the DEN" for the ass gnment of e1plorat on perm ts s bolstered by &ect on 28 of "epubl c Act No. 2542 /other9 se Fno9n as the +h l pp ne M n ng Act of 15580, 9h ch prov des that? &ec. 28. %ransfer or Ass gnment. K An e1plorat on perm t may be transferred or ass gned to a =ual f ed person sub-ect to the approval of the &ecretary upon the recommendat on of the D rector. &EM further pos ts that &ect on 52 of +res dent al Decree No. 4><, 9h ch re=u res the pr or approval of the DEN" 9hen there s a transfer of m n ng r ghts, cannot be appl ed to the ass gnment of E+ 1<< e1ecuted by MM' n favor of &EM because dur ng the e1ecut on of the Deed of Ass gnment on 1> 7ebruary 1554, E1ecut ve Drder No. 22528became the govern ng statute, nasmuch as the latter abrogated the old m n ng system @@ .e., l cense, concess on or lease @@ 9h ch 9as espoused by the former. %h s content on s not 9ell taFen. (h le +res dent al Decree No. 4>< has already been repealed by E1ecut ve Drder No. 225, the adm n strat ve aspect of the

former la9 nonetheless rema ns appl cable. Bence, the transfer or ass gnment of e1plorat on perm ts st ll needs the pr or approval of the &ecretary of the DEN". As ruled n M ners Assoc at on of the +h l pp nes, $nc. v. 7actoran, Jr. 2> ? +res dent al Decree No. 4><, as amended, perta ns to the old system of e1plorat on, development and ut l Aat on of natural resources through ,l cense, concess on or lease, 9h ch, ho9ever, has been d sallo9ed by Art cle G$$, &ect on 2 of the 1562 'onst tut on. Ey v rtue of the sa d const tut onal mandate and ts mplement ng la9, E1ecut ve Drder No. 225, 9h ch superseded E1ecut ve Drder No. 211, the prov s ons deal ng on ,l cense, concess on, or lease, of m neral resources under +res dent al Decree No. 4><, as amended, and other e1 st ng m n ng la9s are deemed repealed and, therefore, ceased to operate as the govern ng la9. $n other 9ords, n all other areas of adm n strat on and management of m neral lands, the prov s ons of +res dent al Decree No. 4><, as amended, and other e1 st ng m n ng la9s, st ll govern. /Emphas s suppl ed.0 Not only d d the ass gnment of E+ 1<< to &EM v olate &ect on 52 of +res dent al Decree No. 4><, t l Fe9 se transgressed one of the cond t ons st pulated n the grant of the sa d perm t. %he follo9 ng terms and cond t ons attached to E+ 1<< are as follo9s?22 1. %hat the perm ttee shall ab de by the 9orF program subm tted 9 th the appl cat on or statements made later n support thereof, and 9h ch shall be cons dered as cond t ons and essent al parts of th s perm tI 2. %hat perm ttee shall ma nta n a complete record of all act v t es and account ng of all e1pend tures ncurred there n sub-ect to per od c nspect on and ver f cat on at reasonable ntervals by the Eureau of M nes at the e1pense of the appl cantI <. %hat the perm ttee shall subm t to the D rector of M nes 9 th n 18 days after the end of each calendar =uarter a report under oath of a full and complete statement of the 9orF done n the area covered by the perm tI 4. %hat the term of th s perm t shall be for t9o /20 years to be effect ve from th s date, rene9able for the same per od at the d scret on of the D rector of M nes and upon re=uest of the appl cantI 8. %hat the D rector of M nes may at any t me cancel th s perm t for v olat on of ts prov s on or n case of trouble or breach of peace ar s ng n the area sub-ect hereof by reason of confl ct ng nterests 9 thout any respons b l ty on the part of the government as to e1pend tures for e1plorat on that m ght have been ncurred, or as to other damages that m ght have been suffered by the perm tteeI >. %hat th s perm t shall be for the e1clus ve use and benef t of the perm ttee or h s duly author Aed agents and shall be used for m neral e1plorat on purposes only and for no other purpose.

$t must be noted that under &ect on 5026 of +res dent al Decree No. 4><, 9h ch 9as the appl cable statute dur ng the ssuance of E+ 1<<, the DEN" &ecretary, through the D rector of the Eureau of M nes and #eosc ences, 9as charged 9 th carry ng out the sa d la9. Also, under 'ommon9ealth Act No. 1<>, also Fno9n as ,An Act 'reat ng the Eureau of M nes,, 9h ch 9as approved on 2 November 15<>, the D rector of M nes had the d rect charge of the adm n strat on of the m neral lands and m neralsI and of the survey, class f cat on, lease or any other form of concess on or d spos t on thereof under the M n ng Act. 25 %h s po9er of adm n strat on ncluded the po9er to prescr be terms and cond t ons n grant ng e1plorat on perm ts to =ual f ed ent t es. %hus, n the grant of E+ 1<< n favor of the MM', the D rector of the EM# acted 9 th n h s po9er n lay ng do9n the terms and cond t ons attendant thereto. MM' and &EM d d not d spute the reasonableness of sa d cond t ons. Uu te consp cuous s the fact that ne ther MM' nor &EM den ed that they 9ere una9are of the terms and cond t ons attached to E+ 1<<. MM' and &EM d d not present any ev dence that they ob-ected to these cond t ons. $ndub tably, MM' 9holeheartedly accepted these terms and cond t ons, 9h ch formed part of the grant of the perm t. MM' agreed to ab de by these cond t ons. $t must be accentuated that a party to a contract cannot deny ts val d ty, 9 thout outrage to oneJs sense of -ust ce and fa rness, after en-oy ng ts benef ts. <0 (here part es have entered nto a 9ell@def ned contractual relat onsh p, t s mperat ve that they should honor and adhere to the r r ghts and obl gat ons as stated n the r contracts, because obl gat ons ar s ng from these have the force of la9 bet9een the contract ng part es and should be compl ed 9 th n good fa th. <1 'ond t on Number > categor cally states that the perm t shall be for the e1clus ve use and benef t of MM' or ts duly author Aed agents. (h le t may be true that &EM, the ass gnee of E+ 1<<, s a 100R subs d ary corporat on of MM', records are bereft of any ev dence sho9 ng that the former s the duly author Aed agent of the latter. %h s 'ourt cannot condone such utter d sregard on the part of MM' to honor ts obl gat ons under the perm t. 3ndoubtedly, hav ng v olated th s cond t on, the ass gnment of E+ 1<< to &EM s vo d and has no legal effect. %o boot, &EM s=uandered 9hatever r ghts t assumed t had under E+ 1<<. Dn > July 155<, E+ 1<< 9as e1tended for t9elve more months or unt l > July 1554. MM' or &EM, ho9ever, never rene9ed E+ 1<< e ther pr or to or after ts e1p rat on. %hus, E+ 1<< e1p red by non@rene9al on > July 1554. ( th the e1p rat on of E+ 1<< on > July 1554, MM' lost any r ght to the D 9al9al #old "ush Area. %he Assa led Dec s on "esolved 7acts and $ssues %hat %ransp red after the +romulgat on of Ape1 M n ng 'o., $nc. v. #arc a &EM asserts that the 2< June 200> Dec s on reversed the 1> July 1551 Dec s on of the 'ourt en banc ent tled, ,Ape1 M n ng 'o., $nc. v. #arc a., <2 %he assa led Dec s on D$D ND% overturn the 1> July 1551 Dec s on n Ape1 M n ng 'o., $nc. v. #arc a.

$t must be po nted out that 9hat Ape1 M n ng 'o., $nc. v. #arc a resolved 9as the ssue of 9h ch, bet9een Ape1 and MM', ava led tself of the proper procedure n ac=u r ng the r ght to prospect and to e1plore n the Agusan@Davao@&ur gao 7orest "eserve. Ape1 reg stered ts Declarat ons of !ocat on /DD!0 9 th the then EM#&, 9h le MM' 9as granted a perm t to prospect by the Eureau of 7orest Development /E7D0 and 9as subse=uently granted an e1plorat on perm t by the EM#&. %aF ng nto cons derat on +res dent al Decree No. 4><, 9h ch prov des that ,m n ng r ghts 9 th n forest reservat on can be ac=u red by n t ally apply ng for a perm t to prospect 9 th the E7D and subse=uently for a perm t to e1plore 9 th the EM#&,, the 'ourt there n ruled that MM' ava led tself of the proper procedure to val dly operate 9 th n the forest reserve or reservat on. (h le t s true that Ape1 M n ng 'o., $nc. v. #arc a settled the ssue of 9h ch bet9een Ape1 and MM' 9as legally ent tled to e1plore n the d sputed area, such r ghts, though, 9ere e1t ngu shed by subse=uent events that transp red after the dec s on 9as promulgated. %hese subse=uent events, 9h ch 9ere not attendant n Ape1 M n ng 'o., $nc. v. #arc a << dated 1> July 1551, are the follo9 ng? /10 the e1p rat on of E+ 1<< by non@rene9al on > July 1554I /20 the transferMass gnment of E+ 1<< to &EM on 1> 7ebruary 1554 9h ch 9as done n v olat on to the cond t on of E+ 1<< proscr b ng ts transferI /<0 the transferMass gnment of E+ 1<< to &EM s 9 thout legal effect for v olat ng +D 4>< 9h ch mandates that the ass gnment of m n ng r ghts must be 9 th the pr or approval of the &ecretary of the DEN". Moreover, n &outheast M ndanao #old M n ng 'orporat on v. Eal te +ortal M n ng 'ooperat ve,<4 the 'ourt, through Assoc ate Just ce 'onsuelo Hnares@&ant ago /no9 ret red0, declared that Ape1 M n ng 'o., $nc. v. #arc a d d not deal 9 th the ssues of the e1p rat on of E+ 1<< and the val d ty of the transfer of E+ 1<< to &EM, v A? Ne ther can the Ape1 M n ng case foreclose any =uest on perta n ng to the cont nu ng val d ty of E+ No. 1<< on grounds 9h ch arose after the -udgment n sa d case 9as promulgated. (h le t s true that the Ape1 M n ng case settled the ssue of 9ho bet9een Ape1 and Marcopper val dly ac=u red m n ng r ghts over the d sputed area by ava l ng of the proper procedural re=u s tes mandated by la9, t certa nly d d not deal 9 th the =uest on ra sed by the oppos tors n the 'onsol dated M nes cases, .e., 9hether E+ No. 1<< had already e1p red and rema ned val d subse=uent to ts transfer by Marcopper to pet t oner. /Emphas s suppl ed.0 (hat s more reveal ng s that n the "esolut on dated 2> November 1552, resolv ng the mot on for recons derat on of Ape1 M n ng 'o., $nc. v. #arc a, the 'ourt clar f ed that the rul ng on the sa d dec s on 9as b nd ng only bet9een Ape1 and MM' and 9 th respect the part cular ssue ra sed there n. 7acts and ssues not attendant to the sa d dec s on, as n these cases, are not settled by

the same. A port on of the d spos t on of the Ape1 M n ng 'o., $nc. v. #arc a "esolut on dated 2> November 1552 decrees? 1 1 1 %he dec s on rendered n th s case s conclus ve only bet9een the part es 9 th respect to the part cular ssue here n ra sed and under the set of c rcumstances here n preva l ng. $n no case should the dec s on be cons dered as a precedent to resolve or settle cla ms of personsMent t es not part es hereto. Ne ther s t ntended to unsettle r ghts of personsMent t es 9h ch have been ac=u red or 9h ch may have accrued upon rel ance on la9s passed by the appropr ate agenc es. /Emphas s suppl ed.0 %he $ssue of the 'onst tut onal ty of +roclamat on $s "a sed Eelatedly $n ts last@d tch effort to salvage ts case, &EM contends that +roclamat on No. 252, ssued by +res dent #lor a Macapagal@Arroyo and declar ng the D 9al9al #old "ush Area as a m neral reservat on, s nval d on the ground that t lacFs the concurrence of 'ongress as mandated by &ect on 4, Art cle G$$ of the 'onst tut onI &ect on 1 of "epubl c Act No. <052I &ect on 14 of E1ecut ve Drder No. 252, other9 se Fno9n as the Adm n strat ve 'ode of 1562I &ect on 8/a0 of "epubl c Act No. 286>, and &ect on 4/a0 of "epubl c Act No. >>82. $t s 9ell@settled that 9hen =uest ons of const tut onal ty are ra sed, the court can e1erc se ts po9er of -ud c al rev e9 only f the follo9 ng re=u s tes are present? /10 an actual and appropr ate case e1 stsI /20 there s a personal and substant al nterest of the party ra s ng the const tut onal =uest onI /<0 the e1erc se of -ud c al rev e9 s pleaded at the earl est opportun tyI and /40 the const tut onal =uest on s the l s mota of the case. %aF ng nto cons derat on the forego ng re=u s tes of -ud c al rev e9, t s read ly clear that the th rd re=u s te s absent. %he general rule s that the =uest on of const tut onal ty must be ra sed at the earl est opportun ty, so that f t s not ra sed n the plead ngs, ord nar ly t may not be ra sed at the tr alI and f not ra sed n the tr al court, t 9 ll not be cons dered on appeal. <8 $n the nstant case, t must be po nted out that n the "eply to "espondent &EMJs 'onsol dated 'omment f led on 20 May 200<, MAE ment oned +roclamat on No. 252, 9h ch 9as ssued on 28 November 2002. %h s proclamat on, accord ng to the MAE, has rendered &EMJs cla m over the contested area moot, as the +res dent has already declared the same as a m neral reservat on and as an env ronmentally cr t cal area. &EM d d not put to ssue the val d ty of sa d proclamat on n any of ts plead ngs desp te numerous opportun t es to =uest on the same. $t 9as only after the assa led Dec s on 9as promulgated @@ .e., n &EMJs Mot on for "econs derat on of the =uest oned Dec s on f led on 1< July 200> and ts Mot on for "eferral of the 'ase to the 'ourt En Eanc and for Dral Arguments f led on 22 August 200> @@ that t assa led the val d ty of sa d proclamat on. 'erta nly, pos ng the =uest on on the const tut onal ty of +roclamat on No. 252 for the f rst t me n ts Mot on for "econs derat on s, ndeed, too late. <>

$n fact, th s 'ourt, 9hen t rendered the Dec s on t merely recogn Aed that the =uest oned proclamat on came from a co@e=ual branch of government, 9h ch ent tled t to a strong presumpt on of const tut onal ty. <2 %he presumpt on of ts const tut onal ty stands nasmuch as the part es n the nstant cases d d not =uest on ts val d ty, much less present any ev dence to prove that the same s unconst tut onal. %h s s n l ne 9 th the precept that adm n strat ve ssuances have the force and effect of la9 and that they benef t from the same presumpt on of val d ty and const tut onal ty en-oyed by statutes. <6 +roclamat on No. 252 $s n Barmony 9 th Art cle G$$, &ect on 4, of the 'onst tut on At any rate, even f th s 'ourt 9ere to cons der the arguments belatedly ra sed by &EM, sa d arguments are not mer tor ous. &EM asserts that Art cle G$$, &ect on 4 of the 'onst tut on, bars the +res dent from e1clud ng forest reservesMreservat ons and procla m ng the same as m neral reservat ons, s nce the po9er to de@class fy them res des n 'ongress. &ect on 4, Art cle G$$ of the 'onst tut on reads? %he 'ongress shall as soon as poss ble, determ ne by la9 the spec f c l m ts of forest lands and nat onal parFs, marF ng clearly the r boundar es on the ground. %hereafter, such forest lands and nat onal parFs shall be conserved and may not be ncreased nor d m n shed, e1cept by la9. %he 'ongress shall prov de, for such per ods as t may determ ne, measures to proh b t logg ng n endangered forests and n 9atershed areas. %he above@=uoted prov s on says that the area covered by forest lands and nat onal parFs may not be e1panded or reduced, unless pursuant to a la9 enacted by 'ongress. 'lear n the language of the const tut onal prov s on s ts prospect ve tenor, s nce t speaFs n th s manner? ,'ongress shall as soon as poss ble., $t s only after the spec f c l m ts of the forest lands shall have been determ ned by the leg slature 9 ll th s const tut onal restr ct on apply. &EM does not allege nor present any ev dence that 'ongress had already enacted a statute determ n ng 9 th spec f c l m ts forest lands and nat onal parFs. 'ons der ng the absence of such la9, +roclamat on No. 252 could not have v olated &ect on 4, Art cle G$$ of the 1562 'onst tut on. $n +$'D+ "esources, $nc. v. Ease Metals M neral "esources 'orporat on,<5 the 'ourt had the occas on to s m larly rule n th s fash on? 1 1 1 &ec. 4, Art. G$$ of the 1562 'onst tut on, on the other hand, prov des that 'ongress shall determ ne the spec f c l m ts of forest lands and nat onal parFs, marF ng clearly the r boundar es on the ground. Dnce th s s done, the area thus covered by sa d forest lands and nat onal parFs may not be e1panded or reduced e1cept also by congress onal leg slat on. & nce 'ongress has yet to enact a la9 determ n ng the spec f c l m ts of the forest lands covered by +roclamat on No. <>5 and marF ng clearly ts boundar es on the ground, there can be no occas on that could g ve r se to a v olat on of the const tut onal prov s on.

&ect on 4, Art cle G$$ of the 'onst tut on, addresses the concern of the drafters of the 1562 'onst tut on about forests and the preservat on of nat onal parFs. %h s 9as brought about by the draftersJ a9areness and fear of the cont nu ng destruct on of th s countryJs forests. 40 $n v e9 of th s concern, 'ongress s tasFed to f 1 by la9 the spec f c l m ts of forest lands and nat onal parFs, after 9h ch the trees n these areas are to be taFen care of. 41Bence, these forest lands and nat onal parFs that 'ongress s to del m t through a la9 could be changed only by 'ongress. $n add t on, there s noth ng n the const tut onal prov s on that proh b ts the +res dent from declar ng a forest land as an env ronmentally cr t cal area and from regulat ng the m n ng operat ons there n by declar ng t as a m neral reservat on n order to prevent the further degradat on of the forest env ronment and to resolve the health and peace and order problems that beset the area. A closer e1am nat on of &ect on 4, Art cle G$$ of the 'onst tut on and +roclamat on No. 252 reveals that there s noth ng contrad ctory bet9een the t9o. +roclamat on No. 252, a measure to atta n and ma nta n a rat onal and orderly balance bet9een soc o@econom c gro9th and env ronmental protect on, - bes 9 th the const tut onal pol cy of preserv ng and protect ng the forest lands from be ng further devastated by denudat on. $n other 9ords, the proclamat on n =uest on s n l ne 9 th &ect on 4, Art cle G$$ of the 'onst tut on, as the former fosters the preservat on of the forest env ronment of the D 9al9al area and s a med at prevent ng the further degradat on of the same. %hese ob-ect ves are the very same reasons 9hy the sub-ect const tut onal prov s on s n place. (hat s more, -ur sprudence has recogn Aed the pol cy of mult ple land use n our la9s to9ards the end that the countryJs prec ous natural resources may be rat onally e1plored, developed, ut l Aed and conserved. 42 $t has been held that forest reserves or reservat ons can at the same t me be open to m n ng operat ons, prov ded a pr or 9r tten clearance by the government agency hav ng -ur sd ct on over such reservat on s obta ned. $n other 9ords m neral lands can e1 st 9 th n forest reservat ons. %hese t9o terms are not ant @thet cal. %h s s made man fest f 9e read &ect on 42 of +res dent al Decree No. 208 or the "ev sed 7orestry 'ode of the +h l pp nes, 9h ch prov des? M n ng operat ons n forest lands shall be regulated and conducted 9 th due regard to protect on, development and ut l Aat on of other surface resources. !ocat on, prospect ng, e1plorat on, ut l Aat on or e1plo tat on of m neral resources n forest reservat ons shall be governed by m n ng la9s, rules and regulat ons. /Emphas s suppl ed.0 Also, &ect on > of "epubl c Act No. 2542 or the M n ng Act of 1558, states that m n ng operat ons n reserved lands other than m neral reservat ons, such as forest reservesMreservat ons, are allo9ed, v A? M n ng operat ons n reserved lands other than m neral reservat ons may be undertaFen by the Department, sub-ect to l m tat ons as here n prov ded. $n the event that the Department cannot undertaFe such act v t es, they may be

undertaFen by a =ual f ed person n accordance 9 th the rules and regulat ons promulgated by the &ecretary. /Emphas s suppl ed.0 & nce forest reservat ons can be made m neral lands 9here m n ng operat ons are conducted, then there s no argument that the d sputed land, 9h ch l es 9 th n a forest reservat on, can be declared as a m neral reservat on as 9ell. "epubl c Act No. 2542 Dther9 se *no9n as the ,+h l pp ne M n ng Act of 1558,, s the Appl cable !a9 Determ ned to r vet ts crumbl ng cause, &EM then argues that +roclamat on No. 252 s nval d, as t transgressed the statutes govern ng the e1clus on of areas already declared as forest reserves, such as &ect on 1 of "epubl c Act No. <052,4< &ect on 14 of the Adm n strat ve 'ode of 1562, &ect on 8/a0 of "epubl c Act No. 286>,44 and &ect on 4/a0 of "epubl c Act No. >>82. 48 ' t ng &ect on 1 of "epubl c Act No. <052, 9h ch prov des as follo9s? 3pon the recommendat on of the D rector of 7orestry, 9 th the approval of the Department Bead, the +res dent of the +h l pp nes shall set apart forest reserves 9h ch shall nclude denuded forest lands from the publ c lands and he shall by proclamat on declare the establ shment of such forest reserves and the boundar es thereof, and thereafter such forest reserves shall not be entered, or other9 se d sposed of, but shall rema n ndef n tely as such for forest uses. %he +res dent of the +h l pp nes may, n l Fe manner upon the recommendat on of the D rector of 7orestry, 9 th the approval of the Department head, by proclamat on, mod fy the boundar es of any such forest reserve to conform 9 th subse=uent prec se survey but not to e1clude any port on thereof e1cept 9 th the concurrence of 'ongress./3nderscor ng suppl ed.0 &EM subm ts that the forego ng prov s on s the govern ng statute on the e1clus on of areas already declared as forest reserves. %hus, areas already set as de by la9 as forest reserves are no longer 9 th n the proclamat on po9ers of the +res dent to mod fy or set as de for any other purposes such as m neral reservat on. %o bolster ts content on that the +res dent cannot d sestabl sh forest reserves nto m neral reservat ons, &EM maFes reference to &ect on 14, 'hapter 4, % tle $, EooF $$$ of the Adm n strat ve 'ode of 1562, 9h ch partly rec tes? %he +res dent shall have the po9er to reserve for settlement or publ c use, and for spec f c publ c purposes, any of the lands of the publ c doma n, the use of 9h ch s not other9 se d rected by la9. %he reserved land shall thereafter rema n sub-ect to the spec f c publ c purpose nd cated unt l other9 se prov ded by la9 or proclamat on. /Emphases suppl ed.0 &EM further contends that &ect on 2 of "epubl c Act No. 286>, 4> 9h ch declares that the d sestabl shment of a protected area shall be done by 'ongress, and &ect on 4/a0 of "epubl c Act No. >>82,42 9h ch n turn re=u res a la9 passed by

'ongress before any forest reserve can be reclass f ed, m l tate aga nst the val d ty of +roclamat on No. 252. +roclamat on No. 252, declar ng a certa n port on of land located n MonFayo, 'ompostela Calley, 9 th an area of 6,100 hectares, more or less, as a m neral reservat on, 9as ssued by the +res dent pursuant to &ect on 8 of "epubl c Act No. 2542, also Fno9n as the ,+h l pp ne M n ng Act of 1558., +roclamat on No. 252 d d not mod fy the boundar es of the Agusan@Davao@ &ur gao 7orest "eserve s nce, as earl er d scussed, m neral reservat ons can e1 st 9 th n forest reserves because of the mult ple land use pol cy. %he metes and bounds of a forest reservat on rema n ntact even f, 9 th n the sa d area, a m neral land s located and thereafter declared as a m neral reservat on. More to the po nt, a perusal of "epubl c Act No. <052, ,An Act to Amend 'erta n &ect ons of the "ev sed Adm n strat ve 'ode of 1512,, 9h ch 9as approved on 12 August 15>1, and the Adm n strat ve 'ode of 1562, sho9s that only those publ c lands declared by the +res dent as reserved pursuant to these t9o statutes are to rema n sub-ect to the spec f c purpose. %he tenor of the c ted prov s ons, namely? ,the +res dent of the +h l pp nes shall set apart forest reserves, and ,the reserved land shall thereafter rema n,, speaFs of future publ c reservat ons to be declared, pursuant to these t9o statutes. %hese prov s ons do not apply to forest reservat ons earl er declared as such, as n th s case, 9h ch 9as procla med 9ay bacF on 22 7ebruary 15<1, by #overnor #eneral D9 ght 7. Dav s under +roclamat on No. <>5. Dver and above that, &ect on 8 of "epubl c Act No. 2542 author Aes the +res dent to establ sh m neral reservat ons, to 9 t? &ec. 8. M neral "eservat ons. @ (hen the nat onal nterest so re=u res, such as 9hen there s a need to preserve strateg c ra9 mater als for ndustr es cr t cal to nat onal development, or certa n m nerals for sc ent f c, cultural or ecolog cal value, the +res dent may establ sh m neral reservat ons upon the recommendat on of the D rector through the &ecretary. M n ng operat ons n e1 st ng m neral reservat ons and such other reservat ons as may thereafter be establ shed, shall be undertaFen by the Department or through a contractor 1 1 1. /Emphas s suppl ed.0 $t s a rud mentary pr nc ple n legal hermeneut cs that 9here there are t9o acts or prov s ons, one of 9h ch s spec al and part cular and certa nly nvolves the matter n =uest on, the other general, 9h ch, f stand ng alone, 9ould nclude the matter and thus confl ct 9 th the spec al act or prov s on, the spec al act must as ntended be taFen as const tut ng an e1cept on to the general act or prov s on, espec ally 9hen such general and spec al acts or prov s ons are contemporaneous, as the !eg slature s not to be presumed to have ntended a confl ct. Bence, t has become an establ shed rule of statutory construct on that 9here one statute deals 9 th a sub-ect n general terms, and another deals 9 th a part

of the same sub-ect n a more deta led 9ay, the t9o should be harmon Aed f poss bleI but f there s any confl ct, the latter shall preva l regardless of 9hether t 9as passed pr or to the general statute. Dr 9here t9o statutes are of contrary tenor or of d fferent dates but are of e=ual theoret cal appl cat on to a part cular case, the one spec ally des gned therefor should preva l over the other. $t must be observed that "epubl c Act No. <052, ,An Act to Amend 'erta n &ect ons of the "ev sed Adm n strat ve 'ode of 1512,, and the Adm n strat ve 'ode of 1562, are general la9s. &ect on 1 of "epubl c Act No. <052 and &ect on 14 of the Adm n strat ve 'ode of 1562 re=u re the concurrence of 'ongress before any port on of a forest reserve can be val dly e1cluded therefrom. %hese prov s ons are broad s nce they deal 9 th all F nds of e1clus on or reclass f cat on relat ve to forest reserves, .e., forest reserve areas can be transformed nto all F nds of publ c purposes, not only the establ shment of a m neral reservat on. &ect on 8 of "epubl c Act No. 2542 s a spec al prov s on, as t spec f cally treats of the establ shment of m neral reservat ons only. &a d prov s on grants the +res dent the po9er to procla m a m neral land as a m neral reservat on, regardless of 9hether such land s also an e1 st ng forest reservat on. &ec. 8/a0 of "epubl c Act No. 286> prov des? &ec. 8. Establ shment and E1tent of the &ystem. O %he establ shment and operat onal Aat on of the &ystem shall nvolve the follo9 ng? /a0 All areas or slands n the +h l pp nes procla med, des gnated or set as de, pursuant to a la9, pres dent al decree, pres dent al proclamat on or e1ecut ve order as nat onal parF, game refuge, b rd and 9 ldl fe sanctuary, 9 lderness area, str ct nature reserve, 9atershed, mangrove reserve, f sh sanctuary, natural and h stor cal landmarF, protected and managed landscapeMseascape as 9ell as dent f ed v rg n forests before the effect v ty of th s Act are hereby des gnated as n t al components of the &ystem. %he n t al components of the &ystem shall be governed by e1 st ng la9s, rules and regulat ons, not ncons stent 9 th th s Act. #lar ng n the forego ng enumerat on of areas compr s ng the n t al component of the N$+A& &ystem under "epubl c Act No. 286> s the absence of forest reserves. Dnly protected areas enumerated under sa d prov s on cannot be mod f ed. & nce the sub-ect matter of +roclamat on No. 252 s a forest reservat on procla med as a m neral reserve, "epubl c Act No. 286> cannot poss bly be made appl cable. Ne ther can +roclamat on No. 252 poss bly v olate sa d la9. & m larly, &ect on 4/a0 of "epubl c Act No. >>82 cannot be made appl cable to the nstant case. &ect on 4/a0 of "epubl c Act No. >>82 reads? All al enable and d sposable lands of the publ c doma n devoted to or su table for agr culture. No reclass f cat on of forest or m neral lands to agr cultural lands shall be undertaFen after the approval of th s Act unt l 'ongress, taF ng nto account ecolog cal, developmental and e=u ty cons derat ons, shall have

determ ned by la9, the spec f c l m ts of the publ c doma n. /3nderscor ng suppl ed.0 &ect on 4/a0 of "epubl c Act No. >>82 proh b ts the reclass f cat on of forest or m neral lands nto agr cultural lands unt l 'ongress shall have determ ned by la9 the spec f c l m ts of the publ c doma n. A cursory read ng of th s prov s on 9 ll read ly sho9 that the same s not relevant to the nstant controversy, as there has been no reclass f cat on of a forest or m neral land nto an agr cultural land. 7urthermore, the settled rule of statutory construct on s that f t9o or more la9s of d fferent dates and of contrary tenors are of e=ual theoret cal appl cat on to a part cular case, the statute of later date must preva l be ng a later e1press on of leg slat ve 9 ll.46 $n the case at bar, there s no =uest on that "epubl c Act No. 2542 9as s gned nto la9 later than "epubl c Act No. <052, the Adm n strat ve 'ode of 1562,45 "epubl c Act No. 286> and "epubl c Act No. >>82. Apply ng the c ted pr nc ple, the prov s ons of "epubl c Act No. <052, the Adm n strat ve 'ode of 1562, "epubl c Act No. 286> and "epubl c Act No. >>82 c ted by &EM must y eld to &ect on 8 of "epubl c Act No. 2542. 'am lo Eanad, et al., 'annot &eeF "el ef from %h s 'ourt 'am lo Eanad and h s group adm t that they are members of the Eal te 'ooperat ve. %hey, ho9ever, cla m that they are d st nct from Eal te and move that th s 'ourt recogn Ae them as pr or m n ng locators. 3nfortunately for them, th s 'ourt cannot grant any rel ef they seeF. "ecords reveal that although they 9ere part es to the nstant cases before the 'ourt of Appeals, they d d not f le a pet t on for rev e9 before th s 'ourt to contest the dec s on of the appellate court. %he only pet t oners n the nstant cases are the MAE, &EM, Eal te and Ape1. 'onse=uently, hav ng no personal ty n the nstant cases, they cannot seeF any rel ef from th s 'ourt. Ape1Js Mot on for 'lar f cat on and Eal teJs Man festat on and Mot on $n ts Mot on for 'lar f cat on, Ape1 des res that the 'ourt eluc date the assa led Dec s onJs pronouncement that ,m n ng operat ons, are no9, therefore 9 th n the full control of the &tate through the e1ecut ve branch, and place the sa d pronouncement n the proper perspect ve as the declarat on n !a Eugal@EJ!aan, 9h ch states that K %he concept of control adopted n &ect on 2 of Art cle G$$ must be taFen to mean less than d ctator al, all@encompass ng controlI but nevertheless suff c ent to g ve the &tate the po9er to d rect, restra n, regulate and govern the affa rs of the e1tract ve enterpr se.80 Ape1 states that the sub-ect port on of the assa led Dec s on could send a ch ll ng effect to potent al nvestors n the m n ng ndustry, 9ho may be of the mpress on that the &tate has taFen over the m n ng ndustry, not as regulator

but as an operator. $t s of the op n on that the &tate cannot d rectly undertaFe m n ng operat ons. Moreover, Ape1 s apprehens ve of the follo9 ng port on n the =uest oned Dec s onK ,%he &tate can also opt to a9ard m n ng operat ons n the m neral reservat on to pr vate ent t es nclud ng pet t oner Ape1 and Eal te, f t 9 shes., $t avers that the phrase , f t 9 shes, may 9h ms cally be nterpreted to mean a blanFet author ty of the adm n strat ve author ty to re-ect the formerJs appl cat on for an e1plorat on perm t even though t compl es 9 th the prescr bed pol c es, rules and regulat ons. + a vv p h i + Ape1 l Fe9 se asFs th s 'ourt to order the M#E to accept ts appl cat on for an e1plorat on perm t. Eal te echoes the same concern as that of Ape1 on the actual taFe@over by the &tate of the m n ng ndustry n the d sputed area to the e1clus on of the pr vate sector. $n add t on, Eal te prays that th s 'ourt d rect M#E to accept Eal teJs appl cat on for an e1plorat on perm t. 'ontrary to the content on of Ape1 and Eal te, the fourth paragraph of &ect on 2, Art cle G$$ of the 'onst tut on and &ect on 8 of "epubl c Act No. 2542 sanct ons the &tate, through the e1ecut ve department, to undertaFe m n ng operat ons d rectly, as an operator and not as a mere regulator of m neral undertaF ngs. %h s s made clearer by the fourth paragraph of &ect on 2, Art cle G$$ of the 1562 'onst tut on, 9h ch prov des n part? &E'. 2. 1 1 1 %he &tate may d rectly undertaFe such act v t es, or t may enter nto co@product on, -o nt venture, or product on@shar ng agreements 9 th 7 l p no c t Aens, or corporat ons or assoc at ons at least s 1ty per centum of 9hose cap tal s o9ned by such c t Aens. 1 1 1. /Emphas s suppl ed.0 Also, &ect on 8 of "epubl c Act No. 2542 states that the m n ng operat ons n m neral reservat ons shall be undertaFen by the Department of Env ronment and Natural "esources or a contractor, to 9 t? &E'. 8. M neral "eservat ons. K (hen the nat onal nterest so re=u res, such as 9hen there s a need to preserve strateg c ra9 mater als for ndustr es cr t cal to nat onal development, or certa n m nerals for sc ent f c, cultural or ecolog cal value, the +res dent may establ sh m neral reservat ons upon the recommendat on of the D rector through the &ecretary. M n ng operat ons n e1 st ng m neral reservat ons and such other reservat ons as may thereafter be establ shed, shall be undertaFen by the Department or through a contractor 1 1 1. /Emphas s suppl ed.0 3ndoubtedly, the 'onst tut on, as 9ell as "epubl c Act No. 2542, allo9s the e1ecut ve department to undertaFe m n ng operat ons. Ees des, !a Eugal@EJ!aan, c ted by Ape1, d d not refer to the fourth sentence of &ect on 2, Art cle G$$ of the 'onst tut on, but to the th rd sentence of the sa d prov s on, 9h ch states?

&E'. 2. 1 1 1 %he e1plorat on, development, and ut l Aat on of natural resources shall be under the full control and superv s on of the &tate. 1 1 1. +ursuant to &ect on 8 of "epubl c Act No. 2542, the e1ecut ve department has the opt on to undertaFe d rectly the m n ng operat ons n the D 9al9al #old "ush Area or to a9ard m n ng operat ons there n to pr vate ent t es. %he phrase , f t 9 shes, must be understood 9 th n the conte1t of th s prov s on. Bence, the 'ourt cannot d ctate th s co@e=ual branch to choose 9h ch of the t9o opt ons to select. $t s the sole prerogat ve of the e1ecut ve department to undertaFe d rectly or to a9ard the m n ng operat ons of the contested area. Even assum ng that the proper author ty may dec de to a9ard the m n ng operat ons of the d sputed area, th s 'ourt cannot arrogate unto tself the tasF of determ n ng 9ho, among the appl cants, s =ual f ed. $t s the duty of the appropr ate adm n strat ve body to determ ne the =ual f cat ons of the appl cants. $t s only 9hen th s adm n strat ve body 9h ms cally den es the appl cat ons of =ual f ed appl cants that the 'ourt may nterfere. Eut unt l then, the 'ourt has no po9er to d rect sa d adm n strat ve body to accept the appl cat on of any =ual f ed appl cant. $n v e9 of th s, the 'ourt cannot grant the prayer of Ape1 and Eal te asF ng the 'ourt to d rect the M#E to accept the r appl cat ons pend ng before the M#E. &EMJs Man festat on and Mot on dated 28 January 2002 &EM 9ants to emphas Ae that ts predecessor@ n@ nterest, Marcopper or MM', compl ed 9 th the mandatory e1plorat on 9orF program, re=u red under E+ 1<<, by attach ng there9 th =uarterly reports on e1plorat on 9orF from 20 June 156> to March 1554. $t must be observed that th s s the very f rst t me at th s very late stage that &EM has presented the =uarterly e1plorat on reports. 7rom the early phase of th s controversy, &EM d d not d sprove the arguments of the other part es that Marcopper v olated the terms under E+ 1<<, among other v olat ons, by not comply ng 9 th the mandatory e1plorat on 9orF program. Ne ther d d t present ev dence for the apprec at on of the lo9er tr bunals. Bence, the non@compl ance 9 th the mandatory e1plorat on 9orF program 9as not made an ssue n any stage of the proceed ngs. %he rule s that an ssue that 9as not ra sed n the lo9er court or tr bunal cannot be ra sed for the f rst t me on appeal, as th s 9ould v olate the bas c rules of fa r play, -ust ce and due process. 81 %hus, th s 'ourt cannot taFe cogn Aance of the ssue of 9hether or not MM' compl ed 9 th the mandatory 9orF program. $n sum, th s 'ourt f nds? 1. %he assa led Dec s on d d not overturn the 1> July 1551 Dec s on n Ape1 M n ng 'o., $nc. v. #arc a. %he former 9as dec ded on facts and ssues that 9ere not attendant n the latter, such as the e1p rat on of E+ 1<<, the v olat on of the cond t on embod ed n E+ 1<< proh b t ng ts ass gnment, and the unauthor Aed

and nval d ass gnment of E+ 1<< by MM' to &EM, s nce th s ass gnment 9as effected 9 thout the approval of the &ecretary of DEN"I 2. &EM d d not ac=u re vested r ght over the d sputed area because ts supposed r ght 9as e1t ngu shed by the e1p rat on of ts e1plorat on perm t and by ts v olat on of the cond t on proh b t ng the ass gnment of E+ 1<< by MM' to &EM. $n add t on, even assum ng that &EM has a val d e1plorat on perm t, such s a mere l cense that can be 9 thdra9n by the &tate. $n fact, the same has been 9 thdra9n by the ssuance of +roclamat on No. 252, 9h ch places the d sputed area under the full control of the &tate through the E1ecut ve DepartmentI <. %he approval re=u rement under &ect on 52 of +res dent al Decree No. 4>< appl es to the ass gnment of E+ 1<< by MM' to &EM, s nce the e1plorat on perm t s an nterest n a m n ng lease contractI 4. %he ssue of the const tut onal ty and the legal ty of +roclamat on No. 252 9as ra sed belatedly, as &EM =uest ons the same for the f rst t me n ts Mot on for "econs derat on. Even f the ssue 9ere to be enterta ned, the sa d proclamat on s found to be n harmony 9 th the 'onst tut on and other e1 st ng statutesI 8. %he mot on for recons derat on of 'am lo Eanad, et al. cannot be passed upon because they are not part es to the nstant casesI >. %he prayers of Ape1 and Eal te asF ng the 'ourt to d rect the M#E to accept the r appl cat ons for e1plorat on perm ts cannot be granted, s nce t s the E1ecut ve Department that has the prerogat ve to accept such appl cat ons, f ever t dec des to a9ard the m n ng operat ons n the d sputed area to a pr vate ent tyI 2. %he 'ourt cannot pass upon the ssue of 9hether or not MM' compl ed 9 th the mandatory e1plorat on 9orF program, as such 9as a non@ ssue and 9as not ra sed before the 'ourt of Appeals and the lo9er tr bunals. (BE"E7D"E, prem ses cons dered, the 'ourt holds? 1. %he Mot ons for "econs derat on f led by 'am lo Eanad, et al. and &outheast M ndanao #old M n ng 'orporat on are DEN$ED for lacF of mer tI 2. %he Mot on for 'lar f cat on of Ape1 M n ng 'o., $nc. and the Man festat on and Mot on of the Eal te 'ommunal +ortal M n ng 'ooperat ve, nsofar as these mot onsMman festat on asF the 'ourt to d rect the M nes and #eo@&c ences Eureau to accept the r respect ve appl cat ons for e1plorat on perm ts, are DEN$EDI <. %he Man festat on and 3rgent Mot on dated 28 January 2002 of &outheast M ndanao #old M n ng 'orporat on s DEN$ED. 4. %he &tate, through the E1ecut ve Department, should t so des re, may no9 a9ard m n ng operat ons n the d sputed area to any =ual f ed ent t es t may determ ne. %he M nes and #eosc ences Eureau may process e1plorat on perm ts

pend ng before t, taF ng nto cons derat on the appl cable m n ng la9s, rules and regulat ons relat ve thereto. &D D"DE"ED. ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce (E 'DN'3"? "EHNA%D &. +3ND 'h ef Just ce AN(/N)/ (. %A$+)/ Assoc ate Just ce Dn off c al leave $ENA(/ %. %/$/NAV Assoc ate Just ce Dn off c al leave +$ES9)(E$/ J. *E#AS%/, J$.V Assoc ate Just ce

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#&%AS +. 9E$SA')N Assoc ate Just ce $/9E$(/ A. A9A! Assoc ate Just ce 'E"%$7$'A%$DN

+ursuant to Art cle C$$$, &ect on 1< of the 'onst tut on, t s hereby cert f ed that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourt. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
V

Dn off c al leave. No part. #.". No. 52>08, 1> July 1551, 155 &'"A 226. 42 +h l. 245 /15220. >> +h l. 285 /15<60.

VV

<

AtoF E g@(edge M n ng 'o. v. $ntermed ate Appellate 'ourt, <<0 +h l. 244, 2>2 /155>0.
8

$d. at 2>2. $d. $d. at 2><. $d. $d. at 2>4. $d. $d. at 2>2@2>6. 46> +h l. 284, 626@625 /20040. 425 +h l. >>6, >62 /20020. &upra note 12 at 658.

>

10

11

12

1<

14

18

&outheast M ndanao #old M n ng 'orporat on v. Eal te +ortal M n ng 'ooperat ve, supra note 1< at >62@>6<.
1>

$d. #.". No. 145522, <0 March 2004, 42> &'"A 812, 8<0. $d. $d at 8<1.

12

16

15

20

M ners Assoc at on of the +h l pp nes, $nc. v. 7actoran, Jr., <10 +h l. 11<, 1<0 /15580.
21

+ND'@Energy Development 'orporat on /+ND'@ED'0 v. Cenerac on, Jr., #.". No. 125620, <0 November 200>, 805 &'"A 5<, 10>.

22

$d. at 102@110. Estrada v. Escr tor, 488 +h l. 411, 8>5 /200<0.

2<

24

M ners Assoc at on of the +h l pp nes, $nc. v. 7actoran, Jr., <10 +h l. 11<, 1<0@ 1<1 /15580.
28

+romulgated on 28 July 1562. &upra note 24 at 1<0. "ecords, Col. 2, pp. 64@68.

2>

22

26

E1ecut ve Dff cer. @ %he &ecretary, through the D rector, shall be the E1ecut ve Dff cer charged 9 th carry ng out the prov s ons of th s Decree. 1 1 1.
25

&ect on <, 'ommon9ealth Act No. 1<>. +rem ere Development EanF v. 'ourt of Appeals, 421 +h l. 204, 21> /20040. $d. &upra note 1 at 264. &upra note 1 at 26<@264. &upra note 1< at >61. Mat bag v. Een payo, 425 +h l. 884, 826@825 /20020. 3mal v. E1ececut ve &ecretary #u ngona, Jr., <>8 +h l. 22, 62 /15550.

<0

<1

<2

<<

<4

<8

<>

<2

&enate of the +h l pp nes v. Erm ta, #.". No. 1>5222, 20 Apr l 200>, 466 &'"A 1, >>.
<6

M rasol v. Department of +ubl c (orFs and B gh9ays, #.". No. 18625<, 6 June 200>, 450 &'"A <16, <42@<46.
<5

#.". No. 1><805, > December 200>, 810 &'"A 400, 41>. "ecords of the 'onst tut onal 'omm ss on, Col. $$$, pp. 852@85<. $d.

40

41

42

+$'D+ "esources, $nc. v. Ease Metals M neral "esources 'orporat on, supra note <5 at 415.
4<

Approved on 12 August 15>1.

44

Approved on 1 June 1552, th s statute s Fno9n as the ,Nat onal $ntegrated +rotected Areas &ystem Act of 1552.,
48

%h s Act s Fno9n as the ,'omprehens ve Agrar an "eform !a9 of 1556., $t tooF effect on 18 June 1566.

4>

D sestabl shment as +rotected Area. K (hen n the op n on of the DEN" a certa n protected area should be 9 thdra9n or d sestabl shed, or ts boundar es mod f ed as 9arranted by a study and sanct oned by the ma-or ty of the members of the respect ve boards for the protected area as here n establ shed n &ect on 11, t shall, n turn, adv se 'ongress. D sestabl shment of a protected area under the &ystem or mod f cat on of ts boundary shall taFe effect pursuant to an act of 'ongress.
42

All al enable and d sposable lands of the publ c doma n devoted to or su table for agr culture. No reclass f cat on of forest or m neral lands to agr cultural lands shall be undertaFen after the approval of th s Act unt l 'ongress, taF ng nto account ecolog cal, developmental and e=u ty cons derat ons, shall have determ ned by la9, the spec f c l m ts of the publ c doma n.
46

+h l pp ne Nat onal EanF v. 'ruA, #.". No. 6085<, 16 December 1565, 160 &'"A 20>, 21<.
45

%h s la9 s dated 28 July 1562. &upra note 12 at 105<.

80

81

Mult @"ealty Development 'orporat on v. MaFat %uscany 'ondom n um 'orporat on, #.". No. 14>22>, 1> June 200>, 451 &'"A 5, 2<. %he !a9ph l +ro-ect @ Arellano !a9 7oundat on

SE+A$A(E /+)N)/N 9E$SA')N, J.: $ concur 9 th Bonorable M n ta C. 'h co@NaAar oJs d spos t on of the challenges posed by the mot on for recons derat on and man festat on and urgent mot on dated January 28, 2002 f led by &outheast M ndanao #old M n ng 'orporat on /&EM0I the mot on for clar f cat on dated July 16, 200> f led by Ape1 M n ng /Ape10I and the man festat on and mot on dated July 26, 200> f led by Eal te 'ommunal +ortal M n ng 'ooperat ve /Eal te0. Het, $ feel compelled to 9r te n order to suggest that 9e should looF at and determ ne 9h ch bet9een Ape1 and Eal te has any pr or ty r ght to e1plore, develop and m ne the D 9al9al #old "ush Area n the event that the &tate, represented by the E1ecut ve Department, dec des e ther to develop and m ne the area d rectly, or to outsource the tasF to a serv ce contractor. $ am sure that do ng so 9 ll preclude further l t gat ons from ar s ng. $ feel that such an approach can only further the ntent and letter of

&ect on 1,1 "ule <>, of the "ules of 'ourt to determ ne the mer ts of the case, not leav ng anyth ng undeterm ned. Antecedents %he relevant antecedents e1cellently recounted n the dec s on are adopted here n for purposes of g v ng th s separate op n on the re=u s te bacFdrop, v A? Dn 22 7ebruary 15<1, #overnor #eneral D9 ght 7. Dav s ssued +roclamat on No. <>5, establ sh ng the Agusan@Davao@&ur gao 7orest "eserve cons st ng of appro1 mately 1,522,400 hectares. %he d sputed area, a r ch tract of m neral land, s ns de the forest reserve located at MonFayo, Davao del Norte, and 'ateel, Davao Dr ental, cons st ng of 4,541.>285 hectares. %h s m neral land s encompassed by Mt. D 9ata, 9h ch s s tuated n the mun c pal t es of MonFayo and 'ateel. $t later became Fno9n as the ,D 9al9al #old "ush Area., $t has s nce the early 1560Js been stormed by confl cts brought about by the numerous m n ng cla mants scrambl ng for gold that l es beneath ts bosom. Dn 21 November 156<, 'am lo Eanad and h s group, 9ho cla med to have f rst d scovered traces of gold n Mount D 9ata, f led a Declarat on of !ocat on /DD!0 for s 1 m n ng cla ms n the area. 'am lo Eanad and some other nat ves pooled the r sF lls and resources and organ Aed the Eal te 'ommunal +ortal M n ng 'ooperat ve /Eal te0. Dn 12 December 156<, Ape1 M n ng 'orporat on /Ape10 entered nto operat ng agreements 9 th Eanad and h s group. 7rom November 156< to 7ebruary 1564, several nd v dual appl cat ons for m n ng locat ons over m neral land cover ng certa n parts of the D 9al9al gold rush area 9ere f led 9 th the Eureau of M nes and #eo@&c ences /EM#0. Dn 2 7ebruary 1564, Marcopper M n ng 'orporat on /MM'0 f led 1> DD!s or m n ng cla ms for areas ad-acent to the area covered by the DD! of Eanad and h s group. After real A ng that the area encompassed by ts m n ng cla ms s a forest reserve 9 th n the coverage of +roclamat on No. <>5 ssued by #overnor #eneral Dav s, MM' abandoned the same and nstead appl ed for a prospect ng perm t 9 th the Eureau of 7orest Development /E7D0. Dn 1 July 1568, E7D ssued a +rospect ng +erm t to MM' cover ng an area of 4,541.>285 hectares travers ng the mun c pal t es of MonFayo and 'ateel, an area 9 th n the forest reserve under +roclamat on No. <>5. %he perm t embraced the areas cla med by Ape1 and the other nd v dual m n ng cla mants. Dn 11 November 1568, MM' f led E1plorat on +erm t Appl cat on No. 64@40 9 th the EM#. Dn 10 March 156>, the EM# ssued to M'' E1plorat on +erm t No. 1<< /E+ 1<<0.

D scover ng the e1 stence of several m n ng cla ms and the prol ferat on of small@ scale m ners n the area covered by E+ 1<<, MM' thus f led on 11 Apr l 156> before the EM# a +et t on for the 'ancellat on of the M n ng 'la ms of Ape1 and &mall &cale M n ng +erm t Nos. /1@10@04 and /1@10@08 9h ch 9as docFeted as MA' No. 10>1. MM' alleged that the areas covered by ts E+ 1<< and the m n ng cla ms of Ape1 9ere 9 th n an establ shed and e1 st ng forest reservat on /Agusan@Davao@&ur gao 7orest "eserve0 under +roclamat on No. <>5 and that pursuant to +res dent al Decree No. 4><, ac=u s t on of m n ng r ghts 9 th n a forest reserve s through the appl cat on for a perm t to prospect 9 th the E7D and not through reg strat on of a DD! 9 th the EM#. Dn 2< &eptember 156>, Ape1 f led a mot on to d sm ss MM'Js pet t on alleg ng that ts m n ng cla ms are not 9 th n any establ shed or procla med forest reserve, and as such, the ac=u s t on of m n ng r ghts thereto must be undertaFen v a reg strat on of DD! 9 th the EM# and not through the f l ng of appl cat on for perm t to prospect 9 th the E7D. Dn 5 December 156>, EM# d sm ssed MM'Js pet t on on the ground that the area covered by the Ape1 m n ng cla ms and MM'Js perm t to e1plore 9as not a forest reservat on. $t further declared null and vo d MM'Js E+ 1<< and susta ned the val d ty of Ape1 m n ng cla ms over the d sputed area. MM' appealed the adverse order of EM# to the Department of Env ronment and Natural "esources /DEN"0. Dn 18 Apr l 1562, after due hear ng, the DEN" reversed the 5 December 155> order of EM# and declared MM'Js E+ 1<< val d and subs st ng. Ape1 f led a Mot on for "econs derat on 9 th the DEN" 9h ch 9as subse=uently den ed. Ape1 then f led an appeal before the Dff ce of the +res dent. Dn 22 July 1565, the Dff ce of the +res dent, through Ass stant E1ecut ve &ecretary for !egal Affa rs, 'anc o '. #arc a,d sm ssed Ape1Js appeal and aff rmed the DEN" rul ng. Ape1 f led a +et t on for .ertiorari before th s 'ourt. %he +et t on 9as docFeted as #.". No. 52>08 ent tled, ,Ape1 M n ng 'o., $nc. v. #arc a., Dn 1> July 1551, th s 'ourt rendered a Dec s on aga nst Ape1 hold ng that the d sputed area s a forest reserveI hence, the proper procedure n ac=u r ng m n ng r ghts there n s by n t ally apply ng for a perm t to prospect 9 th the E7D and not through a reg strat on of DD! 9 th the EM#. Dn 22 December 1551, then DEN" &ecretary 7ulgenc o 7actoran, Jr. ssued Department Adm n strat ve Drder No. >> /DAD No. >>0 declar ng 225 hectares of the areas covered by the Agusan@Davao@&ur gao 7orest "eserve as non@forest lands and open to small@scale m n ng purposes. As DAD No. >> declared a port on of the contested area open to small scale m ners, several m n ng ent t es f led appl cat ons for M neral +roduct on &har ng Agreement /M+&A0.

Dn 28 August 155<, MonFayo $ntegrated &mall &cale M ners Assoc at on /M$&&MA0 f led an M+&A appl cat on 9h ch 9as den ed by the EM# on the grounds that the area appl ed for s 9 th n the area covered by MM' E+ 1<< and that the M$&&MA 9as not =ual f ed to apply for an M+&A under DAD No. 62, &er es of 1550. Dn 8 January 1554, "osendo C llaflor and h s group f led before the EM# a +et t on for 'ancellat on of E+ 1<< and for the adm ss on of the r M+&A Appl cat on. %he +et t on 9as docFeted as "ED M nes 'ase No. 6@6@54. Davao 3n ted M ners 'ooperat ve /D3M'0 and Eal te ntervened and l Fe9 se sought the cancellat on of E+ 1<<. Dn 1> 7ebruary 1554, MM' ass gned E+ 1<< to &outheast M ndanao #old M n ng 'orporat on /&EM0, a domest c corporat on 9h ch s alleged to be a 100R @o9ned subs d ary of MM'. Dn 14 June 1554, Eal te f led 9 th the EM# an M+&A appl cat on 9 th n the contested area that 9as later on re-ected. Dn 2< June 1554, &EM f led an M+&A appl cat on for the ent re 4,541.>285 hectares under E+ 1<<, 9h ch 9as also den ed by reason of the pendency of "ED M nes 'ase No. 6@6@54. Dn 1 &eptember 1558, &EM f led another M+&A appl cat on. Dn 20 Dctober 1558, EM# accepted and reg stered &EMJs M+&A appl cat on and the Deed of Ass gnment over E+ 1<< e1ecuted n ts favor by MM'. &EMJs appl cat on 9as des gnated M+&A Appl cat on No. 126 /M+&AA 1260. After publ cat on of &EMJs appl cat on, the follo9 ng f led before the EM# the r adverse cla ms or oppos t ons? a0 MA' 'ase No. 004 /G$0 K JE Management M n ng 'orporat onI b0 MA' 'ase No. 008/G$0 K Davao 3n ted M ners 'ooperat veI c0 MA' 'ase No. 00>/G$0 K Eal te $ntegrated &mall &cale M nerJs 'ooperat veI d0 MA' 'ase No. 002/G$0 K MonFayo $ntegrated &mall &cale M nerJs Assoc at on, $nc. /M$&&MA0I e0 MA' 'ase No. 006/G$0 K +aper $ndustr es 'orporat on of the +h l pp nesI f0 MA' 'ase No. 005/G$0 K "osendo C llafor, et al.I g0 MA' 'ase No. 010/G$0 K Anton o DacudaoI h0 MA' 'ase No. 011/G$0 K Atty. Jose %. Amac oI 0 MA' 'ase No. 012/G$0 K +ut ng@Eato #old M ners 'ooperat veI -0 MA' 'ase No. 01>/G$0 K Eal te 'ommunal +ortal M n ng 'ooperat veI F0 MA' 'ase No. 52@01/G$0 K "omeo Altamera, et al.

%o address the matter, the DEN" const tuted a +anel of Arb trators /+A0 to resolve the follo9 ng? /a0 %he adverse cla ms on M+&AA No. 126I and /b0 %he +et t on to 'ancel E+ 1<< f led by "osendo C llaflor docFeted as "ED 'ase No. 6@6@54. Dn 1< June 1552, the +A rendered a resolut on n "ED M nes 'ase No. 6@6@54. As to the +et t on for 'ancellat on of E+ 1<< ssued to MM', the +A rel ed on the rul ng n Ape1 M n ng 'o., $nc. v. #arc a and op ned that E+ 1<< 9as val d and subs st ng. $t also declared that the EM# D rector, under &ect on 55 of the 'onsol dated M nes Adm n strat ve Drder mplement ng +res dent al Decree No. 4><, 9as author Aed to ssue e1plorat on perm ts and to rene9 the same 9 thout l m t. ( th respect to the adverse cla ms on &EMJs M+&AA No. 126, the +A ruled that adverse cla mantsJ pet t ons 9ere not f led n accordance 9 th the e1 st ng rules and regulat ons govern ng adverse cla ms because the adverse cla mants fa led to subm t the sFetch plan conta n ng the techn cal descr pt on of the r respect ve cla ms, 9h ch 9as a mandatory re=u rement for an adverse cla m that 9ould allo9 the +A to determ ne f ndeed there s an overlapp ng of the area occup ed by them and the area appl ed for by &EM. $t added that the adverse cla mants 9ere not cla m o9ners but mere occupants conduct ng llegal m n ng act v t es at the contested area s nce only MM' or ts ass gnee &EM had val d m n ng cla ms over the area as enunc ated n Ape1 M n ng 'o., $nc. v. #arc a. Also, t ma nta ned that the adverse cla mants 9ere not =ual f ed as small@scale m ners under DEN" Department Adm n strat ve Drder No. <4 /DAD No. <40, or the $mplement ng "ules and "egulat on of "epubl c Act No. 202> /other9 se Fno9n as the ,+eopleJs &mall@&cale M n ng Act of 1551,0, as they 9ere not duly l censed by the DEN" to engage n the e1tract on or removal of m nerals from the ground, and that they 9ere large@scale m ners. %he decretal port on of the +A resolut on pronounces? C$E(ED $N %BE !$#B% D7 %BE 7D"E#D$N#, the val d ty of E1plorat on +erm t No. 1<< s hereby re terated and all the adverse cla ms aga nst M+&AA No. 126 are D$&M$&&ED. 3ndaunted by the +A rul ng, the adverse cla mants appealed to the M nes Ad-ud cat on Eoard /MAE0. $n a Dec s on dated > January 1556, the MAE cons dered erroneous the d sm ssal by the +A of the adverse cla ms f led aga nst MM' and &EM over a mere techn cal ty of fa lure to subm t a sFetch plan. $t argued that the rules of procedure are not meant to defeat substant al -ust ce as the former are merely secondary n mportance to the latter. Deal ng 9 th the =uest on on E+ 1<<Js val d ty, the MAE op ned that sa d ssue 9as not cruc al and 9as rrelevant n ad-ud cat ng the appealed case because E+ 1<< has long e1p red due to ts non@rene9al and that the holder of the same, MM', 9as no longer a cla mant of the Agusan@Davao@&ur gao 7orest "eserve hav ng rel n=u shed ts r ght to &EM. After t brushed as de the ssue of the val d ty of E+

1<< for be ng rrelevant, the MAE proceeded to treat &EMJs M+&A appl cat on over the d sputed area as an ent rely ne9 and d st nct appl cat on. $t approved the M+&A appl cat on, e1clud ng the area segregated by DAD No. >>, 9h ch declared 225 hectares 9 th n the D 9al9al area as non@forest lands open for small@scale m n ng. %he MAE resolved? (BE"E7D"E, +"EM$&E& 'DN&$DE"ED, the dec s on of the +anel of Arb trators dated 1< June 1552 s hereby CA'A%ED and a ne9 one entered n the records of the case as follo9s? 1. &EMJs M+&A appl cat on s hereby g ven due course sub-ect to the full and str ct compl ance of the prov s ons of the M n ng Act and ts $mplement ng "ules and "egulat onsI 2. %he area covered by DAD >>, ser es of 1551, actually occup ed and act vely m ned by the small@scale m ners on or before August 1, 1562 as determ ned by the +rov nc al M n ng "egulatory Eoard /+M"E0, s hereby e1cluded from the area appl ed for by &EMI <. A morator um on all m n ng and m n ng@related act v t es, s hereby mposed unt l such t me that all necessary procedures, l censes, perm ts, and other re=u s tes as prov ded for by "A 202>, the M n ng Act and ts $mplement ng "ules and "egulat ons and all other pert nent la9s, rules and regulat ons are compl ed 9 th, and the appropr ate env ronmental protect on measures and safeguards have been effect vely put n placeI 4. 'ons stent 9 th the sp r t of "A 202>, the Eoard encourages &EM and all small@ scale m ners to cont nue to negot ate n good fa th and arr ve at an agreement benef c al to all. $n the event of &EMJs str ct and full compl ance 9 th all the re=u rements of the M n ng Act and ts $mplement ng "ules and "egulat ons, and the concurrence of the small@scale m ners actually occupy ng and act vely m n ng the area, &EM may apply for the nclus on of port ons of the areas segregated under paragraph 2 hereof, to ts M+&A appl cat on. $n th s l ght, sub-ect to the preced ng paragraph, the contract bet9een JE :JE Management M n ng 'orporat on; and &EM s hereby recogn Aed. D ssat sf ed, the C llaflor group and Eal te appealed the dec s on to th s 'ourt. &EM, aggr eved by the e1clus on of 225 hectares from ts M+&A appl cat on, l Fe9 se appealed. Ape1 f led a Mot on for !eave to Adm t +et t on for $ntervent on pred cated on ts r ght to staFe ts cla m over the D 9al9al gold rush 9h ch 9as granted by the 'ourt. %hese cases, ho9ever, 9ere remanded to the 'ourt of Appeals for proper d spos t on pursuant to "ule 4< of the 1552 "ules of ' v l +rocedure. %he 'ourt of Appeals consol dated the remanded cases as 'A@ #.". &+ No. >1218 and No. >121>. $n the assa led Dec s on dated 1< March 2002, the 'ourt of Appeals aff rmed n toto the dec s on of the +A and declared null and vo d the MAE dec s on. %he 'ourt of Appeals, banF ng on the prem se that the &EM s the agent of MM' by v rtue of ts ass gnment of E+ 1<< n favor of &EM and the purported fact that

&EM s a 100R subs d ary of MM', ruled that the transfer of E+ 1<< 9as val d. $t argued that s nce &EM s an agent of MM', the ass gnment of E+ 1<< d d not v olate the cond t on there n proh b t ng ts transfer e1cept to MM'Js duly des gnated agent. %hus, desp te the non@rene9al of E+ 1<< on > July 1554, the 'ourt of Appeals deemed t relevant to declare E+ 1<< as val d s nce MM'Js m n ng r ghts 9ere val dly transferred to &EM pr or to ts e1p rat on. %he 'ourt of Appeals also ruled that MM'Js r ght to e1plore under E+ 1<< s a property r ght 9h ch the 1562 'onst tut on protects and 9h ch cannot be d vested 9 thout the holderJs consent. $t stressed that MM'Js fa lure to proceed 9 th the e1tract on and ut l Aat on of m nerals d d not d m n sh ts vested r ght to e1plore because ts fa lure 9as not attr butable to t. "ead ng +roclamat on No. <>5, &ect on 11 of 'ommon9ealth Act 1<2, and &ect ons >, 2, and 6 of +res dent al Decree No. 4><, the 'ourt of Appeals concluded that the ssuance of DAD No. >> 9as done by the DEN" &ecretary beyond h s po9er for t s the +res dent 9ho has the sole po9er to 9 thdra9 from the forest reserve establ shed under +roclamat on No. <>5 as non@forest land for m n ng purposes. Accord ngly, the segregat on of 225 hectares of m n ng areas from the coverage of E+ 1<< by the MAE 9as unfounded. %he 'ourt of Appeals also faulted the DEN" &ecretary n mplement ng DAD No. >> 9hen he a9arded the 225 hectares segregated from the coverage area of E+ 1<< to other corporat ons 9ho 9ere not =ual f ed as small@scale m ners under "epubl c Act No. 202>. As to the pet t ons of C llaflor and company, the 'ourt of Appeals argued that the r fa lure to subm t the sFetch plan to the +A, 9h ch s a -ur sd ct onal re=u rement, 9as fatal to the r appeal. $t l Fe9 se stated the C llaflor and companyJs m n ng cla ms, 9h ch 9ere based on the r alleged r ghts under DAD No. >>, cannot stand as DAD No. >> 9as null and vo d. %he d spos t ve port on of the Dec s on decreed? (BE"E7D"E, prem ses cons dered, the +et t on of &outheast M ndanao #old M n ng 'orporat on s #"AN%ED 9h le the +et t on of "osendo C llaflor, et al., s DEN$ED for lacF of mer t. %he Dec s on of the +anel of Arb trators dated 1< June 1552 s A77$"MED n toto and the assa led MAE Dec s on s hereby &E% A&$DE and declared as N3!! and CD$D. Bence, the nstant +et t ons for "ev e9 on 'ert orar under "ule 48 of the "ules of 'ourt f led by Ape1, Eal te and MAE. Dur ng the pendency of these +et t ons, +res dent #lor a Macapagal@Arroyo ssued +roclamat on No. 252 dated 28 November 2002. %h s proclamat on e1cluded an area of 6,100 hectares located n MonFayo, 'ompostela Calley, and procla med the same as m neral reservat on and as env ronmentally cr t cal area. &ubse=uently, DEN" Adm n strat ve Drder No. 2002@16 9as ssued declar ng an emergency s tuat on n the D 9al9al gold rush area and order ng the stoppage of all m n ng operat ons there n. %hereafter, E1ecut ve Drder No. 212 dated 12 June

200< 9as ssued by the +res dent creat ng the Nat onal %asF 7orce D 9al9al 9h ch s tasFed to address the s tuat on n the D 9al9al #old "ush Area. $n #.". No. 182>1< and No. 182>26, Ape1 ra ses the follo9 ng ssues? $ (BE%BE" D" ND% &D3%BEA&% M$NDANAD #D!D M$N$N#J& :&EM; E.+. 1<< $& N3!! AND CD$D D3E %D %BE 7A$!3"E D7 MA"'D++E" %D 'DM+!H ($%B %BE %E"M& AND 'DND$%$DN& +"E&'"$EED $N E+ 1<<. $$ (BE%BE" D" ND% A+EG BA& A &3+E"$D" AND +"E7E"EN%$A! "$#B% %D &%A*E $%J& '!A$M DCE" %BE EN%$"E 4,541 BE'%A"E& A#A$N&% &EM AND %BE D%BE" '!A$MAN%& +3"&3AN% %D %BE %$ME@BDND"ED +"$N'$+!E $N M$N$N# !A( %BA% ,+"$D"$%H $N %$ME $& +"$D"$%H $N "$#B%., $n #.". No. 182>15@20, Eal te anchors ts pet t on on the follo9 ng grounds? $ (BE%BE" D" ND% %BE M+&A D7 &EM (B$'B (A& 7$!ED N$NE /50 DAH& !A%E /J3NE 2<, 15540 7"DM %BE 7$!$N# D7 %BE M+&A D7 EA!$%E (B$'B (A& 7$!ED DN J3NE 14, 1554 BA& A +"E7E"EN%$A! "$#B% DCE" %BA% D7 EA!$%E. $$ (BE%BE" D" ND% %BE D$&M$&&A! EH %BE +ANE! D7 A"E$%"A%D"& D7 %BE ADCE"&E '!A$M D7 EA!$%E DN %BE #"D3ND %BA% EA!$%E 7A$!ED %D &3EM$% %BE "EU3$"ED &*E%'B +!AN DE&+$%E %BE 7A'% %BA% EA!$%E, BAD $N 7A'% &3EM$%%ED DN %$ME (A& A CA!$D D$&M$&&A! D7 EA!$%EJ& ADCE"&E '!A$M. $$$ (BE%BE" D" ND% %BE A'%3A! D''3+A%$DN AND &MA!!@M$N$N# D+E"A%$DN& D7 EA!$%E +3"&3AN% %D DAD >> $N %BE 225 BE'%A"E& (B$'B (A& +A"% D7 %BE 4,541.>285 BE'%A"E& 'DCE"ED EH $%& M+&A (B$'B (A& "EJE'%ED EH %BE E3"EA3 D7 M$NE& AND #ED&'$EN'E& (A& $!!E#A!. $n #.". No. 182620@21, the MAE subm ts t9o ssues, to 9 t? $ (BE%BE" D" ND% E+ ND. 1<< $& &%$!! CA!$D AND &3E&$&%$N#. $$ (BE%BE" D" ND% %BE &3E&EU3EN% A'%& D7 %BE #DCE"NMEN% &3'B A& %BE $&&3AN'E D7 DAD ND. >>, +"D'!AMA%$DN ND. 252, AND EGE'3%$CE D"DE" 212 'AN D3%(E$#B E+ ND. 1<< A& (E!! A& D%BE" ADCE"&E '!A$M& DCE" %BE D$(A!(A! #D!D "3&B A"EA.

%he common ssues ra sed by pet t oners may be summar Aed as follo9s? $. (hether or not the 'ourt of Appeals erred n uphold ng the val d ty and cont nuous e1 stence of E+ 1<< as 9ell as ts transfer to &EMI $$. (hether or not the 'ourt of Appeals erred n declar ng that the DEN" &ecretary has no author ty to ssue DAD No. >>I and $$$. (hether or not the subse=uent acts of the e1ecut ve department such as the ssuance of +roclamat on No. 252, and DAD No. 2002@16 can out9e gh Ape1 and Eal teJs cla ms over the D 9al9al #old "ush Area. Dn the f rst ssue, Ape1 taFes e1cept on to the 'ourt of AppealsJ rul ng uphold ng the val d ty of MM'Js E+ 1<< and ts subse=uent transfer to &EM assert ng that MM' fa led to comply 9 th the terms and cond t ons n ts e1plorat on perm t, thus, MM' and ts successor@ n@ nterest &EM lost the r r ghts n the D 9al9al #old "ush Area. Ape1 po nted out that MM' v olated four cond t ons n ts perm t. 7 rst, MM' fa led to comply 9 th the mandatory 9orF program, to complete e1plorat on 9orF, and to declare a m n ng feas b l ty. &econd, t reneged on ts duty to subm t an Env ronmental 'ompl ance 'ert f cate. %h rd, t fa led to comply 9 th the reportor al re=u rements. 7ourth, t v olated the terms of E+ 1<< 9hen t ass gned sa d perm t to &EM desp te the e1pl c t proscr pt on aga nst ts transfer. Ape1 l Fe9 se emphas Aes that MM' fa led to f le ts M+&A appl cat on re=u red under DAD No. 62 9h ch caused ts e1plorat on perm t to lapse because DAD No. 62 mandates holders of e1plorat on perm ts to f le a !etter of $ntent and a M+&A appl cat on not later than 12 July 1551. $t sa d that because E+ 1<< e1p red pr or to ts ass gnment to &EM, &EMJs M+&A appl cat on should have been evaluated on ts o9n mer t. As regards the 'ourt of Appeals recogn t on of &EMJs vested r ght over the d sputed area, Ape1 be9a ls the same to be lacF ng n statutory bases. Accord ng to Ape1, +res dent al Decree No. 4>< and "epubl c Act No. 2542 mpose upon the cla mant the obl gat on of actually undertaF ng e1plorat on 9orF 9 th n the reserved lands n order to ac=u re pr or ty r ght over the area. MM', Ape1 cla ms, fa led to conduct the necessary e1plorat on 9orF, thus, MM' and ts successor@ n@ nterest &EM lost any r ght over the area. $n ts Memorandum, Eal te ma nta ns that E+ 1<< of MM', predecessor@ n@ nterest of &EM, s an e1p red and vo d perm t 9h ch cannot be made the bas s of &EMJs M+&A appl cat on. & m larly, the MAE underscores that &EM d d not ac=u re any r ght from MM' by v rtue of the transfer of E+ 1<< because the transfer d rectly v olates the e1press cond t on of the e1plorat on perm t stat ng that , t shall be for the e1clus ve use and benef t of the perm ttee or h s duly author Aed agents., $t added that 9h le MM' s the perm ttee, &EM cannot be cons dered as MM'Js duly des gnated agent as there s no proof on record author A ng &EM to represent MM' n ts bus ness deal ngs or undertaF ngs, and ne ther d d &EM pursue ts nterest n the

perm t as an agent of MM'. Accord ng to the MAE, the ass gnment by MM' of E+ 1<< n favor of &EM d d not maFe the latter the duly author Aed agent of MM' s nce the concept of an agent under E+ 1<< s not e=u valent to the concept of ass gnee. $t f nds fault n the ass gnment of E+ 1<< 9h ch lacFed the approval of the DEN" &ecretary n contravent on of &ect on 28 of "epubl c Act No. 2542 re=u r ng h s approval for a val d ass gnment or transfer of e1plorat on perm t to be val d. &EM, on the other hand, counters that the errors ra sed by pet t oners Ape1, Eal te and the MAE relate to factual and ev dent ary matters 9h ch th s 'ourt cannot n=u re nto n an appeal by cert orar . Effects of t-e !ecision %he dec s on aff rms the appl cat on n th s -ur sd ct on of the "egal an Doctr ne, 9h ch means that the &tate has dom n on over all agr cultural, t mber and m neral lands. $t also aff rms that +roclamat on 252 dated November 28, 2002 9as a const tut onally@sanct oned act. +roclamat on 252 has e1cluded 6,100 hectares of m neral land n MonFayo, 'ompostela Calley, and has declared that? 111. M n ng operat ons n the area may be undertaFen e ther by the DEN" d rectly, sub-ect to payment of -ust compensat on that may be due to leg t mate and e1 st ng cla mants, or thru a =ual f ed contractor, sub-ect to e1 st ng r ghts, f any. $t s clear that under the +roclamat on 252 reg me of e1plorat on, development and ut l Aat on of m neral resources 9 th n the D 9al9al #old "ush Area, the &tate s bound to e ther pay la9ful cla mants -ust compensat on /should t elect to operate the m ne d rectly0, or to honor e1 st ng r ghts /should t choose to outsource m n ng operat ons to a serv ce contractor0. %he pr or ty r ght of an nterested party s only deemed superseded by +roclamat on 252 and DEN" Adm n strat ve Drder /DAD0 2002@16 f the &tate elects to d rectly undertaFe m n ng operat ons n the D 9al9al #old "ush Area /but nonetheless re=u res the &tate to pay -ust compensat on that may be due to leg t mate and e1 st ng cla mants0. $f the &tate chooses to outsource m n ng operat ons to a serv ce contractor, +roclamat on 252 mandates that the e1 st ng r ghts should st ll be recogn Aed and honored. Het, the dec s on states that? %he ssue on 9ho has pr or ty r ght over the d sputed area s deemed overtaFen by the above subse=uent developments part cularly 9 th the ssuance of +roclamat on 252 and DAD No. 2002@16, both be ng const tut onally@sanct oned acts of the E1ecut ve Eranch. M n ng operat ons n the D 9al9al M neral "eservat on are no9, therefore, 9 th n the full control of the &tate through the e1ecut ve branch. +ursuant to &ect on 8 of "epubl c Act No. 2542, the &tate can e ther d rectly undertaFe the e1plorat on, development and ut l Aat on of the area or t can enter nto agreements 9 th =ual f ed ent t es, v A?

&E' 8. M neral "eservat ons. K (hen the nat onal nterest so re=u res, such as 9hen there s a need to preserve strateg c ra9 mater als for ndustr es cr t cal to nat onal development, or certa n m nerals for sc ent f c, cultural or ecolog cal value, the +res dent may establ sh m neral reservat ons upon the recommendat on of the D rector through the &ecretary. M n ng operat ons n e1 st ng m neral reservat ons and such other reservat ons as may thereafter be establ shed, shall be undertaFen by the Department or through a contractor 1 1 1 . $t s no9 up to the E1ecut ve Department 9hether to taFe the f rst opt on, .e., to undertaFe d rectly the m n ng operat ons of the D 9al9al #old "ush Area. As already ruled, the &tate may not be precluded from cons der ng a d rect taFeover of the m nes, f t s the only plaus ble remedy n s ght to the gna9 ng comple1 t es generated by the gold rush. %he &tate need be gu ded only by the demands of publ c nterest n settl ng on th s opt on, as 9ell as ts mater al and log st c feas b l ty. %he &tate can also opt to a9ard m n ng operat ons n the m neral reservat on to pr vate ent t es nclud ng pet t oners Ape1 and Eal te, f t 9 shes. %he e1erc se of th s prerogat ve l es 9 th the E1ecut ve Department over 9h ch courts 9 ll not nterfere. %hat the afore=uoted passage of the dec s on, part cularly the h ghl ghted port on, has generated nterpretat on by the part es causes me to pause n order to asF 9hether the ssuance of +roclamat on 252 declar ng the d sputed area as a m neral reservat on out9e ghs the cla ms of Ape1 and Eal te over the D 9al9al #old "ush AreaI and 9h ch bet9een Ape1 and Eal te 9 ll have pr or ty once the #overnment opts to a9ard m n ng operat ons n the m neral reservat on to pr vate ent t es, nclud ng Ape1 and Eal te, f t so 9 shes. $ humbly subm t that the ans9ers to these =uest ons should be g ven by the 'ourt no9, not later, f 9e are to prevent another round of l t gat on that 9 ll surely underm ne the efforts of the #overnment to establ sh a ne9 order of peace, development and prosper ty n the D 9al9al #old "ush Area. $ also subm t that these =uest ons are ent rely -ust c able n the present case. (e have already el m nated the cla m of &EM and ts parent company, Marcopper M n ng 'orporat on /MM'0, due to the latterJs numerous v olat ons of the terms of E1plorat on +erm t /E+0 1<<, 9h ch mean9h le e1p red 9 thout be ng rene9ed. %he ssuance of +roclamat on 252, and the declarat on by th s 'ourt of the null ty of DAD No. >> /declar ng 225 hectares 9 th n the Agusan@Davao@&ur gao 7orest "eserve as non@forest land open to small@scale m n ng operat ons0 necess tate a f nal and def n t ve determ nat on of the e1 st ng r ght of the rema n ng cla mants n th s d spute, 9ho can replace &EM and f ll the vo d created by the e1p rat on of E+ 1<<. $ have no d ff culty n understand ng from the dec s on that the rema n ng cla mants are Ape1 and Eal te. Su missions

%he r ght of a leg t mate and e1 st ng cla mant env s oned n +roclamat on 252 / .e., ,M n ng operat ons n the area may be undertaFen e ther by the DEN" d rectly, sub-ect to payment of -ust compensat on that may be due to leg t mate and e1 st ng cla mants, or thru a =ual f ed contractor, sub-ect to e1 st ng r ghts, f any,0 s a real r ght ac=u red over t me by a person 9ho d scovered m neral depos ts, and 9as f rst to staFe h s cla m through locat on and reg strat on 9 th the m n ng recorder. 3nder +h l pp ne m n ng la9s, 9h ch are essent ally patterned after Anglo@ Amer can models, the locat on and reg strat on of a m n ng cla m must be follo9ed by actual e1plorat on and e1tract on of m neral depos ts. %he person 9ho s f rst to locate and reg ster h s m n ng cla m and 9ho subse=uently e1plores the area and e1tracts m neral depos ts has a val d and e1 st ng r ght regardless of techn cal defect n the reg strat on. (h ch bet9een Ape1 and Eal te has pr or tyP Dn the one hand, Ape1 rests ts cla m to pr or ty on the precept of f rst@ n@t me, f rst@ n@r ght, a pr nc ple that s e1pl c tly recogn Aed by &ect on 1 of +res dent al Decree /+.D.0 No. 55@A, 9h ch amended 'ommon9ealth Act /'.A.0 No. 1<2 /M n ng Act0, 9h ch prov des? (henever there s a confl ct bet9een cla m o9ners over a m n ng cla m, 9hether m neral or non@m neral, the locator of the cla m 9ho f rst reg stered h s cla m 9 th the proper m n ng reg strar, not9 thstand ng any defect n form or techn cal ty, shall have the e1clus ve r ght to possess, e1plo t, e1plore, develop and operate such m n ng cla m. Ape1 argues that +roclamat on 252 does not e1t ngu sh ts e1 st ng r ght over D 9al9al #old "ush Area, because? /10 t conducted e1plorat on 9orF n the area from 156< to 1551I /20 t spent a total of +18 m ll on on e1plorat on and development 9orF aloneI and /<0 ts pet t on for ntervent on 9as adm tted by the 'ourt n th s case, 9h ch 9as nd cat ve of ts e1 st ng r ght over the d sputed area. Dn the other hand, Eal te states that t f led on June 14, 1554 ts appl cat on for a M neral +roduct on &har ng Agreement /M+&A0 ahead of &EMI and that t had an e1 st ng r ght over the d sputed area by v rtue of ts nat ve t tle r ght under ".A. No. 6<21 /$+"A0,2 because ts members are nd genous peoples /$+s0 belong ng to the four tr bes of Mangguangan, Manobo, Mandaya and D baba9on . Dur ng the oral arguments, Eal teJs counsel descr bed Eal te as a ,cooperat ve for everybody,, for ts members 9ere compr sed of nomads, lo9landers, and $+s belong ng to the four tr bes thus ment oned. Eal te further asserts that t s a small@scale m n ng cooperat ve, as def ned under ".A. No. 202>, and s thus ent tled to apply for 28R percent of the D 9al9al m neral reservat on. 3nder the c rcumstances, t should be Ape1 9ho should be recogn Aed as the cla mant 9 th pr or ty, 9 th or 9 thout +roclamat on 252.

