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.

<

>

10

11

12

1<

14

18

1>

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

2<

24

28

2>

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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<1

<2

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<4

<8

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<2

<6

<5

+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

%/N%5)(A %A$+)/ '/$A#ES Assoc ate Just ce

/No +art0 AN(/N)/ E!&A$!/ 9. NA%5&$AVV Assoc ate Just ce

(E$ES)(A J. #E/NA$!/7!E %AS($/ Assoc ate Just ce

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Dn off c al leave !)/S!A!/ '. +E$A#(AV Assoc ate Just ce 'A$)AN/ %. !E# %AS()##/ Assoc ate Just ce 'A$()N S. *)##A$A'A, J$. Assoc ate Just ce

#&%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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:10; :11; :12;

:1<; :14; :18; :1>; :12; :16;

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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:22; :2<; :24; :28; :2>; :22; :26; :25; :<0; :<1; :<2; :<<;

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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 of good fa th must be alleged and proven. /Eacolod@Murc a M ll ng 'o., $nc. vs. 7 rst 7armers M ll ng 'o., $nc., Etc., 10< &'"A 4<>0. %here s no ev dence on record from 9h ch to conclude that the revocat on of the agency 9as del berately effected by the pet t oners to avo d payment of the respondent)s comm ss on. (hat appears before us s only the pet t oner)s use n court of such a factual allegat on as a defense aga nst the respondent)s cla m. %h s alone does not per se maFe the pet t oners gu lty of bad fa th for that defense should have been fully l t gated. Moral damages cannot be a9arded n the absence of a 9rongful act or om ss on or of fraud or bad fa th. /" N E &urety N $nsurance 'o., $nc. vs. $ntermed ate Appellate 'ourt, 125 &'"A 2<>0.

(e therefore, rule that the a9ard of +28,000.00 as moral damages s 9 thout bas s. %he add t onal a9ard of +28,000.00 damages by 9ay of attorney)s fees, 9as g ven by the courts belo9 on the bas s of Art cle 2206, +aragraph 2, of the ' v l 'ode, 9h ch prov des? ,(hen the defendant)s act or om ss on has compelled the pla nt ff to l t gate 9 th th rd persons or to ncur e1penses to protect h s nterestsI, attorney)s fees may be a9arded as damages. /+ rovano et al. v. De la "ama &teamsh p 'o., 5> +h l. <<80. %he underly ng c rcumstances of th s case lead us to rule out any a9ard of attorney)s fees. 7or one th ng, the respondent d d not come to court 9 th completely clean hands. 7or another, the pet t oners apparently bel eved they could legally revoFe the agency n the manner they d d and deal d rectly 9 th educat on off c als handl ng the purchase of +h l pp ne flags. %hey had reason to s ncerely bel eve they d d not have to pay a comm ss on for the second del very of flags. (e cannot close th s case 9 thout comment ng adversely on the ne1pl cably strange procurement pol c es of the Department of Educat on and 'ulture n ts purchase of +h l pp ne flags. %here s no reason 9hy a shocF ng <0R of the ta1payers) money should go to an agent or fac l tator 9ho had no flags to sell and 9hose only 9orF 9as to secure and handcarry the ndorsements of educat on and budget off c als. %here are only a fe9 manufacturers of flags n our country 9 th the pet t oners cla m ng to have suppl ed flags for our publ c schools on earl er occas ons. $f publ c b dd ng 9as deemed unnecessary, the Department should have negot ated d rectly 9 th flag manufacturers. 'ons der ng the sad pl ght of underpa d and over9orFed classroom teachers 9hose p t ful salar es and allo9ances cannot somet mes be pa d on t me, a +<00,000.00 fee for a +1,000,000.00 purchase of flags s not only clearly unnecessary but a scandalous 9aste of publ c funds as 9ell. (BE"E7D"E, the dec s on of the respondent court s hereby MDD$7$ED. %he pet t oners are ordered to pay the respondent the amount of DNE B3ND"ED 7D3"%H %BD3&AND N$NE B3ND"ED AND N$NE%H 7D3" +E&D& /+140,554.000 as her comm ss on on the second del very of flags 9 th legal nterest from the date of the tr al court)s dec s on. No pronouncement as to costs. &D D"DE"ED. Relova, De la 8uente and $ata"o, 99., concur. Melencio<0errera, 9., is on leave. $lana, 9., too' no part. 7eehan'ee, 9., %et copy hereof #e furnished the .ommission on Audit for appropriate remedial action, as it may ta'e.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. #72144< !ecem er 3<, 1<=4 A)$ :$AN%E, pet t oner, vs. 5/N/$A9#E %/&$( /: A++EA#S, J/SE G. GANA C!eceasedD, %#A$A A. GANA, $A'/N GANA, 'AN&E# GANA, 'A$)A (E$ESA GANA, $/9E$(/ GANA, JA)'E JA*)E$ GANA, %#/()#!E *!A. !E A$E*A#/, and E')#8 SAN J&AN, respondents. !en"amin S. 4alte for petitioner. 3apoleon 2arcia for private respondents.

'E#EN%)/75E$$E$A, J.: $n th s pet t on for rev e9 on certiorari, pet t oner A$" 7"AN'E assa ls the Dec s on of then respondent 'ourt of Appeals 1 promulgated on 18 December 1560 n 'A@#.". No. 861>4@", ent tled ,9ose 2. 2ana, et al. vs. Sociedad 3acionale Air 8rance,, 9h ch reversed the %r al 'ourt)s -udgment d sm ss ng the 'ompla nt of pr vate respondents for damages ar s ng from breach of contract of carr age, and a9ard ng nstead +50,000.00 as moral damages. &omet me n 7ebruary, 1520, the late Jose #. #ana and h s fam ly, number ng n ne /the #ANA&0, purchased from A$" 7"AN'E through $mper al %ravels, $ncorporated, a duly author Aed travel agent, n ne /50 ,open@dated, a r passage t cFets for the Man laMDsaFaM%oFyoMMan la route. %he #ANA& pa d a total of 3&S2,826.68 for the r economy and f rst class fares. &a d t cFets 9ere bought at the then preva l ng e1change rate of +<.50 per 3&S1.00. %he #ANA& also pa d travel ta1es of +100.00 for each passenger. Dn 24 Apr l 1520, A$" 7"AN'E e1changed or subst tuted the aforement oned t cFets 9 th other t cFets for the same route. At th s t me, the #ANA& 9ere booFed for the Man laMDsaFa segment on A$" 7"AN'E 7l ght 164 for 6 May 1520, and for the %oFyoMMan la return tr p on A$" 7"AN'E 7l ght 162 on 22 May 1520. %he aforesa d t cFets 9ere val d unt l 6 May 1521, the date 9r tten under the pr nted 9ords ,Non valuable apres de /mean ng, ,not val d after the,0. %he #ANA& d d not depart on 6 May 1520. &omet me n January, 1521, Jose #ana sought the ass stance of %eres ta Manucdoc, a &ecretary of the &ta. 'lara !umber 'ompany 9here Jose #ana 9as the D rector and %reasurer, for the e1tens on of the val d ty of the r t cFets, 9h ch 9ere due to e1p re on 6 May 1521. %eres ta enl sted the help of !ee Ella Manager

of the +h l pp ne %ravel Eureau, 9ho used to handle travel arrangements for the personnel of the &ta. 'lara !umber 'ompany. Ella sent the t cFets to 'esar " llo, Dff ce Manager of A$" 7"AN'E. %he t cFets 9ere returned to Ella 9ho 9as nformed that e1tens on 9as not poss ble unless the fare d fferent als result ng from the ncrease n fares tr ggered by an ncrease of the e1change rate of the 3& dollar to the +h l pp ne peso and the ncreased travel ta1 9ere f rst pa d. Ella then returned the t cFets to %eres ta and nformed her of the mposs b l ty of e1tens on. $n the meant me, the #ANA& had scheduled the r departure on 2 May 1521 or one day before the e1p ry date. $n the morn ng of the very day of the r scheduled departure on the f rst leg of the r tr p, %eres ta re=uested travel agent Ella to arrange the reval dat on of the t cFets. Ella gave the same negat ve ans9er and 9arned her that although the t cFets could be used by the #ANA& f they left on 2 May 1521, the t cFets 9ould no longer be val d for the rest of the r tr p because the t cFets 9ould then have e1p red on 6 May 1521. %eres ta repl ed that t 9 ll be up to the #ANA& to maFe the arrangements. ( th that assurance, Ella on h s o9n, attached to the t cFets val dat ng st cFers for the DsaFaM%oFyo fl ght, one a JA!. st cFer and the other an &A& /&cand nav an A r9ays &ystem0 st cFer. %he &A& st cFer nd cates thereon that t 9as ,"eevaluated by? the +h l pp ne %ravel Eureau, Eranch No. 2, /as sho9n by a c rcular rubber stamp0 and s gned ,Ador,, and the date s hand9r tten n the center of the c rcle. %hen appear under pr nted head ngs the notat ons? J!. 106 /7l ght0, 1> May /Date0, 1040 /% me0, D* /status0. Apparently, Ella made no more attempt to contact A$" 7"AN'E as there 9as no more t me. Not9 thstand ng the 9arn ngs, the #ANA& departed from Man la n the afternoon of 2 May 1521 on board A$" 7"AN'E 7l ght 164 for DsaFa, Japan. %here s no =uest on 9 th respect to th s leg of the tr p. Bo9ever, for the DsaFaM%oFyo fl ght on 12 May 1521, Japan A rl nes refused to honor the t cFets because of the r e1p rat on, and the #ANA& had to purchase ne9 t cFets. %hey encountered the same d ff culty 9 th respect to the r return tr p to Man la as A$" 7"AN'E also refused to honor the r t cFets. %hey 9ere able to return only after pre@payment n Man la, through the r relat ves, of the read-usted rates. %hey f nally fle9 bacF to Man la on separate A r 7rance 7r ghts on 15 May 1521 for Jose #ana and 2> May 1521 for the rest of the fam ly. Dn 28 August 1521, the #ANA& commenced before the then 'ourt of 7 rst $nstance of Man la, Eranch $$$, ' v l 'ase No. 64111 for damages ar s ng from breach of contract of carr age. A$" 7"AN'E traversed the mater al allegat ons of the 'ompla nt and alleged that the #ANA& brought upon themselves the pred cament they found themselves n and assumed the conse=uent al r sFsI that travel agent Ella)s aff 1 ng of val dat ng st cFers on the t cFets 9 thout the Fno9ledge and consent of A$" 7"AN'E, v olated a rl ne tar ff rules and regulat ons and 9as beyond the scope of h s author ty as a travel agentI and that A$" 7"AN'E 9as not gu lty of any fraudulent conduct or bad fa th.

Dn 25 May 1528, the %r al 'ourt d sm ssed the 'ompla nt based on +art al and Add t onal &t pulat ons of 7act as 9en as on the documentary and test mon al ev dence. %he #ANA& appealed to respondent Appellate 'ourt. Dur ng the pendency of the appeal, Jose #ana, the pr nc pal pla nt ff, d ed. Dn 18 December 1560, respondent Appellate 'ourt set as de and reversed the %r al 'ourt)s -udgment n a Dec s on, 9h ch decreed? (BE"E7D"E, the dec s on appealed from s set as de. A r 7rance s hereby ordered to pay appellants moral damages n the total sum of N$NE%H %BD3&AND +E&D& /+50,000.000 plus costs. &D D"DE"ED.
3

"econs derat on sought by A$" 7"AN'E 9as den ed, hence, pet t oner)s recourse before th s nstance, to 9h ch 9e gave due course. %he cruc al ssue s 9hether or not, under the env ronmental m l eu the #ANA& have made out a case for breach of contract of carr age ent tl ng them to an a9ard of damages. (e are constra ned to reverse respondent Appellate 'ourt)s aff rmat ve rul ng thereon. +ursuant to tar ff rules and regulat ons of the $nternat onal A r %ransportat on Assoc at on /$A%A0, ncluded n paragraphs 5, 10, and 11 of the &t pulat ons of 7act bet9een the part es n the %r al 'ourt, dated <1 March 152<, an a rplane t cFet s val d for one year. ,%he passenger must undertaFe the f nal port on of h s -ourney by depart ng from the last po nt at 9h ch he has made a voluntary stop before the e1p ry of th s l m t /parag. <.1.2. 0 ... %hat s the t me allo9ed a passenger to beg n and to complete h s tr p /parags. <.2 and <.<.0. ... A t cFet can no longer be used for travel f ts val d ty has e1p red before the passenger completes h s tr p /parag. <.8.1.0 ... %o complete the tr p, the passenger must purchase a ne9 t cFet for the rema n ng port on of the -ourney, / i#id.0 4 7rom the forego ng rules, t s clear that A$" 7"AN'E cannot be faulted for breach of contract 9hen t d shonored the t cFets of the #ANA& after 6 May 1521 s nce those t cFets e1p red on sa d dateI nor 9hen t re=u red the #ANA& to buy ne9 t cFets or have the r t cFets re@ ssued for the %oFyoMMan la segment of the r tr p. Ne ther can t be sa d that, 9hen upon sale of the ne9 t cFets, t mposed add t onal charges represent ng fare d fferent als, t 9as mot vated by self@ nterest or un-ust enr chment cons der ng that an ncrease of fares tooF effect, as author Aed by the ' v l Aeronaut cs Eoard /'AE0 n Apr l, 1521. %h s procedure s 9ell n accord 9 th the $A%A tar ff rules 9h ch prov de? >. %A"$77 "3!E& 2. A++!$'AE!E 7A"E DN %BE DA%E D7 DE+A"%3"E

<.1 #eneral "ule. All -ourneys must be charged for at the fare /or charge0 n effect on the date on 9h ch transportat on commences from the po nt of or g n. Any t cFet sold pr or to a change of fare or charge / ncrease or decrease0 occurr ng bet9een the date of commencement of the -ourney, s sub-ect to the above general rule and must be ad-usted accord ngly. A ne9 t cFet must be ssued and the d fference s to be collected or refunded as the case may be. No ad-ustment s necessary f the ncrease or decrease n fare /or charge0 occurs 9hen the -ourney s already commenced. ; %he #ANA& cannot defend by contend ng lacF of Fno9ledge of those rules s nce the ev dence bears out that %eres ta, 9ho handled travel arrangements for the #ANA&, 9as duly nformed by travel agent Ella of the adv ce of "eno, the Dff ce Manager of A r 7rance, that the t cFets n =uest on could not be e1tended beyond the per od of the r val d ty 9 thout pay ng the fare d fferent als and add t onal travel ta1es brought about by the ncreased fare rate and travel ta1es. A%%H. CA!%E U (hat d d you tell Mrs. Manucdoc, n turn after be ng told th s by Mr. " lloP A $ told her, because that s the reason 9hy they accepted aga n the t cFets 9hen 9e returned the t cFets sp n, that they could not be e1tended. %hey could be e1tended by pay ng the add t onal fare, add t onal ta1 and add t onal e1change dur ng that t me. U Hou sa d so to Mrs. ManucdocP A Hes, s r., ...
2

%he rul ng rel ed on by respondent Appellate 'ourt, therefore, n 1%M. vs. .ourt of Appeals, >8 &'"A 2<2 /15280, hold ng that t 9ould be unfa r to charge respondents there n 9 th automat c Fno9ledge or not ce of cond t ons n contracts of adhes on, s nappl cable. %o all legal ntents and purposes, %eres ta 9as the agent of the #ANA& and not ce to her of the re-ect on of the re=uest for e1tens on of the val d ty of the t cFets 9as not ce to the #ANA&, her pr nc pals. %he &A& val dat ng st cFer for the DsaFaM%oFyo fl ght aff 1ed by Era sho9 ng reservat ons for JA!. 7l ght 106 for 1> May 1521, 9 thout clear ng the same 9 th A$" 7"AN'E allegedly because of the mm nent departure of the #ANA& on the same day so that he could not get n touch 9 th A r 7rance 0 9as certa nly n contravent on of $A%A rules although as he had e1pla ned, he d d so upon %eres ta)s assurance that for the on9ard fl ght from DsaFa and return, the #ANA& 9ould maFe other arrangements. U "eferr ng you to page << of the transcr pt of the last sess on, $ had th s =uest on 9h ch reads as follo9s? )Eut d d she say anyth ng to you 9hen you sa d that the t cFets 9ere about to e1p reP) Hour ans9er 9as? )$ am the one 9ho asFed her. At that t me $ told her f the t cFets be ng used ... $ 9as tell ng her 9hat

about the r booF ngs on the return. (hat about the r travel on the returnP &he told me t s up for the #anas to maFe the arrangement.) May $ Fno9 from you 9hat d d you mean by th s test mony of yoursP A %hat 9as on the day 9hen they 9ere asF ng me on May 2, 1521 9hen they 9ere checF ng the t cFets. $ told Mrs. Manucdoc that $ 9as go ng to get the t cFets. $ asFed her 9hat about the t cFets on9ard from the return from %oFyo, and her ans9er 9as t s up for the #anas to maFe the arrangement, because $ told her that they could leave on the seventh, but they could taFe care of that 9hen they arr ved n DsaFa. U (hat do you meanP A %he #anas 9 ll maFe the arrangement from DsaFa, %oFyo and Man la. U (hat arrangementP A %he arrangement for the a rl ne because the t cFets 9ould e1p re on May 2, and they ns sted on leav ng. $ asFed Mrs. Manucdoc 9hat about the return on9ard port on because they 9ould be travell ng to DsaFa, and her ans9er 9as, t s up to for the #anas to maFe the arrangement. U E1actly 9hat 9ere the 9ords of Mrs. Manucdoc 9hen you told her thatP $f you can remember, 9hat 9ere her e1act 9ordsP A Ber 9ords only, t s up for the #anas to maFe the arrangement. U %h s 9as n %agalog or n Engl shP A $ th nF t 9as n Engl sh. ...
1

%he c rcumstances that A$" 7"AN'E personnel at the t cFet counter n the a rport allo9ed the #ANA& to leave s not tantamount to an mpl ed rat f cat on of travel agent Ella)s rregular actuat ons. $t should be recalled that the #ANA& left n Man la the day before the e1p ry date of the r t cFets and that ,other arrangements, 9ere to be made 9 th respect to the rema n ng segments. Ees des, the val dat ng st cFers that Ella aff 1ed on h s o9n merely reflect the status of reservat ons on the spec f ed fl ght and could not legally serve to e1tend the val d ty of a t cFet or rev ve an e1p red one. %he conclus on s nev table that the #ANA& brought upon themselves the pred cament they 9ere n for hav ng ns sted on us ng t cFets that 9ere due to e1p re n an effort, perhaps, to beat the deadl ne and n the thought that by commenc ng the tr p the day before the e1p ry date, they could complete the tr p even thereafter. $t should be recalled that A$" 7"AN'E 9as even una9are of the val dat ng &A& and JA!. st cFers that Ella had aff 1ed spur ously. 'onse=uently, Japan A r ! nes and A$" 7"AN'E merely acted 9 th n the r contractual r ghts 9hen they d shonored the t cFets on the rema n ng segments of the tr p and 9hen A$" 7"AN'E demanded payment of the ad-usted fare rates and travel ta1es for the %oFyoMMan la fl ght.

(BE"E7D"E, the -udgment under rev e9 s hereby reversed and set as de, and the Amended 'ompla nt f led by pr vate respondents hereby d sm ssed. No costs. &D D"DE"ED. 7eehan'ee (.hairman*, $lana, Relova and 2utierrez, 9r., 99., concur.

:ootnotes 1 &eventh D v s on composed of J. #u llermo +. C llasor, ponente concurred n by JJ. Cen c o Escol n and Dnofre A. C llaluA. 2 p. >2, "ollo. < <.1.2 %he t me allo9ed a passenger to complete h s -ourney calculated from the date of comencement of the -ourney, but e1clus ve of that date. %he passenger must undertaFe the f nal port on of h s -ourney by depart ng from the last po nt at 9h ch he has made a voluntary stop before the e1p ry of th s l m t, regardless of 9hether th s last segment s covered by a s ngle or several fl ght coupons. 111 111 111 <.2 7ime allo&ed a passenger to #egin his trip . As a rule, DNE HEA". $t may be mod f ed by per ods dur ng 9h ch fares or reduct ons granted <.< 7ime allo&ed a passenger to complete his trip . $n pr nc ple, DNE HEA". $t may be mod f ed by per ods dur ng 9h ch fares or reduct ons granted are appl cable. 111 111 111 <.8 5 tensions of validity. <.8.1 A t cFet can no longer be used for travel f ts val d ty has e1p red before the passenger completes h s tr p. $t can only be refunded n Accordance 9 th normal refund regulat ons. %o complete the tr p, the passenger must purchase a ne9 t cFet for the rema n ng port on of the -ourney. 4 p. 158, 7older of E1h b ts. 8 %.s.n., D spos t on of !ee Ella May 18, 1522, p. 2. > %.s.n., :#id., p. 20. 2 %.s.n., :#id., pp. 26@25.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #73<30; Au"ust 3<, 1<0<

9A$9A$A $/!$)G&E6, pet t oner, vs. 5/N. %/&$( /: A++EA#S CSecond !iAision, composed of J&S()%ES J&AN +. EN$)E&E6, 5E$'/GENES %/N%E+%)/N, J$. and E!)#9E$(/ S/$)AN/D, A(ANA%)/ *A#EN6&E#A, 'A>)')NA *)%(/$)/, #)9E$A(A SAN(/S, N)E*ES %$&6, su stituted y -er -eirs, A$SEN)/, JA8'E, AN!$ES, NE#/ and A'AN!A, all surnamed NE$8, and %A$'EN and A$SEN)A, ot- surnamed 'EN!/6A, respondents. 8ortunato de %eon for petitioner. Sycip, Salazar, %una, Manalo and 8eliciano for respondent Atanacio 4alenzuela. San 9uan, Africa, 2onzales and San Agustin for respondent 3ieves .ruz. %AS($/, J.: 7or a clear understand ng of the ssues posed by the present pet t on for mandamus and certiorari 9 th prel m nary n-unct on, 9e hereunder =uote the statement of the case and the f nd ngs of fact made by the 'ourt of Appeals n ts dec s on dated Dctober 4, 15>2 n 'A@#.". <8064@", as 9ell as the d spos t ve port on of the sa d dec s on? Dn December <1, 1586, n +araQa=ue, " Aal, by v rtue of a document denom nated ,*asunduan, 9r tten n the vernacular and rat f ed before Notary +ubl c !aAaro '. $son of that local ty, N eves 'ruA, no9 deceased, author Aed the spouses Atanac o CalenAuela, and Ma1 m na C ctor o and ! berate &antos to sell a certa n parcel of land of about 44,><4 s=uare meters belong ng to her and s tuated n & t o Matatdo, Earr o &an D on s o, +araQa=ue, " Aal, the dent ty of 9h ch s not no9 n d spute. Among, the anent cond t ons of th s author ty 9ere that the pr ce payable to N eves 'ruA for the land 9ould be +1.>0 per s=uare meter and any overpr ce 9ould perta n to the agentsI that N eves 'ruA 9ould rece ve from sa d agents, by 9ay of advance payment on account of the purchase pr ce to be pa d by 9homsoever may buy the land, the sum of +10,000.00 upon the e1ecut on of the agreement aforesa d, and another +10,000.00 on January 8, 1585I that the balance on the total purchase pr ce 9ould be payable to N eves 'ruA upon the ssuance of the %orrens t tle over the property, the obtent on of 9h ch 9as undertaFen by the agents 9ho also 9ere bound to advance the e1pense therefor n the sum of +4,000.00 9h ch 9ould be deduct ble from the last amount due on the purchase pr ceI and that should the agent f nd no buyer by the t me that %orrens t tle s ssued, N eves 'ruA reserved the r ght to looF for a buyer herself although all sums already rece ved from the agents 9ould be returned to them 9 thout nterest.

As conf rmed by N eves 'ruA n a ,rec bo,, E1h b t 2, bear ng the date ,... ng Enero ng 1585,, the st pulated ,advance payment /paunang bayad0, of +20,000.00 9as duly made to her. 'ontrary to the agreement that the balance on the purchase pr ce 9ould be pa d upon the ssuance of the %orrens t tle over the land /&eptember 5, 15>00, N eves 'ruA and her ch ldren, ho9ever, collected from the agents, e ther thru Ma1 m na C ctor o or thru &alud #. de !eon, daughter of ! berate &antos, var ous sums of money dur ng the per od from July <, 1585 up to &eptember <, 15>1, all of 9h ch 9ere duly rece pted for by N eves 'ruA andMor her ch ldren and n 9h ch rece pts t s e1pressly stated that sa d amounts 9ere ,b lang Faragdagan sa p nagb l nam ng lupa sa Fan la /add t onal payments for the land 9e sold to them0,, E1h b ts 12, 12@a to 12@A@1. %hese totalled +22,156.>0 9h ch 9 th the +20,000.00 prev ously pa d amounted to +42,156.>0. Mean9h le, proceed ngs to place the land under the operat on of the %orrens system 9ere n t ated. $n due season, the reg strat on court O f nd ng a reg strable t tle n the name of the appl cants, Em l o 'ruA and N eves 'ruA, but that O ,... the appl cant N eves 'ruA has l Fe9 se sold her one@half /1M20 und v ded share to the spouses Atanac o CalenAuela and Ma1 ma /Ma1 m na0 C ctor o and to ! berata &antos from 9hom she had rece ved part al payments thereof n the sum of +22,000.00I, /E1h b t 4@a0. decreed, on July 18, 15>0, the reg strat on of the land n the names of the appl cants aforesa d O ,&ub-ect ... to the r ghts of the spouses Atanac o CalenAuela and Ma1 m na C ctor o and to ! berata &antos over the one@half share of N eves 'ruA of the parcel of land for 9h ch the latter 9as pa d +22,000.00 as part al payment thereof., /E1h b t 40. %he -udgment aforesa d hav ng become f nal, the correspond ng Dr g nal 'ert f cate of % tle No. 2466 of the "eg stry of Deeds of " Aal 9as, on &eptember 5, 15>0, duly entered and ssued to the appl cants aforesa d, sub-ect, amongst others, to the l m tat on heretofore stated. Eventually, pursuant to a part t on bet9een N eves 'ruA and her brother, Em l o 'ruA, by v rtue of 9h ch the ent re land 9as subd v ded nto t9o lots of 46,2>0 s=uare meters each, Dr g nal %ransfer of % tle No. 2466 9as cancelled and superseded by t9o ne9 transfer cert f cates respect vely cover ng the t9o sub@d v ded lots, that 9h ch perta ned to N eves 'ruA, !ot A /!"'0 +sd@1<10>, be ng covered by %ransfer 'ert f cate of % tle No. 60110 ssued on Dctober <, 15>0. &a d t tle carr ed over the annotat on heretofore ment oned respect ng the r ghts of Atanac o CalenAuela and Ma1 m na C ctor o and ! berata &antos over the port on covered thereby. /E1h b ts > and >@a0. %hen, on &eptember 18, 15>1, N eves 'ruA sold the property n =uest on to Earbara !ombos "odr gueA, her ,balae, because the latter)s son 9as marr ed to

her daughter, for the sum of +22,21>.00 /E1h b t J0. $n conse=uence, %ransfer 'ert f cate of % tle No. 60110 n the name of N eves 'ruA 9as cancelled and, n l eu thereof, %ransfer 'ert f cate of % tle No. 511<8 9as ssued n the name of Earbara !ombos "odr gueA /E1h b t $0 9h ch l Fe9 se carr ed over the annotat on respect ng the r ghts of Atanac o CalenAuela, Ma1 m na C ctor o and ! berata &antos over the property covered thereby. 7orth9 th, on &eptember 1>, 15>1, N eves 'ruA, through counsel, gave not ce to Atanac o CalenAuela, Ma1 m na C ctor o and ! berata &antos of her dec s on to resc nd the or g nal agreement heretofore adverted to, enclos ng 9 th sa d not ce EanF of Amer ca checF for +46,<<6.>0, represent ng sums advanced by the latter 9h ch 9ere tendered to be returned. Atanac o CalenAuela, Ma1 m na C ctor o and ! berata &antos, through counsel, balFed at the attempt at resc ss on, deny ng non@compl ance 9 th the r undertaF ng nasmuch as, per agreement, the balance on the purchase pr ce for the land 9as not due unt l after the 15>2 harvest. %hey, accord ngly, returned N eves 'ruA) checF. %hus rebuffed, pla nt ff N eves 'ruA ha led defendants Atanac o CalenAuela, Ma1 m na C ctor o and ! berate &antos before the " Aal 'ourt n the nstant act on for resc ss on of the ,*asunduan, heretofore adverted to, the cancellat on of the annotat on on the t tle to the land respect ng defendant)s r ght thereto, and for damages and attorney)s fees. $n the r return to the compla nt, defendants traversed the mater al averments thereof, contend ng pr nc pally that the agreement sought to be resc nded had s nce been novated by a subse=uent agreement 9hereunder they 9ere to buy the property d rectly. %hey also mpleaded Earbara !omboa "odr gueA on account of the sale by the pla nt ff to her of the sub-ect property and nterposed a countercla m aga nst both pla nt ff and "odr gueA for the annulment of the sale of the land to the latter, as 9ell as the transfer cert f cate of t tle ssued n her favor conse=uent thereto and the reconveyance of the land n the r favor, and also for damages and attorney)s fees. +end ng the proceed ngs belo9, pla nt ff N eves 'ruA d ed and 9as, accord ngly, subst tuted as such by her surv v ng ch ldren, to 9 t? Arsen o, Nelo, Ja me, Andres and Amanda, all surnamed Nery, and 'armen and Armen a both surnamed MendoAa. $n due season, the tr al court O f nd ng for pla nt ff N eves 'ruA and her buyer, Earbara !ombos "odr gueA, and aga nst defendants O rendered -udgment thus O ,$N C$E( D7 A!! %BE 7D"E#D$N#, -udgment s hereby rendered /10 Drder ng the cancellat on at the bacF of %ransfer 'ert f cate of % tle No. 511<8 of the "eg ster of Deeds of " Aal, stat ng that the land covered thereby 9as sold to the defendantsI /20 Drder ng the defendants to pay to the pla nt ff, -o ntly and severally the sum of +>2,8>4.00 as actual damages and +8,000.00 by 9ay of attorney)s feesI /<0 D sm ss ng the defendants countercla mI and /40 Drder ng the defendants to pay the costs of th s su t -o ntly and severally.,

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111

111

(e f nd no obstacle to appellants) purchase of the land n the proh b t on aga nst an agent buy ng the property of h s pr nc pal entrusted to h m for sale. ( th the agreement of N eves 'ruA to sell the land d rectly to sa d appellants, her agents or g nally, t cannot ser ously be contended that the purchase of the land by appellants 9as, 9 thout the e1press consent of the pr nc pal N eves 'ruA. Accord ngly, that purchase s beyond the coverage of the proh b t on. Ey and large, 9e are sat sf ed from a met culous assay of the ev dence at bar that the contract of sale over the land subse=uently made by N eves 'ruA n favor of appellants 9as duly and sat sfactor ly proved. No sho9 ng hav ng been made by appellees to 9arrant the resc ss on of that contract, the attempt of such resc ss on s legally untenable and necessar ly fut le. %he spec f c performance of that contract s under the c rcumstances, legally compellable. 'ons der ng that the r ghts of appellants, as such purchasers of the port on correspond ng to N eves 'ruA, s a matter of off c al record n the latter)s cert f cate of t tle over the land O the annotat on of 9h ch 9as author Aed by the dec s on of the reg strat on court and 9h ch annotat on 9as duly carr ed over n the subse=uent t tles ssued therefor, nclud ng that ssued n the name of appellee "odr gueA O sa d appellee must be conclus vely presumed to have been a9are, as ndeed she 9as, of the pr or r ghts ac=u red by appellants over the sa d port on. &a d appellee)s ac=u s t on of the land from N eves 'ruA rema ns sub-ect, and must y eld, to the super or r ghts of appellants. Appellee "odr gueA cannot seeF refuge beh nd the protect on afforded by the !and "eg strat on Act to purchasers n good fa th and for value. A9are as she 9as of the e1 stence of the annotated pr or r ghts of appellants, she cannot no9 be heard to cla m a r ght better than that of her grantor, N eves 'ruA. Ber obl gat on to reconvey the land to the appellants s thus ndub table. 111 111 111

(BE"E7D"E, the -udgment appealed from s hereby "ECE"&ED in toto, and, n l eu thereof, another s hereby rendered? /10 &ett ng as de and annull ng the deed of sale, E1h b t J, e1ecuted by pla nt ff n favor of Earbara !ombos "odr gueAI /20 Declar ng defendant@appellee Earbara !ombos "odr gueA d vested of t tle over the property covered by %'% No. 511<8 of the "eg ster of Deeds of " Aal and t tle thereto vested n defendants@appellants upon payment of the latter to appellee "odr gueA of the sum of +26,622.40, represent ng the balance of the agreed purchase pr ce due on the property m nus +1<,000.00 a9arded under paragraph /40 9 th n 50 days after th s dec s on shall have become f nal, and order ng the "eg ster of Deeds of " Aal to cancel %'% No. 511<8 and ssue n l eu thereof a ne9 cert f cate of t tle n favor of appellants, upon payment of correspond ng feesI

/<0 Drder ng pla nt ffs and defendant Earbara !ombos "odr gueA to del ver to the defendants@appellants possess on of the property aforement onedI and /40 Drder ng appellees -o ntly and severally to pay to defendants@ appellants the sum of +8,000.00 as temperate damages, +<,000.00 as moral damages and +8,000.00 as attorney)s fees plus costs. %hese amounts shall be deducted from the +26,622.40 appellants are re=u red to pay to "odr gueA under paragraph /20 hereof. %h s case s before us for the second t me. $n !@264>2, the he rs of N eves 'ruA and the present pet t oner /Earbara !ombos "odr gueA0 f led a -o nt pet t on for certiorari O as an or g nal act on under "ule >8 and, s multaneously, as an appeal under "ule 48. As the former, t sought redress aga nst the refuse of the respondent 'ourt of Appeals to cons der a mot on for recons derat on f led beyond the reglementary per od. As the latter, t sought a rev e9 of the respondent 'ourt)s f nd ngs of fact and conclus ons of la9. Dn January <, 15>6 9e den ed the -o nt pet t onI the -o nt pet t on 9as thereafter amended, and th s amended pet t on 9e l Fe9 se den ed on January 2>, 15>6I on 7ebruary 20, 15>6 9e den ed the mot on for recons derat on f led solely by "odr gueA. Dn July 20, 15>6, "odr gueA alone f led the present pet t on for mandamus and cert orar . &he prays for the ssuance of a 9r t of prel m nary n-unct on to restra n the respondents from enforc ng the dec s on of the 'ourt of Appeals n 'A@#.". <8064@" and from enter ng nto any negot at on or transact on or other9 se e1erc s ng acts of o9nersh p over the parcel of land covered by transfer cert f cate of t tle 511<8 ssued by the "eg ster of Deeds of " Aal. &he also prays that prel m nary n-unct on ssue to restra n the "eg ster of Deeds of " Aal from reg ster ng any documents affect ng the sub-ect parcel of land. No n-unct on, ho9ever, 9as ssued by us. %he pet t on n the present case, !@252>4, 9h le aga n assa l ng the f nd ngs of fact and conclus ons of la9 made by the respondent 'ourt, adds t9o ne9 grounds. %he f rst s the allegat on that the land nvolved n 'A@#.". <8064@" has a value n e1cess of +200,000. %he pet t oner compla ns that the 'ourt of Appeals should have cert f ed the appeal to us, pursuant to sect on < of "ule 80 n relat on to sect on 12/80 of the Jud c ary Act of 1546, 1 as she had asFed the sa d 'ourt to do n her supplemental mot on of June 14, 15>6. %he second ground s the cla m that the 'ourt of Appeals gravely abused ts d scret on n deny ng her May 14, 15>6 mot on for ne9 tr al, based on alleged ne9ly d scovered ev dence. $n the r ans9er, Atanac o CalenAuela, Ma1 m na C ctor o and ! berata &antos allege that the f nd ngs of fact made by the 'ourt of Appeals n ts dec s on of Dctober 4, 15>2 are substant ated by the record and the conclus ons of la9 are supported by appl cable la9s and -ur sprudence, and, moreover, that these f nd ngs are no longer open to rev e9 nasmuch as the sa d dec s on has become f nal and e1ecutory, the per od of appeal prov ded n "ule 48 hav ng e1p red. Atanac o CalenAuela, et al. also ma nta n that the land n l t gat on had a value of less than +200,000, accord ng to the records of the case, 9hen the r

appeal from the dec s on of the 'ourt of 7 rst $nstance of " Aal n c v l case >501 9as perfectedI that the pet t oner)s mot on for ne9 tr al n the 'ourt of Appeals 9as f led out of t meI and that the pet t oner s estopped from =uest on ng the -ur sd ct on of the 'ourt of Appeals n the matter of the value of the land n controversy. %9o grounds for the defense of estoppel are offered by Atanac o CalenAuela, et al. Dne s that the pet t oner speculated n obta n ng a favorable -udgment n the 'ourt of Appeals by subm tt ng herself to the -ur sd ct on of the sa d 'ourt and she cannot no9 therefore be allo9ed to attacF ts -ur sd ct on 9hen the -udgment turned out to be unfavorable. %he other s that the pet t oner)s laches made poss ble the sale n good fa th by Atanac o CalenAuela, et al., of the land n l t gat on to Em l o and $s dro "amos, n 9hose names the land s at present reg stered under transfer cert f cate of t tle 2251<8 ssued on &eptember 28, 15>6 by the "eg ster of Deeds of " Aal. %he he rs of N eves 'ruA f led an ans9er un=ual f edly adm tt ng the bas c allegat ons of the pet t on, e1cept as to the value of the land, as to 9h ch they are non@comm ttal. $t s our cons dered v e9 that the pet t oner)s cla m of grave abuse by the respondent 'ourt n deny ng her mot on for ne9 tr al s devo d of mer t. $t s not d sputed that, on the assumpt on that the respondent 'ourt had -ur sd ct on over the appeal, the pet t oner had already lost her r ght to appeal from the dec s on of Dctober 4, 15>2 9hen the pet t on n !@264>2 9as f led n January 15>6. $t log cally follo9s that the case had passed the stage for ne9 tr al on ne9ly d scovered ev dence 9hen the pet t oner f led her mot on for ne9 tr al on May 14, 15>6. %9o ssues rema n, to 9 t, /10 the value of the land n controversyI and /20 estoppel. At the t me appeal 9as taFen to the 'ourt of Appeals. sect on 12/80 of the Jud c ary Act of 1546, as amended, prov ded? %he &upreme 'ourt shall have e1clus ve -ur sd ct on to rev e9, rev se, reverse mod fy or aff rm on appeal, cert orar or 9r t of error, as the la9 or rules of court may prov de, f nal -udgments and decrees of nfer or courts as here n prov ded, n O 111 111 111

/80 All c v l cases n 9h ch the value n controversy e1ceeds t9o hundred thousand pesos, e1clus ve of nterests and costs or n 9h ch the t tle or possess on of real estate e1ceed ng n value the sum of t9o hundred thousand pesos to be ascerta ned by the oath of a party to the cause or by other competent ev dence, s nvolved or brought n =uest on. %he &upreme 'ourt shall l Fe9 se have e1clus ve -ur sd ct on over all appeals n c v l cases, even though the value n controversy, e1clus ve of nterests and costs, s t9o hundred thousand pesos or less, 9hen the ev dence nvolved n sa d cases s the same as

the ev dence subm tted n an appealed c v l case 9 th n the e1clus ve -ur sd ct on of the &upreme 'ourt as prov ded here n. %he pet t oner 9ould have us bel eve that, other than a realtor)s s9orn statement dated June 14, 15>6, 9h ch 9as f led 9 th the respondent 'ourt together 9 th her supplemental mot on, there s noth ng n the records that 9ould nd cate the value of the l t gated parcel. (e d sagree. %he ,*asunduan, /anne1 A to the pet t on0 dated December <1, 1586 e1ecuted by and bet9een N eves 'ruA and Atanac o CalenAuela, et al. f 1ed the value of the land /of an area of 44,><4 s=uare meters0 at +1.>0 per s=uare meter. %he dec s on /anne1 E0 of the 'ourt of 7 rst $nstance of " Aal dated August 12, 15>4 assessed the value of the land at +<.00 per s=uare meter. %he dec s on /anne1 D0 dated Dctober 4, 15>2 of the respondent 'ourt of Appeals po nted out that the cons derat on stated n the deed of sale of the land e1ecuted by N eves 'ruA n favor of "odr gueA, the pet t oner here n, s +22,21>. Moreover, unt l June 14, 15>6, no party to the cause =uest oned the valuat on of +<.00 per s=uare meter made by the tr al court. %he records, therefore, over9helm ngly refute the pet t oner)s allegat on. %hey also prove that the value of the ent re parcel of land had been mpl edly adm tted by the part es as be ng belo9 +200,000. #rant ng arguendo, ho9ever, that the value of the land n controversy s n e1cess of +200,000, to set as de at th s stage all proceed ngs had before the 'ourt of Appeals n 'A@#.". <8064@", and before th s 'ourt n !@264>2, 9ould v olate all norms of -ust ce and e=u ty and contravene publ c pol cy. %he appeal from the dec s on of the 'ourt of 7 rst $nstance of " Aal 9as pend ng before the respondent 'ourt dur ng the per od from 15>4 unt l Dctober 4, 15>2, 9hen on the latter date t 9as dec ded n favor of the appellants and aga nst the pet t oner here n and the he rs of N eves 'ruA. Het, the appellees there n d d not ra se the ssue of -ur sd ct on. %he -o nt pet t on n !@264>2 afforded the pet t oner here n the opportun ty to =uest on the -ur sd ct on of the respondent 'ourt. Aga n, the value of the land n controversy, 9as not =uest oned by the pet t oners, not even n the r amended -o nt pet t on. $t 9as not unt l June 14, 15>6 that the pet t oner here n f led 9 th the respondent 'ourt a supplemental mot on 9here n she ra sed for the f rst t me the ssue of value and =uest oned the val d ty of the f nal dec s on of the respondent 'ourt on the -ur sd ct onal ground that the real estate nvolved has a value n e1cess of +200,000. %hat the pet t oner)s present counsel became her counsel only n May, 15>6 prov des no e1cuse for the pet t oner)s fa lure to e1erc se due d l gence for over three years to d scover that the land has a value that 9ould oust the respondent 'ourt of -ur sd ct on. %he fact rema ns that the pet t oner had allo9ed an unreasonable per od of t me to lapse before she ra sed the =uest on of value and -ur sd ct on, and only after and because the respondent 'ourt had dec ded the case aga nst her. %he doctr ne of estoppel by laches bars her from no9 =uest on ng the -ur sd ct on of the 'ourt of Appeals. %he learned d s=u s t on of Mr. Just ce Arsen o +. D Aon, speaF ng for th s 'ourt n Serafin 7i"am, et al. vs. Magdaleno Si#onghanoy, et al. (%<)+BAC, April +A, +,MD*, e1pla ned, n une=u vocal terms, the reasons 9hy, n a case l Fe the

present, a los ng party cannot be perm tted to belatedly ra se the ssue of -ur sd ct on. A party may be estopped or barred from ra s ng a =uest on n d fferent 9ays and for d fferent reasons. %hus 9e speaF of estoppel in pais, of estoppel by deed or by record, and of estoppel by laches. !aches, n a general sense, s fa lure or neglect, for an unreasonable and une1pla ned length of t me, to do that 9h ch, by e1erc s ng due d l gence, could or should have been done earl erI t s negl gence or om ss on to assert a r ght 9 th n a reasonable t me, 9arrant ng a presumpt on that the party ent tled to assert t e ther has abandoned t or decl ned to assert t. %he doctr ne of laches or of ,stale demands, s based upon grounds of publ c pol cy 9h ch re=u res, for the peace of soc ety, the d scouragement of stale cla ms and, unl Fe the statute of l m tat on s not a mere =uest on of t me but s pr nc pally a =uest on of the ne=u ty or unfa rness of perm tt ng a r ght or cla m to be enforced or asserted. $t has been held that a party cannot nvoFe the -ur sd ct on of a court to secure aff rmat ve rel ef aga nst h s opponent and, after obta n ng or fa l ng to obta n such rel ef, repud ate or =uest on that same -ur sd ct on /Dean vs. Dean, 1<> Dr. >54, 6> A. !. ". 250. $n the case -ust c ted, by 9ay of e1pla n ng the rule, t 9as further sa d that the =uest on 9hether the court had -ur sd ct on e ther of the sub-ect matter of the act on or of the part es 9as not mportant n such cases because the party s barred from such conduct not #ecause the "udgment or order of the court is valid and conclusive as an ad"udication, #ut for the reason that such a practice cannot #e tolerated O obv ously for reasons of publ c pol cy. 7urthermore, t has also been held that after voluntar ly subm tt ng a cause and encounter ng an adverse dec s on on the mer ts, t s too late for the loser to =uest on the -ur sd ct on or po9er of the court /+ease vs. "athbun@Jones, etc., 24< 3.&. 22<, >1 !. Ed. 218, <2 &. 't. 26<I &t. !ou s, etc. vs. McEr de, 141 3.&. 122, <8 !. Ed. >850. And n %ittleton vs. !urgess, 1> (yo 86, the 'ourt sa d that t s not r ght for a party 9ho has aff rmed and nvoFed the -ur sd ct on of a court n a part cular matter to secure an aff rmat ve rel ef, to after9ards deny that same -ur sd ct on to escape a penalty. 3pon th s same pr nc ple s 9hat (e sa d n the three cases ment oned n the resolut on of the 'ourt of Appeals of May 20, 15>< / supra0 O to the effect that 9e fro9n upon the ,undes rable pract ce, of a party subm tt ng h s case for dec s on and then accept ng the -udgment, only f favorable, and attacF ng t for lacF of -ur sd ct on, 9hen adverse O as 9ell as n $inda>gan etc. vs. Dans, et al., #.". !@14851, &eptember 2>, 15>2I Monteli#ano, et al. vs. !acolod<Murcia Milling .o., :nc., #.". !@18052I Foung Men %a#or ;nion, etc. vs. 7he .ourt of :ndustrial Relations, et al., #.". No. !@20<02, 7eb. 2>, 15>8I and Me"ia vs. %ucas, 100 +h l. p. 222.

(e do not here rule that 9here the plead ngs or other documents n the records of a case state a value of a real estate n controversy, a party to the cause may not sho9 that the true value thereof s more or s less than that stated n the records. &ect on 12/80 of the Jud c ary Act of 1546 prec sely allo9s a party to subm t a s9orn statement of such h gher or lo9er value. %h s s not to say, of course, that the court s bound by a party)s s9orn statement, for 9here more than one party subm t mater ally d ffer ng statements of value, or 9here a party)s s9orn statement confl cts 9 th other competent ev dence, the true value s to be determ ned by the tr al court as an ssue of fact before t. %he t me 9hen the ssue of the value of a real estate n controversy s to be resolved s pr or to, or s multaneously 9 th, the approval of the record on appeal and appeal bond, for t s upon the perfect on of the appeal that the appellate court ac=u res -ur sd ct on over the case /"ule 41, sect on 50. $t s at th s t me that a party to the cause, be he the ntended appellant or the ntended appellee, must ra se the ssue of value before the tr al court, for sa d court to allo9 appeal nvolv ng a =uest on of fact e ther to th s 'ourt or to the 'ourt of Appeals, depend ng on ts f nd ng on the value of the realty. 7a lure to ra se th s ssue before the tr al court amounts to a subm ss on of the ssue solely on the bas s of the plead ngs and ev dence a quo and s e=u valent to a 9a ver of the r ght to present the statement under oath or to adduce the other competent ev dence referred to n sect on 12/b0 of the Jud c ary Act of 1546. A contrary rule 9ould be d sastrous. 7or one th ng, to allo9 a party to present proof of value before an appellate court 9ould be to convert the sa d court to a tr al court. 7or another th ng, the value of real estate may change bet9een the perfect on of an appeal and the rece pt of the record or the payment of the appellate court docFet feeI hence, t s best, for stab l ty, to have the value determ ned at the prec se nstant 9hen the tr al court must dec de to 9h ch appellate court the appeal should be made and not at some uncerta n t me thereafter. (orse yet, to perm t a party to prove before the 'ourt of Appeals or before us, after a dec s on on the mer ts has been rendered, that a real estate n controversy e1ceeds, or does not e1ceed +200,000 n value, 9ould be to encourage speculat on by l t gantsI for, a los ng party can be e1pected to ra se the ssue of value of the realty to sho9 that t s n e1cess of +200,000 f the unfavorable -udgment s rendered by the 'ourt of Appeals, or to sho9 that t does not e1ceed +200,000 f the unfavorable -udgment s rendered by th s 'ourt, n an attempt to l t gate the mer ts of the case all over aga n. 2 $n the case at bar, the records O as of the perfect on of the appeal on August 12, 15>4 O sho9 that the l t gated real estate had a value not n e1cess of +200,000. 'onformably 9 th the Jud c ary Act of 1546, therefore, the appeal from the dec s on of the 'ourt of 7 rst $nstance of " Aal n c v l case >501 9as 9 th n the -ur sd ct on of the 'ourt of Appeals. Dther ssues, both of fact and of la9, are ra sed n the plead ngs. 'ons der ng our conclus on that the respondent 'ourt had -ur sd ct on over the appeal, t s not necessary to d scuss, much less resolve, any of those other

ssues. Bo9ever, because the pet t oner and the he rs of N eves 'ruA have hammered on the t9 n ssues of the e1 stence of an oral contract of sale and of the eff cacy of an oral novatory contract of sale, a br ef d scuss on of these ssues 9ould not be am ss. %he agency agreement of December <1, 1586 s not mpugned by any of the part es. N eves 'ruA, ho9ever, asserted that the agency rema ned n force unt l she resc nded t on &eptember 1>, 15>1 by not ce to that effect to Atanac o CalenAuela, et al., tender ng 9 th the sa d not ce the return, n checF, of the sum of +46,<<6.>0 9h ch she had rece ved from Atanac o CalenAuela, et al. %he defendants, upon the other hand, contend that the agency agreement 9as novated by a contract of sale n the r favor and that the balance of the purchase pr ce 9as not due unt l after the 15>2 harvest. "odr gueA, 9hen mpleaded by Atanac o CalenAuela, et al., den ed that she 9as a buyer n bad fa th from N eves 'ruA. %he part es and the lo9er courts are agreed that N eves 'ruA had rece ved +20,000 from Atanac o CalenAuela, et al., by January 8, 1585 and that the payment of th s total sum 9as n accordance 9 th the agency agreement. %he part es and the lo9er courts, ho9ever, are at var ance on the bas s or reason for the subse=uent payments. %he pet t oner here n, the he rs of N eves 'ruA and the 'ourt of 7 rst $nstance of " Aal taFe the pos t on that the payments after January 8, 1585 9ere rece ved by N eves 'ruA as part al or nstallment payments of the purchase pr ce on the representat ons of Atanac o CalenAuela, et al., that they had a buyer for the property from 9hom these payments came, all pursuant to the agency agreement. %he respondents Atanac o CalenAuela, et al., on the other hand, assert that those amounts 9ere pa d by them, as d sclosed buyers, to N eves 'ruA and her ch ldren, pursuant to a novatory verbal contract of sale entered nto 9 th N eves 'ruA, subse=uent to the agency agreement and pr or to the ssuance of the decree of reg strat on of July 18, 15>0. $t s thus clear that the dec s ve ssues are /a0 9hether or not N eves 'ruA d d agree to sell to Atanac o CalenAuela, et al., the l t gated parcel of land somet me after January 8, 1585, and /b0 9hether or not the sa d agreement s enforceable or can be proved under the la9. %he fact that Atanac o CalenAuela, et al. 9ere agents of N eves 'ruA under the agency agreement of December <1, 1586 s not mater al, for f t s true that N eves 'ruA d d agree to sell to her agents the real estate sub-ect of the agency, her consent tooF the transact on out of the proh b t on conta ned n art cle 1451/20 of the ' v l 'ode. Ne ther are art cles 1624 and 1626/80 and /120 of the ' v l 'ode relevant, for they refer to sales made by an agent for a pr nc pal and not to sales made by the o9ner personally to another, 9hether that other be act ng personally or through a representat ve. (as there a novatory oral contract to sell entered nto by N eves n favor of Atanac o CalenAuela, et al.P $n resolv ng th s =uest on, the respondent 'ourt po nted to s gn f cant facts and c rcumstances susta n ng an aff rmat ve ans9er.

' ted by the 'ourt of Appeals s the test mony of Andres Nery, a successor@ n@ nterest of N eves 'ruA and a subst tute pla nt ff upon N eves 'ruA) death, to the effect that after they had gone to the defendants several t mes, they 9ere told that the buyer 9as &alud de !eon. %h s 9 tness also sa d, accord ng to the transcr pt c ted by the respondent 'ourt, that they 9ere pa d l ttle by l ttle and had been pa d a grand total of +46,000. %he respondent 'ourt l Fe9 se adverted to the rece pts /e1h b ts !@12 to !@22, e1h b t !@24, e1h b t !@2>, and e1h b ts 12, 12@a to 12@A@10 s gned by N eves 'ruA andMor her ch ldren and concluded that on the faces of these rece pts t s clear that the amounts there n stated 9ere n payment by Atanac o CalenAuela, et al. of the land 9h ch the rec p ents had sold to them /, p nagb le nam ng lupa sa Fan la,0. Df ncalculable s gn f cance s the notat on n the or g nal cert f cate of t tle and n the transfer cert f cate of t tle n the name of N eves 'ruA 9h ch, n unamb guous language, recorded N eves 'ruA) sale of her nterest n the land to Atanac o CalenAuela, et al. $f that notat on 9ere naccurate or false, N eves 'ruA 9ould not have rema ned unprotest ng for over a year after the entry of the decree of reg strat on n July, 15>0, nor 9ould she and her ch ldren have rece ved 1< nstallment payments totall ng +15,5>< dur ng the per od from &eptember 5, 15>0 to &eptember <, 15>1. &alud de !eon, t should be borne n m nd, s the husband of "ogac ano 7. de !eon and the daughter of the defendant ! berata &antos. $t should l Fe9 se be remembered that, as remarFed by the tr al court, &alud de !eon test f ed that t 9as she 9ho had the oral agreement 9 th N eves 'ruA for the purchase by Atanac o CalenAuela, et al. of the l t gated property and, as found by the respondent 'ourt, &alud de !eon 9as the representat ve of Atanac o CalenAuela, et al., not of N eves 'ruA. (e conclude, therefore, that there s substant al ev dence n the record susta n ng the f nd ng of the respondent 'ourt that the part es to the agency agreement subse=uently entered nto a ne9 and d fferent contract by 9h ch the lando9ner, N eves 'ruA, verbally agreed to sell her nterest n the l t gated real estate to Atanac o CalenAuela, et al. A leg on of rece pts there are of payments of the purchase pr ce s gned by N eves 'ruA. %rue, these rece pts do not state all the bas c elements of a contract of sale, for they do not e1pressly dent fy the ob-ect nor f 1 a pr ce or the manner of f 1 ng the pr ce. %he part es, ho9ever, are agreed O at least the pla nt ff has not =uest oned the defendants) cla m to th s effect O that the ob-ect of the sale referred to n the rece pts s N eves 'ruA) share n the land she co@o9ned 9 th her brother Em l o and that the pr ce therefor s +1.>0 per s=uare meter. At all events, by fa l ng to ob-ect to the presentat on of oral ev dence to prove the sale and by accept ng from the defendants a total of +22,156.>0 after January 8, 1585, the pla nt ff thereby rat f ed the oral contract, conformably 9 th art cle 1408 of the ' v l 'ode, and removed the partly e1ecuted agreement from the operat on of the &tatute of 7rauds. And, f nally, the sale 9as establ shed and recogn Aed n the land reg strat on proceed ngs 9here n the land court, n ts dec s on, categor cally stated?

:%;he appl cant N eves 'ruA has l Fe9 se sold her one@half /]0 und v ded share to the spouses Atanac o CalenAuela and Ma1 m na C ctor o and ! berata &antos from 9hom she had rece ved part al payment thereof n the sum of +22,000.00. %he pert nent cert f cates of t tle bear the annotat on of the aforesa d r ght of Atanac o CalenAuela, et al. %he f nal dec s on of the land court O to the effect that N eves 'ruA had sold her und v ded share to Atanac o CalenAuela, et al., and had rece ved a part al payment of +22,000 O s no9 beyond -ud c al rev e9, and, because a land reg strat on case s a proceed ng n rem, b nds even "odr gueA. "odr gueA nevertheless ns st that desp te the resc ss on by the 'ourt of Appeals of her purchase from N eves 'ruA, the sa d respondent 'ourt d d not order N eves 'ruA to return the +22,21> 9h ch she had rece ved from her. (h le mutual const tut on follo9s resc ss on of a contract /art cle 1<68, ' v l 'ode0, the respondent 'ourt should not be blamed for om tt ng to order N eves 'ruA to restore 9hat she had rece ved from the pet t oner on account of the resc nded contract of sale. $n the f rst place, n the plead ngs f led before the tr al court, "odr gueA made no cla m for rest tut on aga nst N eves 'ruA or her he rs. $n the second place, N eves 'ruA d ed n the course of the proceed ngs belo9 and 9as subst tuted by her he rs 9ho, necessar ly, can be held nd v dually l able for rest tut on only to the e1tent that they nher ted from her. Nevertheless, nasmuch as resc ss on of the contract bet9een N eves 'ruA and the pet t oner here n 9as decreed by the respondent 'ourt, the latter should be ent tled to rest tut on as a matter of la9. $t s of no moment that here n pet t oner d d not f le any cross@cla m for rest tut on aga nst the pla nt ff, for her ans9er 9as d rected to the defendants) cla m 9h ch 9as n the nature of a th rd@ party compla nt. &he 9as ne ther a co@defendant nor a co@th rd@party defendant 9 th N eves 'ruAI nor 9ere N eves 'ruA and the here n pet t oner oppos ng part es a =uo, for they -o ned n ma nta n ng the val d ty of the r contract. &ect on 4 of "ule 5, therefore, has no appl cat on to the pet t oner)s r ght to rest tut on. (e declare, conse=uently, that the estate of N eves 'ruA s l able to Earbara !ombos "odr gueA for the return to the latter of the sum of +22,21>, less the amount 9h ch Atanac o CalenAuela, et al. had depos ted 9 th the tr al court n accordance 9 th the dec s on of respondent 'ourt. (e cannot order the he rs of N eves 'ruA to maFe the refund. As 9e observed above, these he rs are l able for rest tut on only to the e1tent of the r nd v dual nher tance from N eves 'ruA. Dther act ons or proceed ngs have to be commenced to determ ne the l ab l ty accru ng to each of the he rs of N eves 'ruA. A''D"D$N#!H, the present pet t on for mandamus and certiorari s den ed, at pet t oner)s cost. +N&phO+.>Pt .oncepcion, ..9., Dizon, Ma'alintal, Haldivar, Sanchez, .apistrano, 7eehan'ee and !arredo, 99., concur.

8ernando, 9., too' no part. Reyes, 9.!.%., 9., is on leave. :ootnotes

1

%he ent re d scuss on on the ssue of value n th s dec s on has as ts frame of reference sect on 12/80 of the Jud c ary Act of 1546, infra, before ts total el m nat on by "epubl c Act 8440 9h ch 9ent nto effect on &eptember 5, 15>6. As the la9 stands today, all appeal from dec s ons n c v l cases nvolv ng property or money cla ms, regardless of the value or amount n controversy, must no9 be taFen to the 'ourt of Appeals, prov ded that such appeals do not pose only errors or =uest ons of la9. (hatever pronouncements are made n th s dec s on n reference to the sa d sect on 12/80 of the Jud c ary Act of 1546 must be taFen as appl cable only to appeals /s m lar to the case at bar0 9h ch 9ere perfected pr or to the date of effect v ty of "epubl c Act 8440.
2

$t may be asFed? 9hat happens f, contrary to the e1press or mpl ed f nd ng of a tr al court, the 'ourt of Appeals or th s 'ourt f nds that the value of real estate n controversy n an appeal from a tr al court on matters of fact and la9 or fact alone, e1ceeds the value of +200,000 or does not e1ceed such value, as the case may beP %he ans9er s not d ff cult. $f the appeal s made to the 'ourt of Appeals, but on the bas s of the records a =uo, nclud ng any s9orn statement by a party to the cause or other ev dence subm tted before perfect on of the appeal, the realty should appear to have a value n e1cess of +200,000, the 'ourt of Appeals shall cert fy the appeal to the &upreme 'ourt pursuant to sect on < of "ule 80 O and 9e may or may not accede to the cert f cat on depend ng on our f nd ng on the value. Bo9ever, a party l t gant may ra se the ssue of value n a prel m nary mot on or n h s br ef on the bas s solely of the records a quo, aga n nclud ng 9hatever s9orn statement or other competent ev dence of value may have been subm tted before the perfect on of the appealI and f he does that but the 'ourt of Appeals rules that t has -ur sd ct on over the controversy because of ts f nd ng that the realty has a value not n e1cess of +200,000, the f nd ng of value s rev e9able by us on an or g nal act on for mandamus or cert orar , for th s factual matter s nd spensably nvolved n the ssue of -ur sd ct on. $f, on the other hand, the appeal s made to us but, on the same bas s as above, the realty should appear to have a value not n e1cess of +200,000, 9e 9 ll remand the appeal to the 'ourt of Appeals, and our f nd ng on value, though one of fact, 9 ll be b nd ng upon the 'ourt of Appeals. $n resume, the value of real estate, the t tle or possess on of 9h ch s nvolved or brought n =uest on should, for purposes of determ n ng 9h ch appellate court has -ur sd ct on over the appeal, be based solely on the plead ngs, s9orn statement or other competent ev dence already n the records of the case at the t me the appeal s perfected. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la

%B$"D D$C$&$DN G.$. No. 121;<4 :e ruary 2, 3..1

$)6A#)N/, su stituted y -is -eirs, J/SE:)NA, $/#AN!/ and :E$NAN!/, E$NES(/, #E/N/$A, 9)9)AN/, J$., #)9$A!/ and EN$)E&E(A, all surnamed /ES'E$, +et t oners, vs. +A$A)S/ !E*E#/+'EN( %/$+/$A()/N, "espondent. DE'$&$DN %5)%/7NA6A$)/, J.: Eefore th s 'ourt s a +et t on for "ev e9 on 'ert orar under "ule 48 of the 1552 "ev sed "ules of ' v l +rocedure seeF ng to reverse and set as de the 'ourt of Appeals Dec s on1 dated 2> Apr l 2002 n 'A@#.". 'C No. 8<1<0 ent tled, " Aal no, Ernesto, !eonora, E b ano, Jr., ! brado, Enr =ueta, Adolfo, and Jesus, all surnamed Desmer vs. +ara so Development 'orporat on, as mod f ed by ts "esolut on2 dated 4 March 200<, declar ng the 'ontract to &ell val d and b nd ng 9 th respect to the und v ded proport onate shares of the s 1 s gnator es of the sa d document, here n pet t oners, namely? Ernesto, Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora /all surnamed Desmer0I and order ng them to e1ecute the Deed of Absolute &ale concern ng the r >M6 share over the sub-ect parcels of land n favor of here n respondent +ara so Development 'orporat on, and to pay the latter the attorneyJs fees plus costs of the su t. %he assa led Dec s on, as mod f ed, l Fe9 se ordered the respondent to tender payment to the pet t oners n the amount of +<,21>,8>0.00 represent ng the balance of the purchase pr ce of the sub-ect parcels of land. %he facts of the case are as follo9s? +et t oners " Aal no, Ernesto, !eonora, E b ano, Jr., ! brado, and Enr =ueta, all surnamed Desmer, together 9 th Adolfo Desmer /Adolfo0 and Jesus Desmer /Jesus0, are brothers and s sters, and the co@o9ners of und v ded shares of t9o parcels of agr cultural and tenanted land s tuated n Earangay 3long %ub g, 'armona, 'av te, dent f ed as !ot 220 9 th an area of 40,802 s=uare meters /s=. m.0 and !ot 6<4 conta n ng an area of 14,2>5 s=. m., or a total land area of 88,22> s=. m. Eoth lots are unreg stered and or g nally o9ned by the r parents, E b ano Desmer and Encarnac on Durump l , 9ho declared the lots for ta1at on purposes under %a1 Declarat on No. <4<6</cancelled by $.D. No. >0>4@A0 for !ot 220 and %a1 Declarat on No. <4<24 /cancelled by $.D. No. 8>250 for !ot 6<4. (hen the spouses Desmer d ed, pet t oners, together 9 th Adolfo and Jesus, ac=u red the lots as he rs of the former by r ght of success on. "espondent +ara so Development 'orporat on s Fno9n to be engaged n the real estate bus ness. &omet me n March 1565, "ogel o +aular, a res dent and former Mun c pal &ecretary of 'armona, 'av te, brought along pet t oner Ernesto to meet 9 th a

certa n &otero !ee, +res dent of respondent +ara so Development 'orporat on, at Dtan Botel n Man la. %he sa d meet ng 9as for the purpose of broFer ng the sale of pet t onersJ propert es to respondent corporat on. +ursuant to the sa d meet ng, a 'ontract to &ell 8 9as drafted by the E1ecut ve Ass stant of &otero !ee, $nocenc a Almo. Dn 1 Apr l 1565, pet t oners Ernesto and Enr =ueta s gned the aforesa d 'ontract to &ell. A checF n the amount of +100,000.00, payable to Ernesto, 9as g ven as opt on money. &omet me thereafter, " Aal no, !eonora, E b ano, Jr., and ! brado also s gned the sa d 'ontract to &ell. Bo9ever, t9o of the brothers, Adolfo and Jesus, d d not s gn the document. Dn 8 Apr l 1565, a dupl cate copy of the nstrument 9as returned to respondent corporat on. Dn 21 Apr l 1565, respondent brought the same to a notary publ c for notar Aat on. $n a letter> dated 1 November 1565, addressed to respondent corporat on, pet t oners nformed the former of the r ntent on to resc nd the 'ontract to &ell and to return the amount of +100,000.00 g ven by respondent as opt on money. "espondent d d not respond to the aforesa d letter. Dn <0 May 1551, here n pet t oners, together 9 th Adolfo and Jesus, f led a 'ompla nt 2 for Declarat on of Null ty or for Annulment of Dpt on Agreement or 'ontract to &ell 9 th Damages before the "eg onal %r al 'ourt /"%'0 of Eacoor, 'av te. %he sa d case 9as docFeted as ' v l 'ase No. E'C@51@45. Dur ng tr al, pet t oner " Aal no d ed. 3pon mot on of pet t oners, the tr al court ssued an Drder,6 dated 1> &eptember 1552, to the effect that the deceased pet t oner be subst tuted by h s surv v ng spouse, Josef na D. Desmer, and h s ch ldren, "olando D. Desmer and 7ernando D. Desmer. Bo9ever, the name of " Aal no 9as reta ned n the t tle of the case both n the "%' and the 'ourt of Appeals. After tr al on the mer ts, the lo9er court rendered a Dec s on 5 dated 22 March 155> n favor of the respondent, the d spos t ve port on of 9h ch reads? (BE"E7D"E, prem ses cons dered, -udgment s hereby rendered n favor of here n :respondent; +ara so Development 'orporat on. %he assa led 'ontract to &ell s val d and b nd ng only to the und v ded proport onate share of the s gnatory of th s document and rec p ent of the checF, :here n pet t oner; co@ o9ner Ernesto Durump l Desmer. %he latter s hereby ordered to e1ecute the 'ontract of Absolute &ale concern ng h s 1M6 share over the sub-ect t9o parcels of land n favor of here n :respondent; corporat on, and to pay the latter the attorneyJs fees n the sum of %en %housand /+10,000.000 +esos plus costs of su t. %he countercla m of :respondent; corporat on s hereby D sm ssed for lacF of mer t.10 3nsat sf ed, respondent appealed the sa d Dec s on before the 'ourt of Appeals. Dn 2> Apr l 2002, the appellate court rendered a Dec s on mod fy ng the Dec s on

of the court a =uo by declar ng that the 'ontract to &ell s val d and b nd ng 9 th respect to the und v ded proport onate shares of the s 1 s gnator es of the sa d document, here n pet t oners, namely? Ernesto, Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora /all surnamed Desmer0. %he decretal port on of the sa d Dec s on states that? (BE"E7D"E, prem ses cons dered, the Dec s on of the court a =uo s hereby MDD$7$ED. Judgment s hereby rendered n favor of here n :respondent; +ara so Development 'orporat on. %he assa led 'ontract to &ell s val d and b nd ng 9 th respect to the und v ded proport onate share of the s 1 />0 s gnator es of th s document, :here n pet t oners;, namely, Ernesto, Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora /all surnamed Desmer0. %he sa d :pet t oners; are hereby ordered to e1ecute the Deed of Absolute &ale concern ng the r >M6 share over the sub-ect t9o parcels of land and n favor of here n :respondent; corporat on, and to pay the latter the attorneyJs fees n the sum of %en %housand +esos /+10,000.000 plus costs of su t. 11 Aggr eved by the above@ment oned Dec s on, pet t oners f led a Mot on for "econs derat on of the same on 2 July 2002. Act ng on pet t onersJ Mot on for "econs derat on, the 'ourt of Appeals ssued a "esolut on dated 4 March 200<, ma nta n ng ts Dec s on dated 2> Apr l 2002, 9 th the mod f cat on that respondent tender payment to pet t oners n the amount of +<,21>,8>0.00, represent ng the balance of the purchase pr ce of the sub-ect parcels of land. %he d spos t ve port on of the sa d "esolut on reads? (BE"E7D"E, prem ses cons dered, the assa led Dec s on s hereby mod f ed.+a&phi+.net Judgment s hereby rendered n favor of here n :respondent; +ara so Development 'orporat on. %he assa led 'ontract to &ell s val d and b nd ng 9 th respect to the und v ded proport onate shares of the s 1 />0 s gnator es of th s document, :here n pet t oners;, namely, Ernesto, Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora /all surnamed Desmer0. %he sa d :pet t oners; are hereby ordered to e1ecute the Deed of Absolute &ale concern ng the r >M6 share over the sub-ect t9o parcels of land n favor of here n :respondent; corporat on, and to pay the latter attorneyJs fees n the sum of %en %housand +esos /+10,000.000 plus costs of su t. "espondent s l Fe9 se ordered to tender payment to the above@named :pet t oners; n the amount of %hree M ll on %9o Bundred & 1teen %housand 7 ve Bundred & 1ty +esos /+<,21>,8>0.000 represent ng the balance of the purchase pr ce of the sub-ect t9o parcels of land. 12 Bence, th s +et t on for "ev e9 on 'ert orar . +et t oners come before th s 'ourt argu ng that the 'ourt of Appeals erred? $. Dn a =uest on of la9 n not hold ng that, the supposed 'ontract to &ell /E1h b t D0 s not b nd ng upon pet t oner Ernesto DesmerJs co@o9ners /here n pet t oners Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora0.

$$. Dn a =uest on of la9 n not hold ng that, the supposed 'ontract to &ell /E1h b t D0 s vo d altogether cons der ng that respondent tself d d not s gn t as to nd cate ts consent to be bound by ts terms. Moreover, E1h b t D s really a un lateral prom se to sell 9 thout cons derat on d st nct from the pr ce, and hence, vo d. +et t oners assert that the s gnatures of f ve of them namely? Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora, on the marg ns of the supposed 'ontract to &ell d d not confer author ty on pet t oner Ernesto as agent to sell the r respect ve shares n the =uest oned propert es, and hence, for lacF of 9r tten author ty from the above@named pet t oners to sell the r respect ve shares n the sub-ect parcels of land, the supposed 'ontract to &ell s vo d as to them. Ne ther do the r s gnatures s gn fy the r consent to d rectly sell the r shares n the =uest oned propert es. Assum ng that the s gnatures nd cate consent, such consent 9as merely cond t onal. %he effect v ty of the alleged 'ontract to &ell 9as sub-ect to a suspens ve cond t on, 9h ch s the approval of the sale by all the co@o9ners. +et t oners also assert that the supposed 'ontract to &ell /E1h b t D0, contrary to the f nd ngs of the 'ourt of Appeals, s not couched n s mple language. %hey further cla m that the supposed 'ontract to &ell does not b nd the respondent because the latter d d not s gn the sa d contract as to nd cate ts consent to be bound by ts terms. 7urthermore, they ma nta n that the supposed 'ontract to &ell s really a un lateral prom se to sell and the opt on money does not b nd pet t oners for lacF of cause or cons derat on d st nct from the purchase pr ce. %he +et t on s bereft of mer t. $t s true that the s gnatures of the f ve pet t oners, namely? Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora, on the 'ontract to &ell d d not confer author ty on pet t oner Ernesto as agent author Aed to sell the r respect ve shares n the =uest oned propert es because of Art cle 1624 of the ' v l 'ode, 9h ch e1pressly prov des that? Art. 1624. (hen a sale of a p ece of land or any nterest there n s through an agent, the author ty of the latter shall be n 9r t ngI other9 se, the sale shall be vo d. %he la9 tself e1pl c tly re=u res a 9r tten author ty before an agent can sell an mmovable. %he conferment of such an author ty should be n 9r t ng, n as clear and prec se terms as poss ble. $t s 9orth not ng that pet t onersJ s gnatures are found n the 'ontract to &ell. %he 'ontract s absolutely s lent on the establ shment of any pr nc pal@agent relat onsh p bet9een the f ve pet t oners and the r brother and co@pet t oner Ernesto as to the sale of the sub-ect parcels of land. %hus, the 'ontract to &ell, although s gned on the marg n by the f ve pet t oners, s not suff c ent to confer author ty on pet t oner Ernesto to act as the r agent n sell ng the r shares n the propert es n =uest on.

Bo9ever, desp te pet t oner ErnestoJs lacF of 9r tten author ty from the f ve pet t oners to sell the r shares n the sub-ect parcels of land, the supposed 'ontract to &ell rema ns val d and b nd ng upon the latter. As can be clearly gleaned from the contract tself, t s not only pet t oner Ernesto 9ho s gned the sa d 'ontract to &ellI the other f ve pet t oners also personally aff 1ed the r s gnatures thereon. %herefore, a 9r tten author ty s no longer necessary n order to sell the r shares n the sub-ect parcels of land because, by aff 1 ng the r s gnatures on the 'ontract to &ell, they 9ere not sell ng the r shares through an agent but, rather, they 9ere sell ng the same d rectly and n the r o9n r ght. %he 'ourt also f nds untenable the follo9 ng arguments ra sed by pet t oners to the effect that the 'ontract to &ell s not b nd ng upon them, e1cept to Ernesto, because? /10 the s gnatures of f ve of the pet t oners do not s gn fy the r consent to sell the r shares n the =uest oned propert es s nce pet t oner Enr =ueta merely s gned as a 9 tness to the sa d 'ontract to &ell, and that the other pet t oners, namely? ! brado, " Aal no, !eonora, and E b ano, Jr., d d not understand the mportance and conse=uences of the r act on because of the r lo9 degree of educat on and the contents of the aforesa d contract 9ere not read nor e1pla ned to themI and /20 assum ng that the s gnatures nd cate consent, such consent 9as merely cond t onal, thus, the effect v ty of the alleged 'ontract to &ell 9as sub-ect to a suspens ve cond t on, 9h ch s the approval by all the co@o9ners of the sale. $t s 9ell@settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. 7rom that moment, the part es are bound not only to the fulf llment of 9hat has been e1pressly st pulated but also to all the conse=uences 9h ch, accord ng to the r nature, may be n Feep ng 9 th good fa th, usage and la9. %o produce a contract, the acceptance must not =ual fy the terms of the offer. Bo9ever, the acceptance may be e1press or mpl ed. 7or a contract to ar se, the acceptance must be made Fno9n to the offeror. Accord ngly, the acceptance can be 9 thdra9n or revoFed before t s made Fno9n to the offeror.1< $n the case at bar, the 'ontract to &ell 9as perfected 9hen the pet t oners consented to the sale to the respondent of the r shares n the sub-ect parcels of land by aff 1 ng the r s gnatures on the sa d contract. &uch s gnatures sho9 the r acceptance of 9hat has been st pulated n the 'ontract to &ell and such acceptance 9as made Fno9n to respondent corporat on 9hen the dupl cate copy of the 'ontract to &ell 9as returned to the latter bear ng pet t onersJ s gnatures. As to pet t oner Enr =uetaJs cla m that she merely s gned as a 9 tness to the sa d contract, the contract tself does not say so. %here 9as no s ngle nd cat on n the sa d contract that she s gned the same merely as a 9 tness. %he fact that her s gnature appears on the r ght@hand marg n of the 'ontract to &ell s ns gn f cant. %he contract nd sputably referred to the ,Be rs of E b ano and Encarnac on Desmer,, and s nce there s no sho9 ng that Enr =ueta s gned the

document n some other capac ty, t can be safely assumed that she d d so as one of the part es to the sale. Emphas s should also be g ven to the fact that pet t oners Ernesto and Enr =ueta concurrently s gned the 'ontract to &ell. As the 'ourt of Appeals ment oned n ts Dec s on,14 the records of the case speaF of the fact that pet t oner Ernesto, together 9 th pet t oner Enr =ueta, met 9 th the representat ves of the respondent n order to f nal Ae the terms and cond t ons of the 'ontract to &ell. Enr =ueta aff 1ed her s gnature on the sa d contract 9hen the same 9as drafted. &he even adm tted that she understood the undertaF ng that she and pet t oner Ernesto made n connect on 9 th the contract. &he l Fe9 se d sclosed that pursuant to the terms embod ed n the 'ontract to &ell, she updated the payment of the real property ta1es and transferred the %a1 Declarat ons of the =uest oned propert es n her name.18 Bence, t cannot be ga nsa d that she merely s gned the 'ontract to &ell as a 9 tness because she d d not only act vely part c pate n the negot at on and e1ecut on of the same, but her subse=uent act ons also reveal an attempt to comply 9 th the cond t ons n the sa d contract. ( th respect to the other pet t onersJ assert on that they d d not understand the mportance and conse=uences of the r act on because of the r lo9 degree of educat on and because the contents of the aforesa d contract 9ere not read nor e1pla ned to them, the same cannot be susta ned. (e only have to =uote the pert nent port ons of the 'ourt of Appeals Dec s on, clear and conc se, to d spose of th s ssue. %hus, 7 rst, the 'ontract to &ell s couched n such a s mple language 9h ch s undoubtedly easy to read and understand. %he terms of the 'ontract, spec f cally the amount of +100,000.00 represent ng the opt on money pa d by :respondent; corporat on, the purchase pr ce of +>0.00 per s=uare meter or the total amount of+<,<1>,8>0.00 and a br ef descr pt on of the sub-ect propert es are 9ell@ nd cated thereon that any prudent and mature man 9ould have Fno9n the nature and e1tent of the transact on encapsulated n the document that he 9as s gn ng. &econd, the follo9 ng c rcumstances, as test f ed by the 9 tnesses and as can be gleaned from the records of the case clearly nd cate the :pet t onersJ; ntent on to be bound by the st pulat ons chron cled n the sa d 'ontract to &ell. As to :pet t oner; Ernesto, there s no d spute as to h s ntent on to effect the al enat on of the sub-ect property as he n fact 9as the one 9ho n t ated the negot at on process and culm nated the same by aff 1 ng h s s gnature on the 'ontract to &ell and by taF ng rece pt of the amount of +100,000.00 9h ch formed part of the purchase pr ce. 1111 As to :pet t oner; ! brado, the :appellate court; f nds t preposterous that he 9 ll ngly aff 1ed h s s gnature on a document 9r tten n a language /Engl sh0 that he purportedly does not understand. Be test f ed that the document 9as -ust

brought to h m by an 16 year old n ece named Eaby and he 9as told that the document 9as for a checF to be pa d to h m. Be read ly s gned the 'ontract to &ell 9 thout consult ng h s other s bl ngs. %hereafter, he e1erted no effort n commun cat ng 9 th h s brothers and s sters regard ng the document 9h ch he had s gned, d d not n=u re 9hat the checF 9as for and d d not thereafter asF for the checF 9h ch s purportedly due to h m as a result of h s s gn ng the sa d 'ontract to &ell. /%&N, 26 &eptember 155<, pp. 22@2<0 %he :appellate court; notes that ! brado s a 4< year old fam ly man /%&N, 26 &eptember 155<, p. 150. As such, he s e1pected to act 9 th that ord nary degree of care and prudence e1pected of a good father of a fam ly. B s un9 tt ng test mony s -ust d v nely d sbel ev ng. %he other :pet t oners; /" Aal no, !eonora and E b ano Jr.0 are l Fe9 se bound by the sa d 'ontract to &ell. %he theory adopted by the :pet t oners; that because of the r lo9 degree of educat on, they d d not understand the contents of the sa d 'ontract to &ell s devo d of mer t. %he :appellate court; also notes that Adolfo /one of the co@he rs 9ho d d not s gn0 also possess the same degree of educat on as that of the s gn ng co@he rs /%&N, 18 Dctober 1551, p. 150. Be, ho9ever, s employed at the +rov nc al %reasury Dff ce at %rece Mart reA, 'av te and has even accompan ed "ogel o +aular to the AssessorJs Dff ce to locate certa n m ss ng documents 9h ch 9ere needed to transfer the t tles of the sub-ect propert es. /%&N, 26 January 1554, pp. 2> N <80 & m larly, the other co@he rs :pet t oners;, l Fe Adolfo, are far from gnorant, more so, ll terate that they can be e1tr cated from the r obl gat ons under the 'ontract to &ell 9h ch they voluntar ly and Fno9 ngly entered nto 9 th the :respondent; corporat on. %he &upreme 'ourt n the case of 'ec l a Mata v. 'ourt of Appeals /202 &'"A 28< :1552;0, c t ng the case of %an &ua & a v. Hu Ea o &ontua /8> +h l. 2110, nstruct vely ruled as follo9s? ,%he 'ourt does not accept the pet t onerJs cla m that she d d not understand the terms and cond t ons of the transact ons because she only reached #rade %hree and 9as already >< years of age 9hen she s gned the documents. &he 9as l terate, to beg n 9 th, and her age d d not maFe her sen le or ncompetent. 1 1 1. At any rate, MetrobanF had no obl gat on to e1pla n the documents to the pet t oner as no9here has t been proven that she s unable to read or that the contracts 9ere 9r tten n a language not Fno9n to her. $t 9as her respons b l ty to nform herself of the mean ng and conse=uence of the contracts she 9as s gn ng and, f she found them d ff cult to comprehend, to consult other persons, preferably la9yers, to e1pla n them to her. After all, the transact ons nvolved not only a fe9 hundred or thousand pesos but, ndeed, hundreds of thousands of pesos. As the 'ourt has held? 1 1 1 %he rule that one 9ho s gns a contract s presumed to Fno9 ts contents has been appl ed even to contracts of ll terate persons on the ground that f

such persons are unable to read, they are negl gent f they fa l to have the contract read to them. $f a person cannot read the nstrument, t s as much h s duty to procure some rel able persons to read and e1pla n t to h m, before he s gns t, as t 9ould be to read t before he s gned t f he 9ere able to do and h s fa lure to obta n a read ng and e1planat on of t s such gross negl gence as 9 ll estop from avo d ng t on the ground that he 9as gnorant of ts contents.,1> %hat the pet t oners really had the ntent on to d spose of the r shares n the sub-ect parcels of land, rrespect ve of 9hether or not all of the he rs consented to the sa d 'ontract to &ell, 9as unve led by AdolfoJs test mony as follo9s? A%%H. #AMD? %h s alleged agreement bet9een you and your other brothers and s sters that unless everybody 9 ll agree, the propert es 9ould not be sold, 9as that agreement n 9r t ngP ($%NE&&? No s r. A%%H. #AMD? (hat you are say ng s that 9hen your brothers and s sters e1cept Jesus and you d d not s gn that agreement 9h ch had been marFed as :E1h b t; ,D,, your brothers and s sters 9ere grossly v olat ng your agreement. ($%NE&&? Hes, s r, they v olated 9hat 9e have agreed upon. 12 (e also cannot susta n the allegat on of the pet t oners that assum ng the s gnatures nd cate consent, such consent 9as merely cond t onal, and that, the effect v ty of the alleged 'ontract to &ell 9as sub-ect to the suspens ve cond t on that the sale be approved by all the co@o9ners. %he 'ontract to &ell s clear enough. $t s a card nal rule n the nterpretat on of contracts 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. 16 %he terms of the 'ontract to &ell made no ment on of the cond t on that before t can become val d and b nd ng, a unan mous consent of all the he rs s necessary. %hus, 9hen the language of the contract s e1pl c t, as n the present case, leav ng no doubt as to the ntent on of the part es thereto, the l teral mean ng of ts st pulat on s controll ng. $n add t on, the pet t oners, be ng o9ners of the r respect ve und v ded shares n the sub-ect propert es, can d spose of the r shares even 9 thout the consent of all the co@he rs. Art cle 45< of the ' v l 'ode e1pressly prov des? Art cle 45<. Each co@o9ner shall have the full o9nersh p of h s part and of the fru ts and benef ts perta n ng thereto, and he may therefore alienate/ assi2n or -ort2a2e t, and even subst tute another person n ts en-oyment, e1cept 9hen personal r ghts are nvolved. Eut the effect of the al enat on or the mortgage, 9 th respect to the co@o9ners, shall be li-ited to the port on 9h ch may be allotted to h m n the d v s on upon the term nat on of the co@o9nersh p. :Emphases suppl ed.;

'onse=uently, even 9 thout the consent of the t9o co@he rs, Adolfo and Jesus, the 'ontract to &ell s st ll val d and b nd ng 9 th respect to the >M6 proport onate shares of the pet t oners, as properly held by the appellate court. %herefore, th s 'ourt f nds no error n the f nd ngs of the 'ourt of Appeals that all the pet t oners 9ho 9ere s gnator es n the 'ontract to &ell are bound thereby. %he f nal arguments of pet t oners state that the 'ontract to &ell s vo d altogether cons der ng that respondent tself d d not s gn t as to nd cate ts consent to be bound by ts termsI and moreover, the 'ontract to &ell s really a un lateral prom se to sell 9 thout cons derat on d st nct from the pr ce, and hence, aga n, vo d. &a d arguments must necessar ly fa l. %he 'ontract to &ell s not vo d merely because t does not bear the s gnature of the respondent corporat on. "espondent corporat onJs consent to be bound by the terms of the contract s sho9n n the uncontroverted facts 9h ch establ shed that there 9as part al performance by respondent of ts obl gat on n the sa d 'ontract to &ell 9hen t tendered the amount of +100,000.00 to form part of the purchase pr ce, 9h ch 9as accepted and acFno9ledged e1pressly by pet t oners. %herefore, by force of la9, respondent s re=u red to complete the payment to enforce the terms of the contract. Accord ngly, desp te the absence of respondentJs s gnature n the 'ontract to &ell, the former cannot evade ts obl gat on to pay the balance of the purchase pr ce. As a f nal po nt, the 'ontract to &ell entered nto by the part es s not a un lateral prom se to sell merely because t used the 9ord opt on money 9hen t referred to the amount of +100,000.00, 9h ch also form part of the purchase pr ce. &ettled s the rule that n the nterpretat on of contracts, the ascerta nment of the ntent on of the contract ng part es s to be d scharged by looF ng to the 9ords they used to pro-ect that ntent on n the r contract, all the 9ords, not -ust a part cular 9ord or t9o, and 9ords n conte1t, not 9ords stand ng alone. 15 $n the nstant case, the cons derat on of +100,000.00 pa d by respondent to pet t oners 9as referred to as ,opt on money., Bo9ever, a careful e1am nat on of the 9ords used n the contract nd cates that the money s not opt on money but earnest -one,. ,Earnest money, and ,opt on money, are not the same but d st ngu shed thus? /a0 earnest money s part of the purchase pr ce, 9h le opt on money s the money g ven as a d st nct cons derat on for an opt on contractI /b0 earnest money s g ven only 9here there s already a sale, 9h le opt on money appl es to a sale not yet perfectedI and, /c0 9hen earnest money s g ven, the buyer s bound to pay the balance, 9h le 9hen the 9ould@be buyer g ves opt on money, he s not re=u red to buy, but may even forfe t t depend ng on the terms of the opt on.20 %he sum of +100,000.00 9as part of the purchase pr ce. Although the same 9as denom nated as ,opt on money,, t s actually n the nature of earnest money or do9n payment 9hen cons dered 9 th the other terms of the contract. Doubtless, the agreement s not a mere un lateral prom se to sell, but, ndeed, t s a

'ontract to &ell as both the tr al court and the appellate court declared n the r Dec s ons. (BE"E7D"E, prem ses cons dered, the +et t on s DEN$ED, and the Dec s on and "esolut on of the 'ourt of Appeals dated 2> Apr l 2002 and 4 March 200<, respect vely, are A::)$'E!, thus, /a0 the 'ontract to &ell s!E%#A$E! val d and b nd ng 9 th respect to the und v ded proport onate shares n the sub-ect parcels of land of the s 1 s gnator es of the sa d document, here n pet t oners Ernesto, Enr =ueta, ! brado, " Aal no, E b ano, Jr., and !eonora /all surnamed Desmer0I /b0 respondent s /$!E$E! to tender payment to pet t oners n the amount of+<,21>,8>0.00 represent ng the balance of the purchase pr ce for the latterJs shares n the sub-ect parcels of landI and /c0 pet t oners are further /$!E$E! to e1ecute n favor of respondent the Deed of Absolute &ale cover ng the r shares n the sub-ect parcels of land after rece pt of the balance of the purchase pr ce, and to pay respondent attorneyJs fees plus costs of the su t. 'osts aga nst pet t oners. &D D"DE"ED. ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce (E 'DN'3"? %/NS&E#/ 8NA$ESUSAN()AG/ Assoc ate Just ce 'ha rperson 'A. A#)%)A A&S($)A 'A$()NE6 Assoc ate Just ce A%%E&%A%$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 $/'E/ J. %A##EJ/, S$. Asscoc ate Just ce

:ootnotes
1

+enned by Assoc ate Just ce Andres E. "eyes, Jr. 9 th Assoc ate Just ces 'onrado M. Cas=ueA, Jr., and Mar o !. #uar Qa $$$, concurr ng, rollo, pp. <1@44.
2

$d. at 4>@45. "ollo, p. 86. $d. at 85. $d. at 2<8. "ecords, p. 44. "ollo, pp. 8<@82. $d. at >6. +enned by Judge Edel9 na '. +astoralI rollo, pp. >5@2<. $d. at 2<. $d. at 4<@44. $d. at 46@45. Jard ne Dav es, $nc. v. 'ourt of Appeals, <65 +h l. 204, 212 /20000. "ollo, pp. <1@44. %&N, 18 Dctober 1551, pp. 1<@14. "ollo, pp. <>@40. %&N, 26 &eptember 155<, pp. 12@16.

<

>

10

11

12

1<

14

18

1>

12

16

#erman Mar ne Agenc es, $nc. v. Nat onal !abor "elat ons 'omm ss on, 40< +h l. 822, 866@865 /20010.
15

! mson v. 'ourt of Appeals, #.". No. 1<8525, 20 Apr l 2001, <82 &'"A 205, 21>.
20

$d. at 212.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 111;;= January 10, 3..3

A: $EA#(8 ? !E*E#/+'EN(, )N%. and 6ENA)!A $. $AN&##/, pet t oners, vs. !)ESE#'AN :$E)G5( SE$*)%ES, %/., 'AN&E# %. %$&6, J$. and ')!AS !E*E#/+'EN( %/$+/$A()/N,respondents. SAN!/*A#7G&()E$$E6, J.: +et t on for rev e9 on certiorari assa l ng the Dec s on dated December 10, 1552 and the "esolut on /Amend ng Dec s on0 dated August 8, 155< of the 'ourt of Appeals n 'A@#.". 'C No. <01<<. D eselman 7re ght &erv ce 'o. /D eselman for brev ty0 s a domest c corporat on and a reg stered o9ner of a parcel of commerc al lot cons st ng of 2,054 s=uare meters, located at 104 E. "odr gueA Avenue, Earr o 3gong, +as g ' ty, Metro Man la. %he property s covered by %ransfer 'ert f cate of % tle No. <5645 ssued by the "eg stry of Deeds of the +rov nce of " Aal. 1 Dn May 10, 1566, Manuel '. 'ruA, Jr., a member of the board of d rectors of D eselman, ssued a letter denom nated as ,Author ty %o &ell "eal Estate, 2 to 'r steta N. +ol ntan, a real estate broFer of the 'N+ "eal Estate EroFerage. 'ruA, Jr. author Aed +ol ntan ,to looF for a buyerMbuyers and negot ate the sale, of the lot at +<,000.00 per s=uare meter, or a total of +>,262,000.00. 'ruA, Jr. has no 9r tten author ty from D eselman to sell the lot. $n turn, 'r steta +ol ntan, through a letter< dated May 15, 1566, author Aed 7el c s ma /,M m ,0 Noble4 to sell the same lot. 7el c s ma Noble then offered for sale the property to A7 "ealty N Development, $nc. /A7 "ealty0 at +2,800.00 per s=uare meter.8 Lena da "anullo, board member and v ce@pres dent of A7 "ealty, accepted the offer and ssued a checF n the amount of +<00,000.00 payable to the order of D eselman. +ol ntan rece ved the checF and s gned an ,AcFno9ledgement "ece pt, > nd cat ng that the amount of +<00,000.00 represents the part al payment of the property but refundable 9 th n t9o 9eeFs should A7 "ealty d sapprove "anullo)s act on on the matter. Dn June 25, 1566, A7 "ealty conf rmed ts ntent on to buy the lot. Bence, "anullo asFed +ol ntan for the board resolut on of D eselman author A ng the sale of the property. Bo9ever, +ol ntan could only g ve "anullo the or g nal copy of %'% No. <5645, the ta1 declarat on and ta1 rece pt for the lot, and a photocopy of the Art cles of $ncorporat on of D eselman.2 Dn August 2, 1566, Manuel 7. 'ruA, &r., pres dent of D eselman, acFno9ledged rece pt of the sa d +<00,000.00 as ,earnest money, but re=u red A7 "ealty to f nal Ae the sale at +;,...... per s=uare meter.6 A7 "ealty repl ed that t has pa d an n t al do9n payment of +<00,000.00 and s 9 ll ng to pay the balance. 5 Bo9ever, on August 1<, 1566, Mr. 'ruA, &r. term nated the offer and demanded from A7 "ealty the return of the t tle of the lot earl er del vered by +ol ntan. 10

'la m ng that there 9as a perfected contract of sale bet9een them, A7 "ealty f led 9 th the "eg onal %r al 'ourt, Eranch 1>0, +as g ' ty a compla nt for spec f c performance /' v l 'ase No. 8>2260 aga nst D eselman and 'ruA, Jr.. %he compla nt prays that D eselman be ordered to e1ecute and del ver a f nal deed of sale n favor of A7 "ealty.11 $n ts amended compla nt,12 A7 "ealty asFed for payment of +1,800,000.00 as compensatory damagesI +400,000.00 as attorney)s feesI and +800,000.00 as e1emplary damages. $n ts ans9er, D eselman alleged that there 9as no meet ng of the m nds bet9een the part es n the sale of the property and that t d d not author Ae any person to enter nto such transact on on ts behalf. Mean9h le, on July <0, 1566, D eselman and M das Development 'orporat on /M das0 e1ecuted a Deed of Absolute &ale 1< of the same property. %he agreed pr ce 9as +2,600.00 per s=uare meter. M das del vered to D eselman +800,000.00 as do9n payment and depos ted the balance of +8,<00,000.00 n escro9 account 9 th the +'$EanF. 'onstra ned to protect ts nterest n the property, M das f led on Apr l <, 1565 a Mot on for !eave to $ntervene n ' v l 'ase No. 8>226. M das alleged that t has purchased the property and tooF possess on thereof, hence D eselman cannot be compelled to sell and convey t to A7 "ealty. %he tr al court granted M das) mot on. After tr al, the lo9er court rendered the challenged Dec s on hold ng that the acts of 'ruA, Jr. bound D eselman n the sale of the lot to A7 "ealty. 14 'onse=uently, the perfected contract of sale bet9een D eselman and A7 "ealty bars M das) ntervent on. %he tr al court also held that M das acted n bad fa th 9hen t n t ally pa d D eselman +800,000.00 even 9 thout see ng the latter)s t tle to the property. Moreover, the notar al report of the sale 9as not subm tted to the 'lerF of 'ourt of the UueAon ' ty "%' and the balance of +8,<00,000.00 purportedly depos ted n escro9 by M das 9 th a banF 9as not establ shed. +I&phi+.nJt %he d spos t ve port on of the tr al court)s Dec s on reads? ,(BE"E7D"E, forego ng cons dered, -udgment s hereby rendered order ng defendant to e1ecute and del ver to pla nt ffs the f nal deed of sale of the property covered by the %ransfer 'ert f cate of % tle No. <5645 of the "eg stry of Deed of " Aal, Metro Man la D str ct $$, nclud ng the mprovements thereon, and order ng defendants to pay pla nt ffs attorney)s fees n the amount of +80,000.00 and to pay the costs. ,%he countercla m of defendants s necessar ly d sm ssed. ,%he countercla m andMor the compla nt n ntervent on are l Fe9 se d sm ssed ,&D D"DE"ED.,18 D ssat sf ed, all the part es appealed to the 'ourt of Appeals.

A7 "ealty alleged that the tr al court erred n not hold ng D eselman l able for moral, compensatory and e1emplary damages, and n d sm ss ng ts countercla m aga nst M das. 3pon the other hand, D eselman and M das cla med that the tr al court erred n f nd ng that a contract of sale bet9een D eselman and A7 "ealty 9as perfected. M das further averred that there 9as no bad fa th on ts part 9hen t purchased the lot from D eselman. $n ts Dec s on dated December 10, 1552, the 'ourt of Appeals reversed the -udgment of the tr al court hold ng that s nce 'ruA, Jr. 9as not author Aed n 9r t ng by D eselman to sell the sub-ect property to A7 "ealty, the sale 9as not perfectedI and that the Deed of Absolute &ale bet9een D eselman and M das s val d, there be ng no bad fa th on the part of the latter. %he 'ourt of Appeals then declared D eselman and 'ruA, Jr. -o ntly and severally l able to A7 "ealty for +100,000.00 as moral damagesI +100,000.00 as e1emplary damagesI and +100,000.00 as attorney)s fees.1> Dn August 8, 155<, the 'ourt of Appeals, upon mot ons for recons derat on f led by the part es, promulgated an Amend ng Dec s on, the d spos t ve port on of 9h ch reads? ,(BE"E7D"E, %he Dec s on promulgated on Dctober 10, 1552, s hereby AMENDED n the sense that only defendant Mr. Manuel 'ruA, Jr. should be made l able to pay the pla nt ffs the damages and attorney)s fees a9arded there n, plus the amount of +<00,000.00 unless, n the case of the sa d +<00,000.00, the same s st ll depos ted 9 th the 'ourt 9h ch should be rest tuted to pla nt ffs. ,&D D"DE"ED.,12 A7 "ealty no9 comes to th s 'ourt v a the nstant pet t on alleg ng that the 'ourt of Appeals comm tted errors of la9. %he focal ssue for cons derat on by th s 'ourt s 9ho bet9een pet t oner A7 "ealty and respondent M das has a r ght over the sub-ect lot. %he 'ourt of Appeals, n revers ng the -udgment of the tr al court, made the follo9 ng rat oc nat on? ,7rom the forego ng scenar o, the fact that the board of d rectors of D eselman never author Aed, verbally and n 9r t ng, 'ruA, Jr. to sell the property n =uest on or to looF for buyers and negot ate the sale of the sub-ect property s unden able. ,(h le 'r steta +ol ntan 9as actually author Aed by 'ruA, Jr. to looF for buyers and negot ate the sale of the sub-ect property, t should be noted that 'ruA, Jr. could not confer on +ol ntan any author ty 9h ch he h mself d d not have. 3emo dat quod non ha#et. $n the same manner, 7el c s ma Noble could not have possessed author ty broader n scope, be ng a mere e1tens on of +ol ntan)s purported author ty, for t s a legal tru sm n our -ur sd ct on that a spr ng cannot r se h gher than ts source. &ucc nctly stated, the alleged sale of the sub-ect

property 9as effected through persons 9ho 9ere absolutely 9 thout any author ty 9hatsoever from D eselman. ,%he argument that D eselman rat f ed the contract by accept ng the +<00,000.00 as part al payment of the purchase pr ce of the sub-ect property s e=ually untenable. %he sale of land through an agent 9 thout any 9r tten author ty s vo d. 111 111 111

,Dn the contrary, anent the sale of the sub-ect property by D eselman to ntervenor M das, the records bear out that M das purchased the same from D eselman on <0 July 1566. %he not ce of lis pendens 9as subse=uently annotated on the t tle of the property by pla nt ffs on 18 August 1566. Bo9ever, th s subse=uent annotat on of the not ce of lis pendens certa nly operated prospect vely and d d not retroact to maFe the prev ous sale of the property to M das a conveyance n bad fa th. A subse=uently reg stered not ce of lis pendens surely s not proof of bad fa th. $t must therefore be borne n m nd that the <0 July 1566 deed of sale bet9een M das and D eselman s a document duly cert f ed by notary publ c under h s hand and seal. 1 1 1. &uch a deed of sale be ng publ c document acFno9ledged before a notary publ c s adm ss ble as to the date and fact of ts e1ecut on 9 thout further proof of ts due e1ecut on and del very /Eael vs. $ntermed ate Appellate 'ourt, 1>5 &'"A>12I Joson vs. EaltaAar, 154 &'"A 1140 and to prove the defects and lacF of consent n the e1ecut on thereof, the ev dence must be strong and not merely preponderant 1 1 1., 16 (e agree 9 th the 'ourt of Appeals. &ect on 2< of the 'orporat on 'ode e1pressly prov des that the corporate po9ers of all corporat ons shall be e1erc sed by the board of d rectors. Just as a natural person may author Ae another to do certa n acts n h s behalf, so may the board of d rectors of a corporat on val dly delegate some of ts funct ons to nd v dual off cers or agents appo nted by t.15 %hus, contracts or acts of a corporat on must be made e ther by the board of d rectors or by a corporate agent duly author Aed by the board.20 Absent such val d delegat onMauthor Aat on, the rule s that the declarat ons of an nd v dual d rector relat ng to the affa rs of the corporat on, but not n the course of, or connected 9 th, the performance of author Aed dut es of such d rector, are held not b nd ng on the corporat on. 21 $n the nstant case, t s und sputed that respondent 'ruA, Jr. has no 9r tten author ty from the board of d rectors of respondent D eselman to sell or to negot ate the sale of the lot, much less to appo nt other persons for the same purpose. "espondent 'ruA, Jr.)s lacF of such author ty precludes h m from conferr ng any author ty to +ol ntan nvolv ng the sub-ect realty. Necessar ly, ne ther could +ol ntan author Ae 7el c s ma Noble. 'learly, the collect ve acts of respondent 'ruA, Jr., +ol ntan and Noble cannot b nd D eselman n the purported contract of sale.

+et t oner A7 "ealty ma nta ns that the sale of land by an unauthor Aed agent may be rat f ed 9here, as here, there s acceptance of the benef ts nvolved. $n th s case the rece pt by respondent 'ruA, Jr. from A7 "ealty of the +<00,000.00 as part al payment of the lot effect vely b nds respondent D eselman. 22 (e are not persuaded. $nvolved n th s case s a sale of land t-rou"- an a"ent. %hus, the la9 on agency under the ' v l 'ode taFes precedence. %h s s 9ell stressed n >ao 7a #in $radin2 's. *ourt o! Appeals,2< ,& nce a corporat on, such as the pr vate respondent, can act only through ts off cers and agents, all acts 9 th n the po9ers of sa d corporat on may e performed y a"ents of its selectionI and, e1cept so far as l m tat ons or restr ct ons may be mposed by spec al charter, by@la9, or statutory prov s ons, t-e same "eneral principles of laF F-ic- "oAern t-e relation of a"ency for a natural person "oAern t-e officer or a"ent of a corporation, of F-ateAer status or ranG, in respect to -is poFer to act for t-e corporationI and a"ents F-en once appointed, or mem ers actin" in t-eir stead, are su Bect to t-e same rules, lia ilities, and incapacities as are a"ents of indiAiduals and priAate persons ., /Emphas s suppl ed0 +ert nently, Art cle 1624 of the same 'ode prov des? ,A"%. 1624. (hen a sale of piece of land or any nterest there n s t-rou"an a"ent, the aut-ority of the latter s-all e in Fritin"I ot-erFise, t-e sale s-all e Aoid., /Emphas s suppl ed0 'ons der ng that respondent 'ruA, Jr., 'r steta +ol ntan and 7el c s ma "anullo 9ere not author Aed by respondent D eselman to sell ts lot, the supposed contract s vo d. Ee ng a vo d contract, t s not suscept ble of rat f cat on by clear mandate of Art cle 1405 of the ' v l 'ode, thus? ,A"%. 1405. %he follo9 ng contracts are ineListent and Aoid from t-e Aery e"innin"? 111 /20 %hose eLpressly pro-i ited or declared Aoid y laF.

,(-ese contracts cannot e ratified. Ne ther can the r ght to set up the defense of llegal ty be 9a ved., /Emphas s suppl ed0 3pon the other hand, the val d ty of the sale of the sub-ect lot to respondent M das s un=uest onable. As aptly noted by the 'ourt of Appeals, 24 the sale 9as author Aed by a board resolut on of respondent D eselman dated May 22, 1566.+I&phi+.nJt %he 'ourt of Appeals a9arded attorney)s fees and moral and e1emplary damages n favor of pet t oner A7 "ealty and aga nst respondent 'ruA, Jr.. %he

a9ard 9as made by reason of a breach of contract mputable to respondent 'ruA, Jr. for hav ng acted n bad fa th. (e are no persuaded. $t bears stress ng that pet t oner Lena da "anullo, board member and v ce@pres dent of pet t oner A7 "ealty 9ho accepted the offer to sell the property, adm tted n her test mony28that a board resolut on from respondent D eselman author A ng the sale s necessary to b nd the latter n the transact onI and that respondent 'ruA, Jr. has no such 9r tten author ty. $n fact, desp te demand, such 9r tten author ty 9as not presented to her.2> %h s not9 thstand ng, pet t oner "anullo tendered a part al payment for the unauthor Aed transact on. 'learly, respondent 'ruA, Jr. should not be held l able for damages and attorney)s fees. W5E$E:/$E, the assa led Dec s on and "esolut on of the 'ourt of Appeals are hereby A::)$'E! 9 th'/!):)%A()/N n the sense that the a9ard of damages and attorney)s fees s deleted. "espondent D eselman s ordered to return to pet t oner A7 "ealty ts part al payment of +<00,000.00. 'osts aga nst pet t oners. S/ /$!E$E!. Melo, 4itug, $angani#an, and .arpio, 99., concur.

:ootnote
1

"ollo, p. 125. E1h b t ,J,, "ecords of "%', p. 112. E1h b t ,$,, i#id, p. 111. A real estate broFer of Noblehaus "ealty and MarFet ng. E1h b t ,A,, i#id., p. 102. E1h b t ,',, i#id., p. 104. %ranscr pt of &tenograph c Notes /%&N0, December 2, 1566, p. 16. E1h b t ,7,, "ecords of "%', p. 102. E1h b t ,#,, i#id., p.106. E1h b t ,4,, i#id., p. 242. "ecords of "%', p. >. :#id., pp. 11@12. E1h b t ,M,, i#id., p. 15<. "ollo, pp. 1<@18.

<

>

10

11

12

1<

14

18

:#id, pp. 12@16. "ollo, pp. 81@21. :#id., pp.18@1>. :#id. pp. 12@1<. ' t banF, N.A. vs. 'hua, 220 &'"A 28 /155<0. Earetto vs. !a +rev sora 7 l p na, 82 +h l. >45 /15<20. MendeAona vs. +h l pp ne &ugar Estates Development 'o., 41 +h l. 428 /15210. "ollo, pp. 22 and 24. 205 &'"A 2>< /15520.

1>

12

16

15

20

21

22

2<

24

&ee assa led "esolut on /Amend ng Dec s on0 dated August 8, 155<, p. 12I "ollo, p. 64.
28

%&N, December 2, 1566, pp. 16@20I pp. 8<@84. :#id.

2>

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 10.4;0 Au"ust 32, 3..<

+&$)(A +A5&!, S/#E!A! +A5&!, and )AN #EE %AS()##A Crepresented y 'ot-er and Attorney7in7:act *)$G)N)A %AS()##AD, +et t oners, vs. %/&$( /: A++EA#S, S+/&SES )SAGAN) 9E#A$')N/ and #E()%)A /%A'+/, E&:E')A SAN AG&S()N7'AGS)N/, 6ENA)!A SAN AG&S()N7 'c%$AE, ')#AG$/S SAN AG&S()N7:/$('AN, ')NE$*A SAN AG&S()N7 A(K)NS/N, :E$!)NAN! SAN AG&S()N, $A&# SAN AG&S()N, )SA9E#)(A SAN AG&S()N7#&S(EN9E$GE$ and *)$G)#)/ SAN AG&S()N, "espondents. DE'$&$DN NA%5&$A, J.: 7or our resolut on s a pet t on for rev e9 on cert orar assa l ng the Apr l 2<, 200< Dec s on1 and Dctober 6, 200< "esolut on 2 of the 'ourt of Appeals /'A0 n 'A@#.". 'C No. 8542>. %he appellate court, n the sa d dec s on and resolut on, reversed and set as de the January 14, 1556 Dec s on < of the "eg onal %r al 'ourt /"%'0, 9h ch ruled n favor of pet t oners. %he d spute stemmed from the follo9 ng facts.

Dur ng the r l fet me, spouses +edro &an Agust n and Agatona #en l 9ere able to ac=u re a 24>@s=uare meter parcel of land s tuated n Earangay Anos, !os EaQos, !aguna and covered by Dr g nal 'ert f cate of % tle /D'%0 No. D@/1>880 0@ 18.4 Agatona #en l d ed on &eptember 1<, 1550 9h le +edro &an Agust n d ed on &eptember 14, 1551. Eoth d ed ntestate, surv ved by the r e ght /60 ch ldren? respondents Eufem a, "aul, 7erd nand, Lena da, M lagros, M nerva, $sabel ta and C rg l o. &omet me n 1552, Eufem a, 7erd nand and "aul e1ecuted a Deed of Absolute &ale of 3nd v ded &hares8convey ng n favor of pet t oners /the +ahuds, for brev ty0 the r respect ve shares from the lot they nher ted from the r deceased parents for +828,000.00.> Eufem a also s gned the deed on behalf of her four /40 other co@he rs, namely? $sabel ta on the bas s of a spec al po9er of attorney e1ecuted on &eptember 26, 1551,2 and also for M lagros, M nerva, and Lena da but 9 thout the r apparent 9r tten author ty. 6 %he deed of sale 9as also not notar Aed.5 Dn July 21, 1552, the +ahuds pa d +<8,252.<1 to the !os EaQos "ural EanF 9here the sub-ect property 9as mortgaged.10 %he banF ssued a release of mortgage and turned over the o9nerJs copy of the D'% to the +ahuds. 11 Dver the follo9 ng months, the +ahuds made more payments to Eufem a and her s bl ngs total ng to+<80,000.00.12 %hey agreed to use the rema n ng +62,800.001< to defray the payment for ta1es and the e1penses n transferr ng the t tle of the property.14 (hen Eufem a and her co@he rs drafted an e1tra@-ud c al settlement of estate to fac l tate the transfer of the t tle to the +ahuds, C rg l o refused to s gn t.18 Dn July 6, 155<, C rg l oJs co@he rs f led a compla nt 1> for -ud c al part t on of the sub-ect property before the "%' of 'alamba, !aguna. Dn November 26, 1554, n the course of the proceed ngs for -ud c al part t on, a 'omprom se Agreement12 9as s gned 9 th seven /20 of the co@he rs agree ng to sell the r und v ded shares to C rg l o for+200,000.00. %he comprom se agreement 9as, ho9ever, not approved by the tr al court because Atty. D metr o B lbero, la9yer for Eufem a and her s 1 />0 co@he rs, refused to s gn the agreement because he Fne9 of the prev ous sale made to the +ahuds. 16la&phil.net Dn December 1, 1554, Eufem a acFno9ledged hav ng rece ved +200,000.00 from C rg l o.15 C rg l o then sold the ent re property to spouses $sagan Eelarm no and !et c a Dcampo /Eelarm nos0 somet me n 1554. %he Eelarm nos mmed ately constructed a bu ld ng on the sub-ect property. Alarmed and be9 ldered by the ongo ng construct on on the lot they purchased, the +ahuds mmed ately confronted Eufem a 9ho conf rmed to them that C rg l o had sold the property to the Eelarm nos. 20 Aggr eved, the +ahuds f led a compla nt n ntervent on21 n the pend ng case for -ud c al part t on. +avvphil After tr al, the "%' upheld the val d ty of the sale to pet t oners. %he d spos t ve port on of the dec s on reads?

(BE"E7D"E, the forego ng cons dered, the 'ourt orders? 1. the sale of the 2M6 port on of the property covered by D'% No. D /1>880 D@18 by the pla nt ffs as he rs of deceased &ps. +edro &an Agust n and Agatona #en l n favor of the $ntervenors@%h rd +arty pla nt ffs as val d and enforceable, but obl gat ng the $ntervenors@%h rd +arty pla nt ffs to complete the payment of the purchase pr ce of +4<2,800.00 by pay ng the balance of +62,800.00 to defendant 7e /s c0 &an Agust n Mags no. 3pon rece pt of the balance, the pla nt ff shall formal Ae the sale of the 2M6 port on n favor of the $ntervenor:s;@%h rd +arty pla nt ffsI 2. declar ng the document ent tled ,&alaysay sa +agsang@ayon sa E l han, /E1h. ,2@a,0 s gned by pla nt ff Eufem a &an Agust n attached to the unapproved 'omprom se Agreement /E1h. ,2,0 as not a val d sale n favor of defendant C rg l o &an Agust nI <. declar ng the sale /E1h. ,4,0 made by defendant C rg l o &an Agust n of the property covered by D'% No. D /1>880@D@18 reg stered n the names of &pouses +edro &an Agust n and Agatona #en l n favor of %h rd@party defendant &pouses $sagan and !et c a Eelarm no as not a val d sale and as ne1 stentI 4. declar ng the defendant C rg l o &an Agust n and the %h rd@+arty defendants spouses $sagan and !et c a Eelarm no as n bad fa th n buy ng the port on of the property already sold by the pla nt ffs n favor of the $ntervenors@%h rd +arty +la nt ffs and the %h rd@+arty Defendant &ps. $sagan and !et c a Eelarm no n construct ng the t9o@:storey; bu ld ng n /s c0 the property sub-ect of th s caseI and 8. declar ng the part es as not ent tled to any damages, 9 th the part es shoulder ng the r respect ve respons b l t es regard ng the payment of attorney:J;s fees to the r respect ve la9yers. No pronouncement as to costs. &D D"DE"ED.22 Not sat sf ed, respondents appealed the dec s on to the 'A argu ng, n the ma n, that the sale made by Eufem a for and on behalf of her other co@he rs to the +ahuds should have been declared vo d and ne1 stent for 9ant of a 9r tten author ty from her co@he rs. %he 'A y elded and set as de the f nd ngs of the tr al court. $n d spos ng the ssue, the 'A ruled? (BE"E7D"E, n v e9 of the forego ng, the Dec s on dated January 14, 1556, rendered by the "eg onal %r al 'ourt of 'alamba, !aguna, Eranch 52 n ' v l 'ase No. 2011@5<@' for Jud c al +art t on s hereby "ECE"&ED and &E% A&$DE, and a ne9 one entered, as follo9s? /10 %he case for part t on among the pla nt ffs@appellees and appellant C rg l o s no9 cons dered closed and term natedI

/20 Drder ng pla nt ffs@appellees to return to ntervenors@appellees the total amount they rece ved from the latter, plus an nterest of 12R per annum from the t me the compla nt : n; ntervent on 9as f led on Apr l 12, 1558 unt l actual payment of the sameI /<0 Declar ng the sale of appellant C rg l o &an Agust n to appellants spouses, $sagan and !et c a Eelarm no:,; as val d and b nd ngI /40 Declar ng appellants@spouses as buyers n good fa th and for value and are the o9ners of the sub-ect property. No pronouncement as to costs. &D D"DE"ED.2< +et t oners no9 come to th s 'ourt ra s ng the follo9 ng arguments? $. %he 'ourt of Appeals comm tted grave and revers ble error 9hen t d d not apply the second paragraph of Art cle 1<12 of the Ne9 ' v l 'ode nsofar as rat f cat on s concerned to the sale of the 4M6 port on of the sub-ect property e1ecuted by respondents &an Agust n n favor of pet t onersI $$. %he 'ourt of Appeals comm tted grave and revers ble error n hold ng that respondents spouses Eelarm nos are n good fa th 9hen they bought the sub-ect property from respondent C rg l o &an Agust n desp te the f nd ngs of fact by the court a =uo that they 9ere n bad fa th 9h ch clearly contravenes the presence of long l ne of case la9s uphold ng the tasF of g v ng utmost 9e ght and value to the factual f nd ngs of the tr al court dur ng appealsI :and; $$$. %he 'ourt of Appeals comm tted grave and revers ble error n hold ng that respondents spouses Eelarm nos have super or r ghts over the property n =uest on than pet t oners desp te the fact that the latter 9ere pr or n possess on thereby m sapply ng the prov s ons of Art cle 1844 of the Ne9 ' v l 'ode. 24 %he focal ssue to be resolved s the status of the sale of the sub-ect property by Eufem a and her co@he rs to the +ahuds. (e f nd the transact on to be val d and enforceable. Art cle 1624 of the ' v l 'ode pla nly prov des? Art. 1624. (hen a sale of a p ece of land or any nterest there n s through an agent, the author ty of the latter shall be n 9r t ngI other9 se, the sale shall be vo d. Also, under Art cle 1626,28 a spec al po9er of attorney s necessary for an agent to enter nto a contract by 9h ch the o9nersh p of an mmovable property s transm tted or ac=u red, e ther gratu tously or for a valuable cons derat on. &uch str ngent statutory re=u rement has been e1pla ned n 'osm c !umber 'orporat on v. 'ourt of Appeals?2>

:%;he author ty of an agent to e1ecute a contract :of; 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. 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. %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. 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.22 $n several cases, 9e have repeatedly held that the absence of a 9r tten author ty to sell a p ece of land s, pso -ure, vo d, 26 prec sely to protect the nterest of an unsuspect ng o9ner from be ng pre-ud ced by the un9arranted act of another. Eased on the forego ng, t s not d ff cult to conclude, n pr nc ple, that the sale made by Eufem a, $sabel ta and her t9o brothers to the +ahuds somet me n 1552 should be val d only 9 th respect to the 4M6 port on of the sub-ect property. %he sale 9 th respect to the <M6 port on, represent ng the shares of Lena da, M lagros, and M nerva, s vo d because Eufem a could not d spose of the nterest of her co@he rs n the sa d lot absent any 9r tten author ty from the latter, as e1pl c tly re=u red by la9. %h s 9as, n fact, the rul ng of the 'A. &t ll, n the r pet t on, the +ahuds argue that the sale 9 th respect to the <M6 port on of the land should have been deemed rat f ed 9hen the three co@he rs, namely? M lagros, M nerva, and Lena da, e1ecuted the r respect ve spec al po9er of attorneys25 author A ng Eufem a to represent them n the sale of the r shares n the sub-ect property.<0 (h le the sale 9 th respect to the <M6 port on s vo d by e1press prov s on of la9 and not suscept ble to rat f cat on, <1 9e nevertheless uphold ts val d ty on the bas s of the common la9 pr nc ple of estoppel. Art cle 14<1 of the ' v l 'ode prov des? Art. 14<1. %hrough estoppel an adm ss on or representat on s rendered conclus ve upon the person maF ng t, and cannot be den ed or d sproved as aga nst the person rely ng thereon. %rue, at the t me of the sale to the +ahuds, Eufem a 9as not armed 9 th the re=u s te spec al po9er of attorney to d spose of the <M6 port on of the property. $n t ally, n the r ans9er to the compla nt n ntervent on, <2 Eufem a and her other co@he rs den ed hav ng sold the r shares to the +ahuds. Dur ng the pre@tr al conference, ho9ever, they adm tted that they had ndeed sold 2M6 of the property to the +ahuds somet me n 1552.<< %hus, the prev ous den al 9as

superseded, f not accord ngly amended, by the r subse=uent adm ss on.<4 Moreover, n the r 'omment,<8 the sa d co@he rs aga n adm tted the sale made to pet t oners.<> $nterest ngly, n no nstance d d the three /<0 he rs concerned assa l the val d ty of the transact on made by Eufem a to the +ahuds on the bas s of 9ant of 9r tten author ty to sell. %hey could have eas ly f led a case for annulment of the sale of the r respect ve shares aga nst Eufem a and the +ahuds. $nstead, they opted to rema n s lent and left the tasF of ra s ng the val d ty of the sale as an ssue to the r co@he r, C rg l o, 9ho s not pr vy to the sa d transact on. %hey cannot be allo9ed to rely on Eufem a, the r attorney@ n@fact, to mpugn the val d ty of the f rst transact on because to allo9 them to do so 9ould be tantamount to g v ng prem um to the r s sterJs d shonest and fraudulent deed. 3nden ably, therefore, the s lence and pass v ty of the three co@he rs on the ssue bar them from maF ng a contrary cla m. $t s a bas c rule n the la9 of agency that a pr nc pal s sub-ect to l ab l ty for loss caused to another by the latterJs rel ance upon a dece tful representat on by an agent n the course of h s employment /10 f the representat on s author AedI /20 f t s 9 th n the mpl ed author ty of the agent to maFe for the pr nc palI or /<0 f t s apparently author Aed, regardless of 9hether the agent 9as author Aed by h m or not to maFe the representat on.<2 Ey the r cont nued s lence, Lena da, M lagros and M nerva have caused the +ahuds to bel eve that they have ndeed clothed Eufem a 9 th the author ty to transact on the r behalf. 'learly, the three co@he rs are no9 estopped from mpugn ng the val d ty of the sale from assa l ng the author ty of Eufem a to enter nto such transact on. Accord ngly, the subse=uent sale made by the seven co@he rs to C rg l o 9as vo d because they no longer had any nterest over the sub-ect property 9h ch they could al enate at the t me of the second transact on. <6 Nemo dat =uod non habet. C rg l o, ho9ever, could st ll al enate h s 1M6 und v ded share to the Eelarm nos. %he Eelarm nos, for the r part, cannot argue that they purchased the property from C rg l o n good fa th. As a general rule, a purchaser of a real property s not re=u red to maFe any further n=u ry beyond 9hat the cert f cate of t tle nd cates on ts face.<5 Eut the rule e1cludes those 9ho purchase 9 th Fno9ledge of the defect n the t tle of the vendor or of facts suff c ent to nduce a reasonable and prudent person to n=u re nto the status of the property. 40 &uch purchaser cannot close h s eyes to facts 9h ch should put a reasonable man on guard, and later cla m that he acted n good fa th on the bel ef that there 9as no defect n the t tle of the vendor. B s mere refusal to bel eve that such defect e1 sts, or h s obv ous neglect by clos ng h s eyes to the poss b l ty of the e1 stence of a defect n the vendorJs t tle, 9 ll not maFe h m an nnocent purchaser for value, f after9ards t turns out that the t tle 9as, n fact, defect ve. $n such a case, he s deemed to have bought the property at h s o9n r sF, and any n-ury or pre-ud ce occas oned by such transact on must be borne by h m. 41

$n the case at bar, the Eelarm nos 9ere fully a9are that the property 9as reg stered not n the name of the mmed ate transferor, C rg l o, but rema ned n the name of +edro &an Agust n and Agatona #en l. 42 %h s fact alone s suff c ent mpetus to maFe further n=u ry and, thus, negate the r cla m that they are purchasers for value n good fa th.4< %hey Fne9 that the property 9as st ll sub-ect of part t on proceed ngs before the tr al court, and that the comprom se agreement s gned by the he rs 9as not approved by the "%' follo9 ng the oppos t on of the counsel for Eufem a and her s 1 other co@he rs. 44 %he Eelarm nos, be ng transferees pendente l te, are deemed buyers n mala f de, and they stand e1actly n the shoes of the transferor and are bound by any -udgment or decree 9h ch may be rendered for or aga nst the transferor.48 7urthermore, had they ver f ed the status of the property by asF ng the ne ghbor ng res dents, they 9ould have been able to talF to the +ahuds 9ho occupy an ad-o n ng bus ness establ shment 4> and 9ould have Fno9n that a port on of the property had already been sold. All these e1 st ng and read ly ver f able facts are suff c ent to suggest that the Eelarm nos Fne9 that they 9ere buy ng the property at the r o9n r sF. (BE"E7D"E, prem ses cons dered, the Apr l 2<, 200< Dec s on of the 'ourt of Appeals as 9ell as ts Dctober 6, 200< "esolut on n 'A@#.". 'C No. 8542>, are "ECE"&ED and &E% A&$DE. Accord ngly, the January 14, 1556 Dec s on of Eranch 52 of the "eg onal %r al 'ourt of 'alamba, !aguna s "E$N&%A%ED 9 th the MDD$7$'A%$DN that the sale made by respondent C rg l o &an Agust n to respondent spouses $sagan Eelarm no and !et c a Dcampo s val d only 9 th respect to the 1M6 port on of the sub-ect property. %he tr al court s ordered to proceed 9 th the part t on of the property 9 th d spatch. &D D"DE"ED. AN(/N)/ E!&A$!/ 9. NA%5&$A Assoc ate Just ce (E 'DN'3"? %/N%5)(A %A$+)/ '/$A#ESV Assoc ate Just ce ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce !)/S!A!/ '. +E$A#(A Assoc ate Just ce A%%E&%A%$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. +$ES9)(E$/ J. *E#AS%/, J$. Assoc ate Just ce

')N)(A *. %5)%/7NA6A$)/VV Assoc ate Just ce Act ng '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 Act ng 'ha rperson)s Attestat on, $ cert fy 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. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
V

Add t onal member n l eu of Assoc ate Just ce 'onsuelo Hnares@&ant ago per &pec al Drder No. >25 dated August <, 2005.
VV

$n l eu of Assoc ate Just ce 'onsuelo@Hnares@&ant ago per &pec al Drder No. >26 dated August <, 2005.
1

+enned by Assoc ate Just ce Juan U. Enr =ueA, Jr., 9 th Assoc ate Just ces Mercedes #oAo@Dadole and BaF m &. Abdul9ah d, concurr ngI rollo, pp. <8@48.
2

$d. at 42@46. "ollo, pp. 121@14>. $d. at 68@6>. $d. at 45@80. $d. at <2@<6. $d. at >1. $d. at <2. $d. at 80, 140. $d. at 1<. $d. at <6. $d. at 65@5>. $d. at 52. $d. at 1<, 140.

<

>

10

11

12

1<

14

18

$d. at <6. $d. at 81@84. %he compla nt 9as docFeted as ' v l 'ase No. 2011@5<@'. $d. at >5@21. $d. at 1<>, 1<5. $d. at 10>. $d. at 1<8@1<>. $d. at 22@64. $d. at 148@14>. $d. at 44@48. $d. at 15. Art cle 1626/80 prov des?

1>

12

16

15

20

21

22

2<

24

28

Art. 1626. &pec al po9ers of attorney are necessary n the follo9 ng cases? 1111 /80 %o 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.
2>

<<2 +h l. 546 /155>0. $d. at 582@586. /Emphas s suppl ed, c tat ons om tted.0

22

26

Estate of ! no Dlaguer, etc. v. Bon. 'A and Em l ano M. Dng-oco, #.". No. 12<<12, August 2>, 2006I D Aon v. 'ourt of Appeals, #.". Nos. 122844 and 124241, January 26, 200<, <5> &'"A 181, 188I A7 "ealty N Development, $nc. v. D eselman 7re ght &erv ces, 'o., 424 +h l. 44>, 488 /20020I &an Juan &tructural and &teel 7abr cators, $nc. v. 'ourt of Appeals, #.". No. 125485, &eptember 25, 1556, 25> &'"A ><1, >46.
25

&pec al +o9er of Attorney of $sabel ta &an Agust n@!ustenberger 9as e1ecuted on &eptember 26, 1551, rollo, p. >1 /Anne1 ,E,0I &pec al +o9er of Attorney of M lagros &an Agust n@7ortman 9as e1ecuted n December 1552, d. at >2 /Anne1 ,7,0I &pec al +o9er of Attorney of M nerva &an Agust n@AtF nson 9as e1ecuted, undated, but 9as 9 tnessed by #.". &tephenson, 'omm ss oner for Daths, on 7ebruary 12, 155<, d. at >< /Anne1 ,#,0I and &pec al +o9er of Attorney of Lena da &an Agust n@Mc'rae 9as e1ecuted on May 10, 155<, d. at >4 /Anne1 ,B,0.
<0

"ollo, p. 20. '$C$! 'DDE, Art. 1405 prov des n part?

<1

Art. 1405. %he follo9 ng contracts are ne1 stent and vo d from the beg nn ng?

1111 /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 up the defense of llegal ty be 9a ved.
<2

$ "ecords, p. 2>I E1h. ,$@A,, ent tled Ans9er to 'ountercla m dated December 14, 155<.
<<

$$ "ecords, pp. 2>2@2>4. "3!E& D7 'D3"%, "ule 10, &ec. 8 prov des n full?

<4

&E'. 8. Amendment to conform to or author Ae presentat on of ev dence. K (hen ssues not ra sed by the plead ngs are tr ed 9 th the e1press or mpl ed consent of the part es, they shall be treated n all respects as f they had been ra sed n the plead ngs. &uch amendment of the plead ngs as may be necessary to cause them to conform to the ev dence and to ra se these ssues may be made upon mot on of any party at any t me, even after -udgmentI but fa lure to amend does not affect the result of the tr al of these ssues. $f ev dence s ob-ected to at the tr al on the ground that t s not 9 th n the ssues made by the plead ngs, the court may allo9 the plead ngs to be amended and shall do so 9 th l beral ty f the presentat on of the mer ts of the act on and the ends of substant al -ust ce 9 ll be subserved thereby. %he court may grant a cont nuance to enable the amendment to be made.
<8

"ollo, pp. 200@204. $d. at 200.

<>

<2

&ee De !eon, 'omments and 'ases on +artnersh p, Agency and %rusts, 2008 ed t on, p. 8<6, c t ng Mechem, 'ases on the !a9 of Agency, p. 2<0.
<6

'$C$! 'DDE, Art. 1405 prov des n part?

Art. 1405. %he follo9 ng contracts are ne1 stent and vo d from the beg nn ng? 1111 /<0 %hose 9hose cause or ob-ect d d not e1 st at the t me of the transact onI 1111 %hese contracts cannot be rat f ed. Ne ther can the r ght to set up the defense of llegal ty be 9a ved.
<5

!u v. $ntermed ate Appellate 'ourt, #.". No. 20145, January <0, 1565, 1>5 &'"A 858, >04I !opeA v. 'ourt of Appeals, #.". No. 452<5, January 20, 1565, 1>5 &'"A 221, 228@22>.
40

Abad v. #u mba, #.". No. 182002, July 25, 2008, 4>8 &'"A <8>, <>2.

41

Ea lon@'as lao v. 'ourt of Appeals, #.". No. !@26126, Apr l 18, 1566, 1>0 &'"A 2<6, 280.
42

$ "ecords, pp. 8@>.

4<

#uaranteed Bomes, $nc. v. Be rs of Mar a +. CaldeA, et al., #.". No. 1218<1, January <0, 2005.
44

$ "ecords, pp. at >0@>1. Coluntad v. D Aon, #.". No. 1<2254, August 2>, 1555, <1< &'"A 205. "ollo, p. 1>.

48

4>

%he !a9ph l +ro-ect @ Arellano !a9 7oundat on

%/N%&$$)NG AN! !)SSEN()NG /+)N)/N %A$+)/ '/$A#ES, J.: %he ponencia re nstates the tr al courtJs Dec s on of January 14, 1556 9 th the mod f cat on that ,the sale made by respondent C rg l o &an Agust n to respondent spouses $sagan Eelarm no and !et c a Dcampo s val d only 9 th respect to the 1M6 port on of the sub-ect property.,1 $ subm t that the val d ty of the sale to spouses Eelarm no e1tends to 4M6 or one@ half of the property, nclus ve of the comb ned <M6 share of respondents@s sters Lena da, M lagros and M nerva, all bear ng the ma den surname of &an Agust n, thus leav ng only one@half of the property to pet t oners +ur ta +ahud, et al. 9ho earl er purchased from Eufem a &an Agust n /Eufem a0 the property nclud ng the <M6 port on over 9h ch no 9r tten author ty from the three s sters 9as secured. %he ponente, Just ce Nachura, n fact, agrees to th s propos t on , n pr nc ple., 2 %he ponenc a even re-ects pet t onersJ content on that the spec al po9er of attorney subse=uently e1ecuted by Lena da, M lagros and M nerva n favor of Eufem a effect vely rat f ed the r earl er purchase of the property nsofar as the <M6 port on s concerned, for the establ shed reason that vo d contracts or the llegal terms thereof< are not suscept ble to rat f cat on. %he subse=uent e1ecut on by the three s sters of the respect ve spec al po9ers of attorney only means that they cons dered the prev ous sale null and recogn Aed the salab l ty of the r <M6 port on, thus pav ng the 9ay for ts transfer to C rg l o &an Agust n and ts eventual sale to the spouses Eelarm no. $ndeed, as the ponenc a eluc dates, Art cles 1624 and 1626 of the ' v l 'ode clearly prov de that a spec al po9er of attorney s necessary for an agent 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, and that

spec f cally n cases of sale of a p ece of land or any nterest there n through an agent, ,the author ty of the latter shall be n 9r t ngI other9 se the sale shall be Aoid., %he ponenc a taFes one step further, ho9ever, n uphold ng the val d ty of the sale of the <M6 port on belong ng to the < s sters to pet t oner not9 thstand ng the 9ant of a 9r tten author ty to sell, by apply ng the pr nc ple of estoppel. $t rat oc nates? (h le the sale 9 th respect to the <M6 port on s vo d by e1press prov s on of la9 and not suscept ble to rat f cat on, 9e nevertheless uphold ts val d ty on the bas s of the common la9 pr nc ple of estoppel. Art cle 14<1 of the ' v l 'ode prov des? Art. 14<1. %hrough estoppel an adm ss on or representat on s rendered conclus ve upon the person maF ng t, and cannot be den ed or d sproved as aga nst the person rely ng thereon %rue, at the t me of the sale to the +ahuds, Eufem a 9as not armed 9 th the re=u s te spec al po9er of attorney to d spose of the <M6 port on of the property. $n t ally, n the r ans9er to the compla nt n ntervent on, Eufem a and her other co@he rs den ed hav ng sold the r shares to the +ahuds. Dur ng the pre@tr al conference, ho9ever, they adm tted that they had ndeed sold 2M6 of the property to the +ahuds somet me n 1552. %hus, the prev ous den al 9as superseded, f not accord ngly amended, by the r subse=uent adm ss on. Moreover, n the r 'omment, the sa d co@he rs aga n adm tted the sale made to pet t oners. $nterest ngly, n no nstance d d the three /<0 he rs concerned assa l the val d ty of the transact on made by Eufem a to the +ahuds on the bas s of 9ant of 9r tten author ty to sell. %hey could have eas ly f led a case for annulment of the sale of the r respect ve shares aga nst Eufem a and the +ahuds. $nstead, they opted to rema n s lent and left the tasF of ra s ng the val d ty of the sale as an ssue to the r co@he r, C rg l o, 9ho s not pr vy to the sa d transact on. %hey cannot be allo9ed to rely on Eufem a, the r attorney@ n@fact, to mpugn the val d ty of the f rst transact on because to allo9 them to do so 9ould be tantamount to g v ng prem um to the r s sterJs d shonest and fraudulent deed. 3nden ably, therefore, the s lence and pass v ty of the three co@he rs on the ssue bar them from maF ng a contrary cla m. $t s a bas c rule n the la9 of agency that a pr nc pal s sub-ect to l ab l ty for loss caused to another by the latterJsrel ance upon a dece tful representat on by an agent in t-e course of -is employment /10 f the representat on s author AedI /20 f t s 9 th n the mpl ed author ty of the agent to maFe for the pr nc palI or /<0 f t s apparently author Aed, regardless of 9hether the agent 9as author Aed by h m or not to maFe the representat on. Ey the r cont nued s lence, Lena da, M lagros and M nerva have caused the +ahuds to bel eve that they have ndeed clothed Eufem a 9 th the author ty to

transact on the r behalf. 'learly, the three co@he rs are no9 estopped from mpugn ng the val d ty of the sale from assa l ng the author ty of Eufem a to enter such transact on.4/Emphas s and underscor ng suppl ed0 $t s from th s aspect of the ponencia that $ respectfully d ssent. E=u ty cannot supplant or contravene the la9. 8 Art cle 14<2 of the ' v l 'ode e1pressly states that the pr nc ples of estoppel are adopted , nsofar as they are not n confl ct 9 th the prov s ons of th s 'ode,, among other la9s. $ndeed, estoppel, be ng a pr nc ple n e=u ty, cannot be appl ed n the presence of a la9 clearly appl cable to the case. %he 'ourt s f rst and foremost a court of la9. (h le e=u ty m ght t lt on the s de of one party, the same cannot be enforced so as to overrule pos t ve prov s ons of la9 n favor of the other. > Moreover, the ev dent purpose of the legal re=u rement of such 9r tten author ty s not only to safeguard the nterest of an unsuspect ng o9ner from be ng pre-ud ced by the unauthor Aed act of another, but also to caut on the buyer to assure h mself of the spec f c author Aat on of the putat ve agent. $n other 9ords, the drafters of the la9 already sa9 the r sFy pred cament of sell ng lands through agents 9h ch, n the absence of a spec f c la9, 9ould other9 se ult mately depend on e=u ty to resolve d sputes such as the present case. %he la9 undoubtedly seeFs to prevent the follo9 ng confus on? 'ase la9 tells us that the elements of estoppel are? ,f rst, the actor 9ho usually must have Fno9ledge, not ce or susp c on of the true facts, commun cates someth ng to another n a m slead ng 9ay, e ther by 9ords, conduct or s lenceI second, the other n fact rel es, and rel es reasonably or -ust f ably, upon that commun cat onI th rd, the other 9ould be harmed mater ally f the actor s later perm tted to assert any cla m ncons stent 9 th h s earl er conductI and fourth, the actor Fno9s, e1pects or foresees that the other 9ould act upon the nformat on g ven or that a reasonable person n the actor)s pos t on 9ould e1pect or foresee such act on.,2 %he dep cted scenar o s prec sely the m sunderstand ng bet9een part es to such type of sale 9h ch the la9maFers sought to avo d n prescr b ng the cond t ons for the val d ty of such sale of land. %he present case s a class c e1ample of a ted ous l t gat on 9h ch had ensued as a result of such m sunderstand ng. %h s s 9hat the la9 endeavors to avert.6 $t s not for the 'ourt to suspend the appl cat on of the la9 and revert to e=u table grounds n resolv ng the present d spute. Assum ng arguendo that estoppel can contrad ct pos t ve la9, $ subm t that Art cle 14<1 of the ' v l 'ode does not apply s nce t speaFs of oneJs prior admission or representation, 9 thout 9h ch the other person could not have rel ed on t before act ng accord ngly.

%he ponenc a c tes acts or om ss ons on the part of the three s sters 9h ch came after the fact such as the r ,adm ss on, and ,cont nued s lence, 9h ch, ho9ever, could not retroact to the t me of the prev ous sale as to cons der pet t oners to have accord ngly rel ed on such adm ss on or representat on before buy ng the property from Eufem a. %he appl cat on of the pr nc ple of estoppel s proper and t mely n head ng off shre9d efforts at renounc ng oneJs prev ous acts to the pre-ud ce of another 9ho had dealt honestly and n good fa th. 5 $t s thus erroneous to conclude that Lena da, M lagros and M nerva have caused pet t oners to bel eve that they have clothed Eufem a 9 th the author ty to transact on the r behalf. 'ould the three s sters rat fy the prev ous sale through the r su#sequent acts or om ss onsP $ op ne they cannot. %he ponenc a concedes that ,the sale 9 th respect to the <M6 port on s vo d by e1press prov s on of la9 and not suscept ble to rat f cat on., %he prev ous sale be ng v olat ve of an e1press mandate of la9, such cannot be rat f ed by estoppel. Estoppel cannot g ve val d ty to an act that s proh b ted by la9 or one that s aga nst publ c pol cy. Ne ther can the defense of llegal ty be 9a ved.10 An act on or defense for the declarat on of the ne1 stence of a contract does not prescr be.11 Am d the confus on from the double deal ng made by the r s bl ng Eufem a, the three s sters e1pectedly Fept mum about t. &ucc nctly, the r ,cont nued s lence, cannot be taFen aga nst them. Earga n ng a9ay a prov s on of la9 should not be countenanced. Ne ther can the r ,adm ss on, to a =uest on of la9 b nd them. %he ponencia h ghl ghts the adm ss on made by Eufem a and her co@he rs dur ng the pre@tr al conference before the tr al court and n the r 'omment on the present pet t on that they had earl er sold 2M6 of the property to pet t oners. %hese statements could not mean, ho9ever, as an adm ss on n pet t onersJ favor that Lena da, M lagros and M nerva val dly sold the r respect ve shares to pet t oners. %hey could only adm t to the statement of fact 12 that the sale tooF place, but not to the conclus on of la9 that the sale 9as val d, prec sely because the val d ty of the sales transact on s at ssue as t 9as contested by the part es. 7urther, the te1tbooF c tat on of the rule nvolv ng a pr nc palJs respons b l ty for an agentJs m srepresentat on 9 th n the scope of an agentJs author ty as annotated by the c ted author under Art cle 1500 of the ' v l 'ode s nappl cable. %he =ual fy ng phrase , n the course of h s employment, presupposes that an agency relat onsh p s e1 st ng. %he =uoted rule clearly rec tes that a pr nc pal s held l able f the ,dece tful representat on, /not the agency relat onsh p0 s author Aed e ther e1pressly, mpl edly, or apparently. $n th s case, there 9as no agency relat onsh p to speaF of. $, therefore, vote to re nstate the tr al courtJs January 14, 1556 Dec s on 9 th mod f cat on that the sale made by respondent C rg l o &an Agust n to respondent spouses $sagan Eelarm no and !et c a Dcampo s val d 9 th respect to the 4M6 port on of the sub-ect property.

%/N%5)(A %A$+)/ '/$A#ES Assoc ate Just ce

:ootnotes
1

+onenc a, p. 12 /underscor ng suppl ed0. +onenc a, p. 2. ' v l 'ode, Art. 1420 n relat on to Art. 45<. +onenc a, pp. 6@10. 4aldevieso v. Damalerio, 452 +h l. 81, 85 /20080.

<

>

4ide d. A 9a ver 9 ll be noperat ve and vo d f t nfr nges on the r ghts of others /=uano v. .ourt of Appeals, nfra at 2040.
2

$hil. !an' of .ommunications v. .A, <82 +h l. 1, 5 /15560.

'f. $o&ton .onglomerate, :nc. v. Agcolicol, 446 +h l. >4<, >8< /200<0 for analogy respect ng the v tal precond t ons to the val d ty of a contract for add t onal 9orFs under Art cle 1224 of the ' v l 'ode.
5

4ide $ureza v. .A, <82 +h l. 212, 222 /15560. 4ide =uano v. .ourt of Appeals, 44> +h l. >50, 206 /200<0. ' v l 'ode, Art. 1410.

10

11

12

"ules of 'ourt, "ule 16, &ec. 2 /d0. +re@tr al allo9s the part es to obta n st pulat ons or adm ss ons of factand of documents. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. 1;;=.2 June =, 3..0 E!&A$!/ *. #)N(/NJ&A, J$. and AN(/N)/ K. #)(/NJ&A, +et t oners, vs. E(E$N)( %/$+/$A()/N CnoF E(E$(/N '&#()7$ES/&$%ES %/$+/$A()/ND, E(E$/&($E'E$, S.A. and :A$ EAS( 9ANK ? ($&S( %/'+AN8, "espondents. DE'$&$DN %A##EJ/, S$., J.:

Dn appeal v a a +et t on for "ev e9 on 'ert orar s the Dec s on 1 of the 'ourt of Appeals /'A0 n 'A@#.". 'C No. 81022, 9h ch aff rmed the Dec s on of the "eg onal %r al 'ourt /"%'0, +as g ' ty, Eranch 1>8, n ' v l 'ase No. 84662, as 9ell as the "esolut on2 of the 'A deny ng the mot on for recons derat on thereof. %he Etern t 'orporat on /E'0 s a corporat on duly organ Aed and reg stered under +h l pp ne la9s. & nce 1580, t had been engaged n the manufacture of roof ng mater als and p pe products. $ts manufactur ng operat ons 9ere conducted on e ght parcels of land 9 th a total area of 42,2<< s=uare meters. %he propert es, located n Mandaluyong ' ty, Metro Man la, 9ere covered by %ransfer 'ert f cates of % tle Nos. 481112, 481116, 481115, 481120, 481121, 481122, 481124 and 481128 under the name of 7ar East EanF N %rust 'ompany, as trustee. N nety /50R0 percent of the shares of stocFs of E' 9ere o9ned by Eteroutremer &.A. 'orporat on /E&A'0, a corporat on organ Aed and reg stered under the la9s of Eelg um.< JacF #lanv lle, an Austral an c t Aen, 9as the #eneral Manager and +res dent of E', 9h le 'laude 7reder cF Delsau1 9as the "eg onal D rector for As a of E&A'. Eoth had the r off ces n Eelg um. $n 156>, the management of E&A' gre9 concerned about the pol t cal s tuat on n the +h l pp nes and 9anted to stop ts operat ons n the country. %he 'omm ttee for As a of E&A' nstructed M chael Adams, a member of E'Js Eoard of D rectors, to d spose of the e ght parcels of land. Adams engaged the serv ces of realtorMbroFer !auro #. Mar=ueA so that the propert es could be offered for sale to prospect ve buyers. #lanv lle later sho9ed the propert es to Mar=ueA. Mar=ueA thereafter offered the parcels of land and the mprovements thereon to Eduardo E. ! ton-ua, Jr. of the ! ton-ua N 'ompany, $nc. $n a !etter dated &eptember 12, 156>, Mar=ueA declared that he 9as author Aed to sell the propert es for +22,000,000.00 and that the terms of the sale 9ere sub-ect to negot at on.4 Eduardo ! ton-ua, Jr. responded to the offer. Mar=ueA sho9ed the property to Eduardo ! ton-ua, Jr., and h s brother Anton o *. ! ton-ua. %he ! ton-ua s bl ngs offered to buy the property for +20,000,000.00 cash. Mar=ueA appr sed #lanv lle of the ! ton-ua s bl ngsJ offer and relayed the same to Delsau1 n Eelg um, but the latter d d not respond. Dn Dctober 26, 156>, #lanv lle tele1ed Delsau1 n Eelg um, n=u r ng on h s pos t onM counterproposal to the offer of the ! ton-ua s bl ngs. $t 9as only on 7ebruary 12, 1562 that Delsau1 sent a tele1 to #lanv lle stat ng that, based on the ,Eelg anM&9 ss dec s on,, the f nal offer 9as ,3&S1,000,000.00 and +2,800,000.00 to cover all e1 st ng obl gat ons pr or to f nal l =u dat on.,8 Mar=ueA furn shed Eduardo ! ton-ua, Jr. 9 th a copy of the tele1 sent by Delsau1. ! ton-ua, Jr. accepted the counterproposal of Delsau1. Mar=ueA conferred 9 th #lanv lle, and n a !etter dated 7ebruary 2>, 1562, conf rmed that the ! ton-ua s bl ngs had accepted the counter@proposal of Delsau1. Be also stated that the ! ton-ua s bl ngs 9ould conf rm full payment 9 th n 50 days after e1ecut on and preparat on of all documents of sale, together 9 th the necessary governmental clearances.>

%he ! ton-ua brothers depos ted the amount of 3&S1,000,000.00 9 th the &ecur ty EanF N %rust 'ompany, Erm ta Eranch, and drafted an Escro9 Agreement to e1ped te the sale.2 &omet me later, Mar=ueA and the ! ton-ua brothers n=u red from #lanv lle 9hen the sale 9ould be mplemented. $n a tele1 dated Apr l 22, 1562, #lanv lle nformed Delsau1 that he had met 9 th the buyer, 9h ch had g ven h m the mpress on that ,he s prepared to press for a sat sfactory conclus on to the sale.,6 Be also emphas Aed to Delsau1 that the buyers 9ere concerned because they 9ould ncur e1penses n banF comm tment fees as a conse=uence of prolonged per od of nact on.5 Mean9h le, 9 th the assumpt on of 'oraAon '. A=u no as +res dent of the "epubl c of the +h l pp nes, the pol t cal s tuat on n the +h l pp nes had mproved. Mar=ueA rece ved a telephone call from #lanv lle, adv s ng that the sale 9ould no longer proceed. #lanv lle follo9ed t up 9 th a !etter dated May 2, 1562, conf rm ng that he had been nstructed by h s pr nc pal to nform Mar=ueA that ,the dec s on has been taFen at a Eoard Meet ng not to sell the propert es on 9h ch Etern t 'orporat on s s tuated., 10 Delsau1 h mself later sent a letter dated May 22, 1562, conf rm ng that the E&A' "eg onal Dff ce had dec ded not to proceed 9 th the sale of the sub-ect land, to 9 t? May 22, 1562 Mr. !.#. Mar=ueA !.#. Mar=ueA, $nc. <<4 MaFat &tocF E1change Eldg. >2>2 Ayala Avenue MaFat , Metro Man la +h l pp nes Dear & r? "e? !and of Etern t 'orporat on $ 9ould l Fe to conf rm off c ally that our #roup has dec ded not to proceed 9 th the sale of the land 9h ch 9as proposed to you. %he 'omm ttee for As a of our #roup met recently /meet ng every s 1 months0 and e1am ned the pos t on as far as the +h l pp nes are /s c0 concerned. 'ons der ng :the; ne9 pol t cal s tuat on s nce the departure of M". MA"'D& and a certa n stab l Aat on n the +h l pp nes, the 'omm ttee has dec ded not to stop our operat ons n Man la. $n fact, product on has started aga n last 9eeF, and /s c0 to recogn Ae the part c pat on n the 'orporat on. (e regret that 9e could not maFe a deal 9 th you th s t me, but n case the pol cy 9ould change at a later state, 9e 9ould consult you aga n. 111

Hours s ncerely, /&gd.0 '.7. DE!&A3G cc. %o? J. #!ANC$!!E /Etern t 'orp.011 (hen appr sed of th s development, the ! ton-uas, through counsel, 9rote E', demand ng payment for damages they had suffered on account of the aborted sale. E', ho9ever, re-ected the r demand. %he ! ton-uas then f led a compla nt for spec f c performance and damages aga nst E' /no9 the Eterton Mult @"esources 'orporat on0 and the 7ar East EanF N %rust 'ompany, and E&A' n the "%' of +as g ' ty. An amended compla nt 9as f led, n 9h ch defendant E' 9as subst tuted by Eterton Mult @"esources 'orporat onI Een to '. %an, "uperto C. %an, &tocF Ba %. %an and Deograc as #. Eufem o 9ere mpleaded as add t onal defendants on account of the r purchase of E&A' shares of stocFs and 9ere the controll ng stocFholders of E'. $n the r ans9er to the compla nt, E' and E&A' alleged that s nce Eteroutremer 9as not do ng bus ness n the +h l pp nes, t cannot be sub-ect to the -ur sd ct on of +h l pp ne courtsI the Eoard and stocFholders of E' never approved any resolut on to sell sub-ect propert es nor author Aed Mar=ueA to sell the sameI and the tele1 dated Dctober 26, 156> of JacF #lanv lle 9as h s o9n personal maF ng 9h ch d d not b nd E'. Dn July <, 1558, the tr al court rendered -udgment n favor of defendants and d sm ssed the amended compla nt.12%he fallo of the dec s on reads? (BE"E7D"E, the compla nt aga nst Etern t 'orporat on no9 Eterton Mult @ "esources 'orporat on and Eteroutremer, &.A. s d sm ssed on the ground that there s no val d and b nd ng sale bet9een the pla nt ffs and sa d defendants. %he compla nt as aga nst 7ar East EanF and %rust 'ompany s l Fe9 se d sm ssed for lacF of cause of act on. %he countercla m of Etern t 'orporat on no9 Eterton Mult @"esources 'orporat on and Eteroutremer, &.A. s also d sm ssed for lacF of mer t. 1< %he tr al court declared that s nce the author ty of the agentsMrealtors 9as not n 9r t ng, the sale s vo d and not merely unenforceable, and as such, could not have been rat f ed by the pr nc pal. $n any event, such rat f cat on cannot be g ven any retroact ve effect. +la nt ffs could not assume that defendants had agreed to sell the property 9 thout a clear author Aat on from the corporat on concerned, that s, through resolut ons of the Eoard of D rectors and stocFholders. %he tr al court also po nted out that the supposed sale nvolves substant ally all the assets of defendant E' 9h ch 9ould result n the eventual total cessat on of ts operat on.14 %he ! ton-uas appealed the dec s on to the 'A, alleg ng that ,/10 the lo9er court erred n conclud ng that the real estate broFer n the nstant case needed a

9r tten author ty from appellee corporat on andMor that sa d broFer had no such 9r tten author tyI and /20 the lo9er court comm tted grave error of la9 n hold ng that appellee corporat on s not legally bound for spec f c performance andMor damages n the absence of an enabl ng resolut on of the board of d rectors.,18 %hey averred that Mar=ueA acted merely as a broFer or go@bet9een and not as agent of the corporat onI hence, t 9as not necessary for h m to be empo9ered as such by any 9r tten author ty. %hey further cla med that an agency by estoppel 9as created 9hen the corporat on clothed Mar=ueA 9 th apparent author ty to negot ate for the sale of the propert es. Bo9ever, s nce t 9as a b lateral contract to buy and sell, t 9as e=u valent to a perfected contract of sale, 9h ch the corporat on 9as obl ged to consummate. $n reply, E' alleged that Mar=ueA had no 9r tten author ty from the Eoard of D rectors to b nd tI ne ther 9ere #lanv lle and Delsau1 author Aed by ts board of d rectors to offer the property for sale. & nce the sale nvolved substant ally all of the corporat onJs assets, t 9ould necessar ly need the author ty from the stocFholders. Dn June 1>, 2000, the 'A rendered -udgment aff rm ng the dec s on of the "%'. 1> %he ! ton-uas f led a mot on for recons derat on, 9h ch 9as also den ed by the appellate court. %he 'A ruled that Mar=ueA, 9ho 9as a real estate broFer, 9as a spec al agent 9 th n the purv e9 of Art cle 1624 of the Ne9 ' v l 'ode. 3nder &ect on 2< of the 'orporat on 'ode, he needed a spec al author ty from E'Js board of d rectors to b nd such corporat on to the sale of ts propert es. Delsau1, 9ho 9as merely the representat ve of E&A' /the ma-or ty stocFholder of E'0 had no author ty to b nd the latter. %he 'A po nted out that Delsau1 9as not even a member of the board of d rectors of E'. Moreover, the ! ton-uas fa led to prove that an agency by estoppel had been created bet9een the part es. $n the nstant pet t on for rev e9, pet t oners aver that $ %BE 'D3"% D7 A++EA!& E""ED $N BD!D$N# %BA% %BE"E (A& ND +E"7E'%ED 'DN%"A'% D7 &A!E. $$ %BE A++E!!A%E 'D3"% 'DMM$%%ED #"ACE E""D" D7 !A( $N BD!D$N# %BA% MA"U3EL NEEDED A ("$%%EN A3%BD"$%H 7"DM "E&+DNDEN% E%E"N$% EE7D"E %BE &A!E 'AN EE +E"7E'%ED. $$$ %BE 'D3"% D7 A++EA!& E""ED $N ND% BD!D$N# %BA% #!ANC$!!E AND DE!&A3G BACE %BE NE'E&&A"H A3%BD"$%H %D &E!! %BE &3EJE'% +"D+E"%$E&, D" A% %BE CE"H !EA&%, (E"E *ND($N#!H +E"M$%%ED EH "E&+DNDEN% E%E"N$% %D DD A'%& ($%B$N %BE &'D+E D7 AN A++A"EN% A3%BD"$%H, AND

%B3& BE!D %BEM D3% %D %BE +3E!$' A& +D&&E&&$N# +D(E" %D &E!! %BE &A$D +"D+E"%$E&.12 +et t oners ma nta n that, based on the facts of the case, there 9as a perfected contract of sale of the parcels of land and the mprovements thereon for ,3&S1,000,000.00 plus +2,800,000.00 to cover obl gat ons pr or to f nal l =u dat on., +et t oners ns st that they had accepted the counter@offer of respondent E' and that before the counter@offer 9as 9 thdra9n by respondents, the acceptance 9as made Fno9n to them through real estate broFer Mar=ueA. +et t oners assert that there 9as no need for a 9r tten author ty from the Eoard of D rectors of E' for Mar=ueA to val dly act as broFerMm ddlemanM ntermed ary. As broFer, Mar=ueA 9as not an ord nary agent because h s author ty 9as of a spec al and l m ted character n most respects. B s only -ob as a broFer 9as to looF for a buyer and to br ng together the part es to the transact on. Be 9as not author Aed to sell the propert es or to maFe a b nd ng contract to respondent E'I hence, pet t oners argue, Art cle 1624 of the Ne9 ' v l 'ode does not apply. $n any event, pet t oners aver, 9hat s mportant and dec s ve 9as that Mar=ueA 9as able to commun cate both the offer and counter@offer and the r acceptance of respondent E'Js counter@offer, result ng n a perfected contract of sale. +et t oners pos t that the test mon al and documentary ev dence on record amply sho9s that #lanv lle, 9ho 9as the +res dent and #eneral Manager of respondent E', and Delsau1, 9ho 9as the Manag ng D rector for E&A' As a, had the necessary author ty to sell the sub-ect property or, at least, had been allo9ed by respondent E' to hold themselves out n the publ c as hav ng the po9er to sell the sub-ect propert es. +et t oners dent f ed such ev dence, thus? 1. %he test mony of Mar=ueA that he 9as chosen by #lanv lle as the then +res dent and #eneral Manager of Etern t, to sell the propert es of sa d corporat on to any nterested party, 9h ch author ty, as here nabove d scussed, need not be n 9r t ng. 2. %he fact that the NE#D%$A%$DN& for the sale of the sub-ect propert es spanned &ECE"A! MDN%B&, from 156> to 1562I <. %he 'D3N%E"@D77E" made by Etern t through #!ANC$!!E to sell ts propert es to the +et t onersI 4. %he #DDD 7A$%B of +et t oners n bel ev ng Etern tJs offer to sell the propert es as ev denced by the +et t onersJ A''E+%AN'E of the counter@offerI 8. %he fact that +et t oners DE+D&$%ED the pr ce of :3&;S1,000,000.00 9 th the &ecur ty EanF and that an E&'"D( agreement 9as drafted over the sub-ect propert esI >. #lanv lleJs tele1 to Delsau1 n=u r ng ,(BEN (E /"espondents0 ($!! $M+!EMEN% A'%$DN %D E3H AND &E!!,I

2. More mportantly, E1h b ts ,#, and ,B, of the "espondents, 9h ch ev denced the fact that +et t onersJ offer 9as allegedly "EJE'%ED by both #lanv lle and Delsau1.16 +et t oners ns st that t s ncongruous for #lanv lle and Delsau1 to maFe a counter@offer to pet t onersJ offer and thereafter re-ect such offer unless they 9ere author Aed to do so by respondent E'. +et t oners ns st that Delsau1 conf rmed h s author ty to sell the propert es n h s letter to Mar=ueA, to 9 t? Dear & r, "e? !and of Etern t 'orporat on $ 9ould l Fe to conf rm off c ally that our #roup has dec ded not to proceed 9 th the sale of the land 9h ch 9as proposed to you. %he 'omm ttee for As a of our #roup met recently /meet ng every s 1 months0 and e1am ned the pos t on as far as the +h l pp nes are /s c0 concerned. 'ons der ng the ne9 pol t cal s tuat on s nce the departure of M". MA"'D& and a certa n stab l Aat on n the +h l pp nes, the 'omm ttee has dec ded not to stop our operat ons n Man la:.; :$;n fact product on started aga n last 9eeF, and /s c0 to reorgan Ae the part c pat on n the 'orporat on. (e regret that 9e could not maFe a deal 9 th you th s t me, but n case the pol cy 9ould change at a later stage 9e 9ould consult you aga n. $n the meant me, $ rema n Hours s ncerely, '.7. DE!&A3G15 +et t oners further emphas Ae that they acted n good fa th 9hen #lanv lle and Delsau1 9ere Fno9 ngly perm tted by respondent E' to sell the propert es 9 th n the scope of an apparent author ty. +et t oners ns st that respondents held themselves to the publ c as possess ng po9er to sell the sub-ect propert es. Ey 9ay of comment, respondents aver that the ssues ra sed by the pet t oners are factual, hence, are proscr bed by "ule 48 of the "ules of 'ourt. Dn the mer ts of the pet t on, respondents E' /no9 EM'0 and E&A' re terate the r subm ss ons n the 'A. %hey ma nta n that #lanv lle, Delsau1 and Mar=ueA had no author ty from the stocFholders of respondent E' and ts Eoard of D rectors to offer the propert es for sale to the pet t oners, or to any other person or ent ty for that matter. %hey assert that the dec s on and resolut on of the 'A are n accord 9 th la9 and the ev dence on record, and should be aff rmed n toto. +et t oners aver n the r subse=uent plead ngs that respondent E', through #lanv lle and Delsau1, conformed to the 9r tten author ty of Mar=ueA to sell the propert es. %he author ty of #lanv lle and Delsau1 to b nd respondent E' s ev denced by the fact that #lanv lle and Delsau1 negot ated for the sale of 50R of stocFs of respondent E' to "uperto %an on June 1, 1552. # ven the

s gn f cance of the r pos t ons and the r dut es n respondent E' at the t me of the transact on, and the fact that respondent E&A' o9ns 50R of the shares of stocF of respondent E', a formal resolut on of the Eoard of D rectors 9ould be a mere ceremon al formal ty. (hat s mportant, pet t oners ma nta n, s that Mar=ueA 9as able to commun cate the offer of respondent E' and the pet t onersJ acceptance thereof. %here 9as no t me that they acted 9 thout the Fno9ledge of respondents. $n fact, respondent E' never repud ated the acts of #lanv lle, Mar=ueA and Delsau1. %he pet t on has no mer t. Anent the f rst ssue, 9e agree 9 th the content on of respondents that the ssues ra sed by pet t oner n th s case are factual. (hether or not Mar=ueA, #lanv lle, and Delsau1 9ere author Aed by respondent E' to act as ts agents relat ve to the sale of the propert es of respondent E', and f so, the boundar es of the r author ty as agents, s a =uest on of fact. $n the absence of e1press 9r tten terms creat ng the relat onsh p of an agency, the e1 stence of an agency s a fact =uest on.20 (hether an agency by estoppel 9as created or 9hether a person acted 9 th n the bounds of h s apparent author ty, and 9hether the pr nc pal s estopped to deny the apparent author ty of ts agent are, l Fe9 se, =uest ons of fact to be resolved on the bas s of the ev dence on record. 21 %he f nd ngs of the tr al court on such ssues, as aff rmed by the 'A, are conclus ve on the 'ourt, absent ev dence that the tr al and appellate courts gnored, m sconstrued, or m sappl ed facts and c rcumstances of substance 9h ch, f cons dered, 9ould 9arrant a mod f cat on or reversal of the outcome of the case. 22 $t must be stressed that ssues of facts may not be ra sed n the 'ourt under "ule 48 of the "ules of 'ourt because the 'ourt s not a tr er of facts. $t s not to re@ e1am ne and assess the ev dence on record, 9hether test mon al and documentary. %here are, ho9ever, recogn Aed e1cept ons 9here the 'ourt may delve nto and resolve factual ssues, namely? /10 (hen the conclus on s a f nd ng grounded ent rely on speculat ons, surm ses, or con-ecturesI /20 9hen the nference made s man festly m staFen, absurd, or mposs bleI /<0 9hen there s grave abuse of d scret onI /40 9hen the -udgment s based on a m sapprehens on of factsI /80 9hen the f nd ngs of fact are confl ct ngI />0 9hen the 'ourt of Appeals, n maF ng ts f nd ngs, 9ent beyond the ssues of the case and the same s contrary to the adm ss ons of both appellant and appelleeI /20 9hen the f nd ngs of the 'ourt of Appeals are contrary to those of the tr al courtI /60 9hen the f nd ngs of fact are conclus ons 9 thout c tat on of spec f c ev dence on 9h ch they are basedI /50 9hen the 'ourt of Appeals man festly overlooFed certa n relevant facts not d sputed by the part es, 9h ch, f properly cons dered, 9ould -ust fy a d fferent conclus onI and /100 9hen the f nd ngs of fact of the 'ourt of Appeals are prem sed on the absence of ev dence and are contrad cted by the ev dence on record. 2< (e have rev e9ed the records thoroughly and f nd that the pet t oners fa led to establ sh that the nstant case falls under any of the forego ng e1cept ons.

$ndeed, the assa led dec s on of the 'ourt of Appeals s supported by the ev dence on record and the la9. $t 9as the duty of the pet t oners to prove that respondent E' had dec ded to sell ts propert es and that t had empo9ered Adams, #lanv lle and Delsau1 or Mar=ueA to offer the propert es for sale to prospect ve buyers and to accept any counter@offer. +et t oners l Fe9 se fa led to prove that the r counter@offer had been accepted by respondent E', through #lanv lle and Delsau1. $t must be stressed that 9hen spec f c performance s sought of a contract made 9 th an agent, the agency must be establ shed by clear, certa n and spec f c proof. 24 &ect on 2< of Eatas +ambansa E lang >6, other9 se Fno9n as the 'orporat on 'ode of the +h l pp nes, prov des? &E'. 2<. %he Eoard of D rectors or %rustees. K 3nless other9 se prov ded n th s 'ode, the corporate po9ers of all corporat ons formed under th s 'ode shall be e1erc sed, all bus ness conducted and all property of such corporat ons controlled and held by the board of d rectors or trustees to be elected from among the holders of stocFs, or 9here there s no stocF, from among the members of the corporat on, 9ho shall hold off ce for one /10 year and unt l the r successors are elected and =ual f ed. $ndeed, a corporat on s a -ur d cal person separate and d st nct from ts members or stocFholders and s not affected by the personal r ghts, obl gat ons and transact ons of the latter.28 $t may act only through ts board of d rectors or, 9hen author Aed e ther by ts by@la9s or by ts board resolut on, through ts off cers or agents n the normal course of bus ness. %he general pr nc ples of agency govern the relat on bet9een the corporat on and ts off cers or agents, sub-ect to the art cles of ncorporat on, by@la9s, or relevant prov s ons of la9.2> 3nder &ect on <> of the 'orporat on 'ode, a corporat on may sell or convey ts real propert es, sub-ect to the l m tat ons prescr bed by la9 and the 'onst tut on, as follo9s? &E'. <>. 'orporate po9ers and capac ty. K Every corporat on ncorporated under th s 'ode has the po9er and capac ty? 1111 2. %o purchase, rece ve, taFe or grant, hold, convey, sell, lease, pledge, mortgage and other9 se deal 9 th such real and personal property, nclud ng secur t es and bonds of other corporat ons, as the transact on of a la9ful bus ness of the corporat on may reasonably and necessar ly re=u re, sub-ect to the l m tat ons prescr bed by the la9 and the 'onst tut on. %he property of a corporat on, ho9ever, s not the property of the stocFholders or members, and as such, may not be sold 9 thout e1press author ty from the board of d rectors.22 +hys cal acts, l Fe the offer ng of the propert es of the

corporat on for sale, or the acceptance of a counter@offer of prospect ve buyers of such propert es and the e1ecut on of the deed of sale cover ng such property, can be performed by the corporat on only by off cers or agents duly author Aed for the purpose by corporate by@la9s or by spec f c acts of the board of d rectors.26 Absent such val d delegat onMauthor Aat on, the rule s that the declarat ons of an nd v dual d rector relat ng to the affa rs of the corporat on, but not n the course of, or connected 9 th, the performance of author Aed dut es of such d rector, are not b nd ng on the corporat on. 25 (h le a corporat on may appo nt agents to negot ate for the sale of ts real propert es, the f nal say 9 ll have to be 9 th the board of d rectors through ts off cers and agents as author Aed by a board resolut on or by ts by@la9s. <0An unauthor Aed act of an off cer of the corporat on s not b nd ng on t unless the latter rat f es the same e1pressly or mpl edly by ts board of d rectors. Any sale of real property of a corporat on by a person purport ng to be an agent thereof but 9 thout 9r tten author ty from the corporat on s null and vo d. %he declarat ons of the agent alone are generally nsuff c ent to establ sh the fact or e1tent of h sMher author ty.<1 Ey the contract of agency, a person b nds h mself to render some serv ce or to do someth ng n representat on on behalf of another, 9 th the consent or author ty of the latter.<2 'onsent of both pr nc pal and agent s necessary to create an agency. %he pr nc pal must ntend that the agent shall act for h mI the agent must ntend to accept the author ty and act on t, and the ntent on of the part es must f nd e1press on e ther n 9ords or conduct bet9een them. << An agency may be e1pressed or mpl ed from the act of the pr nc pal, from h s s lence or lacF of act on, or h s fa lure to repud ate the agency Fno9 ng that another person s act ng on h s behalf 9 thout author ty. Acceptance by the agent may be e1pressed, or mpl ed from h s acts 9h ch carry out the agency, or from h s s lence or nact on accord ng to the c rcumstances. <4 Agency may be oral unless the la9 re=u res a spec f c form.<8 Bo9ever, to create or convey real r ghts over mmovable property, a spec al po9er of attorney s necessary. <> %hus, 9hen a sale of a p ece of land or any port on thereof s through an agent, the author ty of the latter shall be n 9r t ng, other9 se, the sale shall be vo d. <2 $n th s case, the pet t oners as pla nt ffs belo9, fa led to adduce n ev dence any resolut on of the Eoard of D rectors of respondent E' empo9er ng Mar=ueA, #lanv lle or Delsau1 as ts agents, to sell, let alone offer for sale, for and n ts behalf, the e ght parcels of land o9ned by respondent E' nclud ng the mprovements thereon. %he bare fact that Delsau1 may have been author Aed to sell to "uperto %an the shares of stocF of respondent E&A', on June 1, 1552, cannot be used as bas s for pet t onersJ cla m that he had l Fe9 se been author Aed by respondent E' to sell the parcels of land. Moreover, the ev dence of pet t oners sho9s that Adams and #lanv lle acted on the author ty of Delsau1, 9ho, n turn, acted on the author ty of respondent E&A', through ts 'omm ttee for As a,<6 the Eoard of D rectors of respondent E&A',<5 and the Eelg anM&9 ss component of the management of respondent

E&A'.40 As such, Adams and #lanv lle engaged the serv ces of Mar=ueA to offer to sell the propert es to prospect ve buyers. %hus, on &eptember 12, 156>, Mar=ueA 9rote the pet t oner that he 9as author Aed to offer for sale the property for+22,000,000.00 and the other terms of the sale sub-ect to negot at ons. (hen pet t oners offered to purchase the property for +20,000,000.00, through Mar=ueA, the latter relayed pet t onersJ offer to #lanv lleI #lanv lle had to send a tele1 to Delsau1 to n=u re the pos t on of respondent E&A' to pet t onersJ offer. Bo9ever, as adm tted by pet t oners n the r Memorandum, Delsau1 9as unable to reply mmed ately to the tele1 of #lanv lle because Delsau1 had to 9a t for conf rmat on from respondent E&A'.41 (hen Delsau1 f nally responded to #lanv lle on 7ebruary 12, 1562, he made t clear that, based on the ,Eelg anM&9 ss dec s on, the f nal offer of respondent E&A' 9as 3&S1,000,000.00 plus +2,800,000.00 to cover all e1 st ng obl gat ons pr or to f nal l =u dat on.42 %he offer of Delsau1 emanated only from the ,Eelg anM&9 ss dec s on,, and not the ent re management or Eoard of D rectors of respondent E&A'. (h le t s true that pet t oners accepted the counter@offer of respondent E&A', respondent E' 9as not a party to the transact on bet9een themI hence, E' 9as not bound by such acceptance. (h le #lanv lle 9as the +res dent and #eneral Manager of respondent E', and Adams and Delsau1 9ere members of ts Eoard of D rectors, the three acted for and n behalf of respondent E&A', and not as duly author Aed agents of respondent E'I a board resolut on ev nc ng the grant of such author ty s needed to b nd E' to any agreement regard ng the sale of the sub-ect propert es. &uch board resolut on s not a mere formal ty but s a cond t on s ne =ua non to b nd respondent E'. Adm ttedly, respondent E&A' o9ned 50R of the shares of stocFs of respondent E'I ho9ever, the mere fact that a corporat on o9ns a ma-or ty of the shares of stocFs of another, or even all of such shares of stocFs, taFen alone, 9 ll not -ust fy the r be ng treated as one corporat on. 4< $t bears stress ng that 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.44 %he pet t oners cannot fe gn gnorance of the absence of any regular and val d author ty of respondent E' empo9er ng Adams, #lanv lle or Delsau1 to offer the propert es for sale and to sell the sa d propert es to the pet t oners. A person deal ng 9 th a Fno9n agent s not author Aed, under any c rcumstances, bl ndly to trust the agentsI statements as to the e1tent of h s po9ersI such person must not act negl gently but must use reasonable d l gence and prudence to ascerta n 9hether the agent acts 9 th n the scope of h s author ty. 48 %he settled rule s that, persons deal ng 9 th an assumed agent are bound at the r per l, and f they 9ould hold the pr nc pal l able, to ascerta n not only the fact of agency but also the nature and e1tent of author ty, and n case e ther s controverted, the burden

of proof s upon them to prove t.4> $n th s case, the pet t oners fa led to d scharge the r burdenI hence, pet t oners are not ent tled to damages from respondent E'. $t appears that Mar=ueA acted not only as real estate broFer for the pet t oners but also as the r agent. As gleaned from the letter of Mar=ueA to #lanv lle, on 7ebruary 2>, 1562, he conf rmed, for and n behalf of the pet t oners, that the latter had accepted such offer to sell the land and the mprovements thereon. Bo9ever, 9e agree 9 th the rul ng of the appellate court that Mar=ueA had no author ty to b nd respondent E' to sell the sub-ect propert es. A real estate broFer s one 9ho negot ates the sale of real propert es. B s bus ness, generally speaF ng, s only to f nd a purchaser 9ho s 9 ll ng to buy the land upon terms f 1ed by the o9ner. Be has no author ty to b nd the pr nc pal by s gn ng a contract of sale. $ndeed, an author ty to f nd a purchaser of real property does not nclude an author ty to sell.42 E=ually barren of mer t s pet t onersJ content on that respondent E' s estopped to deny the e1 stence of a pr nc pal@agency relat onsh p bet9een t and #lanv lle or Delsau1. 7or an agency by estoppel to e1 st, the follo9 ng must be establ shed? /10 the pr nc pal man fested a representat on of the agentJs author ty or Fno9l ngly allo9ed the agent to assume such author tyI /20 the th rd person, n good fa th, rel ed upon such representat onI /<0 rely ng upon such representat on, such th rd person has changed h s pos t on to h s detr ment. 46 An agency by estoppel, 9h ch s s m lar to the doctr ne of apparent author ty, re=u res proof of rel ance upon the representat ons, and that, n turn, needs proof that the representat ons predated the act on taFen n rel ance. 45 &uch proof s lacF ng n th s case. $n the r commun cat ons to the pet t oners, #lanv lle and Delsau1 pos t vely and une=u vocally declared that they 9ere act ng for and n behalf of respondent E&A'. Ne ther may respondent E' be deemed to have rat f ed the transact ons bet9een the pet t oners and respondent E&A', through #lanv lle, Delsau1 and Mar=ueA. %he transact ons and the var ous commun cat ons nter se 9ere never subm tted to the Eoard of D rectors of respondent E' for rat f cat on. $N !$#B% D7 A!! %BE 7D"E#D$N#, the pet t on s DEN$ED for lacF of mer t. 'osts aga nst the pet t oners. &D D"DE"ED. $/'E/ J. %A##EJ/, S$. Assoc ate Just ce (E 'DN'3"? A$(E')/ *. +ANGAN)9AN 'h ef Just ce 'ha rperson /Dn leave0 %/NS&E#/ 8NA$ES7SAN()AG/ 'A. A#)%)A A&S($)A7'A$()NE6

Assoc ate Just ce ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce 'E"%$7$'A%$DN

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 "emed os A. &alaAar@7ernando, 9 th Assoc ate Just ces 7erm n A. Mart n, Jr. and &alvador J. CaldeA, Jr. /ret red0, concurr ngI rollo, pp. 40@8<.
2

"ollo, pp. 84@88. $d. at 11, >1. $d. at <54@<58. $d. at <5>. $d. at <52@<56. $d. at 240. $d. at 241. $d. $d. at <55. $d. at <45@400. $d. at 1><@128. $d. at 124@128. $d. at 12<@124. $d. at 42@46. $d. at 40@8<. $d. at 18.

<

>

10

11

12

1<

14

18

1>

12

16

$d. at 25@<0. $d. at <0@<1. (eathersby v. #ore, 88> 7.2d 1242 /15220. 'av c v. #rand Eahama Development 'o., !td., 201 7.2d 625 /156<0.

15

20

21

22

'ulaba v. 'ourt of Appeals, #.". No. 1286>2, Apr l 18, 2004, 422 &'"A 221, 225I ! ton-ua v. 7ernandeA, #.". No. 14611>, Apr l 14, 2004, 422 &'"A 426, 465.
2<

NoFom v. Nat onal !abor "elat ons 'omm ss on, <50 +h l. 1226, 1242@124< /20000. /c tat ons om tted0
24

Ela r v. &her dan, 10 &.E. 414 /16650.

2>

&an Juan &tructural and &teel 7abr cators, $nc. v. 'ourt of Appeals, <82 +h l. ><1, >44 /15560.
22

%raders "oyal EanF v. 'ourt of Appeals, #.". No. 26412, &eptember 2>, 1565, 122 &'"A 266, 252.
26

E+$ !eas ng 'orporat on v. 'ourt of Appeals, #.". No. 122>24, November 16, 200<, 41> &'"A 4, 11.
25

A7 "ealty N Development, $nc. v. D eselman 7re ght &erv ces, 'o., 424 +h l. 44>, 484 /20020.
<0

De ! ano v. 'ourt of Appeals, 421 +h l. 10<<, 1082 /20010. ! ton-ua v. 7ernandeA, supra note 22, at 45<. Art cle 16>6, ne9 c v l code.

<1

<2

<<

Ell son v. Buns nger, 28 &.E. 2d. 664 /158<0I Dom n on $nsurance 'orporat on v. 'ourt of Appeals, 42> +h l. >20, >2> /20020.
<4

c v l code, Art. 1620. c v l code, Art. 16>5, paragraph 2. c v l code, Art. 1626/120. c v l code, Art. 1624. E1h b ts ,B, and ,B@1,, rollo, p. 1>>. E1h b ts ,#, and ,#@1,, d. E1h b ts ,', and ,'@1,, d. at 1>8. "ollo, p. <5>. E1h b ts ,', and ,'@1,, rollo, p. 1>8.

<8

<>

<2

<6

<5

40

41

42

4<

+h l pp ne Nat onal EanF v. " tratto #roup, $nc., supra note 28, at 80<.

44

Dr ent A r &erv ces and Botel "epresentat ves v. 'ourt of Appeals, 224 +h l. 522, 5<5 /15510.
48

B ll v. Delta !oan and 7 nance 'ompany, 222 &.(. 2d ><, >8.

4>

! ton-ua v. 7ernandeA, supra note 22, at 454I 'ulaba v. 'ourt of Appeals, supra note 22, at 2<0I EA 7 nance 'orporat on v. 'ourt of Appeals, #.". No. 548>>, July <, 1552, 211 &'"A 112, 11>.
42

Donnan v. Adams, 21 &.(. 860. 'arol na@#eorg a 'arpet and %e1t les, $nc. v. +ellon , <20 &o. 2d 480 /15250. $d.

46

45

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

G.$. No. <2<.< Au"ust 10, 1<<1 &N)#AN! $ES/&$%ES, pet t oner, vs. !E*E#/+'EN( 9ANK /: (5E +5)#)++)NES,V respondent. Romeo 2. Ro as for petitioner.

GAN%A8%/, J.:p $n the la9 on agency, t s elementary that 9hen the ma n transact on bet9een the pr nc pal part es does not mater al Ae, the cla m for comm ss on of the duly author Aed broFer s d sallo9ed. 1 Bo9 about the nstance 9hen the sale 9as eventually consummated bet9een part es ntroduced by a m ddleman 9ho, n the f rst place, had no author ty, e1press or mpl ed, from the seller to broFer the transact onP &hould the nterloper be allo9ed a comm ss onP Dn these s mpl f ed terms rests the nature of the controversy on 9h ch th s case turns. As stated by the respondent 'ourt of Appeals, th s case are as follo9s?
3

the amb ent c rcumstances of

/10 :+et t oner; 3n land "esources s a pr vate corporat on engaged n real estate broFerage and l censed as such /p. 2, "ec.0, 9h le :respondent; DE+, as 9e all Fno9 :sic;, s a government corporat on engaged n f nance and banF ng n a propr etary capac ty.

/20 !ong before th s case arose, Mar ndu=ue M n ng 'orporat on obta ned a loan from the DE+ and as secur ty therefor, mortgaged certa n real propert es to the latter, among them t9o lots located n MaFat , M.M., descr bed as follo9s? /a0 'orner lot, covered by %'% No. 1141<6, located at +asong %amo, MaFat 9 th an area of <,<<0 s=. mts. on 9h ch s constructed a :four;@story concrete bu ld ng, etc., 9h ch, for brev ty, shall be called the off ce bu ld ng lotI and /b0 !ot covered by %'% No. 1>225 9 th 12,<88 s=. mts located at +asong %amo, MaFat , on 9h ch s constructed a concreteMsteel 9arehouse, etc., 9h ch, for brev ty, shall be called the 9arehouse lot. %he aforesa d lots had, ho9ever, been prev ously mortgaged by Mar ndu=ue M n ng 'orp., to 'alte1, and the mortgage n favor of DE+ 9as entered on the r t tles as a second mortgage /+re@%r al Drder, p. <2, "ec.0. %he account of the Mar ndu=ue M n ng 'orp., 9 th the DE+ 9as later transferred to the Assets +r vat Aat on %rust CA+%0 pursuant to +roclamat on No. 80. /<0 7or fa lure of the Mar ndu=ue M n ng 'orp. to pay ts obl gat ons to 'alte1, the latter foreclosed ts mortgage on the aforesa d t9o lots /pp. <2@<6, "ec.0. A+% on the other hand, to recover ts nvestment on the Mar ndu=ue Account, offered for sale to the publ c through DE+ ts r ght of redempt on on sa d t9o lots by publ c b dd ng /E1hs. ,1, and ,2,0. /40 'ons der ng, ho9ever, that 'alte1 had re=u red that both lots be redeemed, the b dd ng gu del nes set by DE+ prov ded that any b d to purchase e ther of the t9o lots 9ould be cons dered only should there be t9o b ds or a b d for the t9o tems 9h ch, 9hen comb ned, 9ould fully cover the sale of the t9o lots n =uest on /E1h. ,1,0. /80 %he aforesa d b dd ng 9as held on May 8, 1562 9 th only one b dder, the 'ounsel "ealty 'orp. :an aff l ate of #la1o, +h l pp nes, the cl ent of pet t oner;, 9h ch offered a b d only for the 9arehouse lot n the amount of +2<,500,000.00. &a d b d 9as thus re-ected by DE+. />0 &ee ng, ho9ever, that t 9ould maFe a prof t f t redeemed the t9o lots and then offer them for sale, and as ts r ght to redeem sa d lots from 'alte1 9ould e1p re on May 6, 1562, DE+ retr eved the account from A+% and, on the last day for the e1erc se of ts r ght of redempt on, May 6, 1562, redeemed sa d lots from 'alte1 for +<<,05>,<21.>2 /E1h. ,8,0, thus ac=u r ng them as ts phys cal assets. /20 $n preparat on for the sale of the t9o lots n =uest on, DE+ called a pre@ b dd ng conference 9here n a ne9 set of b dd ng gu del nes 9ere formulated /E1h. ,<,0. %hen, on July <0,1562, the publ c b dd ng for the sale of the t9o lots 9as held and aga n, there 9as only one b dder, the 'harges "ealty 'orp. :another aff l ate of #la1o, +h l pp nes;, for only the 9arehouse lot and for the amount of +24,020,000.00, 9h ch s sl ghtly h gher than the amount prev ously offered by 'ounsel "ealty 'orp., therefor at the May 8, 1562 b dd ng /see E1h. ,8,, p. 1 00, "ec.0. No b d 9as subm tted for the off ce bu ld ng lot / id.0.

/60 Not9 thstand ng that there 9as no b dder for the off ce bu ld ng lot, the DE+ approved the sale of the 9arehouse lot to 'harges "ealty 'orp., and on November 2<, 1562, the proper documentat on of the sale 9as made /E1h. ,D,0. As for the off ce bu ld ng lot, t 9as later sold by DE+ n a negot ated sale to the EanF of +.$. as trustee for the ,+erpetual 'are 7und of the Man la Memor al +arF, for +12,4>0,000.00, and proper documentat on of the sale 9as made on November 12, 1562 /E1h. ,E, and submarF ngs0. %he DE+ adm ttedly pa d the /f ve percent0 broFer)s fee on th s sale to the DE+ Management 'orporat on, 9h ch acted as broFer for sa d negot ated sale /p. 18, Appellant DE+)s br ef0. /50 After the aforesa d sale, :pet t oner;, through ts +res dent, 9rote t9o letters to :respondent DE+;, the f rst through ts &en or C ce +res dent /E1h. ,',0, and, the second through ts C ce 'ha rman /E1h. ,4, : sic;, asF ng for the payment of ts broFer)s fee n nstrument ng the sale of ts /DE+)s0 9arehouse lot to 'harges "ealty 'orp. %he cla m 9as referred to the E dd ng 'omm ttee cha red by Amanda &. #u am 9h ch met on November 5, 1562, and 9h ch, on November 16, 1562, ssued a dec s on deny ng :pet t oner)s; cla m /E1h. ,8,0. Bence, the nstant case f led by :pet t oner; to recover from :respondent; DE+ the aforesa d broFer)s fee. After tr al, the lo9er court, on Dctober 28, 1566, rendered -udgment D"DE"$N# :respondent DE+; to pay :pet t oner; the sum of +1,20<,800,00 9h ch s the e=u valent of :f ve percent; broFer)s fee plus legal nterest thereto /s c0 from the f l ng of the compla nt on 7ebruary 16, 1566 unt l fully pa d and the sum of +80,000.00 as and for attorney)s fees. 'osts aga nst :respondent DE+;. /p. 122, "ec.0. 4 Dn appeal, the 'ourt of Appeals reversed the -udgment of the lo9er court ; and d sm ssed the compla nt. %he mot on for recons derat on f led by pet t oner 9as also subse=uently den ed. 2 +et t oner s no9 before th s 'ourt alleg ng that the pet t on ,"A$&E& A U3E&%$DN D7 !A( $N %BE &EN&E %BA% %BE "E&+DNDEN% 'D3"% D7 A++EA!& EA&ED $%& DE'$&$DN DN!H DN %BE 'DN%"DCE"&$A! 7A'%& 7ACD"AE!E %D %BE +"$CA%E "E&+DNDEN% DE+, 0 pr mar ly maF ng cap tal of the d spar ty bet9een the factual conclus ons of the tr al court and of the appellate court. +et t oner asserts that the respondent 'ourt of Appeals d sregarded ev dence n ts favor cons st ng of ts letters to respondent DE+)s h gher off cers sent pr or to the b dd ng and sale, 9here n pet t oner re=uested accred tat on as a broFer and, n the process of nform ng that t had offered the DE+ propert es for sale, also volunteered the name of ts cl ent, #la1o, +h l pp nes, as an nterested prospect ve buyer. 1 %he rule s that n pet t ons for certiorari as a mode of appeal, only =uest ons of la9 d st nctly set forth may be ra sed. = &uch =uest ons have been def ned as those that do not call for any e1am nat on of the probat ve value of the ev dence presented by the part es. < +et t oner)s s ngular ass gnment of error 9ould, ho9ever, have th s 'ourt go over the facts of th s case because t necessar ly

nvolves the e1am nat on of the ev dence and ts subse=uent reevaluat on. 3nder the present proceed ng, the same, therefore, cannot be done. $t bears emphas A ng that mere d sagreement bet9een the 'ourt of Appeals and the tr al court as to the facts of a case does not of tself 9arrant th s 'ourt)s rev e9 of the same. $t has been held that the doctr ne that the f nd ngs of fact made by the 'ourt of Appeals, be ng conclus ve n nature, are b nd ng on th s 'ourt, appl es even f the 'ourt of Appeals 9as n d sagreement 9 th the lo9er court as to the 9e ght of ev dence 9 th a conse=uent reversal of ts f nd ngs of fact, so long as the f nd ngs of the 'ourt of Appeals are borne out by the record or based on substant al ev dence. 1. 9h le the forego ng doctr ne s not absolute, pet t oner has not suff c ently proved that h s case falls under the Fno9n e1cept ons. 11 Ee that as t may, the 'ourt has perused the assa led dec s on of the 'ourt of Appeals and st ll f nds the pr mary assert on of pet t oner to be unfounded. %he 'ourt of Appeals has addressed all the factual content ons of pet t oner and chose not to g ve credence to pet t oner)s vers on. Moreover, the f nd ngs of the 'ourt of Appeals are cons stent 9 th, and suff c ently supported by, the records of th s case. $t s obv ous that pet t oner 9as never able to secure the re=u red accred tat on from respondent DE+ to transact bus ness on behalf of the latter. %he letters sent by pet t oner to the h gher off cers of the DE+ and the A+% are merely nd cat ve of pet t oner)s des re to secure such accred tat on. At best these m ss ves are self@serv ngI the most that they prove s that they 9ere sent by pet t oner and rece ved by respondent DE+, 9h ch clearly never agreed to be bound thereto. As declared by the tr al court even 9hen t found n favor of pet t oner, there 9as no e1press reply from the DE+ or the A+% as to the accred tat on sought by pet t oner. 13 7rom the very beg nn ng, therefore, pet t oner 9as a9are that t had no e1press author ty from DE+ to f nd buyers of ts propert es. $n ts reply subm tted pursuant to the resolut on re=u r ng the same 14 pet t oner also nvoFes Art cle 16>5 of the ne9 ' v l 'ode 1; n contend ng that an mpl ed agency e1 sted. +et t oner argues that t ,should have been stopped, d sauthor Aed and outr ghtly prevented from deal ng the 12,<88 s=. m /9 th 9arehouse0 :sic; by the DE+ from the ncept on., 12 Dn the contrary, these steps 9ere never necessary. $n the course of pet t oner)s deal ngs 9 th the DE+, t 9as al9ays made clear to pet t oner that only accred ted broFers may looF for buyers on behalf of respondent DE+. %h s s not a s tuat on 9here n a th rd party 9as pre-ud ced by the refusal of respondent DE+ to recogn Ae pet t oner as ts broFer. %he controversy s only bet9een the DE+ and pet t oner, to 9hom t 9as emphas Aed n no uncerta n terms that the arrangement sought d d not e1 st. Art cle 16>5, therefore, has no room for operat on n th s case. +et t oner 9ould also d sparage the formal ty of accred tat on as merely a mechan cal act, 9h ch re=u res not much d scret on, as long as a person or ent ty looFs for a buyer :and; n t ate or promote :sic; the nterests of the seller.10 Ee ng engaged n bus ness, pet t oner should do better to adopt the oppos te att tude

and apprec ate that formal t es, such as the need for accred tat on, result from the evolut on of sound bus ness pract ces for the protect on and benef t of all part es concerned. %hey are des gned and adopted spec f cally to prevent the occurrence of s tuat ons s m lar to that obta n ng n th s case. More mportantly, pet t oner)s stance goes aga nst the bas c a1 om n ' v l !a9 that no one may contract n the name of another 9 thout be ng author Aed by the latter, unless the former has by la9 a r ght to represent h m. 117rom th s pr nc ple, among others, spr ngs the relat onsh p of agency 9h ch, as 9 th other contracts, s one founded on mutual consent? the pr nc pal agrees to be bound by the acts of the agent and the latter n turn consents to render serv ce on behalf or n representat on of the pr nc pal. 1= +et t oner, ho9ever, also nvoFes e=u ty cons derat ons, and n e=u ty, the 'ourt recogn Aes the efforts of pet t oner n br ng ng together respondent DE+ and an nterested and f nanc ally@able buyer. (h le not act vely nvolved n the actual b dd ng and transfer of o9nersh p of the 9arehouse property, pet t oner may be sa d to have n t ated, albe t 9 thout proper author ty, the transact on that eventually tooF place. %he 'ourt s also a9are that respondent DE+ 9as able to real Ae a substant al prof t from the sale of ts t9o propert es. (h le purely c rcumstant al, there s suff c ent reason to bel eve that the DE+ became more conf dent to venture and redeem the propert es from the A+% due to the presence of a ready and 9 ll ng buyer, as commun cated and assured by pet t oner. $n $rats v. .ourt of Appeals, 1< there 9as a f nd ng that the pet t oner there n as the agent 9as no longer the eff c ent procur ng cause n br ng ng about the sale proceed ng from the fact of e1p rat on of h s e1clus ve author ty. %here 9as therefore no bas s n la9 to grant the rel ef sought. Nevertheless, th s 'ourt n e=u ty granted the sum of +100,000.00, out of the +1,<60,000.00 cla med as comm ss on, by 9ay of compensat on for the efforts and ass stance rendered by the agent n the transact on pr or to the e1p rat on of h s author ty. %hese cons st n offer ng the lot for sale to the eventual buyer, send ng follo9@up letters, nv t ng the buyer to d nner and luncheon meet ngs, etc. +arallel c rcumstances obta n n the case at bar. $t 9as pet t oner 9ho adv sed #la1o, +h l pp nes of the ava lab l ty of the 9arehouse property and aroused ts nterest over the same. %hrough pet t oner, respondent DE+ 9as d rectly nformed of the e1 stence of an nterested buyer. +et t oner)s pers stence n commun cat ng 9 th respondent DE+ re nforced the ser ousness of the offer. %h s p ece of nformat on no doubt had a bear ng on the subse=uent dec s ons made by respondent DE+ as regards the d spos t on of ts propert es. +et t oner cla ms the amount of +1,20<,800.00 a9arded by the tr al court as comm ss on computed at f ve percent of the sale pr ce of the 9arehouse property. 3nder the forego ng d s=u s t on and follo9 ng the precedent, as 9ell as roughly the proport on, set n $rats, the 'ourt n e=u ty grants pet t oner the sum of Dne Bundred %housand +esos /+l00,000.000 for the role t played n the transact on bet9een respondent DE+ and buyer #la1o, +h l pp nes. $t s

emphas Aed, ho9ever, that the c rcumstances that came nto play n th s case do not meet the m n mum legal standards re=u red for the e1 stence of an agency relat onsh p and that the a9ard s based purely on e=u ty cons derat ons. Accord ngly, pet t oner)s other arguments need not no9 be d scussed. (BE"E7D"E, the dec s on appealed from s hereby A77$"MED, 9 th the MDD$7$'A%$DN that n e=u ty respondent DE+ s ordered to pay pet t oner the amount of Dne Bundred %housand +esos /+100,000.000. No pronouncement as to costs. &D D"DE"ED. 3arvasa (.hairman*, .ruz, 2ri>o<Aquino and Medialdea, 99., concur.

:ootnotes V +ursuant to the clar f cat on made n Metropol tan (ater9orFs and &e9erage &ystems v. 'ourt of Appeals :#.". No. !@8482>, 28 August 156>, 14< &'"A >2<1, c t ng ElFs 'lub v. "ov ra :#.". No. 46411, 24 7ebruary 1546, 60 +h l. 222;, the name of the 'ourt of Appeals, 9h ch has been ncluded by pet t oner as party respondent n the t tle of th s case, has been deleted. 1 Danon v. Anton o A. Er mo and 'ompany, #.". No. 1862<,12 &eptember 1521, c t ng & bbald v. Eethlehem $ron 'ompany, 6< N.H., <26I <6 Am. "ep., 441 :16601I re terated n "ocha v. +rats and 'ompany, #.". No. 1>21>, <1 May 1522, 4< +h l. <52. 2 N nth D v s on composed of Just ces 7 del +. +ur s ma, as 'ha rman, Cenanc o D. Aldecoa Jr., and Al c a C. &emp o D y 9 th the latter as the ponente. < "ollo, pp. 28@26. 4 "eg onal %r al 'ourt, Eranch 108, UueAon ' ty, 9 th the Bonorable %omas C. %adeo, Jr., pres d ngI "ollo, pp. 16@22. 8 "ollo, p. 48. > "ollo, p. 1<. 2 E1h b ts ,A, and ,E., 6 "ules of 'ourt, "ule 48, sec. 2, par. 2. 5 #oduco v. 'ourt of Appeals, et al., #.". No. !@12>42, 26 7ebruary 15>4, 115 +h l. 8<1. &ee also BernandeA v. 'ourt of Appeals, #.". No. !@<52>2, <1 March 1562,145 &'"A >2. 10 Alsua@Eetts v. 'ourt of Appeals, #.". Nos. !@4>4<0@<1, <0 July 1525, 52 &'"A <<2.

11 &ee &acay v. &and ganbayan, #.". Nos. >>452@56, 10 July 156>, 142 &'"A 85<, and the cases c ted there n. 12 "ollo p. 20. 1< "ollo, p. >4. . 14 Art. 16>5. Agency may be e1press, or mpl ed from the acts of the pr nc pal, from h s s lence or lacF of act on, or h s fa lure to repud ate the agency, Fno9 ng that another person s act ng on h s behalf 9 thout author ty. Agency may be oral, unless the la9 re=u res a spec f c form. 18 "eply, p. 6. 1> "eply, p. 11. 12 Art. 1<12, ' v l 'ode. 16 &ee "allos v. 7el 1 #o 'han and &ons "ealty 'orporat on, #.". No. !@24<<2, <1 January 1526, 61 &'"A 281. 15 #.". No. !@<5622, <1 January 15@16, 61 &'"A <>0. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 1;3032 !ecem er 1<, 3..0

$/GE#)/ +. N/GA#ES, for -imself and on e-alf of t-e minors, $/GE$ AN(5/N8, ANGE#)%A, NAN%8, and ')%5AE# %5$)S(/+5E$, all surnamed N/GA#ES, pet t oners, vs. %A+)(/# 'E!)%A# %EN(E$, !$. /S%A$ ES($A!A, !$. E#8 *)##A:#/$, !$. $/SA &8, !$. J/E# EN$)E&E6, !$. +E$+E(&A #A%S/N, !$. N/E ES+)N/#A, and N&$SE J. !&'#A/, respondents.

DE'$&$DN

%A$+)/, J., (-e %ase

%h s pet t on for rev e91 assa ls the > 7ebruary 1556 Dec s on2 and 21 March 2000 "esolut on< of the 'ourt of Appeals n 'A@#.". 'C No. 48>41. %he 'ourt of Appeals aff rmed in toto the 22 November 155< Dec s on4 of the "eg onal %r al 'ourt of Man la, Eranch <<, f nd ng Dr. Dscar Estrada solely l able for damages for the death of h s pat ent, 'oraAon Nogales, 9h le absolv ng the rema n ng respondents of any l ab l ty. %he 'ourt of Appeals den ed pet t oners) mot on for recons derat on. (-e :acts +regnant 9 th her fourth ch ld, 'oraAon Nogales /,'oraAon,0, 9ho 9as then <2 years old, 9as under the e1clus ve prenatal care of Dr. Dscar Estrada /,Dr. Estrada,0 beg nn ng on her fourth month of pregnancy or as early as December 1528. (h le 'oraAon 9as on her last tr mester of pregnancy, Dr. Estrada noted an ncrease n her blood pressure and development of leg edema 8 nd cat ng preeclamps a,> 9h ch s a dangerous compl cat on of pregnancy. 2 Around m dn ght of 28 May 152>, 'oraAon started to e1per ence m ld labor pa ns prompt ng 'oraAon and "ogel o Nogales /,&pouses Nogales,0 to see Dr. Estrada at h s home. After e1am n ng 'oraAon, Dr. Estrada adv sed her mmed ate adm ss on to the 'ap tol Med cal 'enter /,'M',0. Dn 2> May 152>, 'oraAon 9as adm tted at 2?<0 a.m. at the 'M' after the staff nurse noted the 9r tten adm ss on re=uest 6 of Dr. Estrada. 3pon 'oraAon)s adm ss on at the 'M', "ogel o Nogales /,"ogel o,0 e1ecuted and s gned the ,'onsent on Adm ss on and Agreement,5 and ,Adm ss on Agreement.,10 'oraAon 9as then brought to the labor room of the 'M'. Dr. "osa 3y /,Dr. 3y,0, 9ho 9as then a res dent phys c an of 'M', conducted an nternal e1am nat on of 'oraAon. Dr. 3y then called up Dr. Estrada to not fy h m of her f nd ngs. Eased on the Doctor)s Drder &heet,11 around <?00 a.m., Dr. Estrada ordered for 10 mg. of val um to be adm n stered mmed ately by ntramuscular n-ect on. Dr. Estrada later ordered the start of ntravenous adm n strat on of syntoc non adm 1ed 9 th de1trose, 8R, n lactated " ngers) solut on, at the rate of e ght to ten m cro@drops per m nute. Accord ng to the Nurse)s Dbservat on Notes, 12 Dr. Joel Enr =ueA /,Dr. Enr =ueA,0, an anesthes olog st at 'M', 9as not f ed at 4?18 a.m. of 'oraAon)s adm ss on. &ubse=uently, 9hen asFed f he needed the serv ces of an anesthes olog st, Dr. Estrada refused. Desp te Dr. Estrada)s refusal, Dr. Enr =ueA stayed to observe 'oraAon)s cond t on. At >?00 a.m., 'oraAon 9as transferred to Del very "oom No. 1 of the 'M'. At >?10 a.m., 'oraAon)s bag of 9ater ruptured spontaneously. At >?12 a.m., 'oraAon)s cerv 1 9as fully d lated. At >?1< a.m., 'oraAon started to e1per ence convuls ons.

At >?18 a.m., Dr. Estrada ordered the n-ect on of ten grams of magnes um sulfate. Bo9ever, Dr. Ely C llaflor /,Dr. C llaflor,0, 9ho 9as ass st ng Dr. Estrada, adm n stered only 2.8 grams of magnes um sulfate. At >?22 a.m., Dr. Estrada, ass sted by Dr. C llaflor, appl ed lo9 forceps to e1tract 'oraAon)s baby. $n the process, a 1.0 1 2.8 cm. p ece of cerv cal t ssue 9as allegedly torn. %he baby came out n an apn c, cyanot c, 9eaF and n-ured cond t on. 'onse=uently, the baby had to be ntubated and resusc tated by Dr. Enr =ueA and Dr. +ayumo. At >?22 a.m., 'oraAon began to man fest moderate vag nal bleed ng 9h ch rap dly became profuse. 'oraAon)s blood pressure dropped from 1<0M60 to >0M40 9 th n f ve m nutes. %here 9as cont nuous profuse vag nal bleed ng. %he ass st ng nurse adm n stered hemacel through a gauge 15 needle as a s de dr p to the ongo ng ntravenous n-ect on of de1trose. At 2?48 a.m., Dr. Estrada ordered blood typ ng and cross match ng 9 th bottled blood. $t tooF appro1 mately <0 m nutes for the 'M' laboratory, headed by Dr. +erpetua !acson /,Dr. !acson,0, to comply 9 th Dr. Estrada)s order and del ver the blood. At 6?00 a.m., Dr. Noe Esp nola /,Dr. Esp nola,0, head of the Dbstetr cs@ #ynecology Department of the 'M', 9as appr sed of 'oraAon)s cond t on by telephone. 3pon be ng nformed that 'oraAon 9as bleed ng profusely, Dr. Esp nola ordered mmed ate hysterectomy. "ogel o 9as made to s gn a ,'onsent to Dperat on.,1< Due to the nclement 9eather then, Dr. Esp nola, 9ho 9as fetched from h s res dence by an ambulance, arr ved at the 'M' about an hour later or at 5?00 a.m. Be e1am ned the pat ent and ordered some resusc tat ve measures to be adm n stered. Desp te Dr. Esp nola)s efforts, 'oraAon d ed at 5?18 a.m. %he cause of death 9as ,hemorrhage, post partum., 14 Dn 14 May 1560, pet t oners f led a compla nt for damages 18 9 th the "eg onal %r al 'ourt1> of Man la aga nst 'M', Dr. Estrada, Dr. C llaflor, Dr. 3y, Dr. Enr =ueA, Dr. !acson, Dr. Esp nola, and a certa n Nurse J. Dumlao for the death of 'oraAon. +et t oners ma nly contended that defendant phys c ans and 'M' personnel 9ere negl gent n the treatment and management of 'oraAon)s cond t on. +et t oners charged 'M' 9 th negl gence n the select on and superv s on of defendant phys c ans and hosp tal staff. 7or fa l ng to f le the r ans9er to the compla nt desp te serv ce of summons, the tr al court declared Dr. Estrada, Dr. Enr =ueA, and Nurse Dumlao n default.12 'M', Dr. C llaflor, Dr. 3y, Dr. Esp nola, and Dr. !acson f led the r respect ve ans9ers deny ng and oppos ng the allegat ons n the compla nt. &ubse=uently, tr al ensued. After more than 11 years of tr al, the tr al court rendered -udgment on 22 November 155< f nd ng Dr. Estrada solely l able for damages. %he tr al court ruled as follo9s?

%he v ct m 9as under h s pre@natal care, apparently, h s fault began from h s ncorrect and nade=uate management and lacF of treatment of the pre@ eclampt c cond t on of h s pat ent. $t s not d sputed that he m sappl ed the forceps n caus ng the del very because t resulted n a large cerv cal tear 9h ch had caused the profuse bleed ng 9h ch he also fa led to control 9 th the appl cat on of nade=uate n-ect on of magnes um sulfate by h s ass stant Dra. Ely C llaflor. Dr. Estrada even fa led to not ce the erroneous adm n strat on by nurse Dumlao of hemacel by 9ay of s de dr p, nstead of d rect ntravenous n-ect on, and h s fa lure to consult a sen or obstetr c an at an early stage of the problem. Dn the part ho9ever of Dra. Ely C llaflor, Dra. "osa 3y, Dr. Joel Enr =ueA, Dr. !acson, Dr. Esp nola, nurse J. Dumlao and 'M', the 'ourt f nds no legal -ust f cat on to f nd them c v lly l able. Dn the part of Dra. Ely C llaflor, she 9as only taF ng orders from Dr. Estrada, the pr nc pal phys c an of 'oraAon Nogales. &he can only maFe suggest ons n the manner the pat ent maybe treated but she cannot mpose her 9 ll as to do so 9ould be to subst tute her good -udgment to that of Dr. Estrada. $f she fa led to correctly d agnose the true cause of the bleed ng 9h ch n th s case appears to be a cerv cal lacerat on, t cannot be safely concluded by the 'ourt that Dra. C llaflor had the correct d agnos s and she fa led to nform Dr. Estrada. No ev dence 9as ntroduced to sho9 that ndeed Dra. C llaflor had d scovered that there 9as lacerat on at the cerv cal area of the pat ent)s nternal organ. Dn the part of nurse Dumlao, there s no sho9 ng that 9hen she adm n stered the hemacel as a s de dr p, she d d t on her o9n. $f the correct procedure 9as d rectly thru the ve ns, t could only be because th s 9as 9hat 9as probably the orders of Dr. Estrada. (h le the ev dence of the pla nt ffs sho9s that Dr. Noe Esp nola, 9ho 9as the 'h ef of the Department of Dbstetr cs and #ynecology 9ho attended to the pat ent Mrs. Nogales, t 9as only at 5?00 a.m. %hat he 9as able to reach the hosp tal because of typhoon D dang /E1h b t 20. (h le he 9as able to g ve prescr pt on n the manner 'oraAon Nogales may be treated, the prescr pt on 9as based on the nformat on g ven to h m by phone and he acted on the bas s of facts as presented to h m, bel ev ng n good fa th that such s the correct remedy. Be 9as not 9 th Dr. Estrada 9hen the pat ent 9as brought to the hosp tal at 2?<0 o)clocF a.m. &o, 9hatever errors that Dr. Estrada comm tted on the pat ent before 5?00 o)clocF a.m. are certa nly the errors of Dr. Estrada and cannot be the m staFe of Dr. Noe Esp nola. B s fa lure to come to the hosp tal on t me 9as due to fortu tous event. Dn the part of Dr. Joel Enr =ueA, 9h le he 9as present n the del very room, t s not ncumbent upon h m to call the attent on of Dr. Estrada, Dra. C llaflor and also of Nurse Dumlao on the alleged errors comm tted by them. Ees des, as anesthes olog st, he has no author ty to control the actuat ons of Dr. Estrada and Dra. C llaflor. 7or the 'ourt to assume that there 9ere errors be ng comm tted n the presence of Dr. Enr =ueA 9ould be to d9ell on con-ectures and speculat ons.

