JAI ALAI V.

BPI 66 SCRA 29

FACTS: Checks were deposited by petitioner in its current account with the bank. These checks were from a certain Ramirez, a consistent better in its games, who was a sales agent from Inter-Island Gas. Inter-Island later found out that of the forgeries committed in the checks and thus, it informed all the parties concerned. Upon the demands on the bank as the collecting bank, it debited the account of petitioner. Thereafter, petitioner tried to issue a check for payment of shares of stock but such was dishonored for insufficient funds. It filed a complaint against the bank.

HELD: Respondent bank acted within legal bounds when it debited the account of petitioner. When the petitioner deposited the checks to its account, the relationship created was one of agency still and not of creditor-debtor. The bank was to collect from the drawees of the checks with the corresponding proceeds. The Bank may have the proceeds already when it debited the account of petitioner. Nonetheless, there is still no creditor-debtor relationship. Following Section 23, a forged signature is wholly inoperative and no right to discharge it or enforce its payment can be acquired through or under the forged signature except against a party who cannot invoke its forgery or want of authority. It stands to reason that as a collecting bank which indorsed the checks to the drawee-banks for clearing, should be liable to the latter for reimbursement for the indorsements on the checks had been forged prior to their delivery to the petitioner. The payments made by the drawee banks to respondent were ineffectivethe creditor-debtor relationship hadnt been validly effected. G.R. No. L-10517 June 28, 1957

PEARL ISLAND COMMERCIAL CORPORATION, plaintiff-appellee, -versusLIM TAN TONG and MANILA SURETY & FIDELITY CO., INC., defendants-appellants. Diaz and Baizas for appellee. De Santos and Herrera for appellant Manila Surety & Fidelity Co., Inc.

MONTEMAYOR, J.: In June, 1951, plaintiff Pearl Island Commercial Corporation, engaged in the manufacture of floor wax under the name of "Bee Wax", in the City of Manila, entered into a contract, Exhibit A, with defendant Lim Tan Tong, wherein the latter, designated as sole distributor of said article in the provinces of Samar, Leyte Cebu Bohol and Negros Oriental and all the provinces in the island of Mindanao, was going to buy the said floor wax for resale in the territory abovementioned. The plaintiff undertook not to appoint any other distributor within the said territory; to sell to defendant Tong at factory price in Manila, F. O. B. Manila; that Tong could sell the article in his territory at any price he saw that fit; that payment for any floor wax purchased shall he delivered to plaintiff within sixty days from the date of shipment; that (this is important) Tong was to furnish surety bond to cover all shipments of the floor wax that are damaged or unmerchantable, at its expense; and that in case of loss due to fortuitous event or force majeure, the plaintiff was to shoulder the loss, provided the goods were still in transit. On the same day said contract were executed on June 16, 1951, defendant Manila Surety & Fidelity Co., Inc., with Tong as principal, filed the surety bond (Exhibit B), binding itself unto the plaintiff in the sum of P5,000, by reason of the appointment of Tong as exclusive agent for plaintiff for the Visayas-Mindanao provinces, the bond being conditioned on the faithful performance of Tong's duties, in accordance with the agreement. It would appear that for its security, the Surety Company had Ko Su Kuan and Marciano Du execute in its favor an indemnity agreement that they would indemnify said surety company in whatever amount it may pay to the plaintiff by reason of the bond filed by it. On June 18, 1951, plaintiff shipped 299 cases of Bee Wax, valued at P7,107, to Tong, duly received by the latter. Tong failed to remit the value within sixty days, and despite the demand made by plaintiff on him to send that amount, he sent only P770, leaving a balance of P6,337, which he admits to be still with him, but which he refuses to remit to the plaintiff, claiming that the latter owed him a larger amount. To enforce payment of the balance of P6,337, plaintiff filed this present action not only against Tong, but also against the Surety Company, to recover from the latter the amount of its bond of P5,000. The Surety Company in its answer filed a cross-claim against Tong, and with the trial courts permission, filed a third-party complaint against Ko Su Kuan and Marciano Du who, as already stated, had executed an indemnity agreement in its favor. After trial, the lower court, presided by Judge Hermogenes Concepcion, rendered judgment, the dispositive part of which reads as follows: IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor of the plaintiff and against the defendants as follows: (a) The Court orders the defendants Lim Tan Tong and the Manila Surety & Fidelity Co., Inc., to pay jointly and severally the plaintiff Pearl Island Commercial Corporation the sum of P5,000.00 plus legal interest from the date of the filing of this complaint, until it is fully paid;