7 rstly? Ee ng a cooperat ve 9hose pr nc pal purpose s to engage n the bus ness of m n ng, and not n the protect on of the r ghts and nterest of cultural m nor t es, Eal te s not ent tled to preference by v rtue of $+"A. $ must po nt out that $+"A speaFs of r ghts of $+s, and of those belong ng to the $nd genous 'ultural 'ommun t es /$''s0, but does not nclude a cooperat ve l Fe Eal te. 3nder &ec. 2/b0 of $+"A, only $+s and $''s have the r ght to ,manage and conserve natural resources 9 th n the terr tor es and uphold the respons b l t es for future generat onsI to benef t and share the prof ts from the allocat on and ut l Aat on of natural resources., $+s and $''s have also the ,r ght to negot ate the terms and cond t ons for the e1plorat on of natural resources., $ hasten to clar fy, ho9ever, that n order to protect the r ghts of ts $+ members over certa n port ons of the D 9al9al m neral reservat on, Eal te may represent ts $+ members n negot at ng the terms and cond t ons for the shar ng of prof t and other benef ts ar s ng from the ut l Aat on of the m neral depos ts that lay beneath the r ancestral land 9 th the serv ce contractor chosen by the &tate, but t cannot d rectly undertaFe e1plorat on, development and m n ng n the D 9al9al m neral reservat on. &econdly? 3pon learn ng of MM'Js ass gnment of ts E+ 1<< to &EM, Eal te f led 9 th the "eg onal E1ecut ve D rector of the Department of Env ronment and Natural "esources /DEN"0 a pet t on seeF ng the cancellat on of E+ 1<<, and the adm ss on of ts M+&A /ent tled "osendo C llaflor, et al. v. Marcopper M n ng 'orporat on and docFeted as "ED M$NE& 'ase No. 6@6@540. %he pet t on 9as referred to the +anel of Arb trator /+A0 pursuant to ".A. No. 2542. Het, Eal teJs appl cat on for an M+&A, although f led pr or to &EMJs appl cat on, d d not =ual fy Eal te as a f rst locator and reg strant of a m n ng cla m, because Ape1 had reg stered ts cla ms 9 th the Eureau of M nes and #eo@&c ences /EM#0 n 1562, much earl er than e ther Eal te, or any other cla mant. %h rdly? (h le d scovery and pr or reg strat on of a m n ng cla m 9 th the m n ng recorder pave the 9ay for a cla mant to ac=u re a pr or ty r ght over m neral land, t s also mportant that the cla mant must follo9 h s d scovery and reg strat on 9 th actual e1plorat on and m n ng. %he f nal stage of e1plorat on, development and ut l Aat on s cruc al to besto9 upon the d scoverer or f rst reg strant an e1 st ng r ght that he can nvoFe aga nst the 9hole 9orld, even aga nst the government. Ape1 met the re=u rements of d scovery, reg strat on, actual e1plorat on and m n ng. $n 1562, t e1plored and developed the area covered by ts cla ms located 9 th n the D 9al9al m neral reservat on. $t constructed m n ng tunnels, access roads and br dges n and around ts m ne s te to fac l tate the e1tract on and process ng of gold ores. $t sold tons of gold bull ons to the +h l pp ne government from 1562 to 1552, and rem tted m ll ons of pesos n ta1 revenues to the nat onal coffers. $t operated a modern gold process ng plant, as contrasted from gold panners 9ho used crude m n ng techn =ues to e1tract gold ores.

7ourthly? %he pr mord al cons derat on for grant ng or recogn A ng the e1 stence of real r ghts over m neral lands s d scovery. %he &tate re9ards the d scoverer of m neral depos ts for h s labor and perseverance, and encourages other persons to search for more m nerals and sources of rene9able energy to propel the Nat onJs econom c gro9th and development. 7or th s reason, the +h l pp nes adheres to the f rst@ n@t me, f rst@ n@r ght postulate not only n resolv ng d sputes nvolv ng confl ct ng cla ms, but also n determ n ng e1 st ng r ghts of cla mants. $n v e9 of the forego ng, Ape1 has an e1 st ng pr or ty r ght n the D 9al9al m neral reservat on by v rtue of f rst@ n@t me, f rst@ n@r ght, for hav ng performed the re=u s te acts of locat on and reg strat on, follo9ed by actual e1plorat on and m n ng. Although t d d not follo9 the procedure for reg ster ng ts m n ng cla m la d do9n n theApe Mining .o., :nc. v. 2arcia /#.". No. 52>08, July 1>, 1551, 155 &'"A 2260, Ape1 s not barred from ac=u r ng a super or r ght over the area to the e1clus on of other cla mants, because the reg strat on of ts cla ms pre@ dated that of the other cla mants, nclud ng MM', and because by e1press prov s on of la9 / .e., &ec. 1 of +.D. No. 55@A, 9h ch amended '.A. No. 1<2, M n ng Act, supra0 no defect n form or techn cal ty should bar the pr or ty. 7 fthly? %hat the 'ourt n Ape Mining .o., :nc. v. 2arcia aff rmed the dec s on of the D+ and the DEN" null fy ng and render ng noperat ve Ape1Js m n ng cla ms or declarat ons of locat on /DD!s0 s of no moment. %he pr or ty r ght of Ape1 that th s 'ourt ought to recogn Ae here n, 9h ch the &tate must honor, does not emanate from the DD!s, but s pred cated on the pr nc ple of f rst@ n@t me, f rst@ n@ r ght. %he r ght of Ape1 to be recogn Aed here n s d st nct from ts r ght as a reg stered o9ner and operator of the DD!s, cons der ng that the former ar ses from a vacuum result ng from the e1t nct on and null f cat on of MM'Js E+ 1<<. %onclusion $ vote to grant the mot on for clar f cat on of Ape1 M n ng 'o., $nc., and to mod fy the dec s on by declar ng that Ape1 M n ng 'o., $nc. has an e1 st ng pr or ty r ght to e1plore, develop and ut l Ae the m neral depos ts n the D 9al9al #old "ush Area pursuant to +roclamat on 252, sub-ect only to the super or r ght of the &tate to d rectly e1plore, develop and ut l Ae. #&%AS +. 9E$SA')N Assoc ate Just ce

:ootnotes
1

&ect on 1. "end t on of -udgments and f nal orders. O A -udgment or f nal order determ n ng the mer ts of the case shall be n 9r t ng personally and d rectly prepared by the -udge, stat ng clearly and d st nctly the facts and the la9 on 9h ch t s based, s gned by h m, and f led 9 th the clerF of the court. /1a0
2

$nd genous +eople " ghts Act of 1552.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71.=< Au"ust 41, 1<2;

!/')NG/ !E #A %$&6, pla nt ff@appellant, vs. N/$(5E$N (5EA($)%A# EN(E$+$)SES )N%., E( A#., defendants@appellees. .onrado Ru#io for appellant. Ruiz, Ruiz, Ruiz, Ruiz, and !en"amin 2uerrero for appellees. '/N(E'A8/$, J., %he facts n th s case based on an agreed statement of facts are s mple. $n the year 1541 the Northern %heatr cal Enterpr ses $nc., a domest c corporat on operated a mov e house n !aoag, $locos Norte, and among the persons employed by t 9as the pla nt ff DDM$N#D DE !A '"3L, h red as a spec al guard 9hose dut es 9ere to guard the ma n entrance of the c ne, to ma nta n peace and order and to report the comm ss on of d sorders 9 th n the prem ses. As such guard he carr ed a revolver. $n the afternoon of July 4, 1541, one Een-am n Mart n 9anted to crash the gate or entrance of the mov e house. $nfur ated by the refusal of pla nt ff De la 'ruA to let h m n 9 thout f rst prov d ng h mself 9 th a t cFet, Mart n attacFed h m 9 th a bolo. De la 'ruA defendant h mself as best he could unt l he 9as cornered, at 9h ch moment to save h mself he shot the gate crasher, result ng n the latter)s death. 7or the F ll ng, De la 'ruA 9as charged 9 th hom c de n 'r m nal 'ase No. 6445 of the 'ourt of 7 rst $nstance of $locos Norte. After a re@ nvest gat on conducted by the +rov nc al 7 scal the latter f led a mot on to d sm ss the compla nt, 9h ch 9as granted by the court n January 154<. Dn July 6, 1542, De la 'ruA 9as aga n accused of the same cr me of hom c de, n 'r m nal 'ase No. 4<1 of the same 'ourt. After tr al, he 9as f nally ac=u tted of the charge on January <1, 1546. $n both cr m nal cases De la 'ruA employed a la9yer to defend h m. Be demanded from h s former employer re mbursement of h s e1penses but 9as refused, after 9h ch he f led the present act on aga nst the mov e corporat on and the three members of ts board of d rectors, to recover not only the amounts he had pa d h s la9yers but also moral damages sa d to have been suffered, due to h s 9orry, h s neglect of h s nterests and h s fam ly as 9ell n the superv s on of the cult vat on of h s land, a total of +18,000. Dn the bas s of the compla nt and the ans9er f led by defendants 9here n they asFed for the d sm ssal of the compla nt, as 9ell as the agreed statement of facts, the 'ourt of 7 rst $nstance of $locos Norte after re-ect ng the theory of the pla nt ff that he 9as an agent of the defendants and that as such agent he 9as ent tled to re mbursement of the e1penses ncurred by h m n connect on 9 th the agency /Arts. 1205@1225 of the old ' v l 'ode0, found that pla nt ff had no cause of act on and d sm ssed the

compla nt 9 thout costs. De la 'ruA appealed d rectly to th s %r bunal for the reason that only =uest ons of la9 are nvolved n the appeal. (e agree 9 th the tr al court that the relat onsh p bet9een the mov e corporat on and the pla nt ff 9as not that of pr nc pal and agent because the pr nc ple of representat on 9as n no 9ay nvolved. +la nt ff 9as not employed to represent the defendant corporat on n ts deal ngs 9 th th rd part es. Be 9as a mere employee h red to perform a certa n spec f c duty or tasF, that of act ng as spec al guard and stay ng at the ma n entrance of the mov e house to stop gate crashers and to ma nta n peace and order 9 th n the prem ses. %he =uest on posed by th s appeal s 9hether an employee or servant 9ho n l ne of duty and 9h le n the performance of the tasF ass gned to h m, performs an act 9h ch eventually results n h s ncurr ng n e1penses, caused not d rectly by h s master or employer or h s fello9 servants or by reason of h s performance of h s duty, but rather by a th rd party or stranger not n the employ of h s employer, may recover sa d damages aga nst h s employer. %he learned tr al court n the last paragraph of ts dec s on d sm ss ng the compla nt sa d that ,after study ng many la9s or prov s ons of la9 to f nd out 9hat la9 s appl cable to the facts subm tted and adm tted by the part es, has found none and t has no other alternat ve than to d sm ss the compla nt., %he tr al court s r ght. (e confess that 9e are not a9are of any la9 or -ud c al author ty that s d rectly appl cable to the present case, and real A ng the mportance and far@reach ng effect of a rul ng on the sub-ect@matter 9e have searched, though va nly, for -ud c al author t es and enl ghtenment. All the la9s and pr nc ples of la9 9e have found, as regards master and servants, or employer and employee, refer to cases of phys cal n-ur es, l ght or ser ous, result ng n loss of a member of the body or of any one of the senses, or permanent phys cal d sab l ty or even death, suffered n l ne of duty and n the course of the performance of the dut es ass gned to the servant or employee, and these cases are ma nly governed by the Employer)s ! ab l ty Act and the (orFmen)s 'ompensat on Act. Eut a case nvolv ng damages caused to an employee by a stranger or outs der 9h le sa d employee 9as n the performance of h s dut es, presents a novel =uest on 9h ch under present leg slat on 9e are ne ther able nor prepared to dec de n favor of the employee. $n a case l Fe the present or a s m lar case of say a dr ver employed by a transportat on company, 9ho 9h le n the course of employment runs over and nfl cts phys cal n-ur es on or causes the death of a pedestr anI and such dr ver s later charged cr m nally n court, one can mag ne that t 9ould be to the nterest of the employer to g ve legal help to and defend ts employee n order to sho9 that the latter 9as not gu lty of any cr me e ther del berately or through negl gence, because should the employee be f nally held cr m nally l able and he s found to be nsolvent, the employer 9ould be subs d ar ly l able. %hat s 9hy, 9e repeat, t s to the nterest of the employer to render legal ass stance to ts employee. Eut 9e are not prepared to say and to hold that the g v ng of sa d legal ass stance to ts employees s a legal obl gat on. (h le t m ght yet and

poss bly be regarded as a normal obl gat on, t does not at present count 9 th the sanct on of man@made la9s. $f the employer s not legally obl ged to g ve, legal ass stance to ts employee and prov de h m 9 th a la9yer, naturally sa d employee may not recover the amount he may have pa d a la9yer h red by h m. C e9ed from another angle t may be sa d that the damage suffered by the pla nt ff by reason of the e1penses ncurred by h m n remunerat ng h s la9yer, s not caused by h s act of shoot ng to death the gate crasher but rather by the f l ng of the charge of hom c de 9h ch made t necessary for h m to defend h mself 9 th the a d of counsel. Bad no cr m nal charge been f led aga nst h m, there 9ould have been no e1penses ncurred or damage suffered. &o the damage suffered by pla nt ff 9as caused rather by the mproper f l ng of the cr m nal charge, poss bly at the nstance of the he rs of the deceased gate crasher and by the &tate through the 7 scal. (e say mproper f l ng, -udg ng by the results of the court proceed ngs, namely, ac=u ttal. $n other 9ords, the pla nt ff 9as nnocent and blameless. $f desp te h s nnocence and desp te the absence of any cr m nal respons b l ty on h s part he 9as accused of hom c de, then the respons b l ty for the mproper accusat on may be la d at the door of the he rs of the deceased and the &tate, and so theoret cally, they are the part es that may be held respons ble c v lly for damages and f th s s so, 9e fa l to see no9 th s respons b l ty can be transferred to the employer 9ho n no 9ay ntervened, much less n t ated the cr m nal proceed ngs and 9hose only connect on or relat on to the 9hole affa rs 9as that he employed pla nt ff to perform a spec al duty or tasF, 9h ch tasF or duty 9as performed la9fully and 9 thout negl gence. &t ll another po nt of v e9 s that the damages ncurred here cons st ng of the payment of the la9yer)s fee d d not flo9 d rectly from the performance of h s dut es but only nd rectly because there 9as an eff c ent, nterven ng cause, namely, the f l ng of the cr m nal charges. $n other 9ords, the shoot ng to death of the deceased by the pla nt ff 9as not the pro1 mate cause of the damages suffered but may be regarded as only a remote cause, because from the shoot ng to the damages suffered there 9as not that natural and cont nuous se=uence re=u red to f 1 c v l respons b l ty. $n v e9 of the forego ng, the -udgment of the lo9er court s aff rmed. No costs. !engzon, $adilla, Reyes, A., !autista Angelo, %a#rador, .oncepcion, and Reyes, 9.!.%., 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( %B$"D D$C$&$DN G.$. No. 120303 July 1;, 3..2

'A$)A (&A6/N, A#EJAN!$/ +. (&A6/N, 'E#E%)/ +. (&A6/N, Spouses ANAS(A%)/ and 'A$8 (. 9&ENA*EN(&$A, +et t oners, vs. 5E)$S /: 9A$(/#/'E $A'/S, "espondents. DE'$&$DN +ANGAN)9AN, J.: &tr pped of nonessent als, the present case nvolves the collect on of a sum of money. &pec f cally, th s case arose from the fa lure of pet t oners to pay respondentsJ predecessor@ n@ nterest. %h s fact 9as sho9n by the non@ encashment of checFs ssued by a th rd person, but ndorsed by here n +et t oner Mar a %uaAon n favor of the sa d predecessor. 3nder these c rcumstances, to enable respondents to collect on the ndebtedness, the checF dra9er need not be mpleaded n the 'ompla nt. %hus, the su t s d rected, not aga nst the dra9er, but aga nst the debtor 9ho ndorsed the checFs n payment of the obl gat on. %he 'ase Eefore us s a +et t on for "ev e91 under "ule 48 of the "ules of 'ourt, challeng ng the July <1, 2002 Dec s on 2 of the 'ourt of Appeals /'A0 n 'A@#" 'C No. 4>8<8. %he decretal port on of the assa led Dec s on reads? ,(BE"E7D"E, the appeal s D$&M$&&ED and the appealed dec s on s A77$"MED., Dn the other hand, the aff rmed Dec s on < of Eranch <4 of the "eg onal %r al 'ourt /"%'0 of #apan, Nueva Ec -a, d sposed as follo9s? ,(BE"E7D"E, -udgment s hereby rendered n favor of the pla nt ffs and aga nst the defendants, order ng the defendants spouses !eon lo %uaAon and Mar a %uaAon to pay the pla nt ffs, as follo9s? ,1. %he sum of +1,280,080.00, 9 th nterests from the f l ng of the second amended compla ntI ,2. %he sum of +80,000.00, as attorneyJs feesI ,<. %he sum of +20,000.00, as moral damages ,4. And to pay the costs of su t. 1 1 1 1 1 1 1 1 1,4 %he 7acts %he facts are narrated by the 'A as follo9s? ,:"espondents; alleged that bet9een the per od of May 2, 1566 and June 8, 1566, spouses !eon lo and Mar a %uaAon purchased a total of 6,<2> cavans of r ce from :the deceased Eartolome; "amos :predecessor@ n@ nterest of respondents;. %hat of th s :=uant ty,; 1 1 1 only 4,4<2 cavans :have been pa d for

so far;, leav ng unpa d <,665 cavans valued at +1,211,515.00. $n payment therefor, the spouses %uaAon ssued 1 1 1 :several; %raders "oyal EanF checFs. 111111111 :E;ut 9hen these :checFs; 9ere encashed, all of the checFs bounced due to nsuff c ency of funds. :"espondents; advanced that before ssu ng sa d checFs:,; spouses %uaAon already Fne9 that they had no ava lable fund to support the checFs, and they fa led to prov de for the payment of these desp te repeated demands made on them. ,:"espondents; averred that because spouses %uaAon ant c pated that they 9ould be sued, they consp red 9 th the other :defendants; to defraud them as cred tors by e1ecut ng 1 1 1 f ct t ous sales of the r propert es. %hey e1ecuted 1 1 1 s mulated sale:s; :of three lots; n favor of the 1 1 1 spouses Euenaventura 1 1 1:,; as 9ell as the r res dent al lot and the house thereon:,; all located at Nueva Ec -a, and another s mulated deed of sale dated July 12, 1566 of a &taFe %oyota reg stered 9 th the !and %ransportat on Dff ce of 'abanatuan ' ty on &eptember 2, 1566. :'o@pet t oner; Melec o %uaAon, a son of spouses %uaAon, reg stered a f ct t ous Deed of &ale on July 15, 1566 1 1 1 over a res dent al lot located at Nueva Ec -a. Another s mulated sale of a %oyota ( llys 9as e1ecuted on January 28, 1566 n favor of the r other son, :co@pet t oner; Ale-andro %uaAon 1 1 1. As a result of the sa d sales, the t tles of these propert es ssued n the names of spouses %uaAon 9ere cancelled and ne9 ones 9ere ssued n favor of the :co@;defendants spouses Euenaventura, Ale-andro %uaAon and Melec o %uaAon. "esultantly, by the sa d ante@dated and s mulated sales and the correspond ng transfers there 9as no more property left reg stered n the names of spouses %uaAon ans9erable to cred tors, to the damage and pre-ud ce of :respondents;. ,7or the r part, defendants den ed hav ng purchased 1 1 1 r ce from :Eartolome; "amos. %hey alleged that t 9as Magdalena "amos, 9 fe of sa d deceased, 9ho o9ned and traded the merchand se and Mar a %uaAon 9as merely her agent. %hey argued that t 9as Evangel ne &antos 9ho 9as the buyer of the r ce and ssued the checFs to Mar a %uaAon as payments therefor. $n good fa th:,; the checFs 9ere rece ved :by pet t oner; from Evangel ne &antos and turned over to "amos 9 thout Fno9 ng that these 9ere not funded. And t s for th s reason that :pet t oners; have been ns st ng on the nclus on of Evangel ne &antos as an nd spensable party, and her non@ nclus on 9as a fatal error. "efut ng that the sale of several propert es 9ere f ct t ous or s mulated, spouses %uaAon contended that these 9ere sold because they 9ere then meet ng f nanc al d ff cult es but the d sposals 9ere made for value and n good fa th and done before the f l ng of the nstant su t. %o d spute the content on of pla nt ffs that they 9ere the buyers of the r ce, they argued that there 9as no sales nvo ce, off c al rece pts or l Fe ev dence to prove th s. %hey assert that they 9ere merely agents and should not be held ans9erable.,8 %he correspond ng c v l and cr m nal cases 9ere f led by respondents aga nst &pouses %uaAon. %hose cases 9ere later consol dated and amended to nclude &pouses Anastac o and Mary Euenaventura, 9 th Ale-andro %uaAon and Melec o

%uaAon as add t onal defendants. Bav ng passed a9ay before the pretr al, Eartolome "amos 9as subst tuted by h s he rs, here n respondents. 'ontend ng that Evangel ne &antos 9as an nd spensable party n the case, pet t oners moved to f le a th rd@party compla nt aga nst her. Allegedly, she 9as pr mar ly l able to respondents, because she 9as the one 9ho had purchased the merchand se from the r predecessor, as ev denced by the fact that the checFs had been dra9n n her name. %he "%', ho9ever, den ed pet t onersJ Mot on. & nce the tr al court ac=u tted pet t oners n all three of the consol dated cr m nal cases, they appealed only ts dec s on f nd ng them c v lly l able to respondents. "ul ng of the 'ourt of Appeals &usta n ng the "%', the 'A held that pet t oners had fa led to prove the e1 stence of an agency bet9een respondents and &pouses %uaAon. %he appellate court d sbel eved pet t onersJ content on that Evangel ne &antos should have been mpleaded as an nd spensable party. $nasmuch as all the checFs had been ndorsed by Mar a %uaAon, 9ho thereby became l able to subse=uent holders for the amounts stated n those checFs, there 9as no need to mplead &antos. Bence, th s +et t on.> $ssues +et t oners ra se the follo9 ng ssues for our cons derat on? ,1. (hether or not the Bonorable 'ourt of Appeals erred n rul ng that pet t oners are not agents of the respondents. ,2. (hether or not the Bonorable 'ourt of Appeals erred n render ng -udgment aga nst the pet t oners desp te 1 1 1 the fa lure of the respondents to nclude n the r act on Evangel ne &antos, an nd spensable party to the su t., 2 %he 'ourtJs "ul ng %he +et t on s unmer tor ous. 7 rst $ssue? Agency (ell@entrenched s the rule that the &upreme 'ourtJs role n a pet t on under "ule 48 s l m ted to rev e9 ng errors of la9 allegedly comm tted by the 'ourt of Appeals. 7actual f nd ngs of the tr al court, espec ally 9hen aff rmed by the 'A, are conclus ve on the part es and th s 'ourt. 6 +et t oners have not g ven us suff c ent reasons to dev ate from th s rule. $n a contract of agency, one b nds oneself to render some serv ce or to do someth ng n representat on or on behalf of another, 9 th the latterJs consent or author ty.5 %he follo9 ng are the elements of agency? /10 the part esJ consent, e1press or mpl ed, to establ sh the relat onsh pI /20 the o#"ect, 9h ch s the

e1ecut on of a -ur d cal act n relat on to a th rd personI /<0 the representation, by 9h ch the one 9ho acts as an agent does so, not for oneself, but as a representat veI /40 the limitation that the agent acts 9 th n the scope of h s or her author ty.10 As the bas s of agency s representat on, there must be, on the part of the pr nc pal, an actual ntent on to appo nt, an ntent on naturally nferable from the pr nc palJs 9ords or act ons. $n the same manner, there must be an ntent on on the part of the agent to accept the appo ntment and act upon t. Absent such mutual ntent, there s generally no agency. 11 %h s 'ourt f nds no revers ble error n the f nd ngs of the courts a quo that pet t oners 9ere the r ce buyers themselvesI they 9ere not mere agents of respondents n the r r ce dealersh p. %he =uest on of 9hether a contract s one of sale or of agency depends on the ntent on of the part es. 12 %he declarat ons of agents alone are generally nsuff c ent to establ sh the fact or e1tent of the r author ty.1< %he la9 maFes no presumpt on of agencyI prov ng ts e1 stence, nature and e1tent s ncumbent upon the person alleg ng t. 14 $n the present case, pet t oners ra se the fact of agency as an aff rmat ve defense, yet fa l to prove ts e1 stence. %he 'ourt notes that pet t oners, on the r o9n behalf, sued Evangel ne &antos for collect on of the amounts represented by the bounced checFs, n a separate c v l case that they sought to be consol dated 9 th the current one. $f, as they cla m, they 9ere mere agents of respondents, pet t oners should have brought the su t aga nst &antos for and on behalf of the r alleged pr nc pal, n accordance 9 th &ect on 2 of "ule < of the "ules on ' v l +rocedure. 18 %he r f l ng a su t aga nst her in their o&n names negates the r cla m that they acted as mere agents n sell ng the r ce obta ned from Eartolome "amos. &econd $ssue? :ndispensa#le $arty +et t oners argue that the lo9er courts erred n not allo9 ng Evangel ne &antos to be mpleaded as an nd spensable party. %hey ns st that respondentsJ 'ompla nt aga nst them s based on the bounc ng checFs she ssuedI hence, they po nt to her as the person pr mar ly l able for the obl gat on. (e hold that respondentsJ cause of act on s clearly founded on pet t onersJ fa lure to pay the purchase pr ce of the r ce. %he tr al court held that +et t oner Mar a %uaAon had ndorsed the =uest oned checFs n favor of respondents, n accordance 9 th &ect ons <1 and >< of the Negot able $nstruments !a9. 1> %hat &antos 9as the dra9er of the checFs s thus mmater al to the respondentsJ cause of act on. As ndorser, +et t oner Mar a %uaAon 9arranted that upon due presentment, the checFs 9ere to be accepted or pa d, or both, accord ng to the r tenorI and that n case they 9ere d shonored, she 9ould pay the correspond ng amount. 12 After an nstrument s d shonored by nonpayment, ndorsers cease to be merely secondar ly l ableI they become pr nc pal debtors 9hose l ab l ty becomes

dent cal to that of the or g nal obl gor. %he holder of a negot able nstrument need not even proceed aga nst the maFer before su ng the ndorser. 16 'learly, Evangel ne &antos @@ as the dra9er of the checFs @@ s not an nd spensable party n an act on aga nst Mar a %uaAon, the ndorser of the checFs. $nd spensable part es are def ned as ,part es n nterest 9 thout 9hom no f nal determ nat on can be had.,15 %he nstant case 9as or g nally one for the collect on of the purchase pr ce of the r ce bought by Mar a %uaAon from respondentsJ predecessor. $n th s case, t s clear that there s no pr v ty of contract bet9een respondents and &antos. Bence, a f nal determ nat on of the r ghts and nterest of the part es may be made 9 thout any need to mplead her. (BE"E7D"E, the +et t on s DENIED and the assa led Dec s on AFFIRMED. 'osts aga nst pet t oners. &D D"DE"ED. A"%EM$D C. +AN#AN$EAN Associate Justice 'ha rman, %h rd D v s on WE%/N%&$, ANGE#)NA SAN!/*A#7G&()E$$E6 $ENA(/ %. %/$/NA Assoc ate Just ce Assoc ate Just ce %/N%5)(A %A$+)/ '/$A#ES %AN%)/ %. GA$%)A Assoc ate Just ce Assoc ate Just ce A((ES(A()/N $ attest that the conclus ons n the above Dec s on had been reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. A$(E')/ *. +ANGAN)9AN Assoc ate Just ce 'ha rman, %h rd D v s on %E$():)%A()/N +ursuant to &ect on 1<, Art cle C$$$ of the 'onst tut on, and the D v s on 'ha rmanJs Attestat on, t s hereby cert f ed that the conclus ons n the above Dec s on had been reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. 5)#A$)/ G. !A*)!E, J$.

'h ef Just ce

:ootnotes
1

"ollo, pp. 6@21.

$d., pp. 24@<<. &eventeenth D v s on. +enned by Just ce "oberto A. Earr os /D v s on cha rman0 and concurred n by Just ces E enven do !. "eyes and Edgardo 7. &und am /members0.
<

$d., pp. 18<@128. $d., p. 124. ' tat ons om tted. Assa led Dec s on, pp. 8@2I rollo, pp. 26@<0.

>

%he case 9as deemed subm tted for dec s on on &eptember 6, 200<, upon rece pt by th s 'ourt of pet t onersJ Memorandum, s gned by Atty. !eonc o +. 7errer. "espondentsJ Memorandum, s gned by Atty. $r neo #. 'alderon, 9as rece ved by the 'ourt on &eptember 8, 200<.
2

+et t onerJs Memorandum, pp. 5@10. Dr g nal n uppercase.

.e#allos v. :ntestate 5state of the %ate 5migdio Mercado, 4<0 &'"A <2<, <<1, May 26, 2004 /c t ng!orromeo v. Sun, <28 +h l. 858, Dctober 22, 1555I 2o =ng v. .A, 184 &'"A 220, &eptember 24, 1562.0.
5

Art cle 16>6 of the Ne9 ' v l 'ode.

10

Manila Memorial $ar' .emetery, :nc. v. %insangan, #" No. 181<15, November 22, 2004I Spouses Fu 5ng .ho v. $an American 6orld Air&ays :nc., <68 +h l. 48<, 4>8, March 22, 2000 /c t ng %olent no, .ivil .ode of the $hilippines, p. <5>, Col. C, 1552 ed.0.
11

Dominion :nsurance .orporation v. .A, 42> +h l. >20, >2>, 7ebruary >, 2002I 4ictorias Milling .o., :nc. v. .A, <65 +h l. 164, 15>, June 15, 2000.
12

4ictorias Milling .o., :nc. v. .A, supra, p. 152. %iton"ua v. 8ernandez, 422 &'"A 426, 45<, Apr l 14, 2004.

1<

14

4ictorias Milling .o., :nc. v. .A, supra, p. 15>I %im v. .A, <21 +h l. 262, 254, December 15, 1558 /c t ng$eople v. Fa#ut, 2> &'"A >24, Apr l 25, 15220.
18

,&E'. 2. $arties in interest. < A real party n nterest s the party 9ho stands to be benef ted or n-ured by the -udgment n the su t, or the party ent tled to the ava ls of the su t. 3nless other9 se author Aed by la9 or these "ules, every act on must be prosecuted or defended n the name of the real party n nterest.,

1>

,&E'. <1. :ndorsementG ho& made. < %he ndorsement must be 9r tten on the nstrument tself or upon a paper attached thereto. %he s gnature of the ndorser, 9 thout add t onal 9ords, s a suff c ent ndorsement., &E'. ><. 6hen a person deemed indorser. @ A person plac ng h s s gnature upon an nstrument other9 se than as maFer, dra9er, or acceptor, s deemed to be ndorser unless he clearly nd cates by appropr ate 9ords h s ntent on to be bound n some other capac ty.,
12

.>>, d.

16

Metropol (!acolod* 8inancing & :nvestment .orp. v. Sam#o' Motors .ompany , 208 +h l. 286, 2>2, 7ebruary 26, 156<.
15

.2, "ule < of the "ules of 'ourt.

$epu lic of t-e +-ilippines S&+$E'E %/&$( 'anila SE%/N! !)*)S)/N

G.$. No. 111420 June 1<, 3... *)%(/$)AS ')##)NG %/., )N%., petitioner, As. %/&$( /: A++EA#S and %/NS/#)!A(E! S&GA$ %/$+/$A()/N, respondents.

E&)S&'9)NG, J.: 9efore us is a petition for reAieF on certiorari under $ule ;2 of t-e $ules of %ourt assailin" t-e decision of t-e %ourt of Appeals dated :e ruary 3;, 1<<;, in %A7G.$. %* No. 41111, as Fell as t-e respondent court's resolution of Septem er 4., 1<<; modifyin" said decision. 9otdecision and resolution amended t-e Bud"ment dated :e ruary 14, 1<<1, of t-e $e"ional (rial %ourt of 'aGati %ity, 9ranc- 1;1, in %iAil %ase No. <.711=.1wphi1.nt

(-e facts of t-is case as found as folloFs,

ot- t-e trial and appellate courts are

St. (-erese 'erc-andisin" C-ereafter S('D re"ularly ou"-t su"ar from petitioner *ictorias 'illin" %o., )nc., C*'%D. )n t-e course of t-eir dealin"s, petitioner issued seAeral S-ippin" #istH!eliAery $eceipts CS#!$sD to S(' as proof of purc-ases. Amon" t-ese Fas S#!$ No. 131;', F-ic- "aAe rise to t-e instant case. !ated /cto er 10, 1<=<, S#!$ No. 131;' coAers 32,... a"s of su"ar. Eac- a" contained 2. Gilo"rams and priced at +04=... per a" as Iper sales order *'% 'arGetin" No. .;3 dated /cto er 10, 1<=<.I 1 (-e transaction it coAered Fas a Idirect sale.I 3 (-e S#!$ also contains an additional note F-icreads, Isu Bect for CsicD aAaila ility of a CsicD stocG at NAWA%/ CFare-ouseD.I 4 /n /cto er 32, 1<=<, S(' sold to priAate respondent %onsolidated Su"ar %orporation C%S%D its ri"-ts in S#!$ No. 131;' for +1;,12.,....... %S% issued one c-ecG dated /cto er 32, 1<=< and t-ree c-ecGs postdated NoAem er 14, 1<=< in payment. (-at same day, %S% Frote petitioner t-at it -ad een aut-oriJed y S(' to Fit-draF t-e su"ar coAered y S#!$ No. 131;'. Enclosed in t-e letter Fere a copy of S#!$ No. 131;' and a letter of aut-ority from S(' aut-oriJin" %S% Ito Fit-draF for and in our e-alf t-e refined su"ar coAered y S-ippin" #istH!eliAery $eceipt7$efined Su"ar CS!$D No. 131; dated /cto er 10, 1<=< in t-e total Kuantity of 32,... a"s.I ; /n /cto er 31, 1<=<, S(' issued 10 c-ecGs in t-e total amount of +41,<..,...... Fit- petitioner as payee. (-e latter, in turn, issued /fficial $eceipt No. 441;4 dated /cto er 31, 1<=< acGnoFled"in" receipt of t-e said c-ecGs in payment of 2.,... a"s. Aside from S#!$ No. 131;', said c-ecGs also coAered S#!$ No. 1314. +riAate respondent %S% surrendered S#!$ No. 131;' to t-e petitioner's NAWA%/ Fare-ouse and Fas alloFed to Fit-draF su"ar. 5oFeAer, after 3,... a"s -ad een released, petitioner refused to alloF furt-er Fit-draFals of su"ar a"ainst S#!$ No. 131;'. %S% t-en sent petitioner a letter dated January 34, 1<<. informin" it t-at S#!$ No. 131;' -ad een Isold and endorsedI to it ut t-at it -ad een refused furt-er Fit-draFals of su"ar from petitioner's Fare-ouse despite t-e fact t-at only 3,... a"s -ad een Fit-draFn. 2 %S% t-us inKuired F-en it Fould e alloFed to Fit-draF t-e remainin" 34,... a"s. /n January 41, 1<<., petitioner replied t-at it could not alloF any furt-er Fit-draFals of su"ar a"ainst S#!$ No. 131;' ecause S(' -ad already Fit-draFn all t-e su"ar coAered y t-e cleared c-ecGs. 0 /n 'arc- 3, 1<<., %S% sent petitioner a letter demandin" t-e release of t-e alance of 34,... a"s. SeAen days later, petitioner reiterated t-at all t-e su"ar correspondin" to t-e amount of S(''s cleared c-ecGs -ad een fully Fit-draFn and -ence, t-ere Fould e no more deliAeries of t-e commodity to S(''s account. +etitioner also noted t-at %S% -ad represented itself to e

S(''s a"ent as it -ad Fit-draFn t-e 3,... 131;' Ifor and in e-alfI of S('.

a"s a"ainst S#!$ No.

/n April 31, 1<<., %S% filed a complaint for specific performance, docGeted as %iAil %ase No. <.7111=. !efendants Fere (eresita N" Sy Cdoin" usiness under t-e name of St. (-erese 'erc-andisin"D and -erein petitioner. Since t-e former could not e serAed Fit- summons, t-e case proceeded only a"ainst t-e latter. !urin" t-e trial, it Fas discoAered t-at (eresita N" Go F-o testified for %S% Fas t-e same (eresita N" Sy F-o could not e reac-ed t-rou"- summons. 1 %S%, -oFeAer, did not ot-er to pursue its case a"ainst -er, ut instead used -er as its Fitness. %S%'s complaint alle"ed t-at S(' -ad fully paid petitioner for t-e su"ar coAered y S#!$ No. 131;'. (-erefore, t-e latter -ad no Bustification for refusin" deliAery of t-e su"ar. %S% prayed t-at petitioner e ordered to deliAer t-e 34,... a"s coAered y S#!$ No. 131;' and sou"-t t-e aFard of +1,1.;,...... in unrealiJed profits, +4,...,...... as eLemplary dama"es, +3,3..,...... as attorney's fees and liti"ation eLpenses. +etitioner's primary defense a quo Fas t-at it Fas an unpaid seller for t-e 34,... a"s. = Since S(' -ad already draFn in full all t-e su"ar correspondin" to t-e amount of its cleared c-ecGs, it could no lon"er aut-oriJe furt-er deliAery of su"ar to %S%. +etitioner also contended t-at it -ad no priAity of contract Fit- %S%. +etitioner eLplained t-at t-e S#!$s, F-ic- it -ad issued, Fere not documents of title, ut mere deliAery receipts issued pursuant to a series of transactions entered into etFeen it and S('. (-e S#!$s prescri ed deliAery of t-e su"ar to t-e party specified t-erein and did not aut-oriJe t-e transfer of said party's ri"-ts and interests. +etitioner also alle"ed t-at %S% did not pay for t-e S#!$ and Fas actually S(''s co7conspirator to defraud it t-rou"- a misrepresentation t-at %S% Fas an innocent purc-aser for Aalue and in "ood fait-. +etitioner t-en prayed t-at %S% e ordered to pay it t-e folloFin" sums, +1.,...,...... as moral dama"es; +1.,...,...... as eLemplary dama"es; and +1,2..,...... as attorney's fees. +etitioner also prayed t-at cross7defendant S(' e ordered to pay it +1.,...,...... in eLemplary dama"es, and +1,2..,...... as attorney's fees. Since no settlement Fas reac-ed at pre7trial, t-e trial court -eard t-e case on t-e merits. As earlier stated, t-e trial court rendered its Bud"ment faAorin" priAate respondent %S%, as folloFs, W5E$E:/$E, in AieF of t-e fore"oin", t-e %ourt -ere y renders Bud"ment in faAor of t-e plaintiff and a"ainst defendant *ictorias 'illin" %ompany,

1D /rderin" defendant *ictorias 'illin" %ompany to deliAer to t-e plaintiff 34,... a"s of refined su"ar due under S#!$ No. 131;; 3D /rderin" defendant *ictorias 'illin" %ompany to pay t-e amount of +<3.,...... as unrealiJed profits, t-e amount of +=..,...... as eLemplary dama"es and t-e amount of +1,421,......, F-ic- is 1.M of t-e acKuisition Aalue of t-e undeliAered a"s of refined su"ar in t-e amount of +14,21.,......, as attorney's fees, plus t-e costs. S/ /$!E$E!. < )t made t-e folloFin" o serAations, N(O-e testimony of plaintiff's Fitness (eresita N" Go, t-at s-e -ad fully paid t-e purc-ase price of +12,<2.,...... of t-e 32,... a"s of su"ar ou"-t y -er coAered y S#!$ No. 131; as Fell as t-e purc-ase price of +12,<2.,...... for t-e 32,... a"s of su"ar ou"-t y -er coAered y S#!$ No. 1314 on t-e same date, /cto er 10, 1<=< Cdate of t-e tFo S#!$sD is duly supported y EL-i its % to %712 inclusiAe F-ic- are post7dated c-ecGs dated /cto er 31, 1<=< issued y St. (-erese 'erc-andisin" in faAor of *ictorias 'illin" %ompany at t-e time it purc-ased t-e 2.,... a"s of su"ar coAered y S#!$ No. 1314 and 131;. Said c-ecGs appear to -aAe een -onored and duly credited to t-e account of *ictorias 'illin" %ompany ecause on /cto er 31, 1<=< *ictorias 'illin" %ompany issued official receipt no. 4;14; in faAor of St. (-erese 'erc-andisin" for t-e amount of +41,<..,...... CEL-i its 9 and 971D. (-e testimony of (eresita N" Go is furt-er supported y EL-i it :, F-ic- is a computer printout of defendant *ictorias 'illin" %ompany s-oFin" t-e Kuantity and Aalue of t-e purc-ases made y St. (-erese 'erc-andisin", t-e S#!$ no. issued to coAer t-e purc-ase, t-e official receipt no. and t-e status of payment. )t is clear in EL-i it I:I t-at Fit- respect to t-e su"ar coAered y S#!$ No. 131; t-e same -as een fully paid as indicated y t-e Ford IclearedI appearin" under t-e column of Istatus of payment.I /n t-e ot-er -and, t-e claim of defendant *ictorias 'illin" %ompany t-at t-e purc-ase price of t-e 32,... a"s of su"ar purc-ased y St. (-erese 'erc-andisin" coAered y S#!$ No. 131; -as not een fully paid is supported only y t-e testimony of Arnulfo %aintic, Fitness for defendant *ictorias 'illin" %ompany. (-e %ourt notes t-at t-e testimony of Arnulfo %aintic is merely a sFeepin" arren assertion t-at t-e purc-ase price -as not een fully paid and is not corro orated y any positiAe eAidence. (-ere is an insinuation y Arnulfo %aintic in -is testimony t-at t-e postdated c-ecGs issued y t-e uyer in payment of t-e purc-ase price Fere dis-onored. 5oFeAer, said Fitness failed to present in %ourt any dis-onored c-ecG or any

replacement c-ecG. Said Fitness liGeFise failed to present any anG record s-oFin" t-at t-e c-ecGs issued y t-e uyer, (eresita N" Go, in payment of t-e purc-ase price of t-e su"ar coAered y S#!$ No. 131; Fere dis-onored. 1. +etitioner appealed t-e trial court's decision to t-e %ourt of Appeals. /n appeal, petitioner aAerted t-at t-e dealin"s etFeen it and S(' Fere part of a series of transactions inAolAin" only one account or one "eneral contract of sale. +ursuant to t-is contract, S(' or any of its aut-oriJed a"ents could Fit-draF a"s of su"ar only a"ainst cleared c-ecGs of S('. S#!$ No. 3131;' Fas only one of 33 S#!$s issued to S(' and since t-e latter -ad already Fit-draFn its full Kuota of su"ar under t-e said S#!$, %S% Fas already precluded from seeGin" deliAery of t-e 34,... a"s of su"ar. +riAate respondent %S% countered t-at t-e su"ar purc-ases inAolAin" S#!$ No. 131;' Fere separate and independent transactions and t-at t-e details of t-e series of purc-ases Fere contained in a sin"le statement Fit- a consolidated summary of cleared c-ecG payments and su"ar stocG Fit-draFals ecause t-is a more conAenient system t-an issuin" separate statements for eac- purc-ase. (-e appellate court considered t-e folloFin" issues, CaD W-et-er or not t-e transaction etFeen petitioner and S(' inAolAin" S#!$ No. 131;' Fas a separate, independent, and sin"le transaction; C D W-et-er or not %S% -ad t-e capacity to sue on its oFn on S#!$ No. 131;'; and CcD W-et-er or not %S% as uyer from S(' of t-e ri"-ts to 32,... a"s of su"ar coAered y S#!$ No. 131;' could compel petitioner to deliAer 34,... a"s alle"edly unFit-draFn. /n :e ruary 3;, 1<<;, t-e %ourt of Appeals rendered its decision modifyin" t-e trial court's Bud"ment, to Fit, W5E$E:/$E, t-e %ourt -ere y '/!):)ES t-e assailed Bud"ment and order defendant7appellant to, 1D !eliAer to plaintiff7appellee 13,2=0 y S#!$ No. 131;'; a"s of su"ar coAered

3D +ay to plaintiff7appellee +1<3,<1=... F-ic- is 1.M of t-e Aalue of t-e undeliAered a"s of refined su"ar, as attorneys fees; 4D +ay t-e costs of suit. S/ /$!E$E!.
11

9ot- parties t-en seasona ly filed separate motions for reconsideration. )n its resolution dated Septem er 4., 1<<;, t-e appellate court modified its decision to read,

W5E$E:/$E, t-e %ourt -ere y modifies t-e assailed Bud"ment and orders defendant7appellant to, C1D !eliAer to plaintiff7appellee 34,... under S#!$ No. 131;'; C3D +ay costs of suit. S/ /$!E$E!.
13

a"s of refined su"ar

(-e appellate court eLplained t-e rationale for t-e modification as folloFs, (-ere is merit in plaintiff7appellee's position. EL-i it I:I We relied upon in fiLin" t-e num er of a"s of su"ar F-ic- remained undeliAered as 13,2=0 cannot e made t-e asis for suc- a findin". (-e rule is eLplicit t-at courts s-ould consider t-e eAidence only for t-e purpose for F-ic- it Fas offered. C+eople A. A alos, et al, 1 %A $ep 1=4D. (-e rationale for t-is is to afford t-e party a"ainst F-om t-e eAidence is presented to o Bect t-ereto if -e deems it necessary. +laintiff7appellee is, t-erefore, correct in its ar"ument t-at EL-i it I:I F-ic- Fas offered to proAe t-at c-ecGs in t-e total amount of +12,<2.,...... -ad een cleared. C:ormal /ffer of EAidence for +laintiff; $ecords p. 2=D cannot e used to proAe t-e proposition t-at 13,2=0 a"s of su"ar remained undeliAered. (estimonial eAidence C(estimonies of (eresita N" N(SN, 1. /cto er 1<<., p. 44O and 'arianito #. Santos N(SN, 11 /cto er 1<<., pp. 10, 1=, and 40OD presented y plaintiff7 appellee Fas to t-e effect t-at it -ad Fit-draFn only 3,... a"s of su"ar from S#!$ 131;', after F-ic- it Fas not alloFed to Fit-draF anymore. !ocumentary eAidence CEL-i it ), Id., p. 1=, EL-i it K, Id., p. =.D s-oF t-at plaintiff7 appellee -ad sent demand letters to defendant7appellant asGin" t-e latter to alloF it to Fit-draF t-e remainin" 34,... a"s of su"ar from S#!$ 131;'. !efendant7 appellant, on t-e ot-er -and, alle"ed t-at su"ar deliAery to t-e S(' corresponded only to t-e Aalue of cleared c-ecGs; and t-at all su"ar corresponded to cleared c-ecGs -ad een Fit-draFn. !efendant7appellant did not re ut plaintiff7 appellee's assertions. )t did not present eAidence to s-oF -oF many a"s of su"ar -ad een Fit-draFn a"ainst S#!$ No. 131;', precisely ecause of its t-eory t-at all sales in Kuestion Fere a series of one sin"le transaction and Fit-draFal of su"ar depended on t-e clearin" of c-ecGs paid t-erefor.1wphi1.nt After a second looG at t-e eAidence, We see no reason to oAerturn t-e findin"s of t-e trial court on t-is point. 14

5ence, t-e instant petition, positin" t-e folloFin" errors as "rounds for reAieF, 1. (-e %ourt of Appeals erred in not -oldin" t-at S(''s and priAate respondent's specially informin" petitioner t-at respondent Fas aut-oriJed y uyer S(' to Fit-draF su"ar a"ainst S#!$ No. 131;' !or and in our "#$M% &ehal!. Cemp-asis in t-e ori"inalD priAate respondent's Fit-draFin" 3,... a"s of su"ar for S(', and S(''s empoFerin" ot-er persons as its a"ents to Fit-draF su"ar a"ainst t-e same S#!$ No. 131;', rendered respondent, liGe t-e ot-er persons, an a"ent of S(' as -eld in Rallos '. Feli( )o *han + Realt, *orp., =1 S%$A 323, and precluded it from su seKuently claimin" and proAin" ein" an assi"nee of S#!$ No. 131;' and from suin" y itself for its enforcement ecause it Fas conclusiAely presumed to e an a"ent CSec. 3, $ule 141, $ules of %ourtD and estopped from doin" so. CArt. 1;41, %iAil %odeD. 3. (-e %ourt of Appeals erred in manifestly and ar itrarily i"norin" and disre"ardin" certain releAant and undisputed facts F-ic-, -ad t-ey een considered, Fould -aAe s-oFn t-at petitioner Fas not lia le, eLcept for 0< a"s of su"ar, and F-ic- Fould Bustify reAieF of its conclusion of facts y t-is 5onora le %ourt. 4. (-e %ourt of Appeals misapplied t-e laF on compensation under Arts. 131<, 13=2 and 1030 of t-e %iAil %ode F-en it ruled t-at compensation applied only to credits from one S#!$ or contract and not to t-ose from two or -ore distinct contracts etFeen t-e same parties; and erred in denyin" petitioner's ri"-t to setoff all its credits arisin" prior to notice of assi"nment from ot-er sales or S#!$s a"ainst priAate respondent's claim as assi"nee under S#!$ No. 131;', so as to eLtin"uis- or reduce its lia ility to 0< a"s, ecause t-e laF on compensation applies precisel, to two or -ore distinct contracts &etween the sa-e parties Cemp-asis in t-e ori"inalD. ;. (-e %ourt of Appeals erred in concludin" t-at t-e settlement or liKuidation of accounts in EL-. I:I etFeen petitioner and S(', respondent's admission of its alance, and S(''s acKuiescence t-ereto y silence for almost one year did not render EL-. I:I an account stated and its alance indin". 2. (-e %ourt of Appeals erred in not -oldin" t-at t-e conditions of t-e assi"ned S#!$ No. 131;, namely, CaD its su Bect matter ein" "eneric, and C D t-e sale of su"ar ein" su Bect to its aAaila ility at t-e NaFaco Fare-ouse, made t-e sale conditional and preAented S(' or priAate respondent from acKuirin" title to t-e su"ar; and t-e non7 aAaila ility of su"ar freed petitioner from furt-er o li"ation.

0. (-e %ourt of Appeals erred in not -oldin" t-at t-e Iclean -andsI doctrine precluded respondent from seeGin" Budicial reliefs CsicD from petitioner, its only remedy ein" a"ainst its assi"nor.I 1; Simply stated, t-e issues noF to e resolAed are,

C1D W-et-er or not t-e %ourt of Appeals erred in not rulin" t-at %S% Fas an a"ent of S(' and -ence, estopped to sue upon S#!$ No. 131;' as an assi"nee. C3D W-et-er or not t-e %ourt of Appeals erred in applyin" t-e laF on compensation to t-e transaction under S#!$ No. 131;' so as to preclude petitioner from offsettin" its credits on t-e ot-er S#!$s. C4D W-et-er or not t-e %ourt of Appeals erred in not rulin" t-at t-e sale of su"ar under S#!$ No. 131;' Fas a conditional sale or a contract to sell and -ence freed petitioner from furt-er o li"ations. C;D W-et-er or not t-e %ourt of Appeals committed an error of laF in not applyin" t-e Iclean -ands doctrineI to preclude %S% from seeGin" Budicial relief. (-e issues Fill e discussed in seriati-.

Anent t-e first issue, Fe find from t-e records t-at petitioner raised t-is issue for t-e first time on appeal. )t is settled t-at an issue F-icFas not raised durin" t-e trial in t-e court eloF could not e raised for t-e first time on appeal as to do so Fould e offensiAe to t-e asic rules of fair play, Bustice, and due process. 12 Nonet-eless, t-e %ourt of Appeals opted to address t-is issue, -ence, noF a matter for our consideration. +etitioner -eaAily relies upon S(''s letter of aut-ority alloFin" %S% to Fit-draF su"ar a"ainst S#!$ No. 131;' to s-oF t-at t-e latter Fas S(''s a"ent. (-e pertinent portion of said letter reads, (-is is to aut-oriJe %onsolidated Su"ar %orporation or its representatiAe to Fit-draFn !or and in our &ehal! Cstress suppliedD t-e refined su"ar coAered y S-ippin" #istH!eliAery $eceipt P $efined Su"ar CS!$D No. 131; dated /cto er 10, 1<=< in t-e total Kuantity of 32,... a"s. 10 (-e %iAil %oed defines a contract of a"ency as folloFs, Art. 1=0=. 9y t-e contract of a"ency a person inds -imself to render some serAice or to do somet-in" in representation

or on e-alf of anot-er, Fit- t-e consent or aut-ority of t-e latter. )t is clear from Article 1=0= t-at t-e asis of a"ency is representation. 11 /n t-e part of t-e principal, t-ere must e an actual intention to appoint 1= or an intention naturally infera le from -is Fords or actions; 1< and on t-e part of t-e a"ent, t-ere must e an intention to accept t-e appointment and act on it, 3.and in t-e a sence of sucintent, t-ere is "enerally no a"ency. 31 /ne factor F-ic- most clearly distin"uis-ed a"ency from ot-er le"al concepts is control; one person Q t-e a"ent Q a"rees to act under t-e control or direction of anot-er Q t-e principal. )ndeed, t-e Aery Ford Ia"encyI -as come to connote control y t-e principal. 33 (-e control factor, more t-an any ot-er, -as caused t-e courts to put contracts etFeen principal and a"ent in a separate cate"ory. 34 (-e %ourt of Appeals, in findin" t-at %%S, Fas not an a"ent of S(', opined, (-is %ourt -as ruled t-at F-ere t-e relation of a"ency is dependent upon t-e acts of t-e parties, t-e laF maGes no presumption of a"ency, and it is alFays a fact to e proAed, Fit- t-e urden of proof restin" upon t-e persons alle"in" t-e a"ency, to s-oF not only t-e fact of its eListence, ut also its nature and eLtent CAntonio As. EnriKueJ N%AO, 21 /.G. 4240O. 5ere, defendant7appellant failed to sufficiently esta lis-ed t-e eListence of an a"ency relation etFeen plaintiff7appellee and S('. (-e fact alone t-at it CS('D -ad aut-oriJed Fit-draFal of su"ar y plaintiff7appellee Ifor and in our CS(''sD e-alfI s-ould not e eyed as pointin" to t-e eListence of an a"ency relation. . . )t s-ould e AieFed in t-e conteLt of all t-e circumstances o tainin". Alt-ou"- it Fould seem S(' represented plaintiff7appellee as ein" its a"ent y t-e use of t-e p-rase Ifor and in our CS(''sD e-alfI t-e matter Fas cleared F-en on 34 January 1<<., plaintiff7appellee informed defendant7appellant t-at S#!:$ No. 131;' -ad een Isold and endorsedI to it y S(' CEL-i it ), $ecords, p. 1=D. :urt-er, plaintiff7appellee -as s-oFn t-at t-e 32,... a"s of su"ar coAered y t-e S#!$ No. 131;' Fere sold and transferred y S(' to it. . . A conclusion t-at t-ere Fas a Aalid sale and transfer to plaintiff7appellee may, t-erefore, e made t-us capacitatin" plaintiff7appellee to sue in its oFn name, Fit-out need of Boinin" its imputed principal S(' as co7plaintiff. 3; )n t-e instant case, it appears plain to us t-at priAate respondent %S% Fas a uyer of t-e S#!:$ form, and not an a"ent of S('. +riAate respondent %S% Fas not su Bect to S(''s control. (-e Kuestion of F-et-er a contract is one of sale or a"ency depends on t-e intention of t-e parties as "at-ered from t-e F-ole scope and effect of t-e lan"ua"e employed. 32 (-at t-e aut-oriJation "iAen to %S% contained t-e p-rase Ifor and in our CS(''sD e-alfI did not esta lis- an a"ency. &ltimately, F-at is decisiAe is t-e intention of t-e parties. 30 (-at no a"ency Fas meant to e esta lis-ed y t-e %S% and S(' is clearly s-oFn y %S%'s communication to petitioner t-at S#!$ No. 131;' -ad een Isold ad endorsedI to it. 31 (-e use of t-e Ford Isold and

endorsedI means t-at S(' and %S% intended a contract of sale, and not an a"ency. 5ence, on t-is score, no error Fas committed y t-e respondent appellate court F-en it -eld t-at %S% Fas not S(''s a"ent and could independently sue petitioner. /n t-e second issue, proceedin" from t-e t-eory t-at t-e transactions entered into etFeen petitioner and S(' are ut serial parts of one account, petitioner insists t-at its de t -as een offset y its claim for S(''s unpaid purc-ases, pursuant to Article 131< of t-e %iAil %ode. 3= 5oFeAer, t-e trial court found, and t-e %ourt of Appeals concurred, t-at t-e purc-ase of su"ar coAered y S#!$ No. 131;' Fas a separate and independent transaction; it Fas not a serial part of a sin"le transaction or of one account contrary to petitioner's insistence. EAidence on record s-oFs, Fit-out ein" re utted, t-at petitioner -ad een paid for t-e su"ar purc-ased under S#!$ No. 131;'. +etitioner clearly -ad t-e o li"ation to deliAer said commodity to S(' or its assi"nee. Since said su"ar -ad een fully paid for, petitioner and %S%, as assi"nee of S(', Fere not mutually creditors and de tors of eacot-er. No reAersi le error could t-ere y e imputed to respondent appellate court F-en it refused to apply Article 131< of t-e %iAil %ode to t-e present case. $e"ardin" t-e t-ird issue, petitioner contends t-at t-e sale of su"ar under S#!$ No. 131;' is a conditional sale or a contract to sell, Fittitle to t-e su"ar still remainin" Fit- t-e Aendor. NoteFort-y, S#!$ No. 131;' contains t-e folloFin" terms and conditions, )t is understood and a"reed t-at y payment y uyerHtrader of refined su"ar andHor receipt of t-is document y t-e uyerHtrader personally or t-rou"- a representatiAe, title to refined su"ar is transferred to uyerHtrader and deliAery to -imHit is deemed effected and completed Cstress suppliedD and uyerHtrader assumes full responsi ility t-erefore. . . 3< (-e aforeKuoted terms and conditions clearly s-oF t-at petitioner transferred title to t-e su"ar to t-e uyer or -is assi"nee upon payment of t-e purc-ase price. Said terms clearly esta lis- a contract of sale, not a contract to sell. +etitioner is noF estopped from alle"in" t-e contrary. (-e contract is t-e laF etFeen t-e contractin" parties. 4. And F-ere t-e terms and conditions so stipulated are not contrary to laF, morals, "ood customs, pu lic policy or pu lic order, t-e contract is Aalid and must e up-eld. 41 5aAin" transferred title to t-e su"ar in Kuestion, petitioner is noF o li"ed to deliAer it to t-e purc-aser or its assi"nee. As to t-e fourt- issue, petitioner su mits t-at S(' and priAate respondent %S% -aAe entered into a conspiracy to defraud it of its su"ar. (-is conspiracy is alle"edly eAidenced y, CaD t-e fact t-at S(''s sellin" price to %S% Fas eloF its purc-asin" price; C D %S%'s refusal to pursue its case a"ainst (eresita N" Go; and CcD t-e aut-ority "iAen y t-e latter to ot-er persons to Fit-draF su"ar a"ainst S#!$ No. 131;' after s-e -ad sold -er ri"-ts under said S#!$ to %S%. +etitioner prays

t-at t-e doctrine of Iclean -andsI s-ould e applied to preclude %S% from seeGin" Budicial relief. 5oFeAer, despite careful scrutiny, Fe find -ere t-e records are of conAincin" eAidence F-atsoeAer to support t-e petitioner's alle"ations of fraud. We are noF constrained to deem t-is matter purely speculatiAe, ereft of concrete proof. W5E$E:/$E, t-e instant petition is !EN)E! for lacG of merit. %osts a"ainst petitioner. S/ /$!E$E!.1wphi1.nt .ellosillo/ Mendo0a/ .uena and De 1eon/ Jr./ JJ./ concur. :ootnotes 1 $ecords, p. 0.. 3 I&id. 4 I&id. ; #upra Note 1, at <. 2 Id. at 11. 0 Id. at 13. 1 (SN, /cto er 1., 1<<., p. 10. = #upra Note 1, at 11.. < %A Rollo, p. 14;. 1. Id. at 1417143. 11 Rollo, p. =<. 13 Id. at <2. 14 Id. at <47<;. 1; Id. at 3;. 12 Spouses :elipe and )rma 9uRa" A. %ourt of Appeals, 4.4 S%$A 2<1, 2<0 C1<<<D; $oman %at-olic Arc- is-op of 'anila A. %ourt of Appeals, 440 +-il. 14=, 1;< C1<<1D citin2 GeAero A. )ntermediate Appellate %ourt, 1=< S%$A 3.1, 3.= C1<<.D. 10 $ecords, p. 0=. 11 9ordador A. #uJ, 3=4 S%$A 41;, 4=3 C1<<1D.

1= %onnell A. 'c#ou"-lin, 3= /r. 34.; ;3 +. 31=. 1< 5alladay A. &nderFood, <. )ll. App. 14.. 3. )nternal (rust %o. A. 9rid"es, 21 :. 124. 31 Security %o. A. Gray eal, =2 )oFa 2;4, 23 N.W. ;<1. 33 $/S%/E (. S(E::EN, AGEN%8 Q +A$NE$S5)+ )N A N&(S5EE# C1<11D 4.741. 34 #upra, at 44. 3; #upra Note 11, at =17==. 32 9essin" A. +rince, 23 %al. App. 1<., 1<= +. ;33; Greenlease #ied 'otors A. Sadler, 310 )oFa 4.3, 3;< N.W. 4=4; Salis ury A. 9rooGs, =1 W *a. 344, <; S.E. 111. 30 State A. +arGer, 113 %onn. 4<, 121 A. 432; $ucGs79randt %onst. %o. A. +rice, 102 /Gl. 11=, 34 +3d 0<., cert den 3<1 &S 01<, 1= #. Ed 1.01, 2; S. %t. 230. 31 #upra Note 2. 3= Art. 131<. )n order t-at compensation may is necessary, e proper, it

C1D (-at eac- one of t-e o li"ors e ound principally and t-at -e e at t-e same time a principal creditor of t-e ot-er, C3D (-at ot- de ts consist in a sum of money, or if t-e t-in"s due are consuma le, t-ey e of t-e same Gind, and also of t-e same Kuality if t-e latter -as een stated; C4D (-at t-e tFo de ts C;D (-at t-ey e due;

e liKuidated and demanda le;

C2D (-at oAer neit-er of t-em t-ere e any retention or controAersy, commenced y t-ird persons and communicated in due time to t-e de tor. 3< #upra Note 1. 4. %)*)# %/!E, art. 14.=; $iJal %ommercial 9anGin" %orp. A. %ourt of Appeals, 11= S%$A 14<, 1;; C1<=<D; Escano A. %ourt of Appeals, 1.. S%$A 1<1, 3.3 C1<=.D.

41 %)*)# %/!E, art. 14.0; #e"arda Ko- A. /n"siaco, 40 +-il. 1=2, 1<4 C1<11D; )caJa, et al. A. /rte"a, 2 +-il. 100, 10< C1<.2D.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. 1;<424 June 30, 3..0

J/%E#8N 9. !/#ES, +et t oner, vs. 'A. A&$A ()NA ANGE#ES, "espondent. DE'$&$DN A&S($)A7'A$()NE6, J.: %h s refers to the +et t on for "ev e9 on 'ert orar under "ule 48 of the "ules of 'ourt =uest on ng the Dec s on1dated Apr l <0, 2001 of the 'ourt of Appeals /'A0 n '.A.@#.". 'C No. >>568, 9h ch reversed the Dec s on dated July 25, 1556 of the "eg onal %r al 'ourt /"%'0, Eranch 21, ' ty of Man laI and the 'A "esolut on2 dated August >, 2001 9h ch den ed pet t onerJs Mot on for "econs derat on. %he antecedents of the case follo9? Dn Apr l 1, 1552, Ma. Aura % na Angeles /respondent0 f led 9 th the "%' a compla nt for &pec f c +erformance 9 th Damages aga nst Jocelyn E. Doles /pet t oner0, docFeted as ' v l 'ase No. 52@6221>. "espondent alleged that pet t oner 9as ndebted to the former n the concept of a personal loan amount ng to +408,4<0.00 represent ng the pr nc pal amount and nterestI that on Dctober 8, 155>, by v rtue of a ,Deed of Absolute &ale,, < pet t oner, as seller, ceded to respondent, as buyer, a parcel of land, as 9ell as the mprovements thereon, 9 th an area of 42 s=uare meters, covered by %ransfer 'ert f cate of % tle No. <628<2,4 and located at a subd v s on pro-ect Fno9n as 'amella %o9nhomes &orrente n Eacoor, 'av te, n order to sat sfy her personal loan 9 th respondentI that th s property 9as mortgaged to Nat onal Bome Mortgage 7 nance 'orporat on /NBM7'0 to secure pet t onerJs loan n the sum of +<<2,080.00 9 th that ent tyI that as a cond t on for the forego ng sale, respondent shall assume the undue balance of the mortgage and pay the monthly amort Aat on of +4,246.11 for the rema nder of the 28 years 9h ch began on &eptember <, 1554I that the property 9as at that t me be ng occup ed by a tenant pay ng a monthly rent of +<,000.00I that upon ver f cat on 9 th the NBM7', respondent learned that pet t oner had ncurred arrearages amount ng to +2>,244.05, nclus ve of penalt es and nterestI that upon nform ng the pet t oner of her arrears, pet t oner den ed that she ncurred them and refused to

pay the sameI that desp te repeated demand, pet t oner refused to cooperate 9 th respondent to e1ecute the necessary documents and other formal t es re=u red by the NBM7' to effect the transfer of the t tle over the propertyI that pet t oner collected rent over the property for the month of January 1552 and refused to rem t the proceeds to respondentI and that respondent suffered damages as a result and 9as forced to l t gate. +et t oner, then defendant, 9h le adm tt ng some allegat ons n the 'ompla nt, den ed that she borro9ed money from respondent, and averred that from June to &eptember 1558, she referred her fr ends to respondent 9hom she Fne9 to be engaged n the bus ness of lend ng money n e1change for personal checFs through her cap tal st Arsen o +ua. &he alleged that her fr ends, namely, Lena da "omulo, %heresa Morat n, Jul a $nocenc o, C rg n a Jacob, and El Aabeth %omelden, borro9ed money from respondent and ssued personal checFs n payment of the loanI that the checFs bounced for nsuff c ency of fundsI that desp te her efforts to ass st respondent to collect from the borro9ers, she could no longer locate themI that, because of th s, respondent became fur ous and threatened pet t oner that f the accounts 9ere not settled, a cr m nal case 9 ll be f led aga nst herI that she 9as forced to ssue e ght checFs amount ng to +<80,000 to ans9er for the bounced checFs of the borro9ers she referredI that pr or to the ssuance of the checFs she nformed respondent that they 9ere not suff c ently funded but the latter nonetheless depos ted the checFs and for 9h ch reason they 9ere subse=uently d shonoredI that respondent then threatened to n t ate a cr m nal case aga nst her for v olat on of !atas $am#ansa !lg. 22I that she 9as forced by respondent to e1ecute an ,Absolute Deed of &ale, over her property n Eacoor, 'av te, to avo d cr m nal prosecut onI that the sa d deed had no val d cons derat onI that she d d not appear before a notary publ cI that the 'ommun ty %a1 'ert f cate number on the deed 9as not hers and for 9h ch respondent may be prosecuted for fals f cat on and per-uryI and that she suffered damages and lost rental as a result. %he "%' dent f ed the ssues as follo9s? f rst, 9hether the Deed of Absolute &ale s val dI secondI f val d, 9hether pet t oner s obl ged to s gn and e1ecute the necessary documents to effect the transfer of her r ghts over the property to the respondentI and th rd, 9hether pet t oner s l able for damages. Dn July 25, 1556, the "%' rendered a dec s on the d spos t ve port on of 9h ch states? (BE"E7D"E, prem ses cons dered, the 'ourt hereby orders the d sm ssal of the compla nt for nsuff c ency of ev dence. ( th costs aga nst pla nt ff. &D D"DE"ED. %he "%' held that the sale 9as vo d for lacF of cause or cons derat on? 8 +la nt ff AngelesJ adm ss on that the borro9ers are the fr ends of defendant Doles and further adm ss on that the checFs ssued by these borro9ers n payment of the loan obl gat on negates :s c; the cause or cons derat on of the contract of

sale e1ecuted by and bet9een pla nt ff and defendant. Moreover, the property s not solely o9ned by defendant as appear ng n Entry No. 5088 of %ransfer 'ert f cate of % tle No. <628<2 /Anne1 A, 'ompla nt0, thus? ,Entry No. 5088. &pec al +o9er of Attorney n favor of Jocelyn Doles cover ng the share of %eodor co Doles on the parcel of land descr bed n th s cert f cate of t tle by v rtue of the spec al po9er of attorney to mortgage, e1ecuted before the notary publ c, etc., %he rule under the ' v l 'ode s that contracts 9 thout a cause or cons derat on produce no effect 9hatsoever. /Art. 1<82, ' v l 'ode0. "espondent appealed to the 'A. $n her appeal br ef, respondent nterposed her sole ass gnment of error? %BE %"$A! 'D3"% E""ED $N D$&M$&&$N# %BE 'A&E A% EA" DN %BE #"D3ND D7 :s c; %BE DEED D7 &A!E EE%(EEN %BE +A"%$E& BA& ND 'DN&$DE"A%$DN D" $N&377$'$EN'H D7 EC$DEN'E.> Dn Apr l <0, 2001, the 'A promulgated ts Dec s on, the d spos t ve port on of 9h ch reads? (BE"E7D"E, $N C$E( D7 %BE 7D"E#D$N#, th s appeal s hereby #"AN%ED. %he Dec s on of the lo9er court dated July 25, 1556 s "ECE"&ED and &E% A&$DE. A ne9 one s entered order ng defendant@appellee to e1ecute all necessary documents to effect transfer of sub-ect property to pla nt ff@appellant 9 th the arrearages of the formerJs loan 9 th the NBM7', at the latterJs e1pense. No costs. &D D"DE"ED. %he 'A concluded that pet t oner 9as the borro9er and, n turn, 9ould ,re@lend, the amount borro9ed from the respondent to her fr ends. Bence, the Deed of Absolute &ale 9as supported by a val d cons derat on, 9h ch s the sum of money pet t oner o9ed respondent amount ng to +408,4<0.00, represent ng both pr nc pal and nterest. %he 'A tooF nto account the follo9 ng c rcumstances n the r ent rety? the supposed fr ends of pet t oner never presented themselves to respondent and that all transact ons 9ere made by and bet9een pet t oner and respondentI 2 that the money borro9ed 9as depos ted 9 th the banF account of the pet t oner, 9h le payments made for the loan 9ere depos ted by the latter to respondentJs banF accountI6 that pet t oner herself adm tted n open court that she 9as ,re@ lend ng, the money loaned from respondent to other nd v duals for prof tI 5 and that the documentary ev dence sho9s that the actual borro9ers, the fr ends of pet t oner, cons der her as the r cred tor and not the respondent. 10 7urthermore, the 'A held that the alleged threat or nt m dat on by respondent d d not v t ate consent, s nce the same s cons dered -ust or legal f made to enforce oneJs cla m through competent author ty under Art cle 1<<8 11of the ' v l

'odeI12 that 9 th respect to the arrearages of pet t oner on her monthly amort Aat on 9 th the NBM7' n the sum of +2>,244.05, the same shall be deemed part of the balance of pet t onerJs loan 9 th the NBM7' 9h ch respondent agreed to assumeI and that the amount of +<,000.00 represent ng the rental for January 1552 supposedly collected by pet t oner, as 9ell as the cla m for damages and attorneyJs fees, s den ed for nsuff c ency of ev dence. 1< Dn May 25, 2001, pet t oner f led her Mot on for "econs derat on 9 th the 'A, argu ng that respondent categor cally adm tted n open court that she acted only as agent or representat ve of Arsen o +ua, the pr nc pal f nanc er and, hence, she had no legal capac ty to sue pet t onerI and that the 'A fa led to cons der the fact that pet t onerJs father, 9ho co@o9ned the sub-ect property, 9as not mpleaded as a defendant nor 9as he ndebted to the respondent and, hence, she cannot be made to s gn the documents to effect the transfer of o9nersh p over the ent re property. Dn August >, 2001, the 'A ssued ts "esolut on deny ng the mot on on the ground that the forego ng matters had already been passed upon. Dn August 1<, 2001, pet t oner rece ved a copy of the 'A "esolut on. Dn August 26, 2001, pet t oner f led the present +et t on and ra sed the follo9 ng ssues? $. (BE%BE" D" ND% %BE +E%$%$DNE" 'AN EE 'DN&$DE"ED A& A DEE%D" D7 %BE "E&+DNDEN%. $$. (BE%BE" D" ND% AN A#EN% (BD (A& ND% A3%BD"$LED EH %BE +"$N'$+A! %D 'D!!E'% DEE% $N B$& EEBA!7 'D3!D D$"E'%!H 'D!!E'% +AHMEN% 7"DM %BE DEE%D". $$$. (BE%BE" D" ND% %BE 'DN%"A'% D7 &A!E (A& EGE'3%ED 7D" A 'A3&E. 14 Although, as a rule, t s not the bus ness of th s 'ourt to rev e9 the f nd ngs of fact made by the lo9er courts, -ur sprudence has recogn Aed several e1cept ons, at least three of 9h ch are present n the nstant case, namely? 9hen the -udgment s based on a m sapprehens on of factsI 9hen the f nd ngs of facts of the courts a quo are confl ct ngI and 9hen the 'A man festly overlooFed certa n relevant facts not d sputed by the part es, 9h ch, f properly cons dered, could -ust fy a d fferent conclus on. 18 %o arr ve at a proper -udgment, therefore, the 'ourt f nds t necessary to re@e1am ne the ev dence presented by the contend ng part es dur ng the tr al of the case. %he +et t on s mer tor ous. %he pr nc pal ssue s 9hether the Deed of Absolute &ale s supported by a val d cons derat on.

1. +et t oner argues that s nce she s merely the agent or representat ve of the alleged debtors, then she s not a party to the loanI and that the Deed of &ale e1ecuted bet9een her and the respondent n the r o9n names, 9h ch 9as pred cated on that pre@e1 st ng debt, s vo d for lacF of cons derat on. $ndeed, the Deed of Absolute &ale purports to be supported by a cons derat on n the form of a pr ce certa n n money1> and that th s sum nd sputably perta ns to the debt n ssue. %h s 'ourt has cons stently held that a contract of sale s null and vo d and produces no effect 9hatsoever 9here the same s 9 thout cause or cons derat on.12 %he =uest on that has to be resolved for the moment s 9hether th s debt can be cons dered as a val d cause or cons derat on for the sale. %o restate, the 'A c ted four nstances n the record to support ts hold ng that pet t oner ,re@lends, the amount borro9ed from respondent to her fr ends? f rst, the fr ends of pet t oner never presented themselves to respondent and that all transact ons 9ere made by and bet9een pet t oner and respondentI 16 secondI the money passed through the banF accounts of pet t oner and respondentI15 th rd, pet t oner herself adm tted that she 9as ,re@lend ng, the money loaned to other nd v duals for prof tI20 and fourth, the documentary ev dence sho9s that the actual borro9ers, the fr ends of pet t oner, cons der her as the r cred tor and not the respondent. 21 Dn the f rst, th rd, and fourth po nts, the 'A c tes the test mony of the pet t oner, then defendant, dur ng her cross@e1am nat on? 22 Atty. D Aa? =. Hou also ment oned that you 9ere not the one ndebted to the pla nt ffP 9 tness? a. Hes, s r. Atty. D Aa? =. And you ment oned the persons:,; namely, El Aabeth %omelden, %eresa Mora=u n, Mar a !u sa $nocenc o, Lena da "omulo, they are your fr endsP 9 tness? a. $nocenc o and Mora=u n are my fr ends 9h le :as to; Jacob and %omelden:,; they 9ere -ust referred. Atty. D Aa? =. And you have transact:ed; 9 th the pla nt ffP 9 tness? a. Hes, s r. Atty. D Aa?

=. (hat s that transact onP 9 tness? a. %o refer those persons to Aura and to refer aga n to Arsen o +ua, s r. Atty. D Aa? =. D d the pla nt ff personally see the transact ons 9 th your fr endsP 9 tness? a. No, s r. Atty. D Aa? =. Hour fr ends and the pla nt ff d d not meet personallyP 9 tness? a. Hes, s r. Atty. D Aa? =. Hou are ntermed ar esP 9 tness? a. (e are both ntermed ar es. As ev denced by the checFs of the debtors they 9ere depos ted to the name of Arsen o +ua because the money came from Arsen o +ua. 1111 Atty. D Aa? =. D d the pla nt ff Fne9 :s c; that you 9 ll lend the money to your fr ends spec f cally the one you ment oned :a; 9h le agoP 9 tness? a. Hes, she Fno9s the money 9 ll go to those persons. Atty. D Aa? =. Hou are re@lend ng the moneyP 9 tness? a. Hes, s r. Atty. D Aa? =. (hat prof t do you have, do you have comm ss onP

9 tness? a. Hes, s r. Atty. D Aa? =. Bo9 muchP 9 tness? a. %9o percent to %omelden, one percent to Jacob and then $nocenc o and my fr ends none, s r. Eased on the forego ng, the 'A concluded that pet t oner s the real borro9er, 9h le the respondent, the real lender. Eut as correctly noted by the "%', respondent, then pla nt ff, made the follo9 ng adm ss on dur ng her cross e1am nat on?2< Atty. C llacorta? =. (ho s th s Arsen o +uaP 9 tness? a. +r nc pal f nanc er, s r. Atty. C llacorta? =. &o the money came from Arsen o +uaP 9 tness? a. Hes, because $ am only represent ng h m, s r. Dther port ons of the test mony of respondent must l Fe9 se be cons dered? 24 Atty. C llacorta? =. &o t s not actually your money but the money of Arsen o +uaP 9 tness? a. Hes, s r. 'ourt? =. $t s not your moneyP 9 tness? a. Hes, Hour Bonor. Atty. C llacorta?

=. $s t not a fact Ms. ( tness that the defendant borro9ed from you to accommodate somebody, are you a9are of thatP 9 tness? a. $ am a9are of that. Atty. C llacorta? =. More or less she :accommodated; several fr ends of the defendantP 9 tness? a. Hes, s r, $ am a9are of that. 1111 Atty. C llacorta? =. And these fr ends of the defendant borro9ed money from you 9 th the assurance of the defendantP 9 tness? a. %hey go d rect to Jocelyn because $ donJt Fno9 them. 1111 Atty. C llacorta? =. And s t not also a fact Madam 9 tness that everyt me that the defendant borro9ed money from you her fr ends 9ho :are; n need of money ssued checF:s; to youP %here 9ere checFs ssued to youP 9 tness? a. Hes, there 9ere checFs ssued. Atty. C llacorta? =. Ey the fr ends of the defendant, am $ correctP 9 tness? a. Hes, s r. Atty. C llacorta? =. And because of your ass stance, the fr ends of the defendant 9ho are n need of money 9ere able to obta n loan to :s c; Arsen o +ua through your ass stanceP 9 tness? a. Hes, s r.

Atty. C llacorta? =. &o that occas on lasted for more than a yearP 9 tness? a. Hes, s r. Atty. C llacorta? =. And some of the checFs that 9ere ssued by the fr ends of the defendant bounced, am $ correctP 9 tness? a. Hes, s r. Atty. C llacorta? =. And because of that Arsen o +ua got mad 9 th youP 9 tness? a. Hes, s r. "espondent s estopped to deny that she herself acted as agent of a certa n Arsen o +ua, her d sclosed pr nc pal. &he s also estopped to deny that pet t oner acted as agent for the alleged debtors, the fr ends 9hom she /pet t oner0 referred. %h s 'ourt has aff rmed that, under Art cle 16>6 of the ' v l 'ode, the bas s of agency s representat on.28 %he =uest on of 9hether an agency has been created s ord nar ly a =uest on 9h ch may be establ shed n the same 9ay as any other fact, e ther by d rect or c rcumstant al ev dence. %he =uest on s ult mately one of ntent on.2>Agency may even be mpl ed from the 9ords and conduct of the part es and the c rcumstances of the part cular case. 22 %hough the fact or e1tent of author ty of the agents may not, as a general rule, be establ shed from the declarat ons of the agents alone, f one professes to act as agent for another, she may be estopped to deny her agency both as aga nst the asserted pr nc pal and the th rd persons nterested n the transact on n 9h ch he or she s engaged. 26 $n th s case, pet t oner Fne9 that the f nanc er of respondent s +uaI and respondent Fne9 that the borro9ers are fr ends of pet t oner. %he 'A s ncorrect 9hen t cons dered the fact that the ,supposed fr ends of :pet t oner;, the actual borro9ers, d d not present themselves to :respondent;, as ev dence that negates the agency relat onsh pO t s suff c ent that pet t oner d sclosed to respondent that the former 9as act ng n behalf of her pr nc pals, her fr ends 9hom she referred to respondent. 7or an agency to ar se, t s not necessary that the pr nc pal personally encounter the th rd person 9 th 9hom the agent nteracts. %he la9 n fact contemplates, and to a great degree, mpersonal deal ngs 9here the pr nc pal need not personally Fno9 or meet the

th rd person 9 th 9hom her agent transacts? prec sely, the purpose of agency s to e1tend the personal ty of the pr nc pal through the fac l ty of the agent. 25 $n the case at bar, both pet t oner and respondent have unden ably d sclosed to each other that they are represent ng someone else, and so both of them are estopped to deny the same. $t s ev dent from the record that pet t oner merely refers actual borro9ers and then collects and d sburses the amounts of the loan upon 9h ch she rece ved a comm ss onI and that respondent transacts on behalf of her ,pr nc pal f nanc er,, a certa n Arsen o +ua. $f the r respect ve pr nc pals do not actually and personally Fno9 each other, such gnorance does not affect the r -ur d cal stand ng as agents, espec ally s nce the very purpose of agency s to e1tend the personal ty of the pr nc pal through the fac l ty of the agent. ( th respect to the adm ss on of pet t oner that she s ,re@lend ng, the money loaned from respondent to other nd v duals for prof t, it must #e stressed that the manner in &hich the parties designate the relationship is not controlling . $f an act done by one person n behalf of another s n ts essent al nature one of agency, the former s the agent of the latter not9 thstand ng he or she s not so called.<0 %he =uest on s to be determ ned by the fact that one represents and s act ng for another, and f relat ons e1 st 9h ch 9 ll const tute an agency, it &ill #e an agency &hether the parties understood the e act nature of the relation or not.<1 %hat both part es acted as mere agents s sho9n by the und sputed fact that the fr ends of pet t oner ssued checFs n payment of the loan n the name of +ua. $f t s true that pet t oner 9as ,re@lend ng,, then the checFs should have been dra9n n her name and not d rectly pa d to +ua. ( th respect to the second po nt, part cularly, the f nd ng of the 'A that the d sbursements and payments for the loan 9ere made through the banF accounts of pet t oner and respondent, suff ce t to say that n the normal course of commerc al deal ngs and for reasons of conven ence and pract cal ut l ty t can be reasonably e1pected that the fac l t es of the agent, such as a banF account, may be employed, and that a sub@ agent be appo nted, such as the banF tself, to carry out the tasF, espec ally 9here there s no st pulat on to the contrary. <2 $n v e9 of the t9o agency relat onsh ps, pet t oner and respondent are not pr vy to the contract of loan bet9een the r pr nc pals. & nce the sale s pred cated on that loan, then the sale s vo d for lacF of cons derat on. 2. A further scrut ny of the record sho9s, ho9ever, that the sale m ght have been bacFed up by another cons derat on that s separate and d st nct from the debt? respondent averred n her compla nt and test f ed that the part es had agreed that as a cond t on for the conveyance of the property the respondent shall assume the balance of the mortgage loan 9h ch pet t oner allegedly o9ed to the NBM7'.<< %h s 'ourt n the recent past has declared that an assumpt on of a mortgage debt may const tute a val d cons derat on for a sale. <4

Although the record sho9s that pet t oner adm tted at the t me of tr al that she o9ned the property descr bed n the %'%, <8 the 'ourt must stress that the %ransfer 'ert f cate of % tle No. <628<2<> on ts face sho9s that the o9ner of the property 9h ch adm ttedly forms the sub-ect matter of the Deed of Absolute &ale refers neither to the petitioner nor to her father, 7eodorico Doles, the alleged co<o&ner. "ather, t states that the property s reg stered n the name of ,Bousehold Development 'orporat on., Although there s an entry to the effect that the pet t oner had been granted a spec al po9er of attorney ,cover ng the shares of %eodor co Doles on the parcel of land descr bed n th s cert f cate,, <2 t cannot be nferred from th s bare notat on, nor from any other ev dence on the record, that the pet t oner or her father held any d rect nterest on the property n =uest on so as to val dly const tute a mortgage thereon <6 and, 9 th more reason, to effect the del very of the ob-ect of the sale at the consummat on stage.<5 (hat s 9orse, there s a notat on that the %'% tself has been ,cancelled.,40 $n v e9 of these anomal es, the 'ourt cannot enterta n the poss b l ty that respondent agreed to assume the balance of the mortgage loan 9h ch pet t oner allegedly o9ed to the NBM7', espec ally s nce the record s bereft of any factual f nd ng that pet t oner 9as, n the f rst place, endo9ed 9 th any o9nersh p r ghts to val dly mortgage and convey the property. As the compla nant 9ho n t ated the case, respondent bears the burden of prov ng the bas s of her compla nt. Bav ng fa led to d scharge such burden, the 'ourt has no cho ce but to declare the sale vo d for lacF of cause. And s nce the sale s vo d, the 'ourt f nds t unnecessary to d9ell on the ssue of 9hether duress or nt m dat on had been fo sted upon pet t oner upon the e1ecut on of the sale. Moreover, even assum ng the mortgage val dly e1 sts, the 'ourt notes respondentJs allegat on that the mortgage 9 th the NBM7' 9as for 28 years 9h ch began &eptember <, 1554. "espondent f led her 'ompla nt for &pec f c +erformance n 1552. & nce the 28 years had not lapsed, the prayer of respondent to compel pet t oner to e1ecute necessary documents to effect the transfer of t tle s premature. (BE"E7D"E, the pet t on s granted. %he Dec s on and "esolut on of the 'ourt of Appeals are $E*E$SE! andSE( AS)!E. %he compla nt of respondent n ' v l 'ase No. 52@6221> s !)S')SSE!. &D D"DE"ED. 'A. A#)%)A A&S($)A7'A$()NE6 Assoc ate Just ce (E 'DN'3"? A$(E')/ *. +ANGAN)9AN 'h ef Just ce .hairperson

%/NS&E#/ 8NA$ES7SAN()AG/ Assoc ate Just ce ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce 'E"%$7$'A%$DN

$/'E/ J. %A##EJ/, S$. Asscoc ate Just ce

+ursuant to &ect on 1<, Art cle C$$$ of the 'onst tut on, t s hereby cert f ed that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. A$(E')/ *. +ANGAN)9AN 'h ef Just ce

:ootnotes
1

+enned by Assoc ate Just ce 7erm n A. Mart n /no9 ret red0, 9 th Assoc ate Just ces +ort a Al Qo@Bormachuelos and Mercedes #oAo@Dadole, concurr ng.
2

+enned by Assoc ate Just ce Mercedes #oAo@Dadole /v ce ret red Just ce 7erm n A. Mart n, Jr.0, 9 th Assoc ate Just ces +ort a Al Qo@Bormachuelos and Mar na !. EuAon /ne9 %h rd Member0.
<

E1h b t ,E,, records, p. 5. E1h b t ,A,I records, p 2. "%' Dec s on, at 2@6. 'A records, p. 15. 'A Dec s on, rollo, pp. 82@84. $d. at 84@88. $d. at 5. $d. at 5@10. Art cle 1<<8 of the ' v l 'ode prov des?

