THIRD DIVISION

[G.R. No. 167552. April 23, 2007.]

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner,vs.EDWIN CUIZON and ERWIN
CUIZON, respondents.
DECISION
CHICO-NAZARIO, J p:
Before Us is a petition for review by certiorari assailing the Decision 1 of the Court of Appeals dated 10
August 2004 and its Resolution 2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial
Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision and Resolution affirmed the Order 3 dated
29 January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon
(EDWIN) as a party defendant in Civil Case No. CEB-19672. aSTAIH
The generative facts of the case are as follows:
Petitioner is engaged in the business of importation and distribution of various European industrial
equipment for customers here in the Philippines. It has as one of its customers Impact Systems Sales ("Impact
Systems") which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN).Respondent EDWIN is the
sales manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to
ninety-one thousand three hundred thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of fifty
thousand pesos (P50,000.00). 4 When the sludge pump arrived from the United Kingdom, petitioner refused to
deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June
1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of
receivables in favor of petitioner, the pertinent part of which states:
1.) That ASSIGNOR 5 has an outstanding receivables from Toledo Power Corporation in
the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment
for the purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE 6 the said receivables from Toledo Power Corporation in the amount of THREE
HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is
the lawful recipient; IDCcEa
3.) That the ASSIGNEE does hereby accept this assignment. 7
Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as
shown by Invoice No. 12034 dated 30 June 1995. 8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment,
proceeded to collect from Toledo Power Company the amount of P365,135.29 as evidenced by Check Voucher No.
0933 9 prepared by said power company and an official receipt dated 15 August 1995 issued by Impact
Systems. 10 Alarmed by this development, petitioner made several demands upon respondents to pay their
obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996,
petitioner's counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996,
respondents' total obligations stood at P295,000.00 excluding interests and attorney's fees. 11 Because of
respondents' failure to abide by said final demand letter, petitioner instituted a complaint for sum of money,
damages, with application for preliminary attachment against herein respondents before the Regional Trial Court of
Cebu City. 12
On 8 January 1997, the trial court granted petitioner's prayer for the issuance of writ of preliminary
attachment. 13
On 25 June 1997, respondent EDWIN filed his Answer 14 wherein he admitted petitioner's allegations with
respect to the sale transactions entered into by Impact Systems and petitioner between January and April
1995. 15 He, however, disputed the total amount of Impact Systems' indebtedness to petitioner which, according to
him, amounted to only P220,000.00. 16
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest
in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his
transaction with petitioner and the latter was very much aware of this fact. In support of this argument, petitioner
points to paragraphs 1.2 and 1.3 of petitioner's Complaint stating —
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the
proprietor of a single proprietorship business known as Impact Systems Sales ("Impact Systems"
for brevity),with office located at 46-A del Rosario Street, Cebu City, where he may be served
summons and other processes of the Honorable Court.
Page 1 of 72
 1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City.
He is the Sales Manager of Impact Systems and is sued in this action in such capacity. 17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary
Judgment. The trial court granted petitioner's motion to declare respondent ERWIN in default "for his failure to
answer within the prescribed period despite the opportunity granted" 18 but it denied petitioner's motion for
summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October
2001. 19 However, the conduct of the pre-trial conference was deferred pending the resolution by the trial court of
the special and affirmative defenses raised by respondent EDWIN. 20
After the filing of respondent EDWIN's Memorandum 21 in support of his special and affirmative defenses
and petitioner's opposition 22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping
respondent EDWIN as a party defendant in this case. According to the trial court —
A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant
Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact] Systems
Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is
the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in
the contract which is dated June 28, 1995. A study of Annex "H" to the complaint reveals that
[Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down
payment of P50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of
Annex "G",thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the
records further show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of
Edwin B. Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff,
therefore, cannot say that it was deceived by defendant Edwin B. Cuizon, since in the instant case
the principal has ratified the act of its agent and plaintiff knew about said ratification. Plaintiff could
not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers
since [Impact] Systems Sales made a down payment of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as
party defendant. 23
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which,
however, affirmed the 29 January 2002 Order of the court a quo.The dispositive portion of the now assailed
Decision of the Court of Appeals states:
WHEREFORE,finding no viable legal ground to reverse or modify the conclusions reached
by the public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED. 24
Petitioner's motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17
March 2005. Hence, the present petition raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON,
IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE
OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD. 25
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN's act of collecting the
receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed by
EDWIN on behalf of Impact Systems. While said collection did not revoke the agency relations of respondents,
petitioner insists that ERWIN's action repudiated EDWIN's power to sign the Deed of Assignment. As EDWIN did
not sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally
liable for the obligations of his principal. 26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling
the one unit of sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention
of this Court to the fact that respondents are bound not only by their principal and agent relationship but are in fact
full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud
petitioner. 27
In his Comment, 28 respondent EDWIN again posits the argument that he is not a real party in interest in
this case and it was proper for the trial court to have him dropped as a defendant. He insists that he was a mere
agent of Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as it is
alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business venture.
Page 2 of 72
Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a
representative of Impact Systems in said transaction.
We do not find merit in the petition. ATSIED
In a contract of agency, a person binds himself to render some service or to do something in representation
or on behalf of another with the latter's consent. 29 The underlying principle of the contract of agency is to
accomplish results by using the services of others — to do a great variety of things like selling, buying,
manufacturing, and transporting. 30 Its purpose is to extend the personality of the principal or the party for whom
another acts and from whom he or she derives the authority to act. 31 It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were personally executed by the principal. 32 By this legal fiction,
the actual or real absence of the principal is converted into his legal or juridical presence — qui facit per alium facit
per se. 33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority. 34
In this case, the parties do not dispute the existence of the agency relationship between respondents
ERWIN as principal and EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN
exceeded his authority when he signed the Deed of Assignment thereby binding himself personally to pay the
obligations to petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority granted by his
principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the
party with whom he contracts. The same provision, however, presents two instances when an agent becomes
personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is
when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained
in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of
Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of
broad powers with which to conduct the business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent
or manager; such a position presupposes a degree of confidence reposed and investiture with
liberal powers for the exercise of judgment and discretion in transactions and concerns which are
incidental or appurtenant to the business entrusted to his care and management. In the absence of
an agreement to the contrary, a managing agent may enter into any contracts that he deems
reasonably necessary or requisite for the protection of the interests of his principal entrusted to his
management. ... 35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when
he signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it
received, in full, the payment for Impact Systems' indebtedness. 36 We may very well assume that Impact Systems
desperately needed the sludge pump for its business since after it paid the amount of fifty thousand pesos
(P50,000.00) as down payment on 3 March 1995, 37 it still persisted in negotiating with petitioner which culminated
in the execution of the Deed of Assignment of its receivables from Toledo Power Company on 28 June
1995. 38 The significant amount of time spent on the negotiation for the sale of the sludge pump underscores
Impact Systems' perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that
respondent EDWIN's participation in the Deed of Assignment was "reasonably necessary" or was required in order
for him to protect the business of his principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary relation with his principal. ICHcTD
We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents
ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon
which petitioner anchors its claim against respondent EDWIN "does not hold that in case of excess of authority, both
the agent and the principal are liable to the other contracting party." 39 To reiterate, the first part of Article 1897
declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the
agent is completely absolved of any liability. The second part of the said provision presents the situations when the
agent himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his
authority without giving notice of his powers to the third person. However, it must be pointed out that in case of

Page 3 of 72
excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can
recover from both the principal and the agent. 40
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right
nor incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who should
be impleaded in this case. A real party in interest is one who "stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit." 41 In this respect, we sustain his exclusion as a defendant in
the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August
2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order
dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the
continuation of the proceedings against respondent Erwin Cuizon.
SO ORDERED.
||| (Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, [April 23, 2007], 550 PHIL 165-175)

FIRST DIVISION
[G.R. No. L-24332. January 31, 1978.]
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner, vs. FELIX GO
CHAN & SONS REALTY CORPORATION and COURT OF APPEALS respondents.
SYNOPSIS
After the death of his principal and with full knowledge of such death, the attorney-in-fact sold his
principal's undivided share in a parcel of land pursuant to a special power of attorney which the principal had
executed in his favor. The administrator of the estate of the deceased principal went to court to have the sale
declared unenforceable and to recover the disposed share. The trial court granted the relief prayed for, but on
appeal, the Court of Appeals upheld the validity of the sale and dismissed the complaint.
On review the Supreme Court held that the sale was null and void because, although the buyer may
have been a purchaser in good faith, said sale was made with the agent's knowledge of his principal's death.
The general rule is that death of the principal or the agent extinguishes the agency and this case does not fall
under any of the exceptions to the general rule.
Appealed decision set aside and judgment of the lower court affirmed on toto.
SYLLABUS
1. AGENCY; DEFINED. — Agency is a relationship between two parties whereby one party, called the
principal, authorizes another, called the agent, to act for and in his behalf on transactions with third persons.
2. ID.; ELEMENTS. — The essential elements of agency are: (1) there is consent, express or implied, of
the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not for himself; and (4) the agent acts within the scope of his
authority.
3. ID.; DEATH AS MODE OF EXTINGUISHMENT; EXCEPTIONS. — By reason of the very nature of
the relationship between principal and agent, agency is extinguished by the death of the principal or of the agent
and any act of an agent after the death of his principal is void ab initio, except as explicitly provided for in the
New Civil Code: (1) when the agency is coupled with an interest (Art. 1930); and (2) when the agent performed
an act for the principal without knowledge of the principal's death and the third person who contracted with him
acted in good faith. (Art. 1931)
4. ID.; REVOCATION BY PRINCIPAL DISTINGUISHED FROM REVOCATION BY OPERATION OF
LAW. — Although a revocation of a power of attorney to be effective must be communicated to the parties
concerned, yet a revocation by operation of law, such as death of the principal is, as a rule, instantaneously
effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an execution of the
principal's continuing will." With death, the principal's will ceases or is terminated; the source of authority is
extinguished.
5. ID.; AGENT'S HEIRS MUST NOTIFY PRINCIPAL OF AGENT'S DEATH. — The heirs of the agent
who dies must notify the principal of his death and in the meantime adopt such measures as circumstances may
demand in the interest of the latter, but the heirs of the principal are not duty-bound to give notice of the
principal's death to the agent.

Page 4 of 72
 DECISION
MUÑOZ PALMA, J p:
This is a case of an attorney-in-fact, Simeon Rallos, who after the death of his principal, Concepcion
Rallos, sold the latter's undivided share in a parcel of Land pursuant to a special power of attorney which the
principal had executed in his favor. The administrator of the estate of the deceased principal went to court to
have the sale declared unenforceable and to recover the disposed share. The trial court granted the relief
prayed for, but upon appeal, the Court of Appeals upheld the validity of the sale and dismissed the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and
registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by
Transfer Certificate of Title No. 11118 of the Registry of Cebu. On April 21, 1954, the sisters executed a special
power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983.
On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares
of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of
P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled,
and a new Transfer Certificate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of
the undivided share of the deceased Concepcion Rallos in lot 5983 be declared unenforceable, and said share
be reconveyed to her estate; (2) that the Certificate of Title issued in the name of Felix Go Chan & Sons Realty
Corporation be cancelled and another title be issued in the names of the corporation and the "Intestate estate of
Concepcion Rallos" in equal undivided shares; and (3) that plaintiff be indemnified by way of attorney's fees and
payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter dropped from the complaint. The
complaint was amended twice; defendant Corporation's Answer contained a cross-claim against its co-
defendant, Simeon Rallos, while the latter filed third-party complaint against his sister, Gerundia Rallos. While
the case was pending in the trial court, both Simeon and his sister Gerundia died and they were substituted by
the respective administrators of their estates.
After trial, the court a quo rendered judgment with the following dispositive portion:
"A. On Plaintiff's Complaint —
(1) Declaring the deed of sale, Exh. 'C', null and void insofar as the one-half pro-
indiviso share of Concepcion Rallos in the property in question, - Lot 5983 of the Cadastral
Survey of Cebu — is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of
Title No. 12989 covering Lot 5983 and to issue in lieu thereof another in the names of
FELIX Go CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos
in the proportion of one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of
an undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of
Simeon Rallos, to pay to plaintiff in concept of reasonable attorney's fees the sum of
P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
"B. On GO CHAN'S Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo administrator of the Estate of
Simeon Rallos; to pay to defendant Felix Go Chan & Sons Realty Corporation the sum of
P5,343.45, representing the price of one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon
Rallos, to pay in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty
Corporation the sum of P500.00.
"C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of
Simeon Rallos, against Josefina Rallos, special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint
against the regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate
of Gerundia Rallos, covering the same subject-matter of the third-party complaint, at bar."
(pp. 98-100, Record on Appeal)

Page 5 of 72
 Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the
foregoing judgment insofar as it set aside the sale of the one half (1/2) share of Concepcion Rallos. The
appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the appellant
corporation sustaining the sale in question. 1 The appellee-administrator, Ramon Rallos, moved for a
reconsideration of the decision but the same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more
particularly to the instant case, We have the query: is the sale of the undivided share of Concepcion Rallos in lot
5983 valid although it was executed by the agent after the death of his principal? What is the law in this
jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and in behalf of the
latter? Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an
act performed after such death?
Before proceeding to the issues, We shall briefly restate certain principles of law relevant to the matter
under consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent him. 3 A contract
entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1) of the same
also provides:
"ART. 1403. The following contracts are unenforceable, unless they are justified:
"(1) Those entered into in the name of another person by one who has been given no
authority or legal representation or who has acted beyond his powers; . . . ."
Out of the above given principles, sprung the creation an acceptance of the relationship of
agency whereby one party, called the principal (mandante), authorizes another, called the agent (mandatario),
to act for find in his behalf in transactions with third persons. The essential elements of agency are: (1) there is
consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agents acts as a representative and not for himself; and (4) the
agent acts within the scope of his authority. 5
Agency is basically personal, representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done within the
scope of the authority. Qui facit per alium facit per se. "He who acts through another acts himself." 6
2. There are various ways of extinguishing agency, 7 but here We are concerned only with one cause —
death of the principal: Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish
Civil Code provides:
"ART. 1919. Agency is extinguished:
"xxx xxx xxx
"3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; . . .
." (Underline supplied)
By reason of the very nature of the relationship between principal and agent, agency is extinguished by
the death of the principal or the agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is
found in the juridical basis of agency which is representation. There being an integration of the personality of the
principal into that of the agent it is not possible for the representation to continue to exist once the death of either
is establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a necessary cause for
its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon the
death of either without necessity for the heirs of the principal to notify the agent of the fact of death of the
former. 9
The same rule prevails at common law — the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the power be coupled with an interest. 10 This is the prevalent
rule in American Jurisprudence where it is well-settled that a power without an interest conferred upon an agent
is dissolved by the principal's death, and any attempted execution of the power afterwards is not binding on the
heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that exception? That is
the determinative point in issue in this litigation. It is the contention of respondent corporation which was
sustained by respondent court that notwithstanding the death of the principal, Concepcion Rallos, the act of the

Page 6 of 72
attorney-in-fact, Simeon Rallos, in selling the former's share in the property is valid and enforceable inasmuch
as the corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule aforementioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent, or in the
interest of a third person who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge the death of the principal or of
any other cause which extinguishes the agency, is valid and shall be fully effective with respect to
third persons who may have contracted with him in good faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of
Simeon Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his
principal is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge of the
death of the principal, and (2) that the third person who contracted with the agent himself acted in good faith.
Good faith here means that the third son was not aware of the death of the principal at the time he contracted
with said agent. These two requisites must concur: the absence of one will render the act of the agent invalid
unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his
principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of the
death is clearly to be inferred from the pleadings filed by Simeon Rallos before the trial court. 12 That Simeon
Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of
respondent appellate court when the latter stated that Simeon Rallos "must have known of the death of his
sister, and yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia
Rallos without informing appellant (the realty corporation) of the death of the former." 14
On the basis of the established knowledge of Simeon Rallos concerning the death of his principal,
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application
lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person
acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil Code
now Art. 1931 of the new Civil Code sustained the validity of a sale made after the death of the
principal because it was not shown that the agent knew of his principal's demise. 15 To the same effect is the
case of Herrera, et al. v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court
stated:
". . . even granting arguendo that Luis Herrera did die in 1936 plaintiffs presented no proof
and there is no indication in the record, that the agent Luy Kim Guan was aware of the death of his
principal at the time he sold the property. The death of the principal does not render the act of an
agent unenforceable, where the latter had no knowledge of such extinguishment of the agency." (1
SCRA 406, 412)
4. In sustaining the validity of the sale to respondent corporation, the Court of Appeals reasoned out that
there is no provision in the Code which provides that whatever is done by an agent having knowledge of the
death of his principal is void even with respect to third persons who may have contracted with him in good faith
and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it is ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the general rule it
follows a fortiori that any act o an agent after the death of his principal is void ab initio unless the same falls
under the exceptions provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an
exception to the general rule, is to be strictly construed; it is not to be given an interpretation or application
beyond the clear import of its terms for otherwise the courts will be involved in a process of legislation outside of
their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the
power of attorney which was duly registered on the original certificate of title recorded in the Register of Deeds
of the Province of Cebu, that no notice of the death was ever annotated on said certificate of title by the heirs of
the principal and accordingly they must suffer the consequences of such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
"If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general in nature, without reference
to particular person with whom the agent is to contract, it is sufficient that the principal exercise
due diligence to make the revocation of the agency publicly known.
Page 7 of 72
 "In case of a general power which does not specify the persons to whom representation
should be made, it is the general opinion that all acts executed with third persons who contracted
in good faith, without knowledge of the revocation, are valid. In such case, the principal may
exercise his right against the agent, who, knowing of the revocation, continued to assume a
personality which he no longer had." (Manresa, Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse, however, treats of revocation by an act of the principal as a mode of terminating
an agency which is to be distinguished from revocation by operation of law such as death of the principal which
obtains in this case. On page six of this Opinion We stressed that by reason of the very nature of the
relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal or
agent. Although a revocation of a power of attorney to be effective must be communicated to the parties
concerned, 18 yet a revocation by operation of law, such as by death of the principal is, as a rule,
instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an
execution of the principal's continuing will." 19 With death, the principal's will ceases or is terminated; the source
of authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal. What
the Code provides in Article 1932 is that, if the agent dies, his heirs must notify the principal thereof, and in the
meantime adopt such measures as the circumstances may demand in the interest of the latter. Hence, the fact
that no notice of the death of the principal was registered on the certificate of title of the property in the Office of
the Register of Deeds, is not fatal to the cause of the estate of the principal.
6. Holding that the good faith of a third person in dealing with an agent affords the former sufficient
protection, respondent court drew a "parallel" between the instant case and that of an innocent purchaser for
value of a registered land, stating that if a person purchases a registered land from one who acquired it in bad
faith — even to the extent of foregoing or falsifying the deed of sale in his favor — the registered owner has no
recourse against such innocent purchaser for value but only against the forger. 20
To support the correctness of this "parallelism", respondent corporation, in its brief, cites the case
of Blondeau, et al. v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
"In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a
co-owner of lands with Agustin Nano. The latter had a power of attorney supposedly executed by
Vallejo in his favor. Vallejo delivered to Nano his land titles. The power was registered in the Office
of the Register of Deeds. When the lawyer-husband of Angela Blondeau went to that Office, he
found all in order including the power of attorney. But Vallejo denied having executed the power.
The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the decision of
the court a quo, the Supreme Court, quoting the ruling in the case of Eliason v. Wilborn, 261 U.S.
457, held:
'But there is a narrower ground on which the defenses of the defendant-appellee
must be overruled. Agustin Nano had possession of Jose Vallejo's title papers. Without
those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not
have been perpetuated. When Fernando de la Cantera, a member of the Philippine Bar
and the husband of Angela Blondeau, the principal plaintiff, searched the registration
record, he found them in due form including the power of attorney of Vallejo in favor of
Nano. If this had not been so and if thereafter the proper notation of the encumbrance
could not have been made, Angela Blondeau would not have, lent P12,000.00 to the
defendant Vallejo.' An executed transfer of registered lands placed by the registered owner
thereof in the hands of another operates as a representation to a third party that the holder
of the transfer is authorized to deal with the land.
'As between two innocent persons, one of whom must suffer the consequence of a
breach of trust, the one who made it possible by his act of confidence bear the loss.'" (pp.
19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are
confronted with one who admittedly was an agent of his sister and who sold the property of the latter after her
death with full knowledge of such death. The situation is expressly covered by a provision of law on agency the
terms of which are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in the same
manner that the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land
Registration Law which in part provides:
"xxx xxx xxx
"The production of the owner's duplicate certificate whenever any voluntary instrument is
presented for registration shall be conclusive authority from the registered owner to the register of
Page 8 of 72
 deeds to enter a certificate or to make a memorandum of registration in accordance with such
instruments, and the new certificate or memorandum shall be binding upon the registered owner
and upon all persons claiming under him in favor of every purchaser for value and in good
faith: Provided, however, That in all cases of registration procured by fraud, the owner may pursue
all his legal and equitable remedies against the parties to such fraud, without prejudice, however,
to the rights of any innocent holder for value of a certificate of title. . . . " (Act No. 496 as amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling
of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the
death of the principal were held to be "good", "the parties being ignorant of the death". Let us take note that the
Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the death of the
principal. We quote from that decision the following:
". . . Here the precise point is, whether a payment to an agent when the parties are
ignorant of the death is a good payment. In addition to the case in Campbell before cited, the same
judge Lord Ellenborough, has decided in 5 Esp. 117, the general question that a payment after the
death of principal is not good. Thus, a payment of sailor's wages to a person having a power of
attorney to receive them, has been held void when the principal was dead at the time of the
payment. If, by this case, it is meant merely to decide the general proposition that by operation of
law the death of the principal is a revocation of the powers of the attorney, no objection can be
taken to it. But if it intended to say that his principle applies where there was no notice of death, or
opportunity of notice, I must be permitted to dissent from it.
". . . That a payment may be good today, or bad tomorrow, from the accidental
circumstance of the death of the principal, which he did not know, and which by no possibility could
he know? It would be unjust to the agent and unjust to the debtor. In the civil law, the acts of the
agent, done bona fide in ignorance of the death of his principal, are held valid and binding upon
the heirs of the latter. The same rule holds in the Scottish law, and I cannot believe the common
law is so unreasonable. . . . " (39 Am. Dec. 76. 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be
made that the above represents the minority view in American jurisprudence. Thus in Clayton v. Merrett, the
Court said:
"'There are several cases which seem to hold that although, as a general principle, death
revokes an agency and renders null every act of the agent thereafter performed, yet that where a
payment has been made in ignorance of the death, such payment will be good. The leading case
so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa.) 282, 39 AmD 76, where, in an
elaborate opinion, this view is broadly announced. It is referred to, and seems to have been
followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter case it appeared
that the estate of the deceased principal had received the benefit of the money paid, and therefore
the representative of the estate might well have been held to be estopped from suing for it again. .
. . These cases, in so far, at least, as they announce the doctrine under discussion, are
exceptional. The Pennsylvania Case supra (Cassiday v. McKenzie, 4 Watts & S. 282, 39 AmD 76),
is believed to stand almost, if not quite, alone in announcing the principal in its broadest scope.'"
(52 Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except
so far as it related to the particular facts, was a mere dictum, Baldwin, J. said:
"'The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court upon the point
in question. But accordingly all proper weight to this opinion, as the judgment of a Court of great
respectability, it stands alone among common law authorities, and is opposed by an array too
formidable to permit us to follow it.'" (15 Cal. 12, 17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence,
no such conflict exists in our own for the simple reason that our statute, the Civil Code, expressly provides for
two exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit: (1) that the
agency is coupled with an interest (Art. 1930), and (2) that the act of the agent was executed without knowledge
of the death of the principal and the third person who contracted with the agent acted also in good faith (Art.
1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable requirement
- that the agent acted without knowledge or notice of the death of the principal. In the case before Us the agent
Ramon Rallos executed the sale notwithstanding notice of the death of his principal. Accordingly, the agent's act
is unenforceable against the estate of his principal.
Page 9 of 72
 IN VIEW OF ALL THE FOREGOING, We set aside the decision of respondent appellate court, and We
affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu,
quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all instances.
So Ordered.
||| (Rallos v. Felix Go Chan & Sons Realty Corp., G.R. No. L-24332, [January 31, 1978], 171 PHIL 222-236)

SECOND DIVISION
[G.R. No. 130148. December 15, 1997.]
JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ, ERNESTO M.
LUZ and NARCISO DEGANOS, respondents.
SYNOPSIS
Petitioners were engaged in the business of purchase and sale of jewelry while respondent Brigida Luz was
their regular customer. On several occasions, respondent Narciso Deganos, brother of Brigida, received several
pieces of gold and jewelry from petitioners amounting to P382,816.00. The receipts stated that some of them were
received for a certain Evelyn Aquino and the rest were received for Brigida Luz. Deganos was supposed to sell the
items at a profit and thereafter remit the proceeds and return the unsold items to petitioners. However, Deganos
remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any
unsold item to petitioners. Hence, petitioners instituted an action for recovery of sum of money against Deganos and
Luz claiming that Deganos acted as agent to Brigida Luz when the former received the subject items in her behalf.
And because Deganos failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable with him
therefor. Brigida denied that she had anything to do with the transactions between petitioners and Deganos. She
claimed that she never authorized Deganos to receive any item of jewelry in her behalf and neither did she actually
receive any of the articles in question.
In the absence of consent to the acts of the supposed agent or authority therefor, no agency whatsoever
was created. Hence, the supposed principal cannot be held liable; only Deganos was liable to the petitioners for the
amount and damages claimed. Petitioners attempt to foist liability on the respondent spouses Luz through the
supposed agency relation with Deganos is groundless and ill- advised
SYLLABUS
1. CIVIL LAW; AGENCY; NOT PRESENT WITHOUT AUTHORITY FROM SUPPOSED PRINCIPAL. — The
actual conclusion and ruling of the Court of Appeals categorically stated that, "(Brigida Luz) never authorized her
brother (Deganos) to act for and in her behalf in any transaction with Petitioners x x x." It is clear, therefore, that
even assuming arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her
behalf with regard to the transaction subject of this case. The basis for agency is representation. Petitioners' attempt
to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill -
advised. It was grossly and inexcusably negligent of petitioners to entrust to Deganos, on at least six occasions,
several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A
person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.
Petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their
negligence by conjuring a supposed agency relation between the two respondents where no evidence supports
such claim.
2. REMEDIAL LAW; CRIMINAL PROCEDURE; PROSECUTION OF CIVIL ACTION; SEPARATE ACTION
FOR DAMAGES MAY BE INSTITUTED. — Article 33 of the Civil Code provides that in cases involving alleged
fraudulent acts, a civil action for damages, entirely separate and distinct from the criminal action may be brought by
the injured party. Such civil action shall proceed independently of the criminal prosecution and shall require only a
preponderance of evidence. It is worth noting that this civil case was instituted four years before the criminal case
for estafa was filed and that although there was a move to consolidate both cases, the same was denied by the trial
court. Consequently, it was the duty of the two branches of the Regional Trial Court concerned to independently
proceed with the civil and criminal cases. It will also be observed that a final judgment rendered in a civil action
absolving the defendant from civil liability is no bar to a criminal action. It is clear therefore, that this civil case may
proceed independently of the criminal case especially because while both cases are based on the same facts, the
quantum of proof required for holding the parties liable therein differ. Thus, it is improvident of petitioners to claim
that the decision and resolution of the Court of Appeals in the present case would be preemptive of the outcome of
the criminal case. Their fancied fear of possible conflict between the disposition of this civil case and the outcome of
the pending criminal case is illusory.