(b) the Court orders the defendant Lim Tan Tong to pay to the plaintiff the sum of P1,337.00 with legal rate of interest from the date of the filing of this complaint until said amount is fully paid; (c) The two defendants shall pay jointly and severally another amount of P500 to the plaintiff as attorney's fees, plus the costs of this suit; (d) The Court orders the cross-defendant Lim Tan Tong and the third-party defendants Ko Su Kuan and Marciano Du to pay jointly and severally to the Manila Surety & Fidelity Co., Inc., the sum of P5,000 with legal rate of interest from the date of the filing of this complaint until fully paid, plus P500 as attorney's fees, plus the costs of this suit. The Surety company is appealing said decision. The appeal originally taken to the Court of Appeals was later certified to us as involving only questions of law. Appellant assigns the following errors: I. The trial court erred in holding that the contract between the Pearl Island Commercial Corporation and Lim Tan tong was one of agency so that breach thereof would come within the terms of the surety bond posted by appellant therein. II. The trial court erred in ordering the defendant-appellant herein to pay attorney's fees and other charges stated in the judgement. It is appellant's contention that it cannot be held liable on its bond for the reason that the latter was filed on the theory that the contract between the plaintiff and Tong was one of agency as a result of which, said surety Company guaranteed the faithful performance of tong as agent, but that it turned out that said contract was one of purchase and sale, shown by the very title of said contract (Exhibit A), namely, "Contract of Purchase and Sale", and appellant never undertook to guaranty the faithful performance of Tong as a purchaser. However, a careful examination of the said contract shows that appellant is only partly right, for the reason that the terms of the said contract, while providing for sale of Bee Wax from the plaintiff to Tong and purchase of the same by Tong from the plaintiff, also designates Tong as the sole distributor of the article within a certain territory. Besides, paragraph 4 of the contract entitled "Security", provides that tong was to furnish surety bond to cover all shipments made by the plaintiff to him. Furthermore, appellant must have understood the contract to one, at least partly, of agency because the bond itself (Exhibit B) says the following: WHEREAS, the above bounden principal has been appointed as exclusive agent for Pearl Islands Commercial Corporation of Manila, Philippines, for the Visayas-Mindanao Provinces; . . . Under the circumstances, we are afraid that the Surety Company is not now in a position to deny its liability for the shipment of the 299 cases of Bee Wax duly received by Tong and his failure to pay its value of P7,107, minus P770 or a balance of P6,337, of course, up to the limit of P5,000, the amount of the bond. True, the contract (Exhibit A) is not entirely clear. It is in some

respects, even confusing. While it speaks of sale of Bee Wax to Tong and his responsibility for the payment of the value of every shipment so purchased, at the same time it appoints him sole distributor within a certain area, the plaintiff undertaking not to appoint any other agent or distributor within the same area. Anyway, it seems to have been the sole concern and interest of the plaintiff to be sure that it was paid the value of all shipments of Bee Wax to Tong and the Surety Company by its bond, in the final analysis said payment by Tong, either as purchaser or as agent. Whether the article was purchased by Tong or whether it was consigned to him as agent to be sold within his area, the fact is that Tong admits said shipment, admits its value, admits keeping the same (P7,107 minus the P770 he had paid on account), but that he is retaining it for reasons of his own, namely, that plaintiff allegedly owes him a larger amount. Moreover, the Surety Company is adequately protected, especially by the judgment because by its express terms, appellant can recover from Ko Su Kuan and Marciano Du whatever amounts, including attorney's fees it may pay to plaintiff, and said two persons evidently have not appealed from the decision. In view of the foregoing, the decision appealed from is hereby affirmed, with costs. G.R. No. L-56545 January 28, 1983 BERT OSMEA & ASSOCIATES, petitioners, vs. THE COURT OF APPEALS and SPOUSES PEDRO QUIMBO and LEONADIZA QUIMBO, respondents. Siguion Reyna, Montecillo & Ongsiako for petitioners. Hilario Davide, Jr., for private respondents. RESOLUTION

MELENCIO-HERRERA, J.: Sought to be reversed in this Petition for Review on certiorari is the Decision of respondent Court of Appeals in CA-G.R. No. 62601-R, entitled "Pedro Quimbo and Leonadiza Quimbo vs. Carmen Siguenza and Helena Siguenza, Bert Osmea & Associates, Inc." sentencing defendants, jointly and severally, to pay damages to the plaintiffs, who are the private respondents herein. Upon a review of the evidence, we find as established: (1) that on June 3, 1971, a "Contract of Sale" over Lots 1 and 2, Block I, Phase II of the Clarita Subdivision, Cebu City, for the total price of P15,200.00, was executed in favor of the Quimbo spouses. The sellers were petitioner company, developer of the subdivision, and Carmen and Helena Siguenza, owners of the property, represented by petitioner. Antonio V. Osmea signed the contract on behalf of the company. Signing as witness was one C. Siguenza.