Dn the c v l l ab l ty of Dr. +erpetua !acson, :s;he s a hematolog st and n@charge of the blood banF of the 'M'. %he 'ourt cannot accept the theory of the pla nt ffs that there 9as delay n del ver ng the blood needed by the pat ent. $t 9as test f ed, that n order that th s blood 9 ll be made ava lable, a laboratory test has to be conducted to determ ne the type of blood, cross match ng and other matters cons stent 9 th med cal sc ence so, the lapse of <0 m nutes maybe cons dered a reasonable t me to do all of these th ngs, and not a delay as the pla nt ffs 9ould 9ant the 'ourt to bel eve. Adm ttedly, Dra. "osa 3y s a res dent phys c an of the 'ap tol Med cal 'enter. &he 9as sued because of her alleged fa lure to not ce the ncompetence and negl gence of Dr. Estrada. Bo9ever, there s no ev dence to support such theory. No ev dence 9as adduced to sho9 that Dra. "osa 3y as a res dent phys c an of 'ap tol Med cal 'enter, had Fno9ledge of the m smanagement of the pat ent 'oraAon Nogales, and that not9 thstand ng such Fno9ledge, she tolerated the same to happen. $n the pre@tr al order, pla nt ffs and 'M' agreed that defendant 'M' d d not have any hand or part c pat on n the select on or h r ng of Dr. Estrada or h s ass stant Dra. Ely C llaflor as attend ng phys c an:s; of the deceased. $n other 9ords, the t9o /20 doctors 9ere not employees of the hosp tal and therefore the hosp tal d d not have control over the r profess onal conduct. (hen Mrs. Nogales 9as brought to the hosp tal, t 9as an emergency case and defendant 'M' had no cho ce but to adm t her. &uch be ng the case, there s therefore no legal ground to apply the prov s ons of Art cle 212> and 2160 of the Ne9 ' v l 'ode referr ng to the v car ous l ab l ty of an employer for the negl gence of ts employees. $f ever n th s case there s fault or negl gence n the treatment of the deceased on the part of the attend ng phys c ans 9ho 9ere employed by the fam ly of the deceased, such c v l l ab l ty should be borne by the attend ng phys c ans under the pr nc ple of ,respondeat super or,. (BE"E7D"E, prem ses cons dered, -udgment s hereby rendered f nd ng defendant Dr. Estrada of Number 1< + t m n &t. &an 7ranc sco del Monte, UueAon ' ty c v lly l able to pay pla nt ffs? 10 Ey 9ay of actual damages n the amount of +108,000.00I 20 Ey 9ay of moral damages n the amount of +200,000.00I <0 Attorney)s fees n the amount of +100,000.00 and to pay the costs of su t. 7or fa lure of the pla nt ffs to adduce ev dence to support ts :s c; allegat ons aga nst the other defendants, the compla nt s hereby ordered d sm ssed. (h le the 'ourt looFs 9 th d sfavor the f l ng of the present compla nt aga nst the other defendants by the here n pla nt ffs, as n a 9ay t has caused them personal nconven ence and sl ght damage on the r name and reputat on, the 'ourt cannot accepts :s c; ho9ever, the theory of the rema n ng defendants that pla nt ffs 9ere mot vated n bad fa th n the f l ng of th s compla nt. 7or th s reason defendants) countercla ms are hereby ordered d sm ssed. &D D"DE"ED.16

+et t oners appealed the tr al court)s dec s on. +et t oners cla med that as de from Dr. Estrada, the rema n ng respondents should be held e=ually l able for negl gence. +et t oners po nted out the e1tent of each respondent)s alleged l ab l ty. Dn > 7ebruary 1556, the 'ourt of Appeals aff rmed the dec s on of the tr al court.15 +et t oners f led a mot on for recons derat on 9h ch the 'ourt of Appeals den ed n ts "esolut on of 21 March 2000.20 Bence, th s pet t on. Mean9h le, pet t oners f led a Man festat on dated 12 Apr l 2002 21 stat ng that respondents Dr. Estrada, Dr. Enr =ueA, Dr. C llaflor, and Nurse Dumlao ,need no longer be not f ed of the pet t on because they are absolutely not nvolved n the ssue ra sed before the :'ourt;, regard ng the l ab l ty of :'M';., 22 +et t oners stressed that the sub-ect matter of th s pet t on s the l ab l ty of 'M' for the negl gence of Dr. Estrada.2< %he 'ourt ssued a "esolut on dated 5 &eptember 2002 24 d spens ng 9 th the re=u rement to subm t the correct and present addresses of respondents Dr. Estrada, Dr. Enr =ueA, Dr. C llaflor, and Nurse Dumlao. %he 'ourt stated that 9 th the f l ng of pet t oners) Man festat on, t should be understood that they are cla m ng only aga nst respondents 'M', Dr. Esp nola, Dr. !acson, and Dr. 3y 9ho have f led the r respect ve comments. +et t oners are forego ng further cla ms aga nst respondents Dr. Estrada, Dr. Enr =ueA, Dr. C llaflor, and Nurse Dumlao. %he 'ourt noted that Dr. Estrada d d not appeal the dec s on of the 'ourt of Appeals aff rm ng the dec s on of the "eg onal %r al 'ourt. Accord ngly, the dec s on of the 'ourt of Appeals, aff rm ng the tr al court)s -udgment, s already f nal as aga nst Dr. Dscar Estrada. +et t oners f led a mot on for recons derat on 28 of the 'ourt)s 5 &eptember 2002 "esolut on cla m ng that Dr. Enr =ueA, Dr. C llaflor and Nurse Dumlao 9ere not f ed of the pet t on at the r counsels) last Fno9n addresses. +et t oners re terated the r mputat on of negl gence on these respondents. %he 'ourt den ed pet t oners) Mot on for "econs derat on n ts 16 7ebruary 2004 "esolut on. 2> (-e %ourt of Appeals' $ulin" $n ts Dec s on of > 7ebruary 1556, the 'ourt of Appeals upheld the tr al court)s rul ng. %he 'ourt of Appeals re-ected pet t oners) v e9 that the doctr ne n Darling v. .harleston .ommunity Memorial 0ospital 22 appl es to th s case. Accord ng to the 'ourt of Appeals, the present case d ffers from the Darling case s nce Dr. Estrada s an ndependent contractor@phys c an 9hereas the Darling case nvolved a phys c an and a nurse 9ho 9ere employees of the hosp tal. ' t ng other Amer can cases, the 'ourt of Appeals further held that the mere fact that a hosp tal perm tted a phys c an to pract ce med c ne and use ts fac l t es s not suff c ent to render the hosp tal l able for the phys c an)s negl gence. 26 A

hosp tal s not respons ble for the negl gence of a phys c an 9ho s an ndependent contractor.25 %he 'ourt of Appeals found the cases of Davidson v. .onole<0 and .amp#ell v. 5mma %aing Stevens 0ospital<1appl cable to th s case. Uuot ng .amp#ell, the 'ourt of Appeals stated that 9here there s no proof that defendant phys c an 9as an employee of defendant hosp tal or that defendant hosp tal had reason to Fno9 that any acts of malpract ce 9ould taFe place, defendant hosp tal could not be held l able for ts fa lure to ntervene n the relat onsh p of phys c an@pat ent bet9een defendant phys c an and pla nt ff. Dn the l ab l ty of the other respondents, the 'ourt of Appeals appl ed the ,borro9ed servant, doctr ne cons der ng that Dr. Estrada 9as an ndependent contractor 9ho 9as merely e1erc s ng hosp tal pr v leges. %h s doctr ne prov des that once the surgeon enters the operat ng room and taFes charge of the proceed ngs, the acts or om ss ons of operat ng room personnel, and any negl gence assoc ated 9 th such acts or om ss ons, are mputable to the surgeon.<2 (h le the ass st ng phys c ans and nurses may be employed by the hosp tal, or engaged by the pat ent, they normally become the temporary servants or agents of the surgeon n charge 9h le the operat on s n progress, and l ab l ty may be mposed upon the surgeon for the r negl gent acts under the doctr ne of respondeat superior.<< %he 'ourt of Appeals concluded that s nce "ogel o engaged Dr. Estrada as the attend ng phys c an of h s 9 fe, any l ab l ty for malpract ce must be Dr. Estrada)s sole respons b l ty. (h le t found the amount of damages fa r and reasonable, the 'ourt of Appeals held that no nterest could be mposed on unl =u dated cla ms or damages. (-e )ssue Eas cally, the ssue n th s case s 9hether 'M' s v car ously l able for the negl gence of Dr. Estrada. %he resolut on of th s ssue rests, on the other hand, on the ascerta nment of the relat onsh p bet9een Dr. Estrada and 'M'. %he 'ourt also bel eves that a determ nat on of the e1tent of l ab l ty of the other respondents s nev table to f nally and completely d spose of the present controversy. (-e $ulin" of t-e %ourt %he pet t on s partly mer tor ous. ?n the 1ia&ilit, o! *M* Dr. Estrada)s negl gence n handl ng the treatment and management of 'oraAon)s cond t on 9h ch ult mately resulted n 'oraAon)s death s no longer n ssue. Dr. Estrada d d not appeal the dec s on of the 'ourt of Appeals 9h ch aff rmed the rul ng of the tr al court f nd ng Dr. Estrada solely l able for damages.

Accord ngly, the f nd ng of the tr al court on Dr. Estrada)s negl gence s already f nal. +et t oners ma nta n that 'M' s v car ously l able for Dr. Estrada)s negl gence based on Art cle 2160 n relat on to Art cle 212> of the ' v l 'ode. %hese prov s ons pert nently state? Art. 2160. %he obl gat on mposed by art cle 212> s demandable not only for one)s o9n acts or om ss ons, but also for those of persons for 9hom one s respons ble. 1111 Employers shall be l able for the damages caused by the r employees and household helpers act ng 9 th n the scope of the r ass gned tasFs, even though the former are not engaged n any bus ness or ndustry. 1111 %he respons b l ty treated of n th s art cle shall cease 9hen the persons here n ment oned prove that they observed all the d l gence of a good father of a fam ly to prevent damage. Art. 212>. (hoever by act or om ss on causes damage to another, there be ng fault or negl gence, s obl ged to pay for the damage done. &uch fault or negl gence, f there s no pre@e1 st ng contractual relat on bet9een the part es, s called a =uas @del ct and s governed by the prov s ons of th s 'hapter. & m larly, n the 3n ted &tates, a hosp tal 9h ch s the employer, master, or pr nc pal of a phys c an employee, servant, or agent, may be held l able for the phys c an)s negl gence under the doctr ne of respondeat superior.<4 $n the present case, pet t oners ma nta n that 'M', n allo9 ng Dr. Estrada to pract ce and adm t pat ents at 'M', should be l able for Dr. Estrada)s malpract ce. "ogel o cla ms that he Fne9 Dr. Estrada as an accred ted phys c an of 'M', though he d scovered later that Dr. Estrada 9as not a salar ed employee of the 'M'.<8 "ogel o further cla ms that he 9as deal ng 9 th 'M', 9hose pr mary concern 9as the treatment and management of h s 9 fe)s cond t on. Dr. Estrada -ust happened to be the spec f c person he talFed to represent ng 'M'.<> Moreover, the fact that 'M' made "ogel o s gn a 'onsent on Adm ss on and Adm ss on Agreement<2 and a 'onsent to Dperat on pr nted on the letterhead of 'M' nd cates that 'M' cons dered Dr. Estrada as a member of ts med cal staff. Dn the other hand, 'M' d scla ms l ab l ty by assert ng that Dr. Estrada 9as a mere v s t ng phys c an and that t adm tted 'oraAon because her phys cal cond t on then 9as class f ed an emergency obstetr cs case. <6 'M' alleges that Dr. Estrada s an ndependent contractor ,for 9hose actuat ons 'M' 9ould be a total stranger., 'M' ma nta ns that t had no control or superv s on over Dr. Estrada n the e1erc se of h s med cal profess on.

%he 'ourt had the occas on to determ ne the relat onsh p bet9een a hosp tal and a consultant or v s t ng phys c an and the l ab l ty of such hosp tal for that phys c an)s negl gence n Ramos v. .ourt of Appeals,<5 to 9 t? $n the f rst place, hosp tals e1erc se s gn f cant control n the h r ng and f r ng of consultants and n the conduct of the r 9orF 9 th n the hosp tal prem ses. Doctors 9ho apply for ,consultant, slots, v s t ng or attend ng, are re=u red to subm t proof of complet on of res dency, the r educat onal =ual f cat onsI generally, ev dence of accred tat on by the appropr ate board /d plomate0, ev dence of fello9sh p n most cases, and references. %hese re=u rements are carefully scrut n Aed by members of the hosp tal adm n strat on or by a rev e9 comm ttee set up by the hosp tal 9ho e ther accept or re-ect the appl cat on. %h s s part cularly true 9 th respondent hosp tal. After a phys c an s accepted, e ther as a v s t ng or attend ng consultant, he s normally re=u red to attend cl n co@patholog cal conferences, conduct beds de rounds for clerFs, nterns and res dents, moderate grand rounds and pat ent aud ts and perform other tasFs and respons b l t es, for the pr v lege of be ng able to ma nta n a cl n c n the hosp tal, andMor for the pr v lege of adm tt ng pat ents nto the hosp tal. $n add t on to these, the phys c an)s performance as a spec al st s generally evaluated by a peer rev e9 comm ttee on the bas s of mortal ty and morb d ty stat st cs, and feedbacF from pat ents, nurses, nterns and res dents. A consultant rem ss n h s dut es, or a consultant 9ho regularly falls short of the m n mum standards acceptable to the hosp tal or ts peer rev e9 comm ttee, s normally pol tely term nated. $n other 9ords, pr vate hosp tals, h re, f re and e1erc se real control over the r attend ng and v s t ng ,consultant, staff. W-ile IconsultantsI are not, tec-nically employees, a point F-ic- respondent -ospital asserts in denyin" all responsi ility for t-e patient's condition, t-e control eLercised, t-e -irin", and t-e ri"-t to terminate consultants all fulfill t-e important -allmarGs of an employer7employee relations-ip, Fit- t-e eLception of t-e payment of Fa"es. )n assessin" F-et-er suc- a relations-ip in fact eLists, t-e control test is determinin". Accordin"ly, on t-e asis of t-e fore"oin", Fe rule t-at for t-e purpose of allocatin" responsi ility in medical ne"li"ence cases, an employer7employee relations-ip in effect eLists etFeen -ospitals and t-eir attendin" and Aisitin" p-ysicians. %h s be ng the case, the =uest on no9 ar ses as to 9hether or not respondent hosp tal s sol dar ly l able 9 th respondent doctors for pet t oner)s cond t on. %he bas s for hold ng an employer sol dar ly respons ble for the negl gence of ts employee s found n Art cle 2160 of the ' v l 'ode 9h ch cons ders a person accountable not only for h s o9n acts but also for those of others based on the former)s respons b l ty under a relat onsh p of patr a potestas. 1 1 1 40 /Emphas s suppl ed0 (h le the 'ourt n Ramos d d not e1pound on the control test, such test essent ally determ nes 9hether an employment relat onsh p e1 sts bet9een a

phys c an and a hosp tal based on the e1erc se of control over the phys c an as to deta ls. &pec f cally, the employer /or the hosp tal0 must have the r ght to control both the means and the deta ls of the process by 9h ch the employee /or the phys c an0 s to accompl sh h s tasF. 41 After a thorough e1am nat on of the volum nous records of th s case, the 'ourt f nds no s ngle ev dence po nt ng to 'M')s e1erc se of control over Dr. Estrada)s treatment and management of 'oraAon)s cond t on. $t s und sputed that throughout 'oraAon)s pregnancy, she 9as under the e1clus ve prenatal care of Dr. Estrada. At the t me of 'oraAon)s adm ss on at 'M' and dur ng her del very, t 9as Dr. Estrada, ass sted by Dr. C llaflor, 9ho attended to 'oraAon. %here 9as no sho9 ng that 'M' had a part n d agnos ng 'oraAon)s cond t on. (h le Dr. Estrada en-oyed staff pr v leges at 'M', such fact alone d d not maFe h m an employee of 'M'.42 'M' merely allo9ed Dr. Estrada to use ts fac l t es 4< 9hen 'oraAon 9as about to g ve b rth, 9h ch 'M' cons dered an emergency. 'ons der ng these c rcumstances, Dr. Estrada s not an employee of 'M', but an ndependent contractor. %he =uest on no9 s 9hether 'M' s automat cally e1empt from l ab l ty cons der ng that Dr. Estrada s an ndependent contractor@phys c an. $n general, a hosp tal s not l able for the negl gence of an ndependent contractor@phys c an. %here s, ho9ever, an e1cept on to th s pr nc ple. %he hosp tal may be l able f the phys c an s the ,ostens ble, agent of the hosp tal.44%h s e1cept on s also Fno9n as the ,doctr ne of apparent author ty.,48 $n 2il#ert v. Sycamore Municipal 0ospital,4>the $ll no s &upreme 'ourt e1pla ned the doctr ne of apparent author ty n th s 9 se? :3;nder the doctr ne of apparent author ty a hosp tal can be held v car ously l able for the negl gent acts of a phys c an prov d ng care at the hosp tal, regardless of 9hether the phys c an s an ndependent contractor, unless the pat ent Fno9s, or should have Fno9n, that the phys c an s an ndependent contractor. %he elements of the act on have been set out as follo9s? ,7or a hosp tal to be l able under the doctr ne of apparent author ty, a pla nt ff must sho9 that? /10 the hosp tal, or ts agent, acted n a manner that 9ould lead a reasonable person to conclude that the nd v dual 9ho 9as alleged to be negl gent 9as an employee or agent of the hosp talI /20 9here the acts of the agent create the appearance of author ty, the pla nt ff must also prove that the hosp tal had Fno9ledge of and ac=u esced n themI and /<0 the pla nt ff acted n rel ance upon the conduct of the hosp tal or ts agent, cons stent 9 th ord nary care and prudence., %he element of ,hold ng out, on the part of the hosp tal does not re=u re an e1press representat on by the hosp tal that the person alleged to be negl gent s an employee. "ather, the element s sat sf ed f the hosp tal holds tself out as a prov der of emergency room care 9 thout nform ng the pat ent that the care s prov ded by ndependent contractors.

%he element of -ust f able rel ance on the part of the pla nt ff s sat sf ed f the pla nt ff rel es upon the hosp tal to prov de complete emergency room care, rather than upon a spec f c phys c an. %he doctr ne of apparent author ty essent ally nvolves t9o factors to determ ne the l ab l ty of an ndependent@contractor phys c an. %he f rst factor focuses on the hosp tal)s man festat ons and s somet mes descr bed as an n=u ry 9hether the hosp tal acted n a manner 9h ch 9ould lead a reasonable person to conclude that the nd v dual 9ho 9as alleged to be negl gent 9as an employee or agent of the hosp tal. 42 )n t-is re"ard, t-e -ospital need not maGe eLpress representations to t-e patient t-at t-e treatin" p-ysician is an employee of t-e -ospital; rat-er a representation may e "eneral and implied.46 %he doctr ne of apparent author ty s a spec es of the doctr ne of estoppel. Art cle 14<1 of the ' v l 'ode prov des that ,:t;hrough estoppel, an adm ss on or representat on s rendered conclus ve upon the person maF ng t, and cannot be den ed or d sproved as aga nst the person rely ng thereon., Estoppel rests on th s rule? ,(henever a party has, by h s o9n declarat on, act, or om ss on, ntent onally and del berately led another to bel eve a part cular th ng true, and to act upon such bel ef, he cannot, n any l t gat on ar s ng out of such declarat on, act or om ss on, be perm tted to fals fy t., 45 $n the nstant case, 'M' mpl edly held out Dr. Estrada as a member of ts med cal staff. %hrough 'M')s acts, 'M' clothed Dr. Estrada 9 th apparent author ty thereby lead ng the &pouses Nogales to bel eve that Dr. Estrada 9as an employee or agent of 'M'. 'M' cannot no9 repud ate such author ty. 7 rst, 'M' granted staff pr v leges to Dr. Estrada. 'M' e1tended ts med cal staff and fac l t es to Dr. Estrada. 3pon Dr. Estrada)s re=uest for 'oraAon)s adm ss on, 'M', through ts personnel, read ly accommodated 'oraAon and updated Dr. Estrada of her cond t on. &econd, 'M' made "ogel o s gn consent forms pr nted on 'M' letterhead. +r or to 'oraAon)s adm ss on and supposed hysterectomy, 'M' asFed "ogel o to s gn release forms, the contents of 9h ch re nforced "ogel o)s bel ef that Dr. Estrada 9as a member of 'M')s med cal staff. 80 %he 'onsent on Adm ss on and Agreement e1pl c tly prov des? *ND( A!! MEN EH %BE&E +"E&EN%&? $, "ogel o Nogales, of legal age, a res dent of 1524 M. B. Del + lar &t., Malate Mla., be ng the fatherMmotherMbrotherMs sterMspouseMrelat veM guard anMor person n custody of Ma. 'oraAon, and represent ng h sMher fam ly, of my o9n vol t on and free 9 ll, do consent and subm t sa d Ma. 'oraAon to Dr. Dscar Estrada /here nafter referred to as +hys c an0 for cure, treatment, retreatment, or emergency measures, t-at t-e +-ysician, personally or y and t-rou"t-e %apitol 'edical %enter andHor its staff, may use, adapt, or employ suc- means, forms or met-ods of cure, treatment, retreatment, or

emer"ency measures as -e may see est and most eLpedient; t-at 'a. %oraJon and ) Fill comply Fit- any and all rules, re"ulations, directions, and instructions of t-e +-ysician, t-e %apitol 'edical %enter andHor its staffI and, that $ 9 ll not hold l able or respons ble and hereby 9a ve and forever d scharge and hold free the +hys c an, the 'ap tol Med cal 'enter andMor ts staff, from any and all cla ms of 9hatever F nd of nature, ar s ng from d rectly or nd rectly, or by reason of sa d cure, treatment, or retreatment, or emergency measures or ntervent on of sa d phys c an, the 'ap tol Med cal 'enter andMor ts staff. 1 1 1 181 /Emphas s suppl ed0 (h le the 'onsent to Dperat on pert nently reads, thus? $, "D#E!$D ND#A!E&, 1 1 1, of my o9n vol t on and free 9 ll, do consent and subm t sa d 'D"ALDN ND#A!E& to Bysterectomy, by the Sur"ical Staff and Anest-esiolo"ists of %apitol 'edical %enterandMor 9hatever succeed ng operat ons, treatment, or emergency measures as may be necessary and most e1ped entI and, that $ 9 ll not hold l able or respons ble and hereby 9a ve and forever d scharge and hold free the &urgeon, h s ass stants, anesthes olog sts, the 'ap tol Med cal 'enter andMor ts staff, from any and all cla ms of 9hatever F nd of nature, ar s ng from d rectly or nd rectly, or by reason of sa d operat on or operat ons, treatment, or emergency measures, or ntervent on of the &urgeon, h s ass stants, anesthes olog sts, the 'ap tol Med cal 'enter andMor ts staff.82 /Emphas s suppl ed0 ( thout any nd cat on n these consent forms that Dr. Estrada 9as an ndependent contractor@phys c an, the &pouses Nogales could not have Fno9n that Dr. Estrada 9as an ndependent contractor. & gn f cantly, no one from 'M' nformed the &pouses Nogales that Dr. Estrada 9as an ndependent contractor. Dn the contrary, Dr. Atenc o, 9ho 9as then a member of 'M' Eoard of D rectors, test f ed that Dr. Estrada 9as part of 'M')s surg cal staff. 8< %h rd, Dr. Estrada)s referral of 'oraAon)s profuse vag nal bleed ng to Dr. Esp nola, 9ho 9as then the Bead of the Dbstetr cs and #ynecology Department of 'M', gave the mpress on that Dr. Estrada as a member of 'M')s med cal staff 9as collaborat ng 9 th other 'M'@employed spec al sts n treat ng 'oraAon. %he second factor focuses on the pat ent)s rel ance. $t s somet mes character Aed as an n=u ry on 9hether the pla nt ff acted n rel ance upon the conduct of the hosp tal or ts a"ent, cons stent 9 th ord nary care and prudence.84 %he records sho9 that the &pouses Nogales rel ed upon a perce ved employment relat onsh p 9 th 'M' n accept ng Dr. Estrada)s serv ces. "ogel o test f ed that he and h s 9 fe spec f cally chose Dr. Estrada to handle 'oraAon)s del very not only because of the r fr end)s recommendat on, but more mportantly because of Dr. Estrada)s ,connect on 9 th a reputable hosp tal, the :'M';., 88 $n other 9ords, Dr. Estrada)s relat onsh p 9 th 'M' played a s gn f cant role n the &pouses

Nogales) dec s on n accept ng Dr. Estrada)s serv ces as the obstetr c an@ gynecolog st for 'oraAon)s del very. Moreover, as earl er stated, there s no sho9 ng that before and dur ng 'oraAon)s conf nement at 'M', the &pouses Nogales Fne9 or should have Fno9n that Dr. Estrada 9as not an employee of 'M'. 7urther, the &pouses Nogales looFed to 'M' to prov de the best med cal care and support serv ces for 'oraAon)s del very. %he 'ourt notes that pr or to 'oraAon)s fourth pregnancy, she used to g ve b rth ns de a cl n c. 'ons der ng 'oraAon)s age then, the &pouses Nogales dec ded to have the r fourth ch ld del vered at 'M', 9h ch "ogel o regarded one of the best hosp tals at the t me.8> %h s s prec sely because the &pouses Nogales feared that 'oraAon m ght e1per ence compl cat ons dur ng her del very 9h ch 9ould be better addressed and treated n a modern and b g hosp tal such as 'M'. Moreover, "ogel o)s consent n 'oraAon)s hysterectomy to be performed by a d fferent phys c an, namely Dr. Esp nola, s a clear nd cat on of "ogel o)s conf dence n 'M')s surg cal staff. 'M')s defense that all t d d 9as ,to e1tend to :'oraAon; ts fac l t es, s untenable. %he 'ourt cannot close ts eyes to the real ty that hosp tals, such as 'M', are n the bus ness of treatment. $n th s regard, the 'ourt agrees 9 th the observat on made by the 'ourt of Appeals of North 'arol na n D ggs v. Novant Bealth, $nc.,82 to 9 t? ,%he concept on that the hosp tal does not undertaFe to treat the pat ent, does not undertaFe to act through ts doctors and nurses, but undertaFes nstead s mply to procure them to act upon the r o9n respons b l ty, no longer reflects the fact. +resent day -ospitals, as t-eir manner of operation plainly demonstrates, do far more t-an furnis- facilities for treatment. (-ey re"ularly employ on a salary asis a lar"e staff of p-ysicians, nurses and internes NsicO, as Fell as administratiAe and manual ForGers, and t-ey c-ar"e patients for medical care and treatment, collectin" for sucserAices, if necessary, y le"al action. %ertainly, t-e person F-o aAails -imself of '-ospital facilities' eLpects t-at t-e -ospital Fill attempt to cure -im, not t-at its nurses or ot-er employees Fill act on t-eir oFn responsi ility.I 1 1 1 /Emphas s suppl ed0 ! Fe9 se unconv nc ng s 'M')s argument that pet t oners are estopped from cla m ng damages based on the 'onsent on Adm ss on and 'onsent to Dperat on. Eoth release forms cons st of t9o parts. %he f rst part gave 'M' perm ss on to adm n ster to 'oraAon any form of recogn Aed med cal treatment 9h ch the 'M' med cal staff deemed adv sable. %he second part of the documents, 9h ch may properly be descr bed as the releas ng part, releases 'M' and ts employees ,from any and all cla ms, ar s ng from or by reason of the treatment and operat on. %he documents do not e1pressly release 'M' from l ab l ty for n-ury to 'oraAon due to negl gence dur ng her treatment or operat on. Ne ther do the consent forms e1pressly e1empt 'M' from l ab l ty for 'oraAon)s death due to negl gence

dur ng such treatment or operat on. &uch release forms, be ng n the nature of contracts of adhes on, are construed str ctly aga nst hosp tals. Ees des, a blanFet release n favor of hosp tals ,from any and all cla ms,, 9h ch ncludes cla ms due to bad fa th or gross negl gence, 9ould be contrary to publ c pol cy and thus vo d. Even s mple negl gence s not sub-ect to blanFet release n favor of establ shments l Fe hosp tals but may only m t gate l ab l ty depend ng on the c rcumstances.86 (hen a person need ng urgent med cal attent on rushes to a hosp tal, he cannot barga n on e=ual foot ng 9 th the hosp tal on the terms of adm ss on and operat on. &uch a person s l terally at the mercy of the hosp tal. %here can be no clearer e1ample of a contract of adhes on than one ar s ng from such a d re s tuat on. %hus, the release forms of 'M' cannot rel eve 'M' from l ab l ty for the negl gent med cal treatment of 'oraAon. ?n the 1ia&ilit, o! the ?ther Respondents Desp te th s 'ourt)s pronouncement n ts 5 &eptember 2002 85 "esolut on that the f l ng of pet t oners) Man festat on conf ned pet t oners) cla m only aga nst 'M', Dr. Esp nola, Dr. !acson, and Dr. 3y, 9ho have f led the r comments, the 'ourt deems t proper to resolve the nd v dual l ab l ty of the rema n ng respondents to put an end f nally to th s more than t9o@decade old controversy. aD !r. Ely *illaflor +et t oners blame Dr. Ely C llaflor for fa l ng to d agnose the cause of 'oraAon)s bleed ng and to suggest the correct remedy to Dr. Estrada. >0 +et t oners assert that t 9as Dr. C llaflor)s duty to correct the error of Nurse Dumlao n the adm n strat on of hemacel. %he 'ourt s not persuaded. Dr. C llaflor adm tted adm n ster ng a lo9er dosage of magnes um sulfate. Bo9ever, th s 9as after nform ng Dr. Estrada that 'oraAon 9as no longer n convuls on and that her blood pressure 9ent do9n to a dangerous level.>1 At that moment, Dr. Estrada nstructed Dr. C llaflor to reduce the dosage of magnes um sulfate from 10 to 2.8 grams. & nce pet t oners d d not d spute Dr. C llaflor)s allegat on, Dr. C llaflor)s defense rema ns uncontroverted. Dr. C llaflor)s act of adm n ster ng a lo9er dosage of magnes um sulfate 9as not out of her o9n vol t on or 9as n contravent on of Dr. Estrada)s order. D !r. $osa &y Dr. "osa 3y)s alleged negl gence cons sted of her fa lure /10 to call the attent on of Dr. Estrada on the ncorrect dosage of magnes um sulfate adm n stered by Dr. C llaflorI /20 to taFe correct ve measuresI and /<0 to correct Nurse Dumlao)s 9rong method of hemacel adm n strat on. %he 'ourt bel eves Dr. 3y)s cla m that as a second year res dent phys c an then at 'M', she 9as merely author Aed to taFe the cl n cal h story and phys cal e1am nat on of 'oraAon.>2 Bo9ever, that rout ne nternal e1am nat on d d not ipso facto maFe Dr. 3y l able for the errors comm tted by Dr. Estrada.

7urther, pet t oners) mputat on of negl gence rests on the r baseless assumpt on that Dr. 3y 9as present at the del very room. Noth ng sho9s that Dr. 3y part c pated n del ver ng 'oraAon)s baby. 7urther, t s une1pected from Dr. 3y, a mere res dent phys c an at that t me, to call the attent on of a more e1per enced spec al st, f ever she 9as present at the del very room. cD !r. Joel EnriKueJ +et t oners fault Dr. Joel Enr =ueA also for not call ng the attent on of Dr. Estrada, Dr. C llaflor, and Nurse Dumlao about the r errors. >< +et t oners ns st that Dr. Enr =ueA should have taFen, or at least suggested, correct ve measures to rect fy such errors. %he 'ourt s not conv nced. Dr. Enr =ueA s an anesthes olog st 9hose f eld of e1pert se s def n tely not obstetr cs and gynecology. As such, Dr. Enr =ueA 9as not e1pected to correct Dr. Estrada)s errors. Ees des, there 9as no ev dence of Dr. Enr =ueA)s Fno9ledge of any error comm tted by Dr. Estrada and h s fa lure to act upon such observat on. dD !r. +erpetua #acson +et t oners fault Dr. +erpetua !acson for her purported delay n the del very of blood 'oraAon needed.>4+et t oners cla m that Dr. !acson 9as rem ss n her duty of superv s ng the blood banF staff. As found by the tr al court, there 9as no unreasonable delay n the del very of blood from the t me of the re=uest unt l the transfus on to 'oraAon. Dr. !acson competently e1pla ned the procedure before blood could be g ven to the pat ent.>8 %aF ng nto account the bleed ng t me, clott ng t me and cross@ match ng, Dr. !acson stated that t 9ould taFe appro1 mately 48@>0 m nutes before blood could be ready for transfus on. >> 7urther, no ev dence e1 sts that Dr. !acson neglected her dut es as head of the blood banF. eD !r. Noe Espinola +et t oners argue that Dr. Esp nola should not have ordered mmed ate hysterectomy 9 thout determ n ng the underly ng cause of 'oraAon)s bleed ng. Dr. Esp nola should have f rst cons dered the poss b l ty of cerv cal n-ury, and adv sed a thorough e1am nat on of the cerv 1, nstead of bel ev ng outr ght Dr. Estrada)s d agnos s that the cause of bleed ng 9as uter ne atony. Dr. Esp nola)s order to do hysterectomy 9h ch 9as based on the nformat on he rece ved by phone s not negl gence. %he 'ourt agrees 9 th the tr al court)s observat on that Dr. Esp nola, upon hear ng such nformat on about 'oraAon)s cond t on, bel eved n good fa th that hysterectomy 9as the correct remedy. At any rate, the hysterectomy d d not push through because upon Dr. Esp nola)s arr val, t 9as already too late. At the t me, 'oraAon 9as pract cally dead. fD Nurse J. !umlao

$n Moore v. 2uthrie 0ospital :nc.,>2 the 3& 'ourt of Appeals, 7ourth ' rcu t, held that to recover, a pat ent compla n ng of n-ur es allegedly result ng 9hen the nurse negl gently n-ected med c ne to h m ntravenously nstead of ntramuscularly had to sho9 that /10 an ntravenous n-ect on const tuted a lacF of reasonable and ord nary careI /20 the nurse n-ected med c ne ntravenouslyI and /<0 such n-ect on 9as the pro1 mate cause of h s n-ury. $n the present case, there s no ev dence of Nurse Dumlao)s alleged fa lure to follo9 Dr. Estrada)s spec f c nstruct ons. Even assum ng Nurse Dumlao def ed Dr. Estrada)s order, there s no sho9 ng that s de@dr p adm n strat on of hemacel pro1 mately caused 'oraAon)s death. No ev dence l nF ng 'oraAon)s death and the alleged 9rongful hemacel adm n strat on 9as ntroduced. %herefore, there s no bas s to hold Nurse Dumlao l able for negl gence. ?n the Award o! Interest on Da-a2es %he a9ard of nterest on damages s proper and allo9ed under Art cle 2211 of the ' v l 'ode, 9h ch states that n cr mes and =uas @del cts, nterest as a part of the damages may, n a proper case, be ad-ud cated n the d scret on of the court.>6 W5E$E:/$E, the 'ourt +A$(#8 G$AN(S the pet t on. %he 'ourt f nds respondent 'ap tol Med cal 'enter v car ously l able for the negl gence of Dr. Dscar Estrada. %he amounts of +108,000 as actual damages and+200,000 as moral damages should each earn legal nterest at the rate of s 1 percent />R0 per annum computed from the date of the -udgment of the tr al court. %he 'ourt aff rms the rest of the Dec s on dated > 7ebruary 1556 and "esolut on dated 21 March 2000 of the 'ourt of Appeals n 'A@#.". 'C No. 48>41. S/ /$!E$E!. Quisum#ing, 9., .hairperson, .arpio Morales, 7inga, and 4elasco, 9r., 99., concur.

:ootnotes
1

3nder "ule 48 of the "ules of 'ourt.

+enned by Assoc ate Just ce Artem o #. %u=uero, 9 th Assoc ate Just ces Jorge &. $mper al and Eubulo #. CerAola, concurr ng. Rollo, pp. 42@46.
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+enned by Assoc ate Just ce Eubulo #. CerAola, 9 th Assoc ate Just ces "oberto A. Earr os and Er berto 3. "osar o, Jr., concurr ng. $d. at 45.
4

+enned by Judge "odolfo #. +alattao.

Edema s the accumulat on of e1cess flu d. $t s man fested by the s9ell ng of the e1trem t es. /http?MM999.preeclamps a.orgMsymptoms.asp0

>

A syndrome occurr ng n late pregnancy marFed by an ncrease n blood pressure, s9ell ng of the anFles by flu d, and the appearance of album n n the ur ne, assoc ated 9 th reduced blood flo9 to the placenta, therefore putt ng the fetus at r sF of death, or st llb rth, and putt ng the mother at r sF of compl cat ons from h gh blood pressure, convuls ons /eclampsia0, F dney fa lure, l ver fa lure and death. %reated 9 th drugs to lo9er the blood pressure and to prevent convuls ons, 9h le e1ped t ng the del very of the baby. /http?MM999.-ansen.com.auMD ct onary[+".html0
2

Rollo, p. 42. E1h. ,A@4,, 7older of E1h b ts. E1h. ,A@1,, 7older of E1h b ts. E1h. ,A@2,, 7older of E1h b ts. E1h. ,A@8,, 7older of E1h b ts. E1h. ,A@6,, 7older of E1h b ts. E1h. ,A@20,, 7older of E1h b ts. Rollo, p. 4<. DocFeted as ' v l 'ase No. 1<162<. %hen 'ourt of 7 rst $nstance. "ecords, pp. 52, 5<. "ecords, pp. ><5@>44. Rollo, pp. 42@46. $d. at 45. $d. at 2<2@240. $d. at 2<6. $d. at 202. $d. at 286. $d. at 26<@268. $d. at <12. << $ll.2d <2>, 211 N.E.2d 28< /15>80.

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11

12

1<

14

18

1>

12

16

15

20

21

22

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24

28

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22

26

' t ng .lary v. 0ospital Authority of .ity of Marietta, 10> #a.App. 1<4, 12> &.E.2d 420 /15>20.

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' t ng .ramer v. 0offman, <50 7.2d 15, 2< /15>60I 0olz#erg v. 8lo&er and 8ifth Ave. 0ospitals, <5 A.D.2d 82>, <<0 N.H.&.2d >62, >64 /15220I Snelson v. Margaretville 0ospital, 45 A.D.2d 551, <24 N.H.&.2d 825, 861 /15280.
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25 A.D.2d 4<, 4<> N.H.&.2d 105 /15610. 116 A.D.2d 566, 455 N.H.&.2d 55< /156>0. ' t ng Davis v. 2laze, 162 #a.App. 16, <84 &.E.2d 648, 645 /15620. ' t ng F#arra v. Spangard, 28 'al.2d 46>, 184 +.2d >62 /15440.

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<4

40A Am.Jur.2d Bosp tals and Asylums . 4>, 40A Am.Jur.2d Bosp tals and Asylums . 44.
<8

%&N, 2> July 1564, pp. <1@<2 /"ogel o Nogales0. $d. at 4<@44. %&N, 4 Apr l 156<, pp. 46@45 /"ogel o Nogales0. "ecords, pp. 4<@44. <26 +h l. 1156 /15550. $d. at 1240@1241.

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40

41

&ee Diggs v. 3ovant 0ealth, :nc. , >26 &.E.2d 681 /200>0 c t ng 0ylton v. 1oontz, 1<6 N.'.App. >25 /20000.
42

&ee 9ones v. 7allahassee Memorial Regional 0ealthcare, :nc. , 52< &o.2d 1248 /200>0.
4<

&ee 0ale v. Shei'holeslam, 224 7.2d 1208 /15640 9here the 3& 'ourt of Appeals, 7 fth ' rcu t, found the phys c an an ndependent contractor s nce there s no ev dence or plead ng that the doctor rece ved compensat on from the hosp tal or that the hosp tal e1erc sed any control over h s treatment of pat ents. %he doctor 9as merely allo9ed to use the fac l t es of the hosp tal 9hen, n the doctor)s -udgment, hosp tal care 9as necessary.
44

9ones v. $hilpott, 202 7.&upp. 1210 /15660.

48

&omet mes referred to as the apparent, or ostens ble, agency theory. / 1ing v. Mitchell, <1 A.D.<d 586, 615 N.H.&.2d 1>5 :200>;0.
4>

18> $ll.2d 811, >22 N.E.2d 266 /155<0. Diggs v. 3ovant 0ealth, :nc., supra note 41. $d.

42

46

45

De .astro v. 2inete, 1<2 +h l. 48< /15>50, c t ng &ec. <, par. a, "ule 1<1 of the "ules of 'ourt. &ee also1ing v. Mitchell, <1 A.D.<d 586, 615 N.H.&.2d 1>5 /200>0

9here the Ne9 HorF &upreme 'ourt, Appellate D v s on, %h rd Department, stated as follo9s? As a general propos t on, ,:a; hosp tal may not be held for the acts of an anesthet st 9ho 9as not an employee of the hosp tal, but one of a group of ndependent contractors., *icarious lia ility for medical malpractice may e imposed, -oFeAer, under an apparent, or ostensi le, a"ency t-eory, Ior, as it is sometimes called, a"ency y estoppel or y -oldin" out.I ,Essent al to the creat on of apparent author ty are 9ords or conduct of the pr nc pal, commun cated to a th rd party, that g ve r se to the appearance and bel ef that the agent possesses author ty to act on behalf of the pr nc pal., Also, the th rd party must reasonably rely upon the appearance of author ty created by the pr nc pal. 7 nally, the th rd party must accept the serv ces of the agent n rel ance upon the perce ved relat onsh p bet9een the agent and the pr nc pal. /emphas s suppl ed and nternal c tat ons om tted0
80

$n 2il#ert v. Sycamore Municipal 0ospital, supra note 4>, c ted n For' v. Rush< $res#yterian<St. %u'e/s Medical .enter /222 $ll.2d 142, 684 N.E.2d ><8 :200>;0, the $ll no s &upreme 'ourt made a s m lar observat on, thus? 1 1 1 the language employed n the hosp tal)s treatment consent form could have led pla nt ff to reasonably bel eve that he 9ould be treated by phys c ans and employees of the hosp tal. (e concluded that, upon the record before us, the pla nt ff adduced suff c ent ev dence to create a genu ne ssue of mater al fact 9 th respect to the rel ance element of the pla nt ffs apparent agency cla m aga nst the hosp tal.
81

E1h. ,A@1,, 7older of E1h b ts. E1h. ,A@20,, 7older of E1h b ts. %&N, 12 7ebruary 1552, p. >5 /Dr. 7ranFl n Atenc o0. Diggs v. 3ovant 0ealth, :nc., supra note 41. %&N, 2> July 1564, pp. 12@1< /"ogel o Nogales0. $d. at <2.

82

8<

84

88

8>

82

&upra note 41, c t ng Ra#on v. Ro&an Memorial 0ospital, :nc. , 2>5 N.'.1, 182 &.E.2d 468 /15>20.
86

Art cle 1122 of the ' v l 'ode prov des?

,"espons b l ty ar s ng from negl gence n the performance of every F nd of obl gat on s also demandable, but such l ab l ty may be regulated by the courts, accord ng to the c rcumstances.,
85

Rollo, p. 286. 'A rollo, pp. 26@25.

>0

>1

"ecords, p. 2>. $d. at 85. 'A rollo, p. 65. $d. at 50. %&N, 11 November 1551, pp. 5@12. $d. at 14. 40< 7.2d <>> /15>60.

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>6

$eople v. =campo, #.". No. 1212<1, 11 August 200>, c t ng $eople v. 7orellos, 446 +h l. 262, <01 /200<0. &ee also $eople v. Du#an, #.". No. 141212, 2> &eptember 200<, 412 &'"A 1<1 and $eople v. De 4era, <21 +h l. 8>< /15550. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 11=412 /cto er 4, 3..4

%E#ES()NA (. NAG&)A(, pet t oner, vs. %/&$( /: A++EA#S and A&$/$A E&EA@/, respondents. DE'$&$DN ()NGA, J.: Eefore us s a +et t on for "ev e9 on .ertiorari under "ule 48, assa l ng the dec s on of the & 1teenth D v s on of the respondent 'ourt of Appeals promulgated on 21 December 15541, 9h ch aff rmed n toto the dec s on handed do9n by the "eg onal %r al 'ourt /"%'0 of +asay ' ty. 2 %he case arose 9hen on 11 August 1561, pr vate respondent Aurora UueaQo /UueaQo0 f led a compla nt before the +asay ' ty "%' for cancellat on of a "eal Estate Mortgage she had entered nto 9 th pet t oner 'elest na Nagu at /Nagu at0. %he "%' rendered a dec s on, declar ng the =uest oned "eal Estate Mortgage vo d, 9h ch Nagu at appealed to the 'ourt of Appeals. After the 'ourt of Appeals upheld the "%' dec s on, Nagu at nst tuted the present pet t on.+Vvvphi+.nWt %he operat ve facts follo9? UueaQo appl ed 9 th Nagu at for a loan n the amount of %9o Bundred %housand +esos /+200,000.000, 9h ch Nagu at granted. Dn 11 August 1560, Nagu at ndorsed to UueaQo Assoc ated EanF 'hecF No. 050550 /dated 11 August 15600 for the amount of N nety 7 ve %housand +esos /+58,000.000, 9h ch 9as earl er

ssued to Nagu at by the 'orporate "esources 7 nanc ng 'orporat on. &he also ssued her o9n 7 lmanbanF 'hecF No. 0>8<14, to the order of UueaQo, also dated 11 August 1560 and for the amount of N nety 7 ve %housand +esos /+58,000.000. %he proceeds of these checFs 9ere to const tute the loan granted by Nagu at to UueaQo.< %o secure the loan, UueaQo e1ecuted a Deed of "eal Estate Mortgage dated 11 August 1560 n favor of Nagu at, and surrendered to the latter the o9nerJs dupl cates of the t tles cover ng the mortgaged propert es. 4 Dn the same day, the mortgage deed 9as notar Aed, and UueaQo ssued to Nagu at a prom ssory note for the amount of %(D B3ND"ED %BD3&AND +E&D& /+200,000.000, 9 th nterest at 12R per annum, payable on 11 &eptember 1560. 8UueaQo also ssued a &ecur ty EanF and %rust 'ompany checF, postdated 11 &eptember 1560, for the amount of %(D B3ND"ED %BD3&AND +E&D& /+200,000.000 and payable to the order of Nagu at. 3pon presentment on ts matur ty date, the &ecur ty EanF checF 9as d shonored for nsuff c ency of funds. Dn the follo9 ng day, 12 &eptember 1560, UueaQo re=uested &ecur ty EanF to stop payment of her postdated checF, but the banF re-ected the re=uest pursuant to ts pol cy not to honor such re=uests f the checF s dra9n aga nst nsuff c ent funds. > Dn 1> Dctober 1560, UueaQo rece ved a letter from Nagu atJs la9yer, demand ng settlement of the loan. &hortly thereafter, UueaQo and one "uby "uebenfeldt /"uebenfeldt0 met 9 th Nagu at. At the meet ng, UueaQo told Nagu at that she d d not rece ve the proceeds of the loan, add ng that the checFs 9ere reta ned by "uebenfeldt, 9ho purportedly 9as Nagu atJs agent. 2 Nagu at appl ed for the e1tra-ud c al foreclosure of the mortgage 9 th the &her ff of " Aal +rov nce, 9ho then scheduled the foreclosure sale on 14 August 1561. %hree days before the scheduled sale, UueaQo f led the case before the +asay ' ty "%',6 seeF ng the annulment of the mortgage deed. %he tr al court eventually stopped the auct on sale.5 Dn 6 March 1551, the "%' rendered -udgment, declar ng the Deed of "eal Estate Mortgage null and vo d, and order ng Nagu at to return to UueaQo the o9nerJs dupl cates of her t tles to the mortgaged lots. 10 Nagu at appealed the dec s on before the 'ourt of Appeals, maF ng no less than eleven ass gnments of error. %he 'ourt of Appeals promulgated the dec s on no9 assa led before us that aff rmed n toto the "%' dec s on. Bence, the present pet t on. Nagu at =uest ons the f nd ngs of facts made by the 'ourt of Appeals, espec ally on the ssue of 9hether UueaQo had actually rece ved the loan proceeds 9h ch 9ere supposed to be covered by the t9o checFs Nagu at had ssued or ndorsed. Nagu at cla ms that be ng a notar al nstrument or publ c document, the mortgage deed en-oys the presumpt on that the rec tals there n are true. Nagu at also =uest ons the adm ss b l ty of var ous representat ons and pronouncements of "uebenfeldt, nvoF ng the rule on the non@b nd ng effect of the adm ss ons of th rd persons.11

%he resolut on of the ssues presented before th s 'ourt by Nagu at nvolves the determ nat on of facts, a funct on 9h ch th s 'ourt does not e1erc se n an appeal by certiorari. 3nder "ule 48 9h ch governs appeal by cert orar , only =uest ons of la9 may be ra sed12 as the &upreme 'ourt s not a tr er of facts. 1< %he resolut on of factual ssues s the funct on of lo9er courts, 9hose f nd ngs on these matters are rece ved 9 th respect and are n fact generally b nd ng on the &upreme 'ourt.14 A =uest on of la9 9h ch the 'ourt may pass upon must not nvolve an e1am nat on of the probat ve value of the ev dence presented by the l t gants.18 %here s a =uest on of la9 n a g ven case 9hen the doubt or d fference ar ses as to 9hat the la9 s on a certa n state of factsI there s a =uest on of fact 9hen the doubt or d fference ar ses as to the truth or the falsehood of alleged facts.1> &urely, there are establ shed e1cept ons to the rule on the conclus veness of the f nd ngs of facts of the lo9er courts. 12 Eut Nagu atJs case does not fall under any of the e1cept ons. $n any event, both the dec s ons of the appellate and tr al courts are supported by the ev dence on record and the appl cable la9s. Aga nst the common f nd ng of the courts belo9, Nagu at v gorously ns sts that UueaQo rece ved the loan proceeds. 'ap tal A ng on the status of the mortgage deed as a publ c document, she c tes the rule that a publ c document en-oys the presumpt on of val d ty and truthfulness of ts contents. %he 'ourt of Appeals, ho9ever, s correct n rul ng that the presumpt on of truthfulness of the rec tals n a publ c document 9as defeated by the clear and conv nc ng ev dence n th s case that po nted to the absence of cons derat on. 16 %h s 'ourt has held that the presumpt on of truthfulness engendered by notar Aed documents s rebuttable, y eld ng as t does to clear and conv nc ng ev dence to the contrary, as n th s case.15 Dn the other hand, absolutely no ev dence 9as subm tted by Nagu at that the checFs she ssued or endorsed 9ere actually encashed or depos ted. %he mere ssuance of the checFs d d not result n the perfect on of the contract of loan. 7or the ' v l 'ode prov des that the del very of b lls of e1change and mercant le documents such as checFs shall produce the effect of payment only 9hen they have been cashed.20 $t s only after the checFs have produced the effect of payment that the contract of loan may be deemed perfected. Art. 15<4 of the ' v l 'ode prov des? ,An accepted prom se to del ver someth ng by 9ay of commodatum or s mple loan s b nd ng upon the part es, but the commodatum or s mple loan tself shall not be perfected unt l the del very of the ob-ect of the contract., A loan contract s a real contract, not consensual, and, as such, s perfected only upon the del very of the ob-ect of the contract. 21 $n th s case, the ob-ects of the contract are the loan proceeds 9h ch UueaQo 9ould en-oy only upon the encashment of the checFs s gned or ndorsed by Nagu at. $f ndeed the checFs 9ere encashed or depos ted, Nagu at 9ould have certa nly presented the correspond ng documentary ev dence, such as the returned checFs and the

pert nent banF records. & nce Nagu at presented no such proof, t follo9s that the checFs 9ere not encashed or cred ted to UueaQoJs account. +a&phi+.nWt Nagu at =uest ons the adm ss b l ty of the var ous 9r tten representat ons made by "uebenfeldt on the ground that they could not b nd her follo9 ng the res nter al a acta alter nocere non debet rule. %he 'ourt of Appeals re-ected the argument, hold ng that s nce "uebenfeldt 9as an author Aed representat ve or agent of Nagu at the s tuat on falls under a recogn Aed e1cept on to the rule.22 &t ll, Nagu at ns sts that "uebenfeldt 9as not her agent. &uff ce to say, ho9ever, the e1 stence of an agency relat onsh p bet9een Nagu at and "uebenfeldt s supported by ample ev dence. As correctly po nted out by the 'ourt of Appeals, "uebenfeldt 9as not a stranger or an unauthor Aed person. Nagu at nstructed "uebenfeldt to 9 thhold from UueaQo the checFs she ssued or ndorsed to UueaQo, pend ng del very by the latter of add t onal collateral. "uebenfeldt served as agent of Nagu at on the loan appl cat on of UueaQoJs fr end, Mar lou 7arralese, and t 9as n connect on 9 th that transact on that UueaQo came to Fno9 Nagu at.2< $t 9as also "uebenfeldt 9ho accompan ed UueaQo n her meet ng 9 th Nagu at and on that occas on, on her o9n and 9 thout UueaQo asF ng for t, "eubenfeldt actually dre9 a checF for the sum of+220,000.00 payable to Nagu at, to cover for UueaQoJs alleged l ab l ty to Nagu at under the loan agreement.24 %he 'ourt of Appeals recogn Aed the e1 stence of an ,agency by estoppel 28 c t ng Art cle 162< of the ' v l 'ode.2>Apparently, t cons dered that at the very least, as a conse=uence of the nteract on bet9een Nagu at and "uebenfeldt, UueaQo got the mpress on that "uebenfeldt 9as the agent of Nagu at, but Nagu at d d noth ng to correct UueaQoJs mpress on. $n that s tuat on, the rule s clear. Dne 9ho clothes another 9 th apparent author ty as h s agent, and holds h m out to the publ c as such, cannot be perm tted to deny the author ty of such person to act as h s agent, to the pre-ud ce of nnocent th rd part es deal ng 9 th such person n good fa th, and n the honest bel ef that he s 9hat he appears to be.22 %he 'ourt of Appeals s correct n nvoF ng the sa d rule on agency by estoppel.+a&phi+.nWt More fundamentally, 9hatever 9as the true relat onsh p bet9een Nagu at and "uebenfeldt s rrelevant n the face of the fact that the checFs ssued or ndorsed to UueaQo 9ere never encashed or depos ted to her account of Nagu at. All told, 9e f nd no compell ng reason to d sturb the f nd ng of the courts a =uo that the lender d d not rem t and the borro9er d d not rece ve the proceeds of the loan. %hat be ng the case, t follo9s that the mortgage 9h ch s supposed to secure the loan s null and vo d. %he cons derat on of the mortgage contract s the same as that of the pr nc pal contract from 9h ch t rece ves l fe, and 9 thout 9h ch t cannot e1 st as an ndependent contract. 26 A mortgage contract be ng a mere accessory contract, ts val d ty 9ould depend on the val d ty of the loan secured by t.25

(BE"E7D"E, the pet t on s den ed and the assa led dec s on s aff rmed. 'osts aga nst pet t oner. &D D"DE"ED. Eellos llo, /'ha rman0, Uu sumb ng, Austr a@Mart neA, and 'alle-o, &r., JJ., concur.

:ootnotes
1

Just ce 'orona $bay@&omera 9rote the ponenc a, 9 th Just ces Asaal &. $snan and 'el a ! pana@"eyes, concurr ng.
2

+romulgated on 6 March 1551 by Judge Manuel +. Dumatol.

<

Accord ng to Nagu at, she further del vered to UueaQo the amount of %en %housand +esos /+10,000.000, thus round ng off the amount she allegedly gave to UueaQo to %9o Bundred %housand +esos /&ee +et t on for .ertiorari, p. <0. UueaQo, ho9ever, cla ms that the amount of %en %housand /+10,000.000 9as deducted as the st pulated 8R nterest. "ecords, p. <42.
4

%ransfer 'ert f cates of % tle Nos. 26><1 and 26><2, ssued by the "eg ster of Deeds for D str ct $C /+asay ' ty0 of Metro Man la, 9 th a total area of & 1 Bundred %h rty Dne /><10 &=uare Meters. "ollo, p. 52.
8

"ollo, p. 56. Accord ng to UueaQo, the true agreement bet9een the part es 9as an nterest rate of 8R per month.
>

$d., p. 55. UueaQo alleged that she made the ,stop payment, re=uest because she 9as 9 thdra9 ng her loan appl cat on as she fa led to rece ve the loan proceeds 9h ch 9ere supposed to be covered by Nagu atJs checFs that 9ere turned not to her but to "uby "uebenfeldt, 9ho purportedly 9as an agent of Nagu at. UueaQo cla med further that Nagu at demanded add t onal collaterals and nstructed "uebenfeldt to surrender the checFs to UueaQo only upon rece pt of the add t onal secur ty.
2

$d., p. 55. UueaQo cla med further that Nagu at demanded add t onal collaterals and nstructed "uebenfeldt to surrender the checFs to UueaQo only upon rece pt of the add t onal secur ty.
6

DocFeted as ' v l 'ase No. 5<<0@+. "ollo, p. 8. $d., p. <2.

10

11

&ec. 26, "ule 1<0. &ee "ule 1<0, &ec. 26. ,&ect on 26. Adm ss on by th rd party. O %he r ghts of a party cannot be pre-ud ced by an act, declarat on, or om ss on of another, e1cept as here nafter prov ded.,

12

&ec. 1, "ule 48 states? ,A party des r ng to appeal by cert orar from a -udgment or f nal order or resolut on of the 'ourt of Appeals, the &and ganbayan, the "eg onal %r al 'ourt or other courts 9henever author Aed by la9, may f le 9 th the &upreme 'ourt a ver f ed pet t on for rev e9 on certiorari. %he pet t on shall ra se only =uest ons of la9 9h ch must be d st nctly set forth., &ee also Metro %rans t Drgan Aat on $nc. v. 'A, #.". No. 1421<<, 15 November 2002.
1<

(@"ed 'onstruct on v. 'A, #.". No. 122>46, 12 August 2000. Engreso v. De !a 'ruA, #.". No. 146222, 5 Apr l 200<. (estern &h pyard &erv ces, $nc. v. 'A, #.". No. 110<40, 26 May 2001. Eagunu v. + edad, #.". No. 140528, 6 December 2000.

14

18

1>

12

E1cept onal c rcumstances that 9ould compel the &upreme 'ourt to rev e9 the f nd ngs of fact of the lo9er courts are? /10 9hen the conclus on s a f nd ng grounded ent rely on speculat ons, surm ses or con-ecturesI /20 9hen the nference made s man festly absurd, m staFen or mposs bleI /<0 9hen there s grave abuse of d scret on n the apprec at on of factsI /40 9hen the -udgment s prem sed on a m sapprehens on of factsI /80 9hen the f nd ngs of fact are confl ct ngI />0 9hen the 'ourt of Appeals n maF ng ts f nd ngs, 9ent beyond the ssues of the case and the same s contrary to the adm ss ons of both appellant and appelleeI /20 9hen the 'ourt of Appeals man festly overlooFed certa n relevant facts not d sputed by the part es and 9h ch, f properly cons dered, 9ould -ust fy a d fferent conclus onI and /60 9hen the f nd ngs of fact of the 'ourt of Appeals are contrary to those of the tr al court, or are mere conclus ons 9 thout c tat on of spec f c ev dence, or 9here the facts set forth by the pet t oner are not d sputed by the respondent, or 9here the f nd ngs of fact of the 'ourt of Appeals are prem sed on absence of ev dence but are contrad cted by the ev dence of record. &ee &acay v. &and ganbayan, 22> +h l. 45>, 810 /156>0.
16

"ollo, p. 4<.

15

&ee #erales v. 'ourt of Appeals, #.". No. 68505, 216 &'"A ><6, >46, 5 7ebruary 155<, and Agdeppa vs. $be, #.". No. 5>220, 220 &'"A 864, 854, <0 March 155<.
20

Art. 1245, Ne9 ' v l 'ode. ,. . . %he del very of prom ssory notes payable to order, or b lls of e1change or other mercant le documents shall produce the effect of payment only 9hen they have been cashed, or 9hen through the fault of the cred tor they have been mpa red.,
21

E+$ $nvestment 'orporat on v. 'ourt of Appeals, #.". No. 1<<><2, <22 &'"A 112, 124, 18 7ebruary 2002. %he 'ourt there n clar f ed the prev ous rul ng n Eonnev e v. 'ourt of Appeals, 210 +h l. 104, 106 /156<0 9h ch apparently suggested that a contract of loan 9as a consensual contract, by not ng that the contract n Eonnev e fell under the f rst clause of Art. 15<4 of the ' v l 'ode, t be ng an accepted prom se to del ver someth ng by 9ay of s mple loan.

22

&ee &ec. 25, "ule 1<0. ,&ect on 25. Adm ss on by co@partner or agent. K %he act or declarat on of a partner or agent of the party 9 th n the scope of h s author ty and dur ng the e1 stence of the partnersh p or agency, may be g ven n ev dence aga nst such party after the partnersh p or agency s sho9n by ev dence other than such act or declarat on. %he same rule appl es to the act or declarat on of a -o nt o9ner, -o nt debtor or other person -o ntly nterested 9 th the party.,
2<

"ollo, p. 45.

24

&ecur ty EanF N %rust 'ompany 'hecF No. 012<55, dra9n by "uebenfeldt payable to Nagu at, and postdated to November 18, 1560. Nagu at accepted the checF, allegedly because she 9anted to be assured of repayment. Bo9ever, 9hen Nagu at depos ted th s ne9 checF on 18 November 1560, the same 9as d shonored for be ng dra9n aga nst a closed account. Dn account of the d shonor of "uebenfeldtJs checF, Nagu at f led a cr m nal compla nt for v olat on of E.+. Elg. 22 9 th the ' ty +rosecutorsJs Dff ce of 'aloocan. Bo9ever, the ' ty +rosecutor d sm ssed the sa d act on on the ground that "uebenfeldtJs l ab l ty 9as c v l and not cr m nal. &ee "ollo, p. 8 to >.
28

"ollo, p. 80.

2>

Art. 162<. ,$f a person spec f cally nforms another or states by publ c advert sement that he has g ven a po9er of attorney to a th rd person, the latter thereby becomes a duly author Aed agent, n the former case 9 th respect to the person 9ho rece ved the spec al nformat on, and n the latter case 9 th regard to any person.,
22

'u son v. 'ourt of Appeals, #.". No. 668<1, 2> Dctober 155<. 'h na EanF ng 'orporat on v. ! chauco, 4> +h l. 4>0 /152>0.

26

25

7 l p nas Marble 'orp. v. $ntermed ate Appellate 'ourt, 22> +h l. 105, 115 /156>0. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 1;.001 Au"ust 13, 3..;

W//!%5)#! 5/#!)NGS, )N%., pet t oner, vs. $/>AS E#E%($)% AN! %/NS($&%()/N %/'+AN8, )N%., respondent.

DE'$&$DN

%A##EJ/, S$., J., %h s s a pet t on for rev e9 on cert orar of the Dec s on 1 of the 'ourt of Appeals n 'A@#.". 'C No. 8>128 revers ng the Dec s on 2 of the "eg onal %r al 'ourt of MaFat , Eranch 82, 9h ch ruled n favor of the pet t oner. (-e Antecedents %he respondent "o1as Electr c and 'onstruct on 'ompany, $nc. /"E''$0, formerly the "o1as Electr c and 'onstruct on 'ompany, 9as the o9ner of t9o parcels of land, dent f ed as !ot No. 451@A@<@E@1 covered by %ransfer 'ert f cate of % tle /%'%0 No. 26068 and !ot No. 451@A@<@E@2 covered by %'% No. 2606>. A port on of !ot No. 451@A@<@E@1 9h ch abutted !ot No. 451@A@<@ E@2 9as a d rt road access ng to the &umulong B gh9ay, Ant polo, " Aal. At a spec al meet ng on May 12, 1551, the respondent)s Eoard of D rectors approved a resolut on author A ng the corporat on, through ts pres dent, "oberto E. "o1as, to sell !ot No. 451@A@<@E@2 covered by %'% No. 2606>, 9 th an area of 2,21< s=uare meters, at a pr ce and under such terms and cond t ons 9h ch he deemed most reasonable and advantageous to the corporat onI and to e1ecute, s gn and del ver the pert nent sales documents and rece ve the proceeds of the sale for and on behalf of the company. < +et t oner (oodch ld Bold ngs, $nc. /(B$0 9anted to buy !ot No. 451@A@<@E@2 covered by %'% No. 2606> on 9h ch t planned to construct ts 9arehouse bu ld ng, and a port on of the ad-o n ng lot, !ot No. 451@A@<@E@1, so that ts 48@ foot conta ner van 9ould be able to read ly enter or leave the property. $n a !etter to "o1as dated June 21, 1551, (B$ +res dent Jonathan H. Dy offered to buy !ot No. 451@A@<@E@2 under stated terms and cond t ons for +1,000 per s=uare meter or at the pr ce of +2,21<,000.4 Dne of the terms ncorporated n Dy)s offer 9as the follo9 ng prov s on? 8. %h s Dffer to +urchase s made on the representat on and 9arranty of the D(NE"M&E!!E", that he holds a good and reg strable t tle to the property, 9h ch shall be conveyed '!EA" and 7"EE of all l ens and encumbrances, and that the area of 2,21< s=uare meters of the sub-ect property already ncludes the area on 9h ch the r ght of 9ay traverses from the ma n lot /area0 to9ards the e1 t to the &umulong B gh9ay as sho9n n the locat on plan furn shed by the D9nerM&eller to the buyer. 7urthermore, n the event that the r ght of 9ay s nsuff c ent for the buyer)s purposes /e1ample? entry of a 48@foot conta ner0, the seller agrees to sell add t onal s=uare meter from h s current ad-acent property to allo9 the buyer to full access and full use of the property. 8 "o1as nd cated h s acceptance of the offer on page 2 of the deed. !ess than a month later or on July 1, 1551, "o1as, as +res dent of "E''$, as vendor, and Dy, as +res dent of (B$, as vendee, e1ecuted a contract to sell n 9h ch "E''$ bound

and obl ged tself to sell to Dy !ot No. 451@A@<@E@2 covered by %'% No. 2606> for +2,21<,000.> Dn &eptember 8, 1551, a Deed of Absolute &ale 2 n favor of (B$ 9as ssued, under 9h ch !ot No. 451@A@<@E@2 covered by %'% No. 2606> 9as sold for +8,000,000, rece pt of 9h ch 9as acFno9ledged by "o1as under the follo9 ng terms and cond t ons? %he Cendor agree /s c0, as t hereby agrees and b nds tself to g ve Cendee the benef c al use of and a r ght of 9ay from &umulong B gh9ay to the property here n conveyed cons sts of 28 s=uare meters 9 de to be used as the latter)s egress from and ngress to and an add t onal 28 s=uare meters n the corner of !ot No. 451@A@<@E@1, as turn ng andMor maneuver ng area for Cendee)s veh cles. %he Cendor agrees that n the event that the r ght of 9ay s nsuff c ent for the Cendee)s use /e1 entry of a 48@foot conta ner0 the Cendor agrees to sell add t onal s=uare meters from ts current ad-acent property to allo9 the Cendee full access and full use of the property. T %he Cendor hereby undertaFes and agrees, at ts account, to defend the t tle of the Cendee to the parcel of land and mprovements here n conveyed, aga nst all cla ms of any and all persons or ent t es, and that the Cendor hereby 9arrants the r ght of the Cendee to possess and o9n the sa d parcel of land and mprovements thereon and 9 ll defend the Cendee aga nst all present and future cla ms andMor act on n relat on thereto, -ud c al andMor adm n strat ve. $n part cular, the Cendor shall e-ect all e1 st ng s=uatters and occupants of the prem ses 9 th n t9o /20 9eeFs from the s gn ng hereof. $n case of fa lure on the part of the Cendor to e-ect all occupants and s=uatters 9 th n the t9o@9eeF per od or breach of any of the st pulat ons, covenants and terms and cond t ons here n prov ded and that of contract to sell dated 1 July 1551, the Cendee shall have the r ght to cancel the sale and demand re mbursement for all payments made to the Cendor 9 th nterest thereon at <>R per annum. 6 Dn &eptember 10, 1551, the ( mbeco Eu lder)s, $nc. /(E$0 subm tted ts =uotat on for +6,>45,000 to (B$ for the construct on of the 9arehouse bu ld ng on a port on of the property 9 th an area of 8,066 s=uare meters. 5 (E$ proposed to start the pro-ect on Dctober 1, 1551 and to turn over the bu ld ng to (B$ on 7ebruary 25, 1552.10 $n a !etter dated &eptember 1>, 1551, +onderosa !eather #oods 'ompany, $nc. conf rmed ts lease agreement 9 th (B$ of a 8,000@s=uare@meter port on of the 9arehouse yet to be constructed at the rental rate of +>8 per s=uare meter. +onderosa emphas Aed the need for the 9arehouse to be ready for occupancy before Apr l 1, 1552.11 (B$ accepted the offer. Bo9ever, (E$ fa led to commence the construct on of the 9arehouse n Dctober 1, 1551 as planned because of the presence of s=uatters n the property and suggested a renegot at on of the contract after the s=uatters shall have been ev cted. 12 &ubse=uently, the s=uatters 9ere ev cted from the property.

Dn March <1, 1552, (B$ and (E$ e1ecuted a !etter@'ontract for the construct on of the 9arehouse bu ld ng for +11,604,1>0. 1< %he contractor started construct on n Apr l 1552 even before the bu ld ng off c als of Ant polo ' ty ssued a bu ld ng perm t on May 26, 1552. After the 9arehouse 9as f n shed, (B$ ssued on March 21, 155< a cert f cate of occupancy by the bu ld ng off c al. Earl er, or on March 16, 155<, (B$, as lessor, and +onderosa, as lessee, e1ecuted a contract of lease over a port on of the property for a monthly rental of +<00,000 for a per od of three years from March 1, 155< up to 7ebruary 26, 155>. 14 $n the meant me, (B$ compla ned to "oberto "o1as that the veh cles of "E''$ 9ere parFed on a port on of the property over 9h ch (B$ had been granted a r ght of 9ay. "o1as prom sed to looF nto the matter. Dy and "o1as d scussed the need of the (B$ to buy a 800@s=uare@meter port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068 as prov ded for n the deed of absolute sale. Bo9ever, "o1as d ed soon thereafter. Dn Apr l 18, 1552, the (B$ 9rote the "E''$, re terat ng ts verbal re=uests to purchase a port on of the sa d lot as prov ded for n the deed of absolute sale, and compla ned about the latter)s fa lure to e-ect the s=uatters 9 th n the three@month per od agreed upon n the sa d deed. %he (B$ demanded that the "E''$ sell a port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068 for ts benef c al use 9 th n 22 hours from not ce thereof, other9 se the appropr ate act on 9ould be f led aga nst t. "E''$ re-ected the demand of (B$. (B$ re terated ts demand n a !etter dated May 25, 1552. %here 9as no response from "E''$. Dn June 12, 1552, the (B$ f led a compla nt aga nst the "E''$ 9 th the "eg onal %r al 'ourt of MaFat , for spec f c performance and damages, and alleged, nter al a, the follo9 ng n ts compla nt? 8. %he ,current ad-acent property, referred to n the afore=uoted paragraph of the Deed of Absolute &ale perta ns to the property covered by %ransfer 'ert f cate of % tle No. N@26068 of the "eg stry of Deeds of Ant polo, " Aal, reg stered n the name of here n defendant "o1as Electr c. >. Defendant "o1as Electr c n patent v olat on of the e1press and val d terms of the Deed of Absolute &ale un-ust f ably refused to del ver to (oodch ld Bold ngs the st pulated benef c al use and r ght of 9ay cons st ng of 28 s=uare meters and 88 s=uare meters to the pre-ud ce of the pla nt ff. 2. & m larly, n as much as the 28 s=uare meters and 88 s=uare meters alloted to (oodch ld Bold ngs for ts benef c al use s nade=uate as turn ng andMor maneuver ng area of ts 48@foot conta ner van, (oodch ld Bold ngs man fested ts ntent on pursuant to para. 8 of the Deed of &ale to purchase add t onal s=uare meters from "o1as Electr c to allo9 t full access and use of the purchased property, ho9ever, "o1as Electr c refused and fa led to mer t (oodch ld Bold ngs) re=uest contrary to defendant "o1as Electr c)s obl gat on under the Deed of Absolute &ale /Anne1 ,A,0.

6. Moreover, defendant, l Fe9 se, fa led to e-ect all e1 st ng s=uatters and occupants of the prem ses 9 th n the st pulated t me frame and as a conse=uence thereof, pla nt ff)s planned construct on has been cons derably delayed for seven /20 months due to the s=uatters 9ho cont nue to trespass and obstruct the sub-ect property, thereby (oodch ld Bold ngs ncurred substant al losses amount ng to +<,8>0,000.00 occas oned by the ncreased cost of construct on mater als and labor. 5. D9 ng further to "o1as Electr c)s del berate refusal to comply 9 th ts obl gat on under Anne1 ,A,, (oodch ld Bold ngs suffered unreal Aed ncome of +<00,000.00 a month or +2,100,000.00 supposed ncome from rentals of the sub-ect property for seven /20 months. 10. Dn Apr l 18, 1552, (oodch ld Bold ngs made a f nal demand to "o1as Electr c to comply 9 th ts obl gat ons and 9arrant es under the Deed of Absolute &ale but not9 thstand ng such demand, defendant "o1as Electr c refused and fa led and cont nue to refuse and fa l to heed pla nt ff)s demand for compl ance. 'opy of the demand letter dated Apr l 18, 1552 s hereto attached as Anne1 ,E, and made an ntegral part hereof. 11. 7 nally, on 25 May 1551, (oodch ld Bold ngs made a letter re=uest addressed to "o1as Electr c to part cularly annotate on %ransfer 'ert f cate of % tle No. N@26068 the agreement under Anne1 ,A, 9 th respect to the benef c al use and r ght of 9ay, ho9ever, "o1as Electr c un-ust f ably gnored and d sregarded the same. 'opy of the letter re=uest dated 25 May 1552 s hereto attached as Anne1 ,', and made an ntegral part hereof. 12. Ey reason of "o1as Electr c)s cont nuous refusal and fa lure to comply 9 th (oodch ld Bold ngs) val d demand for compl ance under Anne1 ,A,, the latter 9as constra ned to l t gate, thereby ncurr ng damages as and by 9ay of attorney)s fees n the amount of +100,000.00 plus costs of su t and e1penses of l t gat on.18 %he (B$ prayed that, after due proceed ngs, -udgment be rendered n ts favor, thus? (BE"E7D"E, t s respectfully prayed that -udgment be rendered n favor of (oodch ld Bold ngs and order ng "o1as Electr c the follo9 ng? a0 to del ver to (oodch ld Bold ngs the benef c al use of the st pulated 28 s=uare meters and 88 s=uare metersI b0 to sell to (oodch ld Bold ngs add t onal 28 and 100 s=uare meters to allo9 t full access and use of the purchased property pursuant to para. 8 of the Deed of Absolute &aleI

c0 to cause annotat on on %ransfer 'ert f cate of % tle No. N@26068 the benef c al use and r ght of 9ay granted to (oodch ld Bold ngs under the Deed of Absolute &aleI d0 to pay (oodch ld Bold ngs the amount of +8,>>0,000.00, represent ng actual damages and unreal Aed ncomeI e0 to pay attorney)s fees n the amount of +100,000.00I and f0 to pay the costs of su t. Dther rel efs -ust and e=u table are prayed for. 1> $n ts ans9er to the compla nt, the "E''$ alleged that t never author Aed ts former pres dent, "oberto "o1as, to grant the benef c al use of any port on of !ot No. 451@A@<@E@1, nor agreed to sell any port on thereof or create a l en or burden thereon. $t alleged that, under the "esolut on approved on May 12, 1551, t merely author Aed "o1as to sell !ot No. 451@A@<@E@2 covered by %'% No. 2606>. As such, the grant of a r ght of 9ay and the agreement to sell a port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068 n the sa d deed are ultra vires. %he "E''$ further alleged that the prov s on there n that t 9ould sell a port on of !ot No. 451@A@<@E@1 to the (B$ lacFed the essent al elements of a b nd ng contract. 12 $n ts amended ans9er to the compla nt, the "E''$ alleged that the delay n the construct on of ts 9arehouse bu ld ng 9as due to the fa lure of the (B$)s contractor to secure a bu ld ng perm t thereon. 16 Dur ng the tr al, Dy test f ed that he told "o1as that the pet t oner 9as buy ng a port on of !ot No. 451@A@<@E@1 cons st ng of an area of 800 s=uare meters, for the pr ce of +1,000 per s=uare meter. Dn November 11, 155>, the tr al court rendered -udgment n favor of the (B$, the decretal port on of 9h ch reads? (BE"E7D"E, -udgment s hereby rendered d rect ng defendant? /10 %o allo9 pla nt ff the benef c al use of the e1 st ng r ght of 9ay plus the st pulated 28 s=. m. and 88 s=. m.I /20 %o sell to pla nt ff an add t onal area of 800 s=. m. pr ced at +1,000 per s=. m. to allo9 sa d pla nt ff full access and use of the purchased property pursuant to +ar. 8 of the r Deed of Absolute &aleI /<0 %o cause annotat on on %'% No. N@26068 the benef c al use and r ght of 9ay granted by the r Deed of Absolute &aleI /40 %o pay pla nt ff the amount of +8,8>6,000 represent ng actual damages and pla nt ff)s unreal Aed ncomeI /80 %o pay pla nt ff +100,000 represent ng attorney)s feesI and %o pay the costs of su t.

&D D"DE"ED.15 %he tr al court ruled that the "E''$ 9as estopped from d so9n ng the apparent author ty of "o1as under the May 12, 1551 "esolut on of ts Eoard of D rectors. %he court reasoned that to do so 9ould pre-ud ce the (B$ 9h ch transacted 9 th "o1as n good fa th, bel ev ng that he had the author ty to b nd the (B$ relat ng to the easement of r ght of 9ay, as 9ell as the r ght to purchase a port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068. %he "E''$ appealed the dec s on to the 'A, 9h ch rendered a dec s on on November 5, 1555 revers ng that of the tr al court, and order ng the d sm ssal of the compla nt. %he 'A ruled that, under the resolut on of the Eoard of D rectors of the "E''$, "o1as 9as merely author Aed to sell !ot No. 451@A@<@E@2 covered by %'% No. 2606>, but not to grant r ght of 9ay n favor of the (B$ over a port on of !ot No. 451@A@<@E@1, or to grant an opt on to the pet t oner to buy a port on thereof. %he appellate court also ruled that the grant of a r ght of 9ay and an opt on to the respondent 9ere so lops ded n favor of the respondent because the latter 9as author Aed to f 1 the locat on as 9ell as the pr ce of the port on of ts property to be sold to the respondent. Bence, such prov s ons conta ned n the deed of absolute sale 9ere not b nd ng on the "E''$. %he appellate court ruled that the delay n the construct on of (B$)s 9arehouse 9as due to ts fault. %he +resent +et t on %he pet t oner no9 comes to th s 'ourt assert ng that? $. %BE 'D3"% D7 A++EA!& E""ED $N BD!D$N# %BA% %BE DEED D7 AE&D!3%E &A!E /EGB. ,',0 $& 3!%"A C$"E&. $$. %BE 'D3"% D7 A++EA!& #"ACE!H E""ED $N "ECE"&$N# %BE "3!$N# D7 %BE 'D3"% A U3D A!!D($N# %BE +!A$N%$77@A++E!!EE %BE EENE7$'$A! 3&E D7 %BE EG$&%$N# "$#B% D7 (AH +!3& %BE &%$+3!A%ED 28 &U3A"E ME%E"& AND 88 &U3A"E ME%E"& EE'A3&E %BE&E A"E CA!$D &%$+3!A%$DN& A#"EED EH ED%B +A"%$E& %D %BE DEED D7 AE&D!3%E &A!E /EGB. ,',0. $$$. %BE"E $& ND 7A'%3A! +"DD7 D" EC$DEN'E 7D" %BE 'D3"% D7 A++EA!& %D "3!E %BA% %BE &%$+3!A%$DN& D7 %BE DEED D7 AE&D!3%E &A!E /EGB. ,',0 (E"E D$&ADCAN%A#ED3& %D %BE A++E!!EE, ND" (A& A++E!!EE DE+"$CED D7 $%& +"D+E"%H ($%BD3% D3E +"D'E&&. $C. $N 7A'%, $% (A& (DDD'B$!D (BD (A& DE+"$CED D7 +"D+E"%H ($%BD3% D3E +"D'E&& EH %BE A&&A$!ED DE'$&$DN.

C. %BE DE!AH $N %BE 'DN&%"3'%$DN (A& D3E %D %BE 7A$!3"E D7 %BE A++E!!AN% %D EC$'% %BE &U3A%%E"& DN %BE !AND A& A#"EED $N %BE DEED D7 AE&D!3%E &A!E /EGB. ,',0. C$. %BE 'D3"% D7 A++EA!& #"ACE!H E""ED $N "ECE"&$N# %BE "3!$N# D7 %BE 'D3"% A U3D D$"E'%$N# %BE DE7ENDAN% %D +AH %BE +!A$N%$77 %BE AMD3N% D7 +8,8>6,000.00 "E+"E&EN%$N# A'%3A! DAMA#E& AND +!A$N%$77)& 3N"EA!$LED $N'DME A& (E!! A& A%%D"NEH)& 7EE&.20 %he threshold ssues for resolut on are the follo9 ng? /a0 9hether the respondent s bound by the prov s ons n the deed of absolute sale grant ng to the pet t oner benef c al use and a r ght of 9ay over a port on of !ot No. 451@A@<@E@1 access ng to the &umulong B gh9ay and grant ng the opt on to the pet t oner to buy a port on thereof, and, f so, 9hether such agreement s enforceable aga nst the respondentI /b0 9hether the respondent fa led to e-ect the s=uatters on ts property 9 th n t9o 9eeFs from the e1ecut on of the deed of absolute saleI and, /c0 9hether the respondent s l able to the pet t oner for damages. Dn the f rst ssue, the pet t oner avers that, under ts "esolut on of May 12, 1551, the respondent author Aed "o1as, then ts pres dent, to grant a r ght of 9ay over a port on of !ot No. 451@A@<@E@1 n favor of the pet t oner, and an opt on for the respondent to buy a port on of the sa d property. %he pet t oner contends that 9hen the respondent sold !ot No. 451@A@<@E@2 covered by %'% No. 2606>, t /respondent0 9as 9ell a9are of ts obl gat on to prov de the pet t oner 9 th a means of ngress to or egress from the property to the &umulong B gh9ay, s nce the latter had no ade=uate outlet to the publ c h gh9ay. %he pet t oner asserts that t agreed to buy the property covered by %'% No. 26068 because of the grant by the respondent of a r ght of 9ay and an opt on n ts favor to buy a port on of the property covered by %'% No. 26068. $t contends that the respondent never ob-ected to "o1as) acceptance of ts offer to purchase the property and the terms and cond t ons there nI the respondent even allo9ed "o1as to e1ecute the deed of absolute sale n ts behalf. %he pet t oner asserts that the respondent even rece ved the purchase pr ce of the property 9 thout any ob-ect on to the terms and cond t ons of the sa d deed of sale. %he pet t oner cla ms that t acted n good fa th, and contends that after hav ng been benef ted by the sa d sale, the respondent s estopped from assa l ng ts terms and cond t ons. %he pet t oner notes that the respondent)s Eoard of D rectors never approved any resolut on re-ect ng the deed of absolute sale e1ecuted by "o1as for and n ts behalf. As such, the respondent s obl ged to sell a port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068 9 th an area of 800 s=uare meters at the pr ce of +1,000 per s=uare meter, based on ts ev dence and Art cles >45 and >81 of the Ne9 ' v l 'ode.

7or ts part, the respondent pos ts that "o1as 9as not so author Aed under the May 12, 1551 "esolut on of ts Eoard of D rectors to mpose a burden or to grant a r ght of 9ay n favor of the pet t oner on !ot No. 451@A@<@E@1, much less convey a port on thereof to the pet t oner. Bence, the respondent 9as not bound by such prov s ons conta ned n the deed of absolute sale. Ees des, the respondent contends, the pet t oner cannot enforce ts r ght to buy a port on of the sa d property s nce there 9as no agreement n the deed of absolute sale on the pr ce thereof as 9ell as the spec f c port on and area to be purchased by the pet t oner. (e agree 9 th the respondent. $n San 9uan Structural and Steel 8a#ricators, :nc. v. .ourt of Appeals ,21 9e held that? A corporat on s a -ur d cal person separate and d st nct from ts stocFholders or members. Accord ngly, the property of the corporat on s not the property of ts stocFholders or members and may not be sold by the stocFholders or members 9 thout e1press author Aat on from the corporat on)s board of d rectors. &ect on 2< of E+ >6, other9 se Fno9n as the 'orporat on 'ode of the +h l pp nes, prov des? ,&E'. 2<. 7he !oard of Directors or 7rustees. K 3nless other9 se prov ded n th s 'ode, the corporate po9ers of all corporat ons formed under th s 'ode shall be e1erc sed, all bus ness conducted and all property of such corporat ons controlled and held by the board of d rectors or trustees to be elected from among the holders of stocFs, or 9here there s no stocF, from among the members of the corporat on, 9ho shall hold off ce for one /10 year and unt l the r successors are elected and =ual f ed., $ndub tably, a corporat on may act only through ts board of d rectors or, 9hen author Aed e ther by ts by@la9s or by ts board resolut on, through ts off cers or agents n the normal course of bus ness. %he general pr nc ples of agency govern the relat on bet9een the corporat on and ts off cers or agents, sub-ect to the art cles of ncorporat on, by@la9s, or relevant prov s ons of la9. T 22 #enerally, the acts of the corporate off cers 9 th n the scope of the r author ty are b nd ng on the corporat on. Bo9ever, under Art cle 1510 of the Ne9 ' v l 'ode, acts done by such off cers beyond the scope of the r author ty cannot b nd the corporat on unless t has rat f ed such acts e1pressly or tac tly, or s estopped from deny ng them? Art. 1510. %he pr nc pal must comply 9 th all the obl gat ons 9h ch the agent may have contracted 9 th n the scope of h s author ty. As for any obl gat on 9here n the agent has e1ceeded h s po9er, the pr nc pal s not bound e1cept 9hen he rat f es t e1pressly or tac tly. %hus, contracts entered nto by corporate off cers beyond the scope of author ty are unenforceable aga nst the corporat on unless rat f ed by the corporat on. 2<

$n !A 8inance .orporation v. .ourt of Appeals,24 9e also ruled that persons deal ng 9 th an assumed agency, 9hether the assumed agency be a general or spec al one, are bound at the r per l, f they 9ould hold the pr nc pal l able, to ascerta n not only the fact of agency but also the nature and e1tent of author ty, and n case e ther s controverted, the burden of proof s upon them to establ sh t. $n th s case, the respondent den ed author A ng ts then pres dent "oberto E. "o1as to sell a port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068, and to create a l en or burden thereon. %he pet t oner 9as thus burdened to prove that the respondent so author Aed "o1as to sell the same and to create a l en thereon. 'entral to the ssue at hand s the May 12, 1551 "esolut on of the Eoard of D rectors of the respondent, 9h ch s 9orded as follo9s? "E&D!CED, as t s hereby resolved, that the corporat on, thru the +res dent, sell to any nterested buyer, ts 2,21<@s=.@meter property at the &umulong B gh9ay, Ant polo, " Aal, covered by %ransfer 'ert f cate of % tle No. N@2606>, at a pr ce and on terms and cond t ons 9h ch he deems most reasonable and advantageous to the corporat onI 73"%BE" "E&D!CED, that Mr. "DEE"%D E. "DGA&, +res dent of the corporat on, be, as he s hereby author Aed to e1ecute, s gn and del ver the pert nent sales documents and rece ve the proceeds of sale for and on behalf of the company. 28 Ev dently, "o1as 9as not spec f cally author Aed under the sa d resolut on to grant a r ght of 9ay n favor of the pet t oner on a port on of !ot No. 451@A@<@E@1 or to agree to sell to the pet t oner a port on thereof. %he author ty of "o1as, under the resolut on, to sell !ot No. 451@A@<@E@2 covered by %'% No. 2606> d d not nclude the author ty to sell a port on of the ad-acent lot, !ot No. 451@A@<@E@1, or to create or convey real r ghts thereon. Ne ther may such author ty be mpl ed from the author ty granted to "o1as to sell !ot No. 451@A@<@E@2 to the pet t oner ,on such terms and cond t ons 9h ch he deems most reasonable and advantageous., 3nder paragraph 12, Art cle 1626 of the Ne9 ' v l 'ode, a spec al po9er of attorney s re=u red to convey real r ghts over mmovable property.2> Art cle 1<86 of the Ne9 ' v l 'ode re=u res that contracts 9h ch have for the r ob-ect the creat on of real r ghts over mmovable property must appear n a publ c document.22 %he pet t oner cannot fe gn gnorance of the need for "o1as to have been spec f cally author Aed n 9r t ng by the Eoard of D rectors to be able to val dly grant a r ght of 9ay and agree to sell a port on of !ot No. 451@ A@<@E@1. %he rule s that f the act of the agent s one 9h ch re=u res author ty n 9r t ng, those deal ng 9 th h m are charged 9 th not ce of that fact. 26 +o9ers of attorney are generally construed str ctly and courts 9 ll not nfer or presume broad po9ers from deeds 9h ch do not suff c ently nclude property or sub-ect under 9h ch the agent s to deal. 25 %he general rule s that the po9er of attorney must be pursued 9 th n legal str ctures, and the agent can ne ther go beyond tI nor bes de t. %he act done must be legally dent cal 9 th that

author Aed to be done.<0 $n sum, then, the consent of the respondent to the assa led prov s ons n the deed of absolute sale 9as not obta nedI hence, the assa led prov s ons are not b nd ng on t. (e re-ect the pet t oner)s subm ss on that, n allo9 ng "o1as to e1ecute the contract to sell and the deed of absolute sale and fa l ng to re-ect or d sapprove the same, the respondent thereby gave h m apparent author ty to grant a r ght of 9ay over !ot No. 451@A@<@E@1 and to grant an opt on for the respondent to sell a port on thereof to the pet t oner. Absent estoppel or rat f cat on, apparent author ty cannot remedy the lacF of the 9r tten po9er re=u red under the statement of frauds.<1 $n add t on, the pet t oner)s fallacy s ts 9rong assumpt on of the unproved prem se that the respondent had full Fno9ledge of all the terms and cond t ons conta ned n the deed of absolute sale 9hen "o1as e1ecuted t. $t bears stress ng that apparent author ty s based on estoppel and can ar se from t9o nstances? f rst, the pr nc pal may Fno9 ngly perm t the agent to so hold h mself out as hav ng such author ty, and n th s 9ay, the pr nc pal becomes estopped to cla m that the agent does not have such author tyI second, the pr nc pal may so clothe the agent 9 th the nd c a of author ty as to lead a reasonably prudent person to bel eve that he actually has such author ty. <2 %here can be no apparent author ty of an agent 9 thout acts or conduct on the part of the pr nc pal and such acts or conduct of the pr nc pal must have been Fno9n and rel ed upon n good fa th and as a result of the e1erc se of reasonable prudence by a th rd person as cla mant and such must have produced a change of pos t on to ts detr ment. %he apparent po9er of an agent s to be determ ned by the acts of the pr nc pal and not by the acts of the agent. << 7or the pr nc ple of apparent author ty to apply, the pet t oner 9as burdened to prove the follo9 ng? /a0 the acts of the respondent -ust fy ng bel ef n the agency by the pet t onerI /b0 Fno9ledge thereof by the respondent 9h ch s sought to be heldI and, /c0 rel ance thereon by the pet t oner cons stent 9 th ord nary care and prudence.<4 $n th s case, there s no ev dence on record of spec f c acts made by the respondent<8 sho9 ng or nd cat ng that t had full Fno9ledge of any representat ons made by "o1as to the pet t oner that the respondent had author Aed h m to grant to the respondent an opt on to buy a port on of !ot No. 451@A@<@E@1 covered by %'% No. 26068, or to create a burden or l en thereon, or that the respondent allo9ed h m to do so. %he pet t oner)s content on that by rece v ng and reta n ng the +8,000,000 purchase pr ce of !ot No. 451@A@<@E@2, the respondent effect vely and mpl edly rat f ed the grant of a r ght of 9ay on the ad-acent lot, !ot No. 451@A@<@E@1, and to grant to the pet t oner an opt on to sell a port on thereof, s barren of mer t. $t bears stress ng that the respondent sold !ot No. 451@A@<@E@2 to the pet t oner, and the latter had taFen possess on of the property. As such, the respondent had the r ght to reta n the +8,000,000, the purchase pr ce of the property t had sold to the pet t oner. 7or an act of the pr nc pal to be cons dered as an mpl ed rat f cat on of an unauthor Aed act of an agent, such act must be ncons stent 9 th any other hypothes s than that he approved and ntended to adopt 9hat

had been done n h s name.<> "at f cat on s based on 9a ver K the ntent onal rel n=u shment of a Fno9n r ght. "at f cat on cannot be nferred from acts that a pr nc pal has a r ght to do ndependently of the unauthor Aed act of the agent. Moreover, f a 9r t ng s re=u red to grant an author ty to do a part cular act, rat f cat on of that act must also be n 9r t ng. <2 & nce the respondent had not rat f ed the unauthor Aed acts of "o1as, the same are unenforceable. <6 Bence, by the respondent)s retent on of the amount, t cannot thereby be mpl ed that t had rat f ed the unauthor Aed acts of ts agent, "oberto "o1as. Dn the last ssue, the pet t oner contends that the 'A erred n d sm ss ng ts compla nt for damages aga nst the respondent on ts f nd ng that the delay n the construct on of ts 9arehouse 9as due to ts /pet t oner)s0 fault. %he pet t oner asserts that the 'A should have aff rmed the rul ng of the tr al court that the respondent fa led to cause the ev ct on of the s=uatters from the property on or before &eptember 25, 1551I hence, 9as l able for +8,>>0,000. %he respondent, for ts part, asserts that the delay n the construct on of the pet t oner)s 9arehouse 9as due to ts late f l ng of an appl cat on for a bu ld ng perm t, only on May 26, 1552. %he pet t oner)s content on s mer tor ous. %he respondent does not deny that t fa led to cause the ev ct on of the s=uatters on or before &eptember 25, 1551. $ndeed, the respondent does not deny the fact that 9hen the pet t oner 9rote the respondent demand ng that the latter cause the ev ct on of the s=uatters on Apr l 18, 1552, the latter 9ere st ll n the prem ses. $t 9as only after rece v ng the sa d letter n Apr l 1552 that the respondent caused the ev ct on of the s=uatters, 9h ch thus cleared the 9ay for the pet t oner)s contractor to commence the construct on of ts 9arehouse and secure the appropr ate bu ld ng perm t therefor. %he pet t oner could not be e1pected to f le ts appl cat on for a bu ld ng perm t before Apr l 1552 because the s=uatters 9ere st ll occupy ng the property. Eecause of the respondent)s fa lure to cause the r ev ct on as agreed upon, the pet t oner)s contractor fa led to commence the construct on of the 9arehouse n Dctober 1551 for the agreed pr ce of +6,>45,000. $n the meant me, costs of construct on mater als sp raled. 3nder the construct on contract entered nto bet9een the pet t oner and the contractor, the pet t oner 9as obl ged to pay +11,604,1>0,<5 nclud ng the add t onal 9orF cost ng +1,441,800, or a net ncrease of +1,212,560.40 %he respondent s l able for the d fference bet9een the or g nal cost of construct on and the ncrease thereon, conformably to Art cle 1120 of the Ne9 ' v l 'ode, 9h ch reads? Art. 1120. %hose 9ho n the performance of the r obl gat ons are gu lty of fraud, negl gence, or delay and those 9ho n any manner contravene the tenor thereof, are l able for damages. %he pet t oner, l Fe9 se, lost the amount of +<,500,000 by 9ay of unearned ncome from the lease of the property to the +onderosa !eather #oods 'ompany. %he respondent s, thus, l able to the pet t oner for the sa d amount, under Art cles 2200 and 2201 of the Ne9 ' v l 'ode?

Art. 2200. $ndemn f cat on for damages shall comprehend not only the value of the loss suffered, but also that of the prof ts 9h ch the obl gee fa led to obta n. Art. 2201. $n contracts and =uas @contracts, the damages for 9h ch the obl gor 9ho acted n good fa th s l able shall be those that are the natural and probable conse=uences of the breach of the obl gat on, and 9h ch the part es have foreseen or could have reasonably foreseen at the t me the obl gat on 9as const tuted. $n case of fraud, bad fa th, mal ce or 9anton att tude, the obl gor shall be respons ble for all damages 9h ch may be reasonably attr buted to the non@ performance of the obl gat on. $n sum, 9e aff rm the tr al court)s a9ard of damages and attorney)s fees to the pet t oner. )N #)G5( /: A## (5E :/$EG/)NG, -udgment s hereby rendered A::)$')NG the assa led Dec s on of the 'ourt of Appeals W)(5 '/!):)%A()/N. %he respondent s ordered to pay to the pet t oner the amount of +8,>12,560 by 9ay of actual damages and +100,000 by 9ay of attorney)s fees. No costs. S/ /$!E$E!. $uno, 9., .hairman, Austria<Martinez, 7inga, and .hico<3azario, 99., concur.

:ootnotes
1

+enned by Assoc ate Just ce &alome A. Montoya, 9 th Assoc ate Just ces 'onrado M. Cas=ueA, Jr. and %eodoro +. "eg no, concurr ng.
2

+enned by Judge 7ranc sco G. CeleA. E1h b t ,!,, "ecords, p. 21<. E1h b t ,M,, $d. at 214. $b d. E1h b t ,N,, $d. at 21>. E1h b t ,',, $d. at 152@158. $d. at 15<@154. E1h b t ,D,, $d. at 15>. E1h b t ,D@1,, $d. at 152. E1h b t ,#,, $d. at 201.

<

>

10

11

12

E1h b t ,E,, $d. at 156. E1h b t ,7,, $d. at 155. E1h b t ,B,, $d. at 202@20>. "ecords, pp. 2@4. $d. at 4@8. $d. at 24@28. $d. at 242. $d. at 462. "ollo, pp. 22@2<. 25> &'"A ><1 /15560. $d. at >44@>48. Art. 140<. %he follo9 ng contracts are unenforceable, unless they are rat f ed?

1<

14

18

1>

12

16

15

20

21

22

2<

/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 po9ers.
24

211 &'"A 112 /15520. "ecords, p. 21<. Art. 1626. &pec al po9ers of attorney are necessary n the follo9 ng cases?

28

2>

T /80 %o 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 onI T /120 %o create or convey real r ghts over mmovable propertyI T /140 %o rat fy or recogn Ae obl gat ons contracted before the agencyI /180 Any other act of str ct dom n on.
22

Art. 1<86. %he follo9 ng must appear n a publ c document?

/10 Acts and contracts 9h ch have for the r ob-ect the creat on, transm ss on, mod f cat on or e1t ngu shment of real r ghts over mmovable propertyI sales of real property or of an nterest there n are governed by art cles 140<, No. 2, and 1408I

T /<0 %he po9er to adm n ster property, or any other po9er 9h ch has for ts ob-ect an act appear ng or 9h ch should appear n a publ c document, or should pre-ud ce a th rd personI /40 %he cess on of act ons or r ghts proceed ng from an act appear ng n a publ c document.
26

&tate v. &ellers and "esolute $nsurance 'ompany, 286 N.(.2d 252 /15220. +r or v. Bager, 440 &.(.2d 1>2 /15>50. !ang v. Ea r, <> Mo. 68, d. 3n on 'amp 'orporat on v. Dyal, Jr., 4>0 7.2d >26 /15220. EanFer)s +rotect ve ! fe $nsurance 'o. v. Add son, 22< &.(.2d >54 /15810. $d. at >5>. "es don v. M ller D str butors 'o., $nc., 1<5 N.(.2d 12 /15>>0. &ee (ells 7argo Eus ness v. *oAoff, >58 7.2d 540 /156<0.

25

<0

<1

<2

<<

<4

<8

<>

%he Eoard of &uperv sors v. &chacF, 16 !.E.2d 88> /16520I Amer can 7ood 'orporat on v. 'entral 'arol na EanF N %rust 'ompany, 251 &.(.2d 652.
<2

"euschl n and #regory, %he !a9 of Agency and +artnersh p, 2nd ed., p. 28. Art cle 140<, Ne9 ' v l 'ode / nfra0. E1h b t ,7,, "ecords, p. 155. %&N, <0 &eptember 155<, p. 1<.

<6

<5

40

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 104224 !ecem er 11, 3..<

8&N KWAN 98&NG, +et t oner, vs. +5)#)++)NE A'&SE'EN( AN! GA')NG %/$+/$A()/N, "espondent. DE'$&$DN %A$+)/, J.: (-e %ase

Hun *9an Eyung /pet t oner0 f led th s +et t on for "ev e9 1 assa l ng the 'ourt of AppealsJ Dec s on2 dated 22 May 200< n 'A@#.". 'C No. >8>55 as 9ell as the "esolut on< dated 2 May 2004 deny ng the Mot on for "econs derat on. $n the assa led dec s on, the 'ourt of Appeals /'A0 aff rmed the "eg onal %r al 'ourtJs Dec s on4dated > May 1555. %he "eg onal %r al 'ourt of Man la, Eranch 1< /tr al court0, d sm ssed pet t onerJs demand aga nst respondent +h l pp ne Amusement and #am ng 'orporat on /+A#'D"0 for the redempt on of gambl ng ch ps. (-e :acts +A#'D" s a government@o9ned and controlled corporat on tasFed to establ sh and operate gambl ng clubs and cas nos as a means to promote tour sm and generate sources of revenue for the government. %o ach eve these ob-ect ves, +A#'D" s vested 9 th the po9er to enter nto contracts of every F nd and for any la9ful purpose that perta ns to ts bus ness. +ursuant to th s author ty, +A#'D" launched ts 7ore gn B ghroller MarFet ng +rogram /+rogram0. %he +rogram a ms to nv te patrons from fore gn countr es to play at the dollar p t of des gnated +A#'D"@operated cas nos under spec f ed terms and cond t ons and n accordance 9 th ndustry pract ce. 8 %he *orean@based AE& 'orporat on 9as one of the nternat onal groups that ava led of the +rogram. $n a letter@agreement dated 28 Apr l 155> /JunFet Agreement0, AE& 'orporat on agreed to br ng n fore gn players to play at the f ve des gnated gam ng tables of the 'as no 7 l p no & lah s at the #rand Eoulevard Botel n Man la /'as no 7 l p no0. %he relevant st pulat ons of the JunFet Agreement state? 1. +A#'D" 9 ll prov de AE& 'orporat on 9 th separate -unFet ch ps. %he -unFet ch ps 9 ll be d st ngu shed from the ch ps be ng used by other players n the gam ng tables. AE& 'orporat on 9 ll d str bute these -unFet ch ps to ts players and at the end of the play ng per od, AE& 'orporat on 9 ll collect the -unFet ch ps from ts players and maFe an account ng to the cas no treasury. 2. AE& 'orporat on 9 ll assume sole respons b l ty to pay the 9 nn ngs of ts fore gn players and settle the collect bles from los ng players. <. AE& 'orporat on shall hold +A#'D" absolutely free and harmless from any damage, cla m or l ab l ty 9h ch may ar se from any cause n connect on 9 th the JunFet Agreement. 8. $n prov d ng the gam ng fac l t es and serv ces to these fore gn players, +A#'D" s ent tled to rece ve from AE& 'orporat on a 12.8R share n the gross 9 nn ngs of AE& 'orporat on or 1.8 m ll on 3& dollars, 9h chever s h gher, over a play ng per od of > months. +A#'D" has the opt on to e1tend the per od. > +et t oner, a *orean nat onal, alleges that from November 155> to March 1552, he came to the +h l pp nes four t mes to play for h gh staFes at the 'as no 7 l p no.2 +et t oner cla ms that n the course of the games, he 9as able to

accumulate gambl ng ch ps 9orth 3&S2.1 m ll on. +et t oner presented as ev dence dur ng the tr al gambl ng ch ps 9 th a face value of 3&S1.1 m ll on. +et t oner contends that 9hen he presented the gambl ng ch ps for encashment 9 th +A#'D"Js employees or agents, +A#'D" refused to redeem them. 6 +et t oner brought an act on aga nst +A#'D" seeF ng the redempt on of gambl ng ch ps valued at 3&S2.1 m ll on. +et t oner cla ms that he 9on the gambl ng ch ps at the 'as no 7 l p no, play ng cont nuously day and n ght. +et t oner alleges that every t me he 9ould come to Man la, +A#'D" 9ould e1tend to h m amen t es deserv ng of a h gh roller. A +A#'D" off c al 9ho meets h m at the a rport 9ould br ng h m to 'as no 7 l p no, a cas no managed and operated by +A#'D". %he card dealers 9ere all +A#'D" employees, the gambl ng ch ps, e=u pment and furn tures belonged to +A#'D", and +A#'D" enforced all the regulat ons deal ng 9 th the operat on of fore gn e1change gambl ng p ts. +et t oner states that he 9as able to redeem h s gambl ng ch ps 9 th the cash er dur ng h s f rst fe9 9 nn ng tr ps. Eut later on, the cas no cash er refused to encash h s gambl ng ch ps so he had no recourse but to depos t h s gambl ng ch ps at the #rand Eoulevard BotelJs depos t bo1, every t me he departed from Man la.5 +A#'D" cla ms that pet t oner, 9ho 9as brought nto the +h l pp nes by AE& 'orporat on, s a -unFet player 9ho played n the dollar p t e1clus vely leased by AE& 'orporat on for ts -unFet players. +A#'D" alleges that t prov ded AE& 'orporat on 9 th d st nct -unFet ch ps. AE& 'orporat on d str buted these ch ps to ts -unFet players. At the end of each play ng per od, the -unFet players 9ould surrender the ch ps to AE& 'orporat on. Dnly AE& 'orporat on 9ould maFe an account ng of these ch ps to +A#'D"Js cas no treasury. 10 As add t onal nformat on for the -unFet players play ng n the gam ng room leased to AE& 'orporat on, +A#'D" posted a not ce 9r tten n Engl sh and *orean languages 9h ch reads? ND%$'E %h s #AM$N# "DDM s e1clus vely operated by AE& under arrangement 9 th +A#'D", the former s solely accountable for all +!AH$N# 'B$+& 9agered on the tables. Any f nanc al A""AN#EMEN%M%"AN&A'%$DN bet9een +!AHE"& and AE& shall only be b nd ng upon sa d +!AHE"& and AE&. 11 +A#'D" cla ms that th s not ce s a standard precaut onary measure 12 to avo d confus on bet9een -unFet players of AE& 'orporat on and +A#'D"Js players. +A#'D" argues that pet t oner s not a +A#'D" player because under +A#'D"Js gam ng rules, gambl ng ch ps cannot be brought outs de the cas no. %he gambl ng ch ps must be converted to cash at the end of every gam ng per od as they are nventor ed every sh ft. 3nder +A#'D"Js rules, t s mposs ble for +A#'D" players to accumulate t9o m ll on dollars 9orth of gambl ng ch ps and to br ng the ch ps out of the cas no prem ses. 1<

& nce +A#'D" d scla med l ab l ty for the 9 nn ngs of players recru ted by AE& 'orporat on and refused to encash the gambl ng ch ps, pet t oner f led a compla nt for a sum of money before the tr al court. 14 +A#'D" f led a countercla m aga nst pet t oner. %hen, tr al ensued. Dn > May 1555, the tr al court d sm ssed the compla nt and countercla m. +et t oner appealed the tr al courtJs dec s on to the 'A. Dn 22 May 200<, the 'A aff rmed the appealed dec s on. Dn 22 June 200<, pet t oner moved for recons derat on 9h ch 9as den ed on 2 May 2004. Aggr eved by the 'AJs dec s on and resolut on, pet t oner elevated the case before th s 'ourt. (-e $ulin" of t-e (rial %ourt %he tr al court ruled that based on +A#'D"Js charter, 18 +A#'D" has no author ty to lease any port on of the gambl ng tables to a pr vate party l Fe AE& 'orporat on. &ect on 1< of +res dent al Decree No. 16>5 or the +A#'D"Js charter states? &ec. 1<. E1empt ons @ 111 /40 3t l Aat on of 7ore gn 'urrenc es K %he 'orporat on shall have the r ght and author ty, solely and e1clus vely n connect on 9 th the operat ons of the cas no/s0, to purchase, rece ve, e1change and d sburse fore gn e1change, sub-ect to the follo9 ng terms and cond t ons? /a0 A spec f c area n the cas no/s0 or gam ng p t shall be put up solely and e1clus vely for players and patrons ut l A ng fore gn currenc esI /b0 %he 'orporat on shall appo nt and des gnate a duly accred ted commerc al banF agent of the 'entral EanF, to handle, adm n ster and manage the use of fore gn currenc es n the cas no/s0I /c0 %he 'orporat on shall prov de an off ce at cas no/s0 e1clus vely for the employees of the des gnated banF, agent of the 'entral EanF, 9here the 'orporat on shall ma nta n a dollar account 9h ch 9 ll be ut l Aed e1clus vely for the above purpose and the cas no dollar treasury employeesI /d0 Dnly persons 9 th fore gn passports or cert f cates of dent ty /for Bong *ong patron only0 duly ssued by the government or country of the r res dence 9 ll be allo9ed to play n the fore gn e1change gam ng p tI /e0 Dnly fore gn e1change prescr bed to form part of the +h l pp ne $nternat onal "eserve and the follo9 ng fore gn e1change currenc es? Austral an Dollar, & ngapore Dollar, Bong *ong Dollar, shall be used n th s gam ng p tI /f0 %he d sbursement, adm n strat on, management and record ng of fore gn e1change currenc es used n the cas no/s0 shall be carr ed out n accordance 9 th

e1 st ng fore gn e1change regulat ons, and per od cal reports of the transact ons n such fore gn e1change currenc es by the 'orporat on shall be duly recorded and reported to the 'entral EanF thru the des gnated Agent EanFI and /g0 %he 'orporat on shall ssue the necessary rules and regulat ons for the gu dance and nformat on of players =ual f ed to part c pate n the fore gn e1change gam ng p t, n order to maFe certa n that the terms and cond t ons as above set forth are str ctly compl ed 9 th. %he tr al court held that only +A#'D" could use fore gn currency n ts gam ng tables. (hen +A#'D" accepted only a f 1ed port on of the dollar earn ngs of AE& 'orporat on n the concept of a lease of fac l t es, +A#'D" shared ts franch se 9 th AE& 'orporat on n v olat on of the +A#'D"Js charter. Bence, the JunFet Agreement s vo d. & nce the JunFet Agreement s not perm tted by +A#'D"Js charter, the mutual r ghts and obl gat ons of the part es to th s case 9ould be resolved based on agency and estoppel. 1> %he tr al court found that the pet t oner 9anted to redeem gambl ng ch ps that 9ere spec f cally used by AE& 'orporat on at ts gam ng tables. %he gambl ng ch ps come n d st nct ve orange or yello9 colors 9 th st cFers bear ng denom nat ons of 10,000 or 1,000. %he 1,000 gambl ng ch ps are smaller n s Ae and the 9ords ,no cash value, marFed on them. %he 10,000 gambl ng ch ps do not reflect the ,no cash value, s gn. %he sen or treasury head of +A#'D" test f ed that these 9ere the gambl ng ch ps used by the prev ous -unFet operators and +A#'D" merely cont nued us ng them. Bo9ever, the gambl ng ch ps used n the regular cas no games 9ere of a d fferent =ual ty. 12 %he tr al court po nted out that +A#'D" had taFen steps to 9arn players brought n by all -unFet operators, nclud ng AE& 'orporat on, that they 9ere play ng under spec al rules. Apart from the d fferent F nds of gambl ng ch ps used, the -unFet players 9ere conf ned to certa n gam ng rooms. $n these rooms, not ces 9ere posted that gambl ng ch ps could only be encashed there and no9here else. A photograph of one such not ce, pr nted n *orean and Engl sh, stated that the gam ng room 9as e1clus vely operated by AE& 'orporat on and that AE& 'orporat on 9as solely accountable for all the ch ps 9agered on the gam ng tables. Although pet t oner den ed see ng th s not ce, th s d scla mer has the effect of a negat ve ev dence that can hardly preva l aga nst the pos t ve assert ons of +A#'D" off c als 9hose cred b l ty s also not open to doubt. %he tr al court concluded that pet t oner had been alerted to the e1 stence of these spec al gambl ng rules, and the mere fact that he cont nued to play under the same restr ct ons over a per od of several months conf rms h s ac=u escence to them. Dther9 se, pet t oner could have s mply chose to stop gambl ng. 16 $n d sm ss ng pet t onerJs compla nt, the tr al court concluded that pet t onerJs demand aga nst +A#'D" for the redempt on of the gambl ng ch ps could not stand. %he tr al court stated that pet t oner, a stranger to the agreement bet9een +A#'D" and AE& 'orporat on, could not under pr nc ples of e=u ty be charged 9 th not ce other than of the apparent author ty 9 th 9h ch +A#'D" had clothed ts employees and agents n deal ng 9 th pet t oner. & nce pet t oner 9as

made a9are of the spec al rules by 9h ch he 9as play ng at the 'as no 7 l p no, pet t oner could not no9 cla m that he 9as not bound by them. %he tr al court e1pla ned that n an unla9ful transact on, the courts 9 ll e1tend e=u table rel ef only to a party 9ho 9as una9are of all ts d mens ons and 9hose gnorance of them e1posed h m to the r sF of be ng e1plo ted by the other. (here the part es enter nto such a relat onsh p 9 th the opportun ty to Fno9 all of ts ram f cat ons, as n th s case, there s no room for e=u table cons derat ons to come to the rescue of any party. %he tr al court ruled that t 9ould leave the part es 9here they are.15 (-e $ulin" of t-e %ourt of Appeals $n d sm ss ng the appeal, the appellate court addressed the four errors ass gned by pet t oner. 7 rst, pet t oner ma nta ns that he 9as never a -unFet player of AE& 'orporat on. +et t oner also den es see ng a not ce that certa n gam ng rooms 9ere e1clus vely operated by ent t es under spec al agreement. 20 %he 'A ruled that the records do not support pet t onerJs theory. +et t onerJs o9n test mony reveals that he en-oyed spec al accommodat ons at the #rand Eoulevard Botel. %h s s m lar accommodat on 9as e1tended to players brought n by AE& 'orporat on and other -unFet operators. +et t oner cannot d sassoc ate h mself from AE& 'orporat on for t s unl Fely that an unFno9n h gh roller 9ould be accorded cho ce accommodat ons by the hotel unless the accommodat on 9as fac l tated by a -unFet operator 9ho en-oyed such pr v lege. 21 %he 'A added that the test mon es of +A#'D"Js employees aff rm ng that not ces 9ere posted n Engl sh and *orean n the gam ng areas are cred ble n the absence of any conv nc ng proof of ll mot ve. 7urther, the spec f ed gam ng areas used only spec al ch ps that could be bought and e1changed at certa n cash er booths n that area.22 &econd, pet t oner attacFs the val d ty of the contents of the not ce. & nce the JunFet Agreement s vo d, the not ce, 9h ch 9as ssued pursuant to the JunFet Agreement, s also vo d and cannot affect pet t oner. 2< %he 'A reasoned that the tr al court never declared the not ce val d and ne ther d d t enforce the contents thereof. %he 'A emphas Aed that t 9as the act of caut on ng and alert ng the players that 9as upheld. %he tr al court ruled that s gns and 9arn ngs 9ere n place to nform the publ c, pet t oner ncluded, that spec al rules appl ed to certa n gam ng areas even f the very agreement g v ng r se to these rules s vo d.24 %h rd, pet t oner taFes the pos t on that an mpl ed agency e1 sted bet9een +A#'D" and AE& 'orporat on.28 %he 'A d sagreed 9 th pet t onerJs v e9. A vo d contract has no force and effect from the very beg nn ng. $t produces no effect e ther aga nst or n favor of anyone. Ne ther can t create, mod fy or e1t ngu sh the -ur d cal relat on to 9h ch

t refers. Necessar ly, the JunFet Agreement, be ng vo d from the beg nn ng, cannot g ve r se to an mpl ed agency. %he 'A e1pla ned that t cannot see ho9 the pr nc ple of mpl ed agency can be appl ed to th s case. Art cle 166< 2> of the ' v l 'ode appl es only to a s tuat on 9here the agent s author Aed by the pr nc pal to enter nto a part cular transact on, but nstead of contract ng on behalf of the pr nc pal, the agent acts n h s o9n name. 22 %he 'A concluded that no such legal f ct on e1 sted bet9een +A#'D" and AE& 'orporat on. +A#'D" entered nto a JunFet Agreement to lease to AE& 'orporat on certa n gam ng areas. $t 9as never +A#'D"Js ntent on to deal 9 th the -unFet players. Ne ther d d +A#'D" ntend AE& 'orporat on to represent +A#'D" n deal ng 9 th the -unFet players. "epresentat on s the bas s of agency but unfortunately for pet t oner none s found n th s case. 26 %he 'A added that the spec al gam ng ch ps, 9h le belong ng to +A#'D", are mere accessor es n the vo d JunFet Agreement 9 th AE& 'orporat on. $n Art cle 166<, the phrase ,th ngs belong ng to the pr nc pal, refers only to those th ngs or propert es sub-ect of a part cular transact on author Aed by the pr nc pal to be entered nto by ts purported agent. Necessar ly, the gambl ng ch ps be ng mere nc dents to the vo d lease agreement cannot fall under th s category. 25 %he 'A ruled that Art cle 2182<0 of the ' v l 'ode s also not appl cable. %he c rcumstances relat ng to negotiorum gestio are non@e1 stent to 9arrant an off c ous manager to taFe over the management and adm n strat on of +A#'D".<1 7ourth, pet t oner asFs for e=u table rel ef.<2 %he 'A e1pla ned that although pet t oner 9as never a party to the vo d JunFet Agreement, pet t oner cannot deny or fe gn bl ndness to the s gns and 9arn ngs all around h m. %he not ces, the spec al gambl ng ch ps, and the separate gam ng areas 9ere more than enough to alert h m that he 9as play ng under d fferent terms. +et t oner pers sted and cont nued to play n the cas no. +et t oner also en-oyed the perFs e1tended to -unFet players of AE& 'orporat on. 7or fa l ng to heed these s gns and 9arn ngs, pet t oner can no longer be perm tted to cla m e=u table rel ef. (hen part es do not come to court 9 th clean hands, they cannot be allo9ed to prof t from the r o9n 9rong do ng. << (-e )ssues +et t oners ra se three ssues n th s pet t on? 1. (hether the 'A erred n hold ng that +A#'D" s not l able to pet t oner, d sregard ng the doctr ne of mpl ed agency, or agency by estoppelI 2. (hether the 'A erred n us ng ntent of the contract ng part es as the test for creat on of agency, 9hen such s not relevant s nce the nstant case nvolves l ab l ty of the presumed pr nc pal n mpl ed agency to a th rd partyI and

<. (hether the 'A erred n fa l ng to cons der that +A#'D" rat f ed, or at least adopted, the acts of the agent, AE& 'orporat on. <4 (-e $ulin" of t-e %ourt %he pet t on lacFs mer t. *ourts will not en!orce de&ts arisin2 !ro- ille2al 2a-&lin2 #ambl ng s proh b ted by the la9s of the +h l pp nes as spec f cally prov ded n Art cles 158 to 155 of the "ev sed +enal 'ode, as amended. #ambl ng s an act beyond the pale of good morals, <8 and s thus proh b ted and pun shed to repress an ev l that underm nes the soc al, moral, and econom c gro9th of the nat on.<> +res dent al Decree No. 1>02 /+D 1>020,<2 9h ch mod f ed Art cles 158@ 155 of the "ev sed +enal 'ode and repealed ncons stent prov s ons, <6 prescr bed st ffer penalt es on llegal gambl ng.<5 As a rule, all forms of gambl ng are llegal. %he only form of gambl ng allo9ed by la9 s that st pulated under +res dent al Decree No. 16>5, 9h ch gave +A#'D" ts franch se to ma nta n and operate gambl ng cas nos. %he ssue then turns on 9hether +A#'D" can val dly share ts franch se 9 th -unFet operators to operate gambl ng cas nos n the country. &ect on </h0 of +A#'D"Js charter states? &ect on <. 'orporate +o9ers. @ %he 'orporat on shall have the follo9 ng po9ers and funct ons, among others? 111 h0 to enter nto, maFe, perform, and carry out contracts of every F nd and for any la9ful purpose perta n ng to the bus ness of the 'orporat on, or n any manner nc dent thereto, as pr nc pal, agent or other9 se, 9 th any person, f rm, assoc at on, or corporat on. 111 %he JunFet Agreement 9ould be val d f under &ect on </h0 of +A#'D"Js charter, +A#'D" could share ts gambl ng franch se 9 th another ent ty. $n &enator Ja9orsF v. +h l. Amusement and #am ng 'orp., 40 the 'ourt d scussed the e1tent of the grant of the leg slat ve franch se to +A#'D" on ts author ty to operate gambl ng cas nos? A leg slat ve franch se s a spec al pr v lege granted by the state to corporat ons. $t s a pr v lege of publ c concern 9h ch cannot be e1erc sed at 9 ll and pleasure, but should be reserved for publ c control and adm n strat on, e ther by the government d rectly, or by publ c agents, under such cond t ons and regulat ons as the government may mpose on them n the nterest of the publ c. $t s 'ongress that prescr bes the cond t ons on 9h ch the grant of the franch se may be made. %hus the manner of grant ng the franch se, to 9hom t may be granted, the mode of conduct ng the bus ness, the charter and the =ual ty of the serv ce to be rendered and the duty of the grantee to the publ c n e1erc s ng the franch se are almost al9ays def ned n clear and une=u vocal language.

After a c rcumspect cons derat on of the forego ng d scuss on and the contend ng pos t ons of the part es, 9e hold that +A#'D" has acted beyond the l m ts of ts author ty 9hen t passed on or shared ts franch se to &A#E. $n the Del Mar case 9here a s m lar ssue 9as ra sed 9hen +A#'D" entered nto a -o nt venture agreement 9 th t9o other ent t es n the operat on and management of -a ala games, the 'ourt, n an En Eanc "esolut on dated 24 August 2001, part ally granted the mot ons for clar f cat on f led by respondents there n nsofar as t prayed that +A#'D" has a val d franch se, but only by tself / .e. not n assoc at on 9 th any other person or ent ty0, to operate, ma nta n andMor manage the game of -a @ala . $n the case at bar, +A#'D" e1ecuted an agreement 9 th &A#E 9hereby the former grants the latter the author ty to operate and ma nta n sports bett ng stat ons and $nternet gam ng operat ons. $n essence, the grant of author ty g ves &A#E the pr v lege to act vely part c pate, partaFe and share +A#'D"Js franch se to operate a gambl ng act v ty. %he grant of franch se s a spec al pr v lege that const tutes a r ght and a duty to be performed by the grantee. %he grantee must not perform ts act v t es arb trar ly and 9h ms cally but must ab de by the l m ts set by ts franch se and str ctly adhere to ts terms and cond t onal t es. A corporat on as a creature of the &tate s presumed to e1 st for the common good. Bence, the spec al pr v leges and franch ses t rece ves are sub-ect to the la9s of the &tate and the l m tat ons of ts charter. %here s therefore a reserved r ght of the &tate to n=u re ho9 these pr v leges had been employed, and 9hether they have been abused. /Emphas s suppl ed0 %hus, +A#'D" has the sole and e1clus ve author ty to operate a gambl ng act v ty. (h le +A#'D" s allo9ed under ts charter to enter nto operatorJs or management contracts, +A#'D" s not allo9ed under the same charter to rel n=u sh or share ts franch se. +A#'D" cannot delegate ts po9er n v e9 of the legal pr nc ple of delegata potestas delegare non potest, nasmuch as there s noth ng n the charter to sho9 that t has been e1pressly author Aed to do so. 41 & m larly, n th s case, +A#'D", by taF ng only a percentage of the earn ngs of AE& 'orporat on from ts fore gn currency collect on, allo9ed AE& 'orporat on to operate gam ng tables n the dollar p t. %he JunFet Agreement s n d rect v olat on of +A#'D"Js charter and s therefore vo d. & nce the JunFet Agreement v olates +A#'D"Js charter, gambl ng bet9een the -unFet player and the -unFet operator under such agreement s llegal and may not be enforced by the courts. Art cle 201442 of the ' v l 'ode, 9h ch refers to llegal gambl ng, states that no act on can be ma nta ned by the 9 nner for the collect on of 9hat he has 9on n a game of chance. Although not ra sed as an ssue by pet t oner, 9e deem t necessary to d scuss the appl cab l ty of "epubl c Act No. 54624< /"A 54620 to the present case.

"A 5462 amended the +A#'D" charter, grant ng +A#'D" the po9er to enter nto spec al agreement 9 th th rd part es to share the pr v leges under ts franch se for the operat on of gambl ng cas nos? &ect on 1. %he +h l pp ne Amusement and #am ng 'orporat on /+A#'D"0 franch se granted under +res dent al Decree No. 16>5 other9 se Fno9n as the +A#'D" 'harter, s hereby further amended to read as follo9s? 111 /20 &ect on </h0 s hereby amended to read as follo9s? ,&E'. <. 'orporate +o9ers. @ ,1 1 1 ,/h0 to enter nto, maFe, conclude, perform, and carry out contracts of every F nd and nature and for any la9ful purpose 9h ch are necessary, appropr ate, proper or nc dental to any bus ness or purpose of the +A#'D", nclud ng but not l m ted to nvestment agreements, -o nt venture agreements, management agreements, agency agreements, 9hether as pr nc pal or as an agent, manpo9er supply agreements, or any other s m lar agreements or arrangements 9 th any person, f rm, assoc at on or corporat on., /Eoldfac ng suppl ed0 +A#'D" sought the amendment of ts charter prec sely to address and remedy the legal mped ment ra sed n &enator Ja9orsF v. +h l. Amusement and #am ng 'orp. 3nfortunately for pet t oner, "A 5462 cannot be appl ed to the present case. %he JunFet Agreement 9as entered nto bet9een +A#'D" and AE& 'orporat on on 28 Apr l 155> 9hen the +A#'D" charter then preva l ng /+D 16>50 proh b ted +A#'D" from enter ng nto any arrangement 9 th a th rd party that 9ould allo9 such party to act vely part c pate n the cas no operat ons. $t s a bas c pr nc ple that la9s should only be appl ed prospect vely unless the leg slat ve ntent to g ve them retroact ve effect s e1pressly declared or s necessar ly mpl ed from the language used. 44 "A 5462 does not prov de for any retroact v ty of ts prov s ons. All la9s operate prospect vely absent a clear contrary language n the te1t,48 and that n every case of doubt, the doubt 9 ll be resolved aga nst the retroact ve operat on of la9s. 4> %hus, pet t oner cannot ava l of the prov s ons of "A 5462 as th s 9as not the la9 9hen the acts g v ng r se to the cla med l ab l t es tooF place. %h s maFes the gambl ng act v ty part c pated n by pet t oner llegal. +et t oner cannot sue +A#'D" to redeem the cash value of the gambl ng ch ps or recover damages ar s ng from an llegal act v ty for t9o reasons. 7 rst, pet t oner engaged n gambl ng 9 th AE& 'orporat on and not 9 th +A#'D". &econd, the court cannot ass st pet t oner n enforc ng an llegal act. Moreover, for a court to grant pet t onerJs prayer 9ould mean enforc ng the JunFet Agreement, 9h ch s vo d.

No9, to address the ssues ra sed by pet t oner n h s pet t on, pet t oner cla ms that he s a th rd party proceed ng aga nst the l ab l ty of a presumed pr nc pal and cla ms rel ef, alternat vely, on the bas s of mpl ed agency or agency by estoppel. Art cle 16>5 of the ' v l 'ode states that mpl ed agency s der ved from the acts of the pr nc pal, from h s s lence or lacF of act on, or h s fa lure to repud ate the agency, Fno9 ng that another person s act ng on h s behalf 9 thout author ty. $mpl ed agency, be ng an actual agency, s a fact to be proved by deduct ons or nferences from other facts.42 Dn the other hand, apparent author ty s based on estoppel and can ar se from t9o nstances. 7 rst, the pr nc pal may Fno9 ngly perm t the agent to hold h mself out as hav ng such author ty, and the pr nc pal becomes estopped to cla m that the agent does not have such author ty. &econd, the pr nc pal may clothe the agent 9 th the nd c a of author ty as to lead a reasonably prudent person to bel eve that the agent actually has such author ty. 46 $n an agency by estoppel, there s no agency at all, but the one assum ng to act as agent has apparent or ostens ble, although not real, author ty to represent another. 45 %he la9 maFes no presumpt on of agency and prov ng ts e1 stence, nature and e1tent s ncumbent upon the person alleg ng t. 80 (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. 81 Acts and conduct of +A#'D" negates the e1 stence of an mpl ed agency or an agency by estoppel +et t oner alleges that there s an mpl ed agency. Alternat vely, pet t oner cla ms that even assum ng that no actual agency e1 sted bet9een +A#'D" and AE& 'orporat on, there s st ll an agency by estoppel based on the acts and conduct of +A#'D" sho9 ng apparent author ty n favor of AE& 'orporat on. +et t oner states that one factor 9h ch d st ngu shes agency from other legal precepts s control and the follo9 ng und sputed facts sho9 a relat onsh p of mpl ed agency? 1. %hree floors of the #rand Eoulevard Botel 82 9ere leased to +A#'D" for conduct ng gambl ng operat onsI 8< 2. Df the three floors, +A#'D" allo9ed AE& 'orporat on to use one 9hole floor for fore gn e1change gambl ng, conducted by +A#'D" dealers us ng +A#'D" fac l t es, operated by +A#'D" employees and us ng +A#'D" ch ps bear ng the +A#'D" logoI84 <. +A#'D" controlled the release, 9 thdra9al and return of all the gambl ng ch ps g ven to AE& 'orporat on n that part of the cas no and at the end of the day, +A#'D" conducted an nventory of the gambl ng ch psI 88 4. AE& 'orporat on accounted for all gambl ng ch ps 9 th the 'omm ss on on Aud t /'DA0, the off c al aud tor of +A#'D"I 8>

8. +A#'D" enforced, through ts o9n manager, all the rules and regulat ons on the operat on of the gambl ng p t used by AE& 'orporat on. 82 +et t onerJs argument s clearly m splaced. %he bas s for agency s representat on,86 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. 85 Dn the part of the pr nc pal, there must be an actual ntent on to appo nt or an ntent on naturally nferable from h s 9ords or act ons, 9h le on the part of the agent, there must be an ntent on to accept the appo ntment and act on t. >0 Absent such mutual ntent, there s generally no agency. >1 %here s no mpl ed agency n th s case because +A#'D" d d not hold out to the publ c as the pr nc pal of AE& 'orporat on. +A#'D"Js act ons d d not m slead the publ c nto bel ev ng that an agency can be mpl ed from the arrangement 9 th the -unFet operators, nor d d t hold out AE& 'orporat on 9 th any apparent author ty to represent t n any capac ty. %he JunFet Agreement 9as merely a contract of lease of fac l t es and serv ces. %he players brought n by AE& 'orporat on 9ere covered by a d fferent set of rules n ac=u r ng and encash ng ch ps. %he players used a d fferent F nd of ch p than 9hat 9as used n the regular gam ng areas of +A#'D", and that such -unFet players played spec f cally only n the th rd floor area and d d not m ngle 9 th the regular patrons of +A#'D". 7urthermore, +A#'D", n post ng not ces stat ng that the players are play ng under spec al rules, e1erc sed the necessary precaut on to 9arn the gam ng publ c that no agency relat onsh p e1 sts.+avvphi+ 7or the second ass gned error, pet t oner cla ms that the ntent on of the part es cannot apply to h m as he s not a party to the contract. (e d sagree. %he 'ourt of Appeals correctly used the ntent of the contract ng part es n determ n ng 9hether an agency by estoppel e1 sted n th s case. An agency by estoppel, 9h ch s s m lar to the doctr ne of apparent author ty re=u res proof of rel ance upon the representat ons, and that, n turn, needs proof that the representat ons predated the act on taFen n rel ance. >2 %here can be no apparent author ty of an agent 9 thout acts or conduct on the part of the pr nc pal and such acts or conduct of the pr nc pal must have been Fno9n and rel ed upon n good fa th and as a result of the e1erc se of reasonable prudence by a th rd person as cla mant, and such must have produced a change of pos t on to ts detr ment.>< &uch proof s lacF ng n th s case. $n the ent re durat on that pet t oner played n 'as no 7 l p no, he 9as deal ng only 9 th AE& 'orporat on, and ava l ng of the pr v leges e1tended only to players brought n by AE& 'orporat on. %he facts that he en-oyed spec al treatment upon h s arr val n Man la and spec al accommodat ons n #rand Eoulevard Botel, and that he 9as play ng n spec al gam ng rooms are all nd cat ons that pet t oner cannot cla m good fa th that he bel eved he 9as

deal ng 9 th +A#'D". +et t oner cannot be cons dered as an nnocent th rd party and he cannot cla m ent tlement to e=u table rel ef as 9ell. 7or h s th rd and f nal ass gned error, pet t oner asserts that +A#'D" rat f ed the acts of AE& 'orporat on. %he tr al court has declared, and 9e aff rm, that the JunFet Agreement s vo d. A vo d or ne1 stent contract s one 9h ch has no force and effect from the very beg nn ng. Bence, t s as f t has never been entered nto and cannot be val dated e ther by the passage of t me or by rat f cat on. >4 Art cle 1405 of the ' v l 'ode prov des that contracts e1pressly proh b ted or declared vo d by la9, such as gambl ng contracts, ,cannot be rat f ed., >8 (BE"E7D"E, 9e DENH the pet t on. (e A77$"M the 'ourt of AppealsJ Dec s on dated 22 May 200< as 9ell as the "esolut on dated 2 May 2004 as mod f ed by th s Dec s on. &D D"DE"ED. AN%DN$D %. 'A"+$D Assoc ate Just ce (E 'DN'3"? %/N%5)(A %A$+)/ '/$A#ESV Assoc ate Just ce (E$ES)(A J. #E/NA$!/7!E %AS($/VV Assoc ate Just ce $/9E$(/ A. A9A! 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. AN%DN$D %. 'A"+$D Assoc ate Just ce 'ha rperson '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, $ cert fy 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$)AN/ %. !E# %AS()##/ Assoc ate Just ce

$E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
V

Des gnated add t onal member per &pec al Drder No. 602. Des gnated add t onal member per &pec al Drder No. 22>. 3nder "ule 48 of the "ules of 'ourt.

VV

"ollo , pp. <0@<6. +enned by Assoc ate Just ce "osmar D. 'arandang, 9 th Assoc ate Just ces 'onrado M. Cas=ueA, Jr. and Mercedes #oAo@Dadole, concurr ng.
<

$d. at 82. +enned by Assoc ate Just ce "osmar D. 'arandang 9 th Assoc ate Just ces 'onrado M. Cas=ueA, Jr. and Mercedes #oAo@Dadole, concurr ng.
4

$d. at 86@>2. +enned by "%' Judge Mar o #uar Qa $$$. $d. at 8@>. "ecords, pp. 2<@24. "ollo, p. 6. $d. at >@2. $d. at 6@5. $d. at >5. $d. at 20.

>

10

11

12

$d. +et t oner sho9ed a s m lar not ce posted 9 th regard to another -unFet operator #$%.
1<

$d. $d. at 121.

14

18

+res dent al Decree No. 16>5, 'onsol dat ng and Amend ng +res dent al Decree Nos. 10>2@A, 10>2@E, 10>2@', 1<55 and 1><2 "elat ve to the 7ranch se and +o9ers of the +h l pp ne Amusement and #am ng 'orporat on /+A#'D"0. %ooF effect on 11 July 156<.
1>

"ollo, pp. >0@>1. $d. $d.

12

16

15

$d. at >1@>2. $d. at <<. $d. $d. at <4. $d. $d. at <4@<8. $d.

20

21

22

2<

24

28

2>

Art. 166<. $f an agent acts n h s o9n name, the pr nc pal has no r ght of act on aga nst the persons 9 th 9hom the agent has contracted, ne ther have such persons aga nst the pr nc pal. $n such case, the agent s the one d rectly bound n favor of the person 9 th 9hom he has contracted, as f the transact on 9ere h s o9n, e1cept 9hen the contract nvolves th ngs belong ng to the pr nc pal. %he prov s ons of th s art cle shall be understood to be 9 thout pre-ud ce to the act ons bet9een the pr nc pal and agent.
22

"ollo, p. <8. $d. $d. at <>.

26

25

<0

Art. 2182. %he off c ous manager s personally l able for contracts 9h ch he has entered nto 9 th th rd persons, even though he acted n the name of the o9ner, and there shall be no r ght of act on bet9een the o9ner and th rd persons. %hese prov s ons shall not apply? /10 $f the o9ner has e1pressly or tac tly rat f ed the management, or /20 (hen the contract refers to th ngs perta n ng to the o9ner of the bus ness.
<1

"ollo, p. <>. $d. $d. at <>, <6. $d. at 12. 3n ted &tates v. &alaver a, <5 +h l. 102, 112 /15160. +eople v. +unto, >6 +h l. 461, 462 /15<50. +rescr b ng &t ffer +enalt es on $llegal #ambl ng. %ooF effect on 11 June 1526.

<2

<<

<4

<8

<>

<2

<6

#ambl ng and $llegal !ottery are cr mes covered by 'hapter Dne, % tle C$ /'r mes aga nst +ubl c Morals0 of the "ev sed +enal 'ode.
<5

&ect on 1. +enalt es. %he follo9 ng penalt es are hereby mposed?

/a0 %he penalty of pr s on correcc onal n ts med um per od or a f ne rang ng from one thousand to s 1 thousand pesos, and n case of rec d v sm, the penalty of pr s on mayor n ts med um per od or a f ne rang ng from f ve thousand to ten thousand pesos shall be mposed upon? 1. Any person other than those referred to n the succeed ng sub@sect ons 9ho n any manner, shall d rectly or nd rectly taFe part n any llegal or unauthor Aed act v t es or games of cocFf ght ng, -ueteng, -a ala or horse rac ng to nclude booF e operat ons and game f 1 ng, numbers, b ngo and other forms of lotter esI cara y cruA, pomp ang and the l FeI 2@11 and any game us ng d ceI blacF -acF, lucFy n ne, poFer and ts der vat ves, monte, baccarat, cua-o, panggu ngue and other card gamesI p aF =ue, h gh and lo9, mah-ong, dom no and other games us ng plast c t les and the l FesI slot mach nes, roulette, p nball and other mechan cal contrapt ons and dev cesI dog rac ng, boat rac ng, car rac ng and other forms of races, basFetball, bo1 ng, volleyball, bo9l ng, p ngpong and other forms of nd v dual or team contests to nclude game f 1 ng, po nt shav ng and other mach nat onsI banF ng or percentage game, or any other game scheme, 9hether upon chance or sF ll, 9here n 9agers cons st ng of money, art cles of value or representat ve of value are at staFe or madeI
40

4>4 +h l. <28, <68@<6> /20040. $d.

41

42

Art. 2014. No act on can be ma nta ned by the 9 nner for the collect on of 9hat he has 9on n a game of chance. Eut any loser n a game of chance may recover h s loss from the 9 nner, 9 th legal nterest from the t me he pa d the amount lost, and subs d ar ly from the operator or manager of the gambl ng house.
4<

An Act 7urther Amend ng +res dent al Decree No. 16>5, Dther9 se *no9n as +A#'D" 'harter. %ooF effect on 20 June 2002. +r or to the amendment, &ect on </h0 of the +A#'D" 'harter /+D 16>50 reads as follo9s? &E'. <. 'orporate +o9ers. @ %he 'orporat on shall have the follo9 ng po9ers and funct ons, among others? 111 h0 to enter nto, maFe, perform, and carry out contracts of every F nd and for any la9ful purpose perta n ng to the bus ness of the 'orporat on, or n any manner nc dent thereto, as pr nc pal, agent or other9 se, 9 th any person, f rm, assoc at on or corporat on.

44

Erectors, $nc. v. Nat onal !abor "elat ons 'omm ss on, <2> +h l. >40, >4> /155>0.
48

Agpalo, "uben, &tatutory 'onstruct on /8th ed., 200<0, p. <88.

4>

'ebu +ortland 'ement 'o. v. 'ollector of $nternal "evenue, 1<4 +h l. 2<8, 240 /15>60.
42

De !eon, Bector &., 'omments and 'ases on +artnersh p, Agency and %rusts, 8th ed t on, 1555, p. 411.
46

(oodch ld Bold ngs, $nc. v. "o1as Electr c and 'onstruct on 'ompany, $nc., 425 +h l. 65>, 514 /20040.
45

&upra note 42 at 410.

80

%uaAon v. Be rs of Eartolome "amos, #.". No. 18>2>2, 14 July 2008, 4>< &'"A 406, 418.
81

Angeles v. +h l pp ne Nat onal "a l9ays, #.". No. 180126, <1 August 200>, 800 &'"A 444, 482.
82

7ormerly Fno9n as & lah s Botel. "ollo, p. 124. $d. $d. at 128. $d. $d. Eordador v. !uA, <42 +h l. >84, >>2 /15520.

8<

84

88

8>

82

86

85

Eurotech $ndustr al %echnolog es, $nc. v. 'u Aon, #.". No. 1>2882, 2< Apr l 2002, 821 &'"A 864, 85<.
>0

C ctor as M ll ng 'o., $nc. v. 'ourt of Appeals, <65 +h l. 164, 15> /20000. &upra note 80 at 418.

>1

>2

! ton-ua, Jr. v. Etern t 'orporat on, #.". No. 144608, 6 June 200>, 450 &'"A 204, 228.
><

&upra note 46 at 514. 7ranc sco v. Berrera, 440 +h l. 641, 645 /20020. Art. 1405. %he follo9 ng contracts are ne1 stent and vo d from the beg nn ng?

>4

>8

111

/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 up the defense of llegal ty be 9a ved. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. 1303<1 January 41, 3..1

+$/:ESS)/NA# SE$*)%ES, )N%., +et t oner, vs. NA()*)!A! and EN$)E&E AGANA, "espondents. 1@@@@@@@@@@@@@@@@@@@@@@@1 G.$. No. 130;01 January 41, 3..1

NA()*)!A! CSu stituted y -er c-ildren 'A$%E#)N/ AGANA ))), EN$)E&E AGANA, J$., E''A AGANA AN!A8A, JES&S AGANA, and $A8'&N! AGANAD and EN$)E&E AGANA, +et t oners, vs. J&AN :&EN(ES, "espondent. 1@ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @@ @ @ @ 1 G.$. No. 1312<. January 41, 3..1

')G&E# A'+)#, +et t oner, vs. NA()*)!A! AGANA and EN$)E&E AGANA, "espondents. DE'$&$DN SAN!/*A#7G&()E$$E6, J.: Bosp tals, hav ng undertaFen one of manF ndJs most mportant and del cate endeavors, must assume the grave respons b l ty of pursu ng t 9 th appropr ate care. %he care and serv ce d spensed through th s h gh trust, ho9ever techn cal, comple1 and esoter c ts character may be, must meet standards of respons b l ty commensurate 9 th the undertaF ng to preserve and protect the health, and ndeed, the very l ves of those placed n the hosp talJs Feep ng. 1 Assa led n these three consol dated pet t ons for rev e9 on cert orar s the 'ourt of AppealsJ Dec s on2 dated &eptember >, 155> n 'A@#.". 'C No. 420>2 and 'A@ #.". &+ No. <2156 aff rm ng 9 th mod f cat on the Dec s on <dated March 12, 155< of the "eg onal %r al 'ourt /"%'0, Eranch 5>, UueAon ' ty n ' v l 'ase No. U@ 4<<22 and null fy ng ts Drder dated &eptember 21, 155<.

%he facts, as culled from the records, are? Dn Apr l 4, 1564, Nat v dad Agana 9as rushed to the Med cal ' ty #eneral Bosp tal /Med cal ' ty Bosp tal0 because of d ff culty of bo9el movement and bloody anal d scharge. After a ser es of med cal e1am nat ons, Dr. M guel Amp l, pet t oner n #.". No. 122850, d agnosed her to be suffer ng from ,cancer of the s gmo d., Dn Apr l 11, 1564, Dr. Amp l, ass sted by the med cal staff 4 of the Med cal ' ty Bosp tal, performed an anter or resect on surgery on Nat v dad. Be found that the mal gnancy n her s gmo d area had spread on her left ovary, necess tat ng the removal of certa n port ons of t. %hus, Dr. Amp l obta ned the consent of Nat v dadJs husband, Enr =ue Agana, to perm t Dr. Juan 7uentes, respondent n #.". No. 12>4>2, to perform hysterectomy on her. After Dr. 7uentes had completed the hysterectomy, Dr. Amp l tooF over, completed the operat on and closed the nc s on. Bo9ever, the operat on appeared to be fla9ed. $n the correspond ng "ecord of Dperat on dated Apr l 11, 1564, the attend ng nurses entered these remarFs? ,sponge count lacF ng 2 ,announced to surgeon searched /s c0 done but to no ava l cont nue for closure., Dn Apr l 24, 1564, Nat v dad 9as released from the hosp tal. Ber hosp tal and med cal b lls, nclud ng the doctorsJ fees, amounted to +>0,000.00. After a couple of days, Nat v dad compla ned of e1cruc at ng pa n n her anal reg on. &he consulted both Dr. Amp l and Dr. 7uentes about t. %hey told her that the pa n 9as the natural conse=uence of the surgery. Dr. Amp l then recommended that she consult an oncolog st to e1am ne the cancerous nodes 9h ch 9ere not removed dur ng the operat on. Dn May 5, 1564, Nat v dad, accompan ed by her husband, 9ent to the 3n ted &tates to seeF further treatment. After four months of consultat ons and laboratory e1am nat ons, Nat v dad 9as told she 9as free of cancer. Bence, she 9as adv sed to return to the +h l pp nes. Dn August <1, 1564, Nat v dad fle9 bacF to the +h l pp nes, st ll suffer ng from pa ns. %9o 9eeFs thereafter, her daughter found a p ece of gauAe protrud ng from her vag na. 3pon be ng nformed about t, Dr. Amp l proceeded to her house 9here he managed to e1tract by hand a p ece of gauAe measur ng 1.8 nches n 9 dth. Be then assured her that the pa ns 9ould soon van sh. Dr. Amp lJs assurance d d not come true. $nstead, the pa ns ntens f ed, prompt ng Nat v dad to seeF treatment at the +olymed c #eneral Bosp tal. (h le conf ned there, Dr. "amon #ut erreA detected the presence of another fore gn ob-ect n her vag na @@ a foul@smell ng gauAe measur ng 1.8 nches n 9 dth 9h ch badly nfected her vag nal vault. A recto@vag nal f stula had formed n her reproduct ve organs 9h ch forced stool to e1crete through the vag na. Another

surg cal operat on 9as needed to remedy the damage. %hus, n Dctober 1564, Nat v dad under9ent another surgery. Dn November 12, 1564, Nat v dad and her husband f led 9 th the "%', Eranch 5>, UueAon ' ty a compla nt for damages aga nst the +rofess onal &erv ces, $nc. /+&$0, o9ner of the Med cal ' ty Bosp tal, Dr. Amp l, and Dr. 7uentes, docFeted as ' v l 'ase No. U@4<<22. %hey alleged that the latter are l able for negl gence for leav ng t9o p eces of gauAe ns de Nat v dadJs body and malpract ce for conceal ng the r acts of negl gence. Mean9h le, Enr =ue Agana also f led 9 th the +rofess onal "egulat on 'omm ss on /+"'0 an adm n strat ve compla nt for gross negl gence and malpract ce aga nst Dr. Amp l and Dr. 7uentes, docFeted as Adm n strat ve 'ase No. 1>50. %he +"' Eoard of Med c ne heard the case only 9 th respect to Dr. 7uentes because t fa led to ac=u re -ur sd ct on over Dr. Amp l 9ho 9as then n the 3n ted &tates. Dn 7ebruary 1>, 156>, pend ng the outcome of the above cases, Nat v dad d ed and 9as duly subst tuted by her above@named ch ldren /the Aganas0. Dn March 12, 155<, the "%' rendered ts Dec s on n favor of the Aganas, f nd ng +&$, Dr. Amp l and Dr. 7uentes l able for negl gence and malpract ce, the decretal part of 9h ch reads? (BE"E7D"E, -udgment s hereby rendered for the pla nt ffs order ng the defendants +"D7E&&$DNA! &E"C$'E&, $N'., D". M$#3E! AM+$! and D". J3AN 73EN%E& to pay to the pla nt ffs, -o ntly and severally, e1cept n respect of the a9ard for e1emplary damages and the nterest thereon 9h ch are the l ab l t es of defendants Dr. Amp l and Dr. 7uentes only, as follo9s? 1. As actual damages, the follo9 ng amounts? a. %he e=u valent n +h l pp ne 'urrency of the total of 3&S15,500.00 at the rate of +21.>0@3&S1.00, as re mbursement of actual e1penses ncurred n the 3n ted &tates of Amer caI b. %he sum of +4,600.00 as travel ta1es of pla nt ffs and the r phys c an daughterI c. %he total sum of +48,602.80, represent ng the cost of hosp tal Aat on at +olymed c Bosp tal, med cal fees, and cost of the sal ne solut onI 2. As moral damages, the sum of +2,000,000.00I <. As e1emplary damages, the sum of +<00,000.00I 4. As attorneyJs fees, the sum of +280,000.00I 8. !egal nterest on tems 1 /a0, /b0, and /c0I 2I and < here nabove, from date of f l ng of the compla nt unt l full paymentI and >. 'osts of su t.

&D D"DE"ED. Aggr eved, +&$, Dr. 7uentes and Dr. Amp l nterposed an appeal to the 'ourt of Appeals, docFeted as 'A@#.". 'C No. 420>2. $nc dentally, on Apr l <, 155<, the Aganas f led 9 th the "%' a mot on for a part al e1ecut on of ts Dec s on, 9h ch 9as granted n an Drder dated May 11, 155<. %hereafter, the sher ff lev ed upon certa n propert es of Dr. Amp l and sold them for +481,228.00 and del vered the amount to the Aganas. 7ollo9 ng the r rece pt of the money, the Aganas entered nto an agreement 9 th +&$ and Dr. 7uentes to ndef n tely suspend any further e1ecut on of the "%' Dec s on. Bo9ever, not long thereafter, the Aganas aga n f led a mot on for an al as 9r t of e1ecut on aga nst the propert es of +&$ and Dr. 7uentes. Dn &eptember 21, 155<, the "%' granted the mot on and ssued the correspond ng 9r t, prompt ng Dr. 7uentes to f le 9 th the 'ourt of Appeals a pet t on for cert orar and proh b t on, 9 th prayer for prel m nary n-unct on, docFeted as 'A@ #.". &+ No. <2156. Dur ng ts pendency, the 'ourt of Appeals ssued a "esolut on8 dated Dctober 25, 155< grant ng Dr. 7uentesJ prayer for n-unct ve rel ef. Dn January 24, 1554, 'A@#.". &+ No. <2156 9as consol dated 9 th 'A@#.". 'C No. 420>2. Mean9h le, on January 2<, 1558, the +"' Eoard of Med c ne rendered ts Dec s on> n Adm n strat ve 'ase No. 1>50 d sm ss ng the case aga nst Dr. 7uentes. %he Eoard held that the prosecut on fa led to sho9 that Dr. 7uentes 9as the one 9ho left the t9o p eces of gauAe ns de Nat v dadJs bodyI and that he concealed such fact from Nat v dad. Dn &eptember >, 155>, the 'ourt of Appeals rendered ts Dec s on -o ntly d spos ng of 'A@#.". 'C No. 420>2 and 'A@#.". &+ No. <2156, thus? (BE"E7D"E, e1cept for the mod f cat on that the case aga nst defendant@ appellant Dr. Juan 7uentes s hereby D$&M$&&ED, and 9 th the pronouncement that defendant@appellant Dr. M guel Amp l s l able to re mburse defendant@ appellant +rofess onal &erv ces, $nc., 9hatever amount the latter 9 ll pay or had pa d to the pla nt ffs@appellees, the dec s on appealed from s hereby A77$"MED and the nstant appeal D$&M$&&ED. 'oncom tant 9 th the above, the pet t on for cert orar and proh b t on f led by here n defendant@appellant Dr. Juan 7uentes n 'A@#.". &+ No. <2156 s hereby #"AN%ED and the challenged order of the respondent -udge dated &eptember 21, 155<, as 9ell as the al as 9r t of e1ecut on ssued pursuant thereto are hereby N3!!$7$ED and &E% A&$DE. %he bond posted by the pet t oner n connect on 9 th the 9r t of prel m nary n-unct on ssued by th s 'ourt on November 25, 155< s hereby cancelled. 'osts aga nst defendants@appellants Dr. M guel Amp l and +rofess onal &erv ces, $nc.

&D D"DE"ED. Dnly Dr. Amp l f led a mot on for recons derat on, but t 9as den ed n a "esolut on2 dated December 15, 155>. Bence, the nstant consol dated pet t ons. $n #.". No. 12>252, +&$ alleged n ts pet t on that the 'ourt of Appeals erred n hold ng that? /10 t s estopped from ra s ng the defense that Dr. Amp l s not ts employeeI /20 t s sol dar ly l able 9 th Dr. Amp lI and /<0 t s not ent tled to ts countercla m aga nst the Aganas. +&$ contends that Dr. Amp l s not ts employee, but a mere consultant or ndependent contractor. As such, he alone should ans9er for h s negl gence. $n #.". No. 12>4>2, the Aganas ma nta n that the 'ourt of Appeals erred n f nd ng that Dr. 7uentes s not gu lty of negl gence or med cal malpract ce, nvoF ng the doctr ne of res psa lo=u tur. %hey contend that the p eces of gauAe are pr ma fac e proofs that the operat ng surgeons have been negl gent. 7 nally, n #.". No. 122850, Dr. Amp l asserts that the 'ourt of Appeals erred n f nd ng h m l able for negl gence and malpract ce sans ev dence that he left the t9o p eces of gauAe n Nat v dadJs vag na. Be po nted to other probable causes, such as? /10 t 9as Dr. 7uentes 9ho used gauAes n perform ng the hysterectomyI /20 the attend ng nursesJ fa lure to properly count the gauAes used dur ng surgeryI and /<0 the med cal ntervent on of the Amer can doctors 9ho e1am ned Nat v dad n the 3n ted &tates of Amer ca. 7or our resolut on are these three v tal ssues? f rst, 9hether the 'ourt of Appeals erred n hold ng Dr. Amp l l able for negl gence and malpract ceI second, 9hether the 'ourt of Appeals erred n absolv ng Dr. 7uentes of any l ab l tyI and th rd, 9hether +&$ may be held sol dar ly l able for the negl gence of Dr. Amp l. $ @ #.". No. 122850 (hether the 'ourt of Appeals Erred n Bold ng Dr. Amp l ! able for Negl gence and Malpract ce. Dr. Amp l, n an attempt to absolve h mself, gears the 'ourtJs attent on to other poss ble causes of Nat v dadJs detr ment. Be argues that the 'ourt should not d scount e ther of the follo9 ng poss b l t es? f rst, Dr. 7uentes left the gauAes n Nat v dadJs body after perform ng hysterectomyI second, the attend ng nurses erred n count ng the gauAesI and th rd, the Amer can doctors 9ere the ones 9ho placed the gauAes n Nat v dadJs body. Dr. Amp lJs arguments are purely con-ectural and 9 thout bas s. "ecords sho9 that he d d not present any ev dence to prove that the Amer can doctors 9ere the ones 9ho put or left the gauAes n Nat v dadJs body. Ne ther d d he subm t ev dence to rebut the correctness of the record of operat on, part cularly the number of gauAes used. As to the alleged negl gence of Dr. 7uentes, 9e are m ndful that Dr. Amp l e1am ned h s /Dr. 7uentesJ0 9orF and found t n order.

%he glar ng truth s that all the ma-or c rcumstances, taFen together, as spec f ed by the 'ourt of Appeals, d rectly po nt to Dr. Amp l as the negl gent party, thus? 7 rst, t s not d sputed that the surgeons used gauAes as sponges to control the bleed ng of the pat ent dur ng the surg cal operat on. &econd, mmed ately after the operat on, the nurses 9ho ass sted n the surgery noted n the r report that the Ysponge count /9as0 lacF ng 2JI that such anomaly 9as Yannounced to surgeonJ and that a Ysearch 9as done but to no ava lJ prompt ng Dr. Amp l to Ycont nue for closureJ 1 1 1. %h rd, after the operat on, t9o /20 gauAes 9ere e1tracted from the same spot of the body of Mrs. Agana 9here the surgery 9as performed. An operat on re=u r ng the plac ng of sponges n the nc s on s not complete unt l the sponges are properly removed, and t s settled that the leav ng of sponges or other fore gn substances n the 9ound after the nc s on has been closed s at least pr ma fac e negl gence by the operat ng surgeon. 6 %o put t s mply, such act s cons dered so ncons stent 9 th due care as to ra se an nference of negl gence. %here are even leg ons of author t es to the effect that such act s negl gence per se.5 Df course, the 'ourt s not bl nd to the real ty that there are t mes 9hen danger to a pat entJs l fe precludes a surgeon from further search ng m ss ng sponges or fore gn ob-ects left n the body. Eut th s does not leave h m free from any obl gat on. Even f t has been sho9n that a surgeon 9as re=u red by the urgent necess t es of the case to leave a sponge n h s pat entJs abdomen, because of the dangers attendant upon delay, st ll, t s h s legal duty to so nform h s pat ent 9 th n a reasonable t me thereafter by adv s ng her of 9hat he had been compelled to do. %h s s n order that she m ght seeF rel ef from the effects of the fore gn ob-ect left n her body as her cond t on m ght perm t. %he rul ng n &m th v. Leagler10 s e1pl c t, thus? %he removal of all sponges used s part of a surg cal operat on, and 9hen a phys c an or surgeon fa ls to remove a sponge he has placed n h s pat entJs body that should be removed as part of the operat on, he thereby leaves h s operat on uncompleted and creates a ne9 cond t on 9h ch mposes upon h m the legal duty of call ng the ne9 cond t on to h s pat entJs attent on, and endeavor ng 9 th the means he has at hand to m n m Ae and avo d unto9ard results l Fely to ensue therefrom. Bere, Dr. Amp l d d not nform Nat v dad about the m ss ng t9o p eces of gauAe. (orse, he even m sled her that the pa n she 9as e1per enc ng 9as the ord nary conse=uence of her operat on. Bad he been more cand d, Nat v dad could have taFen the mmed ate and appropr ate med cal remedy to remove the gauAes from her body. %o our m nd, 9hat 9as n t ally an act of negl gence by Dr. Amp l has r pened nto a del berate 9rongful act of dece v ng h s pat ent. %h s s a clear case of med cal malpract ce or more appropr ately, med cal negl gence. %o successfully pursue th s F nd of case, a pat ent must only prove

that a health care prov der e ther fa led to do someth ng 9h ch a reasonably prudent health care prov der 9ould have done, or that he d d someth ng that a reasonably prudent prov der 9ould not have doneI and that fa lure or act on caused n-ury to the pat ent.11 & mply put, the elements are duty, breach, n-ury and pro1 mate causat on. Dr, Amp l, as the lead surgeon, had the duty to remove all fore gn ob-ects, such as gauAes, from Nat v dadJs body before closure of the nc s on. (hen he fa led to do so, t 9as h s duty to nform Nat v dad about t. Dr. Amp l breached both dut es. &uch breach caused n-ury to Nat v dad, necess tat ng her further e1am nat on by Amer can doctors and another surgery. %hat Dr. Amp lJs negl gence s the pro1 mate cause 12 of Nat v dadJs n-ury could be traced from h s act of clos ng the nc s on desp te the nformat on g ven by the attend ng nurses that t9o p eces of gauAe 9ere st ll m ss ng. %hat they 9ere later on e1tracted from Nat v dadJs vag na establ shed the causal l nF bet9een Dr. Amp lJs negl gence and the n-ury. And 9hat further aggravated such n-ury 9as h s del berate concealment of the m ss ng gauAes from the Fno9ledge of Nat v dad and her fam ly. $$ @ #.". No. 12>4>2 (hether the 'ourt of Appeals Erred n Absolv ng Dr. 7uentes of any ! ab l ty %he Aganas assa led the d sm ssal by the tr al court of the case aga nst Dr. 7uentes on the ground that t s contrary to the doctr ne of res psa lo=u tur. Accord ng to them, the fact that the t9o p eces of gauAe 9ere left ns de Nat v dadJs body s a pr ma fac e ev dence of Dr. 7uentesJ negl gence. (e are not conv nced. ! terally, res psa lo=u tur means ,the th ng speaFs for tself., $t s the rule that the fact of the occurrence of an n-ury, taFen 9 th the surround ng c rcumstances, may perm t an nference or ra se a presumpt on of negl gence, or maFe out a pla nt ffJs pr ma fac e case, and present a =uest on of fact for defendant to meet 9 th an e1planat on. 1<&tated d fferently, 9here the th ng 9h ch caused the n-ury, 9 thout the fault of the n-ured, s under the e1clus ve control of the defendant and the n-ury s such that t should not have occurred f he, hav ng such control used proper care, t affords reasonable ev dence, n the absence of e1planat on that the n-ury arose from the defendantJs 9ant of care, and the burden of proof s sh fted to h m to establ sh that he has observed due care and d l gence.14 7rom the forego ng statements of the rule, the re=u s tes for the appl cab l ty of the doctr ne of res psa lo=u tur are? /10 the occurrence of an n-uryI /20 the th ng 9h ch caused the n-ury 9as under the control and management of the defendantI /<0 the occurrence 9as such that n the ord nary course of th ngs, 9ould not have happened f those 9ho had control or management used proper careI and /40 the absence of e1planat on by the defendant. Df the forego ng

re=u s tes, the most nstrumental s the ,control and management of the th ng 9h ch caused the n-ury.,18 (e f nd the element of ,control and management of the th ng 9h ch caused the n-ury, to be 9ant ng. Bence, the doctr ne of res psa lo=u tur 9 ll not l e. $t 9as duly establ shed that Dr. Amp l 9as the lead surgeon dur ng the operat on of Nat v dad. Be re=uested the ass stance of Dr. 7uentes only to perform hysterectomy 9hen he /Dr. Amp l0 found that the mal gnancy n her s gmo d area had spread to her left ovary. Dr. 7uentes performed the surgery and thereafter reported and sho9ed h s 9orF to Dr. Amp l. %he latter e1am ned t and f nd ng everyth ng to be n order, allo9ed Dr. 7uentes to leave the operat ng room. Dr. Amp l then resumed operat ng on Nat v dad. Be 9as about to f n sh the procedure 9hen the attend ng nurses nformed h m that t9o p eces of gauAe 9ere m ss ng. A ,d l gent search, 9as conducted, but the m splaced gauAes 9ere not found. Dr. Amp l then d rected that the nc s on be closed. Dur ng th s ent re per od, Dr. 7uentes 9as no longer n the operat ng room and had, n fact, left the hosp tal. 3nder the ,'apta n of the &h p, rule, the operat ng surgeon s the person n complete charge of the surgery room and all personnel connected 9 th the operat on. %he r duty s to obey h s orders. 1> As stated before, Dr. Amp l 9as the lead surgeon. $n other 9ords, he 9as the ,'apta n of the &h p., %hat he d scharged such role s ev dent from h s follo9 ng conduct? /10 call ng Dr. 7uentes to perform a hysterectomyI /20 e1am n ng the 9orF of Dr. 7uentes and f nd ng t n orderI /<0 grant ng Dr. 7uentesJ perm ss on to leaveI and /40 order ng the closure of the nc s on. %o our m nd, t 9as th s act of order ng the closure of the nc s on not9 thstand ng that t9o p eces of gauAe rema ned unaccounted for, that caused n-ury to Nat v dadJs body. 'learly, the control and management of the th ng 9h ch caused the n-ury 9as n the hands of Dr. Amp l, not Dr. 7uentes. $n th s -ur sd ct on, res psa lo=u tur s not a rule of substant ve la9, hence, does not per se create or const tute an ndependent or separate ground of l ab l ty, be ng a mere ev dent ary rule.12 $n other 9ords, mere nvocat on and appl cat on of the doctr ne does not d spense 9 th the re=u rement of proof of negl gence. Bere, the negl gence 9as proven to have been comm tted by Dr. Amp l and not by Dr. 7uentes. $$$ @ #.". No. 12>252 (hether +&$ $s ! able for the Negl gence of Dr. Amp l %he th rd ssue necess tates a gl mpse at the h stor cal development of hosp tals and the result ng theor es concern ng the r l ab l ty for the negl gence of phys c ans. 3nt l the m d@n neteenth century, hosp tals 9ere generally char table nst tut ons, prov d ng med cal serv ces to the lo9est classes of soc ety, 9 thout regard for a pat entJs ab l ty to pay.16 %hose 9ho could afford med cal treatment 9ere usually treated at home by the r doctors. 15 Bo9ever, the days of house calls and

ph lanthrop c health care are over. %he modern health care ndustry cont nues to d stance tself from ts char table past and has e1per enced a s gn f cant convers on from a not@for@prof t health care to for@prof t hosp tal bus nesses. 'onse=uently, s gn f cant changes n health la9 have accompan ed the bus ness@ related changes n the hosp tal ndustry. Dne mportant legal change s an ncrease n hosp tal l ab l ty for med cal malpract ce. Many courts no9 allo9 cla ms for hosp tal v car ous l ab l ty under the theor es of respondeat super or, apparent author ty, ostens ble author ty, or agency by estoppel. 20 $n th s -ur sd ct on, the statute govern ng l ab l ty for negl gent acts s Art cle 212> of the ' v l 'ode, 9h ch reads? Art. 212>. (hoever by act or om ss on causes damage to another, there be ng fault or negl gence, s obl ged to pay for the damage done. &uch fault or negl gence, f there s no pre@e1 st ng contractual relat on bet9een the part es, s called a =uas @del ct and s governed by the prov s ons of th s 'hapter. A der vat ve of th s prov s on s Art cle 2160, the rule govern ng v car ous l ab l ty under the doctr ne of respondeat super or, thus? A"%. 2160. %he obl gat on mposed by Art cle 212> s demandable not only for oneJs o9n acts or om ss ons, but also for those of persons for 9hom one s respons ble. 1 1 1 1 1 1

%he o9ners and managers of an establ shment or enterpr se are l Fe9 se respons ble for damages caused by the r employees n the serv ce of the branches n 9h ch the latter are employed or on the occas on of the r funct ons. Employers shall be l able for the damages caused by the r employees and household helpers act ng 9 th n the scope of the r ass gned tasFs even though the former are not engaged n any bus ness or ndustry. 1 1 1 1 1 1

%he respons b l ty treated of n th s art cle shall cease 9hen the persons here n ment oned prove that they observed all the d l gence of a good father of a fam ly to prevent damage. A prom nent c v l st commented that profess onals engaged by an employer, such as phys c ans, dent sts, and pharmac sts, are not ,employees, under th s art cle because the manner n 9h ch they perform the r 9orF s not 9 th n the control of the latter /employer0. $n other 9ords, profess onals are cons dered personally l able for the fault or negl gence they comm t n the d scharge of the r dut es, and the r employer cannot be held l able for such fault or negl gence. $n the conte1t of the present case, ,a hosp tal cannot be held l able for the fault or negl gence of a phys c an or surgeon n the treatment or operat on of pat ents., 21 %he forego ng v e9 s grounded on the trad t onal not on that the profess onal status and the very nature of the phys c anJs call ng preclude h m from be ng

classed as an agent or employee of a hosp tal, 9henever he acts n a profess onal capac ty.22 $t has been sa d that med cal pract ce str ctly nvolves h ghly developed and spec al Aed Fno9ledge, 2< such that phys c ans are generally free to e1erc se the r o9n sF ll and -udgment n render ng med cal serv ces sans nterference.24 Bence, 9hen a doctor pract ces med c ne n a hosp tal sett ng, the hosp tal and ts employees are deemed to subserve h m n h s m n strat ons to the pat ent and h s act ons are of h s o9n respons b l ty. 28 %he case of &chloendorff v. &oc ety of Ne9 HorF Bosp tal 2> 9as then cons dered an author ty for th s v e9. %he ,&chloendorff doctr ne, regards a phys c an, even f employed by a hosp tal, as an ndependent contractor because of the sF ll he e1erc ses and the lacF of control e1erted over h s 9orF. 3nder th s doctr ne, hosp tals are e1empt from the appl cat on of the respondeat super or pr nc ple for fault or negl gence comm tted by phys c ans n the d scharge of the r profess on. Bo9ever, the eff cacy of the forego ng doctr ne has 9eaFened 9 th the s gn f cant developments n med cal care. 'ourts came to real Ae that modern hosp tals are ncreas ngly taF ng act ve role n supply ng and regulat ng med cal care to pat ents. No longer 9ere a hosp talJs funct ons l m ted to furn sh ng room, food, fac l t es for treatment and operat on, and attendants for ts pat ents. %hus, n E ng v. %hun g,22 the Ne9 HorF 'ourt of Appeals dev ated from the &chloendorff doctr ne, not ng that modern hosp tals actually do far more than prov de fac l t es for treatment. "ather, they regularly employ, on a salar ed bas s, a large staff of phys c ans, nterns, nurses, adm n strat ve and manual 9orFers. %hey charge pat ents for med cal care and treatment, even collect ng for such serv ces through legal act on, f necessary. %he court then concluded that there s no reason to e1empt hosp tals from the un versal rule of respondeat super or. $n our shores, the nature of the relat onsh p bet9een the hosp tal and the phys c ans s rendered nconse=uent al n v e9 of our categor cal pronouncement n "amos v. 'ourt of Appeals26 that for purposes of apport on ng respons b l ty n med cal negl gence cases, an employer@employee relat onsh p n effect e1 sts bet9een hosp tals and the r attend ng and v s t ng phys c ans. %h s 'ourt held? ,(e no9 d scuss the respons b l ty of the hosp tal n th s part cular nc dent. %he un =ue pract ce /among pr vate hosp tals0 of f ll ng up spec al st staff 9 th attend ng and v s t ng ,consultants,, 9ho are allegedly not hosp tal employees, presents problems n apport on ng respons b l ty for negl gence n med cal malpract ce cases. Bo9ever, the d ff culty s more apparent than real. $n the f rst place, hosp tals e1erc se s gn f cant control n the h r ng and f r ng of consultants and n the conduct of the r 9orF 9 th n the hosp tal prem ses. Doctors 9ho apply for YconsultantJ slots, v s t ng or attend ng, are re=u red to subm t proof of complet on of res dency, the r educat onal =ual f cat ons, generally, ev dence of accred tat on by the appropr ate board /d plomate0, ev dence of fello9sh p n most cases, and references. %hese re=u rements are carefully scrut n Aed by members of the hosp tal adm n strat on or by a rev e9

comm ttee set up by the hosp tal 9ho e ther accept or re-ect the appl cat on. 1 1 1. After a phys c an s accepted, e ther as a v s t ng or attend ng consultant, he s normally re=u red to attend cl n co@patholog cal conferences, conduct beds de rounds for clerFs, nterns and res dents, moderate grand rounds and pat ent aud ts and perform other tasFs and respons b l t es, for the pr v lege of be ng able to ma nta n a cl n c n the hosp tal, andMor for the pr v lege of adm tt ng pat ents nto the hosp tal. $n add t on to these, the phys c anJs performance as a spec al st s generally evaluated by a peer rev e9 comm ttee on the bas s of mortal ty and morb d ty stat st cs, and feedbacF from pat ents, nurses, nterns and res dents. A consultant rem ss n h s dut es, or a consultant 9ho regularly falls short of the m n mum standards acceptable to the hosp tal or ts peer rev e9 comm ttee, s normally pol tely term nated. $n other 9ords, pr vate hosp tals, h re, f re and e1erc se real control over the r attend ng and v s t ng YconsultantJ staff. (h le YconsultantsJ are not, techn cally employees, 1 1 1, the control e1erc sed, the h r ng, and the r ght to term nate consultants all fulf ll the mportant hallmarFs of an employer@employee relat onsh p, 9 th the e1cept on of the payment of 9ages. $n assess ng 9hether such a relat onsh p n fact e1 sts, the control test s determ n ng. Accord ngly, on the bas s of the forego ng, 9e rule that for the purpose of allocat ng respons b l ty n med cal negl gence cases, an employer@employee relat onsh p n effect e1 sts bet9een hosp tals and the r attend ng and v s t ng phys c ans. , Eut the "amos pronouncement s not our only bas s n susta n ng +&$Js l ab l ty. $ts l ab l ty s also anchored upon the agency pr nc ple of apparent author ty or agency by estoppel and the doctr ne of corporate negl gence 9h ch have ga ned acceptance n the determ nat on of a hosp talJs l ab l ty for negl gent acts of health profess onals. %he present case serves as a perfect platform to test the appl cab l ty of these doctr nes, thus, enr ch ng our -ur sprudence. Apparent author ty, or 9hat s somet mes referred to as the ,hold ng out, theory, or doctr ne of ostens ble agency or agency by estoppel, 25 has ts or g n from the la9 of agency. $t mposes l ab l ty, not as the result of the real ty of a contractual relat onsh p, but rather because of the act ons of a pr nc pal or an employer n someho9 m slead ng the publ c nto bel ev ng that the relat onsh p or the author ty e1 sts.<0 %he concept s essent ally one of estoppel and has been e1pla ned n th s manner? ,%he pr nc pal s bound by the acts of h s agent 9 th the apparent author ty 9h ch he Fno9 ngly perm ts the agent to assume, or 9h ch he holds the agent out to the publ c as possess ng. %he =uest on n every case s 9hether the pr nc pal has by h s voluntary act placed the agent n such a s tuat on that a person of ord nary prudence, conversant 9 th bus ness usages and the nature of the part cular bus ness, s -ust f ed n presum ng that such agent has author ty to perform the part cular act n =uest on.<1

%he appl cab l ty of apparent author ty n the f eld of hosp tal l ab l ty 9as upheld long t me ago n $rv ng v. Doctor Bosp tal of !aFe (orth, $nc. <2 %here, t 9as e1pl c tly stated that ,there does not appear to be any rat onal bas s for e1clud ng the concept of apparent author ty from the f eld of hosp tal l ab l ty., %hus, n cases 9here t can be sho9n that a hosp tal, by ts act ons, has held out a part cular phys c an as ts agent andMor employee and that a pat ent has accepted treatment from that phys c an n the reasonable bel ef that t s be ng rendered n behalf of the hosp tal, then the hosp tal 9 ll be l able for the phys c anJs negl gence. Dur -ur sd ct on recogn Aes the concept of an agency by mpl cat on or estoppel. Art cle 16>5 of the ' v l 'ode reads? A"%. 16>5. Agency may be e1press, or mpl ed from the acts of the pr nc pal, from h s s lence or lacF of act on, or h s fa lure to repud ate the agency, Fno9 ng that another person s act ng on h s behalf 9 thout author ty. $n th s case, +&$ publ cly d splays n the lobby of the Med cal ' ty Bosp tal the names and spec al Aat ons of the phys c ans assoc ated or accred ted by t, nclud ng those of Dr. Amp l and Dr. 7uentes. (e concur 9 th the 'ourt of AppealsJ conclus on that t , s no9 estopped from pass ng all the blame to the phys c ans 9hose names t proudly paraded n the publ c d rectory lead ng the publ c to bel eve that t vouched for the r sF ll and competence., $ndeed, +&$Js act s tantamount to hold ng out to the publ c that Med cal ' ty Bosp tal, through ts accred ted phys c ans, offers =ual ty health care serv ces. Ey accred t ng Dr. Amp l and Dr. 7uentes and publ cly advert s ng the r =ual f cat ons, the hosp tal created the mpress on that they 9ere ts agents, author Aed to perform med cal or surg cal serv ces for ts pat ents. As e1pected, these pat ents, Nat v dad be ng one of them, accepted the serv ces on the reasonable bel ef that such 9ere be ng rendered by the hosp tal or ts employees, agents, or servants. %he tr al court correctly po nted out? 1 1 1 regardless of the educat on and status n l fe of the pat ent, he ought not be burdened 9 th the defense of absence of employer@employee relat onsh p bet9een the hosp tal and the ndependent phys c an 9hose name and competence are certa nly cert f ed to the general publ c by the hosp talJs act of l st ng h m and h s spec alty n ts lobby d rectory, as n the case here n. %he h gh costs of todayJs med cal and health care should at least e1act on the hosp tal greater, f not broader, legal respons b l ty for the conduct of treatment and surgery 9 th n ts fac l ty by ts accred ted phys c an or surgeon, regardless of 9hether he s ndependent or employed., << %he 9 sdom of the forego ng rat oc nat on s easy to d scern. 'orporate ent t es, l Fe +&$, are capable of act ng only through other nd v duals, such as phys c ans. $f these accred ted phys c ans do the r -ob 9ell, the hosp tal succeeds n ts m ss on of offer ng =ual ty med cal serv ces and thus prof ts f nanc ally. !og cally, 9here negl gence mars the =ual ty of ts serv ces, the hosp tal should not be allo9ed to escape l ab l ty for the acts of ts ostens ble agents.

(e no9 proceed to the doctr ne of corporate negl gence or corporate respons b l ty. Dne allegat on n the compla nt n ' v l 'ase No. U@4<<<2 for negl gence and malpract ce s that +&$ as o9ner, operator and manager of Med cal ' ty Bosp tal, ,d d not perform the necessary superv s on nor e1erc se d l gent efforts n the superv s on of Drs. Amp l and 7uentes and ts nurs ng staff, res dent doctors, and med cal nterns 9ho ass sted Drs. Amp l and 7uentes n the performance of the r dut es as surgeons.,<4 +rem sed on the doctr ne of corporate negl gence, the tr al court held that +&$ s d rectly l able for such breach of duty. (e agree 9 th the tr al court. "ecent years have seen the doctr ne of corporate negl gence as the -ud c al ans9er to the problem of allocat ng hosp talJs l ab l ty for the negl gent acts of health pract t oners, absent facts to support the appl cat on of respondeat super or or apparent author ty. $ts formulat on proceeds from the -ud c aryJs acFno9ledgment that n these modern t mes, the duty of prov d ng =ual ty med cal serv ce s no longer the sole prerogat ve and respons b l ty of the phys c an. %he modern hosp tals have changed structure. Bosp tals no9 tend to organ Ae a h ghly profess onal med cal staff 9hose competence and performance need to be mon tored by the hosp tals commensurate 9 th the r nherent respons b l ty to prov de =ual ty med cal care. <8 %he doctr ne has ts genes s n Darl ng v. 'harleston 'ommun ty Bosp tal.<> %here, the &upreme 'ourt of $ll no s held that ,the -ury could have found a hosp tal negl gent, nter al a, n fa l ng to have a suff c ent number of tra ned nurses attend ng the pat entI fa l ng to re=u re a consultat on 9 th or e1am nat on by members of the hosp tal staffI and fa l ng to rev e9 the treatment rendered to the pat ent., Dn the bas s of Darl ng, other -ur sd ct ons held that a hosp talJs corporate negl gence e1tends to perm tt ng a phys c an Fno9n to be ncompetent to pract ce at the hosp tal. <2 ( th the passage of t me, more dut es 9ere e1pected from hosp tals, among them? /10 the use of reasonable care n the ma ntenance of safe and ade=uate fac l t es and e=u pmentI /20 the select on and retent on of competent phys c ansI /<0 the oversee ng or superv s on of all persons 9ho pract ce med c ne 9 th n ts 9allsI and /40 the formulat on, adopt on and enforcement of ade=uate rules and pol c es that ensure =ual ty care for ts pat ents. <6 %hus, n %ucson Med cal 'enter, $nc. v. M sev ch,<5 t 9as held that a hosp tal, follo9 ng the doctr ne of corporate respons b l ty, has the duty to see that t meets the standards of respons b l t es for the care of pat ents. &uch duty ncludes the proper superv s on of the members of ts med cal staff. And n Eost v. " ley, 40 the court concluded that a pat ent 9ho enters a hosp tal does so 9 th the reasonable e1pectat on that t 9 ll attempt to cure h m. %he hosp tal accord ngly has the duty to maFe a reasonable effort to mon tor and oversee the treatment prescr bed and adm n stered by the phys c ans pract c ng n ts prem ses. $n the present case, t 9as duly establ shed that +&$ operates the Med cal ' ty Bosp tal for the purpose and under the concept of prov d ng comprehens ve

med cal serv ces to the publ c. Accord ngly, t has the duty to e1erc se reasonable care to protect from harm all pat ents adm tted nto ts fac l ty for med cal treatment. 3nfortunately, +&$ fa led to perform such duty. %he f nd ngs of the tr al court are conv nc ng, thus? 1 1 1 +&$Js l ab l ty s traceable to ts fa lure to conduct an nvest gat on of the matter reported n the nota bene of the count nurse. &uch fa lure establ shed +&$Js part n the darF consp racy of s lence and concealment about the gauAes. Eth cal cons derat ons, f not also legal, d ctated the hold ng of an mmed ate n=u ry nto the events, f not for the benef t of the pat ent to 9hom the duty s pr mar ly o9ed, then n the nterest of arr v ng at the truth. %he 'ourt cannot accept that the med cal and the heal ng profess ons, through the r members l Fe defendant surgeons, and the r nst tut ons l Fe +&$Js hosp tal fac l ty, can callously turn the r bacFs on and d sregard even a mere probab l ty of m staFe or negl gence by refus ng or fa l ng to nvest gate a report of such ser ousness as the one n Nat v dadJs case. $t s 9orthy to note that Dr. Amp l and Dr. 7uentes operated on Nat v dad 9 th the ass stance of the Med cal ' ty Bosp talJs staff, composed of res dent doctors, nurses, and nterns. As such, t s reasonable to conclude that +&$, as the operator of the hosp tal, has actual or construct ve Fno9ledge of the procedures carr ed out, part cularly the report of the attend ng nurses that the t9o p eces of gauAe 9ere m ss ng. $n 7r dena v. Evans, 41 t 9as held that a corporat on s bound by the Fno9ledge ac=u red by or not ce g ven to ts agents or off cers 9 th n the scope of the r author ty and n reference to a matter to 9h ch the r author ty e1tends. %h s means that the Fno9ledge of any of the staff of Med cal ' ty Bosp tal const tutes Fno9ledge of +&$. No9, the fa lure of +&$, desp te the attend ng nursesJ report, to nvest gate and nform Nat v dad regard ng the m ss ng gauAes amounts to callous negl gence. Not only d d +&$ breach ts dut es to oversee or superv se all persons 9ho pract ce med c ne 9 th n ts 9alls, t also fa led to taFe an act ve step n f 1 ng the negl gence comm tted. %h s renders +&$, not only v car ously l able for the negl gence of Dr. Amp l under Art cle 2160 of the ' v l 'ode, but also d rectly l able for ts o9n negl gence under Art cle 212>. $n 7r dena, the &upreme 'ourt of Ar Aona held? 1 1 1 $n recent years, ho9ever, the duty of care o9ed to the pat ent by the hosp tal has e1panded. %he emerg ng trend s to hold the hosp tal respons ble 9here the hosp tal has fa led to mon tor and rev e9 med cal serv ces be ng prov ded 9 th n ts 9alls. &ee *ahn Bosp tal Malpract ce +revent on, 22 De +aul . "ev. 2< /15220. Among the cases nd cat ve of the Yemerg ng trendJ s +urcell v. L mbelman, 16 Ar A. App. 28,800 +. 2d <<8 /15220. $n +urcell, the hosp tal argued that t could not be held l able for the malpract ce of a med cal pract t oner because he 9as an ndependent contractor 9 th n the hosp tal. %he 'ourt of Appeals po nted out that the hosp tal had created a profess onal staff 9hose competence and performance 9as to be mon tored and rev e9ed by the govern ng body of the hosp tal, and the court held that a hosp tal 9ould be negl gent 9here t had

Fno9ledge or reason to bel eve that a doctor us ng the fac l t es 9as employ ng a method of treatment or care 9h ch fell belo9 the recogn Aed standard of care. &ubse=uent to the +urcell dec s on, the Ar Aona 'ourt of Appeals held that a hosp tal has certa n nherent respons b l t es regard ng the =ual ty of med cal care furn shed to pat ents 9 th n ts 9alls and t must meet the standards of respons b l ty commensurate 9 th th s undertaF ng. EeecF v. %ucson #eneral Bosp tal, 16 Ar A. App. 1>8, 800 +. 2d 118< /15220. %h s court has conf rmed the rul ngs of the 'ourt of Appeals that a hosp tal has the duty of superv s ng the competence of the doctors on ts staff. 1 1 1. 1 1 1 1 1 1

$n the amended compla nt, the pla nt ffs d d plead that the operat on 9as performed at the hosp tal 9 th ts Fno9ledge, a d, and ass stance, and that the negl gence of the defendants 9as the pro1 mate cause of the pat entJs n-ur es. (e f nd that such general allegat ons of negl gence, along 9 th the ev dence produced at the tr al of th s case, are suff c ent to support the hosp talJs l ab l ty based on the theory of negl gent superv s on., Anent the corollary ssue of 9hether +&$ s sol dar ly l able 9 th Dr. Amp l for damages, let t be emphas Aed that +&$, apart from a general den al of ts respons b l ty, fa led to adduce ev dence sho9 ng that t e1erc sed the d l gence of a good father of a fam ly n the accred tat on and superv s on of the latter. $n neglect ng to offer such proof, +&$ fa led to d scharge ts burden under the last paragraph of Art cle 2160 c ted earl er, and, therefore, must be ad-udged sol dar ly l able 9 th Dr. Amp l. Moreover, as 9e have d scussed, +&$ s also d rectly l able to the Aganas. Dne f nal 9ord. Dnce a phys c an undertaFes the treatment and care of a pat ent, the la9 mposes on h m certa n obl gat ons. $n order to escape l ab l ty, he must possess that reasonable degree of learn ng, sF ll and e1per ence re=u red by h s profess on. At the same t me, he must apply reasonable care and d l gence n the e1erc se of h s sF ll and the appl cat on of h s Fno9ledge, and e1ert h s best -udgment. (BE"E7D"E, 9e DENH all the pet t ons and A77$"M the challenged Dec s on of the 'ourt of Appeals n 'A@#.". 'C No. 420>2 and 'A@#.". &+ No. <2156. 'osts aga nst pet t oners +&$ and Dr. M guel Amp l. &D D"DE"ED. ANGE#)NA SAN!/*A#7G&()E$$E6 Assoc ate Just ce (E 'DN'3"? $E8NA(/ S. +&N/ 'h ef Just ce 'ha rperson

$ENA(/ %. %/$/NA Assoc ate Just ce /No +art0 %AN%)/ %. GA$%)A Assoc ate Just ce 'E"%$7$'A%$DN

A!/#:/ S. A6%&NA Asscoc ate Just ce

+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 'ourtJs D v s on. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
V

No part. +onente of the assa led Dec s on n the 'ourt of Appeals.

EeecF v. %ucson #eneral Bosp tal, 800 +. 2d 118< /15220, c t ng Darl ng v. 'harleston 'ommun ty Memor al Bosp tal, << $ll. 2d <2>, 211 N.E. 2d 28<.
2

+enned by Assoc ate Just ce 'anc o '. #arc a /no9 a member of the &upreme 'ourt0 and concurred n by Assoc ate Just ces Eugen o &. !ab tor a and Artem o #. %u=uero /both ret red0, "ollo, #.". Nos. 12>252, pp. <>@81I 12>4>2, pp. 22@42I 122850, pp. 2<@<6.
<

+enned by Judge !ucas +. Eersam n /no9 Just ce of the 'ourt of Appeals0, "ollo, #.". No. 12>>42, pp. >5@6<.
4

%he med cal staff 9as composed of phys c ans, both res dents and nterns, as 9ell as nurses.
8

%he d spos t ve port on reads?

,(BE"E7D"E, let a 9r t of prel m nary n-unct on be ssued upon pet t onerJs post ng of bond n the amount of +20,000.00, ENJD$N$N# publ c respondents from mplement ng the =uest oned order dated &eptember 21, 155< and from further taF ng any act on n ' v l 'ase No. U@4<<22 ent tled YNat v dad #. Agana, et al., pla nt ffs, versus +rofess onal &erv ces, $nc., et al., defendantsJ pend ng resolut on of the nstant pet t on. &D D"DE"ED., &ee "ollo, #.". No. 12>252, p. 42.
>

"ollo of #.". No. 12>4>2, pp. 64@65. "ollo of #.". No. 122850, p. 40.

"ule v. 'heeseman, <12 +. 2d 422 /15820, c t ng "ussel v. Ne9man, 11> *an. 2>6 +. 282I Eernsden v. Johnson, 124 *an. 2<0, 288 +. 2d 10<<.
5

&m th v. Leagler, 182 &o. <26 7la. /15<40, c t ng "uth v. Johnson, /'.'.A.0 122 7. 151I "eeves v. !utA, 125 Mo. App. >1, 1>2 &.(. 260I "ayburn v. Day, 12> Dr. 1<8,2>6 +. 1002, 85 A.!.". 10>2I (ynne v. Barvey, 5> (ash. <25, 1>8 +. >2I Barr s v. 7all /'.'.A.0 122 7. 25, 22 !.".A. /N.&.0 1124I Moore v. $vey, /%e1. ' v. App.0 2>4 &.(. 26<I 21 ".'. !. <66.
10

182 &o. <26 7la. /15<40 #arc a@"ueda v. +ascas o, #.". No. 116141, &eptember 8, 1552, 226 &'"A 2>5.

11

12

$n the lead ng case of Cda. de Eataclan v. Med na, /102 +h l. 161 :1582;0, th s 'ourt la d do9n the follo9 ng def n t on of pro1 mate cause n th s -ur sd ct on as follo9s? :%;hat cause, 9h ch, n natural and cont nuous se=uence unbroFen by any eff c ent nterven ng cause, produces the n-ury and 9 thout 9h ch the result 9ould not have occurred. And more comprehens vely, the pro1 mate cause s that act ng f rst and produc ng the n-ury, e ther mmed ately or by sett ng other events n mot on, all const tut ng a natural and cont nuous cha n of events, each hav ng a close causal connect on 9 th the mmed ate predecessor, the f nal event n the cha n mmed ately effect ng the n-ury as a natural and probable result of the cause 9h ch f rst acted, under 9h ch c rcumstances that the person respons ble for the f rst event should, as an ord nar ly prudent and ntell gent person, have reasonable ground to e1pect at the moment of h s act or default that an n-ury to some person m ght probably result therefrom.
1<

"amos v. 'ourt of Appeals, #.". No. 124<84, December 25, 1555, <21 &'"A 864.
14

Afr ca v. 'alte1 /+h ls.0 $nc., 12< +h l. 260 /15>>0.

18

"anos v. 'ourt of Appeals, supra. $n "amos, the phrase used s ,control of the nstrumental ty 9h ch caused the damage,, c t ng &t. JohnJs Bosp tal and &chool of Nurs ng v. 'hapman, 4<4 +2d 1>0 /15>20.
1>

"ural Educat onal Assn v. Eush, 42 %enn. App. <4, 256 &.(. 2d 2>1 /158>0. "amos v. 'ourt of Appeals, supra at footnote 1<.

12

16

!ev n, Bosp tal C car ous ! ab l ty for Negl gence by $ndependent 'ontractor +hys c ans? A Ne9 "ule for Ne9 % mes, Dctober 12, 2008.
15

$d. $d. %olent no, %he ' v l 'ode of the +h l pp nes, Colume C, 1552 Ed., p. >1>.

20

21

22

ArFansas M.". 'o. v. +earson, 56 ArF. 442, 18< &( 858 /15110I "unyan v. #oodrum, 142 ArF. 261, 226 &( <52, 1< A!" 140< /15210I "osane v. &enger, 112 'olo. <><, 145 +. 2d <22 /superseded by statute on other grounds0I Moon v. Mercy Bosp., 180 'ol. 4<0, <2< +. 2d 544 /15>20I Aust n v. ! tvaF, >62 +. 2d 41, 80 A!" 4th 228 /15640I (estern $ns. 'o. v. Erochner, >62 +. 2d 121< /156<0I "odr gueA v. Denver, 202 +. 2d 1<45 /15640.
2<

ArFansas M.". 'o. v. +earson, d.I N eto v. &tate, 582 +. 2d 6<4 /15520. Eut see EeecF v. %ucson #eneral Bosp., 16 Ar A. App. 1>8, 800 +. 2d 118< /15220I +a ntsv lle Bosp. 'o., >6< &( 2d 288 /15680I *elley v. "oss , <58 Mass. >85, 461 NE 2d 1<40 /15680 9h ch held that a phys c anJs profess onal status does not prevent h m or her from be ng a servant or agent of the hosp tal.
24

7r dena v. Evans, 122 Ar A. 81>, 822 +. 2d 4>< /15600. * tto v. # lbert, <5 'olo App <24, 820 +. 2d 844 /15220.

28

2>

211 N.H. 128, 108 N.E. 52, 82 !.".A., N.&., 808 /15140. %he court n &chloendorff op ned that a hosp tal does not act through phys c ans but merely procures them to act on the r o9n n t at ve and respons b l ty. 7or subse=uent appl cat on of the doctr ne, see for nstance, Bendr cFson v. BodF n, 280 App. D v >45, 254 NH& 562, revd on other grounds, 22> NH 282, 11 NE 2d 655 /15<20I Necolayff v. #enesee Bosp., 220 App. D v. >46, >1 NH& 2d 6<2, affd 25> NH 5<>, 2< NE2d 112 /154>0I Dav e v. !eno1 B ll Bosp., $nc., 61 NH& 2d 86< /15460I "oth v. Eeth El Bosp., $nc., 225 App. D v 512, 110 NH& 2d 86< /15820I "uf no v. 3&, 12> 7. &upp. 1<2 /15840I MracheF v. &unsh ne E scu t, $nc., <06 NH 11>, 12< N.E. 2d 601 /15840.
22

2 NH 2d >8>, 1>< NH& 2d <, 14< N.E. 2d < /15820. &upra at footnote 1<.

26

25

ElacFJs !a9 D ct onary />th Ed. 15500 1100. %he terms ,ostens ble agency,, ,agency by estoppel,, ,apparent author ty,, and ,hold ng out, tend to be used nterchangeably by the courts to refer to th s theory of l ab l ty. &ee for nstance, EaFer v. (erner, >84 +2d 2>< /15620 and AdamsF v. %acoma #en. Bosp., 20 (ash App. 56, 825 +2d 520 /15260. Agency by estoppel s def ned as ,one created by operat on of la9 and establ shed by proof of such acts of the pr nc pal as reasonably lead th rd persons to the conclus on of ts e1 stence. Ar ses 9here pr nc pal by negl gence n fa l ng to superv se agentJs affa rs, allo9s agent to e1erc se po9ers not granted to h m, thus -ust fy ng others n bel ev ng the agent possesses re=u s te author ty., ElacFJs, supra, p. >2. An ostens ble agency s ,an mpl ed or presumpt ve agency 9h ch e1 sts 9here one, e ther ntent onally or from 9ant of ord nary care, nduces another to bel eve that a th rd person s h s agent, though he never n fact, employed h m. $t s, str ctly speaF ng, no agency at all, but s n real ty based ent rely upon estoppel., Apparent author ty refers to ,the po9er to affect the legal relat ons of another person by transact ons 9 th th rd persons, professedly as agent for the other, ar s ng from and n accordance 9 th the otherJs man festat ons to such th rd persons., &upra, p. 5>.

<0

$rv ng v. Doctors Bosp tal of !aFe (orth, $nc., 418 &o. 2d 88 /15620, =uot ng Arthur v. &t. +eters Bosp tal, 1>5 N.J. 828, 408 A. 2d 44< /15250.
<1

$d., c t ng Budson v. '., !oan Assn., $nc. v. Boro9ytA, 11> N.J.!. >08, >06, 16> A 4<2 /&up. 't. 15<>0.
<2

&upra. "%' Dec s on, p. 5, "ollo of #.". No. 12>4>2, p. 122. "%' Dec s on, p. 2, "ollo of #.". No. 12>4>2, p. 120. +urcell v. L mbelman, 16 Ar A. App. 28, 800 +2d <<8 /15220. &upra at footnote 1.

<<

<4

<8

<>

<2

'orleto v. Bosp tal, 1<6 N.J. &uper. <02, <80 A. 2d 8<4 /&uper. 't. !a9 D v.15280I +urcell v. L mbelman, 16 Ar A. App. 28,800 +. 2d <<8 /15220I Bosp tal Author ty v. Jo ner, 225 #a. 140,165 &.E. 2d 412 /15220.
<6

(elsh v. Eulger, 846 +a. 804, >56 A.2d 861 /15520. 118 Ar A. <4, 848 +2d 586 /152>0. 2>2 &.E. 2d <51, cert den ed <00 N' 154, 2>5 &.E. 2d >21 /15600. 122 Ar A. 81>, >22 +. 2d 4>< /15600.

<5

40

41

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la :)$S( !)*)S)/N G.$. No. 1303<1 :e ruary 11, 3..=

+$/:ESS)/NA# SE$*)%ES, )N%., pet t oner, vs. (5E %/&$( /: A++EA#S and NA()*)!A! and EN$)E&E AGANA, respondents, 1@ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ 1 G.$. No. 130;01 :e ruary 11, 3..=

NA()*)!A! CSu stituted y -er c-ildren 'A$%E#)N/ AGANA ))), EN$)E&E AGANA, J$., E''A AGANA AN!A8A, JES&S AGANA, and $A8'&N! AGANAD and EN$)E&E AGANA, pet t oners, vs. (5E %/&$( /: A++EA#S and J&AN :&EN(ES, respondents, 1@ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ 1 G.$. No. 1312<. :e ruary 11, 3..=

')G&E# A'+)#, pet t oner, vs. (5E %/&$( /: A++EA#S and NA()*)!A! AGANA and EN$)E&E AGANA, respondents. $ES/#&()/N SAN!/*A#7G&()E$$E6, J., As the hosp tal ndustry changes, so must the la9s and -ur sprudence govern ng hosp tal l ab l ty. %he mmun ty from med cal malpract ce trad t onally accorded to hosp tals has to be eroded f 9e are to balance the nterest of the pat ents and hosp tals under the present sett ng. Eefore th s 'ourt s a mot on for recons derat on f led by +rofess onal &erv ces, $nc. /+&$0, pet t oner n #.". No. 12>252, assa l ng the 'ourtJs 7 rst D v s on Dec s on dated January <1, 2002, f nd ng +&$ and Dr. M guel Amp l, pet t oner n #.". No. 122850, -o ntly and severally l able for med cal negl gence. A br ef rev s t of the antecedent facts s mperat ve. Dn Apr l 4, 1564, Nat v dad Agana 9as adm tted at the Med cal ' ty #eneral Bosp tal /Med cal ' ty0 because of d ff culty of bo9el movement and bloody anal d scharge. Dr. Amp l d agnosed her to be suffer ng from ,cancer of the s gmo d., %hus, on Apr l 11, 1564, Dr. Amp l, ass sted by the med cal staff 1 of Med cal ' ty, performed an anter or resect on surgery upon her. Dur ng the surgery, he found that the mal gnancy n her s gmo d area had spread to her left ovary, necess tat ng the removal of certa n port ons of t. %hus, Dr. Amp l obta ned the consent of Atty. Enr =ue Agana, Nat v dadJs husband, to perm t Dr. Juan 7uentes, respondent n #.". No. 12>4>2, to perform hysterectomy upon Nat v dad. Dr. 7uentes performed and completed the hysterectomy. After9ards, Dr. Amp l tooF over, completed the operat on and closed the nc s on. Bo9ever, the operat on appeared to be fla9ed. $n the correspond ng "ecord of Dperat on dated Apr l 11, 1564, the attend ng nurses entered these remarFs? sponge count lacF ng 2 announced to surgeon searched done /s c0 but to no ava l cont nue for closure. After a couple of days, Nat v dad compla ned of e1cruc at ng pa n n her anal reg on. &he consulted both Dr. Amp l and Dr. 7uentes about t. %hey told her that the pa n 9as the natural conse=uence of the surg cal operat on performed upon her. Dr. Amp l recommended that Nat v dad consult an oncolog st to treat the cancerous nodes 9h ch 9ere not removed dur ng the operat on. Dn May 5, 1564, Nat v dad, accompan ed by her husband, 9ent to the 3n ted &tates to seeF further treatment. After four /40 months of consultat ons and laboratory e1am nat ons, Nat v dad 9as told that she 9as free of cancer. Bence, she 9as adv sed to return to the +h l pp nes.

Dn August <1, 1564, Nat v dad fle9 bacF to the +h l pp nes, st ll suffer ng from pa ns. %9o /20 9eeFs thereafter, her daughter found a p ece of gauAe protrud ng from her vag na. Dr. Amp l 9as mmed ately nformed. Be proceeded to Nat v dadJs house 9here he managed to e1tract by hand a p ece of gauAe measur ng 1.8 nches n 9 dth. Dr. Amp l then assured Nat v dad that the pa ns 9ould soon van sh. Desp te Dr. Amp lJs assurance, the pa ns ntens f ed, prompt ng Nat v dad to seeF treatment at the +olymed c #eneral Bosp tal. (h le conf ned thereat, Dr. "amon #ut erreA detected the presence of a fore gn ob-ect n her vag na @@ a foul@ smell ng gauAe measur ng 1.8 nches n 9 dth. %he gauAe had badly nfected her vag nal vault. A recto@vag nal f stula had formed n her reproduct ve organ 9h ch forced stool to e1crete through the vag na. Another surg cal operat on 9as needed to remedy the s tuat on. %hus, n Dctober 1564, Nat v dad under9ent another surgery. Dn November 12, 1564, Nat v dad and her husband f led 9 th the "eg onal %r al 'ourt, Eranch 5>, UueAon ' ty a compla nt for damages aga nst +&$ /o9ner of Med cal ' ty0, Dr. Amp l and Dr. 7uentes. Dn 7ebruary 1>, 156>, pend ng the outcome of the above case, Nat v dad d ed. &he 9as duly subst tuted by her above@named ch ldren /the Aganas0. Dn March 12, 155<, the tr al court rendered -udgment n favor of spouses Agana f nd ng +&$, Dr. Amp l and Dr. 7uentes -o ntly and severally l able. Dn appeal, the 'ourt of Appeals, n ts Dec s on dated &eptember >, 155>, aff rmed the assa led -udgment 9 th mod f cat on n the sense that the compla nt aga nst Dr. 7uentes 9as d sm ssed. +&$, Dr. Amp l and the Aganas f led 9 th th s 'ourt separate pet t ons for rev e9 on certiorari. Dn January <1, 2002, the 'ourt, through ts 7 rst D v s on, rendered a Dec s on hold ng that +&$ s -o ntly and severally l able 9 th Dr. Amp l for the follo9 ng reasons? first, there s an employer@employee relat onsh p bet9een Med cal ' ty and Dr. Amp l. %he 'ourt rel ed on Ramos v. .ourt of Appeals,2 hold ng that for the purpose of apport on ng respons b l ty n med cal negl gence cases, an employer@employee relat onsh p in effect eLists bet9een hosp tals and the r attend ng and v s t ng phys c ansI second, +&$Js act of publ cly d splay ng n the lobby of the Med cal ' ty the names and spec al Aat ons of ts accred ted phys c ans, nclud ng Dr. Amp l, estopped t from deny ng the e1 stence of an employer@employee relat onsh p bet9een them under the doctrine of ostensi le a"ency or a"ency y estoppel; and third, +&$Js fa lure to superv se Dr. Amp l and ts res dent phys c ans and nurses and to taFe an act ve step n order to remedy the r negl gence rendered t d rectly l able under the doctrine of corporate ne"li"ence. $n ts mot on for recons derat on, +&$ contends that the 'ourt erred n f nd ng t l able under Art cle 2160 of the ' v l 'ode, there be ng no employer@employee relat onsh p bet9een t and ts consultant, Dr. Amp l. +&$ stressed that the 'ourtJs Dec s on n Ramos hold ng that ,an employer@employee relat onsh p in

effect e1 sts bet9een hosp tals and the r attend ng and v s t ng phys c ans for the purpose of apport on ng respons b l ty, had been reversed n a subse=uent "esolut on.< 7urther, +&$ argues that t-e doctrine of ostensi le a"ency or a"ency y estoppelcannot apply because spouses Agana fa led to establ sh one re=u s te of the doctr ne, .e., that Nat v dad rel ed on the representat on of the hosp tal n engag ng the serv ces of Dr. Amp l. And lastly, +&$ ma nta ns that thedoctrine of corporate ne"li"ence s m splaced because the pro1 mate cause of Nat v dadJs n-ury 9as Dr. Amp lJs negl gence. %he mot on lacFs mer t. As earl er ment oned, the 7 rst D v s on, n ts assa led Dec s on, ruled that an employer@employee relat onsh p Iin effectI e1 sts bet9een the Med cal ' ty and Dr. Amp l. 'onse=uently, both are -o ntly and severally l able to the Aganas. %h s rul ng proceeds from the follo9 ng rat oc nat on n Ramos? (e no9 d scuss the respons b l ty of the hosp tal n th s part cular nc dent. %he un =ue pract ce /among pr vate hosp tals0 of f ll ng up spec al st staff 9 th attend ng and v s t ng ,consultants,, 9ho are allegedly not hosp tal employees, presents problems n apport on ng respons b l ty for negl gence n med cal malpract ce cases. 5oFeAer, t-e difficulty is only more apparent t-an real. $n the f rst place, -ospitals eLercise si"nificant control in t-e -irin" and firin" of consultants and in t-e conduct of t-eir ForG Fit-in t-e -ospital premises. Doctors 9ho apply for ,consultant, slots, v s t ng or attend ng, are re=u red to subm t proof of complet on of res dency, the r educat onal =ual f cat onsI generally, ev dence of accred tat on by the appropr ate board /d plomate0, ev dence of fello9sh p n most cases, and references. %hese re=u rements are carefully scrut n Aed by members of the hosp tal adm n strat on or by a rev e9 comm ttee set up by the hosp tal 9ho e ther accept or re-ect the appl cat on. %h s s part cularly true 9 th respondent hosp tal. After a p-ysician is accepted, eit-er as a Aisitin" or attendin" consultant, -e is normally reKuired to attend clinico7pat-olo"ical conferences, conduct edside rounds for clerGs, interns and residents, moderate "rand rounds and patient audits and perform ot-er tasGs and responsi ilities, for t-e priAile"e of ein" a le to maintain a clinic in t-e -ospital, andHor for t-e priAile"e of admittin" patients into t-e -ospital. $n add t on to these, t-e p-ysicianSs performance as a specialist is "enerally eAaluated y a peer reAieF committee on t-e asis of mortality and mor idity statistics, and feed acG from patients, nurses, interns and residents. A consultant remiss in -is duties, or a consultant F-o re"ularly falls s-ort of t-e minimum standards accepta le to t-e -ospital or its peer reAieF committee, is normally politely terminated. $n other 9ords, pr vate hosp tals h re, f re and e1erc se real control over the r attend ng and v s t ng ,consultant, staff. (h le IconsultantsI are not, tec-nically employees, a point F-ic- respondent -ospital asserts in

denyin" all responsi ility for t-e patientSs condition, t-e control eLercised, t-e -irin", and t-e ri"-t to terminate consultants all fulfill t-e important -allmarGs of an employer7employee relations-ip, Fit- t-e eLception of t-e payment of Fa"es. )n assessin" F-et-er suc- a relations-ip in fact eLists, t-e control test is determinin". Accordin"ly, on t-e asis of t-e fore"oin", Fe rule t-at for t-e purpose of allocatin" responsi ility in medical ne"li"ence cases, an employer7employee relations-ip in effect eLists etFeen -ospitals and t-eir attendin" and Aisitin" p-ysicians. %h s be ng the case, the =uest on no9 ar ses as to 9hether or not respondent hosp tal s sol dar ly l able 9 th respondent doctors for pet t onerJs cond t on. %he bas s for hold ng an employer sol dar ly respons ble for the negl gence of ts employee s found n Art cle 2160 of the ' v l 'ode 9h ch cons ders a person accountable not only for h s o9n acts but also for those of others based on the formerJs respons b l ty under a relat onsh p of partia ptetas. 'learly, n Ramos, the 'ourt cons dered the pecul ar relat onsh p bet9een a hosp tal and ts consultants on the bases of certa n factors. Dne such factor s the ,control test, 9here n the hosp tal e1erc ses control n the h r ng and f r ng of consultants, l Fe Dr. Amp l, and n the conduct of the r 9orF. Actually, contrary to +&$Js content on, the 'ourt d d not reverse ts rul ng n Ramos. (hat t clar f ed 9as that the De !os &antos Med cal 'l n c d d not e1erc se control over ts consultant, hence, there s no employer@employee relat onsh p bet9een them. %hus, desp te the grant ng of the sa d hosp talJs mot on for recons derat on, the doctr ne n Ramos stays, .e., for the purpose of allocat ng respons b l ty n med cal negl gence cases, an employer@employee relat onsh p e1 sts bet9een hosp tals and the r consultants. $n the nstant cases, +&$ merely offered a "eneral denial of respons b l ty, ma nta n ng that consultants, l Fe Dr. Amp l, are , ndependent contractors,, not employees of the hosp tal. Even assum ng that Dr. Amp l s not an employee of Med cal ' ty, but an ndependent contractor, st ll the sa d hosp tal s l able to the Aganas. $n 3ograles, et al. v. .apitol Medical .enter, et al. ,4 through Mr. Just ce Anton o %. 'arp o, the 'ourt held? %he =uest on no9 s 9hether 'M' s automat cally e1empt from l ab l ty cons der ng that Dr. Estrada s an ndependent contractor@phys c an. $n general, a hosp tal s not l able for the negl gence of an ndependent contractor@phys c an. %here s, ho9ever, an e1cept on to th s pr nc ple. %he hosp tal may be l able f the phys c an s the ,ostens ble, agent of the hosp tal. /9ones v. $hilpott, 202 7. &upp. 1210 :1566;0 %h s e1cept on s also Fno9n as the ,doctr ne of apparent author ty., /&omet mes referred to as the apparent or ostens ble agency theory. :1ing v. Mitchell, <1 A.D.<rd 586, 615 N.H. &.2d 1>5 /200>0;.

111 %he doctr ne of apparent author ty essent ally nvolves t9o factors to determ ne the l ab l ty of an ndependent contractor@phys c an. %he f rst factor focuses on the hosp talJs man festat ons and s somet mes descr bed as an n=u ry 9hether the hosp tal acted n a manner 9h ch 9ould lead a reasonable person to conclude that the nd v dual 9ho 9as alleged to be negl gent 9as an employee or agent of the hosp tal. / Diggs v. 3ovant 0ealth, :nc., >26 &.E.2d 681 /200>0 c t ng 0ylton v. 1oontz, 1<6 N.'. App. >25 /20000. )n t-is re"ard, t-e -ospital need not maGe eLpress representations to t-e patient t-at t-e treatin" p-ysician is an employee of t-e -ospital; rat-er a representation may e "eneral and implied. /:d.0 %he doctr ne of apparent author ty s a spec e of the doctr ne of estoppel. Art cle 14<1 of the ' v l 'ode prov des that ,:t;hrough estoppel, an adm ss on or representat on s rendered conclus ve upon the person maF ng t, and cannot be den ed or d sproved as aga nst the person rely ng thereon., Estoppel rests on th s rule? ,(hether a party has, by h s o9n declarat on, act, or om ss on, ntent onally and del berately led another to bel eve a part cular th ng true, and to act upon such bel ef, he cannot, n any l t gat on ar s ng out of such declarat on, act or om ss on, be perm tted to fals fy t. / De .astro v. 2inete, 1<2 +h l. 48< :15>5;, c t ng &ec. <, par. A, "ule 1<1 of the "ules of 'ourt. &ee also 1ing v. Mitchell, <1 A.D.<rd 586, 615 N.H.&.2d 1>5 :200>;0. 111 %he second factor focuses on the pat entJs rel ance. $t s somet mes character Aed as an n=u ry on 9hether the pla nt ff acted n rel ance upon the conduct of the hosp tal or ts a"ent, cons stent 9 th ord nary care and prudence. /Diggs v. 3ovant 0ealth, :nc. 0 +&$ argues that the doctrine of apparent aut-ority cannot apply to these cases because spouses Agana fa led to establ sh proof of the r rel ance on the representat on of Med cal ' ty that Dr. Amp l s ts employee. %he argument lacFs mer t. Atty. Agana categor cally test f ed that one of the reasons 9hy he chose Dr. Amp l 9as that -e GneF -im to e a staff mem er of 'edical %ity, a prominent and GnoFn -ospital. U ( ll you tell us 9hat transp red n your v s t to Dr. Amp lP

A (ell, $ sa9 Dr. Amp l at the Med cal ' ty, ) GnoF -im to e a staff mem er t-ere, and $ told h m about the case of my 9 fe and he asFed me to br ng my 9 fe over so she could be e1am ned. +r or to that, $ have Fno9n Dr. Amp l, f rst, he 9as stay ng n front of our house, he 9as a ne ghbor, second, my daughter 9as h s student n the 3n vers ty of the East &chool of Med c ne at "amon MagsaysayI and 9hen my daughter opted to establ sh a hosp tal or a

cl n c, Dr. Amp l 9as one of our consultants on ho9 to establ sh that hosp tal. And from there, $ have Fno9n that he 9as a spec al st 9hen t comes to that llness. Atty. Agcao l Dn that part cular occas on, Apr l 2, 1564, 9hat 9as your reason for choos ng to contact Dr. Amp l n connect on 9 th your 9 feJs llnessP A 7 rst, before that, $ have Fno9n h m to be a spec al st on that part of the body as a surgeonI second, ) -aAe GnoFn -im to e a staff mem er of t-e 'edical %ity F-ic- is a prominent and GnoFn -ospital. And th rd, because he s a ne ghbor, $ e1pect more than the usual med cal serv ce to be g ven to us, than h s ord nary pat ents.8 'learly, +&$ s estopped from pass ng the blame solely to Dr. Amp l. $ts act of d splay ng h s name and those of the other phys c ans n the publ c d rectory at the lobby of the hosp tal amounts to hold ng out to the publ c that t offers =ual ty med cal serv ce through the l sted phys c ans. %h s -ust f es Atty. AganaJs bel ef that Dr. Amp l 9as a member of the hosp talJs staff. )t must e stressed t-at under t-e doctrine of apparent aut-ority, t-e Kuestion in eAery case is F-et-er t-e principal -as y -is Aoluntary act placed t-e a"ent in suc- a situation t-at a person of ordinary prudence, conAersant Fitusiness usa"es and t-e nature of t-e particular usiness, is Bustified in presumin" t-at suc- a"ent -as aut-ority to perform t-e particular act in Kuestion.> $n these cases, the c rcumstances y eld a pos t ve ans9er to the =uest on. %he challenged Dec s on also anchors ts rul ng on the doctrine of corporate responsi ility.2 %he duty of prov d ng =ual ty med cal serv ce s no longer the sole prerogat ve and respons b l ty of the phys c an. %h s s because the modern hosp tal no9 tends to organ Ae a -i"-ly7professional medical staff 9hose competence and performance need also to be mon tored by the hosp tal commensurate 9 th ts nherent respons b l ty to prov de =ual ty med cal care.6 Suc- responsi ility includes t-e proper superAision of t-e mem ers of its medical staff. Accordin"ly, t-e -ospital -as t-e duty to maGe a reasona le effort to monitor and oAersee t-e treatment prescri ed and administered y t-e p-ysicians practicin" in its premises. 3nfortunately, +&$ had been rem ss n ts duty. $t d d not conduct an immediate inAesti"ation on the reported m ss ng gauAes to the great pre-ud ce and agony of ts pat ent. Dr. Jocson, a member of +&$Js med cal staff, 9ho test f ed on 9hether the hosp tal conducted an nvest gat on, 9as evas ve, thus? E We "o acG to t-e operatiAe tec-niKue, t-is Fas si"ned +uru"anan, Fas t-is su mitted to t-e -ospitalV y !r.