Page 10 of 72
 3. LEGAL ETHICS; ALLEGATION OF IRREGULARITIES IN THE COURT OF APPEALS BECAUSE OF ITS
EARLY RESOLUTION, ABHORRED. — The lamentable allegation of irregularities in the Court of Appeals and in
the conduct of its officers strikes us as a desperate attempt of petitioners to induce this Court to give credence to
their arguments which, as already found by both the trial and intermediate appellate courts, are devoid of factual and
legal substance. The regrettably irresponsible attempt to tarnish the image of the intermediate appellate tribunal and
its judicial officers through ad hominem imputations could well be contumacious, but we are inclined to let that pass
with a strict admonition that petitioners refrain from indulging in such conduct in litigations. It is ironic that while some
litigants malign the judiciary for being supposedly slothful in disposing of cases, petitioners are making a show of
calling out for justice because the Court of Appeals issued a resolution disposing of a case sooner than expected of
it. They would even deny the exercise of discretion by the appellate court to prioritize its action on cases in line with
the procedure it has adopted in disposing thereof and in declogging its dockets. It is definitely not for the parties to
determine and dictate when and how a tribunal should act upon those cases since they are not even aware of the
status of the dockets and the internal rules and policies for acting thereon. The fact that a resolution was issued by
said court within a relatively short period of time after the records of the case were elevated to the office of
the ponente cannot, by itself, be deemed irregular. There is no showing whatsoever that the resolution was issued
without considering the reply filed by petitioners. In fact, that brief pleading filed by petitioners does not exhibit any
esoteric or ponderous argument which could not be analyzed within an hour. It is a legal presumption, born of
wisdom and experience, that official duty has been regularly performed; that the proceedings of a judicial tribunal
are regular and valid, and that judicial acts and duties have been and will be duly and properly performed. The
burden of proving irregularity in official conduct is on the part of petitioners and they have utterly failed to do so. It is
thus reprehensible for them to cast aspersions on a court of law on the bases of conjectures or surmises, especially
since one of the petitioners appears to be a member of the Philippine Bar.
DECISION
REGALADO, J p:
In this appeal by certiorari, petitioners assail the judgment of the Court of Appeals in CA-G.R. CV No. 49175
affirming the adjudication of the Regional Trial Court of Malolos, Bulacan which found private respondent Narciso
Deganos liable to petitioners for actual damages, but absolved respondent spouses Brigida D. Luz and Ernesto M.
Luz of liability. Petitioners likewise belabor the subsequent resolution of the Court of Appeals which denied their
motion for reconsideration of its challenged decision. cdtai
Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz,
also known as Aida D. Luz, was their regular customer. On several occasions during the period from April 27, 1987
to September 4, 1987, respondent Narciso Deganos, the brother of Brigida D. Luz, received several pieces of gold
and jewelry from petitioners amounting to P382,816.00. 1 These items and their prices were indicated in seventeen
receipts covering the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a
niece of Deganos, and the remaining six indicated that they were received for Brigida D. Luz. 2
Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold
items to petitioners. Deganos remitted only the sum of P53,207.00. He neither paid the balance of the sales
proceeds, nor did he return any unsold item to petitioners. By January 1990, the total of his unpaid account to
petitioners, including interest, reached the sum of P725,463.98. 3 Petitioners eventually filed a complaint in
the barangay court against Deganos to recover said amount.
In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for
Deganos and ultimately, she and her husband, together with Deganos, signed a compromise agreement with
petitioners. In that compromise agreement, Deganos obligated himself to pay petitioners, on installment basis, the
balance of his account plus interest thereon. However, he failed to comply with his aforestated undertakings.
On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos,
Bulacan against Deganos and Brigida D. Luz for recovery of a sum of money and damages, with an application for
preliminary attachment. 4 Ernesto Luz was impleaded therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were charged with estafa 5 in the
Regional Trial Court of Malolos, Bulacan, which was docketed as Criminal Case No. 785-M-94. That criminal case
appears to be still pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos acted as the agent of Brigida D. Luz when
he received the subject items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her
spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid obligation to petitioners, he claimed that
the same was only in the sum of P382,816.00 and not P725,463.98. He further asserted that it was he alone who
was involved in the transaction with the petitioners; that he neither acted as agent for nor was he authorized to act
as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts indicated that the items were received
Page 11 of 72
by him for the latter. He further claimed that he never delivered any of the items he received from petitioners to
Brigida.
Brigida, on her part, denied that she had anything to do with the transactions between petitioners and
Deganos. She claimed that she never authorized Deganos to receive any item of jewelry in her behalf and, for that
matter, neither did she actually receive any of the articles in question.
After trial, the court below found that only Deganos was liable to petitioners for the amount and damages
claimed. It held that while Brigida D. Luz did have transactions with petitioners in the past, the items involved were
already paid for and all that Brigida owed petitioners was the sum of P21,483.00 representing interest on the
principal account which she had previously paid for. 6
The trial court also found that it was petitioner Lydia Bordador who indicated in the receipts that the items
were received by Deganos for Evelyn Aquino and Brigida D. Luz. 7 Said court was "persuaded that Brigida D. Luz
was behind Deganos," but because there was no memorandum to this effect, the agreement between the parties
was unenforceable under the Statute of Frauds. 8 Absent the required memorandum or any written document
connecting the respondent Luz spouses with the subject receipts, or authorizing Deganos to act on their behalf, the
alleged agreement between petitioners and Brigida D. Luz was unenforceable.
Deganos was ordered to pay petitioners the amount of P725,463.98, plus legal interest thereon from June
25, 1990, and attorney's fees. Brigida D. Luz was ordered to pay P21,483.00 representing the interest on her own
personal loan. She and her co-defendant spouse were absolved from any other or further liability. 9
As stated at the outset, petitioners appealed the judgment of the court a quo to the Court of Appeals which
affirmed said judgment. 10 The motion for reconsideration filed by petitioners was subsequently
dismissed, 11 hence the present recourse to this Court.
The primary issue in the instant petition is whether or not herein respondent spouses are liable to petitioners
for the latter's claim for money and damages in the sum of P725,463.98, plus interests and attorney's fees, despite
the fact that the evidence does not show that they signed any of the subject receipts or authorized Deganos to
receive the items of jewelry on their behalf.
Petitioners argue that the Court of Appeals erred in adopting the findings of the court a quo that respondent
spouses are not liable to them, as said conclusion of the trial court is contradicted by the finding of fact of the
appellate court that "(Deganos) acted as agent of his sister (Brigida Luz)." 12 In support of this contention,
petitioners quoted several letters sent to them by Brigida D. Luz wherein the latter acknowledged her obligation to
petitioners and requested for more time to fulfill the same. They likewise aver that Brigida testified in the trial court
that Deganos took some gold articles from petitioners and delivered the same to her.
Both the Court of Appeals and the trial court, however, found as a fact that the aforementioned letters
concerned the previous obligations of Brigida to petitioners, and had nothing to do with the money sought to be
recovered in the instant case. Such concurrent factual findings are entitled to great weight, hence, petitioners cannot
plausibly claim in this appellate review that the letters were in the nature of acknowledgments by Brigida that she
was the principal of Deganos in the subject transactions.
On the other hand, with regard to the testimony of Brigida admitting delivery of the gold to her, there is no
showing whatsoever that her statement referred to the items which are the subject matter of this case. It cannot,
therefore, be validly said that she admitted her liability regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter clothed him with apparent
authority as her agent and held him out to the public as such, hence Brigida can not be permitted to deny said
authority to innocent third parties who dealt with Deganos under such belief. 13 Petitioners further represent that the
Court of Appeals recognized in its decision that Deganos was an agent of Brigida. 14
The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz and
that the latter should consequently be held solidarily liable with Deganos in his obligation to petitioners. While the
quoted statement in the findings of fact of the assailed appellate decision mentioned that Deganos ostensibly acted
as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals categorically stated that, "(Brigida
Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners . . ." 15 It
is clear, therefore, that even assuming arguendo that Deganos acted as an agent of Brigida, the latter never
authorized him to act on her behalf with regard to the transactions subject of this case.
The Civil Code provides:
Art. 1868. By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of the latter.
The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved.
Petitioners' attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is
groundless and ill-advised.
Page 12 of 72
 Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but
on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial value without
requiring a written authorization from his alleged principal. A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent. 16
The records show that neither an express nor an implied agency was proven to have existed between
Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with Deganos, cannot
seek relief from the effects of their negligence by conjuring a supposed agency relation between the two
respondents where no evidence supports such claim.
Petitioners next allege that the Court of Appeals erred in ignoring the fact that the decision of the court
below, which it affirmed, is "null and void" as it contradicted its ruling in CA-G.R. SP No. 39445 holding that there is
"sufficient evidence/proof" against Brigida D. Luz and Deganos for estafa in the pending criminal case. They further
aver that said appellate court erred in ruling against them in this civil action since the same would result in an
inevitable conflict of decisions should the trial court convict the accused in the criminal case. LLjur
By way of backdrop for this argument of petitioners, herein respondents Brigida D. Luz and Deganos had
filed a demurrer to evidence and a motion for reconsideration in the aforestated criminal case, both of which were
denied by the trial court. They then filed a petition for certiorari in the Court of Appeals to set aside the denial of their
demurrer and motion for reconsideration but, as just stated, their petition therefore was dismissed. 17
Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G.R. SP No.
39445 with respect to the criminal case is equivalent to a finding that there is sufficient ev idence in the estafa case
against Brigida D. Luz and Deganos. Hence, as already stated, petitioners theorize that the decision and resolution
of the Court of Appeals now being impugned in the case at bar would result in a possible conflict with the
prospective decision in the criminal case. Instead of promulgating the present decision and resolution under review,
so they suggest, the Court of Appeals should have awaited the decision in the criminal case, so as not to render
academic or preempt the same or, worse, create two conflicting rulings. 18
Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases involving
alleged fraudulent acts, a civil action for damages, entirely separate and distinct from the criminal action, may be
brought by the injured party. Such civil action shall proceed independently of the criminal prosecution and shall
require only a preponderance of evidence.
It is worth noting that this civil case was instituted four years before the criminal case for estafa was filed,
and that although there was a move to consolidate both cases, the same was denied by the trial court.
Consequently, it was the duty of the two branches of the Regional Trial Court concerned to independently proceed
with the civil and criminal cases. It will also be observed that a final judgment rendered in a civil action absolving the
defendant from civil liability is no bar to a criminal action. 19
It is clear, therefore, that this civil case may proceed independently of the criminal case 20 especially
because while both cases are based on the same facts, the quantum of proof required for holding the parties liable
therein differ. Thus, it is improvident of petitioners to claim that the decision and resolution of the Court of Appeals in
the present case would be preemptive of the outcome of the criminal case. Their fancied fear of possible conflict
between the disposition of this civil case and the outcome of the pending criminal case is illusory.
Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdiction to issue the denial
resolution dated August 18, 1997, as the same was tainted with irregularities and badges of fraud perpetrated by its
court officers. 21 They charge that said appellate court, through conspiracy and fraud on the part of its officers,
gravely abused its discretion in issuing that resolution denying their motion for reconsideration. They claim that said
resolution was drafted by the ponente, then signed and issued by the members of the Eleventh Division of said court
within one and a half days from the elevation thereof by the division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in issuing the resolution as the same was made
without waiting for the lapse of the ten-day period for respondents to file their comment and for petitioners to file
their reply. It was allegedly impossible for the Court of Appeals to resolve the issue in just one and a half days,
especially because its ponente, the late Justice Maximiano C. Asuncion, was then recuperating from surgery and,
that, additionally, "hundreds of more important cases were pending." 22
These lamentable allegation of irregularities in the Court of Appeals and in the conduct of its officers strikes
us as a desperate attempt of petitioners to induce this Court to give credence to their arguments which, as already
found by both the trial and intermediate appellate courts, are devoid of factual and legal substance. The regrettably
irresponsible attempt to tarnish the image of the intermediate appellate tribunal and its judicial officers through ad
hominem imputations could well be contumacious, but we are inclined to let that pass with a strict admonition that
petitioners refrain from indulging in such conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this case affirming the trial court's
decision. 23 Petitioners moved for reconsideration and the Court of Appeals ordered respondents to file a comment.
Page 13 of 72
Respondent filed the same on August 5, 1997 24 and petitioners filed their reply to said comment on August 15,
1997. 25 The Eleventh Division of said court issued the questioned resolution denying petitioner's motion for
reconsideration on August 18, 1997. 26
It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of cases,
petitioners are making a show of calling out for justice because the Court of Appeals issued a resolution disposing of
a case sooner than expected of it. They would even deny the exercise of discretion by the appellate court to
prioritize its action on cases in line with the procedure it has adopted in disposing thereof and in declogging its
dockets. It is definitely not for the parties to determine and dictate when and how a tribunal should act upon those
cases since they are not even aware of the status of the dockets and the internal rules and policies for acting
thereon.
The fact that a resolution was issued by said court within a relatively short period of time after the records of
the case were elevated to the office of the ponente cannot, by itself, be deemed irregular. There is no showing
whatsoever that the resolution was issued without considering the reply filed by petitioners. In fact, that brief
pleading filed by petitioners does not exhibit any esoteric or ponderous argument which would not be analyzed
within an hour. It is a legal presumption, born of wisdom and experience, that official duty has been regularly
performed; 27 that the proceedings of a judicial tribunal are regular and valid, and that judicial acts and duties have
been and will be duly and properly performed. 28 The burden of proving irregularity in official conduct is on the part
of petitioners and they have utterly failed to do so. It is thus reprehensible for them to cast aspersions on a court of
law on the bases of conjectures or surmises, especially since one of the petitioners appears to be a member of the
Philippine Bar.
Lastly, petitioners fault the trial court's holding that whatever contract of agency was established between
Brigida D. Luz and Narciso Deganos is unenforceable under the Statute of Frauds as that aspect of this case
allegedly is not covered thereby. 29 They proceed on the premise that the Statute of Frauds applies only to
executory contracts and not to executed or to partially executed ones. From there, they move on to claim that the
contract involved in this case was an executed contract as the items had already been delivered by petitioners to
Brigida D. Luz, hence, such delivery resulted in the execution of the contract and removed the same from the
coverage of the Statute of Frauds.
Petitioners' claim is speciously unmeritorious. It should be emphasized that neither the trial court nor the
appellate court categorically stated that there was such a contractual relation between these two respondents. The
trial court merely said that if there was such an agency existing between them, the same is unenforceable as the
contract would fall under the Statute of Frauds which requires the presentation of a note or memorandum thereof in
order to be enforceable in court. That was merely a preparatory statement of a principle of law. What was finally
proven as a matter of fact is that there was no such contract between Brigida D. Luz and Narciso Deganos,
executed or partially executed, and no delivery of any of the items subject of this case was ever made to the former.
WHEREFORE, no error having been committed by the Court of Appeals in affirming the judgment of the
court a quo, its challenged decision and resolution are hereby AFFIRMED and the instant petition is DENIED, with
double costs against petitioners. llcd
SO ORDERED.
||| (Bordador v. Luz, G.R. No. 130148, [December 15, 1997], 347 PHIL 654-667)

EN BANC
[G.R. No. L-18287. March 30, 1963.]
TRINIDAD J. FRANCISCO, plaintiff-appellee, vs. GOVERNMENT SERVICE INSURANCE
SYSTEM, defendant-appellant.
[G.R. No. L-18155. March 30, 1963.]
TRINIDAD J. FRANCISCO, plaintiff-appellant, vs. GOVERNMENT SERVICE INSURANCE
SYSTEM, defendant-appellee.
Vicente J. Francisco for plaintiff-appellee.
The Government Corporate Counsel for defendant-appellant.
SYLLABUS
1. CORPORATIONS; BINDING EFFECT OF ACTS OF CORPORATE OFFICERS. — A corporation
cannot evade the binding effect produced by a telegram sent by its board secretary, and the addressee of such
telegram cannot be blamed for relying upon it, because if every person dealing with a corporation were held
duty-bound to disbelieve every act of its responsible officers no matter how regular it should appear on its face,
corporate transactions would speedily come to a standstill.

Page 14 of 72
 2. ID.; ID.; WHEN CORPORATION ESTOPPED TO DENY APPARENT AUTHORITY OF ITS
OFFICERS. — If a private corporation intentionally or negligently clothes its officers or agents with apparent
power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to
innocent third persons dealing in good faith with such officers or agents. (2 Fletcher's Cyclopedia, Priv. Corp,
255, perm. Ed.)
3. ID.; ID.; ID.; WHEN NOTICE OF FACTS BY A CORPORATE OFFICER IS NOTICE TO
CORPORATION. — Knowledge of facts acquired or possessed by an officer or agent of a corporation in the
course of his employment, and in relation to matters within he communicates such knowledge or not.
(Ballentine, Law on Corporations, section 112).
4. ID.; ID.; ID.; SILENCE OF CORPORATION AS RATIFICATION OF AGREEMENT. — The silence of
the corporation, taken together with the unconditional acceptance of three subsequent remittances from plaintiff,
constitutes a binding ratification of the original agreement between them (Civil Code, Article 1393).
5. ID.; ID.; ID.; MAXIM THAT THE ONE WHO MADE IT POSSIBLE FOR A WRONG TO BE DONE
SHOULD SUFFER. — The equitable maxim that between two innocent parties the one who made it possible for
the wrong to be done should be the one to bear the resulting loss, applies when—as in the instant case—a
corporation allows one of its officers, now alleged to be without the proper authority, to send a telegram binding
the corporation.
6. DAMAGES; BREACH OF CONTRACT; MORAL DAMAGES NOT WARRANTED IF BREACH IS NOT
MALICIOUS OR FRAUDULENT. — Award of moral damages under Article 2220 of the Civil Code is not
warranted if the breach of contract is not malicious or fraudulent (Ventanilla vs. Centeno, 110 Phil., 811; Flores
vs. Miranda, 105 Phil., 266).
7. ID.; ID.; WHEN EXEMPLARY DAMAGES ALLOWED. — Exemplary damages are only allowed in
addition to moral, temperate liquidated, or compensatory damages (Art. 2234, Civil Code; Velayo vs. Shell Co.
of P.I. 100 Phil., 186; Singson, et al. vs. Aragon and Lorza, 92 Phil. 514; 49 Off. Gaz. No. 2, 515).
8. ATTORNEY'S FEES; AWARD ESSENTIALLY DISCRETIONARY ALLOWED. — The award of
attorney's fees is essentially discretionary with the trial court, and no abuse of discretion is committed when the
court refuses to make an award because of the absence of gross and evident bad faith in defendant's refusal to
satisfy plaintiff's claim, or of any of the other grounds enumerated in Article 2208 of the Civil Code.

DECISION
REYES, J.B.L., J p:
Appeal by the Government Service Insurance System from the decision of the Court of First Instance of
Rizal (Hon. Angel H. Mojica, presiding), in its Civil Case No. 2088-P, entitled "Trinidad J. Francisco, plaintiff, vs.
Government Service Insurance System, defendant", the dispositive part of which reads as follows:
"WHEREFORE, judgment is hereby rendered: (a) Declaring null and void the consolidation
in the name of the defendant, Government Service Insurance System, of the title of the VIC-MARI
compound; said title shall be restored to the plaintiff; and all payments made by the plaintiff; after
her offer had been accepted by the defendant, must be credited as amortizations on her loans;
and (b) Ordering the defendant to abide by the terms of the contract created by plaintiff's offer and
its unconditional acceptance, with costs against the defendant."
The plaintiff, Trinidad J. Francisco, likewise appealed separately (L-18155), because the trial court did
not award the P535,000.00 damages and attorney's fees she claimed. Both appeals are, therefore, jointly
treated in this decision.
The following facts are admitted by the parties. On 10 October 1956, the plaintiff, Trinidad J. Francisco,
in consideration of a loan in the amount of P400,000.00, out of which the sum of P336,100.00 was released to
her, mortgaged in favor of the defendant, Government Service Insurance System (hereinafter referred to as the
System), a parcel of land containing an area of 18,232 square meters, with twenty-one (21) bungalows, known
as Vic-Mari Compound, located at Baesa, Quezon City, payable within ten (10) years in monthly installments of
P3,902.41, and with interest of 7% per annum compounded monthly.
On 6 January 1959, the System extrajudicially foreclosed the mortgage on the ground that up to that
date the plaintiff-mortgagor was in arrears on her monthly installments in the amount of P52,000.00. Payments
made by the plaintiff at the time of foreclosure amounted to P130,000.00. The System itself was the buyer of the
property in the foreclosure sale.
On 20 February 1959, the plaintiff's father, Atty. Vicente J. Francisco, sent a letter to the general
manager of the defendant corporation, Mr. Rodolfo P. Andal, the material portion of which recited as follows:
Page 15 of 72
 "Yesterday, I was finally able to collect what the Government owed me and I now propose
to pay said amount of P30,000 to the GSIS if it would agree that after such payment the
foreclosure of my daughter's mortgage would be set aside. I am aware that the amount of P30,000
which I offer to pay will not cover the total arrearage of P52,000 but as regards the balance, I
propose this arrangement: for the GSIS to take over the administration of the mortgaged property
and to collect the monthly installments, amounting to about P5,000, due on the unpaid purchase
price of more than 31 lots and houses therein and the monthly installments collected shall be
applied to the payment of Miss Francisco's arrearage until the same is fully covered. It is
requested, however, that from the amount of the monthly installments collected, the sum of
P350.00 be deducted for necessary expenses, such as to pay the security guard, the street
caretaker, the Meralco Bill for the street lights and sundry items.
It will be noted that the collectible income each month from the mortgaged property, which
as I said consists of installments amounting to about P5,000, is more than enough to cover the
monthly amortization on Miss Francisco's loan. Indeed, had she not encountered difficulties, due to
unforeseen circumstances, in collecting the said installments, she could have paid the
amortizations as they fell due and there would have been really no need for the GSIS to resort to
foreclosure.
The proposed administration by the GSIS of the mortgaged property will continue even
after Miss Francisco's account shall have been kept up to date. However, once the arrears shall
have been paid, whatever amount of the monthly installments collected in excess of the
amortization due on the loan will be turned over to Miss Francisco.
I make the foregoing proposal to show Miss Francisco's sincere desire to work out any fair
arrangement for the settlement of her obligation. I trust that the GSIS, under the broad-minded
policies of your administration, would give it serious consideration.
Sincerely,
s/Vicente J. Francisco
t/VICENTE J. FRANCISCO
On the same date, 20 February 1959, Atty. Francisco received the following telegram:
"VICENTE FRANCISCO
SAMANILLO BLDG. ESCOLTA
GSIS BOARD APPROVE YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY
OF YOUR DAUGHTER
ANDAL"
On 28 February 1959, Atty. Francisco remitted to the System, through Andal, a check for P30,000.00,
with an accompanying letter, which reads:
"I am sending you herein BPI Check No. B-299484 for Thirty thousand pesos (P30,000.00)
in accordance with my letter of February 20th and your reply thereto of the same date, which
reads:
"GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED
PROPERTY OF YOUR DAUGHTER'
xxx xxx xxx"
The defendant received the amount of P30,000.00, and issued therefor its official receipt No. 1209874,
dated 4 March 1959. It did not, however, take over the administration of the compound. In the meantime, the
plaintiff received the monthly payments of some of the occupants thereat; then, on 4 March 1960, she remitted,
through her father, the amount of P44,121.29, representing the total monthly installments that she received from
the occupants for the period from March to December 1959 and January to February 1960, minus expenses and
real estate taxes. The defendant also received this amount, and issued the corresponding official receipt.
Remittances, all accompanied by letters, corresponding to the months of March, April, May, and June,
1960 and totalling P24,604.81 were also sent by the plaintiff to the defendant from time to time, all of which were
received and duly receipted for.
Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its assistant
general manager, and the other two letters, dated 19 and 26 February 1960, respectively, which were signed by
Andal, asking the plaintiff for a proposal for the payment of her indebtedness, since according to the System the
one-year period for redemption had expired.
In reply, Atty. Francisco sent a letter, dated 11 March 1960, protesting against the System's request for
proposal of payment and inviting its attention to the concluded contract generated by his offer of 20 February
1959, and its acceptance by telegram of the same date, the compliance of the terms of the offer already
Page 16 of 72
commenced by the plaintiff, and the misapplication by the System of the remittances she had made, and
requesting the proper corrections.
By letter, dated 31 May 1960, the defendant countered the preceding protest that, by all means, the
plaintiff should pay attorney's fees of P35,644.14, publication expenses, filing fee of P301.00, and surcharge of
P23.64 for the foreclosure work done; that the telegram should be disregarded in view of its failure to express
the contents of the board resolution due to the error of its minor employees in couching the correct wording of
the telegram, A copy of the excerpts of the resolution of the Board of Directors (No. 380, February 20, 1959)
was attached to the letter, showing the approval of Francisco's offer —
". . . subject to the condition that Mr. Vicente J. Francisco shall pay all expenses incurred by the
GSIS in the foreclosure of the mortgage."
Inasmuch as, according to the defendant, the remittances previously made by Atty. Francisco were
allegedly not sufficient to pay off her daughter's arrears, including attorney's fees incurred by the defendant in
foreclosing the mortgage, and the one-year period for redemption has expired, said defendant, on 5 July 1960,
consolidated the title to the compound in its name, and gave notice thereof to the plaintiff on 26 July 1960 and to
each occupant of the compound.
Hence, the plaintiff instituted the present suit, for specific performance and damages. The defendant
answered, pleading that the binding acceptance of Francisco's offer was the resolution of the Board, and that
Andal's telegram, being erroneous, should be disregarded. After trial, the court below found that the offer of Atty.
Francisco, dated 20 February 1959, made on behalf of his daughter, had been unqualifiedly accepted, and was
binding, and rendered judgment as noted at the start of his opinion.
The defendant-appellant corporation assigns six (6) errors allegedly committed by the lower court, all of
which, however, are resolvable on the single issue as to whether or not the telegram generated a contract that is
valid and binding upon the parties.
We find no reason for altering the conclusion reached by the court below that the offer of compromise
made by plaintiff in the letter, Exhibit "A", had been validly accepted, and was binding on the defendant. The
terms of the offer were clear, and over the signature of defendant's general manager, Rodolfo Andal, plaintiff
was informed telegraphically that her proposal had been accepted. There was nothing in the telegram that
hinted at any anomaly, or gave ground to suspect its veracity, and the plaintiff, therefore, can not be blamed for
relying upon it. There is no denying that the telegram was within Andal's apparent authority, but the defense is
that he did not sign it, but that it was sent by the Board Secretary in his name and without his knowledge.
Assuming this to be true, how was appellee to know it? Corporate transactions would speedily come to a
standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible
officers, no matter how regular they should appear on their face. This Court has observed in Ramirez vs.
Orientalist Co., 38 Phil. 634, 654-655, that —
"In passing upon the liability of a corporation in cases of this kind it is always well to keep
in mind the situation as it presents itself to the third party with whom the contract is made.
Naturally he can have little or no information as to what occurs in corporate meetings; and he must
necessarily rely upon the external manifestations of corporate consent. The integrity of commercial
transactions can only be maintained by holding the corporation strictly to the liability fixed upon it
by its agents in accordance with law; and we would be sorry to announce a doctrine which would
permit the property of a man in the city of Paris to be whisked out of his hands and carried into a
remote quarter of the earth without recourse against the corporation whose name and authority
had been used in the manner disclosed in this case. As already observed, it is familiar doctrine
that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him out to the public as possessing power to do
those acts, the corporation will, as against any one who has in good faith dealt with the corporation
through such agent, be estopped from denying his authority; and where it is said "if the corporation
permits" his means the same as "if the thing is permitted by the directing power of the corporation."
It has also been decided that —
"A very large part of the business of the country is carried on by corporations. It certainly is
not the practice of persons dealing with officers or agents who assume to act for such entities to
insist on being shown the resolution of the board of directors authorizing the particular officer or
agent to transact the particular business which he assumes to conduct. A person who knows that
the officer or agent of the corporation habitually transacts certain kinds of business for such
corporation under circumstances which necessarily show knowledge on the part of those charged
with the conduct of the corporate business assumes, as he has the right to assume, that such
agent or officer is acting within the scope of his authority." (Curtis Land & Loan Co. vs. Interior
Page 17 of 72
 Land Co., 137 Wis. 341, 118 N. W. 853, 129 Am. St. Rep. 1068; as cited in 2 Fletcher's
Encyclopedia, Priv. Corp. 263, Perm. Ed).
Indeed, it is well-settled that —
"If a private corporation intentionally or negligently clothes its officers or agents with apparent
power to perform acts for it, the corporation will be estopped to deny that such apparent authority
is real, as to innocent third persons dealing in good faith with such officers or agents." (2 Fletcher's
Encyclopedia, Priv. Corp. 255, Perm. Ed).
Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the
binding effect produced by the telegram.
The defendant-appellant does not disown the telegram, and even asserts that it came from its offices, as
may be gleaned from the letter, dated 31 May 1960, to Atty. Francisco, and signed "R. P. Andal, general
manager by Leovigildo Monasterial, legal counsel", wherein these phrases occur: "the telegram sent . . . by this
office" and "the telegram we sent you" (emphasis supplied), but it alleges mistake in couching the correct
wording. This alleged mistake cannot be taken seriously, because while the telegram is dated 20 February
1959, the defendant informed Atty. Francisco of the alleged mistake only on 31 May 1960, and all the while it
accepted the various other remittances, starting on 28 February 1959, sent by the plaintiff to it in compliance
with her performance of her part of the new contract.
The inequity of permitting the System to deny its acceptance becomes more patent when account is
taken the fact that in remitting the payment of P30,000 advanced by her father, plaintiff's letter to Mr. Andal
quoted verbatim the telegram of acceptance. This was in itself notice to the corporation of the terms of the
allegedly unauthorized telegram, for as Ballentine says:
"Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of
his employment, and in relation to matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or not." (Ballentine, Law on Corporations,
section 112).
since a corporation cannot see, or know, anything except through its officers.
Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the
telegram not being in accordance with the true facts, as it now alleges. This silence, taken together with the
unconditional acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding
ratification of the original agreement (Civil Code, Art. 1393).
"ART. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a
tacit ratification if, with knowledge of the reason which renders the contract voidable and such
reason having ceased, the person who has a right to invoke it should execute an act which
necessarily implies an intention to waive his right."
Nowhere else do the circumstances call more insistently for the application of the equitable maxim that
between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear
the resulting loss.
The defendant's assertion that the telegram came from it but that it was incorrectly worded renders
unnecessary to resolve the other point in controversy as to whether the said telegram constitutes an actionable
document.
Since the terms offered by the plaintiff in the letter of 20 February 1959 (Exhibit "A") provided for
the setting aside of the foreclosure affected by the defendant System, the acceptance of the offer left the
account of plaintiff in the same condition as if no foreclosure had taken place. It follows, as the lower court has
correctly held, that the right of the System to collect attorney's fees equivalent to 10% of the sum due
(P35,694.14) and the expenses and charges of P3,300.00 may no longer be enforced, since by the express
terms of the mortgage contract, these sums were collectible only "in the event of foreclosure."
The court a quo also called attention to the unconscionability of the defendant's charging the attorney's
fees, totalling over P35,000.00; and this point appears well-taken, considering that the foreclosure was merely
extra-judicial, and the attorney's work was limited to requiring the sheriff to effectuate the foreclosure. However,
in view of the parties' agreement to set the same aside, with the consequential elimination of such incidental
charges, the matter of unreasonableness of the counsel fees need not be labored further.
Turning now to the plaintiff's separate appeal (Case G. R. No. L-18155): Her prayer for an award of
actual or compensatory damages for P83,333.33 is predicated on her alleged unrealized profits due to her
inability to sell the compound for the price of P750,000.00 offered by one Vicente Alunan, which sale was
allegedly blocked because the System consolidated the title to the property in its name. Plaintiff reckons the
amount of P83,333.33 by placing the actual value of the property at P666,666.67, a figure arrived at by
assuming that the System's loan of P400,000.00 constitutes 60% of the actual value of the security. The court a
Page 18 of 72
 quo correctly refused to award such actual or compensatory damages because it could not determine with
reasonable certainty the difference between the offered price and the actual value of the property, for lack of
competent evidence. Without proof we cannot assume, or take judicial notice, as suggested by the plaintiff, that
the practice of lending institutions in the country is to give out as loan 60% of the actual value of the collateral.
Nor should we lose sight of the fact that the price offered by Alunan was payable in installments covering five
years, so that it may not actually represent true market values.
Nor was there error in the appealed decision in denying moral damages, not only on account of the
plaintiff's failure to take the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., as
the decision holds, but primarily because a breach of contract like that of defendant, not being malicious or
fraudulent, does not warrant the award of moral damages under Article 2220 of the Civil Code (Ventanilla vs.
Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-12163, 4 March 1959).
There is no basis for awarding exemplary damages either, because this species of damages is only
allowed in addition to moral, temperate, liquidated, or compensatory damages, none of which have been
allowed in this case, for reasons hereinbefore discussed (Art. 2234, Civil Code; Velayo vs. Shell Co. of P.I., L-
7817, Res. July 30, 1957; Singson, et al. vs. Aragon and Lorza, L-5164, Jan. 27, 1953; 49 O.G. No. 2, 515).
As to attorney's fees, we agree with the trial court's stand that in view of the absence of gross and
evident bad faith in defendant's refusal to satisfy the plaintiff's claim, and there being none of the other grounds
enumerated in Article 2208 of the Civil Code, such absence precludes a recovery. The award of attorney's fees
is essentially discretionary in the trial court, and no abuse of discretion has been shown.
FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the
defendant Government Service Insurance System in G.R. No. L-18287.
||| (Francisco v. Government Service Insurance System, G.R. No. L-18287, L-18155, [March 30, 1963], 117 PHIL
586-598)