>

10

11

Art. 1<<8. %here s v olence 9hen n order to 9rest consent, ser ous or rres st ble force s employed. %here s nt m dat on 9hen one of the contract ng part es s compelled by a reasonable and 9ell@grounded fear of an mm nent and grave ev l upon h s person or property, or upon the person or property of h s spouse, descendants or ascendants, to g ve h s consent. 1111

A threat to enforce one/s claim through competent authority, if the claim is "ust or legal, does not vitiate consent . /emphas s suppl ed0.
12

'A Dec s on, at 10@12. $d. at 12. Rollo, p. 61.

1<

14

18

&ee Rivera v. Roman, #.". No. 142402, &eptember 20, 2008, 420 &'"A 22>I 7he :nsular %ife Assurance .ompany, %td. v. .ourt of Appeals, #.". No. 12>680, Apr l 26, 2004, 426 &'"A 25, 6>I Aguirre v. .ourt of Appeals, #.". No. 122245, January 25, 2004, 421 &'"A <10, <15I . & S 8ishfarm .orporation v. .ourt of Appeals, 442 +h l. 225 /20020.
1>

%he fourth paragraph of the Deed of Absolute &ale reads? ,ND( %BE"E7D"E, for and n cons derat on of the sum of 7D3" B3ND"ED 7$CE %BD3&AND 7D3" B3ND"ED %B$"%H +E&D& DN!H /+ 408,4<0.000 +h l pp ne 'urrency, the &eller hereby &E!!&, %"AN&7E"& and 'DNCEH& to the Euyer, h s he rs, successors or ass gns, the above@descr bed parcel of land together 9 th all the mprovements thereon., E1h b t ,E,.
12

&ee Hulueta v. 6ong, #.". No. 18<814, June 6, 2008, 485 &'"A >21I !uenaventura v. .ourt of Appeals, #.". No. 12><2>, November 20, 200<, 41> &'"A 2><I Montecillo v. Reynes, 4<4 +h l. 48> /20020I.ruz v. !ancom 8inance .o., 425 +h l. 224 /20020I Rongavilla v. .ourt of Appeals, <88 +h l. 220 /15560I!agnas v. .ourt of Appeals, #.". No. <6456, August 10, 1565, 12> &'"A 185I ' v l 'ode /15800 Arts. 1<82, 1486 N 1421.
16

'A Dec s on, at 8@2I rollo, p. 46. $d. at 2@6. $d. at 5. $d. at 5@10. %&N, March 2<, 1556, pp. 18@16, 20@21. %&N, January 25, 1556, p. 16. $d. at 15@2<.

15

20

21

22

2<

24

28

&ee Amon 7rading .o. v. .ourt of Appeals, #.". No. 186868, December 1<, 2008I 4ictorias Milling .o., :nc. v. .ourt of Appeals , <65 +h l. 164 /20000I ' v l 'ode /15800, Art. 16>6.
2>

&ee 4ictorias Milling .o., :nc. v. .ourt of Appeals , d. c t ng .onnell v. Mc%oughlin, 26 Dr. 2<0, 42 +. 216I0alladay v. ;nder&ood, 50 $ll. App. 1<0I :nternal 7rust .o. v. !ridges, 82 7. 28<I Bector M. De !eon N Bector M. De !eon, Jr. 'omments and 'ases on +artnersh p, Agency, and %rusts, <8>@82 /15550.

22

' v l 'ode /15800, Arts. 16>5@22. De !eon N De !eon, Jr., supra note 24, at 405.

26

25

$d. at <45, c t ng =rient Air Services & 0otel Representatives v. .ourt of Appeals, 224 +h l. 52> /15510.
<0

$d. at <8>, c t ng .ia v. $hil. Refining .o., 48 +h l. 88>, December 20, 152<I 8 Arturo M. %olent no, 'ommentar es and Jur sprudence on the ' v l 'ode of the +h l pp nes <56 /15510.
<1

&ee .ia v. $hil. Refining .o., d. c t ng < Am. Jur. 2d., 4<0@<1. ' v l 'ode /15800, Arts. 1652@5<. +aragraph > of respondentJs compla nt reads?

<2

<<

>. Dn Dctober 8. 155> after defendant cont nuously fa led to settle her personal obl gat on to pla nt ff, defendant offered to pay pla nt ff by 9ay of ced ng the above@descr bed property on cond t on that pla nt ff 9ould assume the balance of the mortgage and pay the monthly amort Aat on of +4,246.11 for the rema nder of the 28 years to 9h ch the latter agreedI 1 1 1 Anne1 ,D, of the +et t on, Rollo, p. <5. "espondent test f ed as follo9s? U. At the t me of the sale, can you tell to th s 'ourt 9hether the defendant : s; st ll ndebted to the :NBM7';P A. $ am a9are that she s ndebted. U. $s there any agreement 9 th respect to the obl gat on of the defendant to the NBM7'P A. (e have a verbal agreement that $ 9 ll be the one to assume the balance. U. (hen you speaF of balance 9hat are you talF ng toP :s c; A. 3ndue :s c; balance, s r. %&N, January 1<, 1556, at 14 /emphas s suppl ed0.
<4

&ee Eravo@#uerrero v. Eravo, #.". No. 182>86, July 25, 2008, 4>8 &'"A 244. %&N, 7ebruary 2>, 1556, pp. 8@>. E1h b t ,A,I Rollo, p. 12. $d. E1h b t ,A@1,I Rollo, p. 22. ' v l 'ode /15800, Art. 2068/<0.

<8

<>

<2

<6

<5

&ee 2onzales v. 7oledo, #.". No. 1454>8, December 6, 200<, 412 &'"A 2>0I 7sai v. .ourt of Appeals, 416 +h l. >0> /20010I $hilippine !an' of

.ommunications v. .ourt of Appeals, et al., 416 +h l. >0> /20010I3oel v. .ourt of Appeals, <10 +h l. 65 /15580I Segura v. Segura, 1>8 &'"A <>6, <28 /15660.
40

E1h b t ,A,I Rollo, p. 21.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN

G.$. No. 13.;02 Septem er <, 1<<< W)##)A' &8 and $/!E# $/>AS, pet t oners, vs. %/&$( /: A++EA#S, 5/N. $/9E$( 9A#A/ and NA()/NA# 5/&S)NG A&(5/$)(8, respondents.

KA+&NAN, J.: +et t oners ( ll am 3y and "odel "o1as are agents author Aed to sell e ght parcels of land by the o9ners thereof. Ey v rtue of such author ty, pet t oners offered to sell the lands, located n %uba, %ad angan, Eenguet to respondent Nat onal Bous ng Author ty /NBA0 to be ut l Aed and developed as a hous ng pro-ect. Dn 7ebruary 14, 1565, the NBA Eoard passed "esolut on No. 1><2 approv ng the ac=u s t on of sa d lands, 9 th an area of <1.62<1 hectares, at the cost of +2<.6>2 m ll on, pursuant to 9h ch the part es e1ecuted a ser es of Deeds of Absolute &ale cover ng the sub-ect lands. Df the e ght parcels of land, ho9ever, only f ve 9ere pa d for by the NBA because of the report 1 t rece ved from the !and #eosc ences Eureau of the Department of Env ronment and Natural "esources /DEN"0 that the rema n ng area s located at an act ve landsl de area and therefore, not su table for development nto a hous ng pro-ect. Dn 22 November 1551, the NBA ssued "esolut on No. 2<82 cancell ng the sale over the three parcels of land. %he NBA, through "esolut on No. 2<54, subsecguently offered the amount of +1.228 m ll on to the lando9ners as da>os per"uicios. Dn 5 March 1552, pet t oners f led before the "eg onal %r al 'ourt /"%'0 of UueAon ' ty a 'ompla nt for Damages aga nst NBA and ts #eneral Manager "obert Ealao. After tr al, the "%' rendered a dec s on declar ng the cancellat on of the contract to be -ust f ed. %he tr al court nevertheless a9arded damages to pla nt ffs n the

sum of +1.288 m ll on, the same amount n t ally offered by NBA to pet t oners as damages.+I&phi+.nJt 3pon appeal by pet t oners, the 'ourt of Appeals reversed the dec s on of the tr al court and entered a ne9 one d sm ss ng the compla nt. $t held that s nce there 9as ,suff c ent -ust f able bas s, n cancell ng the sale, , t sa9 no reason, for the a9ard of damages. %he 'ourt of Appeals also noted that pet t oners 9ere mere attorneys@ n@fact and, therefore, not the real part es@ n@ nterest n the act on before the tr al court. . . . $n paragraph 4 of the compla nt, pla nt ffs alleged themselves to be , sellers/ agents, for the several o&ners of the D lots sub-ect matter of the case. Dbsv ously, ( ll am 3y and "odel "o1as n f l ng th s case acted as attorneys@ n@ fact of the lot o9ners 9ho are the real part es n nterest but 9ho 9ere om tted to be pleaded as party@pla nt ffs n the case. %h s om ss on s fatal. (here the act on s brought by an attorney@ n@fact of a land o9ner n h s name, /as n our present act on0 and not n the name of h s pr nc pal, the act on 9as properly d sm ssed /7errer vs. C llamor, >0 &'"A 40> :1524;I Marcelo vs. de !eon, 108 +h l. 11280 because the rule s that every act on must be prosecuted n the name of the real part es@ n@ nterest /&ect on 2, "ule <, "ules of 'ourt0. (hen pla nt ffs 3H and "o1as sought payment of damages n the r favor n v e9 of the part al resc ss on of "esolut on No. 1><2 and the Deed of Absolute &ale cover ng %'% Nos. 10556, 10555 and 11252 /+rayer compla nt, page 8, "%' records0, t becomes obv ously nd spensable that the lot o9ners be ncluded, ment oned and named as party@pla nt ffs, be ng the real party@ n@ nterest. 3H and "o1as, as attorneys@ n@fact or apoderados, cannot by themselves la9fully commence th s act on, more so, 9hen the supposed spec al po9er of attorney, n the r favor, 9as never presented as an ev dence n th s case. Ees des, even f here n pla nt ffs 3y and "o1as 9ere author Aed by the lot o9ners to commence th s act on, the same must st ll be f led n the name of the pr nc pal, /7 l p no $ndustr al 'orporat on vs. &an D ego, 2< &'"A 20> :15>6;0. As such nd spensable party, the r -o nder n the act on s mandatory and the compla nt may be d sm ssed f not so mpleaded /ND' vs. 'A, 211 &'"A 422 :1552;0. 3 %he r mot on for recons derat on hav ng been den ed, pet t oners seeF rel ef from th s 'ourt contend ng that? $. %BE "E&+DNDEN% 'A E""ED $N DE'!A"$N# %BA% "E&+DNDEN% NBA BAD ANH !E#A! EA&$& 7D" "E&'$ND$N# %BE &A!E $NCD!C$N# %BE !A&% %B"EE /<0 +A"'E!& 'DCE"ED EH NBA "E&D!3%$DN ND. 1><2. $$. #"AN%$N# A"#3ENDD %BA% %BE "E&+DNDEN% NBA BAD !E#A! EA&$& %D "E&'$ND %BE &3EJE'% &A!E, %BE "E&+DNDEN% 'A NDNE%BE!E&& E""ED $N DENH$N# BE"E$N +E%$%$DNE"&) '!A$M %D DAMA#E&, 'DN%"A"H %D %BE +"DC$&$DN& D7 A"%. 1151 D7 %BE '$C$! 'DDE.

$$$. %BE "E&+DNDEN% 'A E""ED $N D$&M$&&$N# %BE &3EJE'% 'DM+!A$N% 7$ND$N# %BA% %BE +E%$%$DNE"& 7A$!ED %D JD$N A& $ND$&+EN&AE!E +A"%H +!A$N%$77 %BE &E!!$N# !D%@D(NE"&. 4 (e f rst resolve the ssue ra sed n the the th rd ass gnment of error. +et t oners cla m that they lodged the compla nt not n behalf of the r pr nc pals but n the r o9n name as agents d rectly damaged by the term nat on of the contract. %he damages prayed for 9ere ntended not for the benef t of the r pr nc pals but to ndemn fy pet t oners for the losses they themselves allegedly ncurred as a result of such term nat on. %hese damages cons st ma nly of ,unearned ncome, and advances. ; +et t oners, thus, attempt to d st ngu sh the case at bar from those nvolv ng agents or apoderedos nst tut ng act ons n the r o9n name but n behalf of the r pr nc pals. 2 +et t oners n th s case purportedly brought the act on for damages n the r o9n name and n the r o9n behalf. (e f nd th s content on unmer tor ous. &ec. 2, "ule < of the "ules of 'ourt re=u res that every act on must be prosecuted and defended n the name of the real party@ n@ nterest. %he real party@ n@ nterest s the party 9ho stands to be benef ted or n-ured by the -udgment or the party ent tled to the ava ls of the su t. ,$nterest, 9 th n the mean ng of the rule, means mater al nterest, an nterest n the ssue and to be affected by the decree, as d st ngu shed from mere nterest n the =uest on nvolved, or a mere nc dental nterest. 0 'ases constru ng the real party@ n@ nterest prov s on can be more eas ly understood f t s borne n m nd that the true mean ng of real party@ n@ nterest may be summar Aed as follo9s? An act on shall be prosecuted n the name of the party 9ho, by the substant ve la9, has the r ght sought to be enforced. 1 Do pet t oners, under substant ve la9, possess the r ght they seeF to enforceP (e rule n the negat ve. %he appl cable substant ve la9 n th s case s Art cle 1<11 of the ' v l 'ode, 9h ch states? .ontracts ta'e effect only #et&een the parties, their assigns, and heirs , e1cept n case 9here the r ghts and obl gat ons ar s ng from the contract are not transm ss ble by the r nature, or by st pulat on, or by prov s on of la9. . . . :f a contract should contain some stipulation in favor of a third person, he may demand its fulfillment prov ded he commun cated h s acceptance to the obl gor before ts revocat on. A mere nc dental benef t or nterest of a person s not suff c ent. %he contract ng part es must have clearly and del berately conferred a favor upon a th rd person. /Emphas s suppl ed.0 +et t oners are not part es to the contract of sale bet9een the r pr nc pals and NBA. %hey are mere agents of the o9ners of the land sub-ect of the sale. As agents, they only render some serv ce or do someth ng n representat on or on behalf of the r pr nc pals. = %he render ng of such serv ce d d not maFe them

part es to the contracts of sale e1ecuted n behalf of the latter. & nce a contract may be v olated only by the part es thereto as aga nst each other, the real part es@ n@ nterest, e ther as pla nt ff or defendant, n an act on upon that contract must, generally, e ther be part es to sa d contract. < Ne ther has there been any allegat on, much less proof, that pet t oners are the he rs of the r pr nc pals. Are pet t oners ass gnees to the r ghts under the contract of saleP $n McMic'ing vs. !anco 5spa>ol<8ilipino, 1. 9e held that the rule re=u r ng every act on to be prosecuted n the name of the real party@ n@ nterest. . . . recogn Aes the ass gnments of r ghts of act on and also recogn Aes that 9hen one has a r ght of act on ass gned to h m he s then the real party n nterest and may ma nta n an act on upon such cla m or r ght. %he purpose of :th s rule; s to re=u re the pla nt ff to be the real party n nterest, or, n other 9ords, he must be the person to 9hom the proceeds of the act on shall belong, and to prevent act ons by persons 9ho have no nterest n the result of the same. . . . %hus, an agent, n h s o9n behalf, may br ng an act on founded on a contract made for h s pr nc pal, as an ass gnee of such contract. (e f nd the follo9 ng declarat on n &ect on <22 /10 of the "estatement of the !a9 on Agency /&econd0? 11 &ec. <22. Agent as D9ner of 'ontract " ght /10 3nless other9 se agreed, an agent 9ho has or 9ho ac=u res an nterest n a contract 9h ch he maFes on behalf of h s pr nc pal can, although not a prom see, ma nta n such act on thereon ma nta n such act on thereon as m ght a transferee hav ng a s m lar nterest. %he 'omment on subsect on /10 states? a. Agent a transferee. Dne 9ho has made a contract on behalf of another may become an ass gnee of the contract and br ng su t aga nst the other party to t, as any other transferee. %he customs of bus ness or the course of conduct bet9een the pr nc pal and the agent may nd cate that an agent 9ho ord nar ly has merely a secur ty nterest s a transferee of the pr nc pals r ghts under the contract and as such s perm tted to br ng su t. $f the agent has settled 9 th h s pr nc pal 9 th the understand ng that he s to collect the cla m aga nst the obl gor by 9ay of re mburs ng h mself for h s advances and comm ss ons, the agent s n the pos t on of an ass gnee 9ho s the benef c al o9ner of the chose n act on. Be has an rrevocable po9er to sue n h s pr nc pal)s name. . . . And, under the statutes 9h ch perm t the real party n nterest to sue, he can ma nta n an act on n h s o9n name. %h s po9er to sue s not affected by a settlement bet9een the pr nc pal and the obl gor f the latter has not ce of the agent)s nterest. . . . Even though the agent has not settled 9 th h s pr nc pal, he may, by agreement 9 th the pr nc pal, have a r ght to rece ve payment and out of the proceeds to re mburse h mself for advances and comm ss ons before turn ng the balance over to the pr nc pal. $n such a case, although there s no formal ass gnment, the

agent s n the pos t on of a transferee of the 9hole cla m for secur tyI he has an rrevocable po9er to sue n h s pr nc pal)s name and, under statutes 9h ch perm t the real party n nterest to sue, he can ma nta n an act on n h s o9n name. +et t oners, ho9ever, have not sho9n that they are ass gnees of the r pr nc pals to the sub-ect contracts. (h le they alleged that they made advances and that they suffered loss of comm ss ons, they have not establ shed any agreement grant ng them ,the r ght to rece ve payment and out of the proceeds to re mburse :themselves; for advances and comm ss ons before turn ng the balance over to the pr nc pal:s;., 7 nally, t does not appear that pet t oners are benef c ar es of a st pulat on pour autrui under the second paragraph of Art cle 1<11 of the ' v l 'ode. $ndeed, there s no st pulat on n any of the Deeds of Absolute &ale ,clearly and del berately, conferr ng a favor to any th rd person. %hat pet t oners d d not obta n the r comm ss ons or recoup the r advances because of the non@performance of the contract d d not ent tle them to f le the act on belo9 aga nst respondent NBA. &ect on <22 /20 of the "estatement of the !a9 on Agency /&econd0 states? /20 An agent does not have such an nterest n a contract as to ent tle h m to ma nta n an act on at la9 upon t n h s o9n name merely because he s ent tled to a port on of the proceeds as compensat on for maF ng t or because he s l able for ts breach. %he follo9 ng 'omment on the above subsect on s llum nat ng? %he fact that an agent 9ho maFes a contract for h s pr nc pal 9 ll ga n or suffer loss by the performance or nonperformance of the contract by the pr nc pal or by the other party thereto does not ent tle h m to ma nta n an act on on h s o9n behalf aga nst the other party for ts breach. An agent ent tled to rece ve a comm ss on from h s pr nc pal upon the performance of a contract 9h ch he has made on h s pr nc pal)s account does not, from th s fact alone, have any cla m aga nst the other party for breach of the contract, e ther n an act on on the contract or other9 se. An agent 9ho s not a prom see cannot ma nta n an act on at la9 aga nst a purchaser merely because he s ent tled to have h s compensat on or advances pa d out of the purchase pr ce before payment to the pr nc pal. . . . %hus, n 0op'ins vs. :ves, 13 the &upreme 'ourt of ArFansas, c t ng &ect on <22 /20 above, den ed the cla m of a real estate broFer to recover h s alleged comm ss on aga nst the purchaser n an agreement to purchase property. $n 2oduco vs. .ourt of appeals,
14

th s 'ourt held that?

. . . grant ng that appellant had the author ty to sell the property, the same d d not maFe the buyer l able for the comm ss on she cla med. At most, the o9ner of the property and the one 9ho prom sed to g ve her a comm ss on should be the

one l able to pay the same and to 9hom the cla m should have been d rected. . . . As pet t oners are not part es, he rs, ass gnees, or benef c ar es of a st pulat on pour autrui under the contracts of sale, they do not, under substant ve la9, possess the r ght they seeF to enforce. %herefore, they are not the real part es@ n@ nterest n th s case. +et t oners not be ng the real part es@ n@ nterest, any dec s on rendered here n 9ould be po ntless s nce the same 9ould not b nd the real part es@ n@ nterest. 1; Nevertheless, to forestall further l t gat on on the substant ve aspects of th s case, 9e shall proceed to rule on me mer ts. 12 +et t oners subm t that respondent NBA had no legal bas s to ,resc nd, the sale of the sub-ect three parcels of land. %he e1 stence of such legal bas s, not9 thstand ng, pet t oners argue that they are st ll ent tled to an a9ard of damages. +et t oners confuse the cancellat on of the contract by the NBA as a resc ss on of the contract under Art cle 1151 of the ' v l 'ode. %he r ght of resc ss on or, more accurately, resolut on, of a party to an obl gat on under Art cle 1151 s pred cated on a breach of fa th by the other party that v olates the rec proc ty bet9een them. 10 %he po9er to resc nd, therefore, s g ven to the n-ured party. 11 Art cle 1151 states? %he po9er to resc nd obl gat ons s mpl ed n rec procal ones, n case one of the obl gors should not comply 9 th 9hat s ncumbent upon h m. %he n-ured party may choose bet9een the fulf llment and the resc ss on of the obl gat on, 9 th the payment of damages n e ther case. Be may also seeF resc ss on, even after he has chosen fulf llment, f the latter should become mposs ble. $n th s case, the NBA d d not resc nd the contract. $ndeed, t d d not have the r ght to do so for the other part es to the contract, the vendors, d d not comm t any breach, much less a substant al breach, 1= of the r obl gat on. %he r obl gat on 9as merely to del ver the parcels of land to the NBA, an obl gat on that they fulf lled. %he NBA d d not suffer any n-ury by the performance thereof. %he cancellat on, therefore, 9as not a resc ss on under Art cle 1151. "ather, the cancellat on 9as based on the negat on of the cause ar s ng from the real Aat on that the lands, 9h ch 9ere the ob-ect of the sale, 9ere not su table for hous ng.+I&phi+.nJt 'ause s the essent al reason 9h ch moves the contract ng part es to enter nto t. 1< $n other 9ords, the cause s the mmed ate, d rect and pro1 mate reason 9h ch -ust f es the creat on of an obl gat on through the 9 ll of the contract ng part es. 3. 'ause, 9h ch s the essent al reason for the contract, should be

d st ngu shed from mot ve, 9h ch s the part cular reason of a contract ng party 9h ch does not affect the other party. 31 7or e1ample, n a contract of sale of a p ece of land, such as n th s case, the cause of the vendor /pet t oners) pr nc pals0 n enter ng nto the contract s to obta n the pr ce. 7or the vendee, NBA, t s the ac=u s t on of the land. 33 %he mot ve of the NBA, on the other hand, s to use sa d lands for hous ng. %h s s apparent from the port on of the Deeds of Absolute &ale 34 stat ng? (BE"EA&, under the E1ecut ve Drder No. 50 dated December 12, 156>, the CENDEE s mandated to focus and concentrate ts efforts and resources n prov d ng hous ng ass stance to the lo9est th rty percent /<0R0 of urban ncome earners, thru slum upgrad ng and development of s tes and serv ces pro-ectsI (BE"EA&, !etters of $nstruct ons Nos. 888 and 882 :as; amended by !etter of $nstruct on No. ><0, prescr bed slum mprovement and upgrad ng, as 9ell as the development of s tes and serv ces as the pr nc pal hous ng strategy for deal ng 9 th slum, s=uatter and other bl ghted commun t esI 111 111 111 (BE"EA&, the CENDEE, n pursu t of and n compl ance 9 th the above@stated purposes offers to buy and the CENDD"&, n a gesture of the r 9 ll ng to cooperate 9 th the above pol cy and comm tments, agree to sell the aforesa d property together 9 th all the e1 st ng mprovements there or belong ng to the CENDD"&I ND(, %BE"E7D"E, for and n cons derat on of the forego ng prem ses and the terms and cond t ons here nbelo9 st pulated, the CENDD"& hereby, sell, transfer, cede and convey unto the CENDEE, ts ass gns, or successors@ n@ nterest, a parcel of land located at Eo. %ad angan, %uba, Eenguet conta n ng a total area of 7$7%H &$G %BD3&AND E$#B% B3ND"ED N$NE%EEN /8>,6150 &U3A"E ME%E"&, more or less . . . . Drd nar ly, a party)s mot ves for enter ng nto the contract do not affect the contract. Bo9ever, 9hen the mot ve predeterm nes the cause, the mot ve may be regarded as the cause. $n %iguez vs. .ourt of Appeals, 3; th s 'ourt, speaF ng through Just ce J.E.!. "EHE&, BE!D? . . . t s 9ell to note, ho9ever, that Manresa h mself /Col. 6, pp. >41@>420, 9h le ma nta n ng the d st nct on and uphold ng the noperat veness of the mot ves of the part es to determ ne the val d ty of the contract, e1pressly e1cepts from the rule those contracts that are cond t oned upon the atta nment of the mot ves of e ther party. %he same v e9 s held by the &upreme 'ourt of &pa n, n ts dec s ons of 7ebruary 4, 1541, and December 4, 154>, hold ng that the mot ve may be regarded as causa 9hen t predeterm nes the purpose of the contract.

$n th s case, t s clear, and pet t oners do not d spute, that NBA 9ould not have entered nto the contract 9ere the lands not su table for hous ng. $n other 9ords, the =ual ty of the land 9as an mpl ed cond t on for the NBA to enter nto the contract. Dn the part of the NBA, therefore, the mot ve 9as the cause for ts be ng a party to the sale. (ere the lands ndeed unsu table for hous ng as NBA cla medP (e deem the f nd ngs conta ned n the report of the !and #eosc ences Eureau dated 18 July 1551 suff c ent bas s for the cancellat on of the sale, thus? $n %ad angan, %uba, the hous ng s te s s tuated n an area of moderate topography. %here :are; more areas of less slop ng ground apparently hab table. %he s te s underla n by . . . th cF sl de depos ts /4@48m0 cons st ng of huge conglomerate boulders /see +hoto No. 20 m 1:ed; 9 th s lty clay mater als. 7hese clay particles &hen saturated have some s&elling characteristics &hich is dangerous for any civil structures especially mass housing development . 32 +et t oners contend that the report 9as merely ,prel m nary,, and not conclus ve, as nd cated n ts t tle? MEMD"AND3M %D? ED($N #. DDM$N#D 'h ef, !ands #eology D v s on 7"DM? A"$&%D%!E A. "$!!DN #eolog st $$ &3EJE'%? $reliminary Assessment of %ad angan Bous ng +ro-ect n %uba, Eenguet %hus, page 2 of the report states n part? 111 111 111 Actually there is a need to conduct further geottechnical KsicL studies in the 30A property. &tandard +enetrat on %est /&+%0 must be carr ed out to g ve an est mate of the degree of compact on /the relat ve dens ty0 of the sl de depos t and also the bear ng capac ty of the so l mater als. Another th ng to cons der s the vulnerab l ty of the area to landsl des and other mass movements due to th cF so l cover. +revent ve phys cal m t gat on methods such as surface and subsurface dra nage and regrad ng of the slope must be done n the area. 31 (e read the =uoted port on, ho9ever, to mean only that further tests are re=u red to determ ne the ,degree of compact on,, ,the bear ng capac ty of the so l mater als,, and the ,vulnerab l ty of the area to landsl des,, s nce the tests already conducted 9ere nade=uate to ascerta n such geolog cal attr butes. $t s only n th s sense that the assessment 9as ,prel m nary.,
30

Accord ngly, 9e hold that the NBA 9as -ust f ed n cancel ng the contract. %he real Aat on of the m staFe as regards the =ual ty of the land resulted n the negat on of the mot veMcause thus render ng the contract ne1 stent. 3= Art cle 1<16 of the ' v l 'ode states that? Art. 1<16. 7here is no contract unless the follo&ing requisites concur ? /10 'onsent of the contract ng part esI /20 Db-ect certa n 9h ch s the sub-ect matter of the contractI /<0 .ause of the obl gat on 9h ch s establ shed. /Emphas s suppl ed.0 %herefore, assum ng that pet t oners are part es, ass gnees or benef c ar es to the contract of sale, they 9ould not be ent tled to any a9ard of damages. (BE"E7D"E, the nstant pet t on s hereby DEN$ED. &D D"DE"ED. $uno, $ardo and Fnares<Santiago, 99., concur. Davide, 9r., ..9., on leave. :ootnotes 1 E1h b t ,4. 2 Rollo, pp. 2>@22. Emphas s n the or g nal. < :d., at 11. 4 +et t oners alleged n the r compla nt? 14. E1hausted 9 th the procrast nat ons and un-ust f ed pos t ons be ng assumed by the defendant NBA, here n pla nt ffs hereby ac=u esce to the not ce of resc ss on handed do9n by the defendant NBA, through ts #eneral Manager "obert Ealao, sub-ect to the a9ard of a reasonable and fa r amount of damages. 14.a. 3nearned $ncome? Bad defendant NBA pa d for the last three parcels of land covered by "es. No. 1><2, and the deeds of absolute sale referred to n par. 10 above, here n pla nt ffs 9ould have made an ncome of appro1 mately +>.4 M ll on. Defendant NBA should be held ans9erable to the pla nt ffs for th s unearned ncome as shall be proven n the course of the tr al. +I&phi+.nJt 14.b. Dpportun ty !oss? Bad defendant NBA pa d for the sub-ect parcels of land 9 th n a reasonable t me from 7ebruary 1565, here n pla nt ffs could have nvested the r ncome of +>.4 M ll on and earn at a conservat ve return on nvestment of 2RMyear or at least +4.> m ll on over the last three years. Aga n, defendant NBA should be re=u red to ndemn fy the here n pla nt ffs for th s lost opportun ty as shall be proven n the course of the tr al.

14.c. E1penses? %hrough the last three years, here n pla nt ffs had cons stently and unhes tantly spent reasonable sums of money by 9ay of representat ons, advances to lando9ners, advances for the clear ng of t tles sub-ect of the here n transact ons, advances to sub@agents, log st cal e1penses and la9yer)s fees, n the process, they also ncurred loans to f nance these e1penses O total e1penses ncurred pr or to the f l ng of the present case be ng est mated at +1.< m ll on. Defendants should be re=u red to re mburse the pla nt ffs for these e1penses as shall be proven n the course of the tr al. 18. +la nt ffs had suffered and cont nue to suffer prolonged agony and mental angu sh from the defendant NBA)s prev ous procrast nat on and condescend ng approach to the here n pla nt ffs) pl ght for 9h ch defendant NBA should be charged moral damages n favor of the pla nt ffs n the amount of +>00,000.00. 1>. %o set an e1ample, and to prevent the recurrence of the here n c rcumstances, defendant NBA should be charged e1emplary damages n the amount of +>00,000.00 n favor of the here n pla nt ff. 12. %o v nd cate the r r ghts n the prem ses, pla nt ffs had to contract the serv ces of here n counsel, and to ncur cost of su t, as shall be proven n the course of the tr al. Defendant NBA should be held l able to the pla nt ffs for these amounts by 9ay of attorney)s fees n the amount of +1 m ll on. /"ecords, pp. 4@ 8.0 8 7 l p nas $ndustr al 'orp. vs. &an D ego, 2< &'"A 20> /15>60I Ero9n vs. Ero9n, < &'"A 481 /15>10I Marcelo vs. De !eon, 108 +h l. 1128 /15850I EsperanAa and Eullo vs. 'at nd g, 22 +h l. <52 /15140. > 3n vers ty of the +h l pp nes vs. ! got@%elan, 222 &'"A <4< /155<0, "alla vs. "alla, 155 &'"A 458 /15510I "ebol do vs. 'ourt of Appeals, 120 &'"A 600 /15650. 2 1 7"AN'$&'D, %he "ev sed "ules of 'ourt n the +h l., ed., p. 211. See also !ubbocF 7eed !ots, $nc. v. lo9e Eeef processors, ><0 7. 2d 280 /15600. 6 Art. 16>6, ' v l 'ode. 5 Mar mper o 'ompaQa Nav era, &.A. vs. 'ourt of Appeals, 18> &'"A <>6 /15620. See also $ MD"AN, 'omments on the "ules of 'ourt, 1525 ed., p. 182. 10 1< +h l. 425 /15050. 11 As Adopted and +romulgated by the Amer can !a9 nst tute at (ash ngton, D.', May 2<, 1582. 12 8>> &.(.2d 142. 1< 10 &'"A 228 /15>40. 14 7 l p nas $ndustr al 'orporat on vs. &an D ego, 2< &'"A 20> /15>60. 18 See? Arroyo and #ranada and #entero, 16 +h l. 464 /15110.

1> "omero vs. 'ourt of Appeals, 280 &'"A 22< /15580. 12 Eoysa9 vs. $nterph l +romot ons, $nc., 146 &'"A ><8, c ted n "omero vs. 'ourt of Appeals, supra. 16 See Dcampo vs. 'ourt of Appeals, 2<< &'"A 881/15540. See also +o9er 'ommerc al and $ndustr al 'orp vs. 'ourt of Appeals, 224 &'"A 852 /15520, and Mass ve 'onstruct on, $nc. vs. $ntermed ate Appelate 'ourt, 22< &'"A 1 /155<0. 15 Eas c EooFs /+h l.0, $nc. vs. !opeA, et al, 1> &'"A 251 /15>>0, citing #eneral Enterpr ses $nc. vs. ! enga Eay !ogg ng 'o., 11 &'"A 2<< /15>40. 20 :d., citing < 'astan, 4th ed., p. <42. 21 "epubl c vs. 'lor bel, <> &'"A 8<4 /15200. See also Art cle 1<81, ' v l 'ode. 22 Art. 1<80, ' v l 'ode. $n onerous contracts, the cause s understood to be, for each contract ng party, the prestat on or prom se of a th ng or serv ce by the other. . . . 2< E1h b ts ,E,, ,',, and ,D., 24 102 +h l. 822 /15820, c ted n E. "aAon $nc. vs. +h l pp ne +orts Author ty, 181 &'"A 2<< /15620. See also +h l pp ne Nat onal 'onstruct on 'orp. vs. 'ourt of Appeals, 222 &'"A 16< /15520, 9here the 'ourt held that ,. . . As a general pr nc ple, the mot ve or part cular purpose of a party n enter ng nto a contract does not affed the val d ty nor e1 stence of the contractI an e1cept on s 9hen the real Aat on of such mot ve or part cular purpose has been made a cond t on upon 9h ch the contract s made to depend., . . . 28 "ecords, p. <2. Emphas s suppl ed. 2> :d., at <1. Emphas s suppl ed. 22 :d., <2. Emphas s suppl ed. 26 Note that sa d contract s also vo dable under Art cle 1<<1 of the ' v l 'ode 9h ch states? Art. 1<<1. $n order that m staFe may nval date consent, t should refer to the substance of the th ng 9h ch s the ob-ect of the contract, or to those cond t ons 9h ch have pr nc pally moved one or both part es to enter nto the contract. 111 111 111 "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 12.13= Au"ust 41, 3..0

#A&$EAN/ (. ANGE#ES, +et t oner, vs. +5)#)++)NE NA()/NA# $A)#WA8S C+N$D AN! $/!/#:/ :#/$ES, 1"espondents. DE'$&$DN GA$%)A, J.: 3nder cons derat on s th s pet t on for rev e9 under "ule 48 of the "ules of 'ourt assa l ng and seeF ng to set as de the follo9 ng ssuances of the 'ourt of Appeals /'A0 n .A<2.R. .4 3o. ABCM), to 9 t? 1. Dec s on 2 dated June 4, 2001, aff rm ng an earl er dec s on of the "eg onal %r al 'ourt /"%'0 of UueAon ' ty, Eranch 25, 9h ch d sm ssed the compla nt for spec f c performance and damages thereat commenced by the pet t oner aga nst the here n respondentsI and 2. "esolut on < dated &eptember 12, 2001, deny ng the pet t oner)s mot on for recons derat on. %he facts? Dn May 8, 1560, the respondent +h l pp ne Nat onal "a l9ays /+N"0 nformed a certa n #audenc o "omualdeA /"omualdeA, here nafter0 that t has accepted the latterJs offer to buy, on an ,A& $&, (BE"E $&, bas s, the +N"Js scrapMunserv ceable ra ls located n Del 'armen and !ubao, +ampanga at +1,<00.00 and +2,100.00 per metr c ton, respect vely, for the total amount of +5>,>00.00. After pay ng the stated purchase pr ce, "omualdeA addressed a letter to Atty. ' pr ano D Aon, +N"Js Act ng +urchas ng Agent. Eear ng date May 2>, 1560, the letter reads? Dear Atty. D Aon? %h s s to nform you as +res dent of &an Juan co Enterpr ses, that $ have author Aed the bearer, !$LE%%E ". ($JAN'D of No. 1>0> Aragon &t., &ta. 'ruA, Man la, to be my la9ful representat ve n the 9 thdra9al of the scrapMunserv ceable ra ls a9arded to me. 7or th s reason, $ have g ven her the or g nal copy of the a9ard, dated May 8, 1560 and D.". No. 620>688 dated May 20, 1560 9h ch 9 ll nd cate my 9a ver of r ghts, nterests and part c pat on n favor of !$LE%%E ". ($JAN'D. %hanF you for your cooperat on. Cery truly yours, /&gd.0 #audenc o "omualdeA %he ! Aette ". ( -anco ment oned n the letter 9as ! Aette ( -anco@ Angeles, pet t oner)s no9 deceased 9 fe. %hat very same day K May 2>, 1560 K ! Aette re=uested the +N" to transfer the locat on of 9 thdra9al for the reason that the

scrapMunserv ceable ra ls located n Del 'armen and !ubao, +ampanga 9ere not ready for haul ng. %he +N" granted sa d re=uest and allo9ed ! Aette to 9 thdra9 scrapMunserv ceable ra ls n Murc a, 'apas and &an M guel, %arlac nstead. Bo9ever, the +N" subse=uently suspended the 9 thdra9al n v e9 of 9hat t cons dered as documentary d screpanc es coupled by reported p lferages of over +800,000.00 9orth of +N" scrap propert es n %arlac. 'onse=uently, the spouses Angeles demanded the refund of the amount of +5>,000.00. %he +N", ho9ever, refused to pay, alleg ng that as per del very rece pt duly s gned by ! Aette, 84.>86 metr c tons of unserv ceable ra ls had already been 9 thdra9n 9h ch, at +2,100.00 per metr c ton, 9ere 9orth +114,261.60, an amount that e1ceeds the cla m for refund. Dn August 10, 1566, the spouses Angeles f led su t aga nst the +N" and ts corporate secretary, "odolfo 7lores, among others, for spec f c performance and damages before the "eg onal %r al 'ourt of UueAon ' ty. $n t, they prayed that +N" be d rected to del ver 4> metr c tons of scrapMunserv ceable ra ls and to pay them damages and attorney)s fees. $ssues hav ng been -o ned follo9 ng the f l ng by +N", et al., of the r ans9er, tr al ensued. Mean9h le, ! Aette (. Angeles passed a9ay and 9as subst tuted by her he rs, among 9hom s her husband, here n pet t oner !aureno %. Angeles. Dn Apr l 1>, 155>, the tr al court, on the postulate that the spouses Angeles are not the real part es@ n@ nterest, rendered -udgment d sm ss ng the r compla nt for lacF of cause of act on. As held by the court, ! Aette 9as merely a representat ve of "omualdeA n the 9 thdra9al of scrap or unserv ceable ra ls a9arded to h m and not an ass gnee to the latter)s r ghts 9 th respect to the a9ard. Aggr eved, the pet t oner nterposed an appeal 9 th the 'A, 9h ch, as stated at the threshold hereof, n ts dec s on of June 4, 2001, d sm ssed the appeal and aff rmed that of the tr al court. %he aff rmatory dec s on 9as re terated by the 'A n ts resolut on of &eptember 12, 2001, deny ng the pet t onerJs mot on for recons derat on. Bence, the pet t onerJs present recourse on the subm ss on that the 'A erred n aff rm ng the tr al court)s hold ng that pet t oner and h s spouse, as pla nt ffs a =uo, had no cause of act on as they 9ere not the real part es@ n@ nterest n th s case. (e DENH the pet t on. At the cru1 of the ssue s the matter of ho9 the afore=uoted May 2>, 1560 letter of "omualdeA to Atty. D Aon of the +N" should be taFen? 9as t meant to des gnate, or has t the effect of des gnat ng, ! Aette (. Angeles as a mere agent or as an ass gnee of h s /"omualdeA)s0 nterest n the scrap ra ls a9arded to &an Juan co Enterpr sesP %he 'AJs conclus on, aff rmatory of that of the tr al court, s that ! Aette 9as not an ass gnee, but merely an agent 9hose author ty 9as l m ted to the 9 thdra9al of the scrap ra ls, hence, 9 thout personal ty to sue.

(here agency e1 sts, the th rd party)s / n th s case, +N")s0 l ab l ty on a contract s to the pr nc pal and not to the agent and the relat onsh p of the th rd party to the pr nc pal s the same as that n a contract n 9h ch there s no agent. Normally, the agent has ne ther r ghts nor l ab l t es as aga nst the th rd party. Be cannot thus sue or be sued on the contract. & nce a contract may be v olated only by the part es thereto as aga nst each other, the real party@ n@ nterest, e ther as pla nt ff or defendant n an act on upon that contract must, generally, be a contract ng party. %he legal s tuat on s, ho9ever, d fferent 9here an agent s const tuted as an ass gnee. $n such a case, the agent may, n h s o9n behalf, sue on a contract made for h s pr nc pal, as an ass gnee of such contract. %he rule re=u r ng every act on to be prosecuted n the name of the real party@ n@ nterest recogn Aes the ass gnment of r ghts of act on and also recogn Aes that 9hen one has a r ght ass gned to h m, he s then the real party@ n@ nterest and may ma nta n an act on upon such cla m or r ght. 4 3pon scrut ny of the sub-ect "omualdeA)s letter to Atty. ' pr ano D Aon dated May 2>, 1560, t s at once apparent that ! Aette 9as to act -ust as a ,representat ve, of "omualdeA n the ,9 thdra9al of ra ls,, and not an ass gnee. 7or perspect ve, 9e reproduce the contents of sa d letter? %h s s to nform you as +res dent of &an Juan co Enterpr ses, that $ have aut-oriJed the bearer, !$LE%%E ". ($JAN'D 1 1 1 to e my laFful representatiAe in t-e Fit-draFal of t-e scrapHunserAicea le rails aFarded to me. :or t-is reason, $ have g ven her the or g nal copy of the a9ard, dated May 8, 1560 and D.". No. 620>688 dated May 20, 1560 9h ch 9 ll nd cate my 9a ver of r ghts, nterests and part c pat on n favor of !$LE%%E ". ($JAN'D. /Emphas s added0 $f ! Aette 9as 9 thout legal stand ng to sue and appear n th s case, there s more reason to hold that her pet t oner husband, e ther as her con-ugal partner or her he r, s also 9 thout such stand ng. +et t oner maFes much of the fact that the terms ,agent, or ,attorney@ n@fact, 9ere not used n the "omualdeA letter aforestated. $t bears to stress, ho9ever, that the 9ords ,pr nc pal, and ,agent,, are not the only terms used to des gnate the part es n an agency relat on. %he agent may also be called an attorney, pro1y, delegate or, as here, representative. $t cannot be over emphas Aed that "omualdeA)s use of the act ve verb ,author Aed,, nstead of ,ass gned,, nd cated an ntent on h s part to Feep and reta n h s nterest n the sub-ect matter. &tated a b t d fferently, he ntended to l m t ! AetteJs role n the scrap transact on to be ng the representat ve of h s nterest there n.

+et t oner subm ts that the second paragraph of the "omualdeA letter, stat ng @ ,$ have g ven :! Aette; the or g nal copy of the a9ard 1 1 1 9h ch 9 ll nd cate my 9a ver of r ghts, nterests and part c pat on n favor of ! Aette ". ( -anco, @ clar f es that ! Aette 9as ntended to be an ass gnee, and not a mere agent. (e are not persuaded. As t 9ere, the pet t oner conven ently om tted an mportant phrase preced ng the paragraph 9h ch 9ould have put the 9hole matter n conte1t. %he phrase s ,7or th s reason,, and the antecedent thereof s h s /"omualdeA0 hav ng appo nted ! Aette as h s representat ve n the matter of the 9 thdra9al of the scrap tems. $n f ne, the Fey phrase clearly conveys the dea that ! Aette 9as g ven the or g nal copy of the contract a9ard to enable her to 9 thdra9 the ra ls as "omualdeAJs author Aed representat ve. Art cle 1<24 of the ' v l 'ode prov des that the var ous st pulat ons of a contract shall be read and nterpreted together, attr but ng to the doubtful ones that sense 9h ch may result from all of them taFen -o ntly. $n f ne, the real ntent on of the part es s pr mar ly to be determ ned from the language used and gathered from the 9hole nstrument. (hen put nto the conte1t of the letter as a 9hole, t s abundantly clear that the r ghts 9h ch "omualdeA 9a ved or ceded n favor of ! Aette 9ere those n furtherance of the agency relat on that he had establ shed for the 9 thdra9al of the ra ls. At any rate, any doubt as to the ntent of "omualdeA generated by the 9ay h s letter 9as couched could be clar f ed by the acts of the ma n players themselves. Art cle 1<21 of the ' v l 'ode prov des that to -udge the ntent on of the contract ng part es, the r contemporaneous and subse=uent acts shall be pr nc pally cons dered. $n other 9ords, n case of doubt, resort may be made to the s tuat on, surround ngs, and relat ons of the part es. %he fact of agency 9as, as the tr al court aptly observed, 8 conf rmed n subse=uent letters from the Angeles spouses n 9h ch they themselves refer to ! Aette as ,author Aed representat ve, of &an Juan co Enterpr ses. Ment on may also be made that the 9 thdra9al rece pt 9h ch ! Aette had s gned nd cated that she 9as do ng so n a representat ve capac ty. Dne profess ng to act as agent for another s estopped to deny h s agency both as aga nst h s asserted pr nc pal and th rd persons nterested n the transact on 9h ch he engaged n. (hether or not an agency has been created s a =uest on to be determ ned by the fact that one represents and s act ng for another. %he appellate court, and before t, the tr al court, had peremptor ly determ ned that ! Aette, 9 th respect to the 9 thdra9al of the scrap n =uest on, 9as act ng for "omualdeA. And 9 th the v e9 9e taFe of th s case, there 9ere substant al p eces of ev dence adduced to support th s determ nat on. %he des red reversal urged by the pet t oner cannot, accord ngly, be granted. 7or, factual f nd ngs of the tr al court, adopted and conf rmed by the 'A, are, as a rule, f nal and conclus ve and may not be d sturbed on appeal. > &o t must be here. +et t oner ma nta ns that the "omualdeA letter n =uest on 9as not n the form of a spec al po9er of attorney, mply ng that the latter had not ntended to merely

author Ae h s 9 fe, ! Aette, to perform an act for h m /"omualdeA0. %he content on s spec ous. $n the absence of statute, no form or method of e1ecut on s re=u red for a val d po9er of attorneyI t may be n any form clearly sho9 ng on ts face the agentJs author ty. 2 A po9er of attorney s only but an nstrument n 9r t ng by 9h ch a person, as pr nc pal, appo nts another as h s agent and confers upon h m the author ty to perform certa n spec f ed acts on behalf of the pr nc pal. %he 9r tten author Aat on tself s the po9er of attorney, and th s s clearly nd cated by the fact that t has also been called a ,letter of attorney., $ts pr mary purpose s not to def ne the author ty of the agent as bet9een h mself and h s pr nc pal but to ev dence the author ty of the agent to th rd part es 9 th 9hom the agent deals. 6 %he letter under cons derat on s suff c ent to const tute a po9er of attorney. E1cept as may be re=u red by statute, a po9er of attorney s val d although no notary publ c ntervened n ts e1ecut on. 5 A po9er of attorney must be str ctly construed and pursued. %he nstrument 9 ll be held to grant only those po9ers 9h ch are spec f ed there n, and the agent may ne ther go beyond nor dev ate from the po9er of attorney. 10'onte1tually, all that ! Aette 9as author Aed to do 9as to &ithdra& the unserv ceableMscrap ra l ngs. Allo9 ng her author ty to sue therefor, espec ally n her o9n name, 9ould be to read someth ng not ntended, let alone 9r tten n the "omualdeA letter. 7 nally, the pet t oner)s cla m that ! Aette pa d the amount of +5>,000.00 to the +N" appears to be a mere afterthoughtI t ought to be d sm ssed outr ght under the estoppel pr nc ple. $n earl er proceed ngs, pet t oner h mself adm tted n h s compla nt that t 9as "omualdeA 9ho pa d th s amount. W5E$E:/$E, the pet t on s !EN)E! and the assa led dec s on of the 'A s A::)$'E!. 'osts aga nst the pet t oner. S/ /$!E$E!. %AN%)/ %. GA$%)A Assoc ate Just ce (E 'DN'3"? $E8NA(/ S. +&N/ Assoc ate Just ce 'ha rperson ANGE#)NA SAN!/*A#7G&()E$$E6 Assoc ate Just ce /DN !EACE0 $ENA(/ %. %/$/NA Assoc ate Just ce

A!/#:/ S. A6%&NA Assoc ate Just ce A%%E&%A%$DN $ attest that the conclus ons n the above dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. $E8NA(/ S . +&N/ Assoc ate Just ce 'ha rperson, &econd D v s on 'E"%$7$'A%$DN +ursuant to Art cle C$$$, &ect on 1< of the 'onst tut on, and the D v s on 'ha rperson)s Attestat on, t s hereby cert f ed that the conclus ons n the above dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourt. A$(E')/ *. +ANGAN)9AN 'h ef Just ce

:ootnotes
1

As f led, the pet t on mpleads the 'ourt of Appeals as among the respondents. +ursuant to &ec. 4, "ule 48, the 'A need not be mpleaded.
2

+enned by Assoc ate Just ce Mart n &. C llarama, Jr., 9 th Assoc ate Just ces 'onrado M. Cas=ueA, Jr. and Al c a !. &antos, concurr ngI "ollo, pp. 4>@8<.
<

$d. at 28. ;y v. .ourt of Appeals, #.". No. 1204>8, &eptember 5, 1555, <14 &'"A >5. "%' Dec s on, pp. 12@16I "ollo, pp. 21@22. %u#os v. 2alupo, #.". No. 1<51<>, January 1>, 2002, <2< &'"A >16. < Am Jur. 2d, Agency, &ec. 28. $b d. &ec. 2<. Reyes v. Santiago, 'A@#.". No. 4255>@2@", Nov. 22, 1528. < Am. Jur. 2d, Agency, &ec. <1. 7$"&% D$C$&$DN

>

10

NG.$. No. 11<=2=. April 3<, 3..4O

E!WA$! %. /NG, petitioner, 's. (5E %/&$( /: A++EA#S AN! (5E +E/+#E /: (5E +5)#)++)NES,respondents. !E%)S)/N %A$+)/, J.,

(-e %ase +et t oner Ed9ard '. Dng /Wpet t onerX0 f led th s pet t on for rev e9 on certiorari:1; to null fy the Dec s on:2; dated 22 Dctober 1554 of the 'ourt of Appeals n 'A@#.". '.". No. 140<1, and ts "esolut on :<; dated 16 Apr l 1558, deny ng pet t onerJs mot on for recons derat on. %he assa led Dec s on aff rmed in toto pet t onerJs conv ct on:4; by the "eg onal %r al 'ourt of Man la, Eranch <8,:8; on t9o counts of estafa for v olat on of the %rust "ece pts !a9, :>; as follo9s? (BE"E7D"E, -udgment s rendered? /10 pronounc ng accused ED(A"D '. DN# gu lty beyond reasonable doubt on t9o counts, as pr nc pal on both counts, of E&%A7A def ned under No. 1 /b0 of Art cle <18 of the "ev sed +enal 'ode n relat on to &ect on 1< of +res dent al Decree No. 118, and penal Aed under the 1st paragraph of the same Art cle <18, and sentenced sa d accused n each count to %EN /100 HEA"& of pr s on mayor, as m n mum, to %(EN%H /200 HEA"& of reclus on temporal, as ma1 mumI /20 A'U3$%%$N# accused EEN$%D DN# of the cr me charged aga nst h m, h s gu lt thereof not hav ng been establ shed by the +eople beyond reasonable doubtI /<0 Drder ng accused Ed9ard '. Dng to pay pr vate compla nant &ol d EanF 'orporat on the aggregate sum of +2,52>,82>.<2 as reparat on for the damages sa d accused caused to the pr vate compla nant, plus the nterest thereon at the legal rate and the penalty of 1R per month, both nterest and penalty computed from July 18, 1551, unt l the pr nc pal obl gat on s fully pa dI /40 Drder ng Een to Dng to pay, -o ntly and severally 9 th Ed9ard '. Dng, the pr vate compla nant the legal nterest and the penalty of 1R per month due and accru ng on the unpa d amount of +1,445,<58.21, st ll o9 ng to the pr vate offended under the trust rece pt E1h b t ', computed from July 18, 1551, unt l the sa d unpa d obl gat on s fully pa dI /80 Drder ng accused Ed9ard '. Dng to pay the costs of these t9o act ons.

&D D"DE"ED.:2;

(-e %-ar"e Ass stant ' ty +rosecutor D na +. %eves of the ' ty of Man la charged pet t oner and Een to Dng 9 th t9o counts of estafa under separate $nformat ons dated 11 Dctober 1551.

$n 'r m nal 'ase No. 52@101565, the $nformat on nd cts pet t oner and Een to Dng of the cr me of estafa comm tted as follo9s? %hat on or about July 2<, 1550, n the ' ty of Man la, +h l pp nes, the sa d accused, represent ng A"MA#"$ $nternat onal 'orporat on, consp r ng and confederat ng together d d then and there 9 llfully, unla9fully and felon ously defraud the &D!$DEAN* 'orporat on represented by ts Accountant, DEME%"$D !ALA"D, a corporat on duly organ Aed and e1 st ng under the la9s of the +h l pp nes located at Juan !una &treet, E nondo, th s ' ty, n the follo9 ng manner, to 9 t? the sa d accused rece ved n trust from sa d &D!$DEAN* 'orporat on the follo9 ng, to 9 t? 10,000 bags of urea valued at +2,080,000.00 spec f ed n a %rust "ece pt Agreement and covered by a !etter of 'red t No. DDM #D 50@005 n favor of the 7ert ph l 'orporat onI under the e1press obl gat on on the part of the sa d accused to account for sa d goods to &ol dbanF 'orporat on andMor rem t the proceeds of the sale thereof 9 th n the per od spec f ed n the Agreement or return the goods, f unsold mmed ately or upon demandI but sa d accused, once n possess on of sa d goods, far from comply ng 9 th the aforesa d obl gat on fa led and refused and st ll fa ls and refuses to do so desp te repeated demands made upon h m to that effect and 9 th ntent to defraud, 9 llfully, unla9fully and felon ously m sappl ed, m sappropr ated and converted the same or the value thereof to h s o9n personal use and benef t, to the damage and pre-ud ce of the sa d &ol dbanF 'orporat on n the aforesa d amount of +2,080,000.00 +h l pp ne 'urrency. 'ontrary to la9. $n 'r m nal 'ase No. 52@101550, the $nformat on l Fe9 se charges pet t oner of the cr me of estafa comm tted as follo9s? %hat on or about July >, 1550, n the ' ty of Man la, +h l pp nes, the sa d accused, represent ng A"MA#"$ $nternat onal 'orporat on, d d then and there 9 llfully, unla9fully and felon ously defraud the &D!$DEAN* 'orporat on represented by ts Accountant, DEME%"$D !ALA"D, a corporat on duly organ Aed and e1 st ng under the la9s of the +h l pp nes located at Juan !una &treet, E nondo, th s ' ty, n the follo9 ng manner, to 9 t? the sa d accused rece ved n trust from sa d &D!$DEAN* 'orporat on the follo9 ng goods, to 9 t? 128 pcs. "ear d ff. assy "NLD 45X 80 pcs. 7ront N "ear d ff assy. $suAu Elof 68 un ts 1@Eeam assy. $suAu &pA all valued at +2,8<2,800.00 spec f ed n a %rust "ece pt Agreement and covered by a Domest c !etter of 'red t No. DDM #D 50@00> n favor of the Metropole $ndustr al &ales 9 th address at +.D. Eo1 A' 215, UueAon ' tyI under the e1press obl gat on on the part of the sa d accused to account for sa d goods to &ol dbanF 'orporat on andMor rem t the proceeds of the sale thereof 9 th n the per od spec f ed n the Agreement or return the goods, f unsold mmed ately or upon demandI but sa d accused, once n possess on of sa d goods, far from comply ng 9 th the aforesa d obl gat on fa led and refused and st ll fa ls and refuses to do so desp te repeated demands made upon h m to that effect and 9 th ntent to

defraud, 9 llfully, unla9fully and felon ously m sappl ed, m sappropr ated and converted the same or the value thereof to h s o9n personal use and benef t, to the damage and pre-ud ce of the sa d &ol dbanF 'orporat on n the aforesa d amount of +2,8<2,800.00 +h l pp ne 'urrency. 'ontrary to la9.

Arrai"nment and +lea ( th the ass stance of counsel, pet t oner and Een to Dng both pleaded not gu lty 9hen arra gned. %hereafter, tr al ensued.

*ersion of t-e +rosecution %he prosecut onJs ev dence d sclosed that on 22 June 1550, pet t oner, represent ng A"MA#"$ $nternat onal 'orporat on :6;/WA"MA#"$X0, appl ed for a letter of cred t for +2,8<2,800.00 9 th &D!$DEAN* 'orporat on /WEanFX0 to f nance the purchase of d fferent al assembl es from Metropole $ndustr al &ales. Dn > July 1550, pet t oner, represent ng A"MA#"$, e1ecuted a trust rece pt:5; acFno9ledg ng rece pt from the EanF of the goods valued at +2,8<2,800.00. Dn 12 July 1550, pet t oner and Een to Dng, represent ng A"MA#"$, appl ed for another letter of cred t for +2,080,000.00 to f nance the purchase of merchand se from 7ert ph l 'orporat on. %he EanF approved the appl cat on, opened the letter of cred t and pa d to 7ert ph l 'orporat on the amount of +2,080,000.00. Dn 2< July 1550, pet t oner, s gn ng for A"MA#"$, e1ecuted another trust rece pt:10; n favor of the EanF acFno9ledg ng rece pt of the merchand se. Eoth trust rece pts conta ned the same st pulat ons. 3nder the trust rece pts, A"MA#"$ undertooF to account for the goods held n trust for the EanF, or f the goods are sold, to turn over the proceeds to the EanF. A"MA#"$ also undertooF the obl gat on to Feep the proceeds n the form of money, b lls or rece vables as the separate property of the EanF or to return the goods upon demand by the EanF, f not sold. $n add t on, pet t oner e1ecuted the follo9 ng add t onal undertaF ng stamped on the dorsal port on of both trust rece pts? $M(e -o ntly and severally agreed to any ncrease or decrease n the nterest rate 9h ch may occur after July 1, 1561, 9hen the 'entral EanF floated the nterest rates, and to pay add t onally the penalty of 1R per month unt l the amountMs or nstallmentMs due and unpa d under the trust rece pt on the reverse s de hereof sMare fully pa d.:11; +et t oner s gned alone the forego ng add t onal undertaF ng n the %rust "ece pt for +2,28<,800.00, 9h le both pet t oner and Een to Dng s gned the add t onal undertaF ng n the %rust "ece pt for +2,080,000.00. or (hen the trust rece pts became due and demandable, A"MA#"$ fa led to pay del ver the goods to the EanF desp te several demand letters. 'onse=uently, as of <1 May 1551, the unpa d account under the f rst trust

:12;

rece pt amounted to +1,822,160.>>,:1<; 9h le the unpa d account under the second trust rece pt amounted to +1,445,<58.21.:14;

*ersion of t-e !efense After the prosecut on rested ts case, pet t oner and Een to Dng, through counsel, man fested n open court that they 9ere 9a v ng the r r ght to present ev dence. %he tr al court then cons dered the case subm tted for dec s on. :18;

(-e $ulin" of t-e %ourt of Appeals +et t oner appealed h s conv ct on to the 'ourt of Appeals. Dn 22 Dctober 1554, the 'ourt of Appeals aff rmed the tr al courtJs dec s on in toto. +et t oner f led a mot on for recons derat on but the same 9as den ed by the 'ourt of Appeals n the "esolut on dated 16 Apr l 1558. %he 'ourt of Appeals held that although pet t oner s ne ther a d rector nor an off cer of A"MA#"$, he certa nly comes 9 th n the term Wemployees or other 1 1 1 persons there n respons ble for the offenseX n &ect on 1< of the %rust "ece pts !a9. %he 'ourt of Appeals e1pla ned as follo9s? $t s not d sputed that appellant transacted 9 th the &ol d EanF on behalf of A"MA#"$. %h s s because the 'orporat on cannot by tself transact bus ness or s gn documents t be ng an art f c al person. $t has to accompl sh these through ts agents. A corporat on has a personal ty d st nct and separate from those act ng on ts behalf. $n the fulf llment of ts purpose, the corporat on by necess ty has to employ persons to act on ts behalf. Ee ng a mere art f c al person, the la9 /&ect on 1<, +.D. 1180 recogn Aes the mposs b l ty of mpos ng the penalty of mpr sonment on the corporat on tself. 7or th s reason, t s the off cers or employees or other persons 9hom the la9 holds respons ble.:1>; %he 'ourt of Appeals ruled that 9hat made pet t oner l able 9as h s fa lure to account to the entruster EanF 9hat he undertooF to perform under the trust rece pts. %he 'ourt of Appeals held that A"MA#"$, 9h ch pet t oner represented, could not tself negot ate the e1ecut on of the trust rece pts, go to the EanF to rece ve, return or account for the entrusted goods. Eased on the representat ons of pet t oner, the EanF accepted the trust rece pts and, conse=uently, e1pected pet t oner to return or account for the goods entrusted. :12; %he 'ourt of Appeals also ruled that the prosecut on need not prove that pet t oner s occupy ng a pos t on n A"MA#"$ n the nature of an off cer or s m lar pos t on to hold h m the Wperson/s0 there n respons ble for the offense.X %he 'ourt of Appeals held that pet t onerJs adm ss on that h s part c pat on 9as merely nc dental st ll maFes h m fall 9 th n the purv e9 of the la9 as one of the corporat onJs Wemployees or other off c als or persons there n respons ble for the offense.X $nc dental or not, pet t oner 9as then act ng on behalf of A"MA#"$, carry ng out the corporat onJs dec s on 9hen he s gned the trust rece pts.

%he 'ourt of Appeals further ruled that the prosecut on need not prove that pet t oner personally rece ved and m sappropr ated the goods sub-ect of the trust rece pts. Ev dence of m sappropr at on s not re=u red under the %rust "ece pts !a9. %o establ sh the cr me of estafa, t s suff c ent to sho9 fa lure by the entrustee to turn over the goods or the proceeds of the sale of the goods covered by a trust rece pt. Moreover, the banF s not obl ged to determ ne f the goods came nto the actual possess on of the entrustee. %rust rece pts are ssued to fac l tate the purchase of merchand se. %o obl gate the banF to e1am ne the fact of actual possess on by the entrustee of the goods sub-ect of every trust rece pt 9 ll greatly mpede commerc al transact ons. Bence, th s pet t on.

(-e )ssues +et t oner seeFs to reverse h s conv ct on by contend ng that the 'ourt of Appeals erred? 1. $N "3!$N# %BA%, EH %BE ME"E '$"'3M&%AN'E %BA% +E%$%$DNE" A'%ED A& A#EN% AND &$#NED 7D" %BE EN%"3&%EE 'D"+D"A%$DN, +E%$%$DNE" (A& NE'E&&A"$!H %BE DNE "E&+DN&$E!E 7D" %BE D77EN&EI AND 2. $N 'DNC$'%$N# +E%$%$DNE" 3NDE" &+E'$7$'A%$DN& ND% A!!E#ED $N %BE $N7D"MA%$DN.

(-e $ulin" of t-e %ourt %he 'ourt susta ns the conv ct on of pet t oner.

First Assi2ned Error: 3etitioner co-es within the pur'iew o! #ection 14 o! the $rust Receipts 1aw. +et t oner contends that the 'ourt of Appeals erred n f nd ng h m l able for the default of A"MA#"$, argu ng that n s gn ng the trust rece pts, he merely acted as an agent of A"MA#"$. +et t oner asserts that no9here n the trust rece pts d d he assume personal respons b l ty for the undertaF ngs of A"MA#"$ 9h ch 9as the entrustee. +et t onerJs arguments fa l to persuade us. %he p votal ssue for resolut on s 9hether pet t oner comes 9 th n the purv e9 of &ect on 1< of the %rust "ece pts !a9 9h ch prov des? 1 1 1. $f the v olat on is committed #y a corporation, partnersh p, assoc at on or other -ur d cal ent t es, the penalty prov ded for n th s Decree shall be mposed upon the d rectors, off cers, employees or other off c als or persons therein responsi#le for the offense, 9 thout pre-ud ce to the c v l l ab l t es ar s ng from the offense. /Emphas s suppl ed0

(e hold that pet t oner s a person respons ble for v olat on of the %rust "ece pts !a9. %he relevant penal prov s on of the %rust "ece pts !a9 reads? &E'. 1<. $enalty .lause. K %he fa lure of the entrustee to turn over the proceeds of the sale of the goods, documents or nstruments covered by a trust rece pt to the e1tent of the amount o9 ng to the entruster or as appears n the trust rece pt or to return sa d goods, documents or nstruments f they 9ere not sold or d sposed of n accordance 9 th the terms of the trust rece pt shall const tute the cr me of estafa, pun shable under the prov s ons of Art cle %hree Bundred and 7 fteen, +aragraph Dne /b0, of Act Numbered %hree %housand E ght Bundred and 7 fteen, as amended, other9 se Fno9n as the "ev sed +enal 'ode. $f the v olat on or offense s committed #y a corporation, partnersh p, assoc at on or other -ur d cal ent t es, the penalty prov ded for n th s Decree shall be mposed upon the d rectors, off cers, employees or other off c als or persons therein responsi#le for the offense, 9 thout pre-ud ce to the c v l l ab l t es ar s ng from the cr m nal offense. /Emphas s suppl ed0 %he %rust "ece pts !a9 s v olated 9henever the entrustee fa ls to? /10 turn over the proceeds of the sale of the goods, or /20 return the goods covered by the trust rece pts f the goods are not sold. :16; %he mere fa lure to account or return g ves r se to the cr me 9h ch s malum prohi#itum.:15; %here s no re=u rement to prove ntent to defraud.:20; %he %rust "ece pts !a9 recogn Aes the mposs b l ty of mpos ng the penalty of mpr sonment on a corporat on. Bence, f the entrustee s a corporat on, the la9 maFes the off cers or employees or other persons respons ble for the offense l able to suffer the penalty of mpr sonment. %he reason s obv ous? corporat ons, partnersh ps, assoc at ons and other -ur d cal ent t es cannot be put to -a l. Bence, the cr m nal l ab l ty falls on the human agent respons ble for the v olat on of the %rust "ece pts !a9. $n the nstant case, the EanF 9as the entruster 9h le A"MA#"$ 9as the entrustee. Ee ng the entrustee, A"MA#"$ 9as the one respons ble to account for the goods or ts proceeds n case of sale. Bo9ever, the cr m nal l ab l ty for v olat on of the %rust "ece pts !a9 falls on the human agent respons ble for the v olat on. +et t oner, 9ho adm ts be ng the agent of A"MA#"$, s the person respons ble for the offense for t9o reasons. 7 rst, pet t oner s the s gnatory to the trust rece pts, the loan appl cat ons and the letters of cred t. &econd, desp te be ng the s gnatory to the trust rece pts and the other documents, pet t oner d d not e1pla n or sho9 9hy he s not respons ble for the fa lure to turn over the proceeds of the sale or account for the goods covered by the trust rece pts. %he EanF released the goods to A"MA#"$ upon e1ecut on of the trust rece pts and as part of the loan transact ons of A"MA#"$. %he EanF had a r ght to demand from A"MA#"$ payment or at least a return of the goods. A"MA#"$ fa led to pay or return the goods desp te repeated demands by the EanF. $t s a 9ell@settled doctr ne long before the enactment of the %rust "ece pts !a9, that the fa lure to account, upon demand, for funds or property held n trust s ev dence of convers on or m sappropr at on. :21; 3nder the la9, mere fa lure by the entrustee to account for the goods rece ved n trust const tutes estafa. %he %rust "ece pts !a9 pun shes d shonesty and abuse of conf dence n the handl ng of money or goods to the pre-ud ce of publ c order. :22; %he mere fa lure to del ver the proceeds of the sale or the goods f not sold const tutes a cr m nal offense

that causes pre-ud ce not only to the cred tor, but also to the publ c nterest. :2<; Ev dently, the EanF suffered pre-ud ce for ne ther money nor the goods 9ere turned over to the EanF. %he %rust "ece pts !a9 e1pressly maFes the corporat onJs off cers or employees or other persons there n respons ble for the offense l able to suffer the penalty of mpr sonment. $n the nstant case, pet t oner s gned the t9o trust rece pts on behalf of A"MA#"$:24; as the latter could only act through ts agents. (hen pet t oner s gned the trust rece pts, he acFno9ledged rece pt of the goods covered by the trust rece pts. $n add t on, pet t oner 9as fully a9are of the terms and cond t ons stated n the trust rece pts, nclud ng the obl gat on to turn over the proceeds of the sale or return the goods to the EanF, to 9 t? Recei'ed/ upon the $R5#$ here nafter ment oned from &D!$DEAN* 'D"+D"A%$DN /hereafter referred to as the EAN*0, the follo9 ng goods and merchand se, the property of sa d EAN* spec f ed n the b ll of lad ng as follo9s? 1 1 1 and n cons derat on thereof, I6we here&, a2ree to hold said 2oods in $rust !or the said .AN7 and as ts property 9 th l berty to sell the same for ts account but 9 thout author ty to maFe any other d spos t on 9hatsoever of the sa d goods or any part thereof /or the proceeds thereof0 e ther by 9ay of cond t onal sale, pledge, or other9 se. In case o! sale I6we a2ree to hand the proceeds as soon as recei'ed to the .AN7 to apply aga nst the relat ve acceptance /as descr bed above0 and for the payment of any other ndebtedness of m neMours to &D!$DEAN* 'D"+D"A%$DN. 1 1 1. $M9e agree to Feep sa d goods, manufactured products, or proceeds thereof, 9hether n the form of money or b lls, rece vables, or accounts, separate and capable of dent f cat on as the property of the EAN*. I6we !urther a2ree to return the 2oods/ docu-ents/ or instru-ents in the e'ent o! their non8sale/ upon de-and or within 9999999 da,s/ at the option o! the .AN7. 1 1 1. /Emphas s suppl ed0:28; %rue, pet t oner acted on behalf of A"MA#"$. Bo9ever, t s a 9ell@settled rule that the la9 of agency govern ng c v l cases has no appl cat on n cr m nal cases. (hen a person part c pates n the comm ss on of a cr me, he cannot escape pun shment on the ground that he s mply acted as an agent of another party. :2>; $n the nstant case, the EanF accepted the trust rece pts s gned by pet t oner based on pet t onerJs representat ons. $t s the fact of be ng the s gnatory to the t9o trust rece pts, and thus a direct participant to the cri-e , 9h ch maFes pet t oner a person respons ble for the offense. +et t oner could have ra sed the defense that he had noth ng to do 9 th the fa lure to account for the proceeds or to return the goods. +et t oner could have sho9n that he had severed h s relat onsh p 9 th A"MA#"$ pr or to the loss of the proceeds or the d sappearance of the goods. +et t oner, ho9ever, 9a ved h s r ght to present any ev dence, and thus fa led to sho9 that he s not respons ble for the v olat on of the %rust "ece pts !a9.

%here s no d spute that on > July 1550 and on 2< July 1550, pet t oner s gned the t9o trust rece pts:22; on behalf of A"MA#"$. +et t oner, act ng on behalf of A"MA#"$, e1pressly acFno9ledged rece pt of the goods n trust for the EanF. A"MA#"$ fa led to comply 9 th ts undertaF ngs under the trust rece pts. Dn the other hand, pet t oner fa led to e1pla n and commun cate to the EanF 9hat happened to the goods desp te repeated demands from the EanF. As of 1< May 1551, the unpa d account under the f rst and second trust rece pts amounted to +1,822,160.>0 and +1,445,<58.21, respect vely.:26;

#econd Assi2ned Error: 3etitioner:s con'iction under the alle2ations in the two In!or-ations !or Esta!a. +et t oner argues that he cannot be conv cted on a ne9 set of facts not alleged n the $nformat ons. +et t oner cla ms that the tr al courtJs dec s on found that t 9as A"MA#"$ that transacted 9 th the EanF, act ng through pet t oner as ts agent. +et t oner asserts that th s contrad cts the spec f c allegat on n the $nformat ons that t 9as pet t oner 9ho 9as const tuted as the entrustee and 9as thus obl gated to account for the goods or ts proceeds f sold. +et t oner ma nta ns that th s absolves h m from cr m nal l ab l ty. (e f nd no mer t n pet t onerJs arguments. 'ontrary to pet t onerJs assert ons, the $nformat ons e1pl c tly allege that pet t oner, represent ng A"MA#"$, defrauded the EanF by fa l ng to rem t the proceeds of the sale or to return the goods desp te demands by the EanF, to the latterJs pre-ud ce. As an essent al element of estafa 9 th abuse of conf dence, t s suff c ent that the $nformat ons spec f cally allege that the entrustee rece ved the goods. %he $nformat ons e1pressly state that A"MA#"$, represented by pet t oner, rece ved the goods n trust for the EanF under the e1press obl gat on to rem t the proceeds of the sale or to return the goods upon demand by the EanF. %here s no need to allege n the $nformat ons n 9hat capac ty pet t oner part c pated to hold h m respons ble for the offense. 3nder the %rust "ece pts !a9, t s suff c ent to allege and establ sh the fa lure of A"MA#"$, 9hom pet t oner represented, to rem t the proceeds or to return the goods to the EanF. (hen pet t oner s gned the trust rece pts, he cla med he 9as represent ng A"MA#"$. %he corporat on obv ously acts only through ts human agents and t s the conduct of such agents 9h ch the la9 must deter. :25; %he e1 stence of the corporate ent ty does not sh eld from prosecut on the agent 9ho Fno9 ngly and ntent onally comm ts a cr me at the nstance of a corporat on. :<0;

3enalt, !or the cri-e o! Esta!a. %he penalty for the cr me of estafa s prescr bed n Art cle <18 of the "ev sed +enal 'ode, as follo9s? 1st. %he penalty of prision correccional n ts ma1 mum per od to prision mayor n ts m n mum per od, f the amount of the fraud s over 12,000 pesos but does not e1ceed 22,000 pesosI and f such amount e1ceeds the latter sum, the penalty prov ded n th s paragraph shall be mposed n ts ma1 mum per od, add ng one

year for each add t onal 10,000 pesosI but the total penalty 9h ch may be mposed should not e1ceed t9enty years. 1 1 1. $n the nstant case, the amount of the fraud n 'r m nal 'ase No. 52@101565 s +1,822,160.>>. $n 'r m nal 'ase No. 52@101550, the amount of the fraud s +1,445,<58.21. & nce the amounts of the fraud n each estafa e1ceeds +22,000.00, the penalty of prision correccional ma1 mum to prision mayor m n mum should be mposed n ts ma1 mum per od as prescr bed n Art cle <18 of the "ev sed +enal 'ode. %he ma1 mum ndeterm nate sentence should be taFen from th s ma1 mum per od 9h ch has a durat on of > years, 6 months and 21 days to 6 years. Dne year s then added for each add t onal +10,000.00, but the total penalty should not e1ceed 20 years. %hus, the ma1 mum penalty for each count of estafa n th s case should be 20 years. 3nder the $ndeterm nate &entence !a9, the m n mum ndeterm nate sentence can be any9here 9 th n the range of the penalty ne1t lo9er n degree to the penalty prescr bed by the 'ode for the offense. %he m n mum range of the penalty s determ ned 9 thout f rst cons der ng any mod fy ng c rcumstance attendant to the comm ss on of the cr me and 9 thout reference to the per ods nto 9h ch t may be subd v ded. :<1; %he mod fy ng c rcumstances are cons dered only n the mpos t on of the ma1 mum term of the ndeterm nate sentence. :<2; & nce the penalty prescr bed n Art cle <18 s prision correccional ma1 mum to prision mayor m n mum, the penalty ne1t lo9er n degree 9ould be prision correccional m n mum to med um. %hus, the m n mum term of the ndeterm nate penalty should be any9here 9 th n > months and 1 day to 4 years and 2 months.
:<<;

Accord ngly, the 'ourt f nds a need to mod fy n part the penalt es mposed by the tr al court. %he m n mum penalty for each count of estafa should be reduced to four /40 years and t9o /20 months of prision correccional. As for the c v l l ab l ty ar s ng from the cr m nal offense, the =uest on s 9hether as the s gnatory for A"MA#"$, pet t oner s personally l able pursuant to the prov s on of &ect on 1< of the %rust "ece pts !a9. $n 3rudential .an; '. Inter-ediate Appellate *ourt,:<4; the 'ourt d scussed the mpos t on of c v l l ab l ty for v olat on of the %rust "ece pts !a9 n th s 9 se? $t s clear that f the v olat on or offense s comm tted by a corporation, partnership, association or other "uridical entities, the penalty shall be mposed upon the d rectors, off cers, employees or other off c als or persons respons ble for the offense. %he penalty referred to s imprisonment, the durat on of 9h ch 9ould depend on the amount of the fraud as prov ded for n Art cle <18 of the "ev sed +enal 'ode. %he reason for th s s obv ous? corporat on, partnersh p, assoc at on or other -ur d cal ent t es cannot be put n -a l. <owe'er/ it is these entities which are -ade lia&le !or the ci'il lia&ilities arisin2 !ro- the cri-inal o!!ense. %h s s the mport of the clause Y9 thout pre-ud ce to the c v l l ab l t es ar s ng from the cr m nal offenseJ. /Emphas s suppl ed0 $n 3rudential .an;, the 'ourt ruled that the person s gn ng the trust rece pt for the corporat on s not sol dar ly l able 9 th the entrustee@corporat on for the c v l l ab l ty ar s ng from the cr m nal offense. Be may, ho9ever, be personally l able f he bound h mself to pay the debt of the corporat on under a separate contract of surety or guaranty.

$n the nstant case, pet t oner d d not s gn n h s personal capac ty the sol dary guarantee clause:<8; found on the dorsal port on of the trust rece pts. +et t oner placed h s s gnature after the type9r tten 9ords WA"M'D $ND3&%"$A! 'D"+D"A%$DNX found at the end of the sol dary guarantee clause. Ev dently, pet t oner d d not undertaFe to guaranty personally the payment of the pr nc pal and nterest of A"MA#"$Js debt under the t9o trust rece pts. $n contrast, pet t oner s gned the stamped add t onal undertaF ng 9 thout any nd cat on he 9as s gn ng for A"MA#"$. +et t oner merely placed h s s gnature after the add t onal undertaF ng. 'learly, 9hat pet t oner s gned n h s personal capac ty 9as the stamped add t onal undertaF ng to pay a monthly penalty of 1R of the total obl gat on n case of A"MA#"$Js default. $n the add t onal undertaF ng, pet t oner bound h mself to pay W-o ntly and severallyX a monthly penalty of 1R n case of A"MA#"$Js default. :<>; %hus, pet t oner s l able to the EanF for the st pulated monthly penalty of 1R on the outstand ng amount of each trust rece pt. %he penalty shall be computed from 18 July 1551, 9hen pet t oner rece ved the demand letter, :<2; unt l the debt s fully pa d. W5E$E:/$E, the assa led Dec s on s A77$"MED 9 th MDD$7$'A%$DN. $n 'r m nal 'ase No. 52@101565 and n 'r m nal 'ase No. 52@101550, for each count of estafa, pet t oner ED(A"D '. DN# s sentenced to an ndeterm nate penalty of mpr sonment from four /40 years and t9o /20 months of prision correccional as M$N$M3M, to t9enty /200 years of reclusion temporal as MAG$M3M. +et t oner s ordered to pay &D!$DEAN* 'D"+D"A%$DN the st pulated penalty of 1R per month on the outstand ng balance of the t9o trust rece pts to be computed from 18 July 1551 unt l the debt s fully pa d. S/ /$!E$E!. Davide, 9r., ..9., (.hairman*, 4itug, Fnares<Santiago, and Azcuna, 99., concur.