A 8es, sir, t-is Fas su mitted to t-e -ospital Fit- t-e record of t-e patient.

E Was t-e -ospital immediately informed a out t-e missin" spon"esV A (-at is t-e duty of t-e sur"eon, sir.

E As a Fitness to an untoFard incident in t-e operatin" room, Fas it not your o li"ation, !r., to also report to t-e -ospital ecause you are under t-e control and direction of t-e -ospitalV A (-e -ospital already -ad t-e record of t-e tFo /S missin", sir.

E )f you place yourself in t-e position of t-e -ospital, -oF Fill you recoAer. A E 8ou do not ansFer my Kuestion Fit- anot-er Kuestion. !id t-e -ospital do anyt-in" a out t-e missin" "auJesV

A (-e -ospital left it up to t-e sur"eon F-o Fas doin" t-e operation, sir. E A !id t-e -ospital inAesti"ate t-e sur"eon F-o did t-e operationV ) am not in t-e position to ansFer t-at, sir.

E 8ou neAer did -ear t-e -ospital inAesti"atin" t-e doctors inAolAed in t-is case of t-ose missin" spon"es, or did you -ear somet-in"V LLLLLL A ) t-inG Fe already made a report y Bust sayin" t-at tFo spon"es Fere missin", it is up to t-e -ospital to maGe t-e moAe. Atty. A"ana +recisely, ) am asGin" you if t-e -ospital did a moAe, if t-e -ospital did a moAe. A ) cannot ansFer t-at.

%ourt 9y t-at ansFer, Fould you mean to tell t-e %ourt t-at you Fere aFare if t-ere Fas suc- a moAe done y t-e -ospitalV A ) cannot ansFer t-at, your -onor, ecause ) did not -aAe any more folloF7up of t-e case t-at -appened until noF.5 %he above test mony obv ously sho9s Dr. JocsonJs lacG of concern for t-e patients. Suc- conduct is reflectiAe of t-e -ospitalSs manner of superAision. Not only did +S) reac- its duty to oAersee or superAise all persons F-o practice medicine Fit-in its Falls, it also failed to taGe an actiAe step in fiLin" t-e ne"li"ence committed. %h s renders +&$, not only

v car ously l able for the negl gence of Dr. Amp l under Art cle 2160 of the ' v l 'ode, but also directly lia le for ts o9n negl gence under Art cle 212>. Moreover, there s mer t n the tr al courtJs f nd ng that the fa lure of +&$ to conduct an nvest gat on ,esta lis-ed +S)Ss part in t-e darG conspiracy of silence and concealment a out t-e "auJes., %he follo9 ng test mony of Atty. Agana supports such f nd ngs, thus? U Hou sa d you rel ed on the prom se of Dr. Amp l and desp te the prom se you 9ere not able to obta n the sa d record. D d you go bacF to the record custod anP A E ) did not ecause ) Fas talGin" to !r. Ampil. 5e promised me.

After your talG to !r. Ampil, you Fent to t-e record custodianV

A ) Fent to t-e record custodian to "et t-e clinical record of my Fife, and ) Fas "iAen a portion of t-e records consistin" of t-e findin"s, amon" t-em, t-e entries of t-e dates, ut not t-e operatin" procedure and operatiAe report.10 $n sum, 9e f nd no mer t n the mot on for recons derat on. W5E$E:/$E, 9e !EN8 +&$Js mot on for recons derat on Fit- finality. S/ /$!E$E!. ANGE#)NA SAN!/*A#7G&()E$$E6 Assoc ate Just ce

WE %/N%&$, $E8NA(/ S. +&N/ 'h ef Just ce $ENA(/ %. %/$/NA Assoc ate Just ce A!/#:/ S. A6%&NA Assoc ate Just ce

(E$ES)(A J. #E/NA$!/7!E %AS($/ Assoc ate Just ce

%E$():)%A()/N +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 "esolut 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

%he med cal staff 9as composed of phys c ans, both res dents and nterns, as 9ell as nurses.
2

#.". No. 124<84, December 25, 1555, <21 &'"A 864. +romulgated on Apr l 11, 2002. #.". No. 142>28, December 15, 200>, 811 &'"A 204. %&N, Apr l 12, 1568, pp. 28@2>.

<

>

:d., c t ng 0udson 4..., %oan Assn., :nc. v. 0oro&ytz , 11> N.J.!. >08, >06, 16> A 4<2 /&up. 't. 15<>0.
2

%he corporate negl gence doctr ne mposes several dut es on a hosp tal? /10 to use reasonable care n the ma ntenance of safe and ade=uate fac l t es and e=u pmentI /20 to select and reta n only competent phys c ansI /<0 to oversee as to pat ent care all persons 9ho pract ce med c ne 9 th n ts 9allsI and /40 to formulate, adopt, and enforce ade=uate rules and pol c es to ensure =ual ty care for ts pat ents. %hese spec al tort dut es ar se from the spec al relat onsh p e1 st ng bet9een a hosp tal or nurs ng home and ts pat ents, 9h ch are based on the vulnerab l ty of the phys cally or mentally ll persons and the r nab l ty to prov de care for themselves. 40 A Am Jur 2d 26 c t ng 8un'houser v. 6ilson, 65 (ash. App. >44, 580 + 2d 801 /D v.1 15560, rev e9 granted, 1<8 (ash. 2d 1001,585 + 2d 12> /15560.
6

$urcell v. Him#elman, 16 Ar A. App. 28, 800 +2d <<8 /15220. %&N, 7ebruary 2>, 1562, pp. 2>@26. %&N, November 22, 1568, pp. 82@8<.

10

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. 1303<1 :e ruary 3, 3.1.

+$/:ESS)/NA# SE$*)%ES, )N%., +et t oner, vs. (5E %/&$( /: A++EA#S and NA()*)!A! and EN$)E&E AGANA, "espondents.

1 @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @1 G.$. No. 130;01 NA()*)!A! Nsu stituted y -er c-ildren 'arcelino A"ana ))), EnriKue A"ana, Jr., Emma A"ana7Andaya, Jesus A"ana and $aymund A"anaO and EN$)E&E AGANA, +et t oners, vs. (5E %/&$( /: A++EA#S and J&AN :&EN(ES, "espondents. 1 @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @1 G.$. No. 1312<. ')G&E# A'+)#, +et t oner, vs. NA()*)!A! and EN$)E&E AGANA, "espondents. "E&D!3%$DN %/$/NA, J.: ( th pr or leave of court,1 pet t oner +rofess onal &erv ces, $nc. /+&$0 f led a second mot on for recons derat on 2urg ng referral thereof to the 'ourt en banc and seeF ng mod f cat on of the dec s on dated January <1, 2002 and resolut on dated 7ebruary 11, 2006 9h ch aff rmed ts v car ous and d rect l ab l ty for damages to respondents Enr =ue Agana and the he rs of Nat v dad Agana /Aganas0. Man la Med cal &erv ces, $nc. /MM&$0,< As an Bosp tal, $nc. /AB$0,4 and +r vate Bosp tal Assoc at on of the +h l pp nes /+BA+0 8 all sought to ntervene n these cases nvoF ng the common ground that, unless mod f ed, the assa led dec s on and resolut on 9 ll -eopard Ae the f nanc al v ab l ty of pr vate hosp tals and -acF up the cost of health care. %he &pec al 7 rst D v s on of the 'ourt granted the mot ons for ntervent on of MM&$, AB$ and +BA+ /hereafter ntervenors0, > and referred en consulta to the 'ourt en #anc the mot on for pr or leave of court and the second mot on for recons derat on of +&$.2 Due to paramount publ c nterest, the 'ourt en #anc accepted the referral6 and heard the part es on oral arguments on one part cular ssue? 9hether a hosp tal may be held l able for the negl gence of phys c ans@consultants allo9ed to pract ce n ts prem ses.5 %o recall the sal ent facts, +&$, together 9 th Dr. M guel Amp l /Dr. Amp l0 and Dr. Juan 7uentes /Dr. 7uentes0, 9as mpleaded by Enr =ue Agana and Nat v dad Agana /later subst tuted by her he rs0, n a compla nt 10 for damages f led n the "eg onal %r al 'ourt /"%'0 of UueAon ' ty, Eranch 5>, for the n-ur es suffered by Nat v dad 9hen Dr. Amp l and Dr. 7uentes neglected to remove from her body t9o gauAes11 9h ch 9ere used n the surgery they performed on her on Apr l 11,

1564 at the Med cal ' ty #eneral Bosp tal. +&$ 9as mpleaded as o9ner, operator and manager of the hosp tal. $n a dec s on12 dated March 12, 155<, the "%' held +&$ sol dar ly l able 9 th Dr. Amp l and Dr. 7uentes for damages.1< Dn appeal, the 'ourt of Appeals /'A0, absolved Dr. 7uentes but aff rmed the l ab l ty of Dr. Amp l and +&$, sub-ect to the r ght of +&$ to cla m re mbursement from Dr. Amp l. 14+avvphi+ Dn pet t on for rev e9, th s 'ourt, n ts January <1, 2002 dec s on, aff rmed the 'A dec s on.18 +&$ f led a mot on for recons derat on1> but the 'ourt den ed t n a resolut on dated 7ebruary 11, 2006.12 %he 'ourt prem sed the d rect l ab l ty of +&$ to the Aganas on the follo9 ng facts and la9? 7 rst, there e1 sted bet9een +&$ and Dr. Amp l an employer@employee relat onsh p as contemplated n the December 25, 1555 dec s on n Ramos v. .ourt of Appeals16 that ,for purposes of allocat ng respons b l ty n med cal negl gence cases, an employer@employee relat onsh p e1 sts bet9een hosp tals and the r consultants.,15Although the 'ourt n Ramos later ssued a "esolut on dated Apr l 11, 200220 revers ng ts earl er f nd ng on the e1 stence of an employment relat onsh p bet9een hosp tal and doctor, a s m lar reversal 9as not 9arranted n the present case because the defense ra sed by +&$ cons sted of a mere general den al of control or respons b l ty over the act ons of Dr. Amp l. 21 &econd, by accred t ng Dr. Amp l and advert s ng h s =ual f cat ons, +&$ created the publ c mpress on that he 9as ts agent. 22 Enr =ue test f ed that t 9as on account of Dr. Amp l)s accred tat on 9 th +&$ that he conferred 9 th sa d doctor about h s 9 fe)s /Nat v dad)s0 cond t on.2< After h s meet ng 9 th Dr. Amp l, Enr =ue asFed Nat v dad to personally consult Dr. Amp l. 24 $n effect, 9hen Enr gue and Nat v dad engaged the serv ces of Dr. Amp l, at the bacF of the r m nds 9as that the latter 9as a staff member of a prest g ous hosp tal. %hus, under the doctr ne of apparent author ty appl ed n 3ogales, et al. v. .apitol Medical .enter, et al.,28 +&$ 9as l able for the negl gence of Dr. Amp l. 7 nally, as o9ner and operator of Med cal ' ty #eneral Bosp tal, +&$ 9as bound by ts duty to prov de comprehens ve med cal serv ces to Nat v dad Agana, to e1erc se reasonable care to protect her from harm, 2> to oversee or superv se all persons 9ho pract ced med c ne 9 th n ts 9alls, and to taFe act ve steps n f 1 ng any form of negl gence comm tted 9 th n ts prem ses. 22 +&$ comm tted a ser ous breach of ts corporate duty 9hen t fa led to conduct an mmed ate nvest gat on nto the reported m ss ng gauAes.26 +&$ s no9 asF ng th s 'ourt to recons der the forego ng rul ngs for these reasons? $ %he declarat on n the <1 January 2002 Dec s on v s@a@v s the 11 7ebruary 2005 "esolut on that the rul ng n "amos vs. 'ourt of Appeals /#.". No. 1<4<84, December 25, 15550 that ,an employer@employee relat ons e1 sts bet9een

hosp tal and the r consultants, stays should be set as de for be ng ncons stent 9 th or contrary to the mport of the resolut on grant ng the hosp tal)s mot on for recons derat on n "amos vs. 'ourt of Appeals /#.". No. 1<4<84, Apr l 11, 20020, 9h ch s appl cable to +&$ s nce the Aganas fa led to prove an employer@ employee relat onsh p bet9een +&$ and Dr. Amp l and +&$ proved that t has no control over Dr. Amp l. $n fact, the tr al court has found that there s no employer@ employee relat onsh p n th s case and that the doctor)s are ndependent contractors. $$ "espondents Aganas engaged Dr. M guel Amp l as the r doctor and d d not pr mar ly and spec f cally looF to the Med cal ' ty Bosp tal /+&$0 for med cal care and supportI other9 se stated, respondents Aganas d d not select Med cal ' ty Bosp tal /+&$0 to prov de med cal care because of any apparent author ty of Dr. M guel Amp l as ts agent s nce the latter 9as chosen pr mar ly and spec f cally based on h s =ual f cat ons and be ng fr end and ne ghbor. $$$ +&$ cannot be l able under doctr ne of corporate negl gence s nce the pro1 mate cause of Mrs. Agana)s n-ury 9as the negl gence of Dr. Amp l, 9h ch s an element of the pr nc ple of corporate negl gence. 25 $n the r respect ve memoranda, ntervenors ra se parallel arguments that the 'ourt)s rul ng on the e1 stence of an employer@employee relat onsh p bet9een pr vate hosp tals and consultants 9 ll force a drast c and comple1 alterat on n the long@establ shed and currently preva l ng relat onsh ps among pat ent, phys c an and hosp tal, 9 th burdensome operat onal and f nanc al conse=uences and adverse effects on all three part es. <0 %he Aganas comment that the arguments of +&$ need no longer be enterta ned for they have all been traversed n the assa led dec s on and resolut on. <1 After gather ng ts thoughts on the ssues, th s 'ourt holds that +&$ s l able to the Aganas, not under the pr nc ple of respondeat superior for lacF of ev dence of an employment relat onsh p 9 th Dr. Amp l but under the pr nc ple of ostens ble agency for the negl gence of Dr. Amp l and, pro hac vice, under the pr nc ple of corporate negl gence for ts fa lure to perform ts dut es as a hosp tal. (h le n theory a hosp tal as a -ur d cal ent ty cannot pract ce med c ne, <2 n real ty t ut l Aes doctors, surgeons and med cal pract t oners n the conduct of ts bus ness of fac l tat ng med cal and surg cal treatment. << ( th n that real ty, three legal relat onsh ps cr sscross? /10 bet9een the hosp tal and the doctor pract c ng 9 th n ts prem sesI /20 bet9een the hosp tal and the pat ent be ng treated or e1am ned 9 th n ts prem ses and /<0 bet9een the pat ent and the doctor. %he e1act nature of each relat onsh p determ nes the bas s and e1tent of the l ab l ty of the hosp tal for the negl gence of the doctor.

(here an employment relat onsh p e1 sts, the hosp tal may be held v car ously l able under Art cle 212><4 n relat on to Art cle 2160<8 of the ' v l 'ode or the pr nc ple of respondeat superior. Even 9hen no employment relat onsh p e1 sts but t s sho9n that the hosp tal holds out to the pat ent that the doctor s ts agent, the hosp tal may st ll be v car ously l able under Art cle 212> n relat on to Art cle 14<1<> and Art cle 16>5<2 of the ' v l 'ode or the pr nc ple of apparent author ty.<6 Moreover, regardless of ts relat onsh p 9 th the doctor, the hosp tal may be held d rectly l able to the pat ent for ts o9n negl gence or fa lure to follo9 establ shed standard of conduct to 9h ch t should conform as a corporat on.<5 %h s 'ourt st ll employs the ,control test, to determ ne the e1 stence of an employer@employee relat onsh p bet9een hosp tal and doctor. $n .alam#a Medical .enter, :nc. v. 3ational %a#or Relations .ommission, et al. 40 t held? 3nder the ,control test,, an employment relat onsh p e1 sts bet9een a phys c an and a hosp tal f the hosp tal controls both the means and the deta ls of the process by 9h ch the phys c an s to accompl sh h s tasF. 111 111 111

As pr orly stated, pr vate respondents ma nta ned spec f c 9orF@schedules, as determ ned by pet t oner through ts med cal d rector, 9h ch cons sted of 24@hour sh fts total ng forty@e ght hours each 9eeF and 9h ch 9ere str ctly to be observed under pa n of adm n strat ve sanct ons. (-at petitioner eLercised control oAer respondents "ains li"-t from t-e undisputed fact t-at in t-e emer"ency room, t-e operatin" room, or any department or Fard for t-at matter, respondents' ForG is monitored t-rou"- its nursin" superAisors, c-ar"e nurses and orderlies. Wit-out t-e approAal or consent of petitioner or its medical director, no operations can e undertaGen in t-ose areas. :or control test to apply, it is not essential for t-e employer to actually superAise t-e performance of duties of t-e employee, it ein" enou"- t-at it -as t-e ri"-t to Field t-e poFer. /emphas s suppl ed0 Even n ts December 25, 1555 dec s on41 and Apr l 11, 2002 resolut on42 n Ramos, the 'ourt found the control test dec s ve. $n the present case, t appears to have escaped the 'ourt)s attent on that both the "%' and the 'A found no employment relat onsh p bet9een +&$ and Dr. Amp l, and that t-e A"anas did not Kuestion suc- findin". $n ts March 12, 155< dec s on, the "%' found ,that defendant doctors 9ere not employees of +&$ n ts hosp tal, they be ng merely consultants 9 thout any employer@employee relat onsh p and n the capac ty of ndependent contractors., 4< %he Aganas never =uest oned such f nd ng. +&$, Dr. Amp l and Dr. 7uentes appealed 44 from the "%' dec s on but only on the ssues of negl gence, agency and corporate l ab l ty. $n ts &eptember >, 155> dec s on, the 'A m staFenly referred to +&$ and Dr. Amp l as employer@employee,

but t 9as clear n ts d scuss on on the matter that t v e9ed the r relat onsh p as one of mere apparent agency.48 %he Aganas appealed from the 'A dec s on, but only to =uest on the e1onerat on of Dr. 7uentes.4> +&$ also appealed from the 'A dec s on, and t 9as then that the ssue of employment, though long settled, 9as un9 tt ngly resurrected. $n f ne, as there 9as no d spute over the "%' f nd ng that +&$ and Dr. Amp l had no employer@employee relat onsh p, such f nd ng became f nal and conclus ve even to th s 'ourt.42 %here 9as no reason for +&$ to have ra sed t as an ssue n ts pet t on. %hus, 9hatever d scuss on on the matter that may have ensued 9as purely academ c. Nonetheless, to allay the an1 ety of the ntervenors, the 'ourt holds that, n th s part cular nstance, the concurrent f nd ng of the "%' and the 'A that +&$ 9as not the employer of Dr. Amp l s correct. 'ontrol as a determ nat ve factor n test ng the employer@employee relat onsh p bet9een doctor and hosp tal under 9h ch the hosp tal could be held v car ously l able to a pat ent n med cal negl gence cases s a re=u s te fact to be establ shed by preponderance of ev dence. Bere, there 9as nsuff c ent ev dence that +&$ e1erc sed the po9er of control or 9 elded such po9er over the means and the deta ls of the spec f c process by 9h ch Dr. Amp l appl ed h s sF lls n the treatment of Nat v dad. 'onse=uently, +&$ cannot be held v car ously l able for the negl gence of Dr. Amp l under the pr nc ple of respondeat superior. %here s, ho9ever, ample ev dence that the hosp tal /+&$0 held out to the pat ent /Nat v dad046 that the doctor /Dr. Amp l0 9as ts agent. +resent are the t9o factors that determ ne apparent author ty? f rst, the hosp tal)s mpl ed man festat on to the pat ent 9h ch led the latter to conclude that the doctor 9as the hosp tal)s agentI and second, the pat entJs rel ance upon the conduct of the hosp tal and the doctor, cons stent 9 th ord nary care and prudence. 45 Enr =ue test f ed that on Apr l 2, 1564, he consulted Dr. Amp l regard ng the cond t on of h s 9 feI that after the meet ng and as adv sed by Dr. Amp l, he ,as;ed :h s; 9 fe to go to Med cal ' ty to be e1am ned by :Dr. Amp l;,I and that the ne1t day, Apr l <, he told h s daughter to taFe her mother to Dr. Amp l. 80 %h s t mel ne nd cates that t 9as Enr =ue 9ho actually made the dec s on on 9hom Nat v dad should consult and 9here, and that the latter merely acceded to t. $t e1pla ns the test mony of Nat v dad that she consulted Dr. Amp l at the nst gat on of her daughter.81 Moreover, 9hen asFed 9hat mpelled h m to choose Dr. Amp l, Enr =ue test f ed? Atty. Agcao l Dn that part cular occas on, Apr l 2, 1564, 9hat 9as your reason for choos ng Dr. Amp l to contact 9 th n connect on 9 th your 9 fe)s llnessP A. 7 rst, before that, $ have Fno9n h m to be a spec al st on that part of the body as a surgeon, second, $ have Fno9n h m to be a staff mem er of the Med cal

' ty 9h ch s a prominent and GnoFn hosp tal. And th rd, because he s a ne ghbor, $ e1pect more than the usual med cal serv ce to be g ven to us, than h s ord nary pat ents.82 /emphas s suppl ed0 'learly, the dec s on made by Enr =ue for Nat v dad to consult Dr. Amp l 9as s gn f cantly nfluenced by the mpress on that Dr. Amp l 9as a staff member of Med cal ' ty #eneral Bosp tal, and that sa d hosp tal 9as 9ell Fno9n and prom nent. Enr =ue looFed upon Dr. Amp l not as ndependent of but as ntegrally related to Med cal ' ty. +&$)s acts tended to conf rm and re nforce, rather than negate, Enr =ue)s v e9. $t s of record that +&$ re=u red a ,consent for hosp tal care, 8< to be s gned preparatory to the surgery of Nat v dad. %he form reads? +erm ss on s hereby g ven to the med cal, nurs ng and laboratory staff of the Med cal ' ty #eneral Bosp tal to perform such d agnost c procedures and to adm n ster such med cat ons and treatments as may e deemed necessary or adAisa le y t-e p-ysicians of t-is -ospital for and dur ng the conf nement of 111. /emphas s suppl ed0 Ey such statement, +&$ v rtually re nforced the publ c mpress on that Dr. Amp l 9as a phys c an of ts hosp tal, rather than one ndependently pract c ng n tI that the med cat ons and treatments he prescr bed 9ere necessary and des rableI and that the hosp tal staff 9as prepared to carry them out. +avvphi+ +&$ po nted out n ts memorandum that Dr. Amp l)s hosp tal aff l at on 9as not the e1clus ve bas s of the AganasJ dec s on to have Nat v dad treated n Med cal ' ty #eneral Bosp tal, mean ng that, had Dr. Amp l been aff l ated 9 th another hosp tal, he 9ould st ll have been chosen by the Aganas as Nat v dad)s surgeon. 84 %he 'ourt cannot speculate on 9hat could have been beh nd the AganasJ dec s on but 9ould rather adhere str ctly to the fact that, under the c rcumstances at that t me, Enr =ue dec ded to consult Dr. Amp l for he bel eved h m to be a staff member of a prom nent and Fno9n hosp tal. After h s meet ng 9 th Dr. Amp l, Enr =ue adv sed h s 9 fe Nat v dad to go to the Med cal ' ty #eneral Bosp tal to be e1am ned by sa d doctor, and the hosp tal acted n a 9ay that fort f ed Enr =ue)s bel ef. %h s 'ourt must therefore ma nta n the rul ng that +&$ s v car ously l able for the negl gence of Dr. Amp l as ts ostens ble agent. Mov ng on to the ne1t ssue, the 'ourt notes that +&$ made the follo9 ng adm ss on n ts Mot on for "econs derat on? 81. 'learly, not be ng an agent or employee of pet t oner +&$, +&$ :s c; s not l able for Dr. Amp l)s acts dur ng the operat on. 'ons der ng further that Dr. Amp l 9as personally engaged as a doctor by Mrs. Agana, t s ncumbent upon Dr. Amp l, as ,'apta n of the &h p,, and as the Agana)s doctor to adv se her on 9hat to do 9 th her s tuat on v s@a@v s the t9o m ss ng gauAes. )n addition to notin" t-e missin" "auJes, re"ular c-ecG7ups Fere made and no si"ns of

complications Fere eL-i ited durin" -er stay at t-e -ospital, F-iccould -aAe alerted petitioner +S)'s -ospital to render and proAide post7 operation serAices to and tread on !r. Ampil's role as t-e doctor of 'rs. A"ana. (-e a sence of ne"li"ence of +S) from t-e patient's admission up to -er disc-ar"e is orne y t-e findin" of facts in t-is case. #iGeFise eAident t-erefrom is t-e a sence of any complaint from 'rs. A"ana after -er disc-ar"e from t-e -ospital F-ic- -ad s-e rou"-t to t-e -ospital's attention, could -aAe alerted petitioner +S) to act accordin"ly and rin" t-e matter to !r. Ampil's attention. 9ut t-is Fas not t-e case. 's. A"ana complained /N#8 to !rs. Ampil and :uentes, not t-e -ospital. 5oF t-en could +S) possi ly do somet-in" to fiL t-e ne"li"ence committed y !r. Ampil F-en it Fas not informed a out it at all.88 /emphas s suppl ed0 +&$ re terated ts adm ss on 9hen t stated that had Nat v dad Agana , nformed the hosp tal of her d scomfort and pa n, the hosp tal 9ould have been o li"ed to act on it.,8> %he s gn f cance of the forego ng statements s cr t cal. 7 rst, they const tute -ud c al adm ss on by +&$ that 9h le t had no po9er to control the means or method by 9h ch Dr. Amp l conducted the surgery on Nat v dad Agana, t had the poFer to reAieF or cause t-e reAieF of 9hat may have rregularly transp red 9 th n ts 9alls str ctly for the purpose of determ n ng 9hether some form of negl gence may have attended any procedure done ns de ts prem ses, 9 th the ult mate end of protect ng ts pat ents. &econd, t s a -ud c al adm ss on that, by v rtue of the nature of ts bus ness as 9ell as ts prom nence82 n the hosp tal ndustry, t assumed a duty to ,tread on, the ,capta n of the sh p, role of any doctor render ng serv ces 9 th n ts prem ses for the purpose of ensur ng the safety of the pat ents ava l ng themselves of ts serv ces and fac l t es. %h rd, by such adm ss on, +&$ def ned the standards of ts corporate conduct under the c rcumstances of th s case, spec f cally? /a0 that t had a corporate duty to Nat v dad even after her operat on to ensure her safety as a pat entI /b0 that ts corporate duty 9as not l m ted to hav ng ts nurs ng staff note or record the t9o m ss ng gauAes and /c0 that ts corporate duty e1tended to determ n ng Dr. Amp l)s role n t, br ng ng the matter to h s attent on, and correct ng h s negl gence. And f nally, by such adm ss on, +&$ barred tself from argu ng n ts second mot on for recons derat on that the concept of corporate respons b l ty 9as not yet n e1 stence at the t me Nat v dad under9ent treatmentI 86 and that f t had any corporate respons b l ty, the same 9as l m ted to report ng the m ss ng gauAes and d d not nclude ,taF ng an act ve step n f 1 ng the negl gence comm tted.,85 An adm ss on made n the plead ng cannot be controverted by the party maF ng such adm ss on and s conclus ve as to h m, and all proofs

subm tted by h m contrary thereto or ncons stent there9 th should be gnored, 9hether or not ob-ect on s nterposed by a party. >0 # ven the standard of conduct that +&$ def ned for tself, the ne1t relevant n=u ry s 9hether the hosp tal measured up to t. +&$ e1cuses tself from fulf ll ng ts corporate duty on the ground that Dr. Amp l assumed the personal respons b l ty of nform ng Nat v dad about the t9o m ss ng gauAes.>1 Dr. " cardo Jocson, 9ho 9as part of the group of doctors that attended to Nat v dad, test f ed that to9ard the end of the surgery, the r group talFed about the m ss ng gauAes but Dr. Amp l assured them that he 9ould personally not fy the pat ent about t.>2 7urthermore, +&$ cla med that there 9as no reason for t to act on the report on the t9o m ss ng gauAes because Nat v dad Agana sho9ed no s gns of compl cat ons. &he d d not even nform the hosp tal about her d scomfort. >< %he e1cuses proffered by +&$ are totally unacceptable. %o beg n 9 th, +&$ could not s mply 9ave off the problem and nonchalantly delegate to Dr. Amp l the duty to rev e9 9hat transp red dur ng the operat on. %he purpose of such rev e9 9ould have been to p npo nt 9hen, ho9 and by 9hom t9o surg cal gauAes 9ere m sla d so that necessary remed al measures could be taFen to avert any -eopardy to Nat v dadJs recovery. 'erta nly, +&$ could not have e1pected that purpose to be ach eved by merely hop ng that the person l Fely to have m sla d the gauAes m ght be able to retrace h s o9n steps. Ey ts o9n standard of corporate conduct, +&$)s duty to n t ate the rev e9 9as non@ delegable. (h le Dr. Amp l may have had the pr mary respons b l ty of not fy ng Nat v dad about the m ss ng gauAes, +&$ mposed upon tself the separate and ndependent respons b l ty of n t at ng the n=u ry nto the m ss ng gauAes. %he purpose of the f rst 9ould have been to appr se Nat v dad of 9hat transp red dur ng her surgery, 9h le the purpose of the second 9ould have been to p npo nt any lapse n procedure that led to the gauAe count d screpancy, so as to prevent a recurrence thereof and to determ ne correct ve measures that 9ould ensure the safety of Nat v dad. %hat Dr. Amp l negl gently fa led to not fy Nat v dad d d not release +&$ from ts self@ mposed separate respons b l ty. 'orollary to ts non@delegable undertaF ng to rev e9 potent al nc dents of negl gence comm tted 9 th n ts prem ses, +&$ had the duty to taFe not ce of med cal records prepared by ts o9n staff and subm tted to ts custody, espec ally 9hen these bear earmarFs of a surgery gone a9ry. %hus, the record taFen dur ng the operat on of Nat v dad 9h ch reported a gauAe count d screpancy should have g ven +&$ suff c ent reason to n t ate a rev e9. $t should not have 9a ted for Nat v dad to compla n. As t happened, +&$ tooF no heed of the record of operat on and conse=uently d d not n t ate a rev e9 of 9hat transp red dur ng Nat v dadJs operat on. "ather, t sh rFed ts respons b l ty and passed t on to others K to Dr. Amp l 9hom t

e1pected to nform Nat v dad, and to Nat v dad herself to compla n before t tooF any mean ngful step. Ey ts nact on, therefore, +&$ fa led ts o9n standard of hosp tal care. $t comm tted corporate negl gence. $t should be borne n m nd that the corporate negl gence ascr bed to +&$ s d fferent from the med cal negl gence attr buted to Dr. Amp l. %he dut es of the hosp tal are d st nct from those of the doctor@consultant pract c ng 9 th n ts prem ses n relat on to the pat entI hence, the fa lure of +&$ to fulf ll ts dut es as a hosp tal corporat on gave r se to a d rect l ab l ty to the Aganas d st nct from that of Dr. Amp l. All th s not9 thstand ng, 9e maFe t clear that +&$Js hosp tal l ab l ty based on ostens ble agency and corporate negl gence appl es only to th s case, pro hac v ce. $t s not ntended to set a precedent and should not serve as a bas s to hold hosp tals l able for every form of negl gence of the r doctors@consultants under any and all c rcumstances. %he rul ng s un =ue to th s case, for the l ab l ty of +&$ arose from an mpl ed agency 9 th Dr. Amp l and an adm tted corporate duty to Nat v dad.>4 Dther c rcumstances pecul ar to th s case 9arrant th s rul ng, >8 not the least of 9h ch be ng that the agony 9rought upon the Aganas has gone on for 2> long years, 9 th Nat v dad com ng to the end of her days racFed n pa n and agony. &uch 9retchedness could have been avo ded had +&$ s mply done 9hat 9as log cal? heed the report of a guaAe count d screpancy, n t ate a rev e9 of 9hat 9ent 9rong and taFe correct ve measures to ensure the safety of Nat vad. "ather, for 2> years, +&$ hemmed and ha9ed at every turn, d so9n ng any such respons b l ty to ts pat ent. Mean9h le, the opt ons left to the Aganas have all but d9 ndled, for the status of Dr. Amp l can no longer be ascerta ned. >> %herefore, taF ng all the e=u t es of th s case nto cons derat on, th s 'ourt bel eves +18 m ll on 9ould be a fa r and reasonable l ab l ty of +&$, sub-ect to 12R p.a. nterest from the f nal ty of th s resolut on to full sat sfact on. W5E$E:/$E, the second mot on for recons derat on s !EN)E! and the mot ons for ntervent on are N/(E!. +rofess onal &erv ces, $nc. s /$!E$E! pro hac vice to pay Nat v dad /subst tuted by her ch ldren Marcel no Agana $$$, Enr =ue Agana, Jr., Emma Agana@Andaya, Jesus Agana and "aymund Agana0 and Enr =ue Agana the total amount of +18 m ll on, sub-ect to 12R p.a. nterest from the f nal ty of th s resolut on to full sat sfact on. No further plead ngs by any party shall be enterta ned n th s case. !et the long@delayed entry of -udgment be made n th s case upon rece pt by all concerned part es of th s resolut on. S/ /$!E$E!.

$ENA(/ %. %/$/NA Assoc ate Just ce (E 'DN'3"? $E8NA(/ S. +&N/ 'h ef Just ce AN(/N)/ (. %A$+)/ Assoc ate Just ce %/N%5)(A %A$+)/ '/$A#ES Assoc ate Just ce AN(/N)/ E!&A$!/ 9. NA%5&$A Assoc ate Just ce

+$ES9)(E$/ J. *E#AS%/, J$. Assoc ate Just ce

(E$ES)(A J. #E/NA$!/7!E %AS($/ Assoc ate Just ce

A$(&$/ !. 9$)/N Assoc ate Just ce

!)/S!A!/ '. +E$A#(A Assoc ate Just ce

/No +art0 #&%AS +. 9E$SA')NV Assoc ate Just ce /Dn Dff c al !eave0 $/9E$(/ A. A9A! Assoc ate Just ce J/SE +. +E$E6 Assoc ate Just ce

'A$)AN/ %. !E# %AS()##/ Assoc ate Just ce

'A$()N S. *)##A$A'A, J$. Assoc ate Just ce /Dn leave0 J/SE %. 'EN!/6A Assoc ate Just ce 'E"%$7$'A%$DN

+ursuant to &ect on 1<, Art cle C$$$ of the 'onst tut on, $ cert fy that the conclus ons n the above "esolut on had been 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

No part. Dn leave. "ollo /#.". No. 12>2520, p. 4>6. $d., p. 465.

VV

<

7 led a mot on for leave of court to ntervene /by 9ay of attached memorandum0, d., p. 812.
4

7 led a mot on to ntervene and for leave to f le memorandum@ n@ ntervent on, d., p. 8<4. AB$ d d not f le any memorandum.

7 led a mot on for ntervent on /by 9ay of attached br efMmemorandum0, d., p. >02.
>

"esolut on dated June 1>, 2006, d., p. >42. "esolut on dated June 12, 2006, d., p. >48. "esolut on dated August 12, 2006, d., p. >45.

As per Adv sory dated March 4, 2005. $t should be borne n m nd that the ssues n #.". No. 12>4>2 on the e1culpat on of Dr. Juan 7uentes from l ab l ty, and n #.". No. 122850 on the culpab l ty of Dr. M guel Amp l for negl gence and med cal malpract ce, are deemed f nally dec ded, no mot on for recons derat on hav ng been f led by the Be rs of Agana n #.". No. 12>4>2 nor by Dr. M guel Amp l n #.". No. 1224>2 from the January <1, 2002 Dec s on of the 7 rst D v s on of the 'ourt.
10

DocFeted as ' v l 'ase No. U@4<<22, record, p. >. Also referred to n the records as ,sponges.,

11

12

+enned by then +res d ng Judge and no9 Assoc ate Just ce of the &upreme 'ourt !ucas Eersam n.
1<

"%' Dec s on, record, p. 1<<.

14

'A dec s on dated &eptember >, 155>, penned by then 'ourt of Appeals Assoc ate Just ce and later &upreme 'ourt Assoc ate Just ce 'anc o #arc a /"et.0I 'A rollo, pp. 1<>@1<2.
18

#.". Nos. 12>252M12>4>2M122850, <1 January 2002, 81< &'"A 426. "ollo, p. 40<. #.". Nos. 12>252M12>4>2M122850, 11 7ebruary 2006, 844 &'"A 120. #.". No. 124<84, 25 December 1555, <21 &'"A 846.

1>

12

16

15

Supra at 18, p. 455. #.". No. 124<84, 11 Apr l 2002, <60 &'"A 4>2. Supra at 12, p. 125. Supra at 18, p. 802. Supra at 12, p. 161, c t ng %&N, Apr l 12, 1568, pp. 28@2>. $d. #.". No. 142>28, 15 December 200>, 811 &'"A 204. Supra at 18, p. 808. Supra at 12, p. 162. $d. "ollo /#.". No. 12>2520, pp. 465@450. $d., pp. 816@822, >08@>1<. $d., p. >85. &ect on 6, "epubl c Act No. 2<62 /"A 2<620 or %he Med cal Act of 1585.

20

21

22

2<

24

28

2>

22

26

25

<0

<1

<2

<<

&ee Ace#edo =ptical .o. :nc. v. .A, #.". No. 100182, <1 March 2000, <14 &'"A <18.
<4

Art cle 212>. (hoever by act or om ss on causes damage to another, there be ng fault or negl gence, s obl ged to pay for the damage done. &uch fault or negl gence, f there s no pre@e1 st ng contractual relat on bet9een the part es s called a =uas @del ct and s governed by the prov s ons of th s 'hapter.
<8

Art. 2160. %he obl gat on mposed by art cle 212> s demandable not only for one)s o9n acts or om ss ons, but also for those of persons for 9hom one s respons ble. %he father and, n case of h s death or ncapac ty, the mother, are respons ble for the damages caused by the m nor ch ldren 9ho l ve n the r company. #uard ans are l able for damages caused by the m nors or ncapac tated persons 9ho are under the r author ty and l ve n the r company. %he o9ners and managers of an establ shment or enterpr se are l Fe9 se respons ble for damages caused by the r employees n the serv ce of the branches n 9h ch the latter are employed or on the occas on of the r funct ons. Employers shall be l able for the damages caused by the r employees and household helpers act ng 9 th n the scope of the r ass gned tasFs, even though the former are not engaged n any bus ness or ndustry.

%he &tate s respons ble n l Fe manner 9hen t acts through a spec al agentI but not 9hen the damage has been caused by the off c al to 9hom the tasF done properly perta ns, n 9h ch case 9hat s prov ded n art cle 212> shall be appl cable. !astly, teachers or heads of establ shments of arts and trades shall be l able for damages caused by the r pup ls and students or apprent ces, so long as they rema n n the r custody. %he respons b l ty treated of n th s art cle shall cease 9hen the persons here n ment oned prove that they observed all the d l gence of a good father of a fam ly to prevent damage.
<>

Art cle 14<1. %hrough estoppel an adm ss on or representat on s rendered conclus ve upon the person maF ng t, and cannot be den ed or d sproved as aga nst the person rely ng thereon.
<2

Art. 16>5. Agency may be e1press, or mpl ed from the acts of the pr nc pal, from h s s lence or lacF of act on, or h s fa lure to repud ate the agency, Fno9 ng that another person s act ng on h s behalf 9 thout author ty.
<6

3ogales v. .apitol Medical .enter, et al., supra at 28.

<5

+edro &ol s, Med cal Jur sprudence /%he +ract ce of Med c ne and the !a90, UueAon ' ty? ".+. #arc a +ubl sh ng 'o., 1566, p. <21, c t ng 3.&. d str ct and appellate cases. &ee also Darl ng v. 'harleston 'ommun ty Memor al Bosp tal, 14 A.!.". <D 6>0 /$ll. &eptember 25, 15>80.
40

#.". No. 12>464, 28 November 2006, 821 &'"A 868. Supra at 16. Supra at 20. Supra at 1<, p. 12>.

41

42

4<

44

Dr. 7uentes f led 9 th the 'A a pet t on for cert orar docFeted as 'A@#.". &+ No. <2156 /'A rollo, p. 10 9h le Dr. Amp l and +&$ -o ntly f led an appeal docFeted as 'A@#.". 'C No. 420>2 /'A rollo, pp. 40 and 1820.
48

Supra at 14, p. 1<8. "ollo /#.". No. 12>4>20, p. 6.

4>

42

5lsie Ang v. Dr. 5rniefel 2rageda, #.". No. 1>>2<5, 6 June 200>, 450 &'"A 424.
46

%hrough the pat ent)s husband Enr =ue. 3ogales v. .apitol Medical .enter, et al., supra at 28. %&N, Apr l 12, 1568, pp. 2>@22.

45

80

81

&econd Mot on for "econs derat on, rollo, pp. 458@45>. &upra at 80, pp. 28@2>. E1h. ,D@1,, E1h b t 7older for +la nt ffs, p. 52. +et t oner)s Memorandum 9 th 'ompl ance, pp. 82@86. Mot on for "econs derat on, rollo, pp. 425@4<0. $d., p. 4<4.

82

8<

84

88

8>

82

+&$ has not den ed ts prom nent place n the hosp tal ndustry but has n fact asserted such role n ts 15>2 brochure /Anne1 ,*, to ts Man festat on f led on May 14, 20050.
86

"ollo, p. 808@80>. $d., pp. 80>@802.

85

>0

%uciano 7an v. Rodil 5nterprises, #. ". No. 1>6021, 16 December 200>, 811 &'"A 1>2I 0eirs of $edro .lemena F Hur#ano v. 0eirs of :rene !. !ien , #.". No. 188806, 11 &eptember 200>, 801 &'"A 408.
>1

&econd Mot on for "econs derat on, rollo, pp. 802@80<. $d., p. 80<, c t ng %&N, 7ebruary 2>, 1562, p. <>. Supra at 88.

>2

><

>4

$n +art do ng Manggaga9a /+M0 and Eut l 7armers +arty /Eut l0 v. 'omelec /#.". No. 1>4202, March 18, 200>, 464 &'"A >210, a rul ng e1pressly =ual f ed as pro hac v ce s l m ted n appl cat on to one part cular case onlyI t cannot be rel ed upon as a precedent to govern other cases.
>8

&ee &ps. 'hua v. Bon. Jac nto Ang, et al., #.". No. 18>1>4, 4 &eptember 2005. B s last plead ng 9as f led on May 1<, 2001, rollo /#.". No. 1228500, p. 212.

>>

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. 12=34 Septem er 13, 1<31

J&#)/ !AN/N, pla nt ff@appellee, vs. AN(/N)/ A. 9$)'/ ? %/., defendant@appellant. .laro M. Recto for appellant. .anillas & .ardenas for appellee.

J/5NS/N, J.: %h s act on 9as brought to recover the sum of +>0,000, alleged to be the value of serv ces rendered to the defendant by the pla nt ff as a broFer. %he pla nt ff alleges that n the month of August, 1516, the defendant company, through ts manager, Anton o A. Er mo, employed h m to looF for a purchaser of ts factory Fno9n as ,Bolland Amer can D l 'o.,, for the sum of +1,200,000, payable n cashI that the defendant prom sed to pay the pla nt ff, as compensat on for h s serv ces, a comm ss on of f ve per cent on the sa d sum of +1,200,000, f the sale 9as consummated, or f the pla nt ff should f nd a purchaser ready, able and 9 ll ng to buy sa d factory for the sa d sum of +1,200,000I that subse=uently the pla nt ff found such a purchaser, but that the defendant refused to sell the sa d factory 9 thout any -ust f able mot ve or reason therefor and 9 thout hav ng prev ously not f ed the pla nt ff of ts des stance or var at on n the pr ce and terms of the sale. %o that compla nt the defendant nterposed a general den al. 3pon the ssue thus presented, the Bonorable & mpl c o del "osar o, -udge, after hear ng and cons der ng the ev dence adduced dur ng the tr al of the cause, rendered a -udgment n favor of the pla nt ff and aga nst the defendant for the sum of +>0,000, 9 th costs. 7rom that -udgment the defendant appealed to th s court. %he proof 9 th regard to the author ty of the pla nt ff to sell the factory n =uest on for the defendant, on comm ss on, s e1tremely unsat sfactory. $t cons sts solely of the test mony of the pla nt ff, on the one hand, and of the manager of the defendant company, Anton o A. Er mo, on the other. 7rom a read ng of the r test mony 9e bel eve that ne ther of them has been ent rely free from prevar cat ons. Bo9ever, after g v ng due 9e ght to the f nd ng of the tr al court n th s regard and after carefully cons der ng the nherent probab l ty or mprobab l ty of the test mony of each of sa d 9 tnesses, 9e bel eve 9e are appro1 mat ng the truth n f nd ng? /10 %hat Anton o A. Er mo, n a conversat on 9 th the pla nt ff, Jul o Danon, about the m ddle of August, 1516, nformed the latter that he /Er mo0 des red to sell h s factory, the Bolland Amer can D l 'o., for the sum of +1,200,000I /20 that he agreed and prom sed to pay to the pla nt ff a comm ss on of 8 per cent prov ded the latter could sell sa d factory for that amountI and /<0 that no def n te per od of t me 9as f 1ed 9 th n 9h ch the pla nt ff should effect the sale. $t seems that another broFer, &ellner, 9as also negot at ng the sale, or try ng to f nd a purchaser for the same property and that the pla nt ff 9as nformed of the fact e ther by Er mo h mself or by someone elseI at least, t s probable that the pla nt ff 9as a9are that he 9as not alone n the f eld, and h s 9hole effort 9as to forestall h s compet tor by be ng the f rst to f nd a purchaser and effect the sale. &uch, 9e bel eve. 9as the contract bet9een the pla nt ff and the defendant, upon 9h ch the present act on s based. %he ne1t =uest on to determ ne s 9hether the pla nt ff had performed all that 9as re=u red of h m under that contract to ent tle h m to recover the comm ss on agreed upon. %he proof n th s regard s no less unsat sfactory. $t seems that mmed ately after hav ng an nterv e9 9 th Mr. Er mo, as above stated, the

pla nt ff 9ent to see Mr. Mauro +r eto, pres dent of the &anta Ana D l M ll, a corporat on, and offered to sell to h m the defendant)s property at +1,200,000. %he sa d corporat on 9as at that t me n need of such a factory as the pla nt ff 9as offer ng for sale, and Mr. +r eto, ts pres dent, nstructed the manager, &amuel E. *ane, to see Mr. Er mo and ascerta n 9hether he really 9anted to sell sa d factory, and, f so, to get perm ss on from h m to nspect the prem ses. Mr. *ane nspected the factory and, presumably, made a favorable report to Mr. +r eto. %he latter asFed for an appo ntment 9 th Mr. Er mo to perfect the negot at on. $n the meant me &ellner, the other broFer referred to, had found a purchaser for the same property, 9ho ult mately bought t for +1,<00,000. 7or that reason Mr. +r eto, the 9ould be purchaser found by the pla nt ff, never came to see Mr. Er mo to perfect the proposed negot at on. 3nder the proofs n th s case, the most that can be sa d as to 9hat the pla nt ff had accompl shed s, that he had found a person 9ho might have #ought the defendant)s factory f the defendant had not sold t to someone else. %he ev dence does not sho9 that the &anta Ana D l M ll had definitely dec ded to buy the property n =uest on at the f 1ed pr ce of +1,200,000. %he board of d rectors of sa d corporat on had not resolved to purchase sa d propertyI and even f ts pres dent could legally maFe the purchase 9 thout prev ous formal author Aat on of the board of d rectors, yet sa d pres dent does not pretend that he had def n tely and formally agreed to buy the factory n =uest on on behalf of h s corporat on at the pr ce stated. Dn d rect e1am nat on he test f ed for the pla nt ff as follo9s? U. Hou say that 9e 9ere go ng to accept or that t 9as benef c al for usI 9 ll you say to 9hom your refer, 9hen you say ,9eP, O A. U. A. U. Dur company, the &anta Ana D l M ll. And s that company able to pay the sum of +1,200,000P O Hes, s r. And you accepted t at that pr ce of +1,200.000P O

A. &urely, because as $ already sa d before, 9e 9ere n the d ff cult pos t on of not be ng able to operate our factory, because of the obstacle placed by the #overnment. U. A. And d d you nform Mr. Danon of th s acceptanceP O : did not e plain to Mr. Danon.

Dn cross@e1am nat on the same 9 tness test f ed? U. (hat act ons d d the board of d rectors of the &anta Ana D l M ll taFe n order to ac=u re or to maFe an offer to Mr. Er mo of the Bolland Amer can D l 'ompanyP O

A. Eut noth ng 9as effected, because Mr. Danon stated that the property had been sold 9hen $ 9as go ng to deal 9 th h m. U. Eut do you not say that you made an offer of +1,200,000P O

A. 3oG it &as Mr. Danon &ho made the offer and &e &ere sure to put the deal through #ecause &e have #ound ourselves . %he pla nt ff cla ms that the reasons 9hy the sale to the &anta Ana M ll 9as not consummated 9as because Mr. Er mo refused to sell to a 7 l p no f rm and preferred an Amer can buyerI that upon learn ng such att tude of the defendant the pla nt ff endeavored to procure another purchaser and found a Mr. !eas, 9ho del vered to the pla nt ff a letter addressed to Mr. Er mo, offer ng to buy the factory n =uest on at +1,200,000. the offer be ng good for t9enty@fourI that sa d offer 9as not accepted by Er mo because 9h le he 9as read ng the letter of !eas, &ellner came n, dre9 Er mo nto another room, and then and there closed the deal at +1,<00,000. %he last statement s adm tted by the defendant. &uch are the facts n th s case, as nearly accurate as 9e can gather them from the confl ct ng ev dence before us. 3nder those facts, s the pla nt ff ent tled to recover the sum of +>0,000, cla med by h m as compensat on for h s serv cesP $t 9 ll be noted that, accord ng to the pla nt ff)s o9n test mony, the defendant agreed and prom sed to pay h m a comm ss on of 8 per cent provided he /the pla nt ff0 could sell the factory at $+,)CC.CCC /,con tal =ue C. me venda la fabr ca en +1,200.000,0. $t 9 ll also be noted that all that the pla nt ff had accompl shed by 9ay of performance of h s contract 9as, that he had found a person 9ho m ght have bought the factory n =uest on had not the defendant sold t to someone else. /Eeaumont vs. +r eto, 41 +h l., >20I 245 3.&., 884.0 3nder these c rcumstances t s d ff cult to see ho9 the pla nt ff can recover anyth ng n the prem ses. %he pla nt ff)s act on s not one for damages for breach of contractI t s an act on to recover ,the reasonable value, of serv ces rendered. th s s unm staFable both from the pla nt ff)s compla nt and h s test mony as a 9 tness dur ng the tr al. U. And 9hat s the reasonable value of the serv ces you rendered to Mr. Er moP O A. 8ive per cent of the price at &hich it &as sold .

U. 3pon 9hat do you base your =ual f cat on that those serv ces 9ere reasonableP O A. 7 rst, because that s the common rate n the c ty, and, secondly, because of the b g ga n that he obta ned from the sale. (hat benef t d d the pla nt ff, by h s ,serv ces,, besto9 upon the defendant to ent tle h m to recover from the latter the sum of +>0,000P $t s perfectly clear and und sputed that h s ,serv ces, d d not any 9ay contr bute to9ards br ng ng about

the sale of the factory n =uest on. Be 9as not ,the eff c ent agent or the procur ng cause of the sale., %he broFer must be the eff c ent agent or the procur ng cause of sale. %he means employed by h m and h s efforts must result n the sale. Be must f nd the purchaser, and the sale must proceed from h s efforts act ng as broFer. /(yl e vs. Mar ne Nat onal EanF, >1 N. H., 414I 41>I c t ng? Mc'lure vs. +a ne, 45 N. H., 8>1I !loyd vs. Mathe9s, 81 id., 124I !yon vs. M tchell, <> d., 2<8I Er ggs vs. "o9e, 4 *eyes, 424I Murray vs.'urr e, 2 'arr. and +ayne, 864I ( lF nson vs. Mart n, 6 id., 8.0 A lead ng case on the sub-ect s that of & bbald vs. Eethlehem $ron 'o. /6< N. H., <26I <6 Am. "ep., 4410. $n the case, after an e1haust ve rev e9 of var ous cases, the 'ourt of Appeals of Ne9 HorF stated the rule as follo9s? $n all the cases, under all and vary ng forms of e1press on, the fundamental and correct doctr ne, s, that the duty assumed #y the #ro'er is to #ring the minds of the #uyer and seller to an agreement for a sale, and the price and terms on &hich it is to #e made, and until that is done his right to commissions does not accrue. /Mc#avocF vs. (oodl ef, 20 Bo9., 221I Earnes vs. "oberts, 8 Eos9., 2<I Bolly vs. #osl ng, 2 E. D., &m th, 2>2I Jacobs vs. *olff, 2 B lt., 1<<I *ocF vs. Emmerl ng, 22 Bo9., 22I 'orn ng vs. 'alvert, 2 B lt., 8>I %rundy vs. N.H. and Bartf. &teamboat 'o., > "obt., <12I Can ! en vs. Eurns, 1 B lt., 1<4.0 111 111 111

$t follo9s, as a necessary deduct on from the establ shed rule, that a broFer s never ent tled to comm ss ons for unsuccessful efforts. %he r sF of a fa lure s 9holly h s. %he re9ard comes only 9 th h s success. %hat s the pla n contract and contemplat on of the part es. %he broFer may devote h s t me and labor, and e1pend h s money 9 th ever so much of devot on to the nterest of h s employer, and yet f he fa ls, f 9 thout effect ng an agreement or accompl sh ng a barga n, he abandons the effort, or h s author ty s fa rly and n good fa th term nated, he ga ns no r ght to comm ss ons. Be loses the labor and effort 9h ch 9as staFed upon success. And n such event t matters not that after h s fa lure, and the term nat on of h s agency, 9hat he has done proves of use and benef t to the pr nc pal. $n a mult tude of cases that must necessar ly result. Be may have ntroduced to each other part es 9ho other9 se 9ould have never metI he may have created mpress ons, 9h ch under later and more favorable c rcumstances naturally lead to and mater ally ass st n the consummat on of a saleI he may have planted the very seed from 9h ch others reap the harvestI but all that g ves h m no cla m. $t 9as part of h s r sF that fa l ng h mself, not successful n fulf ll ng h s obl gat on, others m ght be left to some e1tent to ava l themselves of the fru t of h s labors. As 9e sa d n (yl e vs.Mar ne Nat onal EanF />1 N.H., 41>0, n such a case the pr nc pal v olates no r ght of the broFer by sell ng to the f rst party 9ho offers the pr ce asFed, and t matters not that sale s to the very party 9 th 9hom the broFer had been negot at ng. Be fa led to f nd or produce a purchaser upon the terms prescr bed n h s employment, and the pr nc pal 9as under no obl gat on to 9a t longer that he m ght maFe further efforts. %he fa lure therefore

and ts conse=uences 9ere the r sF of the broFer only. %h s ho9ever must be taFen 9 th one mportant and necessary l m tat on. $f the efforts of the broFer are rendered a fa lure by the fault of the employerI f capriciously he changes h s m nd after the purchaser, ready and 9 ll ng, and consenting to the prescri#ed terms, s producedI or f the latter decl nes to complete the contract because of some defect of t tle n the o9nersh p of the seller, some unremoved ncumbrance, some defect 9h ch s the fault of the latter, then the broFer does not lose h s comm ss ons. And that upon the fam l ar pr nc ple that no one can ava l h mself of the nonperformance of a cond t on precedent, 9ho has h mself occas oned ts nonperformance. Eut th s l m tat on s not even an e1cept on to the general rule affect ng the broFer)s r ght for t goes on the ground that the broFer has done h s duty, that he has brought buyer and seller to an agreement, but that the contract s not consummated and fa ls though the after@fault of the seller. %he cases are un form n th s respect. /Moses vs. Eurl ng, <1 N.H., 4>2I #lent9orth vs. !uther, 21 Earb., 142I Can ! envs. Eurns, 1 B lt., 1<4.0 Dne other pr nc ple appl cable to such a contract as e1 sted n the present case needs to be Fept n v e9.6here no time for the continuance of the contract is fi ed #y its terms either party is at li#erty to terminate it at &ill , sub-ect only to the ord nary re=u rements of good fa th. 3sually the broFer s ent tled to a fa r and reasonable opportun ty to perform h s obl gat on, sub-ect of course to the r ght of the seller to sell ndependently. Eut hav ng been granted h m, the r ght of the pr nc pal to term nate h s author ty s a#soluteand unrestricted, e1cept only that he may not do t n bad fa th, and as a mere dev ce to escape the payment of the broFer)s comm ss ons. %hus, f n the m dst of negot at ons nst tuted by the broFer, and 9h ch 9ere pla nly and ev dently approach ng success, the seller should revoFe the author ty of the broFer, &ith the vie& of concluding the #argain &ithout his aid, and avoiding the payment of commission about to be earned, t m ght be 9ell sa d that the due performance h s obl gat on by the broFer 9as purposely prevented by the pr nc pal. Eut f the latter acts n good fa th, not seeF ng to escape the payment of comm ss ons, butmoved fairly #y a vie& of his o&n interest, he has the a#solute right before a barga n s made 9h le negot at ons rema n unsuccessful, before comm ss ons are earned, to revo'e the #ro'er/s authority, and the latter cannot thereafter cla m compensat on for a sale made by the pr nc pal, even though t be to a customer 9 th 9hom the broFer unsuccessfully negot ated, and even though, to some e1tent, the seller m ght -ustly be sa d to have ava led h mself of the fru ts of the broFer)s labor. /:#id. pp. 444, 448 and 44>.0 %he rule la d do9n n the forego ng case 9as adopted and follo9ed n the cases of Le mer vs. Ant sell /28 'al. 8050, and Ayres vs. %homas /11> 'al., 1400. %he undertaF ng to procure a purchaser re=u res of the party so undertaF ng, not s mply to name or ntroduce a person 9ho may be 9 ll ng to maFe any sort of contract n reference to the property, but to produce a party capable, and 9ho ult mately becomes the purchaser. /* mberly vs. Benderson and !upton, 25 Md., 812, 818, c t ng? *eener vs. Barrod and ErooFe, 2 Md. ><I

Mc#avocF vs. (oodl ef, 20 Bo9., 221. &ee also " chards, E1ecutor, vs. JacFson, <1 Md., 280.0 %he defendant sent a proposal to a broFer n these 9ords? $f you send or cause to be sent to me, by advert sement or other9 se, any party 9 th 9hom $ may see f t and proper to effect a sale or e1change of my real estate, above descr bed $ 9 ll pay you the sum of S200. %he broFer found a person 9ho proposed to purchase the property, but the sale 9as not affected. 0eld? %hat the broFer 9as not ent tled to compensat on. /(alFer vs. % rrel, < Am. "ep., <82.0 $t s clear from the forego ng author t es that, although the present pla nt ff could probably have effected the sale of the defendant)s factory had not the defendant sold t to someone else, he s not ent tled to the comm ss ons agreed upon because he had no ntervent on 9hatever n, and much sale n =uest on. $t must be borne n m nd that no def n te per od 9as f 1ed by the defendant 9 th n 9h ch the pla nt ff m ght effect the sale of ts factory. Nor 9as the pla nt ff g ven by the defendant the e1clus ve agency of such sale. %herefore, the pla nt ff cannot compla nt of the defendant)s conduct n sell ng the property through another agent before the pla nt ff)s efforts 9ere cro9ned 9 th success. ,Dne 9ho has employed a broFer can h mself sell the property to a purchaser 9hom he has procured, 9 thout any a d from the broFer., /Bungerford vs. B cFs, <5 'onn., 285I (yl e vs. Mar ne Nat onal EanF, >1 N.H., 418, 41>.0 7or the forego ng reasons the -udgment appealed from s hereby revoFed and the defendant s hereby absolved from all l ab l ty under the pla nt ff)s compla nt, 9 th costs n both nstances aga nst the pla nt ff. &o ordered. Araullo, Street, Avance>a and 4illamor, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. 114.1; January 33, 1<<1 A#:$E! 5A5N, pet t oner, vs. %/&$( /: A++EA#S and 9A8E$S%5E '/(/$EN WE$KE AK()ENGSE##S%5A:( C9'WD, respondents.

'EN!/6A, J.: %h s s a pet t on for rev e9 of the dec s on 1 of the 'ourt of Appeals d sm ss ng a compla nt for spec f c performance 9h ch pet t oner had f led aga nst pr vate respondent on the ground that the "eg onal %r al 'ourt of UueAon ' ty d d not

ac=u re -ur sd ct on over pr vate respondent, a nonres dent fore gn corporat on, and of the appellate court)s order deny ng pet t oner)s mot on for recons derat on. %he follo9 ng are the facts? +et t oner Alfred Bahn s a 7 l p no c t Aen do ng bus ness under the name and style ,Bahn@Man la., Dn the other hand, pr vate respondent Eayer sche Motoren (erFe AFt engesellschaft /EM(0 s a nonres dent fore gn corporat on e1 st ng under the la9s of the former 7ederal "epubl c of #ermany, 9 th pr nc pal off ce at Mun ch, #ermany. Dn March 2, 15>2, pet t oner e1ecuted n favor of pr vate respondent a ,Deed of Ass gnment 9 th &pec al +o9er of Attorney,, 9h ch reads n full as follo9s? (BE"EA&, the A&&$#ND" s the present o9ner and holder of the EM( trademarF and dev ce n the +h l pp nes 9h ch A&&$#ND" uses and has been us ng on the products manufactured by A&&$#NEE, and for 9h ch A&&$#ND" s the author Aed e1clus ve Dealer of the A&&$#NEE n the +h l pp nes, the same be ng ev denced by cert f cate of reg strat on ssued by the D rector of +atents on 12 December 15>< and s referred to as %rademarF No. 10>28I (BE"EA&, the A&&$#ND" has agreed to transfer and conse=uently record sa d transfer of the sa d EM( trademarF and dev ce n favor of the A&&$#NEE here n 9 th the +h l pp nes +atent Dff ceI ND( %BE"E7D"E, n v e9 of the forego ng and n cons derat on of the st pulat ons hereunder stated, the A&&$#ND" hereby aff rms the sa d ass gnment and transfer n favor of the A&&$#NEE under the follo9 ng terms and cond t ons? 1. %he A&&$#NEE shall taFe appropr ate steps aga nst any user other than A&&$#ND" or nfr nger of the EM( trademarF n the +h l pp nesI for such purpose, the A&&$#ND" shall nform the A&&$#NEE mmed ately of any such use or nfr ngement of the sa d trademarF 9h ch comes to h s Fno9ledge and upon such nformat on the A&&$#ND" shall automat cally act as Attorney@$n@7act of the A&&$#NEE for such case, 9 th full po9er, author ty and respons b l ty to prosecute un laterally or n concert 9 th A&&$#NEE, any such nfr nger of the sub-ect marF and for purposes hereof the A&&$#ND" s hereby named and const tuted as A&&$#NEE)s Attorney@$n@7act, but any such su t 9 thout A&&$#NEE)s consent 9 ll e1clus vely be the respons b l ty and for the account of the A&&$#ND", 2. %hat the A&&$#ND" and the A&&$#NEE shall cont nue bus ness relat ons as has been usual n the past 9 thout a formal contract, and for that purpose, the dealersh p of A&&$#ND" shall cover the A&&$#NEE)s complete product on program 9 th the only l m tat on that, for the present, n v e9 of A&&$#NEE)s l m ted product on, the latter shall not be able to supply automob les to A&&$#ND".

+er the agreement, the part es ,cont nue:d; bus ness relat ons as has been usual n the past 9 thout a formal contract., Eut on 7ebruary 1>, 155<, n a meet ng 9 th a EM( representat ve and the pres dent of 'olumb a Motors 'orporat on /'M'0, Jose AlvareA, pet t oner 9as nformed that EM( 9as arrang ng to grant the e1clus ve dealersh p of EM( cars and products to 'M', 9h ch had e1pressed nterest n ac=u r ng the same. Dn 7ebruary 24, 155<, pet t oner rece ved conf rmat on of the nformat on from EM( 9h ch, n a letter, e1pressed d ssat sfact on 9 th var ous aspects of pet t oner)s bus ness, ment on ng among other th ngs, decl ne n sales, deter orat ng serv ces, and nade=uate sho9room and 9arehouse fac l t es, and pet t oner)s alleged fa lure to comply 9 th the standards for an e1clus ve EM( dealer. 3 Nonetheless, EM( e1pressed 9 ll ngness to cont nue bus ness relat ons 9 th the pet t oner on the bas s of a ,standard EM( mporter, contract, other9 se, t sa d, f th s 9as not acceptable to pet t oner, EM( 9ould have no alternat ve but to term nate pet t oner)s e1clus ve dealersh p effect ve June <0, 155<. +et t oner protested, cla m ng that the term nat on of h s e1clus ve dealersh p 9ould be a breach of the Deed of Ass gnment. 4 Bahn ns sted that as long as the ass gnment of ts trademarF and dev ce subs sted, he rema ned EM()s e1clus ve dealer n the +h l pp nes because the ass gnment 9as made n cons derat on of the e1clus ve dealersh p. $n the same letter pet t oner e1pla ned that the decl ne n sales 9as due to lo9er pr ces offered for EM( cars n the 3n ted &tates and the fact that fe9 customers returned for repa rs and serv c ng because of the durab l ty of EM( parts and the eff c ency of pet t oner)s serv ce. Eecause of Bahn)s ns stence on the former bus ness relat on, EM( 9 thdre9 on March 2>, 155< ts offer of a ,standard mporter contract, and term nated the e1clus ve dealer relat onsh p effect ve June <0, 155<. ; At a conference of EM( "eg onal $mporters held on Apr l 2>, 155< n & ngapore, Bahn 9as surpr sed to f nd AlvareA among those nv ted from the As an reg on. Dn Apr l 25, 155<, EM( proposed that Bahn and 'M' -o ntly mport and d str bute EM( cars and parts. Bahn found the proposal unacceptable. Dn May 14, 155<, he f led a compla nt for spec f c performance and damages aga nst EM( to compel t to cont nue the e1clus ve dealersh p. !ater he f led an amended compla nt to nclude an appl cat on for temporary restra n ng order and for 9r ts of prel m nary, mandatory and proh b tory n-unct on to en-o n EM( from term nat ng h s e1clus ve dealersh p. Bahn)s amended compla nt alleged n pert nent parts? 2. Defendant :EM(; s a fore gn corporat on do ng bus ness n the +h l pp nes 9 th pr nc pal off ces at Mun ch, #ermany. $t may be served 9 th summons and other court processes through the &ecretary of the Department of %rade and $ndustry of the +h l pp nes. . . . 111 111 111 8. Dn March 2, 15>2, +la nt ff e1ecuted n favor of defendant EM( a Deed of Ass gnment 9 th &pec al +o9er of Attorney cover ng the trademarF and n

cons derat on thereof, under ts f rst 9hereas clause, +la nt ff 9as duly acFno9ledged as the ,e1clus ve Dealer of the Ass gnee n the +h l pp nes. . . . 111 111 111 6. 7rom the t me the trademarF ,EM( N DEC$'E, 9as f rst used by the +la nt ff n the +h l pp nes up to the present, +la nt ff, through ts f rm name ,BABN MAN$!A, and 9 thout any monetary contr but on from defendant EM(, establ shed EM()s good9 ll and marFet presence n the +h l pp nes. +ursuant thereto, +la nt ff has nvested a lot of money and resources n order to s ngle@handedly compete aga nst other motorcycle and car compan es. . . . Moreover, +la nt ff has bu lt bu ld ngs and other nfrastructures such as serv ce centers and sho9rooms to ma nta n and promote the car and products of defendant EM(. 111 111 111 10. $n a letter dated 7ebruary 24, 155<, defendant EM( adv sed +la nt ff that t 9as 9 ll ng to ma nta n 9 th +la nt ff a relat onsh p but only ,on the bas s of a standard EM( mporter contract as ad-usted to reflect the part cular s tuat on n the +h l pp nes, sub-ect to certa n cond t ons, other9 se, defendant EM( 9ould term nate +la nt ffs e1clus ve dealersh p and any relat onsh p for cause effect ve June <0, 155<. . . . 111 111 111 18. %he actuat ons of defendant EM( are n breach of the ass gnment agreement bet9een tself and pla nt ff s nce the cons derat on for the ass gnment of the EM( trademarF s the cont nuance of the e1clus ve dealersh p agreement. $t thus, follo9s that the e1clus ve dealersh p should cont nue for so long as defendant EM( en-oys the use and o9nersh p of the trademarF ass gned to t by +la nt ff. %he case 9as docFeted as ' v l 'ase No. U@5<@185<< and raffled to Eranch 104 of the UueAon ' ty "eg onal %r al 'ourt, 9h ch on June 14, 155< ssued a temporary restra n ng order. &ummons and cop es of the compla nt and amended compla nt 9ere thereafter served on the pr vate respondent through the Department of %rade and $ndustry, pursuant to "ule 14, .14 of the "ules of 'ourt. %he order, summons and cop es of the compla nt and amended compla nt 9ere later sent by the D%$ to EM( v a reg stered ma l on June 18, 155< 2 and rece ved by the latter on June 24, 155<. Dn June 12, 155<, 9 thout proof of serv ce on EM(, the hear ng on the appl cat on for the 9r t of prel m nary n-unct on proceeded e parte, 9 th pet t oner Bahn test fy ng. Dn June <0, 155<, the tr al court ssued an order grant ng the 9r t of prel m nary n-unct on upon the f l ng of a bond of +100,000.00. Dn July 1<, 155<, follo9 ng the post ng of the re=u red bond, a 9r t of prel m nary n-unct on 9as ssued. Dn July 1, 155<, EM( moved to d sm ss the case, contend ng that the tr al court d d not ac=u re -ur sd ct on over t through the serv ce of summons on the

Department of %rade and $ndustry, because t /EM(0 9as a fore gn corporat on and t 9as not do ng bus ness n the +h l pp nes. $t contended that the e1ecut on of the Deed of Ass gnment 9as an solated transact onI that Bahn 9as not ts agent because the latter undertooF to assemble and sell EM( cars and products 9 thout the part c pat on of EM( and sold other productsI and that Bahn 9as an ndentor or m ddleman transact ng bus ness n h s o9n name and for h s o9n account. +et t oner Alfred Bahn opposed the mot on. Be argued that EM( 9as do ng bus ness n the +h l pp nes through h m as ts agent, as sho9n by the fact that EM( nvo ces and order forms 9ere used to document h s transact onsI that he gave 9arrant es as e1clus ve EM( dealerI that EM( off c als per od cally nspected standards of serv ce rendered by h mI and that he 9as descr bed n serv ce booFlets and nternat onal publ cat ons of EM( as a ,EM( $mporter, or ,EM( %rad ng 'ompany, n the +h l pp nes. %he tr al court 0 deferred resolut on of the mot on to d sm ss unt l after tr al on the mer ts for the reason that the grounds advanced by EM( n ts mot on d d not seem to be ndub table. ( thout seeF ng recons derat on of the aforement oned order, EM( f led a pet t on for certiorari 9 th the 'ourt of Appeals alleg ng that? $. %BE "E&+DNDEN% J3D#E A'%ED ($%B 3ND3E BA&%E D" D%BE"($&E $NJ3D$'$D3&!H $N +"D'EED$N#& !EAD$N# %D(A"D %BE $&&3AN'E D7 %BE ("$% D7 +"E!$M$NA"H $NJ3N'%$DN, AND $N +"E&'"$E$N# %BE %E"M& 7D" %BE $&&3AN'E %BE"ED7. $$. %BE "E&+DNDEN% J3D#E +A%EN%!H E""ED $N DE7E""$N# "E&D!3%$DN D7 %BE MD%$DN %D D$&M$&& DN %BE #"D3ND D7 !A'* D7 J3"$&D$'%$DN, AND %BE"EEH 7A$!$N# %D $MMED$A%E!H D$&M$&& %BE 'A&E A Q;=. EM( asFed for the mmed ate ssuance of a temporary restra n ng order and, after hear ng, for a 9r t of prel m nary n-unct on, to en-o n the tr al court from proceed ng further n ' v l 'ase No. U@5<@185<<. +r vate respondent po nted out that, unless the tr al court)s order 9as set as de, t 9ould be forced to subm t to the -ur sd ct on of the court by f l ng ts ans9er or to accept -udgment n default, 9hen the very =uest on 9as 9hether the court had -ur sd ct on over t. %he 'ourt of Appeals en-o ned the tr al court from hear ng pet t oner)s compla nt. Dn December 20, 155<, t rendered -udgment f nd ng the tr al court gu lty of grave abuse of d scret on n deferr ng resolut on of the mot on to d sm ss. $t stated? #o ng by the plead ngs already f led 9 th the respondent court before t came out 9 th ts =uest oned order of July 2>, 155<, 9e rule and so hold that pet t oner)s /EM(0 mot on to d sm ss could be resolved then and there, and that the respondent -udge)s deferment of h s act on thereon unt l after tr al on the mer t const tutes, to our m nd, grave abuse of d scret on.

111 111 111 . . . :%;here s not much apprec able d sagreement as regards the factual matters relat ng to the mot on to d sm ss. (hat truly d v de / sic0 the part es and to 9h ch they greatly d ffer s the legal conclus ons they respect vely dra9 from such facts, /sic0 9 th Bahn ma nta n ng that on the bas s thereof, EM( s do ng bus ness n the +h l pp nes 9h le the latter asserts that t s not. %hen, after stat ng that any rul ng 9h ch the tr al court m ght maFe on the mot on to d sm ss 9ould any9ay be elevated to t on appeal, the 'ourt of Appeals tself resolved the mot on. $t ruled that EM( 9as not do ng bus ness n the country and, therefore, -ur sd ct on over t could not be ac=u red through serv ce of summons on the D%$ pursuant to "ule 14, .14. )%he court upheld pr vate respondent)s content on that Bahn acted n h s o9n name and for h s o9n account and ndependently of EM(, based on Alfred Bahn)s allegat ons that he had nvested h s o9n money and resources n establ sh ng EM()s good9 ll n the +h l pp nes and on EM()s cla m that Bahn sold products other than those of EM(. $t held that pet t oner 9as a mere ndentor or broFer and not an agent through 9hom pr vate respondent EM( transacted bus ness n the +h l pp nes. 'onse=uently, the 'ourt of Appeals d sm ssed pet t oner)s compla nt aga nst EM(. Bence, th s appeal. +et t oner contends that the 'ourt of Appeals erred /10 n f nd ng that the tr al court gravely abused ts d scret on n deferr ng act on on the mot on to d sm ss and /20 n f nd ng that pr vate respondent EM( s not do ng bus ness n the +h l pp nes and, for th s reason, d sm ss ng pet t oner)s case. +et t oner)s appeal s 9ell taFen. "ule 14, .14 prov des? .14. Service upon private foreign corporations . O $f the defendant s a fore gn corporat on, or a nonres dent -o nt stocF company or assoc at on, do ng bus ness n the +h l pp nes, serv ce may be made on ts res dent agent des gnated n accordance 9 th la9 for that purpose, or, f there be no such agent, on the government off c al des gnated by la9 to that effect, or on any of ts off cers or agents 9 th n the +h l pp nes. /Emphas s added0. (hat acts are cons dered ,do ng bus ness n the +h l pp nes, are enumerated n .</d0 of the 7ore gn $nvestments Act of 1551 /".A. No. 20420 as follo9s? 1 d0 the phrase ,do ng bus ness, shall nclude sol c t ng orders, serv ce contracts, open ng off ces, 9hether called ,l a son, off ces or branchesI appointing representatives or distri#utors domiciled in the $hilippines or 9ho n any calendar year stay n the country for a per od or per ods totall ng one hundred e ghty /1600 days or moreI part c pat ng n the management, superv s on or control of any domest c bus ness, f rm, ent ty or corporat on n the +h l pp nesI and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that e tent the performance of acts or &or's, or the e ercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and o#"ect of

the #usiness organization? +rov ded, ho9ever, %hat the phrase Qdoing #usinessQ shall not #e deemed to include mere nvestment as a shareholder by a fore gn ent ty n domest c corporat ons duly reg stered to do bus ness, andMor the e1erc se of r ghts as such nvestorI nor hav ng a nom nee d rector or off cer to represent ts nterests n such corporat onI nor appointing a representative or distri#utor domiciled in the $hilippines &hich transacts #usiness in its o&n name and for its o&n account. /Emphas s suppl ed0 %hus, the phrase ncludes ,appo nt ng representat ves or d str butors n the +h l pp nes, but not 9hen the representat ve or d str butor ,transacts bus ness n ts name and for ts o9n account., $n add t on, .1/f0/10 of the "ules and "egulat ons mplement ng /$""0 the Dmn bus $nvestment 'ode of 1562 /E.D. No. 22>0 prov ded? /f0 ,Do ng bus ness, shall be any act or comb nat on of acts, enumerated n Art cle 44 of the 'ode. $n part cular, ,do ng bus ness, ncludes? /10 . . . A fore gn f rm 9h ch does bus ness through m ddlemen act ng n the r o9n names, such as ndentors, commerc al broFers or comm ss on merchants, shall not be deemed do ng bus ness n the +h l pp nes. Eut such ndentors, commerc al broFers or comm ss on merchants shall be the ones deemed to be do ng bus ness n the +h l pp nes. %he =uest on s 9hether pet t oner Alfred Bahn s the agent or d str butor n the +h l pp nes of pr vate respondent EM(. $f he s, EM( may be cons dered do ng bus ness n the +h l pp nes and the tr al court ac=u red -ur sd ct on over t /EM(0 by v rtue of the serv ce of summons on the Department of %rade and $ndustry. Dther9 se, f Bahn s not the agent of EM( but an ndependent dealer, albe t of EM( cars and products, EM(, a fore gn corporat on, s not cons dered do ng bus ness n the +h l pp nes 9 th n the mean ng of the 7ore gn $nvestments Act of 1551 and the $"", and the tr al court d d not ac=u re -ur sd ct on over t /EM(0. %he 'ourt of Appeals held that pet t oner Alfred Bahn acted n h s o9n name and for h s o9n account and not as agent or d str butor n the +h l pp nes of EM( on the ground that ,he alone had contacts 9 th nd v duals or ent t es nterested n ac=u r ng EM( veh cles. $ndependence character Aes Bahn)s undertaF ngs, for 9h ch reason he s to be cons dered, under govern ng statutes, as do ng bus ness., /p. 1<0 $n support of th s conclus on, the appellate court c ted the follo9 ng allegat ons n Bahn)s amended compla nt? 6. 7rom the t me the trademarF ,EM( N DEC$'E, 9as f rst used by the +la nt ff n the +h l pp nes up to the present, +la nt ff, through ts f rm name ,BABN MAN$!A, and 9 thout any monetary contr but ons from defendant EM(, establ shed EM()s good9 ll and marFet presence n the +h l pp nes. +ursuant thereto, +la nt ff nvested a lot of money and resources n order to s ngle@handedly compete aga nst other motorcycle and car compan es. . . . Moreover, +la nt ff has bu lt bu ld ngs and other nfrastructures such as serv ce centers and sho9rooms to ma nta n and promote the car and products of defendant EM(.

As the above =uoted allegat ons of the amended compla nt sho9, ho9ever, there s noth ng to support the appellate court)s f nd ng that Bahn sol c ted orders alone and for h s o9n account and 9 thout , nterference from, let alone d rect on of, EM(., /p. 1<0 %o the contrary, Bahn cla med he tooF orders for EM( cars and transm tted them to EM(. 3pon rece pt of the orders, EM( f 1ed the do9npayment and pr c ng charges, not f ed Bahn of the scheduled product on month for the orders, and reconf rmed the orders by s gn ng and return ng to Bahn the acceptance sheets. +ayment 9as made by the buyer d rectly to EM(. % tle to cars purchased passed d rectly to the buyer and Bahn never pa d for the purchase pr ce of EM( cars sold n the +h l pp nes. Bahn 9as cred ted 9 th a comm ss on e=ual to 14R of the purchase pr ce upon the nvo c ng of a veh cle order by EM(. 3pon conf rmat on n 9r t ng that the veh cles had been reg stered n the +h l pp nes and serv ced by h m, Bahn rece ved an add t onal <R of the full purchase pr ce. Bahn performed after@sale serv ces, nclud ng 9arranty serv ces, for 9h ch he rece ved re mbursement from EM(. All orders 9ere on nvo ces and forms of EM(. = %hese allegat ons 9ere substant ally adm tted by EM( 9h ch, n ts pet t on for certiorari before the 'ourt of Appeals, stated? < 5.4. As soon as the veh cles are fully manufactured and full payment of the purchase pr ces are made, the veh cles are sh pped to the +h l pp nes. /%he payments may be made by the purchasers or th rd@persons or even by Bahn.0 %he b lls of lad ng are made up n the name of the purchasers, but Bahn@Man la s there n nd cated as the person to be not f ed. 5.8. $t s Bahn 9ho p cFs up the veh cles from the +h l pp ne ports, for purposes of conduct ng pre@del very nspect ons. %hereafter, he del vers the veh cles to the purchasers. 5.>. As soon as EM( nvo ces the veh cle ordered, Bahn s cred ted 9 th a comm ss on of fourteen percent /14R0 of the full purchase pr ce thereof, and as soon as he conf rms n 9r t ng that the veh cles have been reg stered n the +h l pp nes and have been serv ced by h m, he 9 ll rece ve an add t onal three percent /<R0 of the full purchase pr ces as comm ss on. 'ontrary to the appellate court)s conclus on, th s arrangement sho9s an agency. An agent rece ves a comm ss on upon the successful conclus on of a sale. Dn the other hand, a broFer earns h s pay merely by br ng ng the buyer and the seller together, even f no sale s eventually made. As to the serv ce centers and sho9rooms 9h ch he sa d he had put up at h s o9n e1pense, Bahn sa d that he had to follo9 EM( spec f cat ons as e1clus ve dealer of EM( n the +h l pp nes. Accord ng to Bahn, EM( per od cally nspected the serv ce centers to see to t that EM( standards 9ere ma nta ned. $ndeed, t 9ould seem from EM()s letter to Bahn that t 9as for Bahn)s alleged fa lure to ma nta n EM( standards that EM( 9as term nat ng Bahn)s dealersh p.

%he fact that Bahn nvested h s o9n money to put up these serv ce centers and sho9rooms does not necessar ly prove that he s not an agent of EM(. 7or as already noted, there are facts n the record 9h ch suggest that EM( e1erc sed control over Bahn)s act v t es as a dealer and made regular nspect ons of Bahn)s prem ses to enforce compl ance 9 th EM( standards and spec f cat ons. 1. 7or e1ample, n ts letter to Bahn dated 7ebruary 2<, 155>, EM( stated? $n the last years 9e have po nted out to you n several d scuss ons and letters that 9e have to tacFle the +h l pp ne marFet more profess onally and that 9e are through your present act v t es not ade=uately prepared to cope 9 th the forthcom ng challenges. 11 $n effect, EM( 9as hold ng Bahn accountable to t under the 15>2 Agreement. %h s case f ts nto the mould of .ommunications Materials, :nc. v. .ourt of Appeals, 13 n 9h ch the fore gn corporat on entered nto a ,"epresentat ve Agreement, and a ,! cens ng Agreement, 9 th a domest c corporat on, by v rtue of 9h ch the latter 9as appo nted ,e1clus ve representat ve, n the +h l pp nes for a st pulated comm ss on. +ursuant to these contracts, the domest c corporat on sold products e1ported by the fore gn corporat on and put up a serv ce center for the products sold locally. %h s 'ourt held that these acts const tuted do ng bus ness n the +h l pp nes. %he arrangement sho9ed that the fore gn corporat on)s purpose 9as to penetrate the +h l pp ne marFet and establ sh ts presence n the +h l pp nes. $n add t on, EM( held out pr vate respondent Bahn as ts e1clus ve d str butor n the +h l pp nes, even as t announced n the As an reg on that Bahn 9as the ,off c al EM( agent, n the +h l pp nes. 14 %he 'ourt of Appeals also found that pet t oner Alfred Bahn dealt n other products, and not e1clus vely n EM( products, and, on th s bas s, ruled that Bahn 9as not an agent of EM(. /p. 140 %h s f nd ng s based ent rely on allegat ons of EM( n ts mot on to d sm ss f led n the tr al court and n ts pet t on for certiorari before the 'ourt of Appeals. 1; Eut th s allegat on 9as den ed by Bahn 12 and therefore the 'ourt of Appeals should not have c ted t as f t 9ere the fact. $ndeed th s s not the only factual ssue ra sed, 9h ch should have nd cated to the 'ourt of Appeals the necess ty of aff rm ng the tr al court)s order deferr ng resolut on of EM()s mot on to d sm ss. +et t oner alleged that 9hether or not he s cons dered an agent of EM(, the fact s that EM( d d bus ness n the +h l pp nes because t sold cars d rectly to +h l pp ne buyers. 10 %h s 9as den ed by EM(, 9h ch cla med that Bahn 9as not ts agent and that, 9h le t 9as true that t had sold cars to +h l pp ne buyers, th s 9as done 9 thout sol c tat on on ts part. 11 $t s not true then that the =uest on 9hether EM( s do ng bus ness could have been resolved s mply by cons der ng the part es) plead ngs. %here are genu ne ssues of facts 9h ch can only be determ ned on the bas s of ev dence duly

presented. EM( cannot short c rcu t the process on the plea that to compel t to go to tr al 9ould be to deny ts r ght not to subm t to the -ur sd ct on of the tr al court 9h ch prec sely t den es. "ule 1>, .< author Aes courts to defer the resolut on of a mot on to d sm ss unt l after the tr al f the ground on 9h ch the mot on s based does not appear to be ndub table. Bere the record of the case br stles 9 th factual ssues and t s not at all clear 9hether some allegat ons correspond to the proof. Any9ay, pr vate respondent need not apprehend that by respond ng to the summons t 9ould be 9a v ng ts ob-ect on to the tr al court)s -ur sd ct on. $t s no9 settled that, for purposes of hav ng summons served on a fore gn corporat on n accordance 9 th "ule 14, .14, t s suff c ent that t be alleged n the compla nt that the fore gn corporat on s do ng bus ness n the +h l pp nes. %he court need not go beyond the allegat ons of the compla nt n order to determ ne 9hether t has Jur sd ct on. 1= A determ nat on that the fore gn corporat on s do ng bus ness s only tentat ve and s made only for the purpose of enabl ng the local court to ac=u re -ur sd ct on over the fore gn corporat on through serv ce of summons pursuant to "ule 14, .14. &uch determ nat on does not foreclose a contrary f nd ng should ev dence later sho9 that t s not transact ng bus ness n the country. As th s 'ourt has e1pla ned? %h s s not to say, ho9ever, that the pet t oner)s r ght to =uest on the -ur sd ct on of the court over ts person s no9 to be deemed a foreclosed matter. $f t s true, as & gnet cs cla ms, that ts only nvolvement n the +h l pp nes 9as through a pass ve nvestment n & gf l, 9h ch t even later d sposed of, and that %EAM +ac f c s not ts agent, then t cannot really be sa d to be do ng bus ness n the +h l pp nes. $t s a defense, ho9ever, that re=u res the contravent on of the allegat ons of the compla nt, as 9ell as a full vent lat on, n effect, of the ma n mer ts of the case, 9h ch should not thus be 9 th n the prov nce of a mere mot on to d sm ss. &o, also, the ssue posed by the pet t oner as to 9hether a fore gn corporat on 9h ch has done bus ness n the country, but 9h ch has ceased to do bus ness at the t me of the f l ng of a compla nt, can st ll be made to ans9er for a cause of act on 9h ch accrued 9h le t 9as do ng bus ness, s another matter that 9ould yet have to a9a t the recept on and adm ss on of ev dence. & nce these po nts have seasonably been ra sed by the pet t oner, there should be no real cause for 9hat may understandably be ts apprehens on, i.e., that by ts part c pat on dur ng the tr al on the mer ts, t may, absent an nvocat on of separate or ndependent rel efs of ts o9n, be cons dered to have voluntar ly subm tted tself to the court)s -ur sd ct on. 1< 7ar from comm tt ng an abuse of d scret on, the tr al court properly deferred resolut on of the mot on to d sm ss and thus avo ded prematurely dec d ng a =uest on 9h ch re=u res a factual bas s, 9 th the same result f t had den ed the mot on and cond t onally assumed -ur sd ct on. $t s the 'ourt of Appeals 9h ch, by rul ng that EM( s not do ng bus ness on the bas s merely of uncerta n allegat ons n the plead ngs, d sposed of the 9hole case 9 th f nal ty and thereby depr ved pet t oner of h s r ght to be heard on h s cause of act on. Nor 9as there -ust f cat on for null fy ng the 9r t of prel m nary n-unct on ssued by the tr al

court. Although the n-unct on 9as ssued e parte, the fact s that EM( 9as subse=uently heard on ts defense by f l ng a mot on to d sm ss. (BE"E7D"E, the dec s on of the 'ourt of Appeals s "ECE"&ED and the case s "EMANDED to the tr al court for further proceed ngs. &D D"DE"ED. Regalado, Romero, $uno and 7orres, 9r., 99., concur. :ootnotes 1 +er Just ce 'anc o '. #arc a and concurred n by Just ce "amon 3. Mabutas and Anton o M. Mart neA, cha rman. 2 Rollo, pp. 28@26. < Rollo, pp. 25@62. 4 Rollo, pp. 6<@64. 8 Rollo, p. 85<. > +er Judge Ma1 m ano Asunc on. 2 %he 7ore gn $nvestments Act of 1551 superseded Arts. 44@8> of the Dmn bus $nvestments 'ode. 6 Rollo, pp. 5>, 140@141. 5 :d., p. 141. 10 (ang !aborator es, $nc. v. MendoAa, 18> &'"A 44 /15620. 11 Rollo, p. 28. 12 #.". No. 10222<, Aug. 22, 155>. 1< Rollo, p. 21<. 14 Rollo, pp. 51, 1><. 18 Rollo, p. 124. 1> Rollo, pp. 248I 252. 12 Rollo, pp. 122, 264, >00. 16 ! tton M lls, $nc. v. 'ourt of Appeals, #.". No. 54560, May 18, 155>I & gnet cs 'orp. v. 'ourt of Appeals, 228 &'"A 2<2 /155<0. 15 & gnet cs 'orp. v. 'ourt of Appeals, 228 &'"A at 24>.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. 1;4<1= !ecem er 4, 3..3

'AN&E# 9. (AN, G$EGG '. (E%S/N and A#E>AN!E$ SA#!A@A, pet t oners, vs. E!&A$!/ $. G&##AS and N/$'A S. G&##AS, respondents. DE'$&$DN 8NA$ES7SAN()AG/, J.: %h s s a pet t on for rev e9 seeF ng to set as de the dec s on 1 of the 'ourt of Appeals2 n 'A@#.". 'C No. 4>8<5, 9h ch reversed and set as de the dec s on < of the "eg onal %r al 'ourt of 'ebu ' ty, Eranch 22 n ' v l 'ase No. 'EE@12240. %he records sho9 that pr vate respondents, &pouses Eduardo ". #ullas and Norma &. #ullas, 9ere the reg stered o9ners of a parcel of land n the Mun c pal ty of M nglan lla, +rov nce of 'ebu, measur ng 104,114 s=. m., 9 th %ransfer 'ert f cate of % tle No. <14>8.4 Dn June 25, 1552, they e1ecuted a spec al po9er of attorney8 author A ng pet t oners Manuel E. %an, a l censed real estate broFer,> and h s assoc ates #regg M. %ecson and Ale1ander &aldaQa, to negot ate for the sale of the land at 7 ve Bundred 7 fty +esos /+880.000 per s=uare meter, at a comm ss on of <R of the gross pr ce. %he po9er of attorney 9as non@e1clus ve and effect ve for one month from June 25, 1552. 2 Dn the same date, pet t oner %an contacted Eng neer Edsel !edesma, construct on manager of the & sters of Mary of Eanneau1, $nc. /hereafter, & sters of Mary0, a rel g ous organ Aat on nterested n ac=u r ng a property n the M nglan lla area. $n the morn ng of July 1, 1552, pet t oner %an v s ted the property 9 th Eng neer !edesma. %hereafter, the t9o men accompan ed & sters M chaela * m and AAucena #av ola, represent ng the & sters of Mary, to see pr vate respondent Eduardo #ullas n h s off ce at the 3n vers ty of C sayas. %he & sters, 9ho had already seen and nspected the land, found the same su table for the r purpose and e1pressed the r des re to buy t.6 Bo9ever, they re=uested that the sell ng pr ce be reduced to 7 ve Bundred %h rty +esos /+8<0.000 per s=uare meter nstead of 7 ve Bundred 7 fty +esos /+880.000 per s=uare meter. +r vate respondent Eduardo #ullas referred the prospect ve buyers to h s 9 fe. $t 9as the f rst t me that the buyers came to Fno9 that pr vate respondent Eduardo #ullas 9as the o9ner of the property. Dn July <, 1552, pr vate respondents agreed to sell the property to the & sters of Mary, and subse=uently e1ecuted a spec al po9er of attorney 5 n favor of Eufem a 'aQete, g v ng her the

spec al author ty to sell, transfer and convey the land at a f 1ed pr ce of %9o Bundred +esos /+200.000 per s=uare meter. Dn July 12, 1552, attorney@ n@fact Eufem a 'aQete e1ecuted a deed of sale n favor of the & sters of Mary for the pr ce of %9enty M ll on E ght Bundred %9enty %9o %housand E ght Bundred +esos /+20,622.600.000, or at the rate of %9o Bundred +esos /+200.000 per s=uare meter.10 %he buyers subse=uently pa d the correspond ng ta1es.11 %hereafter, the "eg ster of Deeds of 'ebu +rov nce ssued %'% No. 28561 n the name of the & sters of Mary of Eanneau1, $nc. 12 Earl er, on July <, 1552, n the afternoon, pet t oners 9ent to see pr vate respondent Eduardo #ullas to cla m the r comm ss on, but the latter told them that he and h s 9 fe have already agreed to sell the property to the & sters of Mary. +r vate respondents refused to pay the broFerJs fee and alleged that another group of agents 9as respons ble for the sale of land to the & sters of Mary. Dn August 26, 1552, pet t oners f led a compla nt 1< aga nst the defendants for recovery of the r broFerJs fee n the sum of Dne M ll on & 1 Bundred 7 fty 7 ve %housand 7our Bundred %9elve and >0M100 +esos /+1,>88,412.>00, as 9ell as moral and e1emplary damages and attorneyJs fees. %hey alleged that they 9ere the eff c ent procur ng cause n br ng ng about the sale of the property to the & sters of Mary, but that the r efforts n consummat ng the sale 9ere frustrated by the pr vate respondents 9ho, n ev dent bad fa th, mal ce and n order to evade payment of broFerJs fee, dealt d rectly 9 th the buyer 9hom pet t oners ntroduced to them. %hey further po nted out that the deed of sale 9as undervalued obv ously to evade payment of the correct amount of cap tal ga ns ta1, documentary stamps and other nternal revenue ta1es. $n the r ans9er, pr vate respondents countered that, contrary to pet t onersJ cla m, they 9ere not the eff c ent procur ng cause n br ng ng about the consummat on of the sale because another broFer, "oberto +acana, ntroduced the property to the & sters of Mary ahead of the pet t oners. 14 +r vate respondents ma nta ned that 9hen pet t oners ntroduced the buyers to pr vate respondent Eduardo #ullas, the former 9ere already dec ded n buy ng the property through +acana, 9ho had been pa d h s comm ss on. +r vate respondent Eduardo #ullas adm tted that pet t oners 9ere n h s off ce on July <, 1552, but only to asF for the re mbursement of the r cellular phone e1penses. $n the r reply and ans9er to countercla m, 18 pet t oners alleged that although the & sters of Mary Fne9 that the sub-ect land 9as for sale through var ous agents, t 9as pet t oners 9ho ntroduced them to the o9ners thereof. After tr al, the lo9er court rendered -udgment n favor of pet t oners, the d spos t ve port on of 9h ch reads? (BE"E7D"E, 3+DN %BE AE#$& D7 %BE 7D"E#D$N#, -udgment s hereby rendered for the pla nt ffs and aga nst the defendants. Ey v rtue hereof,

defendants Eduardo and Norma #ullas are hereby ordered to pay -o ntly and severally pla nt ffs Manuel %an, #regg %ecson and Ale1ander &aldaQaI 10 %he sum of &$G B3ND"ED %(EN%H 7D3" %BD3&AND AND &$G B3ND"ED E$#B%H 7D3" +E&D& /+>24,>64.000 as broFerJs fee 9 th legal nterest at the rate of >R per annum from the date of f l ng of the compla ntI and 20 %he sum of 7$7%H %BD3&AND +E&D& /+80,000.000 as attorneyJs fees and costs of l t gat on. 7or lacF of mer t, defendantsJ countercla m s hereby D$&M$&&ED. $% $& &D D"DE"ED.1> Eoth part es appealed to the 'ourt of Appeals. +r vate respondents argued that the lo9er court comm tted errors of fact and la9 n hold ng that t 9as pet t onersJ efforts 9h ch brought about the sale of the property and d sregard ng the prev ous negot at ons bet9een pr vate respondent Norma #ullas and the & sters of Mary and +acana. %hey further alleged that the lo9er court had no bas s for a9ard ng broFerJs fee, attorneyJs fees and the costs of l t gat on to pet t oners.12 +et t oners, for the r part, assa led the lo9er courtJs bas s of the a9ard of broFerJs fee g ven to them. %hey contended that the r <R comm ss on for the sale of the property should be based on the pr ce of +88,160.420.00, or at +8<0.00 per s=uare meter as agreed upon and not on the alleged actual sell ng pr ce of +20,622,600.00 or at +200.00 per s=uare meter, s nce the actual purchase pr ce 9as undervalued for ta1at on purposes. %hey also cla med that the lo9er court erred n not a9ard ng moral and e1emplary damages n sp te of ts f nd ng of bad fa thI and that the amount of +80,000.00 as attorneyJs fees a9arded to them s nsuff c ent. 7 nally, pet t oners argued that the legal nterest mposed on the r cla m should have been pegged at 12R per annum nstead of the >R f 1ed by the court.16 %he 'ourt of Appeals reversed and set as de the lo9er courtJs dec s on and rendered another -udgment d sm ss ng the compla nt. 15 Bence, th s appeal. +et t oners ra se follo9 ng ssues for resolut on? $. %BE A++E!!A%E 'D3"% #"D&&!H E""ED $N %BE$" 7$ND$N# %BA% %BE +E%$%$DNE"& A"E ND% EN%$%!ED %D %BE E"D*E"A#E 'DMM$&&$DN. $$. $N D$&M$&&$N# %BE 'DM+!A$N%, %BE A++E!!A%E 'D3"% BA& DE+"$CED %BE +E%$%$DNE"& D7 MD"A! AND EGEM+!A"H DAMA#E&, A%%D"NEH&J 7EE& AND $N%E"E&% $N %BE 7D"EEEA"AN'E D7 MDNEH.

%he pet t on s mpressed 9 th mer t. %he records sho9 that pet t oner Manuel E. %an s a l censed real estate broFer, and pet t oners #regg M. %ecson and Ale1ander &aldaQa are h s assoc ates. $n &chm d and Dberly v. "J! Mart neA 7 sh ng 'orporat on, 20 9e def ned a ,broFer, as ,one 9ho s engaged, for others, on a comm ss on, negot at ng contracts relat ve to property 9 th the custody of 9h ch he has no concernI the negot ator bet9een other part es, never act ng n h s o9n name but n the name of those 9ho employed h m. 1 1 1 a broFer s one 9hose occupat on s to br ng the part es together, n matters of trade, commerce or nav gat on., /Emphas s suppl ed0 Dur ng the tr al, t 9as establ shed that pet t oners, as broFers, 9ere author Aed by pr vate respondents to negot ate for the sale of the r land 9 th n a per od of one month recFoned from June 25, 1552. %he author ty g ven to pet t oners 9as non@e1clus ve, 9h ch meant that pr vate respondents 9ere not precluded from grant ng the same author ty to other agents 9 th respect to the sale of the same property. $n fact, pr vate respondent author Aed another agent n the person of Mr. Eobby +acana to sell the same property. %here 9as noth ng llegal or am ss n th s arrangement, per se, cons der ng the non@e1clus v ty of pet t onersJ author ty to sell. %he problem arose 9hen t eventually turned out that these agents 9ere enterta n ng one and the same buyer, the & sters of Mary. As correctly observed by the tr al court, the argument of the pr vate respondents that +acana 9as the one ent tled to the st pulated <R comm ss on s untenable, cons der ng that t 9as the pet t oners 9ho 9ere respons ble for the ntroduct on of the representat ves of the & sters of Mary to pr vate respondent Eduardo #ullas. +r vate respondents, ho9ever, ma nta n that they 9ere not a9are that the r respect ve agents 9ere negot at ng to sell sa d property to the same buyer. +r vate respondents fa led to prove the r content on that +acana began negot at ons 9 th pr vate respondent Norma #ullas 9ay ahead of pet t oners. %hey fa led to present 9 tnesses to substant ate th s cla m. $t s cur ous that Mrs. #ullas herself 9as not presented n court to test fy about her deal ngs 9 th +acana. Ne ther 9as Atty. Nachura 9ho 9as supposedly the one act vely negot at ng on behalf of the & sters of Mary, ever presented n court. +r vate respondentsJ content on that +acana 9as the one respons ble for the sale of the land s also unsubstant ated. %here 9as noth ng on record 9h ch establ shed the e1 stence of a prev ous negot at on among +acana, Mrs. #ullas and the & sters of Mary. %he only p ece of ev dence that the pr vate respondents 9ere able to present s an undated and unnotar Aed &pec al +o9er of Attorney n favor of +acana. (h le the lacF of a date and an oath do not necessar ly render sa d &pec al +o9er of Attorney nval d, t should be borne n m nd that the contract nvolves a cons derable amount of money. Bence, t s ncons stent 9 th sound bus ness pract ce that the author ty to sell s conta ned n an undated and unnotar Aed &pec al +o9er of Attorney. +et t oners, on the other hand, 9ere g ven the 9r tten author ty to sell by the pr vate respondents.

%he tr al courtJs evaluat on of the 9 tnesses s accorded great respect and f nal ty n the absence of any nd cat on that t overlooFed certa n facts or c rcumstances of 9e ght and nfluence, 9h ch f recons dered, 9ould alter the result of the case.21 $ndeed, t s read ly apparent that pr vate respondents are try ng to evade payment of the comm ss on 9h ch r ghtfully belong to pet t oners as broFers 9 th respect to the sale. %here 9as no d spute as to the role that pet t oners played n the transact on. At the very least, pet t oners set the sale n mot on. %hey 9ere not able to part c pate n ts consummat on only because they 9ere prevented from do ng so by the acts of the pr vate respondents. $n the case of Alfred Bahn v. 'ourt of Appeals and Eayer sche Motoren (erFe AFt engesellschaft /EM(022 9e ruled that, ,An agent rece ves a comm ss on upon the successful conclus on of a sale. Dn the other hand, a broFer earns h s pay merely by br ng ng the buyer and the seller together, even f no sale s eventually made., /3nderscor ng ours0. 'learly, therefore, pet t oners, as broFers, should be ent tled to the comm ss on 9hether or not the sale of the property sub-ect matter of the contract 9as concluded through the r efforts. Bav ng ruled that pet t oners are ent tled to the broFersJ comm ss on, 9e should no9 resolve ho9 much comm ss on are pet t oners ent tled toP 7ollo9 ng the st pulat on n the &pec al +o9er of Attorney, pet t oners are ent tled to <R comm ss on for the sale of the land n =uest on. +et t oners ma nta n that the r comm ss on should be based on the pr ce at 9h ch the land 9as offered for sale, .e., +8<0.00 per s=uare meter. Bo9ever, the actual purchase pr ce for 9h ch the land 9as sold 9as only +200.00 per s=uare meter. %herefore, e=u ty cons derat ons d ctate that pet t onersJ comm ss on must be based on th s pr ce. %o rule other9 se 9ould const tute un-ust enr chment on the part of pet t oners as broFers. $n the matter of attorneyJs fees and e1penses of l t gat on, 9e aff rm the amount of +80,000.00 a9arded by the tr al court to the pet t oners. W5E$E:/$E, n v e9 of the forego ng, the pet t on s #"AN%ED. %he May 25, 2000 dec s on of the 'ourt of Appeals s "ECE"&ED and &E% A&$DE. %he dec s on of the "eg onal %r al 'ourt of 'ebu ' ty, Eranch 22, n ' v l 'ase No. 'EE@12240 order ng pr vate respondents Eduardo #ullas and Norma &. #ullas to pay -o ntly and severally pet t oners Manuel E. %an, #regg %ecson and Ale1ander &aldaQa the sum of & 1 Bundred %9enty@7our %housand and & 1 Bundred E ghty@7our +esos /+>24,>64.000 as broFerJs fee 9 th legal nterest at the rate of >R per annum from the f l ng of the compla ntI and the sum of 7 fty %housand +esos /+80,000.000 as attorneyJs fees and costs of l t gat on, s "E$N&%A%ED. &D D"DE"ED. 4itug, and .arpio, 99., concur. Davide, 9r., ..9., (.hairman*, no part due to close relationship to a party. Azcuna, 9., on official leave.

:ootnotes

Dated May 25, 2000, "ollo, p. 1>.

+enned by Assoc ate Just ce Mar ano M. 3mal and concurred n by Assoc ate Just ces 'onrado M. CaA=ueA, Jr. and Er berto 3. "osar o, Jr.
<

+enned by Judge +amp o A. Abar ntos, promulgated on March 11, 1554, "ollo, p. 6.
4

Anne1 ,7,, "ecord, p. 1>. Anne1 ,A,, "ecord, pp. 6@5. 7older of E1h b ts, E1h b t ,$,. $b d., E1h b ts ,A, and ,A@<,. "ecord, p. 1<1. 7older of E1h b ts, E1h b t ,',, dated July 4, 1552. $b d., E1h b t ,D,. $d., E1h b t ,E,. $d., E1h b t ,7,. "ecord, pp. 1@2. "ecord, pp. 26@<4. $d., at <8@<6. "ecord, p. 20>. "ollo, p. 21. $d., at 21@22. "ollo, pp. <2@<<. 1>> &'"A 45< /15660.

>

10

11

12

1<

14

18

1>

12

16

15

20

21

+eople v. "ealm, <01 &'"A 458 /15550I Ham v. 'ourt of Appeals, <0< &'"A 1 /15550I +eople v. Maglatay, <04 &'"A 222 /15550.

22

2>> &'"A 8<2 /15520. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la (5)$! !)*)S)/N

G.$. No. 111.23

January 3=, 3..=

+5)#)++)NE 5EA#(57%A$E +$/*)!E$S, )N%. C'A>)%A$ED, pet t oner, vs. %A$'E#A ES($A!AH%A$A 5EA#(5 SE$*)%ES, respondent. !E%)S)/N NA%5&$A, J., %h s pet t on for rev e9 on certiorari assa ls the Dec s on1 dated June 1>, 2008 of the 'ourt of Appeals /'A0 n 'A@#.". 'C No. >>040 9h ch aff rmed in toto the Dec s on2 dated Dctober 6, 1555 of the "eg onal %r al 'ourt /"%'0, Eranch 1<8, of MaFat ' ty n an act on for breach of contract and damages f led by respondent 'armela Estrada, sole propr etor of 'ara Bealth &erv ces, aga nst +h l pp ne Bealth@'are +rov ders, $nc. /Ma1 care0. %he facts, as found by the 'A and adopted by Ma1 care n ts pet t on, follo9? :Ma1 care; s a domest c corporat on engaged n sell ng health nsurance plans 9hose 'ha rman Dr. "oberto *. Macasaet, 'h ef Dperat ng Dff cer C rg l o del Calle, and &alesMMarFet ng Manager Joseph ne 'abrera 9ere mpleaded as defendants@appellants. Dn &eptember 18, 1550, :Ma1 care; allegedly engaged the serv ces of 'armela Estrada 9ho 9as do ng bus ness under the name of 'A"A BEA!%B :&E"C$'E&; to promote and sell the prepa d group pract ce health care del very program called MAG$'A"E +lan 9 th the pos t on of $ndependent Account E1ecut ve. :Ma1 care; formally appo nted :Estrada; as ts ,#eneral Agent,, ev denced by a letter@agreement dated 7ebruary 1>, 1551. %he letter agreement prov ded for pla nt ff@appelleeJs :EstradaJs; compensat on n the form of comm ss on, viz.? 'omm ss on $n cons derat on of the performance of your funct ons and dut es as spec f ed n th s letter@agreement, :Ma1 care; shall pay you a comm ss on e=u valent to 18 to 16R from nd v dual, fam ly, group accountsI 2.8 to 10R on ta lored f t plansI and 10R on standard plans of comm ss onable amount on corporate accounts from all membersh p dues collected and rem tted by you to :Ma1 care;. :Ma1 care; alleged that t follo9ed a ,franch s ng system, n deal ng 9 th ts agents 9hereby an agent had to f rst secure perm ss on from :Ma1 care; to l st a prospect ve company as cl ent. :Estrada; alleged that t

d d apply 9 th :Ma1 care; for the ME"A!'D account and other accounts, and n fact, ts franch se to sol c t corporate accounts, ME"A!'D account ncluded, 9as rene9ed on 7ebruary 11, 1551. +la nt ff@appellee :Estrada; subm tted proposals and made representat ons to the off cers of ME"A!'D regard ng the MAG$'A"E +lan but 9hen ME"A!'D dec ded to subscr be to the MAG$'A"E +lan, :Ma1 care; d rectly negot ated 9 th ME"A!'D regard ng the terms and cond t ons of the agreement and left pla nt ff@appellee :Estrada; out of the d scuss ons on the terms and cond t ons. Dn November 26, 1551, ME"A!'D eventually subscr bed to the MAG$'A"E +lan and s gned a &erv ce Agreement d rectly 9 th :Ma1 care; for med cal coverage of ts =ual f ed members, .e.? 10 the enrolled dependentMs of regular ME"A!'D e1ecut vesI 20 ret red e1ecut ves and the r dependents 9ho have opted to enroll andMor cont nue the r MAG$'A"E membersh p up to age >8I and <0 regular ME"A!'D female e1ecut ves /e1clus vely for matern ty benef ts0. $ts durat on 9as for one /10 year from December 1, 1551 to November <0, 1552. %he contract 9as rene9ed t9 ce for a term of three /<0 years each, the f rst started on December 1, 1552 9h le the second tooF effect on December 1, 1558. %he prem um amounts pa d by ME"A!'D to :Ma1 care; 9ere alleged to be the follo9 ng? a0 +218,266.00 n December 1551I b0 +<,480,8>4.00 n 1552I c0 +4,22<,210.00 n 155<I d0 +4,262,62<.00 n 1554I e0+8,102,106.00 n 1558I and +2,<54,252.00 n May 155>. As of May 155>, the total amount of prem um pa d by ME"A!'D to :Ma1 care; 9as +20,1>5,<<8.00. Dn March 24, 1552, pla nt ff@appellee :Estrada;, through counsel, demanded from :Ma1 care; that t be pa d comm ss ons for the ME"A!'D account and n ne /50 other accounts. $n reply, :Ma1 care;, through counsel, den ed :EstradaJs; cla ms for comm ss on for the ME"A!'D and other accounts because :Ma1 care; d rectly negot ated 9 th ME"A!'D and the other accounts/,0 and that no agent 9as g ven the go s gnal to ntervene n the negot at ons for the terms and cond t ons and the s gn ng of the serv ce agreement 9 th ME"A!'D and the other accounts so that f ever :Ma1 care; 9as ndebted to :Estrada;, t 9as only for +1,888.00 and+4<.l2 as comm ss ons on the accounts of Dverseas 7re ghters 'o. and Mr. Enr =ue Acosta, respect vely. :Estrada; f led a compla nt on March 16, 155< aga nst :Ma1 care; and ts off cers 9 th the "eg onal %r al 'ourt /"%'0 of MaFat ' ty, docFeted as ' v l 'ase No. 5<@5<8, raffled to Eranch 1<8. Defendants@appellants :Ma1 care; and ts off cers f led the r Ans9er 9 th 'ountercla m on &eptember 1<, 155< and the r Amended Ans9er 9 th 'ountercla m on &eptember 26, 155<, alleg ng that? pla nt ff@appellee :Estrada; had no cause of act onI the cause of act on, f any, should be s aga nst :Ma1 care; only and not aga nst ts off cersI 'A"A BEA!%BJs appo ntment as agent under the 7ebruary 1>, 1551 letter@agreement to promote the MAG$'A"E +lan 9as for a per od of one /10 year onlyI sa d agency 9as not rene9ed after the e1p rat on of the one /10 year per odI

:Estrada; d d not ntervene n the negot at ons of the contract 9 th ME"A!'D 9h ch 9as d rectly negot ated by ME"A!'D 9 th :Ma1 care;I and :EstradaJs; alleged other cl entsMaccounts 9ere not accred ted 9 th :Ma1 care; as re=u red, s nce the agency contract on the MAG$'A"E health plans 9ere not rene9ed. Ey 9ay of countercla m, defendants@appellants :Ma1 care; and ts off cers cla med +100,000.00 n moral damages for each of the off cers of :Ma1 care; mpleaded as defendant, +100,000.00 n e1emplary damages, +100,000.00 n attorneyJs fees, and +10,000.00 n l t gat on e1penses.< After tr al, the "%' found Ma1 care l able for breach of contract and ordered t to pay Estrada actual damages n the amount e=u valent to 10R of +20,1>5,<<8.00, represent ng her comm ss on for the total prem ums pa d by Meralco to Ma1 care from the year 1551 to 155>, plus legal nterest computed from the f l ng of the compla nt on March 16, 155<, and attorneyJs fees n the amount of +100,000.00. Dn appeal, the 'A aff rmed in toto the "%'Js dec s on. $n rul ng for Estrada, both the tr al and appellate courts held that Estrada 9as the ,eff c ent procur ng cause, n the e1ecut on of the serv ce agreement bet9een Meralco and Ma1 care cons stent 9 th our rul ng n Manoto' !rothers, :nc. v. .ourt of Appeals .4 3ndaunted, Ma1 care comes to th s 'ourt and ns sts on the reversal of the "%' Dec s on as aff rmed by the 'A, ra s ng the follo9 ng ssues, to 9 t? 1. (hether the 'ourt of Appeals comm tted ser ous error n aff rm ng EstradaJs ent tlement to comm ss ons for the e1ecut on of the serv ce agreement bet9een Meralco and Ma1 care. 2. 'orollar ly, 9hether Estrada s ent tled to comm ss ons for the t9o /20 consecut ve rene9als of the serv ce agreement effect ve on December 1, 15528 and December 1, 1558.> (e are n complete accord 9 th the tr al and appellate courtsJ rul ng. Estrada s ent tled to comm ss ons for the prem ums pa d under the serv ce agreement bet9een Meralco and Ma1 care from 1551 to 155>. (ell@entrenched n -ur sprudence s the rule that factual f nd ngs of the tr al court, espec ally 9hen aff rmed by the appellate court, are accorded the h ghest degree of respect and are cons dered conclus ve bet9een the part es. 2A rev e9 of such f nd ngs by th s 'ourt s not 9arranted e1cept upon a sho9 ng of h ghly mer tor ous c rcumstances, such as? /10 9hen the f nd ngs of a tr al court are grounded ent rely on speculat on, surm ses or con-ecturesI /20 9hen a lo9er courtJs nference from ts factual f nd ngs s man festly m staFen, absurd or mposs bleI /<0 9hen there s grave abuse of d scret on n the apprec at on of factsI /40 9hen the f nd ngs of the appellate court go beyond the ssues of the case, or fa l to not ce certa n relevant facts 9h ch, f properly cons dered, 9 ll -ust fy a d fferent conclus onI /80 9hen there s a m sapprec at on of factsI />0 9hen the f nd ngs of fact are conclus ons 9 thout ment on of the spec f c ev dence on 9h ch they are based, are prem sed on the absence of ev dence, or are contrad cted by ev dence on record. 6 None of the forego ng e1cept ons 9h ch 9ould 9arrant a reversal of the assa led dec s on obta ns n th s nstance.

Ma1 care urges us that both the "%' and 'A fa led to taFe nto account the st pulat ons conta ned n the 7ebruary 15, 1551 letter agreement author A ng the payment of comm ss ons only upon sat sfact on of t9 n cond t ons, i.e., collect on and contemporaneous rem ttance of prem um dues by Estrada to Ma1 care. Allegedly, the lo9er courts d sregarded EstradaJs adm ss on that the negot at ons 9 th Meralco fa led. %hus, the fla9ed appl cat on of the ,eff c ent procur ng cause, doctr ne enunc ated n Manoto' !rothers, :nc. v. .ourt of Appeals,5 and the erroneous conclus on uphold ng EstradaJs ent tlement to comm ss ons on contracts completed 9 thout her part c pat on. (e are not persuaded. 'ontrary to Ma1 careJs assert on, the tr al and the appellate courts carefully cons dered the factual bacFdrop of the case as borne out by the records. Eoth courts 9ere one n the conclus on that Ma1 care successfully landed the Meralco account for the sale of healthcare plans only by v rtue of EstradaJs nvolvement and part c pat on n the negot at ons. %he assa led Dec s on aptly states? %here s no d spute as to the role that pla nt ff@appellee :Estrada; played n sell ng :Ma1 careJs; health nsurance plan to Meralco. +la nt ff@appellee :EstradaJs; efforts cons sted n be ng the f rst to offer the Ma1 care plan to Meralco, us ng her connect ons 9 th some of Meralco E1ecut ves, nv t ng sa d e1ecut ves to d nner meet ngs, maF ng subm ss ons and representat ons regard ng the health plan, send ng follo9@up letters, etc. %hese efforts 9ere recogn Aed by Meralco as sho9n by the cert f cat on ssued by ts Manpo9er +lann ng and "esearch &taff Bead "uben A. &ap tula on &eptember 8, 1551, to 9 t? ,%h s s to cert fy that Ms. 'armela Estrada has n t ated talFs 9 th us s nce November 1550 9 th regards /s c0 to the BMD re=u rements of both our ranF and f le employees, managers and e1ecut ves, and that t 9as favorably recommended and the same be approved by the Meralco Management 'omm ttee., 1111 %h s 'ourt f nds that pla nt ff@appellee :EstradaJs; efforts 9ere nstrumental n ntroduc ng the Meralco account to :Ma1 care; n regard to the latterJs Ma1 care health nsurance plans. +la nt ff@appellee :Estrada; 9as the eff c ent , nterven ng cause, n br ng ng about the serv ce agreement 9 th Meralco. As po nted out by the tr al court n ts Dctober 6, 1555 Dec s on, to 9 t? ,111 Bad not :Estrada; ntroduced Ma icare $lans to her bosom fr ends, Messrs. !opeA and #u ngona of Meralco, +B+$ 9ould st ll be an anonym ty. 111,10 3nder the forego ng c rcumstances, 9e are hard pressed to d sturb the f nd ngs of the "%', 9h ch the 'A aff rmed. (e cannot overemphas Ae the pr nc ple that n pet t ons for rev e9 on certiorari under "ules 48 of the "ules of 'ourt, only =uest ons of la9 may be

put nto ssue. Uuest ons of fact are not cogn Aable by th s 'ourt. %he f nd ng of ,eff c ent procur ng cause, by the 'A s a =uest on of fact 9h ch 9e des st from pass ng upon as t 9ould enta l delv ng nto factual matters on 9h ch such f nd ng 9as based. %o re terate, the rule s that factual f nd ngs of the tr al court, espec ally those aff rmed by the 'A, are conclus ve on th s 'ourt 9hen supported by the ev dence on record.11 %he -ett son ng of the pet t on s nev table even upon a close perusal of the mer ts of the case. 8irst. Ma1 careJs content on that Estrada may only cla m comm ss ons from membersh p dues 9h ch she has collected and rem tted to Ma1 care as e1pressly prov ded for n the letter@agreement does not conv nce us. $t s read ly apparent that Ma1 care s attempt ng to evade payment of the comm ss on 9h ch r ghtfully belongs to Estrada as the broFer 9ho brought the part es together. $n fact, Ma1 careJs former 'ha rman "oberto *. Macasaet test f ed that Ma1 care had been try ng to land the Meralco account for t9o /20 years pr or to EstradaJs entry n 1550.12 Even 9 thout that adm ss on, 9e note that MeralcoJs Ass stant C ce@ +res dent, Donat la &an Juan, n a letter1< dated January 21, 1552 to then Ma1 care +res dent +edro ". &en, categor cally acFno9ledged EstradaJs efforts relat ve to the sale of Ma1 care health plans to Meralco, thus? &omet me n 1565, Meralco rece ved a proposal from +h l pp ne Bealth@ 'are +rov ders, $nc. /Ma1 care0 through the n t at ve and efforts of Ms. .armela 5strada, 9ho ntroduced Ma1 care to Meralco. +r or to th s t me, 9e d d not Fno9 that Ma1 care s a ma-or health care prov der n the country. (e have s nce negot ated and s gned up 9 th Ma1 care to prov de a health ma ntenance plan for dependents of Meralco e1ecut ves, effect ve December 1, 1551 to November <0, 1552. At the very least, Estrada penetrated the Meralco marFet, n t ally closed to Ma1 care, and la d the ground9orF for a bus ness relat onsh p. %he only reason Estrada 9as not able to part c pate n the collect on and rem ttance of prem um dues to Ma1 care 9as because she 9as prevented from do ng so by the acts of Ma1 care, ts off cers, and employees. $n 7an v. 2ullas,14 9e had occas on to def ne a broFer and d st ngu sh t from an agent, thus? :D;ne 9ho s engaged, for others, on a comm ss on, negot at ng contracts relat ve to property 9 th the custody of 9h ch he has no concernI the negot ator bet9een the other part es, never act ng n h s o9n name but n the name of those 9ho employed h m. :A; broFer s one 9hose occupat on s to #ring the parties together, n matter of trade, commerce or nav gat on.18 An agent rece ves a comm ss on upon the successful conclus on of a sale. Dn the other hand, a broFer earns h s pay merely #y #ringing the #uyer and the seller together, even f no sale s eventually made.1> $n relat on thereto, 9e have held that the term ,procur ng cause, n descr b ng a broFerJs act v ty, refers to a cause originating a ser es of events 9h ch, 9 thout breaF n the r cont nu ty, result n the accompl shment of the pr me ob-ect ve of

the employment of the broFerOproduc ng a purchaser ready, 9 ll ng and able to buy on the o9nerJs terms.12 %o be regarded as the ,procur ng cause, of a sale as to be ent tled to a comm ss on, a broFerJs efforts must have been the foundat on on 9h ch the negot at ons result ng n a sale began. 16 Cer ly, Estrada 9as nstrumental n the sale of the Ma1 care health plans to Meralco. ( thout her ntervent on, no sale could have been consummated. Second. Ma1 care ne1t contends that Estrada herself adm tted that her negot at ons 9 th Meralco fa led as sho9n n Anne1 ,7, of the 'ompla nt. %he ch canery and d s ngenuousness of Ma1 careJs counsel s not lost on th s 'ourt. (e observe that th s Anne1 ,7, s, n fact, Ma1 careJs counselJs letter dated Apr l 10, 1552 addressed to Estrada. %he letter conta ns a un lateral declarat on by Ma1 care that the efforts n t ated and negot at ons undertaFen by Estrada fa led, such that the serv ce agreement 9 th Meralco 9as supposedly d rectly negot ated by Ma1 care. %hus, the latter effect vely declares that Estrada s not the ,eff c ent procur ng cause, of the sale, and as such, s not ent tled to comm ss ons. Dur hold ng n Atillo ::: v. .ourt of Appeals,15 ron cally the case c ted by Ma1 care to bolster ts pos t on that the statement n Anne1 ,7, amounted to an adm ss on, prov des a contrary ans9er to Ma1 careJs r d culous content on. (e ntoned there n that n sp te of the presence of -ud c al adm ss ons n a partyJs plead ng, the tr al court s st ll g ven lee9ay to cons der other ev dence presented. 20 (e ruled, thus? As prov ded for n &ect on 4 of "ule 125 of the "ules of 'ourt, the general rule that a -ud c al adm ss on s conclus ve upon the party maF ng t and does not re=u re proof adm ts of t9o e1cept ons? 10 9hen t s sho9n that the adm ss on 9as made through palpable m staFe, and 20 9hen t s sho9n that no such adm ss on 9as n fact made. %he latter e1cept on allo9s one to contrad ct an adm ss on by deny ng that he made such an adm ss on. 7or nstance, f a party nvoFes an ,adm ss on, by an adverse party, but c tes the adm ss on ,out of conte1t,, then the one ma'ing the admission may sho& that he made no QsuchQ admission, or that his admission &as ta'en out of conte t. 7his may #e interpreted as to mean Qnot in the sense in &hich the admission is made to appear., %hat s the reason for the mod f er ,such.,21 $n th s case, the letter, although part of EstradaJs 'ompla nt, s not, pso facto, an adm ss on of the statements conta ned there n, espec ally s nce the bone of content on relates to EstradaJs ent tlement to comm ss ons for the sale of health plans she cla ms to have broFered. $t s more than obv ous from the ent rety of the records that Estrada has une=u vocally and cons stently declared that her nvolvement as broFer s the pro1 mate cause 9h ch consummated the sale bet9een Meralco and Ma1 care. Moreover, &ect on <4,22 "ule 1<2 of the "ules of 'ourt re=u res the purpose for 9h ch the ev dence s offered to be spec f ed. 3nden ably, the letter 9as

attached to the 'ompla nt, and offered n ev dence, to demonstrate Ma1 careJs bad fa th and ll 9 ll to9ards Estrada. 2< Even a cursory read ng of the 'ompla nt and all the plead ngs f led thereafter before the "%', 'A, and th s 'ourt, read ly sho9 that Estrada does not concede, at any po nt, that her negot at ons 9 th Meralco fa led. 'learly, Ma1 careJs assert on that Estrada herself does not pretend to be the ,eff c ent procur ng cause, n the e1ecut on of the serv ce agreement bet9een Meralco and Ma1 care s baseless and an outr ght falsehood. After muddl ng the ssues and represent ng that Estrada made an adm ss on that her negot at ons 9 th Meralco fa led, Ma1 careJs counsel then proceeds to c te a case 9h ch does not, by any stretch of the mag nat on, bolster the fla9ed content on. (e, therefore, ADMDN$&B Ma1 careJs counsel, and, n turn, rem nd every member of the Ear that the pract ce of la9 carr es 9 th t respons b l t es 9h ch are not to be tr fled 9 th. Ma1 careJs counsel ought to be reac=ua nted 9 th 'anon 1024 of the 'ode of +rofess onal "espons b l ty, spec f cally, "ule 10.02, to 9 t? "ule 10.02 K A la9yer shall not Fno9 ngly m s=uote or m srepresent the contents of a paper, the language or the argument of oppos ng counsel, or the te1t of a dec s on or author ty, or Fno9 ngly c te as la9 a prov s on already rendered noperat ve by repeal or amendment, or assert as a fact that 9h ch has not been proved. 7hird. 7 nally, 9e l Fe9 se aff rm the un form rul ng of the "%' and 'A that Estrada s ent tled to 10R of the total amount of prem ums pa d 28 by Meralco to Ma1 care as of May 155>. Ma1 careJs argument that assum ng Estrada s ent tled to comm ss ons, such ent tlement only covers the n t al year of the serv ce agreement and should not nclude the prem ums pa d for the succeed ng rene9als thereof, fa ls to mpress. 'ons der ng that 9e have susta ned the lo9er courtsJ factual f nd ng of EstradaJs close, pro1 mate and causal connect on to the sale of health plans, 9e are not 9ont to d sturb EstradaJs complete ent tlement to comm ss on for the total prem ums pa d unt l May 155> n the amount of +20,1>5,<<8.00. W5E$E:/$E, prem ses cons dered and f nd ng no revers ble error comm tted by the 'ourt of Appeals, the pet t on s hereby !EN)E!. 'osts aga nst the pet t oner. S/ /$!E$E!. AN(/N)/ E!&A$!/ 9. NA%5&$A 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 Assoc ate Just ce
V

$ENA(/ %. %/$/NA Assoc ate Just ce

$&9EN (. $E8ES 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. %/NS&E#/ 8NA$ES7SAN()AG/ Assoc ate Just ce 'ha rperson, %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 rpersonJs Attestat on, $ cert fy 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. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
V

$n l eu of Assoc ate Just ce M n ta C. 'h co@NaAar o per &pec al Drder No. 464 dated January 11, 2006.
1

+enned by Assoc ate Just ce C cente U. "o1as, 9 th Assoc ate Just ces +ort a Al _o@ Bormachuelos and Juan U. Enr =ueA, Jr., concurr ngI rollo, pp. <2@4>.
2

+enned by Judge 7ranc sco E. $bayI d. at 1<2@142.

<

"ollo, pp. <6@41. #.". No. 5428<, Apr l 2, 155<, 221 &'"A 224.

%he rene9ed serv ce agreement 9as for a per od of three /<0 years and e1p red on November <0, 1558.
>

A subse=uent rene9al of the serv ce agreement 9h ch commenced on December 1, 1558, 9as l Fe9 se for a per od of three /<0 years.
2

% tan 'onstruct on 'orporat on v. 3n @7 eld Enterpr ses, $nc., #.". No. 18<624, March 1, 2002, 812 &'"A 160, 16>, & gaya v. Mayuga, #.". No. 14<284, August 16, 2008, 4>2 &'"A <41, <8<.
6

$lao@Uu anay v. Map le, #.". No. 184062, Dctober 28, 2008, 424 &'"A 24>, 28<I see 'h ld !earn ng 'enter, $nc. v. %agor o, #.". No. 180520, November 28, 2008, 42> &'"A 2<>, 241@242.
5

&upra note 4. "ollo, pp. 4<@44.

10

11

!ambert v. Be rs of "ay 'ast llon, #.". No. 1>0205, 7ebruary 2<, 2008, 482 &'"A 268, 250, c t ng $mper al v. Jauc an, 422 &'"A 812 /20040.
12

"ollo, p. 10. $d. at 6<. 441 +h l. >22 /20020.

1<

14

18

%an v. #ullas, 441 +h l. >22, ><1 /20020, c t ng &chm d and Dberly v. "J! Mart neA 7 sh ng 'orporat on, 1>> &'"A 45< /15660.
1>

$d. at ><<, c t ng Alfred Bahn v. 'ourt of Appeals, 2>> &'"A 8<2 /15520.

12

Medrano v. 'ourt of Appeals, #.". No. 180>26, 7ebruary 16, 2008, 482 &'"A 22, 66, c t ng 'larF v. Ells9orth, >> Ar A. 115, 164 +. 2d 621 /15420.
16

$d. <<4 +h l. 84> /15520. $d. at 884. $d. at 882.

15

20

21

22

&ec. <4. Dffer of Ev dence.O %he court shall cons der no ev dence 9h ch has not been formally offered. %he purpose for 9h ch the ev dence s offered must be spec f ed.
2<

"ollo, p. 22.

24

'ANDN 10 K A !A(HE" D(E& 'ANDD", 7A$"NE&& AND #DDD 7A$%B %D %BE 'D3"%.
28

+20,1>5,<<8.00.

"epubl c of the +h l pp nes S&+$E'E %/&$( %B$"D D$C$&$DN G.$. No. 1;1232 Septem er 3, 3..2 %A$#/S SAN%5E6, +et t oners, vs. 'E!)%A$! +5)#)++)NES, )N%., !$. N)%AN/$ '/N(/8A and %A$#/S EJE$%)(/, "espondent. DE'$&$DN SAN!/*A#7G&()E$$E6, J.? %h s pet t on for rev e9 on certiorari seeFs to reverse the Dec s on1 of the 'ourt of Appeals dated 7ebruary 24, 1555 and ts "esolut on dated January 12, 2000 n 'A@#.". 'C No. 42>61. %he facts, as establ shed by the tr al court and aff rmed by the 'ourt of Appeals, follo9? &omet me n 1562, Med card +h l pp nes, $nc. /Med card0, respondent, appo nted pet t oner as ts spec al corporate agent. As such agent, Med card gave h m a comm ss on based on the ,cash brought n., $n &eptember, 1566, through pet t onerJs efforts, Med card and 3n ted !aborator es #roup of 'ompan es /3n lab0 e1ecuted a Bealth 'are +rogram 'ontract. 3nder th s contract, 3n lab shall pay Med card a f 1ed monthly prem um for the health nsurance of ts personnel. 3n lab pa d Med card +4,146,008.00 represent ng the prem um for one /10 year. Med card then handed pet t oner 16R of sa d amount or +24>,>40.50 represent ng h s comm ss on. Aga n, through pet t onerJs n t at ve, the agency contract bet9een Med card and 3n lab 9as rene9ed for another year, or from Dctober 1, 1565 to &eptember <0, 1550, ncorporat ng there n the ncrease of prem um from+4,146,008.00 to +2,48>,65>.00. Med card pa d pet t oner +1,<42,241.00 as h s comm ss on. +r or to the e1p rat on of the rene9ed contract, Med card proposed to 3n lab, through pet t oner, an ncrease of the prem um for the ne1t year. 3n lab re-ected the proposal ,for the reason that t 9as too h gh,, prompt ng Dr. N canor Montoya /Med cardJs pres dent and general manager0, also a respondent, to re=uest pet t oner to reduce h s comm ss on, but the latter refused.

$n a letter dated Dctober <, 1550, 3n lab, through 'arlos E-erc to, another respondent, conf rmed ts dec s on not to rene9 the health program contract 9 th Med card. Mean9h le, n order not to pre-ud ce ts personnel by the term nat on of the r health nsurance, 3n lab, through respondent E-erc to, negot ated 9 th Dr. Montoya and other off cers of Med card, to d scuss 9ays n order to cont nue the nsurance coverage of those personnel. 3nder the ne9 scheme, 3n lab shall pay Med card only the amount correspond ng to the actual hosp tal Aat on e1penses ncurred by each personnel plus 18R serv ce fee for us ng Med card fac l t es, 9h ch amount shall not be less than +260,000.00. Med card d d not g ve pet t oner any comm ss on under the ne9 scheme. $n a letter dated March 18, 1551, pet t oner demanded from Med card payment of +<<6,000.00 as h s comm ss on plus damages, but the latter refused to heed h s demand. %hus, pet t oner f led 9 th the "eg onal %r al 'ourt /"%'0, Eranch >>, MaFat ' ty, a compla nt for sum of money aga nst Med card, Dr. N canor Montoya and 'arlos E-erc to, here n respondents. After hear ng, the "%' rendered ts Dec s on d sm ss ng pet t onerJs compla nt and respondentsJ countercla m. Dn appeal, the 'ourt of Appeals aff rmed the tr al courtJs assa led Dec s on. %he Appellate 'ourt held that there s no proof that the e1ecut on of the ne9 contract bet9een the part es under the ,cost plus, system s a strategy to depr ve pet t oner of h s comm ss onI that Med card d d not comm t any fraudulent act n revoF ng ts agency contract 9 th &ancheAI that 9hen 3n lab re-ected Med cardJs proposal for an ncrease of prem um, the r Bealth 'are +rogram 'ontract on ts th rd year 9as effect vely revoFedI and that 9here the contract s neffectual, then the agent s not ent tled to a comm ss on. +et t oner f led a mot on for recons derat on, but th s 9as den ed by the 'ourt of Appeals on January 12, 2000. Bence, the nstant pet t on for rev e9 on certiorari. %he bas c ssue for our resolut on s 9hether the 'ourt of Appeals erred n hold ng that the contract of agency has been revoFed by Med card, hence, pet t oner s not ent tled to a comm ss on. $t s d ctum that n order for an agent to be ent tled to a comm ss on, he must be the procur ng cause of the sale, 9h ch s mply means that the measures employed by h m and the efforts he e1erted must result n a sale. 2 $n other 9ords, an agent rece ves h s comm ss on only upon the successful conclus on of a sale.< 'onversely, t follo9s that 9here h s efforts are unsuccessful, or there 9as no effort on h s part, he s not ent tled to a comm ss on.

$n $rats vs. .ourt of Appeals,4 th s 'ourt held that for the purpose of e=u ty, an agent 9ho s not the eff c ent procur ng cause s nonetheless ent tled to h s comm ss on, 9here sa d agent, not9 thstand ng the e1p rat on of h s author ty, nonetheless, tooG dili"ent steps to rin" acG to"et-er t-e parties, suct-at a sale Fas finaliJed and consummated etFeen t-em. $n Manoto' !orthers vs. .ourt of Appeals,8 9here the Deed of &ale 9as only e1ecuted after the agentJs e1tended author ty had e1p red, th s 'ourt, apply ng ts rul ng n $rats, held that the agent / n Manoto'0 s ent tled to a comm ss on s nce he 9as the eff c ent procur ng cause of the sale, not9 thstand ng that the sale tooF place after h s author ty had lapsed. %he pro1 mate, close, and causal connect on bet9een the agentJs efforts and the pr nc palJs sale of h s property can not be gnored. $t may be recalled that through pet t onerJs efforts, Med card 9as able to enter nto a one@year Bealth 'are +rogram 'ontract 9 th 3n lab. As a result, Med card pa d pet t oner h s comm ss on. Aga n, through h s efforts, the contract 9as rene9ed and once more, he rece ved h s comm ss on. Eefore the e1p rat on of the rene9ed contract, Med card, through pet t oner, proposed an ncrease n prem um, but 3n lab re-ected th s proposal. Med card then re=uested pet t oner to reduce h s comm ss on should the contract be rene9ed on ts th rd year, but he 9as obst nate. Meant me, on Dctober <, 1550, 3n lab nformed Med card t 9as no longer rene9 ng the Bealth 'are +rogram contract. $n order not to pre-ud ce ts personnel, 3n lab, through respondent E-erc to, negot ated 9 th respondent Dr. Montoya of Med card, n order to f nd mutually benef c al 9ays of cont nu ng the Bealth 'are +rogram. %he negot at ons resulted n a ne9 contract 9here n 3n lab shall pay Med card the hosp tal Aat on e1penses actually ncurred by each employees, plus a serv ce fee. 3nder the ,cost plus, system 9h ch replaced the prem um scheme, pet t oner 9as not g ven a comm ss on. $t s clear that s nce pet t oner refused to reduce h s comm ss on, Med card d rectly negot ated 9 th 3n lab, thus revoF ng ts agency contract 9 th pet t oner. (e hold that such revocat on s author Aed by Art cle 1524 of the ' v l 'ode 9h ch prov des? ,Art. 1524. %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., Moreover, as found by the lo9er courts, pet t oner d d not render serv ces to Med card, h s pr nc pal, to ent tle h m to a comm ss on. %here s no nd cat on from the records that he e1erted any effort n order that 3n lab and Med card, after the e1p rat on of the Bealth 'are +rogram 'ontract, can rene9 t for the th rd t me. $n fact, h s refusal to reduce h s comm ss on constra ned Med card to negot ate d rectly 9 th 3n lab. (e f nd no reason n la9 or n e=u ty to rule that he s ent tled to a comm ss on. Dbv ously, he 9as not the agent or the ,procur ng cause, of the th rd Bealth 'are +rogram 'ontract bet9een Med card and 3n lab.

W5E$E:/$E, the pet t on s !EN)E!. %he challenged Dec s on and "esolut on of the 'ourt of Appeals n 'A@#.". 'C No. 42>61 are A::)$'E! IN $?$?. 'osts aga nst pet t oner. S/ /$!E$E!. AN#E!$NA &ANDDCA!@#3%$E""EL Assoc ate 9ust ce (E 'DN'3"? A$(E')/ *. +ANGAN)9AN Assoc ate Just ce 'ha rman "ENA%D '. 'D"DNA Assoc ate 9ust ce 'AN'$D '. #A"'$A Assoc ate 9ust ce A((ES(A()/N $ 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 'ourt)s 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 Art cle C$$$, &ect on 1< of the 'onst tut on, and the D v s on 'ha rman)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. B$!A"$D #. DAC$DE, J". 'h ef 9ust ce 'DN'B$%A 'A"+$D MD"A!E& Assoc ate 9ust ce

:ootnotes

+er Assoc ate 9ust ce Mar ano M. 3mal /ret red0 and concurred n by Assoc ate 9ust ce 7erm n A. Mart n, Jr. /ret red0 and Assoc ate 9ust ce "omeo J. 'alle-o, &r., /no9 a member of th s 'ourt0.
2

Damon vs. Antonio A. !rimo & .o., 42 +h l. 1<4, 1<5 /15210. &ee also Ramos vs. .ourt of Appeals, #.". No. 284><, Apr l 4, 1528, >< &'"A <<1.
<

0anh vs. .ourt of Appeals, #.". No. 11<024, January 22, 1552, 2>> &'"A 8<2, 845.
4

#.". No. <5622, January <1, 1526, 61 &'"A <>0. #.". No. 5428<, Apr l 2, 155<, 221 &'"A 224.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #721=. Au"ust 41, 1<24

%/NSEJ/ )N:AN(E, pet t oner, vs. J/SE %&NANAN, J&AN ')JA$ES and (5E %/&$( /: A++EA#S, SE%/N! !)*)S)/N, respondents. Fuseco, A#don & Fuseco for petitioner. 9ose 5. 5rfe and Maria %uisa 2omez for respondents. 9A&()S(A ANGE#/, J., %h s s a pet t on for rev e9 of a dec s on of the 'ourt of appeals aff rm ng the -udgement of the court of or g n 9h ch orders the defendant to pay the pla nt ffs the sum of +2,800 9 th legal nterest thereon from 7ebruary 2,1545 and the costs of act on. 'onse-o $nfante, defendant here n, 9as the o9ner of t9o parcels of land, together 9 th a house bu lt thereon, s tuated n the ' ty of Man la and covered by %ransfer 'ert f cate of % tle No. >126>. Dn or before November <0, 1546, she contracted the serv ces of Jose 'unanan and Juan M -ares, pla nt ff here n, to sell the above@ment oned property for a pr ce of +<0,000 sub-ect to the cond t on that the purchaser 9ould assume the mortgage e1 st ng thereon n the favor of the "ehab l tat on 7 nance 'orporat on. &he agreed to pay them a comm ss on of 8 per cent on the purchase pr ce plus 9hatever overpr ce they may obta n for the property. +la nt ffs found one + o &. Noche 9ho 9as 9 ll ng to buy the property under the terms agreed upon 9 th defendant, but 9hen they ntroduced h m to defendant, the latter nformed them that she 9as no longer nterested n sell ng the property and succeeded n maF ng them s gn a document stat ng there n that the 9r tten author ty she had g ven them 9as already can@celled. Bo9ever, on December 20, 1546, defendant dealt d rectly 9 th + o &. Noche sell ng to h m

the property for +<1,000. 3pon learn ng th s transact on, pla nt ffs demanded from defendant the payment of the r comm ss on, but she refused and so they brought the present act on. Defendant adm tted hav ng contracted the serv ces of the pla nt ffs to sell her property as set forth n the compla nt, but stated that she agreed to pay them a comm ss on of +1,200 only on cond t on that they buy her a property some9here n %aft Avenue to 9here she m ght transfer after sell ng her property. Defendant avers that 9h le pla nt ffs tooF steps to sell her property as agreed upon, they sold the property at %aft Avenue to another party and because of th s fa lure t 9as agreed that the author ty she had g ven them be cancelled. %he lo9er court found that the preponderance of ev dence 9as n favor of the pla nt ffs and rendered -udgement sentens ng the defendant to pay the pla nt ff the sum of +2,800 9 th legal nterest thereon from 7ebruary 2,1545 plus the costs of act on. %h s dec s on 9as aff rmed n toto by the 'ourt of Appeals. %here s no d spute that respondents 9ere author Aed by pet t oner to sell her property for the sum of +<0,000 9 th the understand ng that they 9 ll be g ven a comm ss on of 8 percent plus 9hatever overpr ce they may obta n for the property. +et t oner, ho9ever, contends that author ty has already been 9 thdra9n on November <0, 1546 9hen, by the voluntary act of respondents, they e1ecuted a document stat ng that sa d author ty shall be cons dered cancelled and 9 thout any effect, so that 9hen pet t oner sold the property to + o &. Noche on December 20, 1546, she 9as already free from her comm tment 9 th respondents and, therefore, 9as not n duty bound to pay them any comm ss on for the transact on.. $f the facts 9ere as cla med by pet t oner, there s n@deed no doubt that she 9ould have no obl gat on to pay respondents the comm ss on 9h ch 9as prom sed them under the or g nal author ty because, under the old ' v l 'ode, her r ght to 9 thdra9 such author ty s recogn Aed. A pr nc pal may 9 thdra9 the author ty g ven to an agent at 9 ll. /Art cle 12<<.0 Eut th s fact s d sputed. %hus, respondents cla m that 9h le they agreed to cancel the 9r tten author ty g ven to them, they d d so merely upon the verbal assurance g ven by pet t oner that, should the property be sold to the r o&n #uyer, + o &. Noche, they 9ould be g ven the comm ss on agreed upon. %rue, th s verbal assurance does not appear n the 9r tten cancellat on, E1h b t 1, and, on the other hand, t s d sputed by pet t oner, but respondents 9ere allo9ed to present oral ev dence to prove t, and th s s no9 ass gned as error n th s pet t on for rev e9. %he plea that oral ev dence should not have been allo9ed to prove the alleged verbal assurance s 9ell taFen t appear ng that the 9r tten author ty g ven to respondents has been cancelled n a 9r tten statement. %he rule on th s matter s that ,(hen the terms of an agreement have been reduced to 9r t ng, t s to be cons dered as conta n ng all those terms, and, therefore, there can be, bet9een 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., /&ect on 22, "ule 12<, "ules of 'ourt.0 %he only e1cept ons to th s rule are? ,/a0(here a m staFe or

mperfect on of the 9r t ng, or ts fa lure to e1press the true ntent and agreement of the part es, or the val d ty of the agreement s put n ssue by the plead ngs,I and ,/b0 (here there s an ntr ns c amb gu ty n the 9r t ng., /:#id.* %here s no doubt that the po nt ra sed does not come under any of the cases e1cepted, for there s noth ng there n that has been put n ssue by respondents n the r compla nt. %he terms of the document, E1h b t 1, seem to be clear and they do not conta n any reservat on 9h ch may n any 9ay run counter to the clear ntent on of the part es. Eut even d sregard ng the oral ev dence adduced by respondents n contravent on of the parole ev dence rule, 9e are, ho9ever, of the op n on that there s enough -ust f cat on for the conclus on reached by the lo9er court as 9ell as by the 'ourt of Appeals to the effect that respondents are ent tled to the comm ss on or g nally agreed upon. $t s a fact found by the 'ourt of Appeals that after pet t oner had g ven the 9r tten author ty to respondents to sell her land for the sum of +<0,000, respondents found a buyer n the person of one + o &. Noche 9ho 9as 9 ll ng to buy the property under the terms agreed upon, and th s matter 9as mmed ately brought to the Fno9ledge of pet t oner. Eut the latter, perhaps by 9ay of strategem, adv sed respondents that she 9as no longer nterested n the deal and 9as able to preva l upon them to s gn a document agree ng to the cancellat on of the 9r tten author ty. %hat pet t oner had changed her m nd even f respondents had found a buyer 9ho 9as 9 ll ng to close the deal, s a matter that 9ould not g ve r se to a legal conse=uence f respondents agree to call off the transact on n deference to the re=uest of the pet t oner. Eut the s tuat on var es f one of the part es taFes advantage of the benevolence of the other and acts n a manner that 9ould promote h s o9n self sh nterest. %h s act s unfa r as 9ould amount to bad fa th. %h s act cannot be sanct oned 9 thout ac@cord ng to the party pre-ud ced the re9ard 9h ch s due h m. %h s s the s tuat on n 9h ch respondents 9ere placed by pet t oner. +et t oner tooF advantage of the serv ces rendered by respondents, but bel ev ng that she could evade payment of the r comm ss on, she made use of a ruse by nduc ng them to s gn the deed of cancellat on E1h b t 1. %h s act of subvers on cannot be sanct oned and cannot serve as bas s for pet t oner to escape payment of the comm ss on agreed upon. (herefore, the dec s on appealed from s hereby aff rmed, 9 th costs aga nst pet t oner. $aras, ..9., $a#lo, !engzon, $adilla, 7uason, Monte<mayor, Reyes, and 9ugo, 99., concur.

Separate /pinions #A9$A!/$, J./ concurr ng and d ssent ng?

$ concur n the result. $ can not agree, ho9ever, to the rul ng made n the ma-or ty dec s on that the pet t oners can not ntroduce ev dence of the c rcumstances under 9h ch the document 9as s gned, .e. upon prom se by respondent that should the property be sold to pet t oner)s buyer they 9ould nevertheless be ent tled to the comm ss on agreed upon. &uch ev dence s not e1cluded by the parole ev dence rule, because t does not tend to alter or vary the terms of the document. %h s document 9as merely a 9 thdra9al of the author ty granted the pet t oner to sell the property, not an agreement that they shall not be pa d the r comm ss on. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 10413. !ecem er 10, 3..;

GENE*)E*E #)', pet t oner, vs. :#/$EN%)/ SA9AN, respondents.

DE'$&$DN

()NGA, J., Eefore the 'ourt s a +et t on for "ev e9 on 'ert orar assa l ng the Decision1 dated Dctober 22, 200< of the 'ourt of Appeals, &eventh D v s on, n 'A@#.". C No. >0<52.2 %he late Eduardo HbaQeA /HbaQeA0, the o9ner of a 1,000@s=uare meter lot n 'ebu ' ty /the ,lot,0, entered nto anAgreement and Authority to 3egotiate and Sell /Agency Agreement0 9 th respondent 7lorenc o &aban /&aban0 on 7ebruary 6, 1554. 3nder the Agency Agreement, HbaQeA author Aed &aban to looF for a buyer of the lot for %9o Bundred %housand +esos /+200,000.000 and to marF up the sell ng pr ce to nclude the amounts needed for payment of ta1es, transfer of t tle and other e1penses nc dent to the sale, as 9ell as &abanJs comm ss on for the sale.< %hrough &abanJs efforts, HbaQeA and h s 9 fe 9ere able to sell the lot to the pet t oner #enev eve ! m /! m0 and the spouses Een-am n and !ourdes ! m /the &pouses ! m0 on March 10, 1554. %he pr ce of the lot as nd cated n the Deed of A#solute Sale s %9o Bundred %housand +esos /+200,000.000. 4 $t appears, ho9ever, that the vendees agreed to purchase the lot at the pr ce of & 1 Bundred %housand +esos /+>00,000.000, nclus ve of ta1es and other nc dental e1penses

of the sale. After the sale, ! m rem tted to &aban the amounts of Dne Bundred %h rteen %housand %9o Bundred 7 fty &even +esos /+11<,282.000 for payment of ta1es due on the transact on as 9ell as 7 fty %housand +esos /+80,000.000 as broFerJs comm ss on.8 ! m also ssued n the name of &aban four postdated checFs n the aggregate amount of %9o Bundred %h rty & 1 %housand &even Bundred 7orty %hree +esos /+2<>,24<.000. %hese checFs 9ere EanF of the +h l pp ne $slands /E+$0 'hecF No. 1112>48 dated June 12, 1554 for +28,000.00I E+$ 'hecF No. 1112>42 dated June 15, 1554 for +16,24<.00I E+$ 'hecF No. 1112>4> dated June 2>, 1554 for +28,000.00I and E=u table +'$ EanF 'hecF No. 021451E dated June 20, 1554 for +1>6,000.00. &ubse=uently, HbaQeA sent a letter dated June 10, 1554 addressed to ! m. $n the letter HbaQeA asFed ! m to cancel all the checFs ssued by her n &abanJs favor and to ,e1tend another part al payment, for the lot n h s /HbaQeAJs0 favor. > After the four checFs n h s favor 9ere d shonored upon presentment, &aban f led a .omplaint for collect on of sum of money and damages aga nst HbaQeA and ! m 9 th the "eg onal %r al 'ourt /"%'0 of 'ebu ' ty on August <, 1554. 2 %he case 9as ass gned to Eranch 20 of the "%'. $n h s .omplaint, &aban alleged that ! m and the &pouses ! m agreed to purchase the lot for +>00,000.00, i.e.,9 th a marF@up of 7our Bundred %housand +esos /+400,000.000 from the pr ce set by HbaQeA. Df the total purchase pr ce of +>00,000.00, +200,000.00 9ent to HbaQeA, +80,000.00 allegedly 9ent to ! mJs agent, and+11<,282.00 9as g ven to &aban to cover ta1es and other e1penses nc dental to the sale. ! m also ssued four /40 postdated checFs 6 n favor of &aban for the rema n ng +2<>,24<.00.5 &aban alleged that HbaQeA told ! m that he /&aban0 9as not ent tled to any comm ss on for the sale s nce he concealed the actual sell ng pr ce of the lot from HbaQeA and because he 9as not a l censed real estate broFer. HbaQeA 9as able to conv nce ! m to cancel all four checFs. &aban further averred that HbaQeA and ! m conn ved to depr ve h m of h s sales comm ss on by 9 thhold ng payment of the f rst three checFs. Be also cla med that ! m fa led to maFe good the fourth checF 9h ch 9as d shonored because the account aga nst 9h ch t 9as dra9n 9as closed. $n h s Ans&er, HbaQeA cla med that &aban 9as not ent tled to any comm ss on because he concealed the actual sell ng pr ce from h m and because he 9as not a l censed real estate broFer. ! m, for her part, argued that she 9as not pr vy to the agreement bet9een HbaQeA and &aban, and that she ssued stop payment orders for the three checFs because HbaQeA re=uested her to pay the purchase pr ce d rectly to h m, nstead of cours ng t through &aban. &he also alleged that she agreed 9 th HbaQeA that the purchase pr ce of the lot 9as only +200,000.00.

HbaQeA d ed dur ng the pendency of the case before the "%'. 3pon mot on of h s counsel, the tr al court d sm ssed the case only aga nst h m 9 thout any ob-ect on from the other part es.10 Dn May 14, 1552, the "%' rendered ts Decision11 d sm ss ng &abanJs compla nt, declar ng the four /40 checFs ssued by ! m as stale and non@negot able, and absolv ng ! m from any l ab l ty to9ards &aban. &aban appealed the tr al courtJs Decision to the 'ourt of Appeals. Dn Dctober 22, 200<, the appellate court promulgated ts Decision12 revers ng the tr al courtJs rul ng. $t held that &aban 9as ent tled to h s comm ss on amount ng to +2<>,24<.00.1< %he 'ourt of Appeals ruled that HbaQeAJs revocat on of h s contract of agency 9 th &aban 9as nval d because the agency 9as coupled 9 th an nterest and HbaQeA effected the revocat on n bad fa th n order to depr ve &aban of h s comm ss on and to Feep the prof ts for h mself. 14 %he appellate court found that HbaQeA and ! m conn ved to depr ve &aban of h s comm ss on. $t declared that ! m s l able to pay &aban the amount of the purchase pr ce of the lot correspond ng to h s comm ss on because she ssued the four checFs Fno9 ng that the total amount thereof corresponded to &abanJs comm ss on for the sale, as the agent of HbaQeA. %he appellate court further ruled that, n ssu ng the checFs n payment of &abanJs comm ss on, ! m acted as an accommodat on party. &he s gned the checFs as dra9er, 9 thout rece v ng value therefor, for the purpose of lend ng her name to a th rd person. As such, she s l able to pay &aban as the holder for value of the checFs. 18 ! m f led a Motion for Reconsideration of the appellate courtJs Decision, but her Motion 9as den ed by the 'ourt of Appeals n a Resolution dated May >, 2004.1> Not sat sf ed 9 th the dec s on of the 'ourt of Appeals, ! m f led the present pet t on. ! m argues that the appellate court gnored the fact that after pay ng her agent and rem tt ng to &aban the amounts due for ta1es and transfer of t tle, she pa d the balance of the purchase pr ce d rectly to HbaQeA. 12 &he further contends that she s not l able for HbaQeAJs debt to &aban under the Agency Agreement as she s not pr vy thereto, and that &aban has no one but h mself to blame for consent ng to the d sm ssal of the case aga nst HbaQeA and not mov ng for h s subst tut on by h s he rs. 16 ! m also assa ls the f nd ngs of the appellate court that she ssued the checFs as an accommodat on party for HbaQeA and that she conn ved 9 th the latter to depr ve &aban of h s comm ss on. 15 ! m prays that should she be found l able to pay &aban the amount of h s comm ss on, she should only be held l able to the e1tent of one@th rd /1M<0 of the

amount, s nce she had t9o co@vendees /the &pouses ! m0 9ho should share such l ab l ty.20 $n h s .omment, &aban ma nta ns that ! m agreed to purchase the lot for +>00,000.00, 9h ch cons sted of the+200,000.00 9h ch 9ould be pa d to HbaQeA, the +80,000.00 due to her broFer, the +11<,282.00 earmarFed for ta1es and other e1penses nc dental to the sale and &abanJs comm ss on as broFer for HbaQeA. Accord ng to &aban, ! m assumed the obl gat on to pay h m h s comm ss on. Be ns sts that ! m and HbaQeA conn ved to un-ustly depr ve h m of h s comm ss on from the negot at on of the sale.21 %he ssues for the 'ourtJs resolut on are 9hether &aban s ent tled to rece ve h s comm ss on from the saleI and, assum ng that &aban s ent tled thereto, 9hether t s ! m 9ho s l able to pay &aban h s sales comm ss on. %he 'ourt g ves due course to the pet t on, but agrees 9 th the result reached by the 'ourt of Appeals. %he 'ourt aff rms the appellate courtJs f nd ng that the agency 9as not revoFed s nce HbaQeA re=uested that ! m maFe stop payment orders for the checFs payable to &aban only after the consummat on of the sale on March 10, 1554. At that t me, &aban had already performed h s obl gat on as HbaQeAJs agent 9hen, through h s /&abanJs0 efforts, HbaQeA e1ecuted the Deed of A#solute Sale of the lot 9 th ! m and the &pouses ! m. %o depr ve &aban of h s comm ss on subse=uent to the sale 9h ch 9as consummated through h s efforts 9ould be a breach of h s contract of agency 9 th HbaQeA 9h ch e1pressly states that &aban 9ould be ent tled to any e1cess n the purchase pr ce after deduct ng the +200,000.00 due to HbaQeA and the transfer ta1es and other nc dental e1penses of the sale. 22 $n Macondray & .o. v. Sellner,2< the 'ourt recogn Aed the r ght of a broFer to h s comm ss on for f nd ng a su table buyer for the sellerJs property even though the seller h mself consummated the sale 9 th the buyer. 24 %he 'ourt held that t 9ould be n the he ght of n-ust ce to perm t the pr nc pal to term nate the contract of agency to the pre-ud ce of the broFer 9hen he had already reaped the benef ts of the broFerJs efforts. $n :nfante v. .unanan, et al.,28 the 'ourt upheld the r ght of the broFers to the r comm ss ons although the seller revoFed the r author ty to act n h s behalf after they had found a buyer for h s propert es and negot ated the sale d rectly 9 th the buyer 9hom he met through the broFersJ efforts. %he 'ourt ruled that the sellerJs 9 thdra9al n bad fa th of the broFersJ author ty cannot un-ustly depr ve the broFers of the r comm ss ons as the sellerJs duly const tuted agents. %he pronouncements of the 'ourt n the aforec ted cases are appl cable to the present case, espec ally cons der ng that &aban had completely performed h s obl gat ons under h s contract of agency 9 th HbaQeA by f nd ng a su table buyer to prepar ng the Deed of A#solute Sale bet9een HbaQeA and ! m and her co@ vendees. Moreover, the contract of agency very clearly states that &aban s

ent tled to the e1cess of the marF@up of the pr ce of the lot after deduct ng HbaQeAJs share of +200,000.00 and the ta1es and other nc dental e1penses of the sale. Bo9ever, the 'ourt does not agree 9 th the appellate courtJs pronouncement that &abanJs agency 9as one coupled 9 th an nterest. 3nder Art cle 1522 of the ' v l 'ode, an agency cannot be revoFed f a b lateral contract depends upon t, or f t s the means of fulf ll ng an obl gat on already contracted, or f a partner s appo nted manager of a partnersh p n the contract of partnersh p and h s removal from the management s un-ust f able. &tated d fferently, an agency s deemed as one coupled 9 th an nterest 9here t s establ shed for the mutual benef t of the pr nc pal and of the agent, or for the nterest of the pr nc pal and of th rd persons, and t cannot be revoFed by the pr nc pal so long as the nterest of the agent or of a th rd person subs sts. $n an agency coupled 9 th an nterest, the agentJs nterest must be n the sub-ect matter of the po9er conferred and not merely an nterest n the e1erc se of the po9er because t ent tles h m to compensat on. (hen an agentJs nterest s conf ned to earn ng h s agreed compensat on, the agency s not one coupled 9 th an nterest, s nce an agentJs nterest n obta n ng h s compensat on as such agent s an ord nary nc dent of the agency relat onsh p.2> &abanJs ent tlement to h s comm ss on hav ng been settled, the 'ourt must no9 determ ne 9hether ! m s the proper party aga nst 9hom &aban should address h s cla m. &abanJs r ght to rece ve compensat on for negot at ng as broFer for HbaQeA ar ses from the Agency Agreement bet9een them. ! m s not a party to the contract. Bo9ever, the record reveals that she had Fno9ledge of the fact that HbaQeA set the pr ce of the lot at +200,000.00 and that the +>00,000.00Othe pr ce agreed upon by her and &abanO9as more than the amount set by HbaQeA because t ncluded the amount for payment of ta1es and for &abanJs comm ss on as broFer for HbaQeA. Accord ng to the tr al court, ! m made the follo9 ng payments for the lot? +11<,282.00 for ta1es, +80,000.00 for her broFer, and +400.000.00 d rectly to HbaQeA, or a total of 7 ve Bundred & 1ty %hree %housand %9o Bundred 7 fty &even +esos /+8><,282.000.22 ! m, on the other hand, cla ms that on March 10, 1554, the date of e1ecut on of the Deed of A#solute Sale, she pa d d rectly to HbaQeA the amount of Dne Bundred %housand +esos /+100,000.000 only, and gave to &aban +11<,282.00 for payment of ta1es and +80,000.00 as h s comm ss on,26and Dne Bundred %h rty %housand +esos /+1<0,000.000 on June 26, 1554,25 or a total of %hree Bundred N nety %hree %housand %9o Bundred 7 fty &even +esos /+<5<,282.000. HbaQeA, for h s part, acFno9ledged that ! m and her co@vendees pa d h m +400,000.00 9h ch he sa d 9as the full amount for the sale of the lot.<0 $t thus appears that he rece ved +100,000.00 on March 10, 1554, acFno9ledged rece pt /through &aban0 of the +11<,282.00 earmarFed for ta1es and +80,000.00 for comm ss on, and rece ved the balance of +1<0,000.00 on June 26, 1554. %hus, a total of +2<0,000.00 9ent d rectly to HbaQeA. Apparently,

although the amount actually pa d by ! m 9as+<5<,282.00, HbaQeA rounded off the amount to +400,000.00 and 9a ved the d fference. ! mJs act of ssu ng the four checFs amount ng to +2<>,24<.00 n &abanJs favor bel es her cla m that she and her co@vendees d d not agree to purchase the lot at +>00,000.00. $f she d d not agree thereto, there 9ould be no reason for her to ssue those checFs 9h ch s the balance of +>00,000.00 less the amounts of +200,000.00 /due to HbaQeA0, +80,000.00 /comm ss on0, and the +11<,282.00 /ta1es0. %he only log cal conclus on s that ! m changed her m nd about agree ng to purchase the lot at +>00,000.00 after talF ng to HbaQeA and ult mately real A ng that &abanJs comm ss on s even more than 9hat HbaQeA rece ved as h s share of the purchase pr ce as vendor. Dbv ously, th s change of m nd resulted to the pre-ud ce of &aban 9hose efforts led to the complet on of the sale bet9een the latter, and ! m and her co@vendees. %h s the 'ourt cannot countenance. %he rul ng of the 'ourt n :nfante v. .unanan, et al., c ted earl er, s enl ghten ng for the facts there n are s m lar to the c rcumstances of the present case. $n that case, 'onse-o $nfante asFed Jose 'unanan and Juan M -ares to f nd a buyer for her t9o lots and the house bu lt thereon for %h rty %housand +esos /+<0,000.000 . &he prom sed to pay them f ve percent /8R0 of the purchase pr ce plus 9hatever overpr ce they may obta n for the property. 'unanan and M -ares offered the propert es to + o Noche 9ho n turn e1pressed 9 ll ngness to purchase the propert es. 'unanan and M -ares thereafter ntroduced Noche to $nfante. Bo9ever, the latter told 'unanan and M -ares that she 9as no longer nterested n sell ng the property and asFed them to s gn a document stat ng that the r 9r tten author ty to act as her agents for the sale of the propert es 9as already cancelled. &ubse=uently, $nfante sold the propert es d rectly to Noche for %h rty Dne %housand +esos /+<1,000.000. %he 'ourt upheld the r ght of 'unanan and M -ares to the r comm ss on, e1pla n ng thatO T:$nfante; had changed her m nd even f respondent had found a buyer 9ho 9as 9 ll ng to close the deal, s a matter that 9ould not g ve r se to a legal conse=uence f :'unanan and M -ares; agreed to call off the transact on n deference to the re=uest of :$nfante;. Eut the s tuat on var es f one of the part es taFes advantage of the benevolence of the other and acts n a manner that 9ould promote h s o9n self sh nterest. %h s act s unfa r as 9ould amount to bad fa th. %h s act cannot be sanct oned 9 thout accord ng the party pre-ud ced the re9ard 9h ch s due h m. %h s s the s tuat on n 9h ch :'unanan and M -ares; 9ere placed by :$nfante;. :$nfante; tooF advantage of the serv ces rendered by :'unanan and M -ares;, but bel ev ng that she could evade payment of the r comm ss on, she made use of a ruse by nduc ng them to s gn the deed of cancellat onT.%h s act of subvers on cannot be sanct oned and cannot serve as bas s for :$nfante; to escape payment of the comm ss on agreed upon. <1 %he appellate court therefore had suff c ent bas s for conclud ng that HbaQeA and ! m conn ved to depr ve &aban of h s comm ss on by deal ng 9 th each other

d rectly and reduc ng the purchase pr ce of the lot and leav ng noth ng to compensate &aban for h s efforts. 'ons der ng the c rcumstances surround ng the case, and the und sputed fact that ! m had not yet pa d the balance of +200,000.00 of the purchase pr ce of +>00,000.00, t s -ust and proper for her to pay &aban the balance of +200,000.00. 7urthermore, s nce HbaQeA rece ved a total of +2<0,000.00 from ! m, or an e1cess of +<0,000.00 from h s asF ng pr ce of +200,000.00, &aban may cla m such e1cess from HbaQeAJs estate, f that remedy s st ll ava lable, <2 n v e9 of the tr al courtJs d sm ssal of &abanJs compla nt as aga nst HbaQeA, 9 th &abanJs e1press consent, due to the latterJs dem se on November 11, 1554. << %he appellate court ho9ever erred n rul ng that ! m s l able on the checFs because she ssued them as an accommodat on party. &ect on 25 of the Negot able $nstruments !a9 def nes an accommodat on party as a person ,9ho has s gned the negot able nstrument as maFer, dra9er, acceptor or ndorser, 9 thout rece v ng value therefor, for the purpose of lend ng h s name to some other person., %he accommodat on party s l able on the nstrument to a holder for value even though the holder at the t me of taF ng the nstrument Fne9 h m or her to be merely an accommodat on party. %he accommodat on party may of course seeF re mbursement from the party accommodated. <4 As gleaned from the te1t of &ect on 25 of the Negot able $nstruments !a9, the accommodat on party s one 9ho meets all these three re=u s tes, viz? /10 he s gned the nstrument as maFer, dra9er, acceptor, or ndorserI /20 he d d not rece ve value for the s gnatureI and /<0 he s gned for the purpose of lend ng h s name to some other person. $n the case at bar, 9h le ! m s gned as dra9er of the checFs she d d not sat sfy the t9o other rema n ng re=u s tes. %he absence of the second re=u s te becomes pelluc d 9hen t s noted at the outset that ! m ssued the checFs n =uest on on account of her transact on, along 9 th the other purchasers, 9 th HbaQeA 9h ch 9as a sale and, therefore, a rec procal contract. &pec f cally, she dre9 the checFs n payment of the balance of the purchase pr ce of the lot sub-ect of the transact on. And she had to pay the agreed purchase pr ce n cons derat on for the sale of the lot to her and her co@ vendees. $n other 9ords, the amounts covered by the checFs form part of the cause or cons derat on from HbaQeAJs end, as vendor, 9h le the lot represented the cause or cons derat on on the s de of ! m, as vendee. <8 5rgo, ! m rece ved value for her s gnature on the checFs. Ne ther s there any nd cat on that ! m ssued the checFs for the purpose of enabl ng HbaQeA, or any other person for that matter, to obta n cred t or to ra se money, thereby totally debunF ng the presence of the th rd re=u s te of an accommodat on party. (BE"E7D"E, n v e9 of the forego ng, the pet t on s D$&M$&&ED. &D D"DE"ED.

$uno, 9., .hairman, Austria<Martinez, .hico<3azario, 99. concur. .alle"o, Sr., on leave.

:ootnotes
1

+enned by Assoc ate Just ce Edgardo +. 'ruA and concurred n by Assoc ate Just ces "uben %. "eyes and Noel #. % -am.
2

7lorenc o &aban, +la nt ff@Appellant v. Eduardo HbaneA and #enev eve ! m, DefendantsI #enev eve ! m, Defendant@Appellee.
<

%he agency agreement bet9een HbaQeA and &aban prov des?

T%hat $:,; Engr. Eduardo HbaQeA T have agreed and allo9ed to /s c0 Mr. 7lorenc o &aban, &r. and h s assoc ate to looF for a buyer, and further agreed to sell and d spose the above@ment on /s c0 lot, at the pr ce of +200.00 per s=uare meters :s c; /e=u valent to +200,000.000 net, and any amount over and above for the stated pr ce result ng from the sale shall belong to Mr. 7lorenc o &aban, &r. and h s assoc ate. 7urthermore t s agreed and covenanted that the total e1penses cover ng the sale and transfer of the t tle such as, cap tal ga n /s c0 ta1, documentary stamp, transfer ta1 and other relat ve e1penses, for the sa d sale shall be borne to the agent, and or to the buyer, e1cept the payment of realty ta1es. /"%' "ecords, p. 80
4

"%' "ecords, p. >.

! m on d rect e1am nat on, %&N, March <, 1552, p. 6I "ose C llarosa /! mJs broFer0 on d rect e1am nat on, %&N, Dctober 22, 155>, p. 2.
>

"%' "ecords, p. 28. :d. at 1. Anne1es ,E, to ,E,, "%' "ecords, pp. <2@<8. :d. at 2. Drder dated March >, 1558, "%' "ecords, p. 46. "ollo, pp. 25@<5. "ollo, pp. 22@26.

10

11

12

1<

%he amount of the purchase pr ce less the +200,000.00 payable to HbaQeA and the nc dental e1penses of the sale.
14

"ollo, pp. 28@2>. :d. at 22.

18

1>

"ollo, p. 4>. +et t on, :d. at 12. :d. at 14 and 1>. :d. at 16. :d. at 12. :d. at 114@118. Supra note <. << +h l <20 /151>0. :d. at <22. 5< +h l. >51 /158<0. See $ "estatement of the !a9 $n Agency 2d <40 /15820. "%' Dec s on, "ollo, p. <<. %&N, March <, 1552, p. 6.

12

16

15

20

21

22

2<

24

28

2>

22

26

25

:d., see also, AcFnol9edgement "ece pt ssued by HbaQeA n favor of ! m, "%' "ecords, p. 114.
<0

See AcFno9ledgement "ece pt dated June 26, 1554, :d., and HbaQeAJs Aff dav t dated June 26, 1554, :d.at 118.
<1

Supra note 28, at pp. >58@5>. "ule 6> /'la ms Aga nst Estate0, "ev sed "ules of 'ourt. Drder of the "%' dated March >, 1558, "%' "ecords, p. 46.

<2

<<

<4

Agro 'onglomerates, $nc. v. 'ourt of Appeals, #.". No. 112>>0, December 16, 2000, <46 &'"A 480I EanF of the +h l pp ne $slands v. 'ourt of Appeals, <6< +h l. 8<6 /20000.
<8

See Arts. 1<80 and 1486, ' v l 'ode.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. #74<=33 January 41, 1<1= AN(/N)/ E. +$A(S, doin" usiness under t-e name of +-ilippine $eal Estate ELc-an"e, pet t oner,

vs. 5/N. %/&$( /: A++EA#S, A#:/NS/ !/$/N)#A and +5)#)++)NE NA()/NA# 9ANK, respondents.

: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 n 'A@#.". No. 48524@" ent tledQAntonio 5. $rats, doing #usiness under the name of $hilippine Real 5state 5 change, vs. Alfonso Doronila and the $hilippine 3ational !an'Q, the d spos t ve part of 9h ch reads? $n v e9 of all the forego ng, t s our cons dered op n on and so hold that the dec s on of the lo9er court be, as t s hereby reversed, and the compla nt, d sm ssed. Dn appellant)s countercla m, -udgment s hereby rendered d rect ng appellee to pay attorney)s fees n the sum of +10,000 to appellant, no moral damages as there n cla med be ng a9arded for lacF of ev dence to -ust fy the same. %he n-unct on ssued by the lo9er court on the +2,000,000.00 cash depos t of the appellant s hereby l fted. No spec al pronouncement as to costs. &D D"DE"ED.
1

Dn &eptember 2<, 15>6 Anton o E. +rats, do ng bus ness under the name of ,+h l pp ne "eal Estate E1change, nst tuted aga nst Alfonso Doron la and +h l pp ne Nat onal EanF ' v l 'ase No. U@12412 n the 'ourt of 7 rst $nstance of " Aal at UueAon ' ty to recover a sum of money and damages. %he compla nt stated that defendant Alfonso Doron la 9as the reg stered o9ner of <00 hectares of land s tuated n Montalban, " Aal, covered by %ransfer 'ert f cates of % tle Nos. 22011, 2201<, 21>242 and 21>280I that defendant Doron la had for somet me tr ed to sell h s aforesa d <00 hectares of land and for that purpose had des gnated several agentsI that at one t me, he had offered the same property to the &oc al &ecur ty &ystem but fa led to consummate any saleI that h s offer to sell to the &oc al &ecur ty &ystem hav ng fa led, defendant Doron la on 7ebruary 14, 15>6 gave the pla nt ff an e1clus ve opt on and author ty n 9r t ng to negot ate the sale of h s aforement oned property, 9h ch e1clus ve opt on and author ty the pla nt ff caused to be publ shed n the Man la % mes on 7ebruary 22, 15>6I that t 9as the agreement bet9een pla nt ff and defendant Doron la that the bas c pr ce shall be +<.00 per s=uare meter, that pla nt ff shall be ent tled to a comm ss on of 10R based on +2.10 per s=uare meter or at any pr ce f nally agreed upon and f the property be sold over and above +<.00 per s=uare meter, the e1cess shall be created and pa d to the pla nt ff n add t on to h s 10R comm ss on based on +2.10 per s=uare meterI that as a result of the grant of the e1clus ve opt on and author ty to negot ate the sale of h s <00 hectares of land s tuated n Montalban, " Aal n favor of the pla nt ff, the defendant Doron la, on 7ebruary 20, 15>6, 9rote a letter to the &oc al &ecur ty &ystem 9 thdra9 ng h s prev ous offer to sell the same land and re=uest ng the return to h m of all papers concern ng h s offered property that

the &oc al &ecur ty &ystem, comply ng 9 th sa d re=uest of defendant Doron la, returned all the papers thereon and defendant Doron la, n turn gave them to the pla nt ff as h s duly author Aed real estate broFerI that by v rtue of the e1clus ve 9r tten opt on and author ty granted h m and rely ng upon the announced pol cy of the +res dent of the +h l pp nes to promote lo9 hous ng program the pla nt ff mmed ately 9orFed to negot ate the sale of defendant Doron la)s <00 hectares of land to the &oc al &ecur ty &ystem, maF ng the necessary contacts and representat ons to br ng the part es together, namely, the o9ner and the buyer, and br ng about the ult mate sale of the land by defendant Doron la to the &oc al &ecur ty &ystemI that on 7ebruary 22, 15>6, after pla nt ff had already contacted the &oc al &ecur ty &ystem, ts Deputy Adm n strator, "eynaldo J. #regor o, 9rote a letter to defendant Doron la nv t ng the latter to a conference regard ng the property n =uest on 9 th Adm n strator %eodoro, 'ha rman #av ola and sa d "eynaldo J. #regor o on March 4, 15>6 at 10?00 o)clocF n the morn ng, stat ng that the &&& 9ould l Fe to taFe up the offer of the lotI that hav ng granted pla nt ff the e1clus ve 9r tten opt on and author ty to negot ate the sale of h s <00 hectares of land, defendant Doron la n a letter dated 7ebruary 26, 15>6 decl ned the nv tat on e1tended by the &oc al &ecur ty &ystem to meet 9 th ts Adm n strator and 'ha rman and re=uested them nstead ,to deal d rectly, 9 th the pla nt ff, that on March 1>, 15>6, at the suggest on of defendant Doron la, the pla nt ff 9rote a letter to the &oc al &ecur ty &ystem to the effect that pla nt ff 9ould be glad to s t 9 th the off c als of the &oc al &ecur ty &ystem to d scuss the sale of the property of the defendant Doron laI that on March 16, 15>6, the &oc al &ecur ty &ystem sent a telegram to defendant Doron la to subm t certa n documents regard ng the property offeredI that on May >, 15>6, a 9r tten offer to sell the <00 hectares of land belong ng to defendant Doron la 9as formally made by the pla nt ff to the &oc al &ecur ty &ystem and accord ngly, on May 2, 15>6, the &oc al &ecur ty &ystem Adm n strator d spatched the follo9 ng telegram to defendant Doron la? ,&&& cons der ng purchase your property for ts hous ng pro-ect Adm n strator %eodoro,I that a fe9 days thereafter, the pla nt ff accompan ed the defendant Doron la to the 'h na EanF ng 'orporat on to arrange the matter of clear ng payment by chocF and del very of the t tles over the property to the &oc ety &ecur ty &ystemI that hav ng been brought together by the pla nt ff, the defendant Doron la and the off ces of the &oc ety &ecur ty &ystem, on May 25, 15>6 and on June 4, 15>6, met at the off ce of the &&& Adm n strator 9here n the pr ce for the purchase of the defendant Doron la)s <00 hectares of land 9as, among others, taFen upI that on June 20, 15>6, the &oc al &ecur ty 'omm ss on passed "esolut on No. ><> maF ng a counter@offer of +<.28 per s=uare meter sub-ect to an appra se reportI that on June 22, 15>6, "esolut on No. >>2 9as adopted by the &oc al &ecur ty 'omm ss on author A ng the %oples N Bard ng /7ar East0 $nc. to conduct an appra sal of the property and to subm t a report thereonI that pursuant thereto, the sa d company subm tted ts appra sal report spec fy ng that the present value of the property s +<.<4 per s=uare meter and that a hous ng program development 9ould represent the h ghest and best use thereof, that on July 16, 15>6, the &oc al &ecur ty 'omm ss on, at ts regular meet ng, taF ng note of the favorable appra sal report of the %oples)N Bard ng /7ar East0 $nc., passed "esolut on No. 2<6, approv ng the

purchase of defendant Doron la)s <00 hectares of land n Montalban, " Aal at a pr ce of +<.28 per s=uare meter or for a total purchase pr ce of N ne M ll on &even Bundred 7 fty %housand +esos /+5,280,000.000, appropr at ng the sa d amount for the purpose and author A ng the &&& Adm n strator to s gn the necessary documents to mplement the sa d resolut onI that on July <0, 15>6, defendant Doron la and the &oc al &ecur ty &ystem e1ecuted the correspond ng deed of absolute sale over the <00 hectares of land n Montalban, " Aal covered by %ransfer 'ert f cate of % tle Nos. 22011, 2201<, 21>242 and 21>280 under the terms of 9h ch the total pr ce of +5,280,000.00 shall be payable as follo9s? /a0 >0R of the agreed purchase pr ce, or 7 ve M ll on E ght Bundred 7 fty %housand +esos /+8,6>0,000.000 mmed ately after s gn ng the deed of sale. and /b0 the balance of 40R of the agreed pr ce, or %hree M ll on N ne Bundred %housand +esos /+<,500,000.000 th rty days after the s gn ng of the deed of absolute saleI that on August 21, 15>6, after payment of the purchase pr ce, the deed absolute sale e1ecuted by defendant Doron la n favor of the &oc al &ecur ty &ystem 9as presented for reg strat on n the Dff ce of the "eg ster of Deeds of " Aal, and %ransfer 'ert f cates of % tle Nos. 52>824, 22>828, 22>82> and 22>822 n the name of the &oc al &ecur ty &ystem 9ere ssuedI that defendant Doron la has rece ved the full purchase pr ce for h s <00 hectares of land n the total amount of +5,280,000.00, 9h ch amount he depos ted n h s banF Account No. 0012@44< 9 th the defendant +h l pp ne Nat onal EanFI that on &eptember 12, 15>6, the pla nt ff presented h s statement to, and demanded of defendant Doron la the payment of h s process onal fee as real estate broFer as computed under the agreement of 7ebruary 14, 15>6 n the total amount of +1,<60,000.00I that not9 thstand ng such demand, the defendant Doron la, n gross and ev dent bad fa th after hav ng ava led of the serv ces of pla nt ff as real estate broFer, refused to pay the profess onal fees due h mI that as a result of defendant Doron la)s gross and ev dent bad fa th and un-ust f ed refusal to pay pla nt ff the profess onal fees due h m under the agreement, the latter has suffered and cont nues to suffer mental angu sh, ser ous an1 ety, and soc al hum l at on for 9h ch defendant Doron la shall be held l able to pay moral damagesI and, that by reason l Fe9 se of the aforesa d act of defendant Doron la, the pla nt ff has been compelled to f le th s act on and to engage the serv ces of counsel at a st pulated profess onal fee of +280,000.00. $n h s ans9er f led on November 16, 15>6, the defendant Doron la alleged that 9hen the pla nt ff offered the ans9er ng defendant)s property to the &oc al &ecur ty &ystem on May >, 15>6, sa d defendant had already offered h s property to, and had a closed transact on or contract of sale of, sa d property 9 th the &oc al &ecur ty &ystemI that the letter agreement had become null and vo d because defendant Doron la had not rece ved any 9r tten offer from any prospect ve buyers of the pla nt ff dur ng the agreed per od of >0 days unt l the last day of the author Aat on 9h ch 9as Apr l 1<, 15>6 count ng from 7ebruary 14, 15>6I that t s not true that pla nt ff brought together defendant Doron la and the off c als of the &oc al &ecur ty &ystem to taFe up the purchase pr ce of defendant Doron la)s property for the s mple reason that the pla nt ff)s offer 9as +>.00 per s=uare meter and later on reduced to +4.80 per s=uare meter because

the &&& 'ha rman had already a closed transact on 9 th the defendant Doron la at the pr ce of +<.28 per s=uare meter and that the offer of the pla nt ff 9as refused by the off c als of the &oc al &ecur ty &ystemI and that defendant Doron la d d not ans9er the statement of collect on of the pla nt ff because the latter had not r ght to demand the payment for serv ces not rendered accord ng to the agreement of the part es. %he ans9er ng defendant nterposed a countercla m for damages and attorney)s fees. Dn January 16, 15>5, the pla nt ff and defendant Alfonso Doron la subm tted the follo9 ng st pulat on of facts? &%$+3!A%$DN D7 7A'%& 'DME ND( the pla nt ff and defendant DD"DN$!A, through the r respect ve unders gned counsel, and to th s Bonorable 'ourt by 9ay of abbrev at ng the proceed ng the case at bar, 9 thout pre-ud ce to presentat on of e1planatory ev dence, respectfully subm t the follo9 ng &%$+3!A%$DN D7 7A'%&. 1. %he defendant Doron la 9as the reg stered o9ner of <00 hectares of land, s tuated n Montalban, " Aal, covered by %ransfer 'ert f cates of % tle Nos. 22011, 2201<, 21>242 /formerly %'% No. 11>><10 and 21>280 /formerly %'% No. 220120. 2. %hat on July <, 15>2, defendant DD"DN$!A under h s letter /marFed Anne1 ,1, of the ans9er0 addressed to the &&& 'ha rman, offered h s sa d property to the &oc al &ecur ty &ystem /&&&0 at +4.00 per s=uare meter. %hat on July 12, 15>2 /Anne1 ,2, of the Ans9er0 the &&& 'ha rman, Mr. "amon '. #av ola, Jr., repl ed to defendant DD"DN$!A, as follo9s? %h s 9 ll acFno9ledge your letter of July <rd, 15>2 relat ve to your offer for sale of your real estate property. $n th s regard, may $ please be nformed as to ho9 many hectares, out of the total <00 hectares offered, are located n UueAon ' ty and ho9 many hectares are located n Montalban, " Aal. ! Fe9 se, as regards your offer of +4.00 per s=uare meter, 9ould there be any poss b l ty that the same be reduced to +<.28 per s=uare meter 7 nally and before $ subm t your proposal for process t s re=uested that the NA(A&A cert fy to the effect that they have no ob-ect on to hav ng th s parcel of land subd v ded for res dent al house purposes. %hanF you for your offer and may $ hear from you at the earl est poss ble t me. 2@a %hat on July 15, 15>2, defendant DD"DN$!A 9rote a letter /a 1ero1 copy, attached hereto marFed as Anne1 ,2@a, for DD"DN$!A0 to NA(A&A, and that n

reply thereto, on July 28, 15>2, the NA(A&A 9rote the follo9 ng letter /Gero1 copy attached hereto to be marFed as Anne1 ,2@b, for DD"DN$!A0 to defendant DD"DN$!A. $n connect on 9 th your proposed subd v s on plan of your propert es ad-acent to our Noval ches (atershed, th s Dff ce 9ould l Fe to mpose the follo9 ng cond t ons? 1. & nce your property s an mmed ate boundary of our Noval ches (atershed, a 20@meter road should be constructed along our common boundary. 2. %hat no 9aste or dra nage 9ater from the subd v s on should flo9 to9ards the 9atershed. <. %hat the l =u d from the sept c tanFs or s m lar 9aste 9ater should be treated before t s dra ned to the Alat " ver above our Alat Dam. %he above cond t ons are all safeguards to the dr nF ng 9ater of the people of Man la and &uburbs. $t s therefore e1pected that 9e all cooperate to maFe our dr nF ng 9ater safer from any pollut on. <. %hat on July 15, 15>2, defendant DD"DN$!A 9rote another letter /marFed as Anne1 )<) on h s Ans9er0 addressed to the &&& 'ha rman, Mr. "amon #av ola Jr., stat ng, among others, the follo9 ng? $n th s connect on, $ have your counter@offer of +<.28 per s=uare meter aga nst my offer of +4.00 per s=uare meter, although your counter@offer s lo9er compar ng to the pr ces of ad-acent propert es, $ have to cons der the d fference as my pr v lege and opportun ty to contr bute or support the +res dent al pol cy to promote lo9 cost hous ng n th s country part cularly to the &&& members by accept ng gladly your counter@offer of +<.28 per s=uare meter 9 th the cond t on that t should be pa d n cash and such payment shall be made 9 th n a per od of <0 days from the above stated date /2nd paragraph of letter dated July 16, 15>2, Anne1 ,<, of the Ans9er0. <.a %hat on August 10, 15>2, the &&& 'ha rman, Mr. "amon #av ola Jr., 9rote the follo9 ng /Gero1 copy attached hereto and marFed as Anne1 )2@c) for DD"DN$!A? addressed to defendant DD"DN$!A? ( th reference to your letter, dated July 15>2, please be nformed that the same s no9 9 th the Adm n strator for study and comment. %he 'omm ss on 9 ll act on rece pt of nformat on re such stud es. ( th the assurance that you 9 ll be per od cally nformed of developments, 9e rema n. <@b

%hat on Dctober <0, 15>2, Mr. +astor E. &a-orda, )Ey author ty of Atty. Alfonso Doron la, property o9ner), 9rote the follo9 ng re=uest /Gero1 copy attached hereto and marFed as Anne1 )2@d) for DD"DN$!A0 addressed to "ealtor C cente !. Narc so for a cert f cat on regard ng the actual pr ces of DD"DN$!A)s property, =uoted as follo9s? May $ have the honor to re=uest for your cert f cat on as a member of the Eoard of "ealtor regard ng the actual pr ces of my real estate ra9@land propert es descr bed as !ots <@E@2, 2>E, > and 4@'@< all ad-acent to each other, conta n ng a total area of <,000,000 s=uare meters, all reg stered n the name of Alfonso Doron la, covered by %.'.%. Nos. 11>><1, 2201<, 22011, and 22012, located at Montalban, " Aal, all ad-acent to the Northern port on of the NA(A&A propert es n UueAon ' ty nclud ng those other surround ng ad-acent propert es and even those propert es located before reach ng my o9n propert es com ng from Man la. %h s re=uest s purposely made for my references n case $ dec ded to sell my sa d propert es ment oned above. <@c %hat on November <, 15>2, "ealtor C cente Narc so 9rote the follo9 ng reply /Gero1 copy attached hereto and marFed as Anne1 2 for DD"DN$!A0 to Mr. +astor E. &a-orda? As per your re=uest dated Dctober <0, 15>2, regard ng pr ces of ra9 land, t s my f nd ng that the fa r marFet value of ra9 land n the v c n ty of the NA(A&A propert es at UueAon ' ty and Montalban, " Aal. nclud ng the propert es of Atty. Alfonso Doron la. more part cularly Fno9n as lots <@E@2, 2>@E, and 4@'@< conta n ng appro1 mately <,000,000 s=uare meters s +<.00 to +<.80 per s=uare meter. 'urrent pr ces before reach ng Doron la)s property range from +>.00 to +2.00 per s=uare meter. 4. %hat on 7ebruary 14, 15>6, defendant DD"DN$!A granted pla nt ff an e1clus ve opt on and author ty /Anne1 )A) of the compla nt0, under the follo9 ng terms and cond t ons? 1. %he pr ce of the property s %B"EE /+<.000 +E&D& per s=uare meter. 2. A comm ss on of %EN /10R0 +E"'EN% 9 ll be pa d to us based on +2.10 per s=uare meter, or at any pr ce that you DD"DN$!A f nally agree upon, and all e1penses shall be for our account, nclud ng preparat on of the correspond ng deed of conveyance, documentary stamps and reg strat on fee, 9hether the sale s causes d rectly or nd rectly by us 9 th n the t me of th s opt on. $f the property s sold over and above +<.00 per s=uare meter, the e1cess amount shall be cred ted and pa d to the here n 9orFers. $n add t on to the 10R comm ss on based on +2.10 per s=uare meter, prov ded the broFers shall pay the

correspond ng ta1es to the o9ner of the e1cess amount over +<.00 per s=uare meter, unless pa d by checF 9h ch 9ould then be deduct ble as add t onal e1penses. <. %h s e1clus ve opt on and author ty s good for a per od of s 1ty />00 days from the date of your conform tyI prov ded, ho9ever, that should negot at ons have been started 9 th a buyer, sa d per od s automat cally e1tended unt l sa d negot at ons s term nated, but not more than f fteen /180 daysI 4. %he 9r tten offers must be made by the prospect ve buyers, unless they prefer to have us taFe the offer for and n the r behalf some buyers do not 9ant to be Fno9n n the early stages of the negot at ons? 8. $f no 9r tten offer s made to you unt l the last day of th s author Aat on, th s opt on and author ty shall e1p re and become null and vo dI >. $t s clearly understood that prospect ve buyers and all part es nterested n th s property shall be referred to us, and that you 9 ll not even =uote a pr ce d rectly to any agent or buyer. Hou agree to refer all agents or broFers to us D3"$N# the t me th s opt on s n forceI and 2. %here are some s=uatters occupy ng small port ons of the property, 9h ch fact 9 ll be reported to the prospect ve buyers, and sa d s=uatters 9 ll be removed at our e1pense. /Anne1 ,A, of the compla nt0 Cery truly yours, +B$!$++$NE "EA! E&%A%E EG'BAN'E /&gd0 AN%DN$D E. +"A%& #eneral manager 'DN7D"ME? /&gt.0 A!7DN&D DD"DN$!A Date? 7ebruary 14, 15>6 8. %hat on 7ebruary 15, 15>6, pla nt ff 9rote the follo9 ng letter to defendant DD"DN$!A /Anne1 ,4, of the Ans9er0, =uoted as follo9s? 7ebruary 15, 15>6 Don Alfonso Doron la +laAa 7erguAon Erm ta, Man la Dear Don Alfonso?

$n v e9 of the e1clus ve opt on e1tended to us for the sale of your property cons st ng <00 hectares located at Montalban, " Aal, 9e earnestly re=uest that you taFe mmed ate steps to 9 thdra9 any and all papers perta n ng to th s property offered to the &D'$A! &E'3"$%H &H&%EM Cery truly yours, +B$!$++$NE "EA! E&%A%E EG'BAN#E /&gd0 AN%DN$D E. +"A%& #eneral Manager AE+Macc "E'E$CED D"$#$NA! Ey? /&gd.0 "D#E!$D DA+$%AN >. %hat on 7ebruary 20, 15>6, pursuant to the letter dated 7ebruary 15, 15>6 of pla nt ff, defendant DD"DN$!A 9rote a letter /Anne1 )E) of the compla nt0 to the &&& Adm n strator stat ng? $n as much as the &&& has not acted on my offer to sell a <00 hectare lot located n Montalban, " Aal, for the last f ve /80 months $ respectfully re=uested for the return of all my papers concern ng th s offered property. 2. %hat on 7ebruary 22, 15>6, defendant DD"DN$!A rece ved the follo9 ng letter /Anne1 ,', of the compla nt0 from the &&& Deputy Adm n strator, Mr. "eynaldo J. #regor o, to 9 t? May $ taFe th s opportun ty of nv t ng you n behalf of Adm n strator %eodoro, to meet 9 th h m, 'ha rman #av ola and myself on 7r day, March 4, 10?00 A.M. lot offer. %hanFs and regards. 6. %hat on 7ebruary 26, 15>6, defendant DD"DN$!A 9rote the follo9 ng letter /Anne1 ,D, of the compla nt0 to the &&& Deputy Adm n strator? %hanF you for your nv tat on to meet Adm n strator %eodoro, 'ha rman #av ola and your goodself, to taFe up my former offer to sell my property to the &oc al &ecur ty &ystem.

& nce the &&& had not acted on my offer dated July 15, 15>2, more than seven /20 months ago, $ have asFed for the return of my papers, as per my letter of 7ebruary 20, 15>6, and 9h ch you have F ndly returned to me. As of 7ebruary 20, 15>6, $ gave the +h l pp ne "eal Estate E1change an e1clus ve opt on and author ty to negot ate the sale of th s <00 hectare land, and $ am no longer at l berty to negot ate ts sale personallyI $ shall therefore re=uest you commun cate d rectly 9 th the +h l pp ne "eal Estate E1change, +. D. Eo1 64, UueAon ' ty, and deal 9 th them d rectly f you are st ll nterested n my property. ( th my F nd personal regards, $ am 5. %hat on March 1>, 15>6, pla nt ff, act ng upon the letter of defendant DD"DN$!A dated 7ebruary 26, 15>6 /Anne1 )D) for pla nt ff0, 9rote the follo9 ng letter to &&& Adm n strator? Don Alfonso Doron la, o9ner of the <00 hectare land located at Montalban, " Aal, ad-o n ng the UueAon ' ty boundary, has nformed us that the Adm n strator of the &D'$A! &E'3"$%H) &H&%EM, through Mr. "eynaldo J. #regor o, has nv ted h m to meet 9 th the Adm n strator and 'ha rman #av ola to taFe up the former offer to sell h s property to the &&&. $n h s letter to the Adm n strator dated 7ebruary 20, 15>6 /9h ch has been rece ved by the &&& on the same day0, Mr. Doron la adv sed you that as of 7ebruary 20,15>6, he gave the +B$!$++$NE "EA! E&%A%E EG'BAN#E /+B$!"EG0 the e1clus ve opt on and author ty to negot ate the sale of h s <00 hectare land n Montalban, and that he s no longer at l berty to negot ate ts sale personally, and that, f you are st ll nterested n the property, the &&& should commun cate d rectly 9 th the +B$!$++$NE "EA! E&%A%E EG'BAN#E. $t s by v rtue of th s arrangement that Mr. Doron la no9 refers to us nv tat on and h s reply to the &&& and has re=uested us to get n touch 9 th you. (h le, at present 9e have several prospect ve buyers nterested n th s property, 9e shall, n compl ance 9 th the re=uest of Mr. Doron la, be happy to s t do9n 9 th you and 'ha rman "amon #av ola, Jr. +lease let us Fno9 9hen t 9 ll be conven ent to hold the conference. 10. %hat on Apr l 16, 15>6, defendant DD"DN$!A e1tended the pla nt ff e1clus ve opt on and author ty to e1p re May 16, 15>6./anne1 )E) O "eply letter of Doron la to &&& Deputy Adm n strator dated May 6, 15>60. 11.

%hat on May >,15>6, pla nt ff made a formal 9r tten offer to the &oc al &ecur ty &ystem to sell the <00 hectares land of defendant DD"DN$!A at the pr ce of +>.00 per s=uare meter, Gero1 copy of 9h ch bear ng the stamp or rece pt of &oc al &ecur ty &ystem s attached hereof as Anne1 ,D, O pla nt ff. 12. %hat on May 1>, 15>6 the defendant DD"DN$!A rece ved the follo9 ng telegram /Anne1 )E) of the compla nt0 form the &&& Adm n strat ve, read ng? &&& 'DN&$DE"$N# +3"'BA&E HD3" +"D+E"%H 7D" $%& BD3&$N# +"DJE'% 1<. %hat on May 16, 15>6, after pla nt ff e1clus ve opt on and author ty had been e1tended, pla nt ff 9rote the follo9 ng letter /Anne1 ,A,O "eply) of pla nt ff)s "E+!H %D AN&(E"0 to defendant DD"DN$!A, to 9 t? 'DN7$DEN%$A! $n our conference last Monday, May 1<, 15>6, you have been def n tely adv sed by respons ble part es that the &D'$A! &E'3"$%H &H&%EM s ac=u r ng your <00@ hectare land at Montalban, " Aal, ad-o n ng the UueAon ' ty Eoundary O and that sa d property 9 ll be ac=u red n accordance 9 th the e1clus ve opt on and author ty you gave the +B$!$++$NE "EA! E&%A%E EG'BAN'E. Hou 9ere assured n that conference that the property 9 ll be ac=u red def n tely, but, as t has been ment oned dur ng the conference, t may taFe from <0 to >0 days to have all the papers prepared and to effect the correspond ng payment. %he telegram from the &&& conf rm ng these negot at ons has already been rece ved by you, a copy of 9h ch you yourself have F ndly furn shed us. +ursuant to paragraph < of the terms of the opt on that you have F ndly e1tended, 9e st ll have f fteen days more from today, May 16, 15>6, 9 th n 9h ch to f n sh the negot at ons for the sale of your property to the &&&. 7or your conven ence, 9e =uote the pert nent port on of paragraph < of the opt on? ... prov ded, ho9ever, that should negot at on have been started 9 th a buyer, sa d per od s automat cally e1tended unt l sa d negot at on s term nated, but no more than f fteen /180 days. +lease be assured that 9e 9 ll do our very best to complete these negot at ons for the sale of your property 9 th n th s f fteen@day per od. $n the meant me) 9e hope you 9 ll also observe the prov s ons of paragraph > of the e1clus ve opt on you have e1tended to us. 14. %hat on May 16, 15>6, pla nt ff 9rote the follo9 ng letter /Gero1 copy attached and marFed hereof as Anne1 )B) for pla nt ff0 addressed defendant DD"DN$!A, to 9 t?

Ey v rtue of the e1clus ve opt on and author ty you have granted the +B$!$++$NE "EA! E&%A%E EG'BAN#E to negot ate the sale of your <00@hectare land located at Montalban, " Aal, ad-o n ng the UueAon ' ty boundary, 9h ch propert es are covered by %ransfer 'ert f cate of % tles Nos. 11>><1, 22011, 22012 and 2201<, of the "eg stry of Deeds for the +rov nce of " Aal, 9e hereby maFe a f rm offer, for and n behalf of our buyer, to purchase sa d property at the pr ce of 7D3" +E&D& AND 7$7%H 'EN%ACD& /+4.800 per s=uare meter, or the total amount of %B$"%EEN M$!!$DN 7$CE B3ND"ED %BD3&AND /+1<,800,000.000 +E&D&, +h l pp ne 'urrency, payable n 'ash and D.E.+. +rogress Eonds, on a rat o to be dec ded bet9een you and our pr nc pal. %o e1ped te the negot at ons, 9e suggest that 9e s t do9n somet me early ne1t 9eeF 9 th our pr nc pal to taFe up the f nal arrangement and other deta ls n connect on 9 th the purchase of the sub-ect property. %o g ve you further assurance of the val d ty of th s offer, 9e refer you to the 'B$NA EAN*$N# 'D"+D"A%$DN /%rust Department0 9ho has already been appr sed of these negot at ons, to 9h ch ;sanF 9e strongly recommend that th s transact on be coursed through, for your o9n secur ty and protect on. 18. %hat on May <0, 15>6, pla nt ff 9rote the follo9 ng letter /Gero1 copy attached hereto, and marFed as Anne1 )$) for pla nt ff0 to defendant DD"DN$!A, =uoted as follo9s? %h s s to adv se you that the &D'$A! &E'3"$%H &H&%EM agreed to purchase your <00@hectare land located at Montalban, " Aal, 9h ch purchase can be conformed by the 'ha rman of the &D'$A! &E'3"$%H 'DMM$&&$DN. %he deta ls 9 ll have to be taFen up bet9een you and the 'ha rman, and 9e suggest that you commun cate 9 th the 'ha rman at your earl est conven ence. %h s negot at on 9as made by v rtue of the e1clus ve opt on and author ty you have granted the +B$!$++$NE "EA! E&%A%E EG'BAN#E, 9h ch opt on s n full force and effect, and covers the transact on referred above. 1>. %hat on June >,15>6, defendant DD"DN$!A 9rote the follo9 ng letter /Anne1, 2, for DD"DN$!A0, to the pla nt ff, to 9 t? $ have to nform you off c ally, that $ have not rece ved any 9r tten offer from the &&& or others, to purchase my Montalban property of 9h ch you 9ere g ven an opt on and e1clus ve author ty as appear ng n your letter@ contract dated 7ebruary 14, 15>6, dur ng the >0 days of your e1clus ve author ty 9h ch e1p red on Apr l 14, 15>6, nor dur ng the e1tens on 9h ch 9as properly a ne9 e1clus ve author ty of <0 days from Apr l 16, 9h ch e1p red on May 16, 15>6, nor dur ng the prov ded 18 days grace, n case that you have closed any transact on to term nate t dur ng that per od, 9h ch also e1p red on June <, 15>6.

As stated n sa d letter, 9e have the follo9 ng cond t on? 8. $f no 9r tten offer s made to you unt l the last day of th s author Aat on, th s opt on and author ty shall e1p re and becomes null and vo d. As $ have nformed you, that on Apr l 1>, 15>6 or t9o days after your opt on e1p red $ have s gned an agreement to sell my property to a group of buyers to 9hom $ asFed later that the effect v ty of sa d agreement 9 ll be after your ne9 author ty has e1p red 9 ll be on June 2, 15>6, and they have acceptedI As your opt on has e1p red, and they Fno9 that there 9as no 9r tten offer made by the &&& for any pr ce of my property, as de of the r prev ous letter announc ng me that they are ready to pay, $ 9as not f ed on June 4, 15>6 by the r representat ve, call ng my attent on but our agreementI that s 9hy $ am 9r t ng you, that hav ng e1p red your opt on and e1clus ve author ty to offer for sale my sa d property, $ not f ed only th s afternoon sa d to comply our agreement. Bop ng for your cons derat on on the matter, as 9e have to be gu ded by contracts that 9e have to comply, $ hereby e1press to you my s ncere sent ments. 12. %hat on June 15, 15>6, defendant DD"DN$!A 9rote the follo9 ng letter /Anne1 ,8, of the Ans9er0 to the &&& Adm n strator, rene9 ng h s offer to sell h s <00 hectare land to the &&& at +4.00 per s=uare meter, to 9 t? %h s s to rene9 my offer to sell my propert es located at Montalban, " Aal $dent f ed as !ot Nos. <@E@2, 2>@6, >, and 4@'@< reg stered n my name n the off ce of the "eg stry of Deeds of " Aal under %.'.%. Nos. 11>><1, 2201<, 22011 and 21>280, conta n ng a total area of <00 hectares or <,000,000 s=uare meters. Hou 9 ll recall that last year, $ offered to the &oc al &ecur ty &ystem the same propert es at the pr ce of 7our /+4.000 pesos per s=uare meter. After < ocular nspect on of 'ha rman #av ola one of sa d nspect ons accompan ed by 'omm ss oner Arroyo and after rece v ng the 9r tten appr sal report of Man la realtor C cente !. Narc so, the &ystem then made a counter@offer of %hree pesos and t9enty@f ve /+<.280 per s=uare meter 9h ch $ accepted under the cond t on that the total amount be pa d 9 th n a per od of th rty /<00 days from the date of my acceptance /July 15, 15>20. My acceptance 9as mot vated by the fact that 9 th n sa d per od of t me $ had hoped to purchase my sugarcane hac enda n $lo lo 9 th the proceeds $ e1pected from the sale. No act on 9as ho9ever taFen by the &ystem thereon. "ecently the same propert es 9ere offered by Anton o E. +rats of the +h l pp ne "eal Estate E1change to the +res dent al Ass stant on Bous ng, at the pr ce of s 1 pesos /p>.000 per s=uare meter, 9ho referred t to the &ystem, but aga nst no act on had been taFen by the &ystem. 'ons der ng the lapse of t me s nce our or g nal offer dur ng 9h ch pr ces of real estate have ncreased cons derably, on the one hand and n cooperat on 9 th the

&ystem)s mplementat on of our government)s pol cy to prov de lo9 cost houses to ts members, on the other hand, $ am rene9 ng my offer to sell my propert es to the system only at the same pr ce of +4.00 per s=uare meter, or for a total amount of t9elve m ll on pesos /+12,000,000.000, prov ded the total amount s pa d n cash 9 th n a per od of f fteen /180 days from th s date. 16. %hat on June 20, 15>6, the &oc al &ecur ty 'omm ss on passed "esolut on No. ><> by 9h ch the &&& formal Aed ts counter@offer of +<.28 per s=uare meter. /&ee Anne1 )7) of the compla nt0 15. %hat on June 28, 15>6, the &&& Adm n strator, Mr. # lberto %eodoro, 9rote the follo9 ng reply letter /Anne1 )>) of the Ans9er0 to defendant DD"DN$!A, to 9 t? %h s has reference to your letter dated June 15, 15>> rene9 ng your offer to sell your property located at Montalban, " Aal conta n ng an area of <00 hectares at +4.00 per s=uare meter. +lease be nformed that the sa d letter 9as subm tted for the cons derat on of the &oc al &ecur ty 'omm ss on at ts last meet ng on June 20, 15>6 and pursuant to ts "esolut on No. ><>, current ser es, t dec ded that the &ystem re terate ts counter@offer for +<.28 per s=uare meter sub-ect to a favorable appra sal report by a reputable appra sal ent ty as regards part cularly to pr ce and hous ng pro-ect feas b l ty. &hould th s counter@offer be acceptable to you, F ndly so nd cate by s gn ng hereunder your conform ty thereon. %rust ng that the forego ng suff c ently adv ses you on the matter, $ rema n Cery truly yours, #$!EE"%D %EDDD"D Adm n strator 'DN7D"ME? ( th cond t on that the sale 9 ll be consummated 9 th n %9enty /200 days from th s date. A!7DN&D DD"DN$!A "eturned and rece ved the or g nal by June 28M>6 Admtr)s Dff ce 20. %hat on June 22, 15>6, the &oc al &ecur ty 'omm ss on passed "esolut on No. >>2 author A ng the %oples N Bard ng /7ar East0 to conduct an appra sal of the

property of defendant DD"DN$!A and to subm t a report thereon. /&ee Anne1 )7) of the compla nt0 21. %hat on July 12, 15>6, the &oc al &ecur ty 'omm ss on taF ng note of the report of %oples N Bard ng /7ar East0, passed "esolut on No. 2<>, approv ng the purchase of the <00 hectare land of defendant DD"DN$!A, at the pr ce of +<.28 per s=uare meter, for a total purchase pr ce of N$NE M$!!$DN &ECEN B3ND"ED 7$7%H %BD3&AND +E&D& /+5,280,000.000, and appropr at ng the sa d amount of money for the purpose. /&ee Anne1 )7) of the compla nt0. 22. %hat on July <0, 15>6, defendant DD"DN$!A e1ecuted the deed of absolute sale /Anne1 ,', of the compla nt0 over h s <00@hectare land, s tuated n Montalban, " Aal, covered by %'% Nos. 22011, 2201<, 21>242 /formerly %'% No. 11>><10 and 21>280 /formerly %'% No. 220120, n favor of the &oc al &ecur ty &ystem, for the total purchase pr ce of N$NE M$!!$DN &ECEN B3ND"ED 7$7%H %BD3&AND +E&D& /+5,280,000.000, +h l pp ne currency, 9h ch deed of sale 9as presented for reg strat on n the Dff ce of the "eg ster of Deeds of 7 scal on August 21, 15>6. 2<. %hat defendant DD"DN$!A had rece ved the full purchase pr ce of N$NE M$!!$DN &ECEN B3ND"ED 7$7%H %BD3&AND +E&D& /+5,280,000.000, +h l pp ne 'urrency, n t9o nstallments. 24. %hat on &eptember 12, 15>6, pla nt ff presented h s &%A%EMEN% D7 A''D3N%, dated &eptember 1>, 15>6 /Gero1 copy of 9h ch s attached hereto and marFed as Anne1 pla nt ff) to defendant DD"DN$!A for the payment of h s profess onal serv ces as real estate broFer n the amount of +1,<60,000.00, as computed on the bas s of the letter@agreement, Anne1 ,A, of the compla nt, 9h ch defendant fa led to pay. Man la, for UueAon ' ty, January 16,15>6. "espectfully subm tted? '"$&+$N D. EA$LA& N A&&D'$A%E& and A.N. ED!$NAD, J". Ey? /&gd.0 'ounsel for the pla nt ff &u te <08, &hurdutEldg. $ntramuros, Man la

/&gd.0 E. C. Dbon Atty. E3#EN$D C. DEDN 'ounsel for the defendant 5 (est +o nt &treet UueAon ' ty A!7DN&D DD"DN$!A 'ounsel for the defendant 426 +laAa de 7erguson Erm ta, Man la
3

%he tr al court rendered ts dec s on dated December 12, 15>5, the n t at ve part of 9h ch reads? (BE"E7D"E, -udgment s hereby rendered n favor of pla nt ff, order ng defendant Alfonso Doron la, under the f rst cause of act on, to pay to pla nt ff the sum of +1,<60,000.00 9 th nterest thereon at the rate of >R per annum from &eptember 2<, 15>6 unt l fully pa dI and under the second 'ause of Act on, to pay pla nt ff the sum of +200,000.00 as moral damagesI the sum of +100,000.00 as e1emplary damagesI the sum of +180,000.00 as attorney)s fees, nclud ng the e1penses of. l t gat on and costs of th s su t. %he 9r t of prel m nary n-unct on ssued n th s case s hereby made permanentI and the defendant +h l pp ne Nat onal EanF s hereby ordered to pay to the pla nt ff the amount of +1,<60,000.00 and nterest on the +1,<60,000.00 to be computed separately out of the +2,000,000.00 9h ch t presently holds under a f 1ed t me depos t. &D D"DE"ED. December 12, 15>5, UueAon ' ty, +h l pp nes. /&#D.0 !D3"DE& +. &AN D$E#D Judge
4

%he defendant appealed to the 'ourt of Appeals 9here the appeal 9as docFeted as 'A@#.". No. 48524@". $n a dec s on promulgated on &eptember 15, 1524, the 'ourt of Appeals reversed the der s on of the tr al court and d sm ssed the compla nt because? $n any event, s nce t has been found that the author ty of appellee e1p red on June 2, 15>6, rather than June 12, 15>6 as the lo9er court op ned, the n=u ry 9ould be 9hether up to that t me, a 9r tten offer 9as made by appellee n behalf of the &&&. %he st pulat on s clear on th s po nt. %here should be a 9r tten offer

by the prospect ve buyer or by appellee for or n the r behalf, and that f no such 9r tten offer s made unt l the last day of the author Aat on, the opt on and author ty shall e1p re and become null and vo d. Note that the emphas s s placed on the need of a 9r tten offer to save the author ty from an automat c term nat on on the last day of the author Aat on. (e note such emphas s 9 th spec al s gn f cance n rece ve of the cond t on relat ve to automat c e1tens on of not more than 18 days f negot at ons have been started. %he =uest on then s 9hen are negot at ons deemed started $n the l ght of the prov s ons -ust c ted, t should be 9hen a response s g ven by the prospect ve buyer sho9 ng f ts nterest to buy the property 9hen an offer s made by the seller or broFer and maFe an offer of the pr ce. &tr ctly, therefore, pr or to May 25, 15>6, there 9ere no negot at ons yet started 9 th n contemplat on of the letter@agreement of broFerage /E1h. A0. Nevertheless appellant e1tended appellee)s e1clus ve author ty to on May 16, 15>6 /par. 10, &t pulat on of 7actsI ".A. p. 650, 9h ch 9as automat cally e1tended by 18 days under the r agreement, to e1p re on June 2, 15>6, f the per od e1tended up to May 16, 15>6 a necessary author ty. 7or, t may even be cons dered as taF ng the of the 18@days automat c e1tens on, s nce appellee)s pretens on s that negot at ons have been started 9 th n the or g nal per od of >0 days. Appellant n f 1 ng the e1p ry date on June 2, 15>6, has thus made a l beral concess on n favor of appellee, 9hen he chose not to the e1tens on up to May 16, 15>6 as the automat c e1tens on 9h ch ougth to have been no more than 18 days, but 9h ch he stretched t9 ce as long. ; %he pet t oner ass gned the follo9 ng errors? $ %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N 'DN'!3D$N# %BA% +E%$%$DNE" (A& ND% %BE E77$'$EN% +"D'3"$N# 'A3&E $N E"$N# AED3% %BE &A!E D7 +"$CA%E "E&+DNDEN% DD"DN$!A)& !AND %D %BE &&&. $$ %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N 'DN'!3D$N# %BA% %BE"E (A& 7A$!3"E DN %BE +A"% D7 BE"E$N +E%$%$DNE" %D 'DM+!H ($%B %BE %E"M& AND 'DND$%$DN& D7 B$& 'DN%"A'% ($%B +"$CA%E "E&+DNDEN%. $$$ %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N 'DN'!3D$N# %BA% +E%$%$DNE" $& ND% EN%$%!ED %D B$& 'DMM$&&$DN. $C %BE "E&+DNDEN% 'D3"% D7 A++EA!& E""ED $N A(A"D$N# A%%D"NEH)& 7EE& %D +"$CA%E "E&+DNDEN% DD"DN$!A $N&%EAD D7 A77$"M$N# %BE A(A"D D7 MD"A! AND EGEM+!A"H DAMA#E& A& (E!! As A%%D"NEH 7EE& %D +E%$%$DNE". 2

%he 'ourt n ts "esolut on of May 2<, 1528 or g nally den ed the pet t on for lacF of mer t but upon pet t oner)s mot on for recons derat on and supplemental pet t on nvoF ng e=u ty, resolved n ts "esolut on of August 20, 1528 to g ve due course thereto. 7rom the st pulat on of facts and the ev dence of record, t s clear that the offer of defendant Doron la to sell the <00 hectares of land n =uest on to the &oc al &ecur ty &ystem 9as formally accepted by the &ystem only on June 20, 15>6 after the e1clus ve author ty, E1h b t A, n favor of the pla nt ff, pet t oner here n, had e1p red. %he respondent court)s factual f nd ngs that pet t oner 9as not the eff c ent procur ng cause n br ng ng about the sale proceed ng from the fact of e1p rat on of h s e1clus ve author ty0 9h ch are adm ttedly f nal for purposes of the present pet t on, prov de no bas s la9 to grant rel ef to pet t oner. %he follo9 ng pert nent e1cerpts from respondent court)s e1tens ve dec s on amply demonstrate th s? $t s noted, ho9ever, that even n h s br ef, 9hen he sa d O Accord ng to the test mony of the pla nt ff@appellee a fe9 days before May 25, 15>6, he arranged 9 th Mr. # lberto %eodoro, &&& Adm n strator, a meet ng 9 th the defendant Man la. Be talFed 9 th Mr. %eodoro over the telephone and f 1ed the date of the meet ng 9 th defendant@appellant Doron la for May 25, 15>6, and that he 9as spec f cally re=uested by Mr. %eodoro not to be present at the meet ng, as he, %eodoro, 9anted to deal d rectly 9 th the defendant@appellant alone. /%sn., pp. 444>, March 1, 15>50. 7 nd ng noth ng 9rong 9 th such a re=uest, as the sale could be caused d rectly or nd rectly /E1h. )A)0, and bel ev ng that as a broFer all that he needed to do to be ent tled to h s comm ss on 9as to br ng about a meet ng bet9een the buyer and the seller as to r pen nto a sale, pla nt ff@appellee read ly acceded to the re=uest. appellee s not categor cal that t 9as through h s efforts that the meet ng tooF place on nlay 25, 15>6. Be refers to a telephone call he made ,a fe9 days before May 25, 15>6,, but n the conversat on he had 9 th Mr. %eodoro, the latter re=uested h m not to be present n the meet ng. 7rom these facts, t s man fest that the &&& off c als never 9anted to be n any 9ay gu ded by, or other9 se sub-ect to, the med at on or ntervent on of, appellee relat ve to the negot at on for the purchase of the property. $t s thus more reasonable to conclude that f a meet ng 9as held on May 25, 15>6, t 9as done ndependently, and not by v rtue of, appellee)s 9 sh or efforts to hold such meet ng. 0 111 111 111 ... $t s even doubtful f he tr ed to maFe any arrangement for meet ng at all, because on May 16, 15>6, he told appellant? ... 9e hereby maFe a f rm offer, for and n behalf of our buyer, to purchase sa d property at the pr ce of 7our +esos and 7 fty 'entavos /+4.800 per s=uare meter ....