(2) The spouses had intended to construct a house thereon inasmuch as their rented abode, for which they were paying P170.00 monthly, had become inconvenient for their family. Plans for the house were drawn. The spouses were ready to pay the purchase price in full even before the due date of the first installment and advised Helena Siguenza accordingly so that title in their names could be delivered to them. On the pretext that a road would traverse the lots purchased, Helena proposed to exchange another lot (Lot 409) with the same area for the lots purchased by the spouses to which the latter hesitating agreed. Until 1973, however, no title could be given the Quimbo spouses. (3) It turned out that on December 15, 1969, or approximately a year and a half prior to the sale in the spouses' favor, Lots Nos. 1 and 2 had already been sold to Dr. Francisco Maningo (Exhs. "G " and "G-1 "), and that Transfer Certificates of Title Nos. 48546 and 48547 were issued in favor of Irenea Maningo on September 21, 1970 (Exhs. "H" and "H-1 "), or about nine months before. the sale. Annotated on said titles were mortgages in favor of petitioner. (4) Discovering this fact only in 1973, respondent spouses instituted this suit for Damages against petitioner company and the Siguenzas on March 25, 1974. In its judgment, the lower Court ordered petitioner company and the Siguenzas to pay damages to respondent spouses as follows: WHEREFORE, based on all the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendants ordering the latter: To pay, jointly and severally, the plaintiffs P3,040.00, with interest at the legal rate from June 2, 1971 until the same shall have been fully paid; P100,000.00 as compensation for the pecuniary loss plaintiffs suffered for failure to construct their residential house; P5,610.00 as reimbursement for the rentals plaintiffs paid from January 1972 to September 6, 1974; P50,000.00 as moral damages, P25,000.00 as exemplary damages, P5,000.00 as attorney's fees; and the cost. 1 The Appellate Court affirmed the judgment of the Trial Court in toto. Hence, this recourse by petitioner company, advancing tile following arguments: 1) The Honorable Court of Appeals seriously erred in not having considered the contract as having been novated by virtue of the change in the subject matter or object of the contract; 2) The courts below seriously erred for having found petitioner to have acted fraudulently where there is no evidence to support such a finding;

3) The Court of Appeals committed serious error in law when it held petitioner jointly and severally liable to pay P100,000.00 as compensation for the pecuniary loss suffered by Mrs. Quimbo; 4) The Court seriously erred in holding petitioner jointly and severally liable with the Siguenzas to pay moral damages to Quimbo, there being no evidence showing fraud or bad faith perpetrated by petitioner; 5) The lower court seriously erred in holding petitioner liable to pay the sum of P5,610.00 as reimbursement for rentals because Quimbo was no longer interested in the lots on which her house was supposed to have been constructed but sought only for reimbursement of the downpayment; 6) The Court below erred in holding petitioner liable jointly and severally for exemplary damages, attorneys fees and costs; 7) The court seriously erred in fact and in law in holding petitioner jointly and severally with the Siguenzas to return the downpayment. Except for some items of damages awarded, we affirm. 1) Petitioner's contention that in. as much as respondent spouses had agreed to exchange Lot 409 for Lots 1 and 2, the contract of sale had been novated and its liability extinguished, in untenable. No new contract was ever executed between. petitioner and respondent spouses, notwithstanding Helena Siguenza's assurances to that effect. As held by respondent Court: This stand taken by appellant only reveals its misconception of novation. Novation is a contract containing two stipulations: one to extinguish an existing obligation, the other to substitute a new one in its place. It requires the creation of a new contractual relation as well as the extinguishment of the old. There must be a consent of all the parties to the substitution, resulting in the extinction of the old obligation and the creation of a new valid one (Tiu Suico vs. Habana, 45 Phil. 707). 2 2) Fraud has been established. As the trial Court had concluded: There is no question that the defendants have conveyed and disposed of Lots 1 and 2, Block I, Phase II of the Clarita Village Subdivision to the plaintiffs at a time when they were no longer the owners thereof. At the time of the execution of the contract of sale, their only interest thereon was a mortgage lien in the amount of P13,440.00. As mortgagee they did not have the right to sell the same. Helena and Carmen Siguenza did not reveal this fact to the plaintiffs and the latter relied on their assurances that the same belong to them. Bert Osmea and Associates, Inc. as developer and at the same time attorney-in-fact for Carmen and Helena Siguenza