FIRST DIVISION
[G.R. No. 114311. November 29, 1996.]
COSMIC LUMBER CORPORATION, petitioner, vs. COURT OF APPEALS and ISIDRO
PEREZ, respondents.
SYLLABUS
l. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AUTHORITY OF AGENT TO SELL A PIECE
OF LAND OR INTEREST THEREON MUST BE IN WRITING TO BIND PRINCIPAL. — When the sale of a piece of
land or any interest thereon is through an agent, the authority of the latter shall be in writing otherwise, the sale shall
be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing
and must give him specific authority, either to conduct the general business of the principal or to execute a binding
contract containing terms and conditions which are in the contract he did execute. A special power of attorney is
necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an
agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a
necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no such construction shall be given the
document. cdaisa
2. ID.; ID.; ID.; ID.; ABSENCE OF REQUIRED AUTHORITY RENDERS SALE AND COMPROMISE
JUDGMENT BASED THEREON VOID AB INITIO; CASE AT BAR. — The authority granted Villamil-Estrada under
the special power of attorney was explicit and exclusionary; for her to institute any action in court to eject all persons
found on Lots Nos. 9127 and 443 so that petitioner could take material possession thereof, and for this purpose, to
appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this
was protective of the rights and interests of petitioner in the property. Nowhere in this authorization was Villamil-
Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof. Neither can a
conferment of the power to sell be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall be "so far as it shall
protect the rights and interest of the corporation in the aforementioned lots." In the context of the specific investiture
of powers to Villamil-Estrada, alienation by sale of an immovable certainly cannot be deemed protective of the right
of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square
meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner
Page 19 of 72
never received the proceeds of the sale. It is therefore clear that by selling to respondent Perez a portion of
petitioner's land through a compromise agreement, Villamil-Estrada acted without or in obvious authority. The
sale ipso jure is consequently void. So is the compromise agreement. This being the case, the judgment based
thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving petitioner's motion
for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the jurisdiction of the
trial court to render its decision based on the compromise agreement. (Alviar v. Court of First Instance of La
Union). ICcaST
3. ID.; ID.; ID.; ID.; ID.; REMEDIES AVAILABLE TO PRINCIPAL. — This ruling was adopted in Jacinto v.
Montesa, by Mr. Justice J.B.L. Reyes, a much-respected authority on civil law, where the Court declared that a
judgment based on a compromise entered into by an attorney without specific authority from the client is void. Such
judgment may be impugned and its execution restrained in any proceeding by the party against whom it is sought to
be enforced. The Court also observed that a defendant against whom a judgment based on a compromise is sought
to be enforced may file a petition for certiorari to quash the execution. He could not move to have the compromise
set aside and then appeal from the order of denial since he was not a party to the compromise. Thus it would
appear that the obiter of the appellate court that the alleged nullity of the compromise agreement should be raised
as a defense against its enforcement is not legally feasible. Petitioner could not be in a position to question the
compromise agreement in the action to revive the compromise judgment since it was never privy to such
agreement. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact but she
could not legally bind petitioner thereto as she was not entrusted with a special authority to sell the land, as required
in Art. 1878, par. (5), of the Civil Code.
4. REMEDIAL LAW; COURT OF APPEALS; WITH EXCLUSIVE ORIGINAL JURISDICTION TO ANNUL
JUDGMENT OF THE RTC; REQUISITES. — Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now
petition the Court of Appeals to annul and set aside judgments of Regional Trial Courts. "Thus, the Intermediate
Appellate Court (now Court of Appeals) shall exercise . . . (2) Exclusive original jurisdiction over action for
annulment of judgments of the Regional Trial Courts . . ." However, certain requisites must first be established
before a final and executory judgment can be the subject of an action for annulment. It must either be void for want
of jurisdiction or for lack of due process of law, or it has been obtained by fraud. Conformably with law and the
above-cited authorities, the petition to annul the decision of the trial court in Civil Case No. D-7750 before the Court
of Appeals was proper. Emanating as it did from a void compromise agreement, the trial court had no jurisdiction to
render a judgment based thereon.
5. ID.; ACTIONS; ANNULMENT OF ACTION; EXTRINSIC FRAUD; MANIFEST CONDUCT OF
ATTORNEY-IN-FACT CONCEALING FROM PRINCIPAL THAT LATTER'S PROPERTY WAS SOLD. — It would
also appear, and quite contrary to the finding of the appellate court, that the highly reprehensible conduct of
attorney-in-fact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic or collateral fraud by reason of which
the judgment rendered thereon should have been struck down. Not all the legal semantics in the world can becloud
the unassailable fact that petitioner was deceived and betrayed by its attorney-in-fact. Villamil-Estrada deliberately
concealed from petitioner, her principal, that a compromise agreement had been forged with the end-result that a
portion of petitioner's property was sold to the deforciant, literally for a song. Thus completely kept unaware of its
agent's artifice, petitioner was not accorded even a fighting chance to repudiate the settlement so much so that the
judgment based thereon became final and executory. cAECST
6. ID.; ID.; ID.; ID.; CONSTRUED. — There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P.
Blg. 129, where it is one the effect of which prevents a party from hearing a trial, or real contest, or from presenting
all of his case to the court or where it operates upon matters, not pertaining to the judgment itself, but to the manner
in which it was procured, so that there is not a fair submission of the controversy. In other words, extrinsic fraud
refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case,
whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception
practiced on him by his opponent. Fraud is extrinsic where the unsuccessful party has been prevented from
exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court,
a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance
by the acts of the plaintiff; or where an attorney fraudulently or without authority connives at his defeat; these and
similar cases which show that there has never been a real contest in the trial or hearing of the case are reasons for
which a new suit may be sustained to set aside and annul the former judgment and open the case for a new and fair
hearing.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; PRINCIPAL IS CHARGEABLE WITH THE
KNOWLEDGE OR NOTICE TO HIS AGENT RECEIVED; RULE NOT APPLICABLE WHERE AGENT IS
COMMITTING FRAUD AGAINST THE PRINCIPAL. — It may be argued that petitioner knew of the compromise
agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received
Page 20 of 72
while the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not
as a shield for unfair dealing. Hence there is a well-established exception to the general rule as where the conduct
and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the
facts in controversy. The logical reason for this exception is that where the agent is committing a fraud, it would be
contrary to common sense to presume or to expect that he would communicate the facts to the principal. Verily,
when an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not
really acting for the principal but is really acting for himself, entirely outside the scope of his agency. Indeed, the
basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an agent will not be
permitted to pervert his authority to his own personal advantage, and his act in secret hostility to the interests of his
principal transcends the power afforded him
DECISION
BELLOSILLO, J p:
COSMIC LUMBER CORPORATION, through its General Manager executed on 28 January 1985 a Special
Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact —
. . . to initiate, institute and file any court action for the ejectment of third persons and/or
squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said
squatters to remove their houses and vacate the premises in order that the corporation may take
material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and
enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights
and interest of the corporation in the aforementioned lots. 1
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the
ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the
Regional Trial Court of Dagupan, docketed as Civil Case No. D-7750. 2
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez, the
terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo
dela Cruz the area at present occupied by defendant wherein his house is located is 333 square
meters on the easternmost part of lot 443 and which portion has been occupied by defendant for
several years now;
2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact
the sum of P26,640.00 computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of
this compromise agreement over said portion of 333 square m. of lot 443 which portion will be
located on the easternmost part as indicated in the sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental expenses shall be
shouldered by the defendant. 3
On 27 November 1985 the "Compromise Agreement" was approved by the trial court and judgment was
rendered in accordance therewith. 4
Although the decision became final and executory it was not executed within the 5-year period from date of
its finality allegedly due to the failure of petitioner to produce the owner's duplicate copy of Title No. 37649 needed
to segregate from Lot No. 443 the portion sold by the attorney-in-fact; Paz G. Villamil-Estrada, to private respondent
under the compromise agreement. Thus on 25 January 1993 respondent filed a complaint to revive the judgment,
docketed as Civil Case No. D-10459. 5
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival of judgment
was served upon it that it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada
and respondent Isidro Perez upon which the trial court based its decision of 26 July 1993 in Civil Case No. D-7750.
Forthwith, upon learning of the fraudulent transaction, petitioner sought annulment of the decision of the trial court
before respondent Court of Appeals on the ground that the compromise agreement was void because: (a) the
attorney-in-fact did not have the authority to dispose of, sell, encumber or divest the plaintiff of its ownership over its
real property or any portion thereof; (b) the authority of the attorney-in-fact was confined to the institution and filing
of an ejectment case against third persons/squatters on the property of the plaintiff, and to cause their eviction
therefrom; (c) while the special power of attorney made mention of an authority to enter into a compromise
agreement, such authority was in connection with, and limited to, the eviction of third persons/squatters thereat, in
order that "the corporation may take material possession of the entire lot;" (d) the amount of P26,640.00 alluded to
as alleged consideration of said agreement was never received by the plaintiff; (e) the private defendant acted in
bad faith in the execution of said agreement knowing fully well the want of authority of the attorney-in-fact to sell,
encumber or dispose of the real property of plaintiff; and, (f) the disposal of a corporate property indispensably
Page 21 of 72
requires a Board Resolution of its Directors, a fact which is wanting in said Civil Case No. D-7750, and the General
Manager is not the proper officer to encumber a corporate property. 6
On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that not one of the
grounds for annulment, namely, lack of jurisdiction, fraud or illegality was shown to exist. 7 It also denied the motion
for reconsideration filed by petitioner, discoursing that the alleged nullity of the compromise judgment on the ground
that petitioner's attorney-in-fact Villamil-Estrada was not authorized to sell the subject property may be raised as a
defense in the execution of the compromise judgment as it does not bind petitioner, but not as a ground for
annulment of judgment because it does not affect the jurisdiction of the trial court over the action nor does it amount
to extrinsic fraud. 8
Petitioner challenges this verdict. It argues that the decision of the trial court is void because the
compromise agreement upon which it was based is void. Attorney-in-fact Villamil-Estrada did not possess the
authority to sell or was she armed with a Board Resolution authorizing the sale of its property. She was merely
empowered to enter into a compromise agreement in the recovery suit she was authorized to file against persons
squatting on Lot No. 443, such authority being expressly confined to the "ejectment of third persons or squatters of .
. . lot . . . (No.) 443 . . . for the said squatters to remove their houses and vacate the premises in order that the
corporation may take material possession of the entire lot . . ."
We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney was
explicit and exclusionary: for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443
so that petitioner could take material possession thereof, and for this purpose to appear at the pre-trial and enter
into any stipulation of facts and/or compromise agreement but only insofar as this was protective of the rights and
interests of petitioner in the property. Nowhere in this authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion thereof. Neither can a conferment of the power to sell
be validly inferred from the specific authority "to enter into a compromise agreement" because of the explicit
limitation fixed by the grantor that the compromise entered into shall only be "so far as it shall protect the rights and
interest of the corporation in the aforementioned lots." In the context of the specific investiture of powers to Villamil-
Estrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to
physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very
much less than its assessed value of P250.00 per square meter, and considering further that petitioner never
received the proceeds of the sale.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall
be in writing; otherwise, the sale shall be void. 9 Thus the authority of an agent to execute a contract for the sale of
real estate must be conferred in writing and must give him specific authority, either to conduct the general business
of the principal or to execute a binding contract containing terms and conditions which are in the contract he did
execute. 10 A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration. 11 The express mandate
required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly
mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. 12 For the principal to confer
the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and
unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no
such construction shall be given the document. 13
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise
agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the
compromise agreement. This being the case, the judgment based thereon is necessarily void. Antipodal to the
opinion expressed by respondent court in resolving petitioner's motion for reconsideration, the nullity of the
settlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its decision based
on the compromise agreement. In Alviar v. Court of First Instance of La Union, 14 the Court held —
. . . this court does not hesitate to hold that the judgment in question is null and void ab
initio. It is not binding upon and cannot be executed against the petitioners. It is evident that the
compromise upon which the judgment was based was not subscribed by them . . . . Neither could
Attorney Ortega bind them validly in the compromise because he had no special authority . . . .
As the judgment in question is null and void ab initio, it is evident that the court acquired no
jurisdiction to render it, much less to order the execution thereof . . .
. . . A judgment, which is null and void ab initio, rendered by a court without jurisdiction to
do so, is without legal efficacy and may properly be impugned in any proceeding by the party
against whom it is sought to be enforced . . .
This ruling was adopted in Jacinto v. Montesa, 15 by Mr. Justice J. B. L. Reyes, a much-respected authority
on civil law, where the Court declared that a judgment based on a compromise entered into by an attorney without
Page 22 of 72
specific authority from the client is void. Such judgment may be impugned and its execution restrained in any
proceeding by the party against whom it is sought to be enforced. The Court also observed that a defendant against
whom a judgment based on a compromise is sought to be enforced may file a petition for certiorari to quash the
execution. He could not move to have the compromise set aside and then appeal from the order of denial since he
was not a party to the compromise. Thus it would appear that the obiter of the appellate court that the alleged nullity
of the compromise agreement should be raised as a defense against its enforcement is not legally feasible.
Petitioner could not be in a position to question the compromise agreement in the action to revive the compromise
judgment since it was never privy to such agreement. Villamil-Estrada who signed the compromise agreement may
have been the attorney-in-fact but she could not legally bind petitioner thereto as she was not entrusted with a
special authority to sell the land, as required in Art. 1878, par. (5), of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of Appeals to annul
and set aside judgments of Regional Trial Courts. 16 "Thus, the Intermediate Appellate Court (now Court of
Appeals) shall exercise . . . (2) Exclusive original jurisdiction over action for annulment of judgments of the Regional
Trial Courts . . ." However, certain requisites must first be established before a final and executory judgment can be
the subject of an action for annulment. It must either be void for want of jurisdiction or for lack of due process of law,
or it has been obtained by fraud. 17
Conformably with law and the above-cited authorities, the petition to annul the decision of the trial court in
Civil Case No. D-7750 before the Court of Appeals was proper. Emanating as it did from a void compromise
agreement, the trial court had no jurisdiction to render a judgment based thereon. 18
It would also appear, and quite contrary to the finding of the appellate court, that the highly reprehensible
conduct of attorney-in-fact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic or collateral fraud by
reason of which the judgment rendered thereon should have been struck down. Not all the legal semantics in the
world can becloud the unassailable fact that petitioner was deceived and betrayed by its attorney-in-fact. Villamil-
Estrada deliberately concealed from petitioner, her principal, that a compromise agreement had been forged with
the end-result that a portion of petitioner's property was sold to the deforciant, literally for a song. Thus completely
kept unaware of its agent's artifice, petitioner was not accorded even a fighting chance to repudiate the settlement
so much so that the judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. Fraud may
assume different shapes and be committed in as many different ways and here lies the danger of attempting to
define fraud. For man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of
which prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or where it
operates upon matters, not pertaining to the judgment itself, but to the manner in which it was procured so that there
is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the
prevailing party in the litigation which is committed outside of the trial of the case, whereby the defeated party has
been prevented from exhibiting fully his side of the case by fraud or deception practiced on him by his
opponent. 19 Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by
fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a
compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the
plaintiff; or where an attorney fraudulently or without authority connives at his defeat; these and similar cases which
show that there has never been a real contest in the trial or hearing of the case are reasons for which a new suit
may be sustained to set aside and annul the former judgment and open the case for a new and fair hearing. 20
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with
and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the general
rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence there is a well-
established exception to the general rule as where the conduct and dealings of the agent are such as to raise a
clear presumption that he will not communicate to the principal the facts in controversy. 21 The logical reason for
this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or to
except that he would communicate the facts to the principal. Verily, when an agent is engaged in the perpetration of
a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really acting for
himself, entirely outside the scope of his agency. 22 Indeed, the basic tenets of agency rest on the highest
considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own
personal advantage, and his act in secret hostility to the interests of his principal transcends the power afforded
him. 23
WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of Appeals dated
29 October 1993 and 10 March 1994, respectively, as well as the decision of the Regional Trial Court of Dagupan
City in Civil Case No. D-7750 dated 27 November 1985, are NULLIFIED and SET ASIDE. The"Compromise
Page 23 of 72
Agreement" entered into between Attorney-in-fact Paz G. Villamil-Estrada and respondent Isidro Perez is declared
VOID. This is without prejudice to the right of petitioner to pursue its complaint against private respondent Isidro
Perez in Civil Case No. D-7750 for the recovery of possession of a portion of Lot No. 443.
SO ORDERED.
||| (Cosmic Lumber Corp. v. Court of Appeals, G.R. No. 114311, [November 29, 1996], 332 PHIL 948-963)

EN BANC
[G.R. No. L-18377. December 29, 1962.]
ANASTACIO G. DUÑGO, petitioner, vs. ADRIANO LOPENA, ROSA RAMOS and HON.
ANDRES REYES, Judge of the Court of First Instance of Rizal, respondents.
SYLLABUS
1. CONTRACTS; COMPROMISE; SPECIAL POWER OF ATTORNEY. — It is true that a compromise is, in itself, a
contract. It is as such that the Civil Code speaks of it in Article 2028. Moreover, under Article 1878 of the Civil Code,
a third person cannot bind another to a compromise agreement unless he, the third person, has obtained a special
power of attorney for that purpose from the party intended to be bound.
2. ID.; ID.; ID.; ABSENCE OF DOES NOT RENDER AGREEMENT VOID BUT MERELY UNENFORCEABLE. —
However, although the Civil Code expressly requires a special power of attorney in order that one may compromise
an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise
agreement void. In such a case, the compromise is merely unenforceable. This results from its nature as a contract.
3. ID.; COMPROMISE; RATIFICATION BY CLIENT OF COMPROMISE MADE BY HIS ATTORNEY. — When it
appears that the client, on becoming aware of the compromise and the judgment thereon, fails to repudiate promptly
the action of his attorney, he will not afterwards be heard to contest its validity (Rivero vs. Rivero, 59 Phil. 15).
4. ID.; NOVATION BY PRESUMPTION NOT FAVORED. — Novation by presumption has never been favored. To
be sustained, it need be established that the old and new contracts are incompatible in all points, or that the will to
novate appears by express agreement of the parties or in acts of similar import.
5. ID.; ID.; LACK OF AGREEMENT THAT FIRST DEBTOR SHALL BE RELEASED FROM RESPONSIBILITY
REDUCES SECOND AGREEMENT TO A MERE GUARANTY. — It is a very common thing in business affairs for a
stranger to a contract to assume its obligations; and, while this may have the effect of adding to the number of
person liable, it does not necessarily imply the extinguishment of the liability of the first debtor (Rios vs. Jacinto, etc.,
49 Phil. 7; Garcia vs. Khu Yek Chiong, 65 Phil. 466). The mere fact that the creditor receives a guaranty or accepts
payments from a third person who has agreed to assume the obligation, when there is no agreement that the first
debtor shall be released from responsibility, does not constitute a novation, and the creditor can still enforce the
obligation against the original (Straight vs. Haskell, 49 Phil. 614; Pacific Commercial Co. vs. Sotto, 34 Phil. 237;
Estate of Mota vs. Serra 47 Phil. 464).
DECISION
REGALA, J p:
On September 10, 1959, herein petitioner Anastacio G. Duñgo and one Rodrigo S. Gonzales purchased 3 parcels of
land from the respondents Adriano Lopena and Rosa Ramos for the total price of P269,804.00. Of this amount,
P28,000.00 was given as down payment with the agreement that the balance of P241,804.00 would be paid in 6
monthly installments.
To secure the payment of the balance Anastacio G. Duñgo and Rodrigo S. Gonzales, the vendees, on September
11, 1958, executed over the same 3 parcels of land a Deed of Real Estate Mortgage in favor of the respondents
Adriano Lopena and Rosa Ramos. This deed was duly registered with the Office of the Register of Deeds of Rizal,
with the condition that failure of the vendees to pay any of the installments on their maturity dates shall automatically
cause the entire unpaid balance to become due and demandable.
The vendees defaulted on the first installment. It resulted then that on November 7, 1959, the vendors, herein
respondents Adriano Lopena and Rosa Ramos, filed a complaint for the foreclosure of the aforementioned real
estate mortgage with the Court of First Instance of Rizal, the Hon. Judge Andres Reyes, presiding. This complaint
was answered by the herein petitioner and the other vendee, Rodrigo S. Gonzales, on December 7, 1959.
Meanwhile, there were 2 other civil cases filed in the same lower court against the same defendants Anastacio
Duñgo and Rodrigo S. Gonzales. The plaintiff in one was a certain Dionisio Lopena, and in the other case, the
complainants were Bernardo Lopena and Maria de la Cruz. Both complaints involved the same cause of action as
that of the herein respondents Adriano Lopena and Rosa Ramos. As a matter of fact, all three cases arose out of
one transaction. In view of the identical nature of the above three cases, they were consolidated by the lower court
into just one proceeding.

Page 24 of 72
It must be made clear, however, that this present decision refers solely to the interests and claim of Adriano Lopena
against Anastacio Duñgo alone.
Before the cases could be tried, a compromise agreement dated January 15, 1960 was submitted to the lower court
for approval. It was signed by the herein respondents Adriano Lopena and Rosa Ramos on one hand, and, Rodrigo
S. Gonzales, on the other. It was not signed by the herein petitioner. However, Rodrigo S. Gonzales represented
that his signature was for both himself and the herein petitioner. Moreover, Anastacio Duñgo's counsel of record,
Atty. Manuel O. Chan, the same lawyer who signed and submitted for him the answer to the complaint, was present
at the preparation of the compromise agreement and this counsel affixed his signature thereto.
The text of this agreement is hereunder quoted:
"COMPROMISE AGREEMENT
COME NOW the parties in the above entitled cases and unto this Hon. Court respectfully set forth:
That, the plaintiffs, have agreed to give the defendants up to June 30, 1960 to pay the mortgage
indebtedness in each of the said cases.
That, should the defendants fail to pay the said mortgage indebtedness, judgments of foreclosure
shall thereafter be entered against the said defendants;
That, the defendants hereby waive the period of redemption provided by law after entry of
judgments;
That, in the event of sale of the properties involved in these three cases, the defendants agree that
the said properties shall be sold at one time at public auction, that is, one piece of property cannot
be sold without the others."
This compromise agreement was approved by the lower court on the same day it was submitted, January 15,
1960.
Subsequently, on May 3, 1960, a so called Tri-Party Agreement was drawn. The signatories to it were Anastacio
Duñgo (herein petitioner) and Rodrigo S. Gonzales as debtors, Adriano Lopena and Rosa Ramos (herein
respondents) as creditors, and, one Emma R. Santos as payor. The stipulations of the Tri-Party Agreement were as
follows:
"A TRI-PARTY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This contract entered into by and between —
(1) EMMA R. SANTOS, Filipino, of legal age, single, with residence and postal address at . . . .,
Rizal Avenue, Manila, hereinafter referred to as the PAYOR.
(2) ANASTACIO C. DUÑGO, Filipino, of legal age, single, with residence and postal address at
137 N. Domingo, Quezon City, and RODRIGO S. GONZALES, Filipino, of legal age, married to
Magdalena Balatbat, with residence and postal address at 73 Maryland, Quezon City, hereinafter
referred to as the DEBTOR,
and
(3) DIONISIO LOPENA, married to Teofila Nofuente, Librada Lopena married to Arellano
Cawagas. BERNARDO LOPENA, married to Maria de la Cruz, and ADRIANO LOPENA, married
to Rosa Ramos, all of whom are Filipinos, legal ages, with residence and postal address at Sucat,
Muntinlupa, Rizal, hereinafter represented by their attorney of record, ANTONIO LOPENA,
hereinafter referred to as the CREDITOR,
W I T N E S S E T H:
WHEREAS, the DEBTOR is indebted to the CREDITOR as of this date in the aggregate amount of
P503,000.00 for the collection of which, the latter as party plaintiffs have instituted foreclosure
proceedings against the former as party defendants in Civil Cases Nos. 5872, 5873 and 5874 now
pending in the Court of First Instance, Pasig, Rizal;
WHEREAS, the PAYOR, hereby submits and binds herself to the force and effect of the Order
dated January 15, 1960, of the Court of First Instance of Pasig, Rizal, Branch VI, which order is
hereby made an integral part of this agreement as Annex "A";
WHEREAS, the PAYOR, with due knowledge and consent of the DEBTOR, hereby proposes to
pay the aforesaid indebtedness in the sum of P503,000.00 to the CREDITOR for and in behalf of
the DEBTOR under the following terms and conditions:
(a) To pay the said P503,000.00 in installments in the following schedule of amounts and
time:
P50,000.00 on or before May 31, 1960
70,000.00 on or before June 30, 1960

Page 25 of 72
 70,000.00 on or before July 31, 1960
313,000.00 on or before Aug. 31, 1960.
(b) That the DEBTOR and the PAYOR hereby waive any right to object and oblige
themselves not to oppose the motion that the CREDITOR may file during the first
week of July 1960, or subsequently thereafter, informing the Court of the exact
money obligation of the DEBTOR which shall be P503,000.00 minus whatever
payments, if any, made before June 30, 1960 by the PAYOR, and praying for the
issuance of an order to sell the property covered by the mortgage.
(c) That the CREDITOR, once he has the order referred to, should not execute the same by
giving it to the sheriff if the PAYOR is regular and punctual in the payment of all the
installments stated above. PROVIDED, however, if the PAYOR defaults or fails to
pay anyone of the installments in the manner stated above, the PAYOR and the
DEBTOR hereby permit the CREDITOR to execute the order of sale referred to
above, and they (PAYOR and DEBTOR) hereby waive any and all objections or
oppositions to the propriety of the public auction sale and to the confirmation of the
sale to be made by the court.
(d) That the CREDITOR, at his option. may execute the August installment stated in letter (a)
of this paragraph if the PAYOR has paid regularly the May, June, and July
installments, and provided further that one-half (1/2) of the August installment in the
amount of P156,500.00 is paid on the said date of August 31, 1960.

NOW, THEREFORE, for and in consideration of the foregoing stipulations, the DEBTOR and
CREDITOR hereby accept, approve and ratify the above-mentioned propositions of the PAYOR,
and all the parties herein bind and oblige themselves to comply to the covenants and stipulations
aforestated;
That by mutual agreements of all the parties herein, this Tri-Party Agreement may be submitted to
Court to form integral parts of the records of the Civil Cases mentioned above;
IN WITNESS WHEREOF, the parties hereunto affix their signatures on this 3rd day of May, 1960
in the City of Manila, Philippines.
When Anastacio Duñgo (herein petitioner) and Rodrigo S. Gonzales failed to pay the balance of their indebtedness
on June 30, 1960, herein respondents Lopena and Ramos filed on July 5, 1960, a Motion for the Sale of Mortgaged
Property. Although this last motion was filed ex parte, Anastacio Duñgo and Rodrigo S. Gonzales were notified of it
by the lower court. Neither of them, however, despite the notice, filed any opposition thereto. As a result, the lower
court granted the above motion on July 19, 1960, and ordered the sale of the mortgaged property.
On August 25, 1960, the 3 parcels of land above-mentioned were sold by the Sheriff at a public auction whereat
herein petitioners, together with the plaintiffs of the other two cases, won as the highest bidders. The said sheriff's
sale was later confirmed by the lower court on August 30, 1960. In this connection, it should also be made of record
that before confirming the sale, the lower court gave due notice of the motion for the confirmation to the herein
petitioner who filed no opposition therefor.
On August 31, 1960, Anastacio Duñgo filed a motion to set aside all the proceedings on the ground that the
compromise agreement dated January 15, 1960 was void ab initio with respect to him because he did not sign the
same. Consequently, he argued, all subsequent proceedings under and by virtue of the compromise agreement,
including foreclosure sale of August 25, 1960, were void and null as regards him. This motion to set aside, however,
was denied by the lower court in its order of December 14, 1960.
Upon denial of the said motion to set aside, Anastacio Duñgo filed a Notice of Appeal from the order of August 3 1,
1960 approving the foreclosure sale of August 25, 1960, as well as the order of December 14, 1960, denying his
motion to set aside. The approval of the record on appeal, however, was opposed by the herein respondent
spouses, who claimed that the judgment was not appealable having been rendered by virtue of the compromise
agreement. The opposition was contained in a motion to dismiss the appeal. Anastacio Duñgo filed a reply to the
above motion. Soon thereafter, the lower court dismissed the appeal.
Two issues were raised to this Court for review, to wit:
(1) Was the compromise agreement of January 15, 1960, the Order of the same date approving the same, and, all
the proceedings subsequent thereto, valid or void insofar as the petitioner herein is concerned?
(2) Did the lower court abuse its discretion when it dismissed the appeal of the herein petitioner?
Petitioner Anastacio Duñgo insists that the Compromise Agreement was void ab initio and could have no effect
whatsoever against him because he did not sign the same. Furthermore, as it was void, all the proceedings

Page 26 of 72
subsequent to its execution, including the Order approving it, were similarly void and could not result to anything
adverse to his interest.
The argument was not well taken. It is true that a compromise is, in itself, a contract. It is as such that the Civil Code
speaks of it.
"ART. 2028. A compromise is a contract whereby the parties by making reciprocal concessions,
avoid a litigation or put an end to one already commenced.
Moreover, under Art. 1878 of the Civil Code, a third person cannot bind another to a compromise agreement
unless he, the third persons, has obtained a special power of attorney for that purpose from the party intended
to be bound.
"ART. 1878. Special powers of attorney are necessary in the following cases:
xxx xxx xxx
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a
judgment, to waive objections to the venue of an action or to abandon a prescription already
acquired;"
However, although the Civil Code expressly requires a special power of attorney in order that one may compromise
an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise
agreement void. In such a case, the compromise is contract. It must be governed by the rules and the law merely
unenforceable. This results from its nature as a on contracts.
"ART. 1403. The following contracts are unenforceable unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers."
Logically, then, the next inquiry in this case should be whether the herein petitioner, Anastacio Duñgo, had or had
not ratified the compromise agreement. If he had, then the compromise agreement was legally enforced against
him; otherwise, he should be sustained in his contention that it never bound him, nor ever could it be made to bind
him.
The ratification of the compromise agreement was conclusively established by the tri-party agreement of May 3,
1960. It is to be noted that the compromise agreement was submitted to and approved by the lower court on
January 10, 1960. Now, the Tri-Party Agreement referred itself to that order when it stipulated thus:
"WHEREAS, the PAYOR, hereby submits and binds herself to the force and effect of the Order
dated January 15, 1960, of the Court of First Instance, of Pasig, Rizal, Branch IV, which order is
hereby made an integral part of this agreement as Annex "A."
Having so consented to making that court order approving the compromise agreement an integral part of the Tri-
Party Agreement, how can the petitioner herein now repudiate the compromise agreement and claim he has not
authorized it?
When it appears that the client, on becoming aware of the compromise and the judgment thereon, fails to repudiate
promptly the action of his attorney, he will not afterwards be heard to contest its validity (Rivero vs. Rivero, 59 Phil.
15).
Besides, this Court has not overlooked the fact that while indeed Anastacio Duñgo was not a signatory to the
compromise agreement, the principal provision of the said instrument was for his benefit. Originally, Anastacio
Duñgo's obligation matured and became demandable on October 10, 1959. However, the compromise agreement
extended the date of maturity to June 30, 1960. More than anything, therefore, the compromise agreement operated
to benefit the herein petitioner because it afforded him more time and opportunity to fulfill his monetary obligations
under the contract. If only for this reason, this Court believes that the herein petitioner should not be heard to
repudiate the said agreement.
Lastly, the compromise agreement stated "that, should the defendants fail to pay the said mortgage indebtedness,
judgment of foreclosure shall thereafter be entered against the said defendants;" Beyond doubt, this was ratified by
the Tri-Party Agreement when it covenanted that —
"If the PAYOR defaults or fails to pay anyone of the installments in the manner stated above, the
PAYOR and the DEBTOR hereby permit the CREDITOR to execute the order of sale referred to
above (the Judgment of Foreclosure), and they (PAYOR and DEBTOR) hereby waive any and all
objections or oppositions to the propriety of the public auction sale and to the confirmation of the
sale to be made by the Court."
Petitioner Duñgo finally argued that even assuming that the compromise agreement was valid, it nevertheless could
not be enforced against him because it has been novated by the Tri-Party Agreement which brought in a third party,
namely, Emma R. Santos, who assumed the mortgaged obligation of the herein petitioner.
This Court cannot accept the argument. Novation by presumption has never been favored. To be sustained, it need
be established that the old and new contracts are incompatible in all points, or that the will to novate appears by
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express agreement of the parties or in acts of similar import. (Martinez vs. Cavives, 25 Phil. 581; Tiu
Sinco vs. Havana, 45 Phil. 707; Asia Banking Corporation vs. Lacson Co., 48 Phil., 482; Pascual vs. Lacsamana,
100 Phil., 381; 53 O.G. 2467, April 1957).
An obligation to pay a sum of money is not novated ill a new instrument wherein the old is ratified, by changing only
the term of payment and adding other obligations not incompatible with the old one (Inchausti vs. Yulo, 34 Phil. 978;
Pablo vs. Sapungan 71 Phil. 145) or wherein the old contract is merely supplemented by the new one
(Ramos vs. Gibbon, 67 Phil., 371).
Herein petitioner claims that when a third party, Emma R. Santos, came in and assumed the mortgaged obligation
novation resulted thereby inasmuch as a new debtor was substituted in place of the original one. In this kind of
novation, however, it is not enough that the juridical relation of the parties to the original contract is extended to a
third person; it is necessary that the old debtor be released from the obligation, and the third person or new debtor
takes his place in the new relation. Without such release, there is no novation; the third person who has assumed
the obligation of the debtor merely becomes a co-debtor or surety. If there is no agreement as to solidarity, the first
and the new debtors are considered obligated jointly. (IV Tolentino, Civil Code, p. 360, citing Manresa). There was
no such release of the original debtor in the Tri-Party Agreement.
It is a very common thing in business affairs for a stranger to a contract to assume its obligations; and, while this
may have the effect of adding to the number of persons liable, it does not necessarily imply the extinguishment of
the liability of the first debtor (Rios vs. Jacinto, etc. 49 Phil. 7; Garcia vs. Khu Yek Chiong, 65 Phil. 466). The mere
fact that the creditor receives a guaranty or accepts payments from a third person who has agreed to assume the
obligation, when there is no agreement that the first debtor shall be released from responsibility, does not constitute
a novation, and the creditor can still enforce the obligation against the original debtor (Straight vs. Haskell, 49 Phil.
614; Pacific Commercial Co. vs. Sotto, 34 Phil. 237; Estate of Mota vs. Serra, 47 Phil. 464).