As th s offer s ev dently made n behalf of buyer other than the &&& 9h ch had never offered the pr ce of +4.80 per s=uare meter, appellee could not have at the same t me arranged a meet ng bet9een the &&& off c als and appellant 9 th a v e9 to consummat ng the sale n favor of the &&& 9h ch had made an offer of only +&.28 per s=. m. and thus lose the much b gger prof t he 9ould real Ae 9 th a h gher pr ce of +4.80 per s=. meter. %h s )f rm offer) of +4.80 per s=. m. made by appellee betrayed h s lacF of any eff c ent ntervent on n the negot at ons 9 th the &&& for the purchase by t of appellant)s property ... 1 111 111 111 ... %h s becomes more ev dent 9hen t s cons dered that on May >, 15>6 he 9as maF ng h s f rst offer to sell the property at +>.00 per s=. m. to the &&& to 9h ch offer he rece ved no ans9er. $t s th s cold nd fference of the &&& to h m that must have prompted h m to looF for other buyers, result ng n h s maF ng the f rm offer of 214.80 per s=. m. on May 16, 15>6, a fact 9h ch only goes to sho9 that for be ng gnored by the &&&, he gave up all effort to deal 9 th the &&&. ... = 111 111 111 ... 7or h m to cla m that t 9as he 9ho aroused the nterest of the &&& n buy ng appellant)s property s to gnore the fact that as early as June, /July0 15>2, the &&& had d rectly dealt 9 th appellant to such an e1tent that the pr ce of +<.28 as offered by the &&& 9as accepted by appellant, the latter mpos ng only the cond t on that the pr ce should be pa d n cash, and 9 th n <0 days from the date of the acceptance. $t can truly be sa d then that the nterest of &&& to ac=u re the property had been suff c ently aroused for there to be any need for appellee to st mulate t further. Appellee should Fno9 th s fact for accord ng to h m, the 10@ day grace per od 9as agreed upon to g ve the &&& a chance to pay the pr ce of the land at +<.28 per s=. m., as a ,comprom se, to appellant)s ns stence that the &&& be e1cluded from appellee)s opt on or author ty to sell the land. < ... %here should be a 9r tten offer by the prospect ve buyer or by appellee for or n the r behalf, and that f no such 9r tten offer s made unt l the last day of the author Aat on, the opt on and author ty shall e1p red and become null and vo d. ... Het, no such 9r tten offer 9as made. ... 1. $n equity, ho9ever, the 'ourt notes that pet t oner had Monthly taFen steps to br ng bacF together respondent Doron la and the &&&, among 9h ch may be ment oned the follo9 ng? $n July, 15>2, pr or to 7ebruary 14, 15>6, respondent Doron la had offered to sell the land n =uest on to the &oc al &ecur ty &ystem D rect negot at ons 9ere made by Doron la 9 th the &&&. %he &&& d d not then accept the offer of Doron la. %hereafter, Doron la e1ecuted the e1clus ve author ty n favor of pet t oner +rats on 7ebruary 14, 15>6. +rats commun cated 9 th the Dff ce of the +res dent al Bous ng 'omm ss on on 7ebruary 2<, 15>6 offer ng the Doron la property. +rats 9rote a follo9@up letter on Apr l s, 15>6 9h ch 9as ans9ered by the 'omm ss on 9 th the suggest on

that the property be offered d rectly to the &&&. +rats 9rote the &&& on March 1>, 15>6, nv t ng 'ha rman "amon #av ola, Jr. to d scuss the offer of the sale of the property n =uest on to the &&&. Dn May >, 15>6, +rats made a formal 9r tten offer to the &oc al &ecur ty &ystem to self the <00 hectare land of Doron la at the pr ce of +>.00 per s=uare meter. Doron la rece ved on May 12, 15>6 from the &&& Adm n strator a telegram that the &&& 9as cons der ng the purchase of Doron las property for ts hous ng pro-ect. +rats and h s 9 tness "aagas test f ed that +rats had several d nner and lunch meet ngs 9 th Doron la andMor h s nephe9, Atty. Manuel D. Asenc o, regard ng the progress of the negot at ons 9 th the &&&. Atty. Asenc o had declared that he and h s uncle, Alfonso Doron la, 9ere nv ted several t mes by +rats, somet mes to luncheons and somet mes to d nner. Dn a &unday, June 2, 15>6, +rats and "aagas had luncheon n &ulu Botel n UueAon ' ty and they 9ere -o ned later by 'ha rman #av ola of the &&&. %he 'ourt has noted on the other hand that Doron la f nally sold the property to the &oc al &ecur ty &ystem at +<.28 per s=uare meter 9h ch 9as the very same pr ce counter@offered by the &oc al &ecur ty &ystem and accepted by h m n July, 15>2 9hen he alone 9as deal ng e1clus vely 9 th the sa d buyer long before +rats came nto the p cture but that on the other hand +rats) efforts someho9 9ere nstrumental n br ng ng them together aga n and f nally consummat ng the transact on at the same pr ce of +<.28 s=uare meter, although such f nal Aat on 9as after the e1p rat on of +rats) e1tended e1clus ve author ty. &t ll such pr ce 9as h gher than that st pulated n the e1clus ve author ty granted by Doron la to +rats. 3nder the c rcumstances, the 'ourt grants n e=u ty the sum of Dne Bundred %housand +esos /+100,000.000 by 9ay of compensat on for h s efforts and ass stance n the transact on, 9h ch ho9ever 9as f nal Aed and consummated after the e1p rat on of h s e1clus ve author ty and sets as de the +10,000.00 O attorneys) fees a9ard ad-udged aga nst h m by respondent court. (BE"E7D"E, the der s on appealed from s hereby aff rmed, 9 th the mod f cat on that pr vate respondent Alfonso Doron la n e=u ty s ordered to pay pet t oner or h s he rs the amount of Dne Bundred %housand +esos /+100,000.000 and that the port on of the sa d dec s on sell pet t oner +rats to pay respondent Doron la attorneys) fees n the sum of +10,000.00 s set as de. %he l ft ng of the n-unct on ssued by the lo9er court on the +2,000,000.00 cash depos t of respondent Doron la as ordered by respondent court s hereby 9 th the e1cept on of the sum of Dne Bundred %housand +esos /+100,000.000 9h ch s ordered segregated therefrom to sat sfy the a9ard here n g ven to pet t oner, the l ft ng of sa d n-unct on, as here n ordered, s mmed ately e1ecutory upon promulgat on hereof. No pronouncement as to costs. 7eehan'ee (.hairman*, Ma'asiar, Mu>oz $alma and 2uerrero 99., concur.

:ootnotes 1 "ollo pp. 110@111, %he dec s on 9as 9r tten by -ust ce +ac f co +. de 'astro and concurred n by Just ce #u llermo &. &antos and Just ce Jose '. Eaut sta. 2 "ecord on Appeal, pp. 2>@102, "ollo, p. 82. < "ecord on Appeal, pp. 16<@164, "ollo, p. 82. 4 "ollo, pp. 146@100. 8 Er ef for +et t oner. pp. 26@55, "ollo, p. <82. > +p. <8@<>, 'ourt of Appeals dec s on. 2 +p. <>@<2, $b d. 6 +p. <2, :#id. 5 +p. <5, :#id. 10 +p. 40@41, :#id, "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. <;124. April 1, 1<<4. MAND%D* E"D%BE"&, $N'., pet t oner, vs. %BE BDND"AE!E 'D3"% D7 A++EA!&, %BE BDND"AE!E J3D#E D7 %BE "E#$DNA! %"$A! 'D3"% D7 MAN$!A /Eranch C$0, and &A!CADD" &A!$#3MEA, respondents. Anton o '. "avelo for pet t oner. "em g o M. %r n dad for pr vate respondent. &H!!AE3& 1. '$C$! !A(I A#EN'HI A#EN%)& 'DMM$&&$DNI (BEN EN%$%!ED) "3!EI A++!$'A%$DN $N 'A&E A% EA". O $n an earl er case, th s 'ourt ruled that 9hen there s a close, pro1 mate and causal connect on bet9een the agent)s efforts and labor and the pr nc pal)s sale of h s property, the agent s ent tled to a comm ss on. (e agree 9 th respondent 'ourt that the ' ty of Man la ult mately became the purchaser of pet t oner)s property ma nly through the efforts of

pr vate respondent. ( thout d scount ng the fact that 9hen Mun c pal Drd nance No. >>0< 9as s gned by the ' ty Mayor on May 12, 15>6, pr vate respondent)s author ty had already e1p red, t s to be noted that the ord nance 9as approved on Apr l 2>, 15>6 9hen pr vate respondent)s author Aat on 9as st ll n force. Moreover, the approval by the ' ty Mayor came only three days after the e1p rat on of pr vate respondent)s author ty. $t s also 9orth emphas A ng that from the records, the only party g ven a 9r tten author ty by pet t oner to negot ate the sale from July 8, 15>> to May 14, 15>6 9as pr vate respondent. DE'$&$DN 'AM+D&, J"., J p? +et t oner ManotoF Erothers., $nc., by 9ay of the nstant +et t on docFeted as #.". No. 5428< sought rel ef from th s 'ourt)s "esolut on dated May <, 1565, 9h ch reads? ,#.". No. 26656 /ManotoF Erothers, $nc. vs. &alvador &al gumba and 'ourt of Appeals0. O 'ons der ng the man festat on of compl ance by counsel for pet t oner dated Apr l 14, 1565 9 th the resolut on of March 1<, 1565 9h ch re=u red the pet t oner to locate pr vate respondent and to nform th s 'ourt of the present address of sa d pr vate respondent, the 'ourt "esolved to D$&M$&& th s case, as the ssues cannot be -o ned as pr vate respondent)s and counsel)s addresses cannot be furn shed by the pet t oner to th s court., 1 $n add t on, pet t oner prayed for the ssuance of a prel m nary n-unct on to prevent rreparable n-ury to tself pend ng resolut on by th s 'ourt of ts cause. +et t oner l Fe9 se urged th s 'ourt to hold n contempt pr vate respondent for allegedly adopt ng s n ster ploy to depr ve pet t oner of ts const tut onal r ght to due process. Act ng on sa d +et t on, th s 'ourt n a "esolut on 2 dated Dctober 1, 1550 set as de the entry of -udgment made on May <, 1565 n case #.". No. 26656I adm tted the amended pet t onI and ssued a temporary restra n ng order to restra n the e1ecut on of the -udgment appealed from. %he amended pet t on < adm tted, by th s 'ourt sought rel ef from th s 'ourt)s "esolut on above=uoted. $n the alternat ve, pet t oner begged leave of court to re@f le ts +et t on for 'ert orar 4 /#.". No. 266560 grounded on the allegat on that pet t oner 9as depr ved of ts opportun ty to be heard. %he facts as found by the appellate court, revealed that pet t oner here n /then defendant@appellant0 s the o9ner of a certa n parcel of land and bu ld ng 9h ch 9ere formerly leased by the ' ty of Man la and used by the 'laro M. "ecto B gh &chool, at M.7. Jhocson &treet, &ampaloc Man la. Ey means of a letter 8 dated July 8, 15>>, pet t oner author Aed here n pr vate respondent &alvador &al gumba to negot ate 9 th the ' ty of Man la the sale of the aforement oned property for not less than +428,000.00. $n the same 9r t ng,

pet t oner agreed to pay pr vate respondent a f ve percent /8R0 comm ss on n the event the sale s f nally consummated and pa d. +et t oner, on March 4, 15>2, e1ecuted another letter > e1tend ng the author ty of pr vate respondent for 120 days. %hereafter, another e1tens on 9as granted to h m for 120 more days, as ev denced by another letter 2 dated June 2>, 15>2. 7 nally, through another letter 6 dated November 1>, 15>2, the corporat on 9 th "uf no ManotoF, ts +res dent, as s gnatory, author Aed pr vate respondent to f nal Ae and consummate the sale of the property to the ' ty of Man la for not less than +410,000.00. ( th th s letter came another e1tens on of 160 days. %he Mun c pal Eoard of the ' ty of Man la eventually, on Apr l 2>, 15>6, passed Drd nance No. >>0<, appropr at ng the sum of +410,61>.00 for the purchase of the property 9h ch pr vate respondent 9as author Aed to sell. &a d ord nance ho9ever, 9as s gned by the ' ty Mayor only on May 12, 15>6, one hundred e ghty three /16<0 days after the last letter of author Aat on. Dn January 14, 15>5, the part es s gned the deed of sale of the sub-ect property. %he n t al payment of +200,000.00 hav ng been made, the purchase pr ce 9as fully sat sf ed 9 th a second payment on Apr l 6, 15>5 by a checF n the amount of +210,61>.00. Not9 thstand ng the real Aat on of the sale, pr vate respondent never rece ved any comm ss on, 9h ch should have amounted to +20,884.80. %h s 9as due to the refusal of pet t oner to pay pr vate respondent sa d amount as the former does not recogn Ae the latter)s role as agent n the transact on. 'onse=uently, on June 25, 15>5, pr vate respondent f led a compla nt aga nst pet t oner, alleg ng that he had successfully negot ated the sale of the property. Be cla med that t 9as because of h s efforts that the Mun c pal Eoard of Man la passed Drd nance No. >>0< 9h ch appropr ated the sum for the payment of the property sub-ect of the sale. +et t oner cla med other9 se. $t den ed the cla m of pr vate respondent on the follo9 ng grounds? /10 pr vate respondent 9ould be ent tled to a comm ss on only f the sale 9as consummated and the pr ce pa d 9 th n the per od g ven n the respect ve letters of author tyI and /20 pr vate respondent 9as not the person respons ble for the negot at on and consummat on of the sale, nstead t 9as 7 lomeno E. Buelgas, the +%A pres dent for 15>2@15>6 of the 'laro M. "ecto B gh &chool. As a countercla m, pet t oner /then defendant@appellant0 demanded the sum of +4,000.00 as attorney)s fees and for moral damages. %hereafter, tr al ensued. +r vate respondent, then pla nt ff, test f ed as to the efforts undertaFen by h m to ensure the consummat on of the sale. Be recounted that t f rst began at a meet ng 9 th "uf no ManotoF at the off ce of 7ructuoso Ancheta, pr nc pal of '.M. "ecto B gh &chool. Atty. Dom nador E sbal, then pres dent of the +%A, 9as also present. %he meet ng 9as set prec sely to asF pr vate respondent to negot ate the sale of the school lot and bu ld ng to the ' ty of Man la. +r vate respondent then 9ent to 'ounc lor Mar ano Magsal n, the

author of the Drd nance 9h ch appropr ated the money for the purchase of sa d property, to present the pro-ect. Be also 9ent to the Assessor)s Dff ce for appra sal of the value of the property. (h le these transp red and h s letters of author ty e1p red, "uf no ManotoF al9ays rene9ed the former)s author Aat on unt l the last 9as g ven, 9h ch 9as to rema n n force unt l May 14, 15>6. After secur ng the report of the appra sal comm ttee, he 9ent to the ' ty Mayor)s Dff ce, 9h ch ndorsed the matter to the &uper ntendent of ' ty &chools of Man la. %he latter off ce approved the report and so pr vate respondent 9ent bacF to the ' ty Mayor)s Dff ce, 9h ch thereafter ndorsed the same to the Mun c pal Eoard for appropr at on. &ubse=uently, on Apr l 2>, 15>6, Drd nance No. >>0< 9as passed by the Mun c pal Eoard for the appropr at on of the sum correspond ng to the purchase pr ce. +et t oner rece ved the full payment of the purchase pr ce, but pr vate respondent d d not rece ve a s ngle centavo as comm ss on. 7ructuoso Ancheta and Atty. Dom nador E sbal both test f ed acFno9ledg ng the author ty of pr vate respondent regard ng the transact on. +et t oner presented as ts 9 tnesses 7 lomeno Buelgas and the pet t oner)s +res dent, "uf no ManotoF. Buelgas test f ed to the effect that after be ng nducted as +%A pres dent n August, 15>2 he follo9ed up the sale from the start 9 th 'ounc lor Magsal n unt l after t 9as approved by the Mayor on May 12, 15>6. Be. also sa d that he came to Fno9 "uf no ManotoF only n August, 15>6, at 9h ch meet ng the latter told h m that he 9ould be g ven a ,grat f cat on, n the amount of +20,000.00 f the sale 9as e1ped ted. "uf no ManotoF conf rmed that he Fne9 Buelgas and that there 9as an agreement bet9een the t9o of them regard ng the ,grat f cat on,. Dn rebuttal, Atty. E sbal sa d that Buelgas 9as present n the +%A meet ngs from 15>8 to 15>2 but he never offered to help n the ac=u s t on of sa d property. Moreover, he test f ed that Buelgas 9as a9are of the fact that t 9as pr vate respondent 9ho 9as negot at ng the sale of the sub-ect property. %hereafter, the then 'ourt of 7 rst $nstance /no9, "eg onal %r al 'ourt0 rendered -udgment sentenc ng pet t oner andMor "uf no ManotoF to pay unto pr vate respondent the sum of +20,840.00 by 9ay of h s comm ss on fees 9 th legal nterest thereon from the date of the f l ng of the compla nt unt l payment. %he lo9er court also ordered pet t oner to pay pr vate respondent the amount of +4,000.00 as and for attorney)s fees. 5 +et t oner appealed sa d dec s on, but to no ava l. "espondent 'ourt of Appeals aff rmed the sa d rul ng of the tr al court. 10 $ts Mot on for "econs derat on hav ng been den ed by respondent appellate court n a "esolut on dated June 22, 1562, pet t oner seasonably elevated ts case on +et t on for "ev e9 on 'ert orar on August 10, 1562 before th s 'ourt, docFeted as #.". No. 26656.

Act ng on sa d +et t on, th s 'ourt ssued a M nute "esolut on 11 dated August <1, 1562 order ng pr vate respondent to comment on sa d +et t on. $t appear ng that the abovement oned "esolut on 9as returned unserved 9 th the postmaster)s notat on ,uncla med,, th s 'ourt n another "esolut on 12 dated March 1<, 1565, re=u red pet t oner to locate pr vate respondent and to nform th s 'ourt of the present address of pr vate respondent 9 th n ten /100 days from not ce. As pet t oner 9as unsuccessful n ts efforts to locate pr vate respondent, t opted to man fest that pr vate respondent)s last address 9as the same as that address to 9h ch th s. 'ourt)s "esolut on 9as for9arded. &ubse=uently, th s 'ourt ssued a "esolut on dated May <, 1565 d sm ss ng pet t oner)s case on the ground that the ssues ra sed n the case at bar cannot be -o ned. %hus, the above@ent tled case became f nal and e1ecutory by the entry of -udgment on May <, 1565. %hereafter, on January 5, 1550 pr vate respondent f led a Mot on to E1ecute the sa d -udgment before the court of or g n. 3pon d scovery of sa d development, pet t oner ver f ed 9 th the court of or g n the c rcumstances by 9h ch pr vate respondent obta ned Fno9ledge of the resolut on of th s 'ourt. &ens ng a fraudulent scheme employed by pr vate respondent, pet t oner then nst tuted th s nstant +et t on for "el ef, on August <0, 1550. Dn &eptember 1<, 1550, sa d pet t on 9as amended to nclude, n the alternat ve, ts pet t on to re@f le ts +et t on for 'ert orar /#.". No. 266560. %he sole ssue to be addressed n th s pet t on s 9hether or not pr vate respondent s ent tled to the f ve percent /8R0 agent)s comm ss on. $t s pet t oner)s content on that as a broFer, pr vate respondent)s -ob s to br ng together the part es to a transact on. Accord ngly, f the broFer does not succeed n br ng ng the m nds of the purchaser and the vendor to an agreement 9 th respect to the sale, he s not ent tled to a comm ss on. +r vate respondent, on the other hand, opposes pet t oner)s pos t on ma nta n ng that t 9as because of h s efforts that a purchase actually mater al Aed bet9een the part es. (e rule n favor of pr vate respondent. At f rst s ght, t 9ould seem that pr vate respondent s not ent tled to any comm ss on as he 9as not successful n consummat ng the sale bet9een the part es, for the sole reason that 9hen the Deed of &ale 9as f nally e1ecuted, h s e1tended author ty had already e1p red. Ey th s alone, one m ght be m sled to bel eve that th s case s=uarely falls 9 th n the amb t of the establ shed pr nc ple that a broFer or agent s not ent tled to any comm ss on unt l he has successfully done the -ob g ven to h m. 1< #o ng deeper ho9ever nto the case 9ould reveal that t s 9 th n the coverage of the e1cept on rather than of the general rule, the e1cept on be ng that enunc ated n the case of +rats vs. 'ourt of Appeals. 14 $n the sa d case, th s

'ourt ruled n favor of cla mant@agent, desp te the e1p rat on of h s author ty, 9hen a sale 9as f nally consummated. $n ts dec s on n the abovec ted case, th s 'ourt sa d, that 9h le t 9as respondent court)s /referr ng to the 'ourt of Appeals0 factual f nd ngs that pet t oner +rats /cla mant@agent0 9as not the eff c ent procur ng cause n br ng ng about the sale /presc nd ng from the fact of e1p rat on of h s e1clus ve author ty0, st ll pet t oner 9as a9arded compensat on for h s serv ces. And (e =uote? ,$n e=u ty, ho9ever, the 'ourt notes that pet t oner had d l gently taFen steps to br ng bacF together respondent Doron la and the &&&,. 111 111 111 %he court has noted on the other hand that Doron la f nally sold the property to the &oc al &ecur ty &ystem at +<.28 per s=uare meter 9h ch 9as the very same pr ce counter@offered by the &oc al &ecur ty &ystem and accepted by h m n July, 15>2 9hen he alone 9as deal ng e1clus vely 9 th the sa d buyer long before +rats came nto the p cture but that on the other hand +rats) efforts someho9 9ere nstrumental n br ng ng them together aga n and f nally consummat ng the transact on at the same pr ce of +<.28 per s=uare meter, although such f nal Aat on 9as after the e1p rat on of +rats) e1tended e1clus ve author ty. 111 111 111 3nder the c rcumstances, the 'ourt grants n e=u ty the sum of Dne hundred %housand +esos /+100,000.000 by 9ay of compensat on for h s efforts and ass stance n the transact on, 9h ch ho9ever 9as f nal Aed and consummated after the e1p rat on of h s e1clus ve author ty . . ., 18 /Emphas s suppl ed.0. 7rom the forego ng, t follo9s then that pr vate respondent here n, 9 th more reason, should be pa d h s comm ss on, (h le n +rats vs. 'ourt of Appeals, the agent 9as not even the eff c ent procur ng cause n br ng ng about the sale, unl Fe n the case at bar, t 9as st ll held there n that the agent 9as ent tled to compensat on. $n the case at bar, pr vate respondent s the eff c ent procur ng cause for 9 thout h s efforts, the mun c pal ty 9ould not have anyth ng to pass and the Mayor 9ould not have anyth ng to approve. $n an earl er case, 1> th s 'ourt ruled that 9hen there s a close, pro1 mate and causal connect on bet9een the agent)s efforts and labor and the pr nc pal)s sale of h s property, the agent s ent tled to a comm ss on. (e agree 9 th respondent 'ourt that the ' ty of Man la ult mately became the purchaser of pet t oner)s property ma nly through the efforts of pr vate respondent. ( thout d scount ng the fact that 9hen Mun c pal Drd nance No. >>0< 9as s gned by the ' ty Mayor on May 12, 15>6, pr vate respondent)s author ty had already e1p red, t s to be noted that the ord nance 9as approved on Apr l 2>, 15>6 9hen pr vate respondent)s author Aat on 9as st ll n force. Moreover, the approval by the ' ty Mayor came only three days after the

e1p rat on of pr vate respondent)s author ty. $t s also 9orth emphas A ng that from the records, the only party g ven a 9r tten author ty by pet t oner to negot ate the sale from July 8, 15>> to May 14, 15>6 9as pr vate respondent. 'ontrary to 9hat pet t oner advances, the case of Danon vs. Er mo, 12 on 9h ch t heav ly anchors ts -ust f cat on for the den al of pr vate respondent)s cla m, does not apply s=uarely to the nstant pet t on. 'la mant@agent n sa d case fully comprehended the poss b l ty that he may not real Ae the agent)s comm ss on as he 9as nformed that another agent 9as also negot at ng the sale and thus, compensat on 9 ll perta n to the one 9ho f nds a purchaser and eventually effects the sale. &uch s not the case here n. Dn the contrary, pr vate respondent pursued 9 th h s goal of see ng that the part es reach an agreement, on the bel ef that he alone 9as transact ng the bus ness 9 th the ' ty #overnment as th s 9as 9hat pet t oner made t to appear. (h le t may be true that 7 lomeno Buelgas follo9ed up the matter 9 th 'ounc lor Magsal n, the author of Mun c pal Drd nance No. >>0< and Mayor C llegas, h s ntervent on regard ng the purchase came only after the ord nance had already been passed O 9hen the buyer has already agreed to the purchase and to the pr ce for 9h ch sa d property s to be pa d. ( thout the efforts of pr vate respondent then, Mayor C llegas 9ould have noth ng to approve n the f rst place. $t 9as actually pr vate respondent)s labor that had set n mot on the ntervent on of the th rd party that produced the sale, hence he should be amply compensated. (BE"E7D"E, n the l ght of the forego ng and f nd ng no revers ble error comm tted by respondent 'ourt, the dec s on of the 'ourt of Appeals s hereby A77$"MED. %he temporary restra n ng order ssued by th s 'ourt n ts "esolut on dated Dctober 1, 1550 s hereby l fted. &D D"DE"ED. Narvasa, ' .J ., +ad lla, "egalado and Nocon, JJ ., concur. 7ootnotes 1. "ollo of #.". No. 5428<, p. 12. 2. $b d., p. 22. <. $b d., p. 42. 4. "ollo of #.". No. 26656, p. 12. 8. &upra, note 1 at p. 18>. >. $b d., p. 1>0. 2. $b d., p. 1>1. 6. $b d., p. 1>2.

5. Dec s on rendered by then 'ourt of $nstance, Eranch C$, Man la n ' v l 'ase No. 2>552, "ollo, pp. 1<@16. 10. +enned by Assoc ate Just ce C cente C. MendoAa and concurred n by Assoc ate Just ces Manuel '. Berrera and Jorge &. $mper al. "ollo, pp. 15@26. 11. &upra, note 4 at p. >2. 12. $b d., p. >5. 1<. "amos vs. 'ourt of Appeals, >< &'"A <<1 /15280. 14. 61 &'"A <>0 /15260. 18. $b d., pp. <6<@<68. 1>. "eyes vs. Manaoat, et al., 6 '.A. "ep. 2d <>6 /15>80. 12. 42 +h l. 1<< /15210. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #74.214 /cto er 3<, 1<11 *)%EN(E '. !/')NG/, represented y -is -eirs, AN(/N)NA $A8'&N!/ *!A. !E !/')NG/, $)%A$!/, %ESA$, A'E#)A, *)%EN(E J$., SA#*A!/$, )$ENE and J/SE#)(/, all surnamed !/')NG/, pet t oners@appellants, vs. G$EG/$)/ '. !/')NG/, respondent@appellee, (E/:)#/ +. +&$)S)'A, ntervenor@respondent. 7eofilo %eonin for petitioners<appellants. =sorio, =sorio & =sorio for respondent<appellee. 7eofilo $. $urisima in his o&n #ehalf as intervenor<respondent.

'AKAS)A$, J.: +et t oner@appellant C cente M. Dom ngo, no9 deceased and represented by h s he rs, Anton na "aymundo vda. de Dom ngo, " cardo, 'esar, Amel a, C cente Jr., &alvac on, $rene and Josel to, all surnamed Dom ngo, sought the reversal of the ma-or ty dec s on dated, March 12, 15>5 of the &pec al D v s on of 7 ve of the 'ourt of Appeals aff rm ng the -udgment of the tr al court, 9h ch sentenced the sa d C cente M. Dom ngo to pay #regor o M. Dom ngo +2,<02.80 and the

ntervenor %eof lo +. +ur s ma +2,>02.80 9 th nterest on both amounts from the date of the f l ng of the compla nt, to pay #regor o Dom ngo +1,000.00 as moral and e1emplary damages and +800.00 as attorney)s fees plus costs. %he follo9 ng facts 9ere found to be establ shed by the ma-or ty of the &pec al D v s on of 7 ve of the 'ourt of Appeals? $n a document E1h b t ,A, e1ecuted on June 2, 158>, C cente M. Dom ngo granted #regor o Dom ngo, a real estate broFer, the e1clus ve agency to sell h s lot No. 66< of + edad Estate 9 th an area of about 66,422 s=uare meters at the rate of +2.00 per s=uare meter /or for +12>,584.000 9 th a comm ss on of 8R on the total pr ce, f the property s sold by C cente or by anyone else dur ng the <0@ day durat on of the agency or f the property s sold by C cente 9 th n three months from the term nat on of the agency to apurchaser to 9hom t 9as subm tted by #regor o dur ng the cont nuance of the agency 9 th not ce to C cente. %he sa d agency contract 9as n tr pl cate, one copy 9as g ven to C cente, 9h le the or g nal and another copy 9ere reta ned by #regor o. Dn June <, 158>, #regor o author Aed the ntervenor %eof lo +. +ur s ma to looF for a buyer, prom s ng h m one@half of the 8R comm ss on. %hereafter, %eof lo +ur s ma ntroduced Dscar de !eon to #regor o as a prospect ve buyer. Dscar de !eon subm tted a 9r tten offer 9h ch 9as very much lo9er than the pr ce of +2.00 per s=uare meter /E1h b t ,E,0. C cente d rected #regor o to tell Dscar de !eon to ra se h s offer. After several conferences bet9een #regor o and Dscar de !eon, the latter ra sed h s offer to +105,000.00 on June 20, 158> as ev denced by E1h b t ,',, to 9h ch C cente agreed by s gn ng E1h b t ,',. 3pon demand of C cente, Dscar de !eon ssued to h m a checF n the amount of +1,000.00 as earnest money, after 9h ch C cente advanced to #regor o the sum of +<00.00. Dscar de !eon conf rmed h s former offer to pay for the property at +1.20 per s=uare meter n another letter, E1h b t ,D,. &ubse=uently, C cente asFed for an add t onal amount of +1,000.00 as earnest money, 9h ch Dscar de !eon prom sed to del ver to h m. %hereafter, E1h b t ,', 9as amended to the effect that Dscar de !eon 9 ll vacate on or about &eptember 18, 158> h s house and lot at Denver &treet, UueAon ' ty 9h ch s part of the purchase pr ce. $t 9as aga n amended to the effect that Dscar 9 ll vacate h s house and lot on December 1, 158>, because h s 9 fe 9as on the fam ly 9ay and C cente could stay n lot No. 66< of + edad Estate unt l June 1, 1582, n a document dated June <0, 158> /the year 1582 there n s a mere typograph cal error0 and marFed E1h b t ,D,. +ursuant to h s prom se to #regor o, Dscar gave h m as a g ft or prop na the sum of Dne %housand +esos /+1,000.000 for succeed ng n persuad ng C cente to sell h s lot at +1.20 per s=uare meter or a total n round f gure of Dne Bundred N ne %housand +esos /+105,000.000. %h s g ft of Dne %housand +esos /+1,000.000 9as not d sclosed by #regor o to C cente. Ne ther d d Dscar pay C cente the add t onal amount of Dne %housand +esos /+1,000.000 by 9ay of earnest money. $n the deed of sale 9as not e1ecuted on August 1, 158> as st pulated n E1h b t ,', nor on August 18, 158> as e1tended by C cente,

Dscar told #regor o that he d d not rece ve h s money from h s brother n the 3n ted &tates, for 9h ch reason he 9as g v ng up the negot at on nclud ng the amount of Dne %housand +esos /+1,000.000 g ven as earnest money to C cente and the Dne %housand +esos /+1,000.000 g ven to #regor o as propina or g ft. (hen Dscar d d not see h m after several 9eeFs, #regor o sensed someth ng f shy. &o, he 9ent to C cente and read a port on of E1h b t ,A, marFed hab t ,A@1, to the effect that C cente 9as st ll comm tted to pay h m 8R comm ss on, f the sale s consummated 9 th n three months after the e1p rat on of the <0@day per od of the e1clus ve agency n h s favor from the e1ecut on of the agency contract on June 2, 158> to a purchaser brought by #regor o to C cente dur ng the sa d <0@day per od. C cente grabbed the or g nal of E1h b t ,A, and tore t to p eces. #regor o held h s peace, not 9ant ng to antagon Ae C cente further, because he had st ll dupl cate of E1h b t ,A,. 7rom h s meet ng 9 th C cente, #regor o proceeded to the off ce of the "eg ster of Deeds of UueAon ' ty, 9here he d scovered E1h b t ,#) deed of sale e1ecuted on &eptember 12, 158> by Amparo D aA, 9 fe of Dscar de !eon, over the r house and lot No. 40 Denver &treet, 'ubao, UueAon ' ty, n favor C cente as do9n payment by Dscar de !eon on the purchase pr ce of C cente)s lot No. 66< of + edad Estate. 3pon thus learn ng that C cente sold h s property to the same buyer, Dscar de !eon and h s 9 fe, he demanded n 9r tt ng payment of h s comm ss on on the sale pr ce of Dne Bundred N ne %housand +esos /+105,000.000, E1h b t ,B,. Be also conferred 9 th Dscar de !eon, 9ho told h m that C cente 9ent to h m and asFed h m to el m nate #regor o n the transact on and that he 9ould sell h s property to h m for Dne Bundred 7our %housand +esos /+104,000.0 $n C cente)s reply to #regor o)s letter, E1h b t ,B,, C cente stated that #regor o s not ent tled to the 8R comm ss on because he sold the property not to #regor o)s buyer, Dscar de !eon, but to another buyer, Amparo D aA, 9 fe of Dscar de !eon. %he 'ourt of Appeals found from the ev dence that E1h b t ,A,, the e1clus ve agency contract, s genu neI that Amparo D aA, the vendee, be ng the 9 fe of Dscar de !eon the sale by C cente of h s property s pract cally a sale to Dscar de !eon s nce husband and 9 fe have common or dent cal nterestsI that #regor o and ntervenor %eof lo +ur s ma 9ere the eff c ent cause n the consummat on of the sale n favor of the spouses Dscar de !eon and Amparo D aAI that Dscar de !eon pa d #regor o the sum of Dne %housand +esos /+1,000.000 as ,prop na, or g ft and not as add t onal earnest money to be g ven to the pla nt ff, because E1h b t ,>>,, C cente)s letter addressed to Dscar de !eon 9 th respect to the add t onal earnest money, does not appear to have been ans9ered by Dscar de !eon and therefore there s no 9r t ng or document support ng Dscar de !eon)s test mony that he pa d an add t onal earnest money of Dne %housand +esos /+1,000.000 to #regor o for del very to C cente, unl Fe the f rst amount of Dne %housand +esos /+1,000.000 pa d by Dscar de !eon to C cente as earnest money, ev denced by the letter E1h b t ,4,I and that C cente d d not even ment on such add t onal earnest money n h s t9o repl es E1h b ts ,$, and ,J, to #regor o)s letter of demand of the 8R comm ss on. %he three ssues n th s appeal are /10 9hether the fa lure on the part of #regor o to d sclose to C cente the payment to h m by Dscar de !eon of the amount of

Dne %housand +esos /+1,000.000 as g ft or ,prop na, for hav ng persuaded C cente to reduce the purchase pr ce from +2.00 to +1.20 per s=uare meter, so const tutes fraud as to cause a forfe ture of h s comm ss on on the sale pr ceI /20 9hether C cente or #regor o should be l able d rectly to the ntervenor %eof lo +ur s ma for the latter)s share n the e1pected comm ss on of #regor o by reason of the saleI and /<0 9hether the a9ard of legal nterest, moral and e1emplary damages, attorney)s fees and costs, 9as proper. 3nfortunately, the ma-or ty op n on penned by Just ce Ed lberto &or ano and concurred n by Just ce Juan Enr =ueA d d not touch on these ssues 9h ch 9ere e1tens vely d scussed by Just ce Magno #atma tan n h s d ssent ng op n on. Bo9ever, Just ce Esguerra, n h s concurr ng op n on, aff rmed that t does not const tute breach of trust or fraud on the part of the broFer and regarded same as merely part of the 9hole process of br ng ng about the meet ng of the m nds of the seller and the purchaser and that the comm tment from the prospect buyer that he 9ould g ve a re9ard to #regor o f he could effect better terms for h m from the seller, ndependent of h s leg t mate comm ss on, s not fraudulent, because the pr nc pal can re-ect the terms offered by the prospect ve buyer f he bel eves that such terms are onerous d sadvantageous to h m. Dn the other hand, Just ce #atma tan, 9 th 9hom Just ce Anton o 'af Aares corner held the v e9 that such an act on the part of #regor o 9as fraudulent and const tuted a breach of trust, 9h ch should depr ve h m of h s r ght to the comm ss on. %he dut es and l ab l t es of a broFer to h s employer are essent ally those 9h ch an agent o9es to h s pr nc pal. 1 'onse=uently, the dec s ve legal prov s ons are n found Art cles 1651 and 1505 of the Ne9 ' v l 'ode. Art. 1651. Every agent s bound to render an account of h s transact ons and to del ver to the pr nc pal 9hatever he may have rece ved by v rtue of the agency, even though t may not be o9 ng to the pr nc pal. Every st pulat on e1empt ng the agent from the obl gat on to render an account shall be vo d. 111 111 111 Art. 1505. %he agent s respons ble not only for fraud but also for negl gence, 9h ch shall be -udged 9 th more less r gor by the courts, accord ng to 9hether the agency 9as or 9as not for a compensat on. Art cle 1651 of the Ne9 ' v l 'ode amends Art cle 12 of the old &pan sh ' v l 'ode 9h ch prov des that? Art. 1220. Every agent s bound to g ve an account of h s transact on and to pay to the pr nc pal 9hatever he may have rece ved by v rtue of the agency, even though 9hat he has rece ved s not due to the pr nc pal.

%he mod f cat on conta ned n the f rst paragraph Art cle 1651 cons sts n chang ng the phrase ,to pay, to ,to del ver,, 9h ch latter term s more comprehens ve than the former. +aragraph 2 of Art cle 1651 s a ne9 add t on des gned to stress the h ghest loyalty that s re=u red to an agent O condemn ng as vo d any st pulat on e1empt ng the agent from the duty and l ab l ty mposed on h m n paragraph one thereof. Art cle 1505 of the Ne9 ' v l 'ode s essent ally a re nstatement of Art cle 122> of the old &pan sh ' v l 'ode 9h ch reads thus? Art. 122>. %he agent s l able not only for fraud, but also for negl gence, 9h ch shall be -udged 9 th more or less sever ty by the courts, accord ng to 9hether the agency 9as gratu tous or for a pr ce or re9ard. %he aforec ted prov s ons demand the utmost good fa th, f del ty, honesty, candor and fa rness on the part of the agent, the real estate broFer n th s case, to h s pr nc pal, the vendor. %he la9 mposes upon the agent the absolute obl gat on to maFe a full d sclosure or complete account to h s pr nc pal of all h s transact ons and other mater al facts relevant to the agency, so much so that the la9 as amended does not countenance any st pulat on e1empt ng the agent from such an obl gat on and cons ders such an e1empt on as vo d. %he duty of an agent s l Fened to that of a trustee. %h s s not a techn cal or arb trary rule but a rule founded on the h ghest and truest pr nc ple of moral ty as 9ell as of the str ctest -ust ce. 3 Bence, an agent 9ho taFes a secret prof t n the nature of a bonus, gratu ty or personal benef t from the vendee, 9 thout reveal ng the same to h s pr nc pal, the vendor, s gu lty of a breach of h s loyalty to the pr nc pal and forfe ts h s r ght to collect the comm ss on from h s pr nc pal, even f the pr nc pal does not suffer any n-ury by reason of such breach of f del ty, or that he obta ned better results or that the agency s a gratu tous one, or that usage or custom allo9s tI because the rule s to prevent the poss b l ty of any 9rong, not to remedy or repa r an actual damage. 4 Ey taF ng such prof t or bonus or g ft or prop na from the vendee, the agent thereby assumes a pos t on 9holly ncons stent 9 th that of be ng an agent for h spr nc pal, 9ho has a r ght to treat h m, nsofar as h s comm ss on s concerned, as f no agency had e1 sted. %he fact that the pr nc pal may have been benef ted by the valuable serv ces of the sa d agent does not e1culpate the agent 9ho has only h mself to blame for such a result by reason of h s treachery or perf dy. %h s 'ourt has been cons stent n the r gorous appl cat on of Art cle 1220 of the old &pan sh ' v l 'ode. %hus, for fa lure to del ver sums of money pa d to h m as an nsurance agent for the account of h s employer as re=u red by sa d Art cle 1220, sa d nsurance agent 9as conv cted estafa. ; An adm n strator of an estate 9as l Fe9 se under the same Art cle 1220 for fa lure to render an account of h s adm n strat on to the he rs unless the he rs consented thereto or are estopped by hav ng accepted the correctness of h s account prev ously rendered. 2

Eecause of h s respons b l ty under the aforec ted art cle 1220, an agent s l Fe9 se l able for estafa for fa lure to del ver to h s pr nc pal the total amount collected by h m n behalf of h s pr nc pal and cannot reta n the comm ss on perta n ng to h m by subtract ng the same from h s collect ons. 0 A la9yer s e=ually l able unnder sa d Art cle 1220 f he fa ls to del ver to h s cl ent all the money and property rece ved by h m for h s cl ent desp te h s attorney)s l en. 1 %he duty of a comm ss on agent to render a full account h s operat ons to h s pr nc pal 9as re terated n Duhart, etc. vs. Macias. = %he Amer can -ur sprudence on th s score s 9ell@n gh unan mous. (here a pr nc pal has pa d an agent or broFer a comm ss on 9h le gnorant of the fact that the latter has been unfa thful, the pr nc pal may recover bacF the comm ss on pa d, s nce an agent or broFer 9ho has been unfa thful s not ent tled to any compensat on. 111 111 111 $n d scuss ng the r ght of the pr nc pal to recover comm ss ons reta ned by an unfa thful agent, the court n %ittle vs. $hipps /15110 206 Mass. <<1, 54 NE 2>0, <4 !"A /N&0 104>, sa d? ,$t s 9ell settled that the agent s bound to e1erc se the utmost good fa th n h s deal ngs 9 th h s pr nc pal. As !ord 'a rns sa d, th s rule , s not a techn cal or arb trary rule. $t s a rule founded on the h ghest and truest pr nc ples, of moral ty., $ar'er vs. Mc1enna /16240 !" 10,'h/Eng0 5>,116 ... $f the agent does not conduct h mself 9 th ent re f del ty to9ards h s pr nc pal, but s gu lty of taF ng a secret prof t or comm ss on n regard the matter n 9h ch he s employed, he loses h s r ght to compensat on on the ground that he has taFen a pos t on 9holly ncons stent 9 th that of agent for h s employer, and 9h ch g ves h s employer, upon d scover ng t, the r ght to treat h m so far as compensat on, at least, s concerned as f no agency had e1 sted. %h s may operate to g ve to the pr nc pal the benef t of valuable serv ces rendered by the agent, but the agent has only h mself to blame for that result., 111 111 111 %he ntent 9 th 9h ch the agent tooF a secret prof t has been held mmater al 9here the agent has n fact entered nto a relat onsh p ncons stent 9 th h s agency, s nce the la9 condemns the corrupt ng tendency of the ncons stent relat onsh p. %ittle vs. $hipps /15110 54 NE 2>0. < As a general rule, t s a breach of good fa th and loyalty to h s pr nc pal for an agent, 9h le the agency e1 sts, so to deal 9 th the sub-ect matter thereof, or 9 th nformat on ac=u red dur ng the course of the agency, as to maFe a prof t out of t for h mself n e1cess of h s la9ful compensat onI and f he does so he may be held as a trustee and may #e compelled to account to his principal for all profits, advantages, rights, or privileges acquired #y him in such dealings, &hether in performance or in violation of his duties, and #e required to transfer them to his principal upon #eing reim#ursed for his e penditures for the same, unless the principal has consented to or ratified the transaction 'no&ing that #enefit or

profit &ould accrue or had accrued, to the agent, or unless &ith such 'no&ledge he has allo&ed the agent so as to change his condition that he cannot #e put in status quo. 7he application of this rule is not affected #y the fact that the principal did not suffer any in"ury #y reason of the agent/s dealings or that he in fact o#tained #etter resultsG nor is it affected #y the fact that there is a usage or custom to the contrary or that the agency is a gratuitous one . /Emphas s appl ed.0 1. $n the case at bar, defendant@appellee #regor o Dom ngo as the broFer, rece ved a g ft or propina n the amount of Dne %housand +esos /+1,000.000 from the prospect ve buyer Dscar de !eon, 9 thout the Fno9ledge and consent of h s pr nc pal, here n pet t oner@appellant C cente Dom ngo. B s acceptance of sa d substant al monetary g ft corrupted h s duty to serve the nterests only of h s pr nc pal and underm ned h s loyalty to h s pr nc pal, 9ho gave h m part al advance of %hree Bundred +esos /+<00.000 on h s comm ss on. As a conse=uence, nstead of e1ert ng h s best to persuade h s prospect ve buyer to purchase the property on the most advantageous terms des red by h s pr nc pal, the broFer, here n defendant@appellee #regor o Dom ngo, succeeded n persuad ng h s pr nc pal to accept the counter@offer of the prospect ve buyer to purchase the property at +1.20 per s=uare meter or Dne Bundred N ne %housand +esos /+105,000.000 n round f gure for the lot of 66,422 s=uare meters, 9h ch s very much lo9er the the pr ce of +2.00 per s=uare meter or Dne Bundred &eventy@& 1 %housand N ne Bundred 7 fty@7our +esos /+12>,584.000 for sa d lot or g nally offered by h s pr nc pal. %he duty embod ed n Art cle 1651 of the Ne9 ' v l 'ode 9 ll not apply f the agent or broFer acted only as a m ddleman 9 th the tasF of merely br ng ng together the vendor and vendee, 9ho themselves thereafter 9 ll negot ate on the terms and cond t ons of the transact on. Ne ther 9ould the rule apply f the agent or broFer had nformed the pr nc pal of the g ft or bonus or prof t he rece ved from the purchaser and h s pr nc pal d d not ob-ect therto. 11 Bere n defendant@appellee #regor o Dom ngo 9as not merely a m ddleman of the pet t oner@appellant C cente Dom ngo and the buyer Dscar de !eon. Be 9as the broFer and agent of sa d pet t oner@appellant only. And there n pet t oner@ appellant 9as not a9are of the g ft of Dne %housand +esos /+1,000.000 rece ved by #regor o Dom ngo from the prospect ve buyerI much less d d he consent to h s agent)s accept ng such a g ft. %he fact that the buyer appear ng n the deed of sale s Amparo D aA, the 9 fe of Dscar de !eon, does not mater ally alter the s tuat onI because the transact on, to be val d, must necessar ly be 9 th the consent of the husband Dscar de !eon, 9ho s the adm n strator of the r con-ugal assets nclud ng the r house and lot at No. 40 Denver &treet, 'ubao, UueAon ' ty, 9h ch 9ere g ven as part of and const tuted the do9n payment on, the purchase pr ce of here n pet t oner@ appellant)s lot No. 66< of + edad Estate. Bence, both n la9 and n fact, t 9as st ll Dscar de !eon 9ho 9as the buyer.

As a necessary conse=uence of such breach of trust, defendant@appellee #regor o Dom ngo must forfe t h s r ght to the comm ss on and must return the part of the comm ss on he rece ved from h s pr nc pal. %eof lo +ur s ma, the sub@agent of #regor o Dom ngo, can only recover from #regor o Dom ngo h s one@half share of 9hatever amounts #regor o Dom ngo rece ved by v rtue of the transact on as h s sub@agency contract 9as 9 th #regor o Dom ngo alone and not 9 th C cente Dom ngo, 9ho 9as not even a9are of such sub@agency. & nce #regor o Dom ngo rece ved from C cente Dom ngo and Dscar de !eon respect vely the amounts of %hree Bundred +esos /+<00.000 and Dne %housand +esos /+1,000.000 or a total of Dne %housand %hree Bundred +esos /+1,<00.000, one@half of the same, 9h ch s & 1 Bundred 7 fty +esos /+>80.000, should be pa d by #regor o Dom ngo to %eof lo +ur s ma. Eecause #regor o Dom ngo)s clearly unfounded compla nt caused C cente Dom ngo mental angu sh and ser ous an1 ety as 9ell as 9ounded feel ngs, pet t oner@appellant C cente Dom ngo should be a9arded moral damages n the reasonable amount of Dne %housand +esos /+1,000.000 attorney)s fees n the reasonable amount of Dne %housand +esos /+1,000.000, cons der ng that th s case has been pend ng for the last f fteen /180 years from ts f l ng on Dctober <, 158>. (BE"E7D"E, the -udgment s hereby rendered, revers ng the dec s on of the 'ourt of Appeals and d rect ng defendant@appellee #regor o Dom ngo? /10 to pay to the he rs of C cente Dom ngo the sum of Dne %housand +esos /+1,000.000 as moral damages and Dne %housand +esos /+1,000.000 as attorney)s feesI /20 to pay %eof lo +ur s ma the sum of & 1 Bundred 7 fty +esos /+>80.000I and /<0 to pay the costs. .oncepcion, ..9., Reyes, 9.!.%., Ma'alintal, Haldivar, .astro, 8ernando, 7eehan'ee, !arredo and 4illamor, 99., concur.

:ootnotes 1 12 Am. Jur. 2d 6<8I 1<4 A!" 1<4>I 1 A!" 2d 562I Ero9n vs. 'oates, >2 A!" 2d 54<I Baymes vs. "ogers 12 A!" 2d 65>I Moore vs. %urner, <2 A!" 2d 21<. 2 &ee also Manresa, Col. 2, p. 4>1, 4th ed. < 12 Am. Jur. 2d &ec. 121, 611@12. 4 3.&. vs. * ene 2 +h l. 2<>. 8 D- naga vs. Estate of +ereA, 5 +h l. 168 > 3.&. vs. "eyes, <> +h l. 251. 2 $n "e? Eamberger 45 +h l. 5>2. 6 84 +h l. 81<.

5 1<4 A!" Ann. pp. 1<4>, 1<42@1<46I see also 1 A!" 2d, 562. 10 < 'J& 8<@84I see also 12 Am. Jur. 2d 6<8@641, 506@512. 11 12 Am. Jur. 2d, 6<8@641, 506@512I "aymond vs. Dav s, Jan. <, 15<>, 155 NE <21, 102 A!" 1112@1118, 111>@1121. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 140;44 !ecem er 0, 3..0

AN(/N)/ 9. 9A#(A6A$, pet t oner, vs. 5/N/$A9#E /'9&!S'AN, E&#/G)/ '. 'A$)AN/, J/SE !. J)'ENE6, J$., (/$)9)/ E. )#A/, J$. and E$NES(/ $. SA#ENGA, respondents.

DE'$&$DN

*E#AS%/, J$., J., (-e %ase Ascr b ng grave abuse of d scret on to respondent Dmbudsman, th s +et t on for "ev e9 on 'ert orar ,1 under "ule 48 pursuant to &ect on 22 of "A >220, 2 seeFs to reverse and set as de the November 2>, 1552 Drder < of the Dff ce of the &pec al +rosecutor /D&+0 n DME@1@54@<428 duly approved by then Dmbudsman An ano Des erto on August 21, 1556, 9h ch recommended the d sm ssal of the $nformat on4 n 'r m nal 'ase No. 2<>>1 f led before the &and ganbayan aga nst respondents +ampanga +rov nc al Ad-ud cator %or b o E. $lao, Jr., 'h ef !egal Dff cer Eulog o M. Mar ano and !egal Dff cer Jose D. J meneA, Jr. /both of the DA" !egal D v s on n &an 7ernando, +ampanga0, and Ernesto ". &alenga. %he pet t on l Fe9 se seeFs to set as de the Dctober <0, 1556 Memorandum 8 of the D&+ duly approved by the Dmbudsman on November 22, 1556 9h ch den ed pet t oner)s Mot on for "econs derat on.> +rev ously, the f l ng of the $nformat on aga nst sa d respondents 9as author Aed by the May 10, 155> "esolut on 2 and Dctober <, 155> Drder6 of the Dmbudsman 9h ch found probable cause that they granted un9arranted benef ts, advantage, and preference to respondent &alenga n v olat on of &ect on < /e0 of "A <015.5 (-e :acts

+ac enc a "egala o9ns a seven /20@hectare f shpond located at &asmuan, +ampanga. Ber Attorney@ n@7act 7aust no ". Mercado leased the f shpond for +h+ 2<0,000.00 to Eduardo !ap d for a three /<0@year per od, that s, from August 2, 1550 to August 2, 155<.10 !essee Eduardo !ap d n turn sub@leased the f shpond to "afael !opeA for +h+ 80,000.00 dur ng the last seven /20 months of the or g nal lease, that s, from January 10, 155< to August 2, 155<. 11 "espondent Ernesto &alenga 9as h red by Eduardo !ap d as f shpond 9atchman / #ante< encargado0. $n the sub@lease, "afael !opeA reh red respondent &alenga. Mean9h le, on March 11, 155<, respondent &alenga, through a certa n 7ranc s !agman, sent h s January 26, 155< demand letter12 to "afael !opeA and !ourdes !ap d for unpa d salar es and non@payment of the 10R share n the harvest. Dn June 8, 155<, sub@lessee "afael !opeA 9rote a letter to respondent &alenga nform ng the latter that for the last t9o /20 months of the sub@lease, he had g ven the r ghts over the f shpond to Mar o +alad and Amb t +ereA for +h+ 20,000.00.1< %h s prompted respondent &alenga to f le a 'ompla nt 14 before the +rov nc al Agrar an "eform Ad-ud cat on Eoard /+A"AE0, "eg on $$$, &an 7ernando, +ampanga docFeted as DA"AE 'ase No. 882@+J5< ent tled 5rnesto R. Salenga v. Rafael %. %opez and %ourdes %. %apid for Ma ntenance of +eaceful +ossess on, 'ollect on of &um of Money and &uperv s on of Barvest. %he 'ompla nt 9as s gned by respondent Jose D. J meneA, Jr., !egal Dff cer of the Department of Agrar an "eform /DA"0 "eg on $$$ Dff ce n &an 7ernando, +ampanga, as counsel for respondent &alengaI 9hereas respondent Eulog o M. Mar ano 9as the 'h ef !egal Dff cer of DA" "eg on $$$. %he case 9as ass gned to respondent %or b o E. $lao, Jr., +rov nc al Ad-ud cator of DA"AE, +ampanga. Dn May 10, 155<, respondent &alenga amended h s compla nt. 18 %he amendments ncluded a prayer for the ssuance of a temporary restra n ng order /%"D0 and prel m nary n-unct on. Bo9ever, before the prayer for the ssuance of a %"D could be acted upon, on June 1>, 155<, respondent &alenga f led a Mot on to Ma nta n &tatus Uuo and to $ssue "estra n ng Drder 1> 9h ch 9as set for hear ng on June 22, 155<. $n the hear ng, ho9ever, only respondent &alenga 9 th h s counsel appeared desp te not ce to the other part es. 'onse=uently, the e < partepresentat on of respondent &alengaJs ev dence n support of the prayer for the ssuance of a restra n ng order 9as allo9ed, s nce the mot on 9as unopposed, and on July 21, 155<, respondent $lao, Jr. ssued a %"D. 12 %hereafter, respondent &alenga asFed for superv s on of the harvest, 9h ch the board sher ff d d. Accord ngly, defendants !opeA and !ap d rece ved the r respect ve shares 9h le respondent &alenga 9as g ven h s share under protest. $n the subse=uent hear ng for the ssuance of a prel m nary n-unct on, aga n, only respondent &alenga appeared and presented h s ev dence for the ssuance of the 9r t. +end ng resolut on of the case, 7aust no Mercado, as Attorney@ n@7act of the f shpond o9ner +ac enc a "egala, f led a mot on to ntervene 9h ch 9as granted by respondent $lao, Jr. through the November 18, 155< Drder. After the tr al, respondent $lao, Jr. rendered a Dec s on on May 25, 1558 d sm ss ng the

'ompla nt for lacF of mer tI but los ng pla nt ff, respondent &alenga, appealed the dec s on before the DA"AE Appellate Eoard. %omplaint 9efore t-e /m udsman Dn November 24, 1554, pend ng resolut on of the agrar an case, the nstant case 9as nst tuted by pet t oner Anton o EaltaAar, an alleged nephe9 of 7aust no Mercado, through a 'ompla nt@Aff dav t16 aga nst pr vate respondents before the Dff ce of the Dmbudsman 9h ch 9as docFeted as DME@1@54@<428 ent tled Antonio !. !altazar v. 5ulogio Mariano, 9ose 9imenez, 9r., 7ori#io :lao, 9r. and 5rnesto Salenga for v olat on of "A <015. +et t oner charged pr vate respondents of consp racy through the ssuance of the %"D n allo9 ng respondent &alenga to reta n possess on of the f shpond, operate t, harvest the produce, and Feep the sales under the safeFeep ng of other pr vate respondents. Moreover, pet t oner ma nta ns that respondent $lao, Jr. had no -ur sd ct on to hear and act on DA"AE 'ase No. 882@+J5< f led by respondent &alenga as there 9as no tenancy relat on bet9een respondent &alenga and "afael !. !opeA, and thus, the compla nt 9as d sm ss ble on ts face. %hrough the December 14, 1554 Drder, 15 the Dmbudsman re=u red pr vate respondents to f le the r counter@aff dav ts, aff dav ts of the r 9 tnesses, and other controvert ng ev dence. (h le the other respondents subm tted the r counter@aff dav ts, respondent $lao, Jr. nstead f led h s 7ebruary 5, 1558 mot on to d sm ss, 7ebruary 21, 1558 "eply, and March 24, 1558 "e-o nder. /m udsmanSs !etermination of +ro a le %ause Dn May 10, 155>, the Dmbudsman ssued a "esolut on 20 f nd ng cause to br ng respondents to court, deny ng the mot on to d sm ss of respondent $lao, Jr., and recommend ng the f l ng of an $nformat on for v olat on of &ect on < /e0 of "A <015. &ubse=uently, respondent $lao, Jr. f led h s &eptember 1>, 155> Mot on for "econs derat on andMor "e@ nvest gat on 21 9h ch 9as den ed through the Dctober <, 155> Drder.22 'onse=uently, the March 12, 1552 $nformat on 2< 9as f led aga nst all the pr vate respondents before the &and ganbayan 9h ch 9as docFeted as 'r m nal 'ase No. 2<>>1. Eefore the graft court, respondent $lao, Jr. f led h s May 15, 1552 Mot on for "econs derat on andMor "e@ nvest gat on 9h ch 9as granted through the August 25, 1552 Drder.24 Dn &eptember 6, 1552, respondent $lao, Jr. subse=uently f led h s 'ounter@Aff dav t28 9 th attachments 9h le pet t oner d d not f le any reply@ aff dav t desp te not ce to h m. %he D&+ of the Dmbudsman conducted the re@ nvest gat onI and the result of the re@ nvest gat on 9as embod ed n the assa led November 2>, 1552 Drder2> 9h ch recommended the d sm ssal of the compla nt n DME@1@54@<428 aga nst all pr vate respondents. 3pon rev e9, the Dmbudsman approved the D&+Js recommendat on on August 21, 1556. +et t onerJs Mot on for "econs derat on22 9as l Fe9 se den ed by the D&+ through the Dctober <0, 1556 Memorandum26 9h ch 9as approved by the Dmbudsman on November 22, 1556. 'onse=uently, the tr al prosecutor moved orally before

the &and ganbayan for the d sm ssal of 'r m nal 'ase No. 2<>>1 9h ch 9as granted through the December 11, 1556 Drder. 25 %hus, the nstant pet t on s before us. (-e )ssues +et t oner ra ses t9o ass gnments of errors, to 9 t? %BE BDND"AE!E DME3D&MAN E""ED $N #$C$N# D3E 'D3"&E A M$&+!A'ED 'D3N%E"@A77$DAC$% 7$!ED A7%E" %BE %E"M$NA%$DN D7 %BE +"E!$M$NA"H $NCE&%$#A%$DN ANDMD" %BE 'A&E (A& A!"EADH 7$!ED EE7D"E %BE &AND$#ANEAHAN. A&&3M$N# D%BE"($&E, %BE BDND"AE!E DME3D&MAN !$*E($&E E""ED $N "ECE"&$N# B$& D(N "E&D!3%$DN (BE"E $% (A& "E&D!CED %BA% A''3&ED A& +"DC$N'$A! A#"A"$AN ADJ3D$'A%D" BA& ND J3"$&D$'%$DN DCE" A 'DM+!A$N% (BE"E %BE"E EG$&% :s c; ND %ENAN'H "E!A%$DN&B$+ 'DN&$DE"$N# :s c; 'DM+!A$NAN% $& ND% A %ENAN% E3% A ,EAN%E@EN'A"#ADD, D" (A%'BMAN@ DCE"&EE" B$"ED 7D" A &A!A"H D7 +<,000.00 +E" MDN%B A& A!!E#ED $N B$& D(N 'DM+!A$N%.<0 Eefore delv ng nto the errors ra sed by pet t oner, 9e f rst address the prel m nary procedural ssue of the author ty and locus standi of pet t oner to pursue the nstant pet t on. +reliminary )ssue, #e"al Standin" %ocus standi s def ned as ,a r ght of appearance n a court of -ust ce 1 1 1 on a g ven =uest on.,<1 $n pr vate su ts, stand ng s governed by the ,real@part es@ n nterest, rule found n &ect on 2, "ule < of the 1552 "ules of ' v l +rocedure 9h ch prov des that ,every act on must be prosecuted or defended n the name of the real party n nterest., Accord ngly, the ,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.,<2 &ucc nctly put, the pla nt ffsJ stand ng s based on the r o9n r ght to the rel ef sought. %he records sho9 that pet t oner s a non@la9yer appear ng for h mself and conduct ng l t gat on n person. +et t oner nst tuted the nstant case before the Dmbudsman n h s o9n name. $n so far as the 'ompla nt@Aff dav t f led before the Dff ce of the Dmbudsman s concerned, there s no =uest on on h s author ty and legal stand ng. $ndeed, the Dff ce of the Dmbudsman s mandated to , nvest gate and prosecute on ts o9n or on compla nt by any person, any act or om ss on of any publ c off cer or employee, off ce or agency, 9hen such act or om ss on appears to be llegal, un-ust, mproper or neff c ent /emphas s suppl ed0., << %he Dmbudsman can act on anonymous compla nts and motu proprio n=u re nto alleged mproper off c al acts or om ss ons from 9hatever source, e.g., a ne9spaper.<4 %hus, any compla nant may be enterta ned by the Dmbudsman for the latter to n t ate an n=u ry and nvest gat on for alleged rregular t es.

Bo9ever, f l ng the pet t on n person before th s 'ourt s another matter. %he "ules allo9 a non@la9yer to conduct l t gat on n person and appear for oneself only 9hen he s a party to a legal controversy. &ect on <4 of "ule 1<6 pert nently prov des, thus? &E'. <4. !y &hom litigation conducted. K $n the court of a -ust ce of the peace a party may conduct h s l t gat on n person, 9 th the a d of an agent or fr end appo nted by h m for that purpose, or 9 th the a d of an attorney. $n any other court, a party may conduct h s l t gat on personally or by a d of an attorney, and h sappearance must be e ther personal or by a duly author Aed member of the bar /emphases suppl ed0. +etitioner -as no le"al standin" $s pet t oner a party or a real party n nterest to have the locus standi to pursue the nstant pet t onP (e ans9er n the negat ve. (h le pet t oner may be the compla nant n DME@1@54@<428, he s not a real party n nterest. &ect on 2, "ule < of the 1552 "ules of ' v l +rocedure st pulates, thus? &E'. 2. $arties in interest. K 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. %he same concept s appl ed n cr m nal and adm n strat ve cases. $n the case at bar 9h ch nvolves a cr m nal proceed ng stemm ng from a c v l /agrar an0 case, t s clear that pet t oner s not a real party n nterest. E1cept be ng the compla nant, the records sho9 that pet t oner s a stranger to the agrar an case. $t must be recalled that the und sputed o9ner of the f shpond s +ac enc a "egala, 9ho ntervened n DA"AE 'ase No. 882@+J5< through her Attorney@ n@7act 7aust no Mercado n order to protect her nterest. %he mot on for ntervent on f led by 7aust no Mercado, as agent of +ac enc a "egala, 9as granted by respondent +rov nc al Ad-ud cator $lao, Jr. through the November 18, 155< Drder n DA"AE 'ase No. 882@+J5<. A"ency cannot e furt-er dele"ated

+et t oner asserts that he s duly author Aed by 7aust no Mercado to nst tute the su t and presented a &pec al +o9er of Attorney <8 /&+A0 from 7aust no Mercado. Bo9ever, such &+A s unava l ng for pet t oner. 7or one, pet t onerJs pr nc pal, 7aust no Mercado, s an agent h mself and as such cannot further delegate h s agency to another. Dther9 se put, an agent cannot delegate to another the same agency. %he legal ma1 m potestas delegata non delegare potest I a po9er once delegated cannot be re@delegated, 9h le appl ed pr mar ly n pol t cal la9 to the e1erc se of leg slat ve po9er, s a pr nc ple of agency. <> 7or another, a re@ delegat on of the agency 9ould be detr mental to the pr nc pal as the second agent has no pr v ty of contract 9 th the former. $n the nstant case, pet t oner

has no pr v ty of contract 9 th +ac enc a "egala, o9ner of the f shpond and pr nc pal of 7aust no Mercado. Moreover, 9h le the ' v l 'ode under Art cle 1652 <2 allo9s the agent to appo nt a subst tute, such s not the s tuat on n the nstant case. %he &+A clearly delegates the agency to pet t oner to pursue the case and not merely as a subst tute. Ees des, t s clear n the aforec ted Art cle that 9hat s allo9ed s a subst tute and not a delegat on of the agency. 'learly, pet t oner s ne ther a real party n nterest 9 th regard to the agrar an case, nor s he a real party n nterest n the cr m nal proceed ngs conducted by the Dmbudsman as elevated to the &and ganbayan. Be s not a party 9ho 9 ll be benef ted or n-ured by the results of both cases. +etitioner, a stran"er and not an inBured priAate complainant +et t oner only surfaced n November 1554 as compla nant before the Dmbudsman. As de from that, not be ng an agent of the part es n the agrar an case, he has no locus standi to pursue th s pet t on. Be cannot be l Fened to an n-ured pr vate compla nant n a cr m nal compla nt 9ho has d rect nterest n the outcome of the cr m nal case. More so, 9e note that the pet t on s not pursued as a publ c su t 9 th pet t oner assert ng a ,publ c r ght, n assa l ng an allegedly llegal off c al act on, and do ng so as a representat ve of the general publ c. Be s pursu ng the nstant case as an agent of an neffect ve agency. +etitioner -as not s-oFn entitlement to Budicial protection Even f 9e cons der the nstant pet t on as a publ c su t, 9here 9e may cons der pet t oner su ng as a ,stranger,, or n the category of a ,c t Aen,, or ,ta1payer,, st ll pet t oner has not ade=uately sho9n that he s ent tled to seeF -ud c al protect on. $n other 9ords, pet t oner has not made out a suff c ent nterest n the v nd cat on of the publ c order and the secur ng of rel ef as a ,c t Aen, or ,ta1payer,I more so 9hen there s no sho9 ng that he 9as n-ured by the d sm ssal of the cr m nal compla nt before the &and ganbayan. Eased on the forego ng d scuss on, pet t oner ndub tably does not have locus standi to pursue th s act on and the nstant pet t on must be forth9 th d sm ssed on that score. Even grant ng arguendo that he has locus standi, nonetheless, pet t oner fa ls to sho9 grave abuse of d scret on of respondent Dmbudsman to 9arrant a reversal of the assa led November 2>, 1552 Drder and the Dctober <0, 1556 Memorandum. :irst )ssue, Su mission of %ounter7AffidaAit (-e Sandi"an ayan, not t-e /m udsman, ordered re7inAesti"ation Dn the substant ve aspect, n the f rst ass gnment of error, pet t oner mputes grave abuse of d scret on on publ c respondent Dmbudsman for allo9 ng respondent $lao, Jr. to subm t h s 'ounter@Aff dav t 9hen the prel m nary

nvest gat on 9as already concluded and an $nformat on f led 9 th the &and ganbayan 9h ch assumed -ur sd ct on over the cr m nal case. %h s content on s utterly erroneous. %he facts clearly sho9 that t 9as not the Dmbudsman through the D&+ 9ho allo9ed respondent $lao, Jr. to subm t h s 'ounter@Aff dav t. $t 9as the &and ganbayan 9ho granted the prayed for re@ nvest gat on and ordered the D&+ to conduct the re@ nvest gat on through ts August 25, 1552 Drder, as follo9s? 'ons der ng the man festat on of +rosecutor ' cero Jurado, Jr. that accused %or b o E. $lao, Jr. 9as not able to f le h s counter@aff dav t n the prel m nary nvest gat on, there appears to be some bas s for grant ng the mot on of sa d accused for re nvest gat on. (BE"E7D"E, accused %or b o E. $lao, Jr. may f le h s counter@aff dav t, 9 th documentary ev dence attached, f any, 9 th the Dff ce of the &pec al +rosecutor 9 th n then /100 days from today. %heprosecution is ordered to conduct a reinAesti"ation 9 th n a per od of th rty /<00 days. <6 /Emphases suppl ed.0 As t s, publ c respondent Dmbudsman through the D&+ d d not e1erc se any d scret on n allo9 ng respondent $lao, Jr. to subm t h s 'ounter@Aff dav t. %he D&+ s mply follo9ed the graft courtJs d rect ve to conduct the re@ nvest gat on after the 'ounter@Aff dav t of respondent $lao, Jr. 9as f led. $ndeed, pet t oner d d not contest nor =uest on the August 25, 1552 Drder of the graft court. Moreover, pet t oner d d not f le any reply@aff dav t n the re@ nvest gat on desp te not ce. $e7inAesti"ation upon sound discretion of "raft court 7urthermore, ne ther can 9e fault the graft court n grant ng the prayed for re@ nvest gat on as t can read ly be seen from the antecedent facts that respondent $lao, Jr. 9as not g ven the opportun ty to f le h s 'ounter@Aff dav t. "espondent $lao, Jr. f led a mot on to d sm ss 9 th the Dmbudsman but such 9as not resolved before the "esolut onOf nd ng cause to br ng respondents to tr alO9as ssued. $n fact, respondent $lao, Jr.Js mot on to d sm ss 9as resolved only through the May 10, 155> "esolut on 9h ch recommended the f l ng of an $nformat on. "espondent $lao, Jr.Js Mot on for "econs derat on andMor "e@ nvest gat on 9as den ed and the $nformat on 9as f led 9 th the graft court. Cer ly, courts are g ven 9 de lat tude to accord the accused ample opportun ty to present controvert ng ev dence even before tr al as demanded by due process. %hus, 9e held n 4illaflor v. 4ivar that ,:a; component part of due process n cr m nal -ust ce, prel m nary nvest gat on s a statutory and substant ve r ght accorded to the accused before tr al. %o deny the r cla m to a prel m nary nvest gat on 9ould be to depr ve them of the full measure of the r r ght to due process.,<5 Second )ssue, A"rarian !ispute Anent the second ass gnment of error, pet t oner contends that DA"AE 'ase No. 882@+J5< s not an agrar an d spute and therefore outs de the -ur sd ct on of the

DA"AE. Be ma nta ns that respondent &alenga s not an agr cultural tenant but a mere 9atchman of the f shpond o9ned by +ac enc a "egala. Moreover, pet t oner further argues that "afael !opeA and !ourdes !ap d, the respondents n the DA"AE case, are not the o9ners of the f shpond. Nature of t-e case determined y alle"ations in t-e complaint

%h s argument s l Fe9 se bereft of mer t. $ndeed, as aptly po nted out by respondents and as borne out by the antecedent facts, respondent $lao, Jr. could not have acted other9 se. $t s a settled rule that -ur sd ct on over the sub-ect matter s determ ned by the allegat ons of the compla nt. 40 %he nature of an act on s determ ned by the mater al averments n the compla nt and the character of the rel ef sought, 41 not by the defenses asserted n the ans9er or mot on to d sm ss.42 # ven that respondent &alengaJs compla nt and ts attachment clearly spells out the -ur sd ct onal allegat ons that he s an agr cultural tenant n possess on of the f shpond and s about to be e-ected from t, clearly, respondent $lao, Jr. could not be faulted n assum ng -ur sd ct on as sa d allegat ons character Ae an agr cultural d spute. Ees des, 9hatever defense asserted n an ans9er or mot on to d sm ss s not to be cons dered n resolv ng the ssue on -ur sd ct on as t cannot be made dependent upon the allegat ons of the defendant. )ssuance of ($/ upon t-e sound discretion of -earin" officer As regards the ssuance of the %"D, cons der ng the proper assumpt on of -ur sd ct on by respondent $lao, Jr., t can be read ly culled from the antecedent facts that h s ssuance of the %"D 9as a proper e1erc se of d scret on. 7 rstly, the averments 9 th ev dence as to the e1 stence of the need for the ssuance of the restra n ng order 9ere man fest n respondent &alengaJs Mot on to Ma nta n &tatus Uuo and to $ssue "estra n ng Drder,4< the attached +ol ce $nvest gat on "eport,44 and Med cal 'ert f cate.48 &econdly, only respondent &alenga attended the June 22, 155< hear ng desp te not ce to part es. Bence, &alengaJs mot on 9as not only unopposed but h s ev dence adduced e <parte also ade=uately supported the ssuance of the restra n ng order. +rem ses cons dered, respondent $lao, Jr. has correctly assumed -ur sd ct on and properly e1erc sed h s d scret on n ssu ng the %"DOas respondent $lao, Jr. aptly ma nta ned that g v ng due course to the compla nt and ssu ng the %"D do not reflect the f nal determ nat on of the mer ts of the case. $ndeed, after hear ng the case, respondent $lao, Jr. rendered a Dec s on on May 25, 1558 d sm ss ng DA"AE 'ase No. 882@+J5< for lacF of mer t. %ourt Fill not reAieF prosecutorSs determination of pro a le cause 7 nally, 9e 9 ll not delve nto the mer ts of the DmbudsmanJs reversal of ts n t al f nd ng of probable cause or cause to br ng respondents to tr al. 7 rstly, pet t oner has not sho9n that the Dmbudsman comm tted grave abuse of d scret on n render ng such reversal. &econdly, t s clear from the records that the n t al f nd ng embod ed n the May 10, 155> "esolut on 9as arr ved at before

the f l ng of respondent $lao, Jr.Js 'ounter@Aff dav t. %h rdly, t s the respons b l ty of the publ c prosecutor, n th s case the Dmbudsman, to uphold the la9, to prosecute the gu lty, and to protect the nnocent. !astly, the funct on of determ n ng the e1 stence of probable cause s proper for the Dmbudsman n th s case and 9e 9 ll not tread on the realm of th s e1ecut ve funct on to e1am ne and assess ev dence suppl ed by the part es, 9h ch s supposed to be e1erc sed at the start of cr m nal proceed ngs. $n $erez v. 0agonoy Rural !an', :nc.,4> as c ted n %ongos Rural 6ater&or's and Sanitation Association, :nc. v. 0on. Desierto,42 9e had occas on to rule that 9e cannot pass upon the suff c ency or nsuff c ency of ev dence to determ ne the e1 stence of probable cause. 46 (BE"E7D"E, the nstant pet t on s !EN)E! for lacF of mer t, and the November 2>, 1552 Drder and the Dctober <0, 1556 Memorandum of the Dff ce of the &pec al +rosecutor n 'r m nal 'ase No. 2<>>1 /DME@1@54@<4280 are hereby A::)$'E! IN $?$?, 9 th costs aga nst pet t oner. &D D"DE"ED. Quisum#ing, 9., .hairperson, .arpio, .arpio Morales, and 7inga, 99., concur.

:ootnotes
1

Rollo, pp. 2@24.

An Act +rov d ng for the 7unct onal and &tructural Drgan Aat on of the Dff ce of the Dmbudsman and for Dther +urposes.
<

"ollo, pp. 85@>4. +repared by &pec al +rosecut on Dff cer $$ ' cero D. Jurado, Jr., recommended by Deputy &pec al +rosecutor "obert E. *allos, concurred n by the &pec al +rosecutor !eonardo +. %amayo, and approved by Dmbudsman An ano A. Des erto on August 21, 1556.
4

$d. at 42@46.

$d. at 21@2>. +repared by &pec al +rosecut on Dff cer $ !ol ta &. "odas, recommended by Deputy &pec al +rosecutor "obert E. *allos, concurred n by the &pec al +rosecutor !eonardo +. %amayo, and approved by Dmbudsman An ano A. Des erto on November 22, 1556.
>

$d. at >8@>2. $d. at <>@4<. $d. at 44@4>.

Ant @#raft and 'orrupt +ract ces Act 9as approved on August 12, 15>0. &ect on < /e0 of th s Act prov des? &E'. <. 'orrupt pract ces of publ c off cers. O 1 1 1

/e0 'aus ng any undue n-ury to any party, nclud ng the #overnment, or g v ng any pr vate party any un9arranted benef ts, advantage or preference n the d scharge of h s off c al, adm n strat ve or -ud c al funct ons through man fest part al ty, ev dent bad fa th or gross ne1cusable negl gence. %h s prov s on shall apply to off cers and employees of off ces or government corporat ons charged 9 th the grant of l censes or perm ts or other concess ons.
10

AcFno9ledgement "ece pt dated Apr l 2, 1551, rollo, p. 26. AcFno9ledgement "ece pt dated January 10, 155<, d. at 25. $d. at <<. $d. at 205. $d. at <0@<2. $d. at 200@20<. $d. at 204@20>. $d. at <4@<8. $d. at 28@22. $d. at 142. &upra note 2. Rollo, pp. 146@1>4. &upra note 6. &upra note 4. "ollo, p. 211. $d. at 45@86. &upra note <. &upra note >. &upra note 8. "ollo, pp. 116@115. $d. at 12. B. ElacF, et al., ElacFJs !a9 D ct onary 541 />th ed., 15510.

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<1

<2

Salonga v. 6arner !arnes & .o., #.". No. !@224>, January <1, 1581, 66 +h l. 128.
<<

"A >220, supra note 2, at &ec. 18 /10.

<4

$d. at &ec. 2>. Dated &eptember 2, 1556, rollo, pp. >5@20.

<8

<>

See $eople v. 4era, #.". No. 48>68, November 1>, 15<2, >8 +h l. 8>. %he or g n of the legal ma1 m, ts development and appl cat on, 9as suff c ently d scussed.
<2

Art. 1652. %he agent may appo nt a subst tute f the pr nc pal has not proh b ted h m from do ng soI but he shall be respons ble for the acts of the subst tute? /10 (hen he 9as not g ven the po9er to appo nt oneI /20 (hen he 9as g ven such po9er, but 9 thout des gnat ng the person, and the person appo nted 9as notor ously ncompetent or nsolvent. All acts of the subst tute appo nted aga nst the proh b t on of the pr nc pal shall be vo d.
<6

&upra note 24. #.". No. 1<4244, January 1>, 2001, <45 &'"A 154, 201.

<5

40

Sta. .lara 0omeo&nersT Association v. 2aston , #.". No. 1415>1, January 2<, 2002, <24 &'"A <5>, 405.
41

Sarne v. Maquiling, #.". No. 1<66<5, May 5, 2002, <62 &'"A 68, 52I AlemarTs (Si#al & Sons*, :nc. v. .A, #.". No. 5455>, January 2>, 2001, <80 &'"A <<<, <<5I Saura v. Saura, 9r., #.". No. 1<>185, &eptember 1, 1555, <1< &'"A 4>8, 422I Salva v. .A, #.". No. 1<2280, March 11, 1555, <04 &'"A ><2, >82I ;nilongo v. .A, #.". No. 12<510, Apr l 8, 1555, <08 &'"A 8>1, 8>5I and &pouses Abr n v. 'ampos, #.". No. 82240, November 12, 1551, 20< &'"A 420, 42<.
42

2ochan v. Foung, #.". No. 1<1665, March 12, 2001, <84 &'"A 202, 211 N 21>I Saura v. Saura, 9r., supra note 41I and &pouses Abr n v. 'ampos, supra note 41.
4<

&upra note 1>. Rollo, p. 202. $d. at 206. #.". No. 12>210, March 5, 2000, <22 &'"A 866, >04. #.". No. 1<845>, July <0, 2002, <68 &'"A <52, <52@<56.

44

48

4>

42

46

See also "oberts v. 'ourt of Appeals, #.". No. 11<5<0, March 8, 155>, 284 &'"A <02. %he &upreme 'ourt refra ned from pass ng over the propr ety of f nd ng probable cause aga nst pet t oners as th s funct on s proper to the publ c prosecutor. Moreover, as to the =uest on 9hether the publ c prosecutor has d scharged th s e1ecut ve funct on correctly, the tr al court may not be

compelled to pass upon such =uery as there s no prov s on of la9 author A ng an aggr eved party to pet t on for such determ nat on.

&ubst tute Agent? Alternate Not Delegate < Am. Jur. 2d Agency &ect on 2 . 2. &ubagency (est)s *ey Number D gest (est)s *ey Number D gest, +r nc pal and Agent 12 A subagent s a person employed by the agent to ass st h m or her n conduct ng the pr nc pal)s affa rs.:7N1; Dnce a th rd party s val dly appo nted a subagent, the pr nc pal s l able for the subagent)s act ons.:7N2; %he agent)s author ty to appo nt a subagent:7N<; may be nferred from those po9ers, customs, and usages pos t vely establ shed, but f the agent has no author ty, e1press or mpl ed, to maFe the person so appo nted the agent of the pr nc pal, that person s s mply the agent of the agent, and not of the pr nc pal.:7N4; Also, f an agent, 9ho has undertaFen to do the bus ness of the pr nc pal, employs another person on the agent)s o9n account to ass st n the agent)s undertaF ngs, the person so appo nted s an agent of the agent.:7N8; '3M3!A%$CE &3++!EMEN% &tatutes? "estatement %h rd, Agency . <.18 prov des that /10 a subagent s a person appo nted by an agent to perform funct ons that the agent has consented to perform on behalf of the agent)s pr nc pal and for 9hose conduct the appo nt ng agent s respons ble to the pr nc pal, and that the relat onsh ps bet9een a subagent and the appo nt ng agent and bet9een the subagent and the appo nt ng agent)s pr nc pal are relat onsh ps of agencyI /20 an agent may appo nt a subagent only f the agent has actual or apparent author ty to do so. :END D7 &3++!EMEN%; :7N1; Mc*n ght v. +eoples@+ ttsburgh %rust 'o., <>0 +a. 250, >1 A.2d 620 /15460I 7anset v. #arden ' ty &tate EanF, 24 &.D. 246, 12< N.(. >6> /15050. @ :7N2; EooFer v. 3n ted Amer can $ns. 'o., 200 &o. 2d 1<<< /Ala. 15520. @ :7N<; .. 184 to 18>. @ :7N4; #ulf "ef n ng 'o. v. &h rley, 55 &.(.2d >1< /%e1. ' v. App. Eastland 15<>0, 9r t d sm ssed.

@ :7N8; 'o9an v. Eastern "ac ng Ass)n, <<0 Mass. 1<8, 111 N.E.2d 282 /158<0.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN G.$. No. 14.;34 NoAem er 1=, 3..3

*)$G)E SE$/NA, pet t oner, vs. 5/N. %/&$( /: A++EA#S and (5E +E/+#E /: (5E +5)#)++)NES, respondents. DE'$&$DN 8NA$ES7SAN()AG/, J.: Dur ng the per od from July 1552 to &eptember 1552, !eon da Uu latan del vered p eces of -e9elry to pet t oner C rg e &erona to be sold on comm ss on bas s. Ey oral agreement of the part es, pet t oner shall rem t payment or return the p eces of -e9elry f not sold to Uu latan, both 9 th n <0 days from rece pt of the tems. 3pon pet t onerJs fa lure to pay on &eptember 24, 1552, Uu latan re=u red her to e1ecute an acFno9ledgment rece pt /E1h b t E0 nd cat ng the r agreement and the total amount due, to 9 t? AFo, s C rg n a &erona, naFat ra sa Mother Earth &ubd., !as + nas, ay Fumuha ng mga alahas Fay #ng. !eon da Uu latan na may Fabuohang halaga na +8>2,280.00 para pagb l para aFo magFaFom syon at b b gay ang benta Fung mab b l o babal F sa Fanya ang mga nasab ng alahas Fung h nd mab b l sa loob ng <0 ara9. !as + nas, &eptember 24, 1552.1 %he rece pt 9as s gned by pet t oner and a 9 tness, "uf na #. Navarette. 3nFno9n to Uu latan, pet t oner had earl er entrusted the -e9elry to one Mar chu !abrador for the latter to sell on comm ss on bas s. +et t oner 9as not able to collect payment from !abrador, 9h ch caused her to l Fe9 se fa l to pay her obl gat on to Uu latan. &ubse=uently, Uu latan, through counsel, sent a formal letter of demand 2 to pet t oner for fa lure to settle her obl gat on. Uu latan e1ecuted a compla nt aff dav t< aga nst pet t oner before the Dff ce of the Ass stant +rov nc al +rosecutor. %hereafter, an nformat on for estafa under Art cle <18, paragraph 1/b04 of the "ev sed +enal 'ode 9as f led aga nst pet t oner, 9h ch 9as raffled to Eranch 288 of the "eg onal %r al 'ourt of !as + nas. %he nformat on alleged?

%hat on or about and somet me dur ng the per od from July 1552 up to &eptember 1552, n the Mun c pal ty of !as + nas, Metro Man la, +h l pp nes, and 9 th n the -ur sd ct on of th s Bonorable 'ourt, the sa d accused rece ved n trust from the compla nant !eon da E. Uu latan var ous p eces of -e9elry n the total value of +8>2,280.00 to be sold on comm ss on bas s under the e1press duty and obl gat on of rem tt ng the proceeds thereof to the sa d compla nant f sold or return ng the same to the latter f unsold but the sa d accused once n possess on of sa d var ous p eces of -e9elry, 9 th unfa thfulness and abuse of conf dence and 9 th ntent to defraud, d d then and there 9 llfully, unla9fully and felon ously m sappropr ate and convert the same for her o9n personal use and benef t and desp te oral and 9r tten demands, she fa led and refused to account for sa d -e9elry or the proceeds of sale thereof, to the damage and pre-ud ce of compla nant !eon da E. Uu latan n the aforestated total amount of +8>2,280.00. 'DN%"A"H %D !A(.8 +et t oner pleaded not gu lty to the charge upon arra gnment. > %r al on the mer ts thereafter ensued. Uu latan test f ed that pet t oner 9as able to rem t +100,000.00 and returned +4<,000.00 9orth of -e9elr yI2 that at the start, pet t oner 9as prompt n settl ng her obl gat onI ho9ever, subse=uently the payments 9ere rem tted lateI 6that pet t oner st ll o9ed her n the amount of +424,280.00. 5 Dn the other hand, pet t oner adm tted that she rece ved several p eces of -e9elry from Uu latan and that she ndeed fa led to pay for the same. &he cla med that she entrusted the p eces of -e9elry to Mar chu !abrador 9ho fa led to pay for the same, thereby caus ng her to default n pay ng Uu latan. 10 &he presented hand9r tten rece pts /E1h b ts 1 N 20 11 ev denc ng payments made to Uu latan pr or to the f l ng of the cr m nal case. Mar chu !abrador conf rmed that she rece ved p eces of -e9elry from pet t oner 9orth +441,0<8.00. &he dent f ed an acFno9ledgment rece pt /E1h b t <012 s gned by her dated July 8, 1552 and test f ed that she sold the -e9elry to a person 9ho absconded 9 thout pay ng her. !abrador also e1pla ned that n the past, she too had d rectly transacted 9 th Uu latan for the sale of -e9elry on comm ss on bas sI ho9ever, due to her outstand ng account 9 th the latter, she got -e9elry from pet t oner nstead. 1< Dn November 12, 1554, the tr al court rendered a dec s on f nd ng pet t oner gu lty of estafa, the d spos t ve port on of 9h ch reads? (BE"E7D"E, n the l ght of the forego ng, the court f nds the accused C rg e &erona gu lty beyond reasonable doubt, and as the amount m sappropr ated s +424,280.00 the penalty prov ded under the f rst paragraph of Art cle <18 of the "ev sed +enal 'ode has to be mposed 9h ch shall be n the ma1 mum per od plus one /10 year for every add t onal +10,000.00. Apply ng the $ndeterm nate &entence !a9, the sa d accused s hereby sentenced to suffer the penalty of mpr sonment rang ng from 7D3" /40 HEA"& and DNE /10

DAH of pr s on correcc onal as m n mum to %EN /100 HEA"& and DNE /10 DAH of pr s on mayor as ma1 mumI to pay the sum of +424,280.00 as cost for the unreturned -e9elr esI to suffer the accessory penalt es prov ded by la9I and to pay the costs. &D D"DE"ED.14 +et t oner appealed to the 'ourt of Appeals, 9h ch aff rmed the -udgment of conv ct on but mod f ed the penalty as follo9s? (BE"E7D"E, the appealed dec s on f nd ng the accused@appellant gu lty beyond reasonable doubt of the cr me of estafa s hereby A77$"MED 9 th the follo9 ng MDD$7$'A%$DN? 'ons der ng that the amount nvolved s +424,280.00, the penalty should be mposed n ts ma1 mum per od add ng one /10 year for each add t onal +10,000.00 albe t the total penalty should not e1ceed %9enty /200 Hears /Art. <180. Bence, accused@appellant s hereby &EN%EN'ED to suffer the penalty of mpr sonment rang ng from 7our /40 Hears and Dne /10 Day of +r s on 'orrecc onal as m n mum to %9enty /200 Hears of "eclus on %emporal. &D D"DE"ED.18 3pon den al of her mot on for recons derat on, 1> pet t oner f led the nstant pet t on under "ule 48, alleg ng that? $ "E&+DNDEN% 'D3"% D7 A++EA!& &E"$D3&!H E""ED $N 'DN'!3D$N# %BA% %BE"E (A& AN AE3&E D7 'DN7$DEN'E DN %BE +A"% D7 +E%$%$DNE" $N EN%"3&%$N# %BE &3EJE'% JE(E!"$E& /s c0 %D BE" &3E@A#EN% 7D" &A!E DN 'DMM$&&$DN %D +"D&+E'%$CE E3HE"&. $$ "E&+DNDEN% 'D3"% D7 A++EA!& &E"$D3&!H E""ED $N 'DN'!3D$N# %BA% %BE"E (A& M$&A++"D+"$A%$DN D" 'DNCE"&$DN DN %BE +A"% D7 +E%$%$DNE" (BEN &BE 7A$!ED %D "E%3"N %BE &3EJE'% JE(E!"$E& /s c0 %D +"$CA%E 'DM+!A$NAN%.12 +et t oner argues that the prosecut on fa led to establ sh the elements of estafa as penal Aed under Art cle <18, par. 1/b0 of the "ev sed +enal 'ode. $n part cular, she subm ts that she ne ther abused the conf dence reposed upon her by Uu latan nor converted or m sappropr ated the sub-ect -e9elryI that her g v ng the p eces of -e9elry to a sub@agent for sale on comm ss on bas s d d not v olate her undertaF ng 9 th Uu latan. Moreover, pet t oner del vered the -e9elry to !abrador under the same terms upon 9h ch t 9as or g nally entrusted to her. $t 9as establ shed that pet t oner had not der ved any personal benef t from the loss of the -e9elry. 'onse=uently, t cannot be sa d that she m sappropr ated or converted the same.

(e f nd mer t n the pet t on. %he elements of estafa through m sappropr at on or convers on as def ned n Art cle <18, par. 1/b0 of the "ev sed +enal 'ode are? /10 that the money, good or other personal property s rece ved by the offender n trust, or on comm ss on, or for adm n strat on, or under any other obl gat on nvolv ng the duty to maFe del very of, or to return, the sameI /20 that there be m sappropr at on or convers on of such money or property by the offender or den al on h s part of such rece ptI /<0 that such m sappropr at on or convers on or den al s to the pre-ud ce of anotherI and /40 that there s a demand made by the offended party on the offender.16 (h le the f rst, th rd and fourth elements are concededly present, 9e f nd the second element of m sappropr at on or convers on to be lacF ng n the case at bar. +et t oner d d not pso facto comm t the cr me of estafa through convers on or m sappropr at on by del ver ng the -e9elry to a sub@agent for sale on comm ss on bas s. (e are unable to agree 9 th the lo9er courtsJ conclus on that th s fact alone s suff c ent ground for hold ng that pet t oner d sposed of the -e9elry ,as f t 9ere hers, thereby comm tt ng convers on and a clear breach of trust., 15 $t must be po nted out that the la9 on agency n our -ur sd ct on allo9s the appo ntment by an agent of a subst tute or sub@agent n the absence of an e1press agreement to the contrary bet9een the agent and the pr nc pal. 20 $n the case at bar, the appo ntment of !abrador as pet t onerJs sub@agent 9as not e1pressly proh b ted by Uu latan, as the acFno9ledgment rece pt, E1h b t E, does not conta n any such l m tat on. Ne ther does t appear that pet t oner 9as verbally forb dden by Uu latan from pass ng on the -e9elry to another person before the acFno9ledgment rece pt 9as e1ecuted or at any other t me. %hus, t cannot be sa d that pet t onerJs act of entrust ng the -e9elry to !abrador s character Aed by abuse of conf dence because such an act 9as not proscr bed and s, n fact, legally sanct oned. %he essence of estafa under Art cle <18, par. 1/b0 s the appropr at on or convers on of money or property rece ved to the pre-ud ce of the o9ner. %he 9ords ,convert, and ,m sappropr ated, connote an act of us ng or d spos ng of anotherJs property as f t 9ere oneJs o9n, or of devot ng t to a purpose or use d fferent from that agreed upon. %o m sappropr ate for oneJs o9n use ncludes not only convers on to oneJs personal advantage, but also every attempt to d spose of the property of another 9 thout r ght. 21 $n the case at bar, t 9as establ shed that the nab l ty of pet t oner as agent to comply 9 th her duty to return e ther the p eces of -e9elry or the proceeds of ts sale to her pr nc pal Uu latan 9as due, n turn, to the fa lure of !abrador to ab de by her agreement 9 th pet t oner. Notably, !abrador test f ed that she obl gated herself to sell the -e9elry n behalf of pet t oner also on comm ss on bas s or to return the same f not sold. $n other 9ords, the p eces of -e9elry 9ere g ven by pet t oner to !abrador to ach eve the very same end for 9h ch they 9ere del vered to her n the f rst place. 'onse=uently, there s no convers on s nce the

p eces of -e9elry 9ere not devoted to a purpose or use d fferent from that agreed upon. & m larly, t cannot be sa d that pet t oner m sappropr ated the -e9elry or del vered them to !abrador ,9 thout r ght., As de from the fact that no cond t on or l m tat on 9as mposed on the mode or manner by 9h ch pet t oner 9as to effect the sale, t s also cons stent 9 th usual pract ce for the seller to necessar ly part 9 th the valuables n order to f nd a buyer and allo9 nspect on of the tems for sale. $n +eople v. Nepomuceno,22 the accused@appellant 9as ac=u tted of estafa on facts s m lar to the nstant case. Accused@appellant there n undertooF to sell t9o d amond r ngs n behalf of the compla nant on comm ss on bas s, 9 th the obl gat on to return the same n a fe9 days f not sold. Bo9ever, by reason of the fact that the r ngs 9ere del vered also for sale on comm ss on to sub@agents 9ho fa led to account for the r ngs or the proceeds of ts sale, accused@appellant l Fe9 se fa led to maFe good h s obl gat on to the compla nant thereby g v ng r se to the charge of estafa. $n absolv ng the accused@appellant of the cr me charged, 9e held? (here, as n the present case, the agents to 9hom personal property 9as entrusted for sale, conclus vely proves the nab l ty to return the same s solely due to malfeasance of a subagent to 9hom the f rst agent had actually entrusted the property n good fa th, and for the same purpose for 9h ch t 9as rece vedI there be ng no proh b t on to do so and the chattel be ng del vered to the subagent before the o9ner demands ts return or before such return becomes due, 9e hold that the f rst agent can not be held gu lty of estafa by e ther m sappropr at on or convers on. %he abuse of conf dence that s character st c of th s offense s m ss ng under the c rcumstances. 2< Accord ngly, pet t oner here n must be ac=u tted. %he lo9er courtsJ rel ance on +eople v. 7lores24 and 3.&. v. +anes28 to -ust fy pet t onerJs conv ct on s m splaced, cons der ng that the factual bacFground of the c ted cases d ffer from those 9h ch obta n n the case at bar. $n 7lores, the accused rece ved a r ng to sell under the cond t on that she 9ould return t the follo9 ng day f not sold and 9 thout author ty to reta n the r ng or to g ve t to a sub@agent. %he accused n +anes, mean9h le, 9as obl ged to return the -e9elry he rece ved upon demand, but passed on the same to a sub@agent even after demand for ts return had already been made. $n the forego ng cases, t 9as held that there 9as convers on or m sappropr at on. 7urthermore, n ! m v. 'ourt of Appeals, 2> the 'ourt, c t ng Nepomuceno and the case of +eople v. %r n dad,22held that? $n cases of estafa the prof t or ga n must be obta ned by the accused personally, through h s o9n acts, and h s mere negl gence n perm tt ng another to taFe advantage or benef t from the entrusted chattel cannot const tute estafa under Art cle <18, paragraph 1@b, of the "ev sed +enal 'odeI unless of course the ev dence should d sclose that the agent acted n consp racy or conn vance 9 th

the one 9ho carr ed out the actual m sappropr at on, then the accused 9ould be ans9erable for the acts of h s co@consp rators. $f there s no such ev dence, d rect or c rcumstant al, and f the proof s clear that the accused herself 9as the nnocent v ct m of her sub@agentJs fa thlessness, her ac=u ttal s n order.26 /$tal cs cop ed0 !abrador adm tted that she rece ved the -e9elry from pet t oner and sold the same to a th rd person. &he further acFno9ledged that she o9ed pet t oner +441,0<8.00, thereby negat ng any cr m nal ntent on the part of pet t oner. %here s no sho9 ng that pet t oner der ved personal benef t from or consp red 9 th !abrador to depr ve Uu latan of the -e9elry or ts value. 'onse=uently, there s no estafa 9 th n contemplat on of the la9. Not9 thstand ng the above, ho9ever, pet t oner s not ent rely free from any l ab l ty to9ards Uu latan. %he rule s that an accused ac=u tted of estafa may nevertheless be held c v lly l able 9here the facts establ shed by the ev dence so 9arrant. %hen too, an agent 9ho s not proh b ted from appo nt ng a sub@agent but does so 9 thout e1press author ty s respons ble for the acts of the sub@ agent.25 'ons der ng that the c v l act on for the recovery of c v l l ab l ty ar s ng from the offense s deemed nst tuted 9 th the cr m nal act on, <0 pet t oner s l able to pay compla nant Uu latan the value of the unpa d p eces of -e9elry. (BE"E7D"E, the pet t on s #"AN%ED. %he dec s on of the 'ourt of Appeals n 'A@#.". '" No. 12222 dated Apr l <0,1552 and ts resolut on dated August 26, 1552 are "ECE"&ED and &E% A&$DE. +et t oner C rg e &erona s A'U3$%%ED of the cr me charged, but s held c v lly l able n the amount of +424,280.00 as actual damages, plus legal nterest, 9 thout subs d ary mpr sonment n case of nsolvency. &D D"DE"ED. Dav de, Jr., /'ha rman0, C tug, 'arp o, and AAcuna, JJ., concur.

:ootnotes

"ollo, p. 42. "%' "ecords, p. 6. $b d., at >.

<

A"%. <18. &9 ndl ng /estafa0. K Any person 9ho shall defraud another by any of the means ment oned here nbelo9 shall be pun shed by? 111111111

1. ( th unfa thfulness or abuse of conf dence, namely? 111111111 /b0 Ey m sappropr at ng or convert ng to the pre-ud ce of another, money, goods or any other personal property rece ved by the offender n trust or on comm ss on, or for adm n strat on, or under any other obl gat on nvolv ng the duty to maFe del very of, or to return the same, even though such obl gat on be totally or part ally guaranteed by a bondI or by deny ng hav ng rece ved such money, goods or other propertyI 1 1 1 1 1 1 1 1 1.
8

Dp. c t., note 1 at 4>. Dp. c t., note 2 at 28. %&N, July 2>, 155<, pp. 18@1>. %&N, &eptember 1<, 155<, p. 6. Dp. c t., note 2 at 12. %&N, November 6, 155<, p. 15. Dp. c t., note 2 at 45@80. $b d., at 81. %&N, January 22, 1554, pp. 8@5 N 1>@16. Dp. c t., note 1 at 81@82. $b d., at 40. $d., at 41. Dp. c t., note 1 at 1<@14.

>

10

11

12

1<

14

18

1>

12

16

Earrameda v. 'ourt of Appeals, <1< &'"A 422, 464 /15550, c t ng 7ontan lla v. +eople, 286 &'"A 4>0 /155>0 and Manahan, Jr. v. 'ourt of Appeals, 288 &'"A 202 /155>0.
15

Dp. c t., note 1 at 81.

20

' v l 'ode of the +h l pp nes, Art cle 1652. %he agent may appo nt a subst tute f the pr nc pal has not proh b ted h m from do ng soI but he shall be respons ble for the acts of the subst tute? /10 (hen he 9as not g ven the po9er to appo nt oneI 1 1 1 1 1 1 1 1 1.

21

Amorsolo v. +eople, 184 &'"A 88>, 8>< /15620, c t ng 3.&. v. "am reA, 5 +h l. >2 and 3.&. v. +anes, <2 +h l. 11> /15120.
22

'A 4> D. #. >126 /15450. $b d., at >1<8. 42 D.#. >210 /15450. <2 +h l. 11> /15120. 221 &'"A 12 /15520. 'A 8< D.#. 2<1 /158>0. Dp. c t., note 2> at 20. Dp. c t., note 20. "ev sed "ules of 'r m nal +rocedure, "ule 111, &ect on 1/a0.

2<

24

28

2>

22

26

25

<0

"epubl c of the +h l pp nes S&+$E'E %/&$( &E'DND D$C$&$DN G.$. No. 103=33 Au"ust 32, 3..2 JA)'E G&)N5AWA, +et t oners, vs. +E/+#E /: (5E +5)#)++)NES, "espondent. DE'$&$DN %A##EJ/, S$., J., Ja me #u nha9a 9as engaged n the bus ness of sell ng brand ne9 motor veh cles, nclud ng M tsub sh vans, under the bus ness name of #u nro1 Motor &ales. B s off ce and d splay room for cars 9ere located along +angan ban Avenue, Naga ' ty. Be employed # l AAotea as h s sales manager. Dn March 12, 1558, #u nha9a purchased a brand ne9 M tsub sh !@<00 Cersa Can 9 th Motor No. 4D8>A@'6525 and &er al No. !0>5(ULJ!@02520 from the 3n on Motors 'orporat on /3M'0 n +aco, Man la. %he van bore +late No. D!* 40>. #u nha9aJs dr ver, !eopoldo Dlayan, drove the van from Man la to Naga ' ty. Bo9ever, 9h le the van 9as travel ng along the h gh9ay n !abo, Daet, 'amar nes Norte, Dlayan suffered a heart attacF. %he van 9ent out of control, traversed the h gh9ay onto the oppos te lane, and 9as d tched nto the canal parallel to the h gh9ay.1 %he van 9as damaged, and the left front t re had to be replaced.

%he nc dent 9as reported to the local pol ce author t es and 9as recorded n the pol ce blotter.2 %he van 9as repa red and later offered for sale n #u nha9aJs sho9room.< &omet me n Dctober 1558, the spouses "alph and Joseph ne & lo 9anted to buy a ne9 van for the r garment bus nessI they purchased tems n Man la and sold them n Naga ' ty.4 %hey 9ent to #u nha9aJs off ce, and 9ere sho9n the !@<00 Cersa Can 9h ch 9as on d splay. %he couple nspected ts nter or port on and found t beaut ful. %hey no longer nspected the under chass s s nce they presumed that the veh cle 9as brand ne9. 8 3na9are that the van had been damaged and repa red on account of the acc dent n Daet, the couple dec ded to purchase the van for +851,000.00. AAotea suggested that the couple maFe a do9npayment of +116,200.00, and pay the balance of the purchase pr ce by nstallments via a loan from the 3n ted 'oconut +lanters EanF /3'+E0, Naga Eranch, 9 th the !@<00 Cersa Can as collateral. AAotea offered to maFe the necessary arrangements 9 th the 3'+E for the consummat on of the loan transact on. %he couple agreed. Dn November 10, 1558, the spouses e1ecuted a +rom ssory Note> for the amount of +>52,>2>.00 as payment of the balance on the purchase pr ce, and as ev dence of the chattel mortgage over the van n favor of 3'+E. Dn Dctober 11, 1558, the couple arr ved n #u nha9aJs off ce to taFe del very of the van. #u nha9a e1ecuted the deed of sale, and the couple pa d the +1>1,420.00 do9npayment, for 9h ch they 9ere ssued "ece pt No. 0<05.2%hey 9ere furn shed a &erv ce Manual 6 9h ch conta ned the 9arranty terms and cond t ons. AAotea nstructed the couple on ho9 to start the van and to operate ts rad o. "alph & lo no longer conducted a test dr veI he and h s 9 fe assumed that there 9ere no defects n the van as t 9as brand ne9. 5 Dn Dctober 12, 1558, Joseph ne & lo, accompan ed by #lenda + ngol, 9ent to Man la on board the !@<00 Cersa Can, 9 th #lendaJs husband, Eayan + ngol $$$, as the dr ver. %he r tr p to Man la 9as uneventful. Bo9ever, on the return tr p to Naga from Man la on Dctober 18 or 1>, 1558, Eayan + ngol heard a s=ueaF ng sound 9h ch seemed to be com ng from underneath the van. %hey 9ere n 'alauag, UueAon, 9here there 9ere no humps along the road. 10 + ngol stopped the van n Daet, 'amar nes Norte, and e1am ned the van underneath, but found no abnormal t es or defects.11 Eut as he drove the van to Naga ' ty, the s=ueaF ng sound pers sted. Eel ev ng that the van merely needed grease, + ngol stopped at a &hell gasol ne stat on 9here t 9as e1am ned. %he mechan c d scovered that some parts underneath the van had been 9elded. (hen + ngol compla ned to #u nha9a, the latter told h m that the defects 9ere mere factory defects. As the defects pers sted, the spouses & lo re=uested that #u nha9a change the van 9 th t9o 'harade@Da hatsu veh cles 9 th n a 9eeF or t9o, 9 th the add t onal costs to be taFen from the r do9npayment. Mean9h le, the couple stopped pay ng the monthly amort Aat on on the r loan, pend ng the replacement of the van. #u nha9a n t ally agreed to the coupleJs proposal, but later changed h s m nd and told them that he had to sell the van f rst. %he spouses then brought the

veh cle to the "1 Auto 'l n c n Naga ' ty for e1am nat on. Jesus "e1 "a=u t co, Jr., the mechan c, e1am ned the van and d scovered that t 9as the left front stab l Aer that 9as produc ng the annoy ng sound, and that t had been repa red.12 "a=u t co prepared a Job Drder conta n ng the follo9 ng notat ons and recommendat ons? 1. 'BE'* 3+ &3&+EN&$DN /7"DN%0 2. "E+!A'E %BE "DD END <. "E+!A'E E3&B$N# ND%E? 7"DN% &%E+ EDA"D BA& EEEN A!"EADH DAMA#ED AND "E+A$"ED. ND%E? 7"DN% !E7% &3&+EN&$DN MD3N%$N# $& ND% DN &+E'$7$ED A!$#NMEN%MMEA&3"EMEN%1< Joseph ne & lo f led a compla nt for the resc ss on of the sale and the refund of the r money before the Department of %rade and $ndustry /D%$0. Dur ng the confrontat on bet9een her and #u nha9a, Joseph ne learned that #u nha9a had bought the van from 3M' before t 9as sold to them, and after t 9as damaged n Daet. &ubse=uently, the spouses & lo 9 thdre9 the r compla nt from the D%$. Dn 7ebruary 14, 155>, Joseph ne & lo f led a cr m nal compla nt for v olat on of paragraph 1, Art cle <16 of the "ev sed +enal 'ode aga nst #u nha9a n the Dff ce of the ' ty +rosecutor of Naga ' ty. After the re=u s te nvest gat on, an $nformat on 9as f led aga nst #u nha9a n the Mun c pal %r al 'ourt /M%'0 of Naga ' ty. %he nculpatory port on reads? %he unders gned Ass stant +rosecutor of Naga ' ty accuses Ja me #u nha9a of the cr me of D%BE" DE'E$%& def ned and penal Aed under Art. <16, par. 1 of the "ev sed +enal 'ode, comm tted as follo9s? ,%hat on or about Dctober 11, 1558, n the ' ty of Naga, +h l pp nes, and 9 th n the -ur sd ct on of th s Bonorable 'ourt, the sa d accused, be ng a motor veh cle dealer us ng the trade name of #u nha9a Motor &ales at +angan ban Avenue, Naga ' ty, and a dealer of brand ne9 cars, by means of false pretenses and fraudulent acts, d d then and there 9 llfully, unla9fully and felon ously defraud pr vate compla nant, JD&E+B$NE +. &$!D, as follo9s? sa d accused by means of false man festat ons and fraudulent representat ons, sold to sa d pr vate compla nant, as brand ne9, an automob le 9 th trade name !@<00 Cersa Can colored be ge and the latter pa d for the same n the amount of +851,000.00, 9hen, n truth and n fact, the same 9as not brand ne9 because t 9as d scovered less than a month after t 9as sold to sa d Joseph ne +. & lo that sa d !@<00 Cersa Can had defects n the underchass s and stepboard and repa rs had already been done thereat even before sa d sale, as 9as found upon checF@up by an auto mechan cI that pr vate compla nant returned sa d !@<00 Cersa Can to the accused and demanded ts replacement 9 th a ne9 one or the return of ts purchase pr ce from sa d accused but desp te follo9@up demands no replacement 9as made nor 9as the purchase pr ce returned to pr vate compla nant up to the

present to her damage and pre-ud ce n the amount of +851,000.00, +h l pp ne 'urrency, plus other damages that may be proven n court., 14 #u nha9a test f ed that he 9as a dealer of brand ne9 %oyota, MaAda, Bonda and M tsub sh cars, under the bus ness name #u nro1 Motor &ales. Be purchased %oyota cars from %oyota +h l pp nes, and M tsub sh cars from 3M' n +aco, Man la.18 Be bought the van from the 3M' n March 1558, but d d not use tI he merely had t d splayed n h s sho9room n Naga ' ty. 1> Be ns sted that the van 9as a brand ne9 un t 9hen he sold t to the couple. 12 %he spouses & lo bought the van and tooF del very only after nspect ng and taF ng t for a road tests. 16B s sales manager, AAotea, nformed h m somet me n November 1558 that the spouses & lo had compla ned about the defects under the left front port on of the van. Ey then, the van had a F lometer read ng of 4,000 F lometers. 15Be ns sted that he d d not maFe any false statement or fraudulent m srepresentat on to the couple about the van, e ther before or s multaneous 9 th ts purchase. Be pos ted that the defects not ced by the couple 9ere not ma-or ones, and could be repa red. Bo9ever, the couple refused to have the van repa red and ns sted on a refund of the r payment for the van 9h ch he could not allo9. Be then had the defects repa red by the 3M'.20 Be cla med that the van 9as never nvolved n any acc dent, and den ed that h s dr ver, Dlayan, met an acc dent and susta ned phys cal n-ur es 9hen he drove the van from Man la to Naga ' ty. 21 Be even den ed meet ng Eayan + ngol. %he accused cla med that the couple f led a 'ompla nt 22 aga nst h m 9 th the D%$ on January 28, 155>, only to 9 thdra9 t later. 2< %he couple then fa led to pay the amort Aat ons for the van, 9h ch caused the 3'+E to f le a pet t on for the foreclosure of the chattel mortgage and the sale of the van at publ c auct on. 24 AAotea test f ed that he had been a car salesman for 1> years and that he sold brand ne9 vans.28 Eefore the couple tooF del very of the veh cle, + ngol nspected ts e1ter or, nter or, and unders de, and even drove t for the couple.2> Be 9as present 9hen the van 9as brought to the "1 Auto 'l n c, 9here he not ced the dent on ts front s de. 22 Be cla med that the van never f gured n any veh cular acc dent n !abo, Daet, 'amar nes Norte on March 12, 1558. 26 $n fact, he declared, he found no pol ce record of a veh cular acc dent nvolv ng the van on the sa d date.25 Be adm tted that Dlayan 9as the r dr ver, and 9as n charge of taF ng del very of cars purchased from the manufacturer n Man la. <0 Dn November >, 2001, the tr al court rendered -udgment conv ct ng #u nha9a. %he fallo of the dec s on reads? (BE"E7D"E, prem ses cons dered, -udgment s hereby rendered declar ng the accused, JA$ME #3$NBA(A, gu lty of the cr me of Dther Dece ts def ned and penal Aed under Art. <16/10 of the "ev sed +enal 'ode, the prosecut on hav ng proven the gu lt of the accused beyond reasonable doubt and hereby mposes upon h m the penalty of mpr sonment from 2 months and 1 day to 4 months of Arresto Mayor and a f ne of Dne Bundred E ghty %housand &even Bundred and Eleven +esos /+160,211.000 the total amount of the actual damages caused to pr vate compla nant.

As to the c v l aspect of th s case 9h ch have been deemed nst tuted 9 th th s cr m nal case, Art cles 2201 and 2202 of the ' v l 'ode prov des? ,Art. 2201. $n contracts and =uas @contracts, the damages for 9h ch the obl gor 9ho acted n good fa th s l able shall be those that are the natural and probable conse=uences of the breach of the obl gat on, and 9h ch the part es have foreseen or could have reasonably foreseen at the t me the obl gat on 9as const tuted. ,$n case of fraud, mal ce or 9anton att tude, the obl gor shall be respons ble for all damages 9h ch may be reasonably attr buted to the non@performance of the obl gat on., ,Art. 2202. $n cr mes and =uas @del cts, the defendant shall be l able for all damages 9h ch are the natural and probable conse=uences of the act or om ss on compla ned of. $t s not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant., %hus, accused s condemned to pay actual damages n the amount of Dne Bundred E ghty %housand &even Bundred and Eleven +esos /+hp160,211.000, 9h ch represents the 20R do9npayment and other m scellaneous e1penses pa d by the compla nant plus the amount of N neteen %housand %9o Bundred 7orty@ Dne /+hp15,241.000 +esos, represent ng the 1st nstallment payment made by the pr vate compla nant to the banF. Accused s, l Fe9 se, ordered to pay moral damages n the amount of Dne Bundred %housand +esos /+hp100,000.000 n v e9 of the moral pa n suffered by the compla nantI for e1emplary damages n the amount of %9o Bundred %housand +esos /+hp200,000.000 to serve as deterrent for those bus nessmen s m larly ncl ned to taFe undue advantage over the publ cJs nnocence. As for attorneyJs fees, the reasonable amount of Dne Bundred %housand +esos /+hp100,000.000 s hereby a9arded. &D D"DE"ED.<1 %he tr al court declared that the accused made false pretenses or m srepresentat ons that the van 9as a brand ne9 one 9hen, n fact, t had f gured n an acc dent n !abo, Daet, 'amar nes Norte, and susta ned ser ous damages before t 9as sold to the pr vate compla nant. #u nha9a appealed the dec s on to the "eg onal %r al 'ourt /"%'0 of Naga ' ty, Eranch 15, n 9h ch he alleged that? 1. %he lo9er court erred n ts f nd ng that the repa r 9orFs on the left front port on and underchass s of the van 9as the result of the acc dent n !abo, 'amar nes Norte, 9here ts dr ver suffered an attacF of hypertens on. 2. %he lo9er court erred n ts four /40 f nd ngs of fact that accused@appellant made m srepresentat on or false pretenses ,that the van 9as a brand ne9 car,, 9h ch const tuted dece t as def ned n Art cle <16, paragraph 1 of the "ev sed +enal 'ode.

<. %he lo9er court erred n f nd ng accused@appellant c v lly l able to compla nant Joseph ne & lo. Eut, even f there be such l ab l ty, the act on therefor has already prescr bed and the amount a9arded 9as e1horb tant, e1cess ve and unconsc onable.<2 #u nha9a ns sted that he never talFed to the couple about the sale of the vanI hence, could not have made any false pretense or m srepresentat on. Dn August 1, 2002, the "%' aff rmed the appealed -udgment. << #u nha9a f led a pet t on for rev e9 9 th the 'ourt of Appeals /'A0, 9here he averred that? $ %BE 'D3"% A Q;= E""ED $N 'DNC$'%$N# +E%$%$DNE" D7 %BE '"$ME D7 D%BE" DE'E$%& AND &EN%EN'$N# B$M %D &377E" $M+"$&DNMEN% D7 %(D MDN%B& AND DNE DAH %D 7D3" MDN%B& D7ARR5S7= MAF=R AND %D +AH 7$NE $N %BE AMD3N% D7 +160,211.00. $$ %BE 'D3"% A Q;= E""ED $N D"DE"$N# +E%$%$DNE" %D +AH +"$CA%E 'DM+!A$NAN% +160,211.00 A& DD(N+AHMEN%, +15,241.00 A& 7$"&% $N&%A!!MEN% ($%B 3'+E NA#A, +100,000.00 A& MD"A! DAMA#E&,+200,000.00 A& EGEM+!A"H DAMA#E& AND +100,000.00 A& A%%D"NEHJ& 7EE&.<4 Dn January 8, 2004, the 'A rendered -udgment aff rm ng 9 th mod f cat on the dec s on of the "%'. %he fallo of the dec s on reads? W5E$E:/$E, prem ses cons dered, the nstant pet t on s hereby part ally granted nsofar as the follo9 ng are concerned? a0 the a9ard of moral damages s hereby $E!&%E! to +10,000.00 and b0 the a9ard of attorneyJs fees and e1emplary damages are hereby !E#E(E! for lacF of factual bas s. $n all other respects, (e aff rm the dec s on under rev e9. 'osts aga nst pet t oner. &D D"DE"ED.<8 %he 'A ruled that the pr vate compla nant had the r ght to assume that the van 9as brand ne9 because #u nha9a held h mself out as a dealer of brand ne9 vans. Accord ng to the appellate court, the act of d splay ng the van n the sho9room 9 thout not ce to any 9ould@be buyer that t 9as not a brand ne9 un t 9as tantamount to dece t. %hus, n conceal ng the vanJs true cond t on from the buyer, #u nha9a comm tted dece t. %he appellate court den ed #u nha9aJs mot on for recons derat on, prompt ng h m to f le the present pet t on for rev e9 on certiorari, 9here he contends? $

%BE 'D3"% A Q;= E""ED $N ND% BD!D$N# %BA% %BE $N7D"MA%$DN 'BA"#ED A#A$N&% +E%$%$DNE" D$D ND% $N7D"M B$M D7 A 'BA"#E D7 D%BE" DE'E$%&. $$ %BE 'D3"% A Q;= E""ED $N BD!D$N# %BA% +E%$%$DNE" EM+!DHED 7"A3D D" DE'E$% A& DE7$NED 3NDE" A"%$'!E <16, "EC$&ED +ENA! 'DDE. $$$ %BE 'D3"% A Q;= E""ED $N ND% 'DN&$DE"$N# %BE '$"'3M&%AN'E& +D$N%$N# %D %BE $NND'EN'E D7 %BE +E%$%$DNE". <> %he ssues for resolut on are /10 9hether, under the $nformat on, the pet t oner 9as charged of other dece ts under paragraph 1, Art cle <16 of the "ev sed +enal 'odeI and /20 9hether the respondent adduced proof beyond reasonable doubt of the pet t onerJs gu lt for the cr me charged. %he pet t oner asserts that based on the allegat ons n the $nformat on, he 9as charged 9 th estafa through false pretenses under paragraph 2, Art cle <18 of the "ev sed +enal 'ode. 'ons der ng the allegat on that the pr vate compla nant 9as defrauded of +851,000.00, t s the "%', not the M%', 9h ch has e1clus ve -ur sd ct on over the case. %he pet t oner ma nta ns that he s not estopped from assa l ng th s matter because the tr al courtJs lacF of -ur sd ct on can be assa led at any t me, even on appeal, 9h ch defect cannot even be cured by the ev dence adduced dur ng the tr al. %he pet t oner further avers that he 9as conv cted of other dece ts under paragraph 1, Art cle <16 of the "ev sed +enal 'ode, a cr me for 9h ch he 9as not chargedI hence, he 9as depr ved of h s const tut onal r ght to be nformed of the nature of the charge aga nst h m. And n any case, even f he had been charged of other dece ts under paragraph 1 of Art cle <16, the 'A erred n f nd ng h m gu lty. Be ns sts that the pr vate compla nant merely assumed that the van 9as brand ne9, and that he d d not maFe any m srepresentat on to that effect. Be avers that dece t cannot be comm tted by concealment, the absence of any not ce to the publ c that the van 9as not brand ne9 does not amount to dece t. Be pos ts that based on the pr nc ple of caveat emptor, f the pr vate compla nant purchased the van 9 thout f rst nspect ng t, she must suffer the conse=uences. Moreover, he d d not attend to the pr vate compla nant 9hen they e1am ned the vanI thus, he could not have dece ved them. %he pet t oner ma nta ns that, absent ev dence of consp racy, he s not cr m nally l able for any representat on AAotea may have made to the pr vate compla nant, that the van 9as brand ne9. Be ns sts that the respondent 9as estopped from adduc ng ev dence that the veh cle 9as nvolved n an acc dent n Daet, 'amar nes Norte on March 12, 1558, because such fact 9as not alleged n the $nformat on. $n ts comment on the pet t on, the Dff ce of the &ol c tor #eneral avers that, as gleaned from the mater al averments of the $nformat on, the pet t oner 9as charged 9 th other dece ts under paragraph 1, Art cle <16 of the "ev sed +enal

'ode, a felony 9 th n the e1clus ve -ur sd ct on of the M%'. %he pet t oner 9as correctly charged and conv cted, s nce he falsely cla med that the veh cle 9as brand ne9 9hen he sold the same to the pr vate compla nant. %he pet t onerJs concealment of the fact that the van susta ned ser ous damages as an aftermath of the acc dent n Daet, 'amar nes Norte const tuted dece t 9 th n the mean ng of paragraph 1 of Art cle <16. %he $nformat on f led aga nst the pet t oner reads? %hat on or about Dctober 11, 1558, n the ' ty of Naga, +h l pp nes, and 9 th n the -ur sd ct on of th s Bonorable 'ourt, the sa d accused, be ng a motor veh cle dealer us ng the trade name of #u nha9a Motor &ales at +angan ban Avenue, Naga ' ty, and dealer of brand ne9 cars, by means of false pretenses and fraudulent acts, d d then and there, 9 llfully, unla9fully and felon ously defraud pr vate compla nant, JD&E+B$NE +. &$!D, as follo9s? sa d accused by means of false man festat ons and fraudulent representat ons, sold to sa d pr vate compla nant, as brand ne9, an automob le 9 th trade name !@<00 Cersa Can colored be ge and the latter pa d for the same n the amount of +851,000.00, 9hen, n truth and n fact, the same 9as not brand ne9 because t 9as d scovered less than a month after t 9as sold to sa d Joseph ne +. & lo that sa d !@<00 Cersa Can had defects n the underchass s and stepboard and repa rs have already been done thereat even before sa d sale, as 9as found upon checF@up by an auto mechan cI that pr vate compla nant returned sa d !@<00 Cersa Can to the accused and demanded ts replacement 9 th a ne9 one or the return of ts purchase pr ce from sa d accused but desp te follo9@up demands no replacement 9as made nor 9as the purchase pr ce returned to pr vate compla nant up to the present to her damage and pre-ud ce n the amount of +851,000.00, +h l pp ne 'urrency, plus other damages that may be proven n court. 'DN%"A"H %D !A(.<2 &ect on >, "ule 110 of the "ules of 'r m nal +rocedure re=u res that the $nformat on must allege the acts or om ss ons compla ned of as const tut ng the offense? &E'. >. Sufficiency of complaint or information . K A compla nt or nformat on s suff c ent f t states the name of the accusedI the des gnat on of the offense g ven by the statuteI the acts or om ss ons compla ned of as const tut ng the offenseI the name of the offended partyI the appro1 mate date of the comm ss on of the offenseI and the place 9here the offense 9as comm tted. (hen an offense s comm tted by more than one person, all of them shall be ncluded n the compla nt or nformat on. %he real nature of the offense charged s to be ascerta ned by the facts alleged n the body of the $nformat on and the pun shment prov ded by la9, not by the des gnat on or t tle or capt on g ven by the +rosecutor n the $nformat on. <6 %he $nformat on must allege clearly and accurately the elements of the cr me charged.<5

As can be gleaned from ts averments, the $nformat on alleged the essent al elements of the cr me under paragraph 1, Art cle <16 of the "ev sed +enal 'ode. %he false or fraudulent representat on by a seller that 9hat he offers for sale s brand ne9 /9hen, n fact, t s not0 s one of those dece tful acts env saged n paragraph 1, Art cle <16 of the "ev sed +enal 'ode. %he prov s on reads? Art. <16. =ther deceits. K %he penalty of arresto mayor and a f ne of not less than the amount of the damage caused and not more than t9 ce such amount shall be mposed upon any person 9ho shall defraud or damage another by any other dece t not ment oned n the preced ng art cles of th s chapter. %h s prov s on 9as taFen from Art cle 884 of the &pan sh +enal 'ode 9h ch prov des? 5l que defraudare o per"udicare a otro, usando de cualquier enga>o que no se halle e presado en los artXculos anteriores de esta secciYn, serZ castigado con una multa del tanto al duplo del per"uicio que irrogareG y en caso de reincidencia, con la del duplo y arresto mayor en su grado medio al mZ imo . 7or one to be l able for ,other dece ts, under the la9, t s re=u red that the prosecut on must prove the follo9 ng essent al elements? /a0 false pretense, fraudulent act or pretense other than those n the preced ng art clesI /b0 such false pretense, fraudulent act or pretense must be made or e1ecuted pr or to or s multaneously 9 th the comm ss on of the fraudI and /c0 as a result, the offended party suffered damage or pre-ud ce. 40 $t s essent al that such false statement or fraudulent representat on const tutes the very cause or the only mot ve for the pr vate compla nant to part 9 th her property. %he prov s on ncludes any F nd of conce vable dece t other than those enumerated n Art cles <18 to <12 of the "ev sed +enal 'ode. 41 $t s ntended as the catchall prov s on for that purpose 9 th ts broad scope and ntendment. 42 %hus, the pet t onerJs rel ance on paragraph 2/a0, Art cle <18 of the "ev sed +enal 'ode s m splaced. %he sa d prov s on reads? 2. Ey means of any of the follo9 ng false pretenses or fraudulent acts e1ecuted pr or to or s multaneously 9 th the comm ss on of the fraud? /a0 Ey us ng f ct t ous name, or falsely pretend ng to possess po9er, nfluence, =ual f cat ons, property, cred t, agency, bus ness or mag nary transact onsI or by means of other s m lar dece ts. %he fraudulent representat on of the seller, n th s case, that the van to be sold s brand ne9, s not the dece t contemplated n the la9. 3nder the pr nc ple of e"usdem generis, 9here a statement ascr bes th ngs of a part cular class or F nd accompan ed by 9ords of a gener c character, the gener c 9ords 9 ll usually be l m ted to th ngs of a s m lar nature 9 th those part cularly enumerated unless there be someth ng n the conte1t to the contrary. 4<

Jur sd ct on s conferred by the 'onst tut on or by la9. $t cannot be conferred by the 9 ll of the part es, nor d m n shed or 9a ved by them. %he -ur sd ct on of the court s determ ned by the averments of the compla nt or $nformat on, n relat on to the la9 preva l ng at the t me of the f l ng of the cr m nal compla nt or $nformat on, and the penalty prov ded by la9 for the cr me charged at the t me of ts comm ss on. &ect on <2 of Eatas +ambansa Elg. 125, as amended by "epubl c Act No. 2>51, prov des that the M%' has e1clus ve -ur sd ct on over offenses pun shable 9 th mpr sonment not e1ceed ng s 1 years, rrespect ve of the amount of the f ne? &ec. <2. 9urisdiction of Metropolitan 7rial .ourts, Municipal 7rial .ourts and Municipal .ircuit 7rial .ourts in .riminal .ases . K E1cept n cases fall ng 9 th n the e1clus ve or g nal -ur sd ct on of "eg onal %r al 'ourts and of the &and ganbayan, the Metropol tan %r al 'ourts, Mun c pal %r al 'ourts, and Mun c pal ' rcu t %r al 'ourts shall e1erc se? /10 E1clus ve or g nal -ur sd ct on over all v olat ons of c ty or mun c pal ord nances comm tted 9 th n the r respect ve terr tor al -ur sd ct onI and /20 E1clus ve or g nal -ur sd ct on over all offenses pun shable 9 th mpr sonment not e1ceed ng s 1 />0 years rrespect ve of the amount of f ne, and regardless of other mposable accessory or other penalt es, nclud ng the c v l l ab l ty ar s ng from such offenses or pred cated thereon, rrespect ve of F nd, nature, value or amount thereof?$rovided, ho&ever, %hat n offenses nvolv ng damage to property through cr m nal negl gence, they shall have e1clus ve or g nal -ur sd ct on thereof. & nce the felony of other dece ts s pun shable by arresto mayor, the M%' had e1clus ve -ur sd ct on over the offense lodged aga nst the pet t oner. Dn the mer ts of the pet t on, the 'ourt agrees 9 th the pet t onerJs content on that there s no ev dence on record that he made d rect and pos t ve representat ons or assert ons to the pr vate compla nant that the van 9as brand ne9. %he record sho9s that the pr vate compla nant and her husband "alph & lo 9ere, n fact, attended to by AAotea. Bo9ever, t bears stress ng that the representat on may be n the form of 9ords, or conduct resorted to by an nd v dual to serve as an advantage over another. $ndeed, as declared by the 'A based on the ev dence on record? +et t oner cannot barefacedly cla m that he made no personal representat on that the here n sub-ect van 9as brand ne9 for the s mple reason that no9here n the records d d he ever refute the allegat on n the compla nt, 9h ch held h m out as a dealer of brand ne9 cars. $t has thus become adm tted that the pet t oner 9as deal ng 9 th brand ne9 veh cles K a fact 9h ch, up to no9, pet t oner has not categor cally den ed. %herefore, 9hen pr vate compla nant 9ent to pet t onerJs sho9room, the former had every r ght to assume that she 9as be ng sold brand ne9 veh cles there be ng noth ng to nd cate other9 se. Eut as t turned out, not only d d pr vate compla nant get a defect ve and used van, the veh cle had also

earl er f gured n a road acc dent 9hen dr ven by no less than pet t onerJs o9n dr ver.44 $ndeed, the pet t oner and AAotea obdurately ns sted n the tr al court that the van 9as brand ne9, and that t had never f gured n veh cular acc dent. %h s representat on 9as accentuated by the fact that the pet t oner gave the &erv ce Manual to the pr vate compla nant, 9h ch manual conta ned the 9arranty terms and cond t ons, s gn fy ng that the van 9as ,brand ne9., Eel ev ng th s good fa th, the pr vate compla nant dec ded to purchase the van for her buy@and@sell and garment bus ness, and even made a do9npayment of the purchase pr ce. As supported by the ev dence on record, the van 9as defect ve 9hen the pet t oner sold t to the pr vate compla nant. $t had d tched onto the shoulder of the h gh9ay n Daet, 'amar nes Norte on ts 9ay from Man la to Naga ' ty. %he van 9as damaged and had to be repa redI the rod end and bush ng had to be replaced, 9h le the left front stab l Aer 9h ch gave out a pers stent annoy ng sound 9as repa red. &ome parts underneath the van 9ere even 9elded together. AAotea and the pet t oner del berately concealed these facts from the pr vate compla nant 9hen she bought the van, obv ously so as not to dera l the sale and the prof t from the transact on. %he 'A s correct n rul ng that fraud or dece t may be comm tted by om ss on. As the 'ourt held n $eople v. !alasa?48 7raud, n ts general sense, s deemed to compr se anyth ng calculated to dece ve, nclud ng all acts, om ss ons, and concealment nvolv ng a breach of legal or e=u table duty, trust, or conf dence -ustly reposed, result ng n damage to another, or by 9h ch an undue and unconsc ent ous advantage s taFen of another. $t s a gener c term embrac ng all mult far ous means 9h ch human ngenu ty can dev ce, and 9h ch are resorted to by one nd v dual to secure an advantage over another by false suggest ons or by suppress on of truth and ncludes all surpr se, tr cF, cunn ng, d ssembl ng and any unfa r 9ay by 9h ch another s cheated. =n the other hand, deceit is the false representation of a matter of fact &hether #y &ords or conduct, #y false or misleading allegations, or #y concealment of that &hich should have #een disclosed &hich deceives or is intended to deceive another so that he shall act upon it to his legal in"ury .4> $t s true that mere s lence s not n tself concealment. 'oncealment 9h ch the la9 denounces as fraudulent mpl es a purpose or des gn to h de facts 9h ch the other party sought to Fno9.42 7a lure to reveal a fact 9h ch the seller s, n good fa th, bound to d sclose may generally be class f ed as a decept ve act due to ts nherent capac ty to dece ve.46 &uppress on of a mater al fact 9h ch a party s bound n good fa th to d sclose s e=u valent to a false representat on.45 Moreover, a representat on s not conf ned to 9ords or pos t ve assert onsI t may cons st as 9ell of deeds, acts or art facts of a nature calculated to m slead another and thus allo9 the fraud@feasor to obta n an undue advantage.80

7raudulent nond sclosure and fraudulent concealment are of the same genre. 7raudulent concealment presupposes a duty to d sclose the truth and that d sclosure 9as not made 9hen opportun ty to speaF and nform 9as presented, and that the party to 9hom the duty of d sclosure, as to a mater al fact 9as due, 9as nduced thereby to act to h s n-ury. 81 Art cle 1<65 of the Ne9 ' v l 'ode prov des that fa lure to d sclose facts 9hen there s a duty to reveal them const tutes fraud. $n a contract of sale, a buyer and seller do not deal from e=ual barga n ng pos t ons 9hen the latter has Fno9ledge, a mater al fact 9h ch, f commun cated to the buyer, 9ould render the grounds unacceptable or, at least, substant ally less des rable. 82 $f, n a contract of sale, the vendor Fno9 ngly allo9ed the vendee to be dece ved as to the th ng sold n a mater al matter by fa l ng to d sclose an ntr ns c c rcumstance that s v tal to the contract, Fno9 ng that the vendee s act ng upon the presumpt on that no such fact e1 sts, dece t s accompl shed by the suppress on of the truth.8< $n the present case, the pet t oner and AAotea Fne9 that the van had f gured n an acc dent, 9as damaged and had to be repa red. Nevertheless, the van 9as placed n the sho9room, thus maF ng t appear to the publ c that t 9as a brand ne9 un t. %he pet t oner 9as mandated to reveal the forego ng facts to the pr vate compla nant. Eut the pet t oner and AAotea even obdurately declared 9hen they test f ed n the court a quo that the veh cle d d not f gure n an acc dent, nor had t been repa redI they ma nta ned that the van 9as brand ne9, Fno9 ng that the pr vate compla nant 9as go ng to use t for her garment bus ness. %hus, the pr vate compla nant bought the van, bel ev ng t 9as brand ne9. & gn f cantly, even 9hen the pet t oner 9as appr sed that the pr vate compla nant had d scovered the vanJs defects, the pet t oner agreed to replace the van, but changed h s m nd and ns sted that t must be f rst sold. %he pet t oner s not rel eved of h s cr m nal l ab l ty for dece tful concealment of mater al facts, even f the pr vate compla nant made a v sual nspect on of the vanJs nter or and e1ter or before she agreed to buy t and fa led to nspect ts under chass s. 'ase la9 has t that 9here the vendee made only a part al nvest gat on and rel es, n part, upon the representat on of the vendee, and s dece ved by such representat on to h s n-ury, he may ma nta n an act on for such dece t.84 %he seller cannot be heard to say that the vendee should not have rel ed upon the fraudulent concealmentI that negl gence, on the part of the vendee, should not be a defense n order to prevent the vendor from un-ust f ably escap ng 9 th the fru ts of the fraud. $n one case,88 the defendant 9ho repa nted an automob le, 9orFed t over to resemble a ne9 one and del vered t to the pla nt ff 9as found to have 9arranted and represented that the automob le be ng sold 9as ne9. %h s 9as found to be ,a false representat on of an e1 st ng factI and, f t 9as mater al and nduced the pla nt ff to accept someth ng ent rely d fferent from that 9h ch he had contracted for, t clearly 9as a fraud 9h ch, upon ts d scovery and a tender of the property

bacF to the seller, : t; ent tled the pla nt ff to resc nd the trade and recover the purchase money.,8> Dn the pet t onerJs ns stence that the pr vate compla nant 9as proscr bed from charg ng h m 9 th estafa based on the pr nc ple of caveat emptor, case la9 has t that th s rule only re=u res the purchaser to e1erc se such care and attent on as s usually e1erc sed by ord nar ly prudent men n l Fe bus ness affa rs, and only appl es to defects 9h ch are open and patent to the serv ce of one e1erc s ng such care.82 $n an avuncular case, t 9as held that? T %he rule of caveat emptor, l Fe the rule of s9eet char ty, has often been nvoFed to cover a mult tude of s nsI but 9e th nF ts protect ng mantle has never been stretched to th s e1tent. $t can only be appl ed 9here t s sho9n or conceded that the part es to the contract stand on e=ual foot ng and have e=ual Fno9ledge or e=ual means of Fno9ledge and there s no relat on of trust or conf dence bet9een them. Eut, 9here one party undertaFes to sell to another property s tuated at a d stance and of 9h ch he has or cla ms to have personal Fno9ledge and of 9h ch the buyer Fno9s noth ng e1cept as he s nformed by the seller, the buyer may r ghtfully rely on the truth of the sellerJs representat ons as to ts F nd, =ual ty, and value made n the course of negot at on for the purpose of nduc ng the purchase. $f, n such case, the representat ons prove to be false, ne ther la9 nor e=u ty 9 ll perm t the seller to escape respons b l ty by the plea that the buyer ought not to have bel eved h m or ought to have appl ed to other sources to ascerta n the facts. T 86 $t bears stress ng that AAotea and the pet t oner had every opportun ty to reveal to the pr vate compla nant that the van 9as defect ve. %hey resolved to ma nta n the r s lence, to the pre-ud ce of the pr vate compla nant, 9ho 9as a garment merchant and 9ho had no spec al Fno9ledge of parts of motor veh cles. Eased on the surround ng c rcumstances, she rel ed on her bel ef that the van 9as brand ne9. $n f ne, she 9as the nnocent v ct m of the pet t onerJs fraudulent nond sclosure or concealment. %he pet t oner cannot p n cr m nal l ab l ty for h s fraudulent om ss on on h s general manager, AAotea. %he t9o are e=ually l able for the r collect ve fraudulent s lence. 'ase la9 has t that 9herever the do ng of a certa n act or the transact on of a g ven affa r, or the performance of certa n bus ness s conf ded to an agent, the author ty to so act 9 ll, n accordance 9 th a general rule often referred to, carry 9 th t by mpl cat on the author ty to do all of the collateral acts 9h ch are the natural and ord nary nc dents of the ma n act or bus ness author Aed.85 %he M%' sentenced the pet t oner to suffer mpr sonment of from t9o months and one day, as m n mum, to four months of arresto mayor, as ma1 mum. %he 'A aff rmed the penalty mposed by the tr al court. %h s s erroneous. &ect on 2 of Act 410<, as amended, other9 se Fno9n as the $ndeterm nate &entence !a9, prov des that the la9 9 ll not apply f the ma1 mum term of mpr sonment does not e1ceed one year?

&E'. 2. %h s Act shall not apply to persons conv cted of offenses pun shed 9 th death penalty or l fe@ mpr sonmentI to those conv cted of treason, consp racy or proposal to comm t treasonI to those conv cted of m spr s on of treason, rebell on, sed t on or esp onageI to those conv cted of p racyI to those 9ho are hab tual del n=uentsI to those 9ho shall have escaped from conf nement or evaded sentenceI to those 9ho hav ng been granted cond t onal pardon by the 'h ef E1ecut ve shall have v olated the terms thereofI to those 9hose ma1 mum term of mpr sonment does not e1ceed one year, not to those already sentenced by f nal -udgment at the t me of approval of th s Act, e1cept as prov ded n &ect on 8 hereof. /As amended by Act No. 4228.0 $n th s case, the ma1 mum term of mpr sonment mposed on the pet t oner 9as four months and one day of arresto mayor. Bence, the M%' 9as proscr bed from mpos ng an ndeterm nate penalty on the pet t oner. An ndeterm nate penalty may be mposed f the m n mum of the penalty s one year or less, and the ma1 mum e1ceeds one year. 7or e1ample, the tr al court may mpose an ndeterm nate penalty of s 1 months of arresto mayor, as m n mum, to t9o years and four months of prision correccional, as ma1 mum, s nce the ma1 mum term of mpr sonment t mposed e1ceeds one year. $f the tr al court opts to mpose a penalty of mpr sonment of one year or less, t should not mpose an ndeterm nate penalty, but a stra ght penalty of one year or less nstead. %hus, the pet t oner may be sentenced to a stra ght penalty of one year, or a stra ght penalty of less than one year, i.e., ten months or eleven months. (e bel eve that cons der ng the attendant c rcumstances, a stra ght penalty of mpr sonment of s 1 months s reasonable. 'onformably 9 th Art cle <5 n relat on to paragraph <, Art cle <6 of the "ev sed +enal 'ode, the pet t oner shall suffer subs d ary mpr sonment f he has no property 9 th 9h ch to pay the penalty of f ne. )N #)G5( /: A## (5E :/$EG/)NG, the pet t on s !EN)E!. %he assa led Dec s on and "esolut on areA::)$'E! W)(5 '/!):)%A()/N. 'ons der ng the surround ng c rcumstances of the case, the pet t oner s hereby sentenced to suffer a stra ght penalty of s 1 />0 months mpr sonment. %he pet t oner shall suffer subs d ary mpr sonment n case of nsolvency. 'osts aga nst the pet t oner. S/ /$!E$E!. $/'E/ J. %A##EJ/, S$. Assoc ate Just ce (E 'DN'3"? $E8NA(/ S. +&N/ Assoc ate Just ce 'ha rman

'A. A#)%)A A&S($)A7'A$()NE6 !AN(E /. ()NGA Assoc ate Just ce Assoc ate Just ce ')N)(A *. %5)%/7NA6A$)/ Assoc ate Just ce A((ES(A()/N $ 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. $E8NA(/ S. +&N/ Assoc ate Just ce 'ha rman, &econd D v s on %E$():)%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 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. 5)#A$)/ G. !A*)!E, J$. 'h ef Just ce

:ootnotes
1

E1h b t ,E., E1h b t ,D., %&N, 1 June 2000, pp. 1>@12. %&N, < August 2000, p. 8. %&N, > Dctober 1555, p. 16. E1h b t ,DD@1., E1h b t ,77., E1h b t ,J., %&N, > Dctober 1555, p. 16. %&N, 25 January 1556, pp. 8@2.

<

>

10

11

E1h b t ,7., E1h b ts ,*, to ,*@1., E1h b t ,AA., "ecords, p. 1. %&N, 1 June 2000, p. >. E1h b t ,4@A., %&N, 1 June 2000, p. 15. :d. at 2. E1h b t ,4@A., %&N, 1 June 2000, p. 15I E1h b ts ,4, to ,4@'., E1h b t ,4., E1h b t ,6., E1h b t ,11., E1h b ts ,DD, and ,EE., %&N, 2< November 2000, p. 11. %&N, < August 2000, pp. >@2. :d. at 10. :d. at 14. :d. at 1<. :d. at 1<@14. "ecords, pp. >41@>42. "ecords, p. 828. :d. at 866@852. :d. at >0>.

12

1<

14

18

1>

12

16

15

20

21

22

2<

24

28

2>

22

26

25

<0

<1

<2

<<

<4

<8

+enned by Assoc ate Just ce Andres E. "eyes, Jr., 9 th Assoc ate Just ces Euenaventura J. #uerrero and "egalado E. Maambong, concurr ngI 'A Rollo, p. 100.
<>

Rollo, p. 5. "ecords, p. 1.

<2

<6

!uhat v. .ourt of Appeals, #.". No. 115>01, 12 December 155>, 2>8 &'"A 201I $eople v. 5scosio, #.". No. 101242, 28 March 155<, 220 &'"A 428I !uaya v. $olo, #.". No. 28025, 2> January 1565, 1>5 &'"A 421.
<5

Serapio v. Sandigan#ayan, #.". No. 1462>5, 26 January 200<, <5> &'"A 44<.

40

T +. que e ista realmente una defraudacion, un per"uicio e"ectivoG ()* que este se haya causado mediante enga>o, esto es, con el empleo de medios fraudulentos puestos en "uego por el estafador para conseguir su mal proposito . /C ada, 'od go +enal, >th ed., Col. >, p. 8200
41

"eyes, %he "ev sed +enal 'ode, 2001 ed., Col. $$, p. 618. "egalado, 'r m nal !a9 'onspectus, 1st ed., p. 852.

42

4<

$hilippine !an' of .ommunications v. .ourt of Appeals, #.". No. 116882, 8 7ebruary 155>, 28< &'"A 241.
44

Rollo, p. <4. #.". No. 10><82, < &eptember 1556, 258 &'"A 45. /Emphas s suppl ed0 :d. at 21@22. $hillips $etroleum .o. v. Daniel Motors .o., 145 &.(.2d 525 /15410.

48

4>

42

46

7esto v. Russ Dunmire =ldsmo#ile, :nc., 6< A.!."., <rd ed., p. >60 /152>0I 884 +.2d <45.
45

7yler v. Savage, 14< 3.&. 25, 12 &.'t. <40, <> !.Ed. 62. %ind#erg .adillac .ompany v. %eonard Aron, <21 &.(.2d >81 /15><0. %ovell v. Smith, 1>5 &o. 260 /15<>0. Supra, at note 42. %ind#ergh .adillac .ompany v. Aron, <21 &.(.2d >81 /15><0. !urnett v. !oyer, 268 &.(. >20I Madton v. 3orton, 2<6 N.(. >6>. 1raus v. 3ational !an' of .ommerce of Man'ato, 1>2 N.(. <8<. Snellgrove v. Dingelhoef, 10< &.E. 416 /15200. 9udd v. 6al'er, 65 &.(. 886. 3olan v. 8itzpatric', et al., 12< N.(. 288 /15150. $ar' v. Moorman Manufacturing .ompany, 40 A.!.". 2d 22< /15820.

80

81

82

8<

84

88

8>

82

86

85

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

EN EAN' G.$. No. #71==.2 Au"ust 1;, 1<01

(5E 9/A$! /: #)E&)!A(/$S1 representin" (5E G/*E$N'EN( /: (5E $E+&9#)% /: (5E +5)#)++)NES,pla nt ff@appellant, vs. 5E)$S /: 'A>)'/ '. KA#AW,3 J&AN 9/%A$, ES(A(E /: (5E !E%EASE! %AS)')$/ GA$%)A,4 and #E/N/$ '/##, defendants@appellees. Simeon M. 2opengco and Solicitor 2eneral for plaintiff<appellant. %. 0. 0ernandez, 5mma Quisum#ing, 8ernando and Quisum#ing, 9r.G $once 5nrile, Siguion Reyna, Montecillo and !elo for defendants<appellees. SAN%5E6, J.: %he Nat onal 'oconut 'orporat on /NA'D'D, for short0 9as chartered as a non@ prof t governmental organ Aat on on May 2, 1540 by 'ommon9ealth Act 816 avo9edly for the protect on, preservat on and development of the coconut ndustry n the +h l pp nes. Dn August 1, 154>, NA'D'D)s charter 9as amended :"epubl c Act 8; to grant that corporat on the e1press po9er ,to buy, sell, barter, e1port, and n any other manner deal n, coconut, copra, and dess cated coconut, as 9ell as the r by@products, and to act as agent, broFer or comm ss on merchant of the producers, dealers or merchants, thereof. %he charter amendment 9as enacted to stab l Ae copra pr ces, to serve coconut producers by secur ng advantageous pr ces for them, to cut do9n to a m n mum, f not altogether el m nate, the marg n of m ddlemen, mostly al ens. 4 #eneral manager and board cha rman 9as Ma1 mo M. *ala9I defendants Juan Eocar and 'as m ro #arc a 9ere members of the EoardI defendant !eonor Moll became d rector only on December 22, 1542. NA'D'D, after the passage of "epubl c Act 8, embarFed on copra trad ng act v t es. Amongst the scores of contracts e1ecuted by general manager *ala9 are the d sputed contracts, for the del very of copra, viz? /a0 July <0, 1542? Ale1ander Adamson N 'o., for 2,000 long tons, S1>2.00? per ton, f. o. b., del very? August and &eptember, 1542. %h s contract 9as later ass gned to !ou s Dreyfus N 'o. /Dverseas0 !td. /b0 August 14, 1542? Ale1ander Adamson N 'o., for 2,000 long tons S148.00 per long ton, f.o.b., +h l pp ne ports, to be sh pped? &eptember@Dctober, 1542. %h s contract 9as also ass gned to !ou s Dreyfus N 'o. /Dverseas0 !td. /c0 August 22, 1542? +ac f c Cegetable 'o., for <,000 tons, S1<2.80 per ton, del very? &eptember, 1542. /d0 &eptember 8, 1542? &pencer *ellog N &ons, for 1,000 long tons, S1>0.00 per ton, c. .f., !os Angeles, 'al forn a, del very? November, 1542.

/e0 &eptember 5, 1542? 7ranFl n EaFer D v s on of #eneral 7oods 'orporat on, for 1,800 long tons, S1>4,00 per ton, c. .f., Ne9 HorF, to be sh pped n November, 1542. /f0 &eptember 12, 1542? !ou s Dreyfus N 'o. /Dverseas0 !td., for <,000 long tons, S184.00 per ton, f.o.b., < +h l pp ne ports, del very? November, 1542. /g0 &eptember 1<, 1542? Juan 'o-uangco, for 2,000 tons, S128.00 per ton, del very? November and December, 1542. %h s contract 9as ass gned to +ac f c Cegetable 'o. /h0 Dctober 22, 1542? 7a r9ood N 'o., for 1,000 tons, S210.00 per short ton, c. .f., +ac f c ports, del very? December, 1542 and January, 1546. %h s contract 9as ass gned to +ac f c Cegetable 'o. / 0 Dctober 26, 1542? 7a r9ood N 'o., for 1,000 tons, S210.00 per short ton, c. .f., +ac f c ports, del very? January, 1546. %h s contract 9as ass gned to +ac f c Cegetable 'o. An unhappy cha n of events consp red to deter NA'D'D from fulf ll ng these contracts. Nature supervened. 7our devastat ng typhoons v s ted the +h l pp nes? the f rst n Dctober, the second and th rd n November, and the fourth n December, 1542. 'oconut trees throughout the country suffered e1tens ve damage. 'opra product on decreased. +r ces sp ralled. (arehouses 9ere destroyed. 'ash re=u rements doubled. Depr vat on of e1port fac l t es ncreased the t me necessary to accumulate sh ploads of copra. Uu cF turnovers became mposs ble, f nanc ng a problem. (hen t became clear that the contracts 9ould be unprof table, *ala9 subm tted them to the board for approval. $t 9as not unt l December 22, 1542 9hen the membersh p 9as completed. Defendant Moll tooF her oath on that date. A meet ng 9as then held. *ala9 made a full d sclosure of the s tuat on, appr sed the board of the mpend ng heavy losses. No act on 9as taFen on the contracts. Ne ther d d the board vote thereon at the meet ng of January 2, 1546 follo9 ng. %hen, on January 11, 1546, +res dent "o1as made a statement that the NA'D'D head d d h s best to avert the losses, emphas Aed that government concerns faced the same r sFs that confronted pr vate compan es, that NA'D'D 9as recoup ng ts losses, and that *ala9 9as to rema n n h s post. Not long thereafter, that s, on January <0, 1546, the board met aga n 9 th *ala9, Eocar, #arc a and Moll n attendance. %hey unan mously approved the contracts here nbefore enumerated. As 9as to be e1pected, NA'D'D but part ally performed the contracts, as follo9s? !uyers +ac f c Cegetable D l 7ons Delivered 2,<6>.48 ;ndeliver ed 4,>1<.88

&pencer *ellog 7ranFl n EaFer !ou s Dreyfus !ou s Dreyfus /Adamson contract of July <0, 15420 !ou s Dreyfus /Adamson 'ontract of August 14, 15420

None 1,000 600 1,180

1,000 800 2,200 680

1,288

248

%D%A!&

2,051.48

5,406.88

%he buyers threatened damage su ts. &ome of the cla ms 9ere settled, viz? +ac f c Cegetable D l 'o., n copra del vered by NA'D'D, +8<5,000.00I 7ranFl n EaFer 'orporat on, +26,210.00I &pencer *ellog N &ons, +185,040.00. Eut one buyer, !ou s Dreyfus N #o. /Dverseas0 !td., d d n fact sue before the 'ourt of 7 rst $nstance of Man la, upon cla ms as follo9s? 7or the undel vered copra under the July <0 contract /' v l 'ase 44850I +262,026.00I for the balance on the August 14 contract /' v l 'ase 4<560, +28,056.><I for that per the &eptember 12 contract reduced to -udgment /' v l 'ase 4<22, appealed to th s 'ourt n !@26250, +442,506.40. %hese cases culm nated n an out@of@court am cable settlement 9hen the *ala9 management 9as already out. %he corporat on thereunder pa d Dreyfus +8>2,024.82 represent ng 20R of the total cla ms. ( th part cular reference to the Dreyfus cla ms, NA'D'D put up the defenses that? /10 the contracts 9ere vo d because !ou s Dreyfus N 'o. /Dverseas0 !td. d d not have l cense to do bus ness hereI and /20 fa lure to del ver 9as due to force ma"eure, the typhoons. %o pro-ect the utter unreasonableness of th s comprom se, 9e reproduce in haec ver#a th s f nd ng belo9? 1 1 1 Bo9ever, n s m lar cases brought by the same cla mant :!ou s Dreyfus N 'o. /Dverseas0 !td.; aga nst &ant ago &y-uco for non@del very of copra also nvolv ng a cla m of +<48,>84.>6 9here n defendant set up same defenses as above, pla nt ff accepted a promise of +8,000.00 only /E1hs. <1 N <2 Be rs.0 7ollo9 ng the same proport on, the cla m of Dreyfus aga nst NA'D'D should have been comprom sed for only +10,000.00, f at all. No9, 9hy should defendants be held l able for the large sum pa d as comprom se by the Eoard of ! =u datorsP 7his is "ust a sample to sho& ho& un"ust it &ould #e to hold defendants lia#le for the readiness &ith &hich the !oard of %iquidators disposed of the 3A.=.= funds, although there &as much possi#ility of successfully

resisting the claims, or at least settlement for nominal sums li'e &hat happened in the Sy"uco case.8 All the settlements sum up to +1,<4<,224.82. $n th s su t started n 7ebruary, 1545, NA'D'D seeFs to recover the above sum of +1,<4<,224.82 from general manager and board cha rman Ma1 mo M. *ala9, and d rectors Juan Eocar, 'as m ro #arc a and !eonor Moll. $t charges *ala9 9 th negl gence under Art cle 1502 of the old ' v l 'ode /no9 Art cle 212>, ne9 ' v l 'ode0I and defendant board members, nclud ng *ala9, 9 th bad fa th andMor breach of trust for hav ng approved the contracts. %he f fth amended compla nt, on 9h ch th s case 9as tr ed, 9as f led on July 2, 1585. Defendants res sted the act on upon defenses here nafter n th s op n on to be d scussed. %he lo9er court came out 9 th a -udgment d sm ss ng the compla nt 9 thout costs as 9ell as defendants) countercla ms, e1cept that pla nt ff 9as ordered to pay the he rs of Ma1 mo *ala9 the sum of +2,>01.54 for unpa d salar es and cash depos t due the deceased *ala9 from NA'D'D. +la nt ff appealed d rect to th s 'ourt. +la nt ff)s br ef d d not, =uest on the -udgment on *ala9)s countercla m for the sum of +2,>01.54. " ght at the outset, t9o prel m nary =uest ons ra sed before, but adversely dec ded by, the court belo9, arrest our attent on. Dn appeal, defendants rene9 the r b d. And th s, upon establ shed -ur sprudence that an appellate court may base ts dec s on of aff rmance of the -udgment belo9 on a po nt or po nts gnored by the tr al court or n 9h ch sa d court 9as n error. > 1. 7 rst of the threshold =uest ons s that advanced by defendants that pla nt ff Eoard of ! =u dators has lost ts legal personal ty to cont nue 9 th th s su t. Accepted n th s -ur sd ct on are three methods by 9h ch a corporat on may 9 nd up ts affa rs? /10 under &ect on <, "ule 104, of the "ules of 'ourt :9h ch superseded &ect on >> of the 'orporat on !a9; 2 9hereby, upon voluntary d ssolut on of a corporat on, the court may d rect ,such d spos t on of ts assets as -ust ce re=u res, and may appo nt a rece ver to collect such assets and pay the debts of the corporat onI, /20 under &ect on 22 of the 'orporat on !a9, 9hereby a corporat on 9hose corporate e1 stence s term nated, ,shall nevertheless be cont nued as a body corporate for three years after the t me 9hen t 9ould have been so d ssolved, for the purpose of prosecut ng and defend ng su ts by or aga nst t and of enabl ng t gradually to settle and close ts affa rs, to d spose of and convey ts property and to d v de ts cap tal stocF, but not for the purpose of cont nu ng the bus ness for 9h ch t 9as establ shedI, and /<0 under &ect on 26 of the 'orporat on !a9, by v rtue of 9h ch the corporat on, 9 th n the three year per od -ust ment oned, , s author Aed and empo9ered to convey all of ts property to trustees for the benef t of members, stocFholders, cred tors, and others nterested.,6

$t s defendants) pose that the r case comes 9 th n the coverage of the second method. %hey reason out that su t 9as commenced n 7ebruary, 1545I that by E1ecut ve Drder <22, dated November 24, 1580, NA'D'D, together 9 th other government@o9ned corporat ons, 9as abol shed, and the Eoard of ! =u dators 9as entrusted 9 th the funct on of settl ng and clos ng ts affa rsI and that, s nce the three year per od has elapsed, the Eoard of ! =u dators may not no9 cont nue 9 th, and prosecute, the present case to ts conclus on, because E1ecut ve Drder <22 prov des n &ect on 1 thereof that O &ec.1. %he Nat onal Abaca and Dther 7 bers 'orporat on, the Nat onal 'oconut 'orporat on, the Nat onal %obacco 'orporat on, the Nat onal 7ood +roducer 'orporat on and the former enemy@o9ned or controlled corporat ons or assoc at ons, . . . are hereby abol shed. %he sa d corporat ons shall be l =u dated n accordance 9 th la9, the prov s ons of th s Drder, andMor n such manner as the +res dent of the +h l pp nes may d rectI $rovided, ho&ever, %hat each of the sa d corporat ons shall nevertheless be cont nued as a body corporate for a per od of three /<0 years from the effect ve date of th s E1ecut ve Drder for the purpose of prosecut ng and defend ng su ts by or aga nst t and of enabl ng the Eoard of ! =u dators gradually to settle and close ts affa rs, to d spose of and, convey ts property n the manner here nafter prov ded. ' t ng Mr. Just ce 7 sher, defendants proceed to argue that even 9here t may be found mposs ble 9 th n the < year per od to reduce d sputed cla ms to -udgment, nonetheless, ,su ts by or aga nst a corporat on abate 9hen t ceases to be an ent ty capable of su ng or be ng sued, /7 sher, %he +h l pp ne !a9 of &tocF 'orporat ons, pp. <50@<510. .orpus 9uris Secundum l Fe9 se s author ty for the statement that ,:t;he d ssolut on of a corporat on ends ts e1 stence so that there must be statutory author ty for prolongat on of ts l fe even for purposes of pending litigation,5 and that su t ,cannot be cont nued or rev vedI nor can a val d -udgment be rendered there n, and a -udgment, f rendered, s not only erroneous, but vo d and sub-ect to collateral attacF., 10 &o t s, that abatement of pend ng act ons follo9s as a matter of course upon the e1p rat on of the legal per od for l =u dat on, 11 unless the statute merely re=u res a commencement of su t 9 th n the added t me. 12 7or, the court cannot e1tend the t me alloted by statute. 1< (e, ho9ever, e1press the v e9 that the e1ecut ve order abol sh ng NA'D'D and creat ng the Eoard of ! =u dators should be e1am ned n conte1t. %he prov so n &ect on 1 of E1ecut ve Drder <22, 9hereby the corporate e1 stence of NA'D'D 9as cont nued for a per od of three years from the effect v ty of the order for ,the purpose of prosecut ng and defend ng su ts by or aga nst t and of enabl ng the Eoard of ! =u dators gradually to settle and close ts affa rs, to d spose of and convey ts property n the manner here nafter prov ded,, s to be read not as an solated prov s on but n con-unct on 9 th the 9hole. &o read ng, t 9 ll be read ly observed that no t me l m t has been tacFed to the e1 stence of the Eoard of ! =u dators and ts funct on of clos ng the affa rs of the var ous government o9ned corporat ons, nclud ng NA'D'D.

Ey &ect on 2 of the e1ecut ve order, 9h le the boards of d rectors of the var ous corporat ons 9ere abol shed, the r po9ers and funct ons and dut es under e1 st ng la9s 9ere to be assumed and e1erc sed by the Eoard of ! =u dators. %he +res dent thought t best to do a9ay 9 th the boards of d rectors of the defunct corporat onsI at the same t me, ho9ever, the +res dent had chosen to see to t that the Eoard of ! =u dators step nto the vacuum. And no9here n the e1ecut ve order 9as there any ment on of the l fespan of the Eoard of ! =u dators. A glance at the other prov s ons of the e1ecut ve order buttresses our conclus on. %hus, l =u dat on by the Eoard of ! =u dators may, under sect on 1, proceed n accordance 9 th la9, the prov s ons of the e1ecut ve order, , andSor in such manner as the $resident of the $hilippines may direct ., Ey &ect on 4, 9hen any property, fund, or pro-ect s transferred to any governmental nstrumental ty ,for adm n strat on or cont nuance of any pro-ect,, the necessary funds therefor shall be taFen from the correspond ng spec al fund created n &ect on 8. &ect on 8, n turn, talFs of spec al funds establ shed from the ,net proceeds of the l =u dat on, of the var ous corporat ons abol shed. And by &ect on, 2, f fty per centum of the fees collected from the copra standard Aat on and nspect on serv ce shall accrue ,to the spec al fund created n sect on 8 hereof for the rehab l tat on and development of the coconut ndustry., $mpl c t n all these, s that the term of l fe of the Eoard of ! =u dators s 9 thout t me l m t. 'ontemporary h story g ves us the fact that the Eoard of ! =u dators st ll e1 sts as an off ce 9 th off c als and numerous employees cont nu ng the -ob of l =u dat on and prosecut on of several court act ons. Not that our v e9s on the po9er of the Eoard of ! =u dators to proceed to the f nal determ nat on of the present case s 9 thout -ur sprudent al support. %he f rst -ud c al test before th s 'ourt s 3ational A#aca and =ther 8i#ers .orporation vs. $ore, !@1>225, August 1>, 15>1. $n that case, the corporat on, already d ssolved, commenced su t 9 th n the three@year e1tended per od for l =u dat on. %hat su t 9as for recovery of money advanced to defendant for the purchase of hemp n behalf of the corporat on. &he fa led to account for that money. Defendant moved to d sm ss, =uest oned the corporat on)s capac ty to sue. %he lo9er court ordered pla nt ff to nclude as co@party pla nt ff, 7he !oard of %iquidators, to 9h ch the corporat on)s l =u dat on 9as entrusted by 5 ecutive =rder <22. +la nt ff fa led to effect nclus on. %he lo9er court d sm ssed the su t. +la nt ff moved to recons der. #round? e1cusable negl gence, n that ts counsel prepared the amended compla nt, as d rected, and nstructed the board)s ncom ng and outgo ng correspondence clerF, Mrs. "eceda Cda. de Dcampo, to ma l the or g nal thereof to the court and a copy of the same to defendant)s counsel. &he ma led the copy to the latter but fa led to send the or g nal to the court. %h s mot on 9as re-ected belo9. +la nt ff came to th s 'ourt on appeal. (e there sa d that ,the rule appears to be 9ell settled that, n the absence of statutory prov s on to the contrary, pend ng act ons by or aga nst a corporat on are abated upon e1p rat on of the per od allo9ed by la9 for the l =u dat on of ts affa rs., (e there sa d that ,:o;ur 'orporat on !a9 conta ns no prov s on author A ng a corporat on, after three /<0 years from the e1p rat on of ts l fet me, to cont nue n ts corporate name act ons nst tuted by t 9 th n sa d per od of

three /<0 years., 14 Bo9ever, these precepts not9 thstand ng, 9e, n effect, held n that case that the Eoard of ! =u dators escapes from the operat on thereof for the reason that ,:o;#viously, the complete loss of plaintiff/s corporate e istence after the e piration of the period of three /-0 years for the settlement of its affairs is &hat impelled the $resident to create a !oard of %iquidators, to continue the management of such matters as may then #e pending .,18 (e accord ngly d rected the record of sa d case to be returned to the lo9er court, 9 th nstruct ons to adm t pla nt ff)s amended compla nt to nclude, as party pla nt ff, the Eoard of ! =u dators. Defendants) pos t on s vulnerable to attacF from another d rect on. Ey E1ecut ve Drder <22, the government, the sole stocFholder, abol shed NA'D'D, and placed ts assets n the hands of the Eoard of ! =u dators. %he Eoard of ! =u dators thus became the trustee on behalf of the government. $t 9as an e1press trust. %he legal nterest became vested n the trustee O the Eoard of ! =u dators. %he benef c al nterest remained 9 th the sole stocFholder O the government. At no t me had the government 9 thdra9n the property, or the author ty to cont nue the present su t, from the Eoard of ! =u dators. $f for th s reason alone, 9e cannot stay the hand of the Eoard of ! =u dators from prosecut ng th s case to ts f nal conclus on. 1> %he prov s ons of &ect on 26 of the 'orporat on !a9 O the th rd method of 9 nd ng up corporate affa rs O f nd appl cat on. (e, accord ngly, rule that the Eoard of ! =u dators has personal ty to proceed as? party@pla nt ff n th s case. 2. Defendants) second poser s that the act on s unenforceable aga nst the he rs of *ala9. Appellee he rs of *ala9 ra sed n the r mot on to d sm ss, 12 9h ch 9as overruled, and n the r n neteenth spec al defense, that pla nt ff)s act on s personal to the deceased Ma1 mo M. *ala9, and may not be deemed to have surv ved after h s death.16 %hey say that the controll ng statute s &ect on 8, "ule 62, of the 1540 "ules of 'ourt.15 9h ch prov des that ,:a;ll cla ms for money aga nst the decedent, ar s ng from contract, e1press or mpl ed,, must be f led n the estate proceed ngs of the deceased. (e d sagree. %he su t here revolves around the alleged negl gent acts of *ala9 for hav ng entered nto the =uest oned contracts 9 thout pr or approval of the board of d rectors, to the damage and pre-ud ce of pla nt ffI and s aga nst *ala9 and the other d rectors for hav ng subse=uently approved the sa d contracts n bad fa th andMor breach of trust., 'learly then, the present case s not a mere act on for the recovery of money nor a cla m for money ar s ng from contract. %he su t nvolves alleged tort ous acts. And the act on s embraced n su ts f led ,to recover damages for an n-ury to person or property, real or personal,, 9h ch surv ve. 20

%he lead ng e1pos tor of the la9 on th s po nt s Aguas vs. %lemos, !@16102, August <0, 15>2. %here, pla nt ffs sought to recover damages from defendant !lemos. %he compla nt averred that !lemos had served pla nt ff by reg stered ma l 9 th a copy of a pet t on for a 9r t of possess on n ' v l 'ase 4624 of the 'ourt of 7 rst $nstance at 'atbalogan, &amar, 9 th not ce that the same 9ould be subm tted to the &amar court on 7ebruary 2<, 15>0 at 6?00 a.m.I that n v e9 of the copy and not ce served, pla nt ffs proceeded to the sa d court of &amar from the r res dence n Man la accompan ed by the r la9yers, only to d scover that no such pet t on had been f ledI and that defendant !lemos mal c ously fa led to appear n court, so that pla nt ffs) e1pend ture and trouble turned out to be n va n, caus ng them mental angu sh and undue embarrassment. Defendant d ed before he could ans9er the compla nt. 3pon leave of court, pla nt ffs amended the r compla nt to nclude the he rs of the deceased. %he he rs moved to d sm ss. %he court d sm ssed the compla nt on the ground that the legal representat ve, and not the he rs, should have been made the party defendantI and that, any9ay, the act on be ng for recovery of money, testate or ntestate proceed ngs should be n t ated and the cla m f led there n. %h s 'ourt, thru Mr. Just ce Jose E. !. "eyes, there declared? +la nt ffs argue 9 th cons derable cogency that contrast ng the correlated prov s ons of the "ules of 'ourt, those concern ng cla ms that are barred f not f led n the estate settlement proceed ngs /"ule 62, sec. 80 and those def n ng act ons that surv ve and may be prosecuted aga nst the e1ecutor or adm n strator /"ule 66, sec. 10, t s apparent that act ons for damages caused by tort ous conduct of a defendant /as n the case at bar0 surv ve the death of the latter. 3nder "ule 62, sect on 8, the act ons that are abated by death are? /10 cla ms for funeral e1penses and those for the last s cFness of the decedentI /20 -udgments for moneyI and /<0 ,all cla ms for money aga nst the decedent, arising from contract e press or implied., None of these ncludes that of the pla nt ffs@ appellantsI for t s not enough that the cla m aga nst the deceased party be for money, but t must ar se from ,contract e1press or mpl ed,, and these 9ords /also used by the "ules n connect on 9 th attachments and der ved from the common la90 9ere construed n %eung !en vs. =/!rien, <6 +h l. 162, 165@154, ,to nclude all purely personal obl gat ons other than those 9h ch have the r source n delict or tort., 3pon the other hand, "ule 66, sect on 1, enumerates act ons that surv ve aga nst a decedent)s e1ecutors or adm n strators, and they are? /10 act ons to recover real and personal property from the estateI /20 act ons to enforce a l en thereonI and /<0 act ons to recover damages for an n-ury to person or property. %he present su t s one for damages under the last class, t hav ng been held that , n-ury to property, s not l m ted to n-ur es to spec f c property, but e1tends to other 9rongs by 9h ch personal estate s n-ured or d m n shed /EaFer vs. 'randall, 42 Am. "ep. 12>I also 121 A.!."., 1<580. %o mal c ously cause a party to ncur unnecessary e1penses, as charged n th s case, s certa nly n-ury to that party)s property /Jav er vs. Araneta, !@4<>5, Aug. <1, 158<0.

%he rul ng n the preced ng case 9as hammered out of facts comparable to those of the present. No cogent reason e1 sts 9hy 9e should breaF a9ay from the v e9s -ust e1pressed. And, the conclus on rema ns? Act on aga nst the *ala9 he rs and, for the matter, aga nst the Estate of 'as m ro #arc a surv ves. %he prel m nar es out of the 9ay, 9e no9 go to the core of the controversy. <. +la nt ff levelled a ma-or attacF on the lo9er court)s hold ng that *ala9 -ust f edly entered nto the controverted contracts 9 thout the pr or approval of the corporat on)s d rectorate. +la nt ff leans heav ly on NA'D'D)s corporate by@ la9s. Art cle $C /b0, 'hapter $$$ thereof, rec tes, as amongst the dut es of the general manager, the obl gat on? ,/b0 %o perform or e1ecute on behalf of the 'orporat on upon pr or approval of the Eoard, all contracts necessary and essent al to the proper accompl shment for 9h ch the 'orporat on 9as organ Aed., Not of de minimis mportance n a proper approach to the problem at hand, s the nature of a general manager)s pos t on n the corporate structure. A rule that has ga ned acceptance through the years s that a corporate off cer , ntrusted 9 th the general management and control of ts bus ness, has mpl ed author ty to maFe any contract or do any other act 9h ch s necessary or appropr ate to the conduct of the ord nary bus ness of the corporat on. 21As such off cer, ,he may, 9 thout any spec al author ty from the Eoard of D rectors perform all acts of an ord nary nature, 9h ch by usage or necess ty are nc dent to h s off ce, and may b nd the corporat on by contracts n matters ar s ng n the usual course of bus ness. 22 %he problem, therefore, s 9hether the case at bar s to be taFen out of the general concept of the po9ers of a general manager, g ven the c ted prov s on of the NA'D'D by@la9s re=u r ng pr or d rectorate approval of NA'D'D contracts. %he pecul ar nature of copra trad ng, at th s po nt, deserves e1press art culat on. Drd nary n th s enterpr se are copra sales for future del very. %he movement of the marFet re=u res that sales agreements be entered nto, even though the goods are not yet n the hands of the seller. *no9n n bus ness parlance as for&ard sales, t s concededly the pract ce of the trade. A certa n amount of speculat on s nherent n the undertaF ng. NA'D'D 9as much more conservat ve than the e1porters 9 th b g cap tal. %h s short@sell ng 9as nev table at the t me n the l ght of other factors such as ava lab l ty of vessels, the =uant ty re=u red before be ng accepted for load ng, the labor needed to prepare and sacF the copra for marFet. %o NA'D'D, for9ard sales 9ere a necess ty. 'opra could not stay long n ts handsI t 9ould lose 9e ght, ts value decrease. Above all, NA'D'D)s l m ted funds necess tated a =u cF turnover. 'opra contracts then had to be e1ecuted on short not ce O at t mes 9 th n t9enty@four hours. %o be apprec ated then s the d ff culty of call ng a formal meet ng of the board. &uch 9ere the env ronmental c rcumstances 9hen *ala9 9ent nto copra trad ng.

!ong before the d sputed contracts came nto be ng, *ala9 contracted O by h mself alone as general manager O for for9ard sales of copra. 7or the fiscal year ending 9une -C, +,B[, *ala9 s gned some >0 such contracts for the sale of copra to d vers part es. Dur ng that per od, from those copra sales, NA'D'D reaped a gross prof t of +<,><1,161.46. &o pleased 9as NA'D'D)s board of d rectors that, on December 8, 154>, n *ala9)s absence, t voted to grant h m a special #onus , n recogn t on of the s gnal ach evement rendered by h m n putt ng the 'orporat on)s bus ness on a self@suff c ent bas s 9 th n a fe9 months after assum ng off ce, desp te numerous hand caps and d ff cult es., %hese prev ous contract t should be stressed, 9ere s gned by *ala9 &ithout prior authority from the board. &a d contracts 9ere Fno9n all along to the board members. Noth ng 9as sa d by them. %he aforesa d contracts stand to prove one th ng? Dbv ously, NA'D'D board met the d ff cult es attendant to for9ard sales by leav ng the adopt on of means to end, to the sound d scret on of NA'D'D)s general manager Ma1 mo M. *ala9. ! berally spread on the record are nstances of contracts e1ecuted by NA'D'D)s general manager and subm tted to the board after the r consummat on, not before. %hese agreements 9ere not *ala9)s alone. Dne at least 9as e1ecuted by a predecessor 9ay bacF n 1540, soon after NA'D'D 9as chartered. $t 9as a contract of lease e1ecuted on November 1>, 1540 by the then general manager and board cha rman, Ma1 mo "odr gueA, and A. &or ano y ' a., for the lease of a space n &or ano Eu ld ng Dn November 14, 154>, NA'D'D, thru ts general manager *ala9, sold <,000 tons of copra to the 7ood M n stry, !ondon, thru &ebast an +alanca. Dn December 22, 1542, 9hen the controversy over the present contract cropped up, the board voted to approve a lease contract prev ously e1ecuted bet9een *ala9 and 7 del $sberto and 3lp ana $sberto cover ng a 9arehouse of the latter. Dn the same date, the board gave ts nod to a contract for rene9al of the serv ces of Dr. Manuel !. "o1as. $n fact, also on that date, the board re=uested *ala9 to report for act on all copra contracts s gned by h m ,at the meeting immediately follo&ing the signing of the contracts ., %h s pract ce 9as observed n a later nstance 9hen, on January 2, 1546, the board approved t9o prev ous contracts for the sale of 1,000 tons of copra each to a certa n ,&'A+, and a certa n ,#NA+D,. And more. Dn December 15, 154>, the board resolved to rat fy the broFerage comm ss on of 2R of &m th, Eell and 'o., !td., n the sale of 4,<00 long tons of copra to the 7rench #overnment. &uch rat f cat on 9as necessary because, as stated by *ala9 n that same meet ng, ,under an e1 st ng resolut on he s author Aed to g ve a broFerage fee of only 1R on sales of copra made through broFers., Dn January 18, 1542, the broFerage fee agreements of 1@1M2R on three e1port contracts, and 2R on three others, for the sale of copra 9ere approved by the board 9 th a prov so author A ng the general manager to pay a comm ss on up to the amount of 1@1M2R ,&ithout further action #y the !oard ., Dn 7ebruary 8, 1542, the broFerage fee of 2R of J. 'o-uangco N 'o. on the sale of 2,000 tons of copra 9as favorably acted upon by the board. Dn March 15, 1542, a 2R

broFerage comm ss on 9as s m larly approved by the board for +ac f c %rad ng 'orporat on on the sale of 2,000 tons of copra. $t s to be noted n the forego ng cases that only the broFerage fee agreements 9ere passed upon by the board, not the sales contracts themselves. And even those fee agreements 9ere subm tted only 9hen the comm ss on e1ceeded the ce l ng f 1ed by the board. *no9ledge by the board s also d scern ble from other recorded nstances.+N&phO+.>Pt (hen the board met on May 10, 1542, the d rectors d scussed the copra s tuat on? %here 9as a slo9 do9n9ard trend but bel ef 9as enterta ned that the nad r m ght have already been reached and an mprovement n pr ces 9as e1pected. $n v e9 thereof, *ala9 nformed the board that ,he ntends to &ait until he has signed contracts to sell #efore starting to #uy copra .,2< $n the board meet ng of July 25, 1542, *ala9 reported on the copra pr ce cond t ons then current? %he copra marFet appeared to have become fa rly steadyI t 9as not e1pected that copra pr ces 9ould aga n r se very h gh as n the unprecedented boom dur ng January@Apr l, 1542I the pr ces seemed to osc llate bet9een S140 to S180 per tonI a rad cal r se or decrease 9as not nd cated by the trends. *ala9 cont nued to say that ,the .orporation has #een closing contracts for the sale of copra generally 9 th a marg n of +8.00 to +2.00 per hundred F los., 24 (e no9 l ft the follo9 ng e1cerpts from the m nutes of that same board meet ng of July 25, 1542? 821. $n connect on 9 th the buy ng and sell ng of copra the Eoard n=u red &hether it is the practice of the management to close contracts of sale first #efore #uying. %he #eneral Manager repl ed that this practice is generally follo&ed but that t s not al9ays poss ble to do so for t9o reasons? /10 %he role of the Nacoco to stab l Ae the pr ces of copra re=u res that t should not cease buy ng even 9hen t does not have actual contracts of sale s nce the suspens on of buy ng by the Nacoco 9 ll result n m ddlemen taF ng advantage of the temporary nact v ty of the 'orporat on to lo9er the pr ces to the detr ment of the producers. /20 %he movement of the marFet s such that t may not be pract cal al9ays to 9a t for the consummat on of contracts of sale before beg nn ng to buy copra. %he #eneral Manager e1pla ned that n th s connect on a certa n amount of speculat on s unavo dable. Bo9ever, he sa d that the Nacoco s much more conservat ve than the other b g e1porters n th s respect. 28 &ettled -ur sprudence has t that 9here s m lar acts have been approved by the d rectors as a matter of general pract ce, custom, and pol cy, the general manager may b nd the company 9 thout formal author Aat on of the board of

d rectors. 2> $n vary ng language, e1 stence of such author ty s establ shed, by proof of the course of #usiness, the usage and practices of the company and by the 'no&ledge 9h ch the board of d rectors has, or must be presumed to have, of acts and do ngs of ts subord nates n and about the affa rs of the corporat on. 22 &o also, 1 1 1 author ty to act for and b nd a corporat on may be presumed from acts of recogn t on n other nstances 9here the po9er 9as n fact e1erc sed. 26 1 1 1 %hus, 9hen, n the usual course of bus ness of a corporat on, an off cer has been allo9ed n h s off c al capac ty to manage ts affa rs, h s author ty to represent the corporat on may be mpl ed from the manner n 9h ch he has been perm tted by the d rectors to manage ts bus ness. 25 $n the case at bar, the pract ce of the corporat on has been to allo9 ts general manager to negot ate and e1ecute contracts n ts copra trad ng act v t es for and n NA'D'D)s behalf &ithout pr or board approval. $f the by@la9s 9ere to be l terally follo9ed, the board should g ve ts stamp of pr or approval on all corporate contracts. Eut that board tself, by ts acts and through ac=u escence, pract cally la d as de the by@la9 re=u rement of pr or approval. 3nder the g ven c rcumstances, the *ala9 contracts are val d corporate acts. 4. Eut f more 9ere re=u red, 9e need but turn to the board)s rat f cat on of the contracts n d spute on January <0, 1546, though t s our /and the lo9er court)s0 bel ef that rat f cat on here s noth ng more than a mere formal ty. Author t es, great n number, are one n the dea that ,rat f cat on by a corporat on of an unauthor Aed act or contract by ts off cers or others relates bacF to the t me of the act or contract rat f ed, and s e=u valent to or g nal author tyI, and that , :t;he corporat on and the other party to the transact on are n prec sely the same pos t on as f the act or contract had been author Aed at the t me., <0 %he language of one case s e1press ve? ,%he adopt on or rat f cat on of a contract by a corporat on s noth ng more or less than the maF ng of an or g nal contract. %he theory of corporate rat f cat on s predicated on the right of a corporation to contract, and any rat f cat on or adopt on s equivalent to a grant of prior authority., <1 $ndeed, our la9 pronounces that ,:r;at f cat on cleanses the contract from all ts defects from the moment t 9as const tuted., <2 Ey corporate conf rmat on, the contracts e1ecuted by *ala9 are thus purged of 9hatever v ce or defect they may have. << $n sum, a case s here presented 9hereunder, even n the face of an e1press by@ la9 re=u rement of pr or approval, the la9 on corporat ons s not to be held so r g d and nfle1 ble as to fa l to recogn Ae e=u table cons derat ons. And, the conclus on nev tably s that the embattled contracts rema n val d. 8. $t 9ould be d ff cult, even 9 th host le eyes, to read the record n terms of ,bad fa th andMor breach of trust, n the board)s rat f cat on of the contracts 9 thout

pr or approval of the board. 7or, n real ty, all that 9e have on the government)s s de of the scale s that the board Fne9 that the contracts so conf rmed 9ould cause heavy losses. As 9e have earl er e1pressed, *ala9 had author ty to e1ecute the contracts 9 thout need of pr or approval. Everybody, nclud ng *ala9 h mself, thought so, and for a long t me. Doubts 9ere f rst thro9n on the 9ay only 9hen the contracts turned out to be unprof table for NA'D'D. " ghtfully had t been sa d that bad fa th does not s mply connote bad -udgment or negl genceI t mports a d shonest purpose or some moral obl =u ty and consc ous do ng of 9rongI t means breach of a Fno9n duty thru some mot ve or nterest or ll 9 llI t partaFes of the nature of fraud. <4 Apply ng th s precept to the g ven facts here n, 9e f nd that there 9as no ,d shonest purpose,, or ,some moral obl =u ty,, or ,consc ous do ng of 9rong,, or ,breach of a Fno9n duty,, or ,&ome mot ve or nterest or ll 9 ll, that ,partaFes of the nature of fraud., Nor 9as t even nt mated here that the NA'D'D d rectors acted for personal reasons, or to serve the r o9n pr vate nterests, or to pocFet money at the e1pense of the corporat on. <8 (e have had occas on to aff rm that bad fa th contemplates a ,state of m nd aff rmat vely operat ng 9 th furt ve des gn or 9 th some mot ve of self@ nterest or ll 9 ll or for ulter or purposes., <> !riggs vs. Spaulding, 141 3.&. 1<2, 146@145, <8 !. ed. >>2, >>5, =uotes 9 th approval from Judge &hars9ood / n &per ng)s App., 21 +a. 110, the follo9 ng? ,3pon a close e1am nat on of all the reported cases, although there are many d cta not eas ly reconc lable, yet $ have found no -udgment or decree 9h ch has held d rectors to account, e1cept 9hen they have themselves been personally gu lty of some fraud on the corporat on, or have Fno9n and conn ved at some fraud n others, or 9here such fraud m ght have been prevented had they g ven ord nary attent on to the r dut es. . . ., +la nt ff d d not even dare charge ts defendant@ d rectors 9 th any of these malevolent acts. Dbv ously, the board thought that to -ett son *ala9)s contracts 9ould contravene bas c d ctates of fa rness. %hey d d not th nF of ra s ng the r vo ce n protest aga nst past contracts 9h ch brought n enormous prof ts to the corporat on. Ey the same toFen, fa r deal ng d sagrees 9 th the dea that s m lar contracts, 9hen unprof table, should not mer t the same treatment. +rof t or loss result ng from bus ness ventures s no -ust f cat on for turn ng one)s bacF on contracts entered nto. %he truth, then, of the matter s that O n the 9ords of the tr al court O the rat f cat on of the contracts 9as ,an act of s mple -ust ce and fa rness to the general manager and the best nterest of the corporat on 9hose prest ge 9ould have been ser ously mpa red by a re-ect on by the board of those contracts 9h ch proved d sadvantageous., <2 %he d rectors are not l able.,
<6

>. %o 9hat then may 9e trace the damage suffered by NA'D'D.

%he facts y eld the ans9er. 7our typhoons 9reaFed havoc then on our copra@ produc ng reg ons. "esult? 'opra product on 9as mpa red, pr ces sp ralled, 9arehouses destroyed. Uu cF turnovers could not be e1pected. NA'D'D 9as not alone n th s m sfortune. %he record d scloses that pr vate traders, old, e1per enced, 9 th b gger fac l t es, 9ere not sparedI also suffered tremendous losses. "oughly est mated, eleven pr nc pal trad ng concerns d d run losses to about +10,<00,000.00. +la nt ff)s 9 tness & senando Earretto, head of the copra marFet ng department of NA'D'D, observed that from late 1542 to early 1546 ,there 9ere many 9ho lost money n the trade., <5 NA'D'D 9as not mmune from such usual bus ness r sF. %he typhoons 9ere Fno9n to pla nt ff. $n fact, NA'D'D res sted the su ts f led by !ou s Dreyfus N 'o. by plead ng n ts ans9ers force ma"eure as an aff rmat ve defense and there vehemently asserted that ,as a result of the sa d typhoons, e1tens ve damage 9as caused to the coconut trees n the copra produc ng reg ons of the +h l pp nes and accord ng to est mates of competent author t es, t 9 ll taFe about one year unt l the coconut produc ng reg ons 9 ll be able to produce the r normal coconut y eld and t 9 ll taFe some t me unt l the pr ce of copra 9 ll reach normal levelsI, and that , t had never been the ntent on of the contract ng part es n enter ng nto the contract n =uest on that, n the event of a sharp r se n the pr ce of copra n the +h l pp ne marFet produce by force ma"eureor by caused beyond defendant)s control, the defendant should buy the copra contracted for at e1orb tant pr ces far beyond the buy ng pr ce of the pla nt ff under the contract., 40 A h gh regard for formal -ud c al adm ss ons made n court plead ngs 9ould suff ce to deter us from perm tt ng pla nt ff to stray a9ay therefrom, to charge no9 that the damage suffered 9as because of *ala9)s negl gence, or for that matter, by reason of the board)s rat f cat on of the contracts. 41 $ndeed, 9ere t not for the typhoons, 42 NA'D'D could have, 9 th ease, met ts contractual obl gat ons. &tocF access b l ty 9as no problem. NA'D'D had 50 buy ng agenc es spread throughout the slands. $t could purchase 2,000 tons of copra a day. %he var ous contracts nvolved del very of but 1>,800 tons over a f ve@month per od. Desp te the typhoons, NA'D'D 9as st ll able to del ver a l ttle short of 80R of the tonnage re=u red under the contracts. As the tr al court correctly observed, th s s a case of damnum a#sque in"uria. 'on-unct on of damage and 9rong s here absent. %here cannot be an act onable 9rong f e ther one or the other s 9ant ng. 4< 2. Dn top of all these, s that no assert on s made and no proof s presented 9h ch 9ould l nF *ala9)s acts O rat f ed by the board O to a matr 1 for defraudat on of the government. *ala9 s clear of the st gma of bad fa th. +la nt ff)s corporate counsel 44 concedes that *ala9 all along thought that he had author ty to enter nto the contracts, that he d d so n the best nterests of the corporat onI that he entered nto the contracts n pursuance of an overall pol cy to stab l Ae pr ces, to free the producers from the clutches of the m ddlemen. %he pr ces for 9h ch NA'D'D contracted n the d sputed agreements, 9ere at a level

calculated to produce prof ts and h gher than those preva l ng n the local marFet. +la nt ff)s 9 tness, Earretto, categor cally stated that , t 9ould be fool sh to th nF that one 9ould s gn /a0 contract 9hen you are go ng to lose money, and that no contract 9as e1ecuted ,at a pr ce unsafe for the Nacoco., 48 "eally, on the bas s of pr ces then preva l ng, NA'D'D env s oned a prof t of around +282,440.00. 4> *ala9)s acts 9ere not the result of haphaAard dec s ons e ther. *ala9 nvar ably consulted 9 th NA'D'D)s 'h ef Euyer, & senando Earretto, or the Ass stant #eneral Manager. %he da l es and =uotat ons from abroad 9ere gu deposts to h m. Df course, *ala9 could not have been an nsurer of prof ts. Be could not be e1pected to pred ct the com ng of unpred ctable typhoons. And even as typhoons supervened *ala9 9as not rem ssed n h s duty. Be e1erted efforts to stave off losses. Be asFed the +h l pp ne Nat onal EanF to mplement ts comm tment to e1tend a +400,000.00 loan. %he banF d d not release the loan, not even the sum of +200,000.00, 9h ch, n Dctober, 1542, 9as approved by the banF)s board of d rectors. $n frustrat on, on December 12, 1542, *ala9 turned to the +res dent, compla ned about the banF)s short@s ghted pol cy. $n the end, noth ng came out of the negot at ons 9 th the banF. NA'D'D eventually faltered n ts contractual obl gat ons. %hat *ala9 cannot be tagged 9 th crassa negligentia or as much as s mple negl gence, 9ould seem to be supported by the fact that even as the contracts 9ere be ng =uest oned n 'ongress and n the NA'D'D board tself, +res dent "o1as defended the actuat ons of *ala9. Dn December 22, 1542, +res dent "o1as e1pressed h s des re ,that the Eoard of D rectors should reelect Bon. Ma1 mo M. *ala9 as #eneral Manager of the Nat onal 'oconut 'orporat on., 42 And, on January 2, 1546, at a t me 9hen the contracts had already been openly d sputed, the board, at ts regular meet ng, appo nted Ma1 mo M. *ala9 as act ng general manager of the corporat on. (ell may 9e prof t from the follo9 ng passage from Monteli#ano vs. !acolod< Murcia Milling .o., :nc., !@18052, May 16, 15>2? ,%hey /the d rectors0 hold such off ce charged 9 th the duty to act for the corporat on accord ng to the r best -udgment, and n so do ng they cannot be controlled n the reasonable e1erc se and performance of such duty. (hether the bus ness of a corporat on should be operated at a loss dur ng a bus ness depress on, or closed do9n at a smaller loss, s a purely bus ness and econom c problem to be determ ned by the d rectors of the corporat on, and not by the court. $t s a 9ell Fno9n rule of la9 that =uest ons of pol cy of management are left solely to the honest dec s on of off cers and d rectors of a corporat on, and the court s 9 thout author ty to subst tute ts -udgment for the -udgment of the board of d rectorsI the board s the bus ness manager of the corporat on, and solong as it acts in good faith its orders are not revie&a#le #y the courts ., /7letcher on 'orporat ons, Col. 2, p. <50.046

*ala9)s good fa th, and that of the other d rectors, cl nch the case for defendants. 45 C e9ed n the l ght of the ent re record, the -udgment under rev e9 must be, as t s hereby, aff rmed. ( thout costs. &o ordered. Reyes, 9.!.%., Ma'alintal, !engzon, 9.$., Haldivar, .astro and Angeles, 99., concur. 8ernando, 9., too' no part. .oncepcion, ..9. and Dizon, 9., are on leave. :ootnotes
1

Dr g nal pla nt ff, Nat onal 'oconut 'orporat on, 9as d ssolved on November 24, 1580 by the +res dent)s E1ecut ve Drder <22, 9h ch created the Eoard of ! =u dators. Bence, the subst tut on of party pla nt ff.
2

Defendant Ma1 mo M. *ala9 d ed n March of 1588 before tr al. &ubst tuted for defendant 'as m ro #arc a, deceased.

<

E1planatory Note of Bouse E ll 258, 1st &ess on, 2nd 'ongress, later "epubl c Act 8I 'ongress onal "ecord, Bouse of "epresentat ves, July 22, 154>I M nutes of the NA'D'D D rectors) Meet ng of July 2, 154>, E1h. 4@Be rs.
8

".A., p. 2<6I Emphas s suppl ed.

>

#arc a CaldeA vs. %uason, 40 +h l. 54<, 581@582I !ucero vs. #uAman, 48 +h l. 682, 625I "elat ve vs. 'astro, 2> +h l. 8><, 8>2@8>6.
2

$$$ Agbayan , 'orporat on !a9, 15>4 ed., p. 1>25. #overnment vs. ( se N 'o., !td. /'.A.0, <2 D.#. No. 2>, pp. 848, 84>. 10 '.J.&., p. 180<I emphas s suppl ed. 1 '.J.&., p. 141. :d., p. 14<I 1> 7letcher, p. 501. 1> 7letcher, p. 502. &erv ce N (r ght !umber 'o. vs. &umpter Calley "y. 'o., 182 +. 2>2, 2>8. ' t ng &umera vs. Calenc a, >2 +h l. 221, 22>@222. Emphas s ours. See? &ect on <, "ule <, "ules of 'ourt. "ecord on Appeal, pp. 21@28. :d., p. 184.

10

11

12

1<

14

18

1>

12

16

15

No9 &ect on 8, "ule 6>.

20

&ect on 1, "ule 66 of the 1540 "ules of 'ourtI no9 &ect on 1 "ule 62, "ev sed "ules of 'ourt.
21

2 7letcher 'ycloped a 'orporat ons, p. >02. See? Hu 'hucF vs. *ong ! +o, 4> +h l. >06, >14.
22

&parFs vs. D spatch %ransfer 'o., 18 &.(. 412, 415I +ac f c 'oncrete +roducts 'orporat on vs. D mm cF, 265 +. 2d 801, 804I Massachusetts Eond ng N $ns. 'o. vs. %ransamer can 7re ght ! nes, 261 N.(. 864, 866@865I &ealy D l M ll N Mfg. 'o. vs. E shop Mfg. 'o., 2<8 &.(. 680, 682.
2<

Emphas s suppl ed. Emphas s suppl ed. Emphas s suppl ed. Barr s vs. B. '. %alton (holesale #rocery 'o., 12< &o. 460.

24

28

2>

22

Can Denburgh vs. %ungsten "eef M nes 'o., >2 +. /2d0 <>0, <>1, citing 7 rst Nat onal 7 n. 'orp. vs. 7 ve@D Dr ll ng 'o., 265 +. 644, 648.
26

Mc$ntosh vs. DaFota %rust 'o., 204 N.(. 616. 624.

25

Murphy vs. (. B. N 7. (. 'ane, 62 Atl. 684, 68>. See Mart n vs. (ebb, 110 3.&. 2, 14@18, 26 !. ed. 45, 82. See also C ctory $nvestment 'orporat on vs. MusFogee Electr c %. 'D., 180 7. 2d. 665, 65<.
<0

2 7letcher, p. 686, citing cases.

<1

*r delbaugh vs. Aldrehn %heatres 'o., 151 N.(. 60<, 604, citing casesI emphas s suppl ed.
<2

Art cle 1<1<, old ' v l 'odeI no9 Art cle 1<5>, ne9 ' v l 'ode. %agaytay Development 'o. vs. Dsor o, >5 +h l. 160, 164. &p egel vs. Eeacon +art c pat ons, 6 N.E. /2d0 658, 502, citing cases. See? < 7letcher, &ec. 680, pp. 1>2@1>8. A r 7rance vs. 'arrascoso, !@214<6, &eptember 26, 15>>. ".A., pp. 2<4@2<8. < 7letcher, pp. 480@482, citing cases. .f. Angeles vs. &antos, >4 +h l. >52, 202. %r., p. <0, August 25, 15>0.

<<

<4

<8

<>

<2

<6

<5

40

See E1h b t 25@Be rs, NA'D'D)s &econd Amended Ans9er n ' v l 'ase 4<22, 'ourt of 7 rst nstance of Man la, ent tled ,!ou s Dreyfus N 'o. /Dverseas0 ! m ted, pla nt ff vs. Nat onal 'oconut 'orporat on, defendant.,

41

&ect on 2, "ule 125, "ules of 'ourtI 20 Am. Jur., pp. 4>5@420.

42

%he t me for del very of copra under the July <0, 1542 contract 9as e1tended. 7 fth Amended 'ompla nt, ".A., +. 18. See also E1h b t 2>@ Be rs.
4<

'hurch ll and %a t vs. "afferty <2 +h l. 860, >08I !adrera vs &ecretary of Agr culture and Natural "esources, !@1<<68, Apr l 26, 15>0.
44

Memorandum of #overnment 'orporate 'ounsel Marc al +. ! chauco dated 7ebruary 5, 1545, addressed to the &ecretary of Just ce, 6 days after the or g nal compla nt here n 9as f led n court. ".A., pp. >5, 50@112.
48

%r., pp. 16, 25, August 25, 15>0. See E1h b t 20@Be rs. E1h b t 28@Be rs. Emphas s suppl ed. < 7letcher, pp. 480@482, supra.

4>

42

46

45

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

G.$. No. 13<;2< Septem er 3<, 1<<= SAN J&AN S($&%(&$A# AN! S(EE# :A9$)%A(/$S, )N%., pet t oner, vs. %/&$( /: A++EA#S, '/(/$)%5 SA#ES %/$+/$A()/N, NEN)(A #EE G$&EN9E$G, A%# !E*E#/+'EN( %/$+. and JN' $EA#(8 AN! !E*E#/+'EN( %/$+., respondents.

+ANGAN)9AN, J.: May corporate treasurer, by herself and 9 thout any author Aat on from he board of d rectors, val dly sell a parcel of land o9ned by the corporat onP. May the ve l of corporate f ct on be p erced on the mere ground that almost all of the shares of stocF of the corporat on are o9ned by sa d treasurer and her husbandP 7he .ase %hese =uest ons are ans9ered n the negat ve by th s 'ourt n resolv ng the +et t on for "ev e9 on .ertiorari before us, assa l ng the March 16, 1552 Dec s on 1 of the 'ourt of Appeals 3 n 'A #" 'C No. 4>601 9h ch, n turn, mod f ed the July 16, 1554 Dec s on of the "eg onal %r al 'ourt of MaFat , Metro

Man la, Eranch >< 4 n ' v l 'ase No. 65@<811. %he "%' d sm ssed both the 'ompla nt and the 'ountercla m f led by the part es. Dn the other hand, the 'ourt of Appeals ruled? (BE"E7D"E, prem ses cons dered, the appealed dec s on s A77$"MED ($%B MDD$7$'A%$DN order ng defendant@appellee Nen ta !ee #ruenberg to "E73ND or return to pla nt ff@appellant the do9npayment of +100,000.00 9h ch she rece ved from pla nt ff@appellant. %here s no pronouncement as to costs. ; %he pet t on also challenges the June 10, 1552 'A "esolut on deny ng recons derat on. 2 7he 8acts %he facts as found by the 'ourt of Appeals are as follo9s? +la nt ff@appellant &an Juan &tructural and &teel 7abr cators, $nc.)s amended compla nt alleged that on 14 7ebruary 1565, pla nt ff@appellant entered nto an agreement 9 th defendant@appellee Motor ch &ales 'orporat on for the transfer to t of a parcel of land dent f ed as !ot <0, ElocF 1 of the Acropol s #reens &ubd v s on located n the D str ct of Murphy, UueAon ' ty. Metro Man la, conta n ng an area of 7our Bundred 7ourteen /4140 s=uare meters, covered by %'% No. /<>25050 262>? that as st pulated n the Agreement of 14 7ebruary 1565, pla nt ff@appellant pa d the do9npayment n the sum of Dne Bundred %housand /+100,000.000 +esos, the balance to be pa d on or before March 2, 1565I that on March 1, 1565. Mr. Andres %. 'o, pres dent of pla nt ff@appellant corporat on, 9rote a letter to defendant@appellee Motor ch &ales 'orporat on re=uest ng for a computat on of the balance to be pa d? that sa d letter 9as coursed through defendant@appellee)s broFer. ! nda Aduca, 9ho 9rote the computat on of the balance? that on March 2, 1565, pla nt ff@appellant 9as ready 9 th the amount correspond ng to the balance, covered by MetrobanF 'ash er)s 'hecF No. 00422<, payable to defendant@appellee Motor ch &ales 'orporat onI that pla nt ff@appellant and defendant@appellee Motor ch &ales 'orporat on 9ere supposed to meet n the off ce of pla nt ff@appellant but defendant@appellee)s treasurer, Nen ta !ee #ruenberg, d d not appearI that defendant@appellee Motor ch &ales 'orporat on desp te repeated demands and n utter d sregard of ts comm tments had refused to e1ecute the %ransfer of " ghtsMDeed of Ass gnment 9h ch s necessary to transfer the cert f cate of t tleI that defendant A'! Development 'orp. s mpleaded as a necessary party s nce %ransfer 'ert f cate of % tle No. /<>25050 262> s st ll n the name of sa d defendantI 9h le defendant JNM "ealty N Development 'orp. s l Fe9 se mpleaded as a necessary party n v e9 of the fact that t s the transferor of r ght n favor of defendant@ appellee Motor ch &ales 'orporat on? that on Apr l >, 1565, defendant A'! Development 'orporat on and Motor ch &ales 'orporat on entered nto a Deed of Absolute &ale 9hereby the former transferred to the latter the sub-ect propertyI that by reason of sa d transfer, the "eg stry of Deeds of UueAon ' ty ssued a ne9 t tle n the name of Motor ch &ales 'orporat on, represented by defendant@ appellee Nen ta !ee #ruenberg and "eynaldo !. #ruenberg, under %ransfer 'ert f cate of % tle No. <821I that as a result of defendants@appellees Nen ta !ee

#ruenberg and Motor ch &ales 'orporat on)s bad fa th n refus ng to e1ecute a formal %ransfer of " ghtsMDeed of Ass gnment, pla nt ff@appellant suffered moral and nom nal damages 9h ch may be assessed aga nst defendants@appellees n the sum of 7 ve Bundred %housand /800,000.000 +esosI that as a result of defendants@appellees Nen ta !ee #ruenberg and Motor ch &ales 'orporat on)s un-ust f ed and un9arranted fa lure to e1ecute the re=u red %ransfer of " ghtsMDeed of Ass gnment or formal deed of sale n favor of pla nt ff@appellant, defendants@appellees should be assessed e1emplary damages n the sum of Dne Bundred %housand /+100,000.000 +esosI that by reason of defendants@appellees) bad fa th n refus ng to e1ecute a %ransfer of " ghtsMDeed of Ass gnment n favor of pla nt ff@appellant, the latter lost the opportun ty to construct a res dent al bu ld ng n the sum of Dne Bundred %housand /+100,000.000 +esosI and that as a conse=uence of defendants@appellees Nen ta !ee #ruenberg and Motor ch &ales 'orporat on)s bad fa th n refus ng to e1ecute a deed of sale n favor of pla nt ff@ appellant, t has been constra ned to obta n the serv ces of counsel at an agreed fee of Dne Bundred %housand /+100,000.000 +esos plus appearance fee for every appearance n court hear ngs. $n ts ans9er, defendants@appellees Motor ch &ales 'orporat on and Nen ta !ee #ruenberg nterposed as aff rmat ve defense that the +res dent and 'ha rman of Motor ch d d not s gn the agreement adverted to n par. < of the amended compla ntI that Mrs. #ruenberg)s s gnature on the agreement /ref? par. < of Amended 'ompla nt0 s nade=uate to b nd Motor ch. %he other s gnature, that of Mr. "eynaldo #ruenberg, +res dent and 'ha rman of Motor ch, s re=u red? that pla nt ff Fne9 th s from the very beg nn ng as t 9as presented a copy of the %ransfer of " ghts /Anne1 E of amended compla nt0 at the t me the Agreement /Anne1 E of amended compla nt0 9as s gnedI that pla nt ff@appellant tself drafted the Agreement and ns sted that Mrs. #ruenberg accept the +100,000.00 as earnest moneyI that grant ng, 9 thout adm tt ng, the enforceab l ty of the agreement, pla nt ff@appellant nonetheless fa led to pay n legal tender 9 th n the st pulated per od /up to March 2, 15650I that t 9as the understand ng bet9een Mrs. #ruenberg and pla nt ff@appellant that the %ransfer of " ghtsMDeed of Ass gnment 9 ll be s gned only upon rece pt of cash paymentI thus they agreed that f the payment be n checF, they 9 ll meet at a banF des gnated by pla nt ff@ appellant 9here they 9 ll encash the checF and s gn the %ransfer of " ghtsMDeed. Bo9ever, pla nt ff@appellant nformed Mrs. #ruenberg of the alleged ava lab l ty of the checF, by phone, only after banF ng hours. Dn the bas s of the ev dence, the court a quo rendered the -udgment appealed from:,; d sm ss ng pla nt ff@appellant)s compla nt, rul ng that? %he ssue to be resolved s? 9hether pla nt ff had the r ght to compel defendants to e1ecute a deed of absolute sale n accordance 9 th the agreement of 7ebruary 14, 1565? and f so, 9hether pla nt ff s ent tled to damage. As to the f rst =uest on, there s no ev dence to sho9 that defendant Nen ta !ee #ruenberg 9as ndeed author Aed by defendant corporat on. Motor ch &ales, to d spose of that property covered by %.'.%. No. /<>25050 262>. & nce the property

s clearly o9ned by the corporat on. Motor ch &ales, then ts d spos t on should be governed by the re=u rement la d do9n n &ec. 40. of the 'orporat on 'ode of the +h l pp nes, to 9 t? &ec. 40, &ale or other d spos t on of assets. &ub-ect to the prov s ons of e1 st ng la9s on llegal comb nat on and monopol es, a corporat on may by a ma-or ty vote of ts board of d rectors . . . sell, lease, e1change, mortgage, pledge or other9 se d spose of all or substant ally all of ts property and assets nclud ng ts good9 ll . . . 9hen author Aed by the vote of the stocFholders represent ng at least t9o th rd /2M<0 of the outstand ng cap tal stocF . . . No such vote 9as obta ned by defendant Nen ta !ee #ruenberg for that proposed sale:I; ne ther 9as there ev dence to sho9 that the supposed transact on 9as rat f ed by the corporat on. +la nt ff should have been on the looF out under these c rcumstances. More so, pla nt ff h mself :o9ns; several corporat ons /tsn dated August 1>, 155<, p. <0 9h ch maFes h m Fno9ledgeable on corporat on matters. "egard ng the =uest on of damages, the 'ourt l Fe9 se, does not f nd substant al ev dence to hold defendant Nen ta !ee #ruenberg l able cons der ng that she d d not n any9ay m srepresent herself to be author Aed by the corporat on to sell the property to pla nt ff /tsn dated &eptember 22, 1551, p. 60. $n the l ght of the forego ng, the 'ourt hereby renders -udgment D$&M$&&$N# the compla nt at nstance for lacF of mer t. ,Defendants, countercla m s also D$&M$&&ED for lacF of bas s. /Dec s on, pp. 2@ 6I Rollo, pp. <4@<80 7or clar ty, the Agreement dated 7ebruary 14, 1565 s reproduced hereunder? A#"EEMEN% *ND( A!! MEN EH %BE&E +"E&EN%&? %h s Agreement, made and entered nto by and bet9een? MD%D"$'B &A!E& 'D"+D"A%$DN, a corporat on duly organ Aed and e1 st ng under and by v rtue of +h l pp ne !a9s, 9 th pr nc pal off ce address at 8810 &outh &uper B @9ay cor. Ealderama &t., + o del + lar. MaFat , Metro Man la, represented here n by ts %reasurer, NEN$%A !EE #"3ENEE"#, here nafter referred to as the %"AN&7E"D"I O and O &AN J3AN &%"3'%3"A! N &%EE! 7AE"$'A%D"&, a corporat on duly organ Aed and e1 st ng under and by v rtue of the la9s of the +h l pp nes, 9 th pr nc pal off ce address at &umulong B gh9ay, Earr o Mambungan, Ant polo, " Aal, represented here n by ts +res dent, AND"E& %. 'D, here nafter referred to as the %"AN&7E"EE. ($%NE&&E%B, %hat?