similarly concealed this fact.1wph1.t Their efforts to cover up this fraud make the acts more detestable and obnoxious. Defendants demonstrated palpable malice, bad faith, wantonness and incurable dishonesty. 3 The finding of fraud in this case was a finding of fact and there are no factors which can justify a reversal thereof. 3) The award in the amount of P100,000.00 representing pecuniary loss for not having been able to build a P100,000.00 house should be eliminated. Respondent spouses did not lose that amount. It was only the estimated cost of the house they were unable to construct. It was an expense item, not expected income. 4) The amount of P5,610.00 awarded representing rentals the spouses could have saved, from the time when the house was to be finished to the date when respondent Leonadiza testified in Court (January 1972 to September 6, 1974), should also be eliminated for being speculative. If they had built their P100,000.00 house, thus avoiding the payment of rentals, they would, on the other hand, be losing interest or income from that amount. Evidence that the plaintiff could have bettered his position had it not been for the defendant's wrongful act cannot serve as basis for an award of damages. 4 5) Fraud and bad faith by petitioner company and the Siguenzas having been established, the award of moral damages is in order. Moral damages should be reduced, however, from P50,000.00 to P10,000.00. 6) Moral damages having been awarded, exemplary damages were also properly awarded. 5 They should be reduced, however, from P25,000.00 to P5,000.00. 7) The award of P5,000.00 as attorney's fees is affirmed inasmuch as respondent spouses were compelled to litigate for the protection of their interests. 6 8) The portion of the Decision requiring petitioners and the Siguenzas to return the downpayment of P3,040.00 is also justified. The Quimbo spouses are entitled to the return of their downpayment, with interest at the legal rate from March 25, 1974 when the instant, suit was commenced. 7 9) Petitioner's plea for exception from liability for damages on the ground that it was a mere agent of the Siguenzas is untenable. The contract of sale describes petitioner as seller together with the Siguenzas. In fact, petitioner was the lone signatory for the sellers in said contract. As held by respondent Court: The contract ... is clear that appellant is one of the Seller-of the lots in question. We will not allow a variation of the terms of the written contract by parole evidence, for there is never an allegation in the appellant's answer that Exhibit 6-Osmea does not express the true intent of the parties or that it is suffering from a vice or mistake or imperfection.

Further, appellant never asserted in its answer that it is a mere agent of its co-defendant Helena. Indeed, the tenor of its Answer is one which shows its admission that it is a co-seller of all lots in subdivision which it is developing. We take particular attention to appellant's admission in its answer to the allegations in par. 4, 8 and 9 of appellees' complaint, which show that appellant was not an agent but a co-seller of the lots. 8 ACCORDINGLY, the judgment appealed from is hereby modified in that petitioner is hereby ordered to pay private respondents the following sums: P3,040.00 with interest at the legal rate from March 25, 1974 until fully paid; P10,000.00 as moral damages; P5,000.00 as exemplary damages; and P5,000.00 as attorney's fees. Costs against petitioner company. SO ORDERED. G.R. No. L-40242 December 15, 1982 CONDE v CA, Melencio Herrera, J FACTS:1. Margarita Conde, Bernardo Conde and the petitioner Dominga Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years, a parcel of agricultural land with to Casimira Pasagui, married to Pio Altera), for P165.00.2. On 17 April 1941, the Cadastral Court of Leyte adjudicated Lot No. 840 to the Alteras"subject to the right of redemption by Dominga Conde.3. Original Certificate of Title No. N-534 in the name of the spouses Pio Altera andCasimira Pasagui was then transcribed in the "Registration Book" of the Registry of Deeds of Leyte.4. On 28 November 1945, private respondent Paciente Cordero, son-in-law of theAlteras, signed a document in the Visayan dialect. Neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a signatory to the deed. 5. Petitioner maintains that because Pio Altera was very ill at the time, Paciente Corderoexecuted the deed of resale for and on behalf of his father-in-law. Petitioner further states that she redeemed the property with her own money as her co-heirs were bereftof funds for the purpose6. Afterwhich, Pio Altera sold the disputed lot to the spouses Ramon Conde and CatalinaT. Conde (not related to petitioner).7. Contending that she had validly repurchased the lot in question in 1945, Dominga Condefiled, a Complaint against the respondents for quieting of title to real property anddeclaration of ownership. ISSUE:WON there was an implied agency when Cordero signed the repurchase document HELD:YES.If petitioner had done nothing to formalize her repurchase, by the same token, neither have thevendeesa-retro done anything to clear their title of the encumbrance therein regardingpetitioner's right to repurchase. No new agreement was entered into by the parties as stipulatedin the deed of pacto de retro , if the vendors a retro failed to exercise their right of redemptionafter ten years. If, petitioner exerted no effort to procure the signature of Pio Altera after he hadrecovered from his illness,

neither did the Alteras repudiate the deed that their son-in-law had signed. Thus, an implied agency must be held to have been created from theirsilence or lack of action, or their failure to repudiate the agency .Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from1945 when the document of repurchase was executed, to 1969, when she instituted this action,or for 24 years, the Alteras must be deemed to have incurred in laches. ====================================================================