In view of the foregoing, We hold that the Tri-Party Agreement was an instrument intended to render effective the
compromise agreement. It merely complimented and ratified the same. That a third person was involved in it is
inconsequential. Nowhere in the new agreement may the release of the herein petitioner be even inferred.
Having held that the compromise agreement was valid and enforceable against the herein petitioner, it follows that
the lower court committed no abuse of discretion when it dismissed the appeal of the herein petitioner.
WHEREFORE, the petition for certiorari and mandamus filed by the herein petitioner is hereby dismissed. The order
of the lower court dismissing the appeal is hereby affirmed, with costs.
||| (Duñgo v. Lopena, G.R. No. L-18377, [December 29, 1962], 116 PHIL 1305-1315)

EN BANC
[G.R. No. L-32473. July 31, 1973.]
IGNACIO VICENTE and MOISES ANGELES, petitioners, vs. HON. AMBROSIO M. GERALDEZ,
as Judge of the Court of First Instance of Bulacan, Branch V (Sta. Maria), and HI CEMENT
CORPORATION
DECISION
ANTONIO, J p:
There are two original actions of certiorari with prayer for preliminary injunction wherein petitioners seek
to annul the orders dated April 24, May 18, and July 18, 1970 of respondent Judge of the Court of First Instance
of Bulacan in Civil Case No. SM-201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente and Moises
Angeles). The two cases are herein decided jointly because they proceed from the same case and involve in
substance the same question of law.
On September 9, 1967 herein private respondent Hi Cement Corporation filed with the Court of First
Instance of Bulacan a complaint for injunction and damages against herein petitioners Juan Bernabe, Ignacio
Vicente and Moises Angeles. In said complaint the plaintiff alleged that it had acquired on October 27, 1965,
Placer Lease Contract No. V-90, from the Banahaw Shale Mining Association, under a deed of sale and transfer
which was duly registered with the Office of the Mining Recorder of Bulacan on November 4, 1965 and duly
approved by the Secretary of Agriculture and Natural Resources on December 15, 1965; that the said Placer
Lease Contract No. V-90 was for a period of twenty-five years commencing from August 1, 1960 and covered
two mining claims (Red Star VIII & IX) with a combined area of about fifty-one hectares; that within the limits of
Placer Mining Claim Red Star VIII are three parcels of land claimed by the defendants Juan Bernabe (about two
hectares), Ignacio Vicente (about two hectares), and Moises Angeles (about one-fourth hectare); that the
plaintiff had, on several occasions, informed the defendants, thru its representatives, of the plaintiff's acquisition
Page 28 of 72
of the aforesaid placer mining claims which included the areas occupied by them; that the plaintiff had requested
the defendants to allow its workers to enter the area in question for exploration and development purposes as
well as for the extraction of minerals therefrom, promising to pay the defendants reasonable amounts as
damages, but the defendants refused to allow entry of the plaintiff's representatives; that the defendants were
threatening the plaintiff's workers with bodily harm if they entered the premises, for which reason the plaintiff had
suffered irreparable damages due to its failure to work on and develop its claims and to extract minerals
therefrom, resulting in its inability to comply with its contractual commitments, for all of which reasons the
plaintiff prayed the court to issue preliminary writs of mandatory injunction perpetually restraining the defendants
and those cooperating with them from the commission or continuance of the acts complained of, ordering
defendants to allow plaintiff, or its agents and workers, to enter, develop and extract minerals from the areas
claimed by defendants, to declare the injunction permanent after hearing and to order the defendants to pay
damages to the plaintiff in the amount of P200,000.00, attorney's fees, expenses of litigation and costs.
On September 12, 1967 the trial court issued a restraining order and required the defendants to file their
answers. The defendants filed their respective answers, which contained the usual admissions and denials and
interposed special and affirmative defenses, namely, among others, that they are the rightful owners of certain
portions of the land covered by the supposed mining claims: of the plaintiff; that it was the plaintiff and its
workers who had committed acts of force and violence when they entered into and intruded upon the
defendants' lands; and that the complaint failed to state a cause of action. The defendants set up counter-claims
against the plaintiff for actual and moral damages, as well as for attorney's fees.
In another pleading filed on the same date, defendant Juan Bernabe opposed the issuance of a writ of
preliminary mandatory or prohibitory injunction. In its Order dated September 30, 1967, the trial court, however,
directed the issuance of a writ of preliminary mandatory injunction upon the plaintiff's posting of a bond in the
amount of P100,000.00. In its order, the court suggested the relocation of the boundaries of the plaintiff's claims
in relation to the properties of the defendants, and to this end named as Commissioner, a Surveyor from the
Office of the District Engineer of Bulacan to relocate the boundaries of the plaintiff's mining claims, to show in a
survey plan the location of the areas thereof in conflict with the portions whose ownership is claimed by the
defendants and to submit his report thereof to the court on or before October 31, 1967. The court also directed
the parties to send their representatives to the place of the survey on the date thereof and to f urnish the
surveyor with copies of their titles. The Commissioner submitted his report to the Court on November 24, 1967
containing the following findings:
"1. In the attached survey plan, the area covered and embraced full and heavy lines is the
Placer Mining Claims of the Plaintiff containing an area of 107 hectares while the area bounded by
fine-broken lines are the properties of the Defendants.
"2. The property of the Defendant MOISES ANGELES, consisting of two (2) parcels known
as Lot 1-B and Lot 2 of Psu-103374, both described in O.C.T. No. O-1769 with a total area of
34,984 square meters were totally covered by the Claims of the Plaintiff.
"3. The property of the Defendant IGNACIO VICENTE, containing an area of 32,619
square meters, is also inside the Claims of the Plaintiff.
4. The property of the Defendant JUAN BERNABE known as Psu-178969, described in
O.C.T No. O-2050 is partially covered by the Claims of the Plaintiff and the area affected is 57,539
square meters."
In an Order issued on December 14, 1967, the court approved the report "with the conformity of all the parties in
this case."
Thereafter, on April 2, 1968 plaintiff HI Cement Corporation filed a motion to amend the complaint "so as
to conform to the facts brought out and/or impliedly admitted in the pre-trial." This motion was granted by the
court on April 6, 1968. Accordingly, on October 21, 1968, the plaintiff filed its amended complaint. The
amendments consisted in the statement of the correct areas of the land belonging to defendants Bernabe
(57,539 square meters), Vicente (32,619 square meters) and Angeles (34,984 square meters), as well as the
addition of allegations to the effect, among others, that at the pre-trial the defendants Angeles and Vicente
declared their willingness to sell to the plaintiff their properties covered by the plaintiff's mining claims for P10.00
per square meter, and that when the plaintiff offered to pay only P0.90 per square meter, the said defendants
stated that they were willing to go to trial on the issue of what would be the reasonable price for the properties of
defendants sought to be taken by plaintiff. With particular reference to defendant Bernabe, the amended
complaint alleged that the said defendant neither protested against nor prohibited the predecessor-in-interest of
the plaintiff from prospecting, discovering, locating and contracting minerals from the aforementioned claims, or
from conducting the survey thereon, or filed any opposition against the application for lease by the Red Star
Mining Association, and that as a result of the failure of said defendant to object to the acts of possession or
Page 29 of 72
occupation over the said property by plaintiff, defendant is now estopped from claiming that plaintiff committed
acts of usurpation on said property. The plaintiff prayed the court, among other things, to fix the reasonable
value of the defendants' properties as reasonable compensation for any resulting damage.
Defendant Bernabe filed an amended answer substantially reproducing his original answer and denying
the averments concerning him in the amended complaint.
The respective counsels of the parties then conferred among themselves on the possibility of terminating
the case by compromise the defendants having previously signified their willingness to sell to the plaintiff their
respective properties at reasonable prices.
On January 30, 1969 the counsels of the parties executed and submitted to the court for its approval the
following Compromise Agreement:
"COMPROMISE AGREEMENT
"COME NOW the plaintiff and the defendants represented by their respective counsel and
respectfully submit the following agreement:
"1. That the plaintiff is willing to buy the properties subject of litigation and the defendants
are willing to sell their respective properties;
"2. That this Honorable Court authorizes the plaintiff and the defendants to appoint their
respective commissioners that is one for the plaintiff and one for each defendant;
"3. That the parties hereby agree to abide by the decision of the Court based on the
findings of the Commissioners;
"4. That the fees of the Commissioners shall be paid as follows:
For those appointed by the parties shall be paid by them respectively; and for the one
appointed by the Court his fees shall be paid pro-rata by the parties;
"5. That the names of the Commissioners to be appointed by the parties shall be submitted
to the Court on or before February 8, 1969.
"WHEREFORE the undersigned respectfully pray that the foregoing agreement be
approved.
"Sta. Maria Bulacan, January 30, 1969.

"For the Plaintiff:

(Sgd.) FRANCISCO VENTURA
t/ FRANCISCO VENTURA
(Sgd.) FLORENTINO V. CARDENAS
t/ FLORENTINO V. CARDENAS
(Sgd.) ENRIQUETO I. MAGPANTAY
t/ ENRIQUETO I. MAGPANTAY
"For Juan Bernabe:
(Sgd.) ANDRECIANO F. CABALLERO
t/ ANDRECIANO F. CABALLERO
"For Ignacio Vicente and
Moises Angeles:
(Sgd.) CONRADO MANZANO
t/ CONRADO MANZANO
"The Clerk of Court
CFI, Sta. Maria, Bulacan
"GREETINGS:
"Please submit the foregoing Compromise Agreement to the Honorable Court for the
consideration and approval immediately upon receipt hereof.
VENTURA, CARDENAS & MAGPANTAY
By:
(Sgd.) FRANCISCO VENTURA
t/ FRANClSCO VENTURA"
On the same date, the foregoing Compromise Agreement was approved by the trial court, which
enjoined the parties to comply with the terms and conditions thereof.
Pursuant to the terms of the said compromise agreement the counsels of both parties submitted the
names of the persons designated by them as their respective commissioners, and in conformity therewith, the
trial court, in its Order dated February 26, 1969, appointed the following as Commissioners: Mr. Larry G.
Marquez, to represent the plaintiff; Mr. Demetrio M. Aquino, to represent defendant Bernabe; Mr. Moises
Page 30 of 72
Correa, to represent defendant Angeles; Mr. Santiago Cabungcal, to represent defendant Vicente; and Mr.
Liberato Barrameda, to represent the court, and directed that said Commissioners should appear before the
court on March 17, 1969, to take their oath and qualify as such Commissioners, and then meet on March 31,
1969 in the court for their first session and to submit their report not later than April 30, 1969.
On September 15, 1969, Commissioner Liberato Barrameda submitted to the court for its approval a
Consolidated Report, containing the three reports of the Commissioners of the plaintiff and the three defendants,
together with an analysis of the said reports and a summary of the important facts and conclusions. The
following unit prices for the three defendants' properties were recommended in the Consolidated Report:
"A — JUAN BERNABE at P12.00 per square meter, wherefrom plaintiff has been
extracting its first output, and would still continue to extract therefrom as the property consists of a
mountain of limestone and shale:
"B — IGNACIO VICENTE:
a) 60% or 19,571.4 sq. m. (mineral land) at P12.00 per sq. m.
b) 40% or 13,047.6 sq. m. (riceland) at P8.00 per sq. m.
"C — MOISES ANGELES (riceland) at P8.00 per sq. m."
It is worthy of note that in the individual report of the Commissioner nominated by plaintiff HI Cement
Corporation, the price recommended for defendant Juan Bernabe's property was P0.60 per square meter, while
in the individual report of the Commissioner nominated by the said defendant, the price recommended was
P50.00 per square meter. The Commissioners named by defendants Vicente and Angeles recommended
P15.00 per square meter for the lands owned by the said two defendants, while the Commissioner named by
the plaintiff recommended P0.65 per square meter for Vicente's land, and P0.55 per square meter for Angeles'
land.
On October 21, 1969, Atty. Francisco Ventura, one of the three lawyers for plaintiff HI Cement
Corporation, filed with the trial court a manifestation stating that on September 1, 1969 he sent a copy of the
Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede
with the Board of Directors for the confirmation or approval of the commitment made by the plaintiff's lawyers to
abide by the decision of the court based on the reports of the Commissioners; and that on October 15, 1969 he
received a letter from Mr. Diokno, a copy of which was attached to the manifestation. In that letter Mr. Diokno
said:
"While I realize your interest in cooperating with the Court in its desire to expedite the
disposition of the case, this commitment would deprive us of the right to appeal if we do not agree
with the valuation set by the Court. Our Board, therefore, cannot waive its rights; only when it
knows the value set by the Court on the properties can it decide whether to abide by it or appeal
therefrom. I would like to stress that, under the law, the compromise agreement requires the
express approval of our Board of Directors to be binding on our corporation. Such an approval, I
regret to say, cannot be obtained at this time."
On November 5, 1969, defendant Bernabe filed an answer to Atty. Ventura's manifestation, praying the
court to ignore, disregard and, if possible, order striken from the record, the plaintiff's manifestation on the
following grounds: that its filing after the Consolidated Report of the Commissioners had been submitted and
approved, and long after the signing of the Compromise Agreement on January 30, 1969, cast suspicion on the
sincerity of the plaintiff's motive; that when the Compromise Agreement was being considered, the court inquired
from the parties and their respective lawyers if all the attorneys appearing in the case had been duly authorized
and/or empowered to enter into a compromise agreement, and the three lawyers for the plaintiff answered in the
affirmative; that in fact it was Atty. Ventura himself who prepared the draft of the Compromise Agreement in his
own handwriting and was the first to sign the agreement; that one of the three lawyers for the plaintiff, Atty.
Florentino V. Cardenas, who also signed the Compromise Agreement, was the official representative, indeed
was an executive official, of plaintiff corporation; that the Compromise Agreement, having been executed
pursuant to a pre-trial conference, partakes the nature of a stipulation of facts mutually agreed upon by the
parties and approved by the court, hence, was binding and conclusive upon the parties; and that the nomination
by the plaintiff of Mr. Larry G. Marquez as its Commissioner pursuant to the Compromise Agreement, was a
clear indication of the plaintiff's tacit approval of the terms and conditions of the Compromise Agreement, if not
an implied ratification of Atty. Ventura's acts.
On March 13, 1970 the court rendered a decision in which the terms and conditions of the Compromise
Agreement are reproduced, and the Consolidated Report of the Commissioners is extensively quoted. The
rationale and dispositive portion of the decision read:
"What is fair and just compensation?

Page 31 of 72
 'Just compensation includes all elements of value that inheres in the property, but it does
not exceed market value fairly determined. The sum required to be paid the owner does not
depend upon the usage to which he has devoted his land but is to be arrived at upon just
consideration of all the uses for which it is suitable. The highest and most profitable use for which
the property is adoptable and needed or likely to be needed in the reasonably near future is to be
considered, not necessarily as the measure of value, but to the full extent that the prospect of
demand for such use affects the market value while the property is privately held.'
"The term fair and just compensation as applied in expropriation or eminent domain
proceedings need not necessarily be applied in the present case. In expropriation proceedings the
government is the party involved and its use is for public purpose. In the instant case, however,
private parties are involved and the use of the land is a private venture and for profit.
"It appears that defendants' properties are practically adjacent to plaintiff's plant site. It also
appears that practically all the surrounding areas were acquired by the plaintiff by purchase.
"In the report submitted by the commissioner representing the plaintiff, it is claimed that the
surrounding areas were acquired thru purchase by the plaintiff in the amount of less than P1.00
per square meter. On the other hand, it appears from the reports submitted by the commissioners
representing the defendants that there were some recorded sales around the area from P20.00 to
P25.00 per square meter and there were subdivision lots which command even higher prices.
"The properties are reported to consist of mineral land which are rocky and barren
containing limestone and shale. From the viewpoint of the owners their property which is described
as rocky and barren mineral land must necessarily command a higher price, and this Court
believes that the plaintiff will adopt the same attitude from the viewpoint of its business.
"While it may be true that the plaintiff acquired properties within the area in question at a
low price, we cannot overlook the fact that this was so at the time when plaintiff corporation was
not yet in operation and that the land owners were not as yet aware of the potential value of their
landholdings.
"Irrespective of the different classifications of the properties owned by the defendants, and
considering the benefits that will enure to the plaintiff and bearing in mind the property rights and
privileges to which the property owners are entitled both under the constitution and the mining law,
coupled with the fact that the plaintiff had already taken advantage of the properties even long
before the rightful acquisition of the same, this Court believes that the just and fair market value of
the land should be in the amount of P15.00 per square meter.
"In view of the above findings, the plaintiff pursuant to the compromise agreement, is
hereby ordered to pay the defendants the amount of P15.00 per square meter for the subject
properties, and upon full payment, the restraining order earlier issued by this Court shall be
deemed lifted."
On March 23, 1970 defendant Juan Bernabe filed an urgent motion for execution of judgment anchored
on the proposition that the judgment, being based on a compromise agreement, is not appealable and is, on the
other hand, immediately executory. The other two defendants, Moises Angeles and Ignacio Vicente, likewise
filed their respective motions for execution. These motions were granted by the court in its Order of April 14,
1970.
On April 17, 1970 the plaintiff filed a motion for reconsideration of the April 14, 1970 Order, alleging that
it had an opposition to the defendants' motions for execution, and that the Compromise Agreement had been
repudiated by the plaintiff corporation through its Vice President, as earlier manifested by the plaintiff. The
plaintiff prayed for ten days from the date of the hearing of the motion within which to file its written opposition to
the motions for execution. Defendant Juan Bernabe filed an opposition to the plaintiff's motion on April 21, 1970.
On April 22, 1970 the plaintiff filed with the court a motion for new trial on the ground that the decision of
the court dated March 13, 1970 is null and void because it was based on the Compromise Agreement of
January 30, 1969 which was itself null and void for want of a special authority by the plaintiff's lawyers to enter
into the said agreement. The plaintiff also prayed that the decision dated March 13, 1970 and the Order dated
April 14, 1970 granting the defendants' motions for execution, be set aside. Defendant Juan Bernabe filed on
April 27, 1970 an opposition to the plaintiff's motion on the grounds that the decision of the court is in
accordance with law, for three lawyers for the plaintiff signed the Compromise Agreement, and one of them,
Atty. Cardenas, was an official representative of plaintiff corporation, hence, when he signed the Compromise
Agreement, he did so in the dual capacity of lawyer and representative of the management of the corporation;
that the plaintiff itself pursued, enforced and implemented the agreement by appointing Mr. Larry Marquez as its

Page 32 of 72
duly accredited Commissioner; and that the plaintiff is conclusively bound by the acts of its lawyers in entering
into the Compromise Agreement.
In the meantime, or on April 24, 1970, the court issued an Order setting aside its Order of April 14, 1970
under which the defendants' motions for execution of judgment had been granted, and gave the plaintiff ten
days within which to file an opposition to the defendants' motions for execution.
On May 9, 1970 the plaintiff filed an opposition to the motions for execution of judgment, on the grounds
that the decision dated March 13, 1970 is contrary to law for it is based on a compromise agreement executed
by the plaintiff's lawyers who had no special power of attorney as required by Article 1878 of the Civil Code, or
any special authority as required by Section 23, Rule 138 of the Rules of Court; and that the judgment is void for
lack of jurisdiction of the court because the same is based on a void compromise agreement.
On May 18, 1970 the court issued an Order setting aside its decision dated March 13, 1970, denying the
defendants' motions for execution of judgment, and setting for June 23, 1970 a pretrial conference in the case.
The three defendants moved for reconsideration, but their motions were denied in an Order dated July 18, 1970.
It is in these factual premises that the defendants in Civil Case No. SM-201 came to this Court by means
of the present petitions. In G.R. No. L-32473, petitioners Vicente and Angeles pray this Court to issue a writ of
preliminary injunction, and, after hearing, to annul and set aside the Order dated May 18, 1970 issued by
respondent Judge setting aside the decision dated March 13, 1970; to declare the said decision legal, effective
and immediately executory; to dissolve the writ of preliminary mandatory injunction issued by respondent Judge
on September 30, 1967 commanding petitioners to allow private respondent to enter their respective properties
and excavate thereon; to make the preliminary injunction permanent; and to award treble costs in favor of
petitioners and against private respondent. In G.R. No. L-32483, petitioner Juan Bernabe prays this Court to
issue a writ of preliminary injunction or, at least a temporary restraining order, and, after hearing, to annul and
set aside the Order dated April 24, 1970 issued by respondent Judge setting aside his Order of April 14, 1970
and allowing private respondent to file an opposition to petitioners' motion for execution, the Order dated May
18, 1970, and the Order dated July 18, 1970. Petitioner Bernabe also seeks the reinstatement of the trial court's
decision dated May 13, 1970 and its Order dated April 14, 1970 granting his motion for execution of judgment,
and an award in his favor of attorney's fees and of actual, moral and exemplary damages.
At issue is whether the respondent court, in setting aside its decision of March 13, 1970 and denying the
motions for execution of said decision, had acted without or in excess of its jurisdiction or with grave abuse of
discretion. We hold that said court did not, in view of the following considerations:
1. Special powers of attorney are necessary, among other cases, in the following: to compromise and to
renounce the right to appeal from a judgment. 1 Attorneys have authority to bind their clients in any case by any
agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial
procedure, but they cannot, without special authority, compromise their clients' litigation, or receive anything in
discharge of their clients' claims but the full amount in cash. 2
The Compromise Agreement dated January 30, 1969 was signed only by the lawyers for petitioners and
by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation
had not submitted to the Court any written authority from their client to enter into a compromise.
This Court has said that the Rules 3 "require, for attorneys to compromise the litigation of their clients, a
special authority. And while the same does not state that the special authority he in writing the court has every
reason to expect that, if not in writing, the same be duly established by evidence other than the self-serving
assertion of counsel himself that such authority was verbally given him." 4
2. The law specifically requires that "juridical persons may compromise only in the form and with the
requisites which may be necessary to alienate their property." 5 Under the corporation law the power to
compromise or settle claims in favor of or against the corporation is ordinarily and primarily committed to the
Board of Directors. The right of the Directors "to compromise a disputed claim against the corporation rests upon
their right to manage the affairs of the corporation according to their honest and informed judgment and
discretion as to what is for the best interests of the corporation." 6 This power may however be delegated either
expressly or impliedly to other corporate officials or agents. Thus it has been stated, that as a general rule an
officer or agent of the corporation has no power to compromise or settle a claim by or against the corporation,
except to the extent that such power is given to him either expressly or by reasonable implication from the
circumstances. 7 It is therefore necessary to ascertain whether from the relevant facts it could be reasonably
concluded that the Board of Directors of the HI Cement Corporation had authorized its lawyers to enter into the
said compromise agreement.
Petitioners claim that private respondent's attorneys admitted twice in open court on January 30, 1969,
that they were authorized to compromise their client's case, which fact, according to them, was never denied by
the said lawyers in any of the pleadings filed by them in the case. The claim is unsupported by evidence. On the
Page 33 of 72
 contrary, in private respondent's "Reply to Defendant Bernabe's Answer Dated November 8, 1969," said
counsels categorically denied that they ever represented to the court that they were authorized to enter into a
compromise. Indeed, the complete transcripts of stenographic notes taken at the proceedings on January 30,
1969 are before Us, and nowhere does it appear therein that respondent corporation's lawyers ever made such
a representation. In any event, assuming arguendo that they did, such a self-serving assertion cannot properly
be the basis for the conclusion that the respondent corporation had in fact authorized its lawyers to compromise
the litigation.
3. Petitioners however insist that there was tacit ratification on the part of the corporation, because it
nominated Mr. Larry Marquez as its commissioner pursuant to the agreement, paid his services therefor, and
Atty. Florentino V, Cardenas, respondent corporation's administrative manager, not only did not object but even
affixed his signature to the agreement. It is also argued that respondent corporation having represented, through
its lawyers, to the court and to petitioners that said lawyers had authority to bind the corporation and having
induced by such representations the petitioners to sign the compromise agreement, said respondent is now
estopped from questioning the same.
The infirmity of these arguments is in their assumption that Atty. Cardenas as administrative manager
had authority to bind the corporation or to compromise the case. Whatever authority the officers or agents of a
corporation may have is derived from the board of directors, or other governing body, unless conferred by the
charter of the corporation. A corporate officer's power as an agent of the corporation must therefore be sought
from the statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of the
board of directors, formally expressed or implied from a habit or custom of doing business. 8 In the case at bar
no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of
directors of HI Cement Corporation has been cited, from which We could reasonably infer that the administrative
manager had been granted expressly or impliedly the power to bind the corporation or the authority to
compromise the case. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on
the agreement would be legally ineffectual.
4. As regards the nomination of Mr. Marquez as commissioner, counsel for respondent corporation has
explained — and this has not been disproven — that Atty. Cardenas, apparently on his own, submitted the same
to the court. There is no iota of proof that at the time of the submission to the Court, on February 26, 1969, of
the name of Mr. Marquez, respondent corporation knew of the contents of the compromise agreement. As
matter of fact, according to the manifestation of Atty. Ventura to the court, it was only on September 1, 1969 that
he sent to Mr. Antonio Diokno, Vice-President of the corporation, a copy of the compromise agreement for the
approval by the board of directors and on October 22, 1969, Mr. Diokno informed him that the approval of the
Board cannot be obtained, as under the agreement the corporation is deprived of its right to appeal from the
judgment.
In the absence of any proof that the governing body of respondent corporation had knowledge, either
actual or constructive, or the contents of the compromise agreement before September 1, 1969, why should the
nomination of Mr. Marquez as commissioner, by Attys. Ventura, Cardenas and Magpantay, on February 26,
1969, be considered as a form of tacit ratification of the compromise agreement by the corporation? In order to
ratify the unauthorized act of an agent and make it binding on the corporation, it must be shown that the
governing body or officer authorized to ratify had full and complete knowledge of all the material facts connected
with the transaction to which it relates. 9 It cannot be assumed also that Atty. Cardenas, as administrative
manager of the corporation, had authority to ratify. For ratification can never be made "on the part of the
corporation by the same persons who wrongfully assume the power to make the contract, but the ratification
must be by the officer or governing body having authority to make such contract and, as we have seen, must be
with full knowledge." 10
5. Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, except
those made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act or
declaration of the corporation amounting to false representation or concealment of material facts calculated to
mislead said petitioners. The acts or conduct for which the corporation may be liable under the doctrine of
estoppel must be those of the corporation, its governing body or authorized officers, and not those of the
purported agent who is himself responsible for the misrepresentation. 11
It having been found by the trial court that "the counsel for the plaintiff entered into the compromise
agreement without the written authority of his client and the latter did not ratify, on the contrary it repudiated and
disowned the same . . . ", 12 We therefore declare that the orders of the court a quo subject of these two
petitions, have not been issued in excess of its jurisdictional authority or in grave abuse of its discretion.
WHEREFORE, the petitions in these two cases are hereby dismissed. Costs against the petitioners.
||| (Vicente v. Geraldez, G.R. Nos. L-32473, L-32483, [July 31, 1973], 152 PHIL 184-204)
Page 34 of 72
 SECOND DIVISION
[G.R. No. 118375. October 3, 2003.]
CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and AURORA
QUEAÑO, respondents.
DECISION
TINGA, J p:
Before us is a Petition for Review on Certiorari under Rule 45, assailing the decision of the Sixteenth
Division of the respondent Court of Appeals promulgated on 21 December 1994 1 , which affirmed in toto the
decision handed down by the Regional Trial Court (RTC) of Pasay City. 2
The case arose when on 11 August 1981, private respondent Aurora Queaño (Queaño) filed a complaint
before the Pasay City RTC for cancellation of a Real Estate Mortgage she had entered into with petitioner Celestina
Naguiat (Naguiat). The RTC rendered a decision, declaring the questioned Real Estate Mortgage void, which
Naguiat appealed to the Court of Appeals. After the Court of Appeals upheld the RTC decision, Naguiat instituted
the present petition.
The operative facts follow:
Queaño applied with Naguiat for a loan in the amount of Two Hundred Thousand Pesos (P200,000.00),
which Naguiat granted. On 11 August 1980, Naguiat indorsed to Queaño Associated Bank Check No. 090990
(dated 11 August 1980) for the amount of Ninety Five Thousand Pesos (P95,000.00), which was earlier issued to
Naguiat by the Corporate Resource Financing Corporation. She also issued her own Filmanbank Check No.
065314, to the order of Queaño, also dated 11 August 1980 and for the amount of Ninety Five Thousand Pesos
(P95,000.00). The proceeds of these checks were to constitute the loan granted by Naguiat to Queaño. 3
To secure the loan, Queaño executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of
Naguiat, and surrendered to the latter the owner's duplicates of the titles covering the mortgaged properties. 4 On
the same day, the mortgage deed was notarized, and Queaño issued to Naguiat a promissory note for the amount
of TWO HUNDRED THOUSAND PESOS (P200,000.00), with interest at 12% per annum, payable on 11 September
1980. 5 Queaño also issued a Security Bank and Trust Company check, postdated 11 September 1980, for the
amount of TWO HUNDRED THOUSAND PESOS (P200,000.00) and payable to the order of Naguiat.
Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds.
On the following day, 12 September 1980, Queaño requested Security Bank to stop payment of her postdated
check, but the bank rejected the request pursuant to its policy not to honor such requests if the check is drawn
against insufficient funds. 6
On 16 October 1980, Queaño received a letter from Naguiat's lawyer, demanding settlement of the loan.
Shortly thereafter, Queaño and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queaño told
Naguiat that she did not receive the proceeds of the loan, adding that the checks were retained by Ruebenfeldt, who
purportedly was Naguiat's agent. 7
Naguiat applied for the extrajudicial foreclosure of the mortgage with the Sheriff of Rizal Province, who then
scheduled the foreclosure sale on 14 August 1981. Three days before the scheduled sale, Queaño filed the case
before the Pasay City RTC, 8 seeking the annulment of the mortgage deed. The trial court eventually stopped the
auction sale. 9
On 8 March 1991, the RTC rendered judgment, declaring the Deed of Real Estate Mortgage null and void,
and ordering Naguiat to return to Queaño the owner's duplicates of her titles to the mortgaged lots. 10 Naguiat
appealed the decision before the Court of Appeals, making no less than eleven assignments of error. The Court of
Appeals promulgated the decision now assailed before us that affirmed in toto the RTC decision. Hence, the present
petition.
Naguiat questions the findings of facts made by the Court of Appeals, especially on the issue of whether
Queaño had actually received the loan proceeds which were supposed to be covered by the two checks Naguiat
had issued or indorsed. Naguiat claims that being a notarial instrument or public document, the mortgage deed
enjoys the presumption that the recitals therein are true. Naguiat also questions the admissibility of various
representations and pronouncements of Ruebenfeldt, invoking the rule on the non-binding effect of the admissions
of third persons. 11 IDTHcA
The resolution of the issues presented before this Court by Naguiat involves the determination of facts, a
function which this Court does not exercise in an appeal by certiorari. Under Rule 45 which governs appeal by
certiorari, only questions of law may be raised 12 as the Supreme Court is not a trier of facts. 13 The resolution of
factual issues is the function of lower courts, whose findings on these matters are received with respect and are in
fact generally binding on the Supreme Court. 14 A question of law which the Court may pass upon must not involve
an examination of the probative value of the evidence presented by the litigants. 15 There is a question of law in a