(BE"EA&, the %"AN&7E"D" s the o9ner of a parcel of land dent f ed as !ot <0 ElocF 1 of the A'"D+D!$& #"EEN& &3ED$C$&$DN located at the D str ct of Murphy, UueAon ' ty, Metro Man la, conta n ng an area of 7D3" B3ND"ED 7D3"%EEN /4140 &U3A"E ME%E"&, covered by a %"AN&7E" D7 "$#B%& bet9een JNM "ealty N Dev. 'orp. as the %ransferor and Motor ch &ales 'orp. as the %ransfereeI ND(, %BE"E7D"E, for and n cons derat on of the forego ng prem ses, the part es have agreed as follo9s? 1. %hat the purchase pr ce shall be at 7$CE %BD3&AND %(D B3ND"ED +E&D& /+8,200.000 per s=uare meterI sub-ect to the follo9 ng terms? a. Earnest money amount ng to DNE B3ND"ED %BD3&AND +E&D& /+100,000.000, 9 ll be pa d upon the e1ecut on of th s agreement and shall form part of the total purchase pr ceI b. Ealance shall be payable on or before March 2, 1565I 2. %hat the monthly amort Aat on for the month of 7ebruary 1565 shall be for the account of the %ransferorI and that the monthly amort Aat on start ng March 21, 1565 shall be for the account of the %ransfereeI %he transferor 9arrants that he :sic; s the la9ful o9ner of the above@descr bed property and that there :are; no e1 st ng l ens andMor encumbrances of 9hatsoever natureI $n case of fa lure by the %ransferee to pay the balance on the date spec f ed on 1, /b0, the earnest money shall be forfe ted n favor of the %ransferor. %hat upon full payment of the balance, the %"AN&7E"D" agrees to e1ecute a %"AN&7E" D7 "$#B%&MDEED D7 A&&$#NMEN% n favor of the %"AN&7E"EE. $N ($%NE&& (BE"ED7, the part es have hereunto set the r hands th s 14th day of 7ebruary, 1565 at #reenh lls, &an Juan, Metro Man la, +h l pp nes. MD%D"$'B &A!E& 'D"+D"A%$DN &AN J3AN &%"3'%3"A! N &%EE! 7AE"$'A%D"& %"AN&7E"D" %"AN&7E"EE :&#D.; :&#D.; Ey. NEN$%A !EE #"3ENEE"# Ey? AND"E& %. 'D %reasurer +res dent & gned $n the presence of? :&#D.; :&#D.; OOOOOOOOOOOOO OOOOOOOOOOO 0 $n ts recourse before the 'ourt of Appeals, pet t oner ns sted?

1. Appellant s ent tled to compel the appellees to e1ecute a Deed of Absolute &ale n accordance 9 th the Agreement of 7ebruary 14, 1565, 2. +la nt ff s ent tled to damages.
1

As stated earl er, the 'ourt of Appeals debunFed pet t oner)s arguments and aff rmed the Dec s on of the "%' 9 th the mod f cat on that "espondent Nen ta !ee #ruenberg 9as ordered to refund +100,000 to pet t oner, the amount rem tted as ,do9npayment, or ,earnest money., Bence, th s pet t on before us. = 7he :ssues Eefore th s 'ourt, pet t oner ra ses the follo9 ng ssues? $. (hether or not the doctr ne of p erc ng the ve l of corporate f ct on s appl cable n the nstant case $$. (hether or not the appellate court may cons der matters 9h ch the part es fa led to ra se n the lo9er court $$$. (hether or not there s a val d and enforceable contract bet9een the pet t oner and the respondent corporat on $C. (hether or not the 'ourt of Appeals erred n hold ng that there s a val d correct onMsubst tut on of ans9er n the transcr pt of stenograph c note:s;. C. (hether or not respondents are l able for damages and attorney)s fees
<

%he 'ourt synthes Aed the forego ng and 9 ll thus d scuss them seriatim as follo9s? 1. (as there a val d contract of sale bet9een pet t oner and Motor chP 2. May the doctr ne of p erc ng the ve l of corporate f ct on be appl ed to Motor chP <. $s the alleged alterat on of #ruenberg)s test mony as recorded n the transcr pt of stenograph c notes mater al to the d spos t on of th s caseP 4. Are respondents l able for damages and attorney)s feesP 7he .ourt/s Ruling %he pet t on s devo d of mer t. 8irst :ssueR 4alidity of Agreement +et t oner &an Juan &tructural and &teel 7abr cators, $nc. alleges that on 7ebruary 14, 1565, t entered through ts pres dent, Andres 'o, nto the d sputed Agreement 9 th "espondent Motor ch &ales 'orporat on, 9h ch 9as n turn allegedly represented by ts treasurer, Nen ta !ee #ruenberg. +et t oner ns sts that ,:9;hen #ruenberg and 'o aff 1ed the r s gnatures on the contract they both

consented to be bound by the terms thereof., Ergo, pet t oner contends that the contract s b nd ng on the t9o corporat ons. (e do not agree. %rue, #ruenberg and 'o s gned on 7ebruary 14, 1565, the Agreement, accord ng to 9h ch a lot o9ned by Motor ch &ales 'orporat on 9as purportedly sold. &uch contract, ho9ever, cannot b nd Motor ch, because t never author Aed or rat f ed such sale. A corporat on s a -ur d cal person separate and d st nct from ts stocFholders or members. Accord ngly, the property of the corporat on s not the property of ts stocFholders or members and may not be sold by the stocFholders or members 9 thout e1press author Aat on from the corporat on)s board of d rectors. 1. &ect on 2< of E+ >6, other9 se Fno9n as the 'orporat on 'ode of the +h l pp nes, prov desI &ec. 2<. 7he !oard of Directors or 7rustees. O 3nless other9 se prov ded n th s 'ode, the corporate po9ers of all corporat ons formed under th s 'ode shall be e1erc sed, all bus ness conducted and all property of such corporat ons controlled and held by the board of d rectors or trustees to be elected from among the holders of stocFs, or 9here there s no stocF, from among the members of the corporat on, 9ho shall hold off ce for one /10 year and unt l the r successors are elected and =ual f ed. $ndub tably, a corporat on may act only through ts board of d rectors or, 9hen author Aed e ther by ts byla9s or by ts board resolut on, through ts off cers or agents n the normal course of bus ness. %he general pr nc ples of agency govern the relat on bet9een the corporat on and ts off cers or agents, sub-ect to the art cles of ncorporat on, byla9s, or relevant prov s ons of la9. 11 %hus, th s 'ourt has held that ,a corporate off cer or agent may represent and b nd the corporat on n transact ons 9 th th rd persons to the e1tent that the author ty to do so has been conferred upon h m, and th s ncludes po9ers 9h ch have been ntent onally conferred, and also such po9ers as, n the usual course of the part cular bus ness, are nc dental to, or may be mpl ed from, the po9ers ntent onally conferred, po9ers added by custom and usage, as usually perta n ng to the part cular off cer or agent, and such apparent po9ers as the corporat on has caused persons deal ng 9 th the off cer or agent to bel eve that t has conferred., 13 7urthermore, the 'ourt has also recogn Aed the rule that ,persons deal ng 9 th an assumed agent, 9hether the assumed agency be a general or spec al one bound at the r per l, f they 9ould hold the pr nc pal l able, to ascerta n not only the fact of agency but also the nature and e1tent of author ty, and n case e ther s controverted, the burden of proof s upon them to establ sh t /Barry *eeler v. "odr gueA, 4 +h l. 150., 14 3nless duly author Aed, a treasurer, 9hose po9ers are l m ted, cannot b nd the corporat on n a sale of ts assets. 1; $n the case at bar, "espondent Motor ch categor cally den es that t ever author Aed Nen ta #ruenberg, ts treasurer, to sell the sub-ect parcel of land. 12 'onse=uently, pet t oner had the burden of prov ng that Nen ta

#ruenberg 9as n fact author Aed to represent and b nd Motor ch n the transact on. +et t oner fa led to d scharge th s burden. $ts offer of ev dence before the tr al court conta ned no proof of such author ty. 10 $t has not sho9n any prov s on of sa d respondent)s art cles of ncorporat on, byla9s or board resolut on to prove that Nen ta #ruenberg possessed such po9er. %hat Nen ta #ruenberg s the treasurer of Motor ch does not free pet t oner from the respons b l ty of ascerta n ng the e1tent of her author ty to represent the corporat on. +et t oner cannot assume that she, by v rtue of her pos t on, 9as author Aed to sell the property of the corporat on. &ell ng s obv ously fore gn to a corporate treasurer)s funct on, 9h ch generally has been descr bed as ,to rece ve and Feep the funds of the corporat on, and to d sburse them n accordance 9 th the author ty g ven h m by the board or the properly author Aed off cers., 11 Ne ther 9as such real estate sale sho9n to be a normal bus ness act v ty of Motor ch. %he pr mary purpose of Motor ch s marFet ng, d str but on, e1port and mport n relat on to a general merchand s ng bus ness. 1= 3nm staFably, ts treasurer s not cloaFed 9 th actual or apparent author ty to buy or sell real property, an act v ty 9h ch falls 9ay beyond the scope of her general author ty. Art. 1624 and 1626 of the ' v l 'ode of the +h l pp nes prov des? Art. 1624. (hen a sale of a p ece of land or any nterest there n s through an agent, the author ty of the latter shall be n 9r t ng? other9 se, the sale shall be vo d. Art. 1626. &pec al po9ers of attorney are necessary n the follo9 ng case? 111 111 111 /80 %o enter 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 onI 111 111 111. +et t oner further contends that "espondent Motor ch has rat f ed sa d contract of sale because of ts ,acceptance of benef ts,, as ev denced by the rece pt ssued by "espondent #ruenberg. 1< +et t oner s clutch ng at stra9s. As a general rule, the acts of corporate off cers 9 th n the scope of the r author ty are b nd ng on the corporat on. Eut 9hen these off cers e1ceed the r author ty, the r act ons ,cannot b nd the corporat on, unless t has rat f ed such acts or s estopped from d scla m ng them., 3. $n th s case, there s a clear absence of proof that Motor ch ever author Aed Nen ta #ruenberg, or made t appear to any th rd person that she had the author ty, to sell ts land or to rece ve the earnest money. Ne ther 9as there any proof that Motor ch rat f ed, e1pressly or mpl edly, the contract. +et t oner rests ts argument on the rece pt 9h ch, ho9ever, does not prove the fact of rat f cat on. %he document s a hand@9r tten one, not a corporate rece pt, and t

bears only Nen ta #ruenberg)s s gnature. 'erta nly, th s document alone does not prove that her acts 9ere author Aed or rat f ed by Motor ch. Art. 1<16 of the ' v l 'ode l sts the re=u s tes of a val d and perfected contract? ,/10 consent of the contract ng part esI /20 ob-ect certa n 9h ch s the sub-ect matter of the contractI /<0 cause of the obl gat on 9h ch s establ shed., As found by the tr al court 31 and aff rmed by the 'ourt of Appeals, 33 there s no ev dence that #ruenberg 9as author Aed to enter nto the contract of sale, or that the sa d contract 9as rat f ed by Motor ch. %h s factual f nd ng of the t9o courts s b nd ng on th s 'ourt. 34 As the consent of the seller 9as not obta ned, no contract to b nd the obl gor 9as perfected. %herefore, there can be no val d contract of sale bet9een pet t oner and Motor ch. Eecause Motor ch had never g ven a 9r tten author Aat on to "espondent #ruenberg to sell ts parcel of land, 9e hold that the 7ebruary 14, 1565 Agreement entered nto by the latter 9 th pet t oner s vo d under Art cle 1624 of the ' v l 'ode. Ee ng ne1 stent and vo d from the beg nn ng, sa d contract cannot be rat f ed. 3; Second :ssue? $iercing the .orporate 4eil 3ot 9ustified +et t oner also argues that the ve l of corporate f ct on of Motor ch should be p erced, because the latter s a close corporat on. & nce ,&pouses "eynaldo !. #ruenberg and Nen ta ". #ruenberg o9ned all or almost all or 55.6>>R to be accurate, of the subscr bed cap tal stocF, 32 of Motor ch, pet t oner argues that #ruenberg needed no author Aat on from the board to enter nto the sub-ect contract. 30 $t adds that, be ng solely o9ned by the &pouses #ruenberg, the company can treated as a close corporat on 9h ch can be bound by the acts of ts pr nc pal stocFholder 9ho needs no spec f c author ty. %he 'ourt s not persuaded. 8irst, pet t oner tself concedes hav ng ra sed the ssue belatedly, 31 not hav ng done so dur ng the tr al, but only 9hen t f led ts sur@re-o nder before the 'ourt of Appeals. 3= %hus, th s 'ourt cannot enterta n sa d ssue at th s late stage of the proceed ngs. $t s 9ell@settled the po nts of la9, theor es and arguments not brought to the attent on of the tr al court need not be, and ord nar ly 9 ll not be, cons dered by a rev e9 ng court, as they cannot be ra sed for the f rst t me on appeal. 3<Allo9 ng pet t oner to change horses n m dstream, as t 9ere, s to run roughshod over the bas c pr nc ples of fa r play, -ust ce and due process. Second, even f the above ment oned argument 9ere to be addressed at th s t me, the 'ourt st ll f nds no reason to uphold t. %rue, one of the advantages of a corporate form of bus ness organ Aat on s the l m tat on of an nvestor)s l ab l ty to the amount of the nvestment. 4. %h s feature flo9s from the legal theory that a corporate ent ty s separate and d st nct from ts stocFholders. Bo9ever, the statutor ly granted pr v lege of a corporate ve l may be used only for leg t mate purposes. 41 Dn e=u table cons derat ons, the ve l can be d sregarded 9hen t s ut l Aed as a sh eld to comm t fraud, llegal ty or ne=u tyI defeat publ c

conven enceI confuse leg t mate ssuesI or serve as a mere alter ego or bus ness condu t of a person or an nstrumental ty, agency or ad-unct of another corporat on. 43 %hus, the 'ourt has cons stently ruled that ,:9;hen the f ct on s used as a means of perpetrat ng a fraud or an llegal act or as veh cle for the evas on of an e1 st ng obl gat on, the c rcumvent on of statutes, the ach evement or perfect on of a monopoly or generally the perpetrat on of Fnavery or cr me, the ve l 9 th 9h ch the la9 covers and solates the corporat on from the members or stocFholders 9ho compose t 9 ll be l fted to allo9 for ts cons derat on merely as an aggregat on of nd v duals.,44 (e stress that the corporate f ct on should be set as de 9hen t becomes a sh eld aga nst l ab l ty for fraud, llegal ty or ne=u ty comm tted on th rd persons. %he =uest on of p erc ng the ve l of corporate f ct on s essent ally, then, a matter of proof. $n the present case, ho9ever, the 'ourt f nds no reason to p erce the corporate ve l of "espondent Motor ch. +et t oner utterly fa led to establ sh that sa d corporat on 9as formed, or that t s operated, for the purpose of sh eld ng any alleged fraudulent or llegal act v t es of ts off cers or stocFholdersI or that the sa d ve l 9as used to conceal fraud, llegal ty or ne=u ty at the e1pense of th rd persons l Fe pet t oner. +et t oner cla ms that Motor ch s a close corporat on. (e rule that t s not. &ect on 5> of the 'orporat on 'ode def nes a close corporat on as follo9s? &ec. 5>. Definition and Applica#ility of 7itle. O A close corporat on, 9 th n the mean ng of th s 'ode, s one 9hose art cles of ncorporat on prov de that? /10 All of the corporat on)s ssued stocF of all classes, e1clus ve of treasury shares, shall be held of record by not more than a spec f ed number of persons, not e1ceed ng t9enty /200I /20 All of the ssued stocF of all classes shall be sub-ect to one or more spec f ed restr ct ons on transfer perm tted by th s % tleI and /<0 %he corporat on shall not l st n any stocF e1change or maFe any publ c offer ng of any of ts stocF of any class. Not9 thstand ng the forego ng, a corporat on shall be deemed not a close corporat on 9hen at least t9o@th rds /2M<0 of ts vot ng stocF or vot ng r ghts s o9ned or controlled by another corporat on 9h ch s not a close corporat on 9 th n the mean ng of th s 'ode. . . . . %he art cles of ncorporat on 4; of Motor ch &ales 'orporat on does not conta n any prov s on stat ng that /10 the number of stocFholders shall not e1ceed 20, or /20 a preempt on of shares s restr cted n favor of any stocFholder or of the corporat on, or /<0 l st ng ts stocFs n any stocF e1change or maF ng a publ c offer ng of such stocFs s proh b ted. 7rom ts art cles, t s clear that "espondent Motor ch s not a close corporat on. 42 Motor ch does not become one e ther, -ust because &pouses "eynaldo and Nen ta #ruenberg o9ned 55.6>>R of ts subscr bed cap tal stocF. %he ,:m;ere o9nersh p by a s ngle stocFholder or by another corporat on of all or cap tal stocF of a corporat on s not of tself suff c ent ground for d sregard ng the separate corporate personal t es., 40 &o, too, a narro9 d str but on of o9nersh p does not, by tself, maFe a close corporat on.

+et t oner c tes Manuel R. Dulay 5nterprises, :nc. v. .ourt of Appeals 41 9here n the 'ourt ruled that ,. . . pet t oner corporat on s class f ed as a close corporat on and, conse=uently, a board resolut on author A ng the sale or mortgage of the sub-ect property s not necessary to b nd the corporat on for the act on of ts pres dent., 4= Eut the factual m l eu n Dulay s not on all fours 9 th the present case. $n Dulay, the sale of real property 9as contracted by the pres dent of a close corporat on 9 th the Fno9ledge and ac=u escence of ts board of d rectors. 4< $n the present case, Motor ch s not a close corporat on, as prev ously d scussed, and the agreement 9as entered nto by the corporate treasurer 9 thout the Fno9ledge of the board of d rectors. %he 'ourt s not una9are that there are e1cept onal cases 9here ,an act on by a d rector, 9ho s ngly s the controll ng stocFholder, may be cons dered as a b nd ng corporate act and a board act on as noth ng more than a mere formal ty., ;.%he present case, ho9ever, s not one of them. As stated by pet t oner, &pouses "eynaldo and Nen ta #ruenberg o9n ,almost 55.6>>R, of "espondent Motor ch. ;1 & nce Nen ta s not the sole controll ng stocFholder of Motor ch, the aforement oned e1cept on does not apply. #rant ng arguendothat the corporate ve l of Motor ch s to be d sregarded, the sub-ect parcel of land 9ould then be treated as con-ugal property of &pouses #ruenberg, because the same 9as ac=u red dur ng the r marr age. %here be ng no nd cat on that sa d spouses, 9ho appear to have been marr ed before the effect v ty of the 7am ly 'ode, have agreed to a d fferent property reg me, the r property relat ons 9ould be governed by con-ugal partnersh p of ga ns. ;3 As a conse=uence, Nen ta #ruenberg could not have effected a sale of the sub-ect lot because ,:t;here s no co@o9nersh p bet9een the spouses n the propert es of the con-ugal partnersh p of ga ns. Bence, ne ther spouse can al enate n favor of another h s or nterest n the partnersh p or n any property belong ng to tI ne ther spouse can asF for a part t on of the propert es before the partnersh p has been legally d ssolved., ;4 Assum ng further, for the saFe of argument, that the spouses) property reg me s the absolute commun ty of property, the sale 9ould st ll be nval d. 3nder th s reg me, ,al enat on of commun ty property must have the 9r tten consent of the other spouse or he author ty of the court 9 thout 9h ch the d spos t on or encumbrance s void., ;; Eoth re=u rements are man festly absent n the nstant case. 7hird :ssueR .hallenged $ortion of 7S3 :mmaterial +et t oner calls our attent on to the follo9 ng e1cerpt of the transcr pt of stenograph c notes /%&N0? U D d you ever represent to Mr. 'o that you 9ere author Aed by the corporat on to sell the propertyP A Hes, s r.
;2

+et t oner cla ms that the ans9er ,Hes, 9as crossed out, and, n ts place 9as 9r tten a ,No, 9 th an n t al scr bbled above t. ;0 %h s, ho9ever, s nsuff c ent to prove that Nen ta #ruenberg 9as author Aed to represent "espondent Motor ch n the sale of ts mmovable property. &a d e1cerpt be understood n the conte1t of her 9hole test mony. Dur ng her cross@e1am nat on. "espondent #ruenberg test f ed? U &o, you s gned n your capac ty as the treasurerP :A; Hes, s r. U Even then you Fn:e;9 all along that you :9ere; not author AedP A Hes, s r. U Hou stated on d rect e1am nat on that you d d not represent that you 9ere author Aed to sell the propertyP A Hes, s r. U Eut you also d d not say that you 9ere not author Aed to sell the property, you d d not tell that to Mr. 'o, s that correctP A %hat 9as not asFed of me. U Hes, -ust ans9er t. A $ -ust told them that $ 9as the treasurer of the corporat on and t :9as; also the pres dent 9ho :9as; also author Aed to s gn on behalf of the corporat on. U Hou d d not say that you 9ere not author Aed nor d d you say that you 9ere author AedP A Mr. 'o 9as very nterested to purchase the property and he offered to put up a +100,000.00 earnest money at that t me. %hat 9as our f rst meet ng. ;1 'learly then, Nen ta #ruenberg d d not test fy that Motor ch had author Aed her to sell ts property. Dn the other hand, her test mony demonstrates that the pres dent of +et t oner 'orporat on, n h s great des re to buy the property, thre9 caut on to the 9 nd by offer ng and pay ng the earnest money 9 thout f rst ver fy ng #ruenberg)s author ty to sell the lot. 8ourth :ssue? Damages and Attorney/s 8ees 7 nally, pet t oner prays for damages and attorney)s fees, alleg ng that ,: ;n an utter d splay of mal ce and bad fa th, respondents attempted and succeeded n mpress ng on the tr al court and :the; 'ourt of Appeals that #ruenberg d d not represent herself as author Aed by "espondent Motor ch desp te the rece pt ssued by the former spec f cally nd cat ng that she 9as s gn ng on behalf of Motor ch &ales 'orporat on. "espondent Motor ch l Fe9 se acted n bad fa th 9hen t cla med t d d not author Ae "espondent #ruenberg and that the contract

:9as; not b nd ng, : nsofar; as t :9as; concerned, desp te rece pt and en-oyment of the proceeds of #ruenberg)s act., ;= Assum ng that "espondent Motor ch 9as not a party to the alleged fraud, pet t oner ma nta ns that "espondent #ruenberg should be held l able because she ,acted fraudulently and n bad fa th : n; represent ng herself as duly author Aed by :";espondent :';orporat on., ;< As already stated, 9e susta n the f nd ngs of both the tr al and the appellate courts that the forego ng allegat ons lacF factual bases. Bence, an a9ard of damages or attorney)s fees cannot be -ust f ed. %he amount pa d as ,earnest money, 9as not proven to have redounded to the benef t of "espondent Motor ch. +et t oner cla ms that sa d amount 9as depos ted to the account of "espondent Motor ch, because , t 9as depos ted 9 th the account of Aren 'ommerc al cMo Motor ch &ales 'orporat on., 2. "espondent #ruenberg, ho9ever, d sputes the allegat ons of pet t oner. &he test f ed as follo9s? U Hou voluntar ly accepted the +100,000.00, as a matter of fact, that 9as encashed, the checF 9as encashed. A Hes. s r, the checF 9as pa d n my name and $ depos t:ed; t. U $n your accountP A Hes, s r.
21

$n any event, #ruenberg offered to return the amount to pet t oner ,. . . s nce the sale d d not push through., 23 Moreover, 9e note that Andres 'o s not a neophyte n the 9orld of corporate bus ness. Be has been the pres dent of +et t oner 'orporat on for more than ten years and has also served as ch ef e1ecut ve of t9o other corporate ent t es. 24 'o cannot fe gn gnorance of the scope of the author ty of a corporate treasurer such as #ruenberg. Ne ther can he be obl v ous to h s duty to ascerta n the scope of #ruenberg)s author Aat on to enter nto a contract to sell a parcel of land belong ng to Motor ch. $ndeed, pet t oner)s cla m of fraud and bad fa th s unsubstant ated and fa ls to persuade the 'ourt. $ndub tably, pet t oner appears to be the v ct m of ts o9n off cer)s negl gence n enter ng nto a contract 9 th and pay ng an unauthor Aed off cer of another corporat on. As correctly ruled by the 'ourt of Appeals, ho9ever, Nen ta #ruenberg should be ordered to return to pet t oner the amount she rece ved as earnest money, as ,no one shall enr ch h mself at the e1pense of another., 2; a pr nc ple embod ed n Art cle 2184 of ' v l 'ode. 22 Although there 9as no b nd ng relat on bet9een them, pet t oner pa d #ruenberg on the m staFen bel ef that she had the author ty to sell the property of Motor ch. 20 Art cle 2188 of ' v l 'ode prov des that ,:p;ayment by reason of a m staFe n the contruct on or appl cat on of a d ff cult =uest on of la9 may come 9 th n the scope of the preced ng art cle.,

(BE"E7D"E, the pet t on s hereby DEN$ED and the assa led Dec s on s A77$"MED. &D D"DE"ED. Davide, 9r., !ellosillo, 4itug and Quisum#ing, 99., concur. :ootnotes 1 Rollo, pp. 84 to >8@A. 2 & 1th D v s on, composed of J. Eduardo #. Montenegro, ponente, and JJ. Anton o M. Mart neA, cha rman /non a member of th s 'ourt0I and 'el a ! pana@"eyes, memberI both concurr ng. < +enned by Judge Jul o ". !ogarta. 4 'A Dec s on, p. 14I rollo, p. >8@A. 8 Rollo, p. 2<. > "ecord, pp. 22>@222. 2 +et t oner)s Er ef before the 'ourt of Appeals, p. 4I 'A rollo, p. 21. 6 %h s case 9as deemed subm tted for resolut on on May 18, 1556 upon rece pt by th s 'ourt of the Memorandum for the "espondents. +et t oner)s Memorandum 9as rece ved earl er, on May 2, 1556. 5 +et t oner)s Memorandum, pp. <@4I rollo, pp. 212@21<. 10 %raders "oyal EanFs v. 'ourt of Appeals, 122 &'"A 266, 252, &eptember 2>, 1565. 11 Hao *a & n %rad ng v. 'ourt of Appeals, 205 &'"A 2><, 261, June 18, 1552I citing 15 'J& 488. 12 :#id., pp. 261@262I citing 15 'J& 48>, per Dav de Jr., J. 1< EA 7 nance 'orporat on v. 'ourt of Appeals, 211 &'"A 112, 11>, July <, 1552, per Med aldea, J. 14 Just ce Jose '. 'ampos, Jr. and Mar a 'lara !opeA@'ampos, 7he .orporation .ode .omments, 3otes and Selected .ases , Col. $ /15500, p. <6>. 18 +et t oner)s Memorandum, pp. 1>@12I rollo, pp. 242@24<. 1> See pet t oner)s Dffer of Ev dence before the "%'I "ecord, pp. 2>8@2>>. 12 'ampos and 'ampos, supra, p. <6>. 16 Art. of $ncorporat on of Motor ch, pp. 1@2I 'A rollo, pp. 6>@62. 15 +et t oner)s Memorandum, p. 11I rollo, p. 220.

20 Art. 1510, ' v l 'odeI 'ampos and 'ampos, supra, p. <68. 21 "%' Dec s on, p. 2I 'A rollo, p. <4. 22 'A Dec s on, p. 5I rollo, p. >2. 2< 7uentes v. 'ourt of Appeals, 2>6 &'"A 20<, 210, 7ebruary 2>, 1552. 24 Art. 1405, ' v l 'ode. 28 'A Dec s on, pp. 4@8I rollo, pp. 21<@214. 2> :#id., p. >I rollo, p. 218. 22 :#id., p. 5I rollo, p. 216. 26 'A rollo, pp. 26@25. 25 7 rst +h l pp ne $nternat onal EanF v. 'ourt of Appeals, 282 &'"A 285, January 24, 155>I &ancheA v. 'ourt of Appeals, #" No. 106542, p. 26, &eptember 25, 1552I citing Med da v. 'ourt of Appeals, 206 &'"A 662, 65<, May 6, 1552 and 'alte1 /+h l pp nes0, $nc. v. 'ourt of Appeals, 212 &'"A 446, 4>1, August 10, 1552. <0 'ampos and 'ampos, supra, p.1. <1 :#id., p. 145I Just ce Jose '. C tug, $andect of .ommercial %a& and 9urisprudence /rev sed ed., 15500, p. 26>. <2 3mal v. 'ourt of Appeals, 165 &'"A 825, 842, &eptember 1<, 1550I citing *oppel /+h l pp nes0, $nc. v. Hatco, 22 +h l 45> /154>0 and %elephone Eng neer ng N &erv ce 'o, $nc. v. (orFmen)s 'ompensat on 'omm ss on et al., 104 &'"A <84, May 1<, 1561. See also 7 rst +h l pp ne $nternat onal EanF v. 'ourt of Appeals, supra, 262@266 and Eoyer@"o1as v. 'ourt of Appeals, 211 &'"A 420, 464@462, July 14, 1552. << 7 rst +h l pp ne $nternat onal EanF v. 'ourt of Appeals, supra, pp. 262@266, per +angan ban, J.Iciting C lla@"ey %rans t, $nc. v. 7errer, 28 &'"A 648, 682@686, Dctober 25, 15>6. <4 'A rollo, pp. 68@54. <8 See Abe-o v. De la 'ruA, 145 &'"A >84, >>2, May 15, 1562. <> &antos v. Nat onal !abor "elat ons 'omm ss on, 284 &'"A >2<, March 1<, 155>, per C tug J.Iciting &un o v. Nat onal !abor 'omm ss on, 122 &'"A <50, <52@ <56, January <1, 1564. See alsoC tug, supra, p. 26>I citing Eumet v. 'larFe, 262 3& 410, !. ed. <52. <2 228 &'"A >26, August 22, 155<I cited n Memorandum for +et t oner, pp. >@ 2I rollo, pp. 218@21>. <6 :#id., p. >64, per Nocon, J.

<5 :#id., pp. >64@>6>. 40 C tug, supra, p. <88. 41 +et t oner)s Memorandum, p. 8I rollo, p. 214. See also Art cles of $ncorporat on of Motor ch, p. 2I 'A rollo, p. 52. 42 Arturo M. %olent no, 'ommentar es and Jur sprudence on the ' v l 'ode of the +h l pp nes, Col. $ /15500, p. 406. 4< :#id., p. 412. 44 Just ce Jose '. C tug, 'ompend um of ' v l !a9 and Jur sprudence, /rev sed ed., 155<0, p. 122. 48 %&N, &eptember 22, 155<, p. 6I "ecord, p. <>0. .ited n +et t oner)s Memorandum, p. 12I rollo, p. 221. 4> +et t oner)s Memorandum, p. 12I rollo, p. 221. 42 %&N, &eptember 22, 155<, p. 1>. 46 +et t oner)s Memorandum, p. 14, rollo, p. 22<. 45 :#id., p. 18I rollo, p. 224. 80 :#id., p. 11I rollo, p. 220. 81 %&N, &eptember 22, 155<, pp. 1>@12I "ecord, pp. <>6@<>5. 82 :#id., p. 12I "ecord, p. <>5. 8< %&N, August 1>, 155<, p. <I "ecord, p. <41. .ited n Memorandum for "espondents, p. 15I rollo, p. 248. 84 %olent no, .ommentaries and 9urisprudence on the .ivil .ode of the $hilippines, Col. C /15500, p. 861. 88 ,Art. 2184. $f someth ng s rece ved 9hen there s no r ght to demand t, and t 9as unduly del vered through m staFe, the obl gat on to return t ar ses., 8> See %olent no, supra, Col. C, p. 861. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN

G.$. No. 131=3; January 3<, 1<<=

9$)()S5 A)$WA8S, pet t oner, vs. %/&$( /: A++EA#S, G/+ 'A5(AN), and +5)#)++)NE A)$#)NES, respondents.

$/'E$/, J.: $n th s appeal by certiorari, pet t oner Er t sh A r9ays /EA0 seeFs to set as de the dec s on of respondent 'ourt of Appeals 1 promulgated on &eptember 2, 1558, 9h ch aff rmed the a9ard of damages and attorney)s fees made by the "eg onal %r al 'ourt of 'ebu, 2th Jud c al "eg on, Eranch 12, n favor of pr vate respondent #D+ Mahtan as 9ell as the d sm ssal of ts th rd@party compla nt aga nst +h l pp ne A rl nes /+A!0. 3 %he mater al and relevant facts are as follo9s? Dn Apr l 1>, 1565, Mahtan dec ded to v s t h s relat ves n Eombay, $nd a. $n ant c pat on of h s v s t, he obta ned the serv ces of a certa n Mr. #umar to prepare h s travel plans. %he latter, n turn, purchased a t cFet from EA 9here the follo9 ng t nerary 9as nd cated? 4 'A""$E" MAN$!A BDN#*DN # EDMEAH BDN#*DN # MAN$!A MN! B*# 7!$#B% +" <10 H EA 20 M DA%E 1> A+". 1> A+". %$ME 12<0 2100 &%A%3& D* D*

EDM B*#

EA 15 M +" <11 H

2< A+".

0640

D*

MN!

& nce EA had no d rect fl ghts from Man la to Eombay, Mahtan had to taFe a fl ght to BongFong v a +A!, and upon arr val n BongFong he had to taFe a connect ng fl ght to Eombay on board EA. +r or to h s departure, Mahtan checFed n at the +A! counter n Man la h s t9o p eces of luggage conta n ng h s cloth ngs and personal effects, conf dent that upon reach ng BongFong, the same 9ould be transferred to the EA fl ght bound for Eombay. 3nfortunately, 9hen Mahtan arr ved n Eombay he d scovered that h s luggage 9as m ss ng and that upon n=u ry from the EA representat ves, he 9as told that

the same m ght have been d verted to !ondon. After pat ently 9a t ng for h s luggage for one 9eeF, EA f nally adv sed h m to f le a cla m by accompl sh ng the ,+roperty $rregular ty "eport., ; EacF n the +h l pp nes, spec f cally on June 11, 1550, Mahtan f led h s compla nt for damages and attorney)s fees2 aga nst EA and Mr. #umar before the tr al court, docFeted as ' v l 'ase No. 'EE@502>. Dn &eptember 4, 1550, EA f led ts ans9er 9 th counter cla m 0 to the compla nt ra s ng, as spec al and aff rmat ve defenses, that Mahtan d d not have a cause of act on aga nst t. ! Fe9 se, on November 5, 1550, EA f led a th rd@party compla nt 1 aga nst +A! alleg ng that the reason for the non@transfer of the luggage 9as due to the latter)s late arr val n BongFong, thus leav ng hardly any t me for the proper transfer of Mahtan )s luggage to the EA a rcraft bound for Eombay. Dn 7ebruary 28, 1551, +A! f led ts ans9er to the th rd@party compla nt, 9here n t d scla med any l ab l ty, argu ng that there 9as, n fact, ade=uate t me to transfer the luggage to EA fac l t es n BongFong. 7urthermore, the transfer of the luggage to BongFong author t es should be cons dered as transfer to EA. = After appropr ate proceed ngs and tr al, on March 4, 155<, the tr al court rendered ts dec s on n favor of Mahtan ,< the d spos t ve port on of 9h ch reads as follo9s? (BE"E7D"E, prem ses cons dered, -udgment s rendered for the pla nt ff and aga nst the defendant for 9h ch defendant s ordered to pay pla nt ff the sum of &even %housand /+2,000.000 +esos for the value of the t9o /20 su t casesI 7our Bundred 3.&. /S400.000 Dollars represent ng the value of the contents of pla nt ff)s luggageI 7 fty %housand /+80,000.000 +esos for moral and actual damages and t9enty percent /20R0 of the total amount mposed aga nst the defendant for attorney)s fees and costs of th s act on. %he %h rd@+arty 'ompla nt aga nst th rd@party defendant +h l pp ne A rl nes s D$&M$&&ED for lacF of cause of act on. &D D"DE"ED. D ssat sf ed, EA appealed to the 'ourt of Appeals, 9h ch ho9ever, aff rmed the tr al court)s f nd ngs. %hus? (BE"E7D"E, n v e9 of all the forego ng cons derat ons, f nd ng the Dec s on appealed from to be n accordance 9 th la9 and ev dence, the same s hereby A77$"MED in toto, 9 th costs aga nst defendant@appellant. &D D"DE"ED.
1.

EA s no9 before us seeF ng the reversal of the 'ourt of Appeals) dec s on. $n essence, EA assa ls the a9ard of compensatory damages and attorney)s fees, as 9ell as the d sm ssal of ts th rd@party compla nt aga nst +A!. 11

"egard ng the f rst ass gned ssue, EA asserts that the a9ard of compensatory damages n the separate sum of +2,000.00 for the loss of Mahtan )s t9o p eces of luggage 9as 9 thout bas s s nce Mahtan n h s compla nt 13stated the follo9 ng as the value of h s personal belong ngs? 6. Dn the sa d travel, pla nt ff tooF 9 th h m the follo9 ng tems and ts correspond ng value, to 9 t? 1. personal belong ng +10,000.00 2. g fts for h s parents and relat ves S8,000.00 Moreover, he fa led to declare a h gher valuat on 9 th respect to h s luggage, a cond t on prov ded for n the t cFet, 9h ch reads? 14 ! ab l ty for loss, delay, or damage to baggage s l m ted unless a h gher value s declared n advance and add t onal charges are pa d? 1. 7or most nternat onal travel / nclud ng domest c corporat ons of nternat onal -ourneys0 the l ab l ty l m t s appro1 mately 3.&. S5.02 per pound /3.&. S20.0000 per F lo for checFed baggage and 3.&. S400 per passenger for unchecFed baggage. Eefore 9e resolve the ssues ra sed by EA, t s needful to state that the nature of an a rl ne)s contract of carr age partaFes of t9o types, namely? a contract to del ver a cargo or merchand se to ts dest nat on and a contract to transport passengers to the r dest nat on. A bus ness ntended to serve the travel ng publ c pr mar ly, t s mbued 9 th publ c nterest, hence, the la9 govern ng common carr ers mposes an e1act ng standard. 1; Neglect or malfeasance by the carr er)s employees could pred ctably furn sh bases for an act on for damages. 12 $n the nstant case, t s apparent that the contract of carr age 9as bet9een Mahtan and EA. Moreover, t s ndub table that h s luggage never arr ved n Eombay on t me. %herefore, as n a number of cases 10 9e have assessed the a rl nes) culpab l ty n the form of damages for breach of contract nvolv ng m splaced luggage. $n determ n ng the amount of compensatory damages n th s F nd of cases, t s v tal that the cla mant sat sfactor ly prove dur ng the tr al the e1 stence of the factual bas s of the damages and ts causal connect on to defendant)s acts. 11 $n th s regard, the tr al court granted the follo9 ng a9ard as compensatory damages? & nce pla nt ff d d not declare the value of the contents n h s luggage and even fa led to sho9 rece pts of the alleged g fts for the members of h s fam ly n Eombay, the most that can be e1pected for compensat on of h s lost luggage /2 su t cases0 s %9enty 3.&. Dollars /S20.000 per F lo, or comb ned value of 7our Bundred /S400.000 3.&. Dollars for %9enty F los represent ng the contents plus &even %housand /+2,000.000 +esos represent ng the purchase pr ce of the t9o /20 su t cases.

Bo9ever, as earl er stated, t s the pos t on of EA that there should have been no separate a9ard for the luggage and the contents thereof s nce Mahtan fa led to declare a separate h gher valuat on for the luggage, 1= and therefore, ts l ab l ty s l m ted, at most, only to the amount stated n the t cFet. 'ons der ng the facts of the case, 9e cannot assent to such spec ous argument. Adm ttedly, n a contract of a r carr age a declarat on by the passenger of a h gher value s needed to recover a greater amount. Art cle 22/10 of the (arsa9 'onvent on, 1< prov des as follo9s? 111 111 111 /20 $n the transportat on of checFed baggage and goods, the l ab l ty of the carr er shall be l m ted to a sum of 280 francs per F logram, unless the cons gnor has made, at t me the pacFage 9as handed over to the carr er, a spec al declarat on of the value at del very and has pa d a supplementary sum f the case so re=u res. $n that case the carr er 9 ll be l able to pay a sum not e1ceed ng the declared sum, unless he proves that the sum s greater than the actual value to the cons gnor at del very. Amer can -ur sprudence prov des that an a r carr er s not l able for the loss of baggage n an amount n e1cess of the l m ts spec f ed n the tar ff 9h ch 9as f led 9 th the proper author t es, such tar ff be ng b nd ng, on the passenger regardless of the passenger)s lacF of Fno9ledge thereof or assent thereto. 3. %h s doctr ne s recogn Aed n th s -ur sd ct on. 31 Not9 thstand ng the forego ng, 9e have, nevertheless, ruled aga nst bl nd rel ance on adhes on contracts 9here the facts and c rcumstances -ust fy that they should be d sregarded. 33 $n add t on, 9e have held that benef ts of l m ted l ab l ty are sub-ect to 9a ver such as 9hen the a r carr er fa led to ra se t mely ob-ect ons dur ng the tr al 9hen =uest ons and ans9ers regard ng the actual cla ms and damages susta ned by the passenger 9ere asFed. 34 # ven the forego ng postulates, the nescapable conclus on s that EA had 9a ved the defense of l m ted l ab l ty 9hen t allo9ed Mahtan to test fy as to the actual damages he ncurred due to the m splacement of h s luggage, 9 thout any ob-ect on. $n th s regard, 9e =uote the pert nent transcr pt of stenograph c notes of Mahtan )s d rect test mony? 3; U O Bo9 much are you go ng to asF from th s courtP A O +100,000.00. U O (hat elseP A O E1emplary damages. U O Bo9 muchP

A O +100,000.00. U O (hat elseP A O %he th ngs $ lost, S8,000.00 for the g fts $ lost and my personal belong ngs, +10,000.00. U O (hat about the f l ng of th s caseP A O %he court e1penses and attorney)s fees s <0R. $ndeed, t s a 9ell@settled doctr ne that 9here the proponent offers ev dence deemed by counsel of the adverse party to be nadm ss ble for any reason, the latter has the r ght to ob-ect. Bo9ever, such r ght s a mere pr v lege 9h ch can be 9a ved. Necessar ly, the ob-ect on must be made at the earl est opportun ty, lest s lence 9hen there s opportun ty to speaF may operate as a 9a ver of ob-ect ons. 32 EA has prec sely fa led n th s regard. %o compound matters for EA, ts counsel fa led, not only to nterpose a t mely ob-ect on, but even conducted h s o9n cross@e1am nat on as 9ell. 30 $n the early case of A#renica v. 2onda, 31 9e ruled that? . . . /$0t has been repeatedly la d do9n as a rule of ev dence that a protest or ob-ect on aga nst the adm ss on of any ev dence must be made at the proper t me, and that f not so made t 9 ll be understood to have been 9a ved. %he proper t me to maFe a protest or ob-ect on s 9hen, from the =uest on addressed to the 9 tness, or from the ans9er thereto, or from the presentat on of proof, the nadm ss b l ty of ev dence s, or may be nferred. Needless to say, factual f nd ngs of the tr al court, as aff rmed by the 'ourt of Appeals, are ent tled to great respect. 3= & nce the actual value of the luggage nvolved apprec at on of ev dence, a tasF 9 th n the competence of the 'ourt of Appeals, ts rul ng regard ng the amount s assuredly a =uest on of fact, thus, a f nd ng not rev e9able by th s 'ourt. 3< As to the ssue of the d sm ssal of EA)s th rd@party compla nt aga nst +A!, the 'ourt of Appeals -ust f ed ts rul ng n th s 9 se, and 9e =uote? 4. !astly, 9e susta n the tr al court)s rul ng d sm ss ng appellant)s th rd@party compla nt aga nst +A!. %he contract of a r transportat on n th s case pursuant to the t cFet ssued by appellant to pla nt ff@appellee 9as e1clus vely bet9een the pla nt ff Mahtan and defendant@appellant EA. (hen pla nt ff boarded the +A! plane from Man la to BongFong, +A! 9as merely act ng as a subcontractor or agent of EA. %h s s sho9n by the fact that n the t cFet ssued by appellant to pla nt ff@appellee, t s spec f cally prov ded on the ,'ond t ons of 'ontract,, paragraph 4 thereof that? 4. . . . carr age to be performed hereunder by several success ve carr ers s regarded as a s ngle operat on.

%he rule that carr age by plane although performed by success ve carr ers s regarded as a s ngle operat on and that the carr er ssu ng the passenger)s t cFet s cons dered the pr nc pal party and the other carr er merely subcontractors or agent, s a settled ssue. (e cannot agree 9 th the d sm ssal of the th rd@compla nt. $n 8irestone 7ire and Ru##er .ompany of the $hilippines v . 7empeng'o, 41 9e e1pounded on the nature of a th rd@party compla nt thus? %he th rd@party compla nt s, therefore, a procedural dev ce 9hereby a ,th rd party, 9ho s ne ther a party nor pr vy to the act or deed compla ned of by the pla nt ff, may be brought nto the case 9 th leave of court, by the defendant, 9ho acts, as th rd@party pla nt ff to enforce aga nst such th rd@party defendant a r ght for contr but on, ndemn ty, subrogat on or any other rel ef, n respect of the pla nt ff)s cla m. %he th rd@party compla nt s actually ndependent of and separate and d st nct from the pla nt ff)s compla nt. (ere t not for th s prov s on of the "ules of 'ourt, t 9ould have to be f led ndependently and separately from the or g nal compla nt by the defendant aga nst the th rd@party. Eut the "ules perm t defendant to br ng n a th rd@party defendant or so to speaF, to l t gate h s separate cause of act on n respect of pla nt ff)s cla m aga nst a th rd@ party n the or g nal and pr nc pal case 9 th the ob-ect of avo d ng c rcu try of act on and unnecessary prol ferat on of la9 su ts and of d spos ng e1ped t ously n one l t gat on the ent re sub-ect matter ar s ng from one part cular set of facts. 3nden ably, for the loss of h s luggage, Mahtan s ent tled to damages from EA, n v e9 of the r contract of carr age. Het, EA adamantly d scla med ts l ab l ty and nstead mputed t to +A! 9h ch the latter naturally den es. $n other 9ords, EA and +A! are blam ng each other for the nc dent. $n resolv ng th s ssue, t s 9orth observ ng that the contract of a r transportat on 9as e1clus vely bet9een Mahtan and EA, the latter merely endors ng the Man la to BongFong leg of the former)s -ourney to +A!, as ts subcontractor or agent. $n fact, the fourth paragraph of the ,'ond t ons of 'ontracts, of the t cFet 43 ssued by EA to Mahtan conf rms that the contract 9as one of cont nuous a r transportat on from Man la to Eombay. 4. . . . carr age to be performed hereunder by several success ve carr ers s regarded as a s ngle operat on. +resc nd ng from the above d scuss on, t s und sputed that +A!, n transport ng Mahtan from Man la to BongFong acted as the agent of EA. +arenthet cally, the 'ourt of Appeals should have been cogn Aant of the 9ell@ settled rule that an agent s also respons ble for any negl gence n the performance of ts funct on. 44 and s l able for damages 9h ch the pr nc pal may suffer by reason of ts negl gent act. 4; Bence, the 'ourt of Appeals erred 9hen t op ned that EA, be ng the pr nc pal, had no cause of act on aga nst +A!, ts agent or sub@contractor.

Also, t s 9orth ment on ng that both EA and +A! are members of the $nternat onal A r %ransport Assoc at on /$A%A0, 9here n member a rl nes are regarded as agents of each other n the ssuance of the t cFets and other matters perta n ng to the r relat onsh p. 42 %herefore, n the nstant case, the contractual relat onsh p bet9een EA and +A! s one of agency, the former be ng the pr nc pal, s nce t 9as the one 9h ch ssued the conf rmed t cFet, and the latter the agent. Dur pronouncement that EA s the pr nc pal s cons stent 9 th our rul ng n %ufthansa 2erman Airlines v. .ourt of Appeals. 40 $n that case, !ufthansa ssued a conf rmed t cFet to % rso Ant porda cover ng f ve@leg tr p aboard d fferent a rl nes. 3nfortunately, A r *enya, one of the a rl nes 9h ch 9as to carry Ant porda to a spec f c dest nat on ,bumped, h m off. An act on for damages 9as f led aga nst !ufthansa 9h ch, ho9ever, den ed any l ab l ty, contend ng that ts respons b l ty to9ards ts passenger s l m ted to the occurrence of a m shap on ts o9n l ne. 'onse=uently, 9hen Ant porda transferred to A r *enya, ts obl gat on as a pr nc pal n the contract of carr age ceasedI from there on, t merely acted as a t cFet ng agent for A r *enya. $n re-ect ng !ufthansa)s argument, 9e ruled? $n the very nature of the r contract, %ufthansa is clearly the principal in the contract of carriage &ith Antiporda and remains to #e so, regardless of those instances &hen actual carriage &as to #e performed #y various carriers . %he ssuance of conf rmed !ufthansa t cFet n favor of Ant porda cover ng h s ent re f ve@leg tr p abroad success ve carr ers concretely attest to th s. & nce the nstant pet t on 9as based on breach of contract of carr age, Mahtan can only sue EA alone, and not +A!, s nce the latter 9as not a party to the contract. Bo9ever, th s s not to say that +A! s rel eved from any l ab l ty due to any of ts negl gent acts. $n .hina Air %ines, %td. v. .ourt of Appeals, 41 9h le not e1actly n po nt, the case, ho9ever, llustrates the pr nc ple 9h ch governs th s part cular s tuat on. $n that case, 9e recogn Aed that a carr er /+A!0, act ng as an agent of another carr er, s also l able for ts o9n negl gent acts or om ss on n the performance of ts dut es. Accord ngly, to deny EA the procedural remedy of f l ng a th rd@party compla nt aga nst +A! for the purpose of ult mately determ n ng 9ho 9as pr mar ly at fault as bet9een them, s 9 thout legal bas s. After all, such proceed ng s n accord 9 th the doctr ne aga nst mult pl c ty of cases 9h ch 9ould enta l rece v ng the same or s m lar ev dence for both cases and enforc ng separate -udgments therefor. $t must be borne n m nd that the purpose of a th rd@party compla nt s prec sely to avo d delay and c rcu try of act on and to enable the controversy to be d sposed of n one su t. 4= $t s but log cal, fa r and e=u table to allo9 EA to sue +A! for ndemn f cat on, f t s proven that the latter)s negl gence 9as the pro1 mate cause of Mahtan )s unfortunate e1per ence, nstead of totally absolv ng +A! from any l ab l ty.

(BE"E7D"E, n v e9 of the forego ng, the dec s on of the 'ourt of Appeals n 'A@ #.". 'C No. 4<<05 dated &eptember 2, 1558 s hereby MDD$7$ED, re nstat ng the th rd@party compla nt f led by Er t sh A r9ays dated November 5, 1550 aga nst +h l pp ne A rl nes. No costs. &D D"DE"ED. 3arvasa, ..9., Melo and 8rancisco, 99., concur. $angani#an, 9., concurs in the result. :ootnotes 1 'A #.". 'C No. 4<<05I penned by Assoc ate Just ce 'eAar +. 7ranc sco, concurred n by Assoc ate Just ces Euenaventura J. #uerrero and Anton o +. &olano, Rollo, pp. <6@86. 2 +er Jose +. Eurgos. < Dr g nal "ecord, p. 8. 4 7older of E1h b t, E1h b t ,E., 8 Dr g nal "ecord, pp. 1@4. > :#id., pp. 14@12. 2 :#id., pp. 2>@22. 6 :#id., 8>@82. 5 :#id., pp. 1>8@126. 10 Rollo, pp. <0@86. 11 :#id., p. 16. 12 Dr g nal "ecord, p. 2. 1< 7older of E1h b t, E1h b t ,A., 14 Art. 12<8. $n all cases other than those ment oned n Nos. 1, 2, <, 4 and 8 of the preced ng art cle, f the goods are lost, destroyed or deter orated, common carr ers are presumed to have been at fault or to have acted negl gently, unless they prove that they observed e1traord nary d l gence as re=u red n art cle 12<<. 18 +h l pp ne A rl nes v. 'ourt of Appeals, #.". No. 1202>2, July 12, 1552. 1> !ufthansa #erman A rl nes v. $A', 202 &'"A <80 /15520I 'athay +ac f c A r9ays v. 'A, 215 &'"A 821 /155<0. 12 A r 7rance v. 'ourt of Appeals, 121 &'"A <55 /15650.

16 Rollo, pp. 25@<0. 15 %he full t tle s (arsa9 'onvent on for 3n f cat on of 'erta n "ules "elat ng to $nternat onal 'arr age by A r. See +h l pp ne %reaty &er es, Col. $$, 822@850 /15>60. 20 %annen Eaum v. Nat onal A rl nes, $nc., 12> NH& 2d 400I (adel v. Amer can A rl nes, $nc., 2>5 &( 2d 688I "andall v. 7rontees A rl nes, $nc., <52 7. &upp 640. 21 +h l pp ne A rl nes v. 'ourt of Appeals, 2<8 &'"A 46 /155>0. 22 &9eet ! nes, $nc. v. %eves, 6< &'"A <>1 /15260. 2< !ufthansa #erman A rl nes v. $A', 202 &'"A <80 /15520. 24 %&N, 7ebruary 15, 1552, p. 5. 28 %alos g v. Cda. de Neeba, 4< &'"A 422 /15220I 'atu ra v. 'ourt of Appeals, 2<> &'"A <56 /15540I ( lle1 +last c $ndustr es, 'orp. v. 'ourt of Appeals, 28> &'"A 426 /155>0. 2> %&N, 7ebruary 15, 1552, pp. 1<@14. 22 <4 +h l. 2<5 /151>0. 26 Meneses v. 'ourt of Appeals, 24> &'"A 1>2 /15540. 25 'han v. 'ourt of Appeals, << &'"A 2<2 /15200I Atlant c #ulf and +ac f c 'ompany of Man la, $nc. v. 'ourt of Appeals, 242 &'"A >0> /15580. <0 Rollo, p. 8>. <1 22 &'"A 416 /15>50. <2 E1h b t ,A,. << Art. 1505. ,An agent s respons ble not only for fraud, but also for negl gence, 9h ch shall be -udged 9 th more or less r gor by the court, accord ng to 9hether the agency 9as or 9as not for compensat on., <4 Art. 1664. ,%he agent s bound by h s acceptance to carry out the agency, and s l able for damages 9h ch through h s non@performance, the pr nc pal may suffer., <8 Drt gas v. !ufthansa, >4 &'"A >10 /15280. <> 2<6 &'"A 250 /15540. <2 168 &'"A 445 /15500. <6 >2 'J& 10<4.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #73==0 Au"ust 33, 1<23

G$EG/$)/ A$ANE(A, )N%., pla nt ff@appellant, vs. +A6 (&AS/N !E +A(E$N/ and J/SE *)!A#, defendants@appellants. Araneta and Araneta for appellant. Ramirez and =rtigas for defendants<appellants. $er'ins, $once 5nrile and .ontreras And %a = and 8eria for appellee. (&AS/N, J., %h s s a three@cornered contest bet9een the purchasers, the seller, and the mortgagee of certa n port ons /appro1 mately 40,20< s=uare meters0 of a b g blocF of res dent al land n the d str ct of &anta Mesa, Man la. %he pla nt ff, 9h ch s the purchaser, and the mortgagee elevated th s appeal. %hough not an appellant, the seller and mortgagor has made ass gnments of error n her br ef, some to strengthen the -udgment and others for the purpose of ne9 tr al. %he case s e1tremely compl cated and mult ple ssues 9ere ra sed. %he sal ent facts n so far as they are not controverted are these. +aA %uason de +aterno s the reg stered o9ner of the aforesa d land, 9h ch 9as subd v ded nto c ty lots. Most of these lots 9ere occup ed by lessees 9ho had contracts of lease 9h ch 9ere to e1p re on December <1,1582, and carr ed a st pulat on to the effect that n the event the o9ner and lessor should dec de to sell the property the lessees 9ere to be g ven pr or ty over other buyers f they should des re to buy the r leaseholds, all th ngs be ng e=ual. &maller lots 9ere occup ed by tenants 9 thout formal contract. $n 1540 and 1541 +aA %uason obta ned from Jose C dal several loans totall ng +50,056 and const tuted a f rst mortgage on the aforesa d property to secure the debt. $n January and Apr l, 154<, she obta ned add t onal loans of +<0,000 and +20,000 upon the same secur ty. Dn each of the last@ment oned occas ons the prev ous contract of mortgage 9as rene9ed and the amounts rece ved 9ere consol dated. $n the f rst novated contract the t me of payment 9as f 1ed at t9o years and n the second and last at four years. Ne9 cond t ons not relevant here 9ere also ncorporated nto the ne9 contracts. %here 9as, bes des, a separate 9r tten agreement ent tled ,+enal dad del Documento de Novac on de Esta 7echa, 9h ch, unl Fe the pr nc pal contracts, 9as not reg stered. %he tenor of th s separate agreement, all cop es, of 9h ch 9ere alleged to have been destroyed or lost, 9as n d spute and became the sub-ect of confl ct ng ev dence. %he lo9er court d d not maFe categor cal f nd ngs on th s po nt, ho9ever, and t 9 ll be our tasF to do so at the appropr ate place n th s dec s on.

$n 154< +aA %uason dec ded to sell the ent re property for the net amount of +400,000 and entered nto negot at ons 9 th #regor o Araneta, $nc. for th s purpose. %he result of the negot at ons 9as the e1ecut on on Dctober 15, 154<, of a contract called ,+romesa de 'ompra y Centa, and dent f ed as E1h b t ,1., %h s contract prov ded that sub-ect to the preferred r ght of the lessees and that of Jose C dal as mortgagee, +aA %uason 9ould sell to #regor o Araneta, $nc. and the latter 9ould buy for the sa d amount of +400,000 the ent re estate under these terms. El prec o sera pagado como s gue? un 40 por c ento -untamente con la carta de aceptac on del arrendatar o, un 20 por c ento delprec o al otorgarse la escr tura de comprom so de venta, y el remanente 40 por c ento al otorgarse la escr tura de venta def n t va, la cual sera otorgada despues de =ue se hab ese canceladola h poteca a favor de Jose C dal =ue pesa sobre d chos lotes. !acom s on del 8 por c ento =ue corresponde a Jose Araneta serapagada al otorgarse la escr tura de comprom so de venta. +aA %uason se obl ga a entregar med ante un prop o las cartas=ue d r g ra a este efecto a los arrendatar os, de conform dad con el formular o ad-unto, =ue se marca como Apend ce A. E1p rado el plaAo arr ba menc onado, +aA %uason otorgara las escr turas correspond entes de venta a los arrendatar os =ue hayan dec d do comprar sus respect vos lotes. 5. !os al=u eres correspond entes a este aQo se prorratearan entre la vendedora y el comprador, correspond endo al comprador los al=u leres correspond entes a Nov embre y D c embre de este aQo y as m smo sera por cuenta del comprador el am llaram ento correspond ente a d chos meses. 10. +aA %uason, reconoce haver rec b do en este acto de #regor o Araneta, $nc., la suma de ' ento Noventa M l +esos /+150,0000como adelanto del prec o de venta =ue #regor o Araneta, $nc., tuv ere =ue pagar a +aA %uason. !a cant dad =ue +aA %uason rec be en este acto sera apl cadapor ella a saldar su deuda con Jose C dal, los am llaram entos, sobre el ut l Aado por +aA %uason para otros f nes. 11. 3na veA determ nados los lotes =ue +aA %uason podra vendera #regor o Araneta, $nc., +aA %uason otorgara una escr tura deventa def n t va sobre d chos lotes a favor de #regor o Araneta, $nc. #regor o Araneta, $nc., pagara el prec o de venta como s gue? 50 por c ento del m smo al otorgarse la escr tura de venta def n t va descontandose de la cant dad =ue entonces se tenga =ue pagar de adelanto de +150,000 =ue se entrega en v rtud de esta escr tura. El 10 por c ento remanente se pagara a +aA %uaAon, una veA se haya cancelado la h poteca =ue pesa actualmente sobre el terreno.

No obstante la d spuesto en el parrafo 6, cual=u er arrendatar o =ue dec da comprar el lote =ue occupa con contrato de arrendam ento podra optar por ped r el otorgam ento nmed ato a su favor el acto de la escr tura de venta def n t va pagando en el acto el 80 por c ento del prec o /ademas del 40 por c ento =ue deb o nclu r en su carta de aceptac on0 y el remanente de 10 por c ento nmed atemente despues de cancelarse la h poteca =ue pesa sobre el terreno. 12. & la menc onada cant dad de +150,000 e1ced ere del 50 por c ento de la cant dad =ue #regor o Araneta, $nc., tuv ere =ue vender a d cho comprador, el saldo sera pagado nmed atamente por +aA %uaAon, tomandolo de las cant dades =ue rec ba de los arrendatar os como prec o de venta. $n furtherance of th s prom se to buy and sell, letters 9ere sent the lessees g v ng them unt l August <1, 154<, an opt on to buy the lots they occup ed at the pr ce and terms stated n sa d letters. Most of the tenants 9ho held contracts of lease tooF advantage of the opportun ty thus e1tended and after maF ng the st pulated payments 9ere g v ng the r deeds of conveyance. %hese sales, as far as the record 9ould sho9, have been respected by the seller. ( th the el m nat on of the lots sold or be sold to the tenants there rema ned unencumbered, e1cept for the mortgage to Jose C dal, !ots 1, 6@1> and 16 9h ch have an aggregate area of 14,610.20 s=uare metersI and on December 2, 154<, +aA %uason and #regor o Araneta, $nc. e1ecuted 9 th regard to these lots an absolute deed of sale, the terms of 9h ch, e1cept n t9o respects, 9ere s m lar to those of the sale to the lessees. %h s deed, copy of 9h ch s attached to the pla nt ff)s compla nt as E1h b t A, prov ded, among other th ngs, as follo9s? %he aforesa d lots are be ng sold by he Cendor to the Cendee separately at the pr ces ment oned n paragraph />0 of the aforesa d contract ent tled ,+romesa de 'ompra y Centa,, maF ng a total sum of Dne Bundred %h rty@ N ne %housand E ghty@three pesos and %h rty@t9o centavos /+1<5,06<.<20, n nety /50R0 per cent of 9h ch amount, .e., the sum of Dne Bundred %9enty@f ve %housand Dne Bundred &eventy@four +esos and N nety@n ne centavos /+128,124.550, the Cendor acFno9ledges to have rece ved by v rtue of the advance of Dne Bundred N nety %housand /+150,0000 +esos made by the Cendee to the Cendor upon the e1ecut on of the aforesa d contract ent tled ,+romesa de 'ompra y Centa,. %he balance of & 1ty@7our %housand E ght Bundred %9enty@f ve +esos and Dne centavo /+>4,628.010 bet9een the sum of +128,124.55, has been returned by the Cendor to the Cendee, 9h ch amount the Cendee acFno9ledges to have rece ved by these presentsI %he aforesa d sum of +150,000 9as del vered by the Cendee to the Cendor by v rtue of four checFs ssued by the Cendee aga nst the EanF of the +h l pp ne $slands, as follo9s? No. '@26>448 n favor of +aA %uason de +aterno No. '@26>444 n favor of the ' ty %reasurer, Man la +1<,42>.> 2 <,<2<.<6

No. '@26>44< n favor of Jose C dal No. '@26>442 n favor of Jose C dal %otal

<0,000.0 0 14<,180. 00 +150,000. 00

%he return of the sum of +>4,628.01 9as made by the Cendor to the Cendee n a l =u dat on 9h ch reads as follo9s? Bemos rec b do de Da. +aA %uason de +aterno la cant dad de &esenta y 'uatro m l Dchoc entos Ce nt c nco +esos y un cent mo /+>4,628.010 enconcepto de devoluc on =ue +150,000. nos hace del e1cesode lo pagadoa ella de 00 Menos el 50R de +1<5,06<.<2, mporte de los lotes =ue vamos a comprar E1ceso 'he=ue E$7 No. D@442566 de & mpl c o del "osar o 'he=ue +NE No. 1226><@* de !.E. Dumas 'he=ue +NE No. 2>2>62@* de Alfonso &yc p 'he=ue +NE No. 6<540 de Josef na de +abalan E lletes rec b dos de Alfonso &yc p 128,124. 55 >4,628.0 1 21,564.2 0 21,>66.> 0 20,000.0 0 4,642.5> 42.5> +>6,8><.2 1 Menos las com s ones de 8 R rec b das de Josef na de +abalan !.E. Dumas Angela &. %uason +8<6.> 0 1,064. 4< 1,>21. 54 <,244.52 +>8,<16.2 4 Menos che=ue E$7 No. '@266>42 a favor de Da. +aA %uason de +aterno =ue le entregamos como e1ceso

45<.2< +>4,628.0 1

Man la, Nov embre 2, 154<

#"E#D"$D A"ANE%A, $N'D"+D"A%ED +orI /7do.0 ,JD&E A"ANE%A +res dente "ec b do che=ue No. '@266>42 E$7@+45<.2< +or? /7do.0 ,M.J. #DNLA!EL $n v e9 of the forego ng l =u dat on, the vendor acFno9ledges fully and uncond t onally, hav ng rece ved the sum of +128,124.55 of the present legal currency and hereby e1pressly declares that she 9 ll not hold the Cendee respons ble for any loss that she m ght suffer due to the fact that t9o of the checFs pa d to her by the Cendee 9ere ssued n favor of Jose C dal and the latter has, up to the present t me, not yet collected the same. %he ten /10R0 per cent balance of the purchase pr ce not yet pa d n the total sum of +1<,506.<< 9 ll be pa d by the Cendee to the Cendor 9hen the e1 st ng mortgage over the property sold by the Cendor to the Cendee s duly cancelled n the off ce of the "eg ster of Deeds, or sooner at the opt on of the Cendee. %h s Deed of &ale s e1ecuted by the Cendor free from all l ens and encumbrances, 9 th the only e1cept on of the e1 st ng lease contracts on parcels Nos. 1, 10, 11, and 1>, 9h ch lease contracts 9 ll e1p re on December <1, 158<, 9 th the understand ng, ho9ever, that th s sale s be ng e1ecuted free from any opt on or r ght on the part of the lessees to purchase the lots respect vely leased by them. $t s therefore clearly understood that the Cendor 9 ll pay the e1 st ng mortgage on her property n favor of Jose C dal. %he l =u dat on of the amounts respect vely due bet9een the Cendor and the Cendee n connect on 9 th the rents and real estate ta1es as st pulated n paragraph /50 of the contract ent tled ,+romesa de 'ompara y Centa, 9 ll be ad-usted bet9een the part es n a separate document. &hould any of the aforesa d lessees of lots Nos. 2, <, 4, 8, >, 2, 5 and 12 fa l to carry out the r respect ve obl gat ons under the opt on to purchase e1erc sed by them so that the r ghts of the lessee to purchase the respect ve property leased by h m s cancelled, the Cendor shall be bound to sell the same to the here n Cendee, #regor o Araneta, $ncorporated, n conform ty 9 th the terms and cond t ons prov ded n the aforesa d contract of ,+romesa de 'ompra y Centa,I %he documentary stamps to be aff 1ed to th s deed 9 ll be for the account of the Cendor 9h le the e1penses for the reg strat on of th s document 9 ll be for the account of the Cendee.

%he rema n ng area of the property of the Cendor sub-ect to %ransfer 'ert f cates of % tle Nos. >0421 and >0422, are lots Nos. 2, <, 4, 8, >, 2, 5, and 12, all of the 'onsol dat on of lots Nos. 20 and 112 of plan $$@4288, #.!.".D. "ecord No. 2>60. Eefore the e1ecut on of the above deed, that s, on Dctober 20, 154<, the day mmed ately follo9 ng the s gn ng of the agreement to buy and sell, +aA %uason had offered to C dal the checF for +14<,180 ment oned n E1h b t A, n full settlement of her mortgage obl gat on, but the mortgagee had refused to rece ve that checF or to cancel the mortgage, contend ng that by the separate agreement before ment oned payment of the mortgage 9as not to be effected totally or part ally before the end of four years from Apr l, 154<. Eecause of th s refusal of C dal)s +aA %uason, through Atty. Alfonso +once Enr le, commenced an act on aga nst the mortgagee n Dctober or the early paret of November 154<. the record of that case 9as destroyed and no copy of the compla nt 9as presented n ev dence. Attached to the compla nt or depos ted 9 th the clerF of court by Attorney +once Enr le s multaneously 9 th the docFet ng of the su t 9ere the checF for +14<,180 prev ously turned do9n by C dal, another cert f ed checF for +12,5<2.>1, also dra9n by #regor o Araneta, $nc., n favor of C dal, and one ord nary checF for +<0,000 ssued by +aA %uaAon. %hese three checFs 9ere supposed to cover the 9hole ndebtedness to C dal nclud ng the pr nc pal and nterest up to that t me and the penalty prov ded n the separate agreement. Eut the act on aga nst C dal never came on for tr al and the record and the checFs 9ere destroyed dur ng the 9ar operat ons n January or 7ebruary, 1548I and ne ther 9as the case reconst tuted after9ard. %h s fa lure of the su t for the cancellat on of C dal)s mortgage, coupled 9 th the destruct on of the checFs tendered to the mortgagee, the null f cat on of the banF depos t on 9h ch those checFs had been dra9n, and the tremendous r se of real estate value follo9 ng the term nat on of the 9ar, gave occas on to the breaF ng off the schemes outl ned n E1h b ts 1 and AI +aA %uason after l berat on repud ated them for the reasons to be hereafter set forth. %he nstant act on 9as the offshoot, begun by #regor o Araneta, $nc. to compel +aA %uason to del ver to the pla nt ff a clear t tle to the lots descr bed n E1h b t A free from all l ens and encumbrances, and a deed of cancellat on of the mortgage to C dal. C dal came nto the case n v rtue of a summon ssued by order of the court, and f led a cross@cla m aga nst +aA %uaAon to foreclose h s mortgage. $t should be stated that the outset that all the part es are n agreement that C dal)s loans are st ll outstand ng. +aA %uason)s counsel concede that the tender of payment to C dal 9as legally defect ve and d d not operate to d scharge the mortgage, 9h le the pla nt ff s apparently un nterested n th s feature of the case cons der ng the matter one largely bet9een the mortgagor and the mortgagee, although to a certa n degree th s not on s ncorrect. At any rate, the po nts of d scord bet9een +aA %uason and C dal concern only the accrual of nterest on the loans, C dal)s cla m to attorney)s fees, and the appl cat on of the debt morator um la9 9h ch the debtor no9 nvoFes. %hese matters 9 ll be taFen up n the d scuss on of the controversy bet9een +aA %uason and Jose C dal. %he pr nc pal bone of content on bet9een #regor o Araneta, $nc., and +aA %uason 9as the val d ty of the deed of sale of E1h b t A on 9h ch the su t 9as pred cated. %he lo9er court)s -udgment 9as that th s contract 9as nval d and 9as so

declared, ,s n per -u c o de =ue la demandada +aA %uason de +aterno pague a la ent dad demandante todas las cant dades =ue hab a estado rec b endo de larefer da ent dad demandante, en concepto de pago de losterrenos, en moneda corr ente, segun el camb o =ue deb areg r al t empo de otorgarse la escr tura segun la escalade ,Eallent ne,, descontando, s n embargo, de d chas cant dades cuales=u era =ue la demandante haya estadorec b endo como al=u leres de los terrenos supuestamentevend dos a ella., %he court based ts op n on that E1h b t 1. B s Bonor, Judge &otero "odas, agreed9 th the defendant that under paragraph 6 of E1h b t 1 there 9as to be no absolute sale to #regor o Araneta, $nc., unless C dal)s mortgage 9as cancelled. $n our op n on the tr al court 9as n error n ts nterpretat on of E1h b t 1. %he contemplated e1ecut on of an absolute deed of sale 9as not cont ngent on the cancellat on of C dal)s mortgage. (hat E1h b t 1 d d prov de /eleventh paragraph0 9as that such deed of absolute sale should be e1ecuted ,una veA determ nado los lotes =ue +aA %uason podra vender a #regor o Araneta, $nc., %he lots 9h ch could be sold to #regor o Araneta, $nc. 9ere def n tely Fno9n by Dctober <1, 154<, 9h ch 9as the e1p ry of the tenants) opt on to buy, and the lots ncluded n the absolute of 9h ch the occupants) opt on to buy lapsed uncond t onally. &uch deed as E1h b t A 9as then n a cond t on to be made. C dal)s mortgage 9as not an obstacle to the sale. An amount had been set as de to taFe care of t, and the part es, t 9ould appear, 9ere conf dent that the su t aga nst the mortgagee 9ould succeed. %he only doubt n the r m nds 9as n the amount to 9h ch C dal 9as ent tled. %he fa lure of the court to try and dec de that the case 9as not foreseen e ther. %h s refutes, 9ere th nF, the charge that there 9as undue rush on the part of the pla nt ff to push across the sale. %he fact that s multaneously 9 th E1h b t A s m lar deeds 9ere g ven the lessees 9ho had elected to buy the r leaseholds, 9h ch compr se an area about t9 ce as b g as the lots descr bed n E1h b t A, and the further fact that the sale to the lessees have never been =uest oned and the proceeds thereof have been rece ved by the defendant, should add to d spel any susp c on of bad fa th on the part of the pla nt ff. $f anyone 9as n a hurry t could have been the defendant. %he clear preponderance of the ev dence that +aA %uason 9as pressed for cash and that the payment of the mortgage 9as only an nc dent, or a necessary means to effectuate the sale. Dther9 se she could have settled her mortgage obl gat on merely by sell ng a port on of her estate, say, some of the lots leased to tenants 9ho, e1cept t9o 9ho 9ere n concentrat on camps, 9ere only too an1 ous to buy and o9n the lots on 9h ch the r houses 9ere bu lt. (hatever the terms of E1h b t 1, the pla nt ff and the defendant 9ere at perfect l berty to maFe a ne9 agreement d fferent from or even contrary to the prov s ons of that document. %he val d ty of the subse=uent sale must of necess ty depend on 9hat t sa d and not on the prov s ons of the prom se to buy and sell. $t s as poss ble proof or fraud that the d screpanc es bet9een the t9o documents bear some attent on. $t 9as alleged that Attorneys &alvador Araneta and J. Anton o Araneta 9ho the defendant sa d had been her attorneys and had dra9n E1h b t A, and not nformed or had m s nformed her about ts contentsI that be ng Engl sh, she had not read the deed of saleI that f she had not trusted

the sa d attorneys she 9ould not have been so fool sh as to aff 1 her s gnature to a contract so one@s ded. %he ev dence does not support the defendant. E1cept n t9o part culars, E1h b t A 9as a substant al compl ance 9 th E1h b t 1 n furtherance of 9h ch E1h b t A 9as made. Dne departure 9as the prov so that 10 per cent of the purchase pr ce should be pa d only after C dal)s mortgage should have been cancelled. %h s prov s onal deduct on 9as not onerous or unusual. $t 9as not onerous or unusual that the vendee should 9 thhold a relat vely small port on of the purchase pr ce before all the mped ments to the f nal consummat on of the sale had been removed. %he tenants 9ho had bought the r lots had been granted the pr v lege to deduct as much as 40 per cent of the st pulated pr ce pend ng d scharge of the mortgage, although h s percentage 9as later reduced to 10 as n the case of #regor o Araneta, $nc. $t has also been that the val d ty of the sales to the tenants has not been contestedI that these sales embraced n the aggregate 24,248.40 s=uare meters for +2>0,51>.>6 as compared to 14,611.20 s=uare meters sold to #regor o Araneta, $nc. for +1<5,06<.<2I that the seller has already rece ved from the tenant purchasers 50 per cent of the purchase money. %here s good reason to bel eve that had #regor o Araneta, $nc. not ns sted on charg ng to the defendant the loss of the checFs depos ted 9 th the court, the sale n =uest on 9ould have gone the smooth 9ay of the sales to the tenants. %hus D ndo #onAales, defendant)s son, declared? +. Despues de haberse presentado esta demanda, recuerda usted haber ten do conversac on con &alvador Araneta acerca de este asuntoP ". & &eQor. +. 3sted fue =u en se acerco al seQor &alvador AranetaP ". & , seQor. +. Uu ero usted dec r al Bonorable JuAgado =ue era lo =ue usted d -o al seQor &alvador AranetaP ". No creo =ue es prop o =ue yo d ga, por tratarse de m madre. +. En otras palabras, usted =u ere dec r =ue no =u ere usted =ue se vuelva dec r o repet r ante este Bonorable JuAgado lo =ue usted d -o al seQor &alvador Araneta, pues, se trata de su madreP ". No, seQor. +. +uede usted dec rnos =ue =u so usted dec r cuando =ue no =u s era dec rP ". Coy a dec r lo =ue &alvador Araneta, yo me acer=ue a Don &alvador Araneta, y yo le d -e =ue es una verguenAa de =ue nosotros, en la fam l a tengamos =ue r a la 'orte por este, y tamb en d -e =ue m madre de por s =u ere vender el terreno a ellos, por=ue m madre =u ere pagar al seQor C dal, y =ue es una verguenAa, s endo entre par entes, tener =ue ven r por esteI era lo =ue yo d -e al seQor &alvador Araneta.

111

111

111

+. No recuerda usted tamb en d -o al seQor &alvador Araneta =ue usted no comulgaba con ella /su madre0 en este asuntoP ". & , &eQorI por=ue yo cre a =ue m madre solamente =uer a anular esta venta, pero cuando me d -o el seQor !a D y sus abogados =ue, encima de quitar la propiedad, todavia tendria ella que pagar al se>or 4idal, este no veso claro. 111 111 111

+. Ahora b enI de tal suerte =ue, tal como nosotros desperendemos de su test mon o, tanto, usted como, su madre, esteban muy conformes en la venta, es as P ". & , seQor. %he other st pulat on embod ed n E1h b t A 9h ch had no counterpart n E1h b t 1 9as that by 9h ch #regor o Araneta $nc. 9ould hold +aA %uason l able for the lost checFs and 9h ch, as stated, appeared to be at the root of the 9hole trouble bet9een the pla nt ff and the defendant. %he st pulat on reads? $n v e9 of the forego ng l =u dat on, the Cendor acFno9ledges fully and uncond t onally, hav ng rece ved the sum of +128,124.55 of the present legal currency and hereby e1pressly declares that she 9 ll not hold the Cendee respons ble for any loss that she m ght suffer due to the fact that t9o of the checFs pa d to her by the Cendee 9ere used n favor of Jose C dal and the latter has, up to the present t me, not yet collected the same. $t 9as argued that no person n h s or her r ght senses 9ould Fno9 ngly have agreed to a covenant so n =u tous and unreasonable. $n the l ght of all the c rcumstances, t s d ff cult to bel eve that the defendant 9as dece ved nto s gn ng E1h b t A, n sp te of the prov s on of 9h ch she and her son compla nt. $ntell gent and 9ell educated 9ho had been manag ng her affa rs, she had an able attorney 9ho 9as ass st ng her n the su t aga nst C dal, a case 9h ch 9as nst tuted prec sely to carry nto effect E1h b t A or E1h b t 1, and a son 9ho s lead ng c t Aen and a bus ness@man and Fne9 the Engl sh language very 9ell f she d d not. D ndo #onAaleA tooF act ve part n, f he 9as not the n t ator of the negot at ons that led to the e1ecut on of E1h b t 1, of 9h ch he 9as an attest ng 9 tness bes des. $f the defendant s gned E1h b t A 9 thout be ng appr sed of ts mport, t can hardly be conce ved that she d d not have her attorney or her son read t to her after9ard. %he transact on nvolved the al enat on of property then already 9orth a fortune and no9 assessed by the defendant at several t mes h gher. Doubts n defendant)s verac ty are enhanced by the fact that she den ed or at least pretended n her ans9er to be gnorant of the e1 stence of E1h b t A, and that only after she 9as confronted 9 th the s gned copy of the document on the 9 tness d d she spr ng up the defense of fraud. $t 9ould looF as f she gambled on the chance that no s gned copy of the deed had

been saved from the 9ar. &he could not have forgotten hav ng s gned so mportant a document even f she had not understood some of ts prov s ons. 7rom the unreasonableness and ne=u ty of the afore=uoted E1h b t A t s not to be presumed that the defendant d d not understand t. $t 9as h ghly poss ble that she d d not attach much mportance to t, conv nced that C dal could be forced to accept the checFs and not foresee ng the fate that lay n store for the case aga nst the mortgagee. %echn cal ob-ect ons are made aga nst the deed of sale. 7 rst of these s that Jose Araneta, s nce deceased, 9as defendant)s agent and at the same t me the pres dent of #regor o Araneta, $nc. %he tr al court found that Jose Araneta 9as not +aA %uason)s agent or broFer. %h s f nd ng s contrary to the clear 9e ght of the ev dence, although the po nt 9ould be rrelevant, f the court 9ere r ght n ts hold ng that E1h b t A 9as vo d on another ground, .e., t 9as ncons stent 9 th E1h b t 1. ( thout taF ng nto account defendant)s E1h b t 2 and 6, 9h ch the court re-ected and 9h ch, n our op n on, should have been adm tted, E1h b t 1 s dec s ve of the defendant)s assert on. $n paragraph 6 of E1h b t 1 Jose Araneta 9as referred to as defendant)s agent or broFer ,9ho acts n th s transact on, and 9ho as such 9as to rece ve a comm ss on of 8 per cent, although the comm ss on 9as to be charged to the purchasers, 9h le n paragraph 1< the defendant prom sed, n cons derat on of Jose Araneta)s serv ces rendered to her, to ass gn to h m all her r ght, t tle and nterest to and n certa n lots not embraced n the sales to #regor o Araneta, $nc. or the tenants. Bo9ever, the tr al court hypothet cally adm tt ng the e1 stence of the relat on of pr nc pal and agent bet9een +aA %uason and Jose Araneta, po nted out that not Jose Araneta but #regor o Araneta, $nc. 9as the purchaser, and c ted the 9ell@ Fno9n d st nct on bet9een the corporat on and ts stocFholders. $n other 9ords, the court op ned that the sale to #regor o Araneta, $nc. 9as not a sale to Jose Araneta the agent or broFer. %he defendant 9ould have the court gnore th s d st nct on and apply to th s case the other 9ell@Fno9n pr nc ple 9h ch s thus stated n 16 '.J.&. <60? ,%he courts, at la9 and n e=u ty, 9 ll d sregard the f ct on of corporate ent ty apart from the members of the corporat on 9hen t s attempted to be used as a means of accompl sh ng a fraud or an llegal act.,. $t 9 ll at once be noted that th s pr nc ple does not f t n 9 th the facts of the case at bar. #regor o Araneta, $nc. had long been organ Aed and engaged n real estate bus ness. %he corporate ent ty 9as not used to c rcumvent the la9 or perpetrate decept on. %here s no deny ng that #regor o Araneta, $nc. entered nto the contract for tself and for ts benef t as a corporat on. %he contract and the roles of the part es 9ho part c pated there n 9ere e1actly as they purported to be and 9ere fully revealed to the seller. %here s no pretense, nor s there reason to suppose, that f +aA %uason had Fno9n Jose Araneta to #regor o Araneta, $nc)s pres dent, 9h ch she Fne9, she 9ould not have gone ahead 9 th the deal. 7rom her po nt of v e9 and from the po nt of v e9 of publ c nterest, t 9ould have made no d fference, e1cept for the broFerage fee, 9hether #regor o

Araneta, $nc. or Jose Araneta 9as the purchaser. 3nder these c rcumstances the result of the suggested d sregard of a techn cal ty 9ould be, not to stop the comm ss on of dece t by the purchaser but to pave the 9ay for the evas on of a leg t mate and b nd ng comm tment buy the seller. %he pr nc ple nvoFed by the defendant s resorted to by the courts as a measure or protect on aga nst dece t and not to open the door to dece t. ,%he courts,, t has been sa d, ,9 ll not gnore the corporate ent ty n order to further the perpetrat on of a fraud., /16 '.J.&. <61.0 %he corporate theory as de, and grant ng for the nonce that Jose Araneta and #regor o Araneta, $nc. 9ere dent cal and that the acts of one 9here the acts of the other, the relat on bet9een the defendant and Jose Araneta d d not fall 9 th n the purv e9 of art cle 1485 of the &pan sh ' v l 'ode. 1 Agency s def ned n art cle 1205 n broad term, and 9e have not come across any commentary or dec s on deal ng d rectly 9 th the prec se mean ng of agency as employed n art cle 1485. Eut n the op n on of Manresa/10 Manresa 4th ed. 1000, agent n the sense there used s one 9ho accepts another)s representat on to perform n h s name certa n acts of more or less transcendency, 9h le &caevola /Col. 2<, p. 40<0 says that the agent)s n capac ty to buy h s pr nc pal)s property rests n the fact that the agent and the pr nc pal form one -ur d c al person. $n th s connect on &caevola observes that the fear that greed m ght get the better of the sent ments of loyalty and d s nterestedness 9h ch should an mate an adm n strator or agent, s the reason underly ng var ous classes of ncapac ty enumerated n art cle 1485. And as Amer can courts comment ng on s m lar proh b t on at common la9 put t, the la9 does not trust human nature to res st the temptat ons l Fely to ar se of antogon sm bet9een the nterest of the seller and the buyer. &o the ban of paragraph 2 of art cle 1485 connotes the dea of trust and conf denceI and so 9here the relat onsh p does not nvolve cons derat ons of good fa th and ntegr ty the proh b t on should not and does not apply. %o come under the proh b t on, the agent must be n a f duc ary 9 th h s pr nc pal. %ested by th s standard, Jose Araneta 9as not an agent 9 th n the mean ng of art cle 1485. Ey E1h b ts 2 and 6 he 9as to be noth ng more than a go@bet9een or m ddleman bet9een the defendant and the purchaser, br ng ng them together to maFe the contract themselves. %here 9as no conf dence to be betrayed. Jose Araneta 9as not author Ae to maFe a b nd ng contract for the defendant. Be 9as not to sell and he d d not sell the defendant)s property. Be 9as to looF for a buyer and the o9ner herself 9as to maFe, and d d maFe, the sale. Be 9as not to f 1 the pr ce of the sale because the pr ce had been already f 1ed n h s comm ss on. Be 9as not to maFe the terms of payment because these, too, 9ere clearly spec f ed n h s comm ss on. $n f ne, Jose Araneta 9as left no po9er or d scret on 9hatsoever, 9h ch he could abuse to h s advantage and to the o9ner)s pre-ud ce. Defendant)s other ground for repud at ng E1h b t A s that the la9 f rm of Araneta N Araneta 9ho handled the preparat on of that deed and represented by #regor o Araneta, $nc. 9ere her attorneys also. Dn th s po nt the tr al court)s op n on s l Fe9 se aga nst the defendant.

& nce attorney +once Enr le 9as the defendant)s la9yer n the su t aga nst C dal, t 9as not l Fely that she employed Atty. &alvador Araneta and J. Anton o Araneta as her attorneys n her deal ngs 9 th #regor o Araneta, $nc., Fno9 ng, as she d d, the r dent ty 9 th the buyer. $f she had needed legal counsels, n th s transact on t seems certa n that she 9ould have ava led herself of the serv ces of Mr. +once Enr le 9ho 9as allegedly represent ng her n another case to pave the 9ay for the sale. %he fact that Attys. &alvador and Araneta and J. Anton o Araneta dre9 E1h b ts 1 and A, undertooF to 9r te the letters to the tenants and the deeds of sale to the latter, and charged the defendant the correspond ng fees for all th s 9orF, d d not themselves prove that they 9ere the seller)s attorneys. %hese letters and documents 9ere 9rapped up 9 th the contemplated sale n 9h ch #regor o Araneta, $nc. 9as nterested, and could very 9ell have been 9r tten by Attorneys Araneta and Araneta n furtherance of #regor o Araneta)s o9n nterest. $n collect ng the fees from the defendant they d d 9hat any other buyer could have appropr ately done s nce all such e1penses normally 9ere to be defrayed by the seller. #rant ng that Attorney Araneta and Araneta 9ere attorneys for the defendant, yet they 9ere not forb dden to buy the property n =uest on. Attorneys are only proh b ted from buy ng the r cl ent)s property 9h ch s the sub-ect of l t gat on. /Art. 1485, No. 8, &pan sh ' v l 'ode.0 %he =uest oned sale 9as effected before the sub-ect thereof became nvolved n the present act on. %here 9as already at the t me of the sale a l t gat on over th s property bet9een the defendant and C dal, but Attys. &alvador Araneta and J. Anton o Araneta 9ere not her attorneys n that case. 7rom the pronouncement that E1h b t A s val d, ho9ever, t does not follo9 that the defendant should be held l able for the loss of the cert f ed checFs attached to the compla nt aga nst C dal or depos ted 9 th the court, or of the funds aga nst 9h ch they had been ssued. %he matter of 9ho should bear th s loss does not depend upon the val d ty of the sale but on the e1tent and scope of the clause here nbefore =uoted as appl ed to the facts of the present case. %he la9 and the ev dence on th s branch of the case revealed these facts, of some of 9h ch pass ng ment on has already been made. %he aforesa d checFs, one for +14<,180 and one for +12,5<2.>1, 9ere ssued by #regor o Araneta, $nc. and payable to C dal, and 9ere dra9n aga nst the EanF of the +h l pp nes 9 th 9h ch #regor o Araneta, $nc. had a depos t n the cert f cat on stated that they 9ere to be ,vo d f not presented for payment date of acceptance, off ce /EanF0 9 th n 50 days from date of acceptance., 3nder banF ng la9s and pract ce, by the clar f cat on, the funds represented by the checF 9ere transferred from the cred t of the maFer to that of the payee or holder, and, for all ntents and purposes, the latter became the depos tor of the dra9ee banF, 9 th r ghts and dut es of one such relat on., Eut the transfer of the correspond ng funds from the cred t of the depos tor to that of that of the payee had to be co@e1tens ve 9 th the l fe of the checFs, 9h ch n the case 9as 50 days. $f the checFs 9ere not presented for payment 9 th n that per od they became nval d and the funds 9ere automat cally restored to the cred t of the dra9er

though not as a current depos t but as spec al depos t. %h s s the consensus of the ev dence for both part es 9h ch does not mater ally d ffer on th s propos t on. %he checFs 9ere never collected and the account aga nst 9h ch they 9ere dra9n 9as not used or cla med by #regor o Araneta, $nc.I and s nce that account ,9as opened dur ng the Japanese occupat on and n Japanese currency,, the checFs ,became obsolete as the account sub-ect thereto s cons dered null and vo d n accordance 9 th E1ecut ve Drder No. 45 of the +res dent of the +h l pp nes,, accord ng to the EanF. (hether the EanF of the +h l pp nes could la9fully l m t the negot ab l ty of cert f ed checFs to a per od less than the per od prov ded by the &tatute of ! m tat ons does not seem mater al. %he l m tat on mposed by the EanF as to t me 9ould adversely affect the payee, Jose C dal, 9ho s not try ng to recover on the nstruments but on the contrary re-ected them from the outset, ns st ng that the payment 9as premature. As far as C dal 9as concerned, t 9as of no mportance 9hether the cert f cat on 9as or 9as not restr cted. Dn the other hand, ne ther the pla nt ff nor the defendant no9 ns sts that C dal should present, or should have presented, the checFs for collect on. %hey n fact agree that the offer of those checFs to C dal d d not, for techn cal reason, 9orF to 9 pe out the mortgage. Eut as to #regor o Araneta and +aA %uason, the cond t ons spec f ed n the cert f cat on and the preva l ng regulat ons of the EanF 9ere the la9 of the case. Not only th s, but they 9ere a9are of and ab ded by those regulat ons and pract ce, as nstanced by the fact that the part es presented test mony to prove those regulat ons and pract ce. And that #regor o Araneta, $nc. Fne9 that C dal had not cashed the checFs 9 th n 50 days s not, and could not successfully be den ed. $n these c rcumstances, the st pulat on n E1h b t A that the defendant or seller ,shall not hold the vendee respons ble for any loss of these checFs, 9as unconsc onable, vo d and unenforceable n so far as the sa d st pulat on 9ould stretch the defendant)s l ab l ty for th s checFs beyond 50 days. $t 9as not n accord 9 th la9, e=u ty or good consc ence to hold a party respons ble for someth ng he or she had no access to and could not maFe use of but 9h ch 9as under the absolute control and d spos t on of the other party. %o maFe +aA %uason respons ble for those checFs after they e1p red and 9hen they 9ere absolutely useless 9ould be l Fe hold ng an obl gor to ans9er for the loss or destruct on of someth ng 9h ch the obl gee Fept n ts safe 9 th no po9er g ven the obl gor to protect t or nterfere 9 th the obl gee)s possess on. %o the e1tent that the contract E1h b t A 9ould hold the vendor respons ble for those checFs after they had lapsed, the sa d contract 9as 9 thout cons derat on. %he checFs hav ng become obsolete, the benef t n e1change for 9h ch the defendant had consented to be respons ble for them had van shed. %he sole mot vat on on her part for the st pulat on 9as the fact that by the checFs the mortgage m ght or 9as to be released. After 50 days the defendant stood to ga n absolutely noth ng by them, 9h ch had become ver table scraps of paper, 9h le the o9nersh p of the depos t had reverted to the pla nt ff 9h ch alone could 9 thdra9 and maFe use of t.

(hat the pla nt ff could and should have done f the d sputed st pulat on 9as to be Fept al ve 9as to Feep the funds access ble for the purpose of pay ng the mortgage, by 9r t ng ne9 checFs e ther to C dal or to the defendant, as 9as done 9 th the checF for +<0,000, or plac ng the depos t at the defendant)s d sposal. %he checF for +<0,000 ntended for the penalty prev ously had been ssued n the name of C dal and cert f ed, too, but by mutual agreement t 9as changed to an ord nary checF payable to +aA %uason. Although that checF 9as also depos ted 9 th the court and lost, ts loss undoubtedly 9as mputable to the defendant)s account, and she d d not seem to d so9n her l ab l ty for t. !et t be remembered that the dea of cert fy ng the lost checFs 9as all the pla nt ff)s. %he pla nt ff 9ould not trust the defendant and stud ously so arranged matters that she could not by any poss b l ty put a f nger on the money. 7or all the pract cal ntents and purposes the pla nt ff dealt d rectly 9 th the mortgagee and e1cluded the defendant from meddl ng n the manner of payment to C dal. And let t also be Fept n m nd that #regor o Araneta, $nc. 9as not a mere accommodator n 9r t ng these checFs. $t 9as as much nterested n the cancellat on of the mortgage as +aA %uason. 'om ng do9n to C dal)s cross@cla m Judge "odas rendered no -udgment other than declar ng that the mortgage rema ned ntact and subs st ng. %he amount to be pa d C dal 9as not named and the =uest on 9hether nterest and attorney)s fees 9ere due 9as not passed upon. %he mot on for recons derat on of the dec s on by C dal)s attorney)s pray ng that +aA %uason be sentenced to pay the cred tor +244,512.50 plus nterest at the rate of 1 percent monthly from &eptember 10, 1546 and that the mortgaged property be ordered sold n case of default 9 th n 50 days, and another mot on by the defendant seeF ng spec f cat on of the amount she had to pay the mortgagee 9ere summar ly den ed by Judge +otenc ano +ecson, to 9hom the mot ons 9ere subm tted, Judge "odas by that t me hav ng been appo nted to the 'ourt of Appeals. All the facts and ev dence on th s sub-ect are on the record, ho9ever, and 9e may -ust as 9ell determ ne from these facts and ev dence the amount to 9h ch the mortgagee s ent tled, nstead of remand ng the case for ne9 tr al, f only to avo d further delay f the d spos t on of th s case. $t s obv ous that C dal had a r ght to -udgment for h s cred t and to foreclose the mortgage f the cred t 9as not pa d. %here s no d spute as to the amount of the pr nc pal and there s agreement that the loans made n 154<, n Japanese 9ar notes, should be computed under the Eallantyne convers on table. As has been sa d, 9here the part es do not see eye@ to@eye 9as n regard to the mortgagee)s cla m to attorney)s fees and nterest from Dctober, 154<, 9h ch 9as reached a cons derable amount. $t 9as contended that, hav ng offered to pay C dal her debt n that month, the defendant 9as rel eved thereafter from pay ng such nterest. $t s to be recalled that +aA %uason depos ted 9 th the court three checFs 9h ch 9ere ntended to cover the pr nc pal and nterest up to Dctober, 154<, plus the penalty prov ded n the nstrument ,+enal dad del Documento de Novac on de Esta 7echa., %he mortgagor ma nta ns that although these checFs may not have const tuted a val d payment for the purpose of d scharg ng the debt, yet they d d

for the purpose of stopp ng the runn ng of nterest. %he defendant dra9s attent on to the follo9 ng c tat ons? An offer n 9r t ng to pay a part cular sum of money or to del ver a 9r tten nstrument or spec f c personal property s, f re-ected, e=u valent to the actual product on and tender of the money, nstrument or property. /&ec. 24, "ule 12<.0 $t s not accord 9 th e ther the letter or the sp r t of the la9 to mpose upon the person affect ng a redempt on of property, n add t on to 12 per cent nterest per annum up to the t me of the offer to redeem, a further payment of > per cent per annum from the date of the off cer to redeem. /7abros vs. C lla Agust n, 16 +h l., <<>.0 A tender by the debtor of the amount of th s debt, f made n the proper manner, 9 ll suspend the runn ng of nterest on the debt for the t me of such tender. /<0 Am. Jur., 42.0 $n the case of 8a#rosa vs. 4illa Agustin, supra, a parcel of land had been sold on e1ecut on to one %abl ga. ( th n the per od of redempt on 7abros, to 9hom the land had been mortgaged by the e1ecut on debtor, had offered to redeem the land from the e1ecut on cred tor and purchaser at publ c auct on. %he tr al court ruled that the redempt oner 9as not obl ged to pay the st pulated nterest of 12 per cent after he offered to redeem the propertyI nevertheless he 9as sentenced to pay > per cent nterest from the date of the offer. %h s court on appeal held that ,there s no reason for th s other /> per cent0 nterest, 9h ch appears to be a penalty for del n=uency 9h le there 9as no del n=uency., %he court c ted an earl er dec s on, Martinez vs. .amp#ell, 10 +h l., >2>, 9here th s doctr ne 9as la d do9n? ,(hen the r ght of redempt on s e1erc sed 9 th n the term f 1ed by sect on 4>8 of the 'ode of ' v l +rocedure, and an offer s made of the amount due for the repurchase of the property to 9h ch sa d r ght refers, t s ne ther reasonable nor -ust that the repurchaser should pay nterest on the redempt on money after the t me 9hen he offered to repurchase and tendered the money therefor., $n the l ght of these dec s ons and la9, the ne1t =uery sI D d the mortgagor have the r ght under the contract to pay the mortgage on Dctober 20, 154<P %he ans9er to th s =uest on re=u res an n=u ry nto the prov s on of the ,+enal dad del Documento de Novac on de Esta 7echa., C dal ntroduced oral ev dence to the effect that he reserved unto h mself n that agreement the r ght ,to accept or refuse the total payment of the loan outstand ng . . ., f at the t me of such offer of payment he cons dered t advantageous to h s nterest., %h s 9as g st of C dal)s test mony and that of !uc o M. % angco, one of C dal)s former attorneys 9ho, as notary publ c, had authent cated the document. C dal)s above test mony 9as ordered str cFen out as hearsay, for C dal 9as bl nd and, accord ng to h m, only had h s other la9yer read the document to h m. (e are of the op n on that the court erred n e1clud ng C dal)s statement. %here s no reason to suspect that C dal)s attorney d d not correctly read the paper to h m. %he read ng 9as a contemporaneous nc dent of the 9r t ng and the

c rcumstances under 9h ch the document 9as read precluded every poss b l ty of des gn, premed tat on, or fabr cat on. Nevertheless, C dal)s test mony, l Fe the test mony of !uc o M. % angco)s, 9as based on recollect on 9h ch, 9 th the lapse of t me, 9as for from nfall ble. Ey contrast, the test mony of Attorneys +once Enr le, &alvador Araneta, and J. Anton o Araneta does not suffer from such 9eaFness and s ent tled to full fa th and cred t. %he document 9as the sub-ect of a close and concerted study on the r part 9 th the ob-ect of f nd ng the r ghts and obl gat ons of the mortgagee and the mortgagor n the prem ses and mapp ng out the course to be pursued. And the results of the r study and del berat on 9ere translated nto concrete act on and embod ed n a letter 9h ch has been preserved. $n l ne 9 th the results of the r study, act on 9as nst tuted n court to compel acceptance by C dal of the checFs cons gned 9 th the compla nt, and before the su t 9as commenced, and 9 th the document before h m, Atty. +once Enr le, n behalf of h s cl ent, 9rote C dal demand ng that he accept the payment and e1ecute a deed of cancellat on of the mortgage. $n h s letter Atty. +once Enr le rem nded C dal that the rec tal n the ,+enal dad del Documento de Novac on de Esta 7echa, 9as ,to the effect that should the debtor 9 sh to pay the debt before the e1p rat on of the per od the re nstated /t9o years0 such debtor 9ould have to pay, n add t on to nterest due, the penalty of +<0,000 O th s s n add t on to the penalty clause of 10 per cent of the total amount due nserted n the document of mortgage of January 20, 154<., Atty. +once Enr le)s concept of the agreement, formed after mature and careful read ng of t, - bes 9 th the only poss ble reason for the nsert on of the penalty prov s on. %here 9as no reason for the penalty unless t 9as for defendant)s pay ng her debt before the end of the agreed per od. $t 9as to C dal)s nterest that the mortgage be not settled n the near future, f rst, because h s money 9as earn ng good nterest and 9as guaranteed by a sol d secur ty, and second, 9h ch 9as more mportant, he, n all probab l ty, shared the common bel ef that Japanese 9ar notes 9ere headed for a crash and that four years thence, -udg ng by the trends of the 9ar, the host l t es 9ould be over. %o say, as C dal says, that the debtor could not pay the mortgage 9 th n four years and, at the same t me, that there 9ould be penalty f she pa d after that per od, 9ould be a contrad ct on. Moreover, ade=uate remedy 9as prov ded for fa lure to pay or after the e1p rat on of the mortgage? ncreased rate or nterest, foreclosure of the mortgage, and attorney)s fees. $t s therefore to be concluded that the defendant)s offer to pay C dal n Dctober, 154<, 9as n accordance 9 th the part es) contract and term nated the debtor)s obl gat on to pay nterest. %he techn cal defects of the cons gnat on had to do 9 th the d scharge of the mortgage, 9h ch s conceded on all s des to be st ll n force because of the defects. Eut the matter of the suspens on of the runn ng of nterest on the loan stands of a d fferent foot ng and s governed by d fferent pr nc ples. %hese pr nc ples regard real ty rather than techn cal ty, substance rather than form. #ood fa th of the offer or and ab l ty to maFe good the offer should n s mple -ust ce e1cuse the debtor from pay ng nterest after the offer 9as re-ected. A debtor can not be cons dered del n=uent 9ho offered checFs bacFed by suff c ent depos t or ready to pay cash f the cred tor chose that means of payment. %echn cal defects of the offer cannot be adduced to destroy ts effects 9hen the ob-ect on to accept the payment 9as based on ent rely d fferent grounds. $f the cred tor had told the debtor that he 9anted cash or an

ord nary checF, 9h ch C dal no9 seems to th nF +aA %uason should have tendered, certa nly C dal)s 9 shes 9ould have been fulf lled, gladly. %he pla n truth 9as that the mortgagee bent all h s efforts to put off the payment, and thanFs to the defects 9h ch he no9, 9 th obv ous ncons stency, po nts out, the mortgage has not per shed 9 th the checFs. 7all ng 9 th n the reasons for the stoppage of nterest are attorney)s fees. $n fact there s less mer t n the cla m for attorney)s fees than n the cla m for nterestI for the cred tor t 9as 9ho by h s refusal brought upon h mself th s l t gat on, refusal 9h ch, as -ust sho9n, resulted greatly to h s benef t. C dal, ho9ever, s ent tled to the penalty, a po nt 9h ch the debtor seems to a grant. %he suspens on of the runn ng of the nterest s prem sed on the thes s that the debt 9as cons dered pa d as of the date the offer to pay the pr nc pal 9as made. $t s prec sely the mortgagor)s content on that he 9as to pay sa d penalty f and 9hen she pa d the mortgage before the e1p rat on of the four@year per od prov ded n the mortgage contract. %h s penalty 9as des gned to taFe the place of the nterest 9h ch the cred tor 9ould be ent tled to collect f the durat on of the mortgage had not been cut short and from 9h ch nterest the debtor has been rel eved. ,$n obl gat ons 9 th a penalty clause the penalty shall subst tute ndemn ty for damages and the payment of nterest. . ., /Art. 1182, ' v l 'ode of &pa n.0. %o summar Ae, the follo9 ng are our f nd ngs and dec s on? %he contract of sale E1h b t A 9as val d and enforceable, but the loss of the checFs for +14<,180 and +12,5<2.>1 and nval dat on of the correspond ng depos t s to be borne by the buyer. #regor o Araneta, $nc. the value of these checFs as 9ell as the several payments made by +aA %uason to #regor o Araneta, $nc. shall be deducted from the sum of +150,000 9h ch the buyer advanced to the seller on the e1ecut on of E1h b t 1. %he buyer shall be ent tled to the rents on the land 9h ch 9as the sub-ect of the sale, rents 9h ch may have been collected by +aA %uason after the date of the sale. +aA %uason shall pay Jose C dal the amount of the mortgage and the st pulated nterest up to Dctober 20,154<, plus the penalty of +<0,000, prov ded that the loans obta ned dur ng the Japanese occupat on shall be reduced accord ng to the Eallantyne scale of payment, and prov ded that the date bas s of the computat on as to the penalty s the date of the f l ng of the su t aga nst C dal. +aA %uason shall pay the amount that shall have been found due under the contracts of mortgage 9 th n 50 days from the t me the court)s -udgment upon the l =u dat on shall have become f nal, other9 se the property mortgaged shall be ordered sold prov ded by la9. C dal)s mortgage s super or to the purchaser)s r ght under E1h b t A, 9h ch s hereby declared sub-ect to sa d mortgage. &hould #regor o Araneta, $nc. be forced to pay the mortgage, t 9 ll be subrogated to the r ght of the mortgagee.

%h s case 9 ll be remanded to the court of or g n 9 th nstruct on to hold a rehear ng for the purpose of l =u dat on as here n prov ded. %he court also shall hear and dec de all other controvers es relat ve to the l =u dat on 9h ch may have been overlooFed at th s dec s on, n a manner not ncons stent 9 th the above f nd ngs and -udgment. %he mortgagor s not ent tled to suspens on of payment under the debt morator um la9 or orders. Among other reasons? the bulF of the debt 9as a pre@ 9ar obl gat on and the morator um as to such obl gat ons has been abrogated unless the debtor has suffered 9ar damages and has f led cla m for themI there s no allegat on or proof that she has. $n the second place, the debtor herself caused her cred tor to be brought nto the case 9h ch resulted n the f l ng of the cross@cla m to foreclose the mortgage. $n the th rd place, prompt settlement of the mortgage s necessary to the settlement of the d spute and l =u dat on bet9een #regor o Araneta, $nc. and +aA %uason. $f for no other reason, +aA %uason 9ould do 9ell to forego the benef ts of the morator um la9. %here shall be no spec al -udgments as to costs of e ther nstance. $aras, ..9., $a#lo, !engzon, $adilla, !autista Angelo and %a#rador, 99., concur.

$ES/#&()/N Decem#er )), +,A) (&AS/N, J., %he mot on for recons derat on of the pla nt ff, #regor o Araneta, $nc., and the defendant, +aA %uason de +aterno, are n large part devoted to the =uest on, e1tens vely d scussed n the dec s on, of the val d ty of the contract of sale E1h b t A. %he arguments are not ne9 and at least 9ere g ven due cons derat on n the del berat on and study of the case. (e f nd no reason for d sturb ng our dec s on on th s phase of the case. %he pla nt ff@appellant)s alternat ve propos t on O to 9 t? ,&hould th s Bonorable 'ourt declare that the purchase pr ce 9as not pa d and that pla nt ff has to bear the loss due to the nval dat on of the occupat on currency, ts loss should be l m ted to? /a0 the purchase pr ce of +1<5,06<.<2 less +42,628.20 9h ch pla nt ff pa d and the defendant actually collected dur ng the occupat on, or the sum of +52,2<<.<2, or at most, /b0 the purchase pr ce of the lot n the sum of +1<5,06<.<2,, O as 9ell as the alleged over@payment by the defendant@appellee, may be taFen up n the l =u dat on under the reservat on n the -udgment that ,the court /belo90 shall hold a rehear ng for the purpose of l =u dat on as here n prov ded, and ,shall also hear and dec de all other controvers es relat ve to the l =u dat on 9h ch may have been overlooFed n th s dec s on, n the manner not ncons stent 9 th the above f nd ngs and -udgment., %hese payments and d sbursement are matters of account ng 9h ch, not hav ng been put d rectly n ssue or g ven due attent on at the tr al and n the appealed

dec s on, can better be treshed out n the proposed rehear ng 9here each party 9 ll have an opportun ty to put for9ard h s v e9s and reasons, 9 th support ng ev dence f necessary, on ho9 the var ous tems n =uest on should be regarded and cred ted, n the l ght of our dec s on. As to Jose C dal)s mot on? %here s noth ng to add to or detract from 9hat has been sa d n the dec s on relat ve to the nterest on the loans and attorney)s fees. %here are no substant al features of the case that have not been 9e ghed carefully n arr v ng at our conclus ons. $t s our cons dered op n on that the dec s on s n accord 9 th la9, reason and e=u ty. %he vehement protest that th s court should not mod fy the conclus on of the lo9er court on nterest and attorney)s fees s actually and ent rely contrary to the cross@cla mant)s o9n suggest on n h s br ef. 7rom page 20 of h s br ef, 9e copy these passages? (e subm t that th s Bonorable 'ourt s n a pos t on no9 to render -udgment n the foreclosure of mortgage su t as no further ssue of fact need be acted upon by the tr al court. Defendant +aA %uason has adm tted the amount of cap tal due. %hat s a fact. &he only re=uests that nterest be granted up to Dctober 20,154<, and that the morator um la9 be appl ed. 6hether this is possi#le or not is a legal question, &hich can #e decided #y this court. 3nnecessary loss of t me and e1penses to the part es here n 9 ll be avo ded by th s Bonorable 'ourt by render ng -udgment n the foreclosure of mortgage su t as follo9s? 111 111 111

$n real ty, the -udgment d d not ad-ud cate the foreclosure of the mortgage nor d d t f 1 the amount due on the mortgage. %he pronouncement that the mortgage 9as n full force and effect 9as a conclus on 9h ch the mortgagor d d not and does not no9 =uest on. %here 9as therefore v rtually no dec s on that could be e1ecuted. C dal h mself moved n the 'ourt of 7 rst $nstance for amendment of the dec s on alleg ng, correctly, that ,the court fa led to act on the cross@cla m of Jose C dal dated Apr l 22, 1542, 9here he demanded foreclosure of the mortgage . . . ., %hat mot on l Fe +aA %uason)s mot on to complete the -udgment, 9as summar ly den ed. $n str ct accordance 9 th the procedure, the case should have been remanded to the court of or g n for further proceed ngs n the form stated by +aA %uason)s counsel. Eoth the mortgagor and the mortgagee agree on th s. (e d d not follo9 the above course bel ev ng t best, n the nterest of the part es themselves and follo9 ng C dal)s attorney)s o9n suggest on, to dec de the controvers es bet9een C dal and +aA %uason upon the records and the br efs already subm tted. %he three mot ons for recons derat on are den ed. $aras, ..9., $a#lo, !engzon, $adilla, Montemayor, 9ugo, !autista Angelo and %a#rador, 99., concur.

$ES/#&()/N 9anuary )M, +,A(&AS/N, J., $n the second mot on for recons derat on by defendant@appellee t s urged that the sale be resolved for fa lure of pla nt ff@appellant to pay the ent re purchase pr ce of the property sold. "esc ss on of the contract, t s true, 9as alternat ve prayer n the cross@ compla nt, but the tr al court declared the sale vo d n accordance 9 th the ma n content on of the defendant, and passed no -udgment on the matter of resc ss on. 7or th s reason, and because resc ss on 9as not pressed on appeal, 9e deemed unnecessary, f not uncalled for, any pronouncement touch ng th s po nt. $n the second place, the nonpayment of a port on, albe t b g port on, of the pr ce 9as not, n our op n on, such fa lure as 9ould -ust fy rec ss on under Art cles 1124 and 1808 et se=. of the ' v l 'ode of &pa n, 9h ch 9as st ll n force 9hen th s case 9as tr ed. ,%he general rule s that rec ss on 9 ll not be perm tted for a sl ght or casual breach of the contract, but only for such breaches as are so substant al and fundamental as to defeat the ob-ect of the part es., /&ong 7o N 'o. vs. Ba9a an@+h l pp ne 'o., 42 +h l., 621, 622.0 $n the present case, the vendee d d not fa l or refuse to pay by plan or des gn, grant ng there 9as fa lure or refusal to pay. As a matter of fact, the port on of the purchase pr ce 9h ch s sa d not to have been sat sf ed unt l no9 9as actually rece ved by checFs by the vendor and depos ted by her 9 th the court n the su t aga nst C dal, n accordance 9 th the understand ng f not e1press agreement bet9een vendor and vendee. %he =uest on of 9ho should bear the loss of th s amount, the checFs hav ng been destroyed and the funds aga nst 9h ch they 9ere dra9n hav ng become of no value, 9as one of the most b tterly debated ssues, and n ad-udg ng the vendee to be the party to shoulder the sa d loss and order ng the sa d vendee to pay the amount to the vendor, th s 'ourt)s -udgment 9as not, and 9as not ntended to be, n the nature of an e1tens on of t me of payment. $n contemplat on of the ' v l 'ode there 9as no default, e1cept poss bly n connect on 9 th the alleged overcharges by the vendee ar s ng from honest m staFes of account ng, m staFes 9h ch, by our dec s on, are to be corrected n a ne9 tr al thereby ordered. %he second mot on for recons derat on s, therefore, den ed. $aras, ..9., $a#lo, !engzon, $adilla, Montemayor, Reyes, 9ugo, !autista Angelo and %a#rador, 99., concur.

:ootnotes
1

Art. 1485. %he follo9 ng persons cannot taFe by purchase, even at a publ c or -ud c al auct on, e ther n person or through the med at on of another? 111
2

111

111

An agent, any property of 9h ch the management or sale may have been ntrusted to h mI 111 111 111

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 1;1;=2 June 4., 3..2

+A9#)(/ '&$A/ and NE#)/ 5&E$(A6&E#A, petitioners,. vs. +E/+#E /: (5E +5)#)++)NES, respondent. DE'$&$DN %5)%/7NA6A$)/, J.: $n th s +et t on for "ev e9 on .ertiorari under "ule 48 of the "ules of 'ourt, pet t oners pray for the reversal of the Dec s on of the 'ourt of Appeals n 'A@ #.". '" No. 211<4, dated <1 May 1555,1 aff rm ng 9 th mod f cat on the Judgment of the "eg onal %r al 'ourt /"%'0 of +uerto +r ncesa ' ty, +ala9an, n 'r m nal 'ase No. 1154<, dated 08 May 1552,2 f nd ng pet t oners gu lty beyond reasonable doubt of the cr me of estafa under Art cle <18/10/b0 of the "ev sed +enal 'ode. +et t oner +abl to Murao s the sole o9ner of !orna Murao $ndustr al 'ommerc al Enterpr ses /!M$'E0, a company engaged n the bus ness of sell ng and ref ll ng f re e1t ngu shers, 9 th branches n +ala9an, Naga, !egasp , M ndoro, Aurora, UueAon, $sabela, and !aguna. +et t oner Nel o BuertaAuela s the Eranch Manager of !M$'E n +uerto +r ncesa ' ty, +ala9an. < Dn 01 &eptember 1554, pet t oner Murao and pr vate compla nant 'h to 7eder co entered nto a Dealersh p Agreement for the marFet ng, d str but on, and ref ll ng of f re e1t ngu shers 9 th n +uerto +r ncesa ' ty.4 Accord ng to the Dealersh p Agreement, pr vate compla nant 7eder co, as a dealer for !M$'E, could obta n f re e1t ngu shers from !M$'E at a 80R d scount, prov ded that he sets up h s o9n sales force, ac=u res and ssues h s o9n sales nvo ce, and posts a bond 9 th !M$'E as secur ty for the cred t l ne e1tended to h m by !M$'E. 7a l ng to comply 9 th the cond t ons under the sa d Dealersh p Agreement, pr vate compla nant

7eder co, nonetheless, 9as st ll allo9ed to act as a part@t me sales agent for !M$'E ent tled to a percentage comm ss on from the sales of f re e1t ngu shers. 8 %he amount of pr vate compla nant 7eder coJs comm ss on as sales agent for !M$'E 9as under content on. +r vate compla nant 7eder co cla med that he 9as ent tled to a comm ss on e=u valent to 80R of the gross sales he had made on behalf of !M$'E,> 9h le pet t oners ma nta ned that he should rece ve only <0R of the net sales. +et t oners even contended that as company pol cy, part@t me sales agents 9ere ent tled to a comm ss on of only 28R of the net sales, but s nce pr vate compla nant 7eder co helped n establ sh ng the !M$'E branch off ce n +uerto +r ncesa ' ty, he 9as to rece ve the same comm ss on as the full@ t me sales agents of !M$'E, 9h ch 9as <0R of the net sales. 2 +r vate compla nant 7eder coJs f rst successful transact on as sales agent of !M$'E nvolved t9o f re e1t ngu shers sold to !andbanF of the +h l pp nes /!andbanF0, +uerto +r ncesa ' ty Eranch, for the pr ce of +2,200.00. !andbanF ssued a checF, dated 06 November 155<, pay to the order of ,!.M. $ndustr al 'ommJl. Enterpr ses cMo 'h to 7eder co,, for the amount of +8,5<>.40,6 after deduct ng from the or g nal sales pr ce the 18R d scount granted by pr vate compla nant 7eder co to !andbanF and the <R 9 thhold ng ta1. +r vate compla nant 7eder co encashed the checF at !andbanF and rem tted only +2,4<>.40 to !M$'E, 9h le he Fept +<,800.00 for h mself as h s comm ss on from the sale.5 +et t oners alleged that t 9as contrary to the standard operat ng procedure of !M$'E that pr vate compla nant 7eder co 9as named payee of the !andbanF checF on behalf of !M$'E, and that pr vate compla nant 7eder co 9as not author Aed to encash the sa d checF. Desp te the supposed rregular t es comm tted by pr vate compla nant 7eder co n the collect on of the payment from !andbanF and n the premature 9 thhold ng of h s comm ss on from the sa d payment, pet t oners forgave pr vate compla nant 7eder co because the latter prom sed to maFe@up for h s m sdeeds n the ne1t transact on. 10 +r vate compla nant 7eder co, on behalf of !M$'E, subse=uently fac l tated a transact on 9 th the ' ty #overnment of +uerto +r ncesa for the ref ll of 202 f re e1t ngu shers. Eecause of the cons derable cost, the ' ty #overnment of +uerto +r ncesa re=uested that the transact on be spl t nto t9o purchase orders, and the ' ty #overnment of +uerto +r ncesa shall pay for each of the purchase orders separately.11 +ursuant to the t9o purchase orders, !M$'E ref lled and del vered all 202 f re e1t ngu shers to the ' ty #overnment of +uerto +r ncesa? 184 un ts on 0> January 1554, 4< more un ts on 12 January 1554, and the last f ve un ts on 1< January 1554.12 %he sub-ect of th s +et t on s l m ted to the f rst purchase order, +urchase Drder No. #&D@68>, dated 0< January 1554, for the ref ll of 55 f re e1t ngu shers, 9 th a total cost of +<05,000.00.1< Dn 1> June 1554, the ' ty #overnment of +uerto +r ncesa ssued 'hecF No. >114<2 to !M$'E to pay for +urchase Drder No. #&D@ 68>, n the amount of +<00,822.2<, net of the <R 9 thhold ng ta1. 14 ( th n the same day, pet t oner BuertaAuela cla med 'hecF No. >114<2 from the ' ty

#overnment of +uerto +r ncesa and depos ted t under the current account of !M$'E 9 th +'$EanF.18 Dn 12 June 1554, pr vate compla nant 7eder co 9ent to see pet t oner BuertaAuela at the !M$'E branch off ce n +uerto +r ncesa ' ty to demand for the amount of +184,800.00 as h s comm ss on from the payment of +urchase Drder No. #&D@68> by the ' ty #overnment of +uerto +r ncesa. +et t oner BuertaAuela, ho9ever, refused to pay pr vate compla nant 7eder co h s comm ss on s nce the t9o of them could not agree on the proper amount thereof. 1> Also on 12 June 1554, pr vate compla nant 7eder co 9ent to the pol ce stat on to f le an Aff dav t@'ompla nt for estafa aga nst pet t oners. 12 +et t oners subm tted the r Jo nt 'ounter@Aff dav t on 12 July 1554.16 %he ' ty +rosecut on Dff ce of +uerto +r ncesa ' ty ssued a "esolut on, dated 18 August 1554, f nd ng that a prima faciecase for estafa e1 sted aga nst the pet t oners and recommend ng the f l ng of an nformat on for estafa aga nst both of them. 15 %he $nformat on, docFeted as 'r m nal 'ase No. 1154< and raffled to the "%' of +uerto +r ncesa ' ty, +ala9an, Eranch 82, reads as follo9s K $N7D"MA%$DN %he unders gned accuses +AE!$%D M3"AD and NE!$D '. B3E"%AL3E!A of the cr me of E&%A7A, comm tted as follo9s? %hat on or about the 1>th day of June, 1554, at +uerto +r ncesa ' ty, +h l pp nes, and 9 th n the -ur sd ct on of th s Bonorable 'ourt, the sa d accused, consp r ng and confederat ng together and mutually help ng one another, after hav ng rece ved the amount of +<05,000.00 as payment of the 55 tanFs of ref lled f re e1t ngu sher /sic0 from the ' ty #overnment of +uerto +r ncesa, through dece t, fraud and m srepresentat on, d d then and there 9 llfully, unla9fully and felon ously defraud one 'h to 7eder co n the follo9 ng manner, to 9 t? sa d accused, 9ell Fno9 ng that 'h to 7eder co agent of !M $ndustr al 'ommerc al Enterpr ses s ent tled to 80R comm ss on of the gross sales as per the r Dealersh p 'ontract or the amount of +184,800.00 as h s comm ss on for h s sale of 55 ref lled f re e1t ngu shers 9orth +<05,000.00, and accused once n possess on of sa d amount of +<05,000.00 m sappropr ate, m sapply and convert the amount of +184,800.00 for the r o9n personal use and benef t and desp te repeated demands made upon them by compla nant to del ver the amount of +184,800.00, accused fa led and refused and st ll fa ls and refuses to do so, to the damage and pre-ud ce of sa d 'h to 7eder co n the amount of +184,800.00, +h l pp ne 'urrency.20 After hold ng tr al, the "%' rendered ts Judgment on 08 May 1552 f nd ng pet t oners gu lty beyond reasonable doubt as co@pr nc pals of the cr me of estafa def ned and penal Aed n Art cle <18/10/b0 of the "ev sed +enal 'ode. Estafa, under the sa d prov s on, s comm tted by K A"%. <18. S&indling (estafa*. K Any person 9ho shall defraud another by any of the means ment oned here nbelo9 . . .

1. ( th unfa thfulness or abuse of conf dence, namely? /a0 T /b0 Ey m sappropr at ng or convert ng, to the pre-ud ce of another, money, goods, or any other personal property rece ved by the offender n trust or on comm ss on, or for adm n strat on, or under any other obl gat on nvolv ng the duty to maFe del very of or to return the same, even though such obl gat on be totally or part ally guaranteed by a bondI or by deny ng hav ng rece ved such money, goods, or other propertyI . . . $n the same Judgment, the "%' e1pounded on ts f nd ng of gu lt, thus K 7or the afore@=uoted prov s on of the "ev sed +enal 'ode to be comm tted, the follo9 ng re=u s tes must concur? 1. %hat money, goods or other personal property be rece ved by the offender n trust, or on comm ss on, or for adm n strat on, or under any other obl gat on nvolv ng the duty to maFe del very of, or to return, the sameI 2. %hat there be m sappropr at on or convers on of such money or property by the offender, or den al on h s part of such rece ptI <. %hat such m sappropr at on or convers on or den al s to the pre-ud ce of anotherI and 4. %hat there s demand made by the offended party to the offender. /"eyes, "ev sed +enal 'ode of the +h l pp nes, p. 21>I Manuel Manahan, Jr. vs. 'ourt of Appeals, Et Al., #.". No. 111>8>, March 20, 155>0 All the forego ng elements are present n th s case. %he aborted test mony of Mrs. Norma Dacuan, 'ash er $$$ of the %reasurerJs Dff ce of the ' ty of +uerto +r ncesa establ shed the fact that ndeed, on June 1>, 1554, co@accused Nel o BuertaAuela tooF del very of 'hecF No. >114<2 9 th face value of +<00,822.2<, represent ng payment for the ref ll of 55 cyl nders of f re e1t ngu shers. Although the relat onsh p bet9een compla n ng 9 tness 'h to 7eder co and !M$' s not f duc ary n nature, st ll the clause ,any other obl gat on nvolv ng the duty to maFe del very of or to return, personal property s broad enough to nclude a ,c v l obl gat on, /Manahan vs. '.A., Et. Al., Mar. 20, 155>0. %he second element cannot be ga nsa d. Eoth +abl to Murao and Nel o BuertaAuela categor cally adm tted that they d d not g ve to 'h to 7eder co h s comm ss on. $nstead, they depos ted the full amount of the cons derat on, 9 th the +'$EanF n the 'urrent Account of !M$'. T %he refusal by the accused to g ve 'h to 7eder co 9hat ever percentage h s comm ss on necessar ly caused h m pre-ud ce 9h ch const tute the th rd element of estafa. Demand for payment, although not an essent al element of estafa 9as nonetheless made by the compla nant but 9as rebuffed by the accused. %he

fraudulent ntent by the accused s ndub tably nd cated by the r refusal to pay 'h to 7eder co any percentage of the gross sales as comm ss on. $f t 9ere true that 9hat the dealerMsales Agent s ent tled to by 9ay of comm ss on s only <0R of the gross sales, then by all means the accused should have pa d 'h to 7eder co <0R. $f he refused, they could have t depos ted n h s name. $n that 9ay they may not be sa d to have m sappropr ated for themselves 9hat perta ned to the r Agent by 9ay of comm ss on. T (BE"E7D"E, prem ses cons dered -udgment s hereby rendered f nd ng the accused +AE!$%D M3"AD and NE!$D B3E"%AL3E!A gu lty beyond reasonable doubt as co@pr nc pals, of the cr me of estafa def ned and penal Aed n Art cle <18 par. 1/b0 of the "ev sed +enal 'ode, and apply ng the prov s ons of the $ndeterm nate &entence !a9, both accused are hereby sentenced to an ndeterm nate penalty rang ng from a m n mum of %(D /20 HEA"&, 7D3" /40 MDN%B& and DNE /10 DAH of pr s on correcc onal n ts med um per od, to a ma1 mum of %(EN%H /200 HEA"& of reclus on temporal n ts ma1 mum per odI to pay 'h to 7eder co, -o ntly and severally? a. &ales 'omm ss on e=u valent to 80R of +<05,000.00 or @@@@@@@@@@@@@@@@@@@ +184,800.00 9 th legal nterest thereon from June 12, 1554 unt l fully pa dI b. AttorneyJs fees @@@@@@@@@@@@@@@@@@@@@@@@@@@@ + <0,0000.00.21 "esolv ng the appeal f led by the pet t oners before t, the 'ourt of Appeals, n ts Dec s on, dated <1 May 1555, aff rmed the aforement oned "%' Judgment, f nd ng pet t oners gu lty of estafa, but mod fy ng the sentence mposed on the pet t oners. %he d spos t ve port on of the Dec s on of the 'ourt of Appeals reads K (BE"E7D"E, the appealed dec s on s hereby A77$"MED 9 th the MDD$7$'A%$DN that appellants +AE!$%D M3"AD and NE!$D B3E"%AL3E!A are hereby each sentenced to an ndeterm nate penalty of e ght /60 years and Dne /10 day of prision mayor, as m n mum, to %9enty /200 years of reclusion temporal, as ma1 mum. %he a9ard for attorneyJs fee of +<0,000.00 s deleted because the prosecut on of cr m nal act on s the tasF of the &tate prosecutors. All other aspects of the appealed dec s on are ma nta ned. 22 (hen the 'ourt of Appeals, n ts "esolut on, dated 15 January 2000, 2< den ed the r Mot on for "econs derat on, pet t oners f led the present +et t on for "ev e924 before th s 'ourt, ra s ng the follo9 ng errors allegedly comm tted by the 'ourt of Appeals n ts Dec s on, dated <1 May 1555 K $

($%B D3E "E&+E'%, %BE BDND"AE!E 'D3"% D7 A++EA!& #"ACE!H E""ED (BEN $% "3!ED %BA% +E%$%$DNE"& A"E !$AE!E 7D" E&%A7A 3NDE" A"%$'!E <18 1/E0 D7 %BE "EC$&ED +ENA! 'DDE 3NDE" %BE 7D"E#D$N# &E% D7 7A'%&, (BEN $% $& '!EA" 7"DM %BE &A$D 3ND$&+3%ED 7A'%& %BA% %BE !$AE$!$%H $& '$C$! $N NA%3"E. $$ ($%B D3E "E&+E'%, %BE BDND"AE!E 'D3"% E""ED (BEN $% 3+BD!D / sic0 +"$CA%E 'DM+!A$NAN%J& '!A$M %BA% BE $& EN%$%!ED %D A 7$7%H /80R0 +E"'EN% 'DMM$&&$DN ($%BD3% EC$DEN'E %D &3++D"% &3'B '!A$M. %h s 'ourt f nds the nstant +et t on mpressed 9 th mer t. Absent here n are t9o essent al elements of the cr me of estafa by m sappropr at on or convers on under Art cle <18/10/b0 of the "ev sed +enal 'ode, namely? /10 %hat money, goods or other personal property be rece ved by the offender n trust, or on comm ss on, or for adm n strat on, or under any other obl gat on nvolv ng the duty to maFe del very of, or to return, the sameI and /20 %hat there be a m sappropr at on or convers on of such money or property by the offender. %he f nd ngs of the "%' and the 'ourt of Appeals that pet t oners comm tted estafa rest on the erroneous bel ef that pr vate compla nant 7eder co, due to h s r ght to comm ss on, already o9ned 80R of the amount pa d by the ' ty #overnment of +uerto +r ncesa to !M$'E by v rtue of 'hecF No. >114<2, so that the collect on and depos t of the sa d checF by pet t oners under the account of !M$'E const tuted m sappropr at on or convers on of pr vate compla nant 7eder coJs comm ss on. Bo9ever, his ri2ht to a co--ission does not -a;e pri'ate co-plainant Federico a @oint owner o! the -one,pa d to !M$'E by the ' ty #overnment of +uerto +r ncesa, but merely establ shes the relat on of agent and pr nc pal. 28 $t s une=u vocal that an agency e1 sted bet9een !M$'E and pr vate compla nant 7eder co. Art cle 16>6 of the ' v l 'ode def nes agency as a spec al 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, 9 th the consent or author ty of the latter., Although pr vate compla nant 7eder co never had the opportun ty to operate as a dealer for !M$'E under the terms of the Dealersh p Agreement, he 9as allo9ed to act as a sales agent for !M$'E. Be can negot ate for and on behalf of !M$'E for the ref ll and del very of f re e1t ngu shers, 9h ch he, n fact, d d on t9o occas ons K 9 th !andbanF and 9 th the ' ty #overnment of +uerto +r ncesa. 3nl Fe the Dealersh p Agreement, ho9ever, the agreement that pr vate compla nant 7eder co may act as sales agent of !M$'E 9as based on an oral agreement.2> As a sales agent, pr vate compla nant 7eder co entered nto negot at ons 9 th prospect ve cl ents for and on behalf of h s pr nc pal, !M$'E. (hen negot at ons for the sale or ref ll of f re e1t ngu shers 9ere successful, pr vate compla nant 7eder co prepared the necessary documentat on. +urchase orders, nvo ces, and rece pts 9ere all n the name of !M$'E. $t 9as !M$'E 9ho had the pr mary duty of

p cF ng up the empty f re e1t ngu shers, f ll ng them up, and del ver ng the ref lled tanFs to the cl ents, even though pr vate compla nant 7eder co personally helped n haul ng and carry ng the f re e1t ngu shers dur ng p cF@up from and del very to cl ents. All prof ts made and any advantage ga ned by an agent n the e1ecut on of h s agency should belong to the pr nc pal. 22 $n the nstant case, 9hether the transact ons negot ated by the sales agent 9ere for the sale of brand ne9 f re e1t ngu shers or for the ref ll of empty tanFs, ev dently, the bus ness belonged to !M$'E. 'onse=uently, payments made by cl ents for the f re e1t ngu shers perta ned to !M$'E. (hen pet t oner BuertaAuela, as the Eranch Manager of !M$'E n +uerto +r ncesa ' ty, 9 th the perm ss on of pet t oner Murao, the sole propr etor of !M$'E, personally p cFed up 'hecF No. >114<2 from the ' ty #overnment of +uerto +r ncesa, and depos ted the same under the 'urrent Account of !M$'E 9 th +'$EanF, he 9as merely collect ng 9hat r ghtfully belonged to !M$'E. $ndeed, 'hecF No. >114<2 named !M$'E as the lone payee. +r vate compla nant 7eder co may cla m comm ss on, allegedly e=u valent to 80R of the payment rece ved by !M$'E from the ' ty #overnment of +uerto +r ncesa, based on h s r ght to -ust compensat on under h s agency contract 9 th !M$'E,26 but not as the automat c o9ner of the 80R port on of the sa d payment. & nce !M$'E s the la9ful o9ner of the ent re proceeds of the checF payment from the ' ty #overnment of +uerto +r ncesa, then the pet t oners 9ho collected the payment on behalf of !M$'E d d not rece ve the same or any part thereof n trust, or on comm ss on, or for adm n strat on, or under any other obl gat on nvolv ng the duty to maFe del very of, or to return, the same to pr vate compla nant 7eder co, thus, the "%' correctly found that no f duc ary relat onsh p e1 sted bet9een pet t oners and pr vate compla nant 7eder co. A f duc ary relat onsh p bet9een the compla nant and the accused s an essent al element of estafa by m sappropr at on or convers on, 9 thout 9h ch the accused could not have comm tted estafa.25 %he "%' used the case of Manahan, 9r. v. .ourt of Appeals<0 to support ts pos t on that even n the absence of a f duc ary relat onsh p, the pet t oners st ll had the c v l obl gat on to return and del ver to pr vate compla nant 7eder co h s comm ss on. %he "%' fa led to d scern the substant al d fferences n the factual bacFground of theManahan case from the present +et t on. %he Manahan case nvolved the lease of a dump trucF. Although a contract of lease may not be f duc ary n character, the lessee clearly had the c v l obl gat on to return the trucF to the lessor at the end of the lease per odI and fa lure of the lessee to return the trucF as prov ded for n the contract may const tute estafa. %he phrase ,or any other obl gat on nvolv ng the duty to maFe del very of, or to return the same, refers to contracts of ba lment, such as, contract of lease of personal property, contract of depos t, and commodatum, 9here n -ur d cal possess on of the th ng 9as transferred to the lessee, depos tary or borro9er, and 9here n the latter s obl gated to return the same th ng. <1

$n contrast, the current +et t on concerns an agency contract 9hereby the pr nc pal already rece ved payment from the cl ent but refused to g ve the sales agent, 9ho negot ated the sale, h s comm ss on. As has been establ shed by th s 'ourt n the forego ng paragraphs, !M$'E had a r ght to the full amount pa d by the ' ty #overnment of +uerto +r ncesa. & nce !M$'E, through pet t oners, d rectly collected the payment, then t 9as already n possess on of the amount, and no transfer of -ur d cal possess on thereof 9as nvolved here n. # ven that pr vate compla nant 7eder co could not cla m o9nersh p over the sa d payment or any port on thereof, !M$'E had noth ng at all to del ver and return to h m. %he obl gat on of !M$'E to pay pr vate compla nant 7eder co h s comm ss on does not ar se from any duty to del ver or return the money to ts supposed o9ner, but rather from the duty of a pr nc pal to g ve -ust compensat on to ts agent for the serv ces rendered by the latter. 7urthermore, the 'ourt of Appeals, n ts Dec s on, dated <1 May 1555, def ned the 9ords ,convert, and ,m sappropr ate, n the follo9 ng manner K %he B gh 'ourt n Saddul v. .ourt of Appeals :152 &'"A 222; enunc ated that the 9ords ,convert, and ,m sappropr ate, n the cr me of estafa pun shed under Art. <18, par. 1/b0 connote an act of us ng or d spos ng of anotherJs property as f t 9ere oneJs o9n, or f devot ng t to a purpose or use d fferent from that agreed upon. %o m sappropr ate to oneJs use ncludes, not only convers on to oneJs personal advantage, but also every attempt to d spose of the property of another 9 thout r ght.<2 Eased on the very same def n t on, th s 'ourt f nds that pet t oners d d not convert nor m sappropr ate the proceeds from 'hecF No. >114<2 because the same belonged to !M$'E, and 9as not ,anotherJs property., +et t oners collected the sa d checF from the ' ty #overnment of +uerto +r ncesa and depos ted the same under the 'urrent Account of !M$'E 9 th +'$EanF. & nce the money 9as already 9 th ts o9ner, !M$'E, t could not be sa d that the same had been converted or m sappropr ated for one could not very 9ell fraudulently appropr ate to h mself money that s h s o9n.<< Although pet t onersJ refusal to pay pr vate compla nant 7eder co h s comm ss on caused pre-ud ce or damage to the latter, sa d act does not const tute a cr me, part cularly estafa by convers on or m sappropr at on pun shable under Art cle <18/10/b0 of the "ev sed +enal 'ode. ( thout the essent al elements for the comm ss on thereof, pet t oners cannot be deemed to have comm tted the cr me. (h le pet t oners may have no cr m nal l ab l ty, pet t oners themselves adm t the r c v l l ab l ty to the pr vate compla nant 7eder co for the latterJs comm ss on from the sale, 9hether t be <0R of the net sales or 80R of the gross sales. Bo9ever, th s 'ourt s precluded from maF ng a determ nat on and an a9ard of the c v l l ab l ty for the reason that the sa d c v l l ab l ty of pet t oners to pay pr vate compla nant 7eder co h s comm ss on ar ses from a v olat on of the agency contract and not from a cr m nal act. <4 $t 9ould be mproper and un9arranted for th s 'ourt to mpose n a cr m nal act on the c v l l ab l ty ar s ng

from a c v l contract, 9h ch should have been the sub-ect of a separate and ndependent c v l act on.<8 W5E$E:/$E, the assa led Dec s on of the 'ourt of Appeals n 'A@#.". '" No. 211<4, dated <1 May 1555, aff rm ng 9 th mod f cat on the Judgment of the "%' of +uerto +r ncesa ' ty, +ala9an, n 'r m nal 'ase No. 1154<, dated 08 May 1552, f nd ng pet t oners gu lty beyond reasonable doubt of estafa by convers on or m sappropr at on under Art cle <18/10/b0 of the "ev sed +enal 'ode, and a9ard ng the amount of +184,800.00 as sales comm ss on to pr vate compla nant 7eder co, s hereby "ECE"&ED and &E% A&$DE. A ne9 Judgment s hereby entered A'U3$%%$N# pet t oners based on the forego ng f nd ngs of th s 'ourt that the r act ons d d not const tute the cr me of estafa by convers on or m sappropr at on under Art cle <18/10/b0 of the "ev sed +enal 'ode. %he cash bonds posted by the pet t oners for the r prov s onal l berty are hereby ordered "E!EA&ED and the amounts thereof "E%3"NED to the pet t oners, sub-ect to the usual account ng and aud t ng procedures. &D D"DE"ED. +uno, /'ha rman0, Austr a@Mart neA, 'alle-o, &r., and % nga, JJ., concur.

:ootnotes
1

+enned by Assoc ate Just ce "uben %. "eyes, 9 th Assoc ate Just ces Ja nal D. "asul and Eloy ". Eello, Jr., concurr ngI Rollo, pp. <1@46.
2

+enned by Judge 7 lomeno A. Cergara, :#id., pp. 8<@>8. :#id., p. 4. "ecords, p. <. %&N, 06 June 1558, pp. 18@12. "ecords, p. 4. %&N, 14 &eptember 1558, pp. 6@5I %&N, 15 Dctober 1558, p. 5. "ecords, p. 50. %&N, 14 &eptember 1558, pp. 5@1<I %&N, 15 Dctober 1558, pp. 8@6. %&N, 14 &eptember 1558, pp. 1<@18I %&N, 15 Dctober 1558, pp. 6, 10@11. %&N, 02 March 155>, pp. <1@<2. %&N, 15 Dctober 1558, pp. 1<@14.

<

>

10

11

12

1<

%he $nformat on f led aga nst pet t oners only nvolved the 7 rst +urchase Drder. Dur ng the tr al before the "%', t 9as establ shed that the second

+urchase Drder 9as l Fe9 se pa d. "espondent f led a Mot on to Amend the +lead ngs to nclude there n the deta ls of the second +urchase Drder /"ecords, pp. 122@1<00, but the "%', n ts Drder, dated 2< Dctober 155> /"ecords, pp. 180@18<0, den ed sa d Mot on s nce t 9ould already const tute a substant al amendment of the $nformat on and the ntended amended $nformat on 9ould already charge more than one offense.
14

"ecords, pp. 60@61, 51. %&N, 14 &eptember 1558, p. 16. Supra, note >. "ecords, pp. <@8. "ecords, pp. 10@12. "ecords, pp. >@5. Rollo, pp. 81@82. Supra, note 2, pp. >0@>8. Supra, note 1, p. 42.

18

1>

12

16

15

20

21

22

2<

+enned by Assoc ate Just ce "uben %. "eyes, 9 th Assoc ate Just ces "amon A. Earcelona and Eloy ". Eello, Jr. concurr ngI Rollo, pp. 45@80.
24

Rollo, pp. <@<0. 3n ted &tates v. "eyes, <> +h l 251 /15120. Art. 16>5 of the ' v l 'ode recogn Aes an agency contracted orally. +ederson v. Johnson, 1>5 ( s. <20, 122 N.(. 22< /15150.

28

2>

22

26

Art cle 1628 of the ' v l 'ode prov des that ,Agency s presumed to be for a compensat on, unless there s proof to the contrary.,
25

Hong 'han * m v. +eople, #.". No. 64215, 28 January 1551, 15< &'"A <44, <8<@<84I #alveA v. 'ourt of Appeals, #.". No. !@222>0, 25 November 1521, 42 &'"A 226, 264.
<0

#.". No. 111>8>, 20 March 155>, 288 &'"A 202. 2 "eyes, %he "ev sed +enal 'ode >>2 /155< rev. ed.0 Supra, note 21, p. 41.

<1

<2

<<

Ham v. Mal F, #.". No. !@80880@82, <1 Dctober 1525, 54 &'"A <0, <8I ;n ted &tates v. 7 gueroa, 22 +h l 2>5, 221 /15120.
<4

+eople v. M randa, #.". No. !@12<65, <1 August 15>2, 8 &'"A 10>2I +eople v. +ant g, #.". No. !@6<28, 28 Dctober 1588, 81 D.#. 8>22.

<8

Accord ng to Art cle <1 of the ' v l 'ode, ,(hen a c v l act on s based on an obl gat on not ar s ng from the act or om ss on compla ned of as a felony, such c v l act on may proceed ndependently of the cr m nal proceed ngs and regardless of the result of the latter., "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN

G.$. No. #71.<<41 'arc- 31, 1<<; !E*E#/+'EN( 9ANK /: (5E +5)#)++)NES, pet t oner, vs. %/&$( /: A++EA#S and t-e ES(A(E /: (5E #A(E J&AN 9. !ANS, represented y %AN!)!A G. !ANS, and t-e !9+ '/$(GAGE $E!E'+()/N )NS&$AN%E +//#, respondents. =ffice of the %egal .ounsel for petitioner. Reyes, Santayana, Molo & Alegre for D!$ Mortgage Redemption :nsurance $ool.

E&)AS/N, J.: %h s s a pet t on for rev e9 on certiorari under "ule 48 of the "ev sed "ules of 'ourt to reverse and set as de the dec s on of the 'ourt of Appeals n 'A@#." 'C No. 2>4<4 and ts resolut on deny ng recons derat on thereof. (e aff rm the dec s on of the 'ourt of Appeals 9 th mod f cat on. $ $n May 1562, Juan E. Dans, together 9 th h s 9 fe 'and da, h s son and daughter@ n@la9, appl ed for a loan of +800,000.00 9 th the Development EanF of the +h l pp nes /DE+0, Eas lan Eranch. As the pr nc pal mortgagor, Dans, then 2> years of age, 9as adv sed by DE+ to obta n a mortgage redempt on nsurance /M"$0 9 th the DE+ Mortgage "edempt on $nsurance +ool /DE+ M"$ +ool0. A loan, n the reduced amount of +<00,000.00, 9as approved by DE+ on August 4, 1562 and released on August 11, 1562. 7rom the proceeds of the loan, DE+ deducted the amount of +1,42>.00 as payment for the M"$ prem um. Dn August 18, 1562, Dans accompl shed and subm tted the ,M"$ Appl cat on for $nsurance, and the ,Bealth &tatement for DE+ M"$ +ool., Dn August 20, 1562, the M"$ prem um of Dans, less the DE+ serv ce fee of 10 percent, 9as cred ted by DE+ to the sav ngs account of the DE+ M"$ +ool. Accord ngly, the DE+ M"$ +ool 9as adv sed of the cred t.

Dn &eptember <, 1562, Dans d ed of card ac arrest. %he DE+, upon not ce, relayed th s nformat on to the DE+ M"$ +ool. Dn &eptember 2<, 1562, the DE+ M"$ +ool not f ed DE+ that Dans 9as not el g ble for M"$ coverage, be ng over the acceptance age l m t of >0 years at the t me of appl cat on. Dn Dctober 21, 1562, DE+ appr sed 'and da Dans of the d sapproval of her late husband)s M"$ appl cat on. %he DE+ offered to refund the prem um of +1,42>.00 9h ch the deceased had pa d, but 'and da Dans refused to accept the same, demand ng payment of the face value of the M"$ or an amount e=u valent to the loan. &he, l Fe9 se, refused to accept an e gratia settlement of +<0,000.00, 9h ch the DE+ later offered. Dn 7ebruary 10, 1565, respondent Estate, through 'and da Dans as adm n stratr 1, f led a compla nt 9 th the "eg onal %r al 'ourt, Eranch $, Eas lan, aga nst DE+ and the nsurance pool for ,'ollect on of &um of Money 9 th Damages., "espondent Estate alleged that Dans became nsured by the DE+ M"$ +ool 9hen DE+, 9 th full Fno9ledge of Dans) age at the t me of appl cat on, re=u red h m to apply for M"$, and later collected the nsurance prem um thereon. "espondent Estate therefore prayed? /10 that the sum of +1<5,800.00, 9h ch t pa d under protest for the loan, be re mbursedI /20 that the mortgage debt of the deceased be declared fully pa dI and /<0 that damages be a9arded. %he DE+ and the DE+ M"$ +ool separately f led the r ans9ers, 9 th the former assert ng a cross@cla m aga nst the latter. At the pre@tr al, DE+ and the DE+ M"$ +ool adm tted all the documents and e1h b ts subm tted by respondent Estate. As a result of these adm ss ons, the tr al court narro9ed do9n the ssues and, 9 thout oppos t on from the part es, found the case r pe for summary -udgment. 'onse=uently, the tr al court ordered the part es to subm t the r respect ve pos t on papers and documentary ev dence, 9h ch may serve as bas s for the -udgment. Dn March 10, 1550, the tr al court rendered a dec s on n favor of respondent Estate and aga nst DE+. %he DE+ M"$ +ool, ho9ever, 9as absolved from l ab l ty, after the tr al court found no pr v ty of contract bet9een t and the deceased. %he tr al court declared DE+ n estoppel for hav ng led Dans nto apply ng for M"$ and actually collect ng the prem um and the serv ce fee, desp te Fno9ledge of h s age nel g b l ty. %he d spos t ve port on of the dec s on read as follo9s? (BE"E7D"E, n v e9 of the forego ng cons derat on and n the furtherance of -ust ce and e=u ty, the 'ourt f nds -udgment for the pla nt ff and aga nst Defendant DE+, order ng the latter? 1. %o return and re mburse pla nt ff the amount of +1<5,800.00 plus legal rate of nterest as amort Aat on payment pa d under protestI 2. %o cons der the mortgage loan of +<00,000.00 nclud ng all nterest accumulated or other9 se to have been settled, sat sf ed or set@off by v rtue of the nsurance coverage of the late Juan E. DansI

<. %o pay pla nt ff the amount of +10,000.00 as attorney)s feesI 4. %o pay pla nt ff n the amount of +10,000.00 as costs of l t gat on and other e1penses, and other rel ef -ust and e=u table. %he 'ountercla ms of Defendants DE+ and DE+ M"$ +DD! are hereby d sm ssed. %he 'ross@cla m of Defendant DE+ s l Fe9 se d sm ssed / Rollo, p. 250 %he DE+ appealed to the 'ourt of Appeals. $n a dec s on dated &eptember 2, 1552, the appellate court aff rmed in toto the dec s on of the tr al court. %he DE+)s mot on for recons derat on 9as den ed n a resolut on dated Apr l 20, 155<. Bence, th s recourse. $$ (hen Dans appl ed for M"$, he f lled up and personally s gned a ,Bealth &tatement for DE+ M"$ +ool, /E1h. ,8@EanF,0 9 th the follo9 ng declarat on? $ hereby declare and agree that all the statements and ans9ers conta ned here n are true, complete and correct to the best of my Fno9ledge and bel ef and form part of my appl cat on for nsurance. $t s understood and agreed that no nsurance coverage shall be effected unless and unt l th s appl cat on s approved and the full prem um s pa d dur ng my cont nued good health /"ecords, p. 400. 3nder the aforement oned prov s ons, the M"$ coverage shall taFe effect? /10 9hen the appl cat on shall be approved by the nsurance poolI and /20 9hen the full prem um s pa d dur ng the cont nued good health of the appl cant. %hese t9o cond t ons, be ng -o ned con-unct vely, must concur. 3nd sputably, the po9er to approve M"$ appl cat ons s lodged 9 th the DE+ M"$ +ool. %he pool, ho9ever, d d not approve the appl cat on of Dans. %here s also no sho9 ng that t accepted the sum of +1,42>.00, 9h ch DE+ cred ted to ts account 9 th full Fno9ledge that t 9as payment for Dan)s prem um. %here 9as, as a result, no perfected contract of nsuranceI hence, the DE+ M"$ +ool cannot be held l able on a contract that does not e1 st. %he l ab l ty of DE+ s another matter. $t 9as DE+, as a matter of pol cy and pract ce, that re=u red Dans, the borro9er, to secure M"$ coverage. $nstead of allo9 ng Dans to looF for h s o9n nsurance carr er or some other form of nsurance pol cy, DE+ compelled h m to apply 9 th the DE+ M"$ +ool for M"$ coverage. (hen Dan)s loan 9as released on August 11, 1562, DE+ already deducted from the proceeds thereof the M"$ prem um. 7our days latter, DE+ made Dans f ll up and s gn h s appl cat on for M"$, as 9ell as h s health statement. %he DE+ later subm tted both the appl cat on form and health statement to the DE+ M"$ +ool at the DE+ Ma n Eu ld ng, MaFat Metro Man la. As serv ce fee, DE+ deducted 10 percent of the prem um collected by t from Dans. $n deal ng 9 th Dans, DE+ 9as 9ear ng t9o legal hats? the f rst as a lender, and the second as an nsurance agent.

As an nsurance agent, DE+ made Dans go through the mot on of apply ng for sa d nsurance, thereby lead ng h m and h s fam ly to bel eve that they had already fulf lled all the re=u rements for the M"$ and that the ssuance of the r pol cy 9as forthcom ng. Apparently, DE+ had full Fno9ledge that Dan)s appl cat on 9as never go ng to be approved. %he ma1 mum age for M"$ acceptance s >0 years as clearly and spec f cally prov ded n Art cle 1 of the #roup Mortgage "edempt on $nsurance +ol cy s gned n 1564 by all the nsurance compan es concerned /E1h. ,1@+ool,0. 3nder Art cle 1562 of the ' v l 'ode of the +h l pp nes, ,the agent 9ho acts as such s not personally l able to the party 9 th 9hom he contracts, unless he e1pressly b nds h mself or e1ceeds the l m ts of h s author ty 9 thout g v ng such party suff c ent not ce of h s po9ers., %he DE+ s not author Aed to accept appl cat ons for M"$ 9hen ts cl ents are more than >0 years of age /E1h. ,1@+ool,0. *no9 ng all the 9h le that Dans 9as nel g ble for M"$ coverage because of h s advanced age, DE+ e1ceeded the scope of ts author ty 9hen t accepted Dan)s appl cat on for M"$ by collect ng the nsurance prem um, and deduct ng ts agent)s comm ss on and serv ce fee. %he l ab l ty of an agent 9ho e1ceeds the scope of h s author ty depends upon 9hether the th rd person s a9are of the l m ts of the agent)s po9ers. %here s no sho9 ng that Dans Fne9 of the l m tat on on DE+)s author ty to sol c t appl cat ons for M"$. $f the th rd person deal ng 9 th an agent s una9are of the l m ts of the author ty conferred by the pr nc pal on the agent and he /th rd person0 has been dece ved by the non@d sclosure thereof by the agent, then the latter s l able for damages to h m /C %olent no, 'ommentar es and Jur sprudence on the ' v l 'ode of the +h l pp nes, p. 422 :1552;, c t ng &entenc a :'uba; of &eptember 28, 15020. %he rule that the agent s l able 9hen he acts 9 thout author ty s founded upon the suppos t on that there has been some 9rong or om ss on on h s part e ther n m srepresent ng, or n aff rm ng, or conceal ng the author ty under 9h ch he assumes to act /7ranc sco, C., Agency <02 :1582;, c t ng Ball v. !auderdale, 4> N.H. 20, 280. $nasmuch as the non@d sclosure of the l m ts of the agency carr es 9 th t the mpl cat on that a decept on 9as perpetrated on the unsuspect ng cl ent, the prov s ons of Art cles 15, 20 and 21 of the ' v l 'ode of the +h l pp nes come nto play. Art cle 15 prov des? Every person must, n the e1erc se of h s r ghts and n the performance of h s dut es, act 9 th -ust ce g ve everyone h s due and observe honesty and good fa th. Art cle 20 prov des? Every person 9ho, contrary to la9, 9 llfully or negl gently causes damage to another, shall ndemn fy the latter for the same.

Art cle 21 prov des? Any person, 9ho 9 llfully causes loss or n-ury to another n a manner that s contrary to morals, good customs or publ c pol cy shall compensate the latter for the damage. %he DE+)s l ab l ty, ho9ever, cannot be for the ent re value of the nsurance pol cy. %o assume that 9ere t not for DE+)s concealment of the l m ts of ts author ty, Dans 9ould have secured an M"$ from another nsurance company, and therefore 9ould have been fully nsured by the t me he d ed, s h ghly speculat ve. 'ons der ng h s advanced age, there s no absolute certa nty that Dans could obta n an nsurance coverage from another company. $t must also be noted that Dans d ed almost mmed ately, .e., on the n neteenth day after apply ng for the M"$, and on the t9enty@th rd day from the date of release of h s loan. Dne s ent tled to an ade=uate compensat on only for such pecun ary loss suffered by h m as he has duly proved /' v l 'ode of the +h l pp nes, Art. 21550. Damages, to be recoverable, must not only be capable of proof, but must be actually proved 9 th a reasonable degree of certa nty /"efractor es 'orporat on v. $ntermed ate Appellate 'ourt, 12> &'"A 8<5 :1565;I 'hoa %eF Bee v. +h l pp ne +ubl sh ng 'o., <4 +h l. 442 :151>;0. &peculat ve damages are too remote to be ncluded n an accurate est mate of damages /&un ! fe Assurance v. "ueda Bermanos, <2 +h l. 644 :1516;0. (h le Dans s not ent tled to compensatory damages, he s ent tled to moral damages. No proof of pecun ary loss s re=u red n the assessment of sa d F nd of damages /' v l 'ode of +h l pp nes, Art. 221>0. %he same may be recovered n acts referred to n Art cle 2215 of the ' v l 'ode. %he assessment of moral damages s left to the d scret on of the court accord ng to the c rcumstances of each case /' v l 'ode of the +h l pp nes, Art. 221>0. 'ons der ng that DE+ had offered to pay +<0,000.00 to respondent Estate n e gratia settlement of ts cla m and that DE+)s non@d sclosure of the l m ts of ts author ty amounted to a decept on to ts cl ent, an a9ard of moral damages n the amount of +80,000.00 9ould be reasonable. %he a9ard of attorney)s fees s also -ust and e=u table under the c rcumstances /' v l 'ode of the +h l pp nes, Art cle 2206 :11;0. (BE"E7D"E, the dec s on of the 'ourt of Appeals n 'A #.".@'C No. 2>4<4 s MDD$7$ED and pet t oner DE+ s D"DE"ED? /10 to "E$ME3"&E respondent Estate of Juan E. Dans the amount of +1,42>.00 9 th legal nterest from the date of the f l ng of the compla nt unt l fully pa dI and /20 to +AH sa d Estate the amount of 7 fty %housand +esos /+80,000.000 as moral damages and the amount of %en %housand +esos /+10,000.000 as attorney)s fees. ( th costs aga nst pet t oner. &D D"DE"ED.

.ruz, Davide, 9r., !ellosillo and 1apunan, 99., concur.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7=<== 'arc- 4., 1<10

5A$(:/$! 9EA&'/N(, assi"nee of W. 9orcG, pla nt ff@appellee, vs. 'A&$/ +$)E(/, 9EN)(/ #EGA$!A, J$., and 9EN)(/ *A#!ES as administrator of t-e estate of 9enito #e"arda, deceased, and 9EN)(/ *A#!ES, defendants and appellants. /&ee 3.&. &upreme 'ourt dec s on n th s same case., p. 568, post.0 0ausserman, .ohn & 8isher (and su#sequently* 2il#ert, .ohn & 8isher, and 5scaler & Salas and %edesma, %im & :rurreta 2oyena for appellants %egarda and 4aldes. 3o appearance for the other appellants. !eaumont & 7enney and Ait'en & DeSelms for appellee. A$A&##/, J., Negot at ons hav ng been had, pr or to December 4, 1511, bet9een (. EorcF and Een to Caldes, relat ve to the purchase, at f rst, of a part of the Nagta-an 0acienda, s tuated n the d str ct of &ampaloc of th s c ty of Man la and belong ng to Een to !egarda, and later on, of the ent re hacienda, sa d Een to Caldes, on the date above@ment oned, addressed to sa d EorcF the follo9 ng letter /E1h b t E0? MAN$!A, Decem#er B, +,++. Mr. (. ED"'*, Real 5state Agent, Manila, $.:. &$"? $n compl ance 9 th your re=uest $ here9 th g ve you an opt on for three months to buy the property of Mr. Een to !egarda Fno9n as the Nagtahan 0acienda, s tuated n the d str ct of &ampaloc, Man la, and cons st ng of about, 1,55<,000 s=. meters of land, for the pr ce of ts assessed government valuat on. E. CA!DE&. &ubse=uent to the sa d date, (. EorcF addressed to Een to Caldes several letters relat ve to the purchase and sale of the hacienda, and as he d d not obta n 9hat he e1pected or bel eve he 9as ent tled to obta n from Caldes, he f led the

compla nt that or g nated these proceed ngs, 9h ch 9as amended on the 10th of the follo9 ng month, Apr l, by br ng ng h s act on not only aga nst Een to Caldes but also aga nst Een to !egarda, referred to n the letter above =uoted. $n sa d amended compla nt t s alleged that the defendant Een to !egarda 9as the o9ners n fee s mple of the Nagta-an 0acienda, and that Een to Caldes 9as h s attorney n fact and had acted as such on the occas ons reffered to n the compla nt by v rtue of a po9er of attorney duly e1ecuted under notar al seal and presented n the off ce of the reg ster of deeds, a copy of 9h ch, marFed as E1h b t A, 9as attached to the compla ntI that on or above December 4, 1511, the defendant Een to CaldeA gave to the pla nt ff the document 9r tten and s gned by h m, Caldes, =uoted at the beg nn ng of th s dec s on, to 9 t, the letter afore@ment oned, 9h ch document s nserted n the amendment to the compla ntI that on January 15, 1512, 9h le the offer or opt on ment oned n sa d document st ll stood, the pla nt ff n 9r t ng accepted the terms of sa d offer and re=uested of Caldes to be allo9ed to nspect the property, t tles and other documents perta n ng to the property, and offered to pay to the defendant, mmed ately and n cash as soon as a reasonable e1am nat on could be made of sa d property t tles and other documents, the pr ce st pulated n the contract for sa d hacienda 9h ch s also descr bed n the compla nt, as 9ell as ts value and the revenue annually obta nable therefromI that, n sp te of the fre=uent demands made by the pla nt ff, the defendants ha pers stently refused to del ver to h m the property t tles and other documents relat ve to sa d property and to e1ecute any nstrument of conveyance thereof n h s favorI that the pla nt ff, on account of sa d refusal on the part of the defendant Caldes, based on nstruct ons from the defendant !egarda, had suffered damages n the amount of +2>0,000, and, by the tard ness, fa lure and refusal of the defend to comply 9 th h s obl gat on, the pla nt ff had ncurred great e1pense and suffered great losses, 9hereby he 9as pre-ud ced n the mount of +60,000I that the pla nt ff 9as and had been, on all occas ons, 9 ll ng to comply 9 th the obl gat on mposed upon h m to pay to the defendants the full st pulated pr ce. %he pla nt ff concluded by pray ng? /10 %hat the defendant Caldes be ordered to e1ecute the necessary formal document as proof of the contract or obl gat on before referred to, and to ncorporate the same n a publ c nstrument, and that the defendant !egarda be ordered to convey n absolute sale to the pla nt ff, e ther d rectly or through the defendant Caldes, by a property deed, the sa d Nagta-an Bac enda, descr bed n the compla ntI /20 that both defendants and each of them be ordered and re=u red to render an account to the pla nt ff of such rents and prof ts as they may have collected from the sa d property from the 15th of January, 1512, unt l the date of the e1ecut on of the -udgment that may be rendered n these proceed ngs, together 9 th legal nterest on the amounts thereofI /<0 that, n case t can sho9n that spec f c performance of the contract s mposs ble, that the defendant be ordered to pay the pla nt ff damages n the sum of +2>0,000I and f nally, that the pla nt ff have recovered the nterests and the costs n these proceed ngs. (h le th s compla nt 9as not yet amended, the defendant Caldes f led a demurer, on the grounds that there 9as a m s-o nder of part es on account of the erroneous nclus on there n of the defendant Caldes, that the compla nt d d not set forth fact that const tuted a cause of act on aga nst sa d defendant, and that t 9as amb guous, un ntell g ble and vague. %h s demurrer 9as overruled on Apr l 11, 1512.

%he defendant Een to !egarda also nterposed a demurrer to the amended compla nt on the grounds that the facts there n set forth d d not const tute a r ght of act on aga nst h m. %h s demurrer 9as l Fe9 se overruled on June 2>, 1512. Dn the 22nd of the same month of June, the court, rul ng on a pet t on made n voluntary nsolvency proceed ngs brought on May 10, 1512, by the pla nt ff (. EorcF, and n v e9 of the agreement entered nto n sa d proceed ngs by all of the latter)s cred tors, ordered that the pla nt ff EorcF be subst tuted n the nstant proceed ngs by Bartford Eeaumont, as the trustee appo nted there n and representat ve of the sa d pla nt ff)s cred tors, the ass gnee of h s r ghts, n sa d proceed ngs. %he defendant Een to Caldes, ans9er ng the compla nt as amended, den ed each and all of the allegat ons thereof from paragraph 4, e1cept those 9h ch the adm tted n the spec al defense, n 9h ch he alleged? /10 %hat the opt on g ven by h m to the pla nt ff 9as an opt on 9 thout cons derat on and sub-ect to the approval of the defendant !egardaI /20 that, as the defendant !egarda has not approved sa d opt on, t had no value 9hatever, accord ng to the understand ng and agreement bet9een h mself and the pla nt ffI /<0 that the opt on offered by h m to the pla nt ff had not been accepted by the latter 9 th n a reasonable per od of t me nor dur ng the t me t 9as n force, n accordance 9 th the cond t ons agreed upon bet9een the part esI /40 that he s ghed the letter of December 4, n 9h ch he tendered to the pla nt ff the opt on 9h ch has g ven r se to th s su t, through dece t employed by the pla nt ff 9 th respect to ts contents, for the pla nt ff had stated to h m that t 9as 9r tten n accordance 9 th 9hat had been agreed upon by both part es, 9 thout 9h ch statement he 9ould not have s gned tI /80 that the pla nt ff, on the pr or to January 15, 1512, 9as nsolvent, and had ne ther proven h s solvency nor offered to pay the pr ce n cash, as he had agreed to doI and />0 that he, Caldes, 9as merely a general attorney n fact of the defendant Een to !egarda and had no nterest 9hatever n the sub-ect@ matter of the su t, nor n the l t gat on, and n all h s acts had carr ed out the nstruct ons of the sa d !egarda. Be f nally prayed that the compla nt be d sm ssed 9 th costs aga nst the pla nt ff. %he defendant Een to !egarda, ans9er ng the compla nt, den ed each and all of the allegat ons thereof, from paragraph <, e1cept such as he e1pressly adm tted and 9ere conta ned n the spec al defense nserted n sa d ans9er, n 9h ch he alleged? /10 %hat h s codefendant Een to Caldes, though h s attorney@ n@fact, had nstruct ons not to g ve any opt on on the hacienda n =uest on 9 thout !egarda)s prev ous Fno9ledge and consentI /20 that on and before December 4, 1511, the pla nt ff had Fno9ledge of the scope and l m tat ons of the po9ers conferred upon the defendant CaldesI /<0 that the latter gave the opt on, alleged by the pla nt ff, 9 thout h s /!egarda)s0 Fno9ledge or consent, thus v olat ng the nstruct ons he had g ven to the sa d CaldesI /40 that he had d sapproved and re-ected the opt on n =uest on as soon as he had learned of tI /80 that he had been nformed, and therefore alleged as true, that the opt on sa d to have been e1ecuted n behalf of the pla nt ff had been obta ned by the latter by a false and mal c ous nterrupt on of the letter of December 4, 1511, and that the pla nt ff, ava l ng h mself of such nterpretat on, nduced the defendant Caldes to s gn the sa d opt onI />0 that the opt on sa d to have been tendered to the pla nt ff had not been legally acceptedI and /20 that on the subse=uently to January 15, 1512, the date on 9h ch, accord ng to the pla nt ff, a tender of payment of the pr ce of the Nagta-an 0acienda, n accordance 9 th ts assessed value, 9as made to h s

codefendant Caldes, as 9ell as to the date of the ans9er, the pla nt ff 9as nsolvent. After the hear ng, n 9h ch the respect ve part es presented the r ev dence, the 'ourt of 7 rst $nstance of th s c ty of Man la, on 7ebruary 12, 1512, rendered -udgment n 9h ch he foundI /10 %hat the nstrument E1h b t E that s, the letter of December 4, 1511, =uoted at the beg nn ng of th s dec s on0, as supported by E1h b t A /the po9er of attorney, a copy of 9h ch accompan ed the compla nt0 and as conf rmed by E1h b t # /the letter of January 15, 1512, addressed by the pla nt ff EorcF to the defendant Caldes, presented n ev dence at the tr al and of 9h ch ment on 9 ll be made else9here here n0, const tuted a contract by 9h ch the pr nc pal defendant undertooF to convey to the pla nt ff the property there n descr bedI /20 that the pla nt ff made a suff c ent tender of performance, of h s part, of the contract, n accordance 9 th sect on <42 of the 'ode of ' v l +rocedureI /<0 that the defendants had fa led to e1ecute such conveyance n accordance 9 th sa d contract, and that the pla nt ff 9as ent tled to the spec f c performance thereof, and to the net ncome, f any, obta ned from the land s nce January 15, 1512, but that he had not sho9n suff c ent loss 9h ch ent tle h m to add t onal damage unless t subse=uently should appear that a conveyance could not be made. %he court accord ngly decreed? /10 %hat upon the payment by the pla nt ff to the pr nc pal defendant, Een to !egarda, or to the clerF of the court, of the sum of +<02,000, the sa d defendant, or h s codefendant and attorney@ n@ fact, should e1ecute and del ver to the pla nt ff good and suff c ent conveyance, free of all ncumbrance, of the property descr bed n E1h b ts E and ', attached to the pla nt ffs compla nt, so far as the same 9as ncluded 9 th n the terms of E1h b t #I /20 that upon the sa d defendants) fa lure to e1ecute such conveyance 9 th n a reasonable t me after such payment, the clear of the court should e1ecute one, and the same together 9 th the decree, should const tute a true conveyanceI /<0 that f for any suff c ent reason such conveyance could not then be made, the pla nt ff should have and recover from the defendant !egarda, as alternat ve damages, the sum of +2<,000, 9 th nterest thereon at > per cent per annum from March 1<, 1512I and /40 that the defendants should render an account ng, 9 th n th rty days, of the ncome and prof ts der ved from sa d property s nce January 15, 1512, and pay the costs of the proceed ngs. %he part es hav ng be ng not f ed of th s -udgment, the defendant Een to !egarda and Een to Caldes e1cepted thereto and at the same t me prayed that t be se as de and that they be granted a ne9 tr al on the grounds that the -udgment 9as not suff c ently supported by the ev dence and 9as contrary to la9, and that the f nd ngs of fact there n conta ned 9ere man festly and openly contrary to the 9e ght of the ev dence. %he r prayer hav ng been den ed by a rul ng to 9h ch they also e1cepted, they have brought these proceed ngs on appeal to the &upreme 'ourt by the proper b ll of e1cept ons, and have spec f ed n the r respect ve br efs several errors 9h ch they allege the lo9er court comm tted. &ome of these errors cons st n that the tr al -udge overruled the demurrer f led to the compla ntI others, n that he adm tted certa n ev dence and e1cluded others, th s be ng the alleged cause of the erroneous cons derat on of the nstrument E1h b t E and of the r ghts and obl gat ons der ved from t, both 9 th respect to the pla nt ff and the t9o defendants) and st ll others refer to the var ous statements n the -udgment result ng from those f nd ngs and on 9h ch the conclus ons arr ved at, have been founded. %he defendant Een to !egarda also alleged, among the sa d errors, as espec ally affect ng h s r ghts, that the court held that Een to Caldes 9as h s agent,

empo9ered to e1ecute contracts n h s /!egarda)s0 name n respect to real propertyI that the court adm tted n ev dence the document E1h b t A, ntroduced by the pla nt ff, to 9 t, the copy of the po9er of attorney attached to the compla nt, 9h ch never 9as offered as suchI and that he based one of h s f nd ngs thereon. %he defendant Een to Caldes spec f ed, also part cularly 9 th reference to h mself, other errors cons st ng n the court hav ng held that he voluntar ly e1ecuted the opt on n =uest on, nstead of hold ng that t 9as obta ned through fraudI and l Fe9 se n hold ng that the document E1h b t E 9as a contract of opt on and not an offer to sell, and n not hold ng that sa d opt on 9as an offer sub-ect to the approval of the defendant !egarda. $nasmuch as t does not appear from the b ll of e1cept ons that the defendants recorded the e1cept ons to the overrul ng of the demurrer respect vely f led to the compla nt by both defendants, the ass gnment of error relat ve to the sa d rul ng cannot be taFen nto cons derat on by th s &upreme 'ourt. %he pla nt ff)s act on s based on the fa lure of the defendant Caldes, as the agent or attorney n fact of the other defendant Een to !egarda, to perform the obl gat on contracted by the Een to Caldes to sell to the pla nt ff the property belong ng to the sa d !egarda, ment oned n the letter of December 4, 1511 /E1h b t E0, 9 th n the per od and for the pr ce spec f ed there nI and the ob-ect or purpose of these proceed ngs s to re=u re fulf llment of the sa d obl gat on and to secure the payment of a proper ndemn ty for damages to the pla nt ff because of ts not hav ng been duly and t mely compl ed 9 th. $nasmuch as t 9as set forth n the document E1h b t E that the property Fno9n as the Nagta-an Bac enda, /an opt on to buy 9h ch 9as g ven by the defendant Caldes to the pla nt ff EorcF0 belonged to Een to !egardaI as negot at ons had been undertaFen pr or to the e1ecut on of the sa d document, bet9een the pla nt ff EorcF and the defendant Caldes 9 th respect to the maters set forth n that document, by v rtue of 9h ch EorcF Fne9 that Caldes 9as !egarda)s agent or attorney@ n@fact, although t appears n sa d nstrument that the agent Caldes acted n h s o9n nameI and, further, as the pla nt ff n the compla nt made the necessary allegat ons to e1pla n the relat ons that e1 sted bet9een the pr nc pal !egarda and the agent CaldeA 9 th regard to the sa d document E1h b t E and the fa lure alleged by the pla nt ff, to fulf ll the st pulat ons there n conta nedI therefore, the facts alleged n the compla nt d d const tute a r ght of act on aga nst e ther or both defendants, and the lo9er court d d not err n so hold ng, for, though the person 9ho contracts 9 th an agent has no act on aga nst the pr nc pal, pursuant to art cle 1212 of the ' v l 'ode, 9hen the agent acts n h s o9n name, as n such a case the agent 9ould be d rectly l able to the person 9 th 9hom he contracted as f t 9ere a personal matter of the agent)s yet th s does not occur 9hen the acts performed by the agent nvolved the pr nc pal)s o9n th ngs, and n the document E1h b t E, 9h ch 9as nserted n the compla nt 9hen the latter 9as amended, t appears that the defendant Caldes, 9ho s gned the sa d document, stated that the property, the opt on to buy 9h ch he gave to the pla nt ff, EorcF, belonged to !egarda. And as t s un=uest onable that, pursuant to the above@c ted prov s on of la9, the act on 9as properly brought aga nst Een to !egarda as Caldes) pr nc pal, t s also un=uest onable that Caldes 9as properly ncluded n the compla nt as one of the defendant, for sa d art cle 1212, n prov d ng that n cases l Fe the one here n =uest on the person 9ho contracted 9 th the agent has an act on aga nst the pr nc pal, does not say that

such person does not have, and cannot br ng an act on aga nst the agent also, and the s lence of the statute on th s po nt should not be construed n that sense, 9hen the r ghts and obl gat ons, O the matter brought nto d scuss on by means of the act on prosecuted, O cannot be legally and -ur d cally determ ned 9 thout hear ng both the pr nc pal and the agent. &ect on 114 of the 'ode of ' v l +rocedure n force, treat ng of the part es 9ho should be ncluded n an act on as defendants, ncludes any person 9ho has or cla ms an nterest n the controversy or the sub-ect@mater thereof adverse to the pla nt ff, or 9ho s a necessary party to a complete determ nat on or settlement of the =uest ons nvolved there nI and there can be no doubt 9hatever, and the record tself sho9s, that the agent Een to Caldes 9as and n a necessary party n these proceed ngs for the complete and proper determ nat on of the matter nvolved. As one of the allegat ons of the compla nt 9as that the defendant Een to Caldes 9as the attorney n fact of Een to !egarda, the o9ner of the Nagta-an Bac enda, the opt on to buy 9h ch 9as granted by the sa d defendant Caldes to the pla nt ff EorcF, n the letter of December 4, 1511, E1h b t E, there 9as attached to the compla nt a copy of the po9er of attorney marFed E1h b t A, by v rtue of 9h ch, as there n also set forth, the defendant Een to Caldes, the attorney@ n@fact of Een to !egarda, n g v ng to the pla nt ff the opt on to buy the sa d hacienda, had acted accord ng to the aforesa d document E1h b t 7, 9h ch 9as l Fe9 se nserted n the amended compla nt as a part thereof. $nasmuch as the relat on 9h ch, accord ng to the pla nt ff, e1 sted bet9een Een to !egarda and Een to Caldes as to the obl gat on contracted by means of E1h b t E, and the fulf llment thereof 9as establ shed by means of the sa d allegat ons, supported, as t appeared, by the po9er of attorney E1h b t A, and by the letter or document E1h b t E /9h ch 9ere made by the pla nt ff a part of the compla nt0, the -o n ng of the copy of the po9er of attorney to the compla nt cannot be cons dered to have been done merely for the purpose of attest ng the personal ty of e ther of the defendants, but to sho9 the legal status of each of them n the obl gat on referred to, n v e9 of the terms of the document E1h b t E, the author ty under 9h ch the defendant Caldes acted n e1ecut ng th s document, as 9ell as the fact of h hav ng been granted such author ty by the defendant !egarda, by means of sa d po9er of attorney. &o that as sa d t9o documents, to 9 t, E1h b t A or the po9er of attorney e1ecuted by !egarda n favor of Caldes, author A ng h m to perform var ous acts, among them, that of sell ng, e1chang ng, ced ng, adm tt ng n payment or by 9ay of compensat on or n any other manner ac=u r ng or convey ng all F nds of real property for such pr ces and on such cond t ons he m ght deem proper, and the document E1h b t E, or the letter sett ng forth the opt on g ven to the pla nt ff Caldes to buy the sa d Nagta-an Bac enda belong ng to !egarda, cannot be cons dered separately, n v e9 of the allegat ons of the compla nt and the act on brought thereon aga nst the t9o defendantsI and as sa d t9o documents, each of complement of the other, const tuted the bas s of the act on brought n the compla nt, and as the r genu neness and due e1ecut on 9ere not den ed under oath by e ther of the t9o defendants, as they m ght have done, pursuant to sect on 10< of the 'ode of ' v l +rocedure, the pla nt ff 9as not obl ged to present at the tr al, as proof, the aforement oned po9er of attorney to prove ts e1 stence and the fact of Caldes be ng h s attorney n fact, vested 9 th the po9ers spec f ed n th s nstrument, not9 thstand ng the general den al made by the defendant !egarda n h s ans9er of the allegat ons conta ned n the compla nt from ts th rd paragraph on, n

9h ch paragraph that averment s made, supported by the copy of the sa d po9er of attorney attached to the compla nt. Dn the contrary, as the sa d document E1h b t A const tutes prima facie proof of the fact that Een to Caldes s the attorney@ n@fact of Een to !egarda, and that he s vested 9 th the po9ers spec f ed there n, on account of !egarda)s not hav ng den ed under oath the genu ness and due e1ecut on of the sa d document, t 9as therefore ncumbent upon !egarda h mself to prove that he had not e1ecuted the sa d po9er of attorney n Caldes) favor and that he had not conferred upon h m, by v rtue thereof, the po9ers there n ment oned. /Merchant vs. $nternat onal EanF ng 'orporat on, > +h l., <14I +apa vs. Mart neA, 12 +h l., >1<I 'h nese 'hamber of 'ommerce vs. +ua %e 'h ng, 14 +h l., 222I Eanco Espanol@ 7 l p no vs. Mc*ay N Loeller, 22 +h l., 16<I *n ght vs. (h tmore, 128 'al., 156I Mc'orm cF Barvest ng Mach ne 'o., vs. Doucette, >1 M nn., 40.0 %he lo9er court, therefore, d d not err n hold ng that Een to Caldes 9as the agent of Een to !egarda, vested 9 th po9ers to e1ecute contracts for the sale of real estate n the latter)s nameI nor n cons der ng as proof the po9er of attorney, the pla nt ff)s E1h b t A, and maF ng t the bas s of one of the conclus ons of the -udgment, not9 thstand that t 9as not offered as such proof by the pla nt ff. 'onse=uently, the court l Fe9 se d d not err n adm tt ng the ev dence ntroduced by the pla nt ff h mself to sho9 the e1 stence of the contractual obl gat on on the part of the defendant !egarda, as pr nc pal of the other defendant, Caldes, and 9h ch 9as contended by the pla nt ff to be one of the grounds of the act on brought n th s compla nt aga nst the t9o defendants. $t s un=uest onable that, by means of the document E1h b t E, to 9 t, the letter of December 4, 1511, =uoted at the beg nn ng of th s dec s on, the defendant Caldes granted to the pla nt ff EorcF the r ght to purchase the Nagta-an0acienda belong ng to Een to !egarda, dur ng the per od of three months and for ts assessed valuat on, a grant 9h ch necessar ly mpl ed the offer or obl gat on on the part of the defendant Caldes to sell to EorcF the sa dhacienda dur ng the per od and for the pr ce ment oned, and as the grant made by Caldes to EorcF n the sa d letter 9as made as a result of the re=uests of EorcF h mself, as stated n the letter, and of the negot at ons prev ously entered nto bet9een the latter and Caldes 9 th respect to the purchase of the hacienda, as sho9n n the letter of the 2d of the same month of December, that s, the letter 9h ch t9o days before 9as addressed by EorcF to Caldes, E1h b t ', the terms of the sa d document E1h b t E appear to be of the nature of an opt on contract bet9een Caldes and EorcF, nasmuch as, by means of sa d document, the former f nally accepted the propos t ons of the latter 9 th respect to the grant ng of that r ght to EorcF. %here 9as, therefore a meet ng of m nds on the part of the one and the other, 9 th regard to the st pulat ons made n the sa d document. Eut t s not sho9n that there 9as any cause or cons derat on for that agreement, and th s om ss on s a bar 9h ch precludes our hold ng that the st pulat ons conta ned n E1h b t E s a contract of opt on, for, pursuant to art cle 121 of the ' v l 'ode, there can be no contract 9 thout the re=u s te, among others, of the cause for the obl gat on to be establ shed. $n h s !a9 D ct onary, ed t on of 1652, Eouv er def nes an opt on as a contract, n the follo9 ng language? A contract by v rtue of 9h ch A, n cons derat on of the payment of a certa n sum to E, ac=u res the pr v lege of buy ng from, or sell ng to, E

certa n secur t es or propert es 9 th n a l m ted t me at a spec f ed pr ce. /&toryvs. &alamon, 21 N.H., 420.0 7rom vol. >, page 8001, of the 9orF ,(ords and +hrases,, c t ng the case of $de vs. !e ser /24 +ac., >58I 10 Mont., 8I 24 Am. &t. "ep., 120 the follo9 ng =uotat on has been taFen? An agreement n 9r t ng to g ve a person the `opt on) to purchase lands 9 th n a g ven t me at a named pr ce s ne ther a sale nor an agreement to sell. $t s s mply a contract by 9h ch the o9ner of property agrees 9 th another person that he shall have the r ght to buy h s property at a f 1ed pr ce 9 th n a certa n t me. Be does not sell h s landI he does not then agree to sell tI but he does sell someth ngI that s, the r ght or pr v lege to buy at the elect on or opt on of the other party. %he second party gets n praesenti, not lands, nor an agreement that he shall have lands, but he does get someth ng of valueI that s, the r ght to call for the rece ve lands f he elects. %he o9ner parts 9 th h s r ght to sell h s lands, e1cept to the second party, for a l m ted per od. %he second party rece ves th s r ght, or, rather, from h s po nt of v e9, he rece ves the r ght to elect to buy. Eut the t9o def n t ons above c ted refer to the contract of opt on, or, 9hat amounts to the same th ng, to the case 9here there 9as cause or cons derat on for the obl gat on, the sub-ect of the agreement made by the part esI 9h le n the case at bar there 9as no such cause or cons derat on. %he lo9er court n the -udgment appealed from sa d? %here s some d scuss on n the br efs as to 9hether th s nstrument const tutes a mere offer to sell or an actual contract of opt on. $n terms t purports to be the latter and n fact rec tes the acceptance of a ,re=uest, or offer, by the pla nt ff. Eut v e9 ng the nstrument as n tself no more than an offer, t 9as at least a cont nu ng one, ,for three months,, and as t s not cla med to have been 9 thdra9n dur ng that per od, nor after9ard, the pla nt ff could at any t me enter nto an actual contract, f t 9ere not such already, by mere acceptance. &o the, the lo9er court d d not ns st that, by the sa d document E1h b t E, a real contract of opt on 9as e1ecuted. Be stated that t 9as at least a cont nu ng offer for three months O an offer 9h ch t 9as ne ther alleged nor proven to have been 9 thdra9n dur ng that per od O and held that but the pla nt ff)s mere acceptance at any t me dur ng the course of sa d per od, the terms of the sa d document became a contract, f such t 9ere not already. %here s therefor no foundat on for the th rd ass gnment of error made by the defendant Caldes, to 9 t, that the lo9er court erred n hold ng that the document E1h b t E 9as a contract of opt on and not an offer to sell. A certa nly th s document E1h b t E conta ns an offer or prom se on the part of the defendant Caldes, 9ho s gned t, to sell the hacienda n =uest on to the pla nt ff EorcF, at ts assessed valuat on, to 9hom 9as granted three months 9 th n 9h ch to maFe use of h s r ght to purchase the property. $n order that such an offer, or proposal, or prom se on the part of Caldes, to sell the sa d hacienda m ght be converted nto a b nd ng contract for h m and for EorcF,

t 9as necessary that the latter should have accepted the offer, by maF ng use of the r ght thereby granted h m, 9 th n the per od st pulated, and pay ng the pr ce agreed upon n that document. "eferr ng part cularly to the sale of real estate, there s n fact pract cally no d fference bet9een a contract of opt on to purchase land and an offer or prom se to sell t. $n both cases the purchaser has the r ght to dec de 9hether he 9 ll buy the land, and that r ght becomes a contract 9hen t s e1erc sed, or, 9hat amounts to the same th ng, 9hen use s made of the opt on, or 9hen the offer or prom se to sell the property s accepted n conform ty 9 th the terms and cond t ons spec f ed n such opt on, offer, or prom se. An opt on for the purchase of a real estate s merely a r ght of elect on to purchase 9h ch 9hen e1erc sed, by comes a contract. /Bop9ood vs. Mc'ausland, 120 $o9a, 216.0 &o that n the case at bar t s mmater al 9hether the contents of the document be cons dered as an opt on granted by the defendant Caldes to the pla nt ff to purchase the Nagta-an Bac enda, or as an offer or prom se on the part of the former to sell the estate to the latter 9 th n the per od and for the pr ce spec f ed n E1h b t E. $n the defendants) ans9er no concrete allegat on 9as made that e ther of them had 9 thdra9n sa d offer to sell, but the defendant Caldes ntroduced ev dence to prove that the 9 thdra9al of the offer 9as made before the pla nt ff had accepted t, that s, before January 12, 1512, and for th s purpose presented a letter from the defendant !egarda /p. 10<, part 1 of the record0, dated November 1<, 1511, and addressed from +ar s to Mauro +r eto, also one of !egarda)s attorneys n fact. $n th s letter !egarda stated to +r eto, among other th ngs, that, 9 th reference to the steps taFen by EorcF for the purchase of the Nagta-an Bac enda, the addressee m ght say to EorcF that the 9r ter 9as not very an1 ous to sell the property e1cept for a pr ce greater than +400,000 n cash. %he defendant Caldes test f ed that the contents of th s letter 9ere commun cated by h m to EorcF, though he d d not state pos t vely on 9hat date. Caldes also presented the 9 tnesses Ale-andro "oces and Jose E. Alemany. %he f rst test f ed that somet me dur ng the second half of January, on an occas on 9hen he 9as n Dr. Caldes) off ce, he heard the latter and EorcF speaF ng, and that EorcF sa d someth ng to Dr. Caldes about +<00,000, and that t 9ould be d ff cult to f nd a purchaser for cashI and that he also heard them talF about +400,000. %he second 9 tness, Dr. Jose E. Alemany, also test f ed that about the 12th or 18th of January, at a t me 9hen he 9as n Dr. Caldes) off ce, he heard a conversat on bet9een Caldes and EorcF n 9h ch the former sa d to the latter that 9hat EorcF 9anted 9as mposs ble, and that the latter repl ed to Caldes that t 9as very dear, that he d d not 9ant t, that he d d not have the money. Dn th s occas on, th s 9 tness also heard them talF ng about +400,000. As the record does not sho9 pos t vely that the defendant Caldes, on the occas on above referred to, told the pla nt ff EorcF that he /Caldes0 9 thdre9 the offer of sale conta ned n the document E1h b t E, for here merely commun cated to EorcF the contents of the sa d letter from !egarda to +r eto, as the date 9hen he d d th s does not appearI and as the statements made by the 9 tnesses 9 th regard to the conversat on they heard bet9een Caldes and EorcF are vague and as t cannot be deduced therefrom that such statements referred e1pressly to the fact that Caldes 9 thdre9 the offer on that occas on, t must be concluded

that there s no proof on th s po nt. Eut, though t had been proven that the 9 thdra9al of the offer 9as made n the month of December, 1511, or before January 12, 1512, as stated by Caldes) counsel n h s br ef, such a fact could not be a bar to, or annul the acceptance by the pla nt ff EorcF, of sa d offer on any date pr or to the e1p rat on of the three months f 1ed n the document E1h b t E, to 9 t, March 4, 1512, because the offer or prom se to sell there n conta ned 9as not made 9 thout per od or l m tat on 9hatever / n 9h ch case Caldes m ght have 9 thdra9n t and the latter have accepted t at nay t me unt l t 9as 9 thdra9n0 but for three months, that s, for a spec f c per od of t meI and, as the pla nt ff EorcF had a r ght to accept the offer dur ng that per od, t 9as Caldes) correspond ng duty not to 9 thdra9 the offer dur ng the same per od. %herefore the 9 thdra9al of the offer cla med to have been made by th s defendant 9as null and vo d. 'onse=uently, the lo9er court d d not err n hold ng that the offer and not been 9 thdra9n dur ng the three months ment oned and that t could be converted nto a real contract by the pla nt ff EorcF)s mere acceptance 9 th n the same per od. Dne of the allegat ons made by the pla nt ff n the compla nt, as 9e have seen, s that on January 15, 1512, 9h le the sa d offer 9as st ll open, the pla nt ff accepted t n 9r t ng, n conform ty 9 th ts terms, and re=uested perm ss on of the defendant Caldes to nspect the property t tles and other documents perta n ng to the estate, and offered to pay the defendant Caldes as soon as a reasonable e1am nat on could be made of the sa d property t tles and other documents, mmed ately and n cash the pr ce st pulated and agreed upon n the contract for the sa d st pulated and agreed upon n the contract for the sa d hacienda. %o prove th s allegat on, the pla nt ff presented the document E1h b t #, 9h ch reads as follo9s? MAN$!A, 9anuary +,, +,+). D". EEN$%D CA!DE&, +,A San Se#astian, .ity. &$"? $ hereby adv se you that $ am ready to purchase the 0acienda Nagtahan, s tuated n the d str ct of &ampaloc and Nagtahan, Man la, and n the +rov nce of " Aal, cons st ng of about 1,55<,000, s=uare meters of land, property of Mr. Een to !egarda, for the sum of three hundred and seven thousand /<02,0000 pesos +h. c. the pr ce =uoted n the opt on g ven my by you. 7ull payment 9 ll be made on or before the th rd day of March 1512, prov ded all documents n connect on 9 th the Bac enda Nagtahan, as %orrens t tle deed, contracts of leases and other matters be mmed ately placed at my d sposal for nspect on and f such papers have been found n good order. Cery truly yours, (. ED"'*.

$n the preced ng letter that pla nt ff n fact d d state that he accepted the offer made to h m or the opt on g ven to h m by the defendant Caldes n the document or letter of December 4, 1511, E1h b t E, for, even though t 9as not stated there n 9hat opt on t 9as that 9as ment oned n the sa d letter t s un=uest onable that t could refer to no other than to the opt on or offer ment oned n the sa d E1h b t E, as no other 9as then pend ng bet9een the pla nt ff and th s defendant. Eut as de from the fact that the complete payment of the +<02,000 ment oned n the sa d letter 9as made to depend on the cond t on that all the documents relat ve to the Nagtahan Bac enda, such as the %orrens t tle, etc., be mmed ately placed at the pla nt ff)s d sposal for h s nspect on, and be found sat sfactory, the sa d tender of payment 9as offered to be made on or before March <, 1512. A s mple statement of the last part of the letter s enough to conv nce that the pla nt ff d d not offer to pay, mmed ately and n cash to the defendant Caldes as he alleged n h s compla nt, the pr ce st pulated and agreed upon bet9een themselves n the sa d document E1h b t E. Df court, t s unden able that the pla nt ff EorcF had a r ght to e1am ne the t tle deed and all the documents relat ve to the Nagta-an 0acienda, before the sale of the property should be consummated by means of the e1ecut on of the proper deed of conveyance n h s favor by the defendant Caldes as the attorney@ n@fact of the other defendant !egarda, and, conse=uently, the pla nt ff EorcF 9as also ent tled to refra n from maF ng payment as long as he should not f nd the documents relat ve to the sa d property complete and sat sfactory, an nd spensable cond t on n order that the sa d deed of conveyance m ght be e1ecuted n h s favor. Eut at the very moment th s nstrument 9as e1ecuted and s gned by the vendor, the payment of the st pulated pr ce should have been made n order that t m ght be an mmed ate cash payment. +ursuant to the language of that part of the document or letter E1h b t # to 9h ch 9e no9 refer n respect to the payment, t cannot be understood that the pla nt ff tendered payment to the defendant mmed ately and n cash, for the s mple reason that f the documents had been placed by the defendant at the pla nt ff)s d sposal for h s nspect on, for e1ample, on January 20th, the day follo9 ng the date of the letter E1h b t #, and the pla nt ff had e1am ned and found them sat sfactory, and the defendant Caldes had e1ecuted n the pla nt ff)s favor the proper deed of conveyance or sale of the hacienda on the 28th of the same month of January, accord ng to the e1act terms of the letter of acceptance of the offer, E1h b t #, dated January 15, 1512, the pla nt ff, that s, the purchaser EorcF, could have made full payment to the defendant Caldes, of the +<02,000, the pr ce of the property, on the <d of March, 1512, or on any date on 9h ch the deed of conveyance 9as ssued, from the 28th of January up to the sa d <d day of March, for noth ng else can be understood by, and no other mean ng and scope can attach to, the 9ords ,full payment 9 ll be made on or before the th rd day of March 1512., $n short, by the 9ay the part of sa d document E1h b t # relat ve to the offer of payment n the e1ample above g ven s dra9n, the purchaser EorcF m ght pay the st pulated pr ce of the property, or have the per od from the 28th of January to the <d of March 9 th n 9h ch to pay t, and mean9h le the o9nersh p of the estate 9ould already have been conveyed, by means of the proper deed, to the purchaser EorcF, and he could not have been obl ged to pay the sa d pr ce unt l the very day of March <, 1512, by reason of the contents of the sa d letter, E1h b t #.

$n connect on 9 th the allegat on 9e have -ust been d scuss ng, to 9 t, that the pla nt ff EorcF made a tender of payment to the defendant Caldes , mmed ately and n cash, of the pr ce of the hacienda f 1ed n the nstrument E1h b t #, the pla nt ff also presented as proof, n relat on to the allegat on as to the presentat on of the letter of January 15, 1512, E1h b t #, another letter 9r tten by h mself, and also addressed to the defendant Caldes, under date of the 2<rd of the same month of January %h s document s marFed E1h b t J and s of the follo9 ng tenor? January 2<, 1512. D". EEN$%D CA!DE&, +,A .alle San Se#astian, .ity. &$". $ have the pleasure to nform you that $ can mprove the cond t ons of payment for the Bac enda Nagtahan n so far as to agree to pay the 9hole amount of purchase pr ce, three hundred and seven thousand /<02,0000 pesos, +h., c., ten days after the %orrens t tle deeds and all papers n connect on 9 th the hacienda have been placed at my d sposal for nspect on and these documents and papers have been found n good order. "espectfully yours, As may be seen by the language n 9h ch the preced ng letter s couched, the pla nt ff v rtually recogn Aed, -ust as he had done n the letter of January 15th, that s, the one 9r tten four days before, E1h b t #, that the tender of payment to the defendant Caldes, of the pr ce of the hacienda, could not be understood to have been a tender of , mmed ate and cash, payment, as alleged n the compla nt, but that payment m ght be made on any date pr or to March <, or on th s same date, even though he may have found sat sfactory all the documents that the defendant m ght have placed at h s d sposal to be e1am ned, and conse=uently, although the proper deed of conveyance of the property should have been e1ecuted n h s favor. Noth ng else s meant by the statement made by the pla nt ff EorcF to the defendant Caldes n the letter of January 2<, E1h b t J, that he had the pleasure to nform h m that he could mprove the cond t ons of payment for the Bac enda Nagta-an n so far as to agree to pay the 9hole amount of purchase pr ce, +<02,000, ten days after the %orrens t tle deeds and all papers n connect on 9 th the haciendashould have been placed at h s d sposal for nspect on and should have been found sat sfactory, for the payment 9h ch EorcF offered to maFe to Caldes, of the pr ce of the property, n sa d letter E1h b t J, 9as not ndeed to be effected on the th rd of March or pr or thereto, but 9 th n the l m ted per od of ten days after the documents@relat ve to the property should have been del vered to the pla nt ff for h s nspect on and been found sat sfactory. And 9ere they any doubt that the mean ng or the senseI of sa d offer 9as not as -ust above stated, t 9ould be removed by a mere perusal of the statement made there n by the pla nt ff tell ng the defendant Caldes that he, the former, had the pleasure to nform he latter that he, EorcF, could mprove the cond t ons of payment for the hacienda, to 9 t, those ment oned n the letter 9r tten) four days before, that s, on January 15th, E1h b t #, n the manner aforement oned by pay ng the 9hole amount of the purchase pr ce ten days after

the documents should have been del vered to the pla nt ff and he should have found them sat sfactory. Eut, the letter of January 2<, E1h b t J, s dra9n up[ n such a 9ay that t also does not conta n any tender of , mmed ate and cash, payment by the pla nt ff EorcF to the defendant Caldes. $ndeed, as sa d letter maFes the total payment of the pr ce of the property depend on the del very by the defendant Caldes to the pla nt ff EorcF of all the documents relat ve to the hacienda, and of the further cond t on that, the latter should f nd such documents n good order and sat sfactory, and as a per od of ten days 9as f 1ed for the sa d payment, count ng from the date of the del very of the documents, and on the cond t on that EorcF should f nd them sat sfactory, the date of payment cannot be@understood to have been f 1ed for any certa n day after those ten days, or for the eleventh day, for the s mple reason that, for e1ample, f the documents 9ere del vered to EorcF on 7ebruary 1 for h s nspect on, and after the lapse of ten days thereafter he had not f n shed e1am n ng them and had Fept them n h s possess on for th s purpose for ten days longer, that s, unt l 7ebruary 20, and then had found them sat sfactory, the result 9ould be that the payment 9ould have had to be made, not ten days, but t9enty days, after the del very of the sa d documents, and th s 9ould have been author Aed by the amb guous terms n 9h ch the tender of payment are couched. Eut suppos ng that as appears to be the case, t had been the purpose of the pla nt ff EorcF, n f 1 ng those ten days n the letter E1h b t J, for the payment, that there should be an nterval of sa d ten days bet9een the del very and nspect on of the sa d t tles and the determ nat on of 9hether they 9ere sat sfactory or not, t m ght also have happened that on the th rd day after the del very of the t tles, these m ght have been found by the purchaser to be sat sfactory, and that the vendor m ght mmed ately have e1ecuted the proper deed of conveyance of the property n the purchaser)s favor. $n that event, accord ng to the terms of sa d letter E1h b t J, the purchaser EorcF 9ould not be obl ged to maFe payment to the vendor Caldes unt l seven days after the e1ecut on of the deed of conveyance and the transfer of the property to the former that s, not unt l the e1p rat on of the per od of ten days count ng from the date of the del very of the documents toathe purchaserI and t s ev dent that such a payment 9ould not be n cash, pursuant to the prov s ons of art cle 14>2, n connect on 9 th art cle 1800, of the ' v l 'ode. 7urthermore? %he pla nt ff EorcF also presented another letter n connect on 9 th h s aforement oned allegat on made n the compla nt, and related to the other t9o prev ous letters, E1h b t # and J, to prove 9hat he had ntended to accompl sh by means of the latter, to 9 t, that the tender of payment made by h m to the defendant 9as made n accordance 9 th the sa d allegat on, , mmed ately and n cash., %h s letter /E1h b t *0 bears the date of 7ebruary 26,t1512, and reads as follo9s? MAN$!A, +.$., 8e#ruary )D, +,+). D". EEN$%D CA!DE&, Attorney<in<fact for !enito %egarda Manila.

DEA" &$"? %o prevent any m sunderstand ng, $ 9 sh to adv se you that the purchase pr ce of the Bac enda Nagtahan s ready to be pa d over to you, and $ re=uest you to not fy me 9henever t s conven ent for you to place at my d sposal for nspect on the t tle deed and papers n connect on 9 th sa d estate. Cery respectfully, (. ED"'*. As may also be seen by the very terms employed by the@pla nt ff n th s letter, he v rtually adm ts, clearly acFno9ledges, that n the t9o prev ous letters, E1h b ts # and J, he had made the tender of payment of the pr ce for the Nagta-an Bac enda n such a manner that t could not be understood to have been n accordance 9 th the agreement entered nto bet9een h mself and Caldes, that s, that the payment should be n cash. %he letter E1h b t * n fact beg ns 9 th these 9ords? ,%o prevent any m sunderstand ng., and then says? $ 9 sh to adv se you that the purchase pr ce for the Bac enda Nagtahan s ready to be pa d over to you, and re=uest you to not fy me 9henever t s conven ent for you to place at my d sposal for nspect on the t tle deed and papers n connect on 9 th sa d estate. %he f rst 9ords of the letter of course nd cate that the pla nt ff EorcF h mself, n 9r t ng them, feared, at least the 9as not sure, that, n accept ng, n the letter of January 15th, E1h b t #, the offer of the sale of the hacienda to h m by Caldes, and n maF ng there n the tender of payment band n rene9 ng th s tender n the letter, E1h b t J, of the 2< of the same month, he, the pla nt ff, had not conformed to the terms of the offer of sale or of the opt on to buy, g ven to h m by Caldes by means of the document E1h b t E, for n the sa d last letter, E1h b t *, he taFes t for granted that there 9as or m ght be some m sunderstand ng bet9een h mself and the defendant Caldes 9 th0respect to the tender made by h m of the pr ce of the estate. Accord ng to the adm ss on of the pla nt ff EorcF n h s compla nt, th s pr ce 9as to be pa d ,at one and n cash., $n the sa d letter E1h b t *, to avo d that m sunderstand ng, the pla nt ff EorcF stated to the defendant Caldes that the purchase pr ce for the hacienda 9as ready to be pa d over to h , and re=uested to be not f ed by Caldes 9hen t 9ould be conven ent for h m to place at the pla nt ff)s d sposal for nspect on the t tle deed and papers n connect on 9 th sa d estate. %he not f cat on conta ned n th s letter 9r tten by EorcF to Caldes, that the purchase pr ce of the estate 9as ready to be pa d over to the latter, and the ment on made n th s same letter, mmed ately after the not f cat on, of the nspect on 9h ch the pla nt ff 9 shed to maFe of the t tles 9h ch he des red should be del vered to h m for th s purpose, sho9 that th s last letter, E1h b t *, relates to the one that preceded t, dated January 2<, E1h b t J, or, 9hat amounts to the same th ng, s a result of t, for t s v rtually sa d there n that the pr ce of +<02,000 /9h ch accord ng to h s prev ous letter, he had agreed to pay for the hacienda, ten days after the del very to h m of the documents relat ve to the estate and the r hav ng been found by h m to be sat sfactory0 9as already held n read ness by the pla nt ff for del very to the defendant, but th s del very of the

pr ce 9as subord nated to the del very re=uested by the pla nt ff to those t tles and other documents,aand to the pla nt ff)s f nd ng such documents sat sfactory, and the del very of the pr ce 9as also subord nate to the per od of the ten days, ment oned n the sa d letter E1h b t J. %he letter E1h b t * can have no mean ngb9hatever n that part thereof 9here reference s made tocthe offer of payment of the pr ce of the hacienda, or to the payment tself, e1cept n connect on 9 th the prev ous E1h b t J, nasmuch as the letter E1h b t * does not state 9hen EorcF 9as to del ver to Caldes the pr ce 9h ch, accord ng to th s same letter, the pla nt ff already had n read ness for that purpose. &o that ne ther n the letter E1h b t * s any spec f c offer of payment made by the pla nt ff EorcF to the defendant Caldes, of the pr ce st pulated n the document E1h b t E to be pa d ,at open and n cash,, not9 thstand ng ts be ng sa d there n that the pla nt ff had the money ready to be turned over to the defendant. 3pon the pla nt ff EorcF)s test fy ng at the tr al as 9 tness, sa d documents E1h b ts E, #., J, and *, and also others marFed from A to M, nclud ng the four -ust referred to, 9ere presented n ev dence. Among these documents s found E1h b t 7, 9h ch reads as follo9s? MAN$!A, January 12, 1512. D". EEN$%D CA!DE&, +,B San Se#astian, .ity. &$"? $n reference to our negot at ons regard ng the Bac enda Nagtahan at Man la, property of Mr. Een to !egarda, cons st ng of about 1,55<,000 s=. meters of land, $ offer to purchase sa d property for the sum of three hundred and seven thousand /<02,0000 pesos +. c., cash, net to you, payable the f rst day of May 1512 or before and 9 th del very of a %orrens t tle free of all encumbrances as ta1es and other debts. "espectfully, HD3"&, Dn sa d documents be ng presented n ev dence at the tr al, the defendants ob-ected to the r adm ss onI the court reserved h s dec s on thereon and n the -udgment appealed from made no ment on as to the contents of sa d documentaE1h b t 7, and n rul ng on the defendants) mot on for a ne9 tr al, n 9h ch mot on they s gned as one of the error of the sa d -udgment the fact that no not ce 9hatever had been taFen there n of the sa d E1h b t 7, 9h ch defendants cla med to be one of the the r most mportant proofs, the court stated as a reason for the om ss on that th s E1h b t 7 9as uns gned, un dent f ed and 9as not attested by anyone, bes des the fact that no conclus on, e ther n favoraof or aga nst the pla nt ff, could be based on ts because, although the sa d letter, that s, E1h b t 7, m ght have been actually del vered, no r ght 9hatever could be pred cated thereon, nor any l ab l ty, and t 9as, therefore, nadm ss ble. %he record sho9s that 9hen E1h b t 7 and E1h b ts #, J, *, !, and M, 9ere sho9n to the defendant Caldes by the pla nt ff)s counsel Eeaumont, for the r dent f cat on and n order that Caldes m ght state to the court 9hether he had

rece ved the or g nals and, f so, 9here they 9ere, defendant merely sa d n reply that he had rece ved three or g nals from EorcF and t9o or g nals from Eeaumont /p. 14 of the transcr pt on of the stenograph c notes0, and e1h b ted the or g nals of E1h b ts ', M. !., *, and #, but not that ofaE1h b t 7. %he pla nt ff EorcF hav ng been presented as a 9 tness, after he had been asFed the f rst four =uest ons by Attorney Bartford Eeaumont, the latter made the follo9 ng statement? ,$ 9ould l Fe to nterrupt the 9 tness at th s moment n order to present all the E1h b ts A to M, 9h ch 9ere dent f ed by the prev ous 9 tness., 'ounsel for the defendant !egarda ob-ected to the adm ss on of the sa d documents on the ground that they 9ere ncompetent, mmater al and rrelevant. %he same ob-ect on 9as also made by counsel for the defendant Caldes n behalf of h s cl ent, and the court sa d that he 9ould reserve h s dec s on /pp. 24 and 28 of the record0. Dur ng the e1am nat on of pla nt ff EorcF, n 9h ch Attorney Eeaumont pl ed h m 9 th =uest ons n regard to the aforement oned documents, beg nn ng 9 th E1h b t A and sho9ed h m the documents themselves, on com ng to E1h b t 7, after hav ng g ven attent on to other e1h b ts among 9h ch 9as E1h b t D, 9h ch 9e shall ment on later on, the pla nt ff ans9ered the =uest ons put to h m 9 th respect to E1h b t 7 n the follo9 ng manner as found n the transcr pt on of the stenograph c notes n Engl sh/p. >1 on the record0? U. No9 $ 9 ll sho9 you E1h b t 7, and call you attent on to the fact that t has the same date, January 12, as E1h b t D, and asF you to state the c rcumstances under 9h ch E1h b t D 9as s gned O A. U. %h s s may acceptance of the opt on of Dr. Caldes. Bo9 does t happen that t has the same date as E1h b t DP O

A. Eecause $ don)t bel eve n hang ng bacF 9 th my bus ness. $ conclude t as soon as poss ble. As soon as $ got the offer, $ made my acceptance to Dr. Caldes. %he document E1h b t 7, as has been seen, s uns gned but the document E1h b t J, to 9 t, the aforement oned letter of January 2<, 1512, s n the same cond t on. $t s true that although the document E1h b t J s uns gned because t s a copy of the letter addressed on that same date to Caldes by EorcF, Caldes Fept the or g nal n h s possess on and he d d not present the or g nal of E1h b t 7 but only the other letters before ment oned, although he stated 9 th reference to the letter he had rece ved from EorcF, that as he 9as not a bus ness man and 9as not ac=ua nted 9 th that F nd of bus ness, he somet mes read the letters and, after taF ng notes of the r contents, transm tted the r substance to Mr. !egarda, and at other t mes sent to h m the letters themselves, from 9h ch test mony of Caldes t s concluded that he 9as not n the hab t of Feep ng the or g nals he rece ved from EorcF. Bo9ever, as has already been seen, not9 thstand ng that E1h b t 7 9as not dent f ed by Caldes, the pla nt ff EorcF, Bo9ever, as has already been seen, not9 thstand ng that E1h b t 7 9as not dent f ed by Caldes, the pla nt ff EorcF, referr ng to the sa d document on ts be ng sho9n to h m by h s attorney, 9ho called h s attent on to the fact that t has the same date, January 12, as E1h b t D, and asFed h m to state the c rcumstances under 9h ch E1h b t D 9as s gned, sa d that E1h b t 7 9as h s acceptance of Dr. Caldes) opt onI and n ans9er ng the ne1t =uest on, e1pla ned the reason 9hy E1h b t 7 bore the same date as E1h b t D, say ng that ,he d d not bel eve n hang ngdbacF

9 th h s bus nessI, that he ,concluded t as soon as poss bleI, and that ,as soon as he got the offer, he made h s acceptance to Dr. Caldes., E1h b t D s as follo9s? MAN$!A, 9anuary +[, +,+). (. ED"'*, Es=., Manila. DEA" &$"? "eferr ng to our recent conversat on regard ng[the proposed purchase by cl ents of ours of the property Fno9n as the Bac enda Nagta-an, $ beg to adv se you that our cl ents, after nvest gat on of the phys cal cond t ons of the property, are prepared to maFe an offer for the purchase of the same at the pr ce named by you, to 9 t, +<60,000, cash, prov ded that there s good t tled to the property, that t conta ns substant ally and area represented, namely, 1,55<,000 s=uare meters, and that the e1 st ng leases upon certa n port ons of the sa d property are found to be n proper form. $t s the des re of our cl ents to have an opportun ty to nvest gate the legal ty of[the t tle and leases at the earl est pract cable moment, and they have author Aed us to say that f the cond t ons are sat sfactory 9 th regard to these matters, they are prepared to maFe you a f rm offer of the amount above named, and to maFe a depos t of a reasonable amount as an ev dence of good fa th. Cery truly yours, E"3'E !A("EN'E, "D&&, AND E!D'*, ,JAME& "D&&., 'onnect ng the contents of th s document E1h b t D 9 th those of the prev ous E1h b t 7, and taF ng nto account the test mony g ven by EorcF, as above =uoted, n ans9er ng the =uest ons put to h m by h s o9n attorney, relat ve to the sa d e1h b ts, t s clearly understood that on EorcF)s rece v ng the letter of January 12m 1512, from the la9 f rm of Eruce, !a9rence, "oss and ElocF, and s gned by James "oss, E1h b t D, n 9h ch these gentlemen stated that they 9ere prepared to maFe an offer for the purchase of the Bac enda Nagta-an at the pr ce of +<60,000 cash, he 9rote on the same date, January 12, to Dr. Caldes the letter, a copy of 9h ch s E1h b t 7, n 9h ch, referr ng to the negot at ons bet9een them regard ng the sa d Nagta-an Bac enda, he offered to purchase th s property for +<02,000, cash and net, payable on or before the f rst day of May, 1512, del very to be made to h m to a %orrens t tle free of all encumbrance, such as ta1es and other debts. 7or th s reason the pla nt ff EorcF stated n h s test mony that the sa d letter E1h b t 7 9as h s acceptance of Dr. Caldes opt on, for, not bel ev ng n hang ng bacF 9 th h s bus ness and des r ng to conclude t as soon as poss ble, as soon as he rece ved the off cer, conta ned n the letter E1h b t D, from the sa d la9 f rm, he transm tted or made Fno9n h s acceptance to Dr. Caldes. (e do not th nF there could be a better dent f cat on of the letter E1h b t 7 than that made by t so9n 9r ter, the pla nt ff EorcF, for he adm tted n h s test mony

that he 9rote th s letter, and although the defendant Caldes d d not present the or g nal of the sa d letter E1h b t 7, perhaps because t 9as one of those 9h ch he d d not Feep n h s possess on, there can be no doubt 9hatever that the or g nal of the sa d E1h b t 7 9as transm tted to Caldes by the pla nt ff EorcF, of the latter e1pl c tly sa d so n stat ng that letter 9as h s acceptance of Dr. Caldes) opt on, the pla nt ff e1pla n ng 9hy he had 9r tten sa d letter, on referr ng to the relat on bet9een sa d E1h b t 7 and the E1h b t ', on account of the same date both letters bore, on maF ng further e1planat ons n the matter, hand say ng? ,As soon as $ got the offer, $ made my acceptance to Dr. Caldes., 7urthermore, f there 9ere st ll any doubt 9hatever about th s, t 9ould d sappear after a cons derat on of the follo9 ng =uotat on taFen from the pla nt ff)s 9r tten br ef f le before the lo9er court rendered -udgment, n 9h ch ment on s made of the sa d br ef and of the =uest ons d scussed there n sa d br ef s found on pages 150 to 20> of the record and s s gned, by the pla nt ff)s attorneys, A tFen and Eeaumont. Dn page 158 thereof, appears the follo9 ng? <. %BE A''E+%AN'E. Dn the 12th of January, 1512, Mr. EorcF rece ved a 9r tten offer /E1h b t D0 for the property from Mr. James "oss of th s c ty for the pr ce of +<60,000 and thereupon on the same day 9rote Dr. Caldes the letter 9h ch appears as E1h b t % /pp. 8>, 1>5 of the record0. No =uest on ar ses as to the val d ty of th s acceptance for reasons 9h ch 9 ll presently appear. . . . As may be seen, n the paragraph of that br ef s gned by the pla nt ff)s attorney there s a restatement of 9hat the pla nt ff had sa d n h s test mony, to 9 th, that as soon as he rece ved, on January 12, 1512, a 9r tten offer E1h b t D, from Mr. James "oss of th s c ty for the property n =uest on and for the pr ce of +<60,000, he 9rote on the same day the letter of Dr. Caldes that appears as E1h b t % /pp. 8>, 1>5, of the record0. $n th s same br ef the statement 9as also made that no =uest on had ar sen as to the val d ty of th s acceptance, for the reasons 9h ch 9ould presently appear. $t s to be noted that E1h b t %, ment oned n the preced ng paragraph transcr bed from the br ef, s the same E1h b t 7, 9h ch 9as erroneously marFed 9 th the letter % n the sa d paragraph, as sho9n by the fact that n th s paragraph E1h b t % s referred to as be ng found on page 8> of the record, 9h ch page conta nes E1h b t 7, and on page 1>5 of the record, 9h ch conta ns a copy of the same E1h b t 7,[the date of th s latter e1h b t, January 12, be ng also that of the E1h b t D, ment oned n the sa d br ef. %he tr al court therefore erred n not adm tt ng n ev denceasa d document E1h b t 7 and, conse=uently, n not taF ng t nto cons derat on n the -udgment appealed from. %h s re-ect on cannot be 9arranted by the fact that the defendants themselves opposed ts adm ss on, for the latter also opposed the adm ss on of all the documents presented by the pla nt ff, on the understand ng that, as they 9ere not bound by the documents E1h b ts A and E, the one as pr nc pal and the other as agent, such documents 9ere mmater al, ncompetent and rrelevant, nevertheless the tr al court adm tted some of those documents and cons dered them for the purpose of dra9 ng h s conclus ons n the -udgment rendered.