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3nder "ule 48 of the "ules of 'ourt. +enned by Assoc ate Just ce Anton o M. Mart neA 9 th Assoc ate Just ces 7erm n A. Mart n, Jr. and 'onrado M. Cas=ueA, Jr. concurr ng, "ollo, pp. 15@25. "ollo, p. <1. $n 'r m nal 'ase Nos. 52@101565 N 52@101550, ent tled W+eople v. Een to Dng N Ed9ard '. Dng.X +enned by Judge "amon MaFas ar, 'A "ecords, pp.10@1>. &ect on 1< of +D No. 118, the %rust "ece pts !a9. 'A "ecords, p. 1>. 7ormerly A"M'D $ndustr al 'orporat on, "ollo, p. 21, 'A Dec s on, p. <. E1h b t E, "ecords, p. 10<. E1h b t ', i#id., p. 104. E1h b ts E@< N E@4, "ecords, p. 10<I E1h b ts '@< N '@4, "ecords, p. 104. E1h b ts D, B N $, i#id., pp. 108 N 106@A.

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E1h b t E, i#id., p. 10>. E1h b t 7, i#id., p. 102. "ecords, p. 11>. "ollo, pp. 24@28. :#id., p. 28. Metropol tan EanF and %rust 'ompany v. %onda, #.". No. 1<44<>, 1> August 2000, <<6 &'"A 284. +eople v. N tafan, #.". Nos. 61885@>0, > Apr l 1552, 202 &'"A 22>. 'ol nares v. 'ourt of Appeals, #.". No. 50626, 8 &eptember 2000, <<5 &'"A >05. Bayco v. 'A, Nos. !@88228@6>, 2> August 1558, 1<6 &'"A 222I Daya9on v. Ead lla, A.M. No. M%J@ 00@1<05, > &eptember 2000, <<5 &'"A 202. Supra, see note 16. Supra, see note 20. E1h b ts E@1 N '@2, "ecords, pp. 10< N 104. E1h b ts E N ', "ecords, pp. 10< N 104. +eople v. 'ho9dury, #.". Nos. 125822@60, 18 7ebruary 2000, <28 &'"A 822. Supra, see notes 5 N 10. Supra, see notes 1< N 14. Supra, see note 2>. Supra, see note 2>. +eople v. #abres, <<8 +h l. 242 /15520. :#id. +eople v. Eaut sta, <11 +h l. 222 /15580I Dela 'ruA v. 'A, <<< +h l. 12> /155>0I +eople v. Drt A@M yaFe, <44 +h l. 856 /15520I +eople v. &aley, <8< +h l. 652 /15560. #.". No. 2466>, 6 December 1552, 21> &'"A 282. %h s clause states? W$n cons derat on of &D!$DEAN* 'D"+D"A%$DN comply ng 9 th the forego ng, 9e -o ntly and severally agree and undertaFe to pay on demand to &D!$DEAN* 'D"+D"A%$DN, all sums of money 9h ch the sa d &D!$DEAN* 'D"+D"A%$DN may call upon us to pay ar s ng out of or perta n ng to, andMor n any event connected 9 th the default of andMor non@fulf llment n any respect of the undertaF ng of the aforesa d? 1 1 1.X Supra, see note 11. Supra, see note 12. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la

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7$"&% D$C$&$DN G.$. No. 1;3010 July 41, 3..1

+5)#)++)NE NA()/NA# 9ANK, pet t oner, vs. $)($A((/ G$/&+ )N%., $)A((/ )N(E$NA()/NA#, )N%., and !A!ASAN GENE$A# 'E$%5AN!)SE,respondents. KA+&NAN, J., $n a pet t on for rev e9 on cert orar under "ule 48 of the "ev sed "ules of 'ourt, pet t oner seeFs to annul and set as de the 'ourt of Appeals) dec s on n '.A. 'C #.". &.+. No. 88<24 dated March 22, 2000, aff rm ng the Drder ssu ng a 9r t of prel m nary n-unct on of the "eg onal %r al 'ourt of MaFat , Eranch 142 dated June <0, 1555, and ts Drder dated Dctober 4, 1555, 9h ch den ed pet t oner)s mot on to d sm ss. %he antecedents of th s case are as follo9s? +et t oner +h l pp ne Nat onal EanF s a domest c corporat on organ Aed and e1 st ng under +h l pp ne la9. Mean9h le, respondents " tratto #roup, $nc., " atto $nternat onal, $nc. and Dadasan #eneral Merchand se are domest c corporat ons, l Fe9 se, organ Aed and e1 st ng under +h l pp ne la9. Dn May 25, 155>, +NE $nternat onal 7 nance !td. /+NE@$7!0 a subs d ary company of +NE, organ Aed and do ng bus ness n Bong *ong, e1tended a letter of cred t n favor of the respondents n the amount of 3&S<00,000.00 secured by real estate mortgages const tuted over four /40 parcels of land n MaFat ' ty. %h s cred t fac l ty 9as later ncreased success vely to 3&S1,140,000.00 n &eptember 155>I to 3&S1,250,000.00 n November 155>I to 3&S1,428,000.00 n 7ebruary 1552I and decreased to 3&S1,421,<1>.16 n Apr l 1556. "espondents made repayments of the loan ncurred by rem tt ng those amounts to the r loan account 9 th +NE@$7! n Bong *ong. Bo9ever, as of Apr l <0, 1556, the r outstand ng obl gat ons stood at 3&S1,452,224.20. +ursuant to the terms of the real estate mortgages, +NE@$7!, through ts attorney@ n@fact +NE, not f ed the respondents of the foreclosure of all the real estate mortgages and that the propert es sub-ect thereof 9ere to be sold at a publ c auct on on May 22, 1555 at the MaFat ' ty Ball. Dn May 28, 1555, respondents f led a compla nt for n-unct on 9 th prayer for the ssuance of a 9r t of prel m nary n-unct on andMor temporary restra n ng order before the "eg onal %r al 'ourt of MaFat . %he E1ecut ve Judge of the "eg onal %r al 'ourt of MaFat ssued a 22@hour temporary restra n ng order. Dn May 26, 1555, the case 9as raffled to Eranch 142 of the "eg onal %r al 'ourt of MaFat . %he tr al -udge then set a hear ng on June 6, 1555. At the hear ng of the appl cat on for prel m nary n-unct on, pet t oner 9as g ven a per od of seven days to f le ts 9r tten oppos t on to the appl cat on. Dn June 18, 1555, pet t oner f led an oppos t on to the appl cat on for a 9r t of prel m nary n-unct on to 9h ch the respondents f led a reply. Dn June 28, 1555, pet t oner f led a mot on to d sm ss on the grounds of fa lure to state a cause of act on and the absence of any pr v ty bet9een the pet t oner and respondents. Dn June <0, 1555, the tr al

court -udge ssued an Drder for the ssuance of a 9r t of prel m nary n-unct on, 9h ch 9r t 9as correspond ngly ssued on July 14, 1555. Dn Dctober 4, 1555, the mot on to d sm ss 9as den ed by the tr al court -udge for lacF of mer t. +et t oner, thereafter, n a pet t on for certiorari and proh b t on assa led the ssuance of the 9r t of prel m nary n-unct on before the 'ourt of Appeals. $n the mpugned dec s on,1 the appellate court d sm ssed the pet t on. +et t oner thus seeFs recourse to th s 'ourt and ra ses the follo9 ng errors? 1. %BE 'D3"% D7 A++EA!& +A!+AE!H E""ED $N ND% D$&M$&&$N# %BE 'DM+!A$N% A Q;=, 'DN&$DE"$N# %BA% EH %BE A!!E#A%$DN& D7 %BE 'DM+!A$N%, ND 'A3&E D7 A'%$DN EG$&%& A#A$N&% +E%$%$DNE", (B$'B $& ND% A "EA! +A"%H $N $N%E"E&% EE$N# A ME"E A%%D"NEH@$N@7A'% A3%BD"$LED %D EN7D"'E AN AN'$!!A"H 'DN%"A'%. 2. %BE 'D3"% D7 A++EA!& +A!+AE!H E""ED $N A!!D($N# %BE %"$A! 'D3"% %D $&&3E $N EG'E&& D" !A'* D7 J3"$&D$'%$DN A ("$% D7 +"E!$M$NA"H $NJ3N'%$DN DCE" AND EEHDND (BA% (A& +"AHED 7D" $N %BE 'DM+!A$N% A U3D 'DN%"A"H %D .0:58 =8 S7A88, A8$ 4S. 2;AD:H 9R., 101 &'"A 622.2 +et t oner prays, inter alia, that the 'ourt of Appeals) Dec s on dated March 22, 2000 and the tr al court)s Drders dated June <0, 1555 and Dctober 4, 1555 be set as de and the d sm ssal of the compla nt n the nstant case. < $n the r 'omment, respondents argue that even assum ng arguendo that pet t oner and +NE@$7! are t9o separate ent t es, pet t oner s st ll the party@ n@ nterest n the appl cat on for prel m nary n-unct on because t s tasFed to comm t acts of foreclos ng respondents) propert es. 4 "espondents ma nta n that the ent re cred t fac l ty s vo d as t conta ns st pulat ons n v olat on of the pr nc ple of mutual ty of contracts. 8 $n add t on, respondents -ust f ed the act of the court a quo n apply ng the doctr ne of ,+ erc ng the Ce l of 'orporate $dent ty, by stat ng that pet t oner s merely an alter ego or a bus ness condu t of +NE@$7!.> %he pet t on s mpressed 9 th mer t. "espondents, n the r compla nt, anchor the r prayer for n-unct on on alleged nval d prov s ons of the contract? #"D3ND& $ %BE DE%E"M$NA%$DN D7 %BE $N%E"E&% "A%E& EE$N# !E7% %D %BE &D!E D$&'"E%$DN D7 %BE DE7ENDAN% +NE 'DN%"ACENE& %BE +"$N'$+A! D7 M3%3A!$%H D7 'DN%"A'%&. $$

%BE"E EE$N# A &%$+3!A%$DN $N %BE !DAN A#"EEMEN% %BA% %BE "A%E D7 $N%E"E&% A#"EED 3+DN MAH EE 3N$!A%E"A!!H MDD$7$ED EH DE7ENDAN%, %BE"E (A& ND &%$+3!A%$DN %BA% %BE "A%E D7 $N%E"E&% &BA!! EE "ED3'ED $N %BE ECEN% %BA% %BE A++!$'AE!E MAG$M3M "A%E D7 $N%E"E&% $& "ED3'ED EH !A( D" EH %BE MDNE%A"H EDA"D. 2 Eased on the aforement oned grounds, respondents sought to en-o n and restra n +NE from the foreclosure and eventual sale of the property n order to protect the r r ghts to sa d property by reason of vo d cred t fac l t es as bases for the real estate mortgage over the sa d property. 6 %he contract =uest oned s one entered nto bet9een respondent and +NE@$7!, not +NE. $n the r compla nt, respondents adm t that pet t oner s a mere attorney@ n@fact for the +NE@$7! 9 th full po9er and author ty to, inter alia, foreclose on the propert es mortgaged to secure the r loan obl gat ons 9 th +NE@$7!. $n other 9ords, here n pet t oner s an agent 9 th l m ted author ty and spec f c dut es under a spec al po9er of attorney ncorporated n the real estate mortgage. $t s not pr vy to the loan contracts entered nto by respondents and +NE@$7!. %he ssue of the val d ty of the loan contracts s a matter bet9een +NE@$7!, the pet t oner)s pr nc pal and the party to the loan contracts, and the respondents. Het, desp te the recogn t on that pet t oner s a mere agent, the respondents n the r compla nt prayed that the pet t oner +NE be ordered to re@compute the reschedul ng of the nterest to be pa d by them n accordance 9 th the terms and cond t ons n the documents ev denc ng the cred t fac l t es, and cred t ng the amount prev ously pa d to +NE by here n respondents. 5 'learly, pet t oner not be ng a part to the contract has no po9er to re@compute the nterest rates set forth n the contract. "espondents, therefore, do not have any cause of act on aga nst pet t oner. %he tr al court, ho9ever, n ts Drder dated Dctober 4, 1554, ruled that s nce +NE@$7!, s a 9holly o9ned subs d ary of defendant +h l pp ne Nat onal EanF, the su t aga nst the defendant +NE s a su t aga nst +NE@$7!. 10 $n -ust fy ng ts rul ng, the tr al court, c t ng the case of 1oppel $hil. :nc. vs. Fatco,11 reasoned that the corporate ent ty may be d sregarded 9here a corporat on s the mere alter ego, or bus ness condu t of a person or 9here the corporat on s so organ Aed and controlled and ts affa rs are so conducted, as to maFe t merely an nstrumental ty, agency, condu t or ad-unct of another corporat on. 12 (e d sagree. %he general rule s that as a legal ent ty, a corporat on has a personal ty d st nct and separate from ts nd v dual stocFholders or members, and s not affected by the personal r ghts, obl gat ons and transact ons of the latter. 1<%he mere fact that a corporat on o9ns all of the stocFs of another corporat on, taFen alone s not suff c ent to -ust fy the r be ng treated as one ent ty. $f used to perform leg t mate funct ons, a subs d ary)s separate e1 stence may be respected, and the l ab l ty of the parent corporat on as 9ell as the subs d ary 9 ll be conf ned to those ar s ng n the r respect ve bus ness. %he courts may n the e1erc se of -ud c al d scret on step n to prevent the abuses of separate ent ty pr v lege and p erce the ve l of corporate ent ty.

(e f nd, ho9ever, that the rul ng n 1oppel f nds no appl cat on n the case at bar. $n sa d case, th s 'ourt d sregarded the separate e1 stence of the parent and the subs d ary on the ground that the latter 9as formed merely for the purpose of evad ng the payment of h gher ta1es. $n the case at bar, respondents fa l to sho9 any cogent reason 9hy the separate ent t es of the +NE and +NE@$7! should be d sregarded. (h le there e1 sts no def n te test of general appl cat on n determ n ng 9hen a subs d ary may be treated as a mere nstrumental ty of the parent corporat on, some factors have been dent f ed that 9 ll -ust fy the appl cat on of the treatment of the doctr ne of the p erc ng of the corporate ve l. %he case of 2arrett vs. Southern Rail&ay .o.14 s enl ghten ng. %he case nvolved a su t aga nst the &outhern "a l9ay 'ompany. +la nt ff 9as employed by !eno r 'ar (orFs and alleged that he susta ned n-ur es 9h le 9orF ng for !eno r. Be, ho9ever, f led a su t aga nst &outhern "a l9ay 'ompany on the ground that &outhern had ac=u red the ent re cap tal stocF of !eno r 'ar (orFs, hence, the latter corporat on 9as but a mere nstrumental ty of the former. %he %ennessee &upreme 'ourt stated that as a general rule the stocF o9nersh p alone by one corporat on of the stocF of another does not thereby render the dom nant corporat on l able for the torts of the subs d ary unless the separate corporate e1 stence of the subs d ary s a mere sham, or unless the control of the subs d ary s such that t s but an nstrumental ty or ad-unct of the dom nant corporat on. &a d 'ourt then outl ned the c rcumstances 9h ch may be useful n the determ nat on of 9hether the subs d ary s but a mere nstrumental ty of the parent@corporat on? 7he .ircumstance rendering the su#sidiary an instrumentality . $t s man festly mposs ble to catalogue the nf n te var at ons of fact that can ar se but there are certa n common c rcumstances 9h ch are mportant and 9h ch, f present n the proper comb nat on, are controll ng. %hese are as follo9s? /a0 %he parent corporat on o9ns all or most of the cap tal stocF of the subs d ary. /b0 %he parent and subs d ary corporat ons have common d rectors or off cers. /c0 %he parent corporat on f nances the subs d ary. /d0 %he parent corporat on subscr bes to all the cap tal stocF of the subs d ary or other9 se causes ts ncorporat on. /e0 %he subs d ary has grossly nade=uate cap tal. /f0 %he parent corporat on pays the salar es and other e1penses or losses of the subs d ary. /g0 %he subs d ary has substant ally no bus ness e1cept 9 th the parent corporat on or no assets e1cept those conveyed to or by the parent corporat on.

/h0 $n the papers of the parent corporat on or n the statements of ts off cers, the subs d ary s descr bed as a department or d v s on of the parent corporat on, or ts bus ness or f nanc al respons b l ty s referred to as the parent corporat on)s o9n. / 0 %he parent corporat on uses the property of the subs d ary as ts o9n. /-0 %he d rectors or e1ecut ves of the subs d ary do not act ndependently n the nterest of the subs d ary but taFe the r orders from the parent corporat on. /F0 %he formal legal re=u rements of the subs d ary are not observed. %he %ennessee &upreme 'ourt thus ruled? $n the case at bar only t9o of the eleven l sted nd c a occur, namely, the o9nersh p of most of the cap tal stocF of !eno r by &outhern, and poss bly subscr pt on to the cap tal stocF of !eno r. . . %he compla nt must be d sm ssed. & m larly, n th s -ur sd ct on, 9e have held that the doctr ne of p erc ng the corporate ve l s an e=u table doctr ne developed to address s tuat ons 9here the separate corporate personal ty of a corporat on s abused or used for 9rongful purposes. %he doctr ne appl es 9hen the corporate f ct on s used to defeat publ c conven ence, -ust fy 9rong, protect fraud or defend cr me, or 9hen t s made as a sh eld to confuse the leg t mate ssues, or 9here a corporat on s the mere alter ego or bus ness condu t of a person, or 9here the corporat on s so organ Aed and controlled and ts affa rs are so conducted as to maFe t merely an nstrumental ty, agency, condu t or ad-unct of another corporat on. 18 $n .oncept !uilders, :nc. v. 3%R.,1> 9e have la d the test n determ n ng the appl cab l ty of the doctr ne of p erc ng the ve l of corporate f ct on, to 9 t? 1. 'ontrol, not mere ma-or ty or complete control, but complete dom nat on, not only of f nances but of pol cy and bus ness pract ce n respect to the transact on attacFed so that the corporate ent ty as to th s transact on had at the t me no separate m nd, 9 ll or e1 stence of ts o9n. 2. &uch control must have been used by the defendant to comm t fraud or 9rong, to perpetuate the v olat on of a statutory or other pos t ve legal duty, or d shonest and, un-ust act n contravent on of pla nt ffs legal r ghtsI and, <. %he aforesa d control and breach of duty must pro1 mately cause the n-ury or un-ust loss compla ned of. %he absence of any one of these elements prevents ,p erc ng the corporate ve l., $n apply ng the , nstrumental ty, or ,alter ego, doctr ne, the courts are concerned 9 th real ty and not form, 9 th ho9 the corporat on operated and the nd v dual defendant)s relat onsh p to the operat on.12

As de from the fact that +NE@$7! s a 9holly o9ned subs d ary of pet t oner +NE, there s no sho9 ng of the nd cat ve factors that the former corporat on s a mere nstrumental ty of the latter are present. Ne ther s there a demonstrat on that any of the ev ls sought to be prevented by the doctr ne of p erc ng the corporate ve l e1 sts. $nescapably, therefore, the doctr ne of p erc ng the corporate ve l based on the alter ego or nstrumental ty doctr ne f nds no appl cat on n the case at bar. $n any case, the parent@subs d ary relat onsh p bet9een +NE and +NE@$7! s not the s gn f cant legal relat onsh p nvolved n th s case s nce the pet t oner 9as not sued because t s the parent company of +NE@$7!. "ather, the pet t oner 9as sued because t acted as an attorney@ n@fact of +NE@$7! n n t at ng the foreclosure proceed ngs. A su t aga nst an agent cannot 9 thout compell ng reasons be cons dered a su t aga nst the pr nc pal. 3nder the "ules of 'ourt, every act on must be prosecuted or defended n the name of the real party@ n@ nterest, unless other9 se author Aed by la9 or these "ules. 16 $n mandatory terms, the "ules re=u re that ,part es@ n@ nterest 9 thout 9hom no f nal determ nat on can be had, an act on shall be -o ned e ther as pla nt ffs or defendants.,15 $n the case at bar, the n-unct on su t s d rected only aga nst the agent, not the pr nc pal. Anent the ssuance of the prel m nary n-unct on, the same must be l fted as t s a mere prov s onal remedy but ad-unct to the ma n su t. 20 A 9r t of prel m nary n-unct on s an anc llary or prevent ve remedy that may only be resorted to by a l t gant to protect or preserve h s r ghts or nterests and for no other purpose dur ng the pendency of the pr nc pal act on. %he d sm ssal of the pr nc pal act on thus results n the den al of the prayer for the ssuance of the 9r t. 7urther, there s no sho9 ng that respondents are ent tled to the ssuance of the 9r t. &ect on <, "ule 86, of the 1552 "ules of ' v l +rocedure prov des? &E'%$DN <. 2rounds for issuance of preliminary in"unction . O A prel m nary n-unct on may be granted 9hen t s establ shed? /a0 %hat the appl cant s ent tled to the rel ef demanded, and the 9hole or part of such rel ef cons sts n restra n ng the comm ss on or cont nuance of the act or acts compla ned of, or n re=u r ng the performance of an act or acts, e ther for a l m ted per od or perpetually, /b0 %hat the comm ss on, cont nuance or non@performance of the acts or acts compla ned of dur ng the l t gat on 9ould probably 9orF n-ust ce to the appl cantI or /c0 %hat a party, court, agency or a person s do ng, threaten ng, or s attempt ng to do, or s procur ng or suffer ng to be done, some act or acts probably n v olat on of the r ghts of the appl cant respect ng the sub-ect of the act on or proceed ng, and tend ng to render the -udgment neffectual. %hus, an n-unct ve remedy may only be resorted to 9hen there s a press ng necess ty to avo d n-ur ous conse=uences 9h ch cannot be remed ed under any standard compensat on.21 "espondents do not deny the r ndebtedness. %he r propert es are by the r o9n cho ce encumbered by real estate mortgages. 3pon the non@payment of the loans, 9h ch 9ere secured by the mortgages sought to be foreclosed, the mortgaged propert es are properly sub-ect to a foreclosure

sale. Moreover, respondents =uest oned the alleged vo d st pulat ons n the contract only 9hen pet t oner n t ated the foreclosure proceed ngs. 'learly, respondents have fa led to prove that they have a r ght protected and that the acts aga nst 9h ch the 9r t s to be d rected are v olat ve of sa d r ght. 22%he 'ourt s not unm ndful of the f nd ngs of both the tr al court and the appellate court that there may be ser ous grounds to null fy the prov s ons of the loan agreement. Bo9ever, as earl er d scussed, respondents comm tted the m staFe of f l ng the case aga nst the 9rong party, thus, they must suffer the conse=uences of the r error. All told, respondents do not have a cause of act on aga nst the pet t oner as the latter s not pr vy to the contract the prov s ons of 9h ch respondents seeF to declare vo d. Accord ngly, the case before the "eg onal %r al 'ourt must be d sm ssed and the prel m nary n-unct on ssued n connect on there9 th, must be l fted. $N C$E( D7 %BE 7D"E#D$N#, the pet t on s hereby #"AN%ED. %he assa led dec s on of the 'ourt of Appeals s hereby "ECE"&ED. %he Drders dated June <0, 1555 and Dctober 4, 1555 of the "eg onal %r al 'ourt of MaFat , Eranch 142 n ' v l 'ase No. 55@10<2 are hereby ANN3!!ED and &E% A&$DE and the compla nt n sa d case D$&M$&&ED. &D D"DE"ED. $uno, $ardo and Santiago, 99 ., concur. Davide, 9r., . .9 ., on off c al leave.

:ootnotes
1

Dec s on, 'ourt of Appeals, pp. 1@>I Rollo, pp. <2@42. +et t on, p. 10I Rollo, p. 20. :d., at 24I :d., at <4. 'omment, pp. 12@1<I Rollo, pp. 4<6@4<5. :d., at 12@15I :d., at 44<@448. :d., at 20@24I :d., at 44>@480. Rollo, p. 2>>. :d., at 220. &ee 'ompla nt, p. 18I Rollo, p. >4. Rollo, p. 45.

<

>

10

11

22 +h l. 45> /154>0. :#id.

12

1<

Futivo Sons 0ard&are .ompany v. .ourt of 7a Appeals , 1 &'"A 1>0 /15>10.


14

12< 7. &upp. 518, E.D. %enn. /15850. ;mali v. .ourt of Appeals, 165 &'"A 825, 824 /15500. 282 &'"A 145 /155>0. :d., at 185. &ee "3!E& D7 'D3"%, "ule <, sec. 2. "3!E& D7 'D3"%, "ule <, sec. 2. $hilippine Airlines, :nc. vs. 3%R. , 262 &'"A >22 /15560.

18

1>

12

16

15

20

21

;nion !an' of the $hilippines v. .ourt of Appeals , <11 &'"A 258, 608@ 60> /15550.
22

.hina !an'ing .orporation v. .ourt of Appeals , 2>8 &'"A <22, <4< /155>0.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71=3=1 'arc- 4., 1<04

($)N)!A! J. :$AN%)S%/, pla nt ff@appellee, vs. G/*E$N'EN( SE$*)%E )NS&$AN%E S8S(E', defendant@appellant. @@@@@@@@@@@@@@@@@@@@@@@@@@@@@ G.$. No. #71=122 'arc- 4., 1<04

($)N)!A! J. :$AN%)S%/, pla nt ff@appellant, vs. G/*E$N'EN( SE$*)%E )NS&$AN%E S8S(E', defendant@appellee. 4icente 9. 8rancisco for plaintiff<appellee. 7he 2overnment .orporate .ounsel for defendant<appellant.

$E8ES, J.9.#., J.: Appeal by the #overnment &erv ce $nsurance &ystem from the dec s on of the 'ourt of 7 rst $nstance of " Aal /Bon. Angel B. Mo- ca, pres d ng0, n ts ' v l 'ase No. 2066@+, ent tled ,%r n dad J. 7ranc sco, pla nt ff, vs. #overnment &erv ce $nsurance &ystem, defendant,, the d spos t ve part of 9h ch reads as follo9s? (BE"E7D"E, -udgment s hereby rendered? /a0 Declar ng null and vo d the consol dat on n the name of the defendant, #overnment &erv ce $nsurance &ystem, of the t tle of the C$'@MA"$ 'ompoundI sa d t tle shall be restored to the pla nt ffI and all payments made by the pla nt ff, after her offer had been accepted by the defendant, must be cred ted as amort Aat ons on her loanI and /b0 Drder ng the defendant to ab de by the terms of the contract created by pla nt ff)s offer and t)s uncond t onal acceptance, 9 th costs aga nst the defendant. %he pla nt ff, %r n dad J. 7ranc sco, l Fe9 se appealed separately /!@161880, because the tr al court d d not a9ard the +8<8,000.00 damages and attorney)s fees she cla med. Eoth appeals are, therefore, -o ntly treated n th s dec s on. %he follo9 ng facts are adm tted by the part es? Dn 10 Dctober 158>, the pla nt ff, %r n dad J. 7ranc sco, n cons derat on of a loan n the amount of +400,000.00, out of 9h ch the sum of +<<>,100.00 9as released to her, mortgaged n favor of the defendant, #overnment &erv ce $nsurance &ystem /here nafter referred to as the &ystem0 a parcel of land conta n ng an area of 16,2<2 s=uare meters, 9 th t9enty@one /210 bungalo9s, Fno9n as C c@Mar 'ompound, located at Eaesa, UueAon ' ty, payable 9 th n ten /100 years n monthly nstallments of +<,502.41, and 9 th nterest of 2R per annum compounded monthly. Dn > January 1585, the &ystem e1tra-ud c ally foreclosed the mortgage on the ground that up to that date the pla nt ff@mortgagor 9as n arrears on her monthly nstallments n the amount of +82,000.00. +ayments made by the pla nt ff at the t me of foreclosure amounted to +1<0,000.00. %he &ystem tself 9as the buyer of the property n the foreclosure sale. Dn 20 7ebruary 1585, the pla nt ff)s father, Atty. C cente J. 7ranc sco, sent a letter to the general manager of the defendant corporat on, Mr. "odolfo +. Andal, the mater al port on of 9h ch rec ted as follo9s? Hesterday, $ 9as f nally able to collect 9hat the #overnment o9ed me and $ no9 propose to pay sa d amount of +<0,000 to the #&$& f t 9ould agree that after such payment the foreclosure of my daughter)s mortgage 9ould be set as de. $ am a9are that the amount of +<0,000 9h ch $ offer to pay 9 ll not cover the total arrearage of +82,000 but as regards the balance, $ propose th s arrangement? for the #&$& to taFe over the adm n strat on of the mortgaged property and to collect the monthly nstallments, amount ng to about +8,000, due on the unpa d purchase pr ce of more than <1 lots and houses there n and the monthly nstallments collected shall be appl ed to the payment of M ss 7ranc sco)s

arrearage unt l the same s fully covered. $t s re=uested, ho9ever, that from the amount of the monthly nstallments collected, the sum of +<80.00 be deducted for necessary e1penses, such as to pay the secur ty guard, the street@caretaFer, the Meralco E ll for the street l ghts and sundry tems. $t 9 ll be noted that the collect ble ncome each month from the mortgaged property, 9h ch as $ sa d cons sts of nstallments amount ng to about +8,000, s more than enough to cover the monthly amort Aat on on M ss 7ranc sco)s loan. $ndeed, had she not encountered d ff cult es, due to unforeseen c rcumstances, n collect ng the sa d nstallments, she could have pa d the amort Aat ons as they fell due and there 9ould have been really no need for the #&$& to resort to foreclosure. %he proposed adm n strat on by the #&$& of the mortgaged property 9 ll cont nue even after M ss 7ranc sco)s account shall have been Fept up to date. Bo9ever, once the arrears shall have been pa d, 9hatever amount of the monthly nstallments collected n e1cess of the amort Aat on due on the loan 9 ll be turned over to M ss 7ranc sco. $ maFe the forego ng proposal to sho9 7ranc sco)s s ncere des re to 9orF out any fa r arrangement for the settlement of her obl gat on. $ trust that the #&$&, under the broadm nded pol c es of your adm n strat on, 9ould g ve t ser ous cons derat on. & ncerely,. sM C cente J. 7ranc sco tM C$'EN%E J. 7"AN'$&'D Dn the same date, 20 7ebruary 1585, Atty. 7ranc sco rece ved the follo9 ng telegram?. C$'EN%E 7"AN'$&'D &AMAN$!!D E!D#. E&'D!%A. #&$& EDA"D A++"DCED HD3" "EU3E&% "E "EDEM+%$DN D7 7D"E'!D&ED +"D+E"%H D7 HD3" DA3#B%E" ANDA!, Dn 26 7ebruary 1585, Atty. 7ranc sco rem tted to the &ystem, through Andal, a checF for +<0,000.00, 9 th an accompany ng letter, 9h ch reads? $ am send ng you here9 th E+$ 'hecF No. E@255464 for %h rty %housand +esos /+<0,000.000 n accordance 9 th my letter of 7ebruary 20th and your reply thereto of the same date, 9h ch reads? #&$& EDA"D A++"DCED HD3" "EU3E&% "E "EDEM+%$DN D7 7D"E'!D&ED +"D+E"%H D7 HD3" DA3#B%E" 111 111 111

%he defendant rece ved the amount of +<0,000.00, and ssued therefor ts off c al rece pt No. 1205624, dated 4 March 1585. $t d d not, ho9ever, taFe over the adm n strat on of the compound. $n the meant me, the pla nt ff rece ved the monthly payments of some of the occupants thereatI then on 4 March 15>0, she rem tted, through her father, the amount of +44,121.25, represent ng the total monthly nstallments that she rece ved from the occupants for the per od from March to December 1585 and January to 7ebruary 15>0, m nus e1penses and real estate ta1es. %he defendant also rece ved th s amount, and ssued the correspond ng off c al rece pt. "em ttances, all accompan ed by letters, correspond ng to the months of March, Apr l, May, and June, 15>0 and totall ng +24,>04.61 9ere also sent by the pla nt ff to the defendant from t me to t me, all of 9h ch 9ere rece ved and duly rece pted for. %hen the &ystem sent three /<0 letters, one dated 25 January 15>0, 9h ch 9as s gned by ts ass stant general manager, and the other t9o letters, dated 15 and 2> 7ebruary 15>0, respect vely, 9h ch 9ere s gned by Andal, asF ng the pla nt ff for a proposal for the payment of her ndebtedness, s nce accord ng to the &ystem the one@year per od for redempt on had e1p red. $n reply, Atty. 7ranc sco sent a letter, dated 11 March 15>0, protest ng aga nst the &ystem)s re=uest for proposal of payment and nv t ng ts attent on to the concluded contract generated by h s offer of 20 7ebruary 1585, and ts acceptance by telegram of the same date, the compl ance of the terms of the offer already commenced by the pla nt ff, and the m sappl cat on by the &ystem of the rem ttances she had made, and re=uest ng the proper correct ons. Ey letter, dated <1 May 15>0, the defendant countered the preced ng protest that, by all means, the pla nt ff should pay attorney)s fees of +<8,>44.14, publ cat on e1penses, f l ng fee of +<01.00, and surcharge of +2<.>4 for the foreclosure 9orF doneI that the telegram should be d sregarded n v e9 of ts fa lure to e1press the contents of the board resolut on due to the error of ts m nor employees n couch ng the correct 9ord ng of the telegram. A copy of the e1cerpts of the resolut on of the Eoard of D rectors /No. <60, 7ebruary 20, 15850 9as attached to the letter, sho9 ng the approval of 7ranc sco)s offer O ... sub-ect to the cond t on that Mr. C cente J. 7ranc sco shall pay all e1penses ncurred by the #&$& n the foreclosure of the mortgage. $nasmuch as, accord ng to the defendant, the rem ttances prev ously made by Atty. 7ranc sco 9ere allegedly not suff c ent to pay off her daughter)s arrears, nclud ng attorney)s fees ncurred by the defendant n foreclos ng the mortgage, and the one@year per od for redempt on has e1p red, sa d defendant, on 8 July 15>0, consol dated the t tle to the compound n ts name, and gave not ce thereof to the pla nt ff on 2> July 15>0 and to each occupant of the compound. Bence, the pla nt ff nst tuted the present su t, for spec f c performance and damages. %he defendant ans9ered, plead ng that the b nd ng acceptance of

7ranc sco)s offer 9as the resolut on of the Eoard, and that Andal)s telegram, be ng erroneous, should be d sregarded. After tr al, the court belo9 found that the offer of Atty. 7ranc sco, dated 20 7ebruary 1585, made on behalf of h s daughter, had been un=ual f edly accepted, and 9as b nd ng, and rendered -udgment as noted at the start of th s op n on. %he defendant@appellant corporat on ass gns s 1 />0 errors allegedly comm tted by the lo9er court, all of 9h ch, ho9ever, are resolvable on the s ngle ssue as to 9hether or not the telegram generated a contract that s val d and b nd ng upon the part es. (herefore, the part es respectfully pray that the forego ng st pulat on of facts be adm tted and approved by th s Bonorable 'ourt, 9 thout pre-ud ce to the part es adduc ng other ev dence to prove the r case not covered by th s st pulat on of facts. +N&phO+.>Pt (e f nd no reason for alter ng the conclus on reached by the court belo9 that the offer of comprom se made by pla nt ff n the letter, E1h b t ,A,, had been val dly accepted, and 9as b nd ng on the defendant. %he terms of the offer 9ere clear, and over the s gnature of defendant)s general manager, "odolfo Andal, pla nt ff 9as nformed telegraph cally that her proposal had been accepted. %here 9as noth ng n the telegram that h nted at any anomaly, or gave ground to suspect ts verac ty, and the pla nt ff, therefore, can not be blamed for rely ng upon t. %here s no deny ng that the telegram 9as 9 th n Andal)s apparent author ty, but the defense s that he d d not s gn t, but that t 9as sent by the Eoard &ecretary n h s name and 9 thout h s Fno9ledge. Assum ng th s to be true, ho9 9as appellee to Fno9 tP 'orporate transact ons 9ould speed ly come to a standst ll 9ere every person deal ng 9 th a corporat on held duty@bound to d sbel eve every act of ts respons ble off cers, no matter ho9 regular they should appear on the r face. %h s 'ourt has observed n Ramirez vs. =rientalist .o., -D $hil. M-B, MAB<MAA, that O $n pass ng upon the l ab l ty of a corporat on n cases of th s F nd t s al9ays 9ell to Feep n m nd the s tuat on as t presents tself to the th rd party 9 th 9hom the contract s made. Naturally he can have l ttle or no nformat on as to 9hat occurs n corporate meet ngsI and he must necessar ly rely upon the e1ternal man festat ons of corporate consent. %he ntegr ty of commerc al transact ons can only be ma nta ned by hold ng the corporat on str ctly to the l ab l ty f 1ed upon t by ts agents n accordance 9 th la9I and 9e 9ould be sorry to announce a doctr ne 9h ch 9ould perm t the property of a man n the c ty of +ar s to be 9h sFed out of h s hands and carr ed nto a remote =uarter of the earth 9 thout recourse aga nst the corporat on 9hose name and author ty had been used n the manner d sclosed n th s case. As already observed, t s fam l ar doctr ne that f a corporat on Fno9 ngly perm ts one of ts off cers, or any other agent, to do acts 9 th n the scope of an apparent author ty, and thus holds h m out to the publ c as possess ng po9er to do those acts, the corporat on 9 ll, as aga nst any one 9ho has n good fa th dealt 9 th the corporat on through such agent, be estopped from deny ng h s author tyI and 9here t s sa d , f the corporat on

perm ts, th s means the same as , f the th ng s perm tted by the d rect ng po9er of the corporat on., $t has also been dec ded that O A very large part of the bus ness of the country s carr ed on by corporat ons. $t certa nly s not the pract ce of persons deal ng 9 th off cers or agents 9ho assume to act for such ent t es to ns st on be ng sho9n the resolut on of the board of d rectors author A ng the part cular off cer or agent to transact the part cular bus ness 9h ch he assumes to conduct. A person 9ho Fno9s that the off cer or agent of the corporat on hab tually transacts certa n F nds of bus ness for such corporat on under c rcumstances 9h ch necessar ly sho9 Fno9ledge on the part of those charged 9 th the conduct of the corporate bus ness assumes, as he has the r ght to assume, that such agent or off cer s act ng 9 th n the scope of h s author ty. /'urt s !and N !oan 'o. vs. $nter or !and 'o., 1<2 ( s. <41, 116 N.(. 68<, 125 Am. &t. "ep. 10>6I as c ted n 2 7letcher)s Encycloped a, +r v. 'orp. 2><, perm. Ed.0 $ndeed, t s 9ell@settled that O $f a pr vate corporat on ntent onally or negl gently clothes ts off cers or agents 9 th apparent po9er to perform acts for t, the corporat on 9 ll be estopped to deny that such apparent author ty s real, as to nnocent th rd persons deal ng n good fa th 9 th such off cers or agents. /2 7letcher)s Encycloped a, +r v. 'orp. 288, +erm. Ed.0 Bence, even f t 9ere the board secretary 9ho sent the telegram, the corporat on could not evade the b nd ng effect produced by the telegram.. %he defendant@appellant does not d so9n the telegram, and even asserts that t came from ts off ces, as may be gleaned from the letter, dated <1 May 15>0, to Atty. 7ranc sco, and s gned ,". +. Andal, general manager by !eov g ldo Monaster al, legal counsel,, 9here n these phrases occur? ,the telegram sent ... #y this office, and ,the telegram &e sent your, /emphas s suppl ed0, but t alleges m staFe n couch ng the correct 9ord ng. %h s alleged m staFe cannot be taFen ser ously, because 9h le the telegram s dated 20 7ebruary 1585, the defendant nformed Atty. 7ranc sco of the alleged m staFe only on <1 May 15>0, and all the 9h le t accepted the var ous other rem ttances, start ng on 26 7ebruary 1585, sent by the pla nt ff to t n compl ance 9 th her performance of her part of the ne9 contract. %he ne=u ty of perm tt ng the &ystem to deny ts acceptance become more patent 9hen account s taFen of the fact that n rem tt ng the payment of +<0,000 advanced by her father, pla nt ff)s letter to Mr. Andal =uoted verbat m the telegram of acceptance. %h s 9as n tself not ce to the corporat on of the terms of the allegedly unauthor Aed telegram, for as Eallent ne says? *no9ledge of facts ac=u red or possessed by an off cer or agent of a corporat on n the course of h s employment, and n relat on to matters 9 th n the scope of

h s author ty, s not ce to the corporat on, 9hether he commun cates such Fno9ledge or not. /Eallent ne, !a9 on 'orporat ons, sect on 112.0 s nce a corporat on cannot see, or Fno9, anyth ng e1cept through ts off cers. Het, not9 thstand ng th s not ce, the defendant &ystem pocFeted the amount, and Fept s lent about the telegram not be ng n accordance 9 th the true facts, as t no9 alleges. %h s s lence, taFen together 9 th the uncond t onal acceptance of three other subse=uent rem ttances from pla nt ff, const tutes n tself a b nd ng rat f cat on of the or g nal agreement /' v l 'ode, Art. 1<5<0. A"%. 1<5<. "at f cat on may be effected e1pressly or tac tly. $t s understood that there s a tac t rat f cat on f, 9 th Fno9ledge of the reason 9h ch renders the contract vo dable and such reason hav ng ceased, the person 9ho has a r ght to nvoFe t should e1ecute an act 9h ch necessar ly mpl es an ntent on to 9a ve h s r ght. No9here else do the c rcumstances call more ns stently for the appl cat on of the e=u table ma1 m that bet9een t9o nnocent part es, the one 9ho made t poss ble for the 9rong to be done should be the one to bear the result ng loss.. %he defendant)s assert on that the telegram came from t but that t 9as ncorrectly 9orded renders unnecessary to resolve the other po nt on controversy as to 9hether the sa d telegram const tutes an act onable document.. & nce the terms offered by the pla nt ff n the letter of 20 7ebruary 1585 /E1h b t ,A,0 prov ded for the setting aside of the foreclosure effected by the defendant &ystem, the acceptance of the offer left the account of pla nt ff n the same cond t on as f no foreclosure had taFen place. $t follo9s, as the lo9er court has correctly held, that the r ght of the &ystem to collect attorneys) fees e=u valent to 10R of the due /+<8,>54.140 and the e1penses and charges of +<,<00.00 may no longer be enforced, s nce by the e1press terms of the mortgage contract, these sums 9ere collect ble only Qin the event of foreclosure.Q %he court a quo also called attent on to the unconsc onab l ty of defendant)s charg ng the attorney)s fees, totall ng over +<8,000.00I and th s po nt appears 9ell@taFen, cons der ng that the foreclosure 9as merely e1tra@-ud c al, and the attorneys) 9orF 9as l m ted to re=u r ng the sher ff to effectuate the foreclosure. Bo9ever, n v e9 of the part es) agreement to set the same as de, 9 th the conse=uent al el m nat on of such nc dental charges, the matter of unreasonableness of the counsel fees need not be labored further. %urn ng no9 to the pla nt ff)s separate appeal /'ase #.". No. !@161880? Ber prayer for an a9ard of actual or compensatory damages for +6<,<<<.<< s pred cated on her alleged unreal Aed prof ts due to her nab l ty to sell the compound for the pr ce of +280,000.00 offered by one C cente Alunan, 9h ch sale 9as allegedly blocFed because the &ystem consol dated the t tle to the property n ts name. +la nt ff recFons the amount of +6<,<<<.<< by plac ng the actual value of the property at +>>>,>>>.>2, a f gure arr ved at by assum ng that

the &ystem)s loan of +400,000.00 const tutes >0R of the actual value of the secur ty. %he court a quo correctly refused to a9ard such actual or compensatory damages because t could not determ ne 9 th reasonable certa nty the d fference bet9een the offered pr ce and the actual value of the property, for lacF of competent ev dence. ( thout proof 9e cannot assume, or taFe -ud c al not ce, as suggested by the pla nt ff, that the pract ce of lend ng nst tut ons n the country s to g ve out as loan >0R of the actual value of the collateral. Nor should 9e lose s ght of the fact that the pr ce offered by Alunan 9as payable n nstallments cover ng f ve years, so that t may not actually represent true marFet values. Nor 9as there error n the appealed dec s on n deny ng moral damages, not only on account of the pla nt ff)s fa lure to taFe the 9 tness stand and test fy to her soc al hum l at on, 9ounded feel ngs, an1 ety, etc., as the dec s on holds, but pr mar ly because a breach of contract l Fe that of defendant, not be ng mal c ous or fraudulent, does not 9arrant the a9ard of moral damages under Art cle 2220 of the ' v l 'ode /Centan lla vs. 'enteno, !@14<<<, 26 Jan. 15>1I 7ores vs. M randa, !@121><, 4 March 15850. %here s no bas s for a9ard ng e1emplary damages e ther, because th s spec es of damages s only allo9ed n add t on to moral, temperate, l =u dated, or compensatory damages, none of 9h ch have been allo9ed n th s case, for reasons here n before d scussed /Art. 22<4, ' v l 'odeI Celayo vs. &hell 'o. of +.$., !@2612, "es. July <0, 1582I & ngson, et al. vs. Aragon and !orAa, !@81>4, Jan. 22, 158<, 45 D.#. No. 2, 8180. As to attorneys) fees, 9e agree 9 th the tr al court)s stand that n v e9 of the absence of gross and ev dent bad fa th n defendant)s refusal to sat sfy the pla nt ff)s cla m, and there be ng none of the other grounds enumerated n Art cle 2206 of the ' v l 'ode, such absence precludes a recovery. %he a9ard of attorneys) fees s essent ally d scret onary n the tr al court, and no abuse of d scret on has been sho9n. 7D" %BE 7D"E#D$N# "EA&DN&, the appealed dec s on s hereby aff rmed, 9 th costs aga nst the defendant #overnment &erv ce $nsurance &ystem, n #.". No.!@ 16262. !engzon, ..9., $adilla, !autista Angelo, %a#rador, .oncepcion, !arrera, $aredes, Dizon, Regala and Ma'alintal, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 101121 January 32, 3..0

S&NA%E )N(E$NA()/NA# 'ANAGE'EN( SE$*)%ES, )N%.+et t oner, vs. NA()/NA# #A9/$ $E#A()/NS %/'')SS)/N, Second !iAision; 5/N.

E$NES(/ S. !)N/+/#, in -is capacity as #a or Ar iter, N#$%; N%$, Ar itration 9ranc-, EueJon %ity and !)*)NA A. '/N(E5E$'/6/,"espondents. DE'$&$DN %A$+)/ '/$A#ES, J., +et t oner, &unace $nternat onal Management &erv ces /&unace0, a corporat on duly organ Aed and e1 st ng under the la9s of the +h l pp nes, deployed to %a 9an D v na A. MontehermoAo /D v na0 as a domest c helper under a 12@month contract effect ve 7ebruary 1, 1552.1 %he deployment 9as 9 th the ass stance of a %a 9anese broFer, Edmund (ang, +res dent of Jet 'ro9n $nternat onal 'o., !td. After her 12@month contract e1p red on 7ebruary 1, 1556, D v na cont nued 9orF ng for her %a 9anese employer, Bang "u G ong, for t9o more years, after 9h ch she returned to the +h l pp nes on 7ebruary 4, 2000. &hortly after her return or on 7ebruary 14, 2000, D v na f led a compla nt2 before the Nat onal !abor "elat ons 'omm ss on /N!"'0 aga nst &unace, one Adela de +ereA, the %a 9anese broFer, and the employer@fore gn pr nc pal alleg ng that she 9as -a led for three months and that she 9as underpa d. %he follo9 ng day or on 7ebruary 18, 2000, !abor Arb trat on Assoc ate "eg na %. #av n ssued &ummons< to the Manager of &unace, furn sh ng t 9 th a copy of D v naJs compla nt and d rect ng t to appear for mandatory conference on 7ebruary 26, 2000. %he scheduled mandatory conference 9as reset. $t appears to have been concluded, ho9ever. Dn Apr l >, 2000, D v na f led her +os t on +aper4 cla m ng that under her or g nal one@year contract and the 2@year e1tended contract 9h ch 9as 9 th the Fno9ledge and consent of &unace, the follo9 ng amounts represent ng ncome ta1 and sav ngs 9ere deducted? Hear Deduct on for $ncome %a1 Deduct on for &av ngs N%2<,100.00 N%<>,000.00 N%<>,000.00I8

1552 N%10,480.00 1556 N%5,800.00 1555 N%1<,<00.00

and 9h le the amounts deducted n 1552 9ere refunded to her, those deducted n 1556 and 1555 9ere not. Dn even date, &unace, by ts +ropr etorM#eneral Manager Mar a !u sa Dlarte, f led ts Cer f ed Ans9er and +os t on +aper,> cla m ng as follo9s, =uoted ver#atim? %/'+#A)NAN( )S N/( EN()(#E! :/$ (5E $E:&N! /: 5E$ 3; '/N(5S SA*)NGS

<. 'ompla nant could not anymore cla m nor ent tled for the refund of her 24 months sav ngs as she already tooF bacF her sav ng already last year and the employer d d not deduct any money from her salary, n accordance 9 th a :ascimile 'essa"e from the respondent &3NA'EJs employer, Jet 'ro9n $nternat onal 'o. !td., a 1erograph c copy of 9h ch s here9 th attached as ANNE> I3I hereofI %/'+#A)NAN( )S N/( EN()(#E! (/ $E:&N! /: 5E$ 1; '/N(5S (A> AN! +A8'EN( /: A((/$NE8SS :EES 4. %here s no bas s for the grant of ta1 refund to the compla nant as the she f n shed her one year contract and hence, 9as not llegally d sm ssed by her employer. &he could only lay cla m over the ta1 refund or much more be a9arded of damages such as attorneyJs fees as sa d rel efs are ava lable only 9hen the d sm ssal of a m grant 9orFer s 9 thout -ust val d or la9ful cause as def ned by la9 or contract. %he rat onales beh nd the a9ard of ta1 refund and payment of attorneyJs fees s not to enr ch the compla nant but to compensate h m for actual n-ury suffered. 'ompla nant d d not suffer n-ury, hence, does not deserve to be compensated for 9hatever F nd of damages. Bence, the compla nant has ND cause of act on aga nst respondent &3NA'E for monetary cla ms, cons der ng that she has been totally pa d of all the monetary benef ts due her under her Employment 'ontract to her full sat sfact on. >. 7urthermore, the ta1 deducted from her salary s n compl ance 9 th the %a 9anese la9, 9h ch respondent &3NA'E has no control and compla nant has to obey and th s Bonorable Dff ce has no author tyM-ur sd ct on to ntervene because the po9er to ta1 s a sovere gn po9er 9h ch the %a 9anese #overnment s supreme n ts o9n terr tory. %he sovere gn po9er of ta1at on of a state s recogn Aed under nternat onal la9 and among sovere gn states. 2. %hat respondent &3NA'E respectfully reserves the r ght to f le supplemental Cer f ed Ans9er andMor +os t on +aper to substant ate ts prayer for the d sm ssal of the above case aga nst the here n respondent. AND EH (AH D7 @ 1 1 1 1 /Emphas s and underscor ng suppl ed0 "eact ng to D v naJs +os t on +aper, &unace f led on Apr l 28, 2000 an ,. . . ans9er to compla nantJs pos t on paper, 2 alleg ng that D v naJs 2@year e1tens on of her contract 9as 9 thout ts Fno9ledge and consent, hence, t had no l ab l ty attach ng to any cla m ar s ng therefrom, and D v na n fact e1ecuted a (a verMUu tcla m and "elease of "espons b l ty and an Aff dav t of Des stance, copy of each document 9as anne1ed to sa d ,. . . ans9er to compla nantJs pos t on paper., %o &unaceJs ,. . . ans9er to compla nantJs pos t on paper,, D v na f led a 2@page reply,6 9 thout, ho9ever, refut ng &unaceJs d scla mer of Fno9ledge of the

e1tens on of her contract and 9 thout say ng anyth ng about the "elease, (a ver and Uu tcla m and Aff dav t of Des stance. %he !abor Arb ter, re-ected &unaceJs cla m that the e1tens on of D v naJs contract for t9o more years 9as 9 thout ts Fno9ledge and consent n th s 9 se? (e re-ect &unaceJs subm ss on that t should not be held respons ble for the amount 9 thheld because her contract 9as e1tended for 2 more years 9 thout ts Fno9ledge and consent because as Anne1 ,E,5 sho9s, &unace and Edmund (ang have not stopped commun cat ng 9 th each other and yet the matter of the contractJs e1tens on and &unaceJs alleged non@consent thereto has not been categor cally establ shed. (hat &unace should have done 9as to 9r te to +DEA about the e1tens on and ts ob-ect on thereto, copy furn shed the compla nant herself, her fore gn employer, Bang "u G ong and the %a 9anese broFer, Edmund (ang. And because t d d not, t s presumed to have consented to the e1tens on and should be l able for anyth ng that resulted thereform / sic0.10 /3nderscor ng suppl ed0 %he !abor Arb ter re-ected too &unaceJs argument that t s not l able on account of D v naJs e1ecut on of a (a ver and Uu tcla m and an Aff dav t of Des stance. Dbserved the !abor Arb ter? &hould the part es arr ve at any agreement as to the 9hole or any part of the d spute, the same shall be reduced to 9r t ng and s gned by the part es and the r respect ve counsel /sic0, f any, before the !abor Arb ter. %he settlement shall be approved by the !abor Arb ter after be ng sat sf ed that t 9as voluntar ly entered nto by the part es and after hav ng e1pla ned to them the terms and conse=uences thereof. A comprom se agreement entered nto by the part es not n the presence of the !abor Arb ter before 9hom the case s pend ng shall be approved by h m, f after confront ng the part es, part cularly the compla nants, he s sat sf ed that they understand the terms and cond t ons of the settlement and that t 9as entered nto freely voluntar ly /sic* by them and the agreement s not contrary to la9, morals, and publ c pol cy. And because no cons derat on s nd cated n the documents, 9e str Fe them do9n as contrary to la9, morals, and publ c pol cy. 11 Be accord ngly dec ded n favor of D v na, by dec s on of Dctober 5, 2000, 12 the d spos t ve port on of 9h ch reads? (herefore, -udgment s hereby rendered order ng respondents &3NA'E $N%E"NA%$DNA! &E"C$'E& and ts o9ner ADE!A$DA +E"#E, both n the r personal capac t es and as agent of Bang "u G ongMEdmund (ang to -o ntly and severally pay compla nant D$C$NA A. MDN%EBE"MDLD the sum of N%51,580.00 n ts peso e=u valent at the date of payment, as refund for the amounts 9h ch she s

hereby ad-udged ent tled to as earl er d scussed plus 10R thereof as attorneyJs fees s nce compelled to l t gate, compla nant had to engage the serv ces of counsel. &D D"DE"ED.1< /3nderescor ng suppl ed0 Dn appeal of &unace, the N!"', by "esolut on of Apr l <0, 2002, 14 aff rmed the !abor Arb terJs dec s on. C a pet t on for cert orar ,18 &unace elevated the case to the 'ourt of Appeals 9h ch d sm ssed t outr ght by "esolut on of November 12, 2002, 1> the full te1t of 9h ch reads? %he pet t on for cert orar faces outr ght d sm ssal. %he pet t on fa led to allege facts const tut ve of grave abuse of d scret on on the part of the publ c respondent amount ng to lacF of -ur sd ct on 9hen the N!"' aff rmed the !abor Arb terJs f nd ng that pet t oner &unace $nternat onal Management &erv ces mpl edly consented to the e1tens on of the contract of pr vate respondent D v na A. MontehermoAo. $t s und sputed that pet t oner 9as cont nually commun cat ng 9 th pr vate respondentJs fore gn employer /sic0. As agent of the fore gn pr nc pal, ,pet t oner cannot profess gnorance of such e1tens on as obv ously, t-e act of t-e principal eLtendin" complainant /sic0 employment contract necessarily ound it., #rave abuse of d scret on s not present n the case at bar. A%%/$!)NG#8, the pet t on s hereby !EN)E! !&E %/&$SE and !)S')SSE!.12 &D D"DE"ED. /Emphas s on 9ords n cap tal letters n the or g nalI emphas s on 9ords n small letters and underscor ng suppl ed0 $ts Mot on for "econs derat on hav ng been den ed by the appellate court by "esolut on of January 14, 2004,16&unace f led the present pet t on for rev e9 on cert orar . %he 'ourt of Appeals aff rmed the !abor Arb ter and N!"'Js f nd ng that &unace Fne9 of and mpl edly consented to the e1tens on of D v naJs 2@year contract. $t 9ent on to state that ,$t s und sputed that :&unace; 9as cont nually commun cat ng 9 th :D v naJs; fore gn employer., $t thus concluded that ,:a;s agent of the fore gn pr nc pal, Ypet t oner cannot profess gnorance of such e1tens on as obv ously, the act of the pr nc pal e1tend ng compla nant / sic0 employment contract necessar ly bound t.J, 'ontrary to the 'ourt of Appeals f nd ng, the alleged cont nuous commun cat on 9as 9 th the %a 9anese broFer(ang, not 9 th the fore gn employer G ong. %he 7ebruary 21, 2000 telefa1 message from the %a 9anese broFer to &unace, the only bas s of a f nd ng of cont nuous commun cat on, reads ver#atim?

1111 "egard ng to D v na, she d d not say anyth ng about her sav ng n pol ce stat on. As 9e contact 9 th her employer, she tooF bacF her sav ng already last years. And they d d not deduct any money from her salary. Dr she 9 ll call bacF her employer to checF t aga n. $f her employer sa d yesZ 9e 9 ll get t bacF for her. %hanF you and best regards. /&gd.0 Edmund (ang +res dent15 %he f nd ng of the 'ourt of Appeals solely on the bas s of the above@=uoted telefa1 message, that &unace cont nually commun cated 9 th the fore gn ,pr nc pal, /sic0 and therefore 9as a9are of and had consented to the e1ecut on of the e1tens on of the contract s m splaced. %he message does not prov de ev dence that &unace 9as pr vy to the ne9 contract e1ecuted after the e1p rat on on 7ebruary 1, 1556 of the or g nal contract. %hat &unace and the %a 9anese broFer commun cated regard ng D v naJs allegedly 9 thheld sav ngs does not necessar ly mean that &unace rat f ed the e1tens on of the contract. As &unace po nts out n ts "eply20 f led before the 'ourt of Appeals, As can be seen from that letter commun cat on, t 9as -ust an nformat on g ven to the pet t oner that the pr vate respondent had t:aFen; already her sav ngs from her fore gn employer and that no deduct on 9as made on her salary. $t conta ns noth ng about the e1tens on or the pet t onerJs consent thereto. 21 +arenthet cally, s nce the telefa1 message s dated 7ebruary 21, 2000, t s safe to assume that t 9as sent to enl ghten &unace 9ho had been d rected, by &ummons ssued on 7ebruary 18, 2000, to appear on 7ebruary 26, 2000 for a mandatory conference follo9 ng D v naJs f l ng of the compla nt on 7ebruary 14, 2000. "espect ng the 'ourt of Appeals follo9 ng dictum? As agent of ts fore gn pr nc pal, :&unace; cannot profess gnorance of such an e1tens on as obv ously, the act of ts pr nc pal e1tend ng :D v naJs; employment contract necessar ly bound t,22 t too s a m sappl cat on, a m sappl cat on of the theory of mputed Fno9ledge. %he theory of mputed Fno9ledge ascr bes the Fno9ledge of the agent, &unace, to the pr nc pal, employer G ong,not t-e ot-er Fay around.2< %he Fno9ledge of the pr nc pal@fore gn employer cannot, therefore, be mputed to ts agent &unace. %here be ng no substant al proof that &unace Fne9 of and consented to be bound under the 2@year employment contract e1tens on, t cannot be sa d to be pr vy thereto. As such, t and ts ,o9ner, cannot be held sol dar ly l able for any of

D v naJs cla ms ar s ng from the 2@year employment e1tens on. As the Ne9 ' v l 'ode prov des, 'ontracts taFe effect only bet9een the part es, the r ass gns, and he rs, e1cept n case 9here the r ghts and obl gat ons ar s ng from the contract are not transm ss ble by the r nature, or by st pulat on or by prov s on of la9. 24 7urthermore, as &unace correctly po nts out, there 9as an mpl ed revocat on of ts agency relat onsh p 9 th ts fore gn pr nc pal 9hen, after the term nat on of the or g nal employment contract, the fore gn pr nc pal d rectly negot ated 9 th D v na and entered nto a ne9 and separate employment contract n %a 9an. Art cle 1524 of the Ne9 ' v l 'ode read ng %he agency s revoFed f the pr nc pal d rectly manages the bus ness entrusted to the agent, deal ng d rectly 9 th th rd persons. thus appl es. $n l ght of the forego ng d scuss ons, cons derat on of the val d ty of the (a ver and Aff dav t of Des stance 9h ch D v na e1ecuted n favor of &unace s rendered unnecessary. W5E$E:/$E, the pet t on s G$AN(E!. %he challenged resolut ons of the 'ourt of Appeals are hereby$E*E$SE! and SE( AS)!E. %he compla nt of respondent D v na A. MontehermoAo aga nst pet t oner s!)S')SSE!. S/ /$!E$E!. %/N%5)(A %A$+)/ '/$A#ES Associate 9ustice (E 'DN'3"? #E/NA$!/ A. E&)S&'9)NG Associate 9ustice .hairperson AN(/N)/ (. %A$+)/ Assoc ate Just ce A%%E&%A%$DN $ attest that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. #E/NA$!/ A. E&)S&'9)NG Associate 9ustice .hairperson 'E"%$7$'A%$DN !AN(E /. ()NGA Asscoc ate Just ce

+ursuant to Art cle C$$$, &ect on 1< of the 'onst tut on, and the D v s on 'ha rmanJs Attestat on, t s hereby cert f ed that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourt. A$(E')/ *. +ANGAN)9AN .hief 9ustice

:ootnotes
1

N!"' records, p. 16. :d. at 2. :d. at 8. :d. at 21@2>. :d. at 82. :d. at 1<@15. :d. at 26@<4. :d. at <>@<2.

<

>

+hotocopy of a telefa1 message of %a 9anese broFer (ang to &unace, N!"' records, p. 2>.
10

N!"' records, pp. 88@8>. :d. at 8>@82 /c tat ons om tted0. :d. at 81@86. :d. at 82@86. :d. at 150@15>. 'A rollo, pp. 2@11<.

11

12

1<

14

18

1>

+enned by Assoc ate Just ce "uben %. "eyes 9 th Assoc ate Just ces "emed os &alaAar@7ernando and Edgardo 7. &und am, concurr ng.
12

'A rollo, pp. 118@11> /c tat ons om tted0. :d. at 184@182. Supra note 5. 'A rollo, pp. 14>@182.

16

15

20

21

:d. at 146. :d. at 25, 11> and 182.

22

2<

Rovels 5nterprises, :nc. v. =campo, #.". No. 1<>621, Dctober 12, 2002, <51 &'"A 12>I vide Air 8rance v. .ourt of Appeals, et al., 211 +h l. >01 /156<0.
24

' v l 'ode, Art cle 1<11.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN

G.$. No. 11;411 NoAem er 3<, 1<<0 %/S')% #&'9E$ %/$+/$A()/N, pet t oner, vs. %/&$( /: A++EA# and )S)!$/ +E$E6, respondents.

9E##/S)##/, J.: 'D&M$' !3MEE" 'D"+D"A%$DN through ts #eneral Manager e1ecuted on 26 January 1568 a &pec al +o9er of Attorney appo nt ng +aA #. C llam l@Estrada as attorney@ n@fact O . . . to n t ate, nst tute and f le any court act on for the e-ectment of th rd persons andMor s=uatters of the ent re lot 5122 and 44< and covered by %'% Nos. <2>46 and <2>45, for the sa d s=uatters to remove the r houses and vacate the prem ses n order that the corporat on may taFe mater al possess on of the ent re lot, and for th s purpose, to appear at the pre@tr al conference and enter nto any st pulat on of facts andMor comprom se agreement so far as t shall protect the r ghts and nterest of the corporat on n the aforement oned lots. 1 Dn 11 March 1568 +aA #. C llam l@Estrada, by v rtue of her po9er of attorney, nst tuted an act on for the e-ectment of pr vate respondent $s dro +ereA and recover the possess on of a port on of !ot No. 44< before the "eg onal %r al 'ourt of Dagupan, docFeted as ' v l 'ase No. D@2280. 3 Dn 28 November 1568 C llam l@Estrada entered nto a 'omprom se Agreement 9 th respondent +ereA, the terms of 9h ch follo9? 1. %hat as per relocat on sFetch plan dated June 8, 1568 prepared by Eng neer "odolfo dela 'ruA the area at present occup ed by defendant 9here n h s house s located s <<< s=uare meters on the easternmost part of lot 44< and 9h ch port on has been occup ed by defendant for several years no9I

2. %hat to buy peace sa d defendant pays unto the pla nt ff through here n attorney@ n@fact the sum of +2>,>40.00 computed at +60.00Ms=uare meterI <. %hat pla nt ff hereby recogn Aes o9nersh p and possess on of the defendant by v rtue of th s comprom se agreement over sa d port on of <<< s=uare m. of lot 44< 9h ch port on 9 ll be located on the easternmost part as nd cated n the sFetch as anne1 AI 4. (hatever e1penses of subd v s on, reg strat on, and other nc dental e1penses shall be shouldered by the defendant. 4 Dn 22 November 1568 the ,'omprom se Agreement, 9as approved by the tr al court and -udgment 9as rendered n accordance there9 th. ; Although the dec s on became f nal and e1ecutory t 9as not e1ecuted 9 th n the 8@year per od from date of ts f nal ty allegedly due to the fa lure of pet t oner to produce the o9ner)s dupl cate copy of % tle No. <2>45 needed to segregate from !ot No. 44< the port on sold by the attorney@ n@fact, +aA #. C llam l@Estrada, to pr vate respondent under the comprom se agreement. %hus on 28 January 155< respondent f led a compla nt to rev ve the -udgment, docFeted as ' v l 'ase No. D@10485. 2 +et t oner asserts that t 9as only 9hen the summons n ' v l 'ase No. D@10485 for the rev val of -udgment 9as served upon t that t came to Fno9 of the comprom se agreement entered nto bet9een +aA #. C llam l@Estrada and respondent $s dro +ereA upon 9h ch the tr al court based ts dec s on of 2> July 155< n ' v l 'ase No. D@2280. 7orth9 th, upon learn ng of the fraudulent transact on, pet t oner sought annulment of the dec s on of the tr al court before respondent 'ourt of Appeals on the ground that the comprom se agreement 9as vo d because? /a0 the attorney@ n@fact d d not have the author ty to d spose of, sell, encumber or d vest the pla nt ff of ts o9nersh p over ts real property or any port on thereofI /b0 the author ty of the attorney@ n@fact 9as conf ned to the nst tut on and f l ng of an e-ectment case aga nst th rd personsMs=uatters on the property of the pla nt ff, and to cause the r ev ct on therefromI /c0 9h le the spec al po9er of attorney made ment on of an author ty to enter nto a comprom se agreement, such author ty 9as n connect on 9 th, and l m ted to, the ev ct on of th rd personsMs=uatters thereat, n order that ,the corporat on may taFe mater al possess on of the ent re lotI, /d0 the amount of +2>,>40.00 alluded to as alleged cons derat on of sa d agreement 9as never rece ved by the pla nt ffI /e0 the pr vate defendant acted n bad fa th n. the e1ecut on of sa d agreement Fno9 ng fully 9ell the 9ant of author ty of the attorney@ n@fact to sell, encumber or d spose of the real property of pla nt ffI and, /f0 the d sposal of a corporate property nd spensably re=u res a Eoard "esolut on of ts D rectors, a fact 9h ch s 9ant ng n sa d ' v l 'ase No. D@2280, and the #eneral Manager s not the proper off cer to encumber a corporate property. 0 Dn 25 Dctober 155< respondent court d sm ssed the compla nt on the bas s of ts f nd ng that not one of the grounds for annulment, namely, lacF of -ur sd ct on, fraud or llegal ty 9as sho9n to e1 st. 1 $t also den ed the mot on for

recons derat on f led by pet t oner, d scours ng that the alleged null ty of the comprom se -udgment on the ground that pet t oner)s attorney@ n@fact C llam l@ Estrada 9as not author Aed to sell the sub-ect propety may be ra sed as a defense n the e1ecut on of the comprom se -udgment as t does not b nd pet t oner, but not as a ground for annulment of -udgment because t does not affect the -ur sd ct on of the tr al court over the act on nor does t amount to e1tr ns c fraud. = +et t oner challenges th s verd ct. $t argues that the dec s on of the tr al court s vo d because the comprom se agreement upon 9h ch t 9as based s vo d. Attorney@ n@fact C llam l@Estrada d d not possess the author ty to sell or 9as she armed 9 th a Eoard "esolut on author A ng the sale of ts property. &he 9as merely empo9ered to enter nto a comprom se agreement n the recovery su t she 9as author Aed to f le aga nst persons s=uatt ng on !ot No. 44<, such author ty be ng e1pressly conf ned to the ,e"ectment of third persons or squatters of . . . lot . . . (3o.* BB- . . . for the said squatters to remove their houses and vacate the premises in order that the corporation may ta'e material possession of the entire lot . . ., (e agree 9 th pet t oner. %he author ty granted C llam l@Estrada under the spec al po9er of attorney 9as e1pl c t and e1clus onary? for her to nst tute any act on n court to e-ect all persons found on !ots Nos. 5122 and 44< so that pet t oner could taFe mater al possess on thereof, and for this purpose, to appear at the pre@tr al and enter nto any st pulat on of facts andMor comprom se agreement #ut only insofar as this &as protective of the rights and interests of petitioner in the property. No9here n th s author Aat on 9as C llam l@Estrada granted e1pressly or mpl edly any po9er to sell the sub-ect property nor a port on thereof. Ne ther can a conferment of the po9er to sell be val dly nferred from the spec f c author ty ,to enter into a compromise agreement, because of the e1pl c t l m tat on f 1ed by the grantor that the comprom se entered nto shall only be ,so far as it shall protect the rights and interest of the corporation in the aforementioned lots., $n the conte1t of the spec f c nvest ture of po9ers to C llam l@Estrada, al enat on by sale of an mmovable certa nly cannot be deemed protect ve of the r ght of pet t oner to phys cally possess the same, more so 9hen the land 9as be ng sold for a pr ce of +60.00 per s=uare meter, very much less than ts assessed value of +280.00 per s=uare meter, and cons der ng further that pet t oner never rece ved the proceeds of the sale. (hen the sale of a p ece of land or any nterest thereon s through an agent, the author ty of the latter shall be n 9r t ngI other9 se, the sale shall be vo d. < %hus the author ty of an agent to e1ecute a contract for the sale of real estate must be conferred n 9r t ng and must g ve h m spec f c author ty, e ther to conduct the general bus ness of the pr nc pal or to e1ecute a b nd ng contract conta n ng terms and cond t ons 9h ch are n the contract he d d e1ecute. 1. A spec al po9er of attorney s necessary to enter nto any contract by 9h ch the o9nersh p of an mmovable s transm tted or ac=u red e ther gratu tously or for a valuable cons derat on. 11 %he e1press mandate re=u red by la9 to enable an appo ntee of an agency /couched0 n general terms to sell must be one that e1pressly

ment ons a sale or that ncludes a sale as a necessary ngred ent of the act ment oned. 13 7or the pr nc pal to confer the r ght upon an agent to sell real estate, a po9er of attorney must so e1press the po9ers of the agent n clear and unm staFable language. (hen there s any reasonable doubt that the language so used conveys such po9er, no such construct on shall be g ven the document. 14 $t s therefore clear that by sell ng to respondent +ereA a port on of pet t oner)s land through a comprom se agreement, C llam l@Estrada acted 9 thout or n obv ous author ty. %he sale ipso "ure s conse=uently vo d. &o s the comprom se agreement. %h s be ng the case, the -udgment based thereon s necessar ly vo d. Ant podal to the op n on e1pressed by respondent court n resolv ng pet t oner)s mot on for recons derat on, the null ty of the settlement bet9een C llam l@Estrada and +ereA mpa red the -ur sd ct on of the tr al court to render ts dec s on based on the comprom se agreement. $n Alviar v. .ourt of 8irst :nstance of %a ;nion, 1;the 'ourt held O . . . th s court does not hes tate to hold that the -udgment n =uest on s null and vo d a# initio. $t s not b nd ng upon and cannot be e1ecuted aga nst the pet t oners. $t s ev dent that the comprom se upon 9h ch the -udgment 9as based 9as not subscr bed by them . . . Ne ther could Attorney Drtega b nd them val dly n the comprom se because he had no spec al author ty . . . As the -udgment n =uest on s null and vo d a# initio, t s ev dent that the court ac=u red no -ur sd ct on to render t, much less to order the e1ecut on thereof . . . . . . A -udgment, 9h ch s null and vo d a# initio, rendered by a court 9 thout -ur sd ct on to do so, s 9 thout legal eff cacy and may properly be mpugned n any proceed ng by the party aga nst 9hom t s sought to be enforced . . . %h s rul ng 9as adopted n 9acinto v. Montesa, 12 by Mr. Just ce J. E.!. "eyes, a much@respected author ty on c v l la9, 9here the 'ourt declared that a -udgment based on a comprom se entered nto by an attorney 9 thout spec f c author ty from the cl ent s vo d. &uch -udgment may be mpugned and ts e1ecut on restra ned n any proceed ng by the party aga nst 9hom t s sought to be enforced. %he 'ourt also observed that a defendant aga nst 9hom a -udgment based on a comprom se s sought to be enforced may f le a pet t on for certiorari to =uash the e1ecut on. Be could not move to have the comprom se set as de and then appeal from the order of den al s nce he 9as not a party to the comprom se. %hus t 9ould appear that the ob ter of the appellate court that the alleged null ty of the comprom se agreement should be ra sed as a defense aga nst ts enforcement s not legally feas ble. +et t oner could not be n a pos t on to =uest on the comprom se agreement n the act on to rev ve the comprom se -udgment s nce t 9as never pr vy to such agreement. C llam l@ Estrada 9ho s gned the comprom se agreement may have been the attorney@ n@ fact but she could not legally b nd pet t oner thereto as she 9as not entrusted 9 th a spec al author ty to sell the land, as re=u red n Art. 1626, par. /80, of the ' v l 'ode.

3nder author ty of &ec. 5, par. /20, of E.+. Elg. 125, a party may no9 pet t on the 'ourt of Appeals to annul and set as de -udgments of "eg onal %r al 'ourts. 10 ,%hus, the $ntermed ate Appellant 'ourt /no9 'ourt of Appeals0 shall e1erc se . . . /20 E1clus ve or g nal -ur sd ct on over act on for annulment of -udgments of the "eg onal %r al 'ourts . . ., Bo9ever, certa n re=u s tes must f rst be establ shed before a f nal and e1ecutory -udgment can be the sub-ect of an act on for annulment. $t must e ther be vo d for 9ant of -ur sd ct on or for lacF of due process of la9, or t has been obta ned by fraud. 11 'onformably 9 th la9 and the above@c ted author t es, the pet t on to annul the dec s on of the tr al court n ' v l 'ase No. D@2280 before the 'ourt of Appeals 9as proper. Emanat ng as t d d from a vo d comprom se agreement, the tr al court had no -ur sd ct on to render a -udgment based thereon. 1= $t 9ould also appear, and =u te contrary to the f nd ng of the appellate court, that the h ghly reprehens ble conduct of attorney@ n@fact C llam l@Estrada n ' v l 'ase No. 2280 const tuted an e1tr ns c or collateral fraud by reason of 9h ch the -udgment rendered thereon should have been strucF do9n. Not all the legal semant cs n the 9orld can becloud the unassa lable fact that pet t oner 9as dece ved and betrayed by ts attorney@ n@fact, C llam l@Estrada del berately concealed from pet t oner, her pr nc pal, that a comprom se agreement had been forged 9 th the end@result that a port on of pet t oner)s property 9as sold to the deforc ant, l terally for a song. %hus completely Fept una9are of ts agent)s art f ce, pet t oner 9as not accorded even a f ght ng chance to repud ate the settlement so much so that the -udgment based thereon became f nal and e1ecutory. 7or sure, the 'ourt of Appeals restr cted the concept of fraudulent acts 9 th n too narro9 l m ts. 7raud may assume d fferent shapes and be comm tted n as many d fferent 9ays and here l es the danger of attempt ng to def ne fraud. 7or man n h s ngenu ty and fert le mag nat on 9 ll al9ays contr ve ne9 schemes to fool the un9ary. %here s e1tr ns c fraud 9 th n the mean ng of &ec. 5, par. /20, of E.+. Elg. 125, 9here t s one the effect of 9h ch prevents a party from hear ng a tr al, or real contest, or from present ng all of h s case to the court, or 9here t operates upon matters, not perta n ng to the -udgment tself, but to the manner n 9h ch t 9as procured so that there s not a fa r subm ss on of the controversy. $n other 9ords, e1tr ns c fraud refers to any fraudulent act of the preva l ng party n the l t gat on 9h ch s comm tted outs de of the tr al of the case, 9hereby the defeated party has been prevented from e1h b t ng fully h s s de of the case by fraud or decept on pract ced on h m by h s opponent. 1< 7raud s e1tr ns c 9here the unsuccessful party has been prevented from e1h b t ng fully h s case, by fraud or decept on pract ced on h m by h s opponent, as by Feep ng h m a9ay from court, a false prom se of a comprom seI or 9here the defendant never had Fno9ledge of the su t, be ng Fept n gnorance by the acts of the pla nt ffI or 9here an attorney fraudulently or 9 thout author ty conn ves at h s defeatI these and s m lar cases 9h ch sho9 that there has never been a real contest n the tr al or

hear ng of the case are reasons for 9h ch a ne9 su t may be susta ned to set as de and annul the former -udgment and open the case for a ne9 and fa r hear ng. 3. $t may be argued that pet t oner Fne9 of the comprom se agreement s nce the pr nc pal s chargeable 9 th and bound by the Fno9ledge of or not ce to h s agent rece ved 9h le the agent 9as act ng as such. Eut the general rule s ntended to protect those 9ho e1erc se good fa th and not as a sh eld for unfa r deal ng. Bence there s a 9ell@establ shed e1cept on to the general rule as 9here the conduct and deal ngs of the agent are such as to ra se a clear presumpt on that he 9 ll not commun cate to the pr nc pal the facts n controversy. 31 %he log cal reason for th s e1cept on s that 9here the agent s comm tt ng a fraud, t 9ould be contrary to common sense to presume or to e1pect that he 9ould commun cate the facts to the pr nc pal. Cer ly, 9hen an agent s engaged n the perpetrat on of a fraud upon h s pr nc pal for h s o9n e1clus ve benef t, he s not really act ng for the pr nc pal but s really act ng for h mself, ent rely outs de the scope of h s agency. 33 $ndeed, the bas c tenets of agency rest on the h ghest cons derat ons of -ust ce, e=u ty and fa r play, and an agent 9 ll not be perm tted to pervert h s author ty to h s o9n personal advantage, and h s act n secret host l ty to the nterests of h s pr nc pal transcends the po9er afforded h m. 34 (BE"E7D"E, the pet t on s #"AN%ED. %he dec s on and resolut on of respondent 'ourt of Appeals dated 25 Dctober 155< and 10 March 1554, respect vely, as 9ell as the dec s on of the "eg onal %r al 'ourt of Dagupan ' ty n ' v l 'ase No. D@2280 dated 22 November 1568, are N3!!$7$ED and &E% A&$DE. %he ,'omprom se Agreement, entered nto bet9een Attorney@ n@fact +aA #. C llam l@ Estrada and respondent $s dro +ereA s declared CD$D. %h s s 9 thout pre-ud ce to the r ght of pet t oner to pursue ts compla nt aga nst pr vate respondent $s dro +ereA n ' v l 'ase No. D@2280 for the recovery of possess on of a port on of !ot No. 44<. &D D"DE"ED. $adilla, 4itug and 0ermosisima, 9r., 99., concur. 1apunan, 9., too' no part. :ootnotes 1 'A Rollo, pp. 11. 2 Ass gned to Er. 44. < 'A Rollo, p. 12. 4 +enned by Judge 'r sp n '. !aronI id., p. 15. 8 Ass gned to Er. 42. > 'A Rollo, pp. 8@>.

2 +enned by Just ce M nerva +. #onAaga@"eyes 9 th the concurrence of Just ces &ant ago M. *apunan and Eduardo #. MontenegroI Rollo, p. 4<. 6 Rollo, p. 45. 5 Art. 1642, ' v l 'ode of the +h l pp nes. 10 Johnson v. !enno1, 88 'olo. 128, 1<< + 244. 11 Art. 1626, par. /80, ' v l 'ode of the +h l pp nes. 12 &trong v. #ut erreA "ep de, > +h l. >60 /150>0. 1< ! Qan v. +uno, <1 +h l. 285 /15180. 14 >4 +h l. <01, <08@<0> /15<20. 18 No. !@2<056, 26 7ebruary 15>2, 15 &'"A 81<, 816@815. See also Uu ban v. Eutal d, #.". No. 50524, 22 August 1550, 165 &'"A 102. 1> #oldhoop +ropert es, $nc. v. 'ourt of Appeals, #.". No. 554<1, 11 August 1552, 212 &'"A 456I Mercado v. 3bay, No. !@<>6<0, 24 July 1550, 162 &'"A 215I #erardo v. De la +eQa, #.". No. >1822, 2> December 1550, 152 &'"A >51. 12 $slam c Da )(ah 'ounc l of the +h l pp nes v. 'ourt of Appeals, #.". No. 60652, 25 &eptember 1565, 126 &'"A 126I "am reA v. 'ourt of Appeals, #.". No. 2><>>, < July 1550, 162 &'"A 18<I "u A v. 'ourt of Appeals, #.". No. 5<484, 1< &eptember 1551, 210 &'"A 822I &antos v. 'ourt of Appeals, #.". No. 85221, 21 July 155<, 224 &'"A >2<. See also +arcon v. 'ourt of Appeals, #.". No. 68240, 5 November 1550, 151 &'"A 264. 16 See notes 14 and 18. 15 Macab ngF l v. +BB', No. !@25060, 12 August 152>, 22 &'"A <2>, <4<@<44. 20 :d., p. <44 citing 3& v. %hrocFmorton, 28 !. Ed. 5<, 58. 21 Mutual ! fe $ns. 'o. v. B lton #reen, 241 3& >1<, >0 ! Ed. 1202. 22 Aetna 'asualty and &urety 'o. v. !ocal Eldg. and !oan Assoc., 15 +2d >12, >1>. 2< &trong v. &trong, <> A2d 410, 418. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. <;.11 'arc- 41, 1<<3

NEW #):E EN(E$+$)SES and J&#)AN S8, pet t oners, vs. 5/N. %/&$( /: A++EA#S, EE&)(A9#E )NS&$AN%E %/$+/$A()/N, $E#)AN%E S&$E(8 AN! )NS&$AN%E %/., )N%. and WES(E$N G&A$AN(8 %/$+/$A()/N, respondents.

$EGA#A!/, J.: %h s appeal by certiorari seeFs the null f cat on of the dec s on 1 of respondent 'ourt of Appeals n 'A@#.". 'C No. 1<6>> 9h ch reversed the dec s on of the "eg onal %r al 'ourt, Eranch !C$$ at !ucena ' ty, -o ntly dec d ng ' v l 'ases Nos. >@64, 2@64 and 6@64 thereof and conse=uently ordered the d sm ssal of the aforesa d act ons f led by here n pet t oners. %he und sputed bacFground of th s case as found by the court a quo and adopted by respondent court, be ng susta ned by the ev dence on record, 9e hereby reproduce the same 9 th approval. 3 %he antecedents of th s case sho9 that Jul an &y and Jose &y Eang have formed a bus ness partnersh p n the ' ty of !ucena. 3nder the bus ness name of Ne9 ! fe Enterpr ses, the partnersh p engaged n the sale of construct on mater als at ts place of bus ness, a t9o storey bu ld ng s tuated at $yam, !ucena ' ty. %he facts sho9 that Jul an &y nsured the stocFs n trade of Ne9 ! fe Enterpr ses9 th (estern #uaranty 'orporat on, "el ance &urety and $nsurance. 'o., $nc., and E=u table $nsurance 'orporat on. Dn May 18, 1561, (estern #uaranty 'orporat on ssued 7 re $nsurance +ol cy No. <2201 n the amount of +<80,000.00. %h s pol cy 9as rene9ed on May, 1<, 1562. Dn July <0,1561, "el ance &urety and $nsurance 'o., $nc. ssued 7 re $nsurance +ol cy No. >51<8 nthe amount of +<00,000.00 /"ene9ed under "ene9al 'ert f cate No. 415520 An add t onal nsurance9as ssued by the same company on November 12, 1561 under 7 re $nsurance +ol cy No. 21842 n the amount of +200,000.00. Dn 7ebruary 6, 1562, E=u table $nsurance 'orporat on ssued 7 re $nsurance +ol cy No. <5<26 n the amount of +200,000.00. %hus 9hen the bu ld ng occup ed by the Ne9 ! fe Enterpr ses 9as gutted by f re at about 2?00 o)clocF n the morn ng of Dctober 15, 1562, the stocFs n the trade ns de sa d bu ld ng 9ere nsured aga nst f re n the total amount of +1,880,000.00. Accord ng to the cert f cat on ssued by the Bead=uarters,+h l pp ne 'onstabulary M$ntegrated Nat onal +ol ce, 'amp 'rame, the cause of f re 9as electr cal nnature. Accord ng to the pla nt ffs, the bu ld ng and the stocFs ns de 9ere burned.