Page 35 of 72
given case when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of
fact when the doubt or difference arises as to the truth or the falsehood of alleged facts. 16
Surely, there are established exceptions to the rule on the conclusiveness of the findings of facts of the
lower courts. 17 But Naguiat's case doe not fall under any of the exceptions. In any event, both the decisions of the
appellate and trial courts are supported by the evidence on record and the applicable laws.
Against the common finding of the courts below, Naguiat vigorously insists that Queaño received the loan
proceeds. Capitalizing on the status of the mortgage deed as a public document, she cites the rule that a public
document enjoys the presumption of validity and truthfulness of its contents. The Court of Appeals, however, is
correct in ruling that the presumption of truthfulness of the recitals in a public document was defeated by the clear
and convincing evidence in this case that pointed to the absence of consideration. 18 This Court has held that the
presumption of truthfulness engendered by notarized documents is rebuttable, yielding as it does to clear and
convincing evidence to the contrary, as in this case. 19
On the other hand, absolutely no evidence was submitted by Naguiat that the checks she issued or
endorsed were actually encashed or deposited. The mere issuance of the checks did not result in the perfection of
the contract of loan. For the Civil Code provides that the delivery of bills of exchange and mercantile documents
such as checks shall produce the effect of payment only when they have been cashed. 20 It is only after the checks
have produced the effect of payment that the contract of loan may be deemed perfected. Art. 1934 of the Civil Code
provides:
"An accepted promise to deliver something by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the
delivery of the object of the contract."
A loan contract is a real contract, not consensual, and, as such, is perfected only upon the delivery of the
object of the contract. 21 In this case, the objects of the contract are the loan proceeds which Queaño would enjoy
only upon the encashment of the checks signed or indorsed by Naguiat. If indeed the checks were encashed or
deposited, Naguiat would have certainly presented the corresponding documentary evidence, such as the returned
checks and the pertinent bank records. Since Naguiat presented no such proof, it follows that the checks were not
encashed or credited to Queaño's account.
Naguiat questions the admissibility of the various written representations made by Ruebenfeldt on the
ground that they could not bind her following the res inter alia acta alteri nocere non debet rule. The Court of
Appeals rejected the argument, holding that since Ruebenfeldt was an authorized representative or agent of Naguiat
the situation falls under a recognized exception to the rule. 22 Still, Naguiat insists that Ruebenfeldt was not her
agent.
Suffice to say, however, the existence of an agency relationship between Naguiat and Ruebenfeldt is
supported by ample evidence. As correctly pointed out by the Court of Appeals, Ruebenfeldt was not a stranger or
an unauthorized person. Naguiat instructed Ruebenfeldt to withhold from Queaño the checks she issued or indorsed
to Queaño, pending delivery by the latter of additional collateral. Ruebenfeldt served as agent of Naguiat on the loan
application of Queaño's friend, Marilou Farralese, and it was in connection with that transaction that Queaño came
to know Naguiat. 23 It was also Ruebenfeldt who accompanied Queaño in her meeting with Naguiat and on that
occasion, on her own and without Queaño asking for it, Ruebenfeldt actually drew a check for the sum of
P220,000.00 payable to Naguiat, to cover for Queaño's alleged liability to Naguiat under the loan agreement. 24
The Court of Appeals recognized the existence of an "agency by estoppel 25 citing Article 1873 of the Civil
Code. 26 Apparently, it considered that at the very least, as a consequence of the interaction between Naguiat and
Ruebenfeldt, Queaño got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to
correct Queaño's impression. In that situation, the rule is clear. One who clothes another with apparent authority as
his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person to act
as his agent, to the prejudice of innocent third parties dealing with such person in good faith, and in the honest belief
that he is what he appears to be. 27 The Court of Appeals is correct in invoking the said rule on agency by estoppel.
More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in
the face of the fact that the checks issued or indorsed to Queaño were never encashed or deposited to her account
of Naguiat.
All told, we find no compelling reason to disturb the finding of the courts a quo that the lender did not remit
and the borrower did not receive the proceeds of the loan. That being the case, it follows that the mortgage which is
supposed to secure the loan is null and void. The consideration of the mortgage contract is the same as that of the
principal contract from which it receives life, and without which it cannot exist as an independent contract. 28 A
mortgage contract being a mere accessory contract, its validity would depend on the validity of the loan secured by
it. 29
WHEREFORE, the petition is denied and the assailed decision is affirmed. Costs against petitioner.
Page 36 of 72
 SECOND DIVISION
[G.R. No. 140667. August 12, 2004.]
WOODCHILD HOLDINGS, INC., petitioner, vs. ROXAS ELECTRIC AND CONSTRUCTION
COMPANY, INC., respondent.
DECISION
CALLEJO, SR., J p:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals in CA-G.R. CV No. 56125
reversing the Decision 2 of the Regional Trial Court of Makati, Branch 57, which ruled in favor of the petitioner.
The Antecedents
The respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the Roxas Electric and
Construction Company, was the owner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer
Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2 covered by TCT No. 78086. A portion of Lot No. 491-
A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt road accessing to the Sumulong Highway, Antipolo, Rizal.
At a special meeting on May 17, 1991, the respondent’s Board of Directors approved a resolution
authorizing the corporation, through its president, Roberto B. Roxas, to sell Lot No. 491-A-3-B-2 covered by TCT
No. 78086, with an area of 7,213 square meters, at a price and under such terms and conditions which he deemed
most reasonable and advantageous to the corporation; and to execute, sign and deliver the pertinent sales
documents and receive the proceeds of the sale for and on behalf of the company. 3
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-3-B-2 covered by TCT No. 78086 on
which it planned to construct its warehouse building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1, so that
its 45-foot container van would be able to readily enter or leave the property. In a Letter to Roxas dated June 21,
1991, WHI President Jonathan Y. Dy offered to buy Lot No. 491-A-3-B-2 under stated terms and conditions for
P1,000 per square meter or at the price of P7,213,000. 4 One of the terms incorporated in Dy’s offer was the
following provision: DHcTaE
5. This Offer to Purchase is made on the representation and warranty of the OWNER/SELLER,
that he holds a good and registrable title to the property, which shall be conveyed CLEAR
and FREE of all liens and encumbrances, and that the area of 7,213 square meters of the
subject property already includes the area on which the right of way traverses from the
main lot (area) towards the exit to the Sumulong Highway as shown in the location plan
furnished by the Owner/Seller to the buyer. Furthermore, in the event that the right of way
is insufficient for the buyer’s purposes (example: entry of a 45-foot container), the seller
agrees to sell additional square meter from his current adjacent property to allow the buyer
to full access and full use of the property. 5
Roxas indicated his acceptance of the offer on page 2 of the deed. Less than a month later or on July 1,
1991, Roxas, as President of RECCI, as vendor, and Dy, as President of WHI, as vendee, executed a contract to
sell in which RECCI bound and obliged itself to sell to Dy Lot No. 491-A-3-B-2 covered by TCT No. 78086 for
P7,213,000. 6 On September 5, 1991, a Deed of Absolute Sale 7 in favor of WHI was issued, under which Lot No.
491-A-3-B-2 covered by TCT No. 78086 was sold for P5,000,000, receipt of which was acknowledged by Roxas
under the following terms and conditions:
The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the beneficial
use of and a right of way from Sumulong Highway to the property herein conveyed consists of 25
square meters wide to be used as the latter’s egress from and ingress to and an additional 25
square meters in the corner of Lot No. 491-A-3-B-1, as turning and/or maneuvering area for
Vendee’s vehicles.
The Vendor agrees that in the event that the right of way is insufficient for the Vendee’s
use (ex entry of a 45-foot container) the Vendor agrees to sell additional square meters from its
current adjacent property to allow the Vendee full access and full use of the property.
xxx xxx xxx
The Vendor hereby undertakes and agrees, at its account, to defend the title of the Vendee
to the parcel of land and improvements herein conveyed, against all claims of any and all persons
or entities, and that the Vendor hereby warrants the right of the Vendee to possess and own the
said parcel of land and improvements thereon and will defend the Vendee against all present and
future claims and/or action in relation thereto, judicial and/or administrative. In particular, the
Vendor shall eject all existing squatters and occupants of the premises within two (2) weeks from
the signing hereof. In case of failure on the part of the Vendor to eject all occupants and squatters
within the two-week period or breach of any of the stipulations, covenants and terms and
Page 37 of 72
 conditions herein provided and that of contract to sell dated 1 July 1991, the Vendee shall have the
right to cancel the sale and demand reimbursement for all payments made to the Vendor with
interest thereon at 36% per annum. 8
On September 10, 1991, the Wimbeco Builder’s, Inc. (WBI) submitted its quotation for P8,649,000 to WHI
for the construction of the warehouse building on a portion of the property with an area of 5,088 square
meters. 9 WBI proposed to start the project on October 1, 1991 and to turn over the building to WHI on February 29,
1992. 10
In a Letter dated September 16, 1991, Ponderosa Leather Goods Company, Inc. confirmed its lease
agreement with WHI of a 5,000-square-meter portion of the warehouse yet to be constructed at the rental rate of
P65 per square meter. Ponderosa emphasized the need for the warehouse to be ready for occupancy before April
1, 1992. 11 WHI accepted the offer. However, WBI failed to commence the construction of the warehouse in
October 1, 1991 as planned because of the presence of squatters in the property and suggested a renegotiation of
the contract after the squatters shall have been evicted. 12 Subsequently, the squatters were evicted from the
property.
On March 31, 1992, WHI and WBI executed a Letter-Contract for the construction of the warehouse building
for P11,804,160. 13 The contractor started construction in April 1992 even before the building officials of Antipolo
City issued a building permit on May 28, 1992. After the warehouse was finished, WHI issued on March 21, 1993 a
certificate of occupancy by the building official. Earlier, or on March 18, 1993, WHI, as lessor, and Ponderosa, as
lessee, executed a contract of lease over a portion of the property for a monthly rental of P300,000 for a period of
three years from March 1, 1993 up to February 28, 1996. 14
In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were parked on a portion of
the property over which WHI had been granted a right of way. Roxas promised to look into the matter. Dy and
Roxas discussed the need of the WHI to buy a 500-square-meter portion of Lot No. 491-A-3-B-1 covered by TCT
No. 78085 as provided for in the deed of absolute sale. However, Roxas died soon thereafter. On April 15, 1992, the
WHI wrote the RECCI, reiterating its verbal requests to purchase a portion of the said lot as provided for in the deed
of absolute sale, and complained about the latter’s failure to eject the squatters within the three-month period
agreed upon in the said deed. SEcITC
The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 for its
beneficial use within 72 hours from notice thereof, otherwise the appropriate action would be filed against it. RECCI
rejected the demand of WHI. WHI reiterated its demand in a Letter dated May 29, 1992. There was no response
from RECCI.
On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial Court of Makati, for
specific performance and damages, and alleged, inter alia, the following in its complaint:
5. The “current adjacent property” referred to in the aforequoted paragraph of the Deed of
Absolute Sale pertains to the property covered by Transfer Certificate of Title No. N-78085 of the
Registry of Deeds of Antipolo, Rizal, registered in the name of herein defendant Roxas Electric.
6. Defendant Roxas Electric in patent violation of the express and valid terms of the Deed
of Absolute Sale unjustifiably refused to deliver to Woodchild Holdings the stipulated beneficial use
and right of way consisting of 25 square meters and 55 square meters to the prejudice of the
plaintiff.
7. Similarly, in as much as the 25 square meters and 55 square meters allotted to
Woodchild Holdings for its beneficial use is inadequate as turning and/or maneuvering area of its
45-foot container van, Woodchild Holdings manifested its intention pursuant to para. 5 of the Deed
of Sale to purchase additional square meters from Roxas Electric to allow it full access and use of
the purchased property, however, Roxas Electric refused and failed to merit Woodchild Holdings’
request contrary to defendant Roxas Electric’s obligation under the Deed of Absolute Sale (Annex
“A”).
8. Moreover, defendant, likewise, failed to eject all existing squatters and occupants of the
premises within the stipulated time frame and as a consequence thereof, plaintiff’s planned
construction has been considerably delayed for seven (7) months due to the squatters who
continue to trespass and obstruct the subject property, thereby W oodchild Holdings incurred
substantial losses amounting to P3,560,000.00 occasioned by the increased cost of construction
materials and labor.
9. Owing further to Roxas Electric’s deliberate refusal to comply with its obligation under
Annex “A,” Woodchild Holdings suffered unrealized income of P300,000.00 a month or
P2,100,000.00 supposed income from rentals of the subject property for seven (7) months.

Page 38 of 72
 10. On April 15, 1992, Woodchild Holdings made a final demand to Roxas Electric to
comply with its obligations and warranties under the Deed of Absolute Sale but notwithstanding
such demand, defendant Roxas Electric refused and failed and continue to refuse and fail to heed
plaintiff’s demand for compliance.

Copy of the demand letter dated April 15, 1992 is hereto attached as Annex “B” and made
an integral part hereof.
11. Finally, on 29 May 1991, Woodchild Holdings made a letter request addressed to
Roxas Electric to particularly annotate on Transfer Certificate of Title No. N-78085 the agreement
under Annex “A” with respect to the beneficial use and right of way, however, Roxas Electric
unjustifiably ignored and disregarded the same.
Copy of the letter request dated 29 May 1992 is hereto attached as Annex “C” and made
an integral part hereof.
12. By reason of Roxas Electric’s continuous refusal and failure to comply with Woodchild
Holdings’ valid demand for compliance under Annex “A,” the latter was constrained to litigate,
thereby incurring damages as and by way of attorney’s fees in the amount of P100,000.00 plus
costs of suit and expenses of litigation. 15
The WHI prayed that, after due proceedings, judgment be rendered in its favor, thus:
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of Woodchild
Holdings and ordering Roxas Electric the following:
a) to deliver to Woodchild Holdings the beneficial use of the stipulated 25 square meters
and 55 square meters;
b) to sell to Woodchild Holdings additional 25 and 100 square meters to allow it full access
and use of the purchased property pursuant to para. 5 of the Deed of Absolute
Sale;
c) to cause annotation on Transfer Certificate of Title No. N-78085 the beneficial use and
right of way granted to Woodchild Holdings under the Deed of Absolute Sale;
d) to pay Woodchild Holdings the amount of P5,660,000.00, representing actual damages
and unrealized income;
e) to pay attorney’s fees in the amount of P100,000.00; and
f) to pay the costs of suit.
Other reliefs just and equitable are prayed for. 16
In its answer to the complaint, the RECCI alleged that it never authorized its former president, Roberto
Roxas, to grant the beneficial use of any portion of Lot No. 491-A-3-B-1, nor agreed to sell any portion thereof or
create a lien or burden thereon. It alleged that, under the Resolution approved on May 17, 1991, it merely
authorized Roxas to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086. As such, the grant of a right of way and
the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 in the said deed are ultra vires.
The RECCI further alleged that the provision therein that it would sell a portion of Lot No. 491-A-3-B-1 to the WHI
lacked the essential elements of a binding contract. 17
In its amended answer to the complaint, the RECCI alleged that the delay in the construction of its
warehouse building was due to the failure of the WHI’s contractor to secure a building permit thereon. 18
During the trial, Dy testified that he told Roxas that the petitioner was buying a portion of Lot No. 491-A-3-B-
1 consisting of an area of 500 square meters, for the price of P1,000 per square meter.
On November 11, 1996, the trial court rendered judgment in favor of the WHI, the decretal portion of which
reads:
WHEREFORE, judgment is hereby rendered directing defendant:
(1) To allow plaintiff the beneficial use of the existing right of way plus the stipulated 25 sq.
m. and 55 sq. m.;
(2) To sell to plaintiff an additional area of 500 sq. m. priced at P1,000 per sq. m. to allow
said plaintiff full access and use of the purchased property pursuant to Par. 5 of their Deed of
Absolute Sale;
(3) To cause annotation on TCT No. N-78085 the beneficial use and right of way granted
by their Deed of Absolute Sale;
(4) To pay plaintiff the amount of P5,568,000 representing actual damages and plaintiff’s
unrealized income;
(5) To pay plaintiff P100,000 representing attorney’s fees; and
To pay the costs of suit.
Page 39 of 72
 SO ORDERED. 19
The trial court ruled that the RECCI was estopped from disowning the apparent authority of Roxas under the
May 17, 1991 Resolution of its Board of Directors. The court reasoned that to do so would prejudice the WHI which
transacted with Roxas in good faith, believing that he had the authority to bind the WHI relating to the easement of
right of way, as well as the right to purchase a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085.
The RECCI appealed the decision to the CA, which rendered a decision on November 9, 1999 reversing that
of the trial court, and ordering the dismissal of the complaint. The CA ruled that, under the resolution of the Board of
Directors of the RECCI, Roxas was merely authorized to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, but
not to grant right of way in favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to grant an option to the
petitioner to buy a portion thereof. The appellate court also ruled that the grant of a right of way and an option to the
respondent were so lopsided in favor of the respondent because the latter was authorized to fix the location as well
as the price of the portion of its property to be sold to the respondent. Hence, such provisions contained in the deed
of absolute sale were not binding on the RECCI. The appellate court ruled that the delay in the construction of WHI’s
warehouse was due to its fault. ASHaDT
The Present Petition
The petitioner now comes to this Court asserting that:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ABSOLUTE SALE (EXH.
“C”) IS ULTRA VIRES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A
QUO ALLOWING THE PLAINTIFF-APPELLEE THE BENEFICIAL USE OF THE EXISTING
RIGHT OF WAY PLUS THE STIPULATED 25 SQUARE METERS AND 55 SQUARE METERS
BECAUSE THESE ARE VALID STIPULATIONS AGREED BY BOTH PARTIES TO THE DEED
OF ABSOLUTE SALE (EXH. “C”).
III.
THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT OF APPEALS TO RULE
THAT THE STIPULATIONS OF THE DEED OF ABSOLUTE SALE (EXH. “C”) WERE
DISADVANTAGEOUS TO THE APPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS
PROPERTY WITHOUT DUE PROCESS.
IV.
IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF PROPERTY WITHOUT DUE
PROCESS BY THE ASSAILED DECISION.
V.
THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE APPELLANT TO
EVICT THE SQUATTERS ON THE LAND AS AGREED IN THE DEED OF ABSOLUTE SALE
(EXH. “C”).
VI.
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF THE COURT A
QUO DIRECTING THE DEFENDANT TO PAY THE PLAINTIFF THE AMOUNT OF P5,568,000.00
REPRESENTING ACTUAL DAMAGES AND PLAINTIFF’S UNREALIZED INCOME AS WELL AS
ATTORNEY’S FEES. 20
The threshold issues for resolution are the following: (a) whether the respondent is bound by the provisions
in the deed of absolute sale granting to the petitioner beneficial use and a right of way over a portion of Lot No. 491-
A-3-B-1 accessing to the Sumulong Highway and granting the option to the petitioner to buy a portion thereof, and, if
so, whether such agreement is enforceable against the respondent; (b) whether the respondent failed to eject the
squatters on its property within two weeks from the execution of the deed of absolute sale; and, (c) whether the
respondent is liable to the petitioner for damages.
On the first issue, the petitioner avers that, under its Resolution of May 17, 1991, the respondent authorized
Roxas, then its president, to grant a right of way over a portion of Lot No. 491-A-3-B-1 in favor of the petitioner, and
an option for the respondent to buy a portion of the said property. The petitioner contends that when the respondent
sold Lot No. 491-A-3-B-2 covered by TCT No. 78086, it (respondent) was well aware of its obligation to provide the
petitioner with a means of ingress to or egress from the property to the Sumulong Highway, since the latter had no
adequate outlet to the public highway. The petitioner asserts that it agreed to buy the property covered by TCT No.
78085 because of the grant by the respondent of a right of way and an option in its favor to buy a portion of the
property covered by TCT No. 78085. It contends that the respondent never objected to Roxas’ acceptance of its
offer to purchase the property and the terms and conditions therein; the respondent even allowed Roxas to execute
Page 40 of 72
the deed of absolute sale in its behalf. The petitioner asserts that the respondent even received the purchase price
of the property without any objection to the terms and conditions of the said deed of sale. The petitioner claims that
it acted in good faith, and contends that after having been benefited by the said sale, the respondent is estopped
from assailing its terms and conditions. The petitioner notes that the respondent’s Board of Directors never
approved any resolution rejecting the deed of absolute sale executed by Roxas for and in its behalf. As such, the
respondent is obliged to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 with an area of 500 square
meters at the price of P1,000 per square meter, based on its evidence and Articles 649 and 651 of the New Civil
Code.
For its part, the respondent posits that Roxas was not so authorized under the May 17, 1991 Resolution of
its Board of Directors to impose a burden or to grant a right of way in favor of the petitioner on Lot No. 491-A-3-B-1,
much less convey a portion thereof to the petitioner. Hence, the respondent was not bound by such provisions
contained in the deed of absolute sale. Besides, the respondent contends, the petitioner cannot enforce its right to
buy a portion of the said property since there was no agreement in the deed of absolute sale on the price thereof as
well as the specific portion and area to be purchased by the petitioner.
We agree with the respondent.
In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 21 we held that:
A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or members and
may not be sold by the stockholders or members without express authorization from the
corporation’s board of directors. Section 23 of BP 68, otherwise known as the Corporation Code of
the Philippines, provides:
“SEC. 23. The Board of Directors or Trustees. — Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be exercised,
all business conducted and all property of such corporations controlled and held by the
board of directors or trustees to be elected from among the holders of stocks, or where
there is no stock, from among the members of the corporation, who shall hold office for
one (1) year and until their successors are elected and qualified.”
Indubitably, a corporation may act only through its board of directors or, when authorized
either by its by-laws or by its board resolution, through its officers or agents in the normal course of
business. The general principles of agency govern the relation between the corporation and its
officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. .
. 22
Generally, the acts of the corporate officers within the scope of their authority are binding on the corporation.
However, under Article 1910 of the New Civil Code, acts done by such officers beyond the scope of their authority
cannot bind the corporation unless it has ratified such acts expressly or tacitly, or is estopped from denying them:
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.
Thus, contracts entered into by corporate officers beyond the scope of authority are unenforceable against
the corporation unless ratified by the corporation. 23
In BA Finance Corporation v. Court of Appeals, 24 we also ruled that persons dealing with an assumed
agency, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either
is controverted, the burden of proof is upon them to establish it.
In this case, the respondent denied authorizing its then president Roberto B. Roxas to sell a portion of Lot
No. 491-A-3-B-1 covered by TCT No. 78085, and to create a lien or burden thereon. The petitioner was thus
burdened to prove that the respondent so authorized Roxas to sell the same and to create a lien thereon.
Central to the issue at hand is the May 17, 1991 Resolution of the Board of Directors of the respondent,
which is worded as follows:
RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any
interested buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo, Rizal, covered
by Transfer Certificate of Title No. N-78086, at a price and on terms and conditions which he
deems most reasonable and advantageous to the corporation;
FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation, be,
as he is hereby authorized to execute, sign and deliver the pertinent sales documents and receive
the proceeds of sale for and on behalf of the company. 25
Page 41 of 72
 Evidently, Roxas was not specifically authorized under the said resolution to grant a right of way in favor of
the petitioner on a portion of Lot No. 491-A-3-B-1 or to agree to sell to the petitioner a portion thereof. The authority
of Roxas, under the resolution, to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority
to sell a portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights thereon. Neither may such
authority be implied from the authority granted to Roxas to sell Lot No. 491-A-3-B-2 to the petitioner “on such terms
and conditions which he deems most reasonable and advantageous.” Under paragraph 12, Article 1878 of the New
Civil Code, a special power of attorney is required to convey real rights over immovable property. 26 Article 1358 of
the New Civil Code requires that contracts which have for their object the creation of real rights over immovable
property must appear in a public document. 27 The petitioner cannot feign ignorance of the need for Roxas to have
been specifically authorized in writing by the Board of Directors to be able to validly grant a right of way and agree to
sell a portion of Lot No. 491-A-3-B-1. The rule is that if the act of the agent is one which requires authority in writing,
those dealing with him are charged with notice of that fact. 28
Powers of attorney are generally construed strictly and courts will not infer or presume broad powers from
deeds which do not sufficiently include property or subject under which the agent is to deal. 29 The general rule is
that the power of attorney must be pursued within legal strictures, and the agent can neither go beyond it; nor
beside it. The act done must be legally identical with that authorized to be done. 30 In sum, then, the consent of the
respondent to the assailed provisions in the deed of absolute sale was not obtained; hence, the assailed provisions
are not binding on it.
We reject the petitioner’s submission that, in allowing Roxas to execute the contract to sell and the deed of
absolute sale and failing to reject or disapprove the same, the respondent thereby gave him apparent authority to
grant a right of way over Lot No. 491-A-3-B-1 and to grant an option for the respondent to sell a portion thereof to
the petitioner. Absent estoppel or ratification, apparent authority cannot remedy the lack of the written power
required under the statement of frauds. 31 In addition, the petitioner’s fallacy is its wrong assumption of the
unproved premise that the respondent had full knowledge of all the terms and conditions contained in the deed of
absolute sale when Roxas executed it.
It bears stressing that apparent authority is based on estoppel and can arise from two instances: first, the
principal may knowingly permit the agent to so hold himself out as having such authority, and in this way, the
principal becomes estopped to claim that the agent does not have such authority; second, the principal may so
clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that he actually has
such authority. 32 There can be no apparent authority of an agent without acts or conduct on the part of the principal
and such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the
exercise of reasonable prudence by a third person as claimant and such must have produced a change of position
to its detriment. The apparent power of an agent is to be determined by the acts of the principal and not by the acts
of the agent. 33
For the principle of apparent authority to apply, the petitioner was burdened to prove the following: (a) the
acts of the respondent justifying belief in the agency by the petitioner; (b) knowledge thereof by the respondent
which is sought to be held; and, (c) reliance thereon by the petitioner consistent with ordinary care and
prudence. 34 In this case, there is no evidence on record of specific acts made by the respondent 35 showing or
indicating that it had full knowledge of any representations made by Roxas to the petitioner that the respondent had
authorized him to grant to the respondent an option to buy a portion of Lot No. 491-A-3-B-1 covered by TCT No.
78085, or to create a burden or lien thereon, or that the respondent allowed him to do so. IDESTH
The petitioner’s contention that by receiving and retaining the P5,000,000 purchase price of Lot No. 491-A-
3-B-2, the respondent effectively and impliedly ratified the grant of a right of way on the adjacent lot, Lot No. 491-A-
3-B-1, and to grant to the petitioner an option to sell a portion thereof, is barren of merit. It bears stressing that the
respondent sold Lot No. 491-A-3-B-2 to the petitioner, and the latter had taken possession of the property. As such,
the respondent had the right to retain the P5,000,000, the purchase price of the property it had sold to the petitioner.
For an act of the principal to be considered as an implied ratification of an unauthorized act of an agent, such act
must be inconsistent with any other hypothesis than that he approved and intended to adopt what had been done in
his name. 36 Ratification is based on waiver — the intentional relinquishment of a known right. Ratification cannot
be inferred from acts that a principal has a right to do independently of the unauthorized act of the agent. Moreover,
if a writing is required to grant an authority to do a particular act, ratification of that act must also be in
writing. 37 Since the respondent had not ratified the unauthorized acts of Roxas, the same are
unenforceable. 38 Hence, by the respondent’s retention of the amount, it cannot thereby be implied that it had
ratified the unauthorized acts of its agent, Roberto Roxas.
On the last issue, the petitioner contends that the CA erred in dismissing its complaint for damages against
the respondent on its finding that the delay in the construction of its warehouse was due to its (petitioner’s) fault. The
petitioner asserts that the CA should have affirmed the ruling of the trial court that the respondent failed to cause the
Page 42 of 72
eviction of the squatters from the property on or before September 29, 1991; hence, was liable for P5,660,000. The
respondent, for its part, asserts that the delay in the construction of the petitioner’s warehouse was due to its late
filing of an application for a building permit, only on May 28, 1992.
The petitioner’s contention is meritorious. The respondent does not deny that it failed to cause the eviction of
the squatters on or before September 29, 1991. Indeed, the respondent does not deny the fact that when the
petitioner wrote the respondent demanding that the latter cause the eviction of the squatters on April 15, 1992, the
latter were still in the premises. It was only after receiving the said letter in April 1992 that the respondent caused
the eviction of the squatters, which thus cleared the way for the petitioner’s contractor to commence the construction
of its warehouse and secure the appropriate building permit therefor.
The petitioner could not be expected to file its application for a building permit before April 1992 because the
squatters were still occupying the property. Because of the respondent’s failure to cause their eviction as agreed
upon, the petitioner’s contractor failed to commence the construction of the warehouse in October 1991 for the
agreed price of P8,649,000. In the meantime, costs of construction materials spiraled. Under the construction
contract entered into between the petitioner and the contractor, the petitioner was obliged to pay
P11,804,160, 39 including the additional work costing P1,441,500, or a net increase of P1,712,980. 40 The
respondent is liable for the difference between the original cost of construction and the increase thereon,
conformably to Article 1170 of the New Civil Code, which reads:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence,
or delay and those who in any manner contravene the tenor thereof, are liable for damages.
The petitioner, likewise, lost the amount of P3,900,000 by way of unearned income from the lease of the
property to the Ponderosa Leather Goods Company. The respondent is, thus, liable to the petitioner for the said
amount, under Articles 2200 and 2201 of the New Civil Code:
Art. 2200. Indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in
good faith is liable shall be those that are the natural and probable consequences of the breach of
the obligation, and which the parties have foreseen or could have reasonably foreseen at the time
the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.
In sum, we affirm the trial court’s award of damages and attorney’s fees to the petitioner. EDISTc
IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered AFFIRMING the assailed Decision of
the Court of Appeals WITH MODIFICATION. The respondent is ordered to pay to the petitioner the amount of
P5,612,980 by way of actual damages and P100,000 by way of attorney’s fees. No costs.
SO ORDERED.
||| (Woodchild Holdings, Inc. v. Roxas Electric and Construction Co., Inc., G.R. No. 140667, [August 12, 2004], 479
PHIL 896-917)

SECOND DIVISION
[G.R. No. 15823. September 12, 1921.]
JULIO DANON, plaintiff-appellee, vs. ANTONIO A. BRIMO & Co., defendant-appellant.
SYLLABUS
1. AGENCY; BROKERAGE; COMMISSION AGENT NOT ENTITLED TO COMMISSIONS FOR
UNSUCCESSFUL EFFORTS. — B agreed to pay D could sell B's factory for P1,200,000. No definite period of
time was fixed within which D should effect the sale. D found a person who intended to purchase such a factory
as B was selling; but before such would-be purchaser definitely decided to buy the factory in question at the
fixed price of P1,200,000, B (the owner of the factory) had affected the sale for P1,300,000 through another
broker. Thereafter D brought an action against B to recover P60,000 (5% of P1,2000,000) "for services
rendered," claiming that he could have effected the sale of said factory if B had not sold it to someone else.
Held: "for D is not entitled to recover anything; complaint dismissed, and defendant absolved from all liability
thereunder.
2. ID.; ID.; ID. — The broker must be the efficient agent or the procuring cause of the sale. The means
employed by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed
from his efforts acting as broker.

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 3. ID.; ID.; ID. — In all cases, under all and varying forms of expression the fundamental and correct
doctrine is, that the duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for
a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does
not accrue. A broker is never entitled to commissions for unsuccessful efforts. The risk of a failure is wholly his.
The reward comes only with his success.
4. ID.; ID.; ID. — The undertaking to procure a purchaser requires of the party so undertaking, not simply
to name or introduce a person who may be willing to make any sort of contract in reference to the property, but
to produce a party capable, and who ultimately becomes the purchaser.
5. ID.; ID.; RIGHT OF PRINCIPAL TO TERMINATE AGENT'S AUTHORITY. — Where no time for the
continuance of the contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to the
ordinary requirements of good faith. Usually the broker is entitled to a fair and reasonable opportunity to perform
his obligation, subject of course to the right of the seller to sell independently. But having been granted him, the
right of the principal to terminate his authority is absolute and unrestricted, except only that he may not do it in
bad faith, and as a mere device to escape the payment of the broker's commissions.
DECISION
JOHNSON, J p:
This action was brought to recover the sum of P60,000, alleged to be the value of services rendered to
the defendant by the plaintiff as a broker. The plaintiff alleges that in the month of August, 1918, the defendant
company, through its manager, Antonio A. Brimo, employed him to look for a purchaser of its factory known as
"Holland American Oil Co.," for the sum of P1,200,000, payable in cash; that the defendant promised to pay to
the plaintiff, as compensation for his services, a commission of five per cent on the said sum of P1,200,000, if
the sale was consummated, or if the plaintiff should find a purchaser ready, able and willing to buy said factory
for the said sum of P1,200,000; that subsequently the plaintiff found such a purchaser, but that the defendant
refused to sell the said factory without any justifiable motive or reason therefor and without having previously
notified the plaintiff of its desistance or variation in the price and terms of the sale.
To that complaint the defendant interposed a general denial. Upon the issue thus presented, the
Honorable Simplicio del Rosario, judge, after hearing and considering the evidence adduced during the trial of
the cause, rendered a judgment in favor of the plaintiff and against the defendant for the sum of P60,000, with
costs. From that judgment the defendant appealed to this court.
The proof with regard to the authority of the plaintiff to sell the factory in question for the defendant, on
commission, is extremely unsatisfactory. It consists solely of the testimony of the plaintiff, on the one hand, and
of the manager of the defendant company, Antonio A. Brimo on the other. From a reading of their testimony we
believe that neither of them has been entirely free from prevarications. However, after giving due weight to the
finding of the trial court in this regard and after carefully considering the inherent probability or improbability of
the testimony of each of said witnesses, we believe we are approximating the truth in finding: (1) That Antonio A
Brimo, in a conversation with the plaintiff, Julio Danon, about the middle of August, 1918, informed the latter that
he (Brimo) desired to sell his factory, the Holland American Oil Co., for the sum of P1,200,000; (2) that he
agreed and promised to pay to the plaintiff a commission of 5 per cent provided the latter could sell said factory
for that amount; and (3) that no definite period of time was fixed within which the plaintiff should effect the sale. It
seems that another broker, Sellner, was also negotiating the sale, or trying to find a purchaser for the same
property and that the plaintiff was informed of that fact either by Brimo himself or by someone else; at least, it is
probable that the plaintiff was aware that he was not alone in the field, and his whole effort was to forestall his
competitor by being the first to find a purchaser and effect the sale. Such, we believe, was the contract between
the plaintiff and the defendant, upon which the present action is based.
The next question to determine is whether the plaintiff had performed all that was required of him under
that contract to entitle him to recover the commission agreed upon. The proof in this regard is no less
unsatisfactory. It seems that immediately after having an interview with Mr. Brimo, as above stated, the plaintiff
went to see Mr. Mauro Prieto, president of the Santa Ana Oil Mill, a corporation, and offered to sell to him the
defendant's property at P1,200,000. The said corporation was at that time in need of such a factory as the
plaintiff was offering for sale, and Mr. Prieto, its president, instructed the manager, Samuel E. Kane, to see Mr.
Brimo and ascertain whether he really wanted to sell said factory, and, if so, to get permission from him to
inspect the premises. Mr. Kane inspected the factory and, presumably, made a favorable report to Mr. Prieto.
The latter asked for an appointment with Mr. Brimo to perfect the negotiation. In the meantime Sellner, the other
broker referred to, had found a purchaser for the same property, who ultimately bought it for P1,300,000. For
that reason Mr. Prieto, the would be purchaser found by the plaintiff, never came to see Mr. Brimo to perf ect the
proposed negotiation.