$t s hardly necessary no9 to sho9 that sa d letter of January 12, 1512 /E1h b t 70 9as EorcF)s acceptance of the opt on or offer of sale made to h m by the defendant Caldes n h s letter of December 4, 1511 /E1h b t E0, for the pla nt ff EorcF h mself adm tted n h s test mony at the tr al that the letter E1h b t 7 9as h s acceptance of sa d opt on. $n fact, the pla nt ff EorcF, referr ng n the letter, E1h b t 7, to the negot at ons bet9een h mself and Caldes regard ng the Nagta-an Bac enda belong ng to Een to !egarda, offers to purchase sa d property for the sum of +<02,000, cash and net, payable the f rst day of May 1512, or before, the pla nt ff to be furn shed 9 th a %orrens t tle free of all encumbrances, such as ta1es and other debts. %he offer of sale or opt on of purchase conta ned n the document E1h b t E, 9as for the per od of three months, from December 4, 1511, for the assessed valuat on of the property, understood to be +<02,000, though subse=uently at the tr al t 9as f 1ed by agreement of the part es at +<0>,584 and payment 9as to be made n cash, for, even though th s 9as not stated n the document, that fa lure tself so to state created the understand ng that the pr ce 9as to be pa d n cash 9hen del very of the property 9as made, n accordance 9 th the prov s ons of art cle 14>2, n connect on 9 th art cle 1800, of the ' v l 'ode. %he pla nt ff EorcF recogn Aed th s n h s compla nt, n maF ng the allegat on 9e cons dered at the beg nn ng of th s dec s on, to 9 th, that he accepted n 9r t ng the sa d offer n conform ty 9 th ts terms and offered to pay to the sa d Caldes, , mmed ately and n cash, the pr ce st pulatedI and he also so test f ed atethe tr al, say ng, n reference to the cond t ons of the payment of the purchase pr ce, that ,the cond t ons 9ere not d scussed, because the payment 9as to be made n cash on e1h b t on of the documents., No9 then, n the document E1h b t 7, that s, the letter of January 12, 1512, t s stated that payment of the net amount 9ould be made n cash on[the f rst day of May, 1512, or before. &o that t may be sa d 9 th all the more reason that n relat on to the other offers of payment conta ned n the documents 7, #, J, and *, that n the letter, E1h b t 7, the pla nt ff EorcF, n accept ng the offer of sale, d d not maFe an offer to pay the pr ce , mmed ately and n cash,, as stated n h s allegat on set forth n the compla nt, for, by v rtue of the sa d documents, he reserved to h mself the r ght to maFe the payment on the f rst day of May, 1512, or on any date pr or thereto, as m ght su t h m, that , t9o months after the term nat on of the opt on or of the offer, 9h ch 9ould be, on or before March 4, 1512, although the deed of conveyance of the property n h s favor should have been e1ecuted by the defendant Caldes on any date 9 th n the per od of the opt on, that s, 9 th n the three months 9h ch ended on the sa d 4th day of March, 1512, 9hereby the pla nt ff v rtually gave h mself f ve months from the date of the offer of sale or opt on of purchase, to effect the sa d payment. %h s s ev dently not an offer to pay , mmed ately and n cash,, nor s t a payment n cash, as the la9 prov des, nor such a payment as the pla nt ff EorcF h mself understood t to be, 9hen he stated n h s test mony that the payment 9as to be made n cash upon e1h b t on of the documents. Duly cons der ng the documents E1h b ts 7, #, J, andaF, that s, the statements made by the pla nt ff EorcF n the letter of January 12, 15 and 2<, 1512, and 7ebruary 26th of the same year, addressed by h m to the defendant Caldes, n accept ng the opt on that the latter had granted h m for the purchase of the Nagta-an Bac enda, or the offer of sale of the sa d hacienda defendant made to the pla nt ff, 9 th respect to the payment of the pr ce therof, t s seen that n the sa d documents the pla nt ff EorcF offered to pay to the defendant Caldes the sa d pr ce, f rst 9 th n the per od of f ve months from December 4, 1511, after9ards 9 th n the terms of three months from the same date of December 4,

and, f nally, 9 th n a per od 9h ch could as 9ell be ten days as t9enty or th rty of more days from the t me Caldes should put at the pla nt ff)s d sposal to be nspected, the t tles and other documents relat ve to the sa d hacienda, and the pla nt ff should f nd them sat sfactory and the proper deed of conveyance should, n conse=uence thereof, be e1ecuted n h s favor by CaldesI and th s ev dently s an offer of payment n nstallments, and not an , mmed ate and cash, payment. %he lo9er court n the -udgment appealed from says that as the document E1h b t E, dated December 4, 1511, gave the pla nt ff a three months) opt on for the purchase of the property, a per od 9h ch e1p red, therefore, on March 4, 1512, th s necessar ly allo9ed the pla nt ff them for the payment unt l th s last date, and as n the letter E1h b t #, of the date of January 15, 1512, the pla nt ff sa d that he 9ould pay before the e1p rat on of the sa d per od, n no manner could th s have mod f ed the opt on, rather, on the contrary, t co nc ded 9 th t, the court add ng, moreover, that a payment made on or before the 4th of March 9ould have been a payment n cash, f th s 9as re=u red by E1h b t E. $t s true that the per od granted by the defendant Caldes to the pla nt ff for purchas ng the property, 9as three months from December 4, 1512, but not because th s per od e1p red on March 4, 1512, that s, the last day of the sa d three months, may t be understood that the defendant granted to the pla nt ff the per od for payment unt l the very last day, March 4, 1512, for the s mple reason that, the per od for the purchase be ng three months, that s,athe t me dur ng 9h ch the pla nt ff EorcF could maFe use of the po9er or the r ght granted by h m by Caldes to arrange for the purchase of, and to purchase n fact, the sa d property, f EorcF purchased t on any date pr or to March 4, 1512 /on January 15, 1512, for e1ample0 the result 9ould be that the proper deed of sale be ng conse=uently e1ecuted n h s favor on the sa d date of January 15, and the t me that payment 9ould be made not hav ng been f 1ed n the sa d document E1h b t E, such payment 9ouldahave to be made at the t me of the del very of the th ng sold, pursuant to art cle 1800 of the ' v l 'odeI but as, n accordance 9 th art cle 14>2 of the same code, the e1ecut on of the deed of sale s e=u valent to the del very of the th ng 9h ch s the ob-ect of the contract, the payment 9ould not be n cash f t 9ere not made on the same 15th day of January, 1512, and 9ere postponed unt l some other later day, or unt l March 4, 1512. $n short, t s mposs ble to confound the per od of the opt on granted to the pla nt ff EorcF for the purchase of the Nagta-an Bac enda, 9 th the per od for the payment of t pr ce, had he purchased t. %he pla nt ff EorcF had three months, from December 4, 1511, 9 th n 9h ch to maFe the purchaseI to maFe the payment he d d not have a s ngle day after the date on 9h ch the proper deed of sale 9ould have been e1ecuted n h s favorI he 9as to pay the pr ce at the very moment the sa d deed 9as e1ecuted, because, by th s means, the property 9ould have been del vered to h s, although there st ll m ght have been lacF ng one or t9o months of the three months) per od of the sa d opt on. %h s s the payment n cash to 9h ch the la9 refers n the sale of real estate n cases 9here the t me for maF ng payment has not been f 1ed, and the pla nt ff h mself, EorcF, so understood 9hen he stated n h s test mony, as 9e have before sa d, that, as the cond t ons for the payment had notKbeen d scussed, payment 9as to be made n cash on e1h b t on of the documents, or, 9hat amounts to the same th ng, on the e1ecut on of the proper deed of sale of the property n h s favor. $t s therefore ev dent 9as not f 1ed there n, the document E1h b t E, dated December 4, 1511, re=u red the payment to be made n cash, and the lo9er court erred n hold ng that the pla nt ff EorcF)s letter, E1h b t #, of the date of January 15, 1512, n stat ng that the payment 9ould be made on or before March 4, 1512, n no manner mod f ed

the opt on or offer of sale conta ned n the document E1h b t E, but that on the contrary t co nc ded there9 thI also n hold ng that a payment made on or before March 4, 1512, 9ould have been a cash payment. %he letter of December 4, 1511, E1h b t E, conta ned, as aforesa d, an offer of sale or a proposal of sale on the partof the defendant Caldes to the pla nt ff EorcF, of the Nagta-an Bac enda, for the assessed valuat on of the same, effect ve dur ng the per od of three months count ng from the sa d date. &uch proposal or offer 9as an e1press on of the 9 ll only of the defendant Caldes, man fested to the pla nt ff EorcF. $n order that such a proposal m ght have the force of a contract, t 9as necessary that the pla nt ff EorcF)s 9 ll should have been e1pressed n harmony 9 th all the terms of the sa d proposal. 'onsent s sho9n by the concurrence of the offer and the acceptance of the th ng and the cause 9h ch are to const tute the contract. /Art. 12>2, ' v l 'ode.0 %here s no contract unless, among other re=u s tes, there s consent of the contract ng part es. /Art. 12>1, par. 1, of the same code.0 'ontracts are perfected by mere consent, and from that t me they are b nd ng, not only 9 th regard to the fulf llment of 9hat has been e1pressly st pulated, but also 9 th regard to all the conse=uences 9h ch, accord ng to the r character, are n accordance 9 th good fa th, use, and la9. /Art. 1286, ' v l 'ode.0 +rom ses are b nd ng n -ust so far as they are accepted n the e1pl c t terms n 9h ch they are madeI t not be ng la9ful to alter, aga nst the 9 ll of the prom sor, the cond t ons mposed by h m /Dec s on of the supreme court of &pa n, of November 28, 16860I for only thus may the nd spensable consent of the part es e1 st for the perfect on of the contract. /Dec s on of the same court, of &eptember 2>, 1621.0 An opt on s an unaccepted offer. $t states the terms and cond t ons on 9h ch the o9ner s 9 ll ng to sell or lease h s land, f the holder elects to accept them 9 th nTthe t me l m ted. $f the holder does so elect, he must g ve not ce to the other party, and the accepted offer thereupon becomes a val d and b nd ng contract. $f an acceptance s not made 9 th n the t me f 1ed, the o9ner s no longer bound by h s offer, and the opt on s at an end. /9ords and +hrases, vol. >, p. 8000, c t ng McM llan vs. +h ladelph a 'o., 26 Atl., 220I 185 +a., 142.0 An offer of a barga n by one person to another, mposes no obl gat on upon the former, unless t be accepted by the latter, accord ng to the terms n 9h ch the offer 9as made. Any =ual f cat on or, or departure from, those terms, nval dates the offer, unless the same be agreed to by the person 9ho made t. /El ason et al. vs. Bensha9, 4 (heaton, 228.0 $n order that an acceptance of propos t on may be operat ve t must be une=u vocal, uncond t onal, and 9 thout var ance of any sort bet9een t and the proposal, . . . . An absolute acceptance of a proposal, coupled 9 th any =ual f cat on or cond t on, 9 ll not be regarded as a complete contract,

because there at no t me e1 sts the re=u s te mutual assent to the same th ng n the same senses. /Eruner et al. vs. (heaton, 4> Mo., <><.0 As already seen 9h le 9e 9ere cons der ng the documents E1h b ts 7, #, J, and *, the pla nt ff EorcF accepted the offer of sale made to h , or the opt on of purchase g ven h m n document E1h b t E by the defendant Caldes, of the Nagta-an Bac enda, for the assessed valuat on of the same, but h s acceptance 9as not n accordance 9 th the cond t on 9 th regard to the payment of the pr ce of the property, under 9h ch the offer or the opt on 9as made for, 9h le th s payment 9as to be pa d n cash, as the pla nt ff EorcF h mself adm tted and the defendant Caldes pos t vely stated n h s test mony, and also a prov ded by la9, for the reason that the t me 9as not f 1ed n sa d offer or opt on 9hen the payment should be made n the aforesa d four documents E1h b ts 7, #, J, and *, the pla nt ff EorcF made the offer to pay the sa d pr ce, n the f rst of them, 9 th n the per od of f ve months from December 14, 1511I n the second, 9 th n the per od of three months from the same date, and, f nally, n the other t9o documents, 9 th n an ndef n te per od 9h ch could as 9ell be ten days as t9enty or th rty or more, count ng from the date 9hen the mun ments of t tle relat ve to the sa d hacienda should have been placed at h s d sposal to be nspected and he should have found them sat sfactory and, n conse=uence thereof, the deed of conveyance should have been e1ecuted n h s favor by the defendant Caldes. &o that there 9as no concurrence of the offer and the acceptance as to one of the cond t ons related to the cause of the contract, to 9 t, the form n 9h ch the payment should be made. %he e1press on of EorcF)s 9 ll 9as not n accordance 9 th all the terms of Caldes) proposal, or, 9hat amounts to the same th ng, the latter)s prom se 9as not accepted by the former n the spec f c terms, n 9h ch t 9as made, and f nally, the acceptance of the sa d proposal on EorcF)s part 9as not une=u vocal and 9 thout var ance of any sort bet9een t and the proposal, because, n v e9 of the terms n 9h ch the payment 9as offered by EorcF n h s sa d letters of January 12, 15 and 2<, E1h b ts 7, #, J, and *, there 9as var ance from the moment n 9h ch accord ng to sa d terms, n the f rst t9o letters, the payment of the pr ce should be made on or before the 1st of May and on or before the <d of March, 1512, respect vely, that s, 9 th n a per od l m ted n those letters, and the offer of payment 9as e=u vocal nasmuch as, by the last t9o letters, t 9as made to depend on certa n acts as a bas s for f 1 ng the per od n 9h ch the sa d payment should have to be madeI f nally, there 9as no mutual conform ty bet9een the person 9ho made the proposal or offer, Caldes, and the person 9ho accepted t, EorcF, n the same sense 9 th respect to the form of payment, and EorcF dev ated from the terms of the propos t on 9 th regard to the form of payment and the record does not sho9 that Caldes assented to such var ance. $t s, therefore, ev dent that, n accordance 9 th the prov s on of la9 and the pr nc ples la d do9n n the dec s ons above c ted, the proposal or offer of sale made by the defendant Caldes to the pla nt ff EorcF, or the opt on of purchase granted by the former to the latter, 9 th respect to the Nagta-an Bac enda, n the document E1h b t E, 9as not converted nto a perfect and b nd ng contract for the, and that as Caldes d d not assent to the mod f cat on ntroduced by EorcF n the offer of sale made by th s defendant n regard to one of ts terms, to 9 th, the form of payment, the sa d offer became null and vo d, and, conse=uently, EorcF has no r ght to demand of the defendant Caldes and of the latter)s pr nc pal, the other defendant, !egarda, or of the adm n strators of the estate left by !egarda at h s death 9h ch occurred dur ng the course of these proceed ngs, and 9hose

names appear at the beg nn ng of th s dec s on, the fulf llment of that offer, nor, therefore, any ndemn ty 9hatever for such nonfulf llment. %he lo9er court erred, than, n f nd ng other9 se n the three conclus ons of la9 conta ned n the -udgment appealed from 9h ch 9ere ment oned at the beg nn ng of th s dec s on and on 9h ch, n short, the pronouncement made n that -udgment 9as founded. As the po9er of attorney conferred by Een to !egarda upon Een to Caldes 9as e1pl c t and pos t ve, accord ng to the document E1h b t A, a copy of 9h ch 9as attached to the compla nt, to sell and convey all F nds of real estate at such pr ces and on such cond t ons as Caldes m ght deem proper, and also as the terms of the opt on granted by Caldes to EorcF, or of the offer of sale made by the former to the latter n the document E1h b t E, of the Nagta-an Bac enda belong ng to Een to !egarda, are clearI and, furthermore, as the pla nt ff made the sa d documents an ntegral part of the compla nt as the grounds thereof, the test mony ntroduced by the defendant Caldes to prove that sa d offer of sale made by h m to EorcF 9as sub-ect to the approval of h s, Caldes), pr nc pal 9as mproper /sect ons 10< and 268, 'ode ' v. +roc.0 and the lo9er court d d not err n not taF ng that test mony nto cons derat on n h s -udgment. ! Fe9 se the ev dence presented by the defendant Caldes n an endeavor to prove that sa d offer of sale 9as obta ned from h m by the pla nt ff EorcF by means of fraud and dece t, 9as mproper. 'onse=uently the tr al court d d not err by maF ng no f nd ng n the -udgment on those t9o po nts. $n conclus on, as the offer of sale of the Nagta-an Bac enda, made by Caldes to EorcF, or the opt on of purchase thereof granted by the former to the latter by the letter of December 4, 1511, E1h b t E, d d not const tute a perfect contract and, conse=uently, 9as not b nd ng upon the defendants Caldes and !egarda or the pla nt ff EorcF, by reason of the lacF of the mutual assent of the part es concerned there n, 9h ch s 9holly n accordance 9 th the terms of the sa d offer, there can be no obl gat on demandable n la9 by v rtue of the st pulat ons conta ned n sa d document, and the act on prosecuted by the pla nt ff for that purpose n these proceed ngs n mproper. 7or the forego ng reasons the -udgment appealed from s reversed and 9e absolve the defendants from the compla nt. %he costs of the f rst nstance shall be mposed upon the pla nt ff. No spec al f nd ng s made 9 th respect to those of th s second nstance. &o ordered. Arellano, ..9., 7orres and 9ohnson, 99., concur. Moreland and 7rent, 99., concur n the result. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la SE%/N! !)*)S)/N G.$. No. 12<;=< :e ruary ;, 3..=

:)#)+)NAS #):E ASS&$AN%E %/'+AN8 CnoF A8A#A #):E ASS&$AN%E, )N%.D, pet t oner,

vs. %#E'EN(E N. +E!$/S/, (E$ES)(A /. +E!$/S/ and JENN):E$ N. +A#A%)/ t-ru -er Attorney7in7:act +/N%)AN/ %. 'A$E&E6, respondents. !E%)S)/N E&)S&'9)NG, J., %h s pet t on for rev e9 on cert orar seeFs the reversal of the Dec s on 1 and "esolut on,2 dated November 25, 2002 and August 8, 200<, respect vely, of the 'ourt of Appeals n 'A@#.". 'C No. <<8>6. %he appellate court had aff rmed the Dec s on< dated Dctober 10, 1565 of the "eg onal %r al 'ourt /"%'0 of Man la, Eranch <, f nd ng pet t oner as defendant and the co@defendants belo9 -o ntly and severally l able to the pla nt ffs, no9 here n respondents. %he antecedent facts are as follo9s? "espondent %eres ta D. +edroso s a pol cyholder of a 20@year endo9ment l fe nsurance ssued by pet t oner 7 l p nas ! fe Assurance 'ompany /7 l p nas ! fe0. +edroso cla ms "enato Calle 9as her nsurance agent s nce 1522 and Calle collected her monthly prem ums. $n the f rst 9eeF of January 1522, Calle told her that the 7 l p nas ! fe Escolta Dff ce 9as hold ng a promot onal nvestment program for pol cyholders. $t 9as offer ng 6R prepa d nterest a month for certa n amounts depos ted on a monthly bas s. Ent ced, she n t ally nvested and ssued a post@dated checF dated January 2, 1522 for +10,000.4 $n return, Calle ssued +edroso h s personal checF for+600 for the 6R 8 prepa d nterest and a 7 l p nas ! fe ,AgentJs "ece pt, No. 6026<6.> &ubse=uently, she called the Escolta off ce and talFed to 7ranc sco Alcantara, the adm n strat ve ass stant, 9ho referred her to the branch manager, Angel Apetr or. +edroso n=u red about the promot onal nvestment and Apetr or conf rmed that there 9as such a promot on. &he 9as even told she could ,push through 9 th the checF, she ssued. 7rom the records, the checF, 9 th the endorsement of Alcantara at the bacF, 9as depos ted n the account of 7 l p nas ! fe 9 th the 'ommerc al EanF and %rust 'ompany /'E%'0, Escolta Eranch. "ely ng on the representat ons made by the pet t onerJs duly author Aed representat ves Apetr or and Alcantara, as 9ell as hav ng Fno9n agent Calle for =u te some t me, +edroso 9a ted for the matur ty of her n t al nvestment. A month after, her nvestment of +10,000 9as returned to her after she made a 9r tten re=uest for ts refund. %he formal 9r tten re=uest, dated 7ebruary <, 1522, 9as 9r tten on an nter@off ce memorandum form of 7 l p nas ! fe prepared by Alcantara.2 %o collect the amount, +edroso personally 9ent to the Escolta branch 9here Alcantara gave her the +10,000 n cash. After a second nvestment, she made 2 to 6 more nvestments n vary ng amounts, total ng +<2,000 but at a lo9er rate of 8R6 prepa d nterest a month. 3pon matur ty of +edrosoJs subse=uent nvestments, Calle 9ould taFe bacF from +edroso the correspond ng yello9@colored agentJs rece pt he ssued to the latter. +edroso told respondent Jenn fer N. +alac o, also a 7 l p nas ! fe nsurance pol cyholder, about the nvestment plan. +alac o made a total nvestment of +45,8805 but at only 8R prepa d nterest. Bo9ever, 9hen +edroso tr ed to 9 thdra9 her nvestment, Calle d d not 9ant to return some +12,000 9orth of t.

+alac o also tr ed to 9 thdra9 hers, but 7 l p nas ! fe, desp te demands, refused to return her money. ( th the ass stance of the r la9yer, they 9ent to 7 l p nas ! fe Escolta Dff ce to collect the r respect ve nvestments, and to n=u re 9hy they had not seen Calle for =u te some t me. Eut the r attempts 9ere fut le. Bence, respondents f led an act on for the recovery of a sum of money. After tr al, the "%', Eranch <, Man la, held 7 l p nas ! fe and ts co@defendants Calle, Apetr or and Alcantara -o ntly and sol dar ly l able to the respondents. Dn appeal, the 'ourt of Appeals aff rmed the tr al courtJs rul ng and subse=uently den ed the mot on for recons derat on. +et t oner no9 comes before us ra s ng a s ngle ssue? (BE%BE" D" ND% %BE 'D3"% D7 A++EA!& 'DMM$%%ED A "ECE"&$E!E E""D" AND #"ACE!H AE3&ED $%& D$&'"E%$DN $N A77$"M$N# %BE DE'$&$DN D7 %BE !D(E" 'D3"% BD!D$N# 7!A' :7$!$+$NA& !$7E; %D EE JD$N%!H AND &ECE"A!!H !$AE!E ($%B $%& 'D@DE7ENDAN%& DN %BE '!A$M D7 "E&+DNDEN%& $N&%EAD D7 BD!D$N# $%& A#EN%, "ENA%D CA!!E, &D!E!H !$AE!E %D %BE "E&+DNDEN%&. 10 & mply put, d d the 'ourt of Appeals err n hold ng pet t oner and ts co@ defendants -o ntly and severally l able to the here n respondentsP 7 l p nas ! fe does not d spute that Calle 9as ts agent, but cla ms that t 9as only a l fe nsurance company and 9as not engaged n the bus ness of collect ng nvestment money. $t contends that the nvestment scheme offered to respondents by Calle, Apetr or and Alcantara 9as outs de the scope of the r author ty as agents of 7 l p nas ! fe such that, t cannot be held l able to the respondents.11 Dn the other hand, respondents contend that 7 l p nas ! fe author Aed Calle to sol c t nvestments from them. $n fact, 7 l p nas ! feJs off c al documents and fac l t es 9ere used n consummat ng the transact ons. %hese transact ons, accord ng to respondents, 9ere conf rmed by ts off cers Apetr or and Alcantara. "espondents assert they e1erc sed all the d l gence re=u red of them n ascerta n ng the author ty of pet t onerJs agentsI and t s 7 l p nas ! fe that fa led n ts duty to ensure that ts agents act 9 th n the scope of the r author ty. 'ons der ng the ssue ra sed n the l ght of the subm ss ons of the part es, 9e f nd that the pet t on lacFs mer t. %he 'ourt of Appeals comm tted no revers ble error nor abused gravely ts d scret on n render ng the assa led dec s on and resolut on. $t appears nd sputable that respondents +edroso and +alac o had nvested +42,000 and +45,880, respect vely. %hese 9ere rece ved by Calle and rem tted to 7 l p nas ! fe, us ng 7 l p nas ! feJs off c al rece pts, 9hose authent c ty 9ere not d sputed. CalleJs author ty to sol c t and rece ve nvestments 9as also establ shed by the part es. (hen respondents sought conf rmat on, Alcantara, hold ng a superv sory pos t on, and Apetr or, the branch manager, conf rmed that Calle had author ty. (h le t s true that a person deal ng 9 th an agent s put upon n=u ry and must d scover at h s o9n per l the agentJs author ty, n th s case, respondents d d e1erc se due d l gence n remov ng all doubts and n conf rm ng the val d ty of the representat ons made by Calle.

7 l p nas ! fe, as the pr nc pal, s l able for obl gat ons contracted by ts agent Calle. 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.12 %he general rule s that the pr nc pal s respons ble for the acts of ts agent done 9 th n the scope of ts author ty, and should bear the damage caused to th rd persons. 1< (hen the agent e1ceeds h s author ty, the agent becomes personally l able for the damage. 14 Eut even 9hen the agent e1ceeds h s author ty, the pr nc pal s st ll sol dar ly l able together 9 th the agent f the pr nc pal allo9ed the agent to act as though the agent had full po9ers. 18 $n other 9ords, the acts of an agent beyond the scope of h s author ty do not b nd the pr nc pal, unless the pr nc pal rat f es them, e1pressly or mpl edly.1> "at f cat on n agency s the adopt on or conf rmat on by one person of an act performed on h s behalf by another 9 thout author ty. 12 7 l p nas ! fe cannot profess gnorance of CalleJs acts. Even f CalleJs representat ons 9ere beyond h s author ty as a deb tM nsurance agent, 7 l p nas ! fe thru Alcantara and Apetr or e1pressly and Fno9 ngly rat f ed CalleJs acts. $t cannot even be den ed that 7 l p nas ! fe benef ted from the nvestments depos ted by Calle n the account of 7 l p nas ! fe. $n our cons dered v e9, 7 l p nas ! fe had clothed Calle 9 th apparent author tyI hence, t s no9 estopped to deny sa d author ty. $nnocent th rd persons should not be pre-ud ced f the pr nc pal fa led to adopt the needed measures to prevent m srepresentat on, much more so f the pr nc pal rat f ed h s agentJs acts beyond the latterJs author ty. %he act of the agent s cons dered that of the pr nc pal tself. Qui per alium facit per seipsum facere videtur. ,Be 9ho does a th ng by an agent s cons dered as do ng t h mself.,16 W5E$E:/$E, the pet t on s !EN)E! for lacF of mer t. %he Dec s on and "esolut on, dated November 25, 2002 and August 8, 200<, respect vely, of the 'ourt of Appeals n 'A@#.". 'C No. <<8>6 are A::)$'E!. 'osts aga nst the pet t oner. S/ /$!E$E!. #E/NA$!/ A. E&)S&'9)NG Assoc ate Just ce

(E 'DN'3"? AN(/N)/ (. %A$+)/ Assoc ate Just ce %/N%5)(A %A$+)/ '/$A#ES Assoc ate Just ce +$ES9)(E$/ J. *E#AS%/, J$. Assoc ate Just ce !AN(E /. ()NGA 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. #E/NA$!/ A. E&)S&'9)NG Assoc ate Just ce 'ha rperson

%E$():)%A()/N +ursuant to &ect on 1<, Art cle C$$$ of the 'onst tut on, and the D v s on 'ha rpersonJs Attestat on, $ cert fy 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. $E8NA(/ S. +&N/ 'h ef Just ce

:ootnotes
1

Rollo, pp. 4<@88. +enned by Assoc ate Just ce "enato '. Dacudao, 9 th Assoc ate Just ces Eugen o &. !ab tor a and Dan lo E. + ne concurr ng.
2

$d. at 8>. $d. at 82@><. +enned by Judge 'lemente M. &or ano. "ecords, p. 24>. %&N, Dctober 2, 156<, pp. 5@10. "ecords, p. 246. $d. at 242. &upra note 8. "ecords, pp. 28<@2>4. Rollo, p. 106. $d. at 105. '$C$! 'DDE, Art. 16>6.

<

>

10

11

12

1<

%opez, et al. v. 0on. Alvendia, et al., 120 +h l. 1424, 14<1@14<2 /15>40.

14

!A 8inance .orporation v. .ourt of Appeals, #.". No. 548>>, July <, 1552, 211 &'"A 112, 116.
18

'$C$! 'DDE, Art. 1511.

1>

$d., Art. 1510. %he pr nc pal must comply 9 th all the obl gat ons 9h ch the agent may have contracted 9 th n the scope of h s author ty. As for any obl gat on 9here n the agent has e1ceeded h s po9er, the pr nc pal s not bound e1cept 9hen he rat f es t e1pressly or tac tly.
12

Manila Memorial $ar' .emetery, :nc. v. %insangan , #.". No. 181<15, November 22, 2004, 44< &'"A <22, <54.
16

$rudential !an' v. .ourt of Appeals, #.". No. 106582, June 14, 155<, 22< &'"A <80, <82.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. 12141< NoAem er 33, 3..;

'AN)#A 'E'/$)A# +A$K %E'E(E$8, )N%., pet t oner, vs. +E!$/ #. #)NSANGAN, respondent.

DE'$&$DN

()NGA, J., 7or resolut on n th s case s a class c and nterest ng te1booF =uest on n the la9 on agency. %h s s a pet t on for rev e9 assa l ng the Dec s on 1 of the 'ourt of Appeals dated 22 June 2001, and ts "esolut on2 dated 12 December 2001 n 'A #.". 'C No. 45602 ent tled ,+edro !. ! nsangan v. Man la Memor al 'emetery, $nc. et al.,, f nd ng Man la Memor al +arF 'emetery, $nc. /MM+'$0 -o ntly and severally l able 9 th 7lorenc a '. Ealuyot to respondent Atty. +edro !. ! nsangan.

%he facts of the case are as follo9s? &omet me n 1564, 7lorenc a Ealuyot offered Atty. +edro !. ! nsangan a lot called #arden &tate at the Boly 'ross Memor al +arF o9ned by pet t oner /MM+'$0. Accord ng to Ealuyot, a former o9ner of a memor al lot under 'ontract No. 28012 9as no longer nterested n ac=u r ng the lot and had opted to sell h s r ghts sub-ect to re mbursement of the amounts he already pa d. %he contract 9as for +58,000.00. Ealuyot reassured Atty. ! nsangan that once re mbursement s made to the former buyer, the contract 9ould be transferred to h m. Atty. ! nsangan agreed and gave Ealuyot +<8,258.00 represent ng the amount to be re mbursed to the or g nal buyer and to complete the do9n payment to MM+'$.< Ealuyot ssued hand9r tten and type9r tten rece pts for these payments.4 &omet me n March 1568, Ealuyot nformed Atty. ! nsangan that he 9ould be ssued 'ontract No. 26>>0, a ne9 contract cover ng the sub-ect lot n the name of the latter nstead of old 'ontract No. 28012. Atty. ! nsangan protested, but Ealuyot assured h m that he 9ould st ll be pay ng the old pr ce of +58,000.00 9 th +15,6<6.00 cred ted as full do9n payment leav ng a balance of about +28,000.00.8 &ubse=uently, on 6 Apr l 1568, Ealuyot brought an Dffer to +urchase !ot No. A11 /180, ElocF 6<, #arden Estate $ denom nated as 'ontract No. 26>>0 and the Dff c al "ece pt No. 116512 dated > Apr l 1568 for the amount of +15,6<6.00. 'ontract No. 26>>0 has a l sted pr ce of +1<2,280.00. Atty. ! nsangan ob-ected to the ne9 contract pr ce, as the same 9as not the amount prev ously agreed upon. %o conv nce Atty. ! nsangan, Ealuyot e1ecuted a document > conf rm ng that 9h le the contract pr ce s +1<2,280.00, Atty. ! nsangan 9ould pay only the or g nal pr ce of +58,000.00. %he document reads n part? %he monthly nstallment 9 ll start Apr l >, 1568I the amount of +1,600.00 and the d fference 9 ll be ssued as d scounted to conform to the prev ous pr ce as prev ously agreed upon. @@@ +58,000.00 +repared by? /& gned0 /M"&.0 7!D"EN'$A '. EA!3HD% Agency Manager Boly 'ross Memor al +arF 4M16M68 Dear Atty. ! nsangan? %h s 9 ll conf rm our agreement that 9h le the offer to purchase under 'ontract No. 26>>0 states that the total pr ce of +1<2,280.00 your undertaF ng s to pay only the total sum of +58,000.00 under the old pr ce. 7urther the total sum of +15,6<6.00 already pa d by you under D.". ^ 116512 dated Apr l >, 1568 has been cred ted n the total purchase pr ce

thereby leav ng a balance of +28,1>2.00 on a monthly nstallment of +1,600.00 nclud ng nterests /s c0 charges for a per od of f ve /80 years. /& gned0 7!D"EN'$A '. EA!3HD% Ey v rtue of th s letter, Atty. ! nsangan s gned 'ontract No. 26>>0 and accepted Dff c al "ece pt No. 116512. As re=uested by Ealuyot, Atty. ! nsangan ssued t9elve /120 postdated checFs of +1,600.00 each n favor of MM+'$. %he ne1t year, or on 25 Apr l 156>, Atty. ! nsangan aga n ssued t9elve /120 postdated checFs n favor of MM+'$. Dn 28 May 1562, Ealuyot verbally adv sed Atty. ! nsangan that 'ontract No. 26>>0 9as cancelled for reasons the latter could not e1pla n, and presented to h m another proposal for the purchase of an e=u valent property. Be refused the ne9 proposal and ns sted that Ealuyot and MM+'$ honor the r undertaF ng. 7or the alleged fa lure of MM+'$ and Ealuyot to conform to the r agreement, Atty. ! nsangan f led a 'ompla nt2 for Ereach of 'ontract and Damages aga nst the former. Ealuyot d d not present any ev dence. 7or ts part, MM+'$ alleged that 'ontract No. 26>>0 9as cancelled conformably 9 th the terms of the contract 6 because of non@payment of arrearages.5 MM+'$ stated that Ealuyot 9as not an agent but an ndependent contractor, and as such 9as not author Aed to represent MM+'$ or to use ts name e1cept as to the e1tent e1pressly stated n the Agency Manager Agreement.10 Moreover, MM+'$ 9as not a9are of the arrangements entered nto by Atty. ! nsangan and Ealuyot, as t n fact rece ved a do9n payment and monthly nstallments as nd cated n the contract. 11 Dff c al rece pts sho9 ng the appl cat on of payment 9ere turned over to Ealuyot 9hom Atty. ! nsangan had from the beg nn ng allo9ed to rece ve the same n h s behalf. 7urthermore, 9hatever m s mpress on that Atty. ! nsangan may have had must have been rect f ed by the Account 3pdat ng Arrangement s gned by Atty. ! nsangan 9h ch states that he ,e1pressly adm ts that 'ontract No. 26>>0 )on account of ser ous del n=uencyT s no9 due for cancellat on under ts terms and cond t ons.))) 12 %he tr al court held MM+'$ and Ealuyot -o ntly and severally l able. 1< $t found that Ealuyot 9as an agent of MM+'$ and that the latter 9as estopped from deny ng th s agency, hav ng rece ved and enchased the checFs ssued by Atty. ! nsangan and g ven to t by Ealuyot. (h le MM+'$ ns sted that Ealuyot 9as author Aed to rece ve only the do9n payment, t allo9ed her to cont nue to rece ve postdated checFs from Atty. ! nsangan, 9h ch t n turn cons stently encashed. 14 %he d spos t ve port on of the dec s on reads? (BE"E7D"E, -udgment by preponderance of ev dence s hereby rendered n favor of pla nt ff declar ng 'ontract No. 26>>0 as val d and subs st ng and order ng defendants to perform the r undertaF ngs thereof 9h ch covers bur al lot No. A11 /180, ElocF 6<, &ect on #arden $, Boly 'ross Memor al +arF located at Noval ches, UueAon ' ty. All payments made by

pla nt ff to defendants should be cred ted for h s accounts. ND DAMA#E&, ND A%%D"NEH)& 7EE& but 9 th costs aga nst the defendants. %he cross cla m of defendant Man la Memor al 'emetery $ncorporated as aga nst defendant Ealuyot s #"AN%ED up to the e1tent of the costs. &D D"DE"ED.18 MM+'$ appealed the tr al court)s dec s on to the 'ourt of Appeals. 1> $t cla med that Atty. ! nsangan s bound by the 9r tten contract 9 th MM+'$, the terms of 9h ch 9ere clearly set forth there n and read, understood, and s gned by the former.12 $t also alleged that Atty. ! nsangan, a pract c ng la9yer for over th rteen /1<0 years at the t me he entered nto the contract, s presumed to Fno9 h s contractual obl gat ons and s fully a9are that he cannot belatedly and un laterally change the terms of the contract 9 thout the consent, much less the Fno9ledge of the other contract ng party, 9h ch 9as MM+'$. And n th s case, MM+'$ d d not agree to a change n the contract and n fact mplemented the same pursuant to ts clear terms. $n v e9 thereof, because of Atty. ! nsangan)s del n=uency, MM+'$ val dly cancelled the contract. MM+'$ further alleged that t cannot be held -o ntly and sol dar ly l able 9 th Ealuyot as the latter e1ceeded the terms of her agency, ne ther d d MM+'$ rat fy Ealuyot)s acts. $t added that t cannot be charged 9 th maF ng any m srepresentat on, nor of hav ng allo9ed Ealuyot to act as though she had full po9ers as the 9r tten contract e1pressly stated the terms and cond t ons 9h ch Atty. ! nsangan accepted and understood. $n cancel ng the contract, MM+'$ merely enforced the terms and cond t ons mposed there n. 16 $mput ng negl gence on the part of Atty. ! nsangan, MM+'$ cla med that t 9as the former)s obl gat on, as a party Fno9 ngly deal ng 9 th an alleged agent, to determ ne the l m tat ons of such agent)s author ty, part cularly 9hen such alleged agent)s act ons 9ere patently =uest onable. Accord ng to MM+'$, Atty. ! nsangan d d not even bother to ver fy Ealuyot)s author ty or asF cop es of off c al rece pts for h s payments.15 %he 'ourt of Appeals aff rmed the dec s on of the tr al court. $t upheld the tr al court)s f nd ng that Ealuyot 9as an agent of MM+'$ at the t me the d sputed contract 9as entered nto, hav ng represented MM+'$)s nterest and act ng on ts behalf n the deal ngs 9 th cl ents and customers. Bence, MM+'$ s cons dered estopped 9hen t allo9ed Ealuyot to act and represent MM+'$ even beyond her author ty.20 %he appellate court l Fe9 se found that the acts of Ealuyot bound MM+'$ 9hen the latter allo9ed the former to act for and n ts behalf and stead. (h le Ealuyot)s author ty ,may not have been e1pressly conferred upon her, the same may have been der ved mpl edly by hab t or custom, 9h ch may have been an accepted pract ce n the company for a long per od of t me., 21 %hus, the 'ourt of Appeals noted, nnocent th rd persons such as Atty. ! nsangan should not be pre-ud ced 9here the pr nc pal fa led to adopt the needed measures to prevent m srepresentat on. 7urthermore, f an agent m srepresents to a purchaser and the pr nc pal accepts the benef ts of such m srepresentat on, he cannot at the same t me deny respons b l ty for such m srepresentat on. 22 7 nally, the 'ourt of Appeals declared?

%here be ng absolutely noth ng on the record that 9ould sho9 that the court a =uo overlooFed, d sregarded, or m s nterpreted facts of 9e ght and s gn f cance, ts factual f nd ngs and conclus ons must be g ven great 9e ght and should not be d sturbed by th s 'ourt on appeal. (BE"E7D"E, n v e9 of the forego ng, the appeal s hereby DEN$ED and the appealed dec s on n ' v l 'ase No. 66@128< of the "eg onal %r al 'ourt, Nat onal 'ap tal Jud c al "eg on, Eranch 82 of MaFat , s hereby A77$"MED n toto. &D D"DE"ED.2< MM+'$ f led ts Mot on for "econs derat on,24 but the same 9as den ed for lacF of mer t.28 $n the nstant +et t on for "ev e9, MM+'$ cla ms that the 'ourt of Appeals ser ously erred n d sregard ng the pla n terms of the 9r tten contract and Atty. ! nsangan)s fa lure to ab de by the terms thereof, 9h ch -ust f ed ts cancellat on. $n add t on, even assum ng that Ealuyot 9as an agent of MM+'$, she clearly e1ceeded her author ty and Atty. ! nsangan Fne9 or should have Fno9n about th s cons der ng h s status as a long@pract c ng la9yer. MM+'$ l Fe9 se cla ms that the 'ourt of Appeals erred n fa l ng to cons der that the facts and the appl cable la9 do not support a -udgment aga nst Ealuyot only ,up to the e1tent of costs.,2> Atty. ! nsangan argues that he d d not v olate the terms and cond t ons of the contract, and n fact fa thfully performed h s contractual obl gat ons and compl ed 9 th them n good fa th for at least t9o years. 22 Be cla ms that contrary to MM+'$)s pos t on, h s profess on as a la9yer s mmater al to the val d ty of the sub-ect contract and the case at bar. 26 Accord ng to h m, MM+'$ had pract cally adm tted n ts +et t on that Ealuyot 9as ts agent, and thus, the only ssue left to be resolved s 9hether MM+'$ allo9ed Ealuyot to act as though she had full po9ers to be held sol dar ly l able 9 th the latter. 25 (e f nd for the pet t oner MM+'$. %he -ur sd ct on of the &upreme 'ourt n a pet t on for rev e9 under "ule 48 of the "ules of 'ourt s l m ted to rev e9 ng only errors of la9, not fact, unless the factual f nd ngs compla ned of are devo d of support by the ev dence on record or the assa led -udgment s based on m sapprehens on of facts. <0 $n E+$ $nvestment 'orporat on v. D.#. 'arreon 'ommerc al 'orporat on, <1 th s 'ourt ruled? %here are nstances 9hen the f nd ngs of fact of the tr al court andMor 'ourt of Appeals may be rev e9ed by the &upreme 'ourt, such as /10 9hen the conclus on s a f nd ng grounded ent rely on speculat on, surm ses and con-ecturesI /20 9hen the nference made s man festly m staFen, absurd or mposs bleI /<0 9here there s a grave abuse of d scret onI /40 9hen the -udgment s based on a m sapprehens on of factsI /80 9hen the f nd ngs of fact are confl ct ngI />0 9hen the 'ourt of Appeals, n maF ng ts f nd ngs, 9ent beyond the ssues of the case and the same s contrary to the adm ss ons of both appellant and appelleeI /20 9hen the f nd ngs are contrary to those of the tr al courtI /60 9hen the f nd ngs of

fact are conclus ons 9 thout c tat on of spec f c ev dence on 9h ch they are basedI /50 9hen the facts set forth n the pet t on as 9ell as n the pet t oners) ma n and reply br efs are not d sputed by the respondentsI and /100 the f nd ngs of fact of the 'ourt of Appeals are prem sed on the supposed absence of ev dence and contrad cted by the ev dence on record.<2 $n the case at bar, the 'ourt of Appeals comm tted several errors n the apprehens on of the facts of the case, as 9ell as made conclus ons devo d of ev dent ary support, hence 9e rev e9 ts f nd ngs of fact. 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.<< %hus, the elements of agency are / 0 consent, e1press or mpl ed, of the part es to establ sh the relat onsh pI / 0 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 and / v0 the agent acts 9 th n the scope of h s author ty.<4 $n an attempt to prove that Ealuyot 9as not ts agent, MM+'$ po nted out that under ts Agency Manager AgreementI an agency manager such as Ealuyot s cons dered an ndependent contractor and not an agent.<8Bo9ever, n the same contract, Ealuyot as agency manager 9as author Aed to sol c t and rem t to MM+'$ offers to purchase nterment spaces belong ng to and sold by the latter.<> Not9 thstand ng the cla m of MM+'$ that Ealuyot 9as an ndependent contractor, the fact rema ns that she 9as author Aed to sol c t solely for and n behalf of MM+'$. As properly found both by the tr al court and the 'ourt of Appeals, Ealuyot 9as an agent of MM+'$, hav ng represented the nterest of the latter, and hav ng been allo9ed by MM+'$ to represent t n her deal ngs 9 th ts cl entsMprospect ve buyers. Nevertheless, contrary to the f nd ngs of the 'ourt of Appeals, MM+'$ cannot be bound by the contract procured by Atty. ! nsangan and sol c ted by Ealuyot. Ealuyot 9as author Aed to sol c t and rem t to MM+'$ offers to purchase nterment spaces obta ned on forms prov ded by MM+'$. %he terms of the offer to purchase, therefore, are conta ned n such forms and, 9hen s gned by the buyer and an author Aed off cer of MM+'$, becomes b nd ng on both part es. %he Dffer to +urchase duly s gned by Atty. ! nsangan, and accepted and val dated by MM+'$ sho9ed a total l st pr ce of +1<2,280.00. ! Fe9 se, t 9as clearly stated there n that ,+urchaser agrees that he has read or has had read to h m th s agreement, that he understands ts terms and cond t ons, and that there are no covenants, cond t ons, 9arrant es or representat ons other than those conta ned here n.,<2 Ey s gn ng the Dffer to +urchase, Atty. ! nsangan s gn f ed that he understood ts contents. %hat he and Ealuyot had an agreement d fferent from that conta ned n the Dffer to +urchase s of no moment, and should not affect MM+'$, as t 9as obv ously made outs de Ealuyot)s author ty. %o repeat, Ealuyot)s author ty 9as l m ted only to sol c t ng purchasers. &he had no author ty to alter the terms of the 9r tten contract prov ded by MM+'$. %he documentMletter ,conf rm ng, the agreement that Atty. ! nsangan 9ould have to pay the old pr ce 9as e1ecuted by Ealuyot alone. No9here s there any nd cat on that the same came from MM+'$ or any of ts off cers.

$t s a settled rule that persons deal ng 9 th an agent are bound at the r per l, f they 9ould hold the pr nc pal l able, to ascerta n not only the fact of agency but also the nature and e1tent of author ty, and n case e ther s controverted, the burden of proof s upon them to establ sh t. <6 %he bas s for agency s representat on and 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. <5 $f he does not maFe such an n=u ry, he s chargeable 9 th Fno9ledge of the agent)s author ty and h s gnorance of that author ty 9 ll not be any e1cuse. 40 As noted by one author, the gnorance of a person deal ng 9 th an agent as to the scope of the latter)s author ty s no e1cuse to such person and the fault cannot be thro9n upon the pr nc pal. 41 A person deal ng 9 th an agent assumes the r sF of lacF of author ty n the agent. Be cannot charge the pr nc pal by rely ng upon the agent)s assumpt on of author ty that proves to be unfounded. %he pr nc pal, on the other hand, may act on the presumpt on that th rd persons deal ng 9 th h s agent 9 ll not be negl gent n fa l ng to ascerta n the e1tent of h s author ty as 9ell as the e1 stence of h s agency. 42 $n the nstant case, t has not been establ shed that Atty. ! nsangan even bothered to n=u re 9hether Ealuyot 9as author Aed to agree to terms contrary to those nd cated n the 9r tten contract, much less b nd MM+'$ by her comm tment 9 th respect to such agreements. Even f Ealuyot 9as Atty. ! nsangan)s fr end and Fno9n to be an agent of MM+'$, her declarat ons and act ons alone are not suff c ent to establ sh the fact or e1tent of her author ty.4< Atty. ! nsangan as a pract c ng la9yer for a relat vely long per od of t me 9hen he s gned the contract should have been put on guard 9hen the r agreement 9as not reflected n the contract. More mportantly, Atty. ! nsangan should have been alerted by the fact that Ealuyot fa led to effect the transfer of r ghts earl er prom sed, and 9as unable to maFe good her 9r tten comm tment, nor conv nce MM+'$ to assent thereto, as ev denced by several attempts to nduce h m to enter nto other contracts for a h gher cons derat on. As properly po nted out by MM+'$, as a la9yer, a greater degree of caut on should be e1pected of Atty. ! nsangan espec ally n deal ngs nvolv ng legal documents. Be d d not even bother to asF for off c al rece pts of h s payments, nor n=u re from MM+'$ d rectly to ascerta n the real status of the contract, bl ndly rely ng on the representat ons of Ealuyot. A la9yer by profess on, he Fne9 9hat he 9as do ng 9hen he s gned the 9r tten contract, Fne9 the mean ng and value of every 9ord or phrase used n the contract, and more mportantly, Fne9 the legal effects 9h ch sa d document produced. Be s bound to accept respons b l ty for h s negl gence. %he tr al and appellate courts found MM+'$ l able based on rat f cat on and estoppel. 7or the tr al court, MM+'$)s acts of accept ng and encash ng the checFs ssued by Atty. ! nsangan as 9ell as allo9 ng Ealuyot to rece ve checFs dra9n n the name of MM+'$ conf rm and rat fy the contract of agency. Dn the other hand, the 'ourt of Appeals faulted MM+'$ n fa l ng to adopt measures to prevent m srepresentat on, and declared that n v e9 of MM+'$)s acceptance of the benef ts of Ealuyot)s m srepresentat on, t can no longer deny respons b l ty therefor. %he 'ourt does not agree. +ert nent to th s case are the follo9 ng prov s ons of the ' v l 'ode?

Art. 1656. $f the agent contracts n the name of the pr nc pal, e1ceed ng the scope of h s author ty, and the pr nc pal does not rat fy the contract, t shall be vo d f the party 9 th 9hom the agent contracted s a9are of the l m ts of the po9ers granted by the pr nc pal. $n th s case, ho9ever, the agent s l able f he undertooF to secure the pr nc pal)s rat f cat on. Art. 1510. %he pr nc pal must comply 9 th all the obl gat ons that the agent may have contracted 9 th n the scope of h s author ty. As for any obl gat on 9here n the agent has e1ceeded h s po9er, the pr nc pal s not bound e1cept 9hen he rat f es t e1pressly or tac tly. Art. 1511. Even 9hen the agent has e1ceeded h s author ty, the pr nc pal s sol dar ly l able 9 th the agent f the former allo9ed the latter to act as though he had full po9ers. %hus, the acts of an agent beyond the scope of h s author ty do not b nd the pr nc pal, unless he rat f es them, e1pressly or mpl edly. Dnly the pr nc pal can rat fyI the agent cannot rat fy h s o9n unauthor Aed acts. Moreover, the pr nc pal must have Fno9ledge of the acts he s to rat fy. 44 "at f cat on n agency s the adopt on or conf rmat on by one person of an act performed on h s behalf by another 9 thout author ty. %he substance of the doctr ne s conf rmat on after conduct, amount ng to a subst tute for a pr or author ty. Drd nar ly, the pr nc pal must have full Fno9ledge at the t me of rat f cat on of all the mater al facts and c rcumstances relat ng to the unauthor Aed act of the person 9ho assumed to act as agent. %hus, f mater al facts 9ere suppressed or unFno9n, there can be no val d rat f cat on and th s regardless of the purpose or lacF thereof n conceal ng such facts and regardless of the part es bet9een 9hom the =uest on of rat f cat on may ar se.48Nevertheless, th s pr nc ple does not apply f the pr nc pal)s gnorance of the mater al facts and c rcumstances 9as 9 llful, or that the pr nc pal chooses to act n gnorance of the facts. 4> Bo9ever, n the absence of c rcumstances putt ng a reasonably prudent man on n=u ry, rat f cat on cannot be mpl ed as aga nst the pr nc pal 9ho s gnorant of the facts. 42 No rat f cat on can be mpl ed n the nstant case. A perusal of Ealuyot)s Ans9er46 reveals that the real arrangement bet9een her and Atty. ! nsangan 9as for the latter to pay a monthly nstallment of +1,600.00 9hereas Ealuyot 9as to shoulder the counterpart amount of +1,488.00 to meet the +<,288.00 monthly nstallments as nd cated n the contract. %hus, every t me an nstallment falls due, payment 9as to be made through a checF from Atty. ! nsangan for +1,600.00 and a cash component of +1,488.00 from Ealuyot.45 Bo9ever, t appears that 9h le Atty. ! nsangan ssued the post@dated checFs, Ealuyot fa led to come up 9 th her part of the barga n. %h s 9as supported by Ealuyot)s statements n her letter80 to Mr. 'lyde ( ll ams, Jr., &ales Manager of MM+'$, t9o days after she rece ved the copy of the 'ompla nt. $n the letter, she adm tted that she 9as rem ss n her dut es 9hen she consented to Atty. ! nsangan)s proposal that he 9 ll pay the old pr ce 9h le the d fference 9 ll be shouldered by her. &he l Fe9 se adm tted that the contract suffered arrearages because 9h le Atty. ! nsangan ssued the agreed checFs, she 9as

unable to g ve her share of +1,488.00 due to her o9n f nanc al d ff cult es. Ealuyot even asFed for compass on from MM+'$ for the error she comm tted. Atty. ! nsangan fa led to sho9 that MM+'$ had Fno9ledge of the arrangement. As far as MM+'$ s concerned, the contract pr ce 9as +1<2,280.00, as stated n the Dffer to +urchase s gned by Atty. ! nsangan and MM+'$)s author Aed off cer. %he do9n payment of +15,6<6.00 g ven by Atty. ! nsangan 9as n accordance 9 th the contract as 9ell. +ayments of +<,2<8.00 for at least t9o nstallments 9ere l Fe9 se n accord 9 th the contract, albe t made through a checF and partly n cash. $n v e9 of Ealuyot)s fa lure to g ve her share n the payment, MM+'$ rece ved only +1,600.00 checFs, 9h ch 9ere clearly nsuff c ent payment. $n fact, Atty. ! nsangan 9ould have ncurred arrearages that could have caused the earl er cancellat on of the contract, f not for MM+'$)s appl cat on of some of the checFs to h s account. Bo9ever, the checFs alone 9ere not suff c ent to cover h s obl gat ons. $f MM+'$ 9as a9are of the arrangement, t 9ould have refused the latter)s checF payments for be ng nsuff c ent. $t 9ould not have appl ed to h s account the +1,600.00 checFs. Moreover, the fact that Ealuyot had to pract cally e1pla n to MM+'$)s &ales Manager the deta ls of her ,arrangement, 9 th Atty. ! nsangan and adm t to hav ng made an error n enter ng such arrangement conf rm that MM'+$ had no Fno9ledge of the sa d agreement. $t 9as only 9hen Ealuyot f led her Ans9er that she cla med that MM'+$ 9as fully a9are of the agreement. Ne ther s there estoppel n the nstant case. %he essent al elements of estoppel are / 0 conduct of a party amount ng to false representat on or concealment of mater al facts or at least calculated to convey the mpress on that the facts are other9 se than, and ncons stent 9 th, those 9h ch the party subse=uently attempts to assertI / 0 ntent, or at least e1pectat on, that th s conduct shall be acted upon by, or at least nfluence, the other partyI and / 0 Fno9ledge, actual or construct ve, of the real facts. 81 (h le there s no more =uest on as to the agency relat onsh p bet9een Ealuyot and MM+'$, there s no nd cat on that MM+'$ let the publ c, or spec f cally, Atty. ! nsangan to bel eve that Ealuyot had the author ty to alter the standard contracts of the company. Ne ther s there any sho9 ng that pr or to s gn ng 'ontract No. 26>>0, MM+'$ had any Fno9ledge of Ealuyot)s comm tment to Atty. ! nsangan. Dne 9ho cla ms the benef t of an estoppel on the ground that he has been m sled by the representat ons of another must not have been m sled through h s o9n 9ant of reasonable care and c rcumspect on. 82 Even assum ng that Atty. ! nsangan 9as m sled by MM+'$)s actuat ons, he st ll cannot nvoFe the pr nc ple of estoppel, as he 9as clearly negl gent n h s deal ngs 9 th Ealuyot, and could have eas ly determ ned, had he only been caut ous and prudent, 9hether sa d agent 9as clothed 9 th the author ty to change the terms of the pr nc pal)s 9r tten contract. Estoppel must be ntent onal and une=u vocal, for 9hen m sappl ed, t can eas ly become a most conven ent and effect ve means of n-ust ce.8< $n v e9 of the lacF of suff c ent proof sho9 ng estoppel, 9e refuse to hold MM+'$ l able on th s score. ! Fe9 se, th s 'ourt does not f nd favor n the 'ourt of Appeals) f nd ngs that ,the author ty of defendant Ealuyot may not have been e1pressly conferred upon herI ho9ever, the same may have been der ved mpl edly by hab t or custom 9h ch may have been an accepted pract ce n the r company n a long per od of t me., A perusal of the records of the case fa ls to sho9 any nd cat on that there 9as

such a hab t or custom n MM+'$ that allo9s ts agents to enter nto agreements for lo9er pr ces of ts nterment spaces, nor to assume a port on of the purchase pr ce of the nterment spaces sold at such lo9er pr ce. No ev dence 9as ever presented to th s effect. As the 'ourt sees t, there are t9o obl gat ons n the nstant case. Dne s the 'ontract No. 26>>0 bet9een MM+'$ and by Atty. ! nsangan for the purchase of an nterment space n the former)s cemetery. %he other s the agreement bet9een Ealuyot and Atty. ! nsangan for the former to shoulder the amount +1,488.00, or the d fference bet9een +58,000.00, the or g nal pr ce, and +1<2,280.00, the actual contract pr ce. %o repeat, the acts of the agent beyond the scope of h s author ty do not b nd the pr nc pal unless the latter rat f es the same. $t also bears emphas s that 9hen the th rd person Fno9s that the agent 9as act ng beyond h s po9er or author ty, the pr nc pal cannot be held l able for the acts of the agent. $f the sa d th rd person 9as a9are of such l m ts of author ty, he s to blame and s not ent tled to recover damages from the agent, unless the latter undertooF to secure the pr nc pal)s rat f cat on.84 %h s 'ourt f nds that 'ontract No. 26>>0 9as val dly entered nto both by MM+'$ and Atty. ! nsangan. Ey aff 1 ng h s s gnature n the contract, Atty. ! nsangan assented to the terms and cond t ons thereof. (hen Atty. ! nsangan ncurred del n=uenc es n payment, MM'+$ merely enforced ts r ghts under the sa d contract by cancel ng the same. Ee ng a9are of the l m ts of Ealuyot)s author ty, Atty. ! nsangan cannot ns st on 9hat he cla ms to be the terms of 'ontract No. 26>>0. %he agreement, nsofar as the +58,000.00 contract pr ce s concerned, s vo d and cannot be enforced as aga nst MM+'$. Ne ther can he hold Ealuyot l able for damages under the same contract, s nce there s no ev dence sho9 ng that Ealuyot undertooF to secure MM+'$)s rat f cat on. At best, the ,agreement, bet9een Ealuyot and Atty. ! nsangan bound only the t9o of them. As far as MM+'$ s concerned, t bound tself to sell ts nterment space to Atty. ! nsangan for +1<2,280.00 under 'ontract No. 26>>0, and had n fact rece ved several payments n accordance 9 th the same contract. $f the contract 9as cancelled due to arrearages, Atty. ! nsangan)s recourse should only be aga nst Ealuyot 9ho personally undertooF to pay the d fference bet9een the true contract pr ce of +1<2,280.00 and the or g nal proposed pr ce of +58,000.00. %o surm se that Ealuyot 9as act ng on behalf of MM+'$ 9hen she prom sed to shoulder the sa d d fference 9ould be to conclude that MM+'$ undertooF to pay tself the d fference, a conclus on that s very llog cal, f not ant thet cal to ts bus ness nterests. Bo9ever, th s does not preclude Atty. ! nsangan from nst tut ng a separate act on to recover damages from Ealuyot, not as an agent of MM+'$, but n v e9 of the latter)s breach of the r separate agreement. %o rev e9, Ealuyot obl gated herself to pay +1,488.00 n add t on to Atty. ! nsangan)s +1,600.00 to complete the monthly nstallment payment under the contract, 9h ch, by her o9n adm ss on, she 9as unable to do due to personal f nanc al d ff cult es. $t s und sputed that Atty. ! nsangan ssued the +1,600.00 as agreed upon, and 9ere t not for Ealuyot)s fa lure to prov de the balance, 'ontract No. 26>>0 9ould not have been cancelled. %hus, Atty. ! nsangan has a cause of act on aga nst Ealuyot, 9h ch he can pursue n another case.

(BE"E7D"E, the nstant pet t on s #"AN%ED. %he Dec s on of the 'ourt of Appeals dated 22 June 2001 and ts "esolut on dated 12 December 2001 n 'A@ #.". 'C No. 45602, as 9ell as the Dec s on n ' v l 'ase No. 66@128< of the "eg onal %r al 'ourt, MaFat ' ty Eranch 82, are hereby "ECE"&ED and &E% A&$DE. %he 'ompla nt n ' v l 'ase No. 66@128< s D$&M$&&ED for lacF of cause of act on. No pronouncement as to costs. &D D"DE"ED. $uno, (.hairman*, Austria<Martinez, .alle"o, Sr., and .hico<3azario, 99., concur.

:ootnotes
1

+romulgated by the E ghth D v s on, penned by Assoc ate Just ce +erl ta J. %r a % rona, 9 th Just ces Eugen o &. !ab tor a and Eloy ". Eello, Jr., concurr ngI "ollo. pp. 51@56.
2

$d. at 101. $d. at 52. "%' "ecords, pp. 242@24>. $d. at 242. $d. at 126.

<

>

DocFeted as 'C@66@128<, raffled to "eg onal %r al 'ourt o MaFat , Eranch 22, pres ded by Judge Arsen o Magpale. $d. at 1.
6

$d. at 242I the contract prov des n part? % me s of the essence of th s agreement and +urchaser agrees that should any of the forego ng payments, nclud ng accrued nterest, rema n unpa d or should any of the covenants or cond t ons conta ned here n rema n unperformed by h m for a per od of <0 days after the same 9as to have been pa d or performed under th s Dffer to +urchase, +urchaser shall forth9 th and 9 thout demand be n default and n that event th s agreement shall, at the opt on of &eller, become automat cally null and vo d, and &eller may re@enter the above@descr bed property and hold, sell, or d spose the same 9 thout any l ab l ty to +urchaser, and reta n all payments made by +urchaser pr or to such re@entry as l =u dated damages. &hould +urchaser default n the payment of any one of the above@stated do9npayments or nstallments, then the ent re obl gat on shall automat cally become due and demandable, and n that event, all d scounts and nterest@free concess ons prev ously granted shall be deemed null f ed and the d scounts shall be added bacF to the above purchase pr ce and nterest shall be charged at the rate of t9enty@four percent /24R0 per annum on the decl n ng balance.

+urchaser further agrees that 9a ver by &eller of any breach of any of the covenants or cond t ons conta ned here n shall not be construed as a 9a ver of any subse=uent breach. +urchaser agrees that the e1erc se by the &eller of any remedy to protect ts r ghts shall not be a 9a ver of any other remedy by la9.
5

"ollo, p. 8>. "%' "ecords, p. 25. $d. at <>. $d. at <<. Dec s on dated 22 7ebruary 1558, "ollo, pp. 18>@1>1. $d. at 1>0@1>1. $d. at 1>1. DocFeted as 'A@ #.". 'C No.45602. 'A "ecords, pp. 150@151. "ollo, pp. 202@216. $d. at 220@222. $d. at 58. $d. at 5>. $d. at 52. $d. at 52. $d. at 1<>@182. $d. at 184. $d. at 86@>0. $d. at >0. $d. at 222. $d. at 22<. $d. at 260.

10

11

12

1<

14

18

1>

12

16

15

20

21

22

2<

24

28

2>

2>

22

26

25

<0

%sa v. 'ourt of Appeals, #.". No. 120056, 2 Dctober 2001, <>> &'"A <24, <<8, c t ng 'ongregat on of the "el g ous of the C rg n Mary v. 'ourt of Appeals, 251 &'"A <68 /15560.
<1

422 +h l. <>2 /20010.

<2

$d. at <26 c t ng 'ebu &h pyard and Eng neer ng (orFs, $nc. v. ( ll am ! nes, $nc., <>> +h l. 4<5 /15550, c t ng M sa v. 'ourt of Appeals, 212 &'"A 212.
<<

Art cle 16>6, ' v l 'ode. A. %olent no, the ' v l 'ode <5> /15520. "%' "ecords, p. 4>2. Art. $C of the Agency Manager Agreement prov des n part ? &ub-ect to the terms and cond t ons here nafter set forth and effect ve as of the date set forth above, the 'DM+ANH author Aes A#EN'H MANA#E" to sol c t and rem t to 'DM+ANH offers to purchase nterment spaces belong ng to and sold by the 'DM+ANH. &uch offers to purchase shall be obta ned on forms prov ded by the 'DM+ANH 9h ch, on e1ecut on by a duly author Aed off cer of the 'DM+ANH, and not before, 9 ll b nd the 'DM+ANH. /"%' "ecords, pp. 485.0

<4

<8

<>

<2

$d. at 242.

<6

Hu Eng 'ho v. +an Amer can (orld A r9ays, $nc., <68 +h l. 48<, 4>8 /20000.
<5

&af c Alcan N ' e v. $mper al Cegetable D l 'o., $nc., #.". No. 12>281, 26 March 2001, <88 &'"A 885, 8>6, c tat ons om tted.
40

Eacaltos 'oal M nes v. 'ourt of Appeals, #.". No. 114051, June 25, 1558, 248 &'"A 4>0, 4>2.
41

C. J. 7ranc sco, Agency 2>8 /15820. $d. c t ng 2 Am. Jur. 2>@22 &upra note <6 at 4>2. &upra note <4 c t ng Ero9nell v. +arreQo, /'.A.0 84 Dff. #aA. 2415.

42

4<

44

48

J. Nolledo and 'ap strano, %he +h l pp ne !a9 of Agency, 42 /15>00 c t ng 2 '.J.&. 1061.
4>

$d. at 42 c t ng Butch nson 'o. v. #ould, 161 p. >81, 160 'al. <8>. $d. at 46.

42

46

"%' "ecords, pp. 46@82. $d. at 80. $d. at 4>>.

45

80

81

! m v. Uueensland %oFyo 'ommod t es, $nc., 424 +h l. <8, 4<@44 /2002/ c t ng +h l pp ne Nat onal EanF v. 'ourt of Appeals, <06 &'"A 225 /15550.
82

M -ares v. 'ourt of Appeals, #.". No. 11<886, <<6 +h l. 224, 26> /15520 c t ng 26 Am Jur 2d Estoppel . 60, c tat ons om tted? Dne 9ho cla ms the benef t of an estoppel on the ground that he has been m sled by the representat ons of another must not have been m sled through h s o9n 9ant of reasonable care and c rcumspect on. A lacF of d l gence by a party cla m ng estoppel s generally fatal. $f the party conducts h mself 9 th careless nd fference to means of nformat on reasonable at hand, or gnores h ghly susp c ous c rcumstances, he may not nvoFe the doctr ne of estoppel. #ood fa th s generally regarded as re=u r ng the e1erc se of reasonable d l gence to learn the truth, and accord ngly, estoppel s den ed 9here the party cla m ng t 9as put on n=u ry as to the truth and had ava lable means for ascerta n ng t, at least 9here actual fraud has not been pract ced on the party cla m ng the estoppel T
8<

Arcelona v. 'ourt of Appeals, <48 +h l. 280 /15520 c t ng !a Naval Drug 'orporat on v. 'ourt of Appeals, 2<> &'"A 26 /15540.
84

&upra note <5 at 8>5 c t ng 'ervantes v. 'ourt of Appeals, <04 &'"A 28 /15550. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 1410=0 :e ruary =, 3...

$&$A# 9ANK /: ')#A/$ C%A'A$)NES S&$D, pet t oner, vs. :$AN%)S%A /%:E')A, $/WENA 9A$$/G/, 'A$):E /. N)@/, :E#)%)S)'/ /%:E')A, $ENA(/ /%:E')A J$, and W)NS(/N /%:E')A, respondents. +ANGAN)9AN, J.: (hen a banF, by ts acts and fa lure to act, has clearly clothed ts manager 9 th apparent author ty to sell an ac=u red asset n the normal course of bus ness, t s legally obl ged to conf rm the transact on by ssu ng a board resolut on to enable the buyers to reg ster the property n the r names. $t has a duty to

perform necessary and la9ful acts to enable the other part es to en-oy all benef ts of the contract 9h ch t had author Aed. 7he .ase Eefore th s 'ourt s a +et t on for "ev e9 on .ertiorari challeng ng the December 16, 1556 Dec s on of the 'ourt of Appeals 1 /'A0 n 'A@#" &+ No. 4>24>, 9h ch aff rmed the May 20, 1552 Dec s on 2 of the "eg onal %r al 'ourt /"%'0 of Naga ' ty /Eranch 260. %he 'A d sposed as follo9s? (herefore, prem ses cons dered, the Judgment appealed from s hereby A77$"MED. 'osts aga nst the respondent@appellant. < %he d spos t ve port on of the -udgment aff rmed by the 'A ruled n th s 9 se? (BE"E7D"E, n v e9 of all the forego ng f nd ngs, dec s on s hereby rendered 9hereby the :pet t oner; "ural EanF of M laor /'amar nes &ur0, $nc. through ts Eoard of D rectors s hereby ordered to mmed ately ssue a Eoard "esolut on conf rm ng the Deed of &ale t e1ecuted n favor of "enato Dcfem a marFed E1h b ts ', '@1 and '@20I to pay :respondents; the sum of 7$CE B3ND"ED /+800.000 +E&D& as actual damagesI %EN %BD3&AND /+10,000.000 +E&D& as attorney)s feesI %B$"%H %BD3&AND /+<0,000.000 +E&D& as moral damagesI %B$"%H %BD3&AND /+<0,000.000 +E&D& as e1emplary damagesI and to pay the costs. 4 Also assa led s the 7ebruary 2>, 1555 'A "esolut on Mot on for "econs derat on. 7he 8acts %he tr al court)s summary of the und sputed facts 9as reproduced n the 'A Dec s on as follo9s? %h s s an act on for mandamus 9 th damages. Dn Apr l 10, 155>, :here n pet t oner; 9as declared n default on mot on of the :respondents; for fa lure to f le an ans9er 9 th n the reglementary@per od after t 9as duly served 9 th summons. Dn Apr l 2>, 155>, :here n pet t oner; f led a mot on to set as de the order of default 9 th ob-ect on thereto f led by :here n respondents;. Dn June 12, 155>, an order 9as ssued deny ng :pet t oner)s; mot on to set as de the order of default. Dn July 10, 155>, the defendant f led a mot on for recons derat on of the order of June 12, 155> 9 th ob-ect on thereto by :respondents;. Dn July 12, 155>, an order 9as ssued deny ng :pet t oner)s; mot on for recons derat on. Dn July <1, 155>, :respondents; f led a mot on to set case for hear ng. A copy thereof 9as duly furn shed the :pet t oner; but the latter d d not f le any oppos t on and so :respondents; 9ere allo9ed to present the r ev dence e <parte. A certiorari case 9as f led by the :pet t oner; 9 th the 'ourt of Appeals docFeted as 'A #" No. 41452@&+ but the pet t on 9as den ed n a dec s on rendered on March <1, 1552 and the same s no9 f nal. %he ev dence presented by the :respondents; through the test mony of Mar fe D. N Qo, one of the :respondents; n th s case, sho9:s; that she s the daughter of 7ranc sca Dcfem a, a co@:respondent; n th s case, and the late "enato Dcfem a
8

9h ch den ed pet t oner)s

9ho d ed on July 2<, 1554. %he parents of her father, "enato Dcfem a, 9ere Juan ta Arellano Dcfem a and 7el c s mo Dcfem a. Ber other co@:respondents; "o9ena D. Earrogo, 7el c s mo Dcfem a, "enato Dcfem a, Jr. and ( nston Dcfem a are her brothers and s sters. +I&phi+.nJt Mar fe D. N Qo Fno9s the f ve /80 parcels of land descr bed n paragraph > of the pet t on 9h ch are located n Eombon, 'amar nes &ur and that they are the ones possess ng them 9h ch :9ere; or g nally o9ned by her grandparents, Juan ta Arellano Dcfem a and 7el c s mo Dcfem a. Dur ng the l fet me of her grandparents, :respondents; mortgaged the sa d f ve /80 parcels of land and t9o /20 others to the :pet t oner; "ural EanF of M laor as sho9n by the Deed of "eal Estate Mortgage /E1hs. A and A@10 and the +rom ssory Note /E1h. E0. %he spouses 7el c s mo Dcfem a and Juan ta Arellano Dcfem a 9ere not able to redeem the mortgaged propert es cons st ng of seven /20 parcels of land and so the mortgage 9as foreclosed and thereafter o9nersh p thereof 9as transferred to the :pet t oner; banF. Dut of the seven /20 parcels that 9ere foreclosed, f ve /80 of them are n the possess on of the :respondents; because these f ve /80 parcels of land descr bed n paragraph > of the pet t on 9ere sold by the :pet t oner; banF to the parents of Mar fe D. N Qo as ev denced by a Deed of &ale e1ecuted n January 1566 /E1hs. ', '@1 and '@20. %he aforement oned f ve /80 parcels of land sub-ect of the deed of sale /E1h. '0, have not been, ho9ever transferred n the name of the parents of Mer fe D. N Qo after they 9ere sold to her parents by the :pet t oner; banF because accord ng to the Assessor)s Dff ce the f ve /80 parcels of land, sub-ect of the sale, cannot be transferred n the name of the buyers as there s a need to have the document of sale reg stered 9 th the "eg ster of Deeds of 'amar nes &ur. $n v e9 of the forego ng, Mar fe D. N Qo 9ent to the "eg ster of Deeds of 'amar nes &ur 9 th the Deed of &ale /E1h. '0 n order to have the same reg stered. %he "eg ster of Deeds, ho9ever, nformed her that the document of sale cannot be reg stered 9 thout a board resolut on of the :pet t oner; EanF. Mar fe N Qo then 9ent to the banF, sho9ed to f the Deed of &ale /E1h. '0, the ta1 declarat on and rece pt of ta1 payments and re=uested the :pet t oner; for a board resolut on so that the property can be transferred to the name of "enato Dcfem a the husband of pet t oner 7ranc sca Dcfem a and the father of the other :respondents; hav ng d ed already. %he :pet t oner; banF refused her re=uest for a board resolut on and made many al b :s;. &he 9as told that the :pet t oner; banF ha:d; a ne9 manager and t had no record of the sale. &he 9as asFed and she compl ed 9 th the re=uest of the :pet t oner; for a copy of the deed of sale and rece pt of payment. %he pres dent of the :pet t oner; banF told her to get an author ty from her parents and other :respondents; and rece pts ev denc ng payment of the cons derat on appear ng n the deed of sale. &he compl ed 9 th sa d re=u rements and after she gave all these documents, Mar fe D. N Qo 9as aga n told to 9a t for t9o /20 9eeFs because the :pet t oner; banF 9ould st ll study the matter. After t9o /20 9eeFs, Mar fe D. N Qo returned to the :pet t oner; banF and she 9as told that the resolut on of the board 9ould not be released because the :pet t oner; banF ha:d; no records from the old manager. Eecause of th s, Mar fe D. N Qo brought the matter to her la9yer and the latter 9rote a letter on

December 22, 1558 to the :pet t oner; banF n=u r ng 9hy no act on 9as taFen by the board of the re=uest for the ssuance of the resolut on cons der ng that the banF 9as already fully pa d :for; the cons derat on of the sale s nce January 1566 as sho9n by the deed of sale tself /E1h. D and D@1 0. Dn January 18, 155> the :pet t oner; banF ans9ered :respondents); la9yer)s letter /E1h. D and D@10 nform ng the latter that the re=uest for board resolut on ha:d; already been referred to the board of d rectors of the :pet t oner; banF 9 th another re=uest that the latter should be furn shed 9 th a cert f ed mach ne copy of the rece pt of payment cover ng the sale bet9een the :respondents; and the :pet t oner; /E1h. E0. %h s re=uest of the :pet t oner; banF 9as already compl ed :9 th; by Mar fe D. N Qo even before she brought the matter to her la9yer. Dn January 2<, 155> :respondents); la9yer 9rote bacF the branch manager of the :pet t oner; banF nform ng the latter that they 9ere already furn shed the rece pts the banF 9as asF ng :for; and that the :respondents; 9ant:ed; already to Fno9 the stand of the banF 9hether the board :9ould; ssue the re=u red board resolut on as the deed of sale tself already sho9:ed; that the :respondents 9ere; clearly ent tled to the land sub-ect of the sale /E1h. 70. %he manager of the :pet t oner; banF rece ved the letter 9h ch 9as served personally to h m and the latter told Mar fe D. N Qo that s nce he 9as the one h mself 9ho rece ved the letter he 9ould not s gn anymore a copy sho9 ng h m as hav ng already rece ved sa d letter /E1h. 70. After several days from rece pt of the letter /E1h. 70 9hen Mar fe D. N Qo 9ent to the :pet t oner; aga n and re terated her re=uest, the manager of the :pet t oner; banF told her that they could not ssue the re=u red board resolut on as the :pet t oner; banF ha:d; no records of the sale. Eecause of th s Mer fe D. N Qo already 9ent to the r la9yer and ha:d; th s pet t on f led. %he :respondents; are nterested n hav ng the property descr bed n paragraph > of the pet t on transferred to the r names because the r mother and co@pet t oner, 7ranc sca Dcfem a, s very s cFly and they 9ant to mortgage the property for the med cal e1penses of 7ranc sca Dcfem a. %he llness of 7ranc sca Dcfem a beg:a;n after her husband d ed and her suffer ng from arthr t s and pulmonary d sease already became ser ous before December 1558. Mar fe D. N Qo declared that her mother s no9 n ser ous cond t on and they could not have her hosp tal Aed for treatment as they do not have any money and th s s caus ng the fam ly sleepless n ghts and mental angu sh, th nF ng that the r mother may d e because they could not subm t her for med cat on as they do not have money. > %he tr al court granted the +et t on. As noted earl er, the 'A aff rmed the "%' Dec s on. Bence, th s recourse. 2 $n a "esolut on dated June 2<, 1555, th s 'ourt ssued a %emporary "estra n ng Drder d rect ng the tr al court ,to refra n and des st from e1ecut ng :pend ng appeal; the dec s on dated May 20, 1552 n ' v l 'ase No. "%'@5>@<81<, effect ve mmed ately unt l further orders from th s 'ourt., 6 Ruling of the .ourt of Appeals

%he 'A held that here n respondents 9ere ,able to prove the r present cause of act on, aga nst pet t oner. $t ruled that the "%' had -ur sd ct on over the case, because /10 the +et t on nvolved a matter ncapable of pecun ary est mat onI /20 mandamus fell 9 th n the -ur sd ct on of "%'I and /<0 assum ng that the act on 9as for spec f c performance as argued by the pet t oner, t 9as st ll cogn Aable by the sa d court. :ssues $n ts Memorandum,
5

the banF posed the follo9 ng =uest ons?

1. Question of 9urisdiction of the Regional 7rial .ourt . O Bas a "eg onal %r al 'ourt or g nal -ur sd ct on over an act on nvolv ng t tle to real property 9 th a total assessed value of less than +20,000.00P 2. Question of %a&. O May the board of d rectors of a rural banF ng corporat on be compelled to conf rm a deed of absolute sale of real property o9ned by the corporat on 9h ch deed of sale 9as e1ecuted by the banF manager 9 thout pr or author ty of the board of d rectors of the rural banF ng corporat onP 10 7his .ourt/s Ruling %he present +et t on has no mer t. 8irst :ssueR 9urisdiction of the Regional 7rial .ourt +et t oner subm ts that the "%' had no -ur sd ct on over the case. D sput ng the rul ng of the appellate court that the present act on 9as ncapable of pecun ary est mat on, pet t oner argues that the matter n fact nvolved t tle to real property 9orth less than +20,000. %hus, under "A 2>51, the case should have been f led before a metropol tan tr al court, a mun c pal tr al court or a mun c pal c rcu t tr al court. (e d sagree. %he 9ell@settled rule s that -ur sd ct on s determ ned by the allegat ons of the compla nt. 11 $n the present case, the +et t on for Mandamus f led by respondents before the tr al court prayed that pet t oner@banF be compelled to ssue a board resolut on conf rm ng the Deed of &ale cover ng f ve parcels of unreg stered land, 9h ch the banF manager had e1ecuted n the r favor. %he "%' has -ur sd ct on over such act on pursuant to &ect on 21 of E+ 125, 9h ch prov des? &ec. 21. =riginal "urisdiction in other cases . O "eg onal %r al 'ourts shall e1erc se or g nal -ur sd ct onI /10 n the ssuance of 9r t of certiorari, proh b t on, mandamus, quo &arranto, ha#eas corpus and n-unct on 9h ch may be enforced n any part of the r respect ve reg onsI and /20 $n act ons affect ng ambassadors and other publ c m n sters and consuls. A perusal of the +et t on sho9s that the respondents d d not ra se any =uest on nvolv ng the t tle to the property, but merely asFed that pet t oner)s board of

d rectors be d rected to ssue the sub-ect resolut on. Moreover, the banF d d not controvert the allegat ons n the sa d +et t on. %o repeat, the ssue there n 9as not the t tle to the propertyI t 9as respondents) r ght to compel the banF to ssue a board resolut on conf rm ng the Deed of &ale. Second :ssueR Authority of the !an' Manager "espondents n t ated the present proceed ngs, so that they could transfer to the r names the sub-ect f ve parcels of landI and subse=uently, to mortgage sa d lots and to use the loan proceeds for the med cal e1penses of the r a l ng mother. 7or the property to be transferred n the r names, ho9ever, the reg ster of deeds re=u red the subm ss on of a board resolut on from the banF conf rm ng both the Deed of &ale and the author ty of the banF manager, 7e &. %ena, to enter nto such transact on. +et t oner refused. After be ng g ven the runaround by the banF, respondents sued n e1asperat on. Allegations in the $etition for Mandamus Deemed Admitted "espondents based the r act on before the tr al court on the Deed of &ale, the substance of 9h ch 9as alleged n and a copy thereof 9as attached to the +et t on for Mandamus. %he Deed named 7e &. %ena as the representat ve of the banF. +et t oner, ho9ever, fa led to spec f cally deny under oath the allegat ons n that contract. $n fact, t f led no ans9er at all, for 9h ch reason t 9as declared n default. +ert nent prov s ons of the "ules of 'ourt read? &ec. 2. Action or defense #ased on document. O (henever an act on or defense s based upon a 9r tten nstrument or document, the substance of such nstrument or document shall be set forth n the plead ng, and the or g nal or a copy thereof shall be attached to the plead ng as an e1h b t, 9h ch shall be deemed to be a part of the plead ng, or sa d copy may 9 th l Fe effect be set forth n the plead ng. &ec. 6. 0o& to contest genuineness of such documents .O (hen an act on or defense s founded upon a 9r tten nstrument, cop ed n or attached to the correspond ng plead ng as prov ded n the preced ng sect on, the genu neness and due e1ecut on of the nstrument shall be deemed adm tted unless the adverse party, under oath, spec f cally den es them, and sets forth 9hat he cla ms to be the factsI but th s prov s on does not apply 9hen the adverse party does not appear to be a party to the nstrument or 9hen compl ance 9 th an order for an nspect on of the or g nal nstrument s refused. 12 $n fa l ng to f le ts ans9er spec f cally deny ng under oath the Deed of &ale, the banF adm tted the due e1ecut on of the sa d contract. &uch adm ss on means that t acFno9ledged that %ena 9as author Aed to s gn the Deed of &ale on ts behalf. 1< %hus, defenses that are ncons stent 9 th the due e1ecut on and the genu neness of the 9r tten nstrument are cut off by an adm ss on mpl ed from a fa lure to maFe a ver f ed spec f c den al. =ther Acts of the !an' $n any event, the banF acFno9ledged, by ts o9n acts or fa lure to act, the author ty of 7e &. %ena to enter nto b nd ng contracts. After the e1ecut on of the

Deed of &ale, respondents occup ed the propert es n d spute and pa d the real estate ta1es due thereon. $f the banF management bel eved that t had t tle to the property, t should have taFen some measures to prevent the nfr ngement or nvas on of ts t tle thereto and possess on thereof. ! Fe9 se, %ena had prev ously transacted bus ness on behalf of the banF, and the latter had acFno9ledged her author ty. A banF s l able to nnocent th rd persons 9here representat on s made n the course of ts normal bus ness by an agent l Fe Manager %ena, even though such agent s abus ng her author ty. 14 'learly, persons deal ng 9 th her could not be blamed for bel ev ng that she 9as author Aed to transact bus ness for and on behalf of the banF. %hus, th s 'ourt has ruled n !oard of %iquidators v. 1ala&? 18 &ettled -ur sprudence has t that 9here s m lar acts have been approved by the d rectors as a matter of general pract ce, custom, and pol cy, the general manager may b nd the company 9 thout formal author Aat on of the board of d rectors. $n vary ng language, e1 stence of such author ty s establ shed, by proof of the course of bus ness, the usages and pract ces of the company and by the Fno9ledge 9h ch the board of d rectors has, or must be presumed to have, of acts and do ngs of ts subord nates n and about the affa rs of the corporat on. &o also, . . . author ty to act for and b nd a corporat on may be presumed from acts of recogn t on n other nstances 9here the po9er 9as n fact e1erc sed. . . . %hus, 9hen, n the usual course of bus ness of a corporat on, an off cer has been allo9ed n h s off c al capac ty to manage ts affa rs, h s author ty to represent the corporat on may be mpl ed from the manner n 9h ch he has been perm tted by the d rectors to manage ts bus ness. Not9 thstand ng the putat ve author ty of the manager to b nd the banF n the Deed of &ale, pet t oner has fa led to f le an ans9er to the +et t on belo9 9 th n the reglementary per od, let alone present ev dence controvert ng such author ty. $ndeed, 9hen one of here n respondents, Mar fe &. N no, 9ent to the banF to asF for the board resolut on, she 9as merely told to br ng the rece pts. %he banF fa led to categor cally declare that %ena had no author ty. %h s 'ourt stresses the follo9 ng? . . . '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., <6 +h l. ><4, >84@>88, 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 on 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 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., 1> $n th s l ght, the banF s estopped from =uest on ng the author ty of the banF manager to enter nto the contract of sale. $f a corporat on Fno9 ngly perm ts one of ts off cers or any other agent to act 9 th n the scope of an apparent author ty, t holds the agent out to the publ c as possess ng the po9er to do those actsI thus, the corporat on 9 ll, as aga nst anyone 9ho has n good fa th dealt 9 th t through such agent, be estopped from deny ng the agent)s author ty. 12 3n=uest onably, pet t oner has author Aed %ena to enter nto the Deed of &ale. Accord ngly, t has a clear legal duty to ssue the board resolut on sought by respondent)s. Bav ng author Aed her to sell the property, t behooves the banF to conf rm the Deed of &ale so that the buyers may en-oy ts full use. %he board resolut on s, n fact, mere paper 9orF. Nonetheless, t s paper 9orF necessary n the orderly operat ons of the reg ster of deeds and the full en-oyment of respondents) r ghts. +et t oner@banF pers stently and un-ust f ably refused to perform ts legal duty. (orse, t 9as less than cand d n deal ng 9 th respondents regard ng th s matter. $n th s l ght, the 'ourt f nds t proper to assess the banF treble costs, n add t on to the a9ard of damages. (BE"E7D"E, the +et t on s hereby DEN$ED and the assa led Dec s on and "esolut on A77$"MED. %he %emporary "estra n ng Drder ssued by th s 'ourt s hereby !$7%ED. %reble costs aga nst pet t oner. &D D"DE"ED. Melo, $urisima and 2onzaga<Reyes, 99., concur. 4itug, 9., please see concurr ng op n on.

Separate /pinions *)(&G, J./ concurr ng op n onI $ share the v e9s e1pressed n the ponencia 9r tten for the 'ourt by our esteemed colleague Mr. Just ce Artem o C. +angan ban. %here s -ust a br ef clar f catory statement that $ thought could be made. %he ' v l 'ode, be ng a la9 of general appl cat on, can be suppletory to spec al la9s and certa nly not preclus ve of those that govern commerc al transact ons.

$ndeed, n ts gener c sense, c v l la9 can r ghtly be sa d to encompass commerc al la9. 9us civile, n anc ent "ome, 9as merely used to d st ngu sh t from "us gentium or the la9 common to all the nat ons 9 th n the emp re and, at some t me later, only n contrast to nternat onal la9. $n more recent t mes, c v l la9 s so referred to as pr vate la9 n d st nct on from publ c la9 and cr m nal la9. %oday, t may not be totally naccurate to cons der commerc al la9, among some other spec al la9s, as be ng a branch of c v l la9. &ec. 48 of the 'orporat on 'ode prov des? &ec. 48. ;ltra vires acts of corporations . O No corporat on under th s 'ode shall possess or e1erc se any corporate po9ers e1cept those conferred by th s 'ode or by ts art cles of ncorporat on and e1cept such as are necessary or nc dental to the e1erc se of the po9ers so conferred. %he language of the 'ode appears to conf ne the term ultra vires to an act outs de or beyond e1press, mpl ed and nc dental corporate po9ers. Nevertheless, the concept can also nclude those acts that may ostens bly be 9 th n such po9ers but are, by general or spec al la9s, e ther proscr bed or declared llegal. $n general, although perhaps loosely, ultra vires has also been used to des gnate those acts of the board of d rectors or of corporate off cers 9hen act ng beyond the r respect ve spheres of author ty. $n the conte1t that the la9 has used the term n Art cle 48 of the 'orporat on 'ode, an ultra vires act 9ould be vo d and not suscept ble to rat f cat on. 1 $n determ n ng 9hether or not a corporat on may perform an act, one cons ders the log cal and necessary relat on bet9een the act assa led and the corporate purpose e1pressed by the la9 or n the charter. 7or f the act 9ere one 9h ch s la9ful n tself or not other9 se proh b ted and done for the purpose of serv ng corporate ends or reasonably contr butes to the promot on of those ends n a substant al and not merely n a remote and fanc ful sense, t may be fa rly cons dered 9 th n corporate po9ers. 2 &ec. 2< of the 'orporat on 'ode states that the corporate po9ers are to be e1erc sed, all bus ness conducted, and all property of corporat ons controlled and held, by the Eoard of D rectors. (hen the act of the board s 9 th n corporate po9ers but t s done 9 thout the concurrence of the shareholders as and 9hen such approval s re=u red by la9 < or 9hen the act s beyond ts competence to do, 4 the act has been descr bed as vo d 8 or, as unenforceable, > or as neffect ve and not legally b nd ng. 2 %hese hold ngs not9 thstand ng, the act cannot accurately be l Fened to an ultra vires act of the corporat on tself def ned n &ect on 48 of the 'ode. (here the act s 9 th n corporate po9ers but the board has acted 9 thout be ng competent to ndependently do so, the act on s not necessar ly and totally devo d of effects, and t may generally be rat f ed e1pressly or mpl edly. %hus, an acceptance of benef ts der ved by the shareholders from an outs de nvestment made by the board 9 thout the re=u red concurrence of the stocFholders may, nonetheless, be so cons dered as an effect ve nvestment. 6 $t may be sa d, ho9ever, that 9hen the board resolut on s yet e1ecutory, the act should aptly be deemed noperat ve and spec f c performance cannot be val dly demanded but, f for any reason, the contemplated act on s carr ed out, such pr nc ples as rat f cat on or prescr pt on 9hen appl cable, normally unFno9n n vo d contracts, can serve to negate a cla m for the total null ty thereof.

'orporate off cers, n the r case, may act on such matters as may be author Aed e ther e1pressly by the Ey@la9s or Eoard "esolut ons or mpl edly such as by general pract ce or pol cy or as are mpl ed by e1press po9ers. (hen off cers are allo9ed to act n certa n part cular cases, the r acts conformably there9 th can b nd the company. Bence, a corporate off cer entrusted 9 th general management and control of the bus ness has the mpl ed author ty to act or contract for the corporat on 9h ch may be necessary or appropr ate to conduct the ord nary bus ness. 5 $f the act of corporate off cers comes 9 th n corporate po9ers but t s done 9 thout any e1press or mpl ed author ty therefor from the by@la9s, board resolut ons or corporate pract ces, such an act does not b nd the corporat on. %he Eoard, ho9ever, act ng 9 th n ts competence, may rat fy the unauthor Aed act of the corporate off cer. &o, too, a corporat on may be held n estoppel from deny ng as aga nst nnocent th rd persons the author ty of ts off cers or agents 9ho have been clothed by t 9 th ostens ble or apparent author ty. 10 %he 'orporat on 'ode tself has not been that e1pl c t 9 th respect to the conse=uences of ultra vires actsI hence, the var ed ascr pt ons to ts effects heretofore e1pressed. $t may 9ell be to cons der fut le any further attempt to have these s tuat ons bear any e1act e=u valence to the c v l la9 precepts of defect ve contracts. Nevertheless, general statements could be made. Bere re terated, 9h le an act of the corporat on 9h ch s e ther llegal or outs de of e1press, mpl ed or nc dental po9ers as so prov ded by la9 or the charter 9ould be vo d under Art cle 8 11 of the ' v l 'ode, and the act s not suscept ble to rat f cat on, an unauthor Aed act / f 9 th n corporate po9ers0 of the board or a corporate off cer, ho9ever, 9ould only be unenforceable conformably 9 th Art cle 140< 12 of the ' v l 'ode but, f the party 9 th 9hom the agent has contracted s a9are of the latter)s l m ts of po9ers, the unauthor Aed act s declared vo d by Art cle 1656 1< of the same 'ode, although st ll suscept ble thereunder to rat f cat on by the pr nc pal. Any person deal ng 9 th corporate boards and off cers may be sa d to be charged 9 th the Fno9ledge that the latter can only act 9 th n the r respect ve l m ts of po9er, and he s put to not ce accord ngly. %hus, t 9ould generally behoove such a person to looF nto the e1tent of the author ty of corporate agents s nce the onus 9ould ord nar ly be 9 th h m.+I&phi+.nJt

:ootnotes
1

&pec al %h rteenth D v s on composed of J. "enato '. Dacudao, ponenteI and JJ &alvador J. CaldeA Jr. /cha rman0 and "oberto A. Earr os /member0, both concurr ng.
2

+enned by Judge Anton o N. #erona. 'A Dec s on, p. 5I rollo, p. 28. "%' Dec s on, p. >I rollo, p. 45. Rollo, pp. <>@<2.

<

>

"%' Dec s on, pp. 1@<I rollo, pp. 44@4>.

%he case 9as deemed subm tted for resolut on on Dctober 22, 1555, upon rece pt by th s 'ourt of the respect ve Memoranda of the pet t oner and the respondents. %he Memorandum of +et t oner 9as s gned by Atty. Dav d '. Naval, 9h le that of respondents 9as s gned by Atty. Eusta=u o &. Eeltran.
6

Rollo, p. 112. Rollo, pp. 18<@1>0. :#id., p. 184.

10

11

&ant ago v. #u ngona, 256 &'"A 28>, 2>>, November 16, 1556I Eernate v. 'A, 2>< &'"A <2<, Dctober 16, 155>I &andel v. 'A, 2>2 &'"A 101, &eptember 15, 155>.
12

"ule 6 of the "ules of 'ourt. $mper al %e1t le M lls, $nc. v. '.A., 16< &'"A 1, March 22, 1550. 7 rst +h l pp ne $nternat onal EanF v. 'A, nfra, note 12. 20 &'"A 562, 1008, August 14, 15>2, per &ancheA, J. 7ranc sco v. #&$&, 2 &'"A 822, 86<@864, March <0, 15><, per "eyes, J.E.!., J.

1<

14

18

1>

12

7 rst $nternat onal EanF v. 'A, 282 &'"A 285, January 24, 155>I +eople)s A rcargo and (arehous ng 'o., $nc. v. 'A, 252 &'"A 120, 164@168, Dctober 2, 1556.

*)(&G, 9., concurr ng op n onI

1

"epubl c vs. Aco-e M n ng 'o , $nc., 2 &'"A <>1. Although n th s case the &upreme 'ourt held that the open ng of a post off ce branch by a corporat on falls under ts mpl ed po9ers and, therefore, not an ultra vires act, s nce sa d fac l ty s needed for the conven ence of ts personnel and employees.
2

Nat onal +o9er 'orporat on vs. Judge Cera, 120 &'"A 221.

<

&uch as an the sale of all or substant ally all of the corporate assets or an nvestment n another corporat on outs de corporate purposes. ! Fe the removal of a d rector. +eQa vs. 'ourt of Appeals, 15< &'"A 212. " cafort vs. Moya, 158 &'"A 242.

>

Nat no vs. $ntermed ate Appellate 'ourt, 152 &'"A <2<.

#oFong9e , Jr. vs. &ecur t es N E1change 'omm ss on, 65 &'"A <<> 52 &'"A 26.
5

Eoard of ! =u dators vs. Be rs of *ala9, 20 &'"A 562.

10

$n Hao *a & n %rad ng vs. 'ourt of Appeals, the 'ourt sa d. %he rule s, of course settled that although an off cer or agent acts 9 thout or n e1cess of, h s actual author ty ho9ever, f he acts 9 th n the scope of an apparent author ty 9 th 9h ch the corporat on has clothed h m by hold ng h m out or perm tt ng h m to appear as hav ng such author ty, the corporat on s bound thereby n favor of a person 9ho deals 9 th h m n good fa th n rel ance on that apparent author ty, as 9here an off cer s allo9ed to e1erc se a part cular author ty 9 th respect to the bus ness, or a part cular branch of t, cont nuously and publ cly, for a cons derable t me. Also, , f a pr vate corporat on ntent onally or negl gently clothes ts off cers or agent 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. /7letcher, op, c t. <400 %h s ,apparent author ty may result from /10 the general manner by 9h ch the corporat on holds out an off cer or agent as hav ng po9er to act or, n other 9ords, the apparent author ty 9 th 9h ch t clothes h m to act n general, or /20 the ac=u escence n h s acts of a part cular nature, 9 th actual or construct ve Fno9ledge thereof, 9hether 9 th n or 9 thout the scope of h s ord nary po9ers.,
11

Art. 8. Acts e1ecuted aga nst the prov s ons of mandatory or proh b tory la9s shall be vo d e1cept 9hen the la9 tself author t es the r val d ty.
12

Art. 140<. %he follo9 ng contracts are unenforceable, unless they are rat f ed.

/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 /20 %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 and 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? /a0 An agreement that by ts terms s not to be performed 9 th n a year from the maF ng thereofI /b0 A spec al prom se to ans9er for the debt, default or m scarr age of anotherI /c0 An agreement made n cons derat on of marr age, other than a mutual prom se to marryI /d0 An agreement for the sale of goods, chattels or th ngs n act on, at a pr ce not less than f ve hundred pesos, unless the buyer accept and rece ve part of such goods and chattels, or the ev dences, or some of them of such th ngs n act on, or pay at the t me some part of the purchase moneyI but 9hen a sale s made by

auct on and entry s made by the auct oneer n h s sales booF, at the t me of the sale, of the amount and F nd of property sold, terms of sale, pr ce, names of the purchasers and person on 9hose account the sale s made, t s a suff c ent memorandumI /e0 An agreement for the leas ng for a longer per od than one year, or for the sale of real property or of an nterest there nI /f0 A representat on as to the cred t of a th rd personI /<0 %hose 9here both part es are ncapable of g v ng consent to a contract.
1<

$f the agent contracts n the name of the pr nc pal, e1ceed ng the scope of h s author ty and the pr nc pal does not rat fy the contract, t shall be vo d f the party 9 th 9hom the agent contracted s a9are of the l m ts of the po9ers granted by the pr nc pal. $n th s case, ho9ever, the agent s l able f he undertooF to secure the pr nc pal)s rat f cat on. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN

G.$. No. ==24< /cto er 30, 1<<4 K&E %&)S/N, doin" usiness under t-e firm name and styleIK&E %&)S/N +A+E$ S&++#8,I pet t oner, vs. (5E %/&$( /: A++EA#S, *A#)AN( )N*ES('EN( ASS/%)A(ES, respondents. %eighton R. Siazon for petitioner. Melanio %. Horeta for private respondent.

9)!)N, J.: %h s pet t on for rev e9 assa ls the dec s on of the respondent 'ourt of Appeals order ng pet t oner to pay pr vate respondent, among others, the sum of +252,462.<0 9 th nterest. &a d dec s on reversed the appealed dec s on of the tr al court rendered n favor of pet t oner. %he case nvolves an act on for a sum of money f led by respondent aga nst pet t oner anchored on the follo9 ng antecedent facts? +et t oner *ue 'u son s a sole propr etorsh p engaged n the purchase and sale of ne9spr nt, bond paper and scrap, 9 th places of bus ness at Eaesa, UueAon ' ty, and &to. 'r sto, E nondo, Man la. +r vate respondent Cal ant $nvestment

Assoc ates, on the other hand, s a partnersh p duly organ Aed and e1 st ng under the la9s of the +h l pp nes 9 th bus ness address at *alooFan ' ty. 7rom December 4, 1525 to 7ebruary 18, 1560, pr vate respondent del vered var ous F nds of paper products amount ng to +252,462.<0 to a certa n ! l an %an of !% %rad ng. %he del ver es 9ere made by respondent pursuant to orders allegedly placed by % u Buy % ac 9ho 9as then employed n the E nondo off ce of pet t oner. $t 9as l Fe9 se pursuant to % ac)s nstruct ons that the merchand se 9as del vered to ! l an %an. 3pon del very, ! l an %an pa d for the merchand se by ssu ng several checFs payable to cash at the spec f c re=uest of % u Buy % ac. $n turn, % ac ssued n ne /50 postdated checFs to pr vate respondent as payment for the paper products. 3nfortunately, sad checFs 9ere later d shonored by the dra9ee banF. %hereafter, pr vate respondent made several demands upon pet t oner to pay for the merchand se n =uest on, cla m ng that % u Buy % ac 9as duly author Aed by pet t oner as the manager of h s E nondo off ce, to enter nto the =uest oned transact ons 9 th pr vate respondent and ! l an %an. +et t oner den ed any nvolvement n the transact on entered nto by % u Buy % ac and refused to pay pr vate respondent the amount correspond ng to the sell ng pr ce of the sub-ect merchand se. !eft 9 th no recourse, pr vate respondent f led an act on aga nst pet t oner for the collect on of +252,462.<0 represent ng the pr ce of the merchand se. After due hear ng, the tr al court d sm ssed the compla nt aga nst pet t oner for lacF of mer t. Dn appeal, ho9ever, the dec s on of the tr al court 9as mod f ed, but 9as n effect reversed by the 'ourt of Appeals, the d spos t ve port on of 9h ch reads? (BE"E7D"E, the dec s on appealed from s MDD$7$ED n that defendant@ appellant *ue 'u son s hereby ordered to pay pla nt ff@appellant Cal ant $nvestment Assoc ates the sum of +252,462.<0 9 th 12R nterest from the f l ng of the compla nt unt l the amount s fully pa d, plus the sum of 2R of the total amount due as attorney)s fees, and to pay the costs. $n all other respects, the dec s on appealed from s aff rmed. /Rollo, p. 880 $n th s pet t on, pet t oner contends that? %BE BDND"AE!E 'D3"% E""ED $N 7$ND$N# %$3 B3H %$A' A#EN% D7 DE7ENDAN%@A++E!!AN% 'DN%"A"H %D %BE 3ND$&+3%EDME&%AE!$&BED 7A'%& AND '$"'3M&%AN'E&. %BE BDND"AE!E 'D3"% E""ED $N 7$ND$N# DE7ENDAN%@A++E!!AN% !$AE!E 7D" AN DE!$#A%$DN 3ND$&+3%ED!H EE!DN#$N# %D %$3 B3H %$A'. %BE BDND"AE!E 'D3"% E""ED $N "ECE"&$N# %BE (E!!@7D3NDED DE'$&$DN D7 %BE %"$A! 'D3"%, /Rollo, p, 150 %he ssue here s really =u te s mple O 9hether or not % u Buy % ac possessed the re=u red author ty from pet t oner suff c ent to hold the latter l able for the d sputed transact on. %h s pet t on ought to have been den ed outr ght, for n the f nal analys s, t ra ses a factual ssue. $t s elementary that n pet t ons for rev e9 under "ule 48, th s

'ourt only passes upon =uest ons of la9. An e1cept on thereto occurs 9here the f nd ngs of fact of the 'ourt of Appeals are at var ance 9 th the tr al court, n 9h ch case the 'ourt rev e9s the ev dence n order to arr ve at the correct f nd ngs based on the records. As to the mer ts of the case, t s a 9ell@establ shed rule that one 9ho clothes another 9 th apparent author ty as h s agent and holds h m out to the publ c as such cannot be perm tted to deny the author ty of such person to act as h s agent, to the pre-ud ce of nnocent th rd part es deal ng 9 th such person n good fa th and n the honest bel ef that he s 9hat he appears to be /MacFe, et al, v. 'amps, 2 +h l. 88< /1502;I +h l pp ne Nat onal EanF. v 'ourt of Appeals, 54 &'"A <82 :1525;0. 7rom the facts and the ev dence on record, there s no doubt that th s rule obta ns. %he pet t on must therefore fa l. $t s ev dent from the records that by h s o9n acts and adm ss on, pet t oner held out % u Buy % ac to the publ c as the manager of h s store n &to. 'r sto, E nondo, Man la. More part cularly, pet t oner e1pl c tly ntroduced % u Buy % ac to Eernard no C llanueva, respondent)s manager, as h s /pet t oner)s0 branch manager as test f ed to by Eernard no C llanueva. &econdly, ! l an %an, 9ho has been do ng bus ness 9 th pet t oner for =u te a 9h le, also test f ed that she Fne9 % u Buy % ac to be the manager of pet t oner)s &to. 'r sto, E nondo branch. %h s general percept on of % u Buy % ac as the manager of pet t oner)s &to. 'r sto store s even made man fest by the fact that % u Buy % ac s Fno9n n the commun ty to be the ,F naFapat d, /godbrother0 of pet t oner. $n fact, even pet t oner adm tted h s close relat onsh p 9 th % u Buy % ac 9hen he sa d that they are ,l Fe brothers, /Rollo, p. 840. %here 9as thus no reason for anybody espec ally those transact ng bus ness 9 th pet t oner to even doubt the author ty of % u Buy % ac as h s manager n the &to. 'r sto E nondo branch. $n a fut le attempt to d scred t C llanueva, pet t oner alleges that the former)s test mony s clearly self@serv ng nasmuch as C llanueva 9orFed for pr vate respondent as ts manager. (e d sagree, %he argument that C llanueva)s test mony s self@serv ng and therefore nadm ss ble on the lame e1cuse of h s employment 9 th pr vate respondent utterly m sconstrues the nature of ,)self@serv ng ev dence, and the spec f c ground for ts e1clus on. As po nted out by th s 'ourt n .o v. .ourt of Appeals et, al., /55 &'"A <21 :1560;0? &elf@serv ng ev dence s ev dence made by a party out of court at one t meI it does not include a party/s testimony as a &itness in court . $t s e1cluded on the same ground as any hearsay ev dence, that s the lacF of opportun ty for cross@ e1am nat on by the adverse party, and on the cons derat on that ts adm ss on 9ould open the door to fraud and to fabr cat on of test mony. Dn theother hand, a party)s test mony n court s s9orn and affords the other party the opportun ty for cross@e1am nat on /emphas s suppl ed0 +et t oner c tes C llanueva)s fa lure, desp te h s comm tment to do so on cross@ e1am nat on, to produce the very f rst nvo ce of the transact on bet9een pet t oner and pr vate respondent as another ground to d scred t C llanueva)s test mony. &uch fa lure, proves that C llanueva 9as not only bluff ng 9hen he pretended that he can produce the nvo ce, but that C llanueva 9as l Fe9 se prevar cat ng 9hen he ns sted that such pr or transact ons actually tooF place.

+et t oner s m staFen. $n fact, t 9as pet t oner)s counsel h mself 9ho 9 thdre9 the reservat on to have C llanueva produce the document n court. As aptly observed by the 'ourt of Appeals n ts dec s on? . . . Bo9ever, dur ng the hear ng on March <, 1561, C llanueva fa led to present the document adverted to because defendant@appellant)s counsel 9 thdre9 h s reservat on to have the former /C llanueva0 produce the document or nvo ce, thus prompt ng pla nt ff@appellant to rest ts case that same day /t.s.n., pp. <5@ 40, &ess. of March <, 15610. No9, defendant@appellant assa ls the cred b l ty of C llanueva for hav ng allegedly fa led to produce even one s ngle document to sho9 that pla nt ff@appellant have had transact ons before, 9hen n fact sa d fa lure of C llanueva to produce sa d document s a d rect off@shoot of the act on of defendant@appellant)s counsel 9ho 9 thdre9 h s reservat on for the product on of the document or nvo ce and 9h ch led pla nt ff@appellant to rest ts case that very day. /Rollo, p.820 $n the same manner, pet t oner assa ls the cred b l ty of ! l an %an by alleg ng that %an 9as part of an ntr cate plot to defraud h m. Bo9ever, pet t oner fa led to substant ate or prove that the sub-ect transact on 9as des gned to defraud h m. $ron cally, t 9as even the test mony of pet t oner)s daughter and ass stant manager $melda *ue 'u son 9h ch conf rmed the cred b l ty of %an as a 9 tness. Dn the 9 tness stand, $melda test f ed that she Fne9 for a fact that pr or to the transact on n =uest on, %an regularly transacted bus ness 9 th her father /pet t oner here n0, thereby corroborat ng %an)s test mony to the same effect. As correctly found by the respondent court, there 9as no log cal e1planat on for %an to mpute l ab l ty upon pet t oner. "ather, the test mony of $melda *ue 'u son only served to add credence to %an)s test mony as regards the transact on, the l ab l ty for 9h ch pet t oner 9 shes to be absolved. Eut of even greater 9e ght than any of these test mon es, s pet t oner)s categor cal adm ss on on the 9 tness stand that % u Buy % ac 9as the manager of h s store n &to. 'r sto, E nondo, to 9 t? 'ourt? 111 111 111 U And 9ho 9as manag ng the store n &to. 'r stoP A At f rst t 9as Mr. Ang, then later Mr. % u Buy % ac but $ cannot remember the e1act year. U &o, Mr. % u Buy % ac tooF over the management,. A Not that 9as because every afternoon, $ 9as there, s r. U Eut n the morn ng, 9ho taFes chargeP A 7iu 0uy 7iac ta'es charge of management and f there /s c0 orders for ne9spr nt or bond papers they are al9ays referred to the compound n Eaesa, s r. /t.s.n., p. 1>, &ess on of January 20, 1561, 'A dec s on, Rollo, p. 80, emphas s suppl ed0.

&uch adm ss on, spontaneous no doubt, and stand ng alone, s suff c ent to negate all the den als made by pet t oner regard ng the capac ty of % u Buy % ac to enter nto the transact on n =uest on. 7urthermore, cons stent 9 th and as an obv ous nd cat on of the fact that % u Buy % ac 9as the manager of the &to. 'r sto branch, three /<0 months after % u Buy % ac left pet t oner)s employ, pet t oner even sent, commun cat ons to ts customers not fy ng them that % u Buy % ac s no longer connected 9 th pet t oner)s bus ness. &uch undertaF ng spoFe unm staFenly of % u Buy % ac)s valuable pos t on as pet t oner)s manager than any uttered d scla mer. More than anyth ng else, th s act taFen together 9 th the declarat on of pet t oner n open court amount to adm ss ons under "ule 1<0 &ect on 22 of the "ules of 'ourt, to 9 t ? ,%he act, declarat on or om ss on of a party as to a relevant fact may be g ven n ev dence aga nst h m., 7or 9ell@ settled s the rule that ,a man)s acts, conduct, and declarat on, 9herever made, f voluntary, are adm ss ble aga nst h m, for the reason that t s fa r to presume that they correspond 9 th the truth, and t s h s fault f they do not. $f a man)s e1tra-ud c al adm ss ons are adm ss ble aga nst h m, there seems to be no reason 9hy h s adm ss ons made n open court, under oath, should not be accepted aga nst h m., /3.&. vs. 'h ng +o, 2< +h l. 826, 86< :1512;I0. Moreover, pet t oner)s une1pla ned delay n d so9n ng the transact ons entered nto by % u Buy % ac desp te several attempts made by respondent to collect the amount from h m, proved all the more that pet t oner 9as a9are of the =uest oned comm ss on 9as tantamount to an adm ss on by s lence under "ule 1<0 &ect on 2< of the "ules of 'ourt, thus? ,Any act or declarat on made n the presence of and 9 th n the observat on of a party 9ho does or says noth ng 9hen the act or declarat on s such as naturally to call for act on or comment f not true, may be g ven n ev dence aga nst h m., All of these po nt to the fact that at the t me of the transact on % u Buy % ac 9as adm ttedly the manager of pet t oner)s store n &to. 'r sto, E nondo. 'onse=uently, the transact on n =uest on as 9ell as the concom tant obl gat on s val d and b nd ng upon pet t oner. Ey h s representat ons, pet t oner s no9 estopped from d scla m ng l ab l ty for the transact on entered by % u Buy % ac on h s behalf. $t matters not 9hether the representat ons are ntent onal or merely negl gent so long as nnocent, th rd persons rel ed upon such representat ons n good fa th and for value As held n the case of Manila Remnant .o. :nc. v. .ourt of Appeals, /151 &'"A >22 :1550;0? More n po nt, 9e f nd that by the pr nc ple of estoppel, Man la "emnant s deemed to have allo9ed ts agent to act as though t had plenary po9ers. Art cle 1511 of the ' v l 'ode prov des? ,Even 9hen the agent has e1ceeded h s author ty, the pr nc pal ssol dar ly l able 9 th the agent f the former allo9ed the latter to act as though he had full po9ers., /Emphas s suppl ed0. %he above@=uoted art cle s ne9. $t s ntended to protect the r ghts of nnocent persons. $n such a s tuat on, both the pr nc pal and the agent may be cons dered as -o nt tortfeasors 9hose l ab l ty s -o nt and sol dary. Author ty by estoppel has ar sen n the nstant case because by ts negl gence, the pr nc pal, Man la "emnant, has perm tted ts agent, A.3. Calenc a and 'o., to

e1erc se po9ers not granted to t. %hat the pr nc pal m ght not have had actual Fno9ledge of theagent)s m sdeed s of no moment. % u Buy % ac, therefore, by pet t oner)s o9n representat ons and man festat ons, became an agent of pet t oner by estoppel, an adm ss on or representat on s rendered conclus ve upon the person maF ng t, and cannot be den ed or d sproved as aga nst the person rely ng thereon /Art cle 14<1, ' v l 'ode of the +h l pp nes0. A party cannot be allo9ed to go bacF on h s o9n acts and representat ons to the pre-ud ce of the other party 9ho, n good fa th, rel ed upon them /+h l pp ne Nat onal EanF v. $ntermed ate Appellate 'ourt, et al., 165 &'"A >60 :1550;0. %aFen n th s l ght,. pet t oner s l able for the transact on entered nto by % u Buy % ac on h s behalf. %hus, even 9hen the agent has e1ceeded h s author ty, the pr nc pal s sol dar ly l able 9 th the agent f the former allo9ed the latter to fact as though he had full po9ers /Art cle 1511 ' v l 'ode0, as n the case at bar. 7 nally, although t may appear that % u Buy % ac defrauded h s pr nc pal /pet t oner0 n not turn ng over the proceeds of the transact on to the latter, such fact cannot n any 9ay rel eve nor e1onerate pet t oner of h s l ab l ty to pr vate respondent. 7or t s an e=u table ma1 m that as 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 /7ranc sco vs. #overnment &erv ce $nsurance &ystem, 2 &'"A 822 :15><;0. $nasmuch as the fundamental ssue of the capac ty or ncapac ty of the purported agent % u Buy % ac, has already been resolved, the 'ourt deems t unnecessary to resolve the other per pheral ssues ra sed by pet t oner. (BE"E7D"E, the nstant pet t on n hereby DEN$ED for lacF of mer t. 'osts aga nst pet t oner. &D D"DE"ED. 8eliciano, Romero, Melo and 4itug, 99., concur.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la %B$"D D$C$&$DN G.$. No. 112=4= July 1=, 3..3

%/NS(AN(E A'/$ !E %AS($/ and %/$A6/N A'/$ !E %AS($/, pet t oners,

vs. %/&$( /: A++EA#S and :$AN%)S%/ A$()G/, respondents. %A$+)/, J.: (-e %ase Eefore us s a +et t on for "ev e9 on 'ert orar 1 seeF ng to annul the Dec s on of the 'ourt of Appeals2 dated May 4, 1554 n 'A@#.". 'C No. <255>, 9h ch aff rmed in toto the dec s on< of the "eg onal %r al 'ourt of UueAon ' ty, Eranch 60, n ' v l 'ase No. U@65@2><1. %he tr al court d sposed as follo9s? ,(BE"E7D"E, the 'ourt f nds defendants 'onstante and 'oraAon Amor de 'astro -o ntly and sol dar ly l able to pla nt ff the sum of? a0 +<0<,>0>.24 represent ng unpa d comm ss onI b0 +28,000.00 for and by 9ay of moral damagesI c0 +48,000.00 for and by 9ay of attorney)s feesI d0 %o pay the cost of th s su t. UueAon ' ty, Metro Man la, December 20, 1551., (-e Antecedent :acts Dn May 25, 1565, pr vate respondent 7ranc sco Art go /,Art go, for brev ty0 sued pet t oners 'onstante A. De 'astro /,'onstante, for brev ty0 and 'oraAon A. De 'astro /,'oraAon, for brev ty0 to collect the unpa d balance of h s broFer)s comm ss on from the De 'astros.4 %he 'ourt of Appeals summar Aed the facts n th s 9 se? ,1 1 1. Appellants8 9ere co@o9ners of four /40 lots located at ED&A corner Ne9 HorF and Denver &treets n 'ubao, UueAon ' ty. $n a letter dated January 24, 1564 /E1h b t ,A@1, p. 144, "ecords0, appellee > 9as author Aed by appellants to act as real estate broFer n the sale of these propert es for the amount of+2<,000,000.00, f ve percent /8R0 of 9h ch 9 ll be g ven to the agent as comm ss on. $t 9as appellee 9ho f rst found % mes %rans t 'orporat on, represented by ts pres dent Mr. "ondar s, as prospect ve buyer 9h ch des red to buy t9o /20 lots only, spec f cally lots 14 and 18. Eventually, somet me n May of 1568, the sale of lots 14 and 18 9as consummated. Appellee rece ved from appellants +46,65<.2> as comm ss on. $t 9as then that the r ft bet9een the contend ng part es soon emerged. Appellee apparently felt short changed because accord ng to h m, h s total comm ss on should be +<82,800.00 9h ch s f ve percent /8R0 of the agreed pr ce of +2,080,000.00 pa d by % mes %rans t 'orporat on to appellants for the t9o /20 lots, and that t 9as he 9ho ntroduced the buyer to appellants and unceas ngly fac l tated the negot at on 9h ch ult mately led to the consummat on of the sale. Bence, he sued belo9 to

collect the balance of +<0<,>0>.24 after hav ng rece ved +46,65<.2> n advance.+I&phi+.nJt Dn the other hand, appellants completely traverse appellee)s cla ms and essent ally argue that appellee s self shly asF ng for more than 9hat he truly deserved as comm ss on to the pre-ud ce of other agents 9ho 9ere more nstrumental n the consummat on of the sale. Although appellants read ly concede that t 9as appellee 9ho f rst ntroduced % mes %rans t 'orp. to them, appellee 9as not des gnated by them as the r e1clus ve real estate agent but that n fact there 9ere more or less e ghteen /160 others 9hose collect ve efforts n the long run d9arfed those of appellee)s, cons der ng that the f rst negot at on for the sale 9here appellee tooF act ve part c pat on fa led and t 9as these other agents 9ho successfully broFered n the second negot at on. Eut desp te th s and out of appellants) ,pure l beral ty, benef cence and magnan m ty,, appellee nevertheless 9as g ven the largest cut n the comm ss on /+46,65<.2>0, although on the pr nc ple of quantum meruit he 9ould have certa nly been ent tled to less. &o appellee should not have been heard to compla n of gett ng only a p ttance 9hen he actually got the l on)s share of the comm ss on and 9orse, he should not have been allo9ed to get the ent re comm ss on. 7urthermore, the purchase pr ce for the t9o lots 9as only +<.> m ll on as appear ng n the deed of sale and not +2.08 m ll on as alleged by appellee. %hus, even assum ng that appellee s ent tled to the ent re comm ss on, he 9ould only be gett ng 8R of the +<.> m ll on, or +160,000.00., $ulin" of t-e %ourt of Appeals %he 'ourt of Appeals aff rmed in toto the dec s on of the tr al court. 8irst. %he 'ourt of Appeals found that 'onstante author Aed Art go to act as agent n the sale of t9o lots n 'ubao, UueAon ' ty. %he hand9r tten author Aat on letter s gned by 'onstante clearly establ shed a contract of agency bet9een 'onstante and Art go. %hus, Art go sought prospect ve buyers and found % mes %rans t 'orporat on /,% mes %rans t, for brev ty0. Art go fac l tated the negot at ons 9h ch eventually led to the sale of the t9o lots. %herefore, the 'ourt of Appeals dec ded that Art go s ent tled to the 8R comm ss on on the purchase pr ce as prov ded n the contract of agency. Second. %he 'ourt of Appeals ruled that Art go)s compla nt s not d sm ss ble for fa lure to mplead as nd spensable part es the other co@o9ners of the t9o lots. %he 'ourt of Appeals e1pla ned that t s not necessary to mplead the other co@ o9ners s nce the act on s e1clus vely based on a contract of agency bet9een Art go and 'onstante. 7hird. %he 'ourt of Appeals l Fe9 se declared that the tr al court d d not err n adm tt ng parol ev dence to prove the true amount pa d by % mes %rans t to the De 'astros for the t9o lots. %he 'ourt of Appeals ruled that ev dencealiunde could be presented to prove that the actual purchase pr ce 9as +2.08 m ll on and not +<.> m ll on as appear ng n the deed of sale. Ev dence aliunde s adm ss ble cons der ng that Art go s not a party, but a mere 9 tness n the deed of sale bet9een the De 'astros and % mes %rans t. %he 'ourt of Appeals e1pla ned that, ,the rule that oral ev dence s nadm ss ble to vary the terms of 9r tten nstruments s generally appl ed only n su ts bet9een part es to

the nstrument and strangers to the contract are not bound by t., Ees des, Art go 9as not su ng under the deed of sale, but solely under the contract of agency. %hus, the 'ourt of Appeals upheld the tr al court)s f nd ng that the purchase pr ce 9as +2.08 m ll on and not +<.> m ll on. Bence, the nstant pet t on. (-e )ssues Accord ng to pet t oners, the 'ourt of Appeals erred n @ $. ND% D"DE"$N# %BE D$&M$&&A! D7 %BE 'DM+!A$N% 7D" 7A$!3"E %D $M+!EAD $ND$&+EN&AE!E +A"%$E&@$N@$N%E"E&%I $$. ND% D"DE"$N# %BE D$&M$&&A! D7 %BE 'DM+!A$N% DN %BE #"D3ND %BA% A"%$#D)& '!A$M BA& EEEN EG%$N#3$&BED EH 73!! +AHMEN%, (A$CE", D" AEANDDNMEN%I $$$. 'DN&$DE"$N# $N'DM+E%EN% EC$DEN'EI $C. #$C$N# '"EDEN'E %D +A%EN%!H +E"J3"ED %E&%$MDNHI C. &AN'%$DN$N# AN A(A"D D7 MD"A! DAMA#E& AND A%%D"NEH)& 7EE&I C$. ND% A(A"D$N# %BE DE 'A&%"D)& MD"A! AND EGEM+!A"H DAMA#E&, AND A%%D"NEH)& 7EE&. (-e %ourt's $ulin" %he pet t on s bereft of mer t. First Issue: whether the co-plaint -erits dis-issal !or !ailure to i-plead other co8owners as indispensa&le parties %he De 'astros argue that Art go)s compla nt should have been d sm ssed for fa lure to mplead all the co@o9ners of the t9o lots. %he De 'astros cla m that Art go al9ays Fne9 that the t9o lots 9ere co@o9ned by 'onstante and 'oraAon 9 th the r other s bl ngs Jose and 'armela 9hom 'onstante merely represented. %he De 'astros contend that fa lure to mplead such nd spensable part es s fatal to the compla nt s nce Art go, as agent of all the four co@o9ners, 9ould be pa d 9 th funds co@o9ned by the four co@o9ners. %he De 'astros) content ons are devo d of legal bas s. An nd spensable party s one 9hose nterest 9 ll be affected by the court)s act on n the l t gat on, and 9 thout 9hom no f nal determ nat on of the case can be had.2 %he -o nder of nd spensable part es s mandatory and courts cannot proceed 9 thout the r presence.6 (henever t appears to the court n the course of a proceed ng that an nd spensable party has not been -o ned, t s the duty of the court to stop the tr al and order the nclus on of such party. 5 Bo9ever, the rule on mandatory -o nder of nd spensable part es s not appl cable to the nstant case.

%here s no d spute that 'onstante appo nted Art go n a hand9r tten note dated January 24, 1564 to sell the propert es of the De 'astros for +2< m ll on at a 8 percent comm ss on. %he author ty 9as on a f rst come, f rst serve bas s. %he author ty reads n full? ,24 Jan. 64 %o (hom $t May 'oncern? %h s s to state that Mr. 7ranc sco Art go s author Aed as our real estate broFer n connect on 9 th the sale of our property located at Edsa 'orner Ne9 HorF N Denver, 'ubao, UueAon ' ty. AsF ng pr ce + 2<,000,000.00 9 th 8R comm ss on as agent)s fee. '.'. de 'astro o9ner N represent ng co@o9ners %h s author ty s on a f rst@come 7 rst serve bas s K'A', 'onstante s gned the note as o9ner and as representat ve of the other co@ o9ners. 3nder th s note, a contract of agency 9as clearly const tuted bet9een 'onstante and Art go. (hether 'onstante appo nted Art go as agent, n 'onstante)s nd v dual or representat ve capac ty, or both, the De 'astros cannot seeF the d sm ssal of the case for fa lure to mplead the other co@o9ners as nd spensable part es. $he De *astros ad-it that the other co8owners are solidaril, lia&le under the contract o! a2enc,,10 c t ng Art cle 1518 of the ' v l 'ode, 9h ch reads? Art. 1518. $f t9o or more persons have appo nted an agent for a common transact on or undertaF ng, they shall be sol dar ly l able to the agent for all the conse=uences of the agency. %he sol dary l ab l ty of the four co@o9ners, ho9ever, m l tates aga nst the De 'astros) theory that the other co@o9ners should be mpleaded as nd spensable part es. A noted commentator e1pla ned Art cle 1518 thus K ,%he rule n th s art cle appl es even 9hen the appo ntments 9ere made by the pr nc pals n separate acts, prov ded that they are for the same transact on. (-e solidarity arises from t-e common interest of t-e principals, and not from t-e act of constitutin" t-e a"ency. 9y Airtue of t-is solidarity, t-e a"ent can recoAer from any principal t-e F-ole compensation and indemnity oFin" to -im y t-e ot-ers. %he part es, ho9ever, may, by e1press agreement, negate th s sol dary respons b l ty. %he sol dar ty does not d sappear by the mere part t on effected by the pr nc pals after the accompl shment of the agency.

$f the undertaF ng s one n 9h ch several are nterested, but only some create the agency, only the latter are sol dar ly l able, 9 thout pre-ud ce to the effects of negotiorum gestio 9 th respect to the others. And f the po9er granted ncludes var ous transact ons some of 9h ch are common and others are not, only those nterested n each transact on shall be l able for t.,11 (hen the la9 e1pressly prov des for sol dar ty of the obl gat on, as n the l ab l ty of co@pr nc pals n a contract of agency, each obl gor may be compelled to pay the ent re obl gat on.12 %he agent may recover the 9hole compensat on from any one of the co@pr nc pals, as n th s case. $ndeed, Art cle 121> of the ' v l 'ode prov des that a cred tor may sue an, of the sol dary debtors. %h s art cle reads? Art. 121>. %he cred tor may proceed aga nst any one of the sol dary debtors or some or all of them s multaneously. %he demand made aga nst one of them shall not be an obstacle to those 9h ch may subse=uently be d rected aga nst the others, so long as the debt has not been fully collected. %hus, the 'ourt has ruled n =perators :ncorporated vs. American !iscuit .o., :nc.1< that K ,1 1 1 solidarit, does not -a;e a solidar, o&li2or an indispensa&le part, in a suit !iled &, the creditor. Art cle 121> of the ' v l 'ode says that the cred tor `may proceed aga nst anyone of the sol dary debtors or some or all of them s multaneously)., /Emphas s suppl ed0 #econd Issue: whether Arti2oAs clai- has &een e(tin2uished &, !ull pa,-ent/ wai'er or a&andon-ent %he De 'astros cla m that Art go 9as fully pa d on June 14, 1568, that s, Art go 9as g ven ,h s proport onate share and no longer ent tled to any balance., Accord ng to them, Art go 9as -ust one of the agents nvolved n the sale and ent tled to a ,proport onate share, n the comm ss on. %hey assert that Art go d d absolutely noth ng dur ng the second negot at on but to s gn as a 9 tness n the deed of sale. Be d d not even prepare the documents for the transact on as an act ve real estate broFer usually does. %he De 'astros) arguments are fl msy. A contract of agency 9h ch s not contrary to la9, publ c order, publ c pol cy, morals or good custom s a val d contract, and const tutes the la9 bet9een the part es.14 %he contract of agency entered nto by 'onstante 9 th Art go s the la9 bet9een them and both are bound to comply 9 th ts terms and cond t ons n good fa th. %he mere fact that ,other agents, ntervened n the consummat on of the sale and 9ere pa d the r respect ve comm ss ons cannot vary the terms of the contract of agency grant ng Art go a 8 percent comm ss on based on the sell ng pr ce. %hese ,other agents, turned out to be employees of % mes %rans t, the

buyer Art go ntroduced to the De 'astros. %h s prompted the tr al court to observe? ,%he alleged `second group) of agents came nto the p cture only dur ng the so@called `second negot at on) and t s amus ng to note that these /s c0 second group, prom nent among 9hom are Atty. Del 'ast llo and Ms. +rudenc o, happened to be employees of % mes %rans t, the buyer of the propert es. And the r efforts 9ere l m ted to conv nc ng 'onstante to )part a9ay) 9 th the propert es because the redempt on per od of the foreclosed propert es s around the corner, so to speaF. /tsn. June >, 15510. 111 %o accept 'onstante)s vers on of the story s to open the floodgates of fraud and dece t. A seller could al9ays pretend re-ect on of the offer and 9a t for somet me for others to rene9 t 9ho are much 9 ll ng to accept a comm ss on far less than the or g nal broFer. $he i--oralit, in the instant case easil, presents itsel! i! one has to consider that the alle2ed Bsecond 2roupA are the e-plo,ees o! the &u,er/ $i-es $ransit and the, ha'e not &ettered the o!!er secured &, Mr. Arti2o !or 3C -illion. $t s to be noted also that 9h le 'onstante 9as too part cular about the unrene9ed real estate broFer)s l cense of Mr. Art go, he d d not bother at all to n=u re as to the l censes of +rudenc o and 'ast llo. /tsn, Apr l 11, 1551, pp. <5@400.,18 /Emphas s suppl ed0 $n any event, 9e f nd that the 8 percent real estate broFer)s comm ss on s reasonable and 9 th n the standard pract ce n the real estate ndustry for transact ons of th s nature. %he De 'astros also contend that Art go)s nact on as 9ell as fa lure to protest estops h m from recover ng more than 9hat 9as actually pa d h m. %he De 'astros c te Art cle 12<8 of the ' v l 'ode 9h ch reads? Art. 12<8. (hen the obl gee accepts the performance, Fno9 ng ts ncompleteness and rregular ty, and 9 thout e1press ng any protest or ob-ect on, the obl gat on s deemed fully compl ed 9 th. %he De 'astros) rel ance on Art cle 12<8 of the ' v l 'ode s m splaced. Art go)s acceptance of part al payment of h s comm ss on ne ther amounts to a 9a ver of the balance nor puts h m n estoppel. %h s s the mport of Art cle 12<8 9h ch 9as e1pla ned n th s 9 se? ,%he 9ord accept, as used n Art cle 12<8 of the ' v l 'ode, means to taFe as sat sfactory or suff c ent, or agree to an ncomplete or rregular performance. <ence/ the -ere receipt o! a partial pa,-ent is not equi'alent to the required acceptance o! per!or-ance as would e(tin2uish the whole o&li2ation. 1>/Emphas s suppl ed0 %here s thus a clear d st nct on bet9een acceptance and mere rece pt. $n th s case, t s ev dent that Art go merely rece ved the part al payment 9 thout 9a v ng the balance. %hus, there s no estoppel to speaF of.

%he De 'astros further argue that laches should apply because Art go d d not f le h s compla nt n court unt l May 25, 1565, or almost four years later. Bence, Art go)s cla m for the balance of h s comm ss on s barred by laches. !aches means the fa lure or neglect, for an unreasonable and une1pla ned length of t me, to do that 9h ch by e1erc s ng due d l gence could or should have been done earl er. $t s negl gence or om ss on to assert a r ght 9 th n a reasonable t me, 9arrant ng a presumpt on that the party ent tled to assert t e ther has abandoned t or decl ned to assert t.12 Art go d sputes the cla m that he neglected to assert h s r ghts. Be 9as appo nted as agent on January 24, 1564. %he t9o lots 9ere f nally sold n June 1568. As found by the tr al court, Art go demanded n Apr l and July of 1568 the payment of h s comm ss on by 'onstante on the bas s of the sell ng pr ce of +2.08 m ll on but there 9as no response from 'onstante. 16 After t became clear that h s demands for payment have fallen on deaf ears, Art go dec ded to sue on May 25, 1565. Act ons upon a 9r tten contract, such as a contract of agency, must be brought 9 th n ten years from the t me the r ght of act on accrues. 15 %he r ght of act on accrues from the moment the breach of r ght or duty occurs. 7rom th s moment, the cred tor can nst tute the act on even as the ten@year prescr pt ve per od beg ns to run.20 %he De 'astros adm t that Art go)s cla m 9as f led 9 th n the ten@year prescr pt ve per od. %he De 'astros, ho9ever, st ll ma nta n that Art go)s cause of act on s barred by laches. !aches does not apply because only four years had lapsed from the t me of the sale n June 1568. Art go made a demand n July 1568 and f led the act on n court on May 25, 1565, 9ell 9 th n the ten@year prescr pt ve per od. %h s does not const tute an unreasonable delay n assert ng one)s r ght. %he 'ourt has ruled, a dela, within the prescripti'e period is sanctioned &, law and is not considered to &e a dela, that would &ar relie!. 21 $n e1pla n ng that laches appl es only n the absence of a statutory prescr pt ve per od, the 'ourt has stated @ ,!aches s recourse n e=u ty. Equit,/ howe'er/ is applied onl, in the a&sence/ ne'er in contra'ention/ o! statutor, law. $hus/ laches/ cannot/ as a rule/ &e used to a&ate a collection suit !iled within the prescripti'e period -andated &, the *i'il *ode. 22 'learly, the De 'astros) defense of laches f nds no support n la9, e=u ty or -ur sprudence. $hird issue: whether the deter-ination o! the purchase price was -ade in 'iolation o! the Rules on E'idence %he De 'astros 9ant the 'ourt to re@e1am ne the probat ve value of the ev dence adduced n the tr al court to determ ne 9hether the actual sell ng pr ce of the t9o lots 9as +2.08 m ll on and not +<.> m ll on. %he De 'astros contend that t s erroneous to base the 8 percent comm ss on on a purchase pr ce of +2.08 m ll on as ordered by the tr al court and the appellate court. %he De 'astros ns st that the purchase pr ce s +<.> m ll on as e1pressly stated n the deed of sale, the due e1ecut on and authent c ty of 9h ch 9as adm tted dur ng the tr al.

%he De 'astros bel eve that the tr al and appellate courts comm tted a m staFe n cons der ng ncompetent ev dence and d sregard ng the best ev dence and parole ev dence rules. %hey cla m that the 'ourt of Appeals erroneously aff rmed su# silentio the tr al court)s rel ance on the var ous correspondences bet9een 'onstante and % mes %rans t 9h ch 9ere mere photocop es that do not sat sfy the best ev dence rule. 7urther, these letters covered only the f rst negot at ons bet9een 'onstante and % mes %rans t 9h ch fa ledI hence, these are mmater al n determ n ng the f nal purchase pr ce. %he De 'astros further argue that f there 9as an undervaluat on, Art go 9ho s gned as 9 tness benef ted therefrom, and be ng e=ually gu lty, should be left 9here he presently stands. %hey l Fe9 se cla m that the 'ourt of Appeals erred n rely ng on ev dence 9h ch 9ere not offered for the purpose cons dered by the tr al court. &pec f cally, E1h b ts ,E,, ,',, ,D, and ,E, 9ere not offered to prove that the purchase pr ce 9as +2.08 M ll on. 7 nally, they argue that the courts a quo erred n g v ng credence to the per-ured test mony of Art go. %hey 9ant the ent re test mony of Art go re-ected as a falsehood because he 9as ly ng 9hen he cla med at the outset that he 9as a l censed real estate broFer 9hen he 9as not. (hether the actual purchase pr ce 9as +2.08 M ll on as found by the tr al court and aff rmed by the 'ourt of Appeals, or +<.> M ll on as cla med by the De 'astros, s a =uest on of fact and not of la9. $nev tably, th s calls for an n=u ry nto the facts and ev dence on record. %h s 9e can not do. $t s not the funct on of th s 'ourt to re@e1am ne the ev dence subm tted by the part es, or analyAe or 9e gh the ev dence aga n. 2< %h s 'ourt s not the proper venue to cons der a factual ssue as t s not a tr er of facts. $n pet t ons for rev e9 on cert orar as a mode of appeal under "ule 48, a pet t oner can only ra se =uest ons of la9. Dur pronouncement n the case of .ormero vs. .ourt of Appeals24 bears re terat on? ,At the outset, t s ev dent from the errors ass gned that the pet t on s anchored on a plea to rev e9 the factual conclus on reached by the respondent court. &uch tasF ho9ever s foreclosed by the rule that n pet t ons for cert orar as a mode of appeal, l Fe th s one, only =uest ons of la9 d st nctly set forth may be ra sed. %hese =uest ons have been def ned as those that do not call for any e1am nat on of the probat ve value of the ev dence presented by the part es. /3n land "esources vs. Development EanF of the +h l pp nes, 200 &'"A 281 :1551; c t ng #oduco vs. 'ourt of appeals, et al., 115 +h l. 8<1I BernandeA vs. 'ourt of Appeals, 145 &'"A >20. And 9hen th s court s asFed to go over the proof presented by the part es, and analyAe, assess and 9e gh them to ascerta n f the tr al court and the appellate court 9ere correct n accord ng super or cred t to th s or that p ece of ev dence and eventually, to the total ty of the ev dence of one party or the other, the court cannot and 9 ll not do the same. /Elayda vs. 'ourt of Appeals, 155 &'"A <45 :1551;0. %hus, n the absence of any sho9 ng that the f nd ngs compla ned of are totally devo d of support n the record, or that they are so glar ngly erroneous as to const tute ser ous abuse of d scret on, such f nd ngs must stand, for th s court s not e1pected or re=u red to e1am ne or contrast the oral and documentary ev dence subm tted by the part es. /Morales vs. 'ourt of Appeals, 152 &'"A <51 :1551; c t ng &anta Ana vs. BernandeA, 16 &'"A 52< :15>>;0.,

(e f nd no reason to depart from th s pr nc ple. %he tr al and appellate courts are n a much better pos t on to evaluate properly the ev dence. Bence, 9e f nd no other recourse but to aff rm the r f nd ng on the actual purchase pr ce.+I&phi+.nJt Fourth Issue: whether award o! -oral da-a2es and attorne,As !ees is proper %he De 'astros cla m that Art go fa led to prove that he s ent tled to moral damages and attorney)s fees. %he De 'astros, ho9ever, c te no concrete reason e1cept to say that they are the ones ent tled to damages s nce the case 9as f led to harass and e1tort money from them. !a9 and -ur sprudence support the a9ard of moral damages and attorney)s fees n favor of Art go. %he a9ard of damages and attorney)s fees s left to the sound d scret on of the court, and f such d scret on s 9ell e1erc sed, as n th s case, t 9 ll not be d sturbed on appeal.28 Moral damages may be a9arded 9hen n a breach of contract the defendant acted n bad fa th, or in &anton disregard of his contractual o#ligation.2> Dn the other hand, attorney)s fees are a9arded n nstances 9here ,the defendant acted n gross and ev dent bad fa th n refus ng to sat sfy the pla nt ff)s pla nly val d, -ust and demandable cla m., 22 %here s no reason to d sturb the tr al court)s f nd ng that ,the defendants) lacF of good fa th and unF nd treatment of the pla nt ff n refus ng to g ve h s due comm ss on deserve censure., %h s 9arrants the a9ard of +28,000.00 n moral damages and + 48,000.00 n attorney)s fees. %he amounts are, n our v e9, fa r and reasonable. Bav ng found a buyer for the t9o lots, Art go had already performed h s part of the barga n under the contract of agency. %he De 'astros should have e1erc sed fa rness and good -udgment n deal ng 9 th Art go by fulf ll ng the r o9n part of the barga n @ pay ng Art go h s 8 percent broFer)s comm ss on based on the actual purchase pr ce of the t9o lots. W5E$E:/$E, the pet t on s den ed for lacF of mer t. %he Dec s on of the 'ourt of Appeals dated May 4, 1554 n 'A@#.". 'C No. <255> s A::)$'E! in toto. &D D"DE"ED. $uno, and $angani#an, 99., concur. Sandoval<2utierrez, 9., no part due to close fam ly relat on 9 th a party.

:ootnote
1

3nder "ule 48 of the "ules of 'ourt.

&eventh D v s on composed of Just ces " cardo J. 7ranc sco /'ha rman and +onente0I &alome A. Montoya and "amon A. Earcelona /Members0.
<

+enned by Judge Een gno %. Daya9. (hen referred to collect vely.

"eferr ng to the De 'astros. "eferr ng to Art go.

>

"ule <, &ect on 2 of the "ules of 'ourtI &eno vs. Mangubat, 18> &'"A 11< /15620I Uu sumb ng vs. 'ourt of Appeals, 165 &'"A <28 /15500I !oAano vs. Eallesteros, 158 &'"A >61 /15510.
6

:#id. C cente J. 7ranc sco, %he "ev sed "ules of 'ourt, Col. 1, p. 221, 152< ed. Memorandum of +et t oner dated Apr l 2<, 1552, p.6I "ollo, p. 128.

10

11

Arturo M. %olent no, 'ommentar es and Jur sprudence on the ' v l 'ode of the +h l pp nes, Col. 8, pp.. 426@425, 1552 ed.
12

Art. 1202 of the ' v l 'ode prov des as follo9s? ,Art. 1202. %he concurrence of t9o or more cred tors or of t9o or more debtors n one and the same obl gat on does not mply that each one of the former has a r ght to demand, or that each one of the latter s bound to render, ent re compl ance 9 th the prestat on. %here s 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.,
1<

184 &'"A 2<6 /15620, re terated n "epubl c vs. &and ganbayan, 12< &'"A 22 /15650.
14

&an Andres vs. "odr gueA, <<2 &'"A 2>5 /20000.

18

Dec s on dated December 20, 1551 of "%' Judge Een gno %. Dayan, "ollo, pp. <<@<4.
1>

%olent no, supra, see note 11, Col. 4, p. 225.

12

"epubl c vs. 'ourt of Appeals, <01 &'"A <>> /15550I Dchagab a vs. 'ourt of Appeals, <04 &'"A 862 /15550.
16

"%' Dec s on, p. 2I Rollo, pp. 20@<>, see p. <8.

15

Art cle 1144 of the ' v l 'ode prov des as follo9s? ,Art. 1144. %he follo9 ng act ons must be brought 9 th n ten years from the t me the r ght of act on accrues? /10 3pon a 9r tten contractI /20 3pon an obl gat on created by la9I /<0 3pon a -udgment.,
20

%olent on, supra, see note 1>, p. 44. Agra vs. +h l pp ne Nat onal EanF, <05 &'"A 805 /15550. :#id.

21

22

2<

Moomba M n ng E1plorat on 'ompany vs. 'ourt of Appeals, , <12 &'"A <66 /15550.
24

242 &'"A 251 /15580. EarAaga vs. 'ourt of Appeals, 2>6 &'"A 108 /15520.

28

2>

Jose '. C tug, 'ompend um of ' v l !a9 and Jur sprudence, p. 641, 155< Ed.
22

Art. 2206, ' v l 'ode of the +h l pp nes. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #714;11

January 13, 1<3.

*)%EN(E S87J&%/ and %)+$)ANA *)A$!/, pla nt ffs@appellants, vs. SAN()AG/ *. S87J&%/, defendant@appellant. Sumulong and 5strada for plaintiffs and appellants. Delgado and Delgado for defendant and appellant. A*AN%E@A, J.: $n 1502 the defendant 9as appo nted by the pla nt ffs adm n strator of the r property and acted as such unt l June <0, 151>, 9hen h s author ty 9as cancelled. %he pla nt ffs are defendant)s father and mother 9ho allege that dur ng h s adm n strat on the defendant ac=u red the property cla med n the compla nt n h s capac ty as pla nt ffs) adm n strator 9 th the r money and for the r benef t. After hear ng the case the tr al court rendered h s dec s on, the d spos t ve part of 9h ch s the follo9 ng? (herefore, the court g ve -udgment for the pla nt ffs and orders? 1. %hat the defendant return to the pla nt ffs the launch Mala#on, n =uest on, and e1ecute all the necessary documents and nstruments for such del very and the reg strat on n the records of the 'ustom Bouse of sa d launch as pla nt ffs) propertyI 2. %hat the defendant return to the pla nt ffs the casco No. 2864, or pay to them the value thereof 9h ch has been f 1ed at the sum of +<,000, and should the return of sa d casco be made, e1ecute all the necessary nstruments and documents for ts reg strat on n pla nt ffs) name at the 'ustom BouseI and <. %hat the defendant return to the pla nt ffs the automob le No. 20>0 and e1ecute the necessary nstruments and documents for ts reg strat on at

the Eureau of +ubl c (orFs. And -udgment s hereby g ven for the defendant absolv ng h m from the compla nt so far concerns? 1. %he rend t on of accounts of h s adm n strat on of pla nt ffs propertyI 2. %he return of the casco No. 2848I <. %he return of the type9r t ng mach neI 4. %he return of the house occup ed by the defendantI and 8. %he return of the pr ce of the p ano n =uest on. Eoth part es appealed from th s -udgment. $n th s nstance defendant ass gns three errors alleged to have been comm tted by the lo9er court n connect on 9 th the three tems of the d spos t ve part of the -udgment unfavorable to h m. (e are of the op n on that the ev dence suff c ently -ust f es the -udgment aga nst the defendant. "egard ng the launch Mala#on, t appears that n July, 1514, the defendant bought t n h s o9n name from the +ac f c 'ommerc al 'o., and after9ards reg stered t at the 'ustom Bouse. Eut h s does not necessar ly sho9 that the defendant bought t for h mself and 9 th h s o9n money, as he cla ms. %h s transact on 9as 9 th n the agency 9h ch he had rece ved from the pla nt ffs. %he fact that he has acted n h s o9n name may be only, as 9e bel eve t 9as, a v olat on of the agency on h s part. As the pla nt ffs) counsel truly say, the =uest on s not n 9hose favor the document of sale of the launch s e1ecuted nor n 9hose name same 9as reg stered, but 9 th 9hose money 9as sa d launch bought. %he pla nt ffs) test mony that t 9as bought 9 th the r money and for them s supported by the fact that, mmed ately after ts purchase, the launch had to be repa red at the r e1pense, although sa d e1pense 9as collected from the defendant. $ the launch 9as not bought for the pla nt ffs and 9 th the r money, t s not e1pla ned 9hy they had to pay for ts repa rs. %he defendant nvoFes the dec s on of th s 'ourt n the case of Martinez vs. Martinez /1 +h l. "ep., >420, 9h ch 9e do not bel eve s appl cable to the present case. $n sa d case, Mart neA, Jr., bought a vessel n h s o9n name and n h s name reg stered t at the 'ustom Bouse. %h s court then sa d that although the funds 9 th 9h ch the vessel 9as bought belonged to Mart neA &r., Mart neA Jr. s ts sole and e1clus ve o9ner. Eut n sa d case the relat on of pr nc pal and agent, 9h ch e1 sts bet9een the pla nt ffs and the defendant n the present case, d d not e1 st bet9een Mart neA, &r., and Mart neA, Jr. Ey th s agency the pla nt ffs here n clothed the defendant 9 th the r representat on n order to purchase the launch n =uest on. Bo9ever, the defendant acted 9 thout th s representat on and bought the launch n h s o9n name thereby v olat ng the agency. $f the result of th s transact on should be that the defendant has ac=u red for h mself the o9nersh p of the launch, t 9ould be e=u valent to sanct on ng th s v olat on and accept ng ts conse=uences. Eut not only must the conse=uences of the v olat on of th s agency not be accepted, but the effects of the agency tself must be sought. $f the defendant contracted the obl gat on to but the launch for the pla nt ffs and n the r representat on, but v rtue of the agency, not9 thstand ng the fact that he bought t n h s o9n name, he s obl ged to transfer to the

pla nt ffs the r ghts he rece ved from the vendor, and the pla nt ffs are ent tled to be subrogated n these r ghts. %here s another po nt of v e9 lead ng us to the same conclus on. 7rom the rule establ shed n art cle 1212 of the ' v l 'ode that, 9hen an agency acts n h s o9n name, the pr nc pal shall have no r ght of act on aga nst the person 9 th 9hom the agent has contracted, cases nvolv ng th ngs belong ng to the pr nc pal are e1cepted. Accord ng to th s e1cept on /9hen th ngs belong ng to the pr nc pal are dealt 9 th0 the agent is #ound to the principal although he does not assume the character of such agent and appears acting in his o&n name /Dec s on of the &upreme 'ourt of &pa n, May 1, 15000. %h s means that n the case of th s e1cept on the agent)s apparent representat on y elds to the pr nc pal)s true representat on and that, n real ty and n effect, the contract must be cons dered as entered nto bet9een the pr nc pal and the th rd personI and, conse=uently, f the obl gat ons belong to the former, to h m alone must also belong the r ghts ar s ng from the contract. %he money 9 th 9h ch the launch 9as bough hav ng come from the pla nt ff, the e1cept on establ shed n art cle 1212 s appl cable to the nstant case. 'oncern ng the casco No. 2864, the defendant adm ts t 9as constructed by the pla nt ff h mself n the latter)s sh p@yard. Defendant)s allegat on that t 9as constructed at h s nstance and 9 th h s money s not supported by the ev dence. $n fact the only proof presented to support th s allegat on s h s o9n test mony contrad cted, on the on hand, by the pla nt ffs) test mony and, on the other hand, rebutted by the fact that, on the date th s casco 9as constructed, he d d not have suff c ent money 9 th 9h ch to pay the e1pense of th s construct on. As to the automob le No. 20>0, there s suff c ent ev dence to sho9 that ts pr ces 9as pa d 9 th pla nt ffs) money. Defendant)s adverse allegat on that t 9as pa d 9 th h s o9n money s not supported by the ev dence. %he c rcumstances under 9h ch, he says, th s payment has been made, n order to sho9 that t 9as made 9 th h s o9n money, rather nd cate the contrary. Be presented n ev dence h s checF@booF 9here n t appears that on March 24, 151>, he ssued a checF for +<00 and on the 22th of same month another for +400 and he says that the f rst nstallment 9as pa d 9 th sa d checFs. Eut t results that, n order to ssue the checF for +<00 on March 24 of that year, he had to depos t +<10 on that same dayI and n order to ssue the other checF for +400 on the 22th of the same month, he depos ted +<50 on that same day. $t 9as necessary for the defendant to maFe these depos ts for on those dates he had not suff c ent money n the banF for 9h ch he could ssue those checFs. Eut, n order to pay for the pr ce of the automob le, he could have made these payments d rectly 9 th the money he depos ted 9 thout the necess ty of depos t ng and 9 thdra9 ng t on the same day. $f th s act on sho9s someth ng, t sho9s defendant)s preconce ved purpose of maF ng t appear that he made the payment 9 th h s o9n funds depos ted n the banF. %he pla nt ffs, n turn, ass gn n th s nstance the follo9 ng three errors alleged to have been comm tted by the lo9er court? 1. %he court erred n not declar ng that the pla nt ffs d d not sell to the defendant the casco No. 2848 and that they 9ere ts o9ners unt l t 9as sunF n June, 151>.

2. %he court erred n absolv ng the defendant from h s obl gat on to render an account of h s adm n strat on to the pla nt ffs, and to pay to the latter the amount of the balance due n the r favor. <. %he court erred n not condemn ng the defendant to pay to the pla nt ffs the value of the 9oods, 9 ndo9s and doors taFen from the r lumber@year by the defendant and used n the construct on of the house on calle "eal of the barr o of !a 'oncepc on, mun c pal ty of Malabon, " Aal. 'oncern ng the casco No. 2848, the lo9er court refra ned from maF ng any declarat on about ts o9nersh p n v e9 of the fact that th s casco had been leased and 9as sunF 9h le n the lessee)s hands before the compla nt n th s case 9as f led. %he lo9er court, therefore, cons dered t unnecessary to pass upon th s po nt. (e agree 9 th the pla nt ffs that the tr al court should have made a pronouncement upon th s casco. %he lessee may be respons ble n damages for ts loss, and t s of nterest to the l t gants n th s case that t be determ ned 9ho s the o9ner of sa d casco that may enforce th s respons b l ty of the lessee. 3pon an e1am nat on of the ev dence relat ve to th s casco, 9e f nd that t belonged to the pla nt ffs and that the latter sold t after9ards to the defendant by means of a publ c nstrument. Not9 thstand ng pla nt ffs) allegat on that 9hen they s gned th s nstrument they 9ere dece ved, bel ev ng t not to be an nstrument of sale n favor of the defendant, nevertheless, they have not adduced suff c ent proof of such dece t 9h ch 9ould destroy the presumpt on of truth 9h ch a publ c document carr es 9 th t. Attorney &ev lla, 9ho acted as the notary n the e1ecut on of th s nstrument, test fy ng as a 9 tness n the case, sa d that he never ver f ed any document 9 thout f rst n=u r ng 9hether the part es Fne9 ts content. Dur conclus on s that th s casco 9as la9fully sold to the defendant by the pla nt ffs. 'oncern ng the 9ood, 9 ndo9s and doors g ven by the pla nt ffs to the defendant and used n the construct on of the latter)s house on calle "eal of the barr o of !a 'oncepc on of the mun c pal ty of Malabon, " Aal, 9e f nd correct the tr al 'ourt)s dec s on that they 9ere g ven to the defendant as h s and h s 9 fe)s property. 'oncern ng the rend t on of accounts 9h ch the pla nt ffs re=u re of the defendant, 9e l Fe9 se f nd correct the tr al court)s dec s on absolv ng the latter from th s pet t on, for t appears, from the pla nt ffs) o9n ev dence, that the defendant used to render accounts of h s agency after each transact ons, to the pla nt ffs) sat sfact on. 7rom the forego ng cons derat ons, 9e aff rm the -udgment appealed from n all ts parts e1cept n so far as thecasco No. 2848 s concerned, and as to th s 9e declare that, t hav ng been sold by the pla nt ffs to the defendant, the latter s absolved. No spec al f nd ngs as to costs. &o ordered. Arellano, ..9., 7orres, 9ohnson, Araullo, Street and Malcolm, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #74<.41

/cto er 4., 1<44

(5E +5)#)++)NE NA()/NA# 9ANK, pla nt ff@appellee, vs. +A6 AG&!E#/ 8 G/N6AGA, E( A#., defendants. +A6 AG&!E#/ 8 G/N6AGA, appellant. 0ilado and 0ilado and 3or#erto Romualdez for appellant. Roman 9. %acson for appellee.

*)##A7$EA#, J.: %he defendant +aA Agudelo y #onAaga appeals to th s court from the -udgment rendered by the 'ourt of 7 rst $nstance of Dcc dental Negros, the d spos t ve part of 9h ch reads as follo9s? (herefore, -udgment s rendered here n absolv ng the defendant Mauro A. #arrucho from the compla nt and order ng the defendant +aA Agudelo y #onAaga to pay to the pla nt ff the sum of +<1,051.88, +h l pp ne currency, together 9 th the nterest on the balance of +20,224.2< at 6 per cent per annum of +4.88 da ly from July 1>, 1525, unt l fully pa d, plus the sum of +1,800 as attorney)s fees, and the costs of th s su t. $t s hereby ordered that n case the above sums ad-udged n favor of the defendant by v rtue of th s -udgment are not pa d to the +h l pp ne Nat onal EanF or depos ted n the off ce of the clerF of th s court, for del very to the pla nt ff, 9 th n three months from the date of th s dec s on, the prov nc al sher ff of Dcc dental Negros shall set at publ c auct on the mortgaged propert es descr bed n anne1 E of the second amended compla nt, and apply the proceeds thereof to the payment of the sums n =uest on. $t s further ordered that n case the proceeds of the mortgaged propert es are not suff c ent to cover the amount of th s -udgment, a 9r t of e1ecut on be ssued aga nst any other property belong ng to the defendant +aA Agudelo y #onAaga, not other9 se e1empt from e1ecut on, to cover the balance result ng therefrom. $n support of her appeal, the appellant ass gns s 1 alleged errors as comm tted by the tr al court, 9h ch 9e shall d scuss n the course of th s dec s on. %he follo9 ng pert nent facts, 9h ch have been proven 9 thout d spute dur ng the tr al, are necessary for the dec s on of the =uest ons ra sed n the present appeal, to 9 t? Dn November 5, 1520, the defendant@appellant +aA Agudelo y #onAaga e1ecuted n favor of her nephe9, Mauro A. #arrucho, the document E1h b t * conferr ng upon h m a spec al po9er of attorney suff c ently broad n scope to enable h m to sell, al enate and mortgage n the manner and form he m ght

deem conven ent, all her real estate s tuated n the mun c pal t es of Murc a and Eacolod, Dcc dental Negros, cons st ng n lots Nos. >1 and 202 of the cadastral survey of Eacolod, Dcc dental Negros, together 9 th the mprovement thereon. Dn December 22, 1520, Amparo A. #arrucho e1ecuted the document E1h b t B 9hereby she conferred upon her brother Mauro A #arrucho a spec al po9er of attorney suff c ently broad n scope to enable h m to sell, al enate, mortgage or other9 se encumber, n the manner and form he m ght deem conven ent, all her real estate s tuated n the mun c pal t es of Murc a and Eago, Dcc dental Negros. Noth ng n the aforesa d po9ers of attorney e1pressly author Aed Mauro A. #arrucho to contract any loan nor to const tute a mortgage on the propert es belong ng to the respect ve pr nc pals, to secure h s obl gat ons. Dn December 2<, 1520, Mauro A. #arrucho e1ecuted n the favor of the pla nt ff ent ty, the +h l pp ne Nat onal banF, the document E1h b t #, 9hereby he const tuted a mortgage on lot No. 626 of the cadastral survey of Murc a, Dcc dental Negros, 9 th all the mprovements thereon, descr bed n transfer cert f cate of t tle No. 2418 ssued n the name of Amparo A. #arrucho, to secure the payment of cred ts, loans, commerc al overdrafts, etc., not e1ceed ng +>,000, together 9 th nterest thereon, 9h ch he m ght obta n from the aforesa d pla nt ff ent ty, ssu ng the correspond ng prom ssory note to that effect. Dur ng certa n months of the year 1521 and 1522, Mauro A. #arrucho ma nta ned a personal current account 9 th the pla nt ff banF n the form of a commerc al cred t 9 thdra9able through checFs /E1h b ts &, 1 and %0. Dn August 24, 15<1, the sa d Mauro A. #arrucho e1ecuted n favor of the pla nt ff ent ty, the +h l pp ne Nat onal EanF, the document E1h b t J 9hereby he const tuted a mortgage on lots Nos. >1 and 202 of the cadastral survey of Eacolod together 9 th the bu ld ngs and mprovements thereon, descr bed n or g nal cert f cates of t tle Nos. 221> and 1146, respect vely, ssued n the name of +aA Agudelo y #onAaga, to secure the payment of cred ts, loans and commerc al overdrafts 9h ch the sa d banF m ght furn sh h m to the amount of +1>,00, payable on August 24, 1522, e1ecut ng the correspond ng prom ssory note to that effect. %he mortgage deeds E1h b t # and J as 9ell as the correspond ng prom ssory notes for +>,000 and +1>,000, respect vely, 9ere e1ecuted n Mauro A. #arrucho)s o9n name and s gned by h m n h s personal capac ty, author A ng the mortgage cred tor, the +h l pp ne Nat onal EanF, to taFe possess on of the mortgaged propert es, by means of force f necessary, n case he fa led to comply 9 th any of the cond t ons st pulated there n. Dn January 4, 1522, the manager of the $lo lo branch of the +h l pp ne Nat onal EanF not f ed Mauro A. #arrucho that h s prom ssory note for +>,000 of 10 days 9 th n 9h ch to maFe payment thereof /E1h b t D0. +a&phil.net Dn May 5, 1522, the sa d manager not f ed Mauro A. #arrucho that h s commerc al cred t 9as closed from that date /E1h b t &0.

$nasmuch as Mauro A. #arrucho had overdra9n h s cred t 9 th the pla nt ff@ appellee, the sa d manager thereof, n a letter dated June 22, 1522 /E1h b t %0, re=uested h m to l =u date h s account amount ng to +18,146.18, at the same t me not fy ng h m that h s prom ssory note for +1>,000 g v ng as secur ty for the commerc al overdraft n =uest on, had fallen due some t me s nce. Dn July 18, 1522, Mauro A. #arrucho, e1ecuted n favor of the pla nt ff ent ty the deed E1h b t ' 9hereby he const tuted a mortgage on lots Nos. >1 and 202 of the cadastral survey of Eacolod, together 9 th the mprovements thereon, descr bed n transfer cert f cates of t tle Nos. 221> and 1146, respect vely, ssued n the name of +aA Agudelo y #onAaga, and on lot No. 626 of the cadastral survey of Murc a, descr bed n transfer cert f cate of t tle No. 2418, ssued n the name of Amparo A. #arrucho. $n connect on of the cred ts, loans, and commerc al overdrafts amount ng to +21,000 9h ch had been granted h m, Mauro A. #arrucho, on the sa d date July 18, 1522, e1ecuted the prom ssory note, E1h b t E, for +21,000 as a novat on of the former prom ssory notes for +>,000 and +1>,000, respect vely. $n v e9 of the aforesa d consol dated mortgage, E1h b t ', the +h l pp ne Nat onal EanF, on the sa d date of July 18, 1522, cancelled the mortgages const tuted on lots Nos. >1, 202 and 626 descr bed n %orrens t tles Nos. 221>, 1146 and 2418, respect vely. Dn November 28, 1528, Amparo A. #arrucho sold lot No. 626 descr bed n cert f cate of t tle No. 2418, to +aA Agudelo y #onAaga /E1h b t M0. Dn January 18, 152>, n the ' ty of Man la, +aA Agudelo y #onAaga s gned the aff dav t, E1h b t N, 9h ch reads as follo9s? 1no& all men #y these presents? %hat $, +aA Agudelo y #onAaga, s ngle, of age, and res dent of the ' ty of Man la, +. $., by these present do hereby agree and consent to the transfer n my favor of lot No. 626 of the 'adastre of Murc a, Dcc dental Negros, +. $., by M ss Amparo A. #arrucho, as ev denced by the publ c nstrument dated November 28, 1528, e1ecuted before the notary publ c Mr. #enaro E. Eened cto, and do hereby further agree to the amount of the l en thereon stated n the mortgage deed e1ecuted by M ss Amparo A. #arrucho n favor of the +h l pp ne Nat onal EanF. $n test mony 9hereof, $ hereunto aff 1 my s gnature n the ' ty of Man la, +.$., th s 18th of January, 152>. /&gd.0 +AL A#3DE!D H #DNLA#A. +ursuant to the sale made by Amparo A. #arrucho n favor of +aA Agudelo y #onAaga, of lot No. 626 of the cadastral survey of Murc a, descr bed n cert f cate of t tle No. 2148 ssued n the name of sa d Amparo A. #arrucho, and to the aff dav t, E1h b t N, transfer cert f cate of t tle No. 8<>5 9as ssued n the name of +aA Agudelo y #onAaga. ( thout d scuss ng and pass ng upon 9hether or not the po9ers of attorney ssued n favor of Mauro A. #arrucho by h s s ster, Amparo A. #arrucho,

and by h s aunt, +aA Agudelo y #onAaga, respect vely, to mortgage the r respect ve real estate, author Aed h m to obta n loans secured by mortgage n the propert es n =uest on, 9e shall cons der the =uest on of 9hether or not +aA Agudelo y #onAaga s l able for the payment of the loans obta ned by Mauro A. #arrucho from the +h l pp ne Nat onal EanF for the secur ty of 9h ch he const tuted a mortgage on the aforesa d real estate belong ng to the defendant@ appellant +aA Agudelo y #onAaga. Art cle 1205 of the ' v l 'ode prov des the follo9 ng? A"%. 1205. Ey the contract of agency, one person b nds h mself to render some serv ce, or to do someth ng for the account or at the re=uest of another. And art cle 1212 of the same 'ode prov des as follo9s? A"%. 1212. (hen an agent acts n h s o9n name, the pr nc pal shall have no r ght of act on aga nst the persons 9 th 9hom the agent has contracted, or such persons aga nst the pr nc pal. $n such case, the agent s d rectly l able to the person 9 th 9hom he has contracted, as f the transact on 9ere h s o9n. 'ases nvolv ng th ngs belong ng to the pr nc pal are e1cepted. %he prov s ons of th s art cle shall be understood to be 9 thout pre-ud ce to act ons bet9een pr nc pal and agent. As de from the phrases ,attorney n fact of h s s ster, Amparo A. #arrucho, as ev denced by the po9er of attorney attached hereto, and ,attorney n fact of +aA Agudelo y #onAaga, 9r tten after the name of Mauro A. #arrucho n the mortgage deeds, E1h b ts #. and J, respect vely, there s noth ng n the sa d mortgage deeds to sho9 that Mauro A. #arrucho s attorney n fact of Amparo A. #arrucho and of +aA Agudelo y #onAaga, and that he obta ned the loans ment oned n the aforesa d mortgage deeds and const tuted sa d mortgages as secur ty for the payment of sa d loans, for the account and at the re=uest of sa d Amparo A. #arrucho and +aA Agudelo y #onAaga. %he above@=uoted phrases 9h ch s mply descr bed h s legal personal ty, d d not mean that Mauro A. #arrucho obta ned the sa d loans and const tuted the mortgages n =uest on for the account, and at the re=uest, of h s pr nc pals. 7rom the t tles as 9ell as from the s gnatures there n, Mauro A. #arrucho, appears to have acted n h s personal capac ty. $n the aforesa d mortgage deeds, Mauro A. #arrucho, n h s capac ty as mortgage debtor, appo nted the mortgage cred tor +h l pp ne Nat onal EanF as h s attorney n fact so that t m ght taFe actual and full possess on of the mortgaged propert es by means of force n case of v olat on of any of the cond t ons st pulated n the respect ve mortgage contracts. $f Mauro A. #arrucho acted n h s capac ty as mere attorney n fact of Amparo A. #arrucho and of +aA Agudelo y #onAaga, he could not delegate h s po9er, n v e9 of the legal pr nc ple ofQdelegata potestas delegare non potestQ /a delegated po9er cannot be delegated0, nasmuch as there s noth ng n the records to sho9 that he has been e1pressly author Aed to do so. Be e1ecuted the prom ssory notes ev denc ng the aforesa d loans, under h s o9n s gnature, 9 thout author ty from h s pr nc pal and, therefore, 9ere not

b nd ng upon the latter /2 'orpus Jur s, pp. ><0@><2, par. 2600. Ne ther s there anyth ng to sho9 that he e1ecuted the prom ssory notes n =uest on for the account, and at the re=uest, of h s respect ve pr nc pals /6 'orpus Jur s, pp. 182@ 1860. 7urthermore, t s noted that the mortgage deeds, E1h b ts ' and J, 9ere cancelled by the documents, E1h b ts $ and !, on July 18, 1522, and n the r stead the mortgage deed, E1h b t ', 9as e1ecuted, n 9h ch there s absolutely no ment on of Mauro A. #arrucho be ng attorney n fact of anybody, and 9h ch sho9s that he obta ned such cred t fro h mself n h s personal capac ty and secured the payment thereof by mortgage const tuted by h m n h s personal capac ty, although on propert es belong ng to h s pr nc pal +aA Agudelo y #onAaga. 7urthermore, the prom ssory notes e1ecuted by Mauro A. #arrucho n favor of the +h l pp ne Nat onal EanF, ev denc ng loans of +>,000 and +1>,000 have been novated by the prom ssory notes for +21,000 /E1h b t E0 e1ecuted by Mauro A. #arrucho, not only 9 thout e1press author ty from h s pr nc pal +aA Agudelo y #onAaga but also under h s o9n s gnature. $n the case of 3ational !an' vs. $alma 2il /88 +h l., ><50, th s court la d do9n the follo9 ng doctr ne? A prom ssory note and t9o mortgages e1ecuted by the agent for and on behalf of h s pr nc pal, n accordance 9 th a po9er of attorney e1ecuted by the pr nc pal n favor of the agent, are val d, and as prov ded by art cle 1222 of contracted by the agentI but a mortgage on real property of the pr nc pal not made and s gned n the name of the pr nc pal s not val d as to the pr nc pal. $t has been nt mated, and the tr al -udge so stated. that t 9as the ntent on of the part es that Mauro A. #arrucho 9ould e1ecute the prom ssory note, E1h b t E, and the mortgage deed, E1h b t ', n h s capac ty as attorney n facts of +aA Agudelo y #onAaga, and that although the terms of the aforesa d documents appear to be contrary to the ntent on of the part es, such ntent on should preva l n accordance 9 th art cle 1261 of the ' v l 'ode. 'omment ng on art cle 1261 of the ' v l 'ode, Manresa, n h s 'ommentar es to the ' v l 'ode, says the follo9 ng? $C. :ntention of the contracting partiesG its appreciation . O $n order that the ntent on may preva l, t s necessary that the =uest on of nterpretat on be ra sed, e ther because the 9ords used appear to be contrary thereto, or by the e1 stence of overt acts opposed to such 9ords, n 9h ch the ntent on of the contract ng part es s made man fest. 7urthermore, n order that t may preva l aga nst the terms of the contract, t must be clear or, n other 9ords, bes des the fact that such ntent on should be proven by adm ss ble ev dence, the latter must be of such charter as to carry n the m nd of the -udge an une=u vocal conv ct on. %h s re=u s te as to the F nd of ev dence s la d do9n n the dec s on relat ve to the Mortgage !a9 of &eptember <0, 1651, declar ng that art cle 1261 of the ' v l 'ode g ves preference to ntent on only 9hen t s clear. (hen the aforesa d c rcumstances s not present n a document, the only

th ng left for the reg ster of deeds to do s to suspend the reg strat on thereof, leav ng the solut on of the problem to the free 9 ll of the part es or to the dec s on of the courts. Bo9ever, the ev dent ntent on 9h ch preva ls aga nst the defect ve 9ord ng thereof s not that of one of the part es, but the general ntent, 9h ch, be ng so, s to a certa n e1tent e=u valent to mutual consent, nasmuch as t 9as the result des red and ntended by the contract ng part es. /6 Manresa, <d ed t on, pp. 22> and 222.0 7urthermore, the records do not sho9 that the loan obta ned by Mauro A. #arrucho, ev denced by the prom ssory note, E1h b t E, 9as for h s pr nc pal +aA Agudelo y #onAaga. %he spec al po9er of attorney, E1h b t *, does not author Ae Mauro A. #arrucho to const tute a mortgage on the real estate of h s pr nc pal to secure h s personal obl gat ons. %herefore, n do ng so by v rtue of the document, E1h b t ', he e1ceeded the scope f h s author ty and h s pr nc pal s not l able for h s acts. /2 'orpus Jur s, p. >81I art cle 1214, ' v l 'ode.0 $t s further cla med that nasmuch as the propert es mortgaged by Mauro A. #arrucho belong to +aA Agudelo y #onAaga, the latter s respons ble for the acts of the former although he acted n h s o9n name, n accordance 9 th the e1cept on conta ned n art cle 1212 of the ' v l 'ode. $t 9ould be an e1cept on 9 th the propert es of h s o9n name n connect on 9 th the propert es of h s pr nc pal, does so 9 th n the scope of h s author ty. $t s noted that Mauro A. #arrucho 9as not author Aed to e1ecute prom ssory notes even n the name of h s pr nc pal +aA Agudelo y #onAaga, nor to const tute a mortgage on her real propert es to secure such prom ssory notes. %he pla nt ff +h l pp ne Nat onal EanF should Fno9 th s nasmuch as t s n duty bound to ascerta n the e1tent of the agent)s author ty before deal ng 9 th h m. %herefore, Mauro A. #arrucho and not +aA Agudelo y #onAaga s personally l able for the amount of the prom ssory note E1h b t E. /2 'orpus Jur s, pp. 8><@8>4.0 Bo9ever, +aA Agudelo y #onAaga n an aff dav t dated January 18, 152> /E1h b t AA0, and n a letter dated January 1>, 152> /E1h b t L0, gave her consent to the l en on lot No. 626 of the cadastre of Murc a, Dcc dental Negros, descr bed n %orrens t tle No. 8<>5, the o9nersh p of 9h ch 9as transferred to her by her n ece Amparo A. #arrucho. %h s acFno9ledgment, ho9ever, does not e1tend to lots Nos. 202 and >1 of the cadastral survey of Eacolod, descr bed n transfer cert f cates of t tle Nos. 1146 and 221>, respect vely, nasmuch as, although t s true that a mortgage s nd v s ble as to the contract ng part es and as top the r successors n nterest /art cle 16>0, ' v l 'ode0, t s not so 9 th respect to a th rd person 9ho d d not taFe part n the const tut on thereof e ther personally or through an agent, nasmuch as he can maFe the acFno9ledgment thereof n the form and to the e1tent he may deem conven ent, on the ground that he s not n duty bound to acFno9ledge the sa d mortgage. %herefore, the only l ab l ty of the defendant@appellant +aA Agudelo y #onAaga s that 9h ch ar ses from the aforesa d acFno9ledgment, but only 9 th respect to the l en and not to the pr nc pal obl gat on secured by the mortgage acFno9ledged by her to have been const tuted on sa d lot No. 626 of the cadastral survey of Murc a, Dcc dental Negros. &uch l ab l ty s not d rect but a subs d ary one. Bav ng reach th s content on, t s unnecessary to pass upon the other =uest ons of la9 ra sed by the defendant@ appellant n her br ef and upon the la9 c ted there n.

$n v e9 of the forego ng cons derat on, 9e are of the op n on and so hold that 9hen an agent negot ates a loan n h s personal capac ty and e1ecutes a prom ssory note under h s o9n s gnature, 9 thout e1press author ty from h s pr nc pal, g v ng as secur ty therefor real estate belong ng to the letter, also n h s o9n name and not n the name and representat on of the sa d pr nc pal, the obl gat on do constructed by h m s personal and does not b nd h s aforesa d pr nc pal. (herefore, t s hereby held that the l ab l ty constructed by the aforesa d defendant@appellant +aA Agudelo y #onAaga s merely subs d ary to that of Mauro A. #arrucho, l m ted lot No. 626 of the cadastral survey of Murc a, Dcc dental Negros, descr bed n %orrens t tle No. 2418. Bo9ever, nasmuch as the pr nc pal obl gator, Mauro A. #arrucho, has been absolved from the compla nt and the pla nt ff@ appellee has not appealed from the -udgment absolv ng h m, the la9 does not afford any remedy 9hereby +aA Agudelo y #onAaga may be re=u red to comply 9 th the sa d subs d ary obl gat on n v e9 of the legal ma1 m that the accessory follo9s the pr nc pal. (herefore, the defendant here n should also be absolved from the compla nt 9h ch s hereby d sm ssed, 9 th the costs aga nst the appellee. &o ordered. Avance>a, ..9., Malcolm, 0ull, and :mperial, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71<..1 NoAem er 11, 1<33

5A$$8 E. KEE#E$ E#E%($)% %/., )N%., pla nt ff@appellant, vs. !/')NG/ $/!$)G&E6, defendant@appellee. 0artford !eaumont for appellant. Ross and %a&rence and Antonio 7. .arrascoso, 9r., for appellee. &%A%EMEN% %he pla nt ff s a domest c corporat on 9 th ts pr nc pal off ce n the c ty of Man la and engaged n the electr cal bus ness, and among other th ngs n the sale of 9hat s Fno9n as the ,Matthe9s, electr c plant, and the defendant s a res dent of %al say, Dcc dental Negros, and A. '. Montel bano 9as a res dent of $lo lo. Bav ng th s nformat on, Montel bano approached pla nt ff at ts Man la off ce, cla m ng that he 9as from $lo lo and l ved 9 th #overnor HuloI that he could f nd purchaser for the ,Matthe9s, plant, and 9as told by the pla nt ff that for any plant that he could sell or any customer that he could f nd he 9ould be pa d a comm ss on of 10 per cent for h s serv ces, f the sale 9as consummated. Among other persons. Montel bano nterv e9s the defendant, and, through h s efforts, one of the ,Matthe9s, plants 9as sold by the pla nt ff to the defendant, and 9as sh pped from Man la to $lo lo, and later nstalled on defendant)s

prem ses after 9h ch, 9 thout the Fno9ledge of the pla nt ff, the defendant pa d the purchase pr ce to Montel bano. As a result, pla nt ff commenced th s act on aga nst the defendant, alleg ng that about August 16, 1520, t sold and del vered to the defendant the electr c plant at the agreed pr ce of +2,81<.88 no part of 9h ch has been pa d, the demands -udgment for the amount 9 th nterest from Dctober 20, 1520. 7or ans9er, the defendant adm ts the corporat on of the pla nt ff, and den es all other mater al allegat ons of the compla nt, and, as an aff rmat ve defense, alleges ,that on or about the 16th of August, 1520, the pla nt ff sold and del vered to the defendant a certa n electr c plant and that the defendant pa d the pla nt ff the value of sa d electr c plant, to 9 t? +2,81<.88., 3pon such ssues the test mony 9as taFen, and the lo9er court rendered -udgment for the defendant, from 9h ch the pla nt ff appeals, cla m ng that the court erred n hold ng that the payment to A. '. Montel bano 9ould d scharge the debt of defendant, and n hold ng that the b ll 9as g ven to Montel bano for collect on purposes, and that the pla nt ff had held out Montel bano to the defendant as an agent author Aed to collect, and n render ng -udgment for the defendant, and n not render ng -udgment for the pla nt ff.

J/5NS, J.: %he test mony s conclus ve that the defendant pa d the amount of pla nt ff)s cla m to Montel bano, and that no part of the money 9as ever pa d to the pla nt ff. %he defendant, hav ng alleged that the pla nt ff sold and del vered the plant to h m, and that he pa d the pla nt ff the purchase pr ce, t devolved upon the defendant to prove the payment to the pla nt ff by a preponderance of the ev dence. $t appears from the test mony of B. E. *eeler that he 9as pres dent of the pla nt ff and that the plant n =uest on 9as sh pped from Man la to $lo lo and cons gned to the pla nt ff tself, and that at the t me of the sh pment the pla nt ff sent Juan 'enar, one of ts employees, 9 th the sh pment, for the purpose of nstall ng the plant on defendant)s prem ses. %hat pla nt ff gave 'enar a statement of the account, nclud ng some e1tras and the e1penses of the mechan c, maF ng a total of +2,8><,58. %hat Montel bano had no author ty from the pla nt ff to rece ve or rece pt for money. %hat n truth and n fact h s serv ces 9ere l m ted and conf ned to the f nd ng of purchasers for the ,Matthe9s, plant to 9hom the pla nt ff 9ould later maFe and consummate the sale. %hat Montel bano 9as not an electr c an, could not nstall the plant and d d not Fno9 anyth ng about ts mechan sm. 'enar, as a 9 tness for the pla nt ff, test f ed that he 9ent 9 th sh pment of the plant from Man la to $lo lo, for the purpose of nstall ng, test ng t, and to see that everyth ng 9as sat sfactory. %hat he 9as there about n ne days, and that he nstalled the plant, and that t 9as tested and approved by the defendant. Be also says that he personally tooF 9 th h m the statement of account of the pla nt ff aga nst the defendant, and that after he 9as there a fe9 days, the defendant asFed to see the statement, and that he gave t to h m, and the defendant sa d, ,he 9as go ng to Feep t., $ sa d that 9as all r ght , f you 9ant., ,$

made no effort at all to collect the amount from h m because Mr. "odr gueA told me he 9as go ng to pay for the plant here n Man la., %hat after the plant 9as nstalled and approved, he del vered t to the defendant and returned to Man la. %he only test mony on the part of the defendant s that of h mself n the form of a depos t on n 9h ch he says that Montel bano sold and del vered the plant to h m, and ,9as the one 9ho ordered the nstallat on of that electr cal plant,, and he ntroduced n ev dence as part of h s depos t on a statement and rece pt 9h ch Montel bano s gned to 9hom he pa d the money. (hen asFed 9hy he pa d the money to Montel bano, the 9 tness says? Eecause he 9as the one 9ho sold, del vered, and nstalled the electr cal plant, and he presented to me the account, E1h b ts A and A@$, and he assured me that he 9as duly author Aed to collect the value of the electr cal plant. %he rece pt offered n ev dence s headed? &%A%EMEN% 7ol o No. 2454

Mr. DDM$N#D "DD"$#3EL, :loilo, :loilo, $.:. $n account 9 th BA""H E. *EE!E" E!E'%"$' 'DM+ANH, $N'. 221 'alle Echa=ue, Uu apo, Man la, +.$. MAN$!A, +.$., August +D, +,)C. %he ans9er alleges and the rece pt sho9s upon ts face that the pla nt ff sold the plant to the defendant, and that he bought t from the pla nt ff. %he rece pt s s gned as follo9s? Received payment BA""H E. *EE!E" E!E'%"$' 'D. $nc., "ec b /&gd.0 A. '. MDN%E!$EAND. %here s noth ng on the face of th s rece pt to sho9 that Montel bano 9as the agent of, or that he 9as act ng for, the pla nt ff. $t s h s o9n personal rece pt and h s o9n personal s gnature. Duts de of the fact that Montel bano rece ved the money and s gned th s rece pt, there s no ev dence that he had any author ty, real or apparent, to rece ve or rece pt for the money. Ne ther s there any ev dence that the pla nt ff ever del vered the statement to Montel bano, or author Aed anyone to del ver t to h m, and t s very apparent that the statement n =uest on s the one 9h ch 9as del vered by the pla nt ff to 'enar, and s the one 9h ch 'enar del vered to the defendant at the re=uest of the defendant. %he ev dence of the defendant that Montel bano 9as the one 9ho sold h m the plant s n d rect confl ct 9 th h s o9n plead ngs and the rece pt statement 9h ch he offered n ev dence. %h s statement also sho9s upon ts face that +61.>0 of the b ll s for?

%o +assage round tr p, 1st 'lass f +40.60 a tr p ........................................... +61.>0. +lus !abor f +8.00 per day O Mach ne)s transportat on ................. 5.68. %h s cla m must be for the e1penses of 'enar n go ng to $lo lo from Man la and return, to nstall the plant, and s strong ev dence that t 9as 'enar and not Montel bano 9ho nstalled the plant. $f Montel bano nstalled the plant, as defendant cla ms, there 9ould not have been any necess ty for 'enar to maFe th s tr p at the e1pense of the defendant. After 'enar)s return to Man la, the pla nt ff 9rote a letter to the defendant re=uest ng the payment of ts account, n ans9er to 9h ch the defendant on &eptember 24 sent the follo9 ng telegram? Electr c plant accessor es and nstallat on are pa d to Montel bano about three 9eeFs *eeler 'ompany d d not present b ll. %h s s n d rect confl ct 9 th the rece pted statement, 9h ch the defendant offered n ev dence, s gned by Montel bano. %hat sho9s upon ts face that t 9as an tem Aed statement of the account of pla nt ff 9 th the defendant. Aga n, t 9 ll be noted that the rece pt 9h ch Montel bano s gned s not dated, and t does not sho9 9hen the money 9as pa d? &peaF ng of Montel bano, the defendant also test f ed? ,and he assured me that he 9as duly author Aed to collect the value of the electr cal plant., %h s sho9s upon ts face that the =uest on of Montel bano)s author ty to rece ve the money must have been d scussed bet9een them, and that, n maF ng the payment, defendant rel ed upon Montel bano)s o9n statements and representat on, as to h s author ty, to rece pt for the money. $n the f nal analys s, the plant 9as sold by the pla nt ff to the defendant, and 9as cons gned by the pla nt ff to the pla nt ff at $lo lo 9here t 9as nstalled by 'enar, act ng for, and represent ng, the pla nt ff, 9hose e1pense for the tr p s ncluded n, and made a part of, the b ll 9h ch 9as rece pted by Montel bano. %here s no ev dence that the pla nt ff ever del vered any statements to Montel bano, or that he 9as author Aed to rece ve or rece pt for the money, and defendant)s o9n telegram sho9s that the pla nt ff ,d d not present b ll, to defendant. Be no9 cla ms that at the very t me th s telegram 9as sent, he had the rece pt of Montel bano for the money upon the dent cal statement of account 9h ch t s adm tted the pla nt ff d d render to the defendant. Art cle 11>2 of the ' v l 'ode prov des? +ayment must be made to the persons n 9hose favor the obl gat on s const tuted, or to another author Aed to rece ve t n h s name. And art cle 1222 prov des? %he pr nc pal shall be l able as to matters 9 th respect to 9h ch the agent has e1ceeded h s author ty only 9hen he rat f es the same e1pressly or by mpl cat on. $n the case of =rmachea 7in<.onco vs. 7rillana /1< +h l., 1540, th s court held?

%he repayment of a debt must be made to the person n 9hose favor the obl gat on s const tuted, or to another e1pressly author Aed to rece ve the payment n h s name. Mechem on Agency, volume $, sect on 24<, says? $n approach ng the cons derat on of the n=u ry 9hether an assumed author ty e1 st n a g ven case, there are certa n fundamental pr nc ples 9h ch must not be overlooFed. Among these are, as has been seen, /10 that the la9 ndulges n no bare presumpt ons that an agency e1 sts? t must be proved or presumed from factsI /20 that the agent cannot establ sh h s o9n author ty, e ther by h s representat ons or by assum ng to e1erc se tI /<0 that an author ty cannot be establ shed by mere rumor or general reputat onI /40that even a general author ty s not an unl m ted oneI and /80 that every author ty must f nd ts ult mate source n some act or om ss on of the pr nc pal. An assumpt on of author ty to act as agent for another of tself challenges n=u ry. ! Fe a ra lroad cross ng, t should be n tself a s gn of danger and suggest the duty to ,stop, looF, and l sten., $t s therefore declared to be a fundamental rule, never to be lost s ght of and not eas ly to be overest mated, that persons deal ng 9 th an assumed agent, 9hether the assumed agency be a general or spec al one, are bound at the r per l, f they 9ould hold the pr nc pal, to ascerta n not only the fact of the agency but the nature and e1tent of the author ty, and n case e ther s controverted, the burden of proof s upon them to establ sh t. . . . $t s, moreover, n any case ent rely 9 th n the po9er of the person deal ng 9 th the agent to sat sfy h mself that the agent has the author ty he assumes to e1erc se, or to decl ne to enter nto relat ons 9 th h m. /Melchem on Agency, vol. $, sec. 24>.0 %he person deal ng 9 th the agent must also act 9 th ord nary prudence and reasonable d l gence. Dbv ously, f he Fno9s or has good reason to bel eve that the agent s e1ceed ng h s author ty, he cannot cla m protect on. &o f the suggest ons of probable l m tat ons be of such a clear and reasonable =ual ty, or f the character assumed by the agent s of such a susp c ous or unreasonable nature, or f the author ty 9h ch he seeFs to e1erc se s of such an unusual or mprobable character, as 9ould suff ce to put an ord nar ly prudent man upon h s guard, the party deal ng 9 th h m may not shut h s eyes to the real state of the case, but should e ther refuse to deal 9 th the agent at all, or should ascerta n from the pr nc pal the true cond t on of affa rs. /Mechem on Agency, vol. $, sec 282.0 And not only must the person deal ng 9 th the agent ascerta n the e1 stence of the cond t ons, but he must also, as n other cases, be able to trace the source of h s rel ance to some 9ord or act of the pr nc pal h mself f the latter s to be held respons ble. As has often been po nted out, the agent alone cannot enlarge or e1tend h s author ty by h s o9n acts or statements, nor can he alone remove l m tat ons or 9a ve cond t ons mposed by h s pr nc pal. %o charge the pr nc pal n such a case, the pr nc pal)s consent or concurrence must be sho9n. /Mechem on Agency, vol. $, sect on 282.0

%h s 9as a s ngle transact on bet9een the pla nt ff and the defendant.la&ph\l.net Apply ng the above rules, the test mony s conclus ve that the pla nt ff never author Aed Montel bano to rece ve or rece pt for money n ts behalf, and that the defendant had no r ght to assume by any act or deed of the pla nt ff that Montel bano 9as author Aed to rece ve the money, and that the defendant made the payment at h s o9n r sF and on the sole representat ons of Montel bano that he 9as author Aed to rece pt for the money. %he -udgment of the lo9er court s reversed, and one 9 ll be entered here n favor of the pla nt ff and aga nst the defendant for the sum of +2,81<.88 9 th nterest at the legal rate from January 10, 1521, 9 th costs n favor of the appellant. &o ordered. Araullo, .. 9., 9ohnson, Street, Malcolm, Avance>a, 4illamor, =strand, and Romualdez, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN

G.$. No. <;200 July 4, 1<<3 9A :)NAN%E %/$+/$A()/N, pet t oner, vs. 5/N. %/&$( /: A++EA#S and ($A!E$S $/8A# 9ANK, respondents.

'E!)A#!EA, J.: %h s s a pet t on for rev e9 on certiorari of the dec s on of the respondent appellate court 9h ch reversed the rul ng of the tr al court d sm ss ng the case aga nst pet t oner. %he antecedent facts are as follo9s? Dn December 12, 1560, "enato #aytano, do ng bus ness under the name #ebbs $nternat onal, appl ed for and 9as granted a loan 9 th respondent %raders "oyal EanF n the amount of +>0,000.00. As secur ty for the payment of sa d loan, the #aytano spouses e1ecuted a deed of suretysh p 9hereby they agreed to pay -o ntly and severally to respondent banF the amount of the loan nclud ng nterests, penalty and other banF charges. $n a letter dated December 8, 1560 addressed to respondent banF, +h l p (ong as cred t adm n strator of EA 7 nance 'orporat on for and n behalf of the latter, undertooF to guarantee the loan of the #aytano spouses. %he letter reads?

%h s s n reference to the appl cat on of #ebbs $nternat onal for a t9enty@f ve /280 month term loan of >0,000.00 9 th your EanF. $n th s connect on, please be adv sed that 9e uncond t onally guarantee full payment n peso value the sa d accommodat on /s c0 upon non@payment by sub-ect up to a ma1 mum amount of +>0,000.00. Bop ng th s 9ould meet your re=u rement and e1ped te the early process ng of the r appl cat on. %hanF you. Cery truly yours, EA 7$NAN'E 'D"+D"A%$DN /s gned0 +B$!$+ B. (DN# 'red t Adm n strator /p. 12, Rollo0 +art al payments 9ere made on the loan leav ng an unpa d balance n the amount of +68,602.28. & nce the #aytano spouses refused to pay the r obl gat on, respondent banF f led 9 th the tr al court compla nt for sum of money aga nst the #aytano spouses and pet t oner corporat on as alternat ve defendant. %he #aytano spouses d d not present ev dence for the r defense. +et t oner corporat on, on the other hand, ra sed the defense of lacF of author ty of ts cred t adm n strator to b nd the corporat on. Dn December 12, 1566, the tr al court rendered a dec s on the d spos t ve port on of 9h ch states? $N C$E( D7 %BE 7D"E#D$N#, -udgment s hereby rendered n favor of pla nt ff and aga nst defendantsM#aytano spouses, order ng the latter to -o ntly and severally pay the pla nt ff the follo9 ng? 10 E$#B%H 7$CE %BD3&AND E$#B% B3ND"ED &ECEN AND 28M100 /+68,602.280, represent ng the total unpa d balance 9 th accumulated nterests, penalt es and banF charges as of &eptember 22, 1562, plus nterests, penalt es and banF charges thereafter unt l the 9hole obl gat on shall have been fully pa d. 20 Attorney)s fees at the st pulated rate of ten /10R0 percent computed from the total obl gat onI and <0 %he costs of su t. %he d sm ssal of the case aga nst defendant EA 7 nance 'orporat on s hereby ordered 9 thout pronouncement as to cost. &D D"DE"ED. /p. <1, Rollo0

Not sat sf ed 9 th the dec s on, respondent banF appealed 9 th the 'ourt of Appeals. Dn March 1<, 1550, respondent appellate court rendered -udgment mod fy ng the dec s on of the tr al court as follo9s? $n v e9 of the forego ng, the -udgment s hereby rendered order ng the defendants #aytano spouses and alternat ve defendant EA 7 nance 'orporat on, -o ntly and severally, to pay the pla nt ff the amount of +68,602.28 as of &eptember 6, 1562, nclud ng nterests, penalt es and other bacF /s c0 charges thereon, unt l the full obl gat on shall have been fully pa d. No pronouncement as to costs. &D D"DE"ED. /p. 22 Rollo0 Bence th s pet t on 9as f led 9 th the pet t oner ass gn ng the follo9 ng errors comm tted by respondent appellate court? 1. %BE BDND"AE!E 'D3"% D7 A++EA!& #"ACE!H E""ED $N "3!$N# %BA% +E%$%$DNE" $& JD$N%!H AND &ECE"A!!H !$AE!E ($%B #AH%AND &+D3&E& DE&+$%E $%& 7$ND$N#& %BA% %BE !E%%E" #3A"AN%H /EGB. ,',0 $& ,$NCA!$D A% $%& $N'E+%$DN,I 2. %BE BDND"AE!E 'D3"% D7 A++EA!& #"ACE!H E""ED $N "3!$N# %BA% %BE +E%$%$DNE" (A& #3$!%H D7 E&%D++E! DE&+$%E %BE 7A'% %BA% $% NECE" *NE( D7 &3'B A!!E#ED !E%%E"@#3A"AN%HI <. %BE BDND"AE!E 'D3"% D7 A++EA!& #"ACE!H E""ED $N ND% "3!$N# %BA% &3'B !E%%E" #3A"AN%H /EGB$E$% ,',0 EE$N# +A%EN%!H 3!%"A C$"E&, $& 3NEN7D"'EAE!EI 4. %BE BDND"AE!E 'D3"% D7 A++EA!& E""ED $N ND% A(A"D$N# "E!$E7 DN +E%$%$DNE")& 'D3N%E"'!A$M /p. 10, Rollo0. & nce the ssues are nterrelated, t 9ould be 9ell to d scuss them -o ntly. +et t oner contends that the letter guaranty s ultra vires, and therefore unenforceableI that sa d letter@guaranty 9as ssued by an employee of pet t oner corporat on beyond the scope of h s author ty s nce the pet t oner tself s not even empo9ered by ts art cles of ncorporat on and by@la9s to ssue guarant es. +et t oner also subm ts that t s not gu lty of estoppel to maFe t l able under the letter@guaranty because pet t oner had no Fno9ledge or not ce of such letter@ guarantyI that the allegat on of +h l p (ong, cred t adm n strator, that there 9as an aud t 9as not supported by ev dence of any aud t report or record of such transact on n the off ce f les. (e f nd the pet t oner)s content ons mer tor ous. $t s a settled rule that persons deal ng 9 th an assumed agent, 9hether the assumed agency be a general or spec al one are bound at the r per l, f they 9ould hold the pr nc pal l able, to ascerta n not only the fact of agency but also the nature and e1tent of author ty, and n case e ther s controverted, the burden of proof s upon them to establ sh t /Barry *eeler v. "odr gueA, 4 +h l. 150. Bence, the burden s on respondent banF to sat sfactor ly prove that the cred t adm n strator 9 th 9hom they transacted acted 9 th n the author ty g ven to h m by h s pr nc pal, pet t oner

corporat on. %he only ev dence presented by respondent banF 9as the test mony of +h l p (ong, cred t adm n strator, 9ho test f ed that he had author ty to ssue guarantees as can be deduced from the 9ord ng of the memorandum g ven to h m by pet t oner corporat on on h s lend ng author ty. %he sa d memorandum 9h ch allegedly author Aed (ong not only to approve and grant loans but also to enter nto contracts of guaranty n behalf of the corporat on, partly reads? %o? +h l p B. (ong, &AM 'red t Adm n strator 7rom? Bosp c o E. Eayona, Jr., C+ and Bead of 'red t Adm n strat on "e? !end ng Author ty $ am pleased to delegate to you n your capac ty as 'red t Adm n strator the follo9 ng lend ng l m ts? a0 +>80,000.00 O &ecured !oans b0 +880,000.00 O &upported !oans c0 +<80,000.00 O %rucF !oansM'ontractsM!eases d0 +<80,000.00 O Auto !oan 'ontractsM!eases e0 +<80,000.00 O Appl ance !oan 'ontracts f0 +<80,000.00 O 3nsecured !oans %otal loans andMor cred ts :comb nat on of /a0 thru /f0 e1tended to any one borro9er nclud ng parents, aff l ates andMor subs d ar es, should not e1ceed +280,000.00. $n e1erc s ng the l m ts aforement oned, both d rect and contingent commitments to the borro9er/s0 should be cons dered. All loans must be 9 th n the 'ompany)s establ shed lend ng gu del ne and pol c es. 111 111 111 %545%S =8 A$$R=4A% All transact ons n e1cess of any branch)s l m t must be recommended to you through the Dff c al 'red t "eport for approval. $f the transact on e1ceeds your l m t, you must concur n appl cat on before subm tt ng t to the C ce +res dent, 'red t Adm n strat on for approval or concurrence. . . . /pp. >2@><, Rollo0 /Emphas s ours0 Although (ong 9as clearly author Aed to approve loans even up to +<80,000.00 9 thout any secur ty re=u rement, 9h ch s far above the amount sub-ect of the guaranty n the amount of +>0,000.00, noth ng n the sa d memorandum e1pressly vests on the cred t adm n strator po9er to ssue guarantees. (e cannot agree 9 th respondent)s content on that the phrase ,cont ngent comm tment, set forth n the memorandum means guarantees. $t has been held that a po9er of attorney or author ty of an agent should not be nferred from the

use of vague or general 9ords. #uaranty s not presumed, t must be e1pressed and cannot be e1tended beyond ts spec f ed l m ts /D rector v. & ng Juco, 8< +h l. 2080. $n one case, 9here t appears that a 9 fe gave her husband po9er of attorney to loan money, th s 'ourt ruled that such fact d d not author Ae h m to maFe her l able as a surety for the payment of the debt of a th rd person /EanF of +h l pp ne $slands v. 'oster, 42 +h l. 8540. %he sole allegat on of the cred t adm n strator n the absence of any other proof that he s author Aed to b nd pet t oner n a contract of guaranty 9 th th rd persons should not be g ven 9e ght. %he representat on of one 9ho acts as agent cannot by tself serve as proof of h s author ty to act as agent or of the e1tent of h s author ty as agent /Celasco v. !a 3rbana, 86 +h l. >610. (ong)s test mony that he had entered nto s m lar transact ons of guaranty n the past for and n behalf of the pet t oner, lacFs credence due to h s fa lure to sho9 documents or records of the alleged past transact ons. %he actuat on of (ong n cla m ng and test fy ng that he has the author ty s understandable. Be 9ould naturally taFe steps to save h mself from personal l ab l ty for damages to respondent banF cons der ng that he had e1ceeded h s author ty. %he rule s clear that an agent 9ho e1ceeds h s author ty s personally l able for damages /Nat onal +o9er 'orporat on v. Nat onal Merchand s ng 'orporat on, Nos. !@<<615 and !@<<652, Dctober 2<, 1562, 112 &'"A 2650. Anent the conclus on of respondent appellate court that pet t oner s estopped from alleg ng lacF of author ty due to ts fa lure to cancel or d sallo9 the guaranty, (e f nd that the sa d conclus on has no bas s n fact. "espondent banF had not sho9n any ev dence as de from the test mony of the cred t adm n strator that the d sputed transact on of guaranty 9as n fact entered nto the off c al records or f les of pet t oner corporat on, 9h ch 9 ll sho9 not ce or Fno9ledge on the latter)s part and ts conse=uent rat f cat on of the sa d transact on. $n the absence of clear proof, t 9ould be unfa r to hold pet t oner corporat on gu lty of estoppel n allo9 ng ts cred t adm n strator to act as though the latter had po9er to guarantee. A''D"D$N#!H, the pet t on s #"AN%ED and the assa led dec s on of the respondent appellate court dated March 1<, 1550 s hereby "ECE"&ED and &E% A&$DE and another one s rendered d sm ss ng the compla nt for sum of money aga nst EA 7 nance 'orporat on. &D D"DE"ED. .ruz, 2ri>o<Aquino and !ellosillo, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la 7$"&% D$C$&$DN

G.$. No. 11;.<1 June 3<, 1<<2

9A%A#(/S %/A# ')NES and GE$'AN A. 9A%A#(/S, pet t oners, vs. 5/N. %/&$( /: A++EA#S and SAN ')G&E# %/$+/$A()/N, respondents.

!A*)!E, J$., J.: +et t oners seeF the reversal of the dec s on of <0 &eptember 155< of the 'ourt of Appeals n 'A@#.". 'C No. <8160, 1 ent tled ,&an M guel 'orporat on vs. Eacaltos 'oal M nes, #erman A. Eacaltos and "ene ". &avellon,, 9h ch aff rmed the dec s on of 15 August 1551 of the "eg onal %r al 'ourt /"%'0 of 'ebu, Eranch 5, n ' v l 'ase No. 'EE@6162 3 hold ng pet t oners Eacaltos 'oal M nes and #erman A. Eacaltos and the r co@defendant "ene ". &avellon -o ntly and severally l able to pr vate respondent &an M guel 'orporat on under a %r p 'harter +arty. %he paramount ssue ra sed s 9hether &avellon 9as duly author Aed by the pet t oners to enter nto the %r p 'harter +arty /E1h b t ,A,0 4 under and by v rtue of an Author Aat on /E1h b t ,', and E1h b t ,1,0, ; dated 1 March 1566, the pert nent port ons of 9h ch read as follo9s? $. #E"MAN A. EA'A!%D&, of legal age, 7 l p no, 9 do9er, and res d ng at second street, Esp na C llage, 'ebu ' ty, prov nce of 'ebu, +h l pp nes, do hereby author Ae "ENE ". &ACE!!DN, of legal age, 7 l p no and res d ng at <2>@" DsmeQa Elvd., 'ebu ' ty, +rov nce of 'ebu, +h l pp nes, to use the coal operat ng contract of EA'A!%D& 'DA! M$NE& of 9h ch $ am the propr etor, for any leg t mate purpose that t may serve. Namely, but not by 9ay of l m tat on, as follo9s? /10 %o ac=u re purchase orders for and n behalf of EA'A!%D& 'DA! M$NE&I /20 %o engage n trad ng under the style of EA'A!%D& 'DA! M$NE&M"ENE &ACE!!DNI /<0 %o collect all rece vables due or n arrears from people or compan es hav ng deal ngs under EA'A!%D& 'DA! M$NE&M"ENE &ACE!!DNI /40 %o e1tend to any person or company by subst tut on the same e1tent of author ty that s granted to "ene &avellonI /80 $n connect on 9 th the preceed ng paragraphs to e1ecute and s gn documents, contracts, and other pert nent papers. 7urther, $ hereby g ve and grant to "ENE &ACE!!DN full author ty to do and perform all and every la9ful act re=u s te or necessary to carry nto effect the forego ng st pulat ons as fully to all ntents and purposes as $ m ght or 9ould la9fully do f personally present, 9 th full po9er of subst tut on and revocat on.