After the f re, Jul an&y 9ent to the agent of "el ance $nsurance 9hom he asFed to accompany h m to the off ce of thecompany so that he can f le h s cla m. Be averred that n support of h s cla m, he subm tted the f reclearance, the nsurance pol c es and nventory of stocFs. Be further test f ed that the three nsurance compan es are s ster compan es, and as a matter of fact 9hen he 9as follo9 ng@up h s cla m 9 th E=u table $nsurance, the 'la ms Manager told h m to go f rst to "el ance $nsurance and f sa dcompany agrees to pay, they 9ould also pay. %he same treatment 9as g ven h m by the other nsurance compan es. 3lt mately, the three nsurance compan es den ed pla nt ffs) cla m for payment. $n ts letter of den al dated March 5, 156<, /E1h b t ,', No. 6@ 640 (estern #uaranty 'orporat onthrough 'la ms Manager Eernard &. "aAon told the pla nt ff that h s cla m , s den ed for breach ofpol cy cond t ons., "el ance $nsurance purveyed the same message n ts letter dated November 2<, 1562 and s gned by E1ecut ve C ce@ +res dent Mary Dee 'o /E1h b t Q', No. 2@640 9h ch sa d that ,pla nt ff)s cla m s den ed for breach of pol cy cond t ons., %he letter of den al rece ved by the pla nt fffrom E=u table $nsurance 'orporat on /E1h b t Q', No. >@640 9as of the same tenor, as sa d letter dated 7ebruary 22, 156<, and s gned by C ce@+res dent Elma ". Eondad, sa d ,9e f nd that certa n pol cy cond t ons 9ere v olated, therefore, 9e regret, 9e have to deny your cla m, as t s hereby den ed n ts ent rety., $n relat on to the case aga nst "el ance &urety and $nsurance 'ompany, a certa n Atty. &eraf n D. Dator, act ng n behalf of the pla nt ff, sent a letter dated 7ebruary 1<, 156< /E1h b t ,#@l, No 2@ 640 to E1ecut ve C ce@+res dent Mary Dee 'o asF ng that he be nformed as to the spec f c pol cy cond t ons allegedly v olated by thepla nt ff. $n her reply@letter dated March <0, 156<, E1ecut ve C ce@+res dent Mary Dee 'o nformed Atty. Datorthat Jul an &y v olated +ol cy 'ond t on No. ,<, 9h ch re=u res the nsured to g ve not ce of any nsurance or nsurances already effected cover ng the stocFs n trade. 4 Eecause of the den al of the r cla ms for payment by the three /<0 nsurance compan es, pet t oner f led separate c v l act ons aga nst the former before the "eg onal %r al 'ourt of !ucena ' ty, 9h ch cases 9ere consol dated for tr al, and thereafter the court belo9 rendered ts dec s on on December 15, l56> 9 th the follo9 ng d spos t on? (BE"E7D"E, -udgment n the above@ent tled cases s rendered n the follo9 ng manner, v A? 1. $n ' v l 'ase No. >@64, -udgment s rendered for the pla nt ff Ne9 ! fe Enterpr ses and aga nst the defendant E=u table $nsurance

'orporat on order ng the latter to pay the former the sum of %9oBundred %housand /+200,000.000 +esos and cons der ng that payment of the cla m of the nsuredhas been unreasonably den ed, pursuant to &ec. 244 of the $nsurance 'ode, defendant s furtherordered to p ay the pla nt ff attorney)s fees n the amount of %9enty %housand /+20,000.000 +esos. Allsums of money to be pa d by v rtue hereof shall bear nterest at 12R per annum /pursuant to &ec.244 of the $nsurance 'ode0 from 7ebruary 14, 156<, /51st day from November 1>, 1562, 9hen &9orn&tatement of 7 re 'la m 9as rece ved from the nsured0 unt l they are fully pa dI 2. $n ' v l 'ase No. 2@ 64, -udgment s rendered for the pla nt ff Jul an &y and aga nst the defendant"el ance &urety and $nsurance 'o., $nc., order ng the latter to pay the former the sum of+1,000,000.00 /+<00,000.00 under +ol cy No. >51<8 and +200,000.00 under +ol cy No. 218420 andcons der ng that payment of the cla m of the nsured has been unreasonably den ed, pursuant to &ec.244 of the $nsurance 'ode, defendant s further ordered to pay the pla nt ff the amount of +100,000.00 as attorney)s fees. All sums of money to be pa d by v rtue hereof shall bear nterest at 12R per annum /pursuant to &ec. 244 of the $nsurance 'ode0 from 7ebruary 14, 156<, /51st day from November 1>, 1562 9hen &9orn&tatement of 7 re 'la m 9as rece ved from the nsured0 unt l they are fully pa dI <. $n ' v l 'ase No. 6@64, -udgment s rendered for the pla nt ff Ne9 ! fe Enterpr ses and aga nst thedefendant (estern #uaranty 'o rporat on order ng the latter to pay the sum of +<80,000.00 to the'onsol dated EanF and %rust 'orporat on, !ucena Eranch, !ucena ' ty, as st pulated on the face of+ol cy No. <2201, and cons der ng that payment of the aforement oned sum of money has been unreasonably den ed, pursuant to &ec. 244 of the $nsurance 'ode, defendant s further ordered topay the pla nt ff attorney)s fees n the amount of +<8,000.00. All sums of money to be pa d by v rtue hereof shall bear nterest at 12R per annum /pursuant to &ec. 244 of the $nsurance 'ode0 from 7ebruary 8, 1562, /51st day from 1st 9eeF of November 156< 9hen nsured f ledformal cla m for full ndemn ty accord ng to ad-uster Cetremar Dela Merced0 unt l they are fully pa d. ; As aforestated, respondent 'ourt of Appeals reversed sa d -udgment of the tr al court, hence th s pet t on the cru19here n s 9hether or not 'ond t ons Nos. < and 22 of the nsurance contracts 9ere v olated by pet t oners thereby result ng n the r forfe ture of all the benef ts thereunder.

'ond t on No. < of sa d nsurance pol c es, other9 se Fno9n as the ,Dther $nsurance 'lause,, s un formlyconta ned n all the aforestated nsurance contracts of here n pet t oners, as follo9s? <. %he nsured shall g ve not ce to the 'ompany of any nsurance or nsurances already effected, or 9h ch maysubse=uently be effected, cover ng any of the property or propert es cons st ng of stocFs n trade, goods nprocess andMor nventor es only hereby nsured, and unless such not ce be g ven and the part culars of such nsurance or nsurances be stated there n or endorsed on th s pol cy pursuant to &ect on 80 of the $nsurance 'ode, by or on behalf of the 'ompany before the occurrence of any loss or damage, all benef ts under th spol cy shall be deemed forfe ted, provided ho9ever, that th s cond t on shall not apply 9hen the total nsuranceor nsurances n force at the t me of loss or damage not more than +200,000.00. 2 +et t oners adm t that the respect ve nsurance pol c es ssued by pr vate respondents d d not state or endorse thereon the other nsurance coverage obta ned or subse=uently effected on the same stocFs n trade for the loss of 9h ch compensat on s cla med by pet t oners. 0 %he pol cy ssued by respondent (estern #uaranty'orporat on /(estern0 d d not declare respondent "el ance &urety and $nsurance 'o., $nc. /"el ance0 and respondent E=u table $nsurance 'orporat on /E=u table0 as co@ nsurers on the same stocFs, 9h le "el ance)s+ol c es cover ng the same stocFs d d not l Fe9 se declare (estern and E=u table as such co@ nsurers. $t s furtheradm tted by pet t oners that E=u table)s pol cy stated ,n l, n the space thereon re=u r ng nd cat on of any co@ nsurance although there 9ere three /<0 pol c es subs st ng on the same stocFs n trade at the t me of the loss,namely, that of (estern n the amount of +<80,000.00 and t9o /20 pol c es of "el ance n the total amount of +1,000,000.00. 1 $n other 9ords, the coverage by other nsurance or co@ nsurance effected or subse=uently arranged by pet t oners 9ere ne ther stated nor endorsed n the pol c es of the three /<0 pr vate respondents, 9arrant ng forfe ture of all benef ts thereunder f 9e are to follo9 the e1press st pulat on n the afore=uoted +ol cy 'ond t on No. <. +et t oners contend that they are not to be blamed for the om ss ons, alleg ng that nsurance agent !eon AlvareA /for (estern0 and Hap *am 'huan /for "el ance and E=u table0 Fne9 about the e1 stence of the add t onal nsurance coverage and that they 9ere not nformed about the re=u rement that such other or add t onal nsurance should be stated n the pol cy, as they have not even read pol c es. = %hese content ons cannot pass -ud c al muster.

%he terms of the contract are clear and unamb guous. %he nsured s spec f cally re=u red to d sclose to the nsurer any other nsurance and ts part culars 9h ch he may have effected on the same sub-ect matter. %heFno9ledge of such nsurance by the nsurer)s agents, even assum ng the ac=u s t on thereof by the former, s notthe ,not ce, that 9ould estop the nsurers from deny ng the cla m. Ees des, the so@called theory of mputed Fno9ledge, that s, Fno9ledge of the agent s Fno9ledge of the pr nc pal, as de from be ng of dub ous appl cab l tyhere has l Fe9 se been roundly refuted by respondent court 9hose factual f nd ngs 9e f nd acceptable. %hus, t po nts out that 9h le pet t oner Jul an &y cla med that he had nformed nsurance agent AlvareA regard ng the co@ nsurance on the property, he contrad cted h mself by ne1pl cably cla m ng that he had not read the termsof the pol c esI that Hap Dam 'huan could not l Fe9 se have obta ned such Fno9ledge for the same reason, as defrom the fact that the nsurance 9 th (estern 9as obta ned before those of "el ance and E=u tableI and that theconclus on of the tr al court that "el ance and E=u table are ,s ster compan es, s an unfounded con-ecture dra9nfrom the mere fact that Hap *am 'huan 9as an agent for both compan es 9h ch also had the same nsurancecla ms ad-uster. Ava lment of the serv ces of the same agents and ad-usters by d fferent compan es s a commonpract ce n the nsurance bus ness and such facts do not 9arrant the speculat ve conclus on of the tr al court. 7urthermore, 9hen the 9ords and language of documents are clear and pla n or read ly understandable by an ord nary reader thereof, there s absolutely no room for nterpretat on or construct on anymore. < 'ourts are not allo9ed to maFe contracts for the part esI rather, they 9 ll ntervene only 9hen the terms of the pol cy areamb guous, e=u vocal, or uncerta n. 1. %he part es must ab de by the terms of the contract because such termsconst tute the measure of the nsurer)s l ab l ty and compl ance there9 th s a cond t on precedent to the nsured)sr ght of recovery from the nsurer. 11 (h le t s a card nal pr nc ple of nsurance la9 that a pol cy or contract of nsurance s to be construed l berally nfavor of the nsured and str ctly aga nst the nsurer company, yet contracts of nsurance, l Fe other contracts, are to be construed accord ng to the sense and mean ng of the terms 9h ch the part es themselves have used. $f suchterms are clear and unamb guous, they must be taFen and understood n the r pla n, ord nary and popular sense.13 Moreover, obl gat ons ar s ng from contracts have the force of la9 bet9een the contract ng part es and shouldbe compl ed 9 th n good fa th. 14

+et t oners should be a9are of the fact that a party s not rel eved of the duty to e1erc se the ord nary care and prudence that 9ould be e1acted n relat on to other contracts. %he conform ty of the nsured to the terms of the pol cy s mpl ed from h s fa lure to e1press any d sagreement 9 th 9hat s provided for. 1; $t may be true that thema-or ty rule, as c ted by pet t oners, s that n-ured persons may accept pol c es 9 thout read ng them, and that th s s not negl gence per se. 12 Eut, th s s not 9 thout any e1cept on. $t s and 9as ncumbent upon pet t oner &y to read the nsurance contracts, and th s can be reasonably e1pected of h m cons der ng that he has been a bus nessman s nce 15>8 10 and the contract concerns ndemn ty n case of loss n h s money@ maF ng trade of9h ch mportant cons derat on he could not have been una9are as t 9as pre@ n case of loss n h s money@maF ng trade of 9h ch mportant cons derat on he could not have been una9are as t 9as prec sely the reason for h s procur ng the same. (e re terate our pronouncement n $ioneer :nsurance and Surety .orporation vs. FapR 11 ... And cons der ng the terms of the pol cy 9h ch re=u red the nsured to declare oth er nsurances,the statement n =uest on must be deemed to be a statement /9arranty0 b nd ng on both nsurer and nsured, that there 9ere no other nsurance on the property. . . . %he annotat on then, must be deemed to be a 9arranty that the property 9as not nsured by any other pol cy. C olat on thereof ent tled the nsurer to resc nd /&ec. >5, $nsurance Act0. &uchm srepresentat on s fatal n the l ght of our v e9s n Santa Ana vs. .ommercial ;nion Assurance .ompany, %td. , 88 +h l. <25. %he mater al ty of non@ d sclosure of other nsurance pol c es s not open to doubt. 111 111 111 %he obv ous purpose of the aforesa d re=u rement n the pol cy s to prevent over@ nsurance and thus avert the perpetrat on of fraud. %he publ c, as 9ell as the nsurer, s nterested n prevent ng the s tuat on n 9h ch a f re 9ould be prof table to the nsured. Accord ng to Just ce &tory? ,%he nsured has no r ght to compla n, for he assents to comply 9 th all the st pulat ons on h s s de, n order toent tle h mself to the benef t of the contract, 9h ch, upon reason or pr nc ple, he has no r ght to asFthe court to d spense 9 th the performance of h s o9n part of the agreement, and yet to b nd the otherparty to obl gat ons, 9h ch, but for those st pulat ons, 9ould not have been entered nto., &ubse=uently, n the case of $acific !an'ing .orporation vs. .ourt of Appeals, et al., 1= 9e held?

$t s not d sputed that the nsured fa led to reveal before the loss three other nsurances. As found by the 'ourt of Appeals, by reason of sa d unrevealed nsurances, the nsured had been gu lty of a falsedeclarat onI a clear m srepresentat on and a v tal one because 9here the nsured had been asFed to reveal but d d not, that 9as decept on. Dther9 se stated, had the nsurer Fno9n that there 9ere many co@ nsurances, t could have hes tated or pla nly des sted from enter ng nto such contract. Bence, the nsured 9as gu lty of clear fraud /Rollo, p. 280. +et t oner)s content on that the allegat on of fraud s but a mere nference or susp c on s untenable. $n fact, concrete ev dence of fraud or false declarat on by the nsured 9as furn shed by the pet t oner tself 9hen the facts alleged n the pol cy under clauses Q'o@$nsurances Declared, and ,Dther$nsurance 'lause, are mater ally d fferent from the actual number of co@ nsurances taFen over thesub-ect property. 'onse=uently, Qthe 9hole foundat on of the contract fa ls, the r sF does not attachand the pol cy never becomes a contract bet9een the part es., "epresentat ons of facts are the foundat on of the contract and f the foundat on does not e1 st, the superstructure does not ar se.7alsehood n such representat ons s not sho9n to vary or add to the contract, or to term nate a contract 9h ch has once been made, but to sho9 that no contract has ever e1 sted /%olent no,'ommerc al !a9s of the +h l pp nes, p. 551, Col. $$, 6th Ed.,0 A vo d or ne1 stent contract s one 9h ch has no force and effect from the very beg nn ng, as f t had never been entered nto, and 9h ch cannot be val dated e ther by t me or by rat f cat on /%ongoy vs. '.A., 12< &'"A 55 /156<0I Av la v. '.A., 148 &'"A, 156>0. As the nsurance pol cy aga nst f re e1pressly re=u red that not ce should be g ven by the nsured ofother nsurance upon the same property, the total absence of such not ce null f es the pol cy. %o further 9arrant and -ust fy the forfe ture of the benef ts under the nsurance contracts nvolved, 9e need merelyto turn to +ol cy 'ond t on No. 18 thereof, 9h ch reads n part? 18. . . . f any false declarat on be made or used n support thereof, . . . all benef ts under th s +ol cy shall be forfe ted . . . .
1<

Add t onally, nsofar as the l ab l ty of respondent "el ance s concerned, t s not den ed that the compla nt for recovery 9as f led n court by pet t oners only on January <1, 1564, or after more than one /10 year had elapsedfrom pet t oners) rece pt of the nsurers) letter of den al on November 25, 1562. +ol cy 'ond t on No. 22 of the r nsurance contract 9 th "el ance prov des?

22. Action or suit clause. O $f a cla m be made and re-ected and an act on or su t be not commenc ed e ther nthe $nsurance 'omm ss on or any court of competent -ur sd ct on of not c e of such re-ect on, or n case ofarb trat on taF ng place as provided here n, 9 th n t9elve /120 months after due not ce of the a9ard made by thearb trator or arb trators or ump re, then the cla m shall for all purposes be deemed to have been abandoned andshall not thereafter be recoverable hereunder. 3. Dn th s po nt, the tr al court ruled? . . . Bo9ever, because of the pecul ar c rcumstances of th s case, 9e hes tate n conclud ng that pla nt ff)s r ghtto vent late h s cla m n court has been barred b y reason of the t me constra nt provided n the nsurancecontract. $t s ev dent that after the pla nt ff had rece ved the letter of den al, he st ll found t necessary to be nformed of the spec f c cause s or reasons for the den al of h s cla m, reason for 9h ch h s la9yer, Atty. Dator deemed t 9 se to send a letter of n=u ry to the defendant 9h ch 9as ans9ered by defendant)s E1ecut ve C ce@+res dent n a letter dated March <0, 156<, . . . . Assum ng, gratu tously, that the letter of E1ecut ve C ce@+res dent Mary Dee 'o dated March <0, 156<, 9as rece ved by pla nt ff on the same date, the per od ofl m tat on should start to run only from sa d date n the sp r t of fa r play and e=u ty. . . . 31 (e have perforce to re-ect th s theory of the court belo9 for be ng contrary to 9hat 9e have heretofore declared? $t s mportant to note the pr nc ple la d do9n by th s 'ourt n the case of Ang vs. 8ulton 8ire :nsurance .o. /2 &'"A 548 :15>1;0 to 9 t? %he cond t on conta ned n an nsurance pol cy that cla ms must be presented 9 th n one year after re-ect on s not merely a procedural re=u rement but an mportant matter essent al to a prompt settlement of cla ms aga nst nsurance compan es as t demandsthat nsurance su ts be brought by the nsured 9h le the ev dence as to the or g n andcause of destruct on have not yet d sappeared. $n enunc at ng the above@c ted pr nc ple, th s 'ourt had def n tely settled the rat onale for the necess ty of br ng ng su ts aga nst the $nsurer 9 th n one year from the re-ect on of the cla m. %he content on of the respondents that the one@year prescr pt ve per od does not start to run unt l thepet t on for recons derat on had been resolved by the ns urer, runs counter to the declared purpose for re=u r ng that an act on or su t be f led n the $nsurance 'omm ss on or n a court of competent -ur sd ct on from the den al of the cla m. %o uphold respondents) content on

9ould contrad ct anddefeat the very pr nc ple 9h ch th s 'ourt had la d do9n. Moreover, t can eas ly be used by nsured persons as a scheme or dev ce to 9aste t me unt l any ev dence 9h ch may be cons dered aga nstthem s destroyed. 111 111 111 (h le n the Eagle &tar case /5> +h l. 2010, th s 'ourt uses the phrase ,f nal re-ect on,, the same cannot betaFen to mean the re-ect on of a pet t on for recons derat on as ns sted by respondents. &uch 9as clearly notthe mean ng contemplated by th s 'ourt. %he nsurance pol cy n sa d case prov des that the nsured should f le h s cla m f rst, 9 th the carr er and then 9 th the nsurer. %he ,f nal re-ect on, be ng referred to n sa d case s the re-ect on by the nsurance company. 33 7urthermore, assum ng arguendo that pet t oners felt the leg t mate need to be clar f ed as to the pol cy cond t on v olated, there 9as a cons derable lapse of t me from the r rece pt of the nsurer)s clar f catory letter dated March <0, 156<, up to the t me the compla nt 9as f led n court on January <1, 1564. %he one@year prescr pt ve per od9as yet to e1p re on November 25, 156<, or about e ght /60 months from the rece pt of the clar f catory letter, butpet t oners let the per od lapse 9 thout br ng ng the r act on n court. (e accord ngly f nd no ,pecul arc rcumstances, suff c ent to rela1 the enforcement of the one@year prescr pt ve per od and 9e, therefore, hold thatpet t oners) cla m 9as def n tely f led out of t me. (BE"E7D"E, f nd ng no cogent reason to d sturb the -udgment of respondent 'ourt of Appeals, the same shereby A77$"MED. &D D"DE"ED. Melencio<0ererra and 3ocon, 99., concur. $aras, 9., too' no part. $adilla, 9., too' no part.

:ootnotes 1 Just ce &eraf n C.'. #u ngona, ponente, 9 th Just ces #lor a '. +aras and Eon fac o A. 'acdac, Jr., concurr ng Rollo, 81. 2 +er Judge Boover &. Abl ng. < Rollo, <4@<>. 4 :#id., <2@<<.

8 E1h b ts ,20@c,, ,16@b,, ,14@b,I 7older of E1h b t, 20, 25, <1. > Memorandum for +et t oners, 1<. 2 Rollo, <8. 6 Memorandum for the +et t oners, 1<. 5 Mar na +ort &erv ces, $nc. vs. $n ego, et al., 161 &'"A <04 /15500. 10 +an Malayan $nsurance 'orporat on vs. 'ourt of Appeals, et al., 164 &'"A 84 /15500. 11 +erla 'ompan a de &eguros, $nc. vs. 'ourt of Appeals, et al., 168 &'"A 241 /15500. 12 &un $nsurance Dff ce, !td. vs. 'ourt of Appeals, et al., 158 &'"A 15< /15510. 1< Art cle 1185, ' v l 'ode. 14 Ang # oF 'h p, etc. vs. &pr ngf eld 7 re N Mar ne $nsurance 'ompany, 8> &'"A <28 /15<10. 18 Cance on $nsurance, 1581 ed., 282I Memorandum for the +et t oners, 22. 1> %&N, 7ebruary 11, 156>, 26. 12 >1 &'"A 42> /15240, c t ng #eneral $nsurance N &urety 'orporat on vs. Ng Bua, 10> +h l. 1112, 1115@1120 /15>00. 16 1>6 &'"A 1 /15660. 15 E1h b ts ,20@d,, ,16@e, ,14@e,I 7older of E1h b ts, 21, <0, <<. 20 E1h b t ,14@f,I 7older of E1h b ts, <<. 21 Rollo, 45. 22 &un $nsurance Dff ce, !td. vs. 'ourt of Appeals, et al., supra, 7n. 12. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. #73=1;. :e ruary 3;, 1<=1 :E$')N 6. %A$A', J$., pet t oner, vs. %#A$/ #. #A&$E(A, respondent. :E$NAN!E6, J.:

%h s s a pet t on for cert orar to rev e9 the dec s on of the 'ourt of Appeals promulgated on January 25, 15>6 n 'A@#. ". ND. <8221@" ent tled ,'laro !. !aureta, pla nt ff@appellee versus Marcos Mata, 'od d Mata and 7erm n 'aram, Jr., defendants@ appellantsI %amp no /Mansaca0, et al. $ntervenors@appellants,, aff rm ng the dec s on of the 'ourt of 7 rst $nstance of Davao n ' v l 'ase No. <06<. 1 Dn June 28, 1585, 'laro !. !aureta f led n the 'ourt of 7 rst $nstance of Davao an act on for null ty, recovery of o9nersh p andMor reconveyance 9 th damages and attorney)s fees aga nst Marcos Mata, 'od d Mata, 7erm n L. 'aram, Jr. and the "eg ster of Deeds of Davao ' ty. 3 Dn June 10, 1548, Marcos Mata conveyed a large tract of agr cultural land covered by Dr g nal 'ert f cate of % tle No. <015 n favor of 'laro !aureta, pla nt ff, the respondent here n. %he deed of absolute sale n favor of the pla nt ff 9as not reg stered because t 9as not acFno9ledged before a notary publ c or any other author Aed off cer. At the t me the sale 9as e1ecuted, there 9as no author Aed off cer before 9hom the sale could be acFno9ledged nasmuch as the c v l government n %agum, Davao 9as not as yet organ Aed. Bo9ever, the defendant Marcos Mata del vered to !aureta the peaceful and la9ful possess on of the prem ses of the land together 9 th the pert nent papers thereof such as the D9ner)s Dupl cate Dr g nal 'ert f cate of % tle No. <015, sFetch plan, ta1 declarat on, ta1 rece pts and other papers related thereto. 4 & nce June 10, 1548, the pla nt ff !aureta had been and s st n n cont nuous, adverse and notor ous occupat on of sa d land, 9 thout be ng molested, d sturbed or stopped by any of the defendants or the r representat ves. $n fact, !aureta had been pay ng realty ta1es due thereon and had ntroduced mprovements 9orth not less than +20,000.00 at the t me of the f l ng of the compla nt. ; Dn May 8, 1542, the same land covered by Dr g nal 'ert f cate of % tle No. <015 9as sold by Marcos Mata to defendant 7erm n L. 'aram, Jr., pet t oner here n. %he deed of sale n favor of 'aram 9as acFno9ledged before Atty. Abelardo Aportadera. Dn May 22, 1542, Marcos Mata, through Attys. Abelardo Aportadera and #umerc ndo Arc lla, f led 9 th the 'ourt of 7 rst $nstance of Davao a pet t on for the ssuance of a ne9 D9ner)s Dupl cate of Dr g nal 'ert f cate of % tle No. <015, alleg ng as ground therefor the loss of sa d t tle n the evacuat on place of defendant Marcos Mata n Magugpo, %agum, Davao. Dn June 8, 1542, the 'ourt of 7 rst $nstance of Davao ssued an order d rect ng the "eg ster of Deeds of Davao to ssue a ne9 D9ner)s Dupl cate 'ert f cate of % tle No. <015 n favor of Marcos Mata and declar ng the lost t tle as null and vo d. Dn December 5, 1542, the second sale bet9een Marcos Mata and 7erm n 'aram, Jr. 9as reg stered 9 th the "eg ster of Deeds. Dn the same date, %ransfer 'ert f cate of % tle No. 140 9as ssued n favor of 7erm n 'aram Jr. 2 Dn August 25, 1585, the defendants Marcos Mata and 'od d Mata f led the r ans9er 9 th countercla m adm tt ng the e1 stence of a pr vate absolute deed of sale of h s only property n favor of 'laro !. !aureta but alleg ng that he s gned the same as he 9as sub-ected to duress, threat and nt m dat on for the pla nt ff

9as the command ng off cer of the 10th d v s on 3&7$+ operat ng n the unoccup ed areas of Northern Davao 9 th ts head=uarters at +ro-ect No. 2 /*m. >0, Davao Agusan B gh9ays0, n the Mun c pal ty of %agum, +rov nce of DavaoI that !aureta)s 9ords and re=uests 9ere la9sI that although the defendant Mata d d not l Fe to sell h s property or s gn the document 9 thout even understand ng the same, he 9as ordered to accept +>80.00 M ndanao Emergency notesI and that due to h s fear of harm or danger that 9 ll happen to h m or to h s fam ly, f he refused he had no other alternat ve but to s gn the document. 0 %he defendants Marcos Mata and 'od d Mata also adm t the e1 stence of a record n the "eg stry of Deeds regard ng a document allegedly s gned by h m n favor of h s co@defendant 7erm n 'aram, Jr. but den es that he ever s gned the document for he Fne9 before hand that he had s gned a deed of sale n favor of the pla nt ff and that the pla nt ff 9as n possess on of the cert f cate of t tleI that f ever h s thumb marF appeared n the document purportedly al enat ng the property to 7erm n 'aram, d d h s consent 9as obta ned through fraud and m srepresentat on for the defendant Mata s ll terate and gnorant and d d not Fno9 9hat he 9as s gn ngI and that he d d not rece ve a cons derat on for the sa d sale. 1 %he defendant 7erm n 'aram Jr. f led h s ans9er on Dctober 2<, 1585 alleg ng that he has no Fno9ledge or nformat on about the prev ous encumbrances, transact ons, and al enat ons n favor of pla nt ff unt l the f l ng of the compla nts. = %he tr al court rendered a dec s on dated 7ebruary 25, 15>4, the d spos t ve port on of 9h ch reads? < 1. Declar ng that the deed of sale, E1h b t A, e1ecuted by Marcos Mata n favor of 'laro !. !aureta stands and preva ls over the deed of sale, E1h b t 7, n favor of 7erm n 'aram, Jr.I 2. Declar ng as null and vo d the deed of sale E1h b t 7, n favor of 7erm n 'aram, Jr.I <. D rect ng Marcos Mata to acFno9ledge the deed of sale, E1h b t A, n favor of 'laro !. !auretaI 4. D rect ng 'laro !. !aureta to secure the approval of the &ecretary of Agr culture and Natural "esources on the deed, E1h b t A, after Marcos Mata shall have acFno9ledged the same before a notary publ cI 8. D rect ng 'laro !. !aureta to surrender to the "eg ster of Deeds for the ' ty and +rov nce of Davao the D9ner)s Dupl cate of Dr g nal 'ert f cate of % tle No. <015 and the latter to cancel the sameI >. Drder ng the "eg ster of Deeds for the ' ty and +rov nce of Davao to cancel %ransfer 'ert f cate of % tle No. %@140 n the name of 7erm n 'aram, Jr.I

2. D rect ng the "eg ster of Deeds for the ' ty and +rov nce of Davao to ssue a t tle n favor of 'laro !. !aureta, 7 l p no, res dent of UueAon ' ty, upon presentat on of the deed e1ecuted by Marcos Mata n h s favor, E1h b t A, duly acFno9ledged by h m and approved by the &ecretary of Agr culture and Natural "esources, and 6. D sm ss ng the countercla m and cross cla m of Marcos Mata and 'od d Mata, the countercla m of 'aram, Jr., the ans9er n ntervent on, countercla m and cross@cla m of the Mansacas. %he 'ourt maFes no pronouncement as to costs. &D D"DE"ED. %he defendants appealed from the -udgment to the 'ourt of Appeals. appeal 9as docFeted as 'A@#.". ND. <8221@ ".
1.

%he

%he 'ourt of Appeals promulgated ts dec s on on January 25, 15>6 aff rm ng the -udgment of the tr al court. $n h s br ef, the pet t oner ass gns the follo9 ng errors? $ %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N 'DN'!3D$N# %BA% $"E&+E AND A+D"%ADE"A (E"E A%%D"NEH&@$N@7A'% D7 +E%$%$DNE" 'A"AM 7D" %BE +3"+D&E D7 E3H$N# %BE +"D+E"%H $N U3E&%$DN. $$ %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N 'DN'!3D$N# %BA% %BE EC$DEN'E ADD3'ED $N %BE %"$A! 'D3"% 'DN&%$%3%E !E#A! EC$DEN'E D7 7"A3D DN %BE +A"% D7 $"E&+E AND A+D"%ADE"A A% %"$E3%AE!E %D +E%$%$DNE". $$$ %BE "E&+DNDEN% 'D3"% D7 A++EA!& 'DMM$%%ED #"ACE E""D" D7 !A( $N BD!D$N# %BA% *ND(!ED#E D7 $"E&+E AND A+D"%ADE"A D7 A +"$D" 3N"E#$&%E"ED &A!E D7 A %$%!ED +"D+E"%H A%%"$E3%AE!E %D +E%$%$DNE" AND EU3$CA!EN% $N !A( D7 "E#$&%"A%$DN D7 &A$D &A!E. $C %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N ND% BD!D$N# %BA% AN A'%$DN 7D" "E'DNCEHAN'E DN %BE #"D3ND D7 7"A3D +"E&'"$EE& ($%B$N 7D3" /40 HEA"&. %he pet t oner assa ls the f nd ng of the tr al court that the second sale of the property 9as made through h s representat ves, +edro $respe and Atty. Abelardo Aportadera. Be argues that +edro $respe 9as act ng merely as a broFer or ntermed ary 9 th the spec f c tasF and duty to pay Marcos Mata the sum of
11

+1,000.00 for the latter)s property and to see to t that the re=u s te deed of sale cover ng the purchase 9as properly e1ecuted by Marcos MataI that the $dent ty of the property to be bought and the pr ce of the purchase had already been agreed upon by the part esI and that the other alleged representat ve, Atty. Aportadera, merely acted as a notary publ c n the e1ecut on of the deed of sale. %he content on of the pet t oner has no mer t. %he facts of record sho9 that Mata, the vendor, and 'aram, the second vendee had never met. Dur ng the tr al, Marcos Mata test f ed that he Fno9s Atty. Aportadera but d d not Fno9 'aram. 13 %hus, the sale of the property could have only been through 'aram)s representat ves, $respe and Aportadera. %he pet t oner, n h s ans9er, adm tted that Atty. Aportadera acted as h s notary publ c and attorney@ n@fact at the same t me n the purchase of the property. 14 %he pet t oner contends that he cannot be cons dered to have acted n bad fa th because there s no d rect proof sho9 ng that $respe and Aportadera, h s alleged agents, had Fno9ledge of the f rst sale to !aureta. %h s content on s also 9 thout mer t. %he 'ourt of Appeals, n aff rm ng the dec s on of the tr al court, sa d?
1;

%he tr al court, n hold ng that appellant 'aram. Jr. 9as not a purchaser n good fa th, at the t me he bought the same property from appellant Mata, on May 8, 1542, ent rely d scred ted the test mony of Aportadera. %hus t stated n ts dec s on? %he test mony of Atty. Aportadera =uoted else9here n th s dec s on s hollo9. %here s every reason to bel eve that $respe and he had Fno9n of the sale of the property n =uest on to !aureta on the day Mata and $respe, accompan ed by !ean ng Mansaca, 9ent to the off ce of Atty. Aportadera for the sale of the same property to 'aram, Jr., represented by $respe as attorney@ n@fact. $n ng Mansaca 9as 9 th the t9o O $respe and Mata O to engage the serv ces >f Atty. Aportadera n the annulment of the sale of h s land to !aureta. (hen !ean ng Mansaca narrated to Atty. Aportadera the c rcumstances under 9h ch h s property had been sold to !aureta, he must have ncluded n the narrat on the sale of the land of Mata, for the t9o propert es had been sold on the same occass on and under the same c rcumstances. Even as early as mmed ately after l berat on, $respe, 9ho 9as the 9 tness n most of the cases f led by Atty. Aportadera n h s capac ty as +rov nc al 7 scal of Davao aga nst !aureta, must have Fno9n of the purchases of lands made by !aureta 9hen he 9as reg mental commander, one of 9h ch 9as the sale made by Mata. $t 9as not a mere co nc dence that $respe 9as made guard an ad litem of !ean ng Mansaca, at the suggest on of Atty. Aportadera and attorney@ n@fact of 'aram, Jr. %he 'ourt cannot help be ng conv nced that $respe, attorney@ n@fact of 'aram, Jr. had Fno9ledge of the pr or e1 st ng transact on, E1h b t A, bet9een Mata and !aureta over the land, sub-ect matter of th s l t gat on, 9hen the deed, E1h b t 7, 9as e1ecuted by Mata n favor of 'aram, Jr. And th s Fno9ledge has the effect of reg strat on as to 'aram, Jr. "A pp. 12<@1240

(e agree 9 th B s Bonor)s conclus on on th s part cular po nt, on t9o grounds O the f rst, the same concerns matters affect ng the cred b l ty of a 9 tness of 9h ch the f nd ngs of the tr al court command great 9e ght, and second, the same s borne out by the test mony of Atty. Aportadera h mself. /t.s.n., pp. 162@ 150, 21<@218, "estauro0. Even f $respe and Aportadera d d not have actual Fno9ledge of the f rst sale, st ll the r act ons have not sat sf ed the re=u rement of good fa th. Ead fa th s not based solely on the fact that a vendee had Fno9ledge of the defect or lacF of t tle of h s vendor. $n the case of !eung Hee vs. 7. !. &trong Mach nery 'o. and ( ll amson, th s 'ourt held? 12 Dne 9ho purchases real estate 9 th Fno9ledge of a defect or lacF of t tle n h s vendor can not cla m that he has ac=u red t tle thereto n good fa th, as aga nst the true o9ner of the land or of an nterest there n, and the same rule must be appl ed to one 9ho has Fno9ledge of facts 9h ch should have put h m upon such n=u ry and nvest gat on as m ght be necessary to ac=ua nt h m 9 th the defects n the t tle of h s vendor. $n the nstant case, $respe and Aportadera had Fno9ledge of c rcumstances 9h ch ought to have put them an n=u ry. Eoth of them Fne9 that Mata)s cert f cate of t tle together 9 th other papers perta n ng to the land 9as taFen by sold ers under the command of 'ol. 'laro !. !aureta. 10 Added to th s s the fact that at the t me of the second sale !aureta 9as already n possess on of the land. $respe and Aportadera should have nvest gated the nature of !aureta)s possess on. $f they fa led to e1erc se the ord nary care e1pected of a buyer of real estate they must suffer the conse=uences. %he rule of caveat emptor re=u res the purchaser to be a9are of the supposed t tle of the vendor and one 9ho buys 9 thout checF ng the vendor)s t tle taFes all the r sFs and losses conse=uent to such fa lure. 11 %he pr nc ple that a person deal ng 9 th the o9ner of the reg stered land s not bound to go beh nd the cert f cate and n=u re nto transact ons the e1 stence of 9h ch s not there nt mated 1= should not apply n th s case. $t 9as of common Fno9ledge that at the t me the sold ers of !aureta tooF the documents from Mata, the c v l government of %agum 9as not yet establ shed and that there 9ere no off c als to rat fy contracts of sale and maFe them reg sterable. Dbv ously, Aportadera and $respe Fne9 that even f Mata prev ously had sold t he D sputed such sale could not have been reg stered. %here s no doubt then that $respe and Aportadera, act ng as agents of 'aram, purchased the property of Mata n bad fa th. Apply ng the pr nc ple of agency, 'aram as pr nc pal, should also be deemed to have acted n bad fa th. Art cle 1844 of the Ne9 ' v l 'ode prov des that? Art. 1844. $f the same th ng should have been sold to d fferent vendees, the o9nersh p shall be transferred to the person 9ho may have f rst taFen possess on thereof n good fa th, f t should be movable property.

&hould t be mmovable property, the o9nersh p shall belong to the person ac=u r ng t 9ho n good fa th f rst recordered t n the "eg stry of +roperty. &hould there be no nscr pt on, the o9nersh p shag perta n to the person 9ho n good fa th 9as f rst n the possess onI and, n the absence thereof, to the person 9ho presents the oldest t tle, prov ded there s good fa th. /142<0 & nce 'aram 9as a reg strant n bad fa th, the s tuat on s as f there 9as no reg strat on at all. 1< %he =uest on to be determ ned no9 s, 9ho 9as f rst n possess on n good fa thP A possessor n good fa th s one 9ho s not a9are that there e1 sts n h s t tle or mode of ac=u s t on any fla9 9h ch nval dates t. 3. !aureta 9as f rst n possess on of the property. Be s also a possessor n good fa th. $t s true that Mata had alleged that the deed of sale n favor of !aureta 9as procured by force. 31 &uch defect, ho9ever, 9as cured 9hen, after the lapse of four years from the t me the nt m dat on ceased, Marcos Mata lost both h s r ghts to f le an act on for annulment or to set up null ty of the contract as a defense n an act on to enforce the same. Anent the fourth error ass gned, the pet t oner contends that the second deed of sale, E1h b t ,7,, s a vo dable contract. Ee ng a vo dable contract, the act on for annulment of the same on the ground of fraud must be brought 9 th n four /40 years from the d scovery of the fraud. $n the case at bar, !aureta s deemed to have d scovered that the land n =uest on has been sold to 'aram to h s pre-ud ce on December 5, 1542, 9hen the Deed of &ale, E1h b t ,7, 9as recorded and entered n the Dr g nal 'ert f cate of % tle by the "eg ster of Deeds and a ne9 'ert f cate of % tle No. 140 9as ssued n the name of 'aram. %herefore, 9hen the present case 9as f led on June 25, 1585, pla nt ff)s cause of act on had long prescr bed. %he pet t oner)s conclus on that the second deed of sale, ,E1h b t 7,, s a vo dable contract s not correct. $ n order that fraud can be a ground for the annulment of a contract, t must be employed pr or to or s multaneous to the, consent or creat on of the contract. %he fraud or dolo causante must be that 9h ch determ nes or s the essent al cause of the contract. Dolo causante as a ground for the annulment of contract s spec f cally descr bed n Art cle 1<<6 of the Ne9 ' v l 'ode of the +h l pp nes as , ns d ous 9ords or mach nat ons of one of the contract ng part es, 9h ch nduced the other to enter nto a contract, and ,9 thout them, he 9ould not have agreed to,. %he second deed of sale n favor of 'aram s not a vo dable contract. No ev dence 9hatsoever 9as sho9n that through ns d ous 9ords or mach nat ons, the representat ves of 'aram, $respe and Aportadera had nduced Mata to enter nto the contract. & nce the second deed of sale s not a vo dable contract, Art cle 1<51, ' v l 'ode of the +h l pp nes 9h ch prov des that the act on for annulment shall be brought 9 th n four /40 years from the t me of the d scovery of fraud does not apply.

Moreover, !aureta has been n cont nuous possess on of the land s nce he bought t n June 1548. A more mportant reason 9hy !aureta)s act on could not have prescr bed s that the second contract of sale, hav ng been reg stered n bad fa th, s null and vo d. Art cle 1410 of the ' v l 'ode of the +h l pp nes prov des that any act on or defense for the declarat on of the ne1 stence of a contract does not prescr be. $n a Memorandum of Author t es 33 subm tted to th s 'ourt on March 1<, 1526, the pet t oner ns sts that the act on of !aureta aga nst 'aram has prescr bed because the second contract of sale s not vo d under Art cle 1405 34 of the ' v l 'ode of the +h l pp nes 9h ch enumerates the F nds of contracts 9h ch are cons dered vo d. Moreover, Art cle 1844 of the Ne9 ' v l 'ode of the +h l pp nes does not declare vo d a second sale of mmovable reg stered n bad fa th. %he fact that the second contract s not cons dered vo d under Art cle 1405 and that Art cle 1844 does not declare vo d a deed of sale reg stered n bad fa th does not mean that sa d contract s not vo d. Art cle 1844 spec f cally prov des 9ho shall be the o9ner n case of a double sale of an mmovable property. %o g ve full effect to th s prov s on, the status of the t9o contracts must be declared val d so that one vendee may contract must be declared vo d to cut off all r ghts 9h ch may ar se from sa d contract. Dther9 se, Art cle 1844 9 n be mean ngless. %he f rst sale n favor of !aureta preva ls over the sale n favor of 'aram. (BE"E7D"E, the pet t on s hereby den ed and the dec s on of the 'ourt of Appeals sought to be rev e9ed s aff rmed, 9 thout pronouncement as to costs. &D D"DE"ED. Ma'asiar 2uerrero, De .astroT and Melencio<0errera concur.

:ootnotes 1 Anne1 ,A,, "ollo, pp. <8@46. (r tten by Just ce N cas o Hatco and concurred n by Just ce &alvador Es=uerra and Just ce Eulog o &. &errano. 2 "ecord on Appeal, pp. 2@1<, "ollo, p. >1. < :#id., pp. <@4. 4 :#id., +.10I %&N, January 22, 15>4, pp. 106, 110@111. 8 :#id., pp. >@6. > :#id., p. 22. 2 :#id., p. 25. 6 :#id., p. <5.

5 :#id., pp. 12>@122. 10 :#id., pp. 126@125. 11 Er ef for +et t oner, pp. 1@2, "ollo, p. 1<5. 12 %&N, January 22, 15>4, p. 56. 1< "ecord on Appeal, p. <6, "ollo, p. >1. 14 "ollo, pp. 48@42. 18 !eung Hee vs. &trong Mach nery 'o. and ( ll amson, <2 +h l. >44. 1> %&N, January 22, 15>4, pp. 162@166. 12 &alvoro vs. %aQega, 62 &'"A <45. <>1. 16 Uu mson vs. &uareA, 48 +h l. 50>. 15 &alvorro vs. %aQega, 62 &'"A <><. 20 Art cle 82>, ' v l 'ode of the +h l pp nes. 21 %he tr al court found that the contract n favor of !aureta s vo dable, but the act on to annul the same has long prescr bed. &ee "ecord on Appeal, p. 120, "ollo, p. >1. 22 "ollo, pp. 185@122. 2< Art cle 1405, ' v l 'ode of the +h l pp nes @ %he follo9 ng contracts are ne1 stent and vo d from the beg nn ng? /10 %hose 9hose cause, ob-ect or purpose s contrary to la9, morals, good customs, publ c order or publ c pol cyI /20 %hose 9h ch are absolutely s mulated or f ct t ousI /<0 %hose 9hose cause or ob-ect d d not e1 st at the t me of the transact onI /40 %hose 9hose ob-ect s outs de the commerce of men /80 %hose 9h ch contemplate an mposs ble serv ceI />0 %hose 9here the ntent on of the part es relat ve to the pr nc pal ob-ect of the contract cannot be ascerta nedI /20 %hose e1pressly proh b ted or declared vo d by la9 %hese contracts cannot be rat f ed. Ne ther can the r ght to set the defense of llegal ty be 9a ved. V Mr. Just ce de 'astro 9as des gnat on to s t 9 th the 7 rst D v s on. :)$S( !)*)S)/N

NG. $. No. 13<<1<. :e ruary 0, 3..3O !/')N)/N )NS&$AN%E %/$+/$A()/N, petitioner/ 's.%/&$( /: A++EA#S, $/!/#:/ S. G&E*A$$A, and :E$NAN!/ A&S($)A, respondents. !E%)S)/N +A"DD, 9.? %he 'ase %h s s an appeal via certiorari:1; from the dec s on of the 'ourt of Appeals:2; aff rm ng the dec s on:<; of the "eg onal %r al 'ourt, Eranch 44, &an 7ernando, +ampanga, 9h ch ordered pet t oner Dom n on $nsurance 'orporat on /Dom n on0 to pay "odolfo &. #uevarra /#uevarra0 the sum of +18>,42<.50represent ng the total amount advanced by #uevarra n the payment of the cla ms of Dom n onJs cl ents. %he 7acts %he facts, as found by the 'ourt of Appeals, are as follo9s? WDn January 28, 1551, pla nt ff "odolfo &. #uevarra nst tuted ' v l 'ase No. 6688 for sum of money aga nst defendant Dom n on $nsurance 'orporat on. +la nt ff sought to recover thereunder the sum of +18>,42<.50 9h ch he cla med to have advanced n h s capac ty as manager of defendant to sat sfy certa n cla ms f led by defendantJs cl ents. W$n ts traverse, defendant den ed any l ab l ty to pla nt ff and asserted a countercla m for +245,>22.8<, represent ng prem ums that pla nt ff allegedly fa led to rem t. WDn August 6, 1551, defendant f led a th rd@party compla nt aga nst 7ernando Austr a, 9ho, at the t me relevant to the case, 9as ts "eg onal Manager for 'entral !uAon area. W$n due t me, th rd@party defendant Austr a f led h s ans9er. W%hereafter the pre@tr al conference 9as set on the follo9 ng dates? Dctober 16, 1551, November 12, 1551, March 25, 1551, December 12, 1551, January 12, 1552, January 25, 1552, 7ebruary 26, 1552, March 12, 1552 and Apr l >, 1552, n all of 9h ch dates no pre@tr al conference 9as held. %he record sho9s that e1cept for the sett ngs on Dctober 16, 1551, January 12, 1552 and March 12, 1552 9h ch 9ere cancelled at the nstance of defendant, th rd@party defendant and pla nt ff, respect vely, the rest 9ere postponed upon -o nt re=uest of the part es. WDn May 22, 1552 the case 9as aga n called for pre@tr al conference. Dnly pla nt ff and counsel 9ere present. Desp te due not ce, defendant and counsel d d not appear, although a messenger, "oy #amboa, subm tted to the tr al court a hand9r tten note sent to h m by defendantJs counsel 9h ch nstructed h m to

re=uest for postponement. +la nt ffJs counsel ob-ected to the des red postponement and moved to have defendant declared as n default. %h s 9as granted by the tr al court n the follo9 ng order? WD"DE" W(hen th s case 9as called for pre@tr al th s afternoon only pla nt ff and h s counsel Atty. "omeo Maglalang appeared. (hen sho9n a note dated May 21, 1552 addressed to a certa n "oy 9ho 9as re=uested to asF for postponement, Atty. Maglalang v gorously ob-ected to any postponement on the ground that the note s but a mere scrap of paper and moved that the defendant corporat on be declared as n default for ts fa lure to appear n court desp te due not ce. W7 nd ng the verbal mot on of pla nt ffJs counsel to be mer tor ous and cons der ng that the pre@tr al conference has been repeatedly postponed on mot on of the defendant 'orporat on, the defendant Dom n on $nsurance 'orporat on s hereby declared /as0 n default and pla nt ff s allo9ed to present h s ev dence on June 1>, 1552 at 5?00 oJclocF n the morn ng. W%he pla nt ff and h s counsel are not f ed of th s order n open court. W&D D"DE"ED. W+la nt ff presented h s ev dence on June 1>, 1552. %h s 9as follo9ed by a 9r tten offer of documentary e1h b ts on July 6 and a supplemental offer of add t onal e1h b ts on July 1<, 1552. %he e1h b ts 9ere adm tted n ev dence n an order dated July 12, 1552. WDn August 2, 1552 defendant corporat on f led a YMD%$DN %D !$7% D"DE" D7 DE7A3!%.J $t alleged there n that the fa lure of counsel to attend the pre@tr al conference 9as Ydue to an unavo dable c rcumstanceJ and that counsel had sent h s representat ve on that date to nform the tr al court of h s nab l ty to appear. %he Mot on 9as vehemently opposed by pla nt ff. WDn August 28, 1552 the tr al court den ed defendantJs mot on for reasons, among others, that t 9as ne ther ver f ed nor supported by an aff dav t of mer t and that t further fa led to allege or spec fy the facts const tut ng h s mer tor ous defense. WDn &eptember 26, 1552 defendant moved for recons derat on of the aforesa d order. 7or the f rst t me counsel revealed to the tr al court that the reason for h s nonappearance at the pre@tr al conference 9as h s llness. An Aff dav t of Mer t e1ecuted by ts E1ecut ve C ce@+res dent purport ng to e1pla n ts mer tor ous defense 9as attached to the sa d Mot on. Just the same, n an Drder dated November 1<, 1552, the tr al court den ed sa d Mot on. WDn November 16, 1552, the court a =uo rendered -udgment as follo9s? W(BE"E7D"E, prem ses cons dered, -udgment s hereby rendered order ng?

W1. %he defendant Dom n on $nsurance 'orporat on to pay pla nt ff the sum of +18>,42<.50 represent ng the total amount advanced by pla nt ff n the payment of the cla ms of defendantJs cl entsI W2. %he defendant to pay pla nt ff +10,000.00 as and by 9ay of attorneyJs feesI W<. %he d sm ssal of the counter@cla m of the defendant and the th rd@party compla ntI W4. %he defendant to pay the costs of su t.X:4; Dn December 14, 1552, Dom n on appealed the dec s on to the 'ourt of Appeals. :8; Dn July 15, 155>, the 'ourt of Appeals promulgated a dec s on aff rm ng that of the tr al court.:>; Dn &eptember <, 155>, Dom n on f led 9 th the 'ourt of Appeals a mot on for recons derat on.:2; Dn July 1>, 1552, the 'ourt of Appeals den ed the mot on.:6; Bence, th s appeal.:5; %he $ssues %he ssues ra sed are? /10 9hether respondent #uevarra acted 9 th n h s author ty as agent for pet t oner, and /20 9hether respondent #uevarra s ent tled to re mbursement of amounts he pa d out of h s personal money n settl ng the cla ms of several nsured. %he 'ourt)s "ul ng %he pet t on s 9 thout mer t. Ey the contract of agency, a person b nds h mself to render some serv ce or to do someth ng n representat on or on behalf of another, 9 th the consent or author ty of the latter.:10; %he bas s for agency s representat on.:11; Dn the part of the pr nc pal, there must be an actual ntent on to appo nt:12; or an ntent on naturally nferrable from h s 9ords or act onsI:1<; and on the part of the agent, there must be an ntent on to accept the appo ntment and act on t, :14; and n the absence of such ntent, there s generally no agency.:18; A perusal of the &pec al +o9er of Attorney:1>; 9ould sho9 that pet t oner /represented by th rd@party defendant Austr a0 and respondent #uevarra ntended to enter nto a pr nc pal@agent relat onsh p. Desp te the 9ord Wspec alX n the t tle of the document, the contents reveal that 9hat 9as const tuted 9as actually a general agency. %he terms of the agreement read? W%hat &e, 7$"&% 'DN%$NEN%A! A&&3"AN'E 'DM+ANH, $N'.,:12; a corporat on duly organ Aed and e1 st ng under and by v rtue of the la9s of the "epubl c of the +h l pp nes, 111 represented by the unders gned as "eg onal Manager, 111 dohere#y appoint RS2 2uevarra :nsurance Services represented #y Mr. Rodolfo

2uevarra 111 to #e our Agency Manager n &an 7do., for our place and stead, to do and perform the follo&ing acts and thingsR W1. %o conduct, sign, manager (sic*, carry on and transact !onding and :nsurance #usiness as usually perta n to a Agency Dff ce, or 7$"E, MA"$NE, MD%D" 'A", +E"&DNA! A''$DEN%, and EDND$N# &ith the right, upon our prior &ritten consent, to appoint agents and su#<agents. W2. %o accept, under&rite and su#scri#ed (sic* cover notes or $olicies of $nsurance and Eonds for and on our behalf. W<. %o demand, sue, for (sic* collect, deposit, enforce payment, deliver and transfer for and receive and give effectual receipts and discharge for all money to 9h ch the 7$"&% 'DN%$NEN%A! A&&3"AN'E 'DM+ANH, $N'.,:16; may hereafter become due, o9 ng payable or transferable to sa d 'orporat on by reason of or n connect on 9 th the above@ment oned appo ntment. W4. %o receive notices, summons, and legal processes for and n behalf of the 7$"&% 'DN%$NEN%A! A&&3"AN'E 'DM+ANH, $N'., n connect on 9 th act ons and all legal proceed ngs aga nst the sa d 'orporat on.X:15; :Emphas s suppl ed; %he agency compr ses all the bus ness of the pr nc pal,:20; but, couched n general terms, t s l m ted only to acts of adm n strat on.:21; A general po9er perm ts the agent to do all acts for 9h ch the la9 does not re=u re a spec al po9er.:22; %hus, the acts enumerated n or s m lar to those enumerated n the &pec al +o9er of Attorney do not re=u re a spec al po9er of attorney. Art cle 1626, ' v l 'ode, enumerates the nstances 9hen a spec al po9er of attorney s re=u red. %he pert nent port on that appl es to th s case prov des that? WArt cle 1626. &pec al po9ers of attorney are necessary n the follo9 ng cases? W/10 %o maFe such payments as are not usually cons dered as acts of adm n strat onI W111 111 111 W/180 Any other act of str ct dom n on.X %he payment of cla ms s not an act of adm n strat on. %he settlement of cla ms s not ncluded among the acts enumerated n the &pec al +o9er of Attorney, ne ther s t of a character s m lar to the acts enumerated there n. A spec al po9er of attorney s re=u red before respondent #uevarra could settle the nsurance cla ms of the nsured. "espondent #uevarraJs author ty to settle cla ms s embod ed n the Memorandum of Management Agreement:2<; dated 7ebruary 16, 1562 9h ch enumerates the scope of respondent #uevarraJs dut es and respons b l t es as agency manager for &an 7ernando, +ampanga, as follo9s?

W111 111 111 W1. Hou are hereby g ven author ty to settle and d spose of all motor car claims in the amount of $A,CCC.CC &ith prior approval of the Regional =ffice. W2. 8ull authority s g ven you on 7$$: claims settlement. W111 111 111X:24; $n settl ng the cla ms ment oned above, respondent #uevarraJs author ty s further l m ted by the 9r tten standard author ty to pay,:28; 9h ch states that the payment shall come from respondent #uevarraJs revolv ng fund or collect on. %he author ty to pay s 9orded as follo9s? W%h s s to author Ae you to &ithdra& from your revolving fundScollection the amount of +E&D& [[[[[[[[[[[[[[[[[[ /+ 0 represent ng the payment on the [[[[[[[[[[[[[[[[[ cla m of assured [[[[[[[[[[[[[[[ under +ol cy No. [[[[[[ n that acc dent of [[[[[[[[[[[ at [[[[[[[[[[[[. W$t s further e1pected, release papers 9 ll be s gned and author Aed by the concerned and attached to the correspond ng cla m folder after effect ng payment of the cla m. W/sgd.0 7E"NANDD '. A3&%"$A "eg onal ManagerX:2>; :Emphas s suppl ed; %he nstruct on of pet t oner as the pr nc pal could not be any clearer. "espondent #uevarra 9as author Aed to pay the cla m of the nsured, but the payment shall come from the revolv ng fund or collect on n h s possess on. Bav ng dev ated from the nstruct ons of the pr nc pal, the e1penses that respondent #uevarra ncurred n the settlement of the cla ms of the nsured may not be re mbursed from pet t oner Dom n on. %h s conclus on s n accord 9 th Art cle 1516, ' v l 'ode, 9h ch states that? W%he pr nc pal s not l able for the e1penses ncurred by the agent n the follo9 ng cases? W/10 $f the agent acted in contravention of the principalTs instructions, unless the latter should 9 sh to ava l h mself of the benef ts der ved from the contractI W111 111 111X Bo9ever, 9h le the la9 on agency proh b ts respondent #uevarra from obta n ng re mbursement, h s r ght to recover may st ll be -ust f ed under the general la9 on obl gat ons and contracts. Art cle 12<>, second paragraph, ' v l 'ode, prov des?

W(hoever pays for another may demand from the debtor 9hat he has pa d, e1cept that if he paid &ithout the 'no&ledge or against the &ill of the de#tor, he can recover only insofar as the payment has #een #eneficial to the de#tor.U $n th s case, 9hen the r sF nsured aga nst occurred, pet t onerJs l ab l ty as nsurer arose. %h s obl gat on 9as e1t ngu shed 9hen respondent #uevarra pa d the cla ms and obta ned "elease of 'la m !oss and &ubrogat on "ece pts from the nsured 9ho 9ere pa d. %hus, to the e1tent that the obl gat on of the pet t oner has been e1t ngu shed, respondent #uevarra may demand for re mbursement from h s pr nc pal. %o rule other9 se 9ould result n un-ust enr chment of pet t oner. %he e1tent to 9h ch pet t oner 9as benef ted by the settlement of the nsurance cla ms could best be proven by the "elease of 'la m !oss and &ubrogat on "ece pts:22; 9h ch 9ere attached to the or g nal compla nt as Anne1es '@2, D@1, E@1, 7@1, #@1, B@1, $@1 and J@l, n the total amount of +11>,22>.58. Bo9ever, the amount of the revolv ng fundMcollect on that 9as then n the possess on of respondent #uevarra as reflected n the statement of account dated July 11, 1550 9ould be deducted from the above amount. %he outstand ng balance and the product onMrem ttance for the per od correspond ng to the cla ms 9as +<,>04.64. Deduct ng th s from +11>,22>.58, 9e get +112,>22.11. %h s s the amount that may be re mbursed to respondent #uevarra. %he 7allo )N *)EW W5E$E/:, 9e DENH the +et t on. Bo9ever, 9e MDD$7H the dec s on of the 'ourt of Appeals:26;:25; n that pet t oner s ordered to pay respondent #uevarra the amount of +112,>22.11 represent ng the total amount advanced by the latter n the payment of the cla ms of pet t onerJs cl ents. and that of the "eg onal %r al 'ourt, Eranch 44, &an 7ernando, +ampanga, No costs n th s nstance. &D D"DE"ED. Dav de, Jr., /'ha rman0, +uno, *apunan, and Hnares@&ant ago, JJ., concur.

:1; 3nder "ule 48, "ev sed "ules of 'ourt. :2; $n 'A@#.". 'C No. 4060<, promulgated on July 15, 155>, +et t on, Anne1 WEX, pp. 12@16. #odardo A. Jac nto, J., ponente, &alome A. Montoya and Ma1 m ano '. Asunc on, JJ., concurr ng.. :<; Dec s on, or g nal "ecord, ' v l 'ase 6688, pp. <86@<>1.

:4; +et t on, Anne1 WEX, Rollo, pp. 12@16, at pp. 12@18. :8; Not ce of Appeal, Dr g nal "ecord, ' v l 'ase No. 6688, p. <>2. :>; +et t on, Anne1 WEX, Rollo, pp. 12@16. :2; 'A Rollo, pp. 55@112. :6; +et t on, Anne1 WAX, Rollo, p. 10. :5; 7 led on &eptember 6, 1552, Rollo, pp. 20@80. Dn January <1, 2000, 9e resolved to g ve due course to the pet t on / Rollo, pp. 25@600. :10; Art cle 16>5, ' v l 'ode. :11; Eordador v. !uA, <42 +h l. >84, >>2 /15520. :12; C ctor as M ll ng 'o., $nc. v. 'ourt of Appeals, <<< &'"A >><, >28 /20000, c t ng 'onnell v. Mc!oughl n, 26 Dr. 2<0I 42 +. 216. :1<; C ctor as M ll ng 'o., $nc. v. 'ourt of Appeals, <<< &'"A >><, >28 /20000, c t ng Balladay v. 3nder9ood, 50 $ll. App. 1<0. :14; C ctor as M ll ng 'o., $nc. v. 'ourt of Appeals, <<< &'"A >><, >28 /20000, c t ng $nternal %rust 'o. v. Er dges, 82 7. 28<. :18; C ctor as M ll ng 'o., $nc. v. 'ourt of Appeals, <<< &'"A >><, >28 /20000, c t ng &ecur ty 'o. v. #raybeal, 68 $o9a 84<, 82 N.(. 452. :1>; Dr g nal "ecord, ' v l 'ase No. 6688, p. 2<8. :12; No9 Dom n on $nsurance 'orporat on. :16; No9 Dom n on $nsurance 'orporat on. :15; Dr g nal "ecord, ' v l 'ase No. 6688, p. 2<8. :20; Art cle 162>, ' v l 'ode. :21; Art cle 1622, ' v l 'ode. :22; %olent no, Arturo M., 'ommentar es and Jur sprudence on the ' v l 'ode of the +h l pp nes, Col. C /15520, p. 408, c t ng > !lerena 1<2. :2<; Dr g nal "ecord, ' v l 'ase No. 6688, pp. 2<>@2<2. :24; Dr g nal "ecord, ' v l 'ase No. 6688, pp. 2<>@2<2, at p. 2<>. :28; Dr g nal "ecord, ' v l 'ase No. 6688, p. 255. :2>; Dr g nal "ecord, ' v l 'ase No. 6688, p. 255. :22; Dr g nal "ecords, ' v l 'ase No. 6688, pp. 11, 1<, 18, 12, 15, 21, 2<, 28. :26; $n 'A@#.". 'C No. 4060<.

:25; $n ' v l 'ase No. 6688. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. 1.3141 Au"ust 31, 1<<0 :$AN%)S%/ A. *E#/S/, pet t oner, vs. %/&$( /: A++EA#S, AG#A#/'A 9. ES%A$)/, assisted y -er -us and G$EG/$)/ #. ES%A$)/, t-e $EG)S(E$ /: !EE!S :/$ (5E %)(8 /: 'AN)#A, respondents.

(/$$ES, J$., J.:p %h s pet t on for rev e9 assa ls the dec s on of the 'ourt of Appeals, dated July 25, 1551, the d spos t ve port on of 9h ch reads? (BE"E7D"E, the dec s on appealed from s hereby A77$"MED $N %D%D. 'osts aga nst appellant. 1 %he follo9 ng are the antecedent facts? +et t oner 7ranc sco Celoso 9as the o9ner of a parcel of land s tuated n the d str ct of %ondo, Man la, 9 th an area of one hundred seventy seven /1220 s=uare meters and covered by %ransfer 'ert f cate of % tle No. 451<6 ssued by the "eg stry of Deeds of Man la. 3 %he t tle 9as reg stered n the name of 7ranc sco A. Celoso, s ngle, 4 on Dctober 4, 1582. ; %he sa d t tle 9as subse=uently cancelled and a ne9 one, %ransfer 'ert f cate of % tle No. 160>68, 9as ssued n the name of Aglaloma E. Escar o, marr ed to #regor o !. Escar o, on May 24, 1566. 2 Dn August 24, 1566, pet t oner Celoso f led an act on for annulment of documents, reconveyance of property 9 th damages and prel m nary n-unct on andMor restra n ng order. %he compla nt, docFeted as ' v l 'ase No. 66@4852>, 9as raffled to the "eg onal %r al 'ourt, Eranch 48, Man la. +et t oner alleged there n that he 9as the absolute o9ner of the sub-ect property and he never author Aed anybody, not even h s 9 fe, to sell t. Be alleged that he 9as n possess on of the t tle but 9hen h s 9 fe, $rma, left for abroad, he found out that h s copy 9as m ss ng. Be then ver f ed 9 th the "eg stry of Deeds of Man la and there he d scovered that h s t tle 9as already cancelled n favor of defendant Aglaloma Escar o. %he transfer of property 9as supported by a #eneral +o9er of Attorney 0 dated November 25, 1568 and Deed of Absolute &ale, dated November 2, 1562, e1ecuted by $rma Celoso, 9 fe of the pet t oner and

appear ng as h s attorney@ n@fact, and defendant Aglaloma Escar o. 1 +et t oner Celoso, ho9ever, den ed hav ng e1ecuted the po9er of attorney and alleged that h s s gnature 9as fals f ed. Be also den ed hav ng seen or even Fno9n "osemar e "eyes and $melda &antos, the supposed 9 tnesses n the e1ecut on of the po9er of attorney. Be vehemently den ed hav ng met or transacted 9 th the defendant. %hus, he contended that the sale of the property, and the subse=uent transfer thereof, 9ere null and vo d. +et t oner Celoso, therefore, prayed that a temporary restra n ng order be ssued to prevent the transfer of the sub-ect propertyI that the #eneral +o9er of Attorney, the Deed of Absolute &ale and the %ransfer 'ert f cate of % tle No. 160>68 be annulledI and the sub-ect property be reconveyed to h m. Defendant Aglaloma Escar o n her ans9er alleged that she 9as a buyer n good fa th and den ed any Fno9ledge of the alleged rregular ty. &he allegedly rel ed on the general po9er of attorney of $rma Celoso 9h ch 9as suff c ent n form and substance and 9as duly notar Aed. &he contended that pla nt ff /here n pet t oner0, had no cause of act on aga nst her. $n seeF ng for the declarat on of null ty of the documents, the real party n nterest 9as $rma Celoso, the 9 fe of the pla nt ff. &he should have been mpleaded n the case. $n fact, +la nt ff)s cause of act on should have been aga nst h s 9 fe, $rma. 'onse=uently, defendant Escar o prayed for the d sm ssal of the compla nt and the payment to her of damages. = +re@tr al 9as conducted. %he sole ssue to be resolved by the tr al court 9as 9hether or not there 9as a val d sale of the sub-ect property. < Dur ng the tr al, pla nt ff /here n pet t oner0 7ranc sco Celoso test f ed that he ac=u red the sub-ect property from the +h l pp ne Eu ld ng 'orporat on, as ev denced by a Deed of &ale dated Dctober 1, 1582. 1. Be marr ed $rma !aAat n on January 20, 15>2. 11 Bence, the property d d not belong to the r con-ugal partnersh p. +la nt ff further asserted that he d d not s gn the po9er of attorney and as proof that h s s gnature 9as fals f ed, he presented All ed EanF 'hecFs Nos. 1>><4>40, 1>><4>41 and 1>><4>4<, 9h ch allegedly bore h s genu ne s gnature. ( tness for the pla nt ff Atty. Jul an #. %ub g den ed any part c pat on n the e1ecut on of the general po9er of attorney. Be attested that he d d not s gn thereon, and the same 9as never entered n h s Notar al "eg ster on November 25, 1568. $n the dec s on of the tr al court dated March 5, 1550, 13 defendant Aglaloma Escar o 9as ad-udged the la9ful o9ner of the property as she 9as deemed an nnocent purchaser for value. %he assa led general po9er of attorney 9as held to be val d and suff c ent for the purpose. %he tr al court ruled that there 9as no need for a spec al po9er of attorney 9hen the spec al po9er 9as already ment oned n the general one. $t also declared that pla nt ff fa led to substant ate h s allegat on of fraud. %he court also stressed that pla nt ff 9as not ent rely blameless for although he adm tted to be the only person 9ho had access to the t tle and other mportant documents, h s 9 fe 9as st ll able to possess the copy.

' t ng &ect on 88 of Act 45>, the court held that $rma)s possess on and product on of the cert f cate of t tle 9as deemed a conclus ve author ty from the pla nt ff to the "eg ster of Deeds to enter a ne9 cert f cate. %hen apply ng the pr nc ple of e=u table estoppel, pla nt ff 9as held to bear the loss for t 9as he 9ho made the 9rong poss ble. %hus? (BE"E7D"E, the 'ourt f nds for the defendants and aga nst pla nt ff O a. declar ng that there 9as a val d sale of the sub-ect property n favor of the defendantI b. deny ng all other cla ms of the part es for 9ant of legal and factual bas s. ( thout pronouncement as to costs. &D D"DE"ED. Not sat sf ed 9 th the dec s on, pet t oner Celoso f led h s appeal 9 th the 'ourt of Appeals. %he respondent court aff rmed n toto the f nd ngs of the tr al court. Bence, th s pet t on for rev e9 before 3s. %h s pet t on for rev e9 9as n t ally d sm ssed for fa lure to subm t an aff dav t of serv ce of a copy of the pet t on on the counsel for pr vate respondent. 14 A mot on for recons derat on of the resolut on 9as f led but t 9as den ed n are resolut on dated March <0, 1552. 1; A second mot on for recons derat on 9as f led and n a resolut on dated Aug. <, 1552, the mot on 9as granted and the pet t on for rev e9 9as re nstated. 12 A supplemental pet t on 9as f led on Dctober 5, 1552 9 th the follo9 ng ass gnment of errors? $ %he 'ourt of Appeals comm tted a grave error n not f nd ng that the forgery of the po9er of attorney /E1h . ,',0 had been ade=uately proven, desp te the preponderant ev dence, and n do ng so, t has so far departed from the appl cable prov s ons of la9 and the dec s ons of th s Bonorable 'ourt, as to 9arrant the grant of th s pet t on for rev e9 on certiorari. $$ %here are pr nc ples of -ust ce and e=u ty that 9arrant a rev e9 of the dec s on. $$$ %he 'ourt of Appeals erred n aff rm ng the dec s on of the tr al court 9h ch m sappl ed the pr nc ple of e=u table estoppel s nce the pet t oner d d not fa l n h s duty of observ ng due d l gence n the safeFeep ng of the t tle to the property. (e f nd pet t oner)s content ons not mer tor ous.

An e1am nat on of the records sho9ed that the assa led po9er of attorney 9as val d and regular on ts face. $t 9as notar Aed and as such, t carr es the ev dent ary 9e ght conferred upon t 9 th respect to ts due e1ecut on. (h le t s true that t 9as denom nated as a general po9er of attorney, a perusal thereof revealed that t stated an author ty to sell, to 9 t? 2. %o buy or sell, h re or lease, mortgage or other9 se hypothecate lands, tenements and hered taments or other forms of real property, more spec f cally %'% No. 451<6, upon such terms and cond t ons and under such covenants as my sa d attorney shall deem f t and proper. 10 %hus, there 9as no need to e1ecute a separate and spec al po9er of attorney s nce the general po9er of attorney had e1pressly author Aed the agent or attorney n fact the po9er to sell the sub-ect property. %he spec al po9er of attorney can be ncluded n the general po9er 9hen t s spec f ed there n the act or transact on for 9h ch the spec al po9er s re=u red. %he general po9er of attorney 9as accepted by the "eg ster of Deeds 9hen the t tle to the sub-ect property 9as cancelled and transferred n the name of pr vate respondent. $n !"' 'onsulta No. 12<, "eg ster of Deeds of Albay, Nov. 10, 158>, t stated that? (hether the nstrument be denom nated as ,general po9er of attorney, or ,spec al po9er of attorney,, 9hat matters s the e1tent of the po9er or po9ers contemplated upon the agent or attorney n fact. $f the po9er s couched n general terms, then such po9er cannot go beyond acts of adm n strat on. Bo9ever, 9here the po9er to sell s spec f c, t not be ng merely mpl ed, much less couched n general terms, there can not be any doubt that the attorney n fact may e1ecute a val d sale. An nstrument may be capt oned as ,spec al po9er of attorney, but f the po9ers granted are couched n general terms 9 thout ment on ng any spec f c po9er to sell or mortgage or to do other spec f c acts of str ct dom n on, then n that case only acts of adm n strat on may be deemed conferred. +et t oner contends that h s s gnature on the po9er of attorney 9as fals f ed. Be also alleges that the same 9as not duly notar Aed for as test f ed by Atty. %ub g h mself, he d d not s gn thereon nor 9as t ever recorded n h s notar al reg ster. %o bolster h s argument, pet t oner had presented checFs, marr age cert f cate and h s res dence cert f cate to prove h s alleged genu ne s gnature 9h ch 9hen compared to the s gnature n the po9er of attorney, sho9ed some d fference. (e found, ho9ever, that the bas s presented by the pet t oner 9as nade=uate to susta n h s allegat on of forgery. Mere var ance of the s gnatures cannot be cons dered as conclus ve proof that the same 9ere forged. 7orgery cannot be presumed 11 +et t oner, ho9ever, fa led to prove h s allegat on and s mply rel ed on the apparent d fference of the s gnatures. B s den al had not establ shed that the s gnature on the po9er of attorney 9as not h s.

(e agree 9 th the conclus on of the lo9er court that pr vate respondent 9as an nnocent purchaser for value. "espondent Aglaloma rel ed on the po9er of attorney presented by pet t oner)s 9 fe, $rma. Ee ng the 9 fe of the o9ner and hav ng 9 th her the t tle of the property, there 9as no reason for the pr vate respondent not to bel eve n her author ty. Moreover, the po9er of attorney 9as notar Aed and as such, carr ed 9 th t the presumpt on of ts due e1ecut on. %hus, hav ng had no nFl ng on any rregular ty and hav ng no part c pat on thereof, pr vate respondent 9as a buyer n good fa th. $t has been cons stently held that a purchaser n good fa th s one 9ho buys property of another, 9 thout not ce that some other person has a r ght to, or nterest n such property and pays a full and fa r pr ce for the same, at the t me of such purchase, or before he has not ce of the cla m or nterest of some other person n the property. 1= Documents acFno9ledged before a notary publ c have the ev dent ary 9e ght 9 th respect to the r due e1ecut on. %he =uest oned po9er of attorney and deed of sale, 9ere notar Aed and therefore, presumed to be val d and duly e1ecuted. Atty. %ub g den ed hav ng notar Aed the sa d documents and alleged that h s s gnature had also been fals f ed. Be presented samples of h s s gnature to prove h s content on. 7orgery should be proved by clear and conv nc ng ev dence and 9hoever alleges t has the burden of prov ng the same. Just l Fe the pet t oner, 9 tness Atty. %ub g merely po nted out that h s s gnature 9as d fferent from that n the po9er of attorney and deed of sale. %here had never been an accurate e1am nat on of the s gnature, even that of the pet t oner. %o determ ne forgery, t 9as held n .esar vs. Sandigan#ayan 1</=uot ng Dsborn, %he +roblem of +roof0 that? %he process of dent f cat on, therefore, must nclude the determ nat on of the e1tent, F nd, and s gn f cance of th s resemblance as 9ell as of the var at on. $t then becomes necessary to determ ne 9hether the var at on s due to the operat on of a d fferent personal ty, or s only the e1pected and nev table var at on found n the genu ne 9r t ng of the same 9r ter. $t s also necessary to dec de 9hether the resemblance s the result of a more or less sF llful m tat on, or s the hab tual and character st c resemblance 9h ch naturally appears n a genu ne 9r t ng. (hen these t9o =uest ons are correctly ans9ered the 9hole problem of dent f cat on s solved. Even grant ng for the saFe of argument, that the pet t oner)s s gnature 9as fals f ed and conse=uently, the po9er of attorney and the deed of sale 9ere null and vo d, such fact 9ould not revoFe the t tle subse=uently ssued n favor of pr vate respondent Aglaloma. $n 7enio<=#sequio vs. .ourt of Appeals, 3. t 9as held, viz? %he r ght of an nnocent purchaser for value must be respected and protected, even f the seller obta ned h s t tle through fraud. %he remedy of the person pre-ud ced s to br ng an act on for damages aga nst those 9ho caused or employed the fraud, and f the latter are nsolvent, an act on aga nst the %reasurer of the +h l pp nes may be f led for recovery of damages aga nst the Assurance 7und.

7 nallyI the tr al court d d not err n apply ng e=u table estoppel n th s case. %he pr nc ple of e=u table estoppel states that 9here one or t9o nnocent persons must suffer a loss, he 9ho by h s conduct made the loss poss ble must bear t. 7rom the ev dence adduced, t should be the pet t oner 9ho should bear the loss. As the court a quo found? Ees des, the records of th s case d sclosed that the pla nt ff s not ent rely free from blame. Be adm tted that he s the sole person 9ho has access to %'% No. 451<6 and other documents apperta n ng thereto /%&N, May 2<, 1565, pp. 2@120 Bo9ever, the fact rema ns that the 'ert f cate of % tle, as 9ell as other documents necessary for the transfer of t tle 9ere n the possess on of pla nt ff)s 9 fe, $rma !. Celoso, conse=uently leav ng no doubt or any susp c on on the part of the defendant as to her author ty. 3nder &ect on 88 of Act 45>, as amended, $rma)s possess on and product on of the 'ert f cate of % tle to defendant operated as ,conclus ve author ty from the pla nt ff to the "eg ster of Deeds to enter a ne9 cert f cate., 31 'ons der ng the forego ng prem ses, 9e found no error n the apprec at on of facts and appl cat on of la9 by the lo9er court 9h ch 9 ll 9arrant the reversal or mod f cat on of the appealed dec s on. A''D"D$N#!H, the pet t on for rev e9 s hereby DEN$ED for lacF of mer t. &D D"DE"ED. Regalado, Romero, $uno and Mendoza, 99., concur. :ootnotes 1 Dec s on, Rollo, p. 85, penned by J.N. !apeQa, Jr. and concurred n by J.". +ronove and J. '. &ant ago. 2 E1h. ,A,, Anne1 ,A,, "ecords, p. 12 and 188. < E1h. ,A@1,, :#id. 4 E1h. ,A@2,, :#id. 8 E1h. ,E,, Anne1 E, E1h. ,<,, "ecords, p. 18 and 182. > "ecords, pp. 5>@52. 2 "ecords, pp. 54@58. 6 Ans9er, "ecords, pp. 4<@42. 5 Drder, "ecords, pp. 24@2>. 10 E1h. ,7,, "ecords, pp. 1><@1>4. 11 E1h. ,B,, "ecords, p. 1>>. 12 Dec s on, "ecords, pp. 26<@252.

1< "esolut on, 7ebruary <, 1552, Rollo, p. >8. 14 Rollo, p. 22. 18 Rollo, p. 5<. 1> "ecords, pp. 5>@52. 12 %en o@Dbse=u o vs. 'ourt of Appeals, #.". 1025>2, March 1, 1554. 16 Eaut sta, et. al. vs. 'ourt of Appeals, #.". 10>042, 7eb. 26, 1554. 15 #.". Nos. 84215@80, 12 January 1568. 20 #.". 1052>2, March 1, 1554. 21 Dec s on, "ecords, p. 251. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. #7;11;. July 3., 1<=3 #)' +)N, pet t oner, vs. S+S. %/N%5)(A #)A/ (AN, and (AN %5/ 5&A and 5/N/$A9#E %AN%)/ %. GA$%)A, +$ES)!)NG J&!GE /: 9$AN%5 ), %)(8 %/&$( /: %A#//%AN %)(8, respondents. Raymundo M. Aguila for petitioner. 7eofilo 8 Manalo for private respondent.