Page 44 of 72
 Under the proofs in this case, the most that can be said as to what the plaintiff had accomplished is, that
he had found a person who might have bought the defendants factory if the defendant had not sold it to
someone else. The evidence does not show that the Santa Ana Oil Mill had definitely decided to buy the
property in question at the fixed price of P1,200,000. The board of directors of said corporation had not resolved
to purchase said property; and even if its president could legally make the purchase without previous formal
authorization of the board of directors, yet said president does not pretend that he had definitely and formally
agreed to buy the factory in question on behalf of his corporation at the price stated. On direct examination he
testified for the plaintiff as follows:
"Q. You say that we were going to accept or that it was beneficial for us; will you say to whom you
refer, when you say 'we?' — A. Our company, the Santa Ana Oil Mill.
Q. And is that company able to pay the sum of P1,200,000?— A. Yes, sir
"Q. And you accepted it at that price of P1,200,000? — A. Surely, because as I already said
before, we were in the difficult position of not being able to operate our factory, because of
the obstacle placed by the Government.
Q. And did you inform Mr. Danon of this acceptance. — A. I did not explain to Mr. Danon."
On cross-examination the same witness testified:
Q. What actions did the board of directors of the Santa Ana Oil Mill take in order to acquire or to
make an offer to Mr. Brimo of the Holland American Oil Company? — A. But nothing was
effected, because Mr. Danon stated at the property had been sold when I was going to
deal with him.
"Q. But do you not say that you made an offer of P1,200,000? — A. No; it was Mr. Danon who
made the offer and we were sure to put the deal through because we have bound
ourselves."
The plaintiff claims that the reasons why the sale to the Santa Ana Oil Mill was not consummated was
because Mr. Brimo refused to sell to a Filipino firm and preferred an American buyer; that upon learning such
attitude of the defendant the plaintiff endeavored to procure another purchaser and found a Mr. Leas, who
delivered to the plaintiff a letter addressed to Mr. Brimo, offering to buy the factory in question at P1,200,000, the
offer being good for twenty-four hours; that said offer was not accepted by Brimo because while he was reading
the letter of Leas, Sellner came in, drew Brimo into another room, and then and there closed the deal at
P1,300,000. The last statement is admitted by the defendant.
Such are the facts in this case, as nearly accurate as we can gather them from the conflicting evidence
before us. Under those facts, is the plaintiff entitled to recover the sum of P60,000, claimed by him as
compensation for his services ? It will be noted that, according to the plaintiff's own testimony, the defendant
agreed and promised to pay him a commission of 5 per cent provided he (the plaintiff) could sell the factory at
P1,200,000 ("con tal que V. me venda la fabrica en P1,200,000"). It will also be noted that all that the plaintiff
had accomplished by way of performance of his contract was, that he had found a person who might have
bought the factory in question had not the defendant sold it to someone else. (Beaumont vs. Prieto, 41 Phil.,
670; 249 U. S., 554.)
Under these circumstances it is difficult to see how the plaintiff can recover anything in the premises.
The plaintiff's action is not one for damages for breach of contract; it is an action to recover "the reasonable
value" of services rendered. This is unmistakable both from the plaintiff's complaint and his testimony as a
witness during the trial.
"Q. And what is the reasonable value of the services you rendered to Mr. Brimo? — A. Five per
cent of the price at which it was sold.
"Q. Upon what do you base your qualification that those services were reasonable? — A. First,
because that is the common rate in the city, and, secondly, because of the big gain that he
obtained from the sale."
What benefit did the plaintiff, by his "services," bestow upon the defendant to entitle him to recover from
the latter the sum of P60,000? It is perfectly clear and undisputed that his "services" did not in any way
contribute towards bringing about the sale of the factory in question. He was not "the efficient agent or the
procuring cause of the sale."
"The broker must be the efficient agent or the procuring cause of the sale. The means
employed by him and his efforts must result in the sale. He must find the purchaser, and the sale
must proceed from his efforts acting as broker." (Wylie vs. Marine National Bank, 61 N. Y., 415,
416, citing: McClure vs. Paine, 49 N. Y., 561; Lloyd vs. Mathews, 51 id., 124; Lyon vs. Mitchell, 36
id., 235; Briggs vs. Rowe, 4 Keyes, 424; Murray vs. Currie, 7 Carr. & Payne, 584; Wilkinson vs.
Martin, 8 id., 5.)
Page 45 of 72
 A leading case on the subject is that of Sibbald vs. Bethlehem Iron Co. (83 N. Y., 378; 38 Am. Rep.,
441). In that case, after an exhaustive review of various cases, the Court of Appeals of New York stated the rule
as follows:
"In all the cases, under all and varying forms of expression, the fundamental and correct
doctrine is, that the duty assumed by the broker is to bring the minds of the buyer and seller to an
agreement for a sale, and the price and terms on which it is to be made, and until that is done his
right to commissions does not accrue. (McGavock vs. Woodlief, 20 How., 221; Barnes vs. Roberts,
5 Bosw., 73; Holly vs. Gosling, 3 E. D. Smith, 262; Jacobs vs. Kolff, 2 Hilt., 133; Kock vs.
Emmerling, 22 How., 72; Corning vs. Calvert, 2 Hilt., 56; Trundy vs. N. Y. & Hartf. Steamboat Co.,
6 Robt., 312; Van Lien vs. Burns, 1 Hilt., 134.)"
xxx xxx xxx
"It follows, as a necessary deduction from the established rule, that a broker is never
entitled to commissions for unsuccessful efforts. The risk of a failure is wholly his. The reward
comes only with his success. That is the plain contract and contemplation of the parties. The
broker may devote his time and labor, and expend his money with ever so much of devotion to the
interest of his employer, and yet if he fails, if without effecting an agreement or accomplishing a
bargain, he abandons the effort, or his authority is fairly and in good faith terminated, he gains no
right to commissions. He loses the labor and effort which was staked upon success. And in such
event it matters not that after his failure, and the termination of his agency, what he has done
proves of use and benefit to the principal. In a multitude of cases that must necessarily result. He
may have introduced to each other parties who otherwise would have never met; he may have
created impressions, which under later and more favorable circumstances naturally lead to and
materially assist in the consummation of a sale; he may have planted the very seed from which
others reap the harvest; but all that gives him no claim. It was part of his risk that failing himself,
not successful in fulfilling his obligation, others might be left to some extent to avail themselves of
the fruit of his labors. As was said in Wylie vs. Marine National Bank (61 N. Y., 416), in such a
case the principal violates no right of the broker by selling to the first party who offers the price
asked, and it matters not that sale is to the very party with whom the broker had been negotiating.
He failed to find or produce a purchaser upon the terms prescribed in his employment, and the
principal was under no obligation to wait longer that he might make further efforts. The failure
therefore and its consequences were the risk of the broker only. This however must be taken with
one important and necessary limitation. If the efforts of the broker are rendered a failure by the
fault of the employer; if capriciously he changes his mind after the purchaser, ready and willing,
and consenting to the prescribed terms, is produced; or if the latter declines to complete the
contract because of some defect of title in the ownership of the seller, some unremoved
incumbrance, some defect which is the fault of the latter, then the broker does not lose his
commissions. And that upon the familiar principle that no one can avail himself of the
nonperformance of a condition precedent, who has himself occasioned its nonperformance. But
this limitation is not even an exception to the general rule affecting the broker's right for it goes on
the ground that the broker has done his duty, that he has brought buyer and seller to an
agreement, but that the contract is not consummated and fails though the after-fault of the seller.
The cases are uniform in this respect. (Moses vs. Burling, 31 N. Y., 462; Glentworth vs. Luther, 21
Barb., 147; Van Lien vs. Burns, 1 Hilt., 134.)
"One other principle applicable to such a contract as existed in the present case needs to
be kept in view. Where no time for the continuance of the contract is fixed by its terms either party
is at liberty to terminate it at will, subject only to the ordinary requirements of good faith. Usually
the broker is entitled to a fair and reasonable opportunity to perform his obligation, subject of
course to the right of the seller to sell independently. But having been granted him, the right of the
principal to terminate his authority is absolute and unrestricted, except only that he may not do it in
bad faith, and as a mere device to escape the payment of the broker's commissions. Thus, if in the
midst of negotiations instituted by the broker, and which were plainly and evidently approaching
success, the seller should revoke the authority of the broker, with the view of concluding the
bargain without his aid, and avoiding the payment of commission about to be earned, it might be
well said that the due performance his obligation by the broker was purposely prevented by the
principal. But if the latter acts in good faith, not seeking to escape the payment of commissions,
but moved fairly by a view of his own interest, he has the absolute right before a bargain is made
while negotiations remain unsuccessful, before commissions are earned, to revoke the broker's
Page 46 of 72
 authority, and the latter cannot thereafter claim compensation for a sale made by the principal,
even though it be to a customer with whom the broker unsuccessfully negotiated, and even though
to some extent, the seller might justly be said to have availed himself of the fruits of the broker's
labor." (Ibid. pp. 444 445 and 446.)
The rule laid down in the foregoing case was adopted and followed in the cases of Zeimer vs. Antisell
(75 Cal 509), and Ayres vs. Thomas (116 Cal., 140).
"The undertaking to procure a purchaser requires of the party so undertaking, not simply to
name or introduce a person who may be willing to make any sort of contract in reference to the
property, but to produce a party capable, and who ultimately becomes the purchaser."
(Kimberly vs. Henderson and Lupton, 29 Md., 512, 515, citing: Keener vs. Harrod & Brooke, 2 Md.
63; McGavock vs. Woodlief, 20 How., 221. See also Richards, Executor, vs. Jackson, 31 Md.,
250.)
"The defendant sent a proposal to a broker in these words: If you send or cause to be sent
to me, by advertisement or otherwise, any party with whom I may see fit and proper to effect a sale
or exchange of my real estate, above described I will pay you the sum of $200. The broker found a
person who proposed to purchase the property, but the sale was not effected. Held: That the
broker was not entitled to compensation." (Walker vs. Tirrel, 3 Am. Rep., 352.)
It is clear from the foregoing authorities that, although the present plaintiff could probably have effected
the sale of the defendant's factory had not the defendant sold it to someone else, he is not entitled to the
commissions agreed upon because he had no intervention whatever in, and much sale in question. It must be
borne in mind that no definite period was fixed by the defendant within which the plaintiff might effect the sale of
its factory. Nor was the plaintiff given by the defendant the exclusive agency of such sale. Therefore, the plaintiff
cannot complain of the defendant's conduct in selling the property through another agent before the plaintiff's
efforts were crowned with success. "One who has employed a broker can himself sell the property to a
purchaser whom he has procured, without any aid from the broker." (Hungerford vs. Hicks, 39 Conn., 259;
Wylie vs. Marine National Bank, 61 N. Y., 415, 416.)
For the foregoing reasons the judgment appealed from is hereby revoked and the defendant is hereby
absolved from all liability under the plaintiff's complaint, with costs in both instances against the plaintiff. So
ordered.
||| (Danon v. Brimo, G.R. No. 15823, [September 12, 1921], 42 PHIL 133-143)

Page 47 of 72
 THIRD DIVISION
[G.R. No. 171052. January 28, 2008.]
PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), petitioner, vs. CARMELA
ESTRADA/CARA HEALTH SERVICES, respondent.
DECISION
NACHURA, J p:
This petition for review on certiorari assails the Decision 1 dated June 16, 2005 of the Court of Appeals
(CA) in CA-G.R. CV No. 66040 which affirmed in toto the Decision 2 dated October 8, 1999 of the Regional Trial
Court (RTC), Branch 135, of Makati City in an action for breach of contract and damages filed by respondent
Carmela Estrada, sole proprietor of Cara Health Services, against Philippine Health-Care Providers, Inc.
(Maxicare).
The facts, as found by the CA and adopted by Maxicare in its petition, follow:
[Maxicare] is a domestic corporation engaged in selling health insurance plans whose
Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle, and
Sales/Marketing Manager Josephine Cabrera were impleaded as defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela Estrada
who was doing business under the name of CARA HEALTH [SERVICES] to promote and sell the
prepaid group practice health care delivery program called MAXICARE Plan with the position of
Independent Account Executive. [Maxicare] formally appointed [Estrada] as its "General Agent",
evidenced by a letter-agreement dated February 16, 1991. The letter agreement provided for
plaintiff-appellee's [Estrada's] compensation in the form of commission, viz.: DCaSHI
Commission
In consideration of the performance of your functions and duties as specified in this letter-
agreement, [Maxicare] shall pay you a commission equivalent to 15 to 18% from individual,
family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on standard plans of
commissionable amount on corporate accounts from all membership dues collected and
remitted by you to [Maxicare].
[Maxicare] alleged that it followed a "franchising system" in dealing with its agents
whereby an agent had to first secure permission from [Maxicare] to list a prospective company
as client. [Estrada] alleged that it did apply with [Maxicare] for the MERALCO account and other
accounts, and in fact, its franchise to solicit corporate accounts, MERALCO account included,
was renewed on February 11, 1991.
Plaintiff-appellee [Estrada] submitted proposals and made representations to the officers
of MERALCO regarding the MAXICARE Plan but when MERALCO decided to subscribe to the
MAXICARE Plan, [Maxicare] directly negotiated with MERALCO regarding the terms and
conditions of the agreement and left plaintiff-appellee [Estrada] out of the discussions on the
terms and conditions.
On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan and
signed a Service Agreement directly with [Maxicare] for medical coverage of its qualified
members, i.e.: 1) the enrolled dependent/s of regular MERALCO executives; 2) retired
executives and their dependents who have opted to enroll and/or continue their MAXICARE
membership up to age 65; and 3) regular MERALCO female executives (exclusively for
maternity benefits). Its duration was for one (1) year from December 1, 1991 to November 30,
1992. The contract was renewed twice for a term of three (3) years each, the first started on
December 1, 1992 while the second took effect on December 1, 1995.
The premium amounts paid by MERALCO to [Maxicare] were alleged to be the following:
a) P215,788.00 in December 1991; b) P3,450,564.00 in 1992; c) P4,223,710.00 in 1993; d)
P4,782,873.00 in 1994; e) P5,102,108.00 in 1995; and P2,394,292.00 in May 1996. As of May
1996, the total amount of premium paid by MERALCO to [Maxicare] was
P20,169,335.00. DaAISH
On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from
[Maxicare] that it be paid commissions for the MERALCO account and nine (9) other accounts.
In reply, [Maxicare], through counsel, denied [Estrada's] claims for commission for the
MERALCO and other accounts because [Maxicare] directly negotiated with MERALCO and the
other accounts(,) and that no agent was given the go signal to intervene in the negotiations for
the terms and conditions and the signing of the service agreement with MERALCO and the other
Page 48 of 72
 accounts so that if ever [Maxicare] was indebted to [Estrada], it was only for P1,555.00 and
P43.12 as commissions on the accounts of Overseas Freighters Co. and Mr. Enrique Acosta,
respectively.
[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its officers with the
Regional Trial Court (RTC) of Makati City, docketed as Civil Case No. 93-935, raffled to Branch
135.
Defendants-appellants [Maxicare] and its officers filed their Answer with Counterclaim on
September 13, 1993 and their Amended Answer with Counterclaim on September 28, 1993,
alleging that: plaintiff-appellee [Estrada] had no cause of action; the cause of action, if any,
should be is against [Maxicare] only and not against its officers; CARA HEALTH's appointment
as agent under the February 16, 1991 letter-agreement to promote the MAXICARE Plan was for
a period of one (1) year only; said agency was not renewed after the expiration of the one (1)
year period; [Estrada] did not intervene in the negotiations of the contract with MERALCO which
was directly negotiated by MERALCO with [Maxicare]; and [Estrada's] alleged other
clients/accounts were not accredited with [Maxicare] as required, since the agency contract on
the MAXICARE health plans were not renewed. By way of counterclaim, defendants-appellants
[Maxicare] and its officers claimed P100,000.00 in moral damages for each of the officers of
[Maxicare] impleaded as defendant, P100,000.00 in exemplary damages, P100,000.00 in
attorney's fees, and P10,000.00 in litigation expenses. 3
After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay Estrada actual
damages in the amount equivalent to 10% of P20,169,335.00, representing her commission for the total
premiums paid by Meralco to Maxicare from the year 1991 to 1996, plus legal interest computed from the filing
of the complaint on March 18, 1993, and attorney's fees in the amount of P100,000.00.
On appeal, the CA affirmed in toto the RTC's decision. In ruling for Estrada, both the trial and appellate
courts held that Estrada was the "efficient procuring cause" in the execution of the service agreement between
Meralco and Maxicare consistent with our ruling in Manotok Brothers, Inc. v. Court of Appeals. 4
Undaunted, Maxicare comes to this Court and insists on the reversal of the RTC Decision as affirmed by
the CA, raising the following issues, to wit:
1. Whether the Court of Appeals committed serious error in affirming Estrada's
entitlement to commissions for the execution of the service agreement between Meralco and
Maxicare. HIEASa
2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive
renewals of the service agreement effective on December 1, 1992 5 and December 1, 1995. 6
We are in complete accord with the trial and appellate courts' ruling. Estrada is entitled to commissions
for the premiums paid under the service agreement between Meralco and Maxicare from 1991 to 1996.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when
affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive
between the parties. 7 A review of such findings by this Court is not warranted except upon a showing of highly
meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation,
surmises or conjectures; (2) when a lower court's inference from its factual findings is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the
findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if
properly considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the
findings of fact are conclusions without mention of the specific evidence on which they are based, are premised
on the absence of evidence, or are contradicted by evidence on record. 8 None of the foregoing exceptions
which would warrant a reversal of the assailed decision obtains in this instance.
Maxicare urges us that both the RTC and CA failed to take into account the stipulations contained in the
February 19, 1991 letter agreement authorizing the payment of commissions only upon satisfaction of twin
conditions, i.e., collection and contemporaneous remittance of premium dues by Estrada to Maxicare. Allegedly,
the lower courts disregarded Estrada's admission that the negotiations with Meralco failed. Thus, the flawed
application of the "efficient procuring cause" doctrine enunciated in Manotok Brothers, Inc. v. Court of
Appeals, 9 and the erroneous conclusion upholding Estrada's entitlement to commissions on contracts
completed without her participation.
We are not persuaded.
Contrary to Maxicare's assertion, the trial and the appellate courts carefully considered the factual
backdrop of the case as borne out by the records. Both courts were one in the conclusion that Maxicare

Page 49 of 72
successfully landed the Meralco account for the sale of healthcare plans only by virtue of Estrada's involvement
and participation in the negotiations. The assailed Decision aptly states: cSTCDA
There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling
[Maxicare's] health insurance plan to Meralco. Plaintiff-appellee [Estrada's] efforts consisted in
being the first to offer the Maxicare plan to Meralco, using her connections with some of Meralco
Executives, inviting said executives to dinner meetings, making submissions and representations
regarding the health plan, sending follow-up letters, etc.

These efforts were recognized by Meralco as shown by the certification issued by its
Manpower Planning and Research Staff Head Ruben A. Sapitula on September 5, 1991, to wit:
"This is to certify that Ms. Carmela Estrada has initiated talks with us since
November 1990 with regards (sic) to the HMO requirements of both our rank and file
employees, managers and executives, and that it was favorably recommended and the
same be approved by the Meralco Management Committee." CITcSH
xxx xxx xxx
This Court finds that plaintiff-appellee [Estrada's] efforts were instrumental in introducing
the Meralco account to [Maxicare] in regard to the latter's Maxicare health insurance plans.
Plaintiff-appellee [Estrada] was the efficient "intervening cause" in bringing about the service
agreement with Meralco. As pointed out by the trial court in its October 8, 1999 Decision, to wit:
". . . Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs.
Lopez and Guingona of Meralco, PHPI would still be an anonymity. . . ." 10
Under the foregoing circumstances, we are hard pressed to disturb the findings of the RTC, which the CA
affirmed.
We cannot overemphasize the principle that in petitions for review on certiorari under Rules 45 of the
Rules of Court, only questions of law may be put into issue. Questions of fact are not cognizable by this Court.
The finding of "efficient procuring cause" by the CA is a question of fact which we desist from passing upon as it
would entail delving into factual matters on which such finding was based. To reiterate, the rule is that factual
findings of the trial court, especially those affirmed by the CA, are conclusive on this Court when supported by
the evidence on record. 11
The jettisoning of the petition is inevitable even upon a close perusal of the merits of the case. EICDSA
First. Maxicare's contention that Estrada may only claim commissions from membership dues which she
has collected and remitted to Maxicare as expressly provided for in the letter-agreement does not convince us. It
is readily apparent that Maxicare is attempting to evade payment of the commission which rightfully belongs to
Estrada as the broker who brought the parties together. In fact, Maxicare's former Chairman Roberto K.
Macasaet testified that Maxicare had been trying to land the Meralco account for two (2) years prior to Estrada's
entry in 1990. 12 Even without that admission, we note that Meralco's Assistant Vice-President, Donatila San
Juan, in a letter 13 dated January 21, 1992 to then Maxicare President Pedro R. Sen, categorically
acknowledged Estrada's efforts relative to the sale of Maxicare health plans to Meralco, thus:
Sometime in 1989, Meralco received a proposal from Philippine Health-Care Providers,
Inc. (Maxicare) through the initiative and efforts of Ms. Carmela Estrada, who introduced
Maxicare to Meralco. Prior to this time, we did not know that Maxicare is a major health care
provider in the country. We have since negotiated and signed up with Maxicare to provide a
health maintenance plan for dependents of Meralco executives, effective December 1, 1991 to
November 30, 1992.
At the very least, Estrada penetrated the Meralco market, initially closed to Maxicare, and laid the groundwork
for a business relationship. The only reason Estrada was not able to participate in the collection and remittance
of premium dues to Maxicare was because she was prevented from doing so by the acts of Maxicare, its
officers, and employees.
In Tan v. Gullas, 14 we had occasion to define a broker and distinguish it from an agent, thus:
[O]ne who is engaged, for others, on a commission, negotiating contracts relative to
property with the custody of which he has no concern; the negotiator between the other parties,
never acting in his own name but in the name of those who employed him. [A] broker is one
whose occupation is to bring the parties together, in matter of trade, commerce or navigation. 15
An agent receives a commission upon the successful conclusion of a sale. On the other
hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale
is eventually made. 16 TDAcCa

Page 50 of 72
 In relation thereto, we have held that the term "procuring cause" in describing a broker's activity, refers
to a cause originating a series of events which, without break in their continuity, result in the accomplishment of
the prime objective of the employment of the broker — producing a purchaser ready, willing and able to buy on
the owner's terms. 17 To be regarded as the "procuring cause" of a sale as to be entitled to a commission, a
broker's efforts must have been the foundation on which the negotiations resulting in a sale began. 18 Verily,
Estrada was instrumental in the sale of the Maxicare health plans to Meralco. Without her intervention, no sale
could have been consummated. DSHcTC
Second. Maxicare next contends that Estrada herself admitted that her negotiations with Meralco failed
as shown in Annex "F" of the Complaint.
The chicanery and disingenuousness of Maxicare's counsel is not lost on this Court. We observe that
this Annex "F" is, in fact, Maxicare's counsel's letter dated April 10, 1992 addressed to Estrada. The letter
contains a unilateral declaration by Maxicare that the efforts initiated and negotiations undertaken by Estrada
failed, such that the service agreement with Meralco was supposedly directly negotiated by Maxicare. Thus, the
latter effectively declares that Estrada is not the "efficient procuring cause" of the sale, and as such, is not
entitled to commissions.
Our holding in Atillo III v. Court of Appeals, 19 ironically the case cited by Maxicare to bolster its position
that the statement in Annex "F" amounted to an admission, provides a contrary answer to Maxicare's ridiculous
contention. We intoned therein that in spite of the presence of judicial admissions in a party's pleading, the trial
court is still given leeway to consider other evidence presented. 20 We ruled, thus:
As provided for in Section 4 of Rule 129 of the Rules of Court, the general rule that a
judicial admission is conclusive upon the party making it and does not require proof admits of
two exceptions: 1) when it is shown that the admission was made through palpable mistake, and
2) when it is shown that no such admission was in fact made. The latter exception allows one to
contradict an admission by denying that he made such an admission.
For instance, if a party invokes an "admission" by an adverse party, but cites the
admission "out of context", then the one making the admission may show that he made no
"such" admission, or that his admission was taken out of context.
This may be interpreted as to mean "not in the sense in which the admission is
made to appear". That is the reason for the modifier "such". 21 TaIHEA
In this case, the letter, although part of Estrada's Complaint, is not, ipso facto, an admission of the
statements contained therein, especially since the bone of contention relates to Estrada's entitlement to
commissions for the sale of health plans she claims to have brokered. It is more than obvious from the entirety
of the records that Estrada has unequivocally and consistently declared that her involvement as broker is the
proximate cause which consummated the sale between Meralco and Maxicare.
Moreover, Section 34, 22 Rule 132 of the Rules of Court requires the purpose for which the evidence is
offered to be specified. Undeniably, the letter was attached to the Complaint, and offered in evidence, to
demonstrate Maxicare's bad faith and ill will towards Estrada. 23
Even a cursory reading of the Complaint and all the pleadings filed thereafter before the RTC, CA, and
this Court, readily show that Estrada does not concede, at any point, that her negotiations with Meralco failed.
Clearly, Maxicare's assertion that Estrada herself does not pretend to be the "efficient procuring cause" in the
execution of the service agreement between Meralco and Maxicare is baseless and an outright falsehood.
After muddling the issues and representing that Estrada made an admission that her negotiations with
Meralco failed, Maxicare's counsel then proceeds to cite a case which does not, by any stretch of the
imagination, bolster the flawed contention.
We, therefore, ADMONISH Maxicare's counsel, and, in turn, remind every member of the Bar that the
practice of law carries with it responsibilities which are not to be trifled with. Maxicare's counsel ought to be
reacquainted with Canon 10 24 of the Code of Professional Responsibility, specifically, Rule 10.02, to wit:
Rule 10.02 — A lawyer shall not knowingly misquote or misrepresent the contents of a
paper, the language or the argument of opposing counsel, or the text of a decision or authority,
or knowingly cite as law a provision already rendered inoperative by repeal or amendment, or
assert as a fact that which has not been proved. TCDcSE
Third. Finally, we likewise affirm the uniform ruling of the RTC and CA that Estrada is entitled to 10% of
the total amount of premiums paid 25 by Meralco to Maxicare as of May 1996. Maxicare's argument that
assuming Estrada is entitled to commissions, such entitlement only covers the initial year of the service
agreement and should not include the premiums paid for the succeeding renewals thereof, fails to impress.
Considering that we have sustained the lower courts' factual finding of Estrada's close, proximate and causal

Page 51 of 72
 connection to the sale of health plans, we are not wont to disturb Estrada's complete entitlement to commission
for the total premiums paid until May 1996 in the amount of P20,169,335.00. SacTCA
WHEREFORE, premises considered and finding no reversible error committed by the Court of Appeals,
the petition is hereby DENIED. Costs against the petitioner.
SO ORDERED.
||| (Philippine Health-Care Providers, Inc. v. Estrada, G.R. No. 171052, [January 28, 2008], 566 PHIL 603-616)