%he %r p 'harter +arty 9as e1ecuted on 15 Dctober 1566 ,by and bet9een EA'A!%D& 'DA! M$NE&, represented by ts 'h ef Dperat ng Dff cer, "ENE "D&E! &ACE!!DN, and pr vate respondent &an M guel 'orporat on /here nafter &M'0, represented by 7ranc sco E. ManAon, Jr., ts ,&AC+ and D rector, +lant Dperat ons@ Mandaue, %hereunder, &avellon cla ms that Eacaltos 'oal M nes s the o9ner of the vessel MMC +remsh p $$ and that for +>80,000.00 to be pa d 9 th n seven days after the e1ecut on of the contract, t ,lets, dem ses, the vessel to charterer &M' ,for three round tr ps to Davao., As payment of the aforesa d cons derat on, &M' ssued a checF /E1h b t ,E,0 2 payable to ,"ENE &ACE!!DN $N %"3&% 7D" EA'A!%D& 'DA! M$NE&, for 9h ch &avellon ssued a rece pt under the head ng of EA'A!%D& 'DA! M$NE& 9 th the address at No <2>@" DsmeQa Elvd., 'ebu ' ty /E1h b t ,E@1,0. 0 %he vessel 9as able to maFe only one tr p. $ts demands to comply 9 th the contract hav ng been unheeded, &M' f led aga nst the pet t oners and "ene &avellon the compla nt n ' v l 'ase No. 'EE@6162 for spec f c performance and damages. $n the r Ans9er, 1 the pet t oners alleged that &avellon 9as not the r 'h ef Dperat ng Dff cer and that the po9ers granted to h m are only those clearly e1pressed n the Author Aat on 9h ch do not nclude the po9er to enter nto any contract 9 th &M'. %hey further cla med that f t s true that &M' entered nto a contract 9 th them, t should have ssued the checF n the r favor. %hey setup countercla ms for moral and e1emplary damages and attorney)s fees. &avellon d d not f le h s Ans9er and 9as declared n default on 12 July 1550.
=

At the pre@tr al conference on 1 7ebruary 1551, the pet t oners and &M' agreed to subm t the follo9 ng ssues for resolut on? +la nt ff O 1. (hether or not defendants are -o ntly l able to pla nt ff for damages on account of breach of contractI 2. (hether or not the defendants acted n good fa th n ts representat ons to the pla nt ffI <. (hether or not defendant Eacaltos 9as duly enr ched on the payment made by the pla nt ff for the use of the vesselI 4. (hether or not defendant Eacaltos s estopped to deny the author Aat on g ven to defendant &avellonI Defendants O 1. (hether or not the pla nt ff should have f rst nvest gated the o9nersh p of vessel MMC +"EM :&B$+; $$ before enter ng nto any contract 9 th defendant &avellonI 2. (hether or not defendant &avellon 9as author Aed to enter nto a sh pp ng contract 9 th the :pla nt ff; corporat onI

<. (hether or not the pla nt ff 9as correct and not m staFen n ssu ng the checFs n payment of the contract n the name of defendant &avellon and not n the name of defendant Eacaltos 'oal M nesI 4. (hether or not the pla nt ff s l able on defendants) countercla m. < After tr al, the lo9er court rendered the assa led dec s on n favor of &M' and aga nst the pet t oners and &avellon as follo9s? (BE"E7D"E, by preponderance of ev dence, the 'ourt hereby renders -udgment n favor of pla nt ff and aga nst defendants, order ng defendants "ene &avellon, Eacaltos 'oal M nes and #erman A. Eacaltos, -o ntly and severally, to pay to pla nt ff? 1. %he amount of +4<<,000.00 by 9ay of re mbursement of the cons derat on pa d by pla nt ff, plus 12R nterest to start from date of 9r tten demand, 9h ch s June 14, 1565I 2. %he amount of +20,000.00 by 9ay of e1emplary damagesI <. %he amount of +20,000.00 as attorney)s fees and +8,000.00 as ! t gat on e1penses. +lus costs. 1. $t ruled that the Author Aat on g ven by #erman Eacaltos to &avellon necessar ly ncluded the po9er to enter nto the %r p 'harter +arty. $t d d not g ve credence to the pet t oners) cla m that the author Aat on refers only to coal or coal m n ng and not to sh pp ng because, accord ng to t, ,the bus ness of coal m n ng may also nvolve the sh pp ng of products, and ,a company such as a coal m n ng company s not proh b ted to engage n enter ng nto a %r p 'harter +arty contract., $t further reasoned out that even assum ng that the pet t oners d d not ntend to author Ae &avellon to enter nto the %r p 'harter +arty, they are st ll l able because? /a0 &M' appears to be an nnocent party 9h ch has no Fno9ledge of the real ntent of the part es to the Author Aat on and has reason to rely on the 9r tten Author Aat on subm tted by &avellon pursuant to Art cles 1500 and 1502 of the ' v l 'odeI /b0 &avellon ssued an off c al rece pt of Eacaltos 'oal M nes /E1h b t ,E@1,0 for the cons derat on of the %r p 'harter +arty, and the pet t oners den al that they caused the pr nt ng of such off c al rece pt s ,lame, because they subm tted only a cash voucher and not the r off c al rece ptI /c0 the ,Not ce of "ead ness, /E1h b t ,A@1,0 s 9r tten on a paper 9 th the letterhead ,Eacaltos 'oal M nes, and the logo there n s the same as that appear ng n the r voucherI /d0 the pet t oners 9ere benef ted by the payment because the real payee n the checF s actually Eacaltos 'oal M nes and s nce n the Author Aat on they author Aed &avellon to collect rece vables due or n arrears, the checF 9as then properly del vered to &avellonI and, /e0 f ndeed &avellon had not been author Aed or f ndeed he e1ceeded h s author ty or f the %r p 'harter +arty 9as personal to h m and the pet t oners have noth ng to do 9 th t, then &avellon should have ,bother:ed; to ans9er, the compla nt and the pet t oners should have f led ,a cross@cla m, aga nst h m. $n the r appeal to the 'ourt of Appeals n 'A@#.". 'C No. <8160, the pet t oners asserted that the tr al court erred n? /a0 not hold ng that &M' 9as negl gent n

/10 not ver fy ng the credent als of &avellon and the o9nersh p of the vessel, /20 ssu ng the checF n the name of &avellon n trust for Eacaltos 'oal M nes thereby allo9 ng &avellon to encash the checF, and, /<0 maF ng full payment of +>80,000.00 after the vessel made only one tr p and before t completed three tr ps as re=u red n the %r p 'harter +artyI /b0 hold ng that under the author ty g ven to h m &avellon 9as author Aed to enter nto the %r p 'harter +artyI and, /c0 hold ng #erman Eacaltos -o ntly and severally l able 9 th &avellon and Eacaltos 'oal M nes. 11 As stated at the beg nn ng, the 'ourt of Appeals aff rmed in toto the -udgment of the tr al court. $t held that? /a0 the credent als of &avellon s not an ssue s nce the pet t oners mpl edly adm tted the agency 9h le the o9nersh p of the vessel 9as 9arranted on the face of the %r p 'harter +artyI /b0 &M' 9as not negl gent 9hen t ssued the checF n the name of &avellon n trust for Eacaltos 'oal M nes s nce the Author Aat on clearly prov des that collect bles of the pet t oners can be coursed through &avellon as the agentI /c0 the Author Aat on ncludes the po9er to enter nto the %r p 'harter +arty because the ,f ve prerogat ves, enumerated n the former s prefaced by the phrase ,but not by 9ay of l m tat on,I /d0 the pet t oners) statement that the checF should have been ssued n the name of Eacaltos 'oal M nes s another mpl c t adm ss on that the %r p 'harter +arty s part and parcel of the pet t oners) bus ness not9 thstand ng #erman Eacaltos)s contrary nterpretat on 9hen he test f ed, and n any event, the construct on of obscure 9ords should not favor h m s nce he prepared the Author Aat on n favor of &avellonI and, /e0 #erman Eacaltos adm tted n the Ans9er that he s the propr etor of Eacaltos 'oal M nes and he l Fe9 se represented h mself to be so n the Author Aat on tself, hence he should not no9 be perm tted to d savo9 9hat he n t ally stated to be true and to nterpose the defense that Eacaltos 'oal M nes has a d st nct legal personal ty. %he r mot on for a recons derat on of the above dec s on hav ng been den ed, the pet t oners f led the nstant pet t on 9here n they ra se the follo9 ng errors? $. %BE "E&+DNDEN% 'D3"% E""ED $N BD!D$N# %BA% "ENE &ACE!!DN (A& A3%BD"$LED %D EN%E" $N%D A %"$+ 'BA"%E" +A"%H 'DN%"A'% ($%B +"$CA%E "E&+DNDEN% $N&+$%E D7 $%& 7$ND$N# %BA% &3'B A3%BD"$%H 'ANND% EE 7D3ND $N %BE 7D3" 'D"NE"& D7 %BE A3%BD"$LA%$DNI $$. %BE "E&+DNDEN% 'D3"% E""ED $N ND% BD!D$N# %BA% EH $&&3$N# %BE 'BE'* $N %BE NAME D7 "ENE &ACE!!DN $N %"3&% 7D" EA'A!%D& 'DA! M$NE&, %BE +"$CA%E "E&+DNDEN% (A& %BE A3%BD" D7 $%& D(N DAMA#EI AND $$$. %BE "E&+DNDEN% 'D3"% E""ED $N BD!D$N# +E%$%$DNE" #E"MAN EA'A!%D& JD$N%!H AND &ECE"A!!H !$AE!E ($%B "ENE &ACE!!DN AND 'D@ +E%$%$DNE" EA'A!%D& 'DA! M$NE& $N &+$%E D7 %BE 7$ND$N# D7 %BE 'D3"% A Q;= %BA% +E%$%$DNE" EA'A!%D& 'DA! M$NE& AND +E%$%$DNE" EA'A!%D& A"E %(D D$&%$N'% AND &E+A"A%E !E#A! +E"&DNA!$%$E&. 13

After due del berat ons on the allegat ons, ssues ra sed, and arguments adduced n the pet t on, and the comment thereto and reply to the comment, the 'ourt resolved to g ve due course to the pet t on. Every 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. $f he does not maFe such n=u ry, he s chargeable 9 th Fno9ledge of the agent)s author ty, and h s gnorance of that author ty 9 ll not be any e1cuse. +ersons deal ng 9 th an assumed agent, 9hether the assumed agency be a general or spec al one, are bound at the r per l, f they 9ould hold the pr nc pal, to ascerta n not only the fact of the agency but also the nature and e1tent of the author ty, and n case e ther s controverted, the burden of proof s upon them to establ sh t. 14 Amer can -ur sprudence 1; summar Aes the rule n deal ng 9 th an agent as follo9s? A th rd person deal ng 9 th a Fno9n agent may not act negl gently 9 th regard to the e1tent of the agent)s author ty or bl ndly trust the agent)s statements n such respect. "ather, he must use reasonable d l gence and prudence to ascerta n 9hether the agent s act ng and deal ng 9 th h m 9 th n the scope of h s po9ers. %he mere op n on of an agent as to the e1tent of h s po9ers, or h s mere assumpt on of author ty 9 thout foundat on, 9 ll not b nd the pr nc palI and a th rd person deal ng 9 th a Fno9n agent must bear the burden of determ n ng for h mself, by the e1erc se of reasonable d l gence and prudence, the e1 stence or none1 stence of the agent)s author ty to act n the prem ses. $n other 9ords, 9hether the agency s general or spec al, the th rd person s bound to ascerta n not only the fact of agency, but the nature and e1tent of the author ty. %he pr nc pal, on the other hand, may act on the presumpt on that th rd persons deal ng 9 th h s agent 9 ll not be negl gent n fa l ng to ascerta n the e1tent of h s author ty as 9ell as the e1 stence of h s agency. Dr, as stated n 0arry 5. 1eller 5lectric .o. vs. Rodriguez, Mechem on Agency?
12

=uot ng

%he person deal ng 9 th the agent must also act 9 th ord nary prudence and reasonable d l gence. Dbv ously, f he Fno9s or has good reason to bel eve that the agent s e1ceed ng h s author ty, he cannot cla m protect on. &o f the suggest ons of probable l m tat ons be of such a clear and reasonable =ual ty, or f the character assumed by the agent s of such a susp c ous or unreasonable nature, or f the author ty 9h ch he seeFs to e1erc se s of such an unusual or mprobable character, as 9ould suff ce to put an ord nar ly prudent man upon h s guard, the party deal ng 9 th h m may not shut h s eyes to the real estate of the case, but should e ther refuse to deal 9 th the agent at all, or should ascertain from the principal the true condition of affairs . :emphas s suppl ed;. $n the nstant case, s nce the agency of &avellon s based on a 9r tten document, the Author Aat on of 1 March 1566 /E1h b ts ,', and ,1,0, the e1tent and scope of h s po9ers must be determ ned on the bas s thereof. %he language of the Author Aat on s clear. $t pert nently states as follo9s?

$. #E"MAN A. EA'A!%D& do hereby author Ae "ENE ". &ACE!!DN . . . to use the coal operating contract of !A.A%7=S .=A% M:35S, of 9h ch $ am the propr etor, for any legitimate purpose that it may serve. 3amely, #ut not #y &ay of limitation, as follo&s . . . :emphas s suppl ed;. %here s only one e1press po9er granted to &avellon, v A., to use the coal operating contract for anylegitimate purpose it may serve . %he enumerated ,f ve prerogat ves, O to employ the term used by the 'ourt of Appeals O are noth ng but the spec f c prerogat ves subsumed under or class f ed as part of or as e1amples of the po9er to use the coal operat ng contract. %he clause ,#ut not #y &ay of limitation, 9h ch precedes the enumerat on could only refer to or contemplate other prerogat ves 9h ch must e1clus vely perta n or relate or be germane to the po9er to use the coal operat ng contract. %he conclus on then of the 'ourt of Appeals that the Author Aat on ncludes the po9er to enter nto the %r p 'hapter +arty because the ,f ve prerogat ves, are prefaced by such clause, s ser ously fla9ed. $t fa ls to note that the broadest scope of &avellon)s author ty s l m ted to the use of the coal operating contract and the clause cannot contemplate any other po9er not ncluded n the enumerat on or 9h ch are unrelated e ther to the po9er to use the coal operat ng contract or to those already enumerated. $n short, 9h le the clause allo9s some room for fle1 b l ty, t can comprehend only add t onal prerogat ves fall ng 9 th n the pr mary po9er and 9 th n the same class as those enumerated. %he tr al court, ho9ever, 9ent further by hast ly maF ng a s9eep ng conclus on that ,a company such as a coal m n ng company s not proh b ted to engage n enter ng nto a %r p 'harter +arty contract., 10 Eut 9hat the tr al court fa led to cons der 9as that there s no ev dence at all that Eacaltos 'oal M nes as a coal m n ng company o9ns and operates vessels, and even f t o9ned any such vessels, that t 9as allo9ed to charter or lease them. %he tr al court also fa led to note that the Author Aat on s not a general po&er of attorney. $t s a special po&er of attorney for t refers to a clear mandate spec f cally author A ng the performance of a spec f c po9er and of e1press acts subsumed there n. 11 $n short, both courts belo9 unreasonably e1panded the e1press terms of or other9 se gave unrestr cted mean ng to a clause 9h ch 9as prec sely ntended to prevent un9arranted and unl m ted e1pans on of the po9ers entrusted to &avellon. %he suggest on of the 'ourt of Appeals that there s obscur ty n the Author Aat on 9h ch must be construed aga nst #erman Eacaltos because he prepared the Author Aat on has no leg to stand on nasmuch as there s no obscur ty or amb gu ty n the nstrument. $f any obscur ty or amb gu ty ndeed e1 sted, then there 9 ll be more reason to place &M' on guard and for t to e1erc se due d l gence n seeF ng clar f cat on or enl ghtenment thereon, for that 9as part of ts duty to d scover upon ts per l the nature and e1tent of &avellon)s 9r tten agency. 3nfortunately, t d d not. Bo9soever v e9ed, the forego ng conclus ons of the 'ourt of Appeals and the tr al court are tenuous and farfetched, br ng ng to unreasonable l m ts the clear parameters of the po9ers granted n the Author Aat on. 7urthermore, had &M' e1erc sed due d l gence and prudence, t should have Fno9n n no t me that there s absolutely noth ng on the face of the Author Aat on that confers upon &avellon the author ty to enter nto any %r p 'harter +arty. $ts conclus on to the contrary s based solely on the second prerogative under the Author Aat on, to 9 t?

/20 %o engage n trad ng under the style of EA'A!%D& 'DA! M$NE&M"ENE &ACE!!DNI unm ndful that such s but a part of the pr mary author ty to use the coal operat ng contract 9h ch t d d not even re=u re &avellon to produce. $ts pr nc pal 9 tness, Mr. Caldescona, e1pressly so adm tted on cross@ e1am nat on, thus? Atty. Losa /to 9 tness O DN '"D&&0 U Hou sa d that n your off ce Mr. "ene &avellon presented to you th s author Aat on marFed E1h b t ,', and E1h b t ,1, for the defendantP A Hes, s r. U D d you read n the f rst part:y; of th s author Aat on Mr. Caldescona that Mr. "ene &avellon 9as author Aed as the coal operat ng contract of Eacaltos 'oal M nesP A Hes, s r. U D d t not occur to you that you should have e1am ned further the author Aat on of Mr. "ene &avellon, 9hether or not th s coal operat ng contract allo9s Mr. &avellon to enter nto a tr p charter partyP A Hes, s r. (e d scussed about the e1tent of h s author Aat on and he referred us to the number 2 prov s on of th s author Aat on 9h ch s to engage n trad ng under the style of Eacaltos 'oal M nesM"ene &avellon, 9h ch 9e follo9ed up to the checF preparat on because t s part of the author ty. U $n other 9ords, you e1am ned th s and you found out that Mr. &avellon s author Aed to use the coal operat ng contract of Eacaltos 'oal M nesP A Hes, s r. U Hou doubted h s author ty but you found out n paragraph 2 that he s author Aed that)s 9hy you agreed and entered nto that tr p charter partyP A (e d d not doubt h s author ty but 9e 9ere =uest on ng as to the e1tent of h s operat ng contract. U D d you not re=u re Mr. &avellon to produce that coal operat ng contract of Eacaltos 'oal M nesP A No s r. (e d d not.
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& nce the pr nc pal sub-ect of the Author Aat on s the coal operat ng contract, &M' should have re=u red ts presentat on to determ ne 9hat t s and ho9 t may be used by &avellon. &uch a determ nat on s nd spensable to an n=u ry nto the e1tent or scope of h s author ty. 7or th s reason, 9e no9 deem t necessary to e1am ne the nature of a coal operat ng contract. A coal operat ng contract s governed by +.D. No. 522 /%he 'oal Development Act of 152>0, as amended by +.D. No. 1124. $t s one of the author Aed 9ays of act ve e1plorat on, development, and product on of coal resources 1< n a spec f ed contract area. 3. &ect on 5 of the decree prescr bes the obl gat on of the contractor, thus? &ec. 5. =#ligations of =perator in .oal =perating .ontract . O %he operator under a coal operat ng contract shall undertaFe, manage and e1ecute the coal operat ons 9h ch shall nclude? /a0 %he e1am nat on and nvest gat on of lands supposed to conta n coal, by deta led surface geolog c mapp ng, core dr ll ng, trench ng, test p tt ng and other appropr ate means, for the purpose of prob ng the presence of coal depos ts and the e1tent thereofI /b0 &teps necessary to reach the coal depos t so that t can be m ned, nclud ng but not l m ted to shaft s nF ng and tunnel ngI and /c0 %he e1tract on and ut l Aat on of coal depos ts. %he #overnment shall oversee the management of the operat on contemplated n a coal operat ng contract and n th s connect on, shall re=u re the operator to? /a0 +rov de all the necessary serv ce and technologyI /b0 +rov de the re=u s te f nanc ngI /c0 +erform the 9orF obl gat ons and program prescr bed n the coal operat ng contract 9h ch shall not be less than those prescr bed n th s DecreeI /d0 Dperate the area on behalf of the #overnment n accordance 9 th good coal m n ng pract ces us ng modern methods appropr ate for the geolog cal cond t ons of the area to enable ma1 mum econom c product on of coal, avo d ng haAards to l fe, health and property, avo d ng pollut on of a r, lands and 9aters, and pursuant to an eff c ent and econom c program of operat onI /e0 7urn sh the Energy Development Eoard promptly 9 th all nformat on, data and reports 9h ch t may re=u reI. /f0 Ma nta n deta led techn cal records and account of ts e1pend turesI /g0 'onform to regulat ons regard ng, among others, safety demarcat on of agreement acreage and 9orF areas, non@

nterference 9 th the r ghts of the other petroleum, m neral and natural resources operatorsI O /h0 Ma nta n all necessary e=u pment n good order and allo9 access to these as 9ell as to the e1plorat on, development and product on s tes and operat ons to nspectors author Aed by the Energy Development EoardI / 0 Allo9 representat ves author Aed by the Energy Development Eoard full access to the r accounts, booFs and records for ta1 and other f scal purposes. &ect on 11 thereof prov des for the m n mum terms and cond t ons of a coal operat ng contract. 7rom the forego ng, t s obv ous that a scrut ny of the coal operat ng contract of Eacaltos 'oal M nes 9ould have prov ded &M' Fno9ledge of the act v t es 9h ch are germane, related, or nc dent to the po9er to use t. Eut t d d not even re=u re &avellon to produce the same. &M')s negl gence 9as further compounded by ts fa lure to ver fy f Eacaltos 'oal M nes o9ned a vessel. A party des r ng to charter a vessel must sat sfy tself that the other party s the o9ner of the vessel or s at least ent tled to ts possess on 9 th po9er to lease or charter the vessel. $n the nstant case, &M' made no such attempt. $t merely sat sf ed tself 9 th the cla m of &avellon that the vessel t 9as leas ng s o9ned by Eacaltos 'oal M nes and rel ed on the presentat on of the Author Aat on as 9ell as ts test on the sea 9orth ness of the vessel. Caldescona thus declared on d rect e1am nat on as follo9s? A $n Dctober, a certa n "ene &avellon called our off ce offer ng us sh pp ng serv ces. &o $ told h m to g ve us a formal proposal and also for h m to come to our off ce so that 9e can go over h s proposal and formally d scuss h s offer. U D d Mr. "ene &avellon go to your off ceP A 7e9 days later he came to our off ce and gave us h s proposal verbally offer ng a vessel for us to use for our cargo. U D d he ment on the o9ner of that vesselP A Hes, s r. %hat t s Eacaltos. U D d he present a document to youP A Hes, s r. Be presented to us the author Aat on. U (hen Mr. "ene &avellon presented to you the author Aat on 9hat d d you doP.

A Dn the strength of that author Aat on 9e n t ally asFed h m for us to checF the vessel to see ts sea 9orth ness, and 9e ass gned our n@house surveyor to checF the sea 9orth ness of the vessel 9h ch 9as on dry docF that t me n Danao. U (hat 9as the result of your nspect onP A (e found out the vessel)s sea 9orth ness to be our cargo carr er. U After that 9hat d d you doP A After that 9e 9ere d scuss ng the cond t on of the contract. U (ere you able to e1ecute that contractP A Hes, s r . 31 Be further declared as follo9s? U (hen you entered nto a tr p charter contract d d you checF the o9nersh p of MMC +remsh pP A %he representat on made by Mr. "ene &avellon 9as that Eacaltos 'oal M nes operates the vessel and on the strength of the author Aat on he sho9ed us 9e 9ere made to bel eve that t 9as Eacaltos 'oal M nes that o9ned t. 'D3"%? /to 9 tness0 U $n other 9ords, you -ust bel eved "ene &avellonP A Hes, s r. 'D3"%? /to 9 tness0 U Hou d d not checF 9 th Eacaltos 'oal M nesP A %hat s the representat on he made. U D d he sho9 you document regard ng th s MMC +remsh p $$P A No document sho9n. 33 %he Author Aat on tself does not state that Eacaltos 'oal M nes o9ns any vessel, and s nce t s clear therefrom that t s not engaged n sh pp ng but n coal m n ng or n coal bus ness, &M' should have re=u red the presentat on of pert nent documentary proof of o9nersh p of the vessel to be chartered. $ts n@

house surveyor 9ho sa9 the vessel 9h le drydocFed n Danao and thereafter conducted a sea 9orth ness test could not have fa led to ascerta n the reg stered o9ner of the vessel. %he pet t oners themselves declared n open court that they have not leased any vessel for they do not need t n the r coal operat ons 34 thereby mply ng that they do not even o9n one. %he 'ourt of Appeals) asseverat on that there 9as no need to ver fy the o9nersh p of the vessel because such o9nersh p s 9arranted on the face of the tr p charter party begs the =uest on s nce &avellon)s author ty to enter nto that contract s the very heart of the controversy. (e are not prepared to accept &M')s content on that the pet t oners) cla m that they are not engaged n sh pp ng and do not o9n any sh p s bel ed by the fact that they ma nta ned a pre@pr nted bus ness form Fno9n as a ,Not ce of "ead ness, /E1h b t ,A@1,0. 3; %h s paper s only a photocopy and, desp te ts reservat on to present the or g nal for purposes of compar son at the ne1t hear ng, 32 &M' fa led to produce the latter. %h s ,Not ce of "ead ness, s not, therefore, the best ev dence, hence nadm ss ble under &ect on <, "ule 1<0 of the "ules of 'ourt. $t s true that 9hen &M' made a formal offer of ts e1h b ts, the pet t oners d d not ob-ect to the adm ss on of E1h b t ,A@1,, the ,Not ce of "ead ness,, under the best ev dence rule but on the ground that &avellon 9as not author Aed to enter nto the %r p 'harter +arty and that the party 9ho s gned t, one Elmer Eal =u g, s not the pet t oners) employee but of +rem er &h pp ng ! nes, the o9ner of the vessel n =uest on. 30 %he pet t oners ra sed the ssue of nadm ss b l ty under the best ev dence rule only belatedly n th s pet t on. Eut although E1h b t ,A@1, rema ns adm ss ble for not hav ng been t mely ob-ected to, t has no probat ve value as to the o9nersh p of the vessel. %here s l Fe9 se no proof that the pet t oners rece ved the cons derat on of the %r p 'harter +arty. %he pet t oners den ed hav ng rece ved t. 31 %he ev dence for &M' establ shed beyond doubt that t 9as &avellon 9ho re=uested n 9r t ng on 15 Dctober 1566 that the checF n payment therefor be dra9n n favor of EA'A!%D& 'DA! M$NE&M"ENE &ACE!!DN /E1h b t ,E@<,0 and that &M' dre9 the checF n favor of "ENE &ACE!!DN $N %"3&% 7D" EA'A!%D& 'DA!M$NE& /E1h b t ,E,0 and del vered t to &avellon 9ho there upon ssued a rece pt /E1h b t ,E@1,0. (e agree 9 th the pet t oners that &M' comm tted negl gence n dra9 ng the checF n the manner aforestated. $t even d sregarded the re=uest of &avellon that t be dra9n n favor of EA'A!%D& 'DA! M$NE&M"ENE &ACE!!DN. 7urthermore, assum ng that the transact on 9as perm tted n the Author Aat on, the checF should st ll have been dra9n n favor of the pr nc pal. &M' then made poss ble the 9rong done. %here s an 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. 3= 7or th s rule to apply, the cond t on precedent s that both part es must be nnocent. $n the present case, ho9ever, &M' s gu lty of not ascerta n ng the e1tent and l m ts of the author ty of &avellon. $n not do ng so, &M' dealt 9 th &avellon at ts o9n per l. Bav ng thus found that &M' 9as the author of ts o9n damage and that the pet t oners are, therefore, free from any l ab l ty, t has become unnecessary to d scuss the ssue of 9hether Eacaltos 'oal M nes s a corporat on 9 th a personal ty d st nct and separate from #erman Eacaltos. (BE"E7D"E, the nstant pet t on s #"AN%ED and the challenged dec s on of <0 &eptember 155< of the 'ourt of Appeals n 'A@#.". 'C No. <8160 s hereby

"ECE"&ED and &E% A&$DE and another -udgment s hereby rendered MDD$7H$N# the -udgment of the "eg onal %r al 'ourt of 'ebu, Eranch 5, n ' v l 'ase No. 'EE@ 6162 by sett ng as de the declarat on of sol dary l ab l ty, hold ng defendant "ENE ". &ACE!!DN solely l able for the amounts ad-udged, and order ng the d sm ssal of the case as aga nst here n pet t oners. &D D"DE"ED. !ellosillo, Quiason, and 1apunan, 99., concur. $adilla, 9., too' no part.

:ootnotes 1 Anne1 ,D, of +et t onI Rollo, >4@21. +er Berrera, M., 9., 9 th 7ranc sco, '., and #uerrero, E., 99., concurr ng. 2 Anne1 ,E,, :d.G :d., 24@<2. +er Judge Een gno #. #av ola. < Dr g nal "ecords /D"0, 6@10. 4 :d., 11. %he document s not acFno9ledged before a notary publ c. 8 D", 12. > :d., 1<. 2 :d.,1>@16. 6 :d., 44. 5 D", 82@86. 10 D", 1<6I Rollo, <2. 11 Anne1 ,', of +et t on, Er ef for AppellantsI Rollo, 48@4>. 12 Rollo, 5. 1< Celoso vs. !a 3rbana, 86 +h l. >61 :15<<;, citing Deen vs. +ac f c 'ommerc al 'o., 42 +h l. 2<6 :1522; and Barry E. *elter Electr c 'o. vs. "odr gueA, 44 +h l. 15 :1522;. See also &trong vs. "ep de, > +h l. >60 :150>; and + neda vs. 'ourt of Appeals, 22> &'"A 284 :155<;. 14 < Am Jur 2d Agency . 6< :156>;. 18 Supra note 1<. 1> D", 1<8I Rollo, 25.

12 See Art cle 162> ' v l 'ode. 16 %&N, 4 Apr l 1551, 21@22. 15 &ect on 4. 20 &ect on >. 21 %&N, 4 Apr l 1551, >@2. 22 %&N, 4 Apr l 1551, 14@18. 2< %&N, <0 Apr l 1551, 2<@24. 24 D", 2<. 28 %&N, 4 Apr l 1551, 11@12. 2> D", 24. 22 %&N, <0 Apr l 1551, 8@>. 26 7ranc sco vs. #overnment &erv ce $nsurance &ystem, 2 &'"A 822 :15><;, c ted n 'u son vs. 'ourt of Appeals, 222 &'"A <51 :155<;. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7=10< !ecem er 3<, 1<14 AN(/N)/ '. A. 9A$$E((/, pla nt ff@appellant, vs. J/SE SAN(A 'A$)NA, defendant@appellee. 0ausserman, .ohn and 8isher, for appellant. 6. A. 1incaid and 7hos. %. 0artigan, for appellee.

(/$$ES, J.: %hese cases 9ere appealed by counsel for the pla nt ff, through a b ll of e1cept ons, from the -udgment of January 12, 1512, and the order of 7ebruary 8 of the same year, 9hereby the Bonorable &. del "osar o, -udge, sentenced the defendant to pay to the pla nt ff the salary to 9h ch he 9as ent tled for the f rst e ght days of January, 1510, also that for the follo9 ng month, at the rate of +<,06<.<< per month, 9 thout spec al f nd ng as to costs, and d sm ssed the second cause of act on conta ned n the compla nt presented n that case.

Dn January 8, 1511, for the pla nt ff Anton o M.a Earretto f led su t aga nst Jose &anta Mar na, alleg ng that the defendant, a res dent of &pa n, 9as then the o9ner and propr etor of the bus ness Fno9n as the !a $nsular ' gar and ' garette 7actory, establ shed n these $slands, 9h ch bus ness cons sted n the purchase of leaf tobacco and other ra9 mater al, n the preparat on of the same, and n the sale of c gars and c garettes n large =uant t esI that on January 6, 1510, and for a long t me pr or thereto, the pla nt ff held and had held the pos t on of agent of the defendant n the +h l pp ne $slands for the management of the sa d bus ness n the name and for the account of the sa d defendantI that the pla nt ff)s serv ces 9ere rendered n pursuance of a contract 9hereby the defendant obl gated h mself n 9r t ng to h re the sa d serv ces for so long a t me as the pla nt ff should not sho9 d scouragement and to compensate such serv ces at the rate of +<2,000 +h l pp ne currency per annumI that, on the aforesa d 6th day of January, 1510, the defendant, 9 thout reason, -ust f cat on, or prete1t and n v olat on of the contract before ment oned, summar ly and arb trar ly d spensed 9 th the pla nt ff)s serv ces and removed h m from the management of the bus ness, s nce 9h ch date the defendant had refused to pay h m the compensat on, or any part thereof, due h m and payable n full for serv ces rendered subse=uent to December <1, 1505I and that, as a second cause of act on based upon the facts aforestated, the pla nt ff had suffered losses and damages n the sum of +100,000 +h l pp ne currency. &a d counsel therefore prayed that -udgment be rendered aga nst the defendant by sentenc ng h m to pay to the pla nt ff +1<2,000 +h l pp ne currency, and the nterest thereon at the legal rate, n add t on to the payment of the costs, together 9 th such other e=u table remed es as the la9 allo9s. Ey an order of March 14, 1511, the Bonorable A. &. 'rossf eld, -udge overruled the demurrer to the f rst cause of act on, but susta ned that to the second. 'ounsel for the pla nt ff entered an e1cept on to th s order n so far as t susta ned the demurrer nterposed by the defendant to the second cause of act on. Ey h s 9r tten ans9er to the compla nt, on July 15, 1511, counsel for the defendant, reserv ng h s e1cept on to the order of the court overrul ng h s demurrer f led aga nst the f rst cause of act on, den ed each and all of the allegat ons conta ned n the compla nt, relat ve to such f rst cause of act on. As a spec al defense of the latter, he set forth that the pla nt ff had no contract 9hatever 9 th the defendant n 9h ch any per od of t me 9as st pulated dur ng 9h ch the former 9as to render h s serv ces as manager of the !a $nsular factoryI that the defendant revoFed for -ust cause the po9er conferred upon the pla nt ffI that subse=uent to the revocat on of such po9er, and on the occas on of the pla nt ff)s hav ng sold all h s r ghts and nterests n the bus ness of the !a $nsular factory to the defendant, n cons derat on of the sum rece ved by h m, the pla nt ff renounced all act on, ntervent on and cla m that he m ght have aga nst the defendant relat ve to the bus ness aforement oned, 9hereby all the =uest ons that m ght have ar sen bet9een them 9ere settled. Dn December 15, 1511, counsel for each of the part es presented to the court as st pulat on of the follo9 ng purport? $n clause 11 of the 9 ll e1ecuted by Don Joa=u n &anta Mar na y +ereA n Madr d before a notary publ c on August 4, 1501, and duly legal Aed n these $slands, there appears the follo9 ng?

,%he testator prov des that the testamentary e1ecutor 9ho s hold ng off ce as such shall en-oy a salary, allotment, or emolument of 4,000 pesos per annum 9h ch shall be pa d out of the testator)s estateI but that n case of consultat on, the testamentary e1ecutors consulted shall not be ent tled to th s allotment, nor to any other, on account of such consultat on., Accord ng to the statement of the sums collected by Anton o M.a Earretto as the -ud c al adm n strator of the estate of Joa=u n &anta Mar na from November, 1506, to March, 1510, and dur ng t9enty@three days of Apr l of the latter year, the total amount so collected 9as +8,52<.26. Anton o M.a Earretto ceased to manage the !a $nsular factory, as the -ud c al adm n strator of the estate of the deceased Joa=u n &anta Mar na, n Dctober, 1505, and not on November 2, 1506, as erroneously out n the stenograph c notes. %he remunerat on pa d to Earretto as -ud c al adm n strator of the estate of &anta Mar na 9as ndependent of that 9h ch perta ned to h m for h s serv ces as manager of the !a $nsular factory both before and after the date on 9h ch he ceased to adm n ster the sa d factory as such -ud c al adm n strator. $n the st pulat on before ment oned there also appears the follo9 ng? ,%he facts above stated are true, but there s a controversy bet9een the attorneys for the pla nt ff and the defendant, as to 9hether such facts are relevant as ev dence n the sa d case. %hey therefore subm t th s =uest on to the court f t determ nes that they are relevant as ev dence they should be adm tted as such, 9 th e1cept on by the defendant, but f t determ nes that they are not relevant as ev dence they should be e1cluded, 9 th e1cept on by the pla nt ff., After the hear ng of the case, 9 th the ntroduct on of ev dence by both part es, the court, on January 12, 1512, rendered the -udgment aforement oned, to 9h ch an e1cept on 9as taFen by counsel for the pla nt ff, 9ho by 9r tten mot on asFed that the sa d -udgment be set as de and a ne9 tr al granted, because such -udgment 9as not suff c ently 9arranted by the ev dence and 9as contrary to la9 and because the f nd ngs of fact there n conta ned 9ere openly and man festly contrary to the 9e ght of the ev dence. %h s mot on 9as den ed, 9 th e1cept on by the pla nt ff. Ey an order of the 8th of the follo9 ng month of 7ebruary, ssued n v e9 of a pet t on presented by counsel for the pla nt ff, the court d sm ssed the second cause of act on set out n the compla nt, to 9h ch order sa d counsel l Fe9 se e1cepted. 3pon presentat on of the proper b ll of e1cept ons, the same 9as approved, cert f ed, and for9arded to the clerF of th s court. Demand s made n th s su t for the payment of the cons derable sum of +1<2,000, together 9 th the legal nterest thereon. %9o amounts maFe up th s sum? Dne of +<2,000, as salary for the year 1510, cla med to be due for serv ces rendered by the pla nt ff as agent and manager of the tobacco factory Fno9n as !a $nsularI and the other of +100,000, as an ndemn ty for losses and damages, on account of the pla nt ff)s removal 9 thout -ust cause from h s pos t on as agent and manager of sa d factory, effected arb trar ly and n v olat on of the contract

of h re of serv ces bet9een the part es, the pla nt ff cla m ng to be st ll ent tled to hold the pos t on from 9h ch he 9as d sm ssed. %he most mportant fact n th s case, 9h ch stands out prom nently from the ev dence regarded as a 9hole, s that of the pla nt ff Earretto)s renunc at on or reg strat on of the pos t on he held as agent and manager of the sa d factory, 9h ch 9as freely and voluntar ly made by h m on the occas on of the nsolvency and d sappearance of the 'h naman 3y Han, 9ho had bought from the factory products aggregat ng n value the cons derable sum of +52,000 and, 9 thout pay ng th s large debt, d sappeared and has not been seen s nce. Anton o M.a Earretto the agent and manager of the sa d factory, sa d among other th ngs the follo9 ng, n the letter, E1h b t <, addressed by h m to Jose &anta Mar na, on January 2, 1505? $ have to report to you an e1ceed ngly d sagreeable matter. %h s 'h naman 3y Han, 9 th 9hose name $ beg n th s paragraph, has fa led and o9es the factory the cons derable sum of +52,000. (e 9 ll see that $ can get from h m, although 9hen these 'h namen fa l t s because they have spent everyth ng. $ 9 ll turned the matter over to my attorney n order that he may sue the party. $ am not attempt ng to maFe l ght of th s matter. $ acFno9ledge that $ have been rather more generous 9 th th s fello9 than $ should have beenI but th s s the 9ay of do ng bus ness here. . . . $ have al9ays thought that 9hen the manager of a bus ness tr ps up n a matter l Fe th s he should tender h s res gnat on, and $ st ll th nF so. %he pos t on s at your d sposal to do as you l Fe. %h s letter s authent c and 9as ne ther den ed nor re-ected by the pla nt ff, Earretto.la&phil.net Although &anta Mar na d d not mmed ately reply and tell h m 9hat op n on he may have formed and the dec s on he had reached n the matter, t s no less true that the s lence and lacF of reply on the part of the ch ef o9ner of the factory 9ere suff c ent nd cat ons that the res gnat on had been v rtually accepted and that f he d d not reply mmed ately t 9as because he ntended to act caut ously. As the addressee, the ch ef o9ner of the factory, Fne9 of no one at that t me 9hom he could appo nt rel eve the 9r ter, 9ho had res gned, t 9as to be presumed that he 9as thereafter looF ng for some trust9orthy person 9ho m ght subst tute the pla nt ff n h s pos t on of agent and manager of the factory, commun cated to the pla nt ff that he had revoFed the po9er conferred upon h m and had appo nted Mr. J. Mc#av n to subst tute h m n h s pos t on of manager of the !a $nsular factory, 9hereby the pla nt ff)s res gnat on, tendered n h s aforesa d letter of January 2, 1505, E1h b t <, 9as e1pressly accepted. After the pla nt ff had res gned the pos t on he held, and not9 thstand ng the lapse of several months before ts e1press acceptance, t cannot be understood that he has any r ght to demand an ndemn ty for losses and damages part cularly s nce he ostens bly and franFly acFno9ledged that he had been negl gent n the d scharge of h s dut es and that he had overstepped h s author ty n the management of the factory, 9 th respect to the 'h naman ment oned. %he record does not sho9 that &anta Mar na, h s pr nc pal, re=u red h m to res gn h s pos t on as manager, but that Earretto h mself voluntar ly

stated by letter to h s pr nc pal that, for the reasons there n ment oned, he res gned and placed at the latter)s d sposal the pos t on of agent and manager of the !a $nsular factoryI and f the pr nc pal, &anta Mar na, deemed t su table to rel eve the agent, for hav ng been negl gent and overstepp ng h s author ty n the d scharge of h s off ce, and furthermore because of h s hav ng e1pressly res gned h s pos t on, and placed t at the d sposal of the ch ef o9ner of the bus ness, t cannot be e1pla ned ho9 such person can be ent tled to demand an ndemn ty for losses and damages, from h s pr nc pal, 9ho merely e1erc sed h s la9ful r ght of rel ev ng the pla nt ff from the pos t on 9h ch he had voluntar ly g ven up. &o, the agent and manager Earretto 9as not really d sm ssed or removed by the defendant &anta Mar na. (hat d d occur 9as that, n v e9 of the res gnat on rendered by the pla nt ff for the reasons 9h ch he h mself consc ent ously deemed to 9arrant h s surrender of the pos t on he 9as hold ng n the !a $nsular factory, the pr nc pal o9ner of the establ shment, the defendant &anta Mar na, had to tooF for and appo nt another agent and manager to rel eve and subst tute h m n the sa d employment O a la9ful act performed by the pr nc pal o9ner of the factory and one 9h ch cannot serve as a ground upon 9h ch to demand from the latter an ndemn ty for losses and damages, nasmuch as, n v e9 of the facts that occurred and 9ere acFno9ledged and confessed by Earretto n h s letters, E1h b ts < and >, the pla nt ff could not e1pect, nor ought to have e1pected, that the defendant should have ns sted on the unsuccessful agent)s cont nuance n h s pos t on, or that he should not have accepted the res gnat on tendered by the pla nt ff n h s f rst letter. Ey the mere fact that the defendant rema ned s lent and des gnated another person, Mr. J. Mc#av n, to, d scharge n the pla nt ff)s stead the po9ers and dut es of agent and manager of the sa d factory, Earretto should have understood that h s res gnat on had been accepted and that f ts acceptance 9as not commun cated to h m mmed ately t 9as o9 ng to the c rcumstance that the pr nc pal o9ner of the factory d d not then have, nor unt l several months after9ards, any other person 9hom he could appo nt and place n h s stead, for, as soon as the defendant &anta Mar na could appo nt the sa d Mc#av n, he revoFed the po9er he had conferred upon the pla nt ff and commun cated th s fact to the latter, by means of the letter, E1h b t D, 9h ch 9as presented to h m by the bearer thereof, Mc#av n h mself, the ne9 manager and agent appo nted. Dm tt ng cons derat on for the moment of the f rst error attr buted to the tr al -udge by h s susta n ng the demurrer f led aga nst the second cause of act on, relat ve to the collect on of +100,000 as the amount of the losses and damages occas oned to the pla nt ff, and turn ng our attent on to the second error mputed to h m by h s refusal to sentence the defendant, for the f rst cause of act on, to the payment of +<2,000 or of any sum over +<,06<.<<, 9e shall proceed to e1am ne the =uest on 9hether any per od or term for the durat on of the pos t on of agent and manager 9as f 1ed n the verbal contract made bet9een the deceased Joa=u n &anta Mar na, the defendant)s predecessor n nterest, and the pla nt ff anton o M.a Earretto O a contract 9h ch, after Joa=u n &anta Mar na)s death 9as rat f ed by h s brother and he r, the defendant Jose &anta Mar na. %he defendant acFno9ledged the sa d verbal contract and also ts rat f cat on by h m after h s brother)s deathI but he den ed any st pulat on there n that Earretto should hold h s off ce for any spec f c per od of t me f 1ed by and bet9een the contract ng part es, for the deceased Joa=u n &anta Mar na, n conferr ng po9er upon the pla nt ff, d d not do so for any spec f c t me nor d d he set any per od

9 th n 9h ch he should hold h s off ce of agent and manager of the !a $nsular factoryI ne ther d d he f 1 the date for the term nat on of such serv ces, n the nstrument of po9er of attorney e1ecuted by the defendant &anta Mar na before a notary on the 28th of &eptember, 1506. /"ecord, p. 20.0 7rom the conte1t of the nstrument -ust ment oned t can not be concluded that any t me 9hatever 9as f 1ed dur ng 9h ch the pla nt ff should hold h s pos t on of agent. %he defendant, n e1ecut ng that nstrument, 9hereby the agreement made bet9een h s brother Joa=u n and Earretto 9as rat f ed, d d no more than accord to the pla nt ff the same conf dence that the defendant)s predecessor n nterest had n h mI and so long as th s merely sub-ect ve cond t on of trust lodged n the agent e1 sted, the t me dur ng 9h ch the latter m ght hold h s off ce could be cons dered ndef n te or undeterm ned, but as soon as that ndespensable cond t on of a po9er of attorney d sappeared and the conduct of the agent deceased to nsp re conf dence, the pr nc pal had a r ght to revoFe the po9er he had conferred upon h s agent, espec ally 9hen the latter, for good reasons, gave up the off ce he 9as hold ng. Art cle 12<< of the c v l 'ode, appl cable to the case at bar, accord ng to the prov s ons of art cle 2 of the 'ode of 'ommerce, prescr bes? ,%he pr nc pal may, at h s 9 ll, revoFe the po9er and compel the agent to return the nstrument conta n ng the same n 9h ch the author ty 9as g ven., Art cle 225 of the 'ode of 'ommerce prov des? ,%he pr nc pal may revoFe the comm ss on ntrusted to an agent at any stage of the transact on, adv s ng h m thereof, but al9ays be ng l able for the result of the transact ons 9h ch tooF place before the latter 9as nformed of the revocat on., +a&phi+.net 7rom the above legal prov s ons t s clearly to be nferred that the contract of agency can subs st only so long as the pr nc pal has conf dence n h s agent, because, from the moment such conf dence d sappears and although there be a f 1ed per od for the e1cerc se of the off ce of agent, a c rcumstance that does not appear n the present case the pr nc pal has a perfect r ght to revoFe the po9er that he had conferred upon the agent o9 ng to the conf dence he had n h m and 9h ch for sound reasons had ceased to e1 st. %he record does not sho9 t to have been duly proved. not9 thstand ng the pla nt ff)s allegat on, that a per od 9as f 1ed for hold ng h s agency or off ce of agent and manager of the !a $nsular factory. $t 9ould be mproper, for the purpose of supply ng such defect, to apply to the present case the prov s ons of art cle 1126 of the ' v l 'ode. %h s art cle relates to obl gat on for 9h ch no per od has been f 1ed for the r fulf llment, but, 9h ch, from the r nature and c rcumstances, allo9 the nference that there 9as an ntent on to grant such per od to the debtor, 9herefore the courts are author Aed to f 1 the durat on of the same, and the reason 9hy t s nappl cable s that the r ghts and obl gat ons e1 st ng bet9een Earretto and &anta Mar na are absolutely d fferent from those to 9h ch t refers, for, accord ng to art cle 12<2 of the ' v l 'ode, agency s term nated? 1. Ey revocat on. 2. Ey 9 thdra9al of the agent.

<. Ey death, nterd ct on, banFruptcy, or nsolvency of the pr nc pal or of the agent. $t s not ncumbent upon the courts to f 1 the per od dur ng 9h ch contracts for serv ces shall last. %he r durat on s understood to be mpl c ty f 1ed, n default of e1press st pulat on, by the per od for the payment of the salary of the employee. %herefore the doctr ne of the tac t rene9al of leases of property, establ shed n art cle 18>> of the ' v l 'ode, s not appl cable to the case at bar. And even though the annual salary f 1ed for the serv ces to be rendered by the pla nt ff as agent and manager of the !a $nsular factory, 9as +<2,000, yet, n accordance 9 th the custom un versally observed throughout the 9orld, salar es f 1ed for the year are collected and pa d n monthly nstallments as they fall due, and so the pla nt ff collected and 9as pa d h s remunerat onI therefore, on the latter)s d scont nuance n h s off ce as agent, he 9ould at most be ent tled to the salary for one month and some odd days, allo9ed n the -udgment of the lo9er court. Art cle <02 of the 'ode of 'ommerce reads thus? $n cases n 9h ch no spec al t me s f 1ed n the contracts of serv ce, any one of the part es thereto may d ssolve t, adv s ng the other party thereof one month n advance. %he factor or shop clerF shall be ent tled, n such case, to the salary due for one month. 7rom the mere fact that the pr nc pal no longer had conf dence n the agent, he s ent tled to 9 thdra9 t and to revoFe the po9er he conferred upon the latter, even before the e1p rat on of the per od of the engagement or of the agreement made bet9een themI but, n the present case, once t has been sho9n that, bet9een the deceased Joa=u n &anta Mar na and the latter)s he r, no9 the defendant, on the one hand, and the pla nt ff Earretto, on the other, no per od 9hatever 9as st pulated dur ng 9h ch the last@named should hold the off ce and manager of the sa d factory, t s un=uest onable that the defendant, even 9 thout good reasons, could la9fully revoFe the po9er conferred upon the pla nt ff and appo nt n h s place Mr. Mc#av n, and thereby contracted no l ab l ty 9hatever other than the obl gat on to pay the pla nt ff the salary perta n ng to one month and some odd days, as held n the -udgment belo9. Earretto h mself acFno9ledged n h s aforesa d letter, E1h b t <, that he had e1ceeded h s author ty and acted negl gently n sell ng on cred t to the sa d 'h naman a large =uant ty of the products of the factory under the pla nt ff)s management, reach ng the cons derable value of +52,000I 9hereby he confessed one of the causes 9h ch led to h s removal, the revocat on of the po9er conferred upon h m and the appo ntment of a ne9 agent n h s place. %he defendant, Jose &anta Mar na, n h s letter of December 2, 1505, 9hereby he commun cated to the pla nt ff the revocat on of the po9er he had conferred upon h m and the appo ntment of another ne9 agent, Mr. Mc#av n, stated among other th ngs that the loan contracted by the agent Earretto, 9 thout the approval of the pr nc pal, caused a great pan c among the stocFholders of the factory and that the defendant hoped to allay t by the ne9 measure that he e1pected to adopt. %h s, then, 9as st ll another reason the nduced the pr nc pal to 9 thdra9 the conf dence placed n the pla nt ff and to revoFe the po9er he had conferred

upon h m. %herefore, even om tt ng cons derat on of the res gnat on before ment oned, 9e f nd duly 9arranted the reasons 9h ch mpelled the defendant to revoFe the sa d po9er and rel eve the pla nt ff from the pos t on of agent and manager of the !a $nsular factory. $n accordance 9 th the prov s ons of art cle 26< of the 'ode of 'ommerce, the manager of an enterpr se or manufactur ng or commerc al establ shment, author Aed to adm n ster t and d rect t, 9 th more or less po9ers, as the o9ner may have cons dered adv sable, shall have the legal =ual f cat ons of an agent. Art cle <00 of the same code prescr bes? ,%he follo9 ng shall be spec al reasons for 9h ch pr nc pals may d scharge the r employees, even though the t me of serv ce of the contract has not elapsed? 7raud or breach of trust n the bus ness ntrusted to them . . . , Ey reason of these legal prov s ons the defendant, n revoF ng the author ty conferred upon the pla nt ff, acted 9 th n h s un=uest onable po9ers and d d not thereby v olate any statute 9hatever that may have l m ted themI conse=uently, he could not have caused the pla nt ff any harm or detr ment to h s r ghts and nterests, for not only had &anta Mar na a -ust f able reason to proceed as he d d, but also no per od 9hatever had been st pulated dur ng 9h ch the pla nt ff should be ent tled to hold h s pos t onI and furthermore, because, n rel ev ng the latter and appo nt ng another person n h s place, the defendant acted n accordance 9 th the renunc at on and res gnat on 9h ch the pla nt ff had tendered. $f the pla nt ff s ent tled to any ndemn ty n accordance 9 th la9, such 9as a9arded to h m n the -udgment of the lo9er court by grant ng h m the r ght to collect salary for one month and some odd days. As for the other features of the case, the record does not sho9 that the pla nt ff has any good reason or legal ground upon 9h ch to cla m an ndemn ty for losses and damages n the sum of +100,000, for t 9as not proved that he suffered to that e1tent, and the -udgment appealed from has a9arded h m the month)s salary to 9h ch he s ent tled. %herefore that -udgment and the order of March 14 susta n ng the demurrer to the second cause of act on are both n accordance 9 th the la9. 7or the forego ng reasons, 9hereby the errors ass gned to the sa d -udgment and order are deemed to have been refuted, both -udgment and order are hereby aff rmed, 9 th costs aga nst the appellant. Arellano, ..9., 9ohnson and .arson, 99., concur. Moreland, 9., concurs in the result. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. #7;1;3. July 1., 1<<3

%'S #/GG)NG, )N%., pet t oner, vs. (5E %/&$( /: A++EA#S and !.$. AG&)NA#!/ %/$+/$A()/N, respondents.

N/%/N, J.: %h s s a pet t on for rev e9 on certiorari from the dec s on dated July <1, 1528 of the 'ourt of Appeals n 'A@#.". No. 422><@" 9h ch aff rmed in toto the dec s on of the 'ourt of 7 rst $nstance of Man la, Eranch C$$, n ' v l 'ase No. 8><88 d sm ss ng the compla nt f led by pet t oner 'M& !ogg ng, $nc. /'M&, for brev ty0 aga nst pr vate respondent D.". Agu naldo 'orporat on /D"A'D", for brev ty0 and order ng the former to pay the latter attorney)s fees n the amount of +1,000.00 and the costs. %he facts of the case are as follo9s? +et t oner 'M& s a forest concess ona re engaged n the logg ng bus ness, 9h le pr vate respondent D"A'D" s engaged n the bus ness of e1port ng and sell ng logs and lumber. Dn August 26, 1582, 'M& and D"A'D" entered nto a contract of agency 1 9hereby the former appo nted the latter as ts e1clus ve e1port and sales agent for all logs that the former may produce, for a per od of f ve /80 years. %he pert nent port ons of the agreement, 9h ch 9as dra9n up by D"A'D", 3 are as follo9s? 1. &$&DN :'M&; hereby appo nts D"A'D" as h s sole and e1clus ve e1port sales agent 9 th full author ty, sub-ect to the cond t ons and l m tat ons here nafter set forth, to sell and e1port under a f rm sales contract acceptable to &$&DN, all logs produced by &$&DN for a per od of f ve /80 years commenc ng upon the e1ecut on of the agreement and upon the terms and cond t ons here nafter prov ded and D"A'D" hereby accepts such appo ntmentI 111 111 111 <. $t s e1pressly agreed that D"A'D" shall handle e1clus vely all negot at ons of all e1port sales of &$&DN 9 th the buyers and arrange the procurement and schedules of the vessel or vessels for the sh pment of &$&DN)s logs n accordance 9 th &$&DN)s 9r tten re=uests, but D"A'D" shall not n any9ay :sic; be l able or respons ble for any delay, default or fa lure of the vessel or vessels to comply 9 th the schedules agreed uponI 111 111 111 5. $t s e1pressly agreed by the part es hereto that D"A'D" shall rece ve f ve /8R0 per cent comm ss on of the gross sales of logs of &$&DN based on 7.D.E. nvo ce value 9h ch comm ss on shall be deducted from the proceeds of any andMor all moneys rece ved by D"A'D" for and n behalf and for the account of &$&DNI

Ey v rtue of the aforesa d agreement, 'M& 9as able to sell through D"A'D" a total of 22,2>4,>22 board feet of logs n Japan, from &eptember 20, 1582 to Apr l 4, 15>2. About s 1 months pr or to the e1p rat on of the agreement, 9h le on a tr p to %oFyo, Japan, 'M&)s pres dent, Atty. 'arlos Moran & son, and general manager and legal counsel, Atty. %eodoro ". Dom ngueA, d scovered that D"A'D" had used &h nFo %rad ng 'o., !td. /&h nFo for brev ty0 as agent, representat ve or l a son off cer n sell ng 'M&)s logs n Japan for 9h ch &h nFo earned a comm ss on of 3.&. S1.00 per 1,000 board feet from the buyer of the logs. 3nder th s arrangement, &h nFo 9as able to collect a total of 3.&. S22,2>4.>2. 4 'M& cla med that th s comm ss on pa d to &h nFo 9as n v olat on of the agreement and that t /'M&0 s ent tled to th s amount as part of the proceeds of the sale of the logs. 'M& contended that s nce D"A'D" had been pa d the 8R comm ss on under the agreement, t s no longer ent tled to the add t onal comm ss on pa d to &h nFo as th s tantamount to D"A'D" rece v ng double compensat on for the serv ces t rendered. After th s d scovery, 'M& sold and sh pped logs valued at 3.&. S2<5,<21.1< or +2,66<,<81.50, ; d rectly to several f rms n Japan 9 thout the a d or ntervent on of D"A'D". 'M& sued D"A'D" for the comm ss on rece ved by &h nFo and for moral and e1emplary damages, 9h le D"A'D" countercla med for ts comm ss on, amount ng to +144,1>2.85, from the sales made by 'M& of logs to Japanese f rms. $n ts reply, 'M& averred as a defense to the countercla m that D"A'D" had reta ned the sum of +101,1>2.85 as part of ts comm ss on for the sales made by 'M&. 2 %hus, as ts countercla m to D"A'D")s countercla m, 'M& demanded D"A'D" return the amount t unla9fully reta ned. D"A'D" later f led an amended countercla m, alleg ng that the balance of ts comm ss on on the sales made by 'M& 9as +42,><0.62, 0 thus mpl edly adm tt ng that t reta ned the amount alleged by 'M&. $n d sm ss ng the compla nt, the tr al court ruled that no ev dence 9as presented to sho9 that &h nFo rece ved the comm ss on of 3.&. S22,2>4.>2 ar s ng from the sale of 'M&)s logs n Japan, though the tr al court stated that ,&h nFo 9as able to collect the total amount of S22,2>4.>2 3& Dollars /E1hs. M and M@10., 1 %he countercla m 9as l Fe9 se d sm ssed, as t 9as sho9n that D"A'D" had 9a ved ts r ghts to the balance of ts comm ss on n a letter dated 7ebruary 2, 15>< to Atty. 'arlos Moran & son, pres dent of 'M&. = 7rom sa d dec s on, only 'M& appealed to the 'ourt of Appeals. %he 'ourt of Appeals, n a < to 2 dec s on, < aff rmed the d sm ssal of the compla nt s nce ,:t;he tr al court could not have made a categor cal f nd ng that &h nFo collected comm ss ons from the buyers of & son)s logs n Japan, and could not have held that & son s ent tled to recover from Dracor the amount collected by &h nFo as comm ss ons, pla nt ff@appellant hav ng fa led to prove by competent ev dence ts cla ms., 1. Moreover, the appellate court held?

%here s reason to bel eve that &h nFo %rad ng 'o. !td., 9as pa d by defendant@appellee out of ts o9n comm ss on of 8R, as nd cated n the letter of ts pres dent to the pres dent of & son, dated 7ebruary 2, 15>< /E1h b t ,N,0, and n the Agreement bet9een Agu naldo Development 'orporat on /ADE'D"0 and &h nFo %rad ng 'o., !td. /E1h b t ,5,0. Dan el ". Agu naldo stated n h s sa d letter? . . . , $ nformed you that f you 9anted to pay me for the serv ce, then t 9ould be no more than at the standard rate of 8R comm ss on because n our o9n case, 9e pay our Japanese agents 2@1M2R. Accord ngly, 9e 9ould only add a s m lar amount of 2@1M2R for the serv ce 9h ch 9e 9ould render you n the +h l pp nes. 11 Aggr eved, 'M& appealed to th s 'ourt by 9ay of a pet t on for rev e9 on certiorari, alleg ng /10 that the 'ourt of Appeals erred n not maF ng a complete f nd ngs of factI /20 that the test mony of Atty. %eodoro ". Dom ngueA, regard ng the adm ss on by &h nFo)s pres dent and d rector that t collected a comm ss on of 3.&. S1.00 per 1,000 board feet of logs from the Japanese buyers, s adm ss ble aga nst D"A'D"I /<0 that the statement of D"A'D")s ch ef legal counsel n h s memorandum dated May <1, 15>8, E1h b t ,*,, s an adm ss on that &h nFo 9as able to collect the comm ss on n =uest onI /40 that the fact that &h nFo rece ved the =uest oned comm ss ons s deemed adm tted by D"A'D" by ts s lence under &ect on 2<, "ule 1<0 of the "ules of 'ourt 9hen t fa led to reply to Atty. 'arlos Moran & son)s letter dated 7ebruary >, 15>2I /80 that D"A'D" s not ent tled to ts 8R comm ss on ar s ng from the d rect sales made by 'M& to buyers n JapanI and />0 that D"A'D" s gu lty of fraud and bad fa th n ts deal ngs 9 th 'M&. ( th regard to 'M&)s arguments concern ng 9hether or not &h nFo rece ved the comm ss on n =uest on, (e f nd the same unmer tor ous. %o beg n 9 th, these arguments =uest on the f nd ngs of fact made by the 'ourt of Appeals, 9h ch are f nal and conclus ve and can not be rev e9ed on appeal to the &upreme 'ourt. 13 Moreover, 9h le t s true that the ev dence adduced establ shes the fact that &h nFo s D"A'D")s agent or l a son n Japan, 14 there s no ev dence 9h ch establ shed the fact that &h nFo d d rece ve the amount of 3.&. S22,2>4.>2 as comm ss on ar s ng from the sale of 'M&)s logs to var ous Japanese f rms. %he fact that &h nFo rece ved the comm ss ons n =uest on 9as not establ shed by the test mony of Atty. %eodoro ". Dom ngueA to the effect that &h nFo)s pres dent and d rector told h m that &h nFo rece ved a comm ss on of 3.&. S1.00 for every 1,000 board feet of logs sold, s nce the same s hearsay. & m larly, the letter of Mr. *. &h bata of %oyo MenFa *a sha, !td. 1; s also hearsay s nce Mr. &h bata 9as not presented to test fy on h s letter. 'M&)s other ev dence have l ttle or no probat ve value at all. %he statements made n the memorandum of Atty. & mpl c o ". ' ocon to D"A'D" dated May <1, 15>8, 12 the letter dated 7ebruary 2, 15>< of Dan el ". Agu naldo, 10 pres dent of D"A'D", and the reply@letter dated January 5, 15>4 11 by D"A'D")s counsel Atty. C. E. Del "osar o to 'M&)s demand letter

dated &eptember 28, 15>< can not be categor Aed as adm ss ons that &h nFo d d rece ve the comm ss ons n =uest on. %he alleged adm ss on made by Atty. ' ocon, to 9 t O 7urthermore, as per our records, our sh pment of logs to %oyo MenFa *a sha, !td., s only for a net volume of >2,242,2<2 board feet 9h ch should enable &h nFo to collect a comm ss on of 3& S>2,242.2< only can not be cons dered as such s nce the statement 9as made n the conte1t of =uest on ng 'M&)s tally of logs del vered to var ous Japanese f rms. & m larly, the statement of Dan el ". Agu naldo, to 9 t O . . . *no9 ng as 9e do that %oyo MenFa s a large and reputable company, t s obv ous that they pa d &h nFo for certa n serv ces 9h ch &h nFo must have sat sfactor ly performed for them n Japan other9 se they 9ould not have pa d &h nFo and that of Atty. C. E. Del "osar o, . . . $t does not seem proper, therefore, for 'M& !ogg ng, $nc., as pr nc pal, to concern tself 9 th, much less =uest on, the r ght of &h nFo %rad ng 'o., !td. 9 th 9h ch our cl ent debt d rectly, to 9hatever benef ts t m ght have der ved form the ult mate consumerMbuyer of these logs, %oyo MenFa *a sha, !td. %here appears to be no -ust f cat on for your cl ent)s content on that these benef ts, 9hether they can be cons dered as comm ss ons pa d by %oyo MenFa *a sha to &h nFo %rad ng, are to be regarded part of the gross sales. can not be cons dered adm ss ons that &h nFo rece ved the =uest oned comm ss ons s nce ne ther statements declared categor cally that &h nFo d d n fact rece ve the comm ss ons and that these arose from the sale of 'M&)s logs. As correctly stated by the appellate court? $t s a rule that ,a statement s not competent as an adm ss on 9here t does not, under a reasonable construct on, appear to adm t or acFno9ledge the fact 9h ch s sought to be proved by t,. An adm ss on or declarat on to be competent must have been e1pressed n def n te, certa n and une=u vocal language /EanF of the +h l pp ne $slands vs. 7 del ty N &urety 'o., 81 +h l. 82, >40. 1= 'M&)s content on that D"A'D" had adm tted by ts s lence the allegat on that &h nFo rece ved the comm ss ons n =uest on 9hen t fa led to respond to Atty. 'arlos Moran & son)s letter dated 7ebruary >, 15><, s not supported by the ev dence. D"A'D" d d n fact reply to the letter of Atty. & son, through the letter dated March 8, 15>< of 7.A. Novenar o, 1< 9h ch stated?

%h s s to acFno9ledge rece pt of your letter dated 7ebruary >, 15><, and addressed to Mr. D. ". Agu naldo, 9ho s at present out of the country. 111 111 111 (e have no record or Fno9ledge of any such payment of comm ss on made by %oyo MenFa to &h nFo. $f the payment 9as made by %oyo MenFa to &h nFo, as stated n your letter, 9e Fne9 noth ng about t and had noth ng to do 9 th t. %he f nd ng of fact made by the tr al court, i.e., that ,&h nFo 9as able to collect the total amount of S22,2>4.>2 3& Dollars,, can not be g ven 9e ght s nce th s 9as based on the summary prepared by 'M& tself, E1h b ts ,M, and ,M@1,. Moreover, even f t 9as sho9n that &h nFo d d n fact rece ve the comm ss ons n =uest on, 'M& s not ent tled thereto s nce these 9ere apparently pa d #y the #uyers to &h nFo for arrang ng the sale. %h s s therefore not part of the gross sales of 'M&)s logs. Bo9ever, (e f nd mer t n 'M&)s content on that the appellate court erred n hold ng that D"A'D" 9as ent tled to ts comm ss on from the sales made by 'M& to Japanese f rms. %he pr nc pal may revoFe a contract of agency at 9 ll, and such revocat on may be e1press, or mpl ed, 3. and may be ava led of even f the per od f 1ed n the contract of agency as not yet e1p red. 31 As the pr nc pal has th s absolute r ght to revoFe the agency, the agent can not ob-ect theretoI ne ther may he cla m damages ar s ng from such revocat on, 33 unless t s sho9n that such 9as done n order to evade the payment of agent)s comm ss on. 34 $n the case at bar, 'M& appo nted D"A'D" as ts agent for the sale of ts logs to Japanese f rms. Het, dur ng the e1 stence of the contract of agency, D"A'D" adm tted that 'M& sold ts logs d rectly to several Japanese f rms. %h s act const tuted an mpl ed revocat on of the contract of agency under Art cle 1524 of the ' v l 'ode, 9h ch prov des? Art. 1524 %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. $n 3e& Manila %um#er .ompany, :nc. vs. Repu#lic of the $hilippines, 3; th s 'ourt ruled that the act of a contractor, 9ho, after e1ecut ng po9ers of attorney n favor of another empo9er ng the latter to collect 9hatever amounts may be due to h m from the #overnment, and thereafter demanded and collected from the government the money the collect on of 9h ch he entrusted to h s attorney@ n@ fact, const tuted revocat on of the agency n favor of the attorney@ n@fact. & nce the contract of agency 9as revoFed by 'M& 9hen t sold ts logs to Japanese f rms 9 thout the ntervent on of D"A'D", the latter s no longer ent tled to ts comm ss on from the proceeds of such sale and s not ent tled to reta n 9hatever moneys t may have rece ved as ts comm ss on for sa d transact ons. Ne ther 9ould D"A'D" be ent tled to collect damages from 'M&,

s nce damages are generally not a9arded to the agent for the revocat on of the agency, and the case at bar s not one fall ng under the e1cept on ment oned, 9h ch s to evade the payment of the agent)s comm ss on. "egard ng 'M&)s content on that the 'ourt of Appeals erred n not f nd ng that D"A'D" had comm tted acts of fraud and bad fa th, (e f nd the same unmer tor ous. ! Fe the content on nvolv ng &h nFo and the =uest oned comm ss ons, the f nd ngs of the 'ourt of Appeals on the matter 9ere based on ts apprec at on of the ev dence, and these f nd ngs are b nd ng on th s 'ourt. $n f ne, (e aff rm the rul ng of the 'ourt of Appeals that there s no ev dence to support 'M&)s content on that &h nFo earned a separate comm ss on of 3.&. S1.00 for every 1,000 board feet of logs from the buyer of 'M&)s logs. Bo9ever, (e reverse the rul ng of the 'ourt of Appeals 9 th regard to D"A'D")s r ght to reta n the amount of +101,8<>.22 as part of ts comm ss on from the sale of logs by 'M&, and hold that D"A'D" has no r ght to ts comm ss on. 'onse=uently, D"A'D" s hereby ordered to rem t to 'M& the amount of +101,8<>.22. (BE"E7D"E, the dec s on appealed from s hereby MDD$7$ED as stated n the preced ng paragraph. 'osts de officio. &D D"DE"ED. 3arvasa, ..9., $adilla and Regalado 99., concur.

:ootnotes 1 E1h b t ,A,. 2 E1h b t ,E,. < E1h b ts ,M, and ,M@1,. 4 E1h b t ,AA@2,. 8 See "ecord on Appeal. p. 28. > E1h b t ,EE@1,. 2 "ecord on Appeal, p. <5. 6 E1h b t ,N, and ,N@1,. 5 $onente? Just ce !u s E. "eyesI Just ces " cardo '. +uno and 7ranc sco %antu co, Jr., concurr ng. Just ces "oseller %. ! m and Magno &. #atma tan, d ssent ng. Eecause of a 2 to 1 vote 9 th n the d v s on hear ng the case, t9o add t onal members of the 'ourt of Appeals 9ere ass gned to s t 9 th the members of the d v s on. 10 Dec s on of the 'ourt of Appeals, p. 12.

11 :d., pp. 1<@14. 12 Am go vs. %eves, 80 D.#. 8255. 1< E1h b ts ,',, ,'@1,, ,'@2,, ,E,, ,E@1,, ,E@1@A,, to ,E@1@',. See also %.&.N., August 24, 15>2, pp. 18>@185, and %.&.N., Dctober 12, 15>2, pp. 1>4@1>5. 14 E1h b t ,77,, ,77@1, and ,77@2,. 18 E1h b t ,*, and ,*@1,. 1> E1h b t ,N,. 12 E1h b t ,G,. 16 Dec s on of the 'ourt of Appeals, p. 1<. 15 E1h b t ,+,. 20 Art. 1520, ' v l 'ode. 21 Earretto vs. &anta Mar na, 2> +h l. 440. 22 +ad lla, ' v l !a9, Col. C$, p. 252. 2< $nfante vs. 'unanan, 5< +h l. >51. 24 102 +h l. 624 /15>00. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71.==1 Septem er 4., 1<2=

E&#/G)/ !E# $/SA$)/, A&$E#)/ !E# $/SA$)/, 9EN)(/ !E# $/SA$)/, 9E$NA$!/ !E# $/SA$)/, )S)!$A !E# $/SA$)/, !/')NGA !E# $/SA$)/ and %/N%E+%)/N 9/$$/'E/, pla nt ff@appellees, vs. +$)')()*/ A9A! and (E/!/$)%/ A9A!, defendants@appellants. !austita and !autista for appellees. Agustin .. !agasao for appellants. +A!)##A, J.: Appeal from a -udgment rendered by the 'ourt of 7 rst $nstance of Nueva Ec -a n c v l case No. 1064.

%he facts are und sputed, the part es hav ng entered nto an agreed statement thereof, the pert nent and mater als part of 9h ch are? %he pla nt ffs are the ch ldren and he rs of the late % burc o del "osar o. Dn 12 December 15<>, the &ecretary of Agr culture and 'ommerce, by author ty of the +res dent of the 'ommon9ealth of the +h l pp nes, ssued under the prov s ons of the +ubl c !and Act /Act No. 26240 homestead patent No. 4085> to % burc o del "osar o. %he homestead 9 th an area of 5 hectares, 4< ares and 14 centares s s tuated n barr o &an Maur c o, mun c pal ty of &an Jose, prov nce of Nueva Ec -a. Dn 11 7ebruary 15<2, the "eg strar of Deeds n and for the prov nce of Nueva Ec -a ssued or g nal cert f cate of t tle No. 4620 n the name of the homesteader /Anne1 A, st pulat on of facts, pp. 28@<0, "ec. on App.0. Dn 24 7ebruary 15<2, % burc o del "osar o obta ned a loan from +r m t vo Abad n the sum of +2,000 9 th nterest at the rate of 12R per annum, payable on <1 December 1541. As secur ty for the payment thereof he mortgaged the mprovements of the parcel of land n favor of the cred tor /Anne1 E, compla nt, pp. 10@1<, "ec. on App.0. Dn the same day, 24 7ebruary, the mortgagor e1ecuted an , rrevocable spec al po9er of attorney coupled 9 th nterest, n favor of the mortgagee, author A ng h m, among others, to sell and convey the parcel of land /Anne1 A, compla nt, pp. 2@5, "ec. on App.0. %hereafter the mortgagor and h s fam ly moved to &ant ago, $sabela, and there establ shed a ne9 res dence. &omet me n December 1548 the mortgagor d ed leav ng the mortgage debt unpa d. Dn 5 June 1542, +r m t vo Abad, act ng as attorney@ n@fact of % burc o del "osar o, sold the parcel of land to h s son %eodor co Abad for and n cons derat on of the toFen sum of +1.00 and the payment by the vendee of the mortgage debt of % burc o del "osar o to +r m t vo Abad /Anne1 ', compla nt, pp. 1<@1>, "ec. on App.0. %he vendee tooF possess on of the parcel of land. 3pon the f l ng and reg strat on of the last deed of sale, the "eg strar of Deeds n and for the prov nce of Nueva Ec -a cancelled or g nal cert f cate of t tle No. 4620 n the name of % burc o del "osar o and n l eu thereof ssued transfer cert f cate of t tle No. 1662 n favor of the vendee %eodor co Abad. Dn 25 December 1582 the pla nt ffs brought su t aga nst the defendants to recover possess on and o9nersh p of the parcel of land, damages, attorney)s fees and costs. %he defendants ans9ered the compla nt and prayed for the d sm ssal thereof, damages, attorney)s fees and costs. Dn 28 Dctober 1584, after the part es had subm tted the case upon a st pulat on of facts, the 'ourt rendered -udgment, the d spos t ve part of 9h ch s? (BE"E7D"E, the deed of sale e1ecuted by +r m t vo Abad n favor of %eodor ca Abad, Anne1 ', s hereby declared null and vo dI and %eodor co Abad s hereby ordered to e1ecute a deed of reconveyance of the land or g nally 9 th D'% No. 4620, no9 covered by %ransfer 'ert f cate of % tle No. 1660, n favor of the pla nt ffs. No pronouncement as to costs. %he defendants appealed to the 'ourt of Appeals, 9h ch cert f ed the case to th s 'ourt as no =uest on of fact s nvolved. &ect on 11> of the +ubl c !and Act /Act No. 26240, under 9h ch the homestead 9as granted to the appellees) father, prov des? !ands ac=u red under the free patent or homestead prov s ons shall not be sub-ect to encumbrance or al enat on from the date of the approval of the

appl cat on and for a term of f ve years from and after the date of the ssuance of the patent or grant, nor shall they become l able to the sat sfact on of any debt contracted pr or to the e1p rat on of sa d per odI but the mprovements or crops on the land may be mortgaged or pledged to =ual f ed persons, assoc at ons, or corporat ons. %he encumbrance or al enat on of lands ac=u red by free patent or homestead n v olat on of th s sect on s null and vo d.1 %here s no =uest on that the mortgage on the mprovements of the parcel of land e1ecuted by % burc o del "osar o n favor of +r m t vo Abad /Anne1 E, compla nt, pp. 10@1<, "ec. on App.0 s val d. %he po9er of attorney e1ecuted by % burc o del "osar o n favor of +r m t vo Abad /Anne1 A, compla nt, pp. 2@5, "ec. on App.0 prov d ng, among others, that s coupled 9 th an nterest n the sub-ect matter thereof n favor of the sa d attorney and are therefore rrevocable, and . . . conferr ng upon my sa d attorney full and ample po9er and author ty to do and perform all th ngs reasonably necessary and proper for the due carry ng out of the sa d po9ers accord ng to the true tenor and purport of the same, . . ., does not create an agency coupled 9 th an nterest nor does t clothe the agency 9 th an rrevocable character. A mere statement n the po9er of attorney that t s coupled 9 th an nterest s not enough. $n 9hat does such nterest cons st must be stated n the po9er of attorney. %he fact that % burc o del "osar o, the pr nc pal, had mortgaged the mprovements of the parcel of land to +r m t vo Abad, the agent, /Anne1 E, compla nt, pp. 10@1<, "ec. on App.0 s not such an nterest as could render rrevocable the po9er of attorney e1ecuted by the pr nc pal n favor of the agent. $n fact no ment on of t s made n the po9er of attorney. %he mortgage on the mprovements of the parcel of land has noth ng to do 9 th the po9er of attorney and may be foreclosed by the mortgagee upon fa lure of the mortgagor to comply 9 th h s obl gat on. As the agency 9as not coupled 9 th an nterest, t 9as term nated upon the death of % burc o del "osar o, the pr nc pal, somet me n December 1548, and +r m t vo Abad, the agent, could no longer val dly convey the parcel of land to %eodor co Abad on 5 June 1542. %he sale, therefore, to the later 9as null and vo d. Eut grant ng that the rrevocable po9er of attorney 9as la9ful and val d t 9ould sub-ect the parcel of land to an encumbrance . As t-e -omestead patent Fas issued on 13 !ecem er 1<40 and t-e poFer of attorney Fas eLecuted on 3; :e ruary 1<41, it Fas in Aiolation of t-e laF t-at pro-i its t-e alienation or encum rance of land acKuired y -omestead from t-e date of t-e approAal of t-e application and for a term of fiAe years from and after t-e issuance of t-e patent or "rant. Appellants contend that the po9er of attorney 9as to be ava led of by the agent after the lapse of the proh b t on per od of f ve years, and that n fact +r m t vo Abad sold the parcel of land on 5 June 1542, after the lapse of such per od. Noth ng to that effect s found n the po9er of attorney. Appellants cla m that the tr al court should have d rected the appellees to re mburse %eodor co Abad for 9hat he had pa d to +r m t vo Abad to d scharge the mortgage n the latter)s favor as part of the cons derat on of the sale. As the sale to %eodor co Abad s null and vo d, the appellees can not be compelled to re mburse %eodor co Abad for 9hat he had pa d to +r m t vo Abad. %he former)s r ght of act on s aga nst the latter, 9 thout pre-ud ce to the r ght of +r m t ve Abad to foreclose the mortgage on the mprovements of the parcel of land f the

mortgage debt s not pa d by the appellees, as he rs and successors@ n@ nterest of the mortgagor. %he -udgment appealed from s aff rmed, 9 th costs aga nst the appellants. $aras, .. 9., !engzon, Reyes, A., !autista Angelo, %a#rador, .oncepcion, Reyes, 9.!.%., and 5ndencia, 99.,concur.

:ootnotes
1

&ect on 122, +ubl c !and Act /Act No. 26240.

&E'DND D$C$&$DN NG.$. No. 120.12. Au"ust 11, 3..2O $E+&9#)% /: (5E +5)#)++)NES, represented y #(. GEN. J/SE '. %A#)'#)', in -is capacity as former %-ief of t-e )ntelli"ence SerAice, Armed :orces of t-e +-ilippines C)SA:+D, and former %ommandin" General, +residential Security Group C+SGD, and 'AJ. !A*)! 9. !)%)AN/, in -is capacity as an /fficer of )SA:+ and former mem er of t-e +SG, petitioners/ 's. 5/N. *)%(/$)N/ E*ANGE#)S(A, in -is capacity as +residin" Jud"e, $e"ional (rial %ourt, 9ranc- 334, EueJon %ity, and !AN(E #EGAS+), represented y -is attorney7in7fact, +aul GutierreJ, respondents. !E%)S)/N +&N/, J., %he case at bar stems from a compla nt for damages, 9 th prayer for the ssuance of a 9r t of prel m nary n-unct on, f led by pr vate respondent Dante !egasp , through h s attorney@ n@fact +aul #ut erreA, aga nst pet t oners #en. Jose M. 'al ml m, ' r aco "eyes and Ma-. Dav d D c ano before the "eg onal %r al 'ourt /"%'0 of UueAon ' ty.:1; %he 'ompla nt alleged that pr vate respondent !egasp s the o9ner of a land located n E gte, NorAagaray, Eulacan. $n November 1555, pet t oner 'al ml m, represent ng the "epubl c of the +h l pp nes, and as then head of the $ntell gence &erv ce of the Armed 7orces of the +h l pp nes and the +res dent al &ecur ty #roup, entered nto a Memorandum of Agreement /MDA0 9 th one ' r aco "eyes. %he MDA granted "eyes a perm t to hunt for treasure n a land n E gte, NorAagaray, Eulacan. +et t oner D c ano s gned the MDA as a 9 tness. :2; $t 9as further alleged that thereafter, "eyes, together 9 th pet t oners, started, d gg ng, tunnel ng and blast ng 9orFs on the sa d land of !egasp . %he compla nt also alleged that pet t oner 'al ml m ass gned about 60 m l tary personnel to guard the area

and encamp thereon to nt m date !egasp and other occupants of the area from go ng near the sub-ect land. Dn 7ebruary 18, 2000, !egasp e1ecuted a spec al po9er of attorney /&+A0 appo nt ng h s nephe9, pr vate respondent #ut erreA, as h s attorney@ n@ fact. #ut erreA 9as g ven the po9er to deal 9 th the treasure hunt ng act v t es on !egasp Js land and to f le charges aga nst those 9ho may enter t 9 thout the latterJs author ty. :<; !egasp agreed to g ve #ut erreA 40R of the treasure that may be found n the land. Dn 7ebruary 25, 2000, #ut erreA f led a case for damages and n-unct on aga nst pet t oners for llegally enter ng !egasp Js land. Be h red the legal serv ces of Atty. Bomobono AdaAa. %he r contract prov ded that as legal fees, Atty. AdaAa shall be ent tled to <0R of !egasp Js share n 9hatever treasure may be found n the land. $n add t on, #ut erreA agreed to pay Atty. AdaAa +8,000.00 as appearance fee per court hear ng and defray all e1penses for the cost of the l t gat on. :4; 3pon the f l ng of the compla nt, then E1ecut ve Judge +erl ta J. %r a % rona ssued a 22@hour temporary restra n ng order /%"D0 aga nst pet t oners. %he case:8; 9as subse=uently raffled to the "%' of UueAon ' ty, Eranch 22<, then pres ded by publ c respondent Judge C ctor no +. Evangel sta. Dn March 2, 2000, respondent -udge ssued another 22@hour %"D and a summary hear ng for ts e1tens on 9as set on March 2, 2000. Dn March 14, 2000, pet t oners f led a Mot on to D sm ss :>; contend ng? f rst, there s no real party@ n@ nterest as the &+A of #ut erreA to br ng the su t 9as already revoFed by !egasp on March 2, 2000, as ev denced by a Deed of "evocat on,:2; and, second, #ut erreA fa led to establ sh that the alleged armed men guard ng the area 9ere act ng on orders of pet t oners. Dn March 12, 2000, pet t oners also f led a Mot on for $nh b t on:6; of the respondent -udge on the ground of alleged part al ty n favor of pr vate respondent. Dn March 2<, 2000, the tr al court granted pr vate respondentJs appl cat on for a 9r t of prel m nary n-unct on on the follo9 ng grounds? /10 the d gg ngs and blast ngs appear to have been made on the land of !egasp , hence, there s an urgent need to ma nta n the status quo to prevent ser ous damage to !egasp Js landI and, /20 the &+A granted to #ut erreA cont nues to be val d.:5; %he tr al court ordered thus? (BE"E7D"E, n v e9 of all the forego ng, the 'ourt hereby resolves to #"AN% pla nt ffJs appl cat on for a 9r t of prel m nary n-unct on. 3pon pla nt ffJs f l ng of an n-unct on bond n the amount of DNE B3ND"ED %BD3&AND +E&D& /+100,000.000, let a (r t of +rel m nary $n-unct on ssue en-o n ng the defendants as 9ell as the r assoc ates, agents or representat ves from cont nu ng to occupy and encamp on the land of the pla nt ff !E#A&+$ as 9ell as the v c n ty thereofI from d gg ng, tunnel ng and blast ng the sa d land of pla nt ff !E#A&+$I from remov ng 9hatever treasure may be found on the sa d landI from prevent ng and threaten ng the pla nt ffs and the r representat ves from enter ng the sa d land and perform ng acts of o9nersh pI from threaten ng the pla nt ffs and the r representat ves as 9ell as pla nt ffsJ la9yer.

Dn even date, the tr al court ssued another Drder :10; deny ng pet t onersJ mot on to d sm ss and re=u r ng pet t oners to ans9er the compla nt. Dn Apr l 4, 2000, t l Fe9 se den ed pet t onersJ mot on for nh b t on. :11; Dn appeal, the 'ourt of Appeals aff rmed the dec s on of the tr al court. :12; Bence th s pet t on, 9 th the follo9 ng ass gned errors? $ (BE%BE" %BE 'DN%"A'% D7 A#EN'H EE%(EEN !E#A&+$ AND +"$CA%E "E&+DNDEN% #3%$E""EL BA& EEEN E77E'%$CE!H "ECD*ED EH !E#A&+$. $$ (BE%BE" %BE 'DM+!A$N% A#A$N&% +E%$%$DNE"& &BD3!D EE D$&M$&&ED. $$$ (BE%BE" "E&+DNDEN% J3D#E D3#B% %D BACE $NB$E$%ED B$M&E!7 7"DM 73"%BE" +"D'EED$N# ($%B %BE 'A&E. (e f nd no mer t n the pet t on. Dn the f rst ssue, pet t oners cla m that the spec al po9er of attorney of #ut erreA to represent !egasp has already been revoFed by the latter. +r vate respondent #ut erreA, ho9ever, contends that the un lateral revocat on s nval d as h s agency s coupled 9 th nterest. (e agree 9 th pr vate respondent. Art. 16>6 of the ' v l 'ode prov des that by the contract of agency, an agent b nds h mself to render some serv ce or do someth ng n representat on or on behalf of another, Fno9n as the pr nc pal, 9 th the consent or author ty of the latter.:1<; A contract of agency s generally revocable as t s a personal contract of representat on based on trust and conf dence reposed by the pr nc pal on h s agent. As the po9er of the agent to act depends on the 9 ll and l cense of the pr nc pal he represents, the po9er of the agent ceases 9hen the 9 ll or perm ss on s 9 thdra9n by the pr nc pal. %hus, generally, the agency may be revoFed by the pr nc pal at 9 ll. :14; Bo9ever, an e1cept on to the revocab l ty of a contract of agency s 9hen t s coupled 9 th nterest, i.e., f a b lateral contract depends upon the agency.:18; %he reason for ts rrevocab l ty s because the agency becomes part of another obl gat on or agreement. $t s not solely the r ghts of the pr nc pal but also that of the agent and th rd persons 9h ch are affected. Bence, the la9 prov des that n such cases, the agency cannot be revoFed at the sole 9 ll of the pr nc pal. $n the case at bar, 9e agree 9 th the f nd ng of the tr al and appellate courts that the agency granted by !egasp to #ut erreA s coupled 9 th

nterest as a b lateral contract depends on t. $t s clear from the records that GutierreJ Fas "iAen y #e"aspi, inter alia/ t-e poFer to mana"e t-e treasure -untin" actiAities in t-e su Bect land; to file any case a"ainst anyone F-o enters t-e land Fit-out aut-ority from #e"aspi; to en"a"e t-e serAices of laFyers to carry out t-e a"ency; and, to di" for any treasure Fit-in t-e land and enter into a"reements relatiAe t-ereto. $t 9as l Fe9 se agreed upon that GutierreJ s-all e entitled to ;.M of F-ateAer treasure may e found in t-e land. +ursuant to th s author ty and to protect !egasp Js land from the alleged llegal entry of pet t oners, agent #ut erreA h red the serv ces of Atty. AdaAa to prosecute the case for damages and n-unct on aga nst pet t oners. As payment for le"al serAices, GutierreJ a"reed to assi"n to Atty. AdaJa 4.M of #e"aspiSs s-are in F-ateAer treasure may e recoAered in t-e su Bect land. $t s clear that the treasure that may be found n the land s the sub-ect matter of the agencyI that under the &+A, #ut erreA can enter nto contract for the legal serv ces of Atty. AdaAaI and, thus #ut erreA and Atty. AdaAa have an nterest n the sub-ect matter of the agency, i.e., n the treasures that may be found n the land. %h s b lateral contract depends on the agency and thus renders t as one coupled 9 th nterest, rrevocable at the sole 9 ll of the pr nc pal !egasp .:1>; (hen an agency s const tuted as a clause n a b lateral contract, that s, 9hen the agency s nserted n another agreement, the agency ceases to be revocable at the pleasure of the pr nc pal as the agency shall no9 follo9 the cond t on of the b lateral agreement.:12;'onse=uently, the Deed of "evocat on e1ecuted by !egasp has no effect. %he author ty of #ut erreA to f le and cont nue 9 th the prosecut on of the case at bar s unaffected. Dn the second ssue, 9e hold that the ssuance of the 9r t of prel m nary n-unct on s -ust f ed. A 9r t of prel m nary n-unct on s an anc ll ary or prevent ve remedy that s 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.:16; $t s ssued by the court to prevent threatened or cont nuous rremed able n-ury to the appl cant before h s cla m can be thoroughly stud ed and ad-ud cated. :15; $ts a m s to preserve the status quo ante unt l the mer ts of the case can be heard fully, upon the appl cantJs sho9 ng of t9o mportant cond t ons, viz.? /10 the r ght to be protected prima facie e1 stsI and, /20 the acts sought to be en-o ned are v olat ve of that r ght.:20; &ect on <, "ule 86 of the 1552 "ules of ' v l +rocedure prov des that a 9r t of prel m nary n-unct on may be ssued 9hen t s establ shed? /a0 that the appl cant s ent tled to the rel ef demanded, 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 perpetuallyI /b0 that the comm ss on, cont nuance or non@performance of the act or acts compla ned of dur ng the l t gat on 9ould pro a ly 9orF n-ust ce to the appl cantI or /c0 that 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 pro a ly 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. $t s crystal clear that at the hear ng for the ssuance of a 9r t of prel m nary n-unct on, mere prima facie ev dence s needed to establ sh the appl cantJs r ghts or nterests n the sub-ect matter of the ma n act on. :21; $t s not re=u red that the appl cant should conclusiAely sho9 that there 9as a v olat on of h s r ghts as th s ssue 9 ll st ll be fully l t gated n the ma n case.:22; %hus, an applicant for a Frit is reKuired only to s-oF t-at -e -as an ostensi le ri"-t to t-e final relief prayed for in -is complaint. :2<; $n the case at bar, 9e f nd that respondent -udge had suff c ent bas s to ssue the 9r t of prel m nary n-unct on. $t 9as establ shed, pri-a !acie, t-at #e"aspi -as a ri"-t to peaceful possession of -is land, pendente lite. !egasp had t tle to the sub-ect land. $t 9as l Fe9 se establ shed that the d gg ngs 9ere conducted by pet t oners n the enclosed area of !egasp Js land. W-et-er t-e land fenced y GutierreJ and claimed to e included in t-e land of #e"aspi coAered an area eyond t-at F-ic- is included in t-e title of #e"aspi is a factual issue still su Bect to liti"ation and proof y t-e parties in t-e main case for dama"es. $t 9as necessary for the tr al court to ssue the 9r t of prel m nary n-unct on dur ng the pendency of the ma n case n order to preserve the r ghts and nterests of pr vate respondents !egasp and #ut erreA. Dn the th rd ssue, pet t oners charge that the respondent -udge lacFed the neutral ty of an mpart al -udge. %hey fault the respondent -udge for not g v ng credence to the test mony of the r surveyor that the d gg ngs 9ere conducted outs de the land of !egasp . %hey also cla m that respondent -udgeJs rul ngs on ob-ect ons ra sed by the part es 9ere b ased aga nst them. (e have carefully e1am ned the records and 9e f nd no suff c ent bas s to hold that respondent -udge should have recused h mself from hear ng the case. %here s no d scern ble pattern of b as on the rul ngs of the respondent -udge. E as and part al ty can never be presumed. Eare allegat ons of part al ty 9 ll not suff ce n an absence of a clear sho9 ng that 9 ll overcome the presumpt on that the -udge d spensed -ust ce 9 thout fear or favor.:24; $t bears to stress aga n that a -udgeJs apprec at on or m sapprec at on of the suff c ency of ev dence adduced by the part es, or the correctness of a -udgeJs orders or rul ngs on the ob-ect ons of counsels dur ng the hear ng, 9 thout proof of mal ce on the part of respondent -udge, s not suff c ent to sho9 b as or part al ty. As 9e held n the case of We As. +eople,:28; the adverse and erroneous rul ngs of a -udge on the var ous mot ons of a party do not suff c ently prove b as and pre-ud ce to d s=ual fy h m. %o be d s=ual fy ng, t must be sho9n that the b as and pre-ud ce stemmed from an e1tra-ud c al source and result n an op n on on the mer ts on some bas s other than 9hat the -udge learned from h s part c pat on n the case. Dp n ons formed n the course of -ud c al proceed ngs, although erroneous, as long as based on the ev dence adduced, do not prove b as or pre-ud ce. (e also emphas Aed that repeated rul ngs aga nst a l t gant, no matter ho9 erroneously, v gorously

and cons stently e1pressed, do not amount to b as and pre-ud ce 9h ch can be a bases for the d s=ual f cat on of a -udge. 7 nally, the nh b t on of respondent -udge n hear ng the case for damages has become moot and academ c n v e9 of the latterJs death dur ng the pendency of the case. %he ma n case for damages shall no9 be heard and tr ed before another -udge. )N *)EW W5E$E/:, the mpugned Drders of the tr al court n ' v l 'ase No. U@00@40118, dated March 2< and Apr l 4, 2000, are A77$"MED. %he pres d ng -udge of the "eg onal %r al 'ourt of UueAon ' ty to 9hom ' v l 'ase No. U@00@40118 9as ass gned s d rected to proceed 9 th d spatch n hear ng the ma n case for damages. No pronouncement as to costs. S/ /$!E$E!. Austria<Martinez, .alle"o, Sr., 7inga, and .hico<3azario, 99., concur.

:1;

'ompla nt, dated 7ebruary 25, 2000I Rollo, pp. 64@50. +et t oners have s nce ret red from government serv ce. Rollo, p. 51. Rollo, p. 122. DocFeted as ' v l 'ase No. U@00@40118. Rollo, pp. 58@10<. "evocat on of &+A, Rollo, p. 52. Rollo, pp. 108@122. Drder, dated March 2<, 2000, Rollo, pp. 124@122. Drder, dated March 2<, 2000, Rollo, pp. 126@1<0. Rollo, pp. 1<1@1<2.

:2;

:<;

:4;

:8;

:>;

:2;

:6;

:5;

:10;

:11;

:12;

Dec s on, dated November 6, 2000, penned by Assoc ate Just ce Eubulo #. CerAola and concurred n by Assoc ate Just ces Mar na !. EuAon and +erl ta J. %r a % ronaI Rollo, pp. 22@60.
:1<;

&aums v. +arfet, 220 M ch. 1>8, 286 N.(. 2<8. Agency, C cente J. 7ranc sco, p. <8<.

:14;

:18;

Art. 1522, ' v l 'ode. 'o1 v. 7reeman, 1581 D* 1>, 204 DFla. 1<6, 222 +. 2d >20.

:1>;

:12;

' v l 'ode of the +h l pp nes Annotated, Ambros o +ad lla, 1562 ed., Col. C$, p. 442.
:16;

+h l pp ne Nat onal EanF v. " tratto #roup, $nc., <>2 &'"A 21> /20010. "epubl c of the +h l pp nes v. & ler o, 222 &'"A 260 /15520.

:15;

:20;

Be rs of Joa=u n Asunc on v. 'omm ss on on Aud t, <04 &'"A <22 /15550.

:21;

Euayan 'attle 'o., $nc. v. Uu nt llan, 126 &'"A 22> /15640.

:22;

Developers #roup of 'ompan es, $nc. v. 'ourt of Appeals, 215 &'"A 218 /155<0.
:2<;

&aulog v. 'ourt of Appeals, 2>2 &'"A 81 /155>0.

:24;

&pouses 'aus n v. Judge Demec llo, A.M. No. "%J@04@16>0, &eptember 6, 2004.
:28;

22> &'"A 24< /15520.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #71=010 'arc- 41, 1<0;

*)%EN(E '. %/#E/NG%/, pla nt ff@appellant, vs. E!&A$!/ #. %#A+A$/#S, defendant@appellee. San 9uan, Africa and !enedicto for plaintiff<appellant. Al#erto 9amir for defendant<appellee. $E8ES, J.9.#., J.: Appeal by pla nt ff C cente 'oleongco from a dec s on of the 'ourt of 7 rst $nstance of Negros Dcc dental / n ts ' v l 'ase No. 41200 d sm ss ng pla nt ff)s act on for damages, and order ng h m to pay defendant Eduardo 'laparols the amount of +61,<62.22 plus legal nterest from the f l ng of the countercla m t ll payment thereofI +80,000 as moral and compensatory damages suffered by defendantI and costs.

A 9r t of prel m nary attachment for the sum of +100,000 9as subse=uently ssued aga nst pla nt ff)s propert es n sp te of oppos t on thereto. +la nt ff 'oleongco, not be ng n conform ty 9 th the -udgment appealed to th s 'ourt d rectly, the cla ms nvolved be ng n e1cess of +200,000. %he antecedent facts as found by the tr al court and sho9n by the records, are as follo9s? & nce 1581, defendant@appellee, Eduardo !. 'laparols, operated a factory for the manufacture of na ls n %al say, Dcc dental Negros, under the style of ,'laparols &teel N Na l +lant,. %he ra9 mater al, na l 9 re, 9as mported from fore gn sources, spec ally from Eelg umI and 'laparols had a regular dollar allocat on therefor, granted by the $mport 'ontrol 'omm ss on and the 'entral EanF. %he marFet ng of the na ls 9as handled by the ,AE'D 'ommerc al, of Eacolod, 9h ch 9as o9ned by a 'h naman named *ho %o.+N&phO+.>Pt !osses compelled 'laparols n 158< to looF for someone to f nance h s mports of na l 9 res. At f rst, *ho %o agreed to do the f nanc ng, but on Apr l 28, 158<, the 'h naman ntroduced h s compadre, appellant C cente 'oleongco, to the appellee, recommend ng sa d appellant to be the f nanc er n the stead of *ho %o. 'laparols agreed, and on Apr l 28 of that year a contract /E1h b t E0 9as perfected bet9een them 9hereby 'oleongco undertooF to f nance and put up the funds re=u red for the mportat on of the na l 9 re, 9h ch 'laparols bound h mself to convert nto na ls at h s plant. $t 9as agreed that 'oleongco 9ould have the e1clus ve d str but on of the product, and the ,absolute care n the marFet ng of these na ls and the promot on of sales all over the +h l pp nes,, e1cept the Davao AgencyI that 'oleongco 9ould ,share the control of all the cash, from sales or depos ted n banFsI that he 9ould have a representat ve n the managementI that all contracts and transact ons should be -o ntly approved by both part esI that proper booFs 9ould be Fept and annual accounts renderedI and that prof ts and losses 9ould be shared ,on a 80@80 bas s,. %he contract 9as rene9ed from one year to year unt l 1586, and 'oleongco)s share subse=uently ncreased by 8R of the net prof t of the factory /E1h b ts D, E, 70. %9o days after the e1ecut on of the bas c agreement, E1h b t ,E,, on Apr l 22, 158<, 'laparols e1ecuted n favor of 'oleongco, at the latter)s behest a spec al po9er of attorney /E1h b t '0 to open and negot ate letters of cred t, to s gn contracts, b lls of lad ng, nvo ces, and papers cover ng transact onsI to represent appellee and the na l factoryI and to accept payments and cash advances from dealers and d str butors. %hereafter, 'oleongco also became the ass stant manager of the factory, and tooF over ts bus ness transact ons, 9h le 'laparols devoted most of h s t me to the na l manufacture processes. Around m d@November of 158>, appellee 'laparols 9as d sagreeably surpr sed by serv ce of an al as 9r t of e1ecut on to enforce a -udgment obta ned aga nst h m by the +h l pp ne Nat onal EanF, desp te the fact that on the preced ng &eptember he had subm tted an amort Aat on plan to settle the account. (orr ed and alarmed, 'laparols mmed ately left for Man la to confer 9 th the banF author t es. 3pon arr val, he learned to h s d smay that the e1ecut on had been procured because of derogatory nformat on aga nst appellee that had reached the banF from h s assoc ate, appellant 'oleongco. Dn July >, 158>, the latter, 9 thout appellee)s Fno9ledge, had 9r tten to the banF O

n connect on 9 th the verbal offer O for the ac=u s t on by me of the 9hole nterest of Mr. Eduardo !. 'laparols n the 'laparols &teel N Na l +lant and the 'laparols Bollo9 ElocFs 7actory, /E1h b t <>0I and later, on Dctober 25, 158>, 'oleongco had 9r tten aga n the banF another letter /E1h b t <80, also beh nd the bacF of appellee, 9here n 'oleongco charged 'laparols 9 th taF ng mach nes mortgaged to the banF, and added @ . $n my humble personal op n on $ presume that Mr. Eduardo !. 'laparols s not ser ous n meet ng h s obl gat ons 9 th your banF, other9 se he had not taFen these mach nes and e=u pments a s gn of bad fa th s nce the factory s maF ng a sat sfactory prof t of my adm n strat on. 7ortunately, 'laparols managed to arrange matters 9 th the banF and to have the e1ecut on levy l fted. $ncensed at 9hat he regarded as d sloyalty of h s attorney@ n@fact, he consulted la9yers. %he upshot 9as that appellee revoFed the po9er of attorney /E1h b t ,',0, and nformed 'oleongco thereof /E1h b ts %, %@10, by reg stered ma l, demand ng a full account ng at the same t me. 'oleongco, as could be e1pected, protested these acts of 'laparols, but the latter ns sted, and on the f rst of January, 1582 9rote a letter to 'oleongco d sm ss ng h m as ass stant manager of the plant and asFed '. M ller N 'ompany, aud tors, to go over the booFs and records of the bus ness 9 th a v e9 to ad-ust ng the accounts of the assoc ates. %hese last steps 9ere taFen n v e9 of the revelat on made by h s mach nery super ntendent, "omulo Agsam, that n the course of the preced ng Ne9 Hear celebrat ons 'oleongco had dra9n Agsam as de and proposed that the latter should pour ac d on the mach nery to paralyAe the factory. %he e1am nat on by the aud tors, summar Aed n E1h b ts 60 and 62, found that 'oleongco o9ed the 'laparols Na l 7actory the amount of +62,<62.<2, as of June <0, 1582. $n the meant me, 'laparols had found n the factory f les certa n correspondence n 7ebruary, 1588 bet9een 'oleongco and the na l dealer *ho %o 9hereby the former proposed to *ho that the latter should cut h s monthly advances to 'laparols from +2,000 to +1,000 a month, because O $ th nF t s t me that 9e do our plan to taFe advantage of the d ff cult es of Edd e 9 th the banFs for our benef t. $f 9e can s=ueeAe h m more. $ am sure that 9e can e1tend our contract 9 th h m before t ends ne1t year, and perhaps on better terms. $f 9e play 9ell our cards 9e m ght yet o9n h s factory /E1h b t <20I and conformably to 'oleongco)s proposal, *ho %o had 9r tten to 'laparols that ,due to present bus ness cond t ons, the latter could only be allo9ed to dra9 +1,000 a month beg nn ng Apr l, 1588 /E1h b t <<0. As the part es could not am cably settle the r accounts, 'oleongco f led a su t aga nst 'laparols charg ng breach of contract, asF ng for account ng, and pray ng for +826,2>2.15 as damages, and attorney)s fees, to 9h ch 'laparols ans9ered, deny ng the charge, and counter@cla m ng for the resc ss on of the agreement 9 th 'oleongco for +8>1,<62.55 by 9ay of damages. After tr al, the court rendered -udgment, as stated at the beg nn ng of th s op n on.

$n th s appeal, t s f rst contended by the appellant 'oleongco that the po9er of attorney /E1h b t ,',0 9as made to protect h s nterest under the f nanc ng agreement /E1h b t ,E,0 and 9as one coupled 9 th an nterest that the appellee 'laparols had no legal po9er to revoFe. %h s po nt can not be susta ned. %he f nanc ng agreement tself already conta ned clauses for the protect on of appellant)s nterest, and d d not call for the e1ecut on of any po9er of attorney n favor of 'oleongco. Eut grant ng appellant)s v e9, t must not be forgotten that a po9er of attorney can be made rrevocable by contract only n the sense that the pr nc pal may not recall t at h s pleasureI but coupled 9 th nterest or not, the author ty certa nly can be revoFed for a -ust cause, such as 9hen the attorney@ n@ fact betrays the nterest of the pr nc pal, as happened n th s case. $t s not open to ser ous doubt that the rrevocab l ty of the po9er of attorney may not be used to sh eld the perpetrat on of acts n bad fa th, breach of conf dence, or betrayal of trust, by the agent for that 9ould amount to hold ng that a po9er coupled 9 th an nterest author Aes the agent to comm t frauds aga nst the pr nc pal. Dur ne9 ' v l 'ode, n Art cle 1122, e1pressly prov des the contrary n prescr b ng that respons b l ty ar s ng from fraud s demandable n all obl gat ons, and that any &aiver of action for future fraud is void . $t s also on th s pr nc ple that the ' v l 'ode, n ts Art cle 1600, declares that the po9ers of a partner, appo nted as manager, n the art cles of co@partnersh p are irrevoca#le &ithout "ust or la&ful causeI and an agent 9 th po9er coupled 9 th an nterest can not stand on better ground than such a partner n so far as rrevocab l ty of the po9er s concerned. %hat the appellee 'oleongco acted n bad fa th to9ards h s pr nc pal 'laparols s, on the record, un=uest onable. B s letters to the +h l pp ne Nat onal EanF /E1h b ts <8 and <>0 attempt ng to underm ne the cred t of the pr nc pal and to ac=u re the factory of the latter, 9 thout the pr nc pal)s Fno9ledgeI 'oleongco)s letter to h s cous n, *ho %o /E1h b t <20, nstruct ng the latter to reduce to one@ half the usual monthly advances to 'laparols on account of na l sales n order to s=ueeAe sa d appellee and compel h m to e1tend the contract ent tl ng 'oleongco to share n the prof ts of the na l factory on better terms, and ult mately ,o9n h s factory,, a plan carr ed out by *ho)s letter, E1h b t <<, reduc ng the advances to 'laparolsI 'oleongco)s attempt to, have "omulo Agsam pour ac d on the mach neryI h s llegal d vers on of the prof ts of the factory to h s o9n benef tI and the surrept t ous d spos t on of the Hates band resa9 mach ne n favor of h s cous n)s Bong &h ng !umber Hard, made 9h le 'laparols 9as n Eagu o n July and August of 158>, are pla n acts of del berate sabotage by the agent that fully -ust f ed the revocat on of the po9er of attorney /E1h b t ,',0 by 'laparols and h s demand for an account ng from h s agent 'oleongco. Appellant attempts to -ust fy h s letter to the +h l pp ne Nat onal EanF /E1h b ts <8 and <>0, cla m ng that 'laparols) mal@adm n strat on of the bus ness endangered the secur ty for the advances that he had made under the f nanc ng contract /E1h b t ,E,0. Eut f that 9ere the case, t s to be e1pected that 'oleongco 9ould have f rst protested to 'laparols h mself, 9h ch he never d d. Appellant l Fe9 se den es the authorsh p of the letter to *ho /E1h b t <20 as 9ell as the attempt to nduce Agsam to damage the mach nery of the factory. Eet9een the test mony of Agsam and 'laparols and that of 'oleongco, the court belo9 9hose to bel eve the former, and 9e see no reason to alter the lo9er court)s conclus on on the value of the ev dence before t, cons der ng that *ho)s letter to 'laparols /E1h b t <<0 pla nly corroborates and doveta ls 9 th the plan

outl ned n 'oleongco)s o9n letter /E1h b t <20, s gned by h m, and that the cred b l ty of 'oleongco s affected adversely by h s o9n adm ss on of h s hav ng been prev ously conv cted of estafa /t.s.n., pp. 1<5, 22>0, a cr me that mpl es moral turp tude. Even d sregard ng 'oleongco)s letter to h s son@ n@la9 /E1h b t 620 that so fully reveals 'oleongco)s lacF of bus ness scruples, the clear preponderance of ev dence s aga nst appellant. %he same remarFs apply to the f nd ng of the tr al court that t 9as appellant 'oleongco, and not 'laparols, 9ho d sposed of the band resa9 ng e=u pment, s nce sa d mach ne 9as rece ved n July, 158> and sold n August of that year to the Bong &h ng !umber 'o., managed by appellant)s cous n C cente *ho. %he untruth of 'oleongco)s charge that 'laparols, upon h s return from Eagu o n &eptember, 158>, adm tted hav ng sold the mach ne beh nd h s assoc ate)s bacF s further ev denced by /a0 'oleongco)s letter, E1h b t ,C,, dated Dctober 25, 158>, n=u r ng the 9hereabouts of the resa9 e=u pment from 'laparols /an n=u ry ncompat ble 9 th 'laparols) prev ous adm ss on0I /b0 by the unden ed fact that the appellee 9as n Eagu o and 'oleongco 9as act ng for h m dur ng the months of July and August 9hen the mach ne 9as rece ved and soldI and /c0 the fact that as bet9een the t9o t s 'oleongco 9ho had a clear nterest n sell ng the sa9 ng mach ne to h s cous n *ho %o)s lumber yard. $f 'laparols 9 shed to sell the mach ne 9 thout 'oleongco)s Fno9ledge, he 9ould not have p cFed the latter)s cous n for a buyer. %he act on of pla nt ff@appellant for damages and lost prof ts due to the d scont nuance of the f nanc ng agreement, E1h b t ,E,, may not prosper, because the record sho9s that the appellant l Fe9 se breached h s part of the contract. $t 9 ll be recalled that paragraph 2 of the contract, E1h b t ,E,, t 9as st pulated? %hat the +arty of the &econd +art /'oleongco0 has agreed to f nance and put up all the necessary money 9h ch may be needed to pay for the mportat on of the ra9 mater als needed by such na l factory and allocated by the $'' from t me to t me, e ther n cash of 9 th 9hatever su table means 9h ch the +arty of the &econd +art may be able to maFe by su table arrangements 9 th any 9ell@Fno9n banF ng nst tut on recogn Aed by the 'entral EanF of the +h l pp nes. $nstead of putt ng up all the necessary money needed to f nance the mports of ra9 mater al, 'oleongco merely advanced 28R n cash on account of the pr ce and had the balance covered by surety agreements e1ecuted by 'laparols and others as sol dary, /-o nt and several0 guarantors /see E1h b ts #, B, $0. %he upshot of th s arrangement 9as that 'laparols 9as made to shoulder <M4 of the payment for the mports, contrary to the f nanc ng agreement. +aragraph 11 of the latter e1pressly den ed 'oleongco any po9er or author ty to b nd 'laparols 9 thout prev ous consultat on and author ty. (hen the balances for the cost of the mportat ons became due, 'oleongco, n some nstances, pa d t 9 th the dealers) advances to the na l factory aga nst future sales 9 thout the Fno9ledge of 'laparols /E1h b ts ,*, to *@11, *@1<0. 3nder paragraphs 6 and 11 of the f nanc ng agreement, 'oleongco 9as to g ve preference to the operat ng e1penses before shar ng prof ts, so that unt l the operat ng costs 9ere prov ded for, 'oleongco had no r ght to apply the factory)s ncome to pay h s o9n obl gat ons.

Aga n, the e1am nat on of the booFs by accountant At enAa of '. M ller and 'o., sho9ed that from 1584 on9ards 'oleongco /9ho had the control of the factory)s cash and banF depos ts, under +aragraph 11 of E1h b t ,E,0 never l =u dated and pa d n full to 'laparols h s half of the prof ts, so that by the end of 158> there 9as due to 'laparols +<6,0>6.41 on th s account /E1h b t 510. 7or 1582 to 1586 'laparols f nanced the mports of na l 9 re 9 thout the help of appellant, and n v e9 of the latter)s nfr ngement of h s obl gat ons, h s acts of d sloyalty prev ously d scussed, and h s d vers ons of factory funds /he even bought t9o motor veh cles 9 th them0, 9e f nd no -ust f cat on for h s ns stence n shar ng n the factory)s prof t for those years, nor for the restorat on of the revoFed po9er of attorney. %he accountant)s reports and test mony /spec ally E1h b ts 60 to 620 prove that as of June <0, 1582, 'oleongco o9ed to 'laparols the sum of +6<,4>>.<4 that after some ad-ustment 9as reduced to +61,<62.<2, pract cally accepted even by appellant)s aud tor. %he alleged d screpanc es bet9een the general ledger and the result thus arr ved at 9as sat sfactor ly e1pla ned by accountant At enAa n h s test mony /t.s.n., 112<@11260. No error 9as, therefore, comm tted by the tr al court n declar ng the f nanc ng contract /E1h. E0 properly resolved by 'laparols or n render ng -udgment aga nst appellant n favor of appellee for the sa d amount of +61,<62.<2. %he bas c rule of contracts re=u res part es to act loyally to9ard each other n the pursu t of the common end, and appellant clearly v olated the rule of good fa th prescr bed by Art. 1<18 of the ne9 ' v l 'ode. %he lo9er court also allo9ed 'laparols +80,000 for damages, mater al, moral, and e1emplary, caused by the appellant 'oleongco)s acts n mal c ously underm n ng appellee)s cred t that led the +h l pp ne Nat onal EanF to secure a 9r t of e1ecut on aga nst 'laparols. 3nden ably, the attempts of 'oleongco to d scred t and ,s=ueeAe, 'laparols out of h s o9n factory and bus ness could not but cause the latter mental angu sh and ser ous an1 ety, as found by the court belo9, for 9h ch he s ent tled to compensat onI and the malevolence that lay beh nd appellee)s act ons -ust f ed also the mpos t on of e1emplary or deterrent damages /' v. 'ode, Art. 22<20. (h le the a9ard could have been made larger 9 thout v olat ng the canons of -ust ce, the d scret on n f 1 ng such damages pr mar ly lay n the tr al court, and 9e feel that the same should be respected. $N C$E( D7 %BE 7D"E#D$N#, the dec s on appealed from s aff rmed. 'osts aga nst appellant C cente 'oleongco. !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. =4133 /cto er 1<, 1<<.

A$(&$/ +. *A#EN6&E#A and 5/S+)(A#)(A N. *A#EN6&E#A, pet t oners, vs. (5E 5/N/$A9#E %/&$( /: A++EA#S, 9)EN*EN)!/ '. A$AG/N, $/9E$( E. +A$NE##, %A$#/S K. %A(/#)%/ and (5E +5)#)++)NE A'E$)%AN GENE$A# )NS&$AN%E %/'+AN8, )N%., respondents. Al#ino !. Achas for petitioners. Angara, A#ello, .oncepcion, Regala & .ruz for private respondents.

G&()E$$E6, J$., J.: %h s s a pet t on for rev e9 of the January 25, 1566 dec s on of the 'ourt of Appeals and the Apr l 22, 1566 resolut on deny ng the pet t oners) mot on for recons derat on, 9h ch dec s on and resolut on reversed the dec s on dated June 2<,156> of the 'ourt of 7 rst $nstance of Man la, Eranch <4 n ' v l 'ase No. 12112> uphold ng the pet t oners) causes of act on and grant ng all the rel efs prayed for n the r compla nt aga nst pr vate respondents. %he antecedent facts of the case are as follo9s? +et t oner Arturo +. CalenAuela /CalenAuela for short0 s a #eneral Agent of pr vate respondent +h l pp ne Amer can #eneral $nsurance 'ompany, $nc. /+h lamgen for short0 s nce 15>8. As such, he 9as author Aed to sol c t and sell n behalf of +h lamgen all F nds of non@l fe nsurance, and n cons derat on of serv ces rendered 9as ent tled to rece ve the full agent)s comm ss on of <2.8R from +h lamgen under the scheduled comm ss on rates /E1h b ts ,A, and ,1,0. 7rom 152< to 1528, CalenAuela sol c ted mar ne nsurance from one of h s cl ents, the Delta Motors, $nc. /D v s on of Electron cs A rcond t on ng and "efr gerat on0 n the amount of +4.4 M ll on from 9h ch he 9as ent tled to a comm ss on of <2R /E1h b t ,E,0. Bo9ever, CalenAuela d d not rece ve h s full comm ss on 9h ch amounted to +1.> M ll on from the +4.4 M ll on nsurance coverage of the Delta Motors. Dur ng the per od 152> to 1526, prem um payments amount ng to +1,54>,66>.00 9ere pa d d rectly to +h lamgen and CalenAuela)s comm ss on to 9h ch he s ent tled amounted to +><2,2<2.00. $n 1522, +h lamgen started to become nterested n and e1pressed ts ntent to share n the comm ss on due CalenAuela /E1h b ts ,$$$, and ,$$$@1,0 on a f fty@f fty bas s /E1h b t ,',0. CalenAuela refused /E1h b t ,D,0. Dn 7ebruary 6, 1526 +h lamgen and ts +res dent, E enven do M. Aragon ns sted on the shar ng of the comm ss on 9 th CalenAuela /E1h b t E0. %h s 9as follo9ed by another shar ng proposal dated June 1, 1526. Dn June 1>,1526, CalenAuela f rmly re terated h s ob-ect on to the proposals of

respondents stat ng that? ,$t s 9 th great reluctance that $ have to decl ne upon re=uest to s gn fy my conform ty to your alternat ve proposal regard ng the payment of the comm ss on due me. Bo9ever, $ have no cho ce for to do other9 se 9ould be v olat ve of the Agency Agreement e1ecuted bet9een our goodselves., /E1h b t E@10 Eecause of the refusal of CalenAuela, +h lamgen and ts off cers, namely? E enven do Aragon, 'arlos 'atol co and "obert E. +arnell tooF drast c act on aga nst CalenAuela. %hey? /a0 reversed the comm ss on due h m by not cred t ng n h s account the comm ss on earned from the Delta Motors, $nc. nsurance /E1h b t ,J, and ,2,0I /b0 placed agency transact ons on a cash and carry bas sI /c0 threatened the cancellat on of pol c es ssued by h s agency /E1h b ts ,B, to ,B@2,0I and /d0 started to leaF out ne9s that CalenAuela has a substant al account 9 th +h lamgen. All of these acts resulted n the decl ne of h s bus ness as nsurance agent /E1h b ts ,N,, ,D,, ,*, and ,*@6,0. %hen on December 22, 1526, +h lamgen term nated the #eneral Agency Agreement of CalenAuela /E1h b t ,J,, pp. 1@<, Dec s on %r al 'ourt dated June 2<, 156>, ' v l 'ase No. 12112>, Anne1 $, +et t on0. %he pet t oners sought rel ef by f l ng the compla nt aga nst the pr vate respondents n the court a quo /'ompla nt of January 24, 1525, Anne1 ,7, +et t on0. After due proceed ngs, the tr al court found? 111 111 111 Defendants tr ed to -ust fy the term nat on of pla nt ff Arturo +. CalenAuela as one of defendant +B$!AM#EN)s #eneral Agent by maF ng t appear that pla nt ff Arturo +. CalenAuela has a substant al account 9 th defendant +B$!AM#EN part cularly Delta Motors, $nc.)s Account, thereby pre-ud c ng defendant +B$!AM#EN)s nterest /E1h b ts >,,11,,,11@ ,12@ A,and,1<@A,0. Defendants also nvoFed the prov s ons of the ' v l 'ode of the +h l pp nes /Art cle 16>60 and the prov s ons of the #eneral Agency Agreement as the r bas s for term nat ng pla nt ff Arturo +. CalenAuela as one of the r #eneral Agents. %hat defendants) pos t on could have been -ust f ed had the term nat on of pla nt ff Arturo +. CalenAuela 9as /s c0 based solely on the prov s ons of the ' v l 'ode and the cond t ons of the #eneral Agency Agreement. Eut the records 9 ll sho9 that the pr nc pal cause of the term nat on of the pla nt ff as #eneral Agent of defendant +B$!AM#EN 9as h s refusal to share h s Delta comm ss on. %hat t should be noted that there 9ere several attempts made by defendant E enven do M. Aragon to share 9 th the Delta comm ss on of pla nt ff Arturo +. CalenAuela. Be had pers stently pursued the shar ng scheme to the po nt of term nat ng pla nt ff Arturo +. CalenAuela, and to

maFe matters 9orse, defendants made t appear that pla nt ff Arturo +. CalenAuela had substant al accounts 9 th defendant +B$!AM#EN. Not only that, defendants have also started /a0 to treat separately the Delta 'omm ss on of pla nt ff Arturo +. CalenAuela, /b0 to reverse the Delta comm ss on due pla nt ff Arturo +. CalenAuela by not cred t ng or apply ng sa d comm ss on earned to the account of pla nt ff Arturo +. CalenAuela, /c0 placed pla nt ff Arturo +. CalenAuela)s agency transact ons on a ,cash and carry bas s,, /d0 send ng threats to cancel e1 st ng pol c es ssued by pla nt ff Arturo +. CalenAuela)s agency, /e0 to d vert pla nt ff Arturo +. CalenAuela)s nsurance bus ness to other agenc es, and /f0 to spread 9 ld and mal c ous rumors that pla nt ff Arturo +. CalenAuela has substant al account 9 th defendant +B$!AM#EN to force pla nt ff Arturo +. CalenAuela nto agree ng 9 th the shar ng of h s Delta comm ss on., /pp. 5@10, Dec s on, Anne1 1, +et t on0. 111 111 111 %hese acts of harrassment done by defendants on pla nt ff Arturo +. CalenAuela to force h m to agree to the shar ng of h s Delta comm ss on, 9h ch culm nated n the term nat on of pla nt ff Arturo +. CalenAuela as one of defendant +B$!AM#EN)s #eneral Agent, do not -ust fy sa d term nat on of the #eneral Agency Agreement entered nto by defendant +B$!AM#EN and pla nt ff Arturo +. CalenAuela. %hat s nce defendants are not -ust f ed n the term nat on of pla nt ff Arturo +. CalenAuela as one of the r #eneral Agents, defendants shall be l able for the result ng damage and loss of bus ness of pla nt ff Arturo +. CalenAuela. /Arts. 2155M2200, ' v l 'ode of the +h l pp nes0. /$b d, p. 110 %he court accord ngly rendered -udgment, the d spos t ve port on of 9h ch reads? (BE"E7D"E, -udgment s hereby rendered n favor of the pla nt ffs and aga nst defendants order ng the latter to re nstate pla nt ff Arturo +. CalenAuela as ts #eneral Agent, and to pay pla nt ffs, -o ntly and severally, the follo9 ng? 1. %he amount of f ve hundred t9enty@one thousand n ne hundred s 1ty four and 1>M100 pesos /+821,5>4.1>0 represent ng pla nt ff Arturo +. CalenAuela)s Delta 'omm ss on 9 th nterest at the legal rate from the t me of the f l ng of the compla nt, 9h ch amount shall be ad-usted n accordance 9 th Art cle 1280 of the ' v l 'ode of the +h l pp nesI 2. %he amount of seventy@f ve thousand pesos /+28,000.000 per month as compensatory damages from 1560 unt l such t me that defendant +h lamgen shall re nstate pla nt ff Arturo +. CalenAuela as one of ts general agentsI

<. %he amount of three hundred f fty thousand pesos /+<80,000.000 for each pla nt ff as moral damagesI 4. %he amount of seventy@f ve thousand pesos /+28,000.000 as and for attorney)s feesI 8. 'osts of the su t. /$b d., +. 120 7rom the aforesa d dec s on of the tr al court, E enven do Aragon, "obert E. +arnell, 'arlos *. 'atol co and +B$!AM#EN respondents here n, and defendants@appellants belo9, nterposed an appeal on the follo9 ng? A&&$#NMEN% D7 E""D"& $ %BE !D(E" 'D3"% E""ED $N BD!D$N# %BA% +!A$N%$77 A"%3"D +. CA!ENL3E!A BAD ND D3%&%AND$N# A''D3N% ($%B DE7ENDAN% +B$!AM#EN A% %BE %$ME D7 %BE %E"M$NA%$DN D7 %BE A#EN'H. $$ %BE !D(E" 'D3"% E""ED $N BD!D$N# %BA% +!A$N%$77 A"%3"D +. CA!ENL3E!A $& EN%$%!ED %D %BE 73!! 'DMM$&&$DN D7 <2.8R DN %BE DE!%A A''D3N%. $$$ %BE !D(E" 'D3"% E""ED $N BD!D$N# %BA% %BE %E"M$NA%$DN D7 +!A$N%$77 A"%3"D +. CA!ENL3E!A (A& ND% J3&%$7$ED AND %BA% 'DN&EU3EN%!H DE7ENDAN%& A"E !$AE!E 7D" A'%3A! AND MD"A! DAMA#E&, A%%D"NEH& 7EE& AND 'D&%&. $C A&&3M$N# A"#3ENDD %BA% %BE A(A"D D7 DAMA#E& A#A$N&% DE7ENDAN% +B$!AM#EN (A& +"D+E", %BE !D(E" 'D3"% E""ED $N A(A"D$N# DAMA#E& ECEN A#A$N&% %BE $ND$C$D3A! DE7ENDAN%& (BD A"E ME"E 'D"+D"A%E A#EN%& A'%$N# ($%B$N %BE &'D+E D7 %BE$" A3%BD"$%H. C A&&3M$N# A"#3ENDD %BA% %BE A(A"D D7 DAMA#E& $N 7ACD" D7 +!A$N%$77 A"%3"D +. CA!ENL3E!A (A& +"D+E", %BE !D(E" 'D3"% E""ED $N A(A"D$N# DAMA#E& $N 7ACD" D7 BD&+$%A!$%A CA!ENL3E!A, (BD, ND% EE$N# %BE "EA! +A"%H $N $N%E"E&% $& ND% %D DE%A$N "E!$E7.

Dn January 25, 1566, respondent 'ourt of Appeals promulgated ts dec s on n the appealed case. %he d spos t ve port on of the dec s on reads? (BE"E7D"E, the dec s on appealed from s hereby mod f ed accord ngly and -udgment s hereby rendered order ng? 1. +la nt ff@appellee CalenAuela to pay defendant@appellant +h lamgen the sum of one m ll on n ne hundred th rty t9o thousand f ve hundred th rty@ t9o pesos and seventeen centavos /+1,502,8<2.120, 9 th legal nterest thereon from the date of f nal ty of th s -udgment unt l fully pa d. 2. Eoth pla nt ff@appellees to pay -o ntly and severally defendants@ appellants the sum of f fty thousand pesos /+80,000.000 as and by 9ay of attorney)s fees. No pronouncement s made as to costs. /p. 44, Rollo0 %here s n th s nstance rreconc lable d vergence n the f nd ngs and conclus ons of the 'ourt of Appeals, vis<a<visthose of the tr al court part cularly on the p votal ssue 9hether or not +h lamgen andMor ts off cers can be held l able for damages due to the term nat on of the #eneral Agency Agreement t entered nto 9 th the pet t oners. $n ts =uest oned dec s on the 'ourt of Appeals observed that? $n any event the pr nc pal)s po9er to revoFe an agency at 9 ll s so pervas ve, that the &upreme 'ourt has cons stently held that term nat on may be effected even f the pr nc pal acts n bad fa th, sub-ect only to the pr nc pal)s l ab l ty for damages /Danon v. Anton o A. Er mo N 'o., 42 +h l. 1<<I "eyes v. Mos=ueda, 8< D.#. 2186 and $nfante C. 'unanan, 5< +h l. >51, c ted n +aras, Col. C, ' v l 'ode of the +h l pp nes Annotated :156>; >5>0. %he lo9er court, ho9ever, thought the term nat on of CalenAuela as #eneral Agent mproper because the record 9 ll sho9 the pr nc pal cause of the term nat on of the pla nt ff as #eneral Agent of defendant +h lamgen 9as h s refusal to share h s Delta comm ss on. /Dec s on, p. 5I p. 1<, Rollo, 410 Eecause of the confl ct ng conclus ons, th s 'ourt deemed t necessary n the nterest of substant al -ust ce to scrut n Ae the ev dence and records of the cases. (h le t s an establ shed pr nc ple that the factual f nd ngs of the 'ourt of Appeals are f nal and may not be rev e9ed on appeal to th s 'ourt, there are ho9ever certa n e1cept ons to the rule 9h ch th s 'ourt has recogn Aed and accepted, among 9h ch, are 9hen the -udgment s based on a m sapprehens on of facts and 9hen the f nd ngs of the appellate court, are contrary to those of the tr al court /ManlapaA v. 'ourt of Appeals, 142 &'"A 2<> :1562;0I #u ta v. 'ourt of Appeals, 1<5 &'"A 82> :156>;0. (here the f nd ngs of the 'ourt of Appeals and the tr al court

are contrary to each other, th s 'ourt may scrut n Ae the ev dence on record /'ruA v. 'ourt of Appeals, 125 &'"A 222 :1564;I MendoAa v. 'ourt of Appeals, 18> &'"A 852 :1562;I Maclan v. &antos, 18> &'"A 842 :1562;0. (hen the conclus on of the 'ourt of Appeals s grounded ent rely on speculat on, surm ses or con-ectures, or 9hen the nference made s man festly m staFen, absurd or mposs ble, or 9hen there s grave abuse of d scret on, or 9hen the -udgment s based on a m sapprehens on of facts, and 9hen the f nd ngs of facts are confl ct the e1cept on also appl es /Malays an A rl ne &ystem Eernad v. 'ourt of Appeals, 18> &'"A <21 :1562;0. After a pa nstaF ng rev e9 of the ent re records of the case and the f nd ngs of facts of both the court a quo and respondent appellate court, 9e are constra ned to aff rm the tr al court)s f nd ngs and rule for the pet t oners. (e agree 9 th the court a quo that the pr nc pal cause of the term nat on of CalenAuela as #eneral Agent of +h lamgen arose from h s refusal to share h s Delta comm ss on. %he records susta n the conclus ons of the tr al court on the apparent #ad faith of the pr vate respondents n term nat ng the #eneral Agency Agreement of pet t oners. $t s a1 omat c that the f nd ngs of fact of a tr al -udge are ent tled to great 9e ght /+eople v. Atanac o, 126 &'"A 22 :1564;0 and should not be d sturbed on appeal unless for strong and cogent reasons, because the tr al court s n a better pos t on to e1am ne the ev dence as 9ell as to observe the demeanor of the 9 tnesses 9h le test fy ng /'hase v. Euencam no, &r., 1<> &'"A <>8 :1568;I +eople v. + mentel, 142 &'"A 28 :1562;I and Eal 9ag %rans., $nc. v. 'ourt of Appeals, 142 &'"A 62 :1562;0. $n the case at bar, the records sho9 that the f nd ngs and conclus ons of the tr al court are supported by substant al ev dence and there appears to be no cogent reason to d sturb them /MendoAa v. 'ourt of Appeals. 18> &'"A 852 :1562;0. As early as &eptember <0,1522, +h lamgen told the pet t oners of ts des re to share the Delta 'omm ss on 9 th them. $t stated that should Delta bacF out from the agreement, the pet t oners 9ould be charged nterests through a reduced comm ss on after full payment by Delta. Dn January 2<, 1526 +h lamgen proposed reduc ng the pet t oners) comm ss ons by 80R thus g v ng them an agent)s comm ss on of 1>.28R. Dn 7ebruary 6, 1526, +h lamgen ns sted on the reduct on scheme follo9ed on June 1, 1526 by st ll another ns stence on reduc ng comm ss ons and propos ng t9o alternat ve schemes for reduct on. %here 9ere other pressures. Demands to settle accounts, to confer and thresh out d fferences regard ng the pet t oners) ncome and the threat to term nate the agency follo9ed. %he pet t oners 9ere told that the Delta comm ss ons 9ould not be cred ted to the r account /E1h b t ,J,0. %hey 9ere nformed that the CalenAuela agency 9ould be placed on a cash and carry bas s thus remov ng the >0@day cred t for prem ums due. /%&N., March 2>, 1525, pp. 84@820. E1 st ng pol c es 9ere threatened to be

cancelled /E1h b ts ,B, and ,14,I %&N., March 2>, 1525, pp. 25@<00. %he CalenAuela bus ness 9as threatened 9 th d vers on to other agenc es. /E1h b t ,NNN,0. "umors 9ere also spread about alleged accounts of the CalenAuela agency /%&N., January 28, 1560, p. 410. %he pet t oners cons stently opposed the pressures to hand over the agency or half of the r comm ss ons and for a treatment of the Delta account d st nct from other accounts. %he pressures and demands, ho9ever, cont nued unt l the agency agreement tself 9as f nally term nated. $t s also ev dent from the records that the agency nvolv ng pet t oner and pr vate respondent s one ,coupled 9 th an nterest,, and, therefore, should not be freely revocable at the un lateral 9 ll of the latter. $n the nsurance bus ness n the +h l pp nes, the most d ff cult and frustrat ng per od s the sol c tat on and persuas on of the prospect ve cl ents to buy nsurance pol c es. Normally, agents 9ould encounter much embarrassment, d ff cult es, and oftent mes frustrat ons n the sol c tat on and procurement of the nsurance pol c es. %o sell pol c es, an agent e1erts great effort, pat ence, perseverance, ngenu ty, tact, mag nat on, t me and money. $n the case of CalenAuela, he 9as able to bu ld up an Agency from scratch n 15>8 to a h ghly product ve enterpr se 9 th gross b ll ngs of about %9o M ll on 7 ve Bundred %housand +esos /+2,800,000.000 prem ums per annum. %he records susta n the f nd ng that the pr vate respondent started to covet a share of the nsurance bus ness that CalenAuela had bu lt up, developed and nurtured to prof tab l ty through over th rteen /1<0 years of pat ent 9orF and perseverance. (hen CalenAuela refused to share h s comm ss on n the Delta account, the boom suddenly fell on h m. %he pr vate respondents by the s mple e1ped ent of term nat ng the #eneral Agency Agreement appropr ated the ent re nsurance bus ness of CalenAuela. ( th the term nat on of the #eneral Agency Agreement, CalenAuela 9ould no longer be ent tled to comm ss on on the rene9al of nsurance pol c es of cl ents sourced from h s agency. (orse, desp te the term nat on of the agency, +h lamgen cont nued to hold CalenAuela -o ntly and severally l able 9 th the nsured for unpa d prem ums. 3nder these c rcumstances, t s clear that CalenAuela had an nterest n the cont nuat on of the agency 9hen t 9as unceremon ously term nated not only because of the comm ss ons he should cont nue to rece ve from the nsurance bus ness he has sol c ted and procured but also for the fact that by the very acts of the respondents, he 9as made l able to +h lamgen n the event the nsured fa l to pay the prem ums due. %hey are estopped by the r o9n pos t ve averments and cla ms for damages. %herefore, the respondents cannot state that the agency relat onsh p bet9een CalenAuela and +h lamgen s not coupled 9 th nterest. ,%here may be cases n 9h ch an agent has been nduced to assume a respons b l ty or ncur a l ab l ty, n rel ance upon the cont nuance of the author ty under such c rcumstances that, f the author ty be 9 thdra9n, the agent 9 ll be e1posed to personal loss or l ab l ty, /&ee ME' 8>5 p. 40>0.

7urthermore, there s an e1cept on to the pr nc ple that an agency s revocable at 9 ll and that s 9hen the agency has been g ven not only for the nterest of the pr nc pal but for the nterest of th rd persons or for the mutual nterest of the pr nc pal and the agent. $n these cases, t s ev dent that the agency ceases to be freely revocable by the sole 9 ll of the pr nc pal /&ee +ad lla, ' v l 'ode Annotated, 8> ed., Col. $C p. <800. %he follo9 ng c tat ons are apropos? %he pr nc pal may not defeat the agent)s r ght to ndemn f cat on by a term nat on of the contract of agency /ErsF ne v. 'hevrolet Motors 'o. 168 N' 425, 112 &E 20>, <2 A!" 15>0. (here the pr nc pal term nates or repud ates the agent)s employment n v olat on of the contract of employment and 9 thout cause ... the agent s ent tled to rece ve e ther the amount of net losses caused and ga ns prevented by the breach, or the reasonable value of the serv ces rendered. %hus, the agent s ent tled to prospect ve prof ts 9h ch he 9ould have made e1cept for such 9rongful term nat on prov ded that such prof ts are not con-ectural, or speculat ve but are capable of determ nat on upon some fa rly rel able bas s. And a pr nc pal)s revocat on of the agency agreement made to avo d payment of compensat on for a result 9h ch he has actually accompl shed /B ldendorf v. Bague, 25< N( 2d 222I Ne9hall v. Journal +r nt ng 'o., 108 M nn 44,112 N( 226I #aylen Mach nery 'orp. v. + tman@Moore 'o. :'.A. 2 NH; 22< 7 2d <400 $f a pr nc pal v olates a contractual or =uas @contractual duty 9h ch he o9es h s agent, the agent may as a rule br ng an appropr ate act on for the breach of that duty. %he agent may n a proper case ma nta n an act on at la9 for compensat on or damages ... A 9rongfully d scharged agent has a r ght of act on for damages and n such act on the measure and element of damages are controlled generally by the rules govern ng any other act on for the employer)s breach of an employment contract. /" ggs v. ! ndsay, 11 3& 800, <! Ed 415I % ff n #lass 'o. v. &toehr, 84 Dh o 182, 4< NE 22560 At any rate, the =uest on of 9hether or not the agency agreement s coupled 9 th nterest s helpful to the pet t oners) cause but s not the pr mary and compell ng reason. 7or the p votal factor render ng +h lamgen and the other pr vate respondents l able n damages s that the term nat on by them of the #eneral Agency Agreement 9as ta nted 9 th bad fa th. Bence, f a pr nc pal acts n bad fa th and 9 th abuse of r ght n term nat ng the agency, then he s l able n damages. %h s s n accordance 9 th the precepts n Buman "elat ons enshr ned n our ' v l 'ode that ,every person must n the e1erc se of h s r ghts and n the performance of h s dut es act 9 th -ust ce, g ve every one h s due, and observe honesty and good fa th? /Art. 15, ' v l 'ode0, and every person 9ho, contrary to la9, 9 lfully or negl gently causes damages to another, shall ndemn fy the latter for the same /Art. 20, id0. ,Any person 9ho 9 lfully causes loss or n-ury to another n a manner contrary to morals,

good customs and publ c pol cy shall compensate the latter for the damages, /Art. 21, id.0. As to the ssue of 9hether or not the pet t oners are l able to +h lamgen for the unpa d and uncollected prem ums 9h ch the respondent court ordered CalenAuela to pay +h lamgen the amount of Dne M ll on N ne Bundred %h rty@%9o %housand 7 ve Bundred %h rty@%9o and 12M100 +esos /+1,5<2,8<2,120 9 th legal nterest thereon unt l fully pa d /Dec s on@ January 20, 1566, p. 1>I +et t on, Anne1 ,A,0, 9e rule that the respondent court erred n hold ng CalenAuela l able. (e f nd no factual and legal bas s for the a9ard. 3nder &ect on 22 of the $nsurance 'ode, the remedy for the non@payment of prem ums s to put an end to and render the nsurance pol cy not b nd ng O &ec. 22 ... :N;ot9 thstand ng any agreement to the contrary, no pol cy or contract of nsurance s val d and b nd ng unless and unt l the prem ums thereof have been pa d e1cept n the case of a l fe or ndustr al l fe pol cy 9henever the grace per od prov s on appl es /+.D. >12, as amended other9 se Fno9n as the $nsurance 'ode of 15240 $n $hilippine $hoeni Surety and :nsurance, :nc. v. 6ood&or's, :nc. /52 &'"A 415 :1525;0 9e held that the non@payment of prem um does not merely suspend but puts an end to an nsurance contract s nce the t me of the payment s pecul arly of the essence of the contract. And n Arce v. 7he .apital :nsurance and Surety .o. :nc. /112 &'"A ><, :1562;0, 9e re terated the rule that unless prem um s pa d, an nsurance contract does not taFe effect. %hus? $t s to be noted that Delgado /'ap tal $nsurance N &urety 'o., $nc. v. Delgado, 5 &'"A 122 :15><; 9as dec ded n the l ght of the $nsurance Act before &ec. 22 9as amended by the underscored port on. &upra. +r or to the Amendment, an nsurance contract 9as effect ve even f the prem um had not been pa d so that an nsurer 9as obl gated to pay ndemn ty n case of loss and correlat vely he had also the r ght to sue for payment of the prem um. !ut the amendment to Sec. [) has radically changed the legal regime in that unless the premium is paid there is no insurance. , /Arce v. 'ap tol $nsurance and &urety 'o., $nc., 112 &'"A >>I Emphas s suppl ed0 $n $hilippine $hoeni Surety case, 9e held? Moreover, an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity. /' t ng $nsurance !a9 and +ract ce by John Alan Appleman, Col. 18, p. <<1I Emphas s suppl ed0 %he forego ng f nd ngs are buttressed by &ect on 22> of the nsurance 'ode /+res dent al Decree No. >12, promulgated on December 16, 15240, 9h ch no9 prov des that no contract of $nsurance by an nsurance

company s val d and b nd ng unless and unt l the prem um thereof has been pa d, not9 thstand ng any agreement to the contrary /:#id., 52 &'"A 4280 +erforce, s nce adm ttedly the prem ums have not been pa d, the pol c es ssued have lapsed. %he nsurance coverage d d not go nto effect or d d not cont nue and the obl gat on of +h lamgen as nsurer ceased. Bence, for +h lamgen 9h ch had no more l ab l ty under the lapsed and ne1 stent pol c es to demand, much less sue CalenAuela for the unpa d prem ums 9ould be the he ght of n-ust ce and unfa r deal ng. $n th s nstance, 9 th the laps ng of the pol c es through the nonpayment of prem ums by the nsured there 9ere no more nsurance contracts to speaF of. As th s 'ourt held n the $hilippine $hoeni Surety case, supra ,the non@payment of prem ums does not merely suspend but puts an end to an nsurance contract s nce the t me of the payment s pecul arly of the essence of the contract., %he respondent appellate court also ser ously erred n accord ng undue rel ance to the report of Eanar a and Eanar a and 'ompany, aud tors, that as of December <1, 1526, CalenAuela o9ed +h lamgen +1,826,>56.40. %h s aud t report of Eanar a 9as comm ss oned by +h lamgen after CalenAuela 9as almost through 9 th the presentat on of h s ev dence. $n essence, the Eanar a report started 9 th an unconf rmed and unaud ted beg nn ng balance of account of +1,286,168.4< as of August 20, 152>. Eut even 9 th that unaud ted and unconf rmed beg nn ng balance of +1,286,168.4<, Eanar a st ll came up 9 th the amount of +<,6>8.45 as CalenAuela)s balance as of December 1526 9 th +h lamgen /E1h. ,<6@A@ <,0. $n fact, as of December <1, 152>, and December <1, 1522, CalenAuela had no unpa d account 9 th +h lamgen /"ef? Anne1es ,D,, ,D@1,, ,E,, +et t oner)s Memorandum0. Eut even d sregard ng these anne1es 9h ch are records of +h lamgen and addressed to CalenAuela n due course of bus ness, the facts sho9 that as of July 1522, the beg nn ng balance of CalenAuela)s account 9 th +h lamgen amounted to +244,185.60. %h s 9as conf rmed by +h lamgen tself not only once but four /40 t mes on d fferent occas ons, as sho9n by the records. Dn Apr l <,1526, +h lamgen sent CalenAuela a statement of account 9 th a beg nn ng balance of +244,185@60 as of July 1522. Dn May 2<, 1526, another statement of account 9 th e1actly the same beg nn ng balance 9as sent to CalenAuela. Dn November 12, 1526, +h lamgen sent st ll another statement of account 9 th +244,185.60 as the beg nn ng balance. And on December 20, 1526, a statement of account 9 th e1actly the same f gure 9as sent to CalenAuela.

$t 9as only after the f l ng of the compla nt that a rad cally d fferent statement of accounts surfaced n court. 'erta nly, +h lamgen)s o9n statements made by ts o9n accountants over a long per od of t me and cover ng e1am nat ons made on four d fferent occas ons must preva l over unconf rmed and unaud ted statements made to support a pos t on made n the course of defend ng aga nst a la9su t. $t s not correct to say that CalenAuela should have presented ts o9n records to refute the unconf rmed and unaud ted f nd ng of the Eanar a aud tor. %he records of +h lamgen tself are the best refutat on aga nst f gures made as an afterthought n the course of l t gat on. Moreover, CalenAuela asFed for a meet ng 9here the f gures 9ould be reconc led. +h lamgen refused to meet 9 th h m and, nstead, term nated the agency agreement. After off@sett ng the amount of +244,185.60, beg nn ng balance as of July 1522, by 9ay of cred ts represent ng the comm ss on due from Delta and other accounts, CalenAuela had overpa d +h lamgen the amount of +8<0,040.<2 as of November <0, 1526. +h lamgen cannot later be heard to compla n that t comm tted a m staFe n ts computat on. %he alleged error may be g ven credence f comm tted only once. Eut as earl er stated, the reconc l at on of accounts 9as arr ved at four /40 t mes on d fferent occas ons 9here +h lamgen 9as duly represented by ts account e1ecut ves. Dn the bas s of these adm ss ons and representat ons, +h lamgen cannot later on assume a d fferent posture and cla m that t 9as m staFen n ts representat on 9 th respect to the correct beg nn ng balance as of July 1522 amount ng to +244,185.60. %he Eanar a aud t report comm ss oned by +h lamgen s unrel able s nce ts results are adm ttedly based on an unconf rmed and unaud ted beg nn ng balance of +1,286,168.4< as of August 20,152>. As so aptly stated by the tr al court n ts dec s on? Defendants also conducted an aud t of accounts of pla nt ff Arturo +. CalenAuela after the controversy has started. $n fact, after hear ng pla nt ffs have already rested the r case. %he results of sa d aud t 9ere presented n 'ourt to sho9 pla nt ff Arturo +. CalenAuela)s accountab l ty to defendant +B$!AM#EN. Bo9ever, the aud tor, 9hen presented as 9 tness n th s case test f ed that the beg nn ng balance of the r aud t report 9as based on an unaud ted amount of +1,286,168.4< /E1h b t 4>@A0 as of August 20, 152>, 9h ch 9as unver f ed and merely suppl ed by the off cers of defendant +B$!AM#EN. Even defendants very o9n E1h b t <6@ A@<, sho9ed that pla nt ff Arturo +. CalenAuela)s balance as of 1526 amounted to only +<,6>8.85, not +62>,126.4> as stated n defendant E enven do M. Aragon)s letter dated December 20,1526 /E1h b t 140 or +1,826,>56.40 as reflected n

defendant)s E1h b t 4> /Aud t "eport of Eanar a dated December 24, 15600. %hese glar ng d screpancy /s c0 n the accountab l ty of pla nt ff Arturo +. CalenAuela to defendant +B$!AM#EN only lends credence to the cla m of pla nt ff Arturo +. CalenAuela that he has no outstand ng account 9 th defendant +B$!AM#EN 9hen the latter, thru defendant E enven do M. Aragon, term nated the #eneral Agency Agreement entered nto by pla nt ff /E1h b t A0 effect ve January <1, 1525 /see E1h b ts ,2, and ,2@A,0. +la nt ff Arturo +. CalenAuela has sho9n that as of Dctober <1, 1526, he has overpa d defendant +B$!AM#EN n the amount of +8<,040.<2 /E1h b t ,EEE,, 9h ch computat on 9as based on defendant +B$!AM#EN)s balance of +244,185.60 furn shed on several occas ons to pla nt ff Arturo +. CalenAuela by defendant +B$!AM#EN /E1h b ts B@1, CC, CC@1, ((, ((@1 , HH , HH@2 , LL and , LL@20. +resc nd ng from the forego ng, and cons der ng that the pr vate respondents term nated CalenAuela 9 th ev dent mala fide t necessar ly follo9s that the former are l able n damages. "espondent +h lamgen has been appropr at ng for tself all these years the gross b ll ngs and ncome that t unceremon ously tooF a9ay from the pet t oners. %he preponderance of the author t es susta n the prepos t on that a pr nc pal can be held l able for damages n cases of un-ust term nat on of agency. $n Danon v. !rimo, 42 +h l. 1<< :1521;0, th s 'ourt ruled that 9here no t me for the cont nuance of the contract s f 1ed by ts terms, e ther party s at l berty to term nate t at 9 ll, sub-ect only to the ord nary re=u rements of good faith. %he r ght of the pr nc pal to term nate h s author ty s absolute and unrestr cted, e1cept only that he may not do so n #ad faith. %he tr al court n ts dec s on a9arded to CalenAuela the amount of &eventy 7 ve %housand +esos /+28,000,000 per month as compensatory damages from June 1560 unt l ts dec s on becomes f nal and e1ecutory. %h s a9ard s -ust f ed n the l ght of the ev dence e1tant on record /E1h b ts ,N,, ,N@10,, ,0,, ,0@1,, ,+, and ,+@1,0 sho9 ng that the average gross prem um collect on monthly of CalenAuela over a per od of four /40 months from December 1526 to 7ebruary 1525, amounted to over +<00,000.00 from 9h ch he s ent tled to a comm ss on of +100,000.00 more or less per month. Moreover, h s annual sales product on amounted to +2,800,000.00 from 9here he 9as g ven <2.8R comm ss ons. 3nder Art cle 2200 of the ne9 ' v l 'ode, , ndemn f cat on for damages shall comprehend not only the value of the loss suffered, but also that of the prof ts 9h ch the obl gee fa led to obta n., %he c rcumstances of the case, ho9ever, re=u re that the contractual relat onsh p bet9een the part es shall be term nated upon the sat sfact on of the -udgment. No more cla ms ar s ng from or as a result of the agency shall be enterta ned by the courts after that date.

A''D"D$N#!H, the pet t on s #"AN%ED. %he mpugned dec s on of January 25, 1566 and resolut on of Apr l 22, 1566 of respondent court are hereby &E% A&$DE. %he dec s on of the tr al court dated January 2<, 156> n ' v l 'ase No. 12112> s "E$N&%A%ED 9 th the MDD$7$'A%$DN& that the amount of 7$CE B3ND"ED %(EN%H DNE %BD3&AND N$NE B3ND"ED &$G%H@7D3" AND 1>M100 +E&D& /+821,5>4.1>0 represent ng the pet t oners Delta comm ss on shall earn only legal nterests 9 thout any ad-ustments under Art cle 1280 of the ' v l 'ode and that the contractual relat onsh p bet9een Arturo +. CalenAuela and +h l pp ne Amer can #eneral $nsurance 'ompany shall be deemed term nated upon the sat sfact on of the -udgment as mod f ed. &D D"DE"ED. !idin and .ortes, 99., concur. 8ernan, ..9., (.hairman*, too' no part 8eliciano, 9., is on leave.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #73=.2. 'arc- 14, 1<3=

:E!E$)%/ *A#E$A, pla nt ff@appellant, vs. ')G&E# *E#AS%/, defendant@appellee. 9ose Martinez San Agustin for appellant. 4icente =. Romualdez, .rispulo 7. Manu#ay and $lacido $. Reyes for appellee. *)##A7$EA#, J.: %h s s an appeal taFen by 7eder co Calera from the -udgment of the 'ourt of 7 rst $nstance of Man la d sm ss ng h s compla nt aga nst M guel Celasco, on the ground that he has not sat sfactor ly proven h s r ght of act on. $n support of h s appeal, the appellant ass gns the follo9 ng alleged as comm tted by the tr al court n ts -udgment, to 9 t? /10 %he lo9er court erred n hold ng that one of the 9ays of term nat ng an agency s by the e1press or tac t renunc at on of the agentI /20 the lo9er court erred n hold ng that the nst tut on

of a c v l act on and the e1ecut on of the -udgment obta ned by the agent aga nst h s pr nc pal s but renunc at on of the po9ers conferred on the agentI /<0 the lo9er erred n hold ng that, even f the sale by Eduardo BernandeA to the pla nt ff 7eder co Calera be declared vo d, such a declarat on could not preva l over the r ghts of the defendant M guel Celasco nasmuch as the r ght redempt on 9as e1erc sed by ne ther Eduardo BernandeA nor the pla nt ff 7eder co CaleraI /40 the lo9er court erred n not f nd ng that the defendant M guel Celasco 9as, and at present s, an author Aed representat ve of the pla nt ff 7eder co CaleraI /80 the lo9er court erred n not annull ng the sale made by the sher ff at publ c auct on to defendant M guel Celasco, E1h b t *I />0 the lo9er court erred n fa l ng to annul the sale e1ecuted by Eduardo BernandeA to the pla nt ff 7eder co Calera, E1h b t 'I /20 the lo9er court erred n not annull ng E1h b t !, that s, the sale at publ c auct on of the r ght to repurchase the land n =uest on to &alvador Calle-oI /60 the lo9er court erred n not declar ng E1h b t M null and vo d, 9h ch s the sale by &alvador Calle-o to defendant M guel CelascoI /50 the lo9er court erred n not order ng the defendant M guel Celasco to l =u date h s accounts as agent of the pla nt ff 7eder co CaleraI /100 the lo9er court erred n not a9ard ng pla nt ff the +8,000 damages prayed for. %he pert nent facts necessary for the solut on of the =uest ons ra sed by the above =uoted ass gnments of error are conta ned n the dec s on appealed from and are as follo9s? Ey v rtue of the po9ers of attorney, E1h b ts G and L, e1ecuted by the pla nt ff on Apr l 11, 1515, and on August 6, 1522, the defendant 9as appo nted attorney@ n@fact of the sa d pla nt ff 9 th author ty to manage h s property n the +h l pp nes, cons st ng of the usufruct of a real property located of Echague &treet, ' ty of Man la. %he defendant accepted both po9ers of attorney, managed pla nt ff)s property, reported h s operat ons, and rendered accounts of h s adm n strat onI and on March <1, 152< presented e1h b t 7 to pla nt ff, 9h ch s the f nal account of h s adm n strat on for sa d month, 9here n t appears that there s a balance of +<,086.<< n favor of the pla nt ff. %he l =u dat on of accounts revealed that the pla nt ff o9ed the defendant +1,100, and as m sunderstand ng arose bet9een them, the defendant brought su t aga nst the pla nt ff, c v l case No. 2<442 of th s court. Judgment 9as rendered n h s favor on March 26, 152<, and after the 9r t of e1ecut on 9as ssued, the sher ff lev ed upon the pla nt ff)s r ght of usufruct, sold t at publ c auct on and ad-ud cated t to the defendant n payment of all of h s cla m. &ubse=uently, on May 11, 152<, the pla nt ff sold h s r ght of redempt on to one Eduardo BernandeA, for the sum of +200 /E1h b t A0. Dn &eptember 4, 152<, th s purchaser conveyed the same r ght of redempt on, for the sum of +200, to the pla nt ff h mself, 7eder co Calera /E1h b t '0. After the pla nt ff had recovered h s r ght of redempt on, one &alvador Calle-o, 9ho had an e1ecut on upon a -udgment aga nst the pla nt ff rendered n a c v l case aga nst the latter, lev ed upon sa d r ght of redempt on, 9h ch 9as sold by the sher ff at publ c auct on to &alvador Calle-o for +280 and 9as def n tely ad-ud cated to h m. !ater, he

transferred sa d r ght of redempt on to the defendant Celasco. %h s s ho9 the t tle to the r ght of usufruct to the aforement oned property later came to vest the sa d defendant. As the f rst t9o ass gnments of error are very closely related to each other, 9e 9 ll cons der them -o ntly. Art cle 12<2 of the ' v l 'ode reads as follo9s? Art. 12<2. Agency s term nated? 1. Ey revocat onI 2. Ey the 9 thdra9al of the agentI <. Ey the death, nterd ct on, banFruptcy, or nsolvency of the pr nc pal or of the agent. And art cle 12<> of the same 'ode prov des that? Art. 12<>. An agent may 9 thdra9 from the agency by g v ng not ce to the pr nc pal. &hould the latter suffer any damage through the 9 thdra9al, the agent must ndemn fy h m therefore, unless the agent)s reason for h s 9 thdra9al should be the mposs b l ty of cont nu ng to act as such 9 thout ser ous detr ment to h mself. $n the case of De la $e>a vs. 0idalgo /1> +h l., 4800, th s court sa d la d do9n the follo9 ng rule? 1. A#EN'HI ADM$N$&%"A%$DN D7 +"D+E"%HI $M+!$ED A#EN'H. O (hen the agent and adm n strator of property nforms h s pr nc pal by letter that for reasons of health and med cal treatment he s about to depart from the place 9here he s e1ecut ng h s trust and 9here n the sa d property s s tuated, and abandons the property, turns t over to a th rd party, renders accounts of ts revenues up to the date on 9h ch he ceases to hold h s pos t on and transm ts to h s pr nc pal statement 9h ch summar Aes and embraces all the balances of h s accounts s nce he began the adm n strat on to the date of the term nat on of h s trust, and, 9 thout stat ng 9hen he may return to taFe charge of the adm n strat on of the sa d property, asFs h s pr nc pal to e1ecute a po9er of attorney n due form n favor of a transm t the same to another person 9ho tooF charge of the adm n strat on of the sa d property, t s but reasonable and -ust to conclude that the sa d agent had e1pressly and def n tely renounced h s agency and that such agency duly term nated, n accordance 9 th the prov s ons of art cle 12<2 of the ' v l 'ode, and, although the agent n h s aforement oned letter d d not use the 9ords ,renounc ng the agency,, yet such 9ords, 9ere undoubtedly so understood and accepted by the pr nc pal, because of the lapse of nearly n ne years up to the t me of the latter)s death, 9 thout h s hav ng nterrogated e ther the renounc ng agent, d sapprov ng 9hat he had done, or the person 9ho subst tuted the latter.

%he m sunderstand ng bet9een the pla nt ff and the defendant over the payment of the balance of +1,000 due the latter, as a result of the l =u dat on of the accounts bet9een them ar s ng from the collect ons by v rtue of the former)s usufructuary r ght, 9ho 9as the pr nc pal, made by the latter as h s agent, and the fact that the sa d defendant brought su t aga nst the sa d pr nc pal on March 26, 1526 for the payment of sa d balance, more than prove the breach of the -ur d cal relat on bet9een themI for, although the agent has not e1pressly told h s pr nc pal that he renounced the agency, yet ne ther d gn ty nor decorum perm ts the latter to cont nue represent ng a person 9ho has adopted such an antagon st c att tude to9ards h m. (hen the agent f led a compla nt aga nst h s pr nc pal for recovery of a sum of money ar s ng from the l =u dat on of the accounts bet9een them n connect on 9 th the agency, 7eder co Calera could not have understood other9 se than that M guel Celasco renounced the agencyI because h s act 9as more e1press ve than 9ords and could not have caused any doubt. /2 '. J., 84<.0 $n order to term nate the r relat ons by v rtue of the agency the defendant, as agent, rendered h s f nal account on March <1, 152< to the pla nt ff, as pr nc pal. Er efly, then, the fact that an agent nst tutes an act on aga nst h s pr nc pal for the recovery of the balance n h s favor result ng from the l =u dat on of the accounts bet9een them ar s ng from the agency, and renders and f nal account of h s operat ons, s e=u valent to an e1press renunc at on of the agency, and term nates the -ur d cal relat on bet9een them. $f, as 9e have found, the defendant@appellee M guel Celasco, n adopt ng a host le att tude to9ards h s pr nc pal, su ng h m for the collect on of the balance n h s favor, result ng from the l =u dat on of the agency accounts, ceased ipso facto to be the agent of the pla nt ff@appellant, sa d agent)s purchase of the aforesa d pr nc pal)s r ght of usufruct at publ c auct on held by v rtue of an e1ecut on ssued upon the -udgment rendered n favor of the former and aga nst the latter, s val d and legal, and the lo9er court d d not comm t the fourth and f fth ass gnments of error attr buted to t by the pla nt ff@appellant. $n regard to the th rd ass gnment of error, t s deemed unnecessary to d scuss the val d ty of the sale made by 7eder co Calera to Eduardo BernandeA of h s r ght of redempt on n the sale of h s usufructuary r ght made by the sher ff by v rtue of the e1ecut on of the -udgment n favor of M guel Celasco and aga nst the sa d 7eder co CaleraI and the same th ng s true as to the val d ty of the resale of the same r ght of redempt on made by Eduardo BernandeA to 7eder co CaleraI nasmuch as M guel Celasco)s purchase at publ c auct on held by v rtue of an e1ecut on of 7eder co Calera)s usufructuary r ght s val d and legal, and as ne ther the latter nor Eduardo BernandeA e1erc sed h s r ght of redempt on 9 th n the legal per od, the purchaser)s t tle became absolute. Moreover, the defendant@appellee, M guel Celasco, hav ng ac=u red 7eder co Calera)s r ght of redempt on from &alvador Calle-o, 9ho had ac=u red t at publ c auct on by v rtue of a 9r t of e1ecut on ssued upon the -udgment obta ned by the sa d Calle-o aga nst the sa d Calera, the latter lost all r ght to sa d usufruct. And even suppos ng that Eduardo BernandeA had been tr cFed by M guel Celasco nto sell ng 7eder co Calera)s r ght of repurchase to the latter so that &alvador Calle-o m ght levy an e1ecut on on t, and even suppos ng that sa d resale 9as null for lacF of cons derat on, yet, nasmuch as Eduardo BernandeA d d not present a th rd party cla m 9hen the r ght 9as lev ed upon for the e1ecut on of

the -udgment obta ned by Calle-o aga nst 7eder co Callera, nor d d he f le a compla nt to recover sa d r ght before the per od of redempt on e1p red, sa d Eduardo BernandeA, and much less 7eder co Calera, cannot no9 contest the val d ty of sa d resale, for the reason that the one@year per od of redempt on has already elapsed. Ne ther d d the tr al court err n not order ng M guel Celasco to render a l =u dat on of accounts from March <1, 152<, nasmuch as he had ac=u red the r ghts of the pla nt ff by purchase at the e1ecut on sale, and as purchaser, he 9as ent tled to rece ve the rents from the date of the sale unt l the date of the repurchase, cons der ng them as part of the redempt on pr ceI but not hav ng e1erc sed the r ght repurchase dur ng the legal per od, and the t tle of the repurchaser hav ng become absolute, the latter d d not have to account for sa d rents. &ummar A ng, the conclus on s reached that the d sagreements bet9een an agent and h s pr nc pal 9 th respect to the agency, and the f l ng of a c v l act on by the former aga nst the latter for the collect on of the balance n favor of the agent, result ng from a l =u dat on of the agency accounts, are facts sho9 ng a rupture of relat ons, and the compla nt s e=u valent to an e1press renunc at on of the agency, and s more e1press ve than f the agent had merely sa d, ,$ renounce the agency., Ey v rtue of the forego ng, and f nd ng no error n the -udgment appealed from, the same s hereby aff rmed n all ts parts, 9 th costs aga nst the appellant. &o ordered. 9ohnson, Malcolm, 4illamor, =strand and 9ohns, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN G.$. No. #7;11=374 April 10, 1<== !$. %A$#/S #. SE*)##A and #)NA /. SE*)##A, pet t oners@appellants, vs. (5E %/&$( /: A++EA#S, (/&$)S( W/$#! SE$*)%E, )N%., E#)SE/ S.%AN)#A/, and SEG&N!)NA N/G&E$A, respondents@appellees.

SA$')EN(/ , J.: %he pet t oners nvoFe the prov s ons on human relat ons of the ' v l 'ode n th s appeal by cert orar . %he facts are beyond d spute? 111 111 111 Dn the strength of a contract /E1h b t A for the appellant E1h b t 2 for the appellees0 entered nto on Dct. 15, 15>0 by and bet9een

Mrs. &egund na Noguera, party of the f rst partI the %our st (orld &erv ce, $nc., represented by Mr. El seo 'an lao as party of the second part, and here nafter referred to as appellants, the %our st (orld &erv ce, $nc. leased the prem ses belong ng to the party of the f rst part at Mab n &t., Man la for the former@s use as a branch off ce. $n the sa d contract the party of the th rd part held herself sol dar ly l able 9 th the party of the part for the prompt payment of the monthly rental agreed on. (hen the branch off ce 9as opened, the same 9as run by the here n appellant 3na 0. &ev lla payable to %our st (orld &erv ce $nc. by any a rl ne for any fare brought n on the efforts of Mrs. ! na &ev lla, 4R 9as to go to ! na &ev lla and <R 9as to be 9 thheld by the %our st (orld &erv ce, $nc. Dn or about November 24, 15>1 /E1h b t 1>0 the %our st (orld &erv ce, $nc. appears to have been nformed that ! na &ev lla 9as connected 9 th a r val f rm, the +h l pp ne %ravel Eureau, and, s nce the branch off ce 9as anyho9 los ng, the %our st (orld &erv ce cons dered clos ng do9n ts off ce. %h s 9as f rmed up by t9o resolut ons of the board of d rectors of %our st (orld &erv ce, $nc. dated Dec. 2, 15>1 /E1h b ts 12 and 1<0, the f rst abol sh ng the off ce of the manager and v ce@pres dent of the %our st (orld &erv ce, $nc., Erm ta Eranch, and the second,author A ng the corporate secretary to rece ve the propert es of the %our st (orld &erv ce then located at the sa d branch off ce. $t further appears that on Jan. <, 15>2, the contract 9 th the appellees for the use of the Eranch Dff ce prem ses 9as term nated and 9h le the effect v ty thereof 9as Jan. <1, 15>2, the appellees no longer used t. As a matter of fact appellants used t s nce Nov. 15>1. Eecause of th s, and to comply 9 th the mandate of the %our st (orld &erv ce, the corporate secretary #ab no 'an lao 9ent over to the branch off ce, and, f nd ng the prem ses locFed, and, be ng unable to contact ! na &ev lla, he padlocFed the prem ses on June 4, 15>2 to protect the nterests of the %our st (orld &erv ce. (hen ne ther the appellant ! na &ev lla nor any of her employees could enter the locFed prem ses, a compla nt 9all f led by the here n appellants aga nst the appellees 9 th a prayer for the ssuance of mandatory prel m nary n-unct on. Eoth appellees ans9ered 9 th countercla ms. 7or apparent lacF of nterest of the part es there n, the tr al court ordered the d sm ssal of the case 9 thout pre-ud ce. %he appellee &egund na Noguera sought recons derat on of the order d sm ss ng her countercla m 9h ch the court a =uo, n an order dated June 6, 15><, granted perm tt ng her to present ev dence n support of her countercla m. Dn June 12,15><, appellant ! na &ev lla ref led her case aga nst the here n appellees and after the ssues 9ere -o ned, the re nstated countercla m of &egund na Noguera and the ne9 compla nt of appellant ! na &ev lla 9ere -o ntly heard follo9 ng 9h ch the court a =uo ordered both cases d sm ss for lacF of mer t, on the bas s of 9h ch 9as elevated the nstant appeal on the follo9 ng ass gnment of errors?

$. %BE !D(E" 'D3"% E""ED ECEN $N A++"E'$A%$N# %BE NA%3"E D7 +!A$N%$77@A++E!!AN% M"&. !$NA D. &EC$!!A)& 'DM+!A$N%. $$. %BE !D(E" 'D3"% E""ED $N BD!D$N# %BA% A++E!!AN% M"&. !$NA 0. &EC$!A)& A""AN#EMEN% /($%B A++E!!EE %D3"$&% (D"!D &E"C$'E, $N'.0 (A& DNE ME"E!H D7 EM+!DHE"@EM+!DHEE "E!A%$DN AND $N 7A$!$N# %D BD!D %BA% %BE &A$D A""AN#EMEN% (A& DNE D7 JD$N% E3&$NE&& CEN%3"E. $$$. %BE !D(E" 'D3"% E""ED $N "3!$N# %BA% +!A$N%$77@ A++E!!AN% M"&. !$NA D. &EC$!!A $& E&%D++ED 7"DM DENH$N# %BA% &BE (A& A ME"E EM+!DHEE D7 DE7ENDAN%@A++E!!EE %D3"$&% (D"!D &E"C$'E, $N'. ECEN A& A#A$N&% %BE !A%%E". $C. %BE !D(E" 'D3"% E""ED $N ND% BD!D$N# %BA% A++E!!EE& BAD ND "$#B% %D EC$'% A++E!!AN% M"&. !$NA D. &EC$!!A 7"DM %BE A. MAE$N$ D77$'E EH %A*$N# %BE !A( $N%D %BE$" D(N BAND&. C. %BE !D(E" 'D3"% E""ED $N ND% 'DN&$DE"$N# A% .A!! A++E!!EE ND#3E"A)& "E&+DN&$E$!$%H 7D" A++E!!AN% !$NA D. &EC$!!A)& 7D"'$E!E D$&+D&&E&&$DN D7 %BE A. MAE$N$ +"EM$&E&. C$. %BE !D(E" 'D3"% E""ED $N 7$ND$N# %BA% A++E!!AN% A++E!!AN% M"&. !$NA D. &EC$!!A &$#NED ME"E!H A& #3A"AN%D" 7D" "EN%A!&. Dn the forego ng facts and n the l ght of the errors as gned the ssues to be resolved are? 1. (hether the appellee %our st (orld &erv ce un laterally d sconnected the telephone l ne at the branch off ce on Erm taI 2. (hether or not the padlocF ng of the off ce by the %our st (orld &erv ce 9as act onable or notI and <. (hether or not the lessee to the off ce prem ses belong ng to the appellee Noguera 9as appellees %(& or %(& and the appellant. $n th s appeal, appealant ! na &ev lla cla ms that a -o nt buss ness venture 9as entered nto by and bet9een her and appellee %(& 9 th off ces at the Erm ta branch off ce and that she 9as not an employee of the %(& to the end that her relat onsh p 9 th %(& 9as one of a -o nt bus ness venture appellant made declarat ons sho9 ng? 1. Appellant Mrs. ! na 0. &ev lla, a prom nent f gure and 9 fe of an em nent eye, ear and nose spec al st as 9ell as a med ately column st had been n the travel bus ness pr or to the establ shment of the -o nt bus ness venture 9 th appellee %our st (orld &erv ce, $nc. and appellee El seo 'an lao, her compadre, she be ng the godmother of one of h s ch ldren, 9 th her

o9n cl entele, com ng mostly from her o9n soc al c rcle /pp. <@> tsn. 7ebruary 1>,15>80. 2. Appellant Mrs. &ev lla 9as s gnatory to a lease agreement dated 15 Dctober 15>0 /E1h. )A)0 cover ng the prem ses at A. Mab n &t., she e1pressly 9arrant ng and hold ng :s c; herself )sol dar ly) l able 9 th appellee %our st (orld &erv ce, $nc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera /pp. 14@18, tsn. Jan. 16,15>40. <. Appellant Mrs. &ev lla d d not rece ve any salary from appellee %our st (orld &erv ce, $nc., 9h ch had ts o9n, separate off ce located at the %rade N 'ommerce Eu ld ngI nor 9as she an employee thereof, hav ng no part c pat on n nor connect on 9 th sa d bus ness at the %rade N 'ommerce Eu ld ng /pp. 1>@16 tsn $d .*. 4. Appellant Mrs. &ev lla earned comm ss ons for her o9n passengers, her o9n booF ngs her o9n bus ness /and not for any of the bus ness of appellee %our st (orld &erv ce, $nc.0 obta ned from the a rl ne compan es. &he shared the 2R comm ss ons g ven by the a rl ne compan es g v ng appellee %our st (orld &erv ce, ! c. <R thereof a d reta n ng 4R for herself /pp. 16 tsn. :d.0 8. Appellant Mrs. &ev lla l Fe9 se shared n the e1penses of ma nta n ng the A. Mab n &t. off ce, pay ng for the salary of an off ce secretary, M ss Db eta, and other sundry e1penses, as de from des c on the off ce furn ture and supply ng some of f ce furn sh ngs /pp. 18,16 tsn. Apr l >,15>80, appellee %our st (orld &erv ce, $nc. shoulder ng the rental and other e1penses n cons derat on for the <R spl t n the co procured by appellant Mrs. &ev lla /p. <8 tsn 7eb. 1>,15>80. >. $t 9as the understand ng bet9een them that appellant Mrs. &ev lla 9ould be g ven the t tle of branch manager for appearance)s saFe only /p. <1 tsn. $d.0, appellee El seo 'an lao adm t that t 9as -ust a t tle for d gn ty /p. <> tsn. June 16, 15>8@ test mony of appellee El seo 'an lao pp. <6@<5 tsn Apr l >15>8@ test mony of corporate secretary #ab no 'an lao /pp@ 2@8, Appellants) "eply Er ef0 3pon the other hand, appellee %(& contend that the appellant 9as an employee of the appellee %our st (orld &erv ce, $nc. and as such 9as des gnated manager. 1 111 111 111

%he tr al court 3 held for the pr vate respondent on the prem se that the pr vate respondent, %our st (orld &erv ce, $nc., be ng the true lessee, t 9as 9 th n ts prerogat ve to term nate the lease and padlocF the prem ses. 4 $t l Fe9 se found the pet t oner, ! na &ev lla, to be a mere employee of sa d %our st (orld &erv ce, $nc. and as such, she 9as bound by the acts of her employer. ; %he respondent 'ourt of Appeal 2 rendered an aff rmance. %he pet t oners no9 cla m that the respondent 'ourt, n susta n ng the lo9er court, erred. &pec f cally, they state? $ %BE 'D3"% D7 A++EA!& E""ED DN A U3E&%$DN D7 !A( AND #"ACE!H AE3&ED $%& D$&'"E%$DN $N BD!D$N# %BA% ,%BE +AD!D'*$N# D7 %BE +"EM$&E& EH %D3"$&% (D"!D &E"C$'E $N'. ($%BD3% %BE *ND(!ED#E AND 'DN&EN% D7 %BE A++E!!AN% !$NA &EC$!!A ... ($%BD3% ND%$7H$N# M"&. !$NA D. &EC$!!A D" ANH D7 BE" EM+!DHEE& AND ($%BD3% $N7D"M$N# 'D3N&E! 7D" %BE A++E!!AN% /&EC$!$A0, (BD $MMED$A%E!H EE7D"E %BE +AD!D'*$N# $N'$DEN%, (A& $N 'DN7E"EN'E ($%B %BE 'D"+D"A%E &E'"E%A"H D7 %D3"$&% (D"!D &E"C$'E /ADM$%%ED!H %BE +E"&DN (BD +AD!D'*ED %BE &A$D D77$'E0, $N %BE$" A%%EM+ AM$'AE!H &E%%!E %BE 'DN%"DCE"&H EE%(EEN %BE A++E!!AN% /&EC$!!A0 AND %BE %D3"$&% (D"!D &E"C$'E ... /D$D ND%0 EN%$%!E %BE !A%%E" %D %BE "E!$E7 D7 DAMA#E&, /ANNEG ,A, ++. 2,6 AND ANNEG ,E, +. 20 DE'$&$DN A#A$N&% D3E +"D'E&& (B$'B ADBE"E& %D %BE "3!E D7 !A(. $$ %BE 'D3"% D7 A++EA!& E""ED DN A U3E&%$DN D7 !A( AND #"ACE!H AE3&ED $%& D$&'"E%$DN $N DENH$N# A++E!!AN% &EC$!!A "E!$E7 EE'A3&E &BE BAD ,D77E"ED %D ($%BD"A( BE" 'DM+ +"DC$DED %BA% A!! '!A$M& AND 'D3N%E"'!A$M& !DD#ED EH ED%B A++E!!EE& (E"E ($%BD"A(N., /ANNEG ,A, +. 60 $$$ %BE 'D3"% D7 A++EA!& E""ED DN A U3E&%$DN D7 !A( AND #"ACE!H AE3&ED $%& D$&'"E%$DN $N DENH$N#@$N 7A'% ND% +A&&$N# AND "E&D!C$N#@A++E!!AN% &EC$!!A& 'A3&E D7 A'%$DN 7D3NDED DN A"%$'!E& 15, 20 AND 21 D7 %BE '$C$! 'DDE DN "E!A%$DN&. $C %BE 'D3"% D7 A++EA!& E""ED DN A U3E&%$DN D7 !A( AND #"ACE!H AE3&ED $%& D$&'"E%$DN $N DENH$N# A++EA! A++E!!AN% &EC$!!A "E!$E7 HE% ND% "E&D!C$N# BE" '!A$M %BA% &BE (A& $N JD$N% CEN%3"E ($%B %D3"$&% (D"!D &E"C$'E $N'. D" A% !EA&% $%& A#EN% 'D3+!ED ($%B AN $N%E"E&% (B$'B 'D3!D ND% EE %E"M$NA%ED D" "ECD*ED 3N$!A%E"A!!H EH %D3"$&% (D"!D &E"C$'E $N'. 0 As a prel m nary n=u ry, the 'ourt s asFed to declare the true nature of the relat on bet9een ! na &ev lla and %our st (orld &erv ce, $nc. %he respondent 'ourt of see f t to rule on the =uest on, the cruc al ssue, n ts op n on be ng ,9hether or not the padlocF ng of the prem ses by the %our st (orld &erv ce, $nc.

9 thout the Fno9ledge and consent of the appellant ! na &ev lla ent tled the latter to the rel ef of damages prayed for and 9hether or not the ev dence for the sa d appellant supports the content on that the appellee %our st (orld &erv ce, $nc. un laterally and 9 thout the consent of the appellant d sconnected the telephone l nes of the Erm ta branch off ce of the appellee %our st (orld &erv ce, $nc. 1 %our st (orld &erv ce, $nc., ns sts, on the other hand, that ! na &EC$!!A 9as a mere employee, be ng ,branch manager, of ts Erm ta ,branch, off ce and that nferent ally, she had no say on the lease e1ecuted 9 th the pr vate respondent, &egund na Noguera. %he pet t oners contend, ho9ever, that relat on bet9een the bet9een part es 9as one of -o nt venture, but concede that Q&hatever might have #een the true relationship #et&een Sevilla and 7ourist 6orld Service,Q the "ule of !a9 en-o ned %our st (orld &erv ce and 'an lao from taF ng the la9 nto the r o9n hands, = n reference to the padlocF ng no9 =uest oned. %he 'ourt f nds the resolut on of the ssue mater al, for f, as the pr vate respondent, %our st (orld &erv ce, $nc., ma nta ns, that the relat on bet9een the part es 9as n the character of employer and employee, the courts 9ould have been 9 thout -ur sd ct on to try the case, labor d sputes be ng the e1clus ve doma n of the 'ourt of $ndustr al "elat ons, later, the Eureau Df !abor "elat ons, pursuant to statutes then n force. < $n th s -ur sd ct on, there has been no un form test to determ ne the ev dence of an employer@employee relat on. $n general, 9e have rel ed on the so@called r ght of control test, ,9here the person for 9hom the serv ces are performed reserves a r ght to control not only the end to be ach eved #ut also the means to be used n reach ng such end., 1. &ubse=uently, ho9ever, 9e have cons dered, n add t on to the standard of r ght@of control, the e1 st ng econom c cond t ons preva l ng bet9een the part es, l Fe the nclus on of the employee n the payrolls, n determ n ng the e1 stence of an employer@employee relat onsh p. 11 %he records 9 ll sho9 that the pet t oner, ! na &ev lla, 9as not sub-ect to control by the pr vate respondent %our st (orld &erv ce, $nc., e ther as to the result of the enterpr se or as to the means used n connect on there9 th. $n the f rst place, under the contract of lease cover ng the %our st (orlds Erm ta off ce, she had bound herself n solidumas and for rental payments, an arrangement that 9ould be l Fe cla ms of a master@servant relat onsh p. %rue the respondent 'ourt 9ould later m n m Ae her part c pat on n the lease as one of mere guaranty, 13 that does not maFe her an employee of %our st (orld, s nce n any case, a true employee cannot be made to part 9 th h s o9n money n pursuance of h s employer)s bus ness, or other9 se, assume any l ab l ty thereof. $n that event, the part es must be bound by some other relat on, but certa nly not employment. $n the second place, and as found by the Appellate 'ourt, ):9;hen the branch off ce 9as opened, the same 9as run by the here n appellant ! na D. &ev lla payable to %our st (orld &erv ce, $nc. by any a rl ne for any fare brought n on the effort of Mrs. ! na &ev lla. 14 3nder these c rcumstances, t cannot be sa d that &ev lla 9as under the control of %our st (orld &erv ce, $nc. ,as to the means used., &ev lla n pursu ng the bus ness, obv ously rel ed on her o9n g fts and capab l t es. $t s further adm tted that &ev lla 9as not n the company)s payroll. 7or her efforts, she reta ned 4R n comm ss ons from a rl ne booF ngs, the rema n ng <R go ng to %our st (orld. 3nl Fe an employee then, 9ho earns a f 1ed salary

usually, she earned compensat on n fluctuat ng amounts depend ng on her booF ng successes. %he fact that &ev lla had been des gnated )branch manager, does not maFe her, ergo, %our st (orld)s employee. As 9e sa d, employment s determ ned by the r ght@of@control test and certa n econom c parameters. Eut t tles are 9eaF nd cators. $n re-ect ng %our st (orld &erv ce, $nc.)s arguments ho9ever, 9e are not, as a conse=uence, accept ng ! na &ev lla)s o9n, that s, that the part es had embarFed on a -o nt venture or other9 se, a partnersh p. And apparently, &ev lla herself d d not recogn Ae the e1 stence of such a relat on. $n her letter of November 26, 15>1, she e1pressly )concedes your :%our st (orld &erv ce, $nc.)s; r ght to stop the operat on of your branch off ce 1; n effect, accept ng %our st (orld &erv ce, $nc.)s control over the manner n 9h ch the bus ness 9as run. A -o nt venture, nclud ng a partnersh p, presupposes generally a of stand ng bet9een the -o nt co@venturers or partners, n 9h ch each party has an e=ual propr etary nterest n the cap tal or property contr buted 12 and 9here each party e1erc ses e=ual r ghts n the conduct of the bus ness. 10 furthermore, the part es d d not hold themselves out as partners, and the bu ld ng tself 9as embell shed 9 th the electr c s gn ,%our st (orld &erv ce, $nc. 11 n l eu of a d st nct partnersh p name. $t s the 'ourt)s cons dered op n on, that 9hen the pet t oner, ! na &ev lla, agreed to /9o0man the pr vate respondent, %our st (orld &erv ce, $nc.)s Erm ta off ce, she must have done so pursuant to a contract of agency. $t s the essence of th s contract that the agent renders serv ces , n representat on or on behalf of another. 1= $n the case at bar, &ev lla sol c ted a rl ne fares, but she d d so for and on behalf of her pr nc pal, %our st (orld &erv ce, $nc. As compensat on, she rece ved 4R of the proceeds n the concept of comm ss ons. And as 9e sa d, &ev lla herself based on her letter of November 26, 15>1, pre@assumed her pr nc pal)s author ty as o9ner of the bus ness undertaF ng. (e are conv nced, cons der ng the c rcumstances and from the respondent 'ourt)s rec tal of facts, that the t es had contemplated a pr nc pal agent relat onsh p, rather than a -o nt managament or a partnersh p.. Eut unl Fe s mple grants of a po9er of attorney, the agency that 9e hereby declare to be compat ble 9 th the ntent of the part es, cannot be revoFed at 9 ll. %he reason s that t s one coupled 9 th an nterest, the agency hav ng been created for mutual nterest, of the agent and the pr nc pal. 1< $t appears that ! na &ev lla s a #ona fide travel agent herself, and as such, she had ac=u red an nterest n the bus ness entrusted to her. Moreover, she had assumed a personal obl gat on for the operat on thereof, hold ng herself sol dar ly l able for the payment of rentals. &he cont nued the bus ness, us ng her o9n name, after %our st (orld had stopped further operat ons. Ber nterest, obv ously, s not to the comm ss ons she earned as a result of her bus ness transact ons, but one that e1tends to the very sub-ect matter of the po9er of management delegated to her. $t s an agency that, as 9e sa d, cannot be revoFed at the pleasure of the pr nc pal. Accord ngly, the revocat on compla ned of should ent tle the pet t oner, ! na &ev lla, to damages. As 9e have stated, the respondent 'ourt avo ded th s ssue, conf n ng tself to the telephone d sconnect on and padlocF ng nc dents. Anent the d sconnect on ssue, t s the hold ng of the 'ourt of Appeals that there s )no ev dence sho9 ng

that the %our st (orld &erv ce, $nc. d sconnected the telephone l nes at the branch off ce. 3.Het, 9hat cannot be den ed s the fact that %our st (orld &erv ce, $nc. d d not taFe pa ns to have them reconnected. Assum ng, therefore, that t had no hand n the d sconnect on no9 compla ned of, t had clearly condoned t, and as o9ner of the telephone l nes, t must shoulder respons b l ty therefor. %he 'ourt of Appeals must l Fe9 se be held to be n error 9 th respect to the padlocF ng nc dent. 7or the fact that %our st (orld &erv ce, $nc. 9as the lessee named n the lease con@tract d d not accord t any author ty to term nate that contract 9 thout not ce to ts actual occupant, and to padlocF the prem ses n such fash on. As th s 'ourt has ruled, the pet t oner, ! na &ev lla, had ac=u red a personal staFe n the bus ness tself, and necessar ly, n the e=u pment perta n ng thereto. 7urthermore, &ev lla 9as not a stranger to that contract hav ng been e1pl c tly named there n as a th rd party n charge of rental payments /sol dar ly 9 th %our st (orld, $nc.0. &he could not be ousted from possess on as summar ly as one 9ould e-ect an nterloper. %he 'ourt s sat sf ed that from the chron cle of events, there 9as ndeed some malevolent des gn to put the pet t oner, ! na &ev lla, n a bad l ght follo9 ng d sclosures that she had 9orFed for a r val f rm. %o be sure, the respondent court speaFs of alleged bus ness losses to -ust fy the closure '31 but there s no clear sho9 ng that %our st (orld Erm ta Eranch had n fact susta ned such reverses, let alone, the fact that &ev lla had moonl t for another company. (hat the ev dence d scloses, on the other hand, s that follo9 ng such an nformat on /that &ev lla 9as 9orF ng for another company0, %our st (orld)s board of d rectors adopted t9o resolut ons abol sh ng the off ce of )manager, and author A ng the corporate secretary, the respondent El seo 'an lao, to effect the taFeover of ts branch off ce propert es. Dn January <, 15>2, the pr vate respondents ended the lease over the branch off ce prem ses, nc dentally, 9 thout not ce to her. $t 9as only on June 4, 15>2, and after off ce hours s gn f cantly, that the Erm ta off ce 9as padlocFed, personally by the respondent 'an lao, on the prete1t that t 9as necessary to +rotect the nterests of the %our st (orld &erv ce. , 33 $t s strange ndeed that %our st (orld &erv ce, $nc. d d not f nd such a need 9hen t cancelled the lease f ve months earl er. (h le %our st (orld &erv ce, $nc. 9ould not pretend that t sought to locate &ev lla to nform her of the closure, but surely, t 9as a9are that after off ce hours, she could not have been any9here near the prem ses. 'app ng these ser es of ,offens ves,, t cut the off ce)s telephone l nes, paralyA ng completely ts bus ness operat ons, and n the process, depr v ng &ev lla art c pat on there n. %h s conduct on the part of %our st (orld &erv ce, $nc. betrays a s n ster effort to pun sh &ev llsa t had perce ved to be d sloyalty on her part. $t s offens ve, n any event, to elementary norms of -ust ce and fa r play. (e rule therefore, that for ts un9arranted revocat on of the contract of agency, the pr vate respondent, %our st (orld &erv ce, $nc., should be sentenced to pay damages. 3nder the ' v l 'ode, moral damages may be a9arded for ,breaches of contract 9here the defendant acted ... n bad fa th. 34 (e l Fe9 se condemn %our st (orld &erv ce, $nc. to pay further damages for the moral n-ury done to ! na &ev lla from ts braAen conduct subse=uent to the

cancellat on of the po9er of attorney granted to her on the author ty of Art cle 21 of the ' v l 'ode, n relat on to Art cle 2215 /100 thereof O A"%. 21. Any person 9ho 9 lfully causes loss or n-ury to another n a manner that s contrary to morals, good customs or publ c pol cy shall compensate the latter for the damage. 3; A"%. 2215. Moral damages 32 may be recovered n the follo9 ng and analogous cases? 111 111 111 /100 Acts and act ons refered nto art cle 21, 2>, 22, 26, 25, <0, <2, <4, and <8. %he respondent, El seo 'an lao, as a -o nt tortfeasor s l Fe9 se hereby ordered to respond for the same damages n a sol dary capac ty. $nsofar, ho9ever, as the pr vate respondent, &egund na Noguera s concerned, no ev dence has been sho9n that she had conn ved 9 th %our st (orld &erv ce, $nc. n the d sconnect on and padlocF ng nc dents. &he cannot therefore be held l able as a cotortfeasor. %he 'ourt cons ders the sums of +28,000.00 as and for moral damages,24 +10,000.00 as e1emplary damages, 32and +8,000.00 as nom nal 30 andMor temperate 31 damages, to be -ust, fa r, and reasonable under the c rcumstances. (BE"E7D"E, the Dec s on promulgated on January 2<, 1528 as 9ell as the "esolut on ssued on July <1, 1528, by the respondent 'ourt of Appeals s hereby "ECE"&ED and &E% A&$DE. %he pr vate respondent, %our st (orld &erv ce, $nc., and El seo 'an lao, are D"DE"ED -o ntly and severally to ndemn fy the pet t oner, ! na &ev lla, the sum of 28,00.00 as and for moral damages, the sum of +10,000.00, as and for e1emplary damages, and the sum of +8,000.00, as and for nom nal andMor temperate damages. 'osts aga nst sa d pr vate respondents. &D D"DE"ED. Fap (.hairman*, Melencio<0errera, $aras and $adilla, 99., concur.

:ootnotes 1 "ollo, <0@48. 2 'ourt of 7 rst $nstance of Man la, Eranch G$G Montesa, Agust n, +res d ng Judge. < "ollo, $d 88I "ecord on Appeal, <6.

4 "ecord on Appeal, $d., <2@<6. 8 #av ola, Jr., "Amon, J., "eyes, !u s, and De 'astro, +ac f c, JJ., 'onccurr ng > "ollo, :d., 124I Er ef for +et t oners, 1@2. 2 "ollo, :d., <>. 6 :d., 21I emphas s n the or g nal. 5 &ee "ep. Act No. 628 &ee also "ep. Act No. 1082, as amended by "ep. Act No. 1262. 10 !CN + ctures, $nc. v. +h l pp ne Mus c ans #u ld, No. !@12862, January 26,15>1, 1 &'"A 1<2,12< /15>10I emphas s n the or g nal. 11 C sayan &tevedore %rans. 'o., et al. v. '.$."., et al., No. !@21>5>, 7ebruary 28,15>2,15 &'"A 42> /15>20. 12 "ollo, :d., 40. 1< :d <1. 14 :d., 42. 18 EA3%$&%A, %"EA%$&E DN +B$!$++$NE +A"%NE"&B$+ !A( <4 /15260. 1> Dp c t <2. $n %uaAon v. Ealanos :58 +h l. 10> /15840;, th s 'ourt d st ngu shed bet9een a -o nt venture and a partnersh p but th s v e9 has s nce ra sed =uest ons from author t es. Accord ng to 'ampos, there seems to be no fundamental d st nct on bet9een the t9o forms of bus ness comb nat ons. 'AM+D&, %BE 'D"+D"A%$DN 'DDE 12 /15610.; 7or p of th s case, 9e use the terms of nterchangeable. 12 &ee rollo, id. 16 '$C$! 'DDE, art. 16>6. 15 &ee C$ +AD$!!A, '$C$! !A( <80 /15240. 20 "ollo, id., <>. 21 :d, <1. 22 :d. 2< '$C$! 'DDE, art. 2220. 24 Supra.

28 Supra, art. 22<2. 2> Supra art. 2221. 22 Supra, art. 2224. "epubl c of the +h l pp nes S&+$E'E %/&$( %B$"D D$C$&$DN G.$. N/S. 1003<<74.. !ecem er 14, 3..2 A&$E#)/ K. #)(/NJ&A, J$., +et t oner, vs. E!&A$!/ K. #)(/NJ&A, S$., $/9E$( (. 8ANG, ANG#/ +5)#S. 'A$)()'E, )N%., %)NE+#E>, )N%., !!' GA$'EN(S, )N%., E!!)E K. #)(/NJ&A S5)++)NG AGEN%8, )N%., E!!)E K. #)(/NJ&A S5)++)NG %/., )N%., #)(/NJ&A SE%&$)()ES, )N%. Cformerly E. K. #itonBua SecD, #&NE(A (5EA(E$, )N%., E ? # $EA#(8, Cformerly E ? # )N(S# S5)++)NG %/$+.D, :N+ %/., )N%., 5/'E EN(E$+$)SES, )N%., 9EA&'/N( !E*. $EA#(8 %/., )N%., G#/E! #AN! %/$+., EE&)(8 ($A!)NG %/., )N%., 4! %/$+., I#I !E*. %/$+, #%' (5EA($)%A# EN(E$+$)SES, )N%., #)(/NJ&A S5)++)NG %/. )N%., 'A%/)# )N%., /!E/N $EA#(8 %/$+., SA$A(/GA $EA#(8, )N%., A%( (5EA(E$ )N%. Cformerly General (-eatrical ? :ilm ELc-an"e, )N%.D, A*EN&E $EA#(8, )N%., A*EN&E (5EA(E$, )N%. and #*: +5)#)++)NES, )N%., C:ormerly *: +5)#)++)NESD,"espondents. DE'$&$DN GA$%)A, J.: $n th s pet t on for rev e9 under "ule 48 of the "ules of 'ourt, pet t oner Aurel o *. ! ton-ua, Jr. seeFs to null fy and set as de the Dec s on of the 'ourt of Appeals /'A0 dated March <1, 20041 n consol dated cases ..A. 2.R. Sp. 3o. [M,D[ and ..A. 2.R. S$. 3o [D[[B and ts "esolut on dated December 02, 2004,2 deny ng pet t onerJs mot on for recons derat on. %he recourse s cast aga nst the follo9 ng factual bacFdrop? +et t oner Aurel o *. ! ton-ua, Jr. /Aurel o0 and here n respondent Eduardo *. ! ton-ua, &r. /Eduardo0 are brothers. %he legal d spute bet9een them started 9hen, on December 4, 2002, n the "eg onal %r al 'ourt /"%'0 at +as g ' ty, Aurel o f led a su t aga nst h s brother Eduardo and here n respondent "obert %. Hang /Hang0 and several corporat ons for spec f c performance and account ng. $n h s compla nt,< docFeted as ' v l 'ase No. >52<8 and eventually raffled to Eranch >6 of the court,4 Aurel o alleged that, s nce June 152<, he and Eduardo are nto a -o nt ventureMpartnersh p arrangement n the Ddeon %heater bus ness 9h ch had e1panded thru nvestment n ' neple1, $nc., !'M %heatr cal Enterpr ses, Ddeon "ealty 'orporat on /operator of Ddeon $ and $$ theatres0, Avenue "ealty, $nc., o9ner of lands and bu ld ngs, among other corporat ons. Hang s descr bed n the compla nt as pet t onerJs and EduardoJs partner n the r Ddeon %heater

nvestment.8 %he same compla nt also conta ned the follo9 ng mater al averments? <.01 Dn or about 22 June 152<, :Aurel o; and Eduardo entered nto a -o nt ventureMpartnersh p for the cont nuat on of the r fam ly bus ness and common fam ly funds T. <.01.1 %h s -o nt ventureM:partnersh p; agreement 9as conta ned n a memorandum addressed by Eduardo to h s s bl ngs, parents and other relat ves. 'opy of th s memorandum s attached hereto and made an ntegral part asAnneL IAI and the port on referr ng to :Aurel o; submarFed as AnneL IA71,. <.02 $t 9as then agreed upon bet9een :Aurel o; and Eduardo that n cons derat on of :Aurel oJs; reta n ng h s share n the rema n ng fam ly bus nesses /mostly, mov e theaters, sh pp ng and land development0 and contr but ng h s ndustry to the cont nued operat on of these bus nesses, :Aurel o; 9 ll be g ven +1 M ll on or 10R e=u ty n all these bus nesses and those to be subse=uently ac=u red by them 9h chever s greater. . . . 4.01 T from 22 June 152< to about August 2001, or : n; a span of 26 years, :Aurel o; and Eduardo had accumulated n the r -o nt ventureMpartnersh p var ous assets nclud ng but not l m ted to the corporate defendants and :the r; respect ve assets. 4.02 $n add t on . . . the -o nt ventureMpartnersh p T had also ac=u red :var ous other assets;, but Eduardo caused to be reg stered n the names of other part esT. 111 111 111 4.04 %he substant al assets of most of the corporate defendants cons st of real propert es T. A l st of some of these real propert es s attached hereto and made an ntegral part as AnneL I9,. 111 111 111 8.02 &omet me n 1552, the relat ons bet9een :Aurel o; and Eduardo became sour so that :Aurel o; re=uested for an account ng and l =u dat on of h s share n the -o nt ventureMpartnersh p :but these demands for complete account ng and l =u dat on 9ere not heeded;. 111 111 111 8.08 (hat s 9orse, :Aurel o; has reasonable cause to bel eve that Eduardo andMor the corporate defendants as 9ell as Eobby :Hang;, are transferr ng . . . var ous real propert es of the corporat ons belong ng to the -o nt ventureMpartnersh p to other part es n fraud of :Aurel o;. $n conse=uence, :Aurel o; s therefore caus ng at th s t me the annotat on on the t tles of these real propert esT a not ce of lis pendens W. /Emphas s n the or g nalI underscor ng and 9ords n bracFet added.0

7or ease of reference, Anne1 A81 of the compla nt, 9h ch pet t oner asserts to have been meant for h m by h s brother Eduardo, pert nently reads? 100 J". /A*!0 :"eferr ng to pet t oner Aurel o *. ! ton-ua;? Hou have no9 your o9n l fe to l ve after hav ng been marr ed. T. $ am try ng my best to mold you the 9ay $ 9orF so you can follo9 the pattern T. Hou 9 ll be the only one left 9 th the company, among us brothers and $ 9 ll asF you to stay as $ 9ant you to run th s off ce every t me $ am a9ay. $ 9ant you to run t the 9ay $ am try ng to run t because $ 9 ll be all alone and $ 9 ll depend ent rely to you /s c0. My sons 9 ll not be ready to help me yet unt l about maybe 18M20 years from no9. (hatever s left n the corporat on, $ 9 ll maFe sure that you get DNE M$!!$DN +E&D& /+1,000,000.000 or ten percent /10R0 e=u ty, 9h chever s greater. (e t9o 9 ll gamble the 9hole th ng of 9hat $ have and 9hat you are ent tled to. T. $t 9 ll be you and me alone on th s. $f ever $ pass a9ay, $ 9ant you to taFe care of all of th s. Hou Feep my share for my t9o sons are ready taFe over but g ve them the chance to run the company 9h ch $ have bu lt. 111 111 111 Eecause you 9 ll need a place to stay, $ 9 ll arrange to g ve you f rst DNE B3ND"ED %BD3&AND& +E&D&? /+100, 000.000 n cash or asset, l Fe !t. Art aga so you can l ve better there. %he rest $ 9 ll g ve you n form of stocFs 9h ch you can Feep. %h s stocF $ assure you s good and saleable. $ 9 ll also gladly g ve you the share of (acF@(acF Tand Calley #olf T because you have been good. %he rest 9 ll be n stocFs from all the corporat ons 9h ch $ repeat, ten percent /10R0 e=u ty. > Dn December 20, 2002, Eduardo and the corporate respondents, as defendants a quo, f led a -o nt A3S65R6ith .ompulsory .ounterclaim deny ng under oath the mater al allegat ons of the compla nt, more part cularly that port on thereof dep ct ng pet t oner and Eduardo as hav ng entered nto a contract of partnersh p. As aff rmat ve defenses, Eduardo, et al., apart from ra s ng a -ur sd ct onal matter, alleged that the compla nt states no cause of act on, s nce no cause of act on may be der ved from the act onable document, i.e., Anne1 A81 / be ng vo d under the terms of Art cle 12>2 n relat on to Art cle 122< of the ' v l 'ode, infra. $t s further alleged that 9hatever undertaF ng Eduardo agreed to do, f any, under Anne1 A81 / are unenforceable under the prov s ons of the &tatute of 7rauds. 2 7or h s part, Hang @ 9ho 9as served 9 th summons long after the other defendants subm tted the r ans9er K moved to d sm ss on the ground, inter alia, that, as to h m, pet t oner has no cause of act on and the compla nt does not state any.6 +et t oner opposed th s mot on to d sm ss. Dn January 10, 200<, Eduardo, et al., f led a Motion to Resolve Affirmative Defenses.5 %o th s mot on, pet t oner nterposed an =pposition &ith e <$arte Motion to Set the .ase for $re<trial.10

Act ng on the separate mot ons mmed ately adverted to above, the tr al court, n an Dmn bus Drder dated March 8, 200<, den ed the aff rmat ve defenses and, e1cept for Hang, set the case for pre@tr al on Apr l 10, 200<. 11 $n another Dmn bus Drder of Apr l 2, 200<, the same court den ed the mot on of Eduardo, et al., for recons derat on12 and HangJs mot on to d sm ss. %he follo9 ng then transp red nsofar as Hang s concerned? 1. Dn Apr l 14, 200<, Hang f led h s A3S65R, but e1pressly reserved the r ght to seeF recons derat on of the Apr l 2, 200< Dmn bus Drder and to pursue h s fa led mot on to d sm ss1< to ts full resolut on. 2. Dn Apr l 24, 200<, he moved for recons derat on of the Dmn bus Drder of Apr l 2, 200<, but h s mot on 9as den ed n an Drder of July 4, 200<. 14 <. Dn August 2>, 200<, Hang 9ent to the 'ourt of Appeals /'A0 n a pet t on for certiorari under "ule >8 of the "ules of 'ourt, docFeted as *A8).R. #3 No. CDCCE,18 to null fy the separate orders of the tr al court, the f rst deny ng h s mot on to d sm ss the bas c compla nt and, the second, deny ng h s mot on for recons derat on. Earl er, Eduardo and the corporate defendants, on the content on that grave abuse of d scret on and n-ud c ous haste attended the ssuance of the tr al courtJs aforement oned Dmn bus Drders dated March 8, and Apr l 2, 200<, sought rel ef from the 'A via s m lar recourse. %he r pet t on for certiorari 9as docFeted as *A ).R. #3 No. CFGDC. +er ts resolut on dated Dctober 2, 200<,1> the 'AJs 14th D v s on ordered the consol dat on of .A 2.R. S$ 3o. [D[[B 9 th .A 2.R. S$ 3o. [M,D[. 7ollo9 ng the subm ss on by the part es of the r respect ve Memoranda of Author t es, the appellate court came out 9 th the here n assa led !ecision dated 'arc- 41, 3..;, f nd ng for Eduardo and Hang, as lead pet t oners there n, d spos ng as follo9s? (BE"E7D"E, -udgment s hereby rendered grant ng the ssuance of the 9r t of cert orar n these consol dated cases annull ng, revers ng and sett ng as de the assa led orders of the court a =uo dated March 8, 200<, Apr l 2, 200< and July 4, 200< and the compla nt f led by pr vate respondent :no9 pet t oner Aurel o; aga nst all the pet t oners :no9 here n respondents Eduardo, et al.; 9 th the court a =uo s hereby dis-issed. &D D"DE"ED.12 /Emphas s n the or g nalI 9ords n bracFet added.0 E1pla n ng ts case d spos t on, the appellate court stated, inter alia, that the alleged partnersh p, as ev denced by the act onable documents, Anne1 A and A81 attached to the compla nt, and upon 9h ch pet t oner solely pred cates h s r ghtMs allegedly v olated by Eduardo, Hang and the corporate defendants a quo s ,void or legally ine istent,. $n t me, pet t oner moved for recons derat on but h s mot on 9as den ed by the 'A n ts e=ually assa led$esolution of !ecem er 1, 3..;.16 .

Bence, pet t onerJs present recourse, on the content on that the 'A erred? A. (hen t ruled that there 9as no partnersh p created by the act onable document because th s 9as not a publ c nstrument and mmovable propert es 9ere contr buted to the partnersh p. E. (hen t ruled that the act onable document d d not create a demandable r ght n favor of pet t oner. '. (hen t ruled that the compla nt stated no cause of act on aga nst :respondent; "obert HangI and D. (hen t ruled that pet t oner has changed h s theory on appeal 9hen all that +et t oner had done 9as to support h s pleaded cause of act on by another legal perspect veMargument. %he pet t on lacFs mer t. +et t onerJs demand, as def ned n the pet tory port on of h s compla nt n the tr al court, s for del very or payment to h m, as EduardoJs and HangJs partner, of h s partnersh pM-o nt venture share, after an account ng has been duly conducted of 9hat he deems to be partnersh pM-o nt venture property. 15 A partnersh p e1 sts 9hen t9o or more persons agree to place the r money, effects, labor, and sF ll n la9ful commerce or bus ness, 9 th the understand ng that there shall be a proport onate shar ng of the prof ts and losses bet9een them.20 A contract of partnersh p s def ned by the ' v l 'ode as one 9here t9o or more persons bound themselves to contr bute money, property, or ndustry to a common fund 9 th the ntent on of d v d ng the prof ts among themselves. 21 A -o nt venture, on the other hand, s hardly d st ngu shable from, and may be l Fened to, a partnersh p s nce the r elements are s m lar, i.e., commun ty of nterests n the bus ness and shar ng of prof ts and losses. Ee ng a form of partnersh p, a -o nt venture s generally governed by the la9 on partnersh p. 22 %he underly ng ssue that necessar ly comes to m nd n th s proceed ngs s 9hether or not pet t oner and respondent Eduardo are partners n the theatre, sh pp ng and realty bus ness, as one cla ms but 9h ch the other den es. And the ssue bear ng on the f rst ass gned error relates to the =uest on of 9hat legal prov s on s appl cable under the prem ses, pet t oner seeF ng, as t 9ere, to enforce the act onable document @ Anne1 , A81, @ 9h ch he dep cts n h s compla nt to be the contract of partnersh pM-o nt venture bet9een h mself and Eduardo. 'learly, then, a looF at the legal prov s ons determ nat ve of the e1 stence, or def n ng the formal re=u s tes, of a partnersh p s nd cated. 7oremost of these are the follo9 ng prov s ons of the ' v l 'ode? Art. 1221. A partnersh p may be const tuted n any form, e1cept 9here mmovable property or real r ghts are contr buted thereto, n 9h ch case a publ c nstrument shall be necessary. Art. 1222. Every contract of partnersh p hav ng a cap tal of three thousand pesos or more, n money or property, shall appear n a publ c nstrument, 9h ch must be recorded n the Dff ce of the &ecur t es and E1change 'omm ss on.

7a lure to comply 9 th the re=u rement of the preced ng paragraph shall not affect the l ab l ty of the partnersh p and the members thereof to th rd persons. Art. 122<. A contract of partnersh p s vo d, 9henever mmovable property s contr buted thereto, f an nventory of sa d property s not made, s gned by the part es, and attached to the publ c nstrument. Anne1 ,A81,, on ts face, conta ns type9r tten entr es, personal n tone, but s uns gned and undated. As an uns gned document, there can be no =u bbl ng that Anne1 ,A81, does not meet the publ c nstrumentat on re=u rements e1acted under Art cle 1221 of the ' v l 'ode. Moreover, be ng uns gned and doubtless referr ng to a partnersh p nvolv ng more than +<,000.00 n money or property, Anne1 IA81I cannot be presented for notar Aat on, let alone reg stered 9 th the &ecur t es and E1change 'omm ss on /&E'0, as called for under the Art cle 1222 of the 'ode. And nasmuch as the nventory re=u rement under the succeed ng Art cle 122< goes nto the matter of val d ty 9hen mmovable property s contr buted to the partnersh p, the ne1t log cal po nt of n=u ry turns on the nature of pet t onerJs contr but on, f any, to the supposed partnersh p. %he 'A, address ng the forego ng =uery, correctly stated that pet t onerJs contr but on cons sted of mmovables and real r ghts. (rote that court? A further e1am nat on of the allegat ons n the compla nt 9ould sho9 that :pet t onerJs; contr but on to the so@called ,partnersh pM-o nt venture, 9as h s supposed share n the fam ly bus ness that s cons st ng of mov e theaters, sh pp ng and land development under paragraph <.02 of the compla nt. $n other 9ords, h s contr but on as a partner n the alleged partnersh pM-o nt venture cons sted of mmovable propert es and real r ghts. T. 2< & gn f cantly enough, pet t oner matter@of@factly concurred 9 th the appellate courtJs observat on that, presc nd ng from 9hat he h mself alleged n h s bas c compla nt, h s contr but on to the partnersh p cons sted of h s share n the ! ton-ua fam ly bus nesses 9h ch o9ned var able mmovable propert es. +et t onerJs assert on n h s mot on for recons derat on 24 of the 'AJs dec s on, that ,&hat &as to #e contri#uted to the #usiness Kof the partnershipL &as KpetitionerTsL industry and his share in the family Ktheatre and land developmentL #usinessQ leaves no room for speculat on as to 9hat pet t oner contr buted to the perce ved partnersh p. !est t be overlooFed, the contract@val dat ng nventory re=u rement under Art cle 122< of the ' v l 'ode appl es as long real property or real r ghts are n t ally brought nto the partnersh p. $n short, t s really of no moment 9h ch of the partners, or, n th s case, 9ho bet9een pet t oner and h s brother Eduardo, contr buted mmovables. $n conte1t, the more mportant cons derat on s that real property 9as contr buted, n 9h ch case an nventory of the contr buted property duly s gned by the part es should be attached to the publ c nstrument, else there s legally no partnersh p to speaF of. +et t oner, n an obv ous b d to evade the appl cat on of Art cle 122<, argues that the mmovables n =uest on 9ere not contr buted, but 9ere ac=u red after the format on of the supposed partnersh p. Needless to stress, the 'ourt cannot accord cogency to th s spec ous argument. 7or, as earl er stated, pet t oner h mself adm tted contr but ng h s share n the supposed sh pp ng, mov e theatres

and realty development fam ly bus nesses 9h ch already o9ned mmovables even before Anne1 A81 9as allegedly e1ecuted. 'ons der ng thus the value and nature of pet t onerJs alleged contr but on to the purported partnersh p, the 'ourt, even f so d sposed, cannot plaus bly e1tend Anne1 ,A81, the legal effects that pet t oner so des res and pleads to be g ven. Anne1 A81 , n f ne, cannot support the e1 stence of the partnersh p sued upon and sought to be enforced. %he legal and factual m l eu of the case calls for th s d spos t on. A partnersh p may be const tuted n any form, save 9hen mmovable property or real r ghts are contr buted thereto or 9hen the partnersh p has a cap tal of at least +<,000.00, n 9h ch case a publ c nstrument shall be necessary.28 And f only to stress 9hat has repeatedly been art culated, an nventory to be s gned by the part es and attached to the publ c nstrument s also nd spensable to the val d ty of the partnersh p 9henever mmovable property s contr buted to t. # ven the forego ng perspect ve, 9hat the appellate court 9rote n ts assa led Dec s on2> about the probat ve value and legal effect of Anne1 A81 commends tself for concurrence? 'ons der ng that the allegat ons n the compla nt sho9ed that :pet t oner; contr buted mmovable propert es to the alleged partnersh p, the ,Memorandum, /Anne1 ,A, of the compla nt0 9h ch purports to establ sh the sa d ,partnersh pM-o nt venture, s ND% a publ c nstrument and there 9as ND nventory of the mmovable property duly s gned by the part es. As such, the sa d ,Memorandum, T s null and vo d for purposes of establ sh ng the e1 stence of a val d contract of partnersh p. $ndeed, because of the fa lure to comply 9 th the essent al formal t es of a val d contract, the purported ,partnersh pM-o nt venture, s legally ne1 stent and t produces no effect 9hatsoever. Necessar ly, a vo d or legally ne1 stent contract cannot be the source of any contractual or legal r ght. Accord ngly, the allegat ons n the compla nt, nclud ng the act onable document attached thereto, clearly demonstrates that :pet t oner; has ND val d contractual or legal r ght 9h ch could be v olated by the : nd v dual respondents; here n. As a conse=uence, :pet t onerJs; compla nt does ND% state a val d cause of act on because ND% all the essent al elements of a cause of act on are present. /3nderscor ng and 9ords n bracFet added.0 ! Fe9 se 9ell@taFen are the follo9 ng complementary e1cerpts from the 'AJs e=ually assa led "esolut on of December 2, 2004 22 deny ng pet t onerJs mot on for recons derat on? 7urther, (e conclude that desp te glar ng defects n the allegat ons n the compla nt as 9ell as the act onable document attached thereto /"ollo, p. 1510, the :tr al; court d d not apprec ate and apply the legal prov s ons 9h ch 9ere brought to ts attent on by here n :respondents; n the the r plead ngs. $n our evaluat on of :pet t onerJs; compla nt, the latter alleged inter alia to have contr buted mmovable propert es to the alleged partnersh p but the act onable document s not a publ c document and there 9as no nventory of mmovable propert es s gned by the part es. Eoth the allegat ons n the compla nt and the act onable documents cons dered, t s crystal clear that :pet t oner; has no val d or legal r ght 9h ch could be v olated by :respondents;. /(ords n bracFet added.0

3nder the second ass gned error, t s pet t onerJs posture that Anne1 , A81,, assum ng ts neff cacy or null ty as a partnersh p document, nevertheless created demandable r ghts n h s favor. As pet t oner succ nctly puts t n th s pet t on? 4<. 'ontrar 9 se, th s act onable document, espec ally ts above@=uoted prov s ons, establ shed an act onable contract even though t may not be a partnersh p. %h s act onable contract s 9hat s Fno9n as an nnom nate contract /' v l 'ode, Art cle 1<020. 44. $t may not be a contract of loan, or a mortgage or 9hatever, but surely the contract does create r ghts and obl gat ons of the part es and 9h ch r ghts and obl gat ons may be enforceable and demandable. Just because the relat onsh p created by the agreement cannot be spec f cally labeled or p geonholed nto a category of nom nate contract does not mean t s vo d or unenforceable. +et t oner has thus thrusted the not on of an nnom nate contract on th s 'ourt @ and earl er on the 'A after he e1per enced a reversal of fortune thereat @ as an afterthought. %he appellate court, ho9ever, cannot really be faulted for not y eld ng to pet t onerJs dub ous stratagem of alter ng h s theory of -o nt ventureMpartnersh p to an nnom nate contract. 7or, at bottom, the appellate courtJs cert orar -ur sd ct on 9as c rcumscr bed by 9hat 9as alleged to have been the orderMs ssued by the tr al court n grave abuse of d scret on. As respondent Hang po ntedly observed,26 s nce the part esJ bas c pos t on had been 9ell@def ned, that of pet t oner be ng that the act onable document establ shed a partnersh pM-o nt venture, t s on those pos t ons that the appellate court e1erc sed ts cert orar -ur sd ct on. +et t onerJs act of chang ng h s or g nal theory s an mperm ss ble pract ce and const tutes, as the 'A aptly declared, an adm ss on of the untenab l ty of such theory n the f rst place. :+et t oner; s no9 humm ng a d fferent tune . . . . $n a sudden t9 st of stance, he has no9 contended that the act onable nstrument may be cons dered an inno-inate contract. 111 Cer ly, th s no9 changes :pet t onerJs; theory of the case 9h ch s not only proh b ted by the "ules but also s an mpl ed adm ss on that the very theory he h mself T has adopted, f led and prosecuted before the respondent court s erroneous. Ee that as t may . T. (e hold that th s ne9 theory contravenes :pet t onerJs; theory of the act onable document be ng a partnersh p document. $f anyth ng, t s so obv ous 9e do have to test the suff c ency of the cause of act on on the bas s of partnersh p la9 111.25 /Emphas s n the or g nalI (ords n bracFet added0. Eut even assum ng in gratia argumenti that Anne1 ,A81, partaFes of a perfected nnom nate contract, pet t onerJs compla nt 9ould st ll be d sm ss ble as aga nst Eduardo and, more so, aga nst Hang. $t cannot be over@emphas Aed that pet t oner po nts to Eduardo as the author of Anne1 , A81,. ( thal, even on th s cons derat on alone, pet t onerJs cla m aga nst Hang s doomed from the very start. As t 9ere, the only port on of Anne1 , A81, 9h ch could perhaps be remotely regarded as vest ng pet t oner 9 th a r ght to demand from respondent Eduardo the observance of a determ nate conduct, reads?