G&()E$$E6, J$., J.: $n th s pet t on for cert orar 9 th prayer for the ssuance of a 9r t of prel m nary n-unct on, the pet t oner prays? /10 that Judgment be rendered annull ng or mod fy ng the Judgment, dated Dctober 15, 1522, of the "espondent Judge rendered n ' v l 'ase No. 1121>, ' ty 'ourt of 'aloocan ' ty. /20 %hat a (r t of +rel m nary $n-unct on be ssued re=u r ng +r vate "espondents, and all persons act ng n the r behalf, to refra n from the E1ecut on of the Judgment, dated Dctober 15, 1522, of the ' ty 'ourt of 'aloocan ' ty n ' v l 'ase No. 1121> unt l further order. %he bas s of the -udgment, sub-ect matter of the pet t on, s a comprom se agreement entered nto bet9een the pet t oner, represented by her son, #eorge Bung and the pr vate respondent 'onch ta ! ao %an both part es ass sted by the r

respect ve counsel, dur ng the Dctober 15, 1522 hear ng of ' v l 'ase No. 1121> for unla9ful deta ner. %he compla nt for unla9ful deta ner 9as f led n the court a quo on August 12, 1522 by the pr vate respondents aga nst the pet t oner. %he -udgment ncorporat ng the comprom se agreement reads as follo9s? (hen th s case 9as caged for hear ng th s afternoon, Dctober 15, 1522, pla nt ffs and defendant, the latter act ng thru her son, #eorge Bung, as her duly author Aed representat ve, ass sted by the r respect ve counsels, personally appeared before th s 'ourt and mutually agreed as follo9s? 1. %he part es adm t that the st pulated rental for the leased prem ses s as follo9s? /a0 7or the months of Apr l and May, 1522, at +1,800.00 a monthI thereafter a monthly ncrease of +800.00 unt l the rent al reaches to + 8,000.00 by December, 1522, 2. %hat defendant adm ts hav ng been n arrears n the payment of her rental obl gat on s nce Apr l, 1522 and that as of Dctober, 1522, her total accrued rentals already amounted to +16,000.00, broFen do9n as follo9s? Apr l, 1522.........................+ 1,800.00 May, 1522............................. 1,800.00 June, 1522............................. 2,000.00 July,1522............................... 2,800.00 August,1522......................... <,000.00 &eptember,1522.....................<,800.00 Dctober,1522........................ 4,000.00 %D%A! +16,000.00 <. %hat defendant b nds herself to pay n full sa d accrued rentals of +16,000.00 and attorney)s fee of + 2,000.00, not later than Dctober <1, 1522. 4. %hat the rental for November, 1522, shall be +4,800.00 a month 9h le the rentals for December, 1522 and for the succeed ng months thereafter shall be +8,000.00, payable at the res dence of pla nt ff 9 th n f ve /80 days of the current month. 8. %hat the +la nt ff hereby agrees to allo9 the defendant to rema n n the leased prem ses at the rental here n agreed upon. >. %hat should defendant fa ls to pay her accrued rental of +16,000.00, plus attorney)s fee of +2,000.00 by Dctober <1, 1522, +la nt ff shall be ent tled to an mmed ate 9r t of e1ecut on to enforce defendant)s e-ectment from the leased prem ses and the collect on of all rental n arrearsI

2. Defendant)s representat ve, #eorge Bung, aff rmed before th s court and the same s conf rmed by defendant)s counsel, that he /#eorge Bung0 has the full author ty of her mother, the here n defendant, to act for her and to s gn for and n behalf th s am cable settlement. (BE"E7D"E, th s 'ourt, as prayed for, hereby approves the forego ng comprom se agreement and conse=uently renders Judgment n accordance 9 th the prec se terms and cond t ons hereof. /Anne1 ,D,0 &pouses 'onch ta ! ao %an and %an 'ho Bua alleged n the r compla nt for unla9ful deta ner that the pla nt ff 'onch ta ! ao %an, as o9ner of a parcel of reg stered land 9 th mprovements located at 7ranc sco &treet, 'aloocan ' ty, had leased a port on of t, more part cularly Fno9n as 51 7ranc sco &treet, 'aloocan ' ty to defendant ! m + n on a month to month bas s but that the latter start ng Apr l, 1522 had not pa d the agreed rental st pulated for such month and the succeed ng months thereafter based on the follo9 ng schedule of payments? a0 7or the month of Apr l, 1522 O + 1,800@00I b0 7or the month of May, 1522 O +1,800@00? c0 'ommenc ng on the month of June, 1522 and for each calendar month thereafter +>,000.00 per monthI and that desp te demand, the defendant refused to vacate the leased prem ses. $n add t on to the actual damages, the pla nt ffs asFed for an attorney)s fee n the amount of +<,000.00. Dn August 28, 1522, the defendant ! m + n, f led her Ans9er deny ng the mater al allegat ons of the compla nt and protest ng the alleged h ghly ,unconsc onable and unreasonable, ncrease of rental demanded by pla nt ffs. As a countercla m, she asFed for an attorney)s fee n the amount of +8,000.00. %he countercla m 9as den ed n the pla nt ffs) Ans9er to 'ountercla m, dated &eptember 1, 1562. %he n t al hear ng set for &eptember 1, 1522 9as reset to &eptember 14, 1522 upon the -o nt mot on of the part es 9ho 9ere try ng to 9orF out a poss ble am cable settlement. 3pon the fa lure of the part es to reach an am cable settlement, the &eptember 14, 1522 hear ng proceeded as scheduled dur ng 9h ch pla nt ff 'onch ta ! ao %an test f ed. 7or lacF of mater al t me, 'onch ta ! ao %an)s cross@e1am nat on 9as set for &eptember 22, 1520 but th s hear ng 9as aga n cancelled and reset to Dctober 15, 1522. Dn the scheduled Dctober 15, 1522 hear ng, defendant ! m + n 9as absent. Ber son #eorge Bung 9ho attended 9 th h s mother all the prev ous hear ngs 9as present together 9 th the defendant)s counsel. +la nt ff 'onch ta ! ao %an together 9 th her counsel 9as also present. %hrough the n t at ve of the court a =uo, the sub-ect comprom se agreement 9as formulated and e1ecuted and t f nally became the bas s of the Dctober 15, 1522 -udgment n ' v l 'ase No. 1121>. %he aforesa d -udgment 9as the sub-ect of a mot on for recons derat on f led on Dctober 26, 1522 by defendant ! m + n on the follo9 ng grounds? 10 that she never author Aed her son nor her counsel on record /Atty. +astor Mamar l0 to

enter nto such comprom se agreement and 20 that had she been present 9hen sa d agreement 9as prepared, she 9ould not have acceded thereto. %he mot on prompted the pla nt ffs to f le an ,Dppos t on %o Mot on for "econs derat on ( th +rayer that defendant)s son #eorge Bung and Atty. +astor +. Mamar l be c ted for contempt, n the event they should belatedly deny that #eorge Bung 9as duly author Aed by h s mother to enter nto the comprom se agreement dated November 8, 1562. $n the meant me, the pla nt ffs, on November <, 1522 f led an ,3rgent Mot on 7or $mmed ate E1ecut on of Judgment dated Dctober 15, 1522., All the forego ng mot ons 9ere resolved by the respondent court n ts Drder dated January 2>, 1526. %he d spos t ve port on of the Drder reads? $N C$E( D7 A!! %BE 7D"E#D$N#, defendants) )Mot on 7or "econs derat on,) s hereby DEN$ED, 7or reason here nbefore ment oned, defendant)s son #eorge Bung, s hereby declared n d rect contempt of court and s hereby sentenced to pay a f ne of %(D B3ND"ED /+200.000 +esos, 9 th subs d ary mpr sonment n case of nsolvency. 7 nd ng the e1planat ons g ven by Atty. Mamar l dur ng the hear ng of November 16, 1522, to be mer tor ous, th s 'ourt f nds no bas s to hold h m n contempt. As prayed for by pla nt ffs n the r mot on for e1ecut on, 9h ch th s 'ourt f nds -ust f ed, let a 9r t of e1ecut on be ssued n th s case. A 9r t of e1ecut on 9as ssued by the respondent court on the same date. +ursuant to the 9r t of e1ecut on, the ' ty &her ff of 'aloocan ' ty, Metro Man la served a ,Not ce of E-ectment, and ,Not ce to !evy,, both dated 7ebruary <, 1526, 9h ch 9ere rece ved by the pla nt ff on 7ebruary <, 1526. Bence, th s pet t on. Dn 7ebruary 6, 1526, (e ssued a temporary restra n ng order ,en-o n ng respondent -udge from enforc ng the e1ecut on of the -udgment dated Dctober 15, 1522 ssued n ' v l 'ase No. 11214., %he pet t oner ra ses t9o ssues n th s pet t on? 10 (hether the respondent Judge comm tted grave abuse of d scret on n allo9 ng the Dctober 15, 1522 comprom se agreement n the absence of the pet t onerI and 20 (hether the respondent Judge comm tted grave abuse of d scret on amount ng to lacF of -ur sd ct on n deny ng the pet t oner)s mot on for recons derat on on the Dctober 15, 1522 -udgment and n grant ng the ssuance of e1ecut on thereto upon mot on of the pr vate respondents. Anent the f rst ssue, the pet t oner argues that the respondent Judge should not have allo9ed her son #eorge Bung and her then counsel, Atty. +astor Mamar l n her absence to enter nto the Dctober 15, 1522 comprom se agreement 9 th the pr vate respondent 'onch ta ! ao %an ass sted by her counsel. &he further argues

that ,... cons der ng that such comprom se agreement 9ould mpose onerous obl gat ons upon +et t oner, such as a tremendous ncrease of rentals n the prem ses be ng leased from +r vate "espondents from +1,800.00 a month to +8,000.00 a month,, and that sa d agreement conta ned adm ss ons by pet t oner, the respondent Judge should have re=u red a 9r tten author ty and po9er of attorney from her son and counsel. Ber ob-ect ons to the val d ty of the comprom se agreement are prem sed on Art cle 1626 of the ' v l 'ode and "ule 1<6, &ect on 2< of the "ules of 'ourt. %he arguments are not 9ell taFen. Art cle 1626 s found n % tle G of the ' v l 'ode on Agency. $t states that a spec al po9er of attorney s necessary to comprom se, to subm t =uest ons to arb trat on, to renounce the r ght to appeal from a -udgment, to 9a ve ob-ect ons to the venue of an act on or to abandon a prescr pt on already ac=u red. &ect on 2< of "ule 1<6 on Attorneys and Adm ss on to the Ear governs the author ty of attorneys to b nd the r cl ents and prov des that ,Attorneys have author ty to b nd the r cl ents n any case by any agreement n relat on thereto made n 9r t ng, and n taF ng appeal, and n an matters of ord nary Jud c al +rocedure, but they cannot, 9 thout spec al author ty, comprom se the r cl ents) l t gat on or rece ve anyth ng n d scharge of the r cl ents) cla ms but the full amount n cash., %he re=u rements of a spec al po9er of attorney n Art cle 1626 of the ' v l 'ode and of a spec al author ty n "ule 1<6 of the "ules of 'ourt refer to the nature of the author Aat on and not ts form. %he re=u rements are met f there s a clear mandate from the pr nc pal spec f cally author A ng the performance of the act. As early as 150>, th s .ourt in Strong v. 2utierrez<Repide /> +h l. >600 stated that such a mandate may be e ther oral or 9r tten, the one v tal th ng be ng that t shall be e1press. And more recently, (e stated that, f the spec al author ty s not 9r tten, then t must be duly establ shed by ev dence? ... the "ules re=u re, for attorneys to comprom se the l t gat on of the r cl ents, a spec al author ty. And 9h le the same does not state that the spec al author ty be n 9r t ng the 'ourt has every reason to e1pect that, f not n 9r t ng, the same be duly establ shed by ev dence other than the self@serv ng assert on of counsel h mself that such author ty 9as verbally g ven h m. /Bome $nsurance 'ompany vs. 3n ted &tates l nes 'ompany, et al., 21 &'"A 6><I 6>>? C cente vs. #eraldeA, 82 &'"A 210I 2280. (e are sat sf ed from the records of th s case that Judge 'anc o '. #arc a tooF the necessary precaut onary measures and acted on the bas s of sat sfactory ev dence 9hen he allo9ed the comprom se agreement to be e1ecuted by #eorge Bung the pet t oner)s son. %he records sho9 that pr or to the Dctober 15, 1522 hear ng, the pet t oner as defendant n ' v l 'ase No. 11@11> had repeatedly asFed that the respondent Judge approve her proposals for a monthly ncrease of +800.00 start ng Apr l,

1522 and that the ncreases be pegged at that rate unt l the monthly rental reaches the sum of +8,000.00 on December, 1522. &uch a proposal 9as not acceptable at the t me to the pr vate respondents. Dnly at the Dctober 15, 1522 hear ng d d pr vate respondent 'onch ta ! ao %an have a change of m nd. &he e1pressed a 9 ll ngness to accomodate the proposals or g nat ng from the pet t oner prompt ng the court to suspend proceed ngs and n t ate the e1ecut on of the comprom se agreement bet9een the part es. (hereupon the follo9 ng tooF place? /10 %he court asFed #eorge Bung 9hether he 9as 9 ll ng to enter nto the comprom se agreement and 9hether he had the author ty of h s mother to enter nto such a comprom se agreementI /20 %he defendant)s counsel conf rmed n open court the assurance of #eorge Bung that he had the full author ty of h s mother to enter nto a comprom se agreement? /<0 After the formulat on of the comprom se agreement the Judge e1pla ned n %agalog to both part es, nclud ng #eorge Bung ts terms and cond t ons after 9h ch the same 9as reduced nto 9r t ngI /40 #eorge Bung 9 ll ngly s gned the comprom se agreement, the terms and cond t ons of 9h ch 9ere those or g nally proposed by the pet t oner herself. Bung 9as all the 9h le ass sted by the r counsel. %here 9ere other reasons 9h ch led the lo9er court to a f nd ng that #eorge Bung had the full author ty to enter nto the comprom se. %he court tself observed dur ng the earl er hear ngs and t s not d sputed that ... defendant ! m + n could not dec de on anyth ng 9 thout f rst consult ng her son., #eorge Bung)s later den al that he never man fested h s author ty to represent h s mother 9as re-ected by the court. As a matter of fact, th s sudden turnabout of #eorge Bung led the court to c te h m for contempt. Be 9as f ned %9o Bundred +esos. %he c tat on for contempt 9as never appealed. And f nally, even assum ng that #eorge Bung and the pet t oner)s counsel acted 9 thout author ty, the comprom se agreement tself 9as not null and vo d. $t 9ould be merely unenforceable, capable of be ng rat f ed. /Dungo v. !apena, > &'"A 10020. %he comprom se agreement 9as rat f ed by the pet t oner 9hen, on Dctober 24, 1522, a fe9 days after the promulgat on of the =uest oned -udgment and before the f l ng of a mot on for recons derat on, she f led an ,E1@+arte Mot on %o ( thdra9 Depos ts, n ' v l 'ase No. 11205, a cons gnat on case pend ng before the same court bet9een the same part es. %he e1@parte mot on n part reads? 111 111 111 <. %hat there s another case 9 th th s court ass gned n Eranch $ docFeted as ' v l 'ase No. 1121>, for unla9ful deta ner, nvolv ng the same part es and sub-ect property and n the sa d case, part es have entered nto a comprom se agreement 9hereby, among others, pet t oner here n shall pay the accrued monthly rentals to respondent /pla nt ff n the aforement oned case0I 4. %hat n order to mplement the aforement oned comprom se agreement, t s necessary that the depos ts made by pet t oner be 9 thdra9n, the same to be pa d to respondent 'onch ta ! ao %an. /Anne1 ,2, for the pr vate respondents, p. 21, rollo0.

%he second ground for th s pet t on s conse=uently unmer tor ous. %he +et t oner alleged that the respondent Judge acted 9 th grave abuse of d scret on amount ng to lacF of -ur sd ct on 9hen he den ed the mot on for recons derat on of the Dctober 15, 1522 -udgment. %he mot on 9as based on the same alleged absence of author ty of the pet t oner)s son and her counsel. A s m lar allegat on regard ng the 9r t of e1ecut on s l Fe9 se 9 thout mer t. $t s a 9ell@settled rule that a comprom se -udgment s f nal and e1ecutory and unappealable. (e also note that on or before June 2>, 1526 the pet t oner abandoned the d sputed property, not9 thstand ng our 7ebruary 6, 1526 temporary restra n ng order en-o n ng enforcement of the 9r t of e1ecut on. (BE"E7D"E, the nstant pet t on s hereby D$&M$&&ED for lacF of mer t. %he temporary restra n ng order ssued by th s 'ourt dated 7ebruary 6, 1526 s !$7%ED. %he -udgment appealed from s A77$"MED 9 th costs aga nst the pet t oner. &D D"DE"ED. 7eehan'ee (.hairman*, Ma'asiar, $lana, 4asquez and Relova, 99., concur. Melencio<0errera, 9., too' no part. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71=411 !ecem er 3<, 1<03

ANAS(A%)/ G. !&@G/, pet t oner, vs. A!$)AN/ #/+ENA, $/SA $A'/S and 5/N. AN!$ES $E8ES, Jud"e of t-e %ourt of :irst )nstance of $iJal, respondents. 2atchalian, $adilla & Sison for petitioner. Santiago 8. Alidio for respondents. $EGA#A, J.: Dn &eptember 10, 1585, here n pet t oner Anastac o DuQgo and one "odr go &. #onAales purchased < parcel of land from the respondents Adr ano !opena and "osa "amos for the total pr ce of +2>5,604.00. Df th s amount +26.000.00 9as g ven as do9n payment 9 th the agreement that the balance of +241,604.00 9ould be pa d n > monthly nstallments. %o secure the payment of the balance Anastac o DuQgo and "odr go &. #onAales, the vendees, on &eptember 11, 1586, e1ecuted over the same < parcels of land Deed of "eal Estate Mortgage n favor of the respondent Adr ano !opena and "osa "amos. %h s deed 9as duly reg stered 9 th the Dff ce of the "eg ster of Deeds " Aal, 9 th the cond t on that fa lure of the vendees to pay any of the

nstallments on the r matur ty dates shall automat cally cause the ent re unpa d balance to become due and demandable. %he vendees defaulted on the f rst nstallment. $t resulted then that on November 2, 1585, the vendors, here n respondents Adr ano !opena and "osa "amos, f led a compla nt for the foreclosure of the aforement oned real estate mortgage 9 th the 'ourt of 7 rst $nstance of " Aal the Bon. Judge Andres "eyes, pres d ng. %h s compla nt 9as ans9ered by the here n pet t oner and the other vendee, "odr go &. #onAales, on December 2, 1585. Mean9h le, there 9ere 2 other c v l cases f led n the same lo9er court aga nst the same defendants Anastac o DuQgo and "odr go &. #onAales. %he pla nt ff n one 9as a certa n D on s o !opena, and n the other case, the compla nants 9ere Eernardo !opena and Mar a de la 'ruA. Eoth compla nts nvolved the same cause of act on as that of here n respondents Adr ano !opena and "osa "amos. As a matter of fact all three cases arose out of one transact on. $n v e9 of the dent cal nature of the above three cases, they 9ere consol dated by the lo9er court nto -ust one proceed ng. $t must be made clear, ho9ever, that th s present dec s on refers solely to the nterests and cla m of Adr ano !opena aga nst Anastac o DuQgo alone. Eefore the cases could be tr ed, a comprom se agreement dated January 18, 15>0 9as subm tted to the lo9er court for approval. $t 9as s gned by here n respondents Adr ano !opena and "osa "amos on one hand, and "odr go &. #onAales, on the other. $t 9as not s gned by the here n pet t oner. Bo9ever, "odr go &. #onAales represented that h s s gnature 9as for both h mself and the here n pet t oner. Moreover, Anastac o DuQgo)s counsel of record, Atty. Manuel D. 'han, the same la9yer 9ho s gned and subm tted for h m the ans9er to the compla nt, 9as present at the preparat on of the comprom se agreement and th s counsel aff 1ed h s s gnature thereto. %he te1t of th s agreement s hereunder =uoted? 'DM+"DM$&E A#"EEMEN% 'DME ND( the part es n the above ent tled cases and unto th s Bon. 'ourt respectfully set forth? %hat, the pla nt ffs, have agreed to g ve the defendants up to June <0, 15>0 to pay the mortgage ndebtedness n each of the sa d casesI %hat, should the defendants fa l to pay the sa d mortgage ndebtedness, -udgments of foreclosure shall thereafter be entered aga nst the sa d defendantsI %hat, the defendants hereby 9a ve the per od of redempt on prov ded by la9 after entry of -udgmentsI

%hat, n the event of sale of the propert es nvolved n these three cases, the defendants agree that the sa d propert es shall be sold at one t me at publ c auct on, that s, one p ece of property cannot be sold 9 thout the others. %h s comprom se agreement 9as approved by the lo9er court on the same day t 9as subm tted, January 18, 15>0. &ubse=uently, on May <, 15>0, a so@called %r @+arty Agreement 9as dra9n. %he s gnator es to t 9ere Anastac o DuQgo /here n pet t oner0 and "odr go &. #onAales as debtors, Adr ano !opena and "osa "amos /here n respondents0 as cred tors, and, one Emma ". &antos as pay or. %he st pulat ons of the %r @+arty Agreement 9ere as follo9s? . A %"$@+A"%H A#"EEMEN% *ND( A!! MEN EH %BE&E +"E&EN%&? %h s contract entered nto by and bet9een O /10 MMA ". &AN%D&, 7 l p no, of legal age, s ngle, 9 th res dence and postal address at ..........., " Aal Avenue, Man la, here nafter referred to as the +AHD", /20 ANA&%A'$D '. D3\#D 7 l p no, of legal age, s ngle, 9 th res dence and postal address at 1<2 N. Dom ngo, UueAon ' ty, and "DD"$#D &. #DNLA!E&, 7 l p no, of legal age, marr ed to Magdalena Ealatbat, 9 th res dence and postal address at 2< Maryland, UueAon ' ty, here nafter referred to as the DEE%D", and /<0 D$DN$&$D !D+ENA, marr ed to %eof la Nofuente, !$E"ADA !D+ENA, marr ed to Arellano 'a9agas, EE"NA"DD !D+ENA, marr ed to Mar a de la 'ruA, and AD"$AND !D+ENA, marr ed to "osa "amos, all of 9hom are 7 l p nos, of legal ages, 9 th res dence and postal address at &ucat, Munt nlupa, " Aal, here nafter represented by the r attorney of record, AN%DN$D !D+ENA, here nafter referred to as the '"ED$%D", ( $ % N E & & E % B? (BE"EA&, the DEE%D" s ndebted to the '"ED$%D" as of th s date n the aggregate amount of +80<,000.00 for the collect on of 9h ch, the latter as party pla nt ffs have nst tute foreclosure proceed ngs aga nst the former as party defendant n ' v l 'ases Nos. 8622, 862< and 8624 no9 pend ng n the 'ourt of 7 rst $nstance, +as g, " AalI (BE"EA&, the +AHD", hereby subm ts and b nds herself to the force and effect of the Drder dated January 18, 15>0, of the 'ourt of 7 rst $nstance of +as g, " Aal, Eranch C$, 9h ch order s hereby made an ntegral part of th s agreement as ANNEG ,A,I (BE"EA&, the +AHD" 9 th due Fno9ledge and consent of the DEE%D", hereby proposes to pay the aforesa d ndebtedness n the sum of +80<,000.00 to the

'"ED$%D" for and n behalf of the DEE%D" under the follo9 ng terms and cond t on pet t ons? /a0 %o pay the sa d +80<,000.00 n nstallments n the follo9 ng schedule of amounts and t me? +80,000.00 on or before May <1, 15>0 20,000.00 on or before June <0, 15>0 20,000.00 on or before July <1, 15>0 <1<,000.00 on or before Aug. <1, 15>0. /b0 %hat the DEE%D" and the +AHD" hereby 9a ve any r ght to ob-ect and obl ge themselves not to oppose the mot on that the '"ED$%D" may f le dur ng the f rst 9eeF of July 15>0, or subse=uently thereafter, nform ng the 'ourt of the e1act money obl gat on of the DEE%D" 9h ch shall be +80<,000.00 m nus 9hatever payments, f any, made before June <0, 15>0 by the +AHD" and pray ng for the ssuance of an order to sell the property covered by the mortgage. /c0 %hat the '"ED$%D", once he has the order referred to, should not e1ecute the same by g v ng t to the sher ff f the +AHD" s regular and punctual n the payment of all of the nstallments stated above. +"DC$DED, ho9ever, f the +AHD" defaults or fa ls to pay anyone of the nstallments n the manner stated above, the +AHD" and the DEE%D" hereby perm t the '"ED$%D" to e1ecute the order of sale referred to above, and they /+AHD" and DEE%D"0 hereby 9a ve any and all ob-ect on)s or oppos t ons to the propr ety of the publ c auct on sale and to the conf rmat on of the sale to be made by the court. /d0 %hat the '"ED$%D", at h s opt on, may e1ecute the August nstallment stated n letter /a0 of th s paragraph f the +AHD" has pa d regularly the May, June, and July nstallments, and prov ded further that one half /]0 of the August nstallment n the amount of +18>,800.00 s pa d on the sa d date of August <1, 15>0. ND(, %BE"E7D"E, for and n cons derat on of the forego ng st pulat ons, the DEE%D" and '"ED$%D" hereby accept, approve and rat fy the above@ment oned propos t ons of the +AHD" and all the part es here n b nd and obl ge themselves to comply to the covenants and st pulat ons aforestatedI %hat by mutual agreements of all the part es here n, th s %"$@+A"%H A#"EEMEN% may be subm tted to 'ourt to form ntegral parts of the records of the ' v l 'ases ment oned aboveI $N ($%NE&& (BE"ED7, the part es hereunto aff 1 the r s gnature on th s <rd day of May, 15>0 n the ' ty of Man la, +h l pp nes. (hen Anastac o DuQgo /here n pet t oner0 and "odr go &. #onAales fa led to pay the balance of the r ndebtedness on June <0, 15>0, here n respondents !opena and "amos f led on July 8, 15>0, a Mot on for the &ale of Mortgaged +roperty. Although th s last mot on 9as f led e1 parte, Anastac o DuQgo and "odr go &. #onAales 9ere not f ed of t by the lo9er court. Ne ther of them, ho9ever, desp te the not ce, f led any oppos t on thereto. As a result, the lo9er court granted the above mot on on July 15, 15>0, and ordered the sale of the mortgaged property.

Dn August 28, 15>0, the < parcels of land above@ment oned 9ere sold by the &her ff at a publ c auct on 9here at here n pet t oners, together 9 th the pla nt ffs of the other t9o cases 9on as the h ghest b dders. %he sa d sher ff)s sale 9as later conf rmed by the lo9er court on August <0, 15>0. $n th s connect on, t should also made of record that before conf rm ng the sale, the lo9er court gave due not ce of the mot on for the conf rmat on to the here n pet t oner 9ho f led no oppos t on therefore. Dn August <1, 15>0, Anastac o DuQgo f led a mot on to set as de all the proceed ngs on the ground that the comprom se agreement dated January 18, 15>0 9as vo d a# initio 9 th respect to h m because he d d not s gn the same. 'onse=uently, he argued, all subse=uent proceed ngs under and by v rtue of the comprom se agreement, nclud ng the foreclosure sale of August 28, 15>0, 9ere vo d and null as regards h m. %h s mot on to set as de, ho9ever, 9as den ed by the lo9er court n ts order of December 14, 15>0. 3pon den al of the sa d mot on to set as de, Anastac o DuQgo f led a Not ce of Appeal from the order of August <1, 15>0 approv ng the foreclosure sale of August 28, 15>0, as 9ell as the order of December 14, 15>0, deny ng h s mot on to set as de. %he approval of the record on appeal ho9ever, 9as opposed by the here n respondent spouses 9ho cla med that the -udgment 9as not appealable hav ng been rendered by v rtue of the comprom se agreement. %he oppos t on 9as conta ned n a mot on to d sm ss the appeal. Anastac o DuQgo f led a reply to the above mot on. &oon thereafter, the lo9er court d sm ssed the appeal. %9o ssues 9ere ra sed to th s 'ourt for rev e9, to 9 t? /10 (as the comprom se agreement of January 18, 15>0, the Drder of the same date approv ng the same, and, all the proceed ngs subse=uent thereto, val d or vo d nsofar as the pet t oner here n s concernedP /20 D d the lo9er court abuse ts d scret on 9hen t d sm ssed the appeal of the here n pet t onerP +et t oner Anastac o DuQgo ns sts that the 'omprom se Agreement 9as vo d a# initio and could have no effect 9hatsoever aga nst h m because he d d not s gn the same. 7urthermore, as t 9as vo d, all the proceed ngs subse=uent to ts e1ecut on, nclud ng the Drder approv ng t, 9ere s m larly vo d and could not result to anyth ng adverse to h s nterest. %he argument 9as not 9ell taFen. $t s true that a comprom se s, n tself, a contract. $t s as such that the ' v l 'ode speaFs of t. A"%. 2026. A comprom se s a contract 9hereby the part es, by maF ng rec procal concess ons, avo d a l t gat on or put an end to one already commenced. Moreover, under Art. 1626 of the ' v l 'ode, a th rd person cannot b nd another to a comprom se agreement unless he, the th rd person, has obta ned a spec al po9er of attorney for that purpose from the party ntended to be bound.

A"%. 1626. &pec al po9ers of attorney are necessary n the follo9 ng cases?

/<0 %o comprom se, to subm t =uest ons to arb trat on, to renounce the r ght to appeal from a -udgment, to 9a ve ob-ect ons to the venue of an act on or to abandon a prescr pt on already ac=u redI Bo9ever, although the ' v l 'ode e1pressly re=u res a spec al po9er of attorney n order that one may comprom se an nterest of another, t s ne ther accurate nor correct to conclude that ts absence renders the comprom se agreement vo d. $n such a case, the comprom se s merely unenforceable. %h s results from ts nature s a contract. $t must be governed by the rules and the la9 on contracts. A"%. 140<. %he follo9 ng contracts are unenforceable, unless they are ratified? /10 %hose entered nto n the name of another person by one 9ho has been g ven no author ty or legal representat on, or 9ho has acted beyond h s po9ersI !og cally, then, the ne1t n=u ry n th s case should be 9hether the here n pet t oner, Anastac o DuQgo had or had not rat f ed the comprom se agreement. $f he had, then the comprom se agreement 9as legally enforced aga nst h mI other9 se, he should be susta ned n h s content on that t never bound h m, nor ever could t be made to b nd h m. %he rat f cat on of the comprom se agreement 9as conclus vely establ shed by the %r @+arty Agreement of May 15>0. $t s to be noted that the comprom se agreement 9as subm tted to and approved by the lo9er court January 18, 15>0. No9, the %r @+arty Agreement referred tself to that order 9hen t st pulated thus? (BE"EA&, the MAHD", hereby subm ts and b nds herself to the force and effect of the order dated January 18, 15>0, of the 'ourt of 7 rst $nstance of +as g, " Aal, Eranch 9h ch order s hereby made an ntegral part of th s agreement as Anne1 ,A,.la&phil.net Bav ng so consented to maF ng that court order approv ng the comprom se agreement an ntegral part of the %r @+arty Agreement, ho9 can the pet t oner here n no9 repud ate the comprom se agreement and cla m he has not author Aed tP (hen t appears that the cl ent, on becom ng a9are the comprom se and the -udgment thereon, fa ls to repud ate promptly the act on of h s attorney, he 9 ll not after9ards be heard to contest ts val d ty /" vero vs. " vero, 85 +h l. 180. Ees des, th s 'ourt has not overlooFed the fact that 9h ch ndeed Anastac o DuQgo 9as not a s gnatory to the comprom se agreement, the pr nc pal prov s on of the sa d nstrument 9as for h s benef t. Dr g nally, Anastac o DuQgo)s obl gat on matured and became demandable on Dctober 10, 1585. Bo9ever, the comprom se agreement e1tended the date of matur ty to June <0, 15>0. More

than anyth ng, therefore, the comprom se agreement operated to benef t the here n pet t oner because t afforded h m more t me and opportun ty to fulf ll h s monetary obl gat ons under the contract. $f only for th s reason, th s 'ourt bel eves that the here n pet t oner should not be heard to repud ate the sa d agreement. !astly, the comprom se agreement stated ,that, should the defendants fa l to pay the sa d mortgage ndebtedness, -udgment of foreclosure shall thereafter be entered aga nst the sa d defendants?, Eeyond doubt, th s 9as rat f ed by the %r @ +arty Agreement 9hen t covenanted that O $f the MAHD" defaults or fa ls to pay anyone of the nstallments n the manner stated above, the MAHD" and the DEE%D" hereby perm t the '"ED$%D" to e1ecute the order of sale referred to above /the Judgment of 7oreclosure0, and they /+AHD" and DEE%D"0 hereby 9a ve any and all ob-ect ons or oppos t ons to the propr ety of the publ c auct on sale and to the conf rmat on of the sale to be made by the 'ourt. +et t oner DuQgo f nally argued that even assum ng that the comprom se agreement 9as val d, t nevertheless could not be enforced aga nst h m because t has been novated by the %r @+arty Agreement 9h ch brought n a th rd party, namely, Emma ". &antos, 9ho assumed the mortgaged obl gat on of the here n pet t oner. %h s 'ourt cannot accept the argument. Novat on by presumpt on has never been favored. %o be susta ned, t need be establ shed that the old and ne9 contracts are ncompat ble n all po nts, or that the 9 ll to novate appears by e1press agreement of the part es or n acts of s m lar mport. /Mart neA v. 'av ves, 28 +h l. 861I % y & nco vs. Bavana, 48 +h l. 202I As a EanF ng 'orp. vs. !acson 'o.. 46 +h l. 462I +ascual vs. !acsamana, 8< D.#. 24>2, Apr l 15820. An obl gat on to pay a sum of money s not novated, n a ne9 nstrument 9here n the old s rat f ed, by chang ng only the term of payment and add ng other obl gat ons not ncompat ble 9 th the old one /$nchaust vs. Hulo, <4 +h l. 526I +ablo vs. &apungan, 21 +h l. 1480 or 9here n the old contract s merely supplemented by the ne9 one "amos vs. # bbon, >2 +h l. <210. Bere n pet t oner cla ms that 9hen a th rd party Emma ". &antos, came n and assumed the mortgaged obl gat on, novat on resulted thereby nasmuch as a ne9 debtor 9as subst tuted n place of the or g nal one. $n th s F nd of novat on, ho9ever, t s not enough that the -ur d cal relat on of the part es to the or g nal contract s e1tended to a th rd personI t s necessary that the old debtor be released from the obl gat on, and the th rd person or ne9 debtor taFe h s place n the ne9 relat on. ( thout such release, there s no novat onI the th rd person 9ho has assumed the obl gat on of the debtor merely becomes a co@debtor or surety. $f there s no agreement as to sol dar ty, the f rst and the ne9 debtors are cons dered obl gat on -o ntly. /$C %olent no, ' v l 'ode, p. <>0, c t ng Manresa. %here 9as no such release of the or g nal debtor n the %r @+arty Agreement.

$t s a very common th ng n the bus ness affa rs for a stranger to a contract to assume ts obl gat onsI an 9h le th s may have the effect of add ng to the number of persons l able, t does not necessar ly mply the e1t ngu shment of the l ab l ty of the f rst debtor /" os v Jac nto, etc., 45 +h l. 2I #arc a vs. *hu HeF 'h ng, >8 +h l. 4>>0. %he mere fact that the cred tor rece ves a guaranty or accepts payments from a th rd person 9ho has agreed to assume the obl gat on, 9hen there s no agreement that the f rst debtor shall be released from respons b l ty, do not const tute a novat on, and the cred tor can st ll enforce the obl gat on aga nst the or g nal debtor /&tra ght vs. BasFell, 45 +h l. >14I +ac f c 'ommerc al 'o. vs. &otto, <4 +h l. 2<2I Estate of Mota vs. &erra, 42 +h l. 44>0. $n v e9 of all the forego ng, (e hold that the %r @+arty Agreement 9as an nstrument ntended to render effect ve the comprom se agreement. $t merely complemented an rat f ed the same. %hat a th rd person 9as nvolved n t s nconse=uent al. No9here n the ne9 agreement may the release of the here n pet t oner be even nferred. Bav ng held that the comprom se agreement 9as val d ty and enforceable aga nst the here n pet t oner, t follo9s that the lo9er court comm tted no abuse of d scret on 9hen t d sm ssed the appeal of the here n pet t oner. (BE"E7D"E, the pet t on for cert orar and mandamus f led by the here n pet t oner s hereby d sm ssed. %he order of the lo9er court d sm ss ng the appeal s her by aff rmed, 9 th costs. %a#rador, .oncepcion, Reyes, 9.!.%., !arrera and Ma'alintal, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #743;14 July 41, 1<14 )GNA%)/ *)%EN(E and '/)SES ANGE#ES, pet t oners, vs. 5/N. A'9$/S)/ '. GE$A#!E6, as Jud"e of t-e %ourt of :irst )nstance of 9ulacan, 9ranc- * CSta. 'ariaD, and 5) %E'EN( %/$+/$A()/N, respondents G.$. No. #743;=4 July 41, 1<14 J&AN 9E$NA9E, pet t oner, vs. 5) %E'EN( %/$+/$A()/N and (5E 5/N. A'9$/S)/ '. GE$A#!E6, +residin" Jud"e, 9ranc- *, %ourt of :irst )nstance of 9ulacan, respondents.

%i#rado S. .orrea for petitioners :gnacio 4icente and Moises Angeles. 8rancisco R. .apistrano and Andreciano 8. .a#allero for petitioner 9uan !erna#e. Renato %. .ayetano and 9esus 2. Diaz for respondent 0: .ement .orporation.

AN(/N)/, J.: %here are t9o or g nal act ons of cert orar 9 th prayer for prel m nary n-unct on 9here n pet t oners seeF to annul the orders dated Apr l 24, May 16, and July 16, 1520 of respondent Judge of the 'ourt of 7 rst $nstance of Eulacan n ' v l 'ase No. &M@201 /B 'ement 'orporat on vs. Juan Eernabe, $gnac o C cente and Mo ses Angeles0. %he t9o cases are here n dec ded -o ntly because they proceed from the same case and nvolve n substance the same =uest on of la9. Dn &eptember 5, 15>2 here n pr vate respondent B 'ement 'orporat on f led 9 th the 'ourt of 7 rst $nstance of Eulacan a compla nt for n-unct on and damages aga nst here n pet t oners Juan Eernabe, $gnac o C cente and Mo ses Angeles. $n sa d compla nt the pla nt ff alleged that t had ac=u red on Dctober 22, 15>8, +lacer !ease 'ontract No. C@50, from the Eanaha9 &hale M n ng Assoc at on, under a deed of sale and transfer 9h ch 9as duly reg stered 9 th the Dff ce of the M n ng "ecorder of Eulacan on November 4, 15>8 and duly approved by the &ecretary of Agr culture and Natural "esources on December 18, 15>8I that the sa d +lacer !ease 'ontract No. C@50 9as for a per od of t9enty@f ve years commenc ng from August 1, 15>0 and covered t9o m n ng cla ms /"ed &tar C$$$ N $G0 9 th a comb ned area of about f fty@one hectaresI that 9 th n the l m ts of +lacer M n ng 'la m "ed &tar C$$$ are three parcels of land cla med by the defendants Juan Eernabe /about t9o hectares0, $gnac o C cente /about t9o hectares0 and Mo ses Angeles /about one@fourth hectare0I that the pla nt ff had, on several occas ons, nformed the defendants, thru ts representat ves, of the pla nt ff)s ac=u s t on of the aforesa d placer m n ng cla ms 9h ch ncluded the areas occup ed by themI that the pla nt ff had re=uested the defendants to allo9 ts 9orFers to enter the area n =uest on for e1plorat on and development purposes as 9ell as for the e1tract on of m nerals therefrom, prom s ng to pay the defendants reasonable amounts as damages, but the defendants refused to allo9 entry of the pla nt ff)s representat vesI that the defendants 9ere threaten ng the pla nt ff)s 9orFers 9 th bod ly harm f they entered the prem ses, for 9h ch reason the pla nt ff had suffered rreparable damages due to ts fa lure to 9orF on and develop ts cla ms and to e1tract m nerals therefrom, result ng n ts nab l ty to comply 9 th ts contractual comm tments, for all of 9h ch reasons the pla nt ff prayed the court to ssue prel m nary 9r ts of mandatory n-unct on perpetually restra n ng the defendants and those cooperat ng 9 th them from the comm ss on or cont nuance of the acts compla ned of, order ng defendants to allo9 pla nt ff, or ts agents and 9orFers, to enter, develop and e1tract m nerals from the areas cla med by defendants, to declare the n-unct on permanent after hear ng, and to order the defendants to

pay damages to the pla nt ff n the amount of +200,000.00, attorney)s fees, e1penses of l t gat on and costs. Dn &eptember 12, 15>2 the tr al court ssued a restra n ng order and re=u red the defendants to f le the r ans9ers. %he defendants f led the r respect ve ans9ers, 9h ch conta ned the usual adm ss ons and den als and nterposed spec al and aff rmat ve defenses, namely, among others, that they are r ghtful o9ners of certa n port ons of the land covered by the supposed m n ng cla ms of the pla nt ffI that t 9as the pla nt ff and ts 9orFers 9ho had comm tted acts of force and v olence 9hen they entered nto and ntruded upon the defendants) landsI and that the compla nt fa led to state a cause of act on. %he defendants set up counter@cla ms aga nst the pla nt ff for actual and moral damages, as 9ell as for attorney)s fees. $n another plead ng f led on the same date, defendant Juan Eernabe opposed the ssuance of a 9r t of prel m nary mandatory or proh b tory n-unct on. $n ts Drder dated &eptember <0, 15>2, the tr al court, ho9ever, d rected the ssuance of a 9r t of prel m nary mandatory n-unct on upon the pla nt ff)s post ng of a bond n the amount of +100,000.00. $n ts order, the court suggested the relocat on of the boundar es of the pla nt ff)s cla ms n relat on to the propert es of the defendants, and to th s end named as 'omm ss oner, a &urveyor from the Dff ce of the D str ct Eng neer of Eulacan to relocate the boundar es of the pla nt ff)s m n ng cla ms, to sho9 n a survey plan the locat on of the areas thereof n confl ct 9 th the port ons 9hose o9nersh p s cla med by the defendants and to subm t h s report thereof to the court on or before Dctober <1, 15>2. %he court also d rected the part es to send the r representat ves to the place of the survey on the date thereof and to furn sh the surveyor 9 th cop es of the r t tles. %he 'omm ss oner subm tted h s report to the 'ourt on November 24, 15>2 conta n ng the follo9 ng f nd ngs? 1. $n the attached survey plan, the area covered and embraced full and heavy l nes s the +lacer M n ng 'la ms of the +la nt ff conta n ng an area of 102 hectares 9h le the area bounded by f ne@broFen l nes are the propert es of the Defendants. 2. %he property of the Defendant MD$&E& AN#E!E&, cons st ng of t9o /20 parcels Fno9n as !ot 1@E and !ot 2 of +su@10<<24, both descr bed n D.'.%. No. D@12>5 9 th a total area of <4,564 s=uare meters 9ere totally covered by the 'la ms of the +la nt ff. <. %he property of the Defendant $#NA'$D C$'EN%E, conta n ng an area of <2,>15 s=uare meters, s also ns de the 'la ms of the +la nt ff. 4. %he property of the defendant J3AN EE"NAEE Fno9n as +su@1265>5, descr bed n D.'.%. No. 0@2080 s part ally covered by the 'la ms of the +la nt ff and the area affected s 82,8<5 s=uare meters. $n an Drder ssued on December 14, 15>2, the court approved the report ,9 th the conform ty of all the part es n th s case.,

%hereafter, on Apr l 2, 15>6 pla nt ff B$ 'ement 'orporat on f led a mot on to amend the compla nt ,so as to conform to the facts brought out andMor mpl edly adm tted n the pre@tr al. %h s mot on 9as granted by the court on Apr l >, 15>6. Accord ngly, on Dctober 21, 15>6, the pla nt ff f led ts amended compla nt. %he amendments cons sted n the statement of the correct areas of the land belong ng to defendants Eernabe /82,8<5 s=uare meters0, C cente /<2,>15 s=uare meters0 and Angles /<4,564 s=uare meters0, as 9ell as the add t on of allegat ons to the effect, among others, that at the pre@tr al the defendants Angeles and C cente declared the r 9 ll ngness to sell to the pla nt ff the r propert es covered by the pla nt ff)s m n ng cla ms for +10.00 per s=uare meter, and that 9hen the pla nt ff offered to pay only +0.50 per s=uare meter, the sa d defendants stated that they 9ere 9 ll ng to go to tr al on the ssue of 9hat 9ould be the reasonable pr ce for the propert es of defendants sought to be taFen by pla nt ff. ( th part cular reference to defendant Eernabe, the amended compla nt alleged that the sa d defendant ne ther protested aga nst nor proh b ted the predecessor@ n@ nterest of the pla nt ff from prospect ng, d scover ng, locat ng and contract ng m nerals from the aforement oned cla ms, or from conduct ng the survey thereon, or f led any oppos t on aga nst the appl cat on for lease by the "ed &tar M n ng Assoc at on, and that as a result of the fa lure of sa d defendant to ob-ect to the acts of possess on or occupat on over the sa d property by pla nt ff, defendant s no9 estopped from cla m ng that pla nt ff comm tted acts of usurpat on on sa d property. %he pla nt ff prayed the court, among other th ngs, to f 1 the reasonable value of the defendants) propert es as reasonable compensat on for any result ng damage. Defendant Eernabe f led an amended ans9er substant ally reproduc ng h s or g nal ans9er and deny ng the averments concern ng h m n the amended compla nt. %he respect ve counsels of the part es then conferred among themselves on the poss b l ty of term nat ng the case by comprom se, the defendants hav ng prev ously s gn f ed the r 9 ll ngness to sell to the pla nt ff the r respect ve propert es at reasonable pr ces. Dn January <0, 15>5 the counsels of the part es e1ecuted and subm tted to the court for ts approval the follo9 ng 'omprom se Agreement? 'DM+"DM$&E A#"EEMEN% 'DME ND( the pla nt ff and the defendants, represented by the r respect ve counsel, and respectfully subm t the follo9 ng agreement? 1. %hat the pla nt ff s 9 ll ng to buy the propert es sub-ect of l t gat on, and the defendants are 9 ll ng to sell the r respect ve propert esI 2. %hat th s Bonorable 'ourt author Aes the pla nt ff and the defendants to appo nt the r respect ve comm ss oners, that s, one for the pla nt ff and one for each defendantI

<. %hat the part es hereby agree to ab de by the dec s on of the 'ourt based on the f nd ngs of the 'omm ss onersI 4. %hat the fees of the 'omm ss oners shall be pa d as follo9s? 7or those appo nted by the part es shall be pa d by them respect velyI and for the one appo nted by the 'ourt, h s fees shall be pa d pro@rata by the part esI 8. %hat the names of the 'omm ss oners to be appo nted by the part es shall be subm tted to the 'ourt on or before 7ebruary 6, 15>5. (BE"E7D"E, the unders gned respectfully pray that the forego ng agreement be approved. &ta. Mar a, Eulacan, January <0, 15>5. 7or the +la nt ff? /&gd. 0 7"AN'$&'D CEN%3"A tM 7"AN'$&'D CEN%3"A. /&gd.0 7!D"EN%$ND C. 'A"DENA& tM 7!D"EN%$ND C. 'A"DENA& /&gd.0 EN"$U3E%D $. MA#+AN%AH tM EN"$U3E%D $. MA#+AN%AH 7or Juan Eernabe? /&gd.0 AND"E'$AND 7. 'AEA!!E"D tM AND"E'$AND 7. 'AEA!!E"D 7or $gnac o C cente and Mo ses Angeles? /&gd.0 'DN"ADD MANLAND tM 'DN"ADD MANLAND %he 'lerF of 'ourt '7$, &ta. Mar a, Eulacan #"EE%$N#&? +lease subm t the forego ng 'omprom se Agreement to the Bonorable 'ourt for the cons derat on and approval mmed ately upon rece pt hereof. CEN%3"A, 'A"DENA& N MA#+AN%AH Ey? /&gd.0 7"AN'$&'D CEN%3"A tM 7"AN'$&'D CEN%3"A

Dn the same date, the forego ng 'omprom se Agreement 9as approved by the tr al court, 9h ch en-o ned the part es to comply 9 th the terms and cond t ons thereof. +ursuant to the terms of the sa d comprom se agreement the counsels of both part es subm tted the names of the persons des gnated by them as the r respect ve comm ss oners, and n conform ty there9 th, the tr al court, n ts Drder dated 7ebruary 2>, 15>5, appo nted the follo9 ng as 'omm ss oners? Mr. !arry #. Mar=ueA, to represent the pla nt ffI Mr. Demetr o M. A=u no, to represent defendant EernabeI Mr. Mo ses 'orrea, to represent defendant AngelesI Mr. &ant ago 'abungcal, to represent defendant C centeI and Mr. ! berato Earrameda, to represent the court, and d rected that sa d 'omm ss oners should appear before the court on March 12, 15>5, to taFe the r oath and =ual fy as such 'omm ss oners, and then meet on March <1, 15>5 n the court for the r f rst sess on and to subm t the r report not later than Apr l <0, 15>5. Dn &eptember 18, 15>5, 'omm ss oner ! berato Earrameda subm tted to the court for ts approval a 'onsol dated "eport, conta n ng the three reports of the 'omm ss oners of the pla nt ff and the three defendants, together 9 th an analys s of the sa d reports and a summary of the mportant facts and conclus ons. %he follo9 ng un t pr ces for the three defendants) propert es 9ere recommended n the 'onsol dated "eport? A O J3AN EE"NAEE at +12.00 per s=uare meter, 9herefrom pla nt ff has been e1tract ng ts f rst output, and 9ould st ll cont nue to e1tract therefrom as the property cons sts of a mounta n of l mestone and shaleI E O $#NA'$D C$'EN%E? a0 >0R or 15,821.4 s=. m. /m neral land0 at +12.00 per s=. m. b0 40R or 1<,042.> s=. m. /r celand0 at +6.00 per s=. m. ' O MD$&E& AN#E!E& /r celand0 at +6.00 per s=. m. $t s 9orthy of note that n the nd v dual report of the 'omm ss oner nom nated by pla nt ff B$ 'ement 'orporat on, the pr ce recommended for defendant Juan Eernabe)s property 9as +0.>0 per s=uare meter, 9h le n the nd v dual report of the 'omm ss oner nom nated by the sa d defendant, the pr ce recommended 9as +80.00 per s=uare meter. %he 'omm ss oners named by defendants C cente and Angeles recommended 9as +18.00 per s=uare meter for the lands o9ned by the sa d t9o defendants, 9h le the 'omm ss oners named by the sa d t9o defendants, 9h le the 'omm ss oner named by the pla nt ff recommended +0.>8 per s=uare meter for C cente)s land, and +0.88 per s=uare meter for Angeles) land. Dn Dctober 21, 15>5, Atty. 7ranc sco Centura, one of the three la9yers for pla nt ff B$ 'ement 'orporat on, f led 9 th the tr al court a man festat on stat ng that on &eptember 1, 15>5 he sent a copy of the 'omprom se Agreement to Mr. Anton o D oFno, +res dent of the corporat on, re=uest ng the latter to ntercede

9 th the Eoard of D rectors for the conf rmat on or approval of the comm tment made by the pla nt ff)s la9yers to ab de by the dec s on of the 'ourt based on the reports of the 'omm ss onersI and that on Dctober 18, 15>5 he rece ved a letter from Mr. D oFno, a copy of 9h ch 9as attached to the man festat on. $n that letter Mr. D oFno sa d? (h le $ real Ae your nterest n cooperat ng 9 th the 'ourt n ts des re to e1ped te the d spos t on of the case, th s comm tment 9ould depr ve us of the r ght to appeal f 9e do not agree 9 th the valuat on set by the 'ourt. Dur Eoard, therefore, cannot 9a ve ts r ghtsI only 9hen t Fno9s the value set by the 'ourt on the propert es can t dec de 9hether to ab de by t or appeal therefrom. $ 9ould l Fe to stress that, under the la9, the comprom se agreement re=u res the e1press approval of our Eoard of D rectors to be b nd ng on our corporat on. &uch an approval, $ regret to say, cannot be obta ned at th s t me. Dn November 8, 15>5, defendant Eernabe f led an ans9er to Atty. Centura)s man festat on, pray ng the court to gnore, d sregard and, f poss ble, order str Fen from the record, the pla nt ff)s man festat on on the follo9 ng grounds? that ts f l ng after the 'onsol dated "eport of the 'omm ss oners had been subm tted and approved, and long after the s gn ng of the 'omprom se Agreement on January <0, 15>5, cast susp c on on the s ncer ty of the pla nt ff)s mot veI that 9hen the 'omprom se Agreement 9as be ng cons dered, the court n=u red from the part es and the r respect ve la9yers f all the attorneys appear ng n the case had been duly author Aed andMor empo9ered to enter nto a comprom se agreement, and the three la9yers for the pla nt ff ans9ered n the aff rmat veI that n fact t 9as Atty. Centura h mself 9ho prepared the draft of the 'omprom se Agreement n h s o9n hand9r t ng and 9as the f rst to s gn the agreementI that one of the three la9yers for the pla nt ff, Atty. 7lorent no C. 'ardenas, 9ho also s gned the 'omprom se Agreement, 9as the off c al representat ve, ndeed 9as an e1ecut ve off c al, of pla nt ff corporat onI that the 'omprom se Agreement, hav ng been e1ecuted pursuant to a pre@tr al conference, partaFes the nature of a st pulat on of facts mutually agreed upon by the part es and approved by the court, hence, 9as b nd ng and conclus ve upon the part esI and that the nom nat on by the pla nt ff of Mr. !arry #. Mar=ueA as ts 'omm ss oner pursuant to the 'omprom se Agreement, 9as a clear nd cat on of the pla nt ff)s tac t approval of the terms and cond t ons of the 'omprom se Agreement, f not an mpl ed rat f cat on of Atty. Centura)s acts. Dn March 1<, 1520 the court rendered a dec s on n 9h ch the terms and cond t ons of the 'omprom se Agreement are reproduced, and the 'onsol dated "eport of the 'omm ss oners s e1tens vely =uoted. %he rat onale and d spos t ve port on of the dec s on read? (hat s fa r and -ust compensat onP ,Just compensat on ncludes all elements of value that nheres n the property, but t does not e1ceed marFet value fa rly determ ned. %he sum re=u red to be pa d the o9ner does not depend upon the usage to 9h ch he has devoted h s land but s to be arr ved at upon -ust cons derat on of all the uses for 9h ch t s

su table. %he h ghest and most prof table use for 9h ch the property s adoptable and needed or l Fely to be needed n the reasonably near future s to be cons dered, not necessar ly as the measure of value, but to the full e1tent that the prospect of demand for such use affects the marFet value 9h le the property s pr vately held., %he term fa r and -ust compensat on as appl ed n e1propr at on or em nent doma n proceed ngs need not necessar ly be appl ed n the present case. $n e1propr at on proceed ngs the government s the party nvolved and ts use s for publ c purpose. $n the nstant case, ho9ever, pr vate part es are nvolved and the use of the land s a pr vate venture and for prof t. $t appears that defendants) propert es are pract cally ad-acent to pla nt ff)s plant s te. $t also appears that pract cally all the surround ng areas 9ere ac=u red by the pla nt ff by purchase. $n the report subm tted by the comm ss oner represent ng the pla nt ff, t s cla med that the surround ng areas 9ere ac=u red thru purchase by the pla nt ff n the amount of less than +1.00 per s=uare meter. Dn the other hand, t appears from the reports subm tted by the comm ss oners represent ng the defendants that there 9ere some recorded sales around the area from +20.00 to +28.00 per s=uare meter and there 9ere subd v s on lots 9h ch command even h gher pr ces. %he propert es are reported to cons st of m neral land 9h ch are rocFy and barren conta n ng l mestone and shale. 7rom v e9po nt of the o9ners the r property 9h ch s descr bed as rocFy and barren m neral land must necessar ly command a h gher pr ce, and th s 'ourt bel eves that the pla nt ff 9 ll adopt the same att tude from the v e9po nt of ts bus ness. (h le t may be true that the pla nt ff ac=u red propert es 9 th n the area n =uest on at a lo9 pr ce, 9e cannot overlooF the fact that th s 9as so at the t me 9hen pla nt ff corporat on 9as not yet n operat on and that the land o9ners 9ere not as yet a9are of the potent al value of the r landhold ngs. $rrespect ve of the d fferent class f cat ons of the propert es o9ned by the defendants, and cons der ng the benef ts that 9 ll enure to the pla nt ff and bear ng n m nd the property r ghts and pr v leges to 9h ch the property o9ners are ent tled both under the const tut on and the m n ng la9, coupled 9 th the fact that the pla nt ff had already taFen advantage of the propert es even long before the r ghtful ac=u s t on of the same, th s 'ourt bel eves that the -ust and fa r marFet value of the land should be n the amount +18.00 per s=uare meter. $n v e9 of the above f nd ngs, the pla nt ff pursuant to the comprom se agreement, s hereby ordered to pay the defendants the amount of +18.00 per s=uare meter for the sub-ect propert es, and upon full payment, the restra n ng order earl er ssued by th s 'ourt shall be deemed l fted. Dn March 2<, 1520 defendant Juan Eernabe f led an urgent mot on for e1ecut on of -udgment anchored on the propos t on that the -udgment, be ng based on a

comprom se agreement, s not appealable and s, on the other hand, mmed ately e1ecutory. %he other t9o defendants, Mo ses Angeles and $gnac o C cente, l Fe9 se f led the r respect ve mot ons for e1ecut on. %hese mot ons 9ere granted by the court n ts Drder of Apr l 14, 1520. Dn Apr l 12, 1520 the pla nt ff f led a mot on for recons derat on of the Apr l 14, 1520 Drder, alleg ng that t had an oppos t on to the defendants) mot ons for e1ecut on, and that the 'omprom se Agreement had been repud ated by the pla nt ff corporat on through ts C ce +res dent, as earl er man fested by the pla nt ff. %he pla nt ff prayed for ten days from the date of the hear ng of the mot on 9 th n 9h ch to f le ts 9r tten oppos t on to the mot ons for e1ecut on. Defendant Juan Eernabe f led an oppos t on to the pla nt ff)s mot on on Apr l 21, 1520. Dn Apr l 22, 1520 the pla nt ff f led 9 th the court a mot on for ne9 tr al on the ground that the dec s on of the court dated March 1<, 1520 s null and vo d because t 9as based on the 'omprom se Agreement of January <0, 15>5 9h ch 9as tself null and vo d for 9ant of a spec al author ty by the pla nt ff)s la9yers to enter nto the sa d agreement. %he pla nt ff also prayed that the dec s on dated March 1<, 1520 and the Drder dated Apr l 14, 1520 grant ng the defendants) mot ons for e1ecut on, be set as de. Defendant Juan Eernabe f led on Apr l 22, 1520 an oppos t on to the pla nt ff)s mot on on the grounds that the dec s on of the court s n accordance 9 th la9, for three la9yers for the pla nt ff s gned the 'omprom se Agreement, and one of them, Atty. 'ardenas, 9as an off c al representat ve of pla nt ff corporat on, hence, 9hen he s gned the 'omprom se Agreement, he d d so n the dual capac ty of la9yer and representat ve of the management of the corporat onI that the pla nt ff tself pursued, enforced and mplemented the agreement by appo nt ng Mr. !arry Mar=ueA as ts duly accred ted 'omm ss onerI and that the pla nt ff s conclus vely bound by the acts of ts la9yers n enter ng nto the 'omprom se Agreement. $n the meant me, or on Apr l 24, 1520, the court ssued an Drder sett ng as de ts Drder of Apr l 14, 1520 under 9h ch the defendants) mot ons for e1ecut on of -udgment had been granted, and gave the pla nt ff ten days 9 th n 9h ch to f le an oppos t on to the defendants) mot ons for e1ecut on. Dn May 5, 1520 the pla nt ff f led an oppos t on to the mot ons for e1ecut on of -udgment, on the grounds that the dec s on dated March 1<, 1520 s contrary to la9 for t s based on a comprom se agreement e1ecuted by the pla nt ff)s la9yers 9ho had no spec al po9er of attorney as re=u red by Art cle 1626 of the ' v l 'ode, or any spec al author ty as re=u red by &ect on 2<, "ule 1<6 of the "ules of 'ourtI and that the -udgment s vo d for lacF of -ur sd ct on of the court because the same s based on a vo d comprom se agreement. Dn May 16, 1520 the court ssued an Drder sett ng as de ts dec s on dated March 1<, 1520, deny ng the defendants) mot ons for e1ecut on of -udgment, and sett ng for June 2<, 1520 a pre@tr al conference n the case. %he three defendants moved for recons derat on, but the r mot ons 9ere den ed n an Drder dated July 16, 1520.

$t s n these factual prem ses that the defendants n ' v l 'ase No. &M@201 came to th s 'ourt by means of the present pet t ons. $n #.". No. !@<242<, pet t oners C cente and Angeles pray th s 'ourt to ssue a 9r t of prel m nary n-unct on, and, after hear ng, to annul and set as de the Drder dated May 16,1520 ssued by respondent Judge sett ng as de the dec s on dated March 1<, 1520I to declare the sa d dec s on legal, effect ve and mmed ately e1ecutoryI to d ssolve the 9r t of prel m nary mandatory n-unct on ssued by respondent Judge on &eptember <0, 15>2 command ng pet t oners to allo9 pr vate respondent to enter the r respect ve propert es and e1cavate thereonI to maFe the prel m nary n-unct on permanentI and to a9ard treble costs n favor of pet t oners and aga nst pr vate respondent. $n #.". No. !@<246<, pet t oner Juan Eernabe prays th s 'ourt to ssue a 9r t of prel m nary n-unct on or, at least a temporary restra n ng order, and, after hear ng, to annul and set as de the Drder dated Apr l 24, 1520 ssued by respondent Judge sett ng as de h s Drder of Apr l 14, 1520 and allo9 ng pr vate respondent to f le an oppos t on to pet t oners) mot on for e1ecut on, the Drder dated May 16, 1520, and the Drder dated July 16, 1520. +et t oner Eernabe also seeFs the re nstatement of the tr al court)s dec s on dated May 1<, 1520 and ts Drder dated Apr l 14, 1520 grant ng h s mot on for e1ecut on of -udgment, and an a9ard n h s favor of attorney)s fees and of actual, moral and e1emplary damages. At ssue s 9hether the respondent court, n sett ng as de ts dec s on of March 1<, 1520 and deny ng the mot ons for e1ecut on of sa d dec s on, had acted 9 thout or n e1cess of ts -ur sd ct on or 9 th grave abuse of d scret on. (e hold that sa d court d d not, n v e9 of the follo9 ng cons derat ons? 1. &pec al po9ers of attorney are necessary, among other cases, n the follo9 ng? to comprom se and to renounce the r ght to appeal from a -udgment. 1 Attorneys have author ty to b nd the r cl ents n any case by any agreement n relat on thereto made n 9r t ng, and n taF ng appeals, and n all matters of ord nary -ud c al procedure, but they cannot, 9 thout spec al author ty, comprom se the r cl ents) l t gat on, or rece ve anyth ng n d scharge of the r cl ents) cla ms but the full amount n cash. 3 %he 'omprom se Agreement dated January <0, 15>5 9as s gned only by the la9yers for pet t oners and by the la9yers for pr vate respondent corporat on. $t s not d sputed that the la9yers of respondent corporat on had not subm tted to the 'ourt any 9r tten author ty from the r cl ent to enter nto a comprom se. %h s 'ourt has sa d that the "ules 4 ,re=u re, for attorneys to comprom se the l t gat on of the r cl ents, a spec al author ty. And 9h le the same does not state that the spec al author ty be n 9r t ng the court has every reason to e1pect that, f not n 9r t ng, the same be duly establ shed by ev dence other than the self@ serv ng assert on of counsel h mself that such author ty 9as verbally g ven h m., ; 2. %he la9 spec f cally re=u res that ,-ur d cal persons may comprom se only n the form and 9 th the re=u s tes 9h ch may be necessary to al enate the r property., 2 3nder the corporat on la9 the po9er to comprom se or settle cla ms

n favor of or aga nst the corporat on s ord nar ly and pr mar ly comm tted to the Eoard of D rectors. %he r ght of the D rectors ,to comprom se a d sputed cla m aga nst the corporat on rests upon the r r ght to manage the affa rs of the corporat on accord ng to the r honest and nformed -udgment and d scret on as to 9hat s for the best nterests of the corporat on., 0 %h s po9er may ho9ever be delegated e ther e1pressly or mpl edly to other corporate off c als or agents. %hus t has been stated, that as a general rule an off cer or agent of the corporat on has no po9er to comprom se or settle a cla m by or aga nst the corporat on, e1cept to the e1tent that such po9er s g ven to h m e ther e1pressly or by reasonable mpl cat on from the c rcumstances. 1 $t s therefore necessary to ascerta n 9hether from the relevant facts t could be reasonably concluded that the Eoard of D rectors of the B$ 'ement 'orporat on had author Aed ts la9yers to enter nto the sa d comprom se agreement. +et t oners cla m that pr vate respondent)s attorneys adm tted t9 ce n open court on January <0, 15>5, that they 9ere author Aed to comprom se the r cl ent)s case, 9h ch accord ng to them, 9as never den ed by the sa d la9yers n any of the plead ngs f led by them n the case. %he cla m s unsupported by ev dence. Dn the contrary, n pr vate respondent)s ,"eply to Defendant Eernabe)s Ans9er Dated November 6, 15>5,, sa d counsels categor cally den ed that they ever represented to the court that they 9ere author Aed to enter nto a comprom se. $ndeed, the complete transcr pt of stenograph c notes taFen at the proceed ngs on January <0, 15>5 are before 3s, and no9here does t appear there n that respondent corporat on)s la9yers ever made such a representat on. $n any event, assum ng arguendo that they d d, such a self@serv ng assert on cannot properly be the bas s for the conclus on that the respondent corporat on had n fact author Aed ts la9yers to comprom se the l t gat on. <. +et t oners ho9ever ns st that there 9as tac t rat f cat on on the part of the corporat on, because t nom nated Mr. !arry Mar=ueA as ts comm ss oner pursuant to the agreement, pa d h s serv ces therefor, and Atty. 7lorent no C. 'ardenas, respondent corporat on)s adm n strat ve manager, not only d d not ob-ect but even aff 1ed h s s gnature to the agreement. $t s also argued that respondent corporat on hav ng represented, through ts la9yers, to the court and to pet t oners that sa d la9yers had author ty to b nd the corporat on and hav ng nduced by such representat ons the pet t oners to s gn the comprom se agreement, sa d respondent s no9 estopped from =uest on ng the same. %he nf rm ty of these arguments s n the r assumpt on that Atty. 'erdenas as adm n strat ve manager had author ty to b nd the corporat on or to comprom se the case. (hatever author ty the off cers or agents of a corporat on may have s der ved from the board of d rectors, or other govern ng body, unless conferred by the charter of the corporat on. A corporat on off cer)s po9er as an agent of the corporat on must therefore be sought from the statute, the charter, the by@la9s, or n a delegat on of author ty to such off cer, from the acts of board of d rectors, formally e1pressed or mpl ed from a hab t or custom of do ng bus ness. = $n the case at bar no prov s on of the charter and by@la9s of the corporat on or any resolut on or any other act of the board of d rectors of B$ 'ement 'orporat on

has been c ted, from 9h ch (e could reasonably nfer that the adm n strat ve manager had been granted e1pressly or mpl edly the po9er to b nd the corporat on or the author ty to comprom se the case. Absent such author ty to enter nto the comprom se, the s gnature of Atty. 'ardenas on the agreement 9ould be legally neffectual. 4. As regards the nom nat on of Mr. Mar=ueA as comm ss oner, counsel for respondent corporat on has e1pla ned O and th s has not been d sproven O that Atty. 'ardenas, apparently on h s o9n, subm tted the same to the court. %here s no iota of proof that at the t me of the subm ss on to the 'ourt, on 7ebruary 2>, 15>5, of the name of Mr. Mar=ueA, respondent corporat on Fne9 of the contents of the comprom se agreement. As matter of fact, accord ng to the man festat on of Atty. Centura to the court, t 9as only on &eptember 1, 15>5 that he sent to Mr. Anton o D oFno, C ce@+res dent of the corporat on, a copy of the comprom se agreement for the approval by the board of d rectors and on Dctober 22, 15>5, Mr. D oFno nformed h m that the approval of the Eoard cannot be obta ned, as under the agreement the corporat on s depr ved of ts r ght to appeal from the -udgement. $n the absence of any proof that the govern ng body of respondent corporat on had Fno9ledge, e ther actual or construct ve, or the contents of the comprom se agreement before &eptember 1, 15>5, 9hy should the nom nat on of Mr. Mar=ueA as comm ss oner, by Attys. Centura, 'ardenas and Magpantay, on 7ebruary 2>, 15>5, be cons dered as a form of tac t rat f cat on of the comprom se agreement by the corporat onP $n order to rat fy the unauthor Aed act of an agent and maFe t b nd ng on the corporat on, t must be sho9n that the govern ng body or off cer author Aed to rat fy had full and complete Fno9ledge of all the mater al facts connected 9 th the transact on to 9h ch t relates. < $t cannot be assumed also that Atty. 'ardenas, as adm n strat ve manager of the corporat on, had author ty to rat fy. 7or rat f cat on can never be made ,on the part of the corporat on by the same persons 9ho 9rongfully assume the po9er to maFe the contract, but the rat f cat on must be by the off cer or govern ng body hav ng author ty to maFe such contract and, as 9e have seen, must be 9 th full Fno9ledge., 1. 8. E=ually nappos te s pet t oners) nvocat on of the pr nc ple of estoppel. $n the case at bar, e1cept those made by Attys. Centura, 'ardenas and Magpantay, pet t oners have not demonstrated any act or declarat on of the corporat on amount ng to false representat on or concealment of mater al facts calculated to m slead sa d pet t oners. %he acts or conduct for 9h ch the corporat on may be l able under the doctr ne of estoppel must be those of the corporat on, ts govern ng body or author Aed off cers, and not those of the purported agent 9ho s h mself respons ble for the m srepresentat on. 11 $t hav ng been found by the tr al court that ,the counsel for the pla nt ff entered nto the comprom se agreement 9 thout the 9r tten author ty of h s cl ent and the latter d d not rat fy, on the contrary t repud ated and d so9ned the same ...,, 13 (e therefore declare that the orders of the court a quo sub-ect of

these t9o pet t ons, have not been ssued n e1cess of ts -ur sd ct onal author ty or n grave abuse of ts d scret on. (BE"E7D"E, the pet t ons n these t9o cases are hereby d sm ssed. 'osts aga nst the pet t oners. Ma'alintal, Actg. ..9., .astro, 7eehan'ee, !arredo, Ma'asiar and 5sguerra, 99., concur. Haldivar, 9., is on leave. 8ernando, 9., too' no part.

:ootnotes 1 Art cle 1626:<;, ' v l 'ode. 2 "ule 1<6, &ect on 2<, "ules of 'ourt. < $b d. 4 Bome $nsurance 'ompany v. 3n ted &tates ! nes 'o., et al., !@2885<, November 18, 15>2, 21 &'"A 6><, 6>>. 8 Art cle 20<<, Ne9 ' v l 'ode. > 2 7letcher, 'ycloped a 'orporat ons, 822, 15>5 "ev sed Colume. . 2 #olden (est 'red t N Ad-ustment 'o. v. ( lson, 2 +. 2d. <48, 115 'al. App. >22. 6 'eleste &ugar 'o. v. Dunbar@DuFate 'o., 102 &o. 45<, 1>0 !a. >54. Massachusetts Bosp tal ! fe $ns. 'o. v. Nesson 150 N.E. <1, 26> Mass. 21>. #arland 'orp. v. (aterloo !oan N %rust 'o., 120 N.(. <2<, 168 $o9a 150. (heatland %ube 'o. v. McDo9ell N 'o., 12> A. 212, <12 +a. 258. C ctor a +arF 'o. v. 'ont nental $ns. 'o. of Ne9 HorF, 126 +. 224, <5 'al. App. <42. 6 Eoard of ! =u dators v. *ala9, !@16608, Aug. 14, 15>2, 20 &'"A 562. 2 7letcher, 'ycloped a 'orporat ons, footnote 20, <01, 15>5 "ev sed Colume? ,A corporat on s bound by the act of an off cer or agent only to the e1tent that the po9er to do the act has been conferred upon h m e1pressly by the charter, byla9s or act on of the stocFholders or d rectors, or can be mpl ed from po9ers e1pressly conferred, or 9h ch are nc dental thereto, or 9here the act s 9 th n the apparent po9ers 9h ch the corporat on has caused th rd persons to bel eve t

has conferred upon the off cer or agent. Er e ". 'o. v. &.J. #roves N &ons 'o., 114 NJ! 21>, 12> A. <22., 5 ,$n order to rat fy the unauthor Aed act of an agent and maFe t effectual and obl gatory upon the pr nc pal, the general rule s that the rat f cat on must be made by the pr nc pal 9 th a full and complete Fno9ledge of all the mater al facts connected 9 th the transact on to 9h ch t relatesI and th s rule appl es, of course, to rat f cat on by a corporat on of an unauthor Aed contract or other act by ts off cers or agents, 9hether the rat f cat on s by the stocFholders or by the d rectors, or by a subord nate off cer hav ng author ty to rat fy., /2 7letcher 'ycloped a 'orporat ons, 1045@1082, 15>5 "ev sed Colume0. 10 ,"at f cat on can never be made on the part of the corporat on by the same person 9ho 9rongfully assume the po9er to maFe the contract, but the rat f cat on must be by the off cer or govern ng body hav ng author ty to maFe such contract and, as 9e have seen, must be 9 th full Fno9ledge. Accord ngly, a corporate off cer or agent cannot rat fy an unauthor Aed act or contract done or entered nto by h mself so as to b nd the corporat on. $n other 9ords, one 9ho maFes an unauthor Aed contract has no more r ght to rat fy the r o9n unauthor Aed actsI even though they const tute a ma-or ty of the d rectors or of the stocFholders, and a board of d rectors, the ma-or ty of 9h ch 9ere the members of a preced ng board 9h ch author Aed or entered nto an llegal contract, cannot rat fy t, s nce th s 9ould be n effect a rat f cat on of one)s o9n act., /2 7letcher, 'ycloped a 'orporat ons, 10>2@10>5, 15>5 "ev sed Colume.0 11 Dr. EecF N 'o. v. #eneral Elec. 'o., 210 7 &upp. 6>. #rumm t v. &turgeon Eay ( nter &horts 'lub, 152 7 &upp. 488. Mann on v. 'ampbell &oup 'o., 24< 'al App 2d <12, 82 'al "pts 2 N >. &pencer 'oncrete +roducts 'o. v. ' ty of &pencer, 11> N( 2d 488. 12 Drder of May 16, 1520. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 111;0. July 3;, 3..1

#)##)AN N. 'E$%A!/, %8N(5)A '. :EKA$)S, and J&#)AN 'E$%A!/, J$., represented y t-eir Attorney7)n7:act, A#:$E!/ '. +E$E6, +et t oners, vs. A##)E! 9ANK)NG %/$+/$A()/N, "espondent. DE'$&$DN %5)%/7NA6A$)/, J.:

Eefore th s 'ourt s a +et t on for "ev e9 on .ertiorari under "ule 48 of the "ev sed "ules of 'ourt, f led by pet t oners ! ll an N. Mercado, 'ynth a M. 7eFar s and Jul an Mercado, Jr., represented by the r Attorney@$n@7act, Alfredo M. +ereA, seeF ng to reverse and set as de the Dec s on 1 of the 'ourt of Appeals dated 12 Dctober 2008, and ts "esolut on2 dated 18 7ebruary 200> n 'A@#.". 'C No. 62><>. %he 'ourt of Appeals, n ts assa led Dec s on and "esolut on, reversed the Dec s on< of the "eg onal %r al 'ourt /"%'0 of UueAon ' ty, Eranch 220 dated 2< &eptember 200<, declar ng the deeds of real estate mortgage const tuted on %'% No. "%@1620> /10><<60 null and vo d. %he d spos t ve port on of the assa led 'ourt of Appeals Dec s on thus reads? (BE"E7D"E, the appealed dec s on s "ECE"&ED and &E% A&$DE, and a ne9 -udgment s hereby entered d sm ss ng the :pet t oners; compla nt. 4 +et t oners are he rs of +erla N. Mercado /+erla0. +erla, dur ng her l fet me, o9ned several p eces of real property s tuated n d fferent prov nces of the +h l pp nes. "espondent, on the other hand, s a banF ng nst tut on duly author Aed as such under the +h l pp ne la9s. Dn 26 May 1552, +erla e1ecuted a &pec al +o9er of Attorney /&+A0 n favor of her husband, Jul an D. Mercado /Jul an0 over several p eces of real property reg stered under her name, author A ng the latter to perform the follo9 ng acts? 1. %o act n my behalf, to sell, al enate, mortgage, lease and deal other9 se over the d fferent parcels of land descr bed here nafter, to 9 t? a0 'alapan, Dr ental M ndoro +ropert es covered by %ransfer 'ert f cates of % tle Nos. %@8<>16 @ <,822 &=uare Meters, %@4>610 K <,58< &=uare Meters, %@8<140 K 122 &=uare Meters, %@2140< K 2>< s=uare Meters, %@ 4>602 K <5 &=uare Meters of the "eg stry of Deeds of Dr ental M ndoroI b0 &usana Be ghts, Munt nlupa covered by %ransfer 'ert f cates of % tle Nos. %@ 106584 K >00 &=uare Meters and "%@10><<6 K 608 &=uare Meters of the "eg stry of Deeds of +as g /no9 MaFat 0I c0 +ersonal property K 156< 'ar 9 th Ceh cle "eg strat on No. "@1><61I Model 156<I MaFe K %oyotaI Eng ne No. %@ 24>4 2. %o s gn for and n my behalf any act of str ct dom n on or o9nersh p any sale, d spos t on, mortgage, lease or any other transact ons nclud ng =u t@cla ms, 9a ver and rel n=u shment of r ghts n and over the parcels of land s tuated n #eneral %r as, 'av te, covered by %ransfer 'ert f cates of % tle Nos. %@112284 and %@112288 of the "eg stry of Deeds of 'av te, n con-unct on 9 th h s co@o9ner and n the person A%%H. A3#3&%D 7. DE! "D&A"$DI <. %o e1erc se any or all acts of str ct dom n on or o9nersh p over the above@ ment oned propert es, r ghts and nterest there n. /Emphas s suppl ed.0 Dn the strength of the aforesa d &+A, Jul an, on 12 December 155>, obta ned a loan from the respondent n the amount of +<,000,000.00, secured by real estate

mortgage const tuted on %'% No. "%@1620> /10><<60 9h ch covers a parcel of land 9 th an area of 608 s=uare meters, reg stered 9 th the "eg stry of Deeds of UueAon ' ty /sub-ect property0. 8 &t ll us ng the sub-ect property as secur ty, Jul an obta ned an add t onal loan from the respondent n the sum of+8,000,000.00, ev denced by a +rom ssory Note> he e1ecuted on 8 7ebruary 1552 as another real estate mortgage /"EM0. $t appears, ho9ever, that there 9as no property dent f ed n the &+A as %'% No. "% K 1620> /10><<60 and reg stered 9 th the "eg stry of Deeds of UueAon ' ty. (hat 9as dent f ed n the &+A nstead 9as the property covered by %'% No. "%@ 10><<6 reg stered 9 th the "eg stry of Deeds of +as g. &ubse=uently, Jul an defaulted on the payment of h s loan obl gat ons. %hus, respondent n t ated e1tra@-ud c al foreclosure proceed ngs over the sub-ect property 9h ch 9as subse=uently sold at publ c auct on 9here n the respondent 9as declared as the h ghest b dder as sho9n n the &her ffJs 'ert f cate of &ale dated 18 January 1556.2 Dn 2< March 1555, pet t oners n t ated 9 th the "%' an act on for the annulment of "EM const tuted over the sub-ect property on the ground that the same 9as not covered by the &+A and that the sa d &+A, at the t me the loan obl gat ons 9ere contracted, no longer had force and effect s nce t 9as prev ously revoFed by +erla on 10 March 155<, as ev denced by the "evocat on of &+A s gned by the latter.6 +et t oners l Fe9 se alleged that together 9 th the copy of the "evocat on of &+A, +erla, n a !etter dated 2< January 155>, not f ed the "eg stry of Deeds of UueAon ' ty that any attempt to mortgage or sell the sub-ect property must be 9 th her full consent documented n the form of an &+A duly authent cated before the +h l pp ne 'onsulate #eneral n Ne9 HorF. 5 $n the absence of author ty to do so, the "EM const tuted by Jul an over the sub-ect property 9as null and vo dI thus, pet t oners l Fe9 se prayed that the subse=uent e1tra@-ud c al foreclosure proceed ngs and the auct on sale of the sub-ect property be also null f ed. $n ts Ans9er 9 th 'ompulsory 'ountercla m, 10 respondent averred that, contrary to pet t onerJs allegat ons, the &+A n favor of Jul an ncluded the sub-ect property, covered by one of the t tles spec f ed n paragraph 1/b0 thereof, %'% No. "%@ 10><<6 reg stered 9 th the "eg stry of Deeds of +as g /no9 MaFat 0. %he sub-ect property 9as purportedly reg stered prev ously under %'% No. %@10><<6, and 9as only subse=uently reconst tuted as %'% "%@1620> /10><<60. Moreover, %'% No. %@10><<6 9as actually reg stered 9 th the "eg stry of Deeds of UueAon ' ty and not before the "eg stry of Deeds of +as g /no9 MaFat 0. "espondent e1pla ned that the d screpancy n the des gnat on of the "eg stry of Deeds n the &+A 9as merely an error that must not preva l over the clear ntent on of +erla to nclude the sub-ect property n the sa d &+A. $n sum, the property referred to n the &+A +erla e1ecuted n favor of Jul an as covered by %'% No. 10><<6 of the

"eg stry of Deeds of +as g /no9 MaFat 0 and the sub-ect property n the case at bar, covered by "% K 1620> /10><<60 of the "eg stry of Deeds of UueAon ' ty, are one and the same. Dn 2< &eptember 200<, the "%' rendered a Dec s on declar ng the "EM const tuted over the sub-ect property null and vo d, for Jul an 9as not author Aed by the terms of the &+A to mortgage the same. %he court a =uo l Fe9 se ordered that the foreclosure proceed ngs and the auct on sale conducted pursuant to the vo d "EM, be null f ed. %he d spos t ve port on of the Dec s on reads? (BE"E7D"E, prem ses cons dered, -udgment s hereby rendered n favor of the :here n pet t oners; and aga nst the :here n respondent; EanF? 1. Declar ng the "eal Estate Mortgages const tuted and reg stered under Entry Nos. +E@484<M"%@1620> and 2012M"%@1620> annotated on %'% No. "%@1620> /10><<60 of the "eg stry of Deeds of UueAon ' ty as N3!! and CD$DI 2. Declar ng the &her ffJs &ale and 'ert f cate of &ale under 7"E No. 2212 dated January 18, 1556 over the property covered by %'% No. "%@1620> /10><<60 of the "eg stry of Deeds of UueAon ' ty as N3!! and CD$DI <. Drder ng the defendant "eg stry of Deeds of UueAon ' ty to cancel the annotat on of "eal Estate Mortgages appear ng on Entry Nos. +E@484<M"%@1620> and 2012M"%@1620> on %'% No. "%@1620> /10><<60 of the "eg stry of Deeds of UueAon ' tyI 4. Drder ng the :respondent; EanF to del verMreturn to the :pet t oners; represented by the r attorney@ n@fact Alfredo M. +ereA, the or g nal D9nerJs Dupl cate 'opy of %'% No. "%@1620> /10><<60 free from the encumbrances referred to aboveI and 8. Drder ng the :respondent; EanF to pay the :pet t oners; the amount of +100,000.00 as for attorneyJs fees plus cost of the su t. %he other cla m for damages and countercla m are hereby DEN$ED for lacF of mer t.11 Aggr eved, respondent appealed the adverse Dec s on before the 'ourt of Appeals. $n a Dec s on dated 12 Dctober 2008, the 'ourt of Appeals reversed the "%' Dec s on and upheld the val d ty of the "EM const tuted over the sub-ect property on the strength of the &+A. %he appellate court declared that +erla ntended the sub-ect property to be ncluded n the &+A she e1ecuted n favor of Jul an, and that her subse=uent revocat on of the sa d &+A, not be ng conta ned n a publ c nstrument, cannot b nd th rd persons. %he Mot on for "econs derat on nterposed by the pet t oners 9as den ed by the 'ourt of Appeals n ts "esolut on dated 18 7ebruary 200>.