THIRD DIVISION
[G.R. No. 141525. September 2, 2005.]
CARLOS SANCHEZ, petitioner, vs. MEDICARD PHILIPPINES, INC., DR. NICANOR MONTOYA
and CARLOS EJERCITO, respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AN AGENT RECEIVES HIS COMMISSION
ONLY UPON THE SUCCESSFUL CONCLUSION OF A SALE. — It is dictum that in order for an agent to be entitled
to a commission, he must be the procuring cause of the sale, which simply means that the measures employed by
him and the efforts he exerted must result in a sale. In other words, an agent receives his commission only upon the
successful conclusion of a sale. Conversely, it follows that where his efforts are unsuccessful, or there was no effort
on his part, he is not entitled to a commission.
2. ID.; ID.; ID.; AN AGENT WHO WAS THE EFFICIENT PROCURING CAUSE OF THE SALE IS ENTITLED
TO A COMMISSION NOTWITHSTANDING THAT THE SALE TOOK PLACE AFTER HIS AUTHORITY HAD
LAPSED. — In Prats vs. Court of Appeals, this Court held that for the purpose of equity, an agent who is not the
efficient procuring cause is nonetheless entitled to his commission, where said agent, notwithstanding the expiration
of his authority, nonetheless, took diligent steps to bring back together the parties, such that a sale was finalized and
consummated between them. In Manotok Brothers vs. Court of Appeals, where the Deed of Sale was only executed
after the agent's extended authority had expired, this Court, applying its ruling in Prats, held that the agent (in
Manotok) is entitled to a commission since he was the efficient procuring cause of the sale, notwithstanding that the
sale took place after his authority had lapsed. The proximate, close, and causal connection between the agent's
efforts and the principal's sale of his property can not be ignored.
3. ID.; ID.; ID.; CONSIDERED REVOKED IF THE PRINCIPAL DIRECTLY MANAGES THE BUSINESS
ENTRUSTED TO THE AGENT. — It is clear that since petitioner refused to reduce his commission, Medicard
directly negotiated with Unilab, thus revoking its agency contract with petitioner. We hold that such revocation is
authorized by Article 1924 of the Civil Code which provides: "Art. 1924. The agency is revoked if the principal
directly manages the business entrusted to the agent, dealing directly with third persons." Moreover, as found by the
lower courts, petitioner did not render services to Medicard, his principal, to entitle him to a commission. There is no
indication from the records that he exerted any effort in order that Unilab and Medicard, after the expiration of the
Health Care Program Contract, can renew it for the third time. In fact, his refusal to reduce his commission
constrained Medicard to negotiate directly with Unilab. We find no reason in law or in equity to rule that he is entitled
to a commission. Obviously, he was not the agent or the "procuring cause" of the third Health Care Program
Contract between Medicard and Unilab.
DECISION
SANDOVAL-GUTIERREZ, J p:
This petition for review on certiorari seeks to reverse the Decision 1 of the Court of Appeals dated February
24, 1999 and its Resolution dated January 12, 2000 in CA-G.R. CV No. 47681.
The facts, as established by the trial court and affirmed by the Court of Appeals, follow:
Sometime in 1987, Medicard Philippines, Inc. (Medicard), respondent, appointed petitioner as its special
corporate agent. As such agent, Medicard gave him a commission based on the "cash brought in."
In September, 1988, through petitioner's efforts, Medicard and United Laboratories Group of Companies
(Unilab) executed a Health Care Program Contract. Under this contract, Unilab shall pay Medicard a fixed monthly
premium for the health insurance of its personnel. Unilab paid Medicard P4,148,005.00 representing the premium
for one (1) year. Medicard then handed petitioner 18% of said amount or P746,640.90 representing his commission.
Again, through petitioner's initiative, the agency contract between Medicard and Unilab was renewed for
another year, or from October 1, 1989 to September 30, 1990, incorporating therein the increase of premium from
P4,148,005.00 to P7,456,896.00. Medicard paid petitioner P1,342,241.00 as his commission.
Page 52 of 72
 Prior to the expiration of the renewed contract, Medicard proposed to Unilab, through petitioner, an increase
of the premium for the next year. Unilab rejected the proposal "for the reason that it was too high," prompting Dr.
Nicanor Montoya (Medicard's president and general manager), also a respondent, to request petitioner to reduce his
commission, but the latter refused.
In a letter dated October 3, 1990, Unilab, through Carlos Ejercito, another respondent, confirmed its decision
not to renew the health program contract with Medicard. ECDaTI
Meanwhile, in order not to prejudice its personnel by the termination of their health insurance, Unilab,
through respondent Ejercito, negotiated with Dr. Montoya and other officers of Medicard, to discuss ways in order to
continue the insurance coverage of those personnel.
Under the new scheme, Unilab shall pay Medicard only the amount corresponding to the actual
hospitalization expenses incurred by each personnel plus 15% service fee for using Medicard facilities, which
amount shall not be less than P780,000.00.
Medicard did not give petitioner any commission under the new scheme.
In a letter dated March 15, 1991, petitioner demanded from Medicard payment of P338,000.00 as his
commission plus damages, but the latter refused to heed his demand.
Thus, petitioner filed with the Regional Trial Court (RTC), Branch 66, Makati City, a complaint for sum of
money against Medicard, Dr. Nicanor Montoya and Carlos Ejercito, herein respondents.
After hearing, the RTC rendered its Decision dismissing petitioner's complaint and respondents'
counterclaim.
On appeal, the Court of Appeals affirmed the trial court's assailed Decision. The Appellate Court held that
there is no proof that the execution of the new contract between the parties under the "cost plus" system is a
strategy to deprive petitioner of his commission; that Medicard did not commit any fraudulent act in revoking its
agency contract with Sanchez; that when Unilab rejected Medicard's proposal for an increase of premium, their
Health Care Program Contract on its third year was effectively revoked; and that where the contract is ineffectual,
then the agent is not entitled to a commission.
Petitioner filed a motion for reconsideration, but this was denied by the Court of Appeals on January 12,
2000.
Hence, the instant petition for review on certiorari.
The basic issue for our resolution is whether the Court of Appeals erred in holding that the contract of
agency has been revoked by Medicard, hence, petitioner is not entitled to a commission.
It is dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the
sale, which simply means that the measures employed by him and the efforts he exerted must result in a sale. 2 In
other words, an agent receives his commission only upon the successful conclusion of a sale. 3 Conversely, it
follows that where his efforts are unsuccessful, or there was no effort on his part, he is not entitled to a commission.
In Prats vs. Court of Appeals, 4 this Court held that for the purpose of equity, an agent who is not the
efficient procuring cause is nonetheless entitled to his commission, where said agent, notwithstanding the expiration
of his authority, nonetheless, took diligent steps to bring back together the parties, such that a sale was
finalized and consummated between them. In Manotok Borthers vs. Court of Appeals, 5 where the Deed of Sale
was only executed after the agent's extended authority had expired, this Court, applying its ruling in Prats, held that
the agent (in Manotok) is entitled to a commission since he was the efficient procuring cause of the sale,
notwithstanding that the sale took place after his authority had lapsed. The proximate, close, and causal connection
between the agent's efforts and the principal's sale of his property can not be ignored.
It may be recalled that through petitioner's efforts, Medicard was able to enter into a one-year Health Care
Program Contract with Unilab. As a result, Medicard paid petitioner his commission. Again, through his efforts, the
contract was renewed and once more, he received his commission. Before the expiration of the renewed contract,
Medicard, through petitioner, proposed an increase in premium, but Unilab rejected this proposal. Medicard then
requested petitioner to reduce his commission should the contract be renewed on its third year, but he was

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obstinate. Meantime, on October 3, 1990, Unilab informed Medicard it was no longer renewing the Health Care
Program contract. EcIDaA
In order not to prejudice its personnel, Unilab, through respondent Ejercito, negotiated with respondent Dr.
Montoya of Medicard, in order to find mutually beneficial ways of continuing the Health Care Program. The
negotiations resulted in a new contract wherein Unilab shall pay Medicard the hospitalization expenses actually
incurred by each employees, plus a service fee. Under the "cost plus" system which replaced the premium scheme,
petitioner was not given a commission.
It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with Unilab,
thus revoking its agency contract with petitioner. We hold that such revocation is authorized by Article 1924 of
the Civil Code which provides:
"Art. 1924. The agency is revoked if the principal directly manages the business entrusted
to the agent, dealing directly with third persons."
Moreover, as found by the lower courts, petitioner did not render services to Medicard, his principal, to
entitle him to a commission. There is no indication from the records that he exerted any effort in order that Unilab
and Medicard, after the expiration of the Health Care Program Contract, can renew it for the third time. In fact, his
refusal to reduce his commission constrained Medicard to negotiate directly with Unilab. We find no reason in law or
in equity to rule that he is entitled to a commission. Obviously, he was not the agent or the "procuring cause" of the
third Health Care Program Contract between Medicard and Unilab.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in
CA-G.R. CV No. 47681 are AFFIRMED IN TOTO. Costs against petitioner.
SO ORDERED.
||| (Sanchez v. Medicard Philippines, Inc., G.R. No. 141525, [September 2, 2005], 506 PHIL 332-338)

FIRST DIVISION
[G.R. No. L-39822. January 31, 1978.]
ANTONIO E. PRATS, doing business under the name of Philippine Real Estate
Exchange, petitioner, vs. HON. COURT OF APPEALS, ALFONSO DORONILA and PHILIPPINE
NATIONAL BANK, respondents.
SYNOPSIS
Private respondent offered to sell his 300-hectare land to the Social Security System at P4.00 per
square meter. He received and accepted a counter-offer of P3.25 per square meter. But since the System did
not take definite action on the transaction, private respondent granted petitioner an exclusive 60-day option and
authority to sell the property on condition that if no written offer was made to private respondent until the last day
of the authorization, the authority shall expire and become null and avoid. The option should have expired on
April 18, 1968, but this was extended by private respondent to May 18, 1968.
During the period of his authorization, petitioner diligently took steps to bring back together private
respondent and the Social Security System. On March 16, 1968, he wrote the System inviting the chairman to
discuss the officer of the sale of the property. On May 16, 1968, he made a formal written offer to sell the
property at P6.00 per square meter. Thereafter, respondent received a telegram dated May 17, 1968 from the
System informing him that it was considering the purchase of his property. However, since respondent did not
receive a written offer for the purchase of the property during petitioner's period of authorization (except a latter
dated May 18, 1968 coming from petitioner himself on behalf of an undisclosed buyer who was willing to buy at
P4.50 per square meter), respondent informed petitioner in a lot or that pursuant to their agreement the latter's
authority was deemed terminated.
Thereafter, on June 19, 1968, respondent renewed his offer to sell his 300-hectare land to the System.
The transaction was finalized on July 30, 1968, with the System buying at its original counter offer of P3.25 per
square meter.
Petitioner presented his statement of account to respondent for professional services as real estate
broker in the amount of P1,380,000. Respondent refused to pay. Hence, petitioner sued respondent to recover
the sum plus damages. The trial court found for the petitioner, but on appeal, the Court of Appeals reversed the

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 decision on factual findings that petitioner was not the efficient procuring in bringing about the sale (prescinding
from the fact of expiration of his exclusive authority). Hence, this petition.
The Supreme Court found no basis in law to reverse the factual findings of the Appellate Court and to
grant relief to petitioner. However, in equity, noting that petitioner had diligently taken steps to bring back
together respondent and the Social Security System, the Supreme Court affirmed the decision appealed from,
but ordered respondent to pay petitioner the amount of P100,000, and set aside that portion of the decision
ordering petitioner to pay respondent attorney's fees.
SYLLABUS
1. APPEAL; FACTUAL FINDINGS OF THE COURT OF APPEALS, CONCLUSIVE ON THE SUPREME
COURT. — The factual findings of the Court of Appeals are conclusive on the Supreme Court.
2. EQUITY; PRINCIPAL AND AGENT; ALTHOUGH AGENT IS NOT THE EFFICIENT PROCURING
CAUSE, HE MAY BE COMPENSATED FROM EFFORTS EXERTED TO BRING PRINCIPAL AND BUYER
TOGETHER. — In an action by a real estate broker to recover commission from the principal, although the
Court of Appeals' factual findings provide no basis in law to grant relief to the broker, since said court found that
the broker was not the efficient procuring cause in bringing about the sale, nevertheless, relief in equity may be
granted where it appears that the agent had diligently taken steps to bring back together the principal and the
prospective buyer.
3. CONTRACTS; PARTIES BOUND BY TERMS AND CONDITIONS THEREOF. — Where the contract
between the real estate broker and the principal requires the former to present to the latter a written offer by the
prospective buyer within the period of the broker's authorization, otherwise the broker's authorization shall expire
and become null and void, the failure of the broker to present such written offer within the stipulated period will
terminate the broker's authorization.
DECISION
FERNANDEZ, J p:
This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 45974-R
entitled "Antonio E. Prats, doing business under the name of Philippine Real Estate Exchange, versus Alfonso
Doronila and the Philippine National Bank", the dispositive part of which reads:
"In view of all the foregoing, it is our considered opinion and hold that the decision of the
lower court he, as it is hereby reversed, and the complaint, dismissed. On appellant's
counterclaim, judgment is hereby rendered directing appellee to pay attorney's fees in the sum of
P10,000 to appellant, no moral damages as therein claimed being awarded for lack of evidence to
justify the same. The injunction issued by the lower court on the P2,000,000.00 cash deposit of the
appellant is hereby lifted. No special pronouncement as to costs.
SO ORDERED." 1
On September 23, 1958 Antonio E. Prats, doing business under the name of "Philippine Real Estate
Exchange" instituted against Alfonso Doronila and Philippine National Bank Civil Case No. Q-12412 in the Court
of First Instance of Rizal at Quezon City to recover a sum of money and damages.
The complaint stated that defendant Alfonso Doronila was the registered owner of 300 hectares of land
situated in Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 and 216750;
that defendant Doronila had for sometime tried to sell his aforesaid 300 hectares of land and for that purpose
had designated several agents; that at one time, he had offered the same property to the Social Security System
but failed to consummate any sale; that his offer to sell to the Social Security System having failed, defendant
Doronila on February 14, 1968 gave the plaintiff an exclusive option and authority in writing to negotiate the sale
of his aforementioned property, which exclusive option and authority the plaintiff caused to be published in the
Manila Times on February 22, 1968; that it was the agreement between plaintiff and defendant Doronila that the
basic price shall be P3.00 per square meter; that plaintiff shall be entitled to a commission of 10% based on
P2.10 per square meter or at any price finally agreed upon and if the property be sold over and above P300 per
square meter, the excess shall be credited and paid to the plaintiff in addition to his 10% commission based on
P2.10 per square meter; that as a result of the grant of the exclusive option and authority to negotiate the sale of
his 300 hectares of land situated in Montalban, Rizal, in favor of the plaintiff, the defendant Doronila, on
February 20, 1968, wrote a letter to the Social Security System withdrawing his previous offer to sell the same
land and requesting the return to him of all papers concerning his offered property; that the Social Security
System, complying with said request of defendant Doronila, returned all the papers thereon and defendant
Doronila, in turn, gave them to the plaintiff as his duly authorized real estate broker; that by virtue of the

Page 55 of 72
exclusive written option and authority granted him and relying upon the announced policy of the President of the
Philippines to promote low housing program, the plaintiff immediately worked to negotiate the sale of defendant
Doronila's 300 hectares of land to the Social Security System, making the necessary contacts and
representations to bring the parties together, namely, the owner and the buyer, and bring about the ultimate sale
of the land by defendant Doronila to the Social Security System; that February 27, 1968, after plaintiff had
already contacted the Social Security System, its Deputy Administrator, Reynaldo J. Gregorio, wrote a letter to
defendant Doronila inviting the latter to a conference regarding the property in question with Administrator
Teodoro, Chairman Gaviola and said Reynaldo J. Gregorio on March 4, 1968 at 10:00 o'clock in the morning,
stating that the SSS would like to take up the offer of the lot; that having granted plaintiff the exclusive written
option and authority to negotiate the sale of his 300 hectares of land, defendant Doronila in a letter dated
February 28, 1968 declined the invitation extended by the Social Security System to meet with its Administrator
and Chairman, and requested them instead "to deal directly" with the plaintiff; that on March 16, 1968, at the
suggestion of defendant Doronila , the plaintiff wrote a letter to the Social Security System to the effect that
plaintiff would be glad to sit with the officials of the Social Security System to discuss the sale of the property of
the defendant Doronila; that on March 18, 1968, the Social Security System sent a telegram to defendant
Doronila to submit certain documents regarding the property offered; that on May 6, 1968, a written offer to sell
the 300 hectares of land belonging to defendant Doronila was formally made by the plaintiff to the Social
Security System and accordingly, on May 7, 1968, the Social Security System Administrator dispatched the
following telegram to defendant Doronila "SSS considering purchase your property for its housing project
Administrator Teodoro"; that a few days thereafter, the plaintiff accompanied the defendant Doronila to the
China Banking Corporation to arrange the matter of clearing payment by check and delivery of the titles over the
property to the Social Security System; that having been brought together by the plaintiff, the defendant Doronila
and the officials of Social Security System, on May 29, 1968 and on June 4, 1968, met at the office of the SSS
Administrator wherein the price for the purchase of the defendant Doronila's 300 hectares of land was, among
others, taken up; that on June 20, 1968, the Social Security Commission passed Resolution No. 636 making a
counter-offer of P3.25 per square meter subject to an appraisal report; that on June 27, 1968, Resolution No.
662 was adopted by the Social Security Commission authorizing the Toples & Harding (Far East) Inc. to conduct
an appraisal of the property and to submit a report thereon; that pursuant thereto, the said company submitted
its appraisal report specifying that the present value of the property is P3.34 per square meter and that a
housing program development would sent the highest and best use thereof; that on July 18, 1968, the Social
Security Commission, at its regular meeting; taking note of the favorable appraisal report of the Toples &
Harding (Far East) Inc., passed Resolution No. 738, approving the purchase of defendant Doronila's 300
hectares of land in Montalban, Rizal, at a price of P3.25 per square meter or for a total purchase price of Nine
Million Seven Hundred Fifty Thousand Pesos (P9,750,000.00), appropriating the said amount for the purpose
and authorizing the SSS Administrator to sign the necessary documents to implement the said resolution; that
on July 30, 1968, defendant Doronila and the Social Security System executed the corresponding deed of
absolute the 300 hectares of land in Montalban, Rizal, covered by Transfer Certificate of Title Nos. 7701, 77013,
216747 and 216750 under the terms of which the total price of P9,750,000.00 shall be payable as follows: (a)
60% of the agreed purchase price, or Five Million Eight Hundred Fifty Thousand Pesos (P5,850,000.00)
immediately after signing the deed of sale, and (b) the balance of 40% of the agreed price, or Three Million Nine
Hundred Thousand Pesos (3,900,000.00) thirty days after the signing of the deed of absolute sale; that on
August 21, 1968, after payment of the purchase price, the deed of absolute sale executed by defendant Doronila
in favor of the Social Security System was presented for registration in the Office of the Register of Deeds of
Rizal, and Transfer Certificates of Title Nos. 226574, 226575, 226576, and 226577 in the name of the Social
Security System were issued; that defendant Doronila has received the full purchase price for his 300 hectares
of and in the total amount of P9,750,000.00, which amount he deposited in his bank Account No. 0012-443 with
the defendant Philippine National Bank; that on September 17, 1968, the plaintiff presented his statement to,
and demanded of defendant Doronila the payment of his professional fee as real estate broker as computed
under the agreement of February 14, 1968 in the total amount of P1,380,000.00; that notwithstanding such
demand; the defendant Doronila, in gross and evident bad faith, after having availed of the services of plaintiff
as real estate broker, refused to pay the professional fees due him; that as a result of defendant Doronila's
gross and evident bad faith and unjustified refusal to pay plaintiff the professional fees due him under the
agreement, the latter has suffered and continues to suffer mental anguish, serious anxiety, and social
humiliation for which defendant Doronila shall be held liable to pay moral damages; and, that by reason likewise
of the aforesaid act of defendant Doronila, the plaintiff has been compelled to file this action and to engage the
services of counsel at a stipulated professional fee of P250,000.00.

Page 56 of 72
 In his answer filed on November 18, 1968, the defendant Doronila alleged that when the plaintiff offered
the answering defendant's property to the Social Security System on May 6, 1968, said defendant had already
offered his property to, and had a closed transaction or contract of sale of, said property with the Social Security
System; that the letter agreement had become null and void because defendant Doronila had not received any
written offer from any prospective buyers of the plaintiff during the agreed period of 60 days until the last day of
the authorization which was April 13, 1968 counting from February 14, 1968; that it is not true that plaintiff
brought together defendant Doronila and the officials of the Social Security System to take up the purchase
price of defendant Doronila's property for the simple reason that the plaintiff's offer was P6.00 per square meter
and later on reduced to P4.50 per square meter because the SSS Chairman had already a closed transaction
with the defendant Doronila at the price of P3.25 per square meter and that the offer of the plaintiff refused by
the officials of the Social Security System; and defendant Doronila did not answer the statement of collection of
the plaintiff because the latter had no right to demand the payment for services not rendered according to the
agreement of the parties. The answering defendant interposed a counterclaim for damages and attorney's fees.
On January 18, 1969, the plaintiff and defendant Alfonso Doronila submitted the following stipulation of
facts:
"STIPULATION OF FACTS
COME NOW the plaintiff and defendant DORONILA, I their respective undersigned
counsel, and to this Honorable Court, by way of abbreviating the proceeding in the case at bar,
without prejudice to presentation of explanatory evidence, respectfully submit the following
STIPULATION OF FACTS:
1.
That defendant Doronila was the registered owner of 300 hectares of land, situated in
Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011, 77013, 216747 (formerly
TCT No. 116621) and 216750 (formerly TCT No. 77012).
2.
That on July 3, 1967, defendant DORONILA under his letter (marked Annex '1' of the
answer) addressed to the SSS Chairman, offered his said property to the Social Security System
(SSS) at P4.00 per square meter.
That on July 17, 1967 (Annex '2' of the Answer) the SSS Chairman, Mr. Ramon G.
Gaviola, Jr., replied to defendant DORONILA, as follows:
'This will acknowledge your letter of July 3rd, 1967 relative to your offer for sale of
your real estate property.
In this regard, may I please be informed as to how many hectares, out of the total
300 hectares offered, are located in Quezon City and how many hectares are located in
Montalban, Rizal. Likewise, as regards your offer of P4.00 per square meter, would there
be any possibility that the same be reduced to P3.25 per square meter? Finally and before
I submit your proposal for process it is requested that the NAWASA certify to the effect that
they have no objection to having this parcel of land subdivided for residential house
purposes.
Thank you for your offer and may I hear from you at the earliest possible time.'
2-a
That on July 19, 1967, defendant DORONILA wrote a letter (a, xerox copy, attached hereto
marked as Annex '2-a' for DORONILA) to NAWASA, and that in reply thereto, on July 25, 1967,
the NAWASA wrote the following letter (Xerox copy attached hereto to be marked as Annex '2-b'
for DORONILA) to defendant DORONILA.
'In connection with your proposed subdivision plan of your properties adjacent to
our Novaliches Watershed, this Office would like to impose the following conditions:
1. Since your property is an immediate boundary of our Novaliches Watershed, a
20-meter road should be constructed along our common boundary.
Page 57 of 72
 2. That no waste or drainage water from the subdivision should flow towards the
watershed.
3. That the liquid from the septic tanks or similar waste water should be treated
before it is drained to the Alat River above our Alat Dam.
The above conditions are all safeguards to the drinking water of the people of
Manila and Suburbs. It is therefore expected that we all cooperate to make our drinking
water safer from any pollution.'
3.
That on July 19, 1967, defendant DORONILA wrote another letter (marked as Annex '3' on
his Answer) addressed to the SSS Chairman, Mr. Ramon G. Gaviola, Jr., stating, among others,
the following:
'In this connection, I have your counter-offer of P3.25 per square meter against my
offer of P4.00 per square meter, although your counter-offer is lower comparing to the
prices of adjacent properties, I have to consider the difference as my privilege and
opportunity to contribute or support the Presidential policy to promote low cost housing in
this country particularly to the SSS members by accepting gladly your counter-offer of
P3.25 per square meter with the condition that it should be paid in cash and such payment
shall be made within a period of 30 days from the above stated date' (2nd paragraph of
letter dated July 18, 1967, Annex '3' of the Answer).
3.a
That on August 10, 1967, the SSS Chairman, Mr. Ramon G. Gaviola, Jr., wrote the
following (Xerox copy attached hereto and marked as Annex '2-c' for DORONILA: addressed to
defendant DORONILA:
'With reference to your letter, dated July 1967, please be informed that the same is
now with the Administrator for study and comment. The Commission will act on receipt of
information re such studies.
With the assurance that you will be periodically informed of developments, we
remain.'
3-b
That on October 30, 1967, Mr. Pastor B. Sajorda, 'By authority of Atty. Alfonso Doronila,
property owner', wrote the following request (Xerox copy attached hereto and marked as Annex '2-
d' for DORONILA) addressed to Realtor Vicente L. Narciso for a certification regarding the actual
prices of DORONILA's property quoted as follows:
'May I have the honor to request for your certification as a member of the Board of
Realtor regarding the actual prices of my real estate raw-land properties described as Lots
3-B-7, 26-B, 6 and 4-C-3 all adjacent to each other, containing a total area of 3,000,000
square meters, all registered in the name of Alfonso Doronila, covered by T.C.T. Nos.
116631, 77013, 77011, and 71012, located at Montalban, Rizal, all adjacent to the
Northern portion of the NAWASA properties in Quezon City including those other
surrounding adjacent properties and even those properties located before reaching my
own properties coming from Manila.
This request is purposely made for my references in case decided to sell my said
properties mentioned above.'
3-c
That on November 3, 1961, Realtor Vicente Narciso wrote the following reply (Xerox copy
attached hereto and marked as Annex '2-e' for DORONILA) to Mr. Pastor B. Sajorda:
'As per your request dated (October 30, 1967, regarding prices of raw land, it is my
finding that the fair market value of raw land in the vicinity of the NAWASA properties at
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 Quezon City and Montalban, Rizal, including the properties of Atty. Alfonso Doronila, more
particularly known as lots 3-B-7, 26-B, and 4-C-3 containing approximately 3,000,000
square meters is P3.00 to P3.50 per square meter.
Current prices before reaching Doronila's property range from P6.00 to P7.00 per
square meter.
4.
That on February 14, 1968, defendant DORONILA granted plaintiff an exclusive option and
authority (Annex 'A' of complaint), under the following terms and conditions:
'1. The price of the property is THREE (P3.00) PESOS per square meter.
2. A commission of TEN (10%) PERCENT will be paid to us based on P2.10 per
square meter, or at any price that you (DORONILA) finally agree upon, and all expenses
shall be for our account, including preparation of the corresponding deed of conveyance,
documentary stamps and registration fee, whether the sale is caused directly or indirectly
by us within the time of this option. If the property is sold over and above P3.00 per square
meter, the excess amount shall be credited and the herein brokers. In addition to the 10%
commission based on P2.10 per square meter, provided the brokers shall pay the
corresponding taxes to the owner of the excess amount over P3.00 per square meter,
unless paid by check which would the be deductible as additional expenses.
3. This exclusive option and authority is good for a period of sixty (60) days from
the date of your conformity; provided, however, that should negotiations have been started
with a buyer, said period is automatically extended until said negotiations is terminated, but
not more than fifteen (15) days;
4. The written offers must be made by the prospective buyers, unless they prefer to
have us take the offer for and in their behalf some buyers do not want to be known in the
early stages of the negotiations;
5. If no written offer is made to you until the last day of this authorization, this
option and authority shall expire and become null and void;
6. It is clearly understood that prospective buyers and all parties interested in this
property shall be referred to us, and that you will not even quote a price directly to any
agent or buyer. You agree to refer all agents or brokers to us DURING the time this option
is in force; and
7. There are some squatters occupying small portions of the property, which fact
will be reported to the prospective buyers, and said squatters will be removed at our
expense." (Annex 'A' of the complaint.).
Very truly yours,
PHILIPPINE REAL
ESTATE EXCHANGE
(Sgd.) ANTONIO E. PRATS
General Manager
CONFORME:
(Sgd.) ALFONSO DORONILA'
Date: February 14, 1968
5.
That on February 19, 1968, plaintiff wrote the following letter to defendant DORONILA
(Annex '4' of the Answer), quoted as follows:
February 19, 1968

Page 59 of 72
Don Alfonso Doronila
Plaza Ferguzon
Ermita, Manila
Dear Don Alfonso:
In view of the exclusive option extended to us for the sale of your property consisting 300
hectares located at Montalban, Rizal, we earnestly request that you take immediate steps to
withdraw any and all papers pertaining to this property offered to the SOCIAL SECURITY
SYSTEM.

Very truly yours,

PHILIPPINE REAL
ESTATE EXCHANGE
(Sgd.) ANTONIO E. PRATS
General Manager
AEP/acc
RECEIVED ORIGINAL:
By: (Sgd.) ROGELIO DAPITAN'
6.
That on February 20, 1968, pursuant to the letter dated February 19, 1968 of plaintiff,
defendant DORONILA wrote a letter (Annex 'B' of the complaint) to the SSS Administrator stating:
'Inasmuch as the SSS has not acted on my offer to sell a 300 hectare lot located in
Montalban, Rizal, for the last five (5) months I respectfully requested for the return of all my
papers concerning this offered property.'
7.
That on February 27, 1968, defendant DORONILA received the following letter (Annex 'C'
of the complaint) from the SSS Deputy Administrator, Mr. Reynaldo J. Gregorio, to wit:
'May I take this opportunity of inviting you in behalf of Administrator Teodoro, to
meet with him, Chairman Gaviola and myself on Friday, March 4, 10:00 A.M. lot offer.
Thanks and regards.
8.
That on February 28, 1968, defendant DORONILA wrote the following letter (Annex 'D' of
the complaint) to the SSS Deputy Administrator:
'Thank you for your invitation to meet Administrator Teodoro, Chairman Gaviola
and your goodself, to take up my former offer to sell my property to the Social Security
System.
Since the SSS had not acted on my offer dated July 19, 1967, more than seven (7)
months ago, I have asked for the return of my papers, as per my letter of February 20,
1968, and which you have kindly returned to me.
As of February 20, 1968, I gave the Philippine Real Estate Exchange an exclusive
option and authority to negotiate the sale of this 300 hectare land, and I am no longer at
liberty to negotiate its sale personally; I shall therefore request you communicate directly
with the Philippine Real Exchange, P. O. Box 84, Quezon City, and deal with them directly
if you are still interested in my property.
With my kind personal regards, I am'
9.