111 Hou 9 ll be the only one left 9 th the company, among us brothers and $ 9 ll asF you to stay as $ 9ant you to run th s off ce everyt me $ am a9ay. $ 9ant you to run t the 9ay $ am try ng to run t because $ 9 ll be alone and $ 9 ll depend ent rely to you, My sons 9 ll not be ready to help me yet unt l about maybe 18M20 years from no9.(hatever s left n the corporat on, $ 9 ll maFe sure that you get DNE M$!!$DN +E&D& /+1,000,000.000 or ten percent /10R0 e=u ty, 9h chever s greater. /3nderscor ng added0 $t s at once apparent that 9hat respondent Eduardo mposed upon h mself under the above passage, f he ndeed 9rote Anne1 , A81,, s a prom se 9h ch s not to be performed 9 th n one year from ,contract, e1ecut on on June 22, 152<. Accord ngly, the agreement embod ed n Anne1 ,A81, s covered by the &tatute of 7rauds and ergounenforceable for non@compl ance there9 th. <0 Ey force of the statute of frauds, an agreement that by ts terms s not to be performed 9 th n a year from the maF ng thereof 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. 'orollar ly, no act on can be proved unless the re=u rement e1acted by the statute of frauds s compl ed 9 th.<1 !est t be overlooFed, pet t oner s the ntended benef c ary of the +1 M ll on or 10R e=u ty of the fam ly bus nesses supposedly prom sed by Eduardo to g ve n the near future. Any suggest on that the stated amount or the e=u ty component of the prom se 9as ntended to go to a common fund 9ould be to read someth ng not 9r tten n AnneLIA81I. %hus, even th s angle alone argues aga nst the very dea of a partnersh p, the creat on of 9h ch re=u res t9o or more contract ng m nds mutually agree ng to contr bute money, property or ndustry to a common fund 9 th the ntent on of d v d ng the prof ts bet9een or among themselves.<2 $n sum then, the 'ourt rules, as d d the 'A, that pet t onerJs compla nt for spec f c performance anchored on an act onable document of partnersh p 9h ch s legally ne1 stent or vo d or, at best, unenforceable does not state a cause of act on as aga nst respondent Eduardo and the corporate defendants. And f no of act on can successfully be ma nta ned aga nst respondent Eduardo because no val d partnersh p e1 sted bet9een h m and pet t oner, the 'ourt cannot see ts 9ay clear on ho9 the same act on could plaus bly prosper aga nst Hang. &urely, Hang could not have become a partner n, or could not have had any form of bus ness relat onsh p 9 th, an ne1 stent partnersh p. As may be noted, pet t oner has not, n h s compla nt, prov de the log cal ne1us that 9ould t e Hang to h m as h s partner. $n fact, attendant c rcumstances 9ould nd cate the contrary. 'ons der? 1. +et t oner asserted n h s compla nt that h s so@called -o nt ventureMpartnersh p 9 th Eduardo 9as ,for the cont nuat on of the r fam ly bus ness and common fam ly funds 9h ch 9ere theretofore be ng ma nly managed by Eduardo., << Eut Hang den es F nsh p 9 th the ! ton-ua fam ly and pet t oner has not d sputed the d scla mer. 2. $n some deta l, pet t oner ment oned 9hat he had contr buted to the -o nt ventureMpartnersh p 9 th Eduardo and 9hat h s share n the bus nesses 9 ll be. No allegat on s made 9hatsoever about 9hat Hang contr buted, f any, let alone h s proport onal share n the prof ts. Eut such allegat on cannot, ho9ever, be

made because, as aptly observed by the 'A, the act onable document d d not conta n such prov s on, let alone ment on the name of Hang. Bo9, ndeed, could a person be cons dered a partner 9hen the document purport ng to establ sh the partnersh p contract d d not even ment on h s name. <. +et t oner states n par. 2.01 of the compla nt that ,:he; and Eduardo are bus ness partners n the :respondent; corporat ons,, 9h le ,Eobby s h s and EduardoJs partner n the r Ddeon %heater nvestmentJ /par. 2.0<0. %h s means that the partnersh p bet9een pet t oner and Eduardo came f rstI Hang became the r partner n the r Ddeon %heater nvestment thereafter. &everal paragraphs later, ho9ever, pet t oner 9ould contrad ct h mself by alleg ng that h s , nvestment and that of Eduardo and Hang n the Ddeon theater bus ness has e1panded through a re nvestment of prof t ncome and d rect nvestments n several corporat on nclud ng but not l m ted to :s 1; corporate respondents, %h s s mply means that the ,Ddeon %heatre bus ness, came before the corporate respondents. & gn f cantly enough, pet t oner refers to the corporate respondents as ,progeny, of the Ddeon %heatre bus ness. <4 Needless to stress, pet t oner has not suff c ently establ shed n h s compla nt the legal vinculum 9hence he sourced h s r ght to drag Hang nto the fray. %he 'ourt of Appeals, n ts assa led dec s on, captured and formulated the legal s tuat on n the follo9 ng 9 se? :"espondent; Hang, T s mpleaded because, as alleged n the compla nt, he s a ,partner, of :Eduardo; and the :pet t oner; n the Ddeon %heater $nvestment 9h ch e1panded through re nvestments of prof ts and d rect nvestments n several corporat ons, thus? 111 111 111 'learly, :pet t onerJs; cla m aga nst T Hang arose from h s alleged partnersh p 9 th pet t oner and the Trespondent. Bo9ever, there 9as ND allegat on n the compla nt 9h ch d rectly alleged ho9 the supposed contractual relat on 9as created bet9een :pet t oner; and THang. More mportantly, ho9ever, the forego ng rul ng of th s 'ourt that the purported partnersh p bet9een :Eduardo; s vo d and legally ne1 stent d rectly affects sa d cla m aga nst THang. & nce :pet t oner; s try ng to establ sh h s cla m aga nst T Hang by l nF ng h m to the legally ne1 stent partnersh p . . . such attempt had become fut le because there 9as ND%B$N# that 9ould contractually connect :pet t oner; and T Hang. %o establ sh a val d cause of act on, the compla nt should have a statement of fact upon 9h ch to connect :respondent; Hang to the alleged partnersh p bet9een :pet t oner; and respondent :Eduardo;, nclud ng the r alleged nvestment n the Ddeon %heater. A statement of facts on those matters s p votal to the compla nt as they 9ould const tute the ult mate facts necessary to establ sh the elements of a cause of act on aga nst T Hang. <8 +ress ng ts po nt, the 'A later stated n ts resolut on deny ng pet t onerJs mot on for recons derat on the follo9 ng? 111 (hatever the compla nt calls t, t s the act onable document attached to the compla nt that s controll ng. &uff ce t to state, (e have not gnored the act onable document T As a matter of fact, (e emphas Aed n our dec s on T that nsofar as :Hang; s concerned, he s not even ment oned n the sa d

act onable document. (e are therefore puAAled ho9 a person not ment oned n a document purport ng to establ sh a partnersh p could be cons dered a partner.<> /(ords n bracFet ours0. %he last ssue ra sed by pet t oner, referr ng to 9hether or not he changed h s theory of the case, as peremptor ly determ ned by the 'A, has been d scussed at length earl er and need not deta n us long. &uff ce t to say that after the 'A has ruled that the alleged partnersh p s ne1 stent, pet t oner tooF a d fferent tacF. %hus, from a -o nt ventureMpartnersh p theory 9h ch he adopted and cons stently pursued n h s compla nt, pet t oner embraced the nnom nate contract theory. $llustrat ve of th s sh ft s pet t onerJs statement n par. ^6 of h s mot on for recons derat on of the 'AJs dec s on comb ned 9 th 9hat he sa d n par. ^ 4< of th s pet t on, as follo9s? 6. (hether or not the act onable document creates a partnersh p, -o nt venture, or 9hatever, s a legal matter. (hat s determ nat ve for purposes of suff c ency of the compla nantJs allegat ons, s 9hether the act onable document bears out an act onable contract K be t a partnersh p, a -o nt venture or 9hatever or some nnom nate contract T $t may be noted that one F nd of nnom nate contract s 9hat s Fno9n as du ut facias /$ g ve that you may do0.<2 4<. 'ontrar 9 se, th s act onable document, espec ally ts above@=uoted prov s ons, establ shed an act onable contract even though t may not be a partnersh p. %h s act onable contract s 9hat s Fno9n as an nnom nate contract /' v l 'ode, Art cle 1<020.<6 &pr ng ng surpr ses on the oppos ng party s offens ve to the sport ng dea of fa r play, -ust ce and due processI hence, the proscr pt on aga nst a party sh ft ng from one theory at the tr al court to a ne9 and d fferent theory n the appellate court.<5 Dn the same rat onale, an ssue 9h ch 9as ne ther averred n the compla nt cannot be ra sed for the f rst t me on appeal. 40 $t s not d ff cult, therefore, to agree 9 th the 'A 9hen t made short shr ft of pet t onerJs nnom nate contract theory on the bas s of the forego ng bas c reasons. +et t onerJs protestat on that h s act of ntroduc ng the concept of nnom nate contract 9as not a case of chang ng theor es but of support ng h s pleaded cause of act on K that of the e1 stence of a partnersh p @ by another legal perspect veMargument, str Fes the 'ourt as a stra ned attempt to rat onal Ae an untenable pos t on. +aragraph 12 of h s mot on for recons derat on of the 'AJs dec s on v rtually relegates partnersh p as a fall@bacF theory. %9o paragraphs later, n the same not on, pet t oner faults the appellate court for read ng, 9 th myop c eyes, the act onable document solely as establ sh ng a partnersh pM-o nt venture. Cer ly, the c ted paragraphs are a study of a party hedg ng on 9hether or not to pursue the or g nal cause of act on or altogether abandon ng the same, thus? 12. $nc dentally, assum ng that the act onable document created a partnersh p bet9een :respondent; Eduardo, &r. and :pet t oner;, no mmovables 9ere contr buted to th s partnersh p. 111 14. All told, the Dec s on taFes off from a false prem se that the act onable document attached to the compla nt does not establ sh a contractual relat onsh p bet9een :pet t oner; and T Eduardo, &r. and "oberto % Hang s mply because h s

document does not create a partnersh p or a -o nt venture. %h s s T a myop c read ng of the act onable document. +er the 'ourtJs o9n count, pet t oner used n h s compla nt the m 1ed 9ords ,"oint ventureSpartnership, n neteen /150 t mes and the term , partner, four /40 t mes. Be made reference to the ,la& of "oint ventureSpartnership K#eing applica#leL to the #usiness relationship ] #et&een KhimL, 5duardo and !o##y KFangLQ and to h s Qrights in all specific properties of their "oint ventureSpartnership,. # ven th s cons derat on, pet t onerJs r ght of act on aga nst respondents Eduardo and Hang doubtless p vots on the e1 stence of the partnersh p bet9een the three of them, as purportedly ev denced by the undated and uns gned Anne1 A81,. A vo d Anne1 ,A@1,, as an act onable document of partnersh p, 9ould str p pet t oner of a cause of act on under the prem ses. A compla nt for del very and account ng of partnersh p property based on such vo d or legally non@e1 stent act onable document s d sm ss ble for fa lure to state of act on. &o, n g st, sa d the 'ourt of Appeals. %he 'ourt agrees. W5E$E:/$E, the nstant pet t on s !EN)E! and the mpugned Dec s on and "esolut on of the 'ourt of AppealsA::)$'E!. 'ost aga nst the pet t oner. S/ /$!E$E!. %AN%)/ %. GA$%)A Assoc ate Just ce (E 'DN'3"? A$(E')/ *. +ANGAN)9AN Assoc ate Just ce ANGE#)NA SAN!/*A#7G&()E$$E6 Assoc ate Just ce %/N%5)(A %A$+)/ '/$A#ES Assoc ate Just ce A((ES(A()/N $ 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. A$(E')/ *. +ANGAN)9AN Assoc ate Just ce 'ha rman, %h rd D v s on $ENA(/ %. %/$/NA Assoc ate Just ce

%E$():)%A()/N +ursuant to Art cle C$$$, &ect on 1< of the 'onst tut on, and the D v s on 'ha rman)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. 5)#A$)/ G. !A*)!E, J$. 'h ef Just ce

:ootnotes
1

+enned by Assoc ate Just ce E enven do !. "eyes, concurred n by Assoc ate Just ces 'onrado M. Cas=ueA, Jr. and Arsen o J. MagpaleI "ollo, pp. 22 et seq.
2

"ollo, pp. 86 et seq. $b d, pp. >< et seq. +res ded by Bon. &ant ago #. Estrella. +ar. 2.0< of the 'ompla nt. "ollo, p. 882. :d., pp. 20 et seq. :d., pp. 55 et seq. :d., pp.62 et seq. :d., pp. 5< et seq. :d., pp. 52@56. :d., pp. 1<8 et seq. &ee Note No. 6, supra. "ollo, p. 1>1. :#id, pp. 20> et se=. :d., p. 28<.

<

>

10

11

12

1<

14

18

1>

12

As corrected per 'A "esolut on dated July 14, 2004 to conform to the actual dates of the assa led ordersI "ollo, pp. <2> et seq. %he correct on

cons sted of chang ng the dates ,March 8, 2002, Apr l 2, 2002 and July 2, 200<, appear ng n the or g nal 'A dec s on to ,March 8, 200<, Apr l 2, 200< and July 4, 200<,, respect vely.
16

&ee Note ^2, supra. 'ompla nt, p. >I "ollo, p. >6. ElacFJs !a9 D ct onary, >th ed., p. 1120. Art. 12>2.

15

20

21

22

Be rs of %an Eng *ee vs. 'A, <41 &'"A 240 :2000;, c t ng Aurbach vs. &an tary (ares Manufactur ng 'orp. , 160 &'"A 1<0 :1565;.
2<

At. p. > of the Dec s on, "ollo, p. 42. At p. > of the mot on for recons derat onI "ollo, p. 88.

24

28

C tug, 'DM+END$3M of '$C$! !A( and J3"$&+"3DEN'E, "ev. ed., /155<0, p. 212.
2>

&ee Note ^1, supra. &ee Note ^2, supra. +age 2> of HangJs MemorandumI "ollo, p. 454. +age 4 of the 'AJs assa led "esolut onI "ollo, p. >1. ^2 /a0 of Art. 140< of the ' v l 'ode. %olent no, '$C$! 'DDE D7 %BE +B$!$++$NE&, Col. $C, 1551 ed., p. >12. Be rs of %an Eng *ee vs. 'A, supra. +ar. <.01 of the 'ompla ntI "ollo, p. >4. +et t on, p. 16I "ollo, p. 20. "ollo, p. 48. :#id, p. >1. "ollo, p. 8<I ' tat ons om tted. :#id, p. 15. &an Agust n vs. Earr os, >6 +h l. 428 :15<5; c t ng other cases. 3n on EanF vs. 'A, <85 &'"A 460 :2001;.

22

26

25

<0

<1

<2

<<

<4

<8

<>

<2

<6

<5

40

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7310.1 !ecem er 3=, 1<0=

N)E#S/N ? %/'+AN8, )N%., pla nt ff@appellant, vs. #E+AN(/ %/NS/#)!A(E! ')N)NG %/'+AN8, defendant@appellee. $ES/#&()/N 6A#!)*A$, J.: !epanto seeFs the recons derat on of the dec s on rendered on December 12, 15>>. %he mot on for recons derat on s based on t9o sets of grounds O the f rst set cons st ng of four pr nc pal grounds, and the second set cons st ng of f ve alternat ve grounds, as follo9s? $rincipal 2roundsR 1. %he court erred n overlooF ng and fa l ng to apply the proper la9 appl cable to the agency or management contract n =uest on, namely, Art cle 12<< of the Dld ' v l 'ode /Art cle 1520 of the ne90, by v rtue of 9h ch sa d agency 9as effect vely revoFed and term nated n 1548 9hen, as stated n paragraph 20 of the compla nt, ,defendant voluntar ly ... prevented pla nt ff from resum ng management and operat on of sa d m n ng propert es., 2. %he court erred n hold ng that paragraph $$ of the management contract /E1h b t '0 suspended the per od of sa d contract. <. %he court erred n revers ng the rul ng of the tr al -udge, based on 9ell@ settled -ur sprudence of th s &upreme 'ourt, that the management agreement 9as only suspended but not e1tended on account of the 9ar. 4. %he court erred n revers ng the f nd ng of the tr al -udge that N elson)s act on had prescr bed, but cons der ng only the f rst cla m and gnor ng the prescr pt b l ty of the other cla ms. Alternative 2roundsR 8. %he court erred n hold ng that the per od of suspens on of the contract on account of the 9ar lasted from 7ebruary 1542 to June 2>, 1546. >. Assum ng arguendo that N elson s ent tled to any rel ef, the court erred n a9ard ng as damages /a0 10R of the cash d v dends declared and pa d

n December, 1541I /b0 the management fee of +2,800.00 for the month of January, 1542I and /c0 the full contract pr ce for the e1tended per od of s 1ty months, s nce these damages 9ere ne ther demanded nor proved and, n any case, not allo9able under the general la9 of damages. 2. Assum ng arguendo that appellant s ent tled to any rel ef, the court erred n order ng appellee to ssue and del ver to appellant shares of stocF together 9 th fru ts thereof. 6. %he court erred n a9ard ng to appellant an undeterm ned amount of shares of stocF andMor cash, 9h ch a9ard cannot be ascerta ned and e1ecuted 9 thout further l t gat on. 5. %he court erred n render ng -udgment for attorney)s fees. (e are go ng to d9ell on these grounds n the order they are presented. 1. $n ts f rst pr nc pal ground !epanto cla ms that ts o9n counsel and th s 'ourt had overlooFed the real nature of the management contract entered nto by and bet9een !epanto and N elson, and the la9 that s appl cable on sa d contract. !epanto no9 asserts for the f rst t me and th s s done n a mot on for recons derat on @ that the management contract n =uest on s a contract of agency such that t has the r ght to revoFe and term nate the sa d contract, as t d d term nate the same, under the la9 of agency, and part cularly pursuant to Art cle 12<< of the Dld ' v l 'ode /Art cle 1520 of the Ne9 ' v l 'ode0. (e have taFen note that !epanto s advanc ng a ne9 theory. (e have carefully e1am ned the plead ngs f led by !epanto n the lo9er court, ts memorandum and ts br ef on appeal, and never d d t assert the theory that t has the r ght to term nate the management contract because that contract s one of agency 9h ch t could term nate at 9 ll. (h le t s true that n ts n nth and tenth spec al aff rmat ve defenses, n ts ans9er n the court belo9, !epanto pleaded that t had the r ght to term nate the management contract n =uest on, that plea of ts r ght to term nate 9as not based upon the ground that the relat on bet9een !epanto and N elson 9as that of pr nc pal and agent but upon the ground that N elson had allegedly not compl ed 9 th certa n terms of the management contract. $f !epanto had thought of cons der ng the management contract as one of agency t could have amended ts ans9er by stat ng e1actly ts pos t on. $t could have asserted ts theory of agency n ts memorandum for the lo9er court and n ts br ef on appeal. %h s, !epanto d d not do. $t s the rule, and the settled doctr ne of th s 'ourt, that a party cannot change h s theory on appeal O that s, that a party cannot ra se n the appellate court any =uest on of la9 or of fact that 9as not ra sed n the court belo9 or 9h ch 9as not 9 th n the ssue made by the part es n the r plead ngs /&ect on 15, "ule 45 of the old "ules of 'ourt, and also &ect on 16 of the ne9 "ules of 'ourtI Bautea vs. Magallon, !@20<48, November 26, 15>4I Northern Motors, $nc. vs. +r nce ! ne, !@1<664, 7ebruary 25, 15>0I Amer can

E1press 'o. vs. Nat v dad, 4> +h l. 202I Agonc llo vs. Jav er, <6 +h l. 424 and Mol na vs. &omes, 24 +h l 450. At any rate, even f 9e allo9 !epanto to assert ts ne9 theory at th s very late stage of the proceed ngs, th s 'ourt cannot susta n the same. !epanto contends that the management contract n =uest on /E1h b t '0 s one of agency because? /10 N elson 9as to manage and operate the m n ng propert es and m ll on behalf, and for the account, of !epantoI and /20 N elson 9as author Aed to represent !epanto n enter ng, on !epanto)s behalf, nto contracts for the h r ng of laborers, purchase of suppl es, and the sale and marFet ng of the ores m ned. All these, !epanto cla ms, sho9 that N elson 9as, by the terms of the contract, dest ned to e1ecute -ur d cal acts not on ts o9n behalf but on behalf of !epanto under the control of the Eoard of D rectors of !epanto ,at all t mes,. Bence !epanto cla ms that the contract s one of agency. !epanto then ma nta ns that an agency s revocable at the 9 ll of the pr nc pal /Art cle 12<< of the Dld ' v l 'ode0, regardless of any term or per od st pulated n the contract, and t 9as n pursuance of that r ght that !epanto term nated the contract n 1548 9hen t tooF over and assumed e1clus ve management of the 9orF prev ously entrusted to N elson under the contract. !epanto f nally ma nta ns that N elson as an agent s not ent tled to damages s nce the la9 g ves to the pr nc pal the r ght to term nate the agency at 9 ll. Eecause of !epanto)s ne9 theory (e cons der t necessary to determ ne the nature of the management contract O 9hether t s a contract of agency or a contract of lease of serv ces. $nc dentally, 9e have noted that the lo9er court, n the dec s on appealed from, cons dered the management contract as a contract of lease of serv ces. Art cle 1205 of the Dld ' v l 'ode, def n ng contract of agency, prov des? Ey the contract of agency, one person b nds h mself to render some serv ce or do someth ng for the account or at the re=uest of another. Art cle 1844, def n ng contract of lease of serv ce, prov des? $n a lease of 9orF or serv ces, one of the part es b nds h mself to maFe or construct someth ng or to render a serv ce to the other for a pr ce certa n. $n both agency and lease of serv ces one of the part es b nds h mself to render some serv ce to the other party. Agency, ho9ever, s d st ngu shed from lease of 9orF or serv ces n that the bas s of agency s representat on, 9h le n the lease of 9orF or serv ces the bas s s employment. %he lessor of serv ces does not represent h s employer, 9h le the agent represents h s pr nc pal. Manresa, n h s ,'ommentar os al 'od go ' v l EspaQol, /15<1, %omo $G, pp. <22@<2<0, po nts out that the element of representat on d st ngu shes agency from lease of serv ces, as follo9s?

Nuestro art. 1.205 como el art. 1.564 del 'od go de Napoleon y cuantos te1tos legales c tamos en lasconcordancias, e1presan claramente esta dea de la representac on, ,hacer alguna cosa por cuenta o encargo de otra, d ce nuestro 'od goI ,poder de hacer alguna cosa para el mandante o en su nombre, d ce el 'od go de Napoleon, y en tales palabras aparece v vo y lum noso el concepto y la teor a de la representac on, tan fecunda en ensenanAas, =ue a su sola luA es como se e1pl can las d ferenc as =ue separan el mandato del arrendam ento de serv c os, de los contratos nom nados, del conse-o y de la gest on de negoc os. En efecto, en el arrendam ento de serv c os al obl garse para su e-ecuc on, se traba-a, en verdad, para el dueno =ue remunera la labor, pero n se le representa n se obra en su nombre.... Dn the bas s of the nterpretat on of Art cle 1205 of the old ' v l 'ode, Art cle 16>6 of the ne9 ' v l 'ode has def ned the contract of agency n more e1pl c t terms, as follo9s? Ey the contract of agency a person b nds h mself to render some serv ce or to do someth ng in representation or on #ehalf of another, 9 th the consent or author ty of the latter. %here s another obv ous d st nct on bet9een agency and lease of serv ces. Agency s a preparatory contract, as agency ,does not stop 9 th the agency because the purpose s to enter nto other contracts., %he most character st c feature of an agency relat onsh p s the agent)s po9er to br ng about bus ness relat ons bet9een h s pr nc pal and th rd persons. ,%he agent s dest ned to e1ecute -ur d cal acts /creat on, mod f cat on or e1t nct on of relat ons 9 th th rd part es0. !ease of serv ces contemplate only mater al /non@-ur d cal0 acts., /"eyes and +uno, ,An Dutl ne of +h l pp ne ' v l !a9,, Col. C, p. 2220. $n the l ght of the nterpretat ons 9e have ment oned n the forego ng paragraphs let us no9 determ ne the nature of the management contract n =uest on. 3nder the contract, N elson had agreed, for a per od of f ve years, 9 th the r ght to rene9 for a l Fe per od, to e1plore, develop and operate the m n ng cla ms of !epanto, and to m ne, or m ne and m ll, such pay ore as may be found there n and to marFet the metall c products recovered therefrom 9h ch may prove to be marFetable, as 9ell as to render for !epanto other serv ces spec f ed n the contract. (e gather from the contract that the 9orF undertaFen by N elson 9as to taFe complete charge sub-ect at all t mes to the general control of the Eoard of D rectors of !epanto, of the e1plorat on and development of the m n ng cla ms, of the h r ng of a suff c ent and competent staff and of suff c ent and capable laborers, of the prospect ng and development of the m ne, of the erect on and operat on of the m ll, and of the benef cat on and marFet ng of the m nerals found on the m n ng propert esI and n carry ng out sa d obl gat on N elson should proceed d l gently and n accordance 9 th the best m n ng pract ce. $n connect on 9 th ts 9orF N elson 9as to

subm t reports, maps, plans and recommendat ons 9 th respect to the operat on and development of the m n ng propert es, maFe recommendat ons and plans on the erect on or enlargement of any e1 st ng m ll, d spatch m n ng eng neers and techn c ans to the m n ng propert es as from t me to t me may reasonably be re=u red to nvest gate and maFe recommendat ons 9 thout cost or e1pense to !epanto. N elson 9as also to ,act as purchas ng agent of suppl es, e=u pment and other necessary purchases by !epanto, prov ded, ho9ever, that no purchase shall be made 9 thout the pr or approval of !epantoI and prov ded further, that no comm ss on shall be cla med or reta ned by N elson on such purchase,I and ,to subm t all re=u s t on for suppl es, all constr cts and arrangement 9 th eng neers, and staff and all matters re=u r ng the e1pend tures of money, present or future, for pr or approval by !epantoI and also to maFe contracts sub-ect to the pr or approve of !epanto for the sale and marFet ng of the m nerals m ned from sa d propert es, 9hen sa d products are n a su table cond t on for marFet ng.,1 $t thus appears that the pr nc pal and paramount undertaF ng of N elson under the management contract 9as the operat on and development of the m ne and the operat on of the m ll. All the other undertaF ngs ment oned n the contract are necessary or nc dental to the pr nc pal undertaF ng O these other undertaF ngs be ng dependent upon the 9orF on the development of the m ne and the operat on of the m ll. $n the performance of th s pr nc pal undertaF ng N elson 9as not n any 9ay e1ecut ng -ur d cal acts for !epanto, dest ned to create, mod fy or e1t ngu sh bus ness relat ons bet9een !epanto and th rd persons. $n other 9ords, n perform ng ts pr nc pal undertaF ng N elson 9as not act ng as an agent of !epanto, n the sense that the term agent s nterpreted under the la9 of agency, but as one 9ho 9as perform ng mater al acts for an employer, for a compensat on. $t s true that the management contract prov des that N elson 9ould also act as purchas ng agent of suppl es and enter nto contracts regard ng the sale of m neral, but the contract also prov des that N elson could not maFe any purchase, or sell the m nerals, 9 thout the pr or approval of !epanto. $t s clear, therefore, that even n these cases N elson could not e1ecute -ur d cal acts 9h ch 9ould b nd !epanto 9 thout f rst secur ng the approval of !epanto. N elson, then, 9as to act only as an ntermed ary, not as an agent. !epanto contends that the management contract n =uest on be ng one of agency t had the r ght to term nate the contract at 9 ll pursuant to the prov s on of Art cle 12<< of the old ' v l 'ode. (e f nd, ho9ever, a prov so n the management contract 9h ch m l tates aga nst th s stand of !epanto. +aragraph G$ of the contract prov des? Eoth part es to th s agreement fully recogn Ae that the terms of th s Agreement are made poss ble only because of the fa th or conf dence that the Dff c als of each company have n the otherI therefore, n order to

assure that such conf dence and fa th shall ab de and cont nue, N$E!&DN agrees that !E+AN%D may cancel th s Agreement at any t me upon n nety /500 days 9r tten not ce, n the event that N$E!&DN for any reason 9hatsoever, e1cept acts of #od, str Fe and other causes beyond ts control, shall cease to prosecute the operat on and development of the propert es here n descr bed, n good fa th and n accordance 9 th approved m n ng pract ce. $t s thus seen, from the above@=uoted prov s on of paragraph G$ of the management contract, that !epanto could not term nate the agreement at 9 ll. !epanto could term nate or cancel the agreement by g v ng not ce of term nat on n nety days n advance only n the event that N elson should prosecute n bad fa th and not n accordance 9 th approved m n ng pract ce the operat on and development of the m n ng propert es of !epanto. !epanto could not term nate the agreement f N elson should cease to prosecute the operat on and development of the m n ng propert es by reason of acts of #od, str Fe and other causes beyond the control of N elson. %he phrase ,Eoth part es to th s agreement fully recogn Ae that the terms of th s agreement are made poss ble only because of the fa th and conf dence of the off c als of each company have n the other, n paragraph G$ of the management contract does not =ual fy the relat on bet9een !epanto and N elson as that of pr nc pal and agent based on trust and conf dence, such that the contractual relat on may be term nated by the pr nc pal at any t me that the pr nc pal loses trust and conf dence n the agent. "ather, that phrase s mply mpl es the c rcumstance that brought about the e1ecut on of the management contract. %hus, n the annual report for 15<>2, subm tted by Mr. '. A. De9 t, +res dent of !epanto, to ts stocFholders, under date of March 18, 15<2, 9e read the follo9 ng? %o the stocFholders 111 111 111

%he ncorporat on of our 'ompany 9as effected as a result of negot at ons 9 th Messrs. N elson N 'o., $nc., and an offer by these gentlemen to Messrs. '. $. 'ooFes and C. !. !edn cFy, dated August 11, 15<>, read ng as follo9s? Messrs. 'ooFes and !edn cFy, +resent "e? ManFayan 'opper M nes #EN%!EMEN?

After an e1am nat on of your property by our eng neers, 9e have dec ded to offer as 9e hereby offer to under9r te the ent re ssue of stocF of a corporat on to be formed for the purpose of taF ng over sa d propert es, sa d corporat on to have an author Aed cap tal of +1,280,000.00, of 9h ch +200,000.00 9 ll be ssued n escro9 to the cla m@o9ners n e1change for the r cla ms, and the balance of +1,080,000.00 9e 9 ll sell to the publ c at par or taFe ourselves. %he arrangement 9 ll be under the follo9 ng cond t ons? 1. %he subscr pt ons for cash shall be payable 80R at t me of subscr pt on and the balance sub-ect to the call of the Eoard of D rectors of the proposed corporat on. 2. (e shall have an under9r t ng and broFerage comm ss on of 10R of the +1,080,000.00 to be sold for cash to the publ c, sa d comm ss on to be payable from the f rst payment of 80R on each subscr pt on. <. (e 9 ll bear the cost of prepar ng and ma l ng any prospectus that may be re=u red, but no such prospectus 9 ll be sent out unt l the te1t thereof has been f rst approved by the Eoard of D rectors of the proposed corporat on. 4. %hat after the organ Aat on of the corporat on, all operat ng contract be entered nto bet9een ourselves and sa d corporat on, under the terms 9h ch the property 9 ll be developed and m ned and a m ll erected, under our superv s on, our compensat on to be +2,000.00 per month unt l the property s put on a prof table bas s and +2,800.00 per month plus 10R of the net prof ts for a per od of f ve years thereafter. 8. %hat 9e shall have the opt on to rene9 sa d operat ng contract for an add t onal per od of f ve years, on the same bas s as the or g nal contract, upon the e1p rat on thereof. $t s understood that the development and m n ng operat ons on sa d property, and the erect on of the m ll thereon, and the e1pend tures therefor shall be sub-ect to the general control of the Eoard of D rectors of the proposed corporat on, and, n case you accept th s propos t on, that a deta led operat ng contract 9 ll be entered nto, cover ng the relat onsh ps bet9een the part es. Hours very truly, /&gd.0 !. ". N elson +ursuant to the prov s ons of paragraph 2 of th s offer, Messrs. N elson N 'o., tooF subscr pt ons for Dne M ll on 7 fty %housand +esos /+1,080,000.000 n shares of our 'ompany and the r under9r t ng and broFerage comm ss on has been pa d. More than f fty per cent of these subscr pt ons have been pa d to the 'ompany n cash. %he cla m o9ners

have transferred the r cla ms to the 'orporat on, but the +200,000.00 n stocF 9h ch they are to rece ve therefor, s as yet held n escro9. $mmed ately upon the format on of the 'orporat on Messrs. N elson N 'o., assumed the Management of the property under the control of the Eoard of D rectors. A mod f cat on n the Management 'ontract 9as made 9 th the consent of all the then stocFholders, n v rtue of 9h ch the compensat on of Messrs. N elson N 'o., 9as ncreased to +2,800.00 per month 9hen m ll construct on began. %he formal Management 'ontract 9as not entered nto unt l January <0, 15<2. 111 111 111 Man la, March 18, 15<2 /&gd.0 '. A. De( tt +res dent (e can gather from the forego ng statements n the annual report for 15<>, and from the prov s on of paragraph G$ of the Management contract, that the employment by !epanto of N elson to operate and manage ts m nes 9as pr nc pally n cons derat on of the Fno9@ho9 and techn cal serv ces that N elson offered !epanto. %he contract thus entered nto pursuant to the offer made by N elson and accepted by !epanto 9as a ,deta led operat ng contract,. $t 9as not a contract of agency. No9here n the record s t sho9n that !epanto cons dered N elson as ts agent and that !epanto term nated the management contract because t had lost ts trust and conf dence n N elson. %he content on of !epanto that t had term nated the management contract n 1548, follo9 ng the l berat on of the m nes from Japanese control, because the relat on bet9een t and N elson 9as one of agency and as such t could term nate the agency at 9 ll, s, therefore, untenable. Dn the other hand, t can be sa d that, n assert ng that t had term nated or cancelled the management contract n 1548, !epanto had thereby v olated the e1press terms of the management contract. %he management contract 9as rene9ed to last unt l January <1, 1542, so that the contract had yet almost t9o years to go O upon the l berat on of the m nes n 1548. %here s no sho9 ng that N elson had ceased to prosecute the operat on and development of the m nes n good fa th and n accordance 9 th approved m n ng pract ce 9h ch 9ould 9arrant the term nat on of the contract upon n nety days 9r tten not ce. $n fact there 9as no such 9r tten not ce of term nat on. $t s an adm tted fact that N elson ceased to operate and develop the m nes because of the 9ar O a cause beyond the control of N elson. $ndeed, f the management contract n =uest on 9as ntended to create a relat onsh p of pr nc pal and agent bet9een !epanto and N elson, paragraph G$ of the contract should not have been nserted because, as prov ded n Art cle 12<< of the old ' v l 'ode, agency s essent ally revocable at the 9 ll of the pr nc pal O that means, 9 th or 9 thout cause. Eut prec sely sa d paragraph G$ 9as

nserted n the management contract to prov de for the cause for ts revocat on. %he prov s on of paragraph G$ must be g ven effect. $n the construct on of an nstrument 9here there are several prov s ons or part culars, such a construct on s, f poss ble, to be adopted as 9 ll g ve effect to all,< and f some st pulat on of any contract should adm t of several mean ngs, t shall be understood as bear ng that mport 9h ch s most ade=uate to render t effectual.4 $t s Dur cons dered v e9 that by e1press st pulat on of the part es, the management contract n =uest on s not revocable at the 9 ll of !epanto. (e rule that th s management contract s not a contract of agency as def ned n Art cle 1205 of the old ' v l 'ode, but a contract of lease of serv ces as def ned n Art cle 1844 of the same 'ode. %h s contract can not be un laterally revoFed by !epanto. %he f rst ground of the mot on for recons derat on should, therefore, be brushed as de. 2. $n the second, th rd and f fth grounds of ts mot on for recons derat on, !epanto ma nta ns that th s 'ourt erred, n hold ng that paragraph 11 of the management contract suspended the per od of sa d contract, n hold ng that the agreement 9as not only suspended but 9as e1tended on account of the 9ar, and n hold ng that the per od of suspens on on account of the 9ar lasted from 7ebruary, 1542 to June 2>, 1546. (e are go ng to d scuss these three grounds together because they are nterrelated. $n our dec s on 9e have d9elt length ly on the po nts that the management contract 9as suspended because of the 9ar, and that the per od of the contract 9as e1tended for a per od e=u valent to the t me 9hen N elson 9as unable to perform the 9orF of m n ng and m ll ng because of the adverse effects of the 9ar on the 9orF of m n ng and m ll ng. $t s the content on of !epanto that the happen ng of those events, and the effects of those events, s mply suspended the performance of the obl gat ons by e ther party n the contract, but d d not suspend the per od of the contract, much less e1tended the per od of the contract. (e have consc ent ously cons dered the arguments of !epanto n support of these three grounds, but (e are not persuaded to recons der the rul ngs that (e made n Dur dec s on. (e 9ant to say a l ttle more on these po nts, ho9ever. +aragraph $$ of the management contract prov des as follo9s? $n the event of nundat on, flood ng of the m ne, typhoon, earth=uaFe or any other force ma-eure, 9ar, nsurrect on, c v l commot on, organ Aed

str Fe, r ot, f re, n-ury to the mach nery or other event or cause reasonably beyond the control of N$E!&DN and 9h ch adversely affects the 9orF of m n ng and m ll ngI N$E!&DN shall report such fact to !E+AN%D and 9 thout l ab l ty or breach of the terms of th s Agreement, the same shall rema n n suspense, 9holly or part ally dur ng the terms of such nab l ty. /Emphas s suppl ed0 A read ng of the above@=uoted paragraph $$ cannot but convey the dea that upon the happen ng of any of the events enumerated there n, 9h ch adversely affects the 9orF of m n ng and m ll ng, the agreement s deemed suspended for as long as N elson s unable to perform ts 9orF of m n ng and m ll ng because of the adverse effects of the happen ng of the event on the 9orF of m n ng and m ll ng. Dur ng the per od 9hen the adverse effects on the 9orF of m n ng and m ll ng e1 st, ne ther party n the contract 9ould be held l able for non@compl ance of ts obl gat on under the contract. $n other 9ords, the operat on of the contract s suspended for as long as the adverse effects of the happen ng of any of those events had mpeded or obstructed the 9orF of m n ng and m ll ng. An analys s of the phraseology of the above@=uoted paragraph $$ of the management contract read ly supports the conclus on that t s the agreement, or the contract, that s suspended. %he phrase ,the same, can refer to no other than the term ,Agreement, 9h ch mmed ately precedes t. %he ,Agreement, may be 9holly or part ally suspended, and th s s tuat on 9 ll depend on 9hether the event 9holly or part ally affected adversely the 9orF of m n ng and m ll ng. $n the nstant case, the 9ar had adversely affected O and 9holly at that O the 9orF of m n ng and m ll ng. (e have clearly stated n Dur dec s on the c rcumstances brought about by the 9ar 9h ch caused the 9hole or total suspens on of the agreement or of the management contract. !E+AN%D tself adm ts that the management contract 9as suspended. (e =uote from the br ef of !E+AN%D? +robably, 9hat N elson meant 9as, t 9as prevented by !epanto to assume aga n the management of the m ne n 1548, at the prec se t me 9hen defendant 9as at the fever sh phase of rehab l tat on and although the contract had already been suspended. /!epanto)s Er ef, p. 50. ... t 9as mposs ble, as a result of the destruct on of the m ne, for the pla nt ff to manage and operate the same and because, as prov ded n the agreement, the contract 9as suspended by reason of the 9ar /!epanto)s Er ef, pp. 5@100. 'lause $$, by ts terms, s clear that the contract s suspended n case fortu tous event or force ma-eure, such as 9ar, adversely affects the 9orF of m n ng and m ll ng. /!epanto)s Er ef, p. 450. !epanto s correct 9hen t sa d that the obl gat ons under the contract 9ere suspended upon the happen ng of any of the events enumerated n

paragraph $$ of the management contract. $ndeed, those obl gat ons 9ere suspended because the contract tself 9as suspended. (hen 9e talF of a contract that has been suspended 9e certa nly mean that the contract temporar ly ceased to be operat ve, and the contract becomes operat ve aga n upon the happen ng of a cond t on O or 9hen a s tuat on obta ns O 9h ch 9arrants the term nat on of the suspens on of the contract. $n Dur dec s on (e po nted out that the agreement n the management contract 9ould be suspended 9hen t9o cond t ons concur, namely? /10 the happen ng of the event const tut ng a force ma"eure that 9as reasonably beyond the control of N elson, and /20 that the event const tut ng the force ma-eure adversely affected the 9orF of m n ng and m ll ng. %he suspens on, therefore, 9ould last not only 9h le the event const tut ng the force ma-eure cont nued to occur but also for as long as the adverse effects of the force ma-eure on the 9orF of m n ng and m ll ng had not been el m nated. 3nder the management contract the happen ng alone of the event const tut ng the force ma-eure 9h ch d d not affect adversely the 9orF of m n ng and m ll ng 9ould not suspend the per od of the contract. $t s only 9hen the t9o cond t ons concur that the per od of the agreement s suspended. $t s not den ed that because of the 9ar, n 7ebruary 1542, the m ne, the or g nal m ll, the or g nal po9er plant, the suppl es and e=u pment, and all nstallat ons at the ManFayan m nes of !epanto, 9ere destroyed upon order of the 3n ted &tates Army, to prevent the r ut l Aat on by the enemy. $t s not den ed that for the durat on of the 9ar N elson could not undertaFe the 9orF of m n ng and m ll ng. (hen the m nes 9ere l berated from the enemy n August, 1548, the cond t on of the m nes, the m ll, the po9er plant and other nstallat ons, 9as not the same as n 7ebruary 1542 9hen they 9ere ordered destroyed by the 3& army. 'erta nly, upon the l berat on of the m nes from the enemy, the 9orF of m n ng and m ll ng could not be undertaFen by N elson under the same favorable c rcumstances that obta ned before 7ebruary 1542. %he 9orF of m n ng and m ll ng, as undertaFen by N elson n January, 1542, could not be resumed by N elson soon after l berat on because of the adverse effects of the 9ar, and th s s tuat on cont nued unt l June of 1546. Bence, the suspens on of the management contract d d not end upon the l berat on of the m nes n August, 1548. %he m nes and the m ll and the nstallat ons, la d 9aste by the ravages of 9ar, had to be reconstructed and rehab l tated, and t can be sa d that t 9as only on June 2>, 1546 that the adverse effects of the 9ar on the 9orF of m n ng and m ll ng had ended, because t 9as on that date that the operat on of the m nes and the m ll 9as resumed. %he per od of suspens on should, therefore, be recFoned from 7ebruary 1542 unt l June 2>, 1546, because t 9as dur ng th s per od that the 9ar and the adverse effects of the 9ar on the 9orF of m n ng and m ll ng had lasted. %he m nes and the nstallat ons had to be rehab l tated because of the adverse effects of the 9ar. %he 9orF of rehab l tat on started soon after the l berat on of the m nes n August, 1548 and lasted unt l June 2>, 1546 9hen, as stated n !epanto)s annual report to ts

stocFholders for the year 1546, ,June 26, 1546 marFed the off c al return to operat on of th s company at ts propert es at ManFayan, Mounta n +rov nce, +h l pp nes, /E1h. 7@10. !epanto 9ould argue that f the management contract 9as suspended at all the suspens on should cease n August of 1548, contend ng that the effects of the 9ar should cease upon the l berat on of the m nes from the enemy. %h s content on cannot be susta ned, because the per od of rehab l tat on 9as st ll a per od 9hen the phys cal effects of the 9ar O the destruct on of the m nes and of all the m n ng nstallat ons O adversely affected, and made mposs ble, the 9orF of m n ng and m ll ng. Bence, the per od of the reconstruct on and rehab l tat on of the m nes and the nstallat ons must be counted as part of the per od of suspens on of the contract. !epanto cla ms that t 9ould not be unfa r to end the per od of suspens on upon the l berat on of the m nes because soon after the l berat on of the m nes N elson ns sted to resume the management 9orF, and that N elson 9as under obl gat on to reconstruct the m ll n the same 9ay that t 9as under obl gat on to construct the m ll n 15<2. %h s content on s untenable. $t s true that N elson ns sted to resume ts management 9orF after l berat on, but th s 9as only for the purpose of restor ng the m nes, the m ll, and other nstallat ons to the r operat ng and produc ng cond t on as of 7ebruary 1542 9hen they 9ere ordered destroyed. $t s not sho9n by any ev dence n the record, that N elson had agreed, or 9ould have agreed, that the per od of suspens on of the contract 9ould end upon the l berat on of the m nes. %h s s so because, as found by th s 'ourt, the ntent on of the part es n the management contract, and as understood by them, the management contract 9as suspended for as long as the adverse effects of the force ma-eure on the 9orF of m n ng and m ll ng had not been removed, and the contract 9ould be e1tended for as long as t 9as suspended. 3nder the management contract N elson had the obl gat on to erect and operate the m ll, but not to erect or reconstruct the m ll n case of ts destruct on by force ma"eure. $t s the cons dered v e9 of th s court that t 9ould not be fa r to N elson to cons der the suspens on of the contract as term nated upon the l berat on of the m nes because then N elson 9ould be placed n a s tuat on 9hereby t 9ould have to suffer the adverse effects of the 9ar on the 9orF of m n ng and m ll ng. %he ev dence sho9s that as of January 1542 the operat on of the m nes under the management of N elson 9as already under benef c al cond t ons, so much so that d v dends 9ere already declared by !epanto for the years 15<5, 1540 and 1541. %o maFe the management contract mmed ately operat ve after the l berat on of the m nes from the Japanese, at the t me 9hen the m nes and all ts nstallat ons 9ere la d 9aste as a result of the 9ar, 9ould be to place N elson n a s tuat on 9hereby t 9ould lose all the benef ts of 9hat t had accompl shed n plac ng the !epanto m nes n prof table operat on before the outbreaF of the 9ar n December, 1541. %he record sho9s that N elson

started ts management operat on 9ay bacF n 15<>, even before the management contract 9as entered nto. As early as August 15<> N elson negot ated 9 th Messrs. '. $. 'ooFes and C. !. !edn cFy for the operat on of the ManFayan m nes and t 9as the result of those negot at ons that !epanto 9as ncorporatedI that t 9as N elson that helped to cap tal Ae !epanto, and that after the format on of the corporat on /!epanto0 N elson mmed ately assumed the management of the m n ng propert es of !epanto. $t 9as not unt l January <0, 15<2 9hen the management contract n =uest on 9as entered nto bet9een !epanto and N elson /E1h b t A0. A contract for the management and operat on of m nes calls for a speculat ve and r sFy venture on the part of the manager@operator. %he manager@operator nvests ts techn cal Fno9@ho9, undertaFes bacF@ breaF ng efforts and tremendous spade@9orF, so to say, n the f rst years of ts management and operat on of the m nes, n the e1pectat on that the nvestment and the efforts employed m ght be re9arded later 9 th success. %h s e1pected success may never come. %h s had happened n the very case of the ManFayan m nes 9here, as recounted by Mr. !edn cFy of !epanto, var ous persons and ent t es of d fferent nat onal t es, nclud ng !edn cFy h mself, nvested all the r money and fa led. %he manager@operator may not str Fe suff c ent ore n the f rst, second, th rd, or fourth year of the management contract, or he may not str Fe ore even unt l the end of the f fth year. 3nless the manager@operator str Fes suff c ent =uant ty of ore he cannot e1pect prof ts or re9ard for h s nvestment and efforts. $n the case of N elson, ts corps of competent eng neers, geolog sts, and techn c ans begun 9orF ng on the ManFayan m nes of !epanto s nce the latter part of 15<>, and cont nued the r 9orF 9 thout success and prof t through 15<2, 15<6, and the earl er part of 15<5. $t 9as only n December of 15<5 9hen the efforts of N elson started to be re9arded 9hen !epanto real Aed prof ts and the f rst d v dends 9ere declared. 7rom that t me on N elson could e1pect prof t to come to t O as n fact !epanto declared d v dends for 1540 and 1541 O f the development and operat on of the m nes and the m ll 9ould cont nue unhampered. %he operat on, and the e1pected prof ts, ho9ever, 9ould st ll be sub-ect to haAards due to the occurrence of fortu tous events, f res, earth=uaFes, str Fes, 9ar, etc., const tut ng force ma-eure, 9h ch 9ould result n the destruct on of the m nes and the m ll. Dne of these d verse causes, or one after the other, may consume the 9hole per od of the contract, and f t should happen that 9ay the manager@operator 9ould reap no prof t to compensate for the f rst years of spade@9orF and nvestment of efforts and Fno9@ho9. Bence, n fa rness to the manager@ operator, so that he may not be depr ved of the benef ts of the 9orF he had accompl shed, the force ma-eure clause s ncorporated as a standard clause n contracts for the management and operat on of m nes. %he nature of the contract for the management and operat on of m nes -ust f es the nterpretat on of the force ma-eure clause, that a per od e=ual to the per od of suspens on due to force ma-eure should be added to the or g nal term of the contract by 9ay of an e1tens on. (e, therefore,

re terate the rul ng n Dur dec s on that the management contract n the nstant case 9as suspended from 7ebruary, 1542 to June 2>, 1546, and that from the latter date the contract had yet f ve years to go. <. $n the fourth ground of ts mot on for recons derat on, !epanto ma nta ns that th s 'ourt erred n revers ng the f nd ng of the tr al court that N elson)s act on has prescr bed, by cons der ng only the f rst cla m and gnor ng the prescr pt b l ty of the other cla ms. %h s ground of the mot on for recons derat on has no mer t. $n Dur dec s on (e stated that the cla ms of N elson are based on a 9r tten document, and, as such, the cause of act on prescr bes n ten years.8 $nasmuch as there are d fferent cla ms 9h ch accrued on d fferent dates the prescr pt ve per ods for all the cla ms are not the same. %he cla ms of N elson that have been a9arded by th s 'ourt are tem Aed n the d spos t ve part of the dec s on. %he first tem of the a9ards n Dur dec s on refers to N elson)s compensat on n the sum of +12,800.00, 9h ch s e=u valent to 10R of the cash d v dends declared by !epanto n December, 1541. As 9e have stated n Dur dec s on, th s cla m accrued on December <1, 1541, and the r ght to commence an act on thereon started on January 1, 1542. (e declared that the act on on th s cla m d d not prescr be although the compla nt 9as f led on 7ebruary >, 1586 O or after a lapse of 1> years, 1 month and 8 days O because of the operat on of the morator um la9. (e declared that under the appl cable dec s ons of th s 'ourt> the morator um per od of 6 years, 2 months and 6 days should be deducted from the per od that had elapsed s nce the accrual of the cause of act on to the date of the f l ng of the compla nt, so that there s a per od of less than 6 years to be recFoned for the purpose of prescr pt on. %h s cla m of N elson s covered by E1ecut ve Drder No. <2, ssued on March 10, 1548, 9h ch prov des as follo9s? Enforcement of payments of all de#ts and other monetary o#ligations payable n the +h l pp nes, e1cept debts and other monetary obl gat ons entered nto n any area after declarat on by +res dent al +roclamat on that such area has been freed from enemy occupat on and control, s temporar ly suspended pend ng act on by the 'ommon9ealth #overnment. /41 D.#. 8>@82I Emphas s suppl ed0 E1ecut ve Drder No. <2 covered all debts and monetary obl gat on contracted before the 9ar /or before December 6, 15410 and those contracted subse=uent to December 6, 1541 and dur ng the Japanese occupat on. "epubl c Act No. <42, approved on July 2>, 1546, l fted the morator um prov ded for n E1ecut ve Drder No. <2 on pre@9ar /or pre@ December 6, 15410 debts of debtors 9ho had not f led 9ar damage cla ms

9 th the 3n ted &tates (ar Damage 'omm ss on. $n other 9ords, after the effect v ty of "epubl c Act No. <42, the debt morator um 9as l m ted? /10 to debts and other monetary obl gat ons 9h ch 9ere contracted after December 6, 1541 and dur ng the Japanese occupat on, and /20 to those pre@9ar /or pre@December 6, 15410 debts and other monetary obl gat ons 9here the debtors f led 9ar damage cla ms. %hat 9as the s tuat on up to May 16, 158< 9hen th s 'ourt declared "epubl c Act No. <42 unconst tut onal.2 $t has been held by th s 'ourt, ho9ever, that from March 10, 1548 9hen E1ecut ve Drder No. <2 9as ssued, to May 16, 158< 9hen "epubl c Act No. <42 9as declared unconst tut onal O or a per od of 6 years, 2 months and 6 days O the debt morator um 9as n force, and had the effect of suspend ng the per od of prescr pt on.6 !epanto s 9rong 9hen n ts mot on for recons derat on t cla ms that the morator um prov ded for n E1ecut ve Drder No. <2 9as cont nued by "epubl c Act No. <42 ,only 9 th respect to debtors of pre@9ar obl gat ons or those ncurred pr or to December 6, 1541,, and that ,the morator um 9as lifted and terminated 9 th respect to obl gat ons ncurred after December 6, 1541.,5 %h s 'ourt has held that "epubl c Act No. <42 does not apply to debts contracted dur ng the 9ar and d d not l ft the morator um n relat ons thereto.10 $n the case of Abraham, et al. vs. $ntestate Estate of Juan '. Hsmael, et al., !@1>241, Jan. <1, 15>2, th s 'ourt sa d? "espondents, ho9ever, contend that "epubl c Act No. <42, 9h ch tooF effect on July 2>, 1546, l fted the morator um on debts contracted dur ng the Japanese occupat on. %he court has already held that "epubl c Act No. <42 d d not l ft the morator um on debts contracted dur ng the 9ar /3y vs. *ala9 *at gbaF, #.". No. !@16<0, Dec. <1, 15450 but mod f ed E1ecut ve Drder No. <2 as to pre@9ar debts, maF ng the protect on ava lable only to debtors 9ho had 9ar damage cla ms /& son v. M rasol, #.". No. !@4211, Dct. <, 15820. (e therefore re terate the rul ng n Dur dec s on that the cla m nvolved n the f rst tem a9arded to N elson had not prescr bed. (hat 9e have stated here n regard ng the non@prescr pt on of the cause of act on of the cla m nvolved n the f rst tem n the a9ard also holds true 9 th respect to the second tem n the a9ard, 9h ch refers to N elson)s cla m for management fee of +2,800.00 for January, 1542. !epanto adm ts that th s second tem, l Fe the f rst, s a monetary obl gat on. %he r ght of act on of N elson regard ng th s cla m accrued on January <1, 1542. As regards tems <, 4, 8, > and 2 n the a9ards n the dec s on, the morator um la9 s not appl cable. %hat s the reason 9hy n Dur dec s on (e d d not d scuss the =uest on of prescr pt on regard ng these tems. %he cla ms of N elson nvolved n these tems are based on the management contract, and N elson)s cause of act on regard ng these cla ms prescr bes

n ten years. 'orollary to Dur rul ng that the management contract 9as suspended from 7ebruary, 1542 unt l June 2>, 1546, and that the contract 9as e1tended for f ve years from June 2>, 1546, the r ght of act on of N elson to cla m for 9hat s due to t dur ng that per od of e1tens on accrued dur ng the per od from June 2>, 1546 t ll the end of the f ve@year e1tens on per od or unt l June 2>, 158<. And so, even f (e recFon June 2>, 1546 as the start ng date of the ten@year per od n connect on 9 th the prescr pt b l ty of the cla ms nvolved n tems <, 4, 8, > and 2 of the a9ards n the dec s on, t s obv ous that 9hen the compla nt 9as f led on 7ebruary >, 1586 the ten@year prescr pt ve per od had not yet lapsed. $n Dur dec s on (e have also ruled that the r ght of act on of N elson aga nst !epanto had not prescr bed because of the arb trat on clause n the Management contract. (e are sat sf ed that there s ev dence that N elson had asFed for arb trat on, and an arb trat on comm ttee had been const tuted. %he arb trat on comm ttee, ho9ever, fa led to br ng about any settlement of the d fferences bet9een N elson and !epanto. Dn June 28, 1582 counsel for !epanto def n tely adv sed N elson that they 9ere not enterta n ng any cla m of N elson. %he compla nt n th s case 9as f led on 7ebruary >, 1586. 4. $n the s 1th ground of ts mot on for recons derat on, !epanto ma nta ns that th s 'ourt ,erred n a9ard ng as damages /a0 10R of the cash d v dends declared and pa d n December, 1541I /b0 the management fee of +2,800.00 for the month of January 1542I and /c0 the full contract pr ce for the e1tended per od of >0 months, s nce the damages 9ere never demanded nor proved and, n any case, not allo9able under the general la9 on damages., (e have stated n Dur dec s on that the or g nal agreement n the management contract regard ng the compensat on of N elson 9as mod f ed, such that nstead of rece v ng a monthly compensat on of +2,800.00 plus 10R of the net prof ts from the operat on of the propert es for the preced ng month,11 N elson 9ould rece ve a compensat on of +2,800.00 a month, plus /10 10R of the d v dends declared and pa d, 9hen and as pa d, dur ng the per od of the contract, and at the end of each year, /20 10R of any deplet on reserve that may be set up, and /<0 10R of any amount e1pended dur ng the year out of surplus earn ngs for cap tal account. $t s sho9n that n December, 1541, cash d v dends amount ng to +128,000.00 9as declared by !epanto.12 N elson, therefore, should rece ve the e=u valent of 10R of th s amount, or the sum of +12,800.00. (e have found that th s amount 9as not pa d to N elson. $n ts mot on for recons derat on, !epanto nserted a photograph c copy of page 122 of ts cash d sbursement booF, allegedly for 1541, n an effort to sho9 that th s amount of +12,800.00 had been pa d to N elson. $t appears, ho9ever, n th s photograph c copy of page 122 of the cash d sbursement

booF that the sum of +12,800.00 9as entered on Dctober 25 as ,surplus aMc N elson N 'o. $nc., %he entry does not maFe any reference to d v dends or part c pat on of N elson n the prof ts. Dn the other hand, n the photograph c copy of page 65 of the 1541 cash d sbursement booF, also attached to the mot on for recons derat on, there s an entry for +12,800.00 on Apr l 2<, 1541 9h ch states ,Accts. +ay. +art c p. N elson N 'o. $nc., %h s entry for Apr l 2<, 1541 may really be the part c pat on of N elson n the prof ts based on d v dends declared n Apr l 1541 as sho9n n E1h b t !. Eut n the same E1h b t ! t s not stated that any d v dend 9as declared n Dctober 1541. Dn the contrary t s stated n E1h b t ! that d v dends 9ere declared n December 1541. (e cannot enterta n th s p ece of ev dence for several reasons? /10 because th s ev dence 9as not presented dur ng the tr al n the court belo9I /20 there s no sho9 ng that th s p ece of ev dence s ne9ly d scovered and that !epanto 9as not n possess on of sa d ev dence 9hen th s case 9as be ng tr ed n the court belo9I and /<0 accord ng to E1h b t ! cash d v dends of +128,000.00 9ere declared n December, 1541, and so the sum of +12,800.00 9h ch appears to have been pa d to N elson n Dctober 1541 could not be payment of the e=u valent of 10R of the cash d v dends that 9ere later declared n December, 1541. As regards the management fee of N elson correspond ng to January, 1542, n the sum of +2,800.00, (e have also found that N elson s ent tled to be pa d th s amount, and that th s amount 9as not pa d by !epanto to N elson. (hereas, !epanto 9as able to prove that t had pa d the management fees of N elson for November and December, 1541, 1< t 9as not able to present any ev dence to sho9 that the management fee of +2,800.00 for January, 1542 had been pa d. $t hav ng been declared n Dur dec s on, as 9ell as n th s resolut on, that the management contract had been e1tended for 8 years, or s 1ty months, from June 22, 1546 to June 2>, 158<, and that the cause of act on of N elson to cla m for ts compensat on dur ng that per od of e1tens on had not prescr bed, t follo9s that N elson should be a9arded the management fees dur ng the 9hole per od of e1tens on, plus the 10R of the value of the d v dends declared dur ng the sa d per od of e1tens on, the 10R of the deplet on reserve that 9as set up, and the 10R of any amount e1pended out of surplus earn ngs for cap tal account. 8. $n the seventh ground of ts mot on for recons derat on, !epanto ma nta ns that th s 'ourt erred n order ng !epanto to ssue and del ver to N elson shares of stocF together 9 th fru ts thereof. $n Dur dec s on, (e declared that pursuant to the mod f ed agreement regard ng the compensat on of N elson 9h ch prov des, among others, that N elson 9ould rece ve 10R of any d v dends declared and pa d, 9hen and as pa d, N elson should be pa d 10R of the stocF d v dends declared by !epanto dur ng the per od of e1tens on of the contract.

$t s not den ed that on November 26, 1545, !epanto declared stocF d v dends 9orth +1,000,000.00I and on August 22, 1580, t declared stocF d v dends 9orth +2,000,000.000. $n other 9ords, dur ng the per od of e1tens on !epanto had declared stocF d v dends 9orth +<,000,000.00. (e held n Dur dec s on that N elson s ent tled to rece ve l0R of the stocF d v dends declared, or shares of stocF 9orth +<00,000.00 at the par value of +0.10 per share. (e ordered !epanto to ssue and del ver to N elson those shares of stocFs as 9ell as all the fru ts or d v dends that accrued to sa d shares. $n ts mot on for recons derat on, !epanto contends that the payment to N elson of stocF d v dends as compensat on for ts serv ces under the management contract s a v olat on of the 'orporat on !a9, and that t 9as not, and t could not be, the ntent on of !epanto and N elson O as contract ng part es O that the serv ces of N elson should be pa d n shares of stocF taFen out of stocF d v dends declared by !epanto. (e have ass duously cons dered the arguments adduced by !epanto n support of ts content on, as 9ell as the ans9er of N elson n th s connect on, and (e have arr ved at the conclus on that there s mer t n the content on of !epanto. &ect on 1> of the 'orporat on !a9, n part, prov des as follo9s? No corporat on organ Aed under th s Act shall create or ssue b lls, notes or other ev dence of debt, for c rculat on as money, and no corporat on shall ssue stocF or bonds e1cept n e1change for actual cash pa d to the corporat on or for? /10 property actually rece ved by t at a fa r valuat on e=ual to the par or ssued value of the stocF or bonds so ssuedI and n case of d sagreement as to the r value, the same shall be presumed to be the assessed value or the value appear ng n nvo ces or other commerc al documents, as the case may beI and the burden or proof that the real present value of the property s greater than the assessed value or value appear ng n nvo ces or other commerc al documents, as the case may be, shall be upon the corporat on, or for /20 profits earned #y it #ut not distri#uted among ts stocFholders or membersI $rovided, ho&ever, %hat no stocF or bond d v dend shall be ssued 9 thout the approval of stocFholders represent ng not less than t9o@th rds of all stocF then outstand ng and ent tled to vote at a general meet ng of the corporat on or at a spec al meet ng duly called for the purpose. 111 111 111

3o corporation shall ma'e or declare any dividend e cept from the surplus profits arising from its #usiness, or d v de or d str bute ts cap tal stocF or property other than actual prof ts among ts members or stocFholders unt l after the payment of ts debts and the term nat on of ts e1 stence by l m tat on or la9ful d ssolut on?$rovided, %hat banF ng, sav ngs and loan, and trust corporat ons may rece ve depos ts and ssue cert f cates of depos t, checFs, drafts, and b lls of e1change, and the l Fe n

the transact on of the ord nary bus ness of banF ng, sav ngs and loan, and trust corporat ons. /As amended by Act No. 2252, and Act No. <816I Emphas s suppl ed.0 7rom the above@=uoted prov s on of &ect on 1> of the 'orporat on !a9, the cons derat on for 9h ch shares of stocF may be ssued are? /10 cashI /20 propertyI and /<0 und str buted prof ts. &hares of stocF are g ven the spec al name ,stocF d v dends, only f they are ssued n l eu of und str buted prof ts. $f shares of stocFs are ssued n e1change of cash or property then those shares do not fall under the category of ,stocF d v dends,. A corporat on may legally ssue shares of stocF n cons derat on of serv ces rendered to t by a person not a stocFholder, or n payment of ts ndebtedness. A share of stocF ssued to pay for serv ces rendered s e=u valent to a stocF ssued n e1change of property, because serv ces s e=u valent to property.14 ! Fe9 se a share of stocF ssued n payment of ndebtedness s e=u valent to ssu ng a stocF n e1change for cash. Eut a share of stocF thus ssued should be part of the or g nal cap tal stocF of the corporat on upon ts organ Aat on, or part of the stocFs ssued 9hen the ncrease of the cap tal Aat on of a corporat on s properly author Aed. $n other 9ords, t s the shares of stocF that are or g nally ssued by the corporat on and form ng part of the cap tal that can be e1changed for cash or serv ces rendered, or propertyI that s, f the corporat on has or g nal shares of stocF unsold or unsubscr bed, e ther com ng from the or g nal cap tal Aat on or from the ncreased cap tal Aat on. %hose shares of stocF may be ssued to a person 9ho s not a stocFholder, or to a person already a stocFholder n e1change for serv ces rendered or for cash or property. Eut a share of stocF com ng from stocF d v dends declared cannot be ssued to one 9ho s not a stocFholder of a corporat on. A ,stocF d v dend, s any d v dend payable n shares of stocF of the corporat on declar ng or author A ng such d v dend. $t s, 9hat the term tself mpl es, a d str but on of the shares of stocF of the corporat on among the stocFholders as d v dends. A stocF d v dend of a corporat on s a d v dend pa d n shares of stocF nstead of cash, and s properly payable only out of surplus prof ts.18 &o, a stocF d v dend s actually t9o th ngs? /10 a d v dend, and /20 the enforced use of the d v dend money to purchase add t onal shares of stocF at par.1> (hen a corporat on ssues stocF d v dends, t sho9s that the corporat on)s accumulated prof ts have been cap tal Aed nstead of d str buted to the stocFholders or reta ned as surplus ava lable for d str but on, n money or F nd, should opportun ty offer. 7ar from be ng a real Aat on of prof ts for the stocFholder, t tends rather to postpone sa d real Aat on, n that the fund represented by the ne9 stocF has been transferred from surplus to assets and no longer ava lable for actual d str but on.12 %hus, t s apparent that stocF d v dends are ssued only to stocFholders. %h s s so because only stocFholders are ent tled to d v dends. %hey are the only ones 9ho have a r ght to a proport onal share n that part of the surplus 9h ch s declared as d v dends. A stocF d v dend really adds noth ng to the nterest of the

stocFholderI the proport onal nterest of each stocFholder rema ns the same.16$f a stocFholder s depr ved of h s stocF d v dends @ and th s happens f the shares of stocF form ng part of the stocF d v dends are ssued to a non@stocFholder O then the proport on of the stocFholder)s nterest changes rad cally. &tocF d v dends are c v l fru ts of the or g nal nvestment, and to the o9ners of the shares belong the c v l fru ts.15 %he term ,d v dend, both n the techn cal sense and ts ord nary acceptat on, s that part or port on of the prof ts of the enterpr se 9h ch the corporat on, by ts govern ng agents, sets apart for ratable d v s on among the holders of the cap tal stocF. $t means the fund actually set as de, and declared by the d rectors of the corporat on as d v dends and duly ordered by the d rector, or by the stocFholders at a corporate meet ng, to be d v ded or d str buted among the stocFholders accord ng to the r respect ve nterests.20 $t s Dur cons dered v e9, therefore, that under &ect on 1> of the 'orporat on !a9 stocF d v dends can not be ssued to a person 9ho s not a stocFholder n payment of serv ces rendered. And so, n the case at bar N elson can not be pa d n shares of stocF 9h ch form part of the stocF d v dends of !epanto for serv ces t rendered under the management contract. (e susta n the content on of !epanto that the understand ng bet9een !epanto and N elson 9as s mply to maFe the cash value of the stocF d v dends declared as the bas s for determ n ng the amount of compensat on that should be pa d to N elson, n the proport on of 10R of the cash value of the stocF d v dends declared. And th s conclus on of Durs f nds support n the record. (e had adverted to n Dur dec s on that n 1540 there 9as some d spute bet9een !epanto and N elson regard ng the appl cat on and nterpretat on of certa n prov s ons of the or g nal contract part cularly 9 th regard to the 10R part c pat on of N elson n the net prof ts, so that some ad-ustments had to be made. $n the m nutes of the meet ng of the Eoard of D rectors of !epanto on August 21, 1540, (e read the follo9 ng? %he 'ha rman stated that he bel eved that t 9ould be better to tie the computation of the +CE participation of 3ielson & .ompany, :nc. to the dividend, #ecause 3ielson &ill then #e a#le to definitely compute its net participation #y the amount of the dividends declared. $n add t on to the d v dend, 9e have been sett ng up a deplet on reserve and t does not seem fa r to burden the 10R part c pat on of N elson 9 th the deplet on reserve, as the deplet on reserve should not be cons dered as an operat ng e1pense. After a prolonged d scuss on, upon mot on duly made and seconded, t 9as O "E&D!CED, %hat the +res dent, be, and he hereby s, author Aed to enter nto an agreement 9 th N elson N 'ompany, $nc., mod fy ng +aragraph C of management contract of January <0, 15<2, effect ve January 1, 1540, n such a 9ay that N elson N 'ompany, $nc. shall rece ve 10R of any

d v dends declared and pa d, 9hen and as pa d dur ng the per od of the contract and at the end of each year, 10R of any deplet on reserve that may be set up and 10R of any amount e1pended dur ng the year out of surplus earn ngs for cap tal account. /Emphas s suppl ed.0 7rom the sentence, ,%he 'ha rman stated that he bel eved that t 9ould be better to t e the computat on of the 10R part c pat on of N elson N 'ompany, $nc., to the d v dend, because N elson 9 ll then be able to def n tely compute ts net part c pat on by the amount of the d v dends declared, the dea s conveyed that the ntent on of !epanto, as e1pressed by ts 'ha rman '. A. De( tt, 9as to maFe the value of the d v dends declared O 9hether the d v dends 9ere n cash or n stocF O as the bas s for determ n ng the amount of compensat on that should be pa d to N elson, n the proport on of 10R of the cash value of the d v dends so declared. $t does not mean, ho9ever, that the compensat on of N elson 9ould be taFen from the amount actually declared as cash d v dend to be d str buted to the stocFholder, nor from the shares of stocFs to be ssued to the stocFholders as stocF d v dends, but from the other assets or funds of the corporat on 9h ch are not burdened by the d v dends thus declared. $n other 9ords, f, for e1ample, cash d v dends of +<00,000.00 are declared, N elson 9ould be ent tled to a compensat on of +<0,000.00, but th s +<0,000.00 should not be taFen from the +<00,000.00 to be d str buted as cash d v dends to the stocFholders but from some other funds or assets of the corporat on 9h ch are not ncluded n the amount to ans9er for the cash d v dends thus declared. %h s s so because f the +<0,000.00 9ould be taFen out from the +<00,000.00 declared as cash d v dends, then the stocFholders 9ould not be gett ng +<00,000.00 as d v dends but only +220,000.00. %here 9ould be a d lut on of the d v dend that corresponds to each share of stocF held by the stocFholders. & m larly, f there 9ere stocF d v dends 9orth one m ll on pesos that 9ere declared, 9h ch means an ssuance of ten m ll on shares at the par value of ten centavos per share, t does not mean that N elson 9ould be g ven 100,000 shares. $t only means that N elson should be g ven the e=u valent of 10R of the aggregate cash value of those shares ssued as stocF d v dends. %hat th s 9as the understand ng of N elson tself s borne out by the fact that n ts appeal br ef N elson urged that t should be pa d ,+<00,000.00 be ng 10R of the +<,000,000.00 stocF d v dends declared on November 26, 1545 and August 20, 1580....,21 (e, therefore, recons der that part of Dur dec s on 9h ch declares that N elson s ent tled to shares of stocF 9orth +<00,000.00 based on the stocF d v dends declared on November 26, 1545 and on August 20, 1580, together 9 th all the fru ts accru ng thereto. $nstead, (e declare that N elson s ent tled to payment by !epanto of +<00,000.00 n cash, 9h ch s e=u valent to 10R of the money value of the stocF d v dends 9orth +<,000,000.00 9h ch 9ere declared on November 26, 1545 and on August 20, 1580, 9 th nterest thereon at the rate of >R from 7ebruary >, 1586.

>. $n the e ghth ground of ts mot on for recons derat on !epanto ma nta ns that th s 'ourt erred n a9ard ng to N elson an undeterm ned amount of shares of stocF andMor cash, 9h ch a9ard can not be ascerta ned and e1ecuted 9 thout further l t gat on. $n v e9 of Dur rul ng n th s resolut on that N elson s not ent tled to rece ve shares of stocF as stocF d v dends n payment of ts compensat on under the management contract, (e do not cons der t necessary to d scuss th s ground of the mot on for recons derat on. %he a9ards n the present case are all reduced to spec f c sums of money. 2. $n the n nth ground of ts mot on for recons derat on !epanto ma nta ns that th s 'ourt erred n render ng -udgment or attorney)s fees. %he matter of the a9ard of attorney)s fees s 9 th n the sound d scret on of th s 'ourt. $n Dur dec s on (e have stated the reason 9hy the a9ard of +80,000.00 for attorney)s fees s cons dered by th s 'ourt as reasonable. Accord ngly, (e resolve to mod fy the dec s on that (e rendered on December 12, 15>>, n the sense that nstead of a9ard ng N elson shares of stocF 9orth +<00,000.00 at the par value of ten centavos /+0.100 per share based on the stocF d v dends declared by !epanto on November 26, 1545 and August 20, 1580, together 9 th the r fru ts, N elson should be a9arded the sum of +<00,000.00 9h ch s an amount e=u valent to 10R of the cash value of the stocF d v dends thus declared, as part of the compensat on due N elson under the management contract. %he d spos t ve port on of the dec s on should, therefore, be amended, to read as follo9s? $N C$E( D7 %BE 7D"E#D$N# 'DN&$DE"A%$DN&, (e hereby reverse the dec s on of the court a quo and enter n l eu thereof another, order ng the appellee !epanto to pay the appellant N elson the d fferent amounts as spec f ed here nbelo9? /10 &eventeen thousand f ve hundred pesos /+12,800.000, e=u valent to 10R of the cash d v dends of December, 1541, 9 th legal nterest thereon from the date of the f l ng of the compla ntI /20 %9o thousand f ve hundred pesos /+2,800.000 as management fee for January 1542, 9 th legal nterest thereon from the date of the f l ng of the compla ntI /<0 Dne hundred f fty thousand pesos /+180,000.000, represent ng management fees for the s 1ty@month per od of e1tens on of the management contract, 9 th legal nterest thereon from the date of the f l ng of the compla ntI /40 Dne m ll on four hundred thousand pesos /+1,400,000.000, e=u valent to 10R of the cash d v dends declared dur ng the per od of e1tens on of

the management contract, 9 th legal nterest thereon from the date of the f l ng of the compla ntI /80 %hree hundred thousand pesos /+<00,000.000, e=u valent to 10R of the cash value of the stocF d v dends declared on November 26, 1545 and August 20, 1580, 9 th legal nterest thereon from the date of the f l ng of the compla ntI />0 7 fty three thousand n ne hundred t9enty e ght pesos and e ghty e ght centavos /+8<,526.660, e=u valent to 10R of the deplet on reserve set up dur ng the per od of e1tens on, 9 th legal nterest thereon from the date of the f l ng of the compla ntI /20 & 1 hundred n nety four thousand three hundred s 1ty four pesos and seventy s 1 centavos /+>54,<>4.2>0, e=u valent to 10R of the e1penses for cap tal account dur ng the per od of e1tens on, 9 th legal nterest thereon from the date of the f l ng of the compla ntI /60 7 fty thousand pesos /+80,000.000 as attorney)s feesI and /50 %he costs. $t s so ordered. .oncepcion, ..9., Reyes, 9.!.%., Dizon, Ma'alintal, Sanchez and .astro, 99., concur. 8ernando, .apistrano, 7eehan'ee and !arredo, 99., tooF no part.

:ootnotes
1

Anne1 A to compla nt, pp. 4<@4>, ".A.I Also E1h b t '.

2

E1h b t A.

<

&ec. 5, "ule 1<0 of the "ules of 'ourt.

4

Art cle 1<2< of the /ne90 ' v l 'ode.

8

&ect on 4<, par. 1, Act 150.

>

% ose-o vs. Day, et al., !@5544, Apr l <0, 15<2I !ev Bermanos, $nc. vs. +ereA, !@14462, Apr l 25, 15>0.
2

"utter vs. Esteban, 5< +h l. >6.

% ose-o vs. Day, supraI !ev Bermanos, $nc. vs. +ereA, supra.
5

Mot on for recons derat on, p. >0.

10

3y v. *ala9 *at gbaF, #.". No. !@16<0, Dec. <1, 1545I & son v. M rasol, !@4211, Dct. <1, 15>2I 'ompan a Mar t ma v. 'ourt of Appeals, !@14545, May <0, 15>0.
11

+ar. C of Management 'ontract, E1h b t '.

12

+age <, E1h b t !, "eport for 1584.

1<

E1h b t 1.

14

&ec. 8162, 11 7letcher, 'ycloped a of the !a9 on +r vate 'orporat ons, p. 422.
18

&ec. 1>, 'orporat on !a9 . (ords and +hrases, p. 220.

1>

12

7 sher vs. %r n dad, 4< +h l. 52<.. %o9ns vs. E sner, >2 !. Ed. <22.

16

15

Art. 441, ' v l 'ode of the +h l pp nes. 2 %hompson on 'orporat ons 1<4@1<8.
21

20

. 118, N elson)s Appeal Er ef.

"epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #71.<1=

'arc- ;, 1<10

W)##)A' :$ESSE#, E( A#., pla nt ffs@appellants, vs. 'A$)AN/ &8 %5A%/ S/NS ? %/'+AN8, defendant@appellee. Rohde and 6right for appellants. 2il#ert, 0aussermann, .ohn and 8isher for appellee. ($EN(, J., %h s s an appeal from a -udgment susta n ng the demurrer on the ground that the compla nt does not state a cause of act on, follo9ed by an order d sm ss ng the case after the pla nt ffs decl ned to amend.

%he compla nt, om tt ng the capt on, etc., reads? 2. %hat dur ng the latter part of the year 151<, the defendant entered nto a contract 9 th one E. Merr tt, 9hereby the sa d Merr tt undertooF and agreed 9 th the defendant to bu ld for the defendant a costly ed f ce n the c ty of Man la at the corner of 'alle "osar o and +laAa del +adre Moraga. $n the contract t 9as agreed bet9een the part es thereto, that the defendant at any t me, upon certa n cont ngenc es, before the complet on of sa d ed f ce could taFe possess on of sa d ed f ce n the course of construct on and of all the mater als n and about sa d prem ses ac=u red by Merr tt for the construct on of sa d ed f ce. <. %hat dur ng the month of August land past, the pla nt ffs del vered to Merr tt at the sa d ed f ce n the course of construct on certa n mater als of the value of +1,<61.21, as per deta led l st hereto attached and marFed E1h b t A, 9h ch pr ce Merr tt had agreed to pay on the 1st day of &eptember, 1514. 4. %hat on the 26th day of August, 1514, the defendant under and by v rtue of ts contract 9 th Merr tt tooF possess on of the ncomplete ed f ce n course of construct on together 9 th all the mater als on sa d prem ses nclud ng the mater als del vered by pla nt ffs and ment oned n E1h b t A aforesa d. 8. %hat ne ther Merr tt nor the defendant has pa d for the mater als ment oned n E1h b t A, although payment has been demanded, and that on the 2d day of &eptember, 1514, the pla nt ffs demanded of the defendant the return or perm ss on to enter upon sa d prem ses and retaFe sa d mater als at the t me st ll unused 9h ch 9as refused by defendant. >. %hat n pursuance of the contract bet9een Merr tt and the defendant, Merr tt acted as the agent for defendant n the ac=u s t on of the mater als from pla nt ffs. %he appellants ns st that the above =uoted allegat ons sho9 that Merr tt acted as the agent of the defendant n purchas ng the mater als n =uest on and that the defendant, by taF ng over and us ng such mater als, accepted and rat f ed the purchase, thereby obl gat ng tself to pay for the same. Dr, v e9ed n another l ght, f the defendant tooF over the unf n shed bu ld ng and all the mater als on the ground and then completed the structure accord ng to the plans, spec f cat ons, and bu ld ng perm t, t became n fact the successor or ass gnee of the f rst bu lder, and as successor or ass gnee, t 9as as much bound legally to pay for the mater als used as 9as the or g nal party. %he vendor can enforce h s contract aga nst the ass gnee as read ly as aga nst the ass gnor. (h le, on the other hand, the appellee contends that Merr tt, be ng ,by the very terms of the contract, an ndependent contractor, s the only person l able for the amount cla med. $t s urged that, as the demurrer adm ts the truth of all the allegat ons of fact set out n the compla nt, the allegat on n paragraph > to the effect that Merr tt ,acted as the agent for defendant n the ac=u s t on of the mater als from

pla nt ffs,, must be, at th s stage of the proceed ngs, cons dered as true. %he rule, as thus broadly stated, has many l m tat ons and restr ct ons. A more accurate statement of the rule s that a demurrer adm ts the truth of all mater al and relevant facts 9h ch are 9ell pleaded. . . . .%he adm ss on of the truth of mater al and relevant facts 9ell pleaded does not e1tend to render a demurrer an adm ss on of nferences or conclus ons dra9n therefrom, even f alleged n the plead ngI nor mere nferences or conclus ons from facts not statedI nor conclus ons of la9. /AlAua and Arnalot vs. Johnson, 21 +h l. "ep., <06, <80.0 3pon the =uest on of construct on of plead ngs, sect on 10> of the 'ode of ' v l +rocedure prov des that? $n the construct on of a plead ng, for the purpose of determ n ng ts effects, ts allegat ons shall be l berally construed, 9 th a v e9 of substant al -ust ce bet9een the part es. %h s sect on s essent ally the same as sect on 482 of the 'al forn a 'ode of ' v l +rocedure. ,&ubstant al -ust ce,, as used n the t9o sect ons, means substant al -ust ce to be ascerta ned and determ ned by f 1ed rules and pos t ve statutes. /&tevens vs. "oss, 1 'al. 54, 58.0 ,(here the language of a plead ng s amb guous, after g v ng to t a reasonable ntendment, t should be resolved aga nst the pleader. %h s s espec ally true on appeal from a -udgment rendered after refusal to amendI 9here a general and spec al demurrer to a compla nt has been susta ned, and the pla nt ff had refused to amend, all amb gu t es and uncerta nt es must be construed aga nst h m., /&utherland on 'ode +lead ng, vol. 1, sec. 68, and cases c ted.0 %he allegat ons n paragraphs 1 to 8, nclus ve, above set forth, do not even nt mate that the relat on e1 st ng bet9een Merr tt and the defendant 9as that of pr nc pal and agent, but, on the contrary, they demonstrate that Merr tt 9as an ndependent contractor and that the mater als 9ere purchased by h m as such contractor 9 thout the ntervent on of the defendant. %he fact that ,the defendant entered nto a contract 9 th one E. Merr tt, 9here by the sa d Merr tt undertooF and agreed 9 th the defendant to bu ld for the defendant a costly ed f ce, sho9s that Merr tt 9as author Aed to do the 9orF accord ng to h s o9n method and 9 thout be ng sub-ect to the defendant)s control, e1cept as to the result of the 9orF. Be could purchase h s mater als and suppl es from 9hom he pleased and at such pr ces as he des red to pay. Aga n, the allegat ons that the ,pla nt ffs del vered the Merr tt . . . . certa n mater als /the mater als n =uest on0 of the value of +1,<61.21, . . . . 9h ch pr ce Merr tt agreed to pay,, sho9 that there 9ere no contractual relat ons 9hatever bet9een the sellers and the defendant. %he mere fact that Merr tt and the defendant had st pulated n the r bu ld ng contract that the latter could, ,upon certa n cont ngenc es,, taFe possess on of the ncompleted bu ld ng and all mater als on the ground, d d not change Merr tt from an ndependent contractor to an agent. &uppose that, at the t me the bu ld ng 9as taFen over Merr tt had actually used n the construct on thus far +100,000 9orth of mater als and suppl es 9h ch he had purchased on a cred t, could those cred tors ma nta n an act on aga nst the defendant for the value of such suppl esP 'erta nly not. %he fact that the +100,000 9orth of suppl es had been actually used n the bu ld ng 9ould place those cred tors n no 9orse pos t on to recover than that of the pla nt ffs, although the mater als 9h ch the pla nt ffs sold to Merr tt had not actually gone nto the construct on. %o hold

that e ther group of cred tors can recover 9ould have the effect of compell ng the defendants to pay, as 9e have nd cated, -ust such pr ces for mater als as Merr tt and the sellers sa9 f t to f 1. $n the absence of a statute creat ng 9hat s Fno9n as mechan cs) l ens, the o9ner of a bu ld ng s not l able for the value of mater als purchased by an ndependent contractor e ther as such o9ner or as the ass gnee of the contractor. %he allegat on n paragraph > that Merr tt 9as the agent of the defendant contrad cts all the other allegat ons and s a mere conclus on dra9n from them. &uch conclus on s not adm tted, as 9e have sa d, by the demurrer. %he allegat ons n the compla nt not be ng suff c ent to const tute a cause of act on aga nst the defendant, the -udgment appealed from s aff rmed, 9 th costs aga nst the appellants. &o ordered. Arellano, ..9., 7orres, 9ohnson and Araullo, 99., concur. Moreland, 9., concurs n the result. .arson, 9., d ssents. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7=10< January 3<, 1<21

(5E S5E## %/'+AN8 /: (5E +5)#)++)NES, #(!., pet t oner, vs. :)$E'EN'S )NS&$AN%E %/'+AN8 /: NEWA$K, NEW JE$SE8 %/''E$%)A# %AS&A#(8 )NS&$AN%E %/., SA#*A!/$ S)S/N, +/$:)$)/ !E #A :&EN(E and (5E %/&$( /: A++EA#S C:irst !iAisionD,respondents. Ross, Selph, .arrascoso & 9anda for petitioner. 9. A. 6olfson and Manuel F. Macias for respondents. +A!)##A, J., Appeal by certiorari under "ule 4> to rev e9 a -udgment of the 'ourt of Appeals 9h ch reversed that of the 'ourt of 7 rst $nstance of Man la and sentenced ,. . . the defendants@appellees to pay, -o ntly and severally, the pla nt ffs@appellants the sum of +1,>81.<6, 9 th legal nterest from December >, 1542 /#ut erreA vs. #ut erreA, 8> +h l., 122, 1600, and the costs n both nstances., %he 'ourt of Appeals found the follo9 ng? $nasmuch as both the +la nt ffs@Appellants and the Defendant@Appellee, the &hell 'ompany of the +h l pp ne $slands, !td. accept the statement of facts made by the tr al court n ts dec s on and appear ng on pages 2< to <2 of the "ecord on Appeal, 9e =uote hereunder such statement? %h s s an act on for recovery of sum of money, based on alleged negl gence of the defendants.

$t s a fact that a +lymounth car o9ned by &alvador ". & son 9as brought, on &eptember <, 1542 to the &hell #asol ne and &erv ce &tat on, located at the corner of Mar=ues de 'om llas and $saac +eral &treets, Man la, for 9ash ng, greas ng and spray ng. %he operator of the stat on, hav ng agreed to do serv ce upon payment of +6.00, the car 9as placed on a hydraul c l fter under the d rect on of the personnel of the stat on. (hat happened to the car s recounted by +erl to & son, as follo9s? U. ( ll you please descr be ho9 they proceeded to do the 9orFP A. Hes, s r. %he f rst th ng that 9as done, as $ sa9, 9as to dr ve the car over the l fter. %hen by the a d of the t9o grease men they ra sed up my car up to s 1 feet h gh, and then 9ash ng 9as done. After 9ash ng, the ne1t step 9as greas ng. Eefore greas ng 9as f n shed, there s a part near the shelf of the r ght fender, r ght front fender, of my car to be greased, but the the grease men cannot reached that part, so the ne1t th ng to be done 9as to loosen the l fter -ust a fe9 feet lo9er. %hen upon releas ng the valve to maFe the car lo9er, a l ttle b t lo9er . . . U. (ho released the valveP A. %he greasemen, for the escape of the a r. As the escape of the a r s too strong for my ear $ faced bacF9ard. $ faced to9ard $saac +eral &treet, and covered my ear. After the escaped of the a r has been f n shed, the a r com ng out from the valve, $ turned to face the car and $ sa9 the car s9ay ng at that t me, and -ust for a fe9 second the car fell., /t.s.n. pp. 22@2<.0 %he case 9as mmed ately reported to the Man la Ad-ustor 'ompany, the ad-ustor of the f remen)s $nsurance 'ompany and the 'ommerc al 'asualty $nsurance 'ompany, as the car 9as nsured 9 th these nsurance compan es. After hav ng been nspected by one Mr. Eaylon, representat ve of the Man la Ad-ustor 'ompany, the damaged car 9as taFen to the shops of the +h l pp ne Motors, $ncorporated, for repa r upon order of the 7 remen)s $nsurance 'ompany and the 'ommerc al 'asualty 'ompany, 9 th the consent of &alvador ". & son. %he car 9as restored to runn ng cond t on after repa rs amount ng to +1,>81.<6, and 9as del vered to &alvador ". & son, 9ho, n turn made ass gnments of h s r ghts to recover damages n favor of the 7 remen)s $nsurance 'ompany and the 'ommerc al 'asualty $nsurance 'ompany. Dn the other hand, the fall of the car from the hydraul c l fter has been e1pla ned by Alfonso M. Adr ano, a greaseman n the &hell #asol ne and &erv ce &tat on, as follo9s? U. (ere you able to l ft the car on the hydraul c l fter on the occas on, &eptember <, 1542P A. Hes, s r. U. %o 9hat he ght d d you ra se more or lessP

A. More or less f ve feet, s r. U. After l ft ng that car that he ght, 9hat d d you do 9 th the carP A. $ also 9ashed t, s r. U. And after 9ash ngP A. $ greased t. U. Dn that occas on, have you been able to f n sh greas ng and 9ash ng the carP A. %here s one po nt 9h ch $ could not reach. U. And 9hat d d you do thenP A. $ lo9ered the l fter n order to reach that po nt. U. After lo9er ng t a l ttle, 9hat d d you do thenP A. $ pushed and pressed the valve n ts gradual pressure. U. (ere you able to reach the port on 9h ch you 9ere not able to reach 9h le t 9as lo9erP A. No more, s r. U. (hyP A. Eecause 9hen $ 9as lo9er ng the l fter $ sa9 that the car 9as s9 ng ng and t fell. %BE 'D3"%. (hy d d the car s9 ng and fallP ($%NE&&? )%hat s 9hat $ do not Fno9, s r). /t.s.n., p.>2.0 %he pos t on of Defendant +orf r o de la 7uente s stated n h s counter@statement of facts 9h ch s hereunder also reproduced? $n the afternoon of &eptember <, 1542, an automob le belong ng to the pla nt ff &alvador & son 9as brought by h s son, +erl to & son, to the gasol ne and serv ce stat on at the corner of Mar=ues de 'om llas and $saac +eral &treets, ' ty of Man la, +h l pp nes, o9ned by the defendant %he &hell 'ompany of the +h l pp ne $slands, ! m ted, but operated by the defendant +orf r o de la 7uente, for the purpose of hav ng sa d car 9ashed and greased for a cons derat on of +6.00 /t.s.n., pp. 15@20.0 &a d car 9as nsured aga nst loss or damage by 7 remen)s $nsurance 'ompany of Ne9arF, Ne9 Jersey, and 'ommerc al 'asualty $nsurance 'ompany -o ntly for the sum of +10,000 /E1h b ts ,A), ,E,, and ,D,0.

%he -ob of 9ash ng and greas ng 9as undertaFen by defendant +orf r o de la 7uente through h s t9o employees, Alfonso M. Adr ano, as greaseman and one surnamed de los "eyes, a helper and 9asher /t.s.n., pp. >8@>20. %o perform the -ob the car 9as carefully and centrally placed on the platform of the l fter n the gasol ne and serv ce stat on aforement oned before ra s ng up sa d platform to a he ght of about 8 feet and then the serv c ng -ob 9as started. After more than one hour of 9ash ng and greas ng, the -ob 9as about to be completed e1cept for an ungreased port on underneath the veh cle 9h ch could not be reached by the greasemen. &o, the l fter 9as lo9ered a l ttle by Alfonso M. Adr ano and 9h le do ng so, the car for unFno9n reason acc dentally fell and suffered damage to the value of +1, >81.<6 /t.s.n., pp. >8@>20. %he nsurance compan es after pay ng the sum of +1,>81.<6 for the damage and charg ng the balance of +100.00 to &alvador & son n accordance 9 th the terms of the nsurance contract, have f led th s act on together 9 th sa d &alvador & son for the recovery of the total amount of the damage from the defendants on the ground of negl gence /"ecord on Appeal, pp. 1@>0. %he defendant +orf r o de la 7uente den ed negl gence n the operat on of the l fter n h s separate ans9er and contended further that the acc dental fall of the car 9as caused by unforseen event /"ecord on Appeal, pp. 12@ 150. %he o9ner of the car forth9 th not f ed the nsurers 9ho ordered the r ad-ustor, the Man la Ad-ustor 'ompany, to nvest gate the nc dent and after such nvest gat on the damaged car, upon order of the nsures and 9 th the consent of the o9ner, 9as brought to the shop of the +h l pp ne Motors, $nc. %he car 9as restored to runn ng cond t on after thereon 9h ch amounted to +1,>81.<6 and returned to the o9ner 9ho ass gned h s r ght to collect the aforesa d amount to the 7 remen)s $nsurance 'ompany and the 'ommerc al 'asualty $nsurance 'ompany. Dn > December 1542 the nsures and the o9ner of the car brought an act on n the 'ourt of 7 rst $nstance of Man la aga nst the &hell 'ompany of the +h l pp nes, !td. and +orf r o de la 7uente to recover from them, -o ntly and severally, the sum of +1,>81.<6, nterest thereon at the legal rate from the f l ng of the compla nt unt l fully pa d, the costs. After tr al the 'ourt d sm ssed the compla nt. %he pla nt ffs appealed. %he 'ourt of Appeals reversed the -udgment and sentenced the defendant to pay the amount sought to be recovered, legal nterest and costs, as stated at the beg nn ng of th s op n on. $n arr v ng at the conclus on that on < &eptember 1542 9hen the car 9as brought to the stat on for serv c ng +rof r o de la 7uente, the operator of the gasol ne and serv ce stat on, 9as an agent of the &hell 'ompany of the +h l pp nes, !td., the 'ourt of Appeals found that O . . . De la 7uente o9ned h s pos t on to the &hell 'ompany 9h ch could remove h m term nate h s serv ces at any t me from the sa d 'ompany, and he undertooF to sell the &hell 'ompany)s products e1culus vely at the sa d &tat on. 7or th s purpose, De la 7uente 9as placed n possess on of the gasol ne and serv ce stat on under cons derat on, and 9as prov ded

9 th all the e=u pments needed to operate t, by the sa d 'ompany, such as the tools and art cles l sted on E1h b t 2 9h ch the hydraul c l fter /ho st0 and accessor es, from 9h ch & son)s automob le fell on the date n =uest on /E1h b t 1 and 20. %hese e=u pments 9ere del vered to De la 7uente on a so@called loan bas s. %he &hell 'ompany tooF charge of ts care and ma ntenance and rendered to the publ c or ts customers at that stat on for the proper funct on ng of the e=u pment. ( tness Anton o % ongson, 9ho 9as sales super ntendent of the &hell 'ompany, and 9 tness Augusto &a9yer, foreman of the same 'ompany, superv sed the operators and conducted per od c nspect on of the 'ompany)s gasol ne and serv ce stat on, the serv ce stat on n =uest on nclus ve. E1pla n ng h s dut es and respons b l t es and the reason for the loan, % ongson sa d? ,ma nly of the superv s on of sales or /of0 our dealers and rount nary nspect on of the e=u pment loaned by the 'ompany, /t.s.n., 1020I ,9e merely n=u re about ho9 the e=u pments are, 9hether they have compla nts, and 9hether f sa d e=u pments are n proper order . . .,, /t.s.n., 1100I stat on e=u pments are ,loaned for the e1clus ve use of the dealer on cond t on that all suppl es to be sold by sa d dealer should be e1clus vely &hell, so as a concess on 9e loan e=u pments for the r use . . .,, ,for the proper funct on ng of the e=u pments, 9e ans9er and see to t that the e=u pments are n good runn ng order usable cond t on . . .,, ,9 th respect to the publ c., /t.s.n., 111@1120. De la 7uente, as operator, 9as g ven spec al pr ces by the 'ompany for the gasol ne products sold there n. E1h b t 1 O &hell, 9h ch 9as a rece pt by Anton o % ongson and s gned by the De la 7uente, acFno9ledg ng the del very of e=u pments of the gasol ne and serv ce stat on n =uest on 9as subse=uently replaced by E1h b t 2 O &hell, an off c al from of the nventory of the e=u pment 9h ch De la 7uente s gned above the 9ords? ,Agent)s s gnature, And the serv ce stat on n =uest on had been marFed ,&BE!!,, and all advert sements there n bore the same s gn. . . . . . . De la 7uente 9as the operator of the stat on ,by grace, of the Defendant 'ompany 9h ch could and d d remove h m as t pleasedI that all the e=u pments needed to operate the stat on 9as o9ned by the Defendant 'ompany 9h ch tooF charge of the r proper care and ma ntenance, desp te the fact that they 9ere loaned to h mI that the Defendant company d d not leave the f 1 ng of pr ce for gasol ne to De la 7uenteI on the other hand, the Defendant company had complete control thereofI and that % ongson, the sales representat ve of the Defendant 'ompany, had superv s on over De la 7uente n the operat on of the stat on, and n the sale of Defendant 'ompany)s products there n. . . . %aF ng nto cons derat on the fact that the operator o9ed h s pos t on to the company and the latter could remove h m or term nate h s serv ces at 9 llI that the serv ce stat on belonged to the company and bore ts tradename and the operator sold only the products of the companyI that the e=u pment used by the operator belonged to the company and 9ere -ust loaned to the operator and the company tooF charge of the r repa r and ma ntenanceI that an employee of the company superv sed the operator and conducted per od c nspect on of the company)s gasol ne and serv ce stat onI that the pr ce of the products sold by the operator 9as f 1ed by the company and not by the operatorI and that the rece pt s gned by the operator nd cated that he 9as a mere agent, the f nd ng of the 'ourt of Appeals that the operator 9as an agent of the company and not an ndependent contractor should not be d sturbed.

%o determ ne the nature of a contract courts do not have or are not bound to rely upon the name or t tle g ven t by the contract ng part es, should there be a controversy as to 9hat they really had ntended to enter nto, but the 9ay the contract ng part es do or perform the r respect ve obl gat on st pulated or agreed upon may be sho9n and n=u red nto, and should such performance confl ct 9 th the name or t tle g ven the contract by the part es, the former must preva l over the latter. $t 9as adm tted by the operator of the gasol ne and serv ce stat on that ,the car 9as carefully and centrally placed on the platform of the l fter . . ., and the 'ourt of Appeals found that O . . . the fall of Appellant & son)s car from the hydraul c l ft and the damage caused therefor, 9ere the result of the -erF ng and s9ay ng of the l ft 9hen the valve 9as released, and that the -erF ng 9as due to some acc dent and unforeseen shortcom ng of the mechan sm tself, 9h ch caused ts faulty or defect ve operat on or funct on ng, . . . the serv c ng -ob on Appellant & son)s automob le 9as accepted by De la 7uente n the normal and ord nary conduct of h s bus ness as operator of h s co@appellee)s serv ce stat on, and that the -erF ng and s9ay ng of the hydraul c l ft 9h ch caused the fall of the sub-ect car 9ere due to ts defect ve cond t on, result ng n ts faulty operat on. . . . As the act of the agent or h s employees act ng 9 th n the scope of h s author ty s the act of the pr nc pal, the breach of the undertaF ng by the agent s one for 9h ch the pr nc pal s ans9erable. Moreover, the company undertooF to ,ans9er and see to t that the e=u pments are n good runn ng order and usable cond t onI, and the 'ourt of Appeals found that the 'ompany)s mechan c fa led to maFe a thorough checF up of the hydraul c l fter and the checF up made by ts mechan c 9as ,merely rout ne, by ra s ng ,the l fter once or t9 ce and after observ ng that the operator 9as sat sfactory, he /the mechan c0 left the place., %he latter 9as negl gent and the company must ans9er for the negl gent act of ts mechan c 9h ch 9as the cause of the fall of the car from the hydraul c l fter. %he -udgment under rev e9 s aff rmed, 9 th costs aga nst the pet t oner. $aras, ..9., !engzon, Montemayor, Reyes, A., !autista Angelo, %a#rador, .oncepcion, Reyes, 9.!.%., 5ndencia and 8eli , 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #711;<1 Au"ust 34, 1<1=

AN!$ES E&)$/GA, pla nt ff@appellant, vs. +A$S/NS 5A$!WA$E %/., defendant@appellee.

Alfredo .hicote, 9ose Arnaiz and $ascual !. Azanza for appellant. .rossfield & =/!rien for appellee. A*AN%E@A, J., Dn January 24, 1511, n th s c ty of man la, a contract n the follo9 ng tenor 9as entered nto by and bet9een the pla nt ff, as party of the f rst part, and J. +arsons /to 9hose r ghts and obl gat ons the present defendant later subrogated tself0, as party of the second part? 'DN%"A'% EGE'3%ED EH AND EE%(EEN AND"E& U3$"D#A AND J. +A"&DN&, ED%B ME"'BAN%& E&%AE!$&BED $N MAN$!A, 7D" %BE EG'!3&$CE &A!E D7 ,U3$"D#A, EED& $N %BE C$&AHAN $&!AND&. A"%$'!E 1. Don Andres Uu roga grants the e1clus ve r ght to sell h s beds n the C sayan $slands to J. +arsons under the follo9 ng cond t ons? /A0 Mr. Uu roga shall furn sh beds of h s manufacture to Mr. +arsons for the latter)s establ shment n $lo lo, and shall nvo ce them at the same pr ce he has f 1ed for sales, n Man la, and, n the nvo ces, shall maFe and allo9ance of a d scount of 28 per cent of the nvo ced pr ces, as comm ss on on the saleI and Mr. +arsons shall order the beds by the doAen, 9hether of the same or of d fferent styles. /E0 Mr. +arsons b nds h mself to pay Mr. Uu roga for the beds rece ved, 9 th n a per od of s 1ty days from the date of the r sh pment. /'0 %he e1penses for transportat on and sh pment shall be borne by M. Uu roga, and the fre ght, nsurance, and cost of unload ng from the vessel at the po nt 9here the beds are rece ved, shall be pa d by Mr. +arsons. /D0 $f, before an nvo ce falls due, Mr. Uu roga should re=uest ts payment, sa d payment 9hen made shall be cons dered as a prompt payment, and as such a deduct on of 2 per cent shall be made from the amount of the nvo ce. %he same d scount shall be made on the amount of any nvo ce 9h ch Mr. +arsons may deem conven ent to pay n cash. /E0 Mr. Uu roga b nds h mself to g ve not ce at least f fteen days before hand of any alterat on n pr ce 9h ch he may plan to maFe n respect to h s beds, and agrees that f on the date 9hen such alterat on taFes effect he should have any order pend ng to be served to Mr. +arsons, such order shall en-oy the advantage of the alterat on f the pr ce thereby be lo9ered, but shall not be affected by sa d alterat on f the pr ce thereby be ncreased, for, n th s latter case, Mr. Uu roga assumed the obl gat on to nvo ce the beds at the pr ce at 9h ch the order 9as g ven. /70 Mr. +arsons b nds h mself not to sell any other F nd e1cept the ,Uu roga, beds. A"%. 2. $n compensat on for the e1penses of advert sement 9h ch, for the benef t of both contract ng part es, Mr. +arsons may f nd h mself obl ged to

maFe, Mr. Uu roga assumes the obl gat on to offer and g ve the preference to Mr. +arsons n case anyone should apply for the e1clus ve agency for any sland not compr sed 9 th the C sayan group. A"%. <. Mr. +arsons may sell, or establ sh branches of h s agency for the sale of ,Uu roga, beds n all the to9ns of the Arch pelago 9here there are no e1clus ve agents, and shall mmed ately report such act on to Mr. Uu roga for h s approval. A"%. 4. %h s contract s made for an unl m ted per od, and may be term nated by e ther of the contract ng part es on a prev ous not ce of n nety days to the other party. Df the three causes of act on alleged by the pla nt ff n h s compla nt, only t9o of them const tute the sub-ect matter of th s appeal and both substant ally amount to the averment that the defendant v olated the follo9 ng obl gat ons? not to sell the beds at h gher pr ces than those of the nvo cesI to have an open establ shment n $lo loI tself to conduct the agencyI to Feep the beds on publ c e1h b t on, and to pay for the advert sement e1penses for the sameI and to order the beds by the doAen and n no other manner. As may be seen, 9 th the e1cept on of the obl gat on on the part of the defendant to order the beds by the doAen and n no other manner, none of the obl gat ons mputed to the defendant n the t9o causes of act on are e1pressly set forth n the contract. Eut the pla nt ff alleged that the defendant 9as h s agent for the sale of h s beds n $lo lo, and that sa d obl gat ons are mpl ed n a contract of commerc al agency. %he 9hole =uest on, therefore, reduced tself to a determ nat on as to 9hether the defendant, by reason of the contract here nbefore transcr bed, 9as a purchaser or an agent of the pla nt ff for the sale of h s beds. $n order to class fy a contract, due regard must be g ven to ts essent al clauses. $n the contract n =uest on, 9hat 9as essent al, as const tut ng ts cause and sub-ect matter, s that the pla nt ff 9as to furn sh the defendant 9 th the beds 9h ch the latter m ght order, at the pr ce st pulated, and that the defendant 9as to pay the pr ce n the manner st pulated. %he pr ce agreed upon 9as the one determ ned by the pla nt ff for the sale of these beds n Man la, 9 th a d scount of from 20 to 28 per cent, accord ng to the r class. +ayment 9as to be made at the end of s 1ty days, or before, at the pla nt ff)s re=uest, or n cash, f the defendant so preferred, and n these last t9o cases an add t onal d scount 9as to be allo9ed for prompt payment. %hese are prec sely the essent al features of a contract of purchase and sale. %here 9as the obl gat on on the part of the pla nt ff to supply the beds, and, on the part of the defendant, to pay the r pr ce. %hese features e1clude the legal concept on of an agency or order to sell 9hereby the mandatory or agent rece ved the th ng to sell t, and does not pay ts pr ce, but del vers to the pr nc pal the pr ce he obta ns from the sale of the th ng to a th rd person, and f he does not succeed n sell ng t, he returns t. Ey v rtue of the contract bet9een the pla nt ff and the defendant, the latter, on rece v ng the beds, 9as necessar ly obl ged to pay the r pr ce 9 th n the term f 1ed, 9 thout any other cons derat on and regardless as to 9hether he had or had not sold the beds. $t 9ould be enough to hold, as 9e do, that the contract by and bet9een the defendant and the pla nt ff s one of purchase and sale, n order to sho9 that t 9as not one made on the bas s of a comm ss on on sales, as the pla nt ff cla ms t 9as, for these contracts are ncompat ble 9 th each other. Eut, bes des,

e1am n ng the clauses of th s contract, none of them s found that substant ally supports the pla nt ff)s content on. Not a s ngle one of these clauses necessar ly conveys the dea of an agency. %he 9ords commission on sales used n clause /A0 of art cle 1 mean noth ng else, as stated n the contract tself, than a mere d scount on the nvo ce pr ce. %he 9ord agency, also used n art cles 2 and <, only e1presses that the defendant 9as the only one that could sell the pla nt ff)s beds n the C sayan $slands. ( th regard to the rema n ng clauses, the least that can be sa d s that they are not ncompat ble 9 th the contract of purchase and sale. %he pla nt ff calls attent on to the test mony of Ernesto C dal, a former v ce@ pres dent of the defendant corporat on and 9ho establ shed and managed the latter)s bus ness n $lo lo. $t appears that th s 9 tness, pr or to the t me of h s test mony, had ser ous trouble 9 th the defendant, had ma nta ned a c v l su t aga nst t, and had even accused one of ts partners, #u llermo +arsons, of fals f cat on. Be test f ed that t 9as he 9ho drafted the contract E1h b t A, and, 9hen =uest oned as to 9hat 9as h s purpose n contract ng 9 th the pla nt ff, repl ed that t 9as to #e an agent for his #eds and to collect a commission on sales. Bo9ever, accord ng to the defendant)s ev dence, t 9as Mar ano !opeA &antos, a d rector of the corporat on, 9ho prepared E1h b t A. Eut, even suppos ng that Ernesto C dal has stated the truth, h s statement as to 9hat 9as h s dea n contract ng 9 th the pla nt ff s of no mportance, nasmuch as the agreements conta ned n E1h b t A 9h ch he cla ms to have drafted, const tute, as 9e have sa d, a contract of purchase and sale, and not one of commerc al agency. %h s only means that Ernesto C dal 9as m staFen n h s class f cat on of the contract. Eut t must be understood that a contract s 9hat the la9 def nes t to be, and not 9hat t s called by the contract ng part es. %he pla nt ff also endeavored to prove that the defendant had returned beds that t could not sellI that, 9 thout prev ous not ce, t for9arded to the defendant the beds that t 9antedI and that the defendant rece ved ts comm ss on for the beds sold by the pla nt ff d rectly to persons n $lo lo. Eut all th s, at the most only sho9s that, on the part of both of them, there 9as mutual tolerance n the performance of the contract n d sregard of ts termsI and t g ves no r ght to have the contract cons dered, not as the part es st pulated t, but as they performed t. Dnly the acts of the contract ng part es, subse=uent to, and n connect on 9 th, the e1ecut on of the contract, must be cons dered for the purpose of nterpret ng the contract, 9hen such nterpretat on s necessary, but not 9hen, as n the nstant case, ts essent al agreements are clearly set forth and pla nly sho9 that the contract belongs to a certa n F nd and not to another. 7urthermore, the return made 9as of certa n brass beds, and 9as not effected n e1change for the pr ce pa d for them, but 9as for other beds of another F ndI and for the letter E1h b t !@1, re=uested the pla nt ff)s pr or consent 9 th respect to sa d beds, 9h ch sho9s that t 9as not cons dered that the defendant had a r ght, by v rtue of the contract, to maFe th s return. As regards the sh pment of beds 9 thout prev ous not ce, t s ns nuated n the record that these brass beds 9ere prec sely the ones so sh pped, and that, for th s very reason, the pla nt ff agreed to the r return. And 9 th respect to the so@called comm ss ons, 9e have sa d that they merely const tuted a d scount on the nvo ce pr ce, and the reason for apply ng th s benef t to the beds sold d rectly by the pla nt ff to persons n $lo lo 9as because, as the defendant obl gated tself n the contract to ncur the e1penses of advert sement of the pla nt ff)s beds, such sales 9ere to be cons dered as a result of that advert sement.

$n respect to the defendant)s obl gat on to order by the doAen, the only one e1pressly mposed by the contract, the effect of ts breach 9ould only ent tle the pla nt ff to d sregard the orders 9h ch the defendant m ght place under other cond t onsI but f the pla nt ff consents to f ll them, he 9a ves h s r ght and cannot compla n for hav ng acted thus at h s o9n free 9 ll. 7or the forego ng reasons, 9e are of op n on that the contract by and bet9een the pla nt ff and the defendant 9as one of purchase and sale, and that the obl gat ons the breach of 9h ch s alleged as a cause of act on are not mposed upon the defendant, e ther by agreement or by la9. %he -udgment appealed from s aff rmed, 9 th costs aga nst the appellant. &o ordered. Arellano, ..9., 7orres, 9ohnson, Street and Malcolm, 99., concur. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #732<02 June 4., 1<12 A'E$)%AN $&99E$ %/'+AN8 CNoF American $u er %orporationD, pet t oner, vs. (5E %/##E%(/$ /: )N(E$NA# $E*EN&E CNoF t-e %ommissioner of )nternal $eAenueD and t-e %/&$( /: (A> A++EA#S, respondents. =zaeta, =zaeta, Romulo and De %eon for petitioner. =ffice of the Solicitor 2eneral Antonio $. !arredo, Assistant Solicitor 2eneral 8elicisimo R. Rosete and Special Attorney 4enancia M. $angilinan for respondents.

ESG&E$$A, J.: $n 'ase No. 1>4, the 'ourt of %a1 Appeals n ts dec s on dated July <1, 15>8, held the pet t oner, Amer can "ubber 'ompany /no9 Amer can "ubber 'orporat on0, l able for the payment of the sum of +42,<24.<6, represent ng def c ency sales ta1 and surcharge on ts sales of lumber dur ng the years 1580, 1581, 1582 and 158<. Bence th s appeal. +et t oner, a domest c corporat on organ Aed under the la9s of the +h l pp nes, s engaged n the bus ness of produc ng logs and lumber for sale. $t ac=u red ts logs from ts forest concess on n Eas lan ' ty duly l censed by the Eureau of 7orestry. /E1h b ts ,E@<,, ,E@4,, t.s.n. pp. 18, 1>, 58@5> Col. 1 '%A rec.0 $t l Fe9 se cut t mber n the forest covered by the 3+ !and #rant 9h ch 9as operated by the

&anta 'lara !umber 'o., $nc., here nafter referred to as &'!'D, under % mber ! cense Agreement No. 1 e1ecuted bet9een the 3+ and &'!'D 9here n the latter had an ,e1clus ve l cense to cut, collect and remove t mber of all groups from the #rant, sub-ect to certa n cond t ons, nclud ng payment by &'!'D to the 3+ of the correspond ng forest charges on all t mber cut and removed from the area n accordance 9 th 'ommon9ealth Act No. 4>> /Nat onal $nternal "evenue 'ode0 and such other charges as may be re=u red by other la9s., /p. 2 +et t oner)s Er ef0 Apart from h s, pet t oner here nafter referred to as A"'D 9as allo9ed to cut t mber and operated a port on of the south9estern corner of &'!'D)s concess on n Eas lan covered by % mber ! cense No. 1428@C, 9h ch port on 9as appl ed for by A"'D and f nally ncluded n ts Drd nary % mber ! cense No. 2128, rene9ed May <1, 1542, and e1tended on July >, 1546, to cover per od end ng June <0, 1582. /p. 10 +et t oner)s Er ef0 %he operat on of the aforesa d areas 9as embod ed n a ,!etter Agreement, e1ecuted bet9een A"'D and &'!'D on January 1<, 1546, 9h ch agreement s =uoted hereunder? Amer can "ubber 'ompany $sabela de Eas lan, Lamboanga Dear & rs? $n connect on 9 th your re=uest 9h ch 9as approved by the Eoard of D rectors of the 'ompany n ts last meet ng, you are allo9ed to cut t mber n the &outh9estern corner of our 'oncess on at $sabela de Eas lan 9 th an area of not over 400 hectares under the follo9 ng terms and cond t ons? 1. $n the event that you 9 ll stop the operat on of your m ll or sell and or transfer the o9nersh p of your present lumber bus ness, the above port on of our 'oncess on 9 ll be reverted to usI 2. %he &ta. 'lara !umber 'o., 9 ll be allo9ed the free use of your pr vate roadsI <. %he &ta. 'lara !umber 'o., shall cont nue to taFe charge of the d sposal of your product on that may be sent to Man la n accordance 9 th present arrangements. %he &ta. 'lara !umber 'o., 9 ll taFe up th s matter 9 th the proper author t es for the proper e1ecut on of 9hatever re=u rements that may be needed pursuant to ts agreement. $f the above terms and cond t ons are agreeable to you, please s gn and nd cate your conform ty on the space prov ded for belo9. Cery truly yours, &ta. 'lara !umber 'o.,

$nc. Ey %. M. D aA #eneral Manager Agreed? Amer can "ubber 'ompany Ey J.(. &trong 7rom May, 1545, through 7ebruary, 1582, Mr. Denoga, Adm n strator of the 3+ !and #rant, prepared monthly scale reports of t mber cut by pet t oner from the 3+ !and #rant, pursuant to 9h ch the 3+ b lled forest charges aga nst the &'!'D 9h ch pa d the b lls, later re mbursed by A"'D. /p. 8>1 t.s.n. Col. $$ '%A rec.0 As test f ed to by Mr. "o=ue de !eon, ,No. 2 man, of Amer can "ubber 'o. /A"'D0 /t.s.n. 400@411 Col. $$ '%A rec.0, all the logs of pet t oner n the lumber bus ness 9ere d sposed of n the follo9 ng manner? % mber 9ere cut do9n from the 3+ !and #rant andMor the forest concess on of pet t oner, then the same 9ere hauled n pet t oner)s trucFs to ts sa9m lls 9here they are sa9n nto lumber. %he lumber 9ere then loaded n pet t oner)s trucF and hauled to pet t oner)s docF at $sabela, Eas lan, 9here Jose "ub a, pet t oner)s checFer, checFed the same and prepared a summary or recap tulat on from the tally sheets. +et t oner reta ned a copy of the recap tulat on and for9arded four cop es to &'!'D)s off ce at $sabela, Eas lan. %he tally sheets and the correspond ng recap tulat ons 9ere marFed E1h b ts ,H,, ,H@11,, to ,H@182a,. %he lumber p eces belong ng to pet t oner 9h ch 9ere depos ted at pet t oner)s docF at $sabela, Eas lan, 9ere sold thru contracts e1ecuted by &'!'D 9 th d fferent buyers n Man la and the contracts rec ted among others that sa d lumber 9as ,the t mber of Amer can "ubber 'ompany,. /E1hs. ,7@162,, ,#@1<2,, ,10@B24@b,0 &'!'D ssued n behalf of pet t oner sales nvo ces to sa d buyers. +et t oner re mbursed &'!'D for transportat on, handl ng and other e1penses advanced by the latter. After &'!'D had sh pped to Man la buyers the lumber marFed ,A"'D,, b lls of lad ng 9ere ssued n favor of &'!'D as sh pper and cons gnee. $n some b lls of lad ng, pet t oner appears as sh pper and &'!'D as cons gnee. /t.s.n. pp. 2>8@26<0 &'!'D nsured the lumber aga nst mar ne r sFs of loss or damage occurr ng 9h le n trans t from pet t oner)s docF at Eas lan to Man la. %he prem ums 9ere allegedly pa d by t although t s the content on of respondent that these prem um payments 9ere re mbursed by A"'D. After del very of the lumber sold by &'!'D n behalf of pet t oner, &'!'D sent to pet t oner)s Man la off ce l =u dat on statements of sa d lumber sh pped to Man la /t.s.n. pp. 480@4810 9h ch papers cons sted of statements of lumber costs, banF depos t sl ps, b lls of lad ng and lumber sales contracts. /t.s.n. 4824860 &'!'D n maF ng the sales, charged and collected a 8R comm ss on 9h ch 9as deducted from the gross sales. ! Fe9 se t deducted fre ght, unload ng and trucF ng

charges from the proceeds of sale and the balance 9as depos ted by &'!'D 9 th pet t oner)s banF account O at the Nat onal ' ty EanF of Ne9 HorF. &'!'D prov ded tself 9 th the pr v lege ta1 rece pt and pa d percentage ta1es as commerc al broFers dur ng the per od n =uest on. /p. <<1 '%A rec.0 Dn or about August 22, 158<, #eneral Enterpr ses, $nc., a local bus ness f rm 9 th off ces at Eas lan ' ty, entered nto a contract 9 th pet t oner 9here n t appears that the #eneral Enterpr ses $nc. agreed to sh p to Japan, && ,%amon Maru, under EM! No. 1 voyage No. >, 400,000 bd. ft. of round ap tong logs for 9h ch #eneral Enterpr ses pa d the sum of +<2,000.00 to pet t oner. %he latter d d not declare th s sale nor d d t pay the sales ta1 therefor. /p. <2 +et t oner)s Er ef0 Jose 'abrera, agent of the Eureau of $nternal "evenue, conducted the nvest gat on on pet t oner company)s bus ness transact ons for the years 1545 to 158<, and as a result of th s nvest gat on an assessment 9as recommended. Dn 7ebruary 11, 1588, pet t oner 9as assessed for alleged def c ency sales ta1 and surcharge n the sum of +>>,022.22, tem Aed as follo9s? #ross sales for 1545 O +541,216.<2 8R ta1 due !ess? %a1es pa d Def c ency sales ta1 +42,0>0. 52 <>,805.8 4 +10,881. <6

#ross sales for 1580 O +1,200,<06.85 8R ta1 due !ess? %a1es pa d Def c ency sales ta1 +68,018. 4< ><,882.4 2 +21,482. 5>

#ross sales for 1581 O +1,20<,2<>.25 8R ta1 due +>0,16>. 61

!ess? %a1es pa d Def c ency sales ta1

42,<05.2 4 +12,622. 02

#ross sales for 1582 O +1>4,254.54 8R ta1 due !ess? %a1es pa d Def c ency sales ta1 +6,214.2 8 >,280.26 +1,5>4.4 2

#ross sales for 158< O +<2,000.00 8R ta1 due 1,>00.00

%otal def c ency sales ta1 brought for9ard 28R surcharge Add? 3npa d 28R surcharge for the 4th =uarter of 1582

+46,480. 66

12,112.2 2

8>4.12 +>1,122. 22

+enalty for fa lure to pay on t me +enalty for us ng general -ournal

4,648.00

and ledger n loose form 9 thout 9r tten author ty of E$" 80.00

%D%A!

+>>,022. 22

Dn July 28, 1588, pet t oner f led a pet t on for rev e9 of the assessment 9 th the 'ourt of %a1 Appeals. Dn July 22, 1588, '%A ordered respondent 'omm ss oner /E$"0 to f le an ans9er to the pet t on for rev e9. %he 'omm ss oner by 9ay of spec al defense pleaded that respondent '%A had no -ur sd ct on over the case. After a prel m nary hear ng on the ssue of -ur sd ct on and after the subm ss on by the part es of the r respect ve memoranda, the '%A on August 28, 158>, resolved that t has -ur sd ct on over the case. /pp. 22, 60 '%A rec.0 "espondent 'omm ss oner sought a rev e9 by certiorari on the ssue of -ur sd ct on, #.". No. !@11>12. %h s 'ourt susta ned the -ur sd ct on of respondent '%A 9h ch then proceeded 9 th the tr al of th s case on the mer ts. Dn July <1, 15>8, the respondent court handed do9n ts dec s on mod fy ng the assessment of the 'omm ss oner, the d spos t ve port on of 9h ch reads? 7D" %BE 7D"E#D$N# 'DN&$DE"A%$DN&, the dec s on appealed from s hereby mod f ed, and pet t oner s hereby ordered to pay the sum of +42,<24.<6, represent ng def c ency sales ta1 and surcharge on ts sales of lumber dur ng the years 1580, 1581, 1582 and 158<, 9 th n <0 days from the date th s dec s on becomes f nal. ( thout pronouncement as to costs. Dn Dctober 2, 15>8, pet t oner f led 9 th the respondent court a mot on for recons derat on 9h ch 9as den ed n ts resolut on dated Apr l 20, 15>>. Dn Apr l 22, 15>>, pet t oner f led th s pet t on for rev e9, ass gn ng the follo9 ng errors? 1. "espondent court erroneously held that &'!'D 9as an agent of pet t oner n the =uest oned sales of lumberI 2. Assum ng, arguendo, that &'!'D 9as an agent of the pet t oner n the =uest oned sales of lumber, respondent court erred? /a0 $n not correctly comput ng the gross sales pr ce of the lumber to the e1tent of the ,d scounts, prov ded n the contract of sale for broFen p eces and short del ver esI /b0 $n not deduct ng pet t oner)s cost n ac=u r ng t tle to the logs cut from the 3+ !and #rant and the &'!'D forest concess on.

<. Assum ng arguendo, that &'!'D 9as an agent of the pet t oner n the =uest oned sales of lumber, respondent court erred n assess ng pet t oner for the years 1580 to 1582? /a0 Dn the bas s of the f rst paragraph of &ect on 16> of the Nat onal $nternal "evenue 'ode nstead of the second paragraph of sa d prov s on after enactment of ".A. 866 on &eptember 22, 1580, as amended by ".A. 654 dated June 20, 158<, and the enactment of ".A. No. 4>0 on June 6, 1580I and /b0 Dn the fre ght, handl ng and other e1penses n the transportat on of the lumber and logs from Eas lan to Man la. 4. Assum ng, arguendo, that &'!'D 9as an agent of pet t oner n the =uest oned sales of lumber, respondent court erred n rely ng upon ev dence perta n ng to the sales of lumber n 1545 and n overlooF ng or gnor ng the ev dence perta n ng to the sales of lumber dur ng the years 1580@82 n dec d ng 9hether there are sales ta1es payable for sa d years. 8. "espondent court erred n f nd ng as a fact that t 9as not pet t oner but the #eneral Enterpr ses, $nc. that 9as the sh pper of the logs nvolved n the assessment for 158<. %hrust upon 3s, therefore, for resolut on s the =uest on of 9hether or not the 'ourt of %a1 Appeals correctly aff rmed the assessment of the 'omm ss oner as regards pet t oner)s alleged def c ency sales ta1 and surcharge. $ "egard ng the f rst ass gned error, t s the content on of pet t oner that based on the ,!etter Agreement, E1h. ,G,supra, e1ecuted bet9een &'!'D and A"'D, t s clear and ev dent that there e1 sted no contract of agency but rather a contract of purchase and sale or a contract for a p ece of 9orF. (e bel eve other9 se and susta n respondent courts) theory of agency as the controll ng relat onsh p bet9een pet t oner and &'!'D. As a general rule the essence of a contract determ nes 9hat la9 should apply to the relat on bet9een the part es and not 9hat the part es prefer to call that relat onsh p. Bo9ever, only the acts of the contract ng part es, subse=uent to and n connect on 9 th the e1ecut on of the contract, must be cons dered for the purpose of nterpret ng the same. A careful rev e9 of the volum nous records of the '%A reveals these facts? /a0 that after the del very of the logs of pet t oner at $sabela, Eas lan, &'!'D undertooF the transportat on of lumber from $sabela, Eas lan, to Man la and pa d the fre ght charges but 9h ch e1penses 9ere re mbursed by pet t oner. /t.s.n. 861@86< Col. 11 '%A rec.0 %he buyers n turn re mbursed the pet t oner for the transportat on, handl ng and other e1penses n the amount of +<8.00 per 1,000 bd. ft. 9h ch 9ere advanced by the seller. /t.s.n. 861@86<, ><0@><4, >4<, >44@>4>, 228@2<80 %he b lls of lad ng cover ng the sh pments 9ere e ther cons gned to A"'D or to &'!'D. &a d b lls of lad ng sho9 that the purchase pr ce ncludes not only the cost but also the fre ght, trucF ng, unload ng and other e1penses. %hese facts d sproved the content on of pet t oner that after del very of ts logs at $sabela,

Eas lan, o9nersh p passed to &'!'D and ,there ends the r bus ness 9 th the lumber., /t.s.n. pp. 4824860I /b0 that &'!'D after sell ng pet t oner)s lumber collected payment of the same and rem tted the proceeds of the sale to pet t oner by depos t ng sa d proceeds 9 th pet t oner)s banF. /t.s.n. p. 422 Col. $$ '%A rec.0 $n th s connect on too, a letter of transm ttal dated June 2, 1545, 9as sho9n, the contents of 9h ch are hereunder reproduced? /E1h. ,7@111,0 Dr. J. (. &trong Amer can "ubber 'o. Eas lan ' ty Dear Dr. &trong. Bere9 th please f nd the dupl cate sl p n the amount of +1<,1>8.41 cover ng proceeds from sale of lumber you sh pped to us on the Northern Ba9Fer on May 18, 1545. Enclosed also are the statement of proceeds, b ll to the customer and the correspond ng sales contract. (e bel eve that for the present and n the mmed ate future the pr ce of lumber n the Man la marFet s f 1ed at +1<8.00 per M bd. ft. for (h te !auan and Ap tong and +188.00 for "ed !auan. (e hope that there 9 ll further be no slump n pr ces, the supply and demand at th s t me be ng almost about r ght. (e m ght be a l ttle too opt m st c but t s our o9n bel ef that pr ces 9 ll no longer go further do9n, not9 thstand ng the ra ny season 9h ch has already started to set n, because of the clos ng of some of the small m lls. Cer y trul y yo urs , &ta . 'la ra !u mb er 'o. , $nc . Ey /sg d0 M.

Da A #e ner al Ma na ger Dn cross e1am nat on of Mr. "o=ue de !eon, representat ve of A"'D, regard ng the afore=uoted transm ttal letter, th s 9 tness 9ho earl er =ual f ed h mself to be the ,No. 2 man, of A"'D, 9ho has been employed 9 th the f rm for =u te a long t me and s supposed to have been , n the Fno9,, 9as caught n a =uagm re and pleaded gnorance of the part cular transact on and apolog Aed )that he 9as a mere subord nate to Dr. &trong and the latter made orders). /t.s.n. pp. 86>@862 Col. $$ '%A rec.0I /c0 $n compensat on for ts serv ces, &'!'D, charged 8R comm ss on on ts sales of pet t oner)s lumber for 9h ch t prov ded tself 9 th the pr v lege ta1 rece pt and pa d percentage ta1 as commerc al broFer. /E1h. ,1>,, p. <<1 '%A rec.0 Anent the ,comm ss on,, pet t oner cla ms that &'!'D 9as ts spec al customer ent tled to a 8R comm ss on and n support thereof pet t oner c ted the cases of Quiroga vs. $arsons, <6 +h l. 801 and $uyat and Sons, :nc. vs. AR.= Amusement .o., 22 +h l. 402. (e have gone over sa d cases and (e found that they are not on all fours 9 th the case at bar because n both a contract of purchase and sale, clear on ts face, e1 sted bet9een the part esI /d0 &'!'D b lled 8R sales ta1 as a separate tem n the nvo ce ssued by t to the Man la buyers. As found by the respondent court /Dec s on '%A, +. 464 '%A rec.0? ,7or nstance, n $nvo ce No. 486>, dated August 25, 1545, cover ng a sale of lumber to the Ne9 Man la !umber 'o. /E1h. ,7@16>, pp. 24@28 Memo for +et t oner0, the sales ta1 of 8R n the sum of +525.8> 9as b lled as a separate tem n the nvo ce. $f as alleged, the lumber 9as sold by pet t oner to &ta 'lara !umber 'o., the resale of sa d lumber by the latter to the Ne9 Man la !umber 'o. s not sub-ect to sales ta1 as t 9as not an or g nal sale. %he fact that the nvo ce sho9s that the sales ta1 9as b lled to the purchaser /Ne9 Man la !umber 'o.0 conclus vely sho9s that the sale 9as made by &ta. 'lara !umber 'o. for pet t oner and not for ts o9n account., %h s s a f nd ng of fact 9h ch (e do not d sturb as there s no sho9 ng of abuse on the part of respondent court 9h ch 9ould 9arrant a rev e9 thereof. (e have l Fe9 se gone over the three volumes of stenograph c notes taFen dur ng the hear ng before the respondent court and noted the test mony of Mr. "o=ue de !eon of A"'D 9ho stated that t has been the pract ce of the r company to ssue sales nvo ces 9henever a sale 9as made as per re=u rement of the la9. /t.s.n. p. 461 Col. $$, '%A rec.0 Bo9ever, 9 th regard to th s part cular transact on bet9een &'!'D and A"'D nvolv ng lumber, no sales nvo ce 9as ssued but nstead tally sheets 9ere prepared. (hen =uer ed 9hy, Mr. de !eon m serably fa led to offer an e1planat on e1cept for h s usual and tr te e1cuse that ,he d d not Fno9 the reason for such procedure and that he 9as a mere subord nate and could not =uest on Dr. &trong)s 9 shes., %he reason, (e bel eve, 9hy pet t oner d d not ssue sales nvo ces s the fact that &'!'D acted only as agent of pet t oner as sho9n by the aforement oned c rcumstances surround ng the transact ons bet9een the pet t oner and &'!'D. $$ Dn, the second ass gned error, (e cannot see Dur 9ay clear to pet t oner)s content on that the cost n ac=u r ng t tle to the logs cut by pet t oner from the

3+ !and #rant and the &ta. 'lara !umber 'o. % mber 'oncess on should have been deducted pursuant to &ect on 16> of the Nat onal $nternal "evenue 'ode. 1 Apart from the forest charges 9h ch the 3+ b lled aga nst &'!'D on t mber cut by pet t oner and 9h ch charges pet t oner pa d bacF &'!'D, there s no sho9 ng n the record that the logs 9ere prev ously sub-ected to sales ta1 pa d by the 3+ or the &'!'D. 7orest charges are d fferent from sales ta1 as prov ded for n the %a1 'ode. As regards the alleged d scounts granted by &'!'D to ts Man la buyers, aga n pet t oner cla ms that the 'ourt of %a1 Appeals erred n comput ng def c ency sales ta1 and 28R surcharge on the gross sell ng pr ce of the lumber to the e1tent of these d scounts. (h le t s true ho9ever that there 9as a st pulat on n the sales contract e1ecuted by &'!'D 2 , on behalf of pet t oner, 9 th the Man la buyers that a d scount shall be g ven on short del ver es etc., yet from the &'!'D)s !umber E ll charged aga nst the Man la buyers, no such d scount appeared to have been g ven. %h s s ev denced by the sample document reproduced by no less than +et t oner h mself n ts Er ef /pp. <2@<40. +N&phO+.>Pt $$$ 3nder the th rd ass gned error, pet t oner contends that the def c ency sales ta1 for the years 1580 to 1582 should have been assessed on the bas s of the second paragraph of &ect on 16> 9h ch prov des for a spec al treatment of operators or propr etors of sa9m lls 9hose sales ta1 l ab l ty s computed on a <<@1M<R of the gross cost of logs purchased dur ng any g ven month ntended for manufacture nto lumber, nstead of under the f rst paragraph thereof. +et t oner)s theory s tenable f he 9ere a mere sa9m ll operator. "ecord sho9s, ho9ever, that pet t oner not only logged areas controlled by &'!'D dur ng the years 1580 through 158< but t l Fe9 se logged from ts o9n concess on. As 9as stated earl er /pp. 1 N 2 supra0, pet t oner 9as n the bus ness of produc ng logs and lumber for sale, 9h ch logs he ac=u red from the concess on of &'!'D and also from ts o9n forest concess on duly l censed by the Eureau of 7orestry /Drd nary % mber ! cense No. 2128@"ene9al ssued on May <1, 1542, n favor of pet t oner and e1tended up to June 15820. +et t oner therefore, be ng a forest concess ona re as 9ell as a sa9m ll operator clearly falls under, and s sub-ect to, the f rst paragraph of &ect on 16> 9h ch prov des? A sa9m ll operator 9ho s at the same t me a holder of an ord nary t mber l cense s sub-ect to the 2R sales ta1 on h s gross sales of h s lumber produced by h s sa9m ll. $t s also note9orthy that the second paragraph of &ect on 16> 9h ch prov des for a lesser ta1 9as subse=uently deleted by ".A. >110 made effect ve n &eptember 15>5. Ey v rtue of the delet on, the sales ta1 payable by th s class of ta1payers shall no9 be computed as prov ded for n the f rst and only rema n ng paragraph of the sect on. ! Fe9 se, pet t oner)s content on that the 'ourt of %a1 Appeals erred n assess ng t from 1580 to 1582 on the fre ght, handl ng and other e1penses, s devo d of mer t. &ect on 16> of the %a1 'ode, e1pl c tly prov des that the fre ght charges and e1penses of trucF ng are cons dered part of the gross sell ng pr ce. Dn the term ,actual sell ng pr ce or gross value n money, on 9h ch &ect on 16> of the

%a1 'ode assesses the merchant)s percentage or sales ta1, Mr. Jose AraQas, a ta1 e1pert and former 'omm ss oner of $nternal "evenue, 9r tes? 3 %h s s gn f es the sum st pulated as the e=u valent of the th ng sold and also every nc dent taFen nto cons derat on for the f 1 ng of the pr ce, put to the deb t of the vendee and agreed to by h m. $n other 9ords, the ta1 s based not only on the actual cost of product on of the goods and the prof t added thereto by the vendor to maFe up ts m ll or factory pr ce of the merchand se, but also upon each and every nc dent e1pense taFen nto account charged to and pa d by the vendee, 9hether or not the former maFes add t onal prof t on these nc dental tems. $t s ev dent on the record that pet t oner sold the lumber and that t tle to the lumber t sold passed to the buyer n Man la and not n Eas lan, contrary to the terms of the sales contract e1ecuted by and bet9een &'!'D and the buyers n Man la. +et t oner pa d sales ta1 only on the net sell ng pr ce of the lumber, .e., on the gross sell ng pr ce, less fre ght, trucF ng, handl ng and other e1penses 9h ch formed part of sa d gross sell ng pr ce. %he def c ency sales ta1 n =uest on 9as on the fre ght charges and other e1penses of trucF ng and unload ng advanced by &'!'D and b lled to the buyer n Man la. $f pet t oner ntended to consummate the sale of lumber at the po nt of or g n n Eas lan, and not at the po nt of dest nat on n Man la, (e see no reason 9hy pet t oner, thru ts agent &'!'D, assumed the payment of the handl ng, transportat on and other e1penses from Eas lan to Man la not9 thstand ng the ,7DE, nature of the transact on. $n the case of !ehn Meyer and .o. vs. Fangeo, <6 +h l. >02, >08, >0>, the 9ords ,7DE, and ,'$7, 9ere clearly def ned vizR Determ nat on of the place of del very al9ays resolves tself nto a =uest on of fact. $f the contract be s lent as to the person or mode by 9h ch the goods are to be sent, del very by the vendor to a common carr er, n the usual and ord nary course of bus ness, transfers the property to the vendee. A spec f cat on n a contract relat ve to the payment of the fre ght can be taFen to nd cate the ntent on of the part es n regard to the place of del very. $f the buyer s to pay the fre ght, t s reasonable to suppose that he does so because the goods become h s at the po nt of sh pment. Dn the other hand, f the seller s to pay the fre ght the nference s e=ually strong that the duty of the seller s to have the goods transported to the r ult mate dest nat on and the t tle to property does not pass unt l the goods have reached the r dest nat on. '$7 stand for costs, nsurance and fre ght. %hey s gn fy that the pr ce f 1ed covers not only the costs of the goods, but the e1pense of fre ght and nsurance to be pa d by the seller. 7DE means that the seller shall bear all e1penses unt l the goods are del vered 9here they are to be 7DE. Accord ng as to 9hether the goods are to be del vered 7DE at the po nt of sh pment or at the po nt of dest nat on determ nes the t me 9hen property passes. Eoth of the terms '$7 and 7DE merely maFe rules of presumpt on 9h ch y eld to proof of contrary ntent on. %he =uest on s one of ntent, to be ascerta ned by a cons derat on of all c rcumstances.

3nder the sales contract bet9een &'!'D and the Man la buyers, t s sho9n that pet t oner 9as the o9ner and seller of the lumber sold and that the transportat on, handl ng and other e1penses from Eas lan to Man la 9ere pa d by the seller. $nvolv ng the same sh pment covered by the sales contract, supra, s the l =u dat on statement 9h ch (e also =uote hereunder, sho9 ng that pet t oner pa d for transportat on handl ng and other e1penses from Eas lan to Man la. &ta. 'lara !umber 'o., $nc. 801 %ecson, Man la Dctober 18, 1580 &tatement of Arcos !umber +er MM& %urFs head O &ept. 12, 1580 12580> O Eoard 7t. O (h te lauan at O +1>0.00 O +.M. O +20,220.58 2825 , , , , &tr ps 112.00 , 266.68 486> , , , , &horts 5>.00 , 440.2> <548< , , Ap tong 1>0.00 , >,<12.46 665 , , , &tr ps 112.00 , 55.82 1058 , , , &horts 5>.00 , 108.12 6<218 , , "ed !auan 160.00 , 18,0>6.20 1425 , , , &tr ps 12>.00 , 160.08 2402 , , , &horts 106.00 , 258.5> 2>8>85 board feet +4<,428.5> !ess 1M2R d scount on short del very and badly broFen p eces 212.<6 +4<,286.81 8R comm ss on 2,1>2.5< +41,058.>4 Deduct e1penses? 7re ght charges on 2>88>5 bd. ft.I at +16.20 +.M. +4,6<4.55 Add t onal charges on 2>8>85 bd. ft. 155.24 3nload ng charges at 2>8>85 bd. ft. at +4.00 +.M. 1,0>2.>4 %rucF ng charges on 2>88>5 bd. ft. at +6.00 +.M. 2,128.22 %otal +6,222.14 Ealance due A"'D +<2,62<.80 'ert f ed 'orrect? /&gd.0 M. D aA

#eneral Manager %he balance of +<2,62<.80 due to pet t oner 9as depos ted 9 th the account of pet t oner after deduct on of e1penses advanced by &'!'D as ts agent, sho9 ng that the lumber 9ere sold by pet t oner. /E1h b t ,#, and ,10@B,, Depos t sl p p. 282I E1h b t ,15@ E,, Account &ales 1580 Col. $$.0 And s nce the fre ght charges, unload ng, trucF ng and other nc dental e1penses formed part of the sell ng pr ce of the lumber sold by &'!'D on behalf of the pet t oner, the latter s l able for the payment of the def c ency sales ta1. %h s s amply e1pla ned as follo9s? %he sales ta1 s based on the gross and not on the sell ng pr ce. &uch be ng the case, the sales ta1 necessar ly reaches the cost of manufacture and overhead e1penses of the ta1payer, because n determ n ng h s gross sell ng pr ce the ta1payer taFes nto account these tems. (hatever maybe the theory beh nd the sales ta1 la9 s mmater al n the enforcement of the la9. %he la9 s =u te clear and s mply has to be enforced. /AraQas, Annotat on and Jur sprudence on the Nat onal $nternal "evenue 'ode, pp. 5> and 52, 1520 Ed.0 $C !astly, the pet t oner cla ms that t sh pped logs to Japan on the && ,%AMDN MA"3, No. 1> on August 22, 158<, and, therefore, on th s part cular transact on, be ng an e1port sale, no percentage ta1 should be collected. $t s to be noted that the part cular prov s on of the %a1 'ode relat ve to th s matter, as prov ded for n &ect on 16> as amended by ".A. 654, and referred to by the part es, 9as further amended by ".A. >110. $n the latter amendment, th s prov s on on e1port sale 9as deleted. (e can, therefore, safely say that 9 th the delet on of th s prov s on, the leg slators ntended to do a9ay 9 th th s pr v lege. Although &ect on 166 of the %a1 'ode enumerates transact ons and persons not sub-ect to percentage ta1, and letter /e0 thereof prov des? /e0 Art cles sh pped or e1ported abroad by the manufacturer or producer, rrespect ve of any sh pp ng arrangement that may be agreed upon 9h ch may nfluence or determ ne the transfer or o9nersh p of the art cles so e1ported., t has not been sho9n that pet t oner A"'D sh pped the same to Japan on ts o9n account. $nstead 9hat (e found on record are the nvo ce and purchase order /E1hs. ,10@E and 10@',0, sho9 ng that the purchaser d d so, as follo9s? E1h. ,10@', #ENE"A! EN%E"+"$&E&, $N'. 111 111 111 +3"'BA&E CD3'BE" ND. 1>0

AME"$'AN "3EEE" 'D. &E+%EMEE" 2, 158< LAMEDAN#A '$%H +E" &M& %AMDN MA"3 (e purchased from you? 440 p eces O 400,000 bd. ft. Ap tong logs at +>0.00 per thousand bd. ft. +<2,000.00 #ENE"A! EN%E"+"$ &E&, $N'. /sgd0 #eAa +r eder E1h. ,10@E, AME"$'AN "3EEE" 'D. $sabela, Eas lan ' ty No. E1 por t 15@ 8< $NCD$'E &old to #eneral Enterpr ses, $nc. %erms? 'ash aga nst sh pp ng papers Address? 8th 7loor &tate Eldg. Dest nat on? %oFyo, Japan Man la +er && %amon Maru No. 1> 'ustomers Drder No. Del vered to Date &h pped O August 22, 158< MarFs Uty. +art culars 3n t +r ce %otal 111 111 111 'er tf ed 'or rec t an d +a ym ent

Not yet "e ce ve d A" 'D by /&g d0 Jos e At l an o Cc e@ +re sd ent an d #e n. Ma na ger %he afore=uoted documents clearly sho9 a local sale 9h ch maFes pet t oner l able for the sales ta1 assessed. (BE"E7D"E +"EM$&E& 'DN&$DE"ED, th s 'ourt f nds the assessment made by respondent court correct and hereby aff rms ts -udgment in toto. ( thout costs. Ma'alintal, ..9., .astro, 8ernando, !arredo, Ma'asiar, Antonio, Aquino, .oncepcion, 9r. and Martin, 99., concur. 7eehan'ee and Mu>oz $alma, 99., are on leave.

:ootnotes 1 ,&ect on 16>. +ercentage %a1 on &ales of Dther Art cles. O ... +rov ded, %hat 9here the art cles sub-ect to ta1 under th s sect on are manufactured out of mater als l Fe9 se sub-ect to ta1 under th s sect on and 165, the total cost of such mater als, as duly establ shed, shall be deduct ble from the gross sell ng pr ce or gross value n money of such manufactured art cles.,

&%A. '!A"A !3MEE" 'D., $N'. 801 %ecson, Man la ,&A!E& 'DN%"A'%, ,&D!D, %D? Ne9 Man la !umber Man la %he lumber of the Amer can "ubber 'ompany to be sh pped on the &M& ,%urFs Bead, &ept. 12, 1580 to arr ve n &eptember 21st for Man la on the follo9 ng pr ces? (h te !auan at +128.00 MMbd, ft. 7DE Eas lan Ap tong at +128.00 mMbd. ft. 7DE Eas lan "ed !auan at +148.00 mMbd. ft. 7DE Eas lan %E"M& AND 'DND$%$DN& $ %he buyer 9 ll re mburse the seller for transportat on, handl ng and other e1penses n the amount of +<8.00 per 1,000 bd. ft. 9h ch shall be advanced by the seller. $$ +ayment shall be as follo9s? 80R upon rece pt of the sh pp ng papers /E ll of !ad ng and sa9m ll nvo ces0 the balance 9 th n 10 days thereafter. $$$ No d scount on cracFs 9 ll be allo9ed. %9o broFen p eces of > ft. shall be cons dered as one p eceI a broFen p ece of at least 10 ft. shall be cons dered one p ece. $C A d scount of <0R 9 ll be allo9ed on str ps and 40R on shorts. C A d scount shall be g ven on short del ver es of lumberI on over del ver es the average pr ce per p ece shall be charged accord ngly. A#"EED? /&gd0 NE( MAN$!A !3MEE" 'D. 2 AraQas Annotat ons and Jur sprudence on the N!"', 1520 ed., 16> /<0 p. 215. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN'

G.$. No. #73.=11 April 4., 1<11

KE$ ? %/., #(!., pet t oner, vs. J/SE 9. #)NGA!, as Actin" %ommissioner of )nternal $eAenue, respondent. Ross, Selph and .arrascoso for petitioner. =ffice of the Solicitor 2eneral Arturo A. Alafriz, Solicitor Ale"andro !. Afurong and Special Atty. !al#ino 2atdula, 9r. for respondent.

:E$NAN!/, J.: +et t oner *er N 'o., !td. 9ould have us reverse a dec s on of the 'ourt of %a1 Appeals, hold ng t l able as a commerc al broFer under &ect on 154 /t0 of the Nat onal $nternal "evenue 'ode. $ts plea, not9 thstand ng the v gorous effort of ts counsel, s not suff c ently persuas ve. An obstacle, 9ell@n gh nsuperable stands n the 9ay. %he dec s on under rev e9 conforms to and s n accordance 9 th the controll ng doctr ne announced n the recent case of .ommissioner of :nternal Revenue v. .onstantino. 1 %he dec s ve test, as there n set forth, s the retent on of the o9nersh p of the goods del vered to the possess on of the dealer, l Fe here n pet t oner, for resale to customers, the pr ce and terms rema n ng sub-ect to the control of the f rm cons gn ng such goods. %he facts, as found by respondent 'ourt, to 9h ch 9e defer, unm staFably nd cate that such a s tuat on does e1 st. %he -ur d cal conse=uences must nev tably follo9. (e aff rm. $t 9as sho9n that pet t oner 9as assessed by the then 'omm ss oner of $nternal "evenue Melec o ". Dom ngo the sum of +20,222.<< as the commerc al broFer)s percentage ta1, surcharge, and comprom se penalty for the per od from July 1, 1545 to December <1, 158<. %here 9as a re=uest on the part of pet t oner for the cancellat on of such assessment, 9h ch re=uest 9as turned do9n. As a result, t f led a pet t on for rev e9 9 th the 'ourt of %a1 Appeals. $n ts ans9er, the then 'omm ss oner Dom ngo ma nta ned h s stand that pet t oner should be ta1ed n such amount as a commerc al broFer. $n the dec s on no9 under rev e9, promulgated on Dctober 15, 15>2, the 'ourt of %a1 Appeals held pet t oner ta1able e1cept as to the comprom se penalty of +800.00, the amount due from t be ng f 1ed at +15,222.<<. &uch l ab l ty arose from a contract of pet t oner 9 th the 3n ted &tates "ubber $nternat onal, the former be ng referred to as the D str butor and the latter spec f cally des gnated as the 'ompany. %he contract 9as to apply to transact ons bet9een the former and pet t oner, as D str butor, from July 1, 1546 to cont nue n force unt l term nated by e ther party g v ng to the other s 1ty days) not ce. 3 %he sh pments 9ould cover products ,for consumpt on n 'ebu, Eohol, !eyte, &amar, Jolo, Negros Dr ental, and M ndanao e1cept :the; prov nce of Davao,, pet t oner, as D str butor, be ng precluded from d spos ng such products else9here than n the above places unless 9r tten consent 9ould f rst be obta ned from the 'ompany. 4 +et t oner, as D str butor, s re=u red to e1ert every effort to have the sh pment of the products n the ma1 mum =uant ty and to promote n every 9ay the sale thereof. ; %he pr ces, d scounts, terms of payment, terms of del very and other cond t ons of sale 9ere sub-ect to change n the d scret on of the 'ompany. 2

%hen came th s cruc al st pulat on? ,%he 'ompany shall from t me to t me cons gn to the D str butor and the D str butor 9 ll rece ve, accept andMor hold upon cons gnment the products spec f ed under the terms of th s agreement n such =uant t es as n the -udgment of the 'ompany may be necessary for the successful sol c tat on and ma ntenance of bus ness n the terr tory, and the D str butor agrees that respons b l ty for the f nal sole of all goods del vered shall rest 9 th h m. All goods on cons gnment shall rema n the property of the 'ompany unt l sold by the D str butor to the purchaser or purchasers, but all sales made by the D str butor shall be n h s name, n 9h ch the sale pr ce of all goods sold less the d scount g ven to the D str butor by the 'ompany n accordance 9 th the prov s on of paragraph 1< of th s agreement, 9hether or not such sale pr ce shall have been collected by the D str butor from the purchaser or purchasers, shall mmed ately be pa d and rem tted by the D str butor to the 'ompany. $t s further agreed that th s agreement does not const tute D str butor the agent or legal representat ve 4 of the 'ompany for any purpose 9hatsoever. D str butor s not granted any r ght or author ty to assume or to create any obl gat on or respons b l ty, e1press or mpl ed, n behalf of or n the name of the 'ompany, or to b nd the 'ompany n any manner or th ng 9hatsoever., 0 All spec f cat ons for the goods ordered 9ere sub-ect to acceptance by the 'ompany 9 th pet t oner, as D str butor, re=u red to accept such goods sh pped as 9ell as to clear the same through customs and to arrange for del very n ts 9arehouse n 'ebu ' ty. Moreover, orders are to be f lled n 9hole or n part from the stocFs carr ed by the 'ompany)s ne ghbor ng branches, subs d ar es or other sources of 'ompany)s brands. 1 &h pments 9ere to be nvo ced at pr ces to be agreed upon, 9 th the customs dut es be ng pa d by pet t oner, as D str butor, for account of the 'ompany. = Moreover, all resale pr ces, l sts, d scounts and general terms and cond t ons of local resale 9ere to be sub-ect to the approval of the 'ompany and to change from t me to t me n ts d scret on. < %he dealer, as D str butor, s allo9ed a d scount of ten percent on the net amount of sales of merchand se made under such agreement. 1. Dn a date to be determ ned by the 'ompany, the pet t oner, as D str butor, 9as re=u red to report to t data sho9 ng n deta l all sales dur ng the month mmed ately preced ng, spec fy ng there n the =uant t es, s Aes and types together 9 th such nformat on as may be re=u red for account ng purposes, 9 th the 'ompany render ng an nvo ce on sales as descr bed to be dated as of the date of nventory and sales report. As D str butor, pet t oner had to maFe payment on such nvo ce or nvo ces on due date 9 th the 'ompany be ng pr v leged at ts opt on to term nate and cancel the agreement forth9 th upon the fa lure to comply 9 th th s obl gat on. 11 %he 'ompany, at ts o9n e1pense, 9as to Feep the cons gned stocF fully nsured aga nst loss or damage by f re or as a result of f re, the pol cy of such nsurance to be payable to t n the event of loss. +et t oner, as D str butor, assumed full respons b l ty 9 th reference to the stocF and ts safety at all t mesI and upon re=uest of the 'ompany at any t me, t 9as to render nventory of the e1 st ng stocF 9h ch could be sub-ect to change. 13 %here 9as furthermore th s e=ually tell@tale covenant? ,3pon the term nat on or any cancellat on of th s agreement all goods held on cons gnment shall be held by the D str butor for the account of the 'ompany, 9 thout e1pense to the 'ompany, unt l such t me as prov s on can be made by the 'ompany for d spos t on., 14 %he ssue 9 th the 'ourt of %a1 Appeals, as 9 th us no9, s 9hether the relat onsh p thus created s one of vendor and vendee or of broFer and pr nc pal. Not that there 9ould have been the sl ghtest doubt 9ere t not for the categor cal den al n the contract that pet t oner 9as not const tuted as ,the agent or legal

representat ve of the 'ompany for any purpose 9hatsoever., $t 9ould be, ho9ever, to mpart to such an e1press d scla mer a mean ng t should not possess to gnore 9hat s man festly the role ass gned to pet t oner cons der ng the nstrument as a 9hole. %hat 9ould be to lose s ght altogether of 9hat has been agreed upon. %he 'ourt of %a1 Appeals 9as not m sled n the language of the dec s on no9 on appeal? ,%hat the pet t oner *er N 'o., !td. s, by contractual st pulat on, an agent of 3.&. "ubber $nternat onal s borne out by the facts that pet t oner can d spose of the products of the 'ompany only to certa n persons or ent t es and 9 th n st pulated l m ts, unless e1cepted by the contract or by the "ubber 'ompany /+ar. 20I that t merely rece ves, accepts andMor holds upon cons gnment the products, 9h ch rema n propert es of the latter company /+ar. 60I that every effort shall be made by pet t oner to promote n every 9ay the sale of the products /+ar. <0I that sales made by pet t oner are sub-ect to approval by the company /+ar. 120I that on dates determ ned by the rubber company, pet t oner shall render a deta led report sho9 ng sales dur ng the month /+ar. 140I that the rubber company shall nvo ce the sales as of the dates of nventory and sales report /+ar. 140I that the rubber company agrees to Feep the cons gned goods fully nsured under nsurance pol c es payable to t n case of loss /+ar. 180I that upon re=uest of the rubber company at any t me, pet t oner shall render an nventory of the e1 st ng stocF 9h ch may be checFed by an author Aed representat ve of the former /+ar. 180I and that upon term nat on or cancellat on of the Agreement, all goods held on cons gnment shall be held by pet t oner for the account of the rubber company unt l the r d spos t on s prov ded for by the latter /+ar. 150. All these c rcumstances are rreconc lably antagon st c to the dea of an ndependent merchant., 1; Bence ts conclus on? ,Bo9ever, upon analys s of the contract, as a 9hole, together 9 th the actual conduct of the part es n respect thereto, 9e have arr ved at the conclus on that the relat onsh p bet9een them s one of broFerage or agency., 12 (e f nd ourselves n agreement, not9 thstand ng the able br ef f led on behalf of pet t oner by ts counsel. As noted at the outset, 9e cannot heed pet t oner)s plea for reversal. 1. Accord ng to the Nat onal $nternal "evenue 'ode, a commerc al broFer , ncludes all persons, other than mporters, manufacturers, producers, or bona f de employees, 9ho, for compensat on or prof t, sell or br ng about sales or purchases of merchand se for other persons or br ng proposed buyers and sellers together, or negot ate fre ghts or other bus ness for o9ners of vessels or other means of transportat on, or for the sh ppers, or cons gnors or cons gnees of fre ght carr ed by vessels or other means of transportat on. %he term ncludes comm ss on merchants., 10 %he controll ng dec s on as to the test to be follo9ed as to 9ho falls 9 th n the above def n t on of a commerc al broFer s that of .ommissioner of :nternal Revenue v. .onstantino. 11 $n the language of Just ce J. E. !. "eyes, 9ho penned the op n on? ,& nce the company reta ned o9nersh p of the goods, even as t del vered possess on unto the dealer for resale to customers, the pr ce and terms of 9h ch 9ere sub-ect to the company)s control, the relat onsh p bet9een the company and the dealer s one of agency, ... ., 1= An e1cerpt from &al sbury v. ErooFs 1< c ted n support of such a v e9 follo9s? , )%he d ff culty n d st ngu sh ng bet9een contracts of sale and the creat on of an agency to sell has led to the establ shment of rules by the appl cat on of 9h ch th s d ff culty may be solved. %he dec s ons say the transfer of t tle or agreement to transfer t for a pr ce pa d or prom sed s the essence of sale. $f such transfer puts the transferee n the att tude or pos t on of an o9ner and maFes h m l able to the transferor as a debtor for the agreed pr ce, and not merely as an agent 9ho must account for the proceeds of a resale, the transact on s a saleI 9h le

the essence of an agency to sell s the del very to an agent, not as h s property, but as the property of the pr nc pal, 9ho rema ns the o9ner and has the r ght to control sales, f 1 the pr ce, and terms, demand and rece ve the proceeds less the agent)s comm ss on upon sales made.) ,3. %he op n on rel ed on the 9orF of Mechem on &ales as 9ell as Mechem on Agency. ( ll ston and % edman both of 9hom 9rote treat ses on &ales, 9ere l Fe9 se referred to. E=ually relevant s th s port on of the &al sbury op n on? ,$t s d ff cult to understand or apprec ate the necess ty or presence of these mutual re=u rements and obl gat ons on any theory other than that of a contract of agency. &al sbury 9as to furn sh the m ll and put the t mber o9ned by h m nto a marFetable cond t on n the form of lumberI ErooFs 9as to furn sh the funds necessary for that purpose, sell the manufactured product, and account therefor to &al sbury upon the spec f c terms of the agreement, less the compensat on f 1ed by the part es n l eu of nterest on the money advanced and for serv ces as agent. %hese re=u rements and st pulat ons are n tent 9 th any other concept on of the contract. $f t const tutes an agreement to sell, they are mean ngless. Eut they cannot be gnored. %hey 9ere placed there for some purpose, doubtless as the result of def n te antecedent negot at ons therefore, consummated by the f nal 9r tten e1press on of the agreement., 31 Bence the 'onstant no op n on could categor cally aff rm that the mere d scla mer n a contract that an ent ty l Fe pet t oner s not ,the agent or legal representat ve for any purpose 9hatsoever, does not suff ce to y eld the conclus on that t s an ndependent merchant f the control over the goods for resale of the goods cons gned s pervas ve n character. %he 'ourt of %a1 Appeals dec s on no9 under rev e9 pays fealty to such an appl cable doctr ne. 2. No mer t therefore attaches to the f rst error mputed by pet t oner to the 'ourt of %a1 Appeals. Ne ther d d such 'ourt fa l to apprec ate n ts true s gn f cance the act and conduct pursued n the mplementat on of the contract by both the 3n ted &tates "ubber $nternat onal and pet t oner, as 9as contended n the second ass gnment of error. +et t oner ought to have been a9are that there 9as no need for such an n=u ry. %he terms of the contract, as noted, speaF =u te clearly. %here s lacF ng that degree of amb gu ty suff c ent to g ve r se to ser ous doubt as to 9hat 9as contemplated by the part es. A read ng thereof d scloses that the relat onsh p ar s ng therefrom 9as not one of seller and purchaser. $f t 9ere thus ntended, then t 9ould not have ncluded covenants 9h ch n the r total ty 9ould negate the concept of a f rm ac=u r ng as vendee goods from another. $nstead, the st pulat ons 9ere so 9orded as to lead to no other conclus on than that the control by the 3n ted &tates "ubber $nternat onal over the goods n =uest on s, n the language of the 'onstant no op n on, ,pervas ve,. %he ns stence on a relat onsh p opposed to that apparent from the language employed m ght even y eld the mpress on that such a mode of construct on 9as resorted to n order that the appl cab l ty of a ta1 ng statute m ght be rendered nugatory. 'erta nly, such a result s to be avo ded. Nor s t to be lost s ght of that on a matter left to the d scret on of the 'ourt of %a1 Appeals 9h ch has developed an e1pert se n v e9 of ts funct on be ng l m ted solely to the nterpretat on of revenue la9s, th s 'ourt s not prepared to subst tute ts o9n -udgment unless a grave abuse of d scret on s man fest. $t 9ould be to frustrate the ob-ect ve for 9h ch adm n strat ve tr bunals are created f the -ud c ary, absent such a sho9 ng, s to gnore the r appra sal on a matter that forms the staple of the r spec al Aed competence. (h le t s to be adm tted that counsel for pet t oner d d scrut n Ae 9 th care the dec s on under rev e9 9 th

a v e9 to e1pos ng 9hat 9as cons dered ts fla9s, t cannot be sa d that there 9as such a fa lure to apply 9hat the la9 commands as to call for ts reversal. $nstead, 9hat cannot be den ed s that the 'ourt of %a1 Appeals reached a result to 9h ch the 'ourt n the recent 'onstant no dec s on gave the mpr matur of ts approval. (BE"E7D"E, the 'ourt of %a1 Appeals dec s on of Dctober 15, 15>2 s aff rmed. ( th costs aga nst pet t oner. .oncepcion ..9., Reyes, 9.!.%., Dizon, Ma'alintal, Haldivar, .astro, 7eehan'ee, !arredo, 4illamor and Ma'asiar, 99., concur.

:ootnotes 1 !@2852>, 7ebruary 22, 1520, <1 &'"A 225. 2 'ontract bet9een the 3n ted &tates "ubber $nternat onal and pet t oner, par. 1 =uoted n the Dec s on of the 'ourt of %a1 Appeals, Anne1 A to +et t on, p. 2. < :#id., par. 2, p. 2. 4 :#id., par. <, p. 2. 8 :#id., par. 2, p. <. > :#id., par. 6, pp. < and 4. 2 :#id., par. 5, to 4. 6 :#id., par. 10, p. 4. 5 :#id., par. 12, p. 4. 10 :#id., par. 1<, p. 4. 11 :#id., par. 14, p. 8. 12 :#id., par. 18, p. 8. 1< :#id., par. 15, p. >. 14 Dec s on, Anne1 A to the +et t on, pp. 10@11. 18 :#id., p. 10. 1> &ect on 154/t0. 12 !@2852>, 7ebruary 22, 1520, <1 &'"A 225.

16 :#id., p. 268. 15 54 &E 112 /15120. 20 !@2852>, 7ebruary 22, 1520, <1 &'"A 225, 25>. 21 54 &E 112, 116 /15120. "epubl c of the +h l pp nes S&+$E'E %/&$( Man la EN EAN' G.$. No. #7;124= June 3., 1<;1

G/N6A#/ +&8A( ? S/NS, )N%., pet t oner, vs. A$%/ A'&SE'EN( %/'+AN8 Cformerly GnoFn as (eatro ArcoD, respondent. 8eria & %ao for petitioner. 9. 6. 8errier and Daniel Me. 2omez for respondent. #A&$E#, J., %h s s a pet t on for the ssuance of a 9r t of certiorari to the 'ourt of Appeals for the purpose of rev e9 ng ts Amusement 'ompany /formerly Fno9n as %eatro Arco0, pla nt ff@appellant, vs. #onAalo +uyat and &ons. $nc., defendant@appellee., $t appears that the respondent here n brought an act on aga nst the here n pet t oner n the 'ourt of 7 rst $nstance of Man la to secure a re mbursement of certa n amounts allegedly overpa d by t on account of the purchase pr ce of sound reproduc ng e=u pment and mach nery ordered by the pet t oner from the &tarr + ano 'ompany of " chmond, $nd ana, 3.&.A. %he facts of the case as found by the tr al court and conf rmed by the appellate court, 9h ch are adm tted by the respondent, are as follo9s? $n the year 1525, the ,%eatro Arco,, a corporat on duly organ Aed under the la9s of the +h l pp ne $slands, 9 th ts off ce n Man la, 9as engaged n the bus ness of operat ng c nematographs. $n 15<0, ts name 9as changed to Arco Amusement 'ompany. '. &. &almon 9as the pres dent, 9h le A. E. 'oulette 9as the bus ness manager. About the same t me, #onAalo +uyat N &ons, $nc., another corporat on do ng bus ness n the +h l pp ne $slands, 9 th off ce n Man la, n add t on to ts other bus ness, 9as act ng as e1clus ve agents n the +h l pp nes for the &tarr + ano 'ompany of " chmond, $nd ana, 3.&. A. $t 9ould seem that th s last company dealt n c nematographer e=u pment and mach nery, and the Arco Amusement 'ompany des r ng to e=u pt ts c nematograph 9 th sound reproduc ng dev ces, approached #onAalo +uyat N &ons, $nc., thru ts then pres dent and act ng manager, # l +uyat, and an employee named &antos. After some negot at ons, t 9as agreed bet9een the part es, that s to say, &almon and 'oulette on one s de, represent ng the pla nt ff, and # l +uyat

on the other, represent ng the defendant, that the latter 9ould, on behalf of the pla nt ff, order sound reproduc ng e=u pment from the &tarr + ano 'ompany and that the pla nt ff 9ould pay the defendant, n add t on to the pr ce of the e=u pment, a 10 per cent comm ss on, plus all e1penses, such as, fre ght, nsurance, banF ng charges, cables, etc. At the e1pense of the pla nt ff, the defendant sent a cable, E1h b t ,<,, to the &tarr + ano 'ompany, n=u r ng about the e=u pment des red and maF ng the sa d company to =uote ts pr ce 9 thout d scount. A reply 9as rece ved by #onAalo +uyat N &ons, $nc., 9 th the pr ce, ev dently the l st pr ce of S1,200 f.o.b. factory " chmond, $nd ana. %he defendant d d not sho9 the pla nt ff the cable of n=u ry nor the reply but merely nformed the pla nt ff of the pr ce of S1,200. Ee ng agreeable to th s pr ce, the pla nt ff, by means of E1h b t ,1,, 9h ch s a letter s gned by '. &. &almon dated November 15, 1525, formally author Aed the order. %he e=u pment arr ved about the end of the year 1525, and upon del very of the same to the pla nt ff and the presentat on of necessary papers, the pr ce of S1.200, plus the 10 per cent comm ss on agreed upon and plus all the e1penses and charges, 9as duly pa d by the pla nt ff to the defendant. &omet me the follo9 ng year, and after some negot at ons bet9een the same part es, pla nt ff and defendants, another order for sound reproduc ng e=u pment 9as placed by the pla nt ff 9 th the defendant, on the same terms as the f rst order. %h s agreement or order 9as conf rmed by the pla nt ff by ts letter E1h b t ,2,, 9 thout date, that s to say, that the pla nt ff 9ould pay for the e=u pment the amount of S1,>00, 9h ch 9as supposed to be the pr ce =uoted by the &tarr + ano 'ompany, plus 10 per cent comm ss on, plus all e1penses ncurred. %he e=u pment under the second order arr ved n due t me, and the defendant 9as duly pa d the pr ce of S1,>00 9 th ts 10 per cent comm ss on, and S1>0, for all e1penses and charges. %h s amount of S1>0 does not represent actual out@of@pocFet e1penses pa d by the defendant, but a mere flat charge and rough est mate made by the defendant e=u valent to 10 per cent of the pr ce of S1,>00 of the e=u pment. About three years later, n connect on 9 th a c v l case n C gan, f led by one 7 del "eyes aga nst the defendant here n #onAalo +uyat N &ons, $nc., the off c als of the Arco Amusement 'ompany d scovered that the pr ce =uoted to them by the defendant 9 th regard to the r t9o orders ment oned 9as not the net pr ce but rather the l st pr ce, and that the defendants had obta ned a d scount from the &tarr + ano 'ompany. Moreover, by read ng rev e9s and l terature on pr ces of mach nery and c nematograph e=u pment, sa d off c als of the pla nt ff 9ere conv nced that the pr ces charged them by the defendant 9ere much too h gh nclud ng the charges for out@of@pocFet e1pense. 7or these reasons, they sought to obta n a reduct on from the defendant or rather a re mbursement, and fa l ng n th s they brought the present act on. %he tr al court held that the contract bet9een the pet t oner and the respondent 9as one of outr ght purchase and sale, and absolved that pet t oner from the compla nt. %he appellate court, ho9ever, O by a d v s on of four, 9 th one -ust ce d ssent ng O held that the relat on bet9een pet t oner and respondent 9as that of agent and pr nc pal, the pet t oner act ng as agent of the respondent n the purchase of the e=u pment n =uest on, and sentenced the pet t oner to pay the respondent alleged overpayments n the total sum of S1,<<8.82 or +2,>21.04,

together 9 th legal nterest thereon from the date of the f l ng of the compla nt unt l sa d amount s fully pa d, as 9ell as to pay the costs of the su t n both nstances. %he appellate court further argued that even f the contract bet9een the pet t oner and the respondent 9as one of purchase and sale, the pet t oner 9as gu lty of fraud n conceal ng the true pr ce and hence 9ould st ll be l able to re mburse the respondent for the overpayments made by the latter. %he pet t oner no9 cla ms that the follo9 ng errors have been ncurred by the appellate court? $. El %r bunal de Apelac ones ncurr o en error de derecho al declarar =ue, segun hechos, entre la recurrente y la recurr da e1 st a una relac on mpl c ta de mandatar a a mandante en la transacc on de =ue se trata, en veA de la de vendedora a compradora como ha declarado el JuAgado de +r mera $nstnc a de Man la, pres d do entonces por el hoy Mag strado Bonorable Marcel no Montemayor. $$. El %r bunal de Apelac ones ncurr o en error de derecho al declarar =ue, supon endo =ue d cha relac on fuerra de vendedora a compradora, la recurrente obtuvo, med ante dolo, el consent m ento de la recurr da en cuanto al prec o de S1,200 y S1,>00 de las ma=u nar as y e=u pos en cuest on, y condenar a la recurrente ha obten do de la &tarr + ano 'ompany of " chmond, $nd ana. (e susta n the theory of the tr al court that the contract bet9een the pet t oner and the respondent 9as one of purchase and sale, and not one of agency, for the reasons no9 to be stated. $n the f rst place, the contract s the la9 bet9een the part es and should nclude all the th ngs they are supposed to have been agreed upon. (hat does not appear on the face of the contract should be regarded merely as ,dealer)s, or ,trader)s talF,, 9h ch can not b nd e ther party. /NolbrooF v. 'onner, 8> &o., 82>, 11 Am. "ep., 212I EanF v. Erosscell, 120 $$$., 1>1I EanF v. +almer, 42 $$$., 52I Bosser v. 'opper, 6 Allen, <<4I Doles v. Merr ll, 12< Mass., 411.0 %he letters, E1h b ts 1 and 2, by 9h ch the respondent accepted the pr ces of S1,200 and S1,>00, respect vely, for the sound reproduc ng e=u pment sub-ect of ts contract 9 th the pet t oner, are clear n the r terms and adm t no other nterpretat on that the respondent n =uest on at the pr ces nd cated 9h ch are f 1ed and determ nate. %he respondent adm tted n ts compla nt f led 9 th the 'ourt of 7 rst $nstance of Man la that the pet t oner agreed to sell to t the f rst sound reproduc ng e=u pment and mach nery. %he th rd paragraph of the respondent)s cause of act on states? <. %hat on or about November 15, 1525, the here n pla nt ff /respondent0 and defendant /pet t oner0 entered nto an agreement, under and by v rtue of 9h ch the here n defendant 9as to secure from the 3n ted &tates, and sell and del ver to the here n pla nt ff, certa n sound reproduc ng e=u pment and mach nery, for 9h ch the sa d defendant, under and by v rtue of sa d agreement, 9as to rece ve the actual cost pr ce plus ten per cent /10R0, and 9as also to be re mbursed for all out of pocFet e1penses n connect on 9 th the purchase and del very of such e=u pment, such as costs of telegrams, fre ght, and s m lar e1penses. /Emphas s ours.0

(e agree 9 th the tr al -udge that ,9hatever unforseen events m ght have taFen place unfavorable to the defendant /pet t oner0, such as change n pr ces, m staFe n the r =uotat on, loss of the goods not covered by nsurance or fa lure of the &tarr + ano 'ompany to properly f ll the orders as per spec f cat ons, the pla nt ff /respondent0 m ght st ll legally hold the defendant /pet t oner0 to the pr ces f 1ed of S1,200 and S1,>00., %h s s ncompat ble 9 th the pretended relat on of agency bet9een the pet t oner and the respondent, because n agency, the agent s e1empted from all l ab l ty n the d scharge of h s comm ss on prov ded he acts n accordance 9 th the nstruct ons rece ved from h s pr nc pal /sect on 284, 'ode of 'ommerce0, and the pr nc pal must ndemn fy the agent for all damages 9h ch the latter may ncur n carry ng out the agency 9 thout fault or mprudence on h s part /art cle 1225, ' v l 'ode0. (h le the latters, E1h b ts 1 and 2, state that the pet t oner 9as to rece ve ten per cent /10R0 comm ss on, th s does not necessar ly maFe the pet t oner an agent of the respondent, as th s prov s on s only an add t onal pr ce 9h ch the respondent bound tself to pay, and 9h ch st pulat on s not ncompat ble 9 th the contract of purchase and sale. /See Uu roga vs. +arsons Bard9are 'o., <6 +h l., 801.0 $n the second place, to hold the pet t oner an agent of the respondent n the purchase of e=u pment and mach nery from the &tarr + ano 'ompany of " chmond, $nd ana, s ncompat ble 9 th the adm tted fact that the pet t oner s the e1clus ve agent of the same company n the +h l pp nes. $t s out of the ord nary for one to be the agent of both the vendor and the purchaser. %he facts and c rcumstances nd cated do not po nt to anyth ng but pla n ord nary transact on 9here the respondent enters nto a contract of purchase and sale 9 th the pet t oner, the latter as e1clus ve agent of the &tarr + ano 'ompany n the 3n ted &tates. $t follo9s that the pet t oner as vendor s not bound to re mburse the respondent as vendee for any d fference bet9een the cost pr ce and the sales pr ce 9h ch represents the prof t real Aed by the vendor out of the transact on. %h s s the very essence of commerce 9 thout 9h ch merchants or m ddleman 9ould not e1 st. %he respondents contends that t merely agreed to pay the cost pr ce as d st ngu shed from the l st pr ce, plus ten per cent /10R0 comm ss on and all out@ of@pocFet e1penses ncurred by the pet t oner. %he d st nct on 9h ch the respondents seeFs to dra9 bet9een the cost pr ce and the l st pr ce 9e cons der to be spac ous. $t s to be observed that the t9enty@f ve per cent /28R0 d scount granted by the &tarr p ano 'ompany to the pet t oner s ava lable only to the latter as the former)s e1clus ve agent n the +h l pp nes. %he respondent could not have secured th s d scount from the &tarr + ano 'ompany and ne ther 9as the pet t oner 9 ll ng to 9a ve that d scount n favor of the respondent. As a matter of fact, no reason s advanced by the respondent 9hy the pet t oner should 9a ve the 28 per cent d scount granted t by the &tarr + ano 'ompany n e1change for the 10 percent comm ss on offered by the respondent. Moreover, the pet t oner 9as not duty bound to reveal the pr vate arrangement t had 9 th the &tarr + ano 'ompany relat ve to such d scount to ts prospect ve customers, and the respondent 9as not even a9are of such an arrangement. %he respondent, therefore, could not have offered to pay a 10 per cent comm ss on to the pet t oner prov ded t 9as g ven the benef t of the 28 per cent d scount en-oyed by the pet t oner. $t s 9ell Fno9n that local dealers act ng as agents of

fore gn manufacturers, as de from obta n ng a d scount from the home off ce, somet mes add to the l st pr ce 9hen they resell to local purchasers. $t 9as apparently to guard aga nst an e1horb tant add t onal pr ce that the respondent sought to l m t t to 10 per cent, and the respondent s estopped from =uest on ng that add t onal pr ce. $f the respondent later on d scovers tself at the short end of a bad barga n, t alone must bear the blame, and t cannot resc nd the contract, much less compel a re mbursement of the e1cess pr ce, on that ground alone. %he respondent could not secure e=u pment and mach nery manufactured by the &tarr + ano 'ompany e1cept from the pet t oner aloneI t 9 ll ngly pa d the pr ce =uotedI t rece ved the e=u pment and mach nery as representedI and that 9as the end of the matter as far as the respondent 9as concerned. %he fact that the pet t oner obta ned more or less prof t than the respondent calculated before enter ng nto the contract or reduc ng the pr ce agreed upon bet9een the pet t oner and the respondent. Not every concealment s fraudI and short of fraud, t 9ere better that, 9 th n certa n l m ts, bus ness acumen perm t of the loosen ng of the sleeves and of the sharpen ng of the ntellect of men and 9omen n the bus ness 9orld. %he 9r t of certiorari should be, as t s hereby, granted. %he dec s on of the appellate court s accord ngly reversed and the pet t oner s absolved from the respondent)s compla nt n #. ". No. 102<, ent tled ,Arco Amusement 'ompany /formerly Fno9n as %eatro Arco0, pla nt ff@appellant, vs. #onAalo +uyat N &ons, $nc., defendants@appellee,, 9 thout pronouncement regard ng costs. &o ordered. Avance>a, ..9., Diaz, Moran and 0orrilleno, 99., concur. epubl c of the +h l pp nes S&+$E'E %/&$( Man la &E'DND D$C$&$DN

G.$. No. 114.1; January 33, 1<<1 A#:$E! 5A5N, pet t oner, vs. %/&$( /: A++EA#S and 9A8E$S%5E '/(/$EN WE$KE AK()ENGSE##S%5A:( C9'WD, respondents.

'EN!/6A, J.: %h s s a pet t on for rev e9 of the dec s on 1 of the 'ourt of Appeals d sm ss ng a compla nt for spec f c performance 9h ch pet t oner had f led aga nst pr vate respondent on the ground that the "eg onal %r al 'ourt of UueAon ' ty d d not ac=u re -ur sd ct on over pr vate respondent, a nonres dent fore gn corporat on, and of the appellate court)s order deny ng pet t oner)s mot on for recons derat on. %he follo9 ng are the facts?

+et t oner Alfred Bahn s a 7 l p no c t Aen do ng bus ness under the name and style ,Bahn@Man la., Dn the other hand, pr vate respondent Eayer sche Motoren (erFe AFt engesellschaft /EM(0 s a nonres dent fore gn corporat on e1 st ng under the la9s of the former 7ederal "epubl c of #ermany, 9 th pr nc pal off ce at Mun ch, #ermany. Dn March 2, 15>2, pet t oner e1ecuted n favor of pr vate respondent a ,Deed of Ass gnment 9 th &pec al +o9er of Attorney,, 9h ch reads n full as follo9s? (BE"EA&, the A&&$#ND" s the present o9ner and holder of the EM( trademarF and dev ce n the +h l pp nes 9h ch A&&$#ND" uses and has been us ng on the products manufactured by A&&$#NEE, and for 9h ch A&&$#ND" s the author Aed e1clus ve Dealer of the A&&$#NEE n the +h l pp nes, the same be ng ev denced by cert f cate of reg strat on ssued by the D rector of +atents on 12 December 15>< and s referred to as %rademarF No. 10>28I (BE"EA&, the A&&$#ND" has agreed to transfer and conse=uently record sa d transfer of the sa d EM( trademarF and dev ce n favor of the A&&$#NEE here n 9 th the +h l pp nes +atent Dff ceI ND( %BE"E7D"E, n v e9 of the forego ng and n cons derat on of the st pulat ons hereunder stated, the A&&$#ND" hereby aff rms the sa d ass gnment and transfer n favor of the A&&$#NEE under the follo9 ng terms and cond t ons? 1. %he A&&$#NEE shall taFe appropr ate steps aga nst any user other than A&&$#ND" or nfr nger of the EM( trademarF n the +h l pp nesI for such purpose, the A&&$#ND" shall nform the A&&$#NEE mmed ately of any such use or nfr ngement of the sa d trademarF 9h ch comes to h s Fno9ledge and upon such nformat on the A&&$#ND" shall automat cally act as Attorney@$n@7act of the A&&$#NEE for such case, 9 th full po9er, author ty and respons b l ty to prosecute un laterally or n concert 9 th A&&$#NEE, any such nfr nger of the sub-ect marF and for purposes hereof the A&&$#ND" s hereby named and const tuted as A&&$#NEE)s Attorney@ $n@7act, but any such su t 9 thout A&&$#NEE)s consent 9 ll e1clus vely be the respons b l ty and for the account of the A&&$#ND", 2. %hat the A&&$#ND" and the A&&$#NEE shall cont nue bus ness relat ons as has been usual n the past 9 thout a formal contract, and for that purpose, the dealersh p of A&&$#ND" shall cover the A&&$#NEE)s complete product on program 9 th the only l m tat on that, for the present, n v e9 of A&&$#NEE)s l m ted product on, the latter shall not be able to supply automob les to A&&$#ND". +er the agreement, the part es ,cont nue:d; bus ness relat ons as has been usual n the past 9 thout a formal contract., Eut on 7ebruary 1>, 155<, n a meet ng 9 th a EM( representat ve and the pres dent of 'olumb a Motors 'orporat on /'M'0, Jose AlvareA, pet t oner 9as nformed that EM( 9as arrang ng to grant the e1clus ve dealersh p of EM( cars and products to 'M', 9h ch had e1pressed nterest n ac=u r ng the same. Dn 7ebruary 24, 155<, pet t oner rece ved conf rmat on of the nformat on from EM( 9h ch, n a letter, e1pressed d ssat sfact on 9 th var ous aspects of pet t oner)s bus ness, ment on ng among

other th ngs, decl ne n sales, deter orat ng serv ces, and nade=uate sho9room and 9arehouse fac l t es, and pet t oner)s alleged fa lure to comply 9 th the standards for an e1clus ve EM( dealer. 3 Nonetheless, EM( e1pressed 9 ll ngness to cont nue bus ness relat ons 9 th the pet t oner on the bas s of a ,standard EM( mporter, contract, other9 se, t sa d, f th s 9as not acceptable to pet t oner, EM( 9ould have no alternat ve but to term nate pet t oner)s e1clus ve dealersh p effect ve June <0, 155<. +et t oner protested, cla m ng that the term nat on of h s e1clus ve dealersh p 9ould be a breach of the Deed of Ass gnment. 4 Bahn ns sted that as long as the ass gnment of ts trademarF and dev ce subs sted, he rema ned EM()s e1clus ve dealer n the +h l pp nes because the ass gnment 9as made n cons derat on of the e1clus ve dealersh p. $n the same letter pet t oner e1pla ned that the decl ne n sales 9as due to lo9er pr ces offered for EM( cars n the 3n ted &tates and the fact that fe9 customers returned for repa rs and serv c ng because of the durab l ty of EM( parts and the eff c ency of pet t oner)s serv ce. Eecause of Bahn)s ns stence on the former bus ness relat on, EM( 9 thdre9 on March 2>, 155< ts offer of a ,standard mporter contract, and term nated the e1clus ve dealer relat onsh p effect ve June <0, 155<. ; At a conference of EM( "eg onal $mporters held on Apr l 2>, 155< n & ngapore, Bahn 9as surpr sed to f nd AlvareA among those nv ted from the As an reg on. Dn Apr l 25, 155<, EM( proposed that Bahn and 'M' -o ntly mport and d str bute EM( cars and parts. Bahn found the proposal unacceptable. Dn May 14, 155<, he f led a compla nt for spec f c performance and damages aga nst EM( to compel t to cont nue the e1clus ve dealersh p. !ater he f led an amended compla nt to nclude an appl cat on for temporary restra n ng order and for 9r ts of prel m nary, mandatory and proh b tory n-unct on to en-o n EM( from term nat ng h s e1clus ve dealersh p. Bahn)s amended compla nt alleged n pert nent parts? 2. Defendant :EM(; s a fore gn corporat on do ng bus ness n the +h l pp nes 9 th pr nc pal off ces at Mun ch, #ermany. $t may be served 9 th summons and other court processes through the &ecretary of the Department of %rade and $ndustry of the +h l pp nes. . . . 111 111 111 8. Dn March 2, 15>2, +la nt ff e1ecuted n favor of defendant EM( a Deed of Ass gnment 9 th &pec al +o9er of Attorney cover ng the trademarF and n cons derat on thereof, under ts f rst 9hereas clause, +la nt ff 9as duly acFno9ledged as the ,e1clus ve Dealer of the Ass gnee n the +h l pp nes. . .. 111 111 111 6. 7rom the t me the trademarF ,EM( N DEC$'E, 9as f rst used by the +la nt ff n the +h l pp nes up to the present, +la nt ff, through ts f rm name ,BABN MAN$!A, and 9 thout any monetary contr but on from defendant EM(, establ shed EM()s good9 ll and marFet presence n the +h l pp nes. +ursuant thereto, +la nt ff has nvested a lot of money and resources n order to s ngle@handedly compete aga nst other motorcycle and car compan es. . . . Moreover, +la nt ff has bu lt bu ld ngs and other

nfrastructures such as serv ce centers and sho9rooms to ma nta n and promote the car and products of defendant EM(. 111 111 111 10. $n a letter dated 7ebruary 24, 155<, defendant EM( adv sed +la nt ff that t 9as 9 ll ng to ma nta n 9 th +la nt ff a relat onsh p but only ,on the bas s of a standard EM( mporter contract as ad-usted to reflect the part cular s tuat on n the +h l pp nes, sub-ect to certa n cond t ons, other9 se, defendant EM( 9ould term nate +la nt ffs e1clus ve dealersh p and any relat onsh p for cause effect ve June <0, 155<. . . . 111 111 111 18. %he actuat ons of defendant EM( are n breach of the ass gnment agreement bet9een tself and pla nt ff s nce the cons derat on for the ass gnment of the EM( trademarF s the cont nuance of the e1clus ve dealersh p agreement. $t thus, follo9s that the e1clus ve dealersh p should cont nue for so long as defendant EM( en-oys the use and o9nersh p of the trademarF ass gned to t by +la nt ff. %he case 9as docFeted as ' v l 'ase No. U@5<@185<< and raffled to Eranch 104 of the UueAon ' ty "eg onal %r al 'ourt, 9h ch on June 14, 155< ssued a temporary restra n ng order. &ummons and cop es of the compla nt and amended compla nt 9ere thereafter served on the pr vate respondent through the Department of %rade and $ndustry, pursuant to "ule 14, .14 of the "ules of 'ourt. %he order, summons and cop es of the compla nt and amended compla nt 9ere later sent by the D%$ to EM( v a reg stered ma l on June 18, 155< 2 and rece ved by the latter on June 24, 155<. Dn June 12, 155<, 9 thout proof of serv ce on EM(, the hear ng on the appl cat on for the 9r t of prel m nary n-unct on proceeded e parte, 9 th pet t oner Bahn test fy ng. Dn June <0, 155<, the tr al court ssued an order grant ng the 9r t of prel m nary n-unct on upon the f l ng of a bond of +100,000.00. Dn July 1<, 155<, follo9 ng the post ng of the re=u red bond, a 9r t of prel m nary n-unct on 9as ssued. Dn July 1, 155<, EM( moved to d sm ss the case, contend ng that the tr al court d d not ac=u re -ur sd ct on over t through the serv ce of summons on the Department of %rade and $ndustry, because t /EM(0 9as a fore gn corporat on and t 9as not do ng bus ness n the +h l pp nes. $t contended that the e1ecut on of the Deed of Ass gnment 9as an solated transact onI that Bahn 9as not ts agent because the latter undertooF to assemble and sell EM( cars and products 9 thout the part c pat on of EM( and sold other productsI and that Bahn 9as an ndentor or m ddleman transact ng bus ness n h s o9n name and for h s o9n account. +et t oner Alfred Bahn opposed the mot on. Be argued that EM( 9as do ng bus ness n the +h l pp nes through h m as ts agent, as sho9n by the fact that EM( nvo ces and order forms 9ere used to document h s transact onsI that he gave 9arrant es as e1clus ve EM( dealerI that EM( off c als per od cally nspected standards of serv ce rendered by h mI and that he 9as descr bed n

serv ce booFlets and nternat onal publ cat ons of EM( as a ,EM( $mporter, or ,EM( %rad ng 'ompany, n the +h l pp nes. %he tr al court 0 deferred resolut on of the mot on to d sm ss unt l after tr al on the mer ts for the reason that the grounds advanced by EM( n ts mot on d d not seem to be ndub table. ( thout seeF ng recons derat on of the aforement oned order, EM( f led a pet t on for certiorari 9 th the 'ourt of Appeals alleg ng that? $. %BE "E&+DNDEN% J3D#E A'%ED ($%B 3ND3E BA&%E D" D%BE"($&E $NJ3D$'$D3&!H $N +"D'EED$N#& !EAD$N# %D(A"D %BE $&&3AN'E D7 %BE ("$% D7 +"E!$M$NA"H $NJ3N'%$DN, AND $N +"E&'"$E$N# %BE %E"M& 7D" %BE $&&3AN'E %BE"ED7. $$. %BE "E&+DNDEN% J3D#E +A%EN%!H E""ED $N DE7E""$N# "E&D!3%$DN D7 %BE MD%$DN %D D$&M$&& DN %BE #"D3ND D7 !A'* D7 J3"$&D$'%$DN, AND %BE"EEH 7A$!$N# %D $MMED$A%E!H D$&M$&& %BE 'A&E A Q;=. EM( asFed for the mmed ate ssuance of a temporary restra n ng order and, after hear ng, for a 9r t of prel m nary n-unct on, to en-o n the tr al court from proceed ng further n ' v l 'ase No. U@5<@185<<. +r vate respondent po nted out that, unless the tr al court)s order 9as set as de, t 9ould be forced to subm t to the -ur sd ct on of the court by f l ng ts ans9er or to accept -udgment n default, 9hen the very =uest on 9as 9hether the court had -ur sd ct on over t. %he 'ourt of Appeals en-o ned the tr al court from hear ng pet t oner)s compla nt. Dn December 20, 155<, t rendered -udgment f nd ng the tr al court gu lty of grave abuse of d scret on n deferr ng resolut on of the mot on to d sm ss. $t stated? #o ng by the plead ngs already f led 9 th the respondent court before t came out 9 th ts =uest oned order of July 2>, 155<, 9e rule and so hold that pet t oner)s /EM(0 mot on to d sm ss could be resolved then and there, and that the respondent -udge)s deferment of h s act on thereon unt l after tr al on the mer t const tutes, to our m nd, grave abuse of d scret on. 111 111 111 . . . :%;here s not much apprec able d sagreement as regards the factual matters relat ng to the mot on to d sm ss. (hat truly d v de / sic0 the part es and to 9h ch they greatly d ffer s the legal conclus ons they respect vely dra9 from such facts, /sic0 9 th Bahn ma nta n ng that on the bas s thereof, EM( s do ng bus ness n the +h l pp nes 9h le the latter asserts that t s not. %hen, after stat ng that any rul ng 9h ch the tr al court m ght maFe on the mot on to d sm ss 9ould any9ay be elevated to t on appeal, the 'ourt of Appeals tself resolved the mot on. $t ruled that EM( 9as not do ng bus ness n the country and, therefore, -ur sd ct on over t could not be ac=u red through serv ce of summons on the D%$ pursuant to "ule 14, .14. )%he court upheld pr vate respondent)s content on that Bahn acted n h s o9n name and for h s o9n

account and ndependently of EM(, based on Alfred Bahn)s allegat ons that he had nvested h s o9n money and resources n establ sh ng EM()s good9 ll n the +h l pp nes and on EM()s cla m that Bahn sold products other than those of EM(. $t held that pet t oner 9as a mere ndentor or broFer and not an agent through 9hom pr vate respondent EM( transacted bus ness n the +h l pp nes. 'onse=uently, the 'ourt of Appeals d sm ssed pet t oner)s compla nt aga nst EM(. Bence, th s appeal. +et t oner contends that the 'ourt of Appeals erred /10 n f nd ng that the tr al court gravely abused ts d scret on n deferr ng act on on the mot on to d sm ss and /20 n f nd ng that pr vate respondent EM( s not do ng bus ness n the +h l pp nes and, for th s reason, d sm ss ng pet t oner)s case. +et t oner)s appeal s 9ell taFen. "ule 14, .14 prov des? .14. Service upon private foreign corporations . O $f the defendant s a fore gn corporat on, or a nonres dent -o nt stocF company or assoc at on, do ng bus ness n the +h l pp nes, serv ce may be made on ts res dent agent des gnated n accordance 9 th la9 for that purpose, or, f there be no such agent, on the government off c al des gnated by la9 to that effect, or on any of ts off cers or agents 9 th n the +h l pp nes. /Emphas s added0. (hat acts are cons dered ,do ng bus ness n the +h l pp nes, are enumerated n .</d0 of the 7ore gn $nvestments Act of 1551 /".A. No. 20420 as follo9s? 1 d0 the phrase ,do ng bus ness, shall nclude sol c t ng orders, serv ce contracts, open ng off ces, 9hether called ,l a son, off ces or branchesI appointing representatives or distri#utors domiciled in the $hilippines or 9ho n any calendar year stay n the country for a per od or per ods totall ng one hundred e ghty /1600 days or moreI part c pat ng n the management, superv s on or control of any domest c bus ness, f rm, ent ty or corporat on n the +h l pp nesI and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that e tent the performance of acts or &or's, or the e ercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and o#"ect of the #usiness organization? +rov ded, ho9ever, %hat the phrase Qdoing #usinessQ shall not #e deemed to include mere nvestment as a shareholder by a fore gn ent ty n domest c corporat ons duly reg stered to do bus ness, andMor the e1erc se of r ghts as such nvestorI nor hav ng a nom nee d rector or off cer to represent ts nterests n such corporat onI nor appointing a representative or distri#utor domiciled in the $hilippines &hich transacts #usiness in its o&n name and for its o&n account. /Emphas s suppl ed0 %hus, the phrase ncludes ,appo nt ng representat ves or d str butors n the +h l pp nes, but not 9hen the representat ve or d str butor ,transacts bus ness n ts name and for ts o9n account., $n add t on, .1/f0/10 of the "ules and "egulat ons mplement ng /$""0 the Dmn bus $nvestment 'ode of 1562 /E.D. No. 22>0 prov ded? /f0 ,Do ng bus ness, shall be any act or comb nat on of acts, enumerated n Art cle 44 of the 'ode. $n part cular, ,do ng bus ness, ncludes?

/10 . . . A fore gn f rm 9h ch does bus ness through m ddlemen act ng n the r o9n names, such as ndentors, commerc al broFers or comm ss on merchants, shall not be deemed do ng bus ness n the +h l pp nes. Eut such ndentors, commerc al broFers or comm ss on merchants shall be the ones deemed to be do ng bus ness n the +h l pp nes. %he =uest on s 9hether pet t oner Alfred Bahn s the agent or d str butor n the +h l pp nes of pr vate respondent EM(. $f he s, EM( may be cons dered do ng bus ness n the +h l pp nes and the tr al court ac=u red -ur sd ct on over t /EM(0 by v rtue of the serv ce of summons on the Department of %rade and $ndustry. Dther9 se, f Bahn s not the agent of EM( but an ndependent dealer, albe t of EM( cars and products, EM(, a fore gn corporat on, s not cons dered do ng bus ness n the +h l pp nes 9 th n the mean ng of the 7ore gn $nvestments Act of 1551 and the $"", and the tr al court d d not ac=u re -ur sd ct on over t /EM(0. %he 'ourt of Appeals held that pet t oner Alfred Bahn acted n h s o9n name and for h s o9n account and not as agent or d str butor n the +h l pp nes of EM( on the ground that ,he alone had contacts 9 th nd v duals or ent t es nterested n ac=u r ng EM( veh cles. $ndependence character Aes Bahn)s undertaF ngs, for 9h ch reason he s to be cons dered, under govern ng statutes, as do ng bus ness., /p. 1<0 $n support of th s conclus on, the appellate court c ted the follo9 ng allegat ons n Bahn)s amended compla nt? 6. 7rom the t me the trademarF ,EM( N DEC$'E, 9as f rst used by the +la nt ff n the +h l pp nes up to the present, +la nt ff, through ts f rm name ,BABN MAN$!A, and 9 thout any monetary contr but ons from defendant EM(, establ shed EM()s good9 ll and marFet presence n the +h l pp nes. +ursuant thereto, +la nt ff nvested a lot of money and resources n order to s ngle@handedly compete aga nst other motorcycle and car compan es. . . . Moreover, +la nt ff has bu lt bu ld ngs and other nfrastructures such as serv ce centers and sho9rooms to ma nta n and promote the car and products of defendant EM(. As the above =uoted allegat ons of the amended compla nt sho9, ho9ever, there s noth ng to support the appellate court)s f nd ng that Bahn sol c ted orders alone and for h s o9n account and 9 thout , nterference from, let alone d rect on of, EM(., /p. 1<0 %o the contrary, Bahn cla med he tooF orders for EM( cars and transm tted them to EM(. 3pon rece pt of the orders, EM( f 1ed the do9npayment and pr c ng charges, not f ed Bahn of the scheduled product on month for the orders, and reconf rmed the orders by s gn ng and return ng to Bahn the acceptance sheets. +ayment 9as made by the buyer d rectly to EM(. % tle to cars purchased passed d rectly to the buyer and Bahn never pa d for the purchase pr ce of EM( cars sold n the +h l pp nes. Bahn 9as cred ted 9 th a comm ss on e=ual to 14R of the purchase pr ce upon the nvo c ng of a veh cle order by EM(. 3pon conf rmat on n 9r t ng that the veh cles had been reg stered n the +h l pp nes and serv ced by h m, Bahn rece ved an add t onal <R of the full purchase pr ce. Bahn performed after@sale serv ces, nclud ng 9arranty serv ces, for 9h ch he rece ved re mbursement from EM(. All orders 9ere on nvo ces and forms of EM(. = %hese allegat ons 9ere substant ally adm tted by EM( 9h ch, n ts pet t on for certiorari before the 'ourt of Appeals, stated? <

5.4. As soon as the veh cles are fully manufactured and full payment of the purchase pr ces are made, the veh cles are sh pped to the +h l pp nes. /%he payments may be made by the purchasers or th rd@persons or even by Bahn.0 %he b lls of lad ng are made up n the name of the purchasers, but Bahn@Man la s there n nd cated as the person to be not f ed. 5.8. $t s Bahn 9ho p cFs up the veh cles from the +h l pp ne ports, for purposes of conduct ng pre@del very nspect ons. %hereafter, he del vers the veh cles to the purchasers. 5.>. As soon as EM( nvo ces the veh cle ordered, Bahn s cred ted 9 th a comm ss on of fourteen percent /14R0 of the full purchase pr ce thereof, and as soon as he conf rms n 9r t ng that the veh cles have been reg stered n the +h l pp nes and have been serv ced by h m, he 9 ll rece ve an add t onal three percent /<R0 of the full purchase pr ces as comm ss on. 'ontrary to the appellate court)s conclus on, th s arrangement sho9s an agency. An agent rece ves a comm ss on upon the successful conclus on of a sale. Dn the other hand, a broFer earns h s pay merely by br ng ng the buyer and the seller together, even f no sale s eventually made. As to the serv ce centers and sho9rooms 9h ch he sa d he had put up at h s o9n e1pense, Bahn sa d that he had to follo9 EM( spec f cat ons as e1clus ve dealer of EM( n the +h l pp nes. Accord ng to Bahn, EM( per od cally nspected the serv ce centers to see to t that EM( standards 9ere ma nta ned. $ndeed, t 9ould seem from EM()s letter to Bahn that t 9as for Bahn)s alleged fa lure to ma nta n EM( standards that EM( 9as term nat ng Bahn)s dealersh p. %he fact that Bahn nvested h s o9n money to put up these serv ce centers and sho9rooms does not necessar ly prove that he s not an agent of EM(. 7or as already noted, there are facts n the record 9h ch suggest that EM( e1erc sed control over Bahn)s act v t es as a dealer and made regular nspect ons of Bahn)s prem ses to enforce compl ance 9 th EM( standards and spec f cat ons. 1. 7or e1ample, n ts letter to Bahn dated 7ebruary 2<, 155>, EM( stated? $n the last years 9e have po nted out to you n several d scuss ons and letters that 9e have to tacFle the +h l pp ne marFet more profess onally and that 9e are through your present act v t es not ade=uately prepared to cope 9 th the forthcom ng challenges. 11 $n effect, EM( 9as hold ng Bahn accountable to t under the 15>2 Agreement. %h s case f ts nto the mould of .ommunications Materials, :nc. v. .ourt of Appeals, 13 n 9h ch the fore gn corporat on entered nto a ,"epresentat ve Agreement, and a ,! cens ng Agreement, 9 th a domest c corporat on, by v rtue of 9h ch the latter 9as appo nted ,e1clus ve representat ve, n the +h l pp nes for a st pulated comm ss on. +ursuant to these contracts, the domest c corporat on sold products e1ported by the fore gn corporat on and put up a serv ce center for the products sold locally. %h s 'ourt held that these acts const tuted do ng bus ness n the +h l pp nes. %he arrangement sho9ed that the fore gn corporat on)s purpose 9as to penetrate the +h l pp ne marFet and establ sh ts presence n the +h l pp nes.

$n add t on, EM( held out pr vate respondent Bahn as ts e1clus ve d str butor n the +h l pp nes, even as t announced n the As an reg on that Bahn 9as the ,off c al EM( agent, n the +h l pp nes. 14 %he 'ourt of Appeals also found that pet t oner Alfred Bahn dealt n other products, and not e1clus vely n EM( products, and, on th s bas s, ruled that Bahn 9as not an agent of EM(. /p. 140 %h s f nd ng s based ent rely on allegat ons of EM( n ts mot on to d sm ss f led n the tr al court and n ts pet t on for certiorari before the 'ourt of Appeals. 1; Eut th s allegat on 9as den ed by Bahn 12 and therefore the 'ourt of Appeals should not have c ted t as f t 9ere the fact. $ndeed th s s not the only factual ssue ra sed, 9h ch should have nd cated to the 'ourt of Appeals the necess ty of aff rm ng the tr al court)s order deferr ng resolut on of EM()s mot on to d sm ss. +et t oner alleged that 9hether or not he s cons dered an agent of EM(, the fact s that EM( d d bus ness n the +h l pp nes because t sold cars d rectly to +h l pp ne buyers. 10 %h s 9as den ed by EM(, 9h ch cla med that Bahn 9as not ts agent and that, 9h le t 9as true that t had sold cars to +h l pp ne buyers, th s 9as done 9 thout sol c tat on on ts part. 11 $t s not true then that the =uest on 9hether EM( s do ng bus ness could have been resolved s mply by cons der ng the part es) plead ngs. %here are genu ne ssues of facts 9h ch can only be determ ned on the bas s of ev dence duly presented. EM( cannot short c rcu t the process on the plea that to compel t to go to tr al 9ould be to deny ts r ght not to subm t to the -ur sd ct on of the tr al court 9h ch prec sely t den es. "ule 1>, .< author Aes courts to defer the resolut on of a mot on to d sm ss unt l after the tr al f the ground on 9h ch the mot on s based does not appear to be ndub table. Bere the record of the case br stles 9 th factual ssues and t s not at all clear 9hether some allegat ons correspond to the proof. Any9ay, pr vate respondent need not apprehend that by respond ng to the summons t 9ould be 9a v ng ts ob-ect on to the tr al court)s -ur sd ct on. $t s no9 settled that, for purposes of hav ng summons served on a fore gn corporat on n accordance 9 th "ule 14, .14, t s suff c ent that t be alleged n the compla nt that the fore gn corporat on s do ng bus ness n the +h l pp nes. %he court need not go beyond the allegat ons of the compla nt n order to determ ne 9hether t has Jur sd ct on. 1= A determ nat on that the fore gn corporat on s do ng bus ness s only tentat ve and s made only for the purpose of enabl ng the local court to ac=u re -ur sd ct on over the fore gn corporat on through serv ce of summons pursuant to "ule 14, .14. &uch determ nat on does not foreclose a contrary f nd ng should ev dence later sho9 that t s not transact ng bus ness n the country. As th s 'ourt has e1pla ned? %h s s not to say, ho9ever, that the pet t oner)s r ght to =uest on the -ur sd ct on of the court over ts person s no9 to be deemed a foreclosed matter. $f t s true, as & gnet cs cla ms, that ts only nvolvement n the +h l pp nes 9as through a pass ve nvestment n & gf l, 9h ch t even later d sposed of, and that %EAM +ac f c s not ts agent, then t cannot really be sa d to be do ng bus ness n the +h l pp nes. $t s a defense, ho9ever, that re=u res the contravent on of the allegat ons of the compla nt, as 9ell as a full vent lat on, n effect, of the ma n mer ts of the case, 9h ch should not thus be 9 th n the prov nce of a mere mot on to d sm ss. &o, also, the

ssue posed by the pet t oner as to 9hether a fore gn corporat on 9h ch has done bus ness n the country, but 9h ch has ceased to do bus ness at the t me of the f l ng of a compla nt, can st ll be made to ans9er for a cause of act on 9h ch accrued 9h le t 9as do ng bus ness, s another matter that 9ould yet have to a9a t the recept on and adm ss on of ev dence. & nce these po nts have seasonably been ra sed by the pet t oner, there should be no real cause for 9hat may understandably be ts apprehens on, i.e., that by ts part c pat on dur ng the tr al on the mer ts, t may, absent an nvocat on of separate or ndependent rel efs of ts o9n, be cons dered to have voluntar ly subm tted tself to the court)s -ur sd ct on. 1< 7ar from comm tt ng an abuse of d scret on, the tr al court properly deferred resolut on of the mot on to d sm ss and thus avo ded prematurely dec d ng a =uest on 9h ch re=u res a factual bas s, 9 th the same result f t had den ed the mot on and cond t onally assumed -ur sd ct on. $t s the 'ourt of Appeals 9h ch, by rul ng that EM( s not do ng bus ness on the bas s merely of uncerta n allegat ons n the plead ngs, d sposed of the 9hole case 9 th f nal ty and thereby depr ved pet t oner of h s r ght to be heard on h s cause of act on. Nor 9as there -ust f cat on for null fy ng the 9r t of prel m nary n-unct on ssued by the tr al court. Although the n-unct on 9as ssued e parte, the fact s that EM( 9as subse=uently heard on ts defense by f l ng a mot on to d sm ss. (BE"E7D"E, the dec s on of the 'ourt of Appeals s "ECE"&ED and the case s "EMANDED to the tr al court for further proceed ngs. &D D"DE"ED. Regalado, Romero, $uno and 7orres, 9r., 99., concur. :ootnotes 1 +er Just ce 'anc o '. #arc a and concurred n by Just ce "amon 3. Mabutas and Anton o M. Mart neA, cha rman. 2 Rollo, pp. 28@26. < Rollo, pp. 25@62. 4 Rollo, pp. 6<@64. 8 Rollo, p. 85<. > +er Judge Ma1 m ano Asunc on. 2 %he 7ore gn $nvestments Act of 1551 superseded Arts. 44@8> of the Dmn bus $nvestments 'ode. 6 Rollo, pp. 5>, 140@141. 5 :d., p. 141. 10 (ang !aborator es, $nc. v. MendoAa, 18> &'"A 44 /15620.

11 Rollo, p. 28. 12 #.". No. 10222<, Aug. 22, 155>. 1< Rollo, p. 21<. 14 Rollo, pp. 51, 1><. 18 Rollo, p. 124. 1> Rollo, pp. 248I 252. 12 Rollo, pp. 122, 264, >00. 16 ! tton M lls, $nc. v. 'ourt of Appeals, #.". No. 54560, May 18, 155>I & gnet cs 'orp. v. 'ourt of Appeals, 228 &'"A 2<2 /155<0. 15 & gnet cs 'orp. v. 'ourt of Appeals, 228 &'"A at 24>.