+et t oners are no9 before us assa l ng the Dec s on and "esolut on rendered by the 'ourt of Appeals ra s ng several ssues, 9h ch are summar Aed as follo9s? $ (BE%BE" D" ND% %BE"E (A& A CA!$D MD"%#A#E 'DN&%$%3%ED DCE" &3EJE'% +"D+E"%H. $$ (BE%BE" D" ND% %BE"E (A& A CA!$D "ECD'A%$DN D7 %BE &+A. $$$ (BE%BE" D" ND% %BE "E&+DNDEN% (A& A MD"%#A#EE@$N@ #DDD 7A$%B. 7or a mortgage to be val d, Art cle 2068 of the ' v l 'ode enumerates the follo9 ng essent al re=u s tes? Art. 2068. %he follo9 ng re=u s tes are essent al to the contracts of pledge and mortgage? /10 %hat they be const tuted to secure the fulf llment of a pr nc pal obl gat onI /20 %hat the pledgor or mortgagor be the absolute o9ner of the th ng pledged or mortgagedI /<0 %hat the persons const tut ng the pledge or mortgage have the free d sposal of the r property, and n the absence thereof, that they be legally author Aed for the purpose. %h rd persons 9ho are not part es to the pr nc pal obl gat on may secure the latter by pledg ng or mortgag ng the r o9n property. $n the case at bar, t 9as Jul an 9ho obta ned the loan obl gat ons from respondent 9h ch he secured 9 th the mortgage of the sub-ect property. %he property mortgaged 9as o9ned by h s 9 fe, +erla, cons dered a th rd party to the loan obl gat ons bet9een Jul an and respondent. $t 9as, thus, a s tuat on recogn Aed by the last paragraph of Art cle 2068 of the ' v l 'ode afore@=uoted. Bo9ever, s nce t 9as not +erla 9ho personally mortgaged her o9n property to secure Jul anJs loan obl gat ons 9 th respondent, 9e proceed to determ n ng f she duly author Aed Jul an to do so on her behalf. 3nder Art cle 1626 of the ' v l 'ode, a spec al po9er of attorney s necessary n cases 9here real r ghts over mmovable property are created or conveyed. 12 $n the &+A e1ecuted by +erla n favor of Jul an on 26 May 1552, the latter 9as conferred 9 th the author ty to ,sell, al enate, mort"a"e, lease and deal other9 se, the d fferent p eces of real and personal property reg stered n +erlaJs name. %he &+A l Fe9 se author Aed Jul an ,:t;o e1erc se any or all acts of strict dominion or oFners-ip, over the dent f ed propert es, and r ghts and nterest there n. %he e1 stence and due e1ecut on of th s &+A by +erla 9as not den ed or challenged by pet t oners. %here s no =uest on therefore that Jul an 9as vested 9 th the po9er to mortgage the p eces of property dent f ed n the &+A. Bo9ever, as to 9hether the sub-ect property 9as among those dent f ed n the &+A, so as to render Jul anJs mortgage of the same val d, s a =uest on 9e st ll must resolve.

+et t oners ns st that the sub-ect property 9as not ncluded n the &+A, cons der ng that t conta ned an e1clus ve enumerat on of the p eces of property over 9h ch Jul an had author ty, and these nclude only? /10 %'% No. %@8<>16, 9 th an area of <,822 s=uare meters, located at 'alapan, Dr ental M ndoro, and reg stered 9 th the "eg stry of Deeds of Dr ental M ndoroI /20 %'% No. %@4>610, 9 th an area of <,58< s=uare meters, located at 'alapan, Dr ental M ndoro, and reg stered 9 th the "eg stry of Deeds of Dr ental M ndoroI /<0 %'% No. %@8<140, 9 th an area of 122 s=uare meters, located at 'alapan, Dr ental M ndoro, and reg stered 9 th the "eg stry of Deeds of Dr ental M ndoroI /40 %'% No. %@2140<, 9 th an area of 2>< s=uare meters, located at 'alapan, Dr ental M ndoro, and reg stered 9 th the "eg stry of Deeds of Dr ental M ndoroI /80 %'% No. %@ 4>602, 9 th an area of <5 s=uare meters, located at 'alapan, Dr ental M ndoro, and reg stered 9 th the "eg stry of Deeds of Dr ental M ndoroI />0 %'% No. %@106584, 9 th an area of >50 s=uare meters and located at &usana Be ghts, Munt nlupaI /20 "%@10><<6 K 608 &=uare Meters reg stered 9 th the "eg stry of Deeds of +as g /no9 MaFat 0I and /60 +ersonal +roperty cons st ng of a 156< 'ar 9 th Ceh cle "eg strat on No. "@1><61, Model K 156<, MaFe K %oyota, and Eng ne No. %@ 24>4. No9here s t stated n the &+A that Jul anJs author ty e1tends to the sub-ect property covered by %'% No. "% K 1620> /10><<60 reg stered 9 th the "eg stry of Deeds of UueAon ' ty. 'onse=uently, the act of Jul an of const tut ng a mortgage over the sub-ect property s unenforceable for hav ng been done 9 thout author ty. "espondent, on the other hand, ma nly h nges ts argument on the declarat ons made by the 'ourt of Appeals that there 9as no property covered by %'% No. 10><<6 reg stered 9 th the "eg stry of Deeds of +as g /no9 MaFat 0I but there e1 sts a property, the sub-ect property here n, covered by %'% No. "%@1620> /10><<60 reg stered 9 th the "eg stry of Deeds of UueAon ' ty. 7urther ver f cat on 9ould reveal that %'% No. "%@1620> s merely a reconst tut on of %'% No. 10><<6, and the property covered by both cert f cates of t tle s actually s tuated n UueAon ' ty and not +as g. 7rom the forego ng c rcumstances, respondent argues that +erla ntended to nclude the sub-ect property n the &+A, and the fa lure of the nstrument to reflect the recent %'% Number or the e1act des gnat on of the "eg stry of Deeds, should not defeat +erlaJs clear ntent on. After an e1am nat on of the l teral terms of the &+A, 9e f nd that the sub-ect property 9as not among those enumerated there n. %here s no obv ous reference to the sub-ect property covered by %'% No. "%@1620> /10><<60 reg stered 9 th the "eg stry of Deeds of UueAon ' ty. %here 9as also noth ng n the language of the &+A from 9h ch 9e could deduce the ntent on of +erla to nclude the sub-ect property there n. (e cannot attr bute such alleged ntent on to +erla 9ho e1ecuted the &+A 9hen the language of the nstrument s bare of any nd cat on suggest ve of such ntent on. 'ontrar 9 se, to adopt the ntent theory advanced by the respondent, n the absence of clear and conv nc ng ev dence to that effect, 9ould run afoul of the e1press tenor of the &+A and thus defeat +erlaJs true ntent on.

$n cases 9here the terms of the contract are clear as to leave no room for nterpretat on, resort to c rcumstant al ev dence to ascerta n the true ntent of the part es, s not countenanced. As aptly stated n the case of JMA Bouse, $ncorporated v. &ta. Mon ca $ndustr al and Development 'orporat on, 1< thus? :%;he la9 s that f the terms of a contract are clear and leave no doubt upon the ntent on of the contract ng part es, the l teral mean ng of ts st pulat on shall control. (hen the language of the contract s e1pl c t, leav ng no doubt as to the ntent on of the drafters, the courts may not read nto t : n; any other ntent on that 9ould contrad ct ts ma n mport. %he clear terms of the contract should never be the sub-ect matter of nterpretat on. Ne ther abstract -ust ce nor the rule on l beral nterpretat on -ust f es the creat on of a contract for the part es 9h ch they d d not maFe themselves or the mpos t on upon one party to a contract or obl gat on not assumed s mply or merely to avo d seem ng hardsh ps. %he true mean ng must be enforced, as t s to be presumed that the contract ng part es Fno9 the r scope and effects. 14 E=ually relevant s the rule that a po9er of attorney must be str ctly construed and pursued. %he nstrument 9 ll be held to grant only those po9ers 9h ch are spec f ed there n, and the agent may ne ther go beyond nor dev ate from the po9er of attorney.18 (here po9ers and dut es are spec f ed and def ned n an nstrument, all such po9ers and dut es are l m ted and are conf ned to those 9h ch are spec f ed and def ned, and all other po9ers and dut es are e1cluded.1> %h s s but n accord 9 th the d s ncl nat on of courts to enlarge the author ty granted beyond the po9ers e1pressly g ven and those 9h ch nc dentally flo9 or der ve therefrom as be ng usual and reasonably necessary and proper for the performance of such e1press po9ers. 12 Even the commentar es of reno9ned ' v l st Manresa 16 supports a str ct and l m ted construct on of the terms of a po9er of attorney? %he la9, 9h ch must looF after the nterests of all, cannot perm t a man to e1press h mself n a vague and general 9ay 9 th reference to the r ght he confers upon another for the purpose of al enat on or hypothecat on, 9hereby he m ght be despo led of all he possessed and be brought to ru n, such e1cess ve author ty must be set do9n n the most formal and e1pl c t terms, and 9hen th s s not done, the la9 reasonably presumes that the pr nc pal d d not mean to confer t. $n th s case, 9e are not conv nced that the property covered by %'% No. 10><<6 reg stered 9 th the "eg stry of Deeds of +as g /no9 MaFat 0 s the same as the sub-ect property covered by %'% No. "%@1620> /10><<60 reg stered 9 th the "eg stry of Deeds of UueAon ' ty. %he records of the case are str pped of support ng proofs to ver fy the respondentJs cla m that the t9o t tles cover the same property. $t fa led to present any cert f cat on from the "eg str es of Deeds concerned to support ts assert on. Ne ther d d respondent taFe the effort of subm tt ng and maF ng part of the records of th s case cop es of %'%s No. "%@ 10><<6 of the "eg stry of Deeds of +as g /no9 MaFat 0 and "%@1620> /10><<60 of the "eg stry of Deeds of UueAon ' ty, and closely compar ng the techn cal

descr pt ons of the propert es covered by the sa d %'%s. %he bare and s9eep ng statement of respondent that the propert es covered by the t9o cert f cates of t tle are one and the same conta ns noth ng but empty mputat on of a fact that could hardly be g ven any ev dent ary 9e ght by th s 'ourt. Bav ng arr ved at the conclus on that Jul an 9as not conferred by +erla 9 th the author ty to mortgage the sub-ect property under the terms of the &+A, the real estate mortgages Jul an e1ecuted over the sa d property are therefore unenforceable. Assum ng arguendo that the sub-ect property 9as ndeed ncluded n the &+A e1ecuted by +erla n favor of Jul an, the sa d &+A 9as revoFed by v rtue of a publ c nstrument e1ecuted by +erla on 10 March 155<. %o address respondentJs assert on that the sa d revocat on 9as unenforceable aga nst t as a th rd party to the &+A and as one 9ho rel ed on the same n good fa th, 9e =uote 9 th approval the follo9 ng rul ng of the "%' on th s matter? Moreover, an agency s e1t ngu shed, among others, by ts revocat on / Article +,,,, 3e& .ivil .ode of the $hilippines0. %he pr nc pal may revoFe the agency at 9 ll, and compel the agent to return the document ev denc ng the agency. &uch revocat on may be e1press or mpl ed /Article +,)C, supra0. $n th s case, the revocat on of the agency or &pec al +o9er of Attorney s e1pressed and by a publ c document e1ecuted on March 10, 155<. %he "eg ster of Deeds of UueAon ' ty 9as even not f ed that any attempt to mortgage or sell the property covered by %'% No. :"%@1620>; 10><<6 located at No. 21 B lls de Dr ve, Elue " dge, UueAon ' ty must have the full consent documented n the form of a spec al po9er of attorney duly authent cated at the +h l pp ne 'onsulate #eneral, Ne9 HorF ' ty, N.H., 3.&.A. %he non@annotat on of the revocat on of the &pec al +o9er of Attorney on %'% No. "%@1620> s of no conse=uence as far as the revocat onJs e1 stence and legal effect s concerned s nce actual not ce s al9ays super or to construct ve not ce. %he actual not ce of the revocat on relayed to defendant "eg stry of Deeds of UueAon ' ty s not den ed by e ther the "eg stry of Deeds of UueAon ' ty or the defendant EanF. $n 9h ch case, there appears no reason 9hy &ect on 82 of the +roperty "eg strat on Decree /+.D. No. 18250 should not apply to the s tuat on. &a d &ect on 82 of +.D. No. 1825 prov des? ,&ect on 82. 'onstruct ve not ce upon reg strat on. K Every conveyance, mortgage, lease, l en, attachment, order, -udgment, nstrument or entry affect ng reg stered land shall, f reg stered, f led or entered n the Dff ce of the "eg ster of Deeds for the prov nce or c ty 9here the land to 9h ch t relates l es, be construct ve not ce to all persons from the t me of such reg ster ng, f l ng or enter ng. /$res. Decree 3o. +A),, Section A-0 /emphasis ours0 $t thus developed that at the t me the f rst loan transact on 9 th defendant EanF 9as effected on December 12, 155>, there 9as on record at the Dff ce of the "eg ster of Deeds of UueAon ' ty that the spec al po9er of attorney granted

Jul an, &r. by +erla had been revoFed. %hat not ce, 9orFs as construct ve not ce to th rd part es of ts be ng f led, effect vely render ng Jul an, &r. 9 thout author ty to act for and n behalf of +erla as of the date the revocat on letter 9as rece ved by the "eg ster of Deeds of UueAon ' ty on 7ebruary 2, 155>. 15 # ven that +erla revoFed the &+A as early as 10 March 155<, and that she nformed the "eg stry of Deeds of UueAon ' ty of such revocat on n a letter dated 2< January 155> and rece ved by the latter on 2 7ebruary 155>, then th rd part es to the &+A are construct vely not f ed that the same had been revoFed and Jul an no longer had any author ty to mortgage the sub-ect property. Although the revocat on may not be annotated on %'% No. "%@1620> /10><<60, as the "%' po nted out, ne ther the "eg stry of Deeds of UueAon ' ty nor respondent den ed that +erlaJs 2< January 155> letter 9as rece ved by and f led 9 th the "eg stry of Deeds of UueAon ' ty. "espondent 9ould have undoubtedly come across sa d letter f t ndeed d l gently nvest gated the sub-ect property and the c rcumstances surround ng ts mortgage. %he f nal ssue to be threshed out by th s 'ourt s 9hether the respondent s a mortgagee@ n@good fa th. "espondent fervently asserts that t e1erc sed reasonable d l gence re=u red of a prudent man n deal ng 9 th the sub-ect property. Elaborat ng, respondent cla ms to have carefully ver f ed Jul anJs author ty over the sub-ect property 9h ch 9as val dly conta ned n the &+A. $t stresses that the &+A 9as annotated at the bacF of the %'% of the sub-ect property. 7 nally, after conduct ng an nvest gat on, t found that the property covered by %'% No. 10><<6, reg stered 9 th the "eg stry of Deeds of +as g /no9 MaFat 0 referred to n the &+A, and the sub-ect property, covered by %'% No. 1620> /10><<60 reg stered 9 th the "eg stry of Deeds of UueAon ' ty, are one and the same property. 7rom the forego ng, respondent concluded that Jul an 9as ndeed author Aed to const tute a mortgage over the sub-ect property. (e are unconv nced. %he property l sted n the real estate mortgages Jul an e1ecuted n favor of +NE s the one covered by ,%'%^"%@1620>/10><<60., Dn the other hand, the &pec al +o9er of Attorney referred to %'% No. ,"%@10><<6 K 608 &=uare Meters of the "eg stry of Deeds of +as g no9 MaFat ., %he palpable d fference bet9een the %'% numbers referred to n the real estate mortgages and Jul anJs &+A, coupled 9 th the fact that the sa d %'%s are reg stered n the "eg str es of Deeds of d fferent c t es, should have put respondent on guard. "espondentJs cla m of prudence s debunFed by the fact that t had conven ently or other9 se overlooFed the ncons stent deta ls appear ng on the face of the documents, 9h ch t 9as rely ng on for ts r ghts as mortgagee, and 9h ch s gn f cantly affected the dent f cat on of the property be ng mortgaged. $n Arrofo v. Qui>o,20 9e have eluc dated that? :&ettled s the rule that; a person deal ng 9 th reg stered lands : s not re=u red; to n=u re further than 9hat the %orrens t tle on ts face nd cates. %h s rule, ho9ever, s not absolute but adm ts of e1cept ons. (-us, F-ile its is true, L L L t-at a person dealin" Fit- re"istered lands need not "o eyond t-e

certificate of title, it is liGeFise a Fell7settled rule t-at a purc-aser or mort"a"ee cannot close -is eyes to facts F-ic- s-ould put a reasona le man on -is "uard, and t-en claim t-at -e acted in "ood fait- under t-e elief t-at t-ere Fas no defect in t-e title of t-e Aendor or mort"a"or . B s mere refusal to face up the fact that such defect e1 sts, or h s 9 llful clos ng of h s eyes to the poss b l ty of the e1 stence of a defect n the vendorJs or mortgagorJs t tle, 9 ll not maFe h m an nnocent purchaser for value, f t after9ards develops that the t tle 9as n fact defect ve, and t appears that he had such not ce of the defect as 9ould have led to ts d scovery had he acted 9 th the measure of precaut on 9h ch may be re=u red of a prudent man n a l Fe s tuat on. Ey putt ng bl nders on ts eyes, and by refus ng to see the patent defect n the scope of Jul anJs author ty, eas ly d scernable from the pla n terms of the &+A, respondent cannot no9 cla m to be an nnocent mortgagee. 7urther, n the case of A#ad v. 2uim#a,21 9e la d do9n the pr nc ple that 9here the mortgagee does not d rectly deal 9 th the reg stered o9ner of real property, the la9 re=u res that a h gher degree of prudence be e1erc sed by the mortgagee, thus? (h le :the; one 9ho buys from the reg stered o9ner does not need to looF beh nd the cert f cate of t tle, one 9ho buys from :the; one 9ho s not :the; reg stered o9ner s e1pected to e1am ne not only the cert f cate of t tle but all factual c rcumstances necessary for :one; to determ ne f there are any fla9s n the t tle of the transferor, or n :the; capac ty to transfer the land. Although the nstant case does not nvolve a sale but only a mortgage, the same rule appl es nasmuch as the la9 tself ncludes a mortgagee n the term ,purchaser., 22 %h s pr nc ple s appl ed more strenuously 9hen the mortgagee s a banF or a banF ng nst tut on. %hus, n the case of .ruz v. !ancom 8inance 'orporat on,2< 9e ruled? "espondent, ho9ever, s not an ord nary mortgageeI t s a mortgagee@banF. As such, unl Fe pr vate nd v duals, t s e1pected to e1erc se greater care and prudence n ts deal ngs, nclud ng those nvolv ng reg stered lands. A banF ng nst tut on s e1pected to e1erc se due d l gence before enter ng nto a mortgage contract. %he ascerta nment of the status or cond t on of a property offered to t as secur ty for a loan must be a standard and nd spensable part of ts operat ons.24 Bence, cons der ng that the property be ng mortgaged by Jul an 9as not h s, and there are add t onal doubts or susp c ons as to the real dent ty of the same, the respondent banF should have proceeded 9 th ts transact ons 9 th Jul an only 9 th utmost caut on. As a banF, respondent must sub-ect all ts transact ons to the most r g d scrut ny, s nce ts bus ness s mpressed 9 th publ c nterest and ts f duc ary character re=u res h gh standards of ntegr ty and performance.28 (here respondent acted n undue haste n grant ng the mortgage loans n favor of Jul an and d sregard ng the apparent defects n the latterJs

author ty as agent, t fa led to d scharge the degree of d l gence re=u red of t as a banF ng corporat on.+a&phil %hus, even grant ng for the saFe of argument that the sub-ect property and the one dent f ed n the &+A are one and the same, t 9ould not elevate respondentJs status to that of an nnocent mortgagee. As a banF ng nst tut on, -ur sprudence str ngently re=u res that respondent should taFe more precaut ons than an ord nary prudent man should, to ascerta n the status and cond t on of the propert es offered as collateral and to ver fy the scope of the author ty of the agents deal ng 9 th these. Bad respondent acted 9 th the re=u red degree of d l gence, t could have ac=u red Fno9ledge of the letter dated 2< January 155> sent by +erla to the "eg stry of Deeds of UueAon ' ty 9h ch recorded the same. %he fa lure of the respondent to nvest gate nto the c rcumstances surround ng the mortgage of the sub-ect property bel es ts content on of good fa th. Dn a last note, 9e f nd that the real estate mortgages const tuted over the sub-ect property are unenforceable and not null and vo d, as ruled by the "%'. $t s best to re terate that the sa d mortgage 9as entered nto by Jul an on behalf of +erla 9 thout the latterJs author ty and conse=uently, unenforceable under Art cle 140</10 of the ' v l 'ode. 3nenforceable contracts are those 9h ch cannot be enforced by a proper act on n court, unless they are rat f ed, because e ther they are entered nto 9 thout or n e1cess of author ty or they do not comply 9 th the statute of frauds or both of the contract ng part es do not possess the re=u red legal capac ty. 2> An unenforceable contract may be rat f ed, e1pressly or mpl edly, by the person n 9hose behalf t has been e1ecuted, before t s revoFed by the other contract ng party.22 ( thout +erlaJs rat f cat on of the same, the real estate mortgages const tuted by Jul an over the sub-ect property cannot be enforced by any act on n court aga nst +erla andMor her successors n nterest. $n sum, 9e rule that the contracts of real estate mortgage const tuted over the sub-ect property covered by %'% No. "% K 1620> /10><<60 reg stered 9 th the "eg stry of Deeds of UueAon ' ty are unenforceable. 'onse=uently, the foreclosure proceed ngs and the auct on sale of the sub-ect property conducted n pursuance of these unenforceable contracts are null and vo d. %h s, ho9ever, s 9 thout pre-ud ce to the r ght of the respondent to proceed aga nst Jul an, n h s personal capac ty, for the amount of the loans. W5E$E:/$E, )N *)EW /: (5E :/$EG/)NG, the nstant pet t on s #"AN%ED. %he Dec s on dated 12 Dctober 2008 and ts "esolut on dated 18 7ebruary 200> rendered by the 'ourt of Appeals n 'A@#.". 'C No. 62><>, are hereby "ECE"&ED. %he Dec s on dated 2< &eptember 200< of the "eg onal %r al 'ourt of UueAon ' ty, Eranch 220, n ' v l 'ase No. U@55@<2148, s hereby $E)NS(A(E! and A::)$'E! 9 th mod f cat on that the real estate mortgages const tuted over %'% No. "% K 1620> /10><<60 are not null and vo d but 3NEN7D"'EAE!E. No costs. &D D"DE"ED.

')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce (E 'DN'3"? %/NS&E#/ 8NA$ES7SAN()AG/ Assoc ate Just ce 'ha rperson 'A. A#)%)A A&S($)A7'A$()NE6 AN(/N)/ E!&A$!/ 9. NA%5&$A Assoc ate Just ce Assoc ate Just ce A%%E&%A%$DN $ attest that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. %/NS&E#/ 8NA$ES7SAN()AG/ Assoc ate Just ce 'ha rperson, %h rd D v s on 'E"%$7$'A%$DN +ursuant to &ect on 1<, Art cle C$$$ of the 'onst tut on, and the D v s on 'ha rpersonJs Attestat on, t s hereby cert f ed that the conclus ons n the above Dec s on 9ere reached n consultat on before the case 9as ass gned to the 9r ter of the op n on of the 'ourtJs D v s on. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
1

+enned by Assoc ate Just ce Del lah C dallon@Magtol s 9 th Assoc ate Just ces Josef na #uevara@&alonga and 7ernanda !ampas@+eralta, concurr ng. "ollo, pp. 44@85.
2

$d. at >1@>4. $d. at 21@64. $d. at 85.

<

&usana Be ghts, Munt nlupa covered by %ransfer 'ert f cates of % tle Nos. %@ 106584 K >50 s=uare metersI and "%@10><<6 K 608 s=uare meters of the "eg stry of Deeds of +as g /no9 MaFat 0I
>

$d. at 10>@105. $d. at 2<

$d. at 24. $d. at 24@28. $d. at 5>@10<. $d. at 64. +aragraph 12 of Art cle 1626, ' v l 'ode of the +h l pp nes. #.". No. 18418>, <1 August 200>, 800 &'"A 82>. $d. at 848@84>.

10

11

12

1<

14

18

Angeles v. +h l pp ne Nat onal "a l9ays /+N"0, #.". No. 180126, <1 August 200>, 800 &'"A 444, 48<.
1>

EanF of the +h l pp ne $slands v. De 'oster, 45 +h l. 824, 865 /152>0 as c ted n +h l pp ne Nat onal EanF v. &ta. Mar a, 1<5 +h l. 261, 26> /15>50.
12

+h l pp ne Nat onal EanF v. &ta. Mar a, d. Col. $$, p. >0. "ollo, pp. 60@61. #.". No. 148254, 2> January 2008, 445 &'"A 264. #.". No. 182002, 25 July 2008, 4>8 &'"A <8>. $d. at <>6@<>5. 425 +h l. 228 /20020. $d. at 2<5. %he #eneral EanF ng !a9 of 2000, &ect on 2. Art cle 140<, ' v l 'ode of the +h l pp nes. Art cle 1<12, ' v l 'ode of the +h l pp nes.

16

15

20

21

22

2<

24

28

2>

22

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7341=1 'arc- 10, 1<32

(5E 9ANK /: (5E +5)#)++)NE )S#AN!S, pla nt ff@appellee, vs. GA9$)E#A AN!$EA !E %/S(E$ 8 $/>AS, E( A#., defendants. #A /$!EN !E !/')N)%/S or ++. +$E!)%A!/$ES !E #A +$/*)N%)A !E#

SAN()S)'/ $/SA$)/,defendants@appelleesI GA9$)E#A AN!$EA !E %/S(E$ 8 $/>AS, defendant@appellant. Antonio M. =pisso for appellant. Araneta and Haragoza for the #an' as appellee. $erfecto 2a#riel for the Dominican .orporation as appellee. &%A%EMEN% March 10, 1524, the pla nt ff f led a compla nt n 9h ch t 9as alleged that t 9as a domest c banF ng corporat on 9 th ts pr nc pal off ce and place of bus ness n the ' ty of Man laI that the defendant #abr ela Andrea de 'oster y "o1as 9as the 9 fe of the defendant Jean M. +o Aat, both of 9hom 9ere res dents of the ' ty of Man laI that the defendant J. M. +o Aat and 'o. 9as a duly reg stered partnersh p 9 th ts pr nc pal off ce and place of bus ness n the ' ty of Man laI that the defendant !a Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o 9as a rel g ous corporat on duly organ Aed and e1 st ng under the la9s of the +h l pp ne $slands 9 th ts pr nc pal off ce and place of bus ness n the ' ty of Man laI that on December 25, 1521, for value, the defendant #abr ela Andrea de 'oster y "o1as, hav ng the consent and perm ss on of her husband, and he act ng as her agent, sa d defendants made to the pla nt ff a certa n prom ssory note for +252,000, payable one year after date, 9 th nterest of 5 per cent per annum, payable monthly, n 9h ch, among other th ngs, t s prov ded that n the event of a su t or act on, the defendants should pay the further sum of +10,000, as attorney)s feesI that the note n =uest on 9as a -o nt and several noteI that to secure the payment thereof, the defendants Jean M. +o Aat and J. M. +o Aat and 'o. e1ecuted a chattel mortgage to the pla nt ff on the steamers Roger $oizat and 2a#rielle $oizat, 9 th the mach nery and mater als belong ng to the +o Aat Cegetable D l M lls and certa n merchand seI that at the same t me and for the same purpose, the defendant #abr ela Andrea de 'oster y "o1as, hav ng the consent and perm ss on of her husband, and he act ng as her agent, they acFno9ledged and del vered to th s pla nt ff a mortgage on certa n real property ly ng and be ng s tuated n the ' ty of Man la, 9h ch s spec f cally descr bed n the mortgageI that the real property 9as sub-ect to a pr or mortgage n favor of !a Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o, hence t s made a party defendantI that the note n =uest on s long past due and o9 ng. %he pla nt ff hav ng brought act on aga nst the defendants on the note n the 'ourt of 7 rst $nstance of the ' ty of Man la, c v l case No. 28216I that n such case the court rendered -udgment aga nst the defendants #abr ela Andrea de 'oster y "o1as, Jean M. +o Aat and J. M. +o Aat and 'o. -o ntly and severally for +252,000, 9 th nterest at the rate of 5 per cent per annum from the <1st of August, 152<, +10,000 as attorney)s fees, and +2,800 for and n account of nsurance upon the steamer 2a#rielle $oizat, 9 th nterest on that amount from 7ebruary 5, 1524, at the rate of 5 per cent per annum, and costsI that the sa d defendants have not pa d the -udgment or any part thereof, and that the full amount of the debt secured by the mortgaged on the property descr bed n the compla nt s no9 due and o9 ng. (herefore, pla nt ff prays for an order of the court to d rect the sher ff of the ' ty of Man la to

taFe mmed ate possess on of the property descr bed n the chattel mortgage and sell the same accord ng to the 'hattel Mortgage !a9I that the property descr bed n the real mortgage or so much thereof as may be re=u red to pay the amount due the pla nt ff be sold accord ng to la9I that out of such sales pla nt ff shall be pa d the amount due and o9 ng tI and that such defendants be ad-udged to pay any rema n ng def c ency. 'op es of the chattel and real mortgage are attached to, and made a part of, the compla nt and marFed, respect vely, E1h b ts A and E. Dn Apr l 24, 1524, the !a Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o appeared n the su t and f led the follo9 ng plea? %he defendant corporat on, !a Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o, for ans9er to the compla nt, sho9s? $. %hat the encumbrance above@ment oned, but not determ ned n paragraph C of the compla nt, cons st ng of a f rst mortgage n favor of the aforesa d rel g ous corporat on on the property descr bed n paragraph $C of the same compla nt s +128,000 9 th nterest of 10 per cent per annumI $$. %hat the mortgagors Jean M. +o Aat and #abr ela Andrea de 'oster y "o1as, have not pa d the pr nc pal or the nterest st pulated and agreed upon from the 1>th of December, 1521 up to the present dateI $$$. %he nterest due up to the <0th of Apr l of the present year 1524 amounts to a total sum of +22,528.<4. (herefore, t s prayed that the cred t above@ment oned be taFen nto account 9hen the second mortgage s foreclosed. May <, 1524, on mot on of the pla nt ff, for fa lure to appear or ans9er, the defendants #abr ela Andrea de 'oster y "o1as and Jean M. +o Aat and J.M. +o Aat N 'o. 9ere declared n default. ( thout g v ng any not ce of the defendants Jean M. +o Aat, J.M. +o Aat N 'o. and #abr ela Andrea de 'oster y "o1as, and after the ntroduct on of ev dence on the part of the pla nt ff and the defendant Dom n can 7athers, on June 24, 1524, the court rendered an op n on n substance and to the effect that the pla nt ff should have -udgment as prayed for n ts compla nt, and that the Dom n can 7athers should have -udgment for the amount of the r cla m, and that the property should be sold and the proceeds appl ed to sat sfy the respect ve -udgments. About August 2>, although her attorney, the defendant #abr ela Andrea de 'oster y "o1as f led a mot on n 9h ch she rec tes that she s the leg t mate 9 fe of the defendant Jean M. +o AatI that she had been absent from the +h l pp ne $slands and res d ng n the ' ty of +ar s from the year 1506 to Apr l <0, 1524, 9hen she returned to Man laI that at that t me of the f l ng of the compla nt and the ssuance of the summons, she 9as absent from the +h l pp ne $slandsI that the summons 9as del vered by the sher ff of the ' ty of Man la to her husband,

and that through h s mal c ous negl gence, default 9as taFen and -udgment entered for the respect ve amountsI that she never had any Fno9ledge of the actual facts unt l the latter part of July, 1524, 9hen, through the local ne9spapers, she learned that a default -udgment had been rendered aga nst her on July 26, 1524I that 9hen she f rst Fne9 of that fact, she 9as unable to obta n the rend t on of accounts, because her husband had left the +h l pp ne $slands t9o days prev ous and gone to BongFongI that she then 9ent to BongFong and learned that her husband had left there under a false name and had gone to the port of & ngapore from 9hence he 9ent to other places unFno9n to thus defendantI that she then returned to Man la, and that n August, 1524, she came nto possess on of documents sho9 ng the llegally of the notes and mortgage n =uest onI that she has a good and legal defense to the act on, 9h ch nvolves the val d ty of the order of the Dom n can 7athers n th s, that the r mortgage does not guarantee any loan made to th s defendantI that t s a secur ty only g ven for a cred t of a th rd personI that the mortgage 9as e1ecuted 9 thout the mar tal consent of the 9 feI and that he d d not have nay author ty to maFe her l able as surety on the debt of a th rd personI that as regards the notes to the pla nt ff? 7 rst, t does not represent any money pa d to the defendant by the banFI second, that t s e1clus vely the personal debt of the defendants Jean M. +o Aat and J.M. +o Aat N 'o., th rd, that t 9as e1ecuted by her husband, because the banF des red more secur ty for the payment of her husband)s debt to the banFI fourth, that t 9as e1ecuted by her husband n e1cess of the po9ers g ven to h m under h s po9er of attorneyI f fth, that t 9as e1ecuted as the result of collus on bet9een the banF and the defendant l able for the obl gat on of a th rd person. %hat as to the mortgage? 7 rst, t 9as e1ecuted to secure a vo d obl gat onI second, t does not guarantee any loan made to th s defendantI th rd, t 9as e1ecuted to secure a vo d l t gat onI second, t does not guarantee any loan made to th rd defendantI th rd, t 9as e1ecuted 9 thout the e1press mar tal consent 9h ch the la9 re=u resI fourth, t 9as e1ecuted through collus on. %hat f the -udgment s not set as de, the defendant 9 ll suffer rreparable n-uryI that through surpr se and negl gence, for 9h ch she 9as not respons ble, th s defendant 9as prevented from defend ng herself n th s act onI that th s s a case 9h ch comes under sect on 11< of the 'ode of ' v l +rocedure. &he prays that the -udgment annulled and set as de and the case be reopened, and that she be perm tted to f le an ans9er, and that the case be tr ed on ts mer ts, and that a f nal -udgment be rendered, absolv ng her from all l ab l ty. %he mot on 9as based upon, and supported by, the aff dav t of the defendant 9 fe, to 9h ch 9as attached a large number of e1h b ts all of 9h ch tended to support the mot on. After counter sho9 ngs by the banF and the Dom n can 7athers and the arguments of respect ve counsel, the mot on to set as de and vacate the -udgment 9as den ed. A mot on for a recons derat on 9as then made, and the mot on of the defendant to f le an ans9er and maFe a defense 9as aga n den ed. %he defendant #abr ela Andrea de 'oster y "o1as appeals, ass gn ng the follo9 ng errorsI

+A"% $ A& %D %BE J3"$&D$'%$DN $. %he lo9er court erred n hold ng that t had ac=u red -ur sd ct on on the defendant #abr ela Andrea de 'oster y "o1as, /10 %here hav ng been no serv ce of the summons on her n the manner re=u red by sect on <5> of the 'ode of ' v l +rocedure, she be ng absent from the +h l pp ne $slands at the t me of the f l ng of the compla nt and of the ssuance of the summons n th s case, and a res dent of +ar s, 7rance, 9here she had l ved permanently and cont nuously for f fteen years pr or thereof, and /20 %here hav ng been no se r ve by publ cat on n the manner re=u red by sect on <56 of the 'ode of ' v l +rocedure. $$. %he lo9er court erred n cons der ng that n a case &here the &ife is the only necessary party, serv ce of the summons on the husband, at a place 9h ch s not ,the usual place of res dence, of the 9 fe and 9here the 9 fe has never l ved or res ded, s suff c ent to g ve the court -ur sd ct on on the person and property of the 9 fe and to render -udgment by default aga nst her. $$$. %he court erred n adm tt ng and cons der ng ev dence, outs de of the sher ff)s return, of the fact that the husband of the defendant #abr ela Andrea de 'oster y "o1as 9as her attorney n fact 9 th po9er to appear for the defendant n court. $C. %he court erred n hold ng that the non@appearance of an agent of the defendant 9hen serv ce of the summons has been made on h m not as the agent of the defendant but n other capac ty, 9 ll ent tle the pla nt ff 9ho has m sstated the mater al -ur sd ct onal facts of the compla nt to a -udgment by default aga nst the pr nc pal. C. %he lo9er court erred n refus ng to vacate a -udgment by default aga nst the defendant #abr ela Andrea de 'oster y "o1as rendered on a defect ve summons, served n a manner not prov ded for by the la9, and n a case 9here the compla nt sho9s that pla nt ff has no r ght of act on. +A"% $$ A& %D %BE ME"$%& D7 %BE DE7EN&E $. %he lo9er court erred, 9 th abuse of d scret on, n hold ng that the negl gence, f any, of J.M. +o Aat n not appear ng on behalf of the defendant #abr ela Andrea de 'oster y "o1as, can be mputed to th s defendant, 9 thout redress, and to the advantage of the pla nt ff banF 9ho n collus on 9 th sa d J.M. +o Aat caused the latter to contract beyond the scope of h s po9ers as agent of th s defendant the obl gat on 9h ch s the sub-ect matter of th s case. $$. %he lo9er court erred n hold ng that the rel ef on the part of J.M. +o Aat that there 9as no defense aga nst the cla m of the pla nt ff on an obl gat on contracted by sa d J.M. +o Aat apparently as agent of the defendant #abr ela Andrea de 'oster y "o1as, but n truth beyond the scope of h s author ty, and

9 th Fno9ledge on the part of the pla nt ff banF that he 9as so act ng beyond h s po9ers, 9as such an error 9as can be mputed to th s defendant, and aga nst 9h ch she can obta n no redress. $$$. %he lo9er court erred n not hold ng that a pr nc pal s not l able for an obl gat on contracted by h s agent beyond h s po9er even 9hen both the cred tor and the agent bel eved that the latter 9as act ng 9 th n the scope of h s po9ers. $C. %he lo9er court erred n hold ng that because the agent of the defendant #abr ela Andrea de 'oster y "o1as had po9er to appear for her n court, h s non@ appearance could render th s defendant l able to a -udgment by default, 9hen the record sho9s that there 9as no serv ce of the summons n accordance 9 th any of the forms of serv ce prov ded by la9. C. %he lo9er court erred n hold ng that J.M. +o Aat 9as summoned as agent of h 9 fe, the defendant #abr ela Andrea de 'oster y "o1as, and 9as, n that capac ty, not f ed of all the dec s ons rendered n th s case, there be ng noth ng n the record to support the truth of such f nd ng. C$. %he lo9er court erred n hold ng that n contract ng the obl gat ons n favor of the pla nt ff EanF of the +h l pp ne $slands and of the defendant Drden de ++. +red cadores de la +rov nc a del &ant s mo "osar o, the agent of the defendant #abr ela Andrea de 'oster y "o1as acted 9 th n the scope of h s po9ers. C$$. %he lo9er court erred n not hold ng that the pla nt ff EanF of the +h l pp ne $slands and the defendant Drden de ++. +red cadores de la +rov nc a del &ant s mo "osar o had Fno9ledge of the fact that J.M. +o Aat n contract ng the respect ve obl gat ons n the r favor, pretend ng to act as agent of the defendant #abr ela Andrea de 'oster y "o1as, 9as act ng beyond the scope of h s po9ers as such agent. C$$$. %he lo9er court erred n maF ng the follo9 ng statement? ,$t s ho9ever alleged, by the pet t oner, that these loans 9ere obta ned to pay debts, of strangers. Even so, th s 9ould not render the loan obta ned by the attorney n fact null and vo d. %he c rcumstance that the agent used the money, borro9ed by h m 9 th n the scope of h s po9ers, to purposes for 9h ch he 9as not author Aed by h s pr nc pal, may ent tle the latter to demand from h m the correspond ng l ab l ty for the damages suffered, but t cannot pre-ud ce the cred tor and cause the null ty of the loan. Eut, even adm tt ng that the money borro9ed 9as used by +o Aat to pay debts 9h ch d d not belong to h s pr nc pal, even then, he 9ould have acted 9 th n h s po9ers, s nce h s pr nc pal, together 9 th the po9er to borro9 money, had g ven her agent po9er to loan any amount of money, and the payment of the debts of a stranger 9ould amount to a loan made by the agent on behalf of h s pr nc pal to the person or ent ty 9hose debt 9as pa d 9 th the money obta ned from the cred tors., $G. %he lo9er court erred n apply ng to th s case the pr nc ple nvolved n the case of +alanca vs. &m th, Eell and 'o., 5 +h l., 1<1.

G. %he court erred n supply ng from ts o9n mag nat on facts 9h ch d d not taFe place, of 9h ch there s no ev dence n the record, and 9h ch the part es never cla med to have e1 sted, and then dra9 the conclus on that f under those hypothet cal facts the transact on bet9een J.M. +o Aat and the EanF of the +h l pp ne $slands m ght have been legal, then the transact on as t actually tooF place 9as also legal. G$. %he lo9er court erred n hold ng that defendant has not alleged any of the grounds enumerated n sect on 11< of the 'ode of ' v l +rocedure. G$$. %he lo9er court erred n hold ng that th s defendant@appellant has no mer tor ous defense aga nst the Dom n can Drder and the EanF of the +h l pp ne $slands. G$$$. %he lo9er court erred n taF ng nto cons derat on E1h b t A appear ng at pages 18>@1>8 of the b ll of e1cept ons. G$C. %he lo9er court erred n deny ng the mot on f led by th s defendant@ appellant. GC. %he lo9er court has acted throughout these proceed ngs 9 th a clear abuse of d scret on.

J/5NS, J.: (e 9 ll dec de the case of the banF f rst %he pet t on of the appellant states under oath? $$. %hat th s defendant has been absent from the +h l pp ne $slands and res d ng n the ' ty of +ar s, 7rance, s nce the year 1506 /15050, up to Apr l <0, 1524, on 9h ch date she arr ved n th s ' ty of Man la, +h l pp ne $slands. $$$. %hat at the t me 9hen the compla nt n th s case 9as f led and the summons ssued, she 9as st ll absent from the +h l pp ne $slands and had no Fno9ledge e ther of the f l ng of th s act on or of the facts 9h ch led to t. 3nder oath the pla nt ff, through ts act ng pres dent, says? $@$$. %hat t adm ts the allegat ons conta ned n paragraphs $ and $$ of the aforesa d mot on. $$$. %hat t adm ts the f rst part of th s paragraph, to 9 t? %hat at the t me that the compla nt n the above ent tled case 9as f led, the defendant #abr ela Andrea de 'oster y "o1as 9as absent from the +h l pp ne $slands. +aragraph > of sect on <5> of the 'ode of ' v l +rocedure prov des? $n all other cases, to the defendant personally, or by leav ng a copy at h s usual place of res dence, n the hands of some person res dent there n of suff c ent

d scret on to rece ve the same. Eut serv ce upon a corporat on, as prov ded n subsect ons one and t9o, may be made by leav ng the copy at the off ce of the proper off cer thereof f such off cer cannot be found. %he return of the sher ff as to the serv ce s as follo9s? Dn th s date $ have served a copy of the 9 th n summons, and of the compla nt attached, upon Jean M. +o Aat, personally, and the cop es correspond ng to J.M. +o Aat and 'o., a company duly organ Aed under the la9s of the +h l pp ne $slands, by del ver ng sa d cop es to ts +res dent Mr. Jean M. +o Aat, personally, and the cop es correspond ng to #abr ela Andrea de 'oster y "o1as, by leav ng the same n the place of her usual res dence n the ' ty of Man la and n the hands of her husband, Mr. J.M. +o Aat, a person res d ng there n and of suff c ent d scret on to rece ve t, personally. Done at Man la, +.$., th s 1<th day of March, 1524. "$'A"DD &3MME"& Sheriff of Manila Ey #"E#D"$D #A"'$A $ hereby cert fy that on th s date $ have del vered a copy of th s summons and of the compla nt correspond ng to the ,!a Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o,, through 7ather +edro +ratt, +rocurador #eneral of sa d Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o, personally. Man la, +.$., Apr l 1, 1524. "$'A"DD &3MME"& Sheriff of Manila Ey &$MEDN D. &E"DE\A $t 9 ll be noted that the serv ce of summons and compla nt 9as made on th s defendant on the 1<th day of March, 1524, and that t s a st pulated fact that s nce the year 1506 and up to Apr l <0, 1524, she 9as ,res d ng n the ' ty of +ar s, 7rance., Even so, t s contended that the serv ce 9as val d by reason of the fact that t 9as made at the usual place of res dence and abode of the defendant husband, and that legally the res dence of the 9 fe s that of the husband. %hat content on s n d rect confl ct 9 th the adm ss on of the pla nt ff that s nce the year 1506 and up to Apr l <0, 1524, the 9 fe 9as res d ng n the ' ty of +ar s. %he res dence of the 9 fe n the ' ty of +ar s covered a per od of s 1teen years. $t may be that 9here n the ord nary course of bus ness the 9 fe s absent from the res dence of husband on a pleasure tr p or for bus ness reasons or to v s t fr ends or relat ves that, n the nature of such th ngs, the res dence of the 9 fe 9ould cont nue and rema n to be that of the husband. %hat s not th s case. 7or s 1teen years the res dence of the husband 9as n the ' ty of Man la, and the res dence of the 9 fe 9as n the ' ty of +ar s.

3pon the adm tted facts, 9e are clearly of the op n on that the res dence of the husband 9as not the usual place of res dence of the 9 fe. # v ng full force and effect to the legal presumpt on that the usual place of res dence of the 9 fe s that of her husband, that presumpt on s overcome by the adm tted fact that the 9 fe 9as ,res d ng n the ' ty of +ar s, 7rance, s nce the year 1506 up to Apr l <0, 1524., ( thout plac ng a l m tat on upon the length of t me suff c ent to overcome the legal presumpt on, suff ce t to say that s 1teen years s amply suff c ent. $t follo9s that the subst tuted serv ce attempted to be made under the prov s ons of sect on <5> of the 'ode of ' v l +rocedure s null and vo d, and that by such serv ce the court never ac=u red -ur sd ct on of the person of the defendant 9 fe. $n that event the pla nt ff contends that under h s po9er of attorney, the husband 9as the general agent of the 9 fe 9 th author ty to accept serv ce of process for her and n her name, and that by reason of the fact that the husband 9as duly served and that he fa led or neglected to appear or ans9er, h s act ons and conduct 9ere b nd ng on the defendant 9 fe. Ee that as t may, there s noth ng n the record tend ng to sho9 that the husband accepted serv ce of any process for or on account of h s 9 fe or as her agent, or that he 9as act ng for or represent ng her n h s fa lure and neglect to appear or ans9er. %he f rst appearance n court of the defendant 9 fe 9as made 9hen she f led the mot on of August 2>, 1524, n 9h ch she prays n legal effect that the -udgment aga nst her be annulled and set as de and the case reopened, and that she be perm tted to f le an ans9er and to have the case tr ed on ts mer ts. %hat 9as a general appearance as d st ngu shed from a spec al appearance. (hen she f led that mot on asF ng to be rel eved from the legal force and effect of the -udgment, she subm tted herself to the -ur sd ct on of the court. $f, n the f rst nstance, she had made a spec al appearance to =uest on only the -ur sd ct on of the court, and had not appeared for any other or d fferent purpose, another and a d fferent =uest on 9ould have been presented. Bav ng made a general appearance for one purpose, she s no9 n court for all purposes. $t s an elementary rule of la9 that as a cond t on precedent, to ent tle a party to rel ef from a -udgment ,taFen aga nst h m through h s m staFe, nadvertence, surpr se or e1cusable neglect,, that, among other th ngs, he must sho9 to the court that he has a mer tor ous defense. Eased upon that legal pr nc ple the banF contends that no such a sho9 ng has been made by the defendant 9 fe. %hat nvolves the legal construct on of the po9er of attorney 9h ch, t s adm tted, the 9 fe gave to her husband on August 28, 150<, 9h ch, among other th ngs mater al to th s op n on, rec tes that she gave to h m? &uch full and ample po9er as re=u red or necessary, to the end that he may perform on my behalf, and n my name and ava l ng h mself of all my r ghts and act ons, the follo9 ng acts? 8. !oan or borro9 any sums of money or fung ble th ngs at the rate of nterest and for the t me and under the cond t ons 9h ch he m ght deem conven ent,

collect ng or pay ng the cap tal or the nterest on the r respect ve due datesI e1ecut ng and s gn ng the correspond ng publ c or pr vate documents related thereto, and maF ng all these transact ons 9 th or 9 thout mortgages, pledges or personal guaranty. >. Enter nto any F nd of contracts 9hether c v l or mercant le, g v ng due form thereof e ther by pr vate documents or publ c deeds 9 th all clauses and re=u s tes prov ded by la9 for the r val d ty and effect, hav ng due regard to the nature of each contract. 2. Dra9, endorse, accept, ssue and negot ate any drafts, b lls of e1change, letters of cred t, letters of payment, b lls, vales, prom ssory notes and all F nds of documents representat ve of valueI pay ng or collect ng the value thereof on the r respect ve due dates, or protest ng them for non@acceptance or non@ payment, ut l A ng n th s case the r ghts granted by the 'ode of 'ommerce no9 n force, n order to collect the value thereof, nterests, e1penses and damages aga nst 9homsoever should be l able therefor. 6. $nst tute before the competent courts the correspond ng act on n -ust f cat on of the possess on 9h ch $ have or m ght have over any real estate, f l ng the necessary plead ngs, ev denc ng them by means of documentary or oral test mony adm ss ble by la9I accept ng not ces and summons, and nst tut ng all necessary proceed ngs for the term nat on thereof and the conse=uent nscr pt on of sa d act on n the correspond ng off ce of the "eg ster of Deeds, n the same manner n 9h ch $ m ght do f personally present and act ng. 5. "epresent me n all cases before the mun c pal courts, -ust ce of the peace courts, courts of f rst nstance, supreme court and all other courts of regular or any other spec al -ur sd ct on, appear ng before them n any c v l or cr m nal proceed ngs, nst tut ng and f l ng cr m nal and ord nary c v l act ons, cla ms n ntestate and testamentary proceed ngs, nsolvenc es and other act ons prov ded by la9I f l ng compla nts, ans9ers, countercla ms, cross compla nts, cr m nal compla nts and such other plead ngs as m ght be necessaryI f l ng demurrers, taF ng and offer ng -ud c al adm ss ons, documentary, e1pert, oral ev dence, and others prov ded by la9, ob-ect ng to and oppos ng 9hatever contrary act ons are taFen, offered and presentedI accept ng not ces, c tat ons and summons and acFno9ledg ng the r rece pt to the proper -ud c al off c als. 10. 7or to the end stated above and the nc dents related thereto, $ confer on h m ample and complete po9er, b nd ng myself n the most solemn manner as re=u red by la9 to recogn Ae as e1 st ng and val d all that he m ght do by v rtue hereof. $t s adm tted that on December 25, 1521, the defendant husband s gned the name of the defendant 9 fe to the prom ssory note n =uest on, and that to secure the payment of the note, upon the same date and as attorney n fact for h s 9 fe, the husband s gned the real mortgage n =uest on n favor of the banF, and that the mortgage 9as duly e1ecuted.

Eased upon such adm ss ons, the banF v gorously contends that the defendant 9 fe has not sho9n a mer tor ous defense. $n fact that t appears from her o9n sho9 ng that she does not have a legal defense. $t must be adm tted that upon the face of the nstruments, that fact appears to be true. %o meet that content on, the defendant 9 fe po nts out, f rst, that the note n =uest on s a -o nt and several note, and, second, that t appears from the ev dence, 9h ch she subm tted, that she s noth ng more than an accommodat on maFer of the note. &he also subm ts ev dence 9h ch tends to sho9? 7 rst. %hat pr or to July 28, 1521, Jean M. +o Aat 9as personally ndebted to the EanF of the +h l pp ne $slands n the sum of +250,080.02 /E1h b t B, page >>, b ll of e1cept ons0I &econd. %hat on July 28, 1521, the personal ndebtedness of Jean M. +o Aat 9as converted nto s 1 prom ssory notes aggregat ng the sum of +<06,486.86 of 9h ch +1>,160 9ere pa d, leav ng an outstand ng balance of +252,226.86 /E1h b ts D, E, 7, #, B and $, pages 28@60, b ll of e1cept ons0I %h rd. %hat on December 25, 1521, the above prom ssory notes 9ere cancelled and subst tuted by a -o nt and several note s gned by Jean M. +o Aat n h s personal capac ty and as agent of #abr ela Andrea de 'oster y "o1as and as member of the f rm J.M. +o Aat and 'o. $n other 9ords, that under the po9er of attorney, the husband had no author ty for and on behalf of the 9 fe to e1ecute a -o nt and several note or to maFe her l able as an accommodat on maFer. %hat the debt n =uest on 9as a pree1 st ng debt of her husband and of the f rm of J.M. +o Aat and 'o., to 9h ch she 9as not a party, and for 9h ch she 9as under no legal obl gat on to pay. %hat she never borro9ed any money from the banF, and that prev ous to the s gn ng of the note, she never had any deal ngs 9 th the banF and 9as not ndebted to the banF n any amount. %hat the old, or g nal debts of her husband and J.M. +o Aat and 'o. to the banF, to 9h ch she 9as not a party, 9ere all taFen up and merged n the ne9 note of December 25, 1521, n =uest on, and that at the t me the note 9as s gned, she d d not borro9 any money, and that no money 9as loaned by the banF to the maFers of the note. Assum ng such facts to be true, t 9ould be a val d defense by the defendant 9 fe to the payment of the note. %here s no cla m or pretense that the banF 9as m sled or dece ved. $f t had made an actual loan of +252,000 at the t me the note 9as e1ecuted, another and a d fferent =uest on 9ould be presented. $n the ord nary course of ts bus ness, the banF Fne9 that not a dollar 9as loaned or borro9ed on the strength of the note. $t 9as g ven at the urgent and press ng demand of the banF to obta n secur ty for the s 1 d fferent notes 9h ch t held aga nst J.M. +o Aat and 'o. and Jean M. +o Aat of date July 28, 1521, aggregat ng about +252,000, and at the t me t 9as g ven, those notes 9ere taFen up and merged n the note of December 25, 1521, no9 n =uest on. 3pon the record before us, there s no ev dence that the defendant 9 fe 9as a party to the notes of July 28, 1521, or that she 9as under any legal l ab l ty to pay them.

%he note and mortgage n =uest on sho9 upon the r face that at the t me they 9ere e1ecuted, the husband 9as attorney n fact for the defendant 9 fe, and the banF Fne9 or should have Fno9n the nature and e1tent of h s author ty and the l m tat ons upon h s po9er. Hou 9 ll search the terms and prov s ons of the po9er of attorney n va n to f nd any author ty for the husband to maFe h s 9 fe l able as a surety for the payment of the pree1 st ng debt of a th rd person. +aragraph 8 of the po9er of attorney above =uoted author Aes the husband for n the name of h s 9 fe to ,loan or borro9 any sums of money or fung ble th ngs, etc., %h s should be construed to mean that the husband had po9er only to loan h s 9 fe)s money and to borro9 money for or on account of h s 9 fe as her agent and attorney n fact. %hat does not carry 9 th t or mply that he had the legal r ght to maFe h s 9 fe l able as a surety for the pree1 st ng debt of a th rd person. +aragraph > author Aes h m to ,enter nto any F nd of contracts 9hether c v l or mercant le, g v ng due form thereof e ther by pr vate documents or publ c deeds, etc., +aragraph 2 author Aes h m to ,dra9, endorse, accept, ssue and negot ate any drafts, b lls of e1change, letters of cred t, letters of payment, b lls, vales, prom ssory notes, etc., %he forego ng are the clauses n the po9er of attorney upon 9h ch the banF rel es for the author ty of the husband to e1ecute prom ssory notes for and on behalf of h s 9 fe and as her agent. $t 9 ll be noted that there s no prov s on n e ther of them 9h ch author Aes or empo9ers h m to s gn anyth ng or to do anyth ng 9h ch 9ould maFe h s 9 fe l able as a surety for a pree1 st ng debt. $t s fundamental rule of construct on that 9here n an nstrument po9ers and dut es are spec f ed and def ned, that all of such po9ers and dut es are l m ted and conf ned to those 9h ch are spec f ed and def ned, and that all other po9ers and dut es are e1cluded. +aragraph 6 of the po9er of attorney author Aes the husband to nst tute, prosecute and defend all act ons or proceed ngs n a court of -ust ce, nclud ng ,accept ng not ces and summons., %here s noth ng n the record tend ng to sho9 that the husband accepted the serv ce of any not ce or summons n the act on on behalf of the banF, and even so, f he had, t 9ould not be a defense to open up and vacate a -udgment under sect on 11< of the 'ode of ' v l +rocedure. %he same th ng s true as to paragraph 5 of the po9er of attorney. %he fact that an agent fa led and neglected to perform h s dut es and to represent the nterests of h s pr nc pal s not a bar to the pr nc pal obta n ng legal

rel ef for the negl gence of her agent, prov ded that the appl cat on for such a rel ef s duly and properly made under the prov s ons of sect on 11<. $t s very apparent from the face of the nstrument that the 9hole purpose and ntent of the po9er of attorney 9as to empo9er and author Ae the husband to looF after and protect the nterests of the 9 fe and for her and n her name to transact any and all of her bus ness. Eut no9here does t prov de or author Ae h m to maFe her l able as a surety for the payment of the pree1 st ng debt of a th rd person. Bence, t follo9s that the husband 9as not author Aed or empo9ered to s gn the note n =uest on for and on behalf of the 9 fe as her act and deed, and that as to her the note s vo d for 9ant of po9er of her husband to e1ecute t. %he same th ng s true as to the real mortgage to the banF. $t 9as g ven to secure the note n =uest on and 9as not g ven for any other purpose. %he real property descr bed n the mortgage to the banF 9as and s the property of the 9 fe. %he note be ng vo d as to her, t follo9s that as to her the real mortgage to the banF s also vo d for 9ant of po9er to e1ecute t. $t appears that before the mot on n =uest on 9as f led, there 9ere certa n negot at ons bet9een the banF and the attorney for the 9 fe 9 th a v e9 of a comprom se or settlement of the banF)s cla m aga nst her, and that dur ng such negot at ons, there 9as some ev dence or adm ss ons on the part of her attorney that she 9as l able for the banF)s cla m. $t no9 contends that as a result of such negot at ons and adm ss ons, the 9 fe s estopped to deny her l ab l ty. but t also appears that dur ng such negot at ons, both the 9 fe and her attorney d d not have any Fno9ledge of the actual facts, and that she 9as then gnorant of the defense upon 9h ch she no9 rel es. Ee that as t may, such negot at ons 9ere more or less n the nature of a comprom se 9h ch 9as re-ected by the banF, and t appears that n any event both the 9 fe and her attorney d d not have any Fno9ledge of the facts upon 9h ch they no9 rely as a defense. %here s no cla m or pretense that the debt n =uest on 9as contracted for or on account of the ,usual da ly e1penses of the fam ly, ncurred by the 9 fe or by her order, 9 th the tac t consent of the husband,, as prov ded for n art cle 1<>2 of the ' v l 'ode. Ne ther s there any ev dence tend ng to sho9 that the 9 fe 9as legally l able for any port on of the or g nal debt ev dence by the note n =uest on. %h s dec s on as to the banF on th s mot on s based on the assumpt on that the facts are true as set forth and alleged n the pet t on to set as de and vacate the -udgment as to the 9 fe, but 9e are not maF ng any f nd ng as to the actual truth of such facts. %hat rema ns for the defendant 9 fe to prove such alleged facts 9hen the case s tr ed on ts mer ts. $t follo9s that the op n on of the lo9er court n refus ng to set as de and vacate the -udgment of the pla nt ff banF aga nst the defendant 9 fe s reversed, and that -udgment s vacated and set as de, and as to the banF the case s remanded

to the lo9er court, 9 th leave for the 9 fe to f le an ans9er to pla nt ff)s cause of act on, and to have the case tr ed on ts mer ts and for any further proceed ngs not ncons stent 9 th th s op n on. As to the -udgment n favor of the Dom n can 7athers, t appears that the r plea above =uoted n the statement of facts 9as f led on Apr l 24, 1524. $n that plea they say that they have a f rst mortgage on the property descr bed n paragraph $C of the compla nt for +128,000 9 th nterest at 10 per cent per annum. %hat the mortgagors Jean M. +o Aat and #abr ela Andrea de 'oster y "o1as have not pa d the pr nc pal or the st pulated nterest from December 1>, 1521, to date, 9h ch up to the <0th day of Apr l, 1524, amounts to +22,528.<4. (herefore, t s prayed that the cred t above@ment oned be taFen nto account 9hen the second mortgage s foreclosed. No other plea of any F nd, nature or descr pt on 9as f led by t. %he record sho9s that a copy of th s alleged plea 9as served upon the attorneys for the pla nt ff banF. %here s noth ng n the record 9h ch sho9s or tends to sho9 that a copy of t 9as ever served on e ther one of the defendants. Ne ther s there any ev dence that e ther of the defendants ever appeared n the or g nal act on. $n fact, -udgment 9as rendered aga nst them by default. 3nder such a state of facts, the -udgment n favor of the Dom n can 7athers cannot be susta ned. $n the f rst place, the plea above =uoted f led on Apr l 24, 1524, 9ould not be suff c ent to susta n a -udgment. $t does not even asF for a -udgment of the foreclosure of ts mortgage. $n the second place, no copy of the plea 9as ever served upon e ther of the defendants, 9ho 9ere the real part es n nterest, and aga nst 9hom a -udgment 9as rendered for the full amount of the note and the foreclosure of the mortgage. &uch a proceed ng cannot be susta ned on any legal pr nc ple. 3nless 9a ved, a defendant has a legal r ght to serv ce of process, to h s day n court and to be heard n h s defense. 7rom 9hat has been sa d, t follo9s that, f the transact on bet9een the Dom n can 7athers and Jean M. +o Aat as attorney n fact for h s 9 fe 9as an or g nal one and the +128,000 9as actually loaned at the t me the note and mortgage 9ere e1ecuted and the money 9as n good fa th del vered to the husband as the agent and attorney n fact of the 9 fe, t 9ould then be a val d e1erc se of the po9er g ven to the husband, regardless of the =uest on as to 9hat he may have done 9 th the money. +aragraph 8 of the po9er of attorney spec f cally author Aes h m to borro9 money for and on account of h s 9 fe and her name, ,and maF ng all these transact ons 9 th or 9 thout mortgages, pledges or personal guaranty., $t follo9s that the -udgment of the lo9er court n favor of !a Drden de Dom n cos or ++. +red cadores de la +rov nc a del &ant s mo "osar o s reversed, 9 thout pre-ud ce to ts r ght to e ther f le an or g nal su t to foreclose ts mortgage or to f le a good and suff c ent plea as ntervenor n the nstant su t, sett ng forth the

facts upon 9h ch t rel es for a -udgment on ts note and the foreclosure of ts mortgage, cop es of 9h ch should be served upon the defendants. Ne ther party to recover costs. &o ordered. =strand and Romualdez, 99., concur. 9ohnson and Malcolm, 99., concur in the result.

Separate /pinions *)##A'/$, J./ concurr ng and d ssent ng? $ concur n the result reached by the court n order ng the remand ng of the case for further proceed ngs, for n my op n on, the defendant@appellant, aga nst 9hom a -udgment by default 9as rendered, has the r ght, under sect on 11< of the 'ode of ' v l +rocedure, to have sa d -udgment set as de and to be g ven an opportun ty to appear, hav ng alleged facts 9h ch, f proven, 9ould const tute a good defense, but $ d ssent from the op n on of the ma-or ty n so far as t attempts to dec de certa n features of the case ra sed by the defendant@ appellant, 9 thout 9a t ng for the outcome of the ne9 tr al 9here n the other part es must naturally have the same opportun ty to present the r defenses aga nst the facts alleged by the appellant. $n my op n on, the mer ts of the =uest on should not no9 be d scussed 9 thout g v ng the tr al court an opportun ty to pass upon the allegat ons and ev dence of the part es l t gant. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #73;102 Au"ust 3<, 1<0<

+5)#)++)NE NA()/NA# 9ANK, pla nt ff@appellee, vs. 'A>)'/ S(A. 'A$)A, E( A#., defendant, *A#E$)ANA, E'E(E$)A, (E/:)#/, E&)N()N, $/SA$)/ and #E/N)#A, all surnamed S(A. 'A$)A, defendants@appellants. 7omas !esa and 9ose !. 2alang for plaintiff<appellee. 2.$. 3uguid, 9r. for defendants<appellants. (EE5ANKEE, J.: $n th s appeal cert f ed to th s 'ourt by the 'ourt of Appeals as nvolv ng purely legal ssues, 9e hold that a spec al po9er of attorney to mortgage real estate s l m ted to such author ty to mortgage and does not b nd the grantor personally to other obl gat ons contracted by the grantee, n the absence of any

rat f cat on or other s m lar act that 9ould estop the grantor from =uest on ng or d so9n ng such other obl gat ons contracted by the grantee. +la nt ff banF f led th s act on on 7ebruary 10, 15>1 aga nst defendant Ma1 mo &ta. Mar a and h s s 1 brothers and s sters, defendants@appellants, Caler ana, Emeter a, %eof lo, Uu nt n, "osar o and !eon la, all surnamed &ta. Mar a, and the Assoc ated $nsurance N &urety 'o., $nc. as surety, for the collect on of certa n amounts represent ng unpa d balances on t9o agr cultural sugar crop loans due allegedly from defendants. 1 %he sa d sugar crop loans 9ere obta ned by defendant Ma1 mo &ta. Mar a from pla nt ff banF under a spec al po9er of attorney, e1ecuted n h s favor by h s s 1 brothers and s sters, defendants@appellants here n, to mortgage a 1>@odd hectare parcel of land, -o ntly o9ned by all of them, the pert nent port on of 9h ch reads as follo9s? %hat 9e, CA!E"$ANA, EME%E"$A, %ED7$!D, U3$N%$N, "D&A"$D and !EDN$!A all surnamed &%A. MA"$A, sole he rs of our deceased parents 'AND$DD &%A. MA"$A and 7"AN'$&'A DE !D& "EHE&, all of legal age, 7 l p nos, and res dents of D nalup han, Eataan, do hereby name, const tute and appo nt Dr. MAG$MD &%A. MA"$A, of legal age, marr ed, and res d ng at D nalup han, Eataan to be our true and la9ful attorney of and n our place, name and stead to mortgage, or convey as security to any #an', company or to any natural or "uridical person, our undivided shares over a certain parcel of land together the improvements thereon 9h ch parcel of land s more part cularly descr bed as follo9s, to 9 t? ,& tuated n the Earr o of + nulot, Mun c pal ty of D nalup han, Eataan, conta n ng an area of 1>.2245 hectares and bounded as follo9s to 9 t? North by property of Ale-andro Een toI on the Northeast, by publ c land and property of %omas %ulopI on the southeast, by property of "am ndo Agust nI on the south9est, by propert es of Jose C. "eyes and Em l o "eyesI and on the north9est, by e1cluded port on cla med by Em l o "eyes., of 9h ch parcel of land aforement oned 9e are together 9 th our sa d attorney 9ho s our brother, the o9ners n e=ual und v ded shares as ev denced by %ransfer 'ert f cate of % tle No. %@2268 of the "eg stry of Deeds of Eataan dated 7eb. 2>th 1581. /E1h. E02 $n add t on, Caler ana &ta. Mar a alone also e1ecuted n favor of her brother, Ma1 mo, a spec al po9er of attorney to #orro& money and mortgage any real estate o9ned by her, grant ng h m the follo9 ng author ty? 7or me and n my name to #orro& money and maFe, e1ecute, s gn and del ver mortgages of real estate no9 o9ned by me stand ng n my name and to ma'e, e ecute, sign and deliver any and all promissory notes necessary in the premises. /E1h. E@$0< Ey v rtue of the t9o above po9ers, Ma1 mo &ta. Mar a appl ed for t9o separate crop loans, for the 1582@158< and 158<@1584 crop years, 9 th pla nt ff banF, one n the amount of +18,000.00, of 9h ch only the sum of +1<,21>.11 9as

actually e1tended by pla nt ff, and the other n the amount of +2<,000.00, of 9h ch only the sum of +12,422.82 9as actually e1tended by pla nt ff. As secur ty for the t9o loans, Ma1 mo &ta. Mar a e1ecuted in his o&n name n favor of pla nt ff banF t9o chattel mortgages on the stand ng crops, guaranteed by surety bonds for the full author Aed amounts of the loans e1ecuted by the Assoc ated $nsurance N &urety 'o., $nc. as surety 9 th Ma1 mo &ta. Mar a as pr nc pal. %he records of the crop loan appl cat on further d sclose that among the secur t es g ven by Ma1 mo for the loans 9ere a ,2nd mortgage on 28.<02< Bas. of sugarland, nclud ng sugar =uota r ghts there n, nclud ng, the parcel of land -o ntly o9ned by Ma1 mo and h s s 1 brothers and s sters here n for the 1582@ 158< crop loan, 9 th the notat on that the banF already held a f rst mortgage on the same propert es for the 1581@1582 crop loan of Ma1 mo, 4 and a <rd mortgage on the same propert es for the 158<@1584 crop loan. 8 %he tr al court rendered -udgment n favor of pla nt ff and aga nst defendants thus?+N&phO+.>Pt (BE"E7D"E prem ses cons dered, -udgment s hereby rendered condemn ng the defendant Ma1 mo ". &ta. Mar a and h s co@defendants Caler ana, Uu nt n, "osar o, Emeter a, %eof lo, and !eon la all surnamed &ta. Mar a and the Assoc ated $nsurance and &urety 'ompany, $nc., -o ntly and severally, to pay the pla nt ff, the +h l pp ne Nat onal EanF, Del 'armen Eranch, as follo9s? 1. Dn the f rst cause of act on, the sum of +6,800.22 9 th a da ly nterest of +0.6< on +>,100.00 at >R per annum beg nn ng August 21, 15>< unt l fully pa dI 2. Dn the second cause of act on, the sum of +14,255.25 9 th a da ly nterest of +1.8< on +5,<4>.44 at >R per annum unt l fully pa dI and <. Dn both causes of act on the further sum e=u valent to 10R of the total amount due as attorney)s fee as of the date of the e1ecut on of th s dec s on, and the costs.> Defendant Ma1 mo &ta. Mar a and h s surety, defendant Assoc ated $nsurance N &urety 'o., $nc. 9ho d d not res st the act on, d d not appeal the -udgment. %h s appeals been taFen by h s s 1 brothers and s sters, defendants@ appellants 9ho re terate n the r br ef the r ma n content on n the r ans9er to the compla nt that under th s spec al po9er of attorney, E1h. E, they had not g ven the r brother, Ma1 mo, the author ty to borro9 money but only to mortgage the real estate -o ntly o9ned by themI and that f they are l able at all, the r l ab l ty should not go beyond the value of the property 9h ch they had author Aed to be g ven as secur ty for the loans obta ned by Ma1 mo. $n the r ans9er, defendants@ appellants had further contended that they d d not benef t 9hatsoever from the loans, and that the pla nt ff banF)s only recourse aga nst them s to foreclose on the property 9h ch they had author Aed Ma1 mo to mortgage. (e f nd the appeal of defendants@appellants, e1cept for defendant Caler ana &ta. Mar a 9ho had e1ecuted another spec al po9er of attorney, E1h.

E@1, e1pressly author A ng Ma1 mo to borro9 money on her behalf, to be 9ell taFen. 1. +la nt ff banF has not made out a cause of act on aga nst defendants@ appellants /e1cept Caler ana0, so as to hold them l able for the unpa d balances of the loans obta ned by Ma1 mo under the chattel mortgages e1ecuted by h m n h s o9n name alone. $n the early case of !an' of $.:. vs. De .oster, th s 'ourt, n hold ng that the broad po9er of attorney g ven by the 9 fe to the husband to looF after and protect the 9 fe)s nterests and to transact her bus ness d d not author Ae h m to maFe her l able as a surety for the payment of the pre@e1 st ng debt of a th rd person, c ted the fundamental construct on rule that ,9here n an nstrument po9ers and dut es are spec f ed and def ned, that all of such po9ers and dut es are l m ted andconf ned to those 9h ch are spec f ed and def ned, and all other po9ers and dut es are e1cluded., 2 %h s s but n accord 9 th the d s ncl nat on of courts to enlarge an author ty granted beyond the po9ers e1pressly g ven and those 9h ch nc dentally flo9 or der ve therefrom as be ng usual or reasonably necessary and proper for the performance of such e1press po9ers. Even before the f l ng of the present act on, th s 'ourt n the s m lar case of De 4illa vs. 8a#ricante 6 had already ruled that 9here the po9er of attorney g ven to the husband by the 9 fe 9as l m ted to a grant of author ty to mortgage a parcel of land t tled n the 9 fe)s name, the 9 fe may not be held l able for the payment of the mortgage debt contracted by the husband, as the author ty to mortgage does not carry 9 th t the author ty to contract obl gat on. %h s 'ourt thus held n the sa d case? Appellant cla ms that the tr al court erred n hold ng that only 'esar o A. 7abr cante s l able to pay the mortgage debt and not h s 9 fe 9ho s e1empt from l ab l ty. %he tr al court sa d? ,=nly the defendant .esario A. 8a#ricante is lia#le for the payment of this amount #ecause it does not appear that the other defendant Maria 2. de 8a#ricante had authorized .esario A. 8a#ricante to contract the de#t also in her name. %he po9er of attorney 9as not presented and t s to be presumed that the po9er /of attorney0 9as l m ted to a grant of author ty to 'esar o A. 7abr cante to mortgage the parcel of land covered by %ransfer 'ert f cate of % tle n the name of Mar a #. de 7abr cante. (e 9ent over the contents of the deed of mortgage e1ecuted by 'esar o 7abr cante n favor of Appellant on Apr l 16, 1544, and there s really noth ng there n from 9h ch 9e may nfer that 'esar o 9as author Aed by h s 9 fe to construct the obl gat on n her name. %he deed sho9s that the author ty 9as l m ted to the e1ecut on of the mortgage nsofar as the property of the 9 fe s concerned. %here s a d fference bet9een author ty to mortgage and author ty to contract obl gat on. & nce the po9er of attorney 9as not presented as ev dence, the tr al court 9as correct n presum ng that the po9er 9as merely l m ted to a grant of author ty to mortgage unless the contrary s sho9n. 5 2. %he author ty granted by defendants@appellants /e1cept Caler ana0 unto the r brother, Ma1 mo, 9as merely to mortgage the property -o ntly o9ned by them. %hey d d not grant Ma1 mo any author ty to contract for any loans n the r names

and behalf. Ma1 mo alone, 9 th Caler ana 9ho author Aed h m to borro9 money, must ans9er for sa d loans and the other defendants@appellants) only l ab l ty s that the real estate author Aed by them to be mortgaged 9ould be sub-ect to foreclosure and sale to respond for the obl gat ons contracted by Ma1 mo. Eut they cannot be held personally l able for the payment of such obl gat ons, as erroneously held by the tr al court. <. %he fact that Ma1 mo presented to the pla nt ff banF Caler ana)s add t onal spec al po9er of attorney e1pressly author A ng h m to borro9 money, E1h. E@1, as de from the author ty to mortgage e1ecuted by Caler ana together 9 th the other defendants@appellants also n Ma1 mo)s favor, lends support to our v e9 that the banF 9as not sat sf ed 9 th the author ty to mortgage alone. 7or other9 se, such author ty to borro9 9ould have been deemed unnecessary and a surplusage. And hav ng fa led to re=u re that Ma1 mo subm t a s m lar author ty to borro9, from the other defendants@appellants, pla nt ff, 9h ch apparently 9as sat sf ed 9 th the surety bond for repayment put up by Ma1 mo, cannot no9 seeF to hold sa d defendants@appellants s m larly l able for the unpa d loans. +la nt ff)s argument that ,a mortgage s s mply an accessory contract, and that to effect the mortgage, a loan has to be secured, 10 falls, far short of the marF. Ma1 mo had ndeed, secured the loan on h s o9n account and the defendants@appellants had author Aed h m to mortgage the r respect ve und v ded shares of the real property -o ntly o9ned by them as secur ty for the loan. Eut that 9as the e1tent of the r author ty land conse=uent l ab l ty, to have the real property ans9er for the loan n case of non@payment. $t s not unusual n fam ly and bus ness c rcles that one 9ould allo9 h s property or an und v ded share n real estate to be mortgaged by another as secur ty, e ther as an accommodat on or for valuable cons derat on, but the grant of such author ty does not e1tend to assum ng personal l ab l ty, much less sol dary l ab l ty, for any loan secured by the grantee n the absence of e1press author ty so g ven by the grantor. 4. %he outcome m ght be d fferent f there had been an e1press rat f cat on of the loans by defendants@appellants or f t had been sho9n that they had been benef ted by the crop loans so as to put them n estoppel. Eut the burden of establ sh ng such rat f cat on or estoppel falls s=uarely upon pla nt ff banF. $t has not only fa led to d scharge th s burden, but the record stands und sputed that defendant@appellant Uu nt n &ta. Mar a test f ed that he and h s co@defendants e1ecuted the author ty to mortgage ,to accommodate /my0 brother Dr. Ma1 mo &ta. Mar a ... and because he s my brother, $ s gned t to accommodate h m as secur ty for 9hatever he may apply as loan. Dnly for that land, 9e gave h m as, secur ty, and that ,9e brothers d d not rece ve any centavo as benef t., 11 %he record further sho9s pla nt ff banF tself adm tted dur ng the tr al that defendants@appellants ,d d not prof t from the loan, and that they ,d d not rece ve any money /the loan proceeds0 from /Ma1 mo0., 12 No estoppel, therefore, can be cla med by pla nt ff as aga nst defendants@appellants. 8. No9, as to the e1tent of defendant Caler ana &ta. Mar a)s l ab l ty to pla nt ff. As already stated above, Caler ana stands l able not merely on the mortgage of her share n the property, but also for the loans 9h ch Ma1 mo had obta ned from

pla nt ff banF, s nce she had e1pressly granted Ma1 mo the author ty to ncur such loans. /E1h. E@1.0 Although the =uest on has not been ra sed n appellants) br ef, 9e hold that Caler ana)s l ab l ty for the loans secured by Ma1 mo s not "oint and several or solidary as ad-udged by the tr al court, but only "oint, pursuant to the prov s ons of Art cle 1202 of the ' v l 'ode that ,the concurrence ... of t9o or more debtors n one and the same obl gat on does not mply that ... each one of the /debtors0 s bound to render ent re compl ance 9 th the prestat on. %here s a sol dary l ab l ty only 9hen the obl gat on e1pressly so states, or 9hen the la9 or the nature of the obl gat on re=u res sol dar ty., $t should be noted that n the add t onal spec al po9er of attorney, E1h. E@1, e1ecuted by Caler ana, she d d not grant Ma1 mo the author ty to b nd her sol dar ty 9 th h m on any loans he m ght secure thereunder. >. 7 nally, as to the 10R a9ard of attorney)s fees, th s 'ourt bel eves that cons der ng the resources of pla nt ff banF and the fact that the pr nc pal debtor, Ma1 mo &ta. Mar a, had not contested the su t, an a9ard of f ve /8R0 per cent of the balance due on the pr nc pal, e1clus ve of nterests, .e., a balance of +>,100.00 on the f rst cause of act on and a balance of +5,<4>.44 on the second cause of act on, per the banF)s statements of August 20, 15><, /E1hs. U@1 and EE@1, respect vely0 should be suff c ent. (BE"E7D"E, the -udgment of the tr al court aga nst defendants@appellants Emeter a, %eof lo, Uu nt n, "osar o and !eon la, all surnamed &ta. Mar a s hereby reversed and set as de, 9 th costs n both nstances aga nst pla nt ff. %he -udgment aga nst defendant@appellant Caler ana &ta. Mar a s mod f ed n that her l ab l ty s held to be -o nt and not sol dary, and the a9ard of attorney)s fees s reduced as set forth n the preced ng paragraph, 9 thout costs n th s nstance. .oncepcion, ..9., Dizon, Ma'alintal, Haldivar, Sanchez, .astro, 8ernando, .apistrano and !arredo, 99., concur. +N&phO+.>Pt Reyes, 9.!.%., 9., is on official leave. :ootnotes
1

%he or g nal compla nt ncluded apparently another s ster by the name of Elena, "ec. on App., p. 2, but th s s the only ment on of Elena n the record. &he appears not to have been summoned and no ans9er 9as f led n her behalf. No -udgment 9as rendered aga nst ElenaI she d d not e1ecute the po9er of attorney n =uest on, and for all purposes, she s not a party hereto.
2

"ec. on App., 14@18, emphas s suppl ed. "ec. on App., pp. 15@20, emphas s suppl ed. E1h. A. E1h. ". "ec. on Appeal, pp. 18>@182. 45 +h l. 824 /152>0I 42 +h l. 854, >1< /15280.

<

>

108 +h l. >22, /Apr l <0, 15850. :d., at >2<@>24, emphas s suppl ed. Appellee)s Er ef, p. 18. %.&.N., August 12, 15><, pp. 40@41. %.&.N., August 2<, 15><, p. 88.

10

11

12

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #74==10 NoAem er 4, 1<44

)NS&#A$ !$&G %/., )N%., pla nt ff@appellee, vs. (5E +5)#)++)NE NA()/NA# 9ANK, E( A#., defendants. (5E +5)#)++)NE NA()/NA# 9ANK, appellant. .amus and Delgado for appellant. 8ranco and Reinoso for appellee.