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 That on March 16, 1968, plaintiff, acting upon the letter of defendant DORONILA dated
February 28, 1968 (Annex 'D' for plaintiff), wrote the following letter to SSS Administrator:
'Don Alfonso Doronila, owner of the 300 hectare land located at Montalban, Rizal,
adjoining the Quezon City boundary, has informed us that the Administrator of the SOCIAL
SECURITY SYSTEM, through Mr. Reynaldo J. Gregorio, has invited him to meet with the
Administrator and Chairman Gaviola to take up the former offer to sell his property to the
SSS.
'In his letter to the Administrator dated February 20, 1968 (which has been
received by the SSS on the same day). Mr. Doronila advised you that as of February 20,
1968, he gave the PHILIPPINE REAL ESTATE EXCHANGE (PHILREX) the exclusive
option and authority to negotiate the sale of his 300 hectare land in Montalban, and that he
is no longer at liberty to negotiate its sale personally, and that, if you are still interested in
this property, the SSS should communicate directly with the PHILIPPINE REAL ESTATE
EXCHANGE.
'It is by virtue of this arrangement that Mr. Doronila now refers to us your invitation
and his reply to the SSS and has requested us to get in touch with you.'
'While, at present we have several prospective buyers interested in this property,
we shall, in compliance with the request of Mr. Doronila, be happy to sit down with you and
Chairman Ramon Gaviola, Jr.'
'Please let us know when it will be convenient to hold the conference.'
10.
That on April 18, 1968, defendant DORONILA extended the plaintiff exclusive option and
authority to expire May 18, 1968. (Annex 'B' — Reply, letter of Doronila to SSS Deputy
Administrator dated May 8, 1968).
11.
That on May 6, 1968, plaintiff made a formal written offer to the Social Security System to
sell the 300 hectare land of defendant DORONILA at the price of P6.00 per square meter, a Xerox
copy of which, bearing the stamp or receipt of the Social Security System is attached hereof as
Annex 'D'-plaintiff.
12.
That on May 17, 1968, the defendant DORONILA received the following telegram (Annex
'E' of the complaint) from the SSS Administrator, reading:
'SSS CONSIDERING PURCHASE YOUR PROPERTY FOR ITS HOUSING
PROJECT'
13.
That on May 18, 1968, after plaintiff's exclusive option and authority had been extended,
plaintiff wrote the following letter (Annex 'A-Reply' of plaintiff's REPLY TO ANSWER) to defendant
DORONILA, to wit:
'CONFIDENTIAL'
'In our conference last Monday, May 13, 1968, you have been definitely advised by
responsible parties that the SOCIAL SECURITY SYSTEM is acquiring your 300-hectare
land at Montalban, Rizal, adjoining the Quezon City Boundary - and that said property will
be acquired in accordance with exclusive option and authority you gave the PHILIPPINE
REAL ESTATE EXCHANGE. You were assured in that conference that the property will be
acquired definitely, but, as it has been mentioned during the conference, it may take from
30 to 60 days to have all the papers prepared and to effect the corresponding payment.
The telegram from the SSS confirming these negotiations has already been received by
you, a copy of which you yourself have kindly furnished us.
Page 61 of 72
 'Pursuant to paragraph 3 of the terms of the option that you have kindly extended, we still
have fifteen days more from today; May 18, 1968, within which to finish the negotiations for the
sale of your property to the SSS. For your convenience, we quote the pertinent portion of
paragraph 3 of the option:
'. . . provided, however, that should negotiation have been started with a buyer,
said period is automatically extended until said negotiation is terminated, but no more than
fifteen (15) days.'
'Please be assured that we will do our very best to complete these negotiations for
the sale of your property within this fifteen-day period. In the meantime, we hope you will
also observe the provisions of paragraph 6 of the exclusive option you have extended to
us.'
14.
That on May 18, 1968, plaintiff wrote the following letter (Xerox copy attached and marked
hereof as Annex 'H' for plaintiff) addressed to defendant DORONILA, to wit:
'By virtue of the exclusive option and authority you have granted the PHILIPPINE
REAL ESTATE EXCHANGE to negotiate the sale of your 300-hectare land located at
Montalban, Rizal, adjoining the Quezon City boundary, which properties are covered by
Transfer Certificate of Titles Nos. 116631, 77011, 77012 and 77013, of the Registry of
Deeds for the Province of Rizal, we hereby make a firm offer, for and in behalf of our
buyer, to purchase said property at the price of FOUR PESOS AND FIFTY CENTAVOS
(P4.50) per square meter, or the total amount of THIRTEEN MILLION FIVE HUNDRED
THOUSAND (P13,500,000.00) PESOS, Philippine Currency, payable in Cash and D.B.P.
Progress Bonds, on a ratio to be decided between you and our principal.'
'To expedite the negotiations, we suggest that we sit down sometime early next
week with our principal to take up the final arrangement and other details in connection
with the purchase of the subject property.'
'To give you further assurance of the validity of this offer, we refer you to the
CHINA BANKING CORPORATION (Trust Department) who has already been apprised of
these negotiations, to which Bank we strongly recommend that this transaction be coursed
through, for your own security and protection.'
15.
That on May 30, 1968, plaintiff wrote the following letter (Xerox copy attached hereto, and
marked as Annex 'I' for plaintiff) to defendant DORONILA, quoted as follows:
'This is to advise you that the SOCIAL SECURITY SYSTEM agreed to purchase
your 300-hectare land located at Montalban, Rizal, which purchase can be conformed by
the Chairman of the SOCIAL SECURITY COMMISSION. The details will have to be taken
up between you and the Chairman, and we suggest that you communicate with the
Chairman at your earliest convenience.'
'This negotiation was made by virtue of the exclusive option and authority you have
granted the PHILIPPINE REAL ESTATE EXCHANGE, which option is in full force and
effect, and covers the transaction referred above.'
16.
That on June 6, 1968, defendant DORONILA wrote the following letter (Annex '7' for
DORONILA), to the plaintiff, to wit:
'I have to inform you officially, that I have not received any written offer from the
SSS or others, to purchase my Montalban property of which you were given an option and
exclusive authority as appearing in your letter-contract dated February 14, 1968, during the
60 days of your exclusive authority which expired on April 14, 1968, nor during the
extension which was properly a new exclusive authority of 30 days from April 18, which
Page 62 of 72
 expired on May 18, 1968, nor during the provided 15 days grace, in case that you have
closed any transaction to terminate it during that period, which also expired on June 3,
1968.'
'As stated in said letter, we have the following condition:
'5. If no written offer is made to you until the last day of this
authorization, this option and authority shall expire and becomes null and
void.'
'As I have informed you, that on April 16, 1968 or two days after your
option expired I have signed an agreement to sell my property to a group of
buyers to whom I asked later that the effectivity of said agreement will be
after your new authority has expired will be on June 2, and they have
accepted; As your option has expired, and they know that there was no
written offer made by the SSS for any price of my property, aside of their
previous letter announcing me that they are ready to pay, I was notified on
June 4, 1968 by their representative, calling my attention about our
agreement; that is why I am writing you, that having expired your option and
exclusive authority to offer for sale my said property, I notified only this
afternoon said to comply our agreement.
'Hoping for your consideration on the matter, as we have to be
guided by contracts that we have to comply, I hereby express to you my
sincere sentiments.'
17.
That on June 19, 1968, defendant DORONILA wrote the following letter (Annex '5' of the
Answer) to the SSS Administrator, renewing his offer to sell his 300 hectare land to the SSS at
P4.00 per square meter, to wit:

'This is to renew my offer to sell my properties located at Montalban, Rizal

identified as Lot Nos. 3-B-7, 26-B, 6, and 4-C-3, registered in my name in the office of the
Registry of Deeds of Rizal under T.C.T. Nos. 116631, 77013, 77011 and 216750,
containing a total area of 300 hectares or 3,000.000 square meters.
You will recall that last year, I offered to the Social Security System the same
properties at the price of Four (P4.00) pesos per square meter. After 3 ocular inspection of
Chairman Gaviola, one of said inspections accompanied by Commissioner Arroyo and
after receiving the written appraisal report of Manila realtor Vicente L. Narciso, the System
then made a counter-offer of Three pesos and twenty-five (P3.25) per square meter which
I accepted under the condition that the total amount be paid within a period of thirty (30)
days from the date of my acceptance (July 19, 1967). My acceptance was motivated by the
fact that within said period of time I had hoped to repurchase my sugarcane hacienda in
Iloilo with the proceeds I expected from the sale. No action was however taken by the
System thereon.
Recently, the same properties were offered by Antonio E. Prats of the Philippine
Real Estate Exchange to the Presidential Assistant on Housing, at the price of six pesos
(P6.00) per square meter, who referred it to the System, but against no action had been
taken by the System.
Considering the lapse of time since our original offer during which prices of real
estate have increased considerably, on the one hand, and in cooperation with the System's
implementation of our government's policy to provide low cost houses to its members, on
the other hand, I am renewing my offer to sell my properties to the system only at the same
price of P4.00 per square meter, or for a total amount of twelve million pesos
(P12,000,000.00), provided the total amount is paid in cash within a period of fifteen (15)
days from this date.'
Page 63 of 72
 18.
That on June 20, 1968, the Social Security Commission passed Resolution No. 636 by
which the SSS formalized its counter-offer of P3.25 per square meter. (See Annex 'F' of the
complaint)
19.
That on June 25, 1968, the SSS Administrator, Mr. Gilberto Teodoro, wrote the following
reply letter (Annex '6' of the Answer) to defendant DORONILA, to wit:
'This has reference to your letter dated June 9, 1968 renewing your offer to sell
your property located at Montalban, Rizal containing an area of 300 hectares at P4.00 per
square meter. Please be informed that the said letter was submitted for the consideration
of the Social Security Commission at its last meeting on June 20, 1968 and pursuant to its
Resolution No. 636, current series, it decided that the System reiterate its counter-offer for
P3.25 per square meter subject to a favorable appraisal report by a reputable appraisal
entity as regards particularly to price and housing project feasibility. Should this counter-
offer be acceptable to you, kindly so indicate by signing hereunder your conformity
thereon.
Trusting that the foregoing sufficiently advises you on the matter, I remain.
Very truly yours,
GILBERTO TEODORO
Administrator
CONFORME: With condition that the sale will consummated within Twenty (20) days from
this date.
ALFONSO DORONILA
Returned and received the original by
June 25/68
Admtr's Office'
20.
That on June 27, 1968, the Social Security Commission passed Resolution No. 662
authorizing the Toples & Harding (Far East) to conduct an appraisal of the property of defendant
DORONILA and to submit a report thereon. (See Annex 'F' of the complaint)
21.
That on July 17, 1968, the Social Security Commission taking note of the report of Toples
& Harding (Far East), passed Resolution No. 738, approving the purchase of the 300 hectare land
of defendant DORONILA, at the price of P3.25 per square meter, for a total purchase price of
NINE MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), and
appropriating the said amount of money for the purpose. (See Annex 'F' of the complaint).
22.
That on July 30, 1968, defendant DORONILA executed the deed of absolute sale (Annex
'G' of the complaint) over his 300-hectare land, situated in Montalban, Rizal, covered by TCT Nos.
77011, 77013, 216747 (formerly TCT No. 116631) and 216750 (formerly TCT No. 77012), in favor
of the Social Security System, for the total purchase price of NINE MILLION SEVEN HUNDRED
FIFTY THOUSAND PESOS (P9,750,000.00), Philippine currency, which deed of sale was
presented for registration in the Office of the Register of Deeds of Rizal on August 21, 1968.
23.
That defendant DORONILA had received the full purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine Currency, in two installments.
24.
Page 64 of 72
 That on September 17, 1968, plaintiff presented his STATEMENT OF ACCOUNT, dated
September 16, 1968 (Xerox copy of which is attached hereto and marked as Annex 'J' plaintiff to
defendant DORONILA for the payment of his professional services as real estate broker in the
amount of P1,380,000.00, as computed on the basis of the letter-agreement, Annex 'A' of the
complaint, which defendant failed to pay.
Manila, for Quezon City, January 18, 1968.
Respectfully submitted:
CRISPIN D. BAIZAS & ASSOCIATES
and A.N. BOLINAO, JR.
By: (Sgd.)
Counsel for the plaintiff
Suite 305, Shurdut Bldg.
Intramuros, Manila
(Sgd.) E. V. Obon
Atty. EUGENIO V. OBON
Counsel for the defendant
9 West Point Street
Quezon City
ALFONSO DORONILA
Counsel for the defendant
428 Plaza de Ferguson
Ermita, Manila" 2
The trial court rendered its decision dated December 12, 1969, the dispositive part of which reads:
"WHEREFORE, judgment is hereby rendered in favor plaintiff, ordering defendant Alfonso
Doronila, under the first cause of action, to pay to plaintiff the sum of P1,380,000.00 with interest
thereon at the rate of 6% per annum from September 23, 1968 until fully paid; and under the
second Cause of Action, to pay plaintiff the sum of P200,000.00 as moral damages; the sum of
P100,000. as exemplary damages; the sum of P150,000.00 as attorney's fees, including the
expenses of litigation and costs of this suit.
The writ of preliminary injunction issued in this case is hereby made permanent; and the
defendant Philippine National Bank is hereby ordered to pay to the plaintiff the amount of
P1,380,000.00 and interest on the P1,380,000.00 to be computed separately out P2,000,000.00
which it presently holds under a fixed time deposit.
SO ORDERED.
December 12, 1969, Quezon City, Philippines.
(SGD.) LOURDES P. SAN DIEGO
J u d g e" 3
The defendant appealed to the Court of Appeals where the appeal was docketed as CA-G.R. No.
45974-R.
In a decision promulgated on September 19, 1974, the Court of Appeals reversed the decision of the
trial court and dismissed the complaint because:
"In any event, since it has been found that the authority of appellee expired on June 2,
1968, rather than June 12, 1968 as the lower court opined, the inquiry would be whether up to that
time, a written offer was made by appellee in behalf of the SSS. The stipulation is clear on this
point. There should he a written offer by the prospective buyer or by appellee for or in their behalf,
and that if no such written offer is made until the last day of the authorization, the option and
authority shall expire and become null and void. Note that the emphasis is placed on the need of a
written offer to save the authority from an automatic termination on the last day of the
authorization. We note such emphasis with special significance in view of the condition relative to
Page 65 of 72
 automatic extension of not more than 15 days if negotiations have been started. The question then
is when are negotiations deemed started? In the light of the provisions just cited, it would be when
a response is given by the prospective buyer showing his interest to buy the property when an
offer is made by the seller or broker and make an offer of the price. Strictly, therefore, prior to May
29, 1968, there were no negotiations yet started within the contemplation of the letter-agreement of
brokerage (Exh. A) Nevertheless, appellant extended appellee's exclusive authority on expire on
May 18, 1968 (par. 10, Stipulation of Facts; R.A. p. 89), which was automatically extended by 15
days under their agreement, to expire on June 2, 1968, if the period extended up to May 18, 1968,
was a new authority. For, it may even be considered as taking the place of the 15-day automatic
extension, since appellee's pretension is that negotiations have been started within the original
period of 60 days. Appellant, in fixing the expiry date on June 2, 1968, has thus made a liberal
concession in favor of appellee, when he chose not to regard the extension up to May 18, 1968 as
the automatic extension which ought to have been no more than 15 days, but which he generously
stretched twice as long." 4
The petitioner assigned the following errors:
"I
THE RESPONDENT COURT OF APPEALS ERRED CONCLUDING THAT PETITIONER
WAS NOT THE EFFICIENT PROCURING CAUSE IN BRINGING ABOUT THE SALE PRIVATE
RESPONDENT DORONILA'S LAND TO THE SSS.
II
THE RESPONDENT COURT OF APPEALS ERRED CONCLUDING THAT THERE WAS
FAILURE ON THE PART OF HEREIN PETITIONER TO COMPLY WITH THE TERMS
CONDITIONS OF HIS CONTRACT WITH PRIVATE RESPONDENT.
III
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT
PETITIONER IS NOT ENTITLED TO HIS COMMISSION.
IV
THE RESPONDENT COURT OF APPEALS ERRED IN AWARDING ATTORNEY'S FEES
TO PRIVATE RESPONDENT DORONILA INSTEAD OF AFFIRMING THE AWARD OF MORAL
AND EXEMPLARY DAMAGES AS WELL AS ATTORNEY'S FEES TO PETITIONER." 5
The Court in its Resolution of May 23, 1975 originally denied the petition for lack of merit but upon
petitioner's motion for reconsideration and supplemental petition invoking equity, resolved in its Resolution of
August 20, 1975 to give due course thereto.
From the stipulation of facts and the evidence of record, it is clear that the offer of defendant Doronila to
sell the 300 hectares of land in question to the Social Security System was formally accepted by the System
only on June 20, 1968 after the exclusive authority, Exhibit A, in favor of the plaintiff, petitioner herein, had
expired. The respondent court's factual findings that petitioner was not the efficient procuring cause in bringing
about the sale (prescinding from the fact of expiration of his exclusive authority) which are admittedly final for
purposes of the present petition, provide no basis in law to grant relief to petitioner. The following pertinent
excerpts from respondent court's extensive decision amply demonstrate this:
"It is noted, however, that even in his brief, when he said —
'According to the testimony of the plaintiff-appellee a few days before May 29,
1968, he arranged with Mr. Gilberto Teodoro, SSS Administrator, a meeting with Doronila.
He talked with Mr. Teodoro over the telephone and fixed the date of the meeting with
defendant-appellant Doronila for May 29, 1968, and that he was specifically requested by
Mr. Teodoro not to be present at the meeting, as he, Teodoro, wanted to deal directly with
the defendant-appellant alone. (Tsn., pp. 44-46, March 1, 1969). Finding nothing wrong
with such a request, as the sale could be caused directly or indirectly (Exh. 'A'), and
believing that as a broker all that he needed to do to be entitled to his commission was to

Page 66 of 72
 bring about a meeting between the buyer and the seller as to ripen into a sale, plaintiff-
appellee readily acceded to the request.'
appellee is not categorical that it was through his efforts that the meeting took place on May
29, 1968. He refers to a telephone call he made 'a few days before May 29, 1968,' but in the
conversation he had with Mr. Teodoro, the latter requested him not to be present in the
meeting. From these facts, it is manifest that the SSS officials never wanted to be in any way
guided by, or otherwise subject to, the mediation or intervention of, appellee relative to the
negotiation for the purchase of the property. It is thus more reasonable to conclude that if a
meeting was held on May 29, 1968, it was done independently, and not by virtue of,
appellee's wish or efforts to hold such meeting." 6
xxx xxx xxx
". . . It is even doubtful if he tried to make any arrangement for meeting at all, because on
May 18, 1968, he told appellant:
'. . . we hereby make a firm offer, for and in behalf of our buyer, to purchase said
property at the price of Four Pesos and Fifty Centavos (P4.50) per square meter . . . .'
"As this offer is evidently made in behalf of buyer other than the SSS which had never
offered the price of P4.50 per square meter, appellee could not have at the same time arranged a
meeting between the SSS officials and appellant with a view to consummating the sale in favor of
the SSS which had made an offer of only P3.25 per sq. m. and thus lose the much bigger profit he
would realize with a higher price of P4.50 per sq. meter. This 'firm offer' of P4.50 per sq. m. made
by appellee betrayed his lack of any efficient intervention in the negotiations with the SSS for the
purchase by it of appellant's property. . . . " 7
xxx xxx xxx
". . . This becomes more evident when it is considered that on May 6, 1968 he was making
his first offer to sell the property at P6.00 per sq. m. to the SSS to which offer he received no
answer. It is this cold indifference of the SSS to him that must have prompted him to look for other
buyers, resulting in his making the firm offer of P4.51 per sq. m. on May 18, 1968, a fact which
only goes to show that for being ignored by the SSS, he gave up all effort to deal with the SSS. . . .
." 8
xxx xxx xxx
". . . For him to claim that it was he who aroused the interest of the SSS in buying
appellant's property is to ignore the fact that as early as June, (July) 1967, the SSS had directly
dealt with appellant to such an extent that the price of P3.25 as offered by the SSS was accepted
by appellant, the latter imposing only the condition that the price should be paid in cash, and within
30 days from the date of the acceptance. It can truly be said then that the interest of SSS to
acquire the property had been sufficiently aroused for there to be any need for appellee to
stimulate it further. Appellee should know this fact for according to him, the 10-day grace period
was agreed upon to give the SSS a chance to pay the price of the land at P3.25 per sq. m., as a
'compromise' to appellant's insistence that the SSS be excluded from appellee's option or authority
to sell the land." 9
". . . There should be a written offer by the prospective buyer or by appellee for or in their
behalf, and that if no such written offer is made until the last day of the authorization, the option
and authority shall expired and become null and void. . . . Yet, no such written offer was made. . . .
" 10
In equity, however, the Court notes that petition diligently taken steps to bring back together respondent
Doronila and the SSS, among which may be mentioned the following:
In July, 1967, prior to February 14, 1968, respondent Doronila had offered to sell the land in question to
the Social Security System. Direct negotiations were made by Doronila with the SSS. The SSS did not then
accept the offer of Doronila. Thereafter, Doronila executed the exclusive authority in favor of petitioner Prats on
February 14, 1968. cdrep
Page 67 of 72
 Prats communicated with the Office of the Presidential Housing Commission on February 23, 1968
offering the Doronila property. Prats wrote a follow-up letter on April 18, 1968 which was answered by the
Commission with the suggestion that the property be offered directly to the SSS. Prats wrote the SSS on March
16, 1968, inviting Chairman Ramon Gaviola, Jr. to discuss the offer of the sale of the property in question to the
SSS. On May 6, 1968, Prats made a formal written offer to the Social Security System to sell the 300-hectare
land of Doronila at the price of P6.00 per square meter. Doronila received on May 17, 1968 from the SSS
Administrator a telegram that the SSS was considering the purchase of Doronila's property for its housing
project. Prats and his witness Raagas testified that Prats had several dinner and lunch meetings with Doronila
and/or his nephew, Atty. Manuel D. Asencio, regarding the progress of the negotiations with the SSS.
Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were invited several times by Prats,
sometimes to luncheons and sometimes to dinner. On a Sunday, June 2, 1968, Prats and Raagas had luncheon
in Sulu Hotel in Quezon City and they were joined later by Chairman Gaviola of the SSS.
The Court has noted on the other hand that Doronila finally sold the property to the Social Security
System at P3.25 per square meter which was the very same price counter-offered by the Social Security System
and accepted by him in July, 1967 when he alone was dealing exclusively with the said buyer long before Prats
came into the picture but that on the other hand Prats' efforts somehow were instrumental in bringing them
together again and finally consummating the transaction the same price of P3.25 square meter, although such
finalization was after the expiration of Prats' extended exclusive authority. Still, such price was higher than that
stipulated in the exclusive authority granted by Doronila to Prats.
Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos
(P100,000.00) by compensation for his efforts and assistance in the transaction, which however was finalized
and consummated after the expiration of his exclusive authority and sets aside the P10,000.00-attorneys' fees
award adjudged against him by respondent court.
WHEREFORE, the decision appealed from is hereby affirmed, with the modification that private
respondent Alfonso Doronila in equity is ordered to pay petitioner or his heirs the amount of One Hundred
Thousand Pesos (P100,000.00) and that the portion of the said decision sentencing petitioner Prats to pay
respondent Doronila attorneys' fees in the sum of P10,000.00 is set aside. cdphil
The lifting of the injunction issued by the lower court on the P2,000,000.00 cash deposit of respondent
Doronila as ordered by respondent court is hereby affirmed, with the exception of the sum of One Hundred
Thousand Pesos (P100,000.00) which is ordered segregated therefrom to satisfy the award herein given to
petitioner; the lifting of said injunction, as herein ordered, is immediately executory upon promulgation hereof.
No pronouncement as to costs.
||| (Prats v. Court of Appeals, G.R. No. L-39822, [January 31, 1978], 171 PHIL 322-347)

SECOND DIVISION
[G.R. No. 94753. April 7, 1993.]
MANOTOK BROTHERS, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, THE
HONORABLE JUDGE OF THE REGIONAL TRIAL COURT OF MANILA (Branch VI), and
SALVADOR SALIGUMBA, respondents.
SYLLABUS
1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN ENTITLED' RULE; APPLICATION IN CASE AT
BAR. — In an earlier case, this Court ruled that when there is a close, proximate and causal connection
between the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a
commission. We agree with respondent Court that the City of Manila ultimately became the purchaser of
petitioner's property mainly through the efforts of private respondent. Without discounting the fact that when
Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private respondent's
authority had already expired, it is to be noted that the ordinance was approved on April 26, 1968 when
private respondent's authorization was still in force. Moreover, the approval by the City Mayor came only
three days after the expiration of private respondent's authority. It is also worth emphasizing that from the
records, the only party given a written authority by petitioner to negotiate the sale from July 5, 1966 to May
14, 1968 was private respondent.

Page 68 of 72
 DECISION
CAMPOS, JR., J p:
Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed as G.R. No. 94753 sought relief from this
Court's Resolution dated May 3, 1989, which reads:
"G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court of Appeals). —
Considering the manifestation of compliance by counsel for petitioner dated April 14, 1989 with the
resolution of March 13, 1989 which required the petitioner to locate private respondent and to
inform this Court of the present address of said private respondent, the Court Resolved to
DISMISS this case, as the issues cannot be joined as private respondent's and counsel's
addresses cannot be furnished by the petitioner to this court." 1
In addition, petitioner prayed for the issuance of a preliminary injunction to prevent irreparable injury to itself pending
resolution by this Court of its cause. Petitioner likewise urged this Court to hold in contempt private respondent for
allegedly adopting sinister ploy to deprive petitioner of its constitutional right to due process. LibLex
Acting on said Petition, this Court in a Resolution 2 dated October 1, 1990 set aside the entry of judgment made on
May 3, 1989 in case G.R. No. 78898; admitted the amended petition; and issued a temporary restraining order to
restrain the execution of the judgment appealed from.
The amended petition 3 admitted, by this Court sought relief from this Court's Resolution abovequoted. In the
alternative, petitioner begged leave of court to re-file its Petition for Certiorari 4 (G.R. No. 78898) grounded on the
allegation that petitioner was deprived of its opportunity to be heard.
The facts as found by the appellate court, revealed that petitioner herein (then defendant-appellant) is the owner of
a certain parcel of land and building which were formerly leased by the City of Manila and used by the Claro M.
Recto High School, at M.F. Jhocson Street, Sampaloc Manila.
By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent Salvador Saligumba to
negotiate with the City of Manila the sale of the aforementioned property for not less than P425,000.00. In the same
writing, petitioner agreed to pay private respondent a five percent (5%) commission in the event the sale is finally
consummated and paid.
Petitioner, on March 4, 1967, executed another letter 6 extending the authority of private respondent for 120 days.
Thereafter, another extension was granted to him for 120 more days, as evidenced by another letter 7 dated June
26, 1967.
Finally, through another letter 8 dated November 16, 1967, the corporation with Rufino Manotok, its President, as
signatory, authorized private respondent to finalize and consummate the sale of the property to the City of Manila for
not less than P410,000.00. With this letter came another extension of 180 days.
The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance No. 6603, appropriating
the sum of P410,816.00 for the purchase of the property which private respondent was authorized to sell. Said
ordinance however, was signed by the City Mayor only on May 17, 1968, one hundred eighty three (183) days after
the last letter of authorization.
On January 14, 1969, the parties signed the deed of sale of the subject property. The initial payment of P200,000.00
having been made, the purchase price was fully satisfied with a second payment on April 8, 1969 by a check in the
amount of P210,816.00.
Notwithstanding the realization of the sale, private respondent never received any commission, which should have
amounted to P20,554.50. This was due to the refusal of petitioner to pay private respondent said amount as the
former does not recognize the latter's role as agent in the transaction.
Consequently, on June 29, 1969, private respondent filed a complaint against petitioner, alleging that he had
successfully negotiated the sale of the property. He claimed that it was because of his efforts that the Municipal
Board of Manila passed Ordinance No. 6603 which appropriated the sum for the payment of the property subject of
the sale.
Petitioner claimed otherwise. It denied the claim of private respondent on the following grounds: (1) private
respondent would be entitled to a commission only if the sale was consummated and the price paid within the period
given in the respective letters of authority; and (2) private respondent was not the person responsible for the
Page 69 of 72
negotiation and consummation of the sale, instead it was Filomeno E. Huelgas, the PTA president for 1967-1968 of
the Claro M. Recto High School. As a counterclaim, petitioner (then defendant-appellant) demanded the sum of
P4,000.00 as attorney's fees and for moral damages.
Thereafter, trial ensued. Private respondent, then plaintiff, testified as to the efforts undertaken by him to ensure the
consummation of the sale. He recounted that it first began at a meeting with Rufino Manotok at the office of
Fructuoso Ancheta, principal of C.M. Recto High School. Atty. Dominador Bisbal, then president of the PTA, was
also present. The meeting was set precisely to ask private respondent to negotiate the sale of the school lot and
building to the City of Manila. Private respondent then went to Councilor Mariano Magsalin, the author of the
Ordinance which appropriated the money for the purchase of said property, to present the project. He also went to
the Assessor's Office for appraisal of the value of the property. While these transpired and his letters of authority
expired, Rufino Manotok always renewed the former's authorization until the last was given, which was to remain in
force until May 14, 1968. After securing the report of the appraisal committee, he went to the City Mayor's Office,
which indorsed the matter to the Superintendent of City Schools of Manila. The latter office approved the report and
so private respondent went back to the City Mayor's Office, which thereafter indorsed the same to the Municipal
Board for appropriation. Subsequently, on April 26, 1968, Ordinance No. 6603 was passed by the Municipal Board
for the appropriation of the sum corresponding to the purchase price. Petitioner received the full payment of the
purchase price, but private respondent did not receive a single centavo as commission. cdll
Fructuoso Ancheta and Atty. Dominador Bisbal both testified acknowledging the authority of private respondent
regarding the transaction.
Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's President, Rufino Manotok.
Huelgas testified to the effect that after being inducted as PTA president in August, 1967 he followed up the sale
from the start with Councilor Magsalin until after it was approved by the Mayor on May 17, 1968. He. also said that
he came to know Rufino Manotok only in August, 1968, at which meeting the latter told him that he would be given a
"gratification" in the amount of P20,000.00 if the sale was expedited.
Rufino Manotok confirmed that he knew Huelgas and that there was an agreement between the two of them
regarding the "gratification".
On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings from 1965 to 1967 but he never offered
to help in the acquisition of said property. Moreover, he testified that Huelgas was aware of the fact that it was
private respondent who was negotiating the sale of the subject property.
Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered judgment sentencing petitioner
and/or Rufino Manotok to pay unto private respondent the sum of P20,540.00 by way of his commission fees with
legal interest thereon from the date of the filing of the complaint until payment. The lower court also ordered
petitioner to pay private respondent the amount of P4,000.00 as and for attorney's fees. 9
Petitioner appealed said decision, but to no avail. Respondent Court of Appeals affirmed the said ruling of the trial
court. 10
Its Motion for Reconsideration having been denied by respondent appellate court in a Resolution dated June 22,
1987, petitioner seasonably elevated its case on Petition for Review on Certiorari on August 10, 1987 before this
Court, docketed as G.R. No. 78898.
Acting on said Petition, this Court issued a Minute Resolution 11 dated August 31, 1987 ordering private respondent
to comment on said Petition.
It appearing that the abovementioned Resolution was returned unserved with the postmaster's notation "unclaimed",
this Court in another Resolution 12 dated March 13, 1989, required petitioner to locate private respondent and to
inform this Court of the present address of private respondent within ten (10) days from notice. As petitioner was
unsuccessful in its efforts to locate private respondent, it opted to manifest that private respondent's last address
was the same as that address to which this. Court's Resolution was forwarded.

Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioner's case on the ground that the
issues raised in the case at bar cannot be joined. Thus, the above-entitled case became final and executory by the
entry of judgment on May 3, 1989.
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Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the said judgment before the court of
origin. Upon discovery of said development, petitioner verified with the court of origin the circumstances by which
private respondent obtained knowledge of the resolution of this Court. Sensing a fraudulent scheme employed by
private respondent, petitioner then instituted this instant Petition for Relief, on August 30, 1990. On September 13,
1990, said petition was amended to include, in the alternative, its petition to re-file its Petition for Certiorari (G.R. No.
78898).
The sole issue to be addressed in this petition is whether or not private respondent is entitled to the five percent
(5%) agent's commission.
It is petitioner's contention that as a broker, private respondent's job is to bring together the parties to a transaction.
Accordingly, if the broker does not succeed in bringing the minds of the purchaser and the vendor to an agreement
with respect to the sale, he is not entitled to a commission.
Private respondent, on the other hand, opposes petitioner's position maintaining that it was because of his efforts
that a purchase actually materialized between the parties.
We rule in favor of private respondent.
At first sight, it would seem that private respondent is not entitled to any commission as he was not successful in
consummating the sale between the parties, for the sole reason that when the Deed of Sale was finally executed,
his extended authority had already expired. By this alone, one might be misled to believe that this case squarely
falls within the ambit of the established principle that a broker or agent is not entitled to any commission until he has
successfully done the job given to him. 13
Going deeper however into the case would reveal that it is within the coverage of the exception rather than of the
general rule, the exception being that enunciated in the case of Prats vs. Court of Appeals. 14 In the said case, this
Court ruled in favor of claimant-agent, despite the expiration of his authority, when a sale was finally
consummated. LibLex
In its decision in the abovecited case, this Court said, that while it was respondent court's (referring to the Court of
Appeals) factual findings that petitioner Prats (claimant-agent) was not the efficient procuring cause in bringing
about the sale (prescinding from the fact of expiration of his exclusive authority), still petitioner was awarded
compensation for his services. And We quote:
"In equity, however, the Court notes that petitioner had diligently taken steps to bring back together
respondent Doronila and the SSS,.
xxx xxx xxx
The court has noted on the other hand that Doronila finally sold the property to the Social Security
System at P3.25 per square meter which was the very same price counter-offered by the Social
Security System and accepted by him in July, 1967 when he alone was dealing exclusively with
the said buyer long before Prats came into the picture but that on the other hand Prats' efforts
somehow were instrumental in bringing them together again and finally consummating the
transaction at the same price of P3.25 per square meter, although such finalization was after the
expiration of Prats' extended exclusive authority.
xxx xxx xxx
Under the circumstances, the Court grants in equity the sum of One hundred Thousand Pesos
(P100,000.00) by way of compensation for his efforts and assistance in the transaction, which
however was finalized and consummated after the expiration of his exclusive authority . .
." 15 (Emphasis supplied.).
From the foregoing, it follows then that private respondent herein, with more reason, should be paid his commission,
While in Prats vs. Court of Appeals, the agent was not even the efficient procuring cause in bringing about the sale,
unlike in the case at bar, it was still held therein that the agent was entitled to compensation. In the case at bar,
private respondent is the efficient procuring cause for without his efforts, the municipality would not have anything to
pass and the Mayor would not have anything to approve.

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In an earlier case, 16 this Court ruled that when there is a close, proximate and causal connection between the
agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioner's property
mainly through the efforts of private respondent. Without discounting the fact that when Municipal Ordinance No.
6603 was signed by the City Mayor on May 17, 1968, private respondent's authority had already expired, it is to be
noted that the ordinance was approved on April 26, 1968 when private respondent's authorization was still in force.
Moreover, the approval by the City Mayor came only three days after the expiration of private respondent's
authority. It is also worth emphasizing that from the records, the only party given a written authority by petitioner to
negotiate the sale from July 5, 1966 to May 14, 1968 was private respondent.
Contrary to what petitioner advances, the case of Danon vs. Brimo, 17 on which it heavily anchors its justification for
the denial of private respondent's claim, does not apply squarely to the instant petition. Claimant-agent in said case
fully comprehended the possibility that he may not realize the agent's commission as he was informed that another
agent was also negotiating the sale and thus, compensation will pertain to the one who finds a purchaser and
eventually effects the sale. Such is not the case herein. On the contrary, private respondent pursued with his goal of
seeing that the parties reach an agreement, on the belief that he alone was transacting the business with the City
Government as this was what petitioner made it to appear.
While it may be true that Filomeno Huelgas followed up the matter with Councilor Magsalin, the author of Munici pal
Ordinance No. 6603 and Mayor Villegas, his intervention regarding the purchase came only after the ordinance had
already been passed — when the buyer has already agreed to the purchase and to the price for which said property
is to be paid. Without the efforts of private respondent then, Mayor Villegas would have nothing to approve in the
first place. It was actually private respondent's labor that had set in motion the intervention of the third party that
produced the sale, hence he should be amply compensated. cdll
WHEREFORE, in the light of the foregoing and finding no reversible error committed by respondent Court, the
decision of the Court of Appeals is hereby AFFIRMED. The temporary restraining order issued by this Court in its
Resolution dated October 1, 1990 is hereby lifted.
SO ORDERED.
||| (Manotok Brothers, Inc. v. Court of Appeals, G.R. No. 94753, [April 7, 1993])

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