'A#%/#', J.: %h s s an appeal taFen by +h l pp ne Nat onal EanF from a -udgment of the 'ourt of 7 rst $nstance of Man la re=u r ng banF to pay to the $nsular Drug 'o., $nc., the sum of +16,268.52 9 th legal nterest and costs. %he record cons sts of the test mony of Alfred Con Arend, +res dent and Manager of the $nsular Drug 'o., $nc., and of e1h b ts obta ned from the +h l pp ne Nat onal EanF sho9 ng transact ons of 3.E. 7oerster 9 th the banF. %he +h l pp ne Nat onal EanF 9as content to subm t the case 9 thout present ng ev dence n ts behalf. %he meagre record and the statement of facts agreed upon by the attorneys for the contend ng part es d sclose the follo9 ng facts? %he $nsular Drug 'o., $nc., s a +h l pp ne corporat on 9 th off ces n the ' ty of Man la. 3.E. 7oerster 9as formerly a salesman of drug company for the $slands of +anay and Negros. 7oerster also acted as a collector for the company. Be 9as nstructed to taFe the checFs 9h ch came to h s hands for the drug company to the $lo lo branch of the 'hartered EanF of $nd a, Austral a and 'h na and depos t the amounts to the cred t of the drug company. $nstead, 7oerster depos ted checFs, nclud ng those of Juan !lorente, Dolores &alcedo, Estan slao &alcedo, and a fourth party, 9 th the $lo lo branch of the +h l pp ne Nat onal EanF. %he checFs 9ere n that banF placed n the personal account of 7oerster. &ome of the checFs 9ere dra9n aga nst the EanF of +h l pp ne Nat onal EanF. After the ndorsement on the checFs 9as 9r tten ,"ece ved payment pr or ndorsement

guaranteed by +h l pp ne Nat onal banF, $lo lo Eranch, Angel +ad lla, Manager., %he ndorsement on the checFs tooF var ous forms, some be ng ,$nsular Drug 'ompany, $nc., Ey? /&gd.0 3. 7oerster, Agent. /&gd.0 3. 7oerster, other be ng ,$nsular Drug 'o., $nc., Ey? /&gd.0 'armen E. de 7oerster, Agent /&gd.0 'armen E. de 7oerster,I others ,$nsular Drug 'o., $nc., Ey? /&gd.0 'armen E. de 7oerster, 'armen E. de 7roster,I others ,/&gd.0 'armen E. de 7oerster, /&gd.0 'armen E. de 7oerster,I one /&gd.0 3. 7oerster. /&gd.0 3. 7oerster,I othersI ,$nsular Drug 'o., $nc., 'armen E. de 7oerster, Ey? /&gd.0 C. Eacaldo,, etc. $n th s connect on t should be e1pla ned that 'armen E. de 7oerster 9as h s stenographer. As a conse=uence of the ndorsements on checFs the amounts there n stated 9ere subse=uently 9 thdra9n by 3. E., 7oerster and 'armen E. de 7oerster. Eventually the Man la off ce of the drug company nvest gated the transact ons of 7oerster. 3pon the d scovery of anomal es, 7oerster comm tted su c de. Eut there s no ev dence sho9 ng that the banF Fne9 that 7oerster 9as m sappropr at ng the funds of h s pr nc pal. %he $nsular Drug 'ompany cla ms that t never rece ved the face value of 1<2 checFs here n the =uest on cover ng a total of +16,268.52.la&phil.net %here s no +h l pp ne author ty 9h ch d rectly f ts the proven facts. %he case of 7ulton $ron (orFs 'o., vs. 'h na EanF ng 'orporat on /:15<0;, 88 +h l., 2060, ment oned by both part es rest on a d fferent states of facts. Bo9ever, there are elementary pr nc ples govern ng the relat onsh p bet9een a banF and ts customers 9h ch are controll ng. $n f rst place, the banF argues that the drug company 9as never defrauded at all. (h le the ev dence on the e1tent of the loss suffered by the drug company s not nearly as clear as t should be, t s a suff c ent ans9er to state that no such spec al defense 9as rel ed upon by the banF n the tr al court. %he drug company sa9 f t to stand on the propos t on that checFs dra9n n ts favor 9ere mproperly and llegally cashed by the banF for 7oerster and placed n h s personal account, thus maF ng t poss ble for 7oerster to defraud the drug company, and the banF d d not try to go bacF of th s propos t on. %he ne1t po nt rel ed upon by the banF, to the effect that 7oerster had mpl ed author ty to ndorse all checFs made out n the name of the $nsular Drug 'o., $nc., has even less force. Not only d d the banF perm t 7oerster to ndorse checFs and then place them to h s personal account, but t 9ent farther and perm tted 7oerster)s 9 fe and clerF to ndorse the checFs. %he r ght of an agent to ndorse commerc al paper s a very respons ble po9er and 9 ll not be l ghtly nferred. A salesman 9 th author ty to collect money belong ng to h s pr nc pal does not have the mpl ed author ty to ndorse checFs rece ved n payment. Any person taF ng checFs made payable to a corporat on, 9h ch can act only by agent does so at h s per l, and must same by the conse=uences f the agent 9ho ndorses the same s 9 thout author ty. /Arcade "ealty 'o. vs. EanF of 'ommerce :1515;, 160 'al., <16I &tandard &team &pec alty 'o., vs. 'orn E1change EanF :1512;, 220 N.H., 226I +eople vs. EanF of North Amer ca :1625;, 28 N.H., 842I #raham vs. 3n ted &tates &av ngs $nst tut on :1620;, 4> Mo., 16>.0 7urther

speaF ng to the errors spec f ed by the banF, t s suff c ent to state that no trust fund 9as nvolvedI that the fact that banF acted n good fa th does not rel eve t from respons b l tyI that no proof 9as adduced, adm tt ng that 7oerster had r ght to ndorse the checFs, nd cat ve of r ght of h s 9 fe and clerF to do the same , and that the checFs dra9n on the EanF of the +h l pp ne $slands can not be d fferent ated from those dra9n on the +h l pp ne Nat onal EanF because of the ndorsement by the latter. $n br ef, th s s a case 9here 1<2 checFs made out n the name of the $nsular Drug 'o., $nc., 9ere brought to the branch off ce of the +h l pp ne Nat onal EanF n $lo lo by 7oerster, a salesman of the drug company, 7oerster)s 9 fe, and 7oerster)s clerF. %he banF could tell by the checFs themselves that the money belonged to the $nsular Drug 'o., $nc., and not to 7oerster or h s 9 fe or h s clerF. (hen the banF cred ted those checFs to the personal account of 7oerster and perm tted 7oerster and h s 9 fe to maFe 9 thdra9als 9 thout there be ng made author ty from the drug company to do so, the banF made tself respons ble to the drug company for the amounts represented by the checFs. %he banF could rel eve tself from respons b l ty by plead ng and prov ng that after the money 9as 9 thdra9n from the banF t passed to the drug company 9h ch thus suffered no loss, but the banF has not done so. Much more could be sa d about th s case, but t suff ces to state n conclus on that banF 9 ll have to stand the loss occas oned by the negl gence of ts agents. Dverrul ng the errors ass gned, -udgment of the tr al court 9 ll be aff rmed, the costs of th s nstance to be pa d by appellant. 4illa<Real, 0ull, :mperial, and !utte, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7;3<2= /cto er 31, 1<40

%. N. 5/!GES, pla nt ff@appellant, vs. %A$#/(A SA#AS and +A6 SA#AS, defendants@appellees. 9ose $. =rozco and 2i##s, McDonough and =zaeta for appellant. 4icente 4arela and .onrado 4. Sanchez for appellees.

)'+E$)A#, J.: %he act on 9as brought by the pla nt ff to foreclose a certa n real estate mortgage const tuted by the defendants to secure a loan. %he pla nt ff appealed from the -udgment of the 'ourt of 7 rst $nstance of Dcc dental Negros absolv ng the defendants from the compla nt and stat ng? %hat of the cap tal of +26,000

referred to n E1h b t A, the defendants 9ere l able only for the sum of +14,481.21I that the transact ons and negot at ons spec f ed n E1h b t A as 9ell as the nterest charged are usur ousI that the sum of +14,226.22 pa d by the defendants to the pla nt ff should be appl ed to the payment of the cap tal of +14,481.21I that the pla nt ff must refund the sum of +<,<22.0> to the defendants and, lastly, he must pay the costs. Dn &eptember 2, 152<, the defendants e1ecuted a po9er of attorney n favor of the r brother@ n@la9 7el 1 &. Hulo to enable h m to obta n a loan and secure t 9 th a mortgage on the real property descr bed n transfer cert f cate of t tle No. <<<8. %he po9er of attorney 9as reg stered n the reg stry of deeds of the +rov nce of Dcc dental Negros and the pert nent clauses thereof read as follo9s? %hat 9e confer upon our brother@ n@la9 Mr. 7el 1 &. Hulo, marr ed, of age and res dent of the mun c pal ty of Eago, +rov nce of Dcc dental Negros, +. $., as re=u red by la9, a spec al po9er of attorney to obta n, n our respect ve names and representat on, a loan n any amount 9h ch our sa d brother@ n@la9 may deem necessary, be ng empo9ered, by v rtue of the author ty conferred n th s po9er of attorney, to const tute a mortgage on a parcel of land absolutely belong ng to us, the techn cal descr pt on of 9h ch s as follo9s? ,%"AN&7E" 'E"%$7$'A%E D7 %$%!E ND. <<<8 ,A parcel of land /lot No. 24>4 of the 'adastral &urvey of Eago0 9 th the mprovements thereon, s tuated n mun c pal ty of Eago. Eounded on the NE. and N(. by the !onoy &apa and lot No. 24>8I on the &E. by the $labo &apaI and on the &(. by the $labo &apa, lot No. 2806 and the &apa %alaptapan. 'onta n ng an area of one m ll on n ne hundred n nety@four thousand e ght hundred and th rty@ four s=uare meters /1,554,6<40, more or less., %hat 9e confer and grant to our sa d brother@ n@la9 Mr. 7el 1 &. Hulo po9er and author ty to perform and e1ecute each and every act necessary to the performance of h s trust, 9h ch acts shall be for all purposes as f 9e had performed or e1ecuted them personally, hereby rat fy ng and conf rm ng everyth ng that our sa d brother@ n@la9 Mr. 7el 1 &. Hulo may e1ecute or cause to be e1ecuted. Act ng under sa d po9er of attorney, 7el 1 &. Hulo, on March 22, 152>, obta ned a loan of +26,000 from the pla nt ff, b nd ng h s pr nc pals -o ntly and severally, to pay t 9 th n ten /100 years, together 9 th nterest thereon at 12 per cent per annum payable annually n advance, to 9h ch effect he s gned a prom ssory note for sa d amount and e1ecuted a deed of mortgage of the real property descr bed n transfer cert f cate of t tle No. <<<8 and the mprovements thereon cons st ng n concrete bu ld ngs. $t 9as stated n the deed that n case the defendants fa led to pay the st pulated nterest and the ta1es on the real property mortgaged and f the pla nt ff 9ere compelled to br ng an act on to recover h s cred t, sa d defendants 9ould be obl ged to pay 10 per cent more on the unpa d cap tal, as fees for the pla nt ff)s attorneys. %he mortgage so

const tuted 9as reg stered n the reg stry of deeds of the +rov nce of Dcc dental Negros and noted on the bacF of the transfer cert f cate of t tle. %he sum of +26,000 9as not del vered to 7el 1 &. Hulo, but by agreement bet9een h m and the pla nt ff, t 9as employed as follo9s? $nterest for one year from March 22, 152>, to March 2>, 1522, collected n advance by +<,<>0. the pla nt ff ......................... 00 +a d for the mortgage const tuted by 7el 1 &. Hulo, cancelled on the date of the loan .......................................................... +a d by 7el 1 &. Hulo on account of the purchase pr ce of the real property bought by h m on Drt A &treet ........................ 'hecF No. 4850 del vered to 7el 1 &. Hulo ..........................

6,166.2 5

2,000.0 0 <,<51.2 1

'hecF No. 4852 n the name of "afael &antos, pa d to h m to cancel the mortgage 5,200.0 const tuted by the defendants ..... 0 'hecF No. 4856 del vered to 7el 1 &. Hulo ........................... 1,6>0.0 0

%otal ............................................................ 26,000. ............ 00 %he defendants fa led to pay at matur ty the nterest st pulated 9h ch should have been pa d one year n advance. All the sums pa d by them on account of accrued nterest up to March 22, 15<4, on 9h ch the compla nt 9as f led, together 9 th the correspond ng e1h b ts, are as follo9s? Date Amount

E1h b t 1 Apr l 8, +1,800. 1522 ............................................................... 00 E1h b t 2 May 2, 800.00 1522 ................................................................ E1h b t 4 August <0, 1522 ......................................................... <<>.00

E1h b t 2 June 4, <,<>0.0 1526 ................................................................ 0

E1h b t 6 May 18, 1525 .............................................................. E1h b t 5 June 15, 1525 ..............................................................

>2.20 >2.20

E1h b t 10 July 28, <<.>0 1525 ............................................................... E1h b t 11 August 2>, 1525 ......................................................... E1h b t 12 Dctober 2, 1525 .......................................................... E1h b t 1< Dctober 2, 1525 .......................................................... E1h b t 14 November 5, 1525 ...................................................... E1h b t 18 November 5, 1525 ...................................................... E1h b t 1> 7ebruary 6, 15<0 ........................................................ E1h b t 12 7ebruary 6, 15<0 ........................................................ <<.>0 <52.88 <0.00 25.>2 5<6.58 >1.04 5<>.4>

E1h b t 16 No date .................................................................. 456.28 ..... E1h b t 15 7ebruary 10, 15<1 ...................................................... E1h b t 20 August 20, 15<1 ......................................................... 456.28 456.28

E1h b t 21 July 2, 456.28 15<2 ................................................................. E1h b t 22 July 25, 800.00 15<2 ............................................................... E1h b t 2< &eptember 2<, 15<2 .................................................... E1h b t 24 December 12, 15<2 ..................................................... E1h b t 28 No 800.00 552.80 1,000.0

date .................................................................. 0 ...... E1h b t 2> January 2<, 15<4 ......................................................... 800.00

%otal ................................................................. 14,225. ............................ 22 %o the forego ng amount must be added the sum of +<,<>0 deducted by the pla nt ff upon grant ng the loan, as nterest for one year, thereby maF ng the total amount of nterest pa d by the defendants and rece ved by the pla nt ff +16,1<6.22. %he forego ng are facts nferred from the ev dence and are not controverted by the part es, 9 th the e1cept on of the e1 stence of the prom ssory note, the reg strat on of the mortgage deed and the notat on on the bacF of the cert f cate of t tle.lI&phi+.nJt $. %he act on brought by the pla nt ff 9as for the foreclosure of a mortgage n accordance 9 th the prov s ons of sect ons 284 to 2>1 of the 'ode of ' v l +rocedure. $t 9as not e1pressly alleged n the compla nt that the mortgage deed had been reg stered n accordance 9 th Act No. 45>, 9h ch 9as the la9 appl cable n the case of the real property reg stered under the %orrens system. A copy of the mortgage deed 9as attached to the compla nt and made a part thereof, but sa d copy d d not sho9 that the or g nal had been duly reg stered. $n paragraph < of the compla nt, ho9ever, t 9as alleged that the mortgage deed had been noted on the bacF of transfer cert f cate of t tle No. <<<8 by the reg ster of deeds of the +rov nce of Dcc dental Negros, n accordance 9 th the prov s ons of the Mortgage !a9. %h s spec f c allegat on s e=u valent to a statement that the mortgage deed had been duly reg stered. At the tr al of the case, the attorney for the pla nt ff d d not present the mortgage deed sho9 ng the reg strat on thereof n the reg stry, or the o9ner)s transfer cert f cate of t tle. $n the r stead the pla nt ff test f ed that the mortgage had been duly reg stered n the reg stry of deeds of Dcc dental Negros and had been noted on the bacF of the transfer cert f cate of t tle. %he oral ev dence 9as adm tted 9 thout any ob-ect on on the part of the attorney for the defendants. $n the appealed dec s on the court held that the pla nt ff had fa led to substant ate h s foreclosure su t and, not hav ng presented competent ev dence, the act on ar s ng from h s ev dence 9as merely a personal act on for the recovery of a certa n sum of money. %he pla nt ff e1cepted to th s conclus on and ass gns t n h s br ef as the f rst error of la9 comm tted by the court. &ect on 264 of the 'ode of ' v l +rocedure re=u res the contents of a 9r t ng to be proven by the 9r t ng tself, e1cept n cases there n spec f ed. &ect on <1<, No. >, prov des that off c al or publ c documents must be proven by present ng the or g nal or a copy cert f ed by the legal Feeper thereof. Accord ng to th s, the pla nt ff 9as obl ged to present the or g nal or a cert f ed copy of the

mortgage deed sho9 ng the reg strat on thereof, as 9ell as the o9ner)s transfer cert f cate of t tle. Eoth 9ould have been the best ev dence to prove the reg strat on of the mortgage and the notat on thereof on the bacF of the t tle. Bad the defendants ob-ected to the oral ev dence offered, there s no doubt that t 9ould have been re-ected as ncompetent. Eut t s un versally accepted that 9hen secondary or ncompetent ev dence s presented and accepted 9 thout any ob-ect on on the part of the other party, the latter s bound thereby and the court s obl ged to grant t, the probatory value t deserves. /' ty of Man la vs. 'abang s, 10 +h l., 181I Eersabal vs. Eernal, 1< +h l., 4><I *uenAle N &tre ff vs. J ongco, 22 +h l., 110I 3. &. vs. 'hoa %ong, 22 +h l., 8>2I 3. &. vs. Dng &h u, 26 +h l., 242I De !eon vs. D rector of +r sons, <1 +h l., >0? 3. &. vs. BernandeA, <1 +h l., <42I 2< '. J., <5, sect on 126<, and the cases there n c tedI 10 ". '. !., 1006, paragraph 152, and the cases there n c ted.0 $nasmuch as the reg strat on of the mortgage and the notat on thereof on the bacF of the transfer cert f cate of t tle have been establ shed by the oral ev dence above stated, the court 9as 9 thout author ty to conclude that the act on 9as personal n character and, conse=uently, the f rst ass gnment of error s 9ell founded. $$. %he court held that the loan and the mortgage 9ere usur ous and llegal for t9o reasons? 7 rst, because the pla nt ff charged compound nterest not9 thstand ng the fact that t had not been st pulated, and second, because the pla nt ff charged nterest yearly n advance n accordance 9 th the agreement. %hese conclus ons are the sub-ect matter of the pla nt ff)s second ass gnment of error. %he pla nt ff categor cally den ed hav ng charged compound nterest, stat ng n h s br ef that all the nterest charged by h m should be appl ed to the nterest unpa d by the defendants. (e have e1am ned E1h b ts 6 to 12 of the defendants, 9h ch are the ev dence offered to establ sh the fact that compound nterest had been charged, and 9e have, 9 thout any d ff culty, arr ved at the conclus on that the pla nt ff has really charged sa d unauthor Aed and unst pulated nterest. $f there s any doubt on th s fact, t s d spelled by E1h b t 10, n the hand9r t ng of the pla nt ff h mself, 9here n t appears that the sum of +<<.>0 9as charged by h m on account of nterest on unpa d nterest. Eut the fact of charg ng llegal nterest that may be charged, does not maFe the loan or the mortgage usur ous because the transact ons tooF place subse=uent to the e1ecut on of sa d contracts and the latter do not appear to be vo d a# initio />> '. J., pages 24<, 244, sect on 1540. &a d nterest should be appl ed f rst to the payment of the st pulated and unpa d nterest and, later, to that of the cap tal. /Agu lar vs. "ub ato and #onAaleA C la, 40 +h l., 820I #o 'h oco vs. Mart neA, 48 +h l., 28>I #u Jong N 'o. vs. " vera and Avellar, 48 +h l., 226I !opeA and Javelona vs. El Bogar 7 l p no, 42 +h l., 245I &a-o vs. #ust lo, 46 +h l, 481.0 %he pla nt ff adm ts hav ng charged n advance the nterest correspond ng to the f rst year. %he mortgage deed conta ns the st pulat on that the defendants should pay n advance the st pulated nterest correspond ng to each year. %he

court declared the contract usur ous for th s reason, bas ng ts op n on upon some Amer can author t es hold ng the same po nt of v e9. %h s court cannot adopt sa d doctr ne n th s -ur sd ct on. &ect on 8 of Act No. 2>88, as amended by sect on < of Act No. <251, e1pressly perm t a cred tor to charge n advance nterest correspond ng to not more than one year, 9hatever the durat on of the loan. (hat s proh b ted s the charg ng n advance of nterest for more than one year. &ect on > re terates sa d rule n e1empt ng a cred tor found gu lty of usury from the obl gat on to return the nterest and comm ss ons collected by h m n advance, prov ded sa d nterest and comm ss ons are not for a per od of more than one year and the rate of nterest does not e1ceed the ma1 mum l m t f 1ed by la9. %h s court concludes, therefore, that the second ass gnment of error s 9ell founded n the sense that both the loan and the mortgage are not usur ous or llegal. $$$. $n h s th rd ass gnment of error, the pla nt ff contends that the court should have declared the act on for the usury nterposed by the defendants n the r cross@compla nt barred by the statute of l m tat ons, n accordance 9 th the prov s on of sect on > of Act No. 2>88, as amended by sect on 4 of Act No. <251. $t s true that accord ng to the ev dence more than t9o years have already elapsed from the t me the defendants pa d and the pla nt ff rece ved the usur ous nterest to the reg strat on of the cross@compla nt, but the pla nt ff cannot successfully nvoFe the defense of prescr pt on because he fa led to allege t n h s reply to the cross@compla nt. $n order that prescr pt on may const tute a val d defense and t may be cons dered on appeal, t must be spec f cally pleaded n the ans9er and proven 9 th the same degree of certa nty 9 th 9h ch an essent al allegat on n a c v l act on s establ shed. Dther9 se t 9 ll not be taFen nto cons derat on, much less f t s alleged for the f rst t me on appeal. /Aldeguer vs. BosFyn, 2 +h l., 800I Dom ngo vs. Dsor o, 2 +h l, 408I MarAon vs. 3dtu-an, 20 +h l., 2<2I +elaeA vs.Abreu, 2> +h l., 418I 'orporac on de ++. Agust nos "ecoletos vs. 'r sostomo, <2 +h l., 422I *aragdag vs. Earado, << +h l., 825.0 $C. %he defendants proved that the r attorney)s fees 9ere contracted at +<,000. %he ev dence has not been contrad cted. %he amount so f 1ed s not unreasonable or unconsc onable. $n the fourth ass gnment of error, the pla nt ff =uest ons that part of the -udgment order ng h m to pay sa d fees. Be contends that he s not respons ble for the payment thereof because ne ther the loan nor the mortgage s usur ous. Bo9ever, th s court has already stated that the pla nt ff v olated the 3sury !a9 n charg ng compound nterest not9 thstand ng the fact that t has not been so st pulated and that add ng these sums to the st pulated nterest the average e1ceeds the ma1 mum rate of nterest that may be charged for the loan 9h ch has been the sub-ect matter of the transact on. %h s v olat on falls under the precept of sect on > of the 3sury !a9 and the pla nt ff s obl ged to pay the fees of the attorney for the defendants. %h s court holds that the fourth ass gnment of error s unfounded.

C. $n the f fth ass gnment of error, the pla nt ff alleges that the -udgment s erroneous for not hav ng declared that the defendants rat f ed all the obl gat ons contracted by the r attorney n fact. $n the s 1th ass gnment of error he contends that an error 9as l Fe9 se comm tted n not declar ng that by v rtue of the author ty conferred by the defendants, agent Hulo 9as author Aed to borro9 money and nvest t as he 9 shed, 9 thout be ng obl ged to apply t necessar ly for the benef t of h s pr nc pals. $n the seventh ass gnment of error the pla nt ff alleges that the court erred n f 1 ng the cap tal, 9h ch the defendants are obl ged to pay h m by v rtue of the po9er of attorney e1ecuted by them, at only +14,481.21. $n the e ghth and last ass gnment of error, he ns sts that the court should have ordered the defendants to pay the ent re cap tal o9ed, 9 th nterest thereon n accordance 9 th the mortgage deed, together 9 th 10 per cent thereof as attorney)s fees, the act on hav ng been nst tuted due to nonfeasance on the part of the defendants. %hese four ass gnments of errors refer to the nterpretat on and scope of the po9er of attorney and to the computat on of the cap tal and the nterest to be pa d by the defendants and, f nally, to 9hether or not the latter are obl ged to pay the fees of the attorney for the pla nt ff. 7or th s reason, th s court passes upon them -o ntly. %he pert nent clauses of the po9er of attorney from 9h ch may be determ ned the ntent on of the pr nc pals n author A ng the r agent to obta n a loan, secur ng t 9 th the r real property, 9ere =uoted at the beg nn ng. %he terms thereof are l m tedI the agent 9as thereby author Aed only to borro9 any amount of money 9h ch he deemed necessary. %here s noth ng, ho9ever, to nd cate that the defendants had l Fe9 se author Aed h m to convert the money obta ned by h m to h s personal use. ( th respect to a po9er of attorney of spec al character, t cannot be nterpreted as also author A ng the agent to d spose of the money as he pleased, part cularly 9hen t does not appear that such 9as the ntent on of the pr nc pals, and n apply ng part of the funds to pay h s personal obl gat ons, he e1ceeded h s author ty /art. 1214, ' v l 'odeI EanF of the +h l pp ne $slands vs. De 'oster, 42 +h l., 854 and 45 +h l., 8240. $n the case l Fe the present one, t should be understood that the agent 9as obl ged to turn over the money to the pr nc pals or, at least, place t at the r d sposal. $n the case of Manila 7rading & Supply .o., vs. ;y 7iepo /#.". No. <0<<5, March 2, 1525, not reported0, referr ng to a po9er of attorney to borro9 any amount of money n cash and to guarantee the payment thereof by the mortgage of certa n property belong ng to the pr nc pals, th s court held that the agent e1ceeded h s author ty n guarantee ng h s personal account for automob le parts by the mortgage, not hav ng been spec ally author Aed to do so. %h s court then sa d? $nasmuch as Jose &. 3y % epo, as agent of Dan el "amos and Em l o C llarosa, 9as only author Aed to ,borro9 any amount of cash,, and to guaranty the payment of the sums of money so borro9ed by the mortgage of the property stated n the po9er of attorney, he e1ceeded the author ty conferred upon h m n mortgag ng h s pr nc pal)s property to secure the payment of h s personal debt

for automob le parts, and the guarant es so made are null and vo d, the pr nc pals n =uest on not be ng respons ble for sa d obl gat ons. %he pla nt ff contends that the agent)s act of employ ng part of the loan to pay h s personal debts 9as rat f ed by the defendants n the r letter to h m dated August 21, 1522 /E1h b t E0. %h s court has carefully read the contents of sa d document and has found noth ng mply ng rat f cat on or approval of the agent)s act. $n t the defendants conf ned themselves to stat ng that they 9ould not fy the r agent of the matur ty of the obl gat on contracted by h m. %hey sa d noth ng about 9hether or not the r agent 9as author Aed to use the funds obta ned by h m n the payment of h s personal obl gat ons. $n v e9 of the forego ng, th s court concludes that the f fth and s 1th ass gnments of error are unfounded. $n the seventh ass gnment of error, the pla nt ff ns sts that the defendants should ans9er for the ent re loan plus the st pulated nterest thereon. %h s court has already stated the manner n 9h ch the agent employed the loan, accord ng to the pla nt ff. Df the loan of +26,000, the agent appl ed the sum of +10,166.25 to the payment of h s personal debt to the pla nt ff. %he balance of +12,611.21 const tutes the cap tal 9h ch the defendants are obl ged to pay by v rtue of the po9er conferred upon the r agent and the mortgage deed. $n connect on 9 th the st pulated nterest, t appears that the cap tal of +12,611.21 bore nterest at 12 per cent per annum from March 22, 152>, to &eptember <0, 15<>, e=u valent to +22,4>0.8>. All the nterest pa d by the defendants to the pla nt ff, nclud ng that 9h ch s cons dered as usur ous, amounts to +16,1<6.22, so that they are st ll ndebted n sa d concept n the sum of +4,<21.25. Add ng th s sum to the cap tal of +12,611.21, maFes a total of +22,1<<.80, from 9h ch the sum of +<,000 const tut ng the fees of the attorney for the defendants must be deducted, leav ng a net balance of +15,1<<.80 9h ch s all that the defendants must pay to the pla nt ff up to sa d date. %he forego ng d sposes of the seventh ass gnment of error. $n the mortgage deed the defendants bound themselves to pay the fees of the attorney for the pla nt ff 9ere to resort to the courts to foreclose the mortgage. &a d fees 9ere f 1ed at 10 per cent of the cap tal 9h ch the defendants m ght o9e. %h s penalty accord ng to 9hat has been stated heretofore, amounts to +1,261.12 9h ch 9ould have to be added to the total amount to be pa d to the pla nt ff by the defendants. %he court, hav ng declared the contracts usur ous, d d not order the defendants to pay the penalty and for th s reason the pla nt ff ass gns the om ss on as the e ghth and last ass gnment of alleged error. $nasmuch as the fees agreed upon are ne ther e1cess ve nor unreasonable, th s court f nds no good reason to d sapprove t, part cularly because the defendants 9ere also granted a larger amount n the same concept. $n v e9 of the conclus ons arr ved at, the mot on for a ne9 tr al f led by the attorneys for the pla nt ff on March 12, 15<8, s den ed, and the amendments to

the compla nt proposed by them n the r plead ng of March 20 of sa d year are adm tted. 7or all the forego ng reasons, the appealed -udgment s mod f ed and the defendants are ordered to, pay -o ntly and severally to the pla nt ff the sums of +15,1<<.80 and +1,261.12. ( th n three months they shall maFe payment of sa d t9o sums of money or depos t them 9 th the clerF of court, at the d sposal of the pla nt ff, upon fa lure to do 9h ch the real property mortgaged 9 th the mprovements thereon shall be sold at publ c auct on and the proceeds thereof appl ed to the payment of the t9o sums of money above@statedI 9 thout spec al pronouncement as to the costs of th s nstance. &o ordered. Avance>a, .. 9., 4illa<Real, A#ad Santos, Diaz, and %aurel, 99., concur. "E&D!3%$DN December 25, 15<> $M+E"$A!, J.? %he mot on for recons derat on presented by the appellee based upon the three grounds? /10 %hat the cap tal for 9h ch they must ans9er to the appellant should be only +1>,422.<5, not +12,611.21 as stated n the dec s onI /20 that the computat on of the payments made s ncorrect, and /<0 that the oral ev dence relat ve to the reg strat on of the mortgage s nsuff c ent. $. $t s cla med that as the true cap tal for 9h ch the appellees 9ere held respons ble amounts only to +1>,422.<5, e1clud ng the sum of +<,<>0 pa d n advance as nterest correspond ng to the f rst year, th s latter sum should not be pa d n ts ent rety by the appellees but only that par thereof n proport on to the cap tal o9ed. %he content on s 9 thout any foundat on because, as 9as already stated n the dec s on, the agent 9as e1pressly author Aed to borro9 and rece ve the total amount of +26,000. Dn the other hand, as t 9as st pulated that the nterest should be pa d annually n advance, t s ev dent and -ust that the ent re sum of +<,<>0 represent ng sa d nterest be pa d by the appellees 9ho contracted the debt through an agent. %he fact that after the contract had been consummated and the nterest for the f rst year pa d, the agent, e1ceed ng h s author ty, unduly used part of the funds ntrusted to h m, does not rel eve the appellees of the r obl gat on to ans9er for the ent re nterest for the f rst year. 7or th s reason, th s court declares that the f rst ground s unfounded. $$. $n the computat on of the nterest pa d by the appellees and of that 9h ch they should pay to the appellant by v rtue of the terms of the contract, th s court proceeded to determ ne the t me that elapsed from the date the contract became effect ve and deb ted to the appellees the nterest at the rate agreed upon, deduct ng therefrom 9hat they had pa d n sa d concept, nclud ng the nterest pa d by them for the f rst year because, the computat on commenced from the date f 1ed n the contract, 9h ch s March 22, 152>. %he d fference represents the nterest unpa d by the appellees up to &eptember <0, 15<>, cons dered by th s court as the date, on 9h ch the appellees) account 9 th the

appellant 9as f nally l =u dated and closed, and added to the cap tal they represent the amount appear ng n the dec s on. %h s court sees no error of account ng n th s computat on. $$$. %he appellees ns st that the oral ev dence upon 9h ch th s court based ts op n on n declar ng that the mortgage deed s reg stered, s nsuff c ent. (hat has been sa d n the dec s on on th s po nt s so clear and understandable that th s court bel eves tself rel eved from the obl gat on of reproduc ng t. %here s no mer t n the last ground of the mot on. $n ans9er ng the appellees) mot on for recons derat on, the appellant l Fe9 se seeFs recons derat on of the dec s on, alleg ng that he s ent tled to a larger amount. ( thout go ng nto deta ls, because th s court deems t unnecessary, t s held that the appellant s not ent tled to asF for recons derat on of the dec s on on the ground that h s pet t on to that effect has been f led too late, after the dec s on n =uest on became f nal 9 th respect to h m. %he appellees) mot on for recons derat on s den ed. Avance>a, .. 9., 4illa<Real, A#ad Santos, Diaz, and %aurel, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( 7$"&% D$C$&$DN G.$. No. 12302=. July 3<, 3..2 #)#8 E#)6A9E(5 9$A*/7G&E$$E$/, 9EN 'A&$)%)/ +. 9$A*/,1 $/#AN! +. 9$A*/, J$., /:E#)A 9$A*/7E&)ES(AS, 5E)$S /: %/$+&S)N)A 9$A*/7 N)/$ namely, GE$S/N &. N)/$, 'A$K GE$$8 9. N)/$, %#):: $)%5A$! 9. N)/$, 9$8AN 9. N)/$, W)!'A$K 9. N)/$, S5E$$8 ANNE 9. N)/$, represented y #)#8 E#)6A9E(5 9$A*/7G&E$$E$/ as t-eir attorney7in7 fact, and 5/N/$A9#E :#/$EN()N/ A. (&AS/N, J$., +residin" Jud"e, $e"ional (rial %ourt, 9ranc- 14<, 'aGati %ity, +et t oners, vs. E!WA$! +. 9$A*/, represented y -is attorney7in7fact :A()'A %. 9$A*/, respondent, and !A*)! 9. !)A6, J$., inter'enor7respondent. DE'$&$DN %A$+)/, J., %he 'ase Eefore the 'ourt s a pet t on for rev e92 assa l ng the Dec s on< of 21 December 2001 of the 'ourt of Appeals n 'A@#.". 'C No. >2254. %he 'ourt of Appeals reversed the Dec s on4 of 11 May 2000 of the "eg onal %r al 'ourt of MaFat , Eranch No. 1<5, n ' v l 'ase No. 52@1<25 deny ng respondentsJ prayer to part t on the sub-ect propert es.

Antecedent 7acts &pouses Maur c o Eravo /,Maur c o,0 and & mona 8 Andaya Eravo /,& mona,0 o9ned t9o parcels of land /,+ropert es,0 measur ng 262 and 251 s=uare meters and located along Evangel sta &treet, MaFat ' ty, Metro Man la. %he +ropert es are reg stered under %'% Nos. 86555 and 85000 ssued by the "eg ster of Deeds of " Aal on 2< May 1586. %he +ropert es conta n a large res dent al d9ell ng, a smaller house and other mprovements. Maur c o and & mona had three ch ldren @ "oland, 'esar and ! ly, all surnamed Eravo. 'esar d ed 9 thout ssue. ! ly Eravo marr ed Dav d D aA, and had a son, Dav d E. D aA, Jr. /,Dav d Jr.,0. "oland had s 1 ch ldren, namely, ! ly El Aabeth Eravo@#uerrero /,El Aabeth,0, Ed9ard Eravo /,Ed9ard,0, "oland Eravo, Jr. /,"oland Jr.,0, &en a Eravo, Een-am n Maur c o Eravo, and the r half@s ster, Dfel a Eravo /,Dfel a,0. & mona e1ecuted a #eneral +o9er of Attorney /,#+A,0 on 12 June 15>> appo nt ng Maur c o as her attorney@ n@fact. $n the #+A, & mona author Aed Maur c o to ,mortgage or other9 se hypothecate, sell, ass gn and d spose of any and all of my property, real, personal or m 1ed, of any F nd 9hatsoever and 9heresoever s tuated, or any nterest there n 111., > Maur c o subse=uently mortgaged the +ropert es to the +h l pp ne Nat onal EanF /+NE0 and Development EanF of the +h l pp nes /DE+0 for +10,000 and +8,000, respect vely.2 Dn 28 Dctober 1520, Maur c o e1ecuted a Deed of &ale 9 th Assumpt on of "eal Estate Mortgage /,Deed of &ale,0 convey ng the +ropert es to ,"oland A. Eravo, Dfel a A. Eravo and El Aabeth Eravo, 6 /,vendees,0. %he sale 9as cond t oned on the payment of +1,000 and on the assumpt on by the vendees of the +NE and DE+ mortgages over the +ropert es. As cert f ed by the 'lerF of 'ourt of the "eg onal %r al 'ourt of Man la, the Deed of &ale 9as notar Aed by Atty. C ctor o U. #uAman on 26 Dctober 1520 and entered n h s Notar al "eg ster.5 Bo9ever, the Deed of &ale 9as not annotated on %'% Nos. 86555 and 85000. Ne ther 9as t presented to +NE and DE+. %he mortage loans and the rece pts for loan payments ssued by +NE and DE+ cont nued to be n Maur c oJs name even after h s death on 20 November 152<. & mona d ed n 1522. Dn 2< June 1552, Ed9ard, represented by h s 9 fe, 7at ma Eravo, f led an act on for the -ud c al part t on of the +ropert es. Ed9ard cla med that he and the other grandch ldren of Maur c o and & mona are co@o9ners of the +ropert es by success on. Desp te th s, pet t oners refused to share 9 th h m the possess on and rental ncome of the +ropert es. Ed9ard later amended h s compla nt to nclude a prayer to annul the Deed of &ale, 9h ch he cla med 9as merely s mulated to pre-ud ce the other he rs. $n 1555, Dav d Jr., 9hose parents d ed n 1544 and 9ho 9as subse=uently ra sed by & mona, moved to ntervene n the case. Dav d Jr. f led a compla nt@ n@

ntervent on mpugn ng the val d ty of the Deed of &ale and pray ng for the part t on of the +ropert es among the surv v ng he rs of Maur c o and & mona. %he tr al court allo9ed the ntervent on n ts Drder dated 8 May 1555. 10 %he "ul ng of the %r al 'ourt %he tr al court upheld Maur c oJs sale of the +ropert es to the vendees. %he tr al court ruled that the sale d d not pre-ud ce the compulsory he rs, as the +ropert es 9ere conveyed for valuable cons derat on. %he tr al court also noted that the Deed of &ale 9as duly notar Aed and 9as n e1 stence for many years 9 thout =uest on about ts val d ty. %he d spos t ve port on of the tr al courtJs Dec s on of 11 May 2000 reads? (BE"E7D"E, prem ses cons dered, the 'ourt hereby DEN$E& the J3D$'$A! +A"%$%$DN of the propert es covered by %'% Nos. 86555 and 85000 reg stered 9 th the Dff ce of the "eg ster of Deeds of " Aal. &D D"DE"ED.11 D ssat sf ed, Ed9ard and Dav d Jr. /,respondents,0 f led a -o nt appeal to the 'ourt of Appeals. %he "ul ng of the 'ourt of Appeals ' t ng Art cle 1>> of the ' v l 'ode /,Art cle 1>>,0, the 'ourt of Appeals declared the Deed of &ale vo d for lacF of & monaJs consent. %he appellate court held that the #+A e1ecuted by & mona n 15>> 9as not suff c ent to author Ae Maur c o to sell the +ropert es because Art cle 1626 of the ' v l 'ode /,Art cle 1626,0 re=u res a spec al po9er of attorney for such transact ons. %he appellate court reasoned that the #+A 9as e1ecuted merely to enable Maur c o to mortgage the +ropert es, not to sell them. %he 'ourt of Appeals also found that there 9as nsuff c ent proof that the vendees made the mortgage payments on the +ropert es, s nce the +NE and DE+ rece pts 9ere ssued n Maur c oJs name. %he appellate court op ned that the rental ncome of the +ropert es, 9h ch the vendees never shared 9 th respondents, 9as suff c ent to cover the mortgage payments to +NE and DE+. %he 'ourt of Appeals declared the Deed of &ale vo d and ordered the part t on of the +ropert es n ts Dec s on of 21 December 2001 /,'A Dec s on,0, as follo9s? (BE"E7D"E, the dec s on of the "eg onal %r al 'ourt of MaFat ' ty, Metro@ Man la, Eranch 1<:5; dated 11 May 2000:,; rev e9 of 9h ch s sought n these proceed ngs:,; s "ECE"&ED. 1. %he Deed of &ale 9 th Assumpt on of "eal Estate Mortgage /E1h. 40 dated 26 Dctober 1520 s hereby declared null and vo dI 2. Jud c al +art t on on the =uest oned propert es s hereby #"AN%ED n the follo9 ng manner?

A. $n representat on of h s deceased mother, !$!H E"ACD@D$AL, ntervenor DAC$D D$AL, J"., s ent tled to one@half /1M20 nterest of the sub-ect propert esI E. +la nt ff@appellant ED(A"D E"ACD and the rest of the f ve s bl ngs, namely? !$!H E!$LAEE%B, ED(A"D, "D!AND, J"., &EN$A, EENJAM$N and D7E!$A are ent tled to one@s 1th /1M>0 represent ng the other half port on of the sub-ect propert esI '. +la nt ff@appellant Ed9ard Eravo, ntervenor DAC$D D$AL, J"., &EN$A and EENJAM$N shall re mburse the defendant@appellees !$!H E!$LAEE%B, D7E!$A and "D!AND the sum of Dne %housand /+1,000.000 +E&D& represent ng the cons derat on pa d on the =uest oned deed of sale 9 th assumpt on of mortgage 9 th nterest of s 1 />0 percent per annum effect ve 26 Dctober 1520 unt l fully pa d. &D D"DE"ED.12 %he $ssues +et t oners seeF a reversal of the Dec s on of the 'ourt of Appeals, ra s ng these ssues? 1. (BE%BE" %BE 'D3"% D7 A++EA!& E""ED $N ND% 3+BD!D$N# %BE CA!$D$%H AND EN7D"'EMEN% D7 %BE DEED D7 &A!E ($%B A&&3M+%$DN D7 MD"%#A#E. 2. (BE%BE" %BE 'D3"% D7 A++EA!& E""ED $N D"DE"$N# %BE +A"%$%$DN D7 %BE +"D+E"%H $N U3E&%$DN.1< At the least, pet t oners argue that the sub-ect sale s val d as to Maur c oJs share n the +ropert es. Dn the other hand, respondents ma nta n that they are co@o9ners of the +ropert es by success on. "espondents argue that the sale of the con-ugal +ropert es s vo d because? /10 Maur c o e1ecuted the Deed of &ale 9 thout & monaJs consentI and /20 the sale 9as merely s mulated, as sho9n by the grossly nade=uate cons derat on Maur c o rece ved for the +ropert es. (h le th s case 9as pend ng, !eon da Andaya !olong /,!eon da,0, Dav d Jr.Js aunt, and Atty. 'endaQa, respondentsJ counsel, nformed the 'ourt that Dav d Jr. d ed on 14 &eptember 2004. After9ards, !eon da and El Aabeth 9rote separate letters asF ng for the resolut on of th s case. Atty. 'endaQa later f led an urgent mot on to annotate attorneyJs l en on %'% Nos. 86555 and 85000. $n ts "esolut on dated 10 November 2004,14 the 'ourt noted the not ce of Dav d Jr.Js death, the letters 9r tten by !eon da and El Aabeth, and granted the mot on to annotate attorneyJs l en on %'% Nos. 86555 and 85000. %he "ul ng of the 'ourt %he pet t on s partly mer tor ous.

%he =uest ons of 9hether & mona consented to the Deed of &ale and 9hether the sub-ect sale 9as s mulated are factual n nature. %he rule s factual f nd ngs of the 'ourt of Appeals are b nd ng on th s 'ourt. Bo9ever, there are e1cept ons, such as 9hen the factual f nd ngs of the 'ourt of Appeals and the tr al court are contrad ctory, or 9hen the ev dence on record does not support the factual f nd ngs.18 Eecause these e1cept ons obta n n the present case, the 'ourt 9 ll cons der these ssues. =n the Requirement of the 6ifeTs .onsent (e hold that the 'ourt of Appeals erred 9hen t declared the Deed of &ale vo d based on Art cle 1>>, 9h ch states? Art. 1>>. 3nless the 9 fe has been declared a non compos mentis or a spendthr ft, or s under c v l nterd ct on or s conf ned n a leprosar um, the husband cannot al enate or encumber any real property of the con-ugal partnersh p 9 thout the 9 feJs consent. $f she refuses unreasonably to g ve her consent, the court may compel her to grant the same. %h s art cle shall not apply to property ac=u red by the con-ugal partnersh ps before the effect ve date of th s 'ode. Art cle 1>> e1pressly appl es only to propert es ac=u red by the con-ugal partnersh p after the effect v ty of the ' v l 'ode of the +h l pp nes /,' v l 'ode,0. %he ' v l 'ode came nto force on <0 August 1580. 1> Although there s no d spute that the +ropert es 9ere con-ugal propert es of Maur c o and & mona, the records do not sho9, and the part es d d not st pulate, 9hen the +ropert es 9ere ac=u red.12 3nder Art cle 141< of the old &pan sh ' v l 'ode, the husband could al enate con-ugal partnersh p property for valuable cons derat on 9 thout the 9 feJs consent.16 Even under the present ' v l 'ode, ho9ever, the Deed of &ale s not vo d. $t s 9ell@settled that contracts al enat ng con-ugal real property 9 thout the 9 feJs consent are merely vo dable under the ' v l 'ode K that s, b nd ng on the part es unless annulled by a competent court K and not vo d a# initio.15 Art cle 1>> must be read n con-unct on 9 th Art cle 12< of the ' v l 'ode /,Art cle 12<,0. %he latter prescr bes certa n cond t ons before a sale of con-ugal property can be annulled for lacF of the 9 feJs consent, as follo9s? Art. 12<. %he Fife may, durin" t-e marria"e and Fit-in ten years from t-e transaction =uest oned, asF the courts for the annulment of any contract of the husband entered nto 9 thout her consent, 9hen such consent s re=u red, or any act or contract of the husband 9h ch tends to defraud her or mpa r her nterest n the con-ugal partnersh p property. S-ould t-e Fife fail to eLercise t-is ri"-t, s-e or -er -eirs after t-e dissolution of t-e marria"e, may demand t-e Aalue of property fraudulently alienated by the husband. /Emphas s suppl ed0

3nder the ' v l 'ode, only the 9 fe can asF to annul a contract that d sposes of con-ugal real property 9 thout her consent. %he 9 fe must f le the act on for annulment dur ng the marr age and 9 th n ten years from the =uest oned transact on. Art cle 12< s e1pl c t on the remed es ava lable f the 9 fe fa ls to e1erc se th s r ght 9 th n the spec f ed per od. $n such case, the 9 fe or her he rs can only demand the value of the property prov ded they prove that the husband fraudulently al enated the property. 7raud s never presumed, but must be establ shed by clear and conv nc ng ev dence. 20 "espondentsJ act on to annul the Deed of &ale based on Art cle 1>> must fa l for hav ng been f led out of t me. %he marr age of Maur c o and & mona 9as d ssolved 9hen Maur c o d ed n 152<. More than ten years have passed s nce the e1ecut on of the Deed of &ale. 7urther, respondents, 9ho are & monaJs he rs, are not the part es 9ho can nvoFe Art cle 1>>. Art cle 12< reserves that remedy to the 9 fe alone. Dnly & mona had the r ght to have the sale of the +ropert es annulled on the ground that Maur c o sold the +ropert es 9 thout her consent. & mona, ho9ever, d d not assa l the Deed of &ale dur ng her marr age or even after Maur c oJs death. %he records are bereft of any nd cat on that & mona =uest oned the sale of the +ropert es at any t me. & mona d d not even attempt to taFe possess on of or res de on the +ropert es after Maur c oJs death. Dav d Jr., 9ho 9as ra sed by & mona, test f ed that he and & mona cont nued to l ve n +asay ' ty after Maur c oJs death, 9h le her ch ldren and other grandch ldren res ded on the +ropert es.21 (e also agree 9 th the tr al court that & mona author Aed Maur c o to d spose of the +ropert es 9hen she e1ecuted the #+A. %rue, Art cle 1626 re=u res a spec al po9er of attorney for an agent to e1ecute a contract that transfers the o9nersh p of an mmovable. Bo9ever, the 'ourt has clar f ed that Art cle 1626 refers to the nature of the author Aat on, not to ts form. 22 Even f a document s t tled as a general po9er of attorney, the re=u rement of a spec al po9er of attorney s met f there s a clear mandate from the pr nc pal spec f cally author A ng the performance of the act. 2< $n =eloso '. *ourt o! Appeals,24 the 'ourt e1pla ned that a general po9er of attorney could conta n a spec al po9er to sell that sat sf es the re=u rement of Art cle 1626, thus? An e1am nat on of the records sho9ed that the assa led po9er of attorney 9as val d and regular on ts face. $t 9as notar Aed and as such, t carr es the ev dent ary 9e ght conferred upon t 9 th respect to ts due e1ecut on. (h le t s true that t 9as denom nated as a general po9er of attorney, a perusal thereof revealed that t stated an author ty to sell, to 9 t? ,2. %o buy or sell, h re or lease, mortgage or other9 se hypothecate lands, tenements and hered taments or other forms of real property, more spec f cally

%'% No. 451<6, upon such terms and cond t ons and under such covenants as my sa d attorney shall deem f t and proper., %hus, there 9as no need to e1ecute a separate and spec al po9er of attorney s nce the general po9er of attorney had e1pressly author Aed the agent or attorney n fact the po9er to sell the sub-ect property. (-e special poFer of attorney can e included in t-e "eneral poFer F-en it is specified t-erein t-e act or transaction for F-ic- t-e special poFer is reKuired . /Emphas s suppl ed0 $n th s case, & mona e1pressly author Aed Maur c o n the #+A to , sell, assi"n and dispose of any and all of my property, real, personal or m 1ed, of any F nd 9hatsoever and 9heresoever s tuated, or any nterest there n 111, as 9ell as to ,act as my general representat ve and agent, 9 th full author ty to buy, sell, negot ate and contract for me and n my behalf., 28 %aFen together, these prov s ons const tute a clear and spec f c mandate to Maur c o to sell the +ropert es. Even f t s called a ,general po9er of attorney,, the spec f c prov s ons n the #+A are suff c ent for the purposes of Art cle 1626. %hese prov s ons n the #+A l Fe9 se nd cate that & mona consented to the sale of the +ropert es. 6hether the Sale of the $roperties &as Simulated or is 4oid for 2ross :nadequacy of $rice (e po nt out that the la9 on leg t me does not bar the d spos t on of property for valuable cons derat on to descendants or compulsory he rs. $n a sale, cash of e=u valent value replaces the property taFen from the estate. 2> %here s no d m nut on of the estate but merely a subst tut on n values. Donat ons and other d spos t ons by gratu tous t tle, on the other hand, must be ncluded n the computat on of leg t mes.22 "espondents, ho9ever, contend that the sale of the +ropert es 9as merely s mulated. As proof, respondents po nt to the cons derat on of +1,000 n the Deed of &ale, 9h ch respondents cla m s grossly nade=uate compared to the actual value of the +ropert es. & mulat on of contract and gross nade=uacy of pr ce are d st nct legal concepts, 9 th d fferent effects. (hen the part es to an alleged contract do not really ntend to be bound by t, the contract s s mulated and vo d. 26 A s mulated or f ct t ous contract has no legal effect 9hatsoever 25 because there s no real agreement bet9een the part es. $n contrast, a contract 9 th nade=uate cons derat on may nevertheless embody a true agreement bet9een the part es. A contract of sale s a consensual contract, 9h ch becomes val d and b nd ng upon the meet ng of m nds of the part es on the pr ce and the ob-ect of the sale. <0 %he concept of a s mulated sale s thus ncompat ble 9 th nade=uacy of pr ce. (hen the part es agree on a pr ce as the actual cons derat on, the sale s not s mulated desp te the nade=uacy of the pr ce.<1

#ross nade=uacy of pr ce by tself 9 ll not result n a vo d contract. #ross nade=uacy of pr ce does not even affect the val d ty of a contract of sale, unless t s gn f es a defect n the consent or that the part es actually ntended a donat on or some other contract. <2 $nade=uacy of cause 9 ll not nval date a contract unless there has been fraud, m staFe or undue nfluence. << $n th s case, respondents have not proved any of the nstances that 9ould nval date the Deed of &ale. "espondents even fa led to establ sh that the cons derat on pa d by the vendees for the +ropert es 9as grossly nade=uate. As the tr al court po nted out, the Deed of &ale st pulates that, n add t on to the payment of +1,000, the vendees should assume the mortgage loans from +NE and DE+. %he cons derat on for the sale of the +ropert es 9as thus +1,000 n cash and the assumpt on of the +18,000 mortgage. "espondents argue that +1>,000 s st ll far belo9 the actual value of the +ropert es. %o bolster the r cla m, respondents presented the follo9 ng? /10 %a1 Declarat ons No. A@001@00508<4 and A@001@0050><8 for the year 1525, 9h ch placed the assessed value of the +ropert es at +20,020 and the r appro1 mate marFet value at+244,250I and /20 a cert f ed copy of the Department of 7 nanceJs Department Drder No. >2@52<> dated > June 1552 and attached gu del nes<2 9h ch establ shed the Aonal value of the propert es along Evangel sta &treet at+18,000 per s=uare meter. %he sub-ect Deed of &ale, ho9ever, 9as e1ecuted n 1520. %he valuat on of the +ropert es n 1525 or 1552 s of l ttle relevance to the ssue of 9hether +1>,000 9as a grossly nade=uate pr ce to pay for the +ropert es n 1520. 'erta nly, there s noth ng surpr s ng n the sharp ncrease n the value of the +ropert es n ne or t9enty@seven years after the sale, part cularly 9hen 9e cons der that the +ropert es are located n the ' ty of MaFat . More pert nent are %a1 Declarat ons No. 18612<6 and No. 1861<,<5 both ssued n 15>2, presented by pet t oners. %hese ta1 declarat ons placed the assessed value of both +ropert es at +1>,1>0. 'ompared to th s, the pr ce of+1>,000 cannot be cons dered grossly nade=uate, much less so shocF ng to the consc ence40 as to -ust fy the sett ng as de of the Deed of &ale. "espondents ne1t contend that the vendees d d not maFe the mortgage payments on the +ropert es. "espondents allege that the rents pa d by the tenants leas ng port ons of the +ropert es 9ere suff c ent to cover the mortgage payments to DE+ and +NE. Aga n, th s argument does not help respondentsJ cause. Assum ng that the vendees fa led to pay the full pr ce stated n the Deed of &ale, such part al fa lure 9ould not render the sale vo d. $n .uena'entura '. *ourt o! Appeals,41 the 'ourt held?

111 $f there s a meet ng of the m nds of the part es as to the pr ce, t-e contract of sale is Aalid, despite the manner of payment, or even the reac- of t-at manner of payment. 111 $t s not the act of payment of pr ce that determ nes the val d ty of a contract of sale. +ayment of the pr ce has noth ng to do 9 th the perfect on of the contract. +ayment of the pr ce goes nto the performance of the contract. 7a lure to pay the cons derat on s d fferent from lacF of cons derat on. %he former results n a r ght to demand the fulf llment or cancellat on of the obl gat on under an e1 st ng val d contract 9h le the latter prevents the e1 stence of a val d contract. /Emphas s suppl ed.0 Ne ther 9as t sho9n that the rentals from tenants 9ere suff c ent to cover the mortgage payments. %he part es to th s case st pulated to only one tenant, a certa n 7eder co M. +uno, 9ho supposedly leased a room on the +ropert es for +<00 per month from 1552 to 1554.42 %h s s hardly s gn f cant, 9hen 9e cons der that the mortgage 9as fully pa d by 1524. $ndeed, the fact that the +ropert es 9ere mortgaged to DE+ and +NE nd cates that the con-ugal partnersh p, or at least Maur c o, 9as short of funds. +et t oners po nt out that they 9ere duly employed and had the f nanc al capac ty to buy the +ropert es n 1520. "espondents d d not refute th s. +et t oners presented 22 rece pts4< sho9 ng the mortgage payments made to +NE and DE+, and the "elease of the "eal Estate Mortgage 44 /,Mortgage "elease,0 dated 8 Apr l 1524. %rue, these documents all bear Maur c oJs name. Bo9ever, th s tends to support, rather than detract from, pet t oner@vendeesJ e1planat on that they n t ally gave the mortgage payments d rectly to Maur c o, and then later d rectly to the banFs, 9 thout formally adv s ng the banF of the sale. %he last < mortgage rece pts and the Mortgage "elease 9ere all ssued n Maur c oJs name even after h s death n 1520. Dbv ously, Maur c o could not have secured the Mortgage "elease and made these last payments. $resumption of Regularity and !urden of $roof %he Deed of &ale 9as notar Aed and, as cert f ed by the "eg onal %r al 'ourt of Man la, entered n the notar al booFs subm tted to that court. As a document acFno9ledged before a notary publ c, the Deed of &ale en-oys the presumpt on of regular ty48 and due e1ecut on.4> Absent ev dence that s clear, conv nc ng and more than merely preponderant, the presumpt on must be upheld. 42 "espondentsJ ev dence n th s case s not even preponderant. "espondentsJ allegat ons, test mony and bare den als cannot preva l over the documentary ev dence presented by pet t oners. %hese documents K the Deed of &ale and the #+A 9h ch are both notar Aed, the rece pts, the Mortgage "elease and the 15>2 ta1 declarat ons over the +ropert es K support pet t onersJ account of the sale. As the part es challeng ng the regular ty of the Deed of &ale and alleg ng ts s mulat on, respondents had the burden of prov ng these charges. 46 "espondents fa led to d scharge th s burden. 'onse=uent ally, the Deed of &ale stands.

=n the $artition of the $roperty Nevertheless, th s 'ourt f nds t proper to grant the part t on of the +ropert es, sub-ect to mod f cat on. +et t oners have cons stently cla med that the r father s one of the vendees 9ho bought the +ropert es. Cendees El Aabeth and Dfel a both test f ed that the ,"oland A. Eravo, n the Deed of &ale s the r father, 45 although the r brother, "oland Eravo, Jr., made some of the mortgage payments. +et t onersJ counsel, Atty. +aggao, made the same clar f cat on before the tr al court. 80 As "oland Eravo, &r. s also the father of respondent Ed9ard Eravo, Ed9ard s thus a compulsory he r of "oland Eravo, and ent tled to a share, along 9 th h s brothers and s sters, n h s fatherJs port on of the +ropert es. $n short, Ed9ard and pet t oners are co@o9ners of the +ropert es. As such, Ed9ard can r ghtfully asF for the part t on of the +ropert es. Any co@ o9ner may demand at any t me the part t on of the common property unless a co@o9ner has repud ated the co@o9nersh p. 81 %h s act on for part t on does not prescr be and s not sub-ect to laches. 82 W5E$E:/$E, 9e "ECE"&E the Dec s on of 21 December 2001 of the 'ourt of Appeals n 'A@#.". 'C No. >2254. (e "E$N&%A%E the Dec s on of 11 May 2000 of the "eg onal %r al 'ourt of MaFat , Eranch No. 1<5, n ' v l 'ase No. 52@1<2, declar ng CA!$D the Deed of &ale 9 th Assumpt on of Mortgage dated 26 Dctober 1520, 9 th the follo9 ng MDD$7$'A%$DN&? 1. (e #"AN% -ud c al part t on of the sub-ect +ropert es n the follo9 ng manner? a. +et t oner !$!H E!$LAEE%B E"ACD@#3E""E"D s ent tled to one@th rd /1M<0 of the +ropert esI b. +et t oner D7E!$A E"ACD@U3$E&%A& s ent tled to one@th rd /1M<0 of the +ropert esI and c. %he rema n ng one@th rd /1M<0 port on of the +ropert es should be d v ded e=ually bet9een the ch ldren of "D!AND E"ACD. 2. %he other he rs of "D!AND E"ACD must re mburse "D!AND E"ACD, J". for 9hatever e1penses the latter ncurred n pay ng for and secur ng the release of the mortgage on the +ropert es. &D D"DE"ED. Dav de, Jr., '.J., /'ha rman0, Uu sumb ng, Hnares@&ant ago, and AAcuna, JJ., concur.

:ootnotes

Also referred to n the records as Een-am n Eravo. 3nder "ule 48 of the "ules of ' v l +rocedure.

<

"ollo, pp. <20@<6>. +enned by Assoc ate Just ce E enven do !. "eyes 9 th Assoc ate Just ces /no9 &upreme 'ourt Assoc ate Just ce0 'anc o '. #arc a and "oberto A. Earr os concurr ng.
4

:#id., pp. <22@<<5@A. +enned by Judge 7lorent no A. %uason, Jr.

Appears n the lo9er courtsJ dec s ons and n %'% Nos. 86555 and 85000 as ,&emona., Bo9ever, the lady herself s gned her name as , Simona Andaya@de Eravo, n the #+A. ,& mona Andaya, s also the name of the surv v ng spouse on Maur c oJs death cert f cate.
>

E1h b t ,8, to ,8@',, "ecords, pp. 222@226. %he relevant port ons of the #+A state? 111 %hat $, &$MDNA ANDAHA DE E"ACD, of legal age, marr ed to Maur c o Eravo and a res dent of 2154 Evangel sta &t., MaFat , " Aal, +h l pp nes, do hereby appo nt, name and const tute my husband Maur c o Eravo, of legal age, res d ng at the same address, to be my true and la9ful attorney to act n, manage, and conduct all my affa rs, and for that purpose n my name and on my behalf to do and e1ecute all or any of the follo9 ng acts, deeds and th ngs, to 9 t? 1. %o e1erc se general control and superv s on over my bus ness and property of every F nd n the +h l pp nes, and to act as my general representat ve and agent, 9 th full author ty to buy, sell, negot ate and contract for me and n my behalf. 111 <. %o buy or other9 se ac=u re, to h re or lease, and to pledge, mortgage or other9 se hypothecate, sell, ass gn and d spose of any and all of my property, real, personal or m 1ed, of any F nd 9hatsoever and 9heresoever s tuated, or any nterest there n, upon such terms and cond t ons and under such covenants as my sa d attorney shall deem f t and proper, and to e1ecute n my name any and all papers relat ng thereto, and to s gn, e1ecute, acFno9ledge and del ver any and all agreements or other 9r t ngs therefore, or n any 9ay connected there9 th or 9 th my bus ness or property. 111
2

E1h b ts ,2, and ,6,, i#id., pp. 260@261. E1h b t ,4,, i#id., p. 22>. %he Deed of &ale states n part?

*ND( A!! MEN EH %BE&E +"E&EN%&? %hat $, MA3"$'$D E"ACD, of legal age, 7 l p no, marr ed to &EMDNA ANDAHA, and res dent of MaFat , " Aal, +h l pp nes, for and n cons derat on of the amount of

DNE %BD3&AND +E&D& /+1,000.000, +h l pp ne 'urrency, and for other valuable cons derat ons, rece ved from "D!AND A. E"ACD, D7E!$A A. E"ACD and E!$LAEE%B E"ACD, l Fe9 se of legal age, 7 l p nos, s ngle and res dents of MaFat , " Aal, +h l pp nes, to my ent re sat sfact on, do by these presents 'EDE, &E!!, %"AN&7E" and 'DNCEH unto sa d "D!AND A. E"ACD, D7E!$A A. E"ACD and E!$LAEE%B E"ACD, all my t tle, r ghts and nterests to t9o parcels of land, more part cularly descr bed as follo9s? %.'.%. No. 86555 111 %.'.%. No. 85006 /s c0 111 111 %he cond t on of th s sale s that the vendees "D!AND A. E"ACD, D7E!$A A. E"ACD and E!$LAEE%B E"ACD 9 ll assume the mortage debt pertao n ng /s c0 to sa d parcels of lands 9 th the +h l pp ne Nat onal EanF and Development EanF of the +h l pp nes. 111 Note that the Deed of &ale m staFenly refers to %.'.%. No. 8500 =I the t tle over the second lot s actually %.'.%. No. 8500.. Bo9ever, the property descr pt on =uoted under ,%.'.%. No. 85006, s dent cal to the descr pt on of the property under %.'.%. No. 85000. No one d sputes that ,%.'.%. 85006, actually perta ns to %.'.%. No. 85000 and both part es have treated th s as a mere typograph cal error.
5

E1h b t ,>,, "ecords, p. 225. "ecords, p. 20<. "ollo, p. <<5@A. :#id., p. <68. :#id., p. 44<. :#id., p. 820. 'hangco v. 'ourt of Appeals, 425 +h l. <<> /20020. !ara, et al. v. Del "osar o, Jr. 54 +h l. 226 /15840.

10

11

12

1<

14

18

1>

12

%he part es and the lo9er courts proceeded on the assumpt on that the +ropert es 9ere ac=u red after <0 August 1580 because %'% Nos. 86555 and 85000 9ere ndeed ssued to Maur c o and & mona on 2< May 1586. Bo9ever, Maur c o and & monaJs con-ugal partnersh p began long before. Ey (orld (ar $$, at least one of the r ch ldren, ! ly Eravo D aA, 9as marr ed and 9 th ch ld.

16

See $sabela 'olleges, $nc. v. Be rs of N eves %olent no@" vera, <52 +h l. 588 /20000.
15

Cera 'ruA v. 'alderon, #.". No. 1>0246, 14 July 2004, 4<4 &'"A 8<4I Be rs of $gnac a Agu lar@"eyes v. M -ares, #.". No. 14<62>, 26 August 200<, 410 &'"A 52I Be rs of 'hr st na Ayuste v. 'ourt of Appeals, <22 +h l. <20 /15550. Note that under the more recent Art cle 124 of the 7am ly 'ode, the sale of con-ugal partnersh p property 9 thout spousal consent s cons dered vo d.
20

Maestrado v. 'ourt of Appeals, <64 +h l. 416 /20000I !oyola v. 'ourt of Appeals, <6< +h l. 121 /20000.
21

%&N, 18 &eptember 1555, pp. >1@>2. Dav d Jr. test f ed as follo9s?

Atty. +aggao? U? Do you Fno9 9hen your grandparent, your grandfather Maur c o d edP ( tness? A? Hes, s r. Atty. +aggao? U? (henP ( tness? A? November 20, 152<, s r. Atty. +aggao? U? And after 152<, 9as t not a fact that you and your grandmother &emona st ll d d not go bacF to MaFat and cont nued to rent n +as g ' tyP ( tness A? Hes, s r.
22

! m + n v. ! ao %an, et al., 200 +h l. >68 /15620. :#id. #.". No. 1022<2, 21 August 155>, 2>0 &'"A 85<. E1h b t ,8, to ,8@',, "ecords, pp. 222@226.

2<

24

28

2>

Euenaventura v. 'ourt of Appeals, #.". No. 12><2>, 20 November 200<, 41> &'"A 2><.
22

' v l 'ode, Art cle 10>1. "amos v. Be rs of Bonor o "amos, &r., 4<1 +h l. <<2 /20020.

26

25

' v l 'ode, Art cles 1<82 and 1405. Supra note 2>. !oyola v. 'ourt of Appeals, <6< +h l. 121 /20000. ' v l 'ode, Art cle 1420. :#id., Art cle 1<88. E1h b t ,',, records, p. 2<0. E1h b t ,D,, i#id., p. 2<1. E1h b t ,E,, i#id., p. 242. E1h b t ,7, to ,7@6,, i#id., pp. 24<@281. E1h b t ,11,, i#id., p. <06. E1h b t ,11@a,, i#id., p. <05.

<0

<1

<2

<<

<4

<8

<>

<2

<6

<5

40

"osales v. 'ourt of Appeals, #.". No. 1<28>>, 26 7ebruary 2001, <8< &'"A 125.
41

Supra note 2>. "ecords, p. <40. E1h b ts ,5, to ,5@ppp, and ,10, to ,10@m,, i#id., pp. 26<@<02. E1h b t ,12,, i#id., p. <10. !lana v. 'ourt of Appeals, 41< +h l. <25 /20010. Eernardo v. 'ourt of Appeals, <62 +h l. 2<> /20000. !lana v. 'ourt of Appeals, supra note 48. Supra, note 26. %&N, 2 December 1555, p. 20. El Aabeth test f ed that?

42

4<

44

48

4>

42

46

45

Atty. +aggao U? (hat about th s "oland A. Eravo, 9ho s that personP ( tness A? %hat s our father. %&N, 6 7ebruary 2000, pp. 25@<0. Dfel a test f ed that? 'ourt?

Ms. Dfel a Eravo, thereJs :a; "oland Eravo here, n the Deed of &ale n /s c0 assumpt on of mortgage, 9ho s th s "oland Eravo, s he "oland Eravo, &r., or Jr.P ( tness A? %hat s &r., Hour Bonor. 111 Atty. 'endaQa? &o the vendee s your father, and also, t9o /s c0 of your s sters, ! lyP ( tness A? Hes, s r.
80

%&N, 18 &eptember 1555, pp. 45@81. De #u a v. 'ourt of Appeals, #.". No. 1206>4, 6 Dctober 200<, 41< &'"A 114. :#id.

81

82

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. #701==< /cto er 1., 1<=2 +$)')()*/ S)ASA( and 'A$%E#)N/ S)ASA(, pet t oners, vs. )N(E$'E!)A(E A++E##A(E %/&$( and (E$ES)(A NA%)AN%EN/, respondents. $aya&al, 9imenez & Associates for petitioners. 3elson A. %oyola for private respondent.

G&()E$$E6, J$., J.: %h s s a pet t on for rev e9 of the dec s on of the $ntermed ate Appellate 'ourt aff rm ng n toto the -udgment of the 'ourt of 7 rst $nstance of Man la, Eranch GG$, 9h ch ordered the pet t oner to pay respondent the th rty percent /<0R0 comm ss on on 18,>>> p eces of +h l pp ne flags 9orth +5<>,5>0.00, moral damages, attorney)s fees and the costs of the su t. &omet me n 1524, respondent %eres ta Nac anceno succeeded n conv nc ng off c als of the then Department of Educat on and 'ulture, here nafter called Department, to purchase 9 thout publ c b dd ng, one m ll on pesos 9orth of nat onal flags for the use of publ c schools throughout the country. %he

respondent 9as able to e1ped te the approval of the purchase by hand@carry ng the d fferent ndorsements from one off ce to another, so that by the f rst 9eeF of &eptember, 1524, all the legal re=u rements had been compl ed 9 th, e1cept the release of the purchase orders. (hen Nac anceno 9as nformed by the 'h ef of the Eudget D v s on of the Department that the purchase orders could not be released unless a formal offer to del ver the flags n accordance 9 th the re=u red spec f cat ons 9as f rst subm tted for approval, she contacted the o9ners of the 3n ted 7lag $ndustry on &eptember 12, 1524. %he ne1t day, after the transact on 9as d scussed, the follo9 ng document /E1h b t A0 9as dra9n up? Mrs. %ess e Nac anceno, %h s s to formal Ae our agreement for you to represent 3n ted 7lag $ndustry to deal 9 th any ent ty or organ Aat on, pr vate or government n connect on 9 th the marFet ng of our products@flags and all ts accessor es. 7or your serv ce, you 9 ll be ent tled to a comm ss on of th rty /<0R0 percent. & gned Mr. +r m t ve & asat D9ner and #en. Manager Dn Dctober 1>, 1524, the f rst del very of 2,5<< flags 9as made by the 3n ted 7lag $ndustry. %he ne1t day, on Dctober 12, 1524, the respondent)s author ty to represent the 3n ted 7lag $ndustry 9as revoFed by pet t oner +r m t vo & asat. Accord ng to the f nd ngs of the courts belo9, & asat, after rece v ng the payment of +4>5,560.00 on Dctober 2<, 1524 for the f rst del very, tendered the amount of +2<,500.00 or f ve percent /8R0 of the amount rece ved, to the respondent as payment of her comm ss on. %he latter allegedly protested. &he refused to accept the sa d amount ns st ng on the <0R comm ss on agreed upon. %he respondent 9as preva led upon to accept the same, ho9ever, because of the assurance of the pet t oners that they 9ould pay the comm ss on n full after they del vered the other half of the order. %he respondent states that she later on learned that pet t oner & asat had already rece ved payment for the second del very of 2,6<< flags. (hen she confronted the pet t oners, they vehemently den ed rece pt of the payment, at the same t me cla m ng that the respondent had no part c pat on 9hatsoever 9 th regard to the second del very of flags and that the agency had already been revoFed. %he respondent or g nally f led a compla nt 9 th the 'ompla nts and $nvest gat on Dff ce n MalacaQang but 9hen noth ng came of the compla nt, she f led an act on n the 'ourt of 7 rst $nstance of Man la to recover the follo9 ng comm ss ons? 28R, as balance on the f rst del very and <0R, on the second del very. %he tr al court dec ded n favor of the respondent. %he d spos t ve port on of the dec s on reads as follo9s?

(BE"E7D"E, -udgment s hereby rendered sentenc ng +r m t vo & asat to pay to the pla nt ff the sum of +261,566.00, m nus the sum +2<,500.00, 9 th legal nterest from the date of th s dec s on, and order ng the defendants to pay -o ntly and sol dar ly the sum of +28,000.00 as moral damages, and +28,000.00 as attorney)s fees, also 9 th legal nterest from the date of th s dec s on, and the costs. %he dec s on 9as aff rmed n toto by the $ntermed ate Appellate 'ourt. After the r mot on for recons derat on 9as den ed, the pet t oners 9ent to th s 'ourt on a pet t on for rev e9 on August >, 1564. $n assa l ng the appellate court)s dec s on, the pet t on tenders the follo9 ng arguments? f rst, the author Aat on maF ng the respondent the pet t oner)s representat ve merely states that she could deal 9 th any ent ty n connect on 9 th the marFet ng of the r products for a comm ss on of <0R. %here 9as no spec f c author Aat on for the sale of 18,>>> +h l pp ne flags to the DepartmentI second, there 9ere t9o transact ons nvolved ev denced by the separate purchase orders and separate del very rece pts, E1h b t >@' for the purchase and del ver on Dctober 1>, 1524, and E1h b ts 2 to 2@', for the purchase and del very on November >, 1524. %he revocat on of agency effected by the part es 9 th mutual consent on Dctober 12, 1524, therefore, forecloses the respondent)s cla m of <0R comm ss on on the second transact onI and last, there 9as no bas s for the grant ng of attorney)s fees and moral damages because there 9as no sho9 ng of bad fa th on the part of the pet t oner. $t 9as respondent 9ho sho9ed bad fa th n deny ng hav ng rece ved her comm ss on on the f rst del very. %he pet t oner)s countercla m, therefore, should have been granted. %h s pet t on 9as n t ally d sm ssed for lacF of mer t n a m nute resolut on.Dn a mot on for recons derat on, ho9ever,th s 'ourt g ve due course to the pet t on on November 14, 1564. After a careful rev e9 of the records, 9e are constra ned to susta n 9 th some mod f cat ons the dec s on of the appellate court. (e f nd respondent)s argument regard ng respondent)s ncapac ty to represent them n the transact on 9 th the Department untenable. %here are several F nds of agents. %o =uote a commentator on the matter? An agent may be /10 un versal? /20 general, or /<0 spec al. A un versalI agent s one author Aed to do all acts for h s pr nc pal 9h ch can la9fully be delegated to an agent. &o far as such a cond t on s poss ble, such an agent may be sa d to have un versal author ty. /Mec. &ec. 860. A general agent s one author Aed to do all acts perta n ng to a bus ness of a certa n F nd or at a part cular place, or all acts perta n ng to a bus ness of a part cular class or ser es. Be has usually author ty e ther e1pressly conferred n general terms or n effect made general by the usages, customs or nature of the bus ness 9h ch he s author Aed to transact.

An agent, therefore, 9ho s empo9ered to transact all the bus ness of h s pr nc pal of a part cular F nd or n a part cular place, 9ould, for th s reason, be ord nar ly deemed a general agent. /Mec &ec. ,<00. A spec al agent s one author Aed to do some part cular act or to act upon some part cular occas on. l e acts usually n accordance 9 th spec f c nstruct ons or under l m tat ons necessar ly mpl ed from the nature of the act to be done. /Mec. &ec. >10 /+ad lla, ' v l !a9 %he ' v l 'ode Annotated, Col. C$, 15>5 Ed t on, p. 2040. Dne does not have to undertaFe a close scrut ny of the document embody ng the agreement bet9een the pet t oners and the respondent to deduce that the )latter 9as nst tuted as a general agent. $ndeed, t can eas ly be seen by the 9ay general 9ords 9ere employed n the agreement that no restr ct ons 9ere ntended as to the manner the agency 9as to be carr ed out or n the place 9here t 9as to be e1ecuted. %he po9er granted to the respondent 9as so broad that t pract cally covers the negot at ons lead ng to, and the e1ecut on of, a contract of sale of pet t oners) merchand se 9 th any ent ty or organ Aat on. %here s no mer t n pet t oners) allegat ons that the contract of agency bet9een the part es 9as entered nto under fraudulent representat on because respondent ,9ould not d sclose the agency 9 th 9h ch she 9as supposed to transact and made the pet t oner bel eve that she 9ould be deal ng 9 th %he C sayas,, and that ,the pet t oner had Fno9n of the transact ons andMor pro-ect for the sa d purchase of the +h l pp ne flags by the Department of Educat on and 'ulture and prec sely t 9as the one be ng follo9ed up also by the pet t oner., $f the c rcumstances 9ere as cla med by the pet t oners, they 9ould have e1erted efforts to protect the r nterests by l m t ng the respondent)s author ty. %here 9as noth ng to prevent the pet t oners from stat ng n the contract of agency that the respondent could represent them only n the C sayas. Dr to state that the Department of Educat on and 'ulture and the Department of Nat onal Defense, 9h ch alone 9ould need a m ll on pesos 9orth of flags, are outs de the scope of the agency. As the tr al court op ned, t s ncred ble that they could be so careless after be ng n the bus ness for f fteen years. A card nal rule of ev dence embod ed n &ect on 2 "ule 1<0 of our "ev sed "ules of 'ourt states that ,9hen the terms of an agreement have been reduced to 9r t ng, t s to be cons dered as conta n ng all such terms, and, therefore, there can be bet9een the part es and the r successors@ n@ nterest, no ev dence of the terms of the agreement other than the contents of the 9r t ng,, e1cept n cases spec f cally ment oned n the same rule. +et t oners have fa led to sho9 that the r agreement falls under any of these e1cept ons. %he respondent 9as g ven ample author ty to transact 9 th the Department n behalf of the pet t oners. E=ually 9 thout mer t s the pet t oners) propos t on that the transact on nvolved t9o separate contracts because there 9ere t9o purchase orders and t9o del ver es. %he pet t oners) ev dence s overcome by other p eces of ev dence prov ng that there 9as only one transact on.

%he ndorsement of then Ass stant E1ecut ve &ecretary "oberto "eyes to the Eudget 'omm ss on on &eptember <, 1524 /E1h b t ,',0 attests to the fact that out of the total budget of the Department for the f scal year 1528, ,+1,000,000.00 s for the purchase of nat onal flags., %h s s also reflected n the 7 nanc al and (orF +lan "e=uest for Allotment /E1h b t ,7,0 subm tted by &ecretary Juan Manuel for f scal year 1528 9h ch ho9ever, d v ded the allocat on and release of the funds nto three, correspond ng to the second, th rd, and fourth =uarters of the sa d year. !ater correspondence bet9een the Department and the Eudget 'omm ss on /E1h b ts ,D, and ,E,0 sho9 that the f rst allotment of +800.000.00 9as released dur ng the second =uarter. Bo9ever, due to the necess ty of furn sh ng all of the publ c schools n the country 9 th the +h l pp ne flag, &ecretary Manuel re=uested for the mmed ate release of the programmed allotments ntended for the th rd and fourth =uarters. %hese c rcumstances e1pla n 9hy t9o purchase orders and t9o del ver es had to be made on one transact on. %he pet t oners) ev dence does not necessar ly prove that there 9ere t9o separate transact ons. E1h b t ,>, s a general ndorsement made by &ecretary Manuel for the purchase of the nat onal flags for publ c schools. $t conta ns no reference to the number of flags to be ordered or the amount of funds to be released. E1h b t ,2, s a letter re=uest for a ,s m lar author ty, to purchase flags from the 3n ted 7lag $ndustry. %h s 9as, ho9ever, 9r tten by Dr. Narc so Albarrac n 9ho 9as appo nted Act ng &ecretary of the Department after &ecretary Manuel)s tenure, and 9ho may not have Fno9n the real nature of the transact on. $f the contracts 9ere separate and d st nct from one another, the 9hole or at least a substant al part of the government)s supply procurement process 9ould have been repeated. $n th s case, 9hat 9ere ssued 9ere mere ndorsements for the release of funds and author Aat on for the ne1t purchase. & nce only one transact on 9as nvolved, 9e deny the pet t oners) content on that respondent Nac anceno s not ent tled to the st pulated comm ss on on the second del very because of the revocat on of the agency effected after the f rst del very. %he revocat on of agency could not prevent the respondent from earn ng her comm ss on because as the tr al court op ned, t came too late, the contract of sale hav ng been already perfected and partly e1ecuted. $n Macondray & .o. v. Sellner /<< +h l. <20, <220, a case analogous to th s one n pr nc ple, th s 'ourt held? (e do not mean to =uest on the general doctr ne as to the po9er of a pr nc pal to revoFe the author ty of h s agent at 9 ll, n the absence of a contract f 1 ng the durat on of the agency /sub-ect, ho9ever, to some 9ell def ned e1cept ons0. Dur rul ng s that at the t me f 1ed by the manager of the pla nt ff company for the term nat on of the negot at ons, the defendant real estate agent had already earned the comm ss ons agreed upon, and could not be depr ved thereof by the arb trary act on of the pla nt ff company n decl n ng to e1ecute the contract of sale for some reason personal to tself.

%he pr nc pal cannot depr ve h s agent of the comm ss on agreed upon by cancell ng the agency and, thereafter, deal ng d rectly 9 th the buyer. /$nfante v. 'unanan, 5< +h l. >510. %he appellate courts c tat on of ts prev ous rul ng n 0eim#rod et al. v. %edesma /'.A. 45 D.#. 18020 s correct? %he appellee s ent tled to recovery. No c tat on s necessary to sho9 that the general la9 of contracts the e=u table pr nc ple of estoppel. and the e1pense of another, uphold payment of compensat on for serv ces rendered. %here s mer t, ho9ever, n the pet t oners) content on that the agent)s comm ss on on the f rst del very 9as fully pa d. %he ev dence does not susta n the respondent)s cla m that the pet t oners pa d her only 8R and that the r r ght to collect another 28R comm ss on on the f rst del very must be upheld. (hen respondent Nac anceno asFed the Malacanang 'ompla nts and $nvest gat on Dff ce to help her collect her comm ss on, her statement under oath referred e1clus vely to the <0R comm ss on on the second del very. %he statement 9as emphat c that ,no9, her demand 9as for the <0R comm ss on on the /second0 release of +4>5,560.00. %he demand letter of the respondent)s la9yer dated November 1<, 1564 asFed pet t oner & asat only for the <0R comm ss on due from the second del very. %he fact that the respondent demanded only the comm ss on on the second del very 9 thout reference to the alleged unpa d balance 9h ch 9as only sl ghtly less than the amount cla med can only mean that the comm ss on on the f rst del very 9as already fully pa d, 'ons der ng the s Aeable sum nvolved, such an om ss on s too glar ngly rem ss to be regarded as an overs ght. Moreover, the respondent)s author Aat on letter /E1h b t ,8,0 bears her s gnature 9 th the hand9r tten 9ords ,7ully +a d,, nscr bed above t. %he respondent contested her s gnature as a forgery, Band9r t ng e1perts from t9o government agenc es test f ed on the matter. %he reason g ven by the tr al court n rul ng for the respondent s too fl msy to 9arrant a f nd ng of forgery. %he court stated that n th rteen documents presented as e1h b ts, the pr vate respondent s gned her name as ,%ess e Nac anceno, 9h le n th s part cular nstance, she s gned as ,%. Nac anceno., %he stated bas s s nade=uate to susta n the respondent)s allegat on of forgery. A var ance n the manner the respondent s gned her name can not be cons dered as conclus ve proof that the =uest oned s gnature s a forgery. %he mere fact that the respondent s gned th rteen documents us ng her full name does not rule out the poss b l ty of her hav ng s gned the notat on ,7ully +a d,, 9 th her n t al for the g ven came and the surname 9r tten n full. (hat she 9as s gn ng 9as a mere acFno9ledgment. %h s leaves the e1pert test mony as the sole bas s for the verd ct of forgery.

$n support of the r allegat on of full payment as ev denced by the s gned author Aat on letter /E1h b t ,8@A,0, the pet t oners presented as 9 tness Mr. 7ranc sco 'ruA. Jr., a sen or document e1am ner of the +h l pp ne 'onstabulary 'r me laboratory. $n rebuttal, the respondent presented Mr. Arcad o "amos, a -un or document e1am ner of the Nat onal Eureau of $nvest gat on. (h le the e1perts test f ed n a c v l case, the pr nc ples n cr m nal cases nvolv ng forgery are appl cable. 7orgery cannot be presumed. $t must be proved. $n !orromeo v. .ourt of Appeals /1<1 &'"A <16, <2>0 9e held that? 111 111 111 ... (here the ev dence, as here, g ves r se to t9o probab l t es, one cons stent 9 th the defendant)s nnocence and another nd cat ve of h s gu lt, that 9h ch s favorable to the accused should be cons dered. %he const tut onal presumpt on of nnocence cont nues unt l overthro9n by proof of gu lt beyond reasonable doubt, 9h ch re=u res moral certa nty 9h ch conv nces and sat sf es the reason and consc ence of those 9ho are to act upon t. /+eople v. 'lores, et al., 128 &'"A >2I +eople v. Eaut sta, 61 +h l. 260. (e ruled n another case that 9here the supposed e1pert)s test mony 9ould const tute the sole ground for conv ct on and there s e=ually conv nc ng e1pert test mony to the contrary, the const tut onal presumpt on of nnocence must preva l. /!orenAo #a. 'esar v. Bon. &and ganbayan and +eople of the +h l pp nes, 1<4 &'"A 1080. $n the present case, the c rcumstances earl er ment oned taFen 9 th the test mony of the +' sen or document e1am ner lead us to rule aga nst forgery. (e also rule aga nst the respondent)s allegat on that the pet t oners acted n bad fa th 9hen they revoFed the agency g ven to the respondent. 7raud and bad fa th are matters not to be presumed but matters to be alleged 9 th suff c ent facts. %o support a -udgment for damages, facts 9h ch -ust fy the nference of a lacF